This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
Scudder Development Fund
Semiannual Report
December 31, 1994
* Offers opportunities for long-term growth of capital by investing
primarily in securities of emerging growth companies.
* A pure no-load(tm) fund with no commissions to buy, sell, or exchange
shares.
CONTENTS
2 Highlights
3 Letter from the Fund's President
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
10 Investment Portfolio
19 Financial Statements
22 Financial Highlights
23 Notes to Financial Statements
29 Officers and Trustees
30 Investment Products and Services
31 How to Contact Scudder
HIGHLIGHTS
* Scudder Development Fund provided shareholders with a 15.01% total
return for the six months ended December 31, 1994, outperforming by a
wide margin the unmanaged Russell 2000 Growth and Standard & Poor's
500 Indexes, which returned 8.52% and 4.87%, respectively.
(BAR CHART TITLE) Total Returns for the Six Months Ended
December 31, 1994
(CHART DATA)
<TABLE>
<CAPTION>
Scudder
Development Russell 2000
Fund Growth Index S&P 500 Index
------ ------------- -------------
<C> <C> <C>
15.01 8.52 4.87
</TABLE>
* The Fund's technology and healthcare holdings contributed greatly to
recent performance, thanks to steady demand for computer-related
software and equipment and earnings improvements among healthcare
holdings.
* The Fund further diversified its holdings with new positions in
regional bank and manufacturing stocks, made possible in part by the
sale of several consumer-oriented holdings.
LETTER FROM THE FUND'S PRESIDENT
Dear Shareholders,
The financial markets were shaken repeatedly in 1994 by a variety of
events. Rising interest rates, losses for investors in highly leveraged
derivatives, and unfavorable legislation impacting utilities and cable
companies were just some of the factors that combined to create a
challenging environment for investors. Masking the market volatility,
however, many broad stock indexes ended the year little changed.
Recent events have put a new face on an old challenge for stock funds:
to provide shareholders with long-term returns that compensate for the
risks inherent in equity investments. For some investors, the temptation is
strong to move from stocks to bonds now that U.S. Treasuries yield between
6% and 8% if held to maturity. At times like these, it is useful to
remember that stocks historically have outperformed fixed-income
investments over longer periods _ a trend not likely altered by one year of
poor performance. Even so, the financial markets are likely to include
additional episodes of difficult adjustment. A sound investment plan that
can weather market storms is therefore more important than ever. Experience
has shown us that maintaining a diversified portfolio and a regular program
of investing can help smooth out overall investment performance in the long
term.
In the coming year, we expect a combination of factors, including
central bank tightening efforts, to keep the economy and inflation on a
moderate course. Meanwhile, corporate profits continue to grow and business
investment is at an all-time high, which should translate into expanded
economic capacity down the road. Given these developments, we expect
investors to begin focusing on positive long-term fundamentals rather than
short-term uncertainties.
If you have questions about your Fund or your investments, please
contact a Scudder Investor Relations representative at 1-800-225-2470. Page
31 provides more information on how to contact Scudder. Thank you for
choosing Scudder Development Fund to help meet your investment needs.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Development Fund
<PAGE>
Scudder Development Fund
Performance Update as of December 31, 1994
- - - - - -----------------------------------------------------------------
Growth of a $10,000 Investment
- - - - - -----------------------------------------------------------------
Scudder Development Fund
- - - - - ----------------------------------------
Total Return
Period Growth -------------
Ended of Average
12/31/94 $10,000 Cumulative Annual
- - - - - --------- ------- ---------- -------
1 Year $ 9,466 -5.34% -5.34%
5 Year $ 17,637 76.37% 12.02%
10 Year $ 30,684 206.84% 11.86%
20 Year $277,472 2,674.72% 18.08%
Russell 2000 Growth Index
- - - - - --------------------------------------
Total Return
Period Growth -------------
Ended of Average
12/31/94 $10,000 Cumulative Annual
- - - - - --------- ------- ---------- -------
1 Year $ 9,757 -2.43% -2.43%
5 Year $ 14,884 48.84% 8.27%
10 Year $ 26,146 161.46% 10.08%
20 Year* $ -- --% --%
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:
Yearly periods ended December 31
Scudder Development Fund
Year Amount
- - - - - ----------------------
84 10000
85 11965
86 12898
87 12714
88 14120
89 17397
90 17654
91 30335
92 29783
93 32416
94 30684
Russell 2000 Growth Index
Year Amount
- - - - - ----------------------
84 10000
85 13097
86 13566
87 12145
88 14619
89 17567
90 14509
91 21935
92 23639
93 26798
94 26146
The Russell 2000 Growth Index is an unmanaged capitalization-
weighted measure of 2,000 of the smallest capitalized U.S.
companies with a greater-than-average growth orientation and
whose common stocks trade on the NYSE, AMEX, and NASDAQ. Index
returns assume reinvestment of dividends and, unlike Fund returns,
do not reflect any fees or expenses.
- - - - - -----------------------------------------------------------------
Returns and Per Share Information
- - - - - -------------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
Yearly periods ended December 31
- - - - - ----------------------------------
<TABLE>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
---------------------------------------------------------------------------------
Net Asset Value... $20.43 $20.71 $18.69 $20.32 $22.69 $21.73 $36.23 $33.62 $33.51 $29.54
Income Dividends.. $ .17 $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
Capital Gains
Dividends......... $ .92 $ 1.33 $ 1.90 $ .42 $ 2.28 $ 1.23 $ .96 $ 1.70 $ 3.07 $ 2.12
Fund Total
Return (%)........ 19.65 7.79 -1.42 11.06 23.21 1.48 71.83 -1.82 8.84 -5.34
Index Total
Return (%)........ 30.97 3.58 -10.48 20.37 20.17 -17.41 51.19 7.77 13.36 -2.43
</TABLE>
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results.
Investment return and principal value will fluctuate, so an investor's
shares, when redeemed, may be worth more or less than when purchased.
*Index returns not available for this period.
Portfolio Summary as of December 31, 1994
- - - - - ---------------------------------------------------------------------------
Diversification
- - - - - ---------------------------------------------------------------------------
Equity Securities 97%
Cash Equivalents 3%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- - - - - --------------------------------------------------------------------------
Sectors (Excludes 3% Cash Equivalents)
- - - - - --------------------------------------------------------------------------
Technology 28%
Consumer Discretionary 15% We further diversified portfolio
Health 15% assets during the period, eliminating
Service Industries 15% for example several consumer stocks
Manufacturing 9% in favor of select manufacturing companies.
Durables 6%
Energy 5%
Financial 3%
Media 3%
Other 1%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- - - - - --------------------------------------------------------------------------
Ten Largest Equity Holdings
- - - - - --------------------------------------------------------------------------
1. Parametric Technology Corp.
Mechanical design software producer
2. Cintas Corp.
Uniform rentals
3. SAP AG
Computer software manufacturer
4. American Power Conversion Corp.
Manufacturer of backup power supply products
5. Informix Corp.
Database management software
6. Fiserv Inc.
Data processing services
7. STERIS Corp.
Manufacturer of sterile processing systems
8. Autodesk, Inc.
Computer-aided design and drafting
9. G&K Services Inc.
Uniform rentals
10. Superior Industries International Inc.
Manufacturer of aluminum wheels for automobiles
The Fund's largest holdings reflect our interest in innovative,
fast-growing companies that are filling niche markets with new
or newly applied technology.
For more complete details about the Fund's investment portfolio,
see page 10.
A monthly Investment Portfolio Summary is available upon request.
<PAGE>
SCUDDER DEVELOPMENT FUND
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
After 1994's difficult first half, we are pleased to report stronger
performance for Scudder Development Fund during the six months ended
December 31, 1994. Despite continued volatility in certain market sectors,
the Fund returned 15.01% during the period, surpassing the 8.52% return
reported by the Russell 2000 Growth Index. By contrast, the S&P 500 Index,
which contains primarily large-capitalization stocks, returned just 4.87%
during the period. To date, Scudder Development Fund's average annual
return since inception on February 11, 1971, is 11.83%.
The tug of war between higher interest rates and stronger corporate
earnings continued in the second half of 1994, leaving some broad indexes
little changed from the start of the period. On the whole, healthcare and
technology stocks performed well during the period, while consumer
services, retail, and financial services stocks did not. Our relatively
heavy weighting in technology and health-related stocks, the Fund's two
largest sectors, provided the largest earnings gains and thus the biggest
boost to performance, enabling the Fund to outperform the market averages.
Strategy Calls for Broader Diversification
As long-term investors, part of our basic strategy is to buy stocks
that have experienced price declines but remain fundamentally strong.
Conversely, we sell holdings that we feel have become overvalued, either
due to significant price appreciation or to deteriorating business
conditions. We did both during the period, selling consumer stocks because
of generally weaker business conditions and buying bank and industrial
stocks at temporarily depressed prices. The overall effect on the portfolio
has been a broader diversification of assets, which should help dampen
price volatility in the future.
In recent years, women's apparel stores have become increasingly
abundant in the United States, and the competition between these stores is
intense. Several retail stocks suffered price declines near the end of the
year due to lower-than-expected holiday sales. Given the weakened business
climate for these companies, we decided to decrease our overall retail
position, eliminating Cato Corporation and High Fashion International and
reducing others. One exception to the retail sales trend is Ann Taylor,
which we owned during the year but later sold after its price had risen
substantially. Wishing to participate in its growth but wary of its high
valuation, we bought Ann Taylor's primary supplier, Cygne Designs. Cygne
presented a classic buying opportunity after suffering a dramatic price
decline in December due to temporary manufacturing difficulties. We bought
the stock near its low for the year.
The Federal Reserve's monetary tightening efforts raised short-term
interest rates considerably last year, and interest-rate-sensitive
businesses suffered. Bank stocks in particular have fallen to levels we
believe merit renewed attention. While additional increases in short-term
interest rates are possible in 1995, we believe the bulk of the Fed's
tightening was accomplished in 1994. Furthermore, high stable rates do not
necessarily create a problem for financial stocks. Once interest rates have
stabilized, many banks, now priced at less than 10 times 1995's projected
earnings, should be poised to provide solid returns. In anticipation, we
added to our existing holdings in West One Bancorp, a commercial bank in
Idaho, and initiated new positions in several regional banks, including
Crestar Financial, Dauphin Deposit, and First Security Corporation _ all
possible takeover candidates in a broader move toward nationwide banking.
In an effort to diversify Fund assets, positions were also initiated
in industrial and electronic manufacturing companies. In all cases, these
companies possess the innovative management, niche markets, and high growth
rates necessary to meet our selection criteria. For example, American Power
Conversion, a Rhode Island manufacturer of backup power supplies, has
developed a unique technology that provides uninterruptable power in the
event of electrical failure while also sensing and eliminating potentially
damaging surges in electricity. Because their product provides a continuous
flow of power, it is ideally suited for computer networks, which can lose
valuable information during even momentary blackouts. American Power has
developed a backup for home use as well that retails for under $100. An
innovative manufacturing process coupled with a long-standing,
owner-oriented management team should continue to provide healthy growth in
earnings for this company.
New Faces in Healthcare, Technology
As part of the Fund's overall strategy, we concentrate our investments
in fast-growing, employee-owned companies filling niche markets with new or
newly applied technology. Moreover, we try to find companies capable of
generating growing revenues regardless of the current stage in the economic
cycle. Historically, these characteristics have been typical of companies
involved in software and electronic services. Indeed, we added to several
of our consumer software holdings during the period, including Broderbund
Software, Sierra On-Line, and Sanctuary Woods Multimedia _ all participants
in the growing multimedia and on-line services industries.
Innovative companies with entrepreneurial management teams are fast
becoming the healthcare industry's hallmark as well, thanks in part to
stiff competition and the continuing drive to reduce healthcare costs.
During the period we added to our healthcare-related holdings with select
investments in health maintenance organizations, medical suppliers, and
pharmaceutical companies. Recent additions include CliniCom, a developer
and installer of hospital computer systems; Target Therapeutics, a
manufacturer of disposable medical devices for treatment of vascular
disorders in the brain; and CIMA Laboratories, a developer of oral dosage
drugs. Notably, we also added to our holdings in STERIS, a manufacturer of
sterilizing systems. STERIS's patented cold sterilizing unit has been
embraced by hospitals around the country. The dishwasher-like apparatus is
installed directly in operating rooms and can sterilize metal instruments
and perishable plastic devices in a fraction of the time it takes
conventional heat-based methods. Best of all, the sterilant needed to
operate the unit, which only STERIS sells, can be disposed of safely.
Hospitals equipped with STERIS's new system have saved hundreds of
thousands of dollars simply by eliminating the need for multiple sets of
the same instruments. STERIS has no debt outstanding, and its earnings are
expected to grow by 53% in 1995.
Encouraging Prospects for 1995
The recent volatility in financial markets serves as a reminder that
all investments _ whether conservative or aggressive _ can perform poorly
in the short term. But it is also important to remember that the best
performance is usually achieved by maintaining a long-term perspective.
What's more, in the stock market, long-term results are driven by earnings
growth. Looking ahead, we expect the tug of war between interest rates and
earnings growth to end as soon as the fear of inflation recedes from
investors' minds. Meanwhile, the turmoil in foreign markets and the rising
possibility of a capital gains tax rate reduction increase the relative
attractiveness of domestic stocks overall and small-capitalization stocks
in particular. In the coming months, we intend to further diversify your
portfolio while maintaining our commitment to companies that possess
innovative management, strong balance sheets, and exciting growth
prospects.
Sincerely,
Your Portfolio Management Team
/s/Roy C. McKay /s/Peter Chin
Roy C. McKay Peter Chin
<PAGE>
<TABLE>
SCUDDER DEVELOPMENT FUND
INVESTMENT PORTFOLIO as of December 31, 1994 (Unaudited)
- - - - - -----------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- - - - - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2.8% COMMERCIAL PAPER
-----------------------------------------------------------------------
17,149,000 CIT Group Holdings Inc., 6.05%, 1/3/95
(Cost $17,143,236) . . . . . . . . . . . . . 17,143,236
-----------
0.4% CONVERTIBLE PREFERRED STOCKS
Shares
-----------------------------------------------------------------------
MEDIA
Broadcasting & 363,637 InTouch Group Inc. "D" (Interactive
Entertainment place-based media applications and
information services) (Cost $4,000,007)(b)(c) . 2,472,732
-----------
4.4% PREFERRED STOCKS
-----------------------------------------------------------------------
CONSUMER DISCRETIONARY 1.0%
Specialty Retail 6,000 Hornbach AG (Do-it-yourself home improvement
retailer) . . . . . . . . . . . . . . . . . . 6,001,355
-----------
HEALTH 0.1%
Medical Supply & 125,000 Cardiometrics, Inc. Series C (Manufacturer
Specialty and marketer of intravascular Doppler
ultrasound devices for diagnostic and
therapeutic uses)(b)(c) . . . . . . . . . . . 500,000
-----------
TECHNOLOGY 3.3%
Computer Software 35,000 SAP AG (Computer software manufacturer) 19,830,284
-----------
TOTAL PREFERRED STOCKS (Cost $9,518,595) . . . . 26,331,639
-----------
92.4% COMMON STOCKS
-----------------------------------------------------------------------
CONSUMER DISCRETIONARY 13.6%
Apparel & Shoes 2.1% 202,000 Cygne Designs, Inc.* (Designer and
manufacturer of woven and knitwear career
and casual women's clothing) . . . . . . . . . 2,777,500
169,600 Jones Apparel Group, Inc.* (Designer and
distributor of women's fashion) . . . . . . . 4,367,200
206,200 Nine West Group Inc.* (Designer and
marketer of women's footwear) . . . . . . . . 5,850,925
-----------
12,995,625
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- - - - - -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- - - - - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Department &
Chain Stores 1.8% 604,500 CML Group Inc. (Sportswear and recreational
products) . . . . . . . . . . . . . . . . . . . . 6,120,562
208,250 Men's Wearhouse Inc.* (Discount retailer) . . . . . 4,685,625
----------
10,806,187
----------
Recreational Products 2.7% 124,600 Broderbund Software Inc.* (Developer of
entertainment and educational software) . . . . . 5,825,050
7,500 Davidson & Associates Inc.* (Developer of
educational software) . . . . . . . . . . . . . . 243,750
170,300 Minnesota Educational Computing Corp.
(Developer and publisher of educational
software for use by children) . . . . . . . . . . 2,682,225
1,100,000 Sanctuary Woods Multimedia Inc.* (Leading
developer of family-oriented entertainment
and educational CD ROM titles)(c) . . . . . . . . 3,025,000
132,300 Sierra On-Line Inc.* (Provider of online
computer services) . . . . . . . . . . . . . . . . 4,531,275
----------
16,307,300
----------
Restaurants 3.7% 495,700 Cracker Barrel Old Country Stores
(Restaurants and gift stores) . . . . . . . . . . 9,170,450
261,600 Outback Steakhouse Inc.* (Operator of
full-service restaurants) . . . . . . . . . . . . 6,147,600
143,500 Starbucks Corp.* (High-quality coffee provider). . . 3,946,250
308,700 Taco Cabana Inc.* (Mexican style restaurant
chain) . . . . . . . . . . . . . . . . . . . . . . 2,816,888
----------
22,081,188
----------
Specialty Retail 3.3% 142,600 Bell Microproducts, Inc.* (Marketer and
distributor of semiconductor and computer
parts to industrial and commercial customers). . . 1,532,950
2,250 Hornbach Baumarkt AG (Do-it-yourself home
improvement retailer) . . . . . . . . . . . . . . 1,154,293
142,400 PETsMART Inc.* (Pet food and supply
superstores) . . . . . . . . . . . . . . . . . . . 4,912,800
67,500 Sports & Recreation Inc.* (Sports equipment
superstores) . . . . . . . . . . . . . . . . . . . 1,738,125
341,000 Viking Office Products Inc.* (Direct marketer of
office supplies) . . . . . . . . . . . . . . . . . 10,443,125
----------
19,781,293
----------
HEALTH 14.3%
Health Industry Services 2.7% 236,000 CliniCom, Inc. (Developer and installer of
computer-based clinical information systems
for hospitals) . . . . . . . . . . . . . . . . . . 2,625,500
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
SCUDDER DEVELOPMENT FUND
- - - - - -----------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- - - - - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
198,800 Foundation Health Corp.* (Managed health
care services through HMO's, government
contracts and specialty service subsidiaries) . . . 6,162,800
173,100 Mid Atlantic Medical Services, Inc.* (Health
care management services) . . . . . . . . . . . . . 3,959,663
127,500 PhyCor Inc. (Operator of specialty medical
clinics) . . . . . . . . . . . . . . . . . . . . . . 3,410,625
----------
16,158,588
----------
Hospital Management 0.1% 64,800 Advocat, Inc.* (Operator of nursing homes and
retirement centers) . . . . . . . . . . . . . . . . 858,600
----------
Medical Supply &
Specialty 9.0% 231,300 Bioject Medical Technologies Inc.* (Research
and development of medical syringes) . . . . . . . . 693,900
360,100 Endosonics Corp.* (Manufacturer of imaging
catheters) . . . . . . . . . . . . . . . . . . . . . 2,475,687
525,000 Heart Technology Inc.* (Developer,
manufacturer and marketer of devices for
treatment of arteriosclerosis) . . . . . . . . . . . 10,500,000
217,700 ICU Medical Inc.* (Designer, manufacturer
and marketer of proprietary disposable
medical products) . . . . . . . . . . . . . . . . . 3,374,350
400,000 Immunomedics (Restricted)* (Cancer imaging
therapy)(c) . . . . . . . . . . . . . . . . . . . . 1,400,000
180,000 PLC Systems Inc.* (Developer, manufacturer
and marketer of medical laser systems) . . . . . . . 888,750
287,700 Research Industries* (Manufacturer of
single-patient use cardiology medical products). . . 3,955,875
373,700 STERIS Corp.* (Manufacturer of sterile
processing systems) . . . . . . . . . . . . . . . . 14,013,750
100,500 Target Therapeutics, Inc.* (Manufacturer of
disposable medical devices for treatment of
vascular diseases) . . . . . . . . . . . . . . . . . 2,839,125
493,500 Thermedics Inc.* (Manufacturer of drug
detection instruments, explosives detectors,
and heart assist devices) . . . . . . . . . . . . . 6,292,125
274,333 UroMed Corp.* (Manufacturer of urological/
gynecological medical products)(b)(c). . . . . . . . 1,207,065
89,700 UroMed Corp.* . . . . . . . . . . . . . . . . . . . . 493,350
192,200 Ventritex Inc.* (Electric heart control devices) . . . 5,189,400
100,000 Vital Signs Inc.* (Manufacturer of single-patient
medical products) . . . . . . . . . . . . . . . . . 1,112,500
----------
54,435,877
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- - - - - -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- - - - - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pharmaceuticals 2.5% 256,600 BioChem Pharma, Inc.* (Research and
development of therapeutic products) . . . . . . 3,207,500
357,143 CIMA Laboratories Inc. (Developer of oral
dosage drug products)(b)(c) . . . . . . . . . . 2,928,573
488,100 Noven Pharmaceuticals, Inc.* (Transdermal
drug delivery systems) . . . . . . . . . . . . . 6,040,238
60,000 R.P. Scherer Corp.* (Manufacturer of drug
delivery system) . . . . . . . . . . . . . . . . 2,722,500
----------
14,898,811
----------
COMMUNICATIONS 0.8%
Cellular Telephone 0.5% 105,400 CommNet Cellular, Inc.* (Management,
maintenance and financing of cellular
telephone systems throughout the
United States) . . . . . . . . . . . . . . . . . 3,056,600
----------
Telephone/
Communications 0.3% 30,000 ALC Communications Corp.* (Long distance
telephone services) . . . . . . . . . . . . . . 933,750
5,280,612 Champion Technology (Paging services) 1,119,251
----------
2,053,001
----------
FINANCIAL 3.2%
Banks 59,000 Crestar Financial Corp. (Commercial banking
in Virginia) . . . . . . . . . . . . . . . . . . 2,219,875
107,000 Dauphin Deposit Corp. (Commercial banking
in Pennsylvania) . . . . . . . . . . . . . . . . 2,527,875
85,000 First American Corp. (Tennessee) (Regional
commercial banking) . . . . . . . . . . . . . . 2,284,375
91,700 First Security Corp. (Commercial banking in
western states) . . . . . . . . . . . . . . . . 2,086,175
200,000 GBC Bancorp (California commercial bank) . . . . . 2,850,000
274,200 West One Bancorp (Commercial banking
in Idaho) . . . . . . . . . . . . . . . . . . . 7,266,300
----------
19,234,600
----------
MEDIA 2.2%
Broadcasting &
Entertainment 0.4% 100,000 International Cablecasting Technologies*
(Provider of premium pay cable audio
programming services)(b) . . . . . . . . . . . . 200,000
850,000 International Cablecasting Technologies* . . . . 2,125,000
----------
2,325,000
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
SCUDDER DEVELOPMENT FUND
- - - - - -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- - - - - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cable Television 0.8% 599,420 Century Communications Corp. "A"* (Owner
and operator of cable TV systems) . . . . . . . . 4,495,650
----------
Print Media 1.0% 121,200 Scholastic Corp.* (Leading publisher and
distributor of educational books, videos and
computer software) . . . . . . . . . . . . . . . . 6,181,200
----------
SERVICE INDUSTRIES 14.2%
EDP Services 5.8% 700,000 Fiserv Inc.* (Data processing services). . . . . . . 15,050,000
484,500 Pyxis Corp.* (Manufacturer of point-of-use
distribution systems) . . . . . . . . . . . . . . 9,205,500
501,200 Systems & Computer Technology Corp.*
(Computer software for educational
institutions) . . . . . . . . . . . . . . . . . . 10,462,550
----------
34,718,050
----------
Investment 1.3% 349,400 Pioneer Group Inc. (Fund management
company owning major gold producer
in Ghana) . . . . . . . . . . . . . . . . . . . . 7,686,800
----------
Miscellaneous Commercial
Services 6.9% 342,000 BI Inc.* (Manufacturer of and service provider
for house arrest electronic monitoring systems). . 1,496,250
98,000 Career Horizons Inc.* (Temporary help
service for business and healthcare) . . . . . . . 1,592,500
620,000 Cintas Corp. (Uniform rentals) . . . . . . . . . . 22,010,000
180,300 Education Alternatives Inc.* (Provider of
school management consulting services and
developer of various educational products) . . . . 2,794,650
9,722 Education Alternatives Inc.* (b)(c) . . . . . . . . 120,553
796,650 G&K Services Inc. "A" (Uniform rentals). . . . . . . 13,244,306
120,000 Strategic Distribution, Inc. (In-plant
distributor of parts and supplies) . . . . . . . . 615,000
----------
41,873,259
----------
Printing/Publishing 0.2% 330,400 Data Broadcasting Corp.* (Provider of stock
quotes, financial information) . . . . . . . . . . 1,362,900
----------
DURABLES 6.1%
Automobiles 2.3% 120,000 Donnelly Corp. "A" (Manufacturer of
automotive glass products) . . . . . . . . . . . . 1,890,000
460,000 Superior Industries International Inc.
(Manufacturer of aluminum wheels for
automobiles) . . . . . . . . . . . . . . . . . . . 12,132,500
----------
14,022,500
----------
Telecommunications
Equipment 3.8% 275,300 Antec Corp.* (Developer and supplier of
optical transmission equipment for cable TV) . . . 5,058,637
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- - - - - ---------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- - - - - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
94,000 Ascend Communications, Inc.* (Developer and
producer of a variety of high-speed wide
area network access products) . . . . . . . . 3,830,500
107,000 Digital Link Corp.* (Manufacturer of digital
access products) . . . . . . . . . . . . . . . 2,875,625
319,550 Megahertz Corp.* (Manufacturer of data
and fax modems for use with portable
computers) . . . . . . . . . . . . . . . . . . 4,513,644
249,800 Summa Four Inc.* (Manufacturer and distributor
of telecommunication switching systems) . . . 6,682,150
-----------
22,960,556
-----------
MANUFACTURING 8.8%
Containers & Paper 0.7% 80,100 Aptargroup, Inc. (Manufacturer of packaging
equipment components) . . . . . . . . . . . . 2,302,875
50,000 Sealed Air Corp.* (Protective packaging
material) . . . . . . . . . . . . . . . . . . 1,812,500
-----------
4,115,375
-----------
Diversified Manufacturing 0.5% 100,300 Duracraft Corp.* (Manufacturer of household
products) . . . . . . . . . . . . . . . . . . 3,197,062
-----------
Electrical Products 3.0% 1,111,100 American Power Conversion Corp.*
(Manufacturer of backup power supply
products) . . . . . . . . . . . . . . . . . . 18,194,262
-----------
Industrial Specialty 1.3% 242,550 Lydall, Inc.* (Engineered fiber materials) . . . 7,882,875
-----------
Machinery/Components/
Controls 1.2% 350,000 Medar Inc.* (Manufacturer of quality
control equipment) . . . . . . . . . . . . . . 4,812,500
40,000 Nordson Corp. (Industrial application
equipment) . . . . . . . . . . . . . . . . . 2,400,000
-----------
7,212,500
-----------
Office Equipment/
Supplies 1.9% 429,600 Danka Business Systems PLC (ADR)
(Distributor of office equipment) . . . . . . 9,290,100
162,800 Encad, Inc.* (Manufacturer of large format color
inkjet printers). . . . . . . . . . . . . . . . 2,014,650
15,000 Nu-Kote Holdings Inc. "A"* (Manufacturer of
office and home printing products) . . . . . . 388,125
------------
11,692,875
------------
Specialty Chemicals 0.2% 65,800 Crompton & Knowles Corp. (Specialty
chemicals) . . . . . . . . . . . . . . 1,085,700
------------
TECHNOLOGY 23.8%
Computer Software 13.0% 350,000 Autodesk, Inc. (Computer-aided design and
drafting) . . . . . . . . . . . . . . 13,868,750
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
SCUDDER DEVELOPMENT FUND
- - - - - ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- - - - - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
617,050 Cheyenne Software Inc.* (Computer software
and equipment) . . . . . . . . . . . . . . . . . . 8,175,912
497,700 Informix Corp.* (Database management
software) . . . . . . . . . . . . . . . . . . . . 15,988,612
216,000 Kurzweil Applied Intelligence* (Developer of
speech recognition software and systems) . . . . . 864,000
662,200 Parametric Technology Corp.* (Mechanical
design software producer) . . . . . . . . . . . . 22,845,900
141,500 Security Dynamics Technologies, Inc.*
(Designer, developer and supporter of a family
of security products used to manage access
to computer-based information resources) . . . . . 2,635,438
192,700 Synopsys Inc.* (Developer of high level
electronic design software) . . . . . . . . . . . 8,430,625
136,700 Wall Data Inc.* (Developer and marketer of
LAN connectivity software products). . . . . . . . 5,433,825
----------
78,243,062
----------
Electronic Components/
Distributors 1.4% 229,100 Three-Five Systems Inc.* (Manufacturer of
opto-electronic components) . . . . . . . . . . . 8,333,513
----------
Office/Plant Automation 2.4% 226,100 Cabletron Systems Inc.* (Computer networking
products and services) . . . . . . . . . . . . . 10,513,650
166,100 Cognex Corp.* (Manufacturer of machine
vision systems) . . . . . . . . . . . . . . . . . 4,277,075
----------
14,790,725
----------
Precision Instruments 2.8% 162,300 KLA Instruments Corp.* (Developer,
manufacturer and marketer of automated
image processing systems) . . . . . . . . . . . . 7,952,700
76,800 Lam Research Corp.* (Manufacturer of
plasma etching equipment) . . . . . . . . . . . . 2,860,800
294,300 Silicon Valley Group Inc.* (Manufacturer of
equipment for semiconductor industry) . . . . . . 6,069,938
----------
16,883,438
----------
Semiconductors 4.2% 353,600 Atmel Corp.* (Developer and manufacturer of
integrated circuits) . . . . . . . . . . . . . . 11,845,600
9,100 Linear Technology Corp. (Manufacturer of
integrated circuits) . . . . . . . . . . . . . . 450,450
89,400 Microchip Technology Inc.* (Manufacturer of
high performance, field programmable
microcontrollers and specialty memory
products) . . . . . . . . . . . . . . . . . . . 2,458,500
62,500 Xilinx Inc.* (Supplier of semiconductors) . . . . . 3,703,125
243,950 Zilog Inc.* (Manufacturer and marketer of
integrated circuits) . . . . . . . . . . . . . . 7,196,525
----------
25,654,200
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- - - - - ----------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- - - - - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ENERGY 5.0%
Oil & Gas Production 3.9% 270,100 Barrett Resources Corp.* (Oil and gas
exploration and production) . . . . . . . . . . 5,537,050
933,100 Benton Oil & Gas Co.* (Oil and gas exploration,
development and production) . . . . . . . . . . 8,514,537
271,600 Triton Energy Corp.* (Oil and gas exploration) . . 9,234,400
-----------
23,285,987
-----------
Oilfield Services/
Equipment 1.1% 114,400 Global Industries Ltd.* (Pipeline construction,
derrick and diving services for offshore oil
and gas industry) . . . . . . . . . . . . . . . 2,616,900
427,900 Weatherford International Inc.* (Oilfield
equipment and services) . . . . . . . . . . . . . 4,172,025
-----------
6,788,925
-----------
TRANSPORTATION 0.4%
Air Freight 0.1% 13,200 Fritz Companies, Inc.* (International air and
ocean freight forwarding, warehousing, and
other services for the international movement
of goods) . . . . . . . . . . . . . . . . . . . . 620,400
-----------
Trucking 0.3% 125,100 Celadon Group Inc.* (Long-haul trucking
services) . . . . . . . . . . . . . . . . . . . . 1,845,225
-----------
TOTAL COMMON STOCKS (Cost $424,646,867). . . . . . 558,119,709
-----------
- - - - - ----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0%
(Cost $455,308,705)(a). . . . . . . . . . . . . . 604,067,316
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
SCUDDER DEVELOPMENT FUND
- - - - - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
* Non-income producing security.
(a) The cost for federal income tax purposes was $455,513,859. At December 31, 1994, net unrealized
appreciation for all securities based on tax cost was $148,553,457. This consisted of aggregate gross
unrealized appreciation for all securities in which there was an excess of market value over tax cost
of $189,786,531 and aggregate gross unrealized depreciation for all securities in which there was an
excess of tax cost over market value of $41,233,074.
(b) Securities valued in good faith by the Valuation Committee of the Board of Trustees. The cost of these
securities at December 31, 1994, aggregated $8,925,768. See Note A of the Notes to Financial Statements.
(c) Restricted Securities -- securities which have not been registered with the Securities and Exchange
Commission under the Securities Act of 1933. Information concerning such restricted securities at
December 31, 1994 is as follows:
</TABLE>
<TABLE>
<CAPTION>
Security Acquisition Date Cost ($)
-------- ---------------- --------
<S> <C> <C>
Cardiometrics, Inc. Series C 4/26/93 500,000
CIMA Laboratories Inc. 1/7/94 2,500,000
Education Alternatives Inc. 7/1/93 240,133
Immunomedics 3/4/91 900,090
InTouch Group Inc."D" 1/20/94 4,000,007
Sanctuary Woods Multimedia Inc. 1/28/94 4,864,066
UroMed Corp. 9/15/93 1,250,003
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- - - - - ------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1994 (UNAUDITED)
- - - - - ------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $455,308,705)
(Note A) . . . . . . . . . . . . . . . . . . . . . . . $604,067,316
Receivables:
Investments sold . . . . . . . . . . . . . . . . . . . 5,431,361
Fund shares sold . . . . . . . . . . . . . . . . . . . 1,702,404
Dividends and interest . . . . . . . . . . . . . . . . 149,872
Other assets . . . . . . . . . . . . . . . . . . . . . . 4,884
------------
Total assets . . . . . . . . . . . . . . . . . . . 611,355,837
LIABILITIES
Payables:
Due to custodian bank . . . . . . . . . . . . . . . . $2,887,834
Investments purchased . . . . . . . . . . . . . . . . 6,782,863
Fund shares redeemed . . . . . . . . . . . . . . . . . 2,922,704
Accrued management fee (Note C) . . . . . . . . . . . 479,888
Other accrued expenses (Note C) . . . . . . . . . . . 213,829
----------
Total liabilities . . . . . . . . . . . . . . . . . 13,287,118
------------
Net assets, at market value . . . . . . . . . . . . . . . $598,068,719
============
NET ASSETS
Net assets consist of:
Accumulated net investment loss . . . . . . . . . . . $ (3,005,659)
Unrealized appreciation on investments . . . . . . . . 148,758,611
Accumulated net realized gain . . . . . . . . . . . . 34,667,864
Shares of beneficial interest . . . . . . . . . . . . 202,454
Additional paid-in capital . . . . . . . . . . . . . . 417,445,449
------------
Net assets, at market value . . . . . . . . . . . . . . . $598,068,719
============
NET ASSET VALUE, offering and redemption price per
share ($598,068,719 -:- 20,245,357 outstanding
shares of beneficial interest, $.01 par value,
unlimited number of shares authorized) . . . . . . . . $29.54
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
SCUDDER DEVELOPMENT FUND
- - - - - ----------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 1994 (UNAUDITED)
- - - - - ----------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes withheld of $12,612) . . $ 736,252
Interest . . . . . . . . . . . . . . . . . . . . . . . . 215,587
-----------
951,839
Expenses:
Management fee (Note C) . . . . . . . . . . . . . . . . . $ 2,917,526
Services to shareholders (Note C) . . . . . . . . . . . . 675,657
Trustees' fees (Note C) . . . . . . . . . . . . . . . . . 17,722
Reports to shareholders . . . . . . . . . . . . . . . . . 137,365
Custodian fees . . . . . . . . . . . . . . . . . . . . . 105,880
Auditing . . . . . . . . . . . . . . . . . . . . . . . . 23,771
State registration . . . . . . . . . . . . . . . . . . . 23,300
Legal . . . . . . . . . . . . . . . . . . . . . . . . . . 17,589
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 38,688 3,957,498
----------- -----------
Net investment loss . . . . . . . . . . . . . . . . . . . (3,005,659)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain from:
Investments . . . . . . . . . . . . . . . . . . . . . 28,655,429
Foreign currency related transactions . . . . . . . . 1,297 28,656,726
-----------
Net unrealized appreciation on investments during the
period . . . . . . . . . . . . . . . . . . . . . . . 54,153,070
-----------
Net gain on investment transactions . . . . . . . . . . . 82,809,796
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . $79,804,137
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- - - - - -------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- - - - - -------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED
1994 JUNE 30,
INCREASE (DECREASE) IN NET ASSETS (UNAUDITED) 1994
- - - - - -------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment loss . . . . . . . . . . . . . . . . $ (3,005,659) $ (6,685,599)
Net realized gain from investment transactions . . 28,656,726 74,717,985
Net unrealized appreciation (depreciation) on
investment transactions during the period . . . 54,153,070 (148,042,293)
------------- --------------
Net increase (decrease) in net assets resulting
from operations . . . . . . . . . . . . . . . . 79,804,137 (80,009,907)
------------- --------------
Distributions to shareholders from net realized
gains from investments ($2.12 and
$3.07 per share, respectively) . . . . . . . . . (41,498,116) (67,981,079)
------------- -------------
Fund share transactions:
Proceeds from shares sold . . . . . . . . . . . . . 135,501,367 321,444,546
Net asset value of shares issued to
shareholders in reinvestment of
distributions . . . . . . . . . . . . . . . . . 39,673,233 64,939,143
Cost of shares redeemed . . . . . . . . . . . . . . (161,139,111) (513,441,752)
------------- -------------
Net increase (decrease) in net assets from
Fund share transactions. . . . . . . . . . . . . 14,035,489 (127,058,063)
------------- -------------
INCREASE (DECREASE) IN NET ASSETS . . . . . . . . . 52,341,510 (275,049,049)
Net assets at beginning of period . . . . . . . . . 545,727,209 820,776,258
------------- -------------
NET ASSETS AT END OF PERIOD (including
accumulated net investment loss of
$3,005,659 at December 31, 1994) . . . . . . . . $ 598,068,719 $ 545,727,209
============= =============
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period . . . . . 19,787,452 23,737,608
------------- -------------
Shares sold . . . . . . . . . . . . . . . . . . . . 4,604,971 9,715,584
Shares issued to shareholders in reinvestment
of distributions . . . . . . . . . . . . . . . . 1,371,263 1,904,190
Shares redeemed . . . . . . . . . . . . . . . . . . (5,518,329) (15,569,930)
------------- -------------
Net increase (decrease) in Fund shares. . . . . . . 457,905 (3,950,156)
------------- -------------
Shares outstanding at end of period . . . . . . . . 20,245,357 19,787,452
============= =============
</TABLE>
<PAGE>
<TABLE>
SCUDDER DEVELOPMENT FUND
FINANCIAL HIGHLIGHTS
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD AND OTHER PERFORMANCE
INFORMATION DERIVED FROM THE FINANCIAL STATEMENTS.
<CAPTION>
Six Months Ended
December 31, Years Ended June 30, (a)
1994(b) -------------------------------------------------------------------------------------------
(Unaudited) 1994(b) 1993(b) 1992(b) 1991(b) 1990(b) 1989(b) 1988 1987 1986(b) 1985
------------ -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period . . . . . . . $27.58 $34.58 $29.92 $27.33 $26.25 $22.54 $22.00 $25.39 $25.12 $20.41 $18.57
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from
investment
operations:
Net investment
income (loss) . . . (.15) (.30) (.27) (.23) (.10) (.08) (.10) (.08) (.07) (.01) .14
Net realized
and unrealized
gain (loss) on
investment
transactions. . . . 4.23 (3.63) 6.63 3.78 2.41 6.07 1.06 (1.41) 1.67 5.81 2.33
------ ------ ------ ----- ------ ------ ------ ------ ------ ------ ------
Total from
investment
operations . . . . . 4.08 (3.93) 6.36 3.55 2.31 5.99 .96 (1.49) 1.60 5.80 2.47
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions
from:
Net investment
income . . . . . . -- -- -- -- -- -- -- -- -- (.17) (.28)
Net realized
gains on
investment
transactions. . . (2.12) (3.07) (1.70) (.96) (1.23) (2.28) (.42) (1.90) (1.33) (.92) (.35)
------ ------ ------ ----- ------ ------ ----- ------ ----- ----- -----
Total distributions. . (2.12) (3.07) (1.70) (.96) (1.23) (2.28) (.42) (1.90) (1.33) (1.09) (.63)
------ ------ ------ ----- ------ ------ ----- ------ ----- ----- ------
Net asset value,
end of period $29.54 $27.58 $34.58 $29.92 $27.33 $26.25 $22.54 $22.00 $25.39 $25.12 $20.41
====== ====== ====== ===== ====== ====== ===== ===== ====== ====== ======
TOTAL RETURN (%) . . . 15.01(d) (12.91) 22.28 12.83 10.32 28.50 4.66 (5.35) 7.51 29.92 13.58
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end
of period
($ millions). . . . . 598 546 821 700 476 361 275 356 387 359 254
Ratio of operating
expenses to
average
net assets (%). . . . 1.34(c) 1.27 1.30 1.30 1.29 1.34 1.32 1.30 1.27 1.25 1.29
Ratio of net
investment
income (loss) to
average
net assets (%). . . . (1.01)(c) (.91) (.83) (.70) (.40) (.35) (.47) (.44) (.33) (.03) .90
Portfolio turnover
rate (%) . . . . . . 43.7(c) 48.3 49.2 53.5 70.8 40.1 32.0 39.2 23.5 29.4 25.7
<FN>
(a) All per share and share outstanding amounts through 1986 have been restated
to reflect the November 17, 1986, 200% stock dividend.
(b) Per share amounts have been calculated using the weighted average shares
outstanding during the period method.
(c) Annualized
(d) Not annualized
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
- - - - - --------------------------------------------------------------------------------
A. SIGNIFICANT ACCOUNTING POLICIES
- - - - - --------------------------------------------------------------------------------
Scudder Development Fund (the "Fund") is organized as a Massachusetts business
trust and is registered under the Investment Company Act of 1940, as amended,
as a diversified, open-end management investment company. The policies
described below are followed consistently by the Fund in the preparation of its
financial statements in conformity with generally accepted accounting
principles.
SECURITY VALUATION. Portfolio securities which are traded on U.S. or foreign
stock exchanges are valued at the most recent sale price reported on the
exchange on which the security is traded most extensively. If no sale occurred,
the security is then valued at the calculated mean between the most recent bid
and asked quotations. If there are no such bid and asked quotations, the most
recent bid quotation is used. Securities quoted on the the National Association
of Securities Dealers Automatic Quotation ("NASDAQ") System, for which there
have been sales, are valued at the most recent sale price reported on such
system. If there are no such sales, the value is the high or "inside" bid
quotation. Securities which are not quoted on the NASDAQ System but are traded
in another over-the-counter market are valued at the most recent sale price on
such market. If no sale occurred, the security is then valued at the calculated
mean between the most recent bid and asked quotations. If there are no such bid
and asked quotations the most recent bid quotation shall be used. Short-term
investments having a maturity of sixty days or less are valued at amortized
cost.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Trustees. Securities valued in good faith by
the Valuation Committee of the Trustees at fair value amounted to $7,428,923
(1.24% of net assets) and have been noted in the investment portfolio as of
December 31, 1994.
RESTRICTED SECURITIES. The Fund may not purchase restricted securities (for
these purposes, restricted security means a security which cannot be sold to
the public without registration under the Securities Act of 1933 or the
availability of an exemption from registration, or which is subject to other
legal or contractual delays in or restrictions on resale), if, as a result
thereof, more than 5% of the value of the Fund's total assets would be invested
in restricted securities. The aggregate fair
<PAGE>
SCUDDER DEVELOPMENT FUND
- - - - - --------------------------------------------------------------------------------
value of restricted securities at December 31, 1994 amounted to $11,653,923
which represents 1.95% of net assets.
FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency transactions are translated into U.S. dollars
on the following basis:
(i) market value of investment securities, other assets and liabilities
at the daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and interest
income and certain expenses at the rates of exchange prevailing on
the respective dates of such transactions.
The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes
in market prices of the investments. Such fluctuations are included with the
net realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on dividends,
interest, and foreign withholding taxes.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value, depending on the maturity of the repurchase
agreement, is equal to at least 100.5% of the resale price.
FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements of
the Internal Revenue Code which are applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, the Fund paid no federal income taxes and no federal income tax
provision was required.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- - - - - --------------------------------------------------------------------------------
DISTRIBUTION OF INCOME AND GAINS. Distributions of net investment income are
made annually. During any particular year net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed and, therefore, will be distributed to
shareholders annually. An additional distribution may be made to the extent
necessary to avoid the payment of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations which may differ from generally accepted accounting principals.
These differences primarily relate to investments in 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.
OTHER. Investment security transactions are accounted for on a trade-date
basis. Dividend income and distributions to shareholders are recorded on the
ex-dividend date.Interest income is recorded on the accrual basis.
B. PURCHASES AND SALES OF SECURITIES
- - - - - --------------------------------------------------------------------------------
During the six months ended December 31, 1994, purchases and sales of
investment securities (excluding short-term investments) aggregated
$126,605,885 and $163,163,760, respectively.
C. RELATED PARTIES
- - - - - --------------------------------------------------------------------------------
Under the Fund's Investment Management Agreement (the "Agreement") with
Scudder, Stevens & Clark, Inc. (the "Adviser"), the Fund agrees to pay to the
Adviser a fee equal to an annual rate of 1% of the Fund's first $500 million of
average daily net assets, .95% of the next $500 million of such net assets, and
.90% on such net assets in excess of $1 billion, 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,
<PAGE>
SCUDDER DEVELOPMENT FUND
- - - - - --------------------------------------------------------------------------------
instruments and other contracts relating to investments to be purchased, sold
or entered into by the Fund. In addition to portfolio management services, the
Adviser provides certain administrative services in accordance with the
Agreement. The Agreement also provides that if the Fund's expenses, exclusive
of taxes, interest, and extraordinary expenses, exceed specified limits, such
excess, up to the amount of the management fee, will be paid by the Adviser.
For the six months ended December 31, 1994, the fee pursuant to the Agreement
amounted to $2,917,526.
Scudder Service Corporation ("SSC"), a wholly-owned subsidiary of the Adviser,
is the transfer, dividend paying and shareholder service agent for the Fund.
For the six months ended December 31, 1994, the amount charged by SSC
aggregated $573,736, of which $98,755 is unpaid at December 31, 1994.
The Fund pays each of its Trustees not affiliated with the Adviser $4,000
annually plus specified amounts for attended board and committee meetings. For
the six months ended December 31, 1994, Trustees' fees aggregated $17,722.
<PAGE>
OFFICERS AND TRUSTEES
Daniel Pierce*
President and Trustee
Paul Bancroft III
Trustee; Venture Capitalist and Consultant
Thomas J. Devine
Trustee; Consultant
Douglas M. Loudon*
Vice President and Trustee
Wilson Nolen
Trustee; Consultant
Juris Padegs*
Trustee
Gordon Shillinglaw
Trustee; Professor Emeritus of Accounting, Columbia University
Graduate School of Business
Robert G. Stone, Jr.
Trustee; Chairman of the Board and Director, Kirby Corporation
Edmond D. Villani*
Trustee
Robert W. Lear
Honorary Trustee; Executive-in-Residence, Columbia University Graduate
School of Business
Edmund R. Swanberg
Honorary Trustee
Peter Chin*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
David S. Lee*
Vice President
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
Roy C. McKay*
Vice President
Edward J. O'Connell*
Vice President and Assistant Treasurer
Kathryn L. Quirk*
Vice President and Assistant Secretary
Richard W. Desmond*
Assistant Secretary
Coleen Downs Dinneen*
Assistant Secretary
*Scudder, Stevens & Clark, Inc.
INVESTMENT PRODUCTS AND SERVICES
The Scudder Family of Funds
Money market
Scudder Cash Investment Trust
Scudder U.S. Treasury Money Fund
Tax free money market+
Scudder Tax Free Money Fund
Scudder California Tax Free Money Fund*
Scudder New York Tax Free Money Fund*
Tax free+
Scudder California Tax Free Fund*
Scudder High Yield Tax Free Fund
Scudder Limited Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder Massachusetts Limited Term Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder Medium Term Tax Free Fund
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
Growth and Income
Scudder Balanced Fund
Scudder Growth and Income Fund
Income
Scudder Emerging Markets Income Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder International Bond Fund
Scudder Short Term Bond Fund
Scudder Short Term Global Income Fund
Scudder Zero Coupon 2000 Fund
Growth
Scudder Capital Growth Fund
Scudder Development Fund
Scudder Global Fund
Scudder Global Small Company Fund
Scudder Gold Fund
Scudder Greater Europe Growth Fund
Scudder International Fund
Scudder Latin America Fund
Scudder Pacific Opportunities Fund
Scudder Quality Growth Fund
Scudder Value Fund
The Japan Fund
Retirement Plans and Tax-Advantaged Investments
IRAs
Keogh Plans
Scudder Horizon Plan+++* (a variable annuity)
401(k) Plans
403(b) Plans
SEP-IRAs
Profit Sharing and Money Purchase Pension Plans
Closed-end Funds#
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder World Income Opportunities Fund, Inc.
Institutional Cash Management
Scudder Institutional Fund, Inc.
Scudder Fund, Inc.
Scudder Treasurers Trust(tm)++
For complete information on any of the above Scudder funds, including
management fees and expenses, call or write for a free prospectus. Read it
carefully before you invest or send money. +A portion of the income from
the tax-free funds may be subject to federal, state and local taxes. *Not
available in all states. +++A no-load variable annuity contract provided by
Charter National Life Insurance Company and its affiliate, offered by
Scudder's insurance agencies, 1-800-225-2470. #These funds, advised by
Scudder, Stevens & Clark, Inc., are traded on various stock exchanges.
++For information on Scudder Treasurers Trust(tm), an institutional cash
management service that utilizes certain portfolios of Scudder Fund, Inc.
($100,000 minimum), call: 1-800-541-7703.
HOW TO CONTACT SCUDDER
Account Service and Information
For existing account service and transactions
SCUDDER INVESTOR RELATIONS
1-800-225-5163
For account updates, prices, yields, exchanges and redemptions
SCUDDER AUTOMATED INFORMATION LINE (SAIL)
1-800-343-2890
Investment Information
To receive information about the Scudder funds, for additional
applications and prospectuses, or for investment questions
SCUDDER INVESTOR RELATIONS
1-800-225-2470
For establishing 401(k) and 403(b) plans
SCUDDER DEFINED CONTRIBUTION SERVICES
1-800-323-6105
Please address all correspondence to
THE SCUDDER FUNDS
P.O. BOX 2291
BOSTON, MASSACHUSETTS
02107-2291
Or stop by a Scudder Funds Center
Many shareholders enjoy the personal, one-on-one service of the
Scudder Funds Centers. Check for a Funds Center near you_they can be
found in the following cities:
Boca Raton
Boston
Chicago
Cincinnati
Los Angeles
New York
Portland, OR
San Diego
San Francisco
Scottsdale
For information on Scudder Treasurers Trust(tm), an institutional cash
management service for corporations, non-profit organizations and trusts
which utilizes certain portfolios of Scudder Fund, Inc.* ($100,000
minimum), call: 1-800-541-7703.
For information on Scudder Institutional Funds,* funds designed to meet the
broad investment management and service needs of banks and other
institutions, call: 1-800-854-8525.
Scudder Investor Relations and Scudder Funds Centers are services
provided through Scudder Investor Services, Inc., Distributor.
* Contact Scudder Investor Services, Inc., Distributor, to receive a
prospectus with more complete information, including management fees
and expenses. Please read it carefully before you invest or send
money.
Celebrating 75 Years of Serving Investors
Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven
Clark, Scudder, Stevens & Clark was the first independent investment
counsel firm in the United States. Since its birth, Scudder's pioneering
spirit and commitment to professional long-term investment management have
helped shape the investment industry. In 1928, we introduced the nation's
first no-load mutual fund. Today we offer 36 pure no load(tm) funds,
including the first international mutual fund offered to U.S. investors.
Over the years, Scudder's global investment perspective and dedication
to research and fundamental investment disciplines have helped Scudder
become one of the largest and most respected investment managers in the
world. Though times have changed since our beginnings, we remain committed
to our longstanding principles: managing money with integrity and
distinction, keeping the interests of our clients first; providing access
to investments and markets that may not be easily available to individuals;
and making investing as simple and convenient as possible through friendly,
comprehensive service.
