Filed electronically with the Securities and Exchange Commission on
June 29, 1998
File No. 2-14400
File No. 811-642
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
----------
Post-Effective Amendment No. 65
----------
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 45
-----------
Scudder International Fund, Inc.
--------------------------------
(Exact Name of Registrant as Specified in Charter)
345 Park Avenue, New York, NY 10154
-----------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (617) 295-2567
--------------
Thomas F. McDonough
Scudder Kemper Investments, Inc.
Two International Place, Boston, MA 02110-4103
----------------------------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
immediately upon filing pursuant to paragraph (b)
--------
X on June 29, 1998 pursuant to paragraph (b)
--------
60 days after filing pursuant to paragraph (a)(i)
--------
75 days after filing pursuant to paragraph (a)(ii)
--------
on pursuant to paragraph (a)(ii) of Rule 485
-------- ------------
If appropriate, check the following:
this post-effective amendment designates a new effective date
-------- for a previously filed post-effective amendment
<PAGE>
SCUDDER INTERNATIONAL FUND, INC.
SCUDDER LATIN AMERICA FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
---------------------------
PART A
- ------
<TABLE>
<S> <C> <C> <C> >
<CAPTION>
Item No. Item Caption Prospectus Caption
-------- ------------ ------------------
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial FINANCIAL HIGHLIGHTS
Information DISTRIBUTION AND PERFORMANCE INFORMATION
4. General Description of INVESTMENT OBJECTIVE AND POLICIES
Registrant WHY INVEST IN THE FUND?
LATIN AMERICAN INVESTMENT EXPERIENCE
ADDITIONAL INFORMATION ABOUT POLICIES AND INVESTMENTS
FUND ORGANIZATION
5. Management of the Fund FINANCIAL HIGHLIGHTS
A MESSAGE FROM SCUDDER'S PRESIDENT
FUND ORGANIZATION--Investment adviser, Transfer agent
SHAREHOLDER BENEFITS--A team approach to investing
DIRECTORS AND OFFICERS
5A. Management's Discussion of NOT APPLICABLE
Fund Performance
6. Capital Stock and Other DISTRIBUTION AND PERFORMANCE INFORMATION--Dividends and capital
Securities gains distributions
FUND ORGANIZATION
TRANSACTION INFORMATION--Tax Information
SHAREHOLDER BENEFITS--SAIL(TM)--Scudder Automated Information Line,
Dividend reinvestment plan, T.D.D. service for the hearing
impaired
HOW TO CONTACT SCUDDER
7. Purchase of Securities Being PURCHASES
Offered FUND ORGANIZATION--Underwriter
TRANSACTION INFORMATION--Purchasing shares, Share price,
Processing time, Minimum balances, Third party transactions
SHAREHOLDER BENEFITS--Dividend reinvestment plan
SCUDDER TAX-ADVANTAGED RETIREMENT PLANS
INVESTMENT PRODUCTS AND SERVICES
8. Redemption or Repurchase EXCHANGES AND REDEMPTIONS
TRANSACTION INFORMATION--Redeeming shares, Tax identification
number, Minimum balances
9. Pending Legal Proceedings NOT APPLICABLE
Cross Reference - Page 1
<PAGE>
SCUDDER LATIN AMERICA FUND
(continued)
PART B
- ------
Caption in Statement of
Item No. Item Caption Additional Information
-------- ------------ ----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and History FUND ORGANIZATION
13. Investment Objectives and THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
Policies PORTFOLIO TRANSACTIONS--Brokerage Commissions, Portfolio Turnover
14. Management of the Fund INVESTMENT ADVISER
DIRECTORS AND OFFICERS
REMUNERATION
15. Control Persons and Principal DIRECTORS AND OFFICERS
Holders of Securities
16. Investment Advisory and Other INVESTMENT ADVISER
Services DISTRIBUTOR
ADDITIONAL INFORMATION--Experts, Other Information
17. Brokerage Allocation PORTFOLIO TRANSACTIONS--Brokerage Commissions, Portfolio Turnover
and Other Practices
18. Capital Stock and Other FUND ORGANIZATION
Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
19. Purchase, Redemption and PURCHASES
Pricing of Securities Being EXCHANGES AND REDEMPTIONS
Offered FEATURES AND SERVICES OFFERED BY THE FUND--Dividend and Capital
Gain Distribution Options
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of PERFORMANCE INFORMATION
Performance Data
23. Financial Statements FINANCIAL STATEMENTS
Cross Reference - Page 2
<PAGE>
SCUDDER INTERNATIONAL FUND, INC.
SCUDDER PACIFIC OPPORTUNITIES FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
---------------------------
PART A
- ------
Item No. Item Caption Prospectus Caption
-------- ------------ ------------------
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial FINANCIAL HIGHLIGHTS
Information DISTRIBUTION AND PERFORMANCE INFORMATION
4. General Description of INVESTMENT OBJECTIVE AND POLICIES
Registrant WHY INVEST IN THE FUND?
INTERNATIONAL INVESTMENT EXPERIENCE
ADDITIONAL INFORMATION ABOUT POLICIES AND INVESTMENTS
FUND ORGANIZATION
5. Management of the Fund FINANCIAL HIGHLIGHTS
A MESSAGE FROM SCUDDER'S PRESIDENT
FUND ORGANIZATION--Investment adviser, Transfer agent
SHAREHOLDER BENEFITS--A team approach to investing
DIRECTORS AND OFFICERS
5A. Management's Discussion NOT APPLICABLE
of Fund Performance
6. Capital Stock and Other DISTRIBUTION AND PERFORMANCE INFORMATION--Dividends and capital
Securities gains distributions
FUND ORGANIZATION
TRANSACTION INFORMATION--Tax Information
SHAREHOLDER BENEFITS--SAIL(TM)--Scudder Automated Information Line,
Dividend reinvestment plan, T.D.D. service for the hearing
impaired
HOW TO CONTACT SCUDDER
7. Purchase of Securities PURCHASES
Being Offered FUND ORGANIZATION--Underwriter
TRANSACTION INFORMATION--Purchasing shares, Share price,
Processing time, Minimum balances, Third party transactions
SHAREHOLDER BENEFITS--Dividend reinvestment plan
SCUDDER TAX-ADVANTAGED RETIREMENT PLANS
INVESTMENT PRODUCTS AND SERVICES
8. Redemption or Repurchase EXCHANGES AND REDEMPTIONS
TRANSACTION INFORMATION--Redeeming shares, Tax identification
number, Minimum balances
9. Pending Legal Proceedings NOT APPLICABLE
Cross Reference - Page 3
<PAGE>
SCUDDER PACIFIC OPPORTUNITIES FUND
(continued)
PART B
- ------
Caption in Statement of
Item No. Item Caption Additional Information
-------- ------------ ----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and History FUND ORGANIZATION
13. Investment Objectives and THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
Policies PORTFOLIO TRANSACTIONS--Brokerage Commissions, Portfolio Turnover
14. Management of the Fund INVESTMENT ADVISER
DIRECTORS AND OFFICERS
REMUNERATION
15. Control Persons and Principal DIRECTORS AND OFFICERS
Holders of Securities
16. Investment Advisory and Other INVESTMENT ADVISER
Services DISTRIBUTOR
ADDITIONAL INFORMATION--Experts, Other Information
17. Brokerage Allocation PORTFOLIO TRANSACTIONS--Brokerage Commissions, Portfolio Turnover
and Other Practices
18. Capital Stock and Other FUND ORGANIZATION
Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
19. Purchase, Redemption and PURCHASES
Pricing of Securities Being EXCHANGES AND REDEMPTIONS
Offered FEATURES AND SERVICES OFFERED BY THE FUND--Dividend and Capital
Gain Distribution Options
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of PERFORMANCE INFORMATION
Performance Data
23. Financial Statements FINANCIAL STATEMENTS
Cross Reference - Page 4
<PAGE>
SCUDDER INTERNATIONAL FUND, INC.
SCUDDER GREATER EUROPE GROWTH FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
---------------------------
PART A
- ------
Item No. Item Caption Prospectus Caption
-------- ------------ ------------------
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial FINANCIAL HIGHLIGHTS
Information DISTRIBUTION AND PERFORMANCE INFORMATION
4. General Description of INVESTMENT OBJECTIVE AND POLICIES
Registrant WHY INVEST IN THE FUND?
INTERNATIONAL INVESTMENT EXPERIENCE
ADDITIONAL INFORMATION ABOUT POLICIES AND INVESTMENTS
RISK CONSIDERATIONS
FUND ORGANIZATION
5. Management of the Fund FINANCIAL HIGHLIGHTS
A MESSAGE FROM SCUDDER'S PRESIDENT
FUND ORGANIZATION--Investment adviser, Transfer agent
SHAREHOLDER BENEFITS--A team approach to investing
DIRECTORS AND OFFICERS
5A. Management's Discussion of NOT APPLICABLE
Fund Performance
6. Capital Stock and Other DISTRIBUTION AND PERFORMANCE INFORMATION--Dividends and capital
Securities gains distributions
FUND ORGANIZATION
TRANSACTION INFORMATION--Tax information
SHAREHOLDER BENEFITS--SAIL(TM)--Scudder Automated Information Line,
Dividend reinvestment plan, T.D.D. service for the hearing
impaired
HOW TO CONTACT SCUDDER
7. Purchase of Securities Being PURCHASES
Offered FUND ORGANIZATION--Underwriter
TRANSACTION INFORMATION--Purchasing shares, Share price,
Processing time, Minimum balances, Third party transactions
SHAREHOLDER BENEFITS--Dividend reinvestment plan
SCUDDER TAX-ADVANTAGED RETIREMENT PLANS
INVESTMENT PRODUCTS AND SERVICES
8. Redemption or Repurchase EXCHANGES AND REDEMPTIONS
TRANSACTION INFORMATION--Redeeming shares, Tax identification
number, Minimum balances
9. Pending Legal Proceedings NOT APPLICABLE
Cross Reference - Page 5
<PAGE>
SCUDDER GREATER EUROPE GROWTH FUND
(continued)
PART B
- ------
Caption in Statement of
Item No. Item Caption Additional Information
-------- ------------ ----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and History FUND ORGANIZATION
13. Investment Objectives and THE FUNDS' INVESTMENT OBJECTIVE AND POLICIES
Policies PORTFOLIO TRANSACTIONS -- Brokerage Commissions, Portfolio
Turnover
14. Management of the Fund INVESTMENT ADVISER
DIRECTORS AND OFFICERS
REMUNERATION
15. Control Persons and Principal DIRECTORS AND OFFICERS
Holders of Securities
16. Investment Advisory and Other INVESTMENT ADVISER
Services DISTRIBUTOR
ADDITIONAL INFORMATION--Experts, Other Information
17. Brokerage Allocation PORTFOLIO TRANSACTIONS--Brokerage Commissions, Portfolio Turnover
and Other Practices
18. Capital Stock and Other FUND ORGANIZATION
Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
19. Purchase, Redemption and PURCHASES
Pricing of Securities Being EXCHANGES AND REDEMPTIONS
Offered FEATURES AND SERVICES OFFERED BY THE FUND--Dividend and Capital
Gain Distribution Options
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of PERFORMANCE INFORMATION
Performance Data
23. Financial Statements FINANCIAL STATEMENTS
Cross Reference - Page 6
<PAGE>
SCUDDER INTERNATIONAL FUND, INC.
SCUDDER EMERGING MARKETS GROWTH FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
---------------------------
PART A
- ------
Item No. Item Caption Prospectus Caption
-------- ------------ ------------------
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial FINANCIAL HIGHLIGHTS
Information DISTRIBUTION AND PERFORMANCE INFORMATION
4. General Description of INVESTMENT OBJECTIVE AND POLICIES
Registrant WHY INVEST IN THE FUND?
INTERNATIONAL INVESTMENT EXPERIENCE
ADDITIONAL INFORMATION ABOUT POLICIES AND INVESTMENTS
RISK CONSIDERATIONS
FUND ORGANIZATION
5. Management of the Fund A MESSAGE FROM SCUDDER'S PRESIDENT
FUND ORGANIZATION--Investment adviser, Transfer agent
SHAREHOLDER BENEFITS--A team approach to investing
DIRECTORS AND OFFICERS
5A. Management's Discussion of NOT APPLICABLE
Fund Performance
6. Capital Stock and Other DISTRIBUTION AND PERFORMANCE INFORMATION--Dividends and capital
Securities gains distributions
FUND ORGANIZATION
TRANSACTION INFORMATION--Tax information
SHAREHOLDER BENEFITS--SAIL(TM)--Scudder Automated Information Line,
Dividend reinvestment plan, T.D.D. service for the hearing
impaired
HOW TO CONTACT SCUDDER
7. Purchase of Securities Being PURCHASES
Offered FUND ORGANIZATION--Underwriter
TRANSACTION INFORMATION--Purchasing shares, Share price,
Processing time, Minimum balances, Third party transactions
SHAREHOLDER BENEFITS--Dividend reinvestment plan
SCUDDER TAX-ADVANTAGED RETIREMENT PLANS
INVESTMENT PRODUCTS AND SERVICES
8. Redemption or Repurchase EXCHANGES AND REDEMPTIONS
TRANSACTION INFORMATION--Redeeming shares, Tax identification
number, Minimum balances
9. Pending Legal Proceedings NOT APPLICABLE
Cross Reference - Page 7
<PAGE>
SCUDDER EMERGING MARKETS GROWTH FUND
(continued)
PART B
- ------
Caption in Statement of
Item No. Item Caption Additional Information
-------- ------------ ----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and History FUND ORGANIZATION
13. Investment Objectives and THE FUNDS' INVESTMENT OBJECTIVE AND POLICIES
Policies PORTFOLIO TRANSACTIONS -- Brokerage Commissions, Portfolio
Turnover
14. Management of the Fund INVESTMENT ADVISER
DIRECTORS AND OFFICERS
REMUNERATION
15. Control Persons and Principal DIRECTORS AND OFFICERS
Holders of Securities
16. Investment Advisory and Other INVESTMENT ADVISER
Services DISTRIBUTOR
ADDITIONAL INFORMATION--Experts, Other Information
17. Brokerage Allocation PORTFOLIO TRANSACTIONS--Brokerage Commissions, Portfolio Turnover
and Other Practices
18. Capital Stock and Other FUND ORGANIZATION
Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
19. Purchase, Redemption and PURCHASES
Pricing of Securities Being EXCHANGES AND REDEMPTIONS
Offered FEATURES AND SERVICES OFFERED BY THE FUND-- Dividend and Capital
Gain Distribution Options
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of PERFORMANCE INFORMATION
Performance Data
23. Financial Statements FINANCIAL STATEMENTS
Cross Reference - Page 8
<PAGE>
SCUDDER INTERNATIONAL FUND, INC.
SCUDDER INTERNATIONAL GROWTH FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
---------------------------
PART A
- ------
Item No. Item Caption Prospectus Caption
-------- ------------ ------------------
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial FINANCIAL HIGHLIGHTS
Information
4. General Description of INVESTMENT OBJECTIVE AND POLICIES
Registrant INVESTMENT STRATEGY
WHY INVEST IN THE FUND?
INTERNATIONAL INVESTMENT EXPERIENCE
ADDITIONAL INFORMATION ABOUT POLICIES AND INVESTMENTS
RISK CONSIDERATIONS
FUND ORGANIZATION
5. Management of the Fund A MESSAGE FROM SCUDDER'S PRESIDENT
FUND ORGANIZATION--Investment adviser and Transfer agent
SHAREHOLDER BENEFITS--A team approach to investing
5A. Management's Discussion of NOT APPLICABLE
Fund Performance
6. Capital Stock and Other DISTRIBUTION AND PERFORMANCE INFORMATION--Dividends and capital
Securities gains distributions
FUND ORGANIZATION
TRANSACTION INFORMATION--Tax information
SHAREHOLDER BENEFITS--SAIL(TM)--Scudder Automated Information Line,
Dividend reinvestment plan, T.D.D. service for the hearing
impaired
HOW TO CONTACT SCUDDER
7. Purchase of Securities Being PURCHASES
Offered FUND ORGANIZATION--Underwriter
TRANSACTION INFORMATION--Purchasing shares, Share price,
Processing time, Minimum balances, Third party transactions
SHAREHOLDER BENEFITS--Dividend reinvestment plan
SCUDDER TAX-ADVANTAGED RETIREMENT PLANS
INVESTMENT PRODUCTS AND SERVICES
8. Redemption or Repurchase EXCHANGES AND REDEMPTIONS
TRANSACTION INFORMATION--Redeeming shares, Tax identification
number, Minimum balances
9. Pending Legal Proceedings NOT APPLICABLE
Cross Reference - Page 9
<PAGE>
SCUDDER INTERNATIONAL GROWTH FUND
(continued)
PART B
- ------
Caption in Statement of
Item No. Item Caption Additional Information
-------- ------------ ----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and History FUND ORGANIZATION
13. Investment Objectives and THE FUNDS' INVESTMENT OBJECTIVE AND POLICIES
Policies PORTFOLIO TRANSACTIONS -- Brokerage Commissions, Portfolio
Turnover
14. Management of the Fund INVESTMENT ADVISER
DIRECTORS AND OFFICERS
REMUNERATION
15. Control Persons and Principal DIRECTORS AND OFFICERS
Holders of Securities
16. Investment Advisory and Other INVESTMENT ADVISER
Services DISTRIBUTOR
ADDITIONAL INFORMATION--Experts, Other Information
17. Brokerage Allocation PORTFOLIO TRANSACTIONS--Brokerage Commissions, Portfolio Turnover
and Other Practices
18. Capital Stock and Other FUND ORGANIZATION
Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
19. Purchase, Redemption and PURCHASES
Pricing of Securities Being EXCHANGES AND REDEMPTIONS
Offered FEATURES AND SERVICES OFFERED BY THE FUND-- Dividend and Capital
Gain Distribution Options
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of PERFORMANCE INFORMATION
Performance Data
23. Financial Statements FINANCIAL STATEMENTS
Cross Reference - Page 10
<PAGE>
SCUDDER INTERNATIONAL FUND, INC.
SCUDDER INTERNATIONAL VALUE FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
---------------------------
PART A
- ------
Item No. Item Caption Prospectus Caption
-------- ------------ ------------------
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial FINANCIAL HIGHLIGHTS
Information
4. General Description of INVESTMENT OBJECTIVE AND POLICIES
Registrant INVESTMENT STRATEGY
WHY INVEST IN THE FUND?
INTERNATIONAL INVESTMENT EXPERIENCE
ADDITIONAL INFORMATION ABOUT POLICIES AND INVESTMENTS
RISK CONSIDERATIONS
FUND ORGANIZATION
5. Management of the Fund A MESSAGE FROM SCUDDER'S PRESIDENT
FUND ORGANIZATION--Investment adviser and Transfer agent
SHAREHOLDER BENEFITS--A team approach to investing
5A. Management's Discussion of NOT APPLICABLE
Fund Performance
6. Capital Stock and Other DISTRIBUTION AND PERFORMANCE INFORMATION--Dividends and capital
Securities gains distributions
FUND ORGANIZATION
TRANSACTION INFORMATION--Tax information
SHAREHOLDER BENEFITS--SAIL(TM)--Scudder Automated Information Line,
Dividend reinvestment plan, T.D.D. service for the hearing
impaired
HOW TO CONTACT SCUDDER
7. Purchase of Securities Being PURCHASES
Offered FUND ORGANIZATION--Underwriter
TRANSACTION INFORMATION--Purchasing shares, Share price,
Processing time, Minimum balances, Third party transactions
SHAREHOLDER BENEFITS--Dividend reinvestment plan
SCUDDER TAX-ADVANTAGED RETIREMENT PLANS
INVESTMENT PRODUCTS AND SERVICES
8. Redemption or Repurchase EXCHANGES AND REDEMPTIONS
TRANSACTION INFORMATION--Redeeming shares, Tax identification
number, Minimum balances
9. Pending Legal Proceedings NOT APPLICABLE
Cross Reference - Page 11
<PAGE>
SCUDDER INTERNATIONAL VALUE FUND
(continued)
PART B
- ------
Caption in Statement of
Item No. Item Caption Additional Information
-------- ------------ ----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and History FUND ORGANIZATION
13. Investment Objectives and THE FUNDS' INVESTMENT OBJECTIVE AND POLICIES
Policies PORTFOLIO TRANSACTIONS -- Brokerage Commissions, Portfolio
Turnover
14. Management of the Fund INVESTMENT ADVISER
DIRECTORS AND OFFICERS
REMUNERATION
15. Control Persons and Principal DIRECTORS AND OFFICERS
Holders of Securities
16. Investment Advisory and Other INVESTMENT ADVISER
Services DISTRIBUTOR
ADDITIONAL INFORMATION--Experts, Other Information
17. Brokerage Allocation PORTFOLIO TRANSACTIONS--Brokerage Commissions, Portfolio Turnover
and Other Practices
18. Capital Stock and Other FUND ORGANIZATION
Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
19. Purchase, Redemption and PURCHASES
Pricing of Securities Being EXCHANGES AND REDEMPTIONS
Offered FEATURES AND SERVICES OFFERED BY THE FUND-- Dividend and Capital
Gain Distribution Options
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of PERFORMANCE INFORMATION
Performance Data
23. Financial Statements FINANCIAL STATEMENTS
Cross Reference - Page 12
<PAGE>
SCUDDER INTERNATIONAL FUND, INC.
SCUDDER INTERNATIONAL GROWTH AND INCOME FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
---------------------------
PART A
- ------
Item No. Item Caption Prospectus Caption
-------- ------------ ------------------
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial FINANCIAL HIGHLIGHTS
Information DISTRIBUTION AND PERFORMANCE INFORMATION
4. General Description of INVESTMENT OBJECTIVE AND POLICIES
Registrant INVESTMENT PROCESS
WHY INVEST IN THE FUND?
INTERNATIONAL INVESTMENT EXPERIENCE
ADDITIONAL INFORMATION ABOUT POLICIES AND INVESTMENTS
RISK CONSIDERATIONS
FUND ORGANIZATION
5. Management of the Fund A MESSAGE FROM SCUDDER'S PRESIDENT
FUND ORGANIZATION--Investment adviser, Transfer agent
SHAREHOLDER BENEFITS--A team approach to investing
DIRECTORS AND OFFICERS
5A. Management's Discussion of NOT APPLICABLE
Fund Performance
6. Capital Stock and Other DISTRIBUTION AND PERFORMANCE INFORMATION--Dividends and capital
Securities gains distributions
FUND ORGANIZATION
TRANSACTION INFORMATION--Tax information
SHAREHOLDER BENEFITS--SAIL(TM)--Scudder Automated Information Line,
Dividend reinvestment plan, T.D.D. service for the hearing
impaired
HOW TO CONTACT SCUDDER
7. Purchase of Securities Being PURCHASES
Offered FUND ORGANIZATION--Underwriter
TRANSACTION INFORMATION--Purchasing shares, Share price,
Processing time, Minimum balances, Third party transactions
SHAREHOLDER BENEFITS--Dividend reinvestment plan
SCUDDER TAX-ADVANTAGED RETIREMENT PLANS
INVESTMENT PRODUCTS AND SERVICES
8. Redemption or Repurchase EXCHANGES AND REDEMPTIONS
TRANSACTION INFORMATION--Redeeming shares, Tax identification
number, Minimum balances
9. Pending Legal Proceedings NOT APPLICABLE
Cross Reference - Page 13
<PAGE>
SCUDDER INTERNATIONAL GROWTH AND INCOME FUND
(continued)
PART B
- ------
Caption in Statement of
Item No. Item Caption Additional Information
-------- ------------ ----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and History FUND ORGANIZATION
13. Investment Objectives and THE FUNDS' INVESTMENT OBJECTIVE AND POLICIES
Policies PORTFOLIO TRANSACTIONS -- Brokerage Commissions, Portfolio
Turnover
14. Management of the Fund INVESTMENT ADVISER
DIRECTORS AND OFFICERS
REMUNERATION
15. Control Persons and Principal DIRECTORS AND OFFICERS
Holders of Securities
16. Investment Advisory and Other INVESTMENT ADVISER
Services DISTRIBUTOR
ADDITIONAL INFORMATION--Experts, Other Information
17. Brokerage Allocation PORTFOLIO TRANSACTIONS--Brokerage Commissions, Portfolio Turnover
and Other Practices
18. Capital Stock and Other FUND ORGANIZATION
Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
19. Purchase, Redemption and PURCHASES
Pricing of Securities Being EXCHANGES AND REDEMPTIONS
Offered FEATURES AND SERVICES OFFERED BY THE FUND-- Dividend and Capital
Gain Distribution Options
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of PERFORMANCE INFORMATION
Performance Data
23. Financial Statements FINANCIAL STATEMENTS
Cross Reference - Page 14
<PAGE>
SCUDDER INTERNATIONAL FUND, INC.
SCUDDER INTERNATIONAL FUND
International Shares
CROSS-REFERENCE SHEET
Items Required By Form N-1A
---------------------------
PART A
- ------
Item No. Item Caption Prospectus Caption
-------- ------------ ------------------
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial FINANCIAL HIGHLIGHTS
Information DISTRIBUTION AND PERFORMANCE INFORMATION
4. General Description of INVESTMENT OBJECTIVE AND POLICIES
Registrant INVESTMENT PROCESS
WHY INVEST IN THE FUND?
INTERNATIONAL INVESTMENT EXPERIENCE
ADDITIONAL INFORMATION ABOUT POLICIES AND INVESTMENTS
RISK CONSIDERATIONS
FUND ORGANIZATION
5. Management of the Fund A MESSAGE FROM SCUDDER'S PRESIDENT
FUND ORGANIZATION--Investment adviser, Transfer agent
SHAREHOLDER BENEFITS--A team approach to investing
DIRECTORS AND OFFICERS
5A. Management's Discussion of NOT APPLICABLE
Fund Performance
6. Capital Stock and Other DISTRIBUTION AND PERFORMANCE INFORMATION--Dividends and capital
Securities gains distributions
FUND ORGANIZATION
TRANSACTION INFORMATION--Tax information
SHAREHOLDER BENEFITS--SAIL(TM)--Scudder Automated Information Line,
Dividend reinvestment plan, T.D.D. service for the hearing
impaired
HOW TO CONTACT SCUDDER
7. Purchase of Securities Being PURCHASES
Offered FUND ORGANIZATION--Underwriter
TRANSACTION INFORMATION--Purchasing shares, Share price,
Processing time, Minimum balances, Third party transactions
SHAREHOLDER BENEFITS--Dividend reinvestment plan
SCUDDER TAX-ADVANTAGED RETIREMENT PLANS
INVESTMENT PRODUCTS AND SERVICES
8. Redemption or Repurchase EXCHANGES AND REDEMPTIONS
TRANSACTION INFORMATION--Redeeming shares, Tax identification
number, Minimum balances
9. Pending Legal Proceedings NOT APPLICABLE
Cross Reference - Page 15
<PAGE>
SCUDDER INTERNATIONAL FUND
International Shares
(continued)
PART B
- ------
Caption in Statement of
Item No. Item Caption Additional Information
-------- ------------ ----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and History FUND ORGANIZATION
13. Investment Objectives and THE FUNDS' INVESTMENT OBJECTIVE AND POLICIES
Policies PORTFOLIO TRANSACTIONS -- Brokerage Commissions, Portfolio
Turnover
14. Management of the Fund INVESTMENT ADVISER
DIRECTORS AND OFFICERS
REMUNERATION
15. Control Persons and Principal DIRECTORS AND OFFICERS
Holders of Securities
16. Investment Advisory and Other INVESTMENT ADVISER
Services DISTRIBUTOR
ADDITIONAL INFORMATION--Experts, Other Information
17. Brokerage Allocation PORTFOLIO TRANSACTIONS--Brokerage Commissions, Portfolio Turnover
and Other Practices
18. Capital Stock and Other FUND ORGANIZATION
Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
19. Purchase, Redemption and PURCHASES
Pricing of Securities Being EXCHANGES AND REDEMPTIONS
Offered FEATURES AND SERVICES OFFERED BY THE FUND-- Dividend and Capital
Gain Distribution Options
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of PERFORMANCE INFORMATION
Performance Data
23. Financial Statements FINANCIAL STATEMENTS
Cross Reference - Page 16
<PAGE>
SCUDDER INTERNATIONAL FUND, INC.
SCUDDER INTERNATIONAL FUND
Barrett International Shares
CROSS-REFERENCE SHEET
Items Required By Form N-1A
---------------------------
PART A
- ------
Item No. Item Caption Prospectus Caption
-------- ------------ ------------------
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial NOT APPLICABLE
Information
4. General Description of INVESTMENT OBJECTIVE AND POLICIES
Registrant WHY INVEST IN THE FUND?
INTERNATIONAL INVESTMENT EXPERIENCE
ADDITIONAL INFORMATION ABOUT POLICIES AND INVESTMENTS
RISK FACTORS
FUND ORGANIZATION
5. Management of the Fund FUND ORGANIZATION--Investment adviser, Transfer agent
SHAREHOLDER BENEFITS--A team approach to investing
5A. Management's Discussion of NOT APPLICABLE
Fund Performance
6. Capital Stock and Other DISTRIBUTION AND PERFORMANCE INFORMATION--Dividends and capital
Securities gains distributions
FUND ORGANIZATION
TRANSACTION INFORMATION--Tax information
SHAREHOLDER Dividend reinvestment plan
HOW TO CONTACT SCUDDER
7. Purchase of Securities Being PURCHASES
Offered FUND ORGANIZATION--Underwriter
TRANSACTION INFORMATION--Purchasing shares, Share price,
Processing time, Minimum balances, Third party transactions
SHAREHOLDER BENEFITS--Dividend reinvestment plan
8. Redemption or Repurchase EXCHANGES AND REDEMPTIONS
TRANSACTION INFORMATION--Redeeming shares, Tax identification
number, Minimum balances
9. Pending Legal Proceedings NOT APPLICABLE
Cross Reference - Page 17
<PAGE>
SCUDDER INTERNATIONAL FUND
Barrett International Shares
(continued)
PART B
- ------
Caption in Statement of
Item No. Item Caption Additional Information
-------- ------------ ----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and History FUND ORGANIZATION
13. Investment Objectives and THE FUNDS' INVESTMENT OBJECTIVE AND POLICIES
Policies PORTFOLIO TRANSACTIONS -- Brokerage Commissions, Portfolio
Turnover
14. Management of the Fund INVESTMENT ADVISER
DIRECTORS AND OFFICERS
REMUNERATION
15. Control Persons and Principal DIRECTORS AND OFFICERS
Holders of Securities
16. Investment Advisory and Other INVESTMENT ADVISER
Services DISTRIBUTOR
ADDITIONAL INFORMATION--Experts, Other Information
17. Brokerage Allocation PORTFOLIO TRANSACTIONS--Brokerage Commissions, Portfolio Turnover
and Other Practices
18. Capital Stock and Other FUND ORGANIZATION
Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
19. Purchase, Redemption and PURCHASES
Pricing of Securities Being REDEEMING SHARES
Offered FEATURES AND SERVICES OFFERED BY THE FUND-- Dividend and Capital
Gain Distributions
NET ASSET VALUE
20. Tax Status DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of PERFORMANCE INFORMATION
Performance Data
23. Financial Statements FINANCIAL STATEMENTS
</TABLE>
Cross Reference - Page 18
<PAGE>
Scudder International Growth Fund
Scudder International Value Fund
Supplement to Prospectus
Dated June 29, 1998
The distributor of Scudder International Growth Fund and Scudder International
Value Fund (each a "Fund" or collectively the "Funds"), Scudder Investor
Services, Inc., is soliciting subscriptions for shares of the Funds during an
initial offering period currently scheduled from June 29, 1998 to September 1,
1998 (the "Subscription Period"). The subscription price will be a Fund's
initial net asset value of $12 per share. Orders to purchase shares of a Fund
received during the Subscription Period will be accepted when the Funds commence
operations. Checks accompanying orders must be received in good order during the
Subscription Period and will be held uninvested until 4:00 p.m. on September 1,
1998.
June 29, 1998
<PAGE>
This combined prospectus sets forth concisely the information a prospective
investor should know before investing in the following funds: Scudder
International Growth Fund and Scudder International Value Fund, each a
diversified series of Scudder International Fund, Inc. Please retain this
prospectus for future reference.
If you require more detailed information, a combined Statement of Additional
Information dated June 29, 1998 for Scudder International Growth Fund and
Scudder International Value Fund, 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 SEC'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.
NOT FDIC- MAY LOSE VALUE
INSURED NO BANK GUARANTEE
SCUDDER [LOGO]
Scudder International
Growth Fund
- ------------------------------
Scudder International
Value Fund
Prospectus
June 29, 1998
Two pure no-load(TM) (no sales charges) mutual funds, each seeking long-term
capital appreciation from foreign equity securities by each employing a distinct
investment style.
<PAGE>
Expense information
Scudder International Growth Fund
How to compare a Scudder Family of Funds pure no-load(TM) fund
This information is designed to help you understand the various costs and
expenses of investing in Scudder International Growth 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: Estimated expenses to be 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 initial fiscal year ending
August 31, 1998.
Investment management fee (after waiver) 0.00%**
12b-1 fees NONE
Other expenses (after reimbursements) 1.75%**
-----
Total Fund operating expenses (after waiver and reimbursements) 1.75%**
=====
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. (As noted above, the Fund has no redemption
fees of any kind.)
1 Year 3 Years
------ -------
$18 $55
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 December 31, 1998, the Adviser and certain of its subsidiaries have
agreed to waive and reimburse, respectively, 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 1.75% of average daily net assets. If the
Adviser and certain of its subsidiaries had not agreed to waive and
reimburse, respectively, all or portions of their fees, it is estimated that
annualized Fund expenses would be: investment management fee 1.00%, other
expenses 1.83% and total Fund operating expenses 2.83% for the initial
fiscal year.
2
<PAGE>
Expense information
Scudder International Value Fund
How to compare a Scudder Family of Funds pure no-load(TM) fund
This information is designed to help you understand the various costs and
expenses of investing in Scudder International Value 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: Estimated expenses to be 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 initial fiscal year ending
August 31, 1998.
Investment management fee (after waiver) 0.00%**
12b-1 fees NONE
Other expenses (after reimbursements) 1.75%**
-----
Total Fund operating expenses (after waiver and reimbursements) 1.75%**
=====
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. (As noted above, the Fund has no redemption
fees of any kind.)
1 Year 3 Years
------ -------
$18 $55
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 December 31, 1998, the Adviser and certain of its subsidiaries have
agreed to waive and reimburse, respectively, 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 1.75% of average daily net assets. If the
Adviser and certain of its subsidiaries had not agreed to waive and
reimburse, respectively, all or portions of their fees, it is estimated that
annualized Fund expenses would be: investment management fee 1.00%, other
expenses 1.83% and total Fund operating expenses 2.83% for the initial
fiscal year.
3
<PAGE>
A message from the President
Scudder Kemper Investments, Inc., investment adviser to the Scudder Family of
Funds, is one of the largest and most experienced investment management
organizations worldwide, managing more than $200 billion in assets globally for
mutual fund investors, retirement and pension plans, institutional and corporate
clients, and private family and individual accounts. It is one of the ten
largest mutual fund companies in the U.S.
We offered America's first no-load mutual fund in 1928, and today the Scudder
Family of Funds includes over 50 no-load mutual fund portfolios or classes of
shares. We also 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 numerous other open- and closed-end funds that invest in this
country and other 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 shareholders include toll-free access to professional
representatives, easy exchange among the Scudder Family of Funds, shareholder
reports, informative newsletters and the walk-in convenience of Scudder Investor
Centers.
Funds or fund classes in the Scudder Family of Funds are offered without
commissions to purchase or redeem 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/Edmond D. Villani
Scudder International Growth Fund
Scudder International Value Fund
Two pure no-load(TM) (no sales charges) mutual funds, each seeking long-term
capital appreciation from foreign equity securities by each employing a distinct
investment style.
Investment objective
Scudder International Growth Fund
o long-term capital appreciation through investment primarily in the equity
securities of foreign companies with high growth potential
Scudder International Value Fund
o long-term capital appreciation through investment primarily in undervalued
foreign equity securities
Investment characteristics of the Funds
o diversified, actively-managed portfolios of international equities
o convenient, low-cost access to select overseas investment opportunities
o designed as long-term investments with above-average investment risk and
above-average return potential
o opportunity to enhance international diversification of an investment
portfolio
Contents
Introduction 5
Investment objectives and policies 5
Investment strategy 6
Why invest in these Funds? 7
International investment experience 8
Additional information about policies
and investments 8
Distribution and performance information 12
Fund organization 12
Transaction information 14
Shareholder benefits 18
Purchases 21
Exchanges and redemptions 22
Officers and Directors 24
Investment products and services 25
How to contact Scudder 26
4
<PAGE>
Introduction
Scudder International Growth Fund and Scudder International Value Fund (each a
"Fund," collectively, the "Funds"), each a diversified series of Scudder
International Fund, Inc. (the "Corporation"), are mutual funds advised by
Scudder Kemper Investments, Inc. (the "Adviser"). The two Funds' prospectuses
are presented together so that you can understand each Fund's important
differences and decide which Fund is more suitable for your investment needs.
Each Fund offers all of the benefits of the Scudder Family of Funds. Scudder
Kemper Investments, Inc. manages a diverse family of pure no-load(TM) funds (or
classes of 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.
Except as otherwise indicated, each Fund's investment objective and policies are
not fundamental and may be changed without a vote of shareholders. If there is a
change in a Fund's investment objective, shareholders should consider whether
the Fund remains an appropriate investment in light of their current financial
position and needs. There can be no assurance that either Fund's objective will
be met.
Investment objectives and policies
Scudder International Growth Fund and Scudder International Value Fund, each a
series of Scudder International Fund, Inc., seek long-term capital appreciation
from foreign equity securities by each employing a distinct investment style.
Scudder International Growth Fund seeks long-term capital appreciation through
investment primarily in the equity securities of foreign companies with high
growth potential. This Fund will focus on issuers located primarily in Europe,
Latin America, the emerging markets of the Pacific Basin and Japan, but may also
invest in select issues from elsewhere outside the U.S. The Fund will invest in
a variety of high growth opportunities in both developed and developing markets.
The Fund will seek to invest in those companies that the Adviser believes are
best able to capitalize on the growth and changes taking place within and
between various regions of the world. Typically, these are companies with
leading or rapidly-developing business franchises, strong financial positions,
and high quality management capable of defining and implementing company
strategies to take advantage of local, regional or global market changes.
Scudder International Value Fund seeks long-term capital appreciation through
investment primarily in undervalued foreign equity securities. The Fund will
focus its investments on securities of mid-and large-cap companies, based
outside the U.S., that are either included in, or have similar characteristics
to those in the Morgan Stanley Capital International (MSCI) Value Index. The
Adviser looks for companies selling at what it deems attractive valuations, and
will attempt to further control for downside risk through wide diversification
and other portfolio construction methods.
Each Fund intends to diversify its investments among several countries and each
Fund will normally invest in securities of at least three different countries
other than the U.S.
While the Funds offer the potential for substantial appreciation over time, they
also involve above-average investment risk in comparison to a mutual fund
investing in a broad range of U.S. equity securities. Each Fund is designed as a
long-term investment and not for short-term trading purposes. Neither of the
Funds, nor the Funds together, should be considered a complete investment
program, although each could serve as a core international holding for an
individual's portfolio. Each Fund's net asset value, or price, can fluctuate
5
<PAGE>
significantly with changes in stock market levels, political developments,
movements in currencies, global investment flows and other factors. Scudder
International Growth Fund is expected to exhibit greater day-to-day price
volatility than Scudder International Value Fund.
Investment strategy
Scudder International Growth Fund
In selecting high growth potential industries and companies for investment, the
Adviser will consider a wide assortment of companies located primarily in
Europe, Latin America, the emerging markets of the Pacific Basin, and Japan, as
well as select issues from elsewhere outside the U.S. The Adviser will conduct
regional, country, industry and company analyses in search of investments likely
to benefit from economic, political, industrial and other changes occurring
across developed and emerging markets outside of the U.S.
The Adviser relies heavily on fundamental analysis, supplemented by field
research, in evaluating investment opportunities. 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. Understanding regional themes
enables 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 leading or rapidly-developing business franchises, strong financial
positions, and high quality management capable of defining and implementing
company strategies to take advantage of local, regional or global market
changes.
Scudder International Value Fund
Scudder International Value Fund is actively- managed using a disciplined,
value-oriented investment management approach. Within the large and diverse
universe of overseas companies, the Adviser focuses investments on securities of
mid-and large-cap companies that are either included in, or have similar
characteristics to those in the Morgan Stanley Capital International (MSCI)
Value Index--a benchmark of foreign security performance based on price-to-book
value ratios.
The Adviser, using a proprietary, quantitative, investment strategy, employing a
computerized model, and utilizing, among other measures, price-to-book,
price-to-earnings, and price-to-cash flow ratios, looks for companies trading at
what it deems attractive valuations. In addition to these traditional valuation
benchmarks, the Adviser will look for positive changes in earnings growth rate,
favorable stock price momentum, or changes triggered by some characteristic,
event, or catalyst for improvement. Geographic allocation of fund assets will be
accomplished through use of proprietary, computer-based models that incorporate
country or region specific valuation measures as well as general market and
economic indicators. In addition to its value style, the Adviser will attempt to
control for downside risk through wide diversification and other portfolio
construction methods.
Investments
Under normal market conditions, each Fund will invest at least 80% of its total
assets in foreign equity securities. The Funds' equity investments are common
stock, preferred stock (convertible or non-convertible), and warrants. These may
be illiquid securities. Equity securities may also be purchased through rights
offerings. Securities may be listed on securities exchanges, traded
over-the-counter or have no organized market. In addition, the Funds may engage
in strategic transactions. When the Adviser believes that it is appropriate to
do so in order to achieve a Fund's investment objective, the Fund may invest up
to 20% of its total assets in foreign debt securities as well as cash and cash
equivalents, including
6
<PAGE>
foreign money market instruments, short-term government and corporate
obligations, and repurchase agreements. Such debt securities include debt
securities of foreign governments, supranational organizations and private
issuers, including bonds denominated in the European Currency Unit (ECU). The
value of fixed-income investments will fluctuate with changes in interest rates
and bond market conditions, tending to rise as interest rates decline and
decline as interest rates rise.
Portfolio debt investments will be selected on the basis of, among other things,
yield, credit quality, and the fundamental outlook for currency and interest
rate trends in different parts of the globe, taking into account the ability to
hedge a degree of currency or local bond price risk. The Funds may purchase
investment-grade bonds, which are those rated Aaa, Aa, A or Baa by Moody's
Investors Service, Inc. ("Moody's") or AAA, AA, A or BBB by Standard & Poor's
Corporation ("S&P") or, if unrated, judged by the Adviser to be of equivalent
quality. Each Fund may also invest up to 5% of its total assets in debt
securities which are rated below investmentgrade (see "Risk Factors").
In addition, the Funds may enter into reverse repurchase agreements, invest in
securities of other investment companies and engage in securities lending.
When the Adviser determines that exceptional conditions exist abroad, each Fund
may, for temporary defensive purposes, invest all or a 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 Canada or the
U.S. It is impossible to accurately predict how long such alternative strategies
may be utilized.
Each 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 a Fund's investment performance. If the dollar falls in value
relative to the Japanese yen, for example, the dollar value of a Japanese stock
held in a portfolio will rise, even though the price of the stock remains
unchanged. Conversely, if the dollar rises in value relative to the yen, the
dollar value of the Japanese stock will fall.
Why invest in these Funds?
Scudder International Growth Fund
Scudder International Growth Fund is designed for investors seeking investment
opportunity and diversification through an actively-managed portfolio of foreign
securities. Investors may be able to tap into companies with high growth
potential that are capitalizing on economic and structural changes taking place
in developed and developing regions outside the U.S. through one
actively-managed no-load mutual fund. Aggressive investors with longer time
horizons, or those believing strongly in the nearer-term prospects for the
international markets, may want to add a more growth-oriented product to the
international portion of their portfolios. The Fund also provides an option for
growth investors seeking international diversification, but who lack the time,
resources or knowledge to target select companies, countries or regions on their
own. Certain foreign economies may grow more rapidly than the U.S. economy and
may offer opportunities for achieving superior investment returns. Additionally,
a portfolio invested in a number of markets worldwide offers more
diversification than one which is subject to the movements of a single market.
Scudder International Value Fund
Scudder International Value Fund combines the long-term growth potential of
overseas stocks with the defensive nature of value investing. The Fund focuses
on mid-and large-cap foreign issues that may be out of favor or not closely
followed by investors, yet which, in the opinion of the Adviser, will reward
investors with substantial returns over time. This Fund may appeal to
7
<PAGE>
mutual fund investors seeking overseas diversification in the value portion of
their portfolios. Investors with little or no international exposure might
consider a value approach to overseas investing as an appealing starting point.
The Fund is invested in a number of markets worldwide and offers more
diversification than a portfolio invested in only one region and subject to the
movements of a single market.
Investing in either Fund eliminates the complications and extra costs associated
with direct investment in individual foreign securities. Individuals investing
directly in foreign stocks may find it difficult to make purchases and sales, to
obtain current information, to hold securities in safekeeping, and to convert
the value of their investments from foreign currencies into U.S. dollars. Each
Fund manages these tasks for the investor. With a single investment, the
investor has a diversified international equity portfolio, which is actively
managed by experienced professionals. The Adviser has had many years of
experience in dealing in foreign markets and with brokers and custodian banks
around the world. The Adviser also has the benefit of an established information
network and believes each Fund affords a convenient and cost-effective method of
investing internationally.
International investment experience
The Adviser has been a leader in international investment management and trading
for over 40 years. Its investment company clients include Scudder International
Bond Fund and Scudder International Growth and Income Fund, which invest
internationally, Scudder Global Fund, Scudder Global Bond Fund, and Scudder
Global Discovery Fund, which invest worldwide, Scudder Greater Europe Growth
Fund, which invests primarily in securities of European companies, The Japan
Fund, Inc., which invests primarily in securities of Japanese companies, Scudder
Latin America Fund, which invests primarily in Latin American issuers, Scudder
Pacific Opportunities Fund, which invests primarily in issuers located in the
Pacific Basin, with the exception of Japan, Scudder Emerging Markets Income
Fund, which invests in debt securities issued in emerging markets, and Scudder
Emerging Markets Growth Fund, which invests in equity investments in emerging
markets. The Adviser also manages the assets of seven closed-end investment
companies investing in foreign securities: The Argentina Fund, Inc., The Brazil
Fund, Inc., Scudder Global High Income Fund, Inc., The Korea Fund, Inc., Scudder
New Asia Fund, Inc., Scudder New Europe Fund, Inc., and Scudder Spain and
Portugal Fund, Inc.
Additional information about policies and investments
Investment restrictions
Each Fund has adopted certain fundamental policies, which may not be changed
without a vote of shareholders, and non-fundamental investment restrictions,
which may be changed by a vote of the Corporation's Board of Directors, and
which are designed to reduce each Fund's investment risk.
As a matter of fundamental policy, each Fund may not borrow money, except as
permitted under Federal law. Further, as a matter of non-fundamental policy,
each Fund may not borrow money in an amount greater than 5% of total assets,
except for temporary or emergency purposes, although each Fund may engage up to
5% of total assets in reverse repurchase agreements or dollar rolls.
As a matter of fundamental policy, each Fund may not make loans except through
the lending of portfolio securities, the purchase of debt securities or
interests in indebtedness or through repurchase agreements. Each Fund has
adopted a non-fundamental policy restricting the lending of
8
<PAGE>
portfolio securities to no more than 5% of total assets.
A complete description of these and other policies and restrictions is contained
under "Investment Restrictions" in the Funds' combined Statement of Additional
Information.
Common stocks
Under normal circumstances, each Fund invests 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, each 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.
Convertible securities
Each 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 each 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.
Illiquid securities
Each Fund may invest in securities for which there is not an active trading
market, or which have resale restrictions. These types of securities generally
offer a higher return than more readily marketable securities, but carry the
risk that a Fund may not be able to dispose of them at an advantageous time or
price.
Repurchase agreements
As a means of earning income for periods as short as overnight, each Fund may
enter into repurchase agreements with selected banks and broker/dealers. Under a
repurchase agreement, a Fund acquires securities, subject to the seller's
agreement to repurchase them at a specified time and price.
Debt securities
Each Fund may purchase investment-grade debt securities, which are those rated
Aaa, Aa, A or Baa by Moody's, or AAA, AA, A or BBB by S&P or, if unrated, of
equivalent quality as determined by the Adviser, and may also invest up to 5% of
its total assets in debt securities which are rated below investment-grade.
Strategic Transactions and derivatives
Each 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 each 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, each 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
9
<PAGE>
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 each 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 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 each Fund's total 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. Each
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 to create leveraged exposure in the Funds. Please refer to "Risk
considerations--Strategic Transactions and derivatives" for more information.
Risk factors
Each 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 a
Fund may use from time to time. A complete description of these and other risk
factors can be found in the Funds' combined Statement of Additional Information.
Please refer to each Fund's "Investment objectives and policies" section above
for additional information.
Foreign securities. Investments in foreign securities involve special
considerations due to limited information, higher brokerage costs, different
accounting standards, thinner trading markets as compared to domestic markets
and the likely impact of foreign taxes on the income from securities. They may
also entail other risks, such as the possibility of one or more of the
following: greater market volatility; imposition of dividend or interest
withholding or confiscatory taxes; currency blockages or transfer restrictions;
expropriation, nationalization or other adverse political or economic
developments; less governmental 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, a 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 a 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. A Fund's ability and decisions to purchase and sell
portfolio securities may be affected by laws or regulations relating to the
convertibility and repatriation of assets.
Convertible securities. While convertible securities generally offer lower
yields than
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nonconvertible 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.
Illiquid securities. The absence of a trading market can make it difficult to
ascertain a market value for these investments. Disposing of illiquid
investments may involve time-consuming negotiation and legal expenses, and it
may be difficult or impossible for a Fund to sell them promptly at an acceptable
price.
Repurchase agreements. If the seller under a repurchase agreement becomes
insolvent, a Fund's right to dispose of the securities may be restricted, or the
value of the securities may decline before a 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, a 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. Each Fund may invest up to 5% of its total assets in debt
securities which are rated below investment-grade; that is, rated below Baa by
Moody's or BBB by S&P (commonly referred to as "junk bonds"). The lower the
ratings of such debt securities, the greater their risks render them like equity
securities. Moody's considers bonds it rates Baa to have speculative elements as
well as investment-grade characteristics. Each Fund may invest in securities
which are rated D by S&P or, if unrated, are of equivalent quality. Securities
rated D may be in default with respect to payment of principal or interest.
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 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 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, a
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 Funds
may use
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and some of their risks are described more fully in the Funds' combined
Statement of Additional Information.
Distribution and performance information
Dividends and capital gains distributions
Scudder International Growth Fund and Scudder International Value Fund each
intend to distribute dividends from 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 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 same 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 to
individual shareholders at a maximum 20% or 28% capital gains rate (depending on
the Fund's holding period for the assets giving rise to the gain), 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 Funds to
foreign countries.
The Funds send detailed tax information about the amount and type of its
distributions by January 31 of the following year.
Under normal investment conditions, it is anticipated that each Fund's portfolio
turnover rate will not exceed 75% for the initial fiscal year. However, economic
and market conditions may necessitate more active trading, resulting in a higher
portfolio turnover rate. A higher rate involves greater brokerage expenses to a
Fund and may result in the realization of net capital gains, which would be
taxable to shareholders when distributed.
Performance information
From time to time, quotations of each 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 a Fund for a specified period. The "average annual total
return" of a Fund is the average annual compound rate of return of an investment
in a 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 a 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 particular
Fund. Performance will vary based upon, among other things, changes in market
conditions and the level of each Fund's expenses.
Fund organization
Scudder International Growth Fund and Scudder International Value Fund are each
diversified series of Scudder International Fund, Inc., an open-end, management
investment company registered under the Investment Company Act of 1940 (the
"1940 Act"). The Corporation is a Maryland corporation whose predecessor was
organized in 1953.
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The activities of the Funds 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 Funds are not required to and have 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 management 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.
The prospectus of each of the Funds is combined in this prospectus. Each Fund
offers only its own shares, yet it is possible that a Fund might become liable
for a misstatement or omission regarding the other Fund. The Directors of the
Corporation have considered this and approved the use of a combined prospectus.
Investment adviser
The Fund retains the investment management firm of Scudder Kemper Investments,
Inc., a Delaware corporation formerly known as Scudder, Stevens & Clark, Inc.
("Scudder"), to manage its 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 Funds under Maryland law.
Pursuant to the terms of an agreement, Scudder and Zurich Insurance Company
("Zurich"), an international insurance and financial services organization, have
formed a new global investment organization by combining Scudder with Zurich's
subsidiary, Zurich Kemper Investments, Inc. As a result of the transaction,
Zurich owns approximately 70% of the Adviser, with the balance owned by the
Adviser's officers and employees.
Each Fund pays the Adviser an annual investment management fee of 1.00% of the
Fund's average daily net assets. The fee is payable monthly, provided that each
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 the average management fee charged by many funds
that invest primarily in U.S. securities, but not necessarily higher than that
charged by funds with investment objectives similar to that of each Fund.
The Adviser has agreed to maintain the annualized expenses of each Fund at no
more than 1.75% of the average daily net assets of the Fund until December 31,
1998.
Under each Investment Management Agreement with the Adviser, each Fund is
responsible for all of its expenses, including fees and expenses incurred in
connection with membership in investment company organizations; fees and
expenses of each Fund's accounting agent; brokers' commissions; legal, auditing
and accounting expenses; taxes and governmental fees; the fees and expenses of
the transfer agent; the expenses of and the fees for registering or qualifying
securities for sale; the fees and expenses of Directors, officers and employees
of the Corporation who are not affiliated with the Adviser; the cost of printing
and distributing reports and notices to shareholders; and the fees and
disbursements of custodians.
All of a Fund's expenses are paid out of gross investment income. Shareholders
pay no direct charges or fees for investment or administrative services.
Scudder Kemper Investments, Inc. is located at 345 Park Avenue, New York, New
York.
Like other mutual funds and financial and business organizations worldwide, the
Funds could be adversely affected if computer systems on which the Funds rely,
which primarily include those used by the Adviser, its affiliates or other
service providers, are unable to correctly process date-related information on
and after January 1, 2000. This risk is commonly called the Year 2000
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Issue. Failure to successfully address the Year 2000 Issue could result in
interruptions to and other material adverse effects on the Funds' business and
operations. The Adviser has commenced a review of the Year 2000 Issue as it may
affect the Funds and is taking steps it believes are reasonably designed to
address the Year 2000 Issue, although there can be no assurances that these
steps will be sufficient. In addition, there can be no assurances that the Year
2000 Issue will not have an adverse effect on the companies whose securities are
held by the Funds or on global markets or economies generally.
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 Funds.
Underwriter
Scudder Investor Services, Inc., a subsidiary of the Adviser, is the Funds'
principal underwriter. Scudder Investor Services, Inc. confirms, as agent, all
purchases of shares of the Funds. Scudder Investor Relations is a telephone
information service provided by Scudder Investor Services, Inc.
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 Funds.
Custodian
Brown Brothers Harriman & Co. is the custodian for each of the Funds.
Transaction information
Purchasing shares
Purchases are executed at the next calculated net asset value per share after a
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,
a Fund may hold redemption proceeds until the purchase check has cleared. If you
purchase shares by federal funds wire, you may avoid this delay. Redemption or
exchange requests by telephone prior to the expiration of the seven-day period
will not be accepted.
By wire. To open a new account by wire, first call Scudder at 1-800-225-5163 to
obtain an account number. A representative will instruct you to send a
completed, signed application to the transfer agent. Accounts cannot be opened
without a completed, signed application and a Scudder fund account number.
Contact your bank to arrange a wire transfer to:
The Scudder Funds
State Street Bank and Trust Company
Boston, MA 02101
ABA Number 011000028
DDA Account 9903-5552
Your wire instructions must also include:
- -- the name of the fund in which the money is to be invested,
- -- the account number of the fund, and
- -- the name(s) of the account holder(s).
The account will be established once the application and money order are
received in good order.
You may also make additional investments of $100 or more to your existing
account by wire.
By telephone order. Existing shareholders may purchase shares at a certain day's
price by calling 1-800-225-5163 before the close of regular trading on the New
York Stock Exchange (the "Exchange"), normally 4 p.m. eastern time, on that day.
Orders must be for $10,000 or more and
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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
applicable 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 "QuickBuy." If you elected "QuickBuy" 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
"QuickBuy," call 1-800-225-5163 for more information.
To purchase additional shares, call 1-800-225-5163. Purchases may not be for
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. "QuickBuy" 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 "QuickBuy" and redeem them within seven days of the
purchase, a 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. "QuickBuy" transactions are not
available for most retirement plan accounts. However, "QuickBuy" transactions
are available for Scudder IRA accounts.
By exchange. Each Fund may be exchanged for shares of other funds in the Scudder
Family of Funds unless otherwise determined by the Board of Directors. 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
Each 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
provided your banking information on your application, you can call to request
that federal funds be sent to your authorized bank account. If you did not
include your banking information 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 a
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.
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In the event that you are unable to reach a Fund by telephone, you should write
to the Fund; see "How to contact Scudder" for the address.
By "QuickSell." If you elected "QuickSell" 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 "QuickSell,"
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. "QuickSell" 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.
"QuickSell" 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. (Each 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 for a Fund
is calculated by dividing the value of total Fund assets, less all liabilities,
by the total number of shares of that Fund 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 a Fund's portfolio
securities occur between the time when these foreign exchanges close and the
time when
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the Fund's net asset value is calculated, such securities may 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
Funds' 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.
Each 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
Funds 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 a 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 application
when you open an account. Federal tax law requires a Fund to withhold 31% of
taxable dividends, capital gains distributions and redemption and exchange
proceeds from accounts (other than those of certain exempt payees) without a
correct certified Social Security or tax identification number and certain other
certified information or upon notification from the IRS or a broker that
withholding is required. Each Fund reserves the right to reject new account
applications without a correct certified Social Security or tax identification
number. Each Fund also reserves the right, following 30 days' notice, to redeem
all shares in accounts without a correct certified Social Security or tax
identification number. A shareholder may avoid involuntary redemption by
providing a 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
plan of $100/month is established.
Shareholders who maintain a non-fiduciary account balance of less than $2,500 in
a Fund, without establishing an automatic investment plan, will be assessed an
annual $10.00 per fund charge with the fee to be paid to a 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. Each 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
applicable 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
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Redemptions--Other information" in the Funds' combined 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
Each 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.
Shareholder benefits
Experienced professional management
Scudder Kemper Investments, Inc., one of the nation's most experienced
investment management firms, actively manages your 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
Each Fund is managed by a team of investment professionals, each of whom plays
an important role in the Fund's management process. Team members work together
to develop investment strategies and select securities for the Fund's portfolio.
They are supported by the Adviser's large staff of economists, research
analysts, traders and other investment specialists who work in the Adviser's
offices across the United States and abroad. We believe our team approach
benefits Fund investors by bringing together many disciplines and leveraging our
extensive resources.
For Scudder International Growth Fund, Portfolio Managers Elizabeth Allan, Carol
Franklin, Theresa Gusman and Tara Kenney have responsibility for the Fund's
day-to-day management and investment strategies. Elizabeth J. Allan joined the
Adviser in 1987 as a member of the portfolio management team of a closed-end
mutual fund concentrating its investments in Asia. Carol Franklin joined the
Adviser in 1981 and has over 10 years of European research and investment
management experience. Theresa Gusman joined the Adviser in 1995 after three
years as a Pacific Basin analyst. Ms. Gusman has 14 years of experience in
international investments. Tara C. Kenney joined the Adviser in 1995 and has
over 10 years of financial industry experience. Ms. Kenney was a vice president
of corporate finance for an investment banking firm for seven years, and most
recently, a portfolio manager for two years.
For Scudder International Value Fund, Co-lead Portfolio Managers Philip S.
Fortuna and Shahram Tajbakhsh have responsibility for the Fund's day-to-day
management and investment strategies. Mr. Fortuna joined the Adviser in 1986 as
a manager of institutional equity accounts. Mr. Fortuna served as director of
quantitative services from 1987 to 1993 and director of investment operations
from 1993 to 1995. From 1995 to 1997 he was involved in global planning and new
product development in addition to his portfolio management responsibilities.
Mr. Fortuna is currently director of the Adviser's quantitative group. Shahram
Tajbakhsh joined the Adviser in 1996. Mr. Tajbakhsh has over six years of
industry experience as a project leader and consultant which includes work in
developing analytical investment tools.
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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 applicable 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. (The exchange
privilege may not be available for certain Scudder funds or classes thereof. For
more information, please call 1-800-225-5163.) Telephone and fax redemptions and
exchanges are subject to termination and their terms are subject to change at
any time by a 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 Kemper Investments, Inc., combines the benefits of a
customized portfolio of no-load mutual funds with ongoing portfolio monitoring
and individualized service, for an annual fee of generally 1.25% or less of
assets. In addition, it draws upon the Adviser'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
shares of the applicable Fund. Please call 1-800-225-5163 to request this
feature.
Shareholder statements
You will receive a detailed statement summarizing account activity, including
dividend and capital gain reinvestment, purchases and redemptions. 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 a 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.
19
<PAGE>
Scudder Investor Centers
As a convenience to shareholders who like to conduct business in person, Scudder
Investor Services, Inc. maintains Investor 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.
20
<PAGE>
Purchases
<TABLE>
<S> <C>
<CAPTION>
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 The Scudder Funds
P.O. Box 2291 66 Brooks Drive
Boston, MA Braintree, MA 02184
02107-2291
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 Investor Centers to complete your application with the
help of a Scudder representative. Investor 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
Scudder Funds." the 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 Investor Centers to make an additional
investment in your Scudder fund account. Investor Center locations
are listed under Shareholder
benefits.
o By Telephone Please see Transaction information--Purchasing shares-By
QuickBuy 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. Please call
($50 minimum) 1-800-225-5163 for more information and an enrollment form.
21
<PAGE>
Exchanges and redemptions
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 The Scudder Funds 1-800-821-6234
P.O. Box 2291 66 Brooks Drive
Boston, MA 02107-2291 Braintree, MA 02184
- ------------------------------------------------------------------------------------------------------------------------
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 Plan Call 1-800-225-5163 for more information and an enrollment form.
</TABLE>
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 (up
to $2,000 per individual for married couples filing jointly, even if only
one spouse has 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 Scudder Roth No-Fee IRAs. Similar to the traditional IRA in many respects,
these retirement plans provide a unique opportunity for qualifying
individuals to accumulate investment earnings tax free. Unlike a
traditional IRA, with a Roth IRA, if you meet the distribution
requirements, you can withdraw your money without paying any taxes on the
earnings. No tax deduction is allowed for contributions to a Roth IRA. The
Scudder Roth 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.
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 and most 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
Paul Bancroft III
Director; Venture Capitalist and Consultant
Sheryle J. Bolton
Director; Chief Executive Officer, Scientific Learning Corporation
William T. Burgin
Director; General Partner, Bessemer Venture Partners
Thomas J. Devine
Director; Consultant
Keith R. Fox
Director; President, Exeter Capital Management Corporation
William H. Gleysteen, Jr.
Director; Consultant; Guest Scholar, Brookings Institute
William H. Luers
Director; President, The Metropolitan Museum of Art
Wilson Nolen
Director; Consultant
Kathryn L. Quirk*
Director, Vice President and Assistant Secretary
Robert G. Stone, Jr.
Honorary Director; Chairman Emeritus and Director, Kirby Corporation
Elizabeth J. Allan*
Vice President
Irene T. Cheng*
Vice President
Joyce E. Cornell*
Vice President
Susan E. Dahl*
Vice President
Carol L. Franklin*
Vice President
Edmund B. Games, Jr.*
Vice President
Theresa Gusman*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
Sheridan Reilly*
Vice President
Thomas F. McDonough*
Vice President, Secretary and Treasurer
Richard W. Desmond*
Assistant Secretary
John R. Hebble*
Assistant Treasurer
Caroline Pearson*
Assistant Secretary
*Scudder Kemper Investments, Inc.
24
<PAGE>
Investment products and services
The Scudder Family of Funds[
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series--
Premium Shares*
Managed Shares*
Scudder Government Money Market Series--Managed Shares*
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund**
Scudder Massachusetts Limited
Term Tax Free Fund**
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund**
Scudder Ohio Tax Free Fund**
Scudder Pennsylvania Tax Free Fund**
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Dividend & Growth Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
Scudder Real Estate Investment Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund***
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund***
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Value Fund
Scudder International Growth and Income Fund
Scudder International Fund++
Scudder International Growth Fund
Scudder Global Discovery Fund***
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.
Industry Sector Funds
- ---------------------
Choice Series
Scudder Financial Services Fund
Scudder Health Care Fund
Scudder Technology Fund
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs
- -------------------
Traditional IRA
Roth IRA
SEP-IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan **[[
(a variable annuity)
Education Accounts
- ------------------
Education IRA
UGMA/UTMA
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal Fund, Inc.
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. [Funds within categories are listed in order from
expected least risk to most risk. Certain Scudder funds or classes thereof may
not be available for purchase or exchange. +A portion of the income from the
tax-free funds may be subject to federal, state, and local taxes. *A class of
shares of the Fund. **Not available in all states. ***Only the Scudder Shares of
the Fund are part of the Scudder Family of Funds. + +Only the International
Shares of the Fund are part of the Scudder Family of Funds. [[A no-load variable
annuity contract provided by Charter National Life Insurance Company and its
affiliate, offered by Scudder's insurance agencies, 1-800-225-2470. #These
funds, advised by Scudder Kemper Investments, Inc., are traded on the New York
Stock Exchange and, in some cases, on various foreign stock exchanges.
25
<PAGE>
<TABLE>
<CAPTION>
How to contact Scudder
Account Service and Information:
<S> <C>
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 Investor Center:
Many shareholders enjoy the personal, one-on-one service of the Scudder
Investor Centers. Check for an Investor Center near you--they can be
found in the following cities:
Boca Raton Chicago San Francisco
Boston New York
Scudder Investor Relations and Scudder Investor Centers are services provided
through Scudder Investor Services, Inc., Distributor.
</TABLE>
* Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA
02061--Member NASD/SIPC.
26
<PAGE>
SCUDDER INTERNATIONAL GROWTH FUND
SCUDDER INTERNATIONAL VALUE FUND
Two Pure No-Load(TM) (No Sales Charges) Mutual Funds, Each Seeking
Long-Term Capital Appreciation from Foreign Equity Securities,
By Each Employing a Distinct Investment Style
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
June 29, 1998
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus and should
be read in conjunction with the prospectus for Scudder International Growth Fund
and Scudder International Value Fund dated June 29, 1998, as amended from time
to time, a copy of which may be obtained without charge by writing to Scudder
Investor Services, Inc., Two International Place, Boston, Massachusetts
02110-4103.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
<CAPTION>
Page
THE FUND'S INVESTMENT OBJECTIVE AND POLICIES..........................................................................1
General Investment Objective and Policies.....................................................................1
Investment Strategy...........................................................................................1
Master/feeder structure.......................................................................................2
Investing in Emerging Markets.................................................................................3
Foreign Securities............................................................................................5
Specialized Investment Techniques.............................................................................5
Investment Restrictions..................................................................................... 15
PURCHASES.............................................................................................................16
Additional Information About Opening An Account..............................................................16
Additional Information About Making Subsequent Investments.................................................. 17
Additional Information About Making Subsequent Investments by QuickBuy.......................................17
Checks.......................................................................................................17
Wire Transfer of Federal Funds.............................................................................. 18
Share Price..................................................................................................18
Share Certificates...........................................................................................18
Other Information............................................................................................18
EXCHANGES AND REDEMPTIONS............................................................................................ 19
Exchanges................................................................................................... 19
Redemption By Telephone......................................................................................19
Redemption by QuickSell......................................................................................20
Redemption by Mail or Fax................................................................................... 21
Redemption-in-Kind...........................................................................................21
Other Information............................................................................................21
FEATURES AND SERVICES OFFERED BY THE FUND.............................................................................22
The Pure No-Load(TM) Concept.................................................................................22
Internet access..............................................................................................23
Dividends and Capital Gains Distribution Options............................................................ 24
Scudder Investor Centers.....................................................................................24
Reports to Shareholders......................................................................................24
Transaction Summaries........................................................................................24
THE SCUDDER FAMILY OF FUNDS...........................................................................................24
SPECIAL PLAN ACCOUNTS................................................................................................ 30
Scudder Retirement Plans: Profit-Sharing and Money Purchase Pension Plans for
Corporations and Self-Employed Individuals............................................................. 30
Scudder 401(k): Cash or Deferred Profit-Sharing Plan for Corporations and
Self-Employed Individuals.............................................................................. 30
Scudder IRA: Individual Retirement Account................................................................. 30
Scudder Roth IRA: Individual Retirement Account............................................................ 31
Scudder 403(b) Plan......................................................................................... 32
Automatic Withdrawal Plan................................................................................... 32
Group or Salary Deduction Plan.............................................................................. 32
Automatic Investment Plan................................................................................... 33
Uniform Transfers/Gifts to Minors Act....................................................................... 33
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS............................................................................ 33
PERFORMANCE INFORMATION.............................................................................................. 34
Average Annual Total Return................................................................................. 34
Cumulative Total Return..................................................................................... 34
Total Return................................................................................................ 34
Comparison of Fund Performance...............................................................................34
i
<PAGE>
TABLE OF CONTENTS
Page
FUND ORGANIZATION.................................................................................................... 39
INVESTMENT ADVISER................................................................................................... 40
Personal Investments by Employees of the Adviser............................................................ 43
DIRECTORS AND OFFICERS............................................................................................... 43
Compensation of Officers and Directors...................................................................... 46
DISTRIBUTOR.......................................................................................................... 47
TAXES................................................................................................................ 48
PORTFOLIO TRANSACTIONS............................................................................................... 52
Brokerage Commissions....................................................................................... 52
Portfolio Turnover.......................................................................................... 53
NET ASSET VALUE...................................................................................................... 53
ADDITIONAL INFORMATION............................................................................................... 54
Other Information........................................................................................... 54
FINANCIAL STATEMENTS................................................................................................. 55
APPENDIX............................................................................................................. 56
</TABLE>
ii
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
(See"Investment objective and policies" and "Additional
information about policies and investments" in the Funds' prospectus.)
Scudder International Growth Fund and Scudder International Value Fund
(each a "Fund," collectively the "Funds") are each a pure no-load(TM) series of
Scudder International Fund, Inc. (the "Corporation"), an open-end management
investment company which continuously offers and redeems shares at net asset
value. Each Fund is a company of the type commonly known as a mutual fund. Each
Fund is a diversified series of the Corporation.
General Investment Objective and Policies
Scudder International Growth Fund and Scudder International Value Fund
are each seek long-term capital appreciation from foreign equity securities by
each employing a distinct investment style.
Scudder International Growth Fund seeks long-term capital appreciation through
investment primarily in the equity securities of foreign companies with high
growth potential. This Fund will focus on issuers located primarily in Europe,
Latin America, the emerging markets of the Pacific Basin, and Japan, but may
also invest in select issues from elsewhere outside U.S. boundaries. The Fund
will invest in a variety of high growth opportunities in both developed and
developing markets. Scudder International Growth Fund will seek to invest in
those companies that the Adviser believes are best able to capitalize on the
growth and changes taking place within and between various regions of the world.
Typically, these are companies with leading or rapidly-developing business
franchises, strong financial positions, and high quality management capable of
defining and implementing company strategies to take advantage of local,
regional or global market changes.
Scudder International Value Fund seeks long-term capital appreciation through
investment primarily in undervalued foreign equity securities. This Fund will
focus its investments on securities of mid-and large-cap companies, based
outside the U.S., that are either included in, or have similar characteristics
to those included in, the Morgan Stanley Capital International (MSCI) Value
Index. Scudder Kemper Investments, Inc. (the "Adviser") looks for companies
selling at what it deems attractive valuations, and will attempt to further
control for downside risk through wide diversification and other portfolio
construction methods.
Both Funds intend to diversify investments among several countries and
each will have companies from at least three different countries other than the
U.S. represented in its portfolio. The Funds do not intend to concentrate
investments in any particular industry.
While the Funds offer the potential for substantial appreciation over
time, they also involve above-average investment risk in comparison to a mutual
fund investing in a broad range of U.S. equity securities. Each Fund is designed
as a long-term investment and not for short-term trading purposes. Neither of
the Funds, nor the Funds together, should be considered a complete investment
program, although each could serve as a core international holding for an
individual's portfolio. Each Fund's net asset value, or price, can fluctuate
significantly with changes in stock market levels, political developments,
movements in currencies, global investment flows and other factors. The
International Growth Fund is expected to exhibit greater day-to-day price
volatility than the International Value Fund.
Investment Strategy
Scudder International Growth Fund
In selecting high growth potential industries and companies for
investment, the Adviser will consider a wide assortment of companies located
primarily in Europe, Latin America, the emerging markets of the Pacific Basin,
and Japan, as well as select issues from elsewhere outside U.S. boundaries. The
Adviser will conduct regional, country, industry and company analyses in search
of investments likely to benefit from economic, political, industrial and other
changes occurring across developed and emerging markets outside of the U.S.
<PAGE>
The Adviser relies heavily on fundamental analysis, supplemented by
field research, in evaluating investment opportunities. 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. Understanding
regional themes enables 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 leading or rapidly-developing business franchises,
strong financial positions, and high quality management capable of defining and
implementing company strategies to take advantage of local, regional or global
market changes.
Scudder International Value Fund
Scudder International Value Fund is actively-managed using a
disciplined, value-oriented investment management approach. Within the large and
diverse universe of overseas companies, the Adviser focuses investments on
securities of mid-and large-cap companies that are either included in, or have
similar characteristics to those included in, the Morgan Stanley Capital
International (MSCI) Value Index--a widely used benchmark of foreign security
performance based on price-to-book value ratios (see "Comparison of Fund
Performance").
The Adviser, using a proprietary, quantitative, investment strategy,
employing a computerized model, and utilizing, among other measures,
price-to-book, price-to- earning, and price-to-cash flow ratios, looks for
companies trading at what it deems attractive valuations. In addition to these
traditional valuation benchmarks, the portfolio management team will look for
positive changes in earnings growth rate, favorable stock price momentum, or
changes triggered by some characteristic, event, or catalyst for improvement.
Geographic allocation of fund assets will be accomplished through use of
proprietary, computer-based models that incorporate country or region specific
valuation measures as well as general market and economic indicators. In
addition to its value style, the Adviser will attempt to control for downside
risk through wide diversification and other portfolio construction methods.
Master/feeder structure
The Board of Directors has the discretion to retain the current
distribution arrangement for the Funds while investing in a master fund in a
master/feeder structure as described below.
A master/feeder fund structure is one in which a fund (a "feeder
fund"), instead of investing directly in a portfolio of securities, invests most
or all of its investment assets in a separate registered investment company (the
"master fund") with substantially the same investment objective and policies as
the feeder fund. Such a structure permits the pooling of assets of two or more
feeder funds, preserving separate identities or distribution channels at the
feeder fund level. Based on the premise that certain of the expenses of
operating an investment portfolio are relatively fixed, a larger investment
portfolio may eventually achieve a lower ratio of operating expenses to average
net assets. An existing investment company is able to convert to a feeder fund
by selling all of its investments, which involves brokerage and other
transaction costs and realization of a taxable gain or loss, or by contributing
its assets to the master fund and avoiding transaction costs and, if proper
procedures are followed, the realization of taxable gain or loss.
Investments. Under normal market conditions, each Fund will invest at least 80%
of its total assets in foreign equity securities. The Funds' equity investments
are common stock, preferred stock (convertible or non-convertible), and
warrants. These may be illiquid securities. Equity securities may also be
purchased through rights offerings. Securities may be listed on securities
exchanges, traded over-the-counter or have no organized market. In addition, the
Funds may engage in strategic transactions. When the Adviser believes that it is
appropriate to do so in order to achieve a Fund's investment objective, the Fund
may invest up to 20% of its total assets in foreign debt securities as well as
cash and cash equivalents, including foreign money market instruments,
short-term government and corporate obligations, and repurchase agreements. Such
debt securities include debt securities of foreign governments, supranational
organizations and private issuers, including bonds denominated in the European
Currency Unit (ECU). Portfolio debt investments will be selected on the basis
of, among other things, yield, credit quality, and the fundamental outlooks for
currency and interest rate trends in different parts of the globe, taking into
account the ability to hedge a degree of currency or local bond price risk. The
Funds may purchase "investment-grade" bonds, which are those rated Aaa, Aa, A or
Baa by Moody's Investors Service, Inc. ("Moody's") or AAA, AA, A or BBB by
Standard & Poor's Corporation ("S&P") or, if unrated, judged by the Adviser to
be of equivalent quality. Each Fund may also invest up to 5% of its total assets
in debt securities which are rated below investment-grade (see "Appendix").
2
<PAGE>
In addition, the Funds may enter into reverse repurchase agreements,
invest in securities of other investment companies, and engage in securities
lending.
When the Adviser determines that exceptional conditions exist abroad,
each Fund may, for temporary defensive purposes, invest all or a 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 Canada or
the U.S. It is impossible to accurately predict for how long such alternative
strategies may be utilized.
Each 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 a Fund's investment performance. If the dollar falls
in value relative to the Japanese yen, for example, the dollar value of a
Japanese stock held in a portfolio will rise, even though the price of the stock
remains unchanged. Conversely, if the dollar rises in value relative to the yen,
the dollar value of the Japanese stock will fall.
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.
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 a Fund is
uninvested and no cash is earned thereon. The inability of a Fund to make
intended security purchases due to settlement problems could cause a 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, a Fund will be exposed
to the direct or indirect consequences of political, social and economic changes
in one or more emerging markets. While a 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 a 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 a 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 a
Fund's identification of such condition until the date of
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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 a 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 a 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 a 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. A 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 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 a 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.
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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.
Foreign Securities
The Funds are intended to provide individual and institutional
investors with an opportunity to invest a portion of their assets in a
diversified group of securities of companies, wherever organized, which do
business primarily outside the U.S., and foreign governments. The Adviser
believes that diversification of assets on an international basis decreases the
degree to which events in any one country, including the U.S., 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 U.S. 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
Funds' investment policy, each Fund is not intended to provide a complete
investment program for an investor.
Investors should recognize that investing in foreign securities
involves certain special considerations, including those set forth below, which
are not typically associated with investing in U.S. securities and which may
favorably or unfavorably affect a Fund's performance. As foreign companies are
not generally subject to uniform accounting, 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 securities markets, while
growing in volume of trading activity, have substantially less volume than the
U.S. market, and securities of some foreign issuers are less liquid and more
volatile than securities of domestic issuers. Similarly, volume and liquidity in
most foreign bond markets is less than in the U.S. and, at times, volatility of
price can be greater than in the U.S. Fixed commissions on some foreign
securities exchanges and bid-to-asked spreads in foreign bond markets are
generally higher than commissions or bid-to-asked spreads on U.S. markets,
although each Fund will endeavor to achieve the most favorable net results on
its portfolio transactions. There is generally less government supervision and
regulation of securities exchanges, brokers and listed companies than in the
U.S. It may be more difficult for each 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. Payment for
securities without delivery may be required in certain foreign markets. In
addition, with respect to certain foreign countries, there is the possibility of
expropriation or confiscatory taxation, political or social instability, or
diplomatic developments which could affect U.S. investments in those countries.
Moreover, individual foreign economies may differ favorably or unfavorably from
the U.S. economy in such respects as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position. The management of each Fund seeks to mitigate the risks
associated with the foregoing considerations through continuous professional
management.
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 foreign
currencies and foreign currency futures contracts, the value of the assets of
the Fund as measured in U.S. dollars may be affected favorably or unfavorably by
changes in foreign currency exchange rates and exchange control regulations, and
the Fund may incur costs and experience conversion difficulties and
uncertainties in connection with conversions between various currencies.
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 the 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
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currency exchange market, or through entering into options or forward or futures
contracts to purchase or sell foreign currencies.
Repurchase Agreements. Each Fund may enter into repurchase agreements with any
member bank of the Federal Reserve System and any 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 the Fund may purchase or to be at least
equal to that of issuers of commercial paper rated within the two highest grades
assigned by Moody's Investor Services ("Moody's") or Standard and Poor's
Corporation ("S&P").
A repurchase agreement provides a means for a Fund to earn income on
funds for periods as short as overnight. It is an arrangement under which the
purchaser (i.e., a Fund) acquires a security ("Obligation") and the seller
agrees, at the time of sale, to repurchase the Obligation at a specified time
and price. Securities subject to a repurchase agreement are held in a segregated
account and the value of such securities 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 the Fund together
with the repurchase price upon repurchase. In either case, the income to a Fund
is unrelated to the interest rate on the Obligation itself. Obligations will be
held by the Custodian or in the Federal Reserve Book Entry system.
For purposes of The Investment Company Act of 1940, as amended (the
"1940 Act"), a repurchase agreement is deemed to be a loan from the Fund to the
seller of the Obligation subject to the repurchase agreement and is therefore
subject to 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 the Fund or as being collateral for a
loan by the Fund to the seller. In the event of the commencement of bankruptcy
or insolvency proceedings with respect to the seller of the Obligation before
repurchase of the Obligation under a repurchase agreement, 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, the Fund may be required to return the Obligation to
the seller's estate and be treated as an unsecured creditor of the seller. As an
unsecured creditor, 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 the 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.
Convertible Securities. Each Fund may invest in convertible securities, i.e.,
bonds, notes, debentures, preferred stocks and other securities which are
convertible into common stock. Investments in convertible securities can provide
an opportunity for capital appreciation and/or income through interest and
dividend payments by virtue of their conversion or exchange features.
The convertible securities in which a Fund may invest are either
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. 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
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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 debt 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 debt 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"(TM)).
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 growth and current
income, each Fund may invest up to 20% of its net assets in debt securities
including bonds of foreign governments, supranational organizations and private
issuers, including bonds denominated in the ECU. Portfolio debt investments will
be selected on the basis of, among other things, yield, credit quality, and the
fundamental outlooks for currency and interest rate trends in different parts of
the globe, taking into account the ability to hedge a degree of currency or
local bond price risk. Each Fund may purchase "investment-grade" bonds, which
are those rated Aaa, Aa, A or Baa by Moody's or AAA, AA, A or BBB by S&P or, if
unrated, judged to be of equivalent quality as determined by the Adviser.
Moody's considers bonds it rates Baa to have speculative elements as well as
investment-grade characteristics.
High Yield/High Risk Bonds. Each Fund may also purchase, to a limited extent,
debt securities which are rated below investment-grade (commonly referred to as
"junk bonds"), 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. A Fund will invest no more than 5% of its net assets in securities
rated BB or lower by Moody's or Ba by S&P, and may invest in securities which
are rated D by S&P. Securities rated D 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.
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 a Fund's net asset
value. In addition, investments in high yield zero coupon or pay-in-kind bonds,
rather than income-bearing high yield securities, may be more speculative and
may be subject to greater fluctuations in value due to changes in interest
rates.
The trading market for high yield securities may be thin to the extent
that there is no established retail secondary market. A thin trading market may
limit the ability of a Fund to accurately value high yield securities in its
portfolio and to dispose of those securities. Adverse publicity and investor
perceptions may decrease the values and liquidity of high yield securities.
These securities may also involve special registration responsibilities,
liabilities and costs, and liquidity and valuation difficulties.
Credit quality in the high-yield securities market can change suddenly
and unexpectedly, and even recently-issued credit ratings may not fully reflect
the actual risks posed by a particular high-yield security. For these reasons,
it is the policy of the Adviser not to rely exclusively on ratings issued by
established credit rating agencies, but to
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supplement such ratings with its own independent and on-going review of credit
quality. The achievement of a 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.
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.
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.
Reverse Repurchase Agreements. In a reverse repurchase agreement, a Fund sells a
portfolio instrument to another party, such as a bank or broker-dealer, in
return for cash and agrees to repurchase the instrument at a particular price
and time. While a reverse repurchase agreement is outstanding, a Fund will
maintain liquid assets in a segregated custodial account to cover its obligation
under the agreement. A Fund will enter into reverse repurchase agreements only
with parties whose creditworthiness has been found satisfactory by the Adviser.
Such transactions may increase fluctuations in the market value of the fund's
assets and may be viewed as a form of leverage.
Investment Company Securities. Securities of other investment companies may be
acquired by a Fund to the extent permitted under the 1940 Act. Investment
companies incur certain expenses such as management, custodian, and transfer
agency fees, and, therefore, any investment by a Fund in shares of other
investment companies may be subject to such duplicate expenses.
Lending of Portfolio Securities. Each Fund may seek to increase its net income
by lending portfolio securities. Such loans may be made to registered
broker/dealers or other financial institutions and are required to be secured
continuously by collateral in cash or liquid assets maintained on a current
basis at an amount at least equal to the market value and accrued interest of
the securities loaned. A Fund has the right to call a loan and obtain the
securities loaned on five days notice or, in connection with securities trading
on foreign markets, within such longer period of time which coincides with the
normal settlement period for purchases and sales of such securities in such
foreign markets. During the existence of a loan, a Fund will continue to receive
the equivalent of any distributions paid by the issuer on the securities loaned
and will also receive compensation based on investment of the collateral. The
risks in lending securities, as with other extensions of secured credit, consist
of a possible delay in recovery or even a loss of rights in the collateral
should the borrower of the securities fail financially. Loans will only be made
to firms deemed by the Adviser to be of good standing, and will not be made
unless, in the judgment of the Adviser, the consideration to be earned from such
loans would justify the risk. The value of the securities loaned will not exceed
5% of the value of a Fund's total assets at the time any loan is made.
Warrants. The Fund may invest in warrants up to 5% of the value of its
respective net assets. The holder of a warrant has the right, until the warrant
expires, to purchase a given number of shares of a particular issuer at a
specified price. Such investments can provide a greater potential for profit or
loss than an equivalent investment in the underlying security. Prices of
warrants do not necessarily move, however, in tandem with the prices of the
underlying securities and are, therefore, considered speculative investments.
Warrants pay no dividends and confer no rights other than a purchase option.
Thus, if a warrant held by a Fund were not exercised by the date of its
expiration, the Fund would lose the entire purchase price of the warrant.
Strategic Transactions and Derivatives. Each 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
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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, a 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 a 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 a Fund to utilize these
Strategic Transactions successfully will depend on the Adviser's ability to
predict pertinent market movements, which cannot be assured. Each 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 to create leveraged exposure in a Fund.
Strategic Transactions, including derivative contracts, have risks
associated with them including possible default by the other party to the
transaction, illiquidity and, to the extent the 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 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 a
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, a
Fund might not be able to close out a transaction without incurring substantial
losses, if at all. Although the use of futures and options transactions for
hedging should tend to minimize the risk of loss due to a decline in the value
of the hedged position, at the same time they tend to limit any potential gain
which might result from an increase in value of such position. Finally, the
daily variation margin requirements for futures contracts would create a greater
ongoing potential financial risk than would purchases of options, where the
exposure is limited to the cost of the initial premium. Losses resulting from
the use of Strategic Transactions would reduce net asset value, and possibly
income, and such losses can be greater than if the Strategic Transactions had
not been utilized.
General Characteristics of Options. Put options and call options typically have
similar structural characteristics and operational mechanics regardless of the
underlying instrument on which they are purchased or sold. Thus, the following
general discussion relates to each of the particular types of options discussed
in greater detail below. In addition, many Strategic Transactions involving
options require segregation of Fund assets in special accounts, as described
below under "Use of Segregated and Other Special Accounts."
A put option gives the purchaser of the option, upon payment of a
premium, the right to sell, and the writer the obligation to buy, the underlying
security, commodity, index, currency or other instrument at the exercise price.
For instance, the Fund's purchase of a put option on a security might be
designed to protect its holdings in the underlying instrument (or, in some
cases, a similar instrument) against a substantial decline in the market value
by giving a
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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. A 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. A Fund is
authorized to purchase and sell exchange listed options and over-the-counter
options ("OTC options"). Exchange listed options are issued by a regulated
intermediary such as the Options Clearing Corporation ("OCC"), which guarantees
the performance of the obligations of the parties to such options. The
discussion below uses the OCC as an example, but is also applicable to other
financial intermediaries.
With certain exceptions, OCC-issued and exchange-listed options
generally settle by physical delivery of the underlying security or currency,
although in the future cash settlement may become available. Index options and
Eurodollar instruments are cash settled for the net amount, if any, by which the
option is "in-the-money" (i.e., where the value of the underlying instrument
exceeds, in the case of a call option, or is less than, in the case of a put
option, the exercise price of the option) at the time the option is exercised.
Frequently, rather than taking or making delivery of the underlying instrument
through the process of exercising the option, listed options are closed by
entering into offsetting purchase or sale transactions that do not result in
ownership of the new option.
A Fund's ability to close out its position as a purchaser or seller of
an OCC or exchange listed put or call option is dependent, in part, upon the
liquidity of the option market. Among the possible reasons for the absence of a
liquid option market on an exchange are: (i) insufficient trading interest in
certain options; (ii) restrictions on transactions imposed by an exchange; (iii)
trading halts, suspensions or other restrictions imposed with respect to
particular classes or series of options or underlying securities including
reaching daily price limits; (iv) interruption of the normal operations of the
OCC or an exchange; (v) inadequacy of the facilities of an exchange or OCC to
handle current trading volume; or (vi) a decision by one or more exchanges to
discontinue the trading of options (or a particular class or series of options),
in which event the relevant market for that option on that exchange would cease
to exist, although outstanding options on that exchange would generally continue
to be exercisable in accordance with their terms.
The hours of trading for listed options may not coincide with the hours
during which the underlying financial instruments are traded. To the extent that
the option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.
OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct bilateral
agreement with the Counterparty. In contrast to exchange listed options, which
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term, exercise price,
premium, guarantees and security, are set by negotiation of the parties. A Fund
will only sell OTC options (other than OTC currency options) that are subject to
a buy-back provision permitting the Fund to require the Counterparty to sell the
option back to the Fund at a formula price within seven days. A Fund expects
generally to enter into OTC options that have cash settlement provisions,
although it is not required to do so.
Unless the parties provide for it, there is no central clearing or
guaranty function in an OTC option. As a result, if the Counterparty fails to
make or take delivery of the security, currency or other instrument underlying
an OTC option it has entered into with a Fund or fails to make a cash settlement
payment due in accordance with the terms of that option, the Fund will lose any
premium it paid for the option as well as any anticipated benefit of the
transaction. Accordingly, the 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. A Fund will engage in OTC option transactions only with U.S.
Government securities dealers recognized by the Federal Reserve Bank of New York
as "primary dealers" or broker/dealers, domestic or foreign banks or other
financial institutions which have received (or the guarantors of the obligation
of which have received) a short-term credit rating of A-1 from S&P or P-1 from
Moody's or an equivalent rating from any nationally recognized statistical
rating organization ("NRSRO") or, in the case of OTC currency transactions, are
determined to be of equivalent credit
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quality by the Adviser. The staff of the SEC currently takes the position that
OTC options purchased by a Fund, and portfolio securities "covering" the amount
of the Fund's obligation pursuant to an OTC option sold by it (the cost of the
sell-back plus the in-the-money amount, if any) are illiquid, and are subject to
the Fund's limitation on investing no more than 15% of its total 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 the Fund's income. The sale of put options can also provide income.
A 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., the Fund must own
the securities or futures contract subject to the call) or must meet the asset
segregation requirements described below as long as the call is outstanding.
Even though a Fund will receive the option premium to help protect it against
loss, a call sold by the Fund exposes the Fund during the term of the option to
possible loss of opportunity to realize appreciation in the market price of the
underlying security or instrument and may require the Fund to hold a security or
instrument which it might otherwise have sold.
A 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. A Fund will not sell put options if, as a result, more than 50% of
the Fund's assets would be required to be segregated to cover its potential
obligations under such put options other than those with respect to futures and
options thereon. In selling put options, there is a risk that the Fund may be
required to buy the underlying security at a disadvantageous price above the
market price.
General Characteristics of Futures. Each Fund may enter into financial futures
contracts or purchase or sell put and call options on such futures as a hedge
against anticipated interest rate, currency or equity market changes, for
duration management and for risk management purposes. Futures are generally
bought and sold on the commodities exchanges where they are listed with payment
of initial and variation margin as described below. The sale of a futures
contract creates a firm obligation by a Fund, as seller, to deliver to the buyer
the specific type of financial instrument called for in the contract at a
specific future time for a specified price (or, with respect to index futures
and Eurodollar instruments, the net cash amount). Options on futures contracts
are similar to options on securities except that an option on a futures contract
gives the purchaser the right in return for the premium paid to assume a
position in a futures contract and obligates the seller to deliver such
position.
A 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.
A Fund will not enter into a futures contract or related option (except
for closing transactions) if, immediately thereafter, the sum of the amount of
its initial margin and premiums on open futures contracts and options thereon
would exceed 5% of the Fund's total assets (taken at current value); however, in
the case of an option that is in-
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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. A 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 are determined to be of equivalent credit
quality by the Adviser.
A Fund's dealings in forward currency contracts and other currency
transactions such as futures, options, options on futures and swaps will be
limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is entering into a currency transaction with
respect to specific assets or liabilities of the Fund, which will generally
arise in connection with the purchase or sale of its portfolio securities or the
receipt of income therefrom. Position hedging is entering into a currency
transaction with respect to portfolio security positions denominated or
generally quoted in that currency.
A 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 or cross hedging as described below.
A Fund may also cross-hedge currencies by entering into transactions to
purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which the Fund has or in which the Fund expects
to have portfolio exposure.
To reduce the effect of currency fluctuations on the value of existing
or anticipated holdings of portfolio securities, the Fund may also engage in
proxy hedging. Proxy hedging is often used when the currency to which 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 the 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
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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, the Fund will comply with the asset segregation
requirements described below.
Risks of Currency Transactions. Currency transactions are subject to risks
different from those of other portfolio transactions. Because currency control
is of great importance to the issuing governments and influences economic
planning and policy, purchases and sales of currency and related instruments can
be negatively affected by government exchange controls, blockages, and
manipulations or exchange restrictions imposed by governments. These can result
in losses to each 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 the Fund to do so. A combined
transaction will usually contain elements of risk that are present in each of
its component transactions. Although combined transactions are normally entered
into based on the Adviser's judgment that the combined strategies will reduce
risk or otherwise more effectively achieve the desired portfolio management
goal, it is possible that the combination will instead increase such risks or
hinder achievement of the portfolio management objective.
Swaps, Caps, Floors and Collars. Among the Strategic Transactions into which
each Fund may enter are interest rate, currency and index swaps and the purchase
or sale of related caps, floors and collars. Each Fund expects to enter into
these transactions primarily to preserve a return or spread on a particular
investment or portion of its portfolio, to protect against currency
fluctuations, as a duration management technique or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
date. Each Fund intends to use these transactions as hedges and not as
speculative investments and will not sell interest rate caps or floors where it
does not own securities or other instruments providing the income stream the
Fund may be obligated to pay. Interest rate swaps involve the exchange by 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.
A Fund will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. Inasmuch as these swaps, caps,
floors and collars are entered into for good faith hedging purposes, the Adviser
and the Fund believe such obligations do not constitute senior securities under
the 1940 Act, and, accordingly, will not treat them as being subject to its
borrowing restrictions. A 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
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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. A 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 each Fund segregate cash or liquid
assets with its custodian to the extent Fund obligations are not otherwise
"covered" through ownership of the underlying security, financial instrument or
currency. In general, either the full amount of any obligation by 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 securities at least equal to the
current amount of the obligation must be segregated with the custodian. The
segregated assets cannot be sold or transferred unless equivalent assets are
substituted in their place or it is no longer necessary to segregate them. For
example, a call option written by a Fund will require the Fund to hold the
securities subject to the call (or securities convertible into the needed
securities without additional consideration) or to segregate cash or liquid
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 the Fund to own
portfolio securities which correlate with the index or to segregate cash or
liquid assets equal to the excess of the index value over the exercise price on
a current basis. A put option written by a Fund requires a Fund to segregate
cash or liquid 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 the Fund to buy or sell
currency will generally require the Fund to hold an amount of that currency or
liquid securities denominated in that currency equal to the Fund's obligations
or to segregate cash or liquid assets equal to the amount of the Fund's
obligation.
OTC options entered into by 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 cash or liquid
assets equal to its accrued net obligations, as there is no requirement for
payment or delivery of amounts in excess of the net amount. These amounts will
equal 100% of the exercise price in the case of a non cash-settled put, the same
as an OCC guaranteed listed option sold by 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, the Fund will segregate, until
the option expires or is closed out, cash or cash equivalents equal in value to
such excess. OCC issued and exchange listed options sold by a Fund other than
those above generally settle with physical delivery, or with an election of
either physical delivery or cash settlement and the Fund will segregate an
amount of cash or liquid assets equal to the full value of the option. OTC
options settling with physical delivery, or with an election of either physical
delivery or cash settlement will be treated the same as other options settling
with physical delivery.
In the case of a futures contract or an option thereon, a Fund must
deposit initial margin and possible daily variation margin in addition to
segregating cash or liquid assets sufficient to meet its obligation to purchase
or provide securities or currencies, or to pay the amount owed at the expiration
of an index-based futures contract. Such liquid assets may consist of cash, cash
equivalents, liquid debt or equity securities or other acceptable assets.
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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 assets having a value
equal to the accrued excess. Caps, floors and collars require segregation of
assets with a value equal to a Fund's net obligation, if any.
Strategic Transactions may be covered by other means when consistent
with applicable regulatory policies. A 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 the Fund. Moreover, instead of segregating cash or liquid 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, cash or liquid assets equal to any remaining obligation would need
to be segregated.
Investment Restrictions
The policies set forth below are fundamental policies of the Funds 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, a "majority of the
outstanding voting securities of the Fund" means the lesser of (1) 67% or more
of the voting securities present at such meeting, if the holders of more than
50% of the outstanding voting securities of the Fund are present or represented
by proxy; or (2) more than 50% of the outstanding voting securities of the Fund.
Each Fund has elected to be classified as a diversified series of an open-end
investment company.
In addition, as a matter of fundamental policy, each Fund will not:
(1) borrow money, except as permitted under the Investment Company
Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time;
(2) issue senior securities, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted
or modified by regulatory authority having jurisdiction, from
time to time;
(3) purchase physical commodities or contracts relating to
physical commodities;
(4) concentrate its investments in a particular industry, as that
term is used in the Investment Company Act of 1940, as
amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time;
(5) engage in the business of underwriting securities issued by
others, except to the extent that the Fund may be deemed to be
an underwriter in connection with the disposition of portfolio
securities;
(6) purchase or sell real estate, which term does not include
securities of companies which deal in real estate or mortgages
or investments secured by real estate or interests therein,
except that the Fund reserves freedom of action to hold and to
sell real estate acquired as a result of the Fund's ownership
of securities; and
(7) make loans to other persons, except (i) loans of portfolio
securities, and (ii) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests
in indebtedness in accordance with the Fund's investment
objective and policies may be deemed to be loans.
As a matter of nonfundamental policy, each Fund currently does not
intend to:
(a) borrow money in an amount greater than 5% of its total assets,
except (i) for temporary or emergency purposes and (ii) by
engaging in reverse repurchase agreements, dollar rolls, or
other investments or transactions described in the Fund's
registration statement which may be deemed to be borrowings;
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(b) enter into either of reverse repurchase agreements or dollar
rolls in an amount greater than 5% of its total assets;
(c) purchase securities on margin or make short sales, except (i)
short sales against the box, (ii) in connection with arbitrage
transactions, (iii) for margin deposits in connection with
futures contracts, options or other permitted investments,
(iv) that transactions in futures contracts and options shall
not be deemed to constitute selling securities short, and (v)
that the Fund may obtain such short-term credits as may be
necessary for the clearance of securities transactions;
(d) purchase options, unless the aggregate premiums paid on all
such options held by the Fund at any time do not exceed 20% of
its total assets; or sell put options, if as a result, the
aggregate value of the obligations underlying such put options
would exceed 50% of its total assets;
(e) enter into futures contracts or purchase options thereon
unless immediately after the purchase, the value of the
aggregate initial margin with respect to such futures
contracts entered into on behalf of the Fund and the premiums
paid for such options on futures contracts does not exceed 5%
of the fair market value of the Fund's total assets; provided
that in the case of an option that is in-the-money at the time
of purchase, the in-the-money amount may be excluded in
computing the 5% limit;
(f) purchase warrants if as a result, such securities, taken at
the lower of cost or market value, would represent more than
5% of the value of the Fund's total assets (for this purpose,
warrants acquired in units or attached to securities will be
deemed to have no value); and
(g) lend portfolio securities in an amount greater than 5% of its
total assets.
The foregoing nonfundamental Policies are in addition to Policies
otherwise stated in the Prospectus or Statement of Additional Information.
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, a Fund.
PURCHASES
(See "Purchases" and "Transaction information" in the Funds' prospectus.)
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, telegram, 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 number 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 02101, ABA Number 011000028, DDA
Account 9903-5552. The investor must give the Scudder fund name, account name
and the new account number. Finally, the investor must send a completed and
signed application to the Fund promptly.
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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, telegram, 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 the Funds' 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 three (3) 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, a Fund shall
have the authority, as agent of the shareholder, to redeem shares in the account
in order to reimburse the 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 the Fund.
Additional Information About Making Subsequent Investments by QuickBuy
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 QuickBuy program, may purchase shares of a Fund by telephone. Through
this service shareholders may purchase up to $250,000. To purchase shares by
QuickBuy, shareholders should call before the close of regular trading on the
New York Stock Exchange (the "Exchange"), normally 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. QuickBuy 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 QuickBuy and
redeem them within seven days of the purchase, a 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.
QuickBuy transactions are not available for most retirement plan accounts.
However, QuickBuy transactions are available for Scudder IRA accounts.
In order to request purchases by QuickBuy, 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 QuickBuy may so indicate on the application.
Existing shareholders who wish to add QuickBuy to their account may do so by
completing a QuickBuy Enrollment Form. After sending in an enrollment form
shareholders should allow 15 days for this service to be available.
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 a Fund does not follow such procedures, it may be liable for losses due to
unauthorized or fraudulent telephone instructions. A 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, the Fund reserves the right to cancel the purchase immediately
and the purchaser will be responsible for any loss incurred by the Fund or the
principal underwriter by reason of such cancellation. If the purchaser is a
shareholder, a Fund shall have the
17
<PAGE>
authority, as agent of the shareholder, to redeem shares in the account in order
to reimburse the 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 regular close of 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, a Fund 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 presently closed on certain holidays although the
Exchange may be open. These holidays are 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 federal funds on behalf of a Fund.
Share Price
Purchases will be filled without sales charge at the net asset value
next computed after receipt of the purchase order 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 Scudder Investor
Services, Inc., it is the responsibility of that member broker, rather than the
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 the Funds' management to afford ease of
redemption, certificates will not be issued to indicate ownership in a Fund.
Other Information
The Funds have authorized certain members of the NASD other than the
Distributor to accept purchase and redemption orders for the Funds' shares.
Those brokers may also designate other parties to accept purchase and redemption
orders on each Fund's behalf. Orders for purchase or redemption will be deemed
to have been received by a Fund when such brokers or their authorized designees
accept the orders. Subject to the terms of the contract between a Fund and the
broker, ordinarily orders will be priced at that Fund's net asset value next
computed after acceptance by such brokers or their authorized designees.
Further, if purchases or redemptions of a Fund's shares are arranged and
settlement is made at an investor's election through any other authorized NASD
member, that member may, at its discretion, charge a fee for that service. The
Board of Directors and the Distributor, also the Funds' principal underwriter,
each has the right to limit the amount of purchases by, and to refuse to sell
to, any person. The Directors and the Distributor may suspend or terminate the
offering of shares of a Fund at any time for any reason.
The Board of Directors of the Funds and Scudder Investor Services,
Inc., the Funds' principal underwriter, each has the right to limit the amount
of purchases by and to refuse to sell to any person and each may suspend or
terminate the offering of shares of a Fund at any time for any reason.
The "Tax Identification Number" section of the Application must be
completed when opening an account. Applications and purchase orders without a
correct certified tax identification number and certain other certified
information (e.g., from exempt organizations a certification of exempt status),
may be returned to the investor if a correct, certified tax identification
number and certain other required certificates are not supplied.
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<PAGE>
The Funds 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'
prospectus.)
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 the
Funds' prospectus.
Exchange orders received before the close of regular trading on the
Exchange on any business day ordinarily will be executed at the respective net
asset values determined on that day. Exchange orders received after the close of
regular trading on the Exchange will be executed on the following business day.
Investors may also request, at no extra charge, to have exchanges
automatically executed on a predetermined schedule from one Scudder fund to an
existing account in another Scudder fund, at current net asset value, through
Scudder's Automatic Exchange Program. Exchanges must be for a minimum of $50.
Shareholders may add this free feature over the telephone or in writing.
Automatic Exchanges will continue until the shareholder requests by telephone 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.
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. The Funds 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, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Funds will not be liable for acting upon
instructions communicated by telephone that it reasonably believes 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. The exchange privilege may not be
available for certain Scudder funds or classes of Scudder funds. For more
information, please call 1-800-225-5163.
Scudder retirement plans may have different exchange requirements.
Please refer to appropriate plan literature.
19
<PAGE>
Redemption By Telephone
Shareholders currently receive the right, automatically without having
to elect it, to redeem by telephone up to $100,000 to their address of record.
Shareholders may also request by telephone to have the proceeds mailed or wired
to their predesignated bank account. In order to request wire 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 the telephone redemption
privilege 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 a 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.
The Funds 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, it may be liable for losses due to
unauthorized or fraudulent telephone instructions. The Funds will not be liable
for acting upon instructions communicated by telephone that it reasonably
believes to be genuine.
Redemption by QuickSell
Shareholders, whose predesignated bank account of record is a member of
the Automated Clearing House Network (ACH) and have elected to participate in
the QuickSell program may sell shares of a Fund by telephone. To sell shares by
QuickSell, shareholders should call before the close of regular trading on the
Exchange, normally 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 in two or three business days following your call. Shares will
be redeemed at the net asset value per share calculated at the close of trading
on the day of your call. QuickSell requests after the close of regular trading
on the Exchange will begin their processing the following business day.
QuickSell transactions are not available for Scudder IRA accounts and most other
retirement plan accounts.
In order to request redemptions by QuickSell, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account to which the redemption proceeds will be credited.
New investors wishing to establish QuickSell may so indicate on the application.
Existing shareholders who wish to add QuickSell to their account may do so by
completing a QuickSell Enrollment Form. After sending in an enrollment form,
shareholders should allow for 15 days for this service to be available.
20
<PAGE>
The Funds 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, it may be liable for losses due to
unauthorized or fraudulent telephone instructions. The Funds will not be liable
for acting upon instructions communicated by telephone that it reasonably
believes to be genuine.
Redemption by Mail or Fax
Any existing share certificates representing shares being redeemed must
accompany a request for redemption and be duly endorsed or accompanied by a
proper stock assignment form with signature(s) guaranteed.
In order to ensure proper authorization before redeeming shares, the
Transfer Agent may request additional 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 share certificates or 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 (7) business days
after receipt by the Transfer Agent of a request for redemption that complies
with the above requirements. Delays of more than seven (7) 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 Funds reserve 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
each Fund and valued as they are for purposes of computing each 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.
Other Information
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. The Funds do not impose
a redemption or 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 may be suspended at times and a
shareholder's right to redeem shares and to receive payment therefore 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 the Fund of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Fund fairly to determine
the value of its net assets, or (d) during which the Securities and Exchange
Commission (the "Commission"), 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
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<PAGE>
Commission (or any succeeding governmental authority) shall govern as to whether
the conditions prescribed in (b), (c) or (d) exist.
Shareholders should maintain a share balance worth at least $2,500
($1,000 for IRAs, Uniform Gift to Minor Act, and Uniform Trust to Minor Act
accounts), which amount may be changed by the Board of Directors. Scudder
retirement plans have similar or lower minimum balance requirements. A
shareholder may open an account with at least $1,000 ($500 for an IRA), if an
automatic investment plan ("AIP") of $100/month ($50/month for an IRA) is
established.
Shareholders who maintain a non-fiduciary account balance of less than
$2,500 in a Fund, without establishing an AIP, will be assessed an annual $10.00
per fund charge with the fee to be reinvested in 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. Each 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. Each Fund will mail
the proceeds of the redeemed account to the shareholder at the address of
record. Reductions in value that result solely from market activity will not
trigger an involuntary redemption. UGMA, UTMA, IRA and other retirement accounts
will not be assessed the $10.00 charge or be subject to automatic liquidation.
FEATURES AND SERVICES OFFERED BY THE FUND
(See "Shareholder benefits" in the Funds' prospectus.)
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 Scudder Family
of 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 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 Rule 12b-1 under the 1940 Act.
A front-end load is a sales charge, which can be as high as 8.50% of
the amount invested. A back-end load is a contingent deferred sales charge,
which can be as high as 8.50% of either the amount invested or redeemed. The
maximum front-end or back-end load varies, and depends upon whether or not a
fund also charges a 12b-1 fee and/or a service fee or offers investors various
sales-related services such as dividend reinvestment. The maximum charge for a
12b-1 fee is 0.75% of a fund's average annual net assets, and the maximum charge
for a service fee is 0.25% of a fund's average annual net assets.
A no-load fund does not charge a front-end or back-end load, but can
charge a small 12b-1 fee and/or service fee against fund assets. Under the
National Association of Securities Dealers 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 funds in the Scudder Family of Funds do not pay any asset-based
sales charges or service fees, Scudder Family of Funds 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
22
<PAGE>
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>
<S> <C> <C> <C> <C> <C>
<CAPTION>
====================================================================================================================
Scudder Load Fund with 0.75% No-Load Fund with
YEARS Pure No-Load (TM) 8.50% Load 12b-1 Fee 0.25% 12b-1 Fee
Fund Fund
===================================================================================================================
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 the
Funds' prospectus for more specific information about the rates at which
management fees and other expenses are assessed.
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.
23
<PAGE>
Dividends and Capital Gains 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 received by the Transfer Agent at least five days prior to a
dividend record date. Shareholders also may change their dividend option either
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 a Fund.
Investors may also have dividends and distributions automatically
deposited in their predesignated bank account through Scudder's
DistributionsDirect Program. Shareholders who elect to participate in the
DistributionsDirect Program, and whose predesignated checking account of record
is with a member bank of the Automated Clearing House Network (ACH) can have
income and capital gain distributions automatically deposited to their personal
bank account usually within three business days after the Fund pays its
distribution. A DistributionsDirect request form can be obtained by calling
1-800-225-5163. Confirmation statements will be mailed to shareholders as
notification that distributions have been deposited.
Investors choosing to participate in Scudder's Automatic Withdrawal
Plan must reinvest any dividends or capital gains. For most retirement plan
accounts, the reinvestment of dividends and capital gains is also required.
Scudder Investor Centers
Investors may visit any of the Investor 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 obtain 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 shareholders semiannual and annual financial
statements audited by independent accountants, including a list of investments
held and statements of assets and liabilities, operations, changes in net assets
and financial highlights. The Funds presently intends to distribute to
shareholders informal quarterly reports during the intervening quarters,
containing a statement of the investments of the Funds.
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.
24
<PAGE>
MONEY MARKET
Scudder U.S. Treasury Money Fund seeks to provide safety, liquidity and
stability of capital and, consistent therewith, to provide current
income. The Fund seeks to maintain a constant net asset value of $1.00
per share, although in certain circumstances this may not be possible,
and declares dividends daily.
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. SCIT seeks to maintain a
constant net asset value of $1.00 per share, although in certain
circumstances this may not be possible, and declares dividends daily.
Scudder Money Market Series seeks to provide investors with as high a
level of current income as is consistent with its investment polices
and with preservation of capital and liquidity. The Fund seeks to
maintain a constant net asset value of $1.00 per share, but there is no
assurance that it will be able to do so. The institutional class of
shares of this Fund is not within the Scudder Family of Funds.
Scudder Government Money Market Series seeks to provide investors with
as high a level of current income as is consistent with its investment
polices and with preservation of capital and liquidity. The Fund seeks
to maintain a constant net asset value of $1.00 per share, but there is
no assurance that it will be able to do so. The institutional class of
shares of this Fund is not within the Scudder Family of Funds.
TAX FREE MONEY MARKET
Scudder Tax Free Money Fund ("STFMF") seeks to provide income exempt
from regular federal income tax and stability of principal through
investments primarily in municipal securities. STFMF seeks to maintain
a constant net asset value of $1.00 per share, although in extreme
circumstances this may not be possible.
Scudder Tax Free Money Market Series seeks to provide investors with as
high a level of current income that cannot be subjected to federal
income tax by reason of federal law as is consistent with its
investment policies and with preservation of capital and liquidity. The
Fund seeks to maintain a constant net asset value of $1.00 per share,
but there is no assurance that it will be able to do so. The
institutional class of shares of this Fund is not within the Scudder
Family of Funds.
Scudder California Tax Free Money Fund* seeks stability of capital and
the maintenance of a constant net asset value of $1.00 per share while
providing California taxpayers income exempt from both California State
personal and regular federal income taxes. The Fund is a professionally
managed portfolio of high quality, short-term California municipal
securities. There can be no assurance that the stable net asset value
will be maintained.
Scudder New York Tax Free Money Fund* seeks stability of capital and
the maintenance of a constant net asset value of $1.00 per share, while
providing New York taxpayers income exempt from New York State and New
York City personal income taxes and regular federal income tax. There
can be no assurance that the stable net asset value will be maintained.
TAX FREE
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 Medium Term Tax Free Fund seeks to provide a high level of
income free from regular federal income taxes and to limit principal
fluctuation. The Fund will invest primarily in high-grade,
intermediate-term bonds.
- --------------
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.
25
<PAGE>
Scudder Managed Municipal Bonds seeks to provide income exempt from
regular federal income tax primarily through investments in high-grade,
long-term municipal securities.
Scudder High Yield Tax Free Fund seeks to provide a high level of
interest income, exempt from regular federal income tax, from an
actively managed portfolio consisting primarily of investment-grade
municipal securities.
Scudder California Tax Free Fund* seeks to provide California taxpayers
with income exempt from both California State personal income and
regular federal income tax. The Fund is a professionally managed
portfolio consisting primarily of California municipal securities.
Scudder Massachusetts Limited Term Tax Free Fund* seeks to provide
Massachusetts taxpayers with as high a level of income exempt from
Massachusetts personal income tax and regular federal income tax, as is
consistent with a high degree of price stability, through a
professionally managed portfolio consisting primarily of
investment-grade municipal securities.
Scudder Massachusetts Tax Free Fund* seeks to provide Massachusetts
taxpayers with income exempt from both Massachusetts personal income
tax and regular federal income tax. The Fund is a professionally
managed portfolio consisting primarily of investment-grade municipal
securities.
Scudder New York Tax Free Fund* seeks to provide New York taxpayers
with income exempt from New York State and New York City personal
income taxes and regular federal income tax. The Fund is a
professionally managed portfolio consisting primarily of New York
municipal securities.
Scudder Ohio Tax Free Fund* seeks to provide Ohio taxpayers with income
exempt from both Ohio personal income tax and regular federal income
tax. The Fund is a professionally managed portfolio consisting
primarily of investment-grade municipal securities.
Scudder Pennsylvania Tax Free Fund* seeks to provide Pennsylvania
taxpayers with income exempt from both Pennsylvania personal income tax
and regular federal income tax. The Fund is a professionally managed
portfolio consisting primarily of investment-grade municipal
securities.
U.S. INCOME
Scudder Short Term Bond Fund seeks to provide a high level of income
consistent with a high degree of principal stability by investing
primarily in high quality short-term bonds.
Scudder Zero Coupon 2000 Fund seeks to provide as high an investment
return over a selected period as is consistent with investment in U.S.
Government securities and the minimization of reinvestment risk.
Scudder GNMA Fund seeks to provide high current income primarily from
U.S. Government guaranteed mortgage-backed (Ginnie Mae) securities.
Scudder Income Fund seeks a high level of income, consistent with the
prudent investment of capital, through a flexible investment program
emphasizing high-grade bonds.
Scudder High Yield Bond Fund seeks a high level of current income and,
secondarily, capital appreciation through investment primarily in below
investment-grade domestic debt securities.
- --------------
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.
26
<PAGE>
GLOBAL INCOME
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 International Bond Fund seeks to provide income primarily by
investing in a managed portfolio of high-grade international bonds. 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 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 by
governments and corporations in emerging markets.
ASSET ALLOCATION
Scudder Pathway Series: Conservative Portfolio seeks primarily current
income and secondarily long-term growth of capital. In pursuing these
objectives, the Portfolio, under normal market conditions, will 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 to provide investors
with a balance of growth and income by investing in a select mix of
Scudder money market, bond and equity mutual funds.
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 for investors. Total return consists of any capital appreciation
plus dividend income and interest. To achieve this objective, the
Portfolio invests in a select mix of established international and
global Scudder funds.
U.S. GROWTH AND INCOME
Scudder Balanced Fund seeks a balance of growth and income from a
diversified portfolio of equity and fixed-income securities. The Fund
also seeks long-term preservation of capital through a quality-oriented
approach that is designed to reduce risk.
Scudder Dividend & Growth Fund seeks high current income and long-term
growth of capital through investment in income paying equity
securities.
Scudder Growth and Income Fund seeks long-term growth of capital,
current income, and growth of income.
Scudder S&P 500 Index Fund seeks to provide investment results that,
before expenses, correspond to the total return of common stocks
publicly traded in the United States, as represented by the Standard &
Poor's 500 Composite Stock Price Index.
Scudder Real Estate Investment Fund seeks long-term capital growth and
current income by investing primarily in equity securities of companies
in the real estate industry.
27
<PAGE>
U.S. GROWTH
Value
Scudder Large Company Value Fund seeks to maximize long-term capital
appreciation through a value-driven investment program.
Scudder Value Fund** seeks long-term growth of capital through
investment in undervalued equity securities.
Scudder Small Company Value Fund invests for long-term growth of
capital by seeking out undervalued stocks of small U.S. companies.
Scudder Micro Cap Fund seeks long-term growth of capital by investing
primarily in a diversified portfolio of U.S. micro-capitalization
("micro-cap") common stocks.
Growth
Scudder Classic Growth Fund** seeks to provide long-term growth of
capital with reduced share price volatility compared to other growth
mutual funds.
Scudder Large Company Growth Fund seeks to provide long-term growth of
capital through investment primarily in the equity securities of
seasoned, financially strong U.S. growth companies.
Scudder Development Fund seeks long-term growth of capital by investing
primarily in securities of small and medium-size growth companies.
Scudder 21st Century Growth Fund seeks long-term growth of capital by
investing primarily in the securities of emerging growth companies
poised to be leaders in the 21st century.
SCUDDER CHOICE SERIES
Scudder Financial Services Fund seeks long-term growth of capital
primarily through investment in equity securities of financial services
companies.
Scudder Health Care Fund seeks long-term growth of capital primarily
through investment in securities of companies that are engaged in the
development, production or distribution of products or services related
to the treatment or prevention of diseases and other medical problems.
Scudder Technology Fund seeks long-term growth of capital primarily
through investment in securities of companies engaged in the
development, production or distribution of technology-related products
or services.
GLOBAL GROWTH
Worldwide
Scudder Global Fund seeks long-term growth of capital through a
diversified portfolio of marketable securities, primarily equity
securities, including common stocks, preferred stocks and debt
securities convertible into common stocks.
- --------------
** Only the Scudder Shares are part of the Scudder Family of Funds.
28
<PAGE>
Scudder International Value Fund seeks long-term capital appreciation
through investment primarily in undervalued foreign equity securities.
Scudder International Growth and Income Fund seeks long-term growth of
capital and current income primarily from foreign equity securities.
Scudder International Fund*** seeks long-term growth of capital
primarily through a diversified portfolio of marketable foreign equity
securities.
Scudder International Growth Fund seeks long-term capital appreciation
through investment primarily in the equity securities of foreign
companies with high growth potential.
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 Emerging Markets Growth Fund seeks long-term growth of capital
primarily through equity investment in emerging markets around the
globe.
Scudder Gold Fund seeks maximum return (principal change and income)
consistent with investing in a portfolio of gold-related equity
securities and gold.
Regional
Scudder Greater Europe Growth Fund seeks long-term growth of capital
through investments primarily in the equity securities of European
companies.
Scudder Pacific Opportunities Fund seeks long-term growth of capital
through investment primarily in the equity securities of Pacific Basin
companies, excluding Japan.
Scudder Latin America Fund seeks to provide long-term capital
appreciation through investment primarily in the securities of Latin
American issuers.
The Japan Fund, Inc. seeks long-term capital appreciation by investing
primarily in equity securities (including American Depository Receipts)
of Japanese companies.
The net asset values of most Scudder funds can be found daily in the
"Mutual Funds" section of The Wall Street Journal under "Scudder Funds," and in
other leading newspapers throughout the country. Investors will notice the net
asset value and offering price are the same, reflecting the fact that no sales
commission or "load" is charged on the sale of shares of the Scudder funds. The
latest seven-day yields for the money-market funds can be found every Monday and
Thursday in the "Money-Market Funds" section of The Wall Street Journal. This
information also may be obtained by calling the Scudder Automated Information
Line (SAIL) at 1-800-343-2890.
The Scudder Family of Funds offers many conveniences and services,
including: active professional investment management; broad and diversified
investment portfolios; pure no-load funds with no commissions to purchase or
redeem shares or Rule 12b-1 distribution fees; individual attention from a
service representative of Scudder Investor Relations; and easy telephone
exchanges into other Scudder funds. Certain Scudder funds or classes thereof may
not be available for purchase or exchange. For more information, please call
1-800-225-5163.
- --------------
** Only the Scudder Shares are part of the Scudder Family of Funds.
*** Only the International Shares are part of the Scudder Family of Funds.
29
<PAGE>
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' prospectus.)
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 each 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 each Fund may be purchased as the investment medium under a
plan in the form of a Scudder Profit-Sharing Plan (including a version of the
Plan which includes a cash-or-deferred feature) or a Scudder Money Purchase
Pension Plan (jointly referred to as the Scudder Retirement Plans) adopted by a
corporation, a self-employed individual or a group of self-employed individuals
(including sole proprietorships and partnerships), or other qualifying
organization. Each of these forms was approved by the IRS as a prototype. The
IRS's approval of an employer's plan under Section 401(a) of the Code will be
greatly facilitated if it is in such approved form. Under certain circumstances,
the IRS will assume that a plan, adopted in this form, after special notice to
any employees, meets the requirements of Section 401(a) of the Internal Revenue
Code.
Scudder 401(k): Cash or Deferred Profit-Sharing Plan
for Corporations and Self-Employed Individuals
Shares of each 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 each Fund may be purchased as the underlying investment for
an Individual Retirement Account ("IRA") which meets the requirements of Section
408(a) of the Code.
A single individual who is not an active participant in an
employer-maintained retirement plan, a simplified employee pension plan, or a
tax-deferred annuity program (a "qualified plan"), and a married individual who
is not an active participant in a qualified plan and whose spouse is also not an
active participant in a qualified plan, are eligible to make tax deductible
contributions of up to $2,000 to an IRA prior to the year such individual
attains age 70 1/2. In addition, certain individuals who are active participants
in qualified plans (or who have spouses who are active participants) are also
eligible to make tax-deductible contributions to an IRA; the annual amount, if
any, of the contribution which such an individual will be eligible to deduct
will be determined by the amount of his, her, or their adjusted gross income for
the year. Whenever the adjusted gross income limitation prohibits an individual
from contributing what would otherwise be the maximum tax-deductible
contribution he or she could make, the individual will be eligible to contribute
the difference to an IRA in the form of nondeductible contributions.
An eligible individual may contribute as much as $2,000 of qualified
income (earned income or, under certain circumstances, alimony) to an IRA each
year (up to $2,000 per individual for married couples if only one spouse has
30
<PAGE>
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
<TABLE>
<S> <C> <C> <C> <C>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
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
</TABLE>
This next table shows how much individuals would accumulate in non-IRA
accounts by age 65 if they start with $2,000 in pretax earned income at the
beginning of each year (which is $1,380 after taxes are paid), assuming average
annual returns of 5, 10 and 15%. (At withdrawal, a portion of the accumulation
in this table will be taxable.)
Value of a Non-IRA Account at
Age 65 Assuming $1,380 Annual Contributions
(post tax, $2,000 pretax) and a 31% Tax Bracket
<TABLE>
<S> <C> <C> <C> <C>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Starting Annual Rate of Return
Age of ------------------------------------------------------------------------------
Contributions 5% 10% 15%
- -----------------------------------------------------------------------------------------------------------
25 $119,318 $287,021 $741,431
35 73,094 136,868 267,697
45 40,166 59,821 90,764
55 16,709 20,286 24,681
</TABLE>
Scudder Roth IRA: Individual Retirement Account
Shares of the Funds may be purchased as the underlying investment for
an individual Retirement Account which meets the requirements of Section 408A of
the Internal Revenue Code.
A single individual earning below $95,000 can contribute up to $2,000
per year to a Roth IRA. The maximum contribution amount diminishes and gradually
falls to zero for single filers with adjusted gross incomes ranging from $95,000
to $110,000. Married couples earning less than $150,000 combined, and filing
jointly, can contribute a full $4,000 per year ($2,000 per IRA). The maximum
contribution amount for married couples filing jointly phases out from $150,000
to $160,000.
An eligible individual can contribute money to a traditional IRA and a
Roth IRA as long as the total contribution to all IRAs does not exceed $2,000.
No tax deduction is allowed under Section 219 of the Internal Revenue Code for
contributions to a Roth IRA. Contributions to a Roth IRA may be made even after
the individual for whom the account is maintained has attained age 70 1/2.
All income and capital gains derived from Roth IRA investments are
reinvested and compounded tax-free. Such tax-free compounding can lead to
substantial retirement savings. No distributions are required to be taken prior
to the death of the original account holder. If a Roth IRA has been established
for a minimum of five years, distributions can be taken tax-free after reaching
age 59 1/2, for a first-time home purchase ($10,000 maximum, one-time use) or
upon death or disability. All other distributions from a Roth IRA are taxable
and subject to a 10% tax
31
<PAGE>
penalty unless an exception applies. Exceptions to the 10% penalty include:
disability, excess medical expenses, the purchase of health insurance for an
unemployed individual and education expenses.
An individual with an income of less than $100,000 (who is not married
filing separately) can roll his or her existing IRA into a Roth IRA. However,
the individual must pay taxes on the taxable amount in his or her traditional
IRA. Individuals who complete the rollover in 1998 will be allowed to spread the
tax payments over a four-year period. After 1998, all taxes on such a rollover
will have to be paid in the tax year in which the rollover is made.
Scudder 403(b) Plan
Shares of each Fund may also be purchased as the underlying investment
for tax sheltered annuity plans under the provisions of Section 403(b)(7) of the
Code. In general, employees of tax-exempt organizations described in Section
501(c)(3) of the Code (such as hospitals, churches, religious, scientific, or
literary organizations and educational institutions) or a public school system
are eligible to participate in a 403(b) plan.
Automatic Withdrawal Plan
Non-retirement plan shareholders 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. Shareholders may designate
which day they want the automatic withdrawal to be processed. 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 and any
reinvested dividends and capital gains distributions. Requests for increases in
withdrawal amounts or to change the payee must be submitted in writing, signed
exactly as the account is registered, and contain signature guarantee(s) as
described under "Transaction information--Redeeming shares--Signature
guarantees" in each Funds' prospectus. Any such requests must be received by
each Fund's transfer agent ten days prior to the date of the first automatic
withdrawal. 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 [Trust, Corporation] and its agents reserve the right to establish
a maintenance charge in the future depending on the services required by the
investor.
The Corporation reserves the right, after notice has been given to the
shareholder, to redeem and close a shareholder's account in the event that the
shareholder ceases participating in the group plan prior to investment of $1,000
per individual or in the event of a redemption which occurs prior to the
accumulation of that amount or which reduces the account value to less than
$1,000 and the account value is not increased to $1,000 within a reasonable time
after notification. An investor in a plan who has not purchased shares for six
months shall be presumed to have stopped making payments under the plan.
32
<PAGE>
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' prospectus.)
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. The 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,
the 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 the
Fund does not distribute the amount of capital gain and/or ordinary income
required to be distributed by an excise tax provision of the Code, the Fund may
be subject to that excise tax. In certain circumstances, the Fund may determine
that it is in the interest of shareholders to distribute less than the required
amount. (See "TAXES.")
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 dividends paid deduction on its federal tax return.
The Funds intend to distribute dividends from its net investment income
semiannually in December. The Funds intend to distribute net realized capital
gains after utilization of capital loss carryforwards, if any, in November or
December to prevent application of a federal excise tax. An additional
distribution may be made, if necessary.
Both types of distributions will be made in shares of the Fund and
confirmations will be mailed to each shareholder unless a shareholder has
elected to receive cash, in which case a check will be sent. Distributions of
investment company taxable income and net realized capital gains are taxable
(See "TAXES"), whether made in shares or cash.
Each distribution is accompanied by a brief explanation of the form and
character of the distribution. The characterization of distributions on such
correspondence may differ from the characterization for federal tax purposes. In
January of each year the Fund issues to each shareholder a statement of the
federal income tax status of all distributions in the prior calendar year.
33
<PAGE>
PERFORMANCE INFORMATION
(See "Distribution and performance information--Performance information"
in the Funds' prospectus.)
From time to time, quotations of each Fund's 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 the Fund, ended on the last
day of a recent calendar quarter. Average annual total return quotations reflect
changes in the price of the Fund's shares and assume that all dividends and
capital gains distributions during the respective periods were reinvested in
Fund shares. Average annual total return is calculated by 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:
P = a hypothetical initial investment of $1,000
T = Average Annual Total Return
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.
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 Fund's shares and
assume that all dividends and capital gains distributions during the period were
reinvested in Fund shares. Cumulative Total Return is calculated by 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.
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.
Comparison of Fund Performance
A comparison of the quoted non-standard performance offered for various
investments is valid only if performance is calculated in the same manner. Since
there are different methods of calculating performance, investors
34
<PAGE>
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 Corporation 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, a Fund will be compared to the
appropriate fund category, that is, by fund objective and portfolio holdings, or
to the appropriate volatility grouping, where volatility is a measure of a
fund's risk. For instance, a Scudder growth fund will be compared to funds in
the growth fund category; a Scudder income fund will be compared to funds in the
income fund category; and so on. Scudder funds (except for money market funds)
may also be compared to funds with similar volatility, as measured statistically
by independent organizations. In addition, a Fund's performance may also be
compared to the performance of broad groups of comparable mutual funds.
Unmanaged indices with which a Fund's performance may be compared include, but
are not limited to, the following:
The Europe/Australia/Far East (EAFE) Index
International Finance Corporation's Latin America Investable
Total Return Index
Morgan Stanley Capital International World Index
J.P. Morgan Global Traded Bond Index
Salomon Brothers World Government Bond Index
Nasdaq Composite Index
Wilshire 5000 Stock Index
Morgan Stanley Capital International (MSCI) Value Index
Morgan Stanley Capital International (MSCI) Growth Index
From time to time, in marketing and other Fund literature, Directors
and officers of the Funds, the Funds' portfolio manager, or members of the
portfolio management team may be depicted and quoted to give prospective and
current shareholders a better sense of the outlook and approach of those who
manage the Funds. In addition, the amount of assets that the Adviser has under
management in various geographical areas may be quoted in advertising and
marketing materials.
The Funds may be advertised as an investment choice in Scudder's
college planning program. The description may contain illustrations of projected
future college costs based on assumed rates of inflation and examples of
hypothetical fund performance, calculated as described above.
Statistical and other information, as provided by the Social Security
Administration, may be used in marketing materials pertaining to retirement
planning in order to estimate future payouts of social security benefits.
Estimates may be used on demographic and economic data.
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<PAGE>
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.
Evaluation of Fund performance or other relevant statistical
information made by independent sources may also be used in advertisements
concerning the Funds, including reprints of, or selections from, editorials or
articles about these Funds. Sources for Fund performance information and
articles about the Funds include the following:
American Association of Individual Investors' Journal, a monthly publication of
the AAII that includes articles on investment analysis techniques.
Asian Wall Street Journal, a weekly Asian newspaper that often reviews U.S.
mutual funds investing internationally.
Banxquote, an on-line source of national averages for leading money market and
bank CD interest rates, published on a weekly basis by Masterfund, Inc. of
Wilmington, Delaware.
Barron's, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance data.
Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds investing abroad.
CDA Investment Technologies, Inc., an organization which provides performance
and ranking information through examining the dollar results of hypothetical
mutual fund investments and comparing these results against appropriate market
indices.
Consumer Digest, a monthly business/financial magazine that includes a "Money
Watch" section featuring financial news.
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<PAGE>
Financial Times, Europe's business newspaper, which features from time to time
articles on international or country-specific funds.
Financial World, a general business/financial magazine that includes a "Market
Watch" department reporting on activities in the mutual fund industry.
Forbes, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.
Fortune, a national business publication that periodically rates the performance
of a variety of mutual funds.
The Frank Russell Company, a West-Coast investment management firm that
periodically evaluates international stock markets and compares foreign equity
market performance to U.S. stock market performance.
Global Investor, a European publication that periodically reviews the
performance of U.S. mutual funds investing internationally.
IBC 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.
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.
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<PAGE>
SmartMoney, 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 issued 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
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.
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<PAGE>
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.
FUND ORGANIZATION
(See "Fund organization" in the Funds' prospectus.)
The Corporation was organized as Scudder Fund of Canada Ltd. in Canada
in 1953 by the investment management firm of Scudder, Stevens & Clark, Inc. 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 U.S. 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 900 million
shares of a par value of $.01 each. Each series has one class of shares, except
for Scudder International fund, which has two classes of shares. All shares of a
class have 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 eight series: Scudder International Fund, the original series;
Scudder Latin America Fund, Scudder Pacific Opportunities Fund, both organized
in December 1992, Scudder Greater Europe Growth Fund, organized in October 1994,
Scudder Emerging Markets Growth Fund, organized in May 1996, Scudder
International Growth and Income Fund, organized in June 1997 and Scudder
International Value Fund and Scudder International Growth Fund, organized in
June 1998. Each series consists of 100 million shares except for Scudder
International Fund which consists of 200 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
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 and by class on matters affecting an individual class. For
example, a change in investment policy for a series would be voted upon only by
shareholders of the series involved. Additionally,
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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 Corporation's Amended and Restated Articles 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' prospectus.)
Scudder Kemper Investments, Inc. (the "Adviser"), an investment counsel
firm, acts as investment adviser to the Fund. This organization, the predecessor
of which is Scudder, Stevens & Clark, Inc., is one of the most experienced
investment counsel firms in the U. S. It was established as a partnership in
1919 and pioneered the practice of providing investment counsel to individual
clients on a fee basis. In 1928 it introduced the first no-load mutual fund to
the public. In 1953 the Adviser introduced Scudder International Fund, Inc., the
first mutual fund available in the U.S. investing internationally in securities
of issuers in several foreign countries. The predecessor firm reorganized from a
partnership to a corporation on June 28, 1985. On June 26, 1997, Scudder,
Stevens & Clark, Inc. ("Scudder") entered into an agreement with Zurich
Insurance Company ("Zurich") pursuant to which Scudder and Zurich agreed to form
an alliance. On December 31, 1997, Zurich acquired a majority interest in
Scudder, and Zurich Kemper Investments, Inc., a Zurich subsidiary, became part
of Scudder. Scudder's name has been changed to Scudder Kemper Investments, Inc.
Founded in 1872, Zurich is a multinational, public corporation
organized under the laws of Switzerland. Its home office is located at
Mythenquai 2, 8002 Zurich, Switzerland. Historically, Zurich's earnings have
resulted from its operations as an insurer as well as from its ownership of its
subsidiaries and affiliated companies (the "Zurich Insurance Group"). Zurich and
the Zurich Insurance Group provide an extensive range of insurance products and
services and have branch offices and subsidiaries in more than 40 countries
throughout the world.
The principal source of the Adviser's income is professional fees
received from providing continuous investment advice. 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 Global High Income 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, The Argentina Fund, Inc., The Brazil
Fund, Inc., The Korea Fund, Inc., The
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Japan Fund, Inc. and Scudder Spain and Portugal 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 $13 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.
Pursuant to an Agreement between Scudder Kemper Investments, Inc. and
AMA Solutions, Inc., a subsidiary of the American Medical Association (the
"AMA"), dated May 9, 1997, the Adviser has agreed, subject to applicable state
regulations, to pay AMA Solutions, Inc. royalties in an amount equal to 5% of
the management fee received by the Adviser with respect to assets invested by
AMA members in Scudder funds in connection with the AMA InvestmentLinkSM
Program. The Adviser will also pay AMA Solutions, Inc. a general monthly fee,
currently in the amount of $833. The AMA and AMA Solutions, Inc. are not engaged
in the business of providing investment advice and neither is registered as an
investment adviser or broker/dealer under federal securities laws. Any person
who participates in the AMA InvestmentLinkSM Program will be a customer of the
Adviser (or of a subsidiary thereof) and not the AMA or AMA Solutions, Inc. AMA
InvestmentLinkSM is a service mark of AMA Solutions, Inc.
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. The Adviser's international
investment management team travels the world, researching hundreds of companies.
In selecting the securities in which each 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 a Fund and also for other
clients advised by the Adviser. Investment decisions for the Fund and other
clients are made with a view to achieving their respective investment objectives
and after consideration of such factors as their current holdings, availability
of cash for investment and the size of their investments generally. Frequently,
a particular security may be bought or sold for only one client or in different
amounts and at different times for more than one but less than all clients.
Likewise, a particular security may be bought for one or more clients when one
or more other clients are selling the security. In addition, purchases or sales
of the same security may be made for two or more clients on the same day. In
such event, such transactions will be allocated among the clients in a manner
believed by the 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 the Fund.
For Scudder International Growth Fund and Scudder International Value
Fund the Investment Management Agreements (the "Agreements"), both dated June
29, 1998, were approved by the initial shareholder of each Fund on June 24,
1998, and by the Directors of the Corporation on June 1 and 2, 1998. The
Agreements will continue in effect until September 30, 1998 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 Agreements or interested
persons of the Adviser or the Funds, cast in person at a meeting called for the
purpose of voting on such approval, and either by a vote of the Funds' Directors
or of a majority of the outstanding voting securities of the Funds. 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 its assignment.
Under the Agreements, the Adviser regularly provides each Fund with
continuing investment management for the Fund's portfolio consistent with each
Fund's investment objectives, policies and restrictions and determines what
securities shall be purchased, held or sold and what portion of the Fund's
assets shall be held uninvested, subject to the Corporation's Articles, By-Laws,
the 1940 Act, the Code and to each Fund's investment objectives, policies and
restrictions, and subject, further, to such policies and instructions as the
Board of Directors of the Corporation may from time to time establish.
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Under the Agreements, the Adviser renders significant administrative
services (not otherwise provided by third parties) necessary for each 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 Commission 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 each Fund under
applicable federal and state securities laws; maintaining each Fund's books and
records to the extent not otherwise maintained by a third party; assisting in
establishing accounting policies of each Fund; assisting in the resolution of
accounting and legal issues; establishing and monitoring each Fund's operating
budget; processing the payment of each Fund's bills; assisting each Fund in, and
otherwise arranging for, the payment of distributions and dividends and
otherwise assisting the Fund in the conduct of its business, subject to the
direction and control of the Directors.
The Adviser pays the compensation and expenses (except those of
attending Board and committee meetings outside New York, New York or Boston,
Massachusetts) of all Directors, officers and executive employees of the
Corporation affiliated with the Adviser and makes available, without expense to
the Fund, 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 Fund's
office space and facilities. For these services , the pays the Adviser an annual
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. Until December 31, 1998, the Adviser had agreed not to
impose all or a portion of its management fee in order to maintain the total
annualized expenses of the Fund at not more than 1.75% of average daily net
assets of the Fund.
Under the Agreements each Fund is responsible for all of its other
expenses including: fees and expenses incurred in connection with membership in
investment company organizations; brokers' commissions; legal, auditing and
accounting expenses; the calculation of net asset value; taxes and governmental
fees; the fees and expenses of the Transfer Agent; the cost of preparing share
certificates or any other expenses of issue, sale, underwriting, distribution,
redemption or repurchase of shares; the expenses of and the fees for registering
or qualifying securities for sale; the fees and expenses of Directors, officers
and employees of the Fund who are not affiliated with the Adviser; the cost of
printing and distributing reports and notices to stockholders; and the fees and
disbursements of custodians. Each Fund may arrange to have third parties assume
all or part of the expenses of sale, underwriting and distribution of shares of
the Fund. 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
Corporation with respect thereto.
The Agreements expressly provide that the Adviser shall not be required
to pay a pricing agent of each Fund for portfolio pricing services, if any.
The Agreement identifies the Adviser as the exclusive licensee of the
rights to use and sublicense the names "Scudder," "Scudder Kemper Investments,
Inc." and "Scudder Stevens and Clark, Inc." (together, the "Scudder Marks").
Under this license, the Corporation, with respect to the Fund, has the
non-exclusive right to use and sublicense the Scudder name and marks as part of
its name, and to use the Scudder Marks in the Corporation's investment products
and services.
In reviewing the terms of each Agreement and in discussions with the
Adviser concerning such Agreement, the Directors of each Fund who are not
"interested persons" of the Adviser are represented by independent counsel at
the Fund's expense.
Each Agreement provides that the Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by each 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 each Agreement.
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Officers and employees of the Adviser from time to time may have
transactions with various banks, including each 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.
The Adviser may serve as adviser to other funds with investment
objectives and policies similar to those of the Funds that may have different
distribution arrangements or expenses, which may affect performance.
None of the officers or Directors of the Corporation may have dealings
with the Funds as principals in the purchase or sale of securities, except as
individual subscribers to or holders of shares of the Funds.
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 Fund. Among other things, the Code of Ethics, which
generally complies with standards recommended by the Investment Company
Institute's Advisory Group on Personal Investing, prohibits certain types of
transactions absent prior approval, imposes time periods during which personal
transactions may not be made in certain securities, and requires the submission
of duplicate broker confirmations and monthly reporting of securities
transactions. Additional restrictions apply to portfolio managers, traders,
research analysts and others involved in the investment advisory process.
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>
<S> <C> <C> <C>
<CAPTION>
Position with
Underwriter,
Position with Scudder Investor
Name, Age, and Address Position with Principal Occupation** Services, Inc.
- ---------------------- ------------- ---------------------- --------------
Daniel Pierce (3/18/34)+*@ Chairman of the Board Managing Director of Scudder Kemper Vice President,
and Director Investments, Inc. Director & Assistant
Treasurer
Paul Bancroft III (2/27/30) Director Venture Capitalist and Consultant; --
79 Pine Lane Retired President, Chief Executive
Box 6639 Officer and Director, Bessemer
Snowmass Village, CO 81615 Securities Corporation
Sheryle J. Bolton (7/4/46) Director CEO, Scientific Learning --
Scientific Learning Corporation, Former President and
Corporation Chief Operating Officer, Physicians
417 Montgomery Street Online, Inc. (electronic
Suite 500 transmission of clinical information
San Francisco, CA 94104 for physicians (1994-1995); Member,
Senior Management Team, Rockefeller
& Co. (1990-1993)
William T. Burgin Director General Partner, Bessemer Venture --
(9/2/43) Partners; General Partner, Deer &
83 Walnut Street Company; Director, James River
Wellesley, MA 02181 Corp.; Director, Galile Corp.,
Director of various privately held
companies
43
<PAGE>
Position with
Underwriter,
Position with Scudder Investor
Name, Age, and Address Funds Principal Occupation** Services, Inc.
- ---------------------- ------------- ---------------------- --------------
Thomas J. Devine Director Consultant --
(12/9/26)450 Park Avenue
New York, NY 10022
Keith R. Fox (4/11/54) Director President, Exeter Capital Management --
10 East 53rd Street Corporation
New York, NY 10022
William H. Gleysteen, Jr.
(5/8/26) Director Consultant, Guest Scholar, Brookings --
4937 Crescent Street Institute, formerly President, The
Bethesda, MD 20816 Japan Society, Inc.
William H. Luers Director President, The Metropolitan Museum --
(5/15/29) of Art (1986 to present)
The Metropolitan
Museum of Art
1000 Fifth Avenue
New York, NY 10028
Wilson Nolen (11/28/26) Director Consultant (1989 to present); --
1120 Fifth Avenue, #10-B Corporate Vice President, Becton,
New York, NY 10128-0144 Dickinson & Company (manufacturer of
medical and scientific products)
until 1989
Kathryn L. Quirk Director, Vice Managing Director of Scudder Kemper Senior Vice President,
(12/3/52) #@ President and Investments, Inc. Director & Clerk
Assistant Secretary
Robert G. Stone, Jr. Honorary Director Chairman of the Board and Director, --
(3/21/23) Kirby Corporation (inland and
405 Lexington Avenue, offshore marine transportation and
39th Floor diesel repairs)
New York, NY 10174
Elizabeth J. Allan Vice President Senior Vice President of Scudder --
(7/29/53) # Kemper Investments, Inc.
Nicholas Bratt (6/6/48)#* President Managing Director of Scudder Kemper --
Investments, Inc.
Irene T. Cheng (6/6/54)# Vice President Managing Director of Scudder Kemper --
Investments, Inc.
Joyce E. Cornell Vice President Managing Director of Scudder Kemper --
(3/26/44)# Investments, Inc.
44
<PAGE>
Position with
Underwriter,
Position with Scudder Investor
Name, Age, and Address Funds Principal Occupation** Services, Inc.
- ---------------------- ------------- ---------------------- --------------
Carol L. Franklin Vice President Managing Director of Scudder Kemper --
(12/3/52)# Investments, Inc.
Edmund B. Games, Jr. Vice President Senior Vice President of Scudder --
(7/27/37)+ Kemper Investments, Inc.
Jerard K. Hartman Vice President Managing Director of Scudder Kemper --
(3/1/33)# Investments, Inc.
Thomas W. Joseph Vice President Senior Vice President of Scudder Vice President,
(4/22/39)+ Kemper Investments, Inc. Director, Treasurer &
Assistant Clerk
Thomas F. McDonough Treasurer, Vice Senior Vice President of Scudder Assistant Clerk
(1/20/47)+ President and Secretary Kemper Investments, Inc.
John R. Hebble (6/27/58)+ Assistant Treasurer Senior Vice President of Scudder --
Kemper Investments, Inc.
Richard W. Desmond (3/7/36)# Assistant Secretary Vice President of Scudder Kemper Vice President
Investments, Inc.
Caroline Pearson (4/1/62)+ Assistant Secretary Vice President of Scudder Kemper --
Investments, Inc.; Associate,
Dechert Price & Rhoads (law firm)
1989 - 1997
Sheridan Reilly (2/27/52)# Vice President Vice President of Scudder Kemper --
Investments, Inc.
</TABLE>
* Mr. Pierce and Ms. Quirk are considered by the Funds and its counsel to
be persons who are "interested persons" of the Adviser or of the
Corporation within the meaning of the 1940 Act.
** 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. Pierce and Ms. Quirk are members of the Executive Committee which
may exercise substantially all of the powers of the Board of Directors
when it is not in session.
+ Address: Two International Place, Boston, Massachusetts 02110
# Address: 345 Park Avenue, New York, New York 10154
The Directors and officers of the Corporation also serve in similar
capacities with respect to other Scudder Funds.
To the knowledge of the Corporation, all Directors and officers as a
group owned less than 1% of each Fund's outstanding shares as of the
commencement of operations.
REMUNERATION
Responsibilities of the Board - Board and Committee Meetings
45
<PAGE>
The Board of Directors is responsible for the general oversight of each
Fund's business. A majority of the Board's members are not affiliated with
Scudder Kemper Investments, Inc. These "Independent Directors" have primary
responsibility for assuring that each Fund is managed in the best interests of
its shareholders.
The Board of Directors meets at least quarterly to review the
investment performance of each Fund and other operational matters, including
policies and procedures designed to ensure compliance with various regulatory
requirements. At least annually, the Independent Directors review the fees paid
to the Adviser and its affiliates for investment advisory services and other
administrative and shareholder services. In this regard, they evaluate, among
other things, each Fund's investment performance, the quality and efficiency of
the various other services provided, costs incurred by the Adviser and its
affiliates and comparative information regarding fees and expenses of
competitive funds. They are assisted in this process by each Fund's independent
public accountants and by independent legal counsel selected by the Independent
Directors.
All the Independent Directors serve on the Committee on Independent
Directors, which nominates Independent Directors and considers other related
matters, and the Audit Committee, which selects each Fund's independent public
accountants and reviews accounting policies and controls. In addition,
Independent Directors from time to time have established and served on task
forces and subcommittees focusing on particular matters such as investment,
accounting and shareholder service issues.
Compensation of Officers and Directors
The Independent Directors receive the following compensation from the
Funds Scudder of International Fund, Inc.: an annual director's fee of $3,500; a
fee of $325 for attendance at each board meeting, audit committee meeting or
other meeting held for the purposes of considering arrangements between the
Corporation for the Fund and the Adviser or any affiliate of the Adviser; $100
for all other committee meetings; and reimbursement of expenses incurred for
travel to and from Board Meetings. No additional compensation is paid to any
Independent Director for travel time to meetings, attendance at directors'
educational seminars or conferences, service on industry or association
committees, participation as speakers at directors' conferences or service on
special director task forces or subcommittees . Independent Directors do not
receive any employee benefits such as pension, retirement or health insurance.
Notwithstanding the schedule of fees, the Independent Directors have in the past
and may in the future waive a portion of their compensation.
The Independent Directors also serve in the same capacity for other
funds managed by the Adviser. These funds differ broadly in type and complexity
and in some cases have substantially different Director fee schedules. The
following table shows the aggregate compensation received by each Independent
Director during 1997 from the Corporation and from all of the Scudder funds as a
group.
<TABLE>
<S> <C> <C> <C>
<CAPTION>
Scudder International Fund,
Name Inc.* All Scudder Funds
---- ----- -----------------
Paul Bancroft III, Director $43,400 $156,922 (20 funds)
Sheryle J. Bolton, Director** $9,285 $86,213 (20 funds)
William T. Burgin, Director** $9,285 $85,950 (20 funds)
Thomas J. Devine, Director $50,400 $187,348 (21 funds)
</TABLE>
46
<PAGE>
<TABLE>
<S> <C> <C> <C>
<CAPTION>
Scudder International Fund,
Name Inc.* All Scudder Funds
---- ----- -----------------
Keith R. Fox, Director $52,950 $134,390 (18 funds)
William H. Gleysteen, Jr., $63,650 $136,150*** (14 funds)
Director
William H. Luers, Director $49,800 $117,729 (20 funds)
Wilson Nolen, Director $46,900 $189,548 (21 funds)
Robert G. Stone, Honorary -- $8,000 (1 fund)****
Director
</TABLE>
* Scudder International Fund, Inc. consists of eight funds: Scudder
International Fund, Scudder Latin America Fund, Scudder Pacific
Opportunities Fund, Scudder Greater Europe Growth Fund, Scudder
Emerging Markets Growth Fund and Scudder International Growth and
Income (commencement of operations on June 30, 1997).
** Elected as Director on October 27, 1997.
*** This amount does not reflect $6,098 in retirement benefits accrued as
part of Fund Complex expenses, and $3,000 in estimated annual benefits
payable upon retirement. Retirement benefits accrued and proposed are
to be paid to Mr. Gleysteen as additional compensation for serving on
the Board of The Japan Fund, Inc. **** Retirement benefits accrued and
proposed are to be paid to Mr. Stone as additional compensation for
serving on the Board of the Japan Fund, Inc.
Members of the Board of Directors who are employees of the Adviser or
its affiliates receive no direct compensation from the Corporation, although
they are compensated as employees of the Adviser, or its affiliates, as a result
of which they may be deemed to participate in fees paid by each Fund.
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 September 17, 1992 will remain in effect until
September 30, 1998 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 June 15, 1998.
Under the underwriting agreement, each Fund is responsible for: the
payment of all fees and expenses in connection with the preparation and filing
with the Commission 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 the 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 the 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 Fund and the
Distributor.
The Distributor will pay for printing and distributing prospectuses or
reports prepared for its use in connection with the offering of each Fund's
shares to the public and preparing, printing and mailing any other literature or
47
<PAGE>
advertising in connection with the offering of shares of the 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 the Fund shall bear some or all of such expenses.
Note: Although neither Fund currently has 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 the Fund pursuant
to a 12b-1 Plan, if any, were adopted by the 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 the 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 either Fund.
TAXES
(See "Distribution and performance information--Dividends and capital
gains distributions" and "Transaction information--Tax information,
Tax identification number" in the Funds' prospectus.)
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 taxable to individual shareholders at a maximum 20% or 28% capital gains
rate (depending on the Fund's holding period for the assets giving rise to the
gain), 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
48
<PAGE>
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 either those
shares or shares of the Fund are deemed to have been held by the Fund or the
shareholder, as the case may be, for less than 46 days during the 90-day period
beginning 45 days before the shares become ex-dividend.
Properly designated distributions of the excess of net long-term
capital gain over net short-term capital loss are taxable to individual
shareholders at a maximum 20% or 28% capital gains rate (depending on the Fund's
holding period for the assets giving rise to the gain), regardless of the length
of time the shares of a Fund have been held by such individual 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 except in the case of certain
electing individual shareholders who have limited
49
<PAGE>
creditable foreign taxes and no foreign source income other than passive
investment-type income. Furthermore, the foreign tax credit is eliminated with
respect to foreign taxes withheld on dividends if the dividend-paying shares or
the shares of the Fund are held by the Fund or the shareholder, as the case may
be, for less than 16 days (46 days in the case of preferred shares) during the
30-day period (90-day period for preferred shares) beginning 15 days (45 days
for preferred shares) before the shares become ex-dividend.
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 a call 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.
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.
Notwithstanding any of the foregoing, recent tax law changes may
require the Fund to recognize gain (but not loss) from a constructive sale of
certain "appreciated financial positions" if the Fund enters into a short sale,
offsetting notional principal contract, futures or forward contract transaction
with respect to the appreciated position or substantially identical property.
Appreciated financial positions subject to this constructive sale treatment are
interests (including options, futures and forward contracts and short sales) in
stock, partnership interests, certain actively traded trust instruments and
certain debt instruments. Constructive sale treatment of appreciated financial
positions does not apply to certain transactions closed in the 90-day period
ending with the 30th day after the close of the Fund's taxable year, if certain
conditions are met.
50
<PAGE>
Similarly, if a Fund enters into a short sale of property that becomes
substantially worthless, the Fund will be required to recognize gain at that
time as though it had closed the short sale. Future regulations may apply
similar treatment to other strategic transactions with respect to property that
becomes substantially worthless.
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time a Fund accrues receivables or
liabilities denominated in a foreign currency and the time that Fund actually
collects such receivables or pays such liabilities generally are treated as
ordinary income or ordinary loss. Similarly, on disposition of debt securities
denominated in a foreign currency and on disposition of certain options, futures
and forward contracts, gains or losses attributable to fluctuations in the value
of foreign currency between the date of acquisition of the security or contract
and the date of disposition are also treated as ordinary gain or loss. These
gains or losses, referred to under the Code as "Section 988" gains or losses,
may increase or decrease the amount of a Fund's investment company taxable
income to be distributed to its shareholders as ordinary income.
If a Fund invests in stock of certain foreign investment companies,
that Fund may be subject to U.S. federal income taxation on a portion of any
"excess distribution" with respect to, or gain from the disposition of, such
stock. The tax would be determined by allocating such distribution or gain
ratably to each day of a Fund's holding period for the stock. The distribution
or gain so allocated to any taxable year of a Fund, other than the taxable year
of the excess distribution or disposition, would be taxed to that Fund at the
highest ordinary income rate in effect for such year, and the tax would be
further increased by an interest charge to reflect the value of the tax deferral
deemed to have resulted from the ownership of the foreign company's stock. Any
amount of distribution or gain allocated to the taxable year of the distribution
or disposition would be included in a Fund's investment company taxable income
and, accordingly, would not be taxable to that Fund to the extent distributed by
the Fund as a dividend to its shareholders.
Each Fund may make an election to mark to market its shares of these
foreign investment companies, in lieu of being subject to U.S. federal income
taxation. At the end of each taxable year to which the election applies, each
Fund would report as ordinary income the amount by which the fair market value
of the foreign company's stock exceeds the Fund's adjusted basis in these
shares; any mark-to-market losses and any loss from an actual disposition of
stock would be deductible as ordinary losses to the extent of any net
mark-to-market gains previously included in income in prior years. The effect of
this election would be to treat excess distributions and gain on dispositions as
ordinary income which is not subject to a Fund-level tax when distributed to
shareholders as a dividend. Alternatively, the Funds may elect to include as
income and gain their share of the ordinary earnings and net capital gain of
certain foreign investment companies in lieu of being taxed in the manner
described above.
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 31% 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
51
<PAGE>
who is not a U.S. person should consider the U.S. and foreign tax consequences
of ownership of shares of a Fund, including the possibility that such a
shareholder may be subject to a U.S. withholding tax at a rate of 30% (or at a
lower rate under an applicable income tax treaty) on amounts constituting
ordinary income received by him or her, where such amounts are treated as income
from U.S. sources under the Code.
Shareholders should consult their tax advisers about the application of
the provisions of tax law described in this statement of additional information
in light of their particular tax situations.
PORTFOLIO TRANSACTIONS
Brokerage Commissions
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 a Fund is to obtain the most favorable net results,
taking into account such factors as price, commission where applicable, size of
order, difficulty of execution and skill required of the executing
broker/dealer. The 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 a 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.
The Funds' purchases and sales of portfolio securities 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. Trading does,
however, involve transaction costs. Transactions with dealers serving as primary
market makers reflect the spread between the bid and asked prices. Purchases of
underwritten issues may be made, which will include an underwriting fee paid to
the underwriter.
When it can be done consistently with the policy of obtaining the most
favorable net results, it is the Adviser's practice to place such orders with
broker/dealers who supply market quotations to Scudder Fund Accounting
Corporation for appraisal purposes, or who supply research, market and
statistical information to a Fund or the Adviser. 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
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts.
The Adviser is 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 charge for executing the same transaction on account of the
receipt of research, market or statistical information. The Adviser will not
place orders with broker/dealers on the basis that the broker/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 elsewhere.
To the maximum extent feasible, it is expected that the Adviser will
place orders for portfolio transactions through the Distributor, which is a
corporation registered as a broker-dealer and a subsidiary of the Adviser; the
Distributor will place orders on behalf of the Funds with issuers, underwriters
or other brokers and dealers. The Distributor will not receive any commission,
fee or other remuneration from the Funds for this service.
Although certain research, market and statistical information from
broker/dealers may be useful to a Fund and to the Adviser, it is the opinion of
the Adviser that such information only supplements 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 a Fund, and not all such information is used by
the Adviser in connection with a Fund. Conversely, such information provided to
the Adviser by broker/dealers through whom other clients of the Adviser effect
securities transactions may be useful to the Adviser in providing services to a
Fund.
52
<PAGE>
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
Each Fund's average annual portfolio turnover rate is the ratio of the
lesser of sales or purchases to the monthly average value of the portfolio
securities owned during the year, excluding all securities with maturities or
expiration dates at the time of acquisition of one year or less. A higher rate
involves greater brokerage transaction expenses to the Fund and may result in
the realization of net capital gains, which would be taxable to shareholders
when distributed. Purchases and sales are made for the Fund's portfolio whenever
necessary, in management's opinion, to meet the Fund's objective. Under normal
investment conditions, it is anticipated that the portfolio turnover rate in
each Funds' initial fiscal year will not exceed 75%.
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, Martin Luther King, Jr. 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 most recent 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 money market instruments, are valued at
prices supplied by the Funds' pricing agent(s) which reflect broker/dealer
supplied valuations and electronic data processing techniques. Money market
instruments purchased with an original maturity of sixty days or less, maturing
at par, shall be valued at amortized cost , which the Board believes
approximates market value. If it is not possible to value a particular debt
security pursuant to these valuation methods, the value of such security is the
most recent bid quotation supplied by a bona fide marketmaker. If it is not
possible to value a particular debt security pursuant to the above methods, the
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 Corporation's Valuation Committee, the value
of a portfolio asset as determined in accordance with these procedures does not
represent the fair market value of the portfolio asset, the value of the
portfolio asset is taken to be an amount which, in the opinion of the Valuation
Committee, represents fair market value on the basis of all available
information. The value of other portfolio holdings owned by a Fund is determined
in a
53
<PAGE>
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
The Statement of Assets and Liabilities incorporated by reference to
the Statement of Additional Information will be so included or incorporated by
reference in reliance on the report of Coopers & Lybrand, L.L.P., One Post
Office Square, Boston, Massachusetts 02109, independent accountants, and given
on the authority of that firm as experts in accounting and auditing. Coopers &
Lybrand, L.L.P. is responsible for performing semiannual and annual audits of
the financial statements and financial highlights of the Funds in accordance
with generally accepted auditing Standards, and the preparation of federal tax
returns.
Other Information
Many of the investment changes in the Funds will be made at prices
different from those prevailing at the time they may be reflected in a regular
report to shareholders of the Funds. 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 Scudder International Growth Fund is 811165 80 2.
The CUSIP number of Scudder International Value Fund is 811165 88 5.
Each Fund has a fiscal year end of October 31.
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 estimated at $14,600 incurred by Scudder International Growth
Fund in conjunction with its organization have been deferred and will be
amortized over a five year period beginning at the commencement of operations of
the Fund.
Costs estimated at $14,600 incurred by Scudder International Value Fund
in conjunction with its organization have been deferred and will be amortized
over a five year period beginning at the commencement of operations of the Fund.
The law firm of Dechert Price & Rhoads acts as general counsel to the
Funds.
Scudder Service Corporation ("SSC"), P.O. Box 2291, Boston,
Massachusetts, 02107-2291, a subsidiary of the Adviser, is the transfer and
dividend disbursing agent for each Fund. SSC also serves as shareholder service
agent and provides subaccounting and recordkeeping services for shareholder
accounts in certain retirement and employee benefit plans. Each Fund pays SSC an
annual fee for each account maintained for a participant.
The Funds, or the Adviser (including any affiliate of the Adviser), or
both, may pay unaffiliated third parties for providing recordkeeping and other
administrative services with respect to accounts of participants in retirement
plans or other beneficial owners of Fund shares whose interests are held in an
omnibus account.
Scudder Fund Accounting Corporation ("SFAC"), Two International Place,
Boston, Massachusetts, 02110-4103, a subsidiary of the Adviser, computes net
asset value for each Fund. Each Fund pays SFAC an annual fee equal
54
<PAGE>
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.
Scudder Trust Company ("STC"), Two International Place, Boston, MA
02110-4103, a subsidiary of the Adviser, provides recordkeeping and other
services for certain retirement and employee benefit plan accounts. The Fund
pays STC an annual fee per shareholder account.
The Funds' prospectus and this Statement of Additional Information omit
certain information contained in the Registration Statement which each Fund has
filed with the Commission under the Securities Act of 1933 and reference is
hereby made to the Registration Statement for further information with respect
to each Fund and the securities offered hereby. This Registration Statement and
its amendments are available for inspection by the public at the Commission in
Washington, D.C.
FINANCIAL STATEMENTS
The Statements of Assets and Liabilities of Scudder International
Growth Fund and Scudder International Value Fund as of June 24, 1998 and the
Reports of Independent Accountants for the Funds are included herein.
55
<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 adequate but elements may be present which suggest a susceptibility
to impairment sometime in the future.
<PAGE>
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 INTERNATIONAL GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
June 24, 1998
Assets
Cash.......................................................... $1,200
------
Total assets.................................................. 1,200
------
Net Assets........................................................ $1,200
======
Net Assets consist of:
Capital stock................................................. 1
Additional paid-in capital.................................... 1,199
------
Net Assets........................................................ $1,200
======
Net asset value, offering and redemption price per
share ($1,200/100 shares of capital stock outstanding,
$.01 par value, 100,000,000 shares authorized).................... $12.00
=======
The accompanying note is an integral part of the financial statement.
Scudder International Growth Fund (the "Fund") is a diversified series of
Scudder International Fund, Inc. (the "Corporation"), an open-end management
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"). The Corporation is a Maryland corporation whose
predecessor was organized in 1953. The authorized capital stock of the
Corporation consists of 1 billion 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 eight series: Scudder International Fund, the
original series; Scudder Latin America Fund, Scudder Pacific Opportunities Fund,
Scudder Greater Europe Growth Fund, Scudder Emerging Markets Growth Fund,
Scudder International Growth and Income Fund, Scudder International Value Fund,
and Scudder International Growth Fund. Each series consists of 100 million
shares except for Scudder International Fund which consists of 300 million
shares. The Directors have the authority to issue additional series of shares
and to designate the relative rights and preferneces as between the series. The
Fund has had no operations to date other than matters relating to its
organization and registration as a diversified series. This Financial Statement
is prepared in accordance with generally accepted accounting principles which
require the use of management estimates.
Offering costs, including initial registration costs, will be deferred and
charged to expense during the Fund's first year of operations.
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors of Scudder International Fund, Inc. and the
Shareholder of Scudder International Growth Fund:
We have audited the accompanying statement of assets and liabilities of Scudder
International Growth Fund as of June 24, 1998. This financial statement is the
responsibility of the Fund's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We have 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. 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 of the financial statement provides a reasonable basis
for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of Scudder International Growth
Fund as of June 24, 1998 in conformity with generally accepted accounting
principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
June 25, 1998
<PAGE>
- --------------------------------------------------------------------------------
SCUDDER INTERNATIONAL VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
June 24, 1998
Assets
Cash.......................................................... $1,200
------
Total assets.................................................. 1,200
------
Net Assets........................................................ $1,200
======
Net Assets consist of:
Capital stock................................................. 1
Additional paid-in capital.................................... 1,199
------
Net Assets........................................................ $1,200
======
Net asset value, offering and redemption price per
share ($1,200/100 shares of capital stock outstanding,
$.01 par value, 100,000,000 shares authorized).................... $12.00
=======
The accompanying note is an integral part of the financial statement.
Scudder International Value Fund (the "Fund") is a diversified series of Scudder
International Fund, Inc. (the "Corporation"), an open-end management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"). The Corporation is a Maryland corporation whose predecessor was
organized in 1953. The authorized capital stock of the Corporation consists of 1
billion 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 eight series: Scudder International Fund, the original series; Scudder Latin
America Fund, Scudder Pacific Opportunities Fund, Scudder Greater Europe Growth
Fund, Scudder Emerging Markets Growth Fund, Scudder International Growth and
Income Fund, Scudder International Value Fund, and Scudder International Growth
Fund. Each series consists of 100 million shares except for Scudder
International Fund which consists of 300 million shares. The Directors have the
authority to issue additional series of shares and to designate the relative
rights and preferneces as between the series. The Fund has had no operations to
date other than matters relating to its organization and registration as a
diversified series. This Financial Statement is prepared in accordance with
generally accepted accounting principles which require the use of management
estimates.
Offering costs, including initial registration costs, will be deferred and
charged to expense during the Fund's first year of operations.
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors of Scudder International Fund, Inc. and the
Shareholder of Scudder International Value Fund:
We have audited the accompanying statement of assets and liabilities of Scudder
International Value Fund as of June 24, 1998. This financial statement is the
responsibility of the Fund's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We have 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. 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 of the financial statement provides a reasonable basis
for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of Scudder International Value
Fund as of June 24, 1998 in conformity with generally accepted accounting
principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
June 25, 1998
<PAGE>
This prospectus sets forth concisely the information about Scudder International
Growth and Income Fund, a diversified 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 July 1, 1998, 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 of Additional Information,
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 SEC'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.
NOT FDIC- MAY LOSE VALUE
INSURED NO BANK GUARANTEE
[LOGO] SCUDDER
Scudder
International Growth and
Income Fund
Prospectus
July 1, 1998
A pure no-load(TM) (no sales charges) mutual fund seeking long-term growth of
capital and current income primarily from foreign equity securities.
<PAGE>
Expense information
How to compare a Scudder Family of Funds pure no-load(TM) fund
This information is designed to help you understand the various costs and
expenses of investing in Scudder International Growth and Income 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: 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 ending February 28,
1999.
Investment management fee (after waiver) 0.72%
12b-1 fees NONE
Other expenses (after reimbursements) 1.03%
-----
Total Fund operating expenses (after waiver) 1.75%**
=====
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. (As noted above, the Fund has no
redemption fees of any kind.)
1 Year 3 Years
$18 $55
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 June 30, 1999, 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 1.75% of average daily net assets. If the Adviser and its
subsidiaries had not agreed to waive all or a portion of their fees, Fund
expenses would have been: investment management fee 1.00%, other expenses
1.65%, and total Fund operating expenses 2.65% for the fiscal period ended
February 28, 1998 and estimated at 1.00%, 1.03% and 2.03%, respectively,
for the fiscal year ending February 28, 1999.
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 February 28, 1998, which may be obtained without
charge by writing or calling Scudder Investor Services, Inc.
<TABLE>
<CAPTION>
For the Period
June 30, 1997
(commencement
of operations) to
February 28,
1998
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period ............................................. $12.00
-------------------
Income from investment operations:
Net investment income ............................................................ .01
Net realized and unrealized gain (loss) on investment transactions ............... .69
-------------------
Total from investment operations ................................................. .70
-------------------
Less distributions from:
Net investment income ............................................................ (.02)
-------------------
Total distributions .............................................................. (.02)
-------------------
-------------------
Net asset value, end of period ................................................... $12.68
- ------------------------------------------------------------------------------------------------------------
Total Return (%) (c) ............................................................. 5.80**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ........................................... 49
Ratio of operating expenses, net to average daily net assets (%) ................. 1.75*
Ratio of operating expenses before expense reductions, to average daily net
assets (%) ..................................................................... 2.65*
Ratio of net investment income to average daily net assets (%) ................... .17*
Portfolio turnover rate (%) ...................................................... 50.2*
Average commission rate paid (b) ................................................. $.0201
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Average commission rate paid per share of common and preferred stocks.
(c) Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
3
<PAGE>
A message from the President
Scudder Kemper Investments, Inc., investment adviser to the Scudder Family of
Funds, is one of the largest and most experienced investment management
organizations worldwide, managing more than $200 billion in assets globally for
mutual fund investors, retirement and pension plans, institutional and corporate
clients, and private family and individual accounts. It is one of the ten
largest mutual fund companies in the U.S.
We offered America's first no-load mutual fund in 1928, and today the Scudder
Family of Funds includes over 50 no-load mutual fund portfolios or classes of
shares. We also 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 numerous other open- and closed-end funds that invest in this
country and other 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 shareholders include toll-free access to professional
representatives, easy exchange among the Scudder Family of Funds, shareholder
reports, informative newsletters and the walk-in convenience of Scudder Investor
Centers.
Funds or fund classes in the Scudder Family of Funds are offered without
commissions to purchase or redeem 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.
Scudder International Growth and Income Fund
Investment objective
o long-term growth of capital and current income primarily from foreign
equity securities
Investment characteristics
o access to international investment opportunities, which can enhance the
long-term return potential and diversification of a personal portfolio
o a growth and income approach to international investing that focuses on
foreign stocks with higher dividend yields compared to the averages in
their markets
o a disciplined stock selection process that helps to reduce share price risk
and find opportunity through a combination of company, industry and country
analysis
o a pure no-load(TM) fund with no sales charges, commissions or 12b-1 fees
Contents
Investment objective and policies 7
Investment process 8
Why invest in the Fund? 8
International investment experience 9
Additional information about policies
and investments 9
Distribution and performance information 13
Fund organization 14
Transaction information 15
Shareholder benefits 20
Purchases 22
Exchanges and redemptions 23
Directors and Officers 25
Investment products and services 27
How to contact Scudder Back cover
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Investment objective and policies
Scudder International Growth and Income Fund (the "Fund"), a diversified series
of Scudder International Fund, Inc. (the "Corporation"), seeks long-term growth
of capital and current income primarily from foreign equity securities. The Fund
invests generally in common stocks of established companies listed on foreign
exchanges, which offer prospects for growth of earnings while paying relatively
high current dividends. The Fund can also invest in other types of equity
securities, including preferred stocks and securities convertible into common
stock. The Fund can invest throughout the world, but will emphasize investments
in developed economies other than the U.S.
In the opinion of the Fund's investment adviser, Scudder Kemper Investments,
Inc. (the "Adviser"), foreign capital markets provide investors with
opportunities to participate in the economic growth taking place outside the
U.S., which should translate into positive stock market performance over the
long term. In addition, the Adviser believes that international investing offers
the benefits of diversification, which can lower the overall price volatility of
an investor's portfolio.
While the Fund offers the potential for price appreciation and dividend income,
it also involves various types of risk. The Fund is designed as a long term
investment to be part of an overall diversified portfolio, not as a complete
investment program. The Fund's net asset value (price) can fluctuate with
changes in world stock market levels, political developments, movements in
currencies, investment flows and other factors. (See "Risk factors").
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
In pursuing its dual objective, at least 80% of the Fund's net assets will be
invested in the equity securities of established non-U.S. companies. The Fund
generally invests in equity securities of established companies listed on
foreign securities exchanges, but also may invest in securities traded
over-the-counter. The Fund's equity investments include common stock,
convertible and non-convertible preferred stock, sponsored and unsponsored
depository receipts, and warrants.
The Fund intends to diversify investments among several countries and normally
to have investments in securities of at least three different countries other
than the U.S. The Fund will invest primarily in securities of issuers in the 21
developed foreign countries included in the Morgan Stanley Capital International
(MSCI) World ex-US Index, but may invest in "emerging markets." 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. It is expected that the
Fund's investments will include companies of varying size as measured by assets,
sales or market capitalization.
Under normal conditions, the Fund may also invest up to 20% of its net assets in
debt securities convertible into common stock and fixed-income securities of
governments, governmental agencies, supranational agencies and private issuers
when the Adviser believes the potential for appreciation and income will equal
or exceed that available from investments in equity securities. These securities
will predominantly be "investment grade" securities, which are those rated Aaa,
Aa, A, or Baa by Moody's Investors Service, Inc. ("Moody's") or AAA, AA, A or
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BBB by Standard and Poor's Corporation ("S&P") or if unrated, judged by the
Adviser to be of equivalent quality. The Fund may also invest up to 5% of its
total assets in debt securities which are rated below investment grade (see
"Risk factors").
The Fund may also hold up to 20% of its net assets in U.S. and foreign fixed
income securities for temporary defensive purposes when the Adviser believes
market conditions so warrant. Similarly, the Fund may invest up to 20% of its
net assets in cash or cash equivalents including domestic and foreign money
market instruments, short-term government and corporate obligations and
repurchase agreements under normal circumstances and without limit for temporary
defensive purposes and to maintain liquidity. It is impossible to accurately
predict how long such alternative strategies may be utilized. In addition, the
Fund may engage in reverse repurchase agreements, illiquid securities and
strategic transactions, which may include derivatives.
Investment process
The Adviser applies a disciplined, multi-part investment approach for selecting
stocks for the Fund. The first stage of this process involves analyzing the pool
of foreign dividend-paying securities, primarily from the world's more mature
markets, and targeting stocks that have high relative yields compared to the
median for their markets. In the Adviser's opinion, this group of
higher-yielding stocks offers the potential for returns that is greater than or
equal to the average market return, with price volatility that is lower than
overall market volatility. The Adviser believes that these potentially favorable
risk and return characteristics exist because the higher dividends offered by
these stocks act as a "cushion" when markets are volatile and because stocks
with higher yields tend to have more attractive valuations (e.g., lower
price-to-earning ratios and lower price-to-book ratios).
The second stage of portfolio construction involves a fundamental analysis of
each company's financial strength, profitability, projected earnings,
competitive positioning, and ability of management. During this step, the
Adviser's research team identifies what it believes are the most promising
stocks for the Fund's portfolio.
The third stage of the investment process involves diversifying the portfolio
among different industry sectors. The key element of this stage is evaluating
how the stocks in different sectors react to economic factors such as interest
rates, inflation, Gross Domestic Product, and consumer spending, and then
attaining a proper balance of stocks in these sectors based on the Adviser's
economic forecast.
The fourth and final stage of this ongoing process is diversifying the portfolio
among different countries. The Adviser will seek to have broad country
representation, favoring those countries that it believes have sound economic
conditions and open markets. The Fund's strategy is to manage risk and create
opportunity at each of its four stages in the investment process, starting with
the focus on stocks with high relative yields.
Why invest in the Fund?
The Fund is designed as a convenient, low cost way for investors to participate
in the opportunities for growth of capital and current income afforded by
investing in dividend-paying stocks in foreign markets. Certain foreign
economies may grow more rapidly than the U.S. economy and may offer
opportunities to achieve superior investment returns. Also, foreign stock
markets do not always move in step with each other or with the U.S. market. In
the opinion of the Adviser, a portfolio invested in a number of markets
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worldwide will be better diversified than one which is subject to the movements
of only a single market.
The Fund's income-oriented strategy and its focus on well-established companies
in developed markets may make it appropriate for investors seeking lower share
price volatility than many other international funds.
Investors who prefer investments that pay dividends, which can act as a
"cushion" in volatile markets, can get those benefits as well as gain
international diversification with the Fund.
Individuals investing directly in foreign stocks may find it difficult to make
purchases and sales, to obtain current information, to hold securities in
safekeeping, and to convert the value of their investments from foreign
currencies into U.S. dollars. The Fund manages these tasks for the investor. The
Adviser believes that with a single investment the investor has a diversified
international management portfolio, which is actively managed by experienced
professionals. The Adviser has had many years of experience investing in foreign
markets and dealing with trading, custody, and currency transactions around the
world.
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 Japanese yen, for example, the dollar value of a Japanese 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 yen, the
dollar value of the Japanese stock will fall.
International investment
experience
The Adviser has been a leader in international investment management and trading
for over 40 years. Its investment company clients include Scudder International
Fund, which invests primarily in foreign securities and was initially
incorporated in Canada in 1953 as the first foreign investment company
registered with the United States Securities and Exchange Commission, Scudder
Global Fund, America's first no-load Global Fund, Global Discovery Fund, Scudder
Greater Europe Growth Fund, The Japan Fund, Scudder Latin America Fund, Scudder
Pacific Opportunities Fund, and Scudder Emerging Markets Growth Fund. The
Adviser also manages the assets of seven closed-end investment companies
investing in foreign equity securities: The Argentina Fund, Inc., The Brazil
Fund, Inc., The Korea Fund, Inc., Scudder Global High Income Fund, Inc., Scudder
New Asia Fund, Inc., Scudder New Europe Fund, Inc., and Scudder Spain and
Portugal Fund, Inc. As of December 31, 1997, the Adviser was responsible for
managing more than $200 billion in assets globally.
Additional information about policies and investments
Investment restrictions
The Fund has certain investment restrictions which are designed to reduce the
Fund's investment risk. Fundamental investment restrictions may not be changed
without a vote of shareholders; non-fundamental investment restrictions may be
changed by a vote of the Corporation's Board of Directors.
As a matter of fundamental policy, the Fund may not borrow money, except as
permitted under Federal law. Further, as a matter of non-fundamental policy, the
Fund may not borrow money in an amount greater than 5% of total assets, except
for temporary or emergency purposes, although the Fund may engage up to 5% of
total assets in reverse repurchase agreements or dollar rolls.
As a matter of fundamental policy, the Fund may not make loans except through
the lending of portfolio securities, the purchase of debt securities or
interests in indebtedness or through repurchase agreements. The Fund has adopted
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a non-fundamental policy restricting the lending of portfolio securities to no
more than 5% of total assets.
A complete description of these and other policies and restrictions is contained
under "Investment Restrictions" in the Fund's Statement of Additional
Information.
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 stock also offers the greatest potential for
long-term gain on investment, compared to other classes of financial assets such
as bonds or cash equivalents.
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 both nonconvertible debt
securities and equity securities.
Repurchase agreements
As a means of earning income for periods as short as overnight, the Fund may
enter into repurchase agreements with selected banks and broker/dealers. Under a
repurchase agreement, the Fund acquires securities, subject to the seller's
agreement to repurchase them at a specified time and price.
Illiquid securities
The Fund may invest in securities for which there is not an active trading
market, or which have resale restrictions. 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.
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
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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 to create leveraged exposure in the Fund.
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.
Foreign securities. Investments in foreign securities involve special
considerations due to limited information, higher brokerage costs, different
accounting standards, thinner trading markets as compared to domestic markets
and the likely impact of foreign taxes on the income from securities. They may
also entail 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. Purchases of foreign
securities are usually made in foreign currencies and, as a result, the Fund may
incur currency conversion costs, experience conversion difficulties and
uncertainties, 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., 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 and repatriation of assets. All of the risks
discussed above regarding foreign securities may be of greater concern with
respect to securities of issuers in emerging markets.
Convertible securities. While convertible securities generally offer lower
yields than nonconvertible debt securities of similar quality, their prices may
reflect changes in the value of the underlying common stock.
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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 no more than 5% of its net assets in debt
securities which are rated below investment-grade; that is, rated below Baa by
Moody's or BBB by S&P (commonly referred to as "junk bonds"). The lower the
ratings of such debt securities, the greater their risks render them like equity
securities. Moody's considers bonds it rates Baa to have speculative elements as
well as investment-grade characteristics. The Fund may invest in securities
which are rated D by S&P or, if unrated, are of equivalent quality. Securities
rated D may be in default with respect to payment of principal or interest.
Illiquid securities. The absence of a trading market can make it difficult to
ascertain a market value for these investments. Disposing of illiquid
investments may involve time-consuming negotiation and legal expenses, and it
may be difficult or impossible for the Fund to sell them promptly at an
acceptable price.
Strategic Transactions and derivatives. Strategic Transactions, including
derivative contracts, have risks associated with them including possible default
by the other party to the transaction, illiquidity and, to the extent the
Adviser's view as to certain market movements is incorrect, the risk that the
use of such Strategic Transactions could result in losses greater than if they
had not been used. Use of put and call options may result in losses to the Fund,
force the sale or purchase of portfolio securities at inopportune times or for
prices higher than (in the case of put options) or lower than (in the case of
call options) current market values, limit the amount of appreciation the Fund
can realize on its investments or cause the Fund to hold a security it might
otherwise sell. The use of currency transactions can result in the Fund
incurring losses as a result of a number of factors including the imposition of
exchange controls, suspension of settlements or the inability to deliver or
receive a specified currency. The use of options and futures transactions
entails certain other risks. In particular, the variable degree of correlation
between price movements of futures contracts and price movements in the related
portfolio position of the Fund creates the possibility that losses on the
hedging instrument may be greater than gains in the value of the Fund's
position. In addition, futures and options markets may not be liquid in all
circumstances and certain over-the-counter options may have no markets. As a
result, in certain markets, the Fund might not be able to close out a
transaction without incurring substantial losses, if at all. Although the use of
futures contracts and options transactions for hedging should tend to minimize
the risk of loss due to a decline in the value of the hedged position, at the
same time they tend to limit any potential gain which might result from an
increase in value of such position. Finally, the daily variation margin
requirements for futures contracts would create a greater ongoing potential
financial risk than would purchases of options, where the exposure is limited to
the cost of the initial premium. Losses resulting from the use of Strategic
Transactions would reduce net asset value, and possibly income, and such losses
can be greater than if the Strategic Transactions had not been utilized. The
Strategic Transactions that the Fund may use and some of their risks are
described more fully in the Fund's Statement of Additional Information.
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Distribution and performance information
Dividends and capital gains distributions
The Fund intends to distribute dividends from its net investment income
semiannually in June and December. The Fund intends to distribute net realized
capital gains after utilization of capital loss carryforwards, if any, in
November or December to prevent application of a federal excise tax. 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 during the following January will be treated by
shareholders for federal income tax purposes as if received on December 31 of
the calendar year declared.
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 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 to
individual shareholders at a maximum 20% or 28% capital gains rate (depending on
the Fund's holding period for the assets giving rise to the gain), regardless of
the length of time shareholders have owned shares. Short-term capital gains and
any other taxable income distributions are taxable as ordinary income.
The Fund sends detailed tax information to its shareholders 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 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.
Performance will vary based upon, among other things, changes in market
conditions and the level of the Fund's expenses.
Fund organization
Scudder International Growth and Income Fund is a diversified series of Scudder
International Fund, Inc., an open-end, management investment company registered
under the Investment Company Act of 1940 (the "1940 Act"). The Corporation is a
Maryland corporation whose predecessor was organized in 1953.
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 Kemper Investments,
Inc., a Delaware corporation formerly known as Scudder, Stevens & Clark, Inc.
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("Scudder"), to manage its 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.
Pursuant to the terms of an agreement, Scudder and Zurich Insurance Company
("Zurich"), an international insurance and financial services organization, have
formed a new global investment organization by combining Scudder with Zurich's
subsidiary, Zurich Kemper Investments, Inc. As a result of the transaction,
Zurich owns approximately 70% of the Adviser, with the balance owned by the
Adviser's officers and employees.
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. The Adviser has agreed to maintain the annualized
expenses of the Fund at no more than 1.75% of the average daily net assets of
the Fund until June 30, 1999. For the fiscal period ended February 28, 1998, the
Adviser received a management fee of 0.10% of the Fund's average daily net
assets.
All of the Fund's expenses are paid out of gross investment income. Shareholders
pay no direct charges or fees for investment or administrative services.
Scudder Kemper Investments, Inc., is located at 345 Park Avenue, New York, New
York.
Like other mutual funds and financial and business organizations worldwide, the
Fund could be adversely affected if computer systems on which the Fund relies,
which primarily include those used by the Adviser, its affiliates or other
service providers, are unable to correctly process date-related information on
and after January 1, 2000. This risk is commonly called the Year 2000 Issue.
Failure to successfully address the Year 2000 Issue could result in
interruptions to and other material adverse effects on the Fund's business and
operations. The Adviser has commenced a review of the Year 2000 Issue as it may
affect the Fund and is taking steps it believes are reasonably designed to
address the Year 2000 Issue, although there can be no assurances that these
steps will be sufficient. In addition, there can be no assurances that the Year
2000 Issue will not have an adverse effect on the companies whose securities are
held by the Fund or on global markets or economies generally.
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.
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.
Custodian
Brown Brothers Harriman & Co. is the Fund's custodian.
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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 will be canceled 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 "QuickBuy." If you elected "QuickBuy" 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
"QuickBuy," call 1-800-225-5163 for more information.
To purchase additional shares, call 1-800-225-5163. Purchases may not be for
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. "QuickBuy" 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 "QuickBuy" and redeem them within seven days of the
purchase, the Fund may hold the redemption proceeds for a period of up to seven
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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. "QuickBuy" transactions are not
available for most retirement plan accounts. However, "QuickBuy" transactions
are available for Scudder IRA accounts.
By exchange. The Fund may be exchanged for shares of other funds in the Scudder
Family of Funds unless otherwise determined by the Board of Directors. 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
provided your banking information on your application, you can call to request
that federal funds be sent to your authorized bank account. If you did not
include your banking information 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.
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 "QuickSell." If you elected "QuickSell" 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 "QuickSell,"
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. "QuickSell" requests received after the close of regular
trading on the Exchange will begin their processing and be redeemed at the net
14
<PAGE>
asset value calculated the following business day.
"QuickSell" 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. The Fund uses procedures designed to give
reasonable assurance that telephone instructions are genuine, including
recording telephone calls, testing a caller's identity and sending written
confirmation of telephone transactions. If the Fund does not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Fund will not be liable for acting upon instructions
communicated by telephone that it reasonably believes to be genuine.
Share price
Purchases and redemptions, including exchanges, are made at net asset value.
Scudder Fund Accounting Corporation determines net asset value per share as of
the close of regular trading on the Exchange, normally 4 p.m. eastern time, on
each day the Exchange is open for trading. Net asset value per share is
calculated by dividing the value of total Fund assets, less all liabilities, by
the total number of shares outstanding.
Processing time
All purchase and redemption requests 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.
15
<PAGE>
Tax identification number
Be sure to complete the Tax Identification Number section of the Fund's
application when you open an account. Federal tax law requires the Fund to
withhold 31% of taxable dividends, capital gains distributions and redemption
and exchange proceeds from accounts (other than those of certain exempt payees)
without a correct certified Social Security or tax identification number and
certain other certified information or upon notification from the IRS or a
broker that withholding is required. The Fund reserves the right to reject new
account applications without a correct certified Social Security or tax
identification number. The Fund also reserves the right, following 30 days'
notice, to redeem all shares in accounts without a correct certified Social
Security or tax identification number. A shareholder may avoid involuntary
redemption by providing the 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
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 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 Kemper Investments, Inc., one of the nation's most experienced
investment management firms, actively manages your fund investment. Professional
management is an important advantage for investors who do not have the time or
16
<PAGE>
expertise to invest directly in individual securities.
A team approach to investing
Scudder International Growth and Income Fund is managed by a team of investment
professionals, each of whom plays an important role in the Fund's management
process. Team members work together to develop investment strategies and select
securities for the Fund's portfolio. They are supported by the Adviser's large
staff of economists, research analysts, traders and other investment specialists
who work in the Adviser's offices across the United States and abroad. We
believe our team approach benefits Fund investors by bringing together many
disciplines and leveraging our extensive resources.
Lead Portfolio Manager Sheridan Reilly joined Scudder in 1995 and is a member of
the Adviser's Global Equity Group. Mr. Reilly has over 11 years of industry
experience as an economic, fixed-income and equity analyst.
Portfolio Manager Irene Cheng joined the Adviser as a portfolio manager in 1993
and focuses on portfolio management, research, and equity analysis for the
Adviser's institutional international equity accounts. She has over 14 years of
industry experience.
Deborah A. Chaplin, Portfolio Manager, focuses on stock selection and investment
strategy. Ms. Chaplin has six years of experience in investment management as
both a securities analyst and equity portfolio manager.
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. (The exchange
privilege may not be available for certain Scudder funds or classes thereof. For
more information, please call 1-800-225-5163.) 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 Kemper Investments, Inc., combines the benefits of a
customized portfolio of no-load mutual funds with ongoing portfolio monitoring
and individualized service, for an annual fee of generally 1.25% or less of
assets. In addition, it draws upon the Adviser'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.
17
<PAGE>
Shareholder statements
You will receive a detailed statement summarizing account activity, including
dividend and capital gain reinvestment, purchases and redemptions. 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 Investor Centers
As a convenience to shareholders who like to conduct business in person, Scudder
Investor Services, Inc. maintains Investor 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.
18
<PAGE>
Purchases
<TABLE>
<CAPTION>
<S> <C> <C>
Opening
an account Minimum initial investment: $2,500; IRAs $1,000
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 or by express, registered,
to: or certified mail to:
The Scudder Funds The Scudder Funds
P.O. Box 2291 66 Brooks Drive
Boston, MA Braintree, MA 02184
02107-2291
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 Investor Centers to complete your application with the
help of a Scudder representative. Investor Center locations are listed
under Shareholder benefits.
-----------------------------------------------------------------------------------------------------------------------
Purchasing
additional shares Minimum additional investment: $100; IRAs $50
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 letter of
payable to "The instruction including your account number and the complete Fund name, to
Scudder Funds." the appropriate address listed above.
o By Wire Please see Transaction information--Purchasing shares--By
wire for details, including the ABA wire transfer number.
o In Person Visit one of our Investor Centers to make an additional
investment in your Scudder fund account. Investor Center locations
are listed under Shareholder benefits.
o By Telephone Please see Transaction information--Purchasing shares--By
QuickBuy or By telephone order for more details.
o By Automatic You may arrange to make investments on a regular basis through automatic
Investment Plan deductions from your bank checking account. Please call 1-800-225-5163
($50 minimum) for more information and an enrollment form.
19
<PAGE>
Exchanges and redemptions
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 The Scudder Funds 1-800-821-6234
P.O. Box 2291 66 Brooks Drive
Boston, MA 02107-2291 Braintree, MA 02184
-----------------------------------------------------------------------------------------------------------------------
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. Call
Withdrawal Plan 1-800-225-5163 for more information and an enrollment form.
</TABLE>
20
<PAGE>
Scudder tax-advantaged retirement plans
Scudder offers a variety of tax-advantaged retirement plans for individuals,
businesses and non-profit organizations. These flexible plans are designed for
use with the Scudder Family of Funds (except Scudder tax-free funds, which are
inappropriate for such plans). Scudder Funds offer a broad range of investment
objectives and can be used to seek almost any investment goal. Using Scudder's
retirement plans can help shareholders save on current taxes while building
their retirement savings.
o Scudder No-Fee IRAs. These retirement plans allow a maximum annual
contribution of up to $2,000 per person for anyone with earned income (up
to $2,000 per individual for married couples filing jointly, even if only
one spouse has 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 Scudder Roth No-Fee IRAs. Similar to the traditional IRA in many respects,
these retirement plans provide a unique opportunity for qualifying
individuals to accumulate investment earnings tax free. Unlike a
traditional IRA, with a Roth IRA, if you meet the distribution
requirements, you can withdraw your money without paying any taxes on the
earnings. No tax deduction is allowed for contributions to a Roth IRA. The
Scudder Roth 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.
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 and most 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
Paul Bancroft III
Director; Venture Capitalist and Consultant
Sheryle J. Bolton
Director; Chief Executive Officer, Scientific Learning Corporation
William T. Burgin
Director; General Partner, Bessemer Venture Partners
Thomas J. Devine
Director; Consultant
Keith R. Fox
Director; President, Exeter Capital Management Corporation
William H. Gleysteen, Jr.
Director; Consultant; Guest Scholar, Brookings Institute
William H. Luers
Director; President, The Metropolitan Museum of Art
Wilson Nolen
Director; Consultant
Kathryn L. Quirk*
Director, Vice President and Assistant Secretary
Robert G. Stone, Jr.
Honorary Director; Chairman Emeritus and Director, Kirby Corporation
Elizabeth J. Allan*
Vice President
Nicholas Bratt*
President
Irene T. Cheng*
Vice President
Joyce E. Cornell*
Vice President
Susan E. Dahl*
Vice President
Carol L. Franklin*
Vice President
Edmund B. Games, Jr.*
Vice President
Teresa Gusman*
Vice President
Jerard K. Hartman*
Vice President
Sheridan Reilly*
Vice President
Thomas W. Joseph*
Vice President
Thomas F. McDonough*
Treasurer, Vice President and Secretary
Richard W. Desmond*
Assistant Secretary
John R. Hebble*
Assistant Treasurer
Caroline Pearson*
Assistant Secretary
*Scudder Kemper Investments, Inc.
22
<PAGE>
Investment products and services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series--
Premium Shares*
Managed Shares*
Scudder Government Money Market Series--
Managed Shares*
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--
Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund**
Scudder Massachusetts Limited Term Tax Free Fund**
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund**
Scudder Ohio Tax Free Fund**
Scudder Pennsylvania Tax Free Fund**
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Dividend & Growth Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
Scudder Real Estate Investment Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund***
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund***
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Growth and Income 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, Inc.
Industry Sector Funds
- ---------------------
Choice Series
Scudder Financial Services Fund
Scudder Health Care Fund
Scudder Technology Fund
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs
- -------------------
Traditional IRA
Roth IRA
SEP-IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan **+++ +++
(a variable annuity)
Education Accounts
- ------------------
Education IRA
UGMA/UTMA
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal Fund, Inc.
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +++Funds within categories are listed in order from
expected least risk to most risk. Certain Scudder funds or classes thereof may
not be available for purchase or exchange. +A portion of the income from the
tax-free funds may be subject to federal, state, and local taxes. *A class of
shares of the Fund. **Not available in all states. ***Only the Scudder Shares of
the Fund are part of the Scudder Family of Funds. +++ +++A no-load variable
annuity contract provided by Charter National Life Insurance Company and its
affiliate, offered by Scudder's insurance agencies, 1-800-225-2470. #These
funds, advised by Scudder Kemper Investments, Inc., are traded on the New York
Stock Exchange and, in some cases, on various foreign stock exchanges.
23
<PAGE>
<TABLE>
<CAPTION>
How to contact Scudder
Account Service and Information:
<S> <C>
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 Investor Center:
Many shareholders enjoy the personal, one-on-one service of the Scudder
Investor Centers. Check for an Investor Center near you--they can be
found in the following cities:
Boca Raton Chicago San Francisco
Boston New York
Scudder Investor Relations and Scudder Investor Centers are services provided
through Scudder Investor Services, Inc., Distributor.
</TABLE>
* Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA
02061--Member NASD/SIPC.
<PAGE>
SCUDDER INTERNATIONAL GROWTH AND INCOME FUND
A Pure No-Load(TM) (No Sales Charges) Mutual Fund Seeking
Long-Term Growth of Capital and Current Income Primarily
From Foreign Equity Securities
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
July 1, 1998
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus and should
be read in conjunction with the prospectus of Scudder International Growth and
Income Fund dated July 1, 1998, as amended from time to time, a copy of which
may be obtained without charge by writing to Scudder Investor Services, Inc.,
Two International Place, Boston, Massachusetts 02110-4103.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
Page
THE FUND'S INVESTMENT OBJECTIVE AND POLICIES........................................................................1
General Investment Objective and Policies..................................................................1
Master/feeder structure....................................................................................2
Specialized Investment Techniques..........................................................................5
Investment Restrictions....................................................................................13
PURCHASES...........................................................................................................14
Additional Information About Opening An Account............................................................14
Additional Information About Making Subsequent Investments.................................................14
Additional Information About Making Subsequent Investments by QuickBuy.................................... 15
Checks.....................................................................................................15
Wire Transfer of Federal Funds.............................................................................15
Share Price............................................................................................... 16
Share Certificates........................................................................................ 16
Other Information..........................................................................................16
EXCHANGES AND REDEMPTIONS............................................................................................16
Exchanges...................................................................................................16
Redemption By Telephone.....................................................................................17
Redemption by QuickSell.....................................................................................18
Redemption by Mail or Fax...................................................................................18
Redemption-in-Kind..........................................................................................19
Other Information...........................................................................................19
FEATURES AND SERVICES OFFERED BY THE FUND............................................................................20
The Pure No-Load(TM) Concept................................................................................20
Internet access.............................................................................................21
Dividends and Capital Gains Distribution Options............................................................21
Scudder Investor Centers....................................................................................22
Reports to Shareholders.....................................................................................22
Transaction Summaries.......................................................................................22
THE SCUDDER FAMILY OF FUNDS..........................................................................................22
SPECIAL PLAN ACCOUNTS................................................................................................27
Scudder Retirement Plans: Profit-Sharing and Money Purchase Pension Plans for Corporations and
Self-Employed Individuals..............................................................................27
Scudder 401(k): Cash or Deferred Profit-Sharing Plan for Corporations and Self-Employed Individuals.........27
Scudder IRA: Individual Retirement Account.................................................................27
Scudder Roth IRA: Individual Retirement Account............................................................28
Scudder 403(b) Plan.........................................................................................29
Automatic Withdrawal Plan...................................................................................29
Group or Salary Deduction Plan..............................................................................29
Automatic Investment Plan...................................................................................30
Uniform Transfers/Gifts to Minors Act.......................................................................30
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS............................................................................30
PERFORMANCE INFORMATION..............................................................................................31
Average Annual Total Return.................................................................................31
Cumulative Total Return.....................................................................................31
Total Return................................................................................................32
Comparison of Fund Performance..............................................................................32
Taking a Global Approach....................................................................................36
Scudder's 30% Solution......................................................................................36
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TABLE OF CONTENTS (continued)
Page
FUND ORGANIZATION....................................................................................................36
INVESTMENT ADVISER...................................................................................................38
Personal Investments by Employees of the Adviser............................................................40
DIRECTORS AND OFFICERS...............................................................................................41
Compensation of Officers and Directors......................................................................44
DISTRIBUTOR..........................................................................................................45
TAXES................................................................................................................45
PORTFOLIO TRANSACTIONS...............................................................................................49
Brokerage Commissions.......................................................................................49
NET ASSET VALUE.....................................................................................................50
ADDITIONAL INFORMATION...............................................................................................51
Experts.....................................................................................................51
Other Information...........................................................................................51
FINANCIAL STATEMENTS.................................................................................................52
APPENDIX
</TABLE>
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THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
(See "Investment objective and policies" and
"Additional information about policies and
investments" in the Fund's prospectus.)
Scudder International Growth and Income Fund (the "Fund"), is a
diversified, pure no-load(TM) series of Scudder International Fund, Inc. (the
"Corporation"), an open-end management investment company which continuously
offers and redeems its shares at net asset value. It is a company of the type
commonly known as a mutual fund.
General Investment Objective and Policies
The Fund's investment objectives are to seek long-term growth of
capital and current income primarily from foreign equity securities. The Fund
invests generally in common stocks of established companies listed on foreign
exchanges, which offer prospects for growth of earnings while paying relatively
high current dividends.
To the extent consistent with the Fund's objectives of long-term growth
of capital and current income, as described in the preceding paragraph, it is
the policy of the Fund to provide shareholders with participation in the
economies of a number of countries, other than the U.S. The Fund may purchase
securities of companies, wherever organized, which, in the judgment of the
Fund's investment adviser, Scudder Kemper Investments, Inc. (the "Adviser"),
have their principal activities and interests outside of the U.S.
The Fund will normally invest at least 80% of its net assets in
securities in not less than three different countries other than the U.S. The
Fund may invest in securities of companies incorporated in the U.S. and having
their principal activities and interests outside of the U.S.
Except as otherwise noted, the Fund's investment objectives and
policies may be changed by a vote of the Board of Directors without a
shareholder vote. Achievement of the Fund's investment objectives cannot be
assured.
At least 80% of the Fund's net assets will be invested in the equity
securities of established non-U.S. companies listed on recognized foreign
exchanges; the Adviser expects this condition to continue, although the Fund may
invest in other securities. Up to 20% of the net assets of the Fund may be
invested in debt securities convertible into common stock and fixed-income
securities of foreign governments, supranational organizations and private
issuers, including bonds denominated in the European Currency Unit (ECU). 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. The Adviser applies a disciplined,
multi-part investment approach for selecting stocks for the Fund. The first
stage of this process involves analyzing the pool of foreign dividend-paying
securities, primarily from the world's more mature markets, and targeting stocks
that have high relative yields compared to the average for their markets. In the
Adviser's opinion, this group of higher-yielding stocks offers the potential for
returns that is greater than or equal to the average market return, with price
volatility that is lower than the overall market volatility. The Adviser
believes that these potentially favorable risk and return characteristics exist
because the higher dividends offered by these stocks act as a "cushion" when
markets are volatile and because the stocks with higher yields tend to have more
attractive valuations (e.g., lower price-to-earning ratios and lower
price-to-book ratios). The third stage of the investment process involves
diversifying the portfolio among different industry sectors. The key element of
this stage is evaluating how the stocks in different sectors react to economic
factors such as interest rates, inflation, Gross Domestic Product, and consumer
spending, and then attaining a proper balance of stocks in these sectors based
on the Adviser's economic forecast. The fourth and final stage of this ongoing
process is diversifying the portfolio among different countries. The Adviser
will seek to have broad country representation, favoring those countries that it
believes have sound economic conditions and open markets. The Fund's strategy is
to manage risk and create opportunity at each of the four stages in its
investment process, starting with the focus on stocks with high relative yields.
The Fund may invest in any type of security including, but not limited
to shares of stock, preferred or common; bonds and other evidences of
indebtedness; and other securities of issuers wherever organized, and not
excluding evidences of indebtedness of governments and their political
subdivisions. The Fund, in view of its investment objectives, intends under
normal conditions to maintain a portfolio consisting primarily of a diversified
list of equity securities.
<PAGE>
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. It is impossible to predict for how long
such alternate strategies may be utilized.
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 or
illiquid 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.
Master/feeder structure
The Board of Directors has the discretion to retain the current
distribution arrangement for the Fund while investing in a master fund in a
master/feeder structure as described below.
A master/feeder fund structure is one in which a fund (a "feeder
fund"), instead of investing directly in a portfolio of securities, invests most
or all of its investment assets in a separate registered investment company (the
"master fund") with substantially the same investment objective and policies as
the feeder fund. Such a structure permits the pooling of assets of two or more
feeder funds, preserving separate identities or distribution channels at the
feeder fund level. Based on the premise that certain of the expenses of
operating an investment portfolio are relatively fixed, a larger investment
portfolio may eventually achieve a lower ratio of operating expenses to average
net assets. An existing investment company is able to convert to a feeder fund
by selling all of its investments, which involves brokerage and other
transaction costs and realization of a taxable gain or loss, or by contributing
its assets to the master fund and avoiding transaction costs and, if proper
procedures are followed, the realization of taxable gain or loss.
Investing in Emerging Markets. Most emerging securities markets may have
substantially less volume and are subject to less governmental supervision than
U.S. securities markets. Securities of many issuers in emerging markets may be
less liquid and more volatile than securities of comparable domestic issuers. In
addition, there is less regulation of securities exchanges, securities dealers,
and listed and unlisted companies in emerging markets than in the U.S.
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.
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<PAGE>
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
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.
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<PAGE>
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.
Depository Receipts. For many foreign securities, there are U.S.
Dollar-denominated ADRs, which are bought and sold in the United States and are
issued by domestic banks. ADRs represent the right to receive securities of
foreign issuers deposited in the domestic bank or a correspondent bank. ADRs do
not eliminate all of the risk inherent in investing in the securities of foreign
issuers, such as changes in foreign currency exchange rates. However, by
investing in ADRs rather than directly in foreign issuers' stock, the Fund
avoids currency risks during the settlement period. In general, there is a
large, liquid market in the United States for most ADRs.
Foreign Securities. The Fund is intended to provide individual and institutional
investors with an opportunity to invest a portion of their assets in a
diversified group of securities of companies, wherever organized, which do
business primarily outside the U.S., and foreign governments. The Adviser
believes that diversification of assets on an international basis decreases the
degree to which events in any one country, including the U.S., 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 U.S. 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, the Fund is not intended to provide a complete
investment program for an investor.
Investors should recognize that investing in foreign securities
involves certain special considerations, including those set forth below, which
are not typically associated with investing in U.S. securities and which may
favorably or unfavorably affect the Fund's performance. As foreign companies are
not generally subject to uniform accounting, 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 securities markets, while
growing in volume of trading activity, have substantially less volume than the
U.S. market, and securities of some foreign issuers are less liquid and more
volatile than securities of domestic issuers. Similarly, volume and liquidity in
most foreign bond markets is less than in the U.S. and, at times, volatility of
price can be greater than in the U.S. Fixed commissions on some foreign
securities exchanges and bid-to-asked spreads in foreign bond markets are
generally higher than commissions or bid-to-asked spreads on U.S. markets,
although the Fund will endeavor to achieve the most favorable net results on its
portfolio transactions. There is generally less government supervision and
regulation of securities exchanges, brokers and listed companies than in the
U.S. It may be more difficult for the Fund's agents to keep currently informed
about corporate actions which may affect the prices of portfolio securities.
Communications between the U.S. and foreign countries may be less reliable than
within the U.S., thus increasing the risk of delayed settlements of portfolio
transactions or loss of certificates for portfolio securities. Payment for
securities without delivery may be required in certain foreign markets. In
addition, with respect to certain foreign countries, there is the possibility of
expropriation or confiscatory taxation, political or social instability, or
diplomatic developments which could affect U.S. investments in those countries.
Moreover, individual foreign economies may differ favorably or unfavorably from
4
<PAGE>
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. The management of the Fund seeks to mitigate the risks
associated with the foregoing considerations through continuous professional
management.
Specialized Investment Techniques
Foreign Currencies. Because investments in foreign securities usually will
involve currencies of foreign countries, and because the Fund may hold foreign
currencies and forward contracts, futures contracts and options on foreign
currencies and foreign currency futures contracts, the value of the assets of
the Fund as measured in U.S. dollars may be affected favorably or unfavorably by
changes in foreign currency exchange rates and exchange control regulations, and
the Fund may incur costs in connection with conversions between various
currencies. Although the Fund values its assets daily in terms of U.S. dollars,
it does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. It will do so from time to time, and investors should
be aware of the costs of currency conversion. Although foreign exchange dealers
do not charge a fee for conversion, they do realize a profit based on the
difference (the "spread") between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a foreign currency
to the Fund at one rate, while offering a lesser rate of exchange should the
Fund desire to resell that currency to the dealer. The Fund will conduct its
foreign currency exchange transactions either on a spot (i.e., cash) basis at
the spot rate prevailing in the foreign currency exchange market, or through
entering into options or forward or futures contracts to purchase or sell
foreign currencies.
Warrants. The Fund may invest in warrants up to 5% of the value of its
respective net assets. The holder of a warrant has the right, until the warrant
expires, to purchase a given number of shares of a particular issuer at a
specified price. Such investments can provide a greater potential for profit or
loss than an equivalent investment in the underlying security. Prices of
warrants do not necessarily move, however, in tandem with the prices of the
underlying securities and are, therefore, considered speculative investments.
Warrants pay no dividends and confer no rights other than a purchase option.
Thus, if a warrant held by a Fund were not exercised by the date of its
expiration, the Fund would lose the entire purchase price of the warrant.
Repurchase Agreements. The Fund may enter into repurchase agreements with any
member bank of the Federal Reserve System and any 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 the Fund may purchase or to be at least
equal to that of issuers of commercial paper rated within the two highest grades
assigned by Moody's Investor Services ("Moody's") or Standard and Poor's
Corporation ("S&P").
A repurchase agreement provides a means for the Fund to earn income on
funds for periods as short as overnight. It is an arrangement under which the
purchaser (i.e., the Fund) acquires a security ("Obligation") and the seller
agrees, at the time of sale, to repurchase the Obligation at a specified time
and price. Securities subject to a repurchase agreement are held in a segregated
account and the value of such securities kept at least equal to the repurchase
price on a daily basis. The repurchase price may be higher than the purchase
price, the difference being income to the Fund, or the purchase and repurchase
prices may be the same, with interest at a stated rate due to the Fund together
with the repurchase price upon repurchase. In either case, the income to the
Fund is unrelated to the interest rate on the Obligation itself. Obligations
will be held by the Custodian or in the Federal Reserve Book Entry system.
For purposes of The Investment Company Act of 1940, as amended (the
"1940 Act"), a repurchase agreement is deemed to be a loan from the Fund to the
seller of the Obligation subject to the repurchase agreement and is therefore
subject to the Fund's investment restriction applicable to loans. It is not
clear whether a court would consider the Obligation purchased by the Fund
subject to a repurchase agreement as being owned by the Fund or as being
collateral for a loan by the Fund to the seller. In the event of the
commencement of bankruptcy or insolvency proceedings with respect to the seller
of the Obligation before repurchase of the Obligation under a repurchase
agreement, the Fund may encounter delay and incur costs before being able to
sell the security. Delays may involve loss of interest or decline in price of
the Obligation. If the court characterizes the transaction as a loan and the
Fund has not perfected a security interest in the Obligation, the Fund may be
required to return the Obligation to the seller's estate and be treated as an
unsecured creditor of the seller. As an unsecured creditor, the Fund would be at
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<PAGE>
risk of losing some or all of the principal and income involved in the
transaction. As with any unsecured debt instrument purchased for the 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 the Fund may incur a loss if the proceeds to the 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), the Fund will direct the seller of the
Obligation to deliver additional securities so that the market value of all
securities subject to the repurchase agreement will equal or exceed the
repurchase price. It is possible that the Fund will be unsuccessful in seeking
to enforce the seller's contractual obligation to deliver additional securities.
Reverse Repurchase Agreements. The Fund may enter into "reverse repurchase
agreements," which are repurchase agreements in which the Fund, as the seller of
the securities, agrees to repurchase them at an agreed time and price. The Fund
maintains a segregated account in connection with outstanding reverse repurchase
agreements. The Fund will enter into reverse repurchase agreements only when the
Adviser believes that the interest income to be earned from the investment of
the proceeds of the transaction will be greater than the interest expense of the
transaction.
Convertible Securities. The Fund may invest in convertible securities, i.e.,
bonds, notes, debentures, preferred stocks and other securities which are
convertible into common stock. Investments in convertible securities can provide
an opportunity for capital appreciation and/or income through interest and
dividend payments by virtue of their conversion or exchange features.
The convertible securities in which the Fund may invest are either
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. 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 debt 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 debt 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"(TM)).
Debt Securities. When the Adviser believes that it is appropriate to do so in
order to achieve the Fund's objective of long-term capital growth and current
income, the Fund may invest up to 20% of its net assets in debt securities
including bonds of foreign governments, supranational organizations and private
issuers, including bonds denominated in the ECU. Portfolio debt investments will
be selected on the basis of, among other things, yield, credit quality, and the
fundamental outlooks for currency and interest rate trends in different parts of
the globe, taking into account the ability to hedge a degree of currency or
local bond price risk. The Fund may purchase "investment-grade" bonds, which are
6
<PAGE>
those rated Aaa, Aa, A or Baa by Moody's or AAA, AA, A or BBB by S&P or, if
unrated, judged to be of equivalent quality as determined by the Adviser.
Moody's considers bonds it rates Baa to have speculative elements as well as
investment-grade characteristics.
High Yield/High Risk Bonds. The Fund may also purchase, to a limited extent,
debt securities which are rated below investment-grade (commonly referred to as
junk bonds), 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 Fund will invest no more than 5% of its net assets in securities
rated BB or lower by Moody's or Ba by S&P, and may invest in securities which
are rated D by S&P. Securities rated D 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.
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 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 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 the Fund to accurately value high yield securities in its
portfolio and to dispose of those securities. Adverse publicity and investor
perceptions may decrease the values and liquidity of high yield securities.
These securities may also involve special registration responsibilities,
liabilities and costs, and liquidity and valuation difficulties.
Credit quality in the high-yield securities market can change suddenly
and unexpectedly, and even recently-issued credit ratings may not fully reflect
the actual risks posed by a particular high-yield security. For these reasons,
it is the policy of the Adviser not to rely exclusively on ratings issued by
established credit rating agencies, but to supplement such ratings with its own
independent and on-going review of credit quality. The achievement of the Fund's
investment objective by investment in such securities may be more dependent on
the Adviser's credit analysis than is the case for higher quality bonds. Should
the rating of a portfolio security be downgraded, the Adviser will determine
whether it is in the best interest of 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.
Illiquid Securities. The 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.
Lending of Portfolio Securities. The Fund may seek to increase its net income by
lending portfolio securities. Such loans may be made to registered
broker/dealers or other financial institutions and are required to be secured
continuously by collateral in cash or liquid assets maintained on a current
basis at an amount at least equal to the market value and accrued interest of
the securities loaned. The Fund has the right to call a loan and obtain the
securities loaned on five days notice or, in connection with securities trading
on foreign markets, within such longer period of time which coincides with the
normal settlement period for purchases and sales of such securities in such
foreign markets. During the existence of a loan, the Fund will continue to
receive the equivalent of any distributions paid by the issuer on the securities
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loaned and will also receive compensation based on investment of the collateral.
The risks in lending securities, as with other extensions of secured credit,
consist of a possible delay in recovery or even a loss of rights in the
collateral should the borrower of the securities fail financially. Loans will
only be made to firms deemed by the Adviser to be of good standing. The value of
the securities loaned will not exceed 5% of the value of the Fund's total assets
at the time any loan is made.
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, or to enhance potential gain.
These strategies may be executed through the use of derivative contracts. Such
strategies are generally accepted as 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 exchange-listed and over-the-counter put and call options on
securities, equity and fixed-income indices and other financial instruments,
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 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 to create leveraged exposure
in the Fund.
Strategic Transactions, including derivative contracts, have risks
associated with them including possible default by the other party to the
transaction, illiquidity and, to the extent the 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 entails certain other risks. 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
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. 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."
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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, index, currency or other instrument at the exercise price. For
instance, the Fund's purchase of a put option on a security might be designed to
protect its holdings in the underlying instrument (or, in some cases, a similar
instrument) against a substantial decline in the market value by giving the Fund
the right to sell such instrument at the option exercise price. A call option,
upon payment of a premium, gives the purchaser of the option the right to buy,
and the seller the obligation to sell, the underlying instrument at the exercise
price. The Fund's purchase of a call option on a security, index, currency or
other instrument might be intended to protect the Fund against an increase in
the price of the underlying instrument that it intends to purchase in the future
by fixing the price at which it may purchase such instrument. An American style
put or call option may be exercised at any time during the option period while a
European style put or call option may be exercised only upon expiration or
during a fixed period prior thereto. The Fund is authorized to purchase exchange
listed options and over-the-counter options ("OTC options"). Exchange listed
options are issued by a regulated intermediary such as the Options Clearing
Corporation ("OCC"), which guarantees the performance of the obligations of the
parties to such options. The discussion below uses the OCC as an example, but is
also applicable to other financial intermediaries.
With certain exceptions, OCC issued and exchange listed options
generally settle by physical delivery of the underlying security or currency,
although in the future cash settlement may become available. Index options and
Eurodollar instruments are cash settled for the net amount, if any, by which the
option is "in-the-money" (i.e., where the value of the underlying instrument
exceeds, in the case of a call option, or is less than, in the case of a put
option, the exercise price of the option) at the time the option is exercised.
Frequently, rather than taking or making delivery of the underlying instrument
through the process of exercising the option, listed options are closed by
entering into offsetting purchase or sale transactions that do not result in
ownership of the new option.
The Fund's ability to close out its position as a purchaser of an OCC
or exchange listed put or call option is dependent, in part, upon the liquidity
of the option market. Among the possible reasons for the absence of a liquid
option market on an exchange are: (i) insufficient trading interest in certain
options; (ii) restrictions on transactions imposed by an exchange; (iii) trading
halts, suspensions or other restrictions imposed with respect to particular
classes or series of options or underlying securities including reaching daily
price limits; (iv) interruption of the normal operations of the OCC or an
exchange; (v) inadequacy of the facilities of an exchange or OCC to handle
current trading volume; or (vi) a decision by one or more exchanges to
discontinue the trading of options (or a particular class or series of options),
in which event the relevant market for that option on that exchange would cease
to exist, although outstanding options on that exchange would generally continue
to be exercisable in accordance with their terms.
The hours of trading for listed options may not coincide with the hours
during which the underlying financial instruments are traded. To the extent that
the option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.
OTC options are purchased from securities dealers, financial
institutions or other parties ("Counterparties") through direct bilateral
agreement with the Counterparty. In contrast to exchange listed options, which
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term, exercise price,
premium, guarantees and security, are set by negotiation of the parties. The
Fund expects generally to enter into OTC options that have cash settlement
provisions, although it is not required to do so.
Unless the parties provide for it, there is no central clearing or
guaranty function in an OTC option. As a result, if the Counterparty fails to
make or take delivery of the security, currency or other instrument underlying
an OTC option it has entered into with the Fund or fails to make a cash
settlement payment due in accordance with the terms of that option, the Fund
will lose any premium it paid for the option as well as any anticipated benefit
of the transaction. Accordingly, the 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 Fund will engage in OTC option transactions only
with U.S. government securities dealers recognized by the Federal Reserve Bank
of New York as "primary dealers", or broker dealers, domestic or foreign banks
or other financial institutions which have received (or the guarantors of the
obligation of which have received) a short-term credit rating of A-1 from S&P or
P-1 from Moody's or an equivalent rating from any other nationally recognized
statistical rating organization ("NRSRO") or, in the case of OTC currency
transactions, are determined to be of equivalent credit quality by the Adviser.
The staff of the SEC currently takes the position that OTC options purchased by
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the Fund are illiquid, and are subject to the Fund's limitation on investing no
more than 10% of its assets in illiquid securities.
The Fund may purchase 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 and currencies. All calls
sold by the Fund must be "covered" (i.e., the Fund must own the securities
subject to the call) or must meet the asset segregation requirements described
below as long as the call is outstanding. Even though the Fund will receive the
option premium to help protect it against loss, a call sold by the Fund exposes
the Fund during the term of the option to possible loss of opportunity to
realize appreciation in the market price of the underlying security or
instrument and may require the Fund to hold a security or instrument which it
might otherwise have sold.
The Fund may purchase 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 and currencies.
Options on Securities Indices and Other Financial Indices. The Fund also may
purchase 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 purchase of options on individual securities or other instruments. Options
on securities indices and other financial indices are similar to options on a
security or other instrument except that, rather than settling by physical
delivery of the underlying instrument, they settle by cash settlement, i.e., an
option on an index gives the holder the right to receive, upon exercise of the
option, an amount of cash if the closing level of the index upon which the
option is based exceeds, in the case of a call, or is less than, in the case of
a put, the exercise price of the option (except if, in the case of an OTC
option, physical delivery is specified). This amount of cash is equal to the
excess of the closing price of the index over the exercise price of the option,
which also may be multiplied by a formula value. The seller of the option is
obligated, in return for the premium received, to make delivery of this amount.
The gain or loss on an option on an index depends on price movements in the
instruments making up the market, market segment, industry or other composite on
which the underlying index is based, rather than price movements in individual
securities, as is the case with respect to options on securities.
Currency Transactions. The Fund may engage in currency transactions with
Counterparties 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, the purchase of exchange listed and OTC options on currencies, and
currency swaps. A forward currency contract involves a privately negotiated
obligation to purchase or sell (with delivery generally required) a specific
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. A currency swap is an agreement to exchange cash flows based on the
notional difference among two or more currencies and operates similarly to an
interest rate swap, which is described below. The Fund may enter into currency
transactions with Counterparties which have received (or the guarantors of the
obligations of 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 an NRSRO or are
determined to be of equivalent credit quality by the Adviser.
The Fund's dealings in forward currency contracts and other currency
transactions such as futures, options, options on futures and swaps will be
limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is entering into a currency transaction with
respect to specific assets or liabilities of the Fund, which will generally
arise in connection with the purchase or sale of its portfolio securities or the
receipt of income therefrom. Position hedging is entering into a currency
transaction with respect to portfolio security positions denominated or
generally quoted in that currency.
The Fund will not enter into a transaction to hedge currency exposure
to an extent greater, after netting all transactions intended wholly or
partially to offset other transactions, than the aggregate market value (at the
time of entering into the transaction) of the securities held in its portfolio
that are denominated or generally quoted in or currently convertible into such
currency, other than with respect to proxy hedging or cross hedging as described
below.
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The Fund may also cross-hedge currencies by entering into transactions
to purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which the Fund has or in which the Fund expects
to have portfolio exposure.
To reduce the effect of currency fluctuations on the value of existing
or anticipated holdings of portfolio securities, the Fund may also engage in
proxy hedging. Proxy hedging is often used when the currency to which the Fund's
portfolio is exposed is difficult to hedge or to hedge against the dollar. Proxy
hedging entails entering into a commitment or option to sell a currency whose
changes in value are generally considered to be correlated to a currency or
currencies in which some or all of the Fund's portfolio securities are or are
expected to be denominated, in exchange for U.S. dollars. The amount of the
commitment or option would not exceed the value of the Fund's securities
denominated in correlated currencies. For example, if the 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 the Fund
if the currency being hedged fluctuates in value to a degree or in a direction
that is not anticipated. Further, there is the risk that the perceived
correlation between various currencies may not be present or may not be present
during the particular time that the Fund is engaging in proxy hedging. If the
Fund enters into a currency hedging transaction, the Fund will comply with the
asset segregation requirements described below.
Risks of Currency Transactions. Currency transactions are subject to risks
different from those of other portfolio transactions. Because currency control
is of great importance to the issuing governments and influences economic
planning and policy, purchases and sales of currency and related instruments can
be negatively affected by government exchange controls, blockages, and
manipulations or exchange restrictions imposed by governments. These can result
in losses to the Fund if it is unable to deliver or receive currency or funds in
settlement of obligations and could also cause hedges it has entered into to be
rendered useless, resulting in full currency exposure as well as incurring
transaction costs. Buyers and sellers of currency futures are subject to the
same risks that apply to the use of futures generally. Further, settlement of a
currency futures contract for the purchase of most currencies must occur at a
bank based in the issuing nation. Trading options on currency futures is
relatively new, and the ability to establish and close out positions on such
options is subject to the maintenance of a liquid market which may not always be
available. Currency exchange rates may fluctuate based on factors extrinsic to
that country's economy.
Combined Transactions. The Fund may enter into multiple transactions, including
multiple options transactions, multiple currency transactions (including forward
currency contracts) and multiple interest rate transactions and any combination
of 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 the
Fund to do so. A combined transaction will usually contain elements of risk that
are present in each of its component transactions. Although combined
transactions are normally entered into based on the Adviser's judgment that the
combined strategies will reduce risk or otherwise more effectively achieve the
desired portfolio management goal, it is possible that the combination will
instead increase such risks or hinder achievement of the portfolio management
objective.
Swaps, Caps, Floors and Collars. Among the Strategic Transactions into which the
Fund may enter are interest rate, currency and index swaps and the purchase or
sale of related caps, floors and collars. The Fund expects to enter into these
transactions primarily to preserve a return or spread on a particular investment
or portion of its portfolio, to protect against currency fluctuations, as a
duration management technique or to protect against any increase in the price of
securities the Fund anticipates purchasing at a later date. The Fund intends to
use these transactions as hedges and not as speculative investments and will not
sell interest rate caps or floors where it does not own securities or other
instruments providing the income stream the Fund may be obligated to pay.
Interest rate swaps involve the exchange by the Fund with another party of their
respective commitments to pay or receive interest, e.g., an exchange of floating
rate payments for fixed rate payments with respect to a notional amount of
principal. A currency swap is an agreement to exchange cash flows on a notional
amount of two or more currencies based on the relative value differential among
them and an index swap is an agreement to swap cash flows on a notional amount
based on changes in the values of the reference indices. The purchase of a cap
entitles the purchaser to receive payments on a notional principal amount from
the party selling such cap to the extent that a specified index exceeds a
predetermined interest rate or amount. The purchase of a floor entitles the
purchaser to receive payments on a notional principal amount from the party
selling such floor to the extent that a specified index falls below a
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predetermined interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain return within a predetermined range of interest
rates or values.
The Fund will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. Inasmuch as these swaps, caps,
floors and collars are entered into for good faith hedging purposes, the Adviser
and the Fund believe such obligations do not constitute senior securities under
the 1940 Act and, accordingly, will not treat them as being subject to its
borrowing restrictions. The Fund will not enter into any swap, cap, floor or
collar transaction unless, at the time of entering into such transaction, the
unsecured long-term debt of the Counterparty, combined with any credit
enhancements, is rated at least A by S&P or Moody's or has an equivalent rating
from an 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.
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 the Fund's ability to act upon economic
events occurring in foreign markets during non-business hours in the U.S., (iv)
the imposition of different exercise and settlement terms and procedures and
margin requirements than in the U.S., and (v) lower trading volume and
liquidity.
Use of Segregated and Other Special Accounts. Many Strategic Transactions, in
addition to other requirements, require that the Fund segregate cash or liquid
assets with its custodian to the extent Fund obligations are not otherwise
"covered" through ownership of the underlying security, financial instrument or
currency. In general, either the full amount of any obligation by the Fund to
pay or deliver securities or assets must be covered at all times by the
securities, instruments or currency required to be delivered, or, subject to any
regulatory restrictions, an amount of cash or liquid assets at least equal to
the current amount of the obligation must be segregated with the custodian. The
segregated assets cannot be sold or transferred unless equivalent assets are
substituted in their place or it is no longer necessary to segregate them.
Except when the Fund enters into a forward contract for the purchase or
sale of a security denominated in a particular currency, which requires no
segregation, a currency contract which obligates the Fund to buy or sell
currency will generally require the Fund to hold an amount of that currency or
liquid assets denominated in that currency equal to the Fund's obligations or to
segregate cash or liquid assets equal to the amount of the Fund's obligation.
With respect to swaps, the Fund will accrue the net amount of the
excess, if any, of its obligations over its entitlements with respect to each
swap on a daily basis and will segregate an amount of cash or liquid assets
having a value equal to the accrued excess. Caps, floors and collars require
segregation of assets with a value equal to the Fund's net obligation, if any.
Strategic Transactions may be covered by other means when consistent
with applicable regulatory policies. The Fund may also enter into offsetting
transactions so that its combined position, coupled with any segregated assets,
equals its net outstanding obligation in related options and Strategic
Transactions. For example, instead of segregating assets if the Fund held a
futures or forward contract, it could purchase a put option on the same futures
or forward contract with a strike price as high or higher than the price of the
contract held. Other Strategic Transactions may also be offset in combinations.
If the offsetting transaction terminates at the time of or after the primary
transaction no segregation is required, but if it terminates prior to such time,
assets equal to any remaining obligation would need to be segregated.
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Investment Restrictions
The policies set forth below are fundamental policies of the Fund and
may not be changed without the approval of a majority of the Fund's outstanding
shares. As used in this Statement of Additional Information, a "majority of the
outstanding voting securities of the Fund" means the lesser of (1) 67% or more
of the voting securities present at such meeting, if the holders of more than
50% of the outstanding voting securities of the Fund are present or represented
by proxy; or (2) more than 50% of the outstanding voting securities of the Fund.
The Fund has elected to be classified as a diversified series of an open-end
investment company.
In addition, as a matter of fundamental policy, the Fund will not:
(1) borrow money, except as permitted under the Investment Company
Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time;
(2) issue senior securities, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted
or modified by regulatory authority having jurisdiction, from
time to time;
(3) purchase physical commodities or contracts relating to
physical commodities;
(4) concentrate its investments in a particular industry, as that
term is used in the Investment Company Act of 1940, as
amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time;
(5) engage in the business of underwriting securities issued by
others, except to the extent that the Fund may be deemed to be
an underwriter in connection with the disposition of portfolio
securities;
(6) purchase or sell real estate, which term does not include
securities of companies which deal in real estate or mortgages
or investments secured by real estate or interests therein,
except that the Fund reserves freedom of action to hold and to
sell real estate acquired as a result of the Fund's ownership
of securities; and
(7) make loans to other persons, except (i) loans of portfolio
securities, and (ii) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests
in indebtedness in accordance with the Fund's investment
objective and policies may be deemed to be loans.
As a matter of nonfundamental policy, the Fund currently does not
intend to:
(a) borrow money in an amount greater than 5% of its total assets,
except (i) for temporary or emergency purposes and (ii) by
engaging in reverse repurchase agreements, dollar rolls, or
other investments or transactions described in the Fund's
registration statement which may be deemed to be borrowings;
(b) enter into either of reverse repurchase agreements or dollar
rolls in an amount greater than 5% of its total assets;
(c) purchase securities on margin or make short sales, except (i)
short sales against the box, (ii) in connection with arbitrage
transactions, (iii) for margin deposits in connection with
futures contracts, options or other permitted investments,
(iv) that transactions in futures contracts and options shall
not be deemed to constitute selling securities short, and (v)
that the Fund may obtain such short-term credits as may be
necessary for the clearance of securities transactions;
(d) purchase options, unless the aggregate premiums paid on all
such options held by the Fund at any time do not exceed 20% of
its total assets; or sell put options, if as a result, the
aggregate value of the obligations underlying such put options
would exceed 50% of its total assets;
(e) enter into futures contracts or purchase options thereon
unless immediately after the purchase, the value of the
aggregate initial margin with respect to such futures
contracts entered into on behalf of the Fund and the premiums
paid for such options on futures contracts does not exceed 5%
of the fair market value of the Fund's total assets; provided
that in the case of an option that is in-the-money at the time
of purchase, the in-the-money amount may be excluded in
computing the 5% limit;
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(f) purchase warrants if as a result, such securities, taken at
the lower of cost or market value, would represent more than
5% of the value of the Fund's total assets (for this purpose,
warrants acquired in units or attached to securities will be
deemed to have no value); and
(g) lend portfolio securities in an amount greater than 5% of it
total assets.
The foregoing nonfundamental policies are in addition to policies
otherwise stated in the Prospectus or Statement of Additional Information.
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, the Fund.
PURCHASES
(See "Purchases" and "Transaction information" in the Fund's prospectus.)
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, telegram, 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 number 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 02101, ABA Number 011000028, DDA
Account 9903-5552. The investor must give the Scudder fund name, account name
and the new account number. Finally, the investor must send a 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, telegram, 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 the 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 three (3) 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 the Fund or the principal underwriter by
reason of such cancellation. If the purchaser is a shareholder, the Fund shall
have the authority, as agent of the shareholder, to redeem shares in the account
in order to reimburse the Fund or the principal underwriter for the loss
incurred. Net losses on such transactions which are not recovered from the
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<PAGE>
purchaser will be absorbed by the principal underwriter. Any net profit on the
liquidation of unpaid shares will accrue to the Fund.
Additional Information About Making Subsequent Investments by QuickBuy
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 QuickBuy program, may purchase shares of the Fund by telephone. Through
this service shareholders may purchase up to $250,000. To purchase shares by
QuickBuy, shareholders should call before the close of regular trading on the
New York Stock Exchange (the "Exchange"), normally 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. QuickBuy 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 QuickBuy 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.
QuickBuy transactions are not available for most retirement plan accounts.
However, QuickBuy transactions are available for Scudder IRA accounts.
In order to request purchases by QuickBuy, 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 QuickBuy may so indicate on the application.
Existing shareholders who wish to add QuickBuy to their account may do so by
completing a QuickBuy Enrollment Form. After sending in an enrollment form
shareholders should allow 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 the Fund are purchased by a check which proves to be
uncollectible, the Fund reserves the right to cancel the purchase immediately
and the purchaser will be responsible for any loss incurred by the Fund or the
principal underwriter by reason of such cancellation. If the purchaser is a
shareholder, the Fund shall have the authority, as agent of the shareholder, to
redeem shares in the account in order to reimburse the 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 the Fund prior to the regular close of 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 Fund 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 presently closed on certain holidays although the
Exchange may be open. These holidays are 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 federal funds on behalf of the 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 purchase order 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 Scudder Investor
Services, Inc., it is the responsibility of that member broker, rather than the
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 the Fund's management to afford ease of
redemption, certificates will not be issued to indicate ownership in the Fund.
Other Information
The Fund has authorized certain members of the NASD other than the
Distributor to accept purchase and redemption orders for the Fund's shares.
Those brokers may also designate other parties to accept purchase and redemption
orders on the Fund's behalf. Orders for purchase or redemption will be deemed to
have been received by the Fund when such brokers or their authorized designees
accept the orders. Subject to the terms of the contract between the Fund and the
broker, ordinarily orders will be priced at the Fund's net asset value next
computed after acceptance by such brokers or their authorized designees.
Further, if purchases or redemptions of the Fund's shares are arranged and
settlement is made at an investor's election through any other authorized NASD
member, that member may, at its discretion, charge a fee for that service. The
Board of Directors and the Distributor, also the Fund's principal underwriter,
each has the right to limit the amount of purchases by, and to refuse to sell
to, any person. The Directors and the Distributor may suspend or terminate the
offering of shares of the Fund at any time for any reason.
The Board of Directors of the Fund and Scudder Investor Services, Inc.,
the Fund's principal underwriter, each has the right to limit the amount of
purchases by and to refuse to sell to any person and each may suspend or
terminate the offering of shares of the 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., from exempt organizations a certification of exempt status), may be
returned to the investor if a correct, certified tax identification number and
certain other required certificates are not supplied.
The 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
Fund's prospectus.)
Exchanges
Exchanges are comprised of a redemption from one Scudder fund and a
purchase into shares of other funds in the Scudder Family of Funds unless
otherwise determined by the Board of Directors. 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
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<PAGE>
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 the
Fund's prospectus.
Exchange orders received before the close of regular trading on the
Exchange on any business day ordinarily will be executed at the respective net
asset values determined on that day. Exchange orders received after the close of
regular trading on the Exchange will be executed on the following business day.
Investors may also request, at no extra charge, to have exchanges
automatically executed on a predetermined schedule from one Scudder fund to an
existing account in another Scudder fund, at current net asset value, through
Scudder's Automatic Exchange Program. Exchanges must be for a minimum of $50.
Shareholders may add this free feature over the telephone or in writing.
Automatic Exchanges will continue until the shareholder requests by telephone 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.
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. 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. The Fund
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. The exchange privilege may not be
available for certain Scudder funds or classes of Scudder funds. For more
information, please call 1-800-225-5163.
Scudder retirement plans may have different exchange requirements.
Please refer to appropriate plan literature.
Redemption By Telephone
Shareholders currently receive the right, automatically without having
to elect it, to redeem by telephone up to $100,000 to their address of record.
Shareholders may also request by telephone to have the proceeds mailed or wired
to their predesignated bank account. In order to request wire 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 the telephone redemption
privilege 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.
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<PAGE>
If a request for a 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.
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 QuickSell
Shareholders, whose predesignated bank account of record is a member of
the Automated Clearing House Network (ACH) and have elected to participate in
the QuickSell program may sell shares of the Fund by telephone. To sell shares
by QuickSell, shareholders should call before the close of regular trading on
the Exchange, normally 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 in two or three business days following your call. Shares will
be redeemed at the net asset value per share calculated at the close of trading
on the day of your call. QuickSell requests after 4 p.m. eastern time will begin
their processing the following business day. QuickSell transactions are not
available for Scudder IRA accounts and most other retirement plan accounts.
In order to request redemptions by QuickSell, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account to which the redemption proceeds will be credited.
New investors wishing to establish QuickSell may so indicate on the application.
Existing shareholders who wish to add QuickSell to their account may do so by
completing a QuickSell 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
Any existing share certificates representing shares being redeemed must
accompany a request for redemption and be duly endorsed or accompanied by a
proper stock assignment form with signature(s) guaranteed.
In order to ensure proper authorization before redeeming shares, the
Transfer Agent may request additional 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 share certificates or 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 (7) business days
after receipt by the Transfer Agent of a request for redemption that complies
with the above requirements. Delays of more than seven (7) days of payment for
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<PAGE>
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 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 into 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 that Fund at the beginning of the
period.
Other Information
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. The Fund does not
impose a redemption or 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 may be suspended at times and a
shareholder's right to redeem shares and to receive payment therefore 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 the Fund of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Fund fairly to determine
the value of its net assets, or (d) during which the Securities and Exchange
Commission (the "Commission"), 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 Commission (or any succeeding
governmental authority) shall govern as to whether the conditions prescribed in
(b), (c) or (d) exist.
Shareholders should maintain a share balance worth at least $2,500
($1,000 for IRAs, Uniform Gift to Minor Act, and Uniform Trust to Minor Act
accounts), which amount may be changed by the Board of Directors. Scudder
retirement plans have similar or lower minimum balance requirements. A
shareholder may open an account with at least $1,000 ($500 for an IRA), if an
automatic investment plan ("AIP") of $100/month ($50/month for an IRA) is
established.
Shareholders who maintain a non-fiduciary account balance of less than
$2,500 in the Fund, without establishing an AIP, will be assessed an annual
$10.00 per fund charge with the fee to be reinvested in 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 at the address
of record. Reductions in value that result solely from market activity will not
trigger an involuntary redemption. UGMA, UTMA, IRA and other retirement accounts
will not be assessed the $10.00 charge or be subject to automatic liquidation.
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FEATURES AND SERVICES OFFERED BY THE FUND
(See "Shareholder benefits" in the Fund's prospectus)
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 funds in its
Scudder Family of 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 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 Rule 12b-1 under the 1940 Act.
A front-end load is a sales charge, which can be as high as 8.50% of
the amount invested. A back-end load is a contingent deferred sales charge,
which can be as high as 8.50% of either the amount invested or redeemed. The
maximum front-end or back-end load varies, and depends upon whether or not a
fund also charges a 12b-1 fee and/or a service fee or offers investors various
sales-related services such as dividend reinvestment. The maximum charge for a
12b-1 fee is 0.75% of a fund's average annual net assets, and the maximum charge
for a service fee is 0.25% of a fund's average annual net assets.
A no-load fund does not charge a front-end or back-end load, but can
charge a small 12b-1 fee and/or service fee against fund assets. Under the
Conduct Rules of the National Association of Securities Dealers , 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 funds in the Scudder Family of 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 Family of Funds pure no-load fund over investing
the same amount in a load fund that collects an 8.50% front-end load, a load
fund that collects only a 0.75% 12b-1 and/or service fee, and a no-load fund
charging only a 0.25% 12b-1 and/or service fee. The hypothetical figures in the
chart show the value of an account assuming a constant 10% rate of return over
the time periods indicated and reinvestment of dividends and distributions.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEARS ScudderPure No-Load(TM) 8.50% Load Fund Load Fund with 0.75% No-Load Fund with
Fund 12b-1 Fee 0.25% 12b-1 Fee
10 $ 25,937 $ 23,733 $ 24,222 $ 25,354
15 41,772 38,222 37,698 40,371
20 67,275 61,557 58,672 64,282
</TABLE>
Investors are encouraged to review the fee tables on page 2 of the
Fund's prospectus for more specific information about the rates at which
management fees and other expenses are assessed.
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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 MeTM 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 MeTM 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.
Dividends and Capital Gains 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 received by the Transfer Agent at least five days prior to a
dividend record date. Shareholders also may change their dividend option either
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 Fund's prospectus 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
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<PAGE>
income and capital gain distributions automatically deposited to their personal
bank account usually within three business days after the Fund pays its
distribution. A DistributionsDirect request form can be obtained by calling
1-800-225-5163. Confirmation statements will be mailed to shareholders as
notification that distributions have been deposited.
Investors choosing to participate in Scudder's Automatic Withdrawal
Plan must reinvest any dividends or capital gains. For most retirement plan
accounts, the reinvestment of dividends and capital gains is also required.
Scudder Investor Centers
Investors may visit any of the Investor Centers maintained by the
Distributor listed in the Fund's prospectus. The Centers are designed to provide
individuals with services during any business day. Investors may pick up
literature or obtain 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 shareholders unaudited semiannual financial
statements and annual financial statements audited by independent accountants,
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
the Fund.
Transaction Summaries
Annual summaries of all transactions in each Fund account are available
to shareholders. The summaries may be obtained by calling 1-800-225-5163.
THE SCUDDER FAMILY OF FUNDS
(See "Investment products and services" in the Fund's prospectus.)
The Scudder Family of Funds is America's first family of mutual funds
and the nation's oldest family of no-load mutual funds. To assist investors in
choosing a Scudder fund, descriptions of the Scudder funds' objectives follow.
MONEY MARKET
Scudder U.S. Treasury Money Fund seeks to provide safety, liquidity and
stability of capital and, consistent therewith, to provide current
income. The Fund seeks to maintain a constant net asset value of $1.00
per share, although in certain circumstances this may not be possible,
and declares dividends daily.
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. SCIT seeks to maintain a
constant net asset value of $1.00 per share, although in certain
circumstances this may not be possible, and declares dividends daily.
Scudder Money Market Series seeks to provide investors with as high a
level of current income as is consistent with its investment polices
and with preservation of capital and liquidity. The Fund seeks to
maintain a constant net asset value of $1.00 per share, but there is no
assurance that it will be able to do so. The institutional class of
shares of this Fund is not within the Scudder Family of Funds.
Scudder Government Money Market Series seeks to provide investors with
as high a level of current income as is consistent with its investment
polices and with preservation of capital and liquidity. The Fund seeks
to maintain a constant net asset value of $1.00 per share, but there is
no assurance that it will be able to do so. The institutional class of
shares of this Fund is not within the Scudder Family of Funds.
22
<PAGE>
TAX FREE MONEY MARKET
Scudder Tax Free Money Fund ("STFMF") seeks to provide income exempt
from regular federal income tax and stability of principal through
investments primarily in municipal securities. STFMF seeks to maintain
a constant net asset value of $1.00 per share, although in extreme
circumstances this may not be possible.
Scudder Tax Free Money Market Series seeks to provide investors with as
high a level of current income that cannot be subjected to federal
income tax by reason of federal law as is consistent with its
investment policies and with preservation of capital and liquidity. The
Fund seeks to maintain a constant net asset value of $1.00 per share,
but there is no assurance that it will be able to do so. The
institutional class of shares of this Fund is not within the Scudder
Family of Funds.
Scudder California Tax Free Money Fund* seeks stability of capital and
the maintenance of a constant net asset value of $1.00 per share while
providing California taxpayers income exempt from both California State
personal and regular federal income taxes. The Fund is a professionally
managed portfolio of high quality, short-term California municipal
securities. There can be no assurance that the stable net asset value
will be maintained.
Scudder New York Tax Free Money Fund* seeks stability of capital and
the maintenance of a constant net asset value of $1.00 per share, while
providing New York taxpayers income exempt from New York State and New
York City personal income taxes and regular federal income tax. There
can be no assurance that the stable net asset value will be maintained.
TAX FREE
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 Medium Term Tax Free Fund seeks to provide a high level of
income free from regular federal income taxes and to limit principal
fluctuation. The Fund will invest primarily in high-grade,
intermediate-term bonds.
Scudder Managed Municipal Bonds seeks to provide income exempt from
regular federal income tax primarily through investments in high-grade,
long-term municipal securities.
Scudder High Yield Tax Free Fund seeks to provide a high level of
interest income, exempt from regular federal income tax, from an
actively managed portfolio consisting primarily of investment-grade
municipal securities.
Scudder California Tax Free Fund* seeks to provide California taxpayers
with income exempt from both California State personal income and
regular federal income tax. The Fund is a professionally managed
portfolio consisting primarily of California municipal securities.
Scudder Massachusetts Limited Term Tax Free Fund* seeks to provide
Massachusetts taxpayers with as high a level of income exempt from
Massachusetts personal income tax and regular federal income tax, as is
consistent with a high degree of price stability, through a
professionally managed portfolio consisting primarily of
investment-grade municipal securities.
Scudder Massachusetts Tax Free Fund* seeks to provide Massachusetts
taxpayers with income exempt from both Massachusetts personal income
tax and regular federal income tax. The Fund is a professionally
managed portfolio consisting primarily of investment-grade municipal
securities.
- --------
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.
23
<PAGE>
Scudder New York Tax Free Fund* seeks to provide New York taxpayers
with income exempt from New York State and New York City personal
income taxes and regular federal income tax. The Fund is a
professionally managed portfolio consisting primarily of New York
municipal securities.
Scudder Ohio Tax Free Fund* seeks to provide Ohio taxpayers with income
exempt from both Ohio personal income tax and regular federal income
tax. The Fund is a professionally managed portfolio consisting
primarily of investment-grade municipal securities.
Scudder Pennsylvania Tax Free Fund* seeks to provide Pennsylvania
taxpayers with income exempt from both Pennsylvania personal income tax
and regular federal income tax. The Fund is a professionally managed
portfolio consisting primarily of investment-grade municipal
securities.
U.S. INCOME
Scudder Short Term Bond Fund seeks to provide a high level of income
consistent with a high degree of principal stability by investing
primarily in high quality short-term bonds.
Scudder Zero Coupon 2000 Fund seeks to provide as high an investment
return over a selected period as is consistent with investment in U.S.
Government securities and the minimization of reinvestment risk.
Scudder GNMA Fund seeks to provide high current income primarily from
U.S. Government guaranteed mortgage-backed (Ginnie Mae) securities.
Scudder Income Fund seeks a high level of income, consistent with the
prudent investment of capital, through a flexible investment program
emphasizing high-grade bonds.
Scudder High Yield Bond Fund seeks a high level of current income and,
secondarily, capital appreciation through investment primarily in below
investment-grade domestic debt securities.
GLOBAL INCOME
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 International Bond Fund seeks to provide income primarily by
investing in a managed portfolio of high-grade international bonds. 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 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 by
governments and corporations in emerging markets.
ASSET ALLOCATION
Scudder Pathway Series: Conservative Portfolio seeks primarily current
income and secondarily long-term growth of capital. In pursuing these
objectives, the Portfolio, under normal market conditions, will 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 to provide investors
with a balance of growth and income by investing in a select mix of
Scudder money market, bond and equity mutual funds.
- --------
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.
24
<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 for investors. Total return consists of any capital appreciation
plus dividend income and interest. To achieve this objective, the
Portfolio invests in a select mix of established international and
global Scudder funds.
U.S. GROWTH AND INCOME
Scudder Balanced Fund seeks a balance of growth and income from a
diversified portfolio of equity and fixed-income securities. The Fund
also seeks long-term preservation of capital through a quality-oriented
approach that is designed to reduce risk.
Scudder Growth and Income Fund seeks long-term growth of capital,
current income, and growth of income.
Scudder S&P 500 Index Fund seeks to provide investment results that,
before expenses, correspond to the total return of common stocks
publicly traded in the United States, as represented by the Standard &
Poor's 500 Composite Stock Price Index.
Scudder Real Estate Investment Fund seeks long-term capital growth and
current income by investing primarily in equity securities of companies
in the real estate industry.
U.S. GROWTH
Value
Scudder Large Company Value Fund seeks to maximize long-term capital
appreciation through a value-driven investment program.
Scudder Value Fund** seeks long-term growth of capital through
investment in undervalued equity securities.
Scudder Small Company Value Fund invests for long-term growth of
capital by seeking out undervalued stocks of small U.S. companies.
Scudder Micro Cap Fund seeks long-term growth of capital by investing
primarily in a diversified portfolio of U.S. micro-capitalization
("micro-cap") common stocks.
Growth
Scudder Classic Growth Fund** seeks to provide long-term growth of
capital with reduced share price volatility compared to other growth
mutual funds.
Scudder Large Company Growth Fund seeks to provide long-term growth of
capital through investment primarily in the equity securities of
seasoned, financially strong U.S. growth companies.
Scudder Development Fund seeks long-term growth of capital by investing
primarily in securities of small and medium-size growth companies.
Scudder 21st Century Growth Fund seeks long-term growth of capital by
investing primarily in the securities of emerging growth companies
poised to be leaders in the 21st century.
- --------
** Only the Scudder Shares are part of the Scudder Family of Funds.
25
<PAGE>
SCUDDER CHOICE SERIES
Scudder Financial Services Fund seeks long-term growth of capital
primarily through investment in equity securities of financial services
companies.
Scudder Health Care Fund seeks long-term growth of capital primarily
through investment in securities of companies that are engaged in the
development, production or distribution of products or services related
to the treatment or prevention of diseases and other medical problems.
Scudder Technology Fund seeks long-term growth of capital primarily
through investment in securities of companies engaged in the
development, production or distribution of technology-related products
or services.
GLOBAL GROWTH
Worldwide
Scudder Global Fund seeks long-term growth of capital through a
diversified portfolio of marketable securities, primarily equity
securities, including common stocks, preferred stocks and debt
securities convertible into common stocks.
Scudder International Growth and Income Fund seeks long-term growth of
capital and current income primarily from foreign equity securities.
Scudder International Fund seeks long-term growth of capital primarily
through a diversified portfolio of marketable foreign equity
securities.
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 Emerging Markets Growth Fund seeks long-term growth of capital
primarily through equity investment in emerging markets around the
globe.
Scudder Gold Fund seeks maximum return (principal change and income)
consistent with investing in a portfolio of gold-related equity
securities and gold.
Regional
Scudder Greater Europe Growth Fund seeks long-term growth of capital
through investments primarily in the equity securities of European
companies.
Scudder Pacific Opportunities Fund seeks long-term growth of capital
through investment primarily in the equity securities of Pacific Basin
companies, excluding Japan.
Scudder Latin America Fund seeks to provide long-term capital
appreciation through investment primarily in the securities of Latin
American issuers.
The Japan Fund, Inc. seeks long-term capital appreciation by
investing primarily in equity securities (including American
Depository Receipts) of Japanese companies.
The net asset values of most Scudder funds can be found daily in the
"Mutual Funds" section of The Wall Street Journal under "Scudder Funds," and in
other leading newspapers throughout the country. Investors will notice the net
asset value and offering price are the same, reflecting the fact that no sales
commission or "load" is charged on the sale of shares of the Scudder funds. The
- -----------------
** Only the Scudder Shares are part of the Scudder Family of Funds.
26
<PAGE>
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; and easy telephone
exchanges into other Scudder funds. Certain Scudder funds or classes thereof may
not be available for purchase or exchange. For more information, please call
1-800-225-5163.
SPECIAL PLAN ACCOUNTS
(See "Scudder tax-advantaged retirement plans," "Purchases--By
Automatic Investment Plan" and "Exchanges and redemptions--By
Automatic Withdrawal Plan" in the Fund's prospectus.)
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. The
discussions of the plans below describe only certain aspects of the federal
income tax treatment of the plans. The state tax treatment may be different and
may vary from state to state. 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 IRAs 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 as to form.
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
27
<PAGE>
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
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ---------------------------- ------------------------- -------------------------- -------------------------
Starting
Age of Annual Rate of Return
------------------------------------------------------------------------------
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
</TABLE>
This next table shows how much individuals would accumulate in non-IRA
accounts by age 65 if they start with $2,000 in pretax earned income at the
beginning of each year (which is $1,380 after taxes are paid), assuming average
annual returns of 5, 10 and 15%. (At withdrawal, a portion of the accumulation
in this table will be taxable.)
Value of a Non-IRA Account at
Age 65 Assuming $1,380 Annual Contributions
(post tax, $2,000 pretax) and a 31% Tax Bracket
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ---------------------------- ------------------------- -------------------------- -------------------------
Starting
Age of Annual Rate of Return
------------------------------------------------------------------------------
Contributions 5% 10% 15%
- ---------------------------- ------------------------- -------------------------- -------------------------
25 $119,318 $287,021 $741,431
35 73,094 136,868 267,697
45 40,166 59,821 90,764
55 16,709 20,286 24,681
</TABLE>
Scudder Roth IRA: Individual Retirement Account
Shares of the Fund may be purchased as the underlying investment for a
Roth Individual Retirement Account which meets the requirements of Section 408A
of the Internal Revenue Code.
A single individual earning below $95,000 can contribute up to $2,000
per year to a Roth IRA. The maximum contribution amount diminishes and gradually
falls to zero for single filers with adjusted gross incomes ranging from $95,000
to $110,000. Married couples earning less than $150,000 combined, and filing
jointly, can contribute a full $4,000 per year ($2,000 per IRA). The maximum
contribution amount for married couples filing jointly phases out from $150,000
to $160,000.
28
<PAGE>
An eligible individual can contribute money to a traditional IRA and a
Roth IRA as long as the total contribution to all IRAs does not exceed $2,000.
No tax deduction is allowed under Section 219 of the Internal Revenue Code for
contributions to a Roth IRA. Contributions to a Roth IRA may be made even after
the individual for whom the account is maintained has attained age 70 1/2.
All income and capital gains derived from Roth IRA investments are
reinvested and compounded tax-free. Such tax-free compounding can lead to
substantial retirement savings. No distributions are required to be taken prior
to the death of the original account holder. If a Roth IRA has been established
for a minimum of five years, distributions can be taken tax-free after reaching
age 59 1/2, for a first-time home purchase ($10,000 maximum, one-time use) or
upon death or disability. All other distributions of earnings from a Roth IRA
are taxable and subject to a 10% tax penalty unless an exception applies.
Exceptions to the 10% penalty include: disability, excess medical expenses, the
purchase of health insurance for an unemployed individual and education
expenses.
An individual with an income of less than $100,000 (who is not married
filing separately) can roll his or her existing IRA into a Roth IRA. However,
the individual must pay taxes on the taxable amount in his or her traditional
IRA. Individuals who complete the rollover in 1998 will be allowed to spread the
tax payments over a four-year period. After 1998, all taxes on such a rollover
will have to be paid in the tax year in which the rollover is made.
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. Shareholders may designate
which day they want the automatic withdrawal to be processed. 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 and any
reinvested dividends and capital gains distributions. Requests for increases in
withdrawal amounts or to change the 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 ten days prior to the date of the first automatic
withdrawal. 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.
29
<PAGE>
The Corporation reserves the right, after notice has been given to the
shareholder, to redeem and close a shareholder's account in the event that the
shareholder ceases participating in the group plan prior to investment of $1,000
per individual or in the event of a redemption which occurs prior to the
accumulation of that amount or which reduces the account value to less than
$1,000 and the account value is not increased to $1,000 within a reasonable time
after notification. An investor in a plan who has not purchased shares for six
months shall be presumed to have stopped making payments under the plan.
Automatic Investment Plan
Shareholders may arrange to make periodic investments through automatic
deductions from checking accounts by completing the appropriate form and
providing the necessary documentation to establish this service. The minimum
investment is $50.
The Automatic Investment Plan involves an investment strategy called
dollar cost averaging. Dollar cost averaging is a method of investing whereby a
specific dollar amount is invested at regular intervals. By investing the same
dollar amount each period, when shares are priced low the investor will purchase
more shares than when the share price is higher. Over a period of time this
investment approach may allow the investor to reduce the average price of the
shares purchased. However, this investment approach does not assure a profit or
protect against loss. This type of regular investment program may be suitable
for various investment goals such as, but not limited to, college planning or
saving for a home.
Uniform Transfers/Gifts to Minors Act
Grandparents, parents or other donors may set up custodian accounts for
minors. The minimum initial investment is $1,000 unless the donor agrees to
continue to make regular share purchases for the account through Scudder's
Automatic Investment Plan (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 Fund's prospectus.)
The 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. The 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,
the 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 the
Fund does not distribute the amount of capital gain and/or ordinary income
required to be distributed by an excise tax provision of the Code, the Fund may
be subject to that excise tax. In certain circumstances, the Fund may determine
that it is in the interest of shareholders to distribute less than the required
amount. (See "TAXES.")
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 dividends paid deduction on its federal tax return.
The Fund intends to distribute dividends from its net investment income
semiannually in June and December. The Fund intends to distribute net realized
capital gains after utilization of capital loss carryforwards, if any, in
November or December to prevent application of a federal excise tax. An
additional distribution may be made, if necessary.
Both types of distributions will be made in shares of the Fund and
confirmations will be mailed to each shareholder unless a shareholder has
elected to receive cash, in which case a check will be sent. Distributions of
30
<PAGE>
investment company taxable income and net realized capital gains are taxable
(See "TAXES"), whether made in shares or cash.
Each distribution is accompanied by a brief explanation of the form and
character of the distribution. The characterization of distributions on such
correspondence may differ from the characterization for federal tax purposes. In
January of each year the Fund issues 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 Fund's prospectus.)
From time to time, quotations of the Fund's performance may be included
in advertisements, sales literature or reports to shareholders or prospective
investors. These performance figures are calculated in the following manner:
Average Annual Total Return
Average Annual Total Return is the average annual compound rate of
return for periods of one year and the life of the Fund, all ended on the last
day of a recent calendar quarter. Average Annual Total Return quotations reflect
changes in the price of the Fund's shares and assume that all dividends and
capital gains distributions during the respective periods were reinvested in
Fund shares. Average Annual Total Return is calculated by 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:
P = a hypothetical initial investment of $1,000
T = Average Annual Total Return
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 period ended February 28, 1998
Life of Fund (1)*
5.80
* For the period beginning June 30, 1997 (commencement of operations).
(1) The Adviser maintained Fund expenses for the period June 30, 1997
(commencement of operations) through February 28, 1998. The Average Annual
Total Return for the period ended February 28, 1998 would have been lower
if the Adviser had not maintained expenses.
Cumulative Total Return
Cumulative Total Return is the cumulative rate of return on a
hypothetical initial investment of $1,000 for a specified period. Cumulative
Total Return quotations reflect changes in the price of the Fund's shares and
assume that all dividends and capital gains distributions during the period were
reinvested in Fund shares. Cumulative Total Return is calculated by 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):
31
<PAGE>
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 February 28, 1998
Life of the Fund (1)*
5.80%
* For the period beginning June 30, 1997 (commencement of operations).
(1) The Adviser maintained Fund expenses for the period June 30, 1997
(commencement of operations) through February 28, 1998. The Cumulative
Total Return for the period ended February 28, 1998 would have been lower
if the Adviser had not maintained expenses.
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.
Quotations of the Fund's 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 the Fund will
vary based on changes in market conditions and the level of the Fund's expenses.
Comparison of Fund Performance
A comparison of the quoted non-standard performance offered for various
investments is valid only if performance is calculated in the same manner. Since
there are different methods of calculating performance, investors should
consider the effects of the methods used to calculate performance when comparing
performance of the Fund with performance quoted with respect to other investment
companies or types of investments.
In connection with communicating its performance to current or
prospective shareholders, the Fund also may compare these figures to the
performance of unmanaged indices which may assume reinvestment of dividends or
interest but generally do not reflect deductions for administrative and
management costs. 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, the Wilshire Real Estate Securities
Index and statistics published by the Small Business Administration.
Because some or all of the 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 of 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 Fund. Such historical
information is not indicative of future fluctuations in the value of the U.S.
dollar against these currencies. In addition, marketing materials may cite
country and economic statistics and historical stock market performance for any
of the countries in which the Fund invests, 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.
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From time to time, in advertising and marketing literature, this 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
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, Directors
and officers of the Fund, the Fund's portfolio manager, or members of the
portfolio management team may be depicted and quoted to give prospective and
current shareholders a better sense of the outlook and approach of those who
manage the Fund. In addition, the amount of assets that the Adviser has under
management in various geographical areas may be quoted in advertising and
marketing materials.
The Fund 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 Fund. The
description may include a "risk/return spectrum" which compares the Fund to
other Scudder funds or broad categories of funds, such as money market, bond or
equity funds, in terms of potential risks and returns. Money market funds are
designed to maintain a constant $1.00 share price and have a fluctuating yield.
Share price, yield and total return of a bond fund will fluctuate. The share
price and return of an equity fund also will fluctuate. The description may also
compare the Fund to bank products, such as certificates of deposit. Unlike
mutual funds, certificates of deposit are insured up to $100,000 by the U.S.
government and offer a fixed rate of return.
Because bank products guarantee the principal value of an investment
and money market funds seek stability of principal, these investments are
considered to be less risky than investments in either bond or equity funds,
which may involve the loss of principal. However, all long-term investments,
including investments in bank products, may be subject to inflation risk, which
is the risk of erosion of the value of an investment as prices increase over a
long time period. The risks/returns associated with an investment in bond or
equity funds depend upon many factors. For bond funds these factors include, but
are not limited to, a fund's overall investment objective, the average portfolio
maturity, credit quality of the securities held, and interest rate movements.
For equity funds, factors include a fund's overall investment objective, the
types of equity securities held and the financial position of the issuers of the
securities. The risks/returns associated with an investment in international
bond or equity funds also will depend upon currency exchange rate fluctuation.
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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.
Evaluation of Fund performance or other relevant statistical
information made by independent sources may also be used in advertisements
concerning the Fund, including reprints of, or selections from, editorials or
articles about this Fund. Sources for Fund performance information and articles
about the Fund include the following:
American Association of Individual Investors' Journal, a monthly publication of
the AAII that includes articles on investment analysis techniques.
Asian Wall Street Journal, a weekly Asian newspaper that often reviews U.S.
mutual funds investing internationally.
Banxquote, an on-line source of national averages for leading money market and
bank CD interest rates, published on a weekly basis by Masterfund, Inc. of
Wilmington, Delaware.
Barron's, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance data.
Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds investing abroad.
CDA Investment Technologies, Inc., an organization which provides performance
and ranking information through examining the dollar results of hypothetical
mutual fund investments and comparing these results against appropriate market
indices.
Consumer Digest, a monthly business/financial magazine that includes a "Money
Watch" section featuring financial news.
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."
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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.
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.
SmartMoney, 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.
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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 issued 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
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.
FUND ORGANIZATION
(See "Fund organization" in the Fund's prospectus.)
The Corporation was organized as Scudder Fund of Canada Ltd. in Canada
in 1953 by the investment management firm of Scudder, Stevens & Clark, Inc. On
March 16, 1964, the name of the Corporation was changed to Scudder International
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Investments Ltd. On July 31, 1975, the corporate domicile of the Corporation was
changed to the U.S. 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 700 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 eight
series: Scudder International Fund, the original series; Scudder Latin America
Fund, Scudder Pacific Opportunities Fund, both organized in December 1992,
Scudder Greater Europe Growth Fund, organized in October 1994, Scudder Emerging
Markets Growth Fund, organized in May 1996 , Scudder International Growth and
Income Fund, organized in June 1997 and Scudder International Growth and Scudder
International Value, organized in June 1998. Each series consists of 100 million
shares except for Scudder International Fund which consists of 200 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
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 Corporation's Amended and Restated Articles 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
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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 Fund's prospectus.)
Scudder Kemper Investments, Inc. (the "Adviser"), an investment counsel
firm, acts as investment adviser to the Fund. This organization, the predecessor
of which is Scudder, Stevens & Clark, Inc., is one of the most experienced
investment counsel firms in the U. S. It was established as a partnership in
1919 and pioneered the practice of providing investment counsel to individual
clients on a fee basis. In 1928 it introduced the first no-load mutual fund to
the public. In 1953 the Adviser introduced Scudder International Fund, Inc., the
first mutual fund available in the U.S. investing internationally in securities
of issuers in several foreign countries. The predecessor firm reorganized from a
partnership to a corporation on June 28, 1985. On June 26, 1997, Scudder,
Stevens & Clark, Inc. ("Scudder") entered into an agreement with Zurich
Insurance Company ("Zurich") pursuant to which Scudder and Zurich agreed to form
an alliance. On December 31, 1997, Zurich acquired a majority interest in
Scudder, and Zurich Kemper Investments, Inc., a Zurich subsidiary, became part
of Scudder. Scudder's name has been changed to Scudder Kemper Investments, Inc.
Founded in 1872, Zurich is a multinational, public corporation
organized under the laws of Switzerland. Its home office is located at
Mythenquai 2, 8002 Zurich, Switzerland. Historically, Zurich's earnings have
resulted from its operations as an insurer as well as from its ownership of its
subsidiaries and affiliated companies (the "Zurich Insurance Group"). Zurich and
the Zurich Insurance Group provide an extensive range of insurance products and
services and have branch offices and subsidiaries in more than 40 countries
throughout the world.
The principal source of the Adviser's income is professional fees
received from providing continuous investment advice. 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 Global High Income 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, The Argentina Fund, Inc., The Brazil
Fund, Inc., The Korea Fund, Inc., The Japan Fund, Inc. and Scudder Spain and
Portugal 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 $13 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.
Pursuant to an Agreement between Scudder Kemper Investments, Inc. and
AMA Solutions, Inc., a subsidiary of the American Medical Association (the
"AMA"), dated May 9, 1997, the Adviser has agreed, subject to applicable state
regulations, to pay AMA Solutions, Inc. royalties in an amount equal to 5% of
the management fee received by the Adviser with respect to assets invested by
AMA members in Scudder funds in connection with the AMA InvestmentLinkSM
Program. The Adviser will also pay AMA Solutions, Inc. a general monthly fee,
currently in the amount of $833. The AMA and AMA Solutions, Inc. are not engaged
in the business of providing investment advice and neither is registered as an
investment adviser or broker/dealer under federal securities laws. Any person
who participates in the AMA InvestmentLinkSM Program will be a customer of the
Adviser (or of a subsidiary thereof) and not the AMA or AMA Solutions, Inc. AMA
InvestmentLinkSM is a service mark of AMA Solutions, Inc.
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
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Adviser's clients. However, the Adviser regards this information and material as
an adjunct to its own research activities. The Adviser's international
investment management team travels the world, researching hundreds of companies.
In selecting the securities in which the Fund may invest, the conclusions and
investment decisions of the Adviser with respect to the Fund are based primarily
on the analyses of its own research department.
Certain investments may be appropriate for the Fund and also for other
clients advised by the Adviser. Investment decisions for the Fund and other
clients are made with a view to achieving their respective investment objectives
and after consideration of such factors as their current holdings, availability
of cash for investment and the size of their investments generally. Frequently,
a particular security may be bought or sold for only one client or in different
amounts and at different times for more than one but less than all clients.
Likewise, a particular security may be bought for one or more clients when one
or more other clients are selling the security. In addition, purchases or sales
of the same security may be made for two or more clients on the same day. In
such event, such transactions will be allocated among the clients in a manner
believed by the 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 the Fund. Purchase and sale orders for the Fund may be combined with
those of other clients of the Adviser in the interest of achieving the most
favorable net results to the Fund.
The Investment Management Agreement (the "Agreement") dated June 3,
1997 was approved by the initial shareholder of the Fund on June 10, 1997, and
by the Directors of the Corporation on June 3, 1997. Because the transaction
between Scudder and Zurich resulted in the assignment of the Fund's investment
management agreement with Scudder, that agreement was deemed to be automatically
terminated at the consummation of the transaction. In anticipation of the
transaction, however, a new investment management agreement between the Fund and
the Adviser was approved by the Corporation's Directors on August 6, 1997. At
the special meeting of the Fund's stockholders held on October 27, 1997, the
stockholders also approved the new investment management agreement. The new
investment management agreement (the "Agreement") became effective as of
December 31, 1997 and will be in effect for an initial term ending on September
30, 1998. The Agreement is in all material respects on the same terms as the
previous investment management agreement which it supersedes. The Agreement
incorporates conforming changes which promote consistency among all of the funds
advised by the Adviser and which permit ease of administration. The Agreement
will continue in effect and from year to year thereafter only if its continuance
is approved annually by the vote of a majority of those Directors who are not
parties to such Agreement or interested persons of the Adviser or the Fund, cast
in person at a meeting called for the purpose of voting on such approval, and
either by a vote of the Corporation's Directors or of a majority of the
outstanding voting securities of the Fund. The Agreement may be terminated at
any time without payment of penalty by either party on sixty days' written
notice, and automatically terminates in the event of its assignment.
Under the Agreement, the Adviser regularly provides the Fund with
continuing investment management for the Fund's portfolio consistent with the
Fund's investment objectives, policies and restrictions and determines what
securities shall be purchased, held or sold and what portion of the Fund's
assets shall be held uninvested, subject to the Fund's Articles, By-Laws, the
1940 Act, the Code and to the Fund's investment objective, policies and
restrictions, and subject, further, to such policies and instructions as the
Board of Directors of the Corporation may from time to time establish.
Under the Agreement, the Adviser renders significant administrative
services (not otherwise provided by third parties) necessary for the Fund's
operations as an open-end investment company including, but not limited to,
preparing reports and notices to the Directors and shareholders; supervising,
negotiating contractual arrangements with, and monitoring various third-party
service providers to the Fund (such as the Fund's transfer agent, pricing
agents, custodian, accountants and others); preparing and making filings with
the Commission and other regulatory agencies; assisting in the preparation and
filing of the Fund's federal, state and local tax returns; preparing and filing
the Fund's federal excise tax returns; assisting with investor and public
relations matters; monitoring the valuation of securities and the calculation of
net asset value; monitoring the registration of shares of the Fund under
applicable federal and state securities laws; maintaining the Fund's books and
records to the extent not otherwise maintained by a third party; assisting in
establishing accounting policies of the Fund; assisting in the resolution of
accounting and legal issues; establishing and monitoring the Fund's operating
budget; processing the payment of the Fund's bills; assisting the Fund in, and
otherwise arranging for, the payment of distributions and dividends and
otherwise assisting the Fund in the conduct of its business, subject to the
direction and control of the Directors.
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The Adviser pays the compensation and expenses (except those of
attending Board and committee meetings outside New York, New York or Boston,
Massachusetts) of all Directors, officers and executive employees of the Fund
affiliated with the Adviser and makes available, without expense to the Fund,
the services of such Directors, officers and employees of the Adviser as may
duly be elected officers of the Fund, subject to their individual consent to
serve and to any limitations imposed by law, and provides the Fund's office
space and facilities.
For these services, the pays the Adviser an annual 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. Until
June 30, 1999, the Adviser had agreed not to impose all or a portion of its
management fee in order to maintain the total annualized expenses of the Fund at
not more than 1.75% of average daily net assets of the Fund. For the period June
30, 1997 (commencement of operations) to February 28, 1998 the Adviser did not
impose a portion of its management fee which amounted to $255,434, and the
amount imposed amounted to $36,408.
Under the Agreement the Fund is responsible for all of its other
expenses including: fees and expenses incurred in connection with membership in
investment company organizations; brokers' commissions; legal, auditing and
accounting expenses; the calculation of net asset value; taxes and governmental
fees; the fees and expenses of the Transfer Agent; the cost of preparing share
certificates or any other expenses of issue, sale, underwriting, distribution,
redemption or repurchase of shares; the expenses of and the fees for registering
or qualifying securities for sale; the fees and expenses of Directors, officers
and employees of the Fund who are not affiliated with the Adviser; the cost of
printing and distributing reports and notices to stockholders; and the fees and
disbursements of custodians. The Fund may arrange to have third parties assume
all or part of the expenses of sale, underwriting and distribution of shares of
the Fund. The Fund is also responsible for its expenses of shareholders'
meetings, the cost of responding to shareholders' inquiries, and its expenses
incurred in connection with litigation, proceedings and claims and the legal
obligation it may have to indemnify its officers and Directors of the Fund with
respect thereto.
The Agreement expressly provides that the Adviser shall not be required
to pay a pricing agent of the Fund for portfolio pricing services, if any.
The Agreement identifies the Adviser as the exclusive licensee of the
rights to use and sublicense the names "Scudder," "Scudder Kemper Investments,
Inc." and "Scudder, Stevens and Clark, Inc." (together, the "Scudder Marks").
Under this license, the Corporation, with respect to the Fund, has the
non-exclusive right to use and sublicense the Scudder name and marks as part of
its name, and to use the Scudder Marks in the Corporation's investment products
and services.
In reviewing the terms of the Agreement and in discussions with the
Adviser concerning such Agreement, the Directors of the Fund who are not
"interested persons" of the Adviser are represented by independent counsel at
the Fund's expense.
The Agreement provides that the Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund in
connection with matters to which the Agreement relates, except a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of the
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.
The Adviser may serve as adviser to other funds with investment
objectives and policies similar to those of the Fund that may have different
distribution arrangements or expenses, which may affect performance.
None of the officers or Directors of the Fund may have dealings with
the Fund as principals in the purchase or sale of securities, except as
individual subscribers to or holders of shares of the Fund.
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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 Fund. Among other things, the Code of Ethics, which
generally complies with standards recommended by the Investment Company
Institute's Advisory Group on Personal Investing, prohibits certain types of
transactions absent prior approval, imposes time periods during which personal
transactions may not be made in certain securities, and requires the submission
of duplicate broker confirmations and monthly reporting of securities
transactions. Additional restrictions apply to portfolio managers, traders,
research analysts and others involved in the investment advisory process.
Exceptions to these and other provisions of the Code of Ethics may be granted in
particular circumstances after review by appropriate personnel.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DIRECTORS AND OFFICERS
Name, Age, and Address Position with Fund Principal Occupation** Position with
Underwriter, Scudder
Investor Services,
Inc.
Daniel Pierce (3/4/91)+*@ Chairman of the Board Managing Director of Scudder Kemper Vice President and
and Director Investments, Inc. Assistant Treasurer
Paul Bancroft III Director Venture Capitalist and Consultant; --
(2/27/30)79 Pine LaneBox Retired President, Chief Executive
6639Snowmass Village, CO Officer and Director, Bessemer
81615 Securities Corporation
Sheryle J. Bolton Director CEO, Scientific Learning --
(7/4/46)Scientific Learning Corporation, Former President and
Corporation417 Montgomery Chief Operating Officer, Physicians
StreetSuite 500San Online, Inc. (electronic
Francisco, CA 94104 transmission of clinical information
for physicians (1994-1995); Member,
Senior Management Team, Rockefeller
& Co. (1990-1993)
William T. Burgin Director General Partner, Bessemer Venture --
(9/2/43)83 Walnut Partners; General Partner, Deer &
StreetWellesley, MA 02181 Company; Director, James River
Corp.; Director, Galile Corp.,
Director of various privately held
companies
Thomas J. Devine Director Consultant --
(12/9/26)450 Park AvenueNew
York, NY 10022
Keith R. Fox (4/11/54)10 Director President, Exeter Capital Management --
East 53rd StreetNew York, Corporation
NY 10022
41
<PAGE>
Name, Age, and Address Position with Fund Principal Occupation** Position with
Underwriter, Scudder
Investor Services,
Inc.
William H. Gleysteen, Jr. Director Consultant, Guest Scholar, Brookings --
(5/8/26)4937 Crescent Institute, formerly President, The
StreetBethesda, MD 20816 Japan Society, Inc.
William H. Luers Director President, The Metropolitan Museum --
(5/15/29)The MetrMuseum of of Art (1986 to present)
Art1000 Fifth AvenueNew
York, NY 10028
Wilson Nolen (11/28/26)1120 Director Consultant (1989 to present); --
Fifth Avenue, #10-BNew York, Corporate Vice President, Becton,
NY 10128-0144 Dickinson & Company (manufacturer of
medical and scientific products)
until 1989
Kathryn L. Quirk (12/3/52) Director, Vice Managing Director of Scudder Kemper Senior Vice President,
#@ President and Investments, Inc. Chief Legal Officer
Assistant Secretary and Assistant Clerk
Robert G. Stone, Jr. Honorary Director Chairman of the Board and Director, --
(3/21/23) Kirby Corporation (inland and
405 Lexington Avenue, offshore marine transportation and
39th FloorNew York, NY 10174 diesel repairs)
Elizabeth J. Allan Vice President Senior Vice President of Scudder --
(7/29/53) # Kemper Investments, Inc.
Nicholas Bratt (6/6/48)#* President Managing Director of Scudder Kemper --
Investments, Inc.
Irene T. Cheng (6/6/54)# Vice President Managing Director of Scudder Kemper --
Investments, Inc.
Joyce E. Cornell (3/26/44)# Vice President Managing Director of Scudder Kemper --
Investments, Inc.
Carol L. Franklin (12/3/52)# Vice President Managing Director of Scudder Kemper --
Investments, Inc.
Edmund B. Games, Jr. Vice President Senior Vice President of Scudder --
(7/27/37)+ Kemper Investments, Inc.
Jerard K. Hartman (3/1/33)# Vice President Managing Director of Scudder Kemper --
Investments, Inc.
42
<PAGE>
Name, Age, and Address Position with Fund Principal Occupation** Position with
Underwriter, Scudder
Investor Services,
Inc.
Thomas W. Joseph (4/22/39)+ Vice President Senior Vice President of Scudder Vice President,
Kemper Investments, Inc. Treasurer and
Assistant Clerk
Thomas F. McDonough Treasurer, Vice Senior Vice President of Scudder Assistant Clerk
(1/20/47)+ President and Secretary Kemper Investments, Inc.
John R. Hebble (6/27/58)+ Assistant Treasurer Senior Vice President of Scudder --
Kemper Investments, Inc.
Richard W. Desmond (3/7/36)# Assistant Secretary Vice President of Scudder Kemper Vice President
Investments, Inc.
Caroline Pearson (4/1/62)+ Assistant Secretary Vice President of Scudder Kemper --
Investments, Inc.; Associate,
Dechert Price & Rhoads (law firm)
1989 - 1997
Sheridan Reilly (2/27/52)# Vice President Vice President of Scudder Kemper --
Investments, Inc.
</TABLE>
* Mr. Pierce and Ms. Quirk are considered by the Corporation and its counsel
to be persons who are "interested persons" of the Adviser or of the
Corporation within the meaning of the 1940 Act.
** 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. Pierce and Ms. Quirk are members of the Executive Committee which may
exercise substantially all of the powers of the Board of Directors when it
is not in session.
+ Address: Two International Place, Boston, Massachusetts 02110
# Address: 345 Park Avenue, New York, New York 10154
The Directors and officers of the Fund also serve in similar capacities
with other Scudder Funds.
To the knowledge of the Corporation, as of May 31, 1998, all Directors
and officers as a group owned less than 1% of the Fund's outstanding shares .
To the best of the Fund's knowledge, as of May 31, 1998, no person
owned beneficially more than 5% of the Fund's outstanding shares.
REMUNERATION
Responsibilities of the Board - Board and Committee Meetings
The Board of Directors is responsible for the general oversight of the
Fund's business. A majority of the Board's members are not affiliated with
Scudder Kemper Investments, Inc. These "Independent Directors" have primary
responsibility for assuring that the Fund is managed in the best interests of
its shareholders.
The Board of Directors meets at least quarterly to review the
investment performance of the Fund and other operational matters, including
policies and procedures designed to ensure compliance with various regulatory
requirements. At least annually, the Independent Directors review the fees paid
to the Adviser and its affiliates for investment advisory services and other
administrative and shareholder services. In this regard, they evaluate, among
43
<PAGE>
other things, the Fund's investment performance, the quality and efficiency of
the various other services provided, costs incurred by the Adviser and its
affiliates and comparative information regarding fees and expenses of
competitive funds. They are assisted in this process by the Fund's independent
public accountants and by independent legal counsel selected by the Independent
Directors.
All the Independent Directors serve on the Committee on Independent
Directors which nominates Independent Directors and considers other related
matters, and the Audit Committee, which selects the Fund's independent public
accountants and reviews accounting policies and controls. In addition,
Independent Directors from time to time have established and served on task
forces and subcommittees focusing on particular matters such as investment,
accounting and shareholder service issues.
Compensation of Officers and Directors
The Independent Directors receive the following compensation from the
Fund of International Fund, Inc.: an annual director's fee of $3,500; a fee of
$325 for attendance at each board, meeting, audit committee meeting or other
meeting held for the purposes of considering arrangements between the
Corporation for the Fund and the Adviser or any affiliate of the Adviser; $100
for all other committee meetings; and reimbursement of expenses incurred for
travel to and from Board Meetings. No additional compensation is paid to any
Independent Director for travel time to meetings, attendance at directors'
educational seminars or conferences, service on industry or association
committees, participation as speakers at directors' conferences or service on
special director task forces or subcommittees . Independent Directors do not
receive any employee benefits such as pension, retirement or health insurance.
Notwithstanding the schedule of fees, the Independent Directors have in the past
and may in the future waive a portion of their compensation.
The Independent Directors also serve in the same capacity for other
funds managed by the Adviser. These funds differ broadly in type and complexity
and in some cases have substantially different Director fee schedules. The
following table shows the aggregate compensation received by each Independent
Director during 1997 from the Corporation and from all of the Scudder funds as a
group.
<TABLE>
<CAPTION>
<S> <C> <C>
Name Scudder International Fund, Inc.* All Scudder Funds
Paul Bancroft III, Director $43,400 $156,922 (20 funds)
Sheryle J. Bolton, Director** $9,285 $86,213 (20 funds)
William T. Burgin, Director** $9,285 $85,950 (20 funds)
Thomas J. Devine, Director $50,400 $187,348 (21 funds)
Keith R. Fox, Director $52,950 $134,390 (18 funds)
William H. Gleysteen, Jr., Director $48,900 $136,150*** (14 funds)
William H. Luers, Director $49,800 $117,729 (20 funds)
Wilson Nolen, Director $46,900 $189,548 (21 funds)
</TABLE>
* Scudder International Fund, Inc. consists of eight funds: Scudder
International Fund, Scudder Latin America Fund, Scudder Pacific
Opportunities Fund, Scudder Greater Europe Growth Fund, Scudder Emerging
Markets Growth Fund, Scudder International Growth and Income Fund, Scudder
International Growth Fund and Scudder International Value Fund.
44
<PAGE>
** Elected as Director on October 27, 1997.
*** This amount does not reflect $6,098 in retirement benefits accrued as part
of Fund Complex expenses, and $3,000 in estimated annual benefits payable
upon retirement. Retirement benefits accrued and proposed are to be paid to
Mr. Gleysteen as additional compensation for serving on the Board of The
Japan Fund, Inc.
Members of the Board of Directors who are employees of the Adviser or
its affiliates receive no direct compensation from the Corporation, although
they are compensated as employees of the Adviser, or its affiliates, as a result
of which they may be deemed to participate in fees paid by each Fund.
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 September 17, 1992 will remain in effect until
September 30, 1998 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 the Fund. The underwriting agreement was last approved by
the Directors on June 15, 1998.
Under the underwriting agreement, the Fund is responsible for: the
payment of all fees and expenses in connection with the preparation and filing
with the Commission 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 the 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 the 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 Fund 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 the 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 the Fund, unless a Rule 12b-1 Plan is in effect
which provides that the Fund shall bear some or all of such expenses.
Note: Although the Fund does not currently have a 12b-1 Plan, and the
Directors have no current intention of adopting one, the Fund would
also pay those fees and expenses permitted to be paid or assumed by the
Fund pursuant to a 12b-1 Plan, if any, were adopted by the Fund,
notwithstanding any other provision to the contrary in the underwriting
agreement.
As agent, the Distributor currently offers shares of the Fund on a
continuous basis to investors in all states in which shares of the 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 the Fund.
TAXES
(See "Distribution and performance information -- Dividends and capital
gains distributions" and "Transaction information--Tax information, Tax
identification number" in the Fund's prospectus.)
45
<PAGE>
The Fund has elected to be treated as a regulated investment company
under Subchapter M of the Code, or a predecessor statute and has qualified as
such since its inception. 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.
The 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 the 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 the Fund. At February
28, 1998, the Fund had a net tax basis capital loss carryforward of
approximately $309,000 which may be applied against any realized net taxable
capital gains of each succeeding year until fully utilized or until February 28,
2006, whichever occurs first.
If any net realized long-term capital gains in excess of net realized
short-term capital losses are retained by the Fund for reinvestment, requiring
federal income taxes to be paid thereon by the Fund, the Fund intends to elect
to treat such capital gains as having been distributed to shareholders. As a
result, each shareholder will report such capital gains as long-term capital
gains, will be able to claim a proportionate share of federal income taxes paid
by the Fund on such gains as a credit against the shareholder's federal income
tax liability, and will be entitled to increase the adjusted tax basis of the
shareholder's Fund shares by the difference between the shareholder's pro rata
share of such gains and the shareholder's tax credit.
Distributions of investment company taxable income are taxable to
shareholders as ordinary income.
Dividends from domestic corporations are not expected to comprise a
substantial part of the Fund's gross income. If any such dividends constitute a
portion of the Fund's gross income, a portion of the income distributions of the
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
the Fund with respect to which the dividends are received are treated as
debt-financed under federal income tax law and is eliminated if either those
shares or the shares of the Fund are deemed to have been held by the Fund or the
shareholders, as the case may be, for less than 46 days.
Properly designated distributions of the excess of net long-term
capital gain over net short-term capital are taxable to shareholders as
long-term capital gain, regardless of the length of time the shares of the 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.
46
<PAGE>
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 (up to $2,000 per
individual for married couples if only one spouse has 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 $4,000 to IRAs for an individual and his or her nonearning
spouse) for that year. There are special rules for determining how withdrawals
are to be taxed if an IRA contains both deductible and nondeductible amounts. In
general, a proportionate amount of each withdrawal will be deemed to be made
from nondeductible contributions; amounts treated as a return of nondeductible
contributions will not be taxable. Also, annual contributions may be made to a
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 the Fund result in a reduction in the net asset value
of the Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above, even though,
from an investment standpoint, it may constitute a partial return of capital. In
particular, investors should consider the tax implications of buying shares just
prior to a distribution. The price of shares purchased at that time 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.
Dividend and interest income received by the Fund from sources outside
the U.S. may be subject to withholding and other taxes imposed by such foreign
jurisdictions. Tax conventions between certain countries and the U.S. may reduce
or eliminate these foreign taxes, however, and foreign countries generally do
not impose taxes on capital gains respecting investments by foreign investors.
The 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 the Fund to foreign countries (which
taxes relate primarily to investment income). The Fund may make an election
under Section 853 of the Code, provided that more than 50% of the value of the
total assets of the 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 the 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 the Fund, nor will shareholders be required to
treat as part of the amounts distributed to them their pro rata portion of such
taxes paid.
Equity options (including covered call options written on portfolio
stock) and over-the-counter options on debt securities written or purchased by
the Fund will be subject to tax under Section 1234 of the Code. In general, no
loss will be recognized by the Fund upon payment of a premium in connection with
the purchase of a put or call option. The character of any gain or loss
recognized (i.e. long-term or short-term) will generally depend, in the case of
a lapse or sale of the option, on the Fund's holding period for the option, and
in the case of the exercise of a put option, on the 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 stock in the Fund's portfolio similar to the stocks on which the
index is based. If the 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 a call option is exercised, the
character of the gain or loss depends on the holding period of the underlying
stock.
Positions of the 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 the Fund's risk of loss with respect to such stock
47
<PAGE>
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 Fund.
Many futures and forward contracts entered into by the Fund and listed
nonequity options written or purchased by the 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, 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. 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 the Fund will be
treated as ordinary income or loss.
+-Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time the Fund accrues receivables or
liabilities denominated in a foreign currency and the time the 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 the Fund's investment company taxable
income to be distributed to its shareholders as ordinary income.
If the Fund invests in stock of certain foreign investment companies,
the 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 the Fund's holding period for the stock. The distribution
or gain so allocated to any taxable year of the Fund, other than the taxable
year of the excess distribution or disposition, would be taxed to the 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 the Fund's investment company taxable income
and, accordingly, would not be taxable to the Fund to the extent distributed by
the Fund as a dividend to its shareholders.
Proposed regulations have been issued which may allow the Fund to make
an election to mark to market its shares of these foreign investment companies
in lieu of being subject to U.S. federal income taxation. At the end of each
taxable year to which the election applies, the Fund would report as ordinary
income the amount by which the fair market value of the foreign company's stock
exceeds the Fund's adjusted basis in these shares. No mark to market losses
would be recognized. The effect of the election would be to treat excess
distributions and gain on dispositions as ordinary income which is not subject
to a fund level tax when distributed to shareholders as a dividend.
Alternatively, the Fund may elect to include as income and gain its share of the
ordinary earnings and net capital gain of certain foreign investment companies
in lieu of being taxed in the manner described above.
Investments by the Fund in zero coupon securities will result in income
to the Fund equal to a portion of the excess of the face value of the securities
over their issue price (the "original issue discount") each year that the
securities are held, even though the Fund receives no cash interest payments.
This income is included in determining the amount of income which the Fund must
distribute to maintain its status as a regulated investment company and to avoid
the payment of federal income tax and the 4% excise tax. In addition, if the
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 the 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 the Fund in
a written notice to shareholders.
The Fund will be required to report to the IRS 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
48
<PAGE>
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 31% 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 the Fund may be subject to state and local taxes on
distributions received from the Fund and on redemptions of the 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 the Fund, including the possibility that
such a shareholder may be subject to a U.S. withholding tax at a rate of 30% (or
at a lower rate under an applicable income tax treaty) on amounts constituting
ordinary income received by him or her, where such amounts are treated as income
from U.S. sources under the Code.
Shareholders should consult their tax advisers about the application of
the provisions of tax law described in this statement of additional information
in light of their particular tax situations.
PORTFOLIO TRANSACTIONS
Brokerage Commissions
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 Fund is to obtain the most favorable net results,
taking into account such factors as price, commission where applicable, size of
order, difficulty of execution and skill required of the executing
broker/dealer. The 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.
The Fund's purchases and sales of portfolio securities are generally
placed by the Adviser with primary market makers for these securities on a net
basis, without any brokerage commission being paid by the Fund. Trading does,
however, involve transaction costs. Transactions with dealers serving as primary
market makers reflect the spread between the bid and asked prices. Purchases of
underwritten issues may be made, which will include an underwriting fee paid to
the underwriter.
When it can be done consistently with the policy of obtaining the most
favorable net results, it is the Adviser's practice to place such orders with
broker/dealers who supply research, market and statistical information to the
Fund. The term "research, market and statistical information" includes advice as
to the value of securities; the advisability of investing in, purchasing or
selling securities; the availability of securities or purchasers or sellers of
securities; and analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts.
The Adviser is authorized when placing portfolio transactions for the Fund to
pay a brokerage commission in excess of that which another broker might charge
for executing the same transaction on account of execution services and the
receipt of research, market or statistical information. The Adviser will not
place orders with broker/dealers on the basis that the broker/dealer has or has
not sold shares of the Fund. In effecting transactions in over-the-counter
securities, orders are placed with the principal market makers for the security
being traded unless, after exercising care, it appears that more favorable
results are available elsewhere.
49
<PAGE>
To the maximum extent feasible, it is expected that the Adviser will
place orders for portfolio transactions through the Distributor, which is a
corporation registered as a broker-dealer and a subsidiary of the Adviser; the
Distributor will place orders on behalf of the Fund with issuers, underwriters
or other brokers and dealers. The Distributor will not receive any commission,
fee or other remuneration from the Fund for this service.
Although certain research, market and statistical information from
broker/dealers may be useful to the Fund and to the Adviser, it is the opinion
of the Adviser that such information only supplements 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 Fund, and not all such information is used by
the Adviser in connection with the Fund. Conversely, such information provided
to the Adviser by broker/dealers through whom other clients of the Adviser
effect securities transactions may be useful to the Adviser in providing
services to the Fund.
The Directors review from time to time whether the recapture for the
benefit of the Fund of some portion of the brokerage commissions or similar fees
paid by the Fund on portfolio transactions is legally permissible and advisable.
For the period June 30, 1997 (commencement of operations) to February
28, 1998, Scudder International Growth and Income Fund paid no brokerage
commissions.
Portfolio Turnover
The Fund's average annual portfolio turnover rate is the ratio of the
lesser of sales or purchases to the monthly average value of the portfolio
securities owned during the year, excluding all securities with maturities or
expiration dates at the time of acquisition of one year or less. A higher rate
involves greater brokerage transaction expenses to the Fund and may result in
the realization of net capital gains, which would be taxable to shareholders
when distributed. Purchases and sales are made for the Fund's portfolio whenever
necessary, in management's opinion, to meet the Fund's objective. The Fund's
annualized portfolio turnover rate for the period June 30, 1997 (commencement of
operations) to February 28, 1998 was 50.2%. Under normal market conditions, it
is anticipated that the Fund's portfolio turnover rate will not exceed 75% for
the fiscal year ended February 28, 1999.
NET ASSET VALUE
The net asset value of shares of the Fund is computed as of the close
of regular trading on the Exchange on each day the Exchange is open for trading.
The Exchange is scheduled to be closed on the following holidays: New Year's
Day, Martin Luther King, Jr. 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 Nasdaq
Stock Market ("Nasdaq") is valued at its most recent sale price. Lacking any
sales, the security is valued at the most recent 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 money market instruments, are valued at
prices supplied by the Fund's pricing agent(s) which reflect broker/dealer
supplied valuations and electronic data processing techniques. Short-term
securities purchases with remaining maturities of sixty days or less shall be
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.
50
<PAGE>
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 Corporation's Valuation Committee, the value
of a portfolio asset as determined in accordance with these procedures does not
represent the fair market value of the portfolio asset, the value of the
portfolio asset is taken to be an amount which, in the opinion of the Valuation
Committee, represents fair market value on the basis of all available
information. The value of other portfolio holdings owned by the Fund is
determined in a manner which, in the discretion of the Valuation Committee most
fairly reflects fair market value of the property on the valuation date.
Following the valuations of securities or other portfolio assets in
terms of the currency in which the market quotation used is expressed ("Local
Currency"), the value of these portfolio assets in terms of U.S. dollars is
calculated by converting the Local Currency into U.S. dollars at the prevailing
currency exchange rate on the valuation date.
ADDITIONAL INFORMATION
Experts
The Statement of Assets and Liabilities incorporated by reference to
the Statement of Additional Information will be so included or incorporated by
reference in reliance on the report of Coopers & Lybrand, L.L.P., One Post
Office Square, Boston, Massachusetts 02109, independent accountants, and given
on the authority of that firm as experts in accounting and auditing. Coopers &
Lybrand, L.L.P. is responsible for performing annual audits of the financial
statements and financial highlights of the Fund in accordance with Generally
Accepted Auditing Standards, and the preparation of federal tax returns.
Other Information
Many of the investment changes in the Fund will be made at prices
different from those prevailing at the time they may be reflected in a regular
report to shareholders of the Fund. These transactions will reflect investment
decisions made by the 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 the Fund is 811165604.
The Fund has a fiscal year end of February 28.
The 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 $39,500 incurred by the Fund in conjunction with its
organization were deferred and being amortized over a five year period beginning
at the commencement of operations of the Fund.
The law firm of Dechert Price & Rhoads acts as general counsel to the
Fund.
Scudder Service Corporation ("SSC"), P.O. Box 2291, Boston,
Massachusetts, 02107-2291, a subsidiary of the Adviser, is the transfer and
dividend disbursing agent for the Fund. SSC also serves as shareholder service
agent and provides subaccounting and recordkeeping services for shareholder
51
<PAGE>
accounts in certain retirement and employee benefit plans. The Fund pays SSC an
annual fee for each account maintained for a participant. For the period June
30, 1997 (commencement of operations) to February 28, 1998, the amount charged
to the Fund by SSC aggregated $196,689, which was unpaid at February 28, 1998.
The Fund, or the Adviser (including any affiliate of the Adviser), or
both, may pay unaffiliated third parties for providing recordkeeping and other
administrative services with respect to accounts of participants in retirement
plans or other beneficial owners of Fund shares whose interests are held in an
omnibus account.
Scudder Fund Accounting Corporation ("SFAC"), Two International Place,
Boston, Massachusetts, 02110-4103, a subsidiary of the Adviser, computes net
asset value for the Fund. The Fund pays SFAC an annual fee equal to 0.065% of
the first $150 million of average daily net assets, 0.040% of such assets in
excess of $150 million, 0.020% of such assets in excess of $1 billion, plus
holding and transaction charges for this service. For the period June 30, 1997
(commencement of operations) to February 28, 1998, the amount charged to the
Fund by SFAC aggregated $36,039, of which $25,000 was unpaid at February28,
1998.
Scudder Trust Company ("STC"), Two International Place, Boston, MA
02110-4103, a subsidiary of the Adviser, provides recordkeeping and other
services for certain retirement and employee benefit plan accounts. The Fund
pays STC an annual fee per shareholder account. For the period June 30, 1997
(commencement of operations) to February 28, 1998, the amount charged to the
Fund by STC aggregated $452, of which $242 was unpaid at February 28, 1998.
The Fund's prospectus and this Statement of Additional Information omit
certain information contained in the Registration Statement which the Fund has
filed with the Commission under the Securities Act of 1933 and reference is
hereby made to the Registration Statement for further information with respect
to the Fund and the securities offered hereby. This Registration Statement and
its amendments are available for inspection by the public at the Commission in
Washington, D.C.
FINANCIAL STATEMENTS
The financial statements, including the investment portfolio, of
Scudder International Growth and Income 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 February 28, 1998, and are deemed to be a part of
this Statement of Additional Information.
52
<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 adequate but elements may be present which suggest a susceptibility
to impairment sometime in the future.
<PAGE>
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
International
Growth and
Income Fund
Annual Report
February 28, 1998
Pure No-Load(TM) Funds
A fund seeking long-term growth of capital and current income primarily from
foreign equity securities.
A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
SCUDDER (logo)
<PAGE>
Scudder International Growth and Income Fund
- --------------------------------------------------------------------------------
Date of Inception: 6/30/97 Total Net Assets as of Ticker Symbol: SIGIX
2/28/98: $49 million
- --------------------------------------------------------------------------------
o For the abbreviated annual period beginning with the Fund's start of
operations on June 30, 1997, and ending February 28, 1998, Scudder International
Growth and Income Fund provided a total return of 5.80%, versus a 2.11% total
return for the unmanaged MSCI EAFE plus Canada Index for the same period.
o The Fund's country allocations contributed to its strong relative performance,
with an underweighting in Japan and a significant overweighting in Western
Europe.
o In pursuit of its objective of long-term growth of capital and current income,
the Fund maintained its "relative yield" approach of seeking to purchase
companies that have high yields relative to the median for their market.
Table of Contents
3 Letter from the Fund's Chairman 19 Notes to Financial Statements
4 Performance Update 23 Report of Independent Accountants
5 Portfolio Summary 24 Tax Information
6 Portfolio Management Discussion 25 Shareholder Meeting Results
9 Glossary of Investment Terms 28 Officers and Directors
11 Investment Portfolio 29 Investment Products and Services
15 Financial Statements 30 Scudder Solutions
18 Financial Highlights
2 - Scudder International Growth and Income Fund
<PAGE>
Letter from the Fund's Chairman
Dear Shareholders,
We are pleased to present the first annual report for Scudder International
Growth and Income Fund, covering the abbreviated fiscal period beginning with
the Fund's inception on June 30, 1997, and ending February 28, 1998. The
eight-month period was rewarding for investors since the Fund significantly
outperformed its benchmark index during an especially volatile period marked by
the Southeast Asian currency crisis.
The state of the Pacific Rim economies remains a crucial consideration for
investors going forward. Securities of Asian companies were largely absent from
the Fund's portfolio during this troubled period for that region. Moreover, the
Fund was able to identify issuers that were beneficiaries of the weakened Asian
markets, such as some companies in Western Europe. Continued volatility is
anticipated in the international markets in the near future, but we believe that
the Fund's conservative, yield-oriented approach has positioned it well for
investors who wish to keep some of their portfolio invested abroad, but with
less risk than more aggressive international funds.
At the beginning of 1998, the Fund's investment adviser changed its name to
Scudder Kemper Investments, Inc., from Scudder, Stevens & Clark, Inc., pursuant
to the acquisition of a majority interest in Scudder, Stevens & Clark by Zurich
Insurance Company, and the combining of Scudder's business with that of Zurich
Kemper Investments, Inc. We think these changes are positive and broaden our
resources in managing the Fund.
For those of you who are interested in new Scudder products, we recently
introduced three new industry sector funds as a part of our Choice Series funds:
Scudder Financial Services Fund, which seeks long-term growth by investing in
financial services companies in the U.S. and abroad; Scudder Health Care Fund,
which seeks long-term growth from health care companies located around the
world; and Scudder Technology Fund, which pursues long-term growth by investing
in companies that develop, produce, or distribute technology. In addition, April
6, 1998 marked the debut of our newest entrant in the growth and income
category: Scudder Real Estate Investment Fund, investing in equity securities of
companies in the real estate industry. For further information on these new
funds, please call 1-800-225-2470.
Thank you for your continued investment in Scudder International Growth and
Income Fund. If you have any questions about your account, please call Scudder
Investor Relations at the toll-free number above, or visit our Internet Web site
at http://funds.scudder.com.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
Chairman,
Scudder International Growth and Income Fund
3 - Scudder International Growth and Income Fund
<PAGE>
PERFORMANCE UPDATE as of February 28, 1998
- ----------------------------------------------------------------
FUND INDEX COMPARISONS
- ----------------------------------------------------------------
Total Return
--------------
Period Ended Growth of Average
2/28/98 $10,000 Cumulative Annual
- --------------------------------------------
SCUDDER INTERNATIONAL GROWTH AND INCOME FUND
- --------------------------------------------
Life of Fund* $ 10,580 5.80% --
- --------------------------------------------
MSCI EAFE PLUS CANADA INDEX
- --------------------------------------------
Life of Fund* $ 10,211 2.11% --
* The Fund commenced operations on June 30, 1997.
Index comparisons begin June 30, 1997.
- -----------------------------------------------------------------
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 INTERNATIONAL GROWTH AND INCOME FUND
Date Amount
- ----------------------
6/97* $10,000
7/97 $10,158
8/97 $ 9,708
9/97 $10,342
10/97 $ 9,725
11/97 $ 9,608
12/97 $ 9,771
1/98 $ 9,996
2/98 $10,580
MSCI EAFE PLUS CANADA INDEX
Year Amount
- ----------------------
6/97* $10,000
7/97 $10,184
8/97 $ 9,433
9/97 $ 9,963
10/97 $ 9,211
11/97 $ 9,108
12/97 $ 9,195
1/98 $ 9,587
2/98 $10,211
The Morgan Stanley Capital International (MSCI) Europe, Australia, the
Far East (EAFE) & Canada Index is an unmanaged capitalization-weighted
measure of stock markets in Europe, Australia, the Far East and Canada.
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 PERIOD ENDED FEBRUARY 28
1998*
--------
NET ASSET VALUE $12.68
INCOME DIVIDENDS $ .02
FUND TOTAL RETURN (%) 5.80
INDEX TOTAL RETURN (%) 2.11
Performance is historical and assumes reinvestment of all dividends and
capital gains and is not indicative of future results. Total 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 International Growth and Income Fund
<PAGE>
PORTFOLIO SUMMARY as of February 28, 1998
- ---------------------------------------------------------------------------
GEOGRAPHICAL
(Excludes 2% Cash Equivalents)
- ---------------------------------------------------------------------------
Europe 77%
Japan 12%
Pacific Basin 6%
Canada 4%
Latin America 1%
- --------------------------------------
100%
- --------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
We view Europe as well
positioned to profit from the
implementation of the European
Monetary Union.
- --------------------------------------------------------------------------
SECTORS
(Excludes 2% Cash Equivalents)
- --------------------------------------------------------------------------
Financial 32%
Manufacturing 18%
Communications 9%
Consumer Discretionary 6%
Transportation 6%
Service Industries 6%
Consumer Staples 5%
Durables 5%
Construction 5%
Other 8%
- ---------------------------------------------
100%
- ---------------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
Sector weightings in banks and
consumer non-durables
contributed to the
outperformance of the Fund
versus its benchmark index.
- --------------------------------------------------------------------------
TEN LARGEST EQUITY HOLDINGS
(26% OF PORTFOLIO)
- --------------------------------------------------------------------------
1. BANK AUSTRIA AG
Commercial and corporate banking and
financial services in Austria
2. ALLIED IRISH BANK PLC
Bank in Ireland
3. BCE, INC.
Telecommunication services in Canada
4. CREDIT SUISSE GROUP
Provider of bank services, management services
and life insurance in Switzerland
5. SCOR SA
Property, casualty and life reinsurance
company in France
6. LA RINASCENTE SPA
Department store chain in Italy
7. RWE AG
Producer and marketer of petroleum and
chemical products in Germany
8. MBL INTERNATIONAL FINANCE BERMUDA
Bank in Japan
9. BHF-BANK AG
Universal banking services in Germany
10.TELECOM ITALIA SPA
Telecommunications, electronics, and network
construction in Italy
Bank Austria and Allied Irish
Bank illustrate the Fund's
concentrations in Western
European companies and the
banking sector.
For more complete details about the Fund's investment portfolio,
see page 11. A monthly Investment Portfolio Summary and quarterly Portfolio
Holdings are available upon request.
5 - Scudder International Growth and Income Fund
<PAGE>
Portfolio Management Discussion
In the following interview, Lead Portfolio Manager Sheridan Reilly discusses
Scudder International Growth and Income Fund's strategy and the market
environment during the period June 30, 1997 through February 28, 1998.
Q: Could you discuss the Fund's performance over the eight months since it began
operations?
A: The last eight months were characterized by significant problems in many of
the Asian and Pacific Rim economies and encouraging signs of strength in some
Western European markets.
The currency and banking problems and the subsequent IMF (International Monetary
Fund) intervention in many of the Asian economies have created a difficult
investment environment there. The problems in these economies also warrant a
critical look at the Japanese banking system, since these banks have invested
heavily in their neighboring Pacific Rim economies. In Western Europe conditions
have been more benign, as many companies are realizing the benefits of recent
consolidations and restructurings and consumer demand has been relatively
strong. For the period, the Scudder International Growth and Income Fund
realized a total return of +5.80% versus a +2.11% total return for the unmanaged
MSCI EAFE plus Canada Index. Once again, our relatively conservative value
approach to investing has served us well in this difficult environment.
Q: Could you give an overview of the Fund's investment discipline?
A: In pursuit of its objective of long-term growth of capital and current
income, the Fund invests primarily in dividend-paying common stocks and
preferred stocks of companies listed on foreign stock exchanges. We generally
look for well-capitalized, established companies in mature overseas markets.
In selecting stocks for purchase, one of the first criteria we look for are
companies that have high yields relative to the median for their market. This
"relative yield" approach has been applied previously by Scudder's domestic
Growth and Income team. We look to purchase companies whose dividend yields are
more than 25% above their respective market median. On the flip side, if the
yield of a stock we are holding falls to 25% below its market median, we will
consider selling that stock.
Once we have identified companies with the requisite relative yields, we
undertake an extensive company analysis. This fundamental analysis is integral
to our investment decision process. It entails a review of the companies'
financial statements and earnings estimates, as well as an evaluation of the
quality and tenure of management.
As a complement to the fundamental company analysis discussed above, extensive
consideration is also given to country and sector diversification. Sector
diversification can reduce investment risk as well as position the portfolio to
accommodate changes in economic factors such as inflation, GDP growth and
interest rate levels in the countries where we invest. Country diversification
allows us to pursue a broader range of investment opportunities and reduce
currency exchange risk.
Q: The Fund outperformed the MSCI EAFE plus Canada Index in this period. To what
investment decisions do you attribute this?
A: Perhaps the most significant factor in our strong relative performance was
our country allocation. Relative to EAFE we were underweighted in Japan, which
6 - Scudder International Growth and Income Fund
<PAGE>
represents roughly 10% of our portfolio. The difficulties experienced by the
Pacific Rim economies have been the prevalent economic story. These problems
affected Japan for two reasons: its trading partners were seriously weakened and
Japanese banks have lent heavily to these economies. The magnitude of these
problems was reflected in the EAFE over much of this period. Because of our
underweighting in Japan, these problems had significantly less effect on our
portfolio than they did on the index.
While we were underweighted in Japan, we were overweighted in Western Europe.
These holdings were not greatly affected by the problems in Asia and performed
well for us over most of this period. Given its concentration of established
companies with strong balance sheets that operate in mature markets, Western
Europe aligns nicely with the Fund's investment objectives. Additionally, many
of these companies are undergoing the consolidation and restructuring that so
many U.S. companies experienced in the past decade. Consequently, we find many
of these companies to be attractive at these valuations. These factors are
reflected in our portfolio weightings with Western European countries
representing nearly 80% of the portfolio.
Our pursuit of value in Western Europe also afforded us some protection against
the extremely volatile Asian currency markets during this period. The European
currencies held up extremely well and some even benefited from the problems in
Asia as there was a flight from the weaker currencies of the Far East to the
stronger, more stable currencies of the U.S. and Western Europe.
Beyond country allocation, our sector weightings also worked well. Two sectors
which performed well for the Fund were consumer-nondurables and banks.
Q: Could you tell us about any specific companies that demonstrate the Fund's
investment approach?
A: I mentioned above that the portfolio is heavily weighted in Western Europe,
so I suppose it's not too surprising that a few companies that best illustrate
our approach would be located there. As the European economies strengthen, so
will the demand for consumer goods, and we are positioned well in that industry
sector. One consumer stock we bought was the Italian retailer Rinascente. The
company has been modernizing its approach to marketing, as well as making
excellent gains in increasing sales per square foot in existing stores and
finding attractive sites for opening new stores. It has also been helped by an
increase in consumer spending.
Bank of Austria and Allied Irish Bank are two other good examples of our
investment approach. European banks are established, well regulated, and,
because they are active in the capital markets, they will benefit from the
strengthening economies there. Bank of Austria offers an attractive yield and we
feel it is undervalued at these levels. Allied Irish Bank offers an attractive
yield and we believe it has strong prospects for growth. The Irish economy
continues to strengthen with further integration with the European Union and
Dublin is becoming an increasingly important financial center. Allied Irish Bank
is well positioned to take advantage of these changes.
7 - Scudder International Growth and Income Fund
<PAGE>
Q: What is your outlook for International Equities?
A: We think the markets will continue to be volatile. The problems in the
Pacific Rim are still not completely worked out. Bank lending there will have to
be monitored for improvements in lending practices and the creditworthiness of
debtors. In Japan, needed government policies to encourage economic growth are
meeting political resistance, and the banking system is still fragile because of
its dependence on Pacific Rim neighbors. By contrast, Europe seems poised to
realize the benefits of closer integration of its economies and the
restructuring and consolidation of its industries.
In this environment we will seek to adhere to our investment discipline of
investing in well-run companies that offer high "relative yields" and strong
balance sheets. We will continue our rigorous fundamental analysis and closely
monitor our sector and country allocations. We intend to remain fully invested
and to take profits as stocks reach their target prices and yields and to
purchase stocks that meet our yield and other valuation criteria.
We are confident in the long-term value of our approach and believe Scudder
International Growth and Income Fund will continue to be appropriate for
investors who wish to allocate assets overseas in a relatively conservative
fashion as compared to other international investments, or for investors to add
balance to the international portion of their portfolios.
Scudder International
Growth and Income Fund:
A Team Approach to Investing
Scudder International Growth and Income Fund is managed by a team of Scudder
Kemper Investments, Inc. (the "Adviser") 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 a large staff of economists, research analysts, traders,
and other investment specialists who work in our offices across the United
States and abroad. We believe our team approach benefits Fund investors by
bringing together many disciplines and leveraging the Adviser's extensive
resources.
Lead Portfolio Manager Sheridan Reilly joined the Adviser in 1995 and is a
member of the Adviser's Global Equity Group. Mr. Reilly has over 10 years of
industry experience focusing on strategies for global portfolios, currency
hedging, and foreign equity markets. Portfolio Manager Irene T. Cheng joined
the Adviser in 1993. Ms. Cheng, who has over 13 years of industry experience,
focuses on portfolio management, research, and equity analysis for the
Adviser's institutional international equity accounts. Deborah A. Chaplin,
Portfolio Manager, joined the Adviser in 1996 and has over five years of
experience as a securities analyst and portfolio manager.
8 - Scudder International Growth and Income Fund
<PAGE>
Glossary of Investment Terms
CURRENCY EXCHANGE RATE The price at which one country's currency can
be exchanged into another country's currency.
When a country's currency rises relative to
other currencies, this decreases the buying
power of foreign purchasers of that country's
goods and services and tends to hurt the
earnings of companies that export; by
contrast, a weak currency promotes exports.
From the perspective of a U.S. investor in
overseas securities, a weakening U.S. dollar
adds to total returns, as assets denominated
in foreign currencies then translate into
more in dollar terms; a strengthening dollar
relative to foreign currencies reduces
returns to U.S. investors.
DIVIDEND YIELD With stocks, a company's payment out of
earnings to shareholders divided by its share
price. For example, a stock that sells for
$10 and pays annual dividends totaling $1 has
a yield of 10%; if the stock price goes up to
$20, the yield would fall to 5%.
EMU (EUROPEAN MONETARY UNION) A proposed integration of European economies
involving among other changes a move to a
single currency for member nations. To
qualify for EMU membership, nations will be
required to meet certain guidelines
concerning total governmental debt and annual
budget deficits, designed to ensure a strong
common currency.
FUNDAMENTAL RESEARCH Analysis of companies based on the projected
impact of management, products, sales, and
earnings on their balance sheets and income
statements. Distinct from technical analysis,
which evaluates the attractiveness of a stock
based on historical price and trading volume
movements, rather than the financial results
of the underlying company.
GROWTH STOCK Stock of a company that has displayed above
average earnings growth and is expected to
continue to increase profits rapidly going
forward. Stocks of such companies usually
trade at higher multiples to earnings (see
price/earnings ratio) and experience more
price volatility than the market as a whole.
Distinct from value stock.
LIQUIDITY A stock that is liquid has enough shares
outstanding and a substantial enough market
capitalization to allow large purchases and
sales to occur without causing a significant
move in its market price as a result.
9 - Scudder International Growth and Income Fund
<PAGE>
MARKET CAPITALIZATION The value of a company's outstanding shares
of common stock, determined by the number of
shares outstanding multiplied by the share
price (shares x price = market
capitalization). The universe of publicly
traded companies is frequently divided into
large-, mid-, and small-capitalization.
"Large-cap" stocks tend to be more liquid.
PRICE/EARNINGS RATIO A widely used gauge of a stock's valuation
that indicates what investors are paying for
a company's earning power at the current
stock price. May be based on a company's
projected earnings for the coming 12 months.
A higher "earnings multiple" indicates higher
expected earnings growth, along with greater
risk of earnings disappointments.
VALUE STOCK A company whose stock price does not fully
reflect its intrinsic value, as indicated by
price/earnings ratio, price/book value ratio,
dividend yield, or some other valuation
measure, relative to its industry or the
market overall. Value stocks tend to display
less price volatility and may carry higher
dividend yields. Distinct from growth stock.
WEIGHTING (OVER/UNDER) Refers to the allocation of assets -- usually
in terms of sectors, industries, or countries
-- within a portfolio relative to the
portfolio's benchmark index or investment
universe.
(Sources: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
10 - Scudder International Growth and Income Fund
<PAGE>
Investment Portfolio as of February 28, 1998
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements 2.3%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 2/27/98 at 5.63%,
to be repurchased at $1,127,529 on 3/2/98, collateralized by a $906,000 U.S. -----------
Treasury Bond, 8.125%, 8/15/19 (Cost $1,127,000) ...................................... 1,127,000 1,127,000
-----------
Convertible Bonds 5.5%
- ------------------------------------------------------------------------------------------------------------------------------
Hong Kong 1.4%
Hysan Development Finance Co., Ltd., 6.75%, 6/1/00 (Investment holding company) ......... 680,000 663,000
-----------
Japan 2.3%
MBL International Finance Bermuda, 3%, 11/30/02 (Bank) .................................. 1,046,000 1,127,065
-----------
Netherlands 1.8%
BPH Finance Co., 3%, 5/22/02 (Finance company) .......................................... 700,000 854,000
- ------------------------------------------------------------------------------------------------------------------------------
Total Convertible Bonds (Cost $2,654,782) 2,644,065
- ------------------------------------------------------------------------------------------------------------------------------
Shares
- ------------------------------------------------------------------------------------------------------------------------------
Preferred Stocks 3.7%
- ------------------------------------------------------------------------------------------------------------------------------
Austria
Bank Austria AG* (Commercial and corporate banking and financial services) -----------
(Cost $1,004,633) ..................................................................... 27,490 1,801,737
-----------
Common Stocks 88.0%
- ------------------------------------------------------------------------------------------------------------------------------
Australia 2.8%
Commonwealth Bank of Australia (Bank) ................................................... 52,267 647,537
Foster's Brewing Group, Ltd. (Leading brewery) .......................................... 321,810 709,998
-----------
1,357,535
-----------
Brazil 1.0%
Aracruz Celulose S.A. (ADR) "B" (Producer of eucalyptus kraft pulp) ..................... 37,400 511,912
-----------
Canada 4.4%
BCE, Inc. (Telecommunication services) .................................................. 34,300 1,217,038
Moore Corp. Ltd. (Manufacturer of business communication products) ...................... 58,400 910,929
-----------
2,127,967
-----------
Finland 2.0%
Merita Ltd. "B" (Financial services group) .............................................. 179,210 976,125
-----------
France 10.5%
Accor S.A. (Catering, hotels, travel services) .......................................... 2,361 545,847
Dexia France (Municipal and local development financing) ................................ 7,820 999,119
Havas S.A. (Advertising, publishing and broadcasting conglomerate) ...................... 11,535 900,760
Scor S.A. (Property, casualty and life reinsurance company) ............................. 23,167 1,198,063
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder International Growth and Income Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Societe Nationale Elf Aquitaine (Petroleum company) ..................................... 5,550 632,434
Sommer-Allibert (Manufacturer of plastic products for automotive industry) .............. 21,529 840,415
-----------
5,116,638
-----------
Germany 9.3%
BHF-Bank AG (Universal banking services) ................................................ 36,930 1,054,416
Bayer AG (Leading chemical producer) .................................................... 21,656 913,151
Dyckerhoff AG (pfd.) (Producer of cement, ready-mixed concrete and finishing
products) ............................................................................. 2,508 688,430
Hochtief AG (Construction and civil engineering services) ............................... 19,214 667,208
RWE AG (Producer and marketer of petroleum and chemical products) ....................... 20,990 1,161,001
-----------
4,484,206
-----------
Ireland 3.2%
Allied Irish Bank PLC (Bank) ............................................................ 119,460 1,556,906
-----------
Italy 5.7%
Banca Commerciale Italiana SpA (Commercial bank) ........................................ 126,000 575,915
La Rinascente SpA di Risparmio (Department store chain) ................................. 237,000 1,180,061
Telecom Italia SpA di Risparmio (Telecommunications, electronics, network
construction) ......................................................................... 207,000 1,005,788
-----------
2,761,764
-----------
Japan 9.5%
East Japan Railway Co. (Railroad operator) .............................................. 86 407,088
Matsushita Electric Works, Inc. (Leading maker of building materials and
lighting equipment) ................................................................... 65,000 649,382
Nintendo Co., Ltd. (Game equipment manufacturer) ........................................ 10,200 938,154
Nippon Meat Packers, Inc. (Leading meat processor) ...................................... 69,000 908,183
Sakura Bank Ltd. (Full service bank) .................................................... 207,000 866,603
Teijin Ltd. (Manufacturer of polyester products) ........................................ 268,000 822,360
-----------
4,591,770
-----------
Netherlands 4.9%
KLM Royal Dutch Air Lines NV (World-wide full service airline) .......................... 24,970 904,892
Koninklijke Nedlloyd Groep NV (Container shipping and transportation) ................... 28,570 666,482
Royal Dutch Petroleum Co. (Owner of 60% of Royal Dutch/Shell Group) ..................... 14,900 815,410
-----------
2,386,784
-----------
New Zealand 1.4%
Telecom Corp. of New Zealand (Telecommunication services) ............................... 140,800 675,014
-----------
Portugal 1.5%
Portugal Telecom S.A. (Telecommunication services) ...................................... 13,950 732,037
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - Scudder International Growth and Income Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Spain 5.7%
Autopistas del Mare Nostrum S.A. (Builder and operator of toll motorways) ............... 34,000 729,709
Banco Bilbao Vizcaya S.A. (Commercial bank) ............................................. 15,150 692,667
Compania Telefonica Nacional de Espana S.A. (Telecommunication services) ................ 19,100 657,121
Iberdrola S.A. (Electric utility) ....................................................... 46,100 667,095
-----------
2,746,592
-----------
Sweden 4.8%
AssiDoman AB (Forestry group) ........................................................... 20,540 505,861
OM Gruppen AB (Free) (Operator of financial exchanges and clearing organizations) ....... 17,390 786,996
Skanska AB "B" (Free) (International construction company) .............................. 11,900 538,542
Svedala Industri AB (Manufacturer of machinery for construction, mineral
processing and materials handling) .................................................... 26,670 473,452
-----------
2,304,851
-----------
Switzerland 6.5%
Credit Suisse Group (Registered) (Provider of bank services, management services
and life insurance) ................................................................... 6,716 1,213,432
Georg Fischer AG (Bearer) (Manufacturer of automotive products and piping systems) ...... 557 938,017
Sika Finanz AG (Registered) (Manufacturer of water management products and systems) ..... 18,160 990,523
-----------
3,141,972
-----------
United Kingdom 14.8%
Albright & Wilson PLC (Manufacturer of phosphates, surfactants and specialty
chemicals) ............................................................................ 246,420 648,775
Courtaulds Textiles PLC (Producer of clothing, fabrics and home furnishings) ............ 133,440 742,165
Dorling Kindersley Holdings PLC (Book publisher) ........................................ 165,700 567,131
Elementis PLC (Producer of specialty performance chemicals) ............................. 174,762 365,215
Energy Group PLC (Electricity generation and distribution) .............................. 68,640 878,729
General Electric Co., PLC (Manufacturer of power, communications and defense
equipment and other various electrical components) .................................... 92,450 603,942
Laporte PLC (Producer of specialty chemicals) ........................................... 47,225 514,238
Man (ED&F) Group PLC (Commodities trading company) ...................................... 1,150 4,636
Rank Group PLC (Diversified leisure services: hotels, amusement machines,
restaurants, film and television) ..................................................... 110,710 606,698
Royal & Sun Alliance Insurance Group PLC (Multi-line insurance holding company) ......... 75,000 954,596
Tomkins PLC (Manufacturer of fluid controls, industrial products, garden and
leisure products) ..................................................................... 116,150 670,848
Transport Development Group PLC (Distribution, leasing, storage and transport
services) ............................................................................. 157,230 602,822
-----------
7,159,795
- ------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $38,481,565) 42,631,868
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - Scudder International Growth and Income Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Contracts Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchased Options 0.5%
- ------------------------------------------------------------------------------------------------------------------------------
Call on Japan Stock Index, strike price 180 JPY, expire 6/20/98 (Cost $131,598) ......... JPY 337 231,687
-----------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $43,399,578) (a) 48,436,357
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
Currency abbreviations:
JPY Japanese Yen
(a) The cost for federal income tax purposes was $43,409,492. At February 28,
1998, net unrealized appreciation for all securities based on tax cost was
$5,026,865. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $6,763,725 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$1,736,860.
At February 28, 1998, outstanding written options were as follows:
<TABLE>
<CAPTION>
Expiration Strike Price Market
Call Options Shares Date (GBP) Value($)
------------ -------------------------------------------------------------------
<S> <C> <C> <C> <C>
General Electric Co. ................. 78,453 4/15/98 4.27 8,649
Royal & Sun Alliance ................. 48,536 4/15/98 6.943 66,688
---------
Total outstanding written options (Premiums received $26,005) .............................. 75,337
=========
</TABLE>
Transactions in written options for the period June 30, 1997 (commencement
of operations) to February 28, 1998 were:
Options on Securities
--------------------------------
Premiums
Shares Received ($)
--------------- ----------------
Outstanding at June 30, 1997 ....... -- --
--------------- ----------------
Written:
General Electric Co. ............... 78,453 11,052
Royal & Sun Alliance ............... 48,536 14,953
-----------
Outstanding at February 28, 1998 26,005
===========
The accompanying notes are an integral part of the financial statements.
14 - Scudder International Growth and Income Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of February 28, 1998
<TABLE>
<CAPTION>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investments, at market (identified cost $43,399,578) ................ $ 48,436,357
Receivable for investments sold ..................................... 445,269
Dividends, distributions and interest receivable .................... 336,307
Receivable for Fund shares sold ..................................... 216,762
Foreign taxes recoverable ........................................... 8,540
Deferred organization expenses ...................................... 35,571
----------------
Total assets ........................................................ 49,478,806
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for Fund shares redeemed .................................... 164,846
Written options, at value (premiums received $26,005) ............... 75,337
Accrued management fee .............................................. 36,407
Other payables and accrued expenses ................................. 322,052
----------------
Total liabilities ................................................... 598,642
-------------------------------------------------------------------------------------------
Net assets, at market value $ 48,880,164
-------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Accumulated distributions in excess of net investment income ........ (213,599)
Unrealized appreciation (depreciation) on:
Investments ...................................................... 5,036,779
Written options .................................................. (49,332)
Foreign currency related transactions ............................ (559)
Accumulated net realized gain (loss) ................................ (2,320,425)
Paid-in capital ..................................................... 46,427,300
-------------------------------------------------------------------------------------------
Net assets, at market value $ 48,880,164
-------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($48,880,164 / 3,854,083 shares of capital stock outstanding, ----------------
$.01 par value, 100,000,000 shares authorized) .................... $12.68
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder International Growth and Income Fund
<PAGE>
Statement of Operations
For the period June 30, 1997 (commencement of operations)
to February 28, 1998
<TABLE>
<CAPTION>
Investment Income
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Income:
Dividends (net of foreign taxes withheld of $46,905) ................ $ 361,482
Interest ............................................................ 199,255
-----------------
560,737
-----------------
Expenses:
Management fee ...................................................... 291,842
Services to shareholders ............................................ 227,627
Custodian and accounting fees ....................................... 91,692
Directors' fees and expenses ........................................ 25,767
Registration fees ................................................... 57,786
Auditing ............................................................ 37,180
Reports to shareholders ............................................. 20,721
Legal ............................................................... 13,477
Amortization of organization expense ................................ 3,873
Other ............................................................... 7,492
-----------------
Total expenses before reductions .................................... 777,457
Expense reductions .................................................. (267,101)
-----------------
Expenses, net ....................................................... 510,356
--------------------------------------------------------------------------------------------
Net investment income 50,381
--------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- -----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ......................................................... (2,371,165)
Options ............................................................. (140,134)
Foreign currency related transactions ............................... (54,984)
-----------------
(2,566,283)
-----------------
Net unrealized appreciation (depreciation) during the period on:
Investments ......................................................... 5,036,779
Options ............................................................. (49,332)
Foreign currency related transactions ............................... (559)
-----------------
4,986,888
--------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions 2,420,605
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 2,470,986
--------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - Scudder International Growth and Income Fund
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the Period
June 30, 1997
(commencement
of operations) to
Increase (Decrease) in Net Assets February 28, 1998
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ............................................ $ 50,381
Net realized gain (loss) from investment transactions ............ (2,566,283)
Net unrealized appreciation (depreciation) on investment
transactions during the period ................................. 4,986,888
Net increase (decrease) in net assets resulting from -----------------------
operations ..................................................... 2,470,986
-----------------------
Distributions to shareholders from net investment income ......... (59,796)
-----------------------
Fund share transactions:
Proceeds from shares sold ........................................ 64,146,242
Net asset value of shares issued to shareholders in
reinvestment of distributions .................................. 55,470
Cost of shares redeemed .......................................... (17,733,938)
Net increase (decrease) in net assets from Fund share -----------------------
transactions ................................................... 46,467,774
-----------------------
Increase (decrease) in net assets ................................ 48,878,964
Net assets at beginning of period ................................ 1,200
Net assets at end of period (including accumulated -----------------------
distributions in excess of net investment income of $213,599) .. $ 48,880,164
-----------------------
Other Information
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ........................ 100
-----------------------
Shares sold ...................................................... 5,333,375
Shares issued to shareholders in reinvestment of
distributions .................................................. 4,745
Shares redeemed .................................................. (1,484,137)
-----------------------
Net increase (decrease) in Fund shares ........................... 3,853,983
-----------------------
Shares outstanding at end of period .............................. 3,854,083
-----------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 - Scudder International Growth and Income Fund
<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.
<TABLE>
<CAPTION>
For the Period
June 30, 1997
(commencement
of operations) to
February 28,
1998
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period ............................................. $12.00
-------------------
Income from investment operations:
Net investment income ............................................................ .01
Net realized and unrealized gain (loss) on investment transactions ............... .69
-------------------
Total from investment operations ................................................. .70
-------------------
Less distributions from:
Net investment income ............................................................ (.02)
-------------------
Total distributions .............................................................. (.02)
-------------------
-------------------
Net asset value, end of period ................................................... $12.68
- ------------------------------------------------------------------------------------------------------------
Total Return (%) (c) ............................................................. 5.80**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ........................................... 49
Ratio of operating expenses, net to average daily net assets (%) ................. 1.75*
Ratio of operating expenses before expense reductions, to average daily net
assets (%) ..................................................................... 2.65*
Ratio of net investment income to average daily net assets (%) ................... .17*
Portfolio turnover rate (%) ...................................................... 50.2*
Average commission rate paid (b) ................................................. $.0201
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Average commission rate paid per share of common and preferred stocks.
(c) Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
18 - Scudder International Growth and Income Fund
<PAGE>
Notes to Financial Statements
A. Significant Accounting Policies
Scudder International Growth and Income 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 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.
Options. An option contract is a contract in which the writer of the option
grants the buyer of the option the right to purchase from (call option), or sell
to (put option), the writer a designated instrument at a specified price within
a specified period of time. Certain options, including options on indices, will
require cash settlement by the Fund if the option is exercised. During the
period, the Fund purchased put options and wrote call options on securities and
currencies as a hedge against potential adverse price movements in the value of
portfolio assets. In addition, during the period, the Fund purchased call
options on currencies as a temporary substitute for purchasing selected
investments and to enhance potential gain.
If the Fund writes an option and the option expires unexercised, the Fund will
realize income, in the form of a capital gain, to the extent of the amount
received for the option (the "premium"). If the Fund elects to close out the
option it would recognize a gain or loss based on the difference between the
cost of closing the option and the initial premium received. If the Fund
purchased an option and allows the option to expire it would realize a loss to
the extent of the premium paid. If the Fund elects to close out the option it
would recognize a gain or loss equal to the difference between the cost of
acquiring the option and the amount realized upon the sale of the option.
The gain or loss recognized by the Fund upon the exercise of a written call or
purchased put option is adjusted for the amount of option premium. If a written
put or purchased call option is exercised the Fund's cost basis of the acquired
security or currency would be the exercise price adjusted for the amount of the
option premium.
The liability representing the Fund's obligation under an exchange traded
written option or investment in a purchased option is valued at the last sale
price or, in the absence of a sale, the mean between the closing bid and asked
price or at the most recent
19 - Scudder International Growth and Income Fund
<PAGE>
asked price (bid for purchased options) if no bid and asked price are available.
Over-the-counter written or purchased options are valued using dealer supplied
quotations.
When the Fund writes a covered call option, the Fund foregoes, in exchange for
the premium, the opportunity to profit during the option period from an increase
in the market value of the underlying security or currency above the exercise
price. When the Fund writes a put option it accepts the risk of a decline in the
market value of the underlying security or currency below the exercise price.
Over-the-counter options have the risk of the potential inability of
counterparties to meet the terms of their contracts. The Fund's maximum exposure
to purchased options is limited to the premium initially paid. In addition,
certain risks may arise upon entering into option contracts including the risk
that an illiquid secondary market will limit the Fund's ability to close out an
option contract prior to the expiration date and that a change in the value of
the option contract may not correlate exactly with changes in the value of the
securities or currencies hedged.
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 repurchase price.
Foreign Currency Translations. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency transactions are translated into U.S. dollars
on the following basis:
(i) market value of investment securities, other assets and 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.
The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes in
market prices of the investments. Such fluctuations are included with the net
realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on dividends,
interest, and foreign withholding taxes.
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange
contract (forward contract) is a commitment to purchase or sell a foreign
currency at the settlement date at a negotiated rate. During the period, the
Fund utilized forward contracts as a hedge in connection with portfolio
purchases and sales of securities denominated in foreign currencies.
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Forward
contracts having the same settlement date and broker are offset and any gain
(loss) is realized on the date of offset; otherwise, gain (loss) is realized on
settlement date. Realized and unrealized gains and losses which represent the
difference between the value of the forward contract to buy and the forward
contract to sell are included in net realized and unrealized gain (loss) from
foreign currency related transactions.
20 - Scudder International Growth and Income Fund
<PAGE>
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, as amended, which are applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. The Fund paid no federal income taxes and no federal income tax
provision was required. In addition, from November 1, 1997 through February 28,
1998, the Fund incurred approximately $1,901,000 and $122,000 in net realized
capital losses and currency losses, respectively. As permitted by tax
regulations, the Fund intends to elect to defer these losses and treat them as
arising in the fiscal year ending February 28, 1999.
At February 28, 1998, the Fund had a net tax basis capital loss carryforward of
approximately $309,000 which may be applied against any realized net taxable
capital gains of each succeeding year until fully utilized or until February 28,
2006, whichever occurs first.
Distribution of Income and Gains. Distributions of net investment income are
made semiannually. 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 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.
B. Purchases and Sales of Securities
For the period June 30, 1997 (commencement of operations) to February 28, 1998,
purchases and sales of investment securities (excluding short-term investments)
aggregated $57,280,007 and $12,507,385, respectively.
C. Related Parties
Effective December 31, 1997, Scudder, Stevens & Clark, Inc. ("Scudder") and The
Zurich Insurance Company ("Zurich"), an international insurance and financial
services organization, formed a new global investment organization by combining
21 - Scudder International Growth and Income Fund
<PAGE>
Scudder's business with that of Zurich's subsidiary, Zurich Kemper Investments,
Inc. As a result of the transaction, Scudder changed its name to Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the "Adviser"). The transaction between
Scudder and Zurich resulted in the termination of the Fund's Investment
Management Agreement with Scudder. However, a new Investment Management
Agreement (the "Management Agreement") between the Fund and Scudder Kemper was
approved by the Fund's Board of Directors and by the Fund's Shareholders. The
Management Agreement, which is effective December 31, 1997, is the same in all
material respects as the corresponding previous Investment Management Agreement,
except that Scudder Kemper is the new investment adviser to the Fund.
Under the Fund's Management Agreement with Scudder Kemper, the Fund pays the
Adviser a fee equal to an annual 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 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 Management Agreement. In addition, the Adviser has agreed not to impose
all or a portion of its management fee until June 30, 1998 in order to maintain
the annualized expenses of the Fund at not more than 1.75% of average daily net
assets. For the period June 30, 1997 (commencement of operations) to February
28, 1998, the Adviser did not impose a portion of its management fee which
amounted to $255,434, and the amount imposed amounted to $36,408.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
period June 30, 1997 (commencement of operations) to February 28, 1998, the
amount charged to the Fund by SSC aggregated $196,689, which is unpaid at
February 28, 1998.
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 June 30, 1997
(commencement of operations) to February 28, 1998, the amount charged to the
Fund by STC aggregated $452, of which $242 is unpaid at February 28, 1998.
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 June
30, 1997 (commencement of operations) to February 28, 1998, the amount charged
to the Fund by SFAC aggregated $36,039, of which $25,000 is unpaid.
The Fund pays each Director not affiliated with the Adviser an annual retainer
plus specified amounts for attended board and committee meetings. For the period
June 30, 1997 (commencement of operations) to February 28, 1998, the Trustees
did not impose a portion of their fee amounting to $11,667, and the fee imposed
amounted to $14,100.
22 - Scudder International Growth and Income Fund
<PAGE>
Report of Independent Accountants
To the Board of Directors of Scudder International Fund, Inc. and the
Shareholders of Scudder International Growth and Income Fund:
We have audited the accompanying statement of assets and liabilities of Scudder
International Growth and Income Fund, including the investment portfolio, as of
February 28, 1998, and the related statement of operations, the statement of
changes in net assets and the financial highlights for the period June 30, 1997
(commencement of operations) to February 28, 1998. 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 February 28, 1998 by
correspondence with the custodian. 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 International Growth and Income Fund as of February 28, 1998, the
results of its operations, the changes in its net assets and the financial
highlights for the period June 30, 1997 (commencement of operations) to February
28, 1998 in conformity with generally accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
April 23, 1998
23 - Scudder International Growth and Income Fund
<PAGE>
Tax Information
By now shareholders for whom year-end tax reporting is required by the IRS
should have received their Form 1099-DIV and tax information letter from the
Fund.
The Fund paid foreign taxes of $46,905 and recognized $690,635 of foreign source
income during the period ended February 28, 1998. Pursuant to Section 853 of the
Internal Revenue Code, the Fund designates $0.0122 per share of foreign taxes
and $0.0403 per share of income from foreign sources as having been paid in the
period ended February 28, 1998.
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.
24 - Scudder International Growth and Income Fund
<PAGE>
Shareholder Meeting Results
A Special Meeting of Shareholders (the "Meeting") of Scudder International
Growth and Income Fund (the "Fund") was held on October 27, 1997, at the office
of Scudder Kemper Investments, Inc. (formerly Scudder, Stevens & Clark, Inc.),
345 Park Avenue (at 51st Street), New York, New York 10154. At the Meeting, as
adjourned and reconvened, the following matters were voted upon by the
shareholders (the resulting votes for each matter are presented below). With
regard to certain proposals, it was recommended that the Meeting be reconvened
in order to provide shareholders with an additional opportunity to return their
proxies. The date of the reconvened meeting at which the matters were decided is
noted after the proposed matter.
1. To elect Trustees.
Number of Votes:
----------------
Trustee For Withheld
------- --- --------
Paul Bancroft III 2,105,903 95,360
Sheryle J. Bolton 2,107,750 93,513
William T. Burgin 2,105,350 95,913
Thomas J. Devine 2,105,404 95,859
Keith R. Fox 2,107,309 93,954
William H. Gleysteen 2,104,593 96,670
William H. Luers 2,106,070 95,193
Wilson Nolen 2,104,557 96,706
Daniel Pierce 2,106,509 94,754
Kathryn L. Quirk 2,106,177 95,086
2. To approve the new Investment Management Agreement between the Fund and
Scudder Kemper Investments, Inc.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
2,054,951 99,018 47,294 66,309
3. To approve the Board's discretionary authority to convert the Fund to a
master/feeder fund structure through a sale or transfer of assets or
otherwise. (Approved on December 2, 1997.)
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
1,962,859 170,445 82,900 66,309
25 - Scudder International Growth and Income Fund
<PAGE>
4. To approve the revision of certain fundamental investment policies.
<TABLE>
<CAPTION>
Number of Votes:
----------------
Fundamental Policies For Against Abstain Broker
-------------------- --- ------- ------- ------
Non-Votes*
<S> <C> <C> <C> <C>
4.1 Diversification 1,895,353 150,756 88,845 66,309
4.2 Borrowing 1,879,399 166,710 88,845 66,309
4.3 Senior securities 1,891,519 154,590 88,845 66,309
4.4 Purchase of physical commodities 1,887,873 158,236 88,845 66,309
4.5 Concentration 1,891,350 154,759 88,845 66,309
4.6 Underwriting of securities 1,893,509 152,600 88,845 66,309
4.7 Investment in real estate 1,893,747 152,362 88,845 66,309
4.8 Lending 1,889,440 136,271 109,243 66,309
</TABLE>
5. To ratify the selection of Coopers & Lybrand L.L.P. as the Fund's independent
accountants.
Number of Votes:
----------------
For Against Abstain
--- ------- -------
2,100,660 40,239 60,364
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary power
to vote on a particular matter.
26 - Scudder International Growth and Income Fund
<PAGE>
This Page
intentionally
left blank.
27 - Scudder International Growth and Income 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
Sheryle J. Bolton
Director; Chief Executive
Officer, Scientific Learning
Corporation
William T. Burgin
Director; General Partner,
Bessemer Venture Partners
Thomas J. Devine
Director; Consultant
Keith R. Fox
Director; President, Exeter
Capital Management
Corporation
William H. Gleysteen, Jr.
Director; Consultant
William H. Luers
Director; President, The
Metropolitan Museum of Art
Wilson Nolen
Director; Consultant
Kathryn L. Quirk*
Vice President and
Assistant Secretary
Robert W. Lear
Honorary Director;
Executive-in-Residence, Visiting
Professor, Columbia University
Graduate School of Business
Robert G. Stone, Jr.
Honorary Director; Chairman
Emeritus of the Board and
Director, Kirby Corporation
Elizabeth J. Allan*
Vice President
Irene T. Cheng*
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
Sheridan Reilly*
Vice President
Thomas F. McDonough*
Vice President, Secretary and
Treasurer
Richard W. Desmond*
Assistant Secretary
John R. Hebble*
Assistant Treasurer
Caroline Pearson*
Assistant Secretary
*Scudder Kemper Investments, Inc.
28 - Scudder International Growth and Income Fund
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series --
Premium Shares*
Managed Shares*
Scudder Government Money Market Series --
Managed Shares*
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--
Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund**
Scudder Massachusetts Limited Term Tax Free Fund**
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund**
Scudder Ohio Tax Free Fund**
Scudder Pennsylvania Tax Free Fund**
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder 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
Scudder S&P 500 Index Fund
Scudder Real Estate Investment Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Growth and Income 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, Inc.
Industry Sector Funds
- ---------------------
Choice Series
Scudder Financial Services Fund
Scudder Health Care FUnd
Scudder Technology Fund
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs
- -------------------
Traditional IRA
Roth IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan**+++ +++
(a variable annuity)
Education Accounts
- ------------------
Education IRA
UGMA/UTMA
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal Fund, Inc.
For complete information on any of the above Scudder funds, including
management fees and expenses, call or write for a free prospectus. Read it
carefully before you invest or send money. +++Funds within categories are listed
in order from expected least risk to most risk. Certain Scudder funds may not be
available for purchase or exchange. +A portion of the income from the tax-free
funds may be subject to federal, state, and local taxes. *A class of shares of
the Fund. **Not available in all states. +++ +++A no-load variable annuity
contract provided by Charter National Life Insurance Company and its affiliate,
offered by Scudder's insurance agencies, 1-800-225-2470. #These funds, advised
by Scudder Kemper Investments, Inc., are traded on the New York Stock Exchange
and, in some cases, on various other stock exchanges.
29 - Scudder International Growth and Income Fund
<PAGE>
Scudder Solutions
<TABLE>
<CAPTION>
Convenient ways to invest, quickly and reliably:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Automatic Investment Plan QuickBuy
A convenient investment program in which money is Lets you purchase Scudder fund shares
electronically debited from your bank account monthly to electronically, avoiding potential mailing delays;
regularly purchase fund shares and "dollar cost average" money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from a previously designated bank
fewer when it's higher, which can reduce your average account.
purchase price over time.
Automatic Dividend Transfer Payroll Deduction and Direct Deposit
The most timely, reliable, and convenient way to Have all or part of your paycheck -- even government
purchase shares -- use distributions from one Scudder checks -- invested in up to four Scudder funds at
fund to purchase shares in another, automatically one time.
(accounts with identical registrations or the same
social security or tax identification number).
Dollar cost averaging involves continuous investment in securities regardless of price
fluctuations and does not assure a profit or protect against loss in declining markets.
Investors should consider their ability to continue such a plan through periods of low price
levels.
Around-the-clock electronic account service and information, including some transactions:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Automated Information Line: SAIL(TM) -- Scudder's Web Site -- http://funds.scudder.com
1-800-343-2890
Scudder Electronic Account Services: Offering
Personalized account information, the ability to account information and transactions, interactive
exchange or redeem shares, and information on other worksheets, prospectuses and applications for all
Scudder funds and services via touchtone telephone. Scudder funds, plus your current asset allocation,
whenever you need them. Scudder's Site also
provides news about Scudder funds, retirement
planning information, and more.
Retirees and those who depend on investment proceeds for living expenses can enjoy these convenient,
timely, and reliable automated withdrawal programs:
- ------------------------------------------------------------------------------------------------------------------------------
Automatic Withdrawal Plan QuickSell
You designate the bank account, determine the schedule Provides speedy access to your money by
(as frequently as once a month) and amount of the electronically crediting your redemption proceeds
redemptions, and Scudder does the rest. to the bank account you previously designated.
Distributions Direct
Automatically deposits your fund distributions into the
bank account you designate within three business days
after each distribution is paid.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
30 - Scudder International Growth and Income Fund
<PAGE>
Mutual Funds and More -- Brokerage and Guidance Services:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Brokerage Services Scudder Portfolio Builder
Offers you access to a world of investments, A free service designed to help suggest ways investors like
including stocks, corporate bonds, Treasuries, plus you can diversify your portfolio among domestic and global,
over 6,000 mutual funds from at least 150 mutual as well as equity, fixed-income, and money market funds,
fund companies. And Scudder Fund Folio(SM) provides using Scudder funds.
investors with access to a marketplace of more than
500 no-load funds from well-known companies--with no Personal Counsel from Scudder(SM)
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder Developed for investors who prefer the benefits of no-load
Brokerage account already reserved for them, with Scudder funds but want ongoing professional assistance in
no minimum investment. For information about managing a portfolio. Personal Counsel(SM) is a highly
Scudder Brokerage Services, call 1-800-700-0820. customized, fee-based asset management service for
individuals investing $100,000 or more.
Fund Folio funds held less than six months will be charged a fee for redemptions. You can buy
shares directly from the fund itself or its principal underwriter or distributor without
paying this fee. Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061.
Member SIPC.
Personal Counsel From Scudder(SM) and Personal Counsel(SM) are service marks of and represent a
program offered by Scudder Investor Services, Inc., Adviser.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
Additional Information on How to Contact Scudder:
- ------------------------------------------------------------------------------------------------------------------------------
For existing account services and transactions Please address all written correspondence to
Scudder Investor Relations -- 1-800-225-5163 The Scudder Funds
P.O. Box 2291
For establishing 401(k) and 403(b) plans Boston, Massachusetts
Scudder Defined Contribution Services -- 02107-2291
1-800-323-6105
Or Stop by a Scudder Investor Center
For information about The Scudder Funds, including Many shareholders enjoy the personal, one-on-one service of
additional applications and prospectuses, or for the Scudder Investor Centers. Check for an Investor Center near
answers to investment questions you -- they can be found in the following cities:
Scudder Investor Relations -- 1-800-225-2470 Boca Raton Chicago San Francisco
[email protected] Boston New York
</TABLE>
31 - Scudder International Growth and Income Fund
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc., is one of the largest and most experienced
investment management oganizations worldwide, managing more than $200 billion in
assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts. It is one of the ten largest mutual fund companies in the
U.S.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 79
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Group. As a result, Zurich's subsidiary, Zurich Kemper Investments,
Inc., with 50 years of mutual fund and investment management experience, was
combined with Scudder. Headquartered in New York, Scudder Kemper Investments
offers a full range of investment counsel and asset management capabilities,
based on a combination of proprietary research and disciplined, long-term
investment strategies. With its global investment resources and perspective,
the firm seeks opportunities in markets throughout the world to meet the needs
of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Group. The Zurich Group is an internationally recognized leader in
financial services, including property/casualty and life insurance, reinsurance,
and asset management.
This information must be preceded or accompanied by a
current prospectus.
Portfolio changes should not be considered recommendations
for action by individual investors.
SCUDDER
[LOGO]
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
- -------- ---------------------------------
<TABLE>
<S> <C> <C>
a. Financial Statements
Included in Part A of this Registration Statement:
For Scudder International Fund:
Financial highlights for the ten fiscal years ended March 31, 1998
To be filed by amendment
For Scudder Latin America Fund:
Financial highlights for the period December 8, 1992 (commencement of
operations) to October 31, 1993 and for the four fiscal years ended October
31, 1997
(Incorporated by reference to Post-Effective Amendment No. 61 to the
Registration Statement.)
For Scudder Pacific Opportunities Fund:
Financial highlights for the period December 8, 1992 (commencement of
operations) to October 31, 1993 and for the four fiscal years ended October
31, 1997
(Incorporated by reference to Post-Effective Amendment No. 61 to the
Registration Statement.)
For Scudder Greater Europe Growth Fund:
Financial highlights for the period October 10, 1994 (commencement of
operations) to October 31, 1994 and for the three fiscal years ended October
31, 1997
(Incorporated by reference to Post-Effective Amendment No. 61 to the
Registration Statement.)
For Scudder Emerging Markets Growth Fund:
Financial highlights for the period May 8, 1996 (commencement of operations)
to October 31, 1996 and for the fiscal year ended October 31, 1997
(Incorporated by reference to Post-Effective Amendment No. 61 to the
Registration Statement.)
For Scudder International Growth and Income Fund:
Financial highlights for the period June 30, 1997 (commencement of operations)
to February 28, 1998 are filed herein
For Scudder International Growth Fund:
Financial highlights to be filed by amendment
For Scudder International Value Fund:
Financial highlights to be filed by amendment
Included in Part B of this Registration Statement:
For Scudder International Fund:
Investment Portfolio as of March 31, 1998
Statement of Assets and Liabilities as of March 31, 1998
Statement of Operations for the fiscal year ended March 31, 1998
Part C - Page 1
<PAGE>
Statements of Changes in Net Assets for the two fiscal years ended
March 31, 1998
Financial Highlights for the ten fiscal years ended March 31, 1998
Notes to Financial Statements
Report of Independent Accountants
To be filed by amendment
For Scudder Latin America Fund:
Investment Portfolio as of October 31, 1997
Statement of Assets and Liabilities as of October 31, 1997
Statement of Operations for the fiscal year ended October 31, 1997
Statements of Changes in Net Assets for the two fiscal years ended October 31,
1997
Financial Highlights for the period December 8, 1992 (commencement of
operations) to October 31, 1993 and for the four fiscal years ended October
31, 1997
Notes to Financial Statements
Report of Independent Accountants
(Incorporated by reference to Post-Effective Amendment No. 61 to the
Registration Statement.)
For Scudder Pacific Opportunities Fund:
Investment Portfolio as of October 31, 1997
Statement of Assets and Liabilities as of October 31, 1997
Statement of Operations for the fiscal year ended October 31, 1997
Statements of Changes in Net Assets for the two fiscal years ended October 31,
1997
Financial Highlights for the period December 8, 1992 (commencement of
operations) to October 31, 1993 and for the four fiscal years ended October
31, 1997
Notes to Financial Statements
Report of Independent Accountants
(Incorporated by reference to Post-Effective Amendment No. 61 to the
Registration Statement.)
For Scudder Greater Europe Growth Fund:
Investment Portfolio as of October 31, 1997
Statement of Assets and Liabilities as of October 31, 1997
Statement of Operations for the fiscal year ended October 31, 1997
Statement of Changes in Net Assets for the two fiscal years ended October 31,
1997
Financial Highlights for the period October 10, 1994 (commencement of
operations) to October 31, 1994 and for the three fiscal years ended October
31, 1997
Notes to Financial Statements
Report of Independent Accountants
(Incorporated by reference to Post-Effective Amendment No. 61 to the
Registration Statement.)
For Scudder Emerging Markets Growth Fund:
Investment Portfolio as of October 31, 1997
Statement of Assets and Liabilities as of October 31, 1997
Part C - Page 2
<PAGE>
Statement of Operations for the fiscal year ended October 31, 1997
Statement of Changes in Net Assets for the period May 8, 1996 (commencement of
operations) to October 31, 1996 and the fiscal year ended October 31, 1997
Financial Highlights for the period May 8, 1996 (commencement of operations)
to October 31, 1996 and the fiscal year ended October 31, 1997
Notes to Financial Statements
Report of Independent Accountants
(Incorporated by reference to Post-Effective Amendment No. 61 to the
Registration Statement.)
For Scudder International Growth and Income Fund:
Statement of Assets and Liabilities for the period June 30, 1997 (commencement
of operations) to February 28, 1998
Investment Portfolio for the period June 30, 1997 (commencement of operations)
to February 28, 1998
Statement of Assets and Liabilities for the period June 30, 1997 (commencement
of operations) to February 28, 1998
Statement of Operations for the period June 30, 1997 (commencement of
operations) to February 28, 1998
Statement of Changes in Net Assets for the period June 30, 1997 (commencement
of operations) to February 28, 1998
Financial Highlights for the period June 30, 1997 (commencement of operations)
to February 28, 1998
Notes to Financial Statements
Report of Independent Accountants
Are filed herein.
For Scudder International Growth Fund:
Statement of Assets and Liabilities as of June 24, 1998 is filed herein.
For Scudder International Value Fund:
Statement of Assets and Liabilities as of June 24, 1998 is filed herein.
b. Exhibits:
1. (a) Articles of Amendment and Restatement of the Registrant as of
January 24, 1991.
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
(b) Articles Supplementary dated September 17, 1992.
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
(c) Articles Supplementary dated December 1, 1992.
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
(d) Articles Supplementary dated August 3, 1994.
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
Part C - Page 3
<PAGE>
(e) Articles Supplementary dated February 20, 1996.
(Incorporated by reference to Exhibit 1(e) to Post-Effective
Amendment No. 46 to the Registration Statement.)
(f) Articles Supplementary dated September 5, 1996.
(Incorporated by reference to Exhibit 1(f) to Post-Effective
Amendment No. 52 to the Registration Statement.)
(g) Articles Supplementary dated December 12, 1996.
(Incorporated by reference to Post-Effective Amendment No. 55 to
the Registration Statement.)
(h) Articles Supplementary dated March 3, 1997.
(Incorporated by reference to Post-Effective Amendment No. 55 to
the Registration Statement.)
(i) Articles Supplementary dated December 23, 1997 is filed herein.
(j) Articles Supplementary dated March 2,1998 is filed herein.
(k) Articles Supplementary dated March 31, 1998 is filed herein.
2. (a) Amended and Restated By-Laws of the Registrant dated March 4, 1991.
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
(b) Amended and Restated By-Laws of the Registrant dated September 20,
1991.
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
(c) Amended and Restated By-Laws of the Registrant dated December 12,
1991.
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
(d) Amended and Restated By-Laws of the Registrant dated September 4,
1996.
(Incorporated by reference to Post-Effective Amendment No. 55 to
the Registration Statement.)
(e) Amended and Restated By-Laws of the Registrant dated December 3,
1997. (Incorporated by reference to Post-Effective Amendment No.
59 to the Registration Statement.)
3. Inapplicable.
4. Specimen certificate representing shares of Common Stock ($.01 par
value) for Scudder International Fund.
(Incorporated by reference to Exhibit 4 to Post-Effective
Amendment No. 31 to the Registration Statement.)
Part C - Page 4
<PAGE>
5. (a) Investment Management Agreement between the Registrant, on behalf
of Scudder International Fund, and Scudder, Stevens & Clark, Inc.
dated December 14, 1990.
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
(b) Investment Management Agreement between the Registrant, on behalf
of Scudder Latin America Fund, and Scudder, Stevens & Clark, Inc.
dated December 7, 1992.
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
(c) Investment Management Agreement between the Registrant, on behalf
of Scudder Pacific Opportunities Fund, and Scudder, Stevens &
Clark, Inc. dated December 7, 1992.
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
(d) Investment Management Agreement between the Registrant, on behalf
of Scudder Greater Europe Growth Fund, and Scudder, Stevens &
Clark, Inc. dated October 10, 1994.
(Incorporated by reference to Post-Effective Amendment No. 44 to
the Registration Statement.)
(e) Investment Management Agreement between the Registrant on behalf
of Scudder International Fund, and Scudder, Stevens & Clark, Inc.
dated September 8, 1994.
(Incorporated by reference to Post-Effective Amendment No. 45 to
the Registration Statement.)
(f) Investment Management Agreement between the Registrant on behalf
of Scudder Emerging Markets Growth Fund and Scudder, Stevens &
Clark, Inc. dated May 8, 1996.
(Incorporated by reference to Post-Effective Amendment No. 48 to
the Registration Statement.)
(g) Investment Management Agreement between the Registrant, on behalf
of Scudder International Growth and Income Fund, and Scudder,
Stevens & Clark, Inc. dated June 10, 1997.
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
(h) Investment Management Agreement between the Registrant, on behalf
of Scudder International Fund, and Scudder, Stevens & Clark, Inc.
dated September 5, 1996.
(Incorporated by reference to Post-Effective Amendment No. 55 to
the Registration Statement.)
(i) Investment Management Agreement between the Registrant, on behalf
of Scudder Latin America Fund, and Scudder, Stevens & Clark, Inc.,
dated September 11, 1997. (Incorporated by reference to
Post-Effective Amendment No. 59 to the Registration Statement.)
Part C - Page 5
<PAGE>
(j) Investment Management Agreement between the Registrant, on behalf
of Scudder International Fund, and Scudder Kemper Investments,
Inc. dated December 31, 1997. (Incorporated by reference to
Post-Effective Amendment No. 61 to the Registration Statement.)
(k) Investment Management Agreement between the Registrant, on behalf
of Scudder Emerging Markets Growth Fund, and Scudder Kemper
Investments, Inc., dated December 31, 1997. (Incorporated by
reference to Post-Effective Amendment No. 61 to the Registration
Statement.)
(l) Investment Management Agreement between the Registrant, on behalf
of Scudder Greater Europe Growth Fund, and Scudder Kemper
Investments, Inc., dated December 31, 1997. (Incorporated by
reference to Post-Effective Amendment No. 61 to the Registration
Statement.)
(m) Investment Management Agreement between the Registrant, on behalf
of Scudder Pacific Opportunities Fund, and Scudder Kemper
Investments, Inc., dated December 31, 1997. (Incorporated by
reference to Post-Effective Amendment No. 61 to the Registration
Statement.)
(n) Investment Management Agreement between the Registrant, on behalf
of Scudder Latin America Fund, and Scudder Kemper Investments,
Inc., dated December 31, 1997. (Incorporated by reference to
Post-Effective Amendment No. 61 to the Registration Statement.)
(o) Investment Management Agreement between the Registrant, on behalf
of Scudder International Growth and Income Fund, and Scudder
Kemper Investments, Inc. dated December 31, 1997. (Incorporated by
reference to Post-Effective Amendment No. 61 to the Registration
Statement.)
(p) Investment Management Agreement between the Registrant, on behalf
of Scudder International Growth Fund, and Scudder Kemper
Investments, Inc. dated June 29, 1998 is filed herein.
(q) Investment Management Agreement between the Registrant, on behalf
of Scudder International Value Fund, and Scudder Kemper
Investments, Inc. dated June 29, 1998 is filed herein.
6. (a) Underwriting Agreement between the Registrant and Scudder Investor
Services, Inc., formerly Scudder Fund Distributors, Inc., dated
July 15, 1985.
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
(b) Underwriting Agreement between the Registrant and Scudder Investor
Services, Inc. dated September 17, 1992.
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
Part C - Page 6
<PAGE>
7. Inapplicable.
8. (a)(1) Custodian Contract between the Registrant and Brown Brothers
Harriman & Co. dated April 14, 1986.
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
(a)(2) Custodian Contract between the Registrant, on behalf of Scudder
Latin America Fund, and Brown Brothers Harriman & Co. dated
November 25, 1992.
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
(a)(3) Custodian Contract between the Registrant, on behalf of Scudder
Pacific Opportunities Fund, and Brown Brothers Harriman & Co.
dated November 25, 1992.
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
(a)(4) Custodian Contract between the Registrant, on behalf of Scudder
Greater Europe Growth Fund, and Brown Brothers Harriman & Co.
dated October 10, 1994.
(Incorporated by reference to Post-Effective Amendment No. 44 to
the Registration Statement.)
(a)(5) Fee schedule for Exhibit 8(a)(1).
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
(a)(6) Revised fee schedule for Exhibit 8(a)(1).
(Incorporated by reference to Post-Effective Amendment No. 45 to
the Registration Statement.)
(a)(7) Custodian Contract between the Registrant and Brown Brothers
Harriman & Co. dated March 7, 1995.
(Incorporated by reference to Post-Effective Amendment No. 55 to
the Registration Statement.)
(a)(8) Fee schedule for Exhibit 8(a)(7).
(Incorporated by reference to Post-Effective Amendment No. 55 to
the Registration Statement.)
(b)(1) Master Subcustodian Agreement between Brown Brothers Harriman &
Co. and Morgan Guaranty Trust Company of New York, Tokyo office,
dated November 8, 1976.
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
(b)(2) Fee schedule for Exhibit 8(b)(1).
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
Part C - Page 7
<PAGE>
(c)(1) Master Subcustodian Agreement between Brown Brothers Harriman &
Co. and Morgan Guaranty Trust Company of New York, Brussels
office, dated November 15, 1976.
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
(c)(2) Fee schedule for Exhibit 8(c)(l).
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
(d)(1) Subcustodian Agreement between Brown Brothers Harriman & Co. and
The Bank of New York, London office, dated January 30, 1979.
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
(d)(2) Fee schedule for Exhibit 8(d)(1).
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
(e)(1) Master Subcustodian Agreement between Brown Brothers Harriman &
Co. and The Chase Manhattan Bank, N.A., Singapore office, dated
June 9, 1980.
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
(e)(2) Fee schedule for Exhibit 8(e)(1).
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.).
(f)(1) Master Subcustodian Agreement between Brown Brothers Harriman &
Co. and The Chase Manhattan Bank, N.A., Hong Kong office, dated
June 4, 1979.
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
(f)(2) Fee schedule for Exhibit 8(f)(1).
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
(g)(1) Master Subcustodian Agreement between Brown Brothers Harriman &
Co. and Citibank, N.A. New York office, dated July 16, 1981.
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
(g)(2) Fee schedule for Exhibit 8(g)(1).
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
9. (a)(1) Transfer Agency and Service Agreement between the Registrant and
Scudder Service Corporation dated October 2, 1989.
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
Part C - Page 8
<PAGE>
(a)(2) Fee schedule for Exhibit 9(a)(1).
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
(a)(3) Service Agreement between Copeland Associates, Inc. and Scudder
Service Corporation dated June 8, 1995.
(Incorporated by reference to Post-Effective Amendment No. 45 to
the Registration Statement.)
(b) Letter Agreement between the Registrant and Cazenove, Inc. dated
January 23, 1978, with respect to the pricing of securities.
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
(c)(1) COMPASS Service Agreement between the Registrant and Scudder Trust
Company dated January 1, 1990.
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
(c)(2) Fee schedule for Exhibit (9)(c)(1).
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
(c)(3) COMPASS and TRAK 2000 Service Agreement between the Registrant and
Scudder Trust Company dated October 1, 1995.
(Incorporated by reference to Exhibit 9(c)(3) to Post-Effective
Amendment No. 47 to the Registration Statement.)
(d)(1) Shareholder Services Agreement between the Registrant and Charles
Schwab & Co., Inc. dated June 1, 1990.
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
(d)(2) Administrative Services Agreement between the Registrant and
McGladrey & Pullen, Inc. dated September 30, 1995.
(Incorporated by reference to Exhibit 9(d)(2) to Post-Effective
Amendment No. 47 to the Registration Statement.)
(e)(1) Fund Accounting Services Agreement between the Registrant, on
behalf of Scudder Greater Europe Growth Fund, and Scudder Fund
Accounting Corporation dated October 10, 1994.
(Incorporated by reference to Post-Effective Amendment No. 44 to
the Registration Statement.)
(e)(2) Fund Accounting Services Agreement between the Registrant, on
behalf of Scudder International Fund, and Scudder Fund Accounting
Corporation dated April 12, 1995 is filed herein.
(Incorporated by reference to Post-Effective Amendment No. 45 to
the Registration Statement.)
(e)(3) Fund Accounting Services Agreement between the Registrant, on
behalf of Scudder Latin America Fund, dated May 17, 1995.
(Incorporated by reference to Exhibit 9(e)(3) to Post-Effective
Amendment No. 47 to the Registration Statement.)
Part C - Page 9
<PAGE>
(e)(4) Fund Accounting Services Agreement between the Registrant, on
behalf of Scudder Pacific Opportunities Fund, dated May 5, 1995.
(Incorporated by reference to Exhibit 9(e)(4) to Post-Effective
Amendment No. 47 to the Registration Statement.)
(e)(5) Fund Accounting Services Agreement between the Registrant, on
behalf of Scudder Emerging Markets Growth Fund dated May 8, 1996.
(Incorporated by reference to Exhibit 9(e)(5) to Post-Effective
Amendment No. 49 to the Registration Statement.)
(e)(6) Fund Accounting Services Agreement between the Registrant, on
behalf of Scudder International Growth and Income Fund dated June
3, 1997.
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
(e)(7) Fund Accounting Services Agreement between the Registrant, on
behalf of Scudder International Growth Fund to be filed by
Amendment.
(e)(8) Fund Accounting Services Agreement between the Registrant, on
behalf of Scudder International Value Fund to be filed by
Amendment.
10. Inapplicable.
11. Consents of Independent Accountants is filed herein.
12. Inapplicable.
13. Inapplicable.
14. (a) Scudder Flexi-Plan for Corporations and Self-Employed Individuals.
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
(b) Scudder Individual Retirement Plan.
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
(c) Scudder Funds 403(b) Plan.
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
(d) Scudder Employer - Select 403(b) Plan.
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
(e) Scudder Cash or Deferred Profit Sharing Plan under Section 401(k).
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
Part C - Page 10
<PAGE>
(f) Scudder Roth IRA Plan
(Incorporated by reference to Post-Effective Amendment No. 61 to
the Registration Statement.)
15. Inapplicable.
16. Schedule for Computation of Performance Quotations.
(Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement.)
17. Inapplicable
18. Plan with respect to Scudder International Fund pursuant to
Rule 18f-3.
(Incorporated by reference to Post-Effective Amendment No. 58 to
the Registration Statement.)
</TABLE>
Power of Attorney for Nicholas Bratt, Paul Bancroft III,
Thomas J. Devine, William H. Gleysteen, Jr., William H. Luers,
Wilson Nolen, Juris Padegs, Daniel Pierce, and Gordon
Shillinglaw is incorporated by reference to the signature page
of Post-Effective Amendment No. 35.
Power of Attorney for Keith R. Fox is incorporated by
reference to the Signature Page of Post-Effective Amendment
No. 47.
Power of Attorney for Kathryn L. Quirk is incorporated by
reference to the signature page of Post-Effective Amendment
No. 54.
Power of Attorney for David S. Lee is incorporated by
reference to the signature page of Post-Effective Amendment
No. 56.
Power of Attorney for Sheryle J. Bolton and William T. Burgin
is incorporated by reference to the Signature Page of
Post-Effective Amendment No. 58.
Item 25. Persons Controlled by or under Common Control with Registrant.
- -------- --------------------------------------------------------------
None
Item 26. Number of Holders of Securities (as of June 22, 1998).
- -------- ------------------------------------------------------
<TABLE>
<S> <C> <C>
(1) (2)
Title of Class Number of Shareholders
-------------- ----------------------
Capital Stock ($.01 par value per share)
Scudder International Fund:
International Shares 164,989
Barrett International Shares NA
Scudder Latin America Fund 65,249
Scudder Pacific Opportunities Fund 23,685
Scudder Greater Europe Growth Fund 34,619
Scudder Emerging Markets Growth Fund 16,300
Scudder International Growth and Income Fund 6,924
</TABLE>
Part C - Page 11
<PAGE>
Item 27. Indemnification.
- -------- ----------------
A policy of insurance covering Scudder Kemper Investments,
Inc., its affiliates including Scudder Investor Services,
Inc., and all of the registered investment companies advised
by Scudder Kemper Investments, Inc. insures the Registrant's
directors and officers and others against liability arising by
reason of an alleged breach of duty caused by any negligent
act, error or accidental omission in the scope of their
duties.
Article Tenth of Registrant's Articles of Incorporation state
as follows:
TENTH: Liability and Indemnification
To the fullest extent permitted by the Maryland
General Corporation Law and the Investment Company Act of
1940, no director or officer of the Corporation shall be
liable to the Corporation or to its stockholders for damages.
The limitation on liability applies to events occurring at the
time a person serves as a director or officer of the
Corporation, whether or not such person is a director or
officer at the time of any proceeding in which liability is
asserted. No amendment to these Articles of Amendment and
Restatement or repeal of any of its provisions shall limit or
eliminate the benefits provided to directors and officers
under this provision with respect to any act or omission which
occurred prior to such amendment or repeal.
The Corporation, including its successors and
assigns, shall indemnify its directors and officers and make
advance payment of related expenses to the fullest extent
permitted, and in accordance with the procedures required by
Maryland law, including Section 2-418 of the Maryland General
Corporation law, as may be amended from time to time, and the
Investment Company Act of 1940. The By-Laws may provide that
the Corporation shall indemnify its employees and/or agents in
any manner and within such limits as permitted by applicable
law. Such indemnification shall be in addition to any other
right or claim to which any director, officer, employee or
agent may otherwise be entitled.
The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer,
employee or agent of the Corporation or is or was serving at
the request of the Corporation as a director, officer,
partner, trustee, employee or agent of another foreign or
domestic corporation, partnership, joint venture, trust or
other enterprise or employee benefit plan against any
liability asserted against and incurred by such person in any
such capacity or arising out of such person's position,
whether or not the Corporation would have had the power to
indemnify against such liability.
The rights provided to any person by this Article
shall be enforceable against the Corporation by such person
who shall be presumed to have relied upon such rights in
serving or continuing to serve in the capacities indicated
herein. No amendment of these Articles of Amendment and
Restatement shall impair the rights of any person arising at
any time with respect to events occurring prior to such
amendment.
Nothing in these Articles of Amendment and
Restatement shall be deemed to (i) require a waiver of
compliance with any provision of the Securities Act of 1933,
as amended, or the Investment Company Act of 1940, as amended,
or of any valid rule, regulation or order of the Securities
and Exchange Commission under those Acts or (ii) protect any
director or officer of the Corporation against any liability
to the Corporation or its stockholders to which he would
otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of his or her
duties or by reason of his or her reckless disregard of his or
her obligations and duties hereunder.
Part C - Page 12
<PAGE>
Article V of Registrant's Amended and Restated By-Laws states as follows:
ARTICLE V
---------
INDEMNIFICATION AND INSURANCE
-----------------------------
SECTION 1. Indemnification of Directors and Officers. Any person who
was or is a party or is threatened to be made a party in any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that such person is a current or former
Director or officer of the Corporation, or is or was serving while a Director or
officer of the Corporation at the request of the Corporation as a Director,
officer, partner, trustee, employee, agent or fiduciary or another corporation,
partnership, joint venture, trust, enterprise or employee benefit plan, shall be
indemnified by the Corporation against judgments, penalties, fines, excise
taxes, settlements and reasonable expenses (including attorneys' fees) actually
incurred by such person in connection with such action, suit or proceeding to
the fullest extent permissible under the Maryland General Corporation Law, the
Securities Act of 1933 and the 1940 Act, as such statutes are now or hereafter
in force, except that such indemnity shall not protect any such person against
any liability to the Corporation or any stockholder thereof to which such person
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
office ("disabling conduct").
SECTION 2. Advances. Any current or former Director or officer of the
Corporation claiming indemnification within the scope of this Article V shall be
entitled to advances from the Corporation for payment of the reasonable expenses
incurred by him in connection with proceedings to which he is a party in the
manner and to the fullest extent permissible under the Maryland General
Corporation Law, the Securities Act of 1933 and the 1940 Act, as such statutes
are now or hereafter in force; provided however, that the person seeking
indemnification shall provide to the Corporation a written affirmation of his
good faith belief that the standard of conduct necessary for indemnification by
the Corporation has been met and a written undertaking by or on behalf of the
Director to repay any such advance if it is ultimately determined that he is not
entitled to indemnification, and provided further that at least one of the
following additional conditions is met: (1) the person seeking indemnification
shall provide a security in form and amount acceptable to the Corporation for
his undertaking; (2) the Corporation is insured against losses arising by reason
of the advance; or (3) a majority of a quorum of Directors of the Corporation
who are neither "interested persons" as defined in Section 2(a)(19) of the 1940
Act, as amended, nor parties to the proceeding ("disinterested non-party
Directors") or independent legal counsel, in a written opinion, shall determine,
based on a review of facts readily available to the Corporation at the time the
advance is proposed to be made, that there is reason to believe that the person
seeking indemnification will ultimately be found to be entitled to
indemnification.
SECTION 3. Procedure. At the request of any current or former Director
or officer, or any employee or agent whom the Corporation proposes to indemnify,
the Board of Directors shall determine, or cause to be determined, in a manner
consistent with the Maryland General Corporation Law, the Securities Act of 1933
and the 1940 Act, as such statutes are now or hereafter in force, whether the
standards required by this Article V have been met; provided, however, that
indemnification shall be made only following: (1) a final decision on the merits
by a court or other body before whom the proceeding was brought that the person
to be indemnified was not liable by reason of disabling conduct or (2) in the
absence of such a decision, a reasonable determination, based upon a review of
the facts, that the person to be indemnified was not liable by reason of
disabling conduct, by (a) the vote of the majority of a quorum of disinterested
non-party Directors or (b) an independent legal counsel in a written opinion.
SECTION 4. Indemnification of Employees and Agents. Employees and
agents who are not officers or Directors of the Corporation may be indemnified,
and reasonable expenses may be advanced to such employees or agents, in
accordance with the procedures set forth in this Article V to the extent
permissible under the Maryland General Corporation Law, the Securities Act of
1933 and the 1940 Act, as such statutes are now or hereafter in force, and to
such further extent, consistent with the foregoing, as may be provided by action
of the Board of Directors or by contract.
Part C - Page 13
<PAGE>
SECTION 5. Other Rights. The indemnification provided by this Article V
shall not be deemed exclusive of any other right, in respect of indemnification
or otherwise, to which those seeking such indemnification may be entitled under
any insurance or other agreement, vote of stockholders or disinterested
Directors or otherwise, both as to action by a Director or officer of the
Corporation in his official capacity and as to action by such person in another
capacity while holding such office or position, and shall continue as to a
person who has ceased to be a Director or officer and shall inure to the benefit
of the heirs, executors and administrators of such a person.
SECTION 6. Constituent, Resulting or Surviving Corporations. For the
purposes of this Article V, references to the "Corporation" shall include all
constituent corporations absorbed in a consolidation or merger as well as the
resulting or surviving corporation so that any person who is or was a Director,
officer, employee or agent of a constituent corporation or is or was serving at
the request of a constituent corporation as a Director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise shall stand in the same position under this Article V with respect to
the resulting or surviving corporation as he would if he had served the
resulting or surviving corporation in the same capacity.
Item 28. Business or Other Connections of Investment Adviser
- -------- ---------------------------------------------------
Scudder Kemper Investments, Inc. has stockholders and
employees who are denominated officers but do not as such have
corporation-wide responsibilities. Such persons are not
considered officers for the purpose of this Item 28.
<TABLE>
<S> <C> <C>
<CAPTION>
Business and Other Connections of Board
Name of Directors of Registrant's Adviser
---- ------------------------------------
Stephen R. Beckwith Treasurer and Chief Financial Officer, Scudder Kemper Investments, Inc.**
Vice President and Treasurer, Scudder Fund Accounting Corporation*
Director, Scudder Stevens & Clark Corporation**
Director and Chairman, Scudder Defined Contribution Services, Inc.**
Director and President, Scudder Capital Asset Corporation**
Director and President, Scudder Capital Stock Corporation**
Director and President, Scudder Capital Planning Corporation**
Director and President, SS&C Investment Corporation**
Director and President, SIS Investment Corporation**
Director and President, SRV Investment Corporation**
Lynn S. Birdsong Director and Vice President, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark (Luxembourg) S.A.#
Laurence W. Cheng Director, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland##
Director, ZKI Holding Corporation xx
Steven Gluckstern Director, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland##
Director, Zurich Holding Company of America o
Rolf Huppi Director, Chairman of the Board, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland##
Director, Chairman of the Board, Zurich Holding Company of America o
Director, ZKI Holding Corporation xx
Kathryn L. Quirk Director, Chief Legal Officer, Chief Compliance Officer and Secretary, Scudder Kemper
Investments, Inc.**
Director, Senior Vice President & Assistant Clerk, Scudder Investor Services, Inc.*
Director, Vice President & Secretary, Scudder Fund Accounting Corporation*
Part C - Page 14
<PAGE>
Director, Vice President & Secretary, Scudder Realty Holdings Corporation*
Director & Assistant Clerk, Scudder Service Corporation*
Director, SFA, Inc.*
Vice President, Director & Assistant Secretary, Scudder Precious Metals, Inc.***
Director, Scudder, Stevens & Clark Japan, Inc.***
Director, Vice President and Secretary, Scudder, Stevens & Clark of Canada, Ltd.***
Director, Vice President and Secretary, Scudder Canada Investor Services Limited***
Director, Vice President and Secretary, Scudder Realty Advisers, Inc. x
Director and Secretary, Scudder, Stevens & Clark Corporation**
Director and Secretary, Scudder, Stevens & Clark Overseas Corporation oo
Director and Secretary, SFA, Inc.*
Director, Vice President and Secretary, Scudder Defined Contribution Services, Inc.**
Director, Vice President and Secretary, Scudder Capital Asset Corporation**
Director, Vice President and Secretary, Scudder Capital Stock Corporation**
Director, Vice President and Secretary, Scudder Capital Planning Corporation**
Director, Vice President and Secretary, SS&C Investment Corporation**
Director, Vice President and Secretary, SIS Investment Corporation**
Director, Vice President and Secretary, SRV Investment Corporation**
Director, Vice President and Secretary, Scudder Brokerage Services, Inc.*
Director, Korea Bond Fund Management Co., Ltd.+
Markus Rohrbasser Director, Scudder Kemper Investments, Inc.**
Member Corporate Executive Board, Zurich Insurance Company of Switzerland##
President, Director, Chairman of the Board, ZKI Holding Corporation xx
Cornelia M. Small Vice President, Scudder Kemper Investments, Inc.**
Edmond D. Villani Director, President and Chief Executive Officer, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark Japan, Inc.###
President and Director, Scudder, Stevens & Clark Overseas Corporation oo
President and Director, Scudder, Stevens & Clark Corporation**
Director, Scudder Realty Advisors, Inc.x
Director, IBJ Global Investment Management S.A. Luxembourg, Grand-Duchy of Luxembourg
* Two International Place, Boston, MA
x 333 South Hope Street, Los Angeles, CA
** 345 Park Avenue, New York, NY
# Societe Anonyme, 47, Boulevard Royal, L-2449 Luxembourg, R.C. Luxembourg B 34.564
*** Toronto, Ontario, Canada
xxx Grand Cayman, Cayman Islands, British West Indies
oo 20-5, Ichibancho, Chiyoda-ku, Tokyo, Japan
### 1-7, Kojimachi, Chiyoda-ku, Tokyo, Japan
xx 222 S. Riverside, Chicago, IL
o Zurich Towers, 1400 American Ln., Schaumburg, IL
+ P.O. Box 309, Upland House, S. Church St., Grand Cayman, British West Indies
## Mythenquai-2, P.O. Box CH-8022, Zurich, Switzerland
</TABLE>
Item 29. Principal Underwriters.
- -------- -----------------------
(a)
Scudder Investor Services, Inc. acts as principal underwriter of the
Registrant's shares and also acts as principal underwriter for other
funds managed by Scudder Kemper Investments, Inc.
Part C - Page 15
<PAGE>
(b)
The Underwriter has employees who are denominated officers of an
operational area. Such persons do not have corporation-wide
responsibilities and are not considered officers for the purpose of
this Item 29.
<TABLE>
<S> <C> <C> <C>
<CAPTION>
(1) (2) (3)
Name and Principal Position and Offices with Positions and
Business Address Scudder Investor Services, Inc. Offices with Registrant
---------------- ------------------------------- -----------------------
William S. Baughman Vice President None
Two International Place
Boston, MA 02110
Lynn S. Birdsong Senior Vice President None
345 Park Avenue
New York, NY 10154
Mary Elizabeth Beams Vice President None
Two International Place
Boston, MA 02110
Mark S. Casady Director, President and Assistant None
Two International Place Treasurer
Boston, MA 02110
Linda Coughlin Director and Senior Vice President None
Two International Place
Boston, MA 02110
Richard W. Desmond Vice President Assistant Secretary
345 Park Avenue
New York, NY 10154
Paul J. Elmlinger Senior Vice President and Assistant None
345 Park Avenue Clerk
New York, NY 10154
Philip S. Fortuna Vice President None
101 California Street
San Francisco, CA 94111
William F. Glavin Vice President None
Two International Place
Boston, MA 02110
Margaret D. Hadzima Assistant Treasurer None
Two International Place
Boston, MA 02110
Thomas W. Joseph Director, Vice President, Treasurer Vice President
Two International Place and Assistant Clerk
Boston, MA 02110
Part C - Page 16
<PAGE>
Name and Principal Position and Offices with Positions and
Business Address Scudder Investor Services, Inc. Offices with Registrant
---------------- ------------------------------- -----------------------
Thomas F. McDonough Clerk Vice President, Secretary
Two International Place and Treasurer
Boston, MA 02110
Daniel Pierce Director, Vice President Director
Two International Place and Assistant Treasurer
Boston, MA 02110
Kathryn L. Quirk Director, Senior Vice President and Director, Vice President
345 Park Avenue Assistant Clerk and Assistant Secretary
New York, NY 10154
Robert A. Rudell Vice President None
Two International Place
Boston, MA 02110
William M. Thomas Vice President None
Two International Place
Boston, MA 02110
Benjamin Thorndike Vice President None
Two International Place
Boston, MA 02110
Sydney S. Tucker Vice President None
Two International Place
Boston, MA 02110
Linda J. Wondrack Vice President None
Two International Place
Boston, MA 02110
(c)
(1) (2) (3) (4) (5)
Net Underwriting Compensation on
Name of Principal Discounts and Redemptions Brokerage Other
Underwriter Commissions and Repurchases Commissions Compensation
----------- ----------- --------------- ----------- ------------
Scudder Investor None None None None
Services, Inc.
</TABLE>
Item 30. Location of Accounts and Records.
- -------- ---------------------------------
Certain accounts, books and other documents required to be
maintained by Section 31(a) of the 1940 Act and the Rules
promulgated thereunder are maintained by Scudder Kemper
Investments, Inc., 345 Park Avenue, New York, New York 10154.
Records relating to the duties of the Registrant's custodian
are maintained by Brown Brothers Harriman & Co., 40 Water
Street, Boston, Massachusetts. Records relating to the duties
of the Registrant's transfer agent are maintained by Scudder
Service Corporation, Two International Place, Boston,
Massachusetts 02110-4103.
Part C - Page 17
<PAGE>
Item 31. Management Services.
- -------- --------------------
Inapplicable.
Item 32. Undertakings
- -------- ------------
Inapplicable
Part C - Page 18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this amendment to its Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereto duly authorized, in the City of Boston and the
Commonwealth of Massachusetts on June 19, 1998.
SCUDDER INTERNATIONAL FUND, INC.
By/s/Thomas F. McDonough
---------------------------------
Thomas F. McDonough,
Treasurer, Vice President and Secretary
(Principal Financial and
Accounting Officer)
Pursuant to the requirements of the Securities Act of 1933,
this amendment to its Registration Statement has been signed below
by the following persons in the capacities and on the dates
indicated.
SIGNATURE TITLE DATE
/s/Paul Bancroft, III
- ---------------------
Paul Bancroft, III* Director June 19, 1998
/s/Sheryle J. Bolton
- ---------------------
Sheryle J. Bolton* Director June 19, 1998
/s/William T. Burgin
- ---------------------
William T. Burgin* Director June 19, 1998
/s/Thomas J. Devine
- --------------------
Thomas J. Devine* Director June 19, 1998
/s/Keith R. Fox
- --------------------
Keith R. Fox* Director June 19, 1998
/s/William H. Gleysteen, Jr.
- ----------------------------
William H. Gleysteen, Jr.* Director June 19, 1998
/s/William H. Luers
- --------------------
William H. Luers*
Director June 19, 1998
<PAGE>
SIGNATURE TITLE DATE
/s/Wilson Nolen
- -----------------
Wilson Nolen*
Director June 19, 1998
/s/Daniel Pierce
- ----------------
Daniel Pierce*
Chairman of the Board June 19, 1998
and Director
/s/Kathryn L. Quirk
- -------------------
Kathryn L. Quirk*
Director, Vice June 19, 1998
President and
Assistant Secretary
*By:/s/Thomas F. McDonough
------------------------
Thomas F. McDonough,
Attorney-in-Fact pursuant to a
power of attorney contained in
the signature page of Post-
Effective Amendment Nos. 35,
47, 49, 54, 56 and 58 to the
Registration Statement, filed
October 8, 1992, February 27,
1996, July 17, 1996, June 2,
1997, July 31, 1997 and
December 4, 1997,
respectively.
<PAGE>
File No. 2-14400
File No. 811-642
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
FORM N-1A
POST-EFFECTIVE AMENDMENT No. 65
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 45
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
SCUDDER INTERNATIONAL FUND, INC.
<PAGE>
SCUDDER INTERNATIONAL FUND, INC.
EXHIBIT INDEX
Exhibit 1(i)
Exhibit 1(j)
Exhibit 1(k)
Exhibit 5(p)
Exhibit5(q)
Exhibit 11
ARTICLES OF AMENDMENT
of
SCUDDER INTERNATIONAL FUND, INC.
SCUDDER INTERNATIONAL FUND, INC., a Maryland corporation (the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Charter of the Corporation is hereby amended to include
Article TWELFTH as follows:
"TWELFTH: Master Feeder Structure.
The Corporation shall be empowered to transfer some or all of
its assets to any entity or entities of which all of the equity
interests are owned by the Corporation at the time of transfer for the
purpose of creating a master-feeder or similar structure in accordance
with the Investment Company Act of 1940, as amended, the precise
structure of such transfer of assets to be determined by action of the
Corporation's Board of Directors as constituted at the time such Board
of Directors deems any such transfer to be advisable"
SECOND: The Board of Directors of the Corporation on August 6, 1997,
unanimously adopted a resolution in which was set forth the foregoing amendment
to the Charter, declaring that such amendment as proposed was advisable and
directing that it be submitted for action thereon at the next Special Meeting of
stockholders of the Corporation.
THIRD: Said amendment was submitted for the approval of the
stockholders of the Corporation at the Special Meeting of stockholders of the
Corporation held on October 27, 1997. Item 3, relating to the Articles of
Amendment as outlined herein, was adjourned until November 10, 1997. The
November 10, 1997 adjourned meeting was further adjourned until December 2,
1997, at which time said amendment was approved by the holders of a majority of
the outstanding shares of the Corporation entitled to vote thereon.
FOURTH: The amendment of the charter of the Corporation as hereinabove
set forth has been duly advised by the Board of Directors and approved by the
stockholders of the Corporation.
IN WITNESS WHEREOF, The Corporation has caused these presents to be
signed in its name and on its behalf by its President and attested by its
Secretary this 23 day of December, 1997.
<PAGE>
SCUDDER INTERNATIONAL FUND, INC.
By /s/Nicholas Bratt
--------------------
Nicholas Bratt
President
Attest:
/s/Thomas F. McDonough
- -----------------------
Thomas F. McDonough
Secretary
The undersigned, President of International Fund, Inc., who executed on
behalf of said Corporation the foregoing Articles of Amendment, of which this
certificate is made part, hereby acknowledges, in the name and on behalf of the
said Corporation, the foregoing Articles of Amendment to the corporate act of
said Corporation and further certifies that, to the best of his knowledge,
information and belief, the matters and fact set forth therein with respect to
the approval thereof are true in all material respects, under the penalty of
perjury.
/s/Nicholas Bratt
---------------------
Nicholas Bratt
President
2
SCUDDER INTERNATIONAL FUND, INC.
ARTICLES SUPPLEMENTARY
Scudder International Fund, Inc., a Maryland corporation (which is
hereinafter called the "Corporation"), hereby certifies to the State Department
of Assessments and Taxation of Maryland that:
FIRST: Pursuant to the authority expressly vested in the Board of Directors
of the Corporation by Article FIFTH of the Charter of the Corporation, the Board
of Directors (i) has duly designated and classified one hundred million
(100,000,000) shares of the authorized but unissued shares of the "International
Fund" Series of the Corporation's capital stock as a separate class of the
"International Fund" Series, such class being designated as the "Barrett
International Shares" class of the "International Fund" Series, and (ii) has
duly designated the one hundred million (100,000,000) shares of the issued and
unissued authorized shares of the "International Fund" Series of the
Corporation's capital stock not designated and classified pursuant to (i) above
as a separate class of the "International Fund" Series, such class being
designated as the "International Shares" class of the "International Fund"
Series.
(a) Immediately prior to the filing of these Articles Supplementary, the
Corporation had authority to issue 700,000,000 shares of capital stock, $0.01
par value per share, 100,000,000 million of such shares being designated as the
"International Growth and Income Fund" Series; 100,000,000 of such shares being
designated as the "Pacific Opportunities Fund" Series; 200,000,000 of such
shares being designated as the "International Fund" Series; 100,000,000 of such
shares being designated as the "Latin America Fund" Series; 100,000,000 of such
shares being designated as the "Greater Europe Growth Fund" Series; and
100,000,000 of such shares being designated as the "Emerging Markets Growth
Fund" Series.
(b) Immediately after the filing of these Articles Supplementary, the
Corporation will have the authority to issue 700,000,000 shares of capital
stock, $0.01 par value per share, 100,000,000 million of such shares being
designated as the "International Growth and Income Fund" Series; 100,000,000 of
such shares being designated as the "Pacific Opportunities Fund" Series;
200,000,000 of such shares being designated as the "International Fund" Series,
of which 100,000,000 shares will be designated as the "Barrett International
Shares" class of the "International Fund" series and 100,000,000 shares will be
designated as the "International Shares" class of the "International Fund"
Series; 100,000,000 of such shares being designated as the "Latin America Fund"
Series; 100,000,000 of such shares being designated as the "Greater Europe
<PAGE>
Growth Fund" Series; and 100,000,000 of such shares being designated as the
"Emerging Markets Growth Fund" Series.
SECOND: A description of the "Barrett International Shares" class of the
"International Fund" Series, including the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends, qualifications
and the terms or conditions of redemption of, such shares, as set by the Board
of Directors of the Corporation, is as follows:
(a) Except as provided in the Charter of the Corporation and except as
described in (b) below, the "Barrett International Shares" class of the
"International Fund" Series shall be identical in all respects, and shall have
the same preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption, as the "International Shares" class of the International Fund
Series.
(b) The "Barrett International Shares" class of the "International Fund"
Series may be issued and sold subject to such sales loads or charges, whether
initial, deferred or contingent, or any combination thereof, and to such
expenses and fees (including, without limitation, distribution expenses under a
Rule 12b-1 plan and administrative expenses under an administrative or service
agreement, plan or other arrangement, however designated), and to such account
size requirements, which may be different from the sales loads, charges,
expenses, fees or account size requirements of the "International Shares" class
of the International Fund Series, all as the Board of Directors may from time to
time establish in accordance with the Investment Company Act of 1940, as
amended, and other applicable law.
THIRD: Except as otherwise provided by the express provisions of these
Articles Supplementary, nothing herein shall limit, by inference or otherwise,
the discretionary right of the Board of Directors of the Corporation to classify
and reclassify and issue any unissued shares of any Series or class of the
Corporation's capital stock and to fix or alter all terms thereof to the full
extent provided by the Charter of the Corporation.
FOURTH: The Board of Directors of the Corporation, at a meeting duly called
and held, duly authorized and adopted resolutions classifying and designating
the "Barrett International Shares" class of the "International Fund" Series and
designating the "International Shares" class of "International Fund" Series as
set forth in these Articles Supplementary.
2
<PAGE>
IN WITNESS WHEREOF, Scudder International Fund, Inc. has caused these
Articles Supplementary to be signed and acknowledged in its name and on its
behalf by its President and attested to by its Secretary on this 31st day of
March, 1998; and its President acknowledges that these Articles Supplementary
are the act of Scudder International Fund, Inc., and he further acknowledges
that, as to all matters or facts set forth herein which are required to be
verified under oath, such matters and facts are true in all material respects to
the best of his knowledge, information and belief, and that this statement is
made under the penalties for perjury.
SCUDDER INTERNATIONAL FUND, INC.
By:
/s/Nicholas Bratt
- ----------------------------
Nicholas Bratt, President
ATTEST:
/s/Thomas F. McDonough
- ------------------------------
Thomas F. McDonough, Secretary
Scudder International Fund, Inc.
345 Park Avenue
New York, New York 10154
June 29, 1998
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Scudder International Growth Fund
Ladies and Gentlemen:
Scudder International Fund, Inc. (the "Corporation") has been established
as a Maryland corporation to engage in the business of an investment company.
Pursuant to the Corporation's Articles of Incorporation, as amended from
time-to-time (the "Articles"), the Board of Directors has divided the
Corporation's shares of capital stock, par value $.01 per share, (the "Shares")
into separate series, or funds, including Scudder International Growth Fund (the
"Fund"). Series may be abolished and dissolved, and additional series
established, from time to time by action of the Directors.
The Corporation, on behalf of the Fund, has selected you to act as the sole
investment manager of the Fund and to provide certain other services, as more
fully set forth below, and you have indicated that you are willing to act as
such investment manager and to perform such services under the terms and
conditions hereinafter set forth. Accordingly, the Corporation on behalf of the
Fund agrees with you as follows:
1. Delivery of Documents. The Corporation engages in the business of
investing and reinvesting the assets of the Fund in the manner and in accordance
with the investment objectives, policies and restrictions specified in the
currently effective Prospectus (the "Prospectus") and Statement of Additional
Information (the "SAI") relating to the Fund included in the Corporation's
Registration Statement on Form N-1A, as amended from time to time, (the
"Registration Statement") filed by the Corporation under the Investment Company
Act of 1940, as amended, (the "1940 Act") and the Securities Act of 1933, as
amended. Copies of the documents referred to in the preceding sentence have been
furnished to you by the Corporation. The Corporation has also furnished you with
copies properly certified or authenticated of each of the following additional
documents related to the Corporation and the Fund:
(a) The Articles dated June 23, 1975, as amended to date.
(b) By-Laws of the Corporation as in effect on the date hereof (the "By-Laws").
(c) Resolutions of the Directors of the Corporation and the shareholders of the
Fund selecting you as investment manager and approving the form of this
Agreement.
<PAGE>
The Corporation will furnish you from time to time with copies, properly
certified or authenticated, of all amendments of or supplements, if any, to the
foregoing, including the Prospectus, the SAI and the Registration Statement.
2. Sublicense to Use the Scudder Trademarks. As exclusive licensee of the
rights to use and sublicense the use of the "Scudder," "Scudder Kemper
Investments, Inc." and "Scudder, Stevens & Clark, Inc." trademarks (together,
the "Scudder Marks"), you hereby grant the Corporation a nonexclusive right and
sublicense to use (i) the "Scudder" name and mark as part of the Corporation's
name (the "Fund Name"), and (ii) the Scudder Marks in connection with the
Corporation's investment products and services, in each case only for so long as
this Agreement, any other investment management agreement between you (or any
organization which shall have succeeded to your business as investment manager
("your Successor")) and the Corporation, or any extension, renewal or amendment
hereof or thereof remains in effect, and only for so long as you are a licensee
of the Scudder Marks, provided however, that you agree to use your best efforts
to maintain your license to use and sublicense the Scudder Marks. The
Corporation agrees that it shall have no right to sublicense or assign rights to
use the Scudder Marks, shall acquire no interest in the Scudder Marks other than
the rights granted herein, that all of the Corporation's uses of the Scudder
Marks shall inure to the benefit of Scudder Trust Company as owner and licensor
of the Scudder Marks (the "Trademark Owner"), and that the Corporation shall not
challenge the validity of the Scudder Marks or the Trademark Owner's ownership
thereof. The Corporation further agrees that all services and products it offers
in connection with the Scudder Marks shall meet commercially reasonable
standards of quality, as may be determined by you or the Trademark Owner from
time to time, provided that you acknowledge that the services and products the
Corporation rendered during the one-year period preceding the date of this
Agreement are acceptable. At your reasonable request, the Corporation shall
cooperate with you and the Trademark Owner and shall execute and deliver any and
all documents necessary to maintain and protect (including but not limited to in
connection with any trademark infringement action) the Scudder Marks and/or
enter the Corporation as a registered user thereof. At such time as this
Agreement or any other investment management agreement shall no longer be in
effect between you (or your Successor) and the Corporation, or you no longer are
a licensee of the Scudder Marks, the Corporation shall (to the extent that, and
as soon as, it lawfully can) cease to use the Fund Name or any other name
indicating that it is advised by, managed by or otherwise connected with you (or
your Successor) or the Trademark Owner. In no event shall the Corporation use
the Scudder Marks or any other name or mark confusingly similar thereto
(including, but not limited to, any name or mark that includes the name
"Scudder") if this Agreement or any other investment advisory agreement between
you (or your Successor) and the Fund is terminated.
3. Portfolio Management Services. As manager of the assets of the Fund, you
shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations thereunder; and all other
applicable federal and state laws and regulations of which you have knowledge;
subject always to policies and instructions adopted by the Corporation's Board
of Directors. In connection therewith, you shall use reasonable efforts to
manage the Fund so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Fund shall have
the benefit of the investment analysis and research, the review of current
economic conditions and trends and the consideration of long-range investment
policy generally available to your investment advisory clients. In managing the
Fund in accordance with the requirements set forth in this section 3, you shall
be entitled to receive and act upon advice of counsel to the Corporation or
counsel to you. You shall also make available to the Corporation promptly upon
request all of the Fund's investment records and ledgers as are necessary to
assist the Corporation in complying with the requirements of the 1940 Act and
2
<PAGE>
other applicable laws. To the extent required by law, you shall furnish to
regulatory authorities having the requisite authority any information or reports
in connection with the services provided pursuant to this Agreement which may be
requested in order to ascertain whether the operations of the Corporation are
being conducted in a manner consistent with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
the Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Corporation's Board of Directors periodic reports
on the investment performance of the Fund and on the performance of your
obligations pursuant to this Agreement, and you shall supply such additional
reports and information as the Corporation's officers or Board of Directors
shall reasonably request.
4. Administrative Services. In addition to the portfolio management
services specified above in section 3, you shall furnish at your expense for the
use of the Fund such office space and facilities in the United States as the
Fund may require for its reasonable needs, and you (or one or more of your
affiliates designated by you) shall render to the Corporation administrative
services on behalf of the Fund necessary for operating as an open- end
investment company and not provided by persons not parties to this Agreement
including, but not limited to, preparing reports to and meeting materials for
the Corporation's Board of Directors and reports and notices to Fund
shareholders; supervising, negotiating contractual arrangements with, to the
extent appropriate, and monitoring the performance of, accounting agents,
custodians, depositories, transfer agents and pricing agents, accountants,
attorneys, printers, underwriters, brokers and dealers, insurers and other
persons in any capacity deemed to be necessary or desirable to Fund operations;
preparing and making filings with the Securities and Exchange Commission (the
"SEC") and other regulatory and self-regulatory organizations, including, but
not limited to, preliminary and definitive proxy materials, post-effective
amendments to the Registration Statement, semi-annual reports on Form N-SAR and
notices pursuant to Rule 24f-2 under the 1940 Act; overseeing the tabulation of
proxies by the Fund's transfer agent; assisting in the preparation and filing of
the Fund's federal, state and local tax returns; preparing and filing the Fund's
federal excise tax return pursuant to Section 4982 of the Code; providing
assistance with investor and public relations matters; monitoring the valuation
of portfolio securities and the calculation of net asset value; monitoring the
registration of Shares of the Fund under applicable federal and state securities
laws; maintaining or causing to be maintained for the Fund all books, records
and reports and any other information required under the 1940 Act, to the extent
that such books, records and reports and other information are not maintained by
the Fund's custodian or other agents of the Fund; assisting in establishing the
accounting policies of the Fund; assisting in the resolution of accounting
issues that may arise with respect to the Fund's operations and consulting with
the Fund's independent accountants, legal counsel and the Fund's other agents as
necessary in connection therewith; establishing and monitoring the Fund's
operating expense budgets; reviewing the Fund's bills; processing the payment of
bills that have been approved by an authorized person; assisting the Fund in
determining the amount of dividends and distributions available to be paid by
the Fund to its shareholders, preparing and arranging for the printing of
dividend notices to shareholders, and providing the transfer and dividend paying
agent, the custodian, and the accounting agent with such information as is
required for such parties to effect the payment of dividends and distributions;
and otherwise assisting the Corporation as it may reasonably request in the
conduct of the Fund's business, subject to the direction and control of the
3
<PAGE>
Corporation's Board of Directors. Nothing in this Agreement shall be deemed to
shift to you or to diminish the obligations of any agent of the Fund or any
other person not a party to this Agreement which is obligated to provide
services to the Fund.
5. Allocation of Charges and Expenses. Except as otherwise specifically
provided in this section 5, you shall pay the compensation and expenses of all
Directors, officers and executive employees of the Corporation (including the
Fund's share of payroll taxes) who are affiliated persons of you, and you shall
make available, without expense to the Fund, the services of such of your
directors, officers and employees as may duly be elected officers of the
Corporation, subject to their individual consent to serve and to any limitations
imposed by law. You shall provide at your expense the portfolio management
services described in section 3 hereof and the administrative services described
in section 4 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 5. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Directors and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out-of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Corporation; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent, custodians,
subcustodians, transfer agents, dividend disbursing agents and registrars;
payment for portfolio pricing or valuation services to pricing agents,
accountants, bankers and other specialists, if any; expenses of preparing share
certificates and, except as provided below in this section 5, other expenses in
connection with the issuance, offering, distribution, sale, redemption or
repurchase of securities issued by the Fund; expenses relating to investor and
public relations; expenses and fees of registering or qualifying Shares of the
Fund for sale; interest charges, bond premiums and other insurance expense;
freight, insurance and other charges in connection with the shipment of the
Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Corporation business) of Directors,
officers and employees of the Corporation who are not affiliated persons of you;
brokerage commissions or other costs of acquiring or disposing of any portfolio
securities of the Fund; expenses of printing and distributing reports, notices
and dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of the Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Directors and officers of the Corporation; costs of
shareholders' and other meetings; and travel expenses (or an appropriate portion
thereof) of Directors and officers of the Corporation who are directors,
officers or employees of you to the extent that such expenses relate to
attendance at meetings of the Board of Directors of the Corporation or any
committees thereof or advisors thereto held outside of Boston, Massachusetts or
New York, New York.
You shall not be required to pay expenses of any activity which is
primarily intended to result in sales of Shares of the Fund if and to the extent
that (i) such expenses are required to be borne by a principal underwriter which
acts as the distributor of the Fund's Shares pursuant to an underwriting
agreement which provides that the underwriter shall assume some or all of such
expenses, or (ii) the Corporation on behalf of the Fund shall have adopted a
plan in conformity with Rule 12b-1 under the 1940 Act providing that the Fund
(or some other party) shall assume some or all of such expenses. You shall be
required to pay such of the foregoing sales expenses as are not required to be
paid by the principal underwriter pursuant to the underwriting agreement or are
4
<PAGE>
not permitted to be paid by the Fund (or some other party) pursuant to such a
plan.
6. Management Fee. For all services to be rendered, payments to be made and
costs to be assumed by you as provided in sections 3, 4 and 5 hereof, the
Corporation on behalf of the Fund shall pay you in United States Dollars on the
last day of each month the unpaid balance of a fee equal to the excess of 1/12
of 1.00 percent of the average daily net assets as defined below of the Fund for
such month over any compensation waived by you from time to time (as more fully
described below). You shall be entitled to receive during any month such interim
payments of your fee hereunder as you shall request, provided that no such
payment shall exceed 75 percent of the amount of your fee then accrued on the
books of the Fund and unpaid.
The "average daily net assets" of the Fund shall mean the average of the
values placed on the Fund's net assets as of 4:00 p.m. (New York time) on each
day on which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c- 1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of the Fund shall always be determined
pursuant to the applicable provisions of the Articles and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 6, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of 4:00 p.m. (New York time), or as of such other time as the value of
the net assets of the Fund's portfolio may be lawfully determined on that day.
If the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of this
section 6.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Fund's expenses, as if such waiver
or limitation were fully set forth herein.
7. Avoidance of Inconsistent Position; Services Not Exclusive. In
connection with purchases or sales of portfolio securities and other investments
for the account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
Your services to the Fund pursuant to this Agreement are not to be deemed
to be exclusive and it is understood that you may render investment advice,
management and services to others. In acting under this Agreement, you shall be
an independent contractor and not an agent of the Corporation. Whenever the Fund
and one or more other accounts or investment companies advised by the Manager
have available funds for investment, investments suitable and appropriate for
each shall be allocated in accordance with procedures believed by the Manager to
be equitable to each entity. Similarly, opportunities to sell securities shall
be allocated in a manner believed by the Manager to be equitable. The Fund
5
<PAGE>
recognizes that in some cases this procedure may adversely affect the size of
the position that may be acquired or disposed of for the Fund.
8. Limitation of Liability of Manager. As an inducement to your undertaking
to render services pursuant to this Agreement, the Corporation agrees that you
shall not be liable under this Agreement for any error of judgment or mistake of
law or for any loss suffered by the Fund in connection with the matters to which
this Agreement relates, provided that nothing in this Agreement shall be deemed
to protect or purport to protect you against any liability to the Corporation,
the Fund or its shareholders to which you would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of your
duties, or by reason of your reckless disregard of your obligations and duties
hereunder. Any person, even though also employed by you, who may be or become an
employee of and paid by the Fund shall be deemed, when acting within the scope
of his or her employment by the Fund, to be acting in such employment solely for
the Fund and not as your employee or agent.
9. Duration and Termination of This Agreement. This Agreement shall remain
in force until September 30, 1999, and continue in force from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually (a) by the vote of a majority of the Directors who are not
parties to this Agreement or interested persons of any party to this Agreement,
cast in person at a meeting called for the purpose of voting on such approval,
and (b) by the Directors of the Corporation, or by the vote of a majority of the
outstanding voting securities of the Fund. The aforesaid requirement that
continuance of this Agreement be "specifically approved at least annually" shall
be construed in a manner consistent with the 1940 Act and the rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
This Agreement may be terminated with respect to the Fund at any time,
without the payment of any penalty, by the vote of a majority of the outstanding
voting securities of the Fund or by the Corporation's Board of Directors on 60
days' written notice to you, or by you on 60 days' written notice to the
Corporation. This Agreement shall terminate automatically in the event of its
assignment.
10. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement shall be
effective until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
11. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
In interpreting the provisions of this Agreement, the definitions contained
in Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
6
<PAGE>
This Agreement shall be construed in accordance with the laws of the State
of Maryland, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, or in a manner which would cause the Fund to
fail to comply with the requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Corporation on behalf of the Fund.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Corporation, whereupon this letter shall become a binding
contract effective as of the date of this Agreement.
Yours very truly,
SCUDDER INTERNATIONAL FUND,
INC., on behalf of
Scudder International Growth
Fund
By:/s/Nicholas Bratt
-------------------------------------
President
The foregoing Agreement is hereby accepted as of the date
hereof.
SCUDDER KEMPER INVESTMENTS,
INC.
By:/s/Benjamin Thorndike
--------------------------------------
Managing Director
Scudder International Fund, Inc.
345 Park Avenue
New York, New York 10154
June 29, 1998
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Scudder International Value Fund
Ladies and Gentlemen:
Scudder International Fund, Inc. (the "Corporation") has been established
as a Maryland corporation to engage in the business of an investment company.
Pursuant to the Corporation's Articles of Incorporation, as amended from
time-to-time (the "Articles"), the Board of Directors has divided the
Corporation's shares of capital stock, par value $.01 per share, (the "Shares")
into separate series, or funds, including Scudder International Value Fund (the
"Fund"). Series may be abolished and dissolved, and additional series
established, from time to time by action of the Directors.
The Corporation, on behalf of the Fund, has selected you to act as the sole
investment manager of the Fund and to provide certain other services, as more
fully set forth below, and you have indicated that you are willing to act as
such investment manager and to perform such services under the terms and
conditions hereinafter set forth. Accordingly, the Corporation on behalf of the
Fund agrees with you as follows:
1. Delivery of Documents. The Corporation engages in the business of
investing and reinvesting the assets of the Fund in the manner and in accordance
with the investment objectives, policies and restrictions specified in the
currently effective Prospectus (the "Prospectus") and Statement of Additional
Information (the "SAI") relating to the Fund included in the Corporation's
Registration Statement on Form N-1A, as amended from time to time, (the
"Registration Statement") filed by the Corporation under the Investment Company
Act of 1940, as amended, (the "1940 Act") and the Securities Act of 1933, as
amended. Copies of the documents referred to in the preceding sentence have been
furnished to you by the Corporation. The Corporation has also furnished you with
copies properly certified or authenticated of each of the following additional
documents related to the Corporation and the Fund:
(a) The Articles dated June 23, 1975, as amended to date.
(b) By-Laws of the Corporation as in effect on the date hereof (the "By-Laws").
(c) Resolutions of the Directors of the Corporation and the shareholders of the
Fund selecting you as investment manager and approving the form of this
Agreement.
<PAGE>
The Corporation will furnish you from time to time with copies, properly
certified or authenticated, of all amendments of or supplements, if any, to the
foregoing, including the Prospectus, the SAI and the Registration Statement.
2. Sublicense to Use the Scudder Trademarks. As exclusive licensee of the
rights to use and sublicense the use of the "Scudder," "Scudder Kemper
Investments, Inc." and "Scudder, Stevens & Clark, Inc." trademarks (together,
the "Scudder Marks"), you hereby grant the Corporation a nonexclusive right and
sublicense to use (i) the "Scudder" name and mark as part of the Corporation's
name (the "Fund Name"), and (ii) the Scudder Marks in connection with the
Corporation's investment products and services, in each case only for so long as
this Agreement, any other investment management agreement between you (or any
organization which shall have succeeded to your business as investment manager
("your Successor")) and the Corporation, or any extension, renewal or amendment
hereof or thereof remains in effect, and only for so long as you are a licensee
of the Scudder Marks, provided however, that you agree to use your best efforts
to maintain your license to use and sublicense the Scudder Marks. The
Corporation agrees that it shall have no right to sublicense or assign rights to
use the Scudder Marks, shall acquire no interest in the Scudder Marks other than
the rights granted herein, that all of the Corporation's uses of the Scudder
Marks shall inure to the benefit of Scudder Trust Company as owner and licensor
of the Scudder Marks (the "Trademark Owner"), and that the Corporation shall not
challenge the validity of the Scudder Marks or the Trademark Owner's ownership
thereof. The Corporation further agrees that all services and products it offers
in connection with the Scudder Marks shall meet commercially reasonable
standards of quality, as may be determined by you or the Trademark Owner from
time to time, provided that you acknowledge that the services and products the
Corporation rendered during the one-year period preceding the date of this
Agreement are acceptable. At your reasonable request, the Corporation shall
cooperate with you and the Trademark Owner and shall execute and deliver any and
all documents necessary to maintain and protect (including but not limited to in
connection with any trademark infringement action) the Scudder Marks and/or
enter the Corporation as a registered user thereof. At such time as this
Agreement or any other investment management agreement shall no longer be in
effect between you (or your Successor) and the Corporation, or you no longer are
a licensee of the Scudder Marks, the Corporation shall (to the extent that, and
as soon as, it lawfully can) cease to use the Fund Name or any other name
indicating that it is advised by, managed by or otherwise connected with you (or
your Successor) or the Trademark Owner. In no event shall the Corporation use
the Scudder Marks or any other name or mark confusingly similar thereto
(including, but not limited to, any name or mark that includes the name
"Scudder") if this Agreement or any other investment advisory agreement between
you (or your Successor) and the Fund is terminated.
3. Portfolio Management Services. As manager of the assets of the Fund, you
shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations thereunder; and all other
applicable federal and state laws and regulations of which you have knowledge;
subject always to policies and instructions adopted by the Corporation's Board
of Directors. In connection therewith, you shall use reasonable efforts to
manage the Fund so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Fund shall have
the benefit of the investment analysis and research, the review of current
economic conditions and trends and the consideration of long-range investment
policy generally available to your investment advisory clients. In managing the
Fund in accordance with the requirements set forth in this section 3, you shall
be entitled to receive and act upon advice of counsel to the Corporation or
counsel to you. You shall also make available to the Corporation promptly upon
request all of the Fund's investment records and ledgers as are necessary to
assist the Corporation in complying with the requirements of the 1940 Act and
2
<PAGE>
other applicable laws. To the extent required by law, you shall furnish to
regulatory authorities having the requisite authority any information or reports
in connection with the services provided pursuant to this Agreement which may be
requested in order to ascertain whether the operations of the Corporation are
being conducted in a manner consistent with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
the Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Corporation's Board of Directors periodic reports
on the investment performance of the Fund and on the performance of your
obligations pursuant to this Agreement, and you shall supply such additional
reports and information as the Corporation's officers or Board of Directors
shall reasonably request.
4. Administrative Services. In addition to the portfolio management
services specified above in section 3, you shall furnish at your expense for the
use of the Fund such office space and facilities in the United States as the
Fund may require for its reasonable needs, and you (or one or more of your
affiliates designated by you) shall render to the Corporation administrative
services on behalf of the Fund necessary for operating as an open- end
investment company and not provided by persons not parties to this Agreement
including, but not limited to, preparing reports to and meeting materials for
the Corporation's Board of Directors and reports and notices to Fund
shareholders; supervising, negotiating contractual arrangements with, to the
extent appropriate, and monitoring the performance of, accounting agents,
custodians, depositories, transfer agents and pricing agents, accountants,
attorneys, printers, underwriters, brokers and dealers, insurers and other
persons in any capacity deemed to be necessary or desirable to Fund operations;
preparing and making filings with the Securities and Exchange Commission (the
"SEC") and other regulatory and self-regulatory organizations, including, but
not limited to, preliminary and definitive proxy materials, post-effective
amendments to the Registration Statement, semi-annual reports on Form N-SAR and
notices pursuant to Rule 24f-2 under the 1940 Act; overseeing the tabulation of
proxies by the Fund's transfer agent; assisting in the preparation and filing of
the Fund's federal, state and local tax returns; preparing and filing the Fund's
federal excise tax return pursuant to Section 4982 of the Code; providing
assistance with investor and public relations matters; monitoring the valuation
of portfolio securities and the calculation of net asset value; monitoring the
registration of Shares of the Fund under applicable federal and state securities
laws; maintaining or causing to be maintained for the Fund all books, records
and reports and any other information required under the 1940 Act, to the extent
that such books, records and reports and other information are not maintained by
the Fund's custodian or other agents of the Fund; assisting in establishing the
accounting policies of the Fund; assisting in the resolution of accounting
issues that may arise with respect to the Fund's operations and consulting with
the Fund's independent accountants, legal counsel and the Fund's other agents as
necessary in connection therewith; establishing and monitoring the Fund's
operating expense budgets; reviewing the Fund's bills; processing the payment of
bills that have been approved by an authorized person; assisting the Fund in
determining the amount of dividends and distributions available to be paid by
the Fund to its shareholders, preparing and arranging for the printing of
dividend notices to shareholders, and providing the transfer and dividend paying
agent, the custodian, and the accounting agent with such information as is
required for such parties to effect the payment of dividends and distributions;
and otherwise assisting the Corporation as it may reasonably request in the
conduct of the Fund's business, subject to the direction and control of the
3
<PAGE>
Corporation's Board of Directors. Nothing in this Agreement shall be deemed to
shift to you or to diminish the obligations of any agent of the Fund or any
other person not a party to this Agreement which is obligated to provide
services to the Fund.
5. Allocation of Charges and Expenses. Except as otherwise specifically
provided in this section 5, you shall pay the compensation and expenses of all
Directors, officers and executive employees of the Corporation (including the
Fund's share of payroll taxes) who are affiliated persons of you, and you shall
make available, without expense to the Fund, the services of such of your
directors, officers and employees as may duly be elected officers of the
Corporation, subject to their individual consent to serve and to any limitations
imposed by law. You shall provide at your expense the portfolio management
services described in section 3 hereof and the administrative services described
in section 4 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 5. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Directors and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out-of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Corporation; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent, custodians,
subcustodians, transfer agents, dividend disbursing agents and registrars;
payment for portfolio pricing or valuation services to pricing agents,
accountants, bankers and other specialists, if any; expenses of preparing share
certificates and, except as provided below in this section 5, other expenses in
connection with the issuance, offering, distribution, sale, redemption or
repurchase of securities issued by the Fund; expenses relating to investor and
public relations; expenses and fees of registering or qualifying Shares of the
Fund for sale; interest charges, bond premiums and other insurance expense;
freight, insurance and other charges in connection with the shipment of the
Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Corporation business) of Directors,
officers and employees of the Corporation who are not affiliated persons of you;
brokerage commissions or other costs of acquiring or disposing of any portfolio
securities of the Fund; expenses of printing and distributing reports, notices
and dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of the Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Directors and officers of the Corporation; costs of
shareholders' and other meetings; and travel expenses (or an appropriate portion
thereof) of Directors and officers of the Corporation who are directors,
officers or employees of you to the extent that such expenses relate to
attendance at meetings of the Board of Directors of the Corporation or any
committees thereof or advisors thereto held outside of Boston, Massachusetts or
New York, New York.
You shall not be required to pay expenses of any activity which is
primarily intended to result in sales of Shares of the Fund if and to the extent
that (i) such expenses are required to be borne by a principal underwriter which
acts as the distributor of the Fund's Shares pursuant to an underwriting
agreement which provides that the underwriter shall assume some or all of such
expenses, or (ii) the Corporation on behalf of the Fund shall have adopted a
plan in conformity with Rule 12b-1 under the 1940 Act providing that the Fund
(or some other party) shall assume some or all of such expenses. You shall be
required to pay such of the foregoing sales expenses as are not required to be
paid by the principal underwriter pursuant to the underwriting agreement or are
4
<PAGE>
not permitted to be paid by the Fund (or some other party) pursuant to such a
plan.
6. Management Fee. For all services to be rendered, payments to be made and
costs to be assumed by you as provided in sections 3, 4 and 5 hereof, the
Corporation on behalf of the Fund shall pay you in United States Dollars on the
last day of each month the unpaid balance of a fee equal to the excess of 1/12
of 1.00 percent of the average daily net assets as defined below of the Fund for
such month over any compensation waived by you from time to time (as more fully
described below). You shall be entitled to receive during any month such interim
payments of your fee hereunder as you shall request, provided that no such
payment shall exceed 75 percent of the amount of your fee then accrued on the
books of the Fund and unpaid.
The "average daily net assets" of the Fund shall mean the average of the
values placed on the Fund's net assets as of 4:00 p.m. (New York time) on each
day on which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c- 1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of the Fund shall always be determined
pursuant to the applicable provisions of the Articles and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 6, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of 4:00 p.m. (New York time), or as of such other time as the value of
the net assets of the Fund's portfolio may be lawfully determined on that day.
If the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of this
section 6.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Fund's expenses, as if such waiver
or limitation were fully set forth herein.
7. Avoidance of Inconsistent Position; Services Not Exclusive. In
connection with purchases or sales of portfolio securities and other investments
for the account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
Your services to the Fund pursuant to this Agreement are not to be deemed
to be exclusive and it is understood that you may render investment advice,
management and services to others. In acting under this Agreement, you shall be
an independent contractor and not an agent of the Corporation. Whenever the Fund
and one or more other accounts or investment companies advised by the Manager
have available funds for investment, investments suitable and appropriate for
each shall be allocated in accordance with procedures believed by the Manager to
be equitable to each entity. Similarly, opportunities to sell securities shall
be allocated in a manner believed by the Manager to be equitable. The Fund
5
<PAGE>
recognizes that in some cases this procedure may adversely affect the size of
the position that may be acquired or disposed of for the Fund.
8. Limitation of Liability of Manager. As an inducement to your undertaking
to render services pursuant to this Agreement, the Corporation agrees that you
shall not be liable under this Agreement for any error of judgment or mistake of
law or for any loss suffered by the Fund in connection with the matters to which
this Agreement relates, provided that nothing in this Agreement shall be deemed
to protect or purport to protect you against any liability to the Corporation,
the Fund or its shareholders to which you would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of your
duties, or by reason of your reckless disregard of your obligations and duties
hereunder. Any person, even though also employed by you, who may be or become an
employee of and paid by the Fund shall be deemed, when acting within the scope
of his or her employment by the Fund, to be acting in such employment solely for
the Fund and not as your employee or agent.
9. Duration and Termination of This Agreement. This Agreement shall remain
in force until September 30, 1999, and continue in force from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually (a) by the vote of a majority of the Directors who are not
parties to this Agreement or interested persons of any party to this Agreement,
cast in person at a meeting called for the purpose of voting on such approval,
and (b) by the Directors of the Corporation, or by the vote of a majority of the
outstanding voting securities of the Fund. The aforesaid requirement that
continuance of this Agreement be "specifically approved at least annually" shall
be construed in a manner consistent with the 1940 Act and the rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
This Agreement may be terminated with respect to the Fund at any time,
without the payment of any penalty, by the vote of a majority of the outstanding
voting securities of the Fund or by the Corporation's Board of Directors on 60
days' written notice to you, or by you on 60 days' written notice to the
Corporation. This Agreement shall terminate automatically in the event of its
assignment.
10. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement shall be
effective until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
11. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
In interpreting the provisions of this Agreement, the definitions contained
in Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
6
<PAGE>
This Agreement shall be construed in accordance with the laws of the State
of Maryland, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, or in a manner which would cause the Fund to
fail to comply with the requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Corporation on behalf of the Fund.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Corporation, whereupon this letter shall become a binding
contract effective as of the date of this Agreement.
Yours very truly,
SCUDDER INTERNATIONAL FUND,
INC., on behalf of
Scudder International Value
Fund
By:/s/Nicholas Bratt
---------------------------------
President
The foregoing Agreement is hereby accepted as of the date
hereof.
SCUDDER KEMPER INVESTMENTS,
INC.
By:/s/Benjamin Thorndike
-----------------------------------
Managing Director
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Scudder International Fund, Inc.:
We consent to the incorporation by reference in Post-Effective Amendment No. 65
to the Registration Statement of Scudder International Fund, Inc. on Form N-1A
of our report dated April 23, 1998 on our audit of the financial statements and
financial highlights of Scudder International Growth and Income Fund, which
report is included in the Annual Report to Shareholders for the period ended
February 28, 1998 which is incorporated by reference in the Post-Effective
Amendment to the Registration Statement.
We also consent to the reference to our Firm under the caption "Experts".
/s/COOPERS & LYBRAND L.L.P.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
June 26, 1998
Consent of Independent Accountants
To the Board of Directors of Scudder International Fund, Inc.:
We consent to the inclusion in Post-Effective Amendment No. 65 to the
Registration Statement of Scudder International Fund, Inc. on Form N-1A, of our
reports dated June 25, 1998 on our audits of the Statements of Assets and
Liabilities of Scudder International Value Fund and Scudder International Growth
Fund as of June 24, 1998, which are included in the Post-Effective Amendment to
the Registration Statement. We also consent to the reference to our Firm under
the caption, "Additional Information."
/s/Coopers & Lybrand L.L.P.
Boston, Massachusetts Coopers & Lybrand L.L.P.
June 25, 1998
