-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, UQvSqZLtCyHKffShWijY6arfNnIgdDol8QZKlmMqEJJtir0Tc3QVQwapF12g5rgT 1zThm9I68LEvV5w3x0CcRg== 0000067813-95-000003.txt : 19950615 0000067813-95-000003.hdr.sgml : 19950615 ACCESSION NUMBER: 0000067813-95-000003 CONFORMED SUBMISSION TYPE: NSAR-B PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950228 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCUDDER NEW ASIA FUND INC CENTRAL INDEX KEY: 0000798738 STANDARD INDUSTRIAL CLASSIFICATION: 0000 IRS NUMBER: 133410777 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: NSAR-B SEC ACT: 1940 Act SEC FILE NUMBER: 811-04789 FILM NUMBER: 95517145 BUSINESS ADDRESS: STREET 1: 345 PARK AVE CITY: NEW YORK STATE: NY ZIP: 10154 BUSINESS PHONE: 2123266200 FORMER COMPANY: FORMER CONFORMED NAME: JAPAN ASIA SPECIAL FUND INC DATE OF NAME CHANGE: 19870518 NSAR-B 1 N-SAR (3.0.A) PAGE 1 000 B000000 12/31/94 000 C000000 798738 000 D000000 N 000 E000000 NF 000 F000000 Y 000 G000000 N 000 H000000 N 000 I000000 3.0.a 000 J000000 U 001 A000000 SCUDDER NEW ASIA FUND, INC. 001 B000000 811-4789 001 C000000 6179511848 002 A000000 345 PARK AVENUE 002 B000000 NEW YORK 002 C000000 NY 002 D010000 10154 003 000000 N 004 000000 N 005 000000 N 006 000000 N 007 A000000 N 007 B000000 0 007 C010100 1 007 C010200 2 007 C010300 3 007 C010400 4 007 C010500 5 007 C010600 6 007 C010700 7 007 C010800 8 007 C010900 9 007 C011000 10 008 A000001 SCUDDER, STEVENS & CLARK, INC. 008 B000001 A 008 C000001 801-252 008 D010001 NEW YORK 008 D020001 NY 008 D030001 10154 018 000000 Y 019 A000000 Y 019 B000000 36 019 C000000 SCUDDERRRR 020 A000001 BZW SECURITIES 020 C000001 168 020 A000002 CREDIT LYONNAISE 020 C000002 166 020 A000003 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0.0000 074 X000000 0 074 Y000000 0 075 A000000 0 075 B000000 190551 076 000000 20.38 077 A000000 Y 077 B000000 Y 077 C000000 Y 077 D000000 N 077 E000000 N 077 F000000 N 077 G000000 N 077 H000000 N 077 I000000 N 077 J000000 N 077 K000000 N 077 L000000 N 077 M000000 N 077 N000000 N 077 O000000 N 077 P000000 N 077 Q010000 Y 078 000000 N 080 A000000 ICI MUTUAL INSURANCE 080 C000000 60000 081 A000000 Y 081 B000000 63 082 A000000 N 082 B000000 0 083 A000000 N 083 B000000 0 084 A000000 N 084 B000000 0 085 A000000 Y 085 B000000 N 086 A010000 1305 086 A020000 30818 086 B010000 0 PAGE 6 086 B020000 0 086 C010000 0 086 C020000 0 086 D010000 0 086 D020000 0 086 E010000 0 086 E020000 0 086 F010000 0 086 F020000 0 SIGNATURE THOMAS F. MCDONOUGH TITLE SECRETARY EX-99.77B 2 INTERNAL CONTROL REPORT Exhibit 77(B) REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Scudder New Asia Fund, Inc.: In planning and performing our audit of the financial statements and financial highlights of Scudder New Asia Fund, Inc. (the Fund) for the year ended December 31, 1994, we considered its internal control structure, including procedures for safeguarding securities, in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and financial highlights and to comply with the requirements of Form N-SAR, not to provide assurance on the internal control structure. The management of Scudder New Asia Fund, Inc. is responsible for establishing and maintaining an internal control structure. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of internal control structure policies and procedures. Two of the objectives of an internal control structure are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition and that transactions are executed in accordance with management's authorization and recorded properly to permit preparation of financial statements in conformity with generally accepted accounting principles. Because of inherent limitations in any internal control structure, errors or irregularities may occur and not be detected. Also, projection of any evaluation of the structure to future periods is subject to the risk that it may become inadequate because of changes in conditions or that the effectiveness of the design and operations may deteriorate. Our consideration of the Fund's internal control structure would not necessarily disclose all matters in the internal control structure that might be material weaknesses under standards established by the American Institute of Certified Public Accountants. A material weakness is a condition in which the design or operation of the specific internal control structure elements does not reduce to a relatively low level the risk that errors or irregularities in amounts that would be material in relation to the financial statements and financial highlights being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. However, we noted no matters involving the internal control structure, including procedures for safeguarding securities, that we consider to be material weaknesses, as defined above, as of December 31, 1994. This report is intended solely for the information and use of management of Scudder New Asia Fund, Inc. and the Securities and Exchange Commission. /s/COOPERS & LYBRAND L.L.P. Boston, Massachusetts COOPERS & LYBRAND L.L.P. February 10, 1995 EX-99 3 PROXY SCUDDER NEW ASIA FUND 8/29/94 Scudder New Asia Fund, Inc. 345 Park Avenue (at 51st Street) New York, New York 10154 (800) 349-4281 August 29, 1994 To the Stockholders: The Annual Meeting of Stockholders of Scudder New Asia Fund, Inc. (the "Fund") is to be held at 1:30 p.m., eastern time, on Thursday, October 13, 1994 at the offices of Scudder, Stevens & Clark, Inc., 25th Floor, 345 Park Avenue (at 51st Street), New York, New York 10154. Stockholders who are unable to attend this meeting are strongly encouraged to vote by proxy, which is customary in corporate meetings of this kind. A Proxy Statement regarding the meeting, a proxy card so your vote may be cast and a postage-prepaid envelope for returning your proxy card are enclosed. At the Annual Meeting the stockholders will elect three Directors, consider the ratification of the selection of Coopers & Lybrand as independent accountants, consider the approval of the continuance of the Investment Advisory, Management and Administration Agreement between the Fund and its investment manager, Scudder, Stevens & Clark, Inc. and consider the elimination of two, and an amendment to one, of the Fund's fundamental investment policies. The stockholders present will hear a report on the Fund and there will be an opportunity to discuss matters of interest to you as a stockholder. Your Fund's Directors recommend that the stockholders vote in favor of each of the foregoing matters. Respectfully, /s/Nicholas Bratt /s/Edmond D. Villani Nicholas Bratt Edmond D. Villani President Chairman of the Board STOCKHOLDERS ARE URGED TO SIGN THE PROXY AND MAIL IT IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE SO AS TO ENSURE A QUORUM AT THE MEETING. THIS IS IMPORTANT WHETHER YOU OWN FEW OR MANY SHARES. SCUDDER NEW ASIA FUND, INC. Notice of Annual Meeting of Stockholders To the Stockholders of Scudder New Asia Fund, Inc.: Please take notice that the Annual Meeting of Stockholders of Scudder New Asia Fund, Inc. (the "Fund") has been called for 1:30 p.m., eastern time, on Thursday, October 13, 1994 at the offices of Scudder, Stevens & Clark, Inc., 25th Floor, 345 Park Avenue (at 51st Street), New York, New York 10154, for the following purposes: (1) To elect three Directors of the Fund to hold office for a term of three years or until their respective successors are duly elected and qualified. (2) To ratify or reject the action taken by the Board of Directors in selecting Coopers & Lybrand as independent accountants for the year ending December 31, 1994. (3) To approve or disapprove the continuance of the Investment Advisory, Management and Administration Agreement between the Fund and Scudder, Stevens & Clark, Inc. (4) To approve or disapprove the elimination of the Fund's fundamental investment policies regarding non-publicly traded securities. (5) To approve or disapprove an amendment to the Fund's fundamental investment policy regarding commodities and real estate. To transact such other business as may properly come before the meeting or any adjournments thereof. Holders of record of shares of common stock of the Fund at the close of business on August 16, 1994 are entitled to vote at the meeting and any adjournments thereof. By order of the Board of Directors, Thomas F. McDonough, Secretary August 29, 1994 IMPORTANT_We urge you to sign and date the enclosed proxy and return it in the enclosed addressed envelope which requires no postage and is intended for your convenience. Your prompt return of the enclosed proxy card may save the Fund the necessity and expense of further solicitations to ensure a quorum at the Annual Meeting. If you can attend the meeting and wish to vote your shares in person at that time, you will be able to do so. PROXY STATEMENT GENERAL This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of Scudder New Asia Fund, Inc. (the "Fund") for use at the Annual Meeting of Stockholders, to be held at 1:30 p.m., eastern time, on Thursday, October 13, 1994 at the offices of Scudder, Stevens & Clark, Inc. (the "Manager" or "Scudder"), 25th Floor, 345 Park Avenue (at 51st Street), New York, New York 10154, and at any adjournments thereof. This Proxy Statement, the Notice of Annual Meeting of Stockholders and the proxy card are first being mailed to stockholders on or about August 29, 1994. All properly executed proxies received in time for the meeting will be voted as specified in the proxy or, if no specification is made, in favor of each proposal referred to in the Proxy Statement. Any stockholder giving a proxy has the power to revoke it by mail (addressed to the Secretary at the principal executive office of the Fund, 345 Park Avenue, New York, New York 10154) or in person at the meeting, by executing a superseding proxy or by submitting a notice of revocation to the Fund. The presence at any stockholders' meeting, in person or by proxy, of stockholders entitled to cast a majority of the votes entitled to be cast shall be necessary and sufficient to constitute a quorum for the transaction of business. For purposes of determining the presence of a quorum for transacting business at the Annual Meeting, abstentions and broker "non-votes" will be treated as shares that are present but which have not been voted. Broker "non-votes" are proxies received by the Fund from brokers or nominees when the broker or nominee has neither received instructions from the beneficial owner or other persons entitled to vote nor has discretionary power to vote on a particular matter. Accordingly, stockholders are urged to forward their voting instructions promptly. Abstentions and broker non-votes will not be counted in favor of, but will have no other effect on, the vote for proposals (1) and (2) that require the approval of a majority of shares voting at the Annual Meeting. Abstentions and broker non-votes will have the effect of a "no" vote for proposals (3), (4) and (5) which require the approval of a specified percentage of the outstanding shares of the Fund or of such shares present at the Annual Meeting. Holders of record of the common stock of the Fund at the close of business on August 16, 1994 (the "Record Date") will be entitled to one vote per share on all business of the meeting and any adjournments. There were 8,423,056 shares of common stock outstanding on the Record Date. (1) ELECTION OF DIRECTORS Persons named as proxies in the accompanying form of proxy intend, in the absence of contrary instructions, to vote all proxies in favor of the election of the three nominees listed below as Directors of the Fund to serve for a term of three years or until their respective successors are duly elected and qualified. All nominees have consented to stand for election and to serve if elected. If any such nominee should be unable to serve, an event not now anticipated, the proxies will be voted for such person, if any, as shall be designated by the Board of Directors to replace any such nominee. Your Fund's Directors recommend that the stockholders vote in favor of the election of the nominees listed on the following page. Information Concerning Nominees The following table sets forth certain information concerning each of the nominees as a Director of the Fund. Each of the nominees is now a Director of the Fund. Unless otherwise noted, each of the nominees has engaged in the principal occupation listed in the following table for more than five years, but not necessarily in the same capacity. Class III_Nominees to serve until the 1997 Annual Meeting of Stockholders
Present Office with the Fund, if any; Principal Shares Occupation or Employment Year First Beneficially and Directorships in Became a Owned June 30, Percent Name (Age) Publicly Held Companies Director 1994 (1) of Class - - - ---------- ----------------------- --------- -------- -------- Edmond D. Chairman of the Board and 1990 3,333 less than Villani Director of the Fund; and 1/4 of 1% (47)*+ President and Managing Director of Scudder, Stevens & Clark, Inc. Juris Vice President, Director 1986 1,475 (3) less than Padegs and Assistant Secretary of 1/4 of 1% (62)*+ the Fund; and Managing Director of Scudder, Stevens & Clark, Inc. Robert J. Director of the Fund; 1994 _ _ Callander Executive-in-Residence, (63) Columbia Business School, Columbia University; Former Vice Chairman, Chemical Banking Corporation; Director, The ARA Group, Inc.; Barnes Group Inc.; Beneficial Corporation; Omnicom Group, Inc.; Member, Council on Foreign Relations. + Messrs. Padegs and Villani are members of the Executive Committee of the Fund.
Information Concerning Continuing Directors The Board of Directors is divided into three classes, each serving a term of three years. The terms of Classes I and II do not expire this year. The following table sets forth certain information regarding the Directors in such classes. Class I_Directors to serve until the 1995 Annual Meeting of Stockholders
Present Office with the Fund, if any; Principal Shares Occupation or Employment Year First Beneficially and Directorships in Became a Owned June 30, Percent Name (Age) Publicly Held Companies Director 1994 (1) of Class - - - ---------- ----------------------- --------- -------- -------- Daniel Director of the Fund; and 1991 21,372 (4) 0.2537% Pierce Chairman of the Board and (60)* Managing Director of Scudder, Stevens & Clark, Inc. Paul Director of the Fund; 1986 4,000 less than Bancroft Venture Capitalist and 1/4 of 1% III (64) Consultant since 1988; Retired President, Chief Executive Officer and Director of Bessemer Securities Corporation (private investment company); and Director of Albany International, Inc. (paper machine belt manufacturer), Western Atlas, Inc. (diversified oil services and industrial automation company) and Measurex Corp. (process control systems company). William H. Director of the Fund; 1986 1,599 (5) less than Gleysteen, President, The Japan 1/4 of 1% Jr. (68) Society, Inc. (1989- present); Vice President of Studies, Council on Foreign Relations (1987-89); and United States Ambassador to Korea (1978-81). Thomas J. Director of the Fund; 1994 - _ Devine (67) Consultant.
Class II_Directors to serve until the 1996 Annual Meeting of Stockholders
Present Office with the Fund, if any; Principal Shares Occupation or Employment Year First Beneficially and Directorships in Became a Owned June 30, Percent Name (Age) Publicly Held Companies Director 1994 (1) of Class - - - ---------- ----------------------- --------- -------- -------- Nicholas President and Director of 1986 2,416 less than Bratt (46)* the Fund; and Managing 1/4 of 1% Director of Scudder, Stevens & Clark, Inc. Wilson Director of the Fund; 1986 13,256 (2) less than Nolen (67) Consultant (June 1989 to 1/4 of 1% present); Corporate Vice President of Becton, Dickinson & Company (manufacturer of medical and scientific products) (until June 1989); and Director of Ecohealth, Inc. (biotechnology company). Hugh T. Director of the Fund; Co- 1993 1,343 less than Patrick Director, Pacific Basin 1/4 of 1% (64) Studies Program, Columbia University; Member, Center for Korean Research, East Asian Institute, Columbia University; Advisory Board, Pacific Basin Institute; ASEAN Economic Bulletin; Asia Society; Professor of Far Eastern Economics, Yale University (1968-1984). All Directors and Officers as a group 55,318 (6) 0.66% - - - ------------------ * Directors considered by the Fund and its counsel to be "interested persons" (which as used in this proxy statement is as defined in the Investment Company Act of 1940, as amended) of the Fund or of the Fund's Manager. Messrs. Bratt, Padegs, Pierce and Villani are deemed to be interested persons because of their affiliation with the Fund's manager, Scudder, Stevens & Clark, Inc., or because they are officers of the Fund or both. (1) The information as to beneficial ownership is based on statements furnished to the Fund by the nominees and Directors. Unless otherwise noted, beneficial ownership is based on sole voting and investment power. (2) Dr. Nolen's total includes 2,156 shares held by members of his family as to which he shares investment and voting power. (3) Mr. Padegs' total includes 800 shares held in a fiduciary capacity. (4) Mr. Pierce's total includes 19,322 shares held in a fiduciary capacity and 1,000 shares held by members of his family as to which he shares investment and voting power. (5) Mr. Gleysteen's total includes 1,344 shares held by members of his family as to which he shares investment and voting power. (6) The total for the group includes 29,714 shares held with sole investment and voting power and 4,499 shares held with shared investment and voting power.
The Directors and Officers of the Fund may also serve in similar capacities for other funds managed by Scudder. Section 30(f) of the Investment Company Act of 1940, as amended (the "1940 Act"), as applied to the Fund requires the Fund's Officers, Directors, Manager, affiliates of the Manager, and persons who beneficially own more than ten percent of a registered class of the Fund's outstanding securities ("reporting persons"), to file reports of ownership of the Fund's securities and changes in such ownership with the Securities and Exchange Commission (the "SEC") and The New York Stock Exchange. Such persons are required by SEC regulations to furnish the Fund with copies of all such filings. Based solely upon its review of the copies of such forms furnished to it, and written representations from certain reporting persons that no year-end reports were required for those persons, the Fund believes that during the fiscal year ended December 31, 1993, all filing requirements applicable to its reporting persons were complied with except that a monthly Statement of Changes in Beneficial Ownership on behalf of Scudder, Stevens & Clark, Inc. was filed late. Certain accounts for which the Manager acts as investment adviser owned 823,870 shares, in the aggregate, or 9.78% of the outstanding shares of the Fund on June 30, 1994. The Manager may be deemed to be the beneficial owner of such shares but disclaims any beneficial ownership in such shares. Except as noted above, to the best of the Fund's knowledge, as of June 30, 1994, no other person owned beneficially more than 5% of the Fund's outstanding shares. Honorary Director James W. Morley serves as Honorary Director of the Fund. Honorary Directors are invited to attend all Board meetings and to participate in Board discussions, but are not entitled to vote on any matter presented to the Board. Mr. Morley had served as Director of the Fund since 1986. Mr. Morley retired as Director in 1993 in accordance with the Board of Directors' retirement policy. Committees of the Board_Board Meetings The Board of Directors of the Fund met four times during the year ended December 31, 1993. Each Director attended at least 75% of the total number of meetings of the Board of Directors and of all committees of the Board on which they served as regular members, except for Mr. Bratt who attended 62.5%. The Valuation Committee is considered to consist of regular members and alternates. The Directors, in addition to an Executive Committee, have an Audit Committee and a Nominating Committee. Audit Committee The Board has an Audit Committee consisting of those Directors who are not interested persons of the Fund or of Scudder ("Noninterested Directors") as defined in the 1940 Act, which met once during the year ended December 31, 1993. The Audit Committee reviews with management and the independent accountants for the Fund, among other things, the scope of the audit and the controls of the Fund and its agents, reviews and approves in advance the type of services to be rendered by independent accountants, recommends the selection of independent accountants for the Fund to the Board and in general considers and reports to the Board on matters regarding the Fund's accounting and bookkeeping practices. Nominating Committee The Board has a Special Nominating Committee consisting of the Noninterested Directors which met twice during the year ended December 31, 1993. The Committee is charged with the duty of making all nominations for Noninterested Directors. Stockholders' recommendations as to nominees received by management are referred to the Committee for their consideration and action. The Committee met on April 14, 1994 to consider and to nominate the nominees set forth above. Executive Officers The following persons are Executive Officers of the Fund:
Present Office with the Fund; Year First Became Name (Age) Principal Occupation or Employment an Officer(1) ----------- ---------------------------------- ------------- Edmond D. Villani (47) Chairman of the Board; President 1990 and Managing Director of Scudder, Stevens & Clark, Inc. Nicholas Bratt (46) President; Managing Director of 1986 Scudder, Stevens & Clark, Inc. Elizabeth J. Allan (41) Vice President; Principal of 1989 Scudder, Stevens & Clark, Inc. Jerard K. Hartman (61) Vice President; Managing Director 1986 of Scudder, Stevens & Clark, Inc. Seung K. Kwak (33) Vice President; Managing Director 1993 of Scudder, Stevens & Clark, Inc. David S. Lee (60) Vice President; Managing Director 1986 of Scudder, Stevens & Clark, Inc. Pamela A. McGrath (40) Vice President and Assistant 1990 Treasurer; Principal of Scudder, Stevens & Clark, Inc. Juris Padegs (62) Vice President and Assistant 1986 Secretary; Managing Director of Scudder, Stevens & Clark, Inc. Edward J. O'Connell (49) Treasurer; Principal of Scudder, 1986 Stevens & Clark, Inc. Thomas F. McDonough (47) Secretary and Assistant Treasurer; 1986 Principal of Scudder, Stevens & Clark, Inc. Coleen Downs Dinneen (33) Assistant Secretary; Vice 1992 President of Scudder, Stevens & Clark, Inc. (1) The President, Treasurer and Secretary each holds office until a successor has been duly elected and qualified and all other officers hold office at the pleasure of the Directors.
Transactions with and Remuneration of Directors and Officers The aggregate direct remuneration by the Fund of Directors not affiliated with Scudder, Stevens & Clark, Inc. was $45,764, including expenses, during the year ended December 31, 1993. Each unaffiliated Director currently receives fees, paid by the Fund, of $750 per Directors' meeting attended and an annual Director's fee of $4,500. Effective October 1, 1994, the annual fee will be $6,000. Each Director also receives $250 per committee meeting attended (other than Audit Committee and contract meetings for each of which such Director receives a fee of $750). Scudder, Stevens & Clark, Inc., as the Fund's Investment Manager, supervises the Fund's investments, pays the compensation and certain expenses of its personnel who serve as Directors and Officers of the Fund and receives a management fee for its services. Several of the Fund's Officers and Directors are also officers, directors, employees or stockholders of the Manager and participate in the fees paid to that firm (see "Investment Manager," page 12), although the Fund makes no direct payments to them. Required Vote Election of each of the listed nominees for Director requires the affirmative vote of a majority of the votes cast at the meeting in person or by proxy. Your Fund's Directors recommend that stockholders vote in favor of each of the nominees. (2) RATIFICATION OR REJECTION OF THE SELECTION OF INDEPENDENT ACCOUNTANTS At a meeting held on July 19, 1994, the Board of Directors of the Fund, including a majority of the Noninterested Directors, selected Coopers & Lybrand to act as independent accountants for the Fund for the year ending December 31, 1994. Coopers & Lybrand are independent accountants and have advised the Fund that they have no direct financial interest or material indirect financial interest in the Fund. One or more representatives of Coopers & Lybrand are expected to be present at the Annual Meeting of Stockholders and will have an opportunity to make a statement if they so desire. Such representatives are expected to be available to respond to appropriate questions posed by stockholders or management. The Fund's financial statements for the year ended December 31, 1993 were audited by Coopers & Lybrand. In connection with its audit services, Coopers & Lybrand reviewed the financial statements included in the Fund's annual and semiannual reports to stockholders and its filings with the SEC. Required Vote Ratification of the selection of independent accountants requires the affirmative vote of a majority of the votes cast at the meeting in person or by proxy. Your Fund's Directors recommend that stockholders of the Fund ratify the selection of Coopers & Lybrand as independent accountants. (3) APPROVAL OR DISAPPROVAL OF THE CONTINUANCE OF THE INVESTMENT ADVISORY, MANAGEMENT AND ADMINISTRATION AGREEMENT Scudder, Stevens & Clark, Inc., 345 Park Avenue, New York, New York, acts as investment adviser to and manager for the Fund pursuant to an Investment Advisory, Management and Administration Agreement dated July 29, 1992 (the "Agreement"). The Agreement was last approved by a vote of the stockholders on October 14, 1993. At a meeting held on July 19, 1994 the Directors, including a majority of the Noninterested Directors, approved the terms and continuance of the Agreement and recommended that the stockholders approve the continuance of the Agreement. The Agreement continues in effect from year to year thereafter only so long as such continuance is specifically approved at least annually by the vote of a majority of the Noninterested Directors cast in person at a meeting called for the purpose of voting on such approval, and either by vote of the Directors or a majority of the Fund's outstanding voting securities, as defined below. The Agreement may be terminated on 60 days' written notice, without penalty, by the Directors; by the vote of the holders of a majority of the Fund's outstanding voting securities; or by the Manager and automatically terminates in the event of its assignment. Under the Agreement, the Manager regularly makes investment decisions for the Fund, prepares and makes available to the Fund research and statistical data in connection therewith and supervises the acquisition and disposition of securities by the Fund, including the selection of broker/dealers to carry out the transactions, all in accordance with the Fund's investment objective and policies and in accordance with guidelines and directions from the Fund's Board of Directors. The Manager also maintains or causes to be maintained for the Fund all books, records and reports and other information (not otherwise provided by third parties) required under the 1940 Act. In considering the Agreement and recommending its approval by stockholders, the Directors of the Fund, including the Noninterested Directors, considering the best interests of stockholders of the Fund, took into account all such factors they deemed relevant. Such factors include the nature, quality and extent of the services furnished by the Manager to the Fund; the necessity of the Manager maintaining and enhancing its ability to continue to retain and attract capable personnel to serve the Fund; the investment record of the Manager in managing the Fund; the experience of the Manager in the field of international investing; possible economies of scale; comparative data as to investment performance, advisory fees and other fees, including administrative fees and expense ratios, particularly fees and expense ratios of funds with foreign investments, including single country and regional funds, advised by the Manager and other investment managers; the risks assumed by the Manager from serving as Manager to the Fund; the advantages and possible disadvantages to the Fund of having a manager which also serves other investment companies as well as other accounts; possible benefits to the Manager from serving as manager to the Fund; current and developing conditions in the financial services industry, including the entry into the industry of large and well capitalized companies which are spending and appear to be prepared to continue to spend substantial sums to engage personnel and to provide services to competing investment companies; the financial resources of the Manager and the continuance of appropriate incentives to assure that the Manager will continue to furnish high-quality services to the Fund. In reviewing the terms of the Agreement, the Noninterested Directors received legal advice and were represented at the Fund's expense by independent counsel, Ropes & Gray. The general counsel for the Fund is Dechert Price & Rhoads. The Agreement provides that the Manager receive an annual fee of 1.25% of the first $75 million of average weekly net assets of the Fund, 1.15% of such net assets on the next $125 million and 1.10% of the excess over $200 million. Under the Agreement each payment of a monthly fee to the Manager shall be made within the ten days next following the day as of which such payment is so computed. This fee is higher than management fees paid by most other investment companies primarily because of the increased research burden involved in investing in Asian markets, greater investment in private placements and unlisted securities, increased travel and communications costs and the increased scope and complexity of administering the Fund. However, the fee is not necessarily higher than the fees charged to funds with investment objectives similar to that of the Fund. Further, the Manager assumes the obligation to provide certain administrative services to the Fund at no extra cost. For the year ended December 31, 1993, the fee amounted to $1,571,815, which was equivalent to an annual effective rate of 1.21%. The Agreement provides that the Manager shall not be liable for any act or omission, error of judgment or mistake of law, or for any loss suffered by the Fund in connection with matters to which such Agreement relates, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of the Manager in the performance of its duties or from reckless disregard by the Manager of its obligations and duties under such Agreement. Required Vote Approval of the continuance of the Agreement will require the affirmative vote of a majority of the Fund's outstanding voting securities which for the purpose of this proposal means (1) the holders of more than 50% of the outstanding voting shares of the Fund or (2) the holders of 67% or more of the shares present if more than 50% of the outstanding voting shares are present at the meeting in person or by proxy, whichever is less. If an affirmative vote of stockholders is not obtained, the Directors will consider such action as they deem to be in the best interests of the Fund's stockholders. Your Fund's Directors recommend that the stockholders vote to approve the continuance of the Agreement. Investment Manager The Manager is a Delaware corporation. Daniel Pierce* is the Chairman of the Board of the Manager. Edmond D. Villani# is the President of the Manager. Stephen R. Beckwith#, Lynn S. Birdsong#, Nicholas Bratt#, Linda C. Coughlin#, Margaret D. Hadzima*, Jerard K. Hartman#, Richard A. Holt@, Dudley H. Ladd*, Douglas M. Loudon#, John T. PackardL, Juris Padegs# and Cornelia M. Small# are the other members of the Board of Directors of the Manager. The principal occupation of each of the above named individuals is serving as a Managing Director of the Manager. - - - ------------------ * Two International Place, Boston, Massachusetts # 345 Park Avenue, New York, New York d 101 California Street, San Francisco, California @ Two Prudential Plaza, 180 West Stetson, Suite 5400, Chicago, Illinois All of the outstanding voting and nonvoting securities of Scudder are held of record by Stephen R. Beckwith, Daniel Pierce, Juris Padegs and Edmond D. Villani, in their capacity as representatives (the "Representatives") of the beneficial owners of such securities, pursuant to a Security Holders' Agreement among Scudder, the beneficial owners of securities of Scudder and the Representatives. Pursuant to such Security Holders' Agreement, the Representatives have the right to reallocate shares among the beneficial owners from time to time. Such reallocation will be in cash transactions at net book value. All Managing Directors of Scudder own voting and nonvoting stock; all Principals own nonvoting stock. Messrs. Pierce, Bratt, Padegs and Villani who are Officers and/or Directors of the Fund are Managing Directors of Scudder. In addition, the following Directors or Officers of Scudder are Officers of the Fund in the following capacities: Elizabeth J. Allan, Jerard K. Hartman, Seung K. Kwak, and David S. Lee, Vice Presidents; and Edward J. O'Connell, Treasurer; Thomas F. McDonough, Secretary and Assistant Treasurer; Pamela A. McGrath, Vice President and Assistant Treasurer; and Coleen Downs Dinneen, Assistant Secretary. Messrs. Hartman, Kwak and Lee are Managing Directors and Messrs. McDonough and O'Connell and Ms. McGrath and Ms. Allan are Principals of the Manager. Ms. Dinneen is a Vice President of the Manager. In addition to acting as Manager to individuals and other organizations, Scudder, or an affiliate acts as investment adviser to all of the investment companies, including the Fund, listed below, and the separate series thereof. All of the investment companies listed below, except for The Argentina Fund, Inc., The Brazil Fund, Inc., The First Iberian Fund, Inc., The Korea Fund, Inc., The Latin America Dollar Income Fund, Inc., Montgomery Street Income Securities, Inc., Scudder New Asia Fund, Inc., Scudder New Europe Fund, Inc. and Scudder World Income Opportunities Fund, Inc. are open-end investment companies or mutual funds.
Total Net Assets as of Management Compensation July 31, 1994 on an Annual Basis Based on the Name (000 omitted) Value of Average Daily Net Assets ------ ------------- ----------------------------------- Scudder California $385,000 Scudder California Tax Free Fund: Tax Free Trust 0.625 of 1%; 0.60 of 1% on net assets in excess of $200 million. Scudder California Tax Free Money Fund: 0.50 of 1%. Scudder Cash $1,676,900 0.50 of 1%; 0.45 of 1% on net assets Investment Trust in excess of $250 million; 0.40 of 1% on net assets in excess of $500 million; 0.35 of 1% on net assets in excess of $1 billion. Scudder $557,000 1%; 0.95 of 1% on net assets in excess Development Fund of $500 million; 0.90 of 1% on net assets in excess of $1 billion. Scudder Equity $1,349,400 Scudder Capital Growth Fund: 0.75 of Trust 1%; 0.65 of 1% on net assets in excess of $500 million; 0.60 of 1% on net assets in excess of $1 billion. Scudder Value Fund: 0.70 of 1%. Scudder Fund, Inc. $571,800 Managed Government Securities Fund: 0.40 of 1%; 0.35 of 1% on net assets in excess of $1.5 billion. Managed Cash Fund: 0.40 of 1%; 0.35 of 1% on net assets in excess of $1.5 billion. Managed Federal Securities Fund: 0.40 of 1%; 0.35 of 1% on net assets in excess of $1.5 billion. Managed Tax Free Fund: 0.40 of 1%; 0.35 of 1% on net assets in excess of $1.5 billion. Managed Intermediate Government Fund: 0.65 of 1%. Scudder Funds $2,645,800 Scudder Short Term Bond Fund: 0.60 of Trust 1%; 0.50 of 1% on net assets in excess of $500 million; 0.45 of 1% on net assets in excess of $1 billion; 0.40 of 1% on net assets in excess of $1.5 billion; 0.375 of 1% on net assets in excess of $2 billion and 0.35 of 1% on net assets in excess of $3 billion. Scudder Zero Coupon 2000 Fund: 0.60 of 1%. Scudder Global $3,364,900 Scudder Global Fund: 1%; 0.95% of 1% Fund, Inc. (1) on net assets in excess of $500 million. Scudder International Bond Fund: 0.85 of 1%. Scudder Short Term Global Income Fund: 0.75%; 0.70% of 1% on net assets in excess of $1 billion. Scudder Global Small Company Fund: 1.10%. Scudder Emerging Markets Income Fund: 1%. Scudder GNMA Fund $482,400 0.65 of 1%; 0.60 of 1% on net assets in excess of $200 million; 0.55 of 1% on net assets in excess of $500 million. Scudder $743,700 Federal Portfolio: 0.15 of 1%. Institutional Government Portfolio: 0.15 of 1%. Cash Fund, Inc. Portfolio: 0.15 of 1%. Tax-Free Portfolio: 0.15 of 1%. Scudder $3,403,700 Scudder International Fund: 1%; 0.90 International of 1% on net assets in excess of $200 Fund, Inc. (2) million; 0.85 of 1% on net assets in excess of $400 million; 0.80 of 1% on net assets in excess of $800 million. Scudder Latin America Fund: 1.25%. Scudder Pacific Opportunities Fund: 1.10%. Scudder Investment $1,978,000 Scudder Growth and Income Fund: 0.65 Trust (3) of 1%; 0.60 of 1% on net assets in excess of $200 million; 0.55 of 1% on net assets in excess of $400 million; 0.50 of 1% on net assets in excess of $900 million. Scudder Quality Growth Fund: 0.70 of 1%. Scudder Municipal $1,109,200 Scudder High Yield Tax Free Fund: 0.70 Trust of 1%; 0.65 of 1% on net assets in excess of $200 million. Scudder Managed Municipal Bonds: 0.55 of 1%; 0.50 of 1% on net assets in excess of $200 million; 0.475 of 1% on net assets in excess of $700 million. Scudder Mutual $130,500 Scudder Gold Fund: 1%. Funds, Inc. Scudder Portfolio $545,700 Scudder Income Fund: 0.65 of 1%; 0.60 Trust of 1% on net assets in excess of $200 million; 0.55 of 1% on net assets in excess of $500 million. Scudder Balanced Fund: 0.70 of 1%. Scudder State Tax $779,500 Scudder Massachusetts Limited Term Tax Free Trust Free Fund: 0.60 of 1%. Scudder Massachusetts Tax Free Fund: 0.60 of 1%. Scudder New York Tax Free Fund: 0.625 of 1%; 0.60 of 1% on net assets in excess of $200 million. Scudder New York Tax Free Money Fund: 0.50 of 1%. Scudder Ohio Tax Free Fund: 0.60 of 1%. Scudder Pennsylvania Tax Free Fund: 0.60 of 1%. Scudder Tax Free $235,200 0.50 of 1%; 0.48 of 1% on net assets Money Fund in excess of $500 million. Scudder Tax Free $907,200 Scudder Limited Term Tax Free Fund: Trust 0.60 of 1%. Scudder Medium Term Tax Free Fund: 0.60 of 1%; 0.50 of 1% on net assets in excess of $500 million. Scudder U.S. $367,900 0.50 of 1%. Treasury Money Fund Scudder Variable $938,500 Money Market Portfolio: 0.37 of 1%. Life Investment Capital Growth Portfolio: 0.475 of 1%. Fund Growth and Income Portfolio: 0.475 of 1%. Bond Portfolio: 0.475 of 1%. Balanced Portfolio: 0.475 of 1%. International Portfolio: 0.875 of 1%. The Japan Fund, $714,200 0.85 of 1% of the first $100 million Inc. of average daily net assets; 0.75 of 1% on assets in excess of $100 million up to and including $300 million; 0.70 of 1% on assets in excess of $300 million up to and including $600 million; 0.65 of 1% on assets in excess of $600 million. The Manager pays The Nikko International Capital Management Co., Ltd. for investment and research services: 0.15 of 1% up to $700 million of average daily net assets; 0.14 of 1% on assets in excess of $700 million, payable monthly during fiscal year 1994; 0.10 of 1% on average daily net assets, payable during fiscal year 1995. Total Net Assets as of Management Compensation July 31, 1994 on an Annual Basis Based on the Name (000 omitted) Value of Average Weekly Net Assets ------ ------------- ----------------------------------- The Argentina $130,800 1.30%; the Investment Manager pays Fund, Inc.* Sociedad General de Negocios y Valores S.A. for investment and research services 0.36 of 1%. The Brazil Fund, $326,400 1.30%; 1.25% on net assets in excess Inc.* of $150 million; and 1.20% on net assets in excess of $300 million; the Manager pays Banco Icatu S.A. for investment and research services 0.25 of 1%; 0.15 of 1% on net assets in excess of $150 million; and 0.05 of 1% on net assets in excess of $300 million. The First Iberian $59,500 1.00%. Fund, Inc.* The Latin America $75,100 1.20%. Dollar Income Fund, Inc.* Scudder New Asia $191,800 1.25%; 1.15% on net assets in excess Fund, Inc.* of $75 million; 1.10% on net assets in excess of $200 million. Scudder New Europe $185,100 1.25%; 1.15% on net assets in excess Fund, Inc.* of $75 million; 1.10% on net assets in excess of $200 million. Scudder World $47,000 1.20%. Income Opportunities Fund, Inc.* Total Net Assets as of Management Compensation July 31, 1994 on an Annual Basis Based on the Name (000 omitted) Value of Average Monthly Net Assets ------ ------------- ----------------------------------- The Korea Fund, $565,900 1.15%; 1.10% on net assets in excess Inc. (4)* of $50 million; 1% on net assets in excess of $100 million. The Investment Manager pays Daewoo Capital Management Co., Ltd. for investment and research services 0.2875 of 1%; 0.275 of 1% on net assets in excess of $50 million; 0.25 of 1% on net assets in excess of $100 million. Montgomery Street $186,300 0.50 of 1%; 0.45 of 1% on net assets Income Securities, in excess of $150 million; 0.40 of 1% Inc. * on net assets in excess of $200 million. - - - ---------- (1) On September 8, 1994, The Board of Directors of Scudder International Bond Fund will consider a new Investment Management Agreement, which includes a change in the rate of management compensation to: 0.85 of 1%; 0.80 of 1% on net assets exceeding $1 billion (2) On September 8, 1994, The Board of Directors of Scudder International Fund will consider a new Investment Management Agreement, which includes a change in the rate of management compensation to: 0.90 of 1%; 0.85 of 1% on net assets in excess of $500 million; 0.80 of 1% on net assets in excess of $1 billion; 0.75 of 1% on nets assets exceeding $2 billion. (3) On August 9, 1994, The Board of Trustees of Scudder Growth and Income Fund approved a change in the rate of management compensation to: 0.60 of 1%; 0.55 of 1% on net assets in excess of $500 million; 0.50 of 1% on net assets in excess of $1 billion; 0.475 of 1% on net assets exceeding $1.5 billion. (4) On July 19, 1994, The Board of Directors of The Korea Fund, Inc. approved, subject to stockholder ratification, a new Investment Advisory, Management and Administration Agreement, which includes a change in the rate of management compensation to: 1.15%; 1.10% on net assets in excess of $50 million; 1.00% on net assets in excess of $100 million; 0.95 of 1% on nets assets in excess of $350 million; 0.90% on net assets exceeding $750 million. * These funds are not subject to state imposed expense limitations.
The Manager also provides investment advisory services to the mutual funds which compose the AARP Investment Program from Scudder (the "Program") with assets of approximately $12 billion. The eight funds which are series of the four AARP trusts and their assets and compensation rates are as follows:
Total Net Assets as of July 31, 1994 Name (000 omitted) Individual Fund Fee Rate+++ ------ ------------- --------------------------- AARP Cash $356,600 AARP High Quality Money Fund: 0.10 of Investment Funds 1%. AARP Income Trust $6,345,000 AARP GNMA and U.S. Treasury Fund: 0.12 of 1%. AARP High Quality Bond Fund: 0.19 of 1%. AARP Tax Free $2,122,300 AARP High Quality Tax Free Money Fund: Income Trust 0.10 of 1%. AARP Insured Tax Free General Bond Fund: 0.19 of 1%. AARP Growth Trust $3,019,300 AARP Growth and Income Fund: 0.19 of 1%. AARP Capital Growth Fund: 0.32 of 1%. AARP Balanced Stock and Bond Fund: 0.19 of 1%. - - - --------- +++ In addition to the Individual Fund Fee listed above, each of the eight AARP Funds pays the Adviser an Annual Base Fee in proportion to the ratio of its daily net assets to the daily net assets of all of the AARP Funds. The Annual Base Fee Rate is: 0.35 of 1% on net assets of the Program up to and including $2 billion; 0.33% on net assets of the Program in excess of $2 billion up to and including $4 billion; 0.30 of 1% on net assets of the Program in excess of $4 billion up to and including $6 billion; 0.28 of 1% on net assets of the Program in excess of $6 billion up to and including $8 billion; 0.26 of 1% on net assets of the Program in excess of $8 billion up to and including $11 billion; 0.25 of 1% on net assets of the Program in excess of $11 billion up to and including $14 billion; and 0.24 of 1% on net assets of the Program in excess of $14 billion.
The Investment Manager (or an affiliate) also acts as investment adviser to the following foreign investment funds: Canadian High Income Fund, Scudder Floating Rate Fund for Fannie Mae Mortgage Securities, Global Balanced Fund, Hot Growth Companies Fund, Indosuez High Yield Bond Fund, InverLatin Dollar Income Fund, Inc., Scudder Latin America Investment Trust PLC, ProMexico Fixed Income Dollar Fund, Scudder Global Opportunities Funds, Scudder Mortgage Fund, Sovereign High Yield Investment Company N.V. (A), Sovereign High Yield Investment Company N.V. (B), The Venezuela High Income Fund N.V., Latin America Income and Appreciation Fund N.V. and The World Capital Fund. Scudder has agreed to maintain the expenses of certain of the above investment companies (or series thereof) at or below a specified percentage of net assets. Directors, officers and employees of the Investment Manager from time to time may have transactions with various banks, including the Fund's custodian bank. It is the Investment Manager's opinion that the terms and conditions of those transactions as have occurred were not influenced by existing or potential custodial or other Fund relationships. The Consolidated Statement of Condition as of December 31, 1993 and related Independent Auditors' Report dated February 11, 1994 for the Adviser is attached hereto as Exhibit A. Brokerage Commissions on Portfolio Transactions To the maximum extent feasible, the Manager places orders for portfolio transactions for the Fund through Scudder Investor Services, Inc. (the "Distributor"), a Massachusetts corporation registered as a broker/dealer and a wholly owned subsidiary of the Manager, which in turn places orders on behalf of the Fund with issuers, underwriters or other brokers and dealers. The Distributor receives no commissions, fees or other remuneration from the Fund for this service. Allocation of brokerage is supervised by Scudder. The Manager's primary objective when 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 (negotiable in the case of U.S. national securities exchange transactions), size of order, difficulty of execution and skill required of the executing broker/dealer. The Manager 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 Manager routinely reviews commission rates and execution and settlement services performed, making internal and external comparisons. When it can be done consistently with the policy of obtaining the most favorable net results, it is the Manager's practice to place orders with brokers and dealers who supply market quotations to the Fund's custodian for appraisal purposes or who supply research, market and statistical information to the Manager. 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 Manager is not authorized, when placing portfolio transactions for the Fund, to pay a brokerage commission (to the extent applicable) or transaction cost in excess of that which another broker might have charged for executing the same transaction solely on account of the receipt of research, market or statistical information. The Manager does not place orders with brokers or dealers on the basis that the broker or dealer has or has not sold shares of investment funds managed by Scudder. 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 otherwise available. Although certain research, market and statistical information from broker/dealers is useful to the Fund and to the Manager, it is the opinion of the Manager that such information is only supplementary to the Manager's own research effort since the information must still be analyzed, weighed and reviewed by the Manager's staff. Such information may be useful to the Manager in providing services to clients other than the Fund and not all such information is used by the Manager in connection with the Fund. Conversely, such information provided to Scudder by brokers and dealers through whom other clients of Scudder effect securities transactions may be useful to Scudder in providing services to the Fund. Certain investments may be appropriate for the Fund and also for other clients, including investment companies, advised by Scudder. 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 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 Scudder 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 Scudder in the interest of obtaining the most favorable net results to the Fund. During the fiscal year ended December 31, 1993, the Fund paid total brokerage commissions of $138,580 of which $138,551 (99.98% of the total commissions paid), resulted from orders placed with brokers and dealers who provided supplementary research, market and statistical information to the Fund or the Manager. The aggregate amount of brokerage transactions subject to brokerage commissions was $29,214,349 (96.70% of all brokerage transactions). The balance of such brokerage was not allocated to any particular broker or dealer or with regard to the above mentioned or any other special factors. During the year ended December 31, 1993 no recapture for the benefit of the Fund of some portion of the brokerage commissions or similar fees paid on behalf of the Fund on portfolio transactions was effected. (4) AND (5) APPROVAL OR DISAPPROVAL OF THE ELIMINATION OF TWO, AND AN AMENDMENT TO ONE, OF THE FUND'S FUNDAMENTAL INVESTMENT POLICIES The 1940 Act requires investment companies such as the Fund to adopt certain specific investment policies that can be changed only by stockholder vote. An investment company may also elect to designate other policies that may be changed only by stockholder vote. Such investment policies are referred to as "fundamental" investment policies. The Board of Directors recommends that the stockholders approve the elimination of two, and an amendment to one, of the Fund's fundamental investment policies to provide the Fund with greater investment flexibility. (4) APPROVAL OR DISAPPROVAL OF THE ELIMINATION OF THE FUND'S FUNDAMENTAL INVESTMENT POLICIES REGARDING NON-PUBLICLY TRADED SECURITIES Securities in which the Fund may invest include those that are not listed on a stock exchange or traded in an over-the-counter market. Such securities may include joint venture partnerships, limited partnerships and restricted securities (securities which are subject to legal or contractual restrictions). Investments in these types of securities give the Fund more flexibility in attempting to achieve its investment objective and the opportunity to invest more readily in developing markets. As a result of the absence of a public trading market for these securities, however, they may be less liquid than publicly traded securities. The Fund may encounter substantial delays in attempting to sell non-publicly traded securities. Although these securities may be resold in privately negotiated transactions, the prices realized from these sales could be less than those originally paid by the Fund. Further, companies whose securities are not publicly traded are not subject to the disclosure and other investor protection requirements which may be applicable if their securities were publicly traded. In order to minimize these risks, the Manager performs careful analysis before investing in any non-publicly traded securities, including consideration of: overall growth prospects, financial condition, competitive position, technology, research and development, productivity, labor costs, raw material costs and sources, profit margins, return on investment, structural changes in local economies, capital resources, the degree of government regulation or deregulation, management and other factors. The Fund's Board of Directors believes it would be in the best interests of the Fund and its stockholders to raise the percentage of assets the Fund may invest in non-publicly traded securities. The Fund's portfolio holds close to the current limit in non-publicly traded securities, limiting the Fund's additional investment opportunities in the newly industrializing economies in the Pacific Basin, where many securities are not publicly traded. Currently, Restriction (6) of the Fund's fundamental investment restrictions limits investment in non-publicly traded securities to 15% of the value of the Fund's total assets, and Restriction (9) limits the Fund's investments to no more than 15% of the value of its total assets, in the aggregate, in securities which are not readily marketable because of legal or contractual restrictions or which are otherwise not readily marketable, as well as repurchase agreements with maturities of longer than seven days. As these restrictions are not required to be fundamental investment policies by the 1940 Act, the Board of Directors proposes that stockholders vote to eliminate Restrictions (6) and (9) as fundamental investment policies. Upon the elimination of these policies, the Board will adopt the non-fundamental policy set forth below regarding purchases of such securities, which may be changed in the future without the expense and delay of obtaining a stockholder vote. If approved by stockholders, fundamental investment Restrictions (6) and (9) would be eliminated, and a non-fundamental policy will be adopted by the Board of Directors as follows: "(The Fund may not) invest in illiquid securities if more than 20% of its total assets (taken at current value) would be invested in such securities." If conditions change in the future, the Board of Directors may change such a policy without further action by stockholders. Voting Requirements for Proposal 4 Approval of this proposal requires the affirmative vote of a majority of the voting securities, which means the lesser of (1) 67% or more of the voting securities of the Fund present at the meeting, if the holders of more than 50% of the outstanding voting securities are present or represented by proxy; or (2) more than 50% of the outstanding voting securities of the Fund. The Directors have considered various factors and believe that this Proposal is in the best interest of the Fund's stockholders. If the Proposal is not approved, the Fund's present fundamental investment restriction will remain in effect. Your Fund's Directors recommend that stockholders vote in favor of the change to the Fund's investment restrictions described above. (5) APPROVAL OR DISAPPROVAL OF AN AMENDMENT TO THE FUND'S FUNDAMENTAL INVESTMENT POLICY REGARDING COMMODITIES AND REAL ESTATE The Fund's strategy is to invest directly in the securities, primarily equity securities, of Asian companies. Although expected to comprise only an incidental portion of the Fund's portfolio at any time, the Fund may, but is not required to, utilize certain investment strategies 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 (although engaging in such strategies to enhance gain is restricted to no more than 5% of the Fund's net assets). These types of "strategic transactions" are commonly referred to as derivatives, and may involve substantial risk. Currently, the Fund has a fundamental investment policy relating to commodities, as required by Section 8(b)(1)(F) of the 1940 Act. This investment policy specifically enumerates a broad range of the types of strategic transactions in which the Fund may invest as exceptions to the policy, since such transactions could be deemed commodities as that term is defined in the Commodity Exchange Act, by the appropriate regulatory authority. The policy was written in 1989, when the Fund commenced operations, and excluded a broad range of the types of strategic transactions available at the time. The proposed change to the fundamental investment policy would specify physical commodities, so that strategic transactions which may be deemed to be "commodities", but which are not related to physical commodities, would no longer need to be specifically and individually excluded from the policy. Should stockholders approve this proposal, the Fund could change the list of those strategic transactions which could be deemed to be "commodities" without seeking stockholder approval. In the course of pursuing these investment strategies, the Fund may enter into certain strategic transactions including the purchase and sale of exchange-listed and over-the-counter put and call options on securities, equity and fixed-income indices and other financial instruments, and the purchase and sale of futures contracts on stock indices and options thereon. Strategic transactions may be used to attempt to protect against possible changes in the market value of securities held in or to be purchased for the Fund's portfolio resulting from securities markets or currency exchange rate fluctuations, to protect the Fund's unrealized gains in the value of its portfolio securities, to facilitate the sale of such securities for investment purposes, to manage the effective maturity or duration of fixed-income securities in the Fund's portfolio, or to establish a position in the derivatives markets as a temporary substitute for purchasing or selling particular securities. Strategic transactions may 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. The Fund's Board of Directors believes that it would be in the best interest of the Fund and its stockholders to amend this restriction to refer to physical commodities. The Fund does not intend to invest in any strategic transactions other than those described in its prospectus dated January 13, 1994. In addition, the proposed amendment will clarify the exception contained in Restriction (7) as it relates to real estate or interests in real estate, in order to permit the Fund to invest in securities of companies which deal in mortgages, as well as real estate and securities secured by real estate and interests therein. The proposed amendment reserves for the Fund the freedom of action to hold and sell real estate acquired as a result of the Fund's ownership of securities. (For example, this new provision would allow the Fund to dispose of real estate in the event that it acquired real estate as a result of a mortgage foreclosure.) The Fund does not intend to invest in any real estate related transactions other than those listed above or in the Fund's prospectus. If approved by stockholders, the Fund's fundamental investment policy regarding commodities and real estate would be amended as follows (changes noted in italics, deleted text noted by strikeouts): "(The Fund may not) buy purchase or sell commodities or commodity contracts or real estate (except that the Fund may invest in (i) securities of companies which deal in real estate or mortgages, and (ii) securities secured by real estate or interests therein, and that the Fund reserves freedom of action to hold and to sell real estate acquired as a result of the Fund's ownership of securities); or interests in real estate, although it may purchase and or purchase or sell physical futures contracts on stock indices and foreign currencies, securities which are secured by real estate or commodities or contracts relating to physical and securities of companies which invest or deal in real estate or commodities." Voting Requirements for Proposal 5 Approval of this proposal requires the affirmative vote of a majority of the voting securities, which means the lesser of (1) 67% or more of the voting securities of the Fund present at the meeting, if the holders of more than 50% of the outstanding voting securities are present or represented by proxy; or (2) more than 50% of the outstanding voting securities of the Fund. The Directors have considered various factors and believe that this Proposal is in the best interest of the Fund's stockholders. If the Proposal is not approved, the Fund's present fundamental investment restriction will remain in effect. Your Fund's Directors recommend that stockholders vote in favor of the change to the Fund's investment restrictions described above. Other Matters The Board of Directors knows of no business to be brought before the meeting other than as set forth above. If, however, any other matters properly come before the meeting, it is the intention of the persons named in the enclosed proxy card to vote such proxies on such matters in accordance with their best judgment. Miscellaneous Proxies will be solicited by mail and may be solicited in person or by telephone or telegraph by officers of the Fund, personnel of Scudder or an agent of the Fund for compensation. The Fund has retained Corporate Investor Communications, Inc., 111 Commerce Road, Carlstadt, New Jersey 07072-2586 to assist in the proxy solicitation. The cost of their services is estimated at $7,000 plus reasonable out-of-pocket expenses. The expenses connected with the solicitation of the proxies and with any further proxies will be borne by the Fund. The Fund will reimburse banks, brokers and other persons holding the Fund's shares registered in their names or in the names of their nominees for their expenses incurred in sending proxy material to and obtaining proxies from the beneficial owners of such shares. The Annual Report for the year ended December 31, 1993 was mailed to stockholders who were stockholders of record on August 16, 1994, the Record Date for the Annual Meeting. In the event that sufficient votes in favor of any proposal set forth in the Notice of this meeting are not received by October 13, 1994, the persons named as proxies on the enclosed proxy card may propose one or more adjournments of the meeting to permit further solicitation of proxies. Any such adjournment will require the affirmative vote of the holders of a majority of the shares present in person or by proxy at the session of the meeting to be adjourned. The persons named as proxies in the enclosed proxy card will vote in favor of such adjournment those proxies which they are entitled to vote in favor of the proposal for which further solicitation of proxies is to be made. They will vote against any such adjournment those proxies required to be voted against such proposal. The costs of any such additional solicitation and of any adjourned session will be borne by the Fund. Stockholder Proposals Any proposal by a stockholder of the Fund intended to be presented at the 1995 Annual Meeting must be received at 345 Park Avenue, New York, New York 10154 no later than May 1, 1995. By order of the Board of Directors, Thomas F. McDonough Secretary 345 Park Avenue New York, New York 10154 August 29, 1994 EXHIBIT A SCUDDER, STEVENS & CLARK, INC. Consolidated Statement of Condition December 31, 1993
ASSETS Current assets Cash and cash equivalents $11,689,984 Short term investments 50,196,591 Investment advisory fees receivable 36,806,144 Service fees receivable 5,005,051 Expense reimbursement from funds 1,399,751 Income taxes receivable 4,502,214 Receivables for fund shares 5,466,585 Other current assets 4,840,317 ------------ Total current assets 119,906,637 Investments available for sale 9,095,068 Other investments 2,222,345 Fixed assets, net of accumulated depreciation and 33,756,800 amortization Other assets 5,554,131 ------------ Total assets $170,534,981 ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable and accrued expenses $19,572,911 Short term borrowing 13,000,000 Payables for fund shares 5,466,585 Deferred lease obligations 1,566,163 Total current liabilities 39,605,659 Deferred lease obligations 6,844,331 ------------ Deferred income taxes 8,675,236 ------------ Total liabilities 55,125,226 ------------ Stockholders' equity Common stock, par value $.01 per share: Class A: Authorized 9,250 shares, issued and outstanding 8,712 87 shares Class B: Authorized 8,000,000 shares, issued and outstanding 60,505 6,050,546 shares Capital in excess of par value 58,784,982 Unrealized securities gains on investments available 1,343,658 for sale, net Cumulative translation adjustment 264,316 Retained earnings 54,956,207 ------------ Total stockholders' equity 115,409,755 ------------ Total liabilities and stockholders' equity $170,534,981 ============
See accompanying notes to consolidated statement of condition. SCUDDER, STEVENS & CLARK, INC. Notes to Consolidated Statement of Condition December 31, 1993 (1) Summary of Significant Accounting Policies Organization, Principles of Consolidation Scudder, Stevens & Clark, Inc. (the "Parent") serves as a registered investment adviser to individuals, institutions and investment companies. Its principal subsidiaries include Scudder Investor Services, Inc., a registered broker/dealer which acts as principal underwriter and administrator for a group of investment companies managed by the Parent; Scudder Service Corporation which acts as transfer agent for these investment companies; and Scudder Trust Company which acts as the trustee/custodian of IRA, Keogh and other retirement plans primarily invested in mutual funds managed or administered by the Parent and also sponsors collective investment trusts and New Hampshire investment trusts. The consolidated statement of condition includes the accounts of Scudder, Stevens & Clark, Inc. and its subsidiaries (the "Company"). All significant intercompany transactions have been eliminated in consolidation. Cash Equivalents Cash equivalents represent primarily investments in affiliated Scudder money market mutual funds amounting to $6,712,700 at December 31, 1993. The Company is the investment manager for these funds. Investment Securities The Company adopted Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities," as of December 31, 1993. The adoption of this standard did not have a material impact on the Company's financial position. The following summarizes the Company's accounting for its investments: a. Short Term Investments Short term investments consist of shares of short and medium term bond funds advised by the Company. The Company does not intend to hold these investments over the long term and carries them for liquidity purposes and investment income and to realize gains from market fluctuations. The investments are carried at market value. Gains and losses on redemptions are calculated on the first in, first out cost method. b. Investments Available for Sale Investments available for sale consist of various equity and bond funds advised by the Company and U.S. Treasury obligations. The Company intends to hold these securities for the foreseeable future unless liquidity needs demand or market conditions make it advantageous to liquidate them. The investments are carried at market value, with unrealized gains and losses net of deferred income taxes recognized as an adjustment to stockholders' equity. Gains and losses on redemptions and sales are calculated on the first in, first out cost method. In determining cost basis, premiums and discounts are amortized on a level yield basis. c. Other Investments Other investments consist of seed money required for various mutual funds advised by the Company which will be held until permitted to be liquidated, normally 5 years, and equity interests in joint ventures and other miscellaneous equity investments which will be held indefinitely. These investments are carried at cost unless their value is permanently impaired. Financial Instruments In the course of its activities, the Company deals in financial instruments such as cash, various receivables, investment securities, and expenses payable. Due to the short term nature of all financial instruments except for investment securities, the market value of such instruments approximates the carrying value of the instruments. Market values of investment securities have been disclosed in the financial statements and footnotes. Fund Share Transactions Sales of fund shares are recorded on a trade date basis. Fixed Assets Fixed assets are carried at cost less accumulated depreciation and amortization. Deferred Lease Obligations The Company recognizes lease obligations in connection with landlord incentive rental terms or payments and premature lease terminations. Income Taxes The Company files a consolidated federal income tax return. The Parent and its subsidiaries file separate state and local income tax returns. Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting for Income Taxes," which requires a change from the deferred method of accounting for timing differences in the recognition of revenues and expenses for tax and financial reporting purposes to the "asset and liability method." Under the asset and liability method, deferred income taxes are recognized for the tax consequences of temporary differences between the financial statements and the tax bases of assets and liabilities. The adoption of this standard did not have a material impact on the Company's financial position. (2) Related Party Transactions The Company serves as an investment manager to various related investment companies. Certain stockholders of the Company are members of the Boards of Directors of these investment companies. At December 31, 1993, investment advisory fees receivable and service fees receivable from affiliated mutual funds were $22,470,588. The Company pays certain expenses on behalf of affiliated mutual funds for which it is reimbursed. At December 31, 1993, the amounts due to the Company relating to these expenses were $1,399,751. In addition, the Company absorbs expenses of mutual funds whose expenses exceed statutory or Company imposed limitations. At December 31, 1993, the Company owed $1,195,345 to these funds related to these expense limitations. (3) Investments Available for Sale
The following table presents information relating to the Company's investments available for sale at December 31, 1993. Gross Unrealized Cost Market Value Gains (Losses) Shares of mutual $4,738,294 $7,126,039 $2,453,988 $(66,243) funds U.S. Treasury 1,939,156 1,937,354 _ (1,802) obligations Other 20,529 31,675 11,146 _ ------ ------ ------ ------ $6,697,979 $9,095,068 $2,465,134 $(68,045) ========== ========== ========== =========
U.S. Treasury obligations mature in two years or less in 1993. (4) Other Investments
The following table presents information relating to the Company's other investments at December 31, 1993. Gross Unrealized Cost Market Value Gains (Losses) Other securities $1,849,060 $3,114,960 $1,265,900 $_ Shares of mutual 373,285 418,809 50,215 (4,691) funds (restricted) ------- ------- ------ ------ $2,222,345 $3,533,769 $1,316,115 $(4,691) ========== ========== ========== ========
(5) Fixed Assets
Fixed assets at December 31, 1993 consisted of the following: Furniture and fixtures $15,340,356 Office equipment 33,904,357 Leasehold improvements 18,220,875 ---------- 67,465,588 Less accumulated depreciation and amortization 33,708,788 ---------- Fixed assets, net $33,756,800 ===========
(6) Short Term Borrowing The Company borrowed $13,000,000 under an unsecured $20,000,000 line of credit from a commercial bank at an average rate of 4.85% to mature February 8, 1994. (7) Employee Benefit Plans The Company sponsors the Scudder, Stevens & Clark Profit Sharing and 401(k) Plan Trust and Scudder Defined Benefit Plan and Trust. Scudder, Stevens & Clark Profit Sharing and 401(k) Plan Trust ("PSk") The profit sharing part of PSk covers all employees of the Parent and participating affiliates (the "Employer") who have worked 1,000 hours during each year after the first year of employment. Employer contributions made to the profit sharing part of PSk are completely discretionary and dependent upon profits. The final determination as to the amount of contribution for any year is made by the Board of Directors of the Parent. Employer contributions are allocated to the profit sharing accounts of eligible participants based on a percentage of such participants' compensation exclusive of commissions. Combined contributions to PSk for any calendar year are limited by statute to $30,000 per participant. Employees are eligible to participate in the 401(k) part of PSk after three months of service. The Employer makes no contributions to the 401(k) part of PSk, employee participation in which is voluntary. Eligible participants may contribute to either or both the profit sharing or 401(k) parts of PSk to a combined maximum of 7% of defined compensation. Scudder Defined Benefit Plan and Trust ("DBP") Effective February 1, 1986, the Employer adopted a noncontributory defined benefit plan covering employees who have worked 1,000 hours during each year after the first year of employment. In general, benefits under DBP are based on a participant's years of service with the Employer after January 31, 1986 and such participant's compensation exclusive of commissions. The funding policy is to contribute annually to DBP the maximum amount that can be deducted for federal income tax purposes. The Parent and its participating affiliates contribute the amount necessary to fund DBP with regard to each entity's employees. The following table sets forth the plan's funded status and the basis for the amounts recognized in the Company's consolidated financial statements at December 31, 1993.
Defined Benefit Plan: Actuarial present value of benefit obligations: Accumulated benefit obligation including vested benefits of $(8,721,044) $7,274,399 ============ Projected benefit obligation for service rendered to date $(11,241,787) Plan assets at fair value 10,897,542 ------------ Plan assets less than projected benefit obligations (344,245) Unrecognized net loss from past experience different from 1,671,673 that assumed and effects of changes in assumptions Prior service cost not yet recognized in net periodic 160,508 pension cost Unrecognized net assets at February 1, 1987 amortized over 34,964 15 years ------------ Prepaid pension cost $1,522,900 ============
At December 31, 1993, essentially all plan assets were invested in related Scudder mutual funds primarily through the Scudder Balanced Fund. The straight line amortization method is used in calculating prior service cost. Gains and losses are amortized only if they are outside of the 10% corridor of the larger of projected benefit obligation or fair value of plan assets. The weighted average discount rate and rate of increase in future compensation levels used in determining the projected benefit obligation were 7.5% and 6%, respectively. The expected long term rate of return on plan assets, net of expenses, was 8.5%. In addition, the Company established a defined contribution plan in London to cover local employees. The Company does not provide any other postretirement benefits to its employees. (8) Stockholders' Equity The Company has two classes of common stock, Class A voting shares and Class B nonvoting shares. The Company has the option to convert any (but not all) shares of Class A common stock into an equal number of shares of Class B common stock, and to convert any or all Class B common stock into Class A common stock. (9) Income Taxes
The components of income taxes receivable and deferred income taxes at December 31, 1993 are as follows: Income taxes receivable: Federal $2,639,473 State and local 1,862,741 ------------ $4,502,214 ============ Deferred income taxes: Federal $(6,109,967) State and local (2,565,269) ------------ $(8,675,236) ============
The components of the net deferred tax liability at December 31, 1993 are as follows: Deferred tax liabilities relating to: Accrual to cash adjustment (Parent only) $7,325,143 Unrealized gain on investments available for sale 1,053,430 Pension contribution 700,418 Foreign exchange 151,929 ---------- Total deferred liabilities 9,230,920 ---------- Deferred tax assets relating to: Depreciation 274,345 Unrealized loss on short term investments 169,243 Compensation expense 112,096 ---------- Total deferred tax assets 555,684 ---------- Net deferred tax liability $8,675,236 ==========
(10) Commitments
Minimum rentals under noncancelable operating leases for office space and equipment at December 31, 1993 are as follows: Year ending December 31 1994 $24,300,055 1995 22,220,816 1996 21,419,054 1997 16,219,558 1998 15,463,942 Later years 143,521,297 ------------ 243,144,722 Less minimum future rentals under noncancelable operating 1,191,207 subleases ------------ Total net minimum payment required $241,953,515 ============ Such rentals are subject to escalation clauses.
INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders Scudder, Stevens & Clark, Inc. We have audited the accompanying consolidated statement of condition of Scudder, Stevens & Clark, Inc. and subsidiaries as of December 31, 1993. This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement 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 statement of condition is free of material misstatement. An audit of a statement of condition includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement of condition. An audit of a statement of condition also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall statement of condition presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated statement of condition referred to above presents fairly, in all material respects, the consolidated financial position of Scudder, Stevens & Clark, Inc. and subsidiaries as of December 31, 1993 in conformity with generally accepted accounting principles. KPMG Peat Marwick New York, New York February 11, 1994 EX-99.77Q2 4 DISCLOSURE FOR PROXY STATEMENT FORM 10K Exhibit 77 Q2 Scudder New Asia Fund, Inc., Fiscal Year 1994 Form of Section 16(a) Disclosures for Proxy Statement and Form 10-K (pursuant to Item 405 of Regulation S-K) Section 30(f) of the Investment Company Act of 1940, as amended (the "1940 Act"), as applied to a fund, requires the Fund's Officers and Directors, Investment Manager, affiliates of the Investment Manager and persons who beneficially own more than ten percent of a registered class of the Fund's outstanding securities ("reporting persons"), to file reports of ownership of the Fund's securities and changes in such ownership with the Securities and Exchange Commission (the "SEC") and the New York Stock Exchange. Such persons are required by SEC regulations to furnish the Fund with copies of all such filings. Based solely upon its review of the copies of such forms received by it, and written representations from certain reporting persons that no year-end reports were required for those persons, the Fund believes that during the fiscal year ended December 31, 1994 all filing requirements applicable to its reporting persons were complied with except that Form 3 on behalf of Margaret Hadzima and Richard Holt were filed late. EX-27 5
6 This schedule contains summary financial information extracted from the Scudder New Asia Fund, Inc. Annual Report for the fiscal year ended December 31, 1994 and is qualified in its entirety by reference to such financial statements. 1 SCUDDER NEW ASIA FUND, INC. YEAR DEC-31-1994 JAN-1-1994 DEC-31-1994 153,091,567 180,176,479 4,141,672 40,076 3,851,412 188,209,639 929,365 0 40,408,788 41,338,153 0 113,261,310 8,423,056 7,102,417 0 (497,182) 6,748,934 0 27,358,424 146,871,486 1,998,481 1,570,663 0 3,175,148 393,996 47,392,802 (72,785,297) (24,998,499) 0 1,935,479 35,376,835 0 1,304,872 0 15,767 (31,105,869) (1,619,849) (2,602,833) 0 0 2,264,745 0 3,175,148 190,550,858 25.06 0.05 (3.21) 0.23 4.20 0 17.44 1.67 0 0
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