Scudder
Development Fund
Annual Report
June 30, 1997
Pure No-Load(TM) Funds
Offers opportunities for long-term growth of capital by investing primarily in
securities of emerging growth companies.
A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
SCUDDER [logo]
<PAGE>
Table of Contents
2 In Brief
3 Letter from the Fund's President
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
10 Glossary of Investment Terms
12 Investment Portfolio
20 Financial Statements
23 Financial Highlights
24 Notes to Financial Statements
28 Report of Independent Accountants
29 Tax Information
32 Officers and Trustees
33 Investment Products and Services
34 Scudder Solutions
In Brief
o After more than two years of strong performance, Scudder Development Fund
gave back some of its gains in the 12-month period ended June 30, 1997. Hit
hard by extreme volatility in some of its most important sectors, the Fund
posted a -4.93% total return for the period.
o The Fund's average annual return of 23.20% exceeds the 21.75% return for
the average mid-cap fund tracked by Lipper Analytical Services for the
three-year period ended June 30, 1997.
o The correction in emerging-growth stocks -- one of the longest and sharpest
in history -- appears to be over. Small company growth stocks rebounded
smartly during the second quarter of 1997, with the Russell 2000 Growth
Index gaining nearly 18%.
o During the fiscal year ended June 30, 1997, the Fund worked toward building
a more balanced portfolio, with additions outside the healthcare and
technology sectors. Newcomers to the portfolio include regional banks and
natural gas exploration and development companies.
2 - SCUDDER DEVELOPMENT FUND
<PAGE>
Letter From the Fund's President
Dear Shareholders,
The past year has not been easy for investors in small growth stocks. In
the first nine months of your fund's fiscal year ended June 30, 1997, the stocks
of emerging-growth companies suffered their worst setback since 1994 due to a
host of factors that included higher interest rates, a stronger dollar, and
increased competition in certain segments of the economy.
Scudder Development Fund was especially hard hit relative to its peers in
the mid-capitalization category of funds tracked by Lipper Analytical Services.
As Fund Managers Roy McKay and Peter Chin outline in the following letter, the
Fund seeks above-average growth and is aggressive by nature. In the past, when
the markets for emerging-growth companies were strong -- as was the case during
the Fund's 1995 and 1996 fiscal years -- the Fund performed even better. In
those years, Scudder Development Fund returned 45.41% and 35.26%, respectively,
versus 25.28% and 25.33% for the average mid-cap fund, according to Lipper.
Conversely, when markets head lower, the Fund may sink at a faster rate, as was
the case this year.
If the second quarter of 1997 is any indication, small-company growth
stocks have begun to stage a recovery. The Russell 2000 Growth Index, a
barometer for small and medium-sized growth stocks, returned 18% in the three
months ended June 30. In view of previous price declines, however, we believe
many of the Fund's holdings remain at attractive levels, given their strong
potential for future earnings gains. We look forward to the coming year, and
thank you for your continued investment in Scudder Development Fund.
We would like to take this opportunity to tell you of a newcomer to
Scudder's mutual fund lineup: Scudder International Growth and Income Fund. The
Fund employs a yield-oriented approach to international investing and seeks to
provide long-term growth of capital plus current income. Investors who desire
international exposure but who wish to take a more conservative approach may
appreciate the Fund's emphasis on the dividend paying stocks of established
companies listed on foreign exchanges. For a complete listing of Scudder's
mutual fund offerings, see page 33.
If you have any questions regarding Scudder Development Fund or any other
Scudder fund, please do not hesitate to call Investor Relations at
1-800-225-2470.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Development Fund
3 - SCUDDER DEVELOPMENT FUND
<PAGE>
PERFORMANCE UPDATE as of June 30, 1997
- -----------------------------------------------------------------
FUND INDEX COMPARISONS
- -----------------------------------------------------------------
Total Return
Period Growth --------------
Ended of Average
6/30/97 $10,000 Cumulative Annual
- ---------------------------------------
SCUDDER DEVELOPMENT FUND
- ---------------------------------------
1 Year $ 9,507 -4.93% -4.93%
5 Year $ 19,914 99.14% 14.77%
10 Year $ 31,550 215.50% 12.18%
20 Year $194,433 1844.33% 15.99%
- ---------------------------------------
RUSSELL 2000 GROWTH INDEX
- ---------------------------------------
1 Year $ 10,451 4.51% 4.51%
5 Year $ 20,211 102.11% 15.10%
10 Year $ 23,543 135.43% 8.93%
20 Year $ - -% -%
- -----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
Yearly periods ended June 30
SCUDDER DEVELOPMENT FUND
Year Amount
- ---------------------------
'87 $10,000
'88 $ 8,911
'89 $ 9,825
'90 $10,681
'91 $10,742
'92 $11,649
'93 $14,031
'94 $14,157
'95 $17,809
'96 $22,526
'97 $23,543
RUSSELL 2000 GROWTH INDEX
Year Amount
- ---------------------------
'87 $10,000
'88 $ 9,465
'89 $ 9,905
'90 $12,729
'91 $14,042
'92 $15,843
'93 $19,374
'94 $16,873
'95 $24,536
'96 $33,187
'97 $31,550
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>
<CAPTION>
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------
NET ASSET VALUE... $ 22.00 $ 22.54 $ 26.25 $ 27.33 $ 29.92 $ 34.58 $ 27.58 $ 37.35 $ 45.56 $ 39.02
CAPITAL GAINS
DIVIDENDS......... $ 1.90 $ .42 $ 2.28 $ 1.23 $ .96 $ 1.70 $ 3.07 $ 2.12 $ 4.20 $ 4.48
FUND TOTAL
RETURN (%)........ -5.35 4.66 28.50 10.32 12.83 22.28 -12.91 45.41 35.26 -4.93
INDEX TOTAL
RETURN (%)........ -10.88 10.26 8.72 .58 8.45 20.45 .88 25.82 26.49 4.51
</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 are not available for this period
4 - SCUDDER DEVELOPMENT FUND
<PAGE>
PORTFOLIO SUMMARY as of June 30, 1997
- ---------------------------------------------------------------------------
ASSET ALLOCATION
- ---------------------------------------------------------------------------
Common Stocks 99%
Convertible Securities 1%
- --------------------------------------
100%
- --------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
Following the Fund's rebound
during the second quarter, we are
keeping the Fund near fully
invested to benefit from any
further gains in the emerging-
growth group.
- --------------------------------------------------------------------------
SECTOR DIVERSIFICATION
- --------------------------------------------------------------------------
Technology 20%
Service Industries 18%
Financial 17%
Health 16%
Consumer Discretionary 8%
Energy 8%
Manufacturing 5%
Durables 2%
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.
In keeping with our strategy of
increasing portfolio
diversification, we added natural
gas companies, banks and
consumer stocks.
- --------------------------------------------------------------------------
TEN LARGEST EQUITY HOLDINGS
(23% OF PORTFOLIO)
- --------------------------------------------------------------------------
1. G & K SERVICES INC.
Uniform rentals
2. CINTAS CORP.
Uniform rentals
3. ACCUSTAFF, INC.
National provider of temporary
staffing personnel
4. SYNOPSIS INC.
Developer of high level electronic design
software
5. FIRST SECURITY CORP.
Commercial banking in western
states
6. KEANE, INC.
Provider of computer software
project management & design
development services
7. FIRST AMERICAN CORP.
Regional commercial banking
8. PARAMETRIC TECHNOLOGY CORP.
Mechanical design software producer
9. ENCAD, INC.
Manufacturer of large format color ink jet
printers
10. SECURITY DYNAMICS TECHNOLOGIES, INC.
Designer, developer & supporter of a family
of security products used to manage access
to computer-based information resources
Solid returns were
demonstrated by information
technology outsourcing
companies including the Fund's
sixth largest holding, Keane,
Inc., which is helping to
reprogram computers for the
year 2000.
For more complete details about the Fund's investment portfolio,
see page 12. A monthly Investment Portfolio Summary and quarterly Portfolio
Holdings are available upon request.
5 - SCUDDER DEVELOPMENT FUND
<PAGE>
Portfolio Management Discussion
Scudder Development Fund has been managed by Roy C. McKay since 1988. Peter Chin
joined the team as co-manager in 1993. For a report on the Fund's fiscal year
1997 performance and strategy, as well as management's outlook for the coming
year, here is an interview with Roy McKay and Peter Chin, Portfolio Managers of
Scudder Development Fund.
Q: How did Scudder Development Fund perform relative to its benchmark, the
Russell 2000 Growth Index, in fiscal year 1997?
A: The Fund's total return was a negative 4.93%, versus an index return of
4.51%. The index's outperformance can be attributed largely to its
diversification. In a correction as sharp as the one just past, holding a basket
of 2000 stocks can provide significantly more downside protection than the
roughly 150 stocks held by the Fund. Of course, when emerging-growth stocks in
general are performing well, the Fund's relatively smaller group of select
holdings historically have had a better track record. In fiscal years 1995 and
1996, for example, your fund outperformed the index by a significant margin.
Q: What were some of the factors that contributed to the underperformance of
emerging-growth stocks relative to large-company stocks this year ?
A: Chief among investors' concerns has been the fear of rising interest rates
and their potential impact on the valuations of emerging-growth companies. As
the economy picked up steam last year, investors began to worry that record low
unemployment and tight manufacturing capacity would spark an increase in
inflation. Under this scenario, the Federal Reserve would be forced to raise
interest rates -- which it eventually did, in March -- thereby increasing the
discount rate used to value growth equities.
Other factors contributed to the darkening mood. For example, a rising dollar
hurt many technology issues, because investors feared that the stronger currency
would give overseas companies a competitive edge. Also, while reported earnings
have continued to grow overall, a number of emerging-growth companies
disappointed investors with weaker-than-expected results. By early 1997, mutual
funds and other large institutional buyers were abandoning emerging-growth
stocks and seeking the safety and liquidity of large, well-established
companies.
In all, the decline lasted roughly nine months, far longer than previous
corrections. The average emerging-growth company on Nasdaq fell 30% from its
summer 1996 highs through the end of March 1997. It is interesting to compare
the actual earnings growth of these stocks with their share price movements.
Over the past twelve months, your fund's largest 30 holdings, representing 45%
of the portfolio, reported weighted average earnings gains of roughly 27% and
weighted average price gains of 28%. With an investment horizon of one year or
beyond, short-term factors like interest rate movements and market psychology
tend to be overcome by actual earnings growth.
Q: What sectors and stocks helped boost Fund performance?
A: Throughout the 12-month period, positive performance came from energy-related
holdings such as Global Industries, Ltd., a company specializing in pipeline
6 - SCUDDER DEVELOPMENT FUND
<PAGE>
construction and other services for offshore drillers. Semiconductor companies
also showed some resilience during the year, bouncing back from last year's
inventory-related downturn.
Solid returns were demonstrated by information technology outsourcing companies
and regional banks. Fund holdings such as Keane and Computer Horizons are
helping to reprogram computers for the year 2000 -- a potentially sticky problem
impacting any company that must keep accurate client records. (In the past, the
mainframe computers that store huge corporate databases were not programmed to
recognize dates past 1999.) Regional banks have also provided strong
performance, thanks to a wave of merger activity in some of the country's
fastest-growing areas. Many of the Fund's bank holdings are take-over
candidates; some -- Dauphin Deposit, for example -- have already been bought out
at attractive premiums.
Q: What were some of the disappointments?
A: In the first three months of 1997, holdings in the healthcare and technology
sectors generally declined in lockstep. Throughout the year a number of large
portfolio holdings announced weaker fundamentals and suffered related price
declines. Many of these holdings were subsequently sold. While we cannot control
investment variables like interest rates and sector fashions, we do take pride
in owning well-managed companies with bright futures. Seeing even a handful of
these report earnings disappointments is painful and leads us to redouble our
efforts to make certain that we are indeed invested in well-managed, rapidly
growing businesses. That may mean somewhat more concentrated positions in the
future as we focus more narrowly on those companies in which we have the
greatest conviction.
Q: Lipper includes the Fund in its mid-capitalization category. How did it
perform relative to this peer group in fiscal year 1997?
A: Scudder Development Fund underperformed the group by a fairly wide margin.
The 188 mid-cap funds tracked by Lipper returned 15.61% on average over the
12-month period, compared with -4.93% for the Fund. It's worth noting that one
of these "mid-cap" funds owns General Electric with a market cap of $232
billion. About 60% of these "mid-cap" funds own Intel, with a market cap of $128
billion. Since the market has favored larger companies over the past twelve
months, it is not surprising that given its smaller-cap focus, Scudder
Development Fund returns lagged during this period.
Q: How would you characterize the Fund's investment strategy relative to its
Lipper category?
A: Scudder Development Fund is clearly one of the more aggressive entrants in
Lipper's mid-cap category. While the Fund's holdings may be medium-sized on
average, it matters more to us that our companies are growing rapidly and that
they offer the potential for above-average earnings growth. This focus naturally
has led to heavy weightings in the growth-oriented technology and healthcare
sectors of the economy -- sectors that were among the hardest hit during the
correction. We maintain our conviction that, over the longer-term, companies
that demonstrate strong earnings growth will provide above-average performance.
7 - SCUDDER DEVELOPMENT FUND
<PAGE>
Q: The Fund rebounded 16.1% in the final three months of the period. In light of
these gains, what stocks do you find attractive now?
A: Even after the strong second quarter, we believe the portfolio represents
some compelling values, given current earnings estimates. In fact, at the end of
June the Fund's price/earnings ratio based on next year's estimated earnings was
20.5, or roughly a 3% discount to the Russell 2000 Growth Index. In early May, a
number of holdings were initiated or increased to take advantage of the extreme
price weakness then prevalent. New investments included PLC Systems, Systems and
Computer Technology, Vivus, Rational Software, and Cornell Corrections.
Q: What other changes to the Fund have you made in recent months?
A: In keeping with our strategy of increasing portfolio diversification, we
added two natural gas and development companies, two banks, and two consumer
stocks. St. Mary Land & Exploration has a number of large drilling opportunities
this year, and KCS Energy has a long-term record of creating shareholder value
through reserve and production expansion. Silicon Valley Bancshares was added to
gain exposure to the California economy and to reinvest profits from the partial
sale of Zions Bancorp, a strong performer during the period. As for our consumer
stocks, West Marine Inc., is a retailer of boating equipment.
THE ORIGINAL DOCUMENT CONTAINS A LINE GRAPH HERE
LINE GRAPH TITLE:
Scudder Development Fund:
Price/Earnings Ratio Relative to the S&P 500
The following data is plotted quarterly from the year 1971 to the present.
The normal range of values is 120 to 180, inclusive.
LINE GRAPH DATA:
130
155
155
180
195
217
214
207
171
153
149
134
116
153
149
134
116
92
88
79
80
89
73
83
92
104
105
115
120
128
130
120
122
128
142
141
129
141
171
162
175
193
180
175
182
165
169
180
192
191
208
180
170
150
155
149
143.5
135
153
155
122
153
133
154
120
111
114
105
84
100
98
120
145.5
137
133.6
148.8
149.3
142.6
136.5
137.4
122.7
135.1
145.1
141.2
142
165
126
97
113
118.9
111.2
134
139
111
124
122
120
150
187
184
169
174
174
195
146
179
120
The portfolio's smaller-cap holdings appear reasonably valued versus the
large company universe.
8 - SCUDDER DEVELOPMENT FUND
<PAGE>
We believe our efforts to diversify the portfolio outside of the health and
technology sectors, combined with recent "bargain hunting" purchases, have
positioned the portfolio to benefit from any further gains in the
emerging-growth group. Large-company stocks now have held the performance lead
for more than a year. We think the gains of the past three months, linked to a
more benign inflationary outlook, indicate that the tide has finally turned in
favor of rapidly growing companies.
/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. Mr. McKay has more than
30 years of investment experience, with over 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. Mr. Chin contributes special expertise in manufacturing, service and
energy companies.
9 - SCUDDER DEVELOPMENT FUND
<PAGE>
Glossary of Investment Terms
CURRENCY The price at which one country's currency can be
EXCHANGE RATE exchanged into another currency. When the
U.S. dollar rises relative to foreign currencies, this
decreases the buying power of overseas purchasers of
U.S. goods and services and tends to hurt the earnings
of U.S. companies that export; by contrast, a weak
dollar promotes U.S. exports.
DIVIDEND YIELD With stocks, a company's payment out of earnings
to shareholders divided by its share price. For
example, a stock that sells for $10 and pays annual
dividends totaling $1 has a yield of 10%; if the stock
price goes up to $20, the yield would fall to 5%.
FEDERAL FUNDS RATE A benchmark short-term interest rate, the
Fed Funds rate is the interest charged by Federal
Reserve member banks to other member banks requiring
overnight loans to meet regulatory reserve
requirements. The Fed Funds rate is a key instrument of
U.S. monetary policy, by which the Federal Reserve
seeks to influence growth and inflation by controlling
the supply of money in the economy.
FUNDAMENTAL Analysis of companies based on the projected impact of
RESEARCH management, products, sales, and earnings on
their balance sheets and income statements. Distinct
from technical analysis, which evaluates the
attractiveness of a stock based on historical price and
trading volume movements, rather than the financial
results of the underlying company.
GROWTH STOCK Stock of a company that has displayed above
average earnings growth and is expected to continue to
increase profits rapidly going forward. Stocks of such
companies usually trade at higher multiples to earnings
and experience more price volatility than the market as
a whole.
PRICE/EARNINGS A widely used gauge of a stock's valuation, that
RATIO indicates what investors are paying for a
company's earning power at the current stock price. May
be based on a company's projected earnings for the
coming 12 months. A higher "earnings multiple"
indicates higher expected earnings growth, along with
greater risk of earnings disappointments.
10 - SCUDDER DEVELOPMENT FUND
<PAGE>
LIQUIDITY A stock that is liquid has enough shares outstanding
and a substantial enough market capitalization to allow
large purchases and sales to occur without causing a
significant move in its market price as a result.
MARKET The market value of a company's outstanding shares of
CAPITALIZATION common stock, determined by the number
of shares outstanding multiplied by the share price
(shares x price = market capitalization). The universe
of publicly traded companies is frequently divided into
large-, mid-, and small-capitalization. "Large-cap"
stocks tend to be more liquid.
NASDAQ The Nasdaq Stock Market (for National Association of
Securities Dealers Automated Quotation system.) A
computerized system that provides brokers and dealers
with price quotations for securities traded over the
counter ("OTC"), as well as for some securities listed
on the New York Stock Exchange or American Stock
Exchange. Historically, most securities traded OTC
using the Nasdaq quotation system have been
smaller-capitalization stocks that do not qualify for
listing on a major exchange.
VALUE STOCK A company whose stock price does not fully
reflect its intrinsic value, as indicated by
price/earnings ratio, price/book value ratio, dividend
yield, or some other valuation measure, relative to its
industry or the market overall. Value stocks tend to
display less price volatility and may carry higher
dividend yields.
OVER/UNDER Refers to the allocation of assets -- usually by
WEIGHTING sector, industry, or country -- within a
portfolio relative to the portfolio's benchmark index
or investment universe.
11 - SCUDDER DEVELOPMENT FUND
<PAGE>
Investment Portfolio as of June 30, 1997
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- -----------------------------------------------------------------------------------------------------------------------------------
Convertible Bonds 0.2%
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Health 0.1%
Pharmaceuticals
North American Vaccine, Inc., 6.5%, 5/1/03 ............................................. 1,000,000 903,750
-----------
Media 0.0%
Broadcasting & Entertainment
Intouch Group, Inc. Promissory Note, 8%, 2/1/96 (b)(c)(d) .............................. 217,500 104,000
-----------
Durables 0.1%
Aerospace
Simula, Inc., 8%, 5/1/04 ............................................................... 823,000 1,024,635
- -----------------------------------------------------------------------------------------------------------------------------------
Total Convertible Bonds (Cost $2,209,985) 2,032,385
- -----------------------------------------------------------------------------------------------------------------------------------
Shares
- -----------------------------------------------------------------------------------------------------------------------------------
Convertible Preferred Stocks 0.8%
- -----------------------------------------------------------------------------------------------------------------------------------
Health 0.4%
Biotechnology 0.2%
Norian Corp. "D" * (Developer and manufacturer of a proprietary biomaterial for
skeletal repair) (b)(c) .............................................................. 357,142 1,999,995
-----------
Medical Supply & Specialty 0.2%
InterVentional Technologies, Inc."G" * (Manufacturer of minimally invasive
disposable microsurgical devices and systems for treatment of cardiovascular
disease) (b)(c) ...................................................................... 120,000 1,200,000
-----------
Miscellaneous 0.4%
HYSEQ Inc. "A" * (Genetic biotechnology company) (b)(c) ................................ 175,000 3,360,000
- -----------------------------------------------------------------------------------------------------------------------------------
Total Convertible Preferred Stocks (Cost $4,599,995) 6,559,995
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stocks 99.0%
- -----------------------------------------------------------------------------------------------------------------------------------
Consumer Discretionary 8.4%
Apparel & Shoes 1.4%
St. John Knits Inc. (Manufacturer of women's clothing) ................................. 221,300 11,950,200
-----------
Hotels & Casinos 1.5%
Anchor Gaming* (Operator of gaming machines and casinos) ............................... 148,300 7,081,325
Grand Casinos Inc.* (Casino manager) (e) ............................................... 200,000 2,950,000
Shuffle Master, Inc.* (Manufacturer of automatic card shuffling systems
for gaming operations) ............................................................... 347,500 2,845,156
-----------
12,876,481
-----------
Recreational Products 1.2%
Family Golf Centers, Inc.* (Operator of golf-related recreational facilities) .......... 441,000 10,143,000
-----------
Restaurants 0.3%
Dave & Buster's, Inc.* (Operator of restaurant/entertainment complexes) ................ 100,000 2,675,000
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - SCUDDER DEVELOPMENT FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Specialty Retail 4.0%
PETsMART Inc.* (Pet food and supply superstores) ....................................... 824,000 9,476,000
Viking Office Products Inc.* (Direct marketer of office supplies) ...................... 662,800 12,593,200
West Marine, Inc.* (Retailer of recreational and commercial boating supplies
and apparel) ......................................................................... 234,400 6,035,800
Wilmar Industries, Inc.* (National distributor of repair and maintenance
products for the apartment housing market) ........................................... 255,700 6,232,688
-----------
34,337,688
-----------
Health 15.8%
Biotechnology 2.6%
Alexion Pharmaceuticals, Inc. (Producer of immunoregulatory compounds) (b)(c) .......... 400,000 3,230,500
CytoTherapeutics, Inc.* (Developer of therapeutic products for treatment of
certain chronic and disabling diseases) .............................................. 382,900 2,058,088
Guilford Pharmaceuticals, Inc.* (Research and development of therapeutic and
diagnostic drugs) .................................................................... 139,000 3,370,750
Neurogen Corp.* (Developer of biopharmaceuticals for treatment of psychiatric and
neurological disorders) .............................................................. 200,000 4,550,000
Neoprobe Corp.* (Research and development of a system for diagnosis and treatment
of cancer) ........................................................................... 435,262 6,093,668
Norland Medical Systems, Inc.* (Marketer of systems used in diagnosis of bone
disorders) ........................................................................... 277,100 3,013,463
-----------
22,316,469
-----------
Health Industry Services 1.4%
IDX Systems Corp.* (Provider of health care information systems to physician
groups and academic medical centers) ................................................. 306,300 10,567,350
Ventana Medical Systems, Inc.* (Manufacturer of automated medical test systems
for cell and tissue analysis) ........................................................ 145,700 1,803,038
-----------
12,370,388
-----------
Hospital Management 1.6%
ARV Assisted Living, Inc.* (Operator of licensed assisted living facilities for
senior citizens) ..................................................................... 228,200 2,510,198
Advocat, Inc.* (Operator of nursing homes and retirement centers) ...................... 100,500 1,143,188
Assisted Living Concepts, Inc.* (Operator of assisted living residences) ............... 157,800 4,359,225
Atria Communities, Inc.* (Provider of assisted and independent living communities
for the elderly) ..................................................................... 222,000 3,413,250
Karrington Health, Inc.* (Owner and operator of private pay assisted living
residences) .......................................................................... 171,000 2,565,000
-----------
13,990,861
-----------
Medical Supply & Specialty 5.7%
Cardiovascular Dynamics, Inc.* (Developer and manufacturer of catheters for
treatment of vascular diseases) ...................................................... 353,800 2,786,175
Closure Medical Corp.* (Manufacturer of medical adhesive products) ..................... 130,100 2,504,425
Endosonics Corp.* (Manufacturer of imaging catheters) .................................. 409,400 4,452,225
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - SCUDDER DEVELOPMENT FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ESC Medical Systems Ltd.* (Producer of devices for non-invasive treatment of
benign vascular lesions) .............................................................. 252,900 6,448,950
ICU Medical Inc.* (Designer, manufacturer and marketer of proprietary disposable
medical products) (e) ................................................................. 550,800 4,199,850
PLC Systems Inc.* (Developer, manufacturer and marketer of medical laser systems) ....... 392,100 8,650,706
Perclose, Inc.* (Developer and producer of minimally invasive single-use systems
to close arterial access sites surgically) ............................................ 247,800 6,195,000
STERIS Corp.* (Manufacturer of sterile processing systems) .............................. 175,800 6,570,525
Sterile Recoveries, Inc.* (Delivery and retrieval service for reusable gowns and
other disposable products needed for surgery) ......................................... 172,900 3,068,975
Thermo Cardiosystems, Inc.* (Manufacturer of implantable heart assisting devices) ....... 172,000 4,472,000
-----------
49,348,831
-----------
Pharmaceuticals 4.5%
Agouron Pharmaceuticals, Inc.* (Developer of therapeutic and synthetic drugs for
treatment of cancer and other diseases) ............................................... 129,500 10,473,313
NABI, Inc.* (Leading biopharmaceutical company in development of products to
prevent and treat autoimmune and infectious diseases) ................................. 444,100 2,942,163
North American Vaccine, Inc.* (Developer of immunological products) ..................... 286,700 5,536,894
Noven Pharmaceuticals, Inc.* (Transdermal drug delivery systems) ........................ 814,400 5,802,600
PathoGenesis Corp.* (Developer of drugs for treatment of serious infectious
diseases) ............................................................................. 300,000 8,737,500
Vivus, Inc.* (Developer of therapeutic systems for treatment of reproductive
dysfunction) .......................................................................... 224,400 5,343,525
-----------
38,835,995
-----------
Financial 16.5%
Banks 13.0%
CCB Financial Corp. (Commercial bank providing retail, commercial, mortgage and
construction loans) ................................................................... 141,100 10,317,938
Corus Bankshares, Inc. (Commercial bank holding company) ................................ 55,200 1,559,400
First American Corp. (Tennessee) (Regional commercial banking) .......................... 450,000 17,268,750
First Commerce Corp. (Commercial banking in Louisiana and Mississippi) .................. 192,400 8,465,600
First Security Corp. (Commercial banking in western states) ............................. 698,175 19,068,905
First Virginia Banks, Inc. (Commercial and mortgage banking and insurance) .............. 190,000 11,459,375
Magna Group, Inc. (Commercial banking and financial services) ........................... 236,100 8,204,475
Signet Banking Corp. (Multi-bank holding company) ....................................... 272,800 9,820,800
Union Planters Corp. (Commercial banking in Tennessee) .................................. 250,000 12,968,750
Zions Bancorp (Commercial banking in Utah) .............................................. 329,400 12,393,675
-----------
111,527,668
-----------
Insurance 2.6%
CapMAC Holdings Inc. (Provider of financial guaranty insurance) ......................... 216,900 7,293,262
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 - SCUDDER DEVELOPMENT FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Compdent Corp.* (Provider of dental coverage in the managed dental care industry) ....... 135,000 2,843,438
Meadowbrook Insurance Group. Inc. (Insurance holding company) ........................... 262,600 6,548,587
Terra Nova (Bermuda) Holdings Ltd. "A" (Property, casualty and marine insurance and
reinsurance company) .................................................................. 273,800 5,749,800
-----------
22,435,087
-----------
Business Finance 0.9%
Imperial Bancorp (Merchant card transaction processing, trust and custodial
services, international trade and foreign exchange services) .......................... 254,100 7,337,140
-----------
Media 1.7%
Advertising 1.5%
Outdoor Systems, Inc.* (Outdoor advertising company) .................................... 115,650 4,423,613
Universal Outdoor Holdings, Inc.* (Outdoor advertising company) ......................... 235,800 8,223,525
-----------
12,647,138
-----------
Broadcasting & Entertainment 0.2%
Jacor Communications, Inc. "A" * (Owner and operator of radio stations) ................. 50,000 1,912,500
-----------
Service Industries 18.0%
EDP Services 5.2%
Analysts International Corp. (Contract programming and software services) ............... 166,600 5,581,100
Computer Horizons Corp.* (Diversified information technology services and
solutions) ............................................................................ 328,050 11,235,713
Keane, Inc.* (Provider of computer software project management and design
development services) ................................................................. 332,100 17,269,200
Systems & Computer Technology Corp.* (Computer software for educational
institutions) ......................................................................... 370,300 9,905,525
-----------
43,991,538
-----------
Environmental Services 0.1%
Commodore Applied Technologies, Inc.* (Developer of environmental technologies) ......... 175,200 1,040,250
Commodore Applied Technologies, Inc. Warrants* (expire 6/1/02) .......................... 113,000 155,375
-----------
1,195,625
-----------
Miscellaneous Commercial Services 12.0%
ABR Information Services, Inc.* (Benefits, compliance and information services) ......... 113,200 3,282,798
AccuStaff, Inc.* (National provider of temporary staffing personnel) .................... 1,038,852 24,607,804
Apollo Group, Inc.* (Provider of higher education programs for working adults) .......... 200,000 7,050,000
CMG Information Services, Inc.* (Developer of information based products and
services for direct marketing) ........................................................ 250,500 3,287,813
Cintas Corp. (Uniform rentals) .......................................................... 376,700 25,898,125
Copart, Inc.* (Auctioneer of damaged vehicles for insurance companies) .................. 347,500 5,733,750
G & K Services Inc. "A" (Uniform rentals) ............................................... 700,000 26,075,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - SCUDDER DEVELOPMENT FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Sitel Corp.* (Nebraska based telemarketing company for major credit-card and
insurance companies) .................................................................. 367,200 7,573,500
-----------
103,508,790
-----------
Miscellaneous Consumer Services 0.7%
Veterinary Centers of America, Inc.* (Owner and manager of veterinary hospitals) ........ 490,200 5,974,313
-----------
Durables 2.4%
Automobiles 0.6%
Tower Automotive, Inc.* (Producer of engineered metal stampings and assemblies for
automotive industry) .................................................................. 120,000 5,160,000
-----------
Telecommunications Equipment 1.8%
AML Communications, Inc.* (Manufacturer of amplifiers and related products for
communications markets) ............................................................... 24,100 68,532
Ascend Communications, Inc.* (Developer and producer of a variety of high-speed
wide area network access products) .................................................... 279,961 11,023,464
Pairgain Technologies Inc.* (Manufactures telecommunications equipment) ................. 260,700 4,040,850
-----------
15,132,846
-----------
Manufacturing 4.4%
Containers & Paper 1.2%
Aptargroup, Inc. (Manufacturer of packaging equipment components) ....................... 124,700 5,642,675
Sealed Air Corp.* (Protective packaging material) ....................................... 99,000 4,702,500
-----------
10,345,175
-----------
Electrical Products 1.0%
Advanced Lighting Technologies, Inc.* (Manufacturer of metal halide lighting
products) ............................................................................. 324,500 8,193,624
-----------
Industrial Specialty 0.5%
Lydall, Inc.* (Engineered fiber materials) .............................................. 196,400 4,148,950
-----------
Office Equipment/Supplies 1.7%
Encad, Inc.* (Manufacturer of large format color inkjet printers) ....................... 357,200 14,823,800
-----------
Technology 20.4%
Computer Software 13.7%
Advent Software, Inc.* (Provider of stand-alone and client/server software
products) ............................................................................. 287,400 7,652,024
Aurum Software, Inc.* (Developer of sales and marketing information software) ........... 300,000 7,200,000
CBT Group PLC* (ADR) (Developer and publisher of software focusing on client/server
technologies) ......................................................................... 94,100 5,940,063
Integrated Systems, Inc.* (Manufacturer of software development tools for various
industries) ........................................................................... 423,300 4,973,775
Lycos, Inc.* (Developer of online guides to the Internet) ............................... 163,656 2,086,614
Parametric Technology Corp.* (Mechanical design software producer) ...................... 373,300 15,888,581
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - SCUDDER DEVELOPMENT FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Project Software & Development, Inc.* (Developer of software used for management of
equipment maintenance) ................................................................ 440,600 6,388,700
Pure Atria Corp.* (Developer of diagnostic and testing products for managing
software projects) .................................................................... 100,000 1,412,500
Rational Software Corp.* (Software products and services for development of
software applications) ................................................................ 273,500 4,598,219
SeaChange International, Inc.* (Manufacturer of software-based products for
management and distribution of digital video for television and
telecommunication companies) .......................................................... 288,200 8,141,650
Security Dynamics Technologies, Inc.* (Designer, developer and supporter of a
family of security products used to manage access to computer-based
information resources) ................................................................ 367,000 13,533,125
Sterling Commerce, Inc.* (Producer of electronic data interchange products and
services) ............................................................................. 210,000 6,903,750
Synopsys Inc.* (Developer of high level electronic design software) ..................... 542,100 19,922,175
Technology Modeling Associates, Inc.* (Physical simulation software for integrated
circuit design and manufacturing) ..................................................... 100,000 1,362,500
Vantive Corp.* (Provides customer interaction applications software) .................... 283,800 8,017,350
VideoServer, Inc.* (Supplier of networking equipment and associated software to
create multimedia conferences over wide area networks) ................................ 318,300 4,217,475
-----------
118,238,501
-----------
EDP Peripherals 0.5%
Network Appliance, Inc.* (Designer and manufacturer of network data storage
devices) .............................................................................. 110,000 4,180,000
-----------
Electronic Components/Distributors 0.2%
Trident International, Inc.* (Manufacturer of impulse ink jet subsystems) ............... 85,200 1,533,600
-----------
Office/Plant Automation 3.3%
Cognex Corp.* (Manufacturer of machine vision systems) .................................. 140,000 3,710,000
Cymer, Inc.* (Provider of laser illumination sources for ultra-violet
photolithography systems) ............................................................. 181,400 8,843,250
KLA Instruments Corp.* (Developer, manufacturer and marketer of automated image
processing systems) ................................................................... 200,000 9,750,000
Teradyne Inc.* (Electronic industry automatic test equipment manufacturer) .............. 150,000 5,887,500
-----------
28,190,750
-----------
Semiconductors 2.7%
Altera Corp.* (Designer and marketer of programmable logic integrated circuits
and computer engineering software and hardware) ....................................... 171,000 8,635,500
Anadigics, Inc.* (Supplier of gallium arsenide integrated circuits for use in
television and telecommunication applications) ........................................ 126,800 3,930,800
Triquint Semiconductor, Inc.* (Manufacturer of high performance analog and
mixed signal integrated circuits) ..................................................... 175,700 6,039,688
Vitesse Semiconductor Corp.* (Manufacturer of digital integrated circuits) .............. 146,350 4,783,816
-----------
23,389,804
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 - SCUDDER DEVELOPMENT FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Energy 7.5%
Oil & Gas Production 4.5%
Barrett Resources Corp.* (Oil and gas exploration and production) ....................... 388,200 11,621,738
Belco Oil & Gas Corp.* (Natural gas and oil exploration, development and production) .... 158,500 3,397,844
Benton Oil & Gas Co.* (Oil and gas exploration, development and production) ............. 164,800 2,472,000
KCS Energy, Inc. (Crude oil and natural gas exploration, development and production) .... 174,000 3,545,250
Nuevo Energy Co.* (Oil and gas exploration, development and production) ................. 109,500 4,489,500
Triton Energy Ltd.* (Independent oil and gas exploration and production company) ........ 294,600 13,496,363
-----------
39,022,695
-----------
Oilfield Services/Equipment 3.0%
Global Industries Ltd.* (Pipeline construction, derrick and diving services for
offshore oil and gas industry) ........................................................ 300,000 7,007,814
Newpark Resources, Inc.* (Environmental management and oilfield construction services) .. 338,500 11,424,375
Transocean Offshore Inc. (Contract drilling services of offshore oil and gas wells) ..... 100,000 7,262,500
-----------
25,694,689
-----------
Metals & Minerals 1.1%
Steel & Metals
RMI Titanium Co.* (Producer of titanium products) ....................................... 336,800 9,177,800
-----------
Construction 1.0%
Building Materials
Simpson Manufacturing Co., Inc.* (Manufacturer of wood-to-wood, wood-to-concrete and
wood-to-masonry connectors) ........................................................... 318,600 8,442,900
-----------
Transportation 0.8%
Marine Transportation
Trico Marine Services, Inc.* (Provider of marine support services for offshore
oil and gas exploration and production operations) .................................... 331,200 7,224,300
-----------
Other 1.0%
Kuhlman Corp. (Manufacturer of electrical and industrial products) ...................... 77,800 2,509,050
Protein Design Labs, Inc.* (Developer of human and humanized antibodies) ................ 75,000 2,137,500
Robert Mondavi Corp. "A" * (Premium wine producer) ...................................... 36,800 1,738,800
St. Mary Land & Exploration Co. (Oil and gas exploration, development and
production) ........................................................................... 77,800 2,732,725
-----------
9,118,075
- -----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $586,019,188) 851,392,221
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio-- 100.0% (Cost $592,829,168) (a) 859,984,601
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 - SCUDDER DEVELOPMENT FUND
<PAGE>
- --------------------------------------------------------------------------------
* Non-income producing security.
(a) The cost for federal income tax purposes was $594,066,122. At June 30,
1997, net unrealized appreciation for all securities based on tax cost was
$265,918,479. This consisted of aggregate gross unrealized appreciation
for all securities in which there was an excess of market value over tax
cost of $310,334,803 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$44,416,324.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $9,894,495 (1.15% of net assets).
Their values have been estimated by the Board of Directors in the absence
of readily ascertainable market values. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly
from the values that would have been used had a ready market for the
securities existed, and the difference could be material. The cost of
these securities at June 30, 1997 aggregated $7,917,500. These securities
may also have certain restrictions as to resale.
(c) Restricted Securities -- securities which have not been registered with
the Securities and Exchange Commission under the Securities Act of 1933.
Information concerning such restricted securities at June 30, 1997 is as
follows were:
Security Acquisition Date Cost ($)
-------- ---------------- --------
InTouch Group Inc. 2/14/95 217,500
Norian Corp. "D" 4/12/95 2,000,000
HYSEQ Inc. "A" 5/15/96 1,400,000
InterVentional Technologies, Inc. "G" 3/6/95 1,200,000
Alexion Pharmaceuticals, Inc. 6/13/97 3,100,000
(d) Issuer filed petition under Chapter 11 of the Federal Bankruptcy Code.
Transactions in written options on securities during the year ended June
30, 1997 were:
Shares Premiums Received ($)
------ ---------------------
Outstanding at June 30, 1996 -- --
Contracts written 500,000 895,100
Contracts closed (500,000) (895,100)
-------------------------------------------------------------------------
Outstanding at June 30, 1997 -- --
========= ==========
(e) Affiliated Issuer (See Notes to Financial Statements)
The accompanying notes are an integral part of the financial statements.
19 - SCUDDER DEVELOPMENT FUND
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of June 30, 1997
<TABLE>
<CAPTION>
Assets
----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investments, at market:
Unaffiliated issuers (identified cost $583,295,724) ............ $ 852,834,751
Affiliated issuers (identified cost $9,533,444) ................ 7,149,850
--------------
Total investments, at market (identified cost $592,829,168) ....... 859,984,601
Cash .............................................................. 1,703
Receivable for investments sold ................................... 14,120,651
Receivable for Fund shares sold ................................... 1,371,243
Dividends and interest receivable ................................. 252,001
Foreign taxes recoverable ......................................... 4,893
Other assets ...................................................... 21,310
--------------
Total assets 875,756,402
Liabilities
----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased ................................. 5,513,810
Payable for Fund shares redeemed .................................. 3,474,389
Notes payable ..................................................... 4,100,000
Accrued management fee ............................................ 708,356
Other payables and accrued expenses ............................... 395,708
--------------
Total liabilities 14,192,263
----------------------------------------------------------------------------------------
Net assets, at market value $ 861,564,139
----------------------------------------------------------------------------------------
Net Assets
----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Net unrealized appreciation (depreciation) on:
Investments .................................................... 267,155,433
Foreign currency related transactions .......................... (199)
Accumulated net realized gain ..................................... 61,527,637
Paid-in capital ................................................... 532,881,268
----------------------------------------------------------------------------------------
Net assets, at market value $ 861,564,139
----------------------------------------------------------------------------------------
Net Asset Value
----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($861,564,139 / 22,081,273 outstanding shares of beneficial
interest, $.01 par value, unlimited number of --------------
shares authorized) ................................................ $39.02
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20 - SCUDDER DEVELOPMENT FUND
<PAGE>
Statement of Operations
year ended June 30, 1997
<TABLE>
<CAPTION>
Investment Income
------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Income:
Dividends ......................................................... $ 2,334,676
Interest .......................................................... 820,442
--------------
3,155,118
--------------
Expenses:
Management fee .................................................... 8,996,442
Services to shareholders .......................................... 2,728,373
Custodian and accounting fees ..................................... 249,415
Trustees' fees and expenses ....................................... 44,794
Reports to shareholders ........................................... 281,227
Registration fees ................................................. 57,728
Auditing .......................................................... 46,500
Legal ............................................................. 31,565
Interest expense .................................................. 21,879
Other ............................................................. 91,208
--------------
12,549,131
----------------------------------------------------------------------------------------
Net investment loss (9,394,013)
----------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments--Unaffiliated issuers ................................. 76,915,053
Investments--Affiliated issuers ................................... (10,947,107)
Options ........................................................... (284,900)
Foreign currency related transactions ............................. (8,055)
--------------
65,674,991
Net unrealized appreciation (depreciation) during the period on:
Investments ....................................................... (110,479,815)
Foreign currency related transactions ............................. (490)
--------------
(110,480,305)
----------------------------------------------------------------------------------------
Net loss on investment transactions (44,805,314)
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations $ (54,199,327)
----------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
21 - SCUDDER DEVELOPMENT FUND
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended June 30,
Increase (Decrease) in Net Assets 1997 1996
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment loss ......................................... $ (9,394,013) $ (8,112,460)
Net realized gain from investment transactions .............. 65,674,991 162,355,115
Net unrealized appreciation (depreciation) on investment
transactions during the period............................. (110,480,305) 102,866,430
-------------- ---------------
Net increase (decrease) in net assets resulting from
operations ............................................... (54,199,327) 257,109,085
-------------- ---------------
Distributions to shareholders from net realized gains ...... (103,800,648) (84,837,216)
-------------- ---------------
Fund share transactions:
Proceeds from shares sold .................................. 437,599,929 486,060,931
Net asset value of shares issued to shareholders in
reinvestment of distributions ........................... 98,959,399 80,963,827
Cost of shares redeemed .................................... (557,283,948) (426,320,016)
-------------- ---------------
Net increase (decrease) in net assets from Fund share
transactions ............................................. (20,724,620) 140,704,742
-------------- ---------------
Increase (decrease) in net assets .......................... (178,724,595) 312,976,611
Net assets at beginning of period .......................... 1,040,288,734 727,312,123
-------------- ---------------
Net assets at end of period ................................ $ 861,564,139 $1,040,288,734
-------------- ---------------
Other Information
---------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period .................. 22,833,256 19,474,819
-------------- ---------------
Shares sold ................................................ 11,250,824 11,614,545
Shares issued to shareholders in reinvestment of
distributions ............................................ 2,413,215 2,054,380
Shares redeemed ............................................ (14,416,022) (10,310,488)
-------------- ---------------
Net increase (decrease) in Fund shares ..................... (751,983) 3,358,437
-------------- ---------------
Shares outstanding at end of period ........................ 22,081,273 22,833,256
-------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
22 - SCUDDER DEVELOPMENT FUND
<PAGE>
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>
<CAPTION>
Years Ended June 30,
1997(b) 1996(b) 1995(b) 1994(b) 1993(b) 1992(b) 1991(b) 1990(b) 1989(b) 1988
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, --------------------------------------------------------------------------------------------
beginning of period ...... $45.56 $37.35 $27.58 $34.58 $29.92 $27.33 $26.25 $22.54 $22.00 $25.39
--------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment loss ......... (.40) (0.38) (.31) (.30) (.27) (.23) (.10) (.08) (.10) (.08)
Net realized and
unrealized gain (loss)
on investment
transactions ............. (1.66) 12.79 12.20 (3.63) 6.63 3.78 2.41 6.07 1.06 (1.41)
Total from investment --------------------------------------------------------------------------------------------
operations ............... (2.06) 12.41 11.89 (3.93) 6.36 3.55 2.31 5.99 .96 (1.49)
--------------------------------------------------------------------------------------------
Less distributions from
net realized gains
on investment
transactions ............. (4.48) (4.20) (2.12) (3.07) (1.70) (.96) (1.23) (2.28) (.42) (1.90)
--------------------------------------------------------------------------------------------
Total distributions ......... (4.48) (4.20) (2.12) (3.07) (1.70) (.96) (1.23) (2.28) (.42) (1.90)
--------------------------------------------------------------------------------------------
Net asset value, --------------------------------------------------------------------------------------------
end of period ............ $39.02 $45.56 $37.35 $27.58 $34.58 $29.92 $27.33 $26.25 $22.54 $22.00
-----------------------------------------------------------------------------------------------------------------------------
Total Return (%) ............ (4.93) 35.26 45.41 (12.91) 22.28 12.83 10.32 28.50 4.66 (5.35)
Ratios and Supplemental Data
Net assets, end of period
($ millions) ............. 862 1,040 727 546 821 700 476 361 275 356
Ratio of operating
expenses to average
daily net assets (%) ..... 1.36 1.24 1.32 1.27 1.30 1.30 1.29 1.34 1.32 1.30
Ratio of net investment
loss to average daily
net assets (%) ........... (1.02) (0.91) (1.01) (.91) (.83) (.70) (.40) (.35) (.47) (.44)
Portfolio turnover rate (%) . 52.2 58.8 41.6 48.3 49.2 53.5 70.8 40.1 32.0 39.2
Average commission rate
paid (a) ................. $.0355 $.0554 $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
</TABLE>
(a) Average commission rate paid per share of common and preferred stocks is
calculated for fiscal periods ending on or after June 30, 1996.
(b) Per share amounts have been calculated using the weighted average shares
method.
23 - SCUDDER DEVELOPMENT FUND
<PAGE>
Notes to Financial Statements
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 Fund's financial statements are prepared in
accordance with generally accepted accounting principles which require the use
of management estimates. The policies described below are followed consistently
by the Fund in the preparation of its financial statements.
Security Valuation. Portfolio securities which are traded on U.S. or foreign
stock exchanges are valued at the most recent sale price reported on the
exchange on which the security is traded most extensively. If no sale occurred,
the security is then valued at the calculated mean between the most recent bid
and asked quotations. If there are no such bid and asked quotations, the most
recent bid quotation is used. Securities quoted on the Nasdaq System, for which
there have been sales, are valued at the most recent sale price reported on such
system. If there are no such sales, the value is the high or "inside" bid
quotation. Securities which are not quoted on the Nasdaq System but are traded
in another over-the-counter market are valued at the most recent sale price on
such market. If no sale occurred, the security is then valued at the calculated
mean between the most recent bid and asked quotations. If there are no such bid
and asked quotations the most recent bid quotation shall be used. 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.
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 10% of the value of the Fund's total assets would be invested in restricted
securities. The aggregate fair value of restricted securities at June 30, 1997,
amounted to $9,894,495 which represents 1.15% 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.
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 - SCUDDER DEVELOPMENT FUND
<PAGE>
Options. An option contract is a contract in which the writer of the option
grants the buyer of the option the right to purchase from (call option), or sell
to (put option), the writer a designated instrument at a specified price within
a specified period of time. Certain options, including options on indices, will
require cash settlement by the Fund if the option is exercised. During the
period, the Fund purchased put options on securities as a hedge against
potential adverse price movements in the value of portfolio assets and wrote put
options as part of a put spread. If the Fund writes an option and the option
expires unexercised, the Fund will realize income, in the form of a capital
gain, to the extent of the amount received for the option (the "premium"). If
the Fund elects to close out the option it would recognize a gain or loss based
on the difference between the cost of closing the option and the initial premium
received. If the Fund purchased an option and allows the option to expire it
would realize a loss to the extent of the premium paid. If the Fund elects to
close out the option it would recognize a gain or loss equal to the difference
between the cost of acquiring the option and the amount realized upon the sale
of the option.
The gain or loss recognized by the Fund upon the exercise of a written call or
purchased put option is adjusted for the amount of option premium. If a written
put or purchased call option is exercised, the Fund's cost basis of the acquired
security or currency would be the exercise price adjusted for the amount of the
option premium.
The liability representing the Fund's obligation under an exchange traded
written option or investment in a purchased option is valued at the last sale
price or, in the absence of a sale, the mean between the closing bid and asked
price or at the most recent asked price (bid for purchased options) if no bid
and asked price are available. Over-the-counter written or purchased options are
valued using dealer supplied quotations.
When the Fund writes a covered call option, the Fund foregoes, in exchange for
the premium, the opportunity to profit during the option period from an increase
in the market value of the underlying security or currency above the exercise
price. When the Fund writes a put option it accepts the risk of a decline in the
market value of the underlying security or currency below the exercise price.
Over-the-counter options have the risk of the potential inability of
counterparties to meet the terms of their contracts. The Fund's maximum exposure
to purchased options is limited to the premium initially paid. In addition,
certain risks may arise upon entering into option contracts including the risk
that an illiquid secondary market will limit the Fund's ability to close out an
option contract prior to the expiration date and, that a change in the value of
the option contract may not correlate exactly with changes in the value of the
securities or currencies hedged.
Distribution of Income and Gains. Distributions of net investment income, if
any, 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.
25 - SCUDDER DEVELOPMENT FUND
<PAGE>
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, 1997, purchases and sales of investment
securities (excluding short-term investments) aggregated $475,012,001 and
$614,141,628, 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, 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,
1997, the fee pursuant to the Agreement amounted to $8,996,442, which was
equivalent to an annual effective rate of .98% of the Fund's average daily net
assets.
On June 26, 1997, the Adviser entered into an agreement with The Zurich
Insurance Company ("Zurich"), an international insurance and financial services
organization, pursuant to which Zurich will acquire a majority interest in the
Adviser, and the Adviser will form a new global investment organization by
combining with Zurich's subsidiary, Zurich Kemper Investments, Inc. and change
its name to Scudder Kemper Investments, Inc. Subject to the receipt of the
required regulatory and shareholder approvals, the transaction is expected to
close in the fourth quarter of 1997.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
year ended June 30, 1997, the amount charged by SSC aggregated $1,504,880, of
which $127,740 is unpaid at June 30, 1997.
The Fund is one of several Scudder Funds (the "Underlying Funds") in which the
Scudder Pathway Series Portfolios (the "Portfolios") invest. In accordance with
the Special Servicing Agreement entered into by the Adviser, the Portfolios, the
Underlying Funds, SSC, SFAC, STC, and Scudder Investor Services, Inc., expenses
from the operation of the Portfolios are borne by the Underlying Funds based on
each Underlying Fund's proportionate share of assets owned by the Portfolios. No
Underlying Funds will be charged expenses that exceed the estimated savings to
each respective Underlying Fund. These estimated savings result from the
elimination of separate shareholder accounts which either currently are or have
potential to be invested in the Underlying Funds. At June 30, 1997, the Special
Servicing Agreement expense charged to the Fund amounted to $5,100.
26 - SCUDDER DEVELOPMENT FUND
<PAGE>
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the year ended June 30, 1997,
the amount charged to the Fund by STC aggregated $893,240, of which $89,950 is
unpaid at June 30, 1997.
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 year ended
June 30, 1997, the amount charged to the Fund by SFAC aggregated $130,526 of
which $10,121 is unpaid at June 30, 1997.
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, 1997, Trustees' fees and expenses aggregated $44,794.
D. Transactions in Securities of Affiliated Issuers
An affiliated issuer is a company in which the Fund has ownership of at least 5%
of the voting securities. A summary of the Fund's transactions with companies
which are or were affiliates for the year ended June 30, 1997 are as follows:
<TABLE>
<CAPTION>
Purchases Sales Dividend Market
Affiliate Cost ($) Cost ($) Income ($) Value ($)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First Team Sports -- 7,661,846 -- --
ICU Medical, Inc. -- 76,850 -- 4,199,850
Grand Casinos Inc -- 18,497,653 -- 2,950,000
The Men's Wearhouse Inc 1,238,200 6,973,567 -- --
------------- ------------- ------------- -------------
1,238,200 33,209,916 -- 7,149,850
============= ============= ============= =============
</TABLE>
E. Lines 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 percent of its net assets under the agreement. In addition, the
Fund also maintains an uncommitted line of credit.
The weighted average outstanding daily balance of all loans (based on the number
of days the loans were outstanding) was $2,819,149 with a weighted average
interest rate of 5.9%. Interest for the year ended June 30, 1997 was $21,879
(less than $.01 per share). The maximum month-end borrowings outstanding during
the year ended June 30, 1997 was $4,100,000.
27 - SCUDDER DEVELOPMENT FUND
<PAGE>
Report of Independent Accountants
To the Trustees of Scudder Securities Trust and the 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, 1997, 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, 1997 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our 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, 1997, 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 8, 1997
28 - SCUDDER DEVELOPMENT FUND
<PAGE>
Tax Information
The Fund paid distributions of $4.34 per share from long-term capital gains
during its year ended June 30, 1997. Pursuant to section 852 of the Internal
Revenue Code, the Fund designates $65,658,062 as capital gain dividends for its
fiscal year ended June 30, 1997.
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.
29 - SCUDDER DEVELOPMENT FUND
<PAGE>
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30 - SCUDDER DEVELOPMENT FUND
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31 - SCUDDER DEVELOPMENT FUND
<PAGE>
Officers and Trustees
Daniel Pierce*
President and Trustee
Paul Bancroft III
Trustee; Venture Capitalist and Consultant
William T. Burgin
Trustee; General Partner,
Bessemer Venture Partners
Thomas J. Devine
Trustee; Consultant
Keith R. Fox
Trustee; President, Exeter Capital Management Corporation
Dudley H. Ladd*
Trustee
Wilson Nolen
Trustee; Consultant
Kathryn L. Quirk*
Trustee, Vice President and Assistant Secretary
Dr. Gordon Shillinglaw
Trustee; Professor Emeritus of Accounting, Columbia University Graduate School
of Business
Robert W. Lear
Honorary Trustee; Executive-in-Residence, Visiting Professor, Columbia
University Graduate School of Business
Robert G. Stone, Jr.
Honorary Trustee; Chairman Emeritus and Director, Kirby Corporation
Edmund R. Swanberg
Honorary Trustee
Peter Chin*
Vice President
Richard W. Desmond*
Assistant Secretary
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
*Scudder, Stevens & Clark, Inc.
32 - SCUDDER DEVELOPMENT FUND
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series --
Premium Shares*
Managed Shares*
Scudder Government Money Market Series --
Managed Shares*
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--
Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund**
Scudder Massachusetts Limited Term Tax Free Fund**
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund**
Scudder Ohio Tax Free Fund**
Scudder Pennsylvania Tax Free Fund**
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Growth and Income Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.
Retirement Programs
- -------------------
IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan**+++ +++
(a variable annuity)
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal Fund, Inc.
Scudder World Income Opportunities
Fund, Inc.
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +++Funds within categories are listed in order from
expected least risk to most risk. +A portion of the income from the tax-free
funds may be subject to federal, state, and local taxes. *A class of shares of
the Fund. **Not available in all states. +++ +++A no-load variable annuity
contract provided by Charter National Life Insurance Company and its affiliate,
offered by Scudder's insurance agencies, 1-800-225-2470. #These funds, advised
by Scudder, Stevens & Clark, Inc., are traded on various stock exchanges.
33 - SCUDDER DEVELOPMENT FUND
<PAGE>
Scudder Solutions
<TABLE>
<CAPTION>
Convenient ways to invest, quickly and reliably:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Automatic Investment Plan QuickBuy
A convenient investment program in which you designate Lets you purchase Scudder fund shares
the purchase details and the bank account, and money is electronically, avoiding potential mailing delays;
electronically debited from that account monthly to designate a bank account and the transaction
regularly purchase fund shares and "dollar cost average" details, and money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from that account.
fewer when it's higher, which can reduce your average
purchase price over time.
Automatic Dividend Transfer Payroll Deduction and Direct Deposit
The most timely, reliable, and convenient way to Have all or part of your paycheck -- even government
purchase shares -- use distributions from one Scudder checks -- invested in up to four Scudder funds at
fund to purchase shares in another, automatically one time.
(accounts with identical registrations or the same
social security or tax identification number).
Dollar cost averaging involves continuous investment in securities regardless of price
fluctuations and does not assure a profit or protect against loss in declining markets.
Investors should consider their ability to continue such a plan through periods of low price
levels.
Around-the-clock electronic account service and information, including some transactions:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Automated Information Line: SAIL(TM) -- Scudder's Web Site -- http://funds.scudder.com
1-800-343-2890
Scudder Electronic Account Services: Offering
Personalized account information, the ability to account information and transactions, interactive
exchange or redeem shares, and information on other worksheets, prospectuses and applications for all
Scudder funds and services via touchtone telephone. Scudder funds, plus your current asset allocation,
whenever you need them. Scudder's Site also
provides news about Scudder funds, retirement
planning information, and more.
Retirees and those who depend on investment proceeds for living expenses can enjoy these convenient,
timely, and reliable automated withdrawal programs:
- ------------------------------------------------------------------------------------------------------------------------------
Automatic Withdrawal Plan QuickSell
You designate the bank account, determine the schedule Provides speedy access to your money by
(as frequently as once a month) and amount of the electronically crediting your redemption proceeds
redemptions, and Scudder does the rest. to the bank account you designate.
DistributionsDirect
Automatically deposits your fund distributions into the
bank account you designate within three business days
after each distribution is paid.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
34 - SCUDDER DEVELOPMENT FUND
<PAGE>
Mutual Funds and More -- Brokerage and Guidance Services:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Brokerage Services Scudder Portfolio Builder
Offers you access to a world of investments, A free service designed to help suggest ways investors like
including stocks, corporate bonds, Treasuries, plus you can diversify your portfolio among domestic and global,
over 6,000 mutual funds from at least 150 mutual as well as equity, fixed-income, and money market funds,
fund companies. And Scudder Fund Folio(SM) provides using Scudder funds.
investors with access to a marketplace of more than
500 no-load funds from well-known companies--with no Personal Counsel from Scudder(SM)
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder Developed for investors who prefer the benefits of no-load
Brokerage account already reserved for them, with Scudder funds but want ongoing professional assistance in
no minimum investment. For information about managing a portfolio. Personal Counsel(SM) is a highly
Scudder Brokerage Services, call 1-800-700-0820. customized, fee-based asset management service for
individuals investing $100,000 or more.
Fund Folio funds held less than six months will be charged a fee for redemptions. You can buy
shares directly from the fund itself or its principal underwriter or distributor without
paying this fee. Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061.
Member SIPC.
Personal Counsel From Scudder(SM) and Personal Counsel(SM) are service marks of and represent a
program offered by Scudder Investor Services, Inc., Adviser.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
Additional Information on How to Contact Scudder:
- ------------------------------------------------------------------------------------------------------------------------------
For existing account services and transactions Please address all written correspondence to
Scudder Investor Relations -- 1-800-225-5163 The Scudder Funds
P.O. Box 2291
For establishing 401(k) and 403(b) plans Boston, Massachusetts
Scudder Defined Contribution Services -- 02107-2291
1-800-323-6105
Or Stop by a Scudder Investor Center
For information about The Scudder Funds, including Many shareholders enjoy the personal, one-on-one service of
additional applications and prospectuses, or for the Scudder Investor Centers. Check for an Investor Center near
answers to investment questions you -- they can be found in the following cities:
Scudder Investor Relations -- 1-800-225-2470 Boca Raton Chicago San Francisco
[email protected] Boston New York
- ------------------------------------------------------------------------------------------------------------------------------
New From Scudder: Scudder International Growth and Income Fund
Scudder International Growth and Income Fund takes a yield-oriented approach to investing in international equities. The
Fund seeks to provide long-term growth of capital plus current income. Investors who desire international exposure but
who wish to take a more conservative approach may appreciate the Fund's emphasis on the dividend paying stocks of
well-established companies outside the United States.
- ------------------------------------------------------------------------------------------------------------------------------
The share price of Scudder International Growth and Income Fund will fluctuate. International investing involves special
risks including currency fluctuation and political instability. Contact Scudder Investor Services, Inc., Distributor,
for a prospectus which contains more complete information, including management fees and other expenses. Please read it
carefully before you invest or send money.
</TABLE>
35 - SCUDDER DEVELOPMENT FUND
<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 over 40 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.
This information must be preceded or accompanied by a
current prospectus.
Portfolio changes should not be considered recommendations
for action by individual investors.
SCUDDER
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