UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM N-CSR Investment Company Act file number 811-5357 SCUDDER BLUE CHIP FUND -------------------------------- (Exact Name of Registrant as Specified in Charter) 222 South Riverside Plaza, Chicago, IL 60606 -------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, including Area Code: (617) 295-2663 -------------- Salvatore Schiavone Two International Place Boston, Massachusetts 02110 --------------------------------------- (Name and Address of Agent for Service) Date of fiscal year end: 10/31 Date of reporting period: 10/31/03ITEM 1. REPORT TO STOCKHOLDERS
[Scudder Investments logo]
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Annual Report to Shareholders | ||
October 31, 2003 |
Contents |
<Click Here> Performance Summary <Click Here> Portfolio Management Review <Click Here> Portfolio Summary <Click Here> Investment Portfolio <Click Here> Financial Statements <Click Here> Financial Highlights <Click Here> Notes to Financial Statements <Click Here> Report of Independent Auditors <Click Here> Tax Information <Click Here> Trustees and Officers <Click Here> Investment Products <Click Here> Account Management Resources |
Scudder Investments is part of Deutsche Asset Management, which is the marketing name in the US for the asset management activities of Deutsche Bank AG, Deutsche Investment Management Americas Inc., Deutsche Asset Management Inc., Deutsche Asset Management Investment Services Ltd., Deutsche Bank Trust Company Americas and Scudder Trust Company.
This report must be preceded or accompanied by a prospectus. To obtain a prospectus for any of our funds, refer to the Account Management Resources information provided in the back of this booklet. The prospectus contains more complete information, including a description of the risks of investing in the fund, management fees and expenses. Please read it carefully before you invest or send money.
Fund shares are not FDIC-insured and are not deposits or other obligations of, or guaranteed by, any bank. Fund shares involve investment risk, including possible loss of principal.
Average Annual Total Returns (Unadjusted for Sales Charge) | ||||
Scudder Blue Chip Fund | 1-Year | 3-Year | 5-Year | 10-Year |
Class A | 17.96% | -10.26% | .07% | 7.45% |
Class B | 17.06% | -10.98% | -.75% | 6.57%(a) |
Class C | 17.05% | -10.94% | -.69% | 6.66%(a) |
Russell 1000 Index+ | 22.32% | -8.24% | 1.14% | 10.39% |
S&P 500 Index++ | 20.80% | -8.34% | .53% | 10.43% |
Scudder Blue Chip Fund | 1-Year | 3-Year | 5-Year | Life of Class* |
Class I** | 18.49% | -9.86% | .56% | 7.33% |
Russell 1000 Index+ | 22.32% | -8.24% | 1.14% | 8.91% |
S&P 500 Index++ | 20.80% | -8.34% | .53% | 8.92% |
Sources: Lipper Inc. and Deutsche Investment Management Americas Inc.
Net Asset Value | ||||
Class A | Class B | Class C | Class I | |
Net Asset Value: 10/31/03 | $ 15.24 | $ 14.55 | $ 14.69 | $ 15.70 |
10/31/02 | $ 12.92 | $ 12.43 | $ 12.55 | $ 13.25 |
Class A Lipper Rankings - Large-Cap Core Funds Category | ||||
Period | Rank | Number of Funds Tracked | Percentile Ranking | |
1-Year | 486 | of | 1065 | 46 |
3-Year | 416 | of | 831 | 50 |
5-Year | 265 | of | 596 | 45 |
10-Year | 144 | of | 208 | 69 |
Rankings are historical and do not guarantee future results. Rankings are based on total return unadjusted for sales charges with distributions reinvested. If sales charges had been included, rankings might have been less favorable.
Source: Lipper Inc.
Growth of an Assumed $10,000 Investment(b) (Adjusted for Sales Charge) |
[] Scudder Blue Chip Fund - Class A [] Russell 1000 Index+[] S&P 500 Index++ |
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Yearly periods ended October 31 |
Comparative Results (Adjusted for Sales Charge) | ||||||
Scudder Blue Chip Fund | 1-Year | 3-Year | 5-Year | 10-Year | Life of Class* | |
Class A(c) | Growth of $10,000 | $11,117 | $6,813 | $9,459 | $19,340 | - |
Average annual total return | 11.17% | -12.01% | -1.11% | 6.82% | - | |
Class B(c) | Growth of $10,000 | $11,406 | $6,918 | $9,542 | $18,893(a) | - |
Average annual total return | 14.06% | -11.56% | -.93% | 6.57%(a) | - | |
Class C(c) | Growth of $10,000 | $11,588 | $6,994 | $9,561 | $18,872(a) | - |
Average annual total return | 15.88% | -11.24% | -.89% | 6.56%(a) | - | |
Class I** | Growth of $10,000 | $11,849 | $7,325 | $10,284 | - | $17,533 |
Average annual total return | 18.49% | -9.86% | .56% | - | 7.33% | |
Russell 1000 Index+ | Growth of $10,000 | $12,232 | $7,726 | $10,581 | $26,884 | $19,651 |
Average annual total return | 22.32% | -8.24% | 1.14% | 10.39% | 8.91% | |
S&P 500 Index++ | Growth of $10,000 | $12,080 | $7,701 | $10,268 | $26,968 | $19,671 |
Average annual total return | 20.80% | -8.34% | .53% | 10.43% | 8.92% |
The growth of $10,000 is cumulative.
* Class I commenced operations on November 22, 1995. Index returns begin November 30, 1995.
** Class I shares are not subject to sales charges.
a Returns shown for Class B and C shares for the periods prior to their inception date on May 31, 1994 are derived from the historical performance of Class A shares of the Scudder Blue Chip Fund during such periods and have been adjusted to reflect the higher gross total annual operating expenses of each specific class. Any difference in expenses will affect performance.
b The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 5.75%. This results in a net initial investment of $9,425.
c Returns shown for Class A, B and C shares have been adjusted to reflect the current applicable sales charges of each specific class. Returns for Class A reflect the current maximum initial sales charge of 5.75%. Class B share performance is adjusted for the applicable contingent deferred sales charge ("CDSC"), which is 4% within the first year after purchase, declining to 0% after six years. Returns for Class C reflect an initial sales charge of 1%. Redemptions on Class C shares within one year of purchase may be subject to a CDSC of 1%. The difference in expenses will affect performance.
+ The Russell 1000 Index is an unmanaged price-only index of the 1,000 largest capitalization companies that are domiciled in the United States and whose common stocks are traded there. Beginning with the next report, the Russell 1000 Index, which better reflects the Portfolio's investment style, will be shown instead of the S&P 500 Index.
++ The Standard & Poor's (S&P) 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.
Index returns assume reinvestment of dividends and, unlike Fund returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
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. Performance figures do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns and rankings may differ by share class.
Investments in funds involve risk. Some funds have more risk than others. These include funds that allow exposure to or otherwise concentrate investments in certain sectors, geographic regions, security types, market capitalization or foreign securities (e.g., political or economic instability, which can be accentuated in emerging market countries). Please read this fund's prospectus for specific details regarding its investments and risk profile.
Please call (800) 621-1048 for the Fund's most up-to-date performance. On the Web, go to scudder.com.
Scudder Blue Chip Fund: A Team Approach to Investing
Deutsche Investment Management Americas Inc. ("DeIM" or the "Advisor"), which is part of Deutsche Asset Management, is the investment advisor for Scudder Blue Chip Fund. DeIM and its predecessors have more than 80 years of experience managing mutual funds and DeIM provides a full range of investment advisory services to institutional and retail clients. DeIM is also responsible for selecting brokers and dealers and for negotiating brokerage commissions and dealer charges.
Deutsche Asset Management is a global asset management organization that offers a wide range of investing expertise and resources. This well-resourced global investment platform brings together a wide variety of experience and investment insight across industries, regions, asset classes and investing styles.
DeIM is an indirect, wholly owned subsidiary of Deutsche Bank AG. Deutsche Bank AG is a major global banking institution that is engaged in a wide range of financial services, including investment management, mutual funds, retail, private and commercial banking, investment banking and insurance.
Portfolio Management Team
Janet Campagna
Managing Director of Deutsche Asset Management and Portfolio Manager of the fund.
• Joined Deutsche Asset Management in 1999 and the fund in 2003.
• Head of global and tactical asset allocation.
• Investment strategist and manager of the asset allocation strategies group for Barclays Global Investors from 1994 to 1999.
• Over 15 years of investment industry experience.
• Master's degree in Social Science from California Institute of Technology.
• Ph.D in Political Science from University of California at Irvine.
Robert Wang
Managing Director of Deutsche Asset Management and Portfolio Manager of the fund.
• Joined Deutsche Asset Management in 1995 as portfolio manager for asset allocation after 13 years of experience of trading fixed income and derivative securities at J.P. Morgan.
• Senior portfolio manager for Multi Asset Class Quantitative Strategies: New York.
• Joined the fund in 2003.
In the following interview, Portfolio Managers Janet Campagna and Robert Wang discuss the market environment for blue chip stocks and the fund's strategy for its most recent fiscal year ended October 31, 2003.
Q: Can you discuss the general market environment during the period?
A: During the past 12 months, major events that affected the economy and markets included the buildup to war in Iraq and its aftermath, the falling US dollar, and the Federal Reserve's (the Fed) strong monetary program. Through its policies, the Fed has been attempting to restart the US economy and to stave off inflation as well as deflation. Stocks enjoyed strong performance during most of the period. In particular, investors bid up technology stocks in a fashion not seen for several years. Sometimes the purchases were based on sound fundamentals, though at other times it seemed investors were simply bargain hunting, buying up tech stocks only because their prices were beaten down. Overall, we believe stocks - including blue chip stocks - were a "place to be" during the period.
Q: Will you describe the portfolio team's investment philosophy?
A: We use a quantitatively based, disciplined stock selection methodology, incorporating a large number of data inputs. Unlike managers of other quantitatively based funds, we also employ the experienced judgment of everyone on the portfolio team. Using our methodology, we believe we can evaluate a much larger pool of stocks in a more objective manner compared with similar funds. We also tend to hold more stocks in our portfolio than traditional managers do. We believe that it's difficult to make objective judgments about stocks based on type of industry, market capitalization and investment style, so we don't select stocks using those factors. By investing in a large number of stocks, but with smaller positions relative to the benchmark based on various fundamental characteristics, we believe that we can achieve significant outperformance over time relative to the benchmark.
Q: How did Scudder Blue Chip Fund perform over its most recent fiscal year?
A: The fund (Class A shares, unadjusted for sales charge) posted a 17.96% total return for the 12 months ended October 31, 2003.1 (Please see pages 3 through 5 for performance of other share classes.) This return was lower than the 22.32% total return of the fund's benchmark, the Russell 1000 Index, which is not available for investment.2 The fund outperformed the 17.78% average return of its peers in the Lipper Large-Cap Core Funds category.3 As of October 31, 2003, the fund's class A shares ranked 486, 416, 265 and 144 out of 1065, 831, 596 and 208 in the Large-Cap Core Funds category for the 1-, 3-, 5- and 10-year periods respectively.4
1 Returns reflect the reinvestment of all distributions.2 The Russell 1000 Index is an unmanaged index that measures the performance of the 1,000 largest companies in the Russell 3000 Index, which measures the performance of the 3,000 largest US companies based on total market capitalization. The Russell 1000 Index represents approximately 92% of the total market capitalization of the Russell 3000 Index.
3 The Lipper Large-Cap Core Funds category is a group of funds that may primarily invest in large companies of both growth and value orientations. It is not possible to invest directly in the Lipper category.
4 Source: Lipper Inc. Rankings are historical and do not guarantee future results. Lipper rankings are based on the fund's total return unadjusted for sales charges with distributions reinvested. If sales charges had been included, rankings might have been less favorable.
Q: What factors contributed to the fund's performance?
A: As for the role of the managers, all of our contribution to return comes from stock selection. The fund remains neutral to the various industry weightings within its benchmark. The largest contributor to fund returns over the period was the commercial services and supplies sector, where the fund exhibited excellent stock selection. Within commercial services and supplies, Rent-A-Center, Inc., a US operator in the rent-to-own industry, was the largest contributor to performance. Based on its attractive value relative to its peers, we took a significant overweight position in this stock. (As one means of managing the fund's risk levels, however, we seek to be at all times no more than 2% overweight in any security relative to the benchmark.) Over the past 12 months, Rent-A-Center beat analysts' earnings forecasts consistently. We sold our position when the most recent earnings declaration disappointed, after which the stock's run-up ended.
In a sharp turnaround from the fall of 2002, technology hardware and equipment issues also boosted the fund's performance. There, we saw results that we like to see from our investment model - namely, that the sector's outperformance compared with the benchmark was spread across several companies. Semiconductor manufacturer Intel Corporation - which enjoyed a successful 12 months - was the fund's number one performing stock overall and the top performer within this sector during the period.
The largest detractor from performance in terms of sectors was health care equipment and services. Losses within this sector were mainly driven by one holding, Tenet Healthcare, a health care services company. Amid allegations of unnecessary surgical procedures and fraudulent billings, as well as the departure of its CEO and a lawsuit filed by the US Department of Justice, the company's stock plummeted. We sold Tenet as this news came to light, but not before sustaining some losses.
Q: What caused the fund's underperformance compared with its benchmark?
A: Overall, the fund outperformed its benchmark during much of the past 12-month period. But during November 2002, the fund's underperformance was especially significant. As we mentioned above, in certain months during the period - including November and July - investors were mainly snapping up heavily discounted stocks on strong economic or political news and ignoring the fundamental characteristics of individual companies. These periods make it difficult for the factors within our investment model - including various signals that we use to determine positive or negative price momentum in stocks - to discriminate successfully and identify worthwhile stocks to own. And these are the periods in which the fund underperformed its benchmark. However, we are encouraged by the market's return to more fundamentally based behavior from August through the end of the period. We are hopeful that in the coming months investors will continue to judge individual companies on their merits and earning potential.
How the fund is managed | |||||||
Investment Discipline The fund's portfolio managers rely on a proprietary, quantitative screening process to identify attractively valued stocks with above-average capital appreciation potential from the fund's potential investment universe of approximately 1,000 blue chip companies. Blue chip companies are large, well-known companies that typically have an established earnings and dividend history, easy access to credit, solid positions in their industry and strong management. In employing our processes, four primary dimensions are considered: valuation, trends in earnings, price momentum and risk. Valuation helps the fund's managers measure how expensive or inexpensive a security is relative to the overall small-cap universe. Earnings trends suggest whether the company's fundamentals are stable, improving or deteriorating. Price momentum provides an indicator of how the market is responding to these fundamentals. Risk measures help management understand the degree of financial uncertainty for a given company. Each stock is then ranked based on its relative attractiveness across all dimensions. Portfolio Construction Management builds a diversified portfolio of attractively rated companies, seeking stocks that are undervalued relative to their industry peers but whose earnings growth prospects are greater than those of their industry peers. To manage individual security risk and provide trading flexibility, approximately 120 blue-chip stocks are held in the portfolio. On an ongoing basis, a portfolio optimization program is used to determine which securities should be replaced due to diminishing return prospects, while managing the overall risk of the portfolio vs. the benchmark index. |
Q: What economic and market trends are you detecting at present?
A: We believe that US economic recovery has begun. Third-quarter economic statistics - as well as predictions for the fourth quarter - appear to reflect an improvement. We believe Fed policy has been largely responsible for this. At the same time, we have yet to see dramatic labor hiring or significant increases in corporate spending, and we await signs of a stronger economic rebound. In terms of the financial markets, events over the past 12 months - especially in late 2002 - spurred significant market volatility. Recently, volatility has subsided within the large-cap sector. Going forward, we will continue to employ a disciplined investment approach that seeks to invest in companies that exhibit strong growth and value characteristics relative to their appropriate peer groups. Our portfolio team will continue to seek attractive value by paying particular attention to the quality of the earnings of the companies in which we invest. We believe that Scudder Blue Chip Fund remains an attractive vehicle for investors seeking long-term capital appreciation.
The views expressed in this report reflect those of the portfolio managers only through the end of the period of the report as stated on the cover. The managers' views are subject to change at any time based on market and other conditions and should not be construed as a recommendation.
Asset Allocation | 10/31/03 | 10/31/02 |
Common Stocks | 98% | 98% |
Cash Equivalents | 2% | 2% |
100% | 100% |
Sector Diversification (Excludes Cash Equivalents) | 10/31/03 | 10/31/02 |
Financials | 20% | 19% |
Consumer Discretionary | 16% | 14% |
Information Technology | 16% | 15% |
Health Care | 14% | 15% |
Industrials | 11% | 10% |
Consumer Staples | 7% | 10% |
Energy | 6% | 6% |
Telecommunication Services | 5% | 6% |
Materials | 3% | 2% |
Other | 2% | 3% |
100% | 100% |
Asset allocation and sector diversification are subject to change.
Ten Largest Equity Holdings at October 31, 2003 (21.2% of Portfolio) | |
1. Citigroup, Inc. Provider of diversified financial services | 3.4% |
2. Intel Corp. Designer, manufacturer and seller of computer components and related products | 2.9% |
3. International Business Machines Corp. Manufacturer of computers and provider of information processing services | 2.3% |
4. PepsiCo, Inc. Provider of soft drinks, snack foods and food services | 2.2% |
5. 3M Co. Manufacturer and provider of various services and equipment | 2.1% |
6. Anheuser-Busch Companies, Inc. Producer and operator of brand name beers, cans, and barley seed processing plants | 1.9% |
7. Merck & Co., Inc. Producer of pharmaceuticals | 1.8% |
8. Eaton Corp. Manufacturer of auto and truck parts | 1.6% |
9. General Electric Co. Industrial conglomerate | 1.5% |
10. ExxonMobil Corp. Explorer and producer of oil and gas | 1.5% |
Portfolio holdings are subject to change.
For more complete details about the fund's investment portfolio, see page 14. A quarterly Fact Sheet and Portfolio Holdings are available upon request.
| Value ($) | |
Common Stocks 97.8% | ||
Consumer Discretionary 16.0% | ||
Auto Components 1.7% | ||
American Axle & Manufacturing Holdings, Inc.* | 159,800 | 5,529,080 |
Autoliv, Inc. | 50,400 | 1,669,248 |
Delphi Corp. | 291,400 | 2,593,460 |
9,791,788 | ||
Hotels, Restaurants & Leisure 1.3% | ||
Brinker International, Inc.* | 45,800 | 1,457,814 |
Starbucks Corp.* | 181,200 | 5,725,920 |
7,183,734 | ||
Household Durables 0.6% | ||
NVR, Inc.* | 1,200 | 587,280 |
Ryland Group, Inc. | 20,100 | 1,786,890 |
Whirlpool Corp. | 15,400 | 1,085,238 |
3,459,408 | ||
Internet & Catalog Retail 0.2% | ||
eBay, Inc.* | 23,200 | 1,297,808 |
Leisure Equipment & Products 1.2% | ||
Eastman Kodak Co. | 234,200 | 5,721,506 |
Marvel Enterprises, Inc.* | 48,600 | 1,431,270 |
7,152,776 | ||
Media 5.6% | ||
Cablevision Systems New York Group "A"* | 67,900 | 1,371,580 |
Clear Channel Communications, Inc. | 64,000 | 2,612,480 |
Cox Communications, Inc. "A"* | 115,600 | 3,938,492 |
General Motors Corp. "H"* | 403,700 | 6,632,791 |
Getty Images, Inc.* | 52,300 | 2,337,810 |
Liberty Media Corp. "A"* | 215,500 | 2,174,395 |
McGraw-Hill, Inc. | 43,700 | 2,925,715 |
Omnicom Group, Inc. | 93,100 | 7,429,380 |
Time Warner, Inc.* | 196,000 | 2,996,840 |
32,419,483 | ||
Specialty Retail 4.0% | ||
Abercrombie & Fitch Co. "A"* | 59,000 | 1,681,500 |
Blockbuster, Inc. "A" | 116,900 | 2,252,663 |
Chico's FAS, Inc.* | 116,000 | 4,354,640 |
Claire's Stores, Inc. | 103,600 | 4,009,320 |
Gap, Inc. | 223,100 | 4,256,748 |
Lowe's Companies, Inc. | 29,200 | 1,720,756 |
PETsMART, Inc. | 72,300 | 1,851,603 |
RadioShack Corp. | 35,800 | 1,073,642 |
Staples, Inc.* | 55,400 | 1,485,828 |
22,686,700 | ||
Textiles, Apparel & Luxury Goods 1.4% | ||
Coach, Inc.* | 129,400 | 4,589,818 |
Jones Apparel Group, Inc. | 11,900 | 410,550 |
Liz Claiborne, Inc. | 44,200 | 1,630,538 |
NIKE, Inc. "B" | 21,500 | 1,373,850 |
8,004,756 | ||
Consumer Staples 7.1% | ||
Beverages 4.1% | ||
Anheuser-Busch Companies, Inc. | 217,300 | 10,704,198 |
PepsiCo, Inc. | 265,700 | 12,705,774 |
23,409,972 | ||
Food & Drug Retailing 1.5% | ||
Safeway, Inc.* | 21,200 | 447,320 |
Sysco Corp. | 169,800 | 5,715,468 |
Wal-Mart Stores, Inc. | 34,800 | 2,051,460 |
Winn-Dixie Stores, Inc. | 13,100 | 105,979 |
8,320,227 | ||
Household Products 0.8% | ||
Dial Corp. | 5,300 | 127,200 |
Procter & Gamble Co. | 45,200 | 4,442,708 |
4,569,908 | ||
Personal Products 0.7% | ||
Gillette Co. | 132,400 | 4,223,560 |
Energy 6.0% | ||
Oil & Gas | ||
Apache Corp. | 41,600 | 2,900,352 |
Chesapeake Energy Corp. | 159,600 | 1,904,028 |
ChevronTexaco Corp. | 66,500 | 4,940,950 |
ConocoPhillips | 37,500 | 2,143,125 |
ExxonMobil Corp. | 240,286 | 8,789,662 |
Occidental Petroleum Corp. | 234,300 | 8,261,418 |
Pogo Producing Co. | 136,700 | 5,715,427 |
34,654,962 | ||
Financials 19.2% | ||
Banks 7.2% | ||
Bank of America Corp. | 112,400 | 8,512,052 |
Golden West Financial Corp. | 76,200 | 7,652,766 |
National City Corp. | 165,800 | 5,415,028 |
Sovereign Bancorp, Inc. | 800 | 16,648 |
US Bancorp. | 68,800 | 1,872,736 |
Wachovia Corp. | 170,700 | 7,830,009 |
Washington Mutual, Inc. | 151,100 | 6,610,625 |
Wells Fargo & Co. | 62,500 | 3,520,000 |
41,429,864 | ||
Diversified Financials 7.9% | ||
Citigroup, Inc. | 410,766 | 19,470,308 |
Countrywide Financial Corp. | 78,100 | 8,209,872 |
Fannie Mae | 28,000 | 2,007,320 |
Goldman Sachs Group, Inc. | 51,100 | 4,798,290 |
J.P. Morgan Chase & Co. | 219,000 | 7,862,100 |
Lehman Brothers Holdings, Inc. | 13,400 | 964,800 |
Moody's Corp. | 16,500 | 954,195 |
SLM Corp. | 18,600 | 728,376 |
44,995,261 | ||
Insurance 3.3% | ||
American International Group, Inc. | 2,200 | 133,826 |
Fidelity National Financial, Inc. | 120,400 | 3,722,768 |
First American Financial Co. | 22,500 | 644,625 |
Progressive Corp. | 54,100 | 3,992,580 |
Prudential Financial, Inc. | 74,000 | 2,859,360 |
W.R. Berkley Corp. | 221,175 | 7,584,091 |
18,937,250 | ||
Real Estate 0.8% | ||
Apartment Investment & Management Co. (REIT) | 26,300 | 1,075,670 |
Boston Properties, Inc. (REIT) | 8,000 | 354,000 |
Equity Office Properties Trust (REIT) | 12,200 | 341,722 |
Equity Residential (REIT) | 52,400 | 1,532,700 |
Hospitality Properties Trust (REIT) | 20,100 | 737,067 |
Liberty Property Trust (REIT) | 16,800 | 611,184 |
4,652,343 | ||
Health Care 13.8% | ||
Biotechnology 4.0% | ||
Amgen, Inc.* | 103,100 | 6,367,456 |
Charles River Laboratories International, Inc.* | 124,300 | 4,007,432 |
Genentech, Inc.* | 64,200 | 5,262,474 |
Gilead Sciences, Inc.* | 85,900 | 4,688,422 |
IDEXX Laboratories, Inc.* | 56,000 | 2,648,800 |
22,974,584 | ||
Health Care Equipment & Supplies 1.2% | ||
Guidant Corp. | 135,700 | 6,922,057 |
Health Care Providers & Services 3.3% | ||
First Health Group Corp.* | 109,900 | 2,682,659 |
Mid Atlantic Medical Services, Inc.* | 64,100 | 3,743,440 |
PacifiCare Health Systems, Inc.* | 66,700 | 3,968,650 |
UnitedHealth Group, Inc. | 171,800 | 8,741,184 |
19,135,933 | ||
Pharmaceuticals 5.3% | ||
Abbott Laboratories | 131,300 | 5,596,006 |
Endo Pharmaceuticals Holdings, Inc.* | 173,900 | 2,845,004 |
Johnson & Johnson | 24,650 | 1,240,634 |
Merck & Co., Inc. | 234,600 | 10,381,050 |
Pfizer, Inc. | 222,500 | 7,031,000 |
Pharmaceutical Resources, Inc.* | 12,500 | 903,500 |
SICOR, Inc.* | 42,900 | 1,149,720 |
Watson Pharmaceuticals, Inc.* | 35,300 | 1,386,231 |
30,533,145 | ||
Industrials 10.2% | ||
Aerospace & Defense 1.7% | ||
Goodrich Corp. | 64,900 | 1,792,538 |
Honeywell International, Inc. | 102,600 | 3,140,586 |
Lockheed Martin Corp. | 97,900 | 4,538,644 |
9,471,768 | ||
Air Freight & Logistics 1.3% | ||
J.B. Hunt Transport Services, Inc.* | 94,900 | 2,408,562 |
Ryder System, Inc. | 162,200 | 4,866,000 |
United Parcel Service, Inc. "B" | 6,100 | 442,372 |
7,716,934 | ||
Airlines 0.4% | ||
Southwest Airlines Co. | 131,100 | 2,543,340 |
Building Products 0.1% | ||
Masco Corp. | 26,100 | 717,750 |
Commercial Services & Supplies 0.1% | ||
Deluxe Corp. | 9,100 | 367,367 |
Industrial Conglomerates 3.8% | ||
3M Co. | 150,400 | 11,862,048 |
Carlisle Companies, Inc. | 21,300 | 1,221,555 |
General Electric Co. | 306,300 | 8,885,763 |
21,969,366 | ||
Machinery 1.8% | ||
Caterpillar, Inc. | 16,500 | 1,209,120 |
Eaton Corp. | 89,700 | 8,991,528 |
10,200,648 | ||
Road & Rail 1.0% | ||
Swift Transportation Co., Inc.* | 184,100 | 4,129,363 |
Werner Enterprises, Inc. | 92,600 | 1,670,504 |
5,799,867 | ||
Information Technology 15.9% | ||
Communications Equipment 1.4% | ||
Cisco Systems, Inc.* | 208,300 | 4,370,134 |
NetScreen Technologies, Inc.* | 84,200 | 2,241,404 |
QUALCOMM, Inc. | 33,200 | 1,577,000 |
8,188,538 | ||
Computers & Peripherals 5.0% | ||
Dell, Inc.* | 22,800 | 823,536 |
EMC Corp.* | 344,400 | 4,766,496 |
Hewlett-Packard Co. | 224,500 | 5,008,595 |
International Business Machines Corp. | 145,100 | 12,983,548 |
SanDisk Corp.* | 18,100 | 1,458,860 |
Storage Technology Corp.* | 158,300 | 3,815,030 |
28,856,065 | ||
Internet Software & Services 0.4% | ||
Yahoo!, Inc.* | 51,000 | 2,228,700 |
IT Consulting & Services 0.4% | ||
Acxiom Corp.* | 119,900 | 1,906,410 |
Convergys Corp.* | 28,600 | 459,316 |
2,365,726 | ||
Office Electronics 0.5% | ||
Xerox Corp.* | 259,900 | 2,728,950 |
Semiconductor Equipment & Products 5.1% | ||
Amkor Technology, Inc.* | 138,200 | 2,605,070 |
Cree, Inc.* | 140,900 | 2,502,384 |
Intel Corp. | 510,000 | 16,855,500 |
International Rectifier Corp.* | 64,000 | 3,054,720 |
MEMC Electronic Materials, Inc.* | 186,400 | 2,087,680 |
Xilinx, Inc.* | 68,500 | 2,171,450 |
29,276,804 | ||
Software 3.1% | ||
BMC Software, Inc.* | 263,300 | 4,576,154 |
Intuit, Inc.* | 32,700 | 1,634,346 |
Microsoft Corp. | 318,500 | 8,328,775 |
Oracle Corp.* | 243,600 | 2,913,456 |
17,452,731 | ||
Materials 2.9% | ||
Chemicals 1.2% | ||
Cabot Corp. | 14,400 | 401,760 |
Praxair, Inc. | 39,700 | 2,762,326 |
Sigma-Aldrich Corp. | 56,900 | 2,984,405 |
The Scotts Co. "A"* | 16,500 | 952,875 |
7,101,366 | ||
Containers & Packaging 0.6% | ||
Ball Corp. | 41,300 | 2,321,060 |
Owens-Illinois, Inc.* | 71,200 | 875,760 |
3,196,820 | ||
Metals & Mining 1.1% | ||
Alcoa, Inc. | 200,800 | 6,339,256 |
Telecommunication Services 4.5% | ||
Diversified Telecommunication Services 3.5% | ||
BellSouth Corp. | 219,200 | 5,767,152 |
SBC Communications, Inc. | 66,200 | 1,587,476 |
Sprint Corp. (FON Group) | 311,800 | 4,988,800 |
Verizon Communications, Inc. | 220,900 | 7,422,240 |
19,765,668 | ||
Wireless Telecommunication Services 1.0% | ||
AT&T Wireless Services, Inc.* | 574,000 | 4,161,500 |
Crown Castle International Corp.* | 71,200 | 901,392 |
Sprint Corp. (PCS Group)* | 201,400 | 876,090 |
5,938,982 | ||
Utilities 2.2% | ||
Electric Utilities | ||
Entergy Corp. | 71,800 | 3,870,020 |
Exelon Corp. | 135,300 | 8,584,785 |
12,454,805 | ||
Total Common Stocks (Cost $486,041,060) | 561,436,970 | |
Principal Amount ($) | Value ($) | |
US Government & Agencies 0.1% | ||
US Treasury Bill, 0.92%**, 1/29/2004 (c) (Cost $823,103) | 825,000 | 823,100 |
| Value ($) | |
Cash Equivalents 2.1% | ||
Scudder Cash Management QP Trust, 1.07% (b) (Cost $11,996,381) | 11,996,381 | 11,996,381 |
Total Investment Portfolio - 100.0% (Cost $498,860,544) (a) | 574,256,451 |
* Non-income producing security.
** Annualized yield at time of purchase; not a coupon rate.
(a) The cost for federal income tax purposes was $502,508,180. At October 31, 2003, net unrealized appreciation for all securities based on tax cost was $71,748,271. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $83,547,867 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $11,799,596.
(b) Scudder Cash Management QP Trust is also managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
(c) At October 31, 2003, this security has been pledged to cover, in whole or part, initial margin requirements for open futures contracts.
At October 31, 2003, open futures contracts purchased were as follows:
Futures | Expiration | Contracts | Aggregate Face Value ($) | Value ($) | Unrealized Appreciation ($) |
S&P 500 Index | 12/18/2003 | 48 | 12,301,126 | 12,594,000 | 292,874 |
The accompanying notes are an integral part of the financial statements.
Statement of Assets and Liabilities as of October 31, 2003 | |
Assets | |
Investments: Investments in securities, at value (cost $486,864,163) | $ 562,260,070 |
Investment in Scudder Cash Management QP Trust (cost $11,996,381) | 11,996,381 |
Total investments in securities, at value (cost $498,860,544) | 574,256,451 |
Cash | 10,000 |
Dividends receivable | 734,685 |
Receivable for Fund shares sold | 303,932 |
Receivable for daily variation margin on open futures contracts | 12,369 |
Total assets | 575,317,437 |
Liabilities | |
Payable for Fund shares redeemed | 777,619 |
Accrued management fee | 263,168 |
Other accrued expenses and payables | 432,936 |
Total liabilities | 1,473,723 |
Net assets, at value | $ 573,843,714 |
Net Assets | |
Net assets consist of: Undistributed net investment income (loss) | 32,621 |
Net unrealized appreciation (depreciation) on: Investments | 75,395,907 |
Futures | 292,874 |
Accumulated net realized gain (loss) | (182,587,002) |
Paid-in capital | 680,709,314 |
Net assets, at value | $ 573,843,714 |
The accompanying notes are an integral part of the financial statements.
Statement of Assets and Liabilities as of October 31, 2003 (continued) | |
Net Asset Value | |
Class A Net Asset Value and redemption price per share ($348,659,538 / 22,870,926 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 15.24 |
Maximum offering price per share (100 / 94.25 of $15.24) | $ 16.17 |
Class B Net Asset Value, offering and redemption price (subject to contingent deferred sales charge) per share ($177,677,734 / 12,212,068 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 14.55 |
Class C Net Asset Value, offering and redemption price (subject to contingent deferred sales charge) per share ($47,325,475 / 3,220,698 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 14.69 |
Maximum offering price per share (100 / 99.00 of $14.69) | $ 14.84 |
Class I Net Asset Value, offering and redemption price per share ($180,967 / 11,524 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 15.70 |
The accompanying notes are an integral part of the financial statements.
Statement of Operations for the year ended October 31, 2003 | |
Investment Income | |
Income: Dividends (net of foreign taxes withheld of $382) | $ 7,985,999 |
Interest - Scudder Cash Management QP Trust | 141,935 |
Interest | 11,936 |
Total Income | 8,139,870 |
Expenses: Management fee | 2,993,327 |
Administrative fee | 2,015,961 |
Services to shareholders | 176,253 |
Distribution service fees | 2,859,102 |
Trustees' fees and expenses | 36,238 |
Other | 23,948 |
Total expenses | 8,104,829 |
Net investment income (loss) | 35,041 |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from: Investments | (4,650,638) |
Futures | 2,410,047 |
(2,240,591) | |
Net unrealized appreciation (depreciation) during the period on: Investments | 88,933,681 |
Futures | (89,316) |
88,844,365 | |
Net gain (loss) on investment transactions | 86,603,774 |
Net increase (decrease) in net assets resulting from operations | $ 86,638,815 |
The accompanying notes are an integral part of the financial statements.
Statement of Changes in Net Assets | ||
Increase (Decrease) in Net Assets | Years Ended October 31, | |
2003 | 2002 | |
Operations: Net investment income (loss) | $ 35,041 | $ (1,126,620) |
Net realized gain (loss) on investment transactions | (2,240,591) | (53,482,959) |
Net unrealized appreciation (depreciation) on investment transactions during the period | 88,844,365 | (42,540,893) |
Net increase (decrease) in net assets resulting from operations | 86,638,815 | (97,150,472) |
Fund share transactions: Proceeds from shares sold | 122,726,992 | 248,345,416 |
Cost of shares redeemed | (187,394,848) | (385,850,246) |
Net increase (decrease) in net assets from Fund share transactions | (64,667,856) | (137,504,830) |
Increase (decrease) in net assets | 21,970,959 | (234,655,302) |
Net assets at beginning of period | 551,872,755 | 786,528,057 |
Net assets at end of period (including undistributed net investment income and accumulated net investment loss of $32,621 and $2,420, respectively) | $ 573,843,714 | $ 551,872,755 |
The accompanying notes are an integral part of the financial statements.
Class A | |||||
Years Ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per Share Data | |||||
Net asset value, beginning of period | $ 12.92 | $ 15.03 | $ 21.76 | $ 20.76 | $ 16.61 |
Income (loss) from investment operations: Net investment income (loss)a | .04 | .03 | (.03) | (.03) | .02 |
Net realized and unrealized gain (loss) on investment transactions | 2.28 | (2.14) | (6.10) | 1.78 | 4.55 |
Total from investment operations | 2.32 | (2.11) | (6.13) | 1.75 | 4.57 |
Less distributions from: | |||||
Net realized gains on investment transactions | - | - | (.60) | (.75) | (.42) |
Net asset value, end of period | $ 15.24 | $ 12.92 | $ 15.03 | $ 21.76 | $ 20.76 |
Total Return (%)b | 17.96 | (14.04) | (28.71) | 8.51 | 27.96 |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | 349 | 308 | 430 | 651 | 547 |
Ratio of expenses before expense reductions (%) | 1.19 | 1.09 | 1.23c | 1.17 | 1.19 |
Ratio of expenses after expense reductions (%) | 1.19 | 1.09 | 1.22c | 1.16 | 1.19 |
Ratio of net investment income (loss) (%) | .34 | .21 | (.14) | (.14) | .13 |
Portfolio turnover rate (%) | 185 | 143 | 124 | 89 | 75 |
a Based on average shares outstanding during the period. b Total return does not reflect the effect of any sales charges. c The ratios of operating expenses excluding costs incurred with a fund complex reorganization before and after expense reductions were 1.20% and 1.20%, respectively. |
Class B | |||||
Years Ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per Share Data | |||||
Net asset value, beginning of period | $ 12.43 | $ 14.58 | $ 21.30 | $ 20.50 | $ 16.55 |
Income (loss) from investment operations: Net investment income (loss)a | (.05) | (.09) | (.16) | (.20) | (.14) |
Net realized and unrealized gain (loss) on investment transactions | 2.17 | (2.06) | (5.96) | 1.75 | 4.51 |
Total from investment operations | 2.12 | (2.15) | (6.12) | 1.55 | 4.37 |
Less distributions from: | |||||
Net realized gains on investment transactions | - | - | (.60) | (.75) | (.42) |
Net asset value, end of period | $ 14.55 | $ 12.43 | $ 14.58 | $ 21.30 | $ 20.50 |
Total Return (%)b | 17.06 | (14.75) | (29.30) | 7.62 | 26.83 |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | 178 | 197 | 293 | 454 | 314 |
Ratio of expenses before expense reductions (%) | 2.00 | 1.93 | 2.04c | 1.98 | 2.07 |
Ratio of expenses after expense reductions (%) | 2.00 | 1.93 | 2.02c | 1.97 | 2.07 |
Ratio of net investment income (loss) (%) | (.47) | (.63) | (.93) | (.95) | (.75) |
Portfolio turnover rate (%) | 185 | 143 | 124 | 89 | 75 |
a Based on average shares outstanding during the period. b Total return does not reflect the effect of any sales charges. c The ratios of operating expenses excluding costs incurred with a fund complex reorganization before and after expense reductions were 1.99% and 1.99%, respectively. |
Class C | |||||
Years Ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per Share Data | |||||
Net asset value, beginning of period | $ 12.55 | $ 14.72 | $ 21.47 | $ 20.64 | $ 16.65 |
Income (loss) from investment operations: Net investment income (loss)a | (.06) | (.09) | (.15) | (.20) | (.13) |
Net realized and unrealized gain (loss) on investment transactions | 2.20 | (2.08) | (6.00) | 1.78 | 4.54 |
Total from investment operations | 2.14 | (2.17) | (6.15) | 1.58 | 4.41 |
Less distributions from: | |||||
Net realized gains on investment transactions | - | - | (.60) | (.75) | (.42) |
Net asset value, end of period | $ 14.69 | $ 12.55 | $ 14.72 | $ 21.47 | $ 20.64 |
Total Return (%)b | 17.05 | (14.74) | (29.21) | 7.72 | 26.91 |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | 47 | 44 | 59 | 75 | 44 |
Ratio of expenses before expense reductions (%) | 1.99 | 1.90 | 1.95c | 1.93 | 1.98 |
Ratio of expenses after expense reductions (%) | 1.99 | 1.90 | 1.92c | 1.93 | 1.97 |
Ratio of net investment income (loss) (%) | (.46) | (.60) | (.84) | (.91) | (.65) |
Portfolio turnover rate (%) | 185 | 143 | 124 | 89 | 75 |
a Based on average shares outstanding during the period. b Total return does not reflect the effect of any sales charges. c The ratios of operating expenses excluding costs incurred with a fund complex reorganization before and after expense reductions were 1.92% and 1.92%, respectively. |
Class I | |||||
Years Ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per Share Data | |||||
Net asset value, beginning of period | $ 13.25 | $ 15.36 | $ 22.11 | $ 20.99 | $ 16.68 |
Income (loss) from investment operations: Net investment income (loss)a | .11 | .09 | .07 | .08 | .13 |
Net realized and unrealized gain (loss) on investment transactions | 2.34 | (2.20) | (6.22) | 1.79 | 4.60 |
Total from investment operations | 2.45 | (2.11) | (6.15) | 1.87 | 4.73 |
Less distributions from: | |||||
Net realized gains on investment transactions | - | - | (.60) | (.75) | (.42) |
Net asset value, end of period | $ 15.70 | $ 13.25 | $ 15.36 | $ 22.11 | $ 20.99 |
Total Return (%) | 18.49 | (13.74) | (28.34) | 9.01 | 28.81 |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | .2 | 3 | 6 | 10 | 10 |
Ratio of expenses before expense reductions (%) | .72 | .66 | .70b | .69 | .72 |
Ratio of expenses after expense reductions (%) | .72 | .66 | .70b | .68 | .72 |
Ratio of net investment income (loss) (%) | .81 | .64 | .39 | .34 | .60 |
Portfolio turnover rate (%) | 185 | 143 | 124 | 89 | 75 |
a Based on average shares outstanding during the period. b The ratios of operating expenses excluding costs incurred with a fund complex reorganization before and after expense reductions were .69% and .69%, respectively. |
A. Significant Accounting Policies
Scudder Blue Chip Fund (the ``Fund'') is registered under the Investment Company Act of 1940, as amended (the ``1940 Act''), as an open-end, diversified management investment company organized as a Massachusetts business trust.
The Fund offers multiple classes of shares which provide investors with different purchase options. Class A shares are offered to investors subject to an initial sales charge. Class B shares are offered without an initial sales charge but are subject to higher ongoing expenses than Class A shares and a contingent deferred sales charge payable upon certain redemptions. Class B shares automatically convert to Class A shares six years after issuance. Class C shares are offered to investors subject to an initial sales charge and are subject to higher ongoing expenses than Class A shares and a contingent deferred sales charge payable upon certain redemptions within one year of purchase. Prior to February 3, 2003, Class C shares were offered without an initial sales charge. Class C shares do not convert into another class. Class I shares are offered to a limited group of investors, are not subject to initial or contingent deferred sales charges and have lower ongoing expenses than other classes.
Investment income, realized and unrealized gains and losses, and certain fund-level expenses and expense reductions, if any, are borne pro rata on the basis of relative net assets by the holders of all classes of shares, except that each class bears certain expenses unique to that class such as distribution service fees, administrative fees and certain other class-specific expenses. Differences in class-level expenses may result in payment of different per share dividends by class. All shares of the Fund have equal rights with respect to voting subject to class-specific arrangements.
The Fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those 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 on each day the exchange is open for trading. Equity securities are valued at the most recent sale price reported on the exchange (US or foreign) or over-the-counter market on which the security is traded most extensively. Securities for which no sales are reported are valued at the calculated mean between the most recent bid and asked quotations on the relevant market or, if a mean cannot be determined, at the most recent bid quotation.
Money market instruments purchased with an original or remaining maturity of sixty days or less, maturing at par, are valued at amortized cost. Investments in open-end investment companies and Scudder Cash Management QP Trust are valued at their net asset value each business day.
Securities and other assets for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value are valued in a manner that is intended to reflect their fair value as determined in accordance with procedures approved by the Trustees.
Futures Contracts. A futures contract is an agreement between a buyer or seller and an established futures exchange or its clearinghouse in which the buyer or seller agrees to take or make a delivery of a specific amount of a financial instrument at a specified price on a specific date (settlement date). The Fund may enter into futures contracts as a hedge against anticipated interest rate, currency or equity market changes, and for duration management, risk management and return enhancement purposes.
Upon entering into a futures contract, the Fund is required to deposit with a financial intermediary an amount ("initial margin") equal to a certain percentage of the face value indicated in the futures contract. Subsequent payments ("variation margin") are made or received by the Fund dependent upon the daily fluctuations in the value of the underlying security and are recorded for financial reporting purposes as unrealized gains or losses by the Fund. When entering into a closing transaction, the Fund will realize a gain or loss equal to the difference between the value of the futures contract to sell and the futures contract to buy. Futures contracts are valued at the most recent settlement price.
Certain risks may arise upon entering into futures contracts, including the risk that an illiquid secondary market will limit the Fund's ability to close out a futures contract prior to the settlement date and that a change in the value of a futures contract may not correlate exactly with the changes in the value of the securities or currencies hedged. When utilizing futures contracts to hedge, the Fund gives up the opportunity to profit from favorable price movements in the hedged positions during the term of the contract.
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.
At October 31, 2003 the Fund had a net tax basis capital loss carryforward of approximately $178,647,000 which may be applied against any realized net taxable capital gains of each succeeding year until fully utilized or until October 31, 2009 ($119,021,000), October 31, 2010 ($56,710,000) and October 31, 2011 ($2,916,000), the respective expiration dates, whichever occurs first.
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 accounting principles generally accepted in the United States of America. These differences primarily relate to certain securities sold at a loss. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund.
At October 31, 2003, the Fund's components of distributable earnings (accumulated losses) on a tax-basis were as follows:
Undistributed ordinary income* | $ 34,667 |
Undistributed net long-term capital gains | $ - |
Capital loss carryforwards | $ (178,647,000) |
Net unrealized appreciation (depreciation) on investments | $ 71,748,271 |
* For tax purposes short-term capital gains distributions are considered ordinary income distributions.
Other. Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date net of foreign withholding taxes. 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.
B. Purchases and Sales of Securities
During the year ended October 31, 2003, purchases and sales of investment securities (excluding short-term instruments) aggregated $963,838,220 and $1,031,712,313, respectively.
C. Related Parties
Management Agreement. Under the Management Agreement with Deutsche Investment Management Americas Inc. ("DeIM" or the "Advisor"), the Advisor directs the investments of the Fund in accordance with its investment objectives, policies and restrictions. The Advisor 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 Advisor provides certain administrative services in accordance with the Management Agreement. The Fund pays a monthly investment management fee of 1/12 of the annual rate of 0.58% of the first $250,000,000 of the Fund's average daily net assets, 0.55% of the next $750,000,000 of such net assets, 0.53% of the next $1,500,000,000 of such net assets, 0.51% of the next $2,500,000,000 of such net assets, 0.48% of the next $2,500,000,000 of such net assets, 0.46% of the next $2,500,000,000 of such net assets, 0.44% of the next $2,500,000,000 of such net assets and 0.42% of such net assets in excess of $12,500,000,000, computed and accrued daily and payable monthly. Accordingly, for the year ended October 31, 2003, the fee pursuant to the Management Agreement was equivalent to an annual effective rate of 0.56% of the Fund's average daily net assets.
Administrative Fee. Under the Administrative Agreement (the "Administrative Agreement") the Advisor provides or pays others to provide substantially all of the administrative services required by the Fund (other than those provided by the Advisor under its Management Agreement with the Fund, as described above) in exchange for the payment by each class of the Fund of an administrative services fee (the "Administrative Fee") of 0.325%, 0.375%, 0.35% and 0.10% of the average daily net assets for Class A, B, C and I shares, respectively, computed and accrued daily and payable monthly for the period November 1, 2002 to December 31, 2002.
Effective January 1, 2003, the Trustees approved new Administrative Fee rates of 0.43%, 0.445%, 0.44% and 0.16% of the average daily net assets for Class A, B, C and I shares, respectively, computed and accrued daily and paid monthly.
For the period November 1, 2002 to September 30, 2003, the Administrative Fee was as follows:
Administrative Fee | Total Aggregated |
Class A | $ 1,144,845 |
Class B | 703,183 |
Class C | 166,228 |
Class I | 1,705 |
$ 2,015,961 |
The Administrative Agreement between the Advisor and the Fund terminated effective September 30, 2003 and the Fund will directly bear the cost of those expenses formerly covered under the Administrative Agreement.
Effective October 1, 2003 through September 30, 2005, the Advisor has agreed to contractually waive all or a portion of its management fee and reimburse or pay certain operating expenses of the Fund to the extent necessary to maintain the operating expenses of each class at 0.99%, 1.01%, 1.00% and 0.725% of average daily net assets for Class A, B, C and I shares, respectively (excluding certain expenses such as Rule 12b-1 and/or service fees, trustee and trustee counsel fees, extraordinary expenses, taxes, brokerage and interest).
Service Provider Fees.
Scudder Investments Service Company ("SISC"), an affiliate of the Advisor, is the Fund's transfer agent, dividend-paying agent and shareholder service agent. Pursuant to a sub-transfer agency agreement between SISC and DST Systems, Inc. ("DST"), SISC has delegated certain transfer agent and dividend paying agent functions to DST. The costs and expenses of such delegation are borne by SISC, not by the Fund. For the period October 1, 2003 through October 31, 2003, the amount charged to the Fund by SISC aggregated $176,253, all of which is unpaid at October 31, 2003.
Prior to September 30, 2003, the fees outlined above were paid by the Advisor in accordance with the Administrative Agreement.
Distribution Service Agreement. Under the Distribution Service Agreement, in accordance with Rule 12b-1 under the 1940 Act, Scudder Distributors, Inc., ("SDI"), a subsidiary of the Advisor, receives a fee ("Distribution Fee") of 0.75% of average daily net assets of Class B and C shares. Pursuant to the agreement, SDI enters into related selling group agreements with various firms at various rates for sales of Class B and C shares. For the year ended October 31, 2003, the Distribution Fee was as follows:
Distribution Fee | Total Aggregated | Unpaid at October 31, 2003 |
Class B | $ 1,335,929 | $ 106,800 |
Class C | 324,373 | 29,165 |
$ 1,660,302 | $ 135,965 |
In addition, SDI provides information and administrative services ("Service Fee") to Class A, B and C shareholders at an annual rate of up to 0.25% of average daily net assets for each such class. SDI in turn has various agreements with financial services firms that provide these services and pays these fees based upon the assets of shareholder accounts the firms service. For the year ended October 31, 2003, the Service Fee was as follows:
Service Fee | Total Aggregated | Unpaid at October 31, 2003 | Effective Rate |
Class A | $ 663,204 | $ 52,188 | .22% |
Class B | 431,515 | 33,733 | .24% |
Class C | 104,081 | 8,825 | .24% |
$ 1,198,800 | $ 94,746 |
Underwriting Agreement and Contingent Deferred Sales Charge. SDI is the principal underwriter for Class A, B and C shares. Underwriting commissions paid in connection with the distribution of Class A shares for the year ended October 31, 2003 aggregated $28,150.
In addition, SDI receives any contingent deferred sales charge ("CDSC") from Class B share redemptions occurring within six years of purchase and Class C share redemptions occurring within one year of purchase. There is no such charge upon redemption of any share appreciation or reinvested dividends. The CDSC is based on declining rates ranging from 4% to 1% for Class B and 1% for Class C, of the value of shares redeemed. For the year ended October 31, 2003, the CDSC for Class B and C shares aggregated $480,965 and $1,533, respectively. A deferred sales charge of up to 1% is assessed on certain redemptions of Class A shares. For the year ended October 31, 2003, SDI received $305.
Trustees' Fees and Expenses. The Fund pays each Trustee not affiliated with the Advisor retainer fees plus specified amounts for attended board and committee meetings.
Scudder Cash Management QP Trust. Pursuant to an Exemptive Order issued by the SEC, the Fund may invest in the Scudder Cash Management QP Trust (the "QP Trust") and other affiliated funds managed by the Advisor. The QP Trust seeks to provide as high a level of current income as is consistent with the preservation of capital and the maintenance of liquidity. The QP Trust does not pay the Advisor a management fee for the affiliated funds' investments in the QP Trust.
D. Expense Off-Set Arrangement
The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund's custodian expenses. During the year ended October 31, 2003, pursuant to the Administrative Agreement, no custodian credits were earned.
E. Line of Credit
The Fund and several other affiliated funds (the ``Participants'') share in a $1.25 billion revolving credit facility administered by J.P. Morgan Chase Bank 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 based upon net assets, among each of the Participants. Interest is calculated at the Federal Funds Rate plus 0.5 percent. The Fund may borrow up to a maximum of 33 percent of its net assets under the agreement.
F. Share Transactions
The following table summarizes share and dollar activity in the Fund:
Year Ended | Year Ended | |||
Shares | Dollars | Shares | Dollars | |
Shares sold | ||||
Class A | 5,616,080 | $ 75,150,805 | 9,481,310 | $ 145,714,283 |
Class B | 2,745,887 | 34,578,346 | 4,981,991 | 73,114,199 |
Class C | 958,445 | 12,285,997 | 1,864,437 | 27,704,245 |
Class I | 54,199 | 711,844 | 121,184 | 1,812,689 |
$ 122,726,992 | $ 248,345,416 | |||
Shares redeemed | ||||
Class A | (6,571,517) | $ (87,310,540) | (14,240,442) | $ (215,943,384) |
Class B | (6,381,526) | (80,502,416) | (9,205,955) | (131,820,268) |
Class C | (1,256,429) | (16,156,404) | (2,330,154) | (34,073,792) |
Class I | (268,601) | (3,425,488) | (262,462) | (4,012,802) |
$ (187,394,848) | $ (385,850,246) | |||
Net increase (decrease) | ||||
Class A | (955,437) | $ (12,159,735) | (4,759,132) | $ (70,229,101) |
Class B | (3,635,639) | (45,924,070) | (4,223,964) | (58,706,069) |
Class C | (297,984) | (3,870,407) | (465,717) | (6,369,547) |
Class I | (214,402) | (2,713,644) | (141,278) | (2,200,113) |
$ (64,667,856) | $ (137,504,830) |
To the Trustees and Shareholders of Scudder Blue Chip Fund:
We have audited the accompanying statement of assets and liabilities, including the investment portfolio, of the Scudder Blue Chip Fund (the "Fund"), as of October 31, 2003, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2003, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Scudder Blue Chip Fund at October 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States.
Boston, Massachusetts | /s/ Ernst & Young LLP |
For federal income tax purposes, the Fund designates $39,000, or the maximum amount allowable under tax law, as qualified dividend income.
Please consult a tax advisor if you have 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 1-800-621-1048.
The following table presents certain information regarding the Trustees and Officers of the fund as of October 31, 2003. Each individual's age is set forth in parentheses after his or her name. Unless otherwise noted, (i) each individual has engaged in the principal occupation(s) noted in the table for at least the most recent five years, although not necessarily in the same capacity, and (ii) the address of each individual is c/o Deutsche Asset Management, 222 South Riverside Plaza, Chicago, Illinois, 60606. Each Trustee's term of office extends until the next shareholder's meeting called for the purpose of electing Trustees and until the election and qualification of a successor, or until such Trustee sooner dies, resigns or is removed as provided in the governing documents of the fund.
Independent Trustees | ||
Name, Age, Position(s) Held with the Fund and Length of Time Served1 | Principal Occupation(s) During Past 5 Years and Other Directorships Held | Number of Funds in Fund Complex Overseen |
John W. Ballantine (57) Trustee, 1999-present | Retired; formerly, Executive Vice President and Chief Risk Management Officer, First Chicago NBD Corporation/The First National Bank of Chicago (1996-1998); Executive Vice President and Head of International Banking (1995-1996). Directorships: Enron Corporation (energy trading firm) (effective May 30, 2002); First Oak Brook Bancshares, Inc.; Oak Brook Bank; American Healthways, Inc. (provider of disease and care management services); F.N.B. Corporation (bank holding company); Prisma Energy International (owner and operator of Enron's international energy infrastructure business). | 82 |
Lewis A. Burnham (70) Trustee, 1977-present | Retired; formerly, Director of Management Consulting, McNulty & Company (1990-1998); prior thereto, Executive Vice President, Anchor Glass Container Corporation. | 82 |
Donald L. Dunaway (66) Trustee, 1980-present | Retired; formerly, Executive Vice President, A.O. Smith Corporation (diversified manufacturer) (1963-1994). | 82 |
James R. Edgar (57) Trustee, 1999-present | Distinguished Fellow, University of Illinois, Institute of Government and Public Affairs (1999-present); formerly, Governor, State of Illinois (1991-1999). Directorships: Kemper Insurance Companies; John B. Sanfilippo & Son, Inc. (processor/packager/marketer of nuts, snacks and candy products); Horizon Group Properties, Inc.; Youbet.com (online wagering platform); Alberto-Culver Company (manufactures, distributes and markets health and beauty-care products). | 82 |
Paul K. Freeman (53) Trustee, 2002-present | President, Cook Street Holdings (consulting); Adjunct Professor, University of Denver; Consultant, World Bank/Inter-American Development Bank; formerly, Project Leader, International Institute for Applied Systems Analysis (1998-2001); Chief Executive Officer, The Eric Group, Inc. (environmental insurance) (1986-1998). | 82 |
Robert B. Hoffman (66) Trustee, 1981-present | Retired; formerly, Chairman, Harnischfeger Industries, Inc. (machinery for the mining and paper industries) (1999-2000); prior thereto, Vice Chairman and Chief Financial Officer, Monsanto Company (agricultural, pharmaceutical and nutritional/food products) (1994-1999). | 82 |
Shirley D. Peterson (62) Trustee, 1995-present | Retired; formerly, President, Hood College (1995-2000); prior thereto, Partner, Steptoe & Johnson (law firm); Commissioner, Internal Revenue Service; Assistant Attorney General (Tax), US Department of Justice. Directorships: Federal Mogul Corp. (supplier of automotive components and subsystems); Trustee, Bryn Mawr College; AK Steel (steel production). | 82 |
Fred B. Renwick (73) Trustee, 1988-present | Retired; Professor Emeritus of Finance, New York University, Stern School of Business (2001-present); formerly, Professor, New York University Stern School of Business (1965-2001). Directorships: The Wartburg Foundation; Chairman, Finance Committee of Morehouse College Board of Trustees; formerly, Director of Board of Pensions, Evangelical Lutheran Church in America; member of the Investment Committee of Atlanta University Board of Trustees; Chair of the Investment Committee, American Bible Society Board of Trustees. | 82 |
William P. Sommers (70) Trustee, 1979-present | Retired; formerly, President and Chief Executive Officer, SRI International (research and development) (1994-1998); prior thereto, Executive Vice President, lameter (medical information and educational service provider); Senior Vice President and Director, Booz, Allen & Hamilton Inc. (management consulting firm). Directorships: PSI Inc. (satellite engineering and components); Evergreen Solar, Inc. (develop/manufacture solar electric system engines); H2 Gen (manufacture hydrogen generators); Zassi Medical Evolutions, Inc. (specialists in intellectual property opportunities in medical device arena); Guckenheimer Enterprises (executive food services). | 82 |
John G. Weithers (70) Trustee, 1993-present | Retired; formerly, Chairman of the Board and Chief Executive Officer, Chicago Stock Exchange. Directorships: Federal Life Insurance Company; Chairman of the Members of the Corporation and Trustee, DePaul University; formerly, International Federation of Stock Exchanges; Records Management Systems. | 82 |
Interested Trustees and Officers2 | ||
Name, Age, Position(s) Held with the Fund and Length of Time Served1 | Principal Occupation(s) During Past 5 Years and Other Directorships Held | Number of Funds in Fund Complex Overseen |
Richard T. Hale3 (58) Chairman and Trustee, 2002-present Chief Executive Officer, 2003-present | Managing Director, Deutsche Investment Management Americas Inc. (2003-present); Managing Director, Deutsche Bank Securities Inc. (formerly Deutsche Banc Alex. Brown Inc.) and Deutsche Asset Management (1999 to present); Director and President, Investment Company Capital Corp. (registered investment advisor) (1996 to present); Director, Deutsche Global Funds, Ltd. (2000 to present), CABEI Fund (2000 to present), North American Income Fund (2000 to present) (registered investment companies); Director, Scudder Global Opportunities Fund (since 2003); Director/Officer Deutsche/Scudder Mutual Funds (various dates); President, Montgomery Street Income Securities, Inc. (2002 to present) (registered investment companies); Vice President, Deutsche Asset Management, Inc. (2000 to present); formerly, Director, ISI Family of Funds (registered investment companies; 4 funds overseen) (1992-1999) | 201 |
Brenda Lyons4,6 (40) President, 2003-present | Managing Director, Deutsche Asset Management | n/a |
Philip J. Collora (57) Vice President and Assistant Secretary, 1986-present | Director, Deutsche Asset Management | n/a |
Daniel O. Hirsch3 (49) Vice President and Assistant Secretary, 2002-present | Managing Director, Deutsche Asset Management (2002-present) and Director, Deutsche Global Funds Ltd. (2002-present); formerly, Director, Deutsche Asset Management (1999-2002); Principal, BT Alex. Brown Incorporated (now Deutsche Bank Securities Inc.) (1998-1999); Assistant General Counsel, United States Securities and Exchange Commission (1993-1998) | n/a |
Kenneth Murphy4 (40) Vice President, 2002-present | Vice President, Deutsche Asset Management (2000-present); Vice President, Scudder Distributors, Inc. (December 2002-present); formerly, Director, John Hancock Signature Services (1992-2000); Senior Manager, Prudential Mutual Fund Services (1987-1992) | n/a |
Charles A. Rizzo4 (46) Treasurer and Chief Financial Officer, 2002-present | Director, Deutsche Asset Management (April 2000-present). Formerly, Vice President and Department Head, BT Alex. Brown Incorporated (now Deutsche Bank Securities Inc.) (1998-1999); Senior Manager, Coopers & Lybrand L.L.P. (now PricewaterhouseCoopers LLP) (1993-1998) | n/a |
Salvatore Schiavone4 (37) Assistant Treasurer, 2003-present | Director, Deutsche Asset Management | n/a |
Lucinda H. Stebbins4 (57) Assistant Treasurer, 2003-present | Director, Deutsche Asset Management | n/a |
Kathleen Sullivan D'Eramo4 (46) Assistant Treasurer, 2003-present | Director, Deutsche Asset Management | n/a |
John Millette4 (41) Secretary, 2001-present | Director, Deutsche Asset Management | n/a |
Lisa Hertz5 (33) Assistant Secretary, 2003-present | Assistant Vice President, Deutsche Asset Management | n/a |
Caroline Pearson4 (41) Assistant Secretary, 1998-present | Managing Director, Deutsche Asset Management | n/a |
1 Length of time served represents the date that each Trustee was first elected to the common board of trustees which oversees a number of investment companies, including the fund, managed by the Advisor. For the Officers of the fund, length of time served represents the date that each Officer was first elected to serve as an officer of any fund overseen by the aforementioned common board of trustees.
2 As a result of their respective positions held with the Advisor, these individuals are considered "interested persons" of the Advisor within the meaning of the 1940 Act, as amended. Interested persons receive no compensation from the fund.
3 Address: One South Street, Baltimore, Maryland
4 Address: Two International Place, Boston, Massachusetts
5 Address: 345 Park Avenue, New York, New York
6 Ms. Lyons was elected by the Trustees as President on November 19, 2003.
The fund's Statement of Additional Information ("SAI") includes additional information about the Trustees. The SAI is available, without charge, upon request. If you would like to request a copy of the SAI, you may do so by calling the following toll-free number: 1-800-621-1048.
Scudder Funds |
Growth Funds Scudder 21st Century Growth Fund Scudder Aggressive Growth Fund Scudder Blue Chip Fund Scudder Capital Growth Fund Scudder Development Fund Scudder Dynamic Growth Fund Scudder Flag Investors Scudder Gold & Precious Metals Fund Scudder Global Biotechnology Fund Scudder Growth Fund Scudder Health Care Fund Scudder Large Company Growth Fund Scudder Micro Cap Fund Scudder Mid Cap Fund Scudder Small Cap Fund Scudder Strategic Growth Fund Scudder Technology Fund Scudder Technology Innovation Fund Scudder Top 50 US Fund Value FundsScudder Contrarian Fund Scudder-Dreman Financial Services Fund Scudder-Dreman High Return Equity Fund Scudder-Dreman Small Cap Value Fund Scudder Flag Investors Equity Scudder Growth and Income Fund Scudder Large Company Value Fund Scudder-RREEF Real Estate Securities Fund Scudder Small Company Stock Fund Scudder Small Company Value Fund Scudder Tax Advantaged Dividend Fund Multicategory/Asset Allocation FundsScudder Balanced Fund Scudder Flag Investors Value Builder Fund Scudder Focus Value+Growth Fund Scudder Lifecycle Mid Range Fund Scudder Lifecycle Long Range Fund Scudder Lifecycle Short Range Fund Scudder Pathway Conservative Portfolio Scudder Pathway Growth Portfolio Scudder Pathway Moderate Portfolio Scudder Target 2013 Fund Scudder Total Return Fund International/Global FundsScudder Emerging Markets Growth Fund Scudder Emerging Markets Income Fund Scudder European Equity Fund Scudder Global Fund Scudder Global Bond Fund Scudder Global Discovery Fund Scudder Greater Europe Growth Fund Scudder International Fund Scudder International Equity Fund Scudder International Select Equity Fund Scudder Japanese Equity Fund Scudder Latin America Fund Scudder New Europe Fund Scudder Pacific Opportunities Fund Income FundsScudder Cash Reserves Fund Scudder Fixed Income Fund Scudder GNMA Fund Scudder High Income Plus Fund (formerly Deutsche High Yield Bond Fund) Scudder High Income Fund Scudder High Income Opportunity Fund Scudder Income Fund Scudder PreservationPlus Fund Scudder PreservationPlus Income Fund Scudder Short Duration Fund (formerly Scudder Short-Term Fixed Income Fund) Scudder Short-Term Bond Fund Scudder Strategic Income Fund Scudder US Government Securities Fund |
Scudder Funds (continued) |
Tax-Free Income Funds Scudder California Tax-Free Income Fund Scudder Florida Tax-Free Income Fund Scudder High Yield Tax-Free Fund Scudder Intermediate Tax/AMT Free Fund (formerly Scudder Medium Term Tax-Free Fund) Scudder Managed Municipal Bond Fund Scudder Massachusetts Tax-Free Fund Scudder Municipal Bond Fund Scudder New York Tax-Free Income Fund Scudder Short-Term Municipal Bond Fund Index-Related FundsScudder EAFE ® Equity Index Fund Scudder Equity 500 Index Fund Scudder S&P 500 Index Fund Scudder S&P 500 Stock Fund Scudder Select 500 Fund Scudder US Bond Index Fund Money MarketA large number of money market funds are available through Scudder Investments. |
Retirement Programs and Education Accounts |
Retirement Programs Traditional IRA Roth IRA SEP-IRA Inherited IRA Keogh Plan 401(k), 403(b) Plans Variable Annuities Education AccountsCoverdell Education Savings Account UGMA/UTMA IRA for Minors |
Closed-End Funds |
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 High Income Trust Scudder Intermediate Government Trust Scudder Multi-Market Income Trust Scudder Municipal Income Trust Scudder RREEF Real Estate Fund, Inc. Scudder RREEF Real Estate Fund II, Inc. Scudder Strategic Income Trust Scudder Strategic Municipal Income Trust The Central Europe and Russia Fund, Inc. (formerly The Central European Equity Fund, Inc.) The Germany Fund, Inc. The New Germany Fund, Inc. |
Not all funds are available in all share classes.
Scudder open-end funds are offered by prospectus only. For more complete information on any fund or variable annuity registered in your state, including information about a fund's objectives, strategies, risks, advisory fees, distribution charges, and other expenses, please order a free prospectus. Read the prospectus before investing in any fund to ensure the fund is appropriate for your goals and risk tolerance.
A money market mutual fund investment is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although a money market mutual fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in such a fund.
The products described should not be considered a solicitation to buy or an offer to sell a security to any person in any jurisdiction where such offer, solicitation, purchase, or sale would be unlawful under the securities laws of such jurisdiction.
Automated Information Lines | ScudderACCESS (800) 972-3060 Personalized account information, information on other Scudder funds and services via touchtone telephone and for Classes A, B, and C only, the ability to exchange or redeem shares. |
Web Site | scudder.com View your account transactions and balances, trade shares, monitor your asset allocation, and change your address, 24 hours a day.Obtain prospectuses and applications, blank forms, interactive worksheets, news about Scudder funds, subscription to fund updates by e-mail, retirement planning information, and more. |
For More Information | (800) 621-1048 To speak with a Scudder service representative. |
Written Correspondence | Scudder Investments PO Box 219356Kansas City, MO 64121-9356 |
Proxy Voting | A description of the fund's policies and procedures for voting proxies for portfolio securities can be found on our Web site - scudder.com (type "proxy voting" in the search field) - or on the SEC's Web site - www.sec.gov. To obtain a written copy without charge, call us toll free at (800) 621-1048. |
Principal Underwriter | If you have questions, comments or complaints, contact: Scudder Distributors, Inc. 222 South Riverside PlazaChicago, IL 60606-5808 (800) 621-1148 |
Class A | Class B | Class C | |
Nasdaq Symbol | KBCAX | KBCBX | KBCCX |
CUSIP Number | 81111P-100 | 81111P-209 | 81111P-308 |
Fund Number | 031 | 231 | 331 |
Notes |
Notes |
Notes |
Notes |
Notes |
ITEM 2. CODE OF ETHICS. As of the end of the period, October 31, 2003, the Scudder Blue Chip Fund has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its President and Treasurer and its Chief Financial Officer. A copy of the code of ethics is filed as an exhibit to this Form N-CSR. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The Fund's Board of Directors/Trustees has determined that the Fund has at least one "audit committee financial expert" serving on its audit committee: Mr. Donald L. Dunaway. This audit committee member is "independent," meaning that he is not an "interested person" of the Fund (as that term is defined in Section 2(a)(19) of the Investment Company Act of 1940) and he does not accept any consulting, advisory, or other compensatory fee from the Fund (except in the capacity as a Board or committee member). An "audit committee financial expert" is not an "expert" for any purpose, including for purposes of Section 11 of the Securities Act of 1933, as a result of being designated as an "audit committee financial expert." Further, the designation of a person as an "audit committee financial expert" does not mean that the person has any greater duties, obligations, or liability than those imposed on the person without the "audit committee financial expert" designation. Similarly, the designation of a person as an "audit committee financial expert" does not affect the duties, obligations, or liability of any other member of the audit committee or board of directors. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not currently applicable. ITEM 5. [RESERVED] ITEM 6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. ITEM 8. [RESERVED] ITEM 9. CONTROLS AND PROCEDURES. (a) The Chief Executive and Financial Officers concluded that the Registrant's Disclosure Controls and Procedures are effective based on the evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report. (b)During the filing period of the report, management identified issues relating to the overall fund expense payment and accrual process. Management discussed these matters with the Registrant's Audit Committee and auditors, instituted additional procedures to enhance its internal controls and will continue to develop additional controls and redesign work flow to strengthen the overall control environment associated with the processing and recording of fund expenses. ITEM 10. EXHIBITS. (a)(1) Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached hereto as EX-99.CODE ETH. (a)(2) Certification pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit 99.CERT. (b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) is furnished and attached hereto as Exhibit 99.906CERT.Form N-CSR Item F SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Registrant: Scudder Blue Chip Fund By: /s/Richard T. Hale --------------------------- Richard T. Hale Chief Executive Officer Date: December 22, 2003 --------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Registrant: Scudder Blue Chip Fund By: /s/Richard T. Hale --------------------------- Richard T. Hale Chief Executive Officer Date: December 22, 2003 --------------------------- By: /s/Charles A. Rizzo --------------------------- Charles A. Rizzo Chief Financial Officer Date: December 22, 2003 ---------------------------