SCUDDER MUTUAL FUNDS INC
485APOS, 2000-12-26
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       Filed electronically with the Securities and Exchange Commission on
                               December 26, 2000

                                                               File No. 33-22059
                                                               File No. 811-5565

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

                                    FORM N-1A


             REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933    /___/

                         Pre-Effective Amendment No. __                 /___/
                         Post-Effective Amendment No. 19                /_X_/
                                                      --
                                     And/or
                        REGISTRATION STATEMENT UNDER THE
                         INVESTMENT COMPANY ACT OF 1940                 /___/

                                Amendment No. 21                        /_X_/
                                              --


                           Scudder Mutual Funds, Inc.
                           --------------------------
               (Exact Name of Registrant as Specified in Charter)

                       345 Park Avenue, New York, NY 10154
                       -----------------------------------
               (Address of Principal Executive Offices) (Zip Code)

       Registrant's Telephone Number, including Area Code: (617) 295-2572
                                                           --------------

                                  John Millette
                        Scudder Kemper Investments, Inc.
                    Two International Place, Boston, MA 02110
                    -----------------------------------------
                     (Name and Address of Agent for Service)

It is proposed that this filing will become effective (check appropriate box):

/___/         Immediately upon filing pursuant to paragraph (b)
/___/         60 days after filing pursuant to paragraph (a) (1)
/___/         75 days after filing pursuant to paragraph (a) (2)
/___/         On ____________pursuant to paragraph (b)
/_X_/         On March 1, 2001 pursuant to paragraph (a) (1)
/___/         On __________________ pursuant to paragraph (a) (2) of Rule 485.

         If Appropriate, check the following box:
/___/    This post-effective amendment designates a new effective date for a
         previously filed post-effective amendment.



<PAGE>


                                                 [LOGO] Scudder Investments (SM)


March 1, 2001

Prospectus
--------------------------------------------------------------------------------


                                                               Scudder Gold Fund



                                                      Advisor Classes A, B and C




As with all mutual funds, the Securities and Exchange Commission (SEC) does not
approve or disapprove these shares or determine whether the information in this
prospectus is truthful or complete. It is a criminal offense for anyone to
inform you otherwise.



<PAGE>

Contents
--------------------------------------------------------------------------------


   How the Fund Works

     4  The Fund's Investment Strategy

     5  The Main Risks of Investing
        in the Fund

     7  The Fund's Performance History

     8  How Much Investors Pay

     9  Other Policies and Risks

    10  Who Manages and Oversees
        the Fund

   How to Invest in the Fund

    12  Choosing a Share Class

    17  How to Buy Shares

    18  How to Exchange or Sell Shares

    19  Policies You Should Know
        About

    24  Understanding Distributions
        and Taxes





<PAGE>



   How The Fund Works


  On the next few pages, you'll find information about this fund's investment
  goal, the main strategies it uses to pursue that goal, and the main risks that
  could affect its performance.

  Whether you are considering investing in the fund or are already a
  shareholder, you'll probably want to look this information over carefully. You
  may want to keep it on hand for reference as well.

  Remember that mutual funds are investments, not bank deposits. They're not
  insured or guaranteed by the FDIC or any other government agency, and you
  could lose money by investing in them.



<PAGE>

--------------------------------------------------------------------------------
                                          Class A     Class B     Class C

                        ticker symbol     XXXXX       XXXXX       XXXXX
                          fund number     000         000         000

  Scudder Gold Fund
--------------------------------------------------------------------------------

         The Fund's Investment Strategy

         The fund seeks maximum return (principal change and income) by
         investing at least 65% of total assets in common stocks and other
         equities of U.S. and foreign gold-related companies and in gold coin
         and bullion. These companies may be involved in any of several
         gold-related activities, such as gold exploration, mining, fabrication,
         processing and distribution. At all times, the fund invests at least
         25% of total assets in securities related to gold and other precious
         metals and directly in gold and precious metals.

         In deciding which types of investments to buy and sell, the portfolio
         managers first consider the relative attractiveness of gold compared to
         stocks and decide on allocations for each. Their decisions are
         generally based on a number of factors, including changes in supply and
         demand for gold and broad economic projections.

         In choosing individual securities, the portfolio managers use a
         combination of two analytical disciplines:

         Bottom-up research. The managers look for companies with strong
         management and highly marketable securities. They also consider the ore
         quality of metals mined by a company, its fabrication techniques and
         costs and its unmined reserves, among other factors.

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

OTHER INVESTMENTS The fund may invest up to 35% of total assets in:

o stocks or high-quality debt securities of companies in precious metals and
  minerals operations,

o precious metals other than gold and

o debt securities whose return is linked to precious metals prices.

Although the fund is permitted to use various types of derivatives (contracts
whose value is based on, for example, indices, commodities, currencies or
securities), the managers don't intend to use them as principal investments, and
may not use them at all. While most of the fund's equities are common stocks,
some may be other types of equities, such as convertible securities and
preferred stocks.


                                       4
<PAGE>


         Growth orientation. The managers prefer companies that offer the
         potential for sustainable above-average revenues or earnings growth and
         whose market value appears reasonable in light of their business
         prospects.


         The fund will normally sell a stock when it reaches a target price or
         when its fundamental factors have changed.

         The Main Risks of Investing in the Fund

         There are several risk factors that could hurt the fund's performance,
         cause you to lose money or make the fund perform less well than other
         investments.

         The most important factor with this fund is gold prices. When gold
         prices fall, you should expect the value of your investment to fall as
         well. Gold prices can be influenced by a variety of economic, financial
         and political factors, especially inflation: when inflation is low or
         expected to fall, gold prices tend to be weak.

         Because a stock represents ownership in its issuer, stock prices can be
         hurt by poor management, shrinking product demand and other business
         risks. These may affect single companies as well as groups of
         companies. Prices of gold-related stocks may move up and down rapidly,
         and have historically offered lower long-term performance than the
         stock market as a whole. Foreign stocks tend to be more volatile than
         their U.S. counterparts, for reasons such as political and economic
         uncertainty. These risks tend to be greater in emerging markets, so to
         the extent that the fund invests in emerging markets, it takes on
         greater risks. The fund concentrates in gold and other precious
         metals-related securities and is not diversified. As a result, the fund
         can invest a larger percentage of assets in a given stock than a
         diversified fund and may be subject to greater volatility than a
         diversified fund.

THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
--------------------------------------------------------------------------------
         This fund is designed for investors interested in exposure to all areas
         of the gold market and who understand the risks connected with it.
--------------------------------------------------------------------------------


                                       5
<PAGE>



         Another risk factor is currency exchange rates. When the dollar value
         of a foreign currency falls, so does the value of any investments the
         fund owns that are denominated in that currency. This is separate from
         market risk and may add to market losses or reduce market gains.

         Other factors that could affect performance include:

         o the managers could be wrong in their analysis of industries,
           companies, economic trends, geographical areas or other matters

         o a company's exploration or extraction operations could prove
           unprofitable

         o derivatives could produce disproportionate losses

         o at times, market conditions might make it hard to value some
           investments or to get an attractive price for them



                                       6
<PAGE>

The Fund's Performance History

While a fund's past performance isn't necessarily a sign of how it will do in
the future, it can be valuable for an investor to know. The bar chart shows how
fund performance has varied from year to year, which may give some idea of risk.
The table shows how fund performance compares with a broad-based market index
(which, unlike the fund, does not have any fees or expenses). The performance of
both the fund and the index varies over time. All figures on this page assume
reinvestment of dividends and distributions.

The share classes offered in this prospectus - Classes A, B and C - are newly
offered. In the bar chart, the performance figures for Class A are based on the
historical performance of the fund's original share class (Class S), adjusted to
reflect the higher gross total annual operating expenses of Class A. The bar
chart does not reflect sales loads; if it did, returns would be lower. In the
table, the performance figures for each share class are based on the historical
performance of Class S, adjusted to reflect both the higher gross total annual
operating expenses of Class A, B or C and the applicable sales charge of that
class. Class S shares are offered in a different prospectus.

Scudder Gold Fund
--------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year              Class ---
--------------------------------------------------------------------------------

THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE ILLUSTRATING THE FUND TOTAL
RETURN (%)

     1991         0.00
     1992         0.00
     1993         0.00
     1994         0.00
     1995         0.00
     1996         0.00
     1997         0.00
     1998         0.00
     1999         0.00
     2000         0.00



2000 Total Return as of            : 0.00%
                        -----------

Best Quarter: 0.00%, Q0 0000               Worst Quarter: 0.00%, Q0 0000

--------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/2000
--------------------------------------------------------------------------------
                            1 Year              5 Years            10 Years
--------------------------------------------------------------------------------
Class A                      0.00                0.00                0.00
--------------------------------------------------------------------------------
Class B                      0.00                0.00                0.00
--------------------------------------------------------------------------------
Class C                      0.00                0.00                0.00
--------------------------------------------------------------------------------
Index                        0.00                0.00                0.00
--------------------------------------------------------------------------------

Index: The Salomon Smith Barney Global Gold Index includes 50 companies in 5
countries. To be included, companies must derive over half of their sales from
gold-related activities. The Index is constructed to include all companies with
an available market capitalization greater than the local currency equivalent of
U.S. $100 million on the last business day of May each year.

Total returns for 1990 through 1992 would have been lower if operating expenses
hadn't been reduced.


                                       7
<PAGE>



How Much Investors Pay

This table describes the fees and expenses that you may pay if you buy and hold
fund shares.

--------------------------------------------------------------------------------
Fee Table                                 Class A        Class B       Class C
--------------------------------------------------------------------------------
Shareholder Fees (paid directly from your investment)
--------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed        5.75%           None          None
on Purchases (as % of offering price)
--------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load)       None*          4.00%         1.00%
(as a % of redemption proceeds)
--------------------------------------------------------------------------------
Annual Operating Expenses (deducted from fund assets)
--------------------------------------------------------------------------------
Management Fee                               %              %             %
--------------------------------------------------------------------------------
Distribution/Service (12b-1) Fee             %              %             %
--------------------------------------------------------------------------------
Other Expenses**                             %              %             %
--------------------------------------------------------------------------------
Total Annual Operating Expenses              %              %             %
--------------------------------------------------------------------------------

*  The redemption of shares purchased at net asset value under the Large Order
   NAV Purchase Privilege (see "Policies You Should Know About -- Policies about
   transactions") may be subject to a contingent deferred sales charge of 1.00%
   if redeemed within one year of purchase and 0.50% if redeemed during the
   second year following purchase.

** Includes a fixed rate administrative fee of __%, __% and __% for Class A,
   Class B and Class C shares, respectively.

Information in the table has been restated to reflect a new fixed rate
administrative fee which became effective on October 2, 2000.


Based on the costs above, this example helps you compare the expenses of each
share class to those of other mutual funds. This example assumes the expenses
above remain the same. It also assumes that you invested $10,000, earned 5%
annual returns, and reinvested all dividends and distributions. This is only an
example; actual expenses will be different.

--------------------------------------------------------------------------------
Example                    1 Year        3 Years        5 Years       10 Years
--------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
--------------------------------------------------------------------------------
Class A shares           $              $              $             $
--------------------------------------------------------------------------------
Class B shares
--------------------------------------------------------------------------------
Class C shares
--------------------------------------------------------------------------------
Expenses, assuming you kept your shares
--------------------------------------------------------------------------------
Class A shares           $              $              $             $
--------------------------------------------------------------------------------
Class B shares
--------------------------------------------------------------------------------
Class C shares
--------------------------------------------------------------------------------


                                       8
<PAGE>



Other Policies and Risks

             While the sections on the previous pages describe the main points
             of the fund's strategy and risks, there are a few other issues to
             know about:

             o  Although major changes tend to be infrequent, the fund's Board
                could change the fund's investment goal without seeking
                shareholder approval.
             o  As a temporary defensive measure, the fund could shift up to
                100% of its assets into investments such as money market
                securities. This could prevent losses, but would mean that the
                fund was not pursuing its goal.

             For more information

             This prospectus doesn't tell you about every policy or risk of
             investing in the fund.

             If you want more information on the fund's allowable securities and
             investment practices and the characteristics and risks of each one,
             you may want to request a copy of the Statement of Additional
             Information (see back cover).

             Keep in mind that there is no assurance that any mutual fund will
             achieve its goal.



                                       9
<PAGE>



Who Manages and Oversees the Fund

             The investment advisor

             The fund's investment advisor is Zurich Scudder Investments, Inc.,
             345 Park Avenue, New York, NY. The advisor has more than 80 years
             of experience managing mutual funds, and currently has more than
             $290 billion in assets under management.

             The advisor's asset management teams include investment
             professionals, economists, research analysts, traders and other
             investment specialists, located in offices across the United States
             and around the world.

             The advisor receives a management fee from the fund. For the 12
             months through the most recent fiscal year end, the actual amount
             the fund paid in management fees was X.XX% of its average daily net
             assets.

             The fund has entered into a new investment management agreement
             with the advisor. The table below describes the new fee rates for
             the fund.


             Investment Management Fee as of October 2, 2000
             -------------------------------------------------------------------
             Average Daily Net Assets                                 Fee Rate
             -------------------------------------------------------------------
             first $500 million                                        1.00%
             -------------------------------------------------------------------
             more than $500 million                                    0.95%
             -------------------------------------------------------------------

             The portfolio managers

             The following people handle the day-to-day management of the fund.

             Joann M. Barry                      Robert D. Hardiman
             Lead Portfolio Manager               o Began investment career in
               o Began investment career in          1973
                 1988                             o Joined the advisor in 1999
               o Joined the advisor in 1995       o Joined the fund team in 1999
               o Joined the fund team in 1999



                                       10
<PAGE>


How to Invest in the Fund

The following pages tell you about many of the services, choices and benefits of
being a shareholder. You'll also find information on how to check the status of
your account using the method that's most convenient for you.

You can find out more about the topics covered here by speaking with your
financial representative or a representative of your workplace retirement plan
or other investment provider.



                                       11
<PAGE>


Choosing A Share Class

Offered in this prospectus are three share classes for the fund. The fund offers
other classes of shares separately. Each class has its own fees and expenses,
offering you a choice of cost structures. Class A, Class B and Class C shares
are intended for investors seeking the advice and assistance of a financial
representative, who may receive compensation for those services through sales
commissions, service fees and/or distribution fees.

Before you invest, take a moment to look over the characteristics of each share
class, so that you can be sure to choose the class that's right for you. You may
want to ask your financial representative to help you with this decision.

We describe each share class in detail on the following pages. But first, you
may want to look at the table below, which gives you a brief comparison of the
main features of each class.


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
Classes and features                                       Points to help you compare
------------------------------------------------------------------------------------------------------------------------
Class A

<S>                                                        <C>
o Sales charges of up to 5.75%, charged when you           o Some investors may be able to reduce or eliminate
  buy shares                                                 their sales charges; see next page

o In most cases, no charges when you sell shares           o Total annual expenses are lower than those for
                                                             Class B or Class C
o 0.25% service fee
------------------------------------------------------------------------------------------------------------------------
Class B

o No charges when you buy shares                           o The deferred sales charge rate falls to zero after
                                                             six years
o Deferred sales charge declining from 4.00%,
  charged when you sell shares you bought within           o Shares automatically convert to Class A after six
  the last six years                                         years, which means lower annual expenses going
                                                             forward
o 1.00% distribution/service fee
------------------------------------------------------------------------------------------------------------------------
Class C

o No charges when you buy shares                           o The deferred sales charge rate is lower, but your
                                                             shares never convert to Class A, so annual
o Deferred sales charge of 1.00%, charged when you           expenses remain higher
  sell shares you bought within the last year

o 1.00% distribution/service fee
------------------------------------------------------------------------------------------------------------------------
</TABLE>



                                       12
<PAGE>

Class A shares

Class A shares do have a 12b-1 plan, under which a service fee of 0.25% is
deducted from fund assets each year.



Class A shares have a sales charge that varies with the amount you invest:

                                                  Sales charge as a
                       Sales charge as a          percent of your
Your investment        percent of offering price  net investment
----------------------------------------------------------------------
Up to $50,000          5.75%                      6.10%
----------------------------------------------------------------------
$50,000-$99,999        4.50                       4.71
----------------------------------------------------------------------
$100,000-$249,999      3.50                       3.63
----------------------------------------------------------------------
$250,000-$499,999      2.60                       2.67
----------------------------------------------------------------------
$500,000-$999,999      2.00                       2.04
----------------------------------------------------------------------
$1 million or more     See below and next page
----------------------------------------------------------------------


The offering price includes the sales charge.

You may be able to lower your Class A sales charges if:

o        you plan to invest at least $50,000 over the next 24 months ("letter of
         intent")

o        the amount of shares you already own (including shares in certain other
         funds) plus the amount you're investing now is at least $50,000
         ("cumulative discount")

o        you are investing a total of $50,000 or more in several funds at once
         ("combined purchases")

The point of these three features is to let you count investments made at other
times for purposes of calculating your present sales charge. Any time you can
use the privileges to "move" your investment into a lower sales charge category
in the table above, it's generally beneficial for you to do so. You can take
advantage of these methods by filling in the appropriate sections of your
application or by speaking with your financial representative.

THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.

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

Class A shares may make sense for long-term investors, especially those who are
eligible for reduced or eliminated sales charges.



                                       13
<PAGE>

You may be able to buy Class A shares without sales charges when you are:

o        reinvesting dividends or distributions

o        participating in an investment advisory program under which you pay a
         fee to an investment advisor or other firm for portfolio management
         services

There are a number of additional provisions that apply in order to be eligible
for a sales charge waiver. The fund may waive the sales charges for investors in
other situations as well. Your financial representative or Shareholder Services
can answer your questions and help you determine if you are eligible.

If you're investing $1 million or more, either as a lump sum or through one of
the sales charge reduction features described on the previous page, you may be
eligible to buy Class A shares without sales charges. However, you may be
charged a contingent deferred sales charge (CDSC) of 1.00% on any shares you
sell within the first year of owning them, and a similar charge of 0.50% on
shares you sell within the second year of owning them. ("Large Order NAV
Purchase Privilege"). This CDSC is waived under certain circumstances (see
"Policies You Should Know About"). Your financial representative or Shareholder
Services can answer your questions and help you determine if you're eligible.


                                       14
<PAGE>

Class B shares

With Class B shares, you pay no up-front sales charges to the fund. Class B
shares do have a 12b-1 plan, under which a distribution fee of 0.75% and a
service fee of 0.25% are deducted from fund assets each year. This means the
annual expenses for Class B shares are somewhat higher (and their performance
correspondingly lower) compared to Class A shares, which don't have a 12b-1 fee.
After six years, Class B shares automatically convert to Class A, which has the
net effect of lowering the annual expenses from the seventh year on. However,
unlike Class A shares, your entire investment goes to work immediately.

Class B shares have a CDSC. This charge declines over the years you own shares,
and disappears completely after six years of ownership. But for any shares you
sell within those six years, you may be charged as follows:


Year after you bought shares   CDSC on shares you sell
---------------------------------------------------------------------
First year                     4.00%
---------------------------------------------------------------------
Second or third year           3.00
---------------------------------------------------------------------
Fourth or fifth year           2.00
---------------------------------------------------------------------
Sixth year                     1.00
---------------------------------------------------------------------
Seventh year and later         None (automatic conversion to Class
                               A)
---------------------------------------------------------------------


This CDSC is waived under certain circumstances (see "Policies You Should Know
About"). Your financial representative or Shareholder Services can answer your
questions and help you determine if you're eligible.

While Class B shares don't have any front-end sales charges, their higher annual
expenses mean that over the years you could end up paying more than the
equivalent of the maximum allowable front-end sales charge.

THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.

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

Class B shares can make sense for long-term investors who would prefer to see
all of their investment go to work right away, and can accept somewhat higher
annual expenses in exchange.


                                       15
<PAGE>

Class C shares

Like Class B shares, Class C shares have no up-front sales charges and have a
12b-1 plan under which a distribution fee of 0.75% and a service fee of 0.25%
are deducted from fund assets each year. Because of this fee, the annual
expenses for Class C shares are similar to those of Class B shares, but higher
than those for Class A shares (and the performance of Class C shares is
correspondingly lower than that of Class A). However, unlike Class A shares,
your entire investment goes to work immediately.

Unlike Class B shares, Class C shares do NOT automatically convert to Class A
after six years, so they continue to have higher annual expenses.

Class C shares have a CDSC, but only on shares you sell within one year of
buying them:

Year after you bought shares  CDSC on shares you sell
---------------------------------------------------------------------
First year                    1.00%
---------------------------------------------------------------------
Second year and later         None
---------------------------------------------------------------------


This CDSC is waived under certain circumstances (see "Policies You Should Know
About"). Your financial representative or Shareholder Services can answer your
questions and help you determine if you're eligible.

While Class C shares don't have any front-end sales charges, their higher annual
expenses (due to 12b-1 fees) mean that over the years you could end up paying
more than the equivalent of the maximum allowable front-end sales charge.

THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.

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

Class C shares may appeal to investors who plan to sell some or all shares
within six years of buying them, or who aren't certain of their investment time
horizon.




                                       16
<PAGE>

How to Buy Shares

Once you've chosen a share class, use these instructions to make investments.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
First investment                                           Additional investments
----------------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>
$1,000 or more for regular accounts                        $100 or more for regular accounts

$250 or more for IRAs                                      $50 or more for IRAs

                                                           $50 or more with an Automatic Investment Plan
----------------------------------------------------------------------------------------------------------------------------
Through a financial representative                         o Contact your representative using the method that's
                                                             most convenient for you
o Contact your representative using the method
  that's most convenient for you
----------------------------------------------------------------------------------------------------------------------------
By mail or express mail (see below)

o Fill out and sign an application                         o Send a check made out to "Kemper Funds" and a
                                                             Kemper investment slip to us at the appropriate
o Send it to us at the appropriate address,                  address below
  along with an investment check
                                                           o If you don't have an investment slip, simply
                                                             include a letter with your name, account number,
                                                             the full name of the fund and the share class and
                                                             your investment instructions
----------------------------------------------------------------------------------------------------------------------------
By wire

o Call (800) 621-1048 for instructions                     o Call (800) 621-1048 for instructions
----------------------------------------------------------------------------------------------------------------------------
By phone

--                                                         o Call (800) 621-1048 for instructions
----------------------------------------------------------------------------------------------------------------------------
With an automatic investment plan

--                                                         o To set up regular investments from a bank checking
                                                             account, call (800) 621-1048 (minimum $50)
----------------------------------------------------------------------------------------------------------------------------
On the Internet

--                                                         o Go to www.kemper.com and register

                                                           o Follow the instructions for buying shares with
                                                             money from your bank account
----------------------------------------------------------------------------------------------------------------------------
</TABLE>


--------------------------------------------------------------------------------
  Regular mail:
  Kemper Funds, PO Box 219153, Kansas City, MO 64121-9153

  Express, registered or certified mail:
  Kemper Service Company, 811 Main Street, Kansas City, MO 64105-2005

  Fax number: (800) 818-7526 (for exchanging and selling only)


                                       17
<PAGE>

How to Exchange or Sell Shares

Use these instructions to exchange or sell shares in your account.


<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
Exchanging into another fund                               Selling shares
-------------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>
$1,000 or more to open a new account ($250 for             Some transactions, including most for over
IRAs)                                                      $50,000, can only be ordered in writing with a
                                                           signature guarantee; if you're in doubt, see page
$100 or more for exchanges between existing                20
accounts
-------------------------------------------------------------------------------------------------------------------------
Through a financial representative                         o Contact your representative by the method
                                                             that's most convenient for you
o Contact your representative by the method
  that's most convenient for you
-------------------------------------------------------------------------------------------------------------------------
By phone or wire

o Call (800) 621-1048 for instructions                     o Call (800) 621-1048 for instructions
-------------------------------------------------------------------------------------------------------------------------
By mail, express mail or fax
(see previous page)

Write a letter that includes:                              Write a letter that includes:

o the fund, class and account number you're                o the fund, class and account number from which
  exchanging out of                                          you want to sell shares

o the dollar amount or number of shares you                o the dollar amount or number of shares you want
  want to exchange                                           to sell

o the name and class of the fund you want to               o your name(s), signature(s) and address, as they
  exchange into                                              appear on your account

o your name(s), signature(s) and address, as               o a daytime telephone number
  they appear on your account

o a daytime telephone number
-------------------------------------------------------------------------------------------------------------------------
With a systematic exchange plan                            With a systematic withdrawal plan

o To set up regular exchanges from a fund                  o To set up regular cash payments from a fund
  account, call (800) 621-1048                               account, call (800) 621-1048
-------------------------------------------------------------------------------------------------------------------------
On the internet

o Go to www.kemper.com and register

o Follow the instructions for making
  on-line-exchanges
-------------------------------------------------------------------------------------------------------------------------
</TABLE>





                                       18
<PAGE>

Policies You Should Know About

Along with the instructions on the previous pages, the policies below may affect
you as a shareholder. Some of this information, such as the section on dividends
and taxes, applies to all investors, including those investing through
investment providers.

If you are investing through an investment provider, check the materials you got
from them. As a general rule, you should follow the information in those
materials wherever it contradicts the information given here. Please note that
an investment provider may charge its own fees.

In either case, keep in mind that the information in this prospectus applies
only to the fund's Class A, Class B and Class C shares. The fund does have other
share classes, which are described in a separate prospectus and which have
different fees, requirements and services.

In order to reduce the amount of mail you receive and to help reduce fund
expenses, we generally send a single copy of any shareholder report and
prospectus to each household. If you do not want the mailing of these documents
to be combined with those for other members of your household, please call (800)
621-1048.

Policies about transactions

The fund is open for business each day the New York Stock Exchange is open. The
fund calculates its share price every business day, as of the close of regular
trading on the Exchange (typically 4 p.m. Eastern time, but sometimes earlier,
as in the case of scheduled half-day trading or unscheduled suspensions of
trading).

You can place an order to buy or sell shares at any time. Once your order is
received by Kemper Service Company, and they have determined that it is a "good
order," it will be processed at the next share price calculated.

Because orders placed through investment providers must be forwarded to Kemper
Service Company before they can be processed, you'll need to allow extra time. A
representative of your investment provider should be able to tell you when your
order will be processed.



                                       19
<PAGE>

KemperACCESS, the Kemper Automated Information Line, is available 24 hours a day
by calling (800) 972-3060. You can use Kemper ACCESS to get information on
Kemper or Scudder funds generally and on accounts held directly at Kemper. You
can also use it to make exchanges and sell shares.

EXPRESS-Transfer lets you set up a link between a Kemper or Scudder account and
a bank account. Once this link is in place, you can move money between the two
with a phone call. You'll need to make sure your bank has Automated Clearing
House (ACH) services. Transactions take two to three days to be completed, and
there is a $100 minimum. To set up EXPRESS-Transfer on a new account, see the
account application; to add it to an existing account, call (800) 621-1048.

Since many transactions may be initiated by telephone or electronically, it's
important to understand that as long as we take reasonable steps to ensure that
an order to purchase or redeem shares is genuine, such as recording calls or
requesting personalized security codes or other information, we are not
responsible for any losses that may occur. For transactions conducted over the
Internet, we recommend the use of a secure Internet browser. In addition, you
should verify the accuracy of your confirmation statements immediately after you
receive them.

When you ask us to send or receive a wire, please note that while we don't
charge a fee to send or receive wires, it's possible that your bank may do so.
Wire transactions are completed within 24 hours. The funds can only send or
accept wires of $100 or more.

Exchanges are a shareholder privilege, not a right: we may reject any exchange
order, particularly when there appears to be a pattern of "market timing" or
other frequent purchases and sales. We may also reject or limit purchase orders,
for these or other reasons.

When you want to sell more than $50,000 worth of shares, you'll usually need to
place your order in writing and include a signature guarantee. The only
exception is if you want money wired to a bank account that is already on file
with us; in that case, you don't need a signature guarantee. Also, you don't
need a signature guarantee for an exchange, although we may require one in
certain other circumstances.

THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.

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

The Kemper Web site can be a valuable resource for shareholders with Internet
access. Go to www.kemper.com to get up-to-date information, review balances or
even place orders for exchanges.



                                       20
<PAGE>

A signature guarantee is simply a certification of your signature -- a valuable
safeguard against fraud. You can get a signature guarantee from most brokers,
banks, savings institutions and credit unions. Note that you can't get a
signature guarantee from a notary public.

When you sell shares that have a CDSC, we calculate the CDSC as a percentage of
what you paid for the shares or what you are selling them for -- whichever
results in the lowest charge to you. In processing orders to sell shares, we
turn to the shares with the lowest CDSC first. Exchanges from one fund into
another don't affect CDSCs: for each investment you make, the date you first
bought shares is the date we use to calculate a CDSC on that particular
investment.

There are certain cases in which you may be exempt from a CDSC. These include:

o        the death or disability of an account owner (including a joint owner)

o        withdrawals made through a systematic withdrawal plan

o        withdrawals related to certain retirement or benefit plans

o        redemptions for certain loan advances, hardship provisions or returns
         of excess contributions from retirement plans

o        for Class A shares purchased through the Large Order NAV Purchase
         Privilege, redemption of shares whose dealer of record at the time of
         the investment notifies Kemper Distributors that the dealer waives the
         applicable commission

o        For Class C shares, redemption of shares purchased through a
         dealer-sponsored asset allocation program maintained on an omnibus
         record-keeping system, provided the dealer of record has waived the
         advance of the first year administrative services and distribution fees
         applicable to such shares and has agreed to receive such fees
         quarterly.

         In each of these cases, there are a number of additional provisions
         that apply in order to be eligible for a CDSC waiver. Your financial
         representative or Shareholder Services can answer your questions and
         help you determine if you are eligible.

THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.

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

If you ever have difficulty placing an order by phone or fax, you can always
send us your order in writing.


                                       21
<PAGE>

If you sell shares in a Scudder fund and then decide to invest with Scudder or
Kemper again within six months, you can take advantage of the "reinstatement
feature." With this feature, you can put your money back into the same class of
a Scudder or Kemper fund at its current NAV and for purposes of sales charges it
will be treated as if it had never left Scudder or Kemper. You'll be reimbursed
(in the form of fund shares) for any CDSC you paid when you sold. Future CDSC
calculations will be based on your original investment date, rather than your
reinstatement date. There is also an option that lets investors who sold Class B
shares buy Class A shares with no sales charge, although they won't be
reimbursed for any CDSC they paid. You can only use the reinstatement feature
once for any given group of shares. To take advantage of this feature, contact
Shareholder Services or your financial representative.

Money from shares you sell is normally sent out within one business day of when
your order is processed (not when it is received), although it could be delayed
for up to seven days. There are also two circumstances when it could be longer:
when you are selling shares you bought recently by check and that check hasn't
cleared yet (maximum delay: 10 days) or when unusual circumstances prompt the
SEC to allow further delays. Certain expedited redemption processes may also be
delayed when you are selling recently purchased shares.

How the fund calculates share price

For each share class, the price at which you buy shares is as follows:

Class A shares -- net asset value per share, or NAV, adjusted to allow for any
applicable sales charges (see "Choosing A Share Class")

Class B and Class C shares-- net asset value per share, or NAV

To calculate NAV, each share class of each fund uses the following equation:

   TOTAL ASSETS - TOTAL LIABILITIES
 ------------------------------------- = NAV
   TOTAL NUMBER OF SHARES OUTSTANDING

For the fund and each share class, the price at which you sell shares is also
the NAV, although CDSC may be taken out of the proceeds (see "Choosing A Share
Class").



                                       22
<PAGE>

We typically use market prices to value securities. However, when a market price
isn't available, or when we have reason to believe it doesn't represent market
realities, we may use fair value methods approved by the fund's Board. In such a
case, the fund's value for a security is likely to be different from quoted
market prices.

To the extent that the fund invests in securities that are traded primarily in
foreign markets, the value of its holdings could change at a time when you
aren't able to buy or sell fund shares. This is because some foreign markets are
open on days when the fund doesn't price its shares.

Other rights we reserve

For this fund, you should be aware that we may do any of the following:

o        withhold 31% of your distributions as federal income tax if you have
         been notified by the IRS that you are subject to backup withholding, or
         if you fail to provide us with a correct taxpayer ID number or
         certification that you are exempt from backup withholding

o        reject a new account application if you don't provide a correct Social
         Security or other tax ID number; if the account has already been
         opened, we may give you 30 days' notice to provide the correct number

o        charge you $9 each calendar quarter if your account balance is below
         $800 for the entire quarter; this policy doesn't apply to most
         retirement accounts or if you have an automatic investment plan

o        pay you for shares you sell by "redeeming in kind," that is, by giving
         you marketable securities (which typically will involve brokerage costs
         for you to liquidate) rather than cash

o        change, add or withdraw various services, fees and account policies
         (for example, we may change or terminate the exchange privilege at any
         time)


                                       23
<PAGE>

Understanding Distributions and Taxes

By law, a mutual fund is required to pass through to its shareholders virtually
all of its net earnings. A fund can earn money in two ways: by receiving
interest, dividends or other income from securities it holds, and by selling
securities for more than it paid for them. (A fund's earnings are separate from
any gains or losses stemming from your own purchase of shares.) A fund may not
always pay a distribution for a given period.

The fund intends to pay dividends and distributions to its shareholders annually
in December, and if necessary may do so at other times as well.

You can choose how to receive your dividends and distributions. You can have
them all automatically reinvested in fund shares (at NAV), all sent to you by
check, have one type reinvested and the other sent to you by check or have them
invested in a different fund. Tell us your preference on your application. If
you don't indicate a preference, your dividends and distributions will all be
reinvested without sales charges. For retirement plans, reinvestment is the only
option.

Buying and selling fund shares will usually have tax consequences for you
(except in an IRA or other tax-advantaged account). Your sales of shares may
result in a capital gain or loss for you; whether long-term or short-term
depends on how long you owned the shares. For tax purposes, an exchange is the
same as a sale.

THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.

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

Because each shareholder's tax situation is unique, it's always a good idea to
ask your tax professional about the tax consequences of your investments,
including any state and local tax consequences.




                                       24
<PAGE>

The tax status of the fund earnings you receive, and your own fund transactions,
generally depends on their type:

Generally taxed at ordinary income rates
----------------------------------------------------------------------
o short-term capital gains from selling fund shares
----------------------------------------------------------------------
o taxable income dividends you receive from the fund
----------------------------------------------------------------------
o short-term capital gains distributions you receive from the fund
----------------------------------------------------------------------

Generally taxed at capital gains rates
----------------------------------------------------------------------
o long-term capital gains from selling fund shares
----------------------------------------------------------------------
o long-term capital gains distributions you receive from the fund
----------------------------------------------------------------------


The fund will send you detailed tax information every January. These statements
tell you the amount and the tax category of any dividends or distributions you
received. They also have certain details on your purchases and sales of shares.
The tax status of dividends and distributions is the same whether you reinvest
them or not. Dividends or distributions declared in the last quarter of a given
year are taxed in that year, even though you may not receive the money until the
following January.

If you invest right before the fund pays a dividend, you'll be getting some of
your investment back as a taxable dividend. You can avoid this, if you want, by
investing after the fund declares a dividend. In tax-advantaged retirement
accounts you don't need to worry about this.

Corporations may be able to take a dividends-received deduction for a portion of
income dividends they receive.


                                       25
<PAGE>


To Get More Information

Shareholder reports -- These include commentary from the
fund's management team about recent market conditions and the effects of a
fund's strategies on its performance. They also have detailed performance
figures, a list of everything the fund owns, and the fund's financial
statements. Shareholders get the reports automatically. For more copies, call
(800) 621-1048.

Statement of Additional Information (SAI) -- This tells you more
about the fund's features and policies, including additional risk information.
The SAI is incorporated by reference into this document (meaning that it's
legally part of this prospectus). If you'd like to ask for copies of these
documents, please contact Scudder or the SEC (see below). If you're a
shareholder and have questions, please contact Scudder. Materials you get from
Scudder are free; those from the SEC involve a copying fee. If you like, you can
look over these materials at the SEC's Public Reference Room in Washington, DC
or request them electronically at [email protected].


SEC                                        Scudder Funds c/o
450 Fifth Street, N.W.                     Kemper Distributors, Inc.
Washington, DC 20549-0102                  222 South Riverside Plaza
www.sec.gov                                Chicago, IL 60606-5808
Tel (202) 942-8090                         www.kemper.com
                                           Tel (800) 621-1048

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

SEC File Number

Scudder Gold Fund                          811-5565


Principal Underwriter
Kemper Distributors, Inc.
222 South Riverside Plaza Chicago, IL 60606-5808
www.kemper.com E-mail [email protected]
Tel (800) 621-1048

<PAGE>

                       STATEMENT OF ADDITIONAL INFORMATION
                                  March 1, 2001

                   Scudder Gold Fund (Class A, B and C Shares)
               222 South Riverside Plaza, Chicago, Illinois 60606
                                 1-800-621-1048

      This Statement of Additional Information is not a prospectus. It is the
Statement of Additional Information for Class A, Class B and Class C Shares (the
"Shares") of Scudder Gold Fund (the "Fund"), a diversified series of Scudder
Mutual Funds, Inc. (the "Corporation"), an open-end management investment
company. It should be read in conjunction with the prospectus of the Shares
dated March 1, 2001. The prospectus may be obtained without charge from the Fund
at the address or telephone number on this cover or the firm from which this
Statement of Additional Information was received.

      Scudder Gold Fund offers the following classes of shares: Class AARP,
Class S, Class A, Class B and Class C Shares (the "Shares"). Only Class A, Class
B and Class C shares of Scudder Gold Fund are offered herein.

                                TABLE OF CONTENTS

Investment Restrictions........................................................2

Investment Policies and Techniques.............................................3

Dividends, Distributions and Taxes.............................................3

Performance...................................................................18

Investment Manager and Underwriter............................................21

Portfolio Transactions........................................................28

Purchase, Repurchase and Redemption of Shares.................................29

Purchase of Shares............................................................31

Redemption or Repurchase of Shares............................................35

Special Features..............................................................38

Officers and Directors........................................................42

Shareholder Rights............................................................44

Zurich Scudder Investments, Inc. (the "Advisor") serves as the Fund's investment
manager.

The financial statements appearing in the Fund's October 31, 2000 Annual Report
to Shareholders are incorporated herein by reference. The Annual Report for the
Fund accompanies this document.
<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)   make loans except as permitted under the 1940 Act and as interpreted
            or modified by regulatory authority having jurisdiction, from time
            to time;

      (2)   engage in the business of underwriting securities issued by others,
            except to the extent that the Fund may be deemed to be an
            underwriter in connection with the disposition of portfolio
            securities;

      (3)   purchase or sell real estate, which term does not include securities
            of companies which deal in real estate or mortgages or investments
            secured by real estate or interests therein, except that the Fund
            reserves freedom of action to hold and to sell real estate acquired
            as a result of the Fund's ownership of securities;

      (4)   purchase or sell physical commodities or contracts relating to
            physical commodities, except for contracts for the future delivery
            of gold, silver, platinum and palladium and gold, silver, platinum
            and palladium bullion and coins;

      (5)   concentrate its investments in a particular industry, as that term
            is used in the 1940 Act and as interpreted or modified by regulatory
            authority having jurisdiction, from time to time, except that the
            Fund may concentrate in securities issued by wholly owned
            subsidiaries of Scudder Mutual Funds, Inc. and securities of
            companies that are primarily engaged in the exploration, mining,
            fabrication, processing or distribution of gold and other precious
            metals and in gold, silver, platinum and palladium bullion and
            coins;

      (6)   borrow money, except as permitted under the 1940 Act and as
            interpreted or modified by regulatory authority having jurisdiction,
            from time to time; and

      (7)   issue senior securities, except as permitted under the 1940 Act and
            as interpreted or modified by regulatory authority having
            jurisdiction, from time to time.

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

      As a matter of non-fundamental policy, the Fund currently does not intend
to:

      (1)   borrow money in an amount greater than 5% of its total assets,
            except (i) for temporary or emergency purposes and (ii) by engaging
            in reverse repurchase agreements, dollar rolls, or other investments
            or transactions described in the Fund's registration statement which
            may be deemed to be borrowings;

      (2)   purchase securities on margin or make short sales, except (i) short
            sales against the box, (ii) in connection with arbitrage
            transactions, (iii) for margin deposits in connection with futures
            contracts, options or other permitted investments, (iv) that
            transactions in futures contracts and options shall not be deemed to
            constitute selling securities short, and (v) that the Fund may
            obtain such short-term credits as may be necessary for the clearance
            of securities transactions;

      (3)   purchase options, unless the aggregate premiums paid on all such
            options held by the Fund at any time do not exceed 20% of its total
            assets; or sell put options, if as a result, the aggregate value of
            the obligations underlying such put options would exceed 50% of its
            total assets;


                                       2
<PAGE>

      (4)   enter into futures contracts or purchase options thereon for other
            than bona fide hedging purposes unless immediately after the
            purchase, the value of the aggregate initial margin with respect to
            such futures contracts entered into on behalf of the Fund and the
            premiums paid for such options on futures contracts 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;

      (5)   purchase warrants if as a result, such securities, taken at the
            lower of cost or market value, would represent more than 5% of the
            value of the Fund's total assets (for this purpose, warrants
            acquired in units or attached to securities will be deemed to have
            no value); and

      (6)   lend portfolio securities in an amount greater than 5% of its total
            assets.

      The 1940 Act limits the Fund's investment in other investment companies.
To the extent that the Fund invests in shares of other investment companies,
pursuant to the 1940 Act, 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.

Master/feeder Fund Structure. The Board of Directors has the discretion to
retain the current distribution arrangement for the Fund while investing in a
master fund in a master/feeder fund structure as described below.

      A master/feeder fund structure is one in which a fund (a "feeder fund"),
instead of investing directly in a portfolio of securities, invests most or all
of its investment assets in a separate registered investment company (the
"master fund") with substantially the same investment objective and policies as
the feeder fund. Such a structure permits the pooling of assets of two or more
feeder funds, preserving separate identities or distribution channels at the
feeder fund level. Based on the premise that certain of the expenses of
operating an investment portfolio are relatively fixed, a larger investment
portfolio may eventually achieve a lower ratio of operating expenses to average
net assets. An existing investment company is able to convert to a feeder fund
by selling all of its investments, which involves brokerage and other
transaction costs and realization of a taxable gain or loss, or by contributing
its assets to the master fund and avoiding transaction costs and, if proper
procedures are followed, the realization of taxable gain or loss.

Interfund Borrowing and Lending Program. The Fund has received exemptive relief
from the SEC that permits the Fund to participate in an interfund lending
program among certain investment companies advised by the Advisor. The interfund
lending program allows the participating funds to borrow money from and loan
money to each other for temporary or emergency purposes. The program is subject
to a number of conditions designed to ensure fair and equitable treatment of all
participating funds, including the following: (1) no fund may borrow money
through the program unless it receives a more favorable interest rate than a
rate approximating the lowest interest rate at which bank loans would be
available to any of the participating funds under a loan agreement; and (2) no
fund may lend money through the program unless it receives a more favorable
return than that available from an investment in repurchase agreements and, to
the extent applicable, money market cash sweep arrangements. In addition, a fund
may participate in the program only if and to the extent that such participation
is consistent with the fund's investment objectives and policies (for instance,
money market funds would normally participate only as lenders and tax exempt
funds only as borrowers). Interfund loans and borrowings may extend overnight,
but could have a maximum duration of seven days. Loans may be called on one
day's notice. A fund may have to borrow from a bank at a higher interest rate if
an interfund loan is called or not renewed. Any delay in repayment to a lending
fund could result in a lost investment opportunity or additional costs. The
program is subject to the oversight and periodic review of the Boards of the
participating funds. To the extent the Fund is actually engaged in borrowing
through the interfund lending program, the Fund, as a matter of non-fundamental
policy, may not borrow for other than temporary or emergency purposes (and not
for leveraging), except that the Fund may engage in reverse repurchase
agreements and dollar rolls for any purpose.

INVESTMENT POLICIES AND TECHNIQUES

      The Fund, a non-diversified series of the Corporation, an open-end
investment management company. The Fund 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.


                                       3
<PAGE>

      Although the Fund is non-diversified under the Investment Company Act of
1940, as amended (the "1940 Act"), it is designed as a convenient and
cost-effective means for investors to diversify 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.
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.

      Descriptions in this Statement of Additional Information of a particular
investment practice or technique in which the Fund may engage (such as hedging,
etc.) or a financial instrument which the Fund may purchase (such as options,
forward foreign currency contracts, etc.) are meant to describe the spectrum of
investments that the Fund's investment Advisor, Scudder Kemper Investments, Inc.
("the Advisor"), in its discretion, might, but is not required to, use in
managing the Fund's portfolio assets. Furthermore, it is possible that certain
types of financial instruments or investment techniques described herein may not
be available, permissible, economically feasible or effective for their intended
purposes in all markets. Certain practices, techniques, or instruments may not
be principal activities of the Fund, but, to the extent employed, could from
time to time have a material impact on the Fund's performance.

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:

      o     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,

      o     gold bullion, and

      o     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;
warrants; and in certain debt securities, a portion of the return on which is
indexed to the price of precious metals and money market instruments. In
addition, the Fund may make short sales against the box, engage in securities
lending and strategic transactions, which may include derivatives, enter into
repurchase and reverse repurchase agreements, and may invest in illiquid
securities.

      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 Ratings Services ("S&P"), or, if unrated, are deemed by the
Advisor, to be of equivalent quality.

      The Fund has adopted an operating policy of limiting to 10% the portion of
the Fund's total assets that 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 "Precious metals").

      When deemed appropriate by the Advisor, the Fund may temporarily invest up
to 30% of its assets to maintain liquidity. For temporary defensive purposes,
the Fund may vary from its investment policies during periods when the Advisor
determines that it is advisable to do so because of conditions in the securities
markets or other economic or political conditions. During such periods, the Fund
may hold without limit cash, 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. It is
impossible to accurately


                                       4
<PAGE>

predict how long such alternative strategies may be utilized. 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 Advisor 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, 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 Advisor
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 certain
closed-end investment companies holding foreign securities in accordance with
the limitations of the 1940 Act.

Foreign Securities. Because of the Fund's policy of investing primarily in
gold-related investments, a substantial part of the Fund's assets is generally
invested in securities of companies primarily outside the United States,
wherever domiciled or operating (including 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. Although the percentages of
Fund assets invested outside the United States will vary, the Fund 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, Inc. (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.


                                       5
<PAGE>

      These considerations generally are more of a concern in developing
countries. For example, the possibility of revolution and the dependence on
foreign economic assistance may be greater in developing 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. Investments in companies domiciled in developing
countries may be subject to potentially greater risks than investments in
developed countries.

      Investments in foreign securities usually will involve currencies of
foreign countries. Moreover, the Fund temporarily may hold funds in bank
deposits in foreign currencies during the completion of investment programs.
Accordingly, the value of the assets for 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 and
experience conversion difficulties and uncertainties 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, if any, into U.S. dollars on a daily basis. It may 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, if any, 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.

      To the extent that the Fund invests in foreign securities, the Fund's
share price could reflect the movements of the stock markets in which it is
invested and the currencies in which the investments are denominated; the
strength or weakness of the U.S. dollar against foreign currencies could account
for part of the Fund's investment performance.

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

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

      In the course of investment in emerging markets, the Fund will be exposed
to the direct or indirect consequences of political, social and economic changes
in one or more emerging markets. While the Fund will manage its assets in a
manner that will seek to minimize the exposure to such risks, there can be no
assurance that adverse political, social or economic changes will not cause the
Fund to suffer a loss of value in respect of the securities in the Fund's
portfolio.

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

      Volume and liquidity in most foreign markets are less than in the U.S. and
securities of many foreign companies are less liquid and more volatile than
securities of comparable U.S. companies. Fixed commissions on foreign securities
exchanges are generally higher than negotiated commissions on U.S. exchanges,
although the Fund endeavors to achieve the most favorable net results on its
portfolio transactions. There is generally less government supervision and
regulation of business and industry practices, securities exchanges, brokers,
dealers and listed companies than in the U.S. Mail service between the U.S. and
foreign countries may be slower or less reliable than within the U.S., thus
increasing the risk of delayed settlements of portfolio transactions or loss of
certificates for portfolio securities. In addition, with respect to certain
emerging markets, there is the possibility of expropriation or confiscatory
taxation, political or social instability, or diplomatic developments which
could affect the Fund's investments in those countries. Moreover, individual
emerging market economies may differ favorably or unfavorably from the U.S.
economy in such respects as growth of gross national product, rate of inflation,
capital reinvestment, resource self-sufficiency and balance of payments
position.


                                       6
<PAGE>

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

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

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

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

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

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

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

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
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.")


                                       7
<PAGE>

      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 herein and in the Prospectus, an investment in shares
of the Fund is not intended to provide a complete investment program for an
investor.

Precious Metals. The Fund "concentrates" (for the purposes of the 1940 Act) its
assets in securities related to gold and gold bullion and coins, which means
that as a matter of fundamental policy, at all times, the Fund invests at least
25% of total assets in securities related to gold and in gold directly. 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, when market conditions warrant, the Fund reserves the freedom
to concentrate its assets in securities related to other precious metals and in
those metals directly.

      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.

      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.

Gold or Precious Metals Custody. Gold and other precious metals held by or on
behalf of the Fund may be held on either an allocated or an unallocated basis
inside or outside the U.S. Placing gold or precious metals in an allocated
custody account gives the fund a direct interest in specified gold bars or
precious metals, whereas an unallocated deposit does not and instead gives the
Fund a right only to compel the counterparty to deliver a specific amount of
gold or precious metals, as applicable. Consequently, the Fund could experience
a loss if the counterparty to an unallocated deposity arrangement becomes
bankrupt or fails to deliver the gold or precious metals as requested. An
allocated gold or precious metals custody account also involves the risk that
the gold or precious metals will be stolen or damaged while in transit. Both
allocated and unallocated arrangements require the Fund as seller to deliver,
either by book entry or physically, the gold or precious metals sold in advance
of the receipt of payment.

Mining and Exploration Risks. The business of gold mining by its nature involves
significant risks and hazards, including environmental hazards, industrial
accidents, labor disputes, discharge of toxic chemicals, fire, drought, flooding
and natural acts. The occurrence of any of these hazards can delay production,
increase production costs and result in liability to the operator of the mines.
A mining operation may become subject to liability for pollution or other
hazards against which it has not insured or cannot insure, including those in
respect of past mining activities for which it was not responsible.

      Exploration for gold and other precious metals is speculative in nature,
involves many risks and frequently is unsuccessful. There can be no assurance
that any mineralisation discovered will result in an increase in the proven and
probable reserves of a mining operation. If reserves are developed, it can take
a number of years from the initial phases of drilling and identification of
mineralisation until production is possible, during which time the economic
feasibility of production may change. Substantial expenditures are required to
establish ore reserves properties and to construct mining and processing
facilities. As a result of these uncertainties, no assurance can be given that
the exploration programs undertaken by a particular mining operation will
actually result in any new commercial mining.

Correlation of Gold and Gold Securities. The Advisor 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.


                                       8
<PAGE>

Non-diversification. The Fund is classified as a non-diversified management
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 fund.

Common Stocks. Under normal circumstances, the Fund invests primarily in common
stocks. Common stock is issued by companies to raise cash for business purposes
and represents a proportionate interest in the issuing companies. Therefore, the
Fund participates in the success or failure of any company in which it holds
stock. The market values of common stock can fluctuate significantly, reflecting
the business performance of the issuing company, investor perception and general
economic or financial market movements. Despite the risk of price volatility,
however, common stocks have traditionally offered the greatest potential for
gain on investment, compared to other classes of financial assets such as bonds
or cash equivalents.

Investment Company Securities. The Fund may acquire securities of other
investment companies to the extent consistent with its investment objective and
subject to the limitations of the 1940 Act. The Fund will indirectly bear its
proportionate share of any management fees and other expenses paid by such other
investment companies.

      For example, the Fund may invest in a variety of investment companies
which seek to track the composition and performance of specific indexes or a
specific portion of an index. These index-based investments hold substantially
all of their assets in securities representing their specific index.
Accordingly, the main risk of investing in index-based investments is the same
as investing in a portfolio of equity securities comprising the index. The
market prices of index-based investments will fluctuate in accordance with both
changes in the market value of their underlying portfolio securities and due to
supply and demand for the instruments on the exchanges on which they are traded
(which may result in their trading at a discount or premium to their NAVs).
Index-based investments may not replicate exactly the performance of their
specified index because of transaction costs and because of the temporary
unavailability of certain component securities of the index.

      Examples of index-based investments include:

            SPDRs(R): SPDRs, an acronym for "Standard & Poor's Depositary
      Receipts," are based on the S&P 500 Composite Stock Price Index. They are
      issued by the SPDR Trust, a unit investment trust that holds shares of
      substantially all the companies in the S&P 500 in substantially the same
      weighting and seeks to closely track the price performance and dividend
      yield of the Index.

            MidCap SPDRs(R): MidCap SPDRs are based on the S&P MidCap 400 Index.
      They are issued by the MidCap SPDR Trust, a unit investment trust that
      holds a portfolio of securities consisting of substantially all of the
      common stocks in the S&P MidCap 400 Index in substantially the same
      weighting and seeks to closely track the price performance and dividend
      yield of the Index.

            Select Sector SPDRs(R): Select Sector SPDRs are based on a
      particular sector or group of industries that are represented by a
      specified Select Sector Index within the Standard & Poor's Composite Stock
      Price Index. They are issued by The Select Sector SPDR Trust, an open-end
      management investment company with nine portfolios that each seeks to
      closely track the price performance and dividend yield of a particular
      Select Sector Index.

            DIAMONDS(SM): DIAMONDS are based on the Dow Jones Industrial
      Average(SM). They are issued by the DIAMONDS Trust, a unit investment
      trust that holds a portfolio of all the component common stocks of the Dow
      Jones Industrial Average and seeks to closely track the price performance
      and dividend yield of the Dow.

            Nasdaq-100 Shares: Nasdaq-100 Shares are based on the Nasdaq 100
      Index. They are issued by the Nasdaq-100 Trust, a unit investment trust
      that holds a portfolio consisting of substantially all of the securities,
      in substantially the same weighting, as the component stocks of the
      Nasdaq-100 Index and seeks to closely track the price performance and
      dividend yield of the Index.

            WEBs(SM): WEBs, an acronym for "World Equity Benchmark Shares," are
      based on 17 country-specific Morgan Stanley Capital International Indexes.
      They are issued by the WEBs Index Fund, Inc., an open-end management
      investment company that seeks to generally correspond to the price and
      yield performance of a specific Morgan Stanley Capital International
      Index.

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

                                       9
<PAGE>

Securities Act of 1933, as amended, 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 Advisor may at
times play a greater role in valuing these securities than in the case of
unrestricted securities. The Fund invests no more than 15% of its net assets in
illiquid investments.

Debt Securities. The Fund may invest up to 35% of its assets 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 or AAA, AA, A
or BBB by S&P or, if unrated, judged to be of equivalent quality as determined
by the Advisor. Moody's considers bonds it rates Baa to have speculative
elements as well as investment-grade characteristics. The Fund may invest in
certain debt securities, a portion of the return on which is indexed to the
price of precious metals and money market instruments (See "DESCRIPTION OF S&P
AND MOODY'S RATINGS.")

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). 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.

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 may 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 Advisor to be at least as high as
that of other obligations the Fund may purchase.

      A repurchase agreement provides a means for the Fund to earn income on
funds for periods as short as overnight. It is an arrangement under which the
Purchaser (i.e., the Fund) acquires a 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 the entire principal and income
involved in the transaction. As with unsecured debt obligations purchased for
the Fund, the Advisor 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


                                       10
<PAGE>

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.

Reverse Repurchase Agreements. The Fund may enter into "reverse repurchase
agreements," which are repurchase agreements in which the Fund, as the seller of
the securities, agrees to repurchase them at an agreed time and price. The Fund
maintains a segregated account in connection with outstanding reverse repurchase
agreements. The Fund will enter into reverse repurchase agreements only when the
Advisor believes that the interest income to be earned from the investment of
the proceeds of the transaction will be greater than the interest expense of the
transaction.

Warrants. The Fund may purchase warrants issued by domestic and foreign issuers
to purchase newly created equity issues consisting of common and preferred
stock, convertible preferred stock and warrants that themselves are only
convertible into common, preferred or convertible preferred stock. The equity
issue underlying an equity warrant is outstanding at the time the equity warrant
is issued or is issued together with the warrant. At the time the Fund acquires
an equity warrant convertible into a warrant, the terms and conditions under
which the warrant received upon conversion can be exercised will have been
determined; the warrant received upon conversion will only be convertible into a
common, preferred or convertible preferred stock.

      Investing in warrants can provide a greater potential for profit or loss
than an equivalent investment in the underlying security, and, thus, can be a
speculative investment. The value of a warrant may decline because of a decline
in the value of the underlying security, the passage of time, changes in
interest rates or in the dividend or other policies of the company whose equity
underlies the warrant or a change in the perception as to the future price of
the underlying security, or any combination thereof. Warrants generally pay no
dividends and confer no voting or other rights other than to purchase the
underlying security.

Short Sales Against the Box. With respect to 30% of its assets, 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.

      Uncertainty regarding the tax effects of short sales of appreciated
investments may limit the extent to which the Fund may enter into short sales
against the box.

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 or liquid 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
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.

Investment of Uninvested Cash Balances. The Fund may have cash balances that
have not been invested in portfolio securities ("Uninvested Cash"). Uninvested
Cash may result from a variety of sources, including dividends or interest
received from portfolio securities, unsettled securities transactions, reserves
held for investment strategy purposes, scheduled maturity


                                       11
<PAGE>

of investments, liquidation of investment securities to meet anticipated
redemptions and dividend payments, and new cash received from investors.
Uninvested Cash may be invested directly in money market instruments or other
short-term debt obligations. Pursuant to an Exemptive Order issued by the SEC,
the Fund may use Uninvested Cash to purchase shares of affiliated funds
including money market funds, short-term bond funds and Scudder Cash Management
Investment Trust, or one or more future entities for which Scudder Kemper
Investments acts as trustee or investment advisor that operate as cash
management investment vehicles and that are excluded from the definition of
investment company pursuant to section 3(c)(1) or 3(c)(7) of the Investment
Company Act of 1940 (collectively, the "Central Funds") in excess of the
limitations of Section 12(d)(1) of the Investment Company Act. Investment by the
Fund in shares of the Central Funds will be in accordance with the Fund's
investment policies and restrictions as set forth in its registration statement.
Certain of the Central Funds comply with rule 2a-7 under the Act. The other
Central Funds are or will be short-term bond funds that invest in fixed-income
securities and maintain a dollar weighted average maturity of three years or
less. Each of the Central Funds will be managed specifically to maintain a
highly liquid portfolio, and access to them will enhance the Fund's ability to
manage Uninvested Cash. The Fund will invest Uninvested Cash in Central Funds
only to the extent that the Fund's aggregate investment in the Central Funds
does not exceed 25% of its total assets in shares of the Central Funds. Purchase
and sales of shares of Central Funds are made at net asset value.

Strategic Transactions and Derivatives. The Fund may, but is not required to,
utilize various other investment strategies as described below for a variety of
purposes, such as hedging various market risks, managing the effective maturity
or duration of fixed-income securities in the Fund's portfolio, or enhancing
potential gain. These strategies may be executed through the use of derivative
contracts.

      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 instruments, purchase and
sell futures contracts and options thereon, enter into various transactions such
as swaps, caps, floors, collars, currency forward contracts, currency futures
contracts, currency swaps or options on currencies, or currency futures and
various other currency transactions (collectively, all the above are called
"Strategic Transactions"). In addition, strategic transactions may also include
new techniques, instruments or strategies that are permitted as regulatory
changes occur. Strategic Transactions may be used without limit (subject to
certain limitations imposed by the 1940 Act) 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 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 Advisor'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 will not be used
to alter fundamental investment purposes and characteristics of the Fund, and
the Fund will segregate assets (or as provided by applicable regulations, enter
into certain offsetting positions) to cover its obligations under options,
futures and swaps to limit leveraging of the Fund.

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


                                       12
<PAGE>

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
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 Advisor must assess the creditworthiness of
each such Counterparty or any guarantor or credit enhancement of the


                                       13
<PAGE>

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 Advisor.
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 15% of its net 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, foreign sovereign
debt, 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 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, and for duration
management, risk management and return enhancement 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 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 for bona fide hedging, risk management (including duration management) or
other portfolio and return enhancement management purposes. Typically,
maintaining a futures contract or selling an option thereon requires the Fund to
deposit with a financial intermediary as security for its obligations an amount
of cash or other specified assets (initial margin) which initially is typically
1% to 10% of the face amount of the contract (but may be higher in some
circumstances). Additional cash or assets (variation margin) may be required to
be deposited thereafter on a daily basis as the mark to market value of the
contract fluctuates. The purchase of an option on financial futures involves
payment of a premium for the option without any further obligation on the part
of the Fund. If the Fund exercises an option on a futures contract it will be
obligated to post initial margin (and potential subsequent variation margin) for
the resulting futures position just as it would for any position. Futures
contracts and options thereon are generally settled by entering into an
offsetting transaction but there can be no assurance that the position can be
offset prior to settlement at an advantageous price, nor that delivery will
occur.

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


                                       14
<PAGE>

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 primarily in order to hedge, or manage the risk of 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 (except
for OTC currency options) are determined to be of equivalent credit quality by
the Advisor.

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

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

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

      To reduce the effect of currency fluctuations on the value of existing or
anticipated holdings of portfolio securities, the Fund may also engage in proxy
hedging. Proxy hedging is often used when the currency to which the Fund's
portfolio is exposed is difficult to hedge or to hedge against the dollar. Proxy
hedging entails entering into a commitment or option to sell a currency whose
changes in value are generally considered to be correlated to a currency or
currencies in which some or all of the Fund's portfolio securities are or are
expected to be denominated, in exchange for U.S. dollars. The amount of the
commitment or option would not exceed the value of the Fund's securities
denominated in correlated currencies. For example, if the Advisor considers that
the Austrian schilling is correlated to the German deutschemark (the "D-mark"),
the Fund holds securities denominated in schillings and the Advisor believes
that the value of schillings will decline against the U.S. dollar, the Advisor
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


                                       15
<PAGE>

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 Advisor, 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 Advisor'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, index and other 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 will not sell interest rate caps or floors where it does not own
securities or other instruments providing the income stream the Fund may be
obligated to pay. Interest rate swaps involve the exchange by the Fund with
another party of their respective commitments to pay or receive interest, e.g.,
an exchange of floating rate payments for fixed rate payments with respect to a
notional amount of principal. A currency swap is an agreement to exchange cash
flows on a notional amount of two or more currencies based on the relative value
differential among them and an index swap is an agreement to swap cash flows on
a notional amount based on changes in the values of the reference indices. The
purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling such cap to the extent that a specified
index exceeds a predetermined interest rate or amount. The purchase of a floor
entitles the purchaser to receive payments on a notional principal amount from
the party selling such floor to the extent that a specified index falls below a
predetermined interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain return within a predetermined range of interest
rates or values.

The Fund will usually enter into swaps on a net basis (i.e., the two payment
streams are netted out in a cash settlement on the payment date or dates
specified in the instrument) with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. Inasmuch as the Fund will segregate
assets (or enter into offsetting positions) to cover its obligations under
swaps, the Advisor 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
Advisor. 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


                                       16
<PAGE>

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

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

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

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

      Strategic Transactions may be covered by other means when consistent with
applicable regulatory policies. The Fund may also enter into offsetting
transactions so that its combined position, coupled with any segregated assets,
equals its net outstanding obligation in related options and Strategic
Transactions. For example, the Fund could purchase a put option if the strike
price of that option is the same or higher than the strike price of a put option
sold by the Fund. Moreover, instead of segregating cash or liquid 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, cash or liquid assets equal to any remaining obligation would need
to be segregated.

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.


                                       17
<PAGE>

      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.

DIVIDENDS, DISTRIBUTIONS AND TAXES

      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.
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.

      Taxes. The Fund has elected to be treated as a regulated investment
company under Subchapter M of 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% 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 up 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.

      To be updated. At October 31, 1999 the Fund had a net tax basis capital
loss carryforward of approximately $88,879,000 which may be applied against any
realized net taxable capital gains of each succeeding year until fully utilized
or until October 31, 2005 ($26,073,000), October 31, 2006 ($52,412,000) or
October 31, 2007 ($10,394,000), the respective expiration dates.

      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.


                                       18
<PAGE>

      If, in any taxable year, the Fund fails to qualify as a regulated
investment company under the Code or fails to meet the distribution requirement,
it would be taxed in the same manner as an ordinary corporation and
distributions to its shareholders would not be deductible by the Fund in
computing its taxable income. In addition, in the event of a failure to qualify,
the Fund's distributions, to the extent derived from the Fund's current or
accumulated earnings and profits would constitute dividends (eligible for the
corporate dividends-received deduction) which are taxable to shareholders as
ordinary income, even though those distributions might otherwise (at least in
part) have been treated in the shareholders' hands as long-term capital gains.
If the Fund fails to qualify as a regulated investment company in any year, it
may be required to pay an interest charge to the IRS and distribute to
shareholders all or a portion of its remaining earnings and profits accumulated
in that year in order to qualify again as a regulated investment company. In
addition, if the Fund fails to qualify as a regulated investment company for a
period greater than one taxable year, the Fund may be required to recognize any
net built-in gains (the excess of the aggregate gains, including items of
income, over aggregate losses that would have been realized if it had been
liquidated) in order to qualify as a regulated investment company in a
subsequent year.

      If any net realized long-term capital gains in excess of net realized
short-term capital losses are retained by the Fund for reinvestment, thereby
requiring federal income taxes to be paid thereon by the Fund, the Fund intends
to elect to treat such capital gains as having been distributed to shareholders.
As a result, each shareholder will report his or her share of such capital gains
as long-term capital gains, will be able to claim a proportionate share of
federal income taxes paid by the Fund on such gains as a credit against the
shareholder's federal income tax liability, and will be entitled to increase the
adjusted tax basis of the shareholder's Fund shares by the difference between
the shareholder's pro rata share of such gains and the shareholder's tax credit.

      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. Dividends and distributions paid by the Fund
(except for the portion thereof, if any, attributable to dividends on stock of
U.S. corporations received by the Fund) will not qualify for the deduction for
dividends received by corporations.

      Properly designated distributions of the excess of net long-term capital
gain over net short-term capital loss are taxable to shareholders as long-term
capital gains, regardless of the length of time the shares of the Fund have been
held by such shareholders. The Fund will designate the amount of each
distribution that will qualify for the 20% capital gains rate or the 28% capital
gains rate. Such distributions are not eligible for the dividends-received
deduction. Any loss realized upon the redemption of shares held at the time of
redemption for six months or less 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.

      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 must 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 reflects 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 make such an election,
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 stock or securities in foreign corporations. The foreign tax credit
available to shareholders is subject to certain limitations imposed by 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


                                       19
<PAGE>

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 taxable
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 a 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 the related 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, the gain or loss recognized by the Fund will be short-term or
long-term depending 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 taxable 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.

      Certain of the Fund's transactions, including short sales against the box
and strategic transactions, if any, may be subject to special provisions of the
Code that may affect the character of gains and losses realized by the Fund and
the holding periods of securities held by the Fund, and may accelerate the
recognition of income to the Fund.

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

      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 an "excess distribution" with respect to PFIC stock or
realizes a gain on a disposition of PFIC stock, the Fund itself may be subject
to a tax even if it distributes those amounts to its shareholders. In general,
under the PFIC rules, an excess distribution and gain on a sale of PFIC stock is
treated as having been received or realized ratably over the period during which
the Fund held the PFIC shares. The Fund will be subject to tax on the amount, if
any, 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 and stock gains allocated to the current taxable year are
characterized as ordinary income even though, absent application of the PFIC
rules, such amounts might have been classified as capital gain.

      To avoid the foregoing tax rules, the Fund may make an election to
mark-to-market its shares of these foreign investment companies with the result
that the Fund will be treated as if it had sold and repurchased all of its PFIC
stock at the end of each year. 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 PFIC's stock exceeds the Fund's adjusted basis in
these shares. Mark-to-market losses may be recognized to the extent of
previously recognized mark-to-market gains. The effect of the election would be
to treat excess distributions and gain on dispositions of PFIC stock as ordinary
income which is not subject to a fund level tax when distributed to shareholders
as a dividend. This election, once made, would be effective for all subsequent
taxable years of the Fund, unless revoked with the consent of the IRS.
Alternatively, the Fund may elect to include as income and gain its share of the
ordinary earnings and net capital gain of certain PFICs in lieu of being taxed
in the manner described above.


                                       20
<PAGE>

      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.

      A brief explanation of the form and character of the distribution
accompany each 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.

      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.

PERFORMANCE

From time to time, quotations of the Fund's performance may be included in
advertisements, sales literature or reports to shareholders or prospective
investors. Performance information will be computed separately for each class.
Class A, B and C shares are newly offered and therefore have no available
performance information. Returns for Class A, B and C shares are derived from
the historical performance of Class S Shares, adjusted to reflect the estimated
operating expenses applicable to Class A, B and C shares, which may be higher or
lower than those of Class S shares.

Performance figures prior to March 1, 2001 for Class A, Class B and C shares are
derived from the historical performance of Class S shares, adjusted to reflect
the operating expenses applicable to Class A, B and C shares, which may be
higher or lower than those of Class S shares. The performance figures are also
adjusted to reflect the maximum sales charge of 5.75% for Class A shares and the
maximum current contingent deferred sales charge of 4% for Class B shares and 1%
for Class C shares.

The returns in the chart below assume reinvestment of distributions at net asset
value and represent both actual past performance figures and adjusted
performance figures of the Class A, B and C shares of the Fund as described
above; they do not guarantee future results. Investment return and principal
value will fluctuate so that an investor's shares, when redeemed, may be worth
more or less than their original cost.

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 ten years (or such shorter periods as
may be applicable dating from the commencement of the Fund's operations), all
ended on the last day of a recent calendar quarter. Average annual total return
quotations reflect changes in the price of 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: 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.


                                       21
<PAGE>

 Average Annual Total Returns for the Period Ended October 31, 2000 (1)(2)(3)(4)

                                          1 Year     5 Years     10 Years
      Scudder Gold Fund -- Class A         ____%      ____%        ____%
      Scudder Gold Fund -- Class B         ____%      ____%        ____%
      Scudder Gold Fund -- Class C         ____%      ____%        ____%

(1)   Because Class B and C shares were not introduced until March 1, 2001, the
      returns for Class A, B and C shares for the period prior to their
      introduction is based upon the performance of Class S shares.

(2)   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 or class will vary based on changes in
      market conditions and the level of the Fund's and class' expenses.

(3)   If the Advisor had not absorbed a portion of Fund expenses and had imposed
      a full management fee, the average annual total return for the life of the
      Fund would have been lower.

(4)   On September 15, 1998, Scudder Gold Fund changed its fiscal year end from
      June 30 to October 31.

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
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):

                                 C = (ERV/P) - 1

Where:

      C         =       Cumulative Total Return

      P         =       a hypothetical initial investment of $1,000

      ERV       =       ending redeemable value: ERV is the value,
                        at the end of the applicable period, of a
                        hypothetical $1,000 investment made at the
                        beginning of the applicable period.

       Cumulative Total Returns for the Period Ended October 31, 2000 (1)

                                          1 Year     5 Years     10 Years
      Scudder Gold Fund -- Class A         ____%       ____%        ____%
      Scudder Gold Fund -- Class B         ____%       ____%        ____%
      Scudder Gold Fund -- Class C         ____%       ____%        ____%

(1)   Because Class B and C shares were not introduced until March 1, 2001, the
      returns for Class A, B and C shares for the period prior to their
      introduction is based upon the performance of Class S shares.

(2)   If the Advisor had not absorbed a portion of Fund expenses and had imposed
      a full management fee, the average annual total return for the life of the
      Fund would have been lower.

(3)   On September 15, 1998, Scudder Gold Fund changed its fiscal year end from
      June 30 to October 31.

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.

From time to time, in advertisements, sales literature, and reports to
shareholders or prospective investors, figures relating to the growth in the
total net assets of the Fund apart from capital appreciation will be cited, as
an update to the information in this section, including, but not limited to: net
cash flow, net subscriptions, gross subscriptions, net asset growth, net account
growth, and subscription rates. Capital appreciation generally will be covered
by marketing literature as part of the Fund's and classes' performance data.


                                       22
<PAGE>

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

Comparison of Fund Performance

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

In connection with communicating its performance to current or prospective
shareholders, 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.

Historical information on the value of the dollar versus foreign currencies may
be used from time to time in advertisements concerning the Fund. Such historical
information is not indicative of future fluctuations in the value of the U.S.
dollar against these currencies. In addition, marketing materials may cite
country and economic statistics and historical stock market performance for any
of the countries in which the Fund invests.

From time to time, in advertising and marketing literature, the Fund's
performance may be compared to the performance of broad groups of mutual funds
with similar investment goals, as tracked by independent organizations.

From time to time, in marketing and other Fund literature, members of the Board
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 Advisor has under
management in various geographical areas may be quoted in advertising and
marketing materials.

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.

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

INVESTMENT MANAGER AND UNDERWRITER

Investment Manager. Zurich Scudder Investments, Inc. (the "Advisor"), Two
International Place, Boston, Massachusetts, an investment counsel firm, acts as
investment Advisor to the Fund. This organization, the predecessor of which is
Scudder, Stevens & Clark, Inc., ("Scudder") is one of the most experienced
investment counsel firms in the U. S. It was established as a partnership in
1919 and pioneered the practice of providing investment counsel to individual
clients on a fee basis. In 1928 it introduced the first no-load mutual fund to
the public. In 1953 the Advisor introduced Scudder International Fund, Inc., the
first mutual fund available in the U.S. investing internationally in securities
of issuers in several foreign countries. The


                                       23
<PAGE>

predecessor firm reorganized from a partnership to a corporation on June 28,
1985. On June 26, 1997, Scudder entered into an agreement with Zurich Insurance
Company ("Zurich") pursuant to which Scudder and Zurich agreed to form an
alliance. On December 31, 1997, Zurich acquired a majority interest in Scudder,
and Zurich Kemper Investments, Inc., a Zurich subsidiary, became part of
Scudder. Scudder's name changed to Scudder Kemper Investments, Inc. (Scudder
Kemper). On September 7, 1998, the businesses of Zurich (including Zurich's 70%
interest in Scudder Kemper) and the financial services businesses of B.A.T
Industries p.l.c. ("B.A.T") were combined to form a new global insurance and
financial services company known as Zurich Financial Services Group. By way of a
dual holding company structure, former Zurich shareholders initially owned
approximately 57% of Zurich Financial Services Group, with the balance initially
owned by former B.A.T shareholders. On October 17, 2000, the dual holding
company structure of Zurich Financial Services Group, comprised of Allied Zurich
p.l.c. in the United Kingdom and Zurich Allied A.G. in Switzerland, was unified
into an single Swiss company, Zurich Financial Services. On [Month Day], 2000
Scudder Kemper Investments, Inc. changed its name to Zurich Scudder Investments,
Inc. The Advisor manages 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
Massachusetts law.

      Founded in 1872, Zurich is a multinational, public corporation organized
under the laws of Switzerland. Its home office is located at Mythenquai 2, 8002
Zurich, Switzerland. Historically, Zurich's earnings have resulted from its
operations as an insurer as well as from its ownership of its subsidiaries and
affiliated companies (the "Zurich Insurance Group"). Zurich and the Zurich
Insurance Group provide an extensive range of insurance products and services
and have branch offices and subsidiaries in more than 40 countries throughout
the world.

      Pursuant to an investment management agreement with the Fund, the Advisor
acts as the Fund's investment Advisor, manages its investments, administers its
business affairs, furnishes office facilities and equipment, provides clerical
and administrative services and permits any of its officers or employees to
serve without compensation as trustees or officers of the Fund if elected to
such positions.

      The principal source of the Advisor'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, industrial
corporations, and financial and banking organizations, as well as providing
investment advice to over 280 open and closed-end mutual funds.

      The Advisor maintains a large research department, which conducts
continuous studies of the factors that affect the position of various
industries, companies and individual securities. The Advisor receives published
reports and statistical compilations from issuers and other sources, as well as
analyses from brokers and dealers who may execute portfolio transactions for the
Advisor's clients. However, the Advisor regards this information and material as
an adjunct to its own research activities. The Advisor's international
investment management team travels the world researching hundreds of companies.
In selecting securities in which the Fund may invest, the conclusions and
investment decisions of the Advisor 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 Advisor. 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 day. In
such event, such transactions will be allocated among the clients in a manner
believed by the Advisor 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 Advisor in the interest of achieving the most
favorable net results to the Fund.

      The present investment management agreement (the "Agreement") was most
recently approved by the Directors on October 10, 2000, which became effective
on October 2, 20002, will continue in effect until September 30, 2001 .. The
Agreement will continue in effect until 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 Advisor or
the Fund, cast in person at a meeting called for the purpose of voting on such
approval, and either by a vote of the Corporation's Directors or of a majority
of the outstanding voting securities of the Fund. The Agreement may be
terminated at any time without payment of penalty by either party on sixty days'
written notice and automatically terminates in the event of its assignment.

      Under the Agreement, the Advisor regularly provides the Fund with
continuing investment management for the Fund's portfolio consistent with the
Fund's investment objective, policies and restrictions and determines what
securities shall be purchased, held or sold and what portion of the Fund's
assets shall be held uninvested, subject to the Corporations' Articles of
Incorporation and By-Laws, the 1940 Act, the Code and to the Fund's investment
objective, policies and restrictions, and subject, further, to such policies and
instructions as the Board of Director of the Corporation may from time to time
establish. The Advisor also advises and assists the officers of the Corporation
in taking such steps as are


                                       24
<PAGE>

necessary or appropriate to carry out the decisions of its Directors and the
appropriate committees of the Director regarding the conduct of the business of
the Fund.

      Under the Agreement, the Advisor renders significant administrative
services (not otherwise provided by third parties) necessary for the Fund's
operations as an open-end investment company including, but not limited to,
preparing reports and notices to the Directors and shareholders; supervising,
negotiating contractual arrangements with, and monitoring various third-party
service providers to the Fund (such as the Fund's transfer agent, pricing
agents, Custodian, accountants and others); preparing and making filings with
the SEC and other regulatory agencies; assisting in the preparation and filing
of the Fund's federal, state and local tax returns; preparing and filing the
Fund's federal excise tax returns; assisting with investor and public relations
matters; monitoring the valuation of securities and the calculation of net asset
value; monitoring the registration of shares of the Fund under applicable
federal and state securities laws; maintaining the Fund's books and records to
the extent not otherwise maintained by a third party; assisting in establishing
accounting policies of the Fund; assisting in the resolution of accounting and
legal issues; establishing and monitoring the Fund's operating budget;
processing the payment of the Fund's bills; assisting the Fund in, and otherwise
arranging for, the payment of distributions and dividends; and otherwise
assisting the Fund in the conduct of its business, subject to the direction and
control of the Directors.

      The Advisor pays the compensation and expenses of all Directors, officers
and executive employees (except expenses incurred attending Board and committee
meetings outside New York, New York; Boston, Massachusetts and Chicago,
Illinois) of the Fund affiliated with the Advisor and makes available, without
expense to the Corporation, the services of such Directors, officers and
employees of the Advisor 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 provides the Fund's office space and facilities.

      For these services, the Fund will pay the Advisor an annual fee equal to
1.00% of the Fund's average daily net assets of the first $500 million, 0.95% of
the Fund's average daily net assets exceeding $500 million, payable monthly,
provided the Fund will make such interim payments as may be requested by the
Advisor not to exceed 75% of the amount of the fee then accrued on the books of
the Fund and unpaid. The net investment advisory fee for the fiscal year ended
October 31, 2000 was $_____ and for the fiscal years ended June 30, 1999 and
1998 were $1,150,027 and $1,471,427, respectively. For the four months ended
October 31, 1998, the net investment advisory fee was $411,019.

      Under the Agreement the Fund is responsible for all of its other expenses
including: organizational costs, fees and expenses incurred in connection with
membership in investment company organizations; brokers' commissions; legal,
auditing and accounting expenses; taxes and governmental fees; the fees and
expenses of the Transfer Agent; any other expenses of issue, sale, underwriting,
distribution, redemption or repurchase of shares; the expenses of and the fees
for registering or qualifying securities for sale; the fees and expenses of
Directors, officers and employees of the Fund who are not affiliated with the
Advisor; the cost of printing and distributing reports and notices to
stockholders; 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 of shareholders' meetings, the cost of responding to shareholders'
inquiries, and its expenses incurred in connection with litigation, proceedings
and claims and the legal obligation it may have to indemnify its officers and
Directors of the Fund with respect thereto.

      The Agreement identifies the Advisor as the exclusive licensee of the
rights to use and sublicense the names "Scudder," "Scudder Kemper Investments,
Inc." and "Scudder, Stevens and Clark, Inc." (together, the "Scudder Marks").
Under this license, the Corporation, with respect to the Fund, has the
non-exclusive right to use and sublicense the Scudder name and marks as part of
its name, and to use the Scudder Marks in the Corporation's investment products
and services.

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

      The Agreement provides that the Advisor 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 Advisor in
the performance of its duties or from reckless disregard by the Advisor of its
obligations and duties under the Agreement.

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

      The Advisor may serve as Advisor to other funds with investment objectives
and policies similar to those of the Fund that may have different distribution
arrangements or expenses, which may affect performance.

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


                                       25
<PAGE>

      The term Scudder Investments is the designation given to the services
provided by Zurich Scudder Investments, Inc. and its affiliates to the Scudder
Family of Funds.

AMA InvestmentLink(SM) Program

      Pursuant to an Agreement between the Advisor and AMA Solutions, Inc., a
subsidiary of the American Medical Association (the "AMA"), dated May 9, 1997,
the Advisor has agreed, subject to applicable state regulations, to pay AMA
Solutions, Inc. royalties in an amount equal to 5% of the management fee
received by the Advisor with respect to assets invested by AMA members in
Scudder funds in connection with the AMA InvestmentLink(SM) Program. The Advisor
will also pay AMA Solutions, Inc. a general monthly fee, currently in the amount
of $833. The AMA and AMA Solutions, Inc. are not engaged in the business of
providing investment advice and neither is registered as an investment Advisor
or broker/dealer under federal securities laws. Any person who participates in
the AMA InvestmentLink(SM) Program will be a customer of the Advisor (or of a
subsidiary thereof) and not the AMA or AMA Solutions, Inc. AMA
InvestmentLink(SM) is a service mark of AMA Solutions, Inc.

Code of Ethics

      The Fund, the Advisor and principal underwriter have each adopted codes of
ethics under rule 17j-1 of the Investment Company Act. Board members, officers
of the Corporation and employees of the The Advisor and principal underwriter
are permitted to make personal securities transactions, including transactions
in securities that may be purchased or held by the Fund, subject to requirements
and restrictions set forth in the applicable Code of Ethics. The The Advisor's
Code of Ethics contains provisions and requirements designed to identify and
address certain conflicts of interest between personal investment activities and
the interests of the Fund. Among other things, the The Advisor's Code of Ethics
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
quarterly 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 The
Advisor's Code of Ethics may be granted in particular circumstances after review
by appropriate personnel.

Principal Underwriter. Pursuant to separate underwriting and distribution
services agreements ("distribution agreements"), Kemper Distributors, Inc.
("KDI"), 222 South Riverside Plaza, Chicago, Illinois 60606, an affiliate of the
Advisor, is the principal underwriter and distributor for the Class A, B and C
shares of the Fund and acts as agent of the Fund in the continuous offering of
its Shares. KDI bears all of its expenses of providing services pursuant to the
distribution agreement, including the payment of any commissions. The Fund pays
the cost for the prospectus and shareholder reports to be set in type and
printed for existing shareholders, and KDI, as principal underwriter, pays for
the printing and distribution of copies thereof used in connection with the
offering of Shares to prospective investors. KDI also pays for supplementary
sales literature and advertising costs.

      The distribution agreement continues in effect from year to year so long
as such continuance is approved for each class at least annually by a vote of
the Board of Directors of the Fund, including the Directors who are not
interested persons of the Fund and who have no direct or indirect financial
interest in the agreement. The agreement automatically terminates in the event
of its assignment and may be terminated for a class at any time without penalty
by the Fund or by KDI upon 60 days' notice. Termination by the Fund with respect
to a class may be by vote of a majority of the Board of Directors or a majority
of the Directors who are not interested persons of the Fund and who have no
direct or indirect financial interest in the distribution agreement or a
"majority of the outstanding voting securities" of the class of the Fund, as
defined under the 1940 Act. The distribution agreement may not be amended for a
class to increase the fee to be paid by the Fund with respect to such class
without approval by a majority of the outstanding voting securities of such
class of the Fund, and all material amendments must in any event be approved by
the Board of Directors in the manner described above with respect to the
continuation of the distribution agreement.

      Class B Shares and Class C Shares. The Fund has adopted a plan under Rule
12b-1 (the "Rule 12b-1 Plan") that provides for fees payable as an expense of
the Class B shares and Class C shares that are used by KDI to pay for
distribution and services for those classes. Because 12b-1 fees are paid out of
fund assets on an ongoing basis they will, over time, increase the cost of an
investment and cost more than other types of sales charges.

      Rule 12b-1 Plan. Since the distribution agreement provides for fees
payable as an expense of the Class B shares and the Class C shares that are used
by KDI to pay for distribution services for those classes, that agreement is
approved and reviewed separately for the Class B shares and the Class C shares
in accordance with Rule 12b-1 under the 1940 Act, which regulates the manner in
which an investment company may, directly or indirectly, bear the expenses of
distributing its shares.

      If a Rule 12b-1 Plan (the "Plan") is terminated in accordance with its
terms, the obligation of a Fund to make payments to KDI pursuant to the Plan
will cease and the Fund will not be required to make any payments past the


                                       26
<PAGE>

termination date. Thus, there is no legal obligation for the Fund to pay any
expenses incurred by KDI in excess of its fees under a Plan, if for any reason
the Plan is terminated in accordance with its terms. Future fees under the Plan
may or may not be sufficient to reimburse KDI for its expenses incurred.

      For its services under the distribution agreement, KDI receives a fee from
the Fund, payable monthly, at the annual rate of 0.75% of average daily net
assets of the Fund attributable to Class B shares. This fee is accrued daily as
an expense of Class B shares. KDI also receives any contingent deferred sales
charges. KDI currently compensates firms for sales of Class B shares at a
commission rate of 0.75%.

      For its services under the distribution agreement, KDI receives a fee from
the Fund, payable monthly, at the annual rate of 0.75% of average daily net
assets of the Fund attributable to Class C shares. This fee is accrued daily as
an expense of Class C shares. KDI currently advances to firms the first year
distribution fee at a rate of 0.75% of the purchase price of Class C shares. For
periods after the first year, KDI currently pays firms for sales of Class C
shares a distribution fee, payable quarterly, at an annual rate of 0.75% of net
assets attributable to Class C shares maintained and serviced by the firm and
the fee continues until terminated by KDI or a Fund. KDI also receives any
contingent deferred sales charges.

Administrative Fee. The Fund has entered into an administrative services
agreement with Zurich Scudder (the "Administration Agreement"), pursuant to
which Zurich Scudder will provide or pay others to provide substantially all of
the administrative services required by the Fund (other than those provided by
Zurich Scudder under its investment management agreements with the Fund, as
described above) in exchange for the payment by the Fund of an administrative
services fee (the "Administrative Fee") of [0.XX]% for Class A, [0.XX]% for
Class B and [0.XX]% for Class C. One effect of this arrangement is to make the
Fund's future expense ratio more predictable.

Various third-party service providers (the "Service Providers"), some of which
are affiliated with Zurich Scudder, provide certain services to the Fund
pursuant to separate agreements with the Fund. Scudder Fund Accounting
Corporation, a subsidiary of Zurich Scudder, computes net asset value for the
Fund and maintains its accounting records. Kemper Service Company is the
transfer, shareholder servicing and dividend-paying agent for the shares of the
Fund. As custodian, Brown Brother Harriman holds the portfolio securities of the
Fund, pursuant to a custodian agreement. PricewaterhouseCoopers LLP audits the
financial statements of the Fund and provides other audit, tax, and related
services. Dechert acts as general counsel for the Fund.

Zurich Scudder will pay the Service Providers for the provision of their
services to the Fund and will pay other fund expenses, including insurance,
registration, printing and postage fees. In return, the Fund will pay Zurich
Scudder an Administrative Fee.

The Administration Agreement has an initial term of three years, subject to
earlier termination by the Fund's Board. The fee payable by the Fund to Zurich
Scudder pursuant to the Administration Agreements is reduced by the amount of
any credit received from the Fund's custodian for cash balances.

Certain expenses of the Fund will not be borne by Zurich Scudder under the
Administration Agreements, such as taxes, brokerage, interest and extraordinary
expenses; and the fees and expenses of the Independent Directors (including the
fees and expenses of their independent counsel). In addition, the Fund will
continue to pay the fees required by its investment management agreement with
Zurich Scudder.

Administrative Services. Administrative services are provided to the Fund on
behalf of Class A, B and C shareholders under an administrative services
agreement ("administrative agreement") with KDI. KDI bears all its expenses of
providing services pursuant to the administrative agreement between KDI and the
Fund, including the payment of service fees. The Fund pays KDI an administrative
services fee, payable monthly, at an annual rate of up to 0.25% of average daily
net assets of Class A, B and C shares of the Fund.

      KDI enters into related arrangements with various broker-dealer firms and
other service or administrative firms ("firms") that provide services and
facilities for their customers or clients who are investors in the Fund. The
firms provide such office space and equipment, telephone facilities and
personnel as is necessary or beneficial for providing information and services
to their clients. Such services and assistance may include, but are not limited
to, establishing and maintaining accounts and records, processing purchase and
redemption transactions, answering routine inquiries regarding the Fund,
assistance to clients in changing dividend and investment options, account
designations and addresses and such other administrative services as may be
agreed upon from time to time and permitted by applicable statute, rule or
regulation. With respect to Class A Shares, KDI pays each firm a service fee,
payable quarterly, at an annual rate of up to 0.25% of the net assets in Fund
accounts that it maintains and services attributable to Class A Shares,
commencing with the month after investment. With respect to Class B and Class C
Shares, KDI currently advances to firms the first-year service fee at a rate of
up to 0.25% of the purchase price of such Shares. For periods after the first
year, KDI currently intends to pay firms a service fee at a rate of


                                       27
<PAGE>

up to 0.25% (calculated monthly and paid quarterly) of the net assets
attributable to Class B and Class C Shares maintained and serviced by the firm.
After the first year, a firm becomes eligible for the quarterly service fee and
the fee continues until terminated by KDI or the Fund. Firms to which service
fees may be paid include affiliates of KDI. In addition KDI may, from time to
time, from its own resources pay certain firms additional amounts for ongoing
administrative services and assistance provided to their customers and clients
who are shareholders of the Fund.

      KDI also may provide some of the above services and may retain any portion
of the fee under the administrative agreement not paid to firms to compensate
itself for administrative functions performed for the Fund. Currently, the
administrative services fee payable to KDI is payable at an annual rate of 0.25%
based upon Fund assets in accounts for which a firm provides administrative
services and at the annual rate of 0.15% based upon Fund assets in accounts for
which there is no firm of record (other than KDI) listed on the Fund's records.
The effective administrative services fee rate to be charged against all assets
of the Fund while this procedure is in effect will depend upon the proportion of
Fund assets that is in accounts for which a firm of record provides
administrative services. The Board of Directors of the Fund, in its discretion,
may approve basing the fee to KDI at the annual rate of 0.25% on all Fund assets
in the future

      Certain Directors or officers of the Fund are also directors or officers
of the Advisor or KDI, as indicated under "Officers and Directors."

Fund Accounting Agent. Scudder Fund Accounting Corporation ("SFAC"), Two
International Place, Boston, Massachusetts, a subsidiary of the Advisor,
computes net asset value for the Fund. SFAC is paid 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 fiscal year ended
October 31, 2000, the amount charged to the Fund by SFAC aggregated $____. For
the fiscal years ended October 31, 1999 and for the four months ended October
31, 1998, the amounts charged by SFAC aggregated $49,857 and $26,870. For the
fiscal year ended June 30, 1998 the amount charged by SFAC aggregated $67,605.

Custodian, Transfer Agent and Shareholder Service Agent. Brown Brothers Harriman
& Company, 40 Water Street, Boston, Massachusetts 02109, as custodian has
custody of all securities and cash of the Fund held outside the United States.
The Custodian attends to the collection of principal and income, and payment for
and collection of proceeds of securities bought and sold by the Fund. Kemper
Service Company ("KSVC"), 811 Main Street, Kansas City, Missouri 64105-2005, an
affiliate of the Advisor, is the Fund's transfer agent, dividend-paying agent
and shareholder service agent for the Fund's Class A, B and C shares. KSVC
receives as transfer agent, annual account fees of $5 per account, transaction
and maintenance charges, annual fees associated with the contingent deferred
sales charge (Class B shares only) and out-of-pocket expense reimbursement.

Independent Accountants and Reports to Shareholders. The financial highlights of
the Fund included in the Fund's prospectus and the Financial Statements
incorporated by reference in this Statement of Additional Information have been
so included or incorporated by reference in reliance on the report of
PricewaterhouseCoopers LLP, 160 Federal Street, Boston, Massachusetts 02110,
independent accountants, given on the authority of said firm as experts in
auditing and accounting. PricewaterhouseCoopers LLP audits the financial
statements of the Fund and provides other audit, tax and related services.
Shareholders will receive annual audited financial statements and semi-annual
unaudited financial statements.

PORTFOLIO TRANSACTIONS

Brokerage Commissions. Allocation of brokerage may be placed by the Advisor.

      The primary objective of the Advisor in placing orders for the purchase
and sale of securities for the Fund's portfolio is to obtain the most favorable
net results taking into account such factors as price, commission where
applicable, size of order, difficulty of execution and skill required of the
executing broker/dealer. The Advisor seeks to evaluate the overall
reasonableness of brokerage commissions paid (to the extent applicable) through
the familiarity of Scudder Investor Services, Inc. ("SIS"), a corporation
registered as a broker-dealer and a subsidiary of the Advisor, with commissions
charged on comparable transactions, as well as by comparing commissions paid by
the Fund to reported commissions paid by others. The Advisor reviews on a
routine basis commission rates, execution and settlement services performed,
making internal and external comparisons.

      The Fund's purchases and sales of fixed-income securities are generally
placed by the Advisor with primary market makers for these securities on a net
basis, without any brokerage commission being paid by the Fund. Trading does,
however, involve transaction costs. Transactions with dealers serving as primary
market makers reflect the spread between the bid and asked prices. Purchases of
underwritten issues may be made, which will include an underwriting fee paid to
the underwriter.

      When it can be done consistently with the policy of obtaining the most
favorable net results, it is the Advisor's practice to place such orders with
broker/dealers who supply research, market and statistical information to the
Fund. The


                                       28
<PAGE>

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 analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts.
The Advisor is not authorized when placing portfolio transactions for the Fund
to pay a brokerage commission in excess of that which another broker might
charge for executing the same transaction solely on account of the receipt of
research, market or statistical information. 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.

      In selecting among firms believed to meet the criteria for handling a
particular transaction, the Advisor may give consideration to those firms that
have sold or are selling shares of the Fund or other funds managed by the
Advisor.

      To the maximum extent feasible, it is expected that the Advisor will place
orders for portfolio transactions through SIS. SIS will place orders on behalf
of the Fund with issuers, underwriters or other brokers and dealers. SIS will
not receive any commission, fee or other remuneration from the Fund for this
service.

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

      The Directors of the Fund 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.

      In the fiscal years ended October 31, 2000, and October 31, 1999 and June
30, 1998 the Fund paid brokerage commissions of $____, $778,462 and $867,223,
respectively. For the four month period ended October 31, 1998, the Fund paid
brokerage commissions of $562,046. For the fiscal year ended October 31, 2000,
$____ (__% of the total brokerage commissions paid) resulted from orders placed,
consistent with the policy of obtaining the most favorable net results, with
brokers and dealers who provided supplementary research, market and statistical
information to the Fund or the Advisor. The total amount of brokerage
transactions aggregated $____, of which $____ (__% of all brokerage
transactions) were transactions which included research commissions.

Portfolio Turnover

      The Fund's average portfolio turnover rate is the ratio of the lesser of
sales or purchases to the monthly average value of the portfolio securities
owned during the year, excluding all securities with maturities or expiration
dates at the time of acquisition of one year or less. A higher rate involves
greater brokerage transaction expenses to the Fund and may result in the
realization of net capital gains, which would be taxable to shareholders when
distributed. Purchases and sales are made for the Fund's portfolio whenever
necessary, in management's opinion, to meet the Fund's objective.

      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 fiscal year ended October 31, 2000 was __% and for October 31,
1999 was 90.7

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 "Value Time"). The Exchange is scheduled to be closed on the following
holidays: New Year's Day, Dr. Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas,
and on the preceding Friday or subsequent Monday when one of these holidays
falls on a Saturday or Sunday, respectively. Net asset value per share is
determined separately for each class of shares by dividing the value of the
total assets of the Fund attributable to the shares of that class, less all
liabilities attributable to that class, by the total number of shares of that
class outstanding. The per share net asset value of the Class B and Class C
Shares of the Fund will generally be lower than that of the Class A Shares of
the Fund because of higher expenses borne by the Class B and Class C Shares.

      An exchange-traded equity security is valued at its most recent sale price
on the exchange it is traded as of the Value Time. Lacking any sales, the
security is valued at the calculated mean between the most recent bid quotation
and the most recent asked quotation (the "Calculated Mean") on such exchange as
of the Value Time. Lacking a Calculated Mean quotation the security is valued at
the most recent bid quotation on such exchange as of the Value Time. An equity
security which is traded on the National Association of Securities Dealers
Automated Quotation ("Nasdaq") system will be valued at


                                       29
<PAGE>

its most recent sale price on such system as of the Value Time. Lacking any
sales, the security will be valued at the most recent bid quotation as of the
Value Time. The value of an equity security not quoted on the Nasdaq system, but
traded in another over-the-counter market, is its most recent sale price if
there are any sales of such security on such market as of the Value Time.
Lacking any sales, the security is valued at the Calculated Mean quotation for
such security as of the Value Time. Lacking a Calculated Mean quotation the
security is valued at the most recent bid quotation as of the Value Time.

      Debt securities, other than money market instruments, are valued at prices
supplied by the Fund's pricing agent(s) which reflect broker/dealer supplied
valuations and electronic data processing techniques. Money market instruments
with an original maturity of sixty days or less maturing at par shall be valued
at amortized cost, which the Board believes approximates market value. If it is
not possible to value a particular debt security pursuant to these valuation
methods, the value of such security is the most recent bid quotation supplied by
a bona fide marketmaker. If it is not possible to value a particular debt
security pursuant to the above methods, the Advisor 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.

      Gold, silver, platinum and palladium bullion shall be valued based on the
London Fixing or, if there is no London Fixing available, the value of gold and
silver bullion shall be based on the last spot settlement as reported by the
Comex, a division of the New York Mercantile Exchange ("NYMEX"), and the value
of platinum and palladium bullion shall be based on the last spot settlement on
NYMEX, as supplied by a recognized precious metals dealer as of the time of
valuation; coins and precious metals other than gold, silver, platinum and
palladium bullion shall be valued at the calculated mean based on market
quotations or, if there are no such bid and ask quotations available
simultaneously, at the most recent bid quotation provided by a bona fide market
maker as of the time of valuation.

PURCHASE, REPURCHASE AND REDEMPTION OF SHARES

      Fund Shares are sold at their public offering price, which is the net
asset value per such shares next determined after an order is received in proper
form plus, with respect to Class A Shares, an initial sales charge. The minimum
initial investment for Class A, B or C is $1,000 and the minimum subsequent
investment is $100 but such minimum amounts may be changed at any time. The Fund
may waive the minimum for purchases by Directors, directors, officers or
employees of the Fund or the Advisor and its affiliates. An order for the
purchase of Shares that is accompanied by a check drawn on a foreign bank (other
than a check drawn on a Canadian bank in U.S. Dollars) will not be considered in
proper form and will not be processed unless and until the Fund determines that
it has received payment of the proceeds of the check. The time required for such
a determination will vary and cannot be determined in advance.


                                       30
<PAGE>

PURCHASE OF SHARES

Alternative Purchase Arrangements. Class A shares of the Fund are sold to
investors subject to an initial sales charge. Class B shares are sold without an
initial sales charge but are subject to higher ongoing expenses than Class A
shares and a contingent deferred sales charge payable upon certain redemptions.
Class B shares automatically convert to Class A shares six years after issuance.
Class C shares are sold without an initial sales charge but are subject to
higher ongoing expenses than Class A shares, are subject to a contingent
deferred sales charge payable upon certain redemptions within the first year
following purchase, and do not convert into another class. When placing purchase
orders, investors must specify whether the order is for Class A, Class B or
Class C shares.

      The primary distinctions among the classes of the Fund's shares lie in
their initial and contingent deferred sales charge structures and in their
ongoing expenses, including asset-based sales charges in the form of Rule 12b-1
distribution fees. These differences are summarized in the table below. Each
class has distinct advantages and disadvantages for different investors, and
investors may choose the class that best suits their circumstances and
objectives.

<TABLE>
<CAPTION>
                                                    Annual 12b-1 Fees
                                                    (as a % of average
              Sales Charge                          daily net assets)           Other Information
              ------------                          -----------------           -----------------

<S>           <C>                                        <C>                    <C>
Class A       Maximum initial sales charge of            0.25%(1)               Initial sales charge
              5.75% of the public offering price                                waived or reduced for
                                                                                certain purchases

Class B       Maximum contingent deferred sales             1.00%               Shares convert to Class A
              charge of 4% of redemption                                        shares six years after
              proceeds; declines to zero after                                  issuance
              six years

Class C       Contingent deferred sales charge of           1.00%               No conversion feature
              1% of redemption proceeds for
              redemptions made during first year
              after purchase
</TABLE>

(1)   Class A shares purchased at net asset value under the "Large Order NAV
      Purchase Privilege" may be subject to a 1% contingent deferred sales
      charge if redeemed within one year of purchase and a 0.50% contingent
      deferred sales charge if redeemed within the second year of purchase.

      The minimum initial investment for each of Class A, B and C of the Fund is
$1,000 and the minimum subsequent investment is $100. The minimum initial
investment for an Individual Retirement Account is $250 and the minimum
subsequent investment is $50. Under an automatic investment plan, such as Direct
Deposit, Payroll Direct Deposit or Government Direct Deposit, the minimum
initial and subsequent investment is $50. These minimum amounts may be changed
at any time in management's discretion.

      Share certificates will not be issued unless requested in writing and may
not be available for certain types of account registrations. It is recommended
that investors not request share certificates unless needed for a specific
purpose. You cannot redeem shares by telephone or wire transfer or use the
telephone exchange privilege if share certificates have been issued. A lost or
destroyed certificate is difficult to replace and can be expensive to the
shareholder (a bond worth 2% or more of the certificate value is normally
required).

Initial Sales Charge Alternative - Class A Shares. The public offering price of
Class A shares for purchasers choosing the initial sales charge alternative is
the net asset value plus a sales charge, as set forth below.

<TABLE>
<CAPTION>
                                                                    Sales Charge
                                                                    ------------
                                                                                       Allowed to Dealers
                                            As a Percentage of    As a Percentage of   As a Percentage of
Amount of Purchase                            Offering Price       Net Asset Value*      Offering Price
------------------                            --------------       ----------------      --------------

<S>                                               <C>                   <C>                  <C>
Less than $50,000                                 5.75%                 6.10%                5.20%
$50,000 but less than $100,000                     4.50                  4.71                 4.00
$100,000 but less than $250,000                    3.50                  3.63                 3.00
$250,000 but less than $500,000                    2.60                  2.67                 2.25
$500,000 but less than $1 million                  2.00                  2.04                 1.75
$1 million and over                               .00**                 .00**                  ***
</TABLE>

*     Rounded to the nearest one-hundredth percent.

**    Redemption of shares may be subject to a contingent deferred sales charge
      as discussed below.

***   Commission is payable by KDI as discussed below.

      The Fund receives the entire net asset value of all its shares sold. KDI,
the Fund's principal underwriter, retains the sales charge on sales of Class A
shares from which it allows discounts from the applicable public offering price
to investment dealers, which discounts are uniform for all dealers in the United
States and its territories. The normal discount allowed to dealers is set forth
in the above table. Upon notice to all dealers with whom it has sales
agreements, KDI may re-allow to


                                       31
<PAGE>

dealers up to the full applicable sales charge, as shown in the above table,
during periods and for transactions specified in such notice and such
re-allowances may be based upon attainment of minimum sales levels. During
periods when 90% or more of the sales charge is re-allowed, such dealers may be
deemed to be underwriters as that term is defined in the Securities Act of 1933.

      Class A shares of the Fund may be purchased at net asset value by: (a) any
purchaser, provided that the amount invested in such Fund or other Zurich
Scudder Funds listed under "Special Features -- Class A Shares -- Combined
Purchases" totals at least $1,000,000 including purchases of Class A shares
pursuant to the "Combined Purchases," "Letter of Intent" and "Cumulative
Discount" features described under "Special Features"; or (b) a
participant-directed qualified retirement plan described in Code Section 401(a),
a participant-directed non-qualified deferred compensation plan described in
Code Section 457 or a participant-directed qualified retirement plan described
in Code Section 403(b)(7) which is not sponsored by a K-12 school district,
provided in each case that such plan has not less than 200 eligible employees
(the "Large Order NAV Purchase Privilege"). Redemption within two years of the
purchase of shares purchased under the Large Order NAV Purchase Privilege may be
subject to a contingent deferred sales charge. See "Redemption or Repurchase of
Shares -- Contingent Deferred Sales Charge -- Large Order NAV Purchase
Privilege."

      KDI may at its discretion compensate investment dealers or other financial
services firms in connection with the sale of Class A shares of the Fund at net
asset value in accordance with the Large Order NAV Purchase Privilege up to the
following amounts: 1.00% of the net asset value of shares sold on amounts up to
$5 million, 0.50% on the next $45 million and 0.25% on amounts over $50 million.
The commission schedule will be reset on a calendar year basis for sales of
shares pursuant to the Large Order NAV Purchase Privilege to employer-sponsored
employee benefit plans using the subaccount recordkeeping system made available
through Kemper Service Company. For purposes of determining the appropriate
commission percentage to be applied to a particular sale, KDI will consider the
cumulative amount invested by the purchaser in the Fund and other Zurich Scudder
Funds listed under "Special Features -- Class A Shares -- Combined Purchases,"
including purchases pursuant to the "Combined Purchases," "Letter of Intent" and
"Cumulative Discount" features referred to above [and including purchases of
Class R shares of certain Scudder Funds. The privilege of purchasing Class A
shares of the Fund at net asset value under the Large Order NAV Purchase
Privilege is not available if another net asset value purchase privilege also
applies.

      Class A shares of the Fund or of any other Zurich Scudder Fund listed
under "Special Features -- Class A Shares -- Combined Purchases" may be
purchased at net asset value in any amount by members of the plaintiff class in
the proceeding known as Howard and Audrey Tabankin, et al. v. Kemper Short-Term
Global Income Fund, et al., Case No. 93 C 5231 (N.D. IL). This privilege is
generally non-transferable and continues for the lifetime of individual class
members and for a ten year period for non-individual class members. To make a
purchase at net asset value under this privilege, the investor must, at the time
of purchase, submit a written request that the purchase be processed at net
asset value pursuant to this privilege specifically identifying the purchaser as
a member of the "Tabankin Class." Shares purchased under this privilege will be
maintained in a separate account that includes only shares purchased under this
privilege. For more details concerning this privilege, class members should
refer to the Notice of (1) Proposed Settlement with Defendants; and (2) Hearing
to Determine Fairness of Proposed Settlement, dated August 31, 1995, issued in
connection with the aforementioned court proceeding. For sales of Fund shares at
net asset value pursuant to this privilege, KDI may in its discretion pay
investment dealers and other financial services firms a concession, payable
quarterly, at an annual rate of up to 0.25% of net assets attributable to such
shares maintained and serviced by the firm. A firm becomes eligible for the
concession based upon assets in accounts attributable to shares purchased under
this privilege in the month after the month of purchase and the concession
continues until terminated by KDI. The privilege of purchasing Class A shares of
the Fund at net asset value under this privilege is not available if another net
asset value purchase privilege also applies.

      Class A shares of a Fund may be purchased at net asset value by persons
who purchase such shares through bank trust departments that process such trades
through an automated, integrated mutual fund clearing program provided by a
third party clearing firm.

      Class A shares of the Fund may be purchased at net asset value in any
amount by certain professionals who assist in the promotion of [Scudder Kemper
Mutual Fund]s pursuant to personal services contracts with KDI, for themselves
or members of their families. KDI in its discretion may compensate financial
services firms for sales of Class A shares under this privilege at a commission
rate of 0.50% of the amount of Class A shares purchased.

      Class A shares of a Fund may be purchased at net asset value by persons
who purchase shares of the Fund through KDI as part of an automated billing and
wage deduction program administered by RewardsPlus of America for the benefit of
employees of participating employer groups.

      Class A shares may be sold at net asset value in any amount to: (a)
officers, Directors, employees (including retirees) and sales representatives of
the Fund, its investment manager, its principal underwriter or certain
affiliated companies, for themselves or members of their families; (b)
registered representatives and employees of broker-dealers having selling group
agreements with KDI and officers, directors and employees of service agents of
the Fund, for themselves or their spouses or dependent children; (c) any trust,
pension, profit-sharing or other benefit plan for only such persons; (d) persons
who


                                       32
<PAGE>

purchase such shares through bank trust departments that process such trades
through an automated, integrated mutual fund clearing program provided by a
third party clearing firm; and (e) persons who purchase shares of the Fund
through KDI as part of an automated billing and wage deduction program
administered by RewardsPlus of America for the benefit of employees of
participating employer groups. Class A shares may be sold at net asset value in
any amount to selected employees (including their spouses and dependent
children) of banks and other financial services firms that provide
administrative services related to order placement and payment to facilitate
transactions in shares of the Fund for their clients pursuant to an agreement
with KDI or one of its affiliates. Only those employees of such banks and other
firms who as part of their usual duties provide services related to transactions
in Fund shares may purchase Fund Class A shares at net asset value hereunder.
Class A shares may be sold at net asset value in any amount to unit investment
trusts sponsored by Ranson & Associates, Inc. In addition, unitholders of unit
investment trusts sponsored by Ranson & Associates, Inc. or its predecessors may
purchase the Fund's Class A shares at net asset value through reinvestment
programs described in the prospectuses of such trusts that have such programs.
Class A shares of the Fund may be sold at net asset value through certain
investment advisers registered under the 1940 Act and other financial services
firms acting solely as agent for their clients, that adhere to certain standards
established by KDI, including a requirement that such shares be sold for the
benefit of their clients participating in an investment advisory program or
agency commission program under which such clients pay a fee to the investment
Advisor or other firm for portfolio management or agency brokerage services.
Such shares are sold for investment purposes and on the condition that they will
not be resold except through redemption or repurchase by the Fund. The Fund may
also issue Class A shares at net asset value in connection with the acquisition
of the assets of or merger or consolidation with another investment company, or
to shareholders in connection with the investment or reinvestment of income and
capital gain dividends.

      The sales charge scale is applicable to purchases made at one time by any
"purchaser" which includes: an individual; or an individual, his or her spouse
and children under the age of 21; or a trustee or other fiduciary of a single
trust estate or single fiduciary account; or an organization exempt from federal
income tax under Section 501(c)(3) or (13) of the Code; or a pension,
profit-sharing or other employee benefit plan whether or not qualified under
Section 401 of the Code; or other organized group of persons whether
incorporated or not, provided the organization has been in existence for at
least six months and has some purpose other than the purchase of redeemable
securities of a registered investment company at a discount. In order to qualify
for a lower sales charge, all orders from an organized group will have to be
placed through a single investment dealer or other firm and identified as
originating from a qualifying purchaser.

Deferred Sales Charge Alternative -- Class B Shares. Investors choosing the
deferred sales charge alternative may purchase Class B shares at net asset value
per share without any sales charge at the time of purchase. Since Class B shares
are being sold without an initial sales charge, the full amount of the
investor's purchase payment will be invested in Class B shares for his or her
account. A contingent deferred sales charge may be imposed upon redemption of
Class B shares. See "Redemption or Repurchase of Shares -- Contingent Deferred
Sales Charge -- Class B Shares."

      KDI compensates firms for sales of Class B shares at the time of sale at a
commission rate of up to 3.75% of the amount of Class B shares purchased. KDI is
compensated by the Fund for services as distributor and principal underwriter
for Class B shares. See "Investment Manager and Underwriter."

      Class B shares of the Fund will automatically convert to Class A shares of
the Fund six years after issuance on the basis of the relative net asset value
per share of the Class B shares. The purpose of the conversion feature is to
relieve holders of Class B shares from the distribution services fee when they
have been outstanding long enough for KDI to have been compensated for
distribution related expenses. For purposes of conversion to Class A shares,
shares purchased through the reinvestment of dividends and other distributions
paid with respect to Class B shares in a shareholder's Fund account will be
converted to Class A shares on a pro rata basis.

Purchase of Class C Shares. The public offering price of the Class C shares of
the Fund is the next determined net asset value. No initial sales charge is
imposed. Since Class C shares are sold without an initial sales charge, the full
amount of the investor's purchase payment will be invested in Class C shares for
his or her account. A contingent deferred sales charge may be imposed upon the
redemption of Class C shares if they are redeemed within one year of purchase.
See "Redemption or Repurchase of Shares -- Contingent Deferred Sales Charge --
Class C Shares." KDI currently advances to firms the first year distribution fee
at a rate of 0.75% of the purchase price of such shares. For periods after the
first year, KDI currently intends to pay firms for sales of Class C shares a
distribution fee, payable quarterly, at an annual rate of 0.75% of net assets
attributable to Class C shares maintained and serviced by the firm. KDI is
compensated by the Fund for services as distributor and principal underwriter
for Class C shares. See "Investment Manager and Underwriter."

Which Arrangement is Better for You? The decision as to which class of shares
provides a more suitable investment for an investor depends on a number of
factors, including the amount and intended length of the investment. In making
this decision, investors should review their particular circumstances carefully
with their financial representative. Investors making investments that qualify
for reduced sales charges might consider Class A shares. Investors who prefer
not to pay an initial sales charge and who plan to hold their investment for
more than six years might consider Class B shares. Investors who prefer not to
pay an initial sales charge but who plan to redeem their shares within six years
might consider Class C shares. KDI has established the following procedures
regarding the purchase of Class A, Class B and Class C shares. These


                                       33
<PAGE>

procedures do not reflect in any way the suitability of a particular class of
shares for a particular investor and should not be relied upon as such. That
determination must be made by investors with the assistance of their financial
representative. Orders for Class B shares or Class C shares for $500,000 or more
will be declined. Orders for Class B shares or Class C shares by employer
sponsored employee benefit plans (not including plans under Code Section 403
(b)(7) sponsored by a K-12 school district) using the subaccount record keeping
system made available through the Shareholder Service Agent ("KemFlex Plans")
will be invested instead in Class A shares at net asset value where the combined
subaccount value in a Fund or other [Scudder Kemper Mutual Fund]s listed under
"Special Features - Class A Shares - Combined Purchases" is in excess of $1
million for Class B shares or $5 million for Class C shares including purchases
pursuant to the "Combined Purchases," "Letter of Intent" and "Cumulative
Discount" features described under "Special Features." KemFlex Plans that on May
1, 2000 have in excess of $1 million invested in Class B shares of Kemper Mutual
Funds, or have in excess of $850,000 invested in Class B shares of Kemper Mutual
Funds and are able to qualify for the purchase of Class A shares at net asset
value (e.g., pursuant to a Letter of Intent), will have future investments made
in Class A shares and will have the option to covert their holdings in Class B
shares to Class A shares free of any contingent deferred sales charge on May 1,
2002. For more information about the three sales arrangements, consult your
financial representative or the Shareholder Service Agent. Financial services
firms may receive different compensation depending upon which class of shares
they sell.

General. Banks and other financial services firms may provide administrative
services related to order placement and payment to facilitate transactions in
shares of the Fund for their clients, and KDI may pay them a transaction fee up
to the level of the discount or commission allowable or payable to dealers, as
described above. Banks or other financial services firms may be subject to
various state laws regarding the services described above and may be required to
register as dealers pursuant to state law. If banking firms were prohibited from
acting in any capacity or providing any of the described services, management
would consider what action, if any, would be appropriate. KDI does not believe
that termination of a relationship with a bank would result in any material
adverse consequences to the Fund.

      KDI may, from time to time, pay or allow to firms a 1% commission on the
amount of shares of the Fund sold under the following conditions: (i) the
purchased shares are held in a Kemper IRA account, (ii) the shares are purchased
as a direct "roll over" of a distribution from a qualified retirement plan
account maintained on a participant subaccount record keeping system provided by
Kemper Service Company, (iii) the registered representative placing the trade is
a member of ProStar, a group of persons designated by KDI in acknowledgment of
their dedication to the employee benefit plan area; and (iv) the purchase is not
otherwise subject to a commission.

      In addition to the discounts or commissions described above, KDI will,
from time to tome, pay or allow additional discounts, commissions or promotional
incentives, in the form of cash, to firms that sell shares of the Fund. In some
instances, such discounts, commissions or other incentives will be offered only
to certain firms that sell or are expected to sell during specified time periods
certain minimum amounts of shares of the Fund, or other Funds underwritten by
KDI.

      Orders for the purchase of shares of the Fund will be confirmed at a price
based on the net asset value of the Fund next determined after receipt in good
order by KDI of the order accompanied by payment. However, orders received by
dealers or other financial services firms prior to the determination of net
asset value (see "Net Asset Value") and received in good order by KDI prior to
the close of its business day will be confirmed at a price based on the net
asset value effective on that day ("trade date"). The Fund reserves the right to
determine the net asset value more frequently than once a day if deemed
desirable. Dealers and other financial services firms are obligated to transmit
orders promptly. Collection may take significantly longer for a check drawn on a
foreign bank than for a check drawn on a domestic bank. Therefore, if an order
is accompanied by a check drawn on a foreign bank, funds must normally be
collected before shares will be purchased. See "Purchase and Redemption of
Shares."

      Investment dealers and other firms provide varying arrangements for their
clients to purchase and redeem the Fund's shares. Some may establish higher
minimum investment requirements than set forth above. Firms may arrange with
their clients for other investment or administrative services. Such firms may
independently establish and charge additional amounts to their clients for such
services, which charges would reduce the clients' return. Firms also may hold
the Fund's shares in nominee or street name as agent for and on behalf of their
customers. In such instances, the Fund's transfer agent will have no information
with respect to or control over the accounts of specific shareholders. Such
shareholders may obtain access to their accounts and information about their
accounts only from their firm. Certain of these firms may receive compensation
from the Fund through the Shareholder Service Agent for recordkeeping and other
expenses relating to these nominee accounts. In addition, certain privileges
with respect to the purchase and redemption of shares or the reinvestment of
dividends may not be available through such firms. Some firms may participate in
a program allowing them access to their clients' accounts for servicing
including, without limitation, transfers of registration and dividend payee
changes; and may perform functions such as generation of confirmation statements
and disbursement of cash dividends. Such firms, including affiliates of KDI, may
receive compensation from the Fund through the Shareholder Service Agent for
these services. This prospectus should be read in connection with such firms'
material regarding their fees and services.

      The Fund reserves the right to withdraw all or any part of the offering
made by this prospectus and to reject purchase orders for any reason. Also, from
time to time, the Fund may temporarily suspend the offering of any class of its


                                       34
<PAGE>

shares to new investors. During the period of such suspension, persons who are
already shareholders of such class of such Fund normally are permitted to
continue to purchase additional shares of such class and to have dividends
reinvested.

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 correct 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 correct
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
correct certified Social Security or tax identification number. A shareholder
may avoid involuntary redemption by providing the applicable Fund with a tax
identification number during the 30-day notice period.

      Shareholders should direct their inquiries to Kemper Service Company, 811
Main Street, Kansas City, Missouri 64105-2005 or to the firm from which they
received this prospectus.

REDEMPTION OR REPURCHASE OF SHARES

General. Any shareholder may require the Fund to redeem his or her shares. When
shares are held for the account of a shareholder by the Fund's transfer agent,
the shareholder may redeem such shares by sending a written request with
signatures guaranteed to [Scudder Kemper Mutual Fund]s, Attention: Redemption
Department, P.O. Box 219153, Kansas City, Missouri 64141-9153. When certificates
for shares have been issued, they must be mailed to or deposited with the
Shareholder Service Agent, along with a duly endorsed stock power and
accompanied by a written request for redemption. Redemption requests and a stock
power must be endorsed by the account holder with signatures guaranteed by a
commercial bank, trust company, savings and loan association, federal savings
bank, member firm of a national securities exchange or other eligible financial
institution. The redemption request and stock power must be signed exactly as
the account is registered including any special capacity of the registered
owner. Additional documentation may be requested, and a signature guarantee is
normally required, from institutional and fiduciary account holders, such as
corporations, custodians (e.g., under the Uniform Transfers to Minors Act),
executors, administrators, trustees or guardians.

      The redemption price for shares of a class of the Fund will be the net
asset value per share of that class of the Fund next determined following
receipt by the Shareholder Service Agent of a properly executed request with any
required documents as described above. Payment for shares redeemed will be made
in cash as promptly as practicable but in no event later than seven days after
receipt of a properly executed request accompanied by any outstanding share
certificates in proper form for transfer. When the Fund is asked to redeem
shares for which it may not have yet received good payment (i.e., purchases by
check, Quick-Buy or Direct Deposit), it may delay transmittal of redemption
proceeds until it has determined that collected funds have been received for the
purchase of such shares, which will be up to 10 days from receipt by the Fund of
the purchase amount. The redemption within two years of Class A shares purchased
at net asset value under the Large Order NAV Purchase Privilege may be subject
to a contingent deferred sales charge (see "Purchase of Shares -- Initial Sales
Charge Alternative -- Class A Shares"), the redemption of Class B shares within
six years may be subject to a contingent deferred sales charge (see "Contingent
Deferred Sales Charge -- Class B Shares" below), and the redemption of Class C
shares within the first year following purchase may be subject to a contingent
deferred sales charge (see "Contingent Deferred Sales Charge -- Class C Shares"
below).

      Because of the high cost of maintaining small accounts, the Fund may
assess a quarterly fee of $9 on any account with a balance below $800 for the
quarter. The fee will not apply to accounts enrolled in an automatic investment
program, Individual Retirement Accounts or employer-sponsored employee benefit
plans using the subaccount record-keeping system made available through the
Shareholder Service Agent.

      Shareholders can request the following telephone privileges: Redemption by
Wire and Quick-Buy and Quick-Sell transactions (see "Special Features") and
exchange transactions for individual and institutional accounts and
pre-authorized telephone redemption transactions for certain institutional
accounts. Shareholders may choose these privileges on the account application or
by contacting the Shareholder Service Agent for appropriate instructions. Please
note that the telephone exchange privilege is automatic unless the shareholder
refuses it on the account application. The Fund or its agents may be liable for
any losses, expenses or costs arising out of fraudulent or unauthorized
telephone requests pursuant to these privileges unless the Fund or its agents
reasonably believe, based upon reasonable verification procedures, that the
telephonic instructions are genuine. The shareholder will bear the risk of loss,
including loss resulting from fraudulent or unauthorized transactions, so long
as reasonable verification procedures are followed. Verification procedures
include recording instructions, requiring certain identifying information before
acting upon instructions and sending written confirmations.

Telephone Redemptions. If the proceeds of the redemption (prior to the
imposition of any contingent deferred sales charge) are $50,000 or less and the
proceeds are payable to the shareholder of record at the address of record,
normally a telephone request or a written request by any one account holder
without a signature guarantee is sufficient for redemptions by individual or
joint account holders, and trust, executor and guardian account holders
(excluding custodial accounts for gifts and transfers to minors), provided the
trustee, executor or guardian is named in the account registration. Other


                                       35
<PAGE>

institutional account holders and guardian account holders of custodial accounts
for gifts and transfers to minors may exercise this special privilege of
redeeming shares by telephone request or written request without signature
guarantee subject to the same conditions as individual account holders and
subject to the limitations on liability described under "General" above,
provided that this privilege has been pre-authorized by the institutional
account holder or guardian account holder by written instruction to the
Shareholder Service Agent with signatures guaranteed. Telephone requests may be
made by calling 1-800-621-1048. Shares purchased by check or through Quick-Buy
or Direct Deposit may not be redeemed under this privilege of redeeming shares
by telephone request until such shares have been owned for at least 10 days.
This privilege of redeeming shares by telephone request or by written request
without a signature guarantee may not be used to redeem shares held in
certificated form and may not be used if the shareholder's account has had an
address change within 30 days of the redemption request. During periods when it
is difficult to contact the Shareholder Service Agent by telephone, it may be
difficult to use the telephone redemption privilege, although investors can
still redeem by mail. The Fund reserves the right to terminate or modify this
privilege at any time.

Repurchases (Confirmed Redemptions). A request for repurchase may be
communicated by a shareholder through a securities dealer or other financial
services firm to KDI, which the Fund has authorized to act as its agent. There
is no charge by KDI with respect to repurchases; however, dealers or other firms
may charge customary commissions for their services. Dealers and other financial
services firms are obligated to transmit orders promptly. The repurchase price
will be the net asset value of the Fund next determined after receipt of a
request by KDI. However, requests for repurchases received by dealers or other
firms prior to the determination of net asset value (see "Net Asset Value") and
received by KDI prior to the close of KDI's business day will be confirmed at
the net asset value effective on that day. The offer to repurchase may be
suspended at any time. Requirements as to stock powers, certificates, payments
and delay of payments are the same as for redemptions.

Redemption by Wire. If the account holder has given authorization for expedited
wire redemption to the account holder's brokerage or bank account, shares of the
Fund can be redeemed and proceeds sent by federal wire transfer to a single
previously designated account. Requests received by the Shareholder Service
Agent prior to the determination of net asset value will result in shares being
redeemed that day at the net asset value per Share Fund effective on that day
and normally the proceeds will be sent to the designated account the following
business day. Delivery of the proceeds of a wire redemption of $250,000 or more
may be delayed by the Fund for up to seven days if the Fund or the Shareholder
Service Agent deems it appropriate under then-current market conditions. Once
authorization is on file, the Shareholder Service Agent will honor requests by
telephone at 1-800-621-1048 or in writing, subject to the limitations on
liability described under "General" above. The Fund is not responsible for the
efficiency of the federal wire system or the account holder's financial services
firm or bank. The Fund currently does not charge the account holder for wire
transfers. The account holder is responsible for any charges imposed by the
account holder's firm or bank. There is a $1,000 wire redemption minimum
(including any contingent deferred sales charge). To change the designated
account to receive wire redemption proceeds, send a written request to the
Shareholder Service Agent with signatures guaranteed as described above or
contact the firm through which shares of the Fund were purchased. Shares
purchased by check or through Quick-Buy or Direct Deposit may not be redeemed by
wire transfer until such shares have been owned for at least 10 days. Account
holders may not use this privilege to redeem shares held in certificated form.
During periods when it is difficult to contact the Shareholder Service Agent by
telephone, it may be difficult to use the expedited wire transfer redemption
privilege, although investors can still redeem by mail. The Fund reserves the
right to terminate or modify this privilege at any time.

Contingent Deferred Sales Charge - Large Order NAV Purchase Privilege. A
contingent deferred sales charge may be imposed upon redemption of Class A
shares that are purchased under the Large Order NAV Purchase Privilege as
follows: 1% if they are redeemed within one year of purchase and 0.50% if they
are redeemed during the second year after purchase. The charge will not be
imposed upon redemption of reinvested dividends or share appreciation. The
charge is applied to the value of the shares redeemed, excluding amounts not
subject to the charge. The contingent deferred sales charge will be waived in
the event of: (a) redemptions by a participant-directed qualified retirement
plan described in Code Section 401(a), a participant-directed non-qualified
deferred compensation plan described in Code Section 457 or a
participant-directed qualified retirement plan described in Code Section
403(b)(7) which is not sponsored by a K-12 school district; (b) redemptions by
employer-sponsored employee benefit plans using the subaccount record keeping
system made available through the Shareholder Service Agent; (c) redemption of
shares of a shareholder (including a registered joint owner) who has died; (d)
redemption of shares of a shareholder (including a registered joint owner) who
after purchase of the shares being redeemed becomes totally disabled (as
evidenced by a determination by the federal Social Security Administration); (e)
redemptions under the Fund's Automatic Withdrawal Plan at a maximum of 10% per
year of the net asset value of the account; and (f) redemptions of shares whose
dealer of record at the time of the investment notifies KDI that the dealer
waives the discretionary commission applicable to such Large Order NAV Purchase.

Contingent Deferred Sales Charge - Class B Shares. A contingent deferred sales
charge may be imposed upon redemption of Class B shares. There is no such charge
upon redemption of any share appreciation or reinvested dividends on Class B
shares. The charge is computed at the following rates applied to the value of
the shares redeemed, excluding amounts not subject to the charge.


                                       36
<PAGE>

            Year of Redemption                         Contingent Deferred
            After Purchase                                 Sales Charge
            --------------                                 ------------

            First                                               4%
            Second                                              3%
            Third                                               3%
            Fourth                                              2%
            Fifth                                               2%
            Sixth                                               1%

      The contingent deferred sales charge will be waived: (a) in the event of
the total disability (as evidenced by a determination by the federal Social
Security Administration) of the shareholder (including a registered joint owner)
occurring after the purchase of the shares being redeemed, (b) in the event of
the death of the shareholder (including a registered joint owner), (c) for
redemptions made pursuant to a automatic withdrawal plan (see "Special Features
-- Automatic Withdrawal Plan" below), (d) for redemptions made pursuant to any
IRA systematic withdrawal based on the shareholder's life expectancy including,
but not limited to, substantially equal periodic payments described in Internal
Revenue Code Section 72(t)(2)(A)(iv) prior to age 59 1/2 and (e) for redemptions
to satisfy required minimum distributions after age 70 1/2 from an IRA account
(with the maximum amount subject to this waiver being based only upon the
shareholder's Kemper IRA accounts). The contingent deferred sales charge will
also be waived in connection with the following redemptions of shares held by
employer sponsored employee benefit plans maintained on the subaccount record
keeping system made available by the Shareholder Service Agent: (a) redemptions
to satisfy participant loan advances (note that loan repayments constitute new
purchases for purposes of the contingent deferred sales charge and the
conversion privilege), (b) redemptions in connection with retirement
distributions (limited at any one time to 10% of the total value of plan assets
invested in the Fund), (c) redemptions in connection with distributions
qualifying under the hardship provisions of the Internal Revenue Code and (d)
redemptions representing returns of excess contributions to such plans.

Contingent Deferred Sales Charge -- Class C Shares. A contingent deferred sales
charge of 1% may be imposed upon redemption of Class C shares if they are
redeemed within one year of purchase. The charge will not be imposed upon
redemption of reinvested dividends or share appreciation. The charge is applied
to the value of the shares redeemed excluding amounts not subject to the charge.
The contingent deferred sales charge will be waived: (a) in the event of the
total disability (as evidenced by a determination by the federal Social Security
Administration) of the shareholder (including a registered joint owner)
occurring after the purchase of the shares being redeemed, (b) in the event of
the death of the shareholder (including a registered joint owner), (c) for
redemptions made pursuant to a automatic withdrawal plan (limited to 10% of the
net asset value of the account during the first year, see "Special Features --
Automatic Withdrawal Plan"), (d) for redemptions made pursuant to any IRA
systematic withdrawal based on the shareholder's life expectancy including, but
not limited to, substantially equal periodic payments described in Internal
Revenue Code Section 72(t)(2)(A)(iv) prior to age 59 1/2, (e) for redemptions to
satisfy required minimum distributions after age 70 1/2 from an IRA account
(with the maximum amount subject to this waiver being based only upon the
shareholder's Kemper IRA accounts), (f) for any participant-directed redemption
of shares held by employer sponsored employee benefit plans maintained on the
subaccount record keeping system made available by the Shareholder Service Agent
(g) redemption of shares by an employer sponsored employee benefit plan that
offers funds in addition to [Scudder Kemper Mutual Fund]s and whose dealer of
record has waived the advance of the first year administrative service and
distribution fees applicable to such shares and agrees to receive such fees
quarterly, and (g) redemption of shares purchased through a dealer-sponsored
asset allocation program maintained on an omnibus record-keeping system provided
the dealer of record had waived the advance of the first year administrative
services and distribution fees applicable to such shares and has agreed to
receive such fees quarterly.

Contingent Deferred Sales Charge - General. The following example will
illustrate the operation of the contingent deferred sales charge. Assume that an
investor makes a single purchase of $10,000 of the Fund's Class B shares and
that 16 months later the value of the shares has grown by $1,000 through
reinvested dividends and by an additional $1,000 of share appreciation to a
total of $12,000. If the investor were then to redeem the entire $12,000 in
share value, the contingent deferred sales charge would be payable only with
respect to $10,000 because neither the $1,000 of reinvested dividends nor the
$1,000 of share appreciation is subject to the charge. The charge would be at
the rate of 3% ($300) because it was in the second year after the purchase was
made.

      The rate of the contingent deferred sales charge is determined by the
length of the period of ownership. Investments are tracked on a monthly basis.
The period of ownership for this purpose begins the first day of the month in
which the order for the investment is received. For example, an investment made
in March 1998 will be eligible for the second year's charge if redeemed on or
after March 1, 1999. In the event no specific order is requested when redeeming
shares subject to a contingent deferred sales charge, the redemption will be
made first from shares representing reinvested dividends and then from the
earliest purchase of shares. KDI receives any contingent deferred sales charge
directly.

Reinvestment Privilege. A shareholder who has redeemed Class A shares of the
Fund or any other [Scudder Kemper Mutual Fund] listed under "Special Features --
Class A Shares -- Combined Purchases" (other than shares of the Kemper


                                       37
<PAGE>

Cash Reserves Fund purchased directly at net asset value) may reinvest up to the
full amount redeemed at net asset value at the time of the reinvestment in Class
A shares of the Fund or of the other listed [Scudder Kemper Mutual Fund]s. A
shareholder of the Fund or other [Scudder Kemper Mutual Fund]s who redeems Class
A shares purchased under the Large Order NAV Purchase Privilege (see "Purchase
of Shares -- Initial Sales Charge Alternative -- Class A Shares") or Class B
shares or Class C shares and incurs a contingent deferred sales charge may
reinvest up to the full amount redeemed at net asset value at the time of the
reinvestment, in the same class of shares as the case may be, of the Fund or of
other [Scudder Kemper Mutual Fund]s. The amount of any contingent deferred sales
charge also will be reinvested. These reinvested shares will retain their
original cost and purchase date for purposes of the contingent deferred sales
charge schedule. Also, a holder of Class B shares who has redeemed shares may
reinvest up to the full amount redeemed, less any applicable contingent deferred
sales charge that may have been imposed upon the redemption of such shares, at
net asset value in Class A shares of the Fund or of the other [Scudder Kemper
Mutual Fund]s listed under "Special Features -- Class A Shares -- Combined
Purchases." Purchases through the reinvestment privilege are subject to the
minimum investment requirements applicable to the shares being purchased and may
only be made for [Scudder Kemper Mutual Fund]s available for sale in the
shareholder's state of residence as listed under "Special Features -- Exchange
Privilege." The reinvestment privilege can be used only once as to any specific
shares and reinvestment must be effected within six months of the redemption. If
a loss is realized on the redemption of shares of the Fund, the reinvestment in
shares of the Fund may be subject to the "wash sale" rules if made within 30
days of the redemption, resulting in a postponement of the recognition of such
loss for federal income tax purposes. The reinvestment privilege may be
terminated or modified at any time.

Redemption in Kind. Although it is the Fund's present policy to redeem in cash,
if the Board of Directors determines that a material adverse effect would be
experienced by the remaining shareholders if payment were made wholly in cash,
the Fund will satisfy the redemption request in whole or in part by a
distribution of portfolio securities in lieu of cash, in conformity with the
applicable rules of the SEC, taking such securities at the same value used to
determine net asset value, and selecting the securities in such manner as the
Board of Directors may deem fair and equitable. If such a distribution occurred,
shareholders receiving securities and selling them could receive less than the
redemption value of such securities and in addition would incur certain
transaction costs. Such a redemption would not be as liquid as a redemption
entirely in cash. The Corporation has elected, however, to be governed by Rule
18f-1 under the 1940 Act, as a result of which the Fund is obligated to redeem
shares, with respect to any one shareholder during any 90-day period, solely in
cash up to the lesser of $250,000 or 1% of the net asset value of a Share at the
beginning of the period.

SPECIAL FEATURES

Class A Shares -- Combined Purchases. The Fund's Class A shares (or the
equivalent) may be purchased at the rate applicable to the discount bracket
attained by combining concurrent investments in Class A shares of any of the
following Funds: Kemper Technology Fund, Kemper Total Return Fund, Kemper Growth
Fund, Kemper Small Capitalization Equity Fund, Kemper Income and Capital
Preservation Fund, Kemper Municipal Bond Fund, Kemper Strategic Income Fund,
Kemper High Yield Series, Kemper U.S. Government Securities Fund, Kemper
International Fund, Kemper State Tax-Free Income Series, Kemper Blue Chip Fund,
Kemper Global Income Fund, Kemper Target Equity Fund (series are subject to a
limited offering period), Kemper Intermediate Municipal Bond Fund, Kemper Cash
Reserves Fund (available only upon exchange or conversion from Class A shares of
another [Scudder Kemper Mutual Fund]), Kemper U.S. Mortgage Fund, Kemper
Short-Intermediate Government Fund, Kemper Value Plus Growth Fund, Kemper
Horizon Fund, Kemper New Europe Fund, Inc., Kemper Asian Growth Fund, Kemper
Aggressive Growth Fund, Kemper Global/International Series, Inc., Kemper Equity
Trust and Kemper Securities Trust, Scudder 21st Century Growth Fund, The Japan
Fund, Inc., Scudder High Yield Tax Free Fund, Scudder Pathway Series - Moderate
Portfolio, Scudder Pathway Series - Conservative Portfolio, Scudder Pathway
Series - Growth Portfolio, Scudder International Fund, Scudder Growth and Income
Fund, Scudder Large Company Growth Fund, Scudder Health Care Fund, Scudder
Technology Fund, Global Discovery Fund, Value Fund, and Classic Growth Fund
("[Scudder Kemper Mutual Fund]s"). Except as noted below, there is no combined
purchase credit for direct purchases of shares of Zurich Money Funds, Cash
Equivalent Fund, Tax-Exempt California Money Market Fund, Cash Account Trust,
Investor's Municipal Cash Fund or Investors Cash Trust ("Money Market Funds"),
which are not considered a "[Scudder Kemper Mutual Fund]" for purposes hereof.
For purposes of the Combined Purchases feature described above as well as for
the Letter of Intent and Cumulative Discount features described below, employer
sponsored employee benefit plans using the subaccount record keeping system made
available through the Shareholder Service Agent may include: (a) Money Market
Funds as "Kemper Mutual Funds", (b) all classes of shares of any [Scudder Kemper
Mutual Fund] and (c) the value of any other plan investments, such as guaranteed
investment contracts and employer stock, maintained on such subaccount record
keeping system.

Class A Shares - Letter of Intent. The same reduced sales charges for Class A
shares, as shown in the applicable prospectus, also apply to the aggregate
amount of purchases of such [Scudder Kemper Mutual Fund]s listed above made by
any purchaser within a 24-month period under a written Letter of Intent
("Letter") provided by KDI. The Letter, which imposes no obligation to purchase
or sell additional Class A shares, provides for a price adjustment depending
upon the actual amount purchased within such period. The Letter provides that
the first purchase following execution of the Letter


                                       38
<PAGE>

must be at least 5% of the amount of the intended purchase, and that 5% of the
amount of the intended purchase normally will be held in escrow in the form of
shares pending completion of the intended purchase. If the total investments
under the Letter are less than the intended amount and thereby qualify only for
a higher sales charge than actually paid, the appropriate number of escrowed
shares are redeemed and the proceeds used toward satisfaction of the obligation
to pay the increased sales charge. The Letter for an employer-sponsored employee
benefit plan maintained on the subaccount record keeping system available
through the Shareholder Service Agent may have special provisions regarding
payment of any increased sales charge resulting from a failure to complete the
intended purchase under the Letter. A shareholder may include the value (at the
maximum offering price) of all shares of such [Scudder Kemper Mutual Fund]s held
of record as of the initial purchase date under the Letter as an "accumulation
credit" toward the completion of the Letter, but no price adjustment will be
made on such shares. Only investments in Class A shares are included for this
privilege.

Class A Shares - Cumulative Discount. Class A shares of the Fund may also be
purchased at the rate applicable to the discount bracket attained by adding to
the cost of shares of the Fund being purchased, the value of all Class A shares
of the above mentioned [Scudder Kemper Mutual Fund]s (computed at the maximum
offering price at the time of the purchase for which the discount is applicable)
already owned by the investor.

Class A Shares - Availability of Quantity Discounts. An investor or the
investor's dealer or other financial services firm must notify the Shareholder
Service Agent or KDI whenever a quantity discount or reduced sales charge is
applicable to a purchase. Upon such notification, the investor will receive the
lowest applicable sales charge. Quantity discounts described above may be
modified or terminated at any time.

Exchange Privilege. Shareholders of Class A, Class B and Class C shares may
exchange their shares for shares of the corresponding class of other [Scudder
Kemper Mutual Fund]s in accordance with the provisions below.

Class A Shares. Class A shares of the [Scudder Kemper Mutual Fund]s and shares
of the Money Market Funds listed under "Special Features -- Class A Shares --
Combined Purchases" above may be exchanged for each other at their relative net
asset values. Shares of Money Market Funds and the Kemper Cash Reserves Fund
that were acquired by purchase (not including shares acquired by dividend
reinvestment) are subject to the applicable sales charge on exchange. Series of
Kemper Target Equity Fund are available on exchange only during the Offering
Period for such series as described in the applicable prospectus. Cash
Equivalent Fund, Tax-Exempt California Money Market Fund, Cash Account Trust,
Investors Municipal Cash Fund and Investors Cash Trust are available on exchange
but only through a financial services firm having a services agreement with KDI.

      Class A shares of the Fund purchased under the Large Order NAV Purchase
Privilege may be exchanged for Class A shares of another [Scudder Kemper Mutual
Fund] or a Money Market Fund under the exchange privilege described above
without paying any contingent deferred sales charge at the time of exchange. If
the Class A shares received on exchange are redeemed thereafter, a contingent
deferred sales charge may be imposed in accordance with the foregoing
requirements provided that the shares redeemed will retain their original cost
and purchase date for purposes of calculating the contingent deferred sales
charge.

Class B Shares. Class B shares of the Fund and Class B shares of any other
[Scudder Kemper Mutual Fund] listed under "Special Features -- Class A Shares --
Combined Purchases" may be exchanged for each other at their relative net asset
values. Class B shares may be exchanged without a contingent deferred sales
charge being imposed at the time of exchange. For purposes of calculating the
contingent deferred sales charge that may be imposed upon the redemption of the
Class B shares received on exchange, amounts exchanged retain their original
cost and purchase date.

Class C Shares. Class C shares of the Fund and Class C shares of any other
[Scudder Kemper Mutual Fund] listed under "Special Features -- Class A Shares --
Combined Purchases" may be exchanged for each other at their relative net asset
values. Class C shares may be exchanged without a contingent deferred sales
charge being imposed at the time of exchange. For purposes of determining
whether there is a contingent deferred sales charge that may be imposed upon the
redemption of the Class C shares received by exchange, they retain the cost and
purchase date of the shares that were originally purchased and exchanged.

General. Shares of a [Scudder Kemper Mutual Fund] with a value in excess of
$1,000,000 (except Kemper Cash Reserves Fund) acquired by exchange through
another [Scudder Kemper Mutual Fund], or from a Money Market Fund, may not be
exchanged thereafter until they have been owned for 15 days (the "15-Day Hold
Policy"). In addition, shares of a [Scudder Kemper Mutual Fund] with a value of
$1,000,000 or less (except Kemper Cash Reserves Fund) acquired by exchange from
another [Scudder Kemper Mutual Fund], or from a money market fund, may not be
exchanged thereafter until they have been owned for 15 days, if, in the
Advisor's judgment, the exchange activity may have an adverse effect on the
fund. In particular, a pattern of exchanges that coincides with a "market
timing" strategy may be disruptive to the [Scudder Kemper Mutual Fund] and
therefore may be subject to the 15-Day Hold Policy.

      For purposes of determining whether the 15-Day Hold Policy applies to a
particular exchange, the value of the shares to be exchanged shall be computed
by aggregating the value of shares being exchanged for all accounts under common
control, discretion or advice, including, without limitation, accounts
administered by a financial services firm


                                       39
<PAGE>

offering market timing, asset allocation or similar services. The total value of
shares being exchanged must at least equal the minimum investment requirement of
the [Scudder Kemper Mutual Fund] into which they are being exchanged. Exchanges
are made based on relative dollar values of the shares involved in the exchange.
There is no service fee for an exchange; however, dealers or other firms may
charge for their services in effecting exchange transactions. Exchanges will be
effected by redemption of shares of the fund held and purchase of shares of the
other fund. For federal income tax purposes, any such exchange constitutes a
sale upon which a gain or loss may be realized, depending upon whether the value
of the shares being exchanged is more or less than the shareholder's adjusted
cost basis of such shares. Shareholders interested in exercising the exchange
privilege may obtain prospectuses of the other Funds from dealers, other firms
or KDI. Exchanges may be accomplished by a written request to Kemper Service
Company, Attention: Exchange Department, P.O. Box 419557, Kansas City, Missouri
64141-6557, or by telephone if the shareholder has given authorization. Once the
authorization is on file, the Shareholder Service Agent will honor requests by
telephone at 1-800-621-1048, subject to the limitations on liability under
"Redemption or Repurchase of Shares -- General." Any share certificates must be
deposited prior to any exchange of such shares. During periods when it is
difficult to contact the Shareholder Service Agent by telephone, it may be
difficult to use the telephone exchange privilege. The exchange privilege is not
a right and may be suspended, terminated or modified at any time. Exchanges may
only be made for Funds that are available for sale in the shareholder's state of
residence. Currently, Tax-Exempt California Money Market Fund is available for
sale only in California and Investors Municipal Cash Fund is available for sale
only in certain states. Except as otherwise permitted by applicable regulations,
60 days' prior written notice of any termination or material change will be
provided.

Systematic Exchange Privilege. The owner of $1,000 or more of any class of the
shares of a [Scudder Kemper Mutual Fund] or Money Market Fund may authorize the
automatic exchange of a specified amount ($100 minimum) of such shares for
shares of the same class of another such [Scudder Kemper Mutual Fund]. If
selected, exchanges will be made automatically until the shareholder or the
[Scudder Kemper Mutual Fund] terminates the privilege. Exchanges are subject to
the terms and conditions described above under "Exchange Privilege," except that
the $1,000 minimum investment requirement for the [Scudder Kemper Mutual Fund]
acquired on exchange is not applicable. This privilege may not be used for the
exchange of shares held in certificated form.

Quick-Buy and Quick-Sell. Quick-Buy and Quick-Sell permits the transfer of money
via the Automated ClearingHouse System (minimum $100 and maximum $50,000) from a
shareholder's bank, savings and loan, or credit union account to purchase shares
in the Fund. Shareholders can also redeem Shares (minimum $100 and maximum
$50,000) from their Fund account and transfer the proceeds to their bank,
savings and loan, or credit union checking account. Shares purchased by check or
through Quick-Buy or Direct Deposit may not be redeemed under this privilege
until such Shares have been owned for at least 10 days. By enrolling in
Quick-Buy and Quick-Sell, the shareholder authorizes the Shareholder Service
Agent to rely upon telephone instructions from any person to transfer the
specified amounts between the shareholder's Fund account and the predesignated
bank, savings and loan or credit union account, subject to the limitations on
liability under "Redemption or Repurchase of Shares -- General." Once enrolled
in Quick-Buy and Quick-Sell, a shareholder can initiate a transaction by calling
Kemper Shareholder Services toll free at 1-800-621-1048, Monday through Friday,
8:00 a.m. to 3:00 p.m. Chicago time. Shareholders may terminate this privilege
by sending written notice to Kemper Service Company, P.O. Box 419415, Kansas
City, Missouri 64141-6415. Termination will become effective as soon as the
Shareholder Service Agent has had a reasonable amount of time to act upon the
request. Quick-Buy and Quick-Sell cannot be used with passbook savings accounts
or for tax-deferred plans such as Individual Retirement Accounts ("IRAs").

Direct Deposit. A shareholder may purchase additional shares of the Fund through
an automatic investment program. With the Direct Deposit Purchase Plan ("Direct
Deposit"), investments are made automatically (maximum $50,000) from the
shareholder's account at a bank, savings and loan or credit union into the
shareholder's Fund account. By enrolling in Direct Deposit, the shareholder
authorizes the Fund and its agents to either draw checks or initiate Automated
ClearingHouse debits against the designated account at a bank or other financial
institution. This privilege may be selected by completing the appropriate
section on the Account Application or by contacting the Shareholder Service
Agent for appropriate forms. A shareholder may terminate his or her Plan by
sending written notice to Kemper Service Company, P.O. Box 419415, Kansas City,
Missouri 64141-6415. Termination by a shareholder will become effective within
thirty days after the Shareholder Service Agent has received the request. A Fund
may immediately terminate a shareholder's Plan in the event that any item is
unpaid by the shareholder's financial institution. The Fund may terminate or
modify this privilege at any time.

Payroll Direct Deposit and Government Direct Deposit. A shareholder may invest
in the Fund through Payroll Direct Deposit or Government Direct Deposit. Under
these programs, all or a portion of a shareholder's net pay or government check
is automatically invested in the Fund account each payment period. A shareholder
may terminate participation in these programs by giving written notice to the
shareholder's employer or government agency, as appropriate. (A reasonable time
to act is required.) The Fund is not responsible for the efficiency of the
employer or government agency making the payment or any financial institutions
transmitting payments.

Automatic Withdrawal Plan. The owner of $5,000 or more of a class of the Fund's
shares at the offering price (net asset value plus, in the case of Class A
shares, the initial sales charge) may provide for the payment from the owner's
account of any requested dollar amount to be paid to the owner or a designated
payee monthly, quarterly, semiannually or annually. The


                                       40
<PAGE>

$5,000 minimum account size is not applicable to Individual Retirement Accounts.
The minimum periodic payment is $100. The maximum annual rate at which Class B
shares may be redeemed (and Class A shares purchased under the Large Order NAV
Purchase Privilege and Class C shares in their first year following the
purchase) under a automatic withdrawal plan is 10% of the net asset value of the
account. Shares are redeemed so that the payee will receive payment
approximately the first of the month. Any income and capital gain dividends will
be automatically reinvested at net asset value. A sufficient number of full and
fractional shares will be redeemed to make the designated payment. Depending
upon the size of the payments requested and fluctuations in the net asset value
of the shares redeemed, redemptions for the purpose of making such payments may
reduce or even exhaust the account.

      The purchase of Class A shares while participating in a automatic
withdrawal plan will ordinarily be disadvantageous to the investor because the
investor will be paying a sales charge on the purchase of shares at the same
time that the investor is redeeming shares upon which a sales charge may have
already been paid. Therefore, the Fund will not knowingly permit additional
investments of less than $2,000 if the investor is at the same time making
systematic withdrawals. KDI will waive the contingent deferred sales charge on
redemptions of Class A shares purchased under the Large Order NAV Purchase
Privilege, Class B shares and Class C shares made pursuant to a automatic
withdrawal plan. The right is reserved to amend the automatic withdrawal plan on
30 days' notice. The plan may be terminated at any time by the investor or the
Fund.

Tax-Sheltered Retirement Plans. The Shareholder Service Agent provides
retirement plan services and documents and KDI can establish investor accounts
in any of the following types of retirement plans:

o     Traditional, Roth and Education Individual Retirement Accounts ("IRAs").
      This includes Savings Incentive Match Plan for Employees of Small
      Employers ("SIMPLE"), Simplified Employee Pension Plan ("SEP") IRA
      accounts and prototype documents.

o     403(b)(7) Custodial Accounts. This type of plan is available to employees
      of most non-profit organizations.

o     Prototype money purchase pension and profit-sharing plans may be adopted
      by employers. The maximum annual contribution per participant is the
      lesser of 25% of compensation or $30,000.

      Brochures describing the above plans as well as model defined benefit
plans, target benefit plans, 457 plans, 401(k) plans, simple 401(k) plans and
materials for establishing them are available from the Shareholder Service Agent
upon request. Investors should consult with their own tax advisors before
establishing a retirement plan.

      The Fund may suspend the right of redemption or delay payment more than
seven days (a) during any period when the Exchange is closed other than
customary weekend and holiday closings or during any period in which trading on
the Exchange is restricted, (b) during any period when an emergency exists as a
result of which (i) disposal of the Fund's investments is not reasonably
practicable, or (ii) it is not reasonably practicable for the Fund to determine
the value of its net assets, or (c) for such other periods as the SEC may by
order permit for the protection of the Fund's shareholders.

      The net asset value per Share of the Fund is determined separately for
each class by dividing the value of the Fund's net assets attributable to that
class by the number of Shares of that class outstanding. The per share net asset
value of the Class B and Class C Shares of the Fund will generally be lower than
that of the Class A Shares of the Fund because of the higher expenses borne by
the Class B and Class C Shares. 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, Martin Luther King Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.

      Although it is the Fund's present policy to redeem in cash, if the Board
of Directors determines that a material adverse effect would be experienced by
the remaining shareholders if payment were made wholly in cash, the Fund will
satisfy the redemption request in whole or in part by a distribution of
portfolio securities in lieu of cash, in conformity with the applicable rules of
the SEC, taking such securities at the same value used to determine net asset
value, and selecting the securities in such manner as the Board of Directors may
deem fair and equitable. If such a distribution occurred, shareholders receiving
securities and selling them could receive less than the redemption value of such
securities and in addition would incur certain transaction costs. Such a
redemption would not be so liquid as a redemption entirely in cash.

      The conversion of Class B Shares to Class A Shares may be subject to the
continuing availability of an opinion of counsel, ruling by the Internal Revenue
Service or other assurance acceptable to the Fund to the effect that (a) the
assessment of the distribution services fee with respect to Class B Shares and
not Class A Shares does not result in the Fund's dividends constituting
"preferential dividends" under the Internal Revenue Code, and (b) that the
conversion of Class B Shares to Class A Shares does not constitute a taxable
event under the Internal Revenue Code. The conversion of Class B Shares to Class
A Shares may be suspended if such assurance is not available. In that event, no
further conversions of Class B Shares would occur, and Shares might continue to
be subject to the distribution services fee for an indefinite period that may
extend beyond the proposed conversion date as described in the prospectus.


                                       41
<PAGE>

OFFICERS AND DIRECTORS

      The officers and Directors of the Corporation, their ages, their principal
occupations and their affiliations, if any, with the Advisor, and Kemper
Distributors, Inc., are as follows:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
                                                                                                   Position with
                                                                                                   Underwriter,
                                                                                                   Kemper Distributors,
Name, Age, and Address             Position with Fund      Principal Occupation**                  Inc.
----------------------------------------------------------------------------------------------------------------------------
<S>                                <C>                     <C>                                     <C>
Henry P. Becton, Jr. (56)          Director                President, WGBH Educational Foundation            --
WGBH
125 Western Avenue
Allston, MA 02134
----------------------------------------------------------------------------------------------------------------------------
Linda C. Coughlin (48)+*           Director and President  Managing Director of Zurich Scudder     Director and Senior
                                                           Investments, Inc.                       Vice President
----------------------------------------------------------------------------------------------------------------------------
Dawn-Marie Driscoll (53)           Director                Executive Fellow, Center for Business             --
4909 SW 9th Place                                          Ethics, Bentley College; President,
Cape Coral, FL  33914                                      Driscoll Associates (consulting firm)
----------------------------------------------------------------------------------------------------------------------------
Edgar R. Fiedler (70)              Director                Senior Fellow and Economic Counselor,             --
50023 Brogden                                              The Conference Board,
Chapel Hill, NC                                            Inc.(not-for-profit business research
                                                           organization)
----------------------------------------------------------------------------------------------------------------------------
Keith R. Fox (45)                  Director                Private Equity Investor, General                  --
10 East 53rd Street                                        Partner, Exeter Group of Funds
New York, NY  10022
----------------------------------------------------------------------------------------------------------------------------
Joan E. Spero (55)                 Director                President, Doris Duke Charitable                  --
Doris Duke Charitable Foundation                           Foundation; Department of State -
650 Fifth Avenue                                           Undersecretary of State for Economic,
New York, NY  10128                                        Business and Agricultural Affairs
                                                           (March 1993 to January 1997)
----------------------------------------------------------------------------------------------------------------------------
Jean Gleason Stromberg (56)        Director                Consultant; Director, Financial                   --
3816 Military Road, NW                                     Institutions Issues, U.S. General
Washington, D.C.                                           Accounting Office (1996-1997);
                                                           Partner, Fulbright & Jaworski Law
                                                           Firm (1978-1996)
----------------------------------------------------------------------------------------------------------------------------
Jean C. Tempel (56)                Director                Managing  Director, First Light                   --
One Boston Place 23rd Floor                                Capital, LLC (venture capital firm)
Boston, MA 02108
----------------------------------------------------------------------------------------------------------------------------
Steven Zaleznick (45)*             Director                President and CEO, AARP Services, Inc.            --
601 E Street
Washington, D.C. 20004
----------------------------------------------------------------------------------------------------------------------------
Thomas V. Bruns (43)#              Vice President          Managing Director of Zurich Scudder               --
                                                           Investments, Inc.
----------------------------------------------------------------------------------------------------------------------------
James M. Eysenbach (38)@           Vice President          Managing Director of Zurich Scudder               --
                                                           Investments, Inc.
----------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       42
<PAGE>

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
                                                                                                   Position with
                                                                                                   Underwriter,
                                                                                                   Kemper Distributors,
Name, Age, and Address             Position with Fund      Principal Occupation**                  Inc.
----------------------------------------------------------------------------------------------------------------------------
<S>                                <C>                     <C>                                     <C>
William F. Glavin (41)#            Vice President          Managing Director of Zurich Scudder     Vice President
                                                           Investments, Inc.
----------------------------------------------------------------------------------------------------------------------------
James E. Masur (40)+               Vice President          Senior Vice President of Zurich                   --
                                                           Scudder Investments, Inc.
----------------------------------------------------------------------------------------------------------------------------
Ann M. McCreary (43) ++            Vice President          Managing Director of Zurich Scudder               --
                                                           Investments, Inc.
----------------------------------------------------------------------------------------------------------------------------
Kathryn L. Quirk (47)+             Vice President and      Managing Director of Zurich Scudder     Director, Senior Vice
                                   Assistant Secretary     Investments, Inc.                       President, Chief Legal
                                                                                                   Officer and Assistant
                                                                                                   Clerk
----------------------------------------------------------------------------------------------------------------------------
Howard S. Schneider (43)#          Vice President          Managing Director of Zurich Scudder               --
                                                           Investments, Inc.
----------------------------------------------------------------------------------------------------------------------------
Joann M. Barry(40)                 Vice President          Senior Vice President of Zurich
                                                           Scudder Investments, Inc.
----------------------------------------------------------------------------------------------------------------------------
John R. Hebble (42)+               Treasurer               Senior Vice President of Zurich         Assistant Treasurer
                                                           Scudder Investments, Inc.
----------------------------------------------------------------------------------------------------------------------------
Brenda Lyons (37)+                 Assistant Treasurer     Senior Vice President of Zurich
                                                           Scudder Investments, Inc.
----------------------------------------------------------------------------------------------------------------------------
Caroline Pearson (38)+             Assistant Secretary     Senior Vice President of Zurich         Clerk
                                                           Scudder Investments, Inc.; Associate,
                                                           Dechert Price & Rhoads (law firm)
                                                           1989 - 1997
----------------------------------------------------------------------------------------------------------------------------
John Millette (37)+                Vice President and      Vice President of Zurich Scudder                  --
                                   Secretary               Investments, Inc.
----------------------------------------------------------------------------------------------------------------------------
</TABLE>

      *     Ms. Coughlin and Mr. Zaleznick are considered by the Fund and its
            counsel to be persons who are "interested persons" of the Advisor or
            of the Corporation, within the meaning of the Investment Company Act
            of 1940, as amended.
      **    Unless otherwise stated, all of the Directors and officers have been
            associated with their respective companies for more than five years,
            but not necessarily in the same capacity.
      +     Address: Two International Place, Boston, Massachusetts
      ++    Address: 345 Park Avenue, New York, New York
      #     222 South Riverside Plaza, Chicago, Illinois
      @     101 California Street, San Francisco, California

      The Directors and Officers of the Corporation also serve in similar
capacities with other Scudder Funds.

      [TO BE UPDATED: INSERTION OF SHAREHOLDING INFORMATION as of January 31,
2001 Class S & Class AARP]


                                       43
<PAGE>

Remuneration

Responsibilities of the Board--Board and Committee Meetings

      The Board of Directors of the Corporation is responsible for the general
oversight of the Fund's business. A majority of the Board's members are not
affiliated with Zurich Scudder Investments, Inc. These "Independent Directors"
have primary responsibility for assuring that the Fund is managed in the best
interests of its shareholders.

      The Board of Directors meets at least quarterly to review the investment
performance of the Fund of the Corporation and other operational matters,
including policies and procedures designated to assure compliance with various
regulatory requirements. At least annually, the Independent Directors review the
fees paid to Scudder and its affiliates for investment advisory services and
other administrative and shareholder services. In this regard, they evaluate,
among other things, the quality and efficiency of the various other services
provided, costs incurred by Scudder and its affiliates, and comparative
information regarding fees and expenses of competitive funds. They are assisted
in this process by the Fund's independent public accountants and by independent
legal counsel selected by the Independent Directors.

      All of the Independent Directors serve on the Committee of Independent
Directors, which nominates Independent Directors and considers other related
matters, and the Audit Committee, which selects the Fund's independent public
accountants and reviews accounting policies and controls. In addition,
Independent Directors from time to time have established and served on task
forces and subcommittees focusing on particular matters such as investment,
accounting and shareholder service issues.

Compensation of Officers and Directors of the Fund

      Each Independent Director receives compensation for his or her services,
which includes an annual retainer and an attendance fee for each meeting
attended. The Independent Director who serves as lead director receives
additional compensation for his or her service. No additional compensation is
paid to any Independent Director for travel time to meetings, attendance at
directors' educational seminars or conferences, service on industry or
association committees, participation as speakers at directors' conferences or
service on special trustee task forces or subcommittees. Independent Directors
do not receive any employee benefits such as pension or retirement benefits or
health insurance. Notwithstanding the schedule of fees, the Independent
Directors have in the past and may in the future waive a portion of their
compensation.

      The Independent Directors also serve in the same capacity for other funds
managed by the Advisor. These funds differ broadly in type and complexity and in
some cases have substantially different Director fee schedules. The following
table shows the aggregate compensation received by each Independent Director
during 2000 from each Corporation and from all of the Scudder funds as a group.

           --------------------------------------------------------------
                                          SCUDDER
                                           MUTUAL           ALL SCUDDER
                       NAME              FUNDS, INC.*          FUNDS
           --------------------------------------------------------------
           Henry P. Becton, Jr.**               $          $ (30 funds)
           --------------------------------------------------------------
           Dawn-Marie Driscoll**                             (30 funds)
           --------------------------------------------------------------
           Edgar R. Fiedler+                                 (29 funds)
           --------------------------------------------------------------
           Keith R. Fox**                                    (23 funds)
           --------------------------------------------------------------
           Joan E. Spero**                                   (23 funds)
           --------------------------------------------------------------
           Jean Gleason Stromberg                            (16 funds)
           --------------------------------------------------------------
           Jean C. Tempel**                                  (30 funds)
           --------------------------------------------------------------

*     Scudder Mutual Funds, Inc. consists of one fund: Scudder Gold Fund.
**    Newly elected Director. On July 13, 2000, shareholders of the Fund elected
      a new Board of Directors. See the "Directors and Officers" section for the
      newly-constituted Board of Directors.
+     Mr. Fiedler's total compensation includes the $9,900 accrued, but not
      received, through the deferred compensation program.

      Members of the Board of Directors who are employees of the Advisor or its
affiliates receive no direct compensation from the Corporation, although they
are compensated as employees of the Advisor, or its affiliates, as a result of
which they may be deemed to participate in fees paid by the Fund.

SHAREHOLDER RIGHTS


                                       44
<PAGE>

      The Corporation is a Maryland corporation organized in March 1988. The
Corporation currently offers shares of common stock of one series, which series
represents interests in the Fund. The authorized capital stock of the
Corporation consists of 3 billion shares of a par value of $0.01 each, 320
million of which are allocated to the Fund. Each share of the Fund has 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 at the option
of the shareholder. Shares have no preemptive or conversion rights. The
Directors have the authority to issue additional series of shares and to
designate the relative rights and preferences as between the different series.

      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.

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

Additional Information

Other Information

The CUSIP numbers of the classes are:

      Class A: [INSERT CUSIP NUMBER]

      Class B: [INSERT CUSIP NUMBER]

      Class C: [INSERT CUSIP NUMBER]

      The Fund has a fiscal year ending October 31st. On September 15, 1998, the
Board of the Fund changed the fiscal year end from June 30th to October 31st.

      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 Advisor in light of the Fund's investment objectives and
policies, its other portfolio holdings and tax considerations, and should not be
construed as recommendations for similar action by other investors.

      The Corporation employs Brown Brothers Harriman & Company, 40 Water
Street, Boston, Massachusetts 02109 as custodian for the Fund. Brown Brothers
Harriman & Company has entered into agreements with foreign subcustodians
approved by the Directors of the Corporation pursuant to Rule 17f-5 of the 1940
Act.

      The law firm of Dechert is counsel to the Fund.

      The Fund's Shares prospectus and this Statement of Additional Information
omit certain information contained in the Registration Statement and its
amendments which the Fund has filed with the SEC under the Securities Act of
1933 and reference is hereby made to the Registration Statement for further
information with respect to the Fund and the securities offered hereby. The
Registration Statement and its amendments are available for inspection by the
public at the SEC in Washington, D.C.

Financial Statements

      The financial statements, including the investment portfolio of the Fund,
together with the Report of Independent Accountants, Financial Highlights and
notes to financial statements in the Annual Report to the Shareholders of the
Fund dated October 31, 2000, are incorporated herein by reference and are hereby
deemed to be a part of this Statement of Additional Information.


                                       45
<PAGE>

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.

      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.


                                       46

<PAGE>

                           SCUDDER MUTUAL FUNDS, INC.

                            PART C: OTHER INFORMATION

<TABLE>
<CAPTION>
Item 23.        Exhibits.
--------        ---------

<S>             <C>                         <C>
(a)             (1)                         Articles of Incorporation dated March 17, 1988.
                                            (Incorporated by reference to Exhibit 1(a) to Post-Effective Amendment No.
                                            10 to the Registration Statement.)

                (2)                         Articles of Amendment dated April 29, 1988.
                                            (Incorporated by reference to Exhibit (a)(2) to Post-Effective Amendment No.
                                            13 to the Registration Statement.)

                (3)                         Articles of Amendment dated October 12, 1990.
                                            (Incorporated by reference to Exhibit 1(b) to Post-Effective Amendment No.
                                            10 to the Registration Statement.)

                (4)                         Articles of Amendment and Restatement dated September 4, 1996.
                                            (Incorporated by reference to Exhibit (a)(4) to Post-Effective Amendment No.
                                            13 to the Registration Statement.)

                (5)                         Articles of Amendment dated December 23, 1997.
                                            (Incorporated by reference to Exhibit (a)(5) to Post-Effective Amendment No.
                                            13 to the Registration Statement.)

                (6)                         Articles Supplementary, dated March 31, 2000, are incorporated by reference
                                            to Post-Effective Amendment No. 17 to the Registration Statement.

(b)             (1)                         By-Laws dated March 18, 1988.
                                            (Incorporated by reference to Exhibit No. 2(a) to Post-Effective Amendment
                                            No. 10 to the Registration Statement.)

                (2)                         By-Laws as adopted March 18, 1988 and amended September 16, 1988.
                                            (Incorporated by reference to Exhibit (b)(2) to Post-Effective Amendment No.
                                            13 to the Registration Statement.)

                (3)                         Amendment to the By-Laws dated September 20, 1991.
                                            (Incorporated by reference to Exhibit (b)(3) to Post-Effective Amendment No.
                                            13 to the Registration Statement.)

                (4)                         Amendment to the By-Laws dated December 12, 1991.
                                            (Incorporated by reference to Exhibit 2(b) to Post-Effective Amendment No.
                                            10 to the Registration Statement.

                (5)                         Amendment to the By-Laws dated March 5, 1996.
                                            (Incorporated by reference to Exhibit (b)(5) to Post-Effective Amendment No.
                                            13 to the Registration Statement.)

                (6)                         Amendment to By-Laws dated June 4, 1996.
                                            (Incorporated by reference to Exhibit 2(c) to Post-Effective Amendment



                                Part C - Page 1
<PAGE>

                                            No. 9 to the Registration Statement.)

                (7)                         Amendment to By-Laws dated September 4, 1996.
                                            (Incorporated by reference to Exhibit 2(d) to Post-Effective Amendment No. 9
                                            to the Registration Statement.)

                (8)                         Amendment to the By-Laws dated December 3, 1997.
                                            (Incorporated by reference to Exhibit (b)(8) to Post-Effective Amendment No.
                                            13 to the Registration Statement.)

                (9)                         Amendment to the By-Laws dated February 7, 2000 is incorporated by reference
                                            to Post-Effective Amendment No. 16 to the Registration Statement.

(c)                                         Inapplicable.

(d)             (1)                         Investment Management Agreement between the Registrant (on behalf of Scudder
                                            Gold Fund) and Scudder Kemper Investments, Inc. dated September 7, 1998.
                                            (Incorporated by reference to Exhibit (d)(1) to Post-Effective Amendment No.
                                            13 to the Registration Statement.)

(e)             (1)                         Underwriting Agreement between the Registrant and Scudder Investor Services,
                                            Inc. dated September 7, 1998.
                                            (Incorporated by reference to Exhibit (e)(1) to Post-Effective Amendment No.
                                            13 to the Registration Statement.)

                (2)                         Underwriting Agreement between the Registrant and Scudder Investor Services,
                                            Inc. dated May 8, 2000. (Incorporated by reference to Post-Effective
                                            Amendment No. 18 to the Registration Statement.)

(f)                                         Inapplicable.

(g)             (1)                         Custodian Agreement between the Registrant and The First National Bank of
                                            Boston dated August 22, 1988.
                                            (Incorporated by reference to Exhibit 8(a)(1) to Post-Effective Amendment
                                            No. 10 to the Registration Statement.)

                (2)                         Custodian Agreement between the Registrant and State Street Bank and Trust
                                            Company ("State Street Bank") dated August 23, 1991.
                                            (Incorporated by reference to Exhibit (g)(2) to Post-Effective Amendment No.
                                            13 to the Registration Statement.)

                (2)(a)                      Fee schedule to Exhibit (g)(2).
                                            (Incorporated by reference to Exhibit 8(a)(2) to Post-Effective Amendment
                                            No. 10 to the Registration Statement.)

                (3)                         Custodian Agreement between the Registrant and Brown Brothers Harriman & Co.
                                            dated April 30, 1998.
                                            (Incorporated by reference to Exhibit 8(b)(1) to Post-Effective Amendment
                                            No. 11 to the Registration Statement.)

                                Part C - Page 2
<PAGE>

                (3)(a)                      Fee schedule for Exhibit (g)(2)
                                            (Incorporated by reference to Exhibit (8)(b)(2) to Post-Effective Amendment
                                            No. 11 to the Registration Statement.)

(h)             (1)                         Transfer Agency and Service Agreement between the Registrant and Scudder
                                            Service Corporation dated October 2, 1989.
                                            (Incorporated by reference to Exhibit 9(a)(1) to Post-Effective Amendment
                                            No. 10 to the Registration Statement.)

                (1)(a)                      Fee schedule for Exhibit (h)(1).
                                            (Incorporated by reference to Exhibit 9(a)(2) to Post-Effective Amendment
                                            No. 10 to the Registration Statement.)

                (2)                         Service Agreement between Copeland Associates, Inc. on behalf of Scudder
                                            Mutual Funds, Inc. and Scudder Gold Fund dated June 8, 1995.
                                            (Incorporated by reference to Exhibit (9)(a)(3) to Post-Effective Amendment
                                            No. 10 to the Registration Statement.)

                (3)                         COMPASS Service Agreement between the Registrant and Scudder Trust Company
                                            dated October 1, 1995.
                                            (Incorporated by reference to Exhibit (9)(b)(3) to Post-Effective Amendment
                                            No. 9 to the Registration Statement.)

                (4)                         Fund Accounting Services Agreement between the Registrant and The First
                                            National Bank of Boston dated August 22, 1988.
                                            (Incorporated by reference to Exhibit (9)(c)(1) to Post-Effective Amendment
                                            No. 10 to the Registration Statement.)

                (4)(a)                      Pricing Authorization Form (Exhibit B) for Exhibit (h)(4) (a) dated January
                                            10, 1991.
                                            (Incorporated by reference to Exhibit (9)(c)(2) to Post-Effective Amendment
                                            No. 10 to the Registration Statement.)

                (5)                         Fund Accounting Services Agreement between the Registrant and Scudder Fund
                                            Accounting Corporation dated March 28, 1995.
                                            (Incorporated by reference to Exhibit (9)(c)(3) to Post-Effective Amendment
                                            No. 10 to the Registration Statement.)

                (6)                         Administrative Agreement between the Registrant on behalf of Scudder Gold
                                            Fund and Scudder Kemper Investments, Inc. dated October 2, 2000. To be filed
                                            by amendment.

(i)                                         Opinion and Consent of Legal Counsel to be filed by amendment.

(j)                                         Consent of Independent Accountants to be filed by amendment.

(k)                                         Inapplicable.

(l)                                         Letter of Investment Intent Purchase Agreement (on behalf of Scudder Mutual
                                            Funds, Inc.) dated August 18, 1988.
                                            (Incorporated by reference to Exhibit 13 to Post-Effective Amendment No. 10
                                            to the Registration Statement.)

                                Part C - Page 3
<PAGE>

(m)                                         Inapplicable.

(n)             (1)                         Plan with respect to Scudder Gold Fund pursuant to Rule 18f-3. (Incorporated
                                            by reference to Post-Effective Amendment No. 18 to the Registration
                                            Statement.)

                (2)                         Amended and Restated Plan with respect to Scudder Gold Fund pursuant to Rule
                                            18f-3. (Incorporated by reference to Post-Effective Amendment No. 18 to the
                                            Registration Statement.)

(p)             (1)                         Scudder Kemper Investments, Inc. and Scudder Investor Services, Inc. Code of
                                            Ethics is incorporated by reference to Post-Effective Amendment No. 17
                                            Exhibit p to the Registration Statement.

(p)             (2)                         Code of Ethics of Scudder Mutual Funds, Inc. (Incorporated by reference to
                                            Post-Effective Amendment No. 18 to the Registration Statement.)
</TABLE>

Item 24.          Persons Controlled by or under Common Control with Fund.
--------          --------------------------------------------------------

Scudder Precious Metals, Inc., a wholly owned subsidiary of the Fund, was
registered on August 11, 1988 in the Cayman Islands, British West Indies.


Item 25.          Indemnification.
--------          ----------------

A policy of insurance covering Scudder Kemper Investments, Inc., its
subsidiaries including Scudder Investor Services, Inc., and all of the
registered investment companies advised by Scudder Kemper Investments, Inc.
insures the Registrant's trustees and officers and others against liability
arising by reason of an alleged breach of duty caused by any negligent act,
error or accidental omission in the scope of their duties.

Article IV, Sections 4.1 - 4.3 of the Registrant's Declaration of Trust provide
as follows:

Section 4.1. No Personal Liability of Shareholders, Trustees, Etc. No
Shareholder shall be subject to any personal liability whatsoever to any Person
in connection with Trust Property or the acts, obligations or affairs of the
Trust. No Trustee, officer, employee or agent of the Trust shall be subject to
any personal liability whatsoever to any Person, other than to the Trust or its
Shareholders, in connection with Trust Property or the affairs of the Trust,
save only that arising from bad faith, willful misfeasance, gross negligence or
reckless disregard of his duties with respect to such Person; and all such
Persons shall look solely to the Trust Property for satisfaction of claims of
any nature arising in connection with the affairs of the Trust. If any
Shareholder, Trustee, officer, employee, or agent, as such, of the Trust, is
made a party to any suit or proceeding to enforce any such liability of the
Trust, he shall not, on account thereof, be held to any personal liability. The
Trust shall indemnify and hold each Shareholder harmless from and against all
claims and liabilities, to which such Shareholder may become subject by reason
of his being or having been a Shareholder, and shall reimburse such Shareholder
for all legal and other expenses reasonably incurred by him in connection with
any such claim or liability. The indemnification and reimbursement required by
the preceding sentence shall be made only out of the assets of the one or more
Series of which the Shareholder who is entitled to indemnification or
reimbursement was a Shareholder at the time the act or event occurred which gave
rise to the claim against or liability of said Shareholder. The rights accruing
to a Shareholder under this Section 4.1 shall not impair any other right to
which such Shareholder may be lawfully entitled, nor shall anything herein
contained restrict the right of the Trust to indemnify or reimburse a
Shareholder in any appropriate situation even though not specifically provided
herein.

                                Part C - Page 4
<PAGE>

Section 4.2. Non-Liability of Trustees, Etc. No Trustee, officer, employee or
agent of the Trust shall be liable to the Trust, its Shareholders, or to any
Shareholder, Trustee, officer, employee, or agent thereof for any action or
failure to act (including without limitation the failure to compel in any way
any former or acting Trustee to redress any breach of trust) except for his own
bad faith, willful misfeasance, gross negligence or reckless disregard of the
duties involved in the conduct of his office.

Section 4.3. Mandatory Indemnification. (a) Subject to the exceptions and
limitations contained in paragraph (b) below:

(i) every person who is, or has been, a Trustee or officer of the Trust shall be
indemnified by the Trust to the fullest extent permitted by law against all
liability and against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been a Trustee
or officer and against amounts paid or incurred by him in the settlement
thereof;

(ii) the words "claim," "action," "suit," or "proceeding" shall apply to all
claims, actions, suits or proceedings (civil, criminal, administrative or other,
including appeals), actual or threatened; and the words "liability" and
"expenses" shall include, without limitation, attorneys' fees, costs, judgments,
amounts paid in settlement, fines, penalties and other liabilities.

(b)      No indemnification shall be provided hereunder to a Trustee or officer:

(i) against any liability to the Trust, a Series thereof, or the Shareholders by
reason of a final adjudication by a court or other body before which a
proceeding was brought that he engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office;

(ii) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief that his
action was in the best interest of the Trust;

(iii) in the event of a settlement or other disposition not involving a final
adjudication as provided in paragraph (b)(i) or (b)(ii) resulting in a payment
by a Trustee or officer, unless there has been a determination that such Trustee
or officer did not engage in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office:

(A) by the court or other body approving the settlement or other disposition; or

(B) based upon a review of readily available facts (as opposed to a full
trial-type inquiry) by (x) vote of a majority of the Disinterested Trustees
acting on the matter (provided that a majority of the Disinterested Trustees
then in office act on the matter) or (y) written opinion of independent legal
counsel.

(c) The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any other
rights to which any Trustee or officer may now or hereafter be entitled, shall
continue as to a person who has ceased to be such Trustee or officer and shall
insure to the benefit of the heirs, executors, administrators and assigns of
such a person. Nothing contained herein shall affect any rights to
indemnification to which personnel of the Trust other than Trustees and officers
may be entitled by contract or otherwise under law.

(d) Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding of the character described in paragraph (a) of this Section
4.3 may be advanced by the Trust prior to final disposition thereof upon receipt
of an undertaking by or on behalf of the recipient to repay such amount if it is
ultimately determined that he is not entitled to indemnification under this
Section 4.3, provided that either:

                                Part C - Page 5
<PAGE>

(i) such undertaking is secured by a surety bond or some other appropriate
security provided by the recipient, or the Trust shall be insured against losses
arising out of any such advances; or

(ii) a majority of the Disinterested Trustees acting on the matter (provided
that a majority of the Disinterested Trustees act on the matter) or an
independent legal counsel in a written opinion shall determine, based upon a
review of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the recipient ultimately will be found
entitled to indemnification.

As used in this Section 4.3, a "Disinterested Trustee" is one who is not (i) an
"Interested Person" of the Trust (including anyone who has been exempted from
being an "Interested Person" by any rule, regulation or order of the
Commission), or (ii) involved in the claim, action, suit or proceeding.

Item 26.          Business or Other Connections of Investment Adviser
--------          ---------------------------------------------------

         Scudder Kemper Investments, Inc. has stockholders and employees who are
         denominated officers but do not as such have corporation-wide
         responsibilities. Such persons are not considered officers for the
         purpose of this Item 26.


<TABLE>
<CAPTION>
                                            Business and Other Connections of Board
         Name                                 of Directors of Registrant's Adviser
         ----                                 ------------------------------------

<S>                   <C>
Stephen R. Beckwith   Treasurer, Scudder Kemper Investments, Inc.**
                      Director, Kemper Service Company
                      Director, Vice President and Treasurer, Scudder Fund Accounting Corporation*
                      Director and Treasurer, Scudder Stevens & Clark Corporation**
                      Director and Chairman, Scudder Defined Contribution Services, Inc.**
                      Director and President, Scudder Capital Asset Corporation**
                      Director and President, Scudder Capital Stock Corporation**
                      Director and President, Scudder Capital Planning Corporation**
                      Director and President, SS&C Investment Corporation**
                      Director and President, SIS Investment Corporation**
                      Director and President, SRV Investment Corporation**
                      Director and Chairman, Scudder Threadneedle International Ltd.
                      Director, Scudder Kemper Holdings (UK) Ltd. oo
                      Director and President, Scudder Realty Holdings Corporation *
                      Director, Scudder, Stevens & Clark Overseas Corporation o
                      Director and Treasurer, Zurich Investment Management, Inc. xx
                      Director and Treasurer, Zurich Kemper Investments, Inc.

                                Part C - Page 6
<PAGE>

Lynn S. Birdsong      Director, Vice President and Chief Investment Officer, Scudder Kemper Investments,
                      Inc.**
                      Director and Chairman, Scudder Investments (Luxembourg) S.A.#
                      Director, Scudder Investments (U.K.) Ltd. oo
                      Director and Chairman of the Board, Scudder Investments Asia, Ltd. ooo
                      Director and Chairman, Scudder Investments Japan, Inc. +
                      Senior Vice President, Scudder Investor Services, Inc.
                      Director and Chairman, Scudder Trust (Cayman) Ltd. @@@
                      Director, Scudder, Stevens & Clark Australia x
                      Director and Vice President, Zurich Investment Management, Inc. xx
                      Director and President, Scudder, Stevens & Clark Corporation **
                      Director and President, Scudder , Stevens & Clark Overseas Corporation o
                      Director, Scudder Threadneedle International Ltd.
                      Director, Korea Bond Fund Management Co., Ltd. @@

William H. Bolinder   Director, Scudder Kemper Investments, Inc.**
                      Member Group Executive Board, Zurich Financial Services, Inc. ##
                      Chairman, Zurich-American Insurance Company  xxx

Nicholas Bratt        Director, Scudder Kemper Investments, Inc.**
                      Vice President, Scudder, Stevens & Clark Corporation **
                      Vice President, Scudder, Stevens & Clark Overseas Corporation o

Laurence W. Cheng     Director, Scudder Kemper Investments, Inc.**
                      Member, Corporate Executive Board, Zurich Insurance Company of Switzerland ##
                      Director, ZKI Holding Corporation xx

Gunther Gose          Director, Scudder Kemper Investments, Inc.**
                      CFO, Member Group Executive Board, Zurich Financial Services, Inc. ##
                      CEO/Branch Offices, Zurich Life Insurance Company ##

Rolf Huppi            Director, Chairman of the Board, Scudder Kemper Investments, Inc.**
                      Member, Corporate Executive Board, Zurich Insurance Company of Switzerland ##
                      Director, Chairman of the Board, Zurich Holding Company of America xxx
                      Director, ZKI Holding Corporation xx

Harold D. Kahn        Chief Financial Officer, Scudder Kemper Investments, Inc.**

                                Part C - Page 7
<PAGE>

Kathryn L. Quirk      Chief Legal Officer, Chief Compliance Officer and Secretary, Scudder Kemper
                      Investments, Inc.**
                      Director, Vice President, Chief Legal Officer and Secretary, Kemper Distributors,
                      Inc.
                      Director and Secretary, Kemper Service Company
                      Director, Senior Vice President, Chief Legal Officer & Assistant Clerk, Scudder
                      Investor Services, Inc.
                      Director, Vice President & Secretary, Scudder Fund Accounting Corporation*
                      Director, Vice President & Secretary, Scudder Realty Holdings Corporation*
                      Director & Assistant Clerk, Scudder Service Corporation*
                      Director and Secretary, SFA, Inc.*
                      Vice President, Director & Assistant Secretary, Scudder Precious Metals, Inc.***
                      Director, Scudder, Stevens & Clark Japan, Inc. ###
                      Director, Vice President and Secretary, Scudder, Stevens & Clark of Canada, Ltd.***
                      Director, Vice President and Secretary, Scudder Canada Investor Services Limited***
                      Director, Vice President and Secretary, Scudder Realty Advisers, Inc. @
                      Director and Secretary, Scudder, Stevens & Clark Corporation**
                      Director and Secretary, Scudder, Stevens & Clark Overseas Corporation o
                      Director, Vice President and Secretary, Scudder Defined Contribution Services,
                      Inc.**
                      Director, Vice President and Secretary, Scudder Capital Asset Corporation**
                      Director, Vice President and Secretary, Scudder Capital Stock Corporation**
                      Director, Vice President and Secretary, Scudder Capital Planning Corporation**
                      Director, Vice President and Secretary, SS&C Investment Corporation**
                      Director, Vice President and Secretary, SIS Investment Corporation**
                      Director, Vice President and Secretary, SRV Investment Corporation**
                      Director, Vice President, Chief Legal Officer and Secretary, Scudder Financial
                      Services, Inc.*
                      Director, Korea Bond Fund Management Co., Ltd. @@
                      Director, Scudder Threadneedle International Ltd.
                      Director, Chairman of the Board and Secretary, Scudder Investments Canada, Ltd.
                      Director, Scudder Investments Japan, Inc. +
                      Director and Secretary, Scudder Kemper Holdings (UK) Ltd. oo
                      Director and Secretary, Zurich Investment Management, Inc. xx

Edmond D. Villani     Director, President and Chief Executive Officer, Scudder Kemper Investments, Inc.**
                      Director, Scudder, Stevens & Clark Japan, Inc. ###
                      President and Director, Scudder, Stevens & Clark Overseas Corporation o
                      President and Director, Scudder, Stevens & Clark Corporation**
                      Director, Scudder Realty Advisors, Inc.  @
                      Director, IBJ Global Investment Management S.A. Luxembourg, Grand-Duchy of
                      Luxembourg
                      Director, Scudder Threadneedle International Ltd.
                      Director, Scudder Investments Japan, Inc. +
                      Director, Scudder Kemper Holdings (UK) Ltd. oo
                      President and Director, Zurich Investment Management, Inc. xx
                      Director and Deputy Chairman, Scudder Investment Holdings Ltd.
</TABLE>


*     Two International Place, Boston, MA
@     333 South Hope Street, Los Angeles, CA
**    345 Park Avenue, New York, NY
#     Societe Anonyme, 47, Boulevard Royal, L-2449 Luxembourg, R.C.
      Luxembourg B 34.564
***   Toronto, Ontario, Canada
@@@   Grand Cayman, Cayman Islands, British West Indies
o     20-5, Ichibancho, Chiyoda-ku, Tokyo, Japan
###   1-7, Kojimachi, Chiyoda-ku, Tokyo, Japan
xx    222 S. Riverside, Chicago, IL


                                Part C - Page 8
<PAGE>

xxx   Zurich Towers, 1400 American Ln., Schaumburg, IL
@@    P.O. Box 309, Upland House, S. Church St., Grand Cayman,
      British West Indies
##    Mythenquai-2, P.O. Box CH-8022, Zurich, Switzerland
oo    One South Place, 5th Floor, London EC2M 2ZS England
ooo   One Exchange Square, 29th Floor, Hong Kong
+     Kamiyachyo Mori Building, 12F1, 4-3-20, Toranomon, Minato-ku,
      Tokyo 105-0001
x     Level 3, Five Blue Street, North Sydney, NSW 2060

Item 27.          Principal Underwriters.
--------          ----------------------

         (a)

Scudder Investor Services, Inc. acts as principal underwriter of the
Registrant's shares and also acts as principal underwriter for other funds
managed by Scudder Kemper Investments, Inc.

         (b)

         The Underwriter has employees who are denominated officers of an
operational area. Such persons do not have corporation-wide responsibilities and
are not considered officers for the purpose of this Item 27.

<TABLE>
<CAPTION>
               (1)                                   (2)                              (3)
 Scudder Investor Services, Inc.
        Name and Principal                Position and Offices with              Positions and
         Business Address              Scudder Investor Services, Inc.      Offices with Registrant
         ----------------              -------------------------------      -----------------------

<S>                               <C>                                      <C>
Lynn S. Birdsong                  Senior Vice President                    None
345 Park Avenue
New York, NY 10154-0010

Ann P. Burbank                    Vice President                           None
Two International Place
Boston, MA  02110-4103

Mark S. Casady                    President, Director and Assistant        None
Two International Place           Treasurer
Boston, MA  02110-4103

Linda C. Coughlin                 Director and Senior Vice President       Trustee and President
Two International Place
Boston, MA  02110-4103

Scott B. David                    Vice President                           None
Two International Place
Boston, MA 02110-4103

Richard W. Desmond                Vice President                           None
345 Park Avenue
New York, NY  10154-0010

William F. Glavin                 Vice President                           None
Two International Place
Boston, MA 02110-4103

Robert J. Guerin                  Vice President                           None
Two International Place
Boston, MA 02110-4103



                                Part C - Page 9
<PAGE>
               (1)                                   (2)                              (3)
 Scudder Investor Services, Inc.
        Name and Principal                Position and Offices with              Positions and
         Business Address              Scudder Investor Services, Inc.      Offices with Registrant
         ----------------              -------------------------------      -----------------------

John R. Hebble                    Assistant Treasurer                      Treasurer
Two International Place
Boston, MA  02110-4103

James J. McGovern                 Chief Financial Officer and Treasurer    None
345 Park Avenue
New York, NY  10154-0010

Kimberly S. Nassar                Vice President                           None
Two International Place
Boston, MA  02110-4103

Gloria S. Nelund                  Vice President                           None
345 Park Avenue
New York, NY 10154-0010

Lorie C. O'Malley                 Vice President                           None
Two International Place
Boston, MA 02110-4103

Caroline Pearson                  Clerk                                    Assistant Secretary
Two International Place
Boston, MA  02110-4103

Kevin G. Poole                    Vice President                           None
Two International Place
Boston, MA  02110-4103

Kathryn L. Quirk                  Director, Senior Vice President, Chief   Vice President and
345 Park Avenue                   Legal Officer and Assistant Clerk        Assistant Secretary
New York, NY  10154-0010

Howard S. Schneider               Vice President                           None
Two International Place
Boston, MA 02110-4103

Linda J. Wondrack                 Vice President and Chief Compliance      None
Two International Place           Officer
Boston, MA  02110-4103
</TABLE>

Item 28.          Location of Accounts and Records.
--------          ---------------------------------

Certain accounts, books and other documents required to be maintained by Section
31(a) of the 1940 Act and the Rules promulgated thereunder are maintained by
Scudder Kemper Investments Inc., Two International Place, Boston, MA 02110-4103.
Records relating to the duties of the Registrant's custodian are maintained by
State Street Bank and Trust Company, Heritage Drive, North Quincy,
Massachusetts. Records relating to the duties of the Registrant's transfer agent
are maintained by Scudder Service Corporation, Two International Place, Boston,
Massachusetts.

Item 29.          Management Services.
--------          --------------------



                                Part C - Page 10
<PAGE>

Inapplicable.

Item 30.          Undertakings.
--------          -------------

Inapplicable.




                                Part C - Page 11
<PAGE>

                                   SIGNATURES
                                   ----------

         Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant pursuant to Rule 485(a) under the
Securities Act of 1933 has duly caused this amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston, and the Commonwealth of Massachusetts, on the
26th day of December, 2000.

                                      SCUDDER MUTUAL FUNDS, INC.

                                      By /s/John Millette
                                         ---------------------------
                                         John Millette
                                         Secretary

         Pursuant to the requirements of the Securities Act of 1933, this
amendment to its Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>

SIGNATURE                                   TITLE                                        DATE
---------                                   -----                                        ----
<S>                                         <C>                                          <C>

/s/ Henry P. Becton, Jr.
--------------------------------------
Henry P. Becton, Jr.*                       Director                                     December 26, 2000

/s/ Linda C. Coughlin
--------------------------------------
Linda C. Coughlin                           Director and President (Chief                December 26, 2000
                                            Executive Officer)

/s/Dawn-Marie Driscoll
--------------------------------------
Dawn-Marie Driscoll*                        Director                                     December 26, 2000

/s/ Edgar R. Fiedler
--------------------------------------
Edgar R. Fiedler *                          Director                                     December 26, 2000

/s/ Keith R. Fox
--------------------------------------
Keith R. Fox*                               Director                                     December 26, 2000

/s/ Joan E. Spero
--------------------------------------
Joan E. Spero*                              Director                                     December 26, 2000

/s/ Jean Gleason Stromberg
--------------------------------------
Jean Gleason Stromberg *                    Director                                     December 26, 2000

/s/ Jean C. Tempel
--------------------------------------
Jean C. Tempel*                             Director                                     December 26, 2000

/s/ Steven Zaleznick
--------------------------------------
Steven Zaleznick*                           Director                                     December 26, 2000


/s/ John R. Hebble
--------------------------------------
John R. Hebble                              Treasurer (Chief Financial Officer)          December 26, 2000

</TABLE>



<PAGE>



*By:     /s/ John Millette
         -----------------
         John Millette**,
         Secretary

**Attorney-in-fact pursuant to the powers of attorney
contained in and incorporated by reference to Post-Effective
Amendment No. 18 the Registration Statement.

<PAGE>

                                                               File No. 33-22059
                                                               File No. 811-5565


                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549


                                    EXHIBITS

                                       TO

                                    FORM N-1A


                         POST-EFFECTIVE AMENDMENT NO. 19
                            TO REGISTRATION STATEMENT

                                      UNDER

                           THE SECURITIES ACT OF 1933

                                       AND

                                AMENDMENT NO. 21
                            TO REGISTRATION STATEMENT

                                      UNDER

                       THE INVESTMENT COMPANY ACT OF 1940



                           SCUDDER MUTUAL FUNDS, INC.



                                Part C - Page 12
<PAGE>


                           SCUDDER MUTUAL FUNDS, INC.

                                  Exhibit Index


                            To be filed by amendment.




                                Part C - Page 13


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