Scudder
Development
Fund
Semiannual Report
December 31, 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>
SCUDDER DEVELOPMENT FUND
CONTENTS
2 In Brief
3 Letter from the Fund's President
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
9 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
IN BRIEF
o Scudder Development Fund provided shareholders with a 19.16% total return
for the six months ended December 31, 1995, outperforming the unmanaged
Russell 2000 Growth Index and the average return of the 120
mid-capitalization funds tracked by Lipper Analytical Services, Inc.
Comparative Returns Through December 31, 1995
----------------------------------------------------------------------------
Scudder Russell 2000 Lipper Average
Development Growth Index
Fund
----------------------------------------------------------------------------
Six Months 19.16% 13.02% 12.81%
----------------------------------------------------------------------------
One Year 50.67% 31.04% 32.17%**
----------------------------------------------------------------------------
Five Years* 21.23% 18.74% 19.68%***
----------------------------------------------------------------------------
*Average annualized returns.
**Average return of 106 funds.
***Average return of 32 funds.
o After contributing greatly to performance earlier in the year, holdings in
semiconductor companies and other large technology companies were trimmed
in favor of less economically sensitive stocks such as biotech and
Internet-related companies.
o The Fund maintained a well-diversified portfolio during the period with
exposure to the energy, service, manufacturing, healthcare, and finance
sectors, among others.
2
<PAGE>
Dear Shareholders,
The past 12 months have been an extraordinary period for Scudder
Development Fund, as evidenced by its 50% total return. This superior
performance continued in the last six months of 1995, the first half of its
fiscal year, when the Fund's 19% total return surpassed that of its benchmark
index and the average mid-capitalization fund tracked by Lipper.
From a combination of price appreciation and new investors, Scudder
Development Fund grew to $876.6 million in net assets at the end of December,
representing over 45,000 shareholder accounts.
We are very pleased with the results of the past year but are cautious
about U.S. markets in 1996. After so strong a run-up in stock prices, it is
natural to be wary of a correction in the near term, which could be triggered by
the economy, among other things. The current U.S. economic expansion is now very
mature by historical standards, having started in early 1991. U.S. consumers
have accumulated debt at the same time that corporations have cut jobs to
increase profits. The combination of slower job growth and higher debt payments
may force consumers to spend less this year, which would slow economic activity
and hamper corporate profits.
In spite of this restrained general economic outlook, the outlook for
the companies held by Scudder Development Fund is for above-average earnings
growth. If achieved, this should provide a strong underpinning to the prices of
the stocks in the portfolio. Longer term, we believe the investment prospects
around the world are fundamentally positive, driven by the dynamics of low
inflation, technological innovation, deregulation, and monetary and fiscal
restraint. Against this background, we believe the Fund should continue to serve
as an attractive vehicle for capital appreciation.
If you have questions about Scudder Development Fund or your
investments, please contact a Scudder Investor Relations representative at
1-800-225-2470. Page 31 contains more information on how to contact us. 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 December 31, 1995
- -----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------
SCUDDER DEVELOPMENT FUND
- ----------------------------------------
Total Return
Period Growth --------------
Ended of Average
12/31/95 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $ 15,067 50.67% 50.67%
5 Year $ 26,188 161.88% 21.23%
10 Year $ 38,639 286.39% 14.47%
20 Year $233,887 2,238.87% 17.07%
RUSSELL 2000 GROWTH INDEX
- --------------------------------------
Total Return
Period Growth --------------
Ended of Average
12/31/95 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $ 13,104 31.04% 31.04%
5 Year $ 23,615 136.15% 18.74%
10 Year $ 26,161 161.61% 10.09%
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
- ----------------------
85 $10,000
86 $10,779
87 $10,626
88 $11,801
89 $14,540
90 $14,755
91 $25,353
92 $24,892
93 $27,093
94 $25,645
95 $38,639
Russell 2000 Growth Index
Year Amount
- ----------------------
85 $10,000
86 $10,358
87 $ 9,273
88 $11,162
89 $13,413
90 $11,078
91 $16,748
92 $18,050
93 $20,461
94 $19,964
95 $26,161
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>
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
--------------------------------------------------------------------------------
NET ASSET VALUE... $20.71 $18.69 $20.32 $22.69 $21.73 $36.23 $33.62 $33.51 $29.54 $40.12
CAPITAL GAINS
DIVIDENDS......... $ 1.33 $ 1.90 $ .42 $ 2.28 $ 1.23 $ .96 $ 1.70 $ 3.07 $ 2.12 $ 4.20
FUND TOTAL
RETURN (%)........ 7.79 -1.42 11.06 23.21 1.48 71.83 -1.82 8.84 -5.34 50.67
INDEX TOTAL
RETURN (%)........ 3.58 -10.48 20.37 20.17 -17.41 51.19 7.77 13.36 -2.43 31.04
</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 December 31, 1995
- ---------------------------------------------------------------------------
DIVERSIFICATION
- ---------------------------------------------------------------------------
Equity Securities 97% The Fund remained near fully
Cash Equivalents 3% invested throughout the period,
---- making the most of a strong
100% stock market.
====
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 25%
Health 21%
Service Industries 14% After strong price gains earlier
Consumer Discretionary 10% in the year, holdings in the
Durables 8% technology sector were trimmed.
Energy 6%
Manufacturing 6%
Financial 4%
Media 2%
Other 4%
----
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. CHEYENNE SOFTWARE INC.
Computer software and equipment
4. BIOCHEM PHARMA, INC.
Research and development of therapeutic products
5. ASCEND COMMUNICATIONS, INC.
Developer and producer of a variety of high-speed wide area
network access products
6. INFORMIX CORP.
Database management software
7. G&K SERVICES INC.
Uniform rentals
8. STERIS CORP.
Manufacturer of sterile processing systems
9. SYNOPSYS INC.
Developer of high level electronic design software
10. FISERV INC.
Data processing services
New to the list of ten largest holdings, Ascend Communications
returned 221% during the period.
For more complete details about the Fund's Investment Portfolio,
see page 9.
A monthly Investment Portfolio Summary and quarterly Portfolio Holdings
are available upon request.
5
<PAGE>
SCUDDER DEVELOPMENT FUND
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
We are very pleased to report Scudder Development Fund's 19.16% total
return for the semiannual period ended December 31, 1995. This return outpaced
the 13.02% return of the unmanaged Russell 2000 Growth Index and the 12.81%
return on average of the 120 mid-capitalization funds tracked by Lipper
Analytical Services. For the year ended December 31, your Fund produced a total
return of 50.67%.
The primary factor affecting performance during the semiannual period
continued to be strong earnings growth. About 30% of holdings in the fourth
quarter of 1995 reported year-to-year earnings per share gains exceeding 100%.
The 30 largest holdings, representing over 50% of the portfolio, appreciated 41%
on average for the six-month period, supported by earnings gains averaging 50%.
Such strong gains are not likely to continue indefinitely. However, our
long-term target of earnings per share gains of 15% - 20% on average is easily
being met.
Strategy Stresses Diversification and Less
Economically Sensitive Stocks
Rather than focus on economic sectors, the Fund's investment decisions
generally are made on an individual stock basis. However, this approach can
sometimes lead to what is arguably too large a weighting in one particular area
and result in unwelcome price volatility. We have therefore striven to diversify
the portfolio over the past year with holdings outside the technology sector --
recently, the Fund's largest area of exposure.
Diversified stock selection paid off during the six-month period just
ended. Energy positions, representing about 6% of the portfolio, rose 24% on
average. Service companies, accounting for 14% of the portfolio at the end of
December, increased 62% on average. The Fund's two airline holdings, while less
than 1% of the total, rose by 45%. Manufacturing companies, 6% of the total
portfolio, rose 32%. Banks and finance, 4% of the portfolio, were up 21% in
price, and healthcare, now 21% of the portfolio, rose 50%.
With economic growth decelerating in the United States, companies whose
earnings depend upon a robust economy may suffer. Therefore, after providing
exceptionally strong performance for most of the year, several of the Fund's
semiconductor and large technology issues were trimmed in the fall to make room
for less economically sensitive biotechnology and Internet-related software
6
<PAGE>
companies. These moves proved fortuitous. The three biotech companies recently
purchased increased by over 50% in the fourth quarter, and the Internet-related
software companies rose by over 100%. Meanwhile, the Fund's remaining
semiconductor stocks provided relatively weak returns for the period, falling
over 30% in the fourth quarter alone. Also weak were mobile communication stocks
(1.9% of the total), which declined 8.8% during the fourth quarter.
Six holdings -- American Oncology Resources, Asia Pacific Resource,
Century Communications, Repap Enterprises, Summa Four, and Vivra Inc. -- were
sold to fund investments with superior fundamentals. In an environment of slower
economic activity, part of our ongoing portfolio strategy has been to eliminate
holdings in anticipation of fundamental deterioration or failure to produce
estimated earnings. In addition, companies are sold when they grow beyond an
appropriate size for a small/mid capitalization portfolio. Such sales recently
included core positions in Cracker Barrel Old Country Stores, SAP AG, and
Autodesk.
Sales proceeds were used to purchase a number of promising new ideas
including Veterinary Centers of America, a leading consolidator of veterinary
services; Cadmus Communications, a steadily expanding specialty printing
company; Agouron Pharmaceuticals, a biotech drug company; Perclose, a specialty
surgical supplier; and CapMAC Holdings, a specialty insurance company.
Outlook
At 27 times 1996 earnings per share on average, the portfolio is less
attractively valued than one year ago. However, price earnings ratios are
largely a function of interest rates. If economic weakness continues, the
Federal Reserve is likely to lower short-term interest rates. Also, should
legislation pass into law to reduce the budget deficit significantly over the
next several years, long-term interest rates should remain stable if not decline
in the months ahead. In either case, declining rates could lead to rising
valuations for the Fund's holdings.
7
<PAGE>
Earnings disappointments are now the largest risk facing equity
investors. A weakening economy means that earnings are increasingly vulnerable
to negative surprises. As the economic and political landscape unfolds, our
focus will remain on earnings growth and the ability of individual companies to
continue to prosper in the economic environment ahead.
Sincerely,
Your Portfolio Management Team
/s/Roy C. McKay /s/Peter Chin
Roy C. McKay Peter Chin
8
<PAGE>
INVESTMENT PORTFOLIO as of December 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
% of Market
Portfolio Shares Value ($)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------
3.5% REPURCHASE AGREEMENTS
--------------------------------------------------------------------------------
30,472,000 Repurchase Agreement with Morgan,
Stanley & Co. dated 12/29/95 at 5.87%,
to be repurchased at $30,491,875 on 1/2/96,
collateralized by a $22,540,000 U.S. Treasury
Note, 9.125%, 5/15/18 (Cost $30,472,000) ......... 30,472,000
----------
--------------------------------------------------------------------------------
0.0% CONVERTIBLE BONDS
--------------------------------------------------------------------------------
MEDIA
Broadcasting &
Entertainment 250,000 Intouch Group, Inc. Promissory Note,
8%, 2/1/96 (Cost $ 250,000)(b)(c) ................ 159,800
----------
--------------------------------------------------------------------------------
0.4% CONVERTIBLE PREFERRED STOCKS
--------------------------------------------------------------------------------
Shares
--------------------------------------------------------------------------------
HEALTH 0.3%
Biotechnology 0.2%
2,857,143 Norian Corp. "D"* (Developer and
manufacturer of a proprietary biomaterial
(for skeletal repair)(b)(c) ...................... 2,000,000
----------
Medical
Supply &
Specialty 0.1% 120,000 InterVentional Technologies, Inc. "G"
(Manufacturer of minimally invasive
disposable microsurgical devices and
systems for treatment of cardiovascular
disease)(b) ...................................... 1,200,000
----------
MEDIA 0.1%
Broadcasting &
Entertainment 363,637 InTouch Group Inc. "D"* (Interactive
place-based media applications and
information services)(b)(c) ...................... 618,183
----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $7,200,007) ................................. 3,818,183
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
SCUDDER DEVELOPMENT FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
% of Market
Portfolio Shares Value ($)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------
0.5% PREFERRED STOCKS
--------------------------------------------------------------------------------
CONSUMER DISCRETIONARY
Specialty Retail 50,000 Hornbach Holding AG (Do-it yourself home
improvement retailer) (Cost $ 2,905,284) 4,293,194
----------
--------------------------------------------------------------------------------
95.6% COMMON STOCKS
--------------------------------------------------------------------------------
CONSUMER
DISCRETIONARY 9.4%
Apparel & Shoes 0.5%
125,700 Tommy Hilfiger Corp.* (Designer and
marketer of men's sportswear) .................... 5,326,538
----------
Department &
Chain Stores 0.9% 306,375 Men's Wearhouse Inc.* (Discount retailer) ......... 7,889,156
Hotels & ----------
Casinos 1.8% 664,500 Grand Casinos Inc.* (Casino manager) .............. 15,449,625
Recreational ----------
Products 1.8% 331,900 First Team Sports, Inc.* (Manufacturer and
wholesaler of in-line roller skates) ............. 5,061,475
367,400 Sierra On-Line Inc.* (Developer of
entertainment software) .......................... 10,562,750
----------
15,624,225
----------
Restaurants 1.7% 258,600 Outback Steakhouse Inc.* (Operator of
full-service restaurants) ........................ 9,277,275
278,000 Starbucks Corp.* (High-quality coffee
provider) ........................................ 5,838,000
----------
15,115,275
----------
Specialty
Retail 2.7% 211,100 PETsMART Inc.* (Pet food and supply
superstores) ..................................... 6,544,100
506,400 Sports & Recreation Inc.* (Sports
equipment superstores) ........................... 3,608,100
296,400 Viking Office Products Inc.* (Direct marketer
of office supplies) .............................. 13,782,600
----------
23,934,800
----------
CONSUMER
STAPLES 0.3%
Package Goods/
Cosmetics 0.3% 100,100 Thermolase Corp.* (Producer of skin-care
and other personal care products) ................ 2,590,088
HEALTH 20.2%
Biotechnology 3.2% 131,500 Agouron Pharmaceuticals, Inc.* (Developer of
therapeutic and synthetic drugs for treatment
of cancer and other diseases) .................... 4,306,625
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
INVESTMENT PORTFOLIO
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
% of Market
Portfolio Shares Value ($)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------
62,500 Cardiometrics, Inc. (Developer and
manufacturer of intravascular devices to
measure blood flow impairment)(b)(c) ............. 428,906
356,100 CytoTherapeutics, Inc.* (Developer of
therapeutic products for treatment of
certain chronic and disabling diseases) .......... 6,098,212
268,100 Matrix Pharmaceutical, Inc.* (Developer of
site-specific treatments for cancer and
serious skin diseases) ........................... 5,026,875
214,962 Neoprobe Corp.* (Research and
development of a system for diagnosis and
treatment of cancer) ............................. 3,466,262
234,100 Neurogen Corp.* (Developer of
biopharmaceuticals for treatment of
psychiatric and neurological disorders) .......... 6,291,438
248,900 PathoGenesis Corp.* (Developer of drugs for
treatment of serious infectious diseases) ........ 2,737,900
----------
28,356,218
Health Industry
Services 0.9% 102,760 HBO & Company* (Designer of computerized
information systems to the health-care
industry) ........................................ 7,873,985
----------
Hospital
Management 1.1% 227,100 Advocat, Inc.* (Operator of nursing homes
and retirement centers) .......................... 2,526,487
400,000 Veterinary Centers of America, Inc.* (Owner
and manager of veterinary hospitals) ............. 6,750,000
----------
9,276,487
----------
Medical Supply
& Specialty 11.1% 92,600 Bio-Plexus Inc.* (Developer and marketer of
various medical products) ........................ 949,150
48,700 Bio-Vascular, Inc.* (Marketer of tissue and
biosynthetic-based medical products and
grafts for cardiovascular surgery) ............... 572,225
518,900 Endosonics Corp.* (Manufacturer of imaging
catheters) ....................................... 7,848,362
500,000 Heart Technology Inc.* (Developer,
manufacturer and marketer of devices for
treatment of arteriosclerosis) ................... 16,437,500
359,400 ICU Medical Inc.* (Designer, manufacturer
and marketer of proprietary disposable
medical products) ................................ 6,109,800
408,600 Isolyser Co., Inc.* (Developer and manufacturer
of varied healthcare products) ................... 5,720,400
86,000 Med-Design Corp.* (Developer and
manufacturer of safety medical devices) .......... 1,311,500
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
SCUDDER DEVELOPMENT FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
% of Market
Portfolio Shares Value ($)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
317,200 PLC Systems Inc.* (Developer, manufacturer
and marketer of medical laser systems) ........... 5,273,450
206,000 Perclose, Inc.* (Developer and producer of
minimally invasive single-use systems to
close arterial access sites surgically) .......... 3,939,750
119,800 Quidel Corp.* (Producer of non-instrumented
diagnostic products for clinical laboratories,
office and home testing markets) ................. 853,575
186,200 Research Industries* (Manufacturer of
single-patient use cardiology medical
products) ........................................ 5,027,400
567,700 STERIS Corp.* (Manufacturer of sterile
processing systems) .............................. 18,308,325
170,200 Target Therapeutics, Inc.* (Manufacturer of
disposable medical devices for treatment of
vascular diseases) ............................... 7,276,050
485,200 Thermedics Inc.* (Manufacturer of drug
detection instruments, explosives detectors,
and heart assist devices) ........................ 13,464,300
274,333 UroMed Corp.* (Manufacturer of urological/
gynecological medical products)(c) ............... 3,532,037
89,700 UroMed Corp.* ..................................... 1,154,888
----------
97,778,712
----------
Pharmaceuticals 3.9%
544,500 BioChem Pharma, Inc.* (Research and
development of therapeutic products) ............. 21,848,062
294,700 North American Vaccine, Inc.* (Developer of
immunological products) .......................... 4,162,638
705,500 Noven Pharmaceuticals, Inc.* (Transdermal
drug delivery systems) ........................... 7,936,875
----------
33,947,575
----------
COMMUNICATIONS 1.9%
Cellular
Telephone 0.6% 163,100 CommNet Cellular, Inc.* (Management,
maintenance and financing of cellular
telephone systems throughout the United
States) .......................................... 4,709,512
----------
Telephone/
Communications 1.3% 122,500 Mobile Telecommunications Technology Corp.*
(Telecommunication and paging services) .......... 2,618,438
162,000 Paging Network, Inc.* (Paging services) ........... 3,948,750
295,700 WinStar Communications, Inc.* (Designer and
marketer of telecommunication and
information services) ............................ 5,063,863
----------
11,631,051
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
INVESTMENT PORTFOLIO
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
% of Market
Portfolio Shares Value ($)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FINANCIAL 3.6%
Banks 2.4% 137,300 Dauphin Deposit Corp. (Commercial banking
in Pennsylvania) ................................. 3,947,375
100,000 First American Corp. (Tennessee) (Regional
commercial banking) .............................. 4,737,500
121,200 First Commerce Corp. (Commercial banking
in Louisiana and Mississippi) .................... 3,878,400
91,700 First Security Corp. (Commercial banking in
western states) .................................. 3,530,450
197,100 Magna Group, Inc. (Commercial banking and
financial services) .............................. 4,681,125
----------
20,774,850
----------
Insurance 1.2% 154,900 CapMAC Holdings Inc.* (Provider of financial
guaranty insurance) .............................. 3,891,862
136,300 Compdent Corp.* (Provider of dental coverage
in the managed dental care industry) ............. 5,656,450
28,000 Meadowbrook Insurance Group. Inc.*
(Insurance holding company) ...................... 938,000
----------
10,486,312
----------
MEDIA 1.8%
Broadcasting &
Entertainment 0.7% 60,500 Broderbund Software Inc.* (Developer of
entertainment and educational software) .......... 3,675,375
829,000 Sanctuary Woods Multimedia Corp.*
(Leading developer of family-oriented
entertainment and educational CD ROM
titles) .......................................... 2,383,375
----------
6,058,750
----------
Print Media 1.1% 32,300 Desktop Data, Inc.*
(Provider of customized real-time news
and information over local
area networks to professional customers) ......... 791,350
118,700 Scholastic Corp.* (Leading publisher and
distributor of educational books, videos and
computer software) ............................... 9,228,925
----------
10,020,275
----------
SERVICE
INDUSTRIES 13.4%
EDP Services 3.2% 593,500 Fiserv Inc.* (Data processing services) ........... 17,805,000
516,200 Systems & Computer Technology Corp.*
(Computer software for educational
institutions) .................................... 10,259,475
----------
28,064,475
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
SCUDDER DEVELOPMENT FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
% of Market
Portfolio Shares Value ($)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment 1.0% 327,900 Pioneer Group Inc. (Fund management
company owning major gold producer in
Ghana) ........................................... 8,935,275
Miscellaneous
Commercial
Services 9.2% 130,100 AccuStaff, Inc.* (National provider of
temporary staffing personnel) .................... 5,724,400
338,500 BI Inc.* (Manufacturer of and service provider
for house arrest electronic monitoring
systems) ......................................... 2,581,062
46,100 CMG Information Services, Inc.* (Developer of
information based products and services for
direct marketing) ................................ 4,281,537
161,900 Cadmus Communications Corp. (Provider of
printing and related graphic arts
communications services) ......................... 4,371,300
98,000 Career Horizons Inc.* (Temporary help
service for business and healthcare) ............. 3,307,500
157,000 Checkfree Corp.* (Designer and provider of
services for electronic commerce) ................ 3,375,500
592,500 Cintas Corp. (Uniform rentals) .................... 26,366,250
160,600 Copart, Inc.* (Auctioneer of damaged vehicles
for insurance companies) ......................... 4,215,750
732,000 G & K Services Inc. "A" (Uniform rentals) ......... 18,666,000
145,100 RTW. Inc.* (Provider of comprehensive
managed care products and services for
workers' compensation programs) .................. 3,808,875
85,800 Sitel Corp.* (Nebraska based telemarketing
company for major credit-card and
insurance companies) ............................. 2,627,625
123,600 Strategic Distribution, Inc.* (In-plant distributor
of parts and supplies) ........................... 973,350
----------
80,299,149
----------
DURABLES 7.2%
Telecommunications
Equipment 250,000 Ascend Communications, Inc.* (Developer and
producer of a variety of high-speed wide
area network access products) .................... 20,281,250
85,000 Cascade Communications Corp.* (Designer
and developer of multi-service wide area
network switches) ................................ 7,246,250
115,500 Shiva Corp.* (Developer and manufacturer of
hardware and software products that enable
remote connectivity to enterprise networks) ...... 8,402,625
159,000 Stratacom, Inc.* (Manufacturer of switching
systems for wide area networks) .................. 11,686,500
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
INVESTMENT PORTFOLIO
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
% of Market
Portfolio Shares Value ($)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
180,054 U.S. Robotics Corp.* (Designer and
manufacturer of high performance data
communication products and systems) .............. 15,799,739
----------
63,416,364
----------
MANUFACTURING 5.9%
Containers &
Paper 0.9% 125,900 Aptargroup, Inc. (Manufacturer of packaging
equipment components) ............................ 4,705,512
100,000 Sealed Air Corp.* (Protective packaging
material) ........................................ 2,812,500
----------
7,518,012
----------
Diversified
Manufacturing 0.4% 144,100 Duracraft Corp.* (Manufacturer of household
products) ........................................ 3,620,512
----------
Electrical
Products 0.5% 69,200 FORE Systems, Inc. (Producer of
high-performance networking products) ............ 4,117,400
----------
Industrial
Specialty 2.0% 2,380,000 Bakrie & Brothers (Manufacturer of industrial
steel products, steel pipes, corrugated sheet
iron, asbestos and fiber cements) ................ 4,319,703
77,000 Itron, Inc.* (Manufacturer of meter reading
instruments for utilities) ....................... 2,598,750
480,000 Lydall, Inc.* (Engineered fiber
materials) ....................................... 10,920,000
----------
17,838,453
----------
Machinery/
Components/
Controls 0.2% 40,000 Nordson Corp. (Industrial application
equipment) ....................................... 2,250,000
----------
Office Equipment/
Supplies 1.9% 341,900 Danka Business Systems PLC (ADR)
(Distributor of office equipment) ................ 12,650,300
217,800 Encad, Inc.* (Manufacturer of large format
color inkjet printers) ........................... 3,811,500
----------
16,461,800
----------
TECHNOLOGY 24.2%
Computer
Software 16.2% 201,700 Advent Software, Inc.* (Provider of
stand-alone and client/server software
products) ........................................ 3,580,175
213,500 Astea International, Inc.* (Developer, marketer
and supporter of applications for the
customer interaction software market) ............ 4,883,812
184,200 BBN Corp.* (Producer of wide area
communications network systems) .................. 7,575,225
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
SCUDDER DEVELOPMENT FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
% of Market
Portfolio Shares Value ($)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
843,950 Cheyenne Software Inc.* (Computer software
and equipment) ................................... 22,048,194
98,900 Datastream Systems, Inc.* (Developer,
marketer and supporter of personal
computer software for industrial
automation market) ............................... 1,879,100
180,000 Excalibur Technologies Corp.* (Manufacturer
of document imaging software) .................... 6,570,000
672,900 Informix Corp.* (Database management
software) ........................................ 20,187,000
32,700 Keane, Inc.* (Provider of computer software
project management and design
development services) ............................ 723,488
216,000 Kurzweil Applied Intelligence* (Developer of
speech recognition software and systems) ......... 945,000
72,800 Novadigm, Inc.* (Developer of enterprise-scale
solutions to reduce cost and complexity of
managing distributed computing) .................. 2,065,700
420,100 Parametric Technology Corp.* (Mechanical
design software producer) ........................ 27,936,650
170,600 Project Software & Development, Inc.*
(Developer of software used for
management of equipment maintenance) ............. 5,949,675
295,300 Security Dynamics Technologies, Inc.*
(Designer, developer and supporter of a
family of security products used to manage
access to computer-based information
resources) ....................................... 16,093,850
190,100 Softdesk, Inc.* (Designer and supporter of
computer-aided design software for
architecture, engineering and construction
industries) ...................................... 3,754,475
480,000 Synopsys Inc.* (Developer of high level
electronic design software) ...................... 18,240,000
-----------
142,432,344
-----------
Electronic
Components/
Distributors 0.9% 144,900 ITI Technologies, Inc.* (Designer and
manufacturer of wireless security system) ........ 4,310,775
201,300 Three-Five Systems Inc.* (Manufacturer of
opto-electronic components) ...................... 3,396,938
----------
7,707,713
----------
Office/Plant
Automation 1.3% 328,200 Cognex Corp.* (Manufacturer of machine
vision systems) .................................. 11,404,950
Precision
Instruments 2.3% 318,300 KLA Instruments Corp.* (Developer,
manufacturer and marketer of automated
image processing systems) ........................ 8,295,694
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
INVESTMENT PORTFOLIO
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
% of Market
Portfolio Shares Value ($)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
100,000 Lam Research Corp.* (Manufacturer of plasma
etching equipment) ............................... 4,575,000
286,000 Silicon Valley Group Inc.* (Manufacturer of
equipment for semiconductor industry) ............. 7,221,500
----------
20,092,194
----------
Semiconductors 3.5% 67,100 Altera Corp.* (Designer and marketer of
programmable logic integrated circuits
and computer engineering software and
hardware) ........................................ 3,338,225
760,000 Atmel Corp.* (Developer and manufacturer of
integrated circuits) ............................. 17,005,000
185,500 Xilinx Inc.* (Supplier of semiconductors) ......... 5,657,750
129,250 Zilog Inc.* (Manufacturer and marketer of
integrated circuits) ............................. 4,733,781
----------
30,734,756
----------
ENERGY 5.6%
Oil & Gas
Production 4.2% 292,700 Barrett Resources Corp.* (Oil and gas
exploration and production) ...................... 8,598,062
792,000 Benton Oil & Gas Co.* (Oil and gas exploration,
development and production) ...................... 11,880,000
294,100 Triton Energy Corp.* (Oil and gas exploration) .... 16,873,988
----------
37,352,050
----------
Oilfield Services/
Equipment 1.4% 124,600 Global Industries Ltd.* (Pipeline construction,
derrick and diving services for offshore oil
and gas industry) ................................ 3,738,000
181,200 Sonat Offshore Drilling Co. (Provider of
contract drilling services of offshore oil and
gas wells worldwide) ............................. 8,108,700
----------
11,846,700
----------
METALS &
MINERALS 0.7%
Precious Metals 300,000 Stillwater Mining Co.* (Exploration and
development of mines in Montana
producing platinum, palladium and
associated metals) ............................... 5,775,000
----------
TRANSPORTATION 0.8%
Airlines 0.8% 100,000 America West Airlines, Inc.* (Passenger
airline in the West and Midwest) ................. 1,700,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
SCUDDER DEVELOPMENT FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
% of Market
Portfolio Shares Value ($)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
209,600 ValuJet Airlines Inc.* (Operator of a low fare
airline) 5,187,600
----------
6,887,600
----------
Trucking 0.0% 41,900 Celadon Group Inc.* (Long-haul
trucking services) 377,100
----------
OTHER 0.6% Miscellaneous Securities 4,967,794
----------
TOTAL COMMON STOCKS (Cost $482,146,475) 838,943,075
-----------
- ---------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO - 100.0%
(Cost $522,973,766)(a) 877,686,252
===========
</TABLE>
* Non-income producing security.
(a) The cost for federal income tax purposes was $524,088,696. At December 31,
1995, net unrealized appreciation for all securities based on tax cost was
$353,597,556. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $376,784,541 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$23,186,985.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Trustees. The cost of these securities at December 31, 1995, aggregated
$7,950,007. See Note A of the Notes to Financial Statements.
(c) Restricted Securities - securities which have not been registered with the
Securities and Exchange Commission under the Securities Act of 1933.
Information concerning such restricted securities at December 31, 1995 is
as follows:
<TABLE>
<CAPTION>
Security Acquisition Date Cost ($)
- -------- ---------------- --------
<S> <C> <C>
Cardiometrics, Inc. "C" 4/26/93 500,000
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
UroMed Corp. 9/15/93 1,250,003
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
DECEMBER 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
<TABLE>
<S> <C> <C>
Investments, at market (identified cost $522,973,766)
(Note A) ....................................... $877,686,252
Receivables:
Investments sold ............................... 1,775,095
Fund shares sold ............................... 1,845,880
Dividends and interest ......................... 172,306
------------
Total assets ....................... 881,479,533
LIABILITIES
Payables:
Investments purchased .......................... $1,327,239
Fund shares redeemed ........................... 2,533,469
Accrued management fee (Note C) ................ 708,400
Other accrued expenses (Note C) ................ 300,621
----------
Total liabilities .................. 4,869,729
------------
Net assets, at market value ........................ $876,609,804
============
NET ASSETS
Net assets consist of:
Accumulated net investment loss ................ $ (3,988,831)
Unrealized appreciation (depreciation) on:
Investments ................................. 354,712,486
Foreign currency related transactions ....... (122)
Accumulated net realized gain .................. 24,873,939
Shares of beneficial interest .................. 218,524
Additional paid-in capital ..................... 500,793,808
------------
Net assets, at market value ........................ $876,609,804
============
NET ASSET VALUE, offering and redemption price per
share ($876,609,804/21,852,408 outstanding
shares of beneficial interest, $.01 par value,
unlimited number of shares authorized) .......... $40.12
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
SCUDDER DEVELOPMENT FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED DECEMBER 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income
Income:
Dividends (net of foreign taxes withheld of $16,252) $ 630,446
Interest ............................................ 461,782
------------
1,092,228
Expenses:
Management fee (Note C) ............................. $ 4,001,733
Services to shareholders (Note C) ................... 737,434
Custodian and accounting fees (Note C) .............. 115,274
Trustees' fees (Note C) ............................. 19,634
Reports to shareholders ............................. 103,358
State registration .................................. 22,875
Auditing ............................................ 21,950
Legal ............................................... 12,497
Other ............................................... 46,304 5,081,059
-------------------------
Net investment loss ................................. (3,988,831)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain (loss) from:
Investments ...................................... 63,494,650
Foreign currency related transactions ............ (28,623) 63,466,027
-----------
Net unrealized appreciation (depreciation) during
the period on:
Investments ...................................... 79,952,364
Foreign currency related transactions ............ (9,109) 79,943,255
-------------------------
Net gain on investment transactions ................. 143,409,282
------------
Net increase in net assets resulting from operations $139,420,451
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED
1995 JUNE 30,
INCREASE (DECREASE) IN NET ASSETS (UNAUDITED) 1995
- --------------------------------------------------------------------------------
Operations:
<S> <C> <C>
Net investment loss ........................... $ (3,988,831) $ (6,157,164)
Net realized gain from investment transactions 63,466,027 58,067,466
Net unrealized appreciation on investment
transactions during the period ............ 79,943,255 180,163,568
------------- -------------
Net increase in net assets resulting from
operations ................................ 139,420,451 232,073,870
------------- -------------
Distributions to shareholders from net realized
gains from investments ($4.20 and
$2.12 per share, respectively) ............ (84,837,216) (41,498,116)
------------- -------------
Fund share transactions:
Proceeds from shares sold ..................... 223,402,944 260,652,295
Net asset value of shares issued to
shareholders in reinvestment of
distributions ............................. 80,963,827 39,673,233
Cost of shares redeemed ....................... (209,652,325) (309,316,368)
------------- -------------
Net increase (decrease) in net assets from
Fund share transactions ................... 94,714,446 (8,990,840)
------------- -------------
Increase in net assets ........................ 149,297,681 181,584,914
Net assets at beginning of period ............. 727,312,123 545,727,209
------------- -------------
NET ASSETS AT END OF PERIOD (including
accumulated net investment loss of
$3,988,831 at December 31, 1995) .......... $ 876,609,804 $ 727,312,123
============= =============
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period ..... 19,474,819 19,787,452
------------- -------------
Shares sold ................................... 5,576,576 8,524,177
Shares issued to shareholders in reinvestment
of distributions .......................... 2,054,380 1,371,263
Shares redeemed ............................... (5,253,367) (10,208,073)
------------- -------------
Net increase (decrease) in Fund shares ........ 2,377,589 (312,633)
------------- -------------
Shares outstanding at end of period ........... 21,852,408 19,474,819
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
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.
<TABLE>
SIX MONTHS ENDED
DECEMBER 31, YEARS ENDED JUNE 30, (a)
1995(b) ---------------------------------------------------------------------------------------------
(UNAUDITED) 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> <C>
Net asset value,
beginning of
period $37.35 $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 (.20) (.31) (.30) (.27) (.23) (.10) (.08) (.10) (.08) (.07) (.01)
Net realized
and unrealized
gain (loss) on
investment
transactions 7.17 12.20 (3.63) 6.63 3.78 2.41 6.07 1.06 (1.41) 1.67 5.81
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from
investment
operations 6.97 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 (4.20) (2.12) (3.07) (1.70) (.96) (1.23) (2.28) (.42) (1.90) (1.33) (.92)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (4.20) (2.12) (3.07) (1.70) (.96) (1.23) (2.28) (.42) (1.90) (1.33) (1.09)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period $40.12 $37.35 $27.58 $34.58 $29.92 $27.33 $26.25 $22.54 $22.00 $25.39 $25.12
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%) 19.16(d) 45.41 (12.91) 22.28 12.83 10.32 28.50 4.66 (5.35) 7.51 29.92
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end
of period
($ millions) 877 727 546 821 700 476 361 275 356 387 359
Ratio of operating
expenses to
average
daily net assets (%) 1.24(c) 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
daily net assets (%) (.98)(c) (1.01) (.91) (.83) (.70) (.40) (.35) (.47) (.44) (.33) (.03)
Portfolio turnover
rate (%) 56.7(c) 41.6 48.3 49.2 53.5 70.8 40.1 32.0 39.2 23.5 29.4
(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>
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
A. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Scudder Development Fund (the "Fund") is a diversified series of Scudder
Securities Trust, 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 $4,406,889
(0.5% of net assets) and have been noted in the investment portfolio as of
December 31, 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 December 31, 1995 amounted to $6,738,926 which
represents 0.8% 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.
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
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 six months ended December 31, 1995, purchases and sales of investment
securities (excluding short-term investments) aggregated $226,724,539 and
$240,074,617, respectively.
The aggregate face value of future contracts opened and closed during the six
months ended December 31, 1995 was $69,755,575.
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, instruments and other
contracts relating to investments to be purchased, sold or entered into by the
Fund. In addition to portfolio
25
<PAGE>
SCUDDER DEVELOPMENT FUND
- --------------------------------------------------------------------------------
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, 1995, the fee
pursuant to the Agreement amounted to $4,001,733 of which $708,400 is unpaid at
December 31, 1995.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
six months ended December 31, 1995, the amount charged by SSC aggregated
$621,998, of which $161,379 is unpaid at December 31, 1995.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the six months
ended December 31, 1995, the amount charged to the Fund by SFAC aggregated
$59,907 of which $10,413 is unpaid at December 31, 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 six months ended December 31, 1995, Trustees' fees aggregated $19,634.
D. LINE OF CREDIT
- --------------------------------------------------------------------------------
The Fund and several affiliated Funds ("The Participants") share in a $500
million revolving credit facility for temporary or emergency purposes, including
the meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated among each of the Participants. Interest is calculated based
on the market rates at the time of the borrowing. The Fund may borrow up to a
maximum of 33.33% of its net assets under the agreement. In addition, the Fund
also maintains an uncommitted line of credit.
26
<PAGE>
(This page intentionally left blank)
27
<PAGE>
(This page intentionally left blank)
28
<PAGE>
OFFICERS AND TRUSTEES
Daniel Pierce*
President and Trustee
Paul Bancroft III
Trustee; Venture Capitalist and Consultant
Thomas J. Devine
Trustee; Consultant
Keith R. Fox
Trustee; President, Exeter Capital Management Corporation
Douglas M. Loudon*
Vice President and Trustee
Dr. Wilson Nolen
Trustee; Consultant
Juris Padegs*
Trustee
Dr. Gordon Shillinglaw
Trustee; Professor Emeritus of Accounting, Columbia University Graduate
School of Business
Edmond D. Villani*
Trustee
Robert W. Lear
Honorary Trustee; Executive-in-Residence, Columbia University Graduate
School of Business
Robert G. Stone, Jr.
Honorary Trustee; Chairman of the Board and Director, Kirby Corporation
Edmund R. Swanberg
Honorary Trustee
Peter Chin*
Vice President
James M. Eysenbach*
Vice President
Philip S. Fortuna*
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
-----------------------------------------------------------------------------------------------------------------
<C> <C>
Money Market Income
Scudder Cash Investment Trust Scudder Emerging Markets Income Fund
Scudder U.S. Treasury Money Fund Scudder Global Bond Fund
Tax Free Money Market+ Scudder GNMA Fund
Scudder Tax Free Money Fund Scudder Income Fund
Scudder California Tax Free Money Fund* Scudder International Bond Fund
Scudder New York Tax Free Money Fund* Scudder Short Term Bond 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 Small Company Value Fund
Scudder Growth and Income Fund Scudder Value 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 Treasurers Trust(TM)++
Scudder Fund, Inc.
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</TABLE>
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.
30
<PAGE>
HOW TO CONTACT SCUDDER
Account Service and Information
- -------------------------------------------------------------------------------
For existing account service and transactions
SCUDDER INVESTOR RELATIONS
1-800-225-5163
For personalized information about your
Scudder accounts; exchanges and
redemptions; or information on any
Scudder fund SCUDDER AUTOMATED
INFORMATION LINE (SAIL) 1-800-343-2890
Investment Information
- -------------------------------------------------------------------------------
To receive information about the
Scudder funds, for additional
applications and prospectuses, or for
investment questions SCUDDER INVESTOR
RELATIONS 1-800-225-2470
For establishing 401(k) and 403(b) plans
SCUDDER DEFINED CONTRIBUTION SERVICES
1-800-323-6105
Please address all correspondence to
- -------------------------------------------------------------------------------
THE SCUDDER FUNDS
P.O. BOX 2291
BOSTON, MASSACHUSETTS
02107-2291
Or stop by a Scudder Funds Center
- -------------------------------------------------------------------------------
Many shareholders enjoy the personal, one-on-one service of the
Scudder Funds Centers. Check for a Funds Center near you--they can
be found in the following cities:
Boca Raton New York
Boston Portland, OR
Chicago San Diego
Cincinnati San Francisco
Los Angeles Scottsdale
- -------------------------------------------------------------------------------
For information on Scudder For information on Scudder
TreasurersTrust,(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.
- -------------------------------------------------------------------------------
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.
31
<PAGE>
Celebrating Over 75 Years of Serving Investors
Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven Clark,
Scudder, Stevens & Clark was the first independent investment counsel firm in
the United States. Since its birth, Scudder's pioneering spirit and commitment
to professional long-term investment management have helped shape the investment
industry. In 1928, we introduced the nation's first no-load mutual fund. Today
we offer 37 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.
