Scudder
Development
Fund
Annual Report
June 30, 1995
o Offers opportunities for long-term growth of capital by investing primarily
in securities of emerging growth companies.
o A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
<PAGE>
CONTENTS
2 In Brief
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
27 Report of Independent Accountants
28 Tax Information
29 Officers and Trustees
30 Investment Products and Services
31 How to Contact Scudder
IN BRIEF
- Scudder Development Fund provided shareholders with a 45.41% total return
for the 12 months ended June 30, 1995, outperforming by a wide margin the
unmanaged Russell 2000 Growth Index, which returned 25.82%.
<TABLE>
<CAPTION>
Comparative Returns Through June 30, 1995
Scudder Russell 2000
Development Fund Growth Index
<S> <C> <C>
One year 45.41% 25.82%
6 months 26.44% 15.95%
3 months 17.71% 9.92%
</TABLE>
- The Fund's technology and healthcare holdings contributed greatly to
performance, thanks to steady demand for computer-related software and
equipment, and rapid earnings improvements throughout the period.
- The Fund further diversified its holdings during the period with new
positions in manufacturing, energy, and regional bank stocks, made possible
in part by the sale of several consumer-oriented holdings.
2
<PAGE>
LETTER FROM THE FUND'S PRESIDENT
Dear Shareholders,
The past 12 months have witnessed an extraordinarily strong rise in the net
asset value of the Scudder Development Fund. The Fund's total return for the
fiscal year ended June 30, 1995, was 45.41% -- almost double that of the
unmanaged Russell 2000 Growth Index. This reflects not only the general strength
in stock prices but the tremendous gains of stocks in the technology and
healthcare industries, which are heavily represented in the portfolio.
In some ways the past year's performance is a catch-up, given the relative
underperformance the technology and healthcare sectors have experienced in the
prior year or two. This type of sector rotation is not unusual in the stock
market. It is vindication, however, for the patient investor who believes that
rapid, above-average earnings growth will eventually be recognized in the
marketplace. And while prices have risen dramatically, so have earnings, as
evidenced by the table on page 7.
Longer term, we believe investment prospects around the world are
fundamentally positive. In our view, the driver of capital market returns over
the next five years will be disinflationary growth, dominated by such forces as
technological innovation, deregulation, and monetary restraint. Those industries
and companies that contribute to, or are beneficiaries of, this disinflationary
environment should offer above-average returns. Fortunately, Scudder Development
Fund has a long history of investing in these types of innovative,
growth-oriented companies. With an approach to investment management grounded in
independent research, your portfolio managers will continue to assess the
changing economic landscape to try to identify those investment opportunities
that provide financial reward for shareholders with an appropriate level of
risk.
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
3
<PAGE>
Scudder Development Fund
Performance Update as of June 30, 1995
-----------------------------------------------------------------
Growth of a $10,000 Investment
-----------------------------------------------------------------
Scudder Development Fund
----------------------------------------
Total Return
Period Growth -------------
Ended of Average
6/30/95 $10,000 Cumulative Annual
--------- ------- ---------- -------
1 Year $ 14,541 45.41% 45.41%
5 Year $ 19,276 92.76% 14.03%
10 Year $ 34,271 242.71% 13.11%
20 Year $172,649 1,726.49% 15.63%
Russell 2000 Growth Index
--------------------------------------
Total Return
Period Growth -------------
Ended of Average
6/30/95 $10,000 Cumulative Annual
--------- ------- ---------- -------
1 Year $ 12,582 25.82% 25.82%
5 Year $ 16,676 66.76% 10.76%
10 Year $ 25,513 155.13% 9.81%
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 June 30
Scudder Development Fund
Year Amount
----------------------
85 10000
86 12992
87 13968
88 13220
89 13835
90 17779
91 19613
92 22129
93 27061
94 23568
95 34271
Russell 2000 Growth Index
Year Amount
----------------------
85 10000
86 13483
87 14319
88 12762
89 14071
90 15300
91 15388
92 16688
93 20100
94 20278
95 25513
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 June 30
----------------------------------
<TABLE>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
---------------------------------------------------------------------------------
Net Asset Value... $25.12 $25.39 $22.00 $22.54 $26.25 $27.33 $29.92 $34.58 $27.58 $37.35
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 (%)........ 29.92 7.51 -5.35 4.66 28.50 10.32 12.83 22.28 -12.91 45.41
Index Total
Return (%)........ 34.83 6.20 -10.88 10.26 8.72 .58 8.45 20.45 .88 25.82
</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.
4
<PAGE>
Portfolio Summary as of June 30, 1995
---------------------------------------------------------------------------
Diversification
---------------------------------------------------------------------------
Equity Securities 99%
Cash Equivalents 1%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
--------------------------------------------------------------------------
Sectors (Excludes 1% Cash Equivalents)
--------------------------------------------------------------------------
Technology 29%
Health 14% The technology and healthcare sectors
Service Industries 13% contributed most to the Fund's recent
Consumer Discretionary 11% strong performance, as investors reacted
Manufacturing 11% to generally stronger-than-expected
Durables 6% earnings gains.
Energy 6%
Media 5%
Communications 2%
Other 3%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
--------------------------------------------------------------------------
Ten Largest Equity Holdings
--------------------------------------------------------------------------
1. Informix Corp.
Database management software
2. American Power Conversion Corp.
Manufacturer of backup power supply products
3. Parametric Technology Corp.
Mechanical design software producer
4. Atmel Corp.
Developer and manufacturer of integrated circuits
5. Cintas Corp.
Uniform rentals
6. Fiserv Inc.
Data processing services
7. STERIS Corp.
Manufacturer of sterile processing systems
8. G&K Services Inc.
Uniform rentals
9. Triton Energy Corp.
Oil and gas exploration
10. SAP AG
Computer software manufacturer
Several of the Fund's largest holdings returned more than 100%
during the year.
For more complete details about the Fund's investment portfolio,
see page 10.
A monthly Investment Portfolio Summary is available upon request.
5
<PAGE>
SCUDDER DEVELOPMENT FUND
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
Scudder Development Fund produced a total return of 45.41% over the
past year ended June 30, far surpassing the 25.82% return of the Russell 2000
Growth Index, its unmanaged benchmark. The Fund also performed well relative to
its peers, outpacing the 25.28% average return of the 86 mid-capitalization
funds tracked by Lipper Analytical Services, Inc. The tables on page 4 put this
recent performance into historical perspective. Over the past three, five, ten
and twenty years, the Development Fund has produced strong average annual
compounded total returns of 15.70%, 14.03%, 13.11%, and 15.63%, respectively.
The primary driver of these returns has been a consistent, long-term
philosophy to concentrate investments in small- to mid-sized companies that are
well-managed and capable of at least 15% earnings growth per annum. Where
possible, we try to purchase stocks that have experienced price declines in
spite of their fundamental strength. Conversely, we sell holdings that we feel
have become overvalued, either due to significant price appreciation or to
deteriorating business conditions. Key to the successful implementation of this
philosophy has been Scudder's fundamental research into each of the Fund's
investments.
Healthcare, Technology Stocks Shine
In the last few months of the period, the economic and investment
environment was most conducive and rewarding to technology and healthcare
companies -- traditionally, areas where your Fund has had its highest investment
concentration. During the first half of 1994, the prices of technology stocks
were held back by concerns about inflationary economic growth and a series of
interest rate increases that many feared were a threat to continued
profitability. Meanwhile, as demand for personal computers soared and the uses
for semiconductors multiplied seemingly without limit, technology companies
posted record earnings gains. Once interest rates peaked and started down,
investors turned their attention to corporate earnings and were encouraged by
what they found.
The resulting price gains over the past several months reflect these
underlying earnings increases, with some stocks up over 150% for the 12-month
period. Historically, rapid price appreciation of this magnitude has been
followed by some amount of profit taking and correction. The enthusiasm
accompanying strong market rallies inevitably invites sharp short-term
corrections and valuation concerns. However, it is important to note that while
6
<PAGE>
this year's advances in stock prices have been extremely rewarding, coming from
depressed valuations one year ago, the earnings growth of these companies also
has been impressive. The following table provides an example of this phenomenon.
The 12-month returns of the Fund's five largest technology holdings are shown
beside each company's earnings growth over the same time period.
<TABLE>
<CAPTION>
Strong Returns Backed By Expanding Earnings
(price and earnings increases through June 30, 1995)
<S> <C> <C>
Price Change Earnings Change
------------ ---------------
Informix Corp. 64% 39%
Parametric Technology Corp. 120 36
Synopsys Inc. 67 86
Atmel Corp. 133 60
KLA Instruments Corp. 106 109
</TABLE>
A number of medical device companies also demonstrated excellent
earnings growth and stock market performance during the period. Prompted in part
by the threat of government regulation, the healthcare industry has
revolutionized itself in recent years by slashing costs and achieving
unprecedented efficiencies. A host of new companies have sprung up to meet the
deflationary challenge, and many are successfully establishing niche markets,
thereby paving the way toward strong profit growth for some time to come.
Companies participating in this trend include PLC Systems (up 150% for the
year), the inventor of laser systems used to revascularize human heart muscle;
Research Industries (up 188%), a leading producer of disposable plastic
components used in open heart surgery; and STERIS Corporation (up 150%), the
manufacturer of a patented system for sterilizing surgical equipment without
damaging heat.
Recent Additions Boost Portfolio Diversification
Despite the Fund's emphasis on the technology and healthcare
industries, now representing 43% of assets, our research is generally conducted
at the individual company level rather than by sector. Over the years, we have
identified what we believe to be strong growth companies in a number of areas
outside technology and healthcare. The overall effect of our approach to stock
selection has been a relatively broad diversification of assets, which should
help dampen price volatility.
7
<PAGE>
What's more, many of the Fund's investments outside of technology and
healthcare performed exceptionally well during the period. Consider, for
example, the Fund's two largest investments in the oil industry. Benton Oil and
Gas and Triton Energy returned 91.4% and 40.0%, respectively, based upon rapidly
expanding oil production from recent discoveries. The regional bank stocks
purchased last summer represent another area providing portfolio diversification
and superior returns. With interest rates declining and much of the savings from
cost cutting behind them, banks have begun acquiring one another in an attempt
to boost profits (generally with positive effects on the stocks of those being
acquired). One holding, West One Bankcorp, was acquired at a 20% premium to the
then-current price in May. Three other regional banks also posted gains of at
least 45% during the year: First Security Corp., Magna Group Inc., and First
American Corp. We are continually looking for opportunities to expand
investments in well-managed regional banks on a selective basis.
Investments were also recently made in the paper industry at attractive
valuations to take advantage of the potential earnings gains that should result
from the global shortage of coated paper and pulp. In recent years, the supply
of wood pulp for manufacturing paper has diminished as environmental protection
has become more widespread and enforceable. The shortage of paper producers is
compounded because businesses have been unwilling to invest the huge sums
required for this type of manufacturing. Meanwhile, the demand for paper
products around the world continues to grow -- particularly in the developing
economies of Asia and Latin America -- and prices have risen sharply. Seeking to
profit from these trends, we purchased Asia Pacific Resources, an Indonesian
producer of pulp, at less than seven times next year's estimated earnings; and
Repap Enterprises, a Canadian producer of fine paper, at less than four times
next year's estimated earnings.
Recent Sales Reflect Gains and Disappointments
As stock prices rose throughout the period, we took the opportunity to
trim our positions in several important holdings. While we remain optimistic in
each case, paring back our exposure to these companies enabled us to "lock in"
returns and reduce the impact of near-term corrections. Holdings reduced in
recent months include STERIS, American Power Conversion, SAP AG, and Parametric
Technology. Other holdings were sold during the period where revenues and
earnings did not meet our expectations or where general economic and business
conditions were likely to impact future earnings negatively, in our opinion.
8
<PAGE>
Among the portfolio's disappointments were Crompton & Knowles, where lackluster
earnings were the result of equally lackluster demand for women's apparel (a
significant end market for Crompton's dyes); Cygne Designs, where competition
among women's apparel suppliers and retailers has squeezed profit margins; and
Crestar Financial, located in the Washington, D.C., area, where federal
government downsizing could negatively impact the local economy.
Outlook
Last year's market correction and this year's substantial recovery
serve as reminders that stock prices in the short term can be influenced by
external variables like interest rates, whereas longer-term results are
determined by earnings growth. Likewise, the recent pull-back in technology
stock prices underscores the importance of our investment approach: to maintain
a consistent long-term investment horizon, have the courage and persistency to
stay invested in well-managed companies in spite of short-term price declines,
and have the flexibility to sell companies whose underlying fundamentals are
deteriorating. Now that investor concern has shifted to the ability of
individual companies to produce the earnings expected by analysts and owners,
Scudder's research team is working to identify early those companies that may be
impacted by economic weakness while at the same time continuing to search for
new opportunities.
Sincerely,
Your Portfolio Management Team
/s/Roy C. McKay /s/Peter Chin
Roy C. McKay Peter Chin
Scudder Development Fund:
A Team Approach to Investing
Scudder Development Fund is managed by a team of Scudder investment
professionals who each play an important role in the Fund's management process.
Team members work together to develop investment strategies and select
securities for the Fund's portfolio. They are supported by Scudder's large staff
of economists, research analysts, traders and other investment specialists who
work in Scudder's offices across the United States and abroad. We believe our
team approach benefits Fund investors by bringing together many disciplines and
leveraging Scudder's extensive resources.
Lead Portfolio Manager Roy C. McKay assumed responsibility for the Fund's
day-to-day management when he joined Scudder in 1988. Roy has 29 years of
investment experience, with 20 years specializing in small company growth
stocks. Peter Chin, who became a Portfolio Manager in 1993, has been with
Scudder since 1973, and joined Scudder's small company group in 1986. Peter
contributes expertise in manufacturing, service and energy companies.
9
<PAGE>
<PAGE>
<TABLE>
SCUDDER DEVELOPMENT FUND
INVESTMENT PORTFOLIO as of June 30, 1995
-------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1.1% REPURCHASE AGREEMENTS
--------------------------------------------------------------------------
7,991,000 Repurchase Agreement with Donaldson,
Lufkin & Jenrette dated 6/30/95 at 6.07%,
to be repurchased at $7,995,042 on 7/3/95,
collateralized by a $7,740,000 U.S. Treasury
Note, 8%, 10/15/96 (Cost $7,991,000)........... 7,991,000
---------
0.0% CONVERTIBLE BONDS
--------------------------------------------------------------------------
MEDIA
Broadcasting &
Entertainment 250,000 InTouch Group, Inc. Promissory Note,
8%, 2/1/96 (Cost $250,000)(b)(c)............... 250,000
---------
0.7% CONVERTIBLE PREFERRED STOCKS
--------------------------------------------------------------------------
Shares
--------------------------------------------------------------------------
MEDIA 0.1%
Broadcasting &
Entertainment 363,637 InTouch Group Inc. "D" * (Interactive
place-based media applications and
information services)(b)(c).................... 909,093
---------
HEALTH 0.6%
Biotechnology 0.3% 2,857,143 Norian Corp. "D" * (Developer and manufacturer
of a proprietary biomaterial for skeletal
repair)(b)(c).................................. 2,000,000
---------
Medical Supply &
Specialty 0.3% 125,000 Cardiometrics, Inc. "C" (Manufacturer
and marketer of intravascular Doppler
ultrasound devices for diagnostic and
therapeutic uses)(b)(c)........................ 500,000
120,000 InterVentional Technologies, Inc. "G"
(Manufacturer of minimally invasive
disposable microsurgical devices and
systems for treatment of cardiovascular
disease)(b).................................... 1,200,000
---------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $7,700,007).............................. 4,609,093
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
----------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2.9% PREFERRED STOCKS
--------------------------------------------------------------------------
CONSUMER DISCRETIONARY 1.1%
Specialty Retail 6,000 Hornbach Holding AG (Do-it-yourself home
improvement retailer).......................... 8,070,289
----------
TECHNOLOGY 1.8%
Computer Software 10,350 SAP AG (Computer software manufacturer).......... 13,041,816
----------
TOTAL PREFERRED STOCKS (Cost $5,291,558)......... 21,112,105
----------
95.3% COMMON STOCKS
--------------------------------------------------------------------------
CONSUMER DISCRETIONARY 9.6%
Department &
Chain Stores 0.8% 208,250 Men's Wearhouse Inc.* (Discount retailer)........ 5,726,875
----------
Hotels & Casinos 0.5% 107,900 Grand Casinos Inc. (Casino manager).............. 3,816,962
----------
Recreational Products 1.3% 373,400 Sierra On-Line Inc.* (Developer of
entertainment software)........................ 9,335,000
----------
Restaurants 3.5% 536,200 Cracker Barrel Old Country Stores
(Restaurants and gift stores).................. 11,059,125
261,600 Outback Steakhouse Inc.* (Operator of
full-service restaurants)...................... 7,553,700
143,500 Starbucks Corp.* (High-quality coffee provider).. 5,112,187
308,700 Taco Cabana Inc.* (Mexican style restaurant
chain)......................................... 1,697,850
----------
25,422,862
----------
Specialty Retail 3.5% 2,250 Hornbach Baumarkt AG (German do-it-yourself
home improvement retailer)..................... 1,505,043
213,600 PETsMART Inc.* (Pet food and supply
superstores)................................... 6,141,000
511,900 Sports & Recreation Inc.* (Sports equipment
superstores)................................... 6,718,688
299,400 Viking Office Products Inc.* (Direct marketer
of office supplies) ........................... 10,965,525
----------
25,330,256
----------
HEALTH 13.8%
Health Industry Services 1.8% 16,700 American Oncology Resources, Inc. * (Provider
of comprehensive management services to
medical and radiation oncology and
hematology practices)......................... 463,425
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
SCUDDER DEVELOPMENT FUND
----------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
298,900 CliniCom, Inc. (Developer and installer of
computer-based clinical information systems
for hospitals).................................... 4,931,850
218,000 Mid Atlantic Medical Services, Inc.* (Health
care management services)......................... 4,033,000
142,900 Vivra, Inc. * (Provider of dialysis services)....... 3,876,163
----------
13,304,438
----------
Hospital Management 0.4% 229,600 Advocat, Inc.* (Operator of nursing homes and
retirement centers)............................... 2,554,300
37,500 OccuSystems Inc. * (Provider of primary care
physician and case management services) .......... 642,187
----------
3,196,487
----------
Medical Supply &
Specialty 8.7% 526,400 Endosonics Corp.* (Manufacturer of imaging
catheters)........................................ 5,856,200
525,000 Heart Technology Inc.* (Developer,
manufacturer and marketer of devices for
treatment of arteriosclerosis).................... 10,171,875
336,500 ICU Medical Inc.* (Designer, manufacturer
and marketer of proprietary disposable
medical products)................................. 4,753,062
300,000 Immunomedics* (Cancer imaging
therapy)(c)....................................... 712,500
180,000 PLC Systems Inc.* (Developer, manufacturer
and marketer of medical laser systems)............ 1,766,250
287,700 Research Industries* (Manufacturer of single-
patient use cardiology medical products).......... 6,617,100
337,600 STERIS Corp.* (Manufacturer of sterile
processing systems)............................... 16,373,600
100,500 Target Therapeutics, Inc.* (Manufacturer of
disposable medical devices for treatment of
vascular diseases) ............................... 4,422,000
493,500 Thermedics Inc.* (Manufacturer of drug
detection instruments, explosives detectors,
and heart assist devices)......................... 9,623,250
274,333 UroMed Corp.* (Manufacturer of urological/
gynecological medical products)(b)(c)............. 1,783,165
89,700 UroMed Corp.* ...................................... 728,812
----------
62,807,814
----------
Pharmaceuticals 2.9% 568,000 BioChem Pharma, Inc. * (Research and
development of therapeutic products).............. 12,425,000
357,143 CIMA Laboratories, Inc. * (Developer of oral
dosage drug products)(b)(c)....................... 1,214,286
665,400 Noven Pharmaceuticals, Inc.* (Transdermal
drug delivery systems) ........................... 5,156,850
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
----------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
60,000 R.P. Scherer Corp.* (Manufacturer of drug
delivery system).............................. 2,535,000
----------
21,331,136
----------
COMMUNICATIONS 1.7%
Cellular Telephone 0.6% 166,100 CommNet Cellular, Inc.* (Management,
maintenance and financing of cellular
telephone systems throughout the
United States)................................ 4,650,800
----------
Telephone/
Communications 1.1% 5,407,268 Champion Technology * (Paging services
in China)..................................... 489,168
125,000 Mobile Telecommunications Technology Corp.*
(Telecommunication and paging services)....... 3,421,875
40,000 Mobilemedia Corp.* (Provider of paging services
and other wireless messaging services)........ 820,000
82,000 Paging Network, Inc.* (Paging services)......... 2,808,500
----------
7,539,543
----------
FINANCIAL 1.6%
Banks 137,300 Dauphin Deposit Corp. (Commercial banking
in Pennsylvania).............................. 3,329,525
85,000 First American Corp. (Tennessee) (Regional
commercial banking) .......................... 3,049,375
91,700 First Security Corp. (Commercial banking in
western states)............................... 2,567,600
137,200 Magna Group, Inc. (Commercial banking and
financial services)........................... 3,018,400
----------
11,964,900
----------
MEDIA 4.6%
Broadcasting &
Entertainment 2.9% 124,600 Broderbund Software Inc.* (Developer of
entertainment and educational software)....... 7,943,250
7,500 Davidson & Associates Inc.* (Developer of
educational software)......................... 298,125
299,000 DMX, Inc.* (Provider of cable
audio services)............................... 756,844
100,000 DMX, Inc. "G" * (b)(c).......................... 202,500
170,300 Minnesota Educational Computing Corp.*
(Developer and publisher of educational
software for use by children)................. 6,088,225
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
<TABLE>
SCUDDER DEVELOPMENT FUND
----------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
300,000 Sanctuary Woods Multimedia Inc.* (Leading
developer of family-oriented entertainment
and educational CD-ROM titles).................... 1,537,500
800,000 Sanctuary Woods Multimedia Inc.*(c)................. 4,100,000
----------
20,926,444
----------
Cable Television 0.8% 599,420 Century Communications Corp. "A"* (Owner
and operator of cable TV systems)................. 5,619,562
----------
Print Media 0.9% 121,200 Scholastic Corp.* (Leading publisher and
distributor of educational books, videos and
computer software)................................ 6,575,100
----------
SERVICE INDUSTRIES 12.9%
EDP Services 5.3% 600,000 Fiserv Inc.* (Data processing services)............. 16,875,000
497,500 Pyxis Corp.* (Manufacturer of point-of-use
distribution systems) ............................ 11,255,938
501,200 Systems & Computer Technology Corp.*
(Computer software for educational institutions).. 10,024,000
----------
38,154,938
----------
Investment 1.5% 414,500 Pioneer Group Inc. (Fund management
company owning major gold producer in
Ghana)............................................ 11,139,687
----------
Miscellaneous
Commercial Services 6.1% 342,000 BI Inc.* (Manufacturer of and service provicer
for house arrest electronic monitoring systems)... 2,265,750
98,000 Career Horizons Inc.* (Temporary help service
for business and healthcare)...................... 1,862,000
600,000 Cintas Corp. (Uniform rentals)...................... 21,300,000
67,100 Copart, Inc.* (Auctioner of damaged vehicles
for insurance companies).......................... 1,526,525
9,722 Education Alternatives Inc.* (Provider of school
management consulting services and
developer of various educational
products)(b)(c) .................................. 95,276
796,650 G&K Services Inc. "A" (Uniform rentals)............. 15,534,675
69,300 RTW, Inc.* (Provider of comprehensive managed
care products and services for workers'
compensation programs)............................ 1,264,725
120,000 Strategic Distribution, Inc.* (In-plant distributor
of parts and supplies)............................ 510,000
----------
44,358,951
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
-------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DURABLES 6.1%
Telecommunications
Equipment 134,600 Ascend Communications, Inc.* (Developer and
producer of a variety of high-speed wide
area network access products)...................... 6,797,300
65,600 Cascade Communications Corp.* (Designer
and developer of multi-service wide area
network switches).................................. 2,837,200
107,000 Digital Link Corp.* (Manufacturer of digital
access products) .................................. 3,022,750
89,300 Shiva Corp.* (Developer and manufacturer of
hardware and software products that enable
remote connectivity to enterprise networks)........ 3,862,225
160,400 Stratacom, Inc.* (Manufacturer of switching
systems for wide area networks).................... 7,819,500
249,800 Summa Four Inc.* (Manufacturer and
distributor of telecommunication switching
systems)........................................... 7,056,850
40,000 Tellabs, Inc.* (Manufacturer of voice data
communication equipment)........................... 1,925,000
96,027 U.S. Robotics Corp.* (Designer and
manufacturer of high performance data
communication products and systems)................ 10,466,943
----------
43,787,768
----------
MANUFACTURING 10.9%
Containers & Paper 2.1% 80,100 Aptargroup, Inc. (Manufacturer of
packaging equipment components).................... 2,573,213
617,900 Asia Pacific Resources International
Holdings Ltd.* (Manufacturer of rayon
fiber for Asian textile markets, owner of world's
leading paper pulp mill)........................... 5,638,338
628,700 Repap Enterprises, Inc.* (Worldwide
manufacturer of various types of paper)............ 4,872,425
50,000 Sealed Air Corp.* (Protective packaging
material).......................................... 2,200,000
----------
15,283,976
----------
Diversified Manufacturing 0.5% 144,100 Duracraft Corp.* (Manufacturer of household
products).......................................... 3,854,675
----------
Electrical Products 3.4% 1,090,200 American Power Conversion Corp.*
(Manufacturer of backup power supply
products).......................................... 24,938,325
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
<TABLE>
SCUDDER DEVELOPMENT FUND
----------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Industrial Specialty 2.1% 140,400 Itron, Inc.* (Manufacturer of meter reading
instruments for utilities)....................... 4,387,500
485,100 Lydall, Inc.* (Engineered fiber materials)......... 10,672,200
----------
15,059,700
----------
Machinery/Components/
Controls 0.8% 352,700 Medar Inc.* (Manufacturer of quality control
equipment)....................................... 3,218,388
40,000 Nordson Corp. (Industrial application equipment)... 2,180,000
----------
5,398,388
----------
Office Equipment/
Supplies 2.0% 429,600 Danka Business Systems PLC (ADR)
(Distributor of office equipment)................ 10,390,950
162,800 Encad, Inc.* (Manufacturer of large format
color inkjet printers)........................... 4,395,600
----------
14,786,550
----------
TECHNOLOGY 26.8%
Computer Software 13.2% 200,000 Autodesk, Inc. (Computer-aided design and
drafting)........................................ 8,600,000
662,250 Cheyenne Software Inc.* (Computer software
and equipment)................................... 12,251,625
995,400 Informix Corp.* (Database management
software)........................................ 25,258,275
216,000 Kurzweil Applied Intelligence* (Developer of
speech recognition software and systems)......... 783,000
80,300 MapInfo Corporation* (Developer and supporter
of desktop mapping software and applications,
and geographic and demographic information
products)........................................ 2,850,650
470,000 Parametric Technology Corp.* (Mechanical
design software producer)........................ 23,382,500
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)......... 6,367,500
123,900 Softdesk, Inc.* (Designer and supporter of
computer-aided design software for
architecture, engineering and construction
industries)...................................... 2,539,950
203,700 Synopsys Inc.* (Developer of high level
electronic design software)...................... 12,756,713
31,000 UUNET Technologies, Inc.* (Provider of a range
of Internet access options, applications and
consulting services)............................. 852,500
----------
95,642,713
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
----------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Electronic Components/
Distributors 2.1% 150,400 ITI Technologies, Inc.* (Designer and
manufacturer of wireless security system)......... 3,572,000
329,000 Three-Five Systems Inc.* (Manufacturer of
opto-electronic components)....................... 11,309,375
----------
14,881,375
----------
Office/Plant Automation 2.0% 150,500 Cabletron Systems Inc.* (Computer
networking products and services)................. 8,014,125
166,100 Cognex Corp.* (Manufacturer of machine
vision systems)................................... 6,685,525
----------
14,699,650
----------
Precision Instruments 4.0% 162,300 KLA Instruments Corp.* (Developer,
manufacturer and marketer of automated
image processing systems)......................... 12,537,675
87,500 Lam Research Corp.* (Manufacturer of
plasma etching equipment)......................... 5,600,000
294,300 Silicon Valley Group Inc.* (Manufacturer
of equipment for semiconductor industry).......... 10,668,375
----------
28,806,050
----------
Semiconductors 5.5% 386,700 Atmel Corp.* (Developer and manufacturer
of integrated circuits) .......................... 21,413,513
62,600 Paradigm Technology Inc.* (Designer,
manufacturer and marketer of high speed,
high density SRAM semiconductor devices).......... 1,404,588
99,600 Tower Semiconductor Ltd. (Manufacturer of
semiconductor integrated circuits on silicon
wafers)........................................... 2,888,400
36,000 Transwitch Corp.* (Developer, marketer and
supporter of integrated digital and
mixed-signal semiconductors for
telecommunication markets)........................ 328,500
62,500 Xilinx Inc.* (Supplier of semiconductors)........... 5,875,000
161,150 Zilog Inc.* (Manufacturer and marketer of
integrated circuits).............................. 8,037,356
----------
39,947,357
----------
ENERGY 5.7%
Oil & Gas Production 4.5% 270,100 Barrett Resources Corp.* (Oil and gas
exploration and production)....................... 6,279,825
933,100 Benton Oil & Gas Co.* (Oil and gas exploration,
development and production)....................... 12,946,762
294,100 Triton Energy Corp. (Oil and gas exploration)....... 13,638,888
----------
32,865,475
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
<TABLE>
SCUDDER DEVELOPMENT FUND
-----------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Oilfield Services/
Equipment 1.2% 126,100 Global Industries Ltd.* (Pipeline construction,
derrick and diving services for offshore oil
and gas industry)............................ 2,805,725
461,600 Weatherford International Inc.* (Oilfield
equipment and services)...................... 5,885,400
-----------
8,691,125
-----------
TRANSPORTATION 0.5%
Trucking 227,600 Celadon Group Inc.* (Long-haul trucking
services).................................... 3,470,900
-----------
OTHER 1.1% Miscellaneous Securities....................... 8,265,911
-----------
TOTAL COMMON STOCKS (Cost $429,551,204)........ 691,581,693
-----------
-----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO - 100.0%
(Cost $450,783,769)(a)....................... 725,543,891
===========
</TABLE>
* Non-income producing security.
(a) The cost for federal income tax purposes was $452,311,805. At June 30,
1995, net unrealized appreciation for all securities based on tax cost was
$273,232,086. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $298,828,756 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$25,596,670.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Trustees. The cost of these securities at June 30, 1995, aggregated
$12,375,768. See Note A of the Notes to Financial Statements.
(c) Restricted Securities - securities which have not been registered with the
Securities and Exchange Commission under the Securities Act of 1933.
Information concerning such restricted securities at June 30, 1995 is as
follows:
Security Acquisition Date Cost ($)
-------- ---------------- --------
Cardiometrics, Inc. "C" 4/26/93 500,000
CIMA Laboratories Inc. 1/7/94 2,500,000
DMX, Inc. 8/23/93 435,625
Education Alternatives Inc. 7/1/93 240,133
Immunomedics 3/4/91 675,068
InTouch Group Inc. 2/14/95 250,000
InTouch Group Inc. "D" 1/20/94 4,000,007
Norian Corp. "D" 4/12/95 2,000,000
Sanctuary Woods Multimedia Inc. 1/28/94 4,000,000
UroMed Corp. 9/15/93 1,250,003
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
----------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
----------------------------------------------------------------------------------
JUNE 30, 1995
----------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $450,783,769)
(Note A)............................................. $725,543,891
Receivables:
Investments sold..................................... 8,435,686
Fund shares sold..................................... 4,173,075
Dividends and interest............................... 67,880
------------
Total assets...................................... 738,220,532
LIABILITIES
Payables:
Investments purchased................................ $9,691,576
Fund shares redeemed................................. 442,978
Accrued management fee (Note C)...................... 566,604
Other accrued expenses (Note C)...................... 207,251
----------
Total liabilities................................. 10,908,409
------------
Net assets, at market value............................ $727,312,123
============
NET ASSETS
Net assets consist of:
Unrealized appreciation on:
Investments....................................... $274,760,122
Foreign currency related transactions............. 8,987
Accumulated net realized gain........................ 46,245,128
Shares of beneficial interest........................ 194,748
Additional paid-in capital........................... 406,103,138
------------
Net assets, at market value............................ $727,312,123
============
NET ASSET VALUE, offering and redemption price per
share ($727,312,123 / 19,474,819 outstanding
shares of beneficial interest, $.01 par value,
unlimited number of shares authorized)............... $37.35
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
<TABLE>
SCUDDER DEVELOPMENT FUND
------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
------------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 1995
------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes withheld of $11,058).... $ 1,525,525
Interest................................................ 363,559
------------
1,889,084
Expenses:
Management fee (Note C)................................. $ 6,050,470
Services to shareholders (Note C)....................... 1,320,362
Custodian and accounting fees (Note C).................. 195,600
Trustees' fees (Note C)................................. 43,660
Reports to shareholders................................. 251,944
Auditing................................................ 52,115
State registration...................................... 35,705
Legal................................................... 24,709
Other................................................... 71,683 8,046,248
--------------------------
Net investment loss..................................... (6,157,164)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain (loss) from:
Investments......................................... 58,077,037
Foreign currency related transactions............... (9,571) 58,067,466
------------
Net unrealized appreciation during the period on:
Investments......................................... 180,154,581
Foreign currency related transactions............... 8,987 180,163,568
--------------------------
Net gain on investment transactions..................... 238,231,034
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.... $232,073,870
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
-------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
-------------------------------------------------------------------------------------
<CAPTION>
YEARS ENDED JUNE 30,
-----------------------------
INCREASE (DECREASE) IN NET ASSETS 1995 1994
-------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment loss................................. $ (6,157,164) $ (6,685,599)
Net realized gain from investment transactions...... 58,067,466 74,717,985
Net unrealized appreciation (depreciation) on
investment transactions during the period....... 180,163,568 (148,042,293)
------------- -------------
Net increase (decrease) in net assets resulting
from operations................................. 232,073,870 (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........................... 260,652,295 321,444,546
Net asset value of shares issued to
shareholders in reinvestment of
distributions................................... 39,673,233 64,939,143
Cost of shares redeemed............................. (309,316,368) (513,441,752)
------------- -------------
Net decrease in net assets from
Fund share transactions. ...................... (8,990,840) (127,058,063)
------------- -------------
INCREASE (DECREASE) IN NET ASSETS................... 181,584,914 (275,049,049)
Net assets at beginning of period................... 545,727,209 820,776,258
------------- -------------
NET ASSETS AT END OF PERIOD......................... $ 727,312,123 $ 545,727,209
============= =============
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period........... 19,787,452 23,737,608
------------- -------------
Shares sold......................................... 8,524,177 9,715,584
Shares issued to shareholders in reinvestment
of distributions................................ 1,371,263 1,904,190
Shares redeemed..................................... (10,208,073) (15,569,930)
------------- -------------
Net decrease in Fund shares......................... (312,633) (3,950,156)
------------- -------------
Shares outstanding at end of period................. 19,474,819 19,787,452
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<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>
YEARS ENDED JUNE 30, (a)
-------------------------------------------------------------------------------------------------------
1995(b) 1994(b) 1993(b) 1992(b) 1991(b) 1990(b) 1989(b) 1988 1987 1986(b)
-------------------------------------------------------------------------------------------------------
<S> <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
------ ------- ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment loss... (.31) (.30) (.27) (.23) (.10) (.08) (.10) (.08) (.07) (.01)
Net realized
and unrealized
gain (loss) on
investment
transactions........ 12.20 (3.63) 6.63 3.78 2.41 6.07 1.06 (1.41) 1.67 5.81
------ ------- ------ ------ ------ ------ ------ ------ ------ ------
Total from
investment
operations............ 11.89 (3.93) 6.36 3.55 2.31 5.99 .96 (1.49) 1.60 5.80
------ ------- ------ ------ ------ ------ ------ ------ ------ ------
Less distributions:
From net investment
income.............. -- -- -- -- -- -- -- -- -- (.17)
From net realized
gains on investment
transactions........ (2.12) (3.07) (1.70) (.96) (1.23) (2.28) (.42) (1.90) (1.33) (.92)
------ ------- ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (2.12) (3.07) (1.70) (.96) (1.23) (2.28) (.42) (1.90) (1.33) (1.09)
------ ------- ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period......... $37.35 $ 27.58 $34.58 $29.92 $27.33 $26.25 $22.54 $22.00 $25.39 $25.12
====== ======= ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%)........ 45.41 (12.91) 22.28 12.83 10.32 28.50 4.66 (5.35) 7.51 29.92
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end
of period
($ millions).......... 727 546 821 700 476 361 275 356 387 359
Ratio of operating
expenses to
average
net assets (%)........ 1.32 1.27 1.30 1.30 1.29 1.34 1.32 1.30 1.27 1.25
Ratio of net
investment
loss to average
net assets (%)........ (1.01) (.91) (.83) (.70) (.40) (.35) (.47) (.44) (.33) (.03)
Portfolio turnover
rate (%).............. 41.6 48.3 49.2 53.5 70.8 40.1 32.0 39.2 23.5 29.4
<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.
</FN>
</TABLE>
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
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 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 $8,154,320
(1.1% of net assets) and have been noted in the investment portfolio as of
June 30, 1995.
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
23
<PAGE>
SCUDDER DEVELOPMENT FUND
--------------------------------------------------------------------------------
value of restricted securities at June 30, 1995 amounted to $11,766,820 which
represents 1.6% 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.
24
<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 principles.
These differences primarily relate to tax equalization and 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 year ended June 30, 1995, purchases and sales of investment
securities (excluding short-term investments) aggregated $251,720,843 and
$312,932,440, 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,
25
<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 year ended June 30, 1995, the fee pursuant to the Agreement amounted
to $6,050,470.
Scudder Service Corporation ("SSC"), a wholly-owned subsidiary of the Adviser,
is the transfer, dividend paying and shareholder service agent for the Fund.
For the year ended June 30, 1995, the amount charged by SSC aggregated
$1,131,627, of which $95,011 is unpaid at June 30, 1995.
Effective March 21, 1995, Scudder Fund Accounting Corporation ("SFAC"), a
wholly-owned subsidiary of the Adviser, assumed responsibility for determining
the daily net asset value per share and maintaining the portfolio and general
accounting records of the Fund. For the year ended June 30, 1995, the amount
charged to the Fund by SFAC aggregated $29,935 of which $9,310 is unpaid at
June 30, 1995.
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 year ended June 30, 1995, Trustees' fees aggregated $43,660.
26
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
--------------------------------------------------------------------------------
TO THE TRUSTEES AND SHAREHOLDERS OF SCUDDER DEVELOPMENT FUND:
We have audited the accompanying statement of assets and liabilities of Scudder
Development Fund, including the investment portfolio, as of June 30, 1995, and
the related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended,
and the financial highlights for each of the ten years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of June 30, 1995 by correspondence with the custodian and brokers. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder Development Fund as of June 30, 1995, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and the financial highlights for each of the ten years
in the period then ended, in conformity with generally accepted accounting
principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
August 10, 1995
27
<PAGE>
SCUDDER DEVELOPMENT FUND
TAX INFORMATION
--------------------------------------------------------------------------------
The Fund paid distributions of $2.12 per share from long-term capital gains
during its year ended June 30, 1995. Pursuant to section 852 of the Internal
Revenue Code, the Fund designates $58,664,154 as capital gain dividends for
its fiscal year ended June 30, 1995.
Please consult a tax adviser if you have any questions about federal or state
income tax laws, or on how to prepare your tax returns. If you have specific
questions about your Scudder Fund account, please call a Scudder Investor
Relations Representative at 1-800-225-5163.
28
<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.
29
<PAGE>
INVESTMENT PRODUCTS AND SERVICES
<TABLE>
<CAPTION>
The Scudder Family of Funds
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Money Market Income
Scudder Cash Investment Trust Scudder Emerging Markets Income Fund
Scudder U.S. Treasury Money Fund Scudder GNMA Fund
Tax Free Money Market+ Scudder Income Fund
Scudder Tax Free Money Fund Scudder International Bond Fund
Scudder California Tax Free Money Fund* Scudder Short Term Bond Fund
Scudder New York Tax Free Money Fund* Scudder Short Term Global Income Fund
Tax Free+ Scudder Zero Coupon 2000 Fund
Scudder California Tax Free Fund* Growth
Scudder High Yield Tax Free Fund Scudder Capital Growth Fund
Scudder Limited Term Tax Free Fund Scudder Development Fund
Scudder Managed Municipal Bonds Scudder Global Fund
Scudder Massachusetts Limited Term Tax Free Fund* Scudder Global Small Company Fund
Scudder Massachusetts Tax Free Fund* Scudder Gold Fund
Scudder Medium Term Tax Free Fund Scudder Greater Europe Growth Fund
Scudder New York Tax Free Fund* Scudder International Fund
Scudder Ohio Tax Free Fund* Scudder Latin America Fund
Scudder Pennsylvania Tax Free Fund* Scudder Pacific Opportunities Fund
Growth and Income Scudder Quality Growth Fund
Scudder Balanced Fund Scudder Value Fund
Scudder Growth and Income Fund The Japan Fund
Retirement Plans and Tax-Advantaged Investments
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IRAs 403(b) Plans
Keogh Plans SEP-IRAs
Scudder Horizon Plan+++* (a variable annuity) Profit Sharing and Money Purchase
401(k) Plans Pension Plans
Closed-End Funds#
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The Argentina Fund, Inc. The Latin America Dollar Income Fund, Inc.
The Brazil Fund, Inc. Montgomery Street Income Securities, Inc.
The First Iberian Fund, Inc. Scudder New Asia Fund, Inc.
The Korea Fund, Inc. Scudder New Europe Fund, Inc.
Scudder World Income
Opportunities Fund, Inc.
Institutional Cash Management
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Scudder Institutional Fund, Inc.
Scudder Fund, Inc.
Scudder Treasurers Trust(TM)++
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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.
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HOW TO CONTACT SCUDDER
Account Service and Information
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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
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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
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THE SCUDDER FUNDS
P.O. BOX 2291
BOSTON, MASSACHUSETTS
02107-2291
Or stop by a Scudder Funds Center
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Many shareholders enjoy the personal,
one-on-one service of the Scudder Funds
Centers. Check for a Funds Center near
you--they can be found in the following
cities:
Boca Raton New York
Boston Portland, OR
Chicago San Diego
Cincinnati San Francisco
Los Angeles Scottsdale
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For information on Scudder For information on Scudder
Treasurers Trust,(TM) an institutional Institutional Funds,* funds
cash management service for designed to meet the broad
corporations, non-profit investment management and
organizations and trusts that uses service needs of banks and
certain portfolios of Scudder Fund, other institutions, call
Inc.* ($100,000 minimum), call 1-800-854-8525.
1-800-541-7703.
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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.
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Celebrating Over 75 Years of Serving Investors
Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven
Clark, Scudder, Stevens & Clark was the first independent investment counsel
firm in the United States. Since its birth, Scudder's pioneering spirit and
commitment to professional long-term investment management have helped shape the
investment industry. In 1928, we introduced the nation's first no-load mutual
fund. Today we offer 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 us become one of the
largest and most respected investment managers in the world. Though times have
changed since our beginnings, we remain committed to our long-standing
principles: managing money with integrity and distinction; keeping the interests
of our clients first; providing access to investments and markets that may not
be easily available to individuals; and making investing as simple and
convenient as possible through friendly, comprehensive service.
