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, 1997, 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 and is available along with other related
materials on the Securities and Exchange Commission's Internet Web site
(http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Contents--see page 4.
Scudder
Latin America
Fund
Prospectus
March 1, 1997
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.
<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.
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, 1996.
Investment management fee (after state imposed expense limitation) 1.25%
12b-1 fees NONE
Other expenses 0.71%
-----
Total Fund operating expenses 1.96%
=====
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
------ ------- ------- --------
$20 $62 $106 $229
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
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, 1996 and may be obtained without charge
by writing or calling Scudder Investor Services, Inc.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
For the Period
Years Ended October 31, December 8, 1992
(commencement of
operations) to
October 31,
1996 (a) 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .......... $16.22 $24.44 $18.41 $12.00
Income from investment operations:
Net investment income (loss).................... .25 .09 (.03) .03
Net realized and unrealized gain (loss) on
investment transactions....................... 4.30 (7.62) 6.10 6.36
Total from investment operations................ 4.55 (7.53) 6.07 6.39
Less distributions:
From net investment income...................... (.15) -- -- --
In excess of net investment income.............. -- -- (.06) --
From net realized gains on investment
transactions.................................. -- (.73) (.06) --
Total distributions............................. (.15) (.73) (.12) --
Redemption fees (Note A)........................ .01 .04 .08 .02
Net asset value, end of period.................. $20.63 $16.22 $24.44 $18.41
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
Total Return (%)................................ 28.31 (30.96) 33.43 53.42(c)**
Ratios and Supplemental Data
Net assets, end of period ($ millions).......... 622 519 809 261
Ratio of operating expenses, net to average
daily net assets (%).......................... 1.96 2.08 2.01 2.00*
Ratio of operating expenses before expense
reductions, to average daily net assets (%)... 1.96 2.11 2.05 2.69*
Ratio of net investment income (loss) to average
daily net assets (%)........................... 1.32 .52 (.20) .44*
Portfolio turnover rate (%)...................... 22.4 39.5 22.4 4.6*
Average commission rate paid (b).......................$.0001 $ -- $ -- $ --
(a) Based on monthly average of shares outstanding during the period.
(b) Average commission rate paid per share of common and preferred stocks is
calculated for fiscal years beginning on or after September 1, 1995.
(c) Total return does not reflect the effect of the applicable redemption fees.
* 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 $115 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
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
<PAGE>
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.
Except as otherwise indicated, the Fund's investment objective and policies are
not fundamental and may be changed without a vote of shareholders. If there is a
change in investment objective, shareholders should consider whether the Fund
remains an appropriate investment in light of their then current financial
position and needs. There can be no assurance that the Fund's objective will be
met.
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.
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.
5
<PAGE>
Investment objective and policies (cont'd)
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
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
6
<PAGE>
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
emergency purposes and may not make loans except through the lending of
portfolio securities, the purchase of debt securities or through repurchase
agreements.
A complete description of these and other policies and restrictions is contained
under "Investment Restrictions" in the Fund's Statement of Additional
Information.
7
<PAGE>
Additional information about policies and investments (cont'd)
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.
Common stocks
Under normal circumstances, the Fund invests primarily in common stocks. Common
stock is issued by companies to raise cash for business purposes and represents
a proportionate interest in the issuing companies. Therefore, the Fund
participates in the success or failure of any company in which it holds stock.
The market values of common stock can fluctuate significantly, reflecting the
business performance of the issuing company, investor perception and general
economic or financial market movements. Smaller companies are especially
sensitive to these factors and may even become valueless. Despite the risk of
price volatility, however, common stocks also offer the greatest potential for
gain on investment, compared to other classes of financial assets such as bonds
or cash equivalents.
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
8
<PAGE>
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.
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,
9
<PAGE>
Additional information about policies and investments (cont'd)
however, should be aware that the Latin American economies have experienced
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
10
<PAGE>
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 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 or restricted investments. The absence of a trading market can make it
difficult to ascertain a market value for illiquid or restricted investments.
Disposing of illiquid or restricted 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.
11
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Additional information about policies and investments (cont'd)
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
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.
12
<PAGE>
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
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.
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.
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.
(continued on page 16)
13
<PAGE>
Purchases
<TABLE>
<S> <C> <C> <C> <C>
Opening Minimum initial investment: $2,500; IRAs $1,000
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 Service
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 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 account number and the
Scudder Funds." complete Fund name, to the appropriate address listed above.
o By Wire Please see Transaction information--Purchasing shares-- By
wire 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>
<S> <C> <C> <C> <C>
Exchanging Minimum investments: $2,500 to establish a new account;
shares $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;
- 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 Service Center
Boston, MA 02107-2291 42 Longwater Drive
Norwell, MA
02061-1612
-----------------------------------------------------------------------------------------------------------------------
Redeeming o By Telephone To speak with a service representative, call 1-800-225-5163 from
shares 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 $100,000 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;
- your signature(s) as it appears on your account; and
- a daytime telephone number.
A signature guarantee is required for redemptions over $100,000.
See Transaction information--Redeeming shares.
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)
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
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
Scudder retirement plan accounts.
16
<PAGE>
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 most retirement plan accounts. However, "AutoBuy" transactions are
available for Scudder IRA 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.
To redeem shares, call 1-800-225-5163. Redemptions must be for at least $250.
Proceeds
17
<PAGE>
Transaction information (cont'd)
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 $100,000 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 $100,000 to their address of record.
Shareholders also may, by telephone, request that redemption proceeds be sent to
a predesignated bank account. Each 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 a Fund does not follow such
procedures, it 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.
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 must be received in good order by the
Fund's transfer agent. Those requests received 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).
Purchase restrictions
Purchases and sales should be made for long-term investment purposes only. The
Fund and Scudder
18
<PAGE>
Investor Services, Inc. each reserves the right to reject purchases of Fund
shares (including exchanges) for any reason including 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 $2,500, which amount
may be changed by the Board of Directors. Scudder retirement plans have similar
or lower minimum share balance requirements. A shareholder may open an account
with at least $1,000, if an automatic investment plan of $100/month is
established.
Shareholders who maintain a non-fiduciary account balance of less than $2,500 in
the Fund, without establishing an automatic investment plan, will be assessed an
annual $10.00 per fund charge with the fee to be paid to the Fund. The $10.00
charge will not apply to shareholders with a combined household account balance
in any of the Scudder Funds of $25,000 or more. The Fund reserves the right,
following 60 days' written notice to shareholders, to redeem all shares in
accounts below $250, including accounts of new investors, where a reduction in
value has occurred due to a redemption or exchange out of the account. The Fund
will mail the proceeds of the redeemed account to the shareholder. Reductions in
value that result solely from market activity will not trigger an involuntary
redemption. Retirement accounts and certain other accounts will not be assessed
the $10.00 charge or be subject to automatic liquidation. Please refer to
"Exchanges and Redemptions--Other information" in the Fund's Statement of
Additional Information for more information.
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
19
<PAGE>
Transaction information (cont'd)
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 ten 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
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.
Personal Counsel(SM) -- A Managed Fund Portfolio Program
If you would like to receive direct guidance and management of your overall
mutual fund portfolio to help you pursue your investment goals, you may be
interested in Personal Counsel from Scudder. Personal Counsel, a program of
Scudder Investor Services, Inc., a registered investment adviser, and a
subsidiary of Scudder, Stevens & Clark, Inc., combines the benefits of a
customized portfolio of pure no-load(TM) Scudder Funds with ongoing portfolio
monitoring and individualized service, for an annual fee of
20
<PAGE>
generally 1% or less of assets (with a $1,000 minimum). In addition, it draws
upon Scudder, Stevens & Clark's more than 75-year heritage of providing
investment counsel to large corporate and private clients. If you have $100,000
or more to invest initially and would like more information about Personal
Counsel, please call 1-800-700-0183.
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,
New York and San Francisco.
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 up to $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 you 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. The Scudder Keogh
charges you no annual custodial fee.
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. The Scudder SEP-IRA charges
you no annual custodial fee.
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.
Scudder Investor Relations is a service provided through Scudder Investor
Services, Inc., Distributor.
22
<PAGE>
Directors and Officers
Daniel Pierce*
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
Dudley H. Ladd*
Director
William H. Luers
Director; President, The Metropolitan Museum of Art
Dr. Wilson Nolen
Director; Consultant
Kathryn L. Quirk*
Director, Vice President and Assistant Secretary
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
Joyce E. Cornell*
Vice President
Carol L. Franklin*
Vice President
Edmund B. Games, Jr.*
Vice President
Jerard K. Hartman*
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
Richard W. Desmond*
Assistant Secretary
* Scudder, Stevens & Clark, Inc.
23
<PAGE>
Investment products and services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder California Tax Free Money Fund*
Scudder New York Tax Free Money Fund*
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund*
Scudder Massachusetts Limited Term Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder Zero Coupon 2000 Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund
Retirement Programs
- -------------------
IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan *+++ +++
(a variable annuity)
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder World Income Opportunities Fund, Inc.
- ----------
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +++Funds within categories are listed in order from
expected least risk to most risk. +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.
24
<PAGE>
How to contact Scudder
Account Service and Information:
For existing account service and transactions
Scudder Investor Relations -- 1-800-225-5163
For 24 hour account information, fund information, exchanges, and an
overview of all the services available to you
Scudder Electronic Account Services -- http://funds.scudder.com
For personalized information about your Scudder accounts, exchanges and
redemptions
Scudder Automated Information Line (SAIL) -- 1-800-343-2890
Investment Information:
For information about the Scudder funds, including additional applications
and prospectuses, or for answers to investment questions
Scudder Investor Relations -- 1-800-225-2470
[email protected]
Scudder's World Wide Web Site -- http://funds.scudder.com
For establishing 401(k) and 403(b) plans
Scudder Defined Contribution Services -- 1-800-323-6105
Scudder Brokerage Services:
To receive information about this discount brokerage service and to obtain
an application
Scudder Brokerage Services* -- 1-800-700-0820
Personal Counsel(SM) -- A Managed Fund Portfolio Program:
To receive information about this mutual fund portfolio guidance and
management program
Personal Counsel from Scudder -- 1-800-700-0183
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 Chicago San Francisco
Boston New York
Scudder Investor Relations and Scudder Funds Centers are services provided
through Scudder Investor Services, Inc., Distributor.
- ----------
* Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA
02061--Member NASD/SIPC.
25
<PAGE>
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, 1997, 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 and is available along with other related
materials on the Securities and Exchange Commission's Internet Web site
(http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Contents--see page 4.
Scudder
Pacific Opportunities
Fund
Prospectus
March 1, 1997
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.
<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.
1) Shareholder transaction expenses: Expenses charged directly to your
individual account in the Fund for various transactions.
Sales commissions to purchase shares (sales load) NONE
Commissions to reinvest dividends NONE
Redemption fees NONE*
Fees to exchange shares NONE
2) Annual Fund operating expenses: Expenses paid by the Fund before it
distributed its net investment income, expressed as a percentage of the
Fund's average daily net assets for the fiscal year ended October 31, 1996.
Investment management fee 1.10%
12b-1 fees NONE
Other expenses 0.65%
-----
Total Fund operating expenses 1.75%
=====
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 $95 $206
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, 1996 and may be obtained without charge
by writing or calling Scudder Investor Services, Inc.
<TABLE>
<CAPTION>
For the Period
December 8, 1992
(commencement of
operations) to
Years Ended October 31, October 31,
1996(a) 1995 1994 1993
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $15.59 $17.57 $16.21 $12.00
------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .02 .10 .04 .04
Net realized and unrealized gain (loss) on .42 (1.98) 1.41 4.17
investment transactions
------------------------------------------------------------
Total from investment operations .44 (1.88) 1.45 4.21
------------------------------------------------------------
Less distributions from:
Net investment income (.10) (.10) (.08) --
Net realized gains on investment transactions -- -- (.01) --
------------------------------------------------------------
Total distributions (.10) (.10) (.09) --
------------------------------------------------------------
------------------------------------------------------------
Net asset value, end of period $15.93 $15.59 $17.57 $16.21
-------------------------------------------------------------------------------------------------------------------
Total Return (%) 2.76 (10.73) 8.97 35.08**
Ratios and Supplemental Data
Net assets, end of period ($ millions) 329 384 499 270
Ratio of operating expenses, net to average daily 1.75 1.74 1.81 1.75*
net
assets (%)
Ratio of operating expenses before expense 1.75 1.74 1.81 2.90*
reductions,
to average daily net assets (%)
Ratio of net investment income (loss) to average .12 .65 .28 1.41*
daily net assets (%)
Portfolio turnover rate (%) 95.4 64.0 38.5 9.9*
Average commission rate paid (b) $.0148 $ -- $ -- $ --
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Average commission rate paid per share of common and preferred stocks is
calculated for fiscal years beginning on or after September 1, 1995.
* 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 $115 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 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. 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 business results.
The Fund may also purchase shares of closed-end investment companies that
5
<PAGE>
Investment objective and policies (cont'd)
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.
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.
Common stocks
Under normal circumstances, the Fund invests primarily in common stocks. Common
stock is issued by companies to raise cash for business purposes and represents
a proportionate interest in the issuing companies. Therefore, the Fund
participates in the success or failure of any company in which it holds stock.
The market values of common stock can fluctuate significantly, reflecting the
business performance of the issuing company, investor perception and general
economic or financial market movements. Smaller companies are especially
sensitive to these factors and may even become
7
<PAGE>
Additional information about policies and investments (cont'd)
valueless. Despite the risk of price volatility, however, common stocks also
offer the greatest potential for gain on investment, compared to other classes
of financial assets such as bonds or cash equivalents.
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.
8
<PAGE>
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 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
9
<PAGE>
Additional information about policies and investments (cont'd)
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.
Illiquid or restricted investments. The absence of a trading market can make it
difficult to ascertain a market value for illiquid or restricted investments.
Disposing of illiquid or restricted 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
10
<PAGE>
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
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
(Continued on page 14)
11
<PAGE>
<TABLE>
<CAPTION>
Purchases
-----------------------------------------------------------------------------------------------------------------------
Opening Minimum initial investment: $2,500; IRAs $1,000
an account
Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums.
See appropriate plan literature.
<S> <C> <C>
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 Service
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 for details, including the ABA wire transfer number.
Then call 1-800-225-5163 for instructions.
o In Person Visit one of our Funds Centers to complete your application
with the help of a Scudder representative. Funds Center
locations are listed under Shareholder benefits.
-----------------------------------------------------------------------------------------------------------------------
Purchasing Minimum additional investment: $100; IRAs $50
additional shares
Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums.
See appropriate plan literature.
Make checks o By Mail Send a check with a Scudder investment slip, or with a
payable to "The letter of instruction including your account number and the
Scudder Funds." complete Fund name, to the appropriate address listed above.
o By Wire Please see Transaction information--Purchasing shares--
By wire 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
($50 minimum) account. Please call 1-800-225-5163 for more information and an
enrollment form.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Exchanges and redemptions
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Exchanging shares Minimum investments: $2,500 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;
- 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 Service 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 $100,000 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;
- your signature(s) as it appears on your account; and
- a daytime telephone number.
A signature guarantee is required for redemptions over $100,000.
See Transaction information--Redeeming shares.
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>
Fund organization (cont'd)
(Continued from page 11)
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.
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.
14
<PAGE>
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 most retirement plan accounts. However, "AutoBuy" transactions are
available for Scudder IRA 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.
15
<PAGE>
Transaction information (cont'd)
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 $100,000 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 $100,000 to their address of record.
Shareholders also may, by telephone, request that redemption proceeds be sent to
a predesignated bank account. Each 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 a Fund does not follow such
procedures, it 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.
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 must be received in good order by the
Fund's transfer agent. Those requests received 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.
16
<PAGE>
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).
Purchase restrictions
Purchases and sales should be made for long-term investment purposes only. The
Fund and Scudder Investor Services, Inc. each reserves the right to reject
purchases of Fund shares (including exchanges) for any reason including 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 $2,500, which amount
may be changed by the Board of Directors. Scudder retirement plans have similar
or lower minimum share balance requirements. A shareholder may open an account
with at least $1,000, if an automatic investment plan of $100/month is
established.
Shareholders who maintain a non-fiduciary account balance of less than $2,500 in
the Fund, without establishing an automatic investment plan, will be assessed an
annual $10.00 per fund charge with the fee to be paid to the Fund. The $10.00
charge will not apply to shareholders with a combined household account balance
in any of the Scudder Funds of $25,000 or more. The Fund reserves the right,
following 60 days' written notice to shareholders, to redeem all shares in
accounts below $250, including accounts of new investors, where a reduction in
value has occurred due to a redemption or exchange out of the account. The Fund
will mail the proceeds of the redeemed account to the shareholder. Reductions in
value that result solely from market activity will not trigger an involuntary
redemption. Retirement accounts and certain other accounts will not be assessed
the $10.00 charge or be subject to automatic liquidation. Please refer to
"Exchanges and Redemptions--Other information" in the Fund's Statement of
Additional Information for more information.
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.
17
<PAGE>
Transaction information (cont'd)
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 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.
Co-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. Co-Lead
Portfolio Manager Theresa Gusman joined the team in 1997 and shares
responsibility with Ms. Allan in the Fund's day-to-day management and investment
strategies. Ms. Gusman joined Scudder in 1995 and has 13 years of experience in
pacific basin investments. 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.
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
18
<PAGE>
conditions on telephone transactions.
Personal Counsel(SM) -- A Managed Fund Portfolio Program
If you would like to receive direct guidance and management of your overall
mutual fund portfolio to help you pursue your investment goals, you may be
interested in Personal Counsel from Scudder. Personal Counsel, a program of
Scudder Investor Services, Inc., a registered investment adviser, and a
subsidiary of Scudder, Stevens & Clark, Inc., combines the benefits of a
customized portfolio of pure no-load(TM) Scudder Funds with ongoing portfolio
monitoring and individualized service, for an annual fee of generally 1% or less
of assets (with a $1,000 minimum). In addition, it draws upon Scudder, Stevens &
Clark's more than 75-year heritage of providing investment counsel to large
corporate and private clients. If you have $100,000 or more to invest initially
and would like more information about Personal Counsel, please call
1-800-700-0183.
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,
New York and San Francisco.
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 up to $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 you 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. The Scudder Keogh
charges you no annual custodial fee.
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. The Scudder SEP-IRA charges
you no annual custodial fee.
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.
Scudder Investor Relations is a service provided through Scudder Investor
Services, Inc., Distributor.
20
<PAGE>
Directors and Officers
Daniel Pierce*
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
Dudley H. Ladd*
Director
William H. Luers
Director; President, The Metropolitan Museum of Art
Dr. Wilson Nolen
Director; Consultant
Kathryn L. Quirk*
Director, Vice President and Assistant
Secretary
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
Joyce E. Cornell*
Vice President
Carol L. Franklin*
Vice President
Edmund B. Games, Jr.*
Vice President
Jerard K. Hartman*
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
Richard W. Desmond*
Assistant Secretary
*Scudder, Stevens & Clark, Inc.
21
<PAGE>
Investment products and services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder California Tax Free Money Fund*
Scudder New York Tax Free Money Fund*
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund*
Scudder Massachusetts Limited
Term Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund
Retirement Programs
- -------------------
IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan *+++ +++
(a variable annuity)
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder World Income Opportunities
Fund, Inc.
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +++Funds within categories are listed in order from
expected least risk to most risk. +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.
22
<PAGE>
How to contact Scudder
Account Service and Information:
For existing account service and transactions
Scudder Investor Relations -- 1-800-225-5163
For 24 hour account information, fund information, exchanges, and an
overview of all the services available to you
Scudder Electronic Account Services -- http://funds.scudder.com
For personalized information about your Scudder accounts, exchanges and
redemptions
Scudder Automated Information Line (SAIL) -- 1-800-343-2890
Investment Information:
For information about the Scudder funds, including additional applications
and prospectuses, or for answers to investment questions
Scudder Investor Relations -- 1-800-225-2470
[email protected]
Scudder's World Wide Web Site -- http://funds.scudder.com
For establishing 401(k) and 403(b) plans
Scudder Defined Contribution Services -- 1-800-323-6105
Scudder Brokerage Services:
To receive information about this discount brokerage service and to obtain
an application
Scudder Brokerage Services* -- 1-800-700-0820
Personal Counsel(SM) -- A Managed Fund Portfolio Program:
To receive information about this mutual fund portfolio guidance and
management program Personal Counsel from Scudder -- 1-800-700-0183
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 Chicago San Francisco
Boston New York
Scudder Investor Relations and Scudder Funds Centers are services provided
through Scudder Investor Services, Inc., Distributor.
* Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA
02061--Member NASD/SIPC.
23
<PAGE>
<PAGE>
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, 1997, 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 and is available along with other related
materials on the Securities and Exchange Commission's Internet Web site
(http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Contents--see page 4.
Scudder
Greater Europe Growth Fund
Prospectus
March 1, 1997
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.
<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 purchase shares (sales load) NONE
Commissions to reinvest dividends NONE
Redemption fees NONE*
Fees to exchange shares NONE
2) Annual Fund operating expenses: Expenses paid by the Fund before it
distributes its net investment income, expressed as a percentage of the
Fund's average daily net assets for the fiscal year ended October 31, 1996.
Investment management fee 1.00%
12b-1 fees NONE
Other expenses 0.97%
-----
Total Fund operating expenses 1.97%**
=====
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
------ ------- ------- --------
$20 $62 $106 $230
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 waived a portion of its investment
management fee to the extent necessary so that the total annualized
expenses of the Fund did not exceed 1.50% of average daily net assets.
Expenses shown above are restated to reflect what the Fund would have paid
during the fiscal year ended October 31, 1996 absent such waiver.
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, 1996 and may be obtained without charge
by writing or calling Scudder Investor Services, Inc.
<TABLE>
<CAPTION>
For the Period
October 10, 1994
(commencement of
operations) to
Years Ended October 31, October 31,
1996 (a) 1995 1994
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........... $13.99 $12.18 $12.00
---------------------------------------------------
Income from investment operations:
Net investment income.......................... .13 .13 .01
Net realized and unrealized gain on investment
transactions................................ 3.33 1.70 .17
---------------------------------------------------
Total from investment operations............... 3.46 1.83 .18
---------------------------------------------------
Less distributions from:
Net investment income.......................... (.11) (.02) --
Net realized gains on investment transactions.. (.14) -- --
---------------------------------------------------
Total distributions............................ (.25) (.02) --
---------------------------------------------------
Net asset value, end of period................. $17.20 $13.99 $12.18
- ------------------------------------------------------------------------------------------------------
Total Return (%) (b)........................... 25.11 15.06 1.50**
Ratios and Supplemental Data
Net assets, end of period ($ millions)......... 120 41 8
Ratio of operating expenses, net to average
daily net assets (%)........................ 1.50 1.50 1.50*
Ratio of operating expenses before expense
reductions, to average daily net assets (%). 1.97 2.74 11.46*
Ratio of net investment income to average daily
net assets (%).............................. .82 1.25 2.40*
Portfolio turnover rate (%).................... 39.0 27.9 --
Average commission rate paid (c)............... $.0509 $ -- $ --
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Total returns would have been lower had certain expenses not been reduced.
(c) Average commission rate paid per share of common and preferred stocks is
calculated for fiscal years beginning on or after September 1, 1995.
* 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 $115 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. 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
5
<PAGE>
Investment objective and policies (cont'd)
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"). See "Risk considerations - Debt securities".
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.
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. As of December 31, 1996, the Adviser was
responsible for managing more than $22 billion of foreign securities, including
approximately $10 billion 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:
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
repurchase agreements.
7
<PAGE>
Additional information about policies and investments (cont'd)
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.
Common stocks
Under normal circumstances, the Fund invests primarily in common stocks. Common
stock is issued by companies to raise cash for business purposes and represents
a proportionate interest in the issuing companies. Therefore, the Fund
participates in the success or failure of any company in which it holds stock.
The market values of common stock can fluctuate significantly, reflecting the
business performance of the issuing company, investor perception and general
economic or financial market movements. Smaller companies are especially
sensitive to these factors and may even become valueless. Despite the risk of
price volatility, however, common stocks also offer the greatest potential for
gain on investment, compared to other classes of financial assets such as bonds
or cash equivalents.
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
8
<PAGE>
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 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.
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.
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
9
<PAGE>
Risk considerations (cont'd)
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 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.
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,
10
<PAGE>
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
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 or restricted investments. The absence of a trading market can make it
difficult to ascertain a market value for illiquid or restricted investments.
Disposing of illiquid or restricted 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 (Continued on page 14)
11
<PAGE>
<TABLE>
<CAPTION>
Purchases
<S> <C>
Opening Minimum initial investment: $2,500; IRAs $1,000
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
P.O. Box 2291 Service Center
Boston, MA 42 Longwater Drive
02107-2291 Norwell, MA
02061-1612
o By Wire Please see Transaction information--Purchasing shares--
By wire 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.
shares See appropriate plan literature.
Make checks o By Mail Send a check with a Scudder investment slip, or with a letter of
payable to "The instruction including your account number and the complete
to Scudder Funds." Fund name, the appropriate address listed above.
o By Wire Please see Transaction information--Purchasing shares--
By wire 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
($50 minimum) account. Please call 1-800-225-5163 for more information and an
enrollment form.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Exchanges and redemptions
<S> <C>
Exchanging Minimum investments: $2,500 to establish a new account;
shares $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;
- 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 Service Center
Boston, MA 42 Longwater Drive
02107-2291 Norwell, MA
02061-1612
- --------------------------------------------------------------------------------------------------------------
Redeeming o By Telephone To speak with a service representative, call 1-800-225-5163 from
shares 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 $100,000 sent to your address of record.
o By Mail Send your instructions for redemption to the appropriate address or fax
or Fax number 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;
- your signature(s) as it appears on your account; and
- a daytime telephone number.
A signature guarantee is required for redemptions over $100,000.
See Transaction information--Redeeming shares.
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)
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 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
14
<PAGE>
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
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, 1996, the Adviser did not impose a portion
of its management fee, maintaining the annualized expenses for the Fund at 1.50%
and, accordingly, received an investment management fee of 0.53% of the Fund's
daily net assets.
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
15
<PAGE>
Transaction information (cont'd)
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
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 most retirement plan accounts. However, "AutoBuy" transactions are
available for Scudder IRA 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
16
<PAGE>
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.
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 $100,000 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 $100,000 to their address of record.
Shareholders also may, by telephone, request that redemption proceeds be sent to
a predesignated bank account. Each 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 a Fund does not follow such
procedures, it 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.
17
<PAGE>
Transaction information (cont'd)
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.
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 must be received in good order by the
Fund's transfer agent. Those requests received 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).
Purchase restrictions
Purchases and sales should be made for long-term investment purposes only. The
Fund and Scudder Investor Services, Inc. each reserves the right to reject
purchases of Fund shares (including exchanges) for any reason including 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 $2,500, which amount
may be changed by the Board of Directors. Scudder retirement plans and certain
other accounts have similar or lower minimum share balance requirements. A
shareholder may open an account with at least $1,000, if an automatic investment
18
<PAGE>
plan of $100/month is established.
Shareholders who maintain a non-fiduciary account balance of less than $2,500 in
the Fund, without establishing an automatic investment plan, will be assessed an
annual $10.00 per fund charge with the fee to be paid to the Fund. The $10.00
charge will not apply to shareholders with a combined household account balance
in any of the Scudder Funds of $25,000 or more. The Fund reserves the right,
following 60 days' written notice to shareholders, to redeem all shares in
accounts below $250, including accounts of new investors, where a reduction in
value has occurred due to a redemption or exchange out of the account. The Fund
will mail the proceeds of the redeemed account to the shareholder. Reductions in
value that result solely from market activity will not trigger an involuntary
redemption. Retirement accounts and certain other accounts will not be assessed
the $10.00 charge or be subject to automatic liquidation. Please refer to
"Exchanges and Redemptions--Other information" in the Fund's Statement of
Additional Information for more information.
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 ten
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
19
<PAGE>
Shareholder benefits (cont'd)
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 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.
Personal CounselSM -- A Managed Fund Portfolio Program
If you would like to receive direct guidance and management of your overall
mutual fund portfolio to help you pursue your investment goals, you may be
interested in Personal Counsel from Scudder. Personal Counsel, a program of
Scudder Investor Services, Inc., a registered investment adviser, and a
subsidiary of Scudder, Stevens & Clark, Inc., combines the benefits of a
customized portfolio of pure no-load(TM) Scudder Funds with ongoing portfolio
monitoring and individualized service, for an annual fee of generally 1% or less
of assets (with a $1,000 minimum). In addition, it draws upon Scudder, Stevens &
Clark's more than 75-year heritage of providing investment counsel to large
corporate and private clients. If you have $100,000 or more to invest initially
and would like more information about Personal Counsel, please call
1-800-700-0183.
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,
20
<PAGE>
New York and San Francisco.
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.
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 you 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. The Scudder Keogh
charges you no annual custodial fee.
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. The Scudder SEP-IRA charges
you no annual custodial fee.
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.
Scudder Investor Relations is a service provided through Scudder Investor
Services, Inc., Distributor.
21
<PAGE>
Directors and Officers
Daniel Pierce*
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
Dudley H. Ladd*
Director
William H. Luers
Director; President, The Metropolitan
Museum of Art
Dr. Wilson Nolen
Director; Consultant
Kathryn L. Quirk*
Director, Vice President and Assistant
Secretary
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
Joyce E. Cornell*
Vice President
Carol L. Franklin*
Vice President
Edmund B. Games, Jr.*
Vice President
Jerard K. Hartman*
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
Richard W. Desmond*
Assistant Secretary
* Scudder, Stevens & Clark, Inc.
22
<PAGE>
Investment products and services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder California Tax Free Money Fund*
Scudder New York Tax Free Money Fund*
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund*
Scudder Massachusetts Limited
Term Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
U. S. Income
- ------------
Scudder Short Term Bond Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder Zero Coupon 2000 Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund
Retirement Programs
- -------------------
IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan *+++ +++
(a variable annuity)
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder World Income Opportunities
Fund, Inc.
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +++Funds within categories are listed in order from
expected least risk to most risk. +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.
23
<PAGE>
How to contact Scudder
Account Service and Information:
For existing account service and transactions
Scudder Investor Relations -- 1-800-225-5163
For 24 hour account information, fund information, exchanges, and an
overview of all the services available to you
Scudder Electronic Account Services -- http://funds.scudder.com
For personalized information about your Scudder accounts, exchanges and
redemptions
Scudder Automated Information Line (SAIL) -- 1-800-343-2890
Investment Information:
For information about the Scudder funds, including additional applications
and prospectuses, or for answers to investment questions
Scudder Investor Relations -- 1-800-225-2470
[email protected]
Scudder's World Wide Web Site -- http://funds.scudder.com
For establishing 401(k) and 403(b) plans
Scudder Defined Contribution Services -- 1-800-323-6105
Scudder Brokerage Services:
To receive information about this discount brokerage service and to obtain
an application
Scudder Brokerage Services* -- 1-800-700-0820
Personal Counsel(SM) -- A Managed Fund Portfolio Program:
To receive information about this mutual fund portfolio guidance and
management program
Personal Counsel from Scudder -- 1-800-700-0183
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 Chicago San Francisco
Boston New York
Scudder Investor Relations and Scudder Funds Centers are services provided
through Scudder Investor Services, Inc., Distributor.
* Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA
02061--Member NASD/SIPC.
<PAGE>
This prospectus sets forth concisely the information about Scudder Emerging
Markets 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, 1997, 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 and is available along with other related
materials on the Securities and Exchange Commission's Internet Web site
(http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Contents--see page 4.
Scudder
Emerging Markets Growth Fund
Prospectus
March 1, 1997
A pure no-load(TM) (no sales charges) mutual fund seeking long-term growth of
capital primarily through equity investment in emerging markets around the
globe.
<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 Emerging Markets 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 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: Estimated 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, 1997.
Investment management fee 0.98%**
12b-1 fees NONE
Other expenses 1.02%**
-----
Total Fund operating expenses 2.00%**
=====
Example
Based on the estimated 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
------ -------
$20 $63
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 may be a 2% fee retained by the Fund which is imposed only on
redemptions or exchanges of shares held less than one year. 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--Exchanging and redeeming shares."
** Until February 28, 1998, the Adviser and certain of its subsidiaries have
agreed to waive all or portions of their fees payable by the Fund to the
extent necessary so that the total annualized expenses of the Fund do not
exceed 2.00% of average daily net assets. If the Adviser and its subsidiaries
had not agreed to waive all or portions of their fees, it is estimated that
annualized Fund expenses would have been: investment management fee 1.25%,
other expenses 2.54% and total operating expenses 3.79% for the initial
fiscal period and 1.25%, 1.02% and 2.27%, respectively, for the fiscal year
ending October 31, 1997. For the Fund's initial fiscal period, the Adviser
did not receive an investment management fee.
2
<PAGE>
Financial highlights
The following table includes selected data for a share outstanding throughout
the period (a) 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, 1996 and may be obtained without charge
by writing or calling Scudder Investor Services, Inc.
<TABLE>
<S> <C>
For the Period
May 8, 1996
(commencement)
of
operations)
to
October 31, 1996
- -----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ................................... $ 12.00
Income from investment operations:
Net investment loss .................................................... (.02)
Net realized and unrealized gain on investments ........................ .86
Total from investment operations ....................................... .84
Redemption fees (Note A) ............................................... .01
Net asset value, end of period ......................................... $ 12.85
- -----------------------------------------------------------------------------------------------------------
Total Return (%) (c) ................................................... 7.08(d)**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ................................. 76
Ratio of operating expenses, net to average daily net assets (%)........ 2.00*
Ratio of operating expenses before expense reductions,
to average daily net assets (%) ................................. 3.79*
Ratio of net investment loss to average daily net assets (%) ........... (.32)*
Portfolio turnover rate (%) ............................................ 19.5*
Average commission rate paid (b) ....................................... $ .0006
(a) Based on monthly average of shares outstanding during the period.
(b) Average commission rate paid per share of common and preferred stocks.
(c) Total return is higher due to maintenance of the Fund's expenses.
(d) Total return does not reflect the effect of the 2% redemption fee on shares held less than one year.
* 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 $115 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 Emerging Markets Growth Fund
Investment objective
o long-term growth of capital primarily through equity investment in emerging
markets around the globe
Investment characteristics
o access to dynamic investment opportunities in the emerging markets of Asia,
Europe, Africa, the Middle East and Latin America
o opportunity to enhance the return potential and global diversification of an
investment portfolio
o involves above-average investment risk and above-average return potential
o a pure no-load(TM) fund with no sales charges, commissions or 12b-1 fees
o a 2% redemption and exchange fee on shares held less than one year, retained
by the Fund for the benefit of remaining shareholders
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 ........................ 12
Fund organization ............................................... 13
Purchases ....................................................... 14
Exchanges and redemptions ....................................... 15
Transaction information ......................................... 16
Shareholder benefits ............................................ 20
Directors and Officers .......................................... 24
Investment products and services ................................ 25
How to contact Scudder .......................................... 26
4
<PAGE>
Investment objective and policies
Scudder Emerging Markets Growth Fund (the "Fund"), a non-diversified series of
Scudder International Fund, Inc., seeks long-term growth of capital primarily
through equity investment in emerging markets around the globe.
The Fund will invest in the Asia-Pacific region, Latin America, less developed
nations in Europe, the Middle East and Africa, focusing investments in countries
and regions where there appear to be the best value and appreciation potential,
subject to considerations of portfolio diversification and liquidity. In the
opinion of the Fund's investment adviser, Scudder, Stevens & Clark, Inc. (the
"Adviser"), many emerging nations around the globe are likely to continue to
experience economic growth rates well in excess of those found in the U.S.,
Japan and other developed markets. In the opinion of the Adviser, this economic
growth should translate into strong stock market performance over the long term.
While the Fund offers the potential for substantial price appreciation over
time, it also involves above-average investment risk. The Fund is designed as a
long-term investment and not for short-term trading purposes. It should not be
considered a complete investment program. The Fund's net asset value (price) can
fluctuate significantly with changes in stock market levels, political
developments, movements in currencies, investment flows and other factors. To
encourage a long-term investment horizon, a 2% redemption and exchange fee,
described more fully below, is payable to the Fund for the benefit of remaining
shareholders on shares held less than one year.
Except as otherwise indicated, the Fund's investment objective and policies are
not fundamental and may be changed without a vote of shareholders. If there is a
change in investment objective, shareholders should consider whether the Fund
remains an appropriate investment in light of their then current financial
position and needs. There can be no assurance that the Fund's objectives will be
met.
Investments
At least 65% of the Fund's total assets will be invested in the equity
securities of emerging market issuers. The Fund considers "emerging markets" to
include any country that is defined as an emerging or developing economy by any
one of the International Bank for Reconstruction and Development (i.e., the
World Bank), the International Finance Corporation or the United Nations or its
authorities. The Fund intends to allocate its investments among at least three
countries at all times, and does not expect to concentrate in any particular
industry. There is no limitation, however, on the amount the Fund can invest in
a specific country or region of the world.
The Fund deems an issuer to be located in an emerging market if:
o the issuer is organized under the laws of an emerging market country;
o the issuer's principal securities trading market is in an emerging market; or
o at least 50% of the issuer's non-current assets, capitalization, gross
revenue or profit in any one of the two most recent fiscal years is derived
(directly or indirectly through subsidiaries) from assets or activities
located in emerging markets.
The Fund's equity investments are common stock, preferred stock (either
convertible or non-convertible), depository receipts and warrants. 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 in illiquid or restricted securities.
The Fund may invest up to 35% of its total assets in emerging market and
domestic debt securities if the Adviser determines that the capital appreciation
of debt securities is likely to equal or exceed the capital appreciation of
equity
5
<PAGE>
Investment objective and policies (cont'd)
securities. Debt instruments held by the Fund take the form of bonds, notes,
bills, debentures, convertible securities, warrants, bank obligations,
short-term paper, loan participations, loan assignments, and trust interests.
Under normal market conditions, the Fund may invest up to 35% of its assets in
equity securities of issuers in the U.S. and other developed markets. In
evaluating the appropriateness of such investments for the Fund, the Adviser
takes into account the issuer's involvement in the emerging markets and the
potential impact of that involvement on business results. The Fund may also
purchase securities on a when-issued or forward delivery basis, and may engage
in various strategic transactions, including derivatives. In addition, to
maintain liquidity, 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.
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. It is impossible to predict for how long such alternative
strategies will be utilized. The Fund may also invest in closed-end investment
companies investing primarily in the emerging markets. To the extent the Fund
invests in such closed-end investment companies, shareholders will incur certain
duplicate fees and expenses. Such closed-end investment company investments will
generally only be made when market access or liquidity restricts direct
investment in the market.
More information about the investments and policies of the Fund is provided
under "Additional information about policies and investments."
Investment strategy
The Adviser takes a top-down approach to evaluating investments for the Fund,
using extensive fundamental and field research. The process begins with a study
of the economic fundamentals of each country and region as well as 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 companies most likely
to benefit from the political, social and economic changes taking place in a
given region of the world.
Within a market, the Adviser looks for individual companies with exceptional
business prospects, which may be due to market dominance, unique franchises,
high growth potential, or innovative services, products or technologies. The
Adviser seeks to identify companies with favorable potential for appreciation
through growing earnings or greater 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. stock market capitalization.
Why invest in the Fund?
This Fund is designed as a convenient, low cost way for investors to participate
in the growth opportunities afforded by a broad range of emerging markets.
Through one actively managed, pure no-load(TM) fund, investors can tap into
developing regions throughout the world, without the burden of deciding where
and when to invest on their own.
The Adviser believes the emerging markets will continue to experience some of
the fastest rates of economic growth over the next decade and continue to offer
attractive stock market potential. In the Pacific Rim and other parts of Asia,
economies are typically characterized by large, relatively low cost labor pools,
high savings rates and worldwide demand for their products.
6
<PAGE>
Many companies there are experiencing rising productivity and profit growth due
to increased focus on higher value-added products and enhanced capital
investment in technology. In Latin America, the region has benefited from
governmental efforts to reduce inflation and budget deficits, invest in much
needed infrastructure, deregulate or privatize industry and liberalize their
capital markets. Eastern European countries are experiencing strong economic
growth as capitalism takes hold. Many African and Middle Eastern countries are
also benefiting from the shift to market based economies and from improved
fiscal and monetary discipline. These regions, as a whole, are attracting a
growing pool of foreign investment and benefiting from growing regional trade,
which is helping fuel rapid economic growth. Stock markets in many of these
countries have outperformed our own and those of the other more developed
countries.
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, 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, over time, increase
the investor's overall diversification, and reduce overall risk.
Investing directly in emerging market 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 for safekeeping, and convert profits from foreign currencies to
U.S. dollars. The Fund offers professional management and administrative
convenience to shareholders wishing to invest in these more dynamic, emerging
markets of the world.
In addition, the Fund offers all the benefits of the Scudder Family of Funds.
Scudder, Stevens and 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 has been active in international investment management for over four
decades. As of December 31, 1996, Scudder was responsible for managing more than
$22 billion in foreign securities, including over $6 billion in emerging market
equity securities.
The Adviser manages a number of U.S. investment companies that invest in
emerging market equity securities. These include Scudder Pacific Opportunities
Fund, Scudder Latin America Fund and Scudder Greater Europe Growth Fund, as well
as a number of closed-end funds that trade on the New York Stock Exchange.
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.
A complete description of these and other policies and restrictions is contained
under "Investment Restrictions" in the Fund's Statement of Additional
Information.
7
<PAGE>
Additional information about policies and investments (cont'd)
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.
Debt securities
Although the debt securities in which the Fund invests are predominantly
denominated in U.S. dollars, the Fund may also invest in debt securities
denominated in foreign currencies. Such securities may be rated 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"), or may be unrated but
equivalent to those rated below investment-grade by internationally recognized
rating agencies such as S&P or Moody's. The Fund may invest in "Brady Bonds,"
which are debt securities issued under the framework of the Brady Plan as a
mechanism for debtor countries to restructure their outstanding bank loans. Most
"Brady Bonds" have their principal collaterized by zero coupon U.S. Treasury
bonds.
Illiquid or restricted securities
The Fund may invest a portion of its assets in securities for which there is not
an active trading market, or which have resale restrictions ("restricted
securities"). These types of securities generally offer a higher return than
more readily marketable securities, but carry the risk that the Fund may not be
able to dispose of them at an advantageous time or price. Some restricted
securities purchased by the Fund, however, may be considered liquid despite
resale restrictions, since they can be sold to other qualified institutional
buyers under a rule of the Securities and Exchange Commission (Rule 144A). Upon
approval from the Fund's Board of Directors, the Adviser may determine which
Rule 144A securities will be considered liquid.
Common stocks
Under normal circumstances, the Fund invests primarily in common stocks. Common
stock is issued by companies to raise cash for business purposes and represents
a proportionate interest in the issuing companies. Therefore, the Fund
participates in the success or failure of any company in which it holds stock.
The market values of common stock can fluctuate significantly, reflecting the
business performance of the issuing company, investor perception and general
economic or financial market movements. Smaller companies are especially
sensitive to these factors and may even become valueless. Despite the risk of
price volatility, however, common stocks also offer the greatest potential for
gain on investment, compared to other classes of financial assets such as bonds
or cash equivalents.
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
8
<PAGE>
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
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.
9
<PAGE>
Additional information about policies and investments (cont'd)
Investing in emerging markets. Securities of many issuers in emerging markets
may be less liquid and more volatile than securities of comparable domestic
issuers. Emerging markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
not kept pace with the volume of securities transactions, making it difficult to
conduct such transactions. Delays in settlement could result in temporary
periods when a portion of the assets of the Fund is uninvested and no return is
earned thereon.
The inability of the Fund to make intended security purchases due to settlement
problems could cause the Fund to miss attractive investment opportunities.
Inability to dispose of portfolio securities due to settlement problems could
result either in losses to the Fund due to subsequent declines in the value of
those securities or, if the Fund has entered into a contract to sell a security,
in possible liability to the purchaser. Costs associated with transactions in
foreign securities are generally higher than costs associated with transactions
in U.S. securities. Such transactions also involve additional costs for the
purchase or sale of foreign currency.
Certain emerging markets may require governmental approval for the repatriation
of investment income, capital or the proceeds of sales of securities by foreign
investors. In addition, if a deterioration occurs in an emerging market's
balance of payments or for other reasons, a country could impose temporary
restrictions on foreign capital remittances. The Fund could be adversely
affected by delays in, or a refusal to grant, any required governmental approval
for repatriation of capital, as well as by the application to the Fund of any
restrictions on investments.
Throughout the last decade many emerging markets have experienced, and continue
to experience, high rates of inflation. In certain countries inflation has at
times accelerated rapidly to hyperinflationary levels, creating a negative
interest rate environment and sharply eroding the value of outstanding financial
assets in those countries. Increases in inflation could have an adverse effect
on the Fund's non-dollar denominated securities.
Individual foreign economies may differ favorably or unfavorably from the U.S.
economy in such respects as growth of gross domestic product, rate of inflation,
capital reinvestment, resources, self-sufficiency and balance of payments
position. The securities markets, values of securities, yields and risks
associated with securities markets in different countries may change
independently of each other.
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 and the lack of a sufficient capital base to expand business
operations. Furthermore, there can be no assurance that the Fund's investments
in Eastern Europe would not 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 and adversely affect existing investment
opportunities. For a more complete description of the risks of investing in
emerging markets, please refer to the Fund's Statement of Additional
Information.
Foreign securities. Investments in foreign securities involve special
considerations due to more limited information, higher brokerage costs,
different accounting standards, thinner trading markets, the greater potential
for insider trading and stock price manipulation, and the likely impact of
foreign taxes on the income
10
<PAGE>
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;
exchange closure; 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. 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. 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 many other
countries. Exchange rate changes or 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.
Some countries also may have managed currencies, which are not free floating
against the U.S. dollar. In addition, there is risk that certain countries may
restrict the free conversion of their currencies into other currencies. Further,
it generally will not be possible to eliminate the Fund's foreign currency risk
through hedging.
Debt securities. The Fund may invest in debt securities with varying degrees of
credit quality. High quality bonds (rated AAA or AA by S&P or Aaa or Aa by
Moody's) characteristically have a strong capacity to pay interest and repay
principal. Medium-grade bonds (rated A or BBB by S&P or A or Baa by Moody's) are
defined as having adequate capacity to pay interest and repay principal. In
addition, certain medium-grade bonds are considered to have speculative
characteristics. Debt securities rated below BBB by S&P or below Baa by Moody's
are considered to be below investment-grade. These types of high yield/high risk
debt obligations (commonly referred to as "junk bonds") are predominantly
speculative with respect to the capacity to pay interest and repay principal in
accordance with their terms and generally involve a greater risk of default and
more volatility in price than securities in higher rating categories, such as
investment-grade U.S. bonds. The Fund may invest in securities whose quality is
comparable to securities rated as low as D by S&P or C by Moody's, which may be
in default with respect to payment of principal or interest.
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 generally entail less 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. 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
before being able to sell the securities. Also, if a seller defaults, the value
of such securities may decline before the Fund is able to dispose of them.
Illiquid or restricted securities. The absence of a trading market can make it
difficult to ascertain a market value for illiquid or restricted securities.
Disposing of illiquid or restricted securities may involve time-consuming
negotiation and legal expenses, and it may be difficult or impossible for
11
<PAGE>
Additional information about policies and investments (cont'd)
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 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 any dividends from its net investment income and
any net realized capital gains after utilization of capital loss carryforwards,
if any, in December. An additional distribution may be made, if necessary. 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.
12
<PAGE>
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
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 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 Emerging Markets Growth Fund is a 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 1.25% 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 by funds with similar
investment objectives.
The Adviser has agreed to maintain the annualized expenses of the Fund at no
more than 2% of the average daily net assets of the Fund until June 30, 1997.
(Continued on page 16)
13
<PAGE>
<TABLE>
<CAPTION>
Purchases
<S> <C> <C> <C> <C>
Opening Minimum initial investment: $2,500; IRAs $1,000
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 Service
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 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
to payable to "The with a letter of instruction including your account number and the
Scudder Funds." complete Fund name, the appropriate address listed above.
o By Wire Please see Transaction information--Purchasing shares-- By
wire 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.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Exchanges and redemptions
<S> <C> <C> <C> <C> <C> <C>
Exchanging Minimum investments: $2,500 to establish a new account;
shares $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;
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 Service Center
Boston, MA 02107-2291 42 Longwater Drive
Norwell, MA 02061-1612
- -----------------------------------------------------------------------------------------------------------------------
Redeeming o By Telephone To speak with a service representative, call 1-800-225-5163 from
shares 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
2% fee payable or Fax number 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;
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 $100,000.
See Transaction information--Redeeming shares.
o By Automatic You may arrange to receive automatic cash payments periodically.
Withdrawal Plan Call 1-800-225-5163 for more information and an enrollment form.
</TABLE>
15
<PAGE>
Fund organization (cont'd)
(Continued from page 13)
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.
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
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
16
<PAGE>
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 most retirement plan accounts. However, "AutoBuy" transactions are
available for Scudder IRA accounts.
Exchanging and redeeming shares
Upon the redemption or exchange of shares held less than one year, a fee of 2%
of 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, if such shares are purchased through a broker, financial
institution or recordkeeper maintaining an omnibus account for the shares, such
waiver may not apply. (Before purchasing shares, please check with your account
representative concerning the availability of the fee waiver.) In addition, this
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,
17
<PAGE>
Transaction information (cont'd)
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.
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 $100,000 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
18
<PAGE>
telephone up to $100,000 to their address of record. Shareholders also may, by
telephone, request that redemption proceeds be sent to a predesignated bank
account. Each 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 a Fund does not follow such procedures, it 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.
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.
Trading in securities on European and Far Eastern 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 must be received in good order by the
Fund's transfer agent. Those requests received 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).
Purchase restrictions
Purchases and sales should be made for long-term investment purposes only. The
Fund and Scudder Investor Services, Inc. each reserves the right to reject
purchases of Fund shares (including exchanges) for any reason including 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
19
<PAGE>
Transaction information (cont'd)
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 $2,500, which amount
may be changed by the Board of Directors. Scudder retirement plans and certain
other accounts have similar or lower minimum share balance requirements. A
shareholder may open an account with at least $1,000, if an automatic investment
plan of $100/month is established.
Shareholders who maintain a non-fiduciary account balance of less than $2,500 in
the Fund, without establishing an automatic investment plan, will be assessed an
annual $10.00 per fund charge with the fee to be paid to the Fund. The $10.00
charge will not apply to shareholders with a combined household account balance
in any of the Scudder Funds of $25,000 or more. The Fund reserves the right,
following 60 days' written notice to shareholders, to redeem all shares in
accounts below $250, including accounts of new investors, where a reduction in
value has occurred due to a redemption or exchange out of the account. The Fund
will mail the proceeds of the redeemed account to the shareholder. Reductions in
value that result solely from market activity will not trigger an involuntary
redemption. Retirement accounts and certain other accounts will not be assessed
the $10.00 charge or be subject to automatic liquidation. Please refer to
"Exchanges and Redemptions--Other information" in the Fund's Statement of
Additional Information for more information.
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 Investment Company Act
of 1940, 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 Emerging Markets 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
20
<PAGE>
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.
Joyce E. Cornell, Lead Portfolio Manager, has responsibility for the Fund's
day-to-day management and investment strategies. Ms. Cornell has been a
portfolio manager at Scudder since 1993, and joined the firm in 1991 after eight
years of investment experience as a research analyst. Elizabeth Allan, Portfolio
Manager, helps set the Fund's general investment strategies. Ms. Allan joined
Scudder in 1987, and has numerous years of Pacific Basin research and investing
experience. Tara C. Kenney, Portfolio Manager, assists with the Fund's research
and investment strategy by focusing on the Latin American securities in the
portfolio. Ms. Kenney joined Scudder in 1995 and has ten years of financial
industry 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
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.
Personal Counsel(SM) -- A Managed Fund Portfolio Program
If you would like to receive direct guidance and management of your overall
mutual fund portfolio to help you pursue your investment goals, you may be
interested in Personal Counsel from Scudder. Personal Counsel, a program of
Scudder Investor Services, Inc., a registered investment adviser, and a
subsidiary of Scudder, Stevens & Clark, Inc., combines the benefits of a
customized portfolio of pure no-load(TM) Scudder Funds with ongoing portfolio
monitoring and individualized service, for an annual fee of generally 1% or less
of assets (with a $1,000 minimum). In addition, it draws upon Scudder, Stevens &
Clark's more than 75-year heritage of providing investment counsel to large
corporate and private clients. If you have $100,000 or more to invest initially
and would like more information about Personal Counsel, please call
1-800-700-0183.
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
21
<PAGE>
Shareholder benefits (cont'd)
(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,
New York and San Francisco.
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.
22
<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 up to $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 you 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. The Scudder Keogh charges you no
annual custodial fee.
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. The Scudder SEP-IRA charges you
no annual custodial fee.
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.
Scudder Investor Relations is a service provided through Scudder Investor
Services, Inc., Distributor.
23
<PAGE>
Directors and Officers
Daniel Pierce*
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
Dudley H. Ladd*
Director
William H. Luers
Director; President, The Metropolitan Museum of Art
Dr. Wilson Nolen
Director; Consultant
Kathryn L. Quirk*
Director, Vice President and Assistant Secretary
Dr. Gordon Shillinglaw
Director; Professor Emeritus of Accounting,
Coluumbia 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
Joyce E. Cornell*
Vice President
Carol L. Franklin*
Vice President
Edmund B. Games, Jr.*
Vice President
Jerard K. Hartman*
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
Richard W. Desmond*
Assistant Secretary
- ----------
* Scudder, Stevens & Clark, Inc.
24
<PAGE>
Investment products and services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder California Tax Free Money Fund*
Scudder New York Tax Free Money Fund*
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund*
Scudder Massachusetts Limited Term Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
U. S. Income
- ------------
Scudder Short Term Bond Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder Zero Coupon 2000 Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund
Retirement Programs
- -------------------
IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan *+++ +++
(a variable annuity)
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder World Income Opportunities Fund, Inc.
- ----------
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +++Funds within categories are listed in order from
expected least risk to most risk. +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.
25
<PAGE>
How to contact Scudder
Account Service and Information:
For existing account service and transactions
Scudder Investor Relations -- 1-800-225-5163
For 24 hour account information, fund information, exchanges, and an
overview of all the services available to you
Scudder Electronic Account Services -- http://funds.scudder.com
For personalized information about your Scudder accounts, exchanges and
redemptions
Scudder Automated Information Line (SAIL) -- 1-800-343-2890
Investment Information:
For information about the Scudder funds, including additional applications
and prospectuses, or for answers to investment questions
Scudder Investor Relations -- 1-800-225-2470
[email protected]
Scudder's World Wide Web Site -- http://funds.scudder.com
For establishing 401(k) and 403(b) plans
Scudder Defined Contribution Services -- 1-800-323-6105
Scudder Brokerage Services:
To receive information about this discount brokerage service and to obtain
an application
Scudder Brokerage Services* -- 1-800-700-0820
Personal Counsel(SM) -- A Managed Fund Portfolio Program:
To receive information about this mutual fund portfolio guidance and
management program
Personal Counsel from Scudder -- 1-800-700-0183
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 Chicago San Francisco
Boston New York
Scudder Investor Relations and Scudder Funds Centers are services provided
through Scudder Investor Services, Inc., Distributor.
- ----------
* Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA
02061--Member NASD/SIPC.
26
<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
and
SCUDDER EMERGING MARKETS GROWTH FUND
A Pure No-Load(TM) (No Sales Charges) Mutual Fund
which seeks to provide long-term growth of capital
primarily through equity investment
in emerging markets
around the globe
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
March 1, 1997
- --------------------------------------------------------------------------------
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, Scudder Greater Europe Growth Fund and
Scudder Emerging Markets Growth Fund dated March 1, 1997, 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
Page
<S> <C>
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
General Investment Objectives and Policies of Scudder Emerging Markets Growth Fund...........................9
Special Considerations.......................................................................................9
Investing in Foreign Securities.............................................................................14
Specialized Investment Techniques...........................................................................15
Investment Restrictions.....................................................................................27
PURCHASES............................................................................................................31
Additional Information About Opening An Account.............................................................31
Additional Information About Making Subsequent Investments..................................................31
Additional Information About Making Subsequent Investments by AutoBuy.......................................31
Checks......................................................................................................32
Wire Transfer of Federal Funds..............................................................................32
Share Price.................................................................................................33
Share Certificates..........................................................................................33
Other Information...........................................................................................33
EXCHANGES AND REDEMPTIONS............................................................................................33
Exchanges...................................................................................................33
Special Redemption and Exchange Information for Scudder Emerging Markets Growth Fund........................34
Redemption by Telephone.....................................................................................35
Redemption by AutoSell......................................................................................35
Redemption by Mail or Fax...................................................................................36
Redemption-in-Kind..........................................................................................36
Other Information...........................................................................................36
FEATURES AND SERVICES OFFERED BY THE FUNDS...........................................................................37
The Pure No-Load(TM) Concept................................................................................37
Dividend and Capital Gain Distribution Options..............................................................38
Scudder Funds Centers.......................................................................................39
Reports to Shareholders.....................................................................................39
Transaction Summaries.......................................................................................39
THE SCUDDER FAMILY OF FUNDS..........................................................................................39
SPECIAL PLAN ACCOUNTS................................................................................................43
Scudder Retirement Plans: Profit-Sharing and Money Purchase Pension Plans for Corporations and
Self-Employed Individuals..............................................................................43
Scudder 401(k): Cash or Deferred Profit-Sharing Plan for Corporations and Self-Employed Individuals.........44
Scudder IRA: Individual Retirement Account.................................................................44
Scudder 403(b) Plan.........................................................................................45
Automatic Withdrawal Plan...................................................................................45
Group or Salary Deduction Plan..............................................................................45
Automatic Investment Plan...................................................................................46
Uniform Transfers/Gifts to Minors Act.......................................................................46
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS............................................................................46
i
<PAGE>
TABLE OF CONTENTS (continued)
Page
PERFORMANCE INFORMATION..............................................................................................47
Average Annual Total Return.................................................................................47
Cumulative Total Return.....................................................................................48
Total Return................................................................................................49
Capital Change..............................................................................................49
Comparison of Portfolio Performance.........................................................................49
ORGANIZATION OF THE FUNDS............................................................................................54
INVESTMENT ADVISER...................................................................................................55
Personal Investments by Employees of the Adviser............................................................58
DIRECTORS AND OFFICERS...............................................................................................59
REMUNERATION.........................................................................................................62
DISTRIBUTOR..........................................................................................................63
TAXES................................................................................................................64
PORTFOLIO TRANSACTIONS...............................................................................................68
Brokerage Commissions.......................................................................................68
Portfolio Turnover..........................................................................................69
NET ASSET VALUE......................................................................................................70
ADDITIONAL INFORMATION...............................................................................................70
Experts.....................................................................................................70
Other Information...........................................................................................71
FINANCIAL STATEMENTS.................................................................................................72
Latin America Fund..........................................................................................72
Pacific Opportunities Fund..................................................................................72
Greater Europe Growth Fund..................................................................................72
Emerging Markets Growth Fund................................................................................72
APPENDIX
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THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES
(See "Investment objective and policies" in the Funds' prospectuses.)
Scudder Latin America Fund, Scudder Pacific Opportunities Fund, Scudder
Greater Europe Growth Fund and Scudder Emerging Markets 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
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be invested 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 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).
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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.
4
<PAGE>
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.
5
<PAGE>
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 distributions, the Fund may borrow from banks and other entities
6
<PAGE>
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.
7
<PAGE>
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.
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
8
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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.
General Investment Objectives and Policies of Scudder Emerging Markets Growth
Fund
Scudder Emerging Markets Growth Fund ("Emerging Markets Growth Fund")
seeks long-term growth of capital primarily through equity investment in
emerging markets around the globe.
The Fund will invest in the Asia-Pacific region, Latin America, less
developed nations in Europe, the Middle East and Africa, focusing investments in
countries and regions where there appear to be the best value and appreciation
potential, subject to considerations for portfolio diversification and
liquidity. In the opinion of the Fund's investment adviser, Scudder, Stevens &
Clark, Inc. (the "Adviser"), many emerging nations around the globe are likely
to continue to experience economic growth rates well in excess of those found in
the U.S., Japan, and other developed markets. In the opinion of the Adviser,
this economic growth should translate into strong stock market performance over
the long term. Some examples of emerging markets in which the Fund may invest
are Poland, Turkey, South Africa, China, India, South Korea, Brazil, Mexico and
Venezuela.
While the Fund offers the potential for substantial price appreciation
over time, it also involves above-average investment risk. The Fund is designed
as a long-term investment and not for short-term trading purposes. It should not
be considered a complete investment program. The Fund's net asset value or price
can fluctuate significantly with changes in stock market levels, political
developments, movements in currencies, investment flows and other factors. To
encourage a long-term investment horizon, a 2% redemption and exchange fee is
payable to the Fund for the benefit of remaining shareholders on shares held
less than one year.
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
objectives will be met.
Special Considerations
Investing in Emerging Markets. Most emerging securities markets may have
substantially less volume and are subject to less government supervision than
U.S. securities markets. Securities of many issuers in emerging markets may be
less liquid and more volatile than securities of comparable domestic issuers. In
addition, there is less regulation of securities exchanges, securities dealers,
and listed and unlisted companies in emerging markets than in the U.S.
9
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Emerging markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
not kept pace with the volume of securities transactions. Delays in settlement
could result in temporary periods when a portion of the assets of the Fund is
uninvested and no cash is earned thereon. The inability of the Fund to make
intended security purchases due to settlement problems could cause the Fund to
miss attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result either in losses to the Fund
due to subsequent declines in value of the portfolio security or, if the Fund
has entered into a contract to sell the security, could result in possible
liability to the purchaser. Costs associated with transactions in foreign
securities are generally higher than costs associated with transactions in U.S.
securities. Such transactions also involve additional costs for the purchase or
sale of foreign currency.
Certain emerging markets require prior governmental approval of
investments by foreign persons, limit the amount of investment by foreign
persons in a particular company, limit the investment by foreign persons only to
a specific class of securities of a company that may have less advantageous
rights than the classes available for purchase by domiciliaries of the countries
and/or impose additional taxes on foreign investors. Certain emerging markets
may also restrict investment opportunities in issuers in industries deemed
important to national interest.
Certain emerging markets may require governmental approval for the
repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if a deterioration occurs in an
emerging market's balance of payments or for other reasons, a country could
impose temporary restrictions on foreign capital remittances. The Fund could be
adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation of capital, as well as by the application
to the Fund of any restrictions on investments.
In the course of investment in emerging markets, the Fund will be
exposed to the direct or indirect consequences of political, social and economic
changes in one or more emerging markets. While the Fund will manage its assets
in a manner that will seek to minimize the exposure to such risks, there can be
no assurance that adverse political, social or economic changes will not cause
the Fund to suffer a loss of value in respect of the securities in the Fund's
portfolio.
The risk also exists that an emergency situation may arise in one or
more emerging markets as a result of which trading of securities may cease or
may be substantially curtailed and prices for the Fund's securities in such
markets may not be readily available. The Corporation may suspend redemption of
its shares for any period during which an emergency exists, as determined by the
Securities and Exchange Commission (the "SEC"). Accordingly if the Fund believes
that appropriate circumstances exist, it will promptly apply to the SEC for a
determination that an emergency is present. During the period commencing from
the Fund's identification of such condition until the date of the SEC action,
the Fund's securities in the affected markets will be valued at fair value
determined in good faith by or under the direction of the Corporation's Board of
Directors.
Volume and liquidity in most foreign markets are less than in the U.S.
and securities of many foreign companies are less liquid and more volatile than
securities of comparable U.S. companies. Fixed commissions on foreign securities
exchanges are generally higher than negotiated commissions on U.S. exchanges,
although the Fund endeavors to achieve the most favorable net results on its
portfolio transactions. There is generally less government supervision and
regulation of business and industry practices, securities exchanges, brokers,
dealers and listed companies than in the U.S. Mail service between the U.S. and
foreign countries may be slower or less reliable than within the U.S., thus
increasing the risk of delayed settlements of portfolio transactions or loss of
certificates for portfolio securities. In addition, with respect to certain
emerging markets, there is the possibility of expropriation or confiscatory
taxation, political or social instability, or diplomatic developments which
could affect the Fund's investments in those countries. Moreover, individual
emerging market economies may differ favorably or unfavorably from the U.S.
economy in such respects as growth of gross national product, rate of inflation,
capital reinvestment, resource self-sufficiency and balance of payments
position.
Income from securities held by the Fund could be reduced by a
withholding tax on the source or other taxes imposed by the emerging market
countries in which the Fund makes its investments. The Fund's net asset value
may also be affected by changes in the rates or methods of taxation applicable
to the Fund or to entities in which the Fund has invested. The Adviser will
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consider the cost of any taxes in determining whether to acquire any particular
investments, but can provide no assurance that the taxes will not be subject to
change.
Many emerging markets have experienced substantial, and in some periods
extremely high rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have adverse
effects on the economies and securities markets of certain emerging market
countries. In an attempt to control inflation, wage and price controls have been
imposed in certain countries. Of these countries, some, in recent years, have
begun to control inflation through prudent economic policies.
Emerging market governmental issuers are among the largest debtors to
commercial banks, foreign governments, international financial organizations and
other financial institutions. Certain emerging market governmental issuers have
not been able to make payments of interest on or principal of debt obligations
as those payments have come due. Obligations arising from past restructuring
agreements may affect the economic performance and political and social
stability of those issuers.
Governments of many emerging market countries have exercised and
continue to exercise substantial influence over many aspects of the private
sector through the ownership or control of many companies, including some of the
largest in any given country. As a result, government actions in the future
could have a significant effect on economic conditions in emerging markets,
which in turn, may adversely affect companies in the private sector, general
market conditions and prices and yields of certain of the securities in the
Fund's portfolio. Expropriation, confiscatory taxation, nationalization,
political, economic or social instability or other similar developments have
occurred frequently over the history of certain emerging markets and could
adversely affect the Fund's assets should these conditions recur.
The ability of emerging market country governmental issuers to make
timely payments on their obligations is likely to be influenced strongly by the
issuer's balance of payments, including export performance, and its access to
international credits and investments. An emerging market whose exports are
concentrated in a few commodities could be vulnerable to a decline in the
international prices of one or more of those commodities. Increased
protectionism on the part of an emerging market's trading partners could also
adversely affect the country's exports and diminish its trade account surplus,
if any. To the extent that emerging markets receive payment for its exports in
currencies other than dollars or non-emerging market currencies, its ability to
make debt payments denominated in dollars or non-emerging market currencies
could be affected.
Another factor bearing on the ability of emerging market countries to
repay debt obligations is the level of international reserves of the country.
Fluctuations in the level of these reserves affect the amount of foreign
exchange readily available for external debt payments and thus could have a
bearing on the capacity of emerging market countries to make payments on these
debt obligations.
To the extent that an emerging market country cannot generate a trade
surplus, it must depend on continuing loans from foreign governments,
multilateral organizations or private commercial banks, aid payments from
foreign governments and on inflows of foreign investment. The access of emerging
markets to these forms of external funding may not be certain, and a withdrawal
of external funding could adversely affect the capacity of emerging market
country governmental issuers to make payments on their obligations. In addition,
the cost of servicing emerging market debt obligations can be affected by a
change in international interest rates since the majority of these obligations
carry interest rates that are adjusted periodically based upon international
rates.
Investing in Europe. Most Eastern European nations, including Hungary,
Poland, Czechoslovakia, and Romania have had centrally planned, socialist
economies since shortly after World War II. A number of their governments,
including those of Hungary, the Czech Republic, and Poland are currently
implementing or considering reforms directed at political and economic
liberalization, including efforts to foster multi-party political systems,
decentralize economic planning, and move toward free market economies. At
present, no Eastern European country has a developed stock market, but Poland,
Hungary, and the Czech Republic have small securities markets in operation.
Ethnic and civil conflict currently exist within the former Yugoslavia. The
outcome is uncertain.
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Both the European Community (the "EC") and Japan, among others, have
made overtures to establish trading arrangements and assist in the economic
development of the Eastern European nations. A great deal of interest also
surrounds opportunities created by the reunification of East and West Germany.
Following reunification, the Federal Republic of Germany has remained a firm and
reliable member of the EC and numerous other international alliances and
organizations. To reduce inflation caused by the unification of East and West
Germany, Germany has adopted a tight monetary policy which has led to weakened
exports and a reduced domestic demand for goods and services. However, in the
long-term, reunification could prove to be an engine for domestic and
international growth.
The conditions that have given rise to these developments are
changeable, and there is no assurance that reforms will continue or that their
goals will be achieved.
Portugal is a genuinely emerging market which has experienced rapid
growth since the mid-1980s, except for a brief period of stagnation over
1990-91. Portugal's government remains committed to privatization of the
financial system away from one dependent upon the banking system to a more
balanced structure appropriate for the requirements of a modern economy.
Inflation continues to be about three times the EC average.
Economic reforms launched in the 1980s continue to benefit Turkey in
the 1990s. Turkey's economy has grown steadily since the early 1980s, with real
growth in per capita GDP increasing more than 6% annually. Agriculture remains
the most important economic sector, employing approximately 55% of the labor
force, and accounting for nearly 20% of GDP and 20% of exports. Inflation and
interest rates remain high, and a large budget deficit will continue to cause
difficulties in Turkey's substantial transformation to a dynamic free market
economy.
Like many other Western economies, Greece suffered severely from the
global oil price hikes of the 1970s, with annual GDP growth plunging from 8% to
2% in the 1980s, and inflation, unemployment, and budget deficits rising
sharply. The fall of the socialist government in 1989 and the inability of the
conservative opposition to obtain a clear majority have led to business
uncertainty and the continued prospects for flat economic performance. Once
Greece has sorted out its political situation, it will have to face the
challenges posed by the steadily increasing integration of the EC, including the
progressive lowering of trade and investment barriers. Tourism continues as a
major industry, providing a vital offset to a sizable commodity trade deficit.
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 and the lack of a sufficient capital base to expand
business operations. Additionally, former Communist regimes of a number of
Eastern European countries had expropriated a large amount of property, the
claims of 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 leadership or
policies of Eastern European countries, or 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 opportunities.
Investing in Africa. Africa is a continent of roughly 50 countries with
a total population of approximately 840 million people. Literacy rates (the
percentage of people who are over 15 years of age and who can read and write)
are relatively low, ranging from 20% to 60%. The primary industries include
crude oil, natural gas, manganese ore, phosphate, bauxite, copper, iron,
diamond, cotton, coffee, cocoa, timber, tobacco, sugar, tourism and cattle.
Many of the countries are fraught with political instability. There has
been a trend over the past five years toward democratization. Many countries are
moving from a military style, Marxist, or single party government to a
multi-party system. Still, there remain many countries that do not have a stable
political process. Other countries have been enmeshed in civil wars and border
clashes.
Economically, the Northern Rim countries (including Morocco, Egypt and
Algeria) and Nigeria, Zimbabwe and South Africa are the wealthier countries on
the continent. The market capitalization of these countries has been growing
recently as more international companies invest in Africa and as local companies
start to list on the exchanges. However, religious and ethnic strife has been a
significant source of instability.
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On the other end of the economic spectrum are countries, such as
Burkinafaso, Madagascar and Malawi, that are considered to be among the poorest
or least developed in the world. These countries are generally landlocked or
have poor natural resources. The economies of many African countries are heavily
dependent on international oil prices. Of all the African industries, oil has
been the most lucrative, accounting for 40% to 60% of many countries' GDP. A
general decline in oil prices may have an adverse impact on many economies.
Economic Growth. Emerging markets are an increasingly important part of the
world's investment activity. In 1985, emerging markets accounted for only 2.7%
of the world's stock market trading value, compared to 17% in 1994.^1 The chief
rationale for investing in emerging markets is the dramatic growth rates that
these economies continue to enjoy. Over the past decade, the annual percentage
change in the economic growth rates of emerging market countries has been
climbing above that of the mature markets, as shown in the chart below.^2
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE.
LINE CHART TITLE: Economic Growth
CHART DATA: Annual Percent Changes
Mature Developing
1986 2.9 3.93
1987 3.2 4.45
1988 4.5 3.43
1989 3.2 3.4
1990 2.3 3.28
1991 0.8 3.58
1992 1.6 4.15
1993 1.4 4.1
1994 3.1 4
1995 2.3 4.55
This growth translates into an average annual percentage change (as
measured by GDP) of 2.53% for mature economies, compared to 3.89% for developing
countries.^3 Emerging market economies are projected to grow at a 6.3% annual
rate -- more than double the expected growth of established countries in Europe,
Asia and North America (2.4%).^4
High Yield/High Risk Securities. Below investment-grade securities (rated Ba and
lower by Moody's and BB and lower by S&P) or unrated securities of equivalent
quality, in which the Fund may invest carry a high degree of 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 and are
considered speculative. The lower the ratings of such debt securities, the
greater their risks render them like equity securities. The Fund will not
purchase the securities of any issuer if, as a result, more than 35% of the
Fund's total assets would be invested in below investment-grade securities or
unrated securities of equivalent quality. 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.
Economic downturns may disrupt the high yield market and impair the
ability of issuers to repay principal and interest. An increase in interest
rates would likely have an adverse impact on the value of such obligations.
During an economic downturn or period of rising interest rates, highly leveraged
issues may experience financial stress which could 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
the 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
- ---------------------------
1 International Finance Corporation, 1995.
2 International Monetary Fund, 1995. OECD Economic Outlook, June 1995.
3 International Monetary Fund, 1995. OECD Economic Outlook, June 1995.
4 IMF World Economic Outlook, 1995.
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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 or because of a decline in
the value of such securities. A thin trading market may limit the ability of the
Fund to accurately value high yield securities in the Fund's 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 the Fund to retain or dispose of such
security.
Prices for below investment-grade securities may be affected by
legislative and regulatory developments. For example, new federal rules require
savings and loan institutions to gradually reduce their holdings of this type of
security. Also, Congress has from time to time considered legislation which
would restrict or eliminate the corporate tax deduction for interest payments in
these securities and regulate corporate restructurings. Such legislation may
significantly depress the prices of outstanding securities of this type. For
more information regarding tax issues related to high yield securities, see
"TAXES."
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
14
<PAGE>
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.
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 directly 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.
15
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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
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, Greater Europe
Growth Fund (within its 20% limit) and Emerging Markets Growth Fund 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, Greater Europe Growth Fund (subject to its 20%
limit) and Emerging Markets Growth Fund 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),
Greater Europe Growth Fund (subject to its 20% limit) and Emerging Markets
Growth Fund 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.
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The Adviser expects that a significant portion of any of the Emerging
Markets Growth Fund's bond investments will be purchased at a discount to par
value. To the extent developments in emerging markets result in improving credit
fundamentals and rating upgrades for countries in emerging markets, the Adviser
believes that there is the potential for capital appreciation as the improving
fundamentals become reflected in the price of the debt instruments. The Adviser
also believes that a country's sovereign credit rating (with respect to foreign
currency denominated issues) acts as a "ceiling" on the rating of all debt
issuers from that country. Thus, the ratings of private sector companies cannot
be higher than that of their home countries. The Adviser believes, however, that
many companies in emerging market countries, if rated on a stand alone basis
without regard to the rating of the home country, possess fundamentals that
could justify a higher credit rating, particularly if they are major exporters
and receive the bulk of their revenues in U.S. dollars or other hard currencies.
The Adviser seeks to identify such opportunities and benefit from this type of
market inefficiency.
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
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, and Emerging Markets Growth
Fund, each Fund 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.
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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.
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
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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
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.
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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
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
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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.
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
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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
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.
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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
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
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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
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
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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.
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
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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 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
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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.
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) 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;
(2) 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; and
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(3) 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.
In addition, as a matter of fundamental policy, Latin America Fund,
Pacific Opportunities Fund and Greater Europe Growth Fund may not:
(4) 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); and
(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.
In addition, as a matter of fundamental policy, Latin America Fund and
Pacific Opportunities Fund may not:
(6) 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:
(7) 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.
In addition, as a matter of fundamental policy, Emerging Markets Growth
Fund may not:
(8) 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, loan assignments and loan
participations and the purchase of debt securities in
accordance with its investment objective and investment
policies may be deemed to be loans;
(9) 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 Fund, provided
that collateral arrangements with respect to Strategic
Transactions and 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; and
(10) 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
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purposes of this restriction, telephone companies are
considered to be in a separate industry from gas and electric
public utilities, wholly-owned finance companies are
considered to be in the same industry of their parents if
their activities are primarily related to financing the
activities of their parents, and each foreign government, its
agencies or instrumentalities as well as supranational
organizations as a group, are each considered to be a separate
industry.
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) 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;
(e) 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;
(f) 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);
(g) 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);
(h) purchase or sell real estate limited partnership interests;
(i) 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
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has no current intention of making loans of portfolio
securities that would amount to greater than 5% of the Fund's
total assets;
(j) 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
(k) 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,
Pacific Opportunities Fund and Greater Europe Growth Fund may not:
(l) 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.
In addition, as a matter of nonfundamental policy, Latin America Fund
may not:
(m) 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:
(n) 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:
(o) 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:
(p) invest more than 20% of its total assets in debt securities
(including convertible securities); or
(q) 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
investments of the Fund in all such issuers to exceed 10% of
the total assets of the Fund taken at market value.
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In addition, as a matter of nonfundamental policy, Emerging Markets
Growth Fund may not:
(r) invest more than 15% of its net assets in securities which are
illiquid.
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 $2,500 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 ($2,500 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 $2,500 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
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<PAGE>
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.
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 most retirement plan
accounts. However, "AutoBuy" transactions are available for Scudder IRA
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.
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<PAGE>
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
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 $2,500. 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
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<PAGE>
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.
There is no charge to the shareholder for any exchange described above.
However, shares that are exchanged from Emerging Markets Growth Fund may be
subject to the Fund's 2% redemption fee. (See "Special Redemption and Exchange
Information for Emerging Markets Growth 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 Emerging Markets Growth
Fund
In general, shares of the 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 98% of the then current net asset value per
share. 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 discount will not be applied to (a) a redemption of
shares of the Fund outstanding for one year or more, (b) 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, (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 size by reason of shareholder redemptions of (ii) when the shareholder has
failed to provide tax identification information. However, if shares are
purchased for a retirement plan account through a broker, financial institution
or recordkeeper maintaining an omnibus account for the shares, such waiver may
not apply. (Before purchasing shares, please check with your account
representative concerning the availability of the fee waiver.) In addition, this
waiver does not apply to IRA and SEP-IRA accounts. For this purpose and without
regard to the shares actually redeemed, shares will be treated as 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
redeeming shareholder acquires Fund shares through a transfer from another
shareholder, applicability of the discount, if any, will be determined by
reference to the date the shares were originally purchased, and not from the
date of transfer between shareholders.
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<PAGE>
Redemption by Telephone
Shareholders currently receive the right, automatically without having
to elect it, to redeem by telephone up to $100,000 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
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.
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<PAGE>
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.
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
36
<PAGE>
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 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 $2,500 in value, the Corporation will notify the
shareholder that, unless the account balance is brought up to at least $2,500,
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 $2,500 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.
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<PAGE>
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.
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>
Scudder Load Fund with 0.75% No-Load Fund with
YEARS Pure No-Load(TM)Fund 8.50% Load Fund 12b-1 Fee 0.25% 12b-1 Fee
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10 $25,937 $23,733 $24,222 $25,354
- ------------------------------------------------------------------------------------------------------------------
15 41,772 38,222 37,698 40,371
- ------------------------------------------------------------------------------------------------------------------
20 67,275 61,557 58,672 64,282
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Investors are encouraged to review the fee tables on page 2 of 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.
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<PAGE>
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 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 Funds' prospectuses.)
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 $2,500 or $1,000 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.
39
<PAGE>
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.
Scudder High Yield Bond Fund seeks to provide a high level of current
income and, secondarily, capital appreciation through investment
primarily in below investment grade domestic debt securities.
Scudder Income Fund seeks to earn a high level of income consistent
with the prudent investment of capital through a flexible investment
program emphasizing high-grade bonds.
Scudder International Bond Fund seeks to provide income from a
portfolio of high-grade bonds denominated in foreign currencies. As a
secondary objective, the Fund seeks protection and possible enhancement
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 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 grade.
- ---------------------
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.
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<PAGE>
Scudder Medium Term Tax Free Fund seeks to provide a high level of
income free from regular federal income taxes and to limit principal
fluctuation by investing in high-grade municipal securities of
intermediate maturities.
Scudder California Tax Free Fund* seeks to provide income exempt from
both California and regular federal income taxes through the
professional and efficient management of a portfolio consisting of
California state, municipal and local government obligations.
Scudder Massachusetts Limited Term Tax Free Fund* seeks to provide as
high a level of income exempt from Massachusetts personal and regular
federal income tax as is consistent with a high degree of principal
stability.
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 Classic Growth Fund seeks long-term growth of capital with
reduced share price volatility compared to other growth mutual funds.
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 Emerging Markets Growth Fund seeks long-term growth of capital
primarily through equity investment in emerging markets around the
globe.
- ---------------------
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.
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Scudder Global Discovery 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 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 Gold Fund seeks maximum return (principal change and income)
consistent with investing in a portfolio of gold-related equity
securities and gold.
Scudder Greater Europe Growth Fund seeks long-term growth of capital
through investments primarily in the equity securities of European
companies.
Scudder International Fund seeks long-term growth of capital through
investment principally in a diversified portfolio of marketable equity
securities selected primarily to permit participation in non-U.S.
companies and economies with prospects for growth. It also invests in
fixed-income securities of foreign governments and companies, with a
view toward total investment return.
Scudder Large Company Growth Fund seeks to provide long-term growth of
capital through investment primarily in equity securities of large U.S.
growth companies.
Scudder Large Company Value Fund seeks to maximize long-term capital
appreciation through a broad and flexible investment program
emphasizing common stocks.
Scudder Latin America Fund seeks to provide long-term capital
appreciation through investment primarily in the securities of Latin
American issuers.
Scudder Micro Cap Fund seeks long-term growth of capital by investing
primarily in a diversified portfolio of U.S. micro-cap stocks.
Scudder Pacific Opportunities Fund seeks long-term growth of capital
through investment primarily in the equity securities of Pacific Basin
companies, excluding Japan.
Scudder Small Company Value Fund invests for long-term growth of
capital by seeking out undervalued stocks of small U.S. companies.
Scudder 21st Century Growth Fund seeks long-term growth of capital by
investing primarily in securities of emerging growth companies poised
to be leaders in the 21st century.
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.
ASSET ALLOCATION
Scudder Pathway Series: Conservative Portfolio seeks primarily current
income and secondarily long-term growth of capital. In pursuing these
objectives, the Portfolio will, under normal market conditions, invest
substantially in a select mix of Scudder bond mutual funds, but will
have some exposure to Scudder equity mutual funds.
Scudder Pathway Series: Balanced Portfolio seeks a balance of growth
and income by investing in a select mix of Scudder money market, bond
and equity mutual funds.
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<PAGE>
Scudder Pathway Series: Growth Portfolio seeks to provide investors
with long-term growth of capital. In pursuing this objective, the
Portfolio will, under normal market conditions, invest predominantly in
a select mix of Scudder equity mutual funds designed to provide
long-term growth.
Scudder Pathway Series: International Portfolio seeks maximum total
return. Total return consists of any capital appreciation plus dividend
income and interest. To achieve this objective, the Portfolio invests
in a select mix of international and global Scudder Funds.
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.
SPECIAL PLAN ACCOUNTS
(See "Scudder tax-advantaged retirement plans," "Purchases--By Automatic
Investment Plan" and "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.
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 Internal
Revenue Code will be greatly facilitated if it is in such approved form. Under
certain circumstances, the IRS will assume that a plan, adopted in this form,
after special notice to any employees, meets the requirements of Section 401(a)
of the Internal Revenue Code.
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<PAGE>
Scudder 401(k): Cash or Deferred Profit-Sharing Plan
for Corporations and Self-Employed Individuals
Shares of the Fund may be purchased as the investment medium under a
plan in the form of a Scudder 401(k) Plan adopted by a corporation, a
self-employed individual or a group of self-employed individuals (including sole
proprietors and partnerships), or other qualifying organization. This plan has
been approved as a prototype by the IRS.
Scudder IRA: Individual Retirement Account
Shares of the Fund may be purchased as the underlying investment for an
Individual Retirement Account which meets the requirements of Section 408(a) of
the Internal Revenue Code.
A single individual who is not an active participant in an
employer-maintained retirement plan, a simplified employee pension plan, or a
tax-deferred annuity program (a "qualified plan"), and a married individual who
is not an active participant in a qualified plan and whose spouse is also not an
active participant in a qualified plan, are eligible to make tax deductible
contributions of up to $2,000 to an IRA prior to the year such individual
attains age 70 1/2. In addition, certain individuals who are active participants
in qualified plans (or who have spouses who are active participants) are also
eligible to make tax-deductible contributions to an IRA; the annual amount, if
any, of the contribution which such an individual will be eligible to deduct
will be determined by the amount of his, her, or their adjusted gross income for
the year. Whenever the adjusted gross income limitation prohibits an individual
from contributing what would otherwise be the maximum tax-deductible
contribution he or she could make, the individual will be eligible to contribute
the difference to an IRA in the form of nondeductible contributions.
An eligible individual may contribute as much as $2,000 of qualified
income (earned income or, under certain circumstances, alimony) to an IRA each
year (up to $2,000 per individual for married couples if only one spouse has
earned income). All income and capital gains derived from IRA investments are
reinvested and compound tax-deferred until distributed. Such tax-deferred
compounding can lead to substantial retirement savings.
The table below shows how much individuals would accumulate in a fully
tax-deductible IRA by age 65 (before any distributions) if they contribute
$2,000 at the beginning of each year, assuming average annual returns of 5, 10,
and 15%. (At withdrawal, accumulations in this table will be taxable.)
Value of IRA at Age 65
Assuming $2,000 Deductible Annual Contribution
- ---------------------------------------------------------------------
Starting Annual Rate of Return
Age of ----------------------------------------------------
Contributions 5% 10% 15%
- ---------------------------------------------------------------------
25 $253,680 $973,704 $4,091,908
35 139,522 361,887 999,914
45 69,439 126,005 235,620
55 26,414 35,062 46,699
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.)
44
<PAGE>
Value of a Non-IRA Account at
Age 65 Assuming $1,380 Annual Contributions
(post tax, $2,000 pretax) and a 31% Tax Bracket
- ----------------------------------------------------------------------------
Starting Annual Rate of Return
Age of --------------------------------------------------------
Contributions 5% 10% 15%
- ----------------------------------------------------------------------------
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
Scudder 403(b) Plan
Shares of the Fund may also be purchased as the underlying investment
for tax sheltered annuity plans under the provisions of Section 403(b)(7) of the
Internal Revenue Code. In general, employees of tax-exempt organizations
described in Section 501(c)(3) of the Internal Revenue Code (such as hospitals,
churches, religious, scientific, or literary organizations and educational
institutions) or a public school system are eligible to participate in a 403(b)
plan.
Automatic Withdrawal Plan
Non-retirement plan shareholders may establish an Automatic Withdrawal
Plan to receive monthly, quarterly or periodic redemptions from his or her
account for any designated amount of $50 or more. Payments are mailed at the end
of each month. The check amounts may be based on the redemption of a fixed
dollar amount, fixed share amount, percent of account value or declining
balance. The Plan provides for income dividends and capital gains distributions,
if any, to be reinvested in additional shares. Shares are then liquidated as
necessary to provide for withdrawal payments. Since the withdrawals are in
amounts selected by the investor and have no relationship to yield or income,
payments received cannot be considered as yield or income on the investment and
the resulting liquidations may deplete or possibly extinguish the initial
investment. Requests for increases in withdrawal amounts or to change payee must
be submitted in writing, signed exactly as the account is registered and contain
signature guarantee(s) as described under "Transaction information--Redeeming
shares--Signature guarantees" in the Fund's prospectus. Any such requests must
be received by the Fund's transfer agent by the 15th of the month in which such
change is to take effect. An Automatic Withdrawal Plan may be terminated at any
time by the shareholder, the Corporation or its agent on written notice, and
will be terminated when all shares of the Fund under the Plan have been
liquidated or upon receipt by the Corporation of notice of death of the
shareholder.
An Automatic Withdrawal Plan request form can be obtained by calling
1-800-225-5163.
Group or Salary Deduction Plan
An investor may join a Group or Salary Deduction Plan where
satisfactory arrangements have been made with Scudder Investor Services, Inc.
for forwarding regular investments through a single source. The minimum annual
investment is $240 per investor which may be made in monthly, quarterly,
semiannual or annual payments. The minimum monthly deposit per investor is $20.
Except for trustees or custodian fees for certain retirement plans, at present
there is no separate charge for maintaining group or salary deduction plans;
however, the Corporation and its agents reserve the right to establish a
maintenance charge in the future depending on the services required by the
investor.
The Corporation reserves the right, after notice has been given to the
shareholder, to redeem and close a shareholder's account in the event that the
shareholder ceases participating in the group plan prior to investment of $1,000
per individual or in the event of a redemption which occurs prior to the
accumulation of that amount or which reduces the account value to less than
$1,000 and the account value is not increased to $1,000 within a reasonable time
45
<PAGE>
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 (AIP). In this case, the minimum initial investment is
$500.
The Corporation reserves the right, after notice has been given to the
shareholder and custodian, to redeem and close a shareholder's account in the
event that regular investments to the account cease before the $1,000 minimum is
reached.
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.")
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.
46
<PAGE>
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, 1996
One year Life of Fund
-------- ------------
Latin America Fund 28.31%* 16.49%*(1)
Pacific Opportunities Fund 2.76% 8.01%*(1)
Greater Europe Growth Fund 25.11%* 20.21%*(2)
Emerging Markets Growth Fund --%* 7.08%*(3)
(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).
(3) For the period beginning May 8, 1996 (commencement of
operations for Emerging Markets 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, 1995 and 1996 for Latin America Fund for the period
47
<PAGE>
October 10, 1994 through October 31, 1994, for the fiscal
years ended October 31, 1995 and 1996 for Greater Europe
Growth Fund and for the period May 8, 1996 through October 31,
1996 for Emerging Markets Growth Fund. For Latin America Fund,
Pacific Opportunities 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 Emerging Markets Growth 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, 1996
One year Life of Fund
-------- ------------
Latin America Fund 28.31% 81.33%(1)
Pacific Opportunities Fund 2.76% 35.04%(1)
Greater Europe Growth Fund 25.11% 46.11%(2)
Emerging Markets Growth Fund --% 7.08%(3)
(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).
(3) For the period beginning May 8, 1996 (commencement of
operations for Emerging Markets Growth Fund).
48
<PAGE>
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 the Fund's investment performance. Historical
information on the value of the dollar versus foreign currencies may be used
from time to time in advertisements concerning the 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, the Fund will be compared to the
appropriate fund category, that is, by fund objective and portfolio holdings, or
to the appropriate volatility grouping, where volatility is a measure of a
fund's risk. For instance, a Scudder growth fund will be compared to funds in
the growth fund category; a Scudder income fund will be compared to funds in the
income fund category; and so on. Scudder funds (except for money market funds)
may also be compared to funds with similar volatility, as measured statistically
by independent organizations. In addition, the Fund's performance may also be
compared to the performance of broad groups of comparable mutual funds.
Unmanaged indices with which the Fund's performance may be compared include, but
are not limited to, the following:
The Europe/Australia/Far East (EAFE) Index
International Finance Corporation's Latin America Investable
Total Return Index
49
<PAGE>
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
From time to time, in marketing and other Fund literature, Trustees 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 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.
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Internet access
World Wide Web Site -- The address of the Scudder Funds site is
http://funds.scudder.com. The site offers guidance on global investing and
developing strategies to help meet financial goals and provides access to the
Scudder investor relations department via e-mail. The site also enables users to
access or view fund prospectuses and profiles with links between summary
information in Profiles and details in the Prospectus. Users can fill out new
account forms on-line, order free software, and request literature on funds.
The site is designed for interactivity, simplicity and maneuverability.
A section entitled "Planning Resources" provides information on asset
allocation, tuition, and retirement planning to users who fill out interactive
"worksheets." Investors can easily establish a "Personal Page," that presents
price information, updated daily, on funds they're interested in following. The
"Personal Page" also offers easy navigation to other parts of the site. Fund
performance data from both Scudder and Lipper Analytical Services, Inc. are
available on the site. Also offered on the site is a news feature, which
provides timely and topical material on the Scudder Funds.
Scudder has communicated with shareholders and other interested parties
on Prodigy since 1988 and has participated since 1994 in GALT's Networth
"financial marketplace" site on the Internet. The firm made Scudder Funds
information available on America Online in early 1996.
Account Access -- Scudder is among the first mutual fund families to allow
shareholders to manage their fund accounts through the World Wide Web. Scudder
Fund shareholders can view a snapshot of current holdings, review account
activity and move assets between Scudder Fund accounts.
Scudder's personal portfolio capabilities -- known as SEAS (Scudder
Electronic Account Services) -- are accessible only by current Scudder Fund
shareholders who have set up a Personal Page on Scudder's Web site. Using a
secure Web browser, shareholders sign on to their account with their Social
Security number and their SAIL password. As an additional security measure,
users can change their current password or disable access to their portfolio
through the World Wide Web.
An Account Activity option reveals a financial history of transactions
for an account, with trade dates, type and amount of transaction, share price
and number of shares traded. For users who wish to trade shares between Scudder
Funds, the Fund Exchange option provides a step-by-step procedure to exchange
shares among existing fund accounts or to new Scudder Fund accounts.
A Call Me(TM) feature enables users to speak with a Scudder Investor
Relations telephone representative while viewing their account on the Web site.
In order to use the Call Me(TM) feature, an individual must have two phone lines
and enter on the screen the phone number that is not being used to connect to
the Internet. They are connected to the next available Scudder Investor
Relations representative from 8 a.m. to 8 p.m. eastern time.
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.
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Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds investing abroad.
CDA Investment Technologies, Inc., an organization which provides performance
and ranking information through examining the dollar results of hypothetical
mutual fund investments and comparing these results against appropriate market
indices.
Consumer Digest, a monthly business/financial magazine that includes a "Money
Watch" section featuring financial news.
Financial Times, Europe's business newspaper, which features from time to time
articles on international or country-specific funds.
Financial World, a general business/financial magazine that includes a "Market
Watch" department reporting on activities in the mutual fund industry.
Forbes, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.
Fortune, a national business publication that periodically rates the performance
of a variety of mutual funds.
The Frank Russell Company, a West-Coast investment management firm that
periodically evaluates international stock markets and compares foreign equity
market performance to U.S. stock market performance.
Global Investor, a European publication that periodically reviews the
performance of U.S. mutual funds investing internationally.
IBC Money Fund Report, a weekly publication of IBC Financial Data, Inc.,
reporting on the performance of the nation's money market funds, summarizing
money market fund activity and including certain averages as performance
benchmarks, specifically "IBC's Money Fund Average," and "IBC'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 Business 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.
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The No-Load Fund Investor, a monthly newsletter, published by Sheldon Jacobs,
that includes mutual fund performance data and recommendations for the mutual
fund investor.
No-Load Fund*X, a monthly newsletter, published by DAL Investment Company, Inc.,
that reports on mutual fund performance, rates funds and discusses investment
strategies for the mutual fund investor.
Personal Investing News, a monthly news publication that often reports on
investment opportunities and market conditions.
Personal Investor, a monthly investment advisory publication that includes a
"Mutual Funds Outlook" section reporting on mutual fund performance measures,
yields, indices and portfolio holdings.
Smart Money, a national personal finance magazine published monthly by Dow Jones
and Company, Inc. and The Hearst Corporation. Focus is placed on ideas for
investing, spending and saving.
Success, a monthly magazine targeted to the world of entrepreneurs and growing
business, often featuring mutual fund performance data.
United Mutual Fund Selector, a semi-monthly investment newsletter, published by
Babson United Investment Advisors, that includes mutual fund performance data
and reviews of mutual fund portfolios and investment strategies.
USA Today, a leading national daily newspaper.
U.S. News and World Report, a national news 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.
Taking a Global Approach
Many U.S. investors limit their holdings to U.S. securities because
they assume that international or global investing is too risky. While there are
risks connected with investing overseas, it's important to remember that no
investment -- even in blue-chip domestic securities -- is entirely risk free.
Looking outside U.S. borders, an investor today can find opportunities that
mirror domestic investments -- everything from large, stable multinational
companies to start-ups in emerging markets. To determine the level of risk with
which you are comfortable, and the potential for reward you're seeking over the
long term, you need to review the type of investment, the world markets, and
your time horizon.
The U.S. is unusual in that it has a very broad economy that is well
represented in the stock market. However, many countries around the world are
not only undergoing a revolution in how their economies operate, but also in
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terms of the role their stock markets play in financing activities. There is
vibrant change throughout the global economy and all of this represents
potential investment opportunity.
Investing beyond the United States can open this world of opportunity,
due partly to the dramatic shift in the balance of world markets. In 1970, the
United States alone accounted for two-thirds of the value of the world's stock
markets. Now, the situation is reversed -- only 35% of global stock market
capitalization resides here. There are companies in Southeast Asia that are
starting to dominate regional activity; there are companies in Europe that are
expanding outside of their traditional markets and taking advantage of faster
growth in Asia and Latin America; other companies throughout the world are
getting out from under state control and restructuring; developing countries
continue to open their doors to foreign investment.
Stocks in many foreign markets can be attractively priced. The global
stock markets do not move in lock step. When the valuations in one market rise,
there are other markets that are less expensive. There is also volatility within
markets in that some sectors may be more expensive while others are depressed in
valuation. A wider set of opportunities can help make it possible to find the
best values available.
International or global investing offers diversification because the
investment is not limited to a single country or economy. In fact, many experts
agree that investment strategies that include both U.S. and non-U.S. investments
strike the best balance between risk and reward.
Scudder's 30% Solution
The 30 Percent Solution -- A Global Guide for Investors Seeking Better
Performance With Reduced Portfolio Risk is a booklet, created by Scudder, to
convey its vision about the new global investment dynamic. This dynamic is a
result of the profound and ongoing changes in the global economy and the
financial markets. The booklet explains how Scudder believes an equity
investment portfolio with up to 30% in international holdings and 70% in
domestic holdings can improve long-term performance while simultaneously helping
to reduce overall risk.
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,
Scudder Greater Europe Growth Fund, organized in August, 1994 and Emerging
Markets Growth Fund, organized in May 1996. 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
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
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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, 1996, 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
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.
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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 Pathway Series, 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, AARP Managed
Investment Portfolios 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, on behalf of Greater
Europe Growth Fund and on behalf of Emerging Markets Growth Fund and the Adviser
were last approved by the Directors on September 4, 1996. The Agreements
(collectively, the "Agreements") are dated December 8, 1992, October 10, 1994
and May 8, 1996, respectively and will continue in effect until September 30,
1997 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.
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,
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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. 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, 1995 and 1996, these agreements resulted in a
reduction of management fees paid by the Latin America Fund of $229,325,
$216,058 and $0, respectively. During the fiscal years ended October 31, 1994,
1995 and 1996, the Adviser imposed a portion of its management fees amounting to
$7,169,711, $7,166,386 and $7,493,637, respectively, of which $663,863 is unpaid
at October 31, 1996.
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 fiscal years ended October 31, 1994, 1995 and 1996,
the fees imposed amounted to $4,662,015, $4,590,699 and $4,235,329,
respectively, of which $312,093 is unpaid at October 31, 1996.
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. For the fiscal years ended October 31, 1995 and 1996, the Adviser did
not impose all of its management fee amounting to $274,656 and $305,892,
respectively. For the fiscal years ended October 31, and 1995 and 1996, the
Adviser did not impose all of its management fee amounting to $274,656 and
$305,892, respectively.
For these services Emerging Markets Growth Fund pays the Adviser a 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. The Adviser has agreed until February 28, 1998 to maintain the total
annualized expenses of the Fund at no more than 2.00% of the average daily net
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assets of the Fund. For the fiscal year ended October 31, 1996, the Adviser did
not impose all of its management fee amounting to $215,973.
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
58
<PAGE>
transactions absent prior approval, imposes time periods during which personal
transactions may not be made in certain securities, and requires the submission
of duplicate broker confirmations and monthly reporting of securities
transactions. Additional restrictions apply to portfolio managers, traders,
research analysts and others involved in the investment advisory process.
Exceptions to these and other provisions of the Code of Ethics may be granted in
particular circumstances after review by appropriate personnel.
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
Position with
Underwriter,
Name Position Principal Scudder Investor
and Address with Corporation Occupation** Services, Inc.
- ----------- ---------------- ------------ --------------
<S> <C> <C> <C>
Daniel Pierce +@* Chairman of the Chairman of the Board and Vice President,
Board and Director Managing Director of Scudder, Director & Assistant
Stevens & Clark, Inc. Treasurer
Nicholas Bratt #@* President and Managing Director of Scudder, --
Director Stevens & Clark, Inc.
Paul Bancroft III Director Venture Capitalist and --
79 Pine Lane Consultant to Bessemer
Box 6639 Securities Corporation;
Snowmass Village, CO 81615 President, Chief Executive
Officer and Director, Bessemer
Securities Corporation (until
1988)
Thomas J. Devine Director Consultant --
149 East 73rd Street
New York, NY 10021
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, --
390 Riverside Drive, Apt. 4E Inc. (1989 to present); Vice
New York, NY 10025 President of Studies, Council on
Foreign Relations (1986-1989)
Dudley H. Ladd+ Director Managing Director of Scudder, --
Stevens & Clark, Inc.
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 410-B Corporate Vice President,
New York, NY 10128 Becton, Dickinson & Company,
(manufacturer of medical and
scientific products) until 1989
59
<PAGE>
Position with
Underwriter,
Name Position Principal Scudder Investor
and Address with Corporation Occupation** Services, Inc.
- ----------- ---------------- ------------ --------------
Kathryn L. Quirk # Director, Managing Director of Scudder, Vice President
Vice President and Stevens & Clark, Inc.
Assistant Secretary
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.
Joyce E. Cornell 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.
60
<PAGE>
Position with
Underwriter,
Name Position Principal Scudder Investor
and Address with Corporation Occupation** Services, Inc.
- ----------- ---------------- ------------ --------------
Pamela A. McGrath + Vice President and Managing Director of Scudder, --
Treasurer Stevens & Clark, Inc.
Edward J. O'Connell # Vice President and Principal of Scudder, Stevens & Assistant Treasurer
Assistant Treasurer Clark, Inc.
Richard W. Desmond # Assistant Secretary Vice President of Scudder, Vice President
Stevens & Clark, Inc.
</TABLE>
* Messrs. 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.
@ Mr. Padegs is a member 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, 1997, 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, 373,492
shares, or 1.87% of the shares of Pacific Opportunities Fund, 165,506 shares, or
1.78% of the shares of Greater Europe Growth Fund and 386,252 shares, or 4.33%
of the shares of Emerging Markets Growth Fund on such date.
Certain accounts for the which the Adviser acts as investment adviser
owned 1,934,263 shares in the aggregate, or 9.69% of the outstanding shares of
Pacific Opportunities Fund on January 31, 1997. The Adviser may be deemed to be
the beneficial owner of such shares but disclaims any beneficial ownership in
such shares.
Certain accounts for the which the Adviser acts as investment adviser
owned 2,374,425 shares in the aggregate, or 26.63% of the outstanding shares of
Emerging Markets Growth Fund on January 31, 1997. The Adviser may be deemed to
be the beneficial owner of such shares but disclaims any beneficial ownership in
such shares.
As of January 31, 1997, 1,284,397 shares in the aggregate, 6.44% of the
outstanding shares of Pacific Opportunities Fund were held in the name of
Charles Schwab & Co., Inc., 101 Montgomery Street, San Francisco, CA 94104-4122,
who may be deemed to be the beneficial owner of certain of these shares, but
disclaims any beneficial ownership therein.
As of January 31, 1997, 1,368,770 shares in the aggregate, 14.72% of
the outstanding shares of Greater Europe Growth Fund were held in the name of
Charles Schwab & Co., Inc., 101 Montgomery Street, San Francisco, CA 94104-4122,
who may be deemed to be the beneficial owner of certain of these shares, but
disclaims any beneficial ownership therein.
As of January 31, 1997, 791,766 shares in the aggregate, 8.52% of the
outstanding shares of Greater Europe Growth Fund were held in the name of
Fidelity Investments Institutional Operations Company, 100 Magellan Way,
Covington, KY 41015-1987, who may be deemed to be the beneficial owner of
certain of these shares, but disclaims any beneficial ownership therein.
61
<PAGE>
To the best of each Fund's knowledge, as of January 31, 1997 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, 1996, Latin America Fund paid such Directors $318,478, Pacific
Opportunities Fund paid such Directors $67,863, Greater Europe Growth Fund paid
such Directors $67,944, and Emerging Markets Growth Fund paid such Directors
$36,072.
The following Compensation Table provides, in tabular form, the following data.
Column (1) All Directors who receive compensation from the Corporation.
Column (2) Aggregate compensation received by a Director from 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.
<TABLE>
<CAPTION>
Compensation Table
for the year ended December 31, 1996
- -----------------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4) (5)
Aggregate Compensation from
Scudder International Fund, Inc.
(consisting of five funds: Scudder Total
International Fund, Scudder Latin Pension or Compensation From
America Fund, Scudder Pacific Retirement Scudder
Opportunities Fund, Scudder Benefits Accrued Estimated International
Greater Europe Growth Fund and As Part of Fund Annual Fund, Inc. and
Name of Person, Scudder Emerging Markets Growth Complex Benefits Upon Fund Complex Paid
Position Fund) Expenses Retirement to Director
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Paul Bancroft III, $41,486 N/A N/A $143,358
Director (16 funds)
Thomas J. Devine, $44,086 N/A N/A $156,058
Director (18 funds)
Keith R. Fox $43,486 N/A N/A $87,508
Director (10 funds)
William H. Gleysteen, $44,086 $4,133* $3,000 $130,336
Jr., Director (13 funds)
62
<PAGE>
- -----------------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4) (5)
Aggregate Compensation from
Scudder International Fund, Inc.
(consisting of five funds: Scudder Total
International Fund, Scudder Latin Pension or Compensation From
America Fund, Scudder Pacific Retirement Scudder
Opportunities Fund, Scudder Benefits Accrued Estimated International
Greater Europe Growth Fund and As Part of Fund Annual Fund, Inc. and
Name of Person, Scudder Emerging Markets Growth Complex Benefits Upon Fund Complex Paid
Position Fund) Expenses Retirement to Director
- -----------------------------------------------------------------------------------------------------------------------
William H. Luers, $43,486 N/A N/A $100,486
Director (11 funds)
Dr. Wilson Nolen, $45,086 N/A N/A $165,608
Director (17 funds)
Dr. Gordon Shillinglaw, $45,086 N/A N/A $119,918
Director (19 funds)
Robert G. Stone, Jr., $0 $6,788* $6,000 $12,272
Honorary Director (2 funds)
</TABLE>
* Retirement benefits accrued and proposed to be paid as additional
compensation for serving on the Board of the Japan Fund, Inc.
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, 1997 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
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 4, 1996.
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.
63
<PAGE>
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 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.
64
<PAGE>
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
$2,000 per individual for married couples if only one spouse has earned income)
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
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.
65
<PAGE>
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.
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.
66
<PAGE>
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
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.
67
<PAGE>
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.
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 fiscal years ended October 31, 1994, 1995 and 1996 Latin
America Fund paid brokerage commissions of $1,959,556, $1,422,389 and $789,007,
respectively. For the fiscal year ended October 31, 1996, $472,379 (60%) of the
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<PAGE>
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 $140,363,059 (57%) 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 years ended October 31, 1994, 1995 and 1996 Pacific
Opportunities Fund paid brokerage commissions of $2,485,807, $3,060,256 and
$3,845,527, respectively. For the fiscal year ended October 31, 1996, $1,988,294
(52%) 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 $313,196,237 (41%) 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 years ended October 31, 1995 and 1996, Greater Europe
Growth Fund paid brokerage commissions of $301,682 and $297,035, respectively.
For the fiscal year ended October 31, 1996, $222,820 (75%) 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
$71,301,634 (66%) 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, 1996, Emerging Markets Growth
Fund paid brokerage commissions of $468,942. For the fiscal year ended October
31, 1996, $464,443 (99%) 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 $68,224,225 (86%) 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 fiscal
years ended October 31, 1994, 1995 and 1996 was 22.4%, 39.5% and 22.4%,
respectively. For the fiscal years ended October 31, 1994, 1995 and 1996,
Pacific Opportunities Fund had a portfolio turnover rate of 38.5%, 64.0% and
95.4%, respectively. For the fiscal years ended October 31, 1995 and 1996,
Greater Europe Growth Fund had a portfolio turnover rate of 27.9% and 39.0%,
respectively. For the fiscal year ended October 31, 1996, Emerging Markets
Growth Fund had a portfolio turnover rate of 19.5%. 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.
69
<PAGE>
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.
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
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<PAGE>
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.
The CUSIP number of Emerging Markets Growth Fund is 811165 50 5.
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, 1996, Latin America Fund incurred charges of $1,514,806 of which $122,144 is
unpaid at October 31, 1996. For the fiscal year ended October 31, 1996, Pacific
Opportunities Fund incurred charges of $843,600 of which $63,272 is unpaid at
October 31, 1996. For the fiscal year ended October 31, 1996, Greater Europe
Growth Fund incurred charges of $177,772 of which $18,156 was unpaid at October
31, 1996. For the fiscal year ended October 31, 1996, Emerging Markets Growth
Fund incurred charges of $65,697 and the amount not imposed amounted to $58,166,
of which $7,531 is unpaid at October 31, 1996.
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 years
ended October 31, 1995 and 1996, Latin America Fund incurred fees of $0 and
$5,093, respectively, Pacific Opportunities Fund incurred fees of $26,282 and
$38,626, respectively, and Greater Europe Growth Fund incurred fees of $931 and
$9,227, respectively, and for the fiscal year ended October 31, 1996, Emerging
Markets Growth Fund incurred a fee of $1,553.
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
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. For the fiscal
year ended October 31, 1996, Latin America Fund incurred a fee of $318,478,
Pacific Opportunities Fund incurred a fee of $233,855, Greater Europe Growth
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<PAGE>
Fund incurred a fee of $66,529 and Emerging Markets Growth Fund incurred a fee
of $34,122.
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, 1996, 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, 1996, 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, 1996, and are hereby deemed to be part of this Statement
of Additional Information.
Emerging Markets Growth Fund
The financial statements, including the Investment Portfolio of
Emerging Markets 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, 1996, and are hereby deemed to be
part of this Statement of Additional Information.
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<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>
Scudder
Latin America
Fund
Annual Report
October 31, 1996
Pure No-Load(TM) Funds
For investors seeking long-term growth of capital from a portfolio investing
primarily in the securities of Latin American issuers.
A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
SCUDDER (logo)
<PAGE>
Table of Contents
2 In Brief
3 Letter from the Fund's Chairman
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
10 Investment Portfolio
13 Financial Statements
16 Financial Highlights
17 Notes to Financial Statements
21 Report of Independent Accountants
22 Tax Information
25 Officers and Directors
26 Investment Products and Services
27 How to Contact Scudder
In Brief
o Scudder Latin America Fund provided a strong 28.31% total return for the
period, compared with a 19.26% return for in the unmanaged International Finance
Corporation's Latin America Investable Total Return Index.
o Economic recovery and falling inflation rates throughout the region provided a
favorable investment environment for Scudder Latin America Fund.
o The Fund's relatively heavy weightings in Argentina and Brazil, two of the
best performing stock markets in Latin America, contributed significantly to the
Fund's superior performance.
2 - Scudder Latin America Fund
<PAGE>
Letter From the Fund's Chairman
Dear Shareholders,
We hope you enjoy our newly redesigned shareholder report. The new format
is designed to enhance the attractiveness and readability of the reports. Let us
know what you think.
In this era of electronic information we have also taken a look at our
abbreviated quarterly reports, which you generally receive during the month
after the end of your fund's first and third fiscal quarters. Going forward,
these printed reports will be discontinued, and portfolio information will be
made available on a more timely basis -- each month, in most cases -- through
Scudder's Web site, Scudder's automated information line (SAIL), and by calling
Investor Relations.
As detailed in the portfolio management discussion that follows, Scudder
Latin America Fund provided a solid return of 28.31% for the 12-month period
ended October 31, 1996, against a favorable backdrop of economic recovery and
falling inflation rates throughout the region. With economic growth in Latin
America expected to rise and the inflation rate projected to fall, we continue
to believe in Latin America's long-term investment potential.
Finally, we'd like to take this opportunity to highlight some additions
made this fall to the Scudder Family of Funds. Scudder Classic Growth Fund seeks
long-term capital appreciation with a higher degree of principal stability than
the average growth fund. Scudder 21st Century Growth Fund takes a more
aggressive approach, focusing primarily on emerging companies with the potential
to benefit from the rapidly changing industrial and economic landscape. Most
recently, we introduced the Scudder Pathway Series, a collection of four
portfolios -- Conservative, Growth, Balanced, and International -- each of which
includes five or more Scudder Funds and which together are designed to meet a
range of investor needs. For more information on these and other Scudder Fund
products and services, please turn to page 26.
Thank you for your continued investment in Scudder Latin America Fund.
Please do not hesitate to call Investor Relations at 1-800-225-2470 with any
questions regarding your account.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
Chairman,
Scudder Latin America Fund
3 - Scudder Latin America Fund
<PAGE>
PERFORMANCE UPDATE as of October 31, 1996
- ----------------------------------------------------------------
FUND INDEX COMPARISONS
- ----------------------------------------------------------------
Total Return
Period Growth --------------
Ended of Average
10/31/96 $10,000 Cumulative Annual
- --------------------------------------
SCUDDER LATIN AMERICA FUND
- --------------------------------------
1 Year $12,831 28.31% 28.31%
Life of
Fund* $18,133 81.33% 16.49%
- --------------------------------------
IFC LATIN AMERICA INVESTABLE
TOTAL RETURN INDEX
- --------------------------------------
1 Year $11,926 19.26% 19.26%
Life of
Fund* $14,104 41.04% 9.39%
- --------------------------------------
*The Fund commenced operations on December 8, 1992.
Index comparisons begin December 31, 1992.
- -----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------
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
4/96 $16,623
10/96 $17,407
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
4/96 $13,816
10/96 $14,104
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 1996
----------------------------------------------------------
NET ASSET VALUE... $18.41 $24.44 $16.22 $20.63
INCOME DIVIDENDS.. $ -- $ .06 $ -- $ .15
CAPITAL GAINS
DISTRIBUTIONS..... $ -- $ .06 $ .73 $ --
FUND TOTAL
RETURN (%)........ 53.42** 33.43 -30.96 28.31
INDEX TOTAL
RETURN (%)........ 28.72 48.17 -37.44 19.26
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 total returns
for the life of Fund period would have been lower.
**Total return does not reflect the effect of the applicable redemption fees.
4 - Scudder Latin America Fund
<PAGE>
PORTFOLIO SUMMARY as of October 31, 1996
- ---------------------------------------------------------------------------
GEOGRAPHICAL
(Excludes 5% Cash Equivalents)
- ---------------------------------------------------------------------------
Brazil 48%
Mexico 25%
Argentina 21%
Peru 2%
Chile 2%
Colombia 2%
- --------------------------------------
100%
- --------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
The Fund's strong weightings in Argentina, Mexico,
and Brazil contributed greatly to performance.
- --------------------------------------------------------------------------
SECTORS
(Excludes 5% Cash Equivalents)
- --------------------------------------------------------------------------
Consumer Staples 24%
Energy 17%
Communications 16%
Utilities 11%
Manufacturing 10%
Financial 10%
Consumer Discretionary 5%
Other 7%
- ---------------------------------------------
100%
- ---------------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
The burgeoning middle class in many Latin American
countries has translated into strong prospects for
many companies in the consumer staples sector.
Currently, this sector represents the largest
Fund weighting.
- --------------------------------------------------------------------------
10 LARGEST EQUITY HOLDINGS
(44% OF PORTFOLIO)
- --------------------------------------------------------------------------
1. PETROLEO BRASILEIRO S.A.
Petroleum company
2. PEREZ COMPANC S.A.
Industrial conglomerate in Argentina
3. COMPANHIA ENERGETICA DE MINSA GERAIS
Electric power utility in Brazil
4. COMPANHIA CERVEJARIA BRAHMA S/A
Leading beer producer and distributor in Brazil
5. TELEFONOS DE MEXICO S.A. DE C.V.
Telecommunication services
6. BANK ITAU S.A.
Bank in Brazil
7. YPF S.A.
Petroleum company in Argentina
8. TELECOMUNICACOES DE SAO PAULO S.A.
Telecommunication services in Brazil
9. CENTRAIS ELETRICAS BRASILEIRAS S/A
Electric utility
10.KIMBERLY CLARK DE MEXICO S.A. DE C.V.
Consumer paper producers and newsprint
Nine companies remain in the top 10 holdings
since our last report, a reflection of our
commitment to quality companies with strong
long-term profit potential.
- -----------------------------------------------------------------------------
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 - Scudder Latin America Fund
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
Scudder Latin America Fund enjoyed a solid recovery from the depressed
valuations prevailing at the end of last year. At the end of its October 31,
1996 fiscal year, the Fund's net asset value had increased to $20.63 per share,
a 28.31% total investment return for the period. This compares favorably with
the 19.26% increase in the unmanaged International Finance Corporation's Latin
America Investable Total Return Index.
Favorable Economic Backdrop
Economic recovery and falling inflation rates throughout the region provided a
favorable backdrop for Scudder Latin America Fund during the period. The
InterAmerica Development Bank estimates a 3% rate of economic growth this year
for Latin America versus 1995's modest 0.7% rate of expansion. The median
inflation rate is projected to fall from 13% to 11%.
The portfolio management team's estimates of economic growth for each of the
major Latin American countries are consistent with the InterAmerica Development
Bank's projections. According to these estimates, Venezuela should be the only
important country to suffer a decline in real economic activity. That country's
laggard performance in the face of growth elsewhere was probably influential in
persuading the Caldera government to abandon its populist policies in favor of a
more orthodox stabilization program.
======================================================
Economic Growth Forecasts (GDP)
------------------------------------------------------
Country 1995 1996* 1997*
------------------------------------------------------
Argentina (4.4%) 2-3% 3-4%
Brazil 4.2 3-4 4-5
Chile 8.2 6-7 6-7
Colombia 5.3 2-3 3-4
Mexico (7.2) 3-4 4-5
Peru 6.7 3-4 4-5
Venezuela 2.2 (2-3) 2-3
======================================================
* Estimated. Estimates may prove inaccurate and, even if accurate, may not
correlate with market activity. Source: Scudder Latin America Group.
Most Markets Rally
Latin American stock markets no longer move in lockstep to the beat of such
regional themes as privatization, free trade, and capital markets reform. Since
the 1994 Mexican peso devaluation, investors have focused on such
country-specific factors as exchange rates and current account deficits, which
can have a material impact on the performance of an individual market but not
necessarily on Latin American markets as a group. The variability of investment
returns across the region is shown in the table on the following page.
6 - Scudder Latin America Fund
<PAGE>
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART TITLE:
Investment Returns in Latin American
Stock Markets
CHART PERIOD:
for the 12 months ended October 31, 1996
CHART DATA:
Argentina +34.5%
Brazil +26.8%
Chile -1.9%
Colombia +14.2%
Mexico +22.1%
Peru +14.5%
Venezuela +29.8%
IFC Latin America +19.3%
Investable Index
Source: IFC Emerging Markets Database. Past performance is no indication
of future results.
The two best performing stock markets during the Fund's fiscal year were
Argentina and Venezuela. In both cases, investment returns represented a
recovery from previously oversold markets. This is particularly true in the case
of Venezuela, which has now reactivated its privatization program, abandoned
currency and exchange rate controls, and turned towards free markets. Windfall
revenues from petroleum sales have facilitated the government's reform program.
Argentina continues to confound investors with its determination to stay the
course with the peso-dollar convertibility program. The peso has been maintained
at a parity with the dollar despite the shocks of Finance Minister Cavallo's
departure from government and a high unemployment rate. Peru's market has been
pressured by an easing of the mining boom and the Fujimora government's
engineering of an economic slowdown in order to deal with a rapid increase in
the current account deficit.
Chile was the only significant country in Latin America whose stock market
actually declined during the Fund's fiscal year. It may seem paradoxical that
the best managed economy should be the only one to miss the year's rally.
Investment valuations in Chile have been comparatively rich for some time,
however, and stocks could not compete against the distressed valuations
prevailing elsewhere in the region.
Both the Brazilian and Mexican stock markets outperformed the IFC Latin America
Index. In these instances, returns were mainly attributable to the performance
of a small number of important industry groups, such as the electric utility and
telecommunications stocks in Brazil and export companies and consumer
consumption plays in Mexico.
The following table shows the Fund's country allocations at the end of its
fiscal year. For comparison purposes, we also show the country weightings for
the unmanaged IFC Latin America Investable Index.
7 - Scudder Latin America Fund
<PAGE>
Fund IFC Index
Country Weighting* Weighting
------- ---------- ---------
Argentina 21% 11%
Brazil 48% 36%
Chile 2% 18%
Colombia 2% 3%
Mexico 25% 27%
Peru 2% 3%
Venezuela 0% 2%
* Excludes Fund's assets in cash equivalents.
The portfolio's overweight position in Argentina and underweight exposure to
Chilean securities contributed to outperformance versus the IFC benchmark index.
Country allocations are declining in importance with respect to explaining
investment performance, due to the diversification of many leading companies
across geographical boundaries. The development of regional trading arrangements
such as Mercosur and NAFTA has hastened the diversification process.
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. Tara C. Kenney, Portfolio Manager, assists
with the Fund's research and investment strategy. Tara, 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. Paul joined Scudder
in 1994 and has over 10 years of investment experience.
8 - Scudder Latin America Fund
<PAGE>
An Eye Towards the Future
The portfolio is constructed and managed with an eye towards company-specific
valuation considerations, although industry themes have played a prominent role
in portfolio allocations. The Fund's important investments in the
telecommunications and beverage industries are a case in point.
A common characteristic of most of the companies in the portfolio is a low level
of debt. This is important because cash flow is not encumbered with an
obligation to take care of the lender and can be spent on new plant and
equipment to benefit the owners of the business. The successful attack on high
rates of inflation throughout Latin America is beginning to tip the balance in
favor of savings and investment, and we believe companies with comparatively low
balance sheet leverage will be the major beneficiaries.
Sincerely,
Your Portfolio Management Team
/s/Edmund B. Games, Jr. /s/Tara C. Kenney
Edmund B. Games, Jr. Tara C. Kenney
/s/Paul H. Rogers
Paul H. Rogers
9 - Scudder Latin America Fund
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO AS OF OCTOBER 31, 1996
<CAPTION>
PRINCIPAL MARKET
AMOUNT(U.S.$) VALUE($)
- ------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS 4.9%
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated
10/31/96 at 5.52%, to be repurchased at $30,583,689 on 11/1/96,
collateralized by a $26,434,000 U.S. Treasury Note, 8.75%,
11/15/08 (Cost $30,579,000) .......................................... 30,579,000 30,579,000
SHARES
- ------------------------------------------------------------------------------------------------------
EQUITY SECURITIES 95.1%
- ------------------------------------------------------------------------------------------------------
ARGENTINA 19.9%
Astra CAPSA (Petroleum company) ........................................ 6,783,630 12,212,367
BI S.A. "A" (Venture capital company)(b) ............................... 3,000,000 3,267,900
Bagley y Cia Ltd. S.A. "B" (Producer of cookies and biscuits) .......... 2,888,651 6,789,348
Buenos Aires Embotelladora S.A. "B" (ADR) (Soft drink bottler
and distributor) ..................................................... 112,000 630,000
Central Costanera "B" (Electric utility) ............................... 684,545 2,149,794
Nobleza Piccardo (Tobacco company) ..................................... 1,547,276 5,416,278
Perez Companc S.A. "B" (Industrial conglomerate) ....................... 4,602,440 29,229,878
Quilmes Industrial S.A. (Leading beer distributor) ..................... 827,000 8,425,063
Quilmes Industrial S.A. (ADR) .......................................... 518,500 5,444,250
Telecom Argentina S.A. "B" (Telecommunication services) ................ 1,701,099 6,422,612
Telecom Argentina S.A. (ADR) ........................................... 115,000 4,341,250
Telefonica de Argentina (ADR) (Telecommunication services) ............. 205,000 4,766,250
Telefonica de Argentina S.A. "B" ....................................... 2,742,068 6,389,977
Transportadora de Gas del Sur "B" (Natural gas utility) ................ 40,000 465,000
YPF S.A. "D" (ADR) (Petroleum company) ................................. 1,200,000 27,300,000
-----------
123,249,967
-----------
BRAZIL 46.7%
Aracruz Celulose S.A. (ADR) (Producer of eucalyptus kraft pulp) ........ 560,800 4,486,400
Banco Bradesco S.A. (pfd.) (Commercial bank) ........................... 2,291,277,111 19,536,293
Banco Itau S.A. (pfd.) (Bank) .......................................... 63,079,600 27,321,805
COPENE Petroquimica do Nordeste S.A. "A" (pfd.) (Leading
producer of petrochemicals) .......................................... 3,600,000 1,378,820
Centrais Eletricas Brasileiras S/A "B" (pfd.) (Electric utility) ....... 72,000,000 23,336,578
Companhia Cervejaria Brahma (pfd.) (Leading beer producer
and distributor) ..................................................... 45,526,569 28,138,380
Companhia Energetica de Minas Gerais (pfd.) (Electric power utility) ... 900,875,000 28,672,973
Companhia Paranaense de Energia (voting) (Electric utility) ............ 455,200,400 4,696,442
Companhia Paulista de Forca e Luz* (Electric power utility) ............ 46,310,000 4,260,033
Companhia Petroquimica do Sul S.A. (voting) (Chemical producer) ........ 53,808,000 2,854,327
Companhia Souza Cruz Industria e Comercio (voting)
(Holding company: cigarettes and tobacco, fiber cellulose) ........... 321,500 1,933,882
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 - Scudder Latin America Fund
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE($)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Companhia Suzano de Papel e Celulose S.A. (pfd.) (Paper products) .... 1,774,840 4,577,892
Companhia Vale do Rio Doce (pfd.) (Diverse mining and
industrial complex) ................................................ 961,800 19,752,755
Empresa Brasileira de Compressores S.A. (pfd.)
(Manufacturer of electrical equipment)(b) .......................... 3,002,000 1,636,286
Industrias Klabin de Papel e Celulose S/A (pfd.) (Producer of
papers and paper products, newsprint, and cardboard boxes) ......... 4,581,000 4,548,005
Investimentos Itau S/A (Diversified holding company, involved
in finance, chemicals, electronics, wood products) ................. 4,359,000 3,436,626
Lojas Americanas S.A. (pfd.) (Discount department store chain) ....... 90,667,360 1,425,227
Lojas Americanas S.A. (voting) (Discount department store chain) ..... 232,308,380 3,277,506
Petroleo Brasileiro S.A .(pfd.) (Petroleum company) .................. 237,000,000 30,680,358
S/A White Martins (voting) (Chemical company) ........................ 9,463,146,120 14,645,126
Sadia Concordia S/A (pfd.) (Processed poultry, pork and beef) ........ 9,164,000 6,154,526
Telecomunicaoees Brasileiras S.A. (ADR)
(Telecommunication services) ....................................... 115,000 8,567,500
Telecomunicaoees de Sao Paulo S.A. (pfd.) (Telecommunication
services) .......................................................... 140,410,000 25,693,089
Telecomunicaoees do Parana S/A (pfd.) (Telecommunication services) ... 9,274,986 4,233,958
Usinas Siderurgicas de Minas Gerais S/A (pfd.) (Non-coated flat
products and electrolytic galvanized products) ..................... 13,300,000,000 13,980,923
------------
289,225,710
------------
CHILE 1.5%
Compania de Telefonos de Chile, S.A. (ADR)
(Telecommunication services) ....................................... 50,000 4,931,250
Enersis S.A. (ADR) (Generator and distributor of electricity
in Chile and Argentina) ............................................ 100,000 2,937,500
Maderas y Sinteticos S.A. (ADR) (Manufacturer of particle
board and veneers) ................................................. 100,500 1,432,125
------------
9,300,875
------------
COLOMBIA 1.5%
Bavaria S/A (Producer and distributor of beer and other malt
beverages, mineral water and soft drinks) .......................... 876,761 3,584,359
Colombiana de Tabaco S.A. (Tobacco producer) ......................... 821,871 2,473,337
Compania Nacional de Chocolates* (Chocolate producer) ................ 294,397 2,472,440
Industrias Alimenticias Noel (Soap and home cleaning products) ....... 180,000 512,897
------------
9,043,033
------------
MEXICO 23.4%
Apasco, S.A. de C.V (Cement producer) ................................ 1,100,000 6,712,329
Fomento Economico Mexicano, S.A. de C.V. "B" (Producer of
beer and soft drinks) .............................................. 2,952,000 8,969,963
Grupo CIFRA S.A. de C.V. "C"* (Retailer) ............................. 10,202,000 13,086,002
Grupo Continental, S.A. "B" (Soft drink bottler) ..................... 2,902,700 10,844,458
Grupo Embotellador de Mexico SA de C.V. "B"* (Soft drink bottler) .... 6,544,500 2,445,019
Grupo Embotellador de Mexico SA de C.V.* (GDR) ....................... 440,950 3,252,006
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder Latin America Fund
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE($)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Grupo Embotelladora Unidas SA de CV "B" (Soft drink producer) (b) .......... 2,009,134 3,002,442
Grupo Financiero Inbursa de C.V. "B" (Banking and insurance services) ...... 1,147,000 3,713,823
Grupo Herdez S.A. de C.V. "A" (Producer of packaged foods) ................. 7,052,000 2,142,824
Grupo Industrial Bimbo, S.A. de C.V. "A" (Producer of bread and
other baked goods) ....................................................... 1,309,000 6,487,945
Grupo Modelo SA "C" (Leading brewery) ...................................... 1,450,000 7,520,859
Kimberly Clark de Mexico S.A. de C.V. "A"
(Consumer paper products and newsprint) .................................. 1,200,000 23,163,138
Organizacion Soriana S.A. "A" de CV (Retailer) ............................. 6,812,022 12,130,998
Panamerican Beverages Inc. "A" (ADR) (Soft drink bottler) .................. 320,800 13,994,900
Telefonos de Mexico S.A. de C.V. "L" (ADR)
(Telecommunication services) ............................................. 900,000 27,450,000
-----------
144,916,706
-----------
PERU 1.7%
Cementos Lima S.A. "T" (Cement producer) ................................... 2,006,933 2,766,576
Cerveceria Backus & Johnston S.A. "T" (Brewery) ............................ 3,456,441 3,479,863
Embotelladora Latinoamericana SA* (Bottler) ................................ 2,169,157 1,763,884
Industrias Pacocha S.A. "T" (Food producer) ................................ 3,466,736 2,268,648
-----------
10,278,971
-----------
VENEZUELA 0.4%
Mavesa SA (ADR) (Food processor) ........................................... 363,750 2,318,906
- ------------------------------------------------------------------------------------------------------
TOTAL EQUITY SECURITIES (Cost $509,488,096) 588,334,168
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0% (Cost $540,067,096)(a) 618,913,168
- ------------------------------------------------------------------------------------------------------
- ----------
<FN>
* Non-income producing security.
(a) The cost for federal income tax purposes was $548,150,657. At October 31,
1996, net unrealized appreciation for all securities based on tax cost was
$70,762,511. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost of
$121,250,145 and aggregate gross unrealized depreciation for all securities
in which there was an excess of tax cost over market value of $50,487,634.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors. The cost of these securities at October 31, 1996, aggregated
$12,101,728. These securities may also have certain restrictions as to
resale. See Note A of the Notes to Financial Statements.
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.
12 - Scudder Latin America Fund
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
AS OF OCTOBER 31, 1996
<CAPTION>
ASSETS
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Investments, at market (identified cost $540,067,096) (Note A) ............. $618,913,168
Cash ....................................................................... 100,836
Foreign currency holdings, at market (identified cost $984,712) (Note A) ... 985,062
Receivable for investments sold ............................................ 3,281,587
Receivable for Fund shares sold ............................................ 135,550
Dividends and interest receivable .......................................... 1,282,087
Deferred organization expenses (Note A) .................................... 17,637
Other assets ............................................................... 11,079
------------
Total assets ............................................................... 624,727,006
LIABILITIES
- ------------------------------------------------------------------------------------------------------------
Payable for investments purchased .......................................... $ 308,206
Payable for Fund shares redeemed ........................................... 979,190
Accrued management fee (Note C) ............................................ 663,863
Other accrued expenses (Note C) ............................................ 694,741
Other payables ............................................................. 166,316
------------
Total liabilities .......................................................... 2,812,316
------------------------------------------------------------------------------------------
Net assets, at market value $621,914,690
------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ........................................ 5,240,925
Unrealized appreciation (depreciation) on:
Investments ............................................................ 78,846,072
Foreign currency related transactions .................................. (23,559)
Accumulated net realized loss .............................................. (73,485,196)
Paid-in capital ............................................................ 611,336,448
------------------------------------------------------------------------------------------
Net assets, at market value $621,914,690
------------------------------------------------------------------------------------------
NET ASSET VALUE
- ------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share ($621,914,690 /
30,148,974 shares of capital stock outstanding, $.01 par value, ------------
100,000,000 shares authorized) ......................................... $20.63
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - Scudder Latin America Fund
<PAGE>
STATEMENT OF OPERATIONS
<TABLE>
YEAR ENDED OCTOBER 31, 1996
<CAPTION>
INVESTMENT INCOME
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Dividends (net of foreign taxes withheld of $1,819,576) .................... $ 17,232,469
Interest ................................................................... 2,236,288
------------
19,468,757
------------
Expenses:
Management fee (Note C) .................................................... 7,493,637
Services to shareholders (Note C) .......................................... 1,853,610
Custodian and accounting fees (Note C) ..................................... 1,701,588
Directors' fees and expenses (Note C) ...................................... 71,483
Reports to shareholders .................................................... 309,071
Auditing ................................................................... 86,214
Legal ...................................................................... 30,345
Registration fees .......................................................... 15,786
Amortization of organization expenses (Note A) ............................. 16,137
Other ...................................................................... 72,525
------------
11,650,396
------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 7,818,361
------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
- ------------------------------------------------------------------------------------------------------------
Net realized loss from:
Investments ................................................................ (5,823,960)
Foreign currency related transactions ...................................... (393,800)
------------
(6,217,760)
------------
Net unrealized appreciation (depreciation) during the period on:
Investments ................................................................ 136,973,831
Foreign currency related transactions ...................................... (21,461)
------------
136,952,370
------------
Net gain on investment transactions ........................................ 130,734,610
------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $138,552,971
------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 - Scudder Latin America Fund
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
YEARS ENDED OCTOBER 31,
INCREASE (DECREASE) IN NET ASSETS 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ......................................... $ 7,818,361 $ 3,061,657
Net realized loss from investment transactions ................ (6,217,760) (68,151,320)
Net unrealized appreciation (depreciation) on investment
transactions during the period .............................. 136,952,370 (193,283,640)
------------- -------------
Net increase (decrease) in net assets resulting
from operations ............................................. 138,552,971 (258,373,303)
------------- -------------
Distributions to shareholders from:
Net investment income ....................................... (4,560,568) --
------------- -------------
Net realized gains from investment transactions ............. -- (24,333,536)
------------- -------------
Fund share transactions:
Proceeds from shares sold ..................................... 119,002,707 199,888,429
Net asset value of shares issued to shareholders in
reinvestment of distributions ............................... 4,261,866 23,383,847
Cost of shares redeemed ....................................... (154,821,892) (232,138,679)
Redemption fees (Note A) ...................................... 226,801 1,459,400
------------- -------------
Net decrease in net assets from Fund share transactions ....... (31,330,518) (7,407,003)
------------- -------------
Increase (decrease) in net assets ............................. 102,661,885 (290,113,842)
Net assets at beginning of period ............................. 519,252,805 809,366,647
Net assets at end of period (including undistributed net
investment income of $5,240,925 and $2,376,933, ------------- -------------
respectively) ............................................... $ 621,914,690 $ 519,252,805
------------- -------------
OTHER INFORMATION
- ------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period ..................... 32,011,664 33,122,382
------------- -------------
Shares sold ................................................... 6,222,218 11,349,018
Shares issued to shareholders in reinvestment of distributions 250,550 1,285,533
Shares redeemed ............................................... (8,335,458) (13,745,269)
------------- -------------
Net decrease in Fund shares ................................... (1,862,690) (1,110,718)
------------- -------------
Shares outstanding at end of period ........................... 30,148,974 32,011,664
------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder Latin America Fund
<PAGE>
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.
<CAPTION>
FOR THE PERIOD
DECEMBER 8, 1992
(COMMENCEMENT
YEARS ENDED OCTOBER 31, OF OPERATIONS) TO
OCTOBER 31,
1996(a) 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
-----------------------------------------------------------
Net asset value, beginning of period ............ $16.22 $ 24.44 $18.41 $12.00
-----------------------------------------------------------
Income from investment operations:
Net investment income (loss) .................... .25 .09 (.03) .03
Net realized and unrealized gain (loss) on
investment transactions ....................... 4.30 (7.62) 6.10 6.36
-----------------------------------------------------------
Total from investment operations ................ 4.55 (7.53) 6.07 6.39
-----------------------------------------------------------
Less distributions:
From net investment income ...................... (.15) -- -- --
In excess of net investment income .............. -- -- (.06) --
From net realized gains on investment transactions -- (.73) (.06) --
-----------------------------------------------------------
Total distributions ............................. (.15) (.73) (.12) --
-----------------------------------------------------------
Redemption fees (Note A) ........................ .01 .04 .08 .02
-----------------------------------------------------------
Net asset value, end of period .................. $20.63 $ 16.22 $24.44 $18.41
- ------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) ................................ 28.31 (30.96) 33.43 53.42(c)**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) .......... 622 519 809 261
Ratio of operating expenses, net to average
daily net assets (%) .......................... 1.96 2.08 2.01 2.00*
Ratio of operating expenses before expense
reductions, to average daily net assets (%) ... 1.96 2.11 2.05 2.69*
Ratio of net investment income (loss) to average
daily net assets (%) .......................... 1.32 .52 (.20) .44*
Portfolio turnover rate (%) ..................... 22.4 39.5 22.4 4.6*
Average commission rate paid (b) ................ $.0001 $ -- $ -- $ --
- ----------
<FN>
(a) Based on monthly average of shares outstanding during the period.
(b) Average commission rate paid per share of common and preferred stocks is
calculated for fiscal years beginning on or after September 1, 1995.
(c) Total return does not reflect the effect of the applicable redemption fees.
* Annualized
** Not annualized
</FN>
</TABLE>
16 - Scudder Latin America Fund
<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 Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
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 $7,906,628 (1.3% of net assets) and have been noted in the
investment portfolio as of October 31, 1996. Their values have been estimated by
the Board of Directors in the absence of readily ascertainable market values.
However, because of the inherent uncertainty of valuation, those estimated
values may differ significantly from the values that would have been used had a
ready market for the securities existed, and the difference could be material.
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 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.
17 - Scudder Latin America Fund
<PAGE>
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on dividends,
interest and foreign withholding taxes.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A forward foreign currency exchange
contract (forward contract) is a commitment to purchase or sell a foreign
currency at the settlement date at a negotiated rate. During the period, the
Fund utilized forward contracts as a hedge in connection with portfolio
purchases and sales of securities denominated in foreign currencies.
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Forward
contracts having the same settlement date and broker are offset and any gain
(loss) is realized on the date of offset; otherwise, gain (loss) is realized on
settlement date. Realized and unrealized gains and losses which represent the
difference between the value of the forward contract to buy and the forward
contract to sell are included in net realized and unrealized gain (loss) from
foreign currency related transactions.
Certain risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their contracts. Additionally,
when utilizing forward contracts to hedge, the Fund gives up the opportunity to
profit from favorable exchange rate movements during the term of the contract.
FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements of
the Internal Revenue Code which are applicable to regulated investment companies
and to distribute all of its taxable income to its shareholders. Accordingly,
the Fund paid no federal income taxes and no federal income tax provision was
required.
As of October 31, 1996, the Fund had a net tax basis capital loss carryforward
of approximately $65,670,000, which may be applied against any realized net
taxable capital gains of each succeeding year until fully utilized or until
October 31, 2003, ($59,152,000) and October 31, 2004, ($6,518,000), the
respective expiration dates, 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 included as an
addition to paid-in capital. Certain amounts have been reclassified in the
fiscal 1995 Statement of Changes in Net Assets and in the fiscal 1993, 1994 and
1995 Financial Highlights to conform with the fiscal 1996 presentation.
Effective September 5, 1996, the redemption fee will no longer be assessed.
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 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,
passive foreign investment companies, and certain securities sold at a loss. As
18 - Scudder Latin America Fund
<PAGE>
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. Dividend
income from certain portfolio companies may fluctuate significantly from year to
year due to dividend distribution policies of such companies.
B. PURCHASES AND SALES OF SECURITIES
During the year ended October 31, 1996, purchases and sales of investment
securities (excluding short-term investments) aggregated $125,183,079 and
$122,893,871, respectively.
C. RELATED PARTIES
Under the Investment Management Agreement (the "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 Agreement. The management fee
payable under the 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
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. For the year ended
October 31, 1996, the fee pursuant to the Agreement aggregated $7,493,637, of
which $663,863 is unpaid at October 31, 1996.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
year ended October 31, 1996, the amount charged to the Fund by SSC aggregated
$1,514,806, of which $122,144 is unpaid at October 31, 1996.
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the year ended October 31,
1996, the amount charged to the Fund by STC aggregated $5,093, of which $1,458
is unpaid at October 31, 1996.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the year ended
October 31, 1996, the amount charged to the Fund by SFAC aggregated $318,478, of
which $28,886 is unpaid at October 31, 1996.
19 - Scudder Latin America Fund
<PAGE>
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, 1996, Directors' fees and expenses aggregated
$71,483.
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, high rates of inflation, repatriation restrictions on
income and capital, and future adverse political and economic developments.
Moreover, securities issued in these markets may be less liquid, subject to
government ownership controls, delayed settlements, and their prices more
volatile than those of comparable securities in the United States.
E. LINES OF CREDIT
The Fund and several affiliated Funds (the "Participants") share in a $500
million revolving credit facility for temporary or emergency purposes, including
the meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated among each of the Participants. Interest is calculated based
on the market rates at the time of the borrowing. The Fund may borrow up to a
maximum of 25 percent of its net assets under the agreement. In addition, the
Fund also maintains an uncommitted line of credit.
20 - Scudder Latin America Fund
<PAGE>
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, 1996,
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 three 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, 1996, 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, 1996, the results of its operations
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 three
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 18, 1996
21 - Scudder Latin America Fund
<PAGE>
TAX INFORMATION
For its fiscal year ended October 31, 1996, the total amount of income received
by the Fund from sources within foreign countries and possessions of the United
States was $.273 per share (representing a total of $8,240,437). The total
amount of taxes paid by the Fund to such countries was $.060 per share
(representing a total of $1,819,576).
22 - Scudder Latin America Fund
<PAGE>
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left blank.
23 - Scudder Latin America Fund
<PAGE>
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intentionally
left blank.
24 - Scudder Latin America Fund
<PAGE>
Officers and Directors
Daniel Pierce*
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.
Dudley Ladd*
Director
William H. Luers
Director; President, The Metropolitan Museum of Art
Dr. Wilson Nolen
Director; Consultant
Juris Padegs*
Director, Vice President and Assistant Secretary
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
Joyce E. Cornell*
Vice President
Carol L. Franklin*
Vice President
Edmund B. Games, Jr.*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
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 - Scudder Latin America Fund
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder California Tax Free Money Fund*
Scudder New York Tax Free Money Fund*
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund*
Scudder Massachusetts Limited Term
Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
U. S. Income
- ------------
Scudder Short Term Bond Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder Zero Coupon 2000 Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
U.S. Growth
- -----------
Value
Scudder Capital Growth Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Quality Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Emerging Markets Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund
Retirement Programs
- -------------------
IRA
SEP IRA
SIMPLE IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan *+++ +++
(a variable annuity)
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder World Income Opportunities
Fund, Inc.
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +++Funds within categories are listed from expected
least to most risk. +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.
26 - Scudder Latin America Fund
<PAGE>
How to Contact Scudder
<TABLE>
<CAPTION>
Account Service and Information
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
For existing account services and transactions
Scudder Investor Relations -- 1-800-225-5163
For 24 hour account information, fund information, exchanges, and an overview of all the services available to you
Scudder Electronic Account Services -- http://funds.scudder.com
For information about your Scudder accounts, exchanges and redemptions
Scudder Automated Information Line (SAIL) -- 1-800-343-2890
Investment Information
- -----------------------------------------------------------------------------------------------------------------------------------
For information about the Scudder funds, including additional applications and prospectuses, or for answers to
investment questions
Scudder Investor Relations -- 1-800-225-2470
[email protected]
Scudder's World Wide Web Site -- http://funds.scudder.com
For establishing 401(k) and 403(b) plans
Scudder Defined Contribution Services -- 1-800-323-6105
Scudder Brokerage Services
- -----------------------------------------------------------------------------------------------------------------------------------
To receive information about this discount brokerage service and to obtain an application
Scudder Brokerage Services* -- 1-800-700-0820
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 Chicago San Francisco
Boston New York
For information on Scudder Treasurers Trust(TM), an institutional cash management service for corporations,
non-profit organizations and trusts which utilizes certain portfolios of Scudder Fund, Inc.* ($100,000 minimum),
call: 1-800-541-7703.
For information on Scudder Institutional Funds**, funds designed to meet the broad investment management and
service needs of banks and other institutions, call: 1-800-854-8525.
Scudder Investor Relations and Scudder Funds Centers are services provided through Scudder Investor Services, Inc., Distributor.
* Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061-- Member NASD/SIPC
** 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>
27 - Scudder Latin America Fund
<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 over 40 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.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
SCUDDER (logo)
<PAGE>
Scudder
Pacific
Opportunities
Fund
Annual Report
October 31, 1996
Pure No-Load(TM) Funds
Offers opportunities for long-term capital appreciation through investment
primarily in the equity securities of Pacific Basin companies, excluding Japan.
A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
SCUDDER (logo)
<PAGE>
Table of Contents
2 In Brief
3 Letter from the Fund's Chairman
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
10 Investment Portfolio
15 Financial Statements
18 Financial Highlights
19 Notes to Financial Statements
23 Report of Independent Accountants
24 Tax Information
25 Officers and Directors
26 Investment Products and Services
27 How to Contact Scudder
In Brief
o Pacific Rim markets remained rocky in 1996, the result of political
turbulence, weakening economic fundamentals, and shifting investor sentiment.
The performance of individual markets varied widely, from a gain of 28% to a
decline of more than 36%.
o Scudder Pacific Opportunities Fund provided a 2.76% total return for the 12
months ended October 31, 1996.
o The stage may now be set for an upturn, with attractive stock valuations,
projected gains in corporate profit growth, and accelerating economic growth as
exports pick up and as monetary policy eases.
2 - Scudder Pacific Opportunities Fund
<PAGE>
Letter From the Fund's Chairman
Dear Shareholders,
We are pleased to present the newly redesigned annual report for Scudder
Pacific Opportunities Fund. The new format is designed to enhance the
attractiveness and readability of the reports. Let us know what you think.
In this era of electronic information we have also taken a look at our
abbreviated quarterly reports, which you generally receive during the month
after the end of your fund's first and third fiscal quarters. Going forward,
these printed reports will be discontinued, and portfolio information will be
made available on a more timely basis through one or more of the following:
Scudder's Web site, Scudder's automated information line (SAIL), and by calling
Investor Relations.
We'd like to take this opportunity to announce that Theresa Gusman has
replaced Joyce Cornell on the Scudder Pacific Opportunities Fund's management
team. Theresa has served since 1995 as an analyst focusing on the Pacific Basin
region in Scudder's Global Equity Group. Prior to Joining Scudder, Ms.
Gusman was an equity research analyst at several other firms.
As detailed in the portfolio management discussion that follows, fiscal
year 1996 saw wide variations in the performance of Asian equities -- a
disappointment for investors who participated in the rocky markets of 1994 and
1995. We look forward to the coming year with optimism and remain unshaken in
our belief that the stock markets of the Pacific region embody some of the best
long-term appreciation potential in the world.
We thank you for your continued investment in Scudder Pacific Opportunities
Fund. Please do not hesitate to call Investor Relations at 1-800-225-2470 with
any questions.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
Chairman,
Scudder Pacific Opportunities Fund
3 - Scudder Pacific Opportunities Fund
<PAGE>
PERFORMANCE UPDATE as of October 31, 1996
- ----------------------------------------------------------------
FUND INDEX COMPARISONS
- ----------------------------------------------------------------
Total Return
Period Growth --------------
Ended of Average
10/31/96 $10,000 Cumulative Annual
- --------------------------------------
SCUDDER PACIFIC OPPORTUNITIES FUND
- --------------------------------------
1 Year $10,276 2.76% 2.76%
Life of
Fund* $13,504 35.04% 8.01%
- --------------------------------------
MSCI ALL COUNTRY ASIA FREE INDEX
(EXCLUDING JAPAN)
- --------------------------------------
1 Year $10,815 8.15% 8.15%
Life of
Fund* $18,527 85.27% 17.44%
- --------------------------------------
MSCI PACIFIC INDEX
(EXCLUDING JAPAN)
- --------------------------------------
1 Year $11.969 19.69% 19.69%
Life of
Fund* $19,887 98.87% 19.66%
- --------------------------------------
*The Fund commenced operations on December 8, 1992.
Index comparisons begin December 31, 1992.
- -----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------
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
4/96 $14,490
10/96 $13,538
MSCI ALL COUNTRY ASIA FREE
INDEX (EXCLUDING JAPAN)
Year Amount
- ----------------------
12/92 $10,000
4/93 $11,910
10/93 $16,472
4/94 $16,806
10/94 $19,063
4/95 $16,186
10/95 $17,131
4/96 $19,977
10/96 $18,527
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
4/96 $19,600
10/96 $19,887
The Morgan Stanley Capital International (MSCI) All Country Asia Free Index is
an unmanaged capitalization-weighted measure of stock markets in the Pacific
Region, excluding Japan. Index returns assume dividends reinvested 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 1996
-------------------------------------------
NET ASSET VALUE... $16.21 $17.57 $15.59 $15.93
INCOME DIVIDENDS.. $ -- $ .08 $ .10 $ .10
CAPITAL GAINS
DISTRIBUTIONS..... $ -- $ .01 $ -- $ --
FUND TOTAL
RETURN (%)........ 35.08 8.97 -10.73 2.76
INDEX TOTAL
RETURN (%)........ 64.72 15.73 -10.14 8.15
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 total return
for the life of Fund period would have been lower.
4 - Scudder Pacific Opportunities Fund
<PAGE>
PORTFOLIO SUMMARY as of October 31, 1996
- ---------------------------------------------------------------------------
GEOGRAPHICAL
(Excludes 4% of Cash Equivalents)
- ---------------------------------------------------------------------------
Hong Kong 26%
Malaysia 14%
Indonesia 12%
Taiwan 11%
Thailand 8%
India 7%
Korea 6%
Singapore 6%
Philippines 4%
Other 6%
- --------------------------------------
100%
- --------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
The Fund's top two country
allocations were also the region's
best performers during the period.
- --------------------------------------------------------------------------
SECTORS
(Excludes 4% Cash Equivalents)
- --------------------------------------------------------------------------
Financial 42%
Manufacturing 10%
Durables 6%
Consumer Staples 6%
Construction 6%
Transportation 5%
Energy 5%
Service Industries 5%
Consumer Discretionary 4%
Other 11%
- ---------------------------------------------
100%
- ---------------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
The Fund's concentration in financial
holdings reflects the region's
overwhelming need for financing
to fund business expansion.
- --------------------------------------------------------------------------
10 LARGEST EQUITY HOLDINGS
(29% OF PORTFOLIO)
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
1. HUTCHISON WHAMPOA, LTD.
Container terminal and real estate company in Hong Kong
2. HSBC HOLDINGS, LTD.
Bank in Hong Kong
3. FIRST PACIFIC CO., LTD.
International management and investment company in Hong Kong
4. TELEVISION BROADCASTS, LTD.
Television broadcasting in Hong Kong
5. PTT EXPLORATION AND PRODUCTION CO., LTD
Petroleum refinery in Thailand
6. SWIRE PACIFIC LTD.
General/trading and real estate company in Hong Kong
7. OVERSEAS UNION BANK LTD.
Leading bank group in Singapore
8. BAJAJ AUTO
Maker of two and three wheel vehicles in India
9. RANBAXY LABORATORIES
Pharmaceutical company in India
10. FAR EASTERN DEPARTMENT STORE
Department store chain in Taiwan
The Fund's concentration on diversified regional
Hong Kong companies reflects our belief that these
companies will best weather any shocks associated
with the transfer of sovereignty.
- -----------------------------------------------------------------------------
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 - Scudder Pacific Opportunities Fund
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
Scudder Pacific Opportunities Fund provided a 2.76% total return for the
12-month period ended October 31, 1996, compared with 8.15% for the unmanaged
MSCI All Country Asia Free Index (excluding Japan), the Fund's benchmark index.
Performance in Review
The Fund's investments in Taiwan and Australia, as well as good stock selection
and underweight positions in Korea and Thailand, contributed to a positive
return this year. On the negative side, select Indonesian stock picks were
disappointing, and the portfolio was underweight relative to the MSCI index in
Malaysia and Hong Kong -- the region's top-performing markets this year.
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART TITLE:
Investment Returns
BAR CHART PERIOD: 10/31/95 to 10/31/96)
BAR CHART DATA: Hong Kong 28.04%
Singapore -3.14
Philippines 10.57
Indonesia 19.27
Malaysia 26.63
Korea -36.25
Thailand -29.45
Australia 16.89
Source: Morgan Stanley Capital International
Three Difficult Years
1996 will mark the third consecutive year of Asian equity market malaise. The
current slowdown in the pace of economic activity in the Pacific Basin is
related, in large part, to a confluence of the four cycles reviewed in the
following paragraphs, and we believe the worst is past in at least two of those
cycles.
o The region is moving toward the bottom of its economic cycle. In the wake of
the economic and equity market booms of 1992-93, Asian central bankers tightened
monetary policy to combat inflation over the 1994-96 period. Recent news from
China, Indonesia, the Philippines and Thailand -- the most inflation-prone
countries in the region -- suggest that they have won the war.
o Weakness in Europe continues to constrain imports from the Asia-Pacific
region. Europe is an important market for Asian goods. In 1994, for example,
Europe purchased US$113 billion of Asian exports, compared with US$164 billion
for the U.S. and US$98 billion for Japan.
o This year, the vise on Asian growth tightened as the electronics cycle turned
downward. Electronics exports comprised 53% of total 1994 exports from Singapore
in 1994, 50% in Malaysia, 36% in the Philippines and 27% in Korea.
6 - Scudder Pacific Opportunities Fund
<PAGE>
o Finally, a sizeable U.S. inventory correction occurred in the fist nine months
of 1996 in two of Asia's largest export markets: electronic products and
apparel. According to our analysts, U.S. inventories at all levels of the PC
production and distribution networks are at the lowest levels in history
relative to sales and probably cannot fall further. Similarly, our consumer soft
goods analyst recently noted that the U.S. apparel retailers have reduced
purchases, resulting in significantly lower inventory levels system-wide.
Stage Set for Market Upturn
Lackluster returns this year, combined with consistently poor relative
performance over the past two years and a palpable slow down in the pace of
economic activity, have led to speculation that the party is over for Asian
equity markets. In our view, Pacific Basin stock markets are about to get their
second wind.
Regional economic growth should accelerate and current account problems should
ease as export growth rebounds and monetary policy is loosened following a
prolonged period of restraint. The inflationary excesses appear to have been
wrung out of economies region-wide and a pick-up in demand is in prospect,
suggesting that aggregate corporate profit growth should ramp-up from the 15%
growth rate of the 1993-96 period. Accelerating economic growth, improving trade
flows and higher levels of corporate profitability -- combined with attractive
stock valuations following nearly three years of market stagnation -- portend a
rebound in Pacific Basin equity markets.
7 - Scudder Pacific Opportunities Fund
<PAGE>
It is difficult to predict the speed with which Pacific Basin economies will
benefit from monetary ease, or to call the turn in the electronics cycle or an
upturn in Europe. However, it is unlikely that U.S. inventories of electronic
products and apparel can be reduced further in the near term if demand in the
United States does not decline. Hence, we expect an increase in Asian exports to
the U.S., which will presage a reacceleration in Asian economic growth.
Challenges and Opportunities
We would be remiss to attribute Asia's current economic woes solely to cyclical
factors. The difficulties associated with trading up the value-added curve given
educational and infrastructure constraints, and Asia's unsustainable exchange
rate regimes and political intransigence are well-documented.
Our strategy is to identify companies that are poised to take advantage of the
opportunities created by the structural inefficiencies in the Pacific Basin. We
believe that such companies will fare particularly well in the healthy economic
and export environment that we envision for 1997. In the table on page 9, we
have identified the key challenges and trends that we foresee for the Pacific
Basin, the opportunities created thereby, and selected beneficiaries.
Sincerely,
Your Portfolio Management Team
/s/Elizabeth J. Allan /s/Nicholas Bratt
Elizabeth J. Allan Nicholas Bratt
/s/Theresa M. Gusman
Theresa M. Gusman
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. Theresa Gusman
joined the Scudder Pacific Opportunities Fund team this summer after having
served as an analyst focusing on the Pacific Basin region in Scudder's Global
Equity Group. Prior to joining Scudder in 1995, Theresa had been an equity
research analyst for 11 years.
8 - Scudder Pacific Opportunities Fund
<PAGE>
<TABLE>
<CAPTION>
Challenges/Trends and Opportunities in the Pacific Basin
<C> <C>
Challenges/Trends Opportunities
Competition is intensifying as international Invest in companies with globally dominant
players enter local markets and tariff barriers fall. partners, as well as local know-how and
established distribution networks. Examples
include Astra International, Bakrie and Siam
Cement.
Regionalization is increasing. Invest in well-managed regional players, which
can leverage cross-border synergies. Such
companies include Evergreen Marine, First Pacific,
Guoco, HSBC, and Hutchinson.
The export model is dead. Identify low-cost producers with a well-defined
competitive advantage. These include Asia Pulp &
Paper, Freeport McMoran, and Pohang Iron &
Steel.
Deregulation rationalizes industries and reduces Invest in companies skillful enough to profit from
costs system-wide -- but it hurts non-competitive inefficiencies, such as Kookmin Bank, Ryohin Keikaku,
players. and State Bank of India.
Skilled labor shortages create upward wage Invest in companies benefiting from a long-term
pressures. bull market in consumer spending. Examples
include Bajaj, Honda, HM Sampoerna, and
Multi-Purpose Co.
Subsidized over-investment is causing negative Consumers of the low-cost output from these
ROIs in target industries, such as selected industries benefiting from low input prices.
chemicals, steel and DRAMs. Examples include Indorama and auto-related
companies.
The above statements are the opinion of the Fund's Adviser. Companies are cited for illustrative purposes and should not be
construed as recommendations to buy or sell securities.
</TABLE>
9 - Scudder Pacific Opportunities Fund
<PAGE>
Investment Portfolio as of October 31, 1996
<TABLE>
<CAPTION>
Principal
Amount ($)(d) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements 3.6%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 10/31/96 at 5.52%, to be
repurchased at $11,780,806 on 11/1/96, collateralized by a $9,226,000 U.S. Treasury -------------
Bond, 9.25%, 2/15/16 (Cost $11,779,000) ........................................................ 11,779,000 11,779,000
-------------
Convertible Bonds 5.2%
- ------------------------------------------------------------------------------------------------------------------------------------
India 0.9%
Mahindra & Mahindra Ltd., 5%, 7/9/01(Manufacturer of automobiles and farm equipment) ............. 2,900,000 2,958,000
-------------
Malaysia 2.8%
Commerce Asset Holdings Berhad, 1.75%, 9/26/04 (Commercial banking and financial services) ....... 3,580,000 4,475,000
Renong Berhad (ICULS), 4%, 5/21/01 (Holding company involved in engineering and
construction, financial services, telecommunication and information technology) ................ MYR 746,000 273,125
United Engineers Malaysia, 2%, 3/1/04 (Holding company involved in expressway operations,
project management, engineering and construction) .............................................. 3,230,000 4,360,500
-------------
9,108,625
-------------
Philippines 1.5%
AYALA International Finance Co., 3%, 6/8/00 (Industrial conglomerate) ............................ 3,587,000 4,645,165
- ------------------------------------------------------------------------------------------------------------------------------------
Total Convertible Bonds (Cost $15,945,803) ....................................................... 16,711,790
- ------------------------------------------------------------------------------------------------------------------------------------
Shares
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stocks 91.2%
- ------------------------------------------------------------------------------------------------------------------------------------
Australia 3.2%
Australia & New Zealand Banking Group Ltd. (General trading and savings bank) .................... 585,915 3,421,953
Coca Cola Amatil Ltd. (Soft drink bottler and distributor) ....................................... 239,899 3,298,374
National Australia Bank, Ltd. (Commercial bank) .................................................. 317,833 3,488,355
-------------
10,208,682
-------------
China 2.2%
China Yuchai International Ltd. (Holding company which manufactures and sells diesel
truck engines) ................................................................................. 225,800 987,875
Guangshen Railway Co. Ltd. (ADR)* (Operator of only railroad in the Pearl River delta) ........... 326,895 6,088,419
-------------
7,076,294
-------------
Hong Kong 24.6%
First Pacific Co., Ltd. (International management and investment company) ........................ 9,035,849 12,504,020
Guoco Group Ltd. (Investment holding company) .................................................... 711,000 3,760,883
HSBC Holdings Ltd. (Bank) ........................................................................ 663,775 13,520,675
Hang Seng Bank Ltd. (Commercial banking and related financial services) .......................... 523,000 6,222,809
Hutchison Whampoa, Ltd. (Container terminal and real estate company) ............................. 2,416,000 16,872,818
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 - Scudder Pacific Opportunities Fund
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Jinhui Shipping and Transportation Ltd. (Operator of cargo fleet of ships transporting steel,
iron ore, non-ferrous metals and agricultural products) ........................................ 1,842,800 1,842,800
Kerry Properties Ltd.* (Real estate company) ..................................................... 1,558,000 3,667,210
Shangri-La Asia Ltd. (Hotel and property holding company) ........................................ 3,097,900 4,427,174
Swire Pacific Ltd."A" (General trading and real estate company) ................................. 842,500 7,463,755
Television Broadcasts, Ltd. (Television broadcasting) ............................................ 2,635,000 9,235,211
-------------
79,517,355
-------------
India 5.9%
Ashok Leyland Ltd. (GDR) (Manufacturer of medium and heavy duty commerical vehicles).............. 150,000 1,687,500
Bajaj Auto (GDR) (Maker of two and three wheel vehicles) ......................................... 222,015 7,104,480
Ranbaxy Laboratories (GDR) (Pharmaceutical company) .............................................. 366,920 6,879,75
State Bank of India (GDR)* (Bank) ................................................................ 229,500 3,465,40
-------------
19,137,180
-------------
Indonesia 11.5%
Asia Pacific Resources International Holdings Ltd. (Manufacturer of rayon fiber for Asian textile
markets, owner of world's leading paper pulp mill) ............................................. 578,200 3,180,100
Asia Pulp & Paper Co., Ltd. (ADR)* (Producer of pulp and paper) .................................. 455,200 4,495,101
Astra International Inc. (Foreign registered) (Distributor of automobiles, motorcycles and
related spare parts) ........................................................................... 2,525,000 5,258,722
Bakrie & Brothers (Foreign registered)(Manufacturer of industrial steel products, steel pipes,
corrugated sheet iron, asbestos and fiber cements) ............................................. 3,913,000 5,797,037
Ciputra Development Co. (Foreign registered) (Developer of office properties, shipping and
commercial centers, industrial properties and sports facilities) ............................... 3,752,000 2,738,980
HM Sampoerna (Foreign registered) (Tobacco company) .............................................. 553,500 5,145,797
Indorama Synthetics (Foreign registered) (Producer of polyester fiber, yarn and fabric) .......... 2,143,000 6,119,571
Jaya Real Properties (Foreign registered) (Property developer) ................................... 2,428,000 2,645,647
Modern Photo Film Co.(Foreign registered) (Photographic film distributor) ........................ 532,300 1,468,611
Modern Photo Film Co.(Foreign registered) (New) (c) .............................................. 133,750 369,015
-------------
37,218,581
-------------
Korea 6.3%
Daewoo Securities Co., Ltd. (Brokerage and financial services) ................................... 110,332 2,216,655
Hyundai Engineering & Construction Co.* (Leading general contractor) ............................. 66,000 1,917,095
Kookmin Bank (GDR)* (Major commercial bank) ...................................................... 126,000 2,661,750
Korea Electric Power Co. (Electric utility) ...................................................... 214,730 6,315,206
Korean Airlines Co., Ltd. (Airline) .............................................................. 85,309 1,590,026
Pohang Iron & Steel Co., Ltd. (Leading steel producer) (b) ....................................... 47,530 3,028,689
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder Pacific Opportunities Fund
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Samsung Heavy Industries Co., Ltd. (Machinery manufacturer) ...................................... 3,996 48,847
Samsung Heavy Industries Co., Ltd. (New) (c) ..................................................... 387 4,501
Ssangyong Oil Refining Co. (Major oil refiner) ................................................... 108,900 2,438,306
-------------
20,221,075
-------------
Malaysia 10.4%
AMMB Holdings Berhad (Holding company for Arab Malaysian Merchant Bank Berhad which
provides financial, insurance and investment services) ......................................... 616,000 4,169,246
AMMB Holdings Berhad (Foreign registered) ........................................................ 314,000 1,690,243
Arab-Malaysian Corp. (Investment holding company with interests in financial services,
infrastructure and property) ................................................................... 1,210,000 5,363,942
Malayan Banking Berhad (Leading banking and financial services group) (b) ........................ 497,000 4,917,871
Malaysia Assurance Alliance Berhad (Multiline insurance company) ................................. 698,000 3,425,767
Malaysian Resources Corp. (Property development and investment) (b) .............................. 616,000 2,365,011
Multi-Purpose Holdings Berhad (Investment holding company) ....................................... 749,000 1,280,697
Oriental Holdings Berhad (Investment holding company) ............................................ 319,200 2,173,062
Petronas Gas Berhad (Natural gas producer, processor and distributor) ............................ 1,375,000 5,605,581
Renong Berhad (Holding company involved in engineering, construction, financial services,
telecommunication and information technology) .................................................. 1,729,000 2,723,697
-------------
33,715,117
-------------
New Zealand 0.7%
Air New Zealand "B" Rights (expires 11/12/96) .................................................... 182,290 189,559
Telecom Corp. of New Zealand (Telecommunication services) ........................................ 390,200 2,028,803
-------------
2,218,362
-------------
Philippines 2.1%
Aboitiz Equity Ventures Inc.* (Conglomerate: electricity, infrastructure, shipbuilding) .......... 13,309,270 1,595,289
C & P Homes, Inc. (Home construction company) .................................................... 3,922,800 1,791,233
First Philippine Holdings Corp."B" (Holding company involved in electric power distribution,
construction services and passenger bus transportation) ........................................ 998,760 2,014,242
Philippine National Bank* (Commercial bank) ...................................................... 119,140 1,371,379
-------------
6,772,143
-------------
Singapore 6.2%
City Developments Ltd. (Developer of residential, industrial, retail and investment properties,
owner and operator of hotels) .................................................................. 698,000 5,500,160
Fraser & Neave Ltd. (Producer of soft drinks, beer, stout and dairy products) .................... 144,000 1,431,157
Oversea-Chinese Banking Corp., Ltd. (Foreign registered) (Provider of banking and financial
services) ...................................................................................... 308,000 3,520,250
Overseas Union Bank Ltd. (Leading bank group) .................................................... 1,051,000 7,162,602
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - Scudder Pacific Opportunities Fund
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Wing Tai Holdings Ltd. (Property investment and development, garment manufacturing, trading
in fabric and architectural products) .......................................................... 969,000 2,380,109
-------------
19,994,278
-------------
Taiwan 10.3%
Asia Cement Corp. (Cement producer) .............................................................. 3,656,000 6,637,618
Cathay Life Insurance Co. (Life insurance company) ............................................... 1,050,500 6,293,845
China Development Corp. (Provider of loan and guarantee services to manufacturing and
service industries) ............................................................................ 2,470,750 6,638,907
Evergreen Marine Corp. (Operator of containerized freighters) .................................... 3,630,000 6,313,617
Far Eastern Department Store (Department store chain) ............................................ 5,050,000 6,582,970
Far Eastern Department Store Rights* (expires 11/18/96) (b) ...................................... 338,350 84,772
Sangyang Industrial Co. (Motorcycle manufacturer) ................................................ 450,000 931,373
-------------
33,483,102
-------------
Thailand 7.8%
Ban Pu Coal Public Co., Ltd. (Foreign registered) (Leading miner of sub-bituminous coal
in southeast Asia) ............................................................................. 216,400 4,004,736
Bangkok Bank Ltd. (Foreign registered) (Leading commercial bank) ................................. 290,100 3,093,793
Finance One Public Co., Ltd. (Commercial, consumer and real estate financing,
investment banking) ............................................................................ 123,800 349,484
Industrial Finance Co. (Bank) .................................................................... 182,000 535,189
PTT Exploration and Production Co., Ltd. (Foreign registered) (Petroleum refinery) ............... 545,300 7,825,124
Sahavirya Steel Industry (Foreign registered)* (Steel producer) .................................. 165,700 63,019
Siam Cement Co., Ltd.(Foreign registered) (Construction materials and industrial conglomerate) ... 76,100 2,601,811
TPI Polene Co., Ltd. (Foreign registered) (Producer and distributor of low density
polyethylene plastic pellets) .................................................................. 512 1,094
Telecomasia, Ltd. (Foreign registered)* (Telecommunication services) ............................. 1,035,800 1,989,971
Thai Farmers Bank (Foreign registered) (Commercial bank) ......................................... 363,000 2,775,338
Thai Farmers Bank Warrants* (expires 9/15/02) (b) ................................................ 45,375 144,104
Thai Telephone & Telecommunication PCL* (Telecommunication services) ............................. 1,201,300 1,978,224
25,361,887
-------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $268,715,409) .......................................................... 294,924,056
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio - 100.0% (Cost $296,440,212) (a) ...................................... 323,414,846
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - Scudder Pacific Opportunities Fund
<PAGE>
(a) The cost for federal income tax purposes was $296,982,490. At October 31,
1996, net unrealized appreciation for all securities based on tax cost was
$26,432,356. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $44,237,869 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$17,805,513.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors. The cost of these securities at October 31, 1996 aggregated
$9,964,116. See Note A of the Notes to Financial Statements.
(c) New shares issued during 1996, eligible for a pro rata share of 1996
dividends.
(d) Principal amount stated in U.S. dollars unless otherwise noted.
* Non-income producing security
Sector breakdown of the Fund's equity securities is noted on page 5.
Currency Abbreviations
MYR Malaysian Ringgits
The accompanying notes are an integral part of the financial statements.
14 - Scudder Pacific Opportunities Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of October 31, 1996
<TABLE>
<CAPTION>
Assets
----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investments, at market (identified cost $296,440,212) (Note A) .. $323,414,846
Cash ............................................................ 500
Foreign currency holdings, at market (identified cost $2,508,753)
(Note A) ........................................................ 2,572,579
Receivables for investments sold ................................ 5,727,822
Dividends and interest receivable ............................... 336,303
Receivables for Fund shares sold ................................ 2,316,762
Foreign taxes recoverable ....................................... 8,222
Deferred organization expense (Note A) .......................... 12,767
------------
Total assets .................................................... 334,389,801
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased ............................... $ 1,668,750
Payable for Fund shares redeemed ................................ 2,639,970
Accrued management fee (Note C) ................................. 312,093
Other accrued expenses (Note C) ................................. 370,942
Other payables .................................................. 6,506
------------
Total liabilities ............................................... 4,998,261
--------------------------------------------------------------------------------
Net assets, at market value ..................................... $329,391,540
--------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ............................. 33,023
Unrealized appreciation on:
Investments .................................................. 26,974,634
Foreign currency related transactions ........................ 59,595
Accumulated net realized loss ................................... (13,483,591)
Paid-in capital ................................................. 315,807,879
--------------------------------------------------------------------------------
Net assets, at market value ..................................... $329,391,540
--------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($329,391,540 / 20,682,798 shares of capital stock ------------
outstanding, $.01 par value, 100,000,000 shares authorized) . $ 15.93
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder Pacific Opportunities Fund
<PAGE>
Statement of Operations
year ended October 31, 1996
<TABLE>
<CAPTION>
Investment Income
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Dividends (net of foreign taxes withheld of $694,852) .......... $ 5,562,436
Interest (net of foreign taxes withheld $1,182) ................ 1,615,060
------------
7,177,496
------------
Expenses:
Management fee (Note C) ........................................ 4,235,329
Services to shareholders (Note C) .............................. 1,128,110
Custodian and accounting fees (Note C) ......................... 912,474
Directors' fees and expenses (Note C) .......................... 67,863
Reports to shareholders ........................................ 155,334
Auditing ....................................................... 95,650
Registration fees .............................................. 22,185
Legal .......................................................... 20,983
Amortization of organization expenses (Note A) ................. 11,657
Other .......................................................... 67,242
------------
6,716,827
-------------------------------------------------------------------------------
Net investment income .......................................... 460,669
-------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments .................................................... 2,732,574
Foreign currency related transactions .......................... (591,421)
------------
2,141,153
------------
Net unrealized appreciation during the period on:
Investments .................................................... 9,866,164
Foreign currency related transactions .......................... 63,536
------------
9,929,700
------------
Net gain on investment transactions ............................ 12,070,853
-------------------------------------------------------------------------------
Net increase in net assets resulting from operations ........... $ 12,531,522
-------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - Scudder Pacific Opportunities Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended October 31,
Increase (Decrease) in Net Assets 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income .................................. $ 460,669 $ 2,715,584
Net realized gain (loss) from investment transactions .. 2,141,153 (10,226,019)
Net unrealized appreciation (depreciation) on investment
transactions)
during the period ................................... 9,929,700 (43,781,152
------------ ------------
Net increase (decrease) in net assets resulting from
operations .......................................... 12,531,522 (51,291,587)
------------ ------------
Distributions to shareholders from net investment income (2,376,933) (2,548,920)
------------ ------------
Fund share transactions:
Proceeds from shares sold .............................. 339,049,361 224,335,340
Net asset value of shares issued to shareholders in
reinvestment of distributions........................ 2,101,548 2,255,971
Cost of shares redeemed ................................ (405,479,114) (288,337,055)
------------ ------------
Net decrease in net assets from Fund share transactions (64,328,205) (61,745,744)
------------ ------------
Decrease in net assets ................................. (54,173,616) (115,586,251)
Net assets at beginning of period ...................... 383,565,156 499,151,407
Net assets at end of period (including undistributed net
investment income of $33,023, and $2,313,689, ------------ ------------
respectively) ........................................ $329,391,540 $383,565,156
------------ ------------
Other Information
- ------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ............. 24,595,415 28,405,889
------------ ------------
Shares sold ........................................... 20,929,794 14,244,117
Shares issued to shareholders in reinvestment of
distributions.......................................... 133,516 142,964
Shares redeemed ....................................... (24,975,927) (18,197,555)
------------ ------------
Net decrease in Fund shares ........................... (3,912,617) (3,810,474)
------------ ------------
Shares outstanding at end of period ................... 20,682,798 24,595,415
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 - Scudder Pacific Opportunities Fund
<PAGE>
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
(commencement of
operations) to
Years Ended October 31, October 31,
1996(a) 1995 1994 1993
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ............... $15.59 $17.57 $16.21 $12.00
----------------------------------------------------------
Income from investment operations:
Net investment income (loss) ....................... .02 .10 .04 .04
Net realized and unrealized gain (loss) on
investment transactions ......................... .42 (1.98) 1.41 4.17
----------------------------------------------------------
Total from investment operations ................... .44 (1.88) 1.45 4.21
----------------------------------------------------------
Less distributions from:
Net investment income .............................. (.10) (.10) (.08) --
Net realized gains on investment transactions ...... -- -- (.01) --
----------------------------------------------------------
Total distributions ................................ (.10) (.10) (.09) --
----------------------------------------------------------
----------------------------------------------------------
Net asset value, end of period ..................... $15.93 $15.59 $17.57 $16.21
----------------------------------------------------------------------------------------------------------------------
Total Return (%) ................................... 2.76 (10.73) 8.97 35.08**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ............. 329 384 499 270
Ratio of operating expenses, net to average daily
net assets (%) .................................. 1.75 1.74 1.81 1.75
Ratio of operating expenses before expense
reductions, to average daily net assets (%)...... 1.75 1.74 1.81 2.90*
Ratio of net investment income (loss) to average
daily net assets (%) ............................ .12 .65 .28 1.41*
Portfolio turnover rate (%) ........................ 95.4 64.0 38.5 9.9*
Average commission rate paid (b) ................... $.0148 $ -- $ -- $ --
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Average commission rate paid per share of common and preferred stocks is
calculated for fiscal years beginning on or after September 1, 1995.
* Annualized
** Not annualized
The accompanying notes are an integral part of the financial statements.
18 - Scudder Pacific Opportunities Fund
<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 Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
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 $10,540,447 (3.20% of net assets) and have been noted in the
investment portfolio as of October 31, 1996.
Their values have been estimated by the Board of Directors in the absence of
readily ascertainable market values. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly from
the values that would have been used had a ready market for the securities
existed, and the difference could be material.
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.
The accompanying notes are an integral part of the financial statements.
19 - Scudder Pacific Opportunities Fund
<PAGE>
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Forward
contracts having the same settlement date and broker are offset and any gain
(loss) is realized on the date of offset; otherwise, gain (loss) is realized on
settlement date. Realized and unrealized gains and losses which represent the
difference between the value of the forward contract to buy and the forward
contract to sell are included in net realized and unrealized gain (loss) from
foreign currency related transactions.
Certain risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their contracts. Additionally,
when utilizing forward contracts to hedge, the Fund gives up the opportunity to
profit from favorable exchange rate movements during the term of the contract.
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.
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, 1996, the Fund had a net tax basis capital loss carryforward of
approximately $12,900,000, which may be applied against any realized net taxable
capital gains of each succeeding year until fully utilized or until October 31,
2002 ($100,000) 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 and foreign currency denominated investments. 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 accompanying notes are an integral part of the financial statements.
20 - Scudder Pacific Opportunities Fund
<PAGE>
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, 1996, purchases and sales of investment
securities (excluding short-term investments) aggregated $347,884,845 and
$411,358,822, 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, 1996, the fee
pursuant to the Agreement amounted to $4,235,329 of which $312,093 is unpaid at
October 31, 1996.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
year ended October 31, 1996, the amount charged to the Fund by SSC aggregated
$843,600, of which $63,272 is unpaid at October 31, 1996.
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans for the Fund. For the year ended October 31, 1996, the
amount charged to the Fund by STC aggregated $38,626, of which $6,046 is unpaid
at October 31, 1996.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the year ended
October 31, 1996, the amount charged to the Fund by SFAC aggregated $233,855, of
which $19,672 is unpaid at October 31, 1996.
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, 1996, Directors' fees and expenses aggregated $67,863.
The accompanying notes are an integral part of the financial statements.
21 - Scudder Pacific Opportunities Fund
<PAGE>
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, high rates of inflation, repatriation restrictions on
income and capital, and future adverse political and economic developments.
Moreover, securities issued in these markets may be less liquid, subject to
government ownership controls, delayed settlements, and their prices more
volatile than those of comparable securities in the United States.
E. Lines of Credit
The Fund and several affiliated Funds (the "Participants") share in a $500
million revolving credit facility for temporary or emergency purposes, including
the meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated among each of the Participants. Interest is calculated based
on the market rates at the time of the borrowing. The Fund may borrow up to a
maximum of 25 percent of its net assets under the agreement. In addition, the
Fund also maintains an uncommitted line of credit.
The accompanying notes are an integral part of the financial statements.
22 - Scudder Pacific Opportunities Fund
<PAGE>
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, 1996, 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 three 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, 1996 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, 1996, the results of its
operations 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 three 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 16, 1996
The accompanying notes are an integral part of the financial statements.
23 - Scudder Pacific Opportunities Fund
<PAGE>
Tax Information
The Fund paid foreign taxes of $696,034 and the Fund recognized $708,172 of
foreign source income during the taxable year ended October 31, 1996. Pursuant
to section 853 of the Internal Revenue Code, the Fund designates $.034 per share
of foreign taxes and $.034 of income from foreign sources as having been paid in
the taxable year ended October 31, 1996.
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.
The accompanying notes are an integral part of the financial statements.
24 - Scudder Pacific Opportunities Fund
<PAGE>
Officers and Directors
Daniel Pierce*
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.
Dudley H. Ladd*
Director
William H. Luers
Director; President, The Metropolitan Museum of Art
Dr. Wilson Nolen
Director; Consultant
Juris Padegs*
Director, Vice President and Assistant Secretary
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
Joyce Cornell*
Vice President
Carol L. Franklin*
Vice President
Edmund B. Games, Jr.*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
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 - Scudder Pacific Opportunities Fund
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder California Tax Free Money Fund*
Scudder New York Tax Free Money Fund*
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund*
Scudder Massachusetts Limited Term
Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder Zero Coupon 2000 Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
U.S. Growth
- -----------
Value
Scudder Capital Growth Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Quality Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Emerging Markets Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund
Retirement Programs
- -------------------
IRA
SEP IRA
SIMPLE IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan *+++ +++
(a variable annuity)
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder World Income Opportunities
Fund, Inc.
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +++Funds within categories are listed from expected
least to most risk. +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. How to Contact Scudder
26 - Scudder Pacific Opportunities Fund
<PAGE>
<TABLE>
How to Contact Scudder
<CAPTION>
Account Service and Information
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C>
For existing account services and transactions
Scudder Investor Relations -- 1-800-225-5163
For 24 hour account information, fund information, exchanges, and an overview of all the services available to you
Scudder Electronic Account Services -- http://funds.scudder.com
For information about your Scudder accounts, exchanges and redemptions
Scudder Automated Information Line (SAIL) -- 1-800-343-2890
Investment Information
- -----------------------------------------------------------------------------------------------------------------------------------
For information about the Scudder funds, including additional applications and prospectuses, or for answers to
investment questions
Scudder Investor Relations -- 1-800-225-2470
[email protected]
Scudder's World Wide Web Site -- http://funds.scudder.com
For establishing 401(k) and 403(b) plans
Scudder Defined Contribution Services -- 1-800-323-6105
Scudder Brokerage Services
- -----------------------------------------------------------------------------------------------------------------------------------
To receive information about this discount brokerage service and to obtain an application
Scudder Brokerage Services* -- 1-800-700-0820
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 Chicago San Francisco
Boston New York
For information on Scudder Treasurers Trust(TM), an institutional cash management service for corporations,
non-profit organizations and trusts which utilizes certain portfolios of Scudder Fund, Inc.* ($100,000 minimum),
call: 1-800-541-7703.
For information on Scudder Institutional Funds**, funds designed to meet the broad investment management and
service needs of banks and other institutions, call: 1-800-854-8525.
Scudder Investor Relations and Scudder Funds Centers are services provided through Scudder Investor Services, Inc., Distributor.
* Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061 -- Member NASD/SIPC
** 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>
27 - Scudder Pacific Opportunities Fund
<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 over 40 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.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
SCUDDER (logo)
<PAGE>
Scudder
Greater Europe
Growth Fund
Annual Report
October 31, 1996
Pure No-Load(TM) Funds
For investors seeking long-term growth of capital through investment primarily
in the equity securities of European companies.
A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
SCUDDER
<PAGE>
Table of Contents
2 In Brief
3 Letter from the Fund's Chairman
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
10 Investment Portfolio
15 Financial Statements
18 Financial Highlights
19 Notes to Financial Statements
22 Report of Independent Accountants
23 Tax Information
25 Officers and Directors
26 Investment Products and Services
27 How to Contact Scudder
In Brief
o Scudder Greater Europe Growth Fund produced a strong total return of 25.11%
for the 12 months ended October 31, 1996, well ahead of the returns for both the
unmanaged MSCI Europe Index and the average European region fund tracked by
Lipper Analytical Services.
o Longstanding political and economic structures in Europe continue to evolve in
response to the pressures of global competition. While the transition will not
be easy, we believe the potential rewards from deregulation, privatization, and
fiscal reform are exciting.
o The Fund continues to seek out companies positioned to benefit from the
important changes in Europe, including a number of companies which are involved
in outsourcing and other means of enhancing corporate competitiveness.
2 - Scudder Greater Europe Growth Fund
<PAGE>
Letter From the Fund's Chairman
Dear Shareholders,
We hope you enjoy our newly redesigned shareholder report. The new format
is designed to enhance the attractiveness and readability of the annual and
semiannual reports. Let us know what you think.
In this age of electronic information we have also taken a look at our
short-form quarterly reports, sent after the end of your Fund's first and third
fiscal quarters. Many shareholders have told us that these reports are no longer
as useful as they once were, so they have been discontinued. Going forward,
portfolio information will be made available on a more timely basis -- each
month in most cases -- through Scudder's Web site, Scudder's automated
information line (SAIL), and by calling a Scudder Investor Relations
representative.
As detailed in the management discussion that follows, Scudder Greater
Europe Growth Fund's performance over the 12-month period covered by this report
was most gratifying. The Fund's total return of 25.11% outstripped both
international stocks in the aggregate and the average European region fund by
comfortable margins. Going forward, we believe that the structural changes
sweeping the continent including privatization, deregulation, and fiscal reform
bode well for European equities. Scudder Greater Europe Growth Fund will
continue to provide important access to the many opportunities for capital
appreciation to be found in the region.
Finally, we would like to take this opportunity to highlight some additions
made this fall to the Scudder Family of Funds. Scudder Classic Growth Fund seeks
long-term capital appreciation with a higher degree of principal stability than
the average growth fund. Scudder 21st Century Growth Fund takes a more
aggressive approach, focusing primarily on emerging companies with the potential
to benefit from the rapidly changing industrial and economic landscape. Most
recently, we introduced the Scudder Pathway Series, four portfolios --
Conservative, Balanced, Growth, and International -- which each comprise five or
more Scudder Funds and which together are designed to meet a range of investor
needs. For more information on these and other Scudder Fund products and
services, please turn to page 26.
Thank you for your continued investment in Scudder Greater Europe Growth
Fund. Please do not hesitate to call Investor Relations at 1-800-225-2470 with
any questions regarding your account.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
Chairman,
Scudder Greater Europe Growth Fund
3 - Scudder Greater Europe Growth Fund
<PAGE>
PERFORMANCE UPDATE as of October 31, 1996
- ----------------------------------------------------------------
FUND INDEX COMPARISONS
- ----------------------------------------------------------------
Total Return
Period Growth --------------
Ended of Average
10/31/96 $10,000 Cumulative Annual
- ----------------------------------------
SCUDDER GREATER EUROPE GROWTH FUND
- ----------------------------------------
1 Year $12,511 25.11% 25.11%
Life of Fund* $14,611 46.11% 20.21%
- ----------------------------------------
MORGAN STANLEY CAPITAL INTERNATIONAL
(MSCI) EUROPE INDEX
- ----------------------------------------
1 Year $11,747 17.47% 17.47%
Life of Fund* $13,299 32.99% 15.34%
- ----------------------------------------
*The Fund commenced operations on October 10, 1994.
Index comparisons begin October 31, 1994.
- -----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------
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
1/96 $11,859
4/96 $12,981
7/96 $13,299
10/96 $14,395
MORGAN STANLEY CAPITAL INTERNATIONAL
(MSCI) EUROPE INDEX
Year Amount
- ----------------------
10/94* $10,000
1/95 $ 9,596
4/95 $10,597
7/95 $11,485
10/95 $11,321
1/96 $11,840
4/96 $12,288
7/96 $12,362
10/96 $13,299
The Morgan Stanley Capital International (MSCI) Europe 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 1996
-------------------------
NET ASSET VALUE... $12.18 $13.99 $17.20
INCOME DIVIDENDS.. $ -- $ .02 $ .11
CAPITAL GAINS
DISTRIBUTIONS..... $ -- $ -- $ .14
FUND TOTAL
RETURN (%)........ 1.50 15.06 25.11
INDEX TOTAL
RETURN (%)........ -- 13.21 17.47
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 total returns
for the one year and life of Fund periods would have been lower.
4 - Scudder Greater Europe Growth Fund
<PAGE>
PORTFOLIO SUMMARY as of October 31, 1996
- ---------------------------------------------------------------------------
GEOGRAPHICAL
(Excludes 6% Cash Equivalents)
- ---------------------------------------------------------------------------
France 23%
Germany 16%
United Kingdom 13%
Sweden 10%
Italy 7%
Netherlands 7%
Spain 7%
Switzerland 6%
Poland 5%
Other 6%
- --------------------------------------
100%
- --------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
Approximately half of portfolio assets
are invested in the core European
markets of France, Germany and the U.K.
- --------------------------------------------------------------------------
SECTORS
(Excludes 6% Cash Equivalents)
- --------------------------------------------------------------------------
Manufacturing 16%
Financial 12%
Service Industries 10%
Health 10%
Consumer Discretionary 8%
Media 6%
Consumer Staples 6%
Durables 6%
Construction 6%
Other 20%
- ---------------------------------------------
100%
- ---------------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
Many manufacturers are actively restructuring
their businesses towards more flexible and
efficient workforces.
- --------------------------------------------------------------------------
10 LARGEST EQUITY HOLDINGS
(15% OF PORTFOLIO)
- --------------------------------------------------------------------------
1. DASSAULT SYSTEMES SA
Computer aided design, manufacturing and engineering software products
in France
2. CIMENTOS DE PORTUGAL SA
Manufacturer of cement, ready mix concrete and aggregates
3. MANNESMANN AG
Diversified construction and technology company in Germany
4. FRESENIUS AG
Developer, manufacturer and distributor of pharmaceuticals in Germany
5. PEARSON PLC
Diversified media and entertainment holding company in the United Kingdom
6. BAYER AG
Leading chemical producer in Germany
7. COMPUTERLAND POLAND SA
Provider of computer services and systems
8. BASF AG
Leading international chemical producer in Germany
9. HENNES & MAURITZ AB
Clothing and cosmetics retailer throughout Europe
10.GENERAL ELECTRIC CO., PLC
Manufacturer of power, communications and defense equipment and other
various electrical components in the United Kingdom
Top holdings include companies positioned to benefit from Europe's evolving
economic structure.
- -----------------------------------------------------------------------------
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 - Scudder Greater Europe Growth Fund
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
Scudder Greater Europe Growth Fund produced a strong total return of 25.11% for
the year ended October 31, 1996, well ahead of the 17.47% return of the
unmanaged MSCI Europe Index. The Fund's performance also compared very favorably
to that of the average pan-European equity fund tracked by Lipper Analytical
Services, which returned 17.08% for the period, and the Fund was ranked second
out of 36 peers. Performance since the Fund's inception in October of 1994 has
been excellent as well. In fact, for the two years through the end of October
1996, the Fund ranked number one out of 30 peers, with a compounded annual
return of 19.98% versus 13.46% for the Lipper average.
Review of the Markets
Over the last 12 months, European equities have been underpinned by a number of
factors including falling interest rates, reasonable valuations, merger and
acquisition activity, and a growing appreciation by investors of positive
structural changes. Within Europe, economic growth patterns have diverged,
impacting individual stock markets variably. The United Kingdom displayed growth
of more than 2%, with healthy gains in employment bolstering retail spending.
This trend was captured in the portfolio's holding of Next, a leading U.K.
clothing retailer, which rose over 40% this year. Yet the U.K. market, Europe's
largest, lagged the region overall. At the same time, the economic environment
in the core continental markets of France and Germany was much gloomier as
unemployment concerns, fiscal stringency, strong currencies, and weak export
demand weighed heavily on growth. Nevertheless, the French market outpaced the
European average, led by growth stocks and companies rebounding from depressed
valuations, and a number of the Fund's best performing stocks over this period
were in France. In Germany, where stocks fell short of the average European
market, investors could still find ample rewards in companies where managements
are actively showing an interest in maximizing value for shareholders and are
taking steps to assure global competitiveness, such as BASF, Bayer,
Daimler-Benz, and Hoechst.
Among peripheral markets, strong performances were turned in by Sweden and
Spain, which benefited from significant interest rate drops as Europe approaches
currency union. While the rest of Europe focused on the problems of
restructuring, slow growth, uncompetitive currencies, and high unemployment,
Poland offered sparkling returns, recovering from the emerging market malaise of
1995. The Polish economy barreled forward with GDP growth of more than 5%,
helped by accelerating foreign direct investment and a rising, entrepreneurial
private sector. Corporate profits growth has been strong and Poland's
well-regulated, transparent stock market is attractive to foreign as well as
domestic investors. The Fund has increased its investments in Poland this year,
which now account for 5% of the portfolio.
6 - Scudder Greater Europe Growth Fund
<PAGE>
Structural Changes Enhance Equity Outlook
Europe today stands at a crossroads. Longstanding political and economic
structures are no longer viable due to the pressures of global competition,
aging dependent populations, and the limits of fiscal support. There is
widespread recognition of the imperative to change -- to deregulate, to
privatize, to reduce labor costs, to cut social welfare spending -- but it will
not be an easy evolution and investors may be shaken by transitional jitters
from time to time. The potential rewards, however, are exciting.
The United States and the United Kingdom have already surmounted similar
challenges, and there are signs that continental Europe is about to do the same.
The corporate sector has been at the forefront of change, determined to reclaim
its global competitiveness. Despite the associated costs and regulatory
barriers, many employers have already cut jobs by as much as 20-30%. Factories
have been closed, production facilities across Europe consolidated, and new
factories built in low cost regions in Eastern Europe and Asia. A push for
greater labor flexibility is making inroads: the reduction of sick pay and
movement of wage negotiations from the industry to the company level in Germany;
the abolition of wage indexation in Italy; the easing of rules on temporary
employment in Spain with expectations of similar changes forthcoming in Germany
and Sweden. A new emphasis on outsourcing has also served to enhance corporate
flexibility and competitiveness.
For their part, governments have been pushing ahead on the privatization
process, with proceeds providing a welcome source of finance in the struggle to
meet the Maastricht requirements. Recent privatizations have involved sales to
industrial buyers as well as issuance on the equity market. In the latter case,
privatizations are playing an important role in developing the equity markets of
Europe. For example, the market capitalization of still emerging Portugal
expanded by nearly 10% last year as a result of several privatizations including
Portugal Telecom, in which the Fund participated. This Fall's flotation of
Deutsche Telecom was a signal event as the largest single privatization in
European stock market history. While the German equity market is among the
larger European markets, it is still underdeveloped by international standards.
German equity market capitalization represents a mere 25% of GDP in comparison
to a similar ratio of 75% in the United States, and only 5% of the German
population own common stocks. The Deutsche Telecom issue enticed many first time
equity investors and, given its success, German investors may well be encouraged
to place more of their considerable savings in equities.
Additional signs of a developing equity culture throughout continental Europe
include a wider array of initial public offerings (IPOs). As corporations need
capital to expand and globalize, they are coming to the equity market for
financing. Adidas in Germany, one of the Fund's holdings, is an example of a
successful IPO in the last year that offered support to the equity investing
trend.
Not only are the investment choices broadening via IPOs and privatizations, the
value system is changing. Continental Europe has traditionally placed the
interests of employees, customers, and suppliers well ahead of the interests of
7 - Scudder Greater Europe Growth Fund
<PAGE>
shareholders, but a new focus on shareholder value is emerging. The drive for
growth at any cost has been supplanted at many companies by the desire to
generate returns for shareholders. Hoechst, the German chemical and
pharmaceutical company, has set strict return requirements for each of its
divisions and has moved to spin off or divest those which do not meet their
criteria or which will achieve higher valuations independently. Daimler-Benz has
jettisoned Fokker, its money-losing aircraft subsidiary, and further
rationalized its business portfolio. Companies such as Compagnie Financiere de
Paribas in France are selling off cross holdings of industrial companies and
have been rewarded with substantial stock price advances. Furthermore,
continental European managers are expected to follow the lead of U.S. companies
which have enhanced value through share buybacks. In continental Europe, share
repurchases have been delayed by regulatory impediments and, where legal, are
often taxed at very high levels. However, authorities in Germany, Switzerland,
and Sweden are reviewing current legislation with an eye towards deregulation.
Positive news on this front should lead to price appreciation for those
corporations poised to use share buybacks as a mechanism to deploy cash.
Equity market development in Europe will also be fostered by the growth of a
private pension system, still in its infancy throughout Europe. The state social
security system has been the principal guarantor of retirement support, but the
limits of affordability have been surpassed. In Germany, public deficits could
rise to more than 20% of GNP if no changes are undertaken. France has already
put proposals on the table to encourage private pension funding. Private pension
funds would create additional and growing demand for European equities as well
as serving as organized advocates for shareholder value.
Portfolio Strategy
The Fund continues to seek out companies with sound management strategies
positioned to benefit from the important changes in Europe and from growth
opportunities through new products or new customers. We have invested in a
number of companies which are involved in outsourcing and other means of
enhancing client competitiveness. Dassault Systemes in France, our largest
holding, is engaged in computer-aided design and engineering, enabling companies
to cut development time and costs in half. Altran Technologies, an engineering
consulting firm in France, helps companies keep down fixed costs while
continuing to invest in R&D. Adecco, BIS, and Randstad are temporary help
agencies and beneficiaries of the movement toward more flexible labor
utilization in Spain, Germany, and Sweden.
Europe is home base to a number of companies which are emerging global
competitors. Fresenius, the German dialysis products manufacturer has broadened
its base to become the world's largest supplier of renal products and services
after its merger with W.R. Grace's National Medical division. Ericsson (Sweden),
a leader in the booming market for cellular telecommunications, is another
example.
8 - Scudder Greater Europe Growth Fund
<PAGE>
In the emerging Eastern countries, companies with strong managements in sectors
key to the development of the economy have enormous scope for growth. Polish
portfolio holdings include Bank Rozwoju Eksportu, a technologically advanced
bank equipped to service the growing corporate middle market as well as foreign
corporations active in Poland, and Computerland, a young, entrepreneurial,
shareholder-oriented company rapidly achieving dominance in the emerging
computer service and consulting business in Poland.
Finally, the restructuring theme is most notable at present in Germany as
exemplified by our holdings in Hoechst, Daimler-Benz, and BASF, but is also
central to such holdings as Pearson (UK) and Assurances Generales de France.
There are many reasons to invest in Europe today, a continent of change and
opportunity. Going forward, Scudder Greater Europe Growth Fund will continue to
provide a vehicle for gaining important exposure to the equity markets of the
region. We are delighted you are participating in the economic and financial
evolution of Europe as shareholders in the Fund.
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 - Scudder Greater Europe Growth Fund
<PAGE>
INSERT FUND REPORTING PAGES 10 - 23 HERE
Investment Portfolio as of October 31, 1996
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements 1.1%
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 10/31/96 at 5.52%, to be
repurchased at $1,342,206 on 11/1/96, collateralized by a $974,000 U.S. Treasury ------------
Note, 14.25%, 2/15/02 (Cost $1,342,000) ................................................. 1,342,000 1,342,000
------------
Short-Term Notes 5.0%
- ------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Association Discount Note, 11/13/96 (Cost $5,989,720) ........... 6,000,000 5,989,720
------------
Shares
- ------------------------------------------------------------------------------------------------------------------------------
Common Stocks 93.9%
- ------------------------------------------------------------------------------------------------------------------------------
Czech Republic 1.0%
Central European Media Enterprises Ltd. "A" *(Owner and operator of national and regional
private commercial television stations in central Europe and Germany) ................... 42,000 1,176,000
------------
Finland 0.5%
Nokia AB Oy "A" (Leading manufacturer of telecommunications equipment and
cellular telephones) ........................................................................ 11,560 533,927
---------
France 21.4%
AXA SA (Insurance group providing insurance, finance and real estate services) ................ 9,928 620,184
Adecco SA * (Personnel and temporary employment company) ...................................... 3,186 902,557
Altran Technologies, SA (Engineering and consulting services for aerospace, telecommunications
and electronics fields) ..................................................................... 3,300 987,792
Assurances Generales de France (Health, life, fire, accident and special risk insurance) ...... 29,100 858,528
BIS SA (Operator of temporary employment agencies in France and Switzerland) .................. 5,800 601,401
Cap Gemini Sogeti SA * (Software consultants) ................................................. 18,000 876,864
Carrefour (Hypermarket operator and food retailer) ............................................ 1,625 901,930
Compagnie Financiere de Paribas "A" (Finance and investment company) .......................... 19,514 1,256,037
Compagnie Generale des Eaux (Water utility) ................................................... 8,400 1,004,108
Compagnie de Saint-Gobain (Glass manufacturer) ................................................ 5,600 755,957
Comptoirs Modernes (Operator of supermarkets, grocery and department stores) .................. 2,310 1,105,423
Dassault Systemes SA * (Computer aided design, manufacturing and engineering software
products) ................................................................................... 65,200 2,806,276
Essilor International (Manufacturer of various types of lenses, eyeglasses, contact lenses
and optical measuring instruments) .......................................................... 4,890 1,286,741
LVMH Moet-Hennessy Louis Vuitton SA (Producer of wines, spirits and luxury products) .......... 1,800 412,372
Lafarge SA (Leading producer of cement, concrete and aggregates) .............................. 13,600 816,309
Lagardere Groupe (Holding company with interests in publishing, defense, audiovisual production
and services, telecommunications and media) ................................................. 28,514 900,930
Legrand SA (Manufacturer of low-voltage electrical devices) ................................... 2,300 399,127
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 - Scudder Greater Europe Growth Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Michelin "B" (Leading tire manufacturer) .................................................. 22,895 1,104,124
Pinault-Printemps, SA (Distributor of consumer goods) ..................................... 1,796 677,444
Rexel SA (Distributor of electrical equipment) ............................................ 3,100 918,829
Salomon S.A. (Manufacturer of sports equipment) ........................................... 10,600 949,799
Schneider SA (Manufacturer of electronic components and automated manufacturing systems) .. 18,392 899,558
Sligos SA (Electrical payment and computing engineering services company) (b) ............. 6,200 668,349
Sylea (Manufacturer of automobile parts and components) ................................... 4,200 485,620
Synthelabo SA (Pharmaceutical and biomedical company) ..................................... 14,600 1,393,904
Total SA "B" (International oil and gas exploration, development and production) .......... 12,223 956,289
Valeo SA (Automobile and truck components manufacturer) ................................... 14,989 899,680
----------
25,446,132
----------
Germany 15.4%
Adidas AG (Manufacturer of sport shoes, clothing and equipment) ........................... 12,200 1,046,048
Altana AG (Developer and producer of pharmaceuticals, chemicals and computer software
products) ............................................................................... 1,460 1,166,958
B.U.S. Berzelius Umwelt-Service AG (Reprocessor of high-zinc dust, aluminum-bearing salt slag) 15,600 216,402
BASF AG (Leading international chemical producer) ......................................... 47,100 1,505,856
Bayer AG (Leading chemical producer) ...................................................... 42,650 1,612,071
Bayerische Vereinsbank Girozentrale (Commercial bank) ..................................... 30,600 1,151,151
Daimler-Benz AG * (Automobile and truck manufacturer) ..................................... 19,050 1,118,701
Draegerwerk AG (pfd.)(Producer of instruments for medical and aeronautical technology) .... 2,600 346,930
Fresenius AG (Developer, manufacturer and distributor of pharmaceuticals) ................. 7,880 1,681,303
Hoechst AG (Chemical producer) ............................................................ 36,900 1,388,153
Leica Camera AG * (Leading manufacturer of cameras and optical equipment) ................. 19,961 675,102
Mannesmann AG (Bearer) (Diversified construction and technology company) .................. 4,650 1,806,123
RWE AG (pfd.)(Producer and marketer of petroleum and chemical products) ................... 31,450 1,067,827
SAP AG (pfd.)(Computer software manufacturer) ............................................. 5,750 774,086
Schering AG (Pharmaceutical and chemical producer) ........................................ 5,950 478,916
Siemens AG (Leading electrical engineering and electronics company) ....................... 18,450 953,669
VEBA AG (Electric utility, distributor of oil and chemicals) .............................. 24,350 1,299,171
----------
18,288,467
----------
Ireland 0.4%
Irish Life PLC (Provider of life and disability insurance and pensions) ................... 116,718 505,693
----------
Italy 6.6%
Banca Fideuram SpA (Commercial bank) ...................................................... 280,000 593,731
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder Greater Europe Growth Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Bulgari SpA (Manufacturer and retailer of fine jewelry, luxury watches and perfumes) ........ 47,000 815,275
Edison SpA (Hydroelectrical energy holding company) ......................................... 145,000 863,109
Ente Nazionale Idrocarburi SpA (Exploration and production of oil, natural gas and chemicals) 135,000 646,875
Gucci Group (New York Shares) (Designer and producer of personal luxury accessories
and apparel) .............................................................................. 17,300 1,193,700
Luxottica Group SpA (ADR) (Manufacturer and marketer of eyeglasses) ......................... 13,840 878,840
Saipem SpA (International contractor in oil and gas exploration and drilling, construction of
refineries and pipelines) ................................................................. 260,000 1,327,287
Telecom Italia Mobile SpA (Ord.) (Cellular telecommunication services) ...................... 572,000 1,182,726
Unicem SpA * (Cement producer) .............................................................. 55,000 366,383
---------
7,867,926
---------
Netherlands 6.5%
Akzo-Nobel N.V. (Chemical producer) ......................................................... 8,900 1,121,186
De Telegraaf Holding N.V. (Leading publisher of newspapers, magazines and books) ............ 43,840 942,851
Getronics N.V. (Provider of computer installation and maintenance services) ................. 52,884 1,299,392
Heineken Holdings N.V. "A" (Brewery) ........................................................ 5,406 915,467
Koninklijke Nedlloyd Groep N.V. (Container shipping and transportation) ..................... 20,000 502,018
Philips Electronics N.V. (Leading manufacturer of electrical equipment) ..................... 12,330 434,454
Randstad Holdings N.V. (Temporary and technical staffing services) .......................... 16,300 1,317,715
Wolters Kluwer CVA (Publisher) .............................................................. 8,940 1,148,875
----------
7,681,958
----------
Poland 5.1%
Agros Holdings "C" * (Construction holding company) ......................................... 44,400 1,145,063
Bank Rozwoju Eksportu SA (Export bank) ...................................................... 42,800 1,271,272
Bydgoska Fabryka Kabli SA * (Manufacturer of cables, wires and insulating materials) ........ 125,000 871,514
ComputerLand Poland S.A. * (Provider of computer services and systems) ...................... 87,000 1,593,803
Elektrim Spolka Akcyjna SA (Manufacturer of power equipment, electrical machinery
and apparatus) ............................................................................ 65,000 554,923
Zaklady Metali Lekkich Kety * (Manufacturer of aluminum casting alloys and products) ........ 7,700 602,590
----------
6,039,165
----------
Portugal 3.4%
Cimentos de Portugal SA (Manufacturer of cement, ready mix concrete and aggregates) ......... 100,000 2,101,927
Engil-SGPS (Civil and public works construction) ............................................ 100,000 1,019,275
Portugal Telecom SA (Telecommunication services) ............................................ 34,400 894,557
----------
4,015,759
----------
Spain 6.3%
Acerinox, S.A. (Stainless steel producer) ................................................... 7,060 846,470
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - Scudder Greater Europe Growth Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Banco Bilbao Vizcaya, S.A. (Leading financial group) ........................................ 22,600 1,098,033
Banco Popular Espanol, S.A. (Retail bank) ................................................... 2,800 535,162
Centros Comerciales Pryca, SA (Owner and operator of hypermarkets selling consumer products
including groceries, appliances and clothing) ............................................. 34,200 785,252
Compania Telefonica Nacional de Espana S.A. (Telecommunication services) .................... 67,000 1,344,095
Empresa Nacional de Electricidad SA (Electric utility) ...................................... 16,000 979,234
Hidroelectrica del Cantabrico (Electric utility) ............................................ 15,800 526,213
Iberdrola SA (Electric utility) ............................................................. 88,000 934,410
Zardoya-Otis SA (Manufacturer and installer of elevator equipment) .......................... 4,730 482,229
---------
7,531,098
---------
Sweden 9.4%
AGA AB "B" (Free) (Producer and distributor of industrial and medical gases) ................ 58,200 934,261
Autoliv AB (Free) (Manufacturer of automobile safety bags) .................................. 33,900 1,439,118
Diligentia AB * (Residential and commercial real estate investment company) ................. 54,240 697,379
Fastighets AB Nackebro Units * (Owner and manager of commercial and residential properties) . 2,000 31,344
Hennes & Mauritz AB "B" (Free) (Clothing and cosmetics retailer throughout Europe) .......... 11,300 1,497,577
Investor AB "B" (Investment company with holdings in listed shares of industrial companies) . 20,000 806,433
Kinnevik AB "B" (Free) (Diversified holding company) ........................................ 18,000 488,881
L.M. Ericsson Telephone Co. "B" (ADR) (Leading manufacturer of cellular telephone equipment) 48,220 1,332,078
NordicTel Holding AB * (Mobile telecommunication services) .................................. 30,000 543,201
S.K.F. AB "A" (Free) (Manufacturer of roller bearings) ...................................... 29,600 646,303
Skandia Foersaekrings AB (Free) (Financial conglomerate) .................................... 39,000 1,094,847
Skandinaviska Enskilda Banken "A" (Commercial bank) ......................................... 92,400 773,263
Svenska Handelbanken "A" (Commercial bank) .................................................. 38,500 949,005
----------
11,233,690
----------
Switzerland 5.3%
ABB AG (Bearer) (Manufacturer of electrical equipment) ...................................... 760 940,591
Adecco SA (Bearer) (Personnel and temporary employment company) ............................. 2,400 675,065
Baloise Holding Ltd. (Registered) (Provider of private, commercial and corporate insurance, life
insurance, international reinsurance) ..................................................... 130 271,928
CS Holdings (Registered) (Provider of bank services, management services and life insurance) 6,435 643,704
Ciba-Geigy AG (Bearer) (Pharmaceutical company) ............................................. 880 1,080,738
Elektrowatt AG (Bearer) (Holding company: owner of electric plants and interests in hydro and
nuclear power plants) ..................................................................... 1,825 694,081
Holderbank Financiere Glaris AG (Bearer) (Cement producer) 700 485,302
Oerlikon-Buehrle Holding AG (Registered)* (Diversified manufacturer of shoes and apparel,
vacuums, aircraft components, missile systems) ............................................ 5,800 573,291
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - Scudder Greater Europe Growth Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Sandoz Ltd. AG (Registered) (Pharmaceutical company) ....................................... 815 943,440
----------
6,308,140
----------
United Kingdom 12.6%
BOC Group PLC (Producer of industrial gases) ............................................... 60,000 831,103
Barclays PLC (Commercial and investment banking, insurance and other financial services) ... 70,000 1,098,941
British Petroleum PLC (Major integrated world oil company) ................................. 63,260 679,848
Carlton Communications PLC (Television post production products and services) .............. 150,800 1,208,876
General Electric Co., PLC (Manufacturer of power, communications and defense equipment and
other various electrical components) ..................................................... 234,000 1,447,350
Glaxo Wellcome PLC (Pharmaceutical company) ................................................ 80,000 1,256,584
Morgan Crucible Co. PLC (Manufacturer of technologically advanced materials, chemicals and
components) .............................................................................. 80,000 615,922
Next PLC (Retailer of clothing, accessories and fashion jewelry, also through home shopping) 94,000 853,761
Pearson PLC (Diversified media and entertainment holding company) .......................... 132,000 1,628,611
PowerGen PLC (Electric utility) ............................................................ 78,750 653,725
Reuters Holdings PLC (International news agency) ........................................... 52,000 647,499
SmithKline Beecham PLC (Manufacturer of ethical drugs and healthcare products) ............. 87,232 1,077,685
Thistle Hotels PLC * (Hotel chain owner and operator) ...................................... 314,900 855,980
WPP Group PLC (Advertising agency) ......................................................... 373,000 1,384,261
Zeneca Group PLC (Holding company: manufacturing and marketing of pharmaceutical and
agrochemical products and specialty chemicals) ........................................... 29,000 790,183
-----------
15,030,329
- ------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $94,112,641) 111,658,284
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio - 100.0% (Cost $101,444,361) (a) 118,990,004
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
(a) The cost for federal income tax purposes was $101,480,946. At October 31,
1996, net unrealized appreciation for all securities based on tax cost was
$17,509,058. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $18,257,386 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$748,328.
(b) Security valued in good faith by the Valuation Committee of the Board of
Directors. The cost of this security at October 31, 1996 aggregated
$466,434. See Note A of the Notes to Financial Statements.
Sector breakdown of the Fund's equity securities is noted on page 5.
The accompanying notes are an integral part of the financial statements.
14 - Scudder Greater Europe Growth Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of October 31, 1996
<TABLE>
<S> <C> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $101,444,361) (Note A) ......... $ 118,990,004
Cash ................................................................... 716
Receivable for investments sold ........................................ 1,357,713
Receivable for Fund shares sold ........................................ 2,076,709
Dividends and interest receivable ...................................... 38,089
Foreign taxes recoverable .............................................. 109,766
Deferred organization expenses (Note A) ................................ 34,691
---------------
Total assets ........................................................... 122,607,688
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased ...................................... 1,566,140
Payable for Fund shares redeemed ....................................... 153,552
Other payables ......................................................... 399,084
Accrued management fee (Note C) ........................................ 53,856
Other accrued expenses (Note C) ........................................ 134,998
----------------
Total liabilities 2,307,630
------------------------------------------------------------------------------------------
Net assets, at market value ............................................ $ 120,300,058
------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income .................................... $ 459,368
Unrealized appreciation on:
Investments ......................................................... 17,545,643
Foreign currency related transactions ............................... 2,833
Accumulated net realized gain .......................................... 1,053,305
Paid-in capital ........................................................ 101,238,909
------------------------------------------------------------------------------------------
Net assets, at market value ............................................ $ 120,300,058
------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($120,300,058 / 6,993,392 shares of capital stock outstanding, ----------------
$.01 par value, 100,000,000 shares authorized) ....................... $17.20
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder Greater Europe Growth Fund
<PAGE>
Statement of Operations
year ended October 31, 1996
<TABLE>
<S> <C>
Investment Income
- ------------------------------------------------------------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $136,932) .............. $ 1,101,564
Interest ........................................................... 421,122
---------------
1,522,686
---------------
Expenses:
Management fee (Note C) ............................................ 655,757
Services to shareholders (Note C) .................................. 232,908
Custodian and accounting fees (Note C) ............................. 167,219
Directors' fees and expenses (Note C) .............................. 67,944
Auditing ........................................................... 45,651
Reports to shareholders ............................................ 37,479
Amortization of organization expense (Note A) ...................... 11,888
Registration fees .................................................. 46,965
Legal .............................................................. 13,328
Other .............................................................. 11,810
---------------
Total expenses before reductions ................................... 1,290,949
Expense reductions (Note C) ........................................ (305,892)
---------------
Expenses, net ...................................................... 985,057
------------------------------------------------------------------------------------------
Net investment income .............................................. 537,629
------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ........................................................ 1,061,625
Foreign currency related transactions .............................. (75,263)
---------------
986,362
---------------
Net unrealized appreciation during the period on:
Investments ........................................................ 13,127,538
Foreign currency related transactions .............................. 2,503
---------------
13,130,041
---------------
Net gain on investment transactions ................................ 14,116,403
------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations ............... $ 14,654,032
------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - Scudder Greater Europe Growth Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended October 31,
Increase (Decrease) in Net Assets 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ...................................... $ 537,629 $ 345,669
Net realized gain from investment transactions ............. 986,362 394,420
Net unrealized appreciation on investment transactions
during the period ........................................ 13,130,041 4,315,264
-------------- -------------
Net increase in net assets resulting from operations 14,654,032 5,055,353
-------------- -------------
Distributions to shareholders from:
Net investment income ...................................... (320,199) (26,912)
-------------- -------------
Net realized gains ......................................... (427,101) --
-------------- -------------
Fund share transactions:
Proceeds from shares sold .................................. 110,490,941 49,268,332
Net asset value of shares issued to shareholders in
reinvestment of distributions ............................ 727,064 26,407
Cost of shares redeemed .................................... (45,416,671) (21,590,930)
-------------- -------------
Net increase in net assets from Fund share transactions .... 65,801,334 27,703,809
-------------- -------------
Increase in net assets ..................................... 79,708,066 32,732,250
Net assets at beginning of period .......................... 40,591,992 7,859,742
-------------- -------------
Net assets at end of period (including undistributed net -------------- -------------
investment income of $459,368 and $307,076, respectively) $120,300,058 $40,591,992
-------------- -------------
Other Information
- ------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period .................. 2,901,077 645,237
-------------- --------------
Shares sold ................................................ 6,939,733 3,909,689
Shares issued to shareholders in reinvestment of
distributions ........................................... 52,194 2,316
Shares redeemed ............................................ (2,899,612) (1,656,165)
-------------- --------------
Net increase in Fund shares ................................ 4,092,315 2,255,840
-------------- --------------
Shares outstanding at end of period ........................ 6,993,392 2,901,077
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 - Scudder Greater Europe Growth Fund
<PAGE>
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
October 10, 1994
(commencement of
operations) to
Years Ended October 31, October 31,
1996 (a) 1995 1994
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period .............. $13.99 $12.18 $12.00
-----------------------------------------------
Income from investment operations:
Net investment income ............................. .13 .13 .01
Net realized and unrealized gain on investment
transactions ................................... 3.33 1.70 .17
-----------------------------------------------
Total from investment operations .................. 3.46 1.83 .18
-----------------------------------------------
Less distributions from:
Net investment income ............................. (.11) (.02) --
Net realized gains on investment transactions ..... (.14) -- --
-----------------------------------------------
Total distributions ............................... (.25) (.02) --
-----------------------------------------------
Net asset value, end of period .................... $17.20 $13.99 $12.18
-----------------------------------------------------------------------------------------------------
Total Return (%) (b) .............................. 25.11 15.06 1.50**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ............ 120 41 8
Ratio of operating expenses, net to average
daily net assets (%) ........................... 1.50 1.50 1.50*
Ratio of operating expenses before expense ........ 1.97 2.74 11.46*
reductions, to average daily net assets (%)
Ratio of net investment income to average daily
net assets (%) ................................. .82 1.25 2.40*
Portfolio turnover rate (%) ....................... 39.0 27.9 --
Average commission rate paid (c) .................. $.0509 $ -- $ --
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Total returns would have been lower had certain expenses not been reduced.
(c) Average commission rate paid per share of common and preferred stocks is
calculated for fiscal years beginning on or after September 1, 1995.
* Annualized
** Not annualized
18 - Scudder Greater Europe Growth Fund
<PAGE>
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 Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
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. The security valued in
good faith by the Valuation Committee of the Board of Directors at fair value
amounted to $668,349 (.56% of net assets) and has been noted in the investment
portfolio as of October 31, 1996. Its value has been estimated by the Board of
Directors in the absence of a readily ascertainable market value. However,
because of the inherent uncertainty of valuation, this estimated value may
differ significantly from the value that would have been used had a ready market
for the security existed, and the difference could be material.
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.
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.
19 - Scudder Greater Europe Growth Fund
<PAGE>
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on dividends,
interest, and foreign withholding taxes.
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange
contract (forward contract) is a commitment to purchase or sell a foreign
currency at the settlement date at a negotiated rate. During the period, the
Fund utilized forward contracts as a hedge in connection with portfolio
purchases and sales of securities denominated in foreign currencies.
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Forward
contracts having the same settlement date and broker are offset and any gain
(loss) is realized on the date of offset; otherwise, gain (loss) is realized on
settlement date. Realized and unrealized gains and losses which represent the
difference between the value of the forward contract to buy and the forward
contract to sell are included in net realized and unrealized gain (loss) from
foreign currency related transactions.
Certain risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their contracts. Additionally,
when utilizing forward contracts to hedge, the Fund gives up the opportunity to
profit from favorable exchange rate movements during the term of the contract.
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code which are applicable to regulated investment companies
and to distribute all of its taxable income to its shareholders. 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. The difference
primarily relates to investments in foreign denominated investments, 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.
20 - Scudder Greater Europe Growth Fund
<PAGE>
B. Purchases and Sales of Securities
For the year ended October 31, 1996, purchases and sales of investment
securities (excluding short-term investments) aggregated $84,806,268 and
$23,791,070, respectively.
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 has agreed not to impose all or a portion of
its management fee until February 28, 1997, 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, 1996, the Adviser did not impose a
portion of its management fee amounting to $305,892, and the amount imposed
amounted to $349,865.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
year ended October 31, 1996, the amount charged by SSC aggregated $177,772, of
which $18,156 was unpaid at October 31, 1996.
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the year ended October 31,
1996, the amount charged by STC aggregated $9,227, of which $1,722 was unpaid at
October 31, 1996.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records for the Fund. For the year ended
October 31, 1996, the amount charged by SFAC aggregated $66,529, of which $8,120
was unpaid at October 31, 1996.
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, 1996, Directors' fees and expenses aggregated $67,944.
D. Lines of Credit
The Fund and several affiliated Funds (the "Participants") share in a $500
million revolving credit facility for temporary or emergency purposes, including
the meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated among each of the Participants. Interest is calculated based
on the market rates at the time of the borrowing. The Fund may borrow up to a
maximum of 33 percent of its net assets under the agreement. In addition, the
Fund also maintains an uncommitted line of credit.
21 - Scudder Greater Europe Growth Fund
<PAGE>
Report of Independent Accountants
To the Board of Directors of Scudder International Fund, Inc. and to 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, 1996, and the related statements 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 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, 1996, 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, 1996, the results of its
operations 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 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 19, 1996
22 - Scudder Greater Europe Growth Fund
<PAGE>
Tax Information
The Fund will mail shareholders IRS Form 1099-Div in late January, summarizing
all taxable distributions paid for 1996.
The Fund paid distributions of $.025 per share from net long-term capital gains
during its year ended October 31, 1996.
Pursuant to section 852 of the Internal Revenue Code, the Fund designates
$64,992 as capital gain dividends for its taxable year ended October 31, 1996.
The Fund paid foreign taxes of $136,932 and the Fund recognized $481,714 of
foreign source income during the taxable year ended October 31, 1996. Pursuant
to section 853 of the Internal Revenue Code, the Fund designates $.02 per share
of foreign taxes and $.07 of income from foreign sources as having been paid in
the taxable year ended October 31, 1996.
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.
23 - Scudder Greater Europe Growth Fund
<PAGE>
This Page
intentionally
left blank.
24 - Scudder Greater Europe Growth Fund
<PAGE>
Officers and Directors
Daniel Pierce*
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.
Dudley H. Ladd*
Director
William H. Luers
Director; President, The Metropolitan Museum of Art
Dr. Wilson Nolen
Director; Consultant
Juris Padegs*
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
Joyce E. Cornell*
Vice President
Carol L. Franklin*
Vice President
Edmund B. Games, Jr.*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
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 - Scudder Greater Europe Growth Fund
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder California Tax Free Money Fund*
Scudder New York Tax Free Money Fund*
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund*
Scudder Massachusetts Limited Term
Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder Zero Coupon 2000 Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
U.S. Growth
- -----------
Value
Scudder Capital Growth Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Quality Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Emerging Markets Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund
Retirement Programs
- -------------------
IRA
SEP IRA
SIMPLE IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan *+++ +++
(a variable annuity)
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder World Income Opportunities
Fund, Inc.
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +++Funds within categories are listed from expected
least to most risk. +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.
26 - Scudder Greater Europe Growth Fund
<PAGE>
<TABLE>
How to Contact Scudder
<CAPTION>
Account Service and Information
- --------------------------------------------------------------------------------
<S> <C>
For existing account services and transactions
Scudder Investor Relations -- 1-800-225-5163
For 24 hour account information, fund information, exchanges, and an overview of all the services available to you
Scudder Electronic Account Services -- http://funds.scudder.com
For information about your Scudder accounts, exchanges and redemptions
Scudder Automated Information Line (SAIL) -- 1-800-343-2890
Investment Information
- --------------------------------------------------------------------------------
For information about the Scudder funds, including additional applications and prospectuses, or for answers to
investment questions
Scudder Investor Relations -- 1-800-225-2470
[email protected]
Scudder's World Wide Web Site -- http://funds.scudder.com
For establishing 401(k) and 403(b) plans
Scudder Defined Contribution Services -- 1-800-323-6105
Scudder Brokerage Services
- --------------------------------------------------------------------------------
To receive information about this discount brokerage service and to obtain an application
Scudder Brokerage Services* -- 1-800-700-0820
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 Chicago San Francisco
Boston New York
For information on Scudder Treasurers Trust(TM), institutional cash management service for corporations,
non-profit organizations and trusts which utilizes certain portfolios of Scudder Fund, Inc.* ($100,000 minimum),
call: 1-800-541-7703.
For information on Scudder Institutional Funds**, funds designed to meet the broad investment management and
service needs of banks and other institutions, call: 1-800-854-8525.
Scudder Investor Relations and Scudder Funds Centers are services provided through Scudder Investor Services, Inc., Distributor.
* Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061 -- Member NASD/SIPC
** 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>
27 - Scudder Greater Europe Growth Fund
<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 over 40 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.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
SCUDDER
<PAGE>
Scudder
Emerging Markets
Growth Fund
Annual Report
October 31, 1996
Pure No-Load(TM) Funds
A fund designed to seek long-term growth of capital primarily through equity
investment in emerging markets around the globe.
A pure no-load(TM) fund with no commissions to buy, sell, or exchange
shares.
Scudder (logo)
<PAGE>
Table of Contents
2 In Brief
3 Letter from the Fund's Chairman
4 Portfolio Summary
5 Portfolio Management Discussion
8 Investment Portfolio
15 Financial Statements
18 Financial Highlights
19 Notes to Financial Statements
23 Report of Independent Accountants
25 Officers and Directors
26 Investment Products and Services
27 How to Contact Scudder
In Brief
o For the period of nearly six months beginning with the Fund's inception on May
8, 1996 and ending October 31, 1996, Scudder Emerging Markets Growth Fund
provided a strong total return of 7.08%.
o The outlook for Central Europe continues to be bright. We believe the region's
transition from command to free market economies presents an outstanding
investment opportunity.
o The rate of growth in emerging Asia is slowing. The region is transitioning
away from mercantilist economic models, which may lead to a period of lackluster
performance in those markets.
2
<PAGE>
Letter From the Fund's Chairman
Dear Shareholders,
We are pleased to welcome you as an investor in Scudder Emerging Markets
Growth Fund and to present the first annual report for the Fund, covering the
abbreviated fiscal year which began with the commencement of operations on May
8, 1996 and ended October 31, 1996. Going forward, you can expect to receive
semiannual updates on the Fund's investments and strategy, with the next report
covering the six-month period ending April 30, 1997.
As detailed in the management discussion that follows, Scudder Emerging
Markets Growth Fund provided a total return of 7.08% for the period of roughly
six months covered by this report, comparing very favorably to the aggregate
performance of emerging markets. Going forward, we expect the higher growth
rates of many emerging market economies to attract increasing investor interest
as the U.S. economy slows, supporting a positive outlook. Scudder Emerging
Markets Growth Fund will continue to be appropriate for investors seeking broad
exposure to the equity markets of developing countries as part of a diversified
portfolio.
Finally, to update those of you who like to stay informed about new funds
from Scudder, we introduced two new equity funds in September. Scudder Classic
Growth Fund seeks long-term capital appreciation with a higher degree of
principal stability than the average growth fund. Scudder 21st Century Growth
Fund takes a more aggressive approach, focusing primarily on emerging companies
with the potential to benefit from the rapidly changing industrial and economic
landscape. For more information on these and other Scudder Fund products and
services, please turn to page 26.
Thank you for your continued investment in Scudder Emerging Markets Growth
Fund. Please do not hesitate to call Investor Relations at 1-800-225-2470 with
any questions regarding your account.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
Chairman,
Scudder Emerging Markets Growth Fund
3
<PAGE>
PORTFOLIO SUMMARY as of OCTOBER 31, 1996
- ---------------------------------------------------------------------------
GEOGRAPHICAL
(Excludes 5% Cash Equivalents)
- ---------------------------------------------------------------------------
Latin America 31%
Europe 29%
Pacific Basin 22%
Africa 11%
U.S.& Canada 5%
Other 2%
- --------------------------------------
100%
- --------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
The Fund has emphasized the emerging markets of Central
Europe while underweighting the Pacific Basin.
- --------------------------------------------------------------------------
SECTORS
(Excludes 5% Cash Equivalents)
- --------------------------------------------------------------------------
Financial 23%
Manufacturing 14%
Consumer Staples 12%
Metals & Minerals 11%
Construction 8%
Consumer Discretionary 7%
Energy 5%
Health 4%
Communications 4%
Other 12%
- ---------------------------------------------
100%
- ---------------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
Finance, Manufacturing, and Consumer Staples stocks are well-represented among
Fund holdings.
- --------------------------------------------------------------------------
TEN LARGEST EQUITY HOLDINGS
(17% of portfolio)
- --------------------------------------------------------------------------
1. WIELKOPOLSKI BANK KREDYTOWY S.A.
Commercial bank in Poland
2. ZAGREBACKA BANKA
Commercial banking in Croatia
3. BANK PRZEMYSLOWO HANDLOWY
Bank in Poland
4. MINAS BUENAVENTURA SA
Mining company in Peru
5. C&P HOMES, INC.
Home construction company in Philippines
6. PLIVA D.D.
Pharmaceutical company in Croatia
7. MONDRAGON INTERNATIONAL PHILIPPINES, INC.
Wholesale and direct selling of consumer products and resort management
8. COMPUTERLAND POLAND S.A.
Provider of computer services and systems
9. PETROLEO BRASILEIRO S/A
Petroleum company
10.DMCI HOLDINGS, INC.
Construction and property development company in Philippines
Central European bank stocks are among the Fund's top holding
- -----------------------------------------------------------------------------
For more complete details about the Fund's investment portfolio,
see page 8. A monthly Investment Portfolio Summary and quarterly Portfolio
Holdings are available upon request.
4
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
For the period of nearly six months beginning with the Fund's inception on May
8, 1996 and ending October 31, 1996, Scudder Emerging Markets Growth Fund
provided a total return of 7.08%. Adjusted for the 2% redemption fee assessed on
shares held less than one year, the Fund's total return was 4.94% for the
period. For purposes of rough comparison, the unmanaged MSCI Emerging Markets
Free Index returned a negative 6.03% between April 30, 1996 and the end of
October.
Country Weightings Key to Portfolio Performance
Poland and Egypt contributed strongly on the positive side to the Fund's
outperformance versus the benchmark Index over the period. Our 16.9% weight in
Poland versus 0.5% in the Index benefited the Fund greatly. The Fund also
carried over a 6% weight in Egypt, a country not presently in the Index. The
Egyptian holdings in the Fund appreciated sharply over the period.
Over a period when the Index lost 6%, avoiding the major downdrafts was key to
the Fund's outperformance. India, 6.4% of the Index, plunged; we held nothing
there. Korea fell sharply as well; being nearly out of that market was helpful.
The same holds true for Thailand. Finally, avoiding South Africa (11% of the
Index) continues to help the portfolio as the plunge in the Rand and
deteriorating fundamentals have made it very hard to make money there this year.
Of course, our country decisions over the period weren't perfect. Most notably,
our persistence in staying overweighted in Indonesia hurt us. Political
disturbances spooked the Indonesian market, and our stock selection within the
country further hurt Fund performance. We have concluded that Mr. Suharto's
advancing age and decades-long tenure in office bring us close enough to the end
of an era that political risk is escalating. The citizens' desire for democracy
is becoming apparent. Notwithstanding the attractive valuations carried by some
excellent companies, political issues will likely unsettle the market. We are
therefore moving to a somewhat underweight position in Indonesia.
Market Outlook: Central
Europe Favored
over Emerging Asia
Recent aggregate declines in emerging markets obscure a number of underlying
trends. The investment outlook for Central Europe continues to be bright while
emerging Asia has become less attractive. We believe Central Europe is only
mid-way through a process that will lead to a risk profile closer to Western
Europe's, as well as a move up to valuation levels found in Latin and Asian
emerging markets. As we believe the region's transition from command to free
market economies presents an outstanding investment opportunity, we continue to
shift the portfolio weightings to capture it. Currently, 27% of portfolio assets
are invested in Central Europe, well above the region's 4% representation in the
MSCI Emerging Markets Free Index.
5
<PAGE>
We have just returned from a trip to Asia, where we saw fresh evidence of the
structural impediments which are in the process of slowing emerging Asia's rate
of growth. A transition away from mercantilist economic models will be forced by
the region's past over-investment in key exporting industries and by currency
rigidities which have caused a decade of accumulated distortions. We see
emerging Asia in the process of slowing from historic growth rates of 8-10% to a
more sustainable 5-6%. The transition will yield several years of pain or at
least dull markets, but in the end Asia will still likely have the highest
sustainable growth in the world. While the Fund's Asian exposure is
significantly underweighted at 22%, we are confident we will be shifting
portfolio assets back to the region some day.
The Philippines remains a glorious exception to Asia's doldrums. Our trip
provided encouraging evidence that the much needed tax reform program has a good
chance of being enacted. The reform proposal represents a massive overhaul which
will greatly broaden the now pitifully tiny tax base. It will make for a fairer
system and -- crucially -- one that will stabilize the fiscal situation and
enable much more investment in needed infrastructure. If the Philippines' young
democracy can enact this huge change in the face of powerful vested interests
(who stand to lose considerably) it will not only be a great victory for the
country, but will broadly challenge the conventional wisdom that only dictators
can push through difficult economic and social reforms in emerging markets.
Philippine GDP growth is accelerating gently, the proverbial "tide that lifts
all boats". The Central Bank is maintaining tight monetary policy and we came
away unconcerned that an asset bubble or other ills of overheating are on the
horizon.
Finally, with respect to Latin America (31% of assets), we see the
fundamentals and valuations as still attractive in select markets. We expect the
region to be a positive contributor to performance going forward.
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART TITLE:
Region Weightings: (October 31, 1996)
Scudder Emerging Markets Growth Fund vs.
MSCI Emerging Markets Free Index
BAR CHART DATA:
Scudder Emerging Markets MSCI Emerging Markets
Growth Fund Free Index
------------------------ ---------------------
Asia 22% 51%
Latin America 31 30
Central Europe 27 4
Middle East/Africa 14 15
Other 6 0
We remain bullish on many of the world's emerging markets, and we see a
generally benign environment for this asset class going forward. The biggest
threat to emerging market performance would be a reduction in global liquidity.
We do not believe the U.S. Federal Reserve is likely to raise rates much, if at
6
<PAGE>
all, and expect 1997 to bring a softening in U.S. growth which will keep
liquidity for financial assets supportive. As U.S. growth slows, the high
earnings growth produced by many emerging markets should prove all the more
attractive to investors.
Scudder Emerging Markets Growth Fund will continue to provide broad-based
exposure to the opportunities for capital appreciation presented by the equity
markets of developing countries. Thank you for your investment in the Fund.
Sincerely,
Your Portfolio Management Team
/s/Joyce E. Cornell /s/Elizabeth Allan
Joyce E. Cornell Elizabeth Allan
/s/Tara C. Kenney
Tara C. Kenney
Scudder Emerging Markets
Growth Fund: A Team Approach
to Investing
Scudder Emerging Markets 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 quantitative 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.
Joyce E. Cornell, Portfolio Manager, has focused on stock selection since
1993. Joyce, who has nine years of investment experience as a research
analyst, joined Scudder in 1991. Elizabeth Allan has been a portfolio manager
at Scudder since 1991 and joined the firm in 1987. Tara C. Kenney, Portfolio
Manager, assists with the Fund's research and investment strategy. Tara, who
joined Scudder in 1995, has ten years of financial industry experience.
7
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO as of October 31, 1996
<CAPTION>
PRINCIPAL MARKET
AMOUNT($) VALUE($)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS 2.3%
- ----------------------------------------------------------------------------------------------------------------------
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 10/31/96 at 5.52%, to be
repurchased at $1,777,272 on 11/1/96, collateralized by a $1,606,000 U.S. Treasury Note, ---------
9.125%, 5/15/99 (Cost $1,777,000) ......................................................... 1,777,000 1,777,000
---------
SHORT TERM NOTES 2.6%
- ----------------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank Discount Note, 11/1/96 (Cost $2,000,000) ............................ 2,000,000 2,000,000
---------
SHARES
- ----------------------------------------------------------------------------------------------------------------------
COMMON STOCKS 95.1%
ARGENTINA 4.8%
Astra CAPSA (Petroleum company) ............................................................ 115,800 208,470
Banco Frances del Rio de la Plata (ADR) (Commercial and private bank) ...................... 3,700 97,125
Banco de Galicia y Buenos Aires "B" (Commercial and private bank) .......................... 96,778 444,278
Banco de Galicia y Buenos Aires "B" Rights* (expiration 11/4/96) ........................... 96,778 97
Banco de Galicia y Buenos Aires (ADR) ...................................................... 15,572 282,243
Compania Interamericana de Automoviles S.A.* (Automobile manufacturer) ..................... 51,250 229,634
Cresud S.A. Comercial* (Agricultural company dealing in cattle and grains) ................. 580,723 1,039,650
Inversiones y Representaciones SA (Real estate developer) .................................. 150,100 459,375
Perez Companc S.A. "B" (Industrial conglomerate) ........................................... 94,600 600,800
Sevel Argentina SA "C"* (Automobile and truck manufacturer) ................................ 140,000 347,252
---------
3,708,924
---------
AUSTRALIA 0.7%
Orogen Minerals* (GDR) (Holding company involved in gold mining and oil development
in New Guinea) ............................................................................ 34,500 546,377
---------
BOLIVIA 0.5%
Compania Boliviana de Energia S.A.(Electric utility) ....................................... 9,400 397,150
---------
BOTSWANA 0.1%
Sechaba Investment Trust Co.* (Investment Co.) ............................................. 135,000 93,488
---------
BRAZIL 11.3%
Aracruz Celulose S.A. (ADR) (Producer of eucalyptus kraft pulp) ............................ 67,700 541,600
Centrais Eletricas de Santa Catarina S.A. "B"* (pfd.) (Electric power distributor) ......... 156,215 132,283
Centrais Electricas de Santa Catarina S.A. (GDR) ........................................... 3,700 310,800
Centrais Eletricas Brasileiras S.A. "B" (pfd.) (Electric utility) .......................... 950,000 307,913
Companhia Cervejaria Brahma (pfd.) (Leading beer producer and distributor) ................. 814,000 503,105
Companhia Siderurgica Paulista "B"* (pfd.) (Steel producer) ................................ 925,000 702,258
Companhia Vale do Rio Doce (pfd.) (Diverse mining and industrial complex) .................. 32,300 663,354
</TABLE>
The accompanying notes are an integral part of the financial statements.
8 -- SCUDDER EMERGING MARKETS GROWTH FUND
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE($)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Industrias Klabin de Papel e Celulose S/A (pfd.) (Producer of papers and paper products,
newsprint, and cardboard boxes) ........................................................... 378,000 375,277
Lojas Renner S.A. (pfd.) (Specialty retailer of apparel, cosmetics, electronics, household
appliances and furniture) ................................................................. 11,700,000 626,338
Multicanal Participacoes S.A.* (ADR) (Operator of cable television systems) ................ 57,000 798,000
Petroleo Brasileiro S/A (pfd.) (Petroleum company) ......................................... 9,085,000 1,176,080
Telecomunicacoes Brasileiras S.A. (ADR) (Telecommunication services) ....................... 5,200 387,400
Telecomunicacoes Brasileiras S.A. .......................................................... 9,200,000 560,561
Telecomunicacoes de Minas Gerais "B" (pfd.) (Telecommunication services) ................... 1,655,000 184,766
Telecomunicacoes de Minas Gerais (voting) .................................................. 15,530 1,859
Telecomunicacoes de Sao Paulo S.A. (pfd.) (Telecommunication services) ..................... 1,060,000 193,965
Telecomunicacoes do Parana S/A (pfd.) (Telecommunication services) ......................... 975,000 445,080
Usinas Siderurgicas de Minas Gerais S/A (pfd.) (Non-coated flat products and electrolytic
galvanized products) ...................................................................... 753,000,000 791,551
---------
8,702,190
---------
CANADA 2.1%
Corriente Resources, Inc.* (Mining and processing of gold, bismuth, tin and tungsten in
South America) ............................................................................ 247,600 784,742
Kazakhstan Minerals Corp.* (Mining and exploring of copper, gold, and other minerals
in Kazakhstan) ............................................................................ 41,500 280,125
Ourominas Minerals Inc.* (Gold exploration in Brazil) ...................................... 167,000 541,743
---------
1,606,610
---------
CHILE 3.4%
Laboratorio Chile S.A. (ADR)(Manufacturer and distributor of off-patent pharmaceutical
products) ................................................................................. 12,800 203,200
Madeco, SA (ADR) (Manufacturer of copper and aluminum products for various industrial and
consumer uses) ............................................................................ 21,900 525,600
Santa Isabel S.A. (ADR) (Supermarket chain) ................................................ 15,900 447,188
Sociedad Quimica y Minera de Chile SA (ADR) (Producer of fertilizer, iodine and industrial
chemicals) ................................................................................ 9,400 540,500
Vina Concha y Toro SA (ADR) (Wine producer) ................................................ 46,500 930,000
---------
2,646,488
---------
CROATIA 3.5%
Pliva D.D.* (GDR) (Pharmaceutical company) ................................................. 25,500 1,255,875
Zagrebacka Banka* (GDR) (Commercial banking) ............................................... 73,700 1,427,938
---------
2,683,813
---------
EGYPT 6.3%
Commercial International Bank (Commercial bank) ............................................ 1,550 203,094
</TABLE>
The accompanying notes are an integral part of the financial statements.
9 -- SCUDDER EMERGING MARKETS GROWTH FUND
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE($)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial International Bank (GDR) ......................................................... 47,200 684,400
Eastern Tobacco Company (Maker of tobacco products) ......................................... 49,160 694,017
Egypt Financial & Industrial Co.* (Fertilizer producer) ..................................... 2,550 45,750
Egyptian Starch & Glucose Co. (Food producer) ............................................... 5,000 57,058
Madinet Nasser City Housing Co.* (Real estate development company) .......................... 12,125 713,229
Misr International Bank (Bank) .............................................................. 3,485 379,267
North Cairo Mills, Ltd. (Textile manufacturer) .............................................. 18,200 588,818
Paints & Chemical Industries, Ltd. (Producer of paints and chemicals) ....................... 792 200,328
Suez Cement Co. (Cement producer) ........................................................... 18,925 267,675
Torrah Portland Cement Co. (Cement producer) ................................................ 56,060 997,529
---------
4,831,165
---------
GHANA 0.7%
Ashanti Goldfields Co., Ltd.* (Leading gold producer) (b) ................................... 10,177 153,571
Ashanti Goldfields Co., Ltd.* (Preference shares) (b) ....................................... 10,177 27,071
Ashanti Goldfields Co., Ltd. (GDR) .......................................................... 19,000 311,125
---------
491,767
---------
GREECE 0.3%
Ergo Bank S.A. (Commercial bank) ............................................................ 3,400 199,525
---------
HONG KONG 0.8%
Sinocan Holdings Ltd. (Manufacturer of three-piece cans for beverage and food
industries) ................................................................................ 1,351,000 642,110
---------
HUNGARY 4.1%
EGIS (Developer and manufacturer of pharmaceutical products) ................................ 13,100 807,950
Graboplast (Producer of home improvement materials, artificial leather and book bindings) ... 32,629 999,383
Inter-Europa Bank (Commercial bank) ......................................................... 900 222,959
Pannonplast (Manufacturer of plastic products from PVC, polypropylene, polyethylene
and other raw materials) ................................................................... 21,100 689,711
Pick Szeged (Ordinary) (Sausage manufacturer) ............................................... 10,000 450,421
---------
3,170,424
---------
INDONESIA 2.8%
Ciputra Development Co. (Foreign registered) (Developer of office properties, shipping and
commercial centers, industrial properties and sports facilities) ........................... 140,000 102,201
Darya Varia Laboratoria (Foreign registered) (Producer of medicines and pharmaceuticals) .... 133,000 199,893
HM Sampoerna (Foreign registered) (Tobacco company) ......................................... 84,500 785,582
Indah Kiat Pulp & Paper (Foreign registered) (Producer of pulp and paper) ................... 1,189,180 931,939
Panin Bank (Foreign registered) (Bank) ...................................................... 105,000 104,831
---------
2,124,446
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 -- SCUDDER EMERGING MARKETS GROWTH FUND
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE($)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ISRAEL 0.7%
Check Point Software Technologies Ltd.* (Developer of network security software) ........... 19,000 522,500
---------
JORDAN 0.4%
Arab Potash Co.* (Salts and chemicals extraction) (b) ...................................... 14,000 110,461
Jordan Cement Factories* (Cement producer) (b) ............................................. 37,675 176,763
---------
287,224
---------
KOREA 1.4%
Chosun Brewery Co., Ltd.* (Brewery) ........................................................ 31,320 833,936
Korea Electric Power Co. (Electric utility) ................................................ 8,100 238,221
---------
1,072,157
---------
MALAYSIA 2.7%
ACP Industries Bhd. (Manufacturer of various precast concrete products and thermoplastic
roadmarking materials) .................................................................... 30,000 197,111
AMMB Holdings Bhd. (Holding company for Arab Malaysian Merchant Bank Bhd. which provides
financial, insurance and investment services) ............................................. 46,000 247,615
Crest Petroleum Bhd.* (Investment company involved in various oilfield services) ........... 19,200 63,835
Hong Leong Credit Bhd. (Investment holding company involved in financing, money market
dealings, investment trading, fund management) ............................................ 44,000 243,816
IOI Corporation Bhd. (Processor of oil palm, rubber and cocoa) ............................. 170,000 267,801
New Straits Times Press Bhd. (Newspaper publisher and property developer) .................. 39,000 205,304
SAP Holdings Bhd. (Property developer) ..................................................... 191,000 831,585
---------
2,057,067
---------
MEXICO 1.8%
Industrias Penoles S.A. (Exploration and marketing of minerals and non-ferrous metals
such as lead, zinc and silver) ............................................................ 207,100 822,726
Telefonos de Mexico S.A. de C.V. "L" (ADR) (Telecommunication services) .................... 19,100 582,550
---------
1,405,276
---------
MOROCCO 1.3%
Omnium Nord Africaine (Conglomerate) ....................................................... 11,200 644,864
Societe Nationale d'Investissements "V" (Conglomerate, various joint ventures) ............. 5,300 341,778
---------
986,642
---------
OMAN 1.0%
Oryx Fund, Ltd.* (Mutual fund domiciled in Guernsey, investing in the Middle East) ......... 70,300 764,513
---------
PERU 8.2%
CPT Telefonica del Peru S.A. (ADR) (Telecommunication services) ............................ 14,100 290,813
Cementos Lima S.A. "T" (Cement producer) ................................................... 50,000 681,897
Cementos Norte Pasasmayo SA (Cement producer) (b) .......................................... 38,472 55,120
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 -- SCUDDER EMERGING MARKETS GROWTH FUND
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE($)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cerveceria Backus & Johnston S.A. "T" (Brewery) ............................................ 315,800 317,940
Compania Peruana de Telefonos S.A. "B" (Public and cellular telephone services) ............ 120,000 253,708
Credicorp Ltd (Holding company providing a full range of financial services) ............... 19,200 336,000
Edegel SA (Electric power utility) ......................................................... 1,463,601 787,766
Talleres Moyopampa S.A. "B" (Electric power utility) ....................................... 1,166 867
Enrique Ferreyros y Cia. (Machinery manufacturer) .......................................... 719,751 707,906
Minas Buenaventura SA "A" (Mining company) ................................................. 168,600 1,307,670
Minas Buenaventura SA* (ADR) (Mining company) .............................................. 2,300 38,525
Minsur S.A. "T" (Tin mining company) ....................................................... 61,700 553,090
Consorcio Alimertos Fabril Pacifico* (Food producer) ....................................... 669,413 977,226
---------
6,308,528
---------
PHILIPPINES 10.5%
Ayala Corp. "B" (Industrial conglomerate) .................................................. 336,000 319,635
C & P Homes, Inc. (Home construction company) .............................................. 2,885,000 1,317,352
DMCI Holdings, Inc.* (Construction and property development company) ....................... 1,615,000 1,167,618
Empire East Land Holdings, Inc.* (Property developer for low to middle income markets) ..... 1,025,000 497,289
Filinvest Development Corp.* (Developer of real estate properties) ......................... 58,000 21,629
HI Cement Corp.* (Manufactures two kinds of cement: portland cement and pozzolan cement) ... 900,000 277,397
International Container Terminal Services, Inc.* (Containerized cargo handling firm) ....... 1,279,000 839,526
Ionics Circuit Inc.* (Manufacturer of electronic components) ............................... 150,000 97,032
Manila Electric Co. "B" (Electric utility) ................................................. 48,100 353,246
Metropolitan Bank and Trust Company (Commercial bank and trust company) .................... 37,525 828,177
Mondragon International Philippines, Inc.* (Wholesale and direct selling of consumer
products and resort management ............................................................ 2,253,000 1,243,094
Philippine Savings Bank* (Bank) ............................................................ 230,000 498,858
Republic Glass Holdings Corp. (Maker of glass products for passenger cars and light
commercial vehicles) ...................................................................... 1,228,800 238,466
SM Prime Holdings Corp. (Leader in commercial center operations) ........................... 810,000 172,603
William Gothong & Aboitiz* (Inter-island passenger and cargo liner services) (b) ........... 658,000 142,717
---------
8,014,639
---------
POLAND 16.9%
Bank Przemyslowo Handlowy (Bank) ........................................................... 19,498 1,352,486
Bank Rozwoju Eksportu SA (Export bank) ..................................................... 28,700 852,465
Bank Slaski SA (Bank) ...................................................................... 10,600 980,364
Bydgoska Fabryka Kabli SA (Manufacturer of cables, wires and insulating materials) ......... 161,500 1,125,996
ComputerLand Poland S.A.* (Provider of computer services and systems) ...................... 65,500 1,199,932
Debica SA "A"* (Tire manufacturer) ......................................................... 31,400 636,668
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 -- SCUDDER EMERGING MARKETS GROWTH FUND
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE($)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Elektrim Spolka Akcyjna SA (Manufacturer of power equipment, electrical machinery
and apparatus) ............................................................................ 67,800 578,828
Krosno S.A. (Manufacturer of wide range of glassware) ...................................... 39,800 750,356
Kutnowskie Zaklady Farmaceutyczne Polfa S.A. "A"* (Producer of pharmaceuticals,
veterinary medicines, food components) .................................................... 27,700 807,982
Mostostal Zabrze Holding SA (Construction company) ......................................... 136,500 558,391
Polifarb Wroclaw SA (Chemical producer) .................................................... 149,000 662,528
Polish Privatization Vouchers (Exchangeable into shares of National Investment
Funds) .................................................................................... 12,000 614,684
STALEXPORT S.A. "A"* (Importer/exporter of machinery and equipment, raw materials,
metallurgical products) ................................................................... 5,000 63,140
Wielkopolski Bank Kredytowy S.A. (Commercial bank) ......................................... 309,600 1,927,291
Zaklady Metali Lekkich Kety* (Manufacturer of aluminum casting alloys and products) ........ 11,400 892,146
----------
13,003,257
----------
PORTUGAL 1.3%
Cimentos de Portugal SA (Manufacturer of cement, ready mix concrete and aggregates) ........ 34,100 716,757
Portugal Telecom SA (Telecommunication services) ........................................... 11,800 306,854
----------
1,023,611
----------
SWITZERLAND 1.0%
Holderbank Financiere Glaris AG (Bearer) (Cement producer) ................................. 715 495,702
Phoenix Mecano AG (Bearer) (Manufacturer of hospital beds) ................................. 550 270,185
----------
765,887
----------
TAIWAN 0.6%
Far Eastern Department Stores Ltd. (Department store chain) ................................ 365,000 475,799
Far Eastern Department Stores Ltd. Rights* (b) (expiration 11/18/96) ....................... 24,455 6,127
----------
481,926
----------
THAILAND 1.4%
PTT Exploration and Production Co., Ltd. (Foreign registered) (Petroleum refinery) ......... 45,000 645,756
Siam Makro Co., Ltd. (Foreign registered) (Food supermarket chain) ......................... 99,000 423,094
----------
1,068,850
----------
UNITED STATES 1.7%
Benton Oil & Gas Co.* (Oil and gas exploration, development and production in Venezuela).... 41,100 1,006,950
Pioneer Group Inc. (Fund management company owning major gold producer in Ghana) ........... 11,300 271,200
----------
1,278,150
----------
ZIMBABWE 2.8%
Delta Corp. (Brewery) ...................................................................... 90,873 282,360
Meikles Africa Ltd.* (GDR) (Hotel operator) ................................................ 756,400 1,021,140
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 -- SCUDDER EMERGING MARKETS GROWTH FUND
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE($)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Wankie Colliery Co., Ltd. (Operator of coal mining activities at Hwange, Zimbabwe) ......... 1,270,000 418,530
Zimbabwe Sun (Operator of hotels and other tourist facilities) ............................. 1,180,847 455,861
----------
2,177,891
- ----------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $71,451,083) 73,062,595
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0% (Cost $75,228,083)(a) 76,839,595
- ----------------------------------------------------------------------------------------------------------------------
<FN>
(a) The cost for federal income tax purposes was $75,541,967. At October 31, 1996, net unrealized appreciation for
all securities based on tax cost was $1,297,628. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost of $4,117,217 and aggregate gross
unrealized depreciation for all securities in which there was an excess of tax cost over market value of
$2,819,589.
(b) Securities valued in good faith by the Valuation Committee of the Board of Directors. The cost of these
securities at October 31, 1996 aggregated $798,067. See Note A of the Notes to Financial Statements.
* Non-income producing security.
Sector breakdown of the Fund's equity securities is noted on page 4.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 -- SCUDDER EMERGING MARKETS GROWTH FUND
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
as of October 31, 1996
<S> <C> <C>
ASSETS
- -----------------------------------------------------------------------------------------------------
Investments, at market (identified cost $75,228,083) (Note A) .......... $76,839,595
Cash ................................................................... 2,222
Foreign currency, at value, (cost $422,234) ............................ 422,125
Receivable for investments sold ........................................ 146,112
Dividends and interest receivable ...................................... 29,488
Receivable for Fund shares sold ........................................ 1,118,956
Foreign taxes recoverable .............................................. 2,184
Deferred organization expenses (Note A) ................................ 27,556
-----------
Total assets ........................................................... 78,588,238
LIABILITIES
- -----------------------------------------------------------------------------------------------------
Payable for investments purchased ...................................... 2,566,881
Payable for Fund shares redeemed ....................................... 42,024
Accrued expenses and other payables .................................... 185,640
-----------
Total liabilities ...................................................... 2,794,545
--------------------------------------------------------------------------------------
NET ASSETS, AT MARKET VALUE $75,793,693
--------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------------
Net assets consist of:
Accumulated net investment loss ........................................ $ (124,716)
Unrealized appreciation (depreciation) on:
Investment securities ............................................. 1,611,512
Foreign currency related transactions ............................. (1,478)
Accumulated net realized loss .......................................... (518,900)
Paid-in capital ........................................................ 74,827,275
--------------------------------------------------------------------------------------
NET ASSETS, AT MARKET VALUE $75,793,693
--------------------------------------------------------------------------------------
NET ASSET VALUE
NET ASSET VALUE, offering and redemption (Note A) price per share
($75,793,693/5,896,839 shares of capital stock outstanding, $.01
par value, 100,000,000 shares authorized) ............................. $12.85
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 -- SCUDDER EMERGING MARKETS GROWTH FUND
<PAGE>
<TABLE>
Statement of Operations
for the period May 8, 1996
(commencement of operations) to October 31, 1996
<S> <C> <C>
INVESTMENT INCOME
- ----------------------------------------------------------------------------------------------------
Income:
Dividends (net of foreign taxes withheld of $24,157) .................. $ 184,752
Interest .............................................................. 106,704
----------
291,456
----------
Expenses:
Management fee (Note C) ............................................... 215,973
Custodian and accounting fees (Note C) ................................ 191,714
Services to shareholders (Note C) ..................................... 89,666
Directors' fees and expenses (Note C) ................................. 36,072
Registration fees ..................................................... 58,513
Auditing .............................................................. 27,750
Reports to shareholders ............................................... 18,307
Legal ................................................................. 8,354
Amortization of organization expense (Note A) ......................... 2,944
Other ................................................................. 6,878
----------
Total expenses before reductions ...................................... 656,171
Expense reductions (Note C) ........................................... (309,636)
----------
Expenses, net ......................................................... 346,535
-------------------------------------------------------------------------------------
NET INVESTMENT LOSS (55,079)
-------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized loss from:
Investments ........................................................... (518,900)
Foreign currency related transactions ................................. (96,473)
----------
(615,373)
----------
Net unrealized appreciation (depreciation) during the period on:
Investments ........................................................... 1,611,512
Foreign currency related transactions ................................. (1,478)
----------
1,610,034
----------
Net gain on investment transactions ................................... 994,661
-------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 939,582
-------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 -- SCUDDER EMERGING MARKETS GROWTH FUND
<PAGE>
<TABLE>
Statement of Changes in Net Assets
<CAPTION>
FOR THE PERIOD
MAY 8, 1996
(COMMENCEMENT
OF OPERATIONS
INCREASE (DECREASE) IN NET ASSETS OCTOBER 31,
1996)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment loss ................................................... $ (55,079)
Net realized loss ..................................................... (615,373)
Net unrealized appreciation on investment transactions during the
period ............................................................... 1,610,034
-----------
Net increase in net assets resulting from operations .................. 939,582
-----------
Fund share transactions:
Proceeds from shares sold ............................................. 76,964,590
Cost of shares redeemed ............................................... (2,135,475)
Redemption fees (Note A) .............................................. 23,796
-----------
Net increase in net assets from Fund share transactions ............... 74,852,911
-----------
Increase in net assets ................................................ 75,792,493
Net assets at beginning of period ..................................... 1,200
NET ASSETS AT END OF PERIOD (including accumulated net investment -----------
loss of $124,716) .................................................... $75,793,693
-----------
OTHER INFORMATION
- -----------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period ............................. 100
-----------
Shares sold ........................................................... 6,064,272
Shares redeemed ....................................................... (167,533)
-----------
Net increase in Fund shares ........................................... 5,896,739
-----------
Shares outstanding at end of period ................................... 5,896,839
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 -- SCUDDER EMERGING MARKETS GROWTH FUND
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
The following table includes selected data for a share outstanding throughout the period (a) and
other performance information derived from the financial statements.
<CAPTION>
FOR THE PERIOD
MAY 8, 1996
(COMMENCEMENT)
OF OPERATIONS) TO
OCTOBER 31,
1996
- -------------------------------------------------------------------------------------------------
<S> <C>
------
Net asset value, beginning of period ...................................... $12.00
------
Income from investment operations:
Net investment loss ....................................................... (.02)
Net realized and unrealized gain on investments ........................... .86
------
Total from investment operations .......................................... .84
------
Redemption fees (Note A) .................................................. .01
------
Net asset value, end of period ............................................ $12.85
------
- -------------------------------------------------------------------------------------------------
TOTAL RETURN (%)(C) ....................................................... 7.08(d)**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) .................................... 76
Ratio of operating expenses, net to average daily net assets (%) .......... 2.00*
Ratio of operating expenses before expense reductions, to average daily net
assets (%) ............................................................... 3.79*
Ratio of net investment loss to average daily net assets (%) .............. (.32)*
Portfolio turnover rate (%) ............................................... 19.5*
Average commission rate paid (b) .......................................... $.0006
<FN>
(a) Based on monthly average of shares outstanding during the period.
(b) Average commission rate paid per share of common and preferred stocks.
(c) Total return is higher due to maintenance of the Fund's expenses.
(d) Total return does not reflect the effect of the 2% redemption fee on shares held less than
one year.
* Annualized
** Not annualized
</FN>
</TABLE>
18 -- SCUDDER EMERGING MARKETS GROWTH FUND
<PAGE>
NOTES TO FINANCIAL STATEMENTS
A. Significant Accounting Policies
Scudder Emerging Markets Growth Fund ("the Fund") is a 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 Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed by the Fund in the preparation of its
financial statements.
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 $671,830 (0.9% of net assets) and have been noted in the investment
portfolio as of October 31, 1996. Their values have been estimated by the Board
of Directors in the absence of readily ascertainable market values. However,
because of the inherent uncertainty of valuation, those estimated values may
differ significantly from the values that would have been used had a ready
market for the securities existed, and the difference could be material.
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 other 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.
19 -- SCUDDER EMERGING MARKETS GROWTH FUND
<PAGE>
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. The Fund paid
no federal income taxes and no federal income tax provision was required.
At October 31, 1996, the Fund had a net tax basis capital loss carry forward of
approximately $481,000, which may be applied against any realized net taxable
capital gains of each succeeding year until fully utilized or until October 31,
2004, 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 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 included as an addition to
paid-in capital.
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. Earnings
and profits 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 income tax return.
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. The differences
primarily relate to investments in forward contracts, passive foreign investment
companies, foreign denominated investments, 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 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.
20 -- SCUDDER EMERGING MARKETS GROWTH FUND
<PAGE>
B. PURCHASES AND SALES OF SECURITIES
For the period May 8, 1996 (commencement of operations) to October 31, 1996,
purchases and sales of investment securities (excluding short-term investments)
aggregated $75,729,996 and $3,760,013, respectively.
C. RELATED PARTIES
Under the Fund's Investment Management Agreement (the "Agreement") with Scudder,
Stevens & Clark, Inc. (the "Adviser"), the Fund pays the Adviser a fee equal to
an annual rate of 1.25% 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
objective, 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 also 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 has agreed not to impose all or a portion of its
management fee until June 30, 1997 in order to maintain the annualized expenses
of the Fund at not more than 2.00% of average daily net assets. For the period
May 8, 1996 (commencement of operations) to October 31, 1996, the Adviser did
not impose any of its management fee amounting to $215,973.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. Included
in services to shareholders is $65,697 charged to the Fund by SSC for the period
May 8, 1996 (commencement of operations) to October 31, 1996 and the amount not
imposed amounted to $58,166, of which $7,531 is unpaid at October 31, 1996.
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the period May 8, 1996
(commencement of operations) to October 31, 1996, the amount charged to the Fund
by STC aggregated $1,553 and the amount not imposed amounted to $1,375.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the period May 8,
1996 (commencement of operations) to October 31, 1996, the amount charged to the
Fund by SFAC aggregated $38,540 and the amount not imposed amounted to $34,122,
of which $4,418 is unpaid at October 31, 1996.
The Fund pays each Director not affiliated with the Adviser $4,000 annually plus
specified amounts for attended board and committee meetings. For the period May
8, 1996 (commencement of operations) to October 31, 1996, Directors' fees
aggregated $36,072.
21 -- SCUDDER EMERGING MARKETS GROWTH FUND
<PAGE>
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, high rates of inflation, repatriation restrictions on
income and capital, and future adverse political and economic developments.
Moreover, securities issued in these markets may be less liquid, subject to
government ownership controls, delayed settlements, and their prices more
volatile than those of comparable securities in the United States.
22 -- SCUDDER EMERGING MARKETS GROWTH FUND
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS OF INTERNATIONAL FUND, INC. AND THE SHAREHOLDERS
OF SCUDDER EMERGING MARKETS GROWTH FUND:
We have audited the accompanying statement of assets and liabilities of Scudder
Emerging Markets Growth Fund, including the investment portfolio, as of October
31, 1996, and the related statement of operations, the statement of changes in
net assets, and the financial highlights for the period May 8, 1996
(commencement of operations) to October 31, 1996. 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 audit.
We conducted our audit 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, 1996 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 audit provides 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 Emerging Markets Growth Fund as of October 31, 1996, the results of its
operations, the changes in its net assets and the financial highlights for the
period May 8, 1996 (commencement of operations) to October 31, 1996, in
conformity with generally accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
December 5, 1996
- --------------------------------------------------------------------------------
23 -- SCUDDER EMERGING MARKETS GROWTH FUND
<PAGE>
This Page
intentionally
left blank.
24
<PAGE>
Officers and Directors
Daniel Pierce*
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
Dudley H. Ladd*
Director
William H. Luers
Director; President, The
Metropolitan
Museum of Art
Dr. Wilson Nolen
Director; Consultant
Juris Padegs*
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
Joyce E. Cornell*
Vice President
Carol L. Franklin*
Vice President
Edmund B. Games, Jr.*
Vice President
Jerard K. Hartman*
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.
25
<PAGE>
Investment Products and Services
The Scudder Family of Funds
- --------------------------------------------------------------------------------
Money Market
Scudder Cash Investment Trust
Scudder U.S. Treasury Money Fund
Tax Free Money Market+
Scudder Tax Free Money Fund
Scudder California Tax Free Money Fund*
Scudder New York Tax Free Money Fund*
Tax Free+
Scudder California Tax Free Fund*
Scudder High Yield Tax Free Fund
Scudder Limited Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder Massachusetts Limited Term
Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder Medium Term Tax Free Fund
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
Growth and Income
Scudder Balanced Fund
Scudder Growth and Income Fund
Income
Scudder Emerging Markets Income Fund
Scudder Global Bond Fund
Scudder GNMA Fund
Scudder High Yield Bond Fund
Scudder Income Fund
Scudder International Bond Fund
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Growth
Scudder Capital Growth Fund
Scudder Classic Growth Fund
Scudder Development Fund
Scudder Emerging Markets Growth Fund
Scudder Global Discovery Fund
Scudder Global Fund
Scudder Gold Fund
Scudder Greater Europe Growth Fund
Scudder International Fund
Scudder Latin America Fund
Scudder Micro Cap Fund
Scudder Pacific Opportunities Fund
Scudder Quality Growth Fund
Scudder Small Company Value Fund
Scudder 21st Century Growth Fund
Scudder Value Fund
The Japan Fund
Retirement Plans and Tax-Advantaged Investments
- --------------------------------------------------------------------------------
IRAs
Keogh Plans
Scudder Horizon Plan*+++ (a variable annuity)
401(k) Plans
403(b) Plans
SEP-IRAs
Profit Sharing and Money Purchase
Pension Plans
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder World Income Opportunities
Fund, Inc.
Institutional Cash Management
- --------------------------------------------------------------------------------
Scudder Institutional Fund, Inc.
Scudder Fund, Inc.
Scudder Treasurers Trust(TM)++
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +A portion of the income from the tax-free funds may
be subject to federal, state, and local taxes. *Not available in all states.
+++A no-load variable annuity contract provided by Charter National Life
Insurance Company and its affiliate, offered by Scudder's insurance agencies,
1-800-225-2470. #These funds, advised by Scudder, Stevens & Clark, Inc., are
traded on various stock exchanges. ++For information on Scudder Treasurers
Trust,(TM) an institutional cash management service that utilizes certain
portfolios of Scudder Fund, Inc. ($100,000 minimum), call 1-800-541-7703.
26
<PAGE>
How to Contact Scudder
Account Service and Information
- --------------------------------------------------------------------------------
For existing account service and transactions
Scudder Investor Relations
1-800-225-5163
For 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
Visit the Scudder World Wide Web Site at:
- --------------------------------------------------------------------------------
http://funds.scudder.com
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 San Francisco
Chicago
For information on Scudder Treasurers Trust(TM), an
institutional cash management service for corporations,
non-profit organizations and trusts which utilizes certain
portfolios of Scudder Fund, Inc.* ($100,000 minimum), call:
1-800-541-7703.
For information on Scudder Institutional Funds*, funds designed
to meet the broad investment management and service needs of
banks and other institutions, call:
1-800-854-8525.
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.
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 over 40 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.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
SCUDDER (logo)
