Scudder
Development
Fund
Annual Report
June 30, 1999
and the one-month
period ended
July 31, 1999
- -------------
No-Load Funds
- -------------
A fund seeking long-term capital appreciation by investing primarily in U.S.
companies with the potential for above-average growth.
A no-load fund with no commissions to buy, sell, or exchange shares.
SCUDDER
<PAGE>
Scudder Development Fund
- --------------------------------------------------------------------------------
Date of Inception: 2/11/71 Total Net Assets as of Ticker Symbol: SCDVX
7/31/99: $716.1 million
- --------------------------------------------------------------------------------
o Scudder Development Fund's investment approach has been expanded to allow a
more flexible application of the fund's growth strategy. In addition to small-
and medium-cap growth stocks, the fund may now invest in large-cap growth
stocks.
o The fund posted an 11.65% total return during its most recent fiscal year
ended June 30, 1999, outpacing the 8.31% return of the fund's unmanaged
benchmark, the Russell 2000 Growth Index. For the one-month period ended July
31, 1999, the fund returned -4.33%.
o A strong emphasis on the technology, biotechnology, pharmaceutical, and
consumer discretionary sectors, as well as a strong underweight in health care
services, boosted the fund's performance during the period.
Table of Contents
3 Letter from the Fund's Chairman 26 Financial Highlights
4 Performance Update 27 Notes to Financial Statements
6 Portfolio Summary 31 Report of Independent Accountants
8 Portfolio Management Discussion 32 Tax Information
11 Glossary of Investment Terms 33 Officers and Trustees
12 Investment Portfolio 34 Investment Products and Services
23 Financial Statements 35 Scudder Solutions
2 - Scudder Development Fund
<PAGE>
Letter from the Fund's Chairman
Dear Shareholders,
As noted in the fund's most recent prospectus supplement, as of June 30,
1999, we have changed Scudder Development Fund's investment approach to allow a
more flexible application of the fund's growth strategy. This enhancement to the
fund's approach will provide the portfolio management team with the flexibility
to invest in stocks they believe offer the best opportunities for capital
appreciation, not limited by a defined range of market capitalization. After
committing time and effort to identifying attractive growth stocks, the fund's
managers will now be able to hold on to winners, rather than having to sell them
because of market cap restrictions. To direct this new investment approach, we
welcome Sewall Hodges, with over 13 years of portfolio management experience, as
Lead Manager of the fund's portfolio team.
In addition, please note that we have changed the fund's fiscal year end
from June 30 to July 31 as part of a larger effort to create efficiencies and
reduce the costs of producing Scudder fund regulatory materials such as fund
reports and prospectuses. Going forward, you will receive regular reports
following the fund's semiannual and annual periods ending in January and July.
Finally, it should be noted that Daniel Pierce retired in June of this year
as President of Scudder Development Fund, at which time I assumed that role and
its responsibilities. We are fortunate that Dan's longstanding affiliation with
Scudder is ongoing, and that we will continue to benefit from his counsel going
forward. I am pleased to join the fund's team in this capacity, and look forward
to serving your interests.
Thank you for your continued investment in Scudder Development Fund. If you
have any questions about your investment, please call Scudder Investor
Information at 1-800-SCUDDER (1-800-728-3337), or visit our Web site at
www.scudder.com.
Sincerely,
/s/Lynn S. Birdsong
Lynn S. Birdsong
President,
Scudder Development Fund
3 - Scudder Development Fund
<PAGE>
Performance Update as of July 31, 1999
- --------------------------------------------------------------------------------
Fund Index Comparisons
- --------------------------------------------------------------------------------
Total Return
- --------------------------------------------------------------------------------
Period Growth of Average
Ended 7/31/1999 $10,000 Cumulative Annual
- --------------------------------------------------------------------------------
Scudder Development Fund
- --------------------------------------------------------------------------------
1 Year $ 11,367 13.67% 13.67%
5 Year $ 23,000 130.00% 18.13%
10 Year $ 37,229 272.29% 14.05%
- --------------------------------------------------------------------------------
S&P 500 Index
- --------------------------------------------------------------------------------
1 Year $ 12,021 20.21% 20.21%
5 Year $ 30,069 200.69% 26.23%
10 Year $ 49,674 396.74% 17.37%
- --------------------------------------------------------------------------------
Russell 2000 Growth Index
- --------------------------------------------------------------------------------
1 Year $ 11,451 14.51% 14.51%
5 Year $ 19,499 94.99% 14.29%
10 Year $ 27,223 172.23% 10.53%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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:
Scudder Development Russell 2000
Fund Growth Index S&P 500 Index
'89 10000 10000 10000
'90 11357 9913 10651
'91 14364 10917 12008
'92 15424 11681 13547
'93 17632 13779 14730
'94 16187 13959 15490
'95 25132 18664 19533
'96 27047 19227 22767
'97 31645 24080 34640
'98 32753 23762 41323
'99 37230 27215 49674
Yearly periods ended July 31
The Standard & Poor's 500 Index is a capitalization-weighted index of 500
stocks. The index is designed to measure performance of the broad domestic
economy through changes in the aggregate market value of 500 stocks representing
all major industries. 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.
Effective June 30, 1999, the Fund has adopted the S&P 500 Index for its primary
securities market index over the Russell 2000 Growth Index, as the S&P 500 Index
better represents the securities and markets in which the Fund now invests.
Returns and Per Share Information
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
ILLUSTRATING THE FUND TOTAL RETURN (%) AND
INDEX TOTAL RETURN (%)
CHART DATA:
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999(a)*
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value $ 24.99 $ 29.83 $ 31.08 $ 33.58 $ 28.23 $ 40.82 $ 39.60 $ 41.76 $ 39.16 $ 40.26
- -----------------------------------------------------------------------------------------------------------------------------
Capital Gains Distributions $ 2.28 $ 1.23 $ 0.96 $ 1.70 $ 3.07 $ 2.12 $ 4.20 $ 4.48 $ 3.88 $ 3.75
- -----------------------------------------------------------------------------------------------------------------------------
Fund Total Return (%) 13.57 26.48 7.38 14.31 (8.20) 55.27 7.62 17.00 3.50 13.67
- -----------------------------------------------------------------------------------------------------------------------------
Index Total Return (%) 6.51 12.74 12.81 8.73 5.16 26.10 16.56 52.15 19.29 20.21
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Effective June 30, 1999, the Fund adopted its current objective to seek
long-term capital appreciation by investing primarily in U.S. companies with the
potential for above-average growth. Prior to that date, the Fund's investment
objective was to seek long-term growth of capital by investing primarily in
medium-size companies with the potential for sustainable above-average earnings
growth. Since adopting its current objective, the cumulative return is -4.33%.
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.
(a) On June 7, 1999, the Board of Trustees of the Fund changed the fiscal year
end from June 30 to July 31.
4 - Scudder Development Fund
<PAGE>
Performance Update as of June 30, 1999
- --------------------------------------------------------------------------------
Fund Index Comparisons
- --------------------------------------------------------------------------------
Total Return
- --------------------------------------------------------------------------------
Period Growth of Average
Ended 7/31/1999 $10,000 Cumulative Annual
- --------------------------------------------------------------------------------
Scudder Development Fund
- --------------------------------------------------------------------------------
1 Year $ 11,165 11.65% 11.65%
5 Year $ 24,607 146.07% 19.73%
10 Year $ 41,916 319.16% 15.41%
- --------------------------------------------------------------------------------
Russell 2000 Growth Index
- --------------------------------------------------------------------------------
1 Year $ 10,831 8.31% 8.31%
5 Year $ 20,403 104.03% 15.32%
10 Year $ 29,399 193.99% 11.38%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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:
Scudder Development Russell 2000
Fund Growth Index
'89 10000 10000
'90 12851 10871
'91 14177 10934
'92 15995 11857
'93 19559 14282
'94 17034 14409
'95 24771 18127
'96 33505 22928
'97 31852 23982
'98 37542 27143
'99 41916 29399
Yearly periods ended June 30
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
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
ILLUSTRATING THE FUND TOTAL RETURN (%) AND
INDEX TOTAL RETURN (%)
CHART DATA:
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999(a)*
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value $ 26.25 $ 27.33 $ 29.92 $ 34.58 $ 27.58 $ 37.35 $ 45.56 $ 39.02 $ 41.67 $ 42.06
- -----------------------------------------------------------------------------------------------------------------------------
Capital Gains Distributions $ 2.28 $ 1.23 $ .96 $ 1.70 $ 3.07 $ 2.12 $ 4.20 $ 4.48 $ 3.88 $ 3.75
- -----------------------------------------------------------------------------------------------------------------------------
Fund Total Return (%) 28.50 10.32 12.83 22.28 -12.91 45.41 35.26 -4.93 17.86 11.65
- -----------------------------------------------------------------------------------------------------------------------------
Index Total Return (%) 8.72 .58 8.45 20.45 .88 25.82 26.49 4.51 13.18 8.31
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Effective July 1, 1998, the Fund adopted its current objective to seek
long-term growth of capital by investing primarily in medium-sized companies
with the potential for sustainable above-average earning growth. Prior to that
date, the Fund's investment objective was to seek long-term growth of capital by
investing primarily in securities of small and medium-sized growth companies.
Since adopting its current objective, the cumulative return is 11.38%.
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.
5 - Scudder Development Fund
<PAGE>
Portfolio Summary as of July 31, 1999
- ----------------
Asset Allocation
- ----------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Common Stocks 96%
Cash Equivalents 3%
Convertible Securities 1%
------------------------------------
100%
------------------------------------
Over the combined periods, the Fund pursued a fully invested approach to
investing in aggressive growth stocks.
- ------------------------------
Sector Diversification
(Excludes 3% Cash Equivalents)
- ------------------------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Technology 22%
Service Industries 17%
Consumer Discretionary 15%
Financial 14%
Health 10%
Media 10%
Manufacturing 4%
Communications 3%
Transportation 2%
Other 3%
------------------------------------
100%
------------------------------------
A bias toward technology, biotechnology, pharmaceuticals, and consumer
discretionary, as well as an underweight in health care services, boosted the
Fund's performance.
- -----------------------------
Ten Largest Equity Holdings
(25% of Portfolio)
- -----------------------------
1. Concord EFS, Inc.
Electronic transaction
authorization, processing,
settlement and transfer services
2. Cintas Corp.
Uniform rentals
3. Network Appliance, Inc.
Designer and manufacturer of network data
storage devices
4. TJX Companies, Inc.
Off-price apparel specialty stores
5. Mercury Interactive Corp.
Producer of automated software testing tools
6. Sanmina Corp.
Provider of electronics contract manufacturing
services
7. Biogen Inc.
Biotechnology research and development
company
8. Linear Technology Corp.
Manufacturer of integrated circuits
9. Vitesse Semiconductor Corp.
Manufacturer of digital integrated circuits
10. Lexmark International Group Inc.
Developer, manufacturer and supplier of printing
solutions and products
Biogen, the Fund's seventh largest holding, was a standout performer during the
combined periods.
For more complete details about the Fund's investment portfolio, see Page 12. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
6 - Scudder Development Fund
<PAGE>
Portfolio Summary as of June 30, 1999
- ----------------
Asset Allocation
- ----------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Common Stocks 94%
Cash Equivalents 5%
Convertible Securities 1%
------------------------------------
100%
------------------------------------
- -------------------------------
Sector Diversification
(Excludes 5% Cash Equivalents)
- -------------------------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Technology 22%
Service Industries 18%
Consumer Discretionary 16%
Financial 15%
Health 10%
Media 10%
Manufacturing 4%
Communications 3%
Transportation 1%
Other 1%
------------------------------------
100%
------------------------------------
- -----------------------------
Ten Largest Equity Holdings
(26% of Portfolio)
- -----------------------------
1. Concord EFS, Inc.
Electronic transaction
authorization, processing,
settlement and transfer services
2. Cintas Corp.
Uniform rentals
3. Sanmina Corp.
Provider of electronic contract manufacturing
services
4. Network Appliance, Inc.
Designer and manufacturer of network data
storage devices
5. Linear Technology Corp.
Manufacturer of integrated circuits
6. TJX Companies, Inc.
Off-price apparel specialty stores
7. Vitesse Semiconductor Corp.
Manufacturer of digital integrated circuits
8. Outdoor Systems, Inc.
Outdoor advertising company
9. Zions Bancorp
Commercial banking
10. Capital One Finance Corp.
Holding company which provides consumer
lending services through its subsidiaries
7 - Scudder Development Fund
<PAGE>
Portfolio Management Discussion
In the following interview, Lead Portfolio Manager Sewall Hodges and Portfolio
Manager Kurt R. Stalzer discuss Scudder Development Fund's performance, recent
changes in the fund's investment criteria, and the fund's outlook:
Q: How did the fund perform over the most recent period?
A: The fund's total return over its most recent fiscal year ended June 30, 1999,
was 11.65%, compared with the 8.31% return of the unmanaged Russell 2000 Growth
Index. For the one-month period ended July 31, 1999, the fund returned -4.33%.
Q: What sectors and companies contributed most to the fund's performance?
A: Within the technology and services sectors, there were several strong
performers: CMGI, a holding company for a number of Internet-related companies;
Solectron, a contract manufacturing company; and Network Appliance, a storage
technology firm, all performed well. Network Appliance alone was up 187% during
the period. Biotechnology was another area that was overweighted and produced
favorable results: The fund held shares of Immunex over the entire period, and
that stock was up over 200%. Biogen was also a good performer. Within health
care, we focused on pharmaceutical products and avoided service-based companies.
Another strong area was retail, with Abercrombie and Fitch the best example.
The fund's portfolio was strongly underweighted in health care services, and
this worked out in our favor. The issue there is the potential impact of reduced
Medicare payments to HMOs. In terms of comparative performance versus the
benchmark, one sector where we did have some difficulty was IT Services. We did
well with the names that we held, but the Russell 2000 Growth Index held some
stocks that produced even better results.
Q: Please explain the changes to Scudder Development Fund's investment approach
that took effect on June 30, and the reasons for the changes.
A: The fund's investment approach has changed from a small- and mid-cap
orientation -- which we found to be too restrictive -- to an all-cap aggressive
growth stance. Here's the problem we faced: When you identify a small- or
mid-cap stock that's a winner, that stock can quickly turn into a large-cap,
which under our previous size requirements we'd then have to sell. There's
enough of an investment of work and time involved in finding a winner that you
don't want to have to sell it if it remains attractive. For example, we
calculated that as a small-cap investor you could have only owned Microsoft for
one year, the first year that the company went public. During that first year
you could have done a lot of work on the stock, but nevertheless have had to
sacrifice substantial upside potential.*
Q: Going forward, how will you identify attractive stocks for the fund's
portfolio?
A: We use a qualitative screen, which is based on bottom-up research by our team
of research analysts. When choosing a stock, we look for seven key traits to
identify attractive growth companies:
- --------------------------------------------------------------------------------
* Effective June 30, 1999, the Fund has adopted the S&P 500 Index for its
primary securities market index over the Russell 2000 Growth Index, as the S&P
500 Index better represents the securities and markets in which the Fund now
invests.
8 - Scudder Development Fund
<PAGE>
[GRAPHIC OMITTED]
leading competitive position, excellent management, new products or new product
development potential, strong industry growth, a "repeat revenues" component
(i.e., an oil company would pass this screen because automobile owners
continually need to purchase gasoline), cost or price control in the business,
and an attractive balance sheet and cash flow. Once we identify companies that
meet these requirements, we apply a simple, but time-tested evaluation
discipline that focuses on risk/return potential. We determine what we believe a
company is worth under two scenarios: if current positive trends continue, or if
problems develop. We formulate two prices, and compare them to the market price.
Based on the company's current stock price, we invest when we believe there is
significantly more upside than downside potential.
Q: Does your management style use elements of value investing?
A: A lot of investors say they buy growth stocks, with the implication that they
don't use any sort of valuation measure. My attitude is that whenever you put
money on the table you have to use a valuation discipline. Everything has a
price, and you can overpay, buy cheaply, or pay fair price. But you have to have
some methodology to determine what the price should be, otherwise you can buy an
attractive growth stock but pay too much. The challenge is to use your valuation
discipline to determine whether you have a reasonable opportunity to achieve a
respectable return, given the amount of risk that you're taking.
- --------------------------------------------------------------------------------
Scudder Development Fund:
A Team Approach to Investing
Scudder Development Fund is managed by a team of Scudder Kemper Investments,
Inc. (the "Adviser") professionals, each of whom plays 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
the Adviser's large staff of economists, research analysts, traders, and other
investment specialists who work in our offices across the United States and
abroad. We believe our team approach benefits fund investors by bringing
together many disciplines and leveraging our extensive resources.
Lead Portfolio Manager Sewall F. Hodges joined the Adviser in 1995 and assumed
responsibility for the fund's day-to-day management and overall investment
strategies in 1999. Mr. Hodges has 13 years of experience in global analysis and
portfolio management.
Portfolio Manager Kurt R. Stalzer joined the Adviser in 1996 and has 15 years of
experience in portfolio management. Mr. Stalzer joined the team in 1999.
- --------------------------------------------------------------------------------
9 - Scudder Development Fund
<PAGE>
Q: How many issues will the fund hold going forward?
A: The fund currently has over 65 holdings. Generally speaking, there will be
approximately 50 core holdings, with the possibility of 20-25 additional smaller
names in the portfolio. At certain times there could be as few as 20 core
holdings -- we like to run portfolios that are as concentrated as possible. Our
feeling is that by keeping the number of names low and maintaining a careful
valuation and fundamental research discipline you can reduce a portfolio's level
of risk.
Q: Does the possibility of an economic slowdown in the second half of the year
concern you?
A: No, it doesn't. Generally speaking, the type of investments that we like to
make should provide opportunities that will be less affected by macroeconomic
factors than would other types of companies. The Internet, for instance, is
operating on a growth curve that's largely independent of any macroeconomic
event. The economy could be slowing down, and the Internet would still be
growing. So, though we have to pay attention to macroeconomic factors, we're
looking for growth markets where they are not necessarily the driver. We believe
that Scudder Development Fund remains an appropriate vehicle for investors
seeking an aggressive growth component for their portfolios.
10 - Scudder Development Fund
<PAGE>
Glossary of Investment Terms
FUNDAMENTAL RESEARCH Analysis of companies based on the projected
impact of management, products, sales, and earnings
on 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.
LIQUIDITY A characteristic of an investment or an asset
referring to the ease of convertibility into cash
within a reasonably short period of time.
MARKET CAPITALIZATION The value of a company's outstanding
shares of common stock, determined by multiplying the
number of shares outstanding by the share price
(shares x price = market capitalization). The
universe of publicly traded companies is frequently
divided into large-, mid-, and small-capitalizations.
OVER/UNDERWEIGHTING Refers to the allocation of assets -- usually by
sector, industry, or country -- within an investment
portfolio relative to a benchmark index or investment
universe.
PRICE/EARNINGS RATIO A widely used gauge of a stock's valuation that
(P/E) (also "earnings indicates what investors are paying for a company's
multiple") earnings on a per share basis. Typically based on a
company's projected earnings for the next six months,
a higher "earnings multiple" indicates a higher
expected growth rate and the potential for greater
price fluctuations.
RETURN ON EQUITY An amount, expressed as a percentage, earned on a
company's common stock investment for a given
period. Calculated by dividing common stock equity
(net worth) at the beginning of the period into net
income for the period after preferred stock
dividends but before common stock dividends. Return
on equity tells common shareholders how effectively
their money is being employed.
VALUE STOCK A company whose stock price does not fully reflect
its intrinsic value, as indicated by price/earnings
and price/book ratios, 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.
(Sources: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
11 - Scudder Development Fund
<PAGE>
Investment Portfolio as of July 31, 1999
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ---------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreement 3.4%
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with State Street Bank and Trust Company dated 7/30/1999 at 5.04%, to be
repurchased at $24,168,146 on 8/2/1999, collateralized by a $22,325,000 U.S. Treasury Bond, -----------
7.25%, 5/15/2016 (Cost $24,158,000) ................................................................. 24,158,000 24,158,000
-----------
Convertible Bonds 0.0%
- ---------------------------------------------------------------------------------------------------------------------------------
Media
Broadcasting & Entertainment -----------
Intouch Group, Inc. Promissory Note, 8%,* 2/1/1996 (Cost $217,500) (b) (c) (d) ........................ 217,500 0
-----------
Convertible Preferred Stocks 0.3%
- ---------------------------------------------------------------------------------------------------------------------------------
Health
Biotechnology 0.1%
Norian Corp. "D"* (Developer and manufacturer of a proprietary biomaterial for skeletal
repair) (b) (c) ..................................................................................... 357,142 949,998
-----------
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
- ---------------------------------------------------------------------------------------------------------------------------------
Total Convertible Preferred Stocks (Cost $3,199,995) 2,149,998
- ---------------------------------------------------------------------------------------------------------------------------------
Shares
- ---------------------------------------------------------------------------------------------------------------------------------
Common Stocks 96.3%
- ---------------------------------------------------------------------------------------------------------------------------------
Consumer Discretionary 14.5%
Apparel & Shoes 2.9%
Abercrombie & Fitch Co. "A"* (Retailer of casual apparel for men and women) ........................... 312,800 12,981,200
Tommy Hilfiger Corp.* (Designer and marketer of men's sportswear) ..................................... 209,200 7,727,325
-----------
20,708,525
-----------
Department & Chain Stores 5.9%
Bed Bath & Beyond Inc.* (Operator of superstores selling domestics merchandise and home
furnishings) ........................................................................................ 189,900 6,444,731
Dollar Tree Stores Inc.* (Store chain that sells assorted general merchandise) ........................ 157,400 6,659,988
Kohl's Corp.* (Operator of a chain of specialty department stores) .................................... 160,100 12,177,606
TJX Companies, Inc. (Off-price apparel specialty stores) .............................................. 517,500 17,109,844
-----------
42,392,169
-----------
Home Furnishings 1.5%
WestPoint Stevens, Inc. (Manufacturer of bedroom and bathroom textile products) ....................... 392,500 10,695,625
-----------
Recreational Products 1.6%
Harley-Davidson Inc. (Manufacturer of motorcycles) .................................................... 199,000 11,019,625
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - Scudder Development Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Specialty Retail 2.6%
Intimate Brands, Inc. (Retailer of intimate apparel and personal care products) ................ 236,670 10,191,602
Office Depot Inc.* (Office supply stores) ...................................................... 453,250 8,498,438
-----------
18,690,040
-----------
Health 9.4%
Biotechnology 4.0%
Biogen Inc.* (Biotechnology research and development company) .................................. 230,200 15,840,638
Immunex Corp.* (Biopharmaceutical company) ..................................................... 110,000 12,416,250
-----------
28,256,888
-----------
Health Industry Services 1.6%
Express Scripts Inc. "A"* (Operator of health care management businesses) ...................... 165,800 11,543,825
-----------
Hospital Management 1.7%
Universal Health Services, Inc.* (Owner and operater of 35 general acute care hospitals and
psychiatric-care facilities located throughout the United States) ............................ 282,100 12,006,881
-----------
Medical Supply & Specialty 2.1%
Biomet Inc. (Manufacturer of surgical implant devices) ......................................... 194,500 7,074,938
Medtronic Inc. (Manufacturer of cardiac pacemakers) ............................................ 109,127 7,863,964
-----------
14,938,902
-----------
Communications 2.8%
Telephone/Communications
American Tower Systems Corp. Class "A"* (Operator and developer of wireless communications
and broadcast towers) ........................................................................ 375,000 8,695,313
CenturyTel, Inc. (Provider of local exchange telephone services and wireless telephone services) 257,400 11,003,850
-----------
19,699,163
-----------
Financial 13.6%
Banks 5.4%
CCB Financial Corp. (Commercial bank providing retail, commercial, mortgage and construction
loans) ....................................................................................... 282,200 14,427,475
First Security Corp. (Commercial banking) ...................................................... 376,625 9,533,320
Zions Bancorp (Commercial banking) ............................................................. 254,300 14,749,400
-----------
38,710,195
-----------
Insurance 5.3%
AMBAC Financial Group, Inc. (Insurer of municipal bonds) ....................................... 116,200 6,463,625
Mutual Risk Management Ltd. (Risk management services) ......................................... 189,900 5,661,394
</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>
Protective Life Corp. (Insurance and financial services) .......................................... 326,400 11,648,400
Providian Financial Corp. (Insurance and financial services) ...................................... 151,700 13,804,700
-----------
37,578,119
-----------
Business Finance 1.1%
Heller Financial Inc. (Commercial finance company) ................................................ 303,200 7,731,600
-----------
Consumer Finance 1.8%
Capital One Finance Corp. (Holding company which provides consumer lending services through
its subsidiaries) ............................................................................... 285,600 13,244,700
-----------
Media 9.8%
Advertising 3.5%
Outdoor Systems, Inc.* (Outdoor advertising company) .............................................. 451,800 15,107,063
Young & Rubicam Inc. (Advertising, marketing and communications company) .......................... 222,000 10,059,375
-----------
25,166,438
-----------
Broadcasting & Entertainment 6.3%
AMFM Inc.* (Owner and operator of radio stations) ................................................. 110,400 5,796,000
Clear Channel Communications, Inc.* (Operator of TV and radio stations) ........................... 162,024 11,270,789
Hispanic Broadcasting Corp.* (Spanish language radio broadcasting company) ........................ 108,000 7,688,250
USA Networks, Inc.* (Diversified media and electronic commerce company) ........................... 150,000 7,190,625
Univision Communication Inc.* (Spanish-language broadcaster in the United States) ................. 185,000 12,811,250
-----------
44,756,914
-----------
Service Industries 16.3%
EDP Services 3.3%
Affiliated Computer Services* (Provider of information technology services and electronic funds
transfer) ....................................................................................... 255,400 11,876,100
CSG Systems International, Inc.* (Provider of billing solutions, software and services for customer
care and billing functions) ..................................................................... 179,500 3,993,875
Fiserv Inc.* (Provider of data processing services) ............................................... 251,100 7,485,919
-----------
23,355,894
-----------
Miscellaneous Commercial Services 13.0%
CMG Information Services, Inc.* (Developer of information-based products and services for direct
marketing) ...................................................................................... 26,000 2,396,875
Cintas Corp. (Uniform rentals) .................................................................... 315,300 20,218,613
Concord EFS, Inc.* (Electronic transaction authorization, processing, settlement and transfer
services) ....................................................................................... 832,800 28,367,250
Ecolab, Inc. (Commercial cleaning, sanitizing and maintenance services) ........................... 244,600 10,426,075
G & K Services, Inc. "A" (Uniform rentals) ........................................................ 129,000 6,849,094
</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>
Swift Transportation Co., Inc.* (National truckload carrier company) ............................ 376,700 8,617,013
US Foodservice Inc.* (Distributor of food, paper products and restaurant equipment) ............. 214,200 9,090,113
United Rentals, Inc.* (Equipment rental company) ................................................ 250,000 7,250,000
-----------
93,215,033
-----------
Durables 1.6%
Aerospace 0.6%
Gilat Satellite Networks Ltd.* (Designer, manufacturer and developer of small aperture terminal
satellite earth stations) ..................................................................... 80,500 4,246,375
-----------
Construction/Agricultural Equipment 1.0%
Global Industrial Technologies, Inc.* (Manufacturer of mining and construction equipment) ....... 603,300 7,201,894
-----------
Manufacturing 4.2%
Containers & Paper 0.6%
Aptargroup, Inc. (Manufacturer of packaging equipment components) ............................... 157,800 4,566,338
-----------
Diversified Manufacturing 1.4%
Pentair, Inc. (Diversified manufacturing company) ............................................... 226,200 9,825,563
-----------
Electrical Products 0.1%
Smartflex Systems, Inc.* (Provider of electronic manufacturing services) ........................ 68,500 702,125
-----------
Office Equipment/Supplies 2.1%
Lexmark International Group Inc. "A"* (Developer, manufacturer and supplier of printing solutions
and products) ................................................................................. 240,000 15,120,000
-----------
Technology 21.4%
Computer Software 2.6%
Intuit Inc.* (Provider of financial software for households and small businesses) ............... 107,700 8,811,206
Reynolds and Reynolds Company (Provider of integrated information management systems and
value-added services) ......................................................................... 370,100 8,697,350
Viasoft, Inc.* (Producer of business solutions for management and automation of large-scale
COBOL software systems) ....................................................................... 96,100 843,878
-----------
18,352,434
-----------
Diverse Electronic Products 3.8%
Gentex Corp.* (Designer, developer, manufacturer and marketer of products which use
electro-optic technology) ..................................................................... 473,300 12,335,381
Solectron Corp.* (Manufacturer of computer products and subsystems) ............................. 232,000 14,949,500
-----------
27,284,881
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder Development Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------------------
EDP Peripherals 4.9%
<S> <C> <C>
Mercury Interactive Corp.* (Producer of automated software testing tools) ........................ 367,500 16,950,938
Network Appliance, Inc.* (Designer and manufacturer of network data storage devices) ............. 330,400 18,006,800
-----------
34,957,738
-----------
Military Electronics 1.5%
L-3 Communications Holdings, Inc.* (Supplier of communications systems, avionics, telemetry,
instrumentation, and wireless products and support services to U.S. military.) ................. 250,000 10,734,375
-----------
Office/Plant Automation 1.9%
Novell Inc.* (Personal computer network systems) ................................................. 519,900 13,387,425
-----------
Semiconductors 6.7%
Linear Technology Corp. (Manufacturer of intergrated circuits) ................................... 257,600 15,810,200
Sanmina Corp.* (Provider of electronics contract manufacturing services) ......................... 255,200 16,667,750
Vitesse Semiconductor Corp.* (Manufacturer of digital integrated circuits) ....................... 245,100 15,655,763
-----------
48,133,713
-----------
Energy 1.0%
Oil/Gas Transmission
El Paso Energy Corp. (Marketer, trader and transporter of natural gas and natural gas products) .. 188,500 6,750,656
-----------
Transportation 1.7%
Air Freight
Expeditors International of Washington, Inc. (Air and ocean freight forwarding, customs clearance,
cargo insurance and logistical services) ....................................................... 380,000 11,803,750
- -----------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $484,115,926) 686,777,803
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $511,691,421) (a) 713,085,801
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
(a) The cost for federal income tax purposes was $511,706,167. At July 31,
1999, net unrealized appreciation for all securities based on tax cost was
$201,379,634. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $212,137,530 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$10,757,896.
The accompanying notes are an integral part of the financial statements.
16 - Scudder Development Fund
<PAGE>
- --------------------------------------------------------------------------------
(b) Securities valued in good faith by the Valuation Committee of the Board of
Trustees at fair value amounted to $2,149,998 (0.3% of net assets). Their
values have been estimated by the Board of Trustees 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 July 31 1999 aggregated $3,417,495. These securities may also
have certain restrictions as to resale.
(c) Restricted Securities are securities which have not been registered with
the Securities and Exchange Commission under the Securities Act of 1933.
The aggregate fair value of restricted securities at July 31, 1999,
amounted $2,149,998 which represents 0.3% of net assets. Information
concerning such restricted securities at July 31, 1999 is as follows:
Security Acquisition Date Cost ($)
-------- ---------------- --------
InTouch Group Inc. 2/14/1995 217,500
Norian Corp. "D" 4/2/1995 1,999,995
InterVentional Technologies, Inc. "G" 3/6/1995 1,200,000
(d) Issuer filed petition under Chapter 11 of the Federal Bankruptcy Code.
The accompanying notes are an integral part of the financial statements.
17 - Scudder Development Fund
<PAGE>
Investment Portfolio as of June 30, 1999
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ---------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreement 2.7%
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 6/30/1999 at 4.8%, to be
repurchased at $20,054,674 on 7/1/1999, collateralized by a $17,883,000 U.S. Treasury Bond, -----------
9.125%, 5/15/2009 (Cost $20,052,000) ................................................................ 20,052,000 20,052,000
-----------
Short Term Investments 2.7%
- ---------------------------------------------------------------------------------------------------------------------------------
-----------
Federal Home Loan Mortgage Corp., 4.6%, 7/1/1999 (Cost $20,000,000) ................................... 20,000,000 20,000,000
-----------
Convertible Bonds 0.0%
- ---------------------------------------------------------------------------------------------------------------------------------
Media
Broadcasting & Entertainment -----------
Intouch Group, Inc. Promissory Note, 8%*, 2/1/1996 (Cost $217,500) (b) (c) (d) ........................ 217,500 0
-----------
Convertible Preferred Stocks 0.4%
- ---------------------------------------------------------------------------------------------------------------------------------
Health 0.4%
Biotechnology 0.3%
Norian Corp. "D"* (Developer and manufacturer of a proprietary biomaterial for skeletal
repair) (b) (c) ..................................................................................... 357,142 1,999,995
-----------
Medical Supply & Specialty 0.1%
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
- ---------------------------------------------------------------------------------------------------------------------------------
Total Convertible Preferred Stocks (Cost $3,199,995) 3,199,995
- ---------------------------------------------------------------------------------------------------------------------------------
Shares
- ---------------------------------------------------------------------------------------------------------------------------------
Common Stocks 94.2%
- ---------------------------------------------------------------------------------------------------------------------------------
Consumer Discretionary 14.7%
Apparel & Shoes 3.0%
Abercrombie & Fitch Co. "A"* (Retailer of casual apparel for men and women) ........................... 312,800 15,014,400
Tommy Hilfiger Corp.* (Designer and marketer of men's sportswear) ..................................... 104,600 7,688,100
-----------
22,702,500
-----------
Department & Chain Stores 5.9%
Bed Bath & Beyond Inc.* (Operator of superstores selling domestics merchandise and home
furnishings) ........................................................................................ 189,900 7,311,150
Dollar Tree Stores Inc.* (Store chain that sells assorted general merchandise) ........................ 157,400 6,925,600
Kohl's Corp.* (Operator of a chain of specialty department stores) .................................... 160,100 12,357,719
TJX Companies, Inc. (Off-price apparel specialty stores) .............................................. 517,500 17,239,219
-----------
43,833,688
-----------
Home Furnishings 1.6%
WestPoint Stevens, Inc. (Manufacturer of bedroom and bathroom textile products) ....................... 392,500 11,701,406
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 - Scudder Development Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Recreational Products 1.4%
Harley-Davidson Inc. (Manufacturer of motorcycles) ............................................. 199,000 10,820,625
-----------
Specialty Retail 2.8%
Intimate Brands, Inc. (Retailer of intimate apparel and personal care products) ................ 236,670 11,212,241
Office Depot Inc.* (Office supply stores) ...................................................... 453,250 9,999,828
-----------
21,212,069
-----------
Health 9.3%
Biotechnology 3.8%
Biogen Inc.* (Biotechnology research and development company) .................................. 230,200 14,804,738
Immunex Corp.* (Biopharmaceutical company) ..................................................... 110,000 14,018,125
-----------
28,822,863
-----------
Health Industry Services 1.3%
Express Scripts Inc. "A"* (Operator of health care management businesses) ...................... 165,800 9,979,088
-----------
Hospital Management 1.8%
Universal Health Services, Inc.* (Owner and operater of 35 general acute care hospitals and
psychiatric-care facilities located throughout the United States) ............................ 282,100 13,470,275
-----------
Medical Supply & Specialty 2.2%
Biomet Inc. (Manufacturer of surgical implant devices) ......................................... 194,500 7,731,375
Medtronic Inc. (Manufacturer of cardiac pacemakers) ............................................ 109,127 8,498,265
-----------
16,229,640
-----------
Pharmaceuticals 0.2%
AmeriSource Health Corp* (Distributer of wholesale pharmaceutical and related products) ........ 53,900 1,374,450
-----------
Communications 2.5%
Telephone/Communications
American Tower Systems Corp. Class "A"* (Operator and developer of wireless communications
and broadcast towers) ........................................................................ 375,000 9,000,000
CenturyTel, Inc. (Provider of local exchange telephone services and wireless telephone services) 257,400
10,231,650
-----------
19,231,650
-----------
Financial 13.8%
Banks 5.5%
CCB Financial Corp. (Commercial bank providing retail, commercial, mortgage and construction
loans) ....................................................................................... 282,200 14,921,325
First Security Corp. (Commercial banking) ...................................................... 376,625 10,263,031
Zions Bancorp (Commercial banking) ............................................................. 254,300 16,148,050
-----------
41,332,406
-----------
Insurance 5.1%
AMBAC Financial Group, Inc. (Insurer of municipal bonds) ....................................... 116,200 6,637,925
</TABLE>
The accompanying notes are an integral part of the financial statements.
19 - Scudder Development Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mutual Risk Management Ltd. (Risk management services) ............................................ 189,900 6,337,913
Protective Life Corp. (Insurance and financial services) .......................................... 326,400 10,771,200
Providian Financial Corp. (Insurance and financial services) ...................................... 151,700 14,183,950
-----------
37,930,988
-----------
Business Finance 1.1%
Heller Financial Inc. (Commercial finance company) ................................................ 303,200 8,432,750
-----------
Consumer Finance 2.1%
Capital One Finance Corp. (Holding company which provides consumer lending services through
its subsidiaries) ............................................................................... 285,600 15,904,350
-----------
Media 9.3%
Advertising 3.5%
Outdoor Systems, Inc.* (Outdoor advertising company) .............................................. 451,800 16,490,700
Young & Rubicam Inc. (Advertising, marketing and communications company) .......................... 222,000 10,087,125
-----------
26,577,825
-----------
Broadcasting & Entertainment 5.8%
Chancellor Media Corp.* (Media company with operations in radio broadcasting and media
representation) ................................................................................. 110,400 6,085,800
Clear Channel Communications, Inc.* (Operator of TV and radio stations) ........................... 162,024 11,169,530
Hispanic Broadcasting Corp.* (Spanish language radio broadcasting company) ........................ 108,000 8,194,500
USA Networks, Inc.* (Diversified media and electronic commerce company) ........................... 150,000 6,018,750
Univision Communication Inc.* (Spanish-language broadcaster in the United States) ................. 185,000 12,210,000
-----------
43,678,580
-----------
Service Industries 16.6%
EDP Services 3.4%
Affiliated Computer Services* (Provider of information technology services and electronic funds
transfer) ....................................................................................... 255,400 12,929,623
CSG Systems International, Inc.* (Provider of billing solutions, software and services for customer
care and billing functions) ..................................................................... 179,500 4,700,656
Fiserv Inc.* (Provider of data processing services) ............................................... 251,100 7,862,569
-----------
25,492,848
-----------
Miscellaneous Commercial Services 13.2%
CMG Information Services, Inc.* (Developer of information-based products and services for direct
marketing) ...................................................................................... 26,000 2,965,625
Cintas Corp. (Uniform rentals) .................................................................... 315,300 21,184,219
Concord EFS, Inc.* (Electronic transaction authorization, processing, settlement and transfer
services) ....................................................................................... 832,800 35,237,850
Ecolab, Inc. (Commercial cleaning, sanitizing and maintenance services) ........................... 244,600 10,670,675
</TABLE>
The accompanying notes are an integral part of the financial statements.
20 - Scudder Development Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
G & K Services, Inc. "A" (Uniform rentals) ...................................................... 129,000 6,756,375
Swift Transportation Co., Inc.* (National truckload carrier company) ............................ 376,700 8,287,400
US Foodservice Inc.* (Distributor of food, paper products and restaurant equipment) ............. 150,000 6,393,750
United Rentals, Inc.* (Equipment rental company) ................................................ 250,000 7,375,000
-----------
98,870,894
-----------
Durables 0.6%
Aerospace
Gilat Satellite Networks Ltd.* (Designer, manufacturer and developer of small aperture terminal
satellite earth stations) ..................................................................... 80,500 4,226,250
-----------
Manufacturing 4.1%
Containers & Paper 0.6%
Aptargroup, Inc. (Manufacturer of packaging equipment components) ............................... 157,800 4,734,000
-----------
Diversified Manufacturing 1.4%
Pentair, Inc. (Diversified manufacturing company) ............................................... 226,200 10,348,650
-----------
Office Equipment/Supplies 2.1%
Lexmark International Group Inc. "A"* (Developer, manufacturer and supplier of printing solutions
and products) ................................................................................. 240,000 15,855,000
-----------
Technology 21.0%
Computer Software 2.5%
Intuit Inc.* (Provider of financial software for households and small businesses) ............... 107,700 9,706,463
Reynolds and Reynolds Company (Provider of integrated information management systems and
value-added services) ......................................................................... 370,100 8,627,956
-----------
18,334,419
-----------
Diverse Electronic Products 3.8%
Gentex Corp.* (Designer, developer, manufacturer and marketer of products which use
electro-optic technology) ..................................................................... 473,300 13,252,400
Solectron Corp.* (Manufacturer of computer products and subsystems) ............................. 232,000 15,471,500
-----------
28,723,900
-----------
EDP Peripherals 4.2%
Mercury Interactive Corp.* (Producer of automated software testing tools) ....................... 367,500 13,000,313
Network Appliance, Inc.* (Designer and manufacturer of network data storage devices) ............ 330,400 18,461,100
-----------
31,461,413
-----------
Military Electronics 1.6%
L-3 Communications Holdings, Inc.* (Supplier of communications systems, avionics, telemetry,
instrumentation, and wireless products and support services to U.S. military.) ................ 250,000 12,078,125
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
21 - Scudder Development Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------------------
Office/Plant Automation 1.8%
<S> <C> <C>
Novell Inc.* (Personal computer network systems) ................................................. 519,900 13,777,350
-----------
Semiconductors 7.1%
Linear Technology Corp. (Manufacturer of intergrated circuits) ................................... 257,600 17,323,600
Sanmina Corp.* (Provider of electronics contract manufacturing services) ......................... 255,200 19,363,300
Vitesse Semiconductor Corp.* (Manufacturer of digital integrated circuits) ....................... 245,100 16,528,931
-----------
53,215,831
-----------
Energy 0.9%
Oil/Gas Transmission
El Paso Energy Corp. (Marketer, trader and transporter of natural gas and natural gas products) .. 188,500 6,632,844
-----------
Transportation 1.4%
Air Freight
Expeditors International of Washington, Inc. (Air and ocean freight forwarding, customs clearance,
cargo insurance and logistical services) ....................................................... 380,000 10,355,000
- -----------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $474,383,163) 707,341,677
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $517,852,658) (a) 750,593,672
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
(a) The cost for federal income tax purposes was $517,867,404. At June 30,
1999, net unrealized appreciation for all securities based on tax cost was
$232,726,268. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $241,195,888 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$8,469,620.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Trustees at fair value amounted to $3,199,995 (0.41% of net assets). Their
values have been estimated by the Board of Trustees 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, 1999 aggregated $3,417,495. These securities may
also have certain restrictions as to resale.
(c) Restricted Securities are securities which have not been registered with
the Securities and Exchange Commission under the Securities Act of 1933.
The aggregate fair value of restricted securities at June 30, 1999,
amounted $3,199,995 which represents 0.41% of net assets. Information
concerning such restricted securities at June 30, 1999 is as follows:
Security Acquisition Date Cost ($)
-------- ---------------- --------
InTouch Group Inc. 2/14/1995 217,500
Norian Corp. "D" 4/12/1995 1,999,995
InterVentional Technologies, Inc. "G" 3/6/1995 1,200,000
(d) Issuer filed petition under Chapter 11 of the Federal Bankruptcy Code.
The accompanying notes are an integral part of the financial statements.
22 - Scudder Development Fund
<PAGE>
Financial Statements
Statements of Assets and Liabilities
<TABLE>
<CAPTION>
July 31, 1999
Assets (Note A) June 30, 1999
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investments, at market (identified cost $511,691,421
and $517,852,658, respectively) ...................... 713,085,801 750,593,672
Cash ................................................... 717 974
Receivable for investments sold ........................ 537,819 26,783,676
Receivable for Fund shares sold ........................ 7,270,530 745,156
Dividends and interest receivable ...................... 115,668 221,906
Foreign taxes recoverable .............................. 1,728 1,756
Other assets ........................................... 4,661 4,661
------------- -------------
Total assets ........................................... 721,016,924 778,351,801
Liabilities
- -----------------------------------------------------------------------------------------------------------
Payable for investments purchased ...................... 3,193,616 --
Payable for Fund shares redeemed ....................... 484,752 2,786,368
Accrued management fee ................................. 628,297 605,422
Other payables and accrued expenses .................... 631,683 451,133
------------- -------------
Total liabilities ...................................... 4,938,348 3,842,923
-----------------------------------------------------------------------------------------
Net assets, at market value $ 716,078,576 $ 774,508,878
-----------------------------------------------------------------------------------------
Net Assets
- -----------------------------------------------------------------------------------------------------------
Net assets consist of:
Net unrealized appreciation (depreciation) on:
Investments ......................................... 201,394,380 232,741,014
Foreign currency related transactions ............... (3,364) (3,336)
Accumulated net realized gain (loss) ................... 156,025,921 156,025,921
Paid-in capital ........................................ 358,661,639 385,745,279
-----------------------------------------------------------------------------------------
Net assets, at market value $ 716,078,576 $ 774,508,878
-----------------------------------------------------------------------------------------
Net Asset Value
- -----------------------------------------------------------------------------------------------------------
------------- -------------
Net Asset Value, offering and redemption price per share $ 40.26 $ 42.06
(outstanding shares of beneficial interest, $.01 ------------- -------------
par value, unlimited number of shares authorized) ... 17,787,902 18,415,573
</TABLE>
The accompanying notes are an integral part of the financial statements.
23 - Scudder Development Fund
<PAGE>
Statements of Operations
<TABLE>
<CAPTION>
For the One
Month Ended
July 31, 1999 Year Ended
Investment Income (Note A) June 30, 1999
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Income:
Dividends ............................................................. $ 108,889 $ 2,235,693
Interest .............................................................. 168,498 1,949,774
------------- -------------
277,387 4,185,467
------------- -------------
Expenses:
Management fee ........................................................ 630,937 7,200,092
Services to shareholders .............................................. 295,220 3,260,182
Custodian and accounting fees ......................................... 15,533 125,380
Trustees' fees and expenses ........................................... 4,619 36,689
Reports to shareholders ............................................... 14,539 206,381
Registration fees ..................................................... 4,185 69,725
Auditing .............................................................. 4,061 50,812
Legal ................................................................. 2,170 15,440
Other ................................................................. 4,984 70,636
------------- -------------
976,248 11,035,337
--------------------------------------------------------------------------------------------------------
Net investment income (loss) (698,861) (6,849,870
--------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- --------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments -- Unaffiliated issuers ................................... 159,681 152,389,719
Investments -- Affiliated issuers ..................................... -- 4,757,283
------------- -------------
159,681 157,147,002
------------- -------------
Net unrealized appreciation (depreciation) during the period on:
Investments ........................................................... (31,346,634) (70,624,900)
Foreign currency related transactions ................................. (28) 944
------------- -------------
(31,346,662) (70,623,956)
--------------------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions (31,186,981) 86,523,046
--------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations $ (31,885,842) $ 79,673,176
--------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
24 - Scudder Development Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the One
Month Ended Years Ended June 30,
July 31, 1999
Increase (Decrease) in Net Assets (Note A) 1999 1998
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income (loss) ...................... $ (698,861) $ (6,849,870) $ (8,621,837)
Net realized gain (loss) from investment
transactions ................................... 159,681 157,147,002 117,823,275
Net unrealized appreciation (depreciation) on
investment transactions during the period ...... (31,346,662) (70,623,956) 36,206,400
------------- --------------- -------------
Net increase (decrease) in net assets resulting
from operations ................................ (31,885,842) 79,673,176 145,407,838
------------- --------------- -------------
Distributions to shareholders from net realized
gains .......................................... -- (70,435,632) (78,146,533)
------------- --------------- -------------
Fund share transactions:
Proceeds from shares sold ......................... 65,351,061 1,005,318,406 623,810,270
Net asset value of shares issued to shareholders in
reinvestment of distributions .................. -- 67,536,828 74,979,135
Cost of shares redeemed ........................... (91,895,521) (1,152,988,975) (782,209,774)
------------- --------------- -------------
Net increase (decrease) in net assets from Fund
share transactions ............................. (26,544,460) (80,133,741) (83,420,369)
------------- --------------- -------------
Increase (decrease) in net assets ................. (58,430,302) (70,896,197) (16,159,064)
Net assets at beginning of period ................. 774,508,878 845,405,075 861,564,139
------------- --------------- -------------
Net assets at end of period ....................... $ 716,078,576 $ 774,508,878 $ 845,405,075
------------- --------------- -------------
Other Information
- -------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ......... 18,415,573 20,289,263 22,081,273
------------- --------------- -------------
Shares sold ....................................... 1,563,492 27,091,983 15,158,214
Shares issued to shareholders in reinvestment of
distributions .................................. -- 1,902,446 2,003,718
Shares redeemed ................................... (2,191,163) (30,868,119) (18,953,942)
------------- --------------- -------------
Net increase (decrease) in Fund shares ............ (627,671) (1,873,690) (1,792,010)
------------- --------------- -------------
Shares outstanding at end of period ............... 17,787,902 18,415,573 20,289,263
------------- --------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
25 - Scudder Development Fund
<PAGE>
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period (a) and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
For the One
Month Ended
July 31, 1999 Years Ended June 30,
(Note A) 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .............. $ 42.06 $ 41.67 $ 39.02 $ 45.56 $ 37.35 $ 27.58
-------------------------------------------------------------------------
Income from investment operations:
Net investment loss ............................... (.04) (.35) (.41) (.40) (.38) (.31)
Net realized and unrealized gain (loss) on
investment transactions ......................... (1.76) 4.49 6.94 (1.66) 12.79 12.20
-------------------------------------------------------------------------
Total from investment operations .................. (1.80) 4.14 6.53 (2.06) 12.41 11.89
-------------------------------------------------------------------------
Less distributions from net realized gains on
investment transactions ......................... -- (3.75) (3.88) (4.48) (4.20) (2.12)
-------------------------------------------------------------------------
Total distributions ............................... -- (3.75) (3.88) (4.48) (4.20) (2.12)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net asset value, end of period .................... $ 40.26 $ 42.06 $ 41.67 $ 39.02 $ 45.56 $ 37.35
-------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Return (%) .................................. (4.33)** 11.65 17.86 (4.93) 35.26 45.41
Ratios and Supplemental Data
Net assets, end of period ($ millions) ............ 716 775 845 862 1,040 727
Ratio of operating expenses to average daily net
assets (%) ...................................... 1.52* 1.51 1.41 1.36 1.24 1.32
Ratio of net investment income (loss) to average
daily net assets (%) ............................ (1.09)* (.94) (.99) (1.02) (.91) (1.01)
Portfolio turnover rate (%) ....................... 3.9* 96.5(b) 52.4 52.2 58.8 41.6
</TABLE>
(a) Per share amounts have been calculated using the weighted average shares
method.
(b) The change in the investment objective during the period resulted in a
higher portfolio turnover rate.
* Annualized
** Not annualized
26 - 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, (the "Trust") which is registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), as an open-end management investment
company organized as a Massachusetts business trust.
On June 7, 1999, the Board of Trustees of the Fund changed the fiscal year end
for financial reporting and federal income tax purposes to July 31 from June 30.
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. Investments are stated at value determined as of the close
of regular trading on the New York Stock Exchange. 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 Stock Market ("Nasdaq"), for which there have been sales, are valued at
the most recent sale price reported. If there are no such sales, the value is
the most recent bid quotation. Securities which are not quoted on Nasdaq but are
traded in another over-the-counter market are valued at the most recent sale
price, or if no sale occurred, at the calculated mean between the most recent
bid and asked quotations on such market. If there are no such bid and asked
quotations, the most recent bid quotation shall be used.
Portfolio debt securities purchased with an original maturity greater than sixty
days are valued by pricing agents approved by the officers of the Fund, whose
quotations reflect broker/dealer-supplied valuations and electronic data
processing techniques. If the pricing agents are unable to provide such
quotations, the most recent bid quotation supplied by a bona fide market maker
shall be used. Money market instruments purchased with an original 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 Board of Trustees.
Foreign Currency Translations. The books and records of the Fund are maintained
in U.S. dollars. Investment securities and other assets and liabilities
denominated in a foreign currency are translated into U.S. dollars at the
prevailing exchange rates at period end. Purchases and sales of investment
securities, income and expenses are translated into U.S. dollars at the
prevailing exchange rates on the respective dates of the transactions.
Net realized and unrealized gains and losses on foreign currency transactions
represent net gains and losses between trade and settlement dates on securities
transactions, the disposition of forward foreign currency exchange contracts and
foreign currencies, and the difference between the amount of net investment
income accrued and the U.S. dollar amount actually received. That portion of
both realized and unrealized gains and losses on investments that results from
fluctuations in foreign currency exchange rates is not separately disclosed but
is included with net realized and unrealized gains and losses on investment
securities.
27 - Scudder Development Fund
<PAGE>
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian or
sub-custodian bank, receives delivery of the underlying securities, the amount
of which at the time of purchase and each subsequent business day is required to
be maintained at such a level that the market value is equal to at least the
principal amount of the repurchase price plus accrued interest.
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code, as amended, which are applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Accordingly, the Fund paid no federal income taxes and no federal
income tax provision was required.
Distribution of Income and Gains. Distributions of net investment income, if
any, are made annually. 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 at least
annually.
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. 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.
Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. Interest income is recorded on the accrual
basis. Dividend income is recorded on the ex-dividend date. Certain dividends
from foreign securities may be recorded subsequent to the ex-dividend date as
soon as the Fund is informed of such dividends. Realized gains and losses from
investment transactions are recorded on an identified cost basis. All discounts
are accreted for both tax and financial reporting purposes.
B. Purchases and Sales of Securities
During the year ended June 30, 1999, purchases and sales of investment
securities (excluding short-term investments) aggregated $670,903,660 and
$860,891,244, respectively. For the one month period ended July 31, 1999,
purchases and sales of investment securities (excluding short-term investments)
aggregated $11,853,754 and $2,249,228, respectively.
C. Related Parties
Under the Management Agreement (the "Agreement") with Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the "Adviser"), the Fund agrees to pay to
the Adviser a fee equal to an annual rate of 1.00% 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. For the year ended June 30, 1999, the fee pursuant to these
agreements amounted to $7,200,092, which was equivalent to an annual effective
rate of .98% of the Fund's average daily net assets. For the period ended July
31, 1999, the fee pursuant to these
28 - Scudder Development Fund
<PAGE>
agreements amounted to $630,937, which was equivalent to an annual effective
rate of .98% of the Fund's average daily net assets.
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, 1999, the amount charged to the Fund by SSC aggregated
$1,214,414, of which $97,647 is unpaid at June 30, 1999. For the period ended
July 31, 1999, the amount charged to the Fund by SSC aggregated to $96,232, all
of which is unpaid at July 31, 1999.
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, 1999,
the amount charged to the Fund by STC aggregated $1,319,745, of which $103,029
is unpaid at June 30, 1999. For the period ended July 31, 1999, the amount
charged to the Fund by STC aggregated $102,903, all of which is unpaid at July
31, 1999.
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, 1999, the amount charged to the Fund by SFAC aggregated $96,545, of
which $8,163 is unpaid at June 30, 1999. For the period ended July 31, 1999, the
amount charged to the Fund by SFAC aggregated $7,758, all of which is unpaid at
July 31, 1999.
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. For the year ended June 30,
1999, the Special Servicing Agreement expense charged to the Fund amounted to
$236,610. For the period ended July 31, 1999, the Special Servicing Agreement
expense charged to the Fund amounted to $14,942.
The Fund pays each of its Trustees not affiliated with the Adviser an annual
retainer plus specified amounts for attended board and committee meetings. For
the year ended June 30, 1999, Trustees' fees and expenses aggregated $36,689.
For the period ended July 31, 1999, Trustees' fees and expenses aggregated
$4,619.
D. Transactions in Securities of Affiliated Issuers
An affiliated issuer is a company in which the Fund has ownership of at least 5%
of the voting securities. A summary of the Fund's transactions with companies
which are or were affiliates during the year ended June 30, 1999 and the period
ended July 31, 1999 are as follows:
<TABLE>
<CAPTION>
Purchases Sales Dividend Market
Affiliate Cost ($) Cost ($) Income ($) Value ($)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ICU Medical, Inc. -- 9,558,749 -- --
Alexion -- 4,717,763 -- --
------------- ------------- ------------- -------------
-- 14,276,512 -- --
============= ============= ============= =============
</TABLE>
29 - Scudder Development Fund
<PAGE>
E. Line of Credit
The Fund and several Scudder Funds ("The Participants") share in a $850 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 pro rata 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.
30 - Scudder Development Fund
<PAGE>
Report of Independent Accountants
To the Trustees of Scudder Securities Trust and the Shareholders of Scudder
Development Fund:
In our opinion, the accompanying statements of assets and liabilities, including
the portfolios of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial positions of Scudder Development Fund (the
"Fund") at July 31, 1999 and June 30, 1999, the results of its operations, the
changes in its net assets, and the financial highlights for each of the periods
indicated therein, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at July
31, 1999 and June 30, 1999 by correspondence with the custodian and brokers,
provide a reasonable basis for the opinion expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
September 3, 1999
31 - Scudder Development Fund
<PAGE>
Tax Information
The Fund paid distributions of $3.75 per share from net long-term capital gains
during its year ended June 30, 1999, of which 100% represents 20% rate gains.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$165,000,000 as capital gain dividends for its year ended June 30, 1999, of
which 100% represents 20% rate gains.
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 account, please call 1-800-SCUDDER.
32 - Scudder Development Fund
<PAGE>
Officers and Trustees
Lynn S. Birdsong*
President and Trustee
Paul Bancroft III
Trustee; Venture Capitalist and
Consultant
Sheryle J. Bolton
Trustee; Chief Executive Officer
and Director, Scientific Learning
Corporation
William T. Burgin
Trustee; General Partner,
Bessemer Venture Partners
Keith R. Fox
Trustee; Private Equity Investor
William H. Luers
Trustee; Chairman and President
of the U.N. Association of the
U.S.A.
Kathryn L. Quirk*
Trustee, Vice President and
Assistant Secretary
Joan E. Spero
Trustee; President, Doris Duke
Charitable Foundation
Thomas J. Devine
Honorary Trustee; Consultant
Wilson Nolen
Honorary Trustee; Consultant
Robert G. Stone, Jr.
Honorary Trustee; Chairman
Emeritus and Director, Kirby
Corporation
Edmund R. Swanberg*
Honorary Trustee
Peter Chin*
Vice President
J. Brooks Doherty*
Vice President
James M. Eysenbach*
Vice President
James E. Fenger*
Vice President
Philip S. Fortuna*
Vice President
Ann M. McCreary*
Vice President
Thaddeus Paluszek*
Vice President
Kurt R. Stalzer*
Vice President
Peter Taylor*
Vice President
John Millette*
Vice President and Secretary
Richard W. Desmond*
Assistant Secretary
John R. Hebble*
Treasurer
Caroline Pearson*
Assistant Secretary
*Scudder Kemper Investments, Inc.
33 - 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 --
Prime Reserve Shares*
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 GNMA Fund
Scudder Income Fund
Scudder Corporate Bond 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 Dividend & Growth Fund
Scudder Growth and Income Fund
Scudder Select 500 Fund
Scudder S&P 500 Index Fund
Scudder Real Estate Investment 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 Select 1000 Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Equity
- -------------
Worldwide
Scudder Global Fund
Scudder International Value Fund
Scudder International Growth and Income Fund
Scudder International Fund++
Scudder International Growth 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.
Industry Sector Funds
- ---------------------
Choice Series
Scudder Financial Services Fund
Scudder Health Care Fund
Scudder Technology Fund
Preferred Series
- ----------------
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small
Company Fund
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs
- -------------------
Traditional IRA
Roth IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Variable Annuities
Scudder Horizon Plan**+++ +++
Scudder Horizon Advantage**+++ +++ +++
Education Accounts
- ------------------
Education IRA
UGMA/UTMA
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe 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. Certain Scudder funds or classes thereof may
not be available for purchase or exchange. +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. ***Only the Scudder Shares of
the Fund are part of the Scudder Family of Funds. ++Only the International
Shares of the Fund are part of the Scudder Family of Funds. +++ +++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. +++
+++ +++A no-load variable annuity contract issued by Glenbrook Life and Annuity
Company and underwritten by Allstate Financial Services, Inc., sold by Scudder's
insurance agencies, 1-800-225-2470. #These funds, advised by Scudder Kemper
Investments, Inc., are traded on the New York Stock Exchange and, in some cases,
on various other stock exchanges.
34 - 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 money is Lets you purchase Scudder fund shares
electronically debited from your bank account monthly to electronically, avoiding potential mailing delays;
regularly purchase fund shares and "dollar cost average" money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from a previously designated bank
fewer when it's higher, which can reduce your average account.
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 -- www.scudder.com
1-800-343-2890
Personal Investment Organizer: 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 previously designated.
Distributions Direct
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-SCUDDER
Please address all written correspondence to: The Scudder Funds, P.O. Box 2291, Boston, Massachusetts 02107-2291
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
35 - Scudder Development Fund
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc., is one of the largest and most experienced
investment management oganizations worldwide, managing more than $280 billion in
assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 80
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Financial Services Group. As a result, Zurich's subsidiary, Zurich
Kemper Investments, Inc., with 50 years of mutual fund and investment management
experience, was combined with Scudder. Headquartered in New York, Scudder Kemper
Investments offers a full range of investment counsel and asset management
capabilities, based on a combination of proprietary research and disciplined,
long-term investment strategies. With its global investment resources and
perspective, the firm seeks opportunities in markets throughout the world to
meet the needs of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Financial Services Group. The Zurich Financial Services Group is
an internationally recognized leader in financial services, including
property/casualty and life insurance, reinsurance, and asset management.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
SCUDDER
