Scudder
Latin America
Fund
Prospectus
March 1, 1996
A pure no-load(TM) (no sales charges) mutual fund which seeks to provide
long-term capital appreciation through investment primarily in the securities of
Latin American issuers.
This prospectus sets forth concisely the information about Scudder Latin America
Fund, a series of Scudder International Fund, Inc., an open-end management
investment company, that a prospective investor should know before investing.
Please retain it for future reference.
If you require more detailed information, a Statement of Additional Information
dated March 1, 1996, as amended from time to time, may be obtained without
charge by writing Scudder Investor Services, Inc., Two International Place,
Boston, MA 02110-4103 or calling 1-800-225-2470. The Statement, which is
incorporated by reference into this prospectus, has been filed with the
Securities and Exchange Commission.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Contents--see page 4.
<PAGE>
Expense information
How to compare a Scudder pure no-load(TM) fund
This information is designed to help you understand the various costs and
expenses of investing in Scudder Latin America Fund (the "Fund"). By reviewing
this table and those in other mutual funds' prospectuses, you can compare the
Fund's fees and expenses with those of other funds. With Scudder's pure
no-load(TM) funds, you pay no commissions to purchase or redeem shares, or to
exchange from one fund to another. As a result, all of your investment goes to
work for you.
1) Shareholder transaction expenses: Expenses charged directly to your
individual account in the Fund for various transactions.
<TABLE>
<CAPTION>
<S> <C>
Sales commissions to purchase shares (sales load) NONE
Commissions to reinvest dividends NONE
Deferred sales charge NONE
Redemption fees payable to the Fund 2.00%*
Exchange fees payable to the Fund 2.00%*
2) Annual Fund operating expenses: Expenses paid by the Fund before it
distributed its net investment income, expressed as a percentage of the
Fund's average daily net assets for the fiscal year ended October 31, 1995.
Investment management fee (after state imposed expense limitation) 1.22%**
12b-1 fees NONE
Other expenses 0.86%
-----
Total Fund operating expenses 2.08%**
=====
Example
Based on the level of total Fund operating expenses listed above, the total
expenses relating to a $1,000 investment, assuming a 5% annual return and
redemption at the end of each period, are listed below. Investors do not pay
these expenses directly; they are paid by the Fund before it distributes its net
investment income to shareholders.
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$21 $65 $112 $241
</TABLE>
See "Fund organization--Investment adviser" for further information about the
investment management fee. This example assumes reinvestment of all dividends
and distributions and that the percentage amounts listed under "Annual Fund
operating expenses" remain the same each year. This example should not be
considered a representation of past or future expenses or return. Actual Fund
expenses and return vary from year to year and may be higher or lower than those
shown.
* There is a 2% fee retained by the Fund which is imposed only on redemptions
or exchanges of shares held less than one year, this fee is waived for all
shares purchased through certain retirement plans. If you wish to receive
your redemption proceeds via wire, there is a $5 wire service fee. For
additional information, please refer to "Transaction
information--Exchanging and redeeming shares."
** For the fiscal year ended October 31, 1995, the Adviser did not impose a
portion of its management fee. Without the state imposed expense
limitation, the total annualized expenses of the Fund would have been 2.11%
(of which 1.25% would have consisted of investment management fees) for the
fiscal year.
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Financial highlights
<TABLE>
The following table includes selected data for a share outstanding throughout each period and other performance
information derived from the financial statements.
If you would like more detailed information concerning the Fund's performance, a complete portfolio listing and
audited financial statements are available in the Fund's Annual Report dated October 31, 1995 and may be obtained
without charge by writing or calling Scudder Investor Services, Inc.
<CAPTION>
For the Period
December 8, 1992
(Commencement
Years Ended October 31, of operations)
------------------------- to October 31,
1995 1994 1993
------------------------- ---------------
<S> <C> <C> <C>
Net asset value, beginning of period ......................................... $24.44 $18.41 $12.00
------ ------ ------
Income from investment operations:
Net investment income (loss) (a) ..................................... .09 (.03) .03
Net realized and unrealized gain (loss) on investment transactions .. (7.58) 6.18 6.38
------ ------ ------
Total from investment operations ............................................. (7.49) 6.15 6.41
------ ------ ------
Less distributions:
In excess of net investment income ................................... -- (.06) --
From net realized gains on investment transactions ................... (.73) (.06) --
------ ------ ------
Total distributions .......................................................... (.73) (.12) --
------ ------ ------
Net asset value, end of period ............................................... $16.22 $24.44 $18.41
====== ====== ======
TOTAL RETURN (%) ............................................................. (30.96) 33.43 53.42(b)**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) ....................................... 519 809 261
Ratio of operating expenses, net to average daily net assets (%) (a) ......... 2.08 2.01 2.00*
Ratio of net investment income (loss) to average daily net assets (%) ........ .52 (.20) .44*
Portfolio turnover rate (%) .................................................. 39.5 22.4 4.6*
<FN>
(a) Reflects a per share amount of management fee not imposed
by the Adviser of ...................................................... $ .01 $ .01 $ .04
Operating expense ratio including management fee not imposed (%) ....... 2.11 2.05 2.69*
(b) Total return does not reflect the effect of the applicable redemption fees.
* Annualized
** Not annualized
</FN>
</TABLE>
3
<PAGE>
A message from Scudder's chairman
Scudder, Stevens & Clark, Inc., investment adviser to the Scudder Family of
Funds, was founded in 1919. We offered America's first no-load mutual fund in
1928. Today, we manage in excess of $100 billion for many private accounts and
over 50 mutual fund portfolios. We manage the mutual funds in a special program
for the American Association of Retired Persons, as well as the fund options
available through Scudder Horizon Plan, a tax-advantaged variable annuity. We
also advise The Japan Fund and nine closed-end funds that invest in countries
around the world.
The Scudder Family of Funds is designed to make investing easy and less costly.
It includes money market, tax free, income and growth funds as well as IRAs,
401(k)s, Keoghs and other retirement plans.
Services available to all shareholders include toll-free access to the
professional service representatives of Scudder Investor Relations, easy
exchange among funds, shareholder reports, informative newsletters and the
walk-in convenience of Scudder Funds Centers.
All Scudder mutual funds are pure no-load(TM). This means you pay no commissions
to purchase or redeem your shares or to exchange from one fund to another. There
are no "12b-1" fees either, which many other funds now charge to support their
marketing efforts. All of your investment goes to work for you. We look forward
to welcoming you as a shareholder.
/s/Daniel Pierce
Scudder Latin America Fund
Investment objective
o long-term capital appreciation through investment primarily in the
securities of Latin American issuers
Investment characteristics
o convenient, low-cost access to emerging investment opportunities in Latin
America
o professional management of a broad range of equity securities, debt
securities and other investments in a rapidly growing region of the world
o above-average investment risk
Contents
Investment objective and policies 5
Why invest in the Fund? 7
Latin American investment experience 7
Additional information about policies
and investments 7
Risk factors 9
Distribution and performance information 12
Fund organization 13
Purchases 14
Exchanges and redemptions 15
Transaction information 16
Shareholder benefits 20
Directors and Officers 23
Investment products and services 24
How to contact Scudder 25
4
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Investment objective and policies
Scudder Latin America Fund (the "Fund"), a non-diversified series of Scudder
International Fund, Inc., seeks to provide long-term capital appreciation
through investment primarily in the securities of Latin American issuers.
The Fund seeks to benefit from economic and political trends emerging throughout
Latin America. These trends are supported by governmental initiatives designed
to promote freer trade and market-oriented economies. The Fund's investment
adviser, Scudder, Stevens & Clark, Inc. (the "Adviser"), believes that efforts
by Latin American countries to, among other things, reduce government spending
and deficits, control inflation, lower trade barriers, stabilize currency
exchange rates, increase foreign and domestic investment and privatize
state-owned companies, will set the stage for attractive investment returns over
time.
The Fund involves above-average investment risk. It is designed as a long-term
investment and not for short-term trading purposes, and should not be considered
a complete investment program. A 2% redemption and exchange fee, described more
fully below, may be payable to the Fund for the benefit of remaining
shareholders on shares held less than one year. Please refer to "Transaction
information--Exchanging and redeeming shares" for more information.
Except as otherwise indicated, the Fund's investment objective and policies are
not fundamental and may be changed without a vote of shareholders. Shareholders
will receive written notice of any changes in the Fund's objective. If there is
a change in investment objective, shareholders should consider whether the Fund
remains an appropriate investment in light of their then current financial
position and needs. There can be no assurance that the Fund's objective will be
met.
Investments
At least 65% of the Fund's total assets will be invested in the securities of
Latin American issuers, and 50% of the Fund's total assets will be invested in
Latin American equity securities. To meet its objective to provide long-term
capital appreciation, the Fund normally invests at least 65% of its total assets
in equity securities. For purposes of this prospectus, Latin America is defined
as Mexico, Central America, South America and the Spanish-speaking islands of
the Caribbean. The Fund defines securities of Latin American issuers as follows:
o Securities of companies organized under the laws of a Latin American
country or for which the principal securities trading market is in Latin
America;
o Securities issued or guaranteed by the government of a country in Latin
America, its agencies or instrumentalities, political subdivisions or the
central bank of such country;
o Securities of companies, wherever organized, when at least 50% of an
issuer's non-current assets, capitalization, gross revenue or profit in any
one of the two most recent fiscal years represents (directly or indirectly
through subsidiaries) assets or activities located in Latin America; or
o Securities of Latin American issuers, as defined above, in the form of
depositary shares.
Although the Fund may participate in markets throughout Latin America, under
present conditions the Fund expects to focus its investments in Argentina,
Brazil, Chile, Mexico and Peru. In the opinion of the Adviser, these five
countries offer the most developed capital markets in Latin America. The Fund
may invest in other countries in Latin America when the Adviser deems it
appropriate. The Fund intends to allocate investments among at least three
countries at all times and does not expect to concentrate investments in any
particular industry.
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Investment objective and policies (cont'd)
The Fund's equity investments are common stock, preferred stock (either
convertible or non-convertible), depositary receipts and warrants. These may be
restricted securities and may also be purchased through rights. Securities may
be listed on securities exchanges, traded over-the-counter, or have no organized
market.
The Fund may invest in debt securities when management anticipates that the
potential for capital appreciation is likely to equal or exceed that of equity
securities. Capital appreciation in debt securities may arise from a favorable
change in relative foreign exchange rates, in relative interest rate levels, or
in the creditworthiness of issuers. Receipt of income from such debt securities
is incidental to the Fund's objective of long-term capital appreciation. Most
debt securities in which the Fund invests are not rated. When debt securities
are rated, it is expected that such ratings will generally be below investment
grade; that is, rated below Baa by Moody's Investors Service, Inc. ("Moody's")
or below BBB by Standard & Poor's ("S&P"). For more information about the debt
securities in which the Fund may invest, including risks, please see "Additional
information about policies and investments."
The Fund may invest up to 35% of its total assets in the equity securities of
U.S. and other non-Latin American issuers. In evaluating non-Latin American
investments, the Adviser seeks investments where an issuer's Latin American
business activities and the impact of developments in Latin America may have a
positive effect on the issuer's business results.
In selecting companies for investment, the Fund typically evaluates industry
trends, a company's financial strength, its competitive position in domestic and
export markets, technology, recent developments and profitability, together with
overall growth prospects. Other considerations generally include quality and
depth of management, government regulation, and availability and cost of labor
and raw materials. Investment decisions are made without regard to arbitrary
criteria as to minimum asset size, debt-equity ratios or dividend history of
portfolio companies.
The allocation between equity and debt, and among countries in Latin America,
varies based on a number of factors, including?: expected rates of economic and
corporate profit growth; past performance and current and comparative valuations
in Latin American capital markets; the level and anticipated direction of
interest rates; changes or anticipated changes in Latin American government
policy; and the condition of the balance of payments and changes in the terms of
trade. The Fund, in seeking undervalued markets or individual securities, also
considers the effects of past economic crises or ongoing financial and political
uncertainties.
To provide for redemptions, or in anticipation of investment in Latin American
securities, the Fund may hold cash or cash equivalents (in U.S. dollars or
foreign currencies) and other short-term securities, including money market
securities denominated in U.S. dollars or foreign currencies. In addition, to
provide for redemptions or distributions, the Fund may borrow from banks in an
amount not exceeding the value of one-third of the Fund's total assets. The Fund
does not expect to borrow for investment purposes. The Fund may assume a
defensive position when, due to political or other factors, the Adviser
determines that opportunities for capital appreciation in Latin American markets
would be significantly limited over an extended period or that investing in
those markets poses undue risk to investors. The Fund may, for temporary
defensive purposes, invest up to 100% of its assets in cash and money market
instruments or invest all or a portion of its assets in securities of U.S. or
other non-Latin American issuers when the Adviser deems such a position
6
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advisable in light of economic or market conditions. The Fund may also invest in
closed-end investment companies investing primarily in Latin America. In
addition, the Fund may invest in loan participations and assignments,
when-issued securities, convertible securities and repurchase agreements and may
engage in strategic transactions. See "Additional information about policies and
investments" for more information about these investment techniques.
Why invest in the Fund?
The Fund seeks to take advantage of evolving economic and political trends in
Latin America. These trends are largely a result of efforts by Latin American
governments to institute democratic and market-oriented economic reforms.
Although the pace and success in accomplishing these objectives vary
significantly throughout Latin America, there has been a general trend in recent
years towards reducing government's role in economic affairs and creating a
business environment conducive to investment and growth. To take better
advantage of Latin America's abundant natural resources and other strengths,
many countries in the region have established policies to control inflation,
reduce government deficits and external debt, stabilize currency exchange rates,
reduce taxes and interest rates, and modernize and open securities markets.
Governments have also privatized state-owned enterprises, including telephone
companies, utilities, banks, petrochemical concerns and railroads, and are
beginning to invest heavily in infrastructure, which is necessary for a strong
economy. In some Latin American countries these initiatives have already led to
more stable economic conditions, stronger economic growth, reduction of capital
outflows, and increased interest by foreign investors in Latin America, all of
which have helped boost capital market returns in recent years.
Investors should be aware that participation in the Fund involves special
considerations and risks not typically associated with a mutual fund investing
principally in the securities of U.S. issuers. However, for investors who can
accept the risks of Latin American investing and have a long-term investment
horizon, the Fund offers the potential for substantial capital appreciation over
time. See "Additional information about policies and investments--Risk factors."
The Fund is the first pure no-load fund to invest in Latin America. In addition,
the Fund offers all the benefits of the Scudder Family of Funds. Scudder,
Stevens & Clark, Inc. manages a diverse family of pure no-load(TM) funds and
provides a wide range of services to help investors meet their investment needs.
Please refer to "Investment products and services" for additional information.
Latin American investment experience
The Adviser has been active in international investment for over 40 years. The
Adviser manages a number of offshore and U.S. investment companies that invest
in all or select regions of Latin America, including three closed-end funds
trading on the New York Stock Exchange: The Argentina Fund, Inc., The Brazil
Fund, Inc., and The Latin America Dollar Income Fund, Inc.
Additional information about policies and investments
Investment restrictions
The Fund has adopted certain fundamental policies which may not be changed
without a vote of shareholders and which are designed to reduce the Fund's
investment risk.
The Fund may not borrow money except as a temporary measure for extraordinary or
7
<PAGE>
Additional information about policies and investments (cont'd)
emergency purposes and may not make loans except through the lending of
portfolio securities, the purchase of debt securities or through repurchase
agreements.
The Fund may not invest more than 25% of its total assets in securities of
companies in the same industry.
In addition, as a matter of nonfundamental policy, the Fund may not invest more
than 10% of its total assets, in the aggregate, in securities which are not
readily marketable, in restricted securities or in repurchase agreements
maturing in more than seven days.
A complete description of these and other policies and restrictions is contained
under "Investment Restrictions" in the Fund's Statement of Additional
Information.
Loan participations and assignments
The Fund may invest in fixed and floating rate loans arranged through private
negotiations between an issuer of emerging market debt instruments and one or
more financial institutions ("lenders"). Generally, the Fund's investments in
loans are expected to take the form of loan participations and assignments of
portions of loans from third parties.
When investing in a participation, the Fund will typically have the right to
receive payments only from the lender to the extent the lender receives payments
from the borrower, and not from the borrower itself. Likewise, the Fund
typically will be able to enforce its rights only through the lender, and not
directly against the borrower. As a result, the Fund will assume the credit risk
of both the borrower and the lender that is selling the participation.
When the Fund purchases assignments from lenders, it will acquire direct rights
against the borrower, but these rights and the Fund's obligations may differ
from, and be more limited than, those held by the assigning lender.
Loan participations and assignments may be illiquid. Please refer to "Risk
factors--Illiquid investments" for more information.
When-issued securities
The Fund may purchase equity and debt securities on a when-issued or forward
delivery basis, for payment and delivery at a later date. The price and yield
are generally fixed on the date of commitment to purchase. During the period
between purchase and settlement, no interest accrues to the Fund. At the time of
settlement, the market value of the security may be more or less than the
purchase price.
Convertible securities
The Fund may invest in convertible securities which may offer higher income than
the common stocks into which they are convertible. The convertible securities in
which the Fund may invest include fixed-income or zero coupon debt securities
which may be converted or exchanged at a stated or determinable exchange ratio
into underlying shares of common stock. Prior to their conversion, convertible
securities may have characteristics similar to non-convertible securities.
Repurchase agreements
As a means of earning income for periods as short as overnight, the Fund may
enter into repurchase agreements with selected banks and broker/dealers. Under a
repurchase agreement, the Fund acquires securities, subject to the seller's
agreement to repurchase at a specified time and price. The Fund may also enter
into repurchase commitments for investment purposes for periods of 30 days or
more. Such commitments involve investment risk similar to that of debt
securities. Please see "Risk factors--Repurchase agreements" for more
information.
Strategic Transactions and derivatives
The Fund may, but is not required to, utilize various other investment
strategies as described below to hedge various market risks (such as interest
rates, currency exchange rates, and broad or specific equity or fixed-income
8
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market movements), to manage the effective maturity or duration of fixed-income
securities in the Fund's portfolio or to enhance potential gain. These
strategies may be executed through the use of derivative contracts. Such
strategies are generally accepted as a part of modern portfolio management and
are regularly utilized by many mutual funds and other institutional investors.
Techniques and instruments may change over time as new instruments and
strategies are developed or regulatory changes occur.
In the course of pursuing these investment strategies, the Fund may purchase and
sell exchange-listed and over-the-counter put and call options on securities,
equity and fixed-income indices and other financial instruments, purchase and
sell financial futures contracts and options thereon, enter into various
interest rate transactions such as swaps, caps, floors or collars, and enter
into various currency transactions such as currency forward contracts, currency
futures contracts, currency swaps or options on currencies or currency futures
(collectively, all the above are called "Strategic Transactions").
Strategic Transactions may be used without limit to attempt to protect against
possible changes in the market value of securities held in or to be purchased
for the Fund's portfolio resulting from securities markets or currency exchange
rate fluctuations, to protect the Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of fixed-income
securities in the Fund's portfolio, or to establish a position in the
derivatives markets as a temporary substitute for purchasing or selling
particular securities. Some Strategic Transactions may also be used to enhance
potential gain although no more than 5% of the Fund's assets will be committed
to Strategic Transactions entered into for non-hedging purposes. Any or all of
these investment techniques may be used at any time and in any combination, and
there is no particular strategy that dictates the use of one technique rather
than another, as use of any Strategic Transaction is a function of numerous
variables including market conditions. The ability of the Fund to utilize these
Strategic Transactions successfully will depend on the Adviser's ability to
predict pertinent market movements, which cannot be assured. The Fund will
comply with applicable regulatory requirements when implementing these
strategies, techniques and instruments. Strategic Transactions involving
financial futures and options thereon will be purchased, sold or entered into
only for bona fide hedging, risk management or portfolio management purposes and
not for speculative purposes. Please refer to "Risk factors--Strategic
Transactions and derivatives" for more information.
Risk factors
The Fund's risks are determined by the nature of the securities held and the
portfolio management strategies used by the Adviser. The following are
descriptions of certain risks related to the investments and techniques that the
Fund may use from time to time.
Non-diversified investment company. The Fund is classified as a non-diversified
investment company under the Investment Company Act of 1940 (the "1940 Act"),
which means that the Fund is not limited by the 1940 Act in the proportion of
its assets that it may invest in the obligations of a single issuer. The
investment of a large percentage of the Fund's assets in the securities of a
small number of issuers may cause the Fund's share price to fluctuate more than
that of a diversified investment company.
Investing in Latin America. The Adviser believes that investment opportunities
may result from recent trends in Latin America encouraging greater market
orientation and less governmental intervention in economic affairs. Investors,
however, should be aware that the Latin American economies have experienced
9
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Additional information about policies and investments (cont'd)
considerable difficulties in the past decade. Although there have been
significant improvements in recent years, the Latin American economies continue
to experience challenging problems, including high inflation rates and high
interest rates relative to the U.S. The emergence of the Latin American
economies and securities markets will require continued economic and fiscal
discipline which has been lacking at times in the past, as well as stable
political and social conditions. Recovery may also be influenced by
international economic conditions, particularly those in the U.S., and by world
prices for oil and other commodities. There is no assurance that recent economic
initiatives will be successful.
Certain risks associated with international investments and investing in
smaller, developing capital markets are heightened for investments in Latin
American countries. For example, some of the currencies of Latin American
countries have experienced steady devaluations relative to the U.S. dollar, and
major adjustments have been made in certain of these currencies periodically. In
addition, although there is a trend toward less government involvement in
commerce, governments of many Latin American countries have exercised and
continue to exercise substantial influence over many aspects of the private
sector. In certain cases, the government still owns or controls many companies,
including some of the largest in the country. Accordingly, government actions in
the future could have a significant effect on economic conditions in Latin
American countries, which could affect private sector companies and the Fund, as
well as the value of securities in the Fund's portfolio.
Most Latin American countries 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 negative
effects on the economies and securities markets of certain Latin American
countries.
Certain Latin American countries are among the largest debtors to commercial
banks and foreign governments. Some of these countries have in the past
defaulted on their sovereign debt. Holders of sovereign debt (including the
Fund) may be requested to participate in the rescheduling of such debt and to
extend further loans to governmental entities. There is no bankruptcy proceeding
by which sovereign debt on which governmental entities have defaulted may be
collected in whole or in part.
The limited size of many Latin American securities markets and limited trading
volume in issuers compared to the volume of trading in U.S. securities could
cause prices to be erratic for reasons apart from factors that affect the
quality of securities.
The portion of the Fund's assets invested directly in Chile may be less than the
portions invested in other countries in Latin America because, at present,
capital invested in Chile normally cannot be repatriated for as long as five
years. As such, direct investments in Chile will be limited by the Fund's
nonfundamental policy of not investing more than 10% of total assets in
securities which are not readily marketable.
Foreign securities. Investments in foreign securities involve special
considerations due to more limited information, higher brokerage costs,
different accounting standards, thinner trading markets and the likely impact of
foreign taxes on the income from securities. They may also entail certain other
risks, such as the possibility of one or more of the following: imposition of
dividend or interest withholding or confiscatory taxes; currency blockages or
transfer restrictions; expropriation, nationalization, military coups or other
adverse political or economic developments; less government supervision and
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regulation of securities exchanges, brokers and listed companies; and the
difficulty of enforcing obligations in other countries. Further, it may be more
difficult for the Fund's agents to keep currently informed about corporate
actions 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., increasing the risk of delayed settlements of portfolio transactions or
loss of certificates for portfolio securities. Certain markets may require
payment for securities before delivery. The Fund's ability and decisions to
purchase and sell portfolio securities may be affected by laws or regulations
relating to the convertibility of currencies and repatriation of assets. Some
countries restrict the extent to which foreigners may invest in their securities
markets.
The Fund invests in securities denominated in currencies of Latin American
countries. Accordingly, changes in the value of these currencies against the
U.S. dollar will result in corresponding changes in the U.S. dollar value of the
Fund's assets denominated in those currencies.
Some Latin American countries also may have managed currencies, which are not
free floating against the U.S. dollar. In addition, there is risk that certain
Latin American countries may restrict the free conversion of their currencies
into other currencies. Further, it generally will not be possible to reduce the
Fund's Latin American currency risk through hedging. Any devaluations in the
currencies in which the Fund's portfolio securities are denominated may have a
detrimental impact on the Fund's net asset value.
Convertible securities. While convertible securities generally offer lower
yields than non-convertible debt securities of similar quality, their prices may
reflect changes in the value of the underlying common stock. Convertible
securities entail less credit risk than the issuer's common stock.
Repurchase agreements. If the seller under a repurchase agreement becomes
insolvent, the Fund's right to dispose of the securities may be restricted, or
the value of the securities may decline before the Fund is able to dispose of
them. In the event of the commencement of bankruptcy or insolvency proceedings
with respect to the seller of the securities before repurchase of the securities
under a repurchase agreement, the Fund may encounter delay and incur costs,
including a decline in the value of the securities, before being able to sell
the securities.
Debt securities. The Fund may invest in debt securities which are unrated, rated
or the equivalent of those rated below investment grade (commonly referred to as
"junk bonds"). The lower the ratings of such debt securities, the greater their
risks render them like equity securities. The Fund will invest no more than 10%
of its net assets in securities rated B or lower by Moody's or S&P, and may
invest in securities rated C by Moody's or D by S&P, which may be in default
with respect to payment of principal or interest. Also, longer maturity bonds
tend to fluctuate more in price as interest rates change than do short-term
bonds, providing both opportunity and risk.
Illiquid investments. The absence of a trading market can make it difficult to
ascertain a market value for illiquid investments. Disposing of illiquid
investments may involve time-consuming negotiation and legal expenses, and it
may be difficult or impossible for the Fund to sell them promptly at an
acceptable price.
Borrowing. Although the principal of the Fund's borrowing will be fixed, the
Fund's assets may change in value during the time a borrowing is outstanding,
increasing exposure to capital risk.
Strategic Transactions and derivatives. Strategic Transactions, including
derivative contracts, have risks associated with them including possible
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Additional information about policies and investments (cont'd)
default by the other party to the transaction, illiquidity and, to the extent
the Adviser's view as to certain market movements is incorrect, the risk that
the use of such Strategic Transactions could result in losses greater than if
they had not been used. Use of put and call options may result in losses to the
Fund, force the sale or purchase of portfolio securities at inopportune times or
for prices higher than (in the case of put options) or lower than (in the case
of call options) current market values, limit the amount of appreciation the
Fund can realize on its investments or cause the Fund to hold a security it
might otherwise sell. The use of currency transactions can result in the Fund
incurring losses as a result of a number of factors including the imposition of
exchange controls, suspension of settlements or the inability to deliver or
receive a specified currency. The use of options and futures transactions
entails certain other risks. In particular, the variable degree of correlation
between price movements of futures contracts and price movements in the related
portfolio position of the Fund creates the possibility that losses on the
hedging instrument may be greater than gains in the value of the Fund's
position. In addition, futures and options markets may not be liquid in all
circumstances and certain over-the-counter options may have no markets. As a
result, in certain markets, the Fund might not be able to close out a
transaction without incurring substantial losses, if at all. Although the use of
futures contracts and options transactions for hedging should tend to minimize
the risk of loss due to a decline in the value of the hedged position, at the
same time they tend to limit any potential gain which might result from an
increase in value of such position. Finally, the daily variation margin
requirements for futures contracts would create a greater ongoing potential
financial risk than would purchases of options, where the exposure is limited to
the cost of the initial premium. Losses resulting from the use of Strategic
Transactions would reduce net asset value, and possibly income, and such losses
can be greater than if the Strategic Transactions had not been utilized. The
Strategic Transactions that the Fund may use and some of their risks are
described more fully in the Fund's Statement of Additional Information.
Distribution and performance information
Dividends and capital gains distributions
The Fund intends to distribute dividends from its net investment income and net
realized capital gains after utilization of capital loss carryforwards, if any,
annually in December to prevent application of federal excise tax, although an
additional distribution may be made if required, at a later date. Any dividends
or capital gains distributions declared in October, November or December with a
record date in such a month and paid the following January will be treated by
shareholders for federal income tax purposes as if received on December 31 of
the calendar year declared. According to preference, shareholders may receive
distributions in cash or have them reinvested in additional shares of the Fund.
Distributions are not subject to the 2% redemption fee, whether paid in cash or
reinvested. If the investment is in the form of a retirement plan, all dividends
and capital gains distributions must be reinvested into the shareholder's
account.
Generally, dividends from net investment income are taxable to shareholders as
ordinary income. Long-term capital gains distributions, if any, are taxable as
long-term capital gains regardless of the length of time shareholders have owned
their shares. Short-term capital gains and any other taxable distributions are
taxable as ordinary income.
Shareholders may be able to claim a credit or deduction on their income tax
12
<PAGE>
returns for their pro rata portion of qualified taxes paid by the Fund to
foreign countries.
The Fund sends detailed tax information about the amount and type of its
distributions to its shareholders by January 31 of the following year.
Performance information
From time to time, quotations of the Fund's performance may be included in
advertisements, sales literature or shareholder reports. All performance figures
are historical, show the performance of a hypothetical investment and are not
intended to indicate future performance. "Total return" is the change in value
of an investment in the Fund for a specified period. The "average annual total
return" of the Fund is the average annual compound rate of return of an
investment in the Fund assuming the investment has been held for one year, and
the life of the Fund as of a stated ending date. "Cumulative total return"
represents the cumulative change in value of an investment in the Fund for
various periods. All types of total return calculations assume that all
dividends and capital gains distributions during the period were reinvested in
shares of the Fund. "Capital change" measures return from capital, including
reinvestment of any capital gains distributions but does not include the
reinvestment of dividends. Performance will vary based upon, among other things,
changes in market conditions and the level of the Fund's expenses.
Fund organization
Scudder Latin America Fund is a non-diversified series of Scudder International
Fund, Inc. (the "Corporation"), an open-end, management investment company
registered under the 1940 Act. The Corporation was organized as a Maryland
corporation in July 1975.
The Fund's activities are supervised by the Corporation's Board of Directors.
Shareholders have one vote for each share held on matters on which they are
entitled to vote. The Fund is not required to and has no current intention of
holding annual shareholder meetings, although special meetings may be called for
purposes such as electing or removing Directors, changing fundamental investment
policies or approving an investment advisory contract. Shareholders will be
assisted in communicating with other shareholders in connection with removing a
Director as if Section 16(c) of the 1940 Act were applicable.
Investment adviser
The Fund retains the investment management firm of Scudder, Stevens & Clark,
Inc., a Delaware corporation, to manage the Fund's daily investment and business
affairs subject to the policies established by the Board of Directors. The
Directors have overall responsibility for the management of the Fund under
Maryland law.
The Fund pays the Adviser an annual fee of 1.25% of the Fund's average daily net
assets. The fee is payable monthly, provided that the Fund will make such
interim payments as may be requested by the Adviser not to exceed 75% of the
amount of the fee then accrued on the books of the Fund and unpaid. The fee is
higher than that charged by many funds which invest primarily in U.S. securities
but not necessarily higher than the fees charged to funds with investment
objectives similar to that of the Fund.
For the fiscal year ended October 31, 1995, the Adviser did not impose a portion
of its management fee, maintaining the annualized expenses for the Fund at 2.08%
and, accordingly, received an investment management fee of 1.22% of the Fund's
average daily net assets.
All the Fund's expenses are paid out of gross investment income. Shareholders
pay no direct charges or fees for investment or administrative services.
Scudder, Stevens & Clark, Inc., is located at 345 Park Avenue, New York, New
York.
(Continued on page 16)
13
<PAGE>
Purchases
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Opening Minimum initial investment: $1,000; IRAs $500
an account Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums. See appropriate
plan literature.
Make checks o By Mail Send your completed and signed application and check
payable to "The
Scudder Funds."
by regular mail to: or by express, registered,
or certified mail to:
The Scudder Funds Scudder Shareholder Services
P.O. Box 2291 Center
Boston, MA 42 Longwater Drive
02107-2291 Norwell, MA
02061-1612
o By Wire Please see Transaction information--Purchasing shares--
By wire following these tables for details, including the ABA
wire transfer number. Then call 1-800-225-5163 for instructions.
o In Person Visit one of our Funds Centers to complete your application with the help
of a Scudder representative. Funds Center locations are listed under
Shareholder benefits.
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
Purchasing Minimum additional investment: $100; IRAs $50
additional Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums. See appropriate
shares plan literature.
Make checks o By Mail Send a check with a Scudder investment slip, or with a letter of
payable to "The instruction including your account number and the complete Fund name, to
Scudder Funds." the appropriate address listed above.
o By Wire Please see Transaction information--Purchasing shares--
By wire following these tables for details, including the ABA
wire transfer number.
o In Person Visit one of our Funds Centers to make an additional
investment in your Scudder fund account. Funds Center
locations are listed under Shareholder benefits.
o By Telephone Please see Transaction information--Purchasing shares--
By AutoBuy or By telephone order for more details.
o By Automatic You may arrange to make investments on a regular basis
Investment Plan through automatic deductions from your bank checking account.
($50 minimum) Please call 1-800-225-5163 for more information and an
enrollment form.
</TABLE>
14
<PAGE>
Exchanges and redemptions
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Exchanging shares Minimum investments: $1,000 to establish a new account; $100 to exchange among
existing accounts
o By Telephone To speak with a service representative, call 1-800-225-5163 from
8 a.m. to 8 p.m. eastern time or to access SAIL(TM), Scudder's Automated
Information Line, call 1-800-343-2890 (24 hours a day).
There may be a o By Mail Print or type your instructions and include:
2% fee payable or Fax - the name of the Fund and the account number you are exchanging from;
to the Fund for - your name(s) and address as they appear on your account;
exchanges of - the dollar amount or number of shares you wish to exchange;
shares held less - the name of the Fund you are exchanging into; and
than one year. - your signature(s) as it appears on your account and a daytime telephone
number.
Send your instructions
by regular mail to: or by express, registered, or by fax to:
or certified mail to:
The Scudder Funds Scudder Shareholder 1-800-821-6234
P.O. Box 2291 Services Center
Boston, MA 02107-2291 42 Longwater Drive
Norwell, MA 02061-1612
-----------------------------------------------------------------------------------------------------------------------
Redeeming shares o By Telephone To speak with a service representative, call 1-800-225-5163
from 8 a.m. to 8 p.m. eastern time or to access SAIL(TM), Scudder's
Automated Information Line, call 1-800-343-2890 (24 hours a day).
You may have redemption proceeds sent to your predesignated bank account,
or redemption proceeds of up to $50,000 sent to your address of record.
There may be a o By Mail Send your instructions for redemption to the appropriate address or fax number
2% fee payable or Fax above and include:
to the Fund for - the name of the Fund and account number you are redeeming from;
redemption of - your name(s) and address as they appear on your account;
shares held less - the dollar amount or number of shares you wish to redeem; and
than one year. - your signature(s) as it appears on your account and a daytime telephone
number.
A signature guarantee is required for redemptions over $50,000. See
Transaction information--Redeeming shares following these tables.
o By Automatic You may arrange to receive automatic cash payments periodically.
Withdrawal Call 1-800-225-5163 for more information and an enrollment form.
Plan
</TABLE>
15
<PAGE>
Fund organization (cont'd)
(Continued from page 13)
Transfer agent
Scudder Service Corporation, P.O. Box 2291, Boston, Massachusetts 02107-2291, a
subsidiary of the Adviser, is the transfer, shareholder servicing and
dividend-paying agent for the Fund.
Underwriter
Scudder Investor Services, Inc., a subsidiary of the Adviser, is the Fund's
principal underwriter. Scudder Investor Services, Inc. confirms, as agent, all
purchases of shares of the Fund. Scudder Investor Relations is a telephone
information service provided by Scudder Investor Services, Inc.
Custodian
Brown Brothers Harriman & Co. is the Fund's custodian.
Fund accounting agent
Scudder Fund Accounting Corporation, a subsidiary of the Adviser, is responsible
for determining the daily net asset value per share and maintaining the general
accounting records of the Fund.
Transaction information
Purchasing shares
Purchases are executed at the next calculated net asset value per share after
the Fund's transfer agent receives the purchase request in good order. Purchases
are made in full and fractional shares. (See "Share price.")
By check. If you purchase shares with a check that does not clear, your purchase
will be canceled and you will be subject to any losses or fees incurred in the
transaction. Checks must be drawn on or payable through a U.S. bank. If you
purchase shares by check and redeem them within seven business days of purchase,
the Fund may hold redemption proceeds until the purchase check has cleared. If
you purchase shares by federal funds wire, you may avoid this delay. Redemption
or exchange requests by telephone prior to the expiration of the seven-day
period will not be accepted.
By wire. To open a new account by wire, first call Scudder at 1-800-225-5163 to
obtain an account number. A representative will instruct you to send a
completed, signed application to the transfer agent. Accounts cannot be opened
without a completed, signed application and a Scudder fund account number.
Contact your bank to arrange a wire transfer to:
The Scudder Funds
State Street Bank and Trust Company
Boston, MA 02101
ABA Number 011000028
DDA Account 9903-5552
Your wire instructions must also include:
- -- the name of the fund in which the money is to be invested,
- -- the account number of the fund, and
- -- the name(s) of the account holder(s).
The account will be established once the application and money order are
received in good order.
You may also make additional investments of $100 or more to your existing
account by wire.
By telephone order. Existing shareholders may purchase shares at a certain day's
price by calling 1-800-225-5163 before the close of regular trading on the New
York Stock Exchange (the "Exchange"), normally 4 p.m. eastern time, on that day.
Orders must be for $10,000 or more and cannot be for an amount greater than four
times the value of your account at the time the order is placed. A confirmation
with complete purchase information is sent shortly after your order is received.
You must include with your payment the order number given at the time the order
is placed. If payment by check or wire is not received within three business
days, the order is subject to cancellation and the shareholder will be
responsible for any loss to the Fund resulting from this cancellation. Telephone
16
<PAGE>
orders are not available for shares held in Scudder IRA accounts and most other
Scudder retirement plan accounts.
By "AutoBuy." If you elected "AutoBuy" for your account, you can call toll-free
to purchase shares. The money will be automatically transferred from your
predesignated bank checking account. Your bank must be a member of the Automated
Clearing House for you to use this service. If you did not elect "AutoBuy," call
1-800-225-5163 for more information.
To purchase additional shares, call 1-800-225-5163. Purchases must be for at
least $250 but not more than $250,000. Proceeds in the amount of your purchase
will be transferred from your bank checking account in two or three business
days following your call. For requests received by the close of regular trading
on the Exchange, shares will be purchased at the net asset value per share
calculated at the close of trading on the day of your call. "AutoBuy" requests
received after the close of regular trading on the Exchange will begin their
processing and be purchased at the net asset value calculated the following
business day.
If you purchase shares by "AutoBuy" and redeem them within seven days of the
purchase, the Fund may hold the redemption proceeds for a period of up to seven
business days. If you purchase shares and there are insufficient funds in your
bank account, the purchase will be canceled and you will be subject to any
losses or fees incurred in the transaction. "AutoBuy" transactions are not
available for Scudder IRA accounts and most other retirement plan accounts.
Exchanging and redeeming shares
Upon the redemption or exchange of shares held less than a year, a fee of 2% of
the lower of the cost or the current net asset value of the shares will be
assessed and retained by the Fund for the benefit of the remaining shareholders.
The fee is waived for all shares purchased through certain retirement plans,
including 401(k) plans, 403(b) plans, 457 plans, Keogh accounts, and Profit
Sharing and Money Purchase Pension Plans. However, this fee waiver does not
apply to IRA and SEP-IRA accounts. This fee is intended to encourage long-term
investment in the Fund, to avoid transaction and other expenses caused by early
redemptions, and to facilitate portfolio management. The fee is not a deferred
sales charge, is not a commission paid to the Adviser or its subsidiaries, and
does not benefit the Adviser in any way. The Fund reserves the right to modify
the terms of or terminate this fee at any time. The fee applies to redemptions
from the Fund and exchanges to other Scudder funds, but not to dividend or
capital gains distributions which have been automatically reinvested in the
Fund. The fee is applied to the shares being redeemed or exchanged in the order
in which they were purchased. See "Exchanges and Redemptions" in the Fund's
Statement of Additional Information for a more detailed description of the
redemption fee.
Exchanges. Your new account will have the same registration and address as your
existing account.
The exchange requirements for corporations, other organizations, trusts,
fiduciaries, agents, institutional investors and retirement plans may be
different from those for regular accounts. Please call 1-800-225-5163 for more
information, including information about the transfer of special account
features.
You can also make exchanges among your Scudder fund accounts on SAIL, the
Scudder Automated Information Line, by calling 1-800-343-2890.
Redemptions by telephone. This is the quickest and easiest way to sell Fund
shares. If you elected telephone redemption to your bank on your application,
you can call to request that federal funds be sent to your authorized bank
account. If you did not elect telephone redemption to your bank on your
application, call 1-800-225-5163 for more information.
17
<PAGE>
Transaction information (cont'd)
Redemption proceeds will be wired to your bank unless otherwise requested. If
your bank cannot receive federal reserve wires, redemption proceeds will be
mailed to your bank. There will be a $5 charge for all wire redemptions. You can
also make redemptions from your Scudder fund account on SAIL by calling
1-800-343-2890.
If you open an account by wire, you cannot redeem shares by telephone until the
Fund's transfer agent has received your completed and signed application.
Telephone redemption is not available for shares held in Scudder IRA accounts
and most other Scudder retirement plan accounts.
In the event that you are unable to reach the Fund by telephone, you should
write to the Fund; see "How to contact Scudder" for the address.
By "AutoSell." If you elected "AutoSell" for your account, you can call
toll-free to redeem shares. The money will be automatically transferred to your
predesignated bank checking account. Your bank must be a member of the Automated
Clearing House for you to use this service. If you did not elect "AutoSell,"
call 1-800-225-5163 for more information.
To redeem shares, call 1-800-225-5163. Redemptions must be for at least $250.
Proceeds in the amount of your redemption will be transferred to your bank
checking account in two or three business days following your call. For requests
received by the close of regular trading on the Exchange, shares will be
redeemed at the net asset value per share calculated at the close of trading on
the day of your call. "AutoSell" requests received after the close of regular
trading on the Exchange will begin their processing and be redeemed at the net
asset value calculated the following business day.
"AutoSell" transactions are not available for Scudder IRA accounts and most
other retirement plan accounts.
Signature guarantees. For your protection and to prevent fraudulent redemptions,
on written redemption requests in excess of $50,000 we require an original
signature and an original signature guarantee for each person in whose name the
account is registered. (The Fund reserves the right, however, to require a
signature guarantee for all redemptions.) You can obtain a signature guarantee
from most banks, credit unions or savings associations, or from broker/dealers,
municipal securities broker/dealers, government securities broker/dealers,
national securities exchanges, registered securities associations, or clearing
agencies deemed eligible by the Securities and Exchange Commission. Signature
guarantees by notaries public are not acceptable. Redemption requirements for
corporations, other organizations, trusts, fiduciaries, agents, institutional
investors and retirement plans may be different from those for regular accounts.
For more information, please call 1-800-225-5163.
Telephone transactions
Shareholders automatically receive the ability to exchange by telephone and the
right to redeem by telephone up to $50,000 to their address of record.
Shareholders also may, by telephone, request that redemption proceeds be sent to
a predesignated bank account. The Fund uses procedures designed to give
reasonable assurance that telephone instructions are genuine, including
recording telephone calls, testing a caller's identity and sending written
confirmation of telephone transactions. If the Fund does not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Fund will not be liable for acting upon instructions
communicated by telephone that it reasonably believes to be genuine.
Share price
Purchases and redemptions, including exchanges, are made at net asset value.
There may be a 2% fee payable to the Fund for exchanges or redemptions of shares
18
<PAGE>
held less than one year. Scudder Fund Accounting Corporation determines net
asset value per share as of the close of regular trading on the Exchange,
normally 4 p.m. eastern time, on each day the Exchange is open for trading. Net
asset value per share is calculated by dividing the value of total Fund assets,
less all liabilities, by the total number of shares outstanding.
Processing time
All purchase and redemption requests received in good order by the Fund's
transfer agent by the close of regular trading on the Exchange are executed at
the net asset value per share calculated at the close of regular trading that
day.
Purchase and redemption requests received after the close of regular trading on
the Exchange will be executed the following business day.
If you wish to make a purchase of $500,000 or more you should notify Scudder
Investor Relations by calling 1-800-225-5163.
The Fund will normally send your redemption proceeds within one business day
following the redemption request, but may take up to seven business days (or
longer in the case of shares recently purchased by check).
Short-term trading
Purchases and sales should be made for long-term investment purposes only. The
Fund and Scudder Investor Services, Inc. each reserves the right to restrict
purchases of Fund shares (including exchanges) when a pattern of frequent
purchases and sales made in response to short-term fluctuations in the Fund's
share price appears evident.
Tax information
A redemption of shares, including an exchange into another Scudder fund, is a
sale of shares and may result in a gain or loss for income tax purposes.
Tax identification number
Be sure to complete the Tax Identification Number section of the Fund's
application when you open an account. Federal tax law requires the Fund to
withhold 31% of taxable dividends, capital gains distributions and redemption
and exchange proceeds from accounts (other than those of certain exempt payees)
without a certified Social Security or tax identification number and certain
other certified information or upon notification from the IRS or a broker that
withholding is required. The Fund reserves the right to reject new account
applications without a certified Social Security or tax identification number.
The Fund also reserves the right, following 30 days' notice, to redeem all
shares in accounts without a certified Social Security or tax identification
number. A shareholder may avoid involuntary redemption by providing the Fund
with a tax identification number during the 30-day notice period. Redemptions
for failure to provide a tax identification number are not subject to the 2%
redemption fee.
Minimum balances
Shareholders should maintain a share balance worth at least $1,000, which amount
may be changed by the Board of Directors. Scudder retirement plans have similar
or lower minimum share balance requirements. The Fund reserves the right,
following 60 days' written notice to shareholders, to redeem all shares in
sub-minimum accounts, including accounts of new investors, where a reduction in
value has occurred due to a redemption or exchange out of the account.
Reductions in value that result solely from market activity will not trigger an
involuntary redemption. The Fund will mail the proceeds of the redeemed account
to the shareholder. The shareholder may restore the share balance to $1,000 or
more during the 60-day notice period and must maintain it at no lower than that
minimum to avoid involuntary redemption.
Third party transactions
If purchases and redemptions of Fund shares are arranged and settlement is made
at an investor's election through a member of the National
19
<PAGE>
Transaction information (cont'd)
Association of Securities Dealers, Inc., other than Scudder Investor Services,
Inc., that member may, at its discretion, charge a fee for that service.
Redemption-in-kind
The Fund reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption or repurchase order by making
payment in whole or in part in readily marketable securities chosen by the Fund
and valued as they are for purposes of computing the Fund's net asset value (a
redemption-in-kind). If payment is made in securities, a shareholder may incur
transaction expenses in converting these securities to cash. The 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 the Fund at the beginning of the
period.
Shareholder benefits
Experienced professional management
Scudder, Stevens & Clark, Inc., one of the nation's most experienced investment
management firms, actively manages your Scudder fund investment. Professional
management is an important advantage for investors who do not have the time or
expertise to invest directly in individual securities.
A team approach to investing
Scudder Latin America Fund is managed by a team of Scudder investment
professionals who each play an important role in the Fund's management process.
Team members work together to develop investment strategies and select
securities for the Fund's portfolio. They are supported by Scudder's large staff
of economists, research analysts, traders and other investment specialists who
work in Scudder's offices across the United States and abroad. Scudder believes
its team approach benefits Fund investors by bringing together many disciplines
and leveraging Scudder's extensive resources.
Lead Portfolio Manager Edmund B. Games, Jr. has set the Fund's investment
strategy and overseen its daily operation since the Fund was introduced in 1992.
Mr. Games joined Scudder's equity research area in 1960 and has focused on Latin
American stocks since 1988. Tara C. Kenney, Portfolio Manager, assists with the
Fund's research and investment strategy. Ms. Kenney, who joined the Fund's team
in 1996, has nine years of financial industry experience. Paul Rogers, Portfolio
Manager, also joined the Fund's team in 1996 and is primarily responsible for
research on Latin American corporations. Mr. Rogers joined Scudder in 1994 and
has over 10 years of investment experience.
SAIL(TM)--Scudder Automated Information Line
For personalized account information including fund prices, yields and account
balances, to perform transactions in existing Scudder fund accounts, or to
obtain information on any Scudder fund, shareholders can call Scudder's
Automated Information Line (SAIL) at 1-800-343-2890, 24 hours a day. During
periods of extreme economic or market changes, or other conditions, it may be
difficult for you to effect telephone transactions in your account. In such an
event you should write to the Fund; please see "How to contact Scudder" for the
address.
Investment flexibility
Scudder offers toll-free telephone exchange between funds at current net asset
value. You can move your investments among money market, income, growth,
tax-free and growth and income funds with a simple toll-free call or, if you
prefer, by sending your instructions through the mail or by fax. Telephone and
fax redemptions and exchanges are subject to termination and their terms are
20
<PAGE>
subject to change at any time by the Fund or the transfer agent. In some cases,
the transfer agent or Scudder Investor Services, Inc. may impose additional
conditions on telephone transactions.
Dividend reinvestment plan
You may have dividends and distributions automatically reinvested in additional
Fund shares. Please call 1-800-225-5163 to request this feature.
Shareholder statements
You receive a detailed account statement every time you purchase or redeem
shares. All of your statements should be retained to help you keep track of
account activity and the cost of shares for tax purposes.
Shareholder reports
In addition to account statements, you receive periodic shareholder reports
highlighting relevant information, including investment results and a review of
portfolio changes.
To reduce the volume of mail you receive, only one copy of most Fund reports,
such as the Fund's Annual Report, may be mailed to your household (same surname,
same address). Please call 1-800-225-5163 if you wish to receive additional
shareholder reports.
Newsletters
Four times a year, Scudder sends you Perspectives, an informative newsletter
covering economic and investment developments, service enhancements and other
topics of interest to Scudder fund investors.
Scudder Funds Centers
As a convenience to shareholders who like to conduct business in person, Scudder
Investor Services, Inc. maintains Funds Centers in Boca Raton, Boston, Chicago,
Cincinnati, Los Angeles, New York, Portland (OR), San Diego, San Francisco and
Scottsdale.
T.D.D. service for the hearing impaired
Scudder's full range of investor information and shareholder services is
available to hearing impaired investors through a toll-free T.D.D. (Telephone
Device for the Deaf) service. If you have access to a T.D.D., call
1-800-543-7916 for investment information or specific account questions and
transactions.
21
<PAGE>
Scudder tax-advantaged retirement plans
Scudder offers a variety of tax-advantaged retirement plans for individuals,
businesses and non-profit organizations. These flexible plans are designed for
use with the Scudder Family of Funds (except Scudder tax-free funds, which are
inappropriate for such plans). Scudder Funds offer a broad range of investment
objectives and can be used to seek almost any investment goal. Using Scudder's
retirement plans can help shareholders save on current taxes while building
their retirement savings.
o Scudder No-Fee IRAs. These retirement plans allow a maximum annual
contribution of $2,000 per person for anyone with earned income. Many
people can deduct all or part of their contributions from their taxable
income, and all investment earnings accrue on a tax deferred basis. The
Scudder No-Fee IRA charges no annual custodial fee.
o 401(k) Plans. 401(k) plans allow employers and employees to make
tax-deductible retirement contributions. Scudder offers a full service
program that includes recordkeeping, prototype plan, employee
communications and trustee services, as well as investment options.
o Profit Sharing and Money Purchase Pension Plans. These plans allow
corporations, partnerships and people who are self-employed to make annual,
tax-deductible contributions of up to $30,000 for each person covered by
the plans. Plans may be adopted individually or paired to maximize
contributions. These are sometimes known as Keogh plans.
o 403(b) Plans. Retirement plans for tax-exempt organizations and school
systems to which employers and employees may both contribute.
o SEP-IRAs. Easily administered retirement plans for small businesses and
self-employed individuals. The maximum annual contribution to SEP-IRA
accounts is adjusted each year for inflation.
o Scudder Horizon Plan. A no-load variable annuity that lets you build assets
by deferring taxes on your investment earnings. You can start with $2,500
or more.
Scudder Trust Company (an affiliate of the Adviser) is Trustee or Custodian for
some of these plans and is paid an annual fee for some of the above retirement
plans. For information about establishing a Scudder No-Fee IRA, SEP-IRA, Profit
Sharing Plan, Money Purchase Pension Plan or a Scudder Horizon Plan, please call
1-800-225-2470. For information about 401(k)s or 403(b)s please call
1-800-323-6105. To effect transactions in existing IRA, SEP-IRA, Profit Sharing
or Pension Plan accounts, call 1-800-225-5163.
The variable annuity contract is provided by Charter National Life Insurance
Company (in New York State, Intramerica Life Insurance Company [S 1802]). The
contract is offered by Scudder Insurance Agency, Inc. (in New York State, Nevada
and Montana, Scudder Insurance Agency of New York, Inc.). CNL, Inc. is the
Principal Underwriter. Scudder Horizon Plan is not available in all states.
22
<PAGE>
Directors and Officers
Edmond D. Villani*
Chairman of the Board and Director
Nicholas Bratt*
President and Director
Paul Bancroft III
Director; Venture Capitalist and Consultant
Thomas J. Devine
Director; Consultant
Keith R. Fox
Director; President, Exeter Capital Management Corporation
William H. Gleysteen, Jr.
Director; Consultant
William H. Luers
Director; President, The Metropolitan Museum of Art
Dr. Wilson Nolen
Director; Consultant
Juris Padegs*
Director, Vice President and Assistant Secretary
Daniel Pierce*
Director
Dr. Gordon Shillinglaw
Director; Professor Emeritus of Accounting, Columbia University Graduate
School of Business
Robert W. Lear
Honorary Director; Executive-in-Residence, Visiting Professor, Columbia
University Graduate School of Business
Robert G. Stone, Jr.
Honorary Director; Chairman of the Board and Director, Kirby Corporation
Elizabeth J. Allan*
Vice President
Carol L. Franklin*
Vice President
Edmund B. Games, Jr.*
Vice President
Jerard K. Hartman*
Vice President
William E. Holzer*
Vice President
Thomas W. Joseph*
Vice President
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
David S. Lee*
Vice President and Assistant Treasurer
Edward J. O'Connell*
Vice President and Assistant Treasurer
Kathryn L. Quirk*
Vice President and Assistant Secretary
Richard W. Desmond*
Assistant Secretary
Coleen Downs Dinneen*
Assistant Secretary
*Scudder, Stevens & Clark, Inc.
23
<PAGE>
Investment products and services
<TABLE>
<CAPTION>
<S> <C>
The Scudder Family of Funds Income
Money market Scudder Emerging Markets Income Fund
Scudder Cash Investment Trust Scudder Global Bond Fund
Scudder U.S. Treasury Money Fund Scudder GNMA Fund
Tax free money market+ Scudder Income Fund
Scudder Tax Free Money Fund Scudder International Bond Fund
Scudder California Tax Free Money Fund* Scudder Short Term Bond Fund
Scudder New York Tax Free Money Fund* Scudder Zero Coupon 2000 Fund
Tax free+ Growth
Scudder California Tax Free Fund* Scudder Capital Growth Fund
Scudder High Yield Tax Free Fund Scudder Development Fund
Scudder Limited Term Tax Free Fund Scudder Global Fund
Scudder Managed Municipal Bonds Scudder Global Small Company Fund
Scudder Massachusetts Limited Term Tax Free Fund* Scudder Gold Fund
Scudder Massachusetts Tax Free Fund* Scudder Greater Europe Growth Fund
Scudder Medium Term Tax Free Fund Scudder International Fund
Scudder New York Tax Free Fund* Scudder Latin America Fund
Scudder Ohio Tax Free Fund* Scudder Pacific Opportunities Fund
Scudder Pennsylvania Tax Free Fund* Scudder Quality Growth Fund
Growth and Income Scudder Small Company Value Fund
Scudder Balanced Fund Scudder Value Fund
Scudder Growth and Income Fund The Japan Fund
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
Retirement Plans and Tax-Advantaged Investments
IRAs 403(b) Plans
Keogh Plans SEP-IRAs
Scudder Horizon Plan*+++ (a variable annuity) Profit Sharing and
401(k) Plans Money Purchase Pension Plans
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
Closed-end Funds#
The Argentina Fund, Inc. Scudder New Europe Fund, Inc.
The Brazil Fund, Inc. Scudder World Income Opportunities Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc. Institutional Cash Management
The Latin America Dollar Income Fund, Inc. Scudder Institutional Fund, Inc.
Montgomery Street Income Securities, Inc. Scudder Fund, Inc.
Scudder New Asia Fund, Inc. Scudder Treasurers Trust(TM)++
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
For complete information on any of the above Scudder funds, including management fees and expenses, call or write for a
free prospectus. Read it carefully before you invest or send money. +A portion of the income from the tax-free funds may
be subject to federal, state and local taxes. *Not available in all states. +++A no-load variable annuity contract
provided by Charter National Life Insurance Company and its affiliate, offered by Scudder's insurance agencies,
1-800-225-2470. #These funds, advised by Scudder, Stevens & Clark, Inc., are traded on various stock exchanges. ++For
information on Scudder Treasurers Trust(TM), an institutional cash management service that utilizes certain portfolios
of Scudder Fund, Inc. ($100,000 minimum), call: 1-800-541-7703.
</TABLE>
24
<PAGE>
How to contact Scudder
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Account Service and Information: Please address all correspondence to:
For existing account service Scudder Investor The Scudder Funds
and transactions Relations P.O. Box 2291
1-800-225-5163 Boston, Massachusetts
02107-2291
For personalized information Scudder Automated
about your Scudder accounts; Information Line
exchanges and redemptions; or (SAIL)
information on any 1-800-343-2890
Scudder fund
Investment Information: Or Stop by a Scudder Funds Center:
To receive information about Scudder Investor Many shareholders enjoy the personal, one-on-one
the Scudder funds, for Relations service of the Scudder Funds Centers. Check for a
additional applications and 1-800-225-2470 Funds Center near you--they can be found in the
prospectuses, or for following cities:
investment questions
For establishing 401(k) and Scudder Defined Boca Raton New York
403(b) plans Contribution Boston Portland, OR
Services Chicago San Diego
1-800-323-6105 Cincinnati San Francisco
Los Angeles Scottsdale
For information on Scudder Treasurers Trust(TM), an For information on Scudder Institutional Funds*,
institutional cash management service for corporations, funds designed to meet the broad investment
non-profit organizations and trusts which utilizes management and service needs of banks and other
certain portfolios of Scudder Fund, Inc.* ($100,000 institutions, call: 1-800-854-8525.
minimum), call: 1-800-541-7703.
Scudder Investor Relations and Scudder Funds Centers are services provided through Scudder
Investor Services, Inc., Distributor.
* Contact Scudder Investor Services, Inc., Distributor, to receive a prospectus with more complete
information, including management fees and expenses. Please read it carefully before you invest or
send money.
</TABLE>
25
<PAGE>
Scudder
Pacific Opportunities
Fund
Prospectus
March 1, 1996
A pure no-load(TM) (no sales charges) mutual fund which seeks long-term growth
of capital through investment primarily in the equity securities of Pacific
Basin companies, excluding Japan.
This prospectus sets forth concisely the information about Scudder Pacific
Opportunities Fund, a series of Scudder International Fund, Inc., an open-end
management investment company, that a prospective investor should know before
investing. Please retain it for future reference.
If you require more detailed information, a Statement of Additional Information
dated March 1, 1996, as amended from time to time, may be obtained without
charge by writing Scudder Investor Services, Inc., Two International Place,
Boston, MA 02110-4103 or calling 1-800-225-2470. The Statement, which is
incorporated by reference into this prospectus, has been filed with the
Securities and Exchange Commission.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Contents--see page 4.
<PAGE>
Expense information
How to compare a Scudder pure no-load(TM) fund
This information is designed to help you understand the various costs and
expenses of investing in Scudder Pacific Opportunities Fund (the "Fund"). By
reviewing this table and those in other mutual funds' prospectuses, you can
compare the Fund's fees and expenses with those of other funds. With Scudder's
pure no-load(TM) funds, you pay no commissions to purchase or redeem shares, or
to exchange from one fund to another. As a result, all of your investment goes
to work for you.
<TABLE>
<CAPTION>
1) Shareholder transaction expenses: Expenses charged directly to your individual account in the Fund for
various transactions.
<S> <C>
Sales commissions to purchase shares (sales load) NONE
Commissions to reinvest dividends NONE
Redemption fees NONE*
Fees to exchange shares NONE
2) Annual Fund operating expenses: Expenses paid by the Fund before it
distributed its net investment income, expressed as a percentage of the
Fund's average daily net assets for the fiscal year ended October 31, 1995.
Investment management fee 1.10%
12b-1 fees NONE
Other expenses 0.64%
-----
Total Fund operating expenses 1.74%
=====
Example
Based on the level of total Fund operating expenses listed above, the total
expenses relating to a $1,000 investment, assuming a 5% annual return and
redemption at the end of each period, are listed below. Investors do not pay
these expenses directly; they are paid by the Fund before it distributes its
net investment income to shareholders. (As noted above, the Fund has no
redemption fees of any kind.)
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$18 $55 $94 $205
</TABLE>
See "Fund organization--Investment adviser" for further information about the
investment management fee. This example assumes reinvestment of all dividends
and distributions and that the percentage amounts listed under "Annual Fund
operating expenses" remain the same each year. This example should not be
considered a representation of past or future expenses or return. Actual Fund
expenses and return vary from year to year and may be higher or lower than
those shown.
* You may redeem by writing or calling the Fund. If you wish to receive your
redemption proceeds via wire, there is a $5 wire service fee. For
additional information, please refer to "Transaction information--Redeeming
shares."
2
<PAGE>
Financial highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the audited financial
statements.
If you would like more detailed information concerning the Fund's performance, a
complete portfolio listing and audited financial statements are available in the
Fund's Annual Report dated October 31, 1995 and may be obtained without charge
by writing or calling Scudder Investor Services, Inc.
<TABLE>
<CAPTION>
FOR THE PERIOD
DECEMBER 8, 1992
YEARS ENDED OCTOBER 31, (COMMENCEMENT
--------------------- OF OPERATIONS) TO
1995 1994 OCTOBER 31, 1993
------- ------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of period ................................... $ 17.57 $ 16.21 $ 12.00
------- ------- -------
Income from investment operations:
Net investment income (a) ........................................ .10 .04 .04
Net realized and unrealized gain (loss) on investment
transactions...................................................... (1.98) 1.41 4.17
------- ------- -------
Total from investment operations ....................................... (1.88) 1.45 4.21
------- ------- -------
Less distributions from:
Net investment income ............................................ (.10) (.08) --
Net realized gains on investment transactions .................... -- (.01) --
------- ------- -------
Total distributions .................................................... (.10) (.09) --
------- ------- -------
Net asset value, end of period ......................................... $ 15.59 $ 17.57 $ 16.21
======= ======= =======
TOTAL RETURN (%) ....................................................... (10.73) 8.97 35.08**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) ................................. 384 499 270
Ratio of operating expenses, net to average daily net assets (%) (a) ... 1.74 1.81 1.75*
Ratio of net investment income to average daily net assets (%) ......... .65 .28 1.41*
Portfolio turnover rate (%) ............................................ 64.0 38.5 9.9*
(a) Reflects a per share amount of management fee and other fees
not imposed by the Adviser of .................................. -- -- .03
Operating expense ratio including expenses reimbursed,
management fee and other expenses not imposed (%) .............. -- -- 2.90*
</TABLE>
* Annualized
** Not annualized
3
<PAGE>
A message from Scudder's chairman
Scudder, Stevens & Clark, Inc., investment adviser to the Scudder Family of
Funds, was founded in 1919. We offered America's first no-load mutual fund in
1928. Today, we manage in excess of $100 billion for many private accounts and
over 50 mutual fund portfolios. We manage the mutual funds in a special program
for the American Association of Retired Persons, as well as the fund options
available through Scudder Horizon Plan, a tax-advantaged variable annuity. We
also advise The Japan Fund and nine closed-end funds that invest in countries
around the world.
The Scudder Family of Funds is designed to make investing easy and less costly.
It includes money market, tax free, income and growth funds as well as IRAs,
401(k)s, Keoghs and other retirement plans.
Services available to all shareholders include toll-free access to the
professional service representatives of Scudder Investor Relations, easy
exchange among funds, shareholder reports, informative newsletters and the
walk-in convenience of Scudder Funds Centers.
All Scudder mutual funds are pure no-load(TM). This means you pay no commissions
to purchase or redeem your shares or to exchange from one fund to another. There
are no "12b-1" fees either, which many other funds now charge to support their
marketing efforts. All of your investment goes to work for you. We look forward
to welcoming you as a shareholder.
/s/Daniel Pierce
Scudder Pacific Opportunities Fund
Investment objective
o long-term growth of capital through investment primarily in the equity
securities of Pacific Basin companies, excluding Japan
Investment characteristics
o convenient, low-cost access to investment opportunities in the Pacific
Basin
o participation in a professionally managed portfolio of securities in a
region of the world that few investors have the time, resources or
experience to research
o increased international diversification
o daily liquidity at net asset value
o above-average investment risk
Contents
Investment objective and policies 5
Why invest in the Fund? 6
International investment experience 7
Additional information about policies
and investments 7
Distribution and performance information 10
Fund organization 11
Purchases 12
Exchanges and redemptions 13
Transaction information 14
Shareholder benefits 18
Directors and Officers 21
Investment products and services 22
How to contact Scudder 23
4
<PAGE>
Investment objective and policies
Scudder Pacific Opportunities Fund (the "Fund"), a non-diversified series of
Scudder International Fund, Inc., seeks long-term growth of capital through
investment primarily in the equity securities of Pacific Basin companies,
excluding Japan. The Fund's investment program focuses on the smaller, emerging
markets in this region of the world. The Fund is appropriate for no-load
investors seeking to benefit from economic growth in the Pacific Basin, but who
do not want direct exposure to the Japanese market. An investment in the Fund
entails above-average investment risk.
Except as otherwise indicated, the Fund's investment objective and policies are
not fundamental and may be changed without a vote of shareholders. Shareholders
will receive written notice of any changes in the Fund's objective. If there is
a change in investment objective, shareholders should consider whether the Fund
remains an appropriate investment in light of their then current financial
position and needs. There can be no assurance that the Fund's objective will be
met.
Investments
The Fund invests, under normal market conditions, at least 65% of its assets in
the equity securities of Pacific Basin companies. Pacific Basin countries
include Australia, the Peoples Republic of China, India, Indonesia, Malaysia,
New Zealand, the Philippines, Sri Lanka, Pakistan and Thailand, as well as Hong
Kong, Singapore, South Korea and Taiwan--the so-called "four tigers." The Fund
may invest in other countries in the Pacific Basin when their markets become
sufficiently developed. The Fund will not, however, invest in Japanese
securities. The Fund intends to allocate investments among at least three
countries at all times and does not expect to concentrate investments in any
particular industry.
The Fund defines securities of Pacific Basin companies as follows:
o Securities of companies organized under the laws of a Pacific Basin country
or for which the principal securities trading market is in the Pacific
Basin; or
o Securities of companies, wherever organized, when at least 50% of a
company's non-current assets, capitalization, gross revenue or profit in
any one of the two most recent fiscal years represents (directly or
indirectly through subsidiaries) assets or activities located in the
Pacific Basin.
The Fund's equity investments are common stock, preferred stock (either
convertible or non-convertible), depositary receipts and warrants. These may be
restricted securities. Equity securities may also be purchased through rights.
Securities may be listed on securities exchanges, traded over-the-counter or
have no organized market.
The Fund may invest up to 35% of its total assets in foreign and domestic debt
securities if the Fund's investment adviser, Scudder, Stevens & Clark, Inc. (the
"Adviser") determines that the capital appreciation of debt securities is likely
to equal or exceed the capital appreciation of equity securities. The Fund may
purchase bonds rated Aaa, Aa or A by Moody's Investors Service, Inc.
("Moody's"), or AAA, AA or A by Standard & Poor's ("S&P") or, if unrated, of
equivalent quality as determined by the Adviser. Should the rating of a security
in the Fund's portfolio be downgraded, the Adviser will determine whether it is
in the best interest of the Fund to retain or dispose of such security.
Under normal market conditions, the Fund may invest up to 35% of its assets in
equity securities of U.S. and other non-Pacific Basin issuers (excluding Japan).
In evaluating non-Pacific Basin investments, the Adviser seeks investments where
an issuer's Pacific Basin business activities and the impact of developments in
the Pacific Basin may have a positive effect on the issuer's
5
<PAGE>
Investment objective and policies (cont'd)
business results. The Fund may also purchase shares of closed-end investment
companies that invest primarily in the Pacific Basin. In addition, the Fund may
invest in when-issued securities and convertible securities and may engage in
strategic transactions. For temporary defensive purposes, the Fund may hold
without limit debt instruments as well as cash and cash equivalents, including
foreign and domestic money market instruments, short-term government and
corporate obligations, and repurchase agreements when the Adviser deems such a
position advisable in light of economic or market conditions. More information
about investment techniques is provided under "Additional information about
policies and investments."
Investment strategy
The Adviser seeks to identify companies with favorable potential for
appreciation through growing earnings or market recognition over time. While
these companies may be among the largest in their local markets, they may be
small by the standards of U.S. market capitalization.
The Adviser evaluates investments for the Fund from both a macroeconomic and a
microeconomic perspective, using extensive field research. Macroeconomic
research includes a study of the economic fundamentals of each country and an
examination of regional themes such as growing trade, increases in direct
foreign investment and deregulation of capital markets. Understanding regional
themes allows the Adviser to identify the industries and sectors most likely to
benefit from the political, social and economic changes taking place across the
Pacific Basin. Microeconomic analysis identifies individual companies with
exceptional business prospects, which may be due to market dominance, unique
franchises, high growth potential, or innovative services, products or
technologies.
Why invest in the Fund?
The Fund is designed for investors wishing to participate in the investment
opportunities afforded by the smaller, emerging markets in the Pacific Basin.
The Adviser believes that the economies of the Pacific Basin will continue to
have among the world's fastest rates of economic growth over the next decade.
These economies are generally characterized by large, hard-working labor pools,
a well-educated and growing middle class and high savings rates. They are
benefiting from rapid growth of intra-regional trade, one of the most important
economic developments in this part of the world in recent years, and a high
level of infrastructure development. Many companies in the Pacific Basin are
experiencing rising productivity and profit growth due to increased focus on
higher value added, more profitable product lines and enhanced capital
investment in technology. In addition, governments are opening capital markets
to foreign investors region-wide. This combination of factors is attracting
foreign capital to the region and fueling growth that is presently more rapid
than that of Japan, the U.S. and other more developed countries. As a result,
the stock markets in many of these countries have, in recent years, outperformed
our own.
The Fund involves above-average risk. It is designed as a long-term investment
and not for short-term trading purposes, and should not be considered a complete
investment program. However, movements in the Fund's share price may have a low
correlation with movements in the U.S. markets, so adding shares of the Fund to
an investor's portfolio may increase the investor's portfolio diversification,
and moderate overall portfolio risk.
Investing directly in foreign securities is usually impractical for individual
investors. Investors frequently find it difficult to arrange purchases and
sales, obtain current market, industry or corporate information, hold securities
6
<PAGE>
for safekeeping and convert profits from foreign currencies to U.S. dollars. The
Fund manages these tasks for the investor. The Adviser has had long experience
in dealing in foreign markets and believes the Fund affords a convenient and
cost-effective method of investing in the more dynamic, developing countries in
the Pacific Basin region. See "Additional information about policies and
investments--Risk factors."
In addition, the Fund offers all the benefits of the Scudder Family of Funds.
Scudder, Stevens & Clark, Inc. manages a diverse family of pure no-load(TM)
funds and provides a wide range of services to help investors meet their
investment needs. Please refer to "Investment products and services" for
additional information.
International investment experience
The Adviser, a leader in international investment management, has been investing
in the Pacific Basin for over 35 years. The Adviser manages a number of offshore
and U.S. investment companies that invest in all or select regions of the
Pacific Basin, including two closed-end funds that trade on the New York Stock
Exchange: Scudder New Asia Fund, Inc. and The Korea Fund, Inc. The Adviser also
manages The Japan Fund, Inc., an open-end investment company investing primarily
in securities of Japanese companies.
Additional information about policies and investments
Investment restrictions
The Fund has adopted certain fundamental policies which may not be changed
without a vote of shareholders and which are designed to reduce the Fund's
investment risk.
The Fund may not borrow money except as a temporary measure for extraordinary or
emergency purposes and may not make loans except through the lending of
portfolio securities, the purchase of debt securities or through repurchase
agreements. The Fund may not invest more than 25% of its total assets in
securities of companies in the same industry.
In addition, as a matter of nonfundamental policy, the Fund may not invest more
than 10% of its total assets, in the aggregate, in securities which are not
readily marketable, in restricted securities or in repurchase agreements
maturing in more than seven days.
A complete description of these and other policies and restrictions is contained
under "The Fund's Investment Objective and Policies" in the Fund's Statement of
Additional Information.
When-issued securities
The Fund may purchase equity and debt securities on a when-issued or forward
delivery basis, for payment and delivery at a later date. The price and yield
are generally fixed on the date of commitment to purchase. During the period
between purchase and settlement, no interest accrues to the Fund. At the time of
settlement, the market value of the security may be more or less than the
purchase price.
Convertible securities
The Fund may invest in convertible securities which may offer higher income than
the common stocks into which they are convertible. The convertible securities in
which the Fund may invest consist of bonds, notes, debentures and preferred
stocks which may be converted or exchanged at a stated or determinable exchange
ratio into underlying shares of common stock. Prior to their conversion,
convertible securities may have characteristics similar to non-convertible
securities.
7
<PAGE>
Additional information about policies and investments (cont'd)
Repurchase agreements
As a means of earning income for periods as short as overnight, the Fund may
enter into repurchase agreements with selected banks and broker/dealers. Under a
repurchase agreement, the Fund acquires securities subject to the seller's
agreement to repurchase at a specified time and price. Please see "Risk
factors--Repurchase agreements" for more information.
Strategic Transactions and derivatives
The Fund may, but is not required to, utilize various other investment
strategies as described below to hedge various market risks (such as interest
rates, currency exchange rates, and broad or specific equity or fixed-income
market movements), to manage the effective maturity or duration of fixed-income
securities in the Fund's portfolio or to enhance potential gain. These
strategies may be executed through the use of derivative contracts. Such
strategies are generally accepted as a part of modern portfolio management and
are regularly utilized by many mutual funds and other institutional investors.
Techniques and instruments may change over time as new instruments and
strategies are developed or regulatory changes occur.
In the course of pursuing these investment strategies, the Fund may purchase and
sell exchange-listed and over-the-counter put and call options on securities,
equity and fixed-income indices and other financial instruments, purchase and
sell financial futures contracts and options thereon, enter into various
interest rate transactions such as swaps, caps, floors or collars, and enter
into various currency transactions such as currency forward contracts, currency
futures contracts, currency swaps or options on currencies or currency futures
(collectively, all the above are called "Strategic Transactions").
Strategic Transactions may be used without limit to attempt to protect against
possible changes in the market value of securities held in or to be purchased
for the Fund's portfolio resulting from securities markets or currency exchange
rate fluctuations, to protect the Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of fixed-income
securities in the Fund's portfolio, or to establish a position in the
derivatives markets as a temporary substitute for purchasing or selling
particular securities. Some Strategic Transactions may also be used to enhance
potential gain although no more than 5% of the Fund's assets will be committed
to Strategic Transactions entered into for non-hedging purposes. Any or all of
these investment techniques may be used at any time and in any combination, and
there is no particular strategy that dictates the use of one technique rather
than another, as use of any Strategic Transaction is a function of numerous
variables including market conditions. The ability of the Fund to utilize these
Strategic Transactions successfully will depend on the Adviser's ability to
predict pertinent market movements, which cannot be assured. The Fund will
comply with applicable regulatory requirements when implementing these
strategies, techniques and instruments. Strategic Transactions involving
financial futures and options thereon will be purchased, sold or entered into
only for bona fide hedging, risk management or portfolio management purposes and
not for speculative purposes. Please refer to "Risk factors--Strategic
Transactions and derivatives" for more information.
Risk factors
The Fund's risks are determined by the nature of the securities held and the
portfolio management strategies used by the Adviser. The following are
descriptions of certain risks related to the investments and techniques that the
Fund may use from time to time.
8
<PAGE>
Non-diversified investment company. The Fund is classified as a non-diversified
investment company under the Investment Company Act of 1940 (the "1940 Act"),
which means that the Fund is not limited by the 1940 Act in the proportion of
its assets that it may invest in the obligations of a single issuer. The
investment of a large percentage of the Fund's assets in the securities of a
small number of issuers may cause the Fund's share price to fluctuate more than
that of a diversified investment company.
Investing in the Pacific Basin. The Fund is susceptible to political and
economic factors affecting issuers in Pacific Basin countries. Although the Fund
will not invest in Japanese companies, some Pacific Basin economies are directly
affected by Japanese capital investment in the region and by Japanese consumer
demands. Many of the countries of the Pacific Basin are developing both
economically and politically. Pacific Basin countries may have relatively
unstable governments, economies based on only a few commodities or industries,
and securities markets trading infrequently or in low volumes. Some Pacific
Basin countries restrict the extent to which foreigners may invest in their
securities markets. Securities of issuers located in some Pacific Basin
countries tend to have volatile prices and may offer significant potential for
loss as well as gain. Further, certain companies in the Pacific Basin may not
have firmly established product markets, may lack depth of management, or may be
more vulnerable to political or economic developments such as nationalization of
their own industries.
Foreign securities. Investments in foreign securities involve special
considerations due to more limited information, higher brokerage costs,
different accounting standards, thinner trading markets and the likely impact of
foreign taxes on the income and gains from securities. They may also entail
certain other risks, such as the possibility of one or more of the following:
imposition of dividend or interest withholding or confiscatory taxes; currency
blockages or transfer restrictions; expropriation, nationalization, military
coups or other adverse political or economic developments; less government
supervision and regulation of securities exchanges, brokers and listed
companies; and the difficulty of enforcing obligations in other countries.
Purchases of foreign securities are usually made in foreign currencies and, as a
result, the Fund may incur currency conversion costs and may be affected
favorably or unfavorably by changes in the value of foreign currencies against
the U.S. dollar. Further, it may be more difficult for the Fund's agents to keep
currently informed about corporate actions 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. Certain markets may require payment for securities before delivery.
The Fund's ability and decisions to purchase and sell portfolio securities may
be affected by laws or regulations relating to the convertibility of currencies
and repatriation of assets.
Convertible securities. While convertible securities generally offer lower
yields than non-convertible debt securities of similar quality, their prices may
reflect changes in the value of the underlying common stock. Convertible
securities entail less credit risk than the issuer's common stock.
Repurchase agreements. If the seller under a repurchase agreement becomes
insolvent, the Fund's right to dispose of the securities may be restricted, or
the value of the securities may decline before the Fund is able to dispose of
them. In the event of the commencement of bankruptcy or insolvency proceedings
with respect to the seller of the security under a repurchase agreement, the
Fund may encounter delay and incur costs, including a decline in the value of
the securities, before being able to sell the security.
9
<PAGE>
Additional information about policies and investments (cont'd)
Illiquid investments. The absence of a trading market can make it difficult to
ascertain a market value for illiquid investments. Disposing of illiquid
investments may involve time-consuming negotiation and legal expenses, and it
may be difficult or impossible for the Fund to sell them promptly at an
acceptable price.
Strategic Transactions and derivatives. Strategic Transactions, including
derivative contracts, have risks associated with them including possible default
by the other party to the transaction, illiquidity and, to the extent the
Adviser's view as to certain market movements is incorrect, the risk that the
use of such Strategic Transactions could result in losses greater than if they
had not been used. Use of put and call options may result in losses to the Fund,
force the sale or purchase of portfolio securities at inopportune times or for
prices higher than (in the case of put options) or lower than (in the case of
call options) current market values, limit the amount of appreciation the Fund
can realize on its investments or cause the Fund to hold a security it might
otherwise sell. The use of currency transactions can result in the Fund
incurring losses as a result of a number of factors including the imposition of
exchange controls, suspension of settlements or the inability to deliver or
receive a specified currency. The use of options and futures transactions
entails certain other risks. In particular, the variable degree of correlation
between price movements of futures contracts and price movements in the related
portfolio position of the Fund creates the possibility that losses on the
hedging instrument may be greater than gains in the value of the Fund's
position. In addition, futures and options markets may not be liquid in all
circumstances and certain over-the-counter options may have no markets. As a
result, in certain markets, the Fund might not be able to close out a
transaction without incurring substantial losses, if at all. Although the use of
futures contracts and options transactions for hedging should tend to minimize
the risk of loss due to a decline in the value of the hedged position, at the
same time they tend to limit any potential gain which might result from an
increase in value of such position. Finally, the daily variation margin
requirements for futures contracts would create a greater ongoing potential
financial risk than would purchases of options, where the exposure is limited to
the cost of the initial premium. Losses resulting from the use of Strategic
Transactions would reduce net asset value, and possibly income, and such losses
can be greater than if the Strategic Transactions had not been utilized. The
Strategic Transactions that the Fund may use and some of their risks are
described more fully in the Fund's Statement of Additional Information.
Distribution and performance information
Dividends and capital gains distributions
The Fund intends to distribute dividends from its net investment income and net
realized capital gains after utilization of capital loss carryforwards, if any,
annually in December to prevent application of federal excise tax, although an
additional distribution may be made if required, at a later date. Any dividends
or capital gains distributions declared in October, November or December with a
record date in such a month and paid the following January will be treated by
shareholders for federal income tax purposes as if received on December 31 of
the calendar year declared. According to preference, shareholders may receive
distributions in cash or have them reinvested in additional shares of the Fund.
If the investment is in the form of a retirement plan, all dividends and capital
gains distributions must be reinvested into the shareholder's account.
Generally, dividends from net investment income are taxable to shareholders as
ordinary income. Long-term capital gains distributions, if any, are taxable as
10
<PAGE>
long-term capital gains regardless of the length of time shareholders have owned
their shares. Short-term capital gains and any other taxable income
distributions are taxable as ordinary income.
Shareholders may be able to claim a credit or deduction on their income tax
returns for their pro rata portion of qualified taxes paid by the Fund to
foreign countries.
The Fund sends detailed tax information about the amount and type of its
distributions to its shareholders by January 31 of the following year.
Performance information
From time to time, quotations of the Fund's performance may be included in
advertisements, sales literature or shareholder reports. All performance figures
are historical, show the performance of a hypothetical investment and are not
intended to indicate future performance. "Total return" is the change in value
of an investment in the Fund for a specified period. The "average annual total
return" of the Fund is the average annual compound rate of return of an
investment in the Fund assuming the investment has been held for one year, and
the life of the Fund as of a stated ending date. "Cumulative total return"
represents the cumulative change in value of an investment in the Fund for
various periods. All types of total return calculations assume that all
dividends and capital gains distributions during the period were reinvested in
additional shares of the Fund. "Capital change" measures return from capital,
including reinvestment of any capital gains distributions but does not include
the reinvestment of dividends. Performance will vary based upon, among other
things, changes in market conditions and the level of the Fund's expenses.
Fund organization
Scudder Pacific Opportunities Fund is a non-diversified series of Scudder
International Fund, Inc. (the "Corporation"), an open-end, management investment
company registered under the 1940 Act. The Corporation was organized as a
Maryland corporation in July 1975.
The Fund's activities are supervised by the Corporation's Board of Directors.
Shareholders have one vote for each share held on matters on which they are
entitled to vote. The Fund is not required to and has no current intention of
holding annual shareholder meetings, although special meetings may be called for
purposes such as electing or removing Directors, changing fundamental investment
policies or approving an investment advisory contract. Shareholders will be
assisted in communicating with other shareholders in connection with removing a
Director as if Section 16(c) of the 1940 Act were applicable.
Investment adviser
The Fund retains the investment management firm of Scudder, Stevens & Clark,
Inc., a Delaware corporation, to manage the Fund's daily investment and business
affairs subject to the policies established by the Board of Directors. The
Directors have overall responsibility for the management of the Fund under
Maryland law.
The Fund pays the Adviser an annual fee of 1.10% of the Fund's average daily net
assets. The fee is payable monthly, provided that the Fund will make such
interim payments as may be requested by the Adviser not to exceed 75% of the
amount of the fee then accrued on the books of the Fund and unpaid. The fee is
higher than that charged by many funds which invest primarily in U.S. securities
but not necessarily higher than the fees charged to funds with investment
objectives similar to that of the Fund.
All the Fund's expenses are paid out of gross investment income. Shareholders
pay no direct charges or fees for investment or administrative services.
Scudder, Stevens & Clark, Inc., is located at 345 Park Avenue, New York, New
York.
(Continued on page 14)
11
<PAGE>
<TABLE>
<CAPTION>
Purchases
<S> <C>
Opening Minimum initial investment: $1,000; IRAs $500
an account Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums. See appropriate
plan literature.
o By Mail Send your completed and signed application and check
Make checks
payable to "The
Scudder Funds." by regular mail to: or by express, registered,
or certified mail to:
The Scudder Funds Scudder Shareholder Services
P.O. Box 2291 Center
Boston, MA 42 Longwater Drive
02107-2291 Norwell, MA
02061-1612
o By Wire Please see Transaction information--Purchasing
shares-- By wire following these tables for details,
including the ABA wire transfer number. Then call
1-800-225-5163 for instructions.
o In Person Visit one of our Funds Centers to complete
your application with the help of a Scudder
representative. Funds Center locations are listed under
Shareholder benefits.
- ------------------------------------------------------------------------------------------------------------------
Purchasing Minimum additional investment: $100; IRAs $50
additional shares Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums. See appropriate
plan literature.
Make checks o By Mail Send a check with a Scudder investment slip, or
payable to "The with a letter of instruction including your
Scudder Funds." account number and the complete Fund name, to
the appropriate address listed above. Scudder Funds."
o By Wire Please see Transaction information--Purchasing
shares-- By wire following these tables for details,
including the ABA wire transfer number.
o In Person Visit one of our Funds Centers to make an
additional investment in your Scudder fund account.
Funds Center locations are listed under Shareholder
benefits.
o By Telephone Please see Transaction
information--Purchasing shares-- By AutoBuy or By
telephone order for more details.
o By Automatic You may arrange to make investments on a
Investment Plan regular basis through automatic
($50 minimum) deductions from your bank checking account. Please call
1-800-225-5163 for more information and
an enrollment form.
12
<PAGE>
Exchanges and redemptions
Exchanging shares Minimum investments: $1,000 to establish a new account; $100 to exchange among existing accounts
o By Telephone To speak with a service representative, call 1-800-225-5163 from
8 a.m. to 8 p.m. eastern time or to access SAIL(TM), Scudder's Automated
Information Line, call 1-800-343-2890 (24 hours a day).
o By Mail Print or type your instructions and include:
or Fax - the name of the Fund and the account number you are exchanging from;
- your name(s) and address as they appear on your account;
- the dollar amount or number of shares you wish to exchange;
- the name of the Fund you are exchanging into; and
- your signature(s) as it appears on your account and a daytime telephone
number.
Send your instructions
by regular mail to: or by express, registered, or by fax to:
or certified mail to:
The Scudder Funds Scudder Shareholder Services 1-800-821-6234
P.O. Box 2291 Center
Boston, MA 02107-2291 42 Longwater Drive
Norwell, MA
02061-1612
- ----------------------------------------------------------------------------------------------------------------------------------
Redeeming o By Telephone To speak with a service representative,
shares call 1-800-225-5163 from 8 a.m. to 8 p.m. eastern time
or to access SAIL(TM), Scudder's Automated Information
Line, call 1-800-343-2890 (24 hours a day). You may
have redemption proceeds sent to your predesignated
bank account, or redemption proceeds of up to $50,000
sent to your address of record.
o By Mail Send your instructions for redemption to the appropriate address or fax number
or Fax above and include:
- the name of the Fund and account number you are
redeeming from;
- your name(s) and address as they appear on your
account;
- the dollar amount or number of shares you wish to
redeem; and
- your signature(s) as it appears on your account and a
daytime telephone number.
A signature guarantee is required for redemptions over
$50,000. See Transaction information--Redeeming shares
following these tables.
o By Automatic You may arrange to receive automatic cash
Withdrawal payments periodically. Call 1-800-225-5163 for more information and an enrollment form.
Plan
</TABLE>
13
<PAGE>
Fund organization (cont'd)
(Continued from page 11)
Transfer agent
Scudder Service Corporation, P.O. Box 2291, Boston, Massachusetts 02107-2291, a
subsidiary of the Adviser, is the transfer, shareholder servicing and
dividend-paying agent for the Fund.
Underwriter
Scudder Investor Services, Inc., a subsidiary of the Adviser, is the Fund's
principal underwriter. Scudder Investor Services, Inc. confirms, as agent, all
purchases of shares of the Fund. Scudder Investor Relations is a telephone
information service provided by Scudder Investor Services, Inc.
Custodian
Brown Brothers Harriman & Co. is the Fund's custodian.
Fund accounting agent
Scudder Fund Accounting Corporation, a subsidiary of the Adviser, is responsible
for determining the daily net asset value per share and maintaining the general
accounting records of the Fund.
Transaction information
Purchasing shares
Purchases are executed at the next calculated net asset value per share after
the Fund's transfer agent receives the purchase request in good order. Purchases
are made in full and fractional shares. (See "Share price.")
By check. If you purchase shares with a check that does not clear, your purchase
will be canceled and you will be subject to any losses or fees incurred in the
transaction. Checks must be drawn on or payable through a U.S. bank. If you
purchase shares by check and redeem them within seven business days of purchase,
the Fund may hold redemption proceeds until the purchase check has cleared. If
you purchase shares by federal funds wire, you may avoid this delay. Redemption
or exchange requests by telephone prior to the expiration of the seven-day
period will not be accepted.
By wire. To open a new account by wire, first call Scudder at 1-800-225-5163 to
obtain an account number. A representative will instruct you to send a
completed, signed application to the transfer agent. Accounts cannot be opened
without a completed, signed application and a Scudder fund account number.
Contact your bank to arrange a wire transfer to:
The Scudder Funds
State Street Bank and Trust Company
Boston, MA 02101
ABA Number 011000028
DDA Account 9903-5552
Your wire instructions must also include:
- -- the name of the fund in which the money is to be invested,
- -- the account number of the fund, and
- -- the name(s) of the account holder(s).
The account will be established once the application and money order are
received in good order.
You may also make additional investments of $100 or more to your existing
account by wire.
By telephone order. Existing shareholders may purchase shares at a certain day's
price by calling 1-800-225-5163 before the close of regular trading on the New
York Stock Exchange (the "Exchange"), normally 4 p.m. eastern time, on that day.
Orders must be for $10,000 or more and cannot be for an amount greater than four
times the value of your account at the time the order is placed. A confirmation
with complete purchase information is sent shortly after your order is received.
You must include with your payment the order number given at the time the order
is placed. If payment by check or wire is not received within three business
days, the order is subject to cancellation and the shareholder will be
responsible for any loss to the Fund resulting from this cancellation. Telephone
orders are not available for shares held in Scudder IRA accounts and most other
14
<PAGE>
Scudder retirement plan accounts.
By "AutoBuy." If you elected "AutoBuy" for your account, you can call toll-free
to purchase shares. The money will be automatically transferred from your
predesignated bank checking account. Your bank must be a member of the Automated
Clearing House for you to use this service. If you did not elect "AutoBuy," call
1-800-225-5163 for more information.
To purchase additional shares, call 1-800-225-5163. Purchases must be for at
least $250 but not more than $250,000. Proceeds in the amount of your purchase
will be transferred from your bank checking account in two or three business
days following your call. For requests received by the close of regular trading
on the Exchange, shares will be purchased at the net asset value per share
calculated at the close of trading on the day of your call. "AutoBuy" requests
received after the close of regular trading on the Exchange will begin their
processing and be purchased at the net asset value calculated the following
business day.
If you purchase shares by "AutoBuy" and redeem them within seven days of the
purchase, the Fund may hold the redemption proceeds for a period of up to seven
business days. If you purchase shares and there are insufficient funds in your
bank account, the purchase will be canceled and you will be subject to any
losses or fees incurred in the transaction. "AutoBuy" transactions are not
available for Scudder IRA accounts and most other retirement plan accounts.
By exchange. Your new account will have the same registration and address as
your existing account.
The exchange requirements for corporations, other organizations, trusts,
fiduciaries, agents, institutional investors and retirement plans may be
different from those for regular accounts. Please call 1-800-225-5163 for more
information, including information about the transfer of special account
features.
You can also make exchanges among your Scudder fund accounts on SAIL, the
Scudder Automated Information Line, by calling 1-800-343-2890.
Redeeming shares
The Fund allows you to redeem shares (i.e., sell them back to the Fund) without
redemption fees.
By telephone. This is the quickest and easiest way to sell Fund shares. If you
elected telephone redemption to your bank on your application, you can call to
request that federal funds be sent to your authorized bank account. If you did
not elect telephone redemption to your bank on your application, call
1-800-225-5163 for more information.
Redemption proceeds will be wired to your bank unless otherwise requested. If
your bank cannot receive federal reserve wires, redemption proceeds will be
mailed to your bank. There will be a $5 charge for all wire redemptions.
You can also make redemptions from your Scudder fund account on SAIL by calling
1-800-343-2890.
If you open an account by wire, you cannot redeem shares by telephone until the
Fund's transfer agent has received your completed and signed application.
Telephone redemption is not available for shares held in Scudder IRA accounts
and most other Scudder retirement plan accounts.
In the event that you are unable to reach the Fund by telephone, you should
write to the Fund; see "How to contact Scudder" for the address.
By "AutoSell." If you elected "AutoSell" for your account, you can call
toll-free to redeem shares. The money will be automatically transferred to your
predesignated bank checking account. Your bank must be a member of the Automated
Clearing House for you to use this service. If you did not elect "AutoSell,"
call 1-800-225-5163 for more information.
15
<PAGE>
Transaction information (cont'd)
To redeem shares, call 1-800-225-5163. Redemptions must be for at least $250.
Proceeds in the amount of your redemption will be transferred to your bank
checking account in two or three business days following your call. For requests
received by the close of regular trading on the Exchange, shares will be
redeemed at the net asset value per share calculated at the close of trading on
the day of your call. "AutoSell" requests received after the close of regular
trading on the Exchange will begin their processing and be redeemed at the net
asset value calculated the following business day.
"AutoSell" transactions are not available for Scudder IRA accounts and most
other retirement plan accounts.
Signature guarantees. For your protection and to prevent fraudulent redemptions,
on written redemption requests in excess of $50,000 we require an original
signature and an original signature guarantee for each person in whose name the
account is registered. (The Fund reserves the right, however, to require a
signature guarantee for all redemptions.) You can obtain a signature guarantee
from most banks, credit unions or savings associations, or from broker/dealers,
municipal securities broker/dealers, government securities broker/dealers,
national securities exchanges, registered securities associations, or clearing
agencies deemed eligible by the Securities and Exchange Commission. Signature
guarantees by notaries public are not acceptable. Redemption requirements for
corporations, other organizations, trusts, fiduciaries, agents, institutional
investors and retirement plans may be different from those for regular accounts.
For more information, please call 1-800-225-5163.
Telephone transactions
Shareholders automatically receive the ability to exchange by telephone and the
right to redeem by telephone up to $50,000 to their address of record.
Shareholders also may, by telephone, request that redemption proceeds be sent to
a predesignated bank account. The Fund uses procedures designed to give
reasonable assurance that telephone instructions are genuine, including
recording telephone calls, testing a caller's identity and sending written
confirmation of telephone transactions. If the Fund does not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Fund will not be liable for acting upon instructions
communicated by telephone that it reasonably believes to be genuine.
Share price
Purchases and redemptions, including exchanges, are made at net asset value.
Scudder Fund Accounting Corporation determines net asset value per share as of
the close of regular trading on the Exchange, normally 4 p.m. eastern time, on
each day the Exchange is open for trading. Net asset value per share is
calculated by dividing the value of total Fund assets, less all liabilities, by
the total number of shares outstanding.
Processing time
All purchase and redemption requests received in good order by the Fund's
transfer agent by the close of regular trading on the Exchange are executed at
the net asset value per share calculated at the close of regular trading that
day.
Purchase and redemption requests received after the close of regular trading on
the Exchange will be executed the following business day.
If you wish to make a purchase of $500,000 or more you should notify Scudder
Investor Relations by calling 1-800-225-5163.
The Fund will normally send your redemption proceeds within one business day
following the redemption request, but may take up to seven business days (or
longer in the case of shares recently purchased by check).
16
<PAGE>
Short-term trading
Purchases and sales should be made for long-term investment purposes only. The
Fund and Scudder Investor Services, Inc. each reserves the right to restrict
purchases of Fund shares (including exchanges) when a pattern of frequent
purchases and sales made in response to short-term fluctuations in the Fund's
share price appears evident.
Tax information
A redemption of shares, including an exchange into another Scudder fund, is a
sale of shares and may result in a gain or loss for income tax purposes.
Tax identification number
Be sure to complete the Tax Identification Number section of the Fund's
application when you open an account. Federal tax law requires the Fund to
withhold 31% of taxable dividends, capital gains distributions and redemption
and exchange proceeds from accounts (other than those of certain exempt payees)
without a certified Social Security or tax identification number and certain
other certified information or upon notification from the IRS or a broker that
withholding is required. The Fund reserves the right to reject new account
applications without a certified Social Security or tax identification number.
The Fund also reserves the right, following 30 days' notice, to redeem all
shares in accounts without a certified Social Security or tax identification
number. A shareholder may avoid involuntary redemption by providing the Fund
with a tax identification number during the 30-day notice period.
Minimum balances
Shareholders should maintain a share balance worth at least $1,000, which amount
may be changed by the Board of Directors. Scudder retirement plans have similar
or lower minimum share balance requirements. The Fund reserves the right,
following 60 days' written notice to shareholders, to redeem all shares in
sub-minimum accounts, including accounts of new investors, where a reduction in
value has occurred due to a redemption or exchange out of the account.
Reductions in value that result solely from market activity will not trigger an
involuntary redemption. The Fund will mail the proceeds of the redeemed account
to the shareholder. The shareholder may restore the share balance to $1,000 or
more during the 60-day notice period and must maintain it at no lower than that
minimum to avoid involuntary redemption.
Third party transactions
If purchases and redemptions of Fund shares are arranged and settlement is made
at an investor's election through a member of the National Association of
Securities Dealers, Inc., other than Scudder Investor Services, Inc., that
member may, at its discretion, charge a fee for that service.
Redemption-in-kind
The Fund reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption or repurchase order by making
payment in whole or in part in readily marketable securities chosen by the Fund
and valued as they are for purposes of computing the Fund's net asset value (a
redemption-in-kind). If payment is made in securities, a shareholder may incur
transaction expenses in converting these securities to cash. The 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 the Fund at the beginning of the
period.
17
<PAGE>
Shareholder benefits
Experienced professional management
Scudder, Stevens & Clark, Inc., one of the nation's most experienced investment
management firms, actively manages your Scudder fund investment. Professional
management is an important advantage for investors who do not have the time or
expertise to invest directly in individual securities.
A team approach to investing
Scudder Pacific Opportunities Fund is managed by a team of Scudder investment
professionals who each play an important role in the Fund's management process.
Team members work together to develop investment strategies and select
securities for the Fund's portfolio. They are supported by Scudder's large staff
of economists, research analysts, traders and other investment specialists who
work in Scudder's offices across the United States and abroad. Scudder believes
its team approach benefits Fund investors by bringing together many disciplines
and leveraging Scudder's extensive resources.
Lead Portfolio Manager Elizabeth J. Allan assumed responsibility for the Fund's
day-to-day management and investment strategies in February 1994. Ms. Allan
joined Scudder in 1987 as a member of the portfolio management team of a Scudder
closed-end mutual fund concentrating its investments in Asia. Nicholas Bratt,
Portfolio Manager, has been a member of the Fund's team since 1992 and has over
20 years of experience in global investing. Joyce E. Cornell, Portfolio Manager
since 1993, has focused on stock selection, a role she has played since the
Fund's introduction in 1992. Ms. Cornell, who has eight years of investment
experience as a research analyst, joined Scudder in 1991 in this
capacity.
SAIL(TM)--Scudder Automated Information Line
For personalized account information including fund prices, yields and account
balances, to perform transactions in existing Scudder fund accounts, or to
obtain information on any Scudder fund, shareholders can call Scudder's
Automated Information Line (SAIL) at 1-800-343-2890, 24 hours a day. During
periods of extreme economic or market changes, or other conditions, it may be
difficult for you to effect telephone transactions in your account. In such an
event you should write to the Fund; please see "How to contact Scudder" for the
address.
Investment flexibility
Scudder offers toll-free telephone exchange between funds at current net asset
value. You can move your investments among money market, income, growth,
tax-free and growth and income funds with a simple toll-free call or, if you
prefer, by sending your instructions through the mail or by fax. Telephone and
fax redemptions and exchanges are subject to termination and their terms are
subject to change at any time by the Fund or the transfer agent. In some cases,
the transfer agent or Scudder Investor Services, Inc. may impose additional
conditions on telephone transactions.
Dividend reinvestment plan
You may have dividends and distributions automatically reinvested in additional
Fund shares. Please call 1-800-225-5163 to request this feature.
Shareholder statements
You receive a detailed account statement every time you purchase or redeem
shares. All of your statements should be retained to help you keep track of
account activity and the cost of shares for tax purposes.
18
<PAGE>
Shareholder reports
In addition to account statements, you receive periodic shareholder reports
highlighting relevant information, including investment results and a review of
portfolio changes.
To reduce the volume of mail you receive, only one copy of most Fund reports,
such as the Fund's Annual Report, may be mailed to your household (same surname,
same address). Please call 1-800-225-5163 if you wish to receive additional
shareholder reports.
Newsletters
Four times a year, Scudder sends you Perspectives, an informative newsletter
covering economic and investment developments, service enhancements and other
topics of interest to Scudder fund investors.
Scudder Funds Centers
As a convenience to shareholders who like to conduct business in person, Scudder
Investor Services, Inc. maintains Funds Centers in Boca Raton, Boston, Chicago,
Cincinnati, Los Angeles, New York, Portland (OR), San Diego, San Francisco and
Scottsdale.
T.D.D. service for the hearing impaired
Scudder's full range of investor information and shareholder services is
available to hearing impaired investors through a toll-free T.D.D. (Telephone
Device for the Deaf) service. If you have access to a T.D.D., call
1-800-543-7916 for investment information or specific account questions and
transactions.
19
<PAGE>
Scudder tax-advantaged retirement plans
Scudder offers a variety of tax-advantaged retirement plans for individuals,
businesses and non-profit organizations. These flexible plans are designed for
use with the Scudder Family of Funds (except Scudder tax-free funds, which are
inappropriate for such plans). Scudder Funds offer a broad range of investment
objectives and can be used to seek almost any investment goal. Using Scudder's
retirement plans can help shareholders save on current taxes while building
their retirement savings.
o Scudder No-Fee IRAs. These retirement plans allow a maximum annual
contribution of $2,000 per person for anyone with earned income. Many
people can deduct all or part of their contributions from their taxable
income, and all investment earnings accrue on a tax deferred basis. The
Scudder No-Fee IRA charges no annual custodial fee.
o 401(k) Plans. 401(k) plans allow employers and employees to make
tax-deductible retirement contributions. Scudder offers a full service
program that includes recordkeeping, prototype plan, employee
communications and trustee services, as well as investment options.
o Profit Sharing and Money Purchase Pension Plans. These plans allow
corporations, partnerships and people who are self-employed to make annual,
tax-deductible contributions of up to $30,000 for each person covered by
the plans. Plans may be adopted individually or paired to maximize
contributions. These are sometimes known as Keogh plans.
o 403(b) Plans. Retirement plans for tax-exempt organizations and school
systems to which employers and employees may both contribute.
o SEP-IRAs. Easily administered retirement plans for small businesses and
self-employed individuals. The maximum annual contribution to SEP-IRA
accounts is adjusted each year for inflation.
o Scudder Horizon Plan. A no-load variable annuity that lets you build assets
by deferring taxes on your investment earnings. You can start with $2,500
or more.
Scudder Trust Company (an affiliate of the Adviser) is Trustee or Custodian for
some of these plans and is paid an annual fee for some of the above retirement
plans. For information about establishing a Scudder No-Fee IRA, SEP-IRA, Profit
Sharing Plan, Money Purchase Pension Plan or a Scudder Horizon Plan, please call
1-800-225-2470. For information about 401(k)s or 403(b)s please call
1-800-323-6105. To effect transactions in existing IRA, SEP-IRA, Profit Sharing
or Pension Plan accounts, call 1-800-225-5163.
The variable annuity contract is provided by Charter National Life Insurance
Company (in New York State, Intramerica Life Insurance Company [S 1802]). The
contract is offered by Scudder Insurance Agency, Inc. (in New York State, Nevada
and Montana, Scudder Insurance Agency of New York, Inc.). CNL, Inc. is the
Principal Underwriter. Scudder Horizon Plan is not available in all states.
20
<PAGE>
Directors and Officers
Edmond D. Villani*
Chairman of the Board and Director
Nicholas Bratt*
President and Director
Paul Bancroft III
Director; Venture Capitalist and Consultant
Thomas J. Devine
Director; Consultant
Keith R. Fox
Director; President, Exeter Capital Management Corporation
William H. Gleysteen, Jr.
Director; Consultant
William H. Luers
Director; President, The Metropolitan Museum of Art
Dr. Wilson Nolen
Director; Consultant
Juris Padegs*
Director, Vice President and Assistant Secretary
Daniel Pierce*
Director
Dr. Gordon Shillinglaw
Director; Professor Emeritus of Accounting, Columbia University Graduate
School of Business
Robert W. Lear
Honorary Director; Executive-in-Residence, Visiting Professor, Columbia
University Graduate School of Business
Robert G. Stone, Jr.
Honorary Director; Chairman of the Board and Director, Kirby Corporation
Elizabeth J. Allan*
Vice President
Carol L. Franklin*
Vice President
Edmund B. Games, Jr.*
Vice President
Jerard K. Hartman*
Vice President
William E. Holzer*
Vice President
Thomas W. Joseph*
Vice President
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
David S. Lee*
Vice President and Assistant Treasurer
Edward J. O'Connell*
Vice President and Assistant Treasurer
Kathryn L. Quirk*
Vice President and Assistant Secretary
Richard W. Desmond*
Assistant Secretary
Coleen Downs Dinneen*
Assistant Secretary
*Scudder, Stevens & Clark, Inc.
21
<PAGE>
<TABLE>
<CAPTION>
Investment products and services
<S> <C>
The Scudder Family of Funds Income
Money market Scudder Emerging Markets Income Fund
Scudder Cash Investment Trust Scudder Global Bond Fund
Scudder U.S. Treasury Money Fund Scudder GNMA Fund
Tax free money market+ Scudder Income Fund
Scudder Tax Free Money Fund Scudder International Bond Fund
Scudder California Tax Free Money Fund* Scudder Short Term Bond Fund
Scudder New York Tax Free Money Fund* Scudder Zero Coupon 2000 Fund
Tax free+ Growth
Scudder California Tax Free Fund* Scudder Capital Growth Fund
Scudder High Yield Tax Free Fund Scudder Development Fund
Scudder Limited Term Tax Free Fund Scudder Global Fund
Scudder Managed Municipal Bonds Scudder Global Small Company Fund
Scudder Massachusetts Limited Term Tax Free Fund* Scudder Gold Fund
Scudder Massachusetts Tax Free Fund* Scudder Greater Europe Growth Fund
Scudder Medium Term Tax Free Fund Scudder International Fund
Scudder New York Tax Free Fund* Scudder Latin America Fund
Scudder Ohio Tax Free Fund* Scudder Pacific Opportunities Fund
Scudder Pennsylvania Tax Free Fund* Scudder Quality Growth Fund
Growth and Income Scudder Small Company Value Fund
Scudder Balanced Fund Scudder Value Fund
Scudder Growth and Income Fund The Japan Fund
------------------------------------------------------------------------------------------------------------------------
Retirement Plans and Tax-Advantaged Investments
IRAs 403(b) Plans
Keogh Plans SEP-IRAs
Scudder Horizon Plan*+++ (a variable annuity) Profit Sharing and
401(k) Plans Money Purchase Pension Plans
------------------------------------------------------------------------------------------------------------------------
Closed-end Funds#
The Argentina Fund, Inc. Scudder New Europe Fund, Inc.
The Brazil Fund, Inc. Scudder World Income Opportunities Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc. Institutional Cash Management
The Latin America Dollar Income Fund, Inc. Scudder Institutional Fund, Inc.
Montgomery Street Income Securities, Inc. Scudder Fund, Inc.
Scudder New Asia Fund, Inc. Scudder Treasurers Trust(TM)++
------------------------------------------------------------------------------------------------------------------------
For complete information on any of the above Scudder funds, including management fees and expenses, call or write for a
free prospectus. Read it carefully before you invest or send money. +A portion of the income from the tax-free funds may
be subject to federal, state and local taxes. *Not available in all states. +++A no-load variable annuity contract
provided by Charter National Life Insurance Company and its affiliate, offered by Scudder's insurance agencies,
1-800-225-2470. #These funds, advised by Scudder, Stevens & Clark, Inc., are traded on various stock exchanges. ++For
information on Scudder Treasurers Trust(TM), an institutional cash management service that utilizes certain portfolios
of Scudder Fund, Inc. ($100,000 minimum), call: 1-800-541-7703.
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
How to contact Scudder
<S> <C> <C>
Account Service and Information: Please address all correspondence to:
For existing account service Scudder Investor Relations The Scudder Funds
and transactions 1-800-225-5163 P.O. Box 2291
Boston, Massachusetts
02107-2291
For personalized information Scudder Automated
about your Scudder accounts; Information Line
exchanges and redemptions; or (SAIL)
information on any Scudder 1-800-343-2890
fund
Investment Information: Or Stop by a Scudder Funds Center:
To receive information about Scudder Investor Relations Many shareholders enjoy the personal, one-on-one
the Scudder funds, for 1-800-225-2470 service of the Scudder Funds Centers. Check for a
additional applications and Funds Center near you--they can be found in the
prospectuses, or for following cities:
investment questions
For establishing 401(k) and Scudder Defined Boca Raton New York
403(b) plans Contribution Services Boston Portland, OR
1-800-323-6105 Chicago San Diego
Cincinnati San Francisco
Los Angeles Scottsdale
For information on Scudder Treasurers Trust(TM), an For information on Scudder Institutional Funds*, funds
institutional cash management service for corporations, designed to meet the broad investment management and
non-profit organizations and trusts which utilizes service needs of banks and other institutions, call:
certain portfolios of Scudder Fund, Inc.* ($100,000 1-800-854-8525.
minimum), call: 1-800-541-7703.
Scudder Investor Relations and Scudder Funds Centers are services provided through Scudder Investor Services, Inc.,
Distributor.
* Contact Scudder Investor Services, Inc., Distributor, to receive a prospectus with more complete information,
including management fees and expenses. Please read it carefully before you invest or send money.
</TABLE>
23
<PAGE>
Scudder
Greater Europe Growth Fund
Prospectus
March 1, 1996
A pure no-load(TM) (no sales charges) mutual fund seeking long-term growth of
capital through investments primarily in the equity securities of European
companies.
This prospectus sets forth concisely the information about
Scudder Greater Europe Growth Fund, a series of Scudder
International Fund, Inc., an open-end management investment
company, that a prospective investor should know before
investing. Please retain it for future reference.
If you require more detailed information, a Statement of
Additional Information dated March 1, 1996, as amended from
time to time, may be obtained without charge by writing
Scudder Investor Services, Inc., Two International Place,
Boston, MA 02110-4103 or calling 1-800-225-2470. The
Statement, which is incorporated by reference into this
prospectus, has been filed with the Securities and Exchange
Commission.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Contents--see page 4.
<PAGE>
Expense information
How to compare a Scudder pure no-load(TM) fund
This information is designed to help you understand the various costs and
expenses of investing in Scudder Greater Europe Growth Fund (the "Fund"). By
reviewing this table and those in other mutual funds' prospectuses, you can
compare the Fund's fees and expenses with those of other funds. With Scudder's
pure no-load(TM) funds, you pay no commissions to purchase or redeem shares, or
to exchange from one fund to another. As a result, all of your investment goes
to work for you.
1) Shareholder transaction expenses: Expenses charged directly to your
individual account in the Fund for various transactions.
Sales commissions to NONE
purchase shares (sales
load)
Commissions to reinvest NONE
dividends
Redemption fees NONE *
Fees to exchange shares NONE
2) Annual Fund operating expenses: Expenses paid by the
Fund before it distributes its net investment income, expressed as a
percentage of the Fund's average daily net assets for the fiscal year ended
October 31, 1995.
Investment management 0%**
fee (after waiver)
12b-1 fees NONE
Other expenses 1.50%**
-----
Total Fund operating 1.50%**
expenses =====
Example
Based on the level of total Fund operating expenses listed above, the total
expenses relating to a $1,000 investment, assuming a 5% annual return and
redemption at the end of each period, are listed below. Investors do not pay
these expenses directly; they are paid by the Fund before it distributes its net
investment income to shareholders. (As noted above, the Fund has no redemption
fees of any kind.)
1 Year 5 Years 10 Years 3 Years
- ------ ------- -------- -------
$15 $47 $82 $179
See "Fund organization--Investment adviser" for further information about the
investment management fee. This example assumes reinvestment of all dividends
and distributions and that the percentage amounts listed under "Annual Fund
operating expenses" remain the same each year. This example should not be
considered a representation of past or future expenses or return. Actual Fund
expenses and return vary from year to year and may be higher or lower than those
shown.
* You may redeem by writing or calling the Fund. If you wish to receive your
redemption proceeds via wire, there is a $5 wire service fee. For
additional information, please refer to "Transaction information--Redeeming
shares."
** Until February 28, 1997, the Adviser has agreed to waive a portion of its
fee to the extent necessary so that the total annualized expenses of the
Fund do not exceed 1.50% of average daily net assets. If the Adviser had
not agreed to waive its fee, Fund expenses would have been: investment
management fee 1.00%, other expenses 1.74% and total operating expenses
2.74% for the fiscal year ended October 31, 1995. To the extent that
expenses fall below 1.50% during the fiscal year, the Adviser reserves the
right to recoup, during the fiscal year incurred, amounts waived during the
period, but only to the extent that the Fund's expenses do not exceed
1.50%.
2
<PAGE>
Financial highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the audited
financial statements.
If you would like more detailed information concerning
the Fund's performance, a complete portfolio listing and audited financial
statements are available in the Fund's Annual Report dated October 31, 1995
and may be obtained without charge by writing or calling Scudder Investor
Services, Inc.
<TABLE>
<CAPTION>
For the Period
Year October 10, 1994
Ended (commencement
October 31, of operations) to
1995 October 31, 1994
----------- -----------------
<S> <C> <C>
Net asset value, beginning of period . . . . . . . . . . . . . . . . . $12.18 $12.00
------ ------
Income from investment operations:
Net investment income (a) . . . . . . . . . . . . . . . . . . . . . . .13 .01
Net realized and unrealized gain on investment transactions . . . . . 1.70 .17
------ ------
Total from investment operations . . . . . . . . . . . . . . . . . . . 1.83 .18
------ ------
Less distributions from net investment income. . . . . . . . . . . . . (.02) -
------ ------
Net asset value, end of period . . . . . . . . . . . . . . . . . . . . $13.99 $12.18
====== ======
Total Return (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.06 1.50**
Ratios and Supplemental Data
Net assets, end of period ($ millions) . . . . . . . . . . . . . . . . 41 8
Ratio of operating expenses, net to average daily net assets (%) (a) 1.50 1.50*
Ratio of net investment income to average daily net assets (%) . . . . 1.25 2.40*
Portfolio turnover rate (%). . . . . . . . . . . . . . . . . . . . . . 27.9 -
(a) Reflects a per share amount of expenses, exclusive of
management fees, reimbursed by the Adviser of . . . . . . . . . $ - $ .01
Reflects a per share amount of management fee and other
fees not imposed. . . . . . . . . . . . . . . . . . . . . . . . $ .13 $ .02
Operating expense ratio including expenses reimbursed,
management fee and other expenses not imposed (%) . . . . . . . 2.74 11.46*
* Annualized
** Not annualized
</TABLE>
3
<PAGE>
A message from Scudder's chairman
Scudder, Stevens & Clark, Inc., investment adviser to the Scudder Family of
Funds, was founded in 1919. We offered America's first no-load mutual fund in
1928. Today, we manage in excess of $100 billion for many private accounts and
over 50 mutual fund portfolios. We manage the mutual funds in a special program
for the American Association of Retired Persons, as well as the fund options
available through Scudder Horizon Plan, a tax-advantaged variable annuity. We
also advise The Japan Fund and nine closed-end funds that invest in countries
around the world.
The Scudder Family of Funds is designed to make investing easy and less costly.
It includes money market, tax free, income and growth funds as well as IRAs,
401(k)s, Keoghs and other retirement plans.
Services available to all shareholders include toll-free access to the
professional service representatives of Scudder Investor Relations, easy
exchange among funds, shareholder reports, informative newsletters and the
walk-in convenience of Scudder Funds Centers.
All Scudder mutual funds are pure no-load(TM). This means you pay no commissions
to purchase or redeem your shares or to exchange from one fund to another. There
are no "12b-1" fees either, which many other funds now charge to support their
marketing efforts. All of your investment goes to work for you. We look forward
to welcoming you as a shareholder.
/s/Daniel Pierce
Scudder Greater Europe Growth Fund
Investment objective
o long-term growth of capital through investments primarily in the equity
securities of European companies
Investment characteristics
o focus on well-managed companies standing to benefit from economic growth and
changes underway in Europe
o actively managed by Scudder, Stevens & Clark, Inc., an investment adviser
with over 35 years of experience investing in Europe
o a pure no-load(TM) fund: no sales charges, redemption fees, or annual 12b-1
payments
Contents
Investment objective and policies 5
Why invest in the Fund? 6
International investment experience 7
Additional information about policies
and investments 7
Risk considerations 9
Distribution and performance information 11
Purchases 12
Exchanges and redemptions 13
Fund organization 14
Transaction information 15
Shareholder benefits 19
Directors and Officers 22
Investment products and services 23
How to contact Scudder Back cover
4
<PAGE>
Investment objective and policies
Scudder Greater Europe Growth Fund (the "Fund"), a non-diversified series of
Scudder International Fund, Inc., seeks long-term growth of capital through
investments primarily in the equity securities of European companies. Although
its focus is on long-term growth, the Fund may provide current income
principally through holdings in dividend-paying securities.
Greater Europe includes both the industrialized nations of Western Europe and
the less wealthy or developed countries in Southern and Eastern Europe. Within
this diverse area, the Fund seeks to benefit from accelerating economic growth
transformation and deregulation taking hold. These developments involve, among
other things, increased privatizations and corporate restructurings, the
reopening of equity markets and economies in Eastern Europe, further broadening
of the European Community, and the implementation of economic policies to
promote non-inflationary growth. The Fund invests in companies it believes are
well placed to benefit from these and other structural and cyclical changes now
underway in this region of the world.
Except as otherwise indicated, the Fund's investment objective and policies are
not fundamental and may be changed without a vote of shareholders. Shareholders
will receive written notice of any changes in the Fund's objective. If there is
a change in investment objective, shareholders should consider whether the Fund
remains an appropriate investment in light of their then current financial
position and needs. There can be no assurance that the Fund's objective will be
met.
Investments
The Fund will invest, under normal market conditions, at least 80% of its total
assets in the equity securities of European companies. The Fund defines a
European company as follows:
o A company organized under the laws of a European country or for which the
principal securities trading market is in Europe; or
o A company, wherever organized, where at least 50% of the company's
non-current assets, capitalization, gross revenue or profit in its most
recent fiscal year represents (directly or indirectly through subsidiaries)
assets or activities located in Europe.
The Fund expects the majority of its equity assets to be in the more established
and liquid markets of Western and Southern Europe. These more established
Western and Southern European countries include: Austria, Belgium, Denmark,
Finland, France, Germany, Iceland, Ireland, Italy, Luxembourg, the Netherlands,
Norway, Spain, Sweden, Switzerland, and the United Kingdom. To enhance return
potential, however, the Fund may pursue investment opportunities in the less
wealthy nations of Southern Europe, currently Greece, Portugal and Turkey, and
the former communist countries of Eastern Europe, including countries once part
of the Soviet Union. The Fund may invest in other countries of Europe when their
markets become sufficiently developed, in the opinion of the Fund's investment
adviser, Scudder, Stevens & Clark, Inc. (the "Adviser").
The Fund intends to allocate its investments among at least three countries at
all times and does not expect to concentrate investments in any particular
industry. The Fund's equity investments are common stock, preferred stock
(convertible or non-convertible), depositary receipts (sponsored or unsponsored)
and warrants. These may be restricted securities. Equity securities may also be
purchased through rights. Securities may be listed on securities exchanges,
traded over-the-counter or have no organized market. In addition, the Fund may
engage in strategic transactions.
The Fund may invest, under normal market conditions, up to 20% of its total
assets in European debt securities. Capital appreciation in debt securities may
5
<PAGE>
Investment objective and policies (cont'd)
arise from a favorable change in relative interest rate levels or in the
creditworthiness of issuers. Within this 20% limit, the Fund may invest in debt
securities which are unrated, rated, or the equivalent of those rated below
investment grade (commonly referred to as "junk bonds"); that is, rated below
Baa by Moody's Investors Service, Inc. ("Moody's") or below BBB by Standard &
Poor's Corporation ("S&P").
The Fund may invest in when-issued securities and convertible securities and may
enter into repurchase agreements. The Fund may also invest in closed-end
investment companies that invest primarily in Europe.
In addition, to provide for redemptions or distributions, the Fund may borrow
from banks and other entities in an amount not exceeding the value of one-third
of the Fund's total assets. The Fund does not expect to borrow for investment
purposes.
When, in the opinion of the Adviser, market conditions warrant, the Fund may
hold foreign or U.S. debt instruments as well as cash or cash equivalents,
including foreign and domestic money market instruments, short-term government
and corporate obligations, and repurchase agreements without limit for temporary
defensive purposes and up to 20% to maintain liquidity. More information about
investment techniques is provided under "Additional information about policies
and investments."
Investment strategy
The Adviser will conduct regional, country, industry and company analysis in
search of investments likely to benefit from economic, political, industrial and
other changes occurring across Europe. In investigating these four areas, the
Adviser relies heavily on fundamental analysis supplemented by field research.
Regional and country analysis involves evaluating such factors as projected
levels of economic growth, changes in interest rates and inflation, trade
patterns, fluctuations in currencies and political developments within and among
nations. Along with this macroeconomic analysis, the Adviser weighs the
prospects for individual industries and companies. The focus will be on looking
for companies with strong management teams, solid finances, leading products,
franchises or technologies, and market strategies well positioned to benefit
from growth and developments in the region.
Why invest in the Fund?
The goal of Scudder Greater Europe Growth Fund is to provide investors with
long-term growth of capital by participating in investments, primarily in the
form of equity securities, located throughout Greater Europe, which encompasses
both the industrialized nations of Western Europe and the less wealthy or
developed markets in Southern and Eastern Europe. Greater Europe is a region of
more than 3.8 million square miles, 800 million consumers, and has a total
wealth unsurpassed by any other continent. While this region is diverse in
culture, politics and industrial development, it is taking steps to promote
greater economic integration and cooperation.
In selecting investments for the Fund, the Adviser seeks out well-managed
companies, both large multinationals and smaller local firms, standing to
benefit from structural and cyclical changes now underway in Europe. Economic
growth transformation and renewal are taking place in different areas and
different ways including: a trend toward privatizations and corporate
restructurings; deregulation and modernization of securities markets; reduction
in trade barriers and currency restrictions; global expansion by major European
companies of both exports and production; steps toward the broadening of the
6
<PAGE>
European Community; economic reform and modernization of the former communist
countries of Eastern Europe; expected further growth of an already large middle
class and a general increase in consumer confidence; and anticipated labor
market restructurings. The Adviser believes that active management, based on
disciplined fundamental research, will yield promising investment opportunities
for long-term capital appreciation.
The Fund seeks to provide appreciation over time with average international
equity fund risk. It is designed as a long-term investment and not for
short-term trading purposes, and should not be considered a complete investment
program. While the Fund entails stock market and other risks, movements in its
share price may have a low correlation with movements in the U.S. markets, so
adding shares of the Fund to an investor's portfolio may increase the investor's
portfolio diversification, and thus may moderate overall portfolio risk.
The Fund's investments are generally denominated in foreign currencies. The
strength or weakness of the U.S. dollar against these currencies is responsible
for part of the Fund's investment performance. If the dollar falls in value
relative to the German deutschemark, for example, the dollar value of a German
stock held in the portfolio will rise even though the price of the stock remains
unchanged. Conversely, if the dollar rises in value relative to the
deutschemark, the dollar value of the German stock will fall.
Investing directly in foreign securities is usually impractical for individual
investors. Investors frequently find it difficult and expensive to arrange
purchases and sales, obtain current market, industry or corporate information,
hold securities for safekeeping and convert profits from foreign currencies to
U.S. dollars. The Fund manages these tasks for the investor. The Adviser has had
long experience in dealing in foreign markets and believes the Fund affords a
convenient and cost-effective method of investing in the European markets. See
"Risk considerations."
In addition, the Fund offers all the benefits of the Scudder Family of Funds.
Scudder, Stevens & Clark, Inc. manages a diverse family of pure no-load(TM)
funds and provides a wide range of services to help investors meet their
investment needs. Please refer to "Investment products and services" for
additional information.
International investment
experience
The Adviser, a leader in international investment management, has been investing
in Europe for over 35 years. In 1953, the Adviser introduced the first foreign
investment company registered with the United States Securities and Exchange
Commission, Scudder International Fund. International assets under Scudder's
supervision as of December 31, 1995 exceeded $20 billion, of which over $10
billion was invested in Europe.
The Adviser also manages a number of offshore and U.S. investment companies that
can invest in all or select regions of Europe, including two closed-end funds
that trade on the New York Stock Exchange: Scudder New Europe Fund, Inc. and The
First Iberian Fund, Inc. The Adviser maintains an office in London with various
contacts there and elsewhere in Europe.
Additional information about policies and investments
Investment restrictions
The Fund has adopted certain fundamental policies which may not be changed
without a vote of shareholders and which are designed to reduce the Fund's
investment risk.
The Fund may not borrow money except as a temporary measure for extraordinary or
emergency purposes and may not make loans except through the lending of
portfolio securities, the purchase of debt securities or through
7
<PAGE>
Additional information about policies and investments (cont'd)
repurchase agreements. The Fund may not invest more than 25% of its assets in
securities of companies in the same industry.
In addition, as a matter of nonfundamental policy, the Fund may not invest more
than 10% of its total assets, in the aggregate, in securities which are not
readily marketable, in restricted securities and repurchase agreements maturing
in more than seven days.
A complete description of these and other policies and restrictions is contained
under "Investment Restrictions" in the Fund's Statement of Additional
Information.
When-issued securities
The Fund may purchase equity and debt securities on a when-issued or forward
delivery basis, for payment and delivery at a later date. The price and yield
are generally fixed on the date of commitment to purchase. During the period
between purchase and settlement, no interest accrues to the Fund. At the time of
settlement, the market value of the security may be more or less than the
purchase price.
Convertible securities
The Fund may invest in convertible securities which may offer higher income than
the common stocks into which they are convertible. The convertible securities in
which the Fund may invest consist of bonds, notes, debentures and preferred
stocks which may be converted or exchanged at a stated or determinable exchange
ratio into underlying shares of common stock. Prior to their conversion,
convertible securities may have characteristics similar to non-convertible
securities.
Repurchase agreements
As a means of earning income for periods as short as overnight, the Fund may
enter into repurchase agreements with selected banks and broker/dealers. Under a
repurchase agreement, the Fund acquires securities, subject to the seller's
agreement to repurchase at a specified time and price. The Fund may also enter
into repurchase commitments for investment purposes for periods of 30 days or
more. Such commitments involve investment risk similar to that of debt
securities. Please see "Risk considerations--Repurchase agreements" for more
information.
Strategic Transactions and derivatives
The Fund may, but is not required to, utilize various other investment
strategies as described below to hedge various market risks (such as interest
rates, currency exchange rates, and broad or specific equity or fixed-income
market movements), to manage the effective maturity or duration of fixed-income
securities in the Fund's portfolio or to enhance potential gain. These
strategies may be executed through the use of derivatives contracts. Such
strategies are generally accepted as a part of modern portfolio management and
are regularly utilized by many mutual funds and other institutional investors.
Techniques and instruments may change over time as new instruments and
strategies are developed or regulatory changes occur.
In the course of pursuing these investment strategies, the Fund may purchase and
sell exchange-listed and over-the-counter put and call options on securities,
equity and fixed-income indices and other financial instruments, purchase and
sell financial futures contracts and options thereon, enter into various
interest rate transactions such as swaps, caps, floors or collars, and enter
into various currency transactions such as currency forward contracts, currency
futures contracts, currency swaps or options on currencies or currency futures
(collectively, all the above are called "Strategic Transactions").
Strategic Transactions may be used without limit to attempt to protect against
possible changes in the market value of securities held in or to be purchased
for the Fund's portfolio resulting from securities markets or currency exchange
rate fluctuations, to protect the Fund's unrealized gains in the value of its
8
<PAGE>
portfolio securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of fixed-income
securities in the Fund's portfolio, or to establish a position in the
derivatives markets as a temporary substitute for purchasing or selling
particular securities. Some Strategic Transactions may also be used to enhance
potential gain although no more than 5% of the Fund's assets will be committed
to Strategic Transactions entered into for non-hedging purposes. Any or all of
these investment techniques may be used at any time and in any combination, and
there is no particular strategy that dictates the use of one technique rather
than another, as use of any Strategic Transaction is a function of numerous
variables including market conditions. The ability of the Fund to utilize these
Strategic Transactions successfully will depend on the Adviser's ability to
predict pertinent market movements, which cannot be assured. The Fund will
comply with applicable regulatory requirements when implementing these
strategies, techniques and instruments. Strategic Transactions involving
financial futures and options thereon will be purchased, sold or entered into
only for bona fide hedging, risk management or portfolio management purposes and
not for speculative purposes. Please refer to "Risk considerations--Strategic
Transactions and derivatives" for more information.
Risk considerations
The Fund's risks are determined by the nature of the securities held and the
portfolio management strategies used by the Adviser. The following are
descriptions of certain risks related to the investments and techniques that the
Fund may use from time to time.
Investing in Europe. The Fund's performance is susceptible to political, social
and economic factors affecting issuers in European countries. Such factors may
include, but are not limited to: growth of GDP or GNP, rate of inflation,
capital reinvestment, resource self-sufficiency and balance of payments
position, as well as interest and monetary exchange rates among European
countries.
Eastern European countries and certain Southern European countries are
considered to be emerging markets. Securities traded in certain emerging
European markets may be subject to additional risks due to political and
economic reforms including efforts to decentralize the economic decision-making
process and move toward a market-oriented economy. Additionally, the
inexperience of financial intermediaries, lack of modern technology and the
possibility of permanent or temporary termination of trading of securities may
affect the Fund's performance. To the extent that the Fund purchases equity
securities of smaller companies, such securities may experience greater
volatility and have limited liquidity.
Former communist regimes of a number of Eastern European countries had
expropriated a large amount of property, the claims on which have not been
entirely settled. There can be no assurance that the Fund's investments in
Eastern Europe would not also be expropriated, nationalized or otherwise
confiscated. Finally, any change in the leadership or policies of Eastern
European countries, or the countries that exercise a significant influence over
those countries, may halt the expansion of or reverse the liberalization of
foreign investment policies now occurring and adversely affect existing
investment opportunity.
Although the governments of certain Eastern European countries currently are
implementing or considering reforms directed at political and economic
liberalization, there can be no
9
<PAGE>
Risk considerations (cont'd)
assurance that these reforms will continue or achieve their goals.
Currency movements. Purchases of foreign securities are usually made in foreign
currencies and, as a result, the Fund may incur currency conversion costs and
may be affected favorably or unfavorably by changes in the value of foreign
currencies against the U.S. dollar. Should the U.S. dollar appreciate against
foreign currencies, then the value of the Fund's securities holdings would
depreciate, all other things being equal. If the reverse is true, then the
Fund's holdings would appreciate in value.
Foreign securities. Investments in foreign securities involve special
considerations due to more limited information, higher brokerage costs,
different accounting standards, thinner trading markets and the likely impact of
foreign taxes on the income from securities. They may also entail certain other
risks, such as the possibility of one or more of the following: imposition of
dividend or interest withholding or confiscatory taxes; currency blockages or
transfer restrictions; expropriation, nationalization or other adverse political
or economic developments; less government supervision and regulation of
securities exchanges, brokers and listed companies; and the difficulty of
enforcing obligations in other countries. Further, it may be more difficult for
the Fund's agents to keep currently informed about corporate actions which may
affect the prices of portfolio securities. Communications between the United
States and foreign countries may be less reliable than within the United States,
thus increasing the risk of delayed settlements of portfolio transactions or
loss of certificates for portfolio securities. Certain markets may require
payment for securities before delivery. The Fund's ability and decisions to
purchase and sell portfolio securities may be affected by laws or regulations
relating to the convertibility of currencies and repatriation of assets. Some
countries restrict the extent to which foreigners may invest in their securities
markets.
Non-diversified investment company. The Fund is classified as a non-diversified
investment company under the Investment Company Act of 1940 (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 securities of a single issuer. The
investment of a large percentage of the Fund's assets in the securities of a
small number of issuers may cause the Fund's share price to fluctuate more than
that of a diversified investment company.
Convertible securities. While convertible securities generally offer lower
yields than non-convertible debt securities of similar quality, their prices may
reflect changes in the value of the underlying common stock. Convertible
securities entail less credit risk than the issuer's common stock.
Repurchase agreements. If the seller under a repurchase agreement becomes
insolvent, the Fund's right to dispose of the securities may be restricted, or
the value of the securities may decline before the Fund is able to dispose of
them. In the event of the commencement of bankruptcy or insolvency proceedings
with respect to the seller of the securities before repurchase of the securities
under a repurchase agreement, the Fund may encounter delay and incur costs,
including a decline in the value of the securities, before being able to sell
the securities.
Debt securities. The Fund may invest up to 20% of its total assets in debt
securities which are unrated, rated or the equivalent of those rated below
investment-grade. The lower the ratings of such debt securities, the greater
their risks render them like equity securities. The Fund may invest in
securities rated C by Moody's or D by S&P, which may be in default with respect
to payment of principal or interest. Also, longer maturity bonds tend to
10
<PAGE>
fluctuate more in price as interest rates change than do short-term bonds,
providing both opportunity and risk. The trading market for lower-grade
securities is generally less liquid than for higher rated securities and the
Fund may have difficulty disposing of these securities at the time it wishes to.
Illiquid investments. The absence of a trading market can make it difficult to
ascertain a market value for illiquid investments. Disposing of illiquid
investments may involve time-consuming negotiation and legal expenses, and it
may be difficult or impossible for the Fund to sell them promptly at an
acceptable price.
Strategic Transactions and derivatives. Strategic Transactions, including
derivatives contracts, have risks associated with them including possible
default by the other party to the transaction, illiquidity and, to the extent
the Adviser's view as to certain market movements is incorrect, the risk that
the use of such Strategic Transactions could result in losses greater than if
they had not been used. Use of put and call options may result in losses to the
Fund, force the sale or purchase of portfolio securities at inopportune times or
for prices higher than (in the case of put options) or lower than (in the case
of call options) current market values, limit the amount of appreciation the
Fund can realize on its investments or cause the Fund to hold a security it
might otherwise sell. The use of currency transactions can result in the Fund
incurring losses as a result of a number of factors including the imposition of
exchange controls, suspension of settlements or the inability to deliver or
receive a specified currency. The use of options and futures transactions
entails certain other risks. In particular, the variable degree of correlation
between price movements of futures contracts and price movements in the related
portfolio position of the Fund creates the possibility that losses on the
hedging instrument may be greater than gains in the value of the Fund's
position. In addition, futures and options markets may not be liquid in all
circumstances and certain over-the-counter options may have no markets. As a
result, in certain markets, the Fund might not be able to close out a
transaction without incurring substantial losses, if at all. Although the use of
futures contracts and options transactions for hedging should tend to minimize
the risk of loss due to a decline in the value of the hedged position, at the
same time they tend to limit any potential gain which might result from an
increase in value of such position.
Finally, the daily variation margin requirements for futures contracts would
create a greater ongoing potential financial risk than would purchases of
options, where the exposure is limited to the cost of the initial premium.
Losses resulting from the use of Strategic Transactions would reduce net asset
value, and possibly income, and such losses can be greater than if the Strategic
Transactions had not been utilized. The Strategic Transactions that the Fund may
use and some of their risks are described more fully in the Fund's Statement of
Additional Information.
Distribution and performance information
Dividends and capital gains distributions
The Fund intends to distribute dividends from its net investment income and net
realized capital gains after utilization of capital loss carryforwards, if any,
annually in December to prevent application of federal excise tax, although an
additional distribution may be made, if required, at a later date. Any dividends
or capital gains distributions declared in October, November or December with a
record date in such a month and paid the following January will be treated by
shareholders for federal income tax purposes as if received on December 31 of
the calendar year declared. According to preference, shareholders may receive
distributions in cash or have them reinvested in additional shares of the Fund.
If an investment is in the form of a
(Continued on page 14)
11
<PAGE>
<TABLE>
<CAPTION>
Purchases
<S> <C> <C> <C>
Opening Minimum initial investment: $1,000; IRAs $500
an account Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums. See appropriate
plan literature.
Make checks payable o By Mail Send your completed and signed application and check
to "The Scudder
Funds."
by regular mail to: or by express, registered,
or certified mail to:
The Scudder Funds Scudder Shareholder Services
P.O. Box 2291 Center
Boston, MA 42 Longwater Drive
02107-2291 Norwell, MA
02061-1612
o By Wire Please see Transaction information--Purchasing shares-- By
wire following these tables for details, including the ABA wire
transfer number. Then call 1-800-225-5163 for instructions.
o In Person Visit one of our Funds Centers to complete your application with the help
of a Scudder representative. Funds Center locations are listed under
Shareholder benefits.
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Purchasing Minimum additional investment: $100; IRAs $50
additional shares Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums. See appropriate
plan literature.
Make checks payable o By Mail Send a check with a Scudder investment slip, or with a letter of
to "The Scudder instruction including your account number and the complete Fund name, to
Funds." the appropriate address listed above.
o By Wire Please see Transaction information--Purchasing shares-- By
wire following these tables for details, including the ABA wire
transfer number.
o In Person Visit one of our Funds Centers to make an additional
investment in your Scudder fund account. Funds Center locations are
listed under Shareholder benefits.
o By Telephone Please see Transaction information--Purchasing shares-- By
AutoBuy or By telephone order for more details.
o By Automatic You may arrange to make investments on a regular basis
Investment Plan through automatic deductions from your bank checking account.
($50 minimum) Please call 1-800-225-5163 for more information and an
enrollment form.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Exchanges and redemptions
<S> <C> <C> <C> <C>
Exchanging Minimum investments: $1,000 to establish a new
shares account; $100 to exchange among existing accounts
o By Telephone To speak with a service representative, call 1-800-225-5163 from
8 a.m. to 8 p.m. eastern time or to access SAIL(TM), Scudder's Automated
Information Line, call 1-800-343-2890 (24 hours a day).
o By Mail Print or type your instructions and include:
or Fax - the name of the Fund and the account number you are exchanging from;
- your name(s) and address as they appear on your account;
- the dollar amount or number of shares you wish to exchange;
- the name of the Fund you are exchanging into; and
- your signature(s) as it appears on your account and a daytime telephone
number.
Send your instructions
by regular mail to: or by express, registered, or by fax to:
or certified mail to:
The Scudder Funds Scudder Shareholder Services 1-800-821-6234
P.O. Box 2291 Center
Boston, MA 02107-2291 42 Longwater Drive
Norwell, MA
02061-1612
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Redeeming shares o By Telephone To speak with a service representative, call 1-800-225-5163 from
8 a.m. to 8 p.m. eastern time or to access SAIL(TM),
Scudder's Automated Information Line, call 1-800-343-2890 (24 hours a day). You may
have redemption proceeds sent to your predesignated bank account, or redemption
proceeds of up to $50,000 sent to your address of record.
o By Mail Send your instructions for redemption to the appropriate address or fax number
or Fax above and include:
- the name of the Fund and account number you are redeeming from;
- your name(s) and address as they appear on your account;
- the dollar amount or number of shares you wish to redeem; and
- your signature(s) as it appears on your account and a daytime
telephone number.
A signature guarantee is required for redemptions over $50,000. See Transaction
information--Redeeming shares following these tables.
o By Automatic You may arrange to receive automatic cash payments periodically.
Withdrawal Call 1-800-225-5163 for more information and an enrollment form.
Plan
</TABLE>
13
<PAGE>
Distribution and performance information (cont'd)
(Continued from page 11)
retirement plan, all dividends and capital gains distributions must be
reinvested into the account.
Generally, dividends from net investment income are taxable to shareholders as
ordinary income. Long-term capital gains distributions, if any, are taxable as
long-term capital gains regardless of the length of time shareholders have owned
their shares. Short-term capital gains and any other taxable income
distributions are taxable as ordinary income.
Shareholders may be able to claim a credit or deduction on their income tax
returns for their pro rata portion of qualified taxes paid by the Fund to
foreign countries.
The Fund sends detailed tax information about the amount and type of its
distributions by January 31 of the following year.
Performance information
From time to time, quotations of the Fund's performance may be included in
advertisements, sales literature or shareholder reports. All performance figures
are historical, show the performance of a hypothetical investment and are not
intended to indicate future performance. "Total return" is the change in value
of an investment in the Fund for a specified period. The "average annual total
return" of the Fund is the average annual compound rate of return of an
investment in the Fund assuming the investment has been held for one year, and
the life of the Fund as of a stated ending date. "Cumulative total return"
represents the cumulative change in value of an investment in the Fund for
various periods. All types of total return calculations assume that all
dividends and capital gains distributions during the period were reinvested in
shares of the Fund. "Capital change" measures return from capital, including
reinvestment of any capital gains distributions but does not include the
reinvestment of dividends. Performance will vary based upon, among other things,
changes in market conditions and the level of the Fund's expenses.
Fund organization
Scudder Greater Europe Growth Fund is a non-diversified series of Scudder
International Fund, Inc. (the "Corporation"), an open-end, management investment
company registered under the 1940 Act. The Corporation was organized as a
Maryland corporation in July 1975.
The Fund's activities are supervised by the Corporation's Board of Directors.
Shareholders have one vote for each share held on matters on which they are
entitled to vote. The Corporation is not required to and has no current
intention of holding annual shareholder meetings, although special meetings may
be called for purposes such as electing or removing Directors, changing
fundamental investment policies or approving an investment advisory contract.
Shareholders will be assisted in communicating with other shareholders in
connection with removing a Director as if Section 16(c) of the 1940 Act were
applicable.
Investment adviser
The Fund retains the investment management firm of Scudder, Stevens & Clark,
Inc., a Delaware corporation, to manage the Fund's daily investment and business
affairs subject to the policies established by the Board of Directors.
The Directors have overall responsibility for the management of the Fund under
Maryland law.
The Fund pays the Adviser an annual fee of 1.00% of the Fund's average daily net
assets. The fee is payable monthly, provided that the Fund will make such
interim payments as may be requested by the Adviser not to exceed 75% of the
amount of the fee then accrued on the books of the Fund and unpaid. The fee is
higher than that charged by many funds which invest primarily in U.S. securities
14
<PAGE>
but not necessarily higher than the fees charged to funds with investment
objectives similar to that of the Fund.
The Adviser has agreed to maintain the annualized expenses of the Fund at no
more than 1.50% of the average daily net assets of the Fund until February 28,
1997.
For the fiscal year ended October 31, 1995, the Adviser waived its investment
management fee.
All the Fund's expenses are paid out of gross investment income. Shareholders
pay no direct charges or fees for investment services.
Scudder, Stevens & Clark, Inc., is located at 345 Park Avenue, New York, New
York.
Transfer agent
Scudder Service Corporation, P.O. Box 2291, Boston, Massachusetts 02107-2291, a
subsidiary of the Adviser, is the transfer, shareholder servicing and
dividend-paying agent for the Fund.
Underwriter
Scudder Investor Services, Inc., a subsidiary of the Adviser, is the Fund's
principal underwriter. Scudder Investor Services, Inc. confirms, as agent, all
purchases of shares of the Fund. Scudder Investor Relations is a telephone
information service provided by Scudder Investor Services, Inc.
Custodian
Brown Brothers Harriman & Co. is the Fund's custodian.
Fund accounting agent
Scudder Fund Accounting Corporation, a subsidiary of the Adviser, is responsible
for determining the daily net asset value per share and maintaining the general
accounting records of the Fund.
Transaction information
Purchasing shares
Purchases are executed at the next calculated net asset value per share after
the Fund's transfer agent receives the purchase request in good order. Purchases
are made in full and fractional shares. (See "Share price.")
By check. If you purchase shares with a check that does not clear, your purchase
will be canceled and you will be subject to any losses or fees incurred in the
transaction. Checks must be drawn on or payable through a U.S. bank. If you
purchase shares by check and redeem them within seven business days of purchase,
the Fund may hold redemption proceeds until the purchase check has cleared. If
you purchase shares by federal funds wire, you may avoid this delay. Redemption
or exchange requests by telephone prior to the expiration of the seven-day
period will not be accepted.
By wire. To open a new account by wire, first call Scudder at 1-800-225-5163 to
obtain an account number. A representative will instruct you to send a
completed, signed application to the transfer agent. Accounts cannot be opened
without a completed, signed application and a Scudder fund account number.
Contact your bank to arrange a wire transfer to:
The Scudder Funds
State Street Bank and Trust Company
Boston, MA 02101
ABA Number 011000028
DDA Account 9903-5552
Your wire instructions must also include:
- -- the name of the fund in which the money is to be invested,
- -- the account number of the fund, and
- -- the name(s) of the account holder(s).
The account will be established once the application and money order are
received in good order.
15
<PAGE>
Transaction information (cont'd)
You may also make additional investments of $100 or more to your existing
account by wire.
By telephone order. Existing shareholders may purchase shares at a certain day's
price by calling 1-800-225-5163 before the close of regular trading on the New
York Stock Exchange (the "Exchange"), normally 4 p.m. eastern time, on that day.
Orders must be for $10,000 or more and cannot be for an amount greater than four
times the value of your account at the time the order is placed. A confirmation
with complete purchase information is sent shortly after your order is received.
You must include with your payment the order number given at the time the order
is placed. If payment by check or wire is not received within three business
days, the order is subject to cancellation and the shareholder will be
responsible for any loss to the Fund resulting from this cancellation. Telephone
orders are not available for shares held in Scudder IRA accounts and most other
Scudder retirement plan accounts.
By "AutoBuy." If you elected "AutoBuy" for your account, you can call toll-free
to purchase shares. The money will be automatically transferred from your
predesignated bank checking account. Your bank must be a member of the Automated
Clearing House for you to use this service. If you did not elect "AutoBuy," call
1-800-225-5163 for more information.
To purchase additional shares, call 1-800-225-5163. Purchases must be for at
least $250 but not more than $250,000. Proceeds in the amount of your purchase
will be transferred from your bank checking account in two or three business
days following your call. For requests received by the close of regular trading
on the Exchange, shares will be purchased at the net asset value per share
calculated at the close of trading on the day of your call. "AutoBuy" requests
received after the close of regular trading on the Exchange will begin their
processing and be purchased at the net asset value calculated the following
business day.
If you purchase shares by "AutoBuy" and redeem them within seven days of the
purchase, the Fund may hold the redemption proceeds for a period of up to seven
business days. If you purchase shares and there are insufficient funds in your
bank account, the purchase will be canceled and you will be subject to any
losses or fees incurred in the transaction. "AutoBuy" transactions are not
available for Scudder IRA accounts and most other retirement plan accounts.
By exchange. Your new account will have the same registration and address as
your existing account.
The exchange requirements for corporations, other organizations, trusts,
fiduciaries, agents, institutional investors and retirement plans may be
different from those for regular accounts. Please call 1-800-225-5163 for more
information, including information about the transfer of special account
features.
You can also make exchanges among your Scudder fund accounts on SAIL, the
Scudder Automated Information Line, by calling 1-800-343-2890.
Redeeming shares
The Fund allows you to redeem shares (i.e., sell them back to the Fund) without
redemption fees.
By telephone. This is the quickest and easiest way to sell Fund shares. If you
elected telephone redemption to your bank on your application, you can call to
request that federal funds be sent to your authorized bank account. If you did
not elect telephone redemption to your bank on your application, call
1-800-225-5163 for more information.
Redemption proceeds will be wired to your bank unless otherwise requested. If
your bank cannot receive federal reserve wires, redemption proceeds will be
mailed to your bank. There will be a $5 charge for all wire redemptions.
16
<PAGE>
You can also make redemptions from your Scudder fund account on SAIL by calling
1-800-343-2890.
If you open an account by wire, you cannot redeem shares by telephone until the
Fund's transfer agent has received your completed and signed application.
Telephone redemption is not available for shares held in Scudder IRA accounts
and most other Scudder retirement plan accounts.
In the event that you are unable to reach the Fund by telephone, you should
write to the Fund; see "How to contact Scudder" for the address.
By "AutoSell." If you elected "AutoSell" for your account, you can call
toll-free to redeem shares. The money will be automatically transferred to your
predesignated bank checking account. Your bank must be a member of the Automated
Clearing House for you to use this service. If you did not elect "AutoSell,"
call 1-800-225-5163 for more information.
To redeem shares, call 1-800-225-5163. Redemptions must be for at least $250.
Proceeds in the amount of your redemption will be transferred to your bank
checking account in two or three business days following your call. For requests
received by the close of regular trading on the Exchange, shares will be
redeemed at the net asset value per share calculated at the close of trading on
the day of your call. "AutoSell" requests received after the close of regular
trading on the Exchange will begin their processing and be redeemed at the net
asset value calculated the following business day.
"AutoSell" transactions are not available for Scudder IRA accounts and most
other retirement plan accounts.
Signature guarantees. For your protection and to prevent fraudulent redemptions,
on written redemption requests in excess of $50,000 we require an original
signature and an original signature guarantee for each person in whose name the
account is registered. (The Fund reserves the right, however, to require a
signature guarantee for all redemptions.) You can obtain a signature guarantee
from most banks, credit unions or savings associations, or from broker/dealers,
municipal securities broker/dealers, government securities broker/dealers,
national securities exchanges, registered securities associations or clearing
agencies deemed eligible by the Securities and Exchange Commission. Signature
guarantees by notaries public are not acceptable. Redemption requirements for
corporations, other organizations, trusts, fiduciaries, agents, institutional
investors and retirement plans may be different from those for regular accounts.
For more information, please call 1-800-225-5163.
Telephone transactions
Shareholders automatically receive the ability to exchange by telephone and the
right to redeem by telephone up to $50,000 to their address of record.
Shareholders also may, by telephone, request that redemption proceeds be sent to
a predesignated bank account. The Fund uses procedures designed to give
reasonable assurance that telephone instructions are genuine, including
recording telephone calls, testing a caller's identity and sending written
confirmation of telephone transactions. If the Fund does not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Fund will not be liable for acting upon instructions
communicated by telephone that it reasonably believes to be genuine.
Share price
Purchases and redemptions, including exchanges, are made at net asset value.
Scudder Fund Accounting Corporation determines net asset value per share as of
the close of regular trading on the Exchange, normally 4 p.m. eastern time, on
each day the Exchange is open for trading. Net asset value per share is
calculated by dividing the value of total Fund assets, less all liabilities, by
the total number of shares outstanding.
17
<PAGE>
Transaction information (cont'd)
Trading in securities on European securities exchanges is normally completed
before the close of regular trading on the Exchange. Trading on these foreign
exchanges may not take place on all days on which there is regular trading on
the Exchange, or may take place on days on which there is no regular trading on
the Exchange. If events materially affecting the value of the Fund's portfolio
securities occur between the time when these foreign exchanges close and the
time when the Fund's net asset value is calculated, such securities will be
valued at fair value as determined by the Corporation's Board of Directors.
Processing time
All purchase and redemption requests received in good order by the Fund's
transfer agent by the close of regular trading on the Exchange are executed at
the net asset value per share calculated at the close of regular trading that
day.
Purchase and redemption requests received after the close of regular trading on
the Exchange will be executed the following business day.
If you wish to make a purchase of $500,000 or more, you should notify Scudder
Investor Relations by calling 1-800-225-5163.
The Fund will normally send your redemption proceeds within one business day
following the redemption request, but may take up to seven business days (or
longer in the case of shares recently purchased by check).
Short-term trading
Purchases and sales should be made for long-term investment purposes only. The
Fund and Scudder Investor Services, Inc. each reserves the right to restrict
purchases of Fund shares (including exchanges) when a pattern of frequent
purchases and sales made in response to short-term fluctuations in the Fund's
share price appears evident.
Tax information
A redemption of shares, including an exchange into another Scudder fund, is a
sale of shares and may result in a gain or loss for income tax purposes.
Tax identification number
Be sure to complete the Tax Identification Number section of the Fund's
application when you open an account. Federal tax law requires the Fund to
withhold 31% of taxable dividends, capital gains distributions and redemption
and exchange proceeds from accounts (other than those of certain exempt payees)
without a certified Social Security or tax identification number and certain
other certified information or upon notification from the IRS or a broker that
withholding is required. The Fund reserves the right to reject new account
applications without a certified Social Security or tax identification number.
The Fund also reserves the right, following 30 days' notice, to redeem all
shares in accounts without a certified Social Security or tax identification
number. A shareholder may avoid involuntary redemption by providing the Fund
with a tax identification number during the 30-day notice period.
Minimum balances
Shareholders should maintain a share balance worth at least $1,000, which amount
may be changed by the Board of Directors. Scudder retirement plans have similar
or lower minimum share balance requirements. The Fund reserves the right,
following 60 days' written notice to shareholders, to redeem all shares in sub-
minimum accounts, including accounts of new investors, where a reduction in
value has occurred due to a redemption or exchange out of the account.
Reductions in value that result solely from market activity will not trigger an
involuntary redemption. The Fund will mail the proceeds of the redeemed account
to the shareholder. The shareholder may restore the share balance to $1,000 or
more during the 60-day notice period and must maintain it at no lower than that
18
<PAGE>
minimum to avoid involuntary redemption.
Third party transactions
If purchases and redemptions of Fund shares are arranged and settlement is made
at an investor's election through a member of the National Association of
Securities Dealers, Inc., other than Scudder Investor Services, Inc., that
member may, at its discretion, charge a fee for that service.
Redemption-in-kind
The Fund reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption or repurchase order by making
payment in whole or in part in readily marketable securities chosen by the Fund
and valued as they are for purposes of computing the Fund's net asset value (a
redemption-in-kind). If payment is made in securities, a shareholder may incur
transaction expenses in converting these securities to cash. The Fund has
elected, however, to be governed by Rule 18f-1 under the 1940 Act, as a result
of which the Fund is obligated to redeem shares, with respect to any one
shareholder during any 90-day period, solely in cash up to the lesser of
$250,000 or 1% of the net asset value of the Fund at the beginning of the
period.
Shareholder benefits
Experienced professional management
Scudder, Stevens & Clark, Inc., one of the nation's most experienced investment
management firms, actively manages your Scudder fund investment. Professional
management is an important advantage for investors who do not have the time or
expertise to invest directly in individual securities.
A team approach to investing
Scudder Greater Europe Growth Fund is managed by a team of Scudder investment
professionals who each play an important role in the Fund's management process.
Team members work together to develop investment strategies and select
securities for the Fund's portfolio. They are supported by Scudder's large staff
of economists, research analysts, traders and other investment specialists who
work in Scudder's offices across the United States and abroad. Scudder believes
its team approach benefits Fund investors by bringing together many disciplines
and leveraging Scudder's extensive resources.
Carol Franklin, Lead Portfolio Manager, sets Fund investment strategy and
oversees its daily operation. Ms. Franklin joined Scudder in 1981 and has nine
years of European research and investment management experience. Nicholas Bratt,
Portfolio Manager, helps set the Fund's general investment strategies. Mr. Bratt
has over 20 years of experience in worldwide investing and has been with Scudder
since 1976. Joan Gregory, Portfolio Manager, focuses on stock selection, a role
she has played since she joined Scudder in 1992. Ms. Gregory has been involved
with investment in global and international stocks as an assistant portfolio
manager since 1989.
SAIL(TM)--Scudder Automated Information Line
For personalized account information including fund prices, yields and account
balances, to perform transactions in existing Scudder fund accounts, or to
obtain information on any Scudder fund, shareholders can call Scudder's
Automated Information Line (SAIL) at 1-800-343-2890, 24 hours a day. During
periods of extreme economic or market changes, or other conditions, it may be
difficult for you to effect telephone transactions in your account. In such an
event you should write to the Fund; please see "How to contact Scudder" for the
address.
Investment flexibility
Scudder offers toll-free telephone exchange between funds at current net asset
value. You can move your investments among money market, income, growth,
tax-free and growth and income
19
<PAGE>
Shareholder benefits (cont'd)
funds with a simple toll-free call or, if you prefer, by sending your
instructions through the mail or by fax. Telephone and fax redemptions and
exchanges are subject to termination and their terms are subject to change at
any time by the Fund or the transfer agent. In some cases, the transfer agent or
Scudder Investor Services, Inc. may impose additional conditions on telephone
transactions.
Dividend reinvestment plan
You may have dividends and distributions automatically reinvested in additional
Fund shares. Please call 1-800-225-5163 to request this feature.
Shareholder statements
You receive a detailed account statement every time you purchase or redeem
shares. All of your statements should be retained to help you keep track of
account activity and the cost of shares for tax purposes.
Shareholder reports
In addition to account statements, you receive periodic shareholder reports
highlighting relevant information, including investment results and a review of
portfolio changes.
To reduce the volume of mail you receive, only one copy of most Fund reports,
such as the Fund's Annual Report, may be mailed to your household (same surname,
same address). Please call 1-800-225-5163 if you wish to receive additional
shareholder reports.
Newsletters
Four times a year, Scudder sends you Perspectives, an informative newsletter
covering economic and investment developments, service enhancements and other
topics of interest to Scudder fund investors.
Scudder Funds Centers
As a convenience to shareholders who like to conduct business in person, Scudder
Investor Services, Inc. maintains Funds Centers in Boca Raton, Boston, Chicago,
Cincinnati, Los Angeles, New York, Portland (OR), San Diego, San Francisco and
Scottsdale.
T.D.D. service for the hearing impaired
Scudder's full range of investor information and shareholder services is
available to hearing impaired investors through a toll-free T.D.D. (Telephone
Device for the Deaf) service. If you have access to a T.D.D., call
1-800-543-7916 for investment information or specific account questions and
transactions.
20
<PAGE>
Scudder tax-advantaged retirement plans
Scudder offers a variety of tax-advantaged retirement plans for individuals,
businesses and non-profit organizations. These flexible plans are designed for
use with the Scudder Family of Funds (except Scudder tax-free funds, which are
inappropriate for such plans). Scudder Funds offer a broad range of investment
objectives and can be used to seek almost any investment goal. Using Scudder's
retirement plans can help shareholders save on current taxes while building
their retirement savings.
o Scudder No-Fee IRAs. These retirement plans allow a maximum annual
contribution of $2,000 per person for anyone with earned income. Many
people can deduct all or part of their contributions from their taxable
income, and all investment earnings accrue on a tax deferred basis. The
Scudder No-Fee IRA charges no annual custodial fee.
o 401(k) Plans. 401(k) plans allow employers and employees to make
tax-deductible retirement contributions. Scudder offers a full service
program that includes recordkeeping, prototype plan, employee
communications and trustee services, as well as investment options.
o Profit Sharing and Money Purchase Pension Plans. These plans allow
corporations, partnerships and people who are self-employed to make
annual, tax-deductible contributions of up to $30,000 for each person
covered by the plans. Plans may be adopted individually or paired to
maximize contributions. These are sometimes known as Keogh plans.
o 403(b) Plans. Retirement plans for tax-exempt organizations and school
systems to which employers and employees may both contribute.
o SEP-IRAs. Easily administered retirement plans for small businesses and
self-employed individuals. The maximum annual contribution to SEP-IRA
accounts is adjusted each year for inflation.
o Scudder Horizon Plan. A no-load variable annuity that lets you build
assets by deferring taxes on your investment earnings. You can start with
$2,500 or more.
Scudder Trust Company (an affiliate of the Adviser) is Trustee or Custodian for
some of these plans and is paid an annual fee for some of the above retirement
plans. For information about establishing a Scudder No-Fee IRA, SEP-IRA, Profit
Sharing Plan, Money Purchase Pension Plan or a Scudder Horizon Plan, please call
1-800-225-2470. For information about 401(k)s or 403(b)s please call
1-800-323-6105. To effect transactions in existing IRA, SEP-IRA, Profit Sharing
or Pension Plan accounts, call 1-800-225-5163.
The variable annuity contract is provided by Charter National Life Insurance
Company (in New York State, Intramerica Life Insurance Company [S 1802]). The
contract is offered by Scudder Insurance Agency, Inc. (in New York State, Nevada
and Montana, Scudder Insurance Agency of New York, Inc.). CNL, Inc. is the
Principal Underwriter. Scudder Horizon Plan is not available in all states.
21
<PAGE>
Directors and Officers
Edmond D. Villani*
Chairman of the Board and Director
Nicholas Bratt*
President and Director
Paul Bancroft III
Director; Venture Capitalist and Consultant
Thomas J. Devine
Director; Consultant
Keith R. Fox
Director; President, Exeter Capital
Management Corporation
William H. Gleysteen, Jr.
Director; Consultant
William H. Luers
Director; President, The Metropolitan
Museum of Art
Dr. Wilson Nolen
Director; Consultant
Juris Padegs*
Director, Vice President and Assistant
Secretary
Daniel Pierce*
Director
Dr. Gordon Shillinglaw
Director; Professor Emeritus of Accounting, Columbia University Graduate
School of Business
Robert W. Lear
Honorary Director; Executive-in-Residence, Visiting Professor,
Columbia University Graduate School of Business
Robert G. Stone, Jr.
Honorary Director; Chairman of the Board and Director, Kirby Corporation
Elizabeth J. Allan*
Vice President
Carol L. Franklin*
Vice President
Edmund B. Games, Jr.*
Vice President
Jerard K. Hartman*
Vice President
William E. Holzer*
Vice President
Thomas W. Joseph*
Vice President
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
David S. Lee*
Vice President and Assistant Treasurer
Edward J. O'Connell*
Vice President and Assistant Treasurer
Kathryn L. Quirk*
Vice President and Assistant Secretary
Richard W. Desmond*
Assistant Secretary
Coleen Downs Dinneen*
Assistant Secretary
*Scudder, Stevens & Clark, Inc.
22
<PAGE>
<TABLE>
<CAPTION>
Investment products and services
<S> <C>
The Scudder Family of Funds Income
Money market Scudder Emerging Markets Income Fund
Scudder Cash Investment Trust Scudder Global Bond Fund
Scudder U.S. Treasury Money Fund Scudder GNMA Fund
Tax free money market+ Scudder Income Fund
Scudder Tax Free Money Fund Scudder International Bond Fund
Scudder California Tax Free Money Fund* Scudder Short Term Bond Fund
Scudder New York Tax Free Money Fund* Scudder Zero Coupon 2000 Fund
Tax free+ Growth
Scudder California Tax Free Fund* Scudder Capital Growth Fund
Scudder High Yield Tax Free Fund Scudder Development Fund
Scudder Limited Term Tax Free Fund Scudder Global Fund
Scudder Managed Municipal Bonds Scudder Global Small Company Fund
Scudder Massachusetts Limited Term Tax Free Fund* Scudder Gold Fund
Scudder Massachusetts Tax Free Fund* Scudder Greater Europe Growth Fund
Scudder Medium Term Tax Free Fund Scudder International Fund
Scudder New York Tax Free Fund* Scudder Latin America Fund
Scudder Ohio Tax Free Fund* Scudder Pacific Opportunities Fund
Scudder Pennsylvania Tax Free Fund* Scudder Quality Growth Fund
Growth and Income Scudder Small Company Value Fund
Scudder Balanced Fund Scudder Value Fund
Scudder Growth and Income Fund The Japan Fund
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Retirement Plans and Tax-Advantaged Investments
IRAs 403(b) Plans
Keogh Plans SEP-IRAs
Scudder Horizon Plan*+++ (a variable annuity) Profit Sharing and
401(k) Plans Money Purchase Pension Plans
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Closed-end Funds#
The Argentina Fund, Inc. Scudder New Europe Fund, Inc.
The Brazil Fund, Inc. Scudder World Income Opportunities Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc. Institutional Cash Management
The Latin America Dollar Income Fund, Inc. Scudder Institutional Fund, Inc.
Montgomery Street Income Securities, Inc. Scudder Fund, Inc.
Scudder New Asia Fund, Inc. Scudder Treasurers Trust(TM)++
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
<FN>
For complete information on any of the above Scudder funds, including management fees and expenses, call or write for a
free prospectus. Read it carefully before you invest or send money. +A portion of the income from the tax-free funds may
be subject to federal, state and local taxes. *Not available in all states. +++A no-load variable annuity contract
provided by Charter National Life Insurance Company and its affiliate, offered by Scudder's insurance agencies,
1-800-225-2470. #These funds, advised by Scudder, Stevens & Clark, Inc., are traded on various stock exchanges. ++For
information on Scudder Treasurers Trust(TM), an institutional cash management service that utilizes certain portfolios
of Scudder Fund, Inc. ($100,000 minimum), call: 1-800-541-7703.
</FN>
</TABLE>
23
<PAGE>
How to contact Scudder
<TABLE>
<CAPTION>
<C> <C> <C>
Account Service and Information: Please address all correspondence to:
For existing account Scudder Investor The Scudder Funds
service and transactions Relations P.O. Box 2291
1-800-225-5163 Boston, Massachusetts
02107-2291
For personalized Scudder Automated
information about your Information Line
Scudder accounts; (SAIL)
exchanges and 1-800-343-2890
redemptions; or
information on any
Scudder fund
Investment Information: Or Stop by a Scudder Funds Center:
To receive information Scudder Investor Many shareholders enjoy the personal, one-on-one
about the Scudder funds, Relations service of the Scudder Funds Centers. Check for a
for additional applications 1-800-225-2470 Funds Center near you--they can be found in the
and prospectuses, or for following cities:
investment questions
For establishing 401(k) and Scudder Defined Boca Raton New York
403(b) plans Contribution Boston Portland, OR
Services Chicago San Diego
1-800-323-6105 Cincinnati San Francisco
Los Angeles Scottsdale
For information on Scudder Treasurers Trust(TM), an For information on Scudder Institutional Funds*,
institutional cash management service for funds designed to meet the broad investment
corporations, non-profit organizations and trusts which management and service needs of banks and
utilizes certain portfolios of Scudder Fund, Inc.* other institutions, call: 1-800-854-8525.
($100,000 minimum), call: 1-800-541-7703.
Scudder Investor Relations and Scudder Funds Centers are services provided
through Scudder Investor Services, Inc., Distributor.
* Contact Scudder Investor Services, Inc., Distributor, to receive a
prospectus with more complete information, including management fees and
expenses. Please read it carefully before you invest or send money.
</TABLE>
<PAGE>
SCUDDER LATIN AMERICA FUND
A Pure No-Load(TM) (No Sales Charges) Mutual Fund Seeking
Long-Term Capital Appreciation Through Investment
Primarily in the Securities of
Latin American Issuers
and
SCUDDER PACIFIC OPPORTUNITIES FUND
A Pure No-Load(TM) (No Sales Charges) Mutual Fund Seeking
Long-Term Growth of Capital Through Investment
Primarily in the Equity Securities of
Pacific Basin Companies,
Excluding Japan
and
SCUDDER GREATER EUROPE GROWTH FUND
A Pure No-Load(TM) (No Sales Charges) Mutual Fund Seeking
Long-Term Growth of Capital Through Investments Primarily
in the Equity Securities of European Companies
- -----------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
March 1, 1996
- -----------------------------------------------------------------------------
This combined Statement of Additional Information is not a prospectus and
should be read in conjunction with the prospectuses of Scudder Latin America
Fund, Scudder Pacific Opportunities Fund and Scudder Greater Europe Growth Fund
dated March 1, 1996, as amended from time to time, copies of which may be
obtained without charge by writing to Scudder Investor Services, Inc., Two
International Place, Boston, Massachusetts 02110-4103.
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
TABLE OF CONTENTS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
Page
THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES.........................................................................1
General Investment Objective and Policies of Scudder Latin America Fund......................................1
Special Considerations.......................................................................................3
General Investment Objective and Policies of Scudder Pacific Opportunities Fund..............................4
Special Considerations.......................................................................................5
General Investment Objective and Policies of Scudder Greater Europe Growth Fund..............................6
Special Considerations.......................................................................................7
Investing in Foreign Securities..............................................................................9
Specialized Investment Techniques...........................................................................10
Investment Restrictions.....................................................................................22
PURCHASES............................................................................................................25
Additional Information About Opening An Account.............................................................25
Additional Information About Making Subsequent Investments..................................................25
Additional Information About Making Subsequent Investments by AutoBuy.......................................25
Checks......................................................................................................26
Wire Transfer of Federal Funds..............................................................................26
Share Price.................................................................................................26
Share Certificates..........................................................................................27
Other Information...........................................................................................27
EXCHANGES AND REDEMPTIONS............................................................................................27
Exchanges...................................................................................................27
Special Redemption and Exchange Information for Scudder Latin America Fund..................................28
Redemption by Telephone.....................................................................................28
Redemption by AutoSell......................................................................................29
Redemption by Mail or Fax...................................................................................30
Redemption-in-Kind..........................................................................................30
Other Information...........................................................................................30
FEATURES AND SERVICES OFFERED BY THE FUNDS...........................................................................31
The Pure No-Load(TM) Concept................................................................................31
Dividend and Capital Gain Distribution Options..............................................................32
Scudder Funds Centers.......................................................................................32
Reports to Shareholders.....................................................................................33
Transaction Summaries.......................................................................................33
THE SCUDDER FAMILY OF FUNDS..........................................................................................33
SPECIAL PLAN ACCOUNTS................................................................................................36
Scudder Retirement Plans: Profit-Sharing and Money Purchase Pension Plans for Corporations and
Self-Employed Individuals..............................................................................37
Scudder 401(k): Cash or Deferred Profit-Sharing Plan for Corporations and Self-Employed Individuals.........37
Scudder IRA: Individual Retirement Account.................................................................37
Scudder 403(b) Plan.........................................................................................38
Automatic Withdrawal Plan...................................................................................38
Group or Salary Deduction Plan..............................................................................39
Automatic Investment Plan...................................................................................39
Uniform Transfers/Gifts to Minors Act.......................................................................39
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS............................................................................39
i
<PAGE>
- -----------------------------------------------------------------------------------------------------------------------
TABLE OF CONTENTS (continued)
- -----------------------------------------------------------------------------------------------------------------------
Page
PERFORMANCE INFORMATION..............................................................................................40
Average Annual Total Return.................................................................................40
Cumulative Total Return.....................................................................................41
Total Return................................................................................................42
Capital Change..............................................................................................42
Comparison of Portfolio Performance.........................................................................42
ORGANIZATION OF THE FUNDS............................................................................................47
INVESTMENT ADVISER...................................................................................................48
Personal Investments by Employees of the Adviser............................................................51
DIRECTORS AND OFFICERS...............................................................................................52
REMUNERATION.........................................................................................................54
DISTRIBUTOR..........................................................................................................55
TAXES................................................................................................................56
PORTFOLIO TRANSACTIONS...............................................................................................60
Brokerage Commissions.......................................................................................60
Portfolio Turnover..........................................................................................61
NET ASSET VALUE......................................................................................................62
ADDITIONAL INFORMATION...............................................................................................63
Experts.....................................................................................................63
Other Information...........................................................................................63
FINANCIAL STATEMENTS.................................................................................................64
Latin America Fund..........................................................................................64
Pacific Opportunities Fund..................................................................................64
Greater Europe Growth Fund..................................................................................64
APPENDIX
</TABLE>
ii
<PAGE>
THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES
(See "Investment objective and policies" in the Funds' prospectuses.)
Scudder Latin America Fund, Scudder Pacific Opportunities Fund and Scudder
Greater Europe Growth Fund (each a "Fund," collectively, the "Funds"), are each
series of Scudder International Fund, Inc. (the "Corporation"), a pure
no-load(TM), non-diversified, open-end management investment company which
continuously offers and redeems its shares at net asset value. They are
companies of the type commonly known as mutual funds.
General Investment Objective and Policies of Scudder Latin America Fund
Scudder Latin America Fund's ("Latin America Fund") investment objective is
to seek long-term capital appreciation through investment primarily in the
securities of Latin American issuers.
Except as otherwise indicated, the Fund's investment objective and policies
are not fundamental and may be changed without a shareholder vote. There can be
no assurance that the Fund will achieve its objective.
The Fund seeks to benefit from economic and political trends emerging
throughout Latin America. These trends are supported by governmental initiatives
designed to promote freer trade and market-oriented economies. The Fund's
investment adviser, Scudder, Stevens & Clark, Inc. (the "Adviser"), believes
that efforts by Latin American countries to, among other things, reduce
government spending and deficits, control inflation, lower trade barriers,
stabilize currency exchange rates, increase foreign and domestic investment, and
privatize state-owned companies, will set the stage for attractive investment
returns over time.
At least 65% of the Fund's total assets will be invested in the securities
of Latin American issuers, and 50% of the Fund's total assets will be invested
in Latin American equity securities. To meet its objective to provide long-term
capital appreciation, the Fund normally invests 65% of its total assets in
equity securities. For purposes of this Statement of Additional Information,
Latin America is defined as Mexico, Central America, South America, and the
Spanish-speaking islands of the Caribbean. The Fund defines securities of Latin
American issuers as follows:
o Securities of companies organized under the laws of a Latin American country
or for which the principal securities trading market is in Latin America;
o Securities issued or guaranteed by the government of a country in Latin
America, its agencies or instrumentalities, political subdivisions or the
central bank of such a country;
o Securities of companies, wherever organized, when at least 50% of an issuer's
non-current assets, capitalization, gross revenue or profit in any one of the
two most recent fiscal years represents (directly or indirectly through
subsidiaries) assets or activities located in Latin America; or,
o Securities of Latin American issuers, as defined herein, in the form of
depositary shares.
Although the Fund may participate in markets throughout Latin America,
under present conditions the Fund expects to focus its investments in Argentina,
Brazil, Chile, Mexico, and Venezuela. In the opinion of the Adviser, these five
countries offer the most developed capital markets in Latin America. The Fund
may invest in other countries in Latin America when the Adviser deems it
appropriate. The securities may be listed on securities exchanges, traded
over-the-counter, or have no organized market. The Fund's equity investments are
common stock, preferred stock (either convertible or non-convertible),
depositary receipts and warrants. These may be restricted securities and/or
securities purchased through rights.
The Fund may invest up to 35% of its total assets in the equity securities
of U.S. and other non-Latin American issuers. In evaluating non-Latin American
investments, the Adviser seeks investments where an issuer's Latin American
business activities and the impact of developments in Latin America may have a
positive effect on the issuer's business results. The Fund's assets may be
invested in debt securities when management anticipates that the potential for
<PAGE>
capital appreciation is likely to equal or exceed that of equity securities.
Capital appreciation in debt securities may arise from a favorable change in
relative foreign exchange rates, in relative interest rate levels, or in the
creditworthiness of issuers. Receipt of income from such debt securities is
incidental to the Fund's objective of long-term capital appreciation. Most debt
securities in which the Fund will invest are not rated; when rated, it is
expected that such ratings will generally be below investment grade.
The Fund intends to spread its holdings of Latin American securities of
private issuers across a number of industries. In selecting companies for
investment, consideration will be given to industry trends, a company's
financial position, its competitive position in domestic and export markets,
technology, recent developments and profitability, together with overall growth
prospects. Other considerations generally include quality and depth of
management, government regulation, and availability and cost of labor and raw
materials. In determining the location of the principal activities and interests
of a company, the Adviser takes into account such factors as the location of the
company's assets, personnel, sales and earnings. In selecting securities for the
Fund's portfolio, the Adviser seeks to identify companies whose securities
prices do not adequately reflect their established positions in their fields. In
analyzing companies for investment, the Adviser ordinarily looks for one or more
of the following characteristics: above-average earnings growth per share, high
return on invested capital, healthy balance sheets and overall financial
strength, strong competitive advantages, strength of management and general
operating characteristics which will enable the companies to compete
successfully in the marketplace. Investment decisions are made without regard to
arbitrary criteria as to minimum asset size, debt-equity ratios or dividend
history of portfolio companies.
The percentage allocation between equity and debt, and among countries in
Latin America, will vary based on a number of factors: expected rates of
economic and corporate profit growth; past performance and current/comparative
valuations in Latin American capital markets; level and anticipated direction of
interest rates; changes or anticipated changes in Latin American government
policy; and, the condition of the balance of payments and changes in the terms
of trade. The Fund, in seeking undervalued markets or individual securities,
will also consider the effect of past economic crises or ongoing financial and
political uncertainties. The Fund may also invest, as part of its Latin American
holdings, in closed-end investment companies investing primarily in Latin
America. In addition, the Fund may engage in strategic transactions.
To provide for redemptions, or in anticipation of investment in Latin
American securities, the Fund may hold cash or cash equivalents (in U.S. dollars
or foreign currencies) and other short-term securities including money market
securities denominated in U.S. dollars or foreign currencies. The Fund may
assume a temporary defensive position when, due to political or other factors,
the Adviser determines that opportunities for capital appreciation in Latin
American markets would be significantly limited or that investing in those
markets poses undue risk to investors. The Fund may, for temporary defensive
purposes, invest up to 100% of its assets in cash and money market instruments
or invest all or a portion of its assets in securities of U.S., Canadian or
other non-Latin American issuers.
Under exceptional economic or market conditions abroad, the Fund may, for
temporary defensive purposes, until normal conditions return, invest all or a
major portion of its assets in Canadian or U.S. Government obligations or
currencies, or securities of companies incorporated in and having their
principal activities in such countries.
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.")
From time to time, the Fund may be a purchaser of restricted debt or equity
securities (i.e., securities which may require registration under the Securities
Act of 1933, or an exemption therefrom, in order to be sold in the ordinary
course of business) in a private placement. The Fund has undertaken not to
purchase or acquire any such securities if, solely as a result of such purchase
or acquisition, more than 10% of the value of the Fund's total assets would be
invested in restricted securities (securities subject to legal or contractual
restrictions on resales).
2
<PAGE>
Special Considerations
Investing in Latin America. Investing in securities of Latin American issuers
may entail risks relating to the potential political and economic instability of
certain Latin American countries and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment and on repatriation of capital invested. In the event of
expropriation, nationalization or other confiscation by any country, the Fund
could lose its entire investment in any such country.
The securities markets of Latin American countries are substantially
smaller, less developed, less liquid and more volatile than the major securities
markets in the U.S. Disclosure and regulatory standards are in many respects
less stringent than U.S. standards. Furthermore, there is a lower level of
monitoring and regulation of the markets and the activities of investors in such
markets.
The limited size of many Latin American securities markets and limited
trading volume in the securities of Latin American issuers compared to volume of
trading in the securities of U.S. issuers could cause prices to be erratic for
reasons apart from factors that affect the soundness and competitiveness of the
securities issuers. For example, limited market size may cause prices to be
unduly influenced by traders who control large positions. Adverse publicity and
investors' perceptions, whether or not based on in-depth fundamental analysis,
may decrease the value and liquidity of portfolio securities.
The Fund invests in securities denominated in currencies of Latin American
countries. Accordingly, changes in the value of these currencies against the
U.S. dollar will result in corresponding changes in the U.S. dollar value of the
Fund's assets denominated in those currencies.
Some Latin American countries also may have managed currencies, which are
not free floating against the U.S. dollar. In addition, there is risk that
certain Latin American countries may restrict the free conversion of their
currencies into other currencies. Further, certain Latin American currencies may
not be internationally traded. Certain of these currencies have experienced a
steep devaluation relative to the U.S. dollar. Any devaluations in the
currencies in which the Fund's portfolio securities are denominated may have a
detrimental impact on the Fund's net asset value.
The economies of individual Latin American countries may differ favorably
or unfavorably from the U.S. economy in such respects as the rate of growth of
gross domestic product, the rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position. Certain Latin American
countries have experienced high levels of inflation which can have a
debilitating effect on an economy. Furthermore, certain Latin American countries
may impose withholding taxes on dividends payable to the Fund at a higher rate
than those imposed by other foreign countries. This may reduce the Fund's
investment income available for distribution to shareholders.
Certain Latin American countries such as Argentina, Brazil and Mexico are
among the world's largest debtors to commercial banks and foreign governments.
At times, certain Latin American countries have declared moratoria on the
payment of principal and/or interest on outstanding debt. Investment in
sovereign debt can involve a high degree of risk. The governmental entity that
controls the repayment of sovereign debt may not be able or willing to repay the
principal and/or interest when due in accordance with the terms of such debt. A
governmental entity's willingness or ability to repay principal and interest due
in a timely manner may be affected by, among other factors, its cash flow
situation, the extent of its foreign reserves, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole, the governmental entity's policy
towards the International Monetary Fund, and the political constraints to which
a governmental entity may be subject. Governmental entities may also be
dependent on expected disbursements from foreign governments, multilateral
agencies and others abroad to reduce principal and interest arrearages on their
debt. The commitment on the part of these governments, agencies and others to
make such disbursements may be conditioned on a governmental entity's
implementation of economic reforms and/or economic performance and the timely
service of such debtor's obligations. Failure to implement such reforms, achieve
such levels of economic performance or repay principal or interest when due may
result in the cancellation of such third parties' commitments to lend funds to
the governmental entity, which may further impair such debtor's ability or
3
<PAGE>
willingness to service its debts in a timely manner. Consequently, governmental
entities may default on their sovereign debt.
Holders of sovereign debt, including the Fund, may be requested to
participate in the rescheduling of such debt and to extend further loans to
governmental entities. There is no bankruptcy proceeding by which defaulted
sovereign debt may be collected in whole or in part.
Latin America is a region rich in natural resources such as oil, copper,
tin, silver, iron ore, forestry, fishing, livestock and agriculture. The region
has a large population (roughly 300 million) representing a large domestic
market. Economic growth was strong in the 1960's and 1970's, but slowed
dramatically (and in some instances was negative) in the 1980's as a result of
poor economic policies, higher international interest rates, and the denial of
access to new foreign capital. Although a number of Latin American countries are
currently experiencing lower rates of inflation and higher rates of real growth
in gross domestic product than they have in the past, other Latin American
countries continue to experience significant problems, including high inflation
rates and high interest rates. Capital flight has proven a persistent problem
and external debt has been forcibly rescheduled. Political turmoil, high
inflation, capital repatriation restrictions, and nationalization have further
exacerbated conditions.
Governments of many Latin American 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
those countries. As a result, government actions in the future could have a
significant effect on economic conditions which may adversely affect prices of
certain portfolio securities. Expropriation, confiscatory taxation,
nationalization, political, economic or social instability or other similar
developments, such as military coups, have occurred in the past and could also
adversely affect the Fund's investments in this region.
Changes in political leadership, the implementation of market oriented
economic policies, such as the North American Free Trade Agreement ("NAFTA"),
privatization, trade reform and fiscal and monetary reform are among the recent
steps taken to renew economic growth. External debt is being restructured and
flight capital (domestic capital that has left home country) has begun to
return. Inflation control efforts have also been implemented. Latin American
equity markets can be extremely volatile and in the past have shown little
correlation with the U.S. market. Currencies are typically weak, but most are
now relatively free floating, and it is not unusual for the currencies to
undergo wide fluctuations in value over short periods of time due to changes in
the market.
The Fund is intended to provide individual and institutional investors with
an opportunity to invest a portion of their assets in a broad range of
securities of Latin American issuers. Management of the Fund believes that
allocation of assets on an international basis decreases the degree to which
events in any one country, including the United States, will affect an
investor's entire investment holdings. In certain periods since World War II,
many leading foreign economies and foreign stock market indices have grown more
rapidly than the United States economy and leading U.S. stock market indices,
although there can be no assurance that this will be true in the future. Because
of the Fund's investment policy, it is not intended to provide a complete
investment program for an investor.
General Investment Objective and Policies of Scudder Pacific Opportunities Fund
Scudder Pacific Opportunities Fund's ("Pacific Opportunities Fund")
investment objective is to seek long-term growth of capital through investment
primarily in the equity securities of Pacific Basin companies, excluding Japan.
The Fund invests, under normal market conditions, at least 65% of its
assets in the equity securities of Pacific Basin companies. Pacific Basin
countries include Australia, The Peoples Republic of China, India, Indonesia,
Malaysia, New Zealand, the Philippines, Sri Lanka, Pakistan and Thailand, as
well as Hong Kong, Singapore, South Korea and Taiwan -- the so-called "four
tigers." The Fund may invest in other countries of the Pacific Basin when their
markets become sufficiently developed. The Fund will not, however, invest in
Japanese securities. The Fund has no current intention of investing more than 5%
of its assets in the equity securities of The Peoples Republic of China. The
Fund intends to allocate investments among at least three countries at all
times, and does not expect to concentrate investments in any particular
industry.
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The Fund will invest in securities that may be listed on securities
exchanges, traded over-the-counter, or have no organized market. The Fund's
equity investments are common stock, preferred stock (either convertible or
non-convertible), depositary receipts and warrants. These may be restricted
securities. Equity securities may also be purchased through rights.
Under normal market conditions, the Fund may invest up to 35% of its assets
in the equity securities of U.S. and other non-Pacific Basin issuers (excluding
Japan). In evaluating non-Pacific Basin investments, the Adviser seeks
investments where an issuer's Pacific Basin business activities and the impact
of developments in the Pacific Basin may have a positive effect on the issuer's
business results. The Fund may also purchase debt securities for capital
appreciation, invest in closed-end investment companies, and may engage in
strategic transactions. For temporary defensive purposes and to maintain
liquidity, the Fund may hold without limit debt instruments as well as cash and
cash equivalents, including foreign and domestic money market instruments,
short-term government and corporate obligations and repurchase agreements.
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.")
Special Considerations
Investing in the Pacific Basin. Economies of individual Pacific Basin
countries 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, interest rate levels, and balance of
payments position. Of particular importance, most of the economies in this
region of the world are heavily dependent upon exports, particularly to
developed countries, and, accordingly, have been and may continue to be
adversely affected by trade barriers, managed adjustments in relative currency
values, and other protectionist measures imposed or negotiated by the U.S. and
other countries with which they trade. These economies also have been and may
continue to be negatively impacted by economic conditions in the U.S. and other
trading partners, which can lower the demand for goods produced in the Pacific
Basin.
With respect to the Peoples Republic of China and other markets in which
the Fund may participate, there is the possibility of nationalization,
expropriation or confiscatory taxation, political changes, government
regulation, social instability or diplomatic developments that could adversely
impact a Pacific Basin country or the Fund's investment in that country.
Trading volume on Pacific Basin stock exchanges outside of Japan, although
increasing, is substantially less than in the U.S. stock market. Further,
securities of some Pacific Basin companies are less liquid and more volatile
than securities of comparable U.S. companies. Fixed commissions on Pacific Basin
stock 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 and may be able to purchase securities in which
the Fund may invest on other stock exchanges where commissions are negotiable.
Foreign companies, including Pacific Basin companies, are not generally
subject to uniform accounting, auditing and financial reporting standards,
practices and disclosure requirements comparable to those applicable to U.S.
companies. Consequently, there may be less publicly available information about
such companies than about U.S. companies. Moreover, there is generally less
government supervision and regulation of Pacific Basin stock exchanges, brokers,
and listed companies than in the U.S.
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 these countries than in developed
countries. The management of the Fund seeks to mitigate the risks associated
with the foregoing considerations through continuous professional management.
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General Investment Objective and Policies of Scudder Greater Europe Growth Fund
Scudder Greater Europe Growth Fund's ("Greater Europe Growth Fund")
investment objective is to seek long-term growth of capital through investments
primarily in the equity securities of European companies. Although its focus is
on long-term growth, the Fund may provide current income principally through
holdings in dividend-paying securities.
Greater Europe includes both the industrialized nations of Western Europe
and the less wealthy or developed countries in Southern and Eastern Europe.
Within this diverse area, the Fund seeks to benefit from accelerating economic
growth transformation and deregulation taking hold. These developments involve,
among other things, increased privatizations and corporate restructurings, the
reopening of equity markets and economies in Eastern Europe, further broadening
of the European Community, and the implementation of economic policies to
promote non-inflationary growth. The Fund invests in companies it believes are
well placed to benefit from these and other structural and cyclical changes now
underway in this region of the world.
Except as otherwise indicated, the Fund's investment objective and policies
are not fundamental and may be changed without a vote of shareholders.
Shareholders will receive written notice of any changes in the Fund's objective.
If there is a change in investment objective, shareholders should consider
whether the Fund remains an appropriate investment in light of their then
current financial position and needs. There can be no assurance that the Fund's
objective will be met.
The Fund will invest, under normal market conditions, at least 80% of its
assets in the equity securities of European companies. The Fund defines a
European company as follows: a company organized under the laws of a European
country or for which the principal securities trading market is in Europe; or a
company, wherever organized, where at least 50% of the company's non-current
assets, capitalization, gross revenue or profit in its most recent fiscal year
represents (directly or indirectly through subsidiaries) assets or activities
located in Europe. Greater Europe is home to 5,816 publicly traded companies.
The Fund expects the majority of its equity assets to be in the more
established and liquid markets of Western and Southern Europe. These more
established Western and Southern European countries include Austria, Belgium,
Denmark, Finland, France, Germany, Iceland, Ireland, Italy, Luxembourg, the
Netherlands, Norway, Spain, Sweden, Switzerland, and the United Kingdom. To
enhance return potential, however, the Fund may pursue investment opportunities
in the less wealthy nations of Southern Europe, currently Greece, Portugal and
Turkey, and the former communist countries of Eastern Europe, including
countries once part of the Soviet Union. The Fund currently has no intention of
investing more than 5% of the Fund's total assets in Turkey. The Fund may invest
in other countries of Europe when their markets become sufficiently developed in
the opinion of the Adviser.
The Fund intends to allocate its investments among at least three countries
at all times and does not expect to concentrate investments in any particular
industry. The Fund's equity investments are common stock, preferred stock
(convertible or non-convertible), depositary receipts (sponsored or unsponsored)
and warrants. These may be restricted securities. Equity securities may also be
purchased through rights. Securities may be listed on securities exchanges,
traded over-the-counter or have no organized market. In addition, the Fund may
engage in strategic transactions.
The Fund may invest, under normal market conditions, up to 20% of its total
assets in European debt securities. Capital appreciation in debt securities may
arise from a favorable change in relative interest rate levels or in the
creditworthiness of issuers. Within this 20% limit, the Fund may invest in debt
securities which are unrated, rated, or the equivalent of those rated below
investment grade (commonly referred to as "junk bonds"); that is, rated below
Baa by Moody's Investors Service, Inc. ("Moody's") or below BBB by Standard &
Poor's Corporation ("S&P"). The Fund may invest in securities which are rated C
by Moody's and D by S&P. Such securities may be in default with respect to
payment of principal or interest. See the Appendix to this Statement of
Additional Information for a more complete description of the ratings
organizations and their respective characteristics.
The Fund may invest in when-issued securities and may enter into repurchase
agreements. The Fund may also invest in closed-end investment companies that
invest primarily in Europe. In addition, to provide for redemptions or
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distributions, the Fund may borrow from banks and other entities in an amount
not exceeding the value of one-third of the Fund's total assets. The Fund does
not expect to borrow for investment purposes.
When, in the opinion of the Adviser, market conditions warrant, the Fund
may hold foreign or U.S. debt instruments as well as cash or cash equivalents,
including foreign and domestic money market instruments, short-term government
and corporate obligations, and repurchase agreements without limit for temporary
defensive purposes and up to 20% to maintain liquidity. More information about
investment techniques is provided under "Additional information about policies
and investments" in the Fund's prospectus.
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.")
From time to time, the Fund may be a purchaser of restricted debt or equity
securities (i.e., securities which may require registration under the Securities
Act of 1933, or an exemption therefrom, in order to be sold in the ordinary
course of business) in a private placement. The Fund has undertaken not to
purchase or acquire any such securities if, solely as a result of such purchase
or acquisition, more than 10% of the value of the Fund's total assets would be
invested in restricted securities and more than 10% of its total assets would be
invested in securities that are not readily marketable.
Special Considerations
Investing in Greater Europe. Scudder, Stevens & Clark, Inc. has been
managing European investments for over 35 years. Scudder employs a dedicated
team of approximately 20 experienced analysts, some of whom have specialized
expertise in Europe, and others of whom focus on one or more industries
globally. These analysts research the diverse European markets and seek to
identify companies, industries and markets which may be undervalued which have
outstanding growth prospects. These two groups of analysts work in teams to
create expertise synergies.
In managing the Fund, the Adviser utilizes reports, statistics and other
investment information from a wide variety of sources, including brokers and
dealers who may execute portfolio transactions for the Fund and for clients of
the Adviser. Investment decisions, however, will be based primarily on critical
analyses and investigations, including visiting companies, touring facilities,
and interviewing suppliers and customers, by the Adviser's own research
specialists and portfolio managers. Field research, including visiting the
companies and/or countries a particular analyst covers, is an important piece of
the research effort.
Market Characteristics. The securities markets of many European countries are
relatively small, with the majority of market capitalization and trading volume
concentrated in a limited number of companies representing a small number of
industries. Consequently, the Fund's investment portfolio may experience greater
price volatility and significantly lower liquidity than a portfolio invested in
equity securities of U.S. companies. These markets may be subject to greater
influence by adverse events generally affecting the market, and by large
investors trading significant blocks of securities, than is usual in the U.S.
Securities settlements may in some instances be subject to delays and related
administrative uncertainties.
Investment and Repatriation Restrictions. Foreign investment in the securities
markets of certain European countries is restricted or controlled to varying
degrees. These restrictions or controls may at times limit or preclude
investment in certain securities and may increase the cost and expenses of the
Fund. As illustrations, certain countries require governmental approval prior to
investments by foreign persons, or limit the amount of investment by foreign
persons in a particular company, or limit the investment by foreign persons to
only a specific class of securities of a company which may have less
advantageous terms than securities of the company available for purchase by
nationals. In addition, the repatriation of both investment income and capital
from certain of the countries is controlled under regulations, including in some
cases the need for certain advance government notification or authority. The
Fund could be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation.
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In accordance with the Investment Company Act of 1940 (the "1940 Act"), the
Fund may invest up to 10% of its total assets in securities of closed-end
investment companies. This restriction on investments in securities of
closed-end investment companies may limit opportunities for the Fund to invest
indirectly in certain small capital markets. If the Fund acquires shares in
closed-end investment companies, shareholders would bear both their
proportionate share of expenses in the Fund (including management and advisory
fees) and, indirectly, the expenses of such closed-end investment companies
(including management and advisory fees).
Role of Banks in Capital Markets. In a number of European countries, commercial
banks act as securities brokers and dealers, and as underwriters, investment
fund managers and investment advisers. They also may hold equity participations,
as well as controlling interests, in industrial, commercial or financial
enterprises, including companies whose securities are publicly traded and listed
on European stock exchanges. Investors should consider the potential conflicts
of interest that result from the combination in a single firm of commercial
banking and diversified securities activities.
The Fund is prohibited under the 1940 Act, in the absence of an exemptive
rule or other exemptive relief, from purchasing the securities of any company
that, in its most recent fiscal year, derived more than 15% of its gross
revenues from securities-related activities.
Corporate Disclosure Standards. Issuers of securities in some European
jurisdictions are not subject to the same degree of regulation as are U.S.
issuers with respect to such matters as insider trading rules, restrictions on
market manipulation, shareholder proxy requirements and timely disclosure of
information. The reporting, accounting and auditing standards of European
countries differ from U.S. standards in important respects and less information
is available to investors in securities of European companies than to investors
in U.S. securities.
Transaction Costs. Brokerage commissions and transaction costs for transactions
both on and off the securities exchanges in many European countries are
generally higher than in the U.S.
Economic and Political Risks. The economies of individual European countries may
differ favorably or unfavorably from the U.S. economy in such respects as growth
of gross domestic product or gross national product, as the case may be, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position. In addition, securities traded in certain emerging European
securities markets may be subject to risks due to the inexperience of financial
intermediaries, the lack of modern technology, the lack of sufficient capital
base to expand business operations and the possibility of permanent or temporary
termination of trading and greater spreads between bid and asked prices for
securities in such markets. Business entities in many Eastern European countries
do not have any recent history of operating in a market-oriented economy, and
the ultimate impact of Eastern European countries' attempts to move toward more
market-oriented economies is currently unclear. In addition, any change in the
leadership or policies of Eastern European countries may halt the expansion of
or reverse the liberalization of foreign investment policies now occurring and
adversely affect existing investment opportunities.
Other Risks of European Investments. The Fund's investments could in the future
be adversely affected by any increase in taxes or by political, economic or
diplomatic developments. The Fund intends to seek investment opportunities
within the former "east bloc" countries in Eastern Europe. See "Investment
objective and policies" in the Fund's prospectus. All or a substantial portion
of such investments may be considered "not readily marketable" for purposes of
the limitations set forth below.
Most Eastern European countries have had a centrally planned, socialist
economy since shortly after World War II. The governments of a number of Eastern
European countries currently are implementing reforms directed at political and
economic liberalization, including efforts to decentralize the economic
decision-making process and move towards a market economy. There can be no
assurance that these reforms will continue or, if continued will achieve their
goals.
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Investing in the securities of the former "east bloc" Eastern European
issuers involves certain considerations not usually associated with investing in
securities of issuers in more developed capital markets such as the U.S., Japan
or Western Europe, including (i) political and economic considerations, such as
greater risks of expropriation, confiscatory taxation, nationalization and less
social, political and economic stability; (ii) the small current size of markets
for such securities and the currently low or non-existent volume of trading,
resulting in lack of liquidity and in price volatility; (iii) certain national
policies which may restrict the Fund's investment opportunities, including,
without limitation, restrictions on investing in issuers or industries deemed
sensitive to relevant national interest; and (iv) the absence of developed legal
structures governing foreign private investments and private property.
Applicable accounting and financial reporting standards in Eastern Europe may be
substantially different from U.S. accounting standards and, in certain Eastern
European countries, no reporting standards currently exist. Consequently,
substantially less information is available to investors in Eastern Europe, and
the information that is available may not be conceptually comparable to, or
prepared on the same basis as that available in more developed capital markets,
which may make it difficult to assess the financial status of particular
companies.
The governments of certain Eastern European countries may require that a
governmental or quasi-governmental authority act as custodian of the Fund's
assets invested in such countries. These authorities may not be qualified to act
as foreign custodians under the 1940 Act and, as a result, the Fund would not be
able to invest in these countries in the absence of exemptive relief from the
Securities and Exchange Commission (the "Commission"). In addition, the risk of
loss through government confiscation may be increased in such countries.
Investing in Foreign 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 United States securities and which may
favorably or unfavorably affect the Funds' performance. As foreign companies are
not generally subject to uniform accounting and auditing and financial reporting
standards, practices and requirements comparable to those applicable to domestic
companies, there may be less publicly available information about a foreign
company than about a domestic company. Many foreign stock markets, while growing
in volume of trading activity, have substantially less volume than the New York
Stock Exchange (the "Exchange"), and securities of some foreign companies are
less liquid and more volatile than securities of domestic companies. Similarly,
volume and liquidity in most foreign bond markets are less than the volume and
liquidity in the United States and at times, volatility of price can be greater
than in the United States. 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 a Fund are
uninvested and no return is earned thereon. The inability of a Fund to make
intended security purchases due to settlement problems could cause that Fund to
miss attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems either could result in losses to a Fund
due to subsequent declines in value of the portfolio security or, if a Fund has
entered into a contract to sell the security, could result in possible liability
to the purchaser. Payment for securities without delivery may be required in
certain foreign markets. Fixed commissions on some foreign stock exchanges are
generally higher than negotiated commissions on U.S. exchanges, although the
Funds will endeavor to achieve the most favorable net results on their portfolio
transactions. Further, a 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 United States. It may be
more difficult for the Funds' 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 United States and foreign
countries may be less reliable than within the United States, thus increasing
the risk of delayed settlements of portfolio transactions or loss of
certificates for portfolio securities. In addition, with respect to certain
foreign countries, there is the possibility of nationalization, expropriation,
the imposition of withholding or confiscatory taxes, political, social, or
economic instability, or diplomatic developments which could affect United
States 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 United States economy in such respects as growth of gross national product,
rate of inflation, capital reinvestment, resource self-sufficiency and balance
of payments position.
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Many of the currencies of Eastern European countries have experienced a
steady devaluation relative to western currencies. Any future devaluation may
have a detrimental impact on any investments made by the Fund in Eastern Europe.
The currencies of most Eastern European countries are not freely convertible
into other currencies and are not internationally traded. The Fund will not
invest its assets in non-convertible fixed income securities denominated in
currencies that are not freely convertible into other currencies at the time the
investment is made.
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 these countries than in developed
countries. The management of each Fund seeks to mitigate the risks associated
with these considerations through diversification and active professional
management. Although investments in companies domiciled in developing countries
may be subject to potentially greater risks than investments in developed
countries, neither Fund will invest in any securities of issuers located in
developing countries if the securities, in the judgment of the Adviser, are
speculative.
Specialized Investment Techniques
Foreign Currencies. Because investments in foreign securities usually will
involve currencies of foreign countries, and because each Fund may hold foreign
currencies and forward contracts, futures contracts and options on futures
contracts on foreign currencies, the value of the assets of a 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 a Fund may incur
costs in connection with conversions between various currencies. In particular,
many Latin American currencies have experienced significant devaluation relative
to the dollar. Although each 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 a Fund at one rate, while offering a lesser rate of exchange should that Fund
desire to resell that currency to the dealer. Each 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 entering
into forward or futures contracts to purchase or sell foreign currencies.
Depositary Receipts. Each Fund may invest indirectly in securities of emerging
country issuers through sponsored or unsponsored American Depositary Receipts
("ADRs"), Global Depositary Receipts ("GDRs"), International Depositary Receipts
("IDRs") and other types of Depositary Receipts (which, together with ADRs, GDRs
and IDRs are hereinafter referred to as "Depositary Receipts"). Depositary
Receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. In addition, the issuers
of the stock of unsponsored Depositary Receipts are not obligated to disclose
material information in the United States and, therefore, there may not be a
correlation between such information and the market value of the Depositary
Receipts. ADRs are Depositary Receipts typically issued by a U.S. bank or trust
company which evidence ownership of underlying securities issued by a foreign
corporation. GDRs, IDRs and other types of Depositary Receipts are typically
issued by foreign banks or trust companies, although they also may be issued by
United States banks or trust companies, and evidence ownership of underlying
securities issued by either a foreign or a United States corporation. Generally,
Depositary Receipts in registered form are designed for use in the United States
securities markets and Depositary Receipts in bearer form are designed for use
in securities markets outside the United States. For purposes of each Fund's
investment policies, a Fund's investments in ADRs, GDRs and other types of
Depositary Receipts will be deemed to be investments in the underlying
securities. Depositary Receipts other than those denominated in U.S. dollars
will be subject to foreign currency exchange rate risk. Certain Depositary
Receipts may not be listed on an exchange and therefore may be illiquid
securities.
Loan Participations and Assignments. Latin America Fund may invest in fixed and
floating rate loans ("Loans") arranged through private negotiations between an
issuer of emerging market debt instruments and one or more financial
institutions ("Lenders"). The Fund's investments in Loans in Latin America are
expected in most instances to be in the form of participations in Loans
("Participations") and assignments of portions of Loans ("Assignments") from
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third parties. Participations typically will result in the Fund having a
contractual relationship only with the Lender and not with the borrower. The
Fund will have the right to receive payments of principal, interest and any fees
to which it is entitled only from the Lender selling the Participation and only
upon receipt by the Lender of the payments from the borrower. In connection with
purchasing Participations, the Fund generally will have no right to enforce
compliance by the borrower with the terms of the loan agreement relating to the
Loan, nor any rights of set-off against the borrower, and the Fund may not
directly benefit from any collateral supporting the Loan in which it has
purchased the Participation. As a result, the Fund will assume the credit risk
of both the borrower and the Lender that is selling the Participation. In the
event of the insolvency of the Lender selling a Participation, the Fund may be
treated as a general creditor of the Lender and may not benefit from any set-off
between the Lender and the borrower. The Fund will acquire Participations only
if the Lender interpositioned between the Fund and the borrower is determined by
the Investment Manager to be creditworthy.
When the Fund purchases Assignments from Lenders, the Fund will acquire
direct rights against the borrower on the Loan. Because Assignments are arranged
through private negotiations between potential assignees and potential
assignors, however, the rights and obligations acquired by the Fund as the
purchaser of an Assignment may differ from, and may be more limited than, those
held by the assigning Lender.
The Fund may have difficulty disposing of Assignments and Participations.
Because no liquid market for these obligations typically exists, the Fund
anticipates that these obligations could be sold only to a limited number of
institutional investors. The lack of a liquid secondary market will have an
adverse effect on the Fund's ability to dispose of particular Assignments or
Participations when necessary to meet the Fund's liquidity needs or in response
to a specific economic event, such as a deterioration in the creditworthiness of
the borrower. The lack of a liquid secondary market for Assignments and
Participations may also make it more difficult for the Fund to assign a value to
those securities for purposes of valuing the Fund's portfolio and calculating
its net asset value.
Debt Securities. When the Adviser believes that it is appropriate to do so in
order to achieve each Fund's objective of long-term capital appreciation, a Fund
may invest in debt securities including bonds of foreign governments,
supranational organizations and private issuers. Portfolio debt investments will
be selected on the basis of, among other things, credit quality, and the
fundamental outlooks for currency, economic and interest rate trends, taking
into account the ability to hedge a degree of currency or local bond price risk.
Each Fund may purchase "investment-grade" bonds, rated Aaa, Aa or A by Moody's
or AAA, AA or A by S&P or, if unrated, judged to be of equivalent quality as
determined by the Adviser. Greater Europe Growth Fund may invest up to 20% of
its total assets in European debt securities. Latin America Fund and Greater
Europe Growth Fund (within its 20% limit) may also purchase bonds rated Baa by
Moody's or BBB by S&P. Bonds rated Baa or BBB may have speculative elements as
well as investment-grade characteristics.
Latin America Fund and Greater Europe Growth Fund (subject to its 20%
limit) may each also purchase debt securities which are rated below
investment-grade, that is, rated below Baa by Moody's or below BBB by S&P and
unrated securities ("high yield/high risk securities"), which usually entail
greater risk (including the possibility of default or bankruptcy of the issues
of such securities), generally involve greater volatility of price and risk of
principal and income, and may be less liquid, than securities in the higher
rating categories. The lower the ratings of such debt securities, the greater
their risks render them like equity securities. Latin America Fund (subject to a
limit of no more than 10% of its total assets) and Greater Europe Growth Fund
(subject to its 20% limit) may purchase bonds rated B or lower by Moody's or
S&P, and may invest in securities which are rated C by Moody's or D by S&P or
securities of comparable quality in the Adviser's judgment. Such securities may
be in default with respect to payment of principal or interest. Such securities
carry a high degree of risk and are considered speculative. See the Appendix to
this Statement of Additional Information for a more complete description of the
ratings assigned by ratings organizations and their respective characteristics.
Certain Latin American countries are among the largest debtors to
commercial banks and foreign governments. Trading in debt obligations
("sovereign debt") issued or guaranteed by Latin American governments or their
agencies or instrumentalities ("governmental entities") involves a high degree
of risk. The governmental entity that controls the repayment of sovereign debt
may not be willing or able to repay the principal and/or interest when due in
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accordance with the terms of such obligations. A governmental entity's
willingness or ability to repay principal and interest due in a timely manner
may be affected by, among other factors, its cash flow situation, dependence on
expected disbursements from third parties, the governmental entity's policy
towards the International Monetary Fund and the political constraints to which a
governmental entity may be subject. As a result, governmental entities may
default on their sovereign debt. Holders of sovereign debt (including Latin
America Fund) may be requested to participate in the rescheduling of such debt
and to extend further loans to governmental entities. There is no bankruptcy
proceeding by which sovereign debt on which governmental entities have defaulted
may be collected in whole or in part.
High Yield/High Risk Bonds. Within Latin America Fund's 10% limit on investments
in bonds rated B or lower by Moody's or S&P and Greater Europe Growth Fund's 20%
limit of investments in European debt securities, both Funds may also purchase
debt securities which are rated below investment-grade, that is, rated below Baa
by Moody's or below BBB by S&P and unrated securities, which usually entail
greater risk (including the possibility of default or bankruptcy of the issuers
of such securities), generally involve greater volatility of price and risk of
principal and income, and may be less liquid, than securities in the higher
rating categories. The lower the ratings of such debt securities, the greater
their risks render them like equity securities. The Funds may invest in
securities which are rated C by Moody's and D by S&P. Such securities may be in
default with respect to payment of principal or interest. See the Appendix to
this Statement of Additional Information for a more complete description of the
ratings assigned by ratings organizations and their respective characteristics.
High-yield, high-risk securities are especially subject to adverse changes
in general economic conditions, to changes in the financial condition of their
issuers and to price fluctuations in response to changes in interest rates. An
economic downturn could disrupt the high yield market and impair the ability of
issuers to repay principal and interest. Also, an increase in interest rates
would have a greater adverse impact on the value of such obligations than on
higher quality debt securities. During an economic downturn or period of rising
interest rates, highly leveraged issues may experience financial stress which
would adversely affect their ability to service their principal and interest
payment obligations. Prices and yields of high yield securities will fluctuate
over time and, during periods of economic uncertainty, volatility of high yield
securities may adversely affect either Fund's net asset value. In addition,
investments in high yield zero coupon or pay-in-kind bonds, rather than
income-bearing high yield securities, may be more speculative and may be subject
to greater fluctuations in value due to changes in interest rates.
The trading market for high yield securities may be thin to the extent that
there is no established retail secondary market. A thin trading market may limit
the ability of a Fund to accurately value high yield securities in its portfolio
and to dispose of those securities. Adverse publicity and investor perceptions
may decrease the values and liquidity of high yield securities. These securities
may also involve special registration responsibilities, liabilities and costs,
and liquidity and valuation difficulties.
Credit quality in the high-yield securities market can change suddenly and
unexpectedly, and even recently-issued credit ratings may not fully reflect the
actual risks posed by a particular high-yield security. For these reasons, it is
the policy of the Adviser not to rely exclusively on ratings issued by
established credit rating agencies, but to supplement such ratings with its own
independent and on-going review of credit quality. The achievement of the Fund's
investment objective by investment in such securities may be more dependent on
the Adviser's credit analysis than is the case for higher quality bonds. Should
the rating of a portfolio security be downgraded, the Adviser will determine
whether it is in the best interest of a Fund to retain or dispose of such
security. For information concerning tax issues related to high yield/high risk
securities, see "TAXES."
Strategic Transactions and Derivatives. The Funds may, but are not required to,
utilize various other investment strategies as described below to hedge various
market risks (such as interest rates, currency exchange rates, and broad or
specific equity or fixed-income market movements), to manage the effective
maturity or duration of the fixed-income securities in each Fund's portfolio, or
to enhance potential gain. These strategies may be executed through the use of
derivative contracts. Such strategies are generally accepted as a part of modern
portfolio management and are regularly utilized by many mutual funds and other
institutional investors. Techniques and instruments may change over time as new
instruments and strategies are developed or regulatory changes occur.
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In the course of pursuing these investment strategies, the Funds may
purchase and sell exchange-listed and over-the-counter put and call options on
securities, equity and fixed-income indices and other financial instruments,
purchase and sell financial futures contracts and options thereon, enter into
various interest rate transactions such as swaps, caps, floors or collars, and
enter into various currency transactions such as currency forward contracts,
currency futures contracts, currency swaps or options on currencies or currency
futures (collectively, all the above are called "Strategic Transactions").
Strategic Transactions may be used without limit to attempt to protect against
possible changes in the market value of securities held in or to be purchased
for each Fund's portfolio resulting from securities markets or currency exchange
rate fluctuations, to protect a 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 the fixed-income
securities in each Fund's portfolio, or to establish a position in the
derivatives markets as a temporary substitute for purchasing or selling
particular securities. Some Strategic Transactions may also be used to enhance
potential gain although no more than 5% of a 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 Funds to utilize these
Strategic Transactions successfully will depend on the Adviser's ability to
predict pertinent market movements, which cannot be assured. The Funds will
comply with applicable regulatory requirements when implementing these
strategies, techniques and instruments. Strategic Transactions involving
financial futures and options thereon will be purchased, sold or entered into
only for bona fide hedging, risk management or portfolio management purposes and
not for speculative purposes.
Strategic Transactions, including derivative contracts, have risks
associated with them including possible default by the other party to the
transaction, illiquidity and, to the extent the Adviser's view as to certain
market movements is incorrect, the risk that the use of such Strategic
Transactions could result in losses greater than if they had not been used. Use
of put and call options may result in losses to a 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 a Fund can realize on its
investments or cause a Fund to hold a security it might otherwise sell. The use
of currency transactions can result in a 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 a
Fund creates the possibility that losses on the hedging instrument may be
greater than gains in the value of a 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, a
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 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, a 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
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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 Funds
are 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.
Each 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. A 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 Funds expect
generally to enter into OTC options that have cash settlement provisions,
although they are 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 a Fund or fails to make a cash settlement
payment due in accordance with the terms of that option, a Fund will lose any
premium it paid for the option as well as any anticipated benefit of the
transaction. Accordingly, the Adviser must assess the creditworthiness of each
such Counterparty or any guarantor or credit enhancement of the Counterparty's
credit to determine the likelihood that the terms of the OTC option will be
satisfied. The Funds 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
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Moody's or an equivalent rating from any nationally recognized statistical
rating organization ("NRSRO") or are determined to be of equivalent credit
quality by the Adviser. The staff of the Securities and Exchange Commission (the
"SEC") currently takes the position that OTC options purchased by a Fund, and
portfolio securities "covering" the amount of a 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 a Fund's limitation on investing no
more than 10% of its assets in illiquid securities.
If a 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 a Fund's income. The sale of put options can also provide income.
Each Fund may purchase and sell call options on securities including U.S.
Treasury and agency securities, mortgage-backed securities, corporate debt
securities, equity securities (including convertible securities) and Eurodollar
instruments that are traded on U.S. and foreign securities exchanges and in the
over-the-counter markets, and on securities indices, currencies and futures
contracts. All calls sold by a Fund must be "covered" (i.e., a 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 a Fund will receive the option premium to help protect it against
loss, a call sold by a Fund exposes that 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 a Fund to hold a security or
instrument which it might otherwise have sold.
Each 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. Each Fund will not sell put options if, as a result, more than 50%
of a 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 a Fund may be
required to buy the underlying security at a disadvantageous price above the
market price.
General Characteristics of Futures. Each Fund may enter into financial futures
contracts or purchase or sell put and call options on such futures as a hedge
against anticipated interest rate, currency or equity market changes, for
duration management and for risk management purposes. Futures are generally
bought and sold on the commodities exchanges where they are listed with payment
of initial and variation margin as described below. The sale of a futures
contract creates a firm obligation by a 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.
Each Fund's use of financial futures and options thereon will in all cases
be consistent with applicable regulatory requirements and in particular the
rules and regulations of the Commodity Futures Trading Commission and will be
entered into only for bona fide hedging, risk management (including duration
management) or other portfolio management purposes. Typically, maintaining a
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 a Fund. If
a 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.
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Each 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 a Fund's total assets (taken at current value); however, in
the case of an option that is in-the-money at the time of the purchase, the
in-the-money amount may be excluded in calculating the 5% limitation. The
segregation requirements with respect to futures contracts and options thereon
are described below.
Options on Securities Indices and Other Financial Indices. Each 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. Each Fund may engage in currency transactions with
Counterparties in order to hedge the value of portfolio holdings denominated in
particular currencies against fluctuations in relative value. Currency
transactions include forward currency contracts, exchange listed currency
futures, exchange listed and OTC options on currencies, and currency swaps. A
forward currency contract involves a privately negotiated obligation to purchase
or sell (with delivery generally required) a specific currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. A currency swap is
an agreement to exchange cash flows based on the notional difference among two
or more currencies and operates similarly to an interest rate swap, which is
described below. Each 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 Adviser.
Each Fund's dealings in forward currency contracts and other currency
transactions such as futures, options, options on futures and swaps will be
limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is entering into a currency transaction with
respect to specific assets or liabilities of a 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.
Each Fund will not enter into a transaction to hedge currency exposure to
an extent greater, after netting all transactions intended wholly or partially
to offset other transactions, than the aggregate market value (at the time of
entering into the transaction) of the securities held in its portfolio that are
denominated or generally quoted in or currently convertible into such currency,
other than with respect to proxy hedging as described below.
Each 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 a Fund has or in which a 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 Funds may also engage in proxy
hedging. Proxy hedging is often used when the currency to which a 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
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changes in value are generally considered to be correlated to a currency or
currencies in which some or all of a 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 a Fund's securities
denominated in correlated currencies. For example, if the Adviser considers that
the Austrian schilling is correlated to the German deutschemark (the "D-mark"),
the Fund holds securities denominated in schillings and the Adviser believes
that the value of schillings will decline against the U.S. dollar, the Adviser
may enter into a commitment or option to sell D-marks and buy dollars. Currency
hedging involves some of the same risks and considerations as other transactions
with similar instruments. Currency transactions can result in losses to a 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 a Fund is engaging in proxy hedging. If a Fund
enters into a currency hedging transaction, that Fund will comply with the asset
segregation requirements described below.
Risks of Currency Transactions. Currency transactions are subject to risks
different from those of other portfolio transactions. Because currency control
is of great importance to the issuing governments and influences economic
planning and policy, purchases and sales of currency and related instruments can
be negatively affected by government exchange controls, blockages, and
manipulations or exchange restrictions imposed by governments. These can result
in losses to the Fund if it is unable to deliver or receive currency or funds in
settlement of obligations and could also cause hedges it has entered into to be
rendered useless, resulting in full currency exposure as well as incurring
transaction costs. Buyers and sellers of currency futures are subject to the
same risks that apply to the use of futures generally. Further, settlement of a
currency futures contract for the purchase of most currencies must occur at a
bank based in the issuing nation. Trading options on currency futures is
relatively new, and the ability to establish and close out positions on such
options is subject to the maintenance of a liquid market which may not always be
available. Currency exchange rates may fluctuate based on factors extrinsic to
that country's economy.
Combined Transactions. Each Fund may enter into multiple transactions, including
multiple options transactions, multiple futures transactions, multiple currency
transactions (including forward currency contracts) and multiple interest rate
transactions and any combination of futures, options, currency and interest rate
transactions ("component" transactions), instead of a single Strategic
Transaction, as part of a single or combined strategy when, in the opinion of
the Adviser, it is in the best interests of a Fund to do so. A combined
transaction will usually contain elements of risk that are present in each of
its component transactions. Although combined transactions are normally entered
into based on the Adviser's judgment that the combined strategies will reduce
risk or otherwise more effectively achieve the desired portfolio management
goal, it is possible that the combination will instead increase such risks or
hinder achievement of the portfolio management objective.
Swaps, Caps, Floors and Collars. Among the Strategic Transactions into which the
Funds may enter are interest rate, currency and index swaps and the purchase or
sale of related caps, floors and collars. The Funds expect to enter into these
transactions primarily to preserve a return or spread on a particular investment
or portion of their portfolios, to protect against currency fluctuations, as a
duration management technique or to protect against any increase in the price of
securities the Funds anticipate purchasing at a later date. The Funds intend to
use these transactions as hedges and not as speculative investments and will not
sell interest rate caps or floors where they do not own securities or other
instruments providing the income stream the Funds may be obligated to pay.
Interest rate swaps involve the exchange by a 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.
Each 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 a Fund receiving or paying, as the case may
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be, only the net amount of the two payments. Inasmuch as these swaps, caps,
floors and collars are entered into for good faith hedging purposes, the Adviser
and the Funds 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. Each Fund will not enter into any swap, cap, floor or
collar transaction unless, at the time of entering into such transaction, the
unsecured long-term debt of the Counterparty, combined with any credit
enhancements, is rated at least A by S&P or Moody's or has an equivalent rating
from a NRSRO or is determined to be of equivalent credit quality by the Adviser.
If there is a default by the Counterparty, the Fund may have contractual
remedies pursuant to the agreements related to the transaction. The swap market
has grown substantially in recent years with a large number of banks and
investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid. Caps, floors and collars are more recent innovations for
which standardized documentation has not yet been fully developed and,
accordingly, they are less liquid than swaps.
Eurodollar Instruments. Each 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. Each Fund might use Eurodollar futures contracts and options thereon
to hedge against changes in LIBOR, to which many interest rate swaps and fixed
income instruments are linked.
Risks of Strategic Transactions Outside the U.S. When conducted outside the
U.S., Strategic Transactions may not be regulated as rigorously as in the U.S.,
may not involve a clearing mechanism and related guarantees, and are subject to
the risk of governmental actions affecting trading in, or the prices of, foreign
securities, currencies and other instruments. The value of such positions also
could be adversely affected by: (i) other complex foreign political, legal and
economic factors, (ii) lesser availability than in the U.S. of data on which to
make trading decisions, (iii) delays in a 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 Funds segregate liquid high
grade assets with their custodian, Brown Brothers Harriman & Company (the
"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 a Fund to pay or deliver
securities or assets must be covered at all times by the securities, instruments
or currency required to be delivered, or, subject to any regulatory
restrictions, an amount of cash or liquid high grade securities at least equal
to the current amount of the obligation must be segregated with the custodian.
The segregated assets cannot be sold or transferred unless equivalent assets are
substituted in their place or it is no longer necessary to segregate them. For
example, a call option written by a Fund will require that Fund to hold the
securities subject to the call (or securities convertible into the needed
securities without additional consideration) or to segregate liquid high-grade
securities sufficient to purchase and deliver the securities if the call is
exercised. A call option sold by a Fund on an index will require that Fund to
own portfolio securities which correlate with the index or to segregate liquid
high grade assets equal to the excess of the index value over the exercise price
on a current basis. A put option written by a Fund requires that Fund to
segregate liquid high grade assets equal to the exercise price.
Except when a 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 a Fund to buy or sell currency
will generally require a Fund to hold an amount of that currency or liquid
securities denominated in that currency equal to a Fund's obligations or to
segregate liquid high grade assets equal to the amount of a Fund's obligation.
OTC options entered into by a 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 a
Fund sells these instruments it will only segregate an amount of 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 a Fund, or the in-the-money amount plus any
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sell-back formula amount in the case of a cash-settled put or call. In addition,
when a Fund sells a call option on an index at a time when the in-the-money
amount exceeds the exercise price, a 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 a Fund other than those
above generally settle with physical delivery, and a Fund will segregate an
amount of assets equal to the full value of the option. OTC options settling
with physical delivery, or with an election of either physical delivery or cash
settlement will be treated the same as other options settling with physical
delivery.
In the case of a futures contract or an option thereon, each Fund must
deposit initial margin and possible daily variation margin in addition to
segregating assets sufficient to meet its obligation to purchase or provide
securities or currencies, or to pay the amount owed at the expiration of an
index-based futures contract. Such assets may consist of cash, cash equivalents,
liquid debt or equity securities or other acceptable assets.
With respect to swaps, a Fund will accrue the net amount of the excess, if
any, of its obligations over its entitlements with respect to each swap on a
daily basis and will segregate an amount of cash or liquid high grade securities
having a value equal to the accrued excess. Caps, floors and collars require
segregation of assets with a value equal to the Fund's net obligation, if any.
Strategic Transactions may be covered by other means when consistent with
applicable regulatory policies. Each 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, a 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 that Fund. Moreover, instead of segregating assets if a Fund held a
futures or forward contract, it could purchase a put option on the same futures
or forward contract with a strike price as high or higher than the price of the
contract held. Other Strategic Transactions may also be offset in combinations.
If the offsetting transaction terminates at the time of or after the primary
transaction no segregation is required, but if it terminates prior to such time,
assets equal to any remaining obligation would need to be segregated.
Each Fund's activities involving Strategic Transactions may be limited by
the requirements of Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), for qualification as a regulated investment company. (See
"TAXES.")
Convertible Securities. Each Fund may invest in convertible securities which are
bonds, notes, debentures, preferred stocks, and other securities which are
convertible into common stocks. Investments in convertible securities can
provide income through interest and dividend payments and/or an opportunity for
capital appreciation by virtue of their conversion or exchange features. Latin
America Fund will limit its purchases of convertible securities to debt
securities convertible into common stocks.
The convertible securities in which a Fund may invest may be converted or
exchanged at a stated or determinable exchange ratio into underlying shares of
common stock. The exchange ratio for any particular convertible security may be
adjusted from time to time due to stock splits, dividends, spin-offs, other
corporate distributions, or scheduled changes in the exchange ratio. Convertible
debt securities and convertible preferred stocks, until converted, have general
characteristics similar to both debt and equity securities. Although to a lesser
extent than with debt securities generally, the market value of convertible
securities tends to decline as interest rates increase and, conversely, tends to
increase as interest rates decline. In addition, because of the conversion or
exchange feature, the market value of convertible securities typically changes
as the market value of the underlying common stocks changes, and, therefore,
also tends to follow movements in the general market for equity securities. A
unique feature of convertible securities is that as the market price of the
underlying common stock declines, convertible securities tend to trade
increasingly on a yield basis and so may not experience market value declines to
the same extent as the underlying common stock. When the market price of the
underlying common stock increases, the prices of the convertible securities tend
to rise as a reflection of the value of the underlying common stock, although
typically not as much as the underlying common stock. While no securities
investments are without risk, investments in convertible securities generally
entail less risk than investments in common stock of the same issuer.
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As fixed income securities, convertible securities are investments which
provide for a stream of income (or in the case of zero coupon securities,
accretion of income) with generally higher yields than common stocks. Of course,
like all fixed income securities, there can be no assurance of income or
principal payments because the issuers of the convertible securities may default
on their obligations. Convertible securities generally offer lower yields than
non-convertible securities of similar quality because of their conversion or
exchange features.
Convertible securities generally are subordinated to other similar but
non-convertible securities of the same issuer, although convertible bonds, as
corporate debt obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common stock, of the
same issuer. However, because of the subordination feature, convertible bonds
and convertible preferred stock typically have lower ratings than similar
non-convertible securities.
Convertible securities may be issued as fixed income obligations that pay
current income or as zero coupon notes and bonds, including Liquid Yield Option
Notes (LYONs). Zero coupon securities pay no cash income 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 purchase price and their value at maturity. Zero coupon
convertible securities offer the opportunity for capital appreciation as
increases (or decreases) in market value of such securities closely follow the
movements in the market value of the underlying common stock. Zero coupon
convertible securities generally are expected to be less volatile than the
underlying common stocks as they usually are issued with shorter maturities (15
years or less) and are issued with options and/or redemption features
exercisable by the holder of the obligation entitling the holder to redeem the
obligation and receive a defined cash payment.
Repurchase Agreements. Each Fund may enter into repurchase agreements with
member banks of the Federal Reserve System, any foreign bank or with any
domestic or foreign broker-dealer which is recognized as a reporting government
securities dealer if the creditworthiness of the bank or broker-dealer has been
determined by the Adviser to be at least as high as that of other obligations a
Fund may purchase.
A repurchase agreement provides a means for each Fund to earn income on
funds for periods as short as overnight. It is an arrangement under which the
purchaser (i.e., the Funds) 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 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 a Fund, or the purchase and repurchase
prices may be the same, with interest at a stated rate due to a Fund together
with the repurchase price upon repurchase. In either case, the income to a Fund
is unrelated to the interest rate on the Obligation itself. Obligations will be
held by the 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 a Fund to the seller of the Obligation subject to the repurchase agreement
and is therefore subject to a Fund's investment restriction applicable to loans.
It is not clear whether a court would consider the Obligation purchased by a
Fund subject to a repurchase agreement as being owned by a Fund or as being
collateral for a loan by a 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, a
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 a Fund has not perfected a
security interest in the Obligation, a 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, a Fund would be at risk of losing some or all
of the principal and income involved in the transaction. As with any unsecured
debt instrument purchased for a Fund, the Adviser seeks to minimize the risk of
loss through repurchase agreements by analyzing the creditworthiness of the
obligor, in this case the seller of the Obligation. Apart from the risk of
bankruptcy or insolvency proceedings, there is also the risk that the seller may
fail to repurchase the Obligation, in which case a Fund may incur a loss if the
proceeds to that Fund of the sale to a third party are less than the repurchase
price. However, if the market value of the Obligation subject to the repurchase
agreement becomes less than the repurchase price (including interest), a Fund
will direct the seller of the Obligation to deliver additional securities so
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that the market value of all securities subject to the repurchase agreement will
equal or exceed the repurchase price. It is possible that a Fund will be
unsuccessful in seeking to enforce the seller's contractual obligation to
deliver additional securities. A repurchase agreement with foreign banks may be
available with respect to government securities of the particular foreign
jurisdiction, and such repurchase agreements involve risks similar to repurchase
agreements with U.S. entities.
Repurchase Commitments. Latin America Fund may enter into repurchase commitments
with any party deemed creditworthy by the Adviser, including foreign banks and
broker/dealers, if the transaction is entered into for investment purposes and
the counterparty's creditworthiness is at least equal to that of issuers of
securities which the Fund may purchase. Such transactions may not provide the
Fund with collateral marked-to-market during the term of the commitment.
Borrowing. Latin America Fund and Greater Europe Growth Fund are each authorized
to borrow money from banks and other entities in an amount equal to up to 33
1/3% of the Fund's net assets for purposes of liquidity and to provide for
redemptions and distributions. Each Fund will borrow only when the Adviser
believes that borrowing will benefit the Funds after taking into account
considerations such as the costs of the borrowing. Each Fund does not expect to
borrow for investment purposes, to increase return or leverage the portfolio.
Borrowing by a Fund will involve special risk considerations. Although the
principal of a Fund's borrowings will be fixed, a Fund's assets may change in
value during the time a borrowing is outstanding, thus increasing exposure to
capital risk. Greater Europe Growth Fund will not make additional investments
when borrowings exceed 5%.
Illiquid Securities. Each Fund may occasionally purchase securities other than
in the open market. While such purchases may often offer attractive
opportunities for investment not otherwise available on the open market, the
securities so purchased are often "restricted securities" or "not readily
marketable," i.e., securities which cannot be sold to the public without
registration under the Securities Act of 1933 or the availability of an
exemption from registration (such as Rules 144 or 144A) or because they are
subject to other legal or contractual delays in or restrictions on resale.
Generally speaking, restricted securities may be sold only to qualified
institutional buyers, or in a privately negotiated transaction to a limited
number of purchasers, or in limited quantities after they have been held for a
specified period of time and other conditions are met pursuant to an exemption
from registration, or in a public offering for which a registration statement is
in effect under the Securities Act of 1933. A Fund may be deemed to be an
"underwriter" for purposes of the Securities Act of 1933 when selling restricted
securities to the public, and in such event a Fund may be liable to purchasers
of such securities if such sale is made in violation of the 1933 Act or if the
registration statement prepared by the issuer, or the prospectus forming a part
of it, is materially inaccurate or misleading.
Each Fund may invest up to 10% of its total assets in securities which are
not readily marketable, the disposition of which is restricted under Federal
securities laws or in repurchase agreements not terminable within seven days,
and each Fund may invest up to 10% of its total assets in restricted securities.
When-Issued Securities. Each Fund may from time to time purchase equity and debt
securities on a "when-issued" or "forward delivery" basis. The price of such
securities, which may be expressed in yield terms, is fixed at the time the
commitment to purchase is made, but delivery and payment for the when-issued or
forward delivery securities takes place at a later date. During the period
between purchase and settlement, no payment is made by a Fund to the issuer and
no interest accrues to a Fund. To the extent that assets of a Fund are held in
cash pending the settlement of a purchase of securities, a Fund would earn no
income; however, it is each Fund's intention to be fully invested to the extent
practicable and subject to the policies stated above. While when-issued or
forward delivery securities may be sold prior to the settlement date, each Fund
intends to purchase such securities with the purpose of actually acquiring them
unless a sale appears desirable for investment reasons. At the time a Fund makes
the commitment to purchase a security on a when-issued or forward delivery
basis, it will record the transaction and reflect the value of the security in
determining its net asset value. The market value of the when-issued or forward
delivery securities may be more or less than the purchase price. Each Fund does
not believe that its net asset value or income will be adversely affected by its
purchase of securities on a when-issued or forward delivery basis.
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Lending of Portfolio Securities. Each Fund may seek to increase its income by
lending portfolio securities. Under present regulatory policies, including those
of the Board of Governors of the Federal Reserve System and the SEC, such loans
may be made to member firms of the Exchange, and would be required to be secured
continuously by collateral in cash, U.S. Government securities or other high
grade debt obligations maintained on a current basis at an amount at least equal
to the market value and accrued interest of the securities loaned. Each Fund
would have the right to call a loan and obtain the securities loaned on no more
than five days' notice. During the existence of a loan, a Fund would continue to
receive the equivalent of the interest paid by the issuer on the securities
loaned and would also receive compensation based on investment of the
collateral. As with other extensions of credit there are risks of delay in
recovery or even loss of rights in the collateral should the borrower of the
securities fail financially. However, the loans would be made only to firms
deemed by the Adviser to be of good standing, and when, in the judgment of the
Adviser, the consideration which can be earned currently from securities loans
of this type justifies the attendant risk. If a Fund determines to make
securities loans, the value of the securities loaned will not exceed 30% of the
value of a Fund's total assets at the time any loan is made.
Investment Restrictions
The policies set forth below are fundamental policies of each Fund and may
not be changed without the approval of a majority of each Fund's outstanding
shares. As used in this Statement of Additional Information, "majority of the
Fund's outstanding shares" means the lesser of (1) more than 50% of the
outstanding shares of the Fund or (2) 67% or more of the shares present at such
meeting, if the holders of more than 50% of the outstanding shares are present
or represented by proxy.
As a matter of fundamental policy, each Fund may not:
(1) purchase any securities which would cause more than 25% of the market
value of its total assets at the time of such purchase to be invested
in the securities of one or more issuers having their principal
business activities in the same industry, provided that there is no
limitation with respect to investments in obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities
(for the purposes of this restriction, telephone companies are
considered to be in a separate industry from gas and electric public
utilities, and wholly-owned finance companies are considered to be in
the industry of their parents if their activities are primarily
related to financing the activities of their parents);
(2) borrow money except as a temporary measure for extraordinary or
emergency purposes or except in connection with reverse repurchase
agreements provided that the Fund maintains asset coverage of 300% for
all borrowings;
(3) act as underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the
disposition of portfolio securities of the Fund;
(4) purchase or sell real estate (except that the Fund may invest in (i)
securities of companies which deal in real estate or mortgages, and
(ii) securities secured by real estate or interests therein, and 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); or
purchase or sell physical commodities or contracts relating to
physical commodities;
(5) issue senior securities, except as appropriate to evidence
indebtedness which it is permitted to incur, and except for shares of
the separate classes or series of the Corporation; provided that
collateral arrangements with respect to currency-related contracts,
futures contracts, options or other permitted investments, including
deposits of initial and variation margin, are not considered to be the
issuance of senior securities for purposes of this restriction.
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In addition, as a matter of fundamental policy, Latin America Fund and
Pacific Opportunities Fund may not:
(1) make loans to other persons, except (a) loans of portfolio securities,
provided collateral is maintained at not less than 100% by marking to
market daily, and (b) to the extent the entry into repurchase
agreements and the purchase of debt securities in accordance with its
investment objective and investment policies may be deemed to be
loans.
In addition, as a matter of fundamental policy, Greater Europe Growth Fund
may not:
(1) make loans to other persons, except (a) loans of portfolio securities,
and (b) to the extent the entry into repurchase agreements and the
purchase of debt securities in accordance with its investment
objectives and investment policies may be deemed to be loans.
The Funds may not deviate from the above policies without a vote of a
majority of the outstanding shares as provided by the 1940 Act.
As a matter of nonfundamental policy, each Fund may not:
(a) purchase or retain securities of any open-end investment company, or
securities of closed-end investment companies except by purchase in
the open market where no commission or profit to a sponsor or dealer
results from such purchases, or except when such purchase, though not
made in the open market, is part of a plan of merger, consolidation,
reorganization or acquisition of assets; in any event the Fund may not
purchase more than 3% of the outstanding voting securities of another
investment company, may not invest more than 5% of its total assets in
another investment company, and may not invest more than 10% of its
total assets in other investment companies;
(b) pledge, mortgage or hypothecate its assets in excess, together with
permitted borrowings, of 1/3 of its total assets;
(c) purchase or retain securities of an issuer any of whose officers,
directors, trustees or security holders is an officer, director or
trustee of the Fund or a member, officer, director or trustee of the
investment adviser of the Fund if one or more of such individuals owns
beneficially more than one-half of one percent (1/2%) of the
outstanding shares or securities or both (taken at market value) of
such issuer and such individuals owning more than one-half of one
percent (1/2%) of such shares or securities together own beneficially
more than 5% of such shares or securities or both;
(d) invest more than 10% of its total assets in securities which are not
readily marketable, the disposition of which is restricted under
Federal securities laws, or in repurchase agreements not terminable
within 7 days, and the Fund will not invest more than 10% of its total
assets in restricted securities;
(e) buy options on securities or financial instruments, unless the
aggregate premiums paid on all such options held by the Fund at any
time do not exceed 20% of its net assets; or sell put options on
securities if, as a result, the aggregate value of the obligations
underlying such put options would exceed 50% of the Fund's net assets;
(f) enter into futures contracts or purchase options thereon unless
immediately after the purchase, the value of the aggregate initial
margin with respect to all futures contracts entered into on behalf of
the Fund and the premiums paid for options on futures contracts does
not exceed 5% of the 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;
(g) invest in oil, gas or other mineral leases or exploration or
development programs (although it may invest in issuers which own or
invest in such interests);
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(h) purchase warrants if as a result warrants taken at the lower of cost
or market value would represent more than 5% of the value of the
Fund's net assets or more than 2% of its net assets in warrants that
are not listed on the New York or American Stock Exchanges or on an
exchange with comparable listing requirements (for this purpose,
warrants attached to securities will be deemed to have no value);
(i) purchase or sell real estate limited partnership interests;
(j) make securities loans if the value of such securities loaned exceeds
30% of the value of the Fund's total assets at the time the loan is
made; all loans of portfolio securities will be fully collateralized
and marked to market daily. The Fund has no current intention of
making loans of portfolio securities that would amount to greater than
5% of the Fund's total assets;
(k) purchase or retain securities of an issuer if, with respect to 75% of
the Fund's total assets, such purchase would result in more than 10%
of the outstanding voting securities of such issuers being held by the
Fund; or
(l) purchase securities on margin or make short sales unless, by virtue of
its ownership of other securities, it has the right to obtain
securities equivalent in kind and amount to the securities sold at no
added cost and, if the right is conditional, the sale is made upon the
same conditions, except in connection with arbitrage transactions and
except that the Fund may obtain such short-term credits as may be
necessary for the clearance of purchases and sales of securities.
In addition, as a matter of nonfundamental policy, Latin America Fund may
not:
(1) purchase any securities which would cause more than 25% of the market
value of its total assets at the time of such purchase to be invested
in the securities of one or more issuers having their principal
business activities in the same industry (for the purposes of this
restriction, the governments of each country in Latin America in which
the Fund invests are considered to be separate industries).
In addition, as a matter of nonfundamental policy, Pacific Opportunities
Fund may not:
(1) borrow money, including reverse repurchase agreements, in excess of 5%
of its total assets (taken at market value) except for temporary or
emergency purposes or borrow other than from banks.
In addition, as a matter of nonfundamental policy, Latin America Fund and
Pacific Opportunities Fund may not:
(1) purchase securities of any issuer with a record of less than three
years continuous operations, including predecessors, or equity
securities which are not readily marketable if such purchase would
cause the investments of the Fund in all such issuers to exceed 5% of
the total assets of the Fund taken at market value; except U.S.
Government securities, securities of such issuers which are rated by
at least one nationally recognized statistical rating organization,
municipal obligations and obligations issued or guaranteed by any
foreign government or its agencies or instrumentalities.
In addition, as a matter of nonfundamental policy, Greater Europe Growth
Fund may not:
(1) invest more than 20% of its total assets in debt securities (including
convertible securities);
(2) purchase securities of any issuer with a record of less than three
years continuous operations, including predecessors, except U.S.
Government securities, securities of such issuers which are rated by
at least one nationally recognized statistical rating organization and
obligations issued or guaranteed by any foreign government or its
agencies or instrumentalities, if such purchase would cause the
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investments of the Fund in all such issuers to exceed 10% of the total
assets of the Fund taken at market value.
Any investment restrictions herein which involve a maximum percentage of
securities or assets shall not be considered to be violated unless an excess
over the percentage occurs immediately after, and is caused by, an acquisition
or encumbrance of securities or assets of, or borrowings by, each Fund. Greater
Europe Growth Fund currently has no intention of engaging in reverse repurchase
agreements.
PURCHASES
(See "Purchases" and "Transaction information" in the Funds' prospectuses.)
Additional Information About Opening An Account
Clients having a regular investment counsel account with the Adviser or its
affiliates and members of their immediate families, officers and employees of
the Adviser or of any affiliated organization and their immediate families,
members of the National Association of Securities Dealers, Inc. ("NASD") and
banks may, if they prefer, subscribe initially for at least $1,000 of Fund
shares through Scudder Investor Services, Inc. by letter, fax, TWX, or
telephone.
Shareholders of other Scudder funds who have submitted an account
application and have certified a Tax Identification Number, clients having a
regular investment counsel account with the Adviser or its affiliates and
members of their immediate families, officers and employees of the Adviser or of
any affiliated organization and their immediate families, members of the NASD,
and banks may open an account by wire. These investors must call 1-800-225-5163
to get an account number. During the call the investor will be asked to indicate
the Fund name, amount to be wired ($1,000 minimum), name of bank or trust
company from which the wire will be sent, the exact registration of the new
account, the tax identification or social security number, address and telephone
number. The investor must then call the bank to arrange a wire transfer to The
Scudder Funds, Boston, MA 02110, ABA Number 011000028, DDA Account Number
9903-5552. The investor must give the Scudder fund name, account name and the
new account number. Finally, the investor must send the completed and signed
application to the Fund promptly.
The minimum initial purchase amount is less than $1,000 under certain
special plan accounts.
Additional Information About Making Subsequent Investments
Subsequent purchase orders for $10,000 or more and for an amount not
greater than four times the value of the shareholder's account may be placed by
telephone, fax, etc. by established shareholders (except by Scudder Individual
Retirement Account (IRA), Scudder pension and profit sharing, Scudder 401(k) and
Scudder 403(b) Plan holders), members of the NASD, and banks. Orders placed in
this manner may be directed to any Scudder Investor Services, Inc. office listed
in each Fund's prospectus. A two-part invoice of the purchase will be mailed out
promptly following receipt of a request to buy. Payment should be attached to a
copy of the invoice for proper identification. Federal regulations require that
payment be received within seven business days. If payment is not received
within that time, the shares may be canceled. In the event of such cancellation
or cancellation at the purchaser's request, the purchaser will be responsible
for any loss incurred by a Fund or the principal underwriter by reason of such
cancellation. If the purchaser is a shareholder, each Fund shall have the
authority, as agent of the shareholder, to redeem shares in the account in order
to reimburse a Fund or the principal underwriter for the loss incurred. Net
losses on such transactions which are not recovered from the purchaser will be
absorbed by the principal underwriter. Any net profit on the liquidation of
unpaid shares will accrue to a Fund.
Additional Information About Making Subsequent Investments by AutoBuy
Shareholders, whose predesignated bank account of record is a member of the
Automated Clearing House Network (ACH) and who have elected to participate in
the AutoBuy program, may purchase shares of the Fund by telephone. Through this
service shareholders may purchase up to $250,000 but not less than $250. To
purchase shares by AutoBuy, shareholders should call before 4 p.m. eastern time.
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Proceeds in the amount of your purchase will be transferred from your bank
checking account two or three business days following your call. For requests
received by the close of regular trading on the Exchange, shares will be
purchased at the net asset value per share calculated at the close of trading on
the day of your call. AutoBuy requests received after the close of regular
trading on the Exchange will begin their processing and be purchased at the net
asset value calculated the following business day. If you purchase shares by
AutoBuy and redeem them within seven days of the purchase, the Fund may hold the
redemption proceeds for a period of up to seven business days. If you purchase
shares and there are insufficient funds in your bank account the purchase will
be canceled and you will be subject to any losses or fees incurred in the
transaction. AutoBuy transactions are not available for Scudder IRA accounts and
most other retirement plan accounts.
In order to request purchases by AutoBuy, shareholders must have completed
and returned to the Transfer Agent the application, including the designation of
a bank account from which the purchase payment will be debited. New investors
wishing to establish AutoBuy may so indicate on the application. Existing
shareholders who wish to add AutoBuy to their account may do so by completing an
AutoBuy Enrollment Form. After sending in an enrollment form shareholders should
allow for 15 days for this service to be available.
The Fund employs procedures, including recording telephone calls, testing a
caller's identity, and sending written confirmation of telephone transactions,
designed to give reasonable assurance that instructions communicated by
telephone are genuine. and to discourage fraud. To the extent that the Fund does
not follow such procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. The Fund will not be liable for acting upon
instructions communicated by telephone that it reasonably believes to be
genuine.
Checks
A certified check is not necessary, but checks are only accepted subject to
collection at full face value in U.S. funds and must be drawn on, or payable
through, a U.S. bank.
If shares of a Fund are purchased by a check which proves to be
uncollectible, each Fund reserves the right to cancel the purchase immediately
and the purchaser will be responsible for any loss incurred by a Fund or the
principal underwriter by reason of such cancellation. If the purchaser is a
shareholder, a Fund shall have the authority, as agent of the shareholder, to
redeem shares in the account in order to reimburse a Fund or the principal
underwriter for the loss incurred. Investors whose orders have been canceled may
be prohibited from or restricted in placing future orders in any of the Scudder
funds.
Wire Transfer of Federal Funds
To obtain the net asset value determined as of the close of regular trading
on the Exchange, on a selected day, your bank must forward federal funds by wire
transfer and provide the required account information so as to be available to a
Fund prior to the close of regular trading on the Exchange (normally 4 p.m.
eastern time).
The bank sending an investor's federal funds by bank wire may charge for
the service. Presently, the Distributor pays a fee for receipt by the Custodian
of "wired funds," but the right to charge investors for this service is
reserved.
Boston banks are closed on certain local holidays although the Exchange may
be open. These holidays include Martin Luther King, Jr. Day (the 3rd Monday in
January), Columbus Day (the 2nd Monday in October) and Veterans Day (November
11). Investors are not able to purchase shares by wiring federal funds on such
holidays because the Custodian is not open to receive such funds on behalf of a
Fund.
Share Price
Purchases will be filled without sales charge at the net asset value next
computed after receipt of the application in good order. Net asset value
normally will be computed as of the close of regular trading on each day the
Exchange is open for trading. Orders received after the close of regular trading
on the Exchange will be executed at the next business day's net asset value. If
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the order has been placed by a member of the NASD, other than the Distributor,
it is the responsibility of that member broker, rather than a Fund, to forward
the purchase order to Scudder Service Corporation (the "Transfer Agent") in
Boston by the close of regular trading on the Exchange.
Share Certificates
Due to the desire of Fund management to afford ease of redemption,
certificates will not be issued to indicate ownership in a Fund.
Other Information
If purchases or redemptions of a Fund's shares are arranged and settlement
is made through a member of the NASD, other than the Distributor, that member
may, at its discretion, charge a fee for that service. The Board of Directors
and the Distributor, the Funds' principal underwriter, each has the right to
limit the amount of purchases and to refuse to sell to any person and each may
suspend or terminate the offering of shares of a Fund at any time.
The Tax Identification Number section of the application must be completed
when opening an account. Applications and purchase orders without a certified
tax identification number and certain other certified information (e.g.,
certification of exempt status from exempt investors), will be returned to the
investor.
Each Fund may issue shares at net asset value in connection with any merger
or consolidation with, or acquisition of the assets of, any investment company
or personal holding company, subject to the requirements of the 1940 Act.
EXCHANGES AND REDEMPTIONS
(See "Exchanges and redemptions" and "Transaction information"
in the Funds' prospectuses.)
Exchanges
Exchanges are comprised of a redemption from one Scudder fund and a
purchase into another Scudder fund. The purchase side of the exchange either may
be an additional investment into an existing account or may involve opening a
new account in the other fund. When an exchange involves a new account, the new
account will be established with the same registration, tax identification
number, address, telephone redemption option, "Scudder Automated Information
Line" (SAIL) transaction authorization and dividend option as the existing
account. Other features will not carry over automatically to the new account.
Exchanges to a new fund account must be for a minimum of $1,000. When an
exchange represents an additional investment into an existing account, the
account receiving the exchange proceeds must have identical registration,
address, and account options/features as the account of origin. Exchanges into
an existing account must be for $100 or more. If the account receiving the
exchange proceeds is to be different in any respect, the exchange request must
be in writing and must contain an original signature guarantee as described
under "Transaction Information--Redeeming shares--Signature guarantees" in each
Fund's prospectus.
Exchange orders received before the close of regular trading on the
Exchange on any business day ordinarily will be executed at the respective net
asset values determined on that day. Exchange orders received after the close of
regular trading on the Exchange will be executed on the following business day.
Investors may also request, at no extra charge, to have exchanges
automatically executed on a predetermined schedule from one Scudder fund to an
existing account in another Scudder fund at current net asset value through
Scudder's Automatic Exchange Program. Exchanges must be for a minimum of $50.
Shareholders may add this free feature over the phone or in writing. Automatic
exchanges will continue until the shareholder requests by phone or in writing to
have the feature removed, or until the originating account is depleted. The
Corporation and the Transfer Agent each reserves the right to suspend or
terminate the privilege of the Automatic Exchange Program at any time.
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<PAGE>
There is no charge to the shareholder for any exchange described above.
However, shares that are exchanged from Latin America Fund may be subject to the
Fund's 2% redemption fee. (See "Special Redemption and Exchange Information for
Latin America Fund.") An exchange into another Scudder fund is a redemption of
shares, and therefore may result in tax consequences (gain or loss) to the
shareholder, and the proceeds of such an exchange may be subject to backup
withholding. (See "TAXES.")
Investors currently receive the exchange privilege, including exchange by
telephone, automatically without having to elect it. Each Fund employ
procedures, including recording telephone calls, testing a caller's identity,
and sending written confirmation of telephone transactions, designed to give
reasonable assurance that instructions communicated by telephone are genuine,
and to discourage fraud. To the extent that the Funds do not follow such
procedures, they may be liable for losses due to unauthorized or fraudulent
telephone instructions. Each Fund will not be liable for acting upon
instructions communicated by telephone that they reasonably believe to be
genuine. The Funds and the Transfer Agent each reserves the right to suspend or
terminate the privilege of exchanging by telephone or fax at any time.
The Scudder funds into which investors may make an exchange are listed
under "THE SCUDDER FAMILY OF FUNDS" herein. Before making an exchange,
shareholders should obtain from the Distributor a prospectus of the Scudder fund
into which the exchange is being contemplated.
Scudder retirement plans may have different exchange requirements. Please
refer to appropriate plan literature.
Special Redemption and Exchange Information for Scudder Latin America Fund
In general, shares of Latin America Fund may be exchanged or redeemed at
net asset value. However, shares of the Fund held for less than one year are
redeemable at a price equal to the greater of 98% of the then current net asset
value per share or such higher percentage of current net asset value per share
that represents the then current net asset value minus an amount equal to 2% of
the cost of the shares. This 2% discount, referred to in the prospectus and this
statement of additional information as a redemption fee, directly affects the
amount a shareholder who is subject to the discount receives upon exchange or
redemption. It is intended to encourage long-term investment in the Fund, to
avoid transaction and other expenses caused by early redemptions and to
facilitate portfolio management. The fee is not a deferred sales charge, is not
a commission paid to the Adviser or its subsidiaries, and does not benefit the
Adviser in any way. The Fund reserves the right to modify the terms of or
terminate this fee at any time.
The redemption fee will not be applied to (a) a redemption of shares held
in certain retirement plans, including 401(k) plans, 403(b) plans, 457 plans,
Keogh accounts, and profit sharing and money purchase pension plans (however,
this fee waiver does not apply to IRA and SEP-IRA accounts), (b) a redemption of
any shares of the Fund outstanding for one year or more, (c) a redemption of
reinvestment shares (i.e., shares purchased through the reinvestment of
dividends or capital gains distributions paid by the Fund), or (d) a redemption
of shares by the Fund upon exercise of its right to liquidate accounts (i)
falling below the minimum account size by reason of shareholder redemptions or
(ii) when the shareholder has failed to provide tax identification information.
For this purpose and without regard to the shares actually redeemed, shares will
be redeemed as follows: first, reinvestment shares; second, purchased shares
held one year or more; and third, purchased shares held for less than one year.
Finally, if a shareholder enters into a transaction in Fund shares which,
although it may technically be treated as a redemption and purchase for
recordkeeping purposes, does not involve the termination of economic interest in
the Fund, no redemption fee will apply and applicability of the redemption fee,
if any, on any subsequent redemption or exchange will be determined by reference
to the date the shares were originally purchased, and not the date of the
transaction.
Redemption by Telephone
Shareholders currently receive the right, automatically without having to
elect it, to redeem by telephone up to $50,000 and have the proceeds mailed to
their address of record. Shareholders may request to have the proceeds mailed or
wired to their predesignated bank account. In order to request redemptions by
telephone, shareholders must have completed and returned to the Transfer Agent
28
<PAGE>
the application, including the designation of a bank account to which the
redemption proceeds are to be sent.
(a) NEW INVESTORS wishing to establish telephone redemption to a
predesignated bank account must complete the appropriate section on
the application.
(b) EXISTING SHAREHOLDERS (except those who are Scudder IRA, Scudder
Pension and Profit-Sharing, Scudder 401(k) and Scudder 403(b)
Planholders) who wish to establish telephone redemption to a
predesignated bank account or who want to change the bank account
previously designated to receive redemption proceeds should either
return a Telephone Redemption Option Form (available upon request) or
send a letter identifying the account and specifying the exact
information to be changed. The letter must be signed exactly as the
shareholder's name(s) appears on the account. An original signature
and an original signature guarantee are required for each person in
whose name the account is registered.
If a request for redemption to a shareholder's bank account is made by
telephone or fax, payment will be by Federal Reserve bank wire to the bank
account designated on the application, unless a request is made that the
redemption check be mailed to the designated bank account. There will be a $5
charge for all wire redemptions.
Note: Investors designating a savings bank to receive their telephone redemption
proceeds are advised that if the savings bank is not a participant in the
Federal Reserve System, redemption proceeds must be wired through a commercial
bank which is a correspondent of the savings bank. As this may delay receipt by
the shareholder's account, it is suggested that investors wishing to use a
savings bank discuss wire procedures with their bank and submit any special wire
transfer information with the telephone redemption authorization. If appropriate
wire information is not supplied, redemption proceeds will be mailed to the
designated bank.
Each Fund employs procedures, including recording telephone calls, testing
a caller's identity, and sending written confirmation of telephone transactions,
designed to give reasonable assurance that instructions communicated by
telephone are genuine, and to discourage fraud. To the extent that the Funds do
not follow such procedures, they may be liable for losses due to unauthorized or
fraudulent telephone instructions. Each Fund will not be liable for acting upon
instructions communicated by telephone that it reasonably believes to be
genuine.
Redemption requests by telephone (technically a repurchase by agreement
between a Fund and the shareholder) of shares purchased by check will not be
accepted until the purchase check has cleared which may take up to seven
business days.
Redemption by AutoSell
Shareholders, whose predesignated bank account of record is a member of the
Automated Clearing House Network (ACH) and who have elected to participate in
the AutoSell program may sell shares of the Fund by telephone. To sell shares by
AutoSell, shareholders should call before 4 p.m. eastern time. Redemptions must
be for at least $250. Proceeds in the amount of your redemption will be
transferred to your bank checking account two or three business days following
your call. For requests received by the close of regular trading on the
Exchange, shares will be redeemed at the net asset value per share calculated at
the close of trading on the day of your call. AutoSell requests received after
the close of regular trading on the Exchange will begin their processing and be
redeemed at the net asset value calculated the following business day. AutoSell
transactions are not available for Scudder IRA accounts and most other
retirement plan accounts.
In order to request redemptions by AutoSell, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account from which the purchase payment will be debited.
New investors wishing to establish AutoSell may so indicate on the application.
Existing shareholders who wish to add AutoSell to their account may do so by
completing an AutoSell Enrollment Form. After sending in an enrollment form,
shareholders should allow for 15 days for this service to be available.
29
<PAGE>
The Fund employs procedures, including recording telephone calls, testing a
caller's identity, and sending written confirmation of telephone transactions,
designed to give reasonable assurance that instructions communicated by
telephone are genuine, and to discourage fraud. To the extent that the Fund does
not follow such procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. The Fund will not be liable for acting upon
instructions communicated by telephone that it reasonably believes to be
genuine.
Redemption by Mail or Fax
In order to ensure proper authorization before redeeming shares, the
Transfer Agent may request documents such as, but not restricted to, stock
powers, trust instruments, certificates of death, appointments as executor,
certificates of corporate authority and waivers of tax required in some states
when settling estates.
It is suggested that shareholders holding shares registered in other than
individual names contact the Transfer Agent prior to any redemptions to ensure
that all necessary documents accompany the request. When shares are held in the
name of a corporation, trust, fiduciary agent, attorney or partnership, the
Transfer Agent requires, in addition to the stock power, certified evidence of
authority to sign. These procedures are for the protection of shareholders and
should be followed to ensure prompt payment. Redemption requests must not be
conditional as to date or price of the redemption. Proceeds of a redemption will
be sent within seven business days after receipt by the Transfer Agent of a
request for redemption that complies with the above requirements. Delays of more
than seven days of payment for shares tendered for repurchase or redemption may
result, but only until the purchase check has cleared.
The requirements for IRA redemptions are different from those for regular
accounts. For more information call 1-800-225-5163.
Redemption-in-Kind
The Corporation reserves the right, if conditions exist which make cash
payments undesirable, to honor any request for redemption or repurchase order by
making payment in whole or in part in readily marketable securities chosen by a
Fund and valued as they are for purposes of computing a Fund's net asset value
(a redemption-in-kind). If payment is made in securities, a shareholder may
incur transaction expenses in converting these securities into cash. The
Corporation has elected, however, to be governed by Rule 18f-1 under the 1940
Act as a result of which each 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 that Fund at the beginning of the
period.
Other Information
Clients, officers or employees of the Adviser or of an affiliated
organization, and members of such clients', officers' or employees' immediate
families, banks and members of the NASD may direct repurchase requests to the
Fund through Scudder Investor Services, Inc. at Two International Place, Boston,
Massachusetts 02110-4103 by letter, fax, TWX, or telephone. A two-part
confirmation will be mailed out promptly after receipt of the repurchase
request. A written request in good order with a proper original signature
guarantee, as described in the Funds' Prospectuses under "Transaction
information--Signature guarantees," should be sent with a copy of the invoice to
Scudder Funds, c/o Scudder Confirmed Processing, Two International Place,
Boston, Massachusetts 02110-4103. Failure to deliver shares or required
documents (see above) by the settlement date may result in cancellation of the
trade and the shareholder will be responsible for any loss incurred by the Fund
or the principal underwriter by reason of such cancellation. Net losses on such
transactions which are not recovered from the shareholder will be absorbed by
the principal underwriter. Any net gains so resulting will accrue to the Fund.
For this group, repurchases will be carried out at the net asset value next
computed after such repurchase requests have been received. The arrangements
described in this paragraph for repurchasing shares are discretionary and may be
discontinued at any time.
If a shareholder redeems all shares in the account after the record date of
a dividend, the shareholder receives in addition to the net asset value thereof,
all declared but unpaid dividends thereon. The value of shares redeemed or
repurchased may be more or less than the shareholder's cost depending on the net
asset value at the time of redemption or repurchase. Each Fund does not impose a
repurchase charge, although a wire charge may be applicable for redemption
30
<PAGE>
proceeds wired to an investor's bank account. Redemption of shares, including
redemptions undertaken to effect an exchange for shares of another Scudder fund,
may result in tax consequences (gain or loss) to the shareholder and the
proceeds of such redemptions may be subject to backup withholding. (See
"TAXES.")
Shareholders who wish to redeem shares from Special Plan Accounts should
contact the employer, trustee or custodian of the Plan for the requirements.
The determination of net asset value and a shareholder's right to redeem
shares and to receive payment may be suspended at times (a) during which the
Exchange is closed, other than customary weekend and holiday closings, (b)
during which trading on the Exchange is restricted for any reason, (c) during
which an emergency exists as a result of which disposal by a Fund of securities
owned by it is not reasonably practicable or it is not reasonably practicable
for a Fund fairly to determine the value of its net assets, or (d) during which
the SEC by order permits a suspension of the right of redemption or a
postponement of the date of payment or of redemption; provided that applicable
rules and regulations of the SEC (or any succeeding governmental authority)
shall govern as to whether the conditions prescribed in (b), (c) or (d) exist.
If transactions at any time reduce a shareholder's account balance in the
Corporation to below $1000 in value, the Corporation will notify the shareholder
that, unless the account balance is brought up to at least $1000, the
Corporation will redeem all shares and close the account by sending redemption
proceeds to the shareholder. The shareholder has sixty days to bring the account
balance up to $1000 before any action will be taken by the Corporation. (This
policy applies to accounts of new shareholders, but does not apply to certain
Special Plan Accounts.) The Directors have the authority to change the minimum
account size.
FEATURES AND SERVICES OFFERED BY THE FUNDS
(See "Shareholder benefits" in the Funds' prospectuses.)
The Pure No-Load(TM) Concept
Investors are encouraged to be aware of the full ramifications of mutual
fund fee structures, and of how Scudder distinguishes its funds from the vast
majority of mutual funds available today. The primary distinction is between
load and no-load funds.
Load funds generally are defined as mutual funds that charge a fee for the
sale and distribution of fund shares. There are three types of loads: front-end
loads, back-end loads, and asset-based Rule 12b-1 fees. 12b-1 fees are
distribution-related fees charged against fund assets and are distinct from
service fees, which are charged for personal services and/or maintenance of
shareholder accounts. Asset-based sales charges and service fees are typically
paid pursuant to distribution plans adopted under 12b-1 under the 1940 Act.
A front-end load is a sales charge, which can be as high as 8.50% of the
amount invested. A back-end load is a contingent deferred sales charge, which
can be as high as 8.50% of either the amount invested or redeemed. The maximum
front-end or back-end load varies, and depends upon whether or not a fund also
charges a 12b-1 fee and/or a service fee or offers investors various
sales-related services such as dividend reinvestment. The maximum charge for a
12b-1 fee is 0.75% of a fund's average annual net assets, and the maximum charge
for a service fee is 0.25% of a fund's average annual net assets.
A no-load fund does not charge a front-end or back-end load, but can charge
a small 12b-1 fee and/or service fee against fund assets. Under the NASD Rules
of Fair Practice, a mutual fund can call itself a "no-load" fund only if the
12b-1 fee and/or service fee does not exceed 0.25% of a fund's average annual
net assets.
Because Scudder funds do not pay any asset-based sales charges or service
fees, Scudder developed and trademarked the phrase pure no-load(TM) to
distinguish Scudder funds from other no-load mutual funds. Scudder pioneered the
no-load concept when it created the nation's first no-load fund in 1928, and
later developed the nation's first family of no-load mutual funds.
31
<PAGE>
The following chart shows the potential long-term advantage of investing
$10,000 in a Scudder pure no-load fund over investing the same amount in a load
fund that collects an 8.50% front-end load, a load fund that collects only a
0.75% 12b-1 and/or service fee, and a no-load fund charging only a 0.25% 12b-1
and/or service fee. The hypothetical figures in the chart show the value of an
account assuming a constant 10% rate of return over the time periods indicated
and reinvestment of dividends and distributions.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Scudder No-Load Fund with
YEARS Pure No-Load(TM)Fund 8.50% Load Fund Load Fund with 0.75% 0.25% 12b-1 Fee
12b-1 Fee
- --------------------------------------------------------------------------------------------------------------------
10 $25,937 $23,733 $24,222 $25,354
- --------------------------------------------------------------------------------------------------------------------
15 41,772 38,222 37,698 40,371
- --------------------------------------------------------------------------------------------------------------------
20 67,275 61,557 58,672 64,282
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Investors are encouraged to review the fee tables on page 2 of each Fund's
prospectus for more specific information about the rates at which management
fees and other expenses are assessed.
Dividend and Capital Gain Distribution Options
Investors have freedom to choose whether to receive cash or to reinvest any
dividends from net investment income or distributions from realized capital
gains in additional shares of the Fund. A change of instructions for the method
of payment must be given to the Transfer Agent in writing at least five days
prior to a dividend record date. Shareholders may change their dividend option
by calling 1-800-225-5163 or by sending written instructions to the Transfer
Agent. Please include your account number with your written request. See "How to
Contact Scudder" in the Funds' Prospectuses for the address.
Reinvestment is usually made at the closing net asset value determined on
the business day following the record date. Investors may leave standing
instructions with the Transfer Agent designating their option for either
reinvestment or cash distribution of any income dividends or capital gains
distributions. If no election is made, dividends and distributions will be
invested in additional shares of the Fund.
Investors may also have dividends and distributions automatically deposited
in their predesignated bank account through Scudder's DistributionsDirect
Program. Shareholders who elect to participate in the DistributionsDirect
Program, and whose predesignated checking account of record is with a member
bank of the Automated Clearing House Network (ACH) can have income and capital
gain distributions automatically deposited to their personal bank account
usually within three business days after the Fund pays its distribution. A
DistributionsDirect request form can be obtained by calling 1-800-225-5163.
Confirmation statements will be mailed to shareholders as notification that
distributions have been deposited.
Investors choosing to participate in Scudder's Automatic Withdrawal Plan
must reinvest any dividends or capital gains. For most retirement plan accounts,
the reinvestment of dividends and capital gains is also required.
Scudder Funds Centers
Investors may visit any of the Centers maintained by the Distributor listed
in the Funds' prospectuses. The Centers are designed to provide individuals with
services during any business day. Investors may pick up literature or find
assistance with opening an account, adding monies or special options to existing
accounts, making exchanges within the Scudder Family of Funds, redeeming shares
32
<PAGE>
or opening retirement plans. Checks should not be mailed to the Centers but
should be mailed to "The Scudder Funds" at the address listed under "How to
contact Scudder" in the prospectuses.
Reports to Shareholders
The Corporation issues to its shareholders audited semiannual financial
statements, including a list of investments held and statements of assets and
liabilities, operations, changes in net assets and financial highlights. The
Corporation presently intends to distribute to shareholders informal quarterly
reports during the intervening quarters, containing a statement of the
investments of a Fund. Each distribution will be accompanied by a brief
explanation of the source of the distribution.
Transaction Summaries
Annual summaries of all transactions in each Fund account are available to
shareholders. The summaries may be obtained by calling 1-800-225-5163.
THE SCUDDER FAMILY OF FUNDS
(See "Investment products and services" in the Fund's prospectus.)
The Scudder Family of Funds is America's first family of mutual funds and
the nation's oldest family of no-load mutual funds. To assist investors in
choosing a Scudder fund, descriptions of the Scudder funds' objectives follow.
Initial purchases in each Scudder fund must be at least $1,000 or $500 in the
case of IRAs. Subsequent purchases must be for $100 or more. Minimum investments
for special plan accounts may be lower.
MONEY MARKET
Scudder Cash Investment Trust ("SCIT") seeks to maintain the stability of
capital, and consistent therewith, to maintain the liquidity of capital and
to provide current income through investment in a supervised portfolio of
short-term debt securities. SCIT intends to seek to maintain a constant net
asset value of $1.00 per share, although in certain circumstances this may
not be possible.
Scudder U.S. Treasury Money Fund seeks to provide safety, liquidity and
stability of capital and consistent therewith to provide current income
through investment in a supervised portfolio of U.S. Government and U.S.
Government guaranteed obligations with maturities of not more than 762
calendar days. The Fund intends to seek to maintain a constant net asset
value of $1.00 per share, although in certain circumstances this may not be
possible.
INCOME
Scudder Emerging Markets Income Fund seeks to provide high current income
and, secondarily, long-term capital appreciation through investments
primarily in high-yielding debt securities issued in emerging markets.
Scudder Global Bond Fund seeks to provide total return with an emphasis on
current income by investing primarily in high-grade bonds denominated in
foreign currencies and the U.S. dollar. As a secondary objective, the Fund
will seek capital appreciation.
Scudder GNMA Fund seeks to provide investors with high current income from
a portfolio of high-quality GNMA securities.
33
<PAGE>
Scudder Income Fund seeks to earn a high level of income consistent with
the prudent investment of capital through a flexible investment program
emphasizing high-grade bonds.
Scudder International Bond Fund seeks to provide income from a portfolio of
high-grade bonds denominated in foreign currencies. As a secondary
objective, the Fund seeks protection and possible enhancement of principal
value by actively managing currency, bond market and maturity exposure and
by security selection.
Scudder Short Term Bond Fund seeks to provide a higher and more stable
level of income than is normally provided by money market investments, and
more price stability than investments in intermediate- and long-term bonds.
Scudder Zero Coupon 2000 Fund seeks to provide as high an investment return
over a selected period as is consistent with the minimization of
reinvestment risks through investments primarily in zero coupon securities.
TAX FREE MONEY MARKET
Scudder Tax Free Money Fund ("STFMF") is designed to provide investors with
income exempt from regular federal income tax while seeking stability of
principal. STFMF seeks to maintain a constant net asset value of $1.00 per
share, although in certain circumstances this may not be possible.
Scudder California Tax Free Money Fund* is designed to provide California
taxpayers income exempt from California state and regular federal income
taxes, and seeks stability of capital and the maintenance of a constant net
asset value of $1.00 per share, although in certain circumstances this may
not be possible.
Scudder New York Tax Free Money Fund* is designed to provide New York
taxpayers income exempt from New York state, New York City and regular
federal income taxes, and seeks stability of capital and the maintenance of
a constant net asset value of $1.00 per share, although in certain
circumstances this may not be possible.
TAX FREE
Scudder High Yield Tax Free Fund seeks to provide high income which is
exempt from regular federal income tax by investing in investment-grade
municipal securities.
Scudder Limited Term Tax Free Fund seeks to provide as high a level of
income exempt from regular federal income tax as is consistent with a high
degree of principal stability.
Scudder Managed Municipal Bonds seeks to provide income which is exempt
from regular federal income tax primarily through investments in long-term
municipal securities with an emphasis on high quality.
Scudder Medium Term Tax Free Fund seeks to provide a high level of income
free from regular federal income taxes and to limit principal fluctuation
by investing in high-grade municipal securities of intermediate maturities.
Scudder California Tax Free Fund* seeks to provide income exempt from both
California and regular federal income taxes through the professional and
efficient management of a portfolio consisting of California state,
municipal and local government obligations.
- --------------------------
* These funds are not available in all states. For information, contact
Scudder Investor Services, Inc.
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<PAGE>
Scudder Massachusetts Limited Term Tax Free Fund* seeks to provide as high
a level of income exempt from Massachusetts personal and regular federal
income tax as is consistent with a high degree of principal stability.
Scudder Massachusetts Tax Free Fund* seeks to provide income exempt from
both Massachusetts and regular federal income taxes through the
professional and efficient management of a portfolio consisting of
Massachusetts state, municipal and local government obligations.
Scudder New York Tax Free Fund* seeks to provide income exempt from New
York state, New York City and regular federal income taxes through the
professional and efficient management of a portfolio consisting of
investments in New York state, municipal and local government obligations.
Scudder Ohio Tax Free Fund* seeks to provide income exempt from both Ohio
and regular federal income taxes through the professional and efficient
management of a portfolio consisting of Ohio state, municipal and local
government obligations.
Scudder Pennsylvania Tax Free Fund* seeks to provide income exempt from
both Pennsylvania and regular federal income taxes through a portfolio
consisting of Pennsylvania state, municipal and local government
obligations.
GROWTH AND INCOME
Scudder Balanced Fund seeks to provide a balance of growth and income, as
well as long-term preservation of capital, from a diversified portfolio of
equity and fixed income securities.
Scudder Growth and Income Fund seeks to provide long-term growth of
capital, current income, and growth of income through a portfolio invested
primarily in common stocks and convertible securities by companies which
offer the prospect of growth of earnings while paying current dividends.
GROWTH
Scudder Capital Growth Fund seeks to maximize long-term growth of capital
through a broad and flexible investment program emphasizing common stocks.
Scudder Development Fund seeks to achieve long-term growth of capital
primarily through investments in marketable securities, principally common
stocks, of relatively small or little-known companies which in the opinion
of management have promise of expanding their size and profitability or of
gaining increased market recognition for their securities, or both.
Scudder Global Fund seeks long-term growth of capital primarily through a
diversified portfolio of marketable equity securities selected on a
worldwide basis. It may also invest in debt securities of U.S. and foreign
issuers. Income is an incidental consideration.
Scudder Global Small Company Fund seeks above-average capital appreciation
over the long term by investing primarily in the equity securities of small
companies located throughout the world.
Scudder Gold Fund seeks maximum return (principal change and income)
consistent with investing in a portfolio of gold-related equity securities
and gold.
Scudder Greater Europe Growth Fund seeks long-term growth of capital
through investments primarily in the equity securities of European
companies.
- --------------------------
* These funds are not available in all states. For information, contact
Scudder Investor Services, Inc.
35
<PAGE>
Scudder International Fund seeks long-term growth of capital through
investment principally in a diversified portfolio of marketable equity
securities selected primarily to permit participation in non-U.S. companies
and economies with prospects for growth. It also invests in fixed-income
securities of foreign governments and companies, with a view toward total
investment return.
Scudder Latin America Fund seeks to provide long-term capital appreciation
through investment primarily in the securities of Latin American issuers.
Scudder Pacific Opportunities Fund seeks long-term growth of capital
through investment primarily in the equity securities of Pacific Basin
companies, excluding Japan.
Scudder Quality Growth Fund seeks to provide long-term growth of capital
through investment primarily in the equity securities of seasoned,
financially strong U.S. growth companies.
Scudder Small Company Value Fund invests for long-term growth of capital by
seeking out undervalued stocks of small U.S. companies.
Scudder Value Fund seeks long-term growth of capital through investment in
undervalued equity securities.
The Japan Fund, Inc. seeks capital appreciation through investment in
Japanese securities, primarily in common stocks of Japanese companies.
The net asset values of most Scudder Funds can be found daily in the
"Mutual Funds" section of The Wall Street Journal under "Scudder Funds," and in
other leading newspapers throughout the country. Investors will notice the net
asset value and offering price are the same, reflecting the fact that no sales
commission or "load" is charged on the sale of shares of the Scudder Funds. The
latest seven-day yields for the money-market funds can be found every Monday and
Thursday in the "Money-Market Funds" section of The Wall Street Journal. This
information also may be obtained by calling the Scudder Automated Information
Line (SAIL) at 1-800-343-2890.
The Scudder Family of Funds offers many conveniences and services,
including: active professional investment management; broad and diversified
investment portfolios; pure no-load funds with no commissions to purchase or
redeem shares or Rule 12b-1 distribution fees; individual attention from a
service representative of Scudder Investor Relations; easy telephone exchanges
into other Scudder funds; shares redeemable at net asset value at any time.
SPECIAL PLAN ACCOUNTS
(See "Scudder tax-advantaged retirement plans," "Purchases--
By Automatic Investment Plan" nd "Exchanges and redemptions-
By Automatic Withdrawal Plan" in the Funds' prospectuses.)
Detailed information on any Scudder investment plan, including the
applicable charges, minimum investment requirements and disclosures made
pursuant to Internal Revenue Service (the "IRS") requirements, may be obtained
by contacting Scudder Investor Services, Inc., Two International Place, Boston,
Massachusetts 02110-4103 or by calling toll free, 1-800-225-2470. It is
advisable for an investor considering the funding of the investment plans
described below to consult with an attorney or other investment or tax adviser
with respect to the suitability requirements and tax aspects thereof.
Shares of the Fund may also be a permitted investment under profit sharing
and pension plans and IRA's other than those offered by the Fund's distributor
depending on the provisions of the relevant plan or IRA.
None of the plans assures a profit or guarantees protection against
depreciation, especially in declining markets.
36
<PAGE>
Scudder Retirement Plans: Profit-Sharing and Money Purchase Pension Plans for
Corporations and Self-Employed Individuals
Shares of the Fund may be purchased as the investment medium under a plan
in the form of a Scudder Profit-Sharing Plan (including a version of the Plan
which includes a cash-or-deferred feature) or a Scudder Money Purchase Pension
Plan (jointly referred to as the Scudder Retirement Plans) adopted by a
corporation, a self-employed individual or a group of self-employed individuals
(including sole proprietorships and partnerships), or other qualifying
organization. Each of these forms was approved by the IRS as a prototype. The
IRS's approval of an employer's plan under Section 401(a) of the Code will be
greatly facilitated if it is in such approved form. Under certain circumstances,
the IRS will assume that a plan, adopted in this form, after special notice to
any employees, meets the requirements of Section 401(a) of the Code.
Scudder 401(k): Cash or Deferred Profit-Sharing Plan for Corporations and
Self-Employed Individuals
Shares of the Fund may be purchased as the investment medium under a plan
in the form of a Scudder 401(k) Plan adopted by a corporation, a self-employed
individual or a group of self-employed individuals (including sole proprietors
and partnerships), or other qualifying organization. This plan has been approved
as a prototype by the IRS.
Scudder IRA: Individual Retirement Account
Shares of the Fund may be purchased as the underlying investment for an
Individual Retirement Account which meets the requirements of Section 408(a) of
the Code.
A single individual who is not an active participant in an
employer-maintained retirement plan, a simplified employee pension plan, or a
tax-deferred annuity program (a "qualified plan"), and a married individual who
is not an active participant in a qualified plan and whose spouse is also not an
active participant in a qualified plan, are eligible to make tax deductible
contributions of up to $2,000 to an IRA prior to the year such individual
attains age 70 1/2. In addition, certain individuals who are active participants
in qualified plans (or who have spouses who are active participants) are also
eligible to make tax-deductible contributions to an IRA; the annual amount, if
any, of the contribution which such an individual will be eligible to deduct
will be determined by the amount of his, her, or their adjusted gross income for
the year. Whenever the adjusted gross income limitation prohibits an individual
from contributing what would otherwise be the maximum tax-deductible
contribution he or she could make, the individual will be eligible to contribute
the difference to an IRA in the form of nondeductible contributions.
An eligible individual may contribute as much as $2,000 of qualified income
(earned income or, under certain circumstances, alimony) to an IRA each year (up
to $2,250 for married couples if one spouse has earned income of no more than
$250). All income and capital gains derived from IRA investments are reinvested
and compound tax-deferred until distributed. Such tax-deferred compounding can
lead to substantial retirement savings.
The following table shows how much individuals would accumulate in a fully
tax-deductible IRA by age 65 (before any distributions) if they contribute
$2,000 at the beginning of each year, assuming average annual returns of 5, 10,
and 15%. (At withdrawal, accumulations in this table will be taxable.)
37
<PAGE>
<TABLE>
<CAPTION>
Value of IRA at Age 65
Assuming $2,000 Deductible Annual Contribution
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Starting Annual Rate of Return
Age of ------------------------------------------------------------------------------
Contributions 5% 10% 15%
- -----------------------------------------------------------------------------------------------------------
25 $253,680 $973,704 $4,091,908
35 139,522 361,887 999,914
45 69,439 126,005 235,620
55 26,414 35,062 46,699
This next table shows how much individuals would accumulate in non-IRA accounts by age 65 if they start with
$2,000 in pretax earned income at the beginning of each year (which is $1,380 after taxes are paid), assuming average
annual returns of 5, 10 and 15%. (At withdrawal, a portion of the accumulation in this table will be taxable.)
Value of a Non-IRA Account at
Age 65 Assuming $1,380 Annual Contributions
(post tax, $2,000 pretax) and a 31% Tax Bracket
- -----------------------------------------------------------------------------------------------------------
Starting Annual Rate of Return
Age of ------------------------------------------------------------------------------
Contributions 5% 10% 15%
- -----------------------------------------------------------------------------------------------------------
25 $119,318 $287,021 $741,431
35 73,094 136,868 267,697
45 40,166 59,821 90,764
55 16,709 20,286 24,681
</TABLE>
Scudder 403(b) Plan
Shares of the Fund may also be purchased as the underlying investment for
tax sheltered annuity plans under the provisions of Section 403(b)(7) of the
Code. In general, employees of tax-exempt organizations described in Section
501(c)(3) of the Code (such as hospitals, churches, religious, scientific, or
literary organizations and educational institutions) or a public school system
are eligible to participate in a 403(b) plan.
Automatic Withdrawal Plan
Non-retirement plan shareholders who currently own or purchase $10,000 or
more of shares of the Fund may establish an Automatic Withdrawal Plan. The
investor can then receive monthly, quarterly or periodic redemptions from his or
her account for any designated amount of $50 or more. Payments are mailed at the
end of each month. The check amounts may be based on the redemption of a fixed
dollar amount, fixed share amount, percent of account value or declining
balance. The Plan provides for income dividends and capital gains distributions,
if any, to be reinvested in additional shares. Shares are then liquidated as
necessary to provide for withdrawal payments. Since the withdrawals are in
amounts selected by the investor and have no relationship to yield or income,
payments received cannot be considered as yield or income on the investment and
the resulting liquidations may deplete or possibly extinguish the initial
investment. Requests for increases in withdrawal amounts or to change payee must
be submitted in writing, signed exactly as the account is registered and contain
signature guarantee(s) as described under "Transaction information--Redeeming
shares--Signature guarantees" in each Fund's prospectus. Any such requests must
be received by the Funds' transfer agent by the 15th of the month in which such
change is to take effect. An Automatic Withdrawal Plan may be terminated at any
time by the shareholder, the Corporation or its agent on written notice, and
will be terminated when all shares of a Fund under the Plan have been liquidated
or upon receipt by the Corporation of notice of death of the shareholder.
An Automatic Withdrawal Plan request form can be obtained by calling
1-800-225-5163.
38
<PAGE>
Group or Salary Deduction Plan
An investor may join a Group or Salary Deduction Plan where satisfactory
arrangements have been made with Scudder Investor Services, Inc. for forwarding
regular investments through a single source. The minimum annual investment is
$240 per investor which may be made in monthly, quarterly, semiannual or annual
payments. The minimum monthly deposit per investor is $20. Except for trustees
or custodian fees for certain retirement plans, at present there is no separate
charge for maintaining group or salary deduction plans; however, the Corporation
and its agents reserve the right to establish a maintenance charge in the future
depending on the services required by the investor.
The Corporation reserves the right, after notice has been given to the
shareholder, to redeem and close a shareholder's account in the event that the
shareholder ceases participating in the group plan prior to investment of $1,000
per individual or in the event of a redemption which occurs prior to the
accumulation of that amount or which reduces the account value to less than
$1,000 and the account value is not increased to $1,000 within a reasonable time
after notification. An investor in a plan who has not purchased shares for six
months shall be presumed to have stopped making payments under the plan.
Automatic Investment Plan
Shareholders may arrange to make periodic investments through automatic
deductions from checking accounts by completing the appropriate form and
providing the necessary documentation to establish this service. The minimum
investment is $50.
The Automatic Investment Plan involves an investment strategy called dollar
cost averaging. Dollar cost averaging is a method of investing whereby a
specific dollar amount is invested at regular intervals. By investing the same
dollar amount each period, when shares are priced low the investor will purchase
more shares than when the share price is higher. Over a period of time this
investment approach may allow the investor to reduce the average price of the
shares purchased. However, this investment approach does not assure a profit or
protect against loss. This type of regular investment program may be suitable
for various investment goals such as, but not limited to, college planning or
saving for a home.
Uniform Transfers/Gifts to Minors Act
Grandparents, parents or other donors may set up custodian accounts for
minors. The minimum initial investment is $1,000 unless the donor agrees to
continue to make regular share purchases for the account through Scudder's
Automatic Investment Plan. In this case, the minimum initial investment is $500.
The Corporation reserves the right, after notice has been given to the
shareholder and Custodian, to redeem and close a shareholder's account in the
event that regular investments to the account cease before the $1,000 minimum is
reached.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
(See "Distribution and performance information--Dividends and
capital gains distributions" in the Funds' prospectuses.)
Each Fund intends to follow the practice of distributing all of its
investment company taxable income, which includes any excess of net realized
short-term capital gains over net realized long-term capital losses. A Fund may
follow the practice of distributing the entire excess of net realized long-term
capital gains over net realized short-term capital losses. However, a Fund may
retain all or part of such gain for reinvestment after paying the related
federal income taxes for which the shareholders may then be asked to claim a
credit against their federal income tax liability. (See "TAXES.")
39
<PAGE>
If a Fund does not distribute an amount of capital gain and/or ordinary
income required to be distributed by an excise tax provision of the Code, it may
be subject to such tax. (See "TAXES.") In certain circumstances, a Fund may
determine that it is in the interest of shareholders to distribute less than
such an amount.
Earnings and profits distributed to shareholders on redemptions of Fund
shares may be utilized by the Fund, to the extent permissible, as part of the
Fund's dividend paid deduction on its federal tax return.
The Corporation intends to distribute the Funds' investment company taxable
income and any net realized capital gains in December to avoid federal excise
tax, although an additional distribution may be made if necessary. Both types of
distributions will be made in shares of the Funds 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 of investment company taxable
income and net realized capital gains are taxable (See "TAXES"), whether made in
shares or cash.
Each distribution is accompanied by a brief explanation of the form and
character of the distribution. The characterization of distributions on such
correspondence may differ from the characterization for federal tax purposes. In
January of each year the Funds issue to each shareholder a statement of the
federal income tax status of all distributions in the prior calendar year.
PERFORMANCE INFORMATION
(See "Distribution and performance information--
Performance information" in the Funds' prospectuses.)
From time to time, quotations of the Funds' performance may be included in
advertisements, sales literature or reports to shareholders or prospective
investors. These performance figures will be calculated in the following manner:
Average Annual Total Return
Average annual total return is the average annual compound rate of return
for the periods of one year and the life of a Fund, ended on the last day of a
recent calendar quarter. Average annual total return quotations reflect changes
in the price of the Funds' 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 finding 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 payment 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.
Average Annual Total Return for the periods ended October 31, 1995
One year Life of Fund
Latin America Fund -30.96%* 12.69%*^(1)
Pacific Opportunities Fund -10.73% 9.89%*^(1)
Greater Europe Growth Fund 15.06%* 15.81%*^(2)
40
<PAGE>
(1) For the period beginning December 8, 1992 (commencement of operations
for Latin America Fund and Pacific Opportunities Fund).
(2) For the period beginning October 10, 1994 (commencement of operations
for Greater Europe Growth Fund).
* The Adviser maintained Fund expenses for the period December 8, 1992
through October 31, 1993 for Latin America Fund and Pacific
Opportunities Fund, for the fiscal years ended October 31, 1994 and
1995 for Latin America Fund for the period October 10, 1994 through
October 31, 1994 and for the fiscal year ended October 31, 1995 for
Greater Europe Growth Fund. For Latin America Fund and Greater Europe
Growth Fund, the average annual total returns for one year and for the
life of the Fund, had the Adviser not maintained each Fund's expenses,
would have been lower. For Pacific Opportunities Fund, the average
annual total return for the life of the Fund had the Adviser not
maintained the Fund's expenses would have been lower.
As described above, average annual total return is based on historical
earnings and is not intended to indicate future performance. Average annual
total return for a Fund will vary based on changes in market conditions and the
level of a Fund's expenses.
In connection with communicating its average annual total return to current
or prospective shareholders, a 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 compound 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 Funds' shares and assume that all
dividends and capital gains distributions during the period were reinvested in
Fund shares. Cumulative total return is calculated by finding 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 Return for the periods ended October 31, 1995
One year Life of Fund
Latin America Fund -30.96% 41.32%^(1)
Pacific Opportunities Fund -10.73% 31.41%^(1)
Greater Europe Growth Fund 15.06% 16.79%^(2)
^(1) For the period beginning December 8, 1992 (commencement of operations
for Latin America Fund and Pacific Opportunities Fund).
41
<PAGE>
^(2) For the period beginning October 10, 1994 (commencement of operations
for Greater Europe Growth Fund).
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.
Capital Change
Capital change measures the return from invested capital including
reinvested capital gains distributions. Capital change does not include the
reinvestment of income dividends.
Quotations of the Funds' performance are historical and are not intended to
indicate future performance. 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 the Funds' expenses.
Comparison of Portfolio 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 a 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, a Fund also may compare these figures to the performance of
unmanaged indices which may assume reinvestment of dividends or interest but
generally do not reflect deductions for administrative and management costs.
Examples include, but are not limited to the Dow Jones Industrial Average, the
Consumer Price Index, Standard & Poor's 500 Composite Stock Price Index (S&P
500), the NASDAQ OTC Composite Index, the NASDAQ Industrials Index, the Russell
2000 Index, and statistics published by the Small Business Administration.
Because some or all each Fund's investments are denominated in foreign
currencies, the strength or weakness of the U.S. dollar as against these
currencies may account for part that Fund's investment performance. Historical
information on the value of the dollar versus foreign currencies may be used
from time to time in advertisements concerning the Funds. 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 either Fund invests, including, but not limited to,
the following: population growth, gross domestic product, inflation rate,
average stock market price-earnings ratios and the total value of stock markets.
Sources for such statistics may include official publications of various foreign
governments and exchanges.
From time to time, in advertising and marketing literature, a Fund's
performance may be compared to the performance of broad groups of mutual funds
with similar investment goals, as tracked by independent organizations such as,
Investment Company Data, Inc. ("ICD"), Lipper Analytical Services, Inc.
("Lipper"), CDA Investment Technologies, Inc. ("CDA"), Morningstar, Inc., Value
Line Mutual Fund Survey and other independent organizations. When these
organizations' tracking results are used, a Fund will be compared to the
appropriate fund category, that is, by fund objective and portfolio holdings, or
to the appropriate volatility grouping, where volatility is a measure of a
fund's risk. For instance, a Scudder growth fund will be compared to funds in
the growth fund category; a Scudder income fund will be compared to funds in the
income fund category; and so on. Scudder funds (except for money market funds)
may also be compared to funds with similar volatility, as measured statistically
by independent organizations. In addition, a Fund's performance may also be
compared to the performance of broad groups of comparable mutual funds.
Unmanaged indices with which a Fund's performance may be compared include, but
are not limited to, the following:
42
<PAGE>
The Morgan Stanley Capital International (MSCI) Europe/Australia/Far East
(EAFE) Index
The MSCI Europe Index
International Finance Corporation's Latin America Investable Total Return
Index
Morgan Stanley Capital International World Index
J.P. Morgan Global Traded Bond Index
Salomon Brothers World Government Bond Index
NASDAQ Composite Index
Wilshire 5000 Stock Index
The following graph illustrates the historical risks and returns of
selected unmanaged indices which track the performance of various combinations
of United States and international securities for the 26 year period ended
December 31, 1995; results for other periods may vary. The graph uses 26 year
annualized international returns represented by the Morgan Stanley Capital
International Europe, Australia and Far East (EAFE) Index and 26 year annualized
United States returns represented by the S&P 500 Index. Risk is measured by the
standard deviation in overall portfolio performance within each index.
Performance of an index is historical, and does not represent the performance of
a Fund, and is not a guarantee of future results.
X-Y SCATTER CHART OMITTED
CHART TITLE:
------------------------------------------------------
EFFICIENT FRONTIER
S&P 500 vs. MSCI EAFE Index (12/31/69-12/31/95)
------------------------------------------------------
Total Return Standard Deviation
(Reward) (Portfolio Volatility-Risk)
13.15 17.18 100% Int'l MSCI EAFE
13.16 16.24 10 US/90 Int'l
13.14 15.43 20/80
13.09 14.76 30 U.S./70 Int'l
13.01 14.26 40/60
12.9 13.94 50 U.S./50Int'l
12.76 13.82 60/40
12.59 13.9 70 U.S./30 Int'l
12.39 14.17 80/20
12.15 14.64 90 U.S./10 Int'l
11.89 15.27 100% U.S. S&P 500
CALLOUT TO PRECEDING CHART:
Data Source: Ibbotson Associates. (Data as of 12/31/95)
The following graph illustrates the historical risks and returns of
selected indices which track the performance of various combinations of United
States and international securities for the 26 year period ended December 31,
1995; results for other periods may vary. The graph uses 26-year annualized
international returns represented by the Morgan Stanley Capital International
Europe (EUR) 14 Index and 26-year annualized United States returns represented
by the S&P 500 Index. Risk is measured by the standard deviation in overall
portfolio performance within each index. Performance of an index is historical,
does not represent the performance of a Fund, and is not a guarantee of future
results.
43
<PAGE>
X-Y SCATTER CHART OMITTED
CHART TITLE:
----------------------------------------------------------
EFFICIENT FRONTIER
S&P 500 vs. MSCI EUROPE Index (12/31/69-12/31/95)
----------------------------------------------------------
Total Return Standard Deviation
(Reward) (Portfolio Volatility-Risk)
12.47 16.93 100% Int'l MSCI EAFE
12.52 16.15 10 US/90 Int'l
12.55 15.48 20/80
12.56 14.93 30 U.S./70 Int'l
12.54 14.51 40/60
12.49 14.25 50 U.S./50Int'l
12.42 14.14 60/40
12.32 14.19 70 U.S./30 Int'l
12.2 14.4 80/20
12.06 14.77 90 U.S./10 Int'l
11.89 15.27 100% U.S. S&P 500
CALLOUT TO PRECEDING CHART:
Data Source: Ibbotson Associates. (Data as of 12/31/95)
From time to time, in marketing and other Fund literature, Directors and
officers of the Funds, the Funds' 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
Funds. In addition, the amount of assets that the Adviser has under management
in various geographical areas may be quoted in advertising and marketing
materials.
The Funds may be advertised as an investment choice in Scudder's college
planning program. The description may contain illustrations of projected future
college costs based on assumed rates of inflation and examples of hypothetical
fund performance, calculated as described above.
Statistical and other information, as provided by the Social Security
Administration, may be used in marketing materials pertaining to retirement
planning in order to estimate future payouts of social security benefits.
Estimates may be used on demographic and economic data.
Marketing and other Fund literature may include a description of the
potential risks and rewards associated with an investment in the Funds. The
description may include a "risk/return spectrum" which compares the Funds 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 Funds 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
44
<PAGE>
risk of erosion of the value of an investment as prices increase over a long
time period. The risks/returns associated with an investment in bond or equity
funds depend upon many factors. For bond funds these factors include, but are
not limited to, a fund's overall investment objective, the average portfolio
maturity, credit quality of the securities held, and interest rate movements.
For equity funds, factors include a fund's overall investment objective, the
types of equity securities held and the financial position of the issuers of the
securities. The risks/returns associated with an investment in international
bond or equity funds also will depend upon currency exchange rate fluctuation.
A risk/return spectrum generally will position the various investment
categories in the following order: bank products, money market funds, bond funds
and equity funds. Shorter-term bond funds generally are considered less risky
and offer the potential for less return than longer-term bond funds. The same is
true of domestic bond funds relative to international bond funds, and bond funds
that purchase higher quality securities relative to bond funds that purchase
lower quality securities. Growth and income equity funds are generally
considered to be less risky and offer the potential for less return than growth
funds. In addition, international equity funds usually are considered more risky
than domestic equity funds but generally offer the potential for greater return.
Risk/return spectrums also may depict funds that invest in both domestic
and foreign securities or a combination of bond and equity securities.
Scudder's Theme: Build Create Provide Marketing and fund literature may refer to
Scudder's theme: "Build Create Provide." This theme intends to encapsulate the
composition of a sound investment philosophy, one through which Scudder can help
provide investors appropriate avenues for pursuing dreams. Individuals recognize
the need to build investment plans that are suitable and directed at achieving
one's financial goals. The desired result from planning and a long-term
commitment to it is the ability to build wealth over time. While there are no
guarantees in the pursuit of wealth through investing, Scudder believes that a
sound investment plan can enhance one's ability to achieve financial goals that
are clearly defined and appropriately approached. Wealth, while a relative term,
may be defined as the freedom to provide for those interests which you hold most
important -- your family, future, and/or your community.
Evaluation of Fund performance or other relevant statistical information
made by independent sources may also be used in advertisements concerning the
Funds, including reprints of, or selections from, editorials or articles about
these Funds. Sources for Fund performance information and articles about the
Funds include the following:
American Association of Individual Investors' Journal, a monthly publication of
the AAII that includes articles on investment analysis techniques.
Asian Wall Street Journal, a weekly Asian newspaper that often reviews U.S.
mutual funds investing internationally.
Banxquote, an on-line source of national averages for leading money market and
bank CD interest rates, published on a weekly basis by Masterfund, Inc. of
Wilmington, Delaware.
Barron's, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance data.
Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds investing abroad.
CDA Investment Technologies, Inc., an organization which provides performance
and ranking information through examining the dollar results of hypothetical
mutual fund investments and comparing these results against appropriate market
indices.
Consumer Digest, a monthly business/financial magazine that includes a "Money
Watch" section featuring financial news.
45
<PAGE>
Financial Times, Europe's business newspaper, which features from time to time
articles on international or country-specific funds.
Financial World, a general business/financial magazine that includes a "Market
Watch" department reporting on activities in the mutual fund industry.
Forbes, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.
Fortune, a national business publication that periodically rates the performance
of a variety of mutual funds.
The Frank Russell Company, a West-Coast investment management firm that
periodically evaluates international stock markets and compares foreign equity
market performance to U.S. stock market performance.
Global Investor, a European publication that periodically reviews the
performance of U.S. mutual funds investing internationally.
IBC/Donoghue's Money Fund Report, a weekly publication of the Donoghue
Organization, Inc., of Holliston, Massachusetts, reporting on the performance of
the nation's money market funds, summarizing money market fund activity and
including certain averages as performance benchmarks, specifically "Donoghue's
Money Fund Average," and "Donoghue's Government Money Fund Average."
Ibbotson Associates, Inc., a company specializing in investment research and
data.
Investment Company Data, Inc., an independent organization which provides
performance ranking information for broad classes of mutual funds.
Investor's Daily, a daily newspaper that features financial, economic, and
business news.
Kiplinger's Personal Finance Magazine, a monthly investment advisory publication
that periodically features the performance of a variety of securities.
Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis, a weekly
publication of industry-wide mutual fund averages by type of fund.
Money, a monthly magazine that from time to time features both specific funds
and the mutual fund industry as a whole.
Morgan Stanley International, an integrated investment banking firm that
compiles statistical information.
Mutual Fund Values, a biweekly Morningstar, Inc. publication that provides
ratings of mutual funds based on fund performance, risk and portfolio
characteristics.
The New York Times, a nationally distributed newspaper which regularly covers
financial news.
The No-Load Fund Investor, a monthly newsletter, published by Sheldon Jacobs,
that includes mutual fund performance data and recommendations for the mutual
fund investor.
No-Load Fund*X, a monthly newsletter, published by DAL Investment Company, Inc.,
that reports on mutual fund performance, rates funds and discusses investment
strategies for the mutual fund investor.
Personal Investing News, a monthly news publication that often reports on
investment opportunities and market conditions.
46
<PAGE>
Personal Investor, a monthly investment advisory publication that includes a
"Mutual Funds Outlook" section reporting on mutual fund performance measures,
yields, indices and portfolio holdings.
Smart Money, a national personal finance magazine published monthly by Dow Jones
and Company, Inc. and The Hearst Corporation. Focus is placed on ideas for
investing, spending and saving.
Success, a monthly magazine targeted to the world of entrepreneurs and growing
business, often featuring mutual fund performance data.
United Mutual Fund Selector, a semi-monthly investment newsletter, published by
Babson United Investment Advisors, that includes mutual fund performance data
and reviews of mutual fund portfolios and investment strategies.
USA Today, a leading national daily newspaper.
U.S. News and World Report, a national business weekly that periodically reports
mutual fund performance data.
Value Line Mutual Fund Survey, an independent organization that provides
biweekly performance and other information on mutual funds.
The Wall Street Journal, a Dow Jones and Company, Inc. newspaper which regularly
covers financial news.
Wiesenberger Investment Companies Services, an annual compendium of information
about mutual funds and other investment companies, including comparative data on
funds' backgrounds, management policies, salient features, management results,
income and dividend records and price ranges.
Working Woman, a monthly publication that features a "Financial Workshop"
section reporting on the mutual fund/financial industry.
Worth, a national publication put out 10 times per year by Capital Publishing
Company, a subsidiary of Fidelity Investments. Focus is placed on personal
financial journalism.
ORGANIZATION OF THE FUNDS
(See "Fund organization" in the Funds' prospectuses.)
The Corporation was organized as Scudder Fund of Canada Ltd. in Canada in
1953 by the investment management firm of Scudder, Stevens & Clark. On March 16,
1964, the name of the Corporation was changed to Scudder International
Investments Ltd. On July 31, 1975, the corporate domicile of the Corporation was
changed to the United States through the transfer of its net assets to a newly
formed Maryland corporation, Scudder International Fund, Inc., in exchange for
shares of the Corporation which then were distributed to the shareholders of the
Corporation.
The authorized capital stock of the Corporation consists of 400 million
shares of a par value of $.01 each, all of one class and all having equal rights
as to voting, redemption, dividends and liquidation. Shareholders have one vote
for each share held. The Corporation's capital stock is comprised of four
series: Scudder International Fund, the original series; Scudder Latin America
Fund and Scudder Pacific Opportunities Fund, both organized in December, 1992
and Scudder Greater Europe Growth Fund, organized in August, 1994. Each series
consists of 100 million shares. The Directors have the authority to issue
additional series of shares and to designate the relative rights and preferences
as between the different series. All shares issued and outstanding are fully
paid and non-assessable, transferable, and redeemable at net asset value at the
option of the shareholder. Shares have no pre-emptive or conversion rights.
The shares of the Corporation have non-cumulative 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
47
<PAGE>
Board of Directors. The assets of the Corporation received for the issue or sale
of the shares of each series and all income, earnings, profits and proceeds
thereof, subject only to the rights of creditors, are specifically allocated to
such series and constitute the underlying assets of such series. The underlying
assets of each series are segregated on the books of account, and are to be
charged with the liabilities in respect to such series and with such a share of
the general liabilities of the Corporation. If a series were unable to meet its
obligations, the assets of all other series may in some circumstances be
available to creditors for that purpose, in which case the assets of such other
series could be used to meet liabilities which are not otherwise properly
chargeable to them. Expenses with respect to any two or more series are to be
allocated in proportion to the asset value of the respective series except where
allocations of direct expenses can otherwise be fairly made. The officers of the
Corporation, subject to the general supervision of the Directors, have the power
to determine which liabilities are allocable to a given series, or which are
general or allocable to two or more series. In the event of the dissolution or
liquidation of the Corporation or any series, the holders of the shares of any
series are entitled to receive as a class the underlying assets of such shares
available for distribution to shareholders.
Shares of the Corporation entitle their holders to one vote per share;
however, separate votes are taken by each series on matters affecting an
individual series. For example, a change in investment policy for a series would
be voted upon only by shareholders of the series involved. Additionally,
approval of the investment advisory agreement is a matter to be determined
separately by each series. Approval by the shareholders of one series is
effective as to that series whether or not enough votes are received from the
shareholders of the other series to approve such agreement as to the other
series.
The Directors, in their discretion, may authorize the division of shares of
the Corporation (or shares of a series) into different classes permitting shares
of different classes to be distributed by different methods. Although
shareholders of different classes of a series would have an interest in the same
portfolio of assets, shareholders of different classes may bear different
expenses in connection with different methods of distribution. The Directors
have no present intention of taking the action necessary to effect the division
of shares into separate classes (which under present regulations would require
the Corporation first to obtain an exemptive order of the SEC) nor of changing
the method of distribution of shares of the Fund.
The Corporation's Amended and Restated Certificate of Incorporation (the
"Articles") provide that the Directors of the Corporation, to the fullest extent
permitted by Maryland General Corporation Law and the 1940 Act, shall not be
liable to the Corporation or its shareholders for damages. Maryland law
currently provides that Directors shall be immune from liability for any action
taken by them in good faith, in a manner reasonably believed to be in the best
interests of the Corporation and with the care that an ordinarily prudent person
in a like position would use under 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 Articles and
the By-Laws provide that the Corporation will indemnify its Directors, officers,
employees or agents against liabilities and expenses incurred in connection with
litigation in which they may be involved because of their offices with the
Corporation consistent with applicable law. Nothing in the Articles or the
By-Laws protects or indemnifies a Director, officer, employee or agent against
any liability to which he or she would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office.
INVESTMENT ADVISER
(See "Fund organization--Investment adviser" in the Funds' prospectuses.)
Scudder, Stevens & Clark, Inc., an investment counsel firm, acts as
investment adviser to the Funds. This organization is one of the most
experienced investment management firms in the United States. It was established
as a partnership in 1919 and pioneered the practice of providing investment
counsel to individual clients on a fee basis. In 1928 it introduced the first
no-load mutual fund to the public. In 1953, the Adviser introduced the Scudder
International Fund, the first mutual fund available in the U.S. investing
internationally in securities of issuers in several foreign countries. As of
September 30, 1995, the Adviser was responsible for managing more than $20
billion in non-U.S. securities, including approximately $3 billion in Latin
American debt and equity securities and $4 billion in Pacific Basin debt and
48
<PAGE>
equity securities. The Adviser manages a number of offshore and U.S. investment
companies that invest in all or select regions of Latin America and the Pacific
Basin.
The principal source of the Adviser's income is professional fees received
from providing continuous investment advice, and the firm derives no income from
brokerage or underwriting of securities. Today, it provides investment counsel
for many individuals and institutions, including insurance companies, colleges,
industrial corporations, and financial and banking organizations. In addition,
it manages Montgomery Street Income Securities, Inc., Scudder California Tax
Free Trust, Scudder Cash Investment Trust, Scudder Equity Trust, Scudder Fund,
Inc., Scudder Funds Trust, Scudder Global Fund, Inc., Scudder GNMA Fund, Scudder
Portfolio Trust, Scudder Institutional Fund, Inc., Scudder International Fund,
Inc., Scudder Investment Trust, Scudder Municipal Trust, Scudder Mutual Funds,
Inc., Scudder New Asia Fund, Inc., Scudder New Europe Fund, Inc., Scudder
Securities Trust, Scudder State Tax Free Trust, Scudder Tax Free Money Fund,
Scudder Tax Free Trust, Scudder U.S. Treasury Money Fund, Scudder Variable Life
Investment Fund, Scudder World Income Opportunities Fund, Inc., The Argentina
Fund, Inc., The Brazil Fund, Inc., The First Iberian Fund, Inc., The Korea Fund,
Inc., The Japan Fund, Inc. and The Latin America Dollar Income Fund, Inc. Some
of the foregoing companies or trusts have two or more series.
The Adviser also provides investment advisory services to the mutual funds
which comprise the AARP Investment Program from Scudder. The AARP Investment
Program from Scudder has assets over $12 billion and includes the AARP Growth
Trust, AARP Income Trust, AARP Tax Free Income Trust and AARP Cash Investment
Funds.
The Adviser maintains a large research department, which conducts
continuous studies of the factors that affect the position of various
industries, companies and individual securities. The Adviser 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
Adviser's clients. However, the Adviser regards this information and material as
an adjunct to its own research activities. Scudder's international investment
management team travels the world, researching hundreds of companies. In
selecting the securities in which a Fund may invest, the conclusions and
investment decisions of the Adviser with respect to a Fund are based primarily
on the analyses of its own research department.
Certain investments may be appropriate for the Funds and also for other
clients advised by the Adviser. Investment decisions for the Funds 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 Adviser to be equitable to each. In some cases, this procedure
could have an adverse effect on the price or amount of the securities purchased
or sold by a Fund. Purchase and sale orders for a Fund may be combined with
those of other clients of the Adviser in the interest of achieving the most
favorable net results to a Fund.
The Investment Management Agreements between the Corporation, on behalf of
Latin America Fund and Pacific Opportunities Fund, and on behalf of Greater
Europe Growth Fund and the Adviser were last approved by the Directors on
September 6, 1995. The Investment Management Agreement between the Corporation,
on the behalf of Greater Europe Growth Fund is dated October 10, 1994. The
Agreements (collectively, the "Agreements") are dated December 8, 1992 and
October 10, 1994, respectively and will continue in effect until September 30,
1996 and from year to year thereafter only if their continuance is approved
annually by the vote of a majority of those Directors who are not parties to
such Agreement or interested persons of the Adviser or the Corporation, cast in
person at a meeting called for the purpose of voting on such approval, and
either by a vote of the Corporation's Directors or of a majority of the
outstanding voting securities of each Fund. The Agreements 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 their assignment.
49
<PAGE>
Under the Agreements, the Adviser regularly provides a Fund with continuing
investment management for a Fund's portfolio consistent with each Fund's
investment objective, policies and restrictions and determines what securities
shall be purchased, held or sold and what portion of a Fund's assets shall be
held uninvested, subject to a Fund's Articles, 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 Directors of each
Fund may from time to time establish.
Under the Agreements, the Adviser renders significant administrative
services (not otherwise provided by third parties) necessary for a 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 Funds (such as the Funds' 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 Funds' federal, state and local tax returns; preparing and filing the
Funds' 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 Funds' books and records to
the extent not otherwise maintained by a third party; assisting in establishing
accounting policies of the Funds; assisting in the resolution of accounting and
legal issues; establishing and monitoring the Funds' operating budget;
processing the payment of the Funds' bills; assisting the Funds in, and
otherwise arranging for, the payment of distributions and dividends and
otherwise assisting the Funds in the conduct of their business, subject to the
direction and control of the Directors.
The Adviser 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 or Boston, Massachusetts) of the Corporation
affiliated with the Adviser and makes available, without expense to the Funds,
the services of such Directors, officers and employees of the Adviser as may
duly be elected officers of the Corporation, subject to their individual consent
to serve and to any limitations imposed by law, and provides the Funds' office
space and facilities.
For these services Latin America Fund pays the Adviser an annual fee equal
to 1.25% of the Fund's average daily net assets, payable monthly, provided the
Fund will make such interim payments as may be requested by the Adviser not to
exceed 75% of the amount of the fee then accrued on the books of the Fund and
unpaid. For the period December 8, 1992 (commencement of operations) to October
31, 1993, the Adviser did not impose a portion of its management fee amounting
to $544,287 and the amount imposed amounted to $445,720. The Agreements provide
that if a Fund's expenses, exclusive of taxes, interest, and extraordinary
expenses, exceed specified limits, such excess, up to the amount of the
management fee, will be paid by the Adviser. The Adviser retains the ability to
be repaid by a Fund if expenses fall below the specified limit prior to the end
of the fiscal year. These expense limitation arrangements can decrease a Fund's
expenses and improve its performance. During the fiscal years ended October 31,
1994 and 1995, these agreements resulted in a reduction of management fees paid
by the Latin America Fund of $229,325 and $216,058, respectively. During the
fiscal years ended October 31, 1994 and 1995, the Adviser imposed a portion of
its management fees amounting to $7,169,711 and $7,166,386, respectively.
For these services Pacific Opportunities Fund pays the Adviser an annual
fee equal to 1.10% of the Fund's average daily net assets payable monthly,
provided the Fund will make interim payments as may be requested by the Adviser
not to exceed 75% of the amount of the fee then accrued on the books of the Fund
and unpaid. For the period December 8, 1992 (commencement of operations) to
October 31, 1993 the Adviser did not impose any of its management fee which
amounted to $531,572. For the fiscal years ended October 31, 1994 and 1995 the
fees imposed amounted to $4,662,015 and $4,590,699, respectively.
For these services Greater Europe Growth Fund pays the Adviser a fee equal
to 1.00% of the Fund's average daily net assets, payable monthly, provided the
Fund will make such interim payments as may be requested by the Adviser not to
exceed 75% of the amount of the fee then accrued on the books of the Fund and
unpaid. The Adviser has agreed until February 28, 1997 to maintain the total
annualized expenses of the Fund at no more than 1.50% of the average daily net
assets of the Fund. For the fiscal year ended October 31, 1995, the Adviser did
not impose all of its management fee amounting to $274,656.
50
<PAGE>
Under the Agreements the Funds are responsible for all of their 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 Funds who are not
affiliated with the Adviser; the cost of printing and distributing reports and
notices to stockholders; and the fees and disbursements of custodians. The Funds
may arrange to have third parties assume all or part of the expenses of sale,
underwriting and distribution of shares of the Funds. Each 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 Funds with respect thereto. The
custodian agreement provides that the Custodian shall compute the net asset
value. Each Agreement expressly provides that the Adviser shall not be required
to pay a pricing agent of any Fund for portfolio pricing services, if any.
Each Agreement requires the Adviser to reimburse that Fund for all or a
portion of advances of its management fee to the extent annual expenses of a
Fund (including the management fee stated above) exceed the limitations
prescribed by any state in which such Fund's shares are offered for sale.
Management has been advised that, while most states have eliminated expense
limitations, the lowest of such limitations is presently 2 1/2% of average daily
net assets up to $30 million, 2% of the next $70 million of average daily net
assets and 1 1/2% of average daily net assets in excess of that amount. Certain
expenses such as brokerage commissions, taxes, extraordinary expenses and
interest are excluded from such limitations. Any such fee advance required to be
returned to a Fund will be returned as promptly as practicable after the end of
the Funds' fiscal year. However, no fee payment will be made to the Adviser
during any fiscal year which will cause year to date expenses to exceed the
cumulative pro rata expense limitations at the time of such payment.
The Agreements also provide that the Funds may use any name derived from
the name "Scudder, Stevens & Clark" only as long as an Agreement or any
extension, renewal or amendment thereof remains in effect.
In reviewing the terms of the Agreements and in discussions with the
Adviser concerning such Agreements, the Directors of the Corporation who are not
"interested persons" of the Adviser are represented by independent counsel at
the Funds' expense.
The Agreements provide that the Adviser shall not be liable for any error
of judgment or mistake of law or for any loss suffered by a Fund in connection
with matters to which the Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of the Adviser in
the performance of its duties or from reckless disregard by the Adviser of its
obligations and duties under the Agreement.
Officers and employees of the Adviser from time to time may have
transactions with various banks, including the Fund's custodian bank. It is the
Adviser's opinion that the terms and conditions of those transactions which have
occurred were not influenced by existing or potential custodial or other Fund
relationships.
None of the officers or Directors of the Corporation may have dealings with
a Fund as principals in the purchase or sale of securities, except as individual
subscribers to or holders of shares of a Fund.
Personal Investments by Employees of the Adviser
Employees of the Adviser are permitted to make personal securities
transactions, subject to requirements and restrictions set forth in the
Adviser's Code of Ethics. The Code of Ethics contains provisions and
requirements designed to identify and address certain conflicts of interest
between personal investment activities and the interests of investment advisory
clients such as the Funds. Among other things, the Code of Ethics, which
generally complies with standards recommended by the Investment Company
Institute's Advisory Group on Personal Investing, prohibits certain types of
transactions absent prior approval, imposes time periods during which personal
transactions may not be made in certain securities, and requires the submission
of duplicate broker confirmations and monthly reporting of securities
transactions. Additional restrictions apply to portfolio managers, traders,
research analysts and others involved in the investment advisory process.
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<PAGE>
Exceptions to these and other provisions of the Code of Ethics may be granted in
particular circumstances after review by appropriate personnel.
<TABLE>
<CAPTION>
DIRECTORS AND OFFICERS
<S> <C> <C> <C>
Position with
Underwriter,
Name Position Principal Scudder Investor
and Address with Corporation Occupation** Services, Inc.
- ----------- ---------------- ------------ --------------
Edmond D. Villani #@* Chairman of the President and Managing Director --
Board and Director of Scudder, Stevens & Clark, Inc.
Nicholas Bratt #@* President and Managing Director of Scudder, --
Director Stevens & Clark, Inc.
Paul Bancroft III Director Venture Capitalist and --
1120 Cheston Lane Consultant to Bessemer
Queenstown, MD 21658 Securities Corporation;
President, Chief Executive
Officer and Director, Bessemer
Securities Corporation (until
1988)
Thomas J. Devine Director Consultant --
641 Lexington Avenue
New York, NY 10022
Keith R. Fox Director President, Exeter Capital --
10 East 53rd Street Management Corporation
New York, NY 10022
William H. Gleysteen, Jr. Director President, The Japan Society, --
The Japan Society, Inc. Inc. (1989 to present); Vice
333 East 47th Street President of Studies, Council on
New York, NY 10017 Foreign Relations (1986-1989)
William H. Luers Director President, The Metropolitan --
The Metropolitan Museum of Art Museum of Art (1986 to present)
1000 Fifth Avenue
New York, NY 10028
Dr. Wilson Nolen Director Consultant (1989 to present); --
1120 Fifth Avenue Corporate Vice President,
New York, NY 10128 Becton, Dickinson & Company,
(manufacturer of medical and
scientific products) until 1989
Juris Padegs #@* Director, Vice Managing Director of Scudder, Vice President &
President and Stevens & Clark, Inc. Director
Assistant Secretary
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
Position with
Underwriter,
Name Position Principal Scudder Investor
and Address with Corporation Occupation** Services, Inc.
- ----------- ---------------- ------------ --------------
<S> <C> <C> <C>
Daniel Pierce +@* Director Chairman of the Board and Vice President,
Managing Director of Scudder, Director & Assistant
Stevens & Clark, Inc. Treasurer
Dr. Gordon Shillinglaw Director Professor Emeritus of --
196 Villard Avenue Accounting, Columbia University
Hastings-on-Hudson, NY 10706 Graduate School of Business
Robert W. Lear Honorary Director Executive-in-Residence, Visiting --
429 Silvermine Road Professor, Columbia University
New Canaan, CT 06840 Graduate School of Business
Robert G. Stone, Jr. Honorary Director Chairman of the Board and --
405 Lexington Avenue Director, Kirby Corporation,
New York, NY 10174 (marine transportation, diesel
repair and property and casualty
insurance in Puerto Rico)
Elizabeth J. Allan# Vice President Principal of Scudder, Stevens & --
Clark, Inc.
Carol L. Franklin# Vice President Principal of Scudder, Stevens & --
Clark, Inc.
Edmund B. Games, Jr. + Vice President Principal of Scudder, Stevens & --
Clark, Inc.
Jerard K. Hartman # Vice President Managing Director of Scudder, --
Stevens & Clark, Inc.
William E. Holzer # Vice President Managing Director of Scudder, --
Stevens & Clark, Inc.
Thomas W. Joseph + Vice President Principal of Scudder, Stevens & Vice President,
Clark, Inc. Director, Treasurer &
Assistant Clerk
David S. Lee + Vice President and Managing Director of Scudder, President, Assistant
Assistant Treasurer Stevens & Clark, Inc. Treasurer and Director
Thomas F. McDonough + Vice President and Principal of Scudder, Stevens & Clerk
Secretary Clark, Inc.
Pamela A. McGrath + Vice President and Managing Director of Scudder, --
Treasurer Stevens & Clark, Inc.
</TABLE>
53
<PAGE>
<TABLE>
Position with
Underwriter,
Name Position Principal Scudder Investor
and Address with Corporation Occupation** Services, Inc.
- ----------- ---------------- ------------ --------------
<S> <C> <C> <C>
Edward J. O'Connell # Vice President and Principal of Scudder, Stevens & Assistant Treasurer
Assistant Treasurer Clark, Inc.
Kathryn L. Quirk # Vice President and Managing Director of Scudder, Vice President
Assistant Secretary Stevens & Clark, Inc.
Richard W. Desmond # Assistant Secretary Vice President of Scudder, Vice President
Stevens & Clark, Inc.
Coleen Downs Dinneen+ Assistant Secretary Vice President of Scudder, Assistant Clerk
Stevens & Clark, Inc.
</TABLE>
* Messrs. Villani, Bratt, Padegs and Pierce are considered by each Fund and its
counsel to be persons who are "interested persons" of the Adviser or of the
Fund within the meaning of the 1940 Act, as amended.
** Unless otherwise stated, all officers and directors have been associated with
their respective companies for more than five years, but not necessarily in
the same capacity.
@ Messrs. Villani and Padegs are members of the Executive Committee which may
exercise substantially all of the powers of the Board of Directors when it is
not in session.
+ Address: Two International Place, Boston, Massachusetts 02110
# Address: 345 Park Avenue, New York, New York 10154
As of January 31, 1996 all Directors and officers as a group owned
beneficially (as the term is defined in Section 13(d) under the Securities
Exchange Act of 1934) less than 1% of the shares of Latin America Fund and
Pacific Opportunities Fund, and 78,739 shares, or 2.31% of the shares of Greater
Europe Growth Fund outstanding on such date.
Certain accounts for which the Adviser acts as investment adviser owned
2,617,167 shares in the aggregate, or 10.58% of the outstanding shares of
Pacific Opportunities Fund on January 31, 1996. The Adviser may be deemed to be
the beneficial owner of such shares but disclaims any beneficial ownership in
such shares.
To the best of each Fund's knowledge, as of January 31, 1996 no person
owned beneficially more than 5% of a Fund's outstanding shares, except as stated
above.
The Directors and officers of the Corporation also serve in similar
capacities with other Scudder funds.
REMUNERATION
Several of the officers and Directors of the Corporation may be officers or
employees of the Adviser, Scudder Service Corporation, Scudder Trust Company or
of Scudder Investor Services, Inc. and participate in the fees paid by the
Corporation. The Corporation pays no direct remuneration to any officer of the
Corporation. However, each of the Corporation's Directors who is not affiliated
with the Adviser will be paid by the Corporation. Each of these unaffiliated
Directors receives an annual director's fee of $4,000 from the Fund and fees of
$400 for each attended Directors meeting, audit committee meeting or meeting
held for the purpose of considering arrangements between the Funds and the
Adviser or any of its affiliates. Each unaffiliated Director also receives $150
per committee meeting other than those set forth above. For the fiscal year
ended October 31, 1995, Latin America Fund paid such Directors $66,435, Pacific
Opportunities Fund paid such Directors $62,705 and such expenses for Greater
Europe Growth Fund aggregated $59,880, of which $28,000 was unpaid at October
31, 1995.
54
<PAGE>
The following Compensation Table provides, in tabular form, the following data.
<TABLE>
Column (1) All Directors who receive compensation from the Corporation.
Column (2) Aggregate compensation received by a Director from all the series of the Corporation.
Columns (3) and (4) Pension or retirement benefits accrued or proposed to be paid by the Fund Complex. Scudder
International Fund, Inc. does not pay its Directors such benefits.
Column (5) Total compensation received by a Director from the Corporation, plus compensation received from all funds
managed by the Adviser for which a Director serves. The total number of funds from which a Director receives such
compensation is also provided in column (5). Generally, compensation received by a Director for serving on the board
of a closed-end fund is greater than the compensation received by a Director for serving on the board of an open-end
fund.
<CAPTION>
Compensation Table
for the year ended December 31, 1995
<S> <C> <C> <C> <C>
=========================================================================================================================
(1) (2) (3) (4) (5)
Aggregate Compensation from Total
Scudder International Fund, Inc. Compensation From
(consisting of four funds: Scudder Pension or Scudder
International Fund, Scudder Latin Retirement Estimated International
Name of Person, America Fund, Scudder Pacific Benefits Accrued Annual Fund, Inc. and
Position Opportunities Fund and Scudder As Part of Fund Benefits Upon Fund Complex Paid
Greater Europe Growth Fund) Complex Expenses Retirement to Director
=========================================================================================================================
Paul Bancroft III, $38,267 N/A N/A $142,067
Director (15 funds)
Thomas J. Devine, $38,267 N/A N/A $146,267
Director (17 funds)
Keith R. Fox $0 N/A N/A $1,686
Director (2 funds)
William H. Gleysteen, $38,267 $4,133* $3,000 $134,650
Jr., Director (12 funds)
William H. Luers, $38,267 N/A N/A $102,267
Director (12 funds)
Dr. Wilson Nolen, $36,667 N/A N/A $148,342
Director (16 funds)
Dr. Gordon Shillinglaw, $39,867 N/A N/A $102,097
Director (15 funds)
Robert G. Stone, Jr., $38,267 $6,788* $6,000 $144,302
Honorary Director (15 funds)
* Retirement benefits accrued and proposed to be paid an additional compensation for serving on the Board of The Japan
Fund, Inc.
</TABLE>
DISTRIBUTOR
The Corporation has an underwriting agreement with Scudder Investor
Services, Inc. (the "Distributor"), a Massachusetts corporation, which is a
subsidiary of the Adviser, a Delaware corporation. The Corporation's
underwriting agreement dated July 15, 1985 will remain in effect until September
30, 1996 and from year to year thereafter only if its continuance is approved
annually by a majority of the members of the Board of Directors who are not
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parties to such agreement or interested persons of any such party and either by
vote of a majority of the Board of Directors or a majority of the outstanding
voting securities of each Fund. The underwriting agreement was last approved by
the Directors on September 6, 1995.
Under the underwriting agreement, the Funds are responsible for: the
payment of all fees and expenses in connection with the preparation and filing
with the SEC of its registration statement and prospectus and any amendments and
supplements thereto; the registration and qualification of shares for sale in
the various states, including registering each Fund as a broker or dealer in
various states, as required; the fees and expenses of preparing, printing and
mailing prospectuses annually to existing shareholders (see below for expenses
relating to prospectuses paid by the Distributor); notices, proxy statements,
reports or other communications to shareholders of a Fund; the cost of printing
and mailing confirmations of purchases of shares and any prospectuses
accompanying such confirmations; any issuance taxes and/or any initial transfer
taxes; a portion of shareholder toll-free telephone charges and expenses of
shareholder service representatives; the cost of wiring funds for share
purchases and redemptions (unless paid by the shareholder who initiates the
transaction); the cost of printing and postage of business reply envelopes; and
a portion of the cost of computer terminals used by both the Funds and the
Distributor.
The Distributor will pay for printing and distributing prospectuses or
reports prepared for its use in connection with the offering of the Fund's
shares to the public and preparing, printing and mailing any other literature or
advertising in connection with the offering of shares of each Fund to the
public. The Distributor will pay all fees and expenses in connection with its
qualification and registration as a broker or dealer under federal and state
laws, a portion of the cost of toll-free telephone service and expenses of
shareholder service representatives, a portion of the cost of computer
terminals, and expenses of any activity which is primarily intended to result in
the sale of shares issued by a Fund, unless a Rule 12b-1 Plan is in effect which
provides that a Fund shall bear some or all of such expenses.
Note: Although each Fund does not currently have a 12b-1 Plan, and the
Directors have no current intention of adopting one, a Fund would also
pay those fees and expenses permitted to be paid or assumed by a Fund
pursuant to a 12b-1 Plan, if any, were adopted by a Fund,
notwithstanding any other provision to the contrary in the
underwriting agreement.
As agent, the Distributor currently offers shares of each Fund on a
continuous basis to investors in all states in which shares of a Fund may from
time to time be registered or where permitted by applicable law. The
underwriting agreement provides that the Distributor accepts orders for shares
at net asset value as no sales commission or load is charged to the investor.
The Distributor has made no firm commitment to acquire shares of each Fund.
TAXES
(See "Distribution and performance information--Dividends and capital
gains distributions" and "Transaction information--Tax information,
Tax identification number" in the Funds' prospectuses.)
Each 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.
A regulated investment company qualifying under Subchapter M of the Code is
required to distribute to its shareholders at least 90 percent of its investment
company taxable income (including net short-term capital gain) and generally is
not subject to federal income tax to the extent that it distributes annually its
investment company taxable income and net realized capital gains in the manner
required under the Code.
Each Fund is subject to a 4% nondeductible excise tax on amounts required
to be but not distributed under a prescribed formula. The formula requires
payment to shareholders during a calendar year of distributions representing at
least 98% of a Fund's ordinary income for the calendar year, at least 98% of the
excess of its capital gains over capital losses (adjusted for certain ordinary
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losses) realized during the one-year period ending October 31 during such year,
and all ordinary income and capital gains for prior years that were not
previously distributed.
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 realized capital gains for a fiscal year are computed
by taking into account any capital loss carryforward of a Fund.
If any net realized long-term capital gains in excess of net realized
short-term capital losses are retained by a Fund for reinvestment, requiring
federal income taxes to be paid thereon by a Fund, that Fund intends to elect to
treat such capital gains as having been distributed to shareholders. As a
result, each shareholder will report such capital gains as long-term capital
gains, will be able to claim a proportionate share of federal income taxes paid
by a 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. If a Fund makes such an
election, it may not be treated as having met the excise tax distribution
requirement.
Distributions of investment company taxable income are taxable to
shareholders as ordinary income.
Dividends from domestic corporations are not expected to comprise a
substantial part of a Fund's gross income. If any such dividends constitute a
portion of a Fund's gross income, a portion of the income distributions of that
Fund may be eligible for the 70% deduction for dividends received by
corporations. Shareholders will be informed of the portion of dividends which so
qualify. The dividends-received deduction is reduced to the extent the shares of
a Fund with respect to which the dividends are received are treated as
debt-financed under federal income tax law and is eliminated if the shares are
deemed to have been held for less than 46 days.
Distributions of the excess of net long-term capital gain over net
short-term capital loss are taxable to shareholders as long-term capital gain,
regardless of the length of time the shares of a Fund have been held by such
shareholders. 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 investment company taxable 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 investment company taxable 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 will be deemed
to have been received by shareholders on December 31, if paid during January of
the following year. Redemptions of shares, including exchanges for shares of
another Scudder fund, may result in tax consequences (gain or loss) to the
shareholder and are also subject to these reporting requirements.
An individual may make a deductible IRA contribution of up to $2,000 or, if
less, the amount of the individual's earned income for any taxable year only if
(i) neither the individual nor his or her spouse (unless filing separate
returns) is an active participant in an employer's retirement plan, or (ii) the
individual (and his or her spouse, if applicable) has an adjusted gross income
below a certain level ($40,050 for married individuals filing a joint return,
with a phase-out of the deduction for adjusted gross income between $40,050 and
$50,000; $25,050 for a single individual, with a phase-out for adjusted gross
income between $25,050 and $35,000). However, an individual not permitted to
make a deductible contribution to an IRA for any such taxable year may
nonetheless make nondeductible contributions up to $2,000 to an IRA (up to
$2,250 to IRAs for an individual and his or her nonearning spouse) for that
year. There are special rules for determining how withdrawals are to be taxed if
an IRA contains both deductible and nondeductible amounts. In general, a
proportionate amount of each withdrawal will be deemed to be made from
nondeductible contributions; amounts treated as a return of nondeductible
contributions will not be taxable. Also, annual contributions may be made to a
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spousal IRA even if the spouse has earnings in a given year if the spouse elects
to be treated as having no earnings (for IRA contribution purposes) for the
year.
Distributions by a Fund result in a reduction in the net asset value of
that Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above, even though,
from an investment standpoint, it may constitute a partial return of capital. In
particular, investors should consider the tax implications of buying shares just
prior to a distribution. The price of shares purchased at that time includes the
amount of the forthcoming distribution. Those purchasing just prior to a
distribution will then receive a partial return of capital upon the
distribution, which will nevertheless be taxable to them.
Each Fund intends to qualify for and may make the election permitted under
Section 853 of the Code so that shareholders may (subject to limitations) be
able to claim a credit or deduction on their federal income tax returns for, and
will be required to treat as part of the amounts distributed to them, their pro
rata portion of qualified taxes paid by a Fund to foreign countries (which taxes
relate primarily to investment income). Each Fund may make an election under
Section 853 of the Code, provided that more than 50% of the value of the total
assets of a Fund at the close of the taxable year consists of securities in
foreign corporations. The foreign tax credit available to shareholders is
subject to certain limitations imposed by the Code.
If a Fund does not make the election permitted under section 853 any
foreign taxes paid or accrued will represent an expense to the Fund which will
reduce its investment company taxable income. Absent this election, shareholders
will not be able to claim either a credit or a deduction for their pro rata
portion of such taxes paid by a Fund, nor will shareholders be required to treat
as part of the amounts distributed to them their pro rata portion of such taxes
paid.
Equity options (including covered call options written on portfolio stock)
and over-the-counter options on debt securities written or purchased by a Fund
will be subject to tax under Section 1234 of the Code. In general, no loss will
be recognized by a 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 a Fund's holding period for the option, and in the case
of the exercise of a put option, on a Fund's holding period for the underlying
property. The purchase of a put option may constitute a short sale for federal
income tax purposes, causing an adjustment in the holding period of any property
in a Fund's portfolio similar to the property underlying the put option. If a
Fund writes an option, no gain is recognized upon its receipt of a premium. If
the option lapses or is closed out, any gain or loss is treated as short-term
capital gain or loss. If the option is exercised, the character of the gain or
loss depends on the holding period of the underlying stock.
Positions of a Fund which consist of at least one stock and at least one
stock option or other position with respect to a related security which
substantially diminishes that Fund's risk of loss with respect to such stock
could be treated as a "straddle" which is governed by Section 1092 of the Code,
the operation of which may cause deferral of losses, adjustments in the holding
periods of stocks or securities and conversion of short-term capital losses into
long-term capital losses. An exception to these straddle rules exists for
certain "qualified covered call options" on stock written by the relevant Fund.
Many futures and forward contracts entered into by a Fund and listed
nonequity options written or purchased by a Fund (including options on debt
securities, options on futures contracts, options on securities indices and
options on currencies), will be governed by Section 1256 of the Code. Absent a
tax election to the contrary, gain or loss attributable to the lapse, exercise
or closing out of any such position generally will be treated as 60% long-term
and 40% short-term capital gain or loss, and on the last trading day of the
Fund's fiscal year, all outstanding Section 1256 positions will be marked to
market (i.e., treated as if such positions were closed out at their closing
price on such day), with any resulting gain or loss recognized as 60% long-term
and 40% short-term capital gain or loss. Under Section 988 of the Code,
discussed below, foreign currency gain or loss from foreign currency-related
forward contracts, certain futures and options and similar financial instruments
entered into or acquired by a Fund will be treated as ordinary income or loss.
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Subchapter M of the Code requires each Fund to realize less than 30% of its
annual gross income from the sale or other disposition of stock, securities and
certain options, futures and forward contracts held for less than three months.
Each Fund's options, futures and forward transactions may increase the amount of
gains realized by the Fund that are subject to this 30% limitation. Accordingly,
the amount of such transactions that a Fund may undertake may be limited.
Positions of a Fund which consist of at least one position not governed by
Section 1256 and at least one futures or forward contract or nonequity option or
other position governed by Section 1256 which substantially diminishes that
Fund's risk of loss with respect to such other position will be treated as a
"mixed straddle." Although mixed straddles are subject to the straddle rules of
Section 1092 of the Code, the operation of which may cause deferral of losses,
adjustments in the holding periods of securities and conversion of short-term
capital losses into long-term capital losses, certain tax elections exist for
them which reduce or eliminate the operation of these rules. Each Fund will
monitor its transactions in options, foreign currency futures and forward
contracts and may make certain tax elections in connection with these
investments.
Under the Code, gains or losses attributable to fluctuations in exchange
rates which occur between the time a Fund accrues interest or other receivables
or accrues expenses or other liabilities denominated in a foreign currency and
the time that Fund actually collects such receivables or pays such liabilities
generally are treated as ordinary income or ordinary loss. Similarly, on
disposition of debt securities denominated in a foreign currency and on
disposition of certain options, futures and forward contracts, gains or losses
attributable to fluctuations in the value of foreign currency between the date
of acquisition of the security or contract and the date of disposition are also
treated as ordinary gain or loss. These gains or losses, referred to under the
Code as "Section 988" gains or losses, may increase or decrease the amount of a
Fund's investment company taxable income to be distributed to its shareholders
as ordinary income.
If a Fund invests in stock of certain foreign investment companies, that
Fund may be subject to U.S. federal income taxation on a portion of any "excess
distribution" with respect to, or gain from the disposition of, such stock. The
tax would be determined by allocating such distribution or gain ratably to each
day of a Fund's holding period for the stock. The distribution or gain so
allocated to any taxable year of a Fund, other than the taxable year of the
excess distribution or disposition, would be taxed to that Fund at the highest
ordinary income rate in effect for such year, and the tax would be further
increased by an interest charge to reflect the value of the tax deferral deemed
to have resulted from the ownership of the foreign company's stock. Any amount
of distribution or gain allocated to the taxable year of the distribution or
disposition would be included in a Fund's investment company taxable income and,
accordingly, would not be taxable to that Fund to the extent distributed by the
Fund as a dividend to its shareholders.
Each Fund may be able to make an election, in lieu of being taxable in the
manner described above, to include annually in income its pro rata share of the
ordinary earnings and net capital gain of the foreign investment company,
regardless of whether it actually received any distributions from the foreign
company. These amounts would be included in a Fund's investment company taxable
income and net capital gain which, to the extent distributed by that Fund as
ordinary or capital gain dividends, as the case may be, would not be taxable to
the Fund. In order to make this election, a Fund would be required to obtain
certain annual information from the foreign investment companies in which it
invests, which in many cases may be difficult to obtain. Each Fund may make an
election with respect to those foreign investment companies which provide a Fund
with the required information.
If a Fund invests in certain high yield original issue discount obligations
issued by corporations, a portion of the original issue discount accruing on the
obligation may be eligible for the deduction for dividends received by
corporations. In such event, dividends of investment company taxable income
received from a Fund by its corporate shareholders, to the extent attributable
to such portion of accrued original issue discount, may be eligible for this
deduction for dividends received by corporations if so designated by a Fund in a
written notice to shareholders.
Each Fund will be required to report to the Internal Revenue Service all
distributions of investment company taxable income and capital gains as well as
gross proceeds from the redemption or exchange of Fund shares, except in the
case of certain exempt shareholders. Under the backup withholding provisions of
Section 3406 of the Code, distributions of investment company taxable income and
capital gains and proceeds from the redemption or exchange of the shares of a
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regulated investment company may be subject to withholding of federal income tax
at the rate of 20% in the case of non-exempt shareholders who fail to furnish
the investment company with their taxpayer identification numbers and with
required certifications regarding their status under the federal income tax law.
Withholding may also be required if a 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. If the withholding provisions are applicable, any such
distributions and proceeds, whether taken in cash or reinvested in additional
shares, will be reduced by the amounts required to be withheld.
Shareholders of each Fund may be subject to state and local taxes on
distributions received from a Fund and on redemptions of a Fund's shares.
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. 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 a Fund, including the possibility that such a shareholder
may be subject to a U.S. withholding tax at a rate of 30% (or at a lower rate
under an applicable income tax treaty) on amounts constituting ordinary income
received by him or her, where such amounts are treated as income from U.S.
sources under the Code.
Shareholders should consult their tax advisers about the application of the
provisions of tax law described in this statement of additional information in
light of their particular tax situations.
PORTFOLIO TRANSACTIONS
Brokerage Commissions
To the maximum extent feasible, the Adviser places orders for portfolio
transactions for each Fund through the Distributor which in turn places orders
on behalf of a Fund with issuers, underwriters or other brokers and dealers. The
Distributor receives no commissions, fees or other remuneration from the Funds
for this service. Allocation of brokerage is supervised by the Adviser.
The primary objective of the Adviser in placing orders for the purchase and
sale of securities for the Funds' portfolio is to obtain the most favorable net
results taking into account such factors as price, commission where applicable
(negotiable in the case of U.S. national securities exchange transactions but
which is generally fixed in the case of foreign exchange transactions) size of
order, difficulty of execution and skill required of the executing
broker/dealer. The Adviser seeks to evaluate the overall reasonableness of
brokerage commissions paid (to the extent applicable) through the familiarity of
the Distributor with commissions charged on comparable transactions, as well as
by comparing commissions paid by the Fund to reported commissions paid by
others. The Adviser reviews on a routine basis commission rates, execution and
settlement services performed, making internal and external comparisons.
When it can be done consistently with the policy of obtaining the most
favorable net results, it is the Adviser's practice to place such orders with
brokers and dealers who supply market quotations to Scudder Fund Accounting
Corporation for appraisal purposes, or who supply research, market and
statistical information to the Funds. The term "research, market and statistical
information" includes advice as to the value of securities, the advisability of
investing in, purchasing or selling securities, and 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 Adviser is not
authorized when placing portfolio transactions for a Fund to pay a brokerage
commission (to the extent applicable) in excess of that which another broker
might have charged for executing the same transaction solely on account of the
receipt of research, market or statistical information. The Adviser will not
place orders with brokers or dealers on the basis that the broker or dealer has
or has not sold shares of a Fund. Except for implementing the policy stated
above, there is no intention to place portfolio transactions with particular
brokers or dealers or groups thereof. In effecting transactions in
over-the-counter securities, orders are placed with the principal market makers
for the security being traded unless, after exercising care, it appears that
more favorable results are available otherwise.
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Each Fund's purchases of securities which are traded in the
over-the-counter market are generally placed by the Adviser with primary market
makers for these securities on a net basis, without any brokerage commission
being paid by a Fund. Such 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.
Although certain research, market and statistical information from brokers
and dealers can be useful to a Fund and to the Adviser, it is the opinion of the
Adviser that such information will only supplement the Adviser's own research
effort since the information must still be analyzed, weighed, and reviewed by
the Adviser's staff. Such information may be useful to the Adviser in providing
services to clients other than the Funds, and not all such information will be
used by the Adviser in connection with each Fund. Conversely, such information
provided to the Adviser by brokers and dealers through whom other clients of the
Adviser effect securities transactions may be useful to the Adviser in providing
services to the Funds.
Subject also to obtaining the most favorable net results, the Adviser may
place brokerage transactions through the Funds' custodian and a credit will be
given against the custodian fee due to the custodian equal to one-half of the
commission on any such transaction.
For the period December 8, 1992 (commencement of operations) to October 31,
1993 and for the fiscal years ended October 31, 1994 and 1995 Latin America Fund
paid brokerage commissions of $664,710, $1,959,556 and $1,422,389, respectively.
For the fiscal year ended October 31, 1995, $1,038,343 (73%) of the total
brokerage commissions paid by the Fund 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 Adviser. The amount of such transactions aggregated
$277,286,821 (71%) of all brokerage transactions. Such brokerage was not
allocated to any particular brokers or dealers or with any regard to the
provision of market quotations for purposes of valuing the Fund's portfolio or
to any other special factors.
For the period December 8, 1992 (commencement of operations) to October 31,
1993 and for the fiscal years ended October 31, 1994 and 1995 Pacific
Opportunities Fund paid brokerage commissions of $1,024,534, $2,485,807, and
$3,060,256, respectively. For the fiscal year ended October 31, 1995, $887,474
(28%) of the total brokerage commissions paid by the Fund 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 Adviser. The amount of such
transactions aggregated $205,628,626 (35%) of all brokerage transactions. Such
brokerage was not allocated to any particular brokers or dealers or with any
regard to the provision of market quotations for purposes of valuing the Fund's
portfolio or to any other special factors.
For the fiscal year ended October 31, 1995, Greater Europe Growth Fund paid
brokerage commissions of $301,682. For the fiscal year ended October 31, 1995,
$244,362 (81%) of the total brokerage commissions paid by the Fund resulted in
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 Adviser. The amount of such
transactions aggregated $73,481,559 (79%) of all brokerage transactions. Such
brokerage was not allocated to any particular brokers or dealers or with any
regard to the provision of market quotations for purposes of valuing the Fund's
portfolio or to any other special factors.
The Directors review from time to time whether the recapture for the
benefit of a Fund of some portion of the brokerage commissions or similar fees
paid by a Fund on portfolio transactions is legally permissible and advisable.
Portfolio Turnover
Latin America Fund's average annual portfolio turnover rate, i.e. the ratio
of the lesser of sales or purchases to the monthly average value of the
portfolio (excluding from both the numerator and the denominator all securities
with maturities at the time of acquisition of one year or less), for the period
December 8, 1992 (commencement of operations) to October 31, 1993 and for the
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fiscal years ended October 31, 1994 and 1995 was 4.6% (annualized), 22.4% and
39.5%, respectively. For the period December 8, 1992 (commencement of
operations) to October 31, 1993 and for the fiscal years ended October 31, 1994
and 1995, Pacific Opportunities Fund had a portfolio turnover rate of 9.9%
(annualized), 38.5% and 64.0%, respectively. For the fiscal year ended October
31, 1995, Greater Europe Growth Fund had a portfolio turnover rate of 27.9%.
Higher levels of activity by the Funds result in higher transaction costs and
may also result in taxes on realized capital gains to be borne by the Funds'
shareholders. Purchases and sales are made for a Fund whenever necessary, in
management's opinion, to meet the Funds' objectives.
NET ASSET VALUE
The net asset value of shares of a Fund is computed as of the close of
regular trading on the Exchange on each day the Exchange is open for trading.
The Exchange is scheduled to be closed on the following holidays: New Year's
Day, Presidents Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas. Net asset value per share is determined by dividing
the value of the total assets of the Fund, less all liabilities, by the total
number of shares outstanding.
An exchange-traded equity security is valued at its most recent sale price.
Lacking any sales, the security is valued at the calculated mean between the
most recent bid quotation and the most recent asked quotation (the "Calculated
Mean"). Lacking a Calculated Mean, the security is valued at the most recent bid
quotation. An equity security which is traded on the National Association of
Securities Dealers Automated Quotation ("NASDAQ") system is valued at its most
recent sale price. Lacking any sales, the security is valued at the high or
"inside" bid quotation. The value of an equity security not quoted on the NASDAQ
System, but traded in another over-the-counter market, is its most recent sale
price. Lacking any sales, the security is valued at the Calculated Mean. Lacking
a Calculated Mean, the security is valued at the most recent bid quotation.
Debt securities, other than short-term securities, are valued at prices
supplied by the Fund's pricing agent(s) which reflect broker/dealer supplied
valuations and electronic data processing techniques. Short-term securities with
remaining maturities of sixty days or less are valued by the amortized cost
method, which the Board believes approximates market value. If it is not
possible to value a particular debt security pursuant to these valuation
methods, the value of such security is the most recent bid quotation supplied by
a bona fide marketmaker. If it is not possible to value a particular debt
security pursuant to the above methods, the Adviser may calculate the price of
that debt security, subject to limitations established by the Board.
An exchange traded options contract on securities, currencies, futures and
other financial instruments is valued at its most recent sale price on such
exchange. Lacking any sales, the options contract is valued at the Calculated
Mean. Lacking any Calculated Mean, the options contract is valued at the most
recent bid quotation in the case of a purchased options contract, or the most
recent asked quotation in the case of a written options contract. An options
contract on securities, currencies and other financial instruments traded
over-the-counter is valued at the most recent bid quotation in the case of a
purchased options contract and at the most recent asked quotation in the case of
a written options contract. Futures contracts are valued at the most recent
settlement price. Foreign currency exchange forward contracts are valued at the
value of the underlying currency at the prevailing exchange rate.
If a security is traded on more than one exchange, or upon one or more
exchanges and in the over-the-counter market, quotations are taken from the
market in which the security is traded most extensively.
If, in the opinion of the Funds' 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.
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ADDITIONAL INFORMATION
Experts
The Financial Highlights of each Fund included in the Funds' prospectuses
and the Financial Statements incorporated by reference in this Statement of
Additional Information have been so included or incorporated by reference in
reliance on the report of Coopers & Lybrand, L.L.P., One Post Office Square,
Boston, Massachusetts 02109, independent accountants, and given on the authority
of that firm as experts in accounting and auditing.
Other Information
Many of the investment changes in each Fund will be made at prices
different from those prevailing at the time they may be reflected in a regular
report to shareholders of a Fund. These transactions will reflect investment
decisions made by the Adviser in the light of its other portfolio holdings and
tax considerations and should not be construed as recommendations for similar
action by other investors.
The CUSIP number of Latin America Fund is 811165 20 8.
The CUSIP number of Pacific Opportunities Fund is 811165 30 7.
The CUSIP number of Greater Europe Growth Fund is 811165 40 6.
Each Fund has a fiscal year end of October 31.
Dechert Price & Rhoads acts as general counsel for the Funds.
Each Fund employs Brown Brothers Harriman & Company, 40 Water Street,
Boston, Massachusetts 02109 as Custodian. 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.
Costs of $80,462 and $58,141 incurred by Latin America Fund and Pacific
Opportunities Fund, respectively, in conjunction with their organization are
amortized over the five year period beginning December 8, 1992.
Scudder Service Corporation ("Service Corporation"), P.O. Box 2291, Boston,
Massachusetts, 02107-2291, a subsidiary of the Adviser, is the transfer and
dividend disbursing agent for each Fund. Service Corporation also serves as
shareholder service agent and provides subaccounting and recordkeeping services
for shareholder accounts in certain retirement and employee benefit plans. The
Funds pay Service Corporation an annual fee of $17.55 per shareholder account
which is $8.05 for its services as transfer and dividend paying agent and $9.50
for its services as shareholder service agent. For the fiscal year ended October
31, 1995, Latin America Fund incurred charges of $1,778,233 of which $134,608 is
unpaid at October 31, 1995. For the fiscal year ended October 31, 1995, Pacific
Opportunities Fund incurred charges of $1,047,442 of which $80,873 is unpaid at
October 31, 1995. For the fiscal year ended October 31, 1995, Greater Europe
Growth Fund incurred charges of $123,598 of which $48,403 was not imposed and
$74,698 was unpaid at October 31, 1995.
Annual service fees are paid by each Fund to Scudder Trust Company, Two
International Place, Boston, Massachusetts, 02110-4103, an affiliate of the
Adviser, for certain retirement plan accounts. Each Fund pays Scudder Trust
Company an annual fee of $17.55 per shareholder account. For the fiscal year
ended October 31, 1995, Latin America Fund incurred fees of $0, Pacific
Opportunities Fund incurred fees of $26,282 and Greater Europe Growth Fund
incurred fees of $931.
Scudder Fund Accounting Corporation, Two International Place, Boston,
Massachusetts 02110-4103, a subsidiary of the Adviser, computes net asset values
for the Funds. Each Fund pays Scudder Fund Accounting Corporation an annual fee
equal to 0.065% of the first $150 million of average daily net assets, 0.04% of
63
<PAGE>
such assets in excess of $150 million and 0.02% of such assets in excess of $1
billion, plus holding and transaction charges for this service.
The Funds' prospectuses and this Statement of Additional Information omit
certain information contained in the Registration Statement which the Funds have
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 a Fund and
the securities offered hereby. This Registration Statement and its amendments
are available for inspection by the public at the SEC in Washington, D.C.
FINANCIAL STATEMENTS
Latin America Fund
The financial statements, including the Investment Portfolio of Latin
America Fund, together with the Report of Independent Accountants, Financial
Highlights and notes to financial statements, are incorporated by reference and
attached hereto in the Annual Report to the Shareholders of the Fund dated
October 31, 1995, and are hereby deemed to be part of this Statement of
Additional Information.
Pacific Opportunities Fund
The financial statements, including the Investment Portfolio of Pacific
Opportunities Fund, together with the Report of Independent Accountants,
Financial Highlights and notes to financial statements, are incorporated by
reference and attached hereto in the Annual Report to the Shareholders of the
Fund dated October 31, 1995, and are hereby deemed to be part of this Statement
of Additional Information.
Greater Europe Growth Fund
The financial statements, including the Investment Portfolio of Greater
Europe Growth Fund, together with the Report of Independent Accountants,
Financial Highlights and notes to financial statements, are incorporated by
reference and attached hereto in the Annual Report to the Shareholders of the
Fund dated October 31, 1995, and are hereby deemed to be part of this Statement
of Additional Information.
64
<PAGE>
APPENDIX
The following is a description of the ratings given by Moody's and S&P to
corporate bonds.
Ratings of Corporate Bonds
S&P:
Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong. Debt rated AA has a very
strong capacity to pay interest and repay principal and differs from the highest
rated issues only in small degree. Debt rated A has a strong capacity to pay
interest and repay principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than debt in
higher rated categories. Debt rated BBB is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major exposures to adverse conditions.
Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating. Debt rated B has a greater
vulnerability to default but currently has the capacity to meet interest
payments and principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to pay interest and repay
principal. The B rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied BB or BB- rating.
Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating. The rating CC typically is applied to debt subordinated to
senior debt that is assigned an actual or implied CCC rating. The rating C
typically is applied to debt subordinated to senior debt which is assigned an
actual or implied CCC- debt rating. The C rating may be used to cover a
situation where a bankruptcy petition has been filed, but debt service payments
are continued. The rating C1 is reserved for income bonds on which no interest
is being paid. Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date due even
if the applicable grace period had not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
Moody's:
Bonds which are rated Aaa are judged to be of 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. 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. 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
<PAGE>
adequate but elements may be present which suggest a susceptibility to
impairment sometime in the future.
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. Bonds which are rated Ba are
judged to have speculative elements; their future cannot be considered as well
assured. Often the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this class. Bonds
which are rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest. Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings. Bonds which are rated C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
<PAGE>
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
Scudder
Latin America
Fund
Annual Report
October 31, 1995
o For investors seeking long-term growth of capital from a portfolio investing
primarily in the securities of Latin American issuers.
o A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
<PAGE>
SCUDDER LATIN AMERICA FUND
CONTENTS
2 In Brief
3 Letter from the Fund's Chairman
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
11 Investment Portfolio
15 Financial Statements
18 Financial Highlights
19 Notes to Financial Statements
24 Report of Independent Accountants
25 Tax Information
25 Officers and Directors
26 Investment Products and Services
27 How to Contact Scudder
IN BRIEF
- Compared with the early years of this decade, the past 12 months have been
highly volatile for most Latin American stock markets. Mexico's decision in
late 1994 to devalue the peso sparked a selloff that resulted in severe
declines in the dollar prices of Mexican stocks. Fearful of currency
devaluations elsewhere, investors liquidated holdings in other Latin
American markets, eroding prices throughout the region.
- Scudder Latin America Fund's -30.96% return for the year, although
disappointing, was less than the decline of the unmanaged IFC Latin America
Investable Total Return Index and the average decline of the 17 Latin
America funds tracked by Lipper Analytical Services.
(bar chart title)
Investment Returns for the 12 Months Ended 10/31/95
(bar chart data)
IFC Latin America
Scudder Latin America Investable Total
Fund Return Index Lipper Average
---- ------------ --------------
-30.96% -37.44% -38.94%
- In the wake of a dramatic outflow of foreign investment this year, Latin
American governments have demonstrated their commitment to economic and
market reforms intended to increase internal savings and investment.
2
<PAGE>
LETTER FROM THE FUND'S CHAIRMAN
Dear Shareholders,
Latin America has been a learning experience for many investors. The
initial success of all Latin American markets in 1993 and most of 1994 convinced
some that these markets were all return and no risk. After the Mexican peso
devaluation in December and subsequent market declines, investors pulled out of
the region en masse, their views on risk and return having made a full pendulum
swing.
As long-term investors, we have tried to put things into perspective.
Similarly, shareholders who have been with the Fund since inception have seen
the best and the worst, and thus can evaluate their commitment to Latin America
with a more complete understanding of the potential risks and rewards. This
year's declines have not lessened our belief in the region's long-term
investment potential. In fact, the dramatic responses in Mexico, Argentina, and
elsewhere to the loss of foreign investment capital have provided new sources of
optimism.
As market-based economic reforms continue in these countries, we
believe opportunities for significant capital appreciation will continue apace.
Over the past few years, your portfolio managers have demonstrated commendable
skill in taking advantage of those opportunities, while also outperforming the
indices in both high and low markets. Scudder Latin America Fund was the
top-performing Latin America fund, according to Lipper, during the two years
ended October 31, 1995 -- a period that encompassed both spectacular gains and
sobering declines.*
As always, please contact a Scudder Investor Relations representative
at 1-800-225-2470 if you have any questions about the Fund or your investments.
Page 27 provides more information on how to contact Scudder. Thank you for
choosing Scudder Latin America Fund to help meet your investment needs.
Sincerely,
/s/Edmond D. Villani
Edmond D. Villani, Chairman
Scudder Latin America Fund
* The Fund was ranked first of nine funds for the two years ended 10/31/95,
second of 17 funds for the 12 months ended 10/31/95, and first of four funds
since inception (12/8/92).
3
<PAGE>
SCUDDER LATIN AMERICA FUND
PERFORMANCE UPDATE as of October 31, 1995
- -----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------
SCUDDER LATIN AMERICA FUND
- ----------------------------------------
Total Return
Period Growth --------------
Ended of Average
10/31/95 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $ 6,904 -30.96% -30.96%
Life of
Fund* $14,132 41.32% 12.69%
IFC LATIN AMERICA INVESTABLE TOTAL
RETURN INDEX
- --------------------------------------
Total Return
Period Growth --------------
Ended of Average
10/31/95 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $ 6,256 -37.44% -37.44%
Life of
Fund* $11,826 18.26% 6.11%
IFC GLOBAL LATIN AMERICA COMPOSITE
INDEX
- --------------------------------------
Total Return
Period Growth --------------
Ended of Average
10/31/95 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $ 6,611 -33.89% -33.89%
Life of
Fund* $12,646 26.46% 8.66%
* The Fund commenced operations on
December 8, 1992. Index comparisons
begin December 31, 1992.
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
Scudder Latin America Fund
Year Amount
- ----------------------
12/92* $10,000
4/93 $10,560
10/93 $14,728
4/94 $16,604
10/94 $19,651
4/95 $13,558
10/95 $13,567
IFC Latin America Investable
Total Return Index
Year Amount
- ----------------------
12/92* $10,000
4/93 $10,350
10/93 $13,434
4/94 $15,495
10/94 $18,903
4/95 $12,114
10/95 $11,826
IFC Global Latin America
Composite Index
Year Amount
- ----------------------
12/92* $10,000
4/93 $ 9,995
10/93 $12,910
4/94 $15,013
10/94 $19,129
4/95 $12,981
10/95 $12,646
The IFC Latin America Investable Total Return Index is prepared
by International Finance Corporation. It is an unmanaged, market
capitalization-weighted representation of stock performance in
seven Latin American markets, and measures the returns of stocks
that are legally and practically available to investors. Unlike
Fund returns, Index returns do not reflect any fees or expenses.
- -----------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
- -----------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
YEARLY PERIODS ENDED OCTOBER 31
1993* 1994 1995
---------------------------
NET ASSET VALUE... $18.41 $24.44 $16.22
INCOME DIVIDENDS.. $ -- $ .06 $ --
CAPITAL GAINS
DISTRIBUTIONS..... $ -- $ .06 $ .73
FUND TOTAL
RETURN (%)........ 53.42** 33.43 -30.96
INDEX TOTAL
RETURN (%)........ 28.72 48.17 -37.44
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results.
Investment return and principal value will fluctuate, so an investor's
shares, when redeemed, may be worth more or less than when purchased.
If the Adviser had not maintained the Fund's expenses, the average annual
total return for the one year and life of Fund periods would have been
lower.
** Total return does not reflect the effect of the applicable redemption
fees.
4
<PAGE>
PORTFOLIO SUMMARY as of October 31, 1995
- ---------------------------------------------------------------------------
GEOGRAPHICAL (Excludes 12% Cash Equivalents)
- ---------------------------------------------------------------------------
Brazil 43%
Mexico 27% The Fund's relatively high
Argentina 22% weighting in Brazilian
Chile 4% and Argentine stocks
Peru 3% provided some protection
Colombia 1% this year against the
---- declines in Mexico.
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
SECTORS (Excludes 12% Cash Equivalents)
- --------------------------------------------------------------------------
Consumer Staples 27%
Communications 16% Consumer staples companies
Energy 14% continue to make up the
Manufacturing 11% Fund's largest sector
Utilities 9% weighting. Such holdings
Financial 8% typically have good cash
Metals and Minerals 7% flow and a large share of
Consumer Discretionary 5% their markets.
Construction 3%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
TEN LARGEST EQUITY HOLDINGS
- --------------------------------------------------------------------------
1. PEREZ COMPANC S.A.
Industrial conglomerate in Argentina
2. TELECOMUNICACOES DE SAO PAULO S.A.
Telecommunication services in Brazil
3. COMPANHIA ENERGETICA DE MINAS GERAIS
Electric power utility in Brazil
4. COMPANHIA CERVEJARIA BRAHMA
Leading beer producer and distributor in Brazil
5. COMPANHIA VALE DO RIO DOCE
Diverse mining and industrial complex in Brazil
6. KIMBERLY CLARK DE MEXICO S.A. DE C.V.
Consumer paper products company
7. PANAMERICAN BEVERAGES INC.
Soft drink bottler in Mexico
8. BANCO ITAU S.A.
Bank in Brazil
9. PETROLEO BRASILIERO S.A.
Petroleum company in Brazil
10. CENTRAIS ELECTRICAS BRASILEIRAS S/A
Electrical utility in Brazil
The predominance of Brazilian stocks among the Fund's largest holdings
attests to our confidence in the country's continued economic and
political reform.
- --------------------------------------------------------------------------
For more complete details about the Fund's Investment Portfolio,
see page 11.
A monthly Investment Portfolio Summary and quarterly Portfolio Holdings
are available upon request.
5
<PAGE>
SCUDDER LATIN AMERICA FUND
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
Fiscal-year 1995 was clearly the most difficult since the Fund's
inception in late 1992. The Fund's -30.96% total return for fiscal year 1995
largely reflects the severe declines most Latin American stock markets
experienced during the first quarter. As we mentioned in previous reports to
shareholders, the unanticipated devaluation of the Mexican peso in late December
1994 was the triggering mechanism for what became one of the worst bear markets
in the region since the debt crisis of the early 1980s.
But market returns for the full year mask substantial recoveries in
some cases -- recoveries prompted by the actions of Latin American governments
to achieve equilibrium in their trade accounts with other nations and to
continue with market-based economic reforms. The Brazilian market, for example,
declined 38% in the six months through April 30, 1995, but cut its losses to 26%
by the end of October. The Peruvian market reversed a 27.47% decline as of April
30, 1995, and posted a 1.28% gain for the full 12-month period ended October 31.
For the same period, the International Finance Corporation's unmanaged Latin
America Investable Total Return Index fell 37.44%. Returns for the individual
country components of the Index are shown below:
(bar chart title)
Investment Returns in Latin American
Stock Markets
(for the 12 months ended October 31, 1995)
(bar chart data)
Argentina -26.33%
Brazil -25.47%
Chile -9.87%
Colombia -28.46%
Mexico -54.54%
Peru +1.28%
Venezuela +4.43%
IFC Latin America -37.44%
Investable Index
Source: IFC Emerging Markets Database
Past performance is no indication of future results.
6
<PAGE>
Mexico Stumbles
Historically, a fundamental problem in Mexico and elsewhere in Latin
America (with the exception of Chile) has been a very low rate of internal
savings. Foreigners have taken up the slack mainly through short-term loans,
adding an element of instability to the extent that investment spending and
therefore economic growth has been highly influenced by the willingness of
foreign savers to supplement internally generated savings.
By late 1994, the situation in Mexico had become unstable. The country
had a current account deficit of over $29 billion and had suffered two unsolved
political assassinations. Given the increase in political and economic risk,
investors who had been sending billions to the country for years decided that it
was no longer prudent to do so. Others demanded steeply higher interest rates,
threatening to snuff out the country's recent economic recovery. The Mexican
government concluded that a devaluation was necessary to trim the current
account deficit and remove the upward pressure on interest rates. In all, gross
fixed investment in Mexico declined from 21.6% of GDP in 1994 to an estimated
17% in 1995, and the economy is expected to contract by upwards of 6% to 7% this
year.
Argentina experienced a similar catastrophe after the Mexico crisis,
losing nearly $8 billion in bank deposits in the three months following the
December devaluation. A subsequent drop in private credit curtailed financing
for investment and consumption goods, as well as working capital, providing an
immediate shock on the supply side from which the economy is only now
recovering. Real GDP this year is expected to be 2% to 3% below that of 1994.
The Case for Investing in Latin America
The capital flight early this year and the region's economic
difficulties have not lessened our belief in Latin America's long-term
investment potential. Desperately in need of investment capital, the region has
the potential to offer comparatively higher rates of return than one typically
finds in the more developed countries of the world. With the exception of
Venezuela, governments in Latin America understand that until they can finance
healthy capital formation ratios with assured levels of internal savings, they
will be beholden to foreign savers and subject to the type of economic
7
<PAGE>
contraction that results when the inflow of capital is withheld. The goal of
economic reform in Latin America should be to encourage the inflow of long-term
foreign savings and to promote higher rates of internal savings. Liberalized
capital markets broaden society's choice about how funds are to be allocated.
The recent turmoil in Mexico has reaffirmed the critical importance of reform in
that direction, demonstrating the damage done by the fall-off of foreign savings
in economies with sub-optimal internal savings rates.
The case for investing in Latin America is bolstered by the fact that
in 1995, countries made difficult adjustments when faced with significant
challenges. Mexico reversed its current account deficit virtually overnight and
is expected to post a slight surplus this year. (Exports continued to grow -- up
25% this year -- while imports have declined due to the economic downturn.)
Argentina also has improved its current account deficit through strong exports
and compressed imports. The country's 1994 deficit of $10.2 billion is expected
to shrink to $2.8 billion this year. Meanwhile inflation in Brazil, which had
been a mind-boggling 1,094% in 1994, is likely to finish this year at about a
23% rate. As a result of these adjustments, we expect healthy rates of economic
growth for most countries in 1996, as shown below.
Economic Growth Forecasts (GDP)
Country 1994 1995* 1996*
------- ---- ----- -----
Argentina 7.1% (2-3)% 1-2%
Brazil 5.8 4-5 4-5
Chile 4.2 6-7 6-7
Colombia 5.7 4-5 4-5
Mexico 3.5 (6-7) 2-3
Peru 12.7 7-8 6-7
Venezuela (3.3) (1-2) (2-3)
* Estimated. Estimates may prove to be inaccurate, and even if accurate,
economic growth may not correlate with market activity.
Source: Scudder Latin America Group
8
<PAGE>
The Portfolio
If the long-term case for investing in Latin America rests on the
ability of those countries to increase internal savings and investment, then the
companies in the portfolio should demonstrate the same. We look for companies
that are producing attractive returns on their invested capital and reinvesting
that money to generate future growth.
Holdings in Mexico (currently 23% of portfolio holdings) are largely
concentrated in food and beverage stocks. Given that Mexico has the region's
second-largest population, consumer-oriented businesses tend to provide steady
cash flows, regardless of the economic climate. An example is the recent
addition to the portfolio of Grupo Modelo, a beer exporter (brewer of Corona)
with a dominant market share in Mexico.
In Argentina (19% of portfolio holdings), we have emphasized oil and
natural gas companies such as YPF, Perez Companc, and Astra. In a region subject
to market volatility, we think it is a strategic advantage to own companies with
gas and oil reserves. Moreover, these companies' revenues are tied to the dollar
while many of their costs are peso denominated. Dollar-based revenues provide a
natural way to hedge against any exchange-rate uncertainties.
In Brazil (38% of portfolio holdings), we have increased the Fund's
emphasis on electric utilities. The basis for investment in this sector is the
projected shortage of power by 1997 and the urgent need for the government to
reform the sector's regulatory structure in order to attract additional
investment capital. Presently, Brazilian electric utilities earn little, if
anything, on their invested capital and are priced at deep discounts to book
value. We believe the privatization program underway in Brazil will reveal the
undervalued nature of these companies. Over the long-term, we expect dramatic
earnings improvements based upon more favorable regulatory treatment.
9
<PAGE>
Outlook
We took profits on some holdings this summer, given the opportunity
provided by improving stock prices. As a result, the Fund's cash position as of
October 31, 1995, (12% of total assets) is relatively high. In the coming
months, we intend to redeploy these funds into the market as investment
opportunities arise. As always, we will seek the best values in companies that
have strong market share, pricing power, and healthy cash flows. The past 12
months have been difficult for investors in Latin America, underscoring the fact
that price volatility is an integral part of the emerging markets. However, we
are encouraged by the region's continued economic and market-based reforms, and
believe that over the long-term investors in Latin America will be rewarded for
their commitment.
Sincerely,
Your Portfolio Management Team
/s/Edmund B. Games, Jr. /s/Joyce E. Cornell
Edmund B. Games, Jr. Joyce E. Cornell
/s/William F. Truscott
William F. Truscott
Scudder Latin America Fund:
A Team Approach to Investing
Scudder Latin America Fund is managed by a team of Scudder investment
professionals who each play an important role in the Fund's management process.
Team members work together to develop investment strategies and select
securities for the Fund. They are supported by Scudder's large staff of
economists, research analysts, traders, and other investment specialists who
work in Scudder's offices across the United States and abroad. We believe our
team approach benefits Fund investors by bringing together many disciplines and
leveraging Scudder's extensive resources.
Lead Portfolio Manager Edmund B. Games, Jr. has set the Fund's investment
strategy and overseen its daily operation since the Fund was introduced in 1992.
Ed joined Scudder's equity research area in 1960 and has focused on Latin
American stocks since 1988. Joyce E. Cornell, Portfolio Manager, has focused on
stock selection since 1993. Joyce, who has eight years of investment experience
as a research analyst, joined Scudder in 1991. William F. Truscott, Portfolio
Manager, contributes expertise on the Fund's Latin American investments, a role
he has filled since the Fund commenced operations. Ted joined Scudder in 1992
and has 12 years of experience in the financial industry, including eight years
specifically focused on Latin American investments.
10
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO as of October 31, 1995
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount (U.S.$) Value ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------
4.7% REPURCHASE AGREEMENT
---------------------------------------------------------------------------------------
24,295,000 Repurchase Agreement with Donaldson,
Lufkin & Jenrette dated 10/31/95 at 5.875%
to be repurchased at $24,298,965 on 11/1/95
collateralized by a $25,423,000 U.S. Treasury
Note, 5.2%, 6/27/96 (Cost $24,295,000) ............... 24,295,000
-----------
---------------------------------------------------------------------------------------
3.8% COMMERCIAL PAPER
---------------------------------------------------------------------------------------
20,000,000 General Electric Corp., 5.7%, 11/15/95
(Cost $19,955,667) ................................. 19,952,083
-----------
---------------------------------------------------------------------------------------
3.7% SHORT TERM NOTES
---------------------------------------------------------------------------------------
19,320,000 Federal Home Loan Mortgage Corp. Discount
Note, 5.85%, 11/1/95 (Cost $19,317,475) ............ 19,317,475
-----------
---------------------------------------------------------------------------------------
87.8% EQUITY SECURITIES
---------------------------------------------------------------------------------------
Shares
---------------------------------------------------------------------------------------
ARGENTINA 19.3% 5,840,890 Astra CAPSA (Petroleum company) ...................... 8,644,085
3,000,000 BI S.A. "A" (Venture capital company) (b) (c) (d) .... 3,159,000
2,591,653 Bagley y Cia Ltd. S.A."B" (Producer of
cookies and biscuits) .............................. 5,234,877
386,701 Corporacion Cementera Argentina "B"
(Cement producer) (b) (c) .......................... 1,662,731
1,472,511 Nobleza Piccardo (Tobacco company) ................... 5,668,884
5,922,160 Perez Companc S.A. "B" (Industrial
conglomerate) ...................................... 26,115,420
737,000 Quilmes Industrial S.A. (Leading beer distributor) ... 12,971,200
2,291,099 Telecom Argentina S.A. "B"
(Telecommunication services) ....................... 8,820,290
80,000 Telecom Argentina S.A. (ADR) ......................... 3,070,000
4,002,068 Telefonica de Argentina (Telecommunication
services) .......................................... 8,443,941
130,000 Telefonica de Argentina (ADR) ........................ 2,697,500
800,000 YPF S.A. "D" (ADR) (Petroleum company) ............... 13,700,000
-----------
100,187,928
-----------
BRAZIL 37.8% 1,235,168,731 Banco Bradesco S.A. (pfd.) (Commercial bank) ......... 11,301,778
57,069,600 Banco Ita# S.A. (pfd.) (Bank) ........................ 16,911,709
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
SCUDDER LATIN AMERICA FUND
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
50,000,000 Centrais Eletricas Brasileiras S/A "B" (pfd.)
(Electric utility) ................................. 14,244,866
49,198,681 Companhia Cervejaria Brahma (pfd.) (Leading
beer producer and distributor) ..................... 18,774,022
1,957,888 Companhia Cervejaria Brahma (pfd.) Warrants
(expire 9/30/96) (c) ............................... 285,006
900,875,000 Companhia Energetica de Minas Gerais
(pfd.) (Electric power utility) .................... 19,296,101
63,850,000 Companhia Energetica de Sao Paulo (pfd.)
(Electric utility) ................................. 2,163,630
326,589,100 Companhia Paranaense de Energia (voting)
(Electric utility) ................................. 2,411,004
22,160,000 Companhia Paulista de Forca e Luz (voting)
(Electric power utility) ........................... 1,093,081
52,043,000 Companhia Petroquimica do Sul S.A. (voting)
(Chemical producer) ................................ 2,191,569
115,300,000 Companhia Siderurgica Nacional (voting)
(Steel producer) ................................... 2,469,644
1,085,840 Companhia Suzano de Papel e Celulose S.A.
(pfd.) (Paper products) ............................ 5,758,029
118,350,000 Companhia Vale do Rio Doce (pfd.) (Diverse
mining and industrial complex) ..................... 19,012,295
3,232,000 Empresa Brasileira de Compressores S.A. (pfd.)
(Manufacturer of electrical equipment) ............. 2,117,141
2,300,000 Investimentos Ita# S/A (pfd.) (Diversified holding
company, involved in finance, electronics,
wood products) ..................................... 1,315,311
107,667,360 Lojas Americanas S.A. (pfd.) (Discount
department store chain) ............................ 2,574,837
201,708,380 Lojas Americanas S.A. (voting) ....................... 4,509,207
175,000,000 Petroleo Brasileiro S.A. (pfd.) (Petroleum
company) ........................................... 15,104,497
10,063,146,120 S/A White Martins (voting) (Chemical company) ........ 9,730,934
8,764,000 Sadia Concordia S/A (pfd.) (Processed poultry
and meat) .......................................... 6,925,542
703,500 Souza Cruz S.A. (voting) (Holding company:
cigarettes and tobacco, fiber cellulose) ........... 5,032,576
153,410,000 Telecomunicacoes de Paulo Paulo S.A. (pfd.)
(Telecommunication services) ....................... 22,014,156
6,710,986 Telecomunicacoes do Parana S/A (pfd.)
(Telecommunication services) ....................... 2,093,367
8,800,000,000 Usinas Siderurgicas de Minas Gerais S/A
(pfd.) (Non-coated flat products and
electrolytic galvanized products) .................. 8,234,988
2,090,000 Weg S.A. (pfd.) (Manufacturer of electrical
equipment) ......................................... 1,043,099
-----------
196,608,389
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CHILE 3.2% 100,000 Compania de Telefonos de Chile, S/A (ADR)
(Telecommunication services) ....................... 7,200,000
100,000 Enersis S.A. (ADR) (Generator and distributor
of electricity in Chile and Argentina) ............. 2,512,500
400,200 Maderas y Sinteticos S.A. (ADR) (Manufacturer
of particle board and veneers) ..................... 7,153,575
----------
16,866,075
----------
COLOMBIA 0.9% 495,000 Bavaria S/A (Producer and distributor of
beer and other malt beverages, mineral
water and soft drinks) ............................. 1,340,286
631,000 Colombiana de Tabaco S.A. (Tobacco
producer) (b) ...................................... 1,629,428
239,397 Compania Nacional de Chocolates
(Chocolate producer) ............................... 1,908,598
----------
4,878,312
----------
MEXICO 23.3% 1,150,000 Apasco, S.A. de C.V. (Cement producer) ............... 4,212,632
200,000 Coca-Cola FEMSA, S.A. de C.V. "L" (ADR)
(Soft drink bottler and distributor) ............... 3,600,000
2,602,000 Fomento Economico Mexicano, S.A. de C.V.
"B" (Producer of beer and soft drinks) ............. 5,390,248
1,669,000 Grupo Carso, S.A. de CV "A" (Diversified
industrial group) (c) .............................. 8,737,361
8,302,000 Grupo CIFRA S.A. de C.V. "C" (Retailer) .............. 8,459,301
2,462,000 Grupo Continental, S.A. (Soft drink bottler) ......... 6,123,037
6,544,500 Grupo Embotellador de Mexico SA de C.V.
"B" (Soft drink bottler) ........................... 3,834,847
256,950 Grupo Embotellador de Mexico SA de C.V.
(GDR) (c) .......................................... 2,665,856
1,619,500 Grupo Embotelladora Unidas SA de CV "B"
(Soft drink producer) (b) .......................... 3,936,806
2,000,000 Grupo Financiero Inbursa S.A. de CV
"B" (Banking and insurance) ........................ 5,417,544
7,452,000 Grupo Herdez S.A. de C.V. "A" (Producer of
packaged foods) .................................... 1,851,234
1,452,000 Grupo Industrial Bimbo, S.A. de C.V. "A"
(Producer of bread and other baked goods) .......... 5,502,316
2,543,000 Grupo Industrial Maseca S.A. de C.V. "B"
(Food producer) .................................... 1,584,691
160,000 Grupo Industrial Maseca S.A. de C.V. (ADR) ........... 1,540,000
400,000 Grupo Modelo SA "C" (Leading brewery) ................ 1,521,404
1,400,000 Kimberly Clark de Mexico S.A. de C.V. "A"
(Consumer paper products company) .................. 18,273,684
8,012,704 Organizacion Soriana S.A. de CV "B"
(Retailer) ......................................... 8,096,483
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
<TABLE>
SCUDDER LATIN AMERICA FUND
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
620,800 Panamerican Beverages Inc. "A" (ADR)
(Soft drink bottler) ............................... 16,994,400
480,000 Telefonos de Mexico S.A. de C.V. "L" (ADR)
(Telecommunication services) ....................... 13,200,000
85,800 Tubos de Acero de Mexico SA (New)
(Manufacturer of various types of pipes,
casings and tubing) ................................ 579,150
-----------
121,520,994
-----------
PERU 2.8% 1,376,077 Cementos Lima S.A. "T" (Cement producer) ............. 2,002,229
1,676,500 Cerveceria Backus & Johnston S.A. "T"
(Brewery) .......................................... 3,001,142
3,000,000 Telefonia del Peru S.A. "B"
(Public and cellular telephone services) ........... 5,357,143
803,207 Embotelladora Latino-Americana S/A "T"
(Bottler) .......................................... 1,034,111
2,420,504 Industrias Pacocha S.A. "T" (Food producer) .......... 1,814,313
1,492,107 Consorcio de Alimentos Fabril Pacifico "T"
(Food producer) .................................... 1,546,054
-----------
14,754,992
-----------
VENEZUELA 0.5% 532,500 Mavesa SA (ADR) (Food processor) ..................... 2,196,562
-----------
TOTAL EQUITY SECURITIES (Cost $515,137,427) .......... 457,013,252
-----------
=================================================================================================================
TOTAL INVESTMENT PORTFOLIO - 100.0%
(Cost $578,705,569) (a) ............................ 520,577,810
===========
<FN>
(a) The cost for federal income tax purposes was $587,373,807. At October 31, 1995, net unrealized depreciation
for all securities based on tax cost was $66,795,997. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of market value over tax cost of $29,954,970
and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over
market value of $96,750,967.
(b) Securities valued in good faith by the Valuation Committee of the Board of Directors. The cost of these
securities at October 31, 1995 aggregated $13,308,947. See Note A of the Notes to Financial Statements.
(c) Non-income producing security.
(d) This security has certain restrictions as to resale. Information concerning such security holding at October
31, 1995 is as follows:
Acquisition Date Cost ($) % of Total Assets
---------------- -------- -----------------
10/22/93 3,000,000 0.6
Sector breakdown of the Fund's equity securities is noted on page 5.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------------------
<CAPTION>
OCTOBER 31, 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $578,705,569)
(Note A) ...................................... $520,577,810
Cash .................................................. 148
Foreign currency holdings, at market
(identified cost $1,075,936) (Note A) ......... 1,074,936
Receivables:
Investments sold .............................. 885,847
Fund shares sold .............................. 277,608
Dividends and interest ........................ 344,942
Deferred organization expenses (Note A) ............... 33,774
Other assets .......................................... 11,079
------------
Total assets .......................... 523,206,144
LIABILITIES
Payables:
Investments purchased ......................... $2,357,642
Fund shares redeemed .......................... 400,522
Accrued management fee (Note C) ............... 581,727
Other accrued expenses (Note C) ............... 613,448
---------
Total liabilities ..................... 3,953,339
------------
Net assets, at market value ........................... $519,252,805
============
NET ASSETS
Net assets consist of:
Undistributed net investment income .......... $ 2,376,933
Unrealized depreciation on:
Investments ........................... (58,127,759)
Foreign currency related transactions . (2,098)
Accumulated net realized loss ................. (67,661,236)
Capital stock ................................. 320,117
Additional paid-in capital .................... 642,346,848
------------
Net assets, at market value ........................... $519,252,805
============
NET ASSET VALUE, offering and redemption price
(Note A) per share ($519,252,805 -:- 32,011,664)
shares of capital stock outstanding, $.01 par
value, 100,000,000 shares authorized) ......... $16.22
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
<TABLE>
SCUDDER LATIN AMERICA FUND
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $1,174,981) .. $ 11,548,569
Interest ................................................. 3,765,742
-------------
15,314,311
Expenses:
Management fee (Note C) .................................. $ 7,166,386
Services to shareholders (Note C) ........................ 2,184,847
Custodian and accounting fees (Note C) ................... 1,779,808
Directors' fees and expenses (Note C) .................... 66,435
Reports to shareholders .................................. 443,295
Brazilian transaction tax ................................ 360,329
Auditing ................................................. 103,742
State registration ....................................... 55,845
Legal .................................................... 25,702
Amortization of organization expenses (Note A) ........... 16,093
Other .................................................... 50,172 12,252,654
-----------------------------
Net investment income .................................... 3,061,657
-------------
NET REALIZED AND UNREALIZED LOSS ON
INVESTMENT TRANSACTIONS
Net realized loss from:
Investments ...................................... (67,486,374)
Foreign currency related transactions ........... (664,946) (68,151,320)
------------
Net unrealized appreciation (depreciation) during the
period on:
Investments ...................................... (193,288,349)
Foreign currency related transactions ............ 4,709 (193,283,640)
-----------------------------
Net loss on investment transactions ...................... (261,434,960)
-------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ..... $(258,373,303)
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------------
<CAPTION>
YEARS ENDED OCTOBER 31,
------------------------------
INCREASE (DECREASE) IN NET ASSETS 1995 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) ............................. $ 3,061,657 $ (1,196,271)
Net realized gain (loss) from investment
transactions ..................................... (68,151,320) 25,731,015
Net unrealized appreciation (depreciation) on
investment transactions during the period ........ (193,283,640) 90,401,699
------------- --------------
Net increase (decrease) in net assets
resulting from operations ........................ (258,373,303) 114,936,443
------------- --------------
Distributions to shareholders:
In excess of net investment income
($.055 per share) ........................ -- (1,013,185)
------------- --------------
From net realized gains from investment
transactions ($.73 and $.055 per share,
respectively) ............................ (24,333,536) (1,013,185)
------------- --------------
Fund share transactions:
Proceeds from shares sold ................................ 199,888,429 635,744,643
Net asset value of shares issued to
shareholders in reinvestment of
distributions .................................... 23,383,847 1,910,655
Cost of shares redeemed (Note A) ......................... (230,679,279) (201,760,965)
------------- --------------
Net increase (decrease) in net assets from Fund
share transactions ............................... (7,407,003) 435,894,333
------------- --------------
INCREASE (DECREASE) IN NET ASSETS ........................ (290,113,842) 548,804,406
Net assets at beginning of period ........................ 809,366,647 260,562,241
------------- --------------
NET ASSETS AT END OF PERIOD (including
undistributed net investment income of
$2,376,933 at October 31, 1995) .................. $ 519,252,805 $ 809,366,647
============= ==============
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period ................ 33,122,382 14,153,599
------------- --------------
Shares sold .............................................. 11,349,018 28,213,736
Shares issued to shareholders in
reinvestment of distributions .................... 1,285,533 88,171
Shares redeemed .......................................... (13,745,269) (9,333,124)
------------- --------------
Net increase (decrease) in Fund shares ................... (1,110,718) 18,968,783
------------- --------------
Shares outstanding at end of period ...................... 32,011,664 33,122,382
============= ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
<TABLE>
SCUDDER LATIN AMERICA FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------------------------------
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD AND OTHER
PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL STATEMENTS.
<CAPTION>
FOR THE PERIOD
DECEMBER 8, 1992
(COMMENCEMENT
YEARS ENDED OCTOBER 31, OF OPERATIONS)
------------------------- TO OCTOBER 31,
1995 1994 1993
------------------------- ---------------
<S> <C> <C> <C>
Net asset value, beginning of period ......................................... $24.44 $18.41 $12.00
------ ------ ------
Income from investment operations:
Net investment income (loss) (a) ..................................... .09 (.03) .03
Net realized and unrealized gain (loss) on investment transactions .. (7.58) 6.18 6.38
------ ------ ------
Total from investment operations ............................................. (7.49) 6.15 6.41
------ ------ ------
Less distributions:
In excess of net investment income ................................... -- (.06) --
From net realized gains on investment transactions ................... (.73) (.06) --
------ ------ ------
Total distributions .......................................................... (.73) (.12) --
------ ------ ------
Net asset value, end of period ............................................... $16.22 $24.44 $18.41
====== ====== ======
TOTAL RETURN (%) ............................................................. (30.96) 33.43 53.42(b)**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) ....................................... 519 809 261
Ratio of operating expenses, net to average daily net assets (%) (a) ......... 2.08 2.01 2.00*
Ratio of net investment income (loss) to average daily net assets (%) ........ .52 (.20) .44*
Portfolio turnover rate (%) .................................................. 39.5 22.4 4.6*
<FN>
(a) Reflects a per share amount of management fee not imposed
by the Adviser of ...................................................... $ .01 $ .01 $ .04
Operating expense ratio including management fee not imposed (%) ....... 2.11 2.05 2.69*
(b) Total return does not reflect the effect of the applicable redemption fees.
* Annualized
** Not annualized
</FN>
</TABLE>
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
A. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Scudder Latin America Fund (the "Fund") is a non-diversified series of Scudder
International Fund, Inc. (the "Corporation"). The Corporation is organized as
a Maryland corporation and is registered under the Investment Company Act of
1940, as amended, as an open-end, management investment company. The policies
described below are followed consistently by the Fund in the preparation of its
financial statements in conformity with generally accepted accounting
principles.
SECURITY VALUATION. Portfolio securities which are traded on U.S. or foreign
stock exchanges are valued at the most recent sale price reported on the
exchange on which the security is traded most extensively. If no sale occurred,
the security is then valued at the calculated mean between the most recent bid
and asked quotations. If there are no such bid and asked quotations, the most
recent bid quotation is used. Securities quoted on the National Association of
Securities Dealers Automatic Quotation ("NASDAQ") System, for which there have
been sales, are valued at the most recent sale price reported on such system.
If there are no such sales, the value is the high or "inside" bid quotation.
Securities which are not quoted on the NASDAQ System but are traded in another
over-the-counter market are valued at the most recent sale price on such
market. If no sale occurred, the security is then valued at the calculated
mean between the most recent bid and asked quotations. If there are no such
bid and asked quotations, the most recent bid quotation shall be used. Short-
term investments having a maturity of sixty days or less are valued at
amortized cost.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Directors. Securities valued in good
faith by the Valuation Committee of the Board of Directors at fair value
amounted to $10,387,965 (2.0% of net assets) and have been noted in the
investment portfolio as of October 31, 1995.
19
<PAGE>
SCUDDER LATIN AMERICA FUND
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value, depending on the maturity of the repurchase
agreement and the underlying collateral, is equal to at least 100.5% of the
resale price.
FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are
maintained in U.S. dollars. Foreign currency transactions are translated into
U.S. dollars on the following basis:
(i) market value of investment securities, other assets and
liabilities at the daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and
interest income and certain expenses at the daily rates of
exchange prevailing on the respective dates of such transactions.
The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes
in market prices of the investments. Such fluctuations are included with the
net realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on dividends,
interest and foreign withholding taxes.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A forward foreign currency
exchange contract (forward contract) is a commitment to purchase or sell a
foreign currency at the settlement date at a negotiated rate. During the
period, the Fund utilized forward contracts as a hedge in connection with
portfolio purchases and sales of securities denominated in foreign currencies.
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Forward
contracts having the same settlement date and broker are offset and any gain
(loss) is realized on the date of offset; otherwise, gain (loss) is realized on
settlement date. Realized and unrealized gains and losses which represent the
difference between the value of the forward contract to buy and the forward
contract to sell are included in net realized and unrealized gain (loss) from
foreign currency related transactions.
Certain risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their contracts.
Additionally, when utilizing forward contracts to hedge, the Fund gives up the
opportunity to profit from favorable exchange rate movements during the term of
the contract.
FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements
of the Internal Revenue Code which are applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, the Fund paid no federal income taxes and no federal income tax
provision was required.
As of October 31, 1995, the Fund had a net tax basis capital loss carryforward
of approximately $59,200,000, which may be applied against any realized net
taxable capital gains of each succeeding year until fully utilized or until
October 31, 2003, the expiration date, whichever occurs first.
REDEMPTION FEES. In general, shares of the Fund may be redeemed at net asset
value. However, upon the redemption or exchange of shares held by shareholders
for less than one year, a fee of 2% of the lower of cost or the current net
asset value of the shares will be assessed and retained by the Fund for the
benefit of the remaining shareholders. The redemption fee is accounted for
as an addition to Brazilian capital. Total redemption fees received by the
Fund for the year ended October 31, 1995 amounted to $1,459,400.
DISTRIBUTION OF INCOME AND GAINS. Distribution of net investment income is
made annually. During any particular year net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed and, therefore, will be distributed to
shareholders annually. An additional distribution may be made to the extent
necessary to avoid the payment of a four percent federal excise tax. Earnings
and profits
21
<PAGE>
SCUDDER LATIN AMERICA FUND
- --------------------------------------------------------------------------------
distributed to shareholders on redemption of Fund shares ("tax equalization")
may be utilized by the Fund, to the extent permissible, as part of the Fund's
dividends paid deduction on its federal tax returns.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations which may differ from generally accepted accounting principles.
These differences primarily relate to investments in foreign denominated
investments and passive foreign investment companies and certain securities
sold at a loss. As a result, net investment income (loss) and net realized gain
(loss) on investment transactions for a reporting period may differ
significantly from distributions during such period. Accordingly, the Fund may
periodically make reclassifications among certain of its capital accounts
without impacting the net asset value of the Fund.
The Fund uses the identified cost method for determining realized gain or loss
on investments for both financial and federal income tax reporting purposes.
ORGANIZATION COSTS. Costs incurred by the Fund in connection with its
organization and initial registration of shares have been deferred and are
being amortized on a straight-line basis over a five-year period.
OTHER. Investment security transactions are accounted for on a trade-date
basis. Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis.
B. PURCHASES AND SALES OF SECURITIES
- --------------------------------------------------------------------------------
During the year ended October 31, 1995, purchases and sales of investment
securities (excluding short-term investments) aggregated $207,795,134 and
$207,762,835, respectively.
C. RELATED PARTIES
- --------------------------------------------------------------------------------
Under the Investment Management Agreement (the "Management Agreement") with
Scudder, Stevens & Clark, Inc. (the "Adviser"), the Adviser directs the
investments of the Fund in accordance with its investment objectives, policies,
and restrictions. The Adviser determines the securities, instruments, and other
contracts relating to investments to be purchased, sold or entered into by the
Fund. In addition to portfolio management services, the Adviser provides
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
certain administrative services in accordance with the Management Agreement.
The management fee payable under the Management Agreement is equal to an annual
rate of 1.25% of the Fund's average daily net assets, computed and accrued
daily and payable monthly. The Management Agreement provides that if the Fund'
expenses, exclusive of taxes, interest, and extraordinary expenses, exceed
specified limits, such excess, up to the amount of the management fee, will be
paid by the Adviser. As a result, for the year ended October 31, 1995, the
Adviser did not impose a portion of its management fee amounting to $216,058,
and the portion imposed amounted to $7,166,386.
Scudder Service Corporation ("SSC"), a wholly-owned subsidiary of the Adviser,
is the transfer, dividend paying and shareholder service agent for the Fund.
For the year ended October 31, 1995, the amount charged to the Fund by SSC
aggregated $1,778,233 of which $134,608 is unpaid at October 31, 1995.
Effective May 17, 1995, Scudder Fund Accounting Corporation ("SFAC"), a wholly-
owned subsidiary of the Adviser, assumed responsibility for determining the
daily net asset value per share and maintaining the portfolio and general
accounting records of the Fund. For the year ended October 31, 1995, the amount
charged to the Fund by SFAC aggregated $147,987, of which $26,620 is unpaid at
October 31, 1995.
The Fund pays each of its Directors not affiliated with the Adviser $4,000
annually, plus specified amounts for attended board and committee meetings.
For the year ended October 31, 1995, Directors' fees and expenses aggregated
$66,435.
D. INVESTING IN EMERGING MARKETS
- --------------------------------------------------------------------------------
Investing in emerging markets may involve special risks and considerations
not typically associated with investing in the United States. These risks
include revaluation of currencies and future adverse political and economic
developments. Moreover, securities issued in these markets may be less liquid
and their prices more volatile than those of comparable securities in the
United States.
23
<PAGE>
SCUDDER LATIN AMERICA FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS OF SCUDDER INTERNATIONAL FUND, INC. AND TO THE
SHAREHOLDERS OF SCUDDER LATIN AMERICA FUND:
We have audited the accompanying statement of assets and liabilities of Scudder
Latin America Fund including the investment portfolio, as of October 31, 1995,
and the related statement of operations for the year then ended, the statements
of changes in net assets for each of the two years in the period then ended,
and the financial highlights for each of the two years in the period then ended
and for the period December 8, 1992 (commencement of operations) to October 31,
1993. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of October 31, 1995, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Scudder Latin America Fund as of October 31, 1995, the results of its operation
for the year then ended, the changes in its net assets for each of the two
years in the period then ended, and the financial highlights for each of the
two years in the period then ended and for the period December 8, 1992
(commencement of operations) to October 31, 1993 in conformity with generally
accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
December 7, 1995
24
<PAGE>
TAX INFORMATION
For its fiscal year ended October 31, 1995, the total amount of income received
by the Fund from sources within foreign countries and possessions of the United
States was $.092 per share (representing a total of $2,960,786). The total
amount of taxes paid by the Fund to such countries was $.037 per share
(representing a total of $1,174,981).
OFFICERS AND DIRECTORS
Edmond D. Villani*
Chairman of the Board and Director
Nicholas Bratt*
President and Director
Paul Bancroft III
Director; Venture Capitalist and Consultant
Thomas J. Devine
Director; Consultant
Keith R. Fox
Director; President, Exeter Capital Management Corporation
William H. Gleysteen, Jr.
Director; President, The Japan Society, Inc.
William H. Luers
Director; President, The Metropolitan Museum of Art
Dr. Wilson Nolen
Director; Consultant
Juris Padegs*
Director, Vice President and Assistant Secretary
Daniel Pierce*
Director
Dr. Gordon Shillinglaw
Director; Professor Emeritus of Accounting, Columbia University Graduate
School of Business
Robert G. Stone, Jr.
Honorary Director; Chairman of the Board and Director, Kirby Corporation
Robert W. Lear
Honorary Director; Executive-in-Residence, Visiting Professor, Columbia
University Graduate School of Business
Elizabeth J. Allan*
Vice President
Carol L. Franklin*
Vice President
Edmund B. Games, Jr.*
Vice President
Jerard K. Hartman*
Vice President
William E. Holzer*
Vice President
Thomas W. Joseph*
Vice President
William F. Truscott*
Vice President
David S. Lee*
Vice President and Assistant Treasurer
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
Edward J. O'Connell*
Vice President and Assistant Treasurer
Kathryn L. Quirk*
Vice President and Assistant Secretary
Richard W. Desmond*
Assistant Secretary
Coleen Downs Dinneen*
Assistant Secretary
* Scudder, Stevens & Clark, Inc.
25
<PAGE>
INVESTMENT PRODUCTS AND SERVICES
<TABLE>
<CAPTION>
The Scudder Family of Funds
-----------------------------------------------------------------------------------------------------------------
<C> <C>
Money Market Income
Scudder Cash Investment Trust Scudder Emerging Markets Income Fund
Scudder U.S. Treasury Money Fund Scudder GNMA Fund
Tax Free Money Market+ Scudder Income Fund
Scudder Tax Free Money Fund Scudder International Bond Fund
Scudder California Tax Free Money Fund* Scudder Short Term Bond Fund
Scudder New York Tax Free Money Fund* Scudder Short Term Global Income Fund
Tax Free+ Scudder Zero Coupon 2000 Fund
Scudder California Tax Free Fund* Growth
Scudder High Yield Tax Free Fund Scudder Capital Growth Fund
Scudder Limited Term Tax Free Fund Scudder Development Fund
Scudder Managed Municipal Bonds Scudder Global Fund
Scudder Massachusetts Limited Term Tax Free Fund* Scudder Global Small Company Fund
Scudder Massachusetts Tax Free Fund* Scudder Gold Fund
Scudder Medium Term Tax Free Fund Scudder Greater Europe Growth Fund
Scudder New York Tax Free Fund* Scudder International Fund
Scudder Ohio Tax Free Fund* Scudder Latin America Fund
Scudder Pennsylvania Tax Free Fund* Scudder Pacific Opportunities Fund
Growth and Income Scudder Quality Growth Fund
Scudder Balanced Fund Scudder Small Company Value Fund
Scudder Growth and Income Fund Scudder Value Fund
The Japan Fund
Retirement Plans and Tax-Advantaged Investments
-----------------------------------------------------------------------------------------------------------------
IRAs 403(b) Plans
Keogh Plans SEP-IRAs
Scudder Horizon Plan+++* (a variable annuity) Profit Sharing and Money Purchase
401(k) Plans Pension Plans
Closed-End Funds#
-----------------------------------------------------------------------------------------------------------------
The Argentina Fund, Inc. The Latin America Dollar Income Fund, Inc.
The Brazil Fund, Inc. Montgomery Street Income Securities, Inc.
The First Iberian Fund, Inc. Scudder New Asia Fund, Inc.
The Korea Fund, Inc. Scudder New Europe Fund, Inc.
Scudder World Income
Opportunities Fund, Inc.
Institutional Cash Management
-----------------------------------------------------------------------------------------------------------------
Scudder Institutional Fund, Inc. Scudder Treasurers Trust(TM)++
Scudder Fund, Inc.
-----------------------------------------------------------------------------------------------------------------
For complete information on any of the above Scudder funds, including
management fees and expenses, call or write for a free prospectus. Read it
carefully before you invest or send money. +A portion of the income from the
tax-free funds may be subject to federal, state, and local taxes. *Not
available in all states. +++A no-load variable annuity contract provided by
Charter National Life Insurance Company and its affiliate, offered by
Scudder's insurance agencies, 1-800-225-2470. #These funds, advised by
Scudder, Stevens & Clark, Inc. are traded on various stock exchanges. ++For
information on Scudder Treasurers Trust,(TM) an institutional cash
management service that utilizes certain portfolios of Scudder Fund, Inc.
($100,000 minimum), call 1-800-541-7703.
</TABLE>
26
<PAGE>
HOW TO CONTACT SCUDDER
<TABLE>
<CAPTION>
<S> <C>
Account Service and Information
-------------------------------------------------------------------------------------------------------------
For existing account service and transactions
SCUDDER INVESTOR RELATIONS
1-800-225-5163
For personalized information about your
Scudder accounts; exchanges and
redemptions; or information on any
Scudder fund SCUDDER AUTOMATED
INFORMATION LINE (SAIL) 1-800-343-2890
Investment Information
-------------------------------------------------------------------------------------------------------------
To receive information about the
Scudder funds, for additional
applications and prospectuses, or for
investment questions SCUDDER INVESTOR
RELATIONS 1-800-225-2470
For establishing 401(k) and 403(b) plans
SCUDDER DEFINED CONTRIBUTION SERVICES
1-800-323-6105
Please address all correspondence to
-------------------------------------------------------------------------------------------------------------
THE SCUDDER FUNDS
P.O. BOX 2291
BOSTON, MASSACHUSETTS
02107-2291
Or stop by a Scudder Funds Center
-------------------------------------------------------------------------------------------------------------
Many shareholders enjoy the personal, one-on-one service of the
Scudder Funds Centers. Check for a Funds Center near you--they can
be found in the following cities:
Boca Raton New York
Boston Portland, OR
Chicago San Diego
Cincinnati San Francisco
Los Angeles Scottsdale
-------------------------------------------------------------------------------------------------------------
For information on Scudder For information on Scudder
Treasurers Trust,(TM)an institutional Institutional Funds,* funds
cash management service for designed to meet the broad
corporations, non-profit investment management and
organizations and trusts that uses service needs of banks and
certain portfolios of Scudder Fund, other institutions, call
Inc.* ($100,000 minimum), call 1-800-854-8525.
1-800-541-7703.
-------------------------------------------------------------------------------------------------------------
Scudder Investor Relations and Scudder Funds Centers are services provided
through Scudder Investor Services, Inc., Distributor.
<FN>
* Contact Scudder Investor Services, Inc., Distributor, to receive a
prospectus with more complete information, including management fees and
expenses. Please read it carefully before you invest or send money.
</FN>
</TABLE>
27
<PAGE>
Celebrating Over 75 Years of Serving Investors
Established in 1919 by Theodore Scudder, Sidney Stevens, and
F. Haven Clark, Scudder, Stevens & Clark was the first independent investment
counsel firm in the United States. Since its birth, Scudder's pioneering spirit
and commitment to professional long-term investment management have helped shape
the investment industry. In 1928, we introduced the nation's first no-load
mutual fund. Today we offer 37 pure no load(TM) funds, including the first
international mutual fund offered to U.S. investors.
Over the years, Scudder's global investment perspective and
dedication to research and fundamental investment disciplines have helped us
become one of the largest and most respected investment managers in the world.
Though times have changed since our beginnings, we remain committed to our
long-standing principles: managing money with integrity and distinction; keeping
the interests of our clients first; providing access to investments and markets
that may not be easily available to individuals; and making investing as simple
and convenient as possible through friendly, comprehensive service.
<PAGE>
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
Scudder
Pacific Opportunities
Fund
Annual Report
October 31, 1995
o Offers opportunities for long-term capital appreciation through investment
primarily in the equity securities of Pacific Basin companies, excluding
Japan.
o A pure no-load(TM) fund with no commissions to buy, sell, or exchange
shares.
<PAGE>
SCUDDER PACIFIC OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
CONTENTS
2 In Brief
3 Letter from the Fund's Chairman
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
11 Investment Portfolio
17 Financial Statements
20 Financial Highlights
21 Notes to Financial
Statements
26 Report of Independent
Accountants
27 Tax Information
29 Officers and Directors
30 Investment Products
and Services
31 How to Contact
Scudder
IN BRIEF
* The price volatility that characterized Pacific Region markets in 1994
continued into 1995 due to a variety of factors, including a general
wariness of emerging markets in the wake of the Mexican peso devaluation.
The attractive returns provided by U.S. stocks this year also drew many U.S.
investors away from emerging markets, and stock prices in Asia suffered as a
result.
* Scudder Pacific Opportunities Fund posted a -10.73% total return for its
1995 fiscal year ended October 31, largely reflecting the poor performance
of emerging Asian markets in the first few months of 1995. Morgan Stanley's
unmanaged Combined Asia Free Index (ex-Japan), which includes many of these
markets, returned -10.14%, about in line with the performance of your Fund.
* In a period of generally negative investor sentiment, your portfolio
managers targeted companies selling at attractive prices despite positive
fundamentals and strong earnings gains. Purchases generally were made in
companies that were likely to benefit from the region's infrastructure
spending, manufacturing, rising standards of living, and increase in
financing.
2
<PAGE>
LETTER FROM THE FUND'S CHAIRMAN
- --------------------------------------------------------------------------------
Dear Shareholders,
The past two years have been difficult for investors in Pacific Rim
markets. The interest rate increases of 1994, the volatility in all emerging
markets following the Mexican peso devaluation, and this year's standout returns
in the United States have compelled many investors to withdraw their savings
from Pacific markets, dampening the region's stock performance.
The market volatility of the past two years has not lessened our belief
in the Pacific region's long-term investment potential. Most Pacific Rim
countries continue to experience strong economic growth. Should the U.S. stock
market cool in anticipation of slower economic activity, global portfolio
allocations may again be directed to the east. Meanwhile, the price declines of
the past two years have provided your portfolio managers opportunities to
purchase fast-growing Asian companies at attractive valuations.
While we remain optimistic about long-term investment prospects in the
Pacific Rim, we recognize that the region periodically is prone to substantial
price volatility. For that reason, we wish to remind investors that Scudder
Pacific Opportunities Fund is best used as a long-term investment vehicle and as
part of a diversified portfolio of domestic and international investments.
As always, please contact a Scudder Investor Relations representative
at 1-800-225-2470 if you have any questions. Page 31 provides more information
on how to contact Scudder. Thank you for choosing Scudder Pacific Opportunities
Fund to help meet your investment needs.
Sincerely,
/s/Edmond D. Villani
Edmond D. Villani
Chairman,
Scudder Pacific Opportunities Fund
3
<PAGE>
SCUDDER PACIFIC OPPORTUNITIES FUND
PERFORMANCE UPDATE as of October 31, 1995
- -----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------
SCUDDER PACIFIC OPPORTUNITIES FUND
- ----------------------------------------
Total Return
Period Growth --------------
Ended of Average
10/31/95 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $ 8,927 -10.73% -10.73%
Life of
Fund* $13,141 31.41% 9.89%
MSCI PACIFIC INDEX (EXCLUDING JAPAN)
- --------------------------------------
Total Return
Period Growth --------------
Ended of Average
10/31/95 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $ 9,756 -2.44% -2.44%
Life of
Fund* $16,615 66.15% 19.67%
* The Fund commenced operations on
December 8, 1992. Index comparisons
begin December 31, 1992.
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
Scudder Pacific Opportunities Fund
Year Amount
- ----------------------
12/92* $10,000
4/93 $11,019
10/93 $13,542
4/94 $13,498
10/94 $14,757
4/95 $12,811
10/95 $13,174
MSCI Pacific Index (excluding Japan)
Year Amount
- ----------------------
12/92* $10,000
4/93 $11,583
10/93 $15,352
4/94 $15,544
10/94 $17,031
4/95 $15,750
10/95 $16,615
The Morgan Stanley Capital International (MSCI) Pacific Index is an
unmanaged capitalization-weighted measure of stock markets in the
Pacific Basin countries, excluding Japan. Index returns assume
dividends reinvested net of withholding tax and, unlike Fund returns,
do not reflect any fees or expenses.
- -----------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
- -----------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
YEARLY PERIODS ENDED OCTOBER 31
1993* 1994 1995
------------------------
NET ASSET VALUE... $16.21 $17.57 $15.59
INCOME DIVIDENDS.. $ -- $ .08 $ .10
CAPITAL GAINS
DISTRIBUTIONS..... $ -- $ .01 $ --
FUND TOTAL
RETURN (%)........ 35.08 8.97 -10.73
INDEX TOTAL
RETURN (%)........ 53.52 10.93 -2.44
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results.
Investment return and principal value will fluctuate, so an investor's
shares, when redeemed, may be worth more or less than when purchased.
If the Adviser had not maintained the Fund's expenses, the average annual
total return for the one year and life of Fund periods would have been
lower.
4
<PAGE>
PORTFOLIO SUMMARY as of October 31, 1995
- ---------------------------------------------------------------------------
GEOGRAPHICAL (Excludes 4% Cash Equivalents)
- ---------------------------------------------------------------------------
Hong Kong 17%
Thailand 12% Indonesia became the Fund's
Indonesia 12% third-largest country weighting
Korea 11% this year, based on strong
Australia 11% corporate profit growth and
Malaysia 9% attractive economic fundamentals.
India 7%
Other 21%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
SECTORS (Excludes 4% Cash Equivalents)
- --------------------------------------------------------------------------
Financial 23%
Consumer Staples 12%
Construction 10% The Fund's sector allocation
Metals & Minerals 10% reflects what we believe are
Manufacturing 9% the most promising investment
Energy 8% opportunities in the Pacific
Utilities 5% region, including massive
Technology 5% infrastructure development and
Media 4% a rising standard of living.
Other 14%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
TEN LARGEST EQUITY HOLDINGS
- --------------------------------------------------------------------------
1. HUTCHISON WHAMPOA, LTD.
Container terminal and real estate company in Hong Kong.
2. KOREA ELECTRIC POWER CO.
Korean electric utility
3. UNITED ENGINEERS
Leading Malaysian comprehensive contractor
4. HSBC HOLDINGS LTD.
Bank in Hong Kong
5. TELEVISION BROADCASTS, LTD.
Television broadcasting in Hong Kong
6. SWIRE PACIFIC LTD.
General trading and real estate company in Hong Kong
7. PTT EXPLORATION AND PRODUCTION CO., LTD.
Petroleum refinery in Thailand
8. OVERSEAS UNION BANK LTD.
Leading bank group in Singapore
9. TELECOM CORP. OF NEW ZEALAND
Telecommunication services
10. WOODSIDE PETROLEUM LTD.
Major Australian oil and gas producer
Increasingly, the Fund has emphasized companies in Hong Kong that
can benefit from regional growth.
- --------------------------------------------------------------------------
For more complete details about the Fund's Investment Portfolio,
see page 11.
A monthly Investment Portfolio Summary and quarterly Portfolio Holdings
are available upon request.
5
<PAGE>
SCUDDER PACIFIC OPPORTUNITIES FUND
PORTFOLIO MANAGEMENT DISCUSSION
- --------------------------------------------------------------------------------
Dear Shareholders,
Fiscal year 1995 provided serious challenges for investors in the Pacific
Rim. As we mentioned in previous reports, disappointing stock market returns
have been the result of a number of factors. Interest-rate worries in the
region's dollar-linked markets dominated investor sentiment at the start of the
Fund's fiscal year. In December, the Mexican peso devaluation led investors to
flee all potential "next Mexicos" in emerging markets around the world, slamming
stock prices. Later, the earthquake in Kobe, Japan, brought the possibility of
supply disruptions for Asian assemblers of Japanese products, as well as the
fear of a liquidity crunch in Asia as Japan repatriated investment capital
needed for construction.
The Fund's -10.73% total return for the 12 months ended October 31, which
is in line with the -10.14% return of the Morgan Stanley Combined Asia Free
Index (ex-Japan), largely reflects the negative performance experienced by the
region's emerging markets during the first quarter. For example, India and the
Philippines returned -28.78% and -22.36%, respectively, for the 12-month period,
based largely on declines in early 1995. By contrast, the unmanaged Morgan
Stanley Capital International Pacific Index (ex-Japan), which does not include
emerging markets, returned -2.44%.
Returns for the full year mask substantial recoveries in some cases. Strong
levels of internal savings combined with a strong Japanese yen fueled continued
economic growth in the developing Asian markets. The yen's strength had positive
implications for companies that competed directly with Japanese exporters in
such key markets as automobiles, steel, shipbuilding, and electronics. In
addition, Southeast Asian countries have benefited from heavy and accelerating
direct investment from Japan, as Japanese manufacturers move plants to cheaper
operating environs. Market returns for the six-month period ended October 31,
1995, as well as the full 12-month period, are shown on the following page.
6
<PAGE>
PORTFOLIO MANAGEMENT DISCUSSION
- --------------------------------------------------------------------------------
(BAR CHART TITLE)
Total Returns in Various Markets
(BAR CHART DATA)
Returns 10/31/94 - 10/31/95 Returns 4/30/95 - 10/31/95
--------------------------- --------------------------
Hong Kong* 0.77% 16.68%
Thailand -16.41 4.95
Indonesia -10.92 12.34
Korea -1.96 12.65
Australia* 4.92 4.82
Malaysia* -10.80 -2.38
India -28.78 -4.37
Phillipines -22.36 -3.83
Singapore* -7.75 -2.35
New Zealand 13.37 1.67
Taiwan -26.99 -20.04
China+ 1.41 17.00
* Markets included in the MSCI Pacific Index (ex-Japan).
Source: Morgan Stanley, +Hang Seng: Hong Kong$ Index
As long-term investors, we generally view market declines as
an opportunity to "buy low." Throughout the year, we continued to invest in
companies benefiting from the economic, political, and cultural trends of
Southeast Asia. For example, most Asian countries outside of Japan are in the
process of building physical and communications infrastructures. Accordingly,
the Fund owns several fast-growing construction and telecommunications
companies. Other investment themes relate to the manufacturing strength of
relatively low-cost labor markets, the need for adequate financing to provide
necessary investment in new plants and equipment, and the rising standards of
living in some of the world's most populous countries.
While our focus remains on long-term investments rather than market
timing, the severe price volatility of early 1995 prompted us to maintain a
relatively large cash position (14% of total assets at the end of April). We
have since deployed that cash
7
<PAGE>
SCUDDER PACIFIC OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
in new investments, careful to diversify portfolio holdings across companies,
industries, and countries. A more detailed discussion of the Fund's three
largest country weightings follows.
Hong Kong
Through the year just ended we have maintained a neutral to underweight
position in Hong Kong (17% of portfolio equity holdings on October 31, 1995). A
growing concern is whether the Beijing government will show favoritism toward
Chinese competitors of Hong Kong businesses when Hong Kong reverts to Chinese
rule in 1997. Companies with ties to Britain, for example, may encounter a
difficult business climate if Beijing wishes to stamp out reminders of Hong
Kong's colonial past. On a more immediate level, corporate and economic
fundamentals have been weakening. This year's GDP growth is expected to be one
percentage point below last year's. Retail sales growth slowed to 6.9% in the
first quarter of 1995 from 14.2% in the first quarter of 1994, and residential
property prices continue to decline. Meanwhile, corporate profit growth slowed
from almost 24% in 1993 to 15% in 1994, and is expected to decelerate to 10%-12%
over the next two years.
Our Hong Kong portfolio reflects these concerns. For example, we have
avoided pure property-related holdings and are focusing on companies that we
believe will benefit from regional growth. First Pacific Company Limited is a
good example. First Pacific is a fast-growing and well-managed conglomerate
involved in the telecommunications, marketing and distribution, banking, and
real estate management businesses of the Pacific region. With strong market
positions in these sectors, we believe the company is poised to benefit from the
general economic growth and rising living standards not only in Hong Kong, but
also in Australia, China, India, Indonesia, the Philippines, Singapore, and
Thailand.
Thailand
Thailand replaced Korea as the Fund's second-largest country weighting this
year (12% of portfolio equity holdings on October 31, 1995). For most of the
year, we were reasonably optimistic about Thailand's economic and market
prospects. The country has won a reputation for extraordinary monetary and
fiscal management in a region where inflation historically has been a concern.
The Bank of Thailand moved in the spring to cool the country's
8
<PAGE>
PORTFOLIO MANAGEMENT DISCUSSION
- --------------------------------------------------------------------------------
overheated economy by dramatically lowering bank loan growth, among other
measures. Thus far, government revenue has slowed along with exports, credit
growth, manufacturing, and private investment.
More recently, some negatives have come to light including the selection of
a politically well-connected but inexperienced Minister of Finance, a rising
current account deficit, and weaker corporate earnings resulting from serious
flooding and the slower economy. As a result of these factors, we have decided
to reduce our Thailand exposure somewhat, retaining companies we believe will
prosper regardless of a slowdown in economic activity. One such company is PTT
Exploration and Production. PTT has demonstrated rapid growth in oil and gas
production, earnings, and cash flow that we expect will continue for several
years. The company's asset base is centered on its share of two world-class gas
fields (Bongkot and Moattama), production and reserves onshore in Thailand, and
exploration potential offshore.
Indonesia
Indonesia is now the Fund's third-largest country weighting, and at 12% of
portfolio equity holdings reflects an overweight position relative to the Morgan
Stanley Combined Asia Free Index (ex-Japan). Corporate profit growth is
accelerating sharply on the heels of strong GDP growth (estimated at 7.0%-7.5%
this year), increased exports, and a flourishing consumer sector. We estimate
that average growth in corporate profits will surge to more than 40% over last
year's levels. Meanwhile, we are encouraged that short-term interest rates
appear to have peaked at 14%.
One example of an attractive Indonesian company, in our view, is Bakrie &
Brothers. A fast-growing holding company, Bakrie has leadership positions in the
Indonesian telecommunications services, construction and building materials,
plantations, and rubber trading industries. Given that Indonesia has one of the
lowest telephone penetration rates in Asia (1.6 fixed lines per 100 people)
Bakrie's telecommunications business is particularly exciting. The company is
licensed to construct, own, and operate 250,000 "Fixed Overlay Network"
telephone lines in Jakarta, which could provide substantial growth in earnings
over the next two years. The new network eliminates the need to lay the physical
lines required by conventional telephone systems.
9
<PAGE>
SCUDDER PACIFIC OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
Outlook
The evidence suggesting long-term capital appreciation in Asian stocks
remains compelling. Economic growth throughout the region is very strong by
western standards, with some economies likely to grow by more than 7% in 1996.
Our visits with company managements and other research suggest that corporate
earnings should also be strong. Near-term market volatility is always a risk in
Asia. For example, continued economic strength in some countries could translate
into higher interest rates, which would undoubtedly affect stock prices in the
short run. Over the longer-term, however, we believe investors in the Pacific
Region will be rewarded for their commitment.
Sincerely,
Your Portfolio Management Team
/s/Elizabeth J. Allan /s/ Nicholas Bratt
Elizabeth J. Allan Nicholas Bratt
/s/Joyce E. Cornell /s/Eileen O. Gerspach
Joyce E. Cornell Eileen O. Gerspach
Scudder Pacific Opportunities Fund: A Team Approach to Investing
Scudder Pacific Opportunities Fund is managed by a team of Scudder
investment professionals who each play an important role in the Fund's
management process. Team members work together to develop investment strategies
and select securities for the Fund. They are supported by Scudder's large staff
of economists, research analysts, traders, and other investment specialists who
work in Scudder's offices across the United States and abroad. We believe our
team approach benefits Fund investors by bringing together many disciplines and
leveraging Scudder's extensive resources.
Lead Portfolio Manager Elizabeth J. Allan assumed responsibility for the
Fund's day-to-day management and investment strategies in February 1994.
Elizabeth joined Scudder in 1987 as a member of the portfolio management team of
a Scudder closed-end mutual fund concentrating its investments in Asia. Nicholas
Bratt, Portfolio Manager, has been a member of the Fund's team since 1992 and
has over 20 years of experience in global investing. Joyce E. Cornell, Portfolio
Manager, focuses on stock selection, a role she has played since the Fund's
introduction in 1992. Joyce, who has seven years of investment experience as a
research analyst, joined Scudder in 1991 in this capacity. Eileen O. Gerspach,
Portfolio Manager, helps set the Fund's general investment strategies. Eileen,
who joined the team in March 1995, has worked in the investment industry since
1984 and has eight years of experience as a portfolio manager.
10
<PAGE>
INVESTMENT PORTFOLIO as of October 31, 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
4.4% REPURCHASE AGREEMENT
16,787,000 Repurchase Agreement with Donaldson,
Lufkin & Jenrette dated 10/31/95 at 5.875%
to be repurchased at $16,789,740 on 11/1/95,
collateralized by a $11,514,000 U.S. Treasury
Note, 12.375%, 5/15/04 (Cost $16,787,000)............. 16,787,000
----------
6.7% CONVERTIBLE BONDS
INDIA 3.3% 4,810,000 Jindal, 4.25%, 3/31/99 (Steel manufacturer)............. 4,569,500
7,750,000 Reliance Industries, 3.5%, 11/3/99 (Producer
of textiles, synthetic fibers and plastics)........... 7,866,250
----------
12,435,750
----------
MALAYSIA 1.7% 2,260,000 Renong Berhad, 2.5%, 1/15/05 (Holding
company involved in engineering and
construction, financial services,
telecommunication and information
technology)........................................... 2,457,750
3,660,000 United Engineers Malaysia, 2%, 3/1/04,
(Leading comprehensive contractor).................... 4,026,000
----------
6,483,750
----------
TAIWAN 1.7% 5,940,000 TECO Electric & Machinery, 2.75%, 4/15/04
(Manufacturer of household appliances and
computer products).................................... 4,603,500
1,461,000 United Microelectronics Corp., Ltd., 1.25%,
6/8/04 (Semiconductor manufacturer)................... 1,972,350
----------
6,575,850
----------
Total Convertible Bonds (Cost $29,115,040).............. 25,495,350
----------
<CAPTION>
88.9% COMMON STOCKS
Shares
----------------------------------------------------------------------------------
AUSTRALIA 10.1% 3,389,043 Ampol Exploration Ltd. (Oil and gas
exploration company).................................. 6,712,167
951,200 Australia & New Zealand Banking Group Ltd.
(General trading and savings bank).................... 3,985,170
580,893 Broken Hill Proprietary Co. Ltd. (Petroleum,
minerals and steel)................................... 7,867,563
1,201,735 Coca Cola Amatil Ltd. (Soft drink bottler
and distributor)...................................... 9,300,681
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
SCUDDER PACIFIC OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
% of Market
Portfolio Shares Value ($)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
9 M.I.M. Holdings Ltd. (Nonferrous metals and
coal)................................................. 12
63,000 Qantas Airways Ltd.* (International airline with
mainly Asian and Pacific routes)...................... 1,102,500
1,969,300 Woodside Petroleum Ltd. (Major oil and gas
producer)............................................. 9,435,716
----------
38,403,809
----------
CHINA 0.6% 225,800 China Yuchai International Ltd.* (Holding
company for Guangxi Yuchai Machinery
Co., which manufactures and sells diesel
truck engines)........................................ 2,258,000
1,000 Tsingtao Brewery "H" (Leading brewery).................. 265
----------
2,258,265
----------
HONG KONG 16.3% 200 China Light & Power Co., Ltd. (Electric utility)........ 1,066
3,590,300 First Pacific Co., Ltd. (International
management and investment company).................... 4,132,813
802,726 HSBC Holdings Ltd. (Bank)............................... 11,680,054
1,861,500 Hong Kong Electric Holdings, Ltd. (Electric
utility and real estate).............................. 6,332,042
2,306,000 Hutchison Whampoa, Ltd. (Container
terminal and real estate company)..................... 12,705,563
1,842,800 Jinhui Shipping and Transportation Ltd.
(Operator of cargo fleet of ships transporting
steel, iron ore, non-ferrous metals and
agricultural products)................................ 2,441,710
1,469,000 Swire Pacific Ltd. "A" (General trading and
real estate company).................................. 11,019,827
2,887,000 Television Broadcasts, Ltd. (Television
broadcasting)......................................... 11,575,333
12,075,744 Yips Hang Cheung (Manufacturer of mixed
solvents and paints).................................. 1,874,218
----------
61,762,626
----------
INDIA 3.8% 222,015 Bajaj Auto (GDR) (Maker of two and three
wheel vehicles)....................................... 5,994,405
366,920 Ranbaxy Laboratories (GDR)
(Pharmaceutical company).............................. 8,439,160
----------
14,433,565
----------
INDONESIA 11.2% 4,340,500 Bakrie & Brothers (Manufacturer of industrial
steel products, steel pipes, corrugated
sheet iron, asbestos and fiber cements)............... 7,716,763
935,000 Gadjah Tunggal (Tire manufacturer)...................... 596,984
775,000 HM Sampoerna (Foreign registered)
(Tobacco company)..................................... 7,166,446
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
% of Market
Portfolio Shares Value ($)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2,097,500 Indorama Synthetics (Producer of polyester
chips, staple fibers and texturized yarn)............. 6,950,105
1,214,000 Jaya Real Properties (Foreign registered)
(Property developer) (b).............................. 3,461,317
309,000 Kabelmetal Indonesia (Cable manufacturer)............... 280,631
127,000 Kabelmetal Indonesia (Foreign registered)............... 115,340
1,606,000 Kalbe Farma* (Foreign registered)
(Pharmaceutical producer and distributor)............. 5,091,678
1,365,000 Modern Photo Film Co. (Foreign registered)
(Photographic film distributor)....................... 8,294,584
133,750 Modern Photo Film Co. (Foreign registered)
(New (c))............................................. 812,748
135,000 Unilever-Indonesia (Foreign registered)
(Consumer products manufacturer) (b).................. 1,902,246
----------
42,388,842
----------
KOREA 10.1% 302,500 Korea Electric Power Co. (Electric utility)............. 12,453,440
90,860 LG Electronics, Inc.* (GDR) (Major
electronics manufacturer)............................. 1,340,185
5,300 LG Electronics, Inc.* (GDR) (New(c)) (b)................ 104,192
81,990 LG Merchant Banking Corp. (Financial
services company)..................................... 4,093,339
53,030 Pohang Iron & Steel Co., Ltd. (Korea's largest
steel producer) (b)................................... 5,354,356
7 Samsung Electronics Co., Ltd. (Major electronics
manufacturer) (b)..................................... 1,583
31 Samsung Electronics Co., Ltd. (New (c)) (b)............. 7,032
2 Samsung Electronics Co., Ltd. (New (c)) (b)............. 446
1,520 Samsung Electronics Co., Ltd. (GDS)
(Voting) (b).......................................... 159,977
397 Samsung Electronics Co., Ltd. (GDS) (Voting)
(New (c)) (b)......................................... 41,836
100,500 Samsung Electronics Co., Ltd. (GDS)
(Non-voting).......................................... 6,582,750
19,889 Samsung Electronics Co., Ltd. (GDS)
(Non-voting) (New (c))................................ 1,193,340
12,040 Samsung Fire & Marine Insurance Co.
(Insurance company) (b)............................... 6,243,208
8 Samsung Heavy Industries Co., Ltd.
(Machinery manufacturer).............................. 244
3,988 Samsung Heavy Industries Co., Ltd. (New (c))............ 118,314
56,000 Yukong, Ltd.* (GDS) (Leading oil refiner)............... 616,000
6,710 Yukong, Ltd.* (GDS) (New (c))........................... 114,070
----------
38,424,312
----------
MALAYSIA 6.6% 200 Aokam Perdana Bhd. (Forest products
company).............................................. 335
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
SCUDDER PACIFIC OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
% of Market
Portfolio Shares Value ($)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1,210,000 Arab-Malaysian Corp. (Investment holding
company with interests in financial services,
infrastructure and property).......................... 4,071,429
853,000 Kim Hin Industries (Ceramic tile manufacturer).......... 1,745,612
555,000 Malayan Banking Bhd. (Leading banking
and financial services group)......................... 4,477,568
1,687,000 Renong Berhad (Holding company involved
in engineering and construction, financial
services, telecommunication and information
technology)........................................... 2,575,978
1,942,000 United Engineers (Leading comprehensive
contractor)........................................... 12,075,403
----------
24,946,325
----------
NEW ZEALAND 2.6% 2,401,800 Telecom Corp. of New Zealand
(Telecommunication services).......................... 9,968,566
----------
PHILIPPINES 6.1% 5,122,060 Ayala Corp. "B" (Industrial conglomerate)............... 5,218,554
2,064,400 Bacnotan Cement Corp. (Producer of
portland and pozzolan cements)........................ 1,984,237
528,330 Benpres Holdings Corp. (GDR) (Media
and infrastructure conglomerate)...................... 3,169,980
5,623,000 C&P Homes, Inc.* (Home construction
company).............................................. 3,621,117
43,800 First Philippine Holdings Corp. "B" (Holding
company involved in electric power
distribution, construction services,
passenger bus transportation)......................... 92,618
2,342,500 Petron Corp. (Refiner and marketer of
petroleum products)................................... 1,035,707
70,400 Philippine Long Distance Telephone Co.
(GDR) (Telecommunication services).................... 2,288,000
13,214,000 SM Prime Holdings Corp.* (Leader in
commercial center operations)......................... 3,556,248
16,711,800 Southeast Asia Cement Holdings, Inc.*
(Cement producer)..................................... 2,184,549
----------
23,151,010
----------
SINGAPORE 4.9% 709,000 Development Bank of Singapore (Foreign
Registered) (Banking and financial services).......... 8,128,662
39 Jardine Matheson Holdings, Ltd.
(Conglomerate: real estate, merchandising,
engineering).......................................... 238
1,661,000 Overseas Union Bank Ltd. (Leading bank
group)................................................ 10,344,515
----------
18,473,415
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
% of Market
Portfolio Shares Value ($)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TAIWAN 1.4% 1,662,000 Taiwan Semiconductor Manufacturing Co.
(Manufacturer of integrated circuits and
other semiconductor devices).......................... 5,173,157
-----------
THAILAND 11.9% 274,500 Ban Pu Coal Public Co., Ltd. (Foreign
registered) (Leading miner of sub-bituminous
coal in southeast Asia)............................... 6,762,964
402,500 Bangkok Bank Ltd. (Foreign registered)
(Leading commercial bank, providing full
range of financial services).......................... 4,158,554
1,169,300 PTT Exploration and Production Co., Ltd.
(Foreign registered) (Petroleum refinery)............. 10,594,095
1,467,000 Sahavirya Steel Industry (Foreign registered)
(Steel producer)...................................... 2,244,367
128,500 Siam Cement Co., Ltd. (Foreign registered)
(Construction materials and industrial
conglomerate)......................................... 7,005,841
751,000 TPI Polene Co., Ltd. (Foreign registered)
(Producer and distributor of low density
polyethylene plastic pellets)......................... 5,073,316
1,103,500 Thai Farmers Bank (Foreign registered)
(Commercial bank)..................................... 9,120,922
-----------
44,960,059
-----------
UNITED STATES 3.3% 385,800 Freeport McMoRan Copper & Gold, Inc. "A"*
(U.S. company mining in Indonesia).................... 8,825,175
259,600 Pacific Basin Bulk Shipping Ltd. (Shipping
company specializing in the handysize dry
bulk carrier segment in the Pacific region)........... 3,666,850
75,300 Pacific Basin Bulk Shipping Ltd. Warrants*
(expire 9/30/99)...................................... 51,769
-----------
12,543,794
-----------
Total Common Stocks (Cost $316,159,585)................. 336,887,745
-----------
- -------------------------------------------------------------------------------------------------------
Total Investment Portfolio - 100.0%
(Cost $362,061,625) (a)............................... 379,170,095
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
SCUDDER PACIFIC OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $362,061,625. At
October 31, 1995, net unrealized appreciation for all securities
based on tax cost was $17,108,470. This consisted of aggregate
gross unrealized appreciation for all securities in which there
was an excess of market value over tax cost of $44,317,160 and
aggregate gross unrealized depreciation for all securities in
which there was an excess of tax cost over market value of
$27,208,690.
(b) Securities valued in good faith by the Valuation Committee of the
Board of Directors. The cost of these securities at October 31,
1995 aggregated $14,779,018. See Note A of the Notes to Financial
Statements.
(c) New shares issued during 1995, eligible for a pro rata share of
1995 dividends.
* Non-income producing security.
Sector breakdown of the Fund's equity securities is noted on
page 5.
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
OCTOBER 31, 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $362,061,625)
(Note A) .............................................. $ 379,170,095
Cash ..................................................... 32,389
Foreign currency holdings, at market
(identified cost $454,375) (Note A) ................... 453,890
Receivables:
Investments sold ...................................... 12,892,842
Dividends and interest ................................ 770,448
Fund shares sold ...................................... 78,260
Foreign taxes recoverable ............................. 21,926
Other assets ............................................. 24,424
-------------
Total assets .......................................... 393,444,274
LIABILITIES
Payables:
Investments purchased ................................. $ 8,517,310
Fund shares redeemed .................................. 721,107
Accrued management fee (Note C) ....................... 368,494
Other accrued expenses (Note C) ....................... 272,207
-------------
Total liabilities ..................................... 9,879,118
-------------
Net assets, at market value .............................. $ 383,565,156
=============
NET ASSETS
Net assets consist of:
Undistributed net investment income ................... $ 2,313,689
Unrealized appreciation (depreciation) on:
Investments ......................................... 17,108,470
Foreign currency related transactions ............... (3,941)
Accumulated net realized loss ......................... (15,989,144)
Capital stock ......................................... 245,954
Additional paid-in capital ............................ 379,890,128
-------------
Net assets, at market value .............................. $ 383,565,156
=============
NET ASSET VALUE, offering and redemption price per
share ($383,565,156 / 24,595,415 shares of
capital stock outstanding, $.01 par value,
100,000,000 shares authorized) ........................ $ 15.59
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
SCUDDER PACIFIC OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $489,565).. $ 6,308,404
Interest .............................................. 3,671,542
------------
9,979,946
Expenses:
Management fee (Note C) ............................... $ 4,590,699
Services to shareholders (Note C) ..................... 1,248,389
Custodian and accounting fees (Note C) ................ 869,480
Directors' fees and expenses (Note C) ................. 62,705
Reports to shareholders ............................... 252,958
Auditing .............................................. 119,376
Legal ................................................. 18,472
State registration .................................... 77,501
Amortization of organization expense (Note A) ......... 11,625
Other ................................................. 13,157 7,264,362
-----------------------------
Net investment income ................................. 2,715,584
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT TRANSACTIONS
Net realized loss from:
Investments ....................................... (10,024,429)
Foreign currency related transactions ............. (201,590) (10,226,019)
------------
Net unrealized depreciation during the period on:
Investments ....................................... (43,779,641)
Foreign currency related transactions ............. (1,511) (43,781,152)
------------------------------
Net loss on investment transactions ................... (54,007,171)
------------
Net decrease in net assets resulting from operations... $(51,291,587)
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
----------------------------------
INCREASE (DECREASE) IN NET ASSETS 1995 1994
- --------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ....................... $ 2,715,584 $ 1,182,190
Net realized loss from investment
transactions ........................... (10,226,019) (3,433,942)
Net unrealized appreciation (depreciation)
on investment transactions during
the period ............................. (43,781,152) 26,525,823
------------- -------------
Net increase (decrease) in net assets
resulting from operations .............. (51,291,587) 24,274,071
------------- -------------
Distributions to shareholders from:
Net investment income ($.10 and
$.08 per share, respectively) ........ (2,548,920) (1,850,366)
------------- -------------
Net realized gains ($.01 per share) .... -- (231,296)
------------- -------------
Fund share transactions:
Proceeds from shares sold ................... 224,335,340 526,344,940
Net asset value of shares issued to
shareholders in reinvestment of
distributions .......................... 2,255,971 1,853,767
Cost of shares redeemed ..................... (288,337,055) (321,356,695)
------------- -------------
Net increase (decrease) in net assets from
Fund share transactions ................ (61,745,744) 206,842,012
------------- -------------
INCREASE (DECREASE) IN NET ASSETS ........... (115,586,251) 229,034,421
Net assets at beginning of period ........... 499,151,407 270,116,986
------------- -------------
NET ASSETS AT END OF PERIOD (including
undistributed net investment income of
$2,313,689 and accumulated distributions
in excess of net investment income of
$471,044) .............................. $ 383,565,156 $ 499,151,407
============= =============
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period ... 28,405,889 16,662,536
------------- -------------
Shares sold ................................. 14,244,117 30,394,493
Shares issued to shareholders in
reinvestment of distributions .......... 142,964 98,710
Shares redeemed ............................. (18,197,555) (18,749,850)
------------- -------------
Net increase (decrease) in Fund shares ...... (3,810,474) 11,743,353
------------- -------------
Shares outstanding at end of period ......... 24,595,415 28,405,889
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
SCUDDER PACIFIC OPPORTUNITIES FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD AND OTHER PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL
STATEMENTS.
<TABLE>
<CAPTION>
FOR THE PERIOD
DECEMBER 8, 1992
YEARS ENDED OCTOBER 31, (COMMENCEMENT
--------------------- OF OPERATIONS) TO
1995 1994 OCTOBER 31, 1993
------- ------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of period ................................... $ 17.57 $ 16.21 $ 12.00
------- ------- -------
Income from investment operations:
Net investment income (a) ........................................ .10 .04 .04
Net realized and unrealized gain (loss) on investment
transactions...................................................... (1.98) 1.41 4.17
------- ------- -------
Total from investment operations ....................................... (1.88) 1.45 4.21
------- ------- -------
Less distributions from:
Net investment income ............................................ (.10) (.08) --
Net realized gains on investment transactions .................... -- (.01) --
------- ------- -------
Total distributions .................................................... (.10) (.09) --
------- ------- -------
Net asset value, end of period ......................................... $ 15.59 $ 17.57 $ 16.21
======= ======= =======
TOTAL RETURN (%) ....................................................... (10.73) 8.97 35.08**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) ................................. 384 499 270
Ratio of operating expenses, net to average daily net assets (%) (a) ... 1.74 1.81 1.75*
Ratio of net investment income to average daily net assets (%) ......... .65 .28 1.41*
Portfolio turnover rate (%) ............................................ 64.0 38.5 9.9*
(a) Reflects a per share amount of management fee and other fees
not imposed by the Adviser of .................................. -- -- .03
Operating expense ratio including expenses reimbursed,
management fee and other expenses not imposed (%) .............. -- -- 2.90*
</TABLE>
* Annualized
** Not annualized
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
A. SIGNIFICANT ACCOUNTING POLICIES
Scudder Pacific Opportunities Fund (the "Fund") is a non-diversified series of
Scudder International Fund, Inc. (the "Corporation"). The Corporation is
organized as a Maryland corporation and is registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment company.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements in conformity with generally accepted
accounting principles.
SECURITY VALUATION. Portfolio securities which are traded on U.S. or foreign
stock exchanges are valued at the most recent sale price reported on the
exchange on which the security is traded most extensively. If no sale occurred,
the security is then valued at the calculated mean between the most recent bid
and asked quotations. If there are no such bid and asked quotations, the most
recent bid quotation is used. Securities quoted on the National Association of
Securities Dealers Automatic Quotation ("NASDAQ") System, for which there have
been sales, are valued at the most recent sale price reported on such system. If
there are no such sales, the value is the high or "inside" bid quotation.
Securities which are not quoted on the NASDAQ System but are traded in another
over-the-counter market are valued at the most recent sale price on such market.
If no sale occurred, the security is then valued at the calculated mean between
the most recent bid and asked quotations. If there are no such bid and asked
quotations, the most recent bid quotation shall be used.
Portfolio debt securities with remaining maturities greater than sixty days are
valued by pricing agents approved by the officers of the Fund, which quotations
reflect broker/dealer-supplied valuations and electronic data processing
techniques. If the pricing agents are unable to provide such quotations, the
most recent bid quotation supplied by a bona fide market maker shall be used.
Short-term investments having a maturity of sixty days or less are valued at
amortized cost.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Directors. Securities valued in good
faith by the Valuation Committee of the Board of Directors at fair value
amounted to $17,276,193 (4.5% of net assets) and have been noted in the
investment portfolio as of October 31, 1995.
21
<PAGE>
SCUDDER PACIFIC OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value, depending on the maturity of the repurchase
agreement and the underlying collateral, is equal to at least 100.5% of the
resale price.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A forward foreign currency exchange
contract (forward contract) is a commitment to purchase or sell a foreign
currency at the settlement date at a negotiated rate. During the period, the
Fund utilized forward contracts as a hedge in connection with portfolio
purchases and sales of securities denominated in foreign currencies.
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Forward
contracts having the same settlement date and broker are offset and any gain
(loss) is realized on the date of offset; otherwise, gain (loss) is realized on
settlement date. Realized and unrealized gains and losses which represent the
difference between the value of the forward contract to buy and the forward
contract to sell are included in net realized and unrealized gain (loss) from
foreign currency related transactions.
Certain risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their contracts. Additionally,
when utilizing forward contracts to hedge, the Fund gives up the opportunity to
profit from favorable exchange rate movements during the term of the contract.
FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency transactions are translated into U.S. dollars
on the following basis:
(i) market value of investment securities, other assets and liabilities at
the daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and interest
income and certain expenses at the rates of exchange prevailing on the
respective dates of such transactions.
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes
in market prices of the investments. Such fluctuations are included with the
net realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on dividends,
interest, and foreign withholding taxes.
FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements of
the Internal Revenue Code which are applicable to regulated investment
companies, and to distribute all of its taxable income to its shareholders.
Accordingly, the Fund paid no federal income taxes, and no federal income tax
provision was required.
At October 31, 1995, the Fund had a net tax basis capital loss carryforward
of approximately $16,000,000, which may be applied against any realized net
taxable capital gains of each succeeding year until fully utilized or until
October 31, 2002 ($3,200,000) and October 31, 2003 ($12,800,000), the respective
expiration dates, whichever occurs first.
DISTRIBUTION OF INCOME AND GAINS. Distributions of net investment income are
made annually. During any particular year, net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed and, therefore, will be distributed to
shareholders annually. An additional distribution may be made to the extent
necessary to avoid the payment of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. These
differences primarily relate to investments in passive foreign investment
companies. As a result, net investment income (loss) and net realized gain
(loss) on investment transactions for a reporting period may differ
significantly from distributions during such period. Accordingly, the Fund may
periodically make reclassifications among certain of its capital accounts
without impacting the net asset value of the Fund.
23
<PAGE>
SCUDDER PACIFIC OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
The Fund uses the identified cost method for determining realized gain or loss
on investments for both financial and federal income tax reporting purposes.
ORGANIZATION COSTS. Costs incurred by the Fund in connection with its
organization and initial registration of shares have been deferred and are being
amortized on a straight-line basis over a five-year period.
OTHER. Investment security transactions are accounted for on a trade date basis.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. All original issue discounts are accreted for both tax and
financial reporting purposes. Interest income is recorded on the accrual basis.
B. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1995, purchases and sales of investment
securities (excluding short-term investments) aggregated $262,839,463 and
$237,599,513, respectively.
C. RELATED PARTIES
Under the Investment Management Agreement (the "Management Agreement") with
Scudder, Stevens & Clark, Inc. (the "Adviser"), the Adviser directs the
investments of the Fund in accordance with its investment objectives, policies,
and restrictions. The Adviser determines the securities, instruments, and other
contracts relating to investments to be purchased, sold or entered into by the
Fund. In addition to portfolio management services, the Adviser provides certain
administrative services in accordance with the Management Agreement. The
management fee payable under the Management Agreement is equal to an annual rate
of 1.10% of the Fund's average daily net assets, computed and accrued daily and
payable monthly. The Management Agreement provides that if the Fund's expenses
exceed specified limits, such excess, up to the amount of the management fee,
will be paid by the Adviser. For the year ended October 31, 1995, the fee
pursuant to the Agreement amounted to $4,590,699.
Scudder Service Corporation ("SSC"), a wholly-owned subsidiary of the Adviser,
is the transfer, dividend paying and shareholder service agent for the Fund.
For the year ended October 31, 1995, the amount charged to the Fund by SSC
aggregated $1,047,442 of which $80,873 is unpaid at October 31, 1995.
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Effective May 5, 1995, Scudder Fund Accounting Corporation ("SFAC"), a
wholly-owned subsidiary of the Adviser, assumed responsibility for determining
the daily net asset value per share and maintaining the portfolio and general
accounting records of the Fund. For the year ended October 31, 1995, the amount
charged to the Fund by SFAC aggregated $121,156, of which $20,685 is unpaid at
October 31, 1995.
The Fund pays each Director not affiliated with the Adviser $4,000 annually,
plus specified amounts for attended board and committee meetings. For the year
ended October 31, 1995, Directors' fees and expenses aggregated $62,705 .
D. INVESTING IN EMERGING MARKETS
Investing in emerging markets may involve special risks and considerations not
typically associated with investing in the United States. These risks include
revaluation of currencies and future adverse political and economic
developments. Moreover, securities issued in these markets may be less liquid
and their prices more volatile than those of securities of comparable U.S.
companies.
25
<PAGE>
SCUDDER PACIFIC OPPORTUNITIES FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS OF SCUDDER INTERNATIONAL FUND, INC. AND TO THE
SHAREHOLDERS OF SCUDDER PACIFIC OPPORTUNITIES FUND:
We have audited the accompanying statement of assets and liabilities of Scudder
Pacific Opportunities Fund including the investment portfolio, as of October
31, 1995, and the related statement of operations for the year then ended,
the statements of changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the two years in the period
then ended and for the period December 8, 1992 (commencement of operations)
to October 31, 1993. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Scudder Pacific Opportunities Fund as of October 31, 1995, the results of its
operations for the year then ended, the changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of
the two years in the period then ended and for the period December 8, 1992
(commencement of operations) to October 31, 1993 in conformity with generally
accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
December 8, 1995
26
<PAGE>
TAX INFORMATION
- --------------------------------------------------------------------------------
The Fund paid foreign taxes of $489,565 and the Fund recognized $2,093,914 of
foreign source income during the taxable year ended October 31, 1995. Pursuant
to section 853 of the Internal Revenue Code, the Fund designates $.020 per share
of foreign taxes and $.085 of income from foreign sources as having been paid in
the taxable year ended October 31, 1995.
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your Scudder Fund account, please call a Scudder Service Representative at
1-800-225-5163.
27
<PAGE>
(This page intentionally left blank.)
28
<PAGE>
OFFICERS AND DIRECTORS
- --------------------------------------------------------------------------------
Edmond D. Villani*
Chairman of the Board and Director
Nicholas Bratt*
President and Director
Paul Bancroft III
Director; Venture Capitalist and Consultant
Thomas J. Devine
Director; Consultant
Keith R. Fox
Director; President, Exeter Capital Management Corporation
William H. Gleysteen, Jr.
Director; President, The Japan Society, Inc.
William H. Luers
Director; President, The Metropolitan Museum of Art
Dr. Wilson Nolen
Director; Consultant
Juris Padegs*
Director, Vice President and Assistant Secretary
Daniel Pierce*
Director
Dr. Gordon Shillinglaw
Director; Professor Emeritus of Accounting, Columbia University
Graduate School of Business
Robert G. Stone, Jr.
Honorary Director; Chairman of the Board and Director, Kirby Corporation
Robert W. Lear
Honorary Director; Executive-in-Residence, Visiting Professor,
Columbia University Graduate School of Business
Elizabeth J. Allan*
Vice President
Carol L. Franklin*
Vice President
Edmund B. Games, Jr.*
Vice President
Jerard K. Hartman*
Vice President
William E. Holzer*
Vice President
Thomas W. Joseph*
Vice President
William F. Truscott*
Vice President
David S. Lee*
Vice President and Assistant Treasurer
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
Edward J. O'Connell*
Vice President and Assistant Treasurer
Kathryn L. Quirk*
Vice President and Assistant Secretary
Richard W. Desmond*
Assistant Secretary
Coleen Downs Dinneen*
Assistant Secretary
*Scudder, Stevens & Clark, Inc.
29
<PAGE>
INVESTMENT PRODUCTS AND SERVICES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
The Scudder Family of Funds
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
<C> <C>
Money Market Income
Scudder Cash Investment Trust Scudder Emerging Markets Income Fund
Scudder U.S. Treasury Money Fund Scudder GNMA Fund
Tax Free Money Market+ Scudder Income Fund
Scudder Tax Free Money Fund Scudder International Bond Fund
Scudder California Tax Free Money Fund* Scudder Short Term Bond Fund
Scudder New York Tax Free Money Fund* Scudder Short Term Global Income Fund
Tax Free+ Scudder Zero Coupon 2000 Fund
Scudder California Tax Free Fund* Growth
Scudder High Yield Tax Free Fund Scudder Capital Growth Fund
Scudder Limited Term Tax Free Fund Scudder Development Fund
Scudder Managed Municipal Bonds Scudder Global Fund
Scudder Massachusetts Limited Term Tax Free Fund* Scudder Global Small Company Fund
Scudder Massachusetts Tax Free Fund* Scudder Gold Fund
Scudder Medium Term Tax Free Fund Scudder Greater Europe Growth Fund
Scudder New York Tax Free Fund* Scudder International Fund
Scudder Ohio Tax Free Fund* Scudder Latin America Fund
Scudder Pennsylvania Tax Free Fund* Scudder Pacific Opportunities Fund
Growth and Income Scudder Quality Growth Fund
Scudder Balanced Fund Scudder Small Company Value Fund
Scudder Growth and Income Fund Scudder Value Fund
The Japan Fund
Retirement Plans and Tax-Advantaged Investments
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
IRAs 403(b) Plans
Keogh Plans SEP-IRAs
Scudder Horizon Plan+++* (a variable annuity) Profit Sharing and Money Purchase
401(k) Plans Pension Plans
Closed-End Funds#
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
The Argentina Fund, Inc. The Latin America Dollar Income Fund, Inc.
The Brazil Fund, Inc. Montgomery Street Income Securities, Inc.
The First Iberian Fund, Inc. Scudder New Asia Fund, Inc.
The Korea Fund, Inc. Scudder New Europe Fund, Inc.
Scudder World Income
Opportunities Fund, Inc.
Institutional Cash Management
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
Scudder Institutional Fund, Inc. Scudder Treasurers Trust(TM)++
Scudder Fund, Inc.
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
For complete information on any of the above Scudder funds, including management fees and expenses, call or
write for a free prospectus. Read it carefully before you invest or send money. +A portion of the income
from the tax-free funds may be subject to federal, state, and local taxes. *Not available in all states. +++A
no-load variable annuity contract provided by Charter National Life Insurance Company and its affiliate,
offered by Scudder's insurance agencies, 1-800-225-2470. #These funds, advised by Scudder, Stevens & Clark,
Inc. are traded on various stock exchanges. ++For information on Scudder Treasurers Trust,(TM) an institutional
cash management service that utilizes certain portfolios of Scudder Fund, Inc. ($100,000 minimum), call
1-800-541-7703.
</TABLE>
30
<PAGE>
HOW TO CONTACT SCUDDER
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Account Service and Information
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
<C> <C>
For existing account service and transactions
SCUDDER INVESTOR RELATIONS
1-800-225-5163
For personalized information about your Scudder accounts;
exchanges and redemptions; or information on any Scudder fund
SCUDDER AUTOMATED INFORMATION LINE (SAIL)
1-800-343-2890
Investment Information
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
To receive information about the Scudder funds, for additional
applications and prospectuses, or for investment questions
SCUDDER INVESTOR RELATIONS
1-800-225-2470
For establishing 401(k) and 403(b) plans
SCUDDER DEFINED CONTRIBUTION SERVICES
1-800-323-6105
Please address all correspondence to
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
THE SCUDDER FUNDS
P.O. BOX 2291
BOSTON, MASSACHUSETTS
02107-2291
Or stop by a Scudder Funds Center
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Many shareholders enjoy the personal, one-on-one service of the
Scudder Funds Centers. Check for a Funds Center near you--they can
be found in the following cities:
Boca Raton New York
Boston Portland, OR
Chicago San Diego
Cincinnati San Francisco
Los Angeles Scottsdale
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
For information on Scudder For information on Scudder
Treasurers Trust,(TM) an Institutional Funds,* funds
institutional cash management designed to meet the broad
service for corporations, non-profit investment management and
organizations and trusts that uses service needs of banks and
certain portfolios of Scudder Fund, other institutions, call
Inc.* ($100,000 minimum), call 1-800-854-8525.
1-800-541-7703.
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Scudder Investor Relations and Scudder Funds Centers are services provided through Scudder
Investor Services, Inc., Distributor.
* Contact Scudder Investor Services, Inc., Distributor, to receive a prospectus with more complete
information, including management fees and expenses. Please read it carefully before you invest or send money.
</TABLE>
31
<PAGE>
Celebrating Over 75 Years of Serving Investors
- --------------------------------------------------------------------------------
Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven
Clark, Scudder, Stevens & Clark was the first independent investment counsel
firm in the United States. Since its birth, Scudder's pioneering spirit and
commitment to professional long-term investment management have helped shape the
investment industry. In 1928, we introduced the nation's first no-load mutual
fund. Today we offer 37 pure no load(TM) funds, including the first
international mutual fund offered to U.S. investors.
Over the years, Scudder's global investment perspective and dedication to
research and fundamental investment disciplines have helped us become one of the
largest and most respected investment managers in the world. Though times have
changed since our beginnings, we remain committed to our long-standing
principles: managing money with integrity and distinction; keeping the interests
of our clients first; providing access to investments and markets that may not
be easily available to individuals; and making investing as simple and
convenient as possible through friendly, comprehensive service.
<PAGE>
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
Scudder
Greater Europe
Growth Fund
Annual Report
October 31, 1995
o For investors seeking long-term growth of capital through investment
primarily in the equity securities of European companies.
o A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
<PAGE>
SCUDDER GREATER EUROPE GROWTH FUND
CONTENTS
2 In Brief
3 Letter from the Fund's Chairman
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
10 Investment Portfolio
16 Financial Statements
19 Financial Highlights
20 Notes to Financial Statements
24 Report of Independent Accountants
25 Tax Information
25 Officers and Directors
26 Investment Products and Services
27 How to Contact Scudder
IN BRIEF
- - Scudder Greater Europe Growth Fund provided a total return of 15.06% for the
12 months ended October 31, 1995, comfortably outperforming the average
European region fund tracked by Lipper Analytical Services, Inc.
- - European markets are attractively valued and the outlook for earnings and
dividend growth remains constructive. While uncertainties surrounding the
prospect of Western Europe's economic integration preoccupy the market,
growth is moderate, inflation is under control, and lower interest rates are
anticipated--an excellent scenario for investors, in our opinion.
- - Portfolio focus is on selecting stocks of European companies positioned to
benefit from market opportunities that develop, whether domestic, regional,
or global. Fund holdings currently include emerging global competitors such
as the fast-growing German software manufacturer SAP, as well as companies
with a domestic focus such as Telecom Italia Mobile, the primary supplier of
cellular phone service in Italy.
2
<PAGE>
LETTER FROM THE FUND'S CHAIRMAN
Dear Shareholders,
Over the past 12 months, several European bourses rallied strongly as
Europe enjoyed the benefits of low inflation, moderate economic growth, and
monetary easing. Volatility in the currency markets created concerns for
investors, but generally the markets have trended upward in dollar terms. We are
particularly pleased with the return of Scudder Greater Europe Growth Fund for
the annual period ended October 31, 1995. The Fund's 15.06% total return is
clearly above-average when measured against its benchmark index and the average
return of its peer group.
Although strong, European markets have failed to keep pace with the
U.S. stock market, which returned 26.44% for the Fund's fiscal year. The fact
that the U.S. market has outperformed European markets on the whole suggests
that European markets are attractively valued by comparison. We expect relative
valuations to change in the coming months as the U.S. stock market peaks under
pressure from slowing earnings growth and as several factors combine to heighten
demand for non-U.S. investments. Furthermore, we believe economic cycles in many
foreign markets are more favorable for equity investment than in the United
States, and Europe in particular has yet to realize the full benefits of ongoing
privatization and corporate restructuring. In view of these conditions, we are
confident that Scudder Greater Europe Growth Fund is well-positioned to provide
attractive returns for its shareholders over time.
We would also like to take this opportunity to announce that on October
6, 1995, we introduced Scudder Small Company Value Fund, a pure no-load(TM)
mutual fund designed to seek long-term growth of capital through a disciplined,
value-oriented approach to small-stock investing. For more information about
Scudder Small Company Value Fund and other investment products and services, see
page 26.
Sincerely,
/s/Edmond D. Villani
Edmond D. Villani
Chairman,
Scudder Greater Europe Growth Fund
3
<PAGE>
SCUDDER GREATER EUROPE GROWTH FUND
PERFORMANCE UPDATE as of October 31, 1995
- -----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------
SCUDDER GREATER EUROPE GROWTH FUND
- ----------------------------------------
Total Return
Period Growth --------------
Ended of Average
10/31/95 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $11,506 15.06% 15.06%
Life of
Fund* $11,679 16.79% 15.81%
MORGAN STANLEY CAPITAL INTERNATIONAL
(MSCI) EUROPE 14 INDEX
- --------------------------------------
Total Return
Period Growth --------------
Ended of Average
10/31/95 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $11,321 13.21% 13.21%
Life of
Fund* $11,321 13.21% 13.21%
* The Fund commenced operations on
October 10, 1994. Index comparisons
begin October 31, 1994.
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
Scudder Greater Europe Growth Fund
Year Amount
- ----------------------
10/94* $10,000
1/95 $ 9,466
4/95 $10,371
7/95 $11,482
10/95 $11,506
Morgan Stanley Capital International
(MSCI) Europe 14 Index
Year Amount
- ----------------------
10/94* $10,000
1/95 $ 9,596
4/95 $10,597
7/95 $11,485
10/95 $11,321
The Morgan Stanley Capital International (MSCI) Europe 14 Index is
an unmanaged capitalization-weighted measure of 14 stock markets
in Europe. Index returns assume dividends reinvested net of
withholding tax and, unlike Fund returns, do not reflect any fees
or expenses.
- -----------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
- -----------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
YEARLY PERIODS ENDED OCTOBER 31
1994* 1995
--------------------
NET ASSET VALUE... $12.18 $13.99
INCOME DIVIDENDS.. $ -- $ .02
FUND TOTAL
RETURN (%)........ 1.50 15.06
INDEX TOTAL
RETURN (%)........ -- 13.21
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results.
Investment return and principal value will fluctuate, so an investor's
shares, when redeemed, may be worth more or less than when purchased.
If the Adviser had not maintained the Fund's expenses, the average annual
total return for the one year and life of Fund periods would have been
lower.
4
<PAGE>
PORTFOLIO SUMMARY as of October 31, 1995
- ---------------------------------------------------------------------------
GEOGRAPHICAL (Excludes 10% Cash Equivalents)
- ---------------------------------------------------------------------------
United Kingdom 16%
France 16% European markets are attractively
Germany 12% values and the outlook for
Italy 11% earnings growth is positive.
Netherlands 11%
Spain 10%
Sweden 9%
Switzerland 6%
Austria 3%
Other 6%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
SECTORS (Excludes 10% Cash Equivalents)
- --------------------------------------------------------------------------
Manufacturing 13%
Financial 12% Europe is homebase to a
Consumer Staples 12% number of global leaders in
Health 10% new, rapidly growing industries
Consumer Discretionary 9% as well as in established
Durables 8% industries which enjoy dynamic
Energy 6% growth prospects in the
Communications 6% emerging nations of the world.
Service Industries 5%
Other 19%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
TEN LARGEST EQUITY HOLDINGS
- --------------------------------------------------------------------------
1. TELECOM ITALIA MOBILE SPA
Cellular telecommunication services in Italy
2. GUCCI GROUP
Designer and producer of personal luxury accessories
and apparel in Italy
3. BULGARIA SPA
Manufacturer and retailer of fine jewelry, luxury watches
and perfumes in Italy
4. HEINEKEN HOLDINGS N.V.
Brewery in the Netherlands
5. SMITHKLINE BEECHAM
Manufacturer of ethical drugs and healthcare products in
the United Kingdom
6. VEBA AG
Electric utility, distributor of oil and chemicals in Germany
7. NEXT PLC
Retailer of clothing, accessories and fashion jewelry, also
through home shopping, in the United Kingdom
8. L.M. ERICSSON TELEPHONE CO.
Leading manufacturer of cellular telephone equipment in Sweden
9. SAP AG
Computer software manufacturer in Germany
10. CARREFOUR
Hypermarket and food retailing in France
Holdings include emerging global competitors as well as companies
with a domestic focus.
- --------------------------------------------------------------------------
For more complete details about the Fund's Investment Portfolio,
see page 10.
A monthly Investment Portfolio Summary and quarterly Portfolio Holdings
are available upon request.
5
<PAGE>
SCUDDER GREATER EUROPE GROWTH FUND
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
Scudder Greater Europe Growth Fund provided a total return of 15.06%
for the 12 months ended October 31, 1995, including price change plus an income
distribution of $0.02 per share. The Fund's net asset value on October 31, 1995,
was $13.99, up from $12.18 on October 31, 1994. The Fund comfortably
outperformed the average European region fund tracked by Lipper Analytical
Services, Inc., which returned 9.33% for the period. The Fund's return also
exceeded the 13.21% return of the unmanaged MSCI Europe 14 Index.
Review: Market and Economic Environment
Early in the Fund's fiscal year, global markets were shaken by a series
of events including rising interest rates, the peso devaluation in Mexico, and a
devastating earthquake in Japan. These setbacks exacerbated anxiety over
European political turbulence and economic divergence, and currency volatility
drove investors to the safety of the deutschemark. In March, pessimism was
replaced by optimism as interest rates eased globally. European markets powered
ahead driven by expectations for economic recovery and the perception that the
Bundesbank was pursuing a less restrictive interest rate policy, setting the
stage for other central banks to do the same. However, political will has been
in some cases at odds with the fiscal austerity measures required by economic
integration. Until agendas become clearer, this tension will be played out in
the marketplace. Moreover, in recent weeks, concerns about the viability of
European Monetary Union have emerged, and European equities have retraced some
of their gains as investors once again focus on exchange rates.
Most European markets displayed positive performance over the past 12
months. The Nordic markets ranked among the top performers, with Sweden and
Finland rising 26.3% and 15.6% in local terms, respectively. Two of the Fund's
holdings, Ericsson and Nokia, global players in cellular telecommunications,
helped propel these indices. The U.K. market returned a positive 12.5% in local
terms, buoyed by a torrid Wall Street, a more favorable interest rate
environment, and continued industry consolidation. U.K. holdings such as
PowerGen, Southern Electric, Royal Bank of Scotland, and Zeneca were excellent
performers due to merger activity in their respective industries. Though France
had positive returns for the period, performance lagged that of other European
markets, as the proposed 1996 budget called into question the government's
commitment to fiscal rectitude in the face of domestic opposition to cuts in
6
<PAGE>
social spending programs. Markets in Switzerland and the Netherlands rose 37.4%
and 15.6% respectively, with several portfolio holdings reflecting the strength
of these markets.
Looking Ahead
In Europe, growth is moderate, inflation is low, and labor costs are
under control. Budgetary concerns, however, currently preoccupy the markets as
the timetable for economic integration draws nearer. Investors are fearful that
economic activity may be weakened and market sentiment dampened by fiscal
tightening and currency volatility. On the positive side, slower growth and
moderate inflation create a favorable backdrop for further policy easing by the
Bundesbank. In addition, we believe European markets are attractively valued,
and the outlook for earnings and dividend growth remains constructive. Though
political uncertainty will likely persist, resulting in currency volatility, our
view is that such episodes will present buying opportunities, particularly if
the result is easier monetary policy as may be the case in France.
There are concerns that upcoming privatizations will cloud market
performance in Europe. We believe that well-managed privatization programs do
not pose a risk. This has been illustrated in the U.K., where far-reaching
deregulation over time has correlated with high equity returns. A major feature
of Germany's market in 1996 will be the $11 billion privatization of Deutsche
Telekom, which we believe will sow the seeds for broader participation in German
equities.
Portfolio Strategy and Key Holdings
Portfolio focus is on selecting stocks of European companies positioned
to benefit from market opportunities that develop, whether domestic, regional,
or global. We are pleased with the outstanding returns this year of a number of
holdings. Fund performance has been enhanced by positions in emerging European
global competitors such as SAP, the fast-growing German software manufacturer,
and Nordic telecommunication companies Nokia and Ericsson. The portfolio
currently is also invested in telecommunication stocks with a domestic focus,
such as Telecom Italia Mobile, the primary supplier of cellular phone service in
Italy. Italy has the fastest-growing cellular market in Europe, and recent stock
price appreciation reflects the strong earnings momentum anticipated over the
next few years.
7
<PAGE>
Holdings Heineken and Carrefour feature key characteristics of
high-quality growth stocks. Netherlands-based Heineken produces one of the most
popular beers in the world. In the face of slowing beer consumption, the company
has built a strong position in the premium segment of the market and is
expanding in Asia and Eastern Europe. Heineken has undergone significant
restructuring and demonstrated its ability to produce consistently strong
earnings and dividend growth. Carrefour is a leading French food retailer. The
company is present in multiple segments of the food retailing market in France,
where it pioneered the concept of hypermarkets -- a cross between a U.S.
supermarket and a Wal-Mart. Carrefour has made a determined effort to diversify
its sources of revenue and earnings geographically; the company's significant
presence in Spain and Latin America and recent inroads into Asia are indicative
of success in this regard.
In a macroeconomic environment where growth appears to be slowing,
holdings with a more defensive tilt, such as pharmaceuticals, have done well.
Ciba-Geigy is a Swiss pharmaceutical conglomerate with a well-diversified
product range. The company has undertaken substantial restructuring, disposing
of lower-margin non-healthcare businesses and reducing its cost base. SmithKline
Beecham, based in the U.K., is a diversified global pharmaceutical manufacturer
with a strong product pipeline. The company is capitalizing on the changing face
of the global healthcare industry and has built up a major presence in the
European over-the-counter market. SmithKline Beecham has leveraged its existing
strengths with the purchase of DPS, a pharmaceutical benefit manager that serves
as a liaison between HMOs and the drug companies.
Many U.K. industries are consolidating in the face of increasing global
competitive pressures, more moderate growth forecasts for the world economy, and
the fear that a potential victory for the Labor party may result in more
government intervention. The Fund is positioned to benefit from this trend. Two
holdings, PowerGen and Southern Electric -- high-quality utilities with
excellent dividend growth prospects and attractive valuations -- were bid up
over the period as focus on prospective mergers in the utility sector
intensified. Another holding, Royal Bank of Scotland, offers the best exposure
to technological advances in the banking and insurance sectors, in our opinion.
Through its Direct Line subsidiary, the bank has innovated the way insurance
products are sold in the U.K. and has expanded into mortgage services. One of
8
<PAGE>
the few viable targets in the market, the bank's stock has rallied as the result
of scrutiny by potential partners.
Ongoing political turmoil may provide a volatile backdrop, but many
Italian companies are nevertheless prospering on the strength of their positions
in attractive market niches. The Fund has profited from its investment in
several of these companies. For example, Luxottica is a world leader in eyeglass
frame manufacture, capitalizing on its skilled, flexible, and relatively
cost-competitive labor force, as well as its marketing and design strengths.
Volume growth and expanding margins from product mix upgradings have supported
consistent earnings growth of 15-20% a year. The luxury goods market is another
appealing niche, as ever-more-discerning consumers are willing to pay up for the
perceived quality of select franchises. Fund holdings Bulgari and Gucci possess
such franchises. Both companies have recently offered their shares to the market
and have managements with sound business plans.
A Broad Range of Opportunities
The European arena offers investors a wide range of investment
opportunities. Europe is home to a number of global leaders in new, rapidly
growing industries such as software and mobile communications, as well as in
established industries that enjoy dynamic growth prospects in the emerging
nations of the world. The process of European integration and industry
restructuring will spawn stronger companies. New companies are coming to the
market, and over time the broadening and deepening of Europe's own emerging
markets will provide a further dimension. Scudder Greater Europe Growth Fund
continues to offer long-term investors a diversified approach to participating
in these exciting opportunities.
Sincerely,
Your Portfolio Management Team
/s/Carol L. Franklin /s/Nicholas Bratt
Carol L. Franklin Nicholas Bratt
/s/Joan R. Gregory
Joan R. Gregory
Scudder Greater Europe
Growth Fund:
A Team Approach to Investing
Scudder Greater Europe Growth Fund is managed by a team of Scudder investment
professionals who each play an important role in the Fund's management process.
Team members work together to develop investment strategies and select
securities for the Fund's portfolio. They are supported by Scudder's large staff
of economists, research analysts, traders and other investment specialists who
work in Scudder's offices across the United States and abroad. Scudder believes
its team approach benefits Fund investors by bringing together many disciplines
and leveraging Scudder's extensive resources.
Carol L. Franklin, Lead Portfolio Manager, sets Fund investment strategy and
oversees its daily operation. Carol joined Scudder in 1981 and has nine years of
European research and investment management experience. Nicholas Bratt,
Portfolio Manager, helps set the Fund's general investment strategies. Nick has
over 20 years of experience in worldwide investing and has been with Scudder
since 1976. Joan R. Gregory, Portfolio Manager, focuses on stock selection, a
role she has played since she joined Scudder in 1992. Joan has been involved
with investment in global and international stocks as an assistant portfolio
manager since 1989.
9
<PAGE>
<TABLE>
<CAPTION>
SCUDDER GREATER EUROPE GROWTH FUND
INVESTMENT PORTFOLIO as of October 31, 1995
- --------------------------------------------------------------------------------------------------------------------------------
% of Principal Market
Portfolio Amount ($) Value ($)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2.9% REPURCHASE AGREEMENT
----------------------------------------------------------------------------------------------------
1,179,000 Repurchase Agreement with Donaldson, Lufkin &
Jenrette dated 10/31/95 at 5.875% to be repurchased at
$1,179,192 on 11/1/95,collateralized by a $784,000 U.S.
Treasury Bond, 12%, 8/15/13 (Cost $1,179,000) . . . . . . . . . . 1,179,000
---------------
--------------------------------------------------------------------------------------------------
7.1% SHORT-TERM NOTE
--------------------------------------------------------------------------------------------------
2,870,000 Federal Home Loan Mortgage Corp.
Discount Note, 5.85%, 11/1/95
(Cost $2,870,000). . . . . . . . . . . . . . . . . . . . . . . . 2,870,000
---------------
--------------------------------------------------------------------------------------------------
3.4% PREFERRED STOCKS
--------------------------------------------------------------------------------------------------
Shares
--------------------------------------------------------------------------------------------------
GERMANY 2.4%
1,475 RWE AG (Producer and marketer of
petroleum and chemical products). . . . . . . . . . . . . . . . . 418,075
3,750 SAP AG (Computer software manufacturer) . . . . . . . . . . . . . 575,407
---------------
993,482
---------------
ITALY 1.0%
200,000 Fiat SpA (Multi-industry, automobiles). . . . . . . . . . . . . . 395,356
---------------
Total Preferred Stocks (Cost $1,057,081). . . . . . . . . . . . . 1,388,838
---------------
--------------------------------------------------------------------------------------------------
86.6% COMMON STOCKS
--------------------------------------------------------------------------------------------------
AUSTRIA 3.0% 6,400 Flughafen Wien AG (Operator of terminals
and facilities at Vienna International Airport) . . . . . . . . 411,089
2,800 OMV AG (Oil and gas company). . . . . . . . . . . . . . . . . . . 241,782
3,600 VAE Eisenbahnsysteme AG (Manufacturer of
electronic control systems for use in rail
transportation technology). . . . . . . . . . . . . . . . . . . . 322,133
4,000 Verbund (Leading supplier of hydro-electricity) . . . . . . . . . 244,407
---------------
1,219,411
---------------
DENMARK 1.0%
9,200 Unidanmark A/S "A" (Bank holding company) . . . . . . . . . . . . 422,621
FINLAND 1.8%
9,060 Nokia AB Oy (Preference) (Leading
manufacturer of cellular telephones). . . . . . . . . . . . . . . 518,379
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- ----
10
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------------------
% of Market
Portfolio Shares Value ($)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
14,300 Outokumpu Oy "A" (Metals and minerals). . . . . . . . . . . . . . 227,275
---------------
745,654
---------------
FRANCE 14.0%
5,800 AXA (Insurance group providing insurance,
finance and real estate services worldwide) . . . . . . . . . . . 322,803
950 Carrefour (Hypermarket and food retailing). . . . . . . . . . . . 559,098
5,000 Club Mediterranee (Operator of informal
vacation resorts) * . . . . . . . . . . . . . . . . . . . . . . . 392,930
5,000 Club Mediterranee Rights *. . . . . . . . . . . . . . . . . . . . 4,939
3,550 Compagnie Bancaire SA (Bank). . . . . . . . . . . . . . . . . . . 368,822
1,025 Comptoirs Modernes (Operator of
supermarkets, grocery and department
stores) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329,764
1,475 ECIA - Equipements et Composants pour
l'Industrie Automobile (Manufacturer of
automobile parts and accessories) . . . . . . . . . . . . . . . . 179,841
2,000 Ecco SA (International business contractor
active in employment services, industrial
surveillance, cleaning and sanitation). . . . . . . . . . . . . . 310,656
2,890 Essilor International (Manufacturer of various
types of lenses, eyeglasses, contact lenses
and optical measuring instruments). . . . . . . . . . . . . . . . 535,953
1,800 LVMH Moet-Hennessy Louis Vuitton (Producer
of wine, spirits and luxury products) . . . . . . . . . . . . . . 358,893
3,975 La Brosse et Du Pont (Toiletries manufacturer). . . . . . . . . . 250,881
9,870 Michelin "B" (Leading tire manufacturer) *. . . . . . . . . . . . 399,452
6,200 Sligos SA (Electrical payment and computing
engineering services company) . . . . . . . . . . . . . . . . . . 537,418
5,200 Synthelabo (Pharmaceutical and biomedical
producer) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335,443
6,867 Total SA "B" (International oil and gas
exploration, development and production). . . . . . . . . . . . . 425,247
7,919 Valeo SA (Automobile and truck components
manufacturer) . . . . . . . . . . . . . . . . . . . . . . . . . . 358,465
---------------
5,670,605
---------------
GERMANY 8.3%
1,500 Bankgesellschaft Berlin AG (Commercial bank). . . . . . . . . . . 442,211
6,000 Deutsche Bank AG (Bank) . . . . . . . . . . . . . . . . . . . . . 271,379
4,085 Kampa-Haus AG (Designing and construction
of prefabricated houses and sub-assemblies) . . . . . . . . . . . 162,216
1,475 Mannesmann AG (Bearer) (Diversified
construction and technology company). . . . . . . . . . . . . . . 485,450
5,950 Schering AG (Pharmaceutical and
chemical producer). . . . . . . . . . . . . . . . . . . . . . . . 415,067
900 Siemens AG (Bearer) (Manufacturer of
electrical and electronic equipment). . . . . . . . . . . . . . . 471,833
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
----
11
<PAGE>
<TABLE>
<CAPTION>
SCUDDER GREATER EUROPE GROWTH FUND
- ------------------------------------------------------------------------------------------------------------------------
% of Market
Portfolio Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
14,950 VEBA AG (Electric utility, distributor of oil
and chemicals). . . . . . . . . . . . . . . . . . . . . . . 613,739
1,200 Viag AG (Provider of electrical power and
natural gas services, aluminum products,
chemicals, ceramics and glass). . . . . . . . . . . . . . . 487,178
-------------
3,349,073
-------------
IRELAND 1.1%
116,717 Irish Life PLC (Provider of life and disability
insurance and pensions) . . . . . . . . . . . . . . . . . . 428,950
-------------
ITALY 9.0%
100,000 Bulgari SpA (Manufacturer and retailer of fine
jewelry, luxury watches and perfumes) * . . . . . . . . . . 869,156
30,500 Gucci Group (New York registered Shares)
(Designer and producer of personal
luxury accessories and apparel)*. . . . . . . . . . . . . . 915,000
7,500 Luxottica Group SpA (ADR) (Manufacturer
and marketer of eyeglasses) . . . . . . . . . . . . . . . . 365,625
572,000 Telecom Italia Mobile SpA (Cellular
telecommunication services) * . . . . . . . . . . . . . . . 960,213
110,000 Telecom Italia SpA (Telecommunication
services) . . . . . . . . . . . . . . . . . . . . . . . . . 167,054
55,000 Unicem SpA (Cement producer) *. . . . . . . . . . . . . . . 345,152
-------------
3,622,200
-------------
NETHERLANDS 9.5%
2,550 Akzo-Nobel N.V. (Chemical producer) . . . . . . . . . . . . 290,427
9,300 Baan Company, N.V. (Producer of business
management computer software) * . . . . . . . . . . . . . . 395,250
17,000 Bols Wessanen CVA (Producer and distributor
of food products) . . . . . . . . . . . . . . . . . . . . . 336,164
8,119 Getronics N.V. (Computer and software
distributor). . . . . . . . . . . . . . . . . . . . . . . . 387,477
3,906 Heineken Holdings N.V. "A" (Brewery). . . . . . . . . . . . 646,173
14,100 Koninklijke PTT Nederland (Telecommunication
services) . . . . . . . . . . . . . . . . . . . . . . . . . 495,975
12,330 Philips Electronics N.V. (Leading manufacturer
of electrical equipment). . . . . . . . . . . . . . . . . . 476,695
3,160 Telegraaf Holdings CVA (Newspaper publisher). . . . . . . . 454,633
4,000 Wolters Kluwer CVA (Publisher). . . . . . . . . . . . . . . 364,051
-------------
3,846,845
-------------
NORWAY 1.1%
35,700 Saga Petroleum AS "A" (Free) (Oil and gas
exploration and production) . . . . . . . . . . . . . . . . 447,074
-------------
PORTUGAL 0.8%
17,400 Portugal Telecom SA (Telecommunication
services) * . . . . . . . . . . . . . . . . . . . . . . . . 329,452
-------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- ----
12
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------
% of Market
Portfolio Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SPAIN 9.0%
4,400 Acerinox, S.A (Stainless steel producer). . . . . . . . . . 459,173
8,000 Banco Bilbao Vizcaya, S.A. (Leading
financial group). . . . . . . . . . . . . . . . . . . . . . 244,560
2,800 Banco Popular Espanol, S.A. (Retail bank) . . . . . . . . . 444,962
11,000 Centros Comerciales Pryca, SA (Owner and
operator of hypermarkets selling consumer
products including groceries, appliances
and clothing) . . . . . . . . . . . . . . . . . . . . . . . 234,397
30,000 Compania Telefonica Nacional de Espana S.A.
(Telecommunication services). . . . . . . . . . . . . . . . 378,642
13,200 Cortefiel, S.A. (Operator of retail clothing stores
and clothing manufacturer). . . . . . . . . . . . . . . . . 389,460
3,000 Cristaleria Espanola, S.A. (Producer of sheet
glass and glass fibers for construction) *. . . . . . . . . 186,862
15,570 Repsol SA (Integrated oil company). . . . . . . . . . . . . 465,128
42,000 Uralita, SA (Processor of concrete pipes and
cement for the construction industry) . . . . . . . . . . . 423,391
4,300 Zardoya-Otis SA (Manufacturer and installer
of elevator equipment). . . . . . . . . . . . . . . . . . . 420,080
-------------
3,646,655
-------------
SWEDEN 8.2%
13,350 Astra AB "A" (Free) (Pharmaceutical company). . . . . . . . 490,421
8,000 Autoliv AB (Free) (Manufacturer of safety
airbags for automobiles). . . . . . . . . . . . . . . . . . 458,894
6,900 Hennes & Mauritz AB "B" (Free) (Clothing
and cosmetics retailer throughout Europe) . . . . . . . . . 450,855
27,720 L.M. Ericsson Telephone Co. "B" (ADR)
(Leading manufacturer of cellular
telephone equipment). . . . . . . . . . . . . . . . . . . . 592,082
7,700 Mo och Domsjo AB "B" (Free) (Manufacturer
of newsprint, paperboard, and various sawn
timber products). . . . . . . . . . . . . . . . . . . . . . 391,837
21,000 S.K.F. AB "A" (Free) (Manufacturer of roller
bearings) . . . . . . . . . . . . . . . . . . . . . . . . . 390,467
21,000 Skandia Foersaekrings AB (Free) (Financial
conglomerate) . . . . . . . . . . . . . . . . . . . . . . . 532,742
-------------
3,307,298
-------------
SWITZERLAND 5.0%
130 Baloise Holding Ltd. (Registered) (Provider
of private, commercial and corporate
insurance, life insurance, international
reinsurance). . . . . . . . . . . . . . . . . . . . . . . . 266,520
430 Brown, Boveri & Cie. AG (Bearer)
(Manufacturer of electrical equipment). . . . . . . . . . . 498,293
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
----
13
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCUDDER GREATER EUROPE GROWTH FUND
- ------------------------------------------------------------------------------------------------------------------------
% of Market
Portfolio Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
500 Ciba-Geigy AG (Bearer) (Pharmaceutical
company). . . . . . . . . . . . . . . . . . . . . . . . . . 431,148
1,000 Elektrowatt AG (Bearer) (Holding company:
owner of electric plants and interests in
hydro and nuclear power plants) . . . . . . . . . . . . . . 301,804
650 Sandoz Ltd. AG (Registered) (Pharmaceutical
company). . . . . . . . . . . . . . . . . . . . . . . . . . 535,900
-------------
2,033,665
-------------
UNITED KINGDOM 14.8%
55,000 Argyll Group PLC (Owner and operator of
retail food supermarkets) . . . . . . . . . . . . . . . . . 279,560
61,567 British Petroleum PLC (Major integrated world
oil company). . . . . . . . . . . . . . . . . . . . . . . . 452,619
22,000 Carlton Communications PLC (Television post
production products and services) . . . . . . . . . . . . . 335,125
28,485 De La Rue PLC (Printer of commercial
banknotes and securities) . . . . . . . . . . . . . . . . . 405,989
66,000 Enterprise Oil PLC (Oil and gas exploration
and production) . . . . . . . . . . . . . . . . . . . . . . 349,559
36,500 Guinness PLC (Brewery). . . . . . . . . . . . . . . . . . . 292,572
52,800 Kingfisher PLC (Retailer of wide range of
consumer goods and merchandise) . . . . . . . . . . . . . . 396,932
94,000 Next PLC (Retailer of clothing, accessories
and fashion jewelry, also through home
shopping) . . . . . . . . . . . . . . . . . . . . . . . . . 613,033
45,903 PowerGen PLC (Electric utility) . . . . . . . . . . . . . . 412,213
52,000 Reuters Holdings PLC (International news
agency) . . . . . . . . . . . . . . . . . . . . . . . . . . 483,407
64,279 Royal Bank of Scotland PLC (Bank) . . . . . . . . . . . . . 520,829
60,067 SmithKline Beecham "A" (Manufacturer of
ethical drugs and healthcare products). . . . . . . . . . . 627,250
19,000 Southern Electric PLC (Electric company). . . . . . . . . . 286,121
29,000 Zeneca Group PLC (Holding company:
manufacturing and marketing of
pharmaceutical and agrochemical
products and specialty chemicals) . . . . . . . . . . . . . 540,331
-------------
5,995,540
-------------
Total Common Stocks (Cost $30,978,695). . . . . . . . . . . 35,065,043
-------------
- ------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio - 100.0%
(Cost $36,084,776) (a) . . . . . . . . . . . . . . . . 40,502,881
-------------
-------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
- ----
14
<PAGE>
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $36,084,776. At October 31,
1995, net unrealized appreciation for all securities based on tax cost was
$4,418,105. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $5,336,989 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$918,884.
* Non-income producing security.
Sector breakdown of the Fund's equity securities is noted on page 5.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
----
15
<PAGE>
<TABLE>
<CAPTION>
SCUDDER GREATER EUROPE GROWTH FUND
FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
--------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $36,084,776)
(Note A). . . . . . . . . . . . . . . . . . . . $ 40,502,881
Cash . . . . . . . . . . . . . . . . . . . . . . 986
Receivables:
Fund shares sold. . . . . . . . . . . . . . . . 212,520
Dividends and interest. . . . . . . . . . . . . 21,904
Foreign taxes recoverable . . . . . . . . . . . 48,728
Deferred organization expense (Note A) . . . . . . 46,580
------------
Total assets. . . . . . . . . . . . . . . . . . 40,833,599
LIABILITIES
Payables:
Fund shares redeemed. . . . . . . . . . . . . . $ 57,199
Accrued expenses (Note C) . . . . . . . . . . . 184,408
----------
Total liabilities . . . . . . . . . . . . . . . 241,607
------------
Net assets, at market value. . . . . . . . . . . . $ 40,591,992
------------
------------
NET ASSETS
Net assets consist of:
Undistributed net investment income . . . . . . $ 307,076
Unrealized appreciation on:
Investments. . . . . . . . . . . . . . . . . 4,418,105
Foreign currency related transactions. . . . 330
Accumulated net realized gain . . . . . . . . . 418,781
Capital stock . . . . . . . . . . . . . . . . . 29,011
Additional paid-in capital. . . . . . . . . . . 35,418,689
------------
Net assets, at market value. . . . . . . . . . . . $ 40,591,992
------------
------------
NET ASSET VALUE, offering and redemption price per
share ($40,591,992 DIVIDED BY 2,901,077 shares of
capital stock outstanding, $.01 par value,
100,000,000 shares authorized). . . . . . . . . $13.99
------
------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- ----
16
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $43,756) . . . . . . $ 523,726
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235,292
-----------
759,018
Expenses:
Management fee (Note C). . . . . . . . . . . . . . . . . . . . . $ -
Services to shareholders (Note C). . . . . . . . . . . . . . . . 110,684
Custodian and accounting fees (Note C) . . . . . . . . . . . . . 84,423
Directors' fees and expenses (Note C). . . . . . . . . . . . . . 59,880
Auditing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,238
Reports to shareholders. . . . . . . . . . . . . . . . . . . . . 39,471
Amortization of organization expense (Note A). . . . . . . . . . 11,854
Federal registration . . . . . . . . . . . . . . . . . . . . . . 9,722
Legal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,049
State registration . . . . . . . . . . . . . . . . . . . . . . . 16,671
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,357 413,349
------------------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . 345,669
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT TRANSACTIONS
Net realized gain (loss) from:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . 418,781
Foreign currency related transactions . . . . . . . . . . . . (24,361) 394,420
---------
Net unrealized appreciation during the period on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . 4,312,975
Foreign currency related transactions . . . . . . . . . . . . 2,289 4,315,264
------------------------
Net gain on investment transactions. . . . . . . . . . . . . . . 4,709,684
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . $ 5,055,353
-----------
-----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
----
17
<PAGE>
<TABLE>
<CAPTION>
SCUDDER GREATER EUROPE GROWTH FUND
- --------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD
OCTOBER 10, 1994
YEAR (COMMENCEMENT
ENDED OF OPERATIONS) TO
OCTOBER 31, OCTOBER 31,
INCREASE (DECREASE) IN NET ASSETS 1995 1994
-------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income. . . . . . . . . . . . . . . $ 345,669 $ 6,080
Net realized gain (loss) from investment
transactions. . . . . . . . . . . . . . . . . . 394,420 (4,369)
Net unrealized appreciation on investment
transactions during the period. . . . . . . . . 4,315,264 103,171
------------- -----------
Net increase in net assets resulting
from operations . . . . . . . . . . . . . . . . 5,055,353 104,882
------------- -----------
Distributions to shareholders from net
investment income ($.02 per share). . . . . . . (26,912) -
------------- -----------
Fund share transactions:
Proceeds from shares sold. . . . . . . . . . . . . 49,268,332 7,878,987
Net asset value of shares issued to
shareholders in reinvestment of distributions . 26,407 -
Cost of shares redeemed. . . . . . . . . . . . . . (21,590,930) (125,327)
------------- -----------
Net increase in net assets from Fund share
transactions. . . . . . . . . . . . . . . . . . 27,703,809 7,753,660
------------- -----------
INCREASE IN NET ASSETS . . . . . . . . . . . . . . 32,732,250 7,858,542
Net assets at beginning of period. . . . . . . . . 7,859,742 1,200
------------- -----------
NET ASSETS AT END OF PERIOD (including
undistributed net investment income
of $307,076 and $1,711, respectively) . . . . . $ 40,591,992 $ 7,859,742
------------- -----------
------------- -----------
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period. . . . . 645,237 100
------------- -----------
Shares sold. . . . . . . . . . . . . . . . . . . . 3,909,689 655,588
Shares issued to shareholders in reinvestment
of distributions. . . . . . . . . . . . . . . . 2,316 -
Shares redeemed. . . . . . . . . . . . . . . . . . (1,656,165) (10,451)
------------- -----------
Net increase in Fund shares. . . . . . . . . . . . 2,255,840 645,137
------------- -----------
Shares outstanding at end of period. . . . . . . . 2,901,077 645,237
------------- -----------
------------- -----------
</TABLE>
THE ACCOMPANY NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- ----
18
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------------------------------------------------
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD AND OTHER PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL
STATEMENTS.
For the Period
Year October 10, 1994
Ended (commencement
October 31, of operations) to
1995 October 31, 1994
----------- -----------------
<S> <C> <C>
Net asset value, beginning of period . . . . . . . . . . . . . . . . . $12.18 $12.00
------ ------
Income from investment operations:
Net investment income (a) . . . . . . . . . . . . . . . . . . . . . . .13 .01
Net realized and unrealized gain on investment transactions . . . . . 1.70 .17
------ ------
Total from investment operations . . . . . . . . . . . . . . . . . . . 1.83 .18
------ ------
Less distributions from net investment income. . . . . . . . . . . . . (.02) -
------ ------
Net asset value, end of period . . . . . . . . . . . . . . . . . . . . $13.99 $12.18
------ ------
------ ------
Total Return (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.06 1.50**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) . . . . . . . . . . . . . . . . 41 8
Ratio of operating expenses, net to average daily net assets (%) (a) 1.50 1.50*
Ratio of net investment income to average daily net assets (%) . . . . 1.25 2.40*
Portfolio turnover rate (%). . . . . . . . . . . . . . . . . . . . . . 27.9 -
(a) Reflects a per share amount of expenses, exclusive of
management fees, reimbursed by the Adviser of . . . . . . . . . $ - $ .01
Reflects a per share amount of management fee and other
fees not imposed. . . . . . . . . . . . . . . . . . . . . . . . $ .13 $ .02
Operating expense ratio including expenses reimbursed,
management fee and other expenses not imposed (%) . . . . . . . 2.74 11.46*
* Annualized
** Not annualized
</TABLE>
<PAGE>
SCUDDER GREATER EUROPE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
A. SIGNIFICANT ACCOUNTING POLICIES
- -------------------------------------------------------------------------------
Scudder Greater Europe Growth Fund (the "Fund") is a non-diversified series of
Scudder International Fund, Inc. (the "Corporation"). The Corporation is
organized as a Maryland corporation and is registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment company.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements in conformity with generally accepted
accounting principles.
SECURITY VALUATION. Portfolio securities which are traded on U.S. or foreign
stock exchanges are valued at the most recent sale price reported on the
exchange on which the security is traded most extensively. If no sale occurred,
the security is then valued at the calculated mean between the most recent bid
and asked quotations. If there are no such bid and asked quotations, the most
recent bid quotation is used. Securities quoted on the National Association of
Securities Dealers Automatic Quotation ("NASDAQ") System, for which there have
been sales, are valued at the most recent sale price reported on such system.
If there are no such sales, the value is the high or "inside" bid quotation.
Securities which are not quoted on the NASDAQ System but are traded in another
over-the-counter market are valued at the most recent sale price on such
market. If no sale occurred, the security is then valued at the calculated mean
between the most recent bid and asked quotations. If there are no such bid and
asked quotations, the most recent bid quotation shall be used.
Short-term investments having a maturity of sixty days or less are valued at
amortized cost.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Directors.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value, depending on the maturity of the repurchase
agreement, is equal to at least 100.5% of the resale price.
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20
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency transactions are translated into U.S. dollars
on the following basis:
(i) market value of investment securities, other assets and liabilities at the
daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and interest income
and certain expenses at the rates of exchange prevailing on the respective
dates of such transactions.
The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes
in market prices of the investments. Such fluctuations are included with the
net realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on dividends,
interest, and foreign withholding taxes.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A forward foreign currency
exchange contract (forward contract) is a commitment to purchase or sell a
foreign currency at the settlement date at a negotiated rate. During the
period, the Fund utilized forward contracts as a hedge in connection with
portfolio purchases and sales of securities denominated in foreign currencies.
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Forward
contracts having the same settlement date and broker are offset and any gain
(loss) is realized on the date of offset; otherwise, gain (loss) is realized on
settlement date. Realized and unrealized gains and losses which represent the
difference between the value of the forward contract to buy and the forward
contract to sell are included in net realized and unrealized gain (loss) from
foreign currency related transactions.
Certain risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their contracts. Additionally,
when utilizing forward contracts to hedge, the Fund gives up the opportunity to
profit from favorable exchange rate movements during the term of the contract.
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21
<PAGE>
SCUDDER GREATER EUROPE GROWTH FUND
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FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements of
the Internal Revenue Code which are applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, the Fund paid no federal income taxes and no federal income tax
provision was required.
DISTRIBUTION OF INCOME AND GAINS. Distributions of net investment income are
made annually. During any particular year net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed and, therefore, will be distributed to
shareholders annually. An additional distribution may be made to the extent
necessary to avoid the payment of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations which may differ from generally accepted accounting principles. As
a result, net investment income (loss) and net realized gain (loss) on
investment transactions for a reporting period may differ significantly from
distributions during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
The Fund uses the identified cost method for determining realized gain or loss
on investments for both financial and federal income tax reporting purposes.
ORGANIZATION COSTS. Costs incurred by the Fund in connection with its
organization and initial registration of shares have been deferred and are
being amortized on a straight-line basis over a five-year period.
OTHER. Investment security transactions are accounted for on a trade-date
basis. Dividend income and distributions to shareholders are recorded on the ex-
dividend date. Interest income is recorded on the accrual basis.
B. PURCHASES AND SALES OF SECURITIES
- -------------------------------------------------------------------------------
For the year ended October 31, 1995, purchases and sales of investment
securities (excluding short-term investments) aggregated $31,543,518 and
$6,727,141, respectively.
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22
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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C. RELATED PARTIES
- -------------------------------------------------------------------------------
Under the Fund's Investment Management Agreement (the "Agreement") with
Scudder, Stevens & Clark, Inc. (the "Adviser"), the Fund has agreed to pay to
the Adviser a fee equal to an annualized rate of 1.00% of the Fund's average
daily net assets, computed and accrued daily and payable monthly. As manager of
the assets of the Fund, the Adviser directs the investments of the Fund in
accordance with its investment objectives, policies, and restrictions. The
Adviser determines the securities, instruments, and other contracts relating to
investments to be purchased, sold or entered into by the Fund. In addition to
portfolio management services, the Adviser provides certain administrative
services in accordance with the Agreement. The Agreement provides that if the
Fund's expenses, exclusive of taxes, interest, and extraordinary expenses,
exceed specified limits, such excess, up to the amount of the management fee,
will be paid by the Adviser. In addition, the Adviser agreed not to impose all
or a portion of its management fee until February 29, 1996, and during such
period to maintain the annualized expenses of the Fund at not more than 1.50%
of average daily net assets. For the year ended October 31, 1995, the Adviser
did not impose all of its management fee amounting to $274,656.
Scudder Service Corporation ("SSC"), a wholly-owned subsidiary of the Adviser,
is the transfer, dividend paying and shareholder service agent for the Fund.
For the year ended October 31, 1995, the amount charged by SSC aggregated
$123,598, of which $48,403 was not imposed and $74,698 was unpaid at October
31, 1995.
Scudder Fund Accounting Corporation ("SFAC"), a wholly-owned subsidiary of the
Adviser, is responsible for determining the daily net asset value per share and
maintaining the portfolio and general accounting records for the Fund. For the
year ended October 31, 1995, the amount charged by SFAC aggregated $50,000, of
which $19,581 was not imposed and $30,419 was unpaid at October 31, 1995.
The Fund pays each Director not affiliated with the Adviser $4,000 annually,
plus specified amounts for attended board and committee meetings. For the year
ended October 31, 1995, Directors' fees and expenses aggregated $59,880, of
which $28,000 was unpaid at October 31, 1995.
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23
<PAGE>
SCUDDER GREATER EUROPE GROWTH FUND
REPORT OF INDEPENDENT ACCOUNTANTS
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TO THE BOARD OF DIRECTORS OF SCUDDER INTERNATIONAL FUND, INC. AND THE
SHAREHOLDERS OF SCUDDER GREATER EUROPE GROWTH FUND:
We have audited the accompanying statement of assets and liabilities of Scudder
Greater Europe Growth Fund, including the investment portfolio, as of October
31, 1995, and the related statement of operations for the year then ended, the
statements of changes in net assets and the financial highlights for the year
then ended and for the period October 10, 1994 (commencement of operations) to
October 31, 1994. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder Greater Europe Growth Fund as of October 31, 1995, the results of its
operations for the year then ended, the changes in its net assets and the
financial highlights for the year then ended and for the period October 10,
1994 (commencement of operations) to October 31, 1994 in conformity with
generally accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
December 11, 1995
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24
<PAGE>
TAX INFORMATION
The Fund will mail shareholders IRS Form 1099-Div in late January, summarizing
all taxable distributions paid for 1995.
Pursuant to section 852 of the Internal Revenue Code, the Fund designates
$69,536 as capital gain dividends for its taxable year ended October 31, 1995.
The Fund paid foreign taxes of $43,756 and the Fund recognized $266,832 of
foreign source income during the taxable year ended October 31, 1995. Pursuant
to section 853 of the Internal Revenue Code, the Fund designates $.02 per share
of foreign taxes and $.09 of income from foreign sources as having been paid in
the taxable year ended October 31, 1995.
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your Scudder Fund account, please call a Scudder Investor Relations
Representative at 1-800-225-5163.
OFFICERS AND DIRECTORS
Edmond D. Villani*
Chairman of the Board and Director
Nicholas Bratt*
President and Director
Paul Bancroft III
Director; Venture Capitalist and Consultant
Thomas J. Devine
Director; Consultant
Keith R. Fox
Director; President, Exeter Capital Management Corporation
William H. Gleysteen, Jr.
Director; President, The Japan Society, Inc.
William H. Luers
Director; President, The Metropolitan Museum of Art
Dr. Wilson Nolen
Director; Consultant
Juris Padegs*
Director, Vice President and Assistant Secretary
Daniel Pierce*
Director
Dr. Gordon Shillinglaw
Director; Professor Emeritus of Accounting, Columbia University Graduate
School of Business
Robert G. Stone, Jr.
Honorary Director; Chairman of the Board and Director, Kirby Corporation
Robert W. Lear
Honorary Director; Executive-in-Residence, Visiting Professor,
Columbia University Graduate School of Business
Elizabeth J. Allan*
Vice President
Carol L. Franklin*
Vice President
Edmund B. Games, Jr.*
Vice President
Jerard K. Hartman*
Vice President
William E. Holzer*
Vice President
Thomas W. Joseph*
Vice President
William F. Truscott*
Vice President
David S. Lee*
Vice President and Assistant Treasurer
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
Edward J. O'Connell*
Vice President and Assistant Treasurer
Kathryn L. Quirk*
Vice President and Assistant Secretary
Richard W. Desmond*
Assistant Secretary
Coleen Downs Dinneen*
Assistant Secretary
* Scudder, Stevens & Clark, Inc.
25
<PAGE>
INVESTMENT PRODUCTS AND SERVICES
<TABLE>
<CAPTION>
The Scudder Family of Funds
-----------------------------------------------------------------------------------------------------------------
<C> <C>
Money Market Income
Scudder Cash Investment Trust Scudder Emerging Markets Income Fund
Scudder U.S. Treasury Money Fund Scudder GNMA Fund
Tax Free Money Market+ Scudder Income Fund
Scudder Tax Free Money Fund Scudder International Bond Fund
Scudder California Tax Free Money Fund* Scudder Short Term Bond Fund
Scudder New York Tax Free Money Fund* Scudder Short Term Global Income Fund
Tax Free+ Scudder Zero Coupon 2000 Fund
Scudder California Tax Free Fund* Growth
Scudder High Yield Tax Free Fund Scudder Capital Growth Fund
Scudder Limited Term Tax Free Fund Scudder Development Fund
Scudder Managed Municipal Bonds Scudder Global Fund
Scudder Massachusetts Limited Term Tax Free Fund* Scudder Global Small Company Fund
Scudder Massachusetts Tax Free Fund* Scudder Gold Fund
Scudder Medium Term Tax Free Fund Scudder Greater Europe Growth Fund
Scudder New York Tax Free Fund* Scudder International Fund
Scudder Ohio Tax Free Fund* Scudder Latin America Fund
Scudder Pennsylvania Tax Free Fund* Scudder Pacific Opportunities Fund
Growth and Income Scudder Quality Growth Fund
Scudder Balanced Fund Scudder Small Company Value Fund
Scudder Growth and Income Fund Scudder Value Fund
The Japan Fund
Retirement Plans and Tax-Advantaged Investments
-----------------------------------------------------------------------------------------------------------------
IRAs 403(b) Plans
Keogh Plans SEP-IRAs
Scudder Horizon Plan+++* (a variable annuity) Profit Sharing and Money Purchase
401(k) Plans Pension Plans
Closed-End Funds#
-----------------------------------------------------------------------------------------------------------------
The Argentina Fund, Inc. The Latin America Dollar Income Fund, Inc.
The Brazil Fund, Inc. Montgomery Street Income Securities, Inc.
The First Iberian Fund, Inc. Scudder New Asia Fund, Inc.
The Korea Fund, Inc. Scudder New Europe Fund, Inc.
Scudder World Income
Opportunities Fund, Inc.
Institutional Cash Management
-----------------------------------------------------------------------------------------------------------------
Scudder Institutional Fund, Inc. Scudder Treasurers Trust(TM)++
Scudder Fund, Inc.
-----------------------------------------------------------------------------------------------------------------
<FN>
For complete information on any of the above Scudder funds, including
management fees and expenses, call or write for a free prospectus. Read it
carefully before you invest or send money. +A portion of the income from the
tax-free funds may be subject to federal, state, and local taxes. *Not
available in all states. +++A no-load variable annuity contract provided by
Charter National Life Insurance Company and its affiliate, offered by
Scudder's insurance agencies, 1-800-225-2470. #These funds, advised by
Scudder, Stevens & Clark, Inc. are traded on various stock exchanges. ++For
information on Scudder Treasurers Trust,(TM) an institutional cash
management service that utilizes certain portfolios of Scudder Fund, Inc.
($100,000 minimum), call 1-800-541-7703.
</FN>
</TABLE>
26
<PAGE>
HOW TO CONTACT SCUDDER
<TABLE>
<S> <C>
Account Service and Information
-------------------------------------------------------------------------------------------------------------
For existing account service and transactions
SCUDDER INVESTOR RELATIONS
1-800-225-5163
For personalized information about your
Scudder accounts; exchanges and
redemptions; or information on any
Scudder fund SCUDDER AUTOMATED
INFORMATION LINE (SAIL) 1-800-343-2890
Investment Information
-------------------------------------------------------------------------------------------------------------
To receive information about the
Scudder funds, for additional
applications and prospectuses, or for
investment questions SCUDDER INVESTOR
RELATIONS 1-800-225-2470
For establishing 401(k) and 403(b) plans
SCUDDER DEFINED CONTRIBUTION SERVICES
1-800-323-6105
Please address all correspondence to
-------------------------------------------------------------------------------------------------------------
THE SCUDDER FUNDS
P.O. BOX 2291
BOSTON, MASSACHUSETTS
02107-2291
Or stop by a Scudder Funds Center
-------------------------------------------------------------------------------------------------------------
Many shareholders enjoy the personal, one-on-one service of the
Scudder Funds Centers. Check for a Funds Center near you--they can
be found in the following cities:
Boca Raton New York
Boston Portland, OR
Chicago San Diego
Cincinnati San Francisco
Los Angeles Scottsdale
-------------------------------------------------------------------------------------------------------------
For information on Scudder For information on Scudder
Treasurers Trust,(TM) an institutional Institutional Funds,* funds
cash management service for designed to meet the broad
corporations, non-profit investment management and
organizations and trusts that uses service needs of banks and
certain portfolios of Scudder Fund, other institutions, call
Inc.* ($100,000 minimum), call 1-800-854-8525.
1-800-541-7703.
-------------------------------------------------------------------------------------------------------------
Scudder Investor Relations and Scudder Funds Centers are services provided
through Scudder Investor Services, Inc., Distributor.
<FN>
* Contact Scudder Investor Services, Inc., Distributor, to receive a
prospectus with more complete information, including management fees and
expenses. Please read it carefully before you invest or send money.
</FN>
</TABLE>
27
<PAGE>
Celebrating Over 75 Years of Serving Investors
Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven
Clark, Scudder, Stevens & Clark was the first independent investment counsel
firm in the United States. Since its birth, Scudder's pioneering spirit and
commitment to professional long-term investment management have helped shape the
investment industry. In 1928, we introduced the nation's first no-load mutual
fund. Today we offer 37 pure no load(TM) funds, including the first
international mutual fund offered to U.S. investors.
Over the years, Scudder's global investment perspective and dedication to
research and fundamental investment disciplines have helped us become one of the
largest and most respected investment managers in the world. Though times have
changed since our beginnings, we remain committed to our long-standing
principles: managing money with integrity and distinction; keeping the interests
of our clients first; providing access to investments and markets that may not
be easily available to individuals; and making investing as simple and
convenient as possible through friendly, comprehensive service.
