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SIGNATURE THOMAS F. MCDONOUGH
TITLE VICE PRESIDENT
Coopers & Lybrand Coopers & Lybrand L.L.P.
a professional services firm
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Scudder New Europe Fund, Inc.:
In planning and performing our audit of the financial statements and
financial highlights of Scudder New Europe Fund, Inc. for the year ended October
31, 1997, we considered its internal control, including controls over
safeguarding securities, in order to determine our auditing procedures for the
purpose of expressing our opinion on the financial statements and financial
highlights and to comply with the requirements of Form N-SAR, not to provide
assurance on internal control.
The management of Scudder New Europe Fund, Inc. is responsible for
establishing and maintaining internal control. In fulfilling this
responsibility, estimates and judgments by management are required to assess the
expected benefits and related costs of controls. Generally, controls that are
relevant to an audit pertain to the entity's objective of preparing financial
statements and financial highlights for external purposes that are fairly
presented in conformity with generally accepted accounting principles. Those
controls include the safeguarding of assets against unauthorized acquisition,
use, or disposition.
Because of inherent limitations in internal control, errors or
irregularities may occur and not be detected. Also, projection of any evaluation
of internal control to future periods is subject to the risk that it may become
inadequate because of changes in conditions or that the effectiveness of the
design and operation may deteriorate.
Our consideration of internal control would not necessarily disclose all
matters in internal control that might be material weaknesses under standards
established by the American Institute of Certified Public Accountants. A
material weakness is a condition in which the design or operation of any
specific internal control component does not reduce to a relatively low level
the risk that errors or irregularities in amounts that would be material in
relation to the financial statements and financial highlights being audited may
occur and not be detected within a timely period by employees in the normal
course of performing their assigned functions. However, we noted no matters
involving internal control, including controls over safeguarding securities,
that we consider to be material weaknesses as defined above as of October 31
1997.
This report is intended solely for the information and use of management
of Scudder New Europe Fund, Inc. and the Securities and Exchange Commission.
/s/Coopers & Lybrand L.L.P.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
December 19, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Scudder
New Europe Fund, Inc. Annual Report for the fiscal year ended October 31, 1997
and is qualified in its entirety by reference to such financial statements.
</LEGEND> <SERIES>
<NUMBER> 1
<NAME> SCUDDER NEW EUROPE FUND, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 209,619,137
<INVESTMENTS-AT-VALUE> 318,016,011
<RECEIVABLES> 6,799,171
<ASSETS-OTHER> 4,666
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 324,819,848
<PAYABLE-FOR-SECURITIES> 2,313,678
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,212,777
<TOTAL-LIABILITIES> 4,526,455
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 179,800,564
<SHARES-COMMON-STOCK> 16,049,224
<SHARES-COMMON-PRIOR> 16,047,487
<ACCUMULATED-NII-CURRENT> (562,639)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 33,646,492
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 107,408,976
<NET-ASSETS> 320,293,393
<DIVIDEND-INCOME> 3,421,880
<INTEREST-INCOME> 955,042
<OTHER-INCOME> 0
<EXPENSES-NET> 4,476,233
<NET-INVESTMENT-INCOME> (99,311)
<REALIZED-GAINS-CURRENT> 38,325,303
<APPREC-INCREASE-CURRENT> 16,585,461
<NET-CHANGE-FROM-OPS> 54,811,453
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (962,847)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 1,737
<NET-CHANGE-IN-ASSETS> 53,874,663
<ACCUMULATED-NII-PRIOR> 605,044
<ACCUMULATED-GAINS-PRIOR> (4,784,335)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,490,192
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 301,344,840
<PER-SHARE-NAV-BEGIN> 16.60
<PER-SHARE-NII> (0.01)
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.06)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 3.43
<PER-SHARE-NAV-END> 19.96
<EXPENSE-RATIO> 1.49
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
INVESTMENT ADVISORY, MANAGEMENT AND
ADMINISTRATION AGREEMENT
AGREEMENT, dated and effective as of December 31, 1997 between SCUDDER
GLOBAL HIGH INCOME FUND, INC., a Maryland corporation (herein referred to as the
"Fund"), and SCUDDER KEMPER INVESTMENTS, INC., a Delaware corporation (herein
referred to as the "Manager").
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is agreed by
the parties as follows:
1. The Manager hereby undertakes and agrees, upon the terms and conditions
herein set forth, (i) to make investment decisions for the Fund, to prepare and
make available to the Fund research and statistical data in connection therewith
and to supervise the acquisition and disposition of securities by the Fund,
including the selection of brokers or dealers to carry out the transactions, all
in accordance with the Fund's investment objectives and policies and in
accordance with guidelines and directions from the Fund's Board of Directors;
(ii) to assist the Fund as it may reasonably request in the conduct of the
Fund's business, subject to the direction and control of the Fund's Board of
Directors; (iii) to maintain or cause to be maintained for the Fund all books,
records, reports and any other information required under the Investment Company
Act of 1940, as amended (the "1940 Act"), to the extent that such books, records
and reports and other information are not maintained or furnished by the
custodian or other agents of the Fund; (iv) to furnish at the Manager's expense
for the use of the Fund such office space and facilities as the Fund may require
for its reasonable needs in the City of New York and to furnish at the Manager's
expense clerical services in the United States related to research, statistical
and investment work; (v) to render to the Fund administrative services such as
preparing reports to and meeting materials for the Fund's Board of Directors and
reports and notices to stockholders, preparing and making filings with the
Securities and Exchange Commission (the "SEC") and other regulatory and
self-regulatory organizations, including preliminary and definitive proxy
materials and post-effective amendments to the Fund's registration statement on
Form N-2 under the Securities Act of 1933, as amended, and 1940 Act, as amended
from time to time, providing assistance in certain accounting and tax matters
and investor and public relations, monitoring the valuation of portfolio
securities, assisting in the calculation of net asset value and calculation and
payment of distributions to stockholders, and overseeing arrangements with the
Fund's custodian, including the maintenance of books and records of the Fund;
and (vi) to pay the reasonable salaries, fees and expenses of such of the Fund's
officers and employees (including the Fund's shares of payroll taxes) and any
fees and expenses of such of the Fund's directors as are directors, officers or
employees of the Manager; provided, however, that the Fund, and not the Manager,
shall bear travel expenses (or an appropriate portion thereof) of directors and
officers of the Fund who are directors, officers or employees of the Manager to
the extent that such expenses relate to attendance at meetings of the Board of
Directors of the Fund or any committees thereof or advisers thereto. The Manager
shall bear all expenses arising out of its duties hereunder but shall not be
responsible for any expenses of the Fund other than those specifically allocated
to the Manager in this paragraph 1. In particular, but without limiting the
generality of the foregoing, the Manager shall not be responsible, except to the
extent of the reasonable
<PAGE>
compensation of such of the Fund's employees as are directors, officers or
employees of the Manager whose services may be involved, for the following
expenses of the Fund: organization and certain offering expenses of the Fund
(including out-of-pocket expenses, but not including overhead or employee costs
of the Manager or of any one or more organizations retained as an advisor or
consultant to the Fund); fees payable to the Manager and to any advisor or
consultants, including an advisory board, if applicable; legal expenses;
auditing and accounting expenses; telephone, telex, facsimile, postage and other
communication expenses; taxes and governmental fees; stock exchange listing
fees; fees, dues and expenses incurred by the Fund in connection with membership
in investment company trade organizations; fees and expenses of the Fund's
custodians, subcustodians, transfer agents and registrars; payment for portfolio
pricing or valuation services to pricing agents, accountants, bankers and other
specialists, if any; expenses of preparing share certificates and other expenses
in connection with the issuance, offering, distribution, sale or underwriting of
securities issued by the Fund; expenses of registering or qualifying securities
of the Fund for sale; expenses relating to investor and public relations;
freight, insurance and other charges in connection with the shipment of the
Fund's portfolio securities; brokerage commissions or other costs of acquiring
or disposing of any portfolio securities of the Fund; expenses of preparing and
distributing reports, notices and dividends to stockholders; costs of
stationery; costs of stockholders' and other meetings; litigation expenses; or
expenses relating to the Fund's dividend reinvestment and cash purchase plan
(except for brokerage expenses paid by participants in such plan).
2. As exclusive licensee of the rights to use and sublicense the use of the
"Scudder," "Scudder, Stevens & Clark," and "Scudder Kemper Investments, Inc."
trademarks (together, the "Scudder Marks"), the Manager hereby grants the Fund a
nonexclusive right and sublicense to use (i) the "Scudder" name and mark as part
of the Fund's name (the "Fund Name"), and (ii) the Scudder Marks in connection
with the Fund's investment products and services, in each case only for so long
as this Agreement, any other investment management agreement between the Fund
and the Manager (or any organization which shall have succeeded to the Manager's
business as investment manager (the Manager's Successor")), or any extension,
renewal or amendment hereof or thereof remains in effect, and only for so long
as the Manager is a licensee of the Scudder Marks, provided, however, that the
Manager agrees to use its best efforts to maintain its license to use and
sublicense the Scudder Marks. The Fund agrees that it shall have no right to
sublicense or assign rights to use the Scudder Marks, shall acquire no interest
in the Scudder Marks other than the rights granted herein, that all of the
Fund's uses of the Scudder Marks shall inure to the benefit of Scudder Trust
Company as owner and licensor of the Scudder Marks (the "Trademark Owner"), and
that the Fund shall not challenge the validity of the Scudder Marks or the
Trademark Owner's ownership thereof. The Fund further agrees that all services
and products it offers in connection with the Scudder Marks shall meet
commercially reasonable standards of quality, as may be determined by the
Manager or the Trademark Owner from time to time, provided that the Manager
acknowledges that the services and products the Fund rendered during the
one-year period preceding the date of this Agreement are acceptable. At your
reasonable request, the Fund shall cooperate with the Manager and the Trademark
Owner and shall execute and deliver any and all documents necessary to maintain
and protect (including but not limited to in connection with any trademark
infringement action) the Scudder Marks and/or enter the Fund as a registered
user thereof. At such time as this Agreement or any other investment management
agreement shall no longer be in effect between the Manager (or the Manager's
Successor) and the Fund, or the Manager
2
<PAGE>
no longer is a licensee of the Scudder Marks, the Fund shall (to the extent
that, and as soon as, it lawfully can) cease to use the Fund Name or any other
name indicating that it is advised by, managed by or otherwise connected with
the Manager (Manager's Successor) or the Trademark Owner. In no event shall the
Fund use the Scudder Marks or any other name or mark confusingly similar thereto
(including, but not limited to, any name or mark that includes the name
"Scudder") if this Agreement or any other investment advisory agreement between
the Manager (or the Manager's Successor) and the Fund is terminated.
3. The Fund agrees to pay to the Manager in United States dollars, as full
compensation for the services to be rendered and expenses to be borne by the
Manager hereunder, a monthly fee which, on an annual basis, is equal to 1.20%
per annum of the value of the Fund's average weekly net assets. Each payment of
a monthly fee to the Manager shall be made within the ten days next following
the day as of which such payment is so computed. Upon any termination of this
Agreement before the end of a month, the fee for such part of that month shall
be prorated according to the proportion that such period bears to the full
monthly period and shall be payable upon the date of termination of this
Agreement.
The value of the net assets of the Fund shall be determined pursuant to the
applicable provisions of the Articles of Incorporation and By-laws of the Fund,
as amended from time to time.
4. The Manager agrees that it will not make a short sale of any capital
stock of the Fund or purchase any share of the capital stock of the Fund
otherwise than for investment.
5. In executing transactions for the Fund and selecting brokers or dealers,
the Manager shall use its best efforts to seek the best overall terms available.
In assessing the best overall terms available for any Fund transaction, the
Manager shall consider on a continuing basis all factors it deems relevant,
including, but not limited to, breadth of the market in the security, the price
of the security, the financial condition and execution capability of the broker
or dealer and the reasonableness of any commission for the specific transaction.
In selecting brokers or dealers to execute a particular transaction and in
evaluating the best overall terms available, the Manager may consider the
brokerage and research services (as those terms are defined in Section 28(e) of
the Securities Exchange Act of 1934) provided to the Fund and/or other accounts
over which the Manager or an affiliate exercises investment discretion.
6. Nothing herein shall be construed as prohibiting the Manager from
providing investment advisory services to, or entering into investment advisory
agreements with, other clients (including other registered investment
companies), including clients which may invest in securities issued by issuers
in emerging market countries, or from utilizing (in providing such services)
information furnished to the Manager by advisors and consultants to the Fund and
others; nor shall anything herein be construed as constituting the Manager as an
agent of the Fund.
Whenever the Fund and one or more other accounts or investment companies
advised by the Manager have available funds for investment, investments suitable
and appropriate for each shall be allocated in accordance with procedures
believed by the Manager to be equitable to each entity. Similarly, opportunities
to sell securities shall be allocated in a manner believed by the Manager to be
equitable. The Fund recognizes that in some cases this procedure may adversely
affect the size of the position that may be
3
<PAGE>
acquired or disposed of for the Fund. In addition, the Fund acknowledges that
the persons employed by the Manager to assist in the performance of the
Manager's duties hereunder will not devote their full time to such service and
nothing contained herein shall be deemed to limit or restrict the right of the
Manager or any affiliate of the Manager to engage in and devote time and
attention to other businesses or to render services of whatever kind or nature.
7. The Manager may rely on information reasonably believed by it to be
accurate and reliable. Neither the Manager nor its officers, directors,
employees or agents shall be subject to any liability for any act or omission,
error of judgment or mistake of law, or for any loss suffered by the Fund, in
the course of, connected with or arising out of any services to be rendered
hereunder, except by reason of willful misfeasance, bad faith, or gross
negligence on the part of the Manager in the performance of its duties or by
reason of reckless disregard on the part of the Manager of its obligations and
duties under this Agreement. Any person, even though also employed by the
Manager, who may be or become an employee of the Fund and paid by the Fund shall
be deemed, when acting within the scope of his employment by the Fund, to be
acting in such employment solely for the Fund and not as an employee or agent of
the Manager.
8. This Agreement shall remain in effect for a period of two years from the
date hereof, and shall continue in effect thereafter, but only so long as such
continuance is specifically approved at least annually by the affirmative vote
of (i) a majority of the members of the Fund's Board of Directors who are not
parties to this agreement or interested persons of any party to this agreement,
or of any entity regularly furnishing investment advisory services with respect
to the Fund pursuant to an agreement with any party to this agreement, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
a majority of the Fund's Board of Directors or the holders of a majority of the
outstanding voting securities of the Fund. This Agreement may nevertheless be
terminated at any time without penalty, on 60 days' written notice, by the
Fund's Board of Directors, by vote of holders of a majority of the outstanding
voting securities of the Fund, or by the Manager.
This Agreement shall automatically be terminated in the event of its
assignment, provided that an assignment to a corporate successor to all or
substantially all of the Manager's business or to a wholly-owned subsidiary of
such corporate successor which does not result in a change of actual control or
management of the Manager's business shall not be deemed to be an assignment for
the purposes of this Agreement. Any notice to the Fund or the Manager shall be
deemed given when received by the addressee.
9. This Agreement may not be transferred, assigned, sold or in any manner
hypothecated or pledged by either party hereto, except as permitted under the
1940 Act or rules and regulations adopted thereunder. It may be amended by
mutual agreement, but only after authorization of such amendment by the
affirmative vote of (i) the holders of a majority of the outstanding voting
securities of the Fund, and (ii) a majority of the members of the Fund's Board
of Directors who are not parties to this agreement or interested persons of any
party to this agreement, or of any entity regularly furnishing investment
advisory services with respect to the Fund pursuant to an agreement with any
party to this agreement, cast in person at a meeting called for the purpose of
voting on such approval.
10. This Agreement shall be construed in accordance with the laws of the
State of New York, without giving effect to the conflicts of laws principles
thereof, provided, however, that nothing
4
<PAGE>
herein shall be construed as being inconsistent with the 1940 Act. As used
herein, the terms "interested person," "assignment," and "vote of a majority of
the outstanding voting securities" shall have the meanings set forth in the 1940
Act.
11. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this agreement to produce or account for more than
one such counterpart.
12. This Agreement supersedes all prior investment advisory, management,
and/or administration agreements in effect between the Fund and the Manager.
IN WITNESS WHEREOF, the parties have executed this Agreement by their
officers thereunto duly authorized as of the day and year first written above.
SCUDDER GLOBAL HIGH INCOME FUND, INC.
By:
--------------------------------------
Title: President
SCUDDER, KEMPER INVESTMENTS, INC.
By:
--------------------------------------
Title: Managing Director
5
Scudder New Europe Fund, Inc.
Stockholder Meeting Results
================================================================================
The Annual Meeting of Stockholders of Scudder New Europe Fund, Inc. was held on
October 21, 1997, at the offices of Scudder, Stevens & Clark, Inc., 25th Floor,
345 Park Avenue (at 51st Street), New York, New York 10154. The following
matters were voted upon by the stockholders (the resulting votes for each matter
are presented below.)
1. To approve the new Investment Management, Advisory and Administration
Agreement between the Fund and Scudder Kemper Investments, Inc.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
10,263,637 515,545 144,858 0
2. To elect Directors.
Number of Votes:
----------------
Director For Withheld
-------- --- --------
Paul Bancroft III 10,408,792 515,248
Richard M. Hunt 10,402,073 521,967
Daniel Pierce 10,426,924 497,116
Continuing Directors:
---------------------
Nicholas Bratt
Paul J. Elmlinger
Mary Johnston Evans
William H. Luers
Wilson Nolen
Ladislas O. Rice
3. To ratify the selection of Coopers & Lybrand L.L.P. as the Fund's
independent accountants.
Number of Votes:
----------------
For Against Abstain
--- ------- -------
10,723,175 76,163 124,702
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary power
to vote on a particular matter.
