UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM N-CSR Investment Company Act file number 811-5002 SCUDDER VARIABLE SERIES II -------------------------- (Exact Name of Registrant as Specified in Charter) 222 South Riverside Plaza, Chicago, Illinois 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: 12/31 Date of reporting period: 12/31/04ITEM 1. REPORT TO STOCKHOLDERS
Annual report to
shareholders for the year
ended December 31, 2004
Scudder Variable Series II
Scudder Aggressive Growth Portfolio
Scudder Blue Chip Portfolio
Scudder Conservative Income Strategy Portfolio
Scudder Fixed Income Portfolio
Scudder Global Blue Chip Portfolio
Scudder Government & Agency Securities Portfolio
Scudder Growth Portfolio
Scudder Growth & Income Strategy Portfolio
Scudder Growth Strategy Portfolio
Scudder High Income Portfolio
Scudder Income & Growth Strategy Portfolio
Scudder International Select Equity Portfolio
Scudder Large Cap Value Portfolio
Scudder Mercury Large Cap Core Portfolio
Scudder Money Market Portfolio
Scudder Small Cap Growth Portfolio
Scudder Strategic Income Portfolio
Scudder Technology Growth Portfolio
Scudder Templeton Foreign Value Portfolio
Scudder Total Return Portfolio
SVS Davis Venture Value Portfolio
SVS Dreman Financial Services Portfolio
SVS Dreman High Return Equity Portfolio
SVS Dreman Small Cap Value Portfolio
SVS Eagle Focused Large Cap Growth Portfolio
SVS Focus Value+Growth Portfolio
SVS Index 500 Portfolio
SVS INVESCO Dynamic Growth Portfolio
SVS Janus Growth and Income Portfolio
SVS Janus Growth Opportunities Portfolio
SVS MFS Strategic Value Portfolio
SVS Oak Strategic Equity Portfolio
SVS Turner Mid Cap Growth Portfolio
Contents |
|
Performance Summary, Information About Your Portfolio's Expenses, Management Summary, Investment Portfolio, Financial Statements and Financial Highlights for:
Click Here Scudder Aggressive Growth Portfolio
Click Here Scudder Blue Chip Portfolio
Click Here Scudder Conservative Income Strategy Portfolio
Click Here Scudder Fixed Income Portfolio
Click Here Scudder Global Blue Chip Portfolio
Click Here Scudder Government & Agency Securities
Portfolio (formerly Scudder Government Securities
Portfolio)
Click Here Scudder Growth Portfolio
Click Here Scudder Growth & Income Strategy Portfolio
Click Here Scudder Growth Strategy Portfolio
Click Here Scudder High Income Portfolio
Click Here Scudder Income & Growth Strategy Portfolio
Click Here Scudder International Select Equity Portfolio
Click Here Scudder Large Cap Value Portfolio (formerly
Scudder Contrarian Value Portfolio)
Click Here Scudder Mercury Large Cap Core Portfolio
Click Here Scudder Money Market Portfolio
Click Here Scudder Small Cap Growth Portfolio
Click Here Scudder Strategic Income Portfolio
Click Here Scudder Technology Growth Portfolio
Click Here Scudder Templeton Foreign Value Portfolio
Click Here Scudder Total Return Portfolio
Click Here SVS Davis Venture Value Portfolio
Click Here SVS Dreman Financial Services Portfolio
Click Here SVS Dreman High Return Equity Portfolio
Click Here SVS Dreman Small Cap Value Portfolio
Click Here SVS Eagle Focused Large Cap Growth Portfolio
Click Here SVS Focus Value+Growth Portfolio
Click Here SVS Index 500 Portfolio
Click Here SVS INVESCO Dynamic Growth Portfolio
Click Here SVS Janus Growth and Income Portfolio
Click Here SVS Janus Growth Opportunities Portfolio
Click Here SVS MFS Strategic Value Portfolio
Click Here SVS Oak Strategic Equity Portfolio
Click Here SVS Turner Mid Cap Growth Portfolio
Click Here Notes to Financial Statements
Click Here Report of Independent Registered Public
Accounting Firm
Click Here Tax Information
Click Here Trustees and Officers
This report must be preceded or accompanied by a prospectus. To obtain a prospectus, call (800) 778-1482 or your financial representative. We advise you to carefully consider the product's objectives, risks, charges and expenses before investing. The prospectus contains this and other important information about the product. Please read the prospectus carefully before you invest.
NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE
Investments in variable portfolios involve risk. Some portfolios have more risk than others. These include portfolios 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 the prospectus for specific details regarding its investments and risk profile.
Performance Summary December 31, 2004 |
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Scudder Aggressive Growth Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns.
This Portfolio is subject to stock market risk, meaning stocks in the portfolio may decline in value for extended periods of time due to the activities and financial prospects of individual companies, or due to general market and economic conditions. Please read this Portfolio's prospectus for specific details regarding its investments and risk profile.
The investment advisor has agreed to either limit, waive or reduce certain fees temporarily for this Portfolio; see the prospectus for complete details. Without such limits, waivers or reductions, the performance figures for this Portfolio would be lower.
Growth of an Assumed $10,000 Investment in Scudder Aggressive Growth Portfolio from 5/1/1999 to 12/31/2004 | ||
[] Scudder Aggressive Growth Portfolio — Class A [] Russell 3000 Growth Index [] S&P 500 Index | ||
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| The Russell 3000 Growth Index is an unmanaged, capitalization-weighted index containing the growth stocks in the Russell 3000 Index with higher price-to-book ratios and higher forecasted growth values. The Standard & Poor's (S&P) 500 Index is a capitalization-weighted index of 500 stocks 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 reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
Yearly periods ended December 31 |
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Comparative Results | |||||
Scudder Aggressive Growth Portfolio |
| 1-Year | 3-Year | 5-Year | Life of Portfolio* |
Class A | Growth of $10,000 | $10,402 | $9,664 | $7,186 | $10,053 |
Average annual total return | 4.02% | -1.13% | -6.40% | .09% | |
Russell 3000 Growth Index | Growth of $10,000 | $10,693 | $10,078 | $6,285 | $7,895 |
Average annual total return | 6.93% | .26% | -8.87% | -4.09% | |
S&P 500 Index | Growth of $10,000 | $11,088 | $11,115 | $8,902 | $9,882 |
Average annual total return | 10.88% | 3.59% | -2.30% | -.21% | |
Scudder Aggressive Growth Portfolio |
|
|
| 1-Year | Life of Class** |
Class B
| Growth of $10,000 |
|
| $10,361 | $13,136 |
Average annual total return |
|
| 3.61% | 11.52% | |
Russell 3000 Growth Index | Growth of $10,000 |
|
| $10,693 | $12,684 |
Average annual total return |
|
| 6.93% | 9.98% | |
S&P 500 Index | Growth of $10,000 |
|
| $11,088 | $12,800 |
Average annual total return |
|
| 10.88% | 10.38% |
The growth of $10,000 is cumulative.
* The Portfolio commenced operations on May 1, 1999. Index returns begin April 30, 1999.
** The Portfolio commenced offering Class B shares on July 1, 2002. Index returns begin June 30, 2002.
Information About Your Portfolio's Expenses |
|
Scudder Aggressive Growth Portfolio
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent six-month period, the Portfolio limited these expenses; had it not done so, expenses would have been higher. The tables are based on an investment of $1,000 made at the beginning of the six-month period ended December 31, 2004.
The tables illustrate your Portfolio's expenses in two ways:
Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2004 | ||
Actual Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,058.10 | $ 1,056.30 |
Expenses Paid per $1,000* | $ 5.10 | $ 7.05 |
Hypothetical 5% Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,020.25 | $ 1,018.35 |
Expenses Paid per $1,000* | $ 5.00 | $ 6.92 |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365.
Annualized Expense Ratios | Class A | Class B |
Scudder Variable Series II — Scudder Aggressive Growth Portfolio | .98% | 1.36% |
For more information, please refer to the Portfolio's prospectus.
Management Summary December 31, 2004 |
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Scudder Aggressive Growth Portfolio
Growth stocks produced favorable returns during 2004, but as a group this asset class underperformed value stocks in the large-cap segment with the reverse holding true in small caps. Among the market capitalization segments, mid-cap stocks outperformed both small caps and large caps. Notably, small, low-quality and high-beta companies that dominated market returns in 2003 continued their reversal as larger-cap, higher-quality and dividend-paying securities outperformed during the annual period. The portfolio produced a total return of 4.02% (Class A shares, unadjusted for contract charges) for the 12-month period ended December 31, 2004, trailing the 6.93% return of its benchmark, the Russell 3000 Growth Index. During the period, the market was able to weather a mixed-bag of labor reports, the insurgency in Iraq, a mid-year spike in oil prices and the hotly contested presidential election.
Throughout the period, stock selection was the primary detractor from fund performance. While our stock selection in the financials, health care and materials sectors aided performance, our stock picks in information technology, industrials, consumer staples, and energy lagged their benchmark counterparts. Asset allocation contributed to performance for the period. The portfolio's underweight in industrials and health care and overweight in information technology detracted from performance. However, the portfolio's overweight in consumer discretionary and energy and underweight in consumer staples aided performance.
Going forward, we believe investors' renewed emphasis on fundamentals and valuations should generate additional performance opportunities for the portfolio given its emphasis on fundamental research and individual stock selection. We will continue to focus on sound growth companies, which are or should be able to produce healthy earnings growth.
Samuel A. Dedio
Robert S. Janis
Co-Lead Portfolio Managers
Deutsche Investment Management Americas Inc.
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the portfolio or any variable life insurance policy or variable annuity contract for which the portfolio is an investment option. These charges and fees will reduce returns.
Risk Considerations
This portfolio is subject to stock market risk, meaning stocks in the portfolio may decline in value for extended periods of time due to the activities and financial prospects of individual companies, or due to general market and economic conditions. Please read this portfolio's prospectus for specific details regarding its investments and risk profile.
The Russell 3000 Growth Index is an unmanaged, capitalization-weighted index containing the growth stocks in the Russell 3000 Index with higher price-to- book ratios and higher forecasted growth values.
The Standard & Poor's (S&P) 500 Index is a capitalization-weighted index of 500 stocks 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 reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
Portfolio management market commentary is as of December 31, 2004, and may not come to pass. This information is subject to change at any time based on market and other conditions.
Portfolio Summary |
Scudder Aggressive Growth Portfolio
Asset Allocation (Excludes Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Common Stocks | 97% | 97% |
Cash Equivalents | 3% | 3% |
| 100% | 100% |
Sector Diversification (Excludes Cash Equivalents and Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Health Care | 26% | 22% |
Information Technology | 25% | 33% |
Consumer Discretionary | 17% | 17% |
Financials | 13% | 9% |
Consumer Staples | 5% | 5% |
Industrials | 5% | 9% |
Materials | 5% | 1% |
Telecommunication Services | 2% | 1% |
Energy | 2% | 3% |
| 100% | 100% |
Asset allocation and sector diversification are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 9. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Portfolio as of month end will be posted to scudder.com on the 15th of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio December 31, 2004 |
|
Scudder Aggressive Growth Portfolio
|
| Value ($) |
|
| |
Common Stocks 97.1% | ||
Consumer Discretionary 16.7% | ||
Hotels Restaurants & Leisure 4.5% | ||
RARE Hospitality International, Inc.* | 19,400 | 618,084 |
Station Casinos, Inc. | 17,200 | 940,496 |
The Cheesecake Factory, Inc.* (c) | 34,200 | 1,110,474 |
| 2,669,054 | |
Household Durables 2.7% | ||
Harman International Industries, Inc. | 12,800 | 1,625,600 |
Specialty Retail 5.5% | ||
Aeropostale, Inc.* | 39,400 | 1,159,542 |
Chico's FAS, Inc.* | 27,700 | 1,261,181 |
Urban Outfitters, Inc.* | 18,300 | 812,520 |
| 3,233,243 | |
Textiles, Apparel & Luxury Goods 4.0% | ||
Columbia Sportswear Co.* | 18,400 | 1,096,824 |
Polo Ralph Lauren Corp. | 29,900 | 1,273,740 |
| 2,370,564 | |
Consumer Staples 4.9% | ||
Beverages 1.1% | ||
Constellation Brands, Inc. "A"* | 14,200 | 660,442 |
Food & Staples Retailing 2.7% | ||
Wal-Mart Stores, Inc. | 30,700 | 1,621,574 |
Household Products 1.1% | ||
Jarden Corp.* | 15,100 | 655,944 |
Energy 1.9% | ||
Energy Equipment & Services | ||
BJ Services Co. | 12,100 | 563,134 |
Rowan Companies, Inc.* | 22,700 | 587,930 |
| 1,151,064 | |
Financials 12.5% | ||
Capital Markets 10.2% | ||
E*TRADE Financial Corp.* | 87,900 | 1,314,105 |
Goldman Sachs Group, Inc. | 8,300 | 863,532 |
Investors Financial Services Corp. (c) | 20,800 | 1,039,584 |
Legg Mason, Inc. | 26,250 | 1,923,075 |
Lehman Brothers Holdings, Inc. | 10,400 | 909,792 |
| 6,050,088 | |
Diversified Financial Services 2.3% | ||
Citigroup, Inc. | 13,600 | 655,248 |
The First Marblehead Corp.* (c) | 12,700 | 714,375 |
| 1,369,623 | |
Health Care 25.7% | ||
Biotechnology 2.8% | ||
Amgen, Inc.* | 14,800 | 949,420 |
Charles River Laboratories International, Inc.* | 15,200 | 699,352 |
| 1,648,772 | |
|
| Value ($) |
|
| |
Health Care Equipment & Supplies 9.3% | ||
C.R. Bard, Inc. | 14,500 | 927,710 |
Cooper Companies, Inc. (c) | 8,300 | 585,897 |
Fisher Scientific International, Inc.* | 9,500 | 592,610 |
Kinetic Concepts, Inc.* | 23,200 | 1,770,160 |
PerkinElmer, Inc. | 36,800 | 827,632 |
Zimmer Holdings, Inc.* | 10,500 | 841,260 |
| 5,545,269 | |
Health Care Providers & Services 8.9% | ||
Aetna, Inc. | 7,900 | 985,525 |
Community Health Systems, Inc.* | 48,400 | 1,349,392 |
Coventry Health Care, Inc.* | 14,000 | 743,120 |
Triad Hospitals, Inc.* | 36,200 | 1,347,002 |
UnitedHealth Group, Inc. | 9,500 | 836,285 |
| 5,261,324 | |
Pharmaceuticals 4.7% | ||
Celgene Corp.* | 41,400 | 1,098,342 |
Johnson & Johnson | 16,800 | 1,065,456 |
Pfizer, Inc. | 22,800 | 613,092 |
| 2,776,890 | |
Industrials 4.6% | ||
Aerospace & Defense 1.0% | ||
United Technologies Corp. | 5,700 | 589,095 |
Commercial Services & Supplies 1.4% | ||
Avery Dennison Corp. | 13,700 | 821,589 |
Machinery 2.2% | ||
Caterpillar, Inc. | 7,300 | 711,823 |
Dover Corp. | 14,100 | 591,354 |
| 1,303,177 | |
Information Technology 24.6% | ||
Communications Equipment 4.4% | ||
Cisco Systems, Inc.* | 58,100 | 1,121,330 |
Polycom, Inc.* | 25,800 | 601,656 |
QUALCOMM, Inc. | 20,500 | 869,200 |
| 2,592,186 | |
Computers & Peripherals 5.5% | ||
Dell, Inc.* | 32,300 | 1,361,122 |
EMC Corp.* | 67,000 | 996,290 |
QLogic Corp.* | 24,700 | 907,231 |
| 3,264,643 | |
Internet Software & Services 2.6% | ||
Check Point Software Technologies Ltd.* | 36,100 | 889,143 |
Google, Inc. "A"* | 3,400 | 656,540 |
| 1,545,683 | |
IT Consulting & Services 2.0% | ||
Paychex, Inc. | 34,400 | 1,172,352 |
Office Electronics 1.5% | ||
Zebra Technologies Corp. "A"* | 16,200 | 911,736 |
|
| Value ($) |
|
| |
Semiconductors & Semiconductor Equipment 2.9% | ||
Linear Technology Corp. | 25,500 | 988,380 |
Microchip Technology, Inc. | 27,800 | 741,148 |
| 1,729,528 | |
Software 5.7% | ||
Cognos, Inc.* | 34,800 | 1,533,288 |
Microsoft Corp. | 69,600 | 1,859,016 |
| 3,392,304 | |
Materials 4.2% | ||
Containers & Packaging 1.4% | ||
Packaging Corp. of America | 35,400 | 833,670 |
Metals & Mining 2.8% | ||
Peabody Energy Corp. | 20,600 | 1,666,746 |
Telecommunication Services 2.0% | ||
Wireless Telecommunication Services | ||
Nextel Partners, Inc. "A"* | 59,400 | 1,160,676 |
Total Common Stocks (Cost $47,343,395) | 57,622,836 | |
|
| Value ($) |
|
| |
Securities Lending Collateral 3.6% | ||
Daily Assets Fund Institutional, 2.25% (d) (e) (Cost $2,157,464) | 2,157,464 | 2,157,464 |
| ||
Cash Equivalents 3.0% | ||
Scudder Cash Management QP Trust, 2.24% (b) (Cost $1,745,508) | 1,745,508 | 1,745,508 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $51,246,367) (a) | 103.7 | 61,525,808 |
Other Assets and Liabilities, Net | (3.7) | (2,173,449) |
Net Assets | 100.0 | 59,352,359 |
Notes to Scudder Aggressive Growth Portfolio of Investments |
* Non-income producing security.
(a) The cost for federal income tax purposes was $51,278,559. At December 31, 2004, net unrealized appreciation for all securities based on tax cost was $10,247,249. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $10,854,843 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $607,594.
(b) Scudder Cash Management QP Trust is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
(c) All or a portion of these securities were on loan (see Notes to Financial Statements). The value of all securities loaned at December 31, 2004 amounted to $2,111,098, which is 3.6% of net assets.
(d) Daily Assets Fund Institutional, an affiliated fund, is also managed by Deutsche Asset Management, Inc. The rate shown is the annualized seven-day yield at period end.
(e) Represents collateral held in connection with securities lending.
The accompanying notes are an integral part of the financial statements.
Financial Statements |
|
Statement of Assets and Liabilities as of December 31, 2004 | |
Assets | |
Investments: Investments in securities, at value (cost $47,343,395) — including $2,111,098 of securities loaned | $ 57,622,836 |
Investment in Daily Assets Fund Institutional (cost $2,157,464)* | 2,157,464 |
Investment in Scudder Cash Management QP Trust (cost $1,745,508) | 1,745,508 |
Total investments in securities, at value (cost $51,246,367) | 61,525,808 |
Receivable for investments sold | 52,680 |
Dividends receivable | 17,385 |
Interest receivable | 3,379 |
Other assets | 1,833 |
Total assets | 61,601,085 |
Liabilities | |
Payable for fund shares redeemed | 1,007 |
Accrued management fee | 14,561 |
Payable upon return of securities loaned | 2,157,464 |
Other accrued expenses and payables | 75,694 |
Total liabilities | 2,248,726 |
Net assets, at value | $ 59,352,359 |
Net Assets | |
Net assets consist of: Accumulated net investment loss | (2,093) |
Net unrealized appreciation (depreciation) on investments | 10,279,441 |
Accumulated net realized gain (loss) | (39,182,351) |
Paid-in capital | 88,257,362 |
Net assets, at value | $ 59,352,359 |
Class A Net Asset Value, offering and redemption price per share ($53,160,434 ÷ 5,401,258 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 9.84 |
Class B Net Asset Value, offering and redemption price per share ($6,191,925 ÷ 634,195 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 9.76 |
* Represents collateral on securities loaned.
Statement of Operations for the year ended December 31, 2004 | |
Investment Income | |
Income: Dividends (net of foreign taxes withheld of $1,370) | $ 428,176 |
Interest — Scudder Cash Management QP Trust | 45,181 |
Securities lending income, including income from Daily Assets Fund Institutional | 11,628 |
Total Income | 484,985 |
Expenses: Management fee | 433,852 |
Custodian and accounting fees | 79,450 |
Distribution service fees (Class B) | 12,985 |
Record keeping fees (Class B) | 6,834 |
Auditing | 44,356 |
Legal | 16,080 |
Reports to shareholders | 16,635 |
Other | 2,616 |
Total expenses before expense reductions | 612,808 |
Expense reductions | (43,768) |
Total expenses after expense reductions | 569,040 |
Net investment income (loss) | (84,055) |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from investments | 2,570,533 |
Net unrealized appreciation (depreciation) during the period on investments | (452,406) |
Net gain (loss) on investment transactions | 2,118,127 |
Net increase (decrease) in net assets resulting from operations | $ 2,034,072 |
The accompanying notes are an integral part of the financial statements.
|
Statement of Changes in Net Assets | ||
Increase (Decrease) in Net Assets | Years Ended December 31, | |
2004 | 2003 | |
Operations: Net investment income (loss) | $ (84,055) | $ (295,832) |
Net realized gain (loss) on investment transactions | 2,570,533 | (6,980,374) |
Net unrealized appreciation (depreciation) on investment transactions during the period | (452,406) | 21,899,078 |
Net increase (decrease) in net assets resulting from operations | 2,034,072 | 14,622,872 |
Portfolio share transactions: Class A Proceeds from shares sold | 4,965,372 | 19,207,656 |
Cost of shares redeemed | (9,699,886) | (21,817,569) |
Net increase (decrease) in net assets from Class A share transactions | (4,734,514) | (2,609,913) |
Class B Proceeds from shares sold | 2,601,994 | 3,541,180 |
Cost of shares redeemed | (435,771) | (186,774) |
Net increase (decrease) in net assets from Class B share transactions | 2,166,223 | 3,354,406 |
Increase (decrease) in net assets | (534,219) | 15,367,365 |
Net assets at beginning of period | 59,886,578 | 44,519,213 |
Net assets at end of period (including accumulated net investment loss of $2,093 and $85, respectively) | $ 59,352,359 | $ 59,886,578 |
Other Information | ||
Class A Shares outstanding at beginning of period | 5,923,874 | 6,292,403 |
Shares sold | 534,758 | 2,320,895 |
Shares redeemed | (1,057,374) | (2,689,424) |
Net increase (decrease) in Portfolio shares | (522,616) | (368,529) |
Shares outstanding at end of period | 5,401,258 | 5,923,874 |
Class B Shares outstanding at beginning of period | 405,258 | 11,689 |
Shares sold | 277,046 | 417,145 |
Shares redeemed | (48,109) | (23,576) |
Net increase (decrease) in Portfolio shares | 228,937 | 393,569 |
Shares outstanding at end of period | 634,195 | 405,258 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights |
|
Class A
Years Ended December 31, | 2004 | 2003 | 2002 | 2001 | 2000a |
Selected Per Share Data | |||||
Net asset value, beginning of period | $ 9.46 | $ 7.06 | $ 10.22 | $ 13.20 | $ 13.99 |
Income (loss) from investment operations: Net investment income (loss)b | (.01) | (.05) | (.01) | .06 | .18 |
Net realized and unrealized gain (loss) on investment transactions | .39 | 2.45 | (3.11) | (2.92) | (.87) |
Total from investment operations | .38 | 2.40 | (3.12) | (2.86) | (.69) |
Less distributions from: Net investment income | — | — | (.04) | (.12) | — |
Net realized gains on investment transactions | — | — | — | — | (.10) |
Total distributions | — | — | (.04) | (.12) | (.10) |
Net asset value, end of period | $ 9.84 | $ 9.46 | $ 7.06 | $ 10.22 | $ 13.20 |
Total Return (%) | 4.02c | 33.99c | (30.66) | (21.76) | (4.96) |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | 53 | 56 | 44 | 71 | 66 |
Ratio of expenses before expense reductions (%) | 1.02 | .98 | .81 | .86 | .95 |
Ratio of expenses after expense reductions (%) | .95 | .95 | .81 | .86 | .94 |
Ratio of net investment income (loss) (%) | (.11) | (.57) | (.19) | .58 | 1.22 |
Portfolio turnover rate (%) | 103 | 91 | 71 | 42 | 103 |
a On June 18, 2001, the Portfolio implemented a 1 for 10 reverse stock split. Per share information, for the period prior to December 31, 2001, has been restated to reflect the effect of the split. Shareholders received 1 share for every 10 shares owned and net asset value per share increased correspondingly.
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
Class B
Years Ended December 31, | 2004 | 2003 | 2002a |
Selected Per Share Data | |||
Net asset value, beginning of period | $ 9.42 | $ 7.06 | $ 7.43 |
Income (loss) from investment operations: Net investment income (loss)b | (.05) | (.09) | (.02) |
Net realized and unrealized gain (loss) on investment transactions | .39 | 2.45 | (.35) |
Total from investment operations | .34 | 2.36 | (.37) |
Net asset value, end of period | $ 9.76 | $ 9.42 | $ 7.06 |
Total Return (%) | 3.61c | 33.43c | (4.98)** |
Ratios to Average Net Assets and Supplemental Data | |||
Net assets, end of period ($ millions) | 6 | 4 | .1 |
Ratio of expenses before expense reductions (%) | 1.41 | 1.37 | 1.06* |
Ratio of expenses after expense reductions (%) | 1.34 | 1.34 | 1.06* |
Ratio of net investment income (loss) (%) | (.50) | (.96) | (.47)* |
Portfolio turnover rate (%) | 103 | 91 | 71 |
a For the period from July 1, 2002 (commencement of operations of Class B shares) to December 31, 2002.
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
* Annualized ** Not annualized
Performance Summary December 31, 2004 |
|
Scudder Blue Chip Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns.
This Portfolio is subject to stock market risk, meaning stocks in the portfolio may decline in value for extended periods of time due to the activities and financial prospects of individual companies, or due to general market and economic conditions. This may result in greater share price volatility. Please read this Portfolio's prospectus for specific details regarding its investments and risk profile.
Growth of an Assumed $10,000 Investment in Scudder Blue Chip Portfolio from 5/1/1997 to 12/31/2004 | ||
[] Scudder Blue Chip Portfolio — Class A [] Russell 1000 Index |
| |
![]() |
| The Russell 1000 Index is an unmanaged capitalization-weighted price-only index composed of the largest-capitalized United States companies whose common stocks are traded in the US. This larger capitalization, market-oriented index is highly correlated with the S&P 500 Index. Index returns assume reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
Yearly periods ended December 31 |
|
|
Comparative Results | |||||
Scudder Blue Chip Portfolio |
| 1-Year | 3-Year | 5-Year | Life of Portfolio* |
Class A | Growth of $10,000 | $11,604 | $11,500 | $8,923 | $14,190 |
Average annual total return | 16.04% | 4.77% | -2.25% | 4.67% | |
Russell 1000 Index | Growth of $10,000 | $11,140 | $11,337 | $9,153 | $17,447 |
Average annual total return | 11.40% | 4.27% | -1.76% | 7.53% | |
Scudder Blue Chip Portfolio |
|
|
| 1-Year | Life of Class** |
Class B | Growth of $10,000 |
|
| $11,555 | $13,323 |
Average annual total return |
|
| 15.55% | 12.15% | |
Russell 1000 Index | Growth of $10,000 |
|
| $11,140 | $13,004 |
Average annual total return |
|
| 11.40% | 11.08% |
The growth of $10,000 is cumulative.
* The Portfolio commenced operations on May 1, 1997. Index returns begin April 30, 1997.
** The Portfolio commenced offering Class B shares on July 1, 2002. Index returns begin June 30, 2002.
Information About Your Portfolio's Expenses |
|
Scudder Blue Chip Portfolio
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. The tables are based on an investment of $1,000 made at the beginning of the six-month period ended December 31, 2004.
The tables illustrate your Portfolio's expenses in two ways:
Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2004 | ||
Actual Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,085.10 | $1,081.90 |
Expenses Paid per $1,000* | $ 3.72 | $ 5.68 |
Hypothetical 5% Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,021.63 | $ 1,019.75 |
Expenses Paid per $1,000* | $ 3.61 | $ 5.51 |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365.
Annualized Expense Ratios | Class A | Class B |
Scudder Variable Series II — Scudder Blue Chip Portfolio | .71% | 1.08% |
For more information, please refer to the Portfolio's prospectus.
Management Summary December 31, 2004 |
|
Scudder Blue Chip Portfolio
The US equity market produced a strong return in 2004, as steady economic growth and favorable corporate earnings results supported stock prices amid a potentially challenging environment. The portfolio returned 16.04% (Class A shares, unadjusted for contract charges), ahead of the 11.40% return of its benchmark, the Russell 1000 Index for the year ended December 31, 2004.
We believe the portfolio's strong performance is attributable to our disciplined focus on individual stock selection. We generated the best relative performance within the diversified financials, media and materials industry groups. The portfolio's position in Ryder System, Inc. (1.3% of net assets), a company that provides transportation and supply-chain-management solutions worldwide, also was a key contributor to performance as an improving economy sparked increased demand for trucking services. Our stock selection was weakest within the industrials sector, where an underweight position in General Electric Co. (2.1% of net assets) detracted from relative performance. General Electric looked weak based on our model, as its fundamental characteristics were poor relative to its industry peers, but the stock nevertheless outperformed in 2004.
Overall, we are pleased with the portfolio's performance and its current positioning. As always, we will continue to utilize a balanced approach to our stock selection methodology — using both value and growth attributes as well as technical signals — to help us pinpoint timely market opportunities.
Janet Campagna
Robert Wang
Co-Managers
Deutsche Investment Management Americas Inc.
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the portfolio or any variable life insurance policy or variable annuity contract for which the portfolio is an investment option. These charges and fees will reduce returns.
Risk Considerations
This Portfolio is subject to stock market risk, meaning stocks in the portfolio may decline in value for extended periods of time due to the activities and financial prospects of individual companies, or due to general market and economic conditions. This may result in greater share price volatility. Please read this portfolio's prospectus for specific details regarding its investments and risk profile.
The Russell 1000 Index is an unmanaged capitalization-weighted price-only index composed of the largest-capitalized United States companies whose common stocks are traded in the US. This larger capitalization, market-oriented index is highly correlated with the S&P 500 Index. Index returns assume reinvestment of all distributions and do not reflect fees or expenses. It is not possible to invest directly into an index.
Portfolio management market commentary is as of December 31, 2004, and may not come to pass. This information is subject to change at any time based on market and other conditions.
Portfolio Summary |
Scudder Blue Chip Portfolio
Asset Allocation (Excludes Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Common Stocks | 96% | 97% |
Cash Equivalents | 4% | 3% |
| 100% | 100% |
Sector Diversification (Excludes Cash Equivalents and Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Financials | 19% | 19% |
Health Care | 15% | 15% |
Information Technology | 14% | 17% |
Industrials | 13% | 10% |
Consumer Discretionary | 12% | 15% |
Consumer Staples | 8% | 7% |
Energy | 8% | 6% |
Materials | 5% | 4% |
Telecommunication Services | 4% | 4% |
Utilities | 2% | 3% |
| 100% | 100% |
Asset allocation and sector diversification are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 19. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Portfolio as of month end will be posted to scudder.com on the 15th of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio December 31, 2004 | ![]() | ![]() |
|
Scudder Blue Chip Portfolio
|
| Value ($) |
|
| |
Common Stocks 96.6% | ||
Consumer Discretionary 11.9% | ||
Auto Components 1.2% | ||
American Axle & Manufacturing Holdings, Inc. | 87,100 | 2,670,486 |
Autoliv, Inc. | 25,600 | 1,236,480 |
| 3,906,966 | |
Hotels Restaurants & Leisure 1.0% | ||
McDonald's Corp. | 88,300 | 2,830,898 |
Regal Entertainment Group "A" | 24,100 | 500,075 |
| 3,330,973 | |
Internet & Catalog Retail 0.7% | ||
eBay, Inc.* | 18,200 | 2,116,296 |
Media 3.2% | ||
McGraw-Hill Companies, Inc. | 54,100 | 4,952,314 |
Walt Disney Co. | 186,100 | 5,173,580 |
| 10,125,894 | |
Multiline Retail 0.8% | ||
Target Corp. | 48,500 | 2,518,605 |
Specialty Retail 3.5% | ||
American Eagle Outfitters, Inc. | 54,300 | 2,557,530 |
Home Depot, Inc. | 129,400 | 5,530,556 |
PETCO Animal Supplies, Inc.* | 11,900 | 469,812 |
The Gap, Inc. | 124,800 | 2,635,776 |
| 11,193,674 | |
Textiles, Apparel & Luxury Goods 1.5% | ||
NIKE, Inc. "B" | 31,800 | 2,883,942 |
V.F. Corp. | 34,200 | 1,893,996 |
| 4,777,938 | |
Consumer Staples 7.8% | ||
Beverages 0.5% | ||
Adolph Coors Co. "B" (e) | 22,900 | 1,732,843 |
Food & Drug Retailing 1.7% | ||
7-Eleven, Inc.* | 24,400 | 584,380 |
BJ's Wholesale Club, Inc.* | 43,800 | 1,275,894 |
Costco Wholesale Corp. | 73,800 | 3,572,658 |
Wal-Mart Stores, Inc. | 100 | 5,282 |
| 5,438,214 | |
Food Products 2.9% | ||
Pilgrim's Pride Corp. (e) | 97,000 | 2,975,960 |
Tyson Foods, Inc. "A" | 179,500 | 3,302,800 |
William Wrigley Jr. Co. | 44,500 | 3,078,955 |
| 9,357,715 | |
Personal Products 1.7% | ||
Gillette Co. | 119,900 | 5,369,122 |
Tobacco 1.0% | ||
Altria Group, Inc. | 19,200 | 1,173,120 |
Loews Corp. — Carolina Group | 9,100 | 263,445 |
UST, Inc. | 35,900 | 1,727,149 |
| 3,163,714 | |
|
| Value ($) |
|
| |
Energy 7.6% | ||
Oil & Gas | ||
Anadarko Petroleum Corp. | 72,200 | 4,679,282 |
Apache Corp. | 89,100 | 4,505,787 |
Burlington Resources, Inc. | 41,100 | 1,787,850 |
Chesapeake Energy Corp. | 42,500 | 701,250 |
Devon Energy Corp. | 32,300 | 1,257,116 |
El Paso Corp. | 147,800 | 1,537,120 |
ExxonMobil Corp. | 101,940 | 5,225,444 |
Noble Energy Inc. | 20,500 | 1,264,030 |
Valero Energy Corp. | 76,000 | 3,450,400 |
| 24,408,279 | |
Financials 18.3% | ||
Banks 6.5% | ||
Bank of America Corp. | 203,800 | 9,576,562 |
Fremont General Corp. | 21,900 | 551,442 |
Golden West Financial Corp. | 2,400 | 147,408 |
National City Corp. | 9,400 | 352,970 |
US Bancorp. | 173,500 | 5,434,020 |
Wachovia Corp. | 30,800 | 1,620,080 |
Wells Fargo & Co. | 49,400 | 3,070,210 |
| 20,752,692 | |
Capital Markets 2.5% | ||
Lehman Brothers Holdings, Inc. | 50,200 | 4,391,496 |
Morgan Stanley | 64,400 | 3,575,488 |
| 7,966,984 | |
Consumer Finance 1.0% | ||
American Express Co. | 10,600 | 597,522 |
Capital One Financial Corp. | 19,000 | 1,599,990 |
Providian Financial Corp.* | 64,400 | 1,060,668 |
| 3,258,180 | |
Diversified Financial Services 2.7% | ||
Citigroup, Inc. | 52,600 | 2,534,268 |
Freddie Mac | 77,600 | 5,719,120 |
JPMorgan Chase & Co. | 9,464 | 369,191 |
| 8,622,579 | |
Insurance 4.1% | ||
American International Group, Inc. | 8,412 | 552,416 |
Chubb Corp. | 30,700 | 2,360,830 |
Loews Corp. | 19,300 | 1,356,790 |
MetLife, Inc. | 97,500 | 3,949,725 |
Odyssey Re Holdings Corp. (e) | 6,800 | 171,428 |
W.R. Berkley Corp. | 101,650 | 4,794,830 |
| 13,186,019 | |
Real Estate 1.5% | ||
Apartment Investment & Management Co. "A" (REIT) | 5,700 | 219,678 |
Avalonbay Communities, Inc. (REIT) | 10,300 | 775,590 |
Camden Property Trust (REIT) | 7,200 | 367,200 |
CenterPoint Properties Corp. (REIT) | 5,200 | 249,028 |
Equity Office Properties Trust (REIT) | 29,600 | 861,952 |
Equity Residential (REIT) | 16,300 | 589,734 |
General Growth Properties, Inc. (REIT) | 12,300 | 444,768 |
|
| Value ($) |
|
| |
Rayonier, Inc. | 8,200 | 401,062 |
The Mills Corp. (REIT) | 4,900 | 312,424 |
Vornado Realty Trust (REIT) | 5,800 | 441,554 |
| 4,662,990 | |
Health Care 14.1% | ||
Biotechnology 2.4% | ||
Cephalon, Inc.* | 10,000 | 508,800 |
Charles River Laboratories International, Inc.* | 52,000 | 2,392,520 |
Genzyme Corp.* | 30,400 | 1,765,328 |
Gilead Sciences, Inc.* | 86,500 | 3,026,635 |
| 7,693,283 | |
Health Care Equipment & Supplies 2.1% | ||
Baxter International, Inc. | 25,200 | 870,408 |
Becton, Dickinson & Co. | 79,600 | 4,521,280 |
Dade Behring, Inc.* | 7,900 | 442,400 |
Respironics, Inc.* | 14,400 | 782,784 |
| 6,616,872 | |
Health Care Providers & Services 4.1% | ||
AmerisourceBergen Corp. | 55,600 | 3,262,608 |
Covance, Inc.* | 11,800 | 457,250 |
Coventry Health Care, Inc.* | 66,300 | 3,519,204 |
UnitedHealth Group, Inc. | 67,000 | 5,898,010 |
| 13,137,072 | |
Pharmaceuticals 5.5% | ||
Allergan, Inc. | 6,000 | 486,420 |
Bristol-Myers Squibb Co. | 8,000 | 204,960 |
Johnson & Johnson | 137,182 | 8,700,082 |
Medicis Pharmaceutical Corp. "A" | 12,500 | 438,875 |
Merck & Co., Inc. | 59,900 | 1,925,186 |
Pfizer, Inc. | 221,150 | 5,946,724 |
| 17,702,247 | |
Industrials 12.3% | ||
Aerospace & Defense 3.8% | ||
Boeing Co. | 87,400 | 4,524,698 |
General Dynamics Corp. | 29,700 | 3,106,620 |
Northrop Grumman Corp. | 2,100 | 114,156 |
Raytheon Co. | 116,200 | 4,512,046 |
| 12,257,520 | |
Air Freight & Logistics 3.1% | ||
FedEx Corp. | 52,400 | 5,160,876 |
J.B. Hunt Transport Services, Inc. | 13,700 | 614,445 |
Ryder System, Inc. | 86,900 | 4,151,213 |
| 9,926,534 | |
Commercial Services & Supplies 2.1% | ||
Cendant Corp. | 181,600 | 4,245,808 |
Corporate Executive Board Co. | 12,600 | 843,444 |
The Brinks Co. | 37,200 | 1,470,144 |
| 6,559,396 | |
Industrial Conglomerates 2.2% | ||
3M Co. | 2,500 | 205,175 |
General Electric Co. | 188,100 | 6,865,650 |
| 7,070,825 | |
|
| Value ($) |
|
| |
Machinery 0.8% | ||
Cummins, Inc. | 31,000 | 2,597,490 |
Road & Rail 0.3% | ||
Norfolk Southern Corp. | 22,200 | 803,418 |
Information Technology 13.8% | ||
Communications Equipment 1.9% | ||
Cisco Systems, Inc.* | 296,900 | 5,730,170 |
Motorola, Inc. | 14,600 | 251,120 |
| 5,981,290 | |
Computers & Peripherals 3.0% | ||
International Business Machines Corp. | 73,000 | 7,196,340 |
Sun Microsystems, Inc.* | 443,200 | 2,384,416 |
| 9,580,756 | |
Internet Software & Services 0.8% | ||
Ingram Micro, Inc. "A"* | 65,600 | 1,364,480 |
Yahoo!, Inc.* | 29,800 | 1,122,864 |
| 2,487,344 | |
IT Consulting & Services 0.7% | ||
Unisys Corp.* | 236,800 | 2,410,624 |
Semiconductors & Semiconductor Equipment 4.8% | ||
Advanced Micro Devices, Inc.* | 83,900 | 1,847,478 |
Cree, Inc.* (e) | 48,300 | 1,935,864 |
Intel Corp. | 270,900 | 6,336,351 |
MEMC Electronic Materials, Inc.* | 59,700 | 791,025 |
Microchip Technology, Inc. | 46,800 | 1,247,688 |
Micron Technology, Inc.* | 186,000 | 2,297,100 |
National Semiconductor Corp.* | 50,600 | 908,270 |
| 15,363,776 | |
Software 2.6% | ||
Autodesk, Inc. | 24,800 | 941,160 |
Microsoft Corp. | 111,300 | 2,972,823 |
Oracle Corp.* | 285,400 | 3,915,688 |
Symantec Corp.* | 14,600 | 376,096 |
| 8,205,767 | |
Materials 4.4% | ||
Chemicals 1.2% | ||
Eastman Chemical Co. | 19,100 | 1,102,643 |
Monsanto Co. | 49,100 | 2,727,505 |
| 3,830,148 | |
Containers & Packaging 0.9% | ||
Owens-Illinois, Inc.* | 119,800 | 2,713,470 |
Metals & Mining 2.3% | ||
Phelps Dodge Corp. | 36,900 | 3,650,148 |
Southern Peru Copper Corp. (e) | 10,600 | 500,426 |
United States Steel Corp. (e) | 61,800 | 3,167,250 |
| 7,317,824 | |
Paper & Forest Products 0.0% | ||
Louisiana-Pacific Corp. | 3,100 | 82,894 |
|
| Value ($) |
|
| |
Telecommunication Services 4.3% | ||
Diversified Telecommunication Services 2.8% | ||
Sprint Corp. | 130,300 | 3,237,955 |
Verizon Communications, Inc. | 142,900 | 5,788,879 |
| 9,026,834 | |
Wireless Telecommunication Services 1.5% | ||
Nextel Communications, Inc. "A"* | 39,800 | 1,194,000 |
Nextel Partners, Inc. "A"* | 96,800 | 1,891,472 |
Western Wireless Corp. "A"* | 53,300 | 1,561,690 |
| 4,647,162 | |
Utilities 2.1% | ||
Electric Utilities 1.5% | ||
American Electric Power Co. | 31,000 | 1,064,540 |
Exelon Corp. | 83,600 | 3,684,251 |
| 4,748,791 | |
Multi-Utilities 0.6% | ||
Duke Energy Corp. | 85,200 | 2,158,115 |
Total Common Stocks (Cost $272,550,345) | 308,809,130 |
| Principal Amount ($) | Value ($) |
|
| |
US Government Backed 0.2% | ||
US Treasury Bill: |
|
|
1.949%**, 1/20/2005 (f) | 90,000 | 89,922 |
1.813%**, 1/20/2005 (f) | 615,000 | 614,422 |
2.946%**, 1/20/2005 (f) | 25,000 | 24,975 |
Total US Government Backed (Cost $729,066) | 729,319 |
|
| Value ($) |
|
| |
Securities Lending Collateral 2.4% | ||
Daily Assets Fund Institutional, 2.25% (c) (d) (Cost $7,703,810) | 7,703,810 | 7,703,810 |
| ||
Cash Equivalents 3.7% | ||
Scudder Cash Management QP Trust, 2.24% (b) (Cost $11,626,481) | 11,626,481 | 11,626,481 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $292,609,702) (a) | 102.9 | 328,868,740 |
Other Assets and Liabilities, Net | (2.9) | (9,176,138) |
Net Assets | 100.0 | 319,692,602 |
Notes to Scudder Blue Chip Portfolio of Investments |
* Non-income producing security.
** Annualized yield at time of purchase; not a coupon rate.
(a) The cost for federal income tax purposes was $294,567,784. At December 31, 2004, net unrealized appreciation for all securities based on tax cost was $34,300,956. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $36,329,188 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $2,028,232.
(b) Scudder Cash Management QP Trust is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
(c) Daily Assets Fund Institutional, an affiliated fund, is managed by Deutsche Asset Management, Inc. The rate shown is the annualized seven-day yield at period end.
(d) Represents collateral held in connection with securities lending.
(e) All or a portion of these securities were on loan (see Notes to Financial Statements). The value of all securities loaned at December 31, 2004 amounted to $7,509,709 which is 2.3% of total net assets.
(f) At December 31, 2004, this security, in part or in whole, has been segregated to cover initial margin requirements for open futures contracts.
REIT: Real Estate Investment Trust
At December 31, 2004, open futures contracts purchased were as follows:
Futures | Expiration Date | Contracts | Aggregate Face Value ($) | Value ($) | Unrealized Appreciation ($) |
S&P 500 | 3/17/2005 | 36 | 10,694,997 | 10,923,300 | 228,303 |
The accompanying notes are an integral part of the financial statements.
Financial Statements |
|
Statement of Assets and Liabilities as of December 31, 2004 | |
Assets | |
Investments: Investments in securities, at value (cost $273,279,411) — including $7,509,709 of securities loaned | $ 309,538,449 |
Investment in Daily Assets Fund Institutional (cost $7,703,810)* | 7,703,810 |
Investment in Scudder Cash Management QP Trust (cost $11,626,481) | 11,626,481 |
Total investments in securities, at value (cost $292,609,702) | 328,868,740 |
Receivable for investments sold | 42,265,548 |
Dividends receivable | 290,468 |
Interest receivable | 21,375 |
Receivable for Portfolio shares sold | 154,705 |
Other assets | 9,451 |
Total assets | 371,610,287 |
Liabilities | |
Payable for Portfolio shares redeemed | 328,600 |
Payable for investments purchased | 43,622,453 |
Payable for daily variation margin on open futures contracts | 8,259 |
Payable upon return of securities loaned | 7,703,810 |
Accrued management fee | 173,127 |
Other accrued expenses and payables | 81,436 |
Total liabilities | 51,917,685 |
Net assets, at value | $ 319,692,602 |
Net Assets | |
Net assets consist of: Undistributed net investment income | 2,788,284 |
Net unrealized appreciation (depreciation) on: Investments | 36,259,038 |
Futures | 228,303 |
Accumulated net realized gain (loss) | (18,711,816) |
Paid-in capital | 299,128,793 |
Net assets, at value | $ 319,692,602 |
Class A Net Asset Value, offering and redemption price per share ($282,957,768 ÷ 20,734,323 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 13.65 |
Class B Net Asset Value, offering and redemption price per share ($36,734,834 ÷ 2,700,912 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 13.60 |
* Represents collateral on securities loaned.
Statement of Operations for the year ended December 31, 2004 | |
Investment Income | |
Income: Dividends (net of foreign taxes withheld of $88) | $ 4,842,841 |
Interest — Scudder Cash Management QP Trust | 126,342 |
Interest | 7,305 |
Securities lending income, including income from Daily Assets Fund Institutional | 7,304 |
Total Income | 4,983,792 |
Expenses: Management fee | 1,814,765 |
Custodian fees | 18,656 |
Distribution service fees (Class B) | 67,530 |
Record keeping fees (Class B) | 34,564 |
Auditing | 47,569 |
Legal | 19,110 |
Trustees' fees and expenses | 7,091 |
Reports to shareholders | 32,455 |
Other | 16,886 |
Total expenses, before expense reductions | 2,058,626 |
Expense reductions | (2,934) |
Total expenses, after expense reductions | 2,055,692 |
Net investment income (loss) | 2,928,100 |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from: Investments | 37,952,397 |
Futures | 766,622 |
| 38,719,019 |
Net unrealized appreciation (depreciation) during the period on: Investments | 1,044,088 |
Futures | 67,347 |
| 1,111,435 |
Net gain (loss) on investment transactions | 39,830,454 |
Net increase (decrease) in net assets resulting from operations | $ 42,758,554 |
The accompanying notes are an integral part of the financial statements.
|
Statement of Changes in Net Assets | ||
Increase (Decrease) in Net Assets | Years Ended December 31, | |
2004 | 2003 | |
Operations: Net investment income (loss) | $ 2,928,100 | $ 1,750,488 |
Net realized gain (loss) on investment transactions | 38,719,019 | 15,303,859 |
Net unrealized appreciation (depreciation) on investment transactions during the period | 1,111,435 | 40,462,393 |
Net increase (decrease) in net assets resulting from operations | 42,758,554 | 57,516,740 |
Distributions to shareholders from: Net investment income Class A | (1,626,701) | (1,353,726) |
Class B | (56,503) | (7,619) |
Portfolio share transactions: Class A Proceeds from shares sold | 28,844,570 | 48,054,210 |
Reinvestment of distributions | 1,626,701 | 1,353,726 |
Cost of shares redeemed | (26,173,350) | (35,300,630) |
Net increase (decrease) in net assets from Class A share transactions | 4,297,921 | 14,107,306 |
Class B Proceeds from shares sold | 16,893,828 | 14,291,287 |
Reinvestment of distributions | 56,503 | 7,619 |
Cost of shares redeemed | (1,310,947) | (18,533) |
Net increase (decrease) in net assets from Class B share transactions | 15,639,384 | 14,280,373 |
Increase (decrease) in net assets | 61,012,655 | 84,543,074 |
Net assets at beginning of period | 258,679,947 | 174,136,873 |
Net assets at end of period (including undistributed net investment income of $2,788,284 and $1,620,422, respectively) | $ 319,692,602 | $ 258,679,947 |
Other Information | ||
Class A Shares outstanding at beginning of period | 20,421,127 | 18,535,421 |
Shares sold | 2,286,747 | 5,312,621 |
Shares issued to shareholders in reinvestment of distributions | 132,360 | 150,749 |
Shares redeemed | (2,105,911) | (3,577,664) |
Net increase (decrease) in Portfolio shares | 313,196 | 1,885,706 |
Shares outstanding at end of period | 20,734,323 | 20,421,127 |
Class B Shares outstanding at beginning of period | 1,427,149 | 40,975 |
Shares sold | 1,373,668 | 1,387,142 |
Shares issued to shareholders in reinvestment of distributions | 4,597 | 849 |
Shares redeemed | (104,502) | (1,817) |
Net increase (decrease) in Portfolio shares | 1,273,763 | 1,386,174 |
Shares outstanding at end of period | 2,700,912 | 1,427,149 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights |
|
Class A
Years Ended December 31, | 2004 | 2003 | 2002 | 2001 | 2000a |
Selected Per Share Data | |||||
Net asset value, beginning of period | $ 11.84 | $ 9.37 | $ 12.07 | $ 14.41 | $ 15.69 |
Income (loss) from investment operations: Net investment income (loss)b | .13 | .08 | .07 | .05 | .07 |
Net realized and unrealized gain (loss) on investment transactions | 1.76 | 2.45 | (2.73) | (2.33) | (1.29) |
Total from investment operations | 1.89 | 2.53 | (2.66) | (2.28) | (1.22) |
Less distributions from: Net investment income | (.08) | (.06) | (.04) | (.06) | (.06) |
Net asset value, end of period | $ 13.65 | $ 11.84 | $ 9.37 | $ 12.07 | $ 14.41 |
Total Return (%) | 16.04 | 27.25 | (22.11) | (15.81) | (7.84) |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | 283 | 242 | 174 | 240 | 228 |
Ratio of expenses (%) | .70 | .71 | .69 | .69 | .71 |
Ratio of net investment income (loss) (%) | 1.08 | .82 | .65 | .42 | .44 |
Portfolio turnover rate (%) | 249 | 182 | 195 | 118 | 86 |
a On June 18, 2001, the Portfolio implemented a 1 for 10 reverse stock split. Per share information, for the period prior to December 31, 2001, has been restated to reflect the effect of the split. Shareholders received 1 share for every 10 shares owned and net asset value per share increased correspondingly.
b Based on average shares outstanding during the period.
Class B
Years Ended December 31, | 2004 | 2003 | 2002a |
Selected Per Share Data | |||
Net asset value, beginning of period | $ 11.80 | $ 9.35 | $ 10.28 |
Income (loss) from investment operations: Net investment income (loss)b | .09 | .04 | .03 |
Net realized and unrealized gain (loss) on investment transactions | 1.74 | 2.45 | (.96) |
Total from investment operations | 1.83 | 2.49 | (.93) |
Less distributions from: Net investment income | (.03) | (.04) | — |
Net asset value, end of period | $ 13.60 | $ 11.80 | $ 9.35 |
Total Return (%) | 15.55 | 26.76 | (9.05)** |
Ratios to Average Net Assets and Supplemental Data | |||
Net assets, end of period ($ millions) | 37 | 17 | .4 |
Ratio of expenses (%) | 1.08 | 1.10 | .94* |
Ratio of net investment income (loss) (%) | .70 | .43 | .61* |
Portfolio turnover rate (%) | 249 | 182 | 195 |
a For the period July 1, 2002 (commencement of operations of Class B shares) to December 31, 2002.
b Based on average shares outstanding during the period.
* Annualized
** Not annualized
|
Scudder Conservative Income Strategy Portfolio
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent period, the Portfolio limited these expenses; had it not done so, expenses would have been higher. The tables are based on an investment of $1,000 made at the beginning of the period (August 16, 2004) ended December 31, 2004.
The tables illustrate your Portfolio's expenses in two ways:
Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the period ended December 31, 2004 | |
Actual Portfolio Return | Class B |
Beginning Account Value 8/16/04 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,049.00 |
Expenses Paid per $1,000* | $ 2.88 |
Hypothetical 5% Portfolio Return | Class B |
Beginning Account Value 8/16/04 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,015.95 |
Expenses Paid per $1,000* | $ 2.84 |
* Expenses are equal to the Portfolio's annualized expense ratio for the share class, multiplied by the average account value over the period, multiplied by the number of days since the commencement of the class (August 16, 2004), then divided by 365.
Annualized Expense Ratio | Class B |
Scudder Variable Series II — Scudder Conservative Income Strategy Portfolio | .75% |
For more information, please refer to the Portfolio's prospectus.
Management Summary December 31, 2004 |
|
Scudder Conservative Income Strategy Portfolio
Scudder Conservative Income Strategy Portfolio is one of four new fund-of-funds portfolios. Each portfolio is constructed as a strategically allocated mix of variable portfolios and managed to pursue consistent returns over time, while mitigating risk and pursuing a long-term investment objective. Scudder Conservative Income Strategy Portfolio seeks current income and, as a secondary objective, long-term growth of capital. The portfolio gained 4.90% (Class B shares, unadjusted for contract charges) from its date of inception, August 16, 2004, through December 31, 2004. Investors should keep in mind that during the start-up phase of the portfolio, it required some time to invest all the cash inflows. Because we had large cash flows, often exceeding the size of the portfolio, our allocation was heavily weighted in cash — even though we invested the cash right away every day.
Stocks performed exceptionally well in 2003, when profit margins widened because productivity accelerated but labor costs remained low (due to a soft labor market). However, equity performance was lower in 2004, due in part to rising interest rates, concerns about inflation and soaring energy prices, all of which can impact the revenue growth of companies. Performance did improve at the end of 2004 as signs of economic strength emerged and oil prices decreased. The end of uncertainty surrounding the US presidential election also helped the stock market find its footing. Specifically, the energy and materials sectors performed particularly well in 2004, while the technology, consumer staples and consumer discretionary sectors lagged behind. Going forward, profit margins are not likely to widen further, and may even narrow. As a result, we believe that returns will likely be modest. The portfolio underweighted equities relative to fixed income only in December and overweighted equities for all other months since inception.
The Federal Reserve Board ("the Fed"), in attempt to prevent the economy from overheating and inflation from rising, raised interest rates five times from 12/31/03 through 12/31/04. Because bond prices typically move in the opposite direction of interest rates, bond prices fell in response. Still, bond investors seemed to be betting that the economy faces too many hurdles for the Fed to raise interest rates drastically, so the price of bonds did not fall significantly. However, it seems likely that the Fed will continue to raise interest rates, so we believe that the bull market for bonds we have experienced over the past decades is likely over. Although, the portfolio is currently overweighting (or favoring) bonds relative to cash, these weightings may change.
Arnim Holzer Inna Okounkova Robert Wang
Co-Managers
Deutsche Investment Management Americas Inc.
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the portfolio or any variable life insurance policy or variable annuity contract for which the portfolio is an investment option. These charges and fees will reduce returns.
Returns during part or all of the periods shown reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns would have been lower.
Risk Considerations
Diversification does not eliminate risk. The underlying portfolios invest in individual equity and bond funds whose yields and market values fluctuate, so that your investment may be worth more or less that its original cost. In addition, the underlying portfolios are subject to stock market risk, meaning stocks in the portfolio may decline in value for extended periods of time due to the activities and financial prospects of individual companies, or due to general market and economic conditions. Investing in foreign securities presents certain unique risks not associated with domestic investments, such as currency fluctuation, political and economic changes, and market risks. Derivatives may be more volatile and less liquid than traditional securities, and the portfolio could suffer losses on its derivative positions. Please read this portfolio's prospectus for specific details regarding its risk profile.
Portfolio management market commentary is as of December 31, 2004, and may not come to pass. This information is subject to change at any time based on market and other conditions.
Portfolio Summary |
Scudder Conservative Income Strategy Portfolio
Asset Allocation | 12/31/04 |
| |
Fixed Income | 72% |
Equity | 25% |
Cash Equivalents | 3% |
| 100% |
Asset allocation is subject to change.
For more complete details about the Portfolio's investment portfolio, see page 29. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Portfolio as of month end will be posted to scudder.com on the 15th of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio December 31, 2004 | ![]() | ![]() |
|
Scudder Conservative Income Strategy Portfolio
|
| Value ($) |
|
| |
Equity Funds 22.6% | ||
Scudder SVS I Global Discovery Portfolio "A" | 273 | 3,484 |
Scudder SVS I Growth & Income Portfolio "A" | 7,921 | 73,590 |
Scudder SVS I International Portfolio "A" | 2,200 | 20,900 |
Scudder SVS II Aggressive Growth Portfolio "A" | 2,285 | 22,489 |
Scudder SVS II Blue Chip Portfolio "A" | 6,023 | 82,218 |
Scudder SVS II Dreman High Return Equity Portfolio "A" | 3,083 | 39,001 |
Scudder SVS II Dreman Small Cap Value Portfolio "A" | 816 | 16,363 |
Scudder SVS II Eagle Focused Large Cap Growth Portfolio "A" | 1,678 | 14,750 |
Scudder SVS II Growth Portfolio "A" | 2,005 | 38,920 |
Scudder SVS II International Select Equity Portfolio "A" | 1,243 | 14,802 |
Scudder SVS II Large Cap Value Portfolio "A" | 2,743 | 43,307 |
Scudder SVS II MFS Strategic Value Portfolio "A" | 1,806 | 21,666 |
Scudder SVS II Small Cap Growth Portfolio "A" | 1,436 | 18,076 |
Scudder VIT Real Estate Portfolio "A" | 638 | 10,412 |
Total Equity Funds (Cost $399,842) | 419,978 | |
|
| Value ($) |
|
| |
Fixed Income Funds 65.5% | ||
Scudder SVS II Fixed Income Portfolio "A" | 84,823 | 1,023,809 |
Scudder SVS II Government and Agency Securities Portfolio "A" | 10,062 | 126,283 |
Scudder SVS II High Income Portfolio "A" | 5,799 | 50,913 |
Scudder SVS II Strategic Income Portfolio "A" | 1,385 | 16,964 |
Total Fixed Income Funds (Cost $1,210,701) | 1,217,969 | |
| ||
Cash Equivalents 2.7% | ||
Scudder Cash Management QP Trust, 2.24% (b) (Cost $50,936) | 50,936 | 50,936 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $1,661,479) (a) | 90.8 | 1,688,883 |
Other Assets and Liabilities, Net | 9.2 | 171,801 |
Net Assets | 100.0 | 1,860,684 |
Notes to Scudder Conservative Income Strategy Portfolio of Investments |
(a) The cost for federal income tax purposes was $1,661,479. At December 31, 2004, net unrealized appreciation for all securities based on tax cost was $27,404. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $27,404 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $0.
(b) Scudder Cash Management QP Trust is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
The accompanying notes are an integral part of the financial statements.
Financial Statements |
|
Statement of Assets and Liabilities | |
Assets | |
Investments: Investments in securities, at value (cost $1,610,543) | $ 1,637,947 |
Investment in Scudder Cash Management QP Trust (cost $50,936) | 50,936 |
Total investments in securities, at value (cost $1,661,479) | 1,688,883 |
Interest receivable | 85 |
Receivable for Portfolio shares sold | 161,910 |
Due from Advisor | 37,040 |
Other assets | 593 |
Total assets | 1,888,511 |
Liabilities | |
Payable for Portfolio shares redeemed | 416 |
Other accrued expenses and payables | 27,411 |
Total liabilities | 27,827 |
Net assets, at value | $ 1,860,684 |
Net Assets | |
Net assets consist of: Net unrealized appreciation (depreciation) on investments | 27,404 |
Accumulated net realized gain (loss) | 4,048 |
Paid-in capital | 1,829,232 |
Net assets, at value | $ 1,860,684 |
Class B Shares Net asset value, offering and redemption price per share ($1,860,684 ÷ 177,411 shares outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 10.49 |
Statement of Operations | |
Investment Income | |
Income: | |
Interest — Scudder Cash Management QP Trust | $ 282 |
Total Income | 282 |
Expenses: Management fee | 363 |
Custodian and accounting fees | 22,806 |
Distribution service fees (Class B) | 604 |
Record keeping fees (Class B) | 363 |
Auditing | 24,001 |
Legal | 493 |
Trustees' fees and expenses | 92 |
Reports to shareholders | 2,046 |
Offering costs | 1,011 |
Other | 128 |
Total expenses, before expense reductions | 51,907 |
Expense reductions | (50,066) |
Total expenses, after expense reductions | 1,841 |
Net investment income (loss) | (1,559) |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from investments | 4,596 |
Net unrealized appreciation (depreciation) during the period on investments | 27,404 |
Net gain (loss) on investment transactions | 32,000 |
Net increase (decrease) in net assets resulting from operations | $ 30,441 |
The accompanying notes are an integral part of the financial statements.
|
Statement of Changes in Net Assets | |
Increase (Decrease) in Net Assets | Period Ended December 31, 2004a |
Operations: Net investment income (loss) | $ (1,559) |
Net realized gain (loss) on investment transactions | 4,596 |
Net unrealized appreciation (depreciation) on investment transactions during the period | 27,404 |
Net increase (decrease) in net assets resulting from operations | 30,441 |
Portfolio share transactions: Class B Proceeds from shares sold | 1,899,687 |
Cost of shares redeemed | (69,444) |
Net increase (decrease) in net assets from Class B share transactions | 1,830,243 |
Increase (decrease) in net assets | 1,860,684 |
Net assets at beginning of period | — |
Net assets at end of period | $ 1,860,684 |
Other Information | |
Class B Shares outstanding at beginning of period | — |
Shares sold | 184,103 |
Shares redeemed | (6,692) |
Net increase (decrease) in Portfolio shares | 177,411 |
Shares outstanding at end of period | 177,411 |
a For the period from August 16, 2004 (commencement of operations) to December 31, 2004.
The accompanying notes are an integral part of the financial statements.
Financial Highlights |
|
Class B
| 2004a |
Selected Per Share Data | |
Net asset value, beginning of period | $ 10.00 |
Income (loss) from investment operations: Net investment income (loss)b | (.02) |
Net realized and unrealized gain (loss) on investment transactions | .51 |
Total from investment operations | .49 |
Net asset value, end of period | $ 10.49 |
Total Return (%)c | 4.90** |
Ratios to Average Net Assets and Supplemental Data | |
Net assets, end of period ($ millions) | 2 |
Ratio of expenses before expense reductions (%) | 21.20* |
Ratio of expenses after expense reductions (%) | .75* |
Ratio of net investment income (loss) (%) | (.63)* |
Portfolio turnover rate (%) | 37* |
a For the period from August 16, 2004 (commencement of operations) to December 31, 2004.
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
Performance Summary December 31, 2004 |
|
Scudder Fixed Income Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns.
Investments by the Portfolio in lower-rated bonds present greater risk to principal and income than investments in higher-quality securities. This Portfolio invests in individual bonds whose yields and market values fluctuate so that your investment may be worth more or less than its original cost. Additionally, investing in foreign securities presents certain unique risks not associated with domestic investments, such as currency fluctuation and changes in political/economic conditions and market risks. All of these factors may result in greater share price volatility. Please see this Portfolio's prospectus for specific details regarding its investments and risk profile.
Growth of an Assumed $10,000 Investment in Scudder Fixed Income Portfolio from 5/1/1996 to 12/31/2004 | ||
[] Scudder Fixed Income Portfolio — Class A [] Lehman Brothers Aggregate Bond Index | ||
![]() |
| The Lehman Brothers Aggregate Bond (LBAB) Index is an unmanaged market value-weighted measure of Treasury issues, agency issues, corporate bond issues and mortgage securities. Index returns assume reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
Yearly periods ended December 31 |
|
Comparative Results | |||||
Scudder Fixed Income Portfolio |
| 1-Year | 3-Year | 5-Year | Life of Portfolio* |
Class A | Growth of $10,000 | $10,453 | $11,869 | $13,790 | $16,462 |
Average annual total return | 4.53% | 5.88% | 6.64% | 5.92% | |
Lehman Brothers Aggregate Bond Index | Growth of $10,000 | $10,434 | $11,976 | $14,497 | $18,181 |
Average annual total return | 4.34% | 6.19% | 7.71% | 7.14% | |
Scudder Fixed Income Portfolio |
|
|
| 1-Year | Life of Class** |
Class B | Growth of $10,000 |
|
| $10,410 | $11,482 |
Average annual total return |
|
| 4.10% | 5.68% | |
Lehman Brothers Aggregate Bond Index | Growth of $10,000 |
|
| $10,434 | $11,539 |
Average annual total return |
|
| 4.34% | 5.89% |
The growth of $10,000 is cumulative.
* The Portfolio commenced operations on May 1, 1996. Index returns begins April 30, 1996. Total returns would have been lower for the 5-Year and Life of Portfolio periods for Class A shares if the Portfolio's expenses were not maintained.
** The Portfolio commenced offering Class B shares on July 1, 2002. Index returns begin June 30, 2002.
Information About Your Portfolio's Expenses |
|
Scudder Fixed Income Portfolio
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. The tables are based on an investment of $1,000 made at the beginning of the six-month period ended December 31, 2004.
The tables illustrate your Portfolio's expenses in two ways:
Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2004 | ||
Actual Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,041.40 | $ 1,038.80 |
Expenses Paid per $1,000* | $ 3.37 | $ 5.26 |
Hypothetical 5% Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,021.90 | $ 1,020.05 |
Expenses Paid per $1,000* | $ 3.34 | $ 5.21 |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365.
Annualized Expense Ratios | Class A | Class B |
Scudder Variable Series II — Scudder Fixed Income Portfolio | .66% | 1.02% |
For more information, please refer to the Portfolio's prospectus.
Management Summary December 31, 2004 |
|
Scudder Fixed Income Portfolio
Although delayed on mixed economic data, the Federal Open Market Committee finally embarked on a "measured" pace of monetary policy tightening at mid-year that included five separate 25 basis points ("bps" — a basis point is one hundredth of a percentage point) increases. The federal funds rate finished the year 125 bps higher at 2.25%. The yield curve flattened in response to the Fed policy coupled with moderate employment growth and the perception that inflation will not accelerate too quickly. The two-year Treasury yield rose 125 bps, in line with the Fed, while the 10-year Treasury yield circuitously finished the year at 4.22% — down only 3 bps from where it started. Against this backdrop, the portfolio returned 4.53% (Class A shares, unadjusted for contract charges) for the 12-month period ended December 31, 2004, outpacing the 4.34% return of its benchmark, the Lehman Brothers Aggregate Bond Index. Please see the following page for standardized performance as of December 31, 2004.
All non-Treasury sectors significantly outperformed similar duration Treasury issues during the year. Credit, the best-performing sector, benefited from excellent fundamentals, continued demand for yield and low volatility. Our security selection within Credit was a positive contributor to performance. Our mortgage holdings emphasized securities that are less prepayment-sensitive than the pass-through issues that comprise the index. On balance, our activities in the mortgage sector contributed to performance, despite declining volatility. The remaining high-quality sectors (asset-backed securities, collateralized mortgage-backed securities) generated solid excess returns as valuations improved.
Gary W. Bartlett Timothy C. Vile
Warren S. Davis J. Christopher Gagnier
Thomas J. Flaherty Daniel R. Taylor William T. Lissenden
Co-Lead Managers Portfolio Manager
Deutsche Investment Management Americas Inc.
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the portfolio or any variable life insurance policy or variable annuity contract for which the portfolio is an investment option. These charges and fees will reduce returns.
Risk Considerations
Investments by the portfolio in lower-rated bonds present greater risk to principal and income than investments in higher-quality securities. This portfolio invests in individual bonds whose yields and market values fluctuate so that your investment may be worth more or less than its original cost. Additionally, investing in foreign securities presents certain unique risks not associated with domestic investments, such as currency fluctuation and changes in political/economic conditions and market risks. All of these factors may result in greater share price volatility. Please see this portfolio's prospectus for specific details regarding its investments and risk profile.
A Treasury's guarantee relates only to the prompt payment of principal and interest and does not remove market risks if the investment is sold prior to maturity.
The Lehman Brothers Aggregate Bond Index is an unmanaged, market-value-weighted measure of Treasury issues, agency issues, corporate bond issues and mortgage securities. Index returns assume reinvested dividends and, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
Portfolio management market commentary is as of December 31, 2004, and may not come to pass. This information is subject to change at any time based on market and other conditions.
Portfolio Summary |
Scudder Fixed Income Portfolio
Asset Allocation (Excludes Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Collateralized Mortgage Obligations | 24% | 19% |
US Government Backed | 17% | 10% |
Corporate Bonds | 16% | 25% |
Commercial and Non-Agency Mortgage Backed Securities | 11% | — |
Asset Backed | 8% | 12% |
Foreign Bonds — US$ Denominated | 8% | 5% |
US Government Agency Sponsored Pass-Throughs | 7% | 18% |
Municipal Investments | 5% | 5% |
Cash Equivalents, net | 4% | 6% |
| 100% | 100% |
Corporate and Foreign Bonds Diversification (Excludes Cash Equivalents and Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Financials | 45% | 29% |
Utilities | 18% | 12% |
Energy | 11% | 15% |
Telecommunication Services | 8% | 4% |
Health Care | 7% | 4% |
Consumer Discretionary | 6% | 12% |
Materials | 4% | 8% |
Industrials | 1% | 15% |
Consumer Staples | — | 1% |
| 100% | 100% |
Quality (Excludes Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
US Government and Agencies | 49% | 46% |
AAA* | 26% | 26% |
AA | 3% | 2% |
A | 11% | 9% |
BBB | 11% | 11% |
BB | — | 4% |
B | — | 2% |
| 100% | 100% |
* Includes cash equivalents
Effective Maturity (Excludes Cash Equivalents and Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Under 1 year | 9% | 6% |
1 < 5 years | 46% | 51% |
5 < 10 years | 25% | 24% |
10 < 15 years | 10% | 8% |
15 years or greater | 10% | 11% |
| 100% | 100% |
Weighted average effective maturity: 6.7 years and 6.8 years, respectively.
Asset allocation, diversification, quality and effective maturity are subject to change.
The quality ratings represent the lower of Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P") credit ratings. The ratings of Moody's and S&P represent their opinions as to the quality of the securities they rate. Ratings are relative and subjective and are not absolute standards of quality. The Fund's credit quality does not remove market risk.
For more complete details about the Portfolio's investment portfolio, see page 38. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Portfolio as of month end will be posted to scudder.com on the 15th of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio December 31, 2004 | ![]() | ![]() |
|
Scudder Fixed Income Portfolio
| Principal Amount ($) | Value ($) |
|
| |
Corporate Bonds 16.5% | ||
Consumer Discretionary 0.9% | ||
Auburn Hills Trust, 12.375%, 5/1/2020 | 161,000 | 252,523 |
Comcast Cable Communications Holdings, Inc., 8.375%, 3/15/2013 | 690,000 | 850,836 |
Comcast MO of Delaware, Inc., 9.0%, 9/1/2008 | 490,000 | 572,383 |
DaimlerChrysler NA Holdings Corp., 4.75%, 1/15/2008 | 540,000 | 551,530 |
General Motors Corp., 8.375%, 7/15/2033 | 205,000 | 212,397 |
Tele-Communications, Inc., "A", 9.875%, 6/15/2022 | 250,000 | 354,895 |
2,794,564 | ||
Energy 1.9% | ||
CenterPoint Energy Resources Corp., Series B, 7.875%, 4/1/2013 | 735,000 | 873,614 |
Enterprise Products Operating LP, 7.5%, 2/1/2011 | 580,000 | 657,601 |
Halliburton Co., 5.5%, 10/15/2010 | 1,770,000 | 1,864,302 |
Pemex Project Funding Master Trust, 144A, 3.79%*, 6/15/2010 | 930,000 | 954,180 |
Tri-State Generation & Transmission Association, 144A, 6.04%, 1/31/2018 | 1,190,000 | 1,257,211 |
5,606,908 | ||
Financials 7.5% | ||
American General Finance Corp., Series H, 4.0%, 3/15/2011 | 1,417,000 | 1,374,214 |
Capital One Bank, 4.875%, 5/15/2008 | 75,000 | 77,026 |
DBS Capital Funding Corp., 144A, 7.657%*, 3/31/2049 | 1,330,000 | 1,537,953 |
Duke Capital LLC, 4.302%, 5/18/2006 | 1,204,000 | 1,218,532 |
Ford Motor Credit Co.: |
|
|
5.8%, 1/12/2009 | 1,070,000 | 1,093,692 |
6.875%, 2/1/2006 | 3,468,000 | 3,572,734 |
General Electric Capital Corp., 2.8%, 1/15/2007 | 1,902,000 | 1,876,764 |
General Motors Acceptance Corp.: |
|
|
6.75%, 1/15/2006 | 1,702,000 | 1,746,048 |
6.875%, 9/15/2011 | 1,075,000 | 1,101,652 |
Goldman Sachs Group, Inc., 4.75%, 7/15/2013 | 945,000 | 935,111 |
HSBC Bank USA, 5.875%, 11/1/2034 (e) | 880,000 | 891,086 |
Merrill Lynch & Co., Inc., Series C, 5.0%, 1/15/2015 | 1,360,000 | 1,354,670 |
Morgan Stanley, 4.0%, 1/15/2010 (e) | 945,000 | 934,265 |
PLC Trust, Series 2003-1, 144A, 2.709%, 3/31/2006 | 1,426,665 | 1,420,644 |
RAM Holdings Ltd., 144A, 6.875%, 4/1/2024 | 1,500,000 | 1,473,135 |
Wells Fargo & Co., 4.2%, 1/15/2010 | 1,775,000 | 1,782,214 |
22,389,740 | ||
| Principal Amount ($) | Value ($) |
|
| |
Health Care 1.2% | ||
Health Care Service Corp., 144A, 7.75%, 6/15/2011 | 2,330,000 | 2,726,105 |
Highmark, Inc., 144A, 6.8%, 8/15/2013 | 675,000 | 736,246 |
3,462,351 | ||
Industrials 0.1% | ||
BAE System 2001 Asset Trust, "B", Series 2001, 144A, 7.156%, 12/15/2011 | 282,980 | 307,156 |
Materials 0.7% | ||
Lubrizol Corp., 6.5%, 10/1/2034 | 1,267,000 | 1,290,385 |
Weyerhaeuser Co.: |
|
|
6.875%, 12/15/2033 | 235,000 | 263,082 |
7.125%, 7/15/2023 | 95,000 | 107,595 |
7.375%, 3/15/2032 | 255,000 | 302,391 |
1,963,453 | ||
Telecommunication Services 1.3% | ||
Bell Atlantic New Jersey, Inc., Series A, 5.875%, 1/17/2012 | 810,000 | 860,598 |
BellSouth Corp., 5.2%, 9/15/2014 | 970,000 | 988,645 |
SBC Communications, Inc., 4.125%, 9/15/2009 | 2,085,000 | 2,081,195 |
3,930,438 | ||
Utilities 2.9% | ||
Centerior Energy Corp., Series B, 7.13%, 7/1/2007 | 1,490,000 | 1,608,974 |
Consumers Energy Co.: |
|
|
Series F, 4.0%, 5/15/2010 | 1,655,000 | 1,625,554 |
144A, 5.0%, 2/15/2012 | 1,160,000 | 1,180,843 |
Pedernales Electric Cooperative, Series 02-A, 144A, 6.202%, 11/15/2032 | 1,715,000 | 1,845,134 |
Progress Energy, Inc., 6.75%, 3/1/2006 | 1,000,000 | 1,037,656 |
Xcel Energy, Inc., 7.0%, 12/1/2010 | 1,240,000 | 1,397,765 |
8,695,926 | ||
Total Corporate Bonds (Cost $48,540,622) | 49,150,536 | |
| ||
Foreign Bonds — US$ Denominated 8.4% | ||
Energy 0.3% | ||
Petroleos Mexicanos, Series P, 9.5%, 9/15/2027 | 565,000 | 711,900 |
Financials 4.5% | ||
Deutsche Telekom International Finance BV: |
|
|
8.5%, 6/15/2010 | 255,000 | 303,800 |
8.75%, 6/15/2030 | 1,955,000 | 2,581,495 |
Endurance Specialty Holdings Ltd., 7.0%, 7/15/2034 | 225,000 | 231,682 |
HSBC Capital Funding LP, 144A, 4.61%*, 12/29/2049 | 340,000 | 328,190 |
Korea First Bank, 144A, 5.75%*, 3/10/2013 | 520,000 | 540,791 |
Mantis Reef Ltd., 144A, 4.692%, 11/14/2008 | 2,720,000 | 2,727,940 |
Mizuho Financial Group, 8.375%, 12/29/2049 | 2,230,000 | 2,443,857 |
| Principal Amount ($) | Value ($) |
|
| |
QBE Insurance Group Ltd., 144A, 5.647%*, 7/1/2023 | 1,085,000 | 1,065,660 |
Westfield Capital Corp.: |
|
|
144A, 4.375%, 11/15/2010 | 235,000 | 232,430 |
144A, 5.125%, 11/15/2014 | 2,950,000 | 2,935,825 |
13,391,670 | ||
Industrials 1.6% | ||
Tyco International Group SA: |
|
|
6.75%, 2/15/2011 | 1,900,000 | 2,129,497 |
6.875%, 1/15/2029 | 1,831,000 | 2,097,431 |
7.0%, 6/15/2028 | 539,000 | 626,661 |
4,853,589 | ||
Materials 0.9% | ||
Sappi Papier Holding AG, 144A, 7.5%, 6/15/2032 | 620,000 | 721,608 |
Sociedad Concesionaria Autopista Central, 144A, 6.223%, 12/15/2026 | 1,915,000 | 2,009,525 |
2,731,133 | ||
Sovereign Bonds 0.2% | ||
United Mexican States: |
|
|
Series A, 6.75%, 9/27/2034 (e) | 475,000 | 469,062 |
8.375%, 1/14/2011 | 145,000 | 170,303 |
639,365 | ||
Telecommunication Services 0.9% | ||
America Movil SA de CV, 144A, 5.75%, 1/15/2015 | 1,065,000 | 1,062,571 |
Telecom Italia Capital, 144A, 4.95%, 9/30/2014 | 910,000 | 891,562 |
Telecomunicaciones de Puerto Rico, 6.8%, 5/15/2009 | 625,000 | 665,349 |
2,619,482 | ||
Total Foreign Bonds — US$ Denominated (Cost $24,071,893) | 24,947,139 | |
| ||
Asset Backed 7.7% | ||
Automobile Receivables 2.4% | ||
Daimler Chrysler Auto Trust, "A4", Series 2002-A, 4.49%, 10/6/2008 | 1,083,000 | 1,089,682 |
Drive Auto Receivables Trust, "A3", Series 2004-1, 144A, 3.5%, 8/15/2008 | 1,490,000 | 1,493,492 |
MMCA Automobile Trust: |
|
|
"A4", Series 2002-4, 3.05%, 11/16/2009 | 1,150,000 | 1,146,610 |
"A4", Series 2002-2, 4.3%, 3/15/2010 | 2,348,246 | 2,356,770 |
"B", Series 2002-2, 4.67%, 3/15/2010 | 486,668 | 483,227 |
"B", Series 2002-1, 5.37%, 1/15/2010 | 438,264 | 442,790 |
7,012,571 | ||
| Principal Amount ($) | Value ($) |
|
| |
Home Equity Loans 5.0% | ||
Chase Funding Mortgage Loan, "2A2", Series 2004-1*, 2.411%, 12/25/2033 | 2,110,000 | 2,110,038 |
Countrywide Asset-Backed Certificates, "N1", Series 2004-2N, 144A, 5.0%, 2/25/2035 | 782,440 | 778,575 |
Countrywide Home Equity Loan Trust: |
|
|
Series 2004-C, 2.62%*, 1/15/2034 | 1,100,545 | 1,098,204 |
"A2", Series 2004-0, 2.68%*, 2/15/2034 | 3,948,727 | 3,948,040 |
Long Beach Mortgage Loan Trust, "N1", Series 2003-4, 144A, 6.535%, 8/25/2033 | 109,472 | 109,573 |
Master Alternative Loan Trust, "5A1", Series 2005-1, 5.5%, 1/1/2019 | 790,000 | 812,589 |
Merrill Lynch Mortgage Investors, Inc., "A2B", Series 2004-HE2, 2.561%*, 8/25/2035 | 1,778,000 | 1,779,247 |
Novastar NIM Trust, Series 2004-N1, 144A, 4.458%, 2/26/2034 | 516,052 | 516,830 |
Park Place Securities NIM Trust, "A", Series 2004-MHQ1, 144A, 2.487%, 12/25/2034 | 1,319,477 | 1,319,477 |
Renaissance NIM Trust, "A", Series 2004-A, 144A, 4.45%, 6/25/2034 | 693,718 | 693,068 |
Residential Asset Securities Corp., "AI6", Series 2000-KS1, 7.905%, 2/25/2031 | 1,648,091 | 1,716,965 |
14,882,606 | ||
Industrials 0.3% | ||
Delta Air Lines, Inc., "G-2", Series 2002-1, 6.417%, 7/2/2012 (e) | 990,000 | 1,033,484 |
Total Asset Backed (Cost $22,991,451) | 22,928,661 | |
| ||
Preferred Stocks 0.2% | ||
Farm Credit Bank of Texas, Series 1, 7.561%, 11/29/2049 (Cost $725,000) | 725,000 | 745,844 |
| ||
US Government Agency Sponsored Pass-Throughs 6.6% | ||
Federal Home Loan Mortgage Corp.: |
|
|
4.0%, 5/1/2019 | 2,549,105 | 2,493,952 |
6.0%, 12/1/2034 | 1,790,000 | 1,849,998 |
Federal National Mortgage Association: |
|
|
4.5%, 12/1/2018 | 384,971 | 384,612 |
5.0%, 3/1/2034 | 5,039,201 | 5,009,640 |
5.5% with various maturities from 3/1/2033 until 7/1/2033 (d) | 3,264,991 | 3,315,085 |
6.0% with various maturities from 7/1/2017 until 11/1/2017 | 1,177,258 | 1,235,198 |
6.31%, 6/1/2008 | 1,500,000 | 1,595,373 |
6.5% with various maturities from 3/1/2017 until 9/1/2034 | 2,421,989 | 2,544,647 |
7.13%, 1/1/2012 | 1,125,276 | 1,187,951 |
| Principal Amount ($) | Value ($) |
|
| |
8.0%, 9/1/2015 | 67,007 | 71,268 |
Total US Government Agency Sponsored Pass-Throughs (Cost $19,547,908) | 19,687,724 | |
| ||
Commercial and Non-Agency Mortgage-Backed Securities 11.1% | ||
Banc of America Commercial Mortgage, Inc., "A5", Series 2004-3, 5.31%, 6/10/2039 | 2,830,000 | 2,963,563 |
Chase Commercial Mortgage Securities Corp., "A1", Series 2000-1, 7.656%, 4/15/2032 | 718,729 | 740,063 |
Citicorp Mortgage Securities, Inc., "A4", Series 2003-3, 5.5%, 3/25/2033 | 1,300,000 | 1,324,218 |
Citigroup Mortgage Loan Trust, Inc.: |
|
|
"1A2", Series 2004-NCM-1, 6.5%, 6/25/2034 | 1,583,415 | 1,656,154 |
"1CB2", Series 2004-NCM2, 6.75%, 8/25/2034 | 2,068,793 | 2,156,065 |
Countrywide Alternative Loan Trust: |
|
|
"1A1", Series 2004-J1, 6.0%, 2/25/2034 | 532,660 | 540,023 |
"7A1", Series 2004-J2, 6.0%, 12/25/2033 | 625,564 | 640,421 |
First Union-Lehman Brothers Commercial Mortgage, "A3", Series 1997-C1, 7.38%, 4/18/2029 | 1,745,245 | 1,857,034 |
GMAC Commercial Mortgage Securities, Inc., "A3", Series 1997-C1, 6.869%, 7/15/2029 | 1,390,121 | 1,470,670 |
GS Mortgage Securities Corp. II, "C", Series 1998-C1, 6.91%, 10/18/2030 | 1,260,000 | 1,378,987 |
Master Adjustable Rate Mortgages Trust, "9A2", Series 2004-5, 4.88%*, 6/25/2032 | 1,865,000 | 1,870,401 |
Master Alternative Loan Trust: |
|
|
"3A1", Series 2004-5, 6.5%, 6/25/2034 | 79,792 | 83,059 |
"5A1", Series 2004-3, 6.5%, 3/25/2034 | 834,601 | 866,681 |
"8A1", Series 2004-3, 7.0%, 4/25/2034 | 627,143 | 655,167 |
Master Asset Securitization Trust, "8A1", Series 2003-6, 5.5%, 7/25/2033 | 1,053,991 | 1,062,555 |
Merrill Lynch Mortgage Investors, Inc., "D", Series 1996-C1, 7.42%, 4/25/2028 | 2,130,000 | 2,202,933 |
Park Place Securities NIM Trust, "B", Series 2004-MHQ1, 144A, 3.474%, 12/25/2034 | 2,090,000 | 2,090,000 |
Residential Asset Securitization Trust, "A1", Series 2003-A11, 4.25%, 11/25/2033 | 2,164,835 | 2,169,463 |
TIAA Real Estate CDO Ltd., "A2", Series 2001-C1A, 144A, 6.3%, 6/19/2021 | 1,931,107 | 2,049,584 |
Wachovia Bank Commercial Mortgage Trust, "A5", Series 2004-C11, 5.215%, 1/15/2041 | 853,000 | 878,211 |
Washington Mutual: |
|
|
"2A1", Series 2002-S8, 4.5%, 1/25/2018 | 847,038 | 850,127 |
"4A", Series 2004-CB2, 6.5%, 8/25/2034 | 272,891 | 285,427 |
| Principal Amount ($) | Value ($) |
|
| |
Washington Mutual Mortgage Securities Corp., "A7, Series 2004-AR9, 4.26%*, 8/25/2034 | 1,393,000 | 1,394,097 |
Wells Fargo Mortgage Backed Securities Trust: |
|
|
"1A6", Series 2003-1, 4.5%, 2/25/2018 | 697,914 | 701,083 |
"1A1", Series 2003-6, 5.0%, 6/25/2018 | 1,313,436 | 1,324,929 |
Total Commercial and Non-Agency Mortgage-Backed Securities (Cost $33,461,281) | 33,210,915 | |
| ||
Collateralized Mortgage Obligations 24.0% | ||
Fannie Mae Grantor Trust: |
|
|
"1A3", Series 2004-T2, 7.0%, 11/25/2043 | 599,913 | 635,719 |
"1A3", Series 2004-T3, 7.0%, 2/25/2044 | 300,217 | 318,135 |
Fannie Mae Whole Loan: |
|
|
"2A", Series 2002-W1, 7.5%, 2/25/2042 | 1,042,175 | 1,113,367 |
"5A", Series 2004-W2, 7.5%, 3/25/2044 | 1,735,182 | 1,857,381 |
Federal Home Loan Mortgage Corp.: |
|
|
"AU", Series 2759, 3.5%, 5/15/2019 | 1,313,000 | 1,309,386 |
"EK", Series 2773, 3.5%, 5/15/2010 | 1,274,000 | 1,275,987 |
"QC", Series 2694, 3.5%, 9/15/2020 | 2,290,000 | 2,275,892 |
"LB", Series 2755, 4.0%, 9/15/2023 | 1,970,000 | 1,973,498 |
"NB", Series 2750, 4.0%, 12/15/2022 | 2,839,000 | 2,835,240 |
"XG", Series 2737, 4.0%, 11/15/2022 | 1,050,000 | 1,049,033 |
"LC", Series 2682, 4.5%, 7/15/2032 | 1,690,000 | 1,632,944 |
"ME", Series 2691, 4.5%, 4/15/2032 | 1,911,000 | 1,828,648 |
"ON", Series 2776, 4.5%, 11/15/2032 | 1,410,000 | 1,342,274 |
"QH", Series 2694, 4.5%, 3/15/2032 | 2,500,000 | 2,408,238 |
"1A2B", Series T-48, 4.688%, 7/25/2022 | 149,297 | 149,305 |
"HG", Series 2543, 4.75%, 9/15/2028 | 1,628,207 | 1,642,144 |
"BG", Series 2640, 5.0%, 2/15/2032 | 2,060,000 | 2,067,793 |
"EG", Series 2836, 5.0%, 12/15/2032 | 2,770,000 | 2,746,601 |
"NE", Series 2802, 5.0%, 2/15/2033 | 2,640,000 | 2,627,135 |
"OE", Series 2840, 5.0%, 2/15/2033 | 2,780,000 | 2,735,517 |
"OL", Series 2840, 5.0%, 11/15/2022 | 2,335,000 | 2,397,704 |
"PD", Series 2783, 5.0%, 1/15/2033 | 1,283,000 | 1,272,328 |
"PD", Series 2844, 5.0%, 12/15/2032 | 2,765,000 | 2,736,505 |
"PE", Series 2721, 5.0%, 1/15/2023 | 135,000 | 133,546 |
| Principal Amount ($) | Value ($) |
|
| |
"PQ", Series 2844, 5.0%, 5/15/2023 | 1,616,000 | 1,664,835 |
"QK", Series 2513, 5.0%, 8/15/2028 | 301,006 | 301,310 |
"TE", Class 2764, 5.0%, 10/15/2032 | 1,495,000 | 1,480,800 |
"TE", Series 2780, 5.0%, 1/15/2033 | 1,785,000 | 1,774,776 |
"CH", Series 2390, 5.5%, 12/15/2016 | 440,000 | 456,296 |
"PE", Series 2378, 5.5%, 11/15/2016 | 1,765,000 | 1,837,349 |
"PE", Series 2512, 5.5%, 2/15/2022 | 45,000 | 46,727 |
"TG", Series 2517, 5.5%, 4/15/2028 | 748,181 | 750,826 |
"BD", Series 2453, 6.0%, 5/15/2017 | 1,050,000 | 1,095,590 |
"Z", Series 2173, 6.5%, 7/15/2029 | 333,859 | 350,464 |
"3A", Series T-41, 7.5%, 7/25/2032 | 1,403,657 | 1,496,388 |
Federal National Mortgage Association: |
|
|
"A2", Series 2003-63, 2.34%, 7/25/2044 | 247,513 | 246,893 |
"NA", Series 2003-128, 4.0%, 8/25/2009 | 2,307,000 | 2,319,051 |
"2A3", Series 2001-4, 4.16%, 6/25/2042 | 1,200,000 | 1,203,705 |
"NE", Series 2004-52, 4.5%, 7/25/2033 | 1,282,000 | 1,218,062 |
"QG", Series 2004-29, 4.5%, 12/25/2032 | 1,420,000 | 1,350,349 |
"WB", Series 2003-106, 4.5%, 10/25/2015 | 1,735,000 | 1,760,836 |
"A2", Series 2002-W10, 4.7%, 8/25/2042 | 8,964 | 8,957 |
"2A3", Series 2003-W15, 4.71%, 8/25/2043 | 2,113,370 | 2,118,480 |
"1A3", Series 2003-W18, 4.732%, 8/25/2043 | 1,160,000 | 1,165,593 |
"A2", Series 2002-60, 4.75%, 2/25/2044 | 44,895 | 44,817 |
"KY", Series 2002-55, 4.75%, 4/25/2028 | 132,708 | 132,497 |
"KH", Series 2003-92, 5.0%, 3/25/2032 | 1,100,000 | 1,087,975 |
"MC", Series 2002-56, 5.5%, 9/25/2017 | 947,587 | 975,562 |
"PG", Series 2002-3, 5.5%, 2/25/2017 | 500,000 | 514,082 |
"QC", Series 2002-11, 5.5%, 3/25/2017 | 640,000 | 665,482 |
"PM", Series 2001-60, 6.0%, 3/25/2030 | 366,829 | 371,571 |
"VD", Series 2002-56, 6.0%, 4/25/2020 | 214,624 | 218,317 |
"A2", Series 1998-M6, 6.32%, 8/15/2008 | 1,124,756 | 1,201,071 |
"HM", Series 2002-36, 6.5%, 12/25/2029 | 86,159 | 87,189 |
"1A2", Series 2003-W3, 7.0%, 8/25/2042 | 645,327 | 683,843 |
| Principal Amount ($) | Value ($) |
|
| |
"A2", Series 2002-T19, Grantor Trust, 7.0%, 7/25/2042 | 820,229 | 869,185 |
FHLMC Structured Pass-Through Securities: |
|
|
"1A2", Series T-59, 7.0%, 10/25/2043 | 840,479 | 889,857 |
"3A", Series T-58, 7.0%, 9/25/2043 | 818,748 | 866,849 |
Total Collateralized Mortgage Obligations (Cost $71,469,198) | 71,619,904 | |
| ||
Municipal Investments 4.8% | ||
Brockton, MA, Core City General Obligation, Economic Development, Series A, 6.45%, 5/1/2017 (c) | 1,530,000 | 1,701,192 |
Illinois, Higher Education Revenue, 7.05%, 7/1/2009 (c) | 1,410,000 | 1,581,625 |
Jicarilla, NM, Sales & Special Tax Revenue, Apache Nation Revenue, 5.2%, 12/1/2013 | 945,000 | 968,880 |
Los Angeles, CA, Community Redevelopment Agency, Community Redevelopment Financing Authority Revenue, Bunker Hill Project, Series B, 5.83%, 12/1/2017 (c) | 2,500,000 | 2,563,250 |
New York, General Obligation, Environmental Facilities Corp., Series B, 4.95%, 1/1/2013 (c) | 1,500,000 | 1,530,285 |
Oklahoma City, OK, Airport Revenue, 5.2%, 10/1/2012 (c) | 1,430,000 | 1,472,614 |
Oregon, School District General Obligation, School Board Association, Series A, Zero Coupon, 6/30/2017 (c) | 3,830,000 | 1,958,049 |
Portland, OR, Industrial Development Revenue, 3.35%, 6/15/2010 (c) | 1,550,000 | 1,489,255 |
Trenton, NJ, School District General Obligation, 4.3%, 4/1/2011 (c) | 1,040,000 | 1,028,602 |
Total Municipal Investments (Cost $13,951,696) | 14,293,752 | |
| ||
Government National Mortgage Association 0.1% | ||
Government National Mortgage Association, 6.0% with various maturities from 1/15/2034 until 6/20/2034 (Cost $377,267) | 367,880 | 381,544 |
| ||
US Government Backed 17.5 % | ||
US Treasury Bond: 6.0%, 2/15/2026 (e) | 10,386,000 | 11,897,246 |
7.25%, 5/15/2016 (e) | 4,682,000 | 5,860,548 |
US Treasury Note: 1.5%, 3/31/2006 (e) | 4,000,000 | 3,934,688 |
3.125%, 10/15/2008 (e) | 207,000 | 204,793 |
3.25%, 1/15/2013 (e) | 28,575,000 | 28,327,198 |
4.25%, 11/15/2013 (e) | 1,995,000 | 2,007,546 |
Total US Government Backed (Cost $52,667,724) | 52,232,019 | |
|
| Value ($) |
|
| |
Securities Lending Collateral 19.0 % | ||
Daily Assets Fund Institutional, 2.25% (f) (g) (Cost $56,591,078) | 56,591,078 | 56,591,078 |
| ||
Cash Equivalents 3.5 % | ||
Scudder Cash Management QP Trust, 2.24% (b) (Cost $10,557,817) | 10,557,817 | 10,557,817 |
| ||
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $354,952,935) (a) | 119.4 | 356,346,933 |
Other Assets and Liabilities, Net | (19.4) | (57,959,700) |
Net Assets | 100.0 | 298,387,233 |
Notes to Scudder Fixed Income Portfolio of Investments |
* Floating rate notes are securities whose yields vary with a designated market index or market rate, such as the coupon-equivalent of the US Treasury bill rate. These securities are shown at their current rate as of December 31, 2004.
(a) The cost for federal income tax purposes was $354,991,184. At December 31, 2004, net unrealized appreciation for all securities based on tax cost was $1,355,749. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $3,274,728 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $1,918,979.
(b) Scudder Cash Management QP Trust is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
(c) Bond is insured by one of these companies:
Insurance Coverage | As a % of | |
AMBAC | AMBAC Assurance Corp. | 1.3% |
FGIC | Financial Guaranty Insurance Company | 1.7% |
FSA | Financial Security Assurance | 0.7% |
(d) Mortgage dollar roll included.
(e) All or a portion of these securities were on loan (see Notes to Financial Statements). The value of all securities loaned at December 31, 2004, amounted to $55,585,732, which is 18.6% of total net assets.
(f) Daily Assets Fund Institutional, an affiliated fund, is managed by Deutsche Asset Management, Inc. The rate shown is the annualized seven-day yield at period end.
(g) Represents collateral held in connection with securities lending.
144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
Included in the portfolio are investments in mortgage or asset-backed securities which are interests in separate pools of mortgages or assets. Effective maturities of these investments may be shorter than stated maturities due to prepayments. Some separate investments in the Federal National Mortgage Association, Federal Home Loan Mortgage Corp. and the Government National Mortgage Association issues which have similar coupon rates have been aggregated for presentation purposes in the investment portfolio.
The accompanying notes are an integral part of the financial statements.
Financial Statements |
|
Statement of Assets and Liabilities as of December 31, 2004 | |
Assets | |
Investments: Investments in securities, at value (cost $287,804,040) — including $55,585,732 of securities loaned | $ 289,198,038 |
Investment in Daily Assets Fund Institutional (cost $56,591,078)* | 56,591,078 |
Investment in Scudder Cash Management QP Trust (cost $10,557,817) | 10,557,817 |
Total investments in securities, at value (cost $354,952,935) | 356,346,933 |
Cash | 73,857 |
Receivable for investments sold | 934,790 |
Interest receivable | 2,459,749 |
Receivable for Portfolio shares sold | 1,478,427 |
Other assets | 11,167 |
Total assets | 361,304,923 |
Liabilities | |
Payable for investments purchased | 3,659,384 |
Payable for investments purchased — mortgage dollar rolls | 2,263,450 |
Payable upon return of securities loaned | 56,591,078 |
Deferred mortgage dollar roll income | 2,521 |
Accrued management fee | 145,855 |
Payable for Portfolio shares redeemed | 140,575 |
Other accrued expenses and payables | 114,827 |
Total liabilities | 62,917,690 |
Net assets, at value | $ 298,387,233 |
Net Assets | |
Net assets consist of: Undistributed net investment income | 9,524,556 |
Net unrealized appreciation (depreciation) on investments | 1,393,998 |
Accumulated net realized gain (loss) | 2,647,909 |
Paid-in capital | 284,820,770 |
Net assets, at value | $ 298,387,233 |
Class A Net Asset Value, offering and redemption price per share ($210,037,506 ÷ 17,397,738 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 12.07 |
Class B Net Asset Value, offering and redemption price per share ($88,349,727 ÷ 7,335,272 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 12.04 |
* Represents collateral on securities loaned.
Statement of Operations for the year ended December 31, 2004 | |
Investment Income | |
Dividends | $ 47,575 |
Interest | 11,599,430 |
Interest — Scudder Cash Management QP Trust | 15,353 |
Mortgage dollar roll income | 172,308 |
Securities lending income, including income from Daily Assets Fund Institutional | 24,595 |
Total Income | 11,859,261 |
Expenses: Management fee | 1,589,597 |
Custodian fees | 23,243 |
Distribution service fees (Class B) | 175,814 |
Record keeping fees (Class B) | 91,731 |
Auditing | 42,156 |
Legal | 18,958 |
Trustees' fees and expenses | 3,041 |
Reports to shareholders | 50,572 |
Other | 16,201 |
Total expenses, before expense reductions | 2,011,313 |
Expense reductions | (4,070) |
Total expenses, after expense reductions | 2,007,243 |
Net investment income | 9,852,018 |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from investments | 2,613,421 |
Net unrealized appreciation (depreciation) during the period on investments | (740,835) |
Net gain (loss) on investment transactions | 1,872,586 |
Net increase (decrease) in net assets resulting from operations | $ 11,724,604 |
The accompanying notes are an integral part of the financial statements.
|
Statement of Changes in Net Assets | ||
Increase (Decrease) in Net Assets | Years Ended December 31, | |
2004 | 2003 | |
Operations: Net investment income (loss) | $ 9,852,018 | $ 9,005,497 |
Net realized gain (loss) on investment transactions | 2,613,421 | 5,632,277 |
Net unrealized appreciation (depreciation) on investment transactions during the period | (740,835) | (3,106,535) |
Net increase (decrease) in net assets resulting from operations | 11,724,604 | 11,531,239 |
Distributions to shareholders from: Net investment income Class A | (6,899,791) | (7,642,555) |
Class B | (1,766,032) | (352,039) |
Net realized gains Class A | (3,369,665) | — |
Class B | (976,642) | — |
Portfolio share transactions: Class A Proceeds from shares sold | 43,408,606 | 33,556,029 |
Reinvestment of distributions | 10,269,456 | 7,642,555 |
Cost of shares redeemed | (42,555,105) | (59,678,316) |
Net increase (decrease) in net assets from Class A share transactions | 11,122,957 | (18,479,732) |
Class B Proceeds from shares sold | 46,084,279 | 45,408,382 |
Reinvestment of distributions | 2,742,674 | 352,039 |
Cost of shares redeemed | (6,180,393) | (2,824,214) |
Net increase (decrease) in net assets from Class B share transactions | 42,646,560 | 42,936,207 |
Increase (decrease) in net assets | 52,481,991 | 27,993,120 |
Net assets at beginning of period | 245,905,242 | 217,912,122 |
Net assets at end of period (including undistributed net investment income of $9,524,556 and $8,499,174, respectively) | $ 298,387,233 | 245,905,242 |
Other Information | ||
Class A Shares outstanding at beginning of period | 16,493,825 | 18,049,005 |
Shares sold | 3,610,180 | 2,793,008 |
Shares issued to shareholders in reinvestment of distributions | 865,161 | 650,984 |
Shares redeemed | (3,571,428) | (4,999,172) |
Net increase (decrease) in Portfolio shares | 903,913 | (1,555,180) |
Shares outstanding at end of period | 17,397,738 | 16,493,825 |
Class B Shares outstanding at beginning of period | 3,731,351 | 144,625 |
Shares sold | 3,887,722 | 3,792,922 |
Shares issued to shareholders in reinvestment of distributions | 230,865 | 29,986 |
Shares redeemed | (514,666) | (236,182) |
Net increase (decrease) in Portfolio shares | 3,603,921 | 3,586,726 |
Shares outstanding at end of period | 7,335,272 | 3,731,351 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights |
|
Class A
Years Ended December 31, | 2004 | 2003 | 2002 | 2001a | 2000b |
Selected Per Share Data | |||||
Net asset value, beginning of period | $ 12.16 | $ 11.98 | $ 11.48 | $ 11.45 | $ 11.00 |
Income from investment operations: Net investment incomec | .50 | .45 | .53 | .62 | .69 |
Net realized and unrealized gain (loss) on investment transactions | .05 | .14 | .37 | .01 | .36 |
Total from investment operations | .55 | .59 | .90 | .63 | 1.05 |
Less distributions from: Net investment income | (.43) | (.41) | (.40) | (.60) | (.60) |
Net realized gains on investment transactions | (.21) | — | — | — | — |
Total distributions | (.64) | (.41) | (.40) | (.60) | (.60) |
Net asset value, end of period | $ 12.07 | $ 12.16 | $ 11.98 | $ 11.48 | $ 11.45 |
Total Return (%) | 4.53 | 5.13 | 8.01 | 5.71 | 9.90 |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | 210 | 201 | 216 | 134 | 78 |
Ratio of expenses before expense reductions (%) | .66 | .66 | .65 | .64 | .68 |
Ratio of expenses after expense reductions (%) | .66 | .66 | .65 | .64 | .67 |
Ratio of net investment income (loss) (%) | 4.18 | 3.75 | 4.57 | 5.46 | 6.36 |
Portfolio turnover rate (%) | 185d | 229d | 267 | 176 | 311 |
a As required, effective January 1, 2001, the Portfolio has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium on debt securities. In addition, paydowns on mortgage-backed securities which were included in realized gain/loss on investment transactions prior to January 1, 2001 are included as interest income. The effect of this change for the year ended December 31, 2001 was to decrease net investment income per share by $.01, increase net realized and unrealized gains and losses per share by $.01 and decrease the ratio of net investment income to average net assets from 5.54% to 5.46%. Per share, ratios and supplemental data for periods prior to January 1, 2001 have not been restated to reflect this change in presentation.
b On June 18, 2001, the Portfolio implemented a 1 for 10 reverse stock split. Per share information, for the periods prior to December 31, 2001, has been restated to reflect the effect of the split. Shareholders received 1 share for every 10 shares owned and net asset value per share increased correspondingly.
c Based on average shares outstanding during the period.
d The portfolio turnover rate including mortgage dollar roll transactions was 204% and 265% for the year ended December 31, 2004 and December 31, 2003, respectively.
Class B
Years Ended December 31, | 2004 | 2003 | 2002a |
Selected Per Share Data | |||
Net asset value, beginning of period | $ 12.13 | $ 11.96 | $ 11.36 |
Income from investment operations: Net investment incomeb | .45 | .40 | .27 |
Net realized and unrealized gain (loss) on investment transactions | .05 | .15 | .33 |
Total from investment operations | .50 | .55 | .60 |
Less distributions from: Net investment income | (.38) | (.38) | — |
Net realized gains on investment transactions | (.21) | — | — |
Total distributions | (.59) | (.38) | — |
Net asset value, end of period | $ 12.04 | $ 12.13 | $ 11.96 |
Total Return (%) | 4.10 | 4.76 | 5.28** |
Ratios to Average Net Assets and Supplemental Data | |||
Net assets, end of period ($ millions) | 88 | 45 | 2 |
Ratio of expenses (%) | 1.03 | 1.05 | .92* |
Ratio of net investment income (loss) (%) | 3.81 | 3.36 | 4.69* |
Portfolio turnover rate (%) | 185c | 229c | 267 |
a For the period from July 1, 2002 (commencement of operations of Class B shares) to December 31, 2002.
b Based on average shares outstanding during the period.
c The portfolio turnover rate including mortgage dollar roll transactions was 204% and 265% for the year ended December 31, 2004 and December 31, 2003, respectively.
* Annualized
** Not annualized
Performance Summary December 31, 2004 |
|
Scudder Global Blue Chip Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns.
This Portfolio is subject to stock market risk. Investing in foreign securities presents certain unique risks not associated with domestic investments, such as currency fluctuation, political and economic changes and market risks. All of these factors may result in greater share price volatility. Please read this Portfolio's prospectus for specific details regarding its investments and risk profile.
Growth of an Assumed $10,000 Investment in Scudder Global Blue Chip Portfolio from 5/5/1998 to 12/31/2004 | ||
[] Scudder Global Blue Chip Portfolio — Class A [] MSCI World Index | ||
![]() |
| MSCI World Index is an unmanaged, capitalization-weighted measure of stock markets around the world, including North America, Europe, Australia and Asia. The index is calculated using closing local market prices and converts to US dollars using the London close foreign exchange rates. Index returns assume reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
Yearly periods ended December 31 |
|
|
Comparative Results | |||||
Scudder Global Blue Chip Portfolio |
| 1-Year | 3-Year | 5-Year | Life of Portfolio* |
Class A | Growth of $10,000 | $11,476 | $12,483 | $10,196 | $12,647 |
Average annual total return | 14.76% | 7.67% | .39% | 3.59% | |
MSCI World Index | Growth of $10,000 | $11,472 | $12,233 | $8,834 | $11,890 |
Average annual total return | 14.72% | 6.95% | -2.45% | 2.63% | |
Scudder Global Blue Chip Portfolio |
|
|
| 1-Year | Life of Class** |
Class B | Growth of $10,000 |
|
| $11,433 | $13,234 |
Average annual total return |
|
| 14.33% | 11.85% | |
MSCI World Index | Growth of $10,000 |
|
| $11,472 | $13,416 |
Average annual total return |
|
| 14.72% | 12.47% |
The growth of $10,000 is cumulative.
* The Portfolio commenced operations on May 5, 1998. Index returns begin April 30, 1998.
** The Portfolio commenced offering Class B shares on July 1, 2002. Index returns begin June 30, 2002.
Information About Your Portfolio's Expenses |
|
Scudder Global Blue Chip Portfolio
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. The tables are based on an investment of $1,000 made at the beginning of the six-month period ended December 31, 2004.
The tables illustrate your Portfolio's expenses in two ways:
Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2004 | ||
Actual Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,143.70 | $ 1,141.50 |
Expenses Paid per $1,000* | $ 8.24 | $ 10.26 |
Hypothetical 5% Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,017.52 | $ 1,015.62 |
Expenses Paid per $1,000* | $ 7.76 | $ 9.66 |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365.
Annualized Expense Ratios | Class A | Class B |
Scudder Variable Series II — Scudder Global Blue Chip Portfolio | 1.53% | 1.90% |
For more information, please refer to the Portfolio's prospectus.
Management Summary December 31, 2004 |
|
Scudder Global Blue Chip Portfolio
Amid a positive environment for the global equity markets, the portfolio returned 14.76% for the year ended December 31, 2004 (Class A shares, unadjusted for contract charges), in line with the 14.72% return of the MSCI World Index. Performance was helped by overweights in energy and materials as well as underweights in health care and technology. We also added value to the portfolio through stock selection in a number of sectors, including health care, financials and utilities. However, the positive impact from these factors was offset by underperforming stocks within the consumer sector.
We continue to invest in companies that we believe will benefit from longer-term themes in the world economy. There are currently 10 themes at work in the portfolio. All produced a positive return in 2004 with the exception of the theme called "Safety Assets," which invests in gold stocks. The top-performing theme was "New Annuities," which invests in companies with assets that can generate predictable long-term returns. Our most notable shift during the year was to take profits by reducing the portfolio's weighting in commodity-related stocks. We maintained its weighting in energy, however, based on our belief that the sector has further upside.
The key factors driving the markets in 2004 were interest rates, the dollar and China. All of these were important components of the portfolio's performance, and we will be watching for key shifts in 2005. Overall, we continue to believe that at a time of continued uncertainty in the markets, our emphasis on longer-term trends will help the portfolio deliver steady returns.
Oliver Kratz
Steve M. Wreford
Co-Managers
Deutsche Investment Management Americas Inc.
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the portfolio or any variable life insurance policy or variable annuity contract for which the portfolio is an investment option. These charges and fees will reduce returns.
Risk Considerations
This portfolio is subject to stock market risk. Investing in foreign securities presents certain unique risks not associated with domestic investments, such as currency fluctuation, political and economic changes and market risks. All of these factors may result in greater share price volatility. Please read this portfolio's prospectus for specific details regarding its investments and risk profile.
The Morgan Stanley Capital International (MSCI) World Index is an unmanaged, capitalization-weighted measure of stock markets around the world, including North America, Europe, Australia and Asia. The index is calculated using closing local market prices and converts to US dollars using the London close foreign exchange rates. Index returns assume reinvested dividends and, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
Portfolio management market commentary is as of December 31, 2004, and may not come to pass. This information is subject to change at any time based on market and other conditions.
Portfolio Summary |
Scudder Global Blue Chip Portfolio
Asset Allocation (Excludes Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Common Stocks | 89% | 97% |
Cash Equivalents | 8% | 3% |
Exchange Traded Fund | 2% | — |
Preferred Stocks | 1% | — |
| 100% | 100% |
Sector Diversification (Excludes Cash Equivalents and Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Financials | 21% | 17% |
Materials | 16% | 19% |
Energy | 13% | 14% |
Industrials | 12% | 7% |
Information Technology | 11% | 10% |
Health Care | 9% | 8% |
Utilities | 7% | 6% |
Consumer Discretionary | 6% | 10% |
Consumer Staples | 3% | 2% |
Telecommunication Services | 2% | 7% |
| 100% | 100% |
Geographical Diversification (Excludes Cash Equivalents and Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Continental Europe | 30% | 19% |
United States | 28% | 34% |
Asia (excluding Japan) | 13% | 11% |
Japan | 11% | 9% |
United Kingdom | 7% | 10% |
Canada | 6% | 5% |
Latin America | 3% | 6% |
Africa | 2% | 3% |
Australia | — | 3% |
| 100% | 100% |
Asset allocation, sector diversification and geographical diversification are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 51. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Portfolio as of month end will be posted to scudder.com on the 15th of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio December 31, 2004 | ![]() | ![]() |
|
Scudder Global Blue Chip Portfolio
|
| Value ($) |
|
| |
Common Stocks 88.7% | ||
Australia 0.3% | ||
Alumina Ltd. (Cost $126,894) | 48,800 | 227,231 |
Austria 1.5% | ||
Erste Bank der oesterreichischen Sparkassen AG | 6,200 | 331,195 |
Wienerberger AG | 16,600 | 793,108 |
(Cost $845,372) | 1,124,303 | |
Brazil 1.2% | ||
Aracruz Celulose SA "B" (ADR) | 10,900 | 410,930 |
Companhia Vale do Rio Doce (ADR) | 17,200 | 498,972 |
(Cost $441,014) | 909,902 | |
Canada 5.1% | ||
Canadian National Railway Co.* | 23,200 | 1,414,868 |
EnCana Corp. | 15,899 | 907,642 |
Goldcorp, Inc.* | 36,600 | 551,680 |
Meridian Gold, Inc.* | 32,700 | 620,622 |
Placer Dome, Inc.* | 20,600 | 388,222 |
(Cost $2,098,359) | 3,883,034 | |
China 0.9% | ||
China Petroleum & Chemical Corp. "H" (Cost $576,393) | 1,580,000 | 645,400 |
France 4.2% | ||
Carrefour SA | 16,002 | 762,145 |
Societe Generale | 5,339 | 540,286 |
Total SA | 8,405 | 1,835,916 |
(Cost $2,646,842) | 3,138,347 | |
Germany 11.9% | ||
Allianz AG (Registered) | 10,299 | 1,366,294 |
BASF AG (d) | 25,950 | 1,869,444 |
Commerzbank AG* (d) | 58,320 | 1,201,755 |
Deutsche Boerse AG (d) | 7,679 | 462,181 |
E.ON AG (d) | 21,239 | 1,935,962 |
Schering AG (d) | 11,600 | 867,359 |
Volkswagen AG | 28,183 | 1,277,563 |
(Cost $6,593,907) | 8,980,558 | |
Hong Kong 3.1% | ||
China Mobile (Hong Kong) Ltd. | 145,600 | 493,594 |
Denway Motors Ltd. | 812,000 | 289,899 |
Fountain Set (Holdings) Ltd. | 908,000 | 589,937 |
Hutchison Whampoa Ltd. | 100,000 | 935,968 |
(Cost $2,160,807) | 2,309,398 | |
India 1.0% | ||
Oil & Natural Gas Corp. Ltd. | 9,600 | 180,991 |
Reliance Industries Ltd. | 44,000 | 540,308 |
(Cost $693,189) | 721,299 | |
Israel 0.4% | ||
Teva Pharmaceutical Industries Ltd. (ADR) (Cost $308,214) | 10,600 | 316,516 |
|
| Value ($) |
|
| |
Italy 2.4% | ||
Capitalia SpA | 169,300 | 775,508 |
Enel SpA | 56,500 | 555,247 |
Mediobanca SpA | 28,200 | 456,520 |
(Cost $1,492,530) | 1,787,275 | |
Japan 10.2% | ||
Daiwa Securities Group, Inc. | 62,000 | 447,741 |
FANUC Ltd. | 21,000 | 1,373,085 |
Japan Retail Fund Investment Corp. (REIT) | 24 | 202,596 |
Komatsu Ltd. | 165,000 | 1,154,533 |
Mitsubishi Estate Co., Ltd. | 77,000 | 901,727 |
Mitsubishi Tokyo Financial Group, Inc. | 38 | 385,674 |
Mitsui Fudosan Co., Ltd. | 107,000 | 1,300,039 |
Mizuho Financial Group, Inc. | 119 | 599,239 |
Nomura Holdings, Inc. | 93,000 | 1,355,928 |
(Cost $6,699,056) | 7,720,562 | |
Korea 2.8% | ||
Daewoo Shipbuilding & Marine Engineering Co., Ltd. | 20,800 | 309,428 |
LG Electronics, Inc. | 13,200 | 817,349 |
Samsung Electronics Co., Ltd. | 2,310 | 1,005,270 |
(Cost $1,884,767) | 2,132,047 | |
Malaysia 0.3% | ||
Resorts World Berhad (Cost $211,544) | 81,200 | 213,684 |
Mexico 1.4% | ||
Cemex SA de CV (ADR) | 10,700 | 389,694 |
Fomento Economico Mexicano SA de CV (ADR) | 8,200 | 431,402 |
Grupo Televisa SA (ADR) | 4,100 | 248,050 |
(Cost $826,238) | 1,069,146 | |
Peru 1.0% | ||
Compania de Minas Buenaventura SA (ADR) (Cost $595,582) | 34,300 | 785,470 |
Russia 1.8% | ||
Gazprom "S" (ADR) 144A (d) | 23,000 | 823,600 |
LUKOIL (ADR) | 4,500 | 551,250 |
(Cost $840,793) | 1,374,850 | |
Singapore 1.8% | ||
DBS Group Holdings Ltd. | 62,000 | 611,492 |
Singapore Telecommunications Ltd. | 519,060 | 756,777 |
(Cost $1,072,310) | 1,368,269 | |
South Africa 1.3% | ||
Gold Fields Ltd. | 49,100 | 605,715 |
Impala Platinum Holdings Ltd. (ADR) | 17,700 | 376,228 |
(Cost $773,476) | 981,943 | |
Sweden 1.8% | ||
Skandinaviska Enskilda Banken AB (Cost $1,081,446) | 70,600 | 1,365,170 |
|
| Value ($) |
|
| |
Switzerland 2.9% | ||
ABB Ltd.* | 101,358 | 566,022 |
Credit Suisse Group | 11,425 | 480,270 |
Nestle SA (Registered) | 1,527 | 399,510 |
Novartis AG (Registered) | 14,463 | 728,810 |
(Cost $1,889,687) | 2,174,612 | |
Taiwan 1.8% | ||
Hon Hai Precision Industry Co., Ltd. | 132,249 | 613,462 |
Quanta Computer, Inc. | 300,417 | 540,352 |
Taiwan Semiconductor Manufacturing Co., Ltd. (ADR) | 27,042 | 229,587 |
(Cost $1,243,503) | 1,383,401 | |
Thailand 0.5% | ||
Bangkok Bank PCL (Foreign Registered)* (Cost $312,623) | 125,600 | 368,556 |
United Kingdom 6.0% | ||
Anglo American PLC | 24,231 | 573,140 |
GlaxoSmithKline PLC | 55,355 | 1,298,695 |
Lonmin PLC | 27,333 | 481,211 |
National Grid Transco PLC | 89,984 | 856,892 |
Rio Tinto PLC | 14,318 | 421,409 |
RT Group PLC* | 54,206 | 11,448 |
William Morrison Supermarkets PLC | 218,828 | 869,665 |
(Cost $4,053,674) | 4,512,460 | |
United States 23.1% | ||
Affiliated Computer Services, Inc. "A"* | 11,200 | 674,128 |
AFLAC, Inc. | 26,800 | 1,067,712 |
Anadarko Petroleum Corp. | 15,300 | 991,593 |
AutoZone, Inc.* | 4,500 | 410,895 |
Avocent Corp.* | 12,500 | 506,500 |
Caremark Rx, Inc.* | 12,300 | 484,989 |
Caterpillar, Inc. | 11,500 | 1,121,365 |
ConocoPhillips | 16,400 | 1,424,012 |
Dean Foods Co.* | 17,000 | 560,150 |
Devon Energy Corp. | 15,300 | 595,476 |
Eaton Corp. | 5,500 | 397,980 |
Equity Residential (REIT) | 11,900 | 430,542 |
Hewlett-Packard Co. | 65,300 | 1,369,341 |
Medicines Co.* | 14,600 | 420,480 |
Microsoft Corp. | 38,300 | 1,022,993 |
|
| Value ($) |
|
| |
Monsanto Co. | 32,400 | 1,799,820 |
Newmont Mining Corp. | 12,500 | 555,125 |
Pfizer, Inc. | 48,300 | 1,298,787 |
Schlumberger Ltd. | 13,500 | 903,825 |
VERITAS Software Corp.* | 22,600 | 645,230 |
Wyeth | 18,700 | 796,433 |
(Cost $14,656,440) | 17,477,376 | |
Venezuela 0.0% | ||
Compania Anonima Nacional Telefonos de Venezuela (ADR) (Cost $35,275) | 1,700 | 38,063 |
Total Common Stocks (Cost $54,159,935) | 67,008,872 | |
| ||
Preferred Stocks 0.8% | ||
Germany | ||
Porsche AG (Cost $645,846) | 1,000 | 638,168 |
| ||
Exchange Traded Funds 2.1% | ||
iShares MSCI Malaysia Index Fund | 11,700 | 83,655 |
iShares Nasdaq Biotechnology Index Fund* (d) | 19,900 | 1,500,460 |
Total Exchange Traded Funds (Cost $1,484,286) | 1,584,115 | |
| ||
Securities Lending Collateral 8.8% | ||
Daily Assets Fund Institutional, 2.25% (c) (e) (Cost $6,643,847) | 6,643,847 | 6,643,847 |
| ||
Cash Equivalents 8.4% | ||
Scudder Cash Management QP Trust, 2.24% (b) (Cost $6,382,314) | 6,382,314 | 6,382,314 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $69,316,228) (a) | 108.8 | 82,257,316 |
Other Assets and Liabilities, Net | (8.8) | (6,684,153) |
Net Assets | 100.0 | 75,573,163 |
Notes to Scudder Global Blue Chip Portfolio of Investments |
* Non-income producing security.
(a) The cost for federal income tax purposes was $69,467,378. At December 31, 2004, net unrealized appreciation for all securities based on tax cost was $12,789,938. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $13,964,276 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $1,174,338.
(b) Scudder Cash Management QP Trust is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
(c) Daily Assets Fund Institutional, an affiliated fund, is also managed by Deutsche Asset Management, Inc. The rate shown is the annualized seven-day yield at period end.
(d) All or a portion of these securities were on loan (see Notes to Financial Statements). The value of all securities loaned at December 31, 2004 amounted to $6,351,889, which is 8.4% of total net assets.
(e) Represents collateral held in connection with securities lending.
ADR: American Depositary Receipts
REIT: Real Estate Investment Trust
144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
The accompanying notes are an integral part of the financial statements.
Financial Statements |
|
Statement of Assets and Liabilities as of December 31, 2004 | |
Assets | |
Investments: Investments in securities, at value (cost $56,290,067) — including $6,351,889 of securities loaned | $ 69,231,155 |
Investment in Daily Assets Fund Institutional (cost $6,643,847)* | 6,643,847 |
Investment in Scudder Cash Management QP Trust (cost $6,382,314) | 6,382,314 |
Total investments in securities, at value (cost $69,316,228) | 82,257,316 |
Cash | 1,336 |
Foreign currency, at value (cost $60,569) | 64,671 |
Receivables for investments sold | 793,632 |
Dividends receivable | 81,978 |
Interest receivable | 8,053 |
Receivable for Portfolio shares sold | 28,292 |
Foreign taxes recoverable | 10,210 |
Other assets | 7,566 |
Total assets | 83,253,054 |
Liabilities | |
Payable for investments purchased | 808,096 |
Payable upon return of securities loaned | 6,643,847 |
Payable for Portfolio shares redeemed | 68,054 |
Accrued management fee | 61,268 |
Other accrued expenses and payables | 98,626 |
Total liabilities | 7,679,891 |
Net assets, at value | $ 75,573,163 |
Net Assets | |
Net assets consist of: Undistributed net investment income | 102,166 |
Net unrealized appreciation (depreciation) on: Investments | 12,941,088 |
Foreign currency related transactions | 6,433 |
Accumulated net realized gain (loss) | (4,812,938) |
Paid-in capital | 67,336,414 |
Net assets, at value | $ 75,573,163 |
Class A Net Asset Value, offering and redemption price per share ($63,027,127 ÷ 5,350,985 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 11.78 |
Class B Net Asset Value, offering and redemption price per share ($12,546,036 ÷ 1,064,827 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 11.78 |
* Represents collateral on securities loaned.
Statement of Operations for the year ended December 31, 2004 | |
Investment Income | |
Income: Dividends (net of foreign taxes withheld of $86,153) | $ 1,100,189 |
Interest — Scudder Cash Management QP Trust | 41,410 |
Securities lending income, including income from Daily Assets Fund Institutional | 29,814 |
Total Income | 1,171,413 |
Expenses: Management fee | 647,402 |
Custodian and accounting fees | 190,058 |
Distribution service fees (Class B) | 23,461 |
Record keeping fees (Class B) | 12,031 |
Auditing | 50,584 |
Legal | 16,830 |
Trustees' fees and expenses | 1,909 |
Reports to shareholders | 13,947 |
Other | 11,575 |
Total expenses, before expense reductions | 967,797 |
Expense reductions | (1,159) |
Total expenses, after expense reductions | 966,638 |
Net investment income (loss) | 204,775 |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from: Investments | 5,258,185 |
Foreign currency related transactions | (17,858) |
| 5,240,327 |
Net unrealized appreciation (depreciation) during the period on: Investments | 3,765,804 |
Foreign currency related transactions | (116) |
| 3,765,688 |
Net gain (loss) on investment transactions | 9,006,015 |
Net increase (decrease) in net assets resulting from operations | $ 9,210,790 |
The accompanying notes are an integral part of the financial statements.
|
Statement of Changes in Net Assets | ||
Increase (Decrease) in Net Assets | Years Ended December 31, | |
2004 | 2003 | |
Operations: Net investment income (loss) | $ 204,775 | $ 469,875 |
Net realized gain (loss) on investment transactions | 5,240,327 | (902,561) |
Net unrealized appreciation (depreciation) on investment transactions during the period | 3,765,688 | 13,515,142 |
Net increase (decrease) in net assets resulting from operations | 9,210,790 | 13,082,456 |
Distributions to shareholders from: Net investment income Class A | (686,309) | (164,671) |
Class B | (57,902) | (1,208) |
Portfolio share transactions: Class A Proceeds from shares sold | 10,246,696 | 14,111,779 |
Reinvestment of distributions | 686,309 | 164,671 |
Cost of shares redeemed | (9,557,336) | (14,079,045) |
Net increase (decrease) in net assets from Class A share transactions | 1,375,669 | 197,405 |
Class B Proceeds from shares sold | 5,449,125 | 5,128,199 |
Reinvestment of distributions | 57,902 | 1,208 |
Cost of shares redeemed | (572,691) | (196,055) |
Net increase (decrease) in net assets from Class B share transactions | 4,934,336 | 4,933,352 |
Increase (decrease) in net assets | 14,776,584 | 18,047,334 |
Net assets at beginning of period | 60,796,579 | 42,749,245 |
Net assets at end of period (including undistributed net investment income of $102,166 and $671,339, respectively) | $ 75,573,163 | $ 60,796,579 |
Other Information | ||
Class A Shares outstanding at beginning of period | 5,262,148 | 5,267,978 |
Shares sold | 941,848 | 1,644,533 |
Shares issued to shareholders in reinvestment of distributions | 64,503 | 21,782 |
Shares redeemed | (917,514) | (1,672,145) |
Net increase (decrease) in Portfolio shares | 88,837 | (5,830) |
Shares outstanding at end of period | 5,350,985 | 5,262,148 |
Class B Shares outstanding at beginning of period | 588,861 | 24,654 |
Shares sold | 522,896 | 585,383 |
Shares issued to shareholders in reinvestment of distributions | 5,427 | 160 |
Shares redeemed | (52,357) | (21,336) |
Net increase (decrease) in Portfolio shares | 475,966 | 564,207 |
Shares outstanding at end of period | 1,064,827 | 588,861 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights |
|
Class A
Years Ended December 31, | 2004 | 2003 | 2002 | 2001 | 2000a |
Selected Per Share Data | |||||
Net asset value, beginning of period | $ 10.39 | $ 8.08 | $ 9.64 | $ 11.81 | $ 12.37 |
Income (loss) from investment operations: Net investment income (loss)b | .04 | .09 | .07 | .08 | .03 |
Net realized and unrealized gain (loss) on investment transactions | 1.48 | 2.25 | (1.57) | (1.90) | (.44) |
Total from investment operations | 1.52 | 2.34 | (1.50) | (1.82) | (.41) |
Less distributions from: Net investment income | (.13) | (.03) | (.06) | — | — |
Net realized gains on investment transactions | — | — | — | (.35) | (.15) |
Total distributions | (.13) | (.03) | (.06) | (.35) | (.15) |
Net asset value, end of period | $ 11.78 | $ 10.39 | $ 8.08 | $ 9.64 | $ 11.81 |
Total Return (%) | 14.76 | 29.13c | (15.77) | (15.48) | (3.36)c |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | 63 | 55 | 43 | 44 | 33 |
Ratio of expenses before expense reductions (%) | 1.44 | 1.48 | 1.32 | 1.24 | 1.78 |
Ratio of expenses after expense reductions (%) | 1.43 | 1.17 | 1.32 | 1.24 | 1.50 |
Ratio of net investment income (loss) (%) | .38 | 1.02 | .79 | .76 | .28 |
Portfolio turnover rate (%) | 81 | 65 | 41 | 52 | 54 |
a On June 18, 2001, the Portfolio implemented a 1 for 10 reverse stock split. Per share information, for the period prior to December 31, 2001, has been restated to reflect the effect of the split. Shareholders received 1 share for every 10 shares owned and net asset value per share increased correspondingly.
b Based on average shares outstanding during the period.
c Total returns would have been lower had certain expenses not been reduced.
Class B
Years Ended December 31, | 2004 | 2003 | 2002a |
Selected Per Share Data | |||
Net asset value, beginning of period | $ 10.38 | $ 8.06 | $ 8.98 |
Income (loss) from investment operations: Net investment income (loss)b | .00d | .04 | .02 |
Net realized and unrealized gain (loss) on investment transactions | 1.48 | 2.29 | (.94) |
Total from investment operations | 1.48 | 2.33 | (.92) |
Less distributions from: Net investment income | (.08) | (.01) | — |
Net asset value, end of period | $ 11.78 | $ 10.38 | $ 8.06 |
Total Return (%) | 14.33 | 28.96c | (10.24)** |
Ratios to Average Net Assets and Supplemental Data | |||
Net assets, end of period ($ millions) | 13 | 6 | .2 |
Ratio of expenses before expense reductions (%) | 1.84 | 1.87 | 1.60* |
Ratio of expenses after expense reductions (%) | 1.83 | 1.64 | 1.60* |
Ratio of net investment income (loss) (%) | .02 | .55 | .49* |
Portfolio turnover rate (%) | 81 | 65 | 41 |
a For the period July 1, 2002 (commencement of operations of Class B shares) to December 31, 2002.
b Based on average shares outstanding during the period.
c Total returns would have been lower had certain expenses not been reduced.
d Amount is less than $.005 per share.
* Annualized ** Not annualized
Performance Summary December 31, 2004 |
|
Scudder Government & Agency Securities Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns.
The guarantee relates only to the prompt payment of principal and interest and does not remove market risks. Additionally, yields will fluctuate in response to changing interest rates and may be affected by the prepayment of mortgage-backed securities. Please read this Portfolio's prospectus for specific details regarding its investments and risk profile.
Growth of an Assumed $10,000 Investment in Scudder Government & Agency Securities Portfolio from 12/31/1994 to 12/31/2004 | ||
[] Scudder Government & Agency Securities Portfolio — Class A [] Lehman Brothers GNMA Index |
| |
![]() |
| The Lehman Brothers GNMA Index is an unmanaged market-value-weighted measure of all fixed-rate securities backed by mortgage pools of the Government National Mortgage Association. Index returns assume reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
Yearly periods ended December 31 |
|
Comparative Results | |||||
Scudder Government & Agency Securities Portfolio |
| 1-Year | 3-Year | 5-Year | 10-Year |
Class A | Growth of $10,000 | $10,375 | $11,464 | $13,668 | $19,584 |
Average annual total return | 3.75% | 4.66% | 6.45% | 6.95% | |
Lehman Brothers GNMA Index | Growth of $10,000 | $10,435 | $11,666 | $14,027 | $20,684 |
Average annual total return | 4.35% | 5.27% | 7.00% | 7.54% | |
Scudder Government & Agency Securities Portfolio |
|
|
| 1-Year | Life of Class* |
Class B | Growth of $10,000 |
|
| $10,336 | $10,917 |
Average annual total return |
|
| 3.36% | 3.57% | |
Lehman Brothers GNMA Index | Growth of $10,000 |
|
| $10,435 | $11,180 |
Average annual total return |
|
| 4.35% | 4.56% |
The growth of $10,000 is cumulative.
* The Portfolio commenced offering Class B shares on July 1, 2002. Index returns begin June 30, 2002.
Information About Your Portfolio's Expenses |
|
Scudder Government & Agency Securities Portfolio
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. The tables are based on an investment of $1,000 made at the beginning of the six-month period ended December 31, 2004.
The tables illustrate your Portfolio's expenses in two ways:
Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2004 | ||
Actual Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,033.80 | $1,031.60 |
Expenses Paid per $1,000* | $ 3.12 | $ 5.06 |
Hypothetical 5% Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,022.14 | $ 1,020.22 |
Expenses Paid per $1,000* | $ 3.10 | $ 5.04 |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365.
Annualized Expense Ratios | Class A | Class B |
Scudder Variable Series II — Scudder Government & Agency Securities Portfolio | .61% | .99% |
For more information, please refer to the Portfolio's prospectus.
Management Summary December 31, 2004 |
|
Scudder Government & Agency Securities Portfolio
The year 2004 produced a more positive environment for mortgage securities than the previous year. Several factors were responsible: (1) interest rates were relatively stable, and any increases — mainly on the short end of the yield curve — were carefully communicated in advance by the Federal Reserve; (2) job growth rose to a respectable average level per month, beginning with the March nonfarm payroll report, and is now in line with economists' forecasts; (3) significant US dollar weakness prompted foreign central banks, primarily in Asia, to intervene and purchase dollars in significant volume to support the value of their own currencies. These actions dampened what might otherwise have been larger long-term interest rate increases during the year; and (4) the net supply of mortgages declined drastically — from $230 billion in 2003 to $40 billion in 2004 while demand remained stable.
During the 12-month period ended December 31, 2004, the portfolio provided a total return of 3.75% (Class A shares, unadjusted for contract charges) compared with the 4.35% return of its benchmark, the Lehman Brothers GNMA Index. The portfolio's return also outperformed the 3.61% return of the average peer in its Lipper category.
During the past 12 months, we focused on mortgages that will maintain their yield in a wide variety of interest rate scenarios. The strategy has been to purchase GNMA mortgages with specifically defined geographic characteristics and smaller loan sizes. Our security selection in this sector of the market has helped performance in terms of price appreciation and a higher yield. In addition, because we anticipated a stable rate environment, we emphasized 30-year mortgages over 15-year instruments because of the yield advantage of longer-term issues. Going forward, we believe that the Fed will continue to raise short-term interest rates incrementally. If interest rates continue to be relatively stable, we expect to maintain our current strategy of emphasizing certain mortgage pool characteristics and longer-term mortgages.
Sean P. McCaffrey
William Chepolis
Co-Managers
Deutsche Investment Management Americas Inc.
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the portfolio or any variable life insurance policy or variable annuity contract for which the portfolio is an investment option. These charges and fees will reduce returns.
Risk Considerations
The government guarantee relates only to the prompt payment of principal and interest and does not remove market risks. Additionally, yields will fluctuate in response to changing interest rates and may be affected by the prepayment of mortgage-backed securities. Please read this portfolio's prospectus for specific details regarding its investments and risk profile.
The Lehman Brothers GNMA Index is an unmanaged market-value-weighted measure of all fixed-rate securities backed by mortgage pools of the Government National Mortgage Association. 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.
Portfolio management market commentary is as of December 31, 2004, and may not come to pass. This information is subject to change at any time based on market and other conditions.
Portfolio Summary |
Scudder Government & Agency Securities Portfolio
Asset Allocation | 12/31/04 | 12/31/03 |
| ||
Agencies Backed by the Full Faith and Credit of the US Government (GNMA) | 57% | 62% |
Agencies Not Backed by the Full Faith and Credit of the US Government (FNMA, FHLMC) | 21% | 31% |
Cash Equivalents | 18% | 3% |
US Government Backed | 4% | 1% |
Repurchase Agreements | — | 3% |
| 100% | 100% |
Credit Quality | 12/31/04 | 12/31/03 |
| ||
AAA | 100% | 100% |
Interest Rate Sensitivity | 12/31/04 | 12/31/03 |
| ||
Average Maturity | 4.6 years | 2.9 years |
Average Duration | 2.6 years | 2.6 years |
|
|
|
Asset allocation, credit quality and interest rate sensitivity are subject to change.
The quality ratings represent the lower of Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P") credit ratings. The ratings of Moody's and S&P represent their opinions as to the quality of the securities they rate. Ratings are relative and subjective and are not absolute standards of quality. The Fund's credit quality does not remove market risk.
For more complete details about the Portfolio's investment portfolio, see page 7. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Portfolio as of month end will be posted to scudder.com on the 15th of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio December 31, 2004 | ![]() | ![]() |
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Scudder Government & Agency Securities Portfolio
| Principal Amount ($) | Value ($) |
|
| |
Agencies Backed by the Full Faith and Credit of the US Government 68.0% | ||
Government National Mortgage Association: |
|
|
4.5%, 8/15/2018 | 3,026,940 | 3,044,920 |
5.0% with various maturities from 7/15/2018 until 7/20/2034 (c) | 38,372,263 | 38,394,313 |
5.5% with various maturities from 12/15/2032 until 12/20/2034 (c) | 83,284,492 | 85,074,527 |
6.0% with various maturities from 5/15/2016 until 12/20/2034 (c) | 50,128,635 | 51,947,012 |
6.5% with various maturities from 3/15/2014 until 8/20/2034 (c) | 27,649,702 | 29,131,129 |
7.0% with various maturities from 4/15/2007 until 10/15/2032 | 7,716,379 | 8,200,573 |
7.5% with various maturities from 12/15/2013 until 7/15/2032 | 5,852,419 | 6,282,828 |
8.0% with various maturities from 12/15/2026 until 11/15/2031 | 1,612,228 | 1,750,673 |
8.5% with various maturities from 5/15/2016 until 12/15/2030 | 204,983 | 224,605 |
9.0%, 8/15/2027 | 22,317 | 25,170 |
9.5% with various maturities from 6/15/2013 until 12/15/2022 | 73,681 | 82,967 |
10.0% with various maturities from 2/15/2016 until 3/15/2016 | 32,718 | 36,327 |
Total Agencies Backed by the Full Faith and Credit of the US Government | 224,195,044 | |
| ||
Agencies Not Backed by the Full Faith and Credit of the US Government 24.8% | ||
Federal Farm Credit Bank, 2.25%, 9/1/2006 | 7,445,000 | 7,333,846 |
Federal Home Loan Bank, Series 1, 3.25%, 12/17/2007 | 15,000,000 | 14,903,670 |
Federal Home Loan Mortgage Corp.: |
|
|
4.5%, 5/1/2019 | 81,382 | 81,161 |
5.0% with various maturities from 6/1/2033 until 6/1/2034 | 5,704,506 | 5,671,799 |
5.5% with various maturities from 2/1/2017 until 4/1/2034 | 1,290,022 | 1,313,147 |
6.0% with various maturities from 3/1/2017 until 11/1/2033 (c) | 8,821,349 | 9,120,822 |
6.5%, 9/1/2032 | 342,357 | 359,489 |
7.0% with various maturities from 5/1/2029 until 9/1/2032 | 5,321,910 | 5,640,651 |
| Principal Amount ($) | Value ($) |
|
| |
7.5% with various maturities from 1/1/2027 until 11/1/2033 | 1,385,816 | 1,484,792 |
8.0%, 11/1/2030 | 11,325 | 12,273 |
8.5%, 7/1/2030 | 7,796 | 8,485 |
Federal National Mortgage Association: |
|
|
5.0% with various maturities from 10/1/2019 until 10/1/2033 | 6,149,849 | 6,231,275 |
5.5% with various maturities from 1/1/2034 until 6/1/2034 | 5,203,959 | 5,286,216 |
6.0% with various maturities from 7/1/2016 until 9/1/2033 | 3,878,105 | 4,037,761 |
6.5% with various maturities from 9/1/2016 until 7/1/2034 (c) | 7,484,421 | 7,854,208 |
7.0% with various maturities from 9/1/2013 until 7/1/2034 | 1,694,428 | 1,795,572 |
7.5% with various maturities from 6/1/2015 until 3/1/2032 | 3,701,670 | 3,965,391 |
8.0%, 12/1/2024 | 29,854 | 32,496 |
Tennessee Valley Authority, 5.625%, 1/18/2011 | 6,000,000 | 6,445,968 |
Total Agencies Not Backed by the Full Faith and Credit of the US Government (Cost $81,555,644) | 81,579,022 | |
| ||
US Government Backed 4.9% | ||
US Treasury Bill, 1.813%*, | 165,000 | 164,845 |
US Treasury Note, 4.25%, 8/15/2014 | 15,825,000 | 15,860,242 |
Total US Government Backed (Cost $15,957,730) | 16,025,087 | |
| ||
Collateralized Mortgage Obligations 0.1% | ||
Federal National Mortgage Association, "IN", Series 2003-84, Interest Only, 4.5%, 4/25/2013 (Cost $356,191) | 4,608,888 | 330,973 |
| ||
Cash Equivalents 20.6% | ||
Scudder Cash Management QP Trust, 2.24% (b) | 67,948,768 | 67,948,768 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $388,030,216) (a) | 118.4 | 390,078,894 |
Other Assets and Liabilities, Net | (18.4) | (60,509,199) |
Net Assets | 100.0 | 329,569,695 |
Notes to Scudder Government & Agency Securities Portfolio of Investments |
* Annualized yield at time of purchase; not a coupon rate.
(a) The cost for federal income tax purposes was $388,052,593. At December 31, 2004, net unrealized appreciation for all securities based on tax cost was $2,026,301. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $2,785,335 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $759,034.
(b) Scudder Cash Management QP Trust is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
(c) Mortgage dollar roll included.
(d) At December 31, 2004, these securities have been segregated, in part or in whole, to cover initial margin requirements for open futures contracts.
At December 31, 2004, open futures contracts purchased were as follows:
Futures | Expiration | Contracts | Aggregate Face Value ($) | Market Value ($) | Net Unrealized Appreciation/ (Depreciation) ($) |
10 year US Treasury Note | 3/21/2005 | 23 | 2,558,062 | 2,574,563 | 16,501 |
At December 31, 2004, open futures contracts sold short were as follows:
Futures | Expiration | Contracts | Aggregate Face Value ($) | Market Value ($) | Net Unrealized Appreciation/ (Depreciation) ($) |
2 year US Treasury Note | 3/31/2005 | 40 | (8,399,213) | (8,383,750) | 15,463 |
5 year US Treasury Note | 3/21/2005 | 85 | (9,298,524) | (9,310,156) | (11,632) |
Total net unrealized appreciation |
|
|
|
| 3,831 |
Included in the portfolio are investments in mortgage or asset-backed securities which are interests in separate pools of mortgages or assets. Effective maturities of these investments may be shorter than stated maturities due to prepayments. Some separate investments in the Federal National Mortgage Association, Government National Mortgage Association and Federal Home Loan Mortgage Corp. issues which have similar coupon rates have been aggregated for presentation purposes in the investment portfolio.
The accompanying notes are an integral part of the financial statements.
Financial Statements |
|
Statement of Assets and Liabilities as of December 31, 2004 | |
Assets | |
Investments: Investments in securities, at value (cost $320,081,448) | $ 322,130,126 |
Investment in Scudder Cash Management QP Trust (cost $67,948,768) | 67,948,768 |
Total investments in securities, at value (cost $388,030,216) | 390,078,894 |
Receivable for investments sold | 39,960,613 |
Interest receivable | 1,909,217 |
Receivable for Portfolio shares sold | 323,832 |
Other assets | 10,053 |
Total assets | 432,282,609 |
Liabilities | |
Payable for investments purchased | 30,127,633 |
Payable for when issued and forward delivery securities | 5,971,711 |
Payable for investments purchased — mortgage dollar rolls | 66,166,759 |
Deferred mortgage dollar roll income | 76,424 |
Payable for Portfolio shares redeemed | 86,162 |
Payable for daily variation margin on open futures contracts | 11,469 |
Accrued management fee | 156,889 |
Other accrued expenses and payables | 115,867 |
Total liabilities | 102,712,914 |
Net assets, at value | $ 329,569,695 |
Net Assets | |
Net assets consist of: Undistributed net investment income | 10,896,663 |
Net unrealized appreciation (depreciation) on: Investments | 2,048,678 |
Futures | 20,332 |
Accumulated net realized gain (loss) | 2,157,418 |
Paid-in capital | 314,446,604 |
Net assets, at value | $ 329,569,695 |
Class A Net Asset Value, offering and redemption price per share ($280,091,543 ÷ 22,309,252 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 12.55 |
Class B Net Asset Value, offering and redemption price per share ($49,478,152 ÷ 3,952,379 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 12.52 |
Statement of Operations for the year ended December 31, 2004 | |
Investment Income | |
Income: Interest | $ 12,383,702 |
Interest — Scudder Cash Management QP Trust | 872,299 |
Mortgage dollar roll income | 1,323,021 |
Securities lending income, including income from Daily Assets Fund Institutional | 10,160 |
Total Income | 14,589,182 |
Expenses: Management fee | 1,908,304 |
Custodian fees | 36,725 |
Distribution service fees (Class B) | 112,953 |
Record keeping fees (Class B) | 61,467 |
Auditing | 58,595 |
Legal | 26,856 |
Trustees' fees and expenses | 2,572 |
Reports to shareholders | 76,696 |
Other | 22,019 |
Total expenses, before expense reductions | 2,306,187 |
Expense reductions | (3,977) |
Total expenses, after expense reductions | 2,302,210 |
Net investment income | 12,286,972 |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from: Investments | 1,710,270 |
Futures | (144,216) |
Net increase from payments by affiliates and net gains (losses) realized on the disposal of investments in violations of restrictions | — |
| 1,566,054 |
Net unrealized appreciation (depreciation) during the period on: Investments | (1,062,304) |
Futures | 1,329 |
| (1,060,975) |
Net gain (loss) on investment transactions | 505,079 |
Net increase (decrease) in net assets resulting from operations | $ 12,792,051 |
The accompanying notes are an integral part of the financial statements.
|
Statement of Changes in Net Assets | ||
Increase (Decrease) in Net Assets | Years Ended December 31, | |
2004 | 2003 | |
Operations: Net investment income (loss) | $ 12,286,972 | $ 12,142,038 |
Net realized gain (loss) on investment transactions | 1,566,054 | 469,040 |
Net unrealized appreciation (depreciation) on investment transactions during the period | (1,060,975) | (3,359,459) |
Net increase (decrease) in net assets resulting from operations | 12,792,051 | 9,251,619 |
Distributions to shareholders from: Net investment income Class A | (8,701,916) | (14,733,066) |
Class B | (986,391) | (755,455) |
Net realized gains Class A | (2,734,888) | (9,005,857) |
Class B | (359,519) | (509,269) |
Portfolio share transactions: Class A Proceeds from shares sold | 20,190,555 | 45,404,708 |
Reinvestment of distributions | 11,436,803 | 23,738,923 |
Cost of shares redeemed | (97,935,807) | (259,047,177) |
Net increase (decrease) in net assets from Class A share transactions | (66,308,449) | (189,903,546) |
Class B Proceeds from shares sold | 23,191,368 | 71,406,944 |
Reinvestment of distributions | 1,345,911 | 1,264,724 |
Cost of shares redeemed | (13,460,654) | (36,011,827) |
Net increase (decrease) in net assets from Class B share transactions | 11,076,625 | 36,659,841 |
Increase (decrease) in net assets | (55,222,487) | (168,995,733) |
Net assets at beginning of period | 384,792,182 | 553,787,915 |
Net assets at end of period (including undistributed net investment income of $10,896,663 and $9,445,556, respectively) | $ 329,569,695 | $ 384,792,182 |
Other Information | ||
Class A Shares outstanding at beginning of period | 27,631,433 | 42,918,597 |
Shares sold | 1,635,527 | 3,576,998 |
Shares issued to shareholders in reinvestment of distributions | 932,855 | 1,917,523 |
Shares redeemed | (7,890,563) | (20,781,685) |
Net increase (decrease) in Portfolio shares | (5,322,181) | (15,287,164) |
Shares outstanding at end of period | 22,309,252 | 27,631,433 |
Class B Shares outstanding at beginning of period | 3,055,787 | 216,015 |
Shares sold | 1,876,522 | 5,681,579 |
Shares issued to shareholders in reinvestment of distributions | 109,781 | 102,159 |
Shares redeemed | (1,089,711) | (2,943,966) |
Net increase (decrease) in Portfolio shares | 896,592 | 2,839,772 |
Shares outstanding at end of period | 3,952,379 | 3,055,787 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights |
|
Class A
Years Ended December 31, | 2004 | 2003 | 2002 | 2001a | 2000b |
Selected Per Share Data | |||||
Net asset value, beginning of period | $ 12.54 | $ 12.84 | $ 12.32 | $ 11.96 | $ 11.56 |
Income from investment operations: Net investment incomec | .44 | .31 | .62 | .61 | .75 |
Net realized and unrealized gain (loss) on investment transactions | .03 | (.04) | .35 | .25 | .45 |
Total from investment operations | .47 | .27 | .97 | .86 | 1.20 |
Less distributions from: Net investment income | (.35) | (.35) | (.45) | (.50) | (.80) |
Net realized gain on investment transactions | (.11) | (.22) | — | — | — |
Total distributions | (.46) | (.57) | (.45) | (.50) | (.80) |
Net asset value, end of period | $ 12.55 | $ 12.54 | $ 12.84 | $ 12.32 | $ 11.96 |
Total Return (%) | 3.75e | 2.26 | 8.05 | 7.48 | 10.93 |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | 280 | 347 | 551 | 305 | 152 |
Ratio of expenses (%) | .61 | .61 | .59 | .60 | .61 |
Ratio of net investment income (loss) (%) | 3.59 | 2.50 | 4.96 | 5.06 | 6.60 |
Portfolio turnover rate (%) | 226d | 511d | 534d | 334 | 173 |
a As required, effective January 1, 2001, the Portfolio has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium on debt securities. In addition, gain/losses on paydowns on mortgage-backed securities which were included in realized gain/loss on investment transactions prior to January 1, 2001 are included as interest income. The effect of this change for the year ended December 31, 2001 was to decrease net investment income per share by $.08, increase net realized and unrealized gains and losses per share by $.08 and decrease the ratio of net investment income to average net assets from 5.67% to 5.06%. Per share, ratios and supplemental data for periods prior to January 1, 2001 have not been restated to reflect this change in presentation.
b On June 18, 2001, the Portfolio implemented a 1 for 10 reverse stock split. Per share information, for the periods prior to December 31, 2001, has been restated to reflect the effect of the split. Shareholders received 1 share for every 10 shares owned and net asset value per share increased correspondingly.
c Based on average shares outstanding during the period.
d The portfolio turnover rate including mortgage dollar roll transactions was 391%, 536% and 651% for the periods ended December 31, 2004, December 31, 2003 and December 31, 2002, respectively.
e Reimbursement of $2,420 due to disposal of investments in violation of restrictions had no effect on total return.
Class B
Years Ended December 31, | 2004 | 2003 | 2002a |
Selected Per Share Data | |||
Net asset value, beginning of period | $ 12.51 | $ 12.82 | $ 12.36 |
Income from investment operations: Net investment incomeb | .40 | .27 | .31 |
Net realized and unrealized gain (loss) on investment transactions | .02 | (.04) | .15 |
Total from investment operations | .42 | .23 | .46 |
Less distributions from: Net investment income | (.30) | (.32) | — |
Net realized gains on investment transactions | (.11) | (.22) | — |
Total distributions | (.41) | (.54) | — |
Net asset value, end of period | $ 12.52 | $ 12.51 | $ 12.82 |
Total Return (%) | 3.36d | 1.83 | 3.72** |
Ratios to Average Net Assets and Supplemental Data | |||
Net assets, end of period ($ millions) | 49 | 38 | 3 |
Ratio of expenses (%) | 1.00 | .98 | .84* |
Ratio of net investment income (loss) (%) | 3.21 | 2.13 | 4.95* |
Portfolio turnover rate (%) | 226c | 511c | 534c |
a For the period July 1, 2002 (commencement of operations of Class B shares) to December 31, 2002.
b Based on average shares outstanding during the period.
c The portfolio turnover rate including mortgage dollar roll transactions was 391%, 536% and 651% for the periods ended December 31, 2004, December 31, 2003 and December 31, 2002, respectively.
d Reimbursement of $2,420 due to disposal of investments in violation of restrictions had no effect on total return.
* Annualized
** Not annualized
Performance Summary December 31, 2004 |
|
Scudder Growth Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns.
This Portfolio is subject to stock market risk, meaning stocks in the Portfolio may decline in value for extended periods of time due to the activities and financial prospects of individual companies, or due to general market and economic conditions. Please read this Portfolio's prospectus for specific details regarding its investments and risk profile.
Growth of an Assumed $10,000 Investment in Scudder Growth Portfolio from 12/31/1994 to 12/31/2004 | ||
[] Scudder Growth Portfolio — Class A [] Russell 1000 Growth Index |
| |
![]() |
| The Russell 1000 Growth Index is an unmanaged index composed of common stock of larger US companies with higher price -to-book ratios and higher forecasted growth values. Index returns assume reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
Yearly periods ended December 31 |
|
|
Comparative Results | |||||
Scudder Growth Portfolio |
| 1-Year | 3-Year | 5-Year | 10-Year |
Class A | Growth of $10,000 | $10,514 | $9,257 | $5,819 | $18,023 |
Average annual total return | 5.14% | -2.54% | -10.26% | 6.07% | |
Russell 1000 Growth Index | Growth of $10,000 | $10,630 | $9,946 | $6,140 | $24,994 |
Average annual total return | 6.30% | -.18% | -9.29% | 9.59% | |
Scudder Growth Portfolio |
|
|
| 1-Year | Life of Class* |
Class B | Growth of $10,000 |
|
| $10,477 | $12,039 |
Average annual total return |
|
| 4.77% | 7.70% | |
Russell 1000 Growth Index | Growth of $10,000 |
|
| $10,630 | $12,555 |
Average annual total return |
|
| 6.30% | 9.53% |
The growth of $10,000 is cumulative.
* The Portfolio commenced offering Class B shares on July 1, 2002. Index returns begin June 30, 2002.
Information About Your Portfolio's Expenses |
|
Scudder Growth Portfolio
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent six-month period, the Portfolio limited these expenses; had it not done so, expenses would have been higher. The tables are based on an investment of $1,000 made at the beginning of the six-month period ended December 31, 2004.
The tables illustrate your Portfolio's expenses in two ways:
Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2004 | ||
Actual Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,030.80 | $ 1,029.30 |
Expenses Paid per $1,000* | $ 3.28 | $ 5.17 |
Hypothetical 5% Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,021.77 | $ 1,020.11 |
Expenses Paid per $1,000* | $ 3.27 | $ 5.15 |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365.
Annualized Expense Ratios | Class A | Class B |
Scudder Variable Series II — Scudder Growth Portfolio | .64% | 1.01% |
For more information, please refer to the Portfolio's prospectus.
Management Summary December 31, 2004 |
|
Scudder Growth Portfolio
While equity market performance in general was positive in 2004, substantial performance disparities existed between investment styles and market capitializations. Small caps outperformed large cap as the 18.33% advance of the Russell 2000 Index outpaced the 10.88% gain of the S&P 500 index. In terms of investment style, the 6.30% annual return of the Russell 1000 Growth Index significantly trailed the 16.49% advance of the Russell 1000 Value Index, marking the fifth consecutive year that value outperformed growth.
The Scudder Growth Portfolio's return of 5.14% (Class A shares, unadjusted for contract charges) underperformed its benchmark, the Russell 1000 Growth Index in the year ended December 31, 2004 as positioning in the Information Technology and Consumer Discretionary sectors detracted from relative performance. As 2004 progressed, we reduced the portfolio's cyclical exposure and emphasized more consistent earners in anticipation of slowing profit growth. This strategy proved successful for most of 2004. In the fourth quarter however, as the presidential election was decided and oil prices declined from near-record highs, investor optimism grew. This optimism led to a sharp rebound in the more cyclical, volatile sectors of the market. The Scudder Growth Portfolio, therefore, underperformed in the fourth quarter and the outperformance we had enjoyed through the first three quarters of the year was negated.
In a continued example of adding value through top-down sector allocation, the portfolio's overweight in the Energy sector remained in place throughout 2004 and proved to be extremely additive to annual performance. While oil prices remain volatile, our investment thesis is focused on the long-term growth opportunities created by a chronic underinvestment in the exploration and production of new reserves.
Our investment philosophy is unchanged as we maintain our belief that a diversified portfolio of high-quality large-cap growth stocks will outperform over longer time periods. Therefore, we continue to seek out and find companies that reconcile well with our key selection criteria of quality, growth and innovation.
Julie M. Van Cleave
Jack A. Zehner
Thomas J. Schmid
Co-Managers
Deutsche Investment Management Americas Inc.
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the portfolio or any variable life insurance policy or variable annuity contract for which the portfolio is an investment option. These charges and fees will reduce returns.
Risk Considerations
This portfolio is subject to stock market risk, meaning stocks in the portfolio may decline in value for extended periods of time due to the activities and financial prospects of individual companies, or due to general market and economic conditions. Please read this portfolio's prospectus for specific details regarding its investments and risk profile.
The Russell 1000 Growth Index is an unmanaged index composed of common stock of larger US companies with higher price -to-book ratios and higher forecasted growth values. Index returns assume reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
Portfolio management market commentary is as of December 31, 2004, and may not come to pass. This information is subject to change at any time based on market and other conditions.
Portfolio Summary |
Scudder Growth Portfolio
Asset Allocation (Excludes Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Common Stocks | 97% | 99% |
Exchange Traded Funds | 1% | — |
Cash Equivalents | 2% | 1% |
| 100% | 100% |
Sector Diversification (Excludes Cash Equivalents and Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Information Technology | 24% | 30% |
Health Care | 23% | 20% |
Consumer Discretionary | 15% | 16% |
Consumer Staples | 12% | 12% |
Industrials | 9% | 8% |
Energy | 9% | 5% |
Financials | 7% | 8% |
Materials | 1% | 1% |
| 100% | 100% |
Asset allocation and sector diversification are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 17. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Portfolio as of month end will be posted to scudder.com on the 15th of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio December 31, 2004 | ![]() | ![]() |
|
Scudder Growth Portfolio
|
| Value ($) |
|
| |
Common Stocks 97.9% | ||
Consumer Discretionary 14.3% | ||
Automobiles 1.6% | ||
Harley-Davidson, Inc. | 82,900 | 5,036,175 |
Hotels Restaurants & Leisure 1.5% | ||
International Game Technology | 105,800 | 3,637,404 |
YUM! Brands, Inc. | 17,800 | 839,804 |
4,477,208 | ||
Household Durables 0.3% | ||
Fortune Brands, Inc. | 13,400 | 1,034,212 |
Internet & Catalog Retail 1.2% | ||
eBay, Inc.* | 30,800 | 3,581,424 |
Media 3.8% | ||
Comcast Corp. "A"* | 74,000 | 2,430,160 |
McGraw-Hill Companies, Inc. | 18,800 | 1,720,952 |
Omnicom Group, Inc. | 57,440 | 4,843,341 |
Viacom, Inc. "B" | 76,230 | 2,774,010 |
11,768,463 | ||
Multiline Retail 2.7% | ||
Kohl's Corp.* | 33,700 | 1,657,029 |
Target Corp. | 125,400 | 6,512,022 |
8,169,051 | ||
Specialty Retail 3.2% | ||
Bed Bath & Beyond, Inc.* | 56,500 | 2,250,395 |
Home Depot, Inc. | 41,900 | 1,790,806 |
Lowe's Companies, Inc. | 32,100 | 1,848,639 |
Staples, Inc. | 116,900 | 3,940,699 |
9,830,539 | ||
Consumer Staples 11.5% | ||
Beverages 2.2% | ||
PepsiCo, Inc. | 127,450 | 6,652,890 |
Food & Drug Retailing 4.3% | ||
Wal-Mart Stores, Inc. | 162,990 | 8,609,132 |
Walgreen Co. | 119,700 | 4,592,889 |
13,202,021 | ||
Food Products 1.5% | ||
Dean Foods Co.* | 40,200 | 1,324,590 |
Hershey Foods Corp. | 34,900 | 1,938,346 |
Kellogg Co. | 33,900 | 1,513,974 |
4,776,910 | ||
Household Products 3.5% | ||
Colgate-Palmolive Co. | 42,840 | 2,191,694 |
Kimberly-Clark Corp. | 22,900 | 1,507,049 |
Procter & Gamble Co. | 125,700 | 6,923,556 |
10,622,299 | ||
Energy 8.7% | ||
Energy Equipment & Services 4.1% | ||
Baker Hughes, Inc. | 83,900 | 3,580,013 |
Nabors Industries Ltd.* | 64,300 | 3,297,947 |
Schlumberger Ltd. | 58,800 | 3,936,660 |
|
| Value ($) |
|
| |
Transocean, Inc.* | 38,900 | 1,648,971 |
12,463,591 | ||
Oil & Gas 4.6% | ||
ConocoPhillips | 38,700 | 3,360,321 |
Devon Energy Corp. | 98,600 | 3,837,512 |
EOG Resources, Inc. | 98,000 | 6,993,280 |
14,191,113 | ||
Financials 7.1% | ||
Capital Markets 2.2% | ||
Goldman Sachs Group, Inc. | 14,600 | 1,518,984 |
Lehman Brothers Holdings, Inc. | 23,100 | 2,020,788 |
Morgan Stanley | 55,400 | 3,075,808 |
6,615,580 | ||
Consumer Finance 1.6% | ||
American Express Co. | 87,900 | 4,954,923 |
Diversified Financial Services 1.4% | ||
Citigroup, Inc. | 91,200 | 4,394,016 |
Insurance 1.9% | ||
AFLAC, Inc. | 72,400 | 2,884,416 |
American International Group, Inc. | 43,810 | 2,877,003 |
5,761,419 | ||
Health Care 22.1% | ||
Biotechnology 5.6% | ||
Amgen, Inc.* | 74,800 | 4,798,420 |
Biogen Idec, Inc.* | 55,700 | 3,710,177 |
Genentech, Inc.* | 86,000 | 4,681,840 |
Gilead Sciences, Inc.* | 111,100 | 3,887,389 |
17,077,826 | ||
Health Care Equipment & Supplies 6.0% | ||
Baxter International, Inc. | 69,900 | 2,414,346 |
Boston Scientific Corp.* | 82,300 | 2,925,765 |
C.R. Bard, Inc. | 39,800 | 2,546,404 |
Medtronic, Inc. | 108,200 | 5,374,294 |
Zimmer Holdings, Inc.* | 65,300 | 5,231,836 |
18,492,645 | ||
Health Care Providers & Services 1.9% | ||
UnitedHealth Group, Inc. | 66,600 | 5,862,798 |
Pharmaceuticals 8.6% | ||
Abbott Laboratories | 53,300 | 2,486,445 |
Eli Lilly & Co. | 32,000 | 1,816,000 |
Johnson & Johnson | 179,586 | 11,389,344 |
Pfizer, Inc. | 242,702 | 6,526,257 |
Teva Pharmaceutical Industries Ltd. (ADR) | 139,800 | 4,174,428 |
26,392,474 | ||
Industrials 9.3% | ||
Aerospace & Defense 2.1% | ||
United Technologies Corp. | 61,600 | 6,366,360 |
Air Freight & Logistics 1.6% | ||
FedEx Corp. | 51,400 | 5,062,386 |
|
| Value ($) |
|
| |
Industrial Conglomerates 5.0% | ||
3M Co. | 37,000 | 3,036,590 |
General Electric Co. | 334,940 | 12,225,310 |
15,261,900 | ||
Machinery 0.6% | ||
Caterpillar, Inc. | 17,900 | 1,745,429 |
Information Technology 24.0% | ||
Communications Equipment 3.8% | ||
Cisco Systems, Inc.* | 365,420 | 7,052,606 |
QUALCOMM, Inc. | 109,400 | 4,638,560 |
11,691,166 | ||
Computers & Peripherals 4.3% | ||
Dell, Inc.* | 60,400 | 2,545,256 |
EMC Corp.* | 385,700 | 5,735,359 |
International Business Machines Corp. | 50,000 | 4,929,000 |
13,209,615 | ||
IT Consulting & Services 3.3% | ||
Accenture Ltd. "A"* | 105,200 | 2,840,400 |
Fiserv, Inc.* | 86,000 | 3,456,340 |
Paychex, Inc. | 106,300 | 3,622,704 |
9,919,444 | ||
Semiconductors & Semiconductor Equipment 4.5% | ||
Intel Corp. | 331,740 | 7,759,398 |
Linear Technology Corp. | 91,230 | 3,536,075 |
Texas Instruments, Inc. | 99,400 | 2,447,228 |
13,742,701 | ||
Software 8.1% | ||
Adobe Systems, Inc. | 15,000 | 941,100 |
Electronic Arts, Inc.* (c) | 74,200 | 4,576,656 |
|
| Value ($) |
|
| |
Intuit, Inc.* | 43,700 | 1,923,237 |
Microsoft Corp. | 457,480 | 12,219,290 |
Oracle Corp.* | 184,000 | 2,524,480 |
Symantec Corp.* | 104,000 | 2,679,040 |
24,863,803 | ||
Materials 0.9% | ||
Chemicals | ||
Ecolab, Inc. | 76,000 | 2,669,880 |
Total Common Stocks (Cost $229,803,236) | 299,890,261 | |
| ||
Exchange Traded Funds 0.9% | ||
iShares Nasdaq Biotechnology Index Fund* (c) | 18,400 | 1,387,360 |
Semiconductor HOLDRs Trust | 44,600 | 1,487,856 |
Total Exchange Traded Funds (Cost $3,020,966) | 2,875,216 | |
| ||
Securities Lending Collateral 1.5% | ||
Daily Assets Fund Institutional, 2.25% (d) (e) (Cost $4,617,400) | 4,617,400 | 4,617,400 |
| ||
Cash Equivalents 1.9% | ||
Scudder Cash Management QP Trust, 2.24% (b) (Cost $5,958,356) | 5,958,356 | 5,958,356 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $243,399,958) (a) | 102.2 | 313,341,233 |
Other Assets and Liabilities, Net | (2.2) | (6,861,289) |
Net Assets | 100.0 | 306,479,944 |
Notes to Scudder Growth Portfolio of Investments |
* Non-income producing security.
(a) The cost for federal income tax purposes was $245,015,726. At December 31, 2004, net unrealized appreciation for all securities based on tax cost was $68,325,507. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $70,905,457 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $2,579,950.
(b) Scudder Cash Management QP Trust is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
(c) All or a portion of these securities were on loan (see Notes to Financial Statements). The value of all securities loaned at December 31, 2004 amounted to $4,479,075, which is 1.5% of net assets.
(d) Daily Assets Fund Institutional, an affiliated fund, is managed by Deutsche Asset Management, Inc. The rate shown is the annualized seven-day yield at period end.
(e) Represents collateral held in connection with securities lending.
ADR: American Depositary Receipts.
HOLDRs: Holding Company Depositary Receipts
The accompanying notes are an integral part of the financial statements.
Financial Statements |
|
Statement of Assets and Liabilities as of December 31, 2004 | |
Assets | |
Investments: Investments in securities, at value (cost $232,824,202) — including $4,479,075 of securities loaned | $ 302,765,477 |
Investments in Daily Assets Fund Institutional (cost $4,617,400)* | 4,617,400 |
Investment in Scudder Cash Management QP Trust (cost $5,958,356) | 5,958,356 |
Total investments in securities, at value (cost $243,399,958) | 313,341,233 |
Cash | 153 |
Dividends receivable | 236,859 |
Interest receivable | 12,072 |
Receivable for Portfolio shares sold | 348,923 |
Other assets | 16,835 |
Total assets | 313,956,075 |
Liabilities | |
Payable for Portfolio shares redeemed | 2,634,253 |
Payable upon return of securities loaned | 4,617,400 |
Accrued management fee | 156,458 |
Other accrued expenses and payables | 68,020 |
Total liabilities | 7,476,131 |
Net assets, at value | $ 306,479,944 |
Net Assets | |
Net assets consist of: Undistributed net investment income | 2,081,479 |
Net unrealized appreciation (depreciation) on investments | 69,941,275 |
Accumulated net realized gain (loss) | (162,361,013) |
Paid-in capital | 396,818,203 |
Net assets, at value | $ 306,479,944 |
Class A Net Asset Value, offering and redemption price per share ($290,395,910 ÷ 14,958,026 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 19.41 |
Class B Net Asset Value, offering and redemption price per share ($16,084,034 ÷ 832,962 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 19.31 |
* Represents collateral on securities loaned.
Statement of Operations for the year ended December 31, 2004 | |
Investment Income | |
Income: Dividends (net of foreign taxes withheld of $7,592) | $ 4,162,057 |
Interest — Scudder Cash Management QP Trust | 73,263 |
Securities lending income, including income from Daily Assets Fund Institutional | 3,559 |
Total Income | 4,238,879 |
Expenses: Management fee | 1,842,117 |
Custodian fees | 16,638 |
Distribution service fees (Class B) | 29,642 |
Record keeping fees (Class B) | 14,980 |
Auditing | 41,460 |
Legal | 18,398 |
Trustees' fees and expenses | 4,785 |
Reports to shareholders | 64,805 |
Other | 6,451 |
Total expenses, before expense reductions | 2,039,276 |
Expense reductions | (3,043) |
Total expenses, after expense reductions | 2,036,233 |
Net investment income (loss) | 2,202,646 |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from investments | (2,112,683) |
Net unrealized appreciation (depreciation) during the period on investments | 15,006,327 |
Net gain (loss) on investment transactions | 12,893,644 |
Net increase (decrease) in net assets resulting from operations | $ 15,096,290 |
The accompanying notes are an integral part of the financial statements.
|
Statement of Changes in Net Assets | ||
Increase (Decrease) in Net Assets | Years Ended December 31, | |
2004 | 2003 | |
Operations: Net investment income (loss) | $ 2,202,646 | $ 830,426 |
Net realized gain (loss) on investment transactions | (2,112,683) | (12,111,531) |
Net unrealized appreciation (depreciation) on investment transactions during the period | 15,006,327 | 78,050,590 |
Net increase (decrease) in net assets resulting from operations | 15,096,290 | 66,769,485 |
Distributions to shareholders from: Net investment income Class A | (815,090) | (328,128) |
Portfolio share transactions: Class A Proceeds from shares sold | 18,466,237 | 46,556,451 |
Reinvestment of distributions | 815,090 | 328,128 |
Cost of shares redeemed | (55,750,428) | (45,206,144) |
Net increase (decrease) in net assets from Class A share transactions | (36,469,101) | 1,678,435 |
Class B Proceeds from shares sold | 8,950,573 | 6,505,025 |
Cost of shares redeemed | (494,088) | (422,693) |
Net increase (decrease) in net assets from Class B share transactions | 8,456,485 | 6,082,332 |
Increase (decrease) in net assets | (13,731,416) | 74,202,124 |
Net assets at beginning of period | 320,211,360 | 246,009,236 |
Net assets at end of period (including undistributed net investment income of $2,081,479 and $702,179, respectively) | $ 306,479,944 | $ 320,211,360 |
Other Information | ||
Class A Shares outstanding at beginning of period | 16,929,119 | 16,549,770 |
Shares sold | 995,737 | 3,153,740 |
Shares issued to shareholders in reinvestment of distributions | 43,869 | 22,156 |
Shares redeemed | (3,010,699) | (2,796,547) |
Net increase (decrease) in Portfolio shares | (1,971,093) | 379,349 |
Shares outstanding at end of period | 14,958,026 | 16,929,119 |
Class B Shares outstanding at beginning of period | 374,544 | 8,811 |
Shares sold | 485,347 | 390,729 |
Shares redeemed | (26,929) | (24,996) |
Net increase (decrease) in Portfolio shares | 458,418 | 365,733 |
Shares outstanding at end of period | 832,962 | 374,544 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights |
|
Class A
Years Ended December 31, | 2004 | 2003 | 2002 | 2001 | 2000a |
Selected Per Share Data | |||||
Net asset value, beginning of period | $ 18.51 | $ 14.86 | $ 21.05 | $ 30.12 | $ 40.54 |
Income (loss) from investment operations: Net investment income (loss)b | .14 | .05 | .01 | .03 | (.01) |
Net realized and unrealized gain (loss) on investment transactions | .81 | 3.62 | (6.20) | (6.75) | (6.81) |
Total from investment operations | .95 | 3.67 | (6.19) | (6.72) | (6.82) |
Less distributions from: Net investment income | (.05) | (.02) | — | (.03) | — |
Net realized gains on investment transactions | — | — | — | (2.31) | (3.60) |
Return of capital | — | — | — | (.01) | — |
Total distributions | (.05) | (.02) | — | (2.35) | (3.60) |
Net asset value, end of period | $ 19.41 | $ 18.51 | $ 14.86 | $ 21.05 | $ 30.12 |
Total Return (%) | 5.14 | 24.71 | (29.41) | (22.34) | (19.06) |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | 290 | 313 | 246 | 420 | 583 |
Ratio of expenses (%) | .65 | .64 | .64 | .63 | .65 |
Ratio of net investment income (loss) (%) | .73 | .29 | .07 | .13 | (.03) |
Portfolio turnover rate (%) | 21 | 26 | 38 | 73 | 65 |
a On June 18, 2001, the Portfolio implemented a 1 for 10 reverse stock split. Per share information, for the period prior to December 31, 2001,
has been restated to reflect the effect of the split. Shareholders received 1 share for every 10 shares owned and net asset value per share increased correspondingly.
b Based on average shares outstanding during the period.
Class B
Years Ended December 31, | 2004 | 2003 | 2002a |
Selected Per Share Data | |||
Net asset value, beginning of period | $ 18.43 | $ 14.83 | $ 16.04 |
Income (loss) from investment operations: Net investment income (loss)b | .07 | (.03) | .06 |
Net realized and unrealized gain (loss) on investment transactions | .81 | 3.63 | (1.27) |
Total from investment operations | .88 | 3.60 | (1.21) |
Net asset value, end of period | $ 19.31 | $ 18.43 | $ 14.83 |
Total Return (%) | 4.77 | 24.28 | (7.54)** |
Ratios to Average Net Assets and Supplemental Data | |||
Net assets, end of period ($ millions) | 16 | 7 | .1 |
Ratio of expenses (%) | 1.03 | 1.03 | .88* |
Ratio of net investment income (loss) (%) | .35 | (.10) | .80* |
Portfolio turnover rate (%) | 21 | 26 | 38 |
a For the period from July 1, 2002 (commencement of operations of Class B shares) to December 31, 2002.
b Based on average shares outstanding during the period.
* Annualized
** Not annualized
|
Scudder Growth & Income Strategy Portfolio
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent six-month period, the Portfolio limited these expenses; had it not done so, expenses would have been higher. The tables are based on an investment of $1,000 made at the beginning of the period (August 16, 2004) ended December 31, 2004.
The tables illustrate your Portfolio's expenses in two ways:
Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the period ended December 31, 2004 | |
Actual Portfolio Return | Class B |
Beginning Account Value 8/16/04 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,084.80 |
Expenses Paid per $1,000* | $ 2.92 |
Hypothetical 5% Portfolio Return | Class B |
Beginning Account Value 8/16/04 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,015.96 |
Expenses Paid per $1,000* | $ 2.83 |
* Expenses are equal to the Portfolio's annualized expense ratio for share class, multiplied by the average account value over the period, multiplied by the number of days since inception (August 16, 2004), then divided by 365.
Annualized Expense Ratios | Class B |
Scudder Variable Series II — Scudder Growth & Income Strategy Portfolio | .75% |
For more information, please refer to the Portfolio's prospectus.
Management Summary December 31, 2004 |
|
Scudder Growth & Income Strategy Portfolio
Scudder Growth & Income Strategy Portfolio is one of four new fund-of-funds portfolios. Each portfolio is constructed as a strategically allocated mix of variable portfolios and managed to pursue consistent returns over time, while mitigating risk and pursuing a long-term investment objective. Scudder Growth & Income Strategy Portfolio seeks a balance of long-term growth of capital and current income with an emphasis on growth of capital. The portfolio gained 8.40% (Class B shares, unadjusted for contract charges) from its date of inception, August 16, 2004, through December 31, 2004. Investors should keep in mind that during the start-up phase of the portfolio, it required some time to invest all the cash inflows. Because we had large cash flows, often exceeding the size of the portfolio, our allocation was heavily weighted in cash — even though we invested the cash right away every day.
Stocks performed exceptionally well in 2003, when profit margins widened because productivity accelerated but labor costs remained low (due to a soft labor market). However, equity performance was lower in 2004, due in part to rising interest rates, concerns about inflation and soaring energy prices, all of which can impact the revenue growth of companies. Performance did improve at the end of 2004 as signs of economic strength emerged and oil prices decreased. The end of uncertainty surrounding the US presidential election also helped the stock market find its footing. Specifically, the energy and materials sectors performed particularly well in 2004, while the technology, consumer staples and consumer discretionary sectors lagged behind. Going forward, profit margins are not likely to widen further, and may even narrow. As a result, we believe that returns will likely be modest. The portfolio underweighted equities relative to fixed income only in December and overweighted equities for all other months since inception. To improve diversification within the stock category, the portfolio overweighted small-cap stocks for all months since inception except December.
The Federal Reserve Board ("the Fed"), in attempt to prevent the economy from overheating and inflation from rising, raised interest rates five times from 12/31/03 through 12/31/04. Because bond prices typically move in the opposite direction of interest rates, bond prices fell in response. Still, bond investors seemed to be betting that the economy faces too many hurdles for the Fed to raise interest rates drastically, so the price of bonds did not fall significantly. However, it seems likely that the Fed will continue to raise interest rates, so we believe that the bull market for bonds we have experienced over the past two decades is likely over. Although, the portfolio is currently overweighting (or favoring) bonds relative to cash, these weightings may change.
Arnim Holzer Inna Okounkova Robert Wang
Co-Managers
Deutsche Investment Management Americas Inc.
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the portfolio or any variable life insurance policy or variable annuity contract for which the portfolio is an investment option. These charges and fees will reduce returns.
Returns during part or all of the periods shown reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns would have been lower.
Risk Considerations
Diversification does not eliminate risk. The underlying portfolios invest in individual bonds whose yields and market values fluctuate, so that your investment may be worth more or less that its original cost. In addition, the underlying portfolios are subject to stock market risk, meaning stocks in the portfolio may decline in value for extended periods of time due to the activities and financial prospects of individual companies, or due to general market and economic conditions. Investing in foreign securities presents certain unique risks not associated with domestic investments, such as currency fluctuation, political and economic changes, and market risks. Derivatives may be more volatile and less liquid than traditional securities, and the portfolio could suffer losses on its derivative positions. Please read this portfolio's prospectus for specific details regarding its risk profile.
Portfolio management market commentary is as of December 31, 2004, and may not come to pass. This information is subject to change at any time based on market and other conditions.
Portfolio Summary |
Scudder Growth & Income Strategy Portfolio
Asset Allocation | 12/31/04 |
| |
Equity | 58% |
Fixed Income | 38% |
Cash Equivalents | 4% |
| 100% |
Asset allocation is subject to change.
For more complete details about the Portfolio's investment portfolio, see page 27. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Portfolio as of month end will be posted to scudder.com on the 15th of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio December 31, 2004 | ![]() | ![]() |
|
Scudder Growth & Income Strategy Portfolio
|
| Value ($) |
|
| |
Equity Funds 58.8% | ||
Scudder SVS I Global Discovery Portfolio "A" | 10,718 | 136,866 |
Scudder SVS I Growth & Income Portfolio "A" | 511,565 | 4,752,442 |
Scudder SVS I International Portfolio "A" | 104,778 | 995,386 |
Scudder SVS II Aggressive Growth Portfolio "A" | 57,115 | 562,011 |
Scudder SVS II Blue Chip Portfolio "A" | 344,262 | 4,699,177 |
Scudder SVS II Davis Venture Value Portfolio "A" | 16,900 | 194,016 |
Scudder SVS II Dreman High Return Equity Portfolio "A" | 115,127 | 1,456,356 |
Scudder SVS II Dreman Small Cap Value Portfolio "A" | 46,219 | 927,146 |
Scudder SVS II Eagle Focused Large Cap Growth Portfolio "A" | 161,086 | 1,415,946 |
Scudder SVS II Growth Portfolio "A" | 109,825 | 2,131,705 |
Scudder SVS II International Select Equity Portfolio "A" | 50,811 | 605,165 |
Scudder SVS II Large Cap Value Portfolio "A" | 148,710 | 2,348,138 |
Scudder SVS II MFS Strategic Value Portfolio "A" | 80,777 | 969,326 |
Scudder SVS II Small Cap Growth Portfolio "A" | 79,470 | 1,000,524 |
Scudder VIT Real Estate Portfolio "A" | 29,674 | 484,581 |
Total Equity Funds (Cost $21,339,889) | 22,678,785 | |
|
| Value ($) |
|
| |
Fixed Income Funds 38.7% | ||
Scudder SVS II Fixed Income Portfolio "A" | 993,421 | 11,990,598 |
Scudder SVS II Government and Agency Securities Portfolio "A" | 171,514 | 2,152,503 |
Scudder SVS II High Income Portfolio "A" | 86,606 | 760,402 |
Total Fixed Income Funds (Cost $14,785,921) | 14,903,503 | |
| ||
Cash Equivalents 4.4% | ||
Scudder Cash Management QP Trust, 2.24% (b) (Cost $1,697,721) | 1,697,721 | 1,697,721 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $37,823,531) (a) | 101.9 | 39,280,009 |
Other Assets and Liabilities, Net | (1.9) | (746,028) |
Net Assets | 100.0 | 38,533,981 |
Notes to Scudder Growth & Income Strategy Portfolio of Investments |
(a) The cost for federal income tax purposes was $37,823,531. At December 31, 2004, net unrealized appreciation for all securities based on tax cost was $1,456,478. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $1,456,478 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $0.
(b) Scudder Cash Management QP Trust is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
The accompanying notes are an integral part of the financial statements.
Financial Statements |
|
Statement of Assets and Liabilities | |
Assets | |
Investments: Investments in securities, at value (cost $36,125,810) | $ 37,582,288 |
Investment in Scudder Cash Management QP Trust (cost $1,697,721) | 1,697,721 |
Total investments in securities, at value (cost $37,823,531) | 39,280,009 |
Interest receivable | 1,403 |
Receivable for Portfolio shares sold | 200,828 |
Other assets | 299 |
Total assets | 39,482,539 |
Liabilities | |
Payable for investments purchased | 922,723 |
Payable for Portfolio shares redeemed | 3,418 |
Other accrued expenses and payables | 22,417 |
Total liabilities | 948,558 |
Net assets, at value | $ 38,533,981 |
Net Assets | |
Net assets consist of: Net unrealized appreciation (depreciation) on investments | 1,456,478 |
Accumulated net realized gain (loss) | 58,128 |
Paid-in capital | 37,019,375 |
Net assets, at value | $ 38,533,981 |
Class B Net Asset Value, offering and redemption price per share ($38,533,981 ÷ 3,555,593 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 10.84 |
Statement of Operations | |
Investment Income | |
Income: Interest — Scudder Cash Management QP Trust | 4,690 |
Total Income | 4,690 |
Expenses: Management fee | 9,387 |
Custodian and accounting fees | 31,926 |
Distribution service fees (Class B) | 15,635 |
Record keeping fees (Class B) | 9,381 |
Auditing | 24,001 |
Legal | 1,077 |
Trustees' fees and expenses | 477 |
Reports to shareholders | 3,011 |
Offering costs | 1,011 |
Other | 530 |
Total expenses | 96,436 |
Expense reductions | (49,254) |
Total expenses, after expense reductions | 47,182 |
Net investment income (loss) | (42,492) |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from investments | 99,609 |
Net unrealized appreciation (depreciation) during the period on investments | 1,456,478 |
Net gain (loss) on investment transactions | 1,556,087 |
Net increase (decrease) in net assets resulting from operations | $ 1,513,595 |
The accompanying notes are an integral part of the financial statements.
|
Statement of Changes in Net Assets | |
Increase (Decrease) in Net Assets | Period Ended December 31, 2004a |
Operations: Net investment income (loss) | $ (42,492) |
Net realized gain (loss) on investment transactions | 99,609 |
Net unrealized appreciation (depreciation) on investment transactions during the period | 1,456,478 |
Net increase (decrease) in net assets resulting from operations | 1,513,595 |
Portfolio share transactions: Class B Proceeds from shares sold | 37,742,213 |
Cost of shares redeemed | (721,827) |
Net increase (decrease) in net assets from Class B share transactions | 37,020,386 |
Increase (decrease) in net assets | 38,533,981 |
Net assets at beginning of period | — |
Net assets at end of period | $ 38,533,981 |
Other Information | |
Class B Shares outstanding at beginning of period | — |
Shares sold | 3,624,260 |
Shares redeemed | (68,667) |
Net increase (decrease) in Portfolio shares | 3,555,593 |
Shares outstanding at end of period | 3,555,593 |
a For the period from August 16, 2004 (commencement of operations) to December 31, 2004.
The accompanying notes are an integral part of the financial statements.
Financial Highlights |
|
Class B
| 2004a |
Selected Per Share Data |
|
Net asset value, beginning of period | $ 10.00 |
Income (loss) from investment operations: Net investment income (loss)b | (.03) |
Net realized and unrealized gain (loss) on investment transactions | .87 |
Total from investment operations | .84 |
Net asset value, end of period | $ 10.84 |
Total Return (%)c | 8.40** |
Ratios to Average Net Assets and Supplemental Data | |
Net assets, end of period ($ millions) | 39 |
Ratio of expenses before expense reductions (%) | 1.53* |
Ratio of expenses after expense reductions (%) | .75* |
Ratio of net investment income (loss) (%) | (.68)* |
Portfolio turnover rate (%) | 13* |
a For the period from August 16, 2004 (commencement of operations) to December 31, 2004.
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
Information About Your Portfolio's Expenses |
|
Scudder Growth Strategy Portfolio
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent six-month period, the Portfolio limited these expenses; had it not done so, expenses would have been higher. The tables are based on an investment of $1,000 made at the beginning of the period (August 16, 2004) ended December 31, 2004.
The tables illustrate your Portfolio's expenses in two ways:
Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the period ended December 31, 2004 | |
Actual Portfolio Return | Class B |
Beginning Account Value 8/16/04 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,103.00 |
Expenses Paid per $1,000* | $ 2.96 |
Hypothetical 5% Portfolio Return | Class B |
Beginning Account Value 8/16/04 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,015.95 |
Expenses Paid per $1,000* | $ 2.84 |
* Expenses are equal to the Portfolio's annualized expense ratio for the share class, multiplied by the average account value over the period, multiplied by the number of days since the commencement of the class (August 16, 2004), then divided by 365.
Annualized Expense Ratios | Class B |
Scudder Variable Series II — Scudder Growth Strategy Portfolio | .75% |
For more information, please refer to the Portfolio's prospectus.
Management Summary December 31, 2004 |
|
Scudder Growth Strategy Portfolio
Scudder Growth Strategy Portfolio is one of four new fund-of-funds portfolios. Each portfolio is constructed as a strategically allocated mix of variable portfolios and managed to pursue consistent returns over time, while mitigating risk and pursuing a long-term investment objective. Scudder Growth Strategy Portfolio seeks a balance of long-term growth of capital and, as a secondary objective, current income. The portfolio gained 10.30% (Class B shares, unadjusted for contract charges) from its date of inception, August 16, 2004 through December 31, 2004. Because we had large cash flows, often exceeding the size of the portfolio, our allocation was heavily weighted in cash — even though we invested the cash right away every day.
Stocks performed exceptionally well in 2003, when profit margins widened because productivity accelerated but labor costs remained low (due to soft labor market). However, equity performance was lower in 2004, due in part to rising interest rates, concerns about inflation and soaring energy prices, all of which can impact the revenue growth of companies. Performance did improve at the end of 2004 as signs of economic strength emerged and oil prices decreased. The end of uncertainty surrounding the US presidential election also helped the stock market find its footing. Specifically, the energy and materials sectors performed particularly well in 2004, while the technology, consumer staples and consumer discretionary sectors lagged behind. Going forward, profit margins are not likely to widen further, and may even narrow. As a result, we believe that returns will likely be modest. The portfolio underweighted equities relative to fixed income only in December and overweighted equities for all other months since inception. To improve diversification within the stock category, the portfolio overweighted small-cap stocks for all months since inception except December.
The Federal Reserve Board ("the Fed"), in attempt to prevent the economy from overheating and inflation from rising, raised interest rates five times from 12/31/03 through 12/31/04. Because bond prices typically move in the opposite direction of interest rates, bond prices fell in response. Still, bond investors seemed to be betting that the economy faces too many hurdles for the Fed to raise interest rates drastically, so the price of bonds did not fall significantly. However, it seems likely that the Fed will continue to raise interest rates, so we believe that the bull market for bonds we have experienced over the past two decades is likely over. Although, the portfolio is currently overweighting (or favoring) bonds relative to cash, these weightings may change.
Arnim Holzer Inna Okounkova Robert Wang
Co-Managers
Deutsche Investment Management Americas Inc.
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the portfolio or any variable life insurance policy or variable annuity contract for which the portfolio is an investment option. These charges and fees will reduce returns.
Returns during part or all of the periods shown reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns would have been lower.
Risk Considerations
Diversification does not eliminate risk. The underlying portfolios invest in individual equity and bond funds whose yields and market values fluctuate, so that your investment may be worth more or less that its original cost. In addition, the underlying portfolios are subject to stock market risk, meaning stocks in the portfolio may decline in value for extended periods of time due to the activities and financial prospects of individual companies, or due to general market and economic conditions. Investing in foreign securities presents certain unique risks not associated with domestic investments, such as currency fluctuation, political and economic changes, and market risks. Derivatives may be more volatile and less liquid than traditional securities, and the portfolio could suffer losses on its derivative positions. Please read this portfolio's prospectus for specific details regarding its risk profile.
Portfolio management market commentary is as of December 31, 2004, and may not come to pass. This information is subject to change at any time based on market and other conditions.
Portfolio Summary |
Scudder Growth Strategy Portfolio
Asset Allocation | 12/31/04 |
| |
Equity | 73% |
Fixed Income | 25% |
Cash Equivalents | 2% |
| 100% |
Asset allocation is subject to change.
For more complete details about the Portfolio's investment portfolio, see page 35. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Portfolio as of month end will be posted to scudder.com on the 15th of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio December 31, 2004 | ![]() |
|
Scudder Growth Strategy Portfolio
|
| Value ($) |
|
| |
Equity Funds 73.2% | ||
Scudder SVS I Global Discovery Portfolio "A" | 20,421 | 260,772 |
Scudder SVS I Growth & Income Portfolio "A" | 754,162 | 7,006,164 |
Scudder SVS I International Portfolio "A" | 206,338 | 1,960,211 |
Scudder SVS II Aggressive Growth Portfolio "A" | 66,902 | 658,313 |
Scudder SVS II Blue Chip Portfolio "A" | 508,265 | 6,937,820 |
Scudder SVS II Davis Venture Value Portfolio "A" | 43,052 | 494,237 |
Scudder SVS II Dreman High Return Equity Portfolio "A" | 149,070 | 1,885,739 |
Scudder SVS II Dreman Small Cap Value Portfolio "A" | 67,788 | 1,359,836 |
Scudder SVS II Eagle Focused Large Cap Growth Portfolio "A" | 281,775 | 2,476,800 |
Scudder SVS II Growth Portfolio "A" | 153,831 | 2,985,866 |
Scudder SVS II International Select Equity Portfolio "A" | 95,181 | 1,133,608 |
Scudder SVS II Large Cap Value Portfolio "A" | 229,401 | 3,622,239 |
Scudder SVS II MFS Strategic Value Portfolio "A" | 117,680 | 1,412,155 |
Scudder SVS II Small Cap Growth Portfolio "A" | 115,479 | 1,453,884 |
Scudder VIT Real Estate Portfolio "A" | 46,368 | 757,184 |
Total Equity Funds (Cost $32,412,712) | 34,404,828 | |
|
| Value ($) |
|
| |
Fixed Income Funds 24.9% | ||
Scudder SVS II Fixed Income Portfolio "A" | 698,663 | 8,432,859 |
Scudder SVS II Government and Agency Securities Portfolio "A" | 222,549 | 2,792,996 |
Scudder SVS II High Income Portfolio "A" | 52,493 | 460,886 |
Total Fixed Income Funds (Cost $11,601,822) | 11,686,741 | |
| ||
Cash Equivalents 1.9% | ||
Scudder Cash Management QP Trust, 2.24% (b) (Cost $883,152) | 883,152 | 883,152 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $44,897,686) (a) | 100.0 | 46,974,721 |
Other Assets and Liabilities, Net | (0.0) | 21,610 |
Net Assets | 100.0 | 46,996,331 |
Notes to Scudder Growth Strategy Portfolio of Investments |
(a) The cost for federal income tax purposes was $44,897,686. At December 31, 2004, net unrealized appreciation for all securities based on tax cost was $2,077,035. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $2,077,035 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $0.
(b) Scudder Cash Management QP Trust is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
The accompanying notes are an integral part of the financial statements.
Financial Statements |
|
Statement of Assets and Liabilities as of December 31, 2004 | |
Assets | |
Investments: Investments in securities, at value (cost $44,014,534) | $ 46,091,569 |
Investment in Scudder Cash Management QP Trust (cost $883,152) | 883,152 |
Total investments in securities, at value (cost $44,897,686) | 46,974,721 |
Interest receivable | 1,629 |
Receivable for Portfolio shares sold | 50,293 |
Due from Advisor | 1,103 |
Other assets | 361 |
Total assets | 47,028,107 |
Liabilities | |
Payable for Portfolio shares redeemed | 2,840 |
Other accrued expenses and payables | 28,936 |
Total liabilities | 31,776 |
Net assets, at value | $ 46,996,331 |
Net Assets | |
Net assets consist of: Net unrealized appreciation (depreciation) on investments | 2,077,035 |
Accumulated net realized gain (loss) | 93,109 |
Paid-in capital | 44,826,187 |
Net assets, at value | $ 46,996,331 |
Class B Net Asset Value, offering and redemption price per share ($46,996,331 ÷ 4,262,187 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 11.03 |
Statement of Operations as of December 31, 2004 | |
Investment Income | |
Income: Interest — Scudder Cash Management QP Trust | $ 4,860 |
Total Income | 4,860 |
Expenses: Management fee | 11,104 |
Custodian and accounting fees | 31,927 |
Distribution service fees (Class B) | 18,496 |
Record keeping fees (Class B) | 11,097 |
Auditing | 24,001 |
Legal | 1,077 |
Trustees' fees and expenses | 477 |
Reports to shareholders | 3,011 |
Offering costs | 1,011 |
Other | 512 |
Total expenses, before expense reductions | 102,713 |
Expense reductions | (46,619) |
Total expenses, after expense reductions | 56,094 |
Net investment income (loss) | (51,234) |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from investments | 143,332 |
Net unrealized appreciation (depreciation) during the period on investments | 2,077,035 |
Net gain (loss) on investment transactions | 2,220,367 |
Net increase (decrease) in net assets resulting from operations | $ 2,169,133 |
The accompanying notes are an integral part of the financial statements.
|
Statement of Changes in Net Assets | |
Increase (Decrease) in Net Assets | Period Ended December 31, 2004a |
Operations: Net investment income (loss) | $ (51,234) |
Net realized gain (loss) on investment transactions | 143,332 |
Net unrealized appreciation (depreciation) on investment transactions during the period | 2,077,035 |
Net increase (decrease) in net assets resulting from operations | 2,169,133 |
Portfolio share transactions: Class B Proceeds from shares sold | 45,093,561 |
Cost of shares redeemed | (266,363) |
Net increase (decrease) in net assets from Class B share transactions | 44,827,198 |
Increase (decrease) in net assets | 46,996,331 |
Net assets at beginning of period | — |
Net assets at end of period | $ 46,996,331 |
Other Information | |
Class B Shares outstanding at beginning of period | — |
Shares sold | 4,287,740 |
Shares redeemed | (25,553) |
Net increase (decrease) in Portfolio shares | 4,262,187 |
Shares outstanding at end of period | 4,262,187 |
a For the period from August 16, 2004 (commencement of operations) to December 31, 2004.
The accompanying notes are an integral part of the financial statements.
Financial Highlights |
|
Class B
| 2004a |
Selected Per Share Data | |
Net asset value, beginning of period | $ 10.00 |
Income (loss) from investment operations: Net investment income (loss)b | (.03) |
Net realized and unrealized gain (loss) on investment transactions | 1.06 |
Total from investment operations | 1.03 |
Net asset value, end of period | $ 11.03 |
Total Return (%)c | 10.30** |
Ratios to Average Net Assets and Supplemental Data | |
Net assets, end of period ($ millions) | 47 |
Ratio of expenses before expense reductions (%) | 1.38* |
Ratio of expenses after expense reductions (%) | 0.75* |
Ratio of net investment income (loss) (%) | (0.69)* |
Portfolio turnover rate (%) | 15* |
a For the period from August 16, 2004 (commencement of operations) to December 31, 2004.
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
Performance Summary December 31, 2004 |
|
Scudder High Income Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns.
Investing in foreign securities presents certain unique risks not associated with domestic investments, such as currency fluctuation, political and economic changes and market risks. Additionally, the Portfolio may invest in lower-quality and nonrated securities which present greater risk of loss of principal and interest than higher-quality securities. All of these factors may result in greater share price volatility. Please read this Portfolio's prospectus for specific details regarding its investments and risk profile.
Growth of an Assumed $10,000 Investment in Scudder High Income Portfolio from 12/31/1994 to 12/31/2004 | ||
[] Scudder High Income Portfolio — Class A [] CSFB High Yield Index [] Citigroup Long-Term High Yield Bond Index | The CSFB High Yield Index is an unmanaged index that is market-weighted, including publicly traded bonds having a rating below BBB by Standard & Poor's and Moody's. The Citigroup Long-Term High Yield Bond Index (formerly known as Salomon Smith Barney Long-Term High Yield Bond Index) is an unmanaged index that is on a total return basis with all dividends reinvested and is composed of high-yield bonds with a par value of $50 million or higher and a remaining maturity of ten years or longer rated BB+ or lower by Standard & Poor's Corporation or Ba1 or lower by Moody's Investors Service, Inc. Index returns assume reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. | |
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| |
Yearly periods ended December 31 |
|
Comparative Results | |||||
Scudder High Income Portfolio |
| 1-Year | 3-Year | 5-Year | 10-Year |
Class A | Growth of $10,000 | $11,242 | $13,967 | $13,090 | $20,274 |
Average annual total return | 12.42% | 11.78% | 5.53% | 7.32% | |
CSFB High Yield Index | Growth of $10,000 | $11,195 | $14,768 | $14,810 | $22,866 |
Average annual total return | 11.95% | 13.88% | 8.17% | 8.62% | |
Citigroup Long-Term High Yield Bond Index | Growth of $10,000 | $11,202 | $15,888 | $19,501 | $35,088 |
Average annual total return | 12.02% | 16.69% | 14.29% | 13.37% | |
Scudder High Income Portfolio |
|
|
| 1-Year | Life of Class* |
Class B | Growth of $10,000 |
|
| $11,208 | $14,261 |
Average annual total return |
|
| 12.08% | 15.24% | |
CSFB High Yield Index | Growth of $10,000 |
|
| $11,195 | $14,744 |
Average annual total return |
|
| 11.95% | 16.72% | |
Citigroup Long-Term High Yield Bond Index | Growth of $10,000 |
|
| $11,202 | $17,511 |
Average annual total return |
|
| 12.02% | 25.00% |
The growth of $10,000 is cumulative.
* The Portfolio commenced offering Class B shares on July 1, 2002. Index returns begin June 30, 2002.
Effective 10/7/2002 the Portfolio changed its investment objective.
Information About Your Portfolio's Expenses |
|
Scudder High Income Portfolio
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. The tables are based on an investment of $1,000 made at the beginning of the six-month period ended December 31, 2004.
The tables illustrate your Portfolio's expenses in two ways:
Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2004 | ||
Actual Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,105.80 | $ 1,103.10 |
Expenses Paid per $1,000* | $ 3.48 | $ 5.52 |
Hypothetical 5% Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,021.90 | $ 1,019.96 |
Expenses Paid per $1,000* | $ 3.34 | $ 5.30 |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365.
Annualized Expense Ratios | Class A | Class B |
Scudder Variable Series II — Scudder High Income Portfolio | .66% | 1.04% |
For more information, please refer to the Portfolio's prospectus.
Management Summary December 31, 2004 |
|
Scudder High Income Portfolio
The high-yield market produced a solid return for the year, making it the top-performing fixed income asset class. Performance of the high-yield market was supported by the continued improvement in its fundamentals, which was reflected in lower default rates, corporations steadily improving financial positions and an increasing ratio of upgrades to downgrades. For the year ended December 31, 2004, the portfolio produced a total return of 12.42% (Class A shares, unadjusted for contract charges) compared with 11.95% for the CS First Boston (CSFB) High Yield Index, the portfolio's benchmark.
We strive to add value by using fundamental research to identify undervalued individual securities rather than making broad predictions about sector performance, interest rates or the overall high-yield market. As a result of this investment approach, we continued to find the most relative value opportunities in higher-yielding securities. Security selection added to return, as did an underweight to issues rated BB and above (since higher-rated bonds underperformed the market as a whole). The portfolio remained underweight in CC/defaulted securities, and this detracted from return somewhat. On a sector basis, the most significant contributor was a position in bonds issued by chemical companies. Overall, we remain positive on the fundamentals of the high-yield asset class. We continue to find value in the middle-tier quality segment of the market, and we will therefore maintain a modestly aggressive positioning within the portfolio.
Andrew P. Cestone
Portfolio Manager
Deutsche Investment Management Americas Inc.
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the portfolio or any variable life insurance policy or variable annuity contract for which the portfolio is an investment option. These charges and fees will reduce returns.
Risk Considerations
Investing in foreign securities presents certain unique risks not associated with domestic investments, such as currency fluctuation, political and economic changes and market risks. Additionally, the portfolio may invest in lower-quality and nonrated securities which present greater risk of loss of principal and interest than higher-quality securities. All of these factors may result in greater share price volatility. Please read this portfolio's prospectus for specific details regarding its investments and risk profile.
Credit quality ratings cited are the ratings of Moody's Investors Service, Inc. (Moody's) and Standard & Poor's Corporation (S&P), which represent these companies' opinions as to the quality of the securities they rate. Ratings are relative and subjective and are not absolute standards of quality. The portfolio's credit quality does not remove market risk.
The CS First Boston High Yield Index (CSFB) is an unmanaged index that is market-weighted, including publicly traded bonds having a rating below BBB by Standard & Poor's and Moody's.
Index returns assume reinvested dividends and, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
Portfolio management market commentary is as of December 31, 2004, and may not come to pass. This information is subject to change at any time based on market and other conditions.
Portfolio Summary |
Scudder High Income Portfolio
Asset Allocation (Excludes Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Corporate Bonds | 74% | 82% |
Foreign Bonds — US$ Denominated | 20% | 12% |
Foreign Bonds — Non US$ Denominated | 2% | 1% |
Cash Equivalents | 2% | 1% |
Asset Backed | 1% | 1% |
Convertible Bonds | 1% | 1% |
Stocks | — | 1% |
US Government Backed | — | 1% |
| 100% | 100% |
Corporate and Foreign Bond Diversification (Excludes Cash Equivalents and Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Consumer Discretionary | 24% | 26% |
Materials | 16% | 13% |
Industrials | 14% | 15% |
Telecommunication Services | 14% | 12% |
Financials | 9% | 9% |
Energy | 7% | 10% |
Utilities | 5% | 6% |
Consumer Staples | 4% | 4% |
Health Care | 3% | 3% |
Sovereign Bonds | 2% | 1% |
Information Technology | 2% | 1% |
| 100% | 100% |
Asset allocation and sector diversification are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 44. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Portfolio as of month end will be posted to scudder.com on the 15th of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio December 31, 2004 | ![]() | ![]() |
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Scudder High Income Portfolio
| Principal Amount ($)(c) | Value ($) |
|
| |
Corporate Bonds 72.7% | ||
Consumer Discretionary 19.2% | ||
Adesa, Inc., 7.625%, 6/15/2012 | 515,000 | 543,325 |
AMC Entertainment, Inc., 8.0%, 3/1/2014 | 1,085,000 | 1,079,575 |
American Lawyer Media, Inc., Series B, 9.75%, 12/15/2007 | 1,235,000 | 1,248,894 |
Atlantic Broadband Finance LLC, 144A, 9.375%, 1/15/2014 | 1,351,000 | 1,307,092 |
Bally Total Fitness Holdings Corp., 10.5%, 7/15/2011 | 1,145,000 | 1,153,587 |
Cablevision Systems New York Group, 144A, 6.669%**, 4/1/2009 (e) | 790,000 | 837,400 |
Caesars Entertainment, Inc., 9.375%, 2/15/2007 | 380,000 | 418,950 |
Carrols Corp., 144A, 9.0%, 1/15/2013 | 365,000 | 377,775 |
Charter Communications Holdings LLC: |
|
|
Step-up Coupon, 0% to 5/15/2006, 11.75% to 5/15/2011 | 2,695,000 | 1,980,825 |
9.625%, 11/15/2009 (e) | 2,055,000 | 1,803,262 |
10.25%, 9/15/2010 | 3,815,000 | 4,043,900 |
Cooper Standard Automotive, Inc., 144A, 8.375%, 12/15/2014 | 515,000 | 513,713 |
CSC Holdings, Inc., 7.875%, 12/15/2007 | 1,200,000 | 1,287,000 |
Dex Media East LLC/Financial, 12.125%, 11/15/2012 | 4,322,000 | 5,267,437 |
DIMON, Inc.: |
|
|
7.75%, 6/1/2013 | 430,000 | 451,500 |
Series B, 9.625%, 10/15/2011 | 3,160,000 | 3,460,200 |
Dura Operating Corp.: |
|
|
Series B, 8.625%, 4/15/2012 (e) | 410,000 | 426,400 |
Series B, 9.0%,5/1/2009 EUR | 185,000 | 238,888 |
Series D, 9.0%, 5/1/2009 (e) | 665,000 | 658,350 |
Dyersburg Corp., Series B, 9.75%, 9/1/2007* | 1,260,000 | 126 |
EchoStar DBS Corp., 144A, 6.625%, 10/1/2014 | 780,000 | 789,750 |
EPL Intermediate, Inc., Step-up Coupon, 0% to 3/15/2009, 12.5% to 3/15/2010 | 475,000 | 311,125 |
Foot Locker, Inc., 8.5%, 1/15/2022 | 545,000 | 599,500 |
Friendly Ice Cream Corp., 8.375%, 6/15/2012 (e) | 1,490,000 | 1,462,062 |
General Motors Corp., 8.25%, 7/15/2023 | 970,000 | 1,010,422 |
Icon Health & Fitness, Inc., 11.25%, 4/1/2012 | 1,005,000 | 844,200 |
Imperial Home Decor Group, Inc., Series B, 11.0%, 3/15/2008* | 1,050,000 | 0 |
Interep National Radio Sales, Inc., Series B, 10.0%, 7/1/2008 (e) | 860,000 | 648,225 |
J Crew Intermediate LLC, Step-up Coupon, 0% to 11/15/2005, 16.0% to 5/15/2008 (e) | 602,862 | 572,659 |
Jacobs Entertainment Co., 11.875%, 2/1/2009 | 2,220,000 | 2,508,600 |
Kellwood Co., 7.625%, 10/15/2017 | 230,000 | 252,952 |
| Principal Amount ($)(c) | Value ($) |
|
| |
Levi Strauss & Co.: |
|
|
7.0%, 11/1/2006 (e) | 935,000 | 981,750 |
12.25%, 12/15/2012 (e) | 95,000 | 105,688 |
Mediacom LLC, 9.5%, 1/15/2013 (e) | 2,165,000 | 2,173,119 |
MGM MIRAGE: |
|
|
8.375%, 2/1/2011 (e) | 1,905,000 | 2,147,887 |
9.75% , 6/1/2007 | 380,000 | 421,800 |
Mothers Work, Inc., 11.25%, 8/1/2010 | 535,000 | 518,950 |
NCL Corp., 144A, 10.625%, 7/15/2014 | 1,290,000 | 1,290,000 |
Norcraft Holdings/Capital, Step-up Coupon, 0% to 9/1/2008, 9.75% to 9/1/2012 | 1,090,000 | 817,500 |
Paxson Communications Corp., 10.75%, 7/15/2008 (e) | 870,000 | 913,500 |
PEI Holding, Inc., 11.0%, 3/15/2010 | 1,310,000 | 1,526,150 |
Petro Stopping Centers, 9.0%, 2/15/2012 | 1,730,000 | 1,829,475 |
Pinnacle Entertainment, Inc., 8.75%, 10/1/2013 (e) | 425,000 | 460,063 |
Premier Entertainment Biloxi LLC/Finance, 10.75%, 2/1/2012 | 940,000 | 1,026,950 |
PRIMEDIA, Inc.: |
|
|
7.665%**, 5/15/2010 | 1,655,000 | 1,754,300 |
8.875%, 5/15/2011 (e) | 1,110,000 | 1,173,825 |
Renaissance Media Group LLC, 10.0%, 4/15/2008 | 1,110,000 | 1,143,300 |
Rent-Way, Inc., 11.875%, 6/15/2010 | 650,000 | 732,063 |
Restaurant Co., 11.25%, 5/15/2008 | 1,438,991 | 1,456,978 |
Sbarro, Inc., 11.0%, 9/15/2009 (e) | 870,000 | 878,700 |
Schuler Homes, Inc., 10.5%, 7/15/2011 (e) | 1,210,000 | 1,376,375 |
Simmons Bedding Co., 144A, Step-up Coupon, 0% to 12/15/2009, 10.0% to 12/15/2014 | 1,160,000 | 707,600 |
Sinclair Broadcast Group, Inc.: |
|
|
8.0%, 3/15/2012 | 2,390,000 | 2,539,375 |
8.75%, 12/15/2011 | 1,755,000 | 1,910,756 |
Sonic Automotive, Inc., Series B, 8.625%, 8/15/2013 (e) | 1,800,000 | 1,919,250 |
Toys "R" Us, Inc.: |
|
|
7.375%, 10/15/2018 | 2,320,000 | 2,146,000 |
7.875%, 4/15/2013 (e) | 850,000 | 843,625 |
True Temper Sports, Inc., 8.375%, 9/15/2011 (e) | 685,000 | 637,050 |
Trump Holdings & Funding, 12.625%, 3/15/2010* | 885,000 | 958,013 |
TRW Automotive, Inc.: |
|
|
11.0%, 2/15/2013 (e) | 950,000 | 1,144,750 |
11.75%, 2/15/2013 EUR | 490,000 | 812,559 |
United Auto Group, Inc., 9.625%, 3/15/2012 | 1,060,000 | 1,171,300 |
Venetian Casino Resort LLC, 11.0%, 6/15/2010 | 1,215,000 | 1,386,619 |
Virgin River Casino Corp., 144A, 9.0%, 1/15/2012 | 95,000 | 98,800 |
Visteon Corp.: |
|
|
7.0%, 3/10/2014 (e) | 1,140,000 | 1,088,700 |
8.25%, 8/1/2010 (e) | 860,000 | 900,850 |
Wheeling Island Gaming, Inc., 10.125%, 12/15/2009 | 990,000 | 1,054,350 |
| Principal Amount ($)(c) | Value ($) |
|
| |
Williams Scotsman, Inc., 9.875%, 6/1/2007 (e) | 2,015,000 | 2,015,000 |
Worldspan LP/WS Finance Corp., 9.625%, 6/15/2011 (e) | 830,000 | 825,850 |
Wynn Las Vegas LLC, 144A, 6.625%, 12/1/2014 | 2,420,000 | 2,395,800 |
XM Satellite Radio, Inc., Step-up Coupon, 0% to 12/31/2005, 14.0% to 12/31/2009 | 1,291,934 | 1,317,773 |
Young Broadcasting, Inc., 8.75%, 1/15/2014 (e) | 1,595,000 | 1,606,962 |
| 86,307,049 | |
Consumer Staples 2.6% | ||
Agrilink Foods, Inc., 11.875%, 11/1/2008 | 588,000 | 612,255 |
Church & Dwight Co., Inc., 144A, 6.0%, 12/15/2012 | 580,000 | 590,150 |
Duane Reade, Inc.: |
|
|
144A, 7.01%**, 12/15/2010 | 480,000 | 487,200 |
144A, 9.75%, 8/1/2011 (e) | 1,255,000 | 1,142,050 |
North Atlantic Holding, Inc., Step-up Coupon, 0% to 3/1/2008, 12.25% to 3/1/2014 | 960,000 | 393,600 |
Pierre Foods, Inc., 144A, 9.875%, 7/15/2012 | 470,000 | 486,450 |
Pinnacle Foods Holding Corp., 144A, 8.25%, 12/1/2013 (e) | 1,420,000 | 1,352,550 |
Prestige Brands, Inc., 144A, 9.25%, 4/15/2012 | 240,000 | 255,000 |
Revlon Consumer Products Corp., 9.0%, 11/1/2006 | 1,160,000 | 1,148,400 |
Rite Aid Corp., 11.25%, 7/1/2008 (e) | 1,725,000 | 1,871,625 |
Standard Commercial Corp., 8.0%, 4/15/2012 | 580,000 | 595,950 |
Swift & Co., 12.5%, 1/1/2010 (e) | 1,005,000 | 1,135,650 |
VICORP Restaurants, Inc., 10.5%, 4/15/2011 (e) | 680,000 | 683,400 |
Wornick Co., 10.875%, 7/15/2011 | 955,000 | 1,036,175 |
| 11,790,455 | |
Energy 4.6% | ||
Avista Corp., 9.75%, 6/1/2008 | 1,700,000 | 1,971,082 |
Chesapeake Energy Corp.: |
|
|
6.875%, 1/15/2016 | 1,025,000 | 1,073,687 |
9.0%, 8/15/2012 | 645,000 | 736,913 |
CITGO Petroleum Corp., 144A, 6.0%, 10/15/2011 | 445,000 | 442,775 |
Dynegy Holdings, Inc.: |
|
|
6.875%, 4/1/2011 (e) | 255,000 | 245,438 |
7.125%, 5/15/2018 | 1,210,000 | 1,078,412 |
7.625%, 10/15/2026 | 405,000 | 351,844 |
144A, 9.875%, 7/15/2010 | 1,350,000 | 1,508,625 |
Edison Mission Energy, 7.73%, 6/15/2009 | 2,615,000 | 2,811,125 |
El Paso Production Holding Corp., 7.75%, 6/1/2013 | 1,335,000 | 1,398,412 |
Mission Resources Corp., 9.875%, 4/1/2011 | 1,070,000 | 1,142,225 |
Newpark Resources, Inc., Series B, 8.625%, 12/15/2007 | 1,470,000 | 1,492,050 |
NGC Corp. Capital Trust I, Series B, 8.316%, 6/1/2027 (e) | 470,000 | 398,913 |
Southern Natural Gas, 8.875%, 3/15/2010 (e) | 810,000 | 907,200 |
| Principal Amount ($)(c) | Value ($) |
|
| |
Stone Energy Corp.: |
|
|
144A, 6.75%, 12/15/2014 | 635,000 | 633,412 |
8.25%, 12/15/2011 | 1,570,000 | 1,695,600 |
Williams Cos., Inc.: |
|
|
8.125%, 3/15/2012 (e) | 1,540,000 | 1,778,700 |
8.75%, 3/15/2032 | 820,000 | 941,975 |
| 20,608,388 | |
Financials 8.0% | ||
AAC Group Holding Corp., 144A, Step-up Coupon, 0% to 10/1/2008, 10.25% to 10/1/2012 | 970,000 | 652,325 |
Affinia Group, Inc., 144A, 9.0%, 11/30/2014 | 1,805,000 | 1,881,712 |
Ahold Finance USA, Inc., 6.25%, 5/1/2009 | 715,000 | 743,600 |
Alamosa Delaware, Inc., Step-up Coupon, 0% to 7/31/2005, 12.0% to 7/31/2009 | 633,000 | 686,805 |
American Commercial Bank, 6.5%, 6/30/2006 | 1,250,000 | 1,281,250 |
AmeriCredit Corp., 9.25%, 5/1/2009 | 2,445,000 | 2,622,263 |
Atlantic Mutual Insurance Co., 144A, 8.15%, 2/15/2028 | 605,000 | 368,930 |
BF Saul Real Estate Investment Trust, 7.5%, 3/1/2014 | 1,765,000 | 1,817,950 |
DFG Holdings, Inc.: |
|
|
144A, 13.95%, 5/15/2012 | 467,238 | 467,238 |
144A, 16.0%, 5/15/2012 | 476,302 | 523,932 |
Dow Jones CDX: |
|
|
144A, Series 3-1, 7.75%, 12/29/2009 (e) | 1,550,000 | 1,593,593 |
144A, Series 3-3, 8.0%, 12/29/2009 | 1,550,000 | 1,589,719 |
E*TRADE Financial Corp., 144A, 8.0%, 6/15/2011 | 1,820,000 | 1,956,500 |
Farmers Insurance Exchange, 144A, 8.625%, 5/1/2024 | 1,865,000 | 2,199,878 |
FINOVA Group, Inc., 7.5%, 11/15/2009 | 10,464,550 | 5,127,629 |
FRD Acquisition Co., Series B, 12.5%, 7/15/2004* | 210,000 | 0 |
Level 3 Commerce Bank, Zero Coupon, 12/15/2011 | 1,000,000 | 1,032,500 |
LNR Property Corp., 7.625%, 7/15/2013 | 555,000 | 629,925 |
Poster Financial Group, Inc., 8.75%, 12/1/2011 (e) | 1,175,000 | 1,207,313 |
PXRE Capital Trust I, 8.85%, 2/1/2027 | 1,055,000 | 1,055,000 |
Qwest Capital Funding, Inc., 6.5%, 11/15/2018 | 1,140,000 | 946,200 |
R.H. Donnelly Finance Corp., 10.875%, 12/15/2012 | 500,000 | 593,750 |
Radnor Holdings Corp., 11.0%, 3/15/2010 | 1,060,000 | 908,950 |
Thornburg Mortgage, Inc., 8.0%, 5/15/2013 | 255,000 | 270,938 |
TIG Capital Holdings Trust, 144A, 8.597%, 1/15/2027 | 1,465,000 | 1,285,538 |
UAP Holdings Corp., 144A, Step-up Coupon, 0% to 1/15/2008, 10.75% to 7/15/2012 | 665,000 | 522,025 |
UGS Corp., 144A, 10.0%, 6/1/2012 | 805,000 | 915,688 |
Universal City Development, 11.75%, 4/1/2010 | 1,800,000 | 2,126,250 |
| Principal Amount ($)(c) | Value ($) |
|
| |
Universal City Florida Holding Co., 144A, 7.2%**, 5/1/2010 | 465,000 | 483,600 |
Venoco, Inc., 144A, 8.75%, 12/15/2011 | 505,000 | 520,150 |
| 36,011,151 | |
Health Care 2.5% | ||
AmeriPath, Inc., 10.5%, 4/1/2013 | 760,000 | 807,500 |
AmerisourceBergen Corp., 7.25%, 11/15/2012 | 15,000 | 16,762 |
Cinacalcet Royalty Subordinated LLC, 8.0%, 3/30/2017 | 1,005,000 | 1,010,025 |
Curative Health Services, Inc., 10.75%, 5/1/2011 | 645,000 | 577,275 |
Encore Medical Corp., 144A, 9.75%, 10/1/2012 | 605,000 | 611,050 |
Hanger Orthopedic Group, Inc., 10.375%, 2/15/2009 (e) | 1,030,000 | 1,063,475 |
HEALTHSOUTH Corp., 10.75%, 10/1/2008 (e) | 1,650,000 | 1,740,750 |
IDI Acquisition Corp., 144A, 10.75%, 12/15/2011 | 355,000 | 363,875 |
InSight Health Services Corp., Series B, 9.875%, 11/1/2011 (e) | 745,000 | 752,450 |
Interactive Health LLC, 144A, 8.0%, 4/1/2011 | 815,000 | 709,050 |
National Mentor, Inc., 144A, 9.625%, 12/1/2012 | 140,000 | 148,750 |
Tenet Healthcare Corp., 6.375%, 12/1/2011 (e) | 3,800,000 | 3,524,500 |
| 11,325,462 | |
Industrials 11.0% | ||
Aavid Thermal Technologies, Inc., 12.75%, 2/1/2007 | 960,000 | 1,051,200 |
Allied Security Escrow Corp., 144A, 11.375%, 7/15/2011 | 980,000 | 1,024,100 |
Allied Waste North America, Inc., Series B, 5.75%, 2/15/2011 | 3,110,000 | 2,923,400 |
AMI Semiconductor, Inc., 10.75%, 2/1/2013 | 323,000 | 379,525 |
Avondale Mills, Inc.: |
|
|
144A, 9.00%**, 7/1/2012 | 1,125,000 | 1,012,500 |
10.25%, 7/1/2013 | 365,000 | 295,650 |
Browning-Ferris Industries: |
|
|
7.4%, 9/15/2035 | 830,000 | 726,250 |
9.25%, 5/1/2021 | 485,000 | 516,525 |
Cenveo Corp., 7.875%, 12/1/2013 (e) | 1,275,000 | 1,185,750 |
Clean Harbors, Inc., 144A, 11.25%, 7/15/2012 | 715,000 | 800,800 |
Collins & Aikman Floor Cover, Series B, 9.75%, 2/15/2010 | 2,105,000 | 2,262,875 |
Collins & Aikman Products, 10.75%, 12/31/2011 (e) | 1,150,000 | 1,173,000 |
Congoleum Corp., 8.625%, 8/1/2008* | 595,000 | 600,950 |
Continental Airlines, Inc., 8.0%, 12/15/2005 (e) | 1,040,000 | 1,014,000 |
Cornell Companies, Inc., 10.75%, 7/1/2012 | 1,360,000 | 1,453,500 |
Corrections Corp. of America, 9.875%, 5/1/2009 | 1,285,000 | 1,426,350 |
Dana Corp., 7.0%, 3/1/2029 | 1,535,000 | 1,531,163 |
| Principal Amount ($)(c) | Value ($) |
|
| |
Delta Air Lines, Inc.: |
|
|
7.9%, 12/15/2009 (e) | 505,000 | 315,625 |
8.3%, 12/15/2029 (e) | 685,000 | 332,225 |
Eagle-Picher Industries, Inc., 9.75%, 9/1/2013 | 215,000 | 215,000 |
Erico International Corp., 8.875%, 3/1/2012 | 905,000 | 950,250 |
Evergreen International Aviation, Inc., 12.0%, 5/15/2010 | 310,000 | 234,825 |
Goodman Global Holding Co., Inc., 144A, 7.875%, 12/15/2012 | 1,515,000 | 1,499,850 |
GS Technologies Operating Co., Inc., 12.0%, 9/1/2024* | 315,268 | 788 |
Interface, Inc., 10.375%, 2/1/2010 | 445,000 | 511,750 |
ISP Chemco, Inc., Series B, 10.25%, 7/1/2011 | 1,615,000 | 1,824,950 |
Joy Global, Inc., Series B, 8.75%, 3/15/2012 | 145,000 | 162,400 |
Kansas City Southern: |
|
|
7.5%, 6/15/2009 | 1,520,000 | 1,596,000 |
9.5%, 10/1/2008 | 1,735,000 | 1,971,394 |
Kinetek, Inc., Series D, 10.75%, 11/15/2006 | 2,170,000 | 2,121,175 |
Laidlaw International, Inc., 10.75%, 6/15/2011 | 1,140,000 | 1,330,950 |
Millennium America, Inc.: |
|
|
7.625%, 11/15/2026 (e) | 1,980,000 | 1,950,300 |
9.25%, 6/15/2008 (e) | 1,865,000 | 2,121,437 |
Remington Arms Co., Inc., 10.5%, 2/1/2011 (e) | 895,000 | 863,675 |
Sea Containers Ltd., 10.5%, 5/15/2012 | 580,000 | 610,450 |
Securus Technologies, Inc., 144A, 11.0%, 9/1/2011 | 1,100,000 | 1,100,000 |
Ship Finance International Ltd., 8.5%, 12/15/2013 | 1,275,000 | 1,313,250 |
SPX Corp.: |
|
|
6.25%, 6/15/2011 (e) | 400,000 | 422,000 |
7.5%, 1/1/2013 | 1,440,000 | 1,562,400 |
Technical Olympic USA, Inc.: |
|
|
7.5%, 3/15/2011 | 405,000 | 408,038 |
10.375%, 7/1/2012 | 1,210,000 | 1,355,200 |
Texas Genco LLC, 144A, 6.875%, 12/15/2014 | 1,155,000 | 1,193,981 |
The Brickman Group, Ltd., Series B, 11.75%, 12/15/2009 | 770,000 | 900,900 |
Thermadyne Holdings Corp., 9.25%, 2/1/2014 | 825,000 | 804,375 |
United Rentals North America, Inc.: |
|
|
6.5%, 2/15/2012 | 1,140,000 | 1,111,500 |
7.0%, 2/15/2014 (e) | 930,000 | 869,550 |
7.75%, 11/15/2013 (e) | 580,000 | 568,400 |
Westlake Chemical Corp., 8.75%, 7/15/2011 | 110,000 | 124,300 |
| 49,724,476 | |
Information Technology 1.3% | ||
Activant Solutions, Inc., 10.5%, 6/15/2011 | 1,075,000 | 1,155,625 |
Itron, Inc., 144A, 7.75%, 5/15/2012 | 705,000 | 717,337 |
Lucent Technologies, Inc.: |
|
|
6.45%, 3/15/2029 (e) | 3,055,000 | 2,764,775 |
7.25%, 7/15/2006 (e) | 400,000 | 418,000 |
| Principal Amount ($)(c) | Value ($) |
|
| |
Spheris, Inc., 144A, 11.0%, 12/15/2012 | 605,000 | 620,125 |
| 5,675,862 | |
Materials 11.1% | ||
Aqua Chemical, Inc., 11.25%, 7/1/2008 | 1,220,000 | 976,000 |
ARCO Chemical Co., 9.8%, 2/1/2020 (e) | 4,955,000 | 5,648,700 |
Associated Materials, Inc., Step-up Coupon, 0% to 3/1/2009, 11.25% to 3/1/2014 | 2,765,000 | 1,990,800 |
Caraustar Industries, Inc., 9.875%, 4/1/2011 (e) | 1,040,000 | 1,128,400 |
Constar International, Inc., 11.0%, 12/1/2012 (e) | 1,185,000 | 1,229,438 |
Dayton Superior Corp.: |
|
|
10.75%, 9/15/2008 | 1,030,000 | 1,102,100 |
13.0%, 6/15/2009 (e) | 2,350,000 | 2,444,000 |
GEO Specialty Chemicals, Inc.: |
|
|
1.0%, 12/31/2009* | 368,000 | 368,000 |
10.125%, 8/1/2008* | 765,000 | 443,700 |
Georgia-Pacific Corp.: |
|
|
8.0%, 1/15/2024 | 2,820,000 | 3,271,200 |
9.375%, 2/1/2013 | 1,320,000 | 1,537,800 |
Hercules, Inc.: |
|
|
6.75%, 10/15/2029 | 855,000 | 882,788 |
11.125%, 11/15/2007 | 1,220,000 | 1,451,800 |
Hexcel Corp., 9.75%, 1/15/2009 (e) | 980,000 | 1,019,200 |
Huntsman Advanced Materials, 144A, 11.0%, 7/15/2010 | 1,225,000 | 1,457,750 |
Huntsman International LLC: |
|
|
144A, 7.375%, 1/1/2015 (e) | 355,000 | 355,888 |
144A, 7.5%, 1/1/2015 | 205,000 | 278,646 |
Huntsman LLC, 11.625%, 10/15/2010 | 1,610,000 | 1,903,825 |
IMC Global, Inc., 10.875%, 8/1/2013 (e) | 115,000 | 143,750 |
Intermet Corp.: |
|
|
144A, 1.0%, 3/31/2009 | 2,000,000 | 1,750,000 |
9.75%, 6/15/2009* (e) | 600,000 | 294,000 |
International Steel Group, Inc., 6.5%, 4/15/2014 | 2,245,000 | 2,407,762 |
MMI Products, Inc., Series B, 11.25%, 4/15/2007 | 1,015,000 | 1,030,225 |
Neenah Corp.: |
|
|
144A, 11.0%, 9/30/2010 | 1,922,000 | 2,123,810 |
144A, 13.0%, 9/30/2013 | 1,102,460 | 1,130,021 |
Omnova Solutions, Inc., 11.25%, 6/1/2010 | 1,595,000 | 1,794,375 |
Owens-Brockway Glass Container, 8.25%, 5/15/2013 | 400,000 | 440,000 |
Oxford Automotive, Inc., 144A, 12.0%, 10/15/2010* (e) | 1,975,000 | 1,244,250 |
Pliant Corp.: |
|
|
Step-up Coupon, 0% to 12/15/2006, 11.125% to 6/15/2009 | 220,000 | 203,225 |
11.125%, 9/1/2009 | 1,385,000 | 1,509,650 |
Portola Packaging, Inc., 8.25%, 2/1/2012 (e) | 910,000 | 718,900 |
Rockwood Specialties Group, Inc., 144A, 7.625%, 11/15/2014 | 1,790,000 | 2,503,007 |
| Principal Amount ($)(c) | Value ($) |
|
| |
Sheffield Steel Corp., 144A, 11.375%, 8/15/2011 | 595,000 | 612,850 |
TriMas Corp., 9.875%, 6/15/2012 | 2,630,000 | 2,787,800 |
United States Steel LLC: |
|
|
9.75%, 5/15/2010 | 1,254,000 | 1,429,560 |
10.75%, 8/1/2008 (e) | 155,000 | 182,513 |
| 49,795,733 | |
Telecommunication Services 8.6% | ||
AirGate PCS, Inc., 144A, 5.85%**, 10/15/2011 | 505,000 | 518,888 |
American Cellular Corp., Series B, 10.0%, 8/1/2011 | 3,515,000 | 3,014,112 |
American Tower Corp., 144A, 7.125%, 10/15/2012 | 580,000 | 593,050 |
AT&T Corp.: |
|
|
9.05%, 11/15/2011 | 1,205,000 | 1,387,256 |
9.75%, 11/15/2031 | 1,170,000 | 1,396,688 |
Cincinnati Bell, Inc., 8.375%, 1/15/2014 (e) | 4,425,000 | 4,480,312 |
Crown Castle International Corp., 9.375%, 8/1/2011 | 720,000 | 806,400 |
Dobson Cellular Systems, Inc., 144A, 6.96%**, 11/1/2011 | 450,000 | 465,750 |
Dobson Communications Corp., 8.875%, 10/1/2013 | 1,255,000 | 881,637 |
GCI, Inc., 7.25%, 2/15/2014 | 840,000 | 840,000 |
Insight Midwest LP, 9.75%, 10/1/2009 (e) | 610,000 | 638,975 |
IWO Escrow Co., 144A, 6.32%**, 1/15/2012 | 100,000 | 100,750 |
LCI International, Inc., 7.25%, 6/15/2007 | 1,610,000 | 1,565,725 |
Level 3 Financing, Inc., 144A, 10.75%, 10/15/2011 (e) | 605,000 | 547,525 |
MCI, Inc., 8.735%, 5/1/2014 | 3,360,000 | 3,612,000 |
Nextel Communications, Inc., 5.95%, 3/15/2014 | 705,000 | 729,675 |
Nextel Partners, Inc., 8.125%, 7/1/2011 | 950,000 | 1,054,500 |
Northern Telecom Capital, 7.875%, 6/15/2026 (e) | 865,000 | 856,350 |
PanAmSat Corp., 144A, 9.0%, 8/15/2014 | 2,160,000 | 2,411,100 |
Qwest Corp., 7.25%, 9/15/2025 | 3,390,000 | 3,296,775 |
Qwest Services Corp.: |
|
|
6.95%, 6/30/2010 | 1,665,000 | 1,709,331 |
144A, 13.5%, 12/15/2010 | 1,940,000 | 2,332,850 |
144A, 14.0%, 12/15/2014 | 1,550,000 | 1,960,750 |
Rural Cellular Corp., 9.875%, 2/1/2010 (e) | 895,000 | 910,662 |
SBA Telecom, Inc., Step-up Coupon, 0% to 12/15/2007, 9.75% to 12/15/2011 | 405,000 | 341,213 |
Triton PCS, Inc., 8.5%, 6/1/2013 | 695,000 | 670,675 |
Ubiquitel Operating Co., 9.875%, 3/1/2011 | 190,000 | 213,275 |
US Unwired, Inc., Series B, 10.0%, 6/15/2012 (e) | 1,210,000 | 1,364,275 |
Western Wireless Corp., 9.25%, 7/15/2013 | 200,000 | 217,500 |
| 38,917,999 | |
Utilities 3.8% | ||
AES Corp., 144A, 8.75%, 5/15/2013 | 395,000 | 448,819 |
| Principal Amount ($)(c) | Value ($) |
|
| |
Allegheny Energy Supply Co. LLC: |
|
|
144A, 8.25%, 4/15/2012 (e) | 765,000 | 854,887 |
144A, 10.25%, 11/15/2007 | 15,000 | 17,025 |
Aquila, Inc., 14.875%, 7/1/2012 | 405,000 | 567,506 |
Calpine Corp.: |
|
|
8.25%, 8/15/2005 (e) | 1,065,000 | 1,075,650 |
144A, 8.5%, 7/15/2010 (e) | 1,495,000 | 1,281,962 |
CMS Energy Corp., 8.5%, 4/15/2011 | 150,000 | 170,438 |
DPL, Inc., 6.875%, 9/1/2011 | 2,795,000 | 3,052,509 |
Midwest Generation LLC, 8.75%, 5/1/2034 | 585,000 | 663,975 |
Mission Energy Holding Co., 13.5%, 7/15/2008 | 205,000 | 255,738 |
NorthWestern Corp., 144A, 5.875%, 11/1/2014 (e) | 385,000 | 393,844 |
NRG Energy, Inc., 144A, 8.0%, 12/15/2013 | 3,585,000 | 3,907,650 |
PSE&G Energy Holdings LLC: |
|
|
8.5%, 6/15/2011 | 1,115,000 | 1,272,494 |
10.0%, 10/1/2009 | 1,350,000 | 1,596,375 |
TNP Enterprises, Inc., Series B, 10.25%, 4/1/2010 | 1,460,000 | 1,558,550 |
| 17,117,422 | |
Total Corporate Bonds (Cost $321,181,919) | 327,273,997 | |
| ||
Asset Backed 0.6% | ||
Golden Tree High Yield Opportunities LP, "D1", Series 1, 13.054%, 10/31/2007 (Cost $2,500,000) | 2,500,000 | 2,582,250 |
| ||
Foreign Bonds — US$ Denominated 20.1% | ||
Consumer Discretionary 2.7% | ||
Advertising Directory Solutions, Inc., 144A, 9.25%, 11/15/2012 (e) | 810,000 | 850,500 |
Grupo Posadas SA de CV, 144A, Series A, 8.75%, 10/4/2011 | 10,000 | 10,675 |
Jafra Cosmetics International, Inc., 10.75%, 5/15/2011 | 1,705,000 | 1,926,650 |
Kabel Deutschland GmbH, 144A, 10.625%, 7/1/2014 | 1,775,000 | 2,041,250 |
Shaw Communications, Inc.: |
|
|
7.2%, 12/15/2011 (e) | 195,000 | 215,231 |
7.25%, 4/6/2011 (e) | 730,000 | 804,825 |
8.25%, 4/11/2010 | 2,510,000 | 2,855,125 |
Telenet Group Holding NV, 144A, Step-up Coupon, 0% to 12/15/2008, 11.5% to 6/15/2014 | 1,745,000 | 1,326,200 |
Vicap SA, 11.375%, 5/15/2007 | 395,000 | 399,938 |
Vitro Envases Norteamerica SA, 144A, 10.75%, 7/23/2011 | 655,000 | 679,563 |
Vitro SA de CV, Series A, 144A, 11.75%, 11/1/2013 (e) | 1,225,000 | 1,185,187 |
| 12,295,144 | |
Consumer Staples 1.0% | ||
Burns, Philip Capital Property Ltd., 10.75%, 2/15/2011 | 1,055,000 | 1,186,875 |
Fage Dairy Industry SA, 9.0%, 2/1/2007 | 2,913,000 | 2,927,565 |
| Principal Amount ($)(c) | Value ($) |
|
| |
Grupo Cosan SA, 144A, 9.0%, 11/1/2009 | 375,000 | 391,875 |
| 4,506,315 | |
Energy 2.3% | ||
Gazprom OAO, 144A, 9.625%, 3/1/2013 | 1,975,000 | 2,330,500 |
Luscar Coal Ltd., 9.75%, 10/15/2011 | 1,415,000 | 1,606,025 |
Petroleum Geo-Services ASA, 10.0%, 11/5/2010 | 4,755,066 | 5,420,775 |
Secunda International Ltd., 144A, 9.76%**, 9/1/2012 | 1,005,000 | 984,900 |
| 10,342,200 | |
Financials 1.0% | ||
Conproca SA de CV, 12.0%, 6/16/2010 | 920,000 | 1,159,200 |
Eircom Funding, 8.25%, 8/15/2013 | 1,160,000 | 1,281,800 |
Mizuho Financial Group, 8.375%, 12/29/2049 | 590,000 | 646,581 |
New ASAT (Finance) Ltd., 144A, 9.25%, 2/1/2011 | 1,375,000 | 1,247,812 |
| 4,335,393 | |
Health Care 0.2% | ||
Biovail Corp., 7.875%, 4/1/2010 (e) | 760,000 | 786,600 |
Elan Financial PLC, 144A, 7.75%, 11/15/2011 | 225,000 | 239,625 |
| 1,026,225 | |
Industrials 2.1% | ||
CP Ships Ltd., 10.375%, 7/15/2012 | 1,280,000 | 1,476,800 |
Grupo Transportacion Ferroviaria Mexicana SA de CV: |
|
|
10.25%, 6/15/2007 | 2,480,000 | 2,641,200 |
11.75%, 6/15/2009 | 1,510,000 | 1,538,313 |
12.5%, 6/15/2012 | 1,451,000 | 1,694,042 |
LeGrand SA, 8.5%, 2/15/2025 | 1,235,000 | 1,457,300 |
Stena AB: |
|
|
144A, 7.0%, 12/1/2016 | 385,000 | 381,150 |
9.625% , 12/1/2012 | 395,000 | 446,350 |
Supercanal Holding SA, 11.5%, 5/15/2005* | 100,000 | 9,000 |
| 9,644,155 | |
Information Technology 0.6% | ||
Flextronics International Ltd., 144A, 6.25%, 11/15/2014 | 1,480,000 | 1,465,200 |
Magnachip Semiconductor SA: |
|
|
144A, 6.875%, 12/15/2011 | 510,000 | 525,300 |
144A, 8.0%, 12/15/2014 | 485,000 | 505,612 |
| 2,496,112 | |
Materials 3.6% | ||
Alrosa Finance SA, 144A, 8.875%, 11/17/2014 | 955,000 | 981,263 |
Avecia Group PLC, 11.0%, 7/1/2009 | 2,815,000 | 2,899,450 |
Cascades, Inc.: |
|
|
7.25%, 2/15/2013 | 1,695,000 | 1,796,700 |
144A, 7.25%, 2/15/2013 | 95,000 | 100,700 |
Citigroup (JSC Severstal), 144A, 9.25%, 4/19/2014 | 1,410,000 | 1,402,950 |
Citigroup Global (Severstal), 8.625%, 2/24/2009 | 124,000 | 124,508 |
| Principal Amount ($)(c) | Value ($) |
|
| |
Corp. Durango SA: |
|
|
13.125%, 8/1/2006* | 350,000 | 236,250 |
144A, 13.75%, 7/15/2009* | 350,000 | 234,500 |
Crown Euro Holdings SA, 10.875%, 3/1/2013 | 895,000 | 1,058,337 |
ISPAT Inland ULC, 9.75%, 4/1/2014 | 1,141,000 | 1,409,135 |
Rhodia SA, 8.875%, 6/1/2011 (e) | 950,000 | 957,125 |
Sino-Forest Corp., 144A, 9.125%, 8/17/2011 | 635,000 | 693,738 |
Tembec Industries, Inc., 8.5%, 2/1/2011 (e) | 4,475,000 | 4,497,375 |
| 16,392,031 | |
Sovereign Bonds 1.8% | ||
Aries Vermogensverwaltung GmbH, 144A, Series C, 9.6%, 10/25/2014 | 1,500,000 | 1,845,000 |
Dominican Republic, 144A, 9.04%, 1/23/2013 | 510,000 | 422,025 |
Federative Republic of Brazil, 8.875%, 10/14/2019 | 1,545,000 | 1,628,430 |
Republic of Argentina: |
|
|
11.375%, 3/15/2010* | 1,980,000 | 673,200 |
Series BGL5, 11.375%, 1/30/2017* | 775,000 | 263,500 |
11.375%, 6/15/2015* | 475,000 | 160,313 |
11.75%, 4/7/2009* | 1,340,000 | 455,600 |
Series 2031, 12.0%, 6/19/2031* | 376,300 | 123,238 |
12.375%, 2/21/2012* (e) | 1,205,000 | 406,687 |
Republic of Turkey: |
|
|
7.25%, 3/15/2015 (e) | 710,000 | 729,525 |
9.0%, 6/30/2011 | 440,000 | 502,700 |
9.5%, 1/15/2014 | 260,000 | 306,800 |
Republic of Uruguay, 7.875%, 1/15/2033 (PIK) | 999 | 887 |
Russian Ministry of Finance, Series VII, 3.0%, 5/14/2011 | 470,000 | 396,351 |
| 7,914,256 | |
Telecommunication Services 4.3% | ||
Alestra SA de RL de CV, 8.0%, 6/30/2010 | 235,000 | 199,163 |
Axtel SA, 11.0%, 12/15/2013 | 1,440,000 | 1,551,600 |
Embratel, Series B, 11.0%, 12/15/2008 | 985,000 | 1,122,900 |
Esprit Telecom Group PLC: |
|
|
10.875%, 6/15/2008* | 800,000 | 80 |
11.5%, 12/15/2007* | 1,625,000 | 163 |
Global Crossing UK Finance, 144A, 10.75%, 12/15/2014 | 1,220,000 | 1,204,750 |
Grupo Iusacell SA de CV, Series B, 10.0%, 7/15/2004* | 240,000 | 184,800 |
Inmarsat Finance PLC, 7.625%, 6/30/2012 | 1,075,000 | 1,118,000 |
Innova S. de R.L., 9.375%, 9/19/2013 (e) | 755,000 | 858,812 |
INTELSAT, 6.5%, 11/1/2013 | 1,435,000 | 1,305,850 |
Millicom International Cellular SA, 144A, 10.0%, 12/1/2013 | 2,335,000 | 2,442,994 |
Mobifon Holdings BV, 12.5% , 7/31/2010 | 1,760,000 | 2,087,800 |
Mobile Telesystems Financial, 144A, 8.375%, 10/14/2010 | 805,000 | 821,100 |
Nortel Networks Corp., 6.875%, 9/1/2023 | 1,345,000 | 1,264,300 |
| Principal Amount ($)(c) | Value ($) |
|
| |
Nortel Networks Ltd., 6.125%, 2/15/2006 | 4,165,000 | 4,237,887 |
Rogers Wireless Communications, Inc., 6.375%, 3/1/2014 | 880,000 | 871,200 |
| 19,271,399 | |
Utilities 0.5% | ||
Calpine Canada Energy Finance, 8.5%, 5/1/2008 (e) | 2,690,000 | 2,205,800 |
Total Foreign Bonds — US$ Denominated (Cost $88,697,061) | 90,429,030 | |
| ||
Foreign Bonds — Non US$ Denominated 1.7% | ||
Consumer Discretionary 0.1% | ||
Victoria Acquisition III BV, 144A, 7.875%, 10/1/2014 EUR | 460,000 | 628,381 |
Industrials 0.5% | ||
Grohe Holdings GmbH, 144A, 8.625%, 10/1/2014 EUR | 1,375,000 | 1,999,796 |
Materials 0.6% | ||
Huntsman International LLC, 10.125%, 7/1/2009 EUR | 995,000 | 1,423,457 |
Rhodia SA, 9.25%, 6/1/2011 EUR | 865,000 | 1,196,327 |
| 2,619,784 | |
Sovereign Bonds 0.5% | ||
Mexican Bonds, Series MI-10, 8.0%, 12/19/2013 MXN | 15,202,000 | 1,214,714 |
Republic of Argentina: |
|
|
8.0%, 2/26/2008* EUR | 775,000 | 310,759 |
Series FEB, 8.0%, 2/26/2008* EUR | 560,000 | 222,645 |
10.25%, 2/6/2049* EUR | 956,116 | 376,884 |
10.25%, 11/14/2049* EUR | 465,276 | 183,403 |
11.25%, 4/10/2006* EUR | 273,541 | 116,191 |
12.0%, 9/19/2016* EUR | 35,790 | 14,352 |
| 2,438,948 | |
Total Foreign Bonds — Non US$ Denominated (Cost $6,648,149) | 7,686,909 | |
| ||
Convertible Bond 0.5% | ||
DIMON, Inc., 6.25%, 3/31/2007 | 1,600,000 | 1,500,000 |
HIH Capital Ltd.: |
|
|
144A, Series DOM, 7.5%, 9/25/2006 | 665,000 | 658,350 |
144A, Series EURO, 7.5%, 9/25/2006 | 85,000 | 84,150 |
Total Convertible Bond (Cost $2,209,763) | 2,242,500 | |
| ||
Common Stocks 0.0% | ||
Catalina Restaurant Group, Inc.* | 3,870 | 6,192 |
IMPSAT Fiber Networks, Inc.* | 33,652 | 193,499 |
Total Common Stocks (Cost $1,938,197) | 199,691 | |
|
| Value ($) |
|
| |
Warrants 0.0% | ||
Dayton Superior Corp., 144A* | 90 | 1 |
DeCrane Aircraft Holdings, Inc., 144A* | 1,350 | 14 |
Destia Communications, Inc., 144A* | 1,260 | 0 |
Hayes Lemmerz International, Inc.* | 1,690 | 642 |
TravelCenters of America, Inc.* | 280 | 1,400 |
UIH Australia Pacific, Inc.* | 750 | 0 |
Total Warrants (Cost $1,583) | 2,057 | |
| ||
Preferred Stocks 0.5% | ||
Paxson Communications Corp., 14.25%, (PIK) | 199 | 1,462,650 |
TNP Enterprises, Inc., 14.5%, "D", (PIK) | 8,000 | 928,000 |
Total Preferred Stocks (Cost $2,734,260) | 2,390,650 | |
| ||
Other Investments 0.7% | ||
Hercules Trust II, (Bond Unit) | 3,680,000 | 3,091,200 |
|
| Value ($) |
|
| |
SpinCycle, Inc., "F" (Common Stock Unit)* | 69 | 76 |
SpinCycle, Inc., (Common Stock Unit)* | 9,913 | 10,904 |
Total Other Investments (Cost $2,667,709) | 3,102,180 | |
| ||
Securities Lending Collateral 16.6% | ||
Daily Assets Fund Institutional, 2.25% (d) (f) (Cost $74,814,217) | 74,814,217 | 74,814,217 |
| ||
Cash Equivalents 1.6% | ||
Scudder Cash Management QP Trust, 2.24% (b) (Cost $7,191,545) | 7,191,545 | 7,191,545 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $510,584,403) (a) | 115.0 | 517,915,026 |
Other Assets and Liabilities, Net | (15.0) | (67,715,584) |
Net Assets | 100.0 | 450,199,442 |
Notes to Scudder High Income Portfolio of Investments |
* Non-income producing security. In the case of a bond, generally denotes that the issuer has defaulted on the payment of principal or interest. The following table represents bonds that are in default.
Security | Coupon | Maturity Date | Principal Amount | Acquisition Cost | Value | |
Congoleum Corp. | 8.625 | 8/1/2008 | 595,000 | USD | $ 441,519 | $ 600,950 |
Corp. Durango SA: | ||||||
13.125 | 8/1/2006 | 350,000 | USD | 179,500 | 236,250 | |
| 13.75 | 7/15/2009 | 350,000 | USD | 337,395 | 234,500 |
Dyersburg Corp. | 9.75 | 9/1/2007 | 1,260,000 | USD | 1,291,288 | 126 |
Esprit Telecom Group PLC: | ||||||
10.875 | 6/15/2008 | 800,000 | USD | 792,956 | 80 | |
| 11.5 | 12/15/2007 | 1,625,000 | USD | 1,628,444 | 163 |
FRD Acquisition Co. | 12.5 | 7/15/2004 | 210,000 | USD | 0 | 0 |
GEO Specialty Chemicals, Inc. | ||||||
| 1 | 12/31/2009 | 368,000 | USD | 368,000 | 368,000 |
| 10.125 | 8/1/2008 | 765,000 | USD | 262,225 | 443,700 |
Grupo Iusacell SA de CV | 10 | 7/15/2004 | 240,000 | USD | 144,738 | 184,800 |
GS Technologies Operating Co., Inc. | 12 | 9/1/2024 | 315,268 | USD | 314,686 | 788 |
Imperial Home Decor Group, Inc. | 11 | 3/15/2008 | 1,050,000 | USD | 1,029,755 | 0 |
Intermet Corp. | ||||||
| 9.75 | 6/15/2009 | 600,000 | USD | 248,411 | 294,000 |
Oxford Automotive, Inc. | 12 | 10/15/2010 | 1,975,000 | USD | 1,321,584 | 1,244,250 |
Security | Coupon | Maturity Date | Principal Amount | Acquisition Cost | Value | |
Republic of Argentina: | ||||||
| 8 | 2/26/2008 | 775,000 | EUR | 224,642 | 310,759 |
| 8 | 2/26/2008 | 560,000 | EUR | 180,836 | 222,645 |
| 10.25 | 2/6/2049 | 956,116 | EUR | 209,225 | 376,884 |
| 10.25 | 11/14/2049 | 465,276 | EUR | 99,469 | 183,403 |
| 11.25 | 4/10/2006 | 273,541 | EUR | 85,600 | 116,191 |
| 11.375 | 3/15/2010 | 1,980,000 | USD | 534,600 | 673,200 |
| 11.375 | 1/30/2017 | 775,000 | USD | 232,985 | 263,500 |
| 11.375 | 6/15/2015 | 475,000 | USD | 148,308 | 160,313 |
| 11.75 | 4/7/2009 | 1,340,000 | USD | 430,150 | 455,600 |
| 12 | 9/19/2016 | 35,790 | EUR | 8,225 | 7,338 |
| 12 | 6/19/2031 | 376,300 | USD | 81,845 | 123,238 |
| 12.375 | 2/21/2012 | 1,205,000 | USD | 334,939 | 406,687 |
Supercanal Holding SA | 11.5 | 5/15/2005 | 100,000 | USD | 36,505 | 9,000 |
Trump Holdings & Funding | 12.625 | 3/15/2010 | 885,000 | USD | 903,435 | 958,013 |
|
|
| $ 11,871,265 | $ 7,874,378 |
** Floating rate notes are securities whose yields vary with a designated market index or market rate, such as the coupon-equivalent of the US Treasury bill rate. These securities are shown at their current rate as of December 31, 2004.
(a) The cost for federal income tax purposes was $510,755,235. At December 31, 2004, net unrealized appreciation for all securities based on tax cost was $7,159,791. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $18,263,308 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $11,103,517.
(b) Scudder Cash Management QP Trust is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
(c) Principal amount stated in US dollars unless otherwise noted.
(d) Daily Assets Fund Institutional, an affiliated fund, is managed by Deutsche Asset Management, Inc. The rate shown is the annualized seven-day yield at period end.
(e) All or a portion of these securities were on loan (see Notes to Financial Statements). The value of all securities loaned at December 31, 2004, amounted to $73,177,211, which is 16.3% of total net assets.
(f) Represents collateral held in connection with securities lending.
144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
PIK denotes that interest and dividend is paid in kind.
Currency Abbreviation | |
EUR | Euro |
MXN | Mexican Peso |
The accompanying notes are an integral part of the financial statements.
Financial Statements |
|
Statement of Assets and Liabilities as of December 31, 2004 | |
Assets | |
Investments: Investments in securities, at value (cost $428,578,641) — including $73,177,211 of securities loaned | $ 435,909,264 |
Investment in Daily Assets Fund Institutional (cost $74,814,217)* | 74,814,217 |
Investment in Scudder Cash Management QP Trust (cost $7,191,545) | 7,191,545 |
Total investments in securities, at value (cost $510,584,403) | 517,915,026 |
Cash | 143,928 |
Foreign currency, at value (cost $37,247) | 37,816 |
Receivable for investments sold | 3,372,406 |
Interest receivable | 8,856,107 |
Receivable for Portfolio shares sold | 52,070 |
Other assets | 13,291 |
Total assets | 530,390,644 |
Liabilities | |
Payable upon return of securities loaned | 74,814,217 |
Payable for investments purchased | 3,215,607 |
Payable for Portfolio shares redeemed | 553,570 |
Unrealized depreciation on forward foreign currency exchange contracts | 884,605 |
Net payable on closed forward foreign currency exchange contract | 343,717 |
Accrued management fee | 232,383 |
Other accrued expenses and payables | 147,103 |
Total liabilities | 80,191,202 |
Net assets, at value | $ 450,199,442 |
Net Assets | |
Net assets consist of: Undistributed net investment income | 34,372,843 |
Net unrealized appreciation (depreciation) on: Investments | 7,330,623 |
Foreign currency related transactions | (867,532) |
Accumulated net realized gain (loss) | (113,027,989) |
Paid-in capital | 522,391,497 |
Net assets, at value | $ 450,199,442 |
Class A Net Asset Value, offering and redemption price per share ($393,438,214 ÷ 44,826,321 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 8.78 |
Class B Net Asset Value, offering and redemption price per share ($56,761,228 ÷ 6,474,194 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 8.77 |
* Represents collateral on securities loaned.
Statement of Operations for the year ended December 31, 2004 | |
Investment Income | |
Income: Dividends | $ 553,283 |
Interest | 36,445,585 |
Interest — Scudder Cash Management QP Trust | 119,706 |
Securities lending income, including income from Daily Assets Fund Institutional | 124,889 |
Total Income | 37,243,463 |
Expenses: Management fee | 2,547,280 |
Custodian fees | 60,081 |
Distribution service fees (Class B) | 116,895 |
Record keeping fees (Class B) | 61,482 |
Auditing | 53,376 |
Legal | 3,356 |
Trustees' fees and expenses | 5,863 |
Reports to shareholders | 134,828 |
Other | 30,569 |
Total expenses, before expense reductions | 3,013,730 |
Expense reductions | (8,909) |
Total expenses, after expense reductions | 3,004,821 |
Net investment income | 34,238,642 |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from: Investments | 9,835,203 |
Foreign currency related transactions | (364,967) |
| 9,470,236 |
Net unrealized appreciation (depreciation) during the period on: Investments | 6,010,970 |
Foreign currency related transactions | (719,594) |
| 5,291,376 |
Net gain (loss) on investment transactions | 14,761,612 |
Net increase (decrease) in net assets resulting from operations | $ 49,000,254 |
The accompanying notes are an integral part of the financial statements.
|
Statement of Changes in Net Assets | ||
Increase (Decrease) in Net Assets | Years Ended December 31, | |
2004 | 2003 | |
Operations: Net investment income | $ 34,238,642 | $ 33,045,620 |
Net realized gain (loss) on investment transactions | 9,470,236 | (3,182,002) |
Net unrealized appreciation (depreciation) on investment transactions during the period | 5,291,376 | 53,500,177 |
Net increase (decrease) in net assets resulting from operations | 49,000,254 | 83,363,795 |
Distributions to shareholders from: Net investment income Class A | (29,352,659) | (29,871,076) |
Class B | (3,056,845) | (462,410) |
Portfolio share transactions: Class A Proceeds from shares sold | 56,878,387 | 120,856,182 |
Reinvestment of distributions | 29,352,659 | 29,871,076 |
Cost of shares redeemed | (119,443,412) | (117,016,053) |
Net increase (decrease) in net assets from Class A share transactions | (33,212,366) | 33,711,205 |
Class B Proceeds from shares sold | 37,277,037 | 36,410,776 |
Reinvestment of distributions | 3,056,845 | 462,410 |
Cost of shares redeemed | (23,434,006) | (3,751,439) |
Net increase (decrease) in net assets from Class B share transactions | 16,899,876 | 33,121,747 |
Increase (decrease) in net assets | 278,260 | 119,863,261 |
Net assets at beginning of period | 449,921,182 | 330,057,921 |
Net assets at end of period (including undistributed net investment income of $34,372,843 and $32,285,235, respectively) | $ 450,199,442 | $ 449,921,182 |
Other Information | ||
Class A Shares outstanding at beginning of period | 48,977,744 | 44,487,776 |
Shares sold | 6,841,589 | 15,606,467 |
Shares issued to shareholders in reinvestment of distributions | 3,696,808 | 4,207,191 |
Shares redeemed | (14,689,820) | (15,323,690) |
Net increase (decrease) in Portfolio shares | (4,151,423) | 4,489,968 |
Shares outstanding at end of period | 44,826,321 | 48,977,744 |
Class B Shares outstanding at beginning of period | 4,421,727 | 136,396 |
Shares sold | 4,504,371 | 4,693,294 |
Shares issued to shareholders in reinvestment of distributions | 384,026 | 65,037 |
Shares redeemed | (2,835,930) | (473,000) |
Net increase (decrease) in Portfolio shares | 2,052,467 | 4,285,331 |
Shares outstanding at end of period | 6,474,194 | 4,421,727 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights |
|
Class A
Years Ended December 31, | 2004 | 2003 | 2002 | 2001a | 2000b |
Selected Per Share Data | |||||
Net asset value, beginning of period | $ 8.43 | $ 7.40 | $ 8.13 | $ 9.16 | $ 11.46 |
Income (loss) from investment operations: Net investment incomec | .67 | .67 | .75 | .84 | 1.14 |
Net realized and unrealized gain (loss) on investment transactions | .31 | 1.03 | (.74) | (.59) | (2.04) |
Total from investment operations | .98 | 1.70 | .01 | .25 | (.90) |
Less distributions from: Net investment income | (.63) | (.67) | (.74) | (1.28) | (1.40) |
Net asset value, end of period | $ 8.78 | $ 8.43 | $ 7.40 | $ 8.13 | $ 9.16 |
Total Return (%) | 12.42 | 24.62 | (.30) | 2.63 | (8.68) |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | 393 | 413 | 329 | 335 | 309 |
Ratio of expenses (%) | .66 | .67 | .66 | .70 | .68 |
Ratio of net investment income (%) | 8.11 | 8.62 | 10.07 | 9.89 | 11.23 |
Portfolio turnover rate (%) | 162 | 165 | 138 | 77 | 54 |
a As required, effective January 1, 2001, the Portfolio has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium on debt securities. The effect of this change for the year ended December 31, 2001 was to decrease net investment income per share by $.08, increase net realized and unrealized gains and losses per share by $.08 and decrease the ratio of net investment income to average net assets from 10.74% to 9.89%. Per share, ratios and supplemental data for periods prior to January 1, 2001 have not been restated to reflect this change in presentation.
b On June 18, 2001, the Portfolio implemented a 1 for 10 reverse stock split. Per share information, for the periods prior to December 31, 2001, has been restated to reflect the effect of the split. Shareholders received 1 share for every 10 shares owned and net asset value per share increased correspondingly.
c Based on average shares outstanding during the period.
Class B
Years Ended December 31, | 2004 | 2003 | 2002a |
Selected Per Share Data | |||
Net asset value, beginning of period | $ 8.41 | $ 7.39 | $ 7.21 |
Income (loss) from investment operations: Net investment incomeb | .64 | .64 | .31 |
Net realized and unrealized gain (loss) on investment transactions | .32 | 1.03 | (.13) |
Total from investment operations | .96 | 1.67 | .18 |
Less distributions from: Net investment income | (.60) | (.65) | — |
Net asset value, end of period | $ 8.77 | $ 8.41 | $ 7.39 |
Total Return (%) | 12.08 | 24.14 | 2.50** |
Ratios to Average Net Assets and Supplemental Data | |||
Net assets, end of period ($ millions) | 57 | 37 | 1 |
Ratio of expenses (%) | 1.06 | 1.06 | .92* |
Ratio of net investment income (%) | 7.71 | 8.23 | 8.78* |
Portfolio turnover rate (%) | 162 | 165 | 138** |
a For the period July 1, 2002 (commencement of operations of Class B shares) to December 31, 2002.
b Based on average shares outstanding during the period.
* Annualized ** Not annualized
|
Scudder Income & Growth Strategy Portfolio
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent period, the portfolio limited these expenses; had it not done so, expenses would have been higher. The tables are based on an investment of $1,000 made at the beginning of the period (August 16, 2004) ended December 31, 2004.
The tables illustrate your Portfolio's expenses in two ways:
Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the period ended December 31, 2004 | |
Actual Portfolio Return | Class B |
Beginning Account Value 8/16/04 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,066.00 |
Expenses Paid per $1,000* | $ 2.91 |
Hypothetical 5% Portfolio Return | Class B |
Beginning Account Value 8/16/04 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,015.95 |
Expenses Paid per $1,000* | $ 2.84 |
* Expenses are equal to the Portfolio's annualized expense ratio for the share class, multiplied by the average account value over the period, multiplied by the number of days since the commencement of the class (August 16, 2004), then divided by 365.
Annualized Expense Ratios | Class B |
Scudder Variable Series II — Scudder Income & Growth Strategy Portfolio | .75% |
For more information, please refer to the Portfolio's prospectus.
Management Summary December 31, 2004 |
|
Scudder Income & Growth Strategy Portfolio
Scudder Income & Growth Strategy Portfolio is one of four new fund-of-funds portfolios. Each portfolio is constructed as a strategically allocated mix of variable portfolios and managed to pursue consistent returns over time, while mitigating risk and pursuing a long-term investment objective. Scudder Income & Growth Strategy Portfolio seeks current income and, as a secondary objective, long-term growth of capital. The portfolio gained 6.60% (Class B shares, unadjusted for contract charges) from its date of inception, August 16, 2004 through December 31, 2004. Investors should keep in mind that during the start-up phase of the portfolio, it required some time to invest all the cash inflows. Because we had large cash flows, often exceeding the size of the portfolio, our allocation was heavily weighted in cash — even though we invested the cash right away every day.
Stocks performed exceptionally well in 2003, when profit margins widened because productivity accelerated but labor costs remained low (due to a soft labor market). However, equity performance was lower in 2004, due in part to rising interest rates, concerns about inflation and soaring energy prices, all of which can impact the revenue growth of companies. Performance did improve at the end of 2004 as signs of economic strength emerged and oil prices decreased. The end of uncertainty surrounding the US presidential election also helped the stock market find its footing. Specifically, the energy and materials sectors performed particularly well in 2004, while the technology, consumer staples and consumer discretionary sectors lagged behind. Going forward, profit margins are not likely to widen further, and may even narrow. As a result, we believe that returns will likely be modest. The portfolio underweighted equities relative to fixed income only in December and overweighted equities for all other months since inception. To improve diversification within the stock category, the portfolio overweighted small-cap stocks for all months since inception except December.
The Federal Reserve ("the Fed"), in attempt to prevent the economy from overheating and inflation from rising, raised interest rates five times from 12/31/03 through 12/31/04. Because bond prices typically move in the opposite direction of interest rates, bond prices fell in response. Still, bond investors seemed to be betting that the economy faces too many hurdles for the Fed to raise interest rates drastically, so the price of bonds did not fall significantly. However, it seems likely that the Fed will continue to raise interest rates, so we believe that the bull market for bonds we have experienced over the past two decades is likely over. Although, the portfolio is currently overweighting (or favoring) bonds relative to cash, these weightings may change.
Arnim Holzer Inna Okounkova Robert Wang
Co-Managers
Deutsche Investment Management Americas Inc.
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the portfolio or any variable life insurance policy or variable annuity contract for which the portfolio is an investment option. These charges and fees will reduce returns.
Returns during part or all of the periods shown reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns would have been lower.
Risk Considerations
Diversification does not eliminate risk. The underlying portfolios invest in individual equity and bond funds whose yields and market values fluctuate, so that your investment may be worth more or less that its original cost. In addition, the underlying portfolios are subject to stock market risk, meaning stocks in the portfolio may decline in value for extended periods of time due to the activities and financial prospects of individual companies, or due to general market and economic conditions. Investing in foreign securities presents certain unique risks not associated with domestic investments, such as currency fluctuation, political and economic changes, and market risks. Derivatives may be more volatile and less liquid than traditional securities, and the portfolio could suffer losses on its derivative positions. Please read this portfolio's prospectus for specific details regarding its risk profile.
Portfolio management market commentary is as of December 31, 2004, and may not come to pass. This information is subject to change at any time based on market and other conditions.
Portfolio Summary |
Scudder Income & Growth Strategy Portfolio
Asset Allocation | 12/31/04 |
| |
Fixed Income Funds | 56% |
Equity Funds | 42% |
Cash Equivalents | 2% |
| 100% |
Asset allocation is subject to change.
For more complete details about the Portfolio's investment portfolio, see page 6. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Portfolio as of month end will be posted to scudder.com on the 15th of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio December 31, 2004 | ![]() | ![]() |
|
Scudder Income & Growth Strategy Portfolio
|
| Value ($) |
|
| |
Equity Funds 41.5% | ||
Scudder SVS I Global Discovery Portfolio "A" | 2,729 | 34,847 |
Scudder SVS I Growth & Income Portfolio "A" | 119,292 | 1,108,222 |
Scudder SVS I International Portfolio "A" | 33,005 | 313,545 |
Scudder SVS II Aggressive Growth Portfolio "A" | 21,800 | 214,513 |
Scudder SVS II Blue Chip Portfolio "A" | 81,158 | 1,107,801 |
Scudder SVS II Dreman High Return Equity Portfolio "A" | 32,888 | 416,031 |
Scudder SVS II Dreman Small Cap Value Portfolio "A" | 13,051 | 261,804 |
Scudder SVS II Eagle Focused Large Cap Growth Portfolio "A" | 34,748 | 305,432 |
Scudder SVS II Growth Portfolio "A" | 26,381 | 512,049 |
Scudder SVS II International Select Equity Portfolio "A" | 15,792 | 188,085 |
Scudder SVS II Large Cap Value Portfolio "A" | 33,792 | 533,568 |
Scudder SVS II MFS Strategic Value Portfolio "A" | 20,224 | 242,682 |
Scudder SVS II Small Cap Growth Portfolio "A" | 22,974 | 289,246 |
|
| Value ($) |
|
| |
Scudder VIT Real Estate | 8,077 | 131,904 |
Total Equity Funds (Cost $5,291,079) | 5,659,729 | |
| ||
Fixed Income Funds 55.8% | ||
Scudder SVS II Fixed Income Portfolio "A" | 521,556 | 6,295,184 |
Scudder SVS II Government and Agency Securities Portfolio "A" | 71,917 | 902,553 |
Scudder SVS II High Income Portfolio "A" | 42,526 | 373,376 |
Scudder SVS II Strategic Income Portfolio "A" | 2,770 | 33,932 |
Total Fixed Income Funds (Cost $7,539,134) | 7,605,045 | |
| ||
Cash Equivalents 2.6% | ||
Scudder Cash Management QP Trust, 2.24% (b) (Cost $348,360) | 348,360 | 348,360 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $13,178,573) (a) | 99.9 | 13,613,134 |
Other Assets and Liabilities, Net | 0.1 | 8,900 |
Net Assets | 100.0 | 13,622,034 |
Notes to Scudder Income & Growth Strategy Portfolio of Investments |
(a) The cost for federal income tax purposes was $13,178,573. At December 31, 2004, net unrealized appreciation for all securities based on tax cost was $434,561. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $434,561 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $0.
(b) Scudder Cash Management QP Trust is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
The accompanying notes are an integral part of the financial statements.
Financial Statements |
|
Statement of Assets and Liabilities | |
Assets | |
Investments: Investments in securities, at value (cost $12,830,213) | $ 13,264,774 |
Investment in Scudder Cash Management QP Trust (cost $348,360) | 348,360 |
Total investments in securities, at value (cost $13,178,573) | 13,613,134 |
Interest receivable | 544 |
Receivable for Portfolio shares sold | 11,710 |
Due from Advisor | 26,510 |
Other assets | 122 |
Total assets | 13,652,020 |
Liabilities | |
Payable for Portfolio shares redeemed | 708 |
Other accrued expenses and payables | 29,278 |
Total liabilities | 29,986 |
Net assets, at value | $ 13,622,034 |
Net Assets | |
Net assets consist of: Net unrealized appreciation (depreciation) on investments | 434,561 |
Accumulated net realized gain (loss) | 33,651 |
Paid-in capital | 13,153,822 |
Net assets, at value | $ 13,622,034 |
Class B Shares Net asset value, offering and redemption price per share ($13,622,034 ÷ 1,277,644 shares outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 10.66 |
Statement of Operations | |
Investment Income | |
Income: Interest — Scudder Cash Management QP Trust | $ 2,050 |
Total Income | 2,050 |
Expenses: Management fee | 3,818 |
Custodian and accounting fees | 31,927 |
Distribution service fees (Class B) | 6,354 |
Record keeping fees (Class B) | 3,813 |
Auditing | 24,001 |
Legal | 1,077 |
Trustees' fees and expenses | 477 |
Reports to shareholders | 3,011 |
Offering costs | 1,011 |
Other | 528 |
Total expenses, before expense reductions | 76,017 |
Expense reductions | (56,748) |
Total expenses, after expense reductions | 19,269 |
Net investment income (loss) | (17,219) |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from investments | 49,859 |
Net unrealized appreciation (depreciation) during the period on investments | 434,561 |
Net gain (loss) on investment transactions | 484,420 |
Net increase (decrease) in net assets resulting from operations | $ 467,201 |
The accompanying notes are an integral part of the financial statements.
|
Statement of Changes in Net Assets | |
Increase (Decrease) in Net Assets | Period Ended December 31, 2004a |
Operations: Net investment income (loss) | $ (17,219) |
Net realized gain (loss) on investment transactions | 49,859 |
Net unrealized appreciation (depreciation) on investment transactions during the period | 434,561 |
Net increase (decrease) in net assets resulting from operations | 467,201 |
Portfolio share transactions: Class B Proceeds from shares sold | 13,456,607 |
Cost of shares redeemed | (301,774) |
Increase (decrease) in net assets | 13,154,833 |
Net assets at beginning of period | — |
Net assets at end of period | $ 13,622,034 |
Other Information | |
Class B Shares outstanding at beginning of period | — |
Shares sold | 1,306,747 |
Shares redeemed | (29,103) |
Net increase (decrease) in Portfolio shares | 1,277,644 |
Shares outstanding at end of period | 1,277,644 |
a For the period from August 16, 2004 (commencement of operations) to December 31, 2004.
The accompanying notes are an integral part of the financial statements.
Financial Highlights |
|
Class B
| 2004a |
Selected Per Share Data | |
Net asset value, beginning of period | $ 10.00 |
Income (loss) from investment operations: Net investment income (loss)b | (.03) |
Net realized and unrealized gain (loss) on investment transactions | .69 |
Total from investment operations | .66 |
Net asset value, end of period | $ 10.66 |
Total Return (%)c | 6.60** |
Ratios to Average Net Assets and Supplemental Data | |
Net assets, end of period ($ millions) | 14 |
Ratio of expenses before expense reductions (%) | 2.96* |
Ratio of expenses after expense reductions (%) | .75* |
Ratio of net investment income (%) | (.67)* |
Portfolio turnover rate (%) | 18* |
a For the period from August 16, 2004 (commencement of operations) to December 31, 2004.
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
Performance Summary December 31, 2004 |
|
Scudder International Select Equity Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns.
This Portfolio is subject to stock market risk, meaning stocks in the Portfolio may decline in value for extended periods of time due to the activities and financial prospects of individual companies, or due to general market and economic conditions. Additionally, investing in foreign securities presents certain unique risks not associated with domestic investments, such as currency fluctuation, political and economic changes and market risks. This may result in greater share price volatility. Please read this Portfolio's prospectus for specific details regarding its investments and risk profile.
Growth of an Assumed $10,000 Investment in Scudder International Select Equity Portfolio from 12/31/1994 to 12/31/2004 | ||
[] Scudder International Select Equity Portfolio — Class A [] MSCI EAFE + EM Index | ||
![]() |
| The MSCI EAFE + EM Index (Morgan Stanley Capital International Europe, Australasia, Far East + Emerging Markets Index) is an unmanaged index generally accepted as a benchmark for major overseas markets plus emerging markets. The index is calculated using closing local market prices and converts to US dollars using the London close foreign exchange rates. Index returns assume reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
Yearly periods ended December 31 |
|
Comparative Results | |||||
Scudder International Select Equity Portfolio |
| 1-Year | 3-Year | 5-Year | 10-Year |
Class A | Growth of $10,000 | $11,825 | $13,282 | $7,981 | $18,408 |
Average annual total return | 18.25% | 9.92% | -4.41% | 6.29% | |
MSCI EAFE + EM Index | Growth of $10,000 | $12,126 | $14,544 | $9,853 | $17,726 |
Average annual total return | 21.26% | 13.30% | -.30% | 5.89% | |
Scudder International Select Equity Portfolio |
|
|
| 1-Year | Life of Class* |
Class B | Growth of $10,000 |
|
| $11,784 | $13,485 |
Average annual total return |
|
| 17.84% | 12.69% | |
MSCI EAFE + EM Index | Growth of $10,000 |
|
| $12,126 | $14,687 |
Average annual total return |
|
| 21.26% | 16.62% |
The growth of $10,000 is cumulative.
* The Portfolio commenced offering Class B shares on July 1, 2002. Index returns begin June 30, 2002.
Information About Your Portfolio's Expenses |
|
Scudder International Select Equity Portfolio
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. The tables are based on an investment of $1,000 made at the beginning of the six-month period ended December 31, 2004.
The tables illustrate your Portfolio's expenses in two ways:
Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2004 | ||
Actual Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,158.60 | $ 1,156.80 |
Expenses Paid per $1,000* | $ 4.94 | $ 6.83 |
Hypothetical 5% Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,020.62 | $ 1,018.87 |
Expenses Paid per $1,000* | $ 4.63 | $ 6.40 |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365.
Annualized Expense Ratios | Class A | Class B |
Scudder Variable Series II — Scudder International Select Equity Portfolio | .91% | 1.26% |
For more information, please refer to the Portfolio's prospectus.
Management Summary December 31, 2004 |
|
Scudder International Select Equity Portfolio
Continued strength in corporate earnings and worldwide economic growth provided a positive underpinning for international equities in 2004. For US investors, the rising value of foreign currencies in relation to the dollar provided an additional boost to performance. The Class A shares of the portfolio produced a positive absolute return of 18.25% (Class A shares, unadjusted for contract charges) during the year ended December 31, 2004, but lagged the 21.26% return of the MSCI EAFE Plus EM Index.
Performance was helped by strong stock selection in the materials, energy and information technology sectors. Materials and energy delivered robust returns, as commodities exporters in those sectors benefited from their exposure to China's growth. Examples include the materials companies POSCO (Korea) (1.2% of net assets as of December 31) and BHP Billiton PLC (United Kingdom) (.97% of net assets), and the energy companies Eni SpA (Italy) (2.9% of net assets) and Total S.A. (France) (3.2% of net assets%). Performance was hurt by exposure to sectors that are sensitive to rising energy and input costs, such as the industrials stock A.P. Moller Maersk*, which was unable to pass on higher transport costs to customers; and consumer staples companies such as Nestle S.A. and Henckel*, whose margins were also pressured by rising input costs and heightened competition.
We continue to emphasize companies with pricing power. In an environment of slow to moderate demand growth, the ability to raise prices will enable companies to maintain their profit margins even if input costs increase. In addition, we continue to look for opportunities to invest in companies positioned to take advantage of the burgeoning consumer sector in Asia.
Alex Tedder
Lead Portfolio Manager
Matthias Knerr
Sangita Uberoi
Managers
Deutsche Asset Management Investment Services Ltd., Subadvisor to the Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the portfolio or any variable life insurance policy or variable annuity contract for which the portfolio is an investment option. These charges and fees will reduce returns.
Risk Considerations
This portfolio is subject to stock market risk, meaning stocks in the portfolio may decline in value for extended periods of time due to the activities and financial prospects of individual companies, or due to general market and economic conditions. Additionally, investing in foreign securities presents certain unique risks not associated with domestic investments, such as currency fluctuation, political and economic changes and market risks. This may result in greater share price volatility. Please read this portfolio's prospectus for specific details regarding its investments and risk profile.
The MSCI EAFE + EM Index (Morgan Stanley Capital International Europe, Australasia, Far East + Emerging Markets Free Index) is an unmanaged index generally accepted as a benchmark for major overseas markets plus emerging markets. The index is calculated using closing local market prices and converts to US dollars using the London close foreign exchange rates. Index returns assume reinvestment of all distributions and do not reflect any fees or expenses. It is not possible to invest directly into an index.
*This security was not held in the portfolio at the end of the reporting period.
Portfolio management market commentary is as of December 31, 2004, and may not come to pass. This information is subject to change at any time based on market and other conditions.
Portfolio Summary |
Scudder International Select Equity Portfolio
Asset Allocation (Excludes Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Common Stocks | 99% | 96% |
Cash Equivalents | 1% | 2% |
Preferred Stocks | — | 2% |
| 100% | 100% |
Geographical Diversification (Excludes Cash Equivalents and Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Continental Europe | 51% | 50% |
Japan | 19% | 22% |
United Kingdom | 18% | 23% |
Asia (excluding Japan) | 12% | 5% |
| 100% | 100% |
Sector Diversification (Excludes Cash Equivalents and Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Financials | 27% | 25% |
Consumer Discretionary | 14% | 18% |
Industrials | 13% | 10% |
Energy | 10% | 7% |
Telecommunication Services | 8% | 8% |
Information Technology | 8% | 6% |
Health Care | 8% | 8% |
Materials | 5% | 7% |
Consumer Staples | 4% | 7% |
Utilities | 3% | 4% |
| 100% | 100% |
Asset allocation, geographical and sector diversification are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 15. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Portfolio as of month end will be posted to scudder.com on the 15th of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio December 31, 2004 | ![]() | ![]() |
|
Scudder International Select Equity Portfolio
|
| Value ($) |
|
| |
Common Stocks 95.7% | ||
Belgium 2.0% | ||
Belgacom SA* (Cost $3,863,300) | 108,000 | 4,668,207 |
China 1.7% | ||
PetroChina Co., Ltd. "H" (Cost $3,606,829) | 7,467,670 | 3,987,138 |
France 7.7% | ||
Christian Dior SA | 48,900 | 3,326,689 |
Credit Agricole SA | 159,709 | 4,819,274 |
Total SA | 33,461 | 7,308,934 |
Vinci SA (d) | 17,300 | 2,323,284 |
(Cost $12,687,700) | 17,778,181 | |
Germany 10.6% | ||
Adidas-Salomon AG | 30,200 | 4,874,609 |
E.ON AG | 65,400 | 5,961,294 |
Hypo Real Estate Holdings AG* | 119,200 | 4,941,688 |
Metro AG | 97,063 | 5,341,961 |
Siemens AG | 39,900 | 3,383,121 |
(Cost $16,029,706) | 24,502,673 | |
Greece 2.3% | ||
Alpha Bank AE (Cost $4,010,044) | 153,600 | 5,357,314 |
Hong Kong 2.0% | ||
Swire Pacific Ltd. "A" (Cost $3,859,366) | 545,831 | 4,564,568 |
India 1.6% | ||
State Bank of India (GDR) (Cost $2,998,549) | 99,566 | 3,634,159 |
Ireland 2.2% | ||
CRH PLC (Cost $3,172,767) | 191,458 | 5,126,713 |
Italy 3.0% | ||
Eni SpA (Cost $4,061,818) | 271,560 | 6,799,151 |
Japan 18.6% | ||
Canon, Inc. | 97,800 | 5,277,974 |
Credit Saison Co., Ltd. | 130,400 | 4,746,677 |
Daito Trust Construction Co., Ltd. | 107,900 | 5,128,067 |
KDDI Corp. | 400 | 2,154,777 |
Kirin Brewery Co., Ltd. | 465,900 | 4,587,617 |
Millea Holdings, Inc. | 250 | 3,708,402 |
Mitsubishi Corp. | 417,000 | 5,387,996 |
SMC Corp. | 36,800 | 4,212,589 |
Toyota Motor Corp. | 130,200 | 5,298,468 |
Trend Micro, Inc. | 42,000 | 2,266,615 |
(Cost $31,971,638) | 42,769,182 | |
Korea 3.8% | ||
POSCO (ADR) (d) | 64,100 | 2,854,373 |
Samsung Electronics Co., Ltd. (GDR), 144A | 26,940 | 5,899,860 |
(Cost $8,345,830) | 8,754,233 | |
|
| Value ($) |
|
| |
Netherlands 6.8% | ||
European Aeronautic Defense & Space Co. | 125,800 | 3,657,553 |
ING Groep NV | 245,255 | 7,420,656 |
TPG NV | 166,700 | 4,527,207 |
(Cost $12,495,804) | 15,605,416 | |
Singapore 2.0% | ||
DBS Group Holdings Ltd. (Cost $4,078,758) | 471,315 | 4,648,476 |
Spain 6.8% | ||
Indra Sistemas SA | 303,000 | 5,176,988 |
Industria de Diseno Textil SA | 149,400 | 4,406,660 |
Telefonica SA | 322,630 | 6,078,091 |
(Cost $11,357,163) | 15,661,739 | |
Switzerland 7.7% | ||
Credit Suisse Group | 166,500 | 6,999,121 |
Nestle SA (Registered) | 16,566 | 4,334,170 |
Roche Holding AG | 56,280 | 6,478,807 |
(Cost $14,154,265) | 17,812,098 | |
United Kingdom 16.9% | ||
BHP Billiton PLC | 191,550 | 2,245,158 |
Centrica PLC | 717,600 | 3,254,867 |
GlaxoSmithKline PLC | 253,600 | 5,949,760 |
HSBC Holdings PLC | 315,200 | 5,319,295 |
Royal Bank of Scotland Group PLC | 116,485 | 3,918,168 |
Smith & Nephew PLC | 428,088 | 4,380,657 |
Trinity Mirror PLC | 324,893 | 3,967,130 |
Vodafone Group PLC | 2,192,721 | 5,946,355 |
WPP Group PLC | 364,600 | 4,010,979 |
(Cost $31,606,411) | 38,992,369 | |
Total Common Stocks (Cost $168,299,949) | 220,661,617 | |
| ||
Securities Lending Collateral 2.1% | ||
Daily Assets Fund Institutional, 2.25% (c) (e) (Cost $4,791,625) | 4,791,625 | 4,791,625 |
| ||
Cash Equivalents 1.0% | ||
Scudder Cash Management QP Trust, 2.24% (b) (Cost $2,321,041) | 2,321,041 | 2,321,041 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $175,412,615) (a) | 98.8 | 227,774,283 |
Other Assets and Liabilities, Net | 1.2 | 2,795,917 |
Net Assets | 100.0 | 230,570,200 |
Notes to Scudder International Select Equity Portfolio of Investments |
* Non-income producing security.
(a) The cost for federal income tax purposes was $178,972,673. At December 31, 2004, net unrealized appreciation for all securities based on tax cost was $48,801,610. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $49,317,375 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $515,765.
(b) Scudder Cash Management QP Trust is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
(c) Daily Assets Fund Institutional, an affiliated fund, is managed by Deutsche Asset Management, Inc. The rate shown is the annualized seven-day yield at period end.
(d) All or a portion of these securities were on loan (see Notes to Financial Statements). The value of all securities loaned at December 31, 2004, amounted to $4,614,982, which is 2.0% of total net assets.
(e) Represents collateral held in connection with securities lending.
ADR: American Depositary Receipts
GDR: Global Depositary Receipts
144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
The accompanying notes are an integral part of the financial statements.
Financial Statements |
|
Statement of Assets and Liabilities as of December 31, 2004 | |
Assets | |
Investments: Investments in securities, at value (cost $168,299,949) — including $4,614,982 of securities loaned | $ 220,661,617 |
Investment in Daily Assets Fund Institutional (cost $4,791,625)* | 4,791,625 |
Investment in Scudder Cash Management QP Trust (cost $2,321,041) | 2,321,041 |
Total investments in securities, at value (cost $175,412,615) | 227,774,283 |
Foreign currency, at value (cost $7,387,345) | 7,539,201 |
Dividends receivable | 401,534 |
Interest receivable | 12,042 |
Receivable for Portfolio shares sold | 30,778 |
Foreign taxes recoverable | 187,731 |
Other assets | 6,336 |
Total assets | 235,951,905 |
Liabilities | |
Payable for Portfolio shares redeemed | 321,835 |
Payable upon return of securities loaned | 4,791,625 |
Accrued management fee | 158,073 |
Other accrued expenses and payables | 110,172 |
Total liabilities | 5,381,705 |
Net assets, at value | $ 230,570,200 |
Net Assets | |
Net assets consist of: Undistributed net investment income | 3,173,342 |
Net unrealized appreciation (depreciation) on: Investments | 52,361,668 |
Foreign currency related transactions | 203,574 |
Accumulated net realized gain (loss) | (50,261,752) |
Paid-in capital | 225,093,368 |
Net assets, at value | $ 230,570,200 |
Class A Net Asset Value, offering and redemption price per share ($183,974,883 ÷ 15,442,740 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 11.91 |
Class B Net Asset Value, offering and redemption price per share ($46,595,317 ÷ 3,923,204 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 11.88 |
Statement of Operations for the year ended December 31, 2004 | |
Investment Income | |
Income: Dividends (net of foreign taxes withheld of $537,188) | $ 4,438,156 |
Interest — Scudder Cash Management QP Trust | 25,694 |
Securities lending income, including income from Daily Assets Fund Institutional | 136,674 |
Total Income | 4,600,524 |
Expenses: Management fee | 1,393,551 |
Custodian fees | 146,550 |
Distribution service fees (Class B) | 78,650 |
Record keeping fees (Class B) | 39,095 |
Auditing | 61,780 |
Legal | 22,220 |
Trustees' fees and expenses | 7,780 |
Reports to shareholders | 27,484 |
Other | 8,912 |
Total expenses, before expense reduction | 1,786,022 |
Expense reduction | (2,084) |
Total expenses, after expense reduction | 1,783,938 |
Net investment income (loss) | 2,816,586 |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from: Investments | 10,217,608 |
Foreign currency related transactions | 436,300 |
| 10,653,908 |
Net unrealized appreciation (depreciation) during the period on: Investments | 20,416,088 |
Foreign currency related transactions | 98,838 |
| 20,514,926 |
Net gain (loss) on investment transactions | 31,168,834 |
Net increase (decrease) in net assets resulting from operations | $ 33,985,420 |
The accompanying notes are an integral part of the financial statements.
* Represents collateral on securities loaned.
|
Statement of Changes in Net Assets | ||
Increase (Decrease) in Net Assets | Years Ended December 31, | |
2004 | 2003 | |
Operations: Net investment income (loss) | $ 2,816,586 | $ 1,470,136 |
Net realized gain (loss) on investment transactions | 10,653,908 | (2,277,480) |
Net unrealized appreciation (depreciation) on investment transactions during the period | 20,514,926 | 36,999,340 |
Net increase (decrease) in net assets resulting from operations | 33,985,420 | 36,191,996 |
Distributions to shareholders from: Net investment income Class A | (1,616,136) | (1,518,587) |
Class B | (162,336) | (31,424) |
Portfolio share transactions: Class A Proceeds from shares sold | 40,441,379 | 34,706,923 |
Reinvestment of distributions | 1,616,136 | 1,518,587 |
Cost of shares redeemed | (30,593,940) | (40,601,242) |
Net increase (decrease) in net assets from Class A share transactions | 11,463,575 | (4,375,732) |
Class B Proceeds from shares sold | 25,663,873 | 16,228,216 |
Reinvestment of distributions | 162,336 | 31,424 |
Cost of shares redeemed | (3,432,245) | (2,025,107) |
Net increase (decrease) in net assets from Class B share transactions | 22,393,964 | 14,234,533 |
Increase (decrease) in net assets | 66,064,487 | 44,500,786 |
Net assets at beginning of period | 164,505,713 | 120,004,927 |
Net assets at end of period (including undistributed net investment income of $3,173,342 and $1,698,928, respectively) | $ 230,570,200 | $ 164,505,713 |
Other Information | ||
Class A Shares outstanding at beginning of period | 14,404,846 | 15,029,877 |
Shares sold | 3,811,740 | 4,153,733 |
Shares issued to shareholders in reinvestment of distributions | 154,506 | 216,015 |
Shares redeemed | (2,928,352) | (4,994,779) |
Net increase (decrease) in Portfolio shares | 1,037,894 | (625,031) |
Shares outstanding at end of period | 15,442,740 | 14,404,846 |
Class B Shares outstanding at beginning of period | 1,760,419 | 48,435 |
Shares sold | 2,466,794 | 1,925,484 |
Shares issued to shareholders in reinvestment of distributions | 15,520 | 4,470 |
Shares redeemed | (319,529) | (217,970) |
Net increase (decrease) in Portfolio shares | 2,162,785 | 1,711,984 |
Shares outstanding at end of period | 3,923,204 | 1,760,419 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights |
|
Class A
Years Ended December 31, | 2004 | 2003 | 2002 | 2001 | 2000a |
Selected Per Share Data | |||||
Net asset value, beginning of period | $ 10.18 | $ 7.96 | $ 9.24 | $ 14.73 | $ 21.45 |
Income (loss) from investment operations: Net investment income (loss)b | .17 | .10 | .12 | .05 | .08 |
Net realized and unrealized gain (loss) on investment transactions | 1.67 | 2.23 | (1.36) | (3.46) | (3.90) |
Total from investment operations | 1.84 | 2.33 | (1.24) | (3.41) | (3.82) |
Less distributions from: Net investment income | (.11) | (.11) | (.04) | (.10) | — |
Net realized gains on investment transactions | — | — | — | (1.98) | (2.90) |
Total distributions | (.11) | (.11) | (.04) | (2.08) | (2.90) |
Net asset value, end of period | $ 11.91 | $ 10.18 | $ 7.96 | $ 9.24 | $ 14.73 |
Total Return (%) | 18.25 | 29.83 | (13.48) | (24.43) | (20.49) |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | 184 | 147 | 120 | 121 | 179 |
Ratio of expenses (%) | .89 | .94 | .85 | .92 | .84 |
Ratio of net investment income (loss) (%) | 1.58 | 1.17 | 1.46 | .44 | .47 |
Portfolio turnover rate (%) | 88 | 139 | 190 | 145 | 87 |
a On June 18, 2001, the Portfolio implemented a 1 for 10 reverse stock split. Per share information, for the period prior to December 31, 2001, has been restated to reflect the effect of the split. Shareholders received 1 share for every 10 shares owned and net asset value per share increased correspondingly.
b Based on average shares outstanding during the period.
Class B
Years Ended December 31, | 2004 | 2003 | 2002a |
Selected Per Share Data | |||
Net asset value, beginning of period | $ 10.15 | $ 7.94 | $ 8.98 |
Income (loss) from investment operations: Net investment income (loss)b | .13 | .06 | .02 |
Net realized and unrealized gain (loss) on investment transactions | 1.67 | 2.24 | (1.06) |
Total from investment operations | 1.80 | 2.30 | (1.04) |
Less distributions from: Net investment income | (.07) | (.09) | — |
Total distributions | (.07) | (.09) | — |
Net asset value, end of period | $ 11.88 | $ 10.15 | $ 7.94 |
Total Return (%) | 17.84 | 29.42 | (11.58)** |
Ratios to Average Net Assets and Supplemental Data | |||
Net assets, end of period ($ millions) | 47 | 18 | .4 |
Ratio of expenses (%) | 1.28 | 1.33 | 1.11* |
Ratio of net investment income (loss) (%) | 1.19 | .78 | .54* |
Portfolio turnover rate (%) | 88 | 139 | 190 |
a For the period July 1, 2002 (commencement of operations of Class B shares) to December 31, 2002.
b Based on average shares outstanding during the period.
* Annualized
** Not annualized
Performance Summary December 31, 2004 |
|
Scudder Large Cap Value Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns.
The Portfolio is subject to stock market risk. It focuses its investments on certain economic sectors, thereby increasing its vulnerability to any single economic, political or regulatory development. This may result in greater share price volatility. Please read this Portfolio's prospectus for specific details regarding its investments and risk profile.
Growth of an Assumed $10,000 Investment in Scudder Large Cap Value Portfolio from 5/1/1996 to 12/31/2004 | ||
[] Scudder Large Cap Value Portfolio — Class A [] Russell 1000 Value Index |
| |
![]() |
| The Russell 1000 Value Index is an unmanaged index, which consists of those stocks in the Russell 1000 Index with lower price-to-book ratios and lower forecasted-growth values. Index returns assume reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
Yearly periods ended December 31 |
|
Comparative Results | |||||
Scudder Large Cap Value Portfolio |
| 1-Year | 3-Year | 5-Year | Life of Portfolio* |
Class A | Growth of $10,000 | $11,007 | $12,408 | $14,678 | $24,051 |
Average annual total return | 10.07% | 7.46% | 7.98% | 10.65% | |
Russell 1000 Value Index | Growth of $10,000 | $11,649 | $12,796 | $12,929 | $24,879 |
Average annual total return | 16.49% | 8.57% | 5.27% | 11.09% | |
Scudder Large Cap Value Portfolio |
|
|
| 1-Year | Life of Class** |
Class B | Growth of $10,000 |
|
| $10,965 | $12,746 |
Average annual total return |
|
| 9.65% | 10.18% | |
Russell 1000 Value Index | Growth of $10,000 |
|
| $11,649 | $13,438 |
Average annual total return |
|
| 16.49% | 12.55% |
The growth of $10,000 is cumulative.
* The Portfolio commenced operations on May 1, 1996. Index returns begin April 30, 1996.
** The Portfolio commenced offering Class B shares on July 1, 2002. Index returns begin June 30, 2002.
Information About Your Portfolio's Expenses |
|
Scudder Large Cap Value Portfolio
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent six-month period, the Portfolio limited these expenses; had it not done so, expenses would have been higher. The tables are based on an investment of $1,000 made at the beginning of the six-month period ended December 31, 2004.
The tables illustrate your Portfolio's expenses in two ways:
Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2004 | ||
Actual Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,073.40 | $ 1,071.30 |
Expenses Paid per $1,000* | $ 4.17 | $ 6.10 |
Hypothetical 5% Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,021.18 | $ 1,019.31 |
Expenses Paid per $1,000* | $ 4.06 | $ 5.95 |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365.
Annualized Expense Ratios | Class A | Class B |
Scudder Variable Series II — Scudder Large Cap Value Portfolio | .80% | 1.17% |
For more information, please refer to the Portfolio's prospectus.
Management Summary December 31, 2004 |
|
Scudder Large Cap Value Portfolio
Scudder Large Cap Value Portfolio (Class A shares, unadjusted for contract charges) posted a total return of 10.07% for the 12-month period ended December 31, 2004. By comparison the Russell 1000 Value Index returned 16.49%, while the broad market, as measured by the Standard & Poor's 500 (S&P 500), gained 10.88%.
We attribute the variance between our return and that of the Russell 1000 Value Index to the portfolio's high-quality stocks, which typically fall under the larger market capitalizations within the index. These were precisely the stocks that underperformed within the Russell 1000 Value Index, while stocks with smaller market caps and lower-quality ratings rallied. However, our strategy, we believe, provides an opportunity to add value over the long term.
The portfolio benefited from its underweight position and stock selection in consumer discretionary stocks, which helped relative performance as investors moved away from these typically economically-sensitive stocks. An overweight position in materials also helped as this sector posted relatively strong returns.
An overweight in information technology hurt performance as some investors sold on the belief that the solid economy and capital expenditure trends might reverse in the near term. An overweight position in health care — primarily pharmaceutical stocks — also hurt performance as these stocks struggled when some major drugs were recalled due to health concerns.
We're pleased with the portfolio, which comprises solid companies with projected earnings growth that is faster than that of the market, valuations that are lower than the market's and current dividend income that is materially higher.
Thomas F. Sassi
Lead Manager
Steve Scrudato
Manager
Deutsche Investment Management Americas Inc.
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the portfolio or any variable life insurance policy or variable annuity contract for which the portfolio is an investment option. These charges and fees will reduce returns.
Risk Considerations
The portfolio is subject to stock market risk. It focuses its investments on certain economic sectors, thereby increasing its vulnerability to any single economic, political or regulatory development. This may result in greater share price volatility. Please read this portfolio's prospectus for specific details regarding its investments and risk profile.
The Russell 1000 Value Index is an unmanaged index, which consists of those stocks in the Russell 1000 Index with lower price-to-book ratios and lower forecasted-growth values.
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 all distributions and do not reflect fees or expenses. It is not possible to invest directly into an index.
Portfolio management market commentary is as of December 31, 2004, and may not come to pass. This information is subject to change at any time based on market and other conditions.
Portfolio Summary |
Scudder Large Cap Value Portfolio
Asset Allocation (Excludes Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Common Stocks | 99% | 94% |
Cash Equivalents | 1% | 6% |
| 100% | 100% |
Sector Diversification (Excludes Cash Equivalents and Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Financials | 31% | 32% |
Information Technology | 15% | 12% |
Health Care | 11% | 14% |
Industrials | 11% | 12% |
Consumer Discretionary | 9% | 6% |
Energy | 7% | 8% |
Consumer Staples | 7% | 5% |
Materials | 7% | 8% |
Telecommunication Services | 1% | 2% |
Utilities | 1% | 1% |
| 100% | 100% |
Asset allocation and sector diversification are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 26. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Portfolio as of month end will be posted to scudder.com on the 15th of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio December 31, 2004 | ![]() | ![]() |
|
Scudder Large Cap Value Portfolio
|
| Value ($) |
|
| |
Common Stocks 98.6% | ||
Consumer Discretionary 9.1% | ||
Hotels Restaurants & Leisure 1.1% | ||
McDonald's Corp. | 108,400 | 3,475,304 |
Multiline Retail 3.1% | ||
Family Dollar Stores, Inc. | 178,300 | 5,568,309 |
The May Department Stores Co. (c) | 142,200 | 4,180,680 |
9,748,989 | ||
Specialty Retail 4.9% | ||
Limited Brands | 182,100 | 4,191,942 |
Lowe's Companies, Inc. | 116,700 | 6,720,753 |
Sherwin-Williams Co. | 99,000 | 4,418,370 |
15,331,065 | ||
Consumer Staples 6.8% | ||
Food Products 5.1% | ||
ConAgra Foods, Inc. | 140,500 | 4,137,725 |
General Mills, Inc. | 135,000 | 6,710,850 |
Sara Lee Corp. | 214,200 | 5,170,788 |
16,019,363 | ||
Household Products 1.7% | ||
Kimberly-Clark Corp. | 80,000 | 5,264,800 |
Energy 7.3% | ||
Oil & Gas | ||
BP PLC (ADR) | 61,344 | 3,582,489 |
ChevronTexaco Corp. | 55,100 | 2,893,301 |
ConocoPhillips | 25,000 | 2,170,750 |
ExxonMobil Corp. | 184,000 | 9,431,840 |
Royal Dutch Petroleum Co. (NY Shares) | 86,000 | 4,934,680 |
23,013,060 | ||
Financials 30.1% | ||
Banks 15.1% | ||
AmSouth Bancorp. | 179,300 | 4,643,870 |
Bank of America Corp. | 229,226 | 10,771,330 |
BB&T Corp. | 74,600 | 3,136,930 |
National City Corp. | 133,500 | 5,012,925 |
PNC Financial Services Group | 144,200 | 8,282,848 |
SunTrust Banks, Inc. (c) | 51,400 | 3,797,432 |
US Bancorp. | 177,600 | 5,562,432 |
Wachovia Corp. | 118,500 | 6,233,100 |
47,440,867 | ||
Capital Markets 4.2% | ||
Bear Stearns Companies, Inc. | 42,400 | 4,337,944 |
Merrill Lynch & Co., Inc. | 96,700 | 5,779,759 |
Morgan Stanley | 55,000 | 3,053,600 |
13,171,303 | ||
Diversified Financial Services 8.9% | ||
Citigroup, Inc. | 234,700 | 11,307,846 |
Fannie Mae | 43,400 | 3,090,514 |
Freddie Mac | 44,400 | 3,272,280 |
|
| Value ($) |
|
| |
JPMorgan Chase & Co. | 264,700 | 10,325,947 |
27,996,587 | ||
Insurance 1.9% | ||
Allstate Corp. | 31,100 | 1,608,492 |
American International Group, Inc. | 68,800 | 4,518,096 |
6,126,588 | ||
Health Care 11.3% | ||
Health Care Equipment & Supplies 2.7% | ||
Baxter International, Inc. | 219,500 | 7,581,530 |
Waters Corp.* | 16,600 | 776,714 |
8,358,244 | ||
Pharmaceuticals 8.6% | ||
Abbott Laboratories | 121,100 | 5,649,315 |
Bristol-Myers Squibb Co. | 289,900 | 7,427,238 |
Johnson & Johnson | 71,700 | 4,547,214 |
Pfizer, Inc. | 161,900 | 4,353,491 |
Wyeth | 119,000 | 5,068,210 |
27,045,468 | ||
Industrials 10.8% | ||
Aerospace & Defense 2.4% | ||
Honeywell International, Inc. | 215,700 | 7,637,937 |
Commercial Services & Supplies 2.0% | ||
Avery Dennison Corp. | 75,500 | 4,527,735 |
Pitney Bowes, Inc. | 35,400 | 1,638,312 |
6,166,047 | ||
Electrical Equipment 1.1% | ||
Emerson Electric Co. | 48,200 | 3,378,820 |
Industrial Conglomerates 5.3% | ||
General Electric Co. | 296,500 | 10,822,250 |
Textron, Inc. | 81,600 | 6,022,080 |
16,844,330 | ||
Information Technology 14.8% | ||
Communications Equipment 1.8% | ||
Nokia Oyj (ADR) | 360,500 | 5,649,035 |
Computers & Peripherals 3.6% | ||
Hewlett-Packard Co. | 253,797 | 5,322,123 |
International Business Machines Corp. | 60,800 | 5,993,664 |
11,315,787 | ||
IT Consulting & Services 2.3% | ||
Automatic Data Processing, Inc. | 165,700 | 7,348,795 |
Semiconductors & Semiconductor Equipment 5.5% | ||
Applied Materials, Inc.* | 271,000 | 4,634,100 |
Intel Corp. (c) | 332,800 | 7,784,192 |
Texas Instruments, Inc. | 200,400 | 4,933,848 |
17,352,140 | ||
Software 1.6% | ||
Microsoft Corp. | 188,900 | 5,045,519 |
|
| Value ($) |
|
| |
Materials 6.7% | ||
Chemicals 2.7% | ||
Air Products & Chemicals, Inc. | 107,400 | 6,225,978 |
Dow Chemical Co. | 45,100 | 2,232,901 |
8,458,879 | ||
Containers & Packaging 2.4% | ||
Sonoco Products Co. | 249,200 | 7,388,780 |
Metals & Mining 1.6% | ||
Alcoa, Inc. | 162,800 | 5,115,176 |
Telecommunication Services 0.9% | ||
Diversified Telecommunication Services | ||
SBC Communications, Inc. | 114,000 | 2,937,780 |
Utilities 0.8% | ||
Electric Utilities | ||
Progress Energy, Inc. | 53,300 | 2,411,292 |
Total Common Stocks (Cost $259,732,207) | 310,041,955 | |
| ||
|
| Value ($) |
|
| |
Securities Lending Collateral 2.9% | ||
Daily Assets Fund Institutional, 2.25% (d) (e) (Cost $9,143,450) | 9,143,450 | 9,143,450 |
| ||
Cash Equivalents 1.1% | ||
Scudder Cash Management QP Trust, 2.24% (b) (Cost $3,407,148) | 3,407,148 | 3,407,148 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $272,282,805) (a) | 102.6 | 322,592,553 |
Other Assets and Liabilities, Net | (2.6) | (8,269,795) |
Net Assets | 100.0 | 314,322,758 |
Notes to Scudder Large Cap Value Portfolio of Investments |
* Non-income producing security.
(a) The cost for federal income tax purposes was $274,462,734. At December 31, 2004, net realized appreciation for all securities based on tax cost was $48,129,819. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $53,855,821 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $5,726,002.
(b) Scudder Cash Management QP Trust is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
(c) All or a portion of these securities were on loan (see Notes to Financial Statements). The value of all securities loaned at December 31, 2004 amounted to $8,940,036, which is 2.8% of net assets.
(d) Daily Assets Fund Institutional, an affiliated fund, is also managed by Deutsche Asset Management, Inc. The rate shown is the annualized seven-day yield at period end.
(e) Represents collateral held in connection with securities lending.
ADR: American Depositary Receipts
The accompanying notes are an integral part of the financial statements.
Financial Statements |
|
Statement of Assets and Liabilities as of December 31, 2004 | |
Assets | |
Investments: Investments in securities, at value (cost $259,732,207) — including $8,940,036 of securities loaned | $ 310,041,955 |
Investment in Daily Assets Fund Institutional (cost $9,143,450)* | 9,143,450 |
Investment in Scudder Cash Management QP Trust (cost $3,407,148) | 3,407,148 |
Total investments in securities, at value (cost $272,282,805) | 322,592,553 |
Cash | 121,117 |
Receivable for investments sold | 1,165,433 |
Dividends receivable | 724,356 |
Interest receivable | 14,821 |
Receivable for Portfolio shares sold | 66,955 |
Other assets | 8,824 |
Total assets | 324,694,059 |
Liabilities | |
Payable for investments purchased | 741,948 |
Payable upon return of securities loaned | 9,143,450 |
Payable for Portfolio shares redeemed | 197,898 |
Accrued management fee | 207,442 |
Other accrued expenses and payables | 80,563 |
Total liabilities | 10,371,301 |
Net assets, at value | $ 314,322,758 |
Net Assets | |
Net assets consist of: Undistributed net investment income | $ 5,206,284 |
Net unrealized appreciation (depreciation) on investments | 50,309,748 |
Accumulated net realized gain (loss) | (26,565,978) |
Paid-in capital | 285,372,704 |
Net assets, at value | $ 314,322,758 |
Class A Net Asset Value, offering and redemption price per share ($273,951,365 ÷ 17,350,180 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 15.79 |
Class B Net Asset Value, offering and redemption price per share ($40,371,393 ÷ 2,560,016 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 15.77 |
Statement of Operations for the year ended December 31, 2004 | |
Investment Income | |
Income: Dividends (net of foreign taxes withheld of $27,291) | $ 7,627,184 |
Interest — Scudder Cash Management QP Trust | 170,328 |
Securities lending income, including income from Daily Assets Fund Institutional | 10,990 |
Total Income | 7,808,502 |
Expenses: Management fee | 2,219,930 |
Custodian fees | 20,665 |
Distribution service fees (Class B) | 81,071 |
Record keeping fees (Class B) | 40,979 |
Auditing | 53,447 |
Legal | 18,839 |
Reports to shareholders | 45,575 |
Other | 7,225 |
Total expenses, before expense reductions | 2,487,731 |
Expense reductions | (3,034) |
Total expenses, after expense reductions | 2,484,697 |
Net investment income (loss) | 5,323,805 |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from investments | 13,617,082 |
Net unrealized appreciation (depreciation) during the period on investments | 9,876,005 |
Net gain (loss) on investment transactions | 23,493,087 |
Net increase (decrease) in net assets resulting from operations | $ 28,816,892 |
The accompanying notes are an integral part of the financial statements.
* Represents collateral on securities loaned.
|
Statement of Changes in Net Assets | ||
Increase (Decrease) in Net Assets | Years Ended December 31, | |
2004 | 2003 | |
Operations: Net investment income (loss) | $ 5,323,805 | $ 4,449,706 |
Net realized gain (loss) on investment transactions | 13,617,082 | (2,062,532) |
Net unrealized appreciation (depreciation) on investment transactions during the period | 9,876,005 | 64,744,276 |
Net increase (decrease) in net assets resulting from operations | 28,816,892 | 67,131,450 |
Distributions to shareholders from: Net investment income Class A | (4,099,698) | (4,338,949) |
Class B | (305,336) | (34,467) |
Portfolio share transactions: Class A Proceeds from shares sold | 26,091,725 | 21,484,093 |
Reinvestment of distributions | 4,099,698 | 4,338,949 |
Cost of shares redeemed | (40,278,155) | (38,394,030) |
Net increase (decrease) in net assets from Class A share transactions | (10,086,732) | (12,570,988) |
Class B Proceeds from shares sold | 22,917,145 | 15,038,872 |
Reinvestment of distributions | 305,336 | 34,467 |
Cost of shares redeemed | (3,736,209) | (130,010) |
Net increase (decrease) in net assets from Class B share transactions | 19,486,272 | 14,943,329 |
Increase (decrease) in net assets | 33,811,398 | 65,130,375 |
Net assets at beginning of period | 280,511,360 | 215,380,985 |
Net assets at end of period (including undistributed net investment income of $5,206,284 and $4,287,513, respectively) | $ 314,322,758 | $ 280,511,360 |
Other Information | ||
Class A Shares outstanding at beginning of period | 18,033,776 | 19,122,645 |
Shares sold | 1,766,310 | 1,748,402 |
Shares issued to shareholders in reinvestment of distributions | 282,738 | 417,608 |
Shares redeemed | (2,732,644) | (3,254,879) |
Net increase (decrease) in Portfolio shares | (683,596) | (1,088,869) |
Shares outstanding at end of period | 17,350,180 | 18,033,776 |
Class B Shares outstanding at beginning of period | 1,221,656 | 44,927 |
Shares sold | 1,563,652 | 1,182,972 |
Shares issued to shareholders in reinvestment of distributions | 21,029 | 3,314 |
Shares redeemed | (246,321) | (9,557) |
Net increase (decrease) in Portfolio shares | 1,338,360 | 1,176,729 |
Shares outstanding at end of period | 2,560,016 | 1,221,656 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights |
|
Class A
Years Ended December 31, | 2004 | 2003 | 2002 | 2001 | 2000a |
Selected Per Share Data | |||||
Net asset value, beginning of period | $ 14.57 | $ 11.24 | $ 13.40 | $ 13.40 | $ 14.70 |
Income (loss) from investment operations: Net investment income (loss)b | .27 | .24 | .23 | .23 | .30 |
Net realized and unrealized gain (loss) on investment transactions | 1.18 | 3.33 | (2.20) | .01 | 1.40 |
Total from investment operations | 1.45 | 3.57 | (1.97) | .24 | 1.70 |
Less distributions from: Net investment income | (.23) | (.24) | (.19) | (.24) | (.40) |
Net realized gains on investment transactions | — | — | — | — | (2.60) |
Total distributions | (.23) | (.24) | (.19) | (.24) | (3.00) |
Net asset value, end of period | $ 15.79 | $ 14.57 | $ 11.24 | $ 13.40 | $ 13.40 |
Total Return (%) | 10.07 | 32.60 | (14.98) | 1.87 | 16.13 |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | 274 | 263 | 215 | 257 | 219 |
Ratio of expenses (%) | .80 | .80 | .79 | .79 | .80 |
Ratio of net investment income (loss) (%) | 1.84 | 1.94 | 1.84 | 1.75 | 2.55 |
Portfolio turnover rate (%) | 40 | 58 | 84 | 72 | 56 |
a On June 18, 2001, the Portfolio implemented a 1 for 10 reverse stock split. Per share information, for the period prior to December 31, 2001, has been restated to reflect the effect of the split. Shareholders received 1 share for every 10 shares owned and net asset value per share increased correspondingly.
b Based on average shares outstanding during the period.
Class B
Years Ended December 31, | 2004 | 2003 | 2002a |
Selected Per Share Data | |||
Net asset value, beginning of period | $ 14.55 | $ 11.23 | $ 12.77 |
Income (loss) from investment operations: Net investment income (loss)b | .22 | .18 | .15 |
Net realized and unrealized gain (loss) on investment transactions | 1.17 | 3.35 | (1.69) |
Total from investment operations | 1.39 | 3.53 | (1.54) |
Less distributions from: Net investment income | (.17) | (.21) | — |
Net asset value, end of period | $ 15.77 | $ 14.55 | $ 11.23 |
Total Return (%) | 9.65 | 32.19 | (12.06)** |
Ratios to Average Net Assets and Supplemental Data | |||
Net assets, end of period ($ millions) | 40 | 18 | .5 |
Ratio of expenses (%) | 1.18 | 1.19 | 1.04* |
Ratio of net investment income (loss) (%) | 1.46 | 1.55 | 2.74* |
Portfolio turnover rate (%) | 40 | 58 | 84** |
a For the period July 1, 2002 (commencement of operations of Class B shares) to December 31, 2002.
b Based on average shares outstanding during the period.
* Annualized
** Not annualized
|
Scudder Mercury Large Cap Core Portfolio
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent six-month period, the Portfolio limited these expenses; had it not done so, expenses would have been higher. The tables are based on an investment of $1,000 made at the beginning of the period (November 15, 2004) ended December 31, 2004.
The tables illustrate your Portfolio's expenses in two ways:
Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the period ended December 31, 2004 | ||
Actual Portfolio Return | Class A | Class B |
Beginning Account Value 11/15/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,039.00 | $ 1,039.00 |
Expenses Paid per $1,000* | $ 1.28 | $ 1.54 |
Hypothetical 5% Portfolio Return | Class A | Class B |
Beginning Account Value 11/15/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,005.05 | $ 1,004.79 |
Expenses Paid per $1,000* | $ 1.26 | $ 1.51 |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days since the commencement of the class (November 15, 2004), then divided by 365.
Annualized Expense Ratios | Class A | Class B |
Scudder Variable Series II — Scudder Mercury Large Cap Core Portfolio | 1.12% | 1.11% |
For more information, please refer to the Portfolio's prospectus.
Management Summary December 31, 2004 |
|
Scudder Mercury Large Cap Core Portfolio
The portfolio gained 3.90% (Class A shares, unadjusted for contract charges) from its date of inception, November 15, 2004, through December 31, 2004, while its benchmark, the Russell 1000 Index, returned 3.01% for the same period.
Security selection in the consumer discretionary sector detracted from the relative return. President Bush's re-election in November sparked a rally in nearly all sectors. The more notable run-ups were among health-care providers and insurers, fueled by the perception that the Bush administration — compared to a possible Kerry presidency — would foster a more favorable regulatory environment. As a result, the portfolio's overweight in health care benefited performance. The fund's overweight in consumer discretionary and absence of positions in telecommunication services also proved beneficial.
Only three of the portfolio's 10 largest holdings contributed positively to its relative performance during the period: Prudential Financial, Inc., Motorola, Inc. and General Electric Co. Our position in Pfizer, Inc. had a slightly negative effect on the comparative performance, while the relative returns of Costco Wholesale Corp., Microsoft Corp., ConocoPhillips, Exxon Mobil Corp., ChevronTexaco Corp. and Johnson & Johnson were virtually flat.
The portfolio currently emphasizes a pro-cyclical approach to the economy because we believe that, for now, economic and earnings growth will be reasonably strong. Accordingly, the portfolio's largest overweights versus the benchmarks are IT, consumer discretionary, materials and energy, while the largest underweights are telecommunication services, consumer staples and financial services.
Bob Doll, CFA, CPA
Lead Portfolio Manager
Tasos Bouloutas Brenda Sklar
Dan Hansen Gregory Brunk
Portfolio Managers
Fund Asset Management L.P., Subadvisor to the Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the portfolio or any variable life insurance policy or variable annuity contract for which the portfolio is an investment option. These charges and fees will reduce returns.
Returns during part or all of the periods shown reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns would have been lower.
Risk Considerations
The portfolio is subject to stock market risk. It focuses its investments on certain economic sectors, thereby increasing its vulnerability to any single economic, political or regulatory development. This may result in greater share price volatility. Please read this portfolio's prospectus for specific details regarding its investments and risk profile.
The Russell 1000 Index is an unmanaged capitalization-weighted price-only index composed of the largest-capitalized United States companies whose common stocks are traded in the US. This larger capitalization, market-oriented index is highly correlated with the S&P 500 Index. Index returns assume reinvestment of all distributions and do not reflect fees or expenses. It is not possible to invest directly into an index.
Portfolio management market commentary is as of December 31, 2004, and may not come to pass. This information is subject to change at any time based on market and other conditions.
Portfolio Summary |
Scudder Mercury Large Cap Core Portfolio
Asset Allocation | 12/31/04 |
| |
Common Stocks | 99% |
Cash Equivalents | 1% |
| 100% |
Sector Diversification (Excludes Cash Equivalents) | 12/31/04 |
| |
Information Technology | 24% |
Consumer Discretionary | 18% |
Health Care | 12% |
Financials | 12% |
Energy | 11% |
Industrials | 8% |
Materials | 8% |
Consumer Staples | 4% |
Utilities | 3% |
| 100% |
Asset allocation and sector diversification are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 36. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Portfolio as of month end will be posted to scudder.com on the 15th of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio December 31, 2004 | ![]() | ![]() |
|
Scudder Mercury Large Cap Core Portfolio
| Shares | Value ($) |
|
| |
Common Stocks 96.1% | ||
Consumer Discretionary 17.6% | ||
Hotels Restaurants & Leisure 1.0% | ||
McDonald's Corp. | 490 | 15,709 |
Household Durables 3.6% | ||
Black & Decker Corp. | 130 | 11,483 |
Harman International Industries, Inc. | 120 | 15,240 |
NVR, Inc.* | 20 | 15,388 |
The Stanley Works | 285 | 13,962 |
| 56,073 | |
Leisure Equipment & Products 0.9% | ||
Eastman Kodak Co. | 435 | 14,029 |
Media 0.5% | ||
Getty Images, Inc.* | 115 | 7,918 |
Multiline Retail 2.9% | ||
Dillard's, Inc. "A" | 475 | 12,763 |
J.C. Penny Co., Inc. | 405 | 16,767 |
Nordstrom, Inc. | 350 | 16,356 |
| 45,886 | |
Specialty Retail 8.7% | ||
Abercrombie & Fitch Co. "A" | 335 | 15,728 |
American Eagle Outfitters, Inc. | 350 | 16,485 |
Circuit City Stores, Inc. | 880 | 13,763 |
Claire's Stores, Inc. | 245 | 5,206 |
Limited Brands | 655 | 15,078 |
Michaels Stores, Inc. | 370 | 11,089 |
PETsMART, Inc. | 390 | 13,857 |
Staples, Inc. | 510 | 17,192 |
The Gap, Inc. | 625 | 13,200 |
Urban Outfitters, Inc.* | 320 | 14,208 |
| 135,806 | |
Consumer Staples 3.4% | ||
Food & Staples Retailing 1.3% | ||
Costco Wholesale Corp. | 365 | 17,670 |
Wal-Mart Stores, Inc. | 35 | 2,377 |
| 20,047 | |
Food Products 1.9% | ||
Archer-Daniels-Midland Co. | 740 | 16,509 |
Tyson Foods, Inc. "A" | 740 | 13,616 |
| 30,125 | |
Household Products 0.2% | ||
Procter & Gamble Co. | 55 | 3,029 |
Energy 11.1% | ||
Oil & Gas | ||
Amerada Hess Corp. | 170 | 14,005 |
Anadarko Petroleum Corp. | 115 | 7,453 |
Ashland, Inc. | 170 | 9,925 |
Burlington Resources, Inc. | 400 | 17,400 |
ChevronTexaco Corp. | 560 | 29,406 |
ConocoPhillips | 260 | 22,576 |
Devon Energy Corp. | 85 | 3,308 |
ExxonMobil Corp. | 525 | 26,911 |
Occidental Petroleum Corp. | 165 | 9,629 |
| Shares | Value ($) |
|
| |
Sunoco, Inc. | 185 | 15,116 |
Valero Energy Corp. | 370 | 16,798 |
| 172,527 | |
Financials 11.1% | ||
Banks 0.6% | ||
Bank of America Corp. | 190 | 8,928 |
Capital Markets 0.5% | ||
E*TRADE Financial Corp.* | 530 | 7,924 |
Diversified Financial Services 1.7% | ||
Citigroup, Inc. | 335 | 16,140 |
Countrywide Financial Corp. | 180 | 6,662 |
JPMorgan Chase & Co. | 85 | 3,316 |
| 26,118 | |
Insurance 8.3% | ||
Allstate Corp. | 305 | 15,775 |
American International Group, Inc. | 65 | 4,268 |
Chubb Corp. | 215 | 16,533 |
Hartford Financial Services Group, Inc. | 70 | 4,852 |
Lincoln National Corp. | 325 | 15,171 |
Loews Corp. | 215 | 15,114 |
MetLife, Inc. | 105 | 4,254 |
Prudential Financial, Inc. | 365 | 20,060 |
Safeco Corp. | 305 | 15,933 |
UnumProvident Corp. | 740 | 13,276 |
W.R. Berkley Corp. | 105 | 4,953 |
| 130,189 | |
Health Care 11.7% | ||
Health Care Equipment & Supplies 0.8% | ||
Bausch & Lomb, Inc. | 35 | 2,256 |
Becton, Dickinson & Co. | 185 | 10,508 |
| 12,764 | |
Health Care Providers & Services 5.1% | ||
Aetna, Inc. | 135 | 16,841 |
CIGNA Corp. | 200 | 16,314 |
Humana, Inc.* | 540 | 16,033 |
Laboratory Corp. of America Holdings* | 300 | 14,946 |
PacifiCare Health Systems, Inc.* | 275 | 15,543 |
| 79,677 | |
Pharmaceuticals 5.8% | ||
Celgene Corp.* | 475 | 12,602 |
Johnson & Johnson | 605 | 38,369 |
Pfizer, Inc. | 1,445 | 38,856 |
| 89,827 | |
Industrials 7.6% | ||
Aerospace & Defense 1.2% | ||
Boeing Co. | 140 | 7,248 |
General Dynamics Corp. | 80 | 8,368 |
Goodrich Corp. | 100 | 3,264 |
| 18,880 | |
Air Freight & Logistics 0.8% | ||
FedEx Corp. | 45 | 4,432 |
Ryder System, Inc. | 170 | 8,121 |
| 12,553 | |
| Shares | Value ($) |
|
| |
Commercial Services & Supplies 0.0% | ||
ITT Educational Services, Inc.* | 15 | 718 |
Electrical Equipment 1.1% | ||
Rockwell Automation, Inc. | 340 | 16,847 |
Industrial Conglomerates 2.1% | ||
General Electric Co. | 920 | 33,580 |
Machinery 1.2% | ||
Cummins, Inc. | 190 | 15,920 |
Graco, Inc. | 70 | 2,614 |
| 18,534 | |
Road & Rail 1.2% | ||
CNF, Inc. | 35 | 1,754 |
Norfolk Southern Corp. | 455 | 16,466 |
| 18,220 | |
Information Technology 23.1% | ||
Communications Equipment 3.8% | ||
Cisco Systems, Inc.* | 120 | 2,316 |
Harris Corp. | 100 | 6,179 |
Lucent Technologies, Inc.* | 4,005 | 15,059 |
Motorola, Inc. | 1,175 | 20,210 |
Tellabs, Inc.* | 1,795 | 15,419 |
| 59,183 | |
Computers & Peripherals 4.5% | ||
Apple Computer, Inc.* | 280 | 18,032 |
Dell, Inc.* | 325 | 13,695 |
Hewlett-Packard Co. | 840 | 17,615 |
International Business Machines Corp. | 55 | 5,422 |
NCR Corp.* | 220 | 15,231 |
| 69,995 | |
Electronic Equipment & Instruments 0.4% | ||
Tech Data Corp.* | 135 | 6,129 |
IT Consulting & Services 3.4% | ||
Affiliated Computer Services, Inc. "A"* | 255 | 15,348 |
CheckFree Corp.* | 375 | 14,280 |
Computer Sciences Corp.* | 100 | 5,637 |
Electronic Data Systems Corp. | 295 | 6,815 |
Sabre Holdings Corp. | 455 | 10,083 |
| 52,163 | |
Office Electronics 1.1% | ||
Xerox Corp.* | 1,040 | 17,690 |
Semiconductors & Semiconductor Equipment 1.7% | ||
Cree, Inc.* | 355 | 14,228 |
Intel Corp. | 215 | 5,029 |
Microchip Technology, Inc. | 275 | 7,332 |
| 26,589 | |
| Shares | Value ($) |
|
| |
Software 8.2% | ||
Adobe Systems, Inc. | 255 | 15,999 |
Autodesk, Inc. | 420 | 15,939 |
BMC Software, Inc.* | 550 | 10,230 |
McAfee, Inc.* | 475 | 13,742 |
Microsoft Corp. | 640 | 17,094 |
Oracle Corp.* | 1,580 | 21,677 |
Symantec Corp.* | 690 | 17,774 |
TIBCO Software, Inc.* | 1,185 | 15,808 |
| 128,263 | |
Materials 7.4% | ||
Chemicals 2.0% | ||
Eastman Chemical Co. | 280 | 16,164 |
Lyondell Chemical Co. | 540 | 15,617 |
| 31,781 | |
Containers & Packaging 0.7% | ||
Ball Corp. | 270 | 11,875 |
Metals & Mining 3.1% | ||
Nucor Corp. | 315 | 16,487 |
Phelps Dodge Corp. | 155 | 15,332 |
United States Steel Corp. | 300 | 16,144 |
| 47,963 | |
Paper & Forest Products 1.6% | ||
Georgia-Pacific Corp. | 420 | 15,742 |
MeadWestvaco Corp. | 255 | 8,642 |
| 24,384 | |
Utilities 3.1% | ||
Electric Utilities 2.3% | ||
Edison International | 455 | 14,574 |
Northeast Utilities | 255 | 4,807 |
TXU Corp. | 240 | 15,494 |
| 34,875 | |
Multi-Utilities 0.7% | ||
Dynegy, Inc. "A"* | 2,405 | 11,112 |
Multi-Utilities & Unregulated Power 0.1% | ||
Reliant Energy, Inc.* | 135 | 1,843 |
Total Common Stocks (Cost $1,455,979) | 1,499,753 | |
| ||
Cash Equivalents 0.6% | ||
Scudder Cash Management QP Trust, 2.24% (b) (Cost $8,787) | 8,787 | 8,787 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $1,464,766) (a) | 96.7 | 1,508,540 |
Other Assets and Liabilities | 3.3 | 51,678 |
Net Assets | 100.0 | 1,560,218 |
Notes to Scudder Mercury Large Cap Core Portfolio of Investments |
* Non-income producing security.
(a) The cost for federal income tax purposes was $1,465,343. At December 31, 2004, net realized appreciation for all securities based on tax cost was $43,197. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $58,142 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $14,945.
(b) Scudder Cash Management QP Trust is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
The accompanying notes are an integral part of the financial statements.
Financial Statements |
|
Statement of Assets and Liabilities | |
Assets | |
Investments: Investments in securities, at value (cost $1,455,979) | $ 1,499,753 |
Investment in Scudder Cash Management QP Trust (cost $8,787) | 8,787 |
Total investments in securities, at value (cost $1,464,766) | 1,508,540 |
Cash | 10,000 |
Receivable for investments sold | 18,490 |
Dividends receivable | 1,899 |
Interest receivable | 145 |
Receivable for Portfolio shares sold | 57,632 |
Due from Advisor | 26,619 |
Total assets | 1,623,325 |
Liabilities | |
Payable for investments purchased | 35,321 |
Payable for Portfolio shares redeemed | 158 |
Other accrued expenses and payables | 27,628 |
Total liabilities | 63,107 |
Net assets, at value | $ 1,560,218 |
Net Assets | |
Net assets consist of: Undistributed net investment income | $ 2,481 |
Net unrealized appreciation (depreciation) on investments | 43,774 |
Accumulated net realized gain (loss) | 6,729 |
Paid-in capital | 1,507,234 |
Net assets, at value | $ 1,560,218 |
Class A Net Asset Value, offering and redemption price per share ($519,469 ÷ 50,000 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 10.39 |
Class B Net Asset Value, offering and redemption price per share ($1,040,749 ÷ 100,195 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 10.39 |
Statement of Operations | |
Investment Income | |
Income: Dividends | $ 2,722 |
Interest — Scudder Cash Management QP Trust | 255 |
Total Income | 2,977 |
Expenses: Management fee | 1,398 |
Custodian and accounting fees | 5,952 |
Distribution service fees (Class B) | 229 |
Record keeping fees (Class B) | 137 |
Auditing | 24,011 |
Trustees' fees and expenses | 138 |
Legal | 322 |
Reports to shareholders | 1,012 |
Offering cost | 1,242 |
Other | 360 |
Total expenses, before expense reductions | 34,801 |
Expense reductions | (33,063) |
Total expenses, after expense reductions | 1,738 |
Net investment income (loss) | 1,239 |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from investments | 6,729 |
Net unrealized appreciation (depreciation) during the period on investments | 43,774 |
Net gain (loss) on investment transactions | 50,503 |
Net increase (decrease) in net assets resulting from operations | $ 51,742 |
The accompanying notes are an integral part of the financial statements.
|
Statement of Changes in Net Assets | |
Increase (Decrease) in Net Assets | Period Ended December 31, 2004a |
Operations: Net investment income (loss) | $ 1,239 |
Net realized gain (loss) on investment transactions | 6,729 |
Net unrealized appreciation (depreciation) on investment transactions during the period | 43,774 |
Net increase (decrease) in net assets resulting from operations | 51,742 |
Portfolio share transactions: Class A Proceeds from shares sold | 499,964 |
Net increase (decrease) in net assets from Class A share transactions | 499,964 |
Class B Proceeds from shares sold | 1,008,929 |
Cost of shares redeemed | (417) |
Net increase (decrease) in net assets from Class B share transactions | 1,008,512 |
Increase (decrease) in net assets | 1,508,476 |
Net assets at beginning of period | — |
Net assets at end of period (including undistributed net investment income of 2,481) | $ 1,560,218 |
Other Information | |
Class A Shares outstanding at beginning of period | — |
Shares sold | 50,000 |
Net increase (decrease) in Portfolio shares | 50,000 |
Shares outstanding at end of period | 50,000 |
Class B Shares outstanding at beginning of period | — |
Shares sold | 100,236 |
Shares redeemed | (41) |
Net increase (decrease) in Portfolio shares | 100,195 |
Shares outstanding at end of period | 100,195 |
a For the period from November 15, 2004 (commencement of operations) to December 31, 2004.
The accompanying notes are an integral part of the financial statements.
Financial Highlights |
|
Class A
| 2004a |
Selected Per Share Data | |
Net asset value, beginning of period | $ 10.00 |
Income (loss) from investment operations: Net investment income (loss)b | .01 |
Net realized and unrealized gain (loss) on investment transactions | .38 |
Total from investment operations | .39 |
Net asset value, end of period | $ 10.39 |
Total Return (%)c | 3.90** |
Ratios to Average Net Assets and Supplemental Data | |
Net assets, end of period ($ millions) | 1 |
Ratio of expenses before expense reductions (%) | 22.15* |
Ratio of expenses after expense reductions (%) | 1.12* |
Ratio of net investment income (loss) (%) | .79* |
Portfolio turnover rate (%) | 104* |
a For the period from November 15, 2004 (commencement of operations) to December 31, 2004.
b Based on average shares outstanding during the period.
c Total returns would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
Class B
| 2004a |
Selected Per Share Data | |
Net asset value, beginning of period | $ 10.00 |
Income (loss) from investment operations: Net investment income (loss)b | .01 |
Net realized and unrealized gain (loss) on investment transactions | .38 |
Total from investment operations | .39 |
Net asset value, end of period | $ 10.39 |
Total Return (%)c | 3.90** |
Ratios to Average Net Assets and Supplemental Data | |
Net assets, end of period ($ millions) | 1 |
Ratio of expenses before expense reductions (%) | 22.55* |
Ratio of expenses after expense reductions (%) | 1.11* |
Ratio of net investment income (loss) (%) | .80* |
Portfolio turnover rate (%) | 104* |
a For the period from November 15, 2004 (commencement of operations) to December 31, 2004.
b Based on average shares outstanding during the period.
c Total returns would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
Performance Summary December 31, 2004 |
|
Scudder Money Market Portfolio
Performance is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Current performance may be higher or lower than the performance quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns. The yield quotation more closely reflects the current earnings of the Portfolio than the total return quotation.
Portfolio's Class A Shares Yield | ||
| 7-day current yield | 7-day compounded effective yield |
December 31, 2004 | 1.62% | 1.63% |
December 31, 2003 | .76% | .77% |
Portfolio's Class B Shares Yield | ||
| 7-day current yield | 7-day compounded effective yield |
December 31, 2004 | 1.24% | 1.25% |
December 31, 2003 | .35% | .35% |
Yields are historical, will fluctuate and do not guarantee future performance. The 7-day current yield refers to the income paid by the portfolio over a 7-day period expressed as an annual percentage rate of the fund's shares outstanding. The 7-day compounded effective yield is the annualized yield based on the most recent 7 days of interest earnings with all income reinvested.
Information About Your Portfolio's Expenses |
|
Scudder Money Market Portfolio
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. The tables are based on an investment of $1,000 made at the beginning of the six-month period ended December 31, 2004.
The tables illustrate your Portfolio's expenses in two ways:
Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these table is meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2004 | ||
Actual Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,005.70 | $ 1,003.80 |
Expenses Paid per $1,000* | $ 2.85 | $ 4.73 |
Hypothetical 5% Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,022.37 | $ 1,020.48 |
Expenses Paid per $1,000* | $ 2.87 | $ 4.77 |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365.
Annualized Expense Ratios | Class A | Class B |
Scudder Variable Series II — Scudder Money Market Portfolio | .56% | .94% |
For more information, please refer to the Portfolio's prospectus.
Management Summary December 31, 2004 |
|
Scudder Money Market Portfolio
As economic recovery gained some momentum during the first quarter of 2004, the market turned its attention to the persistent lack of job creation, and the one-year LIBOR declined from 1.60% at the start of the year to 1.35% by the end of March. In early April, however, fixed income markets experienced a dramatic turnaround as the government reported that the economy had created more than 300,000 new jobs. In reaction, the Fed enacted its "measured pace" policy of gradually raising short-term interest rates at its five Federal Open Market Committee meetings from June through December 2004. In the second half of the year, the economy showed resiliency in the face of sharply rising oil prices, proving to many that the recovery had gained a firm foothold. In light of this renewed confidence — and continued job growth — at the close of the year LIBOR rose to 3.10%, its highest level since March 2002.
During the 12-month period ended December 31, 2004, the portfolio provided a total return of 0.91% (Class A shares, unadjusted for contract charges) compared with the 0.85% average return for funds in the Lipper Variable Money Market Funds category for the same period, according to Lipper Inc. Please see the following page for standardized performance as of December 31, 2004.
In the second quarter, one-year money market rates rose sharply in response to concerns that the Fed would raise short-term interest rates aggressively over the next 12 to 24 months. Our strategy was to substantially decrease the portfolio's average maturity to reduce risk, limiting our purchases to three-month maturity issues and shorter. During this period, we also increased the fund's allocation in floating-rate securities. Our decision to increase our allocation in this sector helped performance during the period. Going forward, we will continue our insistence on the highest credit quality within the portfolio and maintain our conservative investment strategies and standards.
A group of investment professionals is responsible for the day-to-day management of the portfolio. These investment professionals have a broad range of experience managing money market funds.
Deutsche Investment Management Americas Inc.
Performance is historical, assumes reinvestment of all dividends, and does not guarantee future results. Current performance may be higher or lower than the performance quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the portfolio or any variable life insurance policy or variable annuity contract for which the portfolio is an investment option. These charges and fees will reduce returns. The yield quotation more closely reflects the current earnings of the fund than the total return quotation.
Risk Considerations
An investment in this portfolio is not insured or guaranteed by the Federal Deposit Insurance Corporation or by any other government agency. Although the portfolio seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the portfolio. Please read this portfolio's prospectus for specific details regarding its investment and risk profile.
LIBOR, the London Interbank Offered Rate, is the most widely used benchmark or reference rate for short-term interest rates. LIBOR is the rate of interest at which banks borrow funds from other banks, in large volume, in the international market.
The Lipper Variable Money Market Funds category includes funds that invest in high-quality financial instruments rated in the top two grades with dollar-weighted average maturities of less than 90 days and that intend to keep a constant net asset value. It is not possible to invest directly in a Lipper category.
Portfolio management market commentary is as of December 31, 2004, and may not come to pass. This information is subject to change at any time based on market and other conditions.
Portfolio Summary |
Scudder Money Market Portfolio
Asset Allocation | 12/31/04 | 12/31/03 |
| ||
Commercial Paper | 41% | 29% |
Floating Rate Notes | 20% | 37% |
Certificates of Deposit and Bank Notes | 12% | 13% |
US Government Sponsored Agencies+ | 11% | 14% |
Repurchase Agreements | 8% | 5% |
Funding Agreement | 3% | — |
Promissory Notes | 3% | — |
Short-Term Notes | 2% | 1% |
Asset Backed | — | 1% |
| 100% | 100% |
+ Not backed by the full faith and credit of the US Government
Weighted Average Maturity* |
|
|
Scudder Variable Series II — Money Market Portfolio | 30 days | 59 days |
First Tier Money Fund Average | 36 days | 52 days |
* The Funds are compared to their respective iMoneyNet category: Category includes only non-government retail funds that are not holding any second tier securities. Portfolio Holdings of First Tier funds include U.S. Treasury, U.S. Other, Repos, Time Deposits, Domestic Bank Obligations, Foreign Bank Obligations, First Tier CP, Floating Rate Notes and Asset backed Commercial Paper.
Asset allocation is subject to change.
For more complete details about the Portfolios' holdings, see page 47. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Portfolio as of month end will be posted to scudder.com on the 15th of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio December 31, 2004 | ![]() | ![]() |
|
Scudder Money Market Portfolio
| Principal Amount ($) | Value ($) |
|
| |
Certificates of Deposit and Bank Notes 12.2% | ||
HBOS Treasury Services PLC, 2.06%, 1/26/2005 | 10,000,000 | 10,000,000 |
Nordea Bank Finland PLC, 2.36%, 2/2/2005 | 9,000,000 | 9,000,080 |
Societe Generale: |
|
|
1.185%, 1/4/2005 | 5,000,000 | 5,000,000 |
2.32%, 2/2/2005 | 6,000,000 | 6,000,000 |
Toronto Dominion Bank, 2.505%, 5/27/2005 | 6,000,000 | 6,000,120 |
Total Certificates of Deposit and Bank Notes (Cost $36,000,200) | 36,000,200 | |
| ||
Commercial Paper 40.8% | ||
British Transco Capital, Inc., 2.31%**, 2/1/2005 | 3,000,000 | 2,994,032 |
Cancara Asset Securitization LLC: |
|
|
2.04%**, 1/20/2005 | 5,000,000 | 4,994,617 |
2.37%**, 1/24/2005 | 6,000,000 | 5,990,915 |
CC (USA), Inc.: |
|
|
2.0%**, 1/7/2005 | 7,000,000 | 6,997,667 |
2.05%**, 1/25/2005 | 9,000,000 | 8,987,700 |
Charta LLC, 2.34%**, 1/24/2005 | 12,000,000 | 11,982,060 |
CIT Group, Inc.: |
|
|
2.0%**, 1/4/2005 | 2,000,000 | 1,999,667 |
2.32%**, 1/31/2005 | 3,000,000 | 2,994,200 |
2.37%**, 4/4/2005 | 3,000,000 | 2,981,710 |
Dorada Finance, Inc.: |
|
|
2.01%**, 1/10/2005 | 7,000,000 | 6,996,483 |
2.39%**, 3/8/2005 | 4,000,000 | 3,982,473 |
General Electric Capital Corp., 1.88%**, 2/1/2005 | 4,000,000 | 3,993,524 |
Giro Funding US Corp.: |
|
|
2.02%**, 1/14/2005 | 2,000,000 | 1,998,541 |
2.37%**, 1/28/2005 | 3,000,000 | 2,994,668 |
Greyhawk Funding LLC, 2.04%**, 1/19/2005 | 8,000,000 | 7,991,840 |
K2 (USA) LLC: |
|
|
1.87%**, 2/18/2005 | 4,000,000 | 3,990,027 |
1.9%**, 2/18/2005 | 6,000,000 | 5,984,800 |
2.06%**, 1/24/2005 | 5,000,000 | 4,993,419 |
Lake Constance Funding LLC, 2.04%**, 1/21/2005 | 5,000,000 | 4,994,333 |
Perry Global Funding LLC, Series A, 2.06%**, 1/24/2005 | 7,000,000 | 6,990,787 |
Prudential PLC, 2.02%**, 1/7/2005 | 9,000,000 | 8,996,970 |
Swedish National Housing Finance Corp., 2.28%**, 1/31/2005 | 6,000,000 | 5,988,600 |
Total Commercial Paper (Cost $119,819,033) | 119,819,033 | |
| ||
| Principal Amount ($) | Value ($) |
|
| |
Floating Rate Notes* 19.7% | ||
Credit Suisse First Boston, 2.46%, 9/9/2005 | 7,000,000 | 7,001,127 |
Depfa Bank PLC, 1.86%, 9/15/2005 | 4,000,000 | 4,000,000 |
HSBC Finance Corp., 2.41%, 8/18/2005 | 12,000,000 | 12,009,977 |
International Business Machines Corp., 2.07%, 12/8/2005 | 3,000,000 | 2,999,355 |
Merrill Lynch & Co., Inc., 2.708%, 1/14/2005 | 18,000,000 | 18,002,186 |
Morgan Stanley: |
|
|
2.33%, 2/18/2005 | 10,000,000 | 10,000,000 |
2.35%, 4/19/2005 | 4,000,000 | 4,000,000 |
Total Floating Rate Notes (Cost $58,012,645) | 58,012,645 | |
| ||
Short-Term Notes 2.4% | ||
American General Finance Corp., 7.45%, 1/15/2005 (Cost $7,016,460) | 7,000,000 | 7,016,460 |
| ||
US Government Sponsored Agencies+ 11.1% | ||
Federal Home Loan Bank, 1.5%, 3/8/2005 | 5,000,000 | 5,000,000 |
Federal Home Loan Mortgage Corp.: |
|
|
1.5%, 2/14/2005 | 5,000,000 | 5,000,000 |
2.0%*, 10/7/2005 | 10,000,000 | 10,000,000 |
2.165%*, 11/7/2005 | 5,000,000 | 5,000,000 |
Federal National Mortgage Association: |
|
|
1.75%, 5/23/2005 | 3,500,000 | 3,500,000 |
1.835%**, 2/16/2005 | 4,000,000 | 3,990,621 |
Total US Government Sponsored Agencies (Cost $32,490,621) | 32,490,621 | |
| ||
Promissory Notes 3.4% | ||
Goldman Sachs Group, Inc., 2.463%*, 5/26/2005 (Cost $10,000,000) | 10,000,000 | 10,000,000 |
| ||
Funding Agreement 2.4% | ||
New York Life Insurance Co., Series A, 2.0%*, 9/20/2005 (Cost $7,000,000) | 7,000,000 | 7,000,000 |
|
| Principal Amount ($) | Value ($) |
|
| |
Repurchase Agreements 7.9% | ||
Citigroup Global Markets, Inc., 2.3%, dated 12/31/2004, to be repurchased at $23,004,408 on 1/3/2005 (b) | 23,000,000 | 23,000,000 |
State Street Bank and Trust Co., 1.9%, dated 12/31/2004, to be repurchased at $293,046 on 1/3/2005 (c) | 293,000 | 293,000 |
Total Repurchase Agreements (Cost $23,293,000) | 23,293,000 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $293,631,959) (a) | 99.9 | 293,631,959 |
Other Assets and Liabilities, Net | 0.1 | 354,525 |
Net Assets | 100.0 | 293,986,484 |
Notes to Scudder Money Market Portfolio of Investments |
* Floating rate notes are securities whose yields vary with a designated market index or market rate, such as the coupon-equivalent of the US Treasury bill rate. These securities are shown at their current rate as of December 31, 2004.
** Annualized yield at time of purchase; not a coupon rate.
+ Not backed by the full faith and credit of the US Government.
(a) Cost for federal income tax purposes was $293,631,959.
(b) Collateralized by:
Principal Amount ($) | Security | Rate (%) | Maturity Date | Collateral Value ($) |
20,945,000 | Fannie Mae | 6.25 | 2/1/2011 | 23,473,725 |
450,000 | Federal Home Loan Bank | 2.55 | 2/28/2007 | 446,748 |
| 23,920,473 |
(c) Collateralized by a $305,000 Federal National Mortgage Association, 4.50% maturing on 6/1/2018 with a value of $301,950.
The accompanying notes are an integral part of the financial statements.
Financial Statements |
|
Statement of Assets and Liabilities as of December 31, 2004 | |
Assets | |
Investments: Investments in securities, at amortized cost (cost $270,338,959) | $ 270,338,959 |
Repurchase agreements, at amortized cost (cost $23,293,000) | 23,293,000 |
Total investments in securities, at amortized cost (cost $293,631,959) | 293,631,959 |
Cash | 136 |
Receivable for Portfolio shares sold | 280,498 |
Interest receivable | 588,785 |
Other assets | 28,655 |
Total assets | 294,530,033 |
Liabilities | |
Payable for Portfolio shares redeemed | 118,232 |
Dividends payable | 197,762 |
Accrued management fee | 115,328 |
Other accrued expenses and payables | 112,227 |
Total liabilities | 543,549 |
Net assets, at value | $ 293,986,484 |
Net Assets | |
Net assets consist of: Accumulated distributions in excess of net investment income | (42,078) |
Paid-in capital | 294,028,562 |
Net assets, at value | $ 293,986,484 |
Class A Net Asset Value, offering and redemption price per share ($241,274,286 ÷ 241,307,750 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 1.00 |
Class B Net Asset Value, offering and redemption price per share ($52,712,198 ÷ 52,717,331 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 1.00 |
Statement of Operations for the year ended December 31, 2004 | |
Investment Income | |
Income: Interest | $ 5,271,765 |
Expenses: Management fee | 1,840,343 |
Custodian fees | 26,325 |
Distribution service fees (Class B) | 157,184 |
Record keeping fees (Class B) | 82,393 |
Auditing | 34,485 |
Legal | 22,588 |
Trustees' fee and expenses | 6,352 |
Reports to shareholders | 54,350 |
Other | 13,136 |
Total expenses, before expense reductions | 2,237,156 |
Expense reductions | (4,380) |
Total expenses, after expense reductions | 2,232,776 |
Net investment income | 3,038,989 |
Net realized gain (loss) from investments | 3,830 |
Net increase (decrease) in net assets resulting from operations | $ 3,042,819 |
The accompanying notes are an integral part of the financial statements.
|
Statement of Changes in Net Assets | ||
| Years Ended December 31, | |
Increase (Decrease) in Net Assets | 2004 | 2003 |
Operations: Net investment income | $ 3,038,989 | $ 3,494,967 |
Net realized gain (loss) on investment transactions | 3,830 | 41 |
Net increase (decrease) in net assets resulting from operations | 3,042,819 | 3,495,008 |
Distributions to shareholders from: Net investment income Class A | (2,746,531) | (3,404,574) |
Class B | (313,926) | (96,426) |
Portfolio share transactions: Class A Proceeds from shares sold | 220,350,001 | 312,219,158 |
Reinvestment of distributions | 2,679,083 | 3,301,598 |
Cost of shares redeemed | (308,224,544) | (559,028,884) |
Net increase (decrease) in net assets from Class A share transactions | (85,195,460) | (243,508,128) |
Class B Proceeds from shares sold | 69,563,948 | 92,463,564 |
Reinvestment of distributions | 295,489 | 87,495 |
Cost of shares redeemed | (83,569,264) | (28,805,563) |
Net increase (decrease) in net assets from Class B share transactions | (13,709,827) | 63,745,496 |
Increase (decrease) in net assets | (98,922,925) | (179,768,624) |
Net assets at beginning of period | 392,909,409 | 572,678,033 |
Net assets at end of period (including accumulated distributions in excess of net investment income of $42,078 and $24,440, respectively) | $ 293,986,484 | $ 392,909,409 |
Other Information | ||
Class A Shares outstanding at beginning of period | 326,503,210 | 570,017,689 |
Shares sold | 220,350,001 | 312,219,158 |
Shares issued to shareholders in reinvestment of distributions | 2,679,083 | 3,301,598 |
Shares redeemed | (308,224,544) | (559,035,235) |
Net increase (decrease) in Portfolio shares | (85,195,460) | (243,514,479) |
Shares outstanding at end of period | 241,307,750 | 326,503,210 |
Class B Shares outstanding at beginning of period | 66,427,158 | 2,681,662 |
Shares sold | 69,563,948 | 92,463,564 |
Shares issued to shareholders in reinvestment of distributions | 295,489 | 87,495 |
Shares redeemed | (83,569,264) | (28,805,563) |
Net increase (decrease) in Portfolio shares | (13,709,827) | 63,745,496 |
Shares outstanding at end of period | 52,717,331 | 66,427,158 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights |
|
Class A
Years Ended December 31, | 2004 | 2003 | 2002 | 2001 | 2000 |
Selected Per Share Data | |||||
Net asset value, beginning of period | $ 1.000 | $ 1.000 | $ 1.000 | $ 1.000 | $ 1.000 |
Income from investment operations: Net investment income | .009 | .007 | .013 | .037 | .059 |
Total from investment operations | .009 | .007 | .013 | .037 | .059 |
Less distributions from: Net investment income | (.009) | (.007) | (.013) | (.037) | (.059) |
Net asset value, end of period | $ 1.000 | $ 1.000 | $ 1.000 | $ 1.000 | $ 1.000 |
Total Return (%) | .91 | .72 | 1.35 | 3.75 | 6.10 |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | 241 | 326 | 570 | 671 | 279 |
Ratio of expenses (%) | .53 | .54 | .54 | .55 | .58 |
Ratio of net investment income (%) | .88 | .73 | 1.35 | 3.39 | 5.94 |
Class B
Years Ended December 31, | 2004 | 2003 | 2002a |
Selected Per Share Data | |||
Net asset value, beginning of period | $ 1.000 | $ 1.000 | $ 1.000 |
Income from investment operations: Net investment income | .005 | .004 | .007 |
Total from investment operations | .005 | .004 | .007 |
Less distributions from: Net investment income | (.005) | (.004) | (.007) |
Net asset value, end of period | $ 1.000 | $ 1.000 | $ 1.000 |
Total Return (%) | .52 | .42 | .67** |
Ratios to Average Net Assets and Supplemental Data | |||
Net assets, end of period ($ millions) | 53 | 66 | 3 |
Ratio of expenses before expense reductions (%) | .91 | .93 | .79* |
Ratio of expenses after expense reductions (%) | .91 | .92 | .64* |
Ratio of net investment income (%) | .50 | .35 | 1.11* |
a For the period from July 1, 2002 (commencement of operations of Class B shares) to December 31, 2002.
* Annualized
** Not annualized
Performance Summary December 31, 2004 |
|
Scudder Small Cap Growth Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns.
This Portfolio is subject to stock market risk, meaning stocks in the Portfolio may decline in value for extended periods of time due to the activities and financial prospects of individual companies, or due to general market and economic conditions. Additionally, stocks of small companies involve greater risk than securities of larger, more-established companies, as they often have limited product lines, markets or financial resources and may be subject to more erratic and abrupt market movements. Finally, derivatives may be more volatile and less liquid than traditional securities and the Portfolio could suffer losses on its derivatives positions. Please read this Portfolio's prospectus for specific details regarding its investments and risk profile.
Growth of an Assumed $10,000 Investment in Scudder Small Cap Growth Portfolio from 12/31/1994 to 12/31/2004 | ||
[] Scudder Small Cap Growth Portfolio — Class A [] Russell 2000 Growth Index |
| |
![]() |
| The Russell 2000 Growth Index is an unmanaged index (with no defined investment objective) of those securities in the Russell 2000 Index with a higher price-to-book ratio and higher forecasted growth values. Index returns assume reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
Yearly periods ended December 31 |
|
|
Comparative Results | |||||
Scudder Small Cap Growth Portfolio |
| 1-Year | 3-Year | 5-Year | 10-Year |
Class A | Growth of $10,000 | $11,102 | $9,821 | $6,243 | $22,226 |
Average annual total return | 11.02% | -.60% | -8.99% | 8.31% | |
Russell 2000 Growth Index | Growth of $10,000 | $11,431 | $11,841 | $8,338 | $19,888 |
Average annual total return | 14.31% | 5.79% | -3.57% | 7.12% | |
Scudder Small Cap Growth Portfolio |
|
|
| 1-Year | Life of Class* |
Class B | Growth of $10,000 |
|
| $11,054 | $13,291 |
Average annual total return |
|
| 10.54% | 12.04% | |
Russell 2000 Growth Index | Growth of $10,000 |
|
| $11,431 | $14,326 |
Average annual total return |
|
| 14.31% | 15.47% |
The growth of $10,000 is cumulative.
* The Portfolio commenced offering Class B shares on July 1, 2002. Index returns begin June 30, 2002.
Information About Your Portfolio's Expenses |
|
Scudder Small Cap Growth Portfolio
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent six-month period, the Portfolio limited these expenses; had it not done so, expenses would have been higher. The tables are based on an investment of $1,000 made at the beginning of the six-month period ended December 31, 2004.
The tables illustrate your Portfolio's expenses in two ways:
Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2004 | ||
Actual Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,046.60 | $ 1,044.40 |
Expenses Paid per $1,000* | $ 3.73 | $ 5.66 |
Hypothetical 5% Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,021.56 | $ 1,019.67 |
Expenses Paid per $1,000* | $ 3.69 | $ 5.59 |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365.
Annualized Expense Ratios | Class A | Class B |
Scudder Variable Series II — Scudder Small Cap Growth Portfolio | .72% | 1.10% |
For more information, please refer to the Portfolio's prospectus.
Management Summary December 31, 2004 |
|
Scudder Small Cap Growth Portfolio
During 2004, the small-cap equity market outperformed the large-cap segment for the second consecutive year. However, the small, low-quality and high-beta companies that dominated market returns in 2003 continued their reversal as the larger-cap, higher-quality, and dividend-paying securities increasingly drew the attention of investors. In this environment, the portfolio produced an 11.02% total return (Class A shares, unadjusted for contract charges) over the 12-month period ended December 31, 2004, though it underperformed the 14.31% return of the Russell 2000 Growth Index. During the period, the market was able to weather a mixed-bag of labor reports, the insurgency in Iraq, a midyear spike in oil prices and the hotly contested presidential election.
Stock selection contributed to performance over the 12-month period. Holdings within information technology and financials were the largest contributors. Stock selection within the consumer discretionary sector detracted from performance during the period. In terms of sector allocation, the portfolio's overweight in information technology was the biggest driver of positive performance over the period, while an overweight in consumer discretionary was a significant detractor. However, our current view is that industry profit growth in technology is likely to slow, and we have decreased our overall weighting in technology based on this belief.
With underlying economic and market factors supportive of the equity markets, investors should continue to focus on those more profitable small-cap companies that report superior earnings. This should bode well for this segment of the stock market, despite rising interest rates, high energy costs and the weakening dollar. Based on this belief, we have increased or maintained our weighting across most sectors, with the exception of technology.
Samuel A. Dedio
Robert S. Janis
Co-Managers
Deutsche Investment Management Americas Inc.
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the portfolio or any variable life insurance policy or variable annuity contract for which the portfolio is an investment option. These charges and fees will reduce returns.
Risk Considerations
This portfolio is subject to stock market risk, meaning stocks in the portfolio may decline in value for extended periods of time due to the activities and financial prospects of individual companies, or due to general market and economic conditions. Additionally, stocks of small companies involve greater risk than securities of larger, more-established companies, as they often have limited product lines, markets or financial resources and may be subject to more erratic and abrupt market movements. Finally, derivatives may be more volatile and less liquid than traditional securities and the portfolio could suffer losses on its derivatives positions. Please read this portfolio's prospectus for specific details regarding its investments and risk profile.
The Russell 2000 Growth Index is an unmanaged index (with no defined investment objective) of those securities in the Russell 2000 Index with a higher price-to- book ratio and higher forecasted growth values. Index returns assume reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
Portfolio management market commentary is as of December 31, 2004, and may not come to pass. This information is subject to change at any time based on market and other conditions.
Portfolio Summary |
Scudder Small Cap Growth Portfolio
Asset Allocation (Excludes Security Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Common Stocks | 97% | 97% |
Cash Equivalents | 3% | 3% |
| 100% | 100% |
Sector Diversification (Excludes Cash Equivalents and Security Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Information Technology | 29% | 37% |
Health Care | 24% | 18% |
Consumer Discretionary | 22% | 16% |
Industrials | 8% | 9% |
Financials | 8% | 9% |
Consumer Staples | 5% | 5% |
Energy | 3% | 4% |
Materials | 1% | 2% |
| 100% | 100% |
Asset allocation and sector diversification are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 7. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Portfolio as of month end will be posted to scudder.com on the 15th of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio December 31, 2004 | ![]() | ![]() |
|
Scudder Small Cap Growth Portfolio
| Shares | Value ($) |
|
| |
Common Stocks 98.0% | ||
Consumer Discretionary 21.2% | ||
Hotels Restaurants & Leisure 8.9% | ||
Buffalo Wild Wings, Inc.* | 80,900 | 2,816,129 |
LIFE TIME FITNESS, Inc.* | 121,400 | 3,141,832 |
P.F. Chang's China Bistro, Inc.* | 89,500 | 5,043,325 |
RARE Hospitality International, Inc.* | 168,500 | 5,368,410 |
Shuffle Master, Inc.* (d) | 103,400 | 4,870,140 |
| 21,239,836 | |
Internet & Catalog Retail 1.2% | ||
Sharper Image Corp.* | 143,700 | 2,708,745 |
Media 2.2% | ||
Journal Register Co.* | 143,800 | 2,779,654 |
Lions Gate Entertainment Corp.* (d) | 225,400 | 2,393,748 |
| 5,173,402 | |
Specialty Retail 6.6% | ||
Aeropostale, Inc.* | 178,900 | 5,265,027 |
Hot Topic, Inc.* (d) | 267,700 | 4,601,763 |
Kenneth Cole Productions, Inc. | 128,500 | 3,965,510 |
New York & Co., Inc.* | 117,900 | 1,947,708 |
| 15,780,008 | |
Textiles, Apparel & Luxury Goods 2.3% | ||
Gildan Activewear, Inc. "A" | 90,900 | 3,089,691 |
The Warnaco Group, Inc.* | 114,300 | 2,468,880 |
| 5,558,571 | |
Consumer Staples 4.7% | ||
Food & Staples Retailing 2.4% | ||
United Natural Foods, Inc.* | 185,200 | 5,759,720 |
Household Products 2.3% | ||
Jarden Corp.* | 123,300 | 5,356,152 |
Energy 2.8% | ||
Oil & Gas | ||
Bill Barrett Corp.* | 76,300 | 2,440,837 |
Southwestern Energy Co.* | 85,100 | 4,313,719 |
| 6,754,556 | |
Financials 7.8% | ||
Capital Markets 3.7% | ||
Jefferies Group, Inc. | 88,300 | 3,556,724 |
Piper Jaffray Companies, Inc.* | 111,400 | 5,341,630 |
| 8,898,354 | |
Diversified Financial Services 2.7% | ||
Affiliated Managers Group, Inc.* (d) | 95,050 | 6,438,687 |
Insurance 1.4% | ||
KMG America Corp.* | 289,400 | 3,183,400 |
Health Care 23.7% | ||
Health Care Equipment & Supplies 6.5% | ||
Advanced Medical Optics, Inc.* (d) | 115,600 | 4,755,784 |
American Medical Systems Holdings, Inc.* | 62,700 | 2,621,487 |
ArthroCare Corp.* (d) | 113,800 | 3,648,428 |
| Shares | Value ($) |
|
| |
Wright Medical Group, Inc.* | 152,300 | 4,340,550 |
| 15,366,249 | |
Health Care Providers & Services 14.0% | ||
American Healthways, Inc.* (d) | 123,100 | 4,067,224 |
AMERIGROUP Corp.* | 93,300 | 7,059,078 |
Beverly Enterprises, Inc.* | 577,000 | 5,279,550 |
Centene Corp.* | 305,800 | 8,669,430 |
United Surgical Partners International, Inc.* | 120,400 | 5,020,680 |
WellCare Health Plans, Inc.* | 104,100 | 3,383,250 |
| 33,479,212 | |
Pharmaceuticals 3.2% | ||
Able Laboratories, Inc.* | 108,500 | 2,468,375 |
Connetics Corp.* | 212,500 | 5,161,625 |
| 7,630,000 | |
Industrials 8.5% | ||
Commercial Services & Supplies 1.3% | ||
CoStar Group, Inc.* | 64,250 | 2,967,065 |
Machinery 2.8% | ||
Joy Global, Inc. | 90,000 | 3,908,700 |
Watts Water Technologies, Inc. "A" | 83,200 | 2,682,368 |
| 6,591,068 | |
Road & Rail 2.0% | ||
Heartland Express, Inc. | 213,950 | 4,807,457 |
Transportation Infrastructure 2.4% | ||
Overnite Corp. | 156,000 | 5,809,440 |
Information Technology 28.3% | ||
Communications Equipment 5.8% | ||
Avocent Corp.* | 117,500 | 4,761,100 |
CommScope, Inc.* (d) | 186,600 | 3,526,740 |
Foundry Networks, Inc.* | 417,200 | 5,490,352 |
| 13,778,192 | |
Internet Software & Services 4.8% | ||
Audible, Inc.* | 124,800 | 3,251,040 |
Openwave Systems, Inc.* (d) | 256,800 | 3,970,128 |
Websense, Inc.* | 85,400 | 4,331,488 |
| 11,552,656 | |
IT Consulting & Services 1.4% | ||
CSG Systems International, Inc.* | 175,600 | 3,283,720 |
Semiconductors & Semiconductor Equipment 8.4% | ||
AMIS Holdings, Inc.* | 141,000 | 2,329,320 |
Emulex Corp.* | 271,200 | 4,567,008 |
FormFactor, Inc.* | 138,100 | 3,748,034 |
Power Integrations, Inc.* | 252,500 | 4,994,450 |
Tessera Technologies, Inc.* | 116,800 | 4,346,128 |
| 19,984,940 | |
Software 7.9% | ||
Hyperion Solutions Corp.* | 130,300 | 6,074,586 |
Kronos, Inc.* | 84,500 | 4,320,485 |
Macromedia, Inc.* | 135,800 | 4,226,096 |
THQ, Inc.* | 190,000 | 4,358,600 |
| 18,979,767 | |
| Shares | Value ($) |
|
| |
Materials 1.0% | ||
Metals & Mining | ||
Foundation Coal Holdings, Inc.* (d) | 106,000 | 2,444,360 |
Total Common Stocks (Cost $187,273,102) | 233,525,557 | |
| ||
Preferred Stocks 0.0% | ||
Convergent Networks, Inc. "D"* (c) | 113,149 | 6,789 |
fusionOne "D"* (c) | 230,203 | 14,963 |
Planetweb, Inc. "E"* (c) | 137,868 | 0 |
Total Preferred Stocks (Cost $2,000,004) | 21,752 | |
| Shares | Value ($) |
|
| |
Securities Lending Collateral 14.6% | ||
Daily Assets Fund Institutional, 2.25% (e) (f) (cost $34,889,150) | 34,889,150 | 34,889,150 |
| ||
Cash Equivalents 2.6% | ||
Scudder Cash Management QP Trust, 2.24% (b) (Cost $6,200,320) | 6,200,320 | 6,200,320 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $230,362,576) (a) | 115.2 | 274,636,779 |
Other Assets and Liabilities, Net | (15.2) | (36,230,915) |
Net Assets | 100.0 | 238,405,864 |
Notes to Scudder Small Cap Growth Portfolio of Investments |
* Non-income producing security.
(a) The cost for federal income tax purposes was $230,362,576. At December 31, 2004, net unrealized appreciation for all securities based on tax cost was $44,274,203. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $48,400,300 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $4,126,097.
(b) Scudder Cash Management QP Trust is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
(c) The Fund may purchase securities that are subject to legal or contractual restrictions on resale ("restricted securities"). Restricted securities are securities which have not been registered with the Securities and Exchange Commission under the Securities Act of 1933. The Fund may be unable to sell a restricted security and it may be more difficult to determine a market value for a restricted security. Moreover, if adverse market conditions were to develop during the period between the Fund's decision to sell a restricted security and the point at which the Fund is permitted or able to sell such a security, the Fund might obtain a price less favorable than the price that prevailed when it decided to sell. This investment practice, therefore, could have the effect of increasing the level of illiquidity of the Fund.
Schedule of Restricted Securities |
|
|
|
|
Securities | Acquisition Dates | Acquisition Cost ($) | Value ($) | Value as % of Net Assets |
Convergent Networks, Inc. "D" | June 2003 | — | 6,789 | .003 |
fusionOne"D" | October 2000 | 1,250,002 | 14,963 | .006 |
Planetweb, Inc. "E" | September 2000 | 750,002 | — | — |
Total Restricted Securities |
|
| 21,752 | .009 |
(d) All or a portion of these securities were on loan (see Notes to Financials Statements). The value of all securities loaned at December 31, 2004 amounted to $33,864,670, which is 14.2% of total net assets.
(e) Daily Assets Fund Institutional, an affiliated fund, is managed by Deutsche Asset Management, Inc. The rate shown is the annualized seven-day yield at period end.
(f) Represents collateral held in connection with securities lending.
The accompanying notes are an integral part of the financial statements.
Financial Statements |
|
Statement of Assets and Liabilities as of December 31, 2004 | |
Assets | |
Investments: Investments in securities, at value (cost $189,273,106) — including $33,864,670 of securities loaned | $ 233,547,309 |
Investment in Daily Assets Fund Institutional (cost $34,889,150)* | 34,889,150 |
Investment in Scudder Cash Management QP Trust (cost $6,200,320) | 6,200,320 |
Total investments in securities, at value (cost $230,362,576) | 274,636,779 |
Cash | 10,000 |
Receivable for investments sold | 109,972 |
Dividends receivable | 4,279 |
Interest receivable | 20,229 |
Receivable for Portfolio shares sold | 29,855 |
Other assets | 12,431 |
Total assets | 274,823,545 |
Liabilities | |
Payable for investments purchased | 935,660 |
Payable upon return of securities loaned | 34,889,150 |
Payable for Portfolio shares redeemed | 375,462 |
Accrued management fee | 133,718 |
Other accrued expenses and payables | 83,691 |
Total liabilities | 36,417,681 |
Net assets, at value | $ 238,405,864 |
Net Assets | |
Net assets consist of: Accumulated net investment loss | (1,853) |
Net unrealized appreciation (depreciation) on investments | 44,274,203 |
Accumulated net realized gain (loss) | (136,503,455) |
Paid-in capital | 330,636,969 |
Net assets, at value | $ 238,405,864 |
Class A Net Asset Value, offering and redemption price per share ($210,319,486 ÷ 16,708,714 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 12.59 |
Class B Net Asset Value, offering and redemption price per share ($28,086,378 ÷ 2,250,352 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 12.48 |
* Represents collateral on securities loaned.
Statement of Operations for the year ended December 31, 2004 | |
Investment Income | |
Income: Dividends | $ 296,329 |
Securities lending income, including income from Daily Assets Fund Institutional | 105,683 |
Interest — Scudder Cash Management QP Trust | 144,237 |
Total Income | 546,249 |
Expenses: Management fee | 1,466,445 |
Custodian fees | 17,450 |
Distribution service fees (Class B) | 55,527 |
Record keeping fees (Class B) | 28,955 |
Auditing | 59,383 |
Legal | 16,820 |
Reports to shareholders | 44,453 |
Other | 3,178 |
Total expenses, before expense reductions | 1,692,211 |
Expense reductions | (2,584) |
Total expenses, after expense reductions | 1,689,627 |
Net investment income (loss) | (1,143,378) |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from investments | 9,898,921 |
Net unrealized appreciation (depreciation) during the period on investments | 14,522,914 |
Net gain (loss) on investment transactions | 24,421,835 |
Net increase (decrease) in net assets resulting from operations | $ 23,278,457 |
The accompanying notes are an integral part of the financial statements.
|
Statement of Changes in Net Assets | ||
| Years Ended December 31, | |
Increase (Decrease) in Net Assets | 2004 | 2003 |
Operations: Net investment income (loss) | $ (1,143,378) | $ (782,215) |
Net realized gain (loss) on investment transactions | 9,898,921 | 21,248,380 |
Net unrealized appreciation (depreciation) on investment transactions during the period | 14,522,914 | 31,300,241 |
Net increase (decrease) in net assets resulting from operations | 23,278,457 | 51,766,406 |
Portfolio share transactions: Class A Proceeds from shares sold | 41,819,691 | 46,393,822 |
Cost of shares redeemed | (62,320,969) | (40,809,284) |
Net increase (decrease) in net assets from Class A share transactions | (20,501,278) | 5,584,538 |
Class B Proceeds from shares sold | 11,462,792 | 13,298,753 |
Cost of shares redeemed | (1,207,862) | (51,363) |
Net increase (decrease) in net assets from Class B share transactions | 10,254,930 | 13,247,390 |
Increase (decrease) in net assets | 13,032,109 | 70,598,334 |
Net assets at beginning of period | 225,373,755 | 154,775,421 |
Net assets at end of period (including accumulated net investment loss of $1,853 and $14,695, respectively) | $ 238,405,864 | $ 225,373,755 |
Other Information | ||
Class A Shares outstanding at beginning of period | 18,522,593 | 18,086,694 |
Shares sold | 3,534,946 | 4,700,650 |
Shares redeemed | (5,348,825) | (4,264,751) |
Net increase (decrease) in Portfolio shares | (1,813,879) | 435,899 |
Shares outstanding at end of period | 16,708,714 | 18,522,593 |
Class B Shares outstanding at beginning of period | 1,358,975 | 52,833 |
Shares sold | 996,848 | 1,310,980 |
Shares redeemed | (105,471) | (4,838) |
Net increase (decrease) in Portfolio shares | 891,377 | 1,306,142 |
Shares outstanding at end of period | 2,250,352 | 1,358,975 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights |
|
Class A
Years Ended December 31, | 2004 | 2003 | 2002 | 2001 | 2000a |
Selected Per Share Data | |||||
Net asset value, beginning of period | $ 11.34 | $ 8.53 | $ 12.80 | $ 21.64 | $ 26.54 |
Income (loss) from investment operations: Net investment income (loss)b | (.05) | (.04) | (.02) | (.02) | (.09) |
Net realized and unrealized gain (loss) on investment transactions | 1.30 | 2.85 | (4.25) | (6.27) | (2.01) |
Total from investment operations | 1.25 | 2.81 | (4.27) | (6.29) | (2.10) |
Less distributions from: Net realized gains on investment transactions | — | — | — | (2.52) | (2.80) |
Return of capital | — | — | — | (.03) | — |
Total distributions | — | — | — | (2.55) | (2.80) |
Net asset value, end of period | $ 12.59 | $ 11.34 | $ 8.53 | $ 12.80 | $ 21.64 |
Total Return (%) | 11.02 | 32.94 | (33.36) | (28.91) | (10.71) |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | 210 | 210 | 154 | 232 | 301 |
Ratio of expenses (%) | .71 | .69 | .71 | .68 | .72 |
Ratio of net investment income (loss) (%) | (.47) | (.41) | (.24) | (.12) | (.34) |
Portfolio turnover rate (%) | 117 | 123 | 68 | 143 | 124 |
a On June 18, 2001, the Portfolio implemented a 1 for 10 reverse stock split. Per share information, for the periods prior to December 31, 2001, has been restated to reflect the effect of the split. Shareholders received 1 share for every 10 shares owned and net asset value per share increased correspondingly.
b Based on average shares outstanding during the period.
Class B
Years Ended December 31, | 2004 | 2003 | 2002a |
Selected Per Share Data | |||
Net asset value, beginning of period | $ 11.29 | $ 8.52 | $ 9.39 |
Income (loss) from investment operations: Net investment income (loss)b | (.10) | (.09) | (.02) |
Net realized and unrealized gain (loss) on investment transactions | 1.29 | 2.86 | (.85) |
Total from investment operations | 1.19 | 2.77 | (.87) |
Net asset value, end of period | $ 12.48 | $ 11.29 | $ 8.52 |
Total Return (%) | 10.54 | 32.51 | (9.27)** |
Ratios to Average Net Assets and Supplemental Data | |||
Net assets, end of period ($ millions) | 28 | 15 | .5 |
Ratio of expenses before expense reduction (%) | 1.10 | 1.08 | .96* |
Ratio of expenses after expense reduction (%) | 1.09 | 1.08 | .96* |
Ratio of net investment income (loss) (%) | (.85) | (.80) | (.39)* |
Portfolio turnover rate (%) | 117 | 123 | 68 |
a For the period July 1, 2002 (commencement of operations of Class B shares) to December 31, 2002.
b Based on average shares outstanding during the period.
* Annualized
** Not annualized
Performance Summary December 31, 2004 |
|
Scudder Strategic Income Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns.
The Portfolio invests in individual bonds whose yields and market values fluctuate so that your investment may be worth more or less than its original cost. Additionally, investments by the Portfolio in lower-rated bonds present greater risk to principal and income than investments in higher-quality securities. Finally, investing in foreign securities presents certain unique risks not associated with domestic investments, such as currency fluctuation, political and economic changes and market risks. All of these factors may result in greater share price volatility. Please read this Portfolio's prospectus for specific details regarding its investments and risk profile.
Growth of an Assumed $10,000 Investment in Scudder Strategic Income Portfolio from 5/1/1997 to 12/31/2004 | ||
[] Scudder Strategic Income Portfolio — Class A [] Citigroup World Government Bond Index [] JP Morgan Emerging Markets Bond Plus Index [] Merrill Lynch High Yield Master Index [] Lehman Brothers US Treasury Index | The Citigroup World Government Bond Index (formerly known as Salomon Smith Barney World Government Bond Index) is an unmanaged index comprised of government bonds from 18 developed countries (including the US) with maturities greater than one year. JP Morgan Emerging Markets Bond Plus Index is an unmanaged foreign securities index of US dollar- and other external-currency-denominated Brady bonds, loans, Eurobonds and local market debt instruments traded in emerging markets. The Merrill Lynch High Yield Master Index is an unmanaged index which tracks the performance of below investment grade US dollar- denominated corporate bonds publicly issued in the US domestic market. Lehman Brothers US Treasury Index is an unmanaged index reflecting the performance of all public obligations and does not focus on one particular segment of the Treasury market. Index returns assume reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. | |
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| |
Yearly periods ended December 31 |
|
Comparative Results | |||||
Scudder Strategic Income Portfolio |
| 1-Year | 3-Year | 5-Year | Life of Portfolio* |
Class A | Growth of $10,000 | $10,860 | $13,036 | $14,070 | $15,125 |
Average annual total return | 8.60% | 9.24% | 7.07% | 5.54% | |
Citigroup World Government Bond Index | Growth of $10,000 | $11,035 | $15,152 | $15,241 | $17,746 |
Average annual total return | 10.35% | 14.86% | 8.79% | 7.77% | |
JP Morgan Emerging Markets Bond Plus Index | Growth of $10,000 | $11,177 | $16,449 | $18,876 | $22,183 |
Average annual total return | 11.77% | 18.05% | 13.55% | 10.94% | |
Merrill Lynch High Yield Master Index | Growth of $10,000 | $11,076 | $13,931 | $14,234 | $16,546 |
Average annual total return | 10.76% | 11.68% | 7.32% | 6.79% | |
Lehman Brothers US Treasury Index | Growth of $10,000 | $10,354 | $11,834 | $14,340 | $16,753 |
Average annual total return | 3.54% | 5.77% | 7.48% | 6.96% |
The growth of $10,000 is cumulative.
Effective 5/1/2000 the Portfolio changed its investment objective.
* The Portfolio commenced operations on May 1, 1997. Index returns begin April 30, 1997.
|
Comparative Results | |||
Scudder Strategic Income Portfolio |
| 1-Year | Life of Class* |
Class B | Growth of $10,000 | $10,827 | $11,149 |
Average annual total return | 8.27% | 6.73% | |
Citigroup World Government Bond Index | Growth of $10,000 | $11,035 | $12,153 |
Average annual total return | 10.35% | 12.41% | |
JP Morgan Emerging Markets Bond Plus Index | Growth of $10,000 | $11,177 | $12,597 |
Average annual total return | 11.77% | 14.80% | |
Merrill Lynch High Yield Master Index | Growth of $10,000 | $11,076 | $12,481 |
Average annual total return | 10.76% | 14.22% | |
Lehman Brothers US Treasury Index | Growth of $10,000 | $10,354 | $10,434 |
Average annual total return | 3.54% | 2.70% |
The growth of $10,000 is cumulative.
* The Portfolio commenced offering Class B shares on May 1, 2003. Index returns begin April 30, 2003.
Information About Your Portfolio's Expenses |
|
Scudder Strategic Income Portfolio
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. In the most recent six-month period, the Portfolio limited these expenses; had it not done so, expenses would have been higher. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. The tables are based on an investment of $1,000 made at the beginning of the six-month period ended December 31, 2004.
The tables illustrate your Portfolio's expenses in two ways:
Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2004 | ||
Actual Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,101.60 | $ 1,099.30 |
Expenses Paid per $1,000* | $ 4.47 | $ 6.40 |
Hypothetical 5% Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,020.95 | $ 1,019.11 |
Expenses Paid per $1,000* | $ 4.30 | $ 6.15 |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365.
Annualized Expense Ratios | Class A | Class B |
Scudder Variable Series II — Scudder Strategic Income Portfolio | .84% | 1.21% |
For more information, please refer to the Portfolio's prospectus.
Management Summary December 31, 2004 |
|
Scudder Strategic Income Portfolio
The past 12 months have been a positive environment for high-yield and emerging-markets bonds because there has been just enough economic recovery present to (1) keep the corporate balance sheets of high-yield issuers healthy and (2) to keep the "carry trade"* profitable for emerging-markets investors. For the 12-month period ended December 31, 2004, the portfolio posted an 8.60% total return (Class A shares, unadjusted for contract charges). This compares with the portfolio benchmarks' returns of 11.77% for the JP Morgan Emerging Markets Bond Plus Index, 10.76% for the Merrill Lynch High Yield Master Index, 3.54% for the Lehman Brothers US Treasury Index and 10.35% for the Citigroup World Government Bond Index. Please see page 12 for standardized performance as of December 31, 2004.
For the period, we diversified and increased our exposure to the high-yield market through investments in individual high-yield bond issues. Previously, due to the smaller size of the portfolio, its high-yield bond exposure was made through a single high-yield bond which sought to track the returns of the high-yield market. During the period, we also increased our stake in emerging-markets securities, as we believed those securities were trading at attractive yields and the fundamentals of those countries were also attractive. We also reduced exposure to foreign bonds in order to fund the increases in high-yield and emerging-markets securities.
* A "carry trade" is where investors borrow short term and invest longer term in fixed-income investments such as emerging markets bonds to capture higher Yulos.
Jan C. Faller
Lead Manager
Andrew P. Cestone Brett Diment
Sean P. McCaffrey Edwin Gutierrez
Portfolio Managers Portfolio Managers
Deutsche Investment Management Americas Inc. Deutsche Asset Management Investment Services Ltd.
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the portfolio or any variable life insurance policy or variable annuity contract for which the portfolio is an investment option. These charges and fees will reduce returns.
Risk Considerations
The portfolio invests in individual bonds whose yields and market values fluctuate so that your investment may be worth more or less than its original cost. Additionally, investments by the portfolio in lower-rated bonds present greater risk to principal and income than investments in higher-quality securities. Finally, investing in foreign securities presents certain unique risks not associated with domestic investments, such as currency fluctuation, political and economic changes and market risks. All of these factors may result in greater share price volatility. Please read this portfolio's prospectus for specific details regarding its investments and risk profile.
The JP Morgan Emerging Markets Bond Plus Index is an unmanaged foreign securities index of US dollar and other external-currency-denominated Brady bonds, loans, Eurobonds and local market debt instruments traded in emerging markets.
The Merrill Lynch High Yield Master Index is an unmanaged index which tracks the performance of below-investment-grade US dollar-denominated corporate bonds publicly issued in the United States domestic market.
The Lehman Brothers US Treasury Index is an unmanaged index reflecting the performance of all public obligations and does not focus on one particular segment of the Treasury market.
The Citigroup World Government Bond Index (formerly known as Salomon Smith Barney World Government Bond Index) is an unmanaged index comprised of government bonds from 18 developed countries including the US with maturities greater than one year.
Index returns assume reinvestment of all distributions and do not reflect fees or expenses. It is not possible to invest directly into an index.
Portfolio management market commentary is as of December 31, 2004, and may not come to pass. This information is subject to change at any time based on market and other conditions.
Portfolio Summary |
Scudder Strategic Income Portfolio
Asset Allocation (Excludes Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Corporate Bonds | 40% | 14% |
Foreign Bonds — US$ Denominated | 21% | 9% |
Foreign Bonds — Non US$ Denominated | 19% | 37% |
US Government Backed | 13% | 22% |
US Government Sponsored Agencies | 4% | 12% |
Cash Equivalents | 2% | 6% |
Other | 1% | — |
| 100% | 100% |
Quality (Excludes Securities Lending Collateral) | 12/31/04 |
| |
AAA* | 30% |
AA | 2% |
A | 4% |
BBB | 5% |
BB | 16% |
B | 31% |
CCC | 6% |
Below CC | 1% |
Not rated | 5% |
| 100% |
* Includes cash equivalents
Interest Rate Sensitivity | 12/31/04 | 12/31/03 |
| ||
Average maturity | 7.5 years | 13.7 years |
Average duration | 5.4 years | 6.7 years |
Asset allocation, quality and interest rate sensitivity are subject to change.
The quality ratings represent the lower of Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P") credit ratings. The ratings of Moody's and S&P represent their opinions as to the quality of the securities they rate. Ratings are relative and subjective and are not absolute standards of quality. The Fund's credit quality does not remove market risk.
For more complete details about the Portfolio's investment portfolio, see page 18. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Portfolio as of month end will be posted to scudder.com on the 15th of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio December 31, 2004 | ![]() | ![]() |
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Scudder Strategic Income Portfolio
| Principal Amount ($) (c) | Value ($) |
|
| |
Corporate Bonds 38.9% | ||
Consumer Discretionary 9.0% | ||
Adesa, Inc., 7.625%, 6/15/2012 | 45,000 | 47,475 |
AMC Entertainment, Inc., 8.0%, 3/1/2014 | 105,000 | 104,475 |
American Lawyer Media, Inc., Series B, 9.75%, 12/15/2007 | 105,000 | 106,181 |
Atlantic Broadband Finance LLC, 144A, 9.375%, 1/15/2014 | 113,000 | 109,328 |
Bally Total Fitness Holdings Corp., 10.5%, 7/15/2011 | 100,000 | 100,750 |
Cablevision Systems New York Group, 144A, 6.669%**, 4/1/2009 (e) | 65,000 | 68,900 |
Caesars Entertainment, Inc., 9.375%, 2/15/2007 | 30,000 | 33,075 |
Carrols Corp., 144A, 9.0%, 1/15/2013 | 30,000 | 31,050 |
Charter Communications Holdings LLC: |
|
|
Step-up Coupon, 0% to 5/15/2006, 11.75% to 5/15/2011 | 250,000 | 183,750 |
9.625%, 11/15/2009 (e) | 155,000 | 136,012 |
10.25%, 9/15/2010 (e) | 325,000 | 344,500 |
Cooper Standard Automotive, Inc., 144A, 8.375%, 12/15/2014 | 40,000 | 39,900 |
CSC Holdings, Inc., 7.875%, 12/15/2007 | 100,000 | 107,250 |
Dex Media East LLC/Financial, 12.125%, 11/15/2012 | 371,000 | 452,156 |
DIMON, Inc., Series B, 9.625%, 10/15/2011 | 290,000 | 317,550 |
Dura Operating Corp.: |
|
|
Series B, 8.625%, 4/15/2012 (e) | 35,000 | 36,400 |
Series B, 9.0%, 5/1/2009 EUR | 15,000 | 19,369 |
Series D, 9.0%, 5/1/2009 (e) | 55,000 | 54,450 |
EchoStar DBS Corp., 144A, 6.625%, 10/1/2014 | 70,000 | 70,875 |
EPL Intermediate, Inc., Step-up Coupon, 0% to 3/15/2009, 12.5% to 3/15/2010 | 40,000 | 26,200 |
Foot Locker, Inc., 8.5%, 1/15/2022 | 45,000 | 49,500 |
Friendly Ice Cream Corp., 8.375%, 6/15/2012 (e) | 125,000 | 122,656 |
General Motors Corp., 8.25%, 7/15/2023 | 90,000 | 93,750 |
Icon Health & Fitness, Inc., 11.25%, 4/1/2012 | 85,000 | 71,400 |
Interep National Radio Sales, Inc., Series B, 10.0%, 7/1/2008 (e) | 80,000 | 60,300 |
J Crew Intermediate LLC, Step-up Coupon, 0% to 11/15/2005, 16.0% to 5/15/2008 | 83,326 | 79,151 |
Jacobs Entertainment Co., 11.875%, 2/1/2009 | 190,000 | 214,700 |
Levi Strauss & Co.: |
|
|
7.0%, 11/1/2006 (e) | 80,000 | 84,000 |
12.25%, 12/15/2012 (e) | 10,000 | 11,125 |
Mediacom LLC, 9.5%, 1/15/2013 (e) | 185,000 | 185,694 |
MGM MIRAGE: |
|
|
8.375%, 2/1/2011 (e) | 165,000 | 186,038 |
9.75%, 6/1/2007 | 30,000 | 33,300 |
| Principal Amount ($) (c) | Value ($) |
|
| |
Mothers Work, Inc., 11.25%, 8/1/2010 | 45,000 | 43,650 |
NCL Corp., 144A, 10.625%, 7/15/2014 | 125,000 | 125,000 |
Norcraft Holdings/Capital, Step-up Coupon, 0% to 9/1/2008, 9.75% to 9/1/2012 | 95,000 | 71,250 |
Paxson Communications Corp., 10.75%, 7/15/2008 (e) | 75,000 | 78,750 |
PEI Holding, Inc., 11.0%, 3/15/2010 | 110,000 | 128,150 |
Petro Stopping Centers, 9.0%, 2/15/2012 | 160,000 | 169,200 |
Pinnacle Entertainment, Inc., 8.75%, 10/1/2013 (e) | 40,000 | 43,300 |
Premier Entertainment Biloxi LLC/Finance, 10.75%, 2/1/2012 | 80,000 | 87,400 |
PRIMEDIA, Inc.: |
|
|
7.665%**, 5/15/2010 | 140,000 | 148,400 |
8.875%, 5/15/2011 (e) | 95,000 | 100,462 |
Renaissance Media Group LLC, 10.0%, 4/15/2008 | 85,000 | 87,550 |
Rent-Way, Inc., 11.875%, 6/15/2010 | 55,000 | 61,944 |
Restaurant Co., 11.25%, 5/15/2008 | 118,709 | 120,193 |
Sbarro, Inc., 11.0%, 9/15/2009 (e) | 75,000 | 75,750 |
Schuler Homes, Inc., 10.5%, 7/15/2011 | 105,000 | 119,438 |
Simmons Bedding Co., 144A, Step-up Coupon, 0% to 12/15/2009, 10.0% to 12/15/2014 | 105,000 | 64,050 |
Sinclair Broadcast Group, Inc.: |
|
|
8.0%, 3/15/2012 | 220,000 | 233,750 |
8.75%, 12/15/2011 | 135,000 | 146,981 |
Sonic Automotive, Inc., Series B, 8.625%, 8/15/2013 | 150,000 | 159,938 |
Toys "R" Us, Inc.: |
|
|
7.375%, 10/15/2018 | 210,000 | 194,250 |
7.875%, 4/15/2013 (e) | 60,000 | 59,550 |
True Temper Sports, Inc., 8.375%, 9/15/2011 | 60,000 | 55,800 |
Trump Holdings & Funding, 12.625%, 3/15/2010* | 75,000 | 81,188 |
TRW Automotive, Inc.: |
|
|
11.0%, 2/15/2013 (e) | 90,000 | 108,450 |
11.75%, 2/15/2013 EUR | 45,000 | 74,623 |
United Auto Group, Inc., 9.625%, 3/15/2012 | 90,000 | 99,450 |
Venetian Casino Resort LLC, 11.0%, 6/15/2010 | 105,000 | 119,831 |
VICORP Restaurants, Inc., 10.5%, 4/15/2011 (e) | 60,000 | 60,300 |
Virgin River Casino Corp., 144A, 9.0%, 1/15/2012 | 10,000 | 10,400 |
Visteon Corp.: |
|
|
7.0%, 3/10/2014 (e) | 95,000 | 90,725 |
8.25%, 8/1/2010 (e) | 75,000 | 78,563 |
Wheeling Island Gaming, Inc., 10.125%, 12/15/2009 | 85,000 | 90,525 |
Williams Scotsman, Inc., 9.875%, 6/1/2007 (e) | 170,000 | 170,000 |
| Principal Amount ($) (c) | Value ($) |
|
| |
Worldspan LP/WS Finance Corp., 9.625%, 6/15/2011 (e) | 80,000 | 79,600 |
Wynn Las Vegas LLC, 144A, 6.625%, 12/1/2014 | 205,000 | 202,950 |
XM Satellite Radio, Inc., Step-up Coupon, 0% to 12/31/2005, 14.0% to 12/31/2009 | 106,321 | 108,447 |
Young Broadcasting, Inc., 8.75%, 1/15/2014 (e) | 135,000 | 136,013 |
7,467,081 | ||
Consumer Staples 1.1% | ||
Church & Dwight Co., Inc., 144A, 6.0%, 12/15/2012 | 55,000 | 55,962 |
Duane Reade, Inc.: |
|
|
144A, 7.01%**, 12/15/2010 | 40,000 | 40,600 |
144A, 9.75%, 8/1/2011 (e) | 105,000 | 95,550 |
North Atlantic Holding, Inc., Step-up Coupon, 0% to 3/1/2008, 12.25% to 3/1/2014 | 80,000 | 32,800 |
Pierre Foods, Inc., 144A, 9.875%, 7/15/2012 | 40,000 | 41,400 |
Pinnacle Foods Holding Corp.: |
|
|
144A, 8.25%, 12/1/2013 | 45,000 | 42,863 |
144A, 8.25%, 12/1/2013 (e) | 75,000 | 71,437 |
Prestige Brands, Inc., 144A, 9.25%, 4/15/2012 | 25,000 | 26,563 |
Revlon Consumer Products Corp., 9.0%, 11/1/2006 | 100,000 | 99,000 |
Rite Aid Corp., 11.25%, 7/1/2008 | 130,000 | 141,050 |
Standard Commercial Corp., 8.0%, 4/15/2012 | 50,000 | 51,375 |
Swift & Co., 12.5%, 1/1/2010 | 85,000 | 96,050 |
Wornick Co., 10.875%, 7/15/2011 | 80,000 | 86,800 |
881,450 | ||
Energy 2.1% | ||
Avista Corp., 9.75%, 6/1/2008 | 140,000 | 162,324 |
Chesapeake Energy Corp.: |
|
|
6.875%, 1/15/2016 | 105,000 | 109,987 |
9.0%, 8/15/2012 | 55,000 | 62,838 |
CITGO Petroleum Corp., 144A, 6.0%, 10/15/2011 | 40,000 | 39,800 |
Dynegy Holdings, Inc.: |
|
|
6.875%, 4/1/2011 (e) | 20,000 | 19,250 |
7.125%, 5/15/2018 (e) | 105,000 | 93,581 |
7.625%, 10/15/2026 | 35,000 | 30,406 |
144A, 9.875%, 7/15/2010 | 115,000 | 128,513 |
Edison Mission Energy, 7.73%, 6/15/2009 | 200,000 | 215,000 |
El Paso Production Holding Corp., 7.75%, 6/1/2013 | 115,000 | 120,463 |
Mission Resources Corp., 9.875%, 4/1/2011 | 100,000 | 106,750 |
Newpark Resources, Inc., Series B, 8.625%, 12/15/2007 | 130,000 | 131,950 |
Southern Natural Gas, 8.875%, 3/15/2010 | 75,000 | 84,000 |
Stone Energy Corp.: |
|
|
144A, 6.75%, 12/15/2014 | 55,000 | 54,863 |
8.25%, 12/15/2011 | 130,000 | 140,400 |
Williams Cos., Inc.: |
|
|
8.125%, 3/15/2012 (e) | 130,000 | 150,150 |
8.75%, 3/15/2032 | 70,000 | 80,412 |
1,730,687 | ||
| Principal Amount ($) (c) | Value ($) |
|
| |
Financials 9.1% | ||
AAC Group Holding Corp., 144A, Step-up Coupon, 0% to 10/1/2008, 10.25% to 10/1/2012 | 85,000 | 57,163 |
Affinia Group, Inc., 144A, 9.0%, 11/30/2014 | 155,000 | 161,587 |
Ahold Finance USA, Inc., 6.25%, 5/1/2009 | 65,000 | 67,600 |
Alamosa Delaware, Inc., Step-up Coupon, 0% to 7/31/2005, 12.0% to 7/31/2009 | 55,000 | 59,675 |
AmeriCredit Corp., 9.25%, 5/1/2009 | 200,000 | 214,500 |
Atlantic Mutual Insurance Co., 144A, 8.15%, 2/15/2028 | 40,000 | 24,392 |
BF Saul (REIT), 7.5%, 3/1/2014 | 145,000 | 149,350 |
Dow Jones CDX: |
|
|
144A, Series 3-1, 7.75%, 12/29/2009 (e) | 3,150,000 | 3,238,593 |
144A, Series 3-3, 8.0%, 12/29/2009 | 150,000 | 153,844 |
E*TRADE Financial Corp., 144A, 8.0%, 6/15/2011 | 165,000 | 177,375 |
Farmers Insurance Exchange, 144A, 8.625%, 5/1/2024 | 155,000 | 182,832 |
FINOVA Group, Inc., 7.5%, 11/15/2009 | 894,250 | 438,182 |
LNR Property Corp., 7.625%, 7/15/2013 | 50,000 | 56,750 |
Poster Financial Group, Inc., 8.75%, 12/1/2011 (e) | 100,000 | 102,750 |
PXRE Capital Trust I, 8.85%, 2/1/2027 | 90,000 | 90,000 |
Qwest Capital Funding, Inc., 6.5%, 11/15/2018 | 95,000 | 78,850 |
R.H. Donnelly Finance Corp. 10.875%, 12/15/2012 | 45,000 | 53,438 |
Radnor Holdings Corp., 11.0%, 3/15/2010 | 100,000 | 85,750 |
Tennessee Valley Authority, 6.79%, 5/23/2012 | 1,500,000 | 1,727,190 |
TIG Capital Holdings Trust, 144A, 8.597%, 1/15/2027 | 130,000 | 114,075 |
UAP Holdings Corp., 144A, Step-up Coupon, 0% to 1/15/2008, 10.75% to 7/15/2012 | 55,000 | 43,175 |
UGS Corp., 144A, 10.0%, 6/1/2012 | 75,000 | 85,313 |
Universal City Development, 11.75%, 4/1/2010 | 150,000 | 177,187 |
Universal City Florida Holding Co., 144A, 7.2%**, 5/1/2010 | 40,000 | 41,600 |
Venoco, Inc., 144A, 8.75%, 12/15/2011 | 40,000 | 41,200 |
7,622,371 | ||
Health Care 1.2% | ||
AmeriPath, Inc., 10.5%, 4/1/2013 (e) | 70,000 | 74,375 |
Cinacalcet Royalty Subordinated LLC, 8.0%, 3/30/2017 | 95,000 | 95,475 |
Curative Health Services, Inc., 10.75%, 5/1/2011 | 60,000 | 53,700 |
Encore Medical Corp., 144A, 9.75%, 10/1/2012 | 50,000 | 50,500 |
| Principal Amount ($) (c) | Value ($) |
|
| |
Hanger Orthopedic Group, Inc., 10.375%, 2/15/2009 (e) | 90,000 | 92,925 |
HEALTHSOUTH Corp., 10.75%, 10/1/2008 (e) | 140,000 | 147,700 |
IDI Acquisition Corp., 144A, 10.75%, 12/15/2011 | 30,000 | 30,750 |
InSight Health Services Corp., Series B, 9.875%, 11/1/2011 (e) | 65,000 | 65,650 |
Interactive Health LLC, 144A, 7.25%, 4/1/2011 | 70,000 | 60,900 |
National Mentor, Inc., 144A, 9.625%, 12/1/2012 | 15,000 | 15,937 |
Tenet Healthcare Corp., 6.375%, 12/1/2011 (e) | 350,000 | 324,625 |
1,012,537 | ||
Industrials 5.1% | ||
Aavid Thermal Technologies, Inc., 12.75%, 2/1/2007 | 90,000 | 98,550 |
Allied Security Escrow Corp., 144A, 11.375%, 7/15/2011 | 85,000 | 88,825 |
Allied Waste North America, Inc., Series B, 5.75%, 2/15/2011 | 270,000 | 253,800 |
AMI Semiconductor, Inc., 10.75%, 2/1/2013 | 30,000 | 35,250 |
Avondale Mills, Inc.: |
|
|
144A, 9.0%**, 7/1/2012 | 95,000 | 85,500 |
10.25%, 7/1/2013 (e) | 30,000 | 24,300 |
Browning-Ferris Industries: |
|
|
7.4%, 9/15/2035 | 70,000 | 61,250 |
9.25%, 5/1/2021 | 20,000 | 21,300 |
Cenveo Corp., 7.875%, | 120,000 | 111,600 |
Clean Harbors, Inc., 144A, 11.25%, 7/15/2012 | 55,000 | 61,600 |
Collins & Aikman Floor Cover, Series B, 9.75%, 2/15/2010 | 179,000 | 192,425 |
Collins & Aikman Products, 10.75%, 12/31/2011 (e) | 105,000 | 107,100 |
Congoleum Corp., 8.625%, 8/1/2008* | 50,000 | 50,500 |
Continental Airlines, Inc., 8.0%, 12/15/2005 (e) | 90,000 | 87,750 |
Cornell Companies, Inc., 10.75%, 7/1/2012 | 115,000 | 122,906 |
Corrections Corp. of America, 9.875%, 5/1/2009 | 95,000 | 105,450 |
Dana Corp., 7.0%, 3/1/2029 (e) | 125,000 | 124,688 |
Delta Air Lines, Inc.: |
|
|
7.9%, 12/15/2009 (e) | 45,000 | 28,125 |
8.3%, 12/15/2029 (e) | 60,000 | 29,100 |
Eagle-Picher Industries, Inc., 9.75%, 9/1/2013 | 20,000 | 20,000 |
Erico International Corp., 8.875%, 3/1/2012 | 75,000 | 78,750 |
Evergreen International Aviation, Inc., 12.0%, 5/15/2010 | 25,000 | 18,938 |
Goodman Global Holding Co., Inc., 144A, 7.875%, 12/15/2012 | 125,000 | 123,750 |
Interface, Inc., "A", 10.375%, 2/1/2010 | 40,000 | 46,000 |
ISP Chemco, Inc., Series B, 10.25%, 7/1/2011 | 135,000 | 152,550 |
Joy Global, Inc., Series B, 8.75%, 3/15/2012 | 15,000 | 16,800 |
| Principal Amount ($) (c) | Value ($) |
|
| |
Kansas City Southern: |
|
|
7.5%, 6/15/2009 | 190,000 | 199,500 |
9.5%, 10/1/2008 | 105,000 | 119,306 |
Kinetek, Inc., Series D, 10.75%, 11/15/2006 | 180,000 | 175,950 |
Laidlaw International, Inc., 10.75%, 6/15/2011 | 100,000 | 116,750 |
Millennium America, Inc.: |
|
|
7.625%, 11/15/2026 (e) | 170,000 | 167,450 |
9.25%, 6/15/2008 (e) | 155,000 | 176,312 |
Remington Arms Co., Inc., 10.5%, 2/1/2011 (e) | 75,000 | 72,375 |
Sea Containers Ltd., 10.5%, 5/15/2012 | 50,000 | 52,625 |
Securus Technologies, Inc., 144A, 11.0%, 9/1/2011 | 95,000 | 95,000 |
Ship Finance International Ltd., 8.5%, 12/15/2013 | 110,000 | 113,300 |
SPX Corp.: |
|
|
6.25%, 6/15/2011 (e) | 35,000 | 36,925 |
7.5%, 1/1/2013 | 135,000 | 146,475 |
Technical Olympic USA, Inc.: |
|
|
7.5%, 3/15/2011 | 50,000 | 50,375 |
10.375%, 7/1/2012 | 105,000 | 117,600 |
Texas Genco LLC, 144A, 6.875%, 12/15/2014 | 105,000 | 108,544 |
The Brickman Group, Ltd., Series B, 11.75%, 12/15/2009 | 55,000 | 64,350 |
Thermadyne Holdings Corp., 9.25%, 2/1/2014 (e) | 70,000 | 68,250 |
United Rentals North America, Inc.: |
|
|
6.5%, 2/15/2012 | 100,000 | 97,500 |
7.0%, 2/15/2014 (e) | 80,000 | 74,800 |
7.75%, 11/15/2013 (e) | 50,000 | 49,000 |
Westlake Chemical Corp., 8.75%, 7/15/2011 | 13,000 | 14,690 |
4,263,884 | ||
Information Technology 0.6% | ||
Activant Solutions, Inc., 10.5%, 6/15/2011 | 90,000 | 96,750 |
Itron, Inc., 144A, 7.75%, 5/15/2012 | 65,000 | 66,138 |
Lucent Technologies, Inc.: |
|
|
6.45%, 3/15/2029 (e) | 275,000 | 248,875 |
7.25%, 7/15/2006 (e) | 35,000 | 36,575 |
Spheris, Inc., 144A, 11.0%, 12/15/2012 | 50,000 | 51,250 |
499,588 | ||
Materials 4.9% | ||
Aqua Chemical, Inc., 11.25%, 7/1/2008 | 100,000 | 80,000 |
ARCO Chemical Co., 9.8%, 2/1/2020 | 430,000 | 490,200 |
Associated Materials, Inc., Step-up Coupon, 0% to 3/1/2009, 11.25% to 3/1/2014 | 235,000 | 169,200 |
Caraustar Industries, Inc., 9.875%, 4/1/2011 (e) | 90,000 | 97,650 |
Constar International, Inc., 11.0%, 12/1/2012 (e) | 110,000 | 114,125 |
Dayton Superior Corp.: |
|
|
10.75%, 9/15/2008 | 85,000 | 90,950 |
13.0%, 6/15/2009 (e) | 200,000 | 208,000 |
| Principal Amount ($) (c) | Value ($) |
|
| |
GEO Specialty Chemicals, Inc., 10.125%, 8/1/2008* | 65,000 | 37,700 |
Georgia-Pacific Corp.: |
|
|
8.0%, 1/15/2024 | 235,000 | 272,600 |
9.375%, 2/1/2013 | 115,000 | 133,975 |
Hercules, Inc.: |
|
|
6.75%, 10/15/2029 | 75,000 | 77,437 |
11.125%, 11/15/2007 | 105,000 | 124,950 |
Hexcel Corp., 9.75%, 1/15/2009 | 85,000 | 88,400 |
Huntsman Advanced Materials, 144A, 11.0%, 7/15/2010 | 115,000 | 136,850 |
Huntsman International LLC: |
|
|
144A, 7.375%, 1/1/2015 (e) | 40,000 | 40,100 |
144A, 7.5%, 1/1/2015 EUR | 15,000 | 20,389 |
Huntsman LLC, 11.625%, 10/15/2010 | 135,000 | 159,637 |
IMC Global, Inc., 10.875%, 8/1/2013 (e) | 10,000 | 12,500 |
Intermet Corp., 9.75%, 6/15/2009* (e) | 55,000 | 26,950 |
International Steel Group, Inc., 6.5%, 4/15/2014 | 190,000 | 203,775 |
MMI Products, Inc., Series B, 11.25%, 4/15/2007 | 85,000 | 86,275 |
Neenah Corp.: |
|
|
144A, 11.0%, 9/30/2010 | 160,000 | 176,800 |
144A, 13.0%, 9/30/2013 | 74,000 | 75,850 |
Omnova Solutions, Inc., 11.25%, 6/1/2010 | 135,000 | 151,875 |
Owens-Brockway Glass Container, 8.25%, 5/15/2013 (e) | 35,000 | 38,500 |
Oxford Automotive, Inc., 144A, 12.0%, 10/15/2010* (e) | 175,000 | 110,250 |
Pliant Corp.: |
|
|
Step-up Coupon, 0% to 12/15/2006, 11.125% to 6/15/2009 | 20,000 | 18,475 |
11.125%, 9/1/2009 | 120,000 | 130,800 |
Portola Packaging, Inc., 8.25%, 2/1/2012 (e) | 80,000 | 63,200 |
Rockwood Specialties Group, Inc., 144A, 7.625%, 11/15/2014 | 140,000 | 195,766 |
Sheffield Steel Corp., 144A, 11.375%, 8/15/2011 | 55,000 | 56,650 |
TriMas Corp., 9.875%, 6/15/2012 | 250,000 | 265,000 |
United States Steel LLC: |
|
|
9.75%, 5/15/2010 | 105,000 | 119,700 |
10.75%, 8/1/2008 | 15,000 | 17,663 |
4,092,192 | ||
Telecommunication Services 4.0% | ||
AirGate PCS, Inc., 144A, 5.85%**, 10/15/2011 | 45,000 | 46,238 |
American Cellular Corp., Series B, 10.0%, 8/1/2011 | 325,000 | 278,687 |
American Tower Corp., 144A, 7.125%, 10/15/2012 | 55,000 | 56,238 |
AT&T Corp.: |
|
|
9.05%, 11/15/2011 | 115,000 | 132,394 |
9.75%, 11/15/2031 | 110,000 | 131,312 |
Cincinnati Bell, Inc., 8.375%, 1/15/2014 (e) | 380,000 | 384,750 |
Crown Castle International Corp., 9.375%, 8/1/2011 | 60,000 | 67,200 |
| Principal Amount ($) (c) | Value ($) |
|
| |
Dobson Cellular Systems, Inc., 144A, 6.96%**, 11/1/2011 | 40,000 | 41,400 |
Dobson Communications Corp., 8.875%, 10/1/2013 (e) | 110,000 | 77,275 |
GCI, Inc., 7.25%, 2/15/2014 | 80,000 | 80,000 |
Insight Midwest LP, 9.75%, 10/1/2009 (e) | 50,000 | 52,375 |
IWO Escrow Co., 144A, 6.32%**, 1/15/2012 | 10,000 | 10,075 |
LCI International, Inc., 7.25%, 6/15/2007 | 140,000 | 136,150 |
Level 3 Financing, Inc., 144A, 10.75%, 10/15/2011 (e) | 50,000 | 45,250 |
MCI, Inc., 8.735%, 5/1/2014 | 280,000 | 301,000 |
Nextel Communications, Inc., 5.95%, 3/15/2014 | 65,000 | 67,275 |
Nextel Partners, Inc., 8.125%, 7/1/2011 | 85,000 | 94,350 |
PanAmSat Corp., 144A, 9.0%, 8/15/2014 | 185,000 | 206,506 |
Qwest Corp., 7.25%, 9/15/2025 (e) | 440,000 | 427,900 |
Qwest Services Corp.: |
|
|
144A, 13.5%, 12/15/2004 | 180,000 | 216,450 |
144A, 14.0%, 12/15/2004 | 120,000 | 151,800 |
Rural Cellular Corp., 9.875%, 2/1/2010 (e) | 75,000 | 76,312 |
SBA Telecom, Inc., Step-up Coupon, 0% to 12/15/2007, 9.75% to 12/15/2011 | 35,000 | 29,488 |
Triton PCS, Inc., 8.5%, 6/1/2013 | 65,000 | 62,725 |
Ubiquitel Operating Co., 9.875%, 3/1/2011 (e) | 20,000 | 22,450 |
US Unwired, Inc., Series B, 10.0%, 6/15/2012 | 105,000 | 118,387 |
Western Wireless Corp., "A", 9.25%, 7/15/2013 | 15,000 | 16,313 |
3,330,300 | ||
Utilities 1.8% | ||
AES Corp., 144A, 8.75%, 5/15/2013 | 35,000 | 39,769 |
Allegheny Energy Supply Co. LLC, 144A, 8.25%, 4/15/2012 (e) | 65,000 | 72,637 |
Aquila, Inc., 14.875%, 7/1/2012 | 35,000 | 49,044 |
Calpine Corp.: |
|
|
8.25%, 8/15/2005 (e) | 90,000 | 90,900 |
144A, 8.5%, 7/15/2010 (e) | 140,000 | 120,050 |
CMS Energy Corp., 8.5%, 4/15/2011 | 15,000 | 17,044 |
DPL, Inc., 6.875%, 9/1/2011 | 235,000 | 256,651 |
Midwest Generation LLC, 8.75%, 5/1/2034 | 50,000 | 56,750 |
Mission Energy Holding Co., 13.5%, 7/15/2008 | 15,000 | 18,712 |
NorthWestern Corp., 144A, 5.875%, 11/1/2014 (e) | 35,000 | 35,804 |
NRG Energy, Inc., 144A, 8.0%, 12/15/2013 | 340,000 | 370,600 |
PSE&G Energy Holdings LLC: |
|
|
8.5%, 6/15/2011 | 95,000 | 108,419 |
10.0%, 10/1/2009 | 110,000 | 130,075 |
TNP Enterprises, Inc., Series B, 10.25%, 4/1/2010 | 125,000 | 133,438 |
1,499,893 | ||
Total Corporate Bonds (Cost $31,545,234) | 32,399,983 | |
| Principal Amount ($) (c) | Value ($) |
|
| |
Foreign Bonds — US$ Denominated 20.8% | ||
Consumer Discretionary 1.3% | ||
Advertising Directory Solutions, Inc., 144A, 9.25%, 11/15/2012 (e) | 70,000 | 73,500 |
Jafra Cosmetics International, Inc., 10.75%, 5/15/2011 | 150,000 | 169,500 |
Kabel Deutschland GmbH, 144A, 10.625%, 7/1/2014 | 150,000 | 172,500 |
Shaw Communications, Inc.: |
|
|
7.2%, 12/15/2011 (e) | 20,000 | 22,075 |
7.25%, 4/6/2011 (e) | 75,000 | 82,688 |
8.25%, 4/11/2010 | 195,000 | 221,812 |
Telenet Group Holding NV, 144A, Step-up Coupon, 0% to 12/15/2008, 11.5% to 6/15/2014 | 150,000 | 114,000 |
Vitro Envases Norteamerica SA, 144A, 10.75%, 7/23/2011 | 55,000 | 57,062 |
Vitro SA de CV, Series A, 144A, 11.75%, 11/1/2013 (e) | 140,000 | 135,450 |
1,048,587 | ||
Consumer Staples 0.5% | ||
Burns Philip Capital Property, Ltd., 10.75%, 2/15/2011 | 90,000 | 101,250 |
Fage Dairy Industry SA, 9.0%, 2/1/2007 | 250,000 | 251,250 |
Grupo Cosan SA, 144A, 9.0%, 11/1/2009 | 30,000 | 31,350 |
383,850 | ||
Energy 1.3% | ||
Gazprom OAO, 144A, 9.625%, 3/1/2013 | 200,000 | 236,000 |
Luscar Coal Ltd., 9.75%, 10/15/2011 | 115,000 | 130,525 |
Petroleum Geo-Services ASA, 10.0%, 11/5/2010 | 405,005 | 461,706 |
Petroliam Nasional Berhad: |
|
|
7.625%, 10/15/2026 | 40,000 | 48,676 |
7.75%, 8/15/2015 | 80,000 | 97,546 |
Secunda International Ltd., 144A, 9.76%**, 1/18/2005 | 90,000 | 88,200 |
1,062,653 | ||
Financials 0.7% | ||
Central Bank of Nigeria, Series WW, 6.25%, 11/15/2020 | 250,000 | 234,375 |
Conproca SA de CV, 12.0%, 6/16/2010 | 100,000 | 126,000 |
Eircom Funding, 8.25%, 8/15/2013 | 95,000 | 104,975 |
Mizuho Financial Group, 8.375%, 12/29/2049 | 50,000 | 54,795 |
New ASAT (Finance) Ltd., 144A, 9.25%, 2/1/2011 (e) | 115,000 | 104,363 |
624,508 | ||
Health Care 0.1% | ||
Biovail Corp., 7.875%, 4/1/2010 | 70,000 | 72,450 |
Elan Financial PLC, 144A, 7.75%, 11/15/2011 | 20,000 | 21,300 |
93,750 | ||
| Principal Amount ($) (c) | Value ($) |
|
| |
Industrials 1.0% | ||
CP Ships Ltd., 10.375%, 7/15/2012 | 110,000 | 126,913 |
Grupo Transportacion Ferroviaria Mexicana SA de CV: |
|
|
10.25%, 6/15/2007 | 235,000 | 250,275 |
11.75%, 6/15/2009 | 120,000 | 122,250 |
12.5%, 6/15/2012 | 105,000 | 122,587 |
LeGrand SA, 8.5%, 2/15/2025 | 100,000 | 118,000 |
Stena AB: |
|
|
144A, 7.0%, 12/1/2016 | 30,000 | 29,700 |
9.625%, 12/1/2012 | 35,000 | 39,550 |
809,275 | ||
Information Technology 0.2% | ||
Flextronics International Ltd., 144A, 6.25%, 11/15/2014 | 125,000 | 123,750 |
Magnachip Semiconductor SA: |
|
|
144A, 6.875%, 12/15/2011 | 40,000 | 41,200 |
144A, 8.0%, 12/15/2014 | 40,000 | 41,700 |
206,650 | ||
Materials 1.7% | ||
Alrosa Finance SA, 144A, 8.875%, 11/17/2014 | 100,000 | 102,750 |
Avecia Group PLC, 11.0%, 7/1/2009 | 245,000 | 252,350 |
Cascades, Inc.: |
|
|
7.25%, 2/15/2013 | 145,000 | 153,700 |
144A, 7.25%, 2/15/2013 | 10,000 | 10,600 |
Citigroup (JSC Severstal), 144A, 9.25%, 4/19/2014 | 100,000 | 99,500 |
Citigroup Global (Severstal), 8.625%, 2/24/2009 | 40,000 | 40,164 |
Corp. Durango SA: |
|
|
13.125%, 8/1/2006* (e) | 25,000 | 16,875 |
144A, 13.75%, 7/15/2009* | 40,000 | 26,800 |
Crown Euro Holdings SA, 10.875%, 3/1/2013 | 75,000 | 88,687 |
ISPAT Inland ULC, 9.75%, 4/1/2014 | 97,000 | 119,795 |
Rhodia SA, 8.875%, 6/1/2011 (e) | 100,000 | 100,750 |
Sino-Forest Corp., 144A, 9.125%, 8/17/2011 | 55,000 | 60,088 |
Tembec Industries, Inc., 8.5%, 2/1/2011 (e) | 375,000 | 376,875 |
1,448,934 | ||
Sovereign Bonds 11.7% | ||
Aries Vermogensverwaltung GmbH, Series C, 144A, 9.6%, 10/25/2014 | 250,000 | 306,750 |
Dominican Republic: |
|
|
9.04%, 1/23/2013 | 170,000 | 142,375 |
144A, 9.04%, 1/23/2013 | 45,000 | 37,238 |
9.5%, 9/27/2006 | 60,000 | 56,400 |
| Principal Amount ($) (c) | Value ($) |
|
| |
Federative Republic of Brazil: |
|
|
Floating Rate Note Debt Conversion Bond, LIBOR plus .8125%, Series 30YR, 3.063%**, 4/15/2005 | 140,000 | 128,800 |
Series 18YR, 3.125%**, 4/15/2005 | 185,296 | 176,494 |
8.875%, 10/14/2019 | 130,000 | 137,020 |
9.25%, 10/22/2010 | 70,000 | 78,260 |
11.0%, 8/17/2040 | 500,000 | 593,250 |
14.5%, 10/15/2009 | 220,000 | 293,348 |
Government of Ukraine, 7.65%, 6/11/2013 | 430,000 | 459,240 |
Republic of Argentina: |
|
|
9.75%, 9/19/2027* | 590,000 | 195,408 |
Series BGL4, 11.0%, 10/9/2006* | 50,000 | 17,375 |
11.375%, 3/15/2010* | 905,000 | 307,700 |
Series BGL5, 11.375%, 1/30/2017* | 15,000 | 5,100 |
11.75%, 4/7/2009* | 120,000 | 40,800 |
11.75%, 6/15/2015* | 120,000 | 40,500 |
12.375%, 2/21/2012* | 200,000 | 67,500 |
Republic of Bulgaria: |
|
|
Floating Rate Note Debt Conversion Bond, LIBOR plus .8125%, Series RIAB, 2.75%**, 1/28/2005 | 68,250 | 68,209 |
8.25%, 1/15/2015 | 540,000 | 678,996 |
Republic of Colombia: |
|
|
10.75%, 1/15/2013 | 110,000 | 131,450 |
11.755%, 2/25/2020 | 110,000 | 141,350 |
Republic of Ecuador, Step-up Coupon 8.0% to 8/15/2005, 9.0% to 8/15/2006, 10.0% to 8/15/2030 | 480,000 | 414,000 |
Republic of Philippines: |
|
|
9.375%, 1/18/2017 | 460,000 | 477,825 |
9.875%, 1/15/2019 | 70,000 | 71,750 |
Republic of Turkey: |
|
|
7.25%, 3/15/2015 (e) | 60,000 | 61,650 |
8.0%, 2/14/2034 | 60,000 | 62,250 |
9.0%, 6/30/2011 | 40,000 | 45,700 |
9.5%, 1/15/2014 | 95,000 | 112,100 |
11.0%, 1/14/2013 | 210,000 | 267,225 |
11.875%, 1/15/2030 | 420,000 | 604,800 |
12.375%, 6/15/2009 | 280,000 | 351,400 |
Republic of Uruguay, 7.875%, 1/15/2033 (PIK) | 399 | 354 |
Republic of Venezuela: |
|
|
3.09%**, 4/20/2011 | 160,000 | 145,600 |
8.5%, 10/8/2014 | 130,000 | 137,800 |
9.375%, 1/13/2034 | 320,000 | 338,560 |
10.75%, 9/19/2013 | 270,000 | 323,325 |
Russian Federation, Step-up Coupon, 5.0% to 3/31/2007, 7.5% to 3/31/2030 | 795,000 | 822,348 |
Russian Ministry of Finance: |
|
|
Series V, 3.0%, 5/14/2008 | 100,000 | 92,960 |
Series VII, 3.0%, 5/14/2011 | 40,000 | 33,732 |
United Mexican States: |
|
|
6.625%, 3/3/2015 | 250,000 | 268,500 |
Series A, 7.5%, 4/8/2033 | 210,000 | 226,800 |
Series A, 8.0%, 9/24/2022 | 50,000 | 57,675 |
| Principal Amount ($) (c) | Value ($) |
|
| |
8.125%, 12/30/2019 | 170,000 | 199,495 |
8.3%, 8/15/2031 | 240,000 | 281,280 |
Series A, 9.875%, 2/1/2010 | 220,000 | 270,380 |
9,771,072 | ||
Telecommunication Services 2.1% | ||
Alestra SA de RL de CV, 8.0%, 6/30/2010 | 20,000 | 16,950 |
Axtel SA, 11.0%, 12/15/2013 | 125,000 | 134,687 |
Embratel, Series B, 11.0%, 12/15/2008 | 85,000 | 96,900 |
Global Crossing UK Finance, 144A, 10.75%, 12/15/2014 | 100,000 | 98,750 |
Grupo Iusacell SA de CV, Series B, 10.0%, 7/15/2004* | 20,000 | 15,400 |
Inmarsat Finance PLC, 7.625%, 6/30/2012 | 100,000 | 104,000 |
Innova S. de R.L., 9.375%, 9/19/2013 (e) | 65,000 | 73,938 |
INTELSAT, 6.5%, 11/1/2013 | 120,000 | 109,200 |
Millicom International Cellular SA, 144A, 10.0%, 12/1/2013 | 200,000 | 209,250 |
Mobifon Holdings BV, 12.5%, 7/31/2010 | 135,000 | 160,144 |
Mobile Telesystems Financial, 144A, 8.375%, 10/14/2010 | 70,000 | 71,400 |
Nortel Networks Corp., 6.875%, 9/1/2023 | 225,000 | 211,500 |
Nortel Networks Ltd., 6.125%, 2/15/2006 | 350,000 | 356,125 |
Rogers Wireless Communications, Inc., 6.375%, 3/1/2014 | 75,000 | 74,250 |
1,732,494 | ||
Utilities 0.2% | ||
Calpine Canada Energy Finance, 8.5%, 5/1/2008 (e) | 230,000 | 188,600 |
Total Foreign Bonds — US$ Denominated (Cost $16,198,231) | 17,370,373 | |
| ||
Foreign Bonds — Non US$ Denominated 18.9% | ||
Consumer Discretionary 0.1% | ||
Victoria Acquisition III BV, 144A, 7.875%, 10/1/2014 EUR | 50,000 | 68,302 |
Financials 3.7% | ||
KFW Bankengruppe, 5.0%, 7/4/2011 EUR | 2,080,000 | 3,108,550 |
Industrials 0.2% | ||
Grohe Holdings GmbH, 144A, 8.625%, 10/1/2014 EUR | 100,000 | 145,440 |
Materials 0.2% | ||
Huntsman International LLC, 10.125%, 7/1/2009 EUR | 85,000 | 121,602 |
Rhodia SA, 9.25%, 6/1/2011 EUR | 70,000 | 96,812 |
218,414 | ||
Sovereign Bonds 14.7% | ||
Aries Vermogensverwaltung GmbH, Series B, 7.75%, 10/25/2009 EUR | 250,000 | 385,075 |
Federal Republic of Germany, 6.25%, 1/4/2024 EUR | 1,310,000 | 2,276,270 |
Federative Republic of Brazil, 11.0%, 2/4/2010 EUR | 110,000 | 180,856 |
| Principal Amount ($) (c) | Value ($) |
|
| |
Kingdom of Morocco, 1.918%, 1/5/2009 EUR | 252,000 | 247,275 |
Mexican Bonds: |
|
|
Series M-20, 8.0%, | 5,150,000 | 360,828 |
Series MI-10, 8.0%, | 1,336,000 | 106,753 |
Province of Ontario 1.875%,1/25/2010 JPY | 140,000,000 | 1,450,427 |
Republic of Argentina: |
|
|
7.5%, 5/23/2049* EUR | 201,939 | 80,973 |
8.0%, 2/26/2008* EUR | 160,000 | 64,157 |
Series EMTN, 10.0%, | 80,000 | 32,350 |
11.757%, 11/13/2026* EUR | 46,016 | 18,452 |
Republic of Colombia, 11.75%, 3/1/2010 COP | 330,000,000 | 143,790 |
Republic of Greece, 4.65%, 4/19/2007 EUR | 2,105,000 | 2,989,941 |
Republic of Romania, 8.5%, 5/8/2012 EUR | 180,000 | 312,511 |
Republic of Turkey: |
|
|
20.0%, 10/17/2007 TRL | 176,000,000,000 | 144,350 |
20.01%, 10/17/2007 TRL | 178,735,000,000 | 146,593 |
United Kingdom Treasury Bond, 4.75%, 9/7/2015 GBP | 1,700,000 | 3,315,206 |
12,255,807 | ||
Total Foreign Bonds — Non US$ Denominated (Cost $13,367,878) | 15,796,513 | |
| ||
US Government Backed 12.6% | ||
US Treasury Bond: |
|
|
5.375%, 2/15/2031 (e) (g) | 540,000 | 583,917 |
6.0%, 2/15/2026 (g) | 275,000 | 315,015 |
7.5%, 11/15/2016 | 570,000 | 728,420 |
8.5%, 2/15/2020 (g) | 760,000 | 1,072,609 |
10.375%, 11/15/2012 (e) (g) | 3,350,000 | 3,994,091 |
12.75%, 11/15/2010 | 500,000 | 542,129 |
US Treasury Note, 5.75%, 8/15/2010 (g) | 3,000,000 | 3,302,931 |
Total US Government Backed (Cost $10,363,769) | 10,539,112 | |
| ||
US Government Sponsored Agencies 3.6% | ||
Federal Home Loan Mortgage Corp.: |
|
|
2.875%, 9/15/2005 | 500,000 | 500,164 |
5.125%, 7/15/2012 | 2,350,000 | 2,470,611 |
Total US Government Sponsored Agencies (Cost $2,876,350) | 2,970,775 | |
| ||
Convertible Bond 0.2% | ||
DIMON, Inc., 6.25%, 3/31/2007 | 135,000 | 126,562 |
HIH Capital Ltd., 144A, Series DOM, 7.5%, 9/25/2006 | 55,000 | 54,450 |
Total Convertible Bond (Cost $182,157) | 181,012 |
|
| Value ($) |
|
| |
Preferred Stocks 0.2% | ||
Paxson Communications Corp., 14.25% (PIK) | 17 | 124,950 |
TNP Enterprises, Inc., 14.5%, "D", (PIK) | 560 | 64,960 |
Total Preferred Stocks (Cost $220,199) | 189,910 |
| Principal Amount ($)(c) | Value ($) |
|
| |
Loan Participation 0.1% | ||
Republic of Algeria, Floating Rate Debt Conversion Bond, LIBOR plus .8125%, 2.813%**, 3/4/2010 (Cost $111,247) | 115,500 | 114,345 |
|
| Value ($) |
|
| |
Warrants 0.0% | ||
Dayton Superior Corp., 144A* | 10 | 0 |
TravelCenters of America, Inc.* | 20 | 100 |
Total Warrants (Cost $100) | 100 | |
| ||
Other Investments 0.3% | ||
Hercules Trust II, (Bond Unit) (Cost $249,250) | 310,000 | 260,400 |
| ||
Securities Lending Collateral 22.9% | ||
Daily Assets Fund Institutional, 2.25% (d) (f) (Cost $19,149,101) | 19,149,101 | 19,149,101 |
| ||
Cash Equivalents 2.3% | ||
Scudder Cash Management QP Trust, 2.24% (b) (Cost $1,936,248) | 1,936,248 | 1,936,248 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $96,199,764) (a) | 120.8 | 100,907,872 |
Other Assets and Liabilities, Net | (20.8) | (17,400,185) |
Net Assets | 100.0 | 83,507,687 |
Notes to Scudder Strategic Income Portfolio of Investments |
* Non-income producing security. In the case of a bond, generally denotes that the issuer has defaulted on the payment of principal or interest. The following table represents bonds that are in default.
Security | Coupon | Maturity Date | Principal Amount | Acquisition Cost | Value | |
Congoleum Corp. | 8.625 | 8/1/2008 | 50,000 | USD | $ 33,868 | $ 50,500 |
Corp. Durango SA: | ||||||
13.125 | 8/1/2006 | 25,000 | USD | 12,719 | 16,875 | |
| 13.75 | 7/15/2009 | 40,000 | USD | 21,106 | 26,800 |
GEO Specialty Chemicals, Inc. | 10.125 | 8/1/2008 | 65,000 | USD | 19,825 | 37,700 |
Grupo Iusacell SA de CV | 10 | 12/29/2049 | 20,000 | USD | 13,175 | 15,400 |
Intermet Corp. | 9.75 | 6/15/2009 | 55,000 | USD | 22,550 | 26,950 |
Oxford Automotive, Inc. | 12 | 10/15/2010 | 175,000 | USD | 113,324 | 110,250 |
Republic of Argentina: | ||||||
| 7.5 | 5/23/2049 | 201,939 | EUR | 60,356 | 80,973 |
| 8 | 2/26/2008 | 160,000 | EUR | 51,060 | 64,157 |
| 9.75 | 9/19/2027 | 590,000 | USD | 156,710 | 195,408 |
| 10 | 1/7/2049 | 80,000 | EUR | 24,761 | 32,350 |
| 11 | 10/9/2006 | 50,000 | USD | 11,000 | 17,375 |
| 11.375 | 3/15/2010 | 905,000 | USD | 269,445 | 307,700 |
| 11.375 | 1/30/2017 | 15,000 | USD | 4,669 | 5,100 |
| 11.75 | 4/7/2009 | 120,000 | USD | 38,513 | 40,800 |
| 11.75 | 6/15/2005 | 120,000 | USD | 38,871 | 40,500 |
| 11.757 | 6/15/2005 | 46,016 | EUR | 11,189 | 18,452 |
| 12.375 | 2/21/2012 | 200,000 | USD | 63,750 | 67,500 |
Trump Holdings & Funding | 12.625 | 3/15/2010 | 75,000 | USD | 77,992 | 81,188 |
|
|
| $ 1,044,883 | $ 1,235,978 |
** Floating rate notes are securities whose yields vary with a designated market index or market rate, such as the coupon-equivalent of the US Treasury bill rate. These securities are shown at their current rate as of December 31, 2004.
(a) The cost for federal income tax purposes was $96,374,723. At December 31, 2004, net unrealized appreciation for all securities based on tax cost was $4,533,149. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $4,908,984 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $375,835.
(b) Scudder Cash Management QP Trust is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
(c) Principal amount stated in US dollars unless otherwise noted.
(d) Daily Assets Fund Institutional, an affiliated fund, is managed by Deutsche Asset Management, Inc. The rate shown is the annualized seven-day yield at period end.
(e) All or a portion of these securities were on loan (see Notes to Financial Statements). The value of securities loaned at December 31, 2004 amounted to $18,781,631, which is 22.5% of total net assets.
(f) Represents collateral held in connection with securities lending.
(g) At December 31, 2004, these securities have been segregated, in whole or in part, to cover initial margin requirements for open futures contracts.
LIBOR: Represents the London InterBank Offered Rate
PIK: Denotes that all or a portion of income is paid in kind.
REIT: Real Estate Investment Trust
At December 31, 2004, open futures contracts purchased were as follows:
Futures | Expiration Date | Contracts | Aggregate Face Value ($) | Value ($) | Unrealized Appreciation/ (Depreciation) ($) |
10 year Canada Government Bond | 3/21/2005 | 43 | 3,977,251 | 4,025,272 | 48,021 |
10 Year Germany Federal Rip Bond | 3/8/2005 | 21 | 3,356,560 | 3,385,062 | 28,502 |
10 year Japanese Government Bond | 3/10/2005 | 5 | 6,717,225 | 6,751,244 | 34,019 |
10 year US Treasury Note | 3/21/2005 | 22 | 2,433,479 | 2,462,625 | 29,146 |
Total net unrealized appreciation | 139,688 |
At December 31, 2004, open futures contracts sold short were as follows:
Futures | Expiration Date | Contracts | Aggregate Face Value ($) | Value ($) | Unrealized Appreciation/ (Depreciation) ($) |
UK Treasury Bond | 3/29/2005 | 14 | (2,980,247) | (2,998,579) | (18,332) |
2 year US Treasury Note | 3/31/2005 | 34 | (7,119,144) | (7,126,188) | (7,044) |
5 year US Treasury Note | 3/31/2005 | 118 | (12,868,415) | (12,924,688) | (56,273) |
Total net unrealized depreciation | (81,649) |
144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registrations, normally to qualified institutional buyers.
Currency Abbreviations | |||
COP | Colombian Peso | EUR | Euro |
GBP | British Pounds | JPY | Japanese Yen |
MXN | Mexican Peso | TRL | Turkish Lira |
The accompanying notes are an integral part of the financial statements.
Financial Statements |
|
Statement of Assets and Liabilities as of December 31, 2004 | |
Assets | |
Investments: Investments in securities, at value (cost $75,114,415) — including $18,781,631 of securities loaned | $ 79,822,523 |
Investment in Daily Assets Fund Institutional (cost $19,149,101)* | 19,149,101 |
Investment in Scudder Cash Management QP Trust (cost $1,936,248) | 1,936,248 |
Total investments in securities, at value (cost $96,199,764) | 100,907,872 |
Cash | 160,875 |
Foreign currency, at value (cost $554,845) | 557,867 |
Receivable for investments sold | 196,125 |
Interest receivable | 1,625,195 |
Receivable for Portfolio shares sold | 124,340 |
Receivable for daily variation margin on open futures contracts | 13,960 |
Unrealized appreciation on forward foreign currency exchange contracts | 258,057 |
Other assets | 3,087 |
Total assets | 103,847,378 |
Liabilities | |
Payable for investments purchased | 218,024 |
Payable upon return of securities loaned | 19,149,101 |
Payable for Portfolio shares redeemed | 4,722 |
Unrealized depreciation on forward foreign currency exchange contracts | 837,337 |
Net payable on closed forward foreign currency exchange contracts | 16,888 |
Accrued management fee | 39,845 |
Other accrued expenses and payables | 73,774 |
Total liabilities | 20,339,691 |
Net assets, at value | $ 83,507,687 |
Net Assets | |
Net assets consist of: Undistributed net investment income | 7,007,553 |
Net unrealized appreciation (depreciation) on: Investments | 4,708,108 |
Foreign currency related transactions | (601,642) |
Futures | 58,039 |
Accumulated net realized gain (loss) | (199,809) |
Paid-in capital | 72,535,438 |
Net assets, at value | $ 83,507,687 |
Class A Shares Net asset value, offering and redemption price per share ($62,098,917 ÷ 5,069,464 shares outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 12.25 |
Class B Shares Net asset value, offering and redemption price per share ($21,408,770 ÷ 1,758,421 shares outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 12.17 |
* Represents collateral on securities loaned.
Statement of Operations for the year ended December 31, 2004 | |
Investment Income | |
Income: Dividends (net of foreign taxes withheld of $2,689) | $ 34,413 |
Interest | 4,278,030 |
Interest — Scudder Cash Management QP Trust | 35,277 |
Securities lending income, including income from Daily Assets Fund Institutional | 20,278 |
Total Income | 4,367,998 |
Expenses: Management fee | 487,494 |
Custodian fees | 56,035 |
Distribution service fees (Class B) | 39,636 |
Record keeping fees (Class B) | 18,869 |
Auditing | 54,998 |
Legal | 15,015 |
Trustees' fees and expenses | 385 |
Reports to shareholders | 13,136 |
Other | 4,204 |
Total expenses, before expense reductions | 689,772 |
Expense reductions | (2,017) |
Total expenses, after expense reductions | 687,755 |
Net investment income | 3,680,243 |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from: Investments | 2,947,088 |
Futures | (15,609) |
Written options | 266,667 |
Foreign currency related transactions | (915,344) |
| 2,282,802 |
Net unrealized appreciation (depreciation) during the period on: Investments | 62,129 |
Futures | 52,237 |
Written options | (13,130) |
Foreign currency related transactions | 288,862 |
| 390,098 |
Net gain (loss) on investment transactions | 2,672,900 |
Net increase (decrease) in net assets resulting from operations | $ 6,353,143 |
The accompanying notes are an integral part of the financial statements.
|
Statement of Changes in Net Assets | ||
| Years Ended December 31, | |
Increase (Decrease) in Net Assets | 2004 | 2003 |
Operations: Net investment income | $ 3,680,243 | $ 2,379,002 |
Net realized gain (loss) on investment transactions | 2,282,802 | 1,464,156 |
Net unrealized appreciation (depreciation) on investment transactions during the period | 390,098 | 869,023 |
Net increase (decrease) in net assets resulting from operations | 6,353,143 | 4,712,181 |
Distributions to shareholders from: Net investment income Class A | — | (853,600) |
Net realized gains Class A | (2,822,807) | (28,838) |
Class B | (547,427) | — |
Portfolio share transactions: Class A Proceeds from shares sold | 13,206,141 | 39,373,917 |
Reinvestment of distributions | 2,822,807 | 882,438 |
Cost of shares redeemed | (17,995,166) | (41,393,653) |
Net increase (decrease) in net assets from Class A share transactions | (1,966,218) | (1,137,298) |
Class B Proceeds from shares sold | 13,821,690 | 8,762,505 |
Reinvestment of distributions | 547,427 | — |
Cost of shares redeemed | (2,371,956) | (662,224) |
Net increase (decrease) in net assets from Class B share transactions | 11,997,161 | 8,100,281 |
Increase (decrease) in net assets | 13,013,852 | 10,792,726 |
Net assets at beginning of period | 70,493,835 | 59,701,109 |
Net assets at end of period (including undistributed net investment income of $7,007,553 and $964,888, respectively) | $ 83,507,687 | $ 70,493,835 |
Other Information | ||
Class A Shares outstanding at beginning of period | 5,264,429 | 5,379,967 |
Shares sold | 1,130,086 | 3,451,262 |
Shares issued to shareholders in reinvestment of distributions | 247,832 | 78,789 |
Shares redeemed | (1,572,883) | (3,645,589) |
Net increase (decrease) in Portfolio shares | (194,965) | (115,538) |
Shares outstanding at end of period | 5,069,464 | 5,264,429 |
Class B Shares outstanding at beginning of period | 701,718 | — |
Shares sold | 1,213,237 | 759,236 |
Shares issued to shareholders in reinvestment of distributions | 48,231 | — |
Shares redeemed | (204,765) | (57,518) |
Net increase (decrease) in Portfolio shares | 1,056,703 | 701,718 |
Shares outstanding at end of period | 1,758,421 | 701,718 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights |
|
Class A
Years Ended December 31, | 2004 | 2003 | 2002 | 2001a | 2000b |
Selected Per Share Data | |||||
Net asset value, beginning of period | $ 11.82 | $ 11.10 | $ 10.27 | $ 9.86 | $ 9.86 |
Income (loss) from investment operations: Net investment incomec | .58 | .41 | .45 | .48 | .51 |
Net realized and unrealized gain (loss) on investment transactions | .39 | .47 | .68 | .03 | (.26) |
Total from investment operations | .97 | .88 | 1.13 | .51 | .25 |
Less distributions from: Net investment income | — | (.15) | (.30) | (.10) | (.25) |
Net realized gains on investment transactions | (.54) | (.01) | — | — | — |
Total distributions | (.54) | (.16) | (.30) | (.10) | (.25) |
Net asset value, end of period | $ 12.25 | $ 11.82 | $ 11.10 | $ 10.27 | $ 9.86 |
Total Return (%) | 8.60 | 7.85 | 11.30 | 5.23 | 2.57 |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | 62 | 62 | 60 | 21 | 9 |
Ratio of expenses before expense reductions (%) | .84 | .83 | .73 | .66 | 1.14 |
Ratio of expenses after expense reductions (%) | .84 | .83 | .73 | .65 | 1.10 |
Ratio of net investment income (%) | 4.99 | 3.60 | 4.26 | 4.76 | 5.26 |
Portfolio turnover rate (%) | 210 | 160 | 65 | 27 | 154 |
a As required, effective January 1, 2001, the Portfolio has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium on debt securities. In addition, paydowns on mortgage-backed securities which were included in realized gain/loss on investment transactions prior to January 1, 2001 are included as interest income. The effect of this change for the year ended December 31, 2001 was to decrease net investment income per share by $.04, increase net realized and unrealized gains and losses per share by $.04 and decrease the ratio of net investment income to average net assets from 5.16% to 4.76%. Per share, ratios and supplemental data for periods prior to January 1, 2001 have not been restated to reflect this change in presentation.
b On June 18, 2001, the Portfolio implemented a 1 for 10 reverse stock split. Per share information, for the periods prior to December 31, 2001, has been restated to reflect the effect of the split. Shareholders received 1 share for every 10 shares owned and net asset value per share increased correspondingly.
c Based on average shares outstanding during the period.
Class B
| 2004 | 2003a |
Selected Per Share Data | ||
Net asset value, beginning of period | $ 11.78 | $ 11.44 |
Income (loss) from investment operations: Net investment incomeb | .53 | .17 |
Net realized and unrealized gain (loss) on investment transactions | .40 | .17 |
Total from investment operations | .93 | .34 |
Less distributions from: Net realized gains on investment transactions | (.54) | — |
Net asset value, end of period | $ 12.17 | $ 11.78 |
Total Return (%) | 8.27 | 2.97** |
Ratios to Average Net Assets and Supplemental Data | ||
Net assets, end of period ($ millions) | 21 | 8 |
Ratio of expenses (%) | 1.22 | 1.26* |
Ratio of net investment income (%) | 4.61 | 1.80* |
Portfolio turnover rate (%) | 210 | 160 |
a For the period from May 1, 2003 (commencement of operations of Class B shares) to December 31, 2003.
b Based on average shares outstanding during the period.
* Annualized
** Not annualized
Performance Summary December 31, 2004 |
|
Scudder Technology Growth Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns.
Investments by the Portfolio in small companies present greater risk of loss than investments in larger, more established companies. Concentration of the Portfolio's investment in technology stocks may present a greater risk than investments in a more diversified Portfolio. Investments by the Portfolio in emerging technology companies present greater risk than investments in more-established technology companies. This Portfolio is non-diversified and can take larger positions in fewer companies, increasing its overall potential risk. Please read this Portfolio's prospectus for specific details regarding its investments and risk profile.
Growth of an Assumed $10,000 Investment in Scudder Technology Growth Portfolio from 5/1/1999 to 12/31/2004 | ||
[] Scudder Technology Growth Portfolio — Class A [] Goldman Sachs Technology Index [] Russell 1000 Growth Index |
| |
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| The Goldman Sachs Technology Index is a modified capitalization-weighted index composed of companies involved in the technology industry. The Russell 1000 Growth Index is an unmanaged index composed of common stocks of larger US companies with higher price-to-book ratios and higher forecasted growth values. Index returns assume reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
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|
|
Comparative Results | |||||
Scudder Technology Growth Portfolio |
| 1-Year | 3-Year | 5-Year | Life of Portfolio* |
Class A | Growth of $10,000 | $10,192 | $9,635 | $5,109 | $9,079 |
Average annual total return | 1.92% | -1.23% | -12.57% | -1.69% | |
Goldman Sachs Technology Index | Growth of $10,000 | $10,291 | $9,477 | $4,207 | $6,948 |
Average annual total return | 2.91% | -1.77% | -15.90% | -6.22% | |
Russell 1000 Growth Index | Growth of $10,000 | $10,630 | $9,946 | $6,140 | $7,678 |
Average annual total return | 6.30% | -.18% | -9.29% | -4.56% | |
Scudder Technology Growth Portfolio |
|
|
| 1-Year | Life of Class** |
Class B | Growth of $10,000 |
|
| $10,148 | $14,130 |
Average annual total return |
|
| 1.48% | 14.81% | |
Goldman Sachs Technology Index | Growth of $10,000 |
|
| $10,291 | $14,144 |
Average annual total return |
|
| 2.91% | 14.81% | |
Russell 1000 Growth Index | Growth of $10,000 |
|
| $10,630 | $12,555 |
Average annual total return |
|
| 6.30% | 9.53% |
The growth of $10,000 is cumulative.
* The Portfolio commenced operations on May 1, 1999. Index returns begin April 30, 1999. Total returns would have been lower for the Life of Portfolio period for Class A shares if the Portfolio's expenses were not maintained.
** The Portfolio commenced offering Class B shares on July 1, 2002. Index returns begin June 30, 2002.
Information About Your Portfolio's Expenses |
|
Scudder Technology Growth Portfolio
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent six-month period, Class B shares of the Portfolio limited these expenses; had it not done so, expenses would have been higher. The tables are based on an investment of $1,000 made at the beginning of the six-month period ended December 31, 2004.
The tables illustrate your Portfolio's expenses in two ways:
Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2004 | ||
Actual Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,018.10 | $ 1,015.90 |
Expenses Paid per $1,000* | $ 4.27 | $ 6.18 |
Hypothetical 5% Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,020.97 | $ 1,019.08 |
Expenses Paid per $1,000* | $ 4.28 | $ 6.19 |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365.
Annualized Expense Ratios | Class A | Class B |
Scudder Variable Series II — Scudder Technology Growth Portfolio | .84% | 1.22% |
For more information, please refer to the Portfolio's prospectus.
Management Summary December 31, 2004 |
|
Scudder Technology Growth Portfolio
Technology was the worst-performing sector in the US stock market during 2004. The portfolio returned 1.92% for the year ended December 31, 2004 (Class A shares, unadjusted for contract charges) compared with a return of 2.91% for the Goldman Sachs Technology Index and 6.30% for the Russell 1000 Growth Index. Performance was helped by our stock selection within software and communications equipment, but weak selection in semiconductors and our decision not to hold Apple Computer — one of the best-performing stocks in the tech sector — detracted.
The portfolio is overweight in communications equipment, a fast-growing area where we favor Qualcomm, Inc. (3.4% of total net assets as of December 31, 2004) and Research in Motion Ltd. (2.2% of total net assets). We are maintaining the portfolio's overweight position in software, but we have reduced the portfolio's risk profile by taking profits in some of its higher-beta* positions and boosting its weighting in Microsoft Corp. (8.1%). We are less enthusiastic on the prospects for hardware and equipment stocks, many of which have become commodity-oriented companies subject to pricing pressure and intense competition. The portfolio is also underweight in semiconductors — after being overweight in the group for much of the year — as well as Internet stocks, where we believe valuations are generally unattractive. Here, the portfolio owns only Yahoo!, Inc. (1.7%) and eBay, Inc. (2.3%). Within services, where the portfolio is underweight, it holds what we believe are higher-quality stocks such as Paychex, Inc. (2.2%) and Affiliated Computer Services, Inc. (1.5%). The portfolio also held an above-average weighting in cash at year-end to help ensure that we have the resources available to take advantage of any weakness in the broader market.
Overall, we are positive in the outlook for the tech sector, and the portfolio's positioning reflects this. While earnings are indeed likely to slow in 2005, the environment should be generally favorable. We estimate that tech spending will rise in the neighborhood of 8% while earnings climb 10% to 15%. We believe the profit growth within the technology sector is likely to be higher than that for the market as a whole in 2005. This would mark a continuation of the trend that has been in place for the last 50 years, during which the tech sector has grown at twice the rate of the economy overall. Despite this favorable backdrop, market expectations are modest with respect to next year. This means there is less room for disappointment and more room for upside surprises. In this basis, we have positioned the portfolio in a more aggressive fashion in order to take advantage of a potential upward move in the group over the next six to 12 months.
* Beta is a historical measure of a fund's sensitivity to benchmark movements. A fund with a beta great than one is more volatile than its benchmark index. A fund with a beta less than one is less volatile than its benchmark index.
Ian Link Anne Meisner
Lead Manager Portfolio Manager
Deutsche Investment Management Americas Inc.
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the portfolio or any variable life insurance policy or variable annuity contract for which the portfolio is an investment option. These charges and fees will reduce returns.
Risk Considerations
Investments by the portfolio in small companies present greater risk of loss than investments in larger, more established companies. Concentration of the portfolio's investment in technology stocks may present a greater risk than investments in a more diversified portfolio. Investments by the portfolio in emerging technology companies present greater risk than investments in more established technology companies. This portfolio is non-diversified and can take larger positions in fewer companies, increasing its overall potential risk. Please read this portfolio's prospectus for specific details regarding its investments and risk profile.
The Goldman Sachs Technology Index is an unmanaged, capitalization-weighted index based on a universe of technology-related stocks. Index returns assume reinvestment of all distributions and do not reflect fees or expenses. It is not possible to invest directly into an index.
The Russell 1000 Growth Index is an unmanaged index composed of common stocks of larger US companies with higher price-to-book ratios and higher forecasted growth values. Index returns assume reinvestment of all distributions and do not reflect fees or expenses. It is not possible to invest directly into an index.
Portfolio management market commentary is as of December 31, 2004, and may not come to pass. This information is subject to change at any time based on market and other conditions.
Portfolio Summary |
Scudder Technology Growth Portfolio
Asset Allocation (Excludes Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Common Stocks | 91% | 100% |
Cash Equivalents | 9% | — |
| 100% | 100% |
Sector Diversification (Excludes Cash Equivalents and Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Information Technology | 96% | 94% |
Consumer Discretionary | 3% | 5% |
Health Care | 1% | — |
Telecommunication Services | — | 1% |
| 100% | 100% |
Asset allocation and sector diversification are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 36. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Portfolio as of month end will be posted to scudder.com on the 15th of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio December 31, 2004 | ![]() | ![]() |
|
Scudder Technology Growth Portfolio
|
| Value ($) |
|
| |
Common Stocks 91.5% | ||
Consumer Discretionary 2.3% | ||
Internet & Catalog Retail | ||
eBay, Inc.* | 49,300 | 5,732,604 |
Health Care 0.9% | ||
Health Care Equipment & Supplies | ||
Waters Corp.* | 48,100 | 2,250,599 |
Information Technology 88.3% | ||
Communications Equipment 17.0% | ||
Avocent Corp.* | 97,000 | 3,930,440 |
Cisco Systems, Inc.* | 441,600 | 8,522,880 |
Comverse Technologies, Inc.* | 54,800 | 1,339,860 |
Corning, Inc.* | 398,100 | 4,685,637 |
LG Electronics, Inc.* | 39,400 | 2,439,664 |
Motorola, Inc. | 497,084 | 8,549,845 |
QUALCOMM, Inc. | 198,816 | 8,429,798 |
Scientific-Atlanta, Inc. | 125,000 | 4,126,250 |
42,024,374 | ||
Computers & Peripherals 18.0% | ||
ATI Technologies, Inc.* (d) | 185,700 | 3,600,723 |
Dell, Inc.* | 85,175 | 3,589,275 |
EMC Corp.* | 882,300 | 13,119,801 |
Hewlett-Packard Co. | 123,652 | 2,592,982 |
International Business Machines Corp. | 53,700 | 5,293,746 |
Lexmark International, Inc. "A"* | 51,125 | 4,345,625 |
QLogic Corp.* | 87,700 | 3,221,221 |
Quanta Computer, Inc. | 1,771,053 | 3,185,548 |
Research In Motion Ltd.* | 65,200 | 5,373,784 |
44,322,705 | ||
Electronic Equipment & Instruments 3.8% | ||
Agilent Technologies, Inc.* | 103,022 | 2,482,830 |
Flextronics International Ltd.* | 293,800 | 4,060,316 |
Tektronix, Inc. | 90,800 | 2,743,068 |
9,286,214 | ||
Internet Software & Services 3.2% | ||
Check Point Software Technologies Ltd.* | 154,400 | 3,802,872 |
Yahoo!, Inc.* | 110,900 | 4,178,712 |
7,981,584 | ||
IT Consulting & Services 6.5% | ||
Accenture Ltd. "A"* | 163,900 | 4,425,300 |
Affiliated Computer Services, Inc. "A"* | 59,500 | 3,581,305 |
Convergys Corp.* | 164,800 | 2,470,352 |
Paychex, Inc. | 160,008 | 5,453,073 |
15,930,030 | ||
|
| Value ($) |
|
| |
Semiconductors & Semiconductor Equipment 18.1% | ||
Agere Systems, Inc. "B"* | 351,100 | 473,985 |
Altera Corp.* | 120,200 | 2,488,140 |
ASML Holding NV* (d) | 92,737 | 1,475,446 |
Broadcom Corp. "A"* | 146,658 | 4,734,120 |
Cypress Semiconductor Corp.* (d) | 342,400 | 4,016,352 |
Intel Corp. | 384,389 | 8,990,859 |
Linear Technology Corp. | 66,940 | 2,594,594 |
Maxim Integrated Products, Inc. | 81,937 | 3,473,309 |
Microchip Technology, Inc. (d) | 126,100 | 3,361,826 |
National Semiconductor Corp. | 338,700 | 6,079,665 |
Samsung Electronics Co., Ltd. | 5,770 | 2,510,998 |
Xilinx, Inc. | 153,000 | 4,536,450 |
44,735,744 | ||
Software 21.7% | ||
Amdocs Ltd.* | 80,600 | 2,115,750 |
BEA Systems, Inc.* (d) | 499,858 | 4,428,742 |
Electronic Arts, Inc.* | 24,200 | 1,492,656 |
Intuit, Inc.* | 75,813 | 3,336,530 |
Mercury Interactive Corp.* | 41,600 | 1,894,880 |
Microsoft Corp. | 744,446 | 19,884,152 |
Oracle Corp.* | 795,500 | 10,914,260 |
TIBCO Software, Inc.* | 215,600 | 2,876,104 |
VERITAS Software Corp.* | 224,856 | 6,419,640 |
53,362,714 | ||
Total Common Stocks (Cost $187,696,941) | 225,626,568 | |
| ||
Securities Lending Collateral 2.3% | ||
Daily Assets Fund Institutional, 2.25% (c) (e) (Cost $5,561,905) | 5,561,905 | 5,561,905 |
| ||
Cash Equivalents 9.0% | ||
Scudder Cash Management QP Trust, 2.24% (b) (Cost $22,140,384) | 22,140,384 | 22,140,384 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $215,399,230) (a) | 102.8 | 253,328,857 |
Other Assets and Liabilities | (2.8) | (6,895,317) |
Net Assets | 100.0 | 246,433,540 |
Notes to Scudder Technology Growth Portfolio |
* Non-income producing security.
(a) The cost for federal income tax purposes was $239,836,561. At December 31, 2004, net unrealized appreciation for all securities based on tax cost was $13,492,296. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $30,153,678 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $16,661,382.
(b) Scudder Cash Management QP Trust is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
(c) Daily Assets Fund Institutional, an affiliated Fund, is managed by Deutsche Asset Management, Inc. The rate shown is the seven-day yield at period end.
(d) All or a portion of these securities were on loan (see Notes to Financial Statements). The value of all securities loaned at December 31, 2004 amounted to $5,445,750 which is 2.2% of total net assets.
(e) Represents collateral held in connection with securities lending.
At December 31, 2004, open written options were as follows:
Written Options | Contracts | Expiration Date | Strike Price | Value ($) |
Call Options |
|
|
|
|
eBay, Inc. | 80 | 1/22/2005 | 115.00 | 36,000 |
Mercury Interactive Corp. | 416 | 1/22/2005 | 47.50 | 33,280 |
TIBCO Software, Inc. | 433 | 2/19/2005 | 12.50 | 67,115 |
VERITAS Software Corp. | 903 | 1/22/2005 | 30.00 | 54,180 |
Put Options |
|
|
|
|
Electronic Arts, Inc. | 242 | 1/22/2005 | 57.50 | 15,730 |
Total outstanding written options (Premiums received $332,731) |
|
| 206,305 |
The accompanying notes are an integral part of the financial statements.
Financial Statements |
|
Statement of Assets and Liabilities as of December 31, 2004 | |
Assets | |
Investments: Investments in securities, at value (cost $187,696,941) — including $5,445,750 of securities loaned | $ 225,626,568 |
Investment in Daily Assets Fund Institutional (cost $5,561,905)* | 5,561,905 |
Investment in Scudder Cash Management QP Trust (cost $22,140,384) | 22,140,384 |
Total investments in securities, at value (cost $215,399,230) | 253,328,857 |
Cash | 27,131 |
Foreign currency, at value (cost $104,015) | 111,288 |
Receivable for investments sold | 352,259 |
Dividends receivable | 120,147 |
Interest receivable | 35,459 |
Receivable for Portfolio shares sold | 517,044 |
Foreign taxes recoverable | 274 |
Other assets | 7,272 |
Total assets | 254,499,731 |
Liabilities | |
Payable for investments purchased | 1,851,702 |
Payable for Portfolio shares redeemed | 190,668 |
Payable upon return of securities loaned | 5,561,905 |
Written options, at value (premiums received $332,731) | 206,305 |
Accrued management fee | 154,431 |
Other accrued expenses and payables | 101,180 |
Total liabilities | 8,066,191 |
Net assets, at value | $ 246,433,540 |
Net Assets | |
Net assets consist of: Undistributed net investment income | $ 950,616 |
Net unrealized appreciation (depreciation) on: Investments | 37,929,627 |
Written options | 126,426 |
Foreign currency related transactions | 7,714 |
Accumulated net realized gain (loss) | (284,804,711) |
Paid-in capital | 492,223,868 |
Net assets, at value | $ 246,433,540 |
Class A Net Asset Value, offering and redemption price per share ($230,078,244 ÷ 25,536,462 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 9.01 |
Class B Net Asset Value, offering and redemption price per share ($16,355,296 ÷ 1,832,122 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 8.93 |
* Represents collateral on securities loaned.
Statement of Operations for the year ended December 31, 2004 | |
Investment Income | |
Income: Dividends (net of foreign taxes withheld of $42,228) | $ 2,956,147 |
Interest — Scudder Cash Management QP Trust | 113,602 |
Securities lending income, including income from Daily Assets Fund Institutional | 12,349 |
Total Income | 3,082,098 |
Expenses: Management fee | 1,826,919 |
Custodian and accounting fees | 97,218 |
Distribution service fees (Class B) | 34,701 |
Record keeping fees (Class B) | 18,084 |
Auditing | 37,107 |
Legal | 14,160 |
Trustees' fees and expenses | 6,806 |
Reports to shareholders | 26,613 |
Other | 20,030 |
Total expenses, before expense reductions | 2,081,638 |
Expense reductions | (2,610) |
Total expenses, after expense reductions | 2,079,028 |
Net investment income (loss) | 1,003,070 |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from: Investments | 12,475,351 |
Written options | 2,227,923 |
Foreign currency related transactions | (12,526) |
| 14,690,748 |
Net unrealized appreciation (depreciation) during the period on: Investments | (13,058,442) |
Written options | 126,426 |
Foreign currency related transactions | 7,714 |
| (12,924,302) |
Net gain (loss) on investment transactions | 1,766,446 |
Net increase (decrease) in net assets resulting from operations | $ 2,769,516 |
The accompanying notes are an integral part of the financial statements.
|
Statement of Changes in Net Assets | ||
| Years Ended December 31, | |
Increase (Decrease) in Net Assets | 2004 | 2003 |
Operations: Net investment income (loss) | $ 1,003,070 | $ (1,109,123) |
Net realized gain (loss) | 14,690,748 | (64,854,046) |
Net unrealized appreciation (depreciation) on investment transactions during the period | (12,924,302) | 148,935,889 |
Net increase (decrease) in net assets resulting from operations | 2,769,516 | 82,972,720 |
Portfolio share transactions: Class A Proceeds from shares sold | 32,575,554 | 51,551,950 |
Cost of shares redeemed | (61,621,741) | (94,728,478) |
Net increase (decrease) in net assets from Class A share transactions | (29,046,187) | (43,176,528) |
Class B Proceeds from shares sold | 7,002,084 | 9,021,390 |
Cost of shares redeemed | (1,720,967) | (349,231) |
Net increase (decrease) in net assets from Class B share transactions | 5,281,117 | 8,672,159 |
Increase (decrease) in net assets | (20,995,554) | 48,468,351 |
Net assets at beginning of period | 267,429,094 | 218,960,743 |
Net assets at end of period (including undistributed net investment income and accumulated net investment loss of $950,616 and $2,800, respectively) | $ 246,433,540 | $ 267,429,094 |
Other Information | ||
Class A Shares outstanding at beginning of period | 29,035,542 | 36,318,161 |
Shares sold | 3,753,123 | 7,017,960 |
Shares redeemed | (7,252,203) | (14,300,579) |
Net increase (decrease) in Portfolio shares | (3,499,080) | (7,282,619) |
Shares outstanding at end of period | 25,536,462 | 29,035,542 |
Class B Shares outstanding at beginning of period | 1,217,540 | 51,379 |
Shares sold | 821,254 | 1,206,790 |
Shares redeemed | (206,672) | (40,629) |
Net increase (decrease) in Portfolio shares | 614,582 | 1,166,161 |
Shares outstanding at end of period | 1,832,122 | 1,217,540 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights |
|
Class A
Years Ended December 31, | 2004 | 2003 | 2002 | 2001 | 2000a |
Selected Per Share Data | |||||
Net asset value, beginning of period | $ 8.84 | $ 6.02 | $ 9.36 | $ 13.87 | $ 17.77 |
Income (loss) from investment operations: Net investment income (loss)b | .04 | (.04) | (.03) | .01 | .04 |
Net realized and unrealized gain (loss) on investment transactions | .13 | 2.86 | (3.30) | (4.50) | (3.84) |
Total from investment operations | .17 | 2.82 | (3.33) | (4.49) | (3.80) |
Less distributions from: Net investment income | — | — | (.01) | (.02) | — |
Net realized gains on investment transactions | — | — | — | — | (.10) |
Total distributions | — | — | (.01) | (.02) | (.10) |
Net asset value, end of period | $ 9.01 | $ 8.84 | $ 6.02 | $ 9.36 | $ 13.87 |
Total Return (%) | 1.92 | 46.84 | (35.52) | (32.39) | (21.57) |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | 230 | 257 | 219 | 351 | 270 |
Ratio of expenses (%) | .83 | .86 | .80 | .81 | .82 |
Ratio of net investment income (loss) (%) | .43 | (.50) | (.37) | .12 | .21 |
Portfolio turnover rate (%) | 112 | 66 | 64 | 56 | 107 |
a On June 18, 2001, the Portfolio implemented a 1 for 10 reverse stock split. Per share information, for the periods prior to December 31, 2001, has been restated to reflect the effect of the split. Shareholders received 1 share for every 10 shares owned and net asset value per share increased correspondingly.
b Based on average shares outstanding during the period.
Class B
Years Ended December 31, | 2004 | 2003 | 2002a |
Selected Per Share Data | |||
Net asset value, beginning of period | $ 8.80 | $ 6.01 | $ 6.32 |
Income (loss) from investment operations: Net investment income (loss)b | .01 | (.07) | (.02) |
Net realized and unrealized gain (loss) on investment transactions | .12 | 2.86 | (.29) |
Total from investment operations | .13 | 2.79 | (.31) |
Net asset value, end of period | $ 8.93 | $ 8.80 | $ 6.01 |
Total Return (%) | 1.48 | 46.42 | (4.75)** |
Ratios to Average Net Assets and Supplemental Data | |||
Net assets, end of period ($ millions) | 16 | 11 | .3 |
Ratio of expenses before expense reductions (%) | 1.22 | 1.25 | 1.06* |
Ratio of expenses after expense reductions (%) | 1.21 | 1.25 | 1.06* |
Ratio of net investment income (loss) (%) | .05 | (.89) | (.79)* |
Portfolio turnover rate (%) | 112 | 66 | 64 |
a For the period from July 1, 2002 (commencement of operations of Class B shares) to December 31, 2002.
b Based on average shares outstanding during the period.
* Annualized
** Not annualized
|
Scudder Templeton Foreign Value Portfolio
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent six-month period, the Portfolio limited these expenses; had it not done so, expenses would have been higher. The tables are based on an investment of $1,000 made at the beginning of the period (November 15, 2004) ended December 31, 2004.
The tables illustrate your Portfolio's expenses in two ways:
Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the period ended December 31, 2004 | ||
Actual Portfolio Return | Class A | Class B |
Beginning Account Value 11/15/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,056.00 | $ 1,056.00 |
Expenses Paid per $1,000* | $ 1.47 | $ 1.73 |
Hypothetical 5% Portfolio Return | Class A | Class B |
Beginning Account Value 11/15/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,004.87 | $ 1,004.62 |
Expenses Paid per $1,000* | $ 1.43 | $ 1.69 |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days since the commencement of the class (November 15, 2004), then divided by 365.
Annualized Expense Ratios | Class A | Class B |
Scudder Variable Series II — Scudder Templeton Foreign Value Portfolio | 1.14% | 1.34% |
For more information, please refer to the Portfolio's prospectus.
Management Summary December 31, 2004 |
|
Scudder Templeton Foreign Value Portfolio
Global equity markets ended 2004 on a positive note. They registered the second consecutive year of strong gains, after three years of declines. In the fourth quarter, a broad-based rally in global markets changed the pattern of relatively flat returns that characterized the earlier part of 2004. Increasing energy prices had impacted the outlook for global inflation and corporate profit growth for most of the past year. However, investors saw hope of stabilization. In addition, investor sentiment improved because the previously feared hard landing in the Chinese economy appeared unlikely and the US presidential election ended without incident. These factors contributed to the year-end rally.
Against this macroeconomic background, the portfolio posted a return of 5.6% (Class A shares, unadjusted for contract charges) for the period since inception (November 15, 2004) to December 31, 2004 versus the MSCI AC World ex US Index return of 6.1%. The portfolio benefited from strong stock selection in energy and healthcare sectors, with contributors to return in these sectors including Repsol YPF, SA in Spain, ENI SpA in Italy and GlaxoSmithKline in the United Kingdom. On the contrary, stock selection lagged in telecommunication services and industrials sectors during the period. Weak performers included BAE Systems and Rolls-Royce Group in the United Kingdom.
In summary, we believe the economic and corporate framework has remained positive for global equity markets. However, at this stage in the economic cycle (the current recovery is about three and a half years old) it should not be surprising to see a pause. At Templeton our investment focus has always centered on individual companies and longer-term returns. We are confident that regardless of the macroeconomic climate we might encounter in 2005, we should continue to find "bargain" securities. This has been our experience for more than sixty years.
Antonio Docal, CFA
Lead Portfolio Manager
Templeton Investment Counsel LLC, Subadvisor to the Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the portfolio or any variable life insurance policy or variable annuity contract for which the portfolio is an investment option. These charges and fees will reduce returns.
Returns during part or all of the periods shown reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns would have been lower.
Risk Considerations
The portfolio is subject to stock market and equity risks, meaning stocks in the portfolio may decline in value for extended periods of time due to the activities and financial prospects of individual companies, or due to general market and economic conditions. Please read this portfolio's prospectus for specific details regarding its investments and risk profile.
The MSCI ACWI (All Country World Index) World ex US IndexSM is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global developed and emerging markets. As of December 2003 the MSCI ACWI ex US consisted of the following 48 developed and emerging market country indices: Argentina, Australia, Austria, Belgium, Brazil, Canada, Chile, China, Colombia, Czech Republic, Denmark, Egypt, Finland, France, Germany, Greece, Hong Kong, Hungary, India, Indonesia, Ireland, Israel, Italy, Japan, Jordan, Korea, Malaysia, Mexico, Morocco, Netherlands, New Zealand, Norway, Pakistan, Peru, Philippines, Poland, Portugal, Russia, Singapore Free, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, the United Kingdom, and Venezuela. The index is calculated using closing local market prices and converts to US dollars using the London close foreign exchange rates. Index returns assume reinvestment of all distributions and do not reflect fees or expenses. It is not possible to invest directly into an index.
Portfolio management market commentary is as of December 31, 2004, and may not come to pass. This information is subject to change at any time based on market and other conditions.
Portfolio Summary |
Scudder Templeton Foreign Value Portfolio
Asset Allocation | 12/31/04 |
| |
Common Stocks | 95% |
Cash Equivalents | 5% |
| 100% |
Sector Diversification (Excludes Cash Equivalents | 12/31/04 |
| |
Financials | 23% |
Industrials | 14% |
Consumer Discretionary | 13% |
Materials | 11% |
Telecommunication Services | 10% |
Energy | 7% |
Information Technology | 6% |
Health Care | 6% |
Utilities | 5% |
Consumer Staples | 5% |
| 100% |
Geographical (Excludes Cash Equivalents) | 12/31/04 |
| |
Europe (excluding United Kingdom) | 44% |
United kingdom | 24% |
Japan | 11% |
Pacific Basin | 10% |
Latin America | 2% |
Australia | 3% |
Other | 6% |
| 100% |
Asset allocation, sector diversification and geographical are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 45. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Portfolio as of month end will be posted to scudder.com on the 15th of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio December 31, 2004 | ![]() | ![]() |
|
Scudder Templeton Foreign Value Portfolio
|
| Value ($) |
|
| |
Common Stocks 94.3% | ||
Australia 3.0% | ||
Alumina Ltd. | 8,590 | 39,998 |
AMP Ltd. | 9,130 | 51,960 |
National Australia Bank Ltd. | 3,410 | 77,039 |
(Cost $160,468) | 168,997 | |
Bermuda 1.0% | ||
ACE Ltd. (Cost $49,604) | 1,280 | 54,720 |
Brazil 1.3% | ||
Companhia Vale do Rio Doce (ADR) | 1,230 | 29,988 |
Empresa Brasiliera de Aeronautica SA (ADR) | 1,330 | 44,475 |
(Cost $62,913) | 74,463 | |
Canada 1.8% | ||
Alcan, Inc. | 970 | 47,603 |
BCE, Inc. | 2,090 | 50,447 |
(Cost $100,222) | 98,050 | |
Cayman Island 0.9% | ||
XL Capital Ltd. "A" (Cost $50,432) | 670 | 52,025 |
Denmark 0.4% | ||
ISS AS (Cost $24,943) | 430 | 24,004 |
Finland 2.4% | ||
Stora Enso Oyj | 4,510 | 68,885 |
UPM-Kymmene Oyj | 2,980 | 66,267 |
(Cost $129,302) | 135,152 | |
France 6.2% | ||
Accor SA | 580 | 25,393 |
Axa | 2,150 | 53,129 |
Compagnie Generale des Etablissements Michelin "B" | 640 | 41,052 |
Sanofi-Aventis | 1,020 | 81,522 |
Suez SA | 1,620 | 43,203 |
Total SA | 290 | 63,345 |
Valeo SA | 900 | 37,678 |
(Cost $324,155) | 345,322 | |
Germany 6.9% | ||
BASF AG | 1,350 | 97,254 |
Bayer AG | 2,010 | 68,138 |
Deutsche Post AG | 3,940 | 90,507 |
E.ON AG | 900 | 82,036 |
Volkswagen AG | 990 | 44,878 |
(Cost $354,100) | 382,813 | |
Hong Kong 2.7% | ||
Cheung Kong (Holdings) Ltd. | 6,000 | 60,018 |
Hutchison Whampoa Ltd. | 5,000 | 46,798 |
Swire Pacific Ltd. "A" | 5,000 | 41,813 |
(Cost $132,553) | 148,629 | |
Israel 1.0% | ||
Check Point Software Technologies Ltd. (Cost $49,704) | 2,160 | 53,201 |
|
| Value ($) |
|
| |
Italy 2.4% | ||
Eni SpA | 3,120 | 78,117 |
Riunione Adriatica di Sicurta SpA | 2,360 | 53,378 |
(Cost $123,973) | 131,495 | |
Japan 10.2% | ||
East Japan Railway Co. | 12 | 66,751 |
Fuji Photo Film Co., Ltd. | 1,100 | 40,148 |
Hitachi Ltd. | 8,000 | 55,431 |
KDDI Corp. | 6 | 32,322 |
NEC Corp. | 7,000 | 43,515 |
Nintendo Co., Ltd. | 400 | 50,239 |
Nippon Telegraph & Telephone Corp. | 14 | 62,848 |
Nomura Holdings, Inc. | 3,000 | 43,740 |
Olympus Corp. | 1,000 | 21,323 |
Sompo Japan Insurance, Inc. | 5,000 | 50,942 |
Sony Corp. | 1,700 | 65,697 |
Takeda Chemical Industries, Ltd. | 700 | 35,249 |
(Cost $536,587) | 568,205 | |
Korea 4.7% | ||
Kookmin Bank (ADR) | 990 | 38,689 |
Korea Electric Power Corp. (ADR) | 2,050 | 27,142 |
POSCO (ADR) | 610 | 27,163 |
Samsung Electronics Co., Ltd. (GDR), 144A | 530 | 116,070 |
SK Telecom Co., Ltd. (ADR) | 2,250 | 50,063 |
(Cost $246,948) | 259,127 | |
Mexico 1.0% | ||
Telefonos de Mexico SA de CV "L", (ADR) (Cost $49,754) | 1,380 | 52,882 |
Netherlands 7.1% | ||
Akzo Nobel NV | 1,550 | 66,112 |
ING Groep NV | 3,210 | 97,125 |
Koninklijke (Royal) Philips Electronics NV | 2,940 | 77,966 |
Reed Elsevier NV | 2,720 | 37,082 |
Unilever NV | 1,000 | 67,052 |
Wolters Kluwer NV | 2,520 | 50,592 |
(Cost $372,976) | 395,929 | |
Norway 1.5% | ||
Norske Skogindustrier ASA | 1,450 | 31,362 |
Telenor ASA | 5,800 | 52,670 |
(Cost $78,387) | 84,032 | |
Portugal 1.0% | ||
Portugal Telecom SGPS SA (Registered) (Cost $49,550) | 4,280 | 52,940 |
Singapore 0.9% | ||
DBS Group Holdings Ltd. (Cost $49,727) | 5,000 | 49,314 |
Spain 5.3% | ||
Banco Popular Espanol SA | 850 | 56,035 |
Endesa SA | 1,170 | 27,496 |
Iberdrola SA | 2,210 | 56,174 |
|
| Value ($) |
|
| |
Repsolf YPF SA | 3,310 | 86,203 |
Telefonica SA (ADR)* | 1,230 | 69,495 |
(Cost $259,579) | 295,403 | |
Sweden 4.7% | ||
Atlas Copco AB "A" | 1,130 | 51,013 |
Nordea Bank AB | 9,450 | 95,276 |
Securitas AB "B" | 3,940 | 67,590 |
Volvo AB "B" | 1,240 | 49,168 |
(Cost $247,891) | 263,047 | |
Switzerland 4.0% | ||
Lonza Group AG (Registered) | 690 | 38,836 |
Nestle SA (Registered) | 240 | 62,791 |
Swiss Re (Registered) | 740 | 52,778 |
UBS AG (Registered) | 780 | 65,406 |
(Cost $211,475) | 219,811 | |
Taiwan 1.5% | ||
Chunghwa Telecom Co., Ltd. (ADR) | 1,920 | 40,416 |
Compal Electronics, Inc. (GDR), 144A | 8,540 | 42,444 |
(Cost $80,647) | 82,860 | |
United Kingdom 22.4% | ||
Alliance Unichem PLC | 3,000 | 43,457 |
BAE Systems PLC | 13,350 | 59,079 |
Boots Group PLC | 4,050 | 50,969 |
BP PLC | 7,550 | 73,636 |
British Airways PLC* | 8,840 | 39,884 |
British Sky Broadcasting Group PLC | 6,080 | 65,602 |
Cadbury Schweppes PLC | 6,720 | 62,574 |
|
| Value ($) |
|
| |
Compass Group PLC | 11,220 | 53,046 |
GKN PLC | 5,680 | 25,790 |
GlaxoSmithKline PLC | 2,850 | 66,865 |
HSBC Holdings PLC | 2,800 | 47,911 |
Lloyds TSB Group PLC | 7,740 | 70,288 |
National Grid Transco PLC | 4,370 | 41,614 |
Pearson PLC | 4,210 | 50,800 |
Rentokil Initial PLC | 23,320 | 66,151 |
Rolls-Royce Group PLC | 12,680 | 60,131 |
Royal Bank of Scotland Group PLC | 2,900 | 97,546 |
Shell Transport & Trading Co., PLC | 7,610 | 64,870 |
Shire Pharmaceuticals Group PLC* | 5,080 | 53,350 |
Smiths Group PLC | 3,460 | 54,604 |
Vodafone Group PLC | 23,780 | 64,488 |
Yell Group PLC | 3,260 | 27,539 |
(Cost $1,190,667) | 1,240,194 | |
Total Common Stocks (Cost $4,936,557) | 5,232,615 | |
| ||
Cash Equivalents 4.8% | ||
Scudder Cash Management QP Trust, 2.24% (b) (Cost $267,785) | 267,785 | 267,785 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $5,204,342) (a) | 99.1 | 5,500,400 |
Other Assets and Liabilities | 0.9 | 47,473 |
Net Assets | 100.0 | 5,547,873 |
Notes to Scudder Templeton Foreign Value Portfolio |
* Non-income producing security.
(a) The cost for federal income tax purposes was $5,207,475. At December 31, 2004, net unrealized appreciation for all securities based on tax cost was $292,925. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $307,528 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $14,603.
(b) Scudder Cash Management QP Trust is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
ADR: American Depositary Receipts
GDR: Global Depositary Receipts
144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
The accompanying notes are an integral part of the financial statements.
Financial Statements |
|
Statement of Assets and Liabilities | |
Assets | |
Investments: Investments in securities, at value (cost $4,936,557) | $ 5,232,615 |
Scudder Cash Management QP Trust (cost $267,785) | 267,785 |
Total investments in securities, at value (cost $5,204,342) | 5,500,400 |
Dividends receivable | 7,793 |
Interest receivable | 256 |
Receivable for Portfolio shares sold | 64,072 |
Foreign taxes recoverable | 95 |
Due from Advisor | 26,114 |
Total assets | 5,598,730 |
Liabilities | |
Due to custodian bank | 16,116 |
Payable for investments purchased | 5,685 |
Other accrued expenses and payables | 29,056 |
Total liabilities | 50,857 |
Net assets, at value | $ 5,547,873 |
Net Assets | |
Net assets consist of: Accumulated net investment loss | (3,133) |
Net unrealized appreciation (depreciation) on: Investments | 296,058 |
Foreign currency related transactions | 28 |
Paid-in capital | 5,254,920 |
Net assets, at value | $ 5,547,873 |
Class A Net Asset Value, offering and redemption price per share ($2,641,026 ÷ 250,000 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 10.56 |
Class B Net Asset Value, offering and redemption price per share ($2,906,847 ÷ 275,227 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 10.56 |
Statement of Operations | |
Investment Income | |
Income: Dividends (net of foreign taxes withheld of $1,216) | $ 8,310 |
Interest — Scudder Cash Management QP Trust | 1,905 |
Total Income | 10,215 |
Expenses: Management fee | 6,260 |
Custodian and accounting fees | 14,490 |
Distribution service fees (Class B) | 846 |
Record keeping fees (Class B) | 507 |
Auditing | 24,015 |
Legal | 828 |
Trustees' fees and expenses | 180 |
Reports to shareholders | 1,012 |
Offering cost | 1,150 |
Other | 720 |
Total expenses, before expense reductions | 50,008 |
Expense reductions | (41,813) |
Total expenses, after expense reductions | 8,195 |
Net investment income (loss) | 2,020 |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from foreign currency related transactions | (8,340) |
Net unrealized appreciation (depreciation) during the period on: Investments | 296,058 |
Foreign currency related transactions | 28 |
| 296,086 |
Net gain (loss) on investment transactions | 287,746 |
Net increase (decrease) in net assets resulting from operations | $ 289,766 |
The accompanying notes are an integral part of the financial statements.
|
Statement of Changes in Net Assets | |
Increase (Decrease) in Net Assets | Period Ended December 31, 2004a |
Operations: Net investment income (loss) | $ 2,020 |
Net realized gain (loss) on investment transactions | (8,340) |
Net unrealized appreciation (depreciation) on investment transactions during the period | 296,086 |
Net increase (decrease) in net assets resulting from operations | 289,766 |
Portfolio share transactions: Class A Proceeds from shares sold | 2,500,000 |
Net increase (decrease) in net assets from Class A share transactions | 2,500,000 |
Class B Proceeds from shares sold | 2,758,419 |
Cost of shares redeemed | (312) |
Net increase (decrease) in net assets from Class B share transactions | 2,758,107 |
Increase (decrease) in net assets | 5,547,873 |
Net assets at beginning of period | — |
Net assets at end of period (including accumulated net investment loss of $3,133) | $ 5,547,873 |
Other Information | |
Class A Shares outstanding at beginning of period | — |
Shares sold | 250,000 |
Net increase in Portfolio shares | 250,000 |
Shares outstanding at end of period | 250,000 |
Class B Shares outstanding at beginning of period | — |
Shares sold | 275,257 |
Shares redeemed | (30) |
Net increase in Portfolio shares | 275,227 |
Shares outstanding at end of period | 275,227 |
a For the period from November 15, 2004 (commencement of operations) to December 31, 2004.
The accompanying notes are an integral part of the financial statements.
Financial Highlights |
|
Class A
| 2004a |
Selected Per Share Data | |
Net asset value, beginning of period | $ 10.00 |
Income (loss) from investment operations: Net investment income (loss)b | .01 |
Net realized and unrealized gain (loss) on investment transactions | .55 |
Total from investment operations | .56 |
Net asset value, end of period | $ 10.56 |
Total Return (%)c | 5.60** |
Ratios to Average Net Assets and Supplemental Data | |
Net assets, end of period ($ millions) | 3 |
Ratio of expenses before expense reductions (%) | 7.34* |
Ratio of expenses after expense reductions (%) | 1.14* |
Ratio of net investment income (loss) (%) | .41* |
Portfolio turnover rate (%) | — |
a For the period from November 15, 2004 (commencement of operations) to December 31, 2004.
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
Class B
| 2004a |
Selected Per Share Data | |
Net asset value, beginning of period | $ 10.00 |
Income (loss) from investment operations: Net investment income (loss)b | — |
Net realized and unrealized gain (loss) on investment transactions | .56 |
Total from investment operations | .56 |
Net asset value, end of period | $ 10.56 |
Total Return (%)c | 5.60** |
Ratios to Average Net Assets and Supplemental Data | |
Net assets, end of period ($ millions) | 3 |
Ratio of expenses before expense reductions (%) | 7.74* |
Ratio of expenses after expense reductions (%) | 1.34* |
Ratio of net investment income (loss) (%) | .21* |
Portfolio turnover rate (%) | — |
a For the period from November 15, 2004 (commencement of operations) to December 31, 2004.
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
Performance Summary December 31, 2004 |
|
Scudder Total Return Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns.
The Portfolio is subject to stock market risk, meaning stocks in the Portfolio may decline in value for extended periods of time due to the activities and financial prospects of individual companies, or due to general market and economic conditions. The Portfolio also invests in individual bonds whose yields and market values fluctuate so that your investment may be worth more or less than its original cost. Please read this Portfolio's prospectus for specific details regarding its investments and risk profile.
Growth of an Assumed $10,000 Investment in Scudder Total Return Portfolio from 12/31/1994 to 12/31/2004 | ||
[] Scudder Total Return Portfolio — Class A [] S&P 500 Index [] Lehman Brothers Aggregate Bond 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. The Lehman Brothers Aggregate Bond Index is an unmanaged market value-weighted measure of treasury issues, agency issues, corporate and issues and mortgage securities. Index returns assume reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
Yearly periods ended December 31 |
|
Comparative Results | |||||
Scudder Total Return Portfolio |
| 1-Year | 3-Year | 5-Year | 10-Year |
Class A | Growth of $10,000 | $10,664 | $10,684 | $9,769 | $22,787 |
Average annual total return | 6.64% | 2.23% | -.47% | 8.58% | |
S&P 500 Index | Growth of $10,000 | $11,088 | $11,115 | $8,902 | $31,258 |
Average annual total return | 10.88% | 3.59% | -2.30% | 12.07% | |
Lehman Brothers Aggregate Bond Index | Growth of $10,000 | $10,434 | $11,976 | $14,497 | $21,038 |
Average annual total return | 4.34% | 6.19% | 7.71% | 7.72% | |
Scudder Total Return Portfolio |
|
|
| 1-Year | Life of Class* |
Class B | Growth of $10,000 |
|
| $10,626 | $11,977 |
Average annual total return |
|
| 6.26% | 7.47% | |
S&P 500 Index | Growth of $10,000 |
|
| $11,088 | $12,800 |
Average annual total return |
|
| 10.88% | 10.38% | |
Lehman Brothers Aggregate Bond Index | Growth of $10,000 |
|
| $10,434 | $11,539 |
Average annual total return |
|
| 4.34% | 5.89% |
The growth of $10,000 is cumulative.
* The Portfolio commenced offering Class B shares on July 1, 2002. Index returns begin June 30, 2002.
Information About Your Portfolio's Expenses |
|
Scudder Total Return Portfolio
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. The tables are based on an investment of $1,000 made at the beginning of the six-month period ended December 31, 2004.
The tables illustrate your Portfolio's expenses in two ways:
Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2004 | ||
Actual Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,044.80 | $ 1,043.00 |
Expenses Paid per $1,000* | $ 2.97 | $ 4.91 |
Hypothetical 5% Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,022.23 | $ 1,020.33 |
Expenses Paid per $1,000* | $ 2.93 | $ 4.85 |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365.
Annualized Expense Ratios | Class A | Class B |
Scudder Variable Series II — Scudder Total Return Portfolio | .58% | .96% |
For more information, please refer to the Portfolio's prospectus.
Management Summary December 31, 2004 |
|
Scudder Total Return Portfolio
In order to efficiently access the type of returns that Scudder Total Return Portfolio investors expect, we have broadened the investment universe for this portfolio. In the past, the portfolio's investment strategy consisted of a rather simple combination of US large-capitalization growth stocks and core US bonds. The Board approved broadening the investment universe to include US large-cap value stocks, US small-cap stocks, high-yield bonds, international bonds and emerging-market bonds. The asset-allocation mix will be determined by the portfolio management team on a monthly basis. In support, the Advanced Research and Quantitative Strategies group at Deutsche Asset Management will process the portfolio through a quantitatively based risk management model. The model will seek to manage risk, keeping it at a modest level across the underlying strategies.
Stocks and bonds both generated positive returns in 2004. In the equity market, strong corporate earnings helped small caps outperform large caps, while value outpaced growth. Bonds produced a higher return than would typically be expected given that the Federal Reserve raised interest rates from 1.00% to 2.25% during the year. Longer-term bonds outperformed shorter-term paper, while corporate issues bested Treasuries. Against this backdrop, the portfolio returned 6.64% (Class A shares, unadjusted for contract charges) for the 12-month period ended December 31, 2004. Its benchmarks, the S&P 500 index and the Lehman Brothers Aggregate Bond Index (LBAB), returned 10.88% and 4.34%, respectively, for the same period.
An overweight in energy, along with good selection within the group, was beneficial. Here, we continue to favor equipment and service companies. In fixed income, positions in corporates, international bonds and asset-backed securities added value amid an environment in which investors were thirsty for yield.
In the equity portion of the portfolio, weak stock selection and an overweight in information technology made the largest negative contribution to performance during the year. The portfolio's current positioning within technology emphasizes consistent earners over cyclical companies, reflecting our view that industry profit growth is likely to slow. We also decreased our overall weighting in technology based on this belief. Selections within financials, where the portfolio is underweight in insurance and overweight in market-sensitive companies, also detracted. High levels of consumer debt and the current rising interest rate environment threatens the performance of many financial services companies and has led us to reduce our exposure to the financial sectors. Looking ahead, we will continue to focus on higher-quality growth stocks and fundamentally sound, reasonably value fixed-income securities.
Julie M. Van Cleave J. Christopher Gagnier
Andrew P. Cestone Brett Diment
Thomas F. Sassi Arnim S. Holzer
Portfolio Managers
Deutsche Investment Management Americas Inc.
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the portfolio or any variable life insurance policy or variable annuity contract for which the portfolio is an investment option. These charges and fees will reduce returns.
Risk Considerations
The portfolio is subject to stock market risk, meaning stocks in the portfolio may decline in value for extended periods of time due to the activities and financial prospects of individual companies, or due to general market and economic conditions. The portfolio also invests in individual bonds whose yields and market values fluctuate so that your investment may be worth more or less than its original cost. Please read this portfolio's prospectus for specific details regarding its investments and risk profile.
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.
The Lehman Brothers Aggregate Bond Index is an unmanaged market value-weighted measure of treasury issues, agency issues, corporate and issues and mortgage securities.
Index returns assume reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
Portfolio management market commentary is as of December 31, 2004, and may not come to pass. This information is subject to change at any time based on market and other conditions.
Portfolio Summary |
Scudder Total Return Portfolio
Asset Allocation (Excludes Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Common Stocks | 60% | 61% |
Corporate Bonds | 11% | 10% |
Collateralized Mortgage Obligations | 7% | 10% |
Foreign Bonds — US$ Denominated | 5% | 3% |
US Government Backed | 4% | 3% |
Asset Backed | 3% | 4% |
Cash Equivalents | 3% | 2% |
Municipal Investments | 2% | 2% |
Commercial and Non-Agency Mortgage Backed Securities | 2% | — |
US Government Agency Sponsored Pass-Throughs | 1% | 1% |
Government National Mortgage Association | 1% | — |
Foreign Bonds — Non US$ Denominated | 1% | — |
Government Sponsored Agencies | — | 4% |
| 100% | 100% |
Sector Diversification (Excludes Cash Equivalents and Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Financials | 19% | 11% |
Information Technology | 19% | 26% |
Health Care | 16% | 22% |
Consumer Discretionary | 12% | 14% |
Industrials | 11% | 8% |
Energy | 9% | 6% |
Consumer Staples | 8% | 11% |
Materials | 4% | 1% |
Telecommunication Services | 1% | 1% |
Utilities | 1% | — |
| 100% | 100% |
Asset allocation and sector diversification are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 56. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Portfolio as of month end will be posted to scudder.com on the 15th of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio December 31, 2004 | ![]() | ![]() |
|
Scudder Total Return Portfolio
|
| Value ($) |
|
| |
Common Stocks 60.0% | ||
Consumer Discretionary 7.3% | ||
Auto Components 0.0% | ||
Tenneco Automotive, Inc.,* | 17,700 | 305,148 |
Automobiles 0.5% | ||
Harley-Davidson, Inc. | 43,400 | 2,636,550 |
Monaco Coach Corp. | 16,400 | 337,348 |
2,973,898 | ||
Distributors 0.0% | ||
Handleman Co. | 2,200 | 47,256 |
Hotels Restaurants & Leisure 1.2% | ||
Alliance Gaming Corp.* | 28,300 | 390,823 |
Ameristar Casinos, Inc. | 7,600 | 327,636 |
California Pizza Kitchen, Inc.* | 15,200 | 349,600 |
CEC Entertainment, Inc.* | 12,100 | 483,637 |
International Game Technology | 53,300 | 1,832,454 |
Landry's Restaurants, Inc. | 13,800 | 401,028 |
McDonald's Corp. | 59,900 | 1,920,394 |
YUM! Brands, Inc. | 40,000 | 1,887,200 |
7,592,772 | ||
Household Durables 0.1% | ||
American Woodmark Corp. | 3,100 | 135,408 |
Fortune Brands, Inc. | 7,300 | 563,414 |
698,822 | ||
Internet & Catalog Retail 0.3% | ||
eBay, Inc.* | 16,800 | 1,953,504 |
J. Jill Group, Inc.* | 14,900 | 221,861 |
2,175,365 | ||
Leisure Equipment & Products 0.1% | ||
Arctic Cat, Inc. | 7,200 | 190,944 |
RC2 Corp.* | 11,300 | 368,380 |
559,324 | ||
Media 1.3% | ||
aQuantive Inc.* | 7,400 | 66,156 |
Comcast Corp. "A"* | 45,600 | 1,497,504 |
McGraw-Hill Companies, Inc. | 24,600 | 2,251,884 |
Mediacom Communications Corp. "A"* | 25,400 | 158,750 |
Omnicom Group, Inc. | 28,800 | 2,428,416 |
Reader's Digest Association, Inc. | 32,600 | 453,466 |
Salem Communications Corp. "A"* | 2,400 | 59,880 |
Viacom, Inc. "B" | 41,439 | 1,507,965 |
8,424,021 | ||
Multiline Retail 1.4% | ||
Family Dollar Stores, Inc. | 95,900 | 2,994,957 |
Kirkland's, Inc.* | 3,700 | 45,473 |
Kohl's Corp.* | 15,500 | 762,135 |
May Department Stores Co. | 81,600 | 2,399,040 |
Target Corp. | 68,600 | 3,562,398 |
9,764,003 | ||
Specialty Retail 2.2% | ||
Aeropostale, Inc.* | 9,500 | 279,585 |
Bed Bath & Beyond, Inc.* | 13,300 | 529,739 |
|
| Value ($) |
|
| |
Cato Corp. "A" | 14,800 | 426,536 |
Charlotte Russe Holding, Inc.* | 23,100 | 233,310 |
Charming Shoppes, Inc.* | 33,500 | 313,895 |
Dick's Sporting Goods, Inc.* | 2,300 | 80,845 |
GameStop Corp.* | 2,400 | 53,664 |
Home Depot, Inc. | 11,500 | 491,510 |
Limited Brands | 98,500 | 2,267,470 |
Lowe's Companies, Inc. | 87,700 | 5,050,643 |
Sherwin-Williams Co. | 58,500 | 2,610,855 |
Stage Stores, Inc.* | 2,800 | 116,256 |
Staples, Inc. | 35,900 | 1,210,189 |
Stein Mart, Inc.* | 17,800 | 303,668 |
Too, Inc.* | 14,700 | 359,562 |
Trans World Entertainment Corp.* | 4,600 | 57,362 |
14,385,089 | ||
Textiles, Apparel & Luxury Goods 0.2% | ||
Cherokee, Inc. | 600 | 21,168 |
Guess?, Inc.* | 21,000 | 263,550 |
Phillips-Van Heusen Corp. | 1,600 | 43,200 |
Skechers USA, Inc. "A"* | 23,200 | 300,672 |
Wolverine World Wide, Inc. | 15,300 | 480,726 |
1,109,316 | ||
Consumer Staples 5.0% | ||
Beverages 0.6% | ||
Boston Beer Co., Inc. "A"* | 4,800 | 102,096 |
PepsiCo, Inc. | 72,720 | 3,795,984 |
3,898,080 | ||
Food & Staples Retailing 1.1% | ||
Nash-Finch Co. | 6,600 | 249,216 |
Pantry, Inc.* | 12,700 | 382,143 |
Wal-Mart Stores, Inc. | 89,100 | 4,706,262 |
Walgreen Co. | 49,800 | 1,910,826 |
7,248,447 | ||
Food Products 2.0% | ||
ConAgra Foods, Inc. | 99,200 | 2,921,440 |
Dean Foods Co.* | 12,700 | 418,465 |
General Mills, Inc. | 73,400 | 3,648,714 |
Hershey Foods Corp. | 21,800 | 1,210,772 |
Kellogg Co. | 29,200 | 1,304,072 |
Lance, Inc. | 21,800 | 414,854 |
Sara Lee Corp. | 120,100 | 2,899,214 |
12,817,531 | ||
Household Products 1.3% | ||
Colgate-Palmolive Co. | 25,700 | 1,314,812 |
Hooker Furniture Corp. | 8,300 | 188,410 |
Kimberly-Clark Corp. | 54,000 | 3,553,740 |
Procter & Gamble Co. | 66,300 | 3,651,804 |
8,708,766 | ||
Personal Products 0.0% | ||
Elizabeth Arden, Inc.* | 12,600 | 299,124 |
Energy 5.2% | ||
Energy Equipment & Services 1.2% | ||
Baker Hughes, Inc. | 45,100 | 1,924,417 |
Cal Dive International, Inc.* | 10,400 | 423,800 |
|
| Value ($) |
|
| |
Nabors Industries Ltd.* | 36,800 | 1,887,472 |
Offshore Logistics, Inc.* | 1,000 | 32,470 |
Schlumberger Ltd. | 33,300 | 2,229,435 |
Transocean, Inc.* | 21,800 | 924,102 |
7,421,696 | ||
Oil & Gas 4.0% | ||
BP PLC (ADR) | 34,500 | 2,014,800 |
Burlington Resources, Inc. | 45,400 | 1,974,900 |
Callon Petroleum Co.* | 9,800 | 141,708 |
ChevronTexaco Corp. | 45,700 | 2,399,707 |
Cimarex Energy Co.* | 12,200 | 462,380 |
Comstock Resources, Inc.* | 18,400 | 405,720 |
ConocoPhillips | 44,900 | 3,898,667 |
Devon Energy Corp. | 56,200 | 2,187,304 |
EOG Resources, Inc. | 27,800 | 1,983,808 |
ExxonMobil Corp. | 98,600 | 5,054,236 |
Houston Exploration Co.* | 8,500 | 478,635 |
Meridian Resource Corp.* | 27,500 | 166,375 |
Overseas Shipholding Group, Inc. | 8,200 | 452,640 |
Remington Oil & Gas Corp.* | 15,500 | 422,375 |
Royal Dutch Petroleum Co. (NY Shares) | 45,000 | 2,582,100 |
Southwestern Energy Co.* | 10,400 | 527,176 |
Tesoro Petroleum Corp.* | 11,200 | 356,832 |
Vintage Petroleum, Inc. | 17,000 | 385,730 |
Whiting Petroleum Corp.* | 14,200 | 429,550 |
26,324,643 | ||
Financials 11.6% | ||
Banks 4.8% | ||
AmSouth Bancorp. | 63,900 | 1,655,010 |
BancFirst Corp. | 400 | 31,592 |
Bank of America Corp. | 173,200 | 8,138,668 |
Banner Corp. | 4,900 | 152,831 |
BB&T Corp. | 44,700 | 1,879,635 |
Capital Bancorp., Ltd. | 500 | 17,610 |
Central Pacific Financial Corp. | 500 | 18,085 |
Citizens Banking Corp. | 2,700 | 92,745 |
CoBiz, Inc. | 1,200 | 24,360 |
Columbia Banking Systems, Inc. | 3,100 | 77,469 |
Community Bank System, Inc. | 2,500 | 70,625 |
CVB Financial Corp. | 9,000 | 239,040 |
Dime Community Bancshares | 2,200 | 39,402 |
Downey Financial Corp. | 4,500 | 256,500 |
Fidelity Bancshares, Inc. | 4,700 | 200,972 |
First BanCorp. | 9,300 | 590,643 |
First Community Bancorp. | 2,400 | 102,480 |
FirstFed Financial Corp.* | 9,200 | 477,204 |
Frontier Financial Corp. | 1,600 | 61,776 |
Hanmi Financial Corp. | 7,900 | 283,926 |
Harbor Florida Bancshares, Inc. | 6,600 | 228,426 |
Independent Bank Corp. | 1,400 | 47,250 |
Integra Bank Corp. | 2,200 | 50,842 |
MBT Financial Corp. | 1,300 | 30,251 |
National City Corp. | 53,500 | 2,008,925 |
National Penn Bancshares, Inc. | 800 | 22,160 |
Pacific Capital Bancorp. | 1,100 | 37,389 |
PNC Financial Services Group | 71,300 | 4,095,472 |
Prosperity Bancshares, Inc. | 2,000 | 58,420 |
|
| Value ($) |
|
| |
Provident Bankshares Corp. | 3,000 | 109,110 |
Republic Bancorp, Inc. "A" | 1,200 | 30,840 |
Republic Bancorp., Inc. | 19,500 | 297,960 |
Silicon Valley Bancshares* | 11,400 | 510,948 |
Southwest Bancorporation of Texas, Inc. | 3,100 | 72,199 |
Sterling Bancshares, Inc. | 16,900 | 241,163 |
Sterling Financial Corp.* | 3,700 | 145,262 |
SunTrust Banks, Inc. | 27,100 | 2,002,148 |
Texas Capital Bancshares, Inc.* | 2,300 | 49,726 |
TierOne Corp. | 3,500 | 86,975 |
Trustmark Corp. | 5,800 | 180,206 |
Umpqua Holdings Corp. | 3,300 | 83,193 |
United Community Banks, Inc. | 1,000 | 26,930 |
US Bancorp. | 88,900 | 2,784,348 |
Wachovia Corp. | 64,000 | 3,366,400 |
WesBanco, Inc. | 3,100 | 99,107 |
Westamerica Bancorp. | 6,400 | 373,184 |
WSFS Financial Corp. | 3,800 | 229,216 |
31,678,623 | ||
Capital Markets 1.3% | ||
Bear Stearns Companies, Inc. | 21,400 | 2,189,434 |
Goldman Sachs Group, Inc. | 8,200 | 853,128 |
Investment Technology Group, Inc.* | 8,000 | 160,000 |
Lehman Brothers Holdings, Inc. | 10,600 | 927,288 |
Merrill Lynch & Co., Inc. | 46,500 | 2,779,305 |
Morgan Stanley | 28,100 | 1,560,112 |
8,469,267 | ||
Consumer Finance 0.6% | ||
American Express Co. | 64,800 | 3,652,776 |
Diversified Financial Services 2.9% | ||
Accredited Home Lenders Holding Co.* | 8,400 | 417,312 |
ASTA Funding, Inc. | 5,000 | 134,200 |
Bank Mutual Corp. | 3,100 | 37,727 |
Chemical Financial Corp. | 2,200 | 94,424 |
Citigroup, Inc. | 184,299 | 8,879,526 |
F.N.B. Corp. | 4,100 | 83,476 |
Fannie Mae | 32,500 | 2,314,325 |
Freddie Mac | 30,400 | 2,240,480 |
JPMorgan Chase & Co. | 118,300 | 4,614,883 |
18,816,353 | ||
Insurance 1.3% | ||
AFLAC, Inc. | 39,600 | 1,577,664 |
Allstate Corp. | 48,600 | 2,513,592 |
American International Group, Inc. | 56,737 | 3,725,919 |
American Physicians Capital, Inc.* | 1,000 | 36,020 |
Commerce Group, Inc. | 3,100 | 189,224 |
FPIC Insurance Group, Inc.* | 3,200 | 113,216 |
Navigators Group, Inc.* | 1,900 | 57,209 |
UICI | 4,700 | 159,330 |
Zenith National Insurance Corp. | 10,000 | 498,400 |
8,870,574 | ||
Real Estate 0.7% | ||
American Financial Realty Trust (REIT) | 6,400 | 103,552 |
Amli Residential Properties Trust (REIT) | 4,700 | 150,400 |
|
| Value ($) |
|
| |
Bedford Property Investors, Inc. (REIT) | 2,600 | 73,866 |
CarrrAmerica Realty Corp. (REIT) | 7,000 | 231,000 |
Colonial Properties Trust (REIT) | 2,400 | 94,248 |
Commercial Net Lease Realty (REIT) | 7,200 | 148,320 |
Cornerstone Realty Income Trust, Inc. (REIT) | 4,900 | 48,902 |
Corporate Office Properties Trust (REIT) | 6,700 | 196,645 |
Cousins Properties, Inc. (REIT) | 4,600 | 139,242 |
EastGroup Properties, Inc. (REIT) | 1,800 | 68,976 |
Essex Property Trust, Inc. (REIT) | 2,900 | 243,020 |
FelCor Lodging Trust, Inc. (REIT)* | 9,300 | 136,245 |
Gables Residential Trust (REIT) | 5,100 | 182,529 |
Glenborough Realty Trust, Inc. (REIT) | 3,600 | 76,608 |
Glimcher Realty Trust (REIT) | 3,200 | 88,672 |
Healthcare Realty Trust, Inc. (REIT) | 5,900 | 240,130 |
Heritage Property Investment Trust (REIT) | 4,700 | 150,823 |
Highwoods Properties, Inc. (REIT) | 8,100 | 224,370 |
Jones Lang Lasalle, Inc.* | 1,000 | 37,410 |
Kilroy Realty Corp. (REIT) | 4,300 | 183,825 |
Kramont Realty Trust (REIT) | 1,000 | 23,400 |
Lexington Corporate Properties Trust (REIT) | 8,400 | 189,672 |
LTC Properties, Inc. (REIT) | 1,300 | 25,883 |
Nationwide Health Properties, Inc. (REIT) | 9,500 | 225,625 |
Newcastle Investment Corp. (REIT) | 6,100 | 193,858 |
OMEGA Healthcare Investors, Inc. (REIT) | 2,500 | 29,500 |
Parkway Properties, Inc. (REIT) | 3,100 | 157,325 |
Prentiss Properties Trust (REIT) | 2,600 | 99,320 |
Senior Housing Properties Trust (REIT) | 9,700 | 183,718 |
Sun Communities, Inc. (REIT) | 4,100 | 165,025 |
Town & Country Trust (REIT) | 1,200 | 33,156 |
Trammell Crow Co.* | 3,200 | 57,952 |
Urstadt Biddle Properties, Inc. (REIT) | 1,200 | 20,460 |
Washington Real Estate Investment Trust (REIT) | 6,200 | 209,994 |
4,433,671 | ||
Health Care 9.8% | ||
Biotechnology 1.4% | ||
Amgen, Inc.* | 14,100 | 904,515 |
Biogen Idec, Inc.* | 24,900 | 1,658,589 |
deCODE genetics, Inc.* | 11,900 | 92,939 |
Enzon Pharmaceuticals, Inc.* | 19,300 | 264,796 |
Genentech, Inc.* | 70,500 | 3,838,020 |
Gilead Sciences, Inc.* | 63,000 | 2,204,370 |
Regeneron Pharmaceuticals, Inc.* | 13,200 | 121,572 |
Third Wave Technologies* | 24,300 | 208,980 |
9,293,781 | ||
Health Care Equipment & Supplies 2.4% | ||
Align Technology, Inc.* | 19,600 | 210,700 |
Alliance Imaging, Inc.* | 9,300 | 104,625 |
Baxter International, Inc. | 154,600 | 5,339,884 |
Biosite, Inc.* | 5,100 | 313,854 |
Boston Scientific Corp.* | 44,000 | 1,564,200 |
C.R. Bard, Inc. | 17,600 | 1,126,048 |
|
| Value ($) |
|
| |
Closure Medical Corp.* | 5,900 | 115,050 |
Haemonetics Corp.* | 11,500 | 416,415 |
Hospira, Inc.* | 6,450 | 216,075 |
Medtronic, Inc. | 44,300 | 2,200,381 |
Palomar Medical Technologies, Inc.* | 5,000 | 130,350 |
PolyMedica Corp. | 8,700 | 324,423 |
VISX, Inc.* | 7,009 | 181,323 |
Waters Corp.* | 17,800 | 832,862 |
Zimmer Holdings, Inc.* | 36,300 | 2,908,356 |
15,984,546 | ||
Health Care Providers & Services 1.2% | ||
Allscripts Healthcare Solutions, Inc.* | 10,500 | 112,035 |
Amedisys, Inc. "L"* | 10,600 | 343,334 |
Centene Corp.* | 13,600 | 385,560 |
Cerner Corp.* | 6,000 | 319,020 |
Chemed Corp. | 6,000 | 402,660 |
Genesis HealthCare Corp.* | 1,100 | 38,533 |
Healthcare Service Group, Inc. | 1,800 | 37,512 |
IDX Systems Corp.* | 9,800 | 337,708 |
Lifeline Systems, Inc.* | 2,800 | 72,128 |
MedCath Corp.* | 8,600 | 211,904 |
Merge Technologies, Inc.* | 6,500 | 144,625 |
Option Care, Inc. | 16,500 | 283,635 |
PDI, Inc.* | 7,700 | 171,556 |
RehabCare Group, Inc.* | 5,200 | 145,548 |
Res-Care, Inc.* | 20,500 | 312,010 |
SFBC International, Inc.* | 7,800 | 308,100 |
UnitedHealth Group, Inc. | 47,100 | 4,146,213 |
7,772,081 | ||
Pharmaceuticals 4.8% | ||
Abbott Laboratories | 129,600 | 6,045,840 |
Alpharma, Inc. "A" | 16,900 | 286,455 |
Bone Care International, Inc.* | 2,300 | 64,055 |
Bristol-Myers Squibb Co. | 160,400 | 4,109,448 |
Connetics Corp.* | 12,700 | 308,483 |
Eli Lilly & Co. | 20,800 | 1,180,400 |
First Horizon Pharmaceutical Corp.* | 7,600 | 173,964 |
Johnson & Johnson | 129,666 | 8,223,417 |
Kos Pharmaceuticals, Inc.* | 5,700 | 214,548 |
Noven Pharmaceuticals, Inc.* | 13,400 | 228,604 |
Perrigo Co. | 20,300 | 350,581 |
Pfizer, Inc. | 226,475 | 6,089,913 |
POZEN, Inc.* | 22,100 | 160,667 |
Rigel Pharmaceuticals, Inc.* | 7,500 | 183,150 |
United Therapeutics Corp.* | 8,900 | 401,835 |
USANA Health Sciences, Inc.* | 1,400 | 47,880 |
Valeant Pharmaceuticals International | 13,600 | 358,360 |
Wyeth | 65,300 | 2,781,127 |
31,208,727 | ||
Industrials 6.7% | ||
Aerospace & Defense 1.2% | ||
DRS Technologies, Inc.* | 1,800 | 76,878 |
HEICO Corp. | 5,600 | 126,504 |
Honeywell International, Inc. | 117,000 | 4,142,970 |
Teledyne Technologies, Inc.* | 4,500 | 132,435 |
United Technologies Corp. | 34,000 | 3,513,900 |
7,992,687 | ||
|
| Value ($) |
|
| |
Air Freight & Logistics 0.4% | ||
FedEx Corp. | 22,500 | 2,216,025 |
Airlines 0.1% | ||
Frontier Airlines, Inc.* | 19,200 | 219,072 |
Pinnacle Airlines Corp.* | 20,500 | 285,770 |
504,842 | ||
Commercial Services & Supplies 1.1% | ||
Avery Dennison Corp. | 38,400 | 2,302,848 |
Brady Corp. "A" | 4,000 | 250,280 |
Bright Horizons Family Solutions, Inc.* | 500 | 32,380 |
Coinstar, Inc.* | 11,800 | 316,594 |
Duratek, Inc.* | 6,700 | 166,897 |
Electro Rent Corp. | 1,800 | 25,614 |
Euronet Worldwide, Inc.* | 10,900 | 283,618 |
Heidrick & Struggles International, Inc.* | 2,500 | 85,675 |
Navigant Consulting, Inc.* | 13,500 | 359,100 |
NCO Group, Inc.* | 11,500 | 297,275 |
NuCo2, Inc.* | 13,700 | 304,003 |
Pitney Bowes, Inc. | 48,200 | 2,230,696 |
Stewart Enterprises, Inc. "A"* | 19,100 | 133,509 |
TeleTech Holdings, Inc.* | 25,200 | 244,188 |
Ventiv Health, Inc.* | 9,800 | 199,136 |
7,231,813 | ||
Construction & Engineering 0.1% | ||
Dycom Industries, Inc.* | 12,500 | 381,500 |
Perini Corp.* | 20,100 | 335,469 |
716,969 | ||
Electrical Equipment 0.5% | ||
Artesyn Technologies, Inc.* | 22,700 | 256,510 |
Emerson Electric Co. | 37,800 | 2,649,780 |
2,906,290 | ||
Industrial Conglomerates 2.5% | ||
3M Co. | 17,800 | 1,460,846 |
Blout International, Inc.* | 2,300 | 40,066 |
General Electric Co. | 328,900 | 12,004,850 |
Textron, Inc. | 39,700 | 2,929,860 |
Tredegar Corp. | 5,600 | 113,176 |
16,548,798 | ||
Machinery 0.5% | ||
Actuant Corp. "A"* | 5,800 | 302,470 |
Astec Industries, Inc.* | 17,500 | 301,175 |
Caterpillar, Inc. | 10,100 | 984,851 |
Kennametal, Inc. | 10,500 | 522,585 |
Sauer-Danfoss, Inc. | 4,600 | 100,326 |
Terex Corp.* | 10,100 | 481,265 |
The Manitowoc Co., Inc. | 10,600 | 399,090 |
Wabash National Corp.* | 11,300 | 304,309 |
Wabtec Corp. | 2,200 | 46,904 |
3,442,975 | ||
Marine 0.1% | ||
Kirby Corp.* | 11,300 | 501,494 |
Road & Rail 0.1% | ||
Knight Transportation, Inc. | 16,400 | 406,720 |
Old Dominion Freight Line, Inc.* | 13,000 | 452,400 |
859,120 | ||
|
| Value ($) |
|
| |
Trading Companies & Distributors 0.1% | ||
United Rentals, Inc.* | 15,800 | 298,620 |
WESCO International, Inc.* | 10,400 | 308,256 |
606,876 | ||
Information Technology 11.1% | ||
Communications Equipment 1.3% | ||
Aspect Communications Corp.* | 16,400 | 182,696 |
Cisco Systems, Inc.* | 142,900 | 2,757,970 |
CommScope, Inc.* | 16,200 | 306,180 |
Digi International, Inc.* | 2,800 | 48,132 |
Nokia Oyj (ADR) | 180,100 | 2,822,167 |
QUALCOMM, Inc. | 60,000 | 2,544,000 |
8,661,145 | ||
Computers & Peripherals 2.3% | ||
Dell, Inc.* | 35,400 | 1,491,756 |
EMC Corp.* | 208,000 | 3,092,960 |
Hewlett-Packard Co. | 137,700 | 2,887,569 |
Intergraph Corp.* | 14,100 | 379,713 |
International Business Machines Corp. | 67,700 | 6,673,866 |
Komag, Inc.* | 15,800 | 296,724 |
Tyler Technologies, Inc.* | 10,500 | 87,780 |
14,910,368 | ||
Electronic Equipment & Instruments 0.2% | ||
Agilysys, Inc. | 15,600 | 267,384 |
BEI Technologies, Inc. | 9,300 | 287,184 |
Keithley Instruments, Inc. | 3,300 | 65,010 |
LeCroy Corp.* | 14,900 | 347,766 |
Rofin-Sinar Technologies, Inc.* | 8,600 | 365,070 |
X-Rite, Inc. | 12,000 | 192,120 |
1,524,534 | ||
Internet Software & Services 0.2% | ||
Digital River, Inc.* | 5,600 | 233,016 |
DoubleClick, Inc.* | 23,700 | 184,386 |
EarthLink, Inc.* | 20,100 | 231,552 |
eSPEED, Inc. "A"* | 14,600 | 180,602 |
F5 Networks, Inc.* | 4,900 | 238,728 |
InfoSpace, Inc.* | 3,700 | 175,935 |
S1 Corp.* | 3,500 | 31,710 |
1,275,929 | ||
IT Consulting & Services 1.2% | ||
Accenture Ltd. "A"* | 58,800 | 1,587,600 |
Automatic Data Processing, Inc. | 70,700 | 3,135,545 |
CSG Systems International, Inc.* | 15,900 | 297,330 |
eFunds Corp.* | 7,200 | 172,872 |
Fiserv, Inc.* | 54,300 | 2,182,317 |
Paychex, Inc. | 22,300 | 759,984 |
Sapient Corp.* | 18,400 | 145,544 |
8,281,192 | ||
Semiconductors & Semiconductor Equipment 2.8% | ||
ADE Corp.* | 10,200 | 190,944 |
Applied Materials, Inc.* | 142,100 | 2,429,910 |
Axcelis Technologies, Inc.* | 33,700 | 273,981 |
Diodes, Inc.* | 11,300 | 255,719 |
Integrated Device Technology, Inc.* | 23,400 | 270,504 |
Intel Corp. | 321,200 | 7,512,868 |
|
| Value ($) |
|
| |
Kulicke & Soffa Industries, Inc.* | 21,200 | 182,744 |
Linear Technology Corp. | 48,600 | 1,883,736 |
LTX Corp.* | 24,300 | 186,867 |
Micrel, Inc.* | 21,300 | 234,726 |
Microsemi Corp.* | 15,900 | 276,024 |
OmniVision Technologies, Inc.* | 12,400 | 227,540 |
Photronics, Inc.* | 14,200 | 234,300 |
Silicon Image, Inc.* | 14,900 | 245,254 |
Siliconix, Inc.* | 1,600 | 58,384 |
Standard Microsystems Corp.* | 11,600 | 206,828 |
Supertex, Inc.* | 900 | 19,530 |
Texas Instruments, Inc. | 140,400 | 3,456,648 |
18,146,507 | ||
Software 3.1% | ||
Adobe Systems, Inc. | 8,400 | 527,016 |
Ansoft Corp.* | 11,500 | 232,300 |
Aspen Technology, Inc.* | 24,000 | 149,040 |
Borland Software Corp.* | 24,400 | 284,992 |
Electronic Arts, Inc.* | 40,700 | 2,510,376 |
Embarcadero Technologies, Inc.* | 24,200 | 227,722 |
Epicor Software Corp.* | 19,000 | 267,710 |
EPIQ Systems, Inc.* | 14,800 | 216,672 |
FactSet Research Systems, Inc. | 1,800 | 105,192 |
Internet Security Systems, Inc.* | 7,800 | 181,350 |
Interwoven, Inc.* | 15,200 | 165,376 |
Intuit, Inc.* | 24,200 | 1,065,042 |
Kronos, Inc.* | 7,300 | 373,249 |
Macrovision Corp.* | 6,700 | 172,324 |
Microsoft Corp. | 369,200 | 9,861,332 |
MicroStrategy, Inc.* | 22 | 1,326 |
Oracle Corp.* | 102,700 | 1,409,044 |
Quest Software, Inc.* | 2,200 | 35,090 |
SeaChange International, Inc.* | 11,900 | 207,536 |
Sonic Solutions* | 14,700 | 329,868 |
SS&C Technologies, Inc. | 11,000 | 227,150 |
Symantec Corp.* | 57,600 | 1,483,776 |
20,033,483 | ||
Materials 2.4% | ||
Chemicals 1.2% | ||
Air Products & Chemicals, Inc. | 47,700 | 2,765,169 |
Albermarle Corp. | 1,400 | 54,194 |
Compass Minerals International, Inc. | 15,700 | 380,411 |
Dow Chemical Co. | 28,900 | 1,430,839 |
Ecolab, Inc. | 40,800 | 1,433,304 |
FMC Corp.* | 9,700 | 468,510 |
Georgia Gulf Corp. | 9,100 | 453,180 |
Octel Corp. | 15,200 | 316,312 |
Terra Industries, Inc.* | 33,200 | 294,816 |
W.R. Grace & Co.* | 17,800 | 242,258 |
7,838,993 | ||
Containers & Packaging 0.4% | ||
Silgan Holdings, Inc. | 2,100 | 128,016 |
Sonoco Products Co. | 79,200 | 2,348,280 |
2,476,296 | ||
|
| Value ($) |
|
| |
Metals & Mining 0.7% | ||
Alcoa, Inc. | 94,700 | 2,975,474 |
Century Aluminum Co.* | 12,700 | 333,502 |
Hecla Mining Co.* | 34,000 | 198,220 |
Oregon Steel Mills, Inc.* | 16,100 | 326,669 |
Quanex Corp. | 6,800 | 466,276 |
Steel Dynamics, Inc. | 7,000 | 265,160 |
4,565,301 | ||
Paper & Forest Products 0.1% | ||
Buckeye Technologies, Inc.* | 4,600 | 59,846 |
Deltic Timber Corp. | 1,600 | 67,920 |
Pope & Talbot, Inc. | 8,800 | 150,568 |
Potlatch Corp. | 10,700 | 541,206 |
819,540 | ||
Telecommunication Services 0.5% | ||
Diversified Telecommunication Services 0.4% | ||
CT Communications, Inc. | 9,100 | 111,930 |
General Communication, Inc. "A"* | 24,900 | 274,896 |
North Pittsburgh Systems, Inc. | 2,800 | 69,244 |
PTEK Holdings, Inc.* | 24,300 | 260,253 |
SBC Communications, Inc. | 60,700 | 1,564,239 |
Verizon Communications, Inc. | 14,000 | 567,140 |
2,847,702 | ||
Wireless Telecommunication Services 0.1% | ||
Alamosa Holdings, Inc.* | 14,200 | 177,074 |
Centennial Communications Corp.* | 23,300 | 184,769 |
361,843 | ||
Utilities 0.4% | ||
Electric Utilities 0.3% | ||
PNM Resources, Inc. | 15,800 | 399,582 |
Progress Energy, Inc. | 28,900 | 1,307,436 |
1,707,018 | ||
Gas Utilities 0.0% | ||
Southern Union Co.* | 2,800 | 67,144 |
Multi-Utilities 0.1% | ||
Energen Corp. | 10,200 | 601,290 |
Total Common Stocks (Cost $328,259,805) | 392,579,874 | |
| ||
Warrants 0.0% | ||
MircoStrategy, Inc.* | 96 | 9 |
TravelCenters of America, Inc.* | 40 | 200 |
Total Warrants (Cost $200) | 209 | |
| ||
Preferred Stocks 0.1% | ||
Paxson Communications Corp. (PIK) | 27 | 198,450 |
TNP Enterprises, Inc., 14.5% "D" (PIK) | 530 | 61,480 |
Total Preferred Stocks (Cost $268,141) | 259,930 |
| Principal | Value ($) |
|
| |
Convertible Bonds 0.0% | ||
DIMON, Inc., 6.25%, 3/31/2007 | 70,000 | 65,625 |
HIH Capital Ltd., 144A, Series DOM, 7.5%, 9/25/2006 | 50,000 | 49,500 |
Total Convertible Bonds (Cost $114,979) | 115,125 | |
| ||
Corporate Bonds 11.2% | ||
Consumer Discretionary 1.9% | ||
Adesa, Inc., 7.625%, 6/15/2012 | 55,000 | 58,025 |
AMC Entertainment, Inc., 8.0%, 3/1/2014 | 145,000 | 144,275 |
American Lawyer Media, Inc., Series B, 9.75%, 12/15/2007 | 170,000 | 171,913 |
Atlantic Broadband Finance LLC, 144A, 9.375%, 1/15/2014 | 175,000 | 169,312 |
Auburn Hills Trust, 12.375%, 5/1/2020 | 83,000 | 130,183 |
Bally Total Fitness Holdings Corp., 10.5%, 7/15/2011 | 155,000 | 156,163 |
Cablevision Systems New York Group, 144A, 6.669%**, 4/1/2009 | 105,000 | 111,300 |
Caesars Entertainment, Inc., 9.375%, 2/15/2007 | 55,000 | 60,638 |
Carrols Corp., 144A, 9.0%, 1/15/2013 | 50,000 | 51,750 |
Charter Communications Holdings LLC: |
| |
Step-up Coupon, 0% to 5/15/2006, 11.75% to 5/15/2011 | 380,000 | 279,300 |
9.625%, 11/15/2009 | 285,000 | 250,087 |
10.25%, 9/15/2010 | 500,000 | 530,000 |
Cooper Standard Automotive, Inc., 144A, 8.375%, 12/15/2014 | 65,000 | 64,838 |
CSC Holdings, Inc., 7.875%, 12/15/2007 | 80,000 | 85,800 |
DaimlerChrysler NA Holdings Corp., 4.75%, 1/15/2008 | 600,000 | 612,811 |
Dex Media East LLC/Financial, 12.125%, 11/15/2012 | 568,000 | 692,250 |
DIMON, Inc., Series B, 9.625%, 10/15/2011 | 305,000 | 333,975 |
Dura Operating Corp.: |
|
|
Series B, 8.625%, 4/15/2012 | 45,000 | 46,800 |
Series B, 9.0%, 5/1/2009 EUR | 25,000 | 32,282 |
Series D, 9.0%, 5/1/2009 | 90,000 | 89,100 |
EchoStar DBS Corp., 144A, 6.625%, 10/1/2014 | 115,000 | 116,438 |
Foot Locker, Inc., 8.5%, 1/15/2022 | 70,000 | 77,000 |
Friendly Ice Cream Corp., 8.375%, 6/15/2012 | 205,000 | 201,156 |
General Motors Corp., 8.25%, 7/15/2023 | 140,000 | 145,834 |
Icon Health & Fitness, Inc., 11.25%, 4/1/2012 | 140,000 | 117,600 |
Interep National Radio Sales, Inc., Series B, 10.0%, 7/1/2008 | 125,000 | 94,219 |
J Crew Intermediate LLC, Step-up Coupon, 0% to 11/15/2005, 16.0% to 5/15/2008 | 34,889 | 33,141 |
Jacobs Entertainment Co., 11.875%, 2/1/2009 | 300,000 | 339,000 |
Levi Strauss & Co.: |
|
|
7.0%, 11/1/2006 | 130,000 | 136,500 |
12.25%, 12/15/2012 | 15,000 | 16,688 |
Mediacom LLC, 9.5%, 1/15/2013 | 295,000 | 296,106 |
| Principal | Value ($) |
|
| |
MGM MIRAGE: |
|
|
8.375%, 2/1/2011 | 260,000 | 293,150 |
9.75% , 6/1/2007 | 40,000 | 44,400 |
Mothers Work, Inc., 11.25%, 8/1/2010 | 80,000 | 77,600 |
NCL Corp., 144A, 10.625%, 7/15/2014 | 190,000 | 190,000 |
Paxson Communications Corp., 10.75%, 7/15/2008 | 120,000 | 126,000 |
PEI Holding, Inc., 11.0%, 3/15/2010 | 170,000 | 198,050 |
Petro Stopping Centers, 9.0%, 2/15/2012 | 250,000 | 264,375 |
Pinnacle Entertainment, Inc., 8.75%, 10/1/2013 | 60,000 | 64,950 |
Premier Entertainment Biloxi LLC/Finance, 10.75%, 2/1/2012 | 50,000 | 54,625 |
PRIMEDIA, Inc.: |
|
|
7.665%**, 5/15/2010 | 225,000 | 238,500 |
8.875%, 5/15/2011 | 145,000 | 153,337 |
Rent-Way, Inc., 11.875%, 6/15/2010 | 50,000 | 56,313 |
Restaurant Co., 1.0%, 5/15/2008 | 199,779 | 202,276 |
Schuler Homes, Inc., 10.5%, 7/15/2011 | 175,000 | 199,062 |
Simmons Bedding Co., 144A, Step-up Coupon, 0% to 12/15/2009, 10.0% to 12/15/2014 | 165,000 | 100,650 |
Sinclair Broadcast Group, Inc.: |
|
|
8.0%, 3/15/2012 | 155,000 | 164,688 |
8.75%, 12/15/2011 | 410,000 | 446,387 |
Sonic Automotive, Inc., Series B, 8.625%, 8/15/2013 | 245,000 | 261,231 |
Tele-Communications, Inc. "A", 9.875%, 6/15/2022 | 670,000 | 951,119 |
Toys "R" Us, Inc.: |
|
|
7.375%, 10/15/2018 | 355,000 | 328,375 |
7.875%, 4/15/2013 | 65,000 | 64,512 |
True Temper Sports, Inc., 8.375%, 9/15/2011 | 95,000 | 88,350 |
Trump Holdings & Funding, 12.625%, 3/15/2010* | 120,000 | 129,900 |
TRW Automotive, Inc., 11.0%, 2/15/2013 | 210,000 | 253,050 |
United Auto Group, Inc., 9.625%, 3/15/2012 | 140,000 | 154,700 |
Venetian Casino Resort LLC, 11.0%, 6/15/2010 | 160,000 | 182,600 |
VICORP Restaurants, Inc., 10.5%, 4/15/2011 | 90,000 | 90,450 |
Virgin River Casino Corp., 144A, 9.0%, 1/15/2012 | 15,000 | 15,600 |
Visteon Corp.: |
|
|
7.0%, 3/10/2014 | 190,000 | 181,450 |
8.25%, 8/1/2010 | 90,000 | 94,275 |
Wheeling Island Gaming, Inc., 10.125%, 12/15/2009 | 130,000 | 138,450 |
Williams Scotsman, Inc., 9.875%, 6/1/2007 | 270,000 | 270,000 |
Worldspan LP/WS Finance Corp., 9.625%, 6/15/2011 | 120,000 | 119,400 |
Wynn Las Vegas LLC, 144A, 6.625%, 12/1/2014 | 320,000 | 316,800 |
XM Satellite Radio, Inc., Step-up Coupon, 0% to 12/31/2005, 14.0% to 12/31/2009 | 165,000 | 168,300 |
| Principal Amount ($)(f) | Value ($) |
|
| |
Young Broadcasting, Inc., 8.75%, 1/15/2014 | 210,000 | 211,575 |
12,538,984 | ||
Consumer Staples 0.2% | ||
Agrilink Foods, Inc., 11.875%, 11/1/2008 | 15,000 | 15,619 |
Church & Dwight Co., Inc., 144A, 6.0%, 12/15/2012 | 85,000 | 86,487 |
Duane Reade, Inc.: |
|
|
144A, 1.0%**, 12/15/2010 | 70,000 | 71,050 |
144A, 9.75%, 8/1/2011 | 175,000 | 159,250 |
North Atlantic Holding, Inc., Step-up Coupon, 0% to 3/1/2008, 12.25% to 3/1/2014 | 70,000 | 28,700 |
Pierre Foods, Inc., 144A, 9.875%, 7/15/2012 | 35,000 | 36,225 |
Pinnacle Foods Holding Corp., 144A, 8.25%, 12/1/2013 | 195,000 | 185,737 |
Prestige Brands, Inc., 144A, 9.25%, 4/15/2012 | 15,000 | 15,938 |
Revlon Consumer Products Corp., 9.0%, 11/1/2006 | 160,000 | 158,400 |
Rite Aid Corp., 11.25%, 7/1/2008 | 30,000 | 32,550 |
Standard Commercial Corp., 8.0%, 4/15/2012 | 80,000 | 82,200 |
Swift & Co., 12.5%, 1/1/2010 | 150,000 | 169,500 |
Wornick Co., 10.875%, 7/15/2011 | 65,000 | 70,525 |
1,112,181 | ||
Energy 0.7% | ||
Avista Corp., 9.75%, 6/1/2008 | 115,000 | 133,338 |
CenterPoint Energy Resources Corp., Series B, 7.875%, 4/1/2013 | 345,000 | 410,064 |
Chesapeake Energy Corp.: |
|
|
6.875%, 1/15/2016 | 100,000 | 104,750 |
9.0%, 8/15/2012 | 140,000 | 159,950 |
CITGO Petroleum Corp., 144A, 6.0%, 10/15/2011 | 60,000 | 59,700 |
Dynegy Holdings, Inc.: |
|
|
6.875%, 4/1/2011 | 15,000 | 14,438 |
7.125%, 5/15/2018 | 215,000 | 191,619 |
7.625%, 10/15/2026 | 55,000 | 47,781 |
144A, 9.875%, 7/15/2010 | 185,000 | 206,737 |
Edison Mission Energy, 7.73%, 6/15/2009 | 410,000 | 440,750 |
El Paso Production Holding Corp., 7.75%, 6/1/2013 | 175,000 | 183,312 |
Enterprise Products Operating LP, 7.5%, 2/1/2011 | 793,000 | 899,099 |
Mission Resources Corp., 9.875%, 4/1/2011 | 155,000 | 165,463 |
Newpark Resources, Inc., Series B, 8.625%, 12/15/2007 | 195,000 | 197,925 |
NGC Corp. Capital Trust, 8.316%, 6/1/2027 | 100,000 | 84,875 |
Pemex Project Funding Master Trust, 144A, 3.79%, 6/15/2010** | 805,000 | 825,930 |
Southern Natural Gas, 8.875%, 3/15/2010 | 105,000 | 117,600 |
Stone Energy Corp.: |
|
|
144A, 6.75%, 12/15/2014 | 90,000 | 89,775 |
8.25%, 12/15/2011 | 215,000 | 232,200 |
Williams Cos., Inc.: |
|
|
8.125%, 3/15/2012 | 215,000 | 248,325 |
| Principal | Value ($) |
|
| |
8.75%, 3/15/2032 | 100,000 | 114,875 |
4,928,506 | ||
Financials 3.4% | ||
AAC Group Holding Corp., 144A, Step-up Coupon, 0% to 10/1/2008, 10.25% to 10/1/2012 | 130,000 | 87,425 |
Affinia Group, Inc., 144A, 9.0%, 11/30/2014 | 235,000 | 244,987 |
Ahold Finance USA, Inc., 6.25%, 5/1/2009 | 105,000 | 109,200 |
American General Finance Corp., Series H, 4.0%, 3/15/2011 | 1,774,000 | 1,720,434 |
AmeriCredit Corp., 9.25%, 5/1/2009 | 235,000 | 252,037 |
BF Saul (REIT), 7.5%, 3/1/2014 | 145,000 | 149,350 |
Capital One Bank, 4.875%, 5/15/2008 | 70,000 | 71,891 |
Dow Jones CDX: |
|
|
144A, Series 3-1, 7.75%, 12/29/2009 | 955,000 | 981,859 |
144A, Series 3-3, 8.0%, 12/29/2009 | 2,065,000 | 2,117,916 |
E*TRADE Financial Corp., 144A, 8.0%, 6/15/2011 | 250,000 | 268,750 |
Farmers Insurance Exchange, 144A, 8.625%, 5/1/2024 | 255,000 | 300,788 |
FINOVA Group, Inc., 7.5%, 11/15/2009 | 1,390,650 | 681,418 |
Ford Motor Credit Co.: |
|
|
5.8%, 1/12/2009 | 792,000 | 809,536 |
6.875%, 2/1/2006 | 2,293,000 | 2,362,249 |
General Motors Acceptance Corp.: |
|
|
6.75%, 1/15/2006 | 3,910,000 | 4,011,191 |
6.875%, 9/15/2011 | 305,000 | 312,562 |
Goldman Sachs Group, Inc., 4.75%, 7/15/2013 | 745,000 | 737,204 |
HSBC Bank USA, 5.875%, 11/1/2034 | 550,000 | 556,929 |
JPMorgan Chase & Co., 5.125%, 9/15/2014 | 570,000 | 573,739 |
LNR Property Corp., 7.625%, 7/15/2013 | 75,000 | 85,125 |
Morgan Stanley, 4.0%, 1/15/2010 | 676,000 | 668,321 |
Poster Financial Group, Inc., 8.75%, 12/1/2011 | 160,000 | 164,400 |
PXRE Capital Trust I, 8.85%, 2/1/2027 | 140,000 | 140,000 |
Qwest Capital Funding, Inc., 6.5%, 11/15/2018 | 150,000 | 124,500 |
R.H. Donnelly Finance Corp., 10.875%, 12/15/2012 | 65,000 | 77,188 |
Radnor Holdings Corp., 11.0%, 3/15/2010 | 70,000 | 60,025 |
RAM Holdings Ltd., 144A, 6.875%, 4/1/2024 | 1,500,000 | 1,473,135 |
Republic New York Corp., 5.875%, 10/15/2008 | 985,000 | 1,048,414 |
Thornburg Mortgage, Inc., 8.0%, 5/15/2013 | 45,000 | 47,813 |
TIG Capital Holdings Trust, 144A, 8.597%, 1/15/2027 | 185,000 | 162,337 |
UGS Corp., 144A, 10.0%, 6/1/2012 | 115,000 | 130,813 |
Universal City Development, 11.75%, 4/1/2010 | 180,000 | 212,625 |
Universal City Florida Holding Co., 144A, 7.2%**, 5/1/2010 | 65,000 | 67,600 |
Venoco, Inc., 144A, 8.75%, 12/15/2011 | 70,000 | 72,100 |
| Principal Amount ($)(f) | Value ($) |
|
| |
Wells Fargo & Co., 4.2%, 1/15/2010 | 1,118,000 | 1,122,544 |
22,006,405 | ||
Health Care 0.7% | ||
AmeriPath, Inc., 10.5%, 4/1/2013 | 110,000 | 116,875 |
AmerisourceBergen Corp., 7.25%, 11/15/2012 | 11,000 | 12,293 |
Cinacalcet Royalty Subordinated LLC, 8.0%, 3/30/2017 | 145,000 | 145,725 |
Curative Health Services, Inc., 10.75%, 5/1/2011 | 95,000 | 85,025 |
Encore Medical Corp., 144A, 9.75%, 10/1/2012 | 85,000 | 85,850 |
Hanger Orthopedic Group, Inc., 10.375%, 2/15/2009 | 145,000 | 149,713 |
Health Care Service Corp., 144A, 7.75%, 6/15/2011 | 2,695,000 | 3,153,155 |
HEALTHSOUTH Corp., 10.75%, 10/1/2008 | 230,000 | 242,650 |
IDI Acquisition Corp., 144A, 10.75%, 12/15/2011 | 50,000 | 51,250 |
InSight Health Services Corp., Series B, 9.875%, 11/1/2011 | 105,000 | 106,050 |
Interactive Health LLC, 144A, 7.75%, 4/1/2011 | 105,000 | 91,350 |
National Mentor, Inc., 144A, 9.625%, 12/1/2012 | 20,000 | 21,250 |
Tenet Healthcare Corp., 6.375%, 12/1/2011 | 555,000 | 514,762 |
4,775,948 | ||
Industrials 1.0% | ||
Aavid Thermal Technologies, Inc., 12.75%, 2/1/2007 | 140,000 | 153,300 |
Allied Security Escrow Corp., 144A, 11.375%, 7/15/2011 | 135,000 | 141,075 |
Allied Waste North America, Inc., Series B, 5.75%, 2/15/2011 | 575,000 | 540,500 |
AMI Semiconductor, Inc., 10.75%, 2/1/2013 | 45,000 | 52,875 |
Avondale Mills, Inc., 144A, 9.00%**, 7/1/2012 | 30,000 | 27,000 |
BAE System 2001 Asset Trust "B", Series 2001, 144A, 7.156%, 12/15/2011 | 309,509 | 335,952 |
Browning-Ferris Industries: |
|
|
7.4%, 9/15/2035 | 70,000 | 61,250 |
9.25%, 5/1/2021 | 15,000 | 15,975 |
Cenveo Corp., 7.875%, 12/1/2013 | 185,000 | 172,050 |
Clean Harbors, Inc., 144A, 11.25%, 7/15/2012 | 30,000 | 33,600 |
Collins & Aikman Floor Cover, Series B, 9.75%, 2/15/2010 | 260,000 | 279,500 |
Collins & Aikman Products, 10.75%, 12/31/2011 | 165,000 | 168,300 |
Continental Airlines, Inc. "B", 8.0%, 12/15/2005 | 140,000 | 136,500 |
Cornell Companies, Inc., 10.75%, 7/1/2012 | 185,000 | 197,719 |
Corrections Corp. of America, 9.875%, 5/1/2009 | 150,000 | 166,500 |
Dana Corp., 7.0%, 3/1/2029 | 210,000 | 209,475 |
Eagle-Picher Industries, Inc., 9.75%, 9/1/2013 | 30,000 | 30,000 |
Erico International Corp., 8.875%, 3/1/2012 | 120,000 | 126,000 |
| Principal Amount ($)(f) | Value ($) |
|
| |
Evergreen International Aviation, Inc., 12.0%, 5/15/2010 | 40,000 | 30,300 |
Goodman Global Holding Co., Inc., 144A, 7.875%, 12/15/2012 | 205,000 | 202,950 |
Interface, Inc., 10.375%, 2/1/2010 | 60,000 | 69,000 |
ISP Chemco, Inc., Series B, 10.25%, 7/1/2011 | 230,000 | 259,900 |
Kansas City Southern: |
|
|
7.5%, 6/15/2009 | 370,000 | 388,500 |
9.5%, 10/1/2008 | 100,000 | 113,625 |
Kinetek, Inc., Series D, 10.75%, 11/15/2006 | 260,000 | 254,150 |
Laidlaw International, Inc., 10.75%, 6/15/2011 | 70,000 | 81,725 |
Millennium America, Inc.: |
|
|
7.625%, 11/15/2026 | 270,000 | 265,950 |
9.25%, 6/15/2008 | 190,000 | 216,125 |
Remington Arms Co., Inc., 10.5%, 2/1/2011 | 125,000 | 120,625 |
Sea Containers Ltd., 10.5%, 5/15/2012 | 45,000 | 47,362 |
Securus Technologies, Inc., 144A, 11.0%, 9/1/2011 | 145,000 | 145,000 |
Ship Finance International Ltd., 8.5%, 12/15/2013 | 175,000 | 180,250 |
SPX Corp.: |
|
|
6.25%, 6/15/2011 | 55,000 | 58,025 |
7.5%, 1/1/2013 | 210,000 | 227,850 |
Technical Olympic USA, Inc.: |
|
|
7.5%, 3/15/2011 | 70,000 | 70,525 |
10.375%, 7/1/2012 | 160,000 | 179,200 |
Texas Genco LLC, 144A, 6.875%, 12/15/2014 | 170,000 | 175,737 |
The Brickman Group, Ltd., Series B, 11.75%, 12/15/2009 | 60,000 | 70,200 |
United Rentals North America, Inc.: |
|
|
6.5%, 2/15/2012 | 155,000 | 151,125 |
7.0%, 2/15/2014 | 120,000 | 112,200 |
7.75%, 11/15/2013 | 80,000 | 78,400 |
Westlake Chemical Corp., 8.75%, 7/15/2011 | 16,000 | 18,080 |
6,364,375 | ||
Information Technology 0.1% | ||
Activant Solutions, Inc., 10.5%, 6/15/2011 | 150,000 | 161,250 |
Itron, Inc., 144A, 7.75%, 5/15/2012 | 105,000 | 106,837 |
Lucent Technologies, Inc., 6.45%, 3/15/2029 | 425,000 | 384,625 |
Spheris, Inc., 144A, 11.0%, 12/15/2012 | 85,000 | 87,125 |
739,837 | ||
Materials 0.9% | ||
Aqua Chemical, Inc., 11.25%, 7/1/2008 | 155,000 | 124,000 |
ARCO Chemical Co., 9.8%, 2/1/2020 | 685,000 | 780,900 |
Associated Materials, Inc., Step-up Coupon, 0% to 3/01/2009, 11.25% to 3/01/2014 | 375,000 | 270,000 |
Caraustar Industries, Inc., 9.875%, 4/1/2011 | 140,000 | 151,900 |
Constar International, Inc., 11.0%, 12/1/2012 | 170,000 | 176,375 |
| Principal | Value ($) |
|
| |
Dayton Superior Corp.: |
|
|
10.75%, 9/15/2008 | 145,000 | 155,150 |
13.0%, 6/15/2009 | 325,000 | 338,000 |
Georgia-Pacific Corp.: |
|
|
8.0%, 1/15/2024 | 365,000 | 423,400 |
9.375%, 2/1/2013 | 185,000 | 215,525 |
Hercules, Inc.: |
|
|
6.75%, 10/15/2029 | 115,000 | 118,738 |
11.125%, 11/15/2007 | 85,000 | 101,150 |
Huntsman Advanced Materials, 144A, 11.0%, 7/15/2010 | 100,000 | 119,000 |
Huntsman International LLC: |
|
|
144A, 7.375%, 1/1/2015 | 50,000 | 50,125 |
144A, 7.5%, 1/1/2015 EUR | 30,000 | 40,777 |
Huntsman LLC, 11.625%, 10/15/2010 | 200,000 | 236,500 |
IMC Global, Inc., 10.875%, 8/1/2013 | 35,000 | 43,750 |
Intermet Corp., 9.75%, 6/15/2009* | 55,000 | 26,950 |
International Steel Group, Inc., 6.5%, 4/15/2014 | 295,000 | 316,387 |
MMI Products, Inc., Series B, 11.25%, 4/15/2007 | 130,000 | 131,950 |
Neenah Corp., 144A, 11.0%, 9/30/2010 | 250,000 | 276,250 |
Omnova Solutions, Inc., 11.25%, 6/1/2010 | 210,000 | 236,250 |
Owens-Brockway Glass Container, 8.25%, 5/15/2013 | 55,000 | 60,500 |
Oxford Automotive, Inc., 144A, 12.0%, 10/15/2010* | 30,000 | 18,900 |
Pliant Corp.: |
|
|
Step-up Coupon, 0.% to 12/15/2006, 11.125% to 6/15/2009 | 25,000 | 23,094 |
11.125%, 9/1/2009 | 180,000 | 196,200 |
Portola Packaging, Inc., 8.25%, 2/1/2012 | 120,000 | 94,800 |
Rockwood Specialties Group, Inc., 144A, 7.625%, 11/15/2014 | 220,000 | 307,632 |
Sheffield Steel Corp., 144A, 11.375%, 8/15/2011 | 85,000 | 87,550 |
TriMas Corp., 9.875%, 6/15/2012 | 385,000 | 408,100 |
United States Steel LLC: |
|
|
9.75%, 5/15/2010 | 133,000 | 151,620 |
10.75%, 8/1/2008 | 60,000 | 70,650 |
5,752,123 | ||
Telecommunication Services 1.0% | ||
American Cellular Corp., Series B, 10.0%, 8/1/2011 | 505,000 | 433,037 |
American Tower Corp., 144A, 7.125%, 10/15/2012 | 85,000 | 86,913 |
AT&T Corp.: |
|
|
9.05%, 11/15/2011 | 175,000 | 201,469 |
9.75%, 11/15/2031 | 170,000 | 202,937 |
Bell Atlantic New Jersey, Inc., Series A, 5.875%, 1/17/2012 | 825,000 | 876,534 |
BellSouth Corp., 5.2%, 9/15/2014 | 610,000 | 621,725 |
Cincinnati Bell, Inc., 8.375%, 1/15/2014 | 580,000 | 587,250 |
Dobson Cellular Systems, Inc., 144A, 6.96%**, 11/1/2011 | 35,000 | 36,225 |
Dobson Communications Corp., 8.875%, 10/1/2013 | 165,000 | 115,912 |
GCI, Inc., 7.25%, 2/15/2014 | 120,000 | 120,000 |
| Principal | Value ($) |
|
| |
Insight Midwest LP, 9.75%, 10/1/2009 | 35,000 | 36,663 |
IWO Escrow Co., 144A, 6.32%**, 1/15/2012 | 15,000 | 15,113 |
LCI International, Inc., 7.25%, 6/15/2007 | 220,000 | 213,950 |
Level 3 Financing, Inc., 144A, 10.75%, 10/15/2011 | 85,000 | 76,925 |
MCI, Inc., 8.735%, 5/1/2014 | 560,000 | 602,000 |
Nextel Communications, Inc., 5.95%, 3/15/2014 | 105,000 | 108,675 |
Nextel Partners, Inc., 8.125%, 7/1/2011 | 130,000 | 144,300 |
Northern Telecom Capital, 7.875%, 6/15/2026 | 60,000 | 59,400 |
PanAmSat Corp., 144A, 9.0%, 8/15/2014 | 300,000 | 334,875 |
Qwest Corp.: |
|
|
7.25%, 9/15/2025 | 480,000 | 466,800 |
144A, 7.875%, 9/1/2011 | 180,000 | 195,300 |
Qwest Services Corp.: |
|
|
144A, 14.0%, 12/15/2010 | 70,000 | 84,175 |
144A, 14.5%, 12/15/2014 | 430,000 | 543,950 |
Rural Cellular Corp., 9.875%, 2/1/2010 | 120,000 | 122,100 |
SBA Telecom, Inc., Step-up Coupon, 0% to 12/15/2007, 9.75% to 12/15/2011 | 55,000 | 46,338 |
Triton PCS, Inc., 8.5%, 6/1/2013 | 35,000 | 33,775 |
Ubiquitel Operating Co., 9.875%, 3/1/2011 | 25,000 | 28,063 |
US Unwired, Inc., Series B, 10.0%, 6/15/2012 | 170,000 | 191,675 |
Western Wireless Corp., 9.25%, 7/15/2013 | 30,000 | 32,625 |
6,618,704 | ||
Utilities 1.3% | ||
AES Corp., 144A, 8.75%, 5/15/2013 | 35,000 | 39,769 |
Allegheny Energy Supply Co. LLC, 144A, 8.25%, 4/15/2012 | 75,000 | 83,813 |
Calpine Corp.: |
|
|
8.25%, 8/15/2005 | 144,000 | 145,440 |
144A, 8.5%, 7/15/2010 | 215,000 | 184,362 |
CMS Energy Corp., 8.5%, 4/15/2011 | 20,000 | 22,725 |
Consumers Energy Co.: |
|
|
Series F, 4.0%, 5/15/2010 | 1,245,000 | 1,222,849 |
144A, 5.0%, 2/15/2012 | 975,000 | 992,519 |
DPL, Inc., 6.875%, 9/1/2011 | 280,000 | 305,797 |
Midwest Generation LLC, 8.75%, 5/1/2034 | 80,000 | 90,800 |
NorthWestern Corp., 144A, 5.875%, 11/1/2014 | 55,000 | 56,263 |
NRG Energy, Inc., 144A, 8.0%, 12/15/2013 | 525,000 | 572,250 |
Pedernales Electric Cooperative, Series 02-A, 144A, 6.202%, 11/15/2032 | 1,050,000 | 1,129,674 |
Progress Energy, Inc., 6.75%, 3/1/2006 | 1,275,000 | 1,323,011 |
PSE&G Energy Holdings LLC: |
|
|
8.5%, 6/15/2011 | 155,000 | 176,894 |
10.0%, 10/1/2009 | 165,000 | 195,112 |
TNP Enterprises, Inc., Series B, 10.25%, 4/1/2010 | 85,000 | 90,738 |
| Principal | Value ($) |
|
| |
Xcel Energy, Inc., 7.0%, 12/1/2010 | 1,780,000 | 2,006,469 |
8,638,485 | ||
Total Corporate Bonds (Cost $72,042,402) | 73,475,548 | |
|
|
|
Foreign Bonds — US$ Denominated 5.3% | ||
Consumer Discretionary 0.2% | ||
Advertising Directory Solutions, Inc., 144A, 9.25%, 11/15/2012 | 110,000 | 115,500 |
Jafra Cosmetics International, Inc., 10.75%, 5/15/2011 | 235,000 | 265,550 |
Kabel Deutschland GmbH, 144A, 10.625%, 7/1/2014 | 245,000 | 281,750 |
Shaw Communications, Inc.: |
|
|
7.25%, 4/6/2011 | 60,000 | 66,150 |
8.25%, 4/11/2010 | 415,000 | 472,062 |
Vicap SA, 11.375%, 5/15/2007 | 25,000 | 25,313 |
Vitro Envases Norteamerica SA, 144A, 10.75%, 7/23/2011 | 85,000 | 88,188 |
Vitro SA de CV, Series A, 144A, 11.75%, 11/1/2013 | 200,000 | 193,500 |
1,508,013 | ||
Consumer Staples 0.1% | ||
Burns Philip Capital Property Ltd., 10.75%, 2/15/2011 | 140,000 | 157,500 |
Fage Dairy Industry SA, 9.0%, 2/1/2007 | 230,000 | 231,150 |
Grupo Cosan SA, 144A, 9.0%, 11/1/2009 | 50,000 | 52,250 |
440,900 | ||
Energy 0.3% | ||
Gazprom OAO, 144A, 9.625%, 3/1/2013 | 300,000 | 354,000 |
Luscar Coal Ltd., 9.75%, 10/15/2011 | 105,000 | 119,175 |
Petroleos Mexicanos, Series P, 9.5%, 9/15/2027 | 450,000 | 567,000 |
Petroleum Geo-Services ASA, 10.0%, 11/5/2010 | 624,002 | 711,362 |
Secunda International Ltd., 144A, 9.76%**, 9/1/2012 | 140,000 | 137,200 |
1,888,737 | ||
Financials 1.9% | ||
Arcel Finance Ltd., 144A, 5.984%, 2/1/2009 | 954,930 | 986,261 |
Conproca SA de CV, 12.0%, 6/16/2010 | 100,000 | 126,000 |
Deutsche Telekom International Finance BV: |
|
|
8.5%, 6/15/2010 | 240,000 | 285,930 |
8.75%, 6/15/2030 | 1,149,000 | 1,517,206 |
Eircom Funding, 8.25%, 8/15/2013 | 155,000 | 171,275 |
Endurance Specialty Holdings Ltd., 7.0%, 7/15/2034 | 195,000 | 200,791 |
Mantis Reef Ltd., 144A, 4.692%, 11/14/2008 | 1,115,000 | 1,118,255 |
Mizuho Financial Group, 8.375%, 12/29/2049 | 1,865,000 | 2,043,853 |
New ASAT (Finance) Ltd., 144A, 9.25%, 2/1/2011 | 175,000 | 158,813 |
QBE Insurance Group Ltd., 144A, 5.647%**, 7/1/2023 | 1,155,000 | 1,134,412 |
| Principal | Value ($) |
|
| |
Royal Bank of Scotland Group PLC, Series 3, 7.816%, 11/29/2049 | 1,045,000 | 1,086,640 |
Westfield Capital Corp., 144A, 4.375%, 11/15/2010 | 3,475,000 | 3,436,987 |
12,266,423 | ||
Health Care 0.0% | ||
Biovail Corp., 7.875%, 4/1/2010 | 110,000 | 113,850 |
Elan Financial PLC, 144A, 7.75%, 11/15/2011 | 30,000 | 31,950 |
145,800 | ||
Industrials 0.3% | ||
CP Ships Ltd., 10.375%, 7/15/2012 | 170,000 | 196,137 |
Grupo Transportacion Ferroviaria Mexicana SA de CV: |
|
|
10.25%, 6/15/2007 | 235,000 | 250,275 |
11.75%, 6/15/2009 | 85,000 | 86,594 |
12.5%, 6/15/2012 | 98,000 | 114,415 |
LeGrand SA, 8.5%, 2/15/2025 | 130,000 | 153,400 |
Stena AB: |
|
|
144A, 7.0%, 12/1/2016 | 55,000 | 54,450 |
9.625% , 12/1/2012 | 95,000 | 107,350 |
Tyco International Group SA: |
|
|
6.875%, 1/15/2029 | 481,000 | 550,991 |
7.0%, 6/15/2028 | 484,000 | 562,716 |
2,076,328 | ||
Information Technology 0.1% | ||
Flextronics International Ltd., 144A, 6.25%, 11/15/2014 | 190,000 | 188,100 |
Magnachip Semiconductor SA: |
|
|
144A, 6.875%, 12/15/2011 | 70,000 | 72,100 |
144A, 8.0%, 12/15/2014 | 65,000 | 67,763 |
327,963 | ||
Materials 1.0% | ||
Alrosa Finance SA, 144A, 8.875%, 11/17/2014 | 125,000 | 128,438 |
Avecia Group PLC, 11.0%, 7/1/2009 | 385,000 | 396,550 |
Cascades, Inc.: |
|
|
7.25%, 2/15/2013 | 225,000 | 238,500 |
144A, 7.25%, 2/15/2013 | 10,000 | 10,600 |
Celulosa Arauco y Constitucion SA, 7.75%, 9/13/2011 | 435,000 | 504,480 |
Citigroup (JSC Severstal), 144A, 9.25%, 4/19/2014 | 200,000 | 199,000 |
Citigroup Global (Severstal), 8.625%, 2/24/2009 | 24,000 | 24,098 |
Crown Euro Holdings SA, 10.875%, 3/1/2013 | 125,000 | 147,812 |
ISPAT Inland ULC, 9.75%, 4/1/2014 | 150,000 | 185,250 |
Rhodia SA, 8.875%, 6/1/2011 | 150,000 | 151,125 |
Sappi Papier Holding AG, 144A, 6.75%, 6/15/2012 | 1,735,000 | 1,927,774 |
Sino-Forest Corp., 144A, 9.125%, 8/17/2011 | 85,000 | 92,863 |
Sociedad Concesionaria Autopista Central, 144A, 6.223%, 12/15/2026 | 2,015,000 | 2,114,460 |
Tembec Industries, Inc., 8.5%, 2/1/2011 | 620,000 | 623,100 |
6,744,050 | ||
| Principal | Value ($) |
|
| |
Sovereign Bonds 0.9% | ||
Dominican Republic, 9.04%, 1/23/2013 | 100,000 | 83,750 |
Federative Republic of Brazil: |
|
|
8.875%, 10/14/2019 | 215,000 | 226,610 |
9.25%, 10/22/2010 | 280,000 | 313,040 |
11.0%, 8/17/2040 | 310,000 | 367,815 |
Government of Ukraine, 7.65%, 6/11/2013 | 300,000 | 320,400 |
Republic of Argentina: |
|
|
Series BGLO, 8.375%, 12/20/2049* | 595,000 | 193,375 |
11.75%, 4/7/2009* | 515,000 | 175,100 |
11.75%, 6/15/2015* | 475,000 | 160,312 |
Republic of Bulgaria, 8.25%, 1/15/2015 | 300,000 | 377,220 |
Republic of Colombia: |
|
|
10.75%, 1/15/2013 | 50,000 | 59,750 |
11.75%, 2/25/2020 | 40,000 | 51,400 |
Republic of Ecuador, Step-up Coupon 8.0% to 8/15/2005, 9.0% to 8/15/2006, 10.0% to 8/15/2030 | 170,000 | 146,625 |
Republic of Philippines, 9.375%, 1/18/2017 | 270,000 | 280,463 |
Republic of Turkey: |
|
|
7.25%, 3/15/2015 | 135,000 | 138,712 |
9.0%, 6/30/2011 | 20,000 | 22,850 |
9.5%, 1/15/2014 | 45,000 | 53,100 |
11.75%, 6/15/2010 | 300,000 | 376,500 |
11.875%, 1/15/2030 | 260,000 | 374,400 |
Republic of Venezuela: |
|
|
9.25%, 9/15/2027 | 140,000 | 147,700 |
10.75%, 9/19/2013 | 270,000 | 323,325 |
Russian Federation: |
|
|
Step-up Coupon, 5.0% to 3/31/2007, 7.5% to 3/31/2030 | 400,000 | 413,760 |
11.0%, 7/24/2018 | 230,000 | 321,586 |
Russian Ministry of Finance, Series VII, 3.0%, 5/14/2011 | 60,000 | 50,598 |
United Mexican States: |
|
|
Series A, 6.75%, 9/27/2034 | 375,000 | 370,312 |
8.375%, 1/14/2011 | 125,000 | 146,813 |
11.375%, 9/15/2016 | 270,000 | 398,520 |
5,894,036 | ||
Telecommunication Services 0.5% | ||
Alestra SA de RL de CV, 8.0%, 6/30/2010 | 35,000 | 29,663 |
America Movil SA de CV, 144A, 5.75%, 1/15/2015 | 790,000 | 788,198 |
Axtel SA, 11.0%, 12/15/2013 | 200,000 | 215,500 |
Embratel, Series B, 11.0%, 12/15/2008 | 145,000 | 165,300 |
Esprit Telecom Group PLC, 11.5%, 12/15/2007* | 630,000 | 63 |
Global Crossing UK Finance, 144A, 10.75%, 12/15/2014 | 160,000 | 158,000 |
Inmarsat Finance PLC, 7.625%, 6/30/2012 | 160,000 | 166,400 |
Innova S. de R.L., 9.375%, 9/19/2013 | 100,000 | 113,750 |
INTELSAT, 6.5%, 11/1/2013 | 200,000 | 182,000 |
Millicom International Cellular SA, 144A, 10.0%, 12/1/2013 | 315,000 | 329,569 |
Mobifon Holdings BV, 12.5% , 7/31/2010 | 65,000 | 77,106 |
| Principal | Value ($) |
|
| |
Mobile Telesystems Financial, 144A, 8.375%, 10/14/2010 | 110,000 | 112,200 |
Nortel Networks Corp., 6.875%, 9/1/2023 | 260,000 | 244,400 |
Nortel Networks Ltd., 6.125%, 2/15/2006 | 580,000 | 590,150 |
Rogers Wireless Communications, Inc., 6.375%, 3/1/2014 | 115,000 | 113,850 |
3,286,149 | ||
Utilities 0.0% | ||
Calpine Canada Energy Finance, 8.5%, 5/1/2008 | 345,000 | 282,900 |
Total Foreign Bonds — US$ Denominated (Cost $34,707,820) | 34,861,299 | |
| ||
Foreign Bonds — Non US$ Denominated 0.7% | ||
Consumer Discretionary 0.0% | ||
Victoria Acquisition III BV, 144A, 7.875%, 10/1/2014 EUR | 80,000 | 109,284 |
Industrials 0.1% | ||
Grohe Holdings GmbH, 144A, 8.625%, 10/1/2014 EUR | 185,000 | 269,063 |
Materials 0.0% | ||
Rhodia SA, 9.25%, 6/1/2011 EUR | 115,000 | 159,049 |
Sovereign Bonds 0.6% | ||
Mexican Bonds: |
|
|
Series M-20, 8.0%, | 2,750,000 | 192,675 |
Series MI-10, 8.0%, | 44,797,000 | 3,579,500 |
Republic of Argentina: |
|
|
Series FEB, 11.0%, | 80,000 | 31,806 |
Step-up Coupon, 8.25% to 7/16/2006, 9.0% to | 180,000 | 71,565 |
Republic of Colombia, 11.75%, 3/1/2010 COP | 131,000,000 | 57,081 |
Republic of Romania, 5.75%, 7/2/2010 EUR | 110,000 | 163,318 |
4,095,945 | ||
Total Foreign Bonds — Non US$ Denominated (Cost $4,469,099) | 4,633,341 | |
| ||
Asset Backed 2.9% | ||
Automobile Receivables 0.2% | ||
Daimler Chrysler Auto Trust "A4", Series 2002-A, 4.49%, 10/6/2008 | 672,000 | 676,146 |
MMCA Automobile Trust: |
|
|
"A4", Series 2002-4, 3.05%, 11/16/2009 | 700,000 | 697,937 |
"B", Series 2002-1, 5.37%, 1/15/2010 | 327,711 | 331,095 |
1,705,178 | ||
| Principal | Value ($) |
|
| |
Home Equity Loans 2.4% | ||
Argent NIM Trust "A", Series 2004-WN2, 144A, 4.55%, 4/25/2034 | 396,093 | 396,861 |
Countrywide Asset-Backed Certificates, "N1", Series 2004-2N, 144A, 5.0%, 2/25/2035 | 639,347 | 636,189 |
Countrywide Home Equity Loan Trust: |
|
|
Series 2004-C , 2.32%**, 1/15/2034 | 1,352,885 | 1,350,007 |
"2A", Series 2004-D, 2.35%**, 6/15/2029 | 1,651,283 | 1,651,282 |
Countrywide Home Loan: "A16", Series 2002-36, 5.25%, 1/25/2033 | 250,507 | 250,389 |
"1A6", Series 2003-1, 5.5%, 3/25/2033 | 352,932 | 353,882 |
Long Beach Asset Holdings Corp., "N1", Seies 2004-2, 144A, 4.94%, 6/25/2034 | 1,640,741 | 1,636,639 |
Master Alternative Loan Trust, "5A1", Series 2005-1, 5.5%, 1/1/2019 (c) | 1,290,000 | 1,326,886 |
Merrill Lynch Mortgage Investors, Inc., "A2B", Series 2004-HE2, 2.798%**, 8/25/2035 | 1,840,000 | 1,841,291 |
Park Place Securities NIM Trust: |
|
|
"A", Series 2004-MHQ1, 144A, 2.487%, 12/25/2034 | 1,293,605 | 1,293,605 |
"C", Series 2004-MHQ1, 144A, 4.458%, 12/25/2034 | 1,445,000 | 1,445,000 |
Park Place Securities Trust, "B", Series 2004-WHQ1, 144A, 3.483%, 9/25/2034 | 1,555,000 | 1,552,667 |
Residential Asset Securities Corp., "AI6", Series 2000-KS1, 7.905%, 2/25/2031 | 1,741,772 | 1,814,561 |
15,549,259 | ||
Industrials 0.3% | ||
Delta Air Lines, Inc., "G-2", Series 2002-1, 6.417%, 7/2/2012 | 868,000 | 906,126 |
Northwest Airlines, "G", Series 1999-3, 7.935%, 4/1/2019 | 804,126 | 880,155 |
1,786,281 | ||
Total Asset Backed (Cost $19,104,253) | 19,040,718 | |
| ||
US Government Agency Sponsored Pass-Throughs 1.0% | ||
Federal National Mortgage Association: |
| |
5.0% with various maturities from 6/1/2018 until 3/1/2034 | 3,965,751 | 3,965,028 |
6.0%, 11/1/2017 | 818,371 | 859,089 |
6.5% with various maturities from 5/1/2017 until 9/1/2034 | 1,503,946 | 1,579,834 |
8.0%, 9/1/2015 | 304,995 | 324,394 |
Total US Government Agency Sponsored Pass-Throughs (cost $6,728,364) | 6,728,345 | |
| ||
US Government Backed 3.4% | ||
US Treasury Bill, 1.56%**, 1/20/2005 (e) | 30,000 | 29,975 |
| Principal | Value ($) |
|
| |
US Treasury Bond: |
|
|
6.0%, 2/15/2026 | 6,507,000 | 7,453,820 |
7.25%, 5/15/2016 | 3,396,000 | 4,250,838 |
7.5%, 11/15/2016 | 240,000 | 306,703 |
US Treasury Note: |
|
|
3.25%, 1/15/2009 | 9,449,000 | 9,367,058 |
4.25%, 11/15/2013 | 970,000 | 976,101 |
Total US Government Backed (Cost $21,765,475) | 22,384,495 | |
| ||
Commercial and Non-Agency Mortgage-Backed Securities 2.3% | ||
Bank of America Mortgage Securities, "2A6", Series 2004-G, 4.657%**, 8/25/2034 | 2,275,000 | 2,308,576 |
Bank of America-First Union Commercial Mortgage, Inc., "A1", Series 2001-3, 4.89%, 4/11/2037 | 753,626 | 770,617 |
Citigroup Mortgage Loan Trust, Inc., "1CB2", Series 2004-NCM2, 6.75%, 8/25/2034 | 249,145 | 259,655 |
Countrywide Alternative Loan Trust, "1A1", Series 2004-J1, 6.0%, 2/25/2034 | 552,355 | 559,991 |
Countrywide Home Loans, "A5", Series 2002-27, 5.5%, 12/25/2032 | 631,480 | 631,825 |
First Union-Lehman Brothers Commercial Mortgae, "A3", Series 1997-C1, 7.38%, 4/18/2029 | 1,639,701 | 1,744,730 |
Master Adjustable Rate Mortgages Trust, "9A2", Series 2004-5, 4.88%**, 6/25/2032 | 1,200,000 | 1,203,475 |
Master Alternative Loan Trust: |
|
|
"3A1", Series 2004-5, 6.5%, 6/25/2034 | 319,168 | 332,234 |
"8A1", Series 2004-3, 7.0%, 4/25/2034 | 621,960 | 649,753 |
Master Asset Securitization Trust, "8A1", Series 2003-6, 5.5%, 7/25/2033 | 1,107,927 | 1,116,929 |
Mortgage Capital Funding, Inc., "A3", Series 1997-MC1, 7.288%, 7/20/2027 | 1,152,161 | 1,191,259 |
Residential Asset Securities Corp., "AI", Series 2003-KS9, 4.71%, 3/25/2033 | 1,845,000 | 1,874,116 |
Structured Asset Securities Corp., "2A1", Series 2003-1, 6.0%, 2/25/2018 | 105,819 | 109,787 |
Wachovia Bank Commercial Mortgage Trust, "A5", Series 2004-C11, 5.215%, 1/15/2041 | 1,097,000 | 1,129,422 |
Washington Mutual Mortgage Securities Corp.: |
|
|
"A7, Series 2004-AR9, 4.267%, 8/25/2034 | 1,098,000 | 1,098,865 |
"4A1", Series 2002-S7, 4.5%, 11/25/2032 | 204,173 | 204,567 |
Total Commercial and Non-Agency Mortgage-Backed Securities (Cost $15,222,370) | 15,185,801 | |
| ||
Collateralized Mortgage Obligations 7.1% | ||
Fannie Mae, "A1", Series 2002-93, 6.5%, 3/25/2032 | 479,385 | 497,038 |
| Principal | Value ($) |
|
| |
Fannie Mae Grantor Trust: |
|
|
"1A3", Series 2004-T2, 7.0%, 11/25/2043 | 562,651 | 596,233 |
"A2", Series 2002-T16, 7.0%, 7/25/2042 | 1,315,416 | 1,393,927 |
Fannie Mae Whole Loan: |
|
|
"3A2B", Series 2003-W10, 3.056%, 7/25/2037 | 1,250,000 | 1,240,246 |
"1A3", Series 2004-W1, 4.49%, 11/25/2043 | 1,195,000 | 1,200,508 |
"2A", Series 2002-W1, 7.5%, 2/25/2042 | 866,549 | 925,744 |
"5A", Series 2004-W2, 7.5%, 3/25/2044 | 1,718,056 | 1,839,049 |
Federal Home Loan Mortgage Corp.: |
| |
"PV", Series 2726, 3.5%, 4/15/2026 | 1,645,000 | 1,640,101 |
"QC", Series 2694, 3.5%, 9/15/2020 | 1,900,000 | 1,888,295 |
"NB", Series 2750, 4.0%, 12/15/2022 | 1,558,000 | 1,555,936 |
"ME", Series 2691, 4.5%, 4/15/2032 | 3,040,000 | 2,908,995 |
"PE", Series 2727, 4.5%, 7/15/2032 | 1,250,000 | 1,191,966 |
"QH", Series 2694, 4.5%, 3/15/2032 | 2,990,000 | 2,880,253 |
"PE", Series 2777, 5.0%, 4/15/2033 | 2,365,000 | 2,348,994 |
"PQ", Series 2844, 5.0%, 5/15/2023 | 2,220,000 | 2,287,088 |
"QC", Series 2836, 5.0%, 9/15/2022 | 2,220,000 | 2,279,616 |
"TE", Series 2780, 5.0%, 1/15/2033 | 1,685,000 | 1,675,349 |
"PE", Series 2512, 5.5%, 2/15/2022 | 420,000 | 436,118 |
"BD", Series 2453, 6.0%, 5/15/2017 | 2,250,000 | 2,347,692 |
Federal National Mortgage Association: |
| |
"NE", Series 2004-52, 4.5%, 7/25/2033 | 1,118,000 | 1,062,241 |
"QG", Series 2004-29, 4.5%, 12/25/2032 | 1,245,000 | 1,183,932 |
"WB", Series 2003-106, 4.5%, 10/25/2015 | 1,870,000 | 1,897,847 |
"A2", Series 2002-W10, 4.7%, 8/25/2042 | 13,886 | 13,874 |
"KY", Series 2002-55, 4.75%, 4/25/2028 | 138,093 | 137,873 |
"1A3", Series 2003-W19, 4.783%, 11/25/2033 | 1,175,000 | 1,181,965 |
"PD", Series 2002-31, 6.0%, 11/25/2021 | 6,500,000 | 6,721,396 |
"PM", Series 2001-60, 6.0%, 3/25/2030 | 555,004 | 562,179 |
"HM", Series 2002-36, 6.5%, 12/25/2029 | 111,715 | 113,051 |
FHLMC Structured Pass-Through Securities, "3A", Series T-58, 7.0%, 9/25/2043 | 871,147 | 922,327 |
Government National Mortgage Association, "PD", Series 2004-30, 5.0%, 2/20/2033 | 1,115,000 | 1,109,851 |
Total Collateralized Mortgage Obligations (Cost $45,449,574) | 46,039,684 | |
| ||
| Principal | Value ($) |
|
| |
Municipal Investments 1.9% | ||
Broward County, FL, Airport Revenue, Airport Systems Revenue, Series J-2, 6.13%, 10/1/2007 (d) | 1,000,000 | 1,062,080 |
Illinois, Higher Education Revenue, Educational Facilities Authority, Series C, 7.1%, 7/1/2012 (d) | 1,000,000 | 1,156,040 |
Mashantucket, CT, Special Assessment Revenue, Western Pequot Tribe Special Revenue, Series A, 144A, 6.57%, 9/1/2013 (d) | 1,285,000 | 1,410,030 |
New York, General Obligation, Environmental Facilities Corp., Series B, 4.95%, 1/1/2013 (d) | 1,895,000 | 1,933,260 |
Ohio, Sales & Special Tax Revenue, 7.6%, 10/1/2016 (d) | 1,000,000 | 1,081,940 |
Passaic County, NJ, County General Obligation, 5.0%, 2/15/2017 (d) | 1,735,000 | 1,727,886 |
Texas, American Campus Properties Student Housing Financing Ltd, 6.125%, 8/1/2023 (d) | 1,040,000 | 1,109,857 |
Union County, NJ, Improvement Authority, Student Loan Revenue, 5.29%, 4/1/2018 (d) | 1,185,000 | 1,208,807 |
Washington, Industrial Development Revenue, 3.5%, 10/1/2010 (d) | 1,840,000 | 1,766,529 |
Total Municipal Investments (Cost $12,310,926) | 12,456,429 | |
| ||
Government National Mortgage Association 0.4% | ||
Government National Mortgage Association: |
|
|
5.0%, 9/20/2033 | 1,053,108 | 1,054,020 |
6.0%, 7/20/2034 | 1,637,251 | 1,696,008 |
Total Government National Mortgage Association (Cost $2,727,906) | 2,750,028 |
|
| Value ($) |
|
| |
Other Investments 0.1% | ||
Hercules Trust II (Bond Unit) | 510,000 | 428,400 |
| ||
Exchange Traded Fund 0.1% | ||
Semiconductor HOLDRs Trust (Cost $843,677) | 24,200 | 807,312 |
| ||
Cash Equivalents 3.2% | ||
Scudder Cash Management QP Trust, 2.24% (b) (Cost $21,146,078) | 21,146,078 | 21,146,078 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $585,559,850) (a) | 99.7 | 652,892,616 |
Other Assets and Liabilities, Net | 0.3 | 1,657,614 |
Net Assets | 100.0 | 654,550,230 |
Notes to Scudder Total Return Portfolio of Investments |
* Non-income producing security. In the case of a bond, generally denotes that the issuer has defaulted on the payment of principal or interest. The following table represents bonds that are in default.
Security | Coupon | Maturity Date | Principal Amount | Acqusition Cost | Value | |
Esprit Telecom Group PLC | 11.5 | 12/15/2007 | 630,000 | USD | $ 640,458 | $ 63 |
Intermet Corp. | 9.75 | 6/15/2009 | 55,000 | USD | 22,550 | 26,950 |
Oxford Automotive, Inc. | 12 | 10/15/2010 | 30,000 | USD | 14,325 | 18,900 |
Republic of Argentina: | ||||||
| 8.375 | 12/20/2049 | 595,000 | USD | 189,508 | 193,375 |
| 9 | 7/6/2010 | 180,000 | EUR | 70,101 | 71,565 |
| 11 | 2/26/2008 | 80,000 | EUR | 31,417 | 31,806 |
| 11.75 | 4/7/2009 | 515,000 | USD | 170,525 | 175,100 |
| 11.75 | 6/15/2015 | 475,000 | USD | 157,766 | 160,312 |
Trump Holdings & Funding | 12.625 | 3/15/2010 | 120,000 | USD | 130,500 | 129,900 |
|
|
|
|
| $ 1,427,150 | $ 807,971 |
** Floating rate notes are securities whose yields vary with a designed market value, such as the coupon-equivalent of the US Treasury Bill rate. These securities are shown at their current rate as of December 31, 2004.
(a) The cost for federal income tax purposes was $592,425,338. At December 31, 2004, net unrealized appreciation for all securities based on tax cost was $60,467,278. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $68,448,883 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $7,981,605.
(b) Scudder Cash Management QP Trust is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
(c) When-issued of forward delivery security (see Notes to Financial Statements).
(d) Bond is insured by one of these companies:
Insurance Coverage | As a % of | |
AMBAC | AMBAC Assurance Corp. | 0.5 |
FGIC | Financial Guaranty Insurance Company | 0.3 |
FSA | Financial Security Assurance | 0.7 |
MBIA | Municipal Bond Investors Assurance | 0.4 |
(e) At December 31, 2004, this security has been pledged to cover, in whole or part, initial margin requirements for open future contracts.
Futures | Expiration Date | Contracts | Aggregate Face Value ($) | Value ($) | Unrealized Depreciation ($) |
Russell 2000 | 3/17/2005 | 2 | 655,784 | 653,950 | (1,834) |
(f) Principal amount stated in US dollars unless otherwise noted.
144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registrations, normally to qualified institutional buyers.
ADR: American Depositary Receipts
PIK: Denotes that all or a portion of the income is paid in kind.
REIT: Real Estate Investment Trust
HOLDRs: Holding Company Depositary Receipts
Included in the portfolio are investments in mortgage or asset-backed securities which are interests in separate pools of mortgages or assets. Effective maturities of these investments may be shorter than stated maturities due to prepayments. Some separate investments in the Federal Home Loan Mortgage Corp. and the Federal National Mortgage Association and the Government National Mortgage Association issues which have similar coupon rates have been aggregated for presentation purposes in the investment portfolio.
Currency Abbreviations | |
COP | Colombian Peso |
EUR | Euro |
MXN | Mexican Peso |
The accompanying notes are an integral part of the financial statements.
Financial Statements |
|
Statement of Assets and Liabilities as of December 31, 2004 | |
Assets | |
Investments: Investments in securities, at value (cost $564,413,772) | $ 631,746,538 |
Investment in Scudder Cash Management QP Trust (cost $21,146,078) | 21,146,078 |
Total investments in securities, at value (cost $585,559,850) | 652,892,616 |
Cash | 39,710 |
Foreign currency, at value (cost $39,896) | 40,789 |
Receivable for investments sold | 1,340,611 |
Dividends receivable | 578,618 |
Interest receivable | 2,976,490 |
Receivable for Portfolio shares sold | 16,775 |
Unrealized appreciation on forward foreign currency exchange contracts | 127,902 |
Receivable for daily variation margin on open futures contracts | 450 |
Foreign taxes recoverable | 2,988 |
Other assets | 17,537 |
Total assets | 658,034,486 |
Liabilities | |
Payable for investments purchased | 496,312 |
Payable for when-issued and forward delivery securities | 1,332,798 |
Payable for Portfolio shares redeemed | 984,908 |
Unrealized depreciation on forward foreign currency exchange contracts | 227,351 |
Net payable on closed forward foreign currency exchange contracts | 5,293 |
Accrued management fee | 319,427 |
Other accrued expenses and payables | 118,167 |
Total liabilities | 3,484,256 |
Net assets, at value | $ 654,550,230 |
Net Assets | |
Net assets consist of: Undistributed net investment income | 13,460,556 |
Net unrealized appreciation (depreciation) on: Investments | 67,332,766 |
Futures | (1,834) |
Foreign currency related transactions | (94,375) |
Accumulated net realized gain (loss) | (83,333,181) |
Paid-in capital | 657,186,298 |
Net assets, at value | $ 654,550,230 |
Class A Net Asset Value, offering and redemption price per share ($621,557,263 ÷ 27,789,320 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 22.37 |
Class B Net Asset Value, offering and redemption price per share ($32,992,967 ÷ 1,477,597 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 22.33 |
Statement of Operations for the year ended December 31, 2004 | |
Investment Income | |
Income: Dividends (net of foreign taxes withheld of $112) | $ 5,902,441 |
Interest | 12,315,633 |
Interest — Scudder Cash Management QP Trust | 244,726 |
Securities lending income, including income from Daily Assets Fund Institutional | 372 |
Total Income | 18,463,172 |
Expenses: Management fee | 3,670,402 |
Custodian fees | 39,230 |
Distribution service fees (Class B) | 66,432 |
Record keeping fees (Class B) | 34,972 |
Auditing | 22,235 |
Legal | 25,057 |
Trustees' fees and expenses | 26,175 |
Reports to shareholders | 105,061 |
Other | 33,337 |
Total expenses, before expense reductions | 4,022,901 |
Expense reductions | (6,817) |
Total expenses, after expense reductions | 4,016,084 |
Net investment income (loss) | 14,447,088 |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from: Investments | 39,747,609 |
Futures | 176,115 |
Foreign currency related transactions | (11,382) |
| 39,912,342 |
Net unrealized appreciation (depreciation) during the period on: Investments | (12,074,667) |
Futures | (1,834) |
Foreign currency related transactions | (94,879) |
| (12,171,380) |
Net gain (loss) on investment transactions | 27,740,962 |
Net increase (decrease) in net assets resulting from operations | $ 42,188,050 |
The accompanying notes are an integral part of the financial statements.
|
Statement of Changes in Net Assets | ||
Increase (Decrease) in Net Assets | Years Ended December 31, | |
2004 | 2003 | |
Operations: Net investment income (loss) | $ 14,447,088 | $ 12,222,026 |
Net realized gain (loss) on investment transactions | 39,912,342 | (15,813,854) |
Net unrealized appreciation (depreciation) on investment and foreign currency transactions during the period | (12,171,380) | 112,165,816 |
Net increase (decrease) in net assets resulting from operations | 42,188,050 | 108,573,988 |
Distributions to shareholders from: Net investment income Class A | (10,706,370) | (19,941,338) |
Class B | (287,648) | (91,069) |
Portfolio share transactions: Class A Proceeds from shares sold | 8,149,762 | 10,694,541 |
Reinvestment of distributions | 10,706,370 | 19,941,338 |
Cost of shares redeemed | (94,301,996) | (90,416,600) |
Net increase (decrease) in net assets from Class A share transactions | (75,445,864) | (59,780,721) |
Class B Proceeds from shares sold | 12,535,568 | 19,711,965 |
Reinvestment of distributions | 287,648 | 91,069 |
Cost of shares redeemed | (2,353,690) | (1,167,522) |
Net increase (decrease) in net assets from Class B share transactions | 10,469,526 | 18,635,512 |
Increase (decrease) in net assets | (33,782,306) | 47,396,372 |
Net assets at beginning of period | 688,332,536 | 640,936,164 |
Net assets at end of period (including undistributed net investment income of $13,460,556 and $10,239,991, respectively) | $ 654,550,230 | $ 688,332,536 |
Other Information | ||
Class A Shares outstanding at beginning of period | 31,305,397 | 34,306,666 |
Shares sold | 380,053 | 549,966 |
Shares issued to shareholders in reinvestment of distributions | 499,597 | 1,101,123 |
Shares redeemed | (4,395,727) | (4,652,358) |
Net increase (decrease) in Portfolio shares | (3,516,077) | (3,001,269) |
Shares outstanding at end of period | 27,789,320 | 31,305,397 |
Class B Shares outstanding at beginning of period | 988,869 | 43,090 |
Shares sold | 584,945 | 999,072 |
Shares issued to shareholders in reinvestment of distributions | 13,398 | 5,023 |
Shares redeemed | (109,615) | (58,316) |
Net increase (decrease) in Portfolio shares | 488,728 | 945,779 |
Shares outstanding at end of period | 1,477,597 | 988,869 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights |
|
Class A
Years Ended December 31, | 2004 | 2003 | 2002 | 2001a | 2000b |
Selected Per Share Data | |||||
Net asset value, beginning of period | $ 21.32 | $ 18.66 | $ 22.57 | $ 25.91 | $ 28.82 |
Income (loss) from investment operations: Net investment income (loss)c | .47 | .37 | .47 | .61 | .74 |
Net realized and unrealized gain (loss) on investment transactions | .93 | 2.90 | (3.81) | (2.20) | (1.40) |
Total from investment operations | 1.40 | 3.27 | (3.34) | (1.59) | (.66) |
Less distributions from: Net investment income | (.35) | (.61) | (.57) | (.80) | (.90) |
Net realized gains on investment transactions | — | — | — | (.95) | (1.35) |
Total distributions | (.35) | (.61) | (.57) | (1.75) | (2.25) |
Net asset value, end of period | $ 22.37 | $ 21.32 | $ 18.66 | $ 22.57 | $ 25.91 |
Total Return (%) | 6.64 | 18.10 | (15.17) | (6.09) | (2.63) |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | 622 | 667 | 640 | 861 | 851 |
Ratio of expenses (%) | .59 | .59 | .58 | .58 | .61 |
Ratio of net investment income (loss) (%) | 2.18 | 1.88 | 2.32 | 2.63 | 2.75 |
Portfolio turnover rate (%) | 131d | 102d | 140 | 115 | 107 |
a As required, effective January 1, 2001, the Portfolio adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium on debt securities. In addition, paydowns on mortgage-backed securities which were included in realized gain/loss on investment transactions prior to January 1, 2001 were included as interest income. The effect of this change for the year ended December 31, 2001 was to decrease net investment income per share by $.03, increase net realized and unrealized gains and losses per share by $.03 and decrease the ratio of net investment income to average net assets from 2.76% to 2.63%. Per share, ratios and supplemental data for periods prior to January 1, 2001 were not restated to reflect this change in presentation.
b On June 18, 2001, the Portfolio implemented a 1 for 10 reverse stock split. Per share information, for the period prior to December 31, 2001, has been restated to reflect the effect of the split. Shareholders received 1 share for every 10 shares owned and net asset value per share increased correspondingly.
c Based on average shares outstanding during the period.
d The portfolio turnover rate including mortgage dollar roll transactions was 140% and 108% for the periods ended December 31, 2004 and December 31, 2003, respectively.
Class B
Years Ended December 31, | 2004 | 2003 | 2002a |
Selected Per Share Data | |||
Net asset value, beginning of period | $ 21.28 | $ 18.64 | $ 19.46 |
Income (loss) from investment operations: Net investment income (loss)b | .39 | .28 | .18 |
Net realized and unrealized gain (loss) on investment transactions | .92 | 2.92 | (1.00) |
Total from investment operations | 1.31 | 3.20 | (.82) |
Less distributions from: Net investment income | (.26) | (.56) | — |
Net asset value, end of period | $ 22.33 | $ 21.28 | $ 18.64 |
Total Return (%) | 6.26 | 17.66 | (4.21)** |
Ratios to Average Net Assets and Supplemental Data | |||
Net assets, end of period ($ millions) | 33 | 21 | .8 |
Ratio of expenses (%) | .97 | .99 | .86* |
Ratio of net investment income (loss) (%) | 1.80 | 1.48 | 1.96* |
Portfolio turnover rate (%) | 131c | 102c | 140 |
a For the period July 1, 2002 (commencement of operations of Class B shares) to December 31, 2002.
b Based on average shares outstanding during the period.
c The portfolio turnover rate including mortgage dollar roll transactions was 140% and 108% for the periods ended December 31, 2004 and December 31, 2003, respectively.
* Annualized
** Not annualized
Performance Summary December 31, 2004 |
|
SVS Davis Venture Value Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns.
The Portfolio is subject to stock market and equity risks, meaning stocks in the Portfolio may decline in value for extended periods of time due to the activities and financial prospects of individual companies, or due to general market and economic conditions. Please read this Portfolio's prospectus for specific details regarding its investments and risk profile.
Growth of an Assumed $10,000 Investment in SVS Davis Venture Value Portfolio from 5/1/2001 to 12/31/2004 | ||
[] SVS Davis Venture Value Portfolio — Class A [] Russell 1000 Value Index |
| |
![]() |
| Russell 1000 Value Index is an unmanaged index, which consists of those stocks in the Russell 1000 Index with lower price-to-book ratios and lower forecasted-growth values. Index returns assume reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
|
|
Comparative Results | ||||
SVS Davis Venture Value Portfolio |
| 1-Year | 3-Year | Life of Portfolio* |
Class A | Growth of $10,000 | $11,183 | $12,227 | $11,616 |
Average annual total return | 11.83% | 6.93% | 4.17% | |
Russell 1000 Value Index | Growth of $10,000 | $11,649 | $12,796 | $12,233 |
Average annual total return | 16.49% | 8.57% | 5.65% | |
SVS Davis Venture Value Portfolio |
|
| 1-Year | Life of Class** |
Class B | Growth of $10,000 |
| $11,142 | $13,505 |
Average annual total return |
| 11.42% | 12.76% | |
Russell 1000 Value Index | Growth of $10,000 |
| $11,649 | $13,438 |
Average annual total return |
| 16.49% | 12.55% |
The growth of $10,000 is cumulative.
* The Portfolio commenced operations on May 1, 2001. Index returns begin April 30, 2001.
** The Portfolio commenced offering Class B shares on July 1, 2002. Index returns begin June 30, 2002.
Information About Your Portfolio's Expenses |
|
SVS Davis Venture Value Portfolio
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. The tables are based on an investment of $1,000 made at the beginning of the six-month period ended December 31, 2004.
The tables illustrate your Portfolio's expenses in two ways:
Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2004 | ||
Actual Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,071.90 | $ 1,070.00 |
Expenses Paid per $1,000* | $ 5.32 | $ 7.33 |
Hypothetical 5% Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,020.07 | $ 1,018.12 |
Expenses Paid per $1,000* | $ 5.18 | $ 7.15 |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365.
Annualized Expense Ratios | Class A | Class B |
Scudder Variable Series II — SVS Davis Venture Value Portfolio | 1.02% | 1.40% |
For more information, please refer to the Portfolio's prospectus.
Management Summary December 31, 2004 |
|
SVS Davis Venture Value Portfolio
For the year ended December 31, 2004, the portfolio returned 11.83% (Class A shares, unadjusted for contract charges), compared with its benchmark, the Russell 1000 Value Index, which returned 16.49%. Looking at large US stocks in 2004, value outperformed growth, with the Russell 1000 Value Index beating its counterpart 16.49% to 6.30%. This trend benefited the portfolio with its value focus.
Important contributors to and detractors from the portfolio's performance relative to the S&P 500 index over the course of the year include:
All of the portfolio's consumer staples holdings performed well, including Altria Group, Inc. and Costco Wholesale Corp.
Whereas in 2003 the portfolio's large financial services holdings were the most important contributors to strong performance, in 2004 the portfolio's financial service holdings trailed the S&P 500 by a small margin. Although American Express Co., CenterPoint Properties Corp., Golden West Financial Corp. and Loews Corp. turned in strong performances, other financial holdings turned in weaker performances, including Fifth Third Bancorp, Transatlantic Holdings, Inc. and Marsh & McLennan Companies, Inc. (down since being purchased in June).
In general, information technology companies underperformed the broader market in 2004. The portfolio benefited by having only limited exposure to information technology companies.
Other positive contributors to performance included Tyco International Ltd., an industrials company, and ConocoPhillips, an energy company. Other notable detractors from performance included Rentokil Initial PLC, an industrial company, down since being acquired in January, and health care companies Pfizer (no longer held) and Eli Lilly & Co.
Christopher C. Davis
Kenneth Charles Feinberg
Co-Managers
Davis Selected Advisers, L.P., Subadvisor to the Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the portfolio or any variable life insurance policy or variable annuity contract for which the portfolio is an investment option. These charges and fees will reduce returns.
Risk Considerations
The portfolio is subject to stock market and equity risks, meaning stocks in the portfolio may decline in value for extended periods of time due to the activities and financial prospects of individual companies, or due to general market and economic conditions. Please read this portfolio's prospectus for specific details regarding its investments and risk profile.
Russell 1000 Value Index is an unmanaged index, which consists of those stocks in the Russell 1000 Index with lower price-to-book ratios and lower forecasted-growth values. Index returns assume reinvestment of all distributions and do not reflect fees or expenses. It is not possible to invest directly into an 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 all distributions and do not reflect fees or expenses. It is not possible to invest directly into an index.
Portfolio management market commentary is as of December 31, 2004, and may not come to pass. This information is subject to change at any time based on market and other conditions.
In this report Davis Selected Advisers makes candid statements and observations regarding economic and market conditions; however, there is no guarantee that these statements, opinions or forecasts will prove to be correct. All investments involve some degree of risk, and there can be no assurance that the investment strategies will be successful. Market values will vary so that an investor may experience a gain or a loss.
Portfolio Summary |
SVS Davis Venture Value Portfolio
Asset Allocation (Excludes Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Common Stocks | 94% | 93% |
Cash Equivalents | 6% | 7% |
| 100% | 100% |
Sector Diversification (Excludes Cash Equivalents and Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Financials | 50% | 55% |
Consumer Staples | 12% | 13% |
Industrials | 9% | 8% |
Energy | 9% | 7% |
Consumer Discretionary | 7% | 4% |
Materials | 5% | 5% |
Health Care | 4% | 5% |
Information Technology | 3% | 3% |
Telecommunication Services | 1% | — |
| 100% | 100% |
Asset allocation and sector diversification are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 7. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Portfolio as of month end will be posted to scudder.com on the 15th of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio December 31, 2004 | ![]() | ![]() |
|
SVS Davis Venture Value Portfolio
|
| Value ($) |
|
| |
Common Stocks 94.0% | ||
Consumer Discretionary 7.0% | ||
Household Durables 0.0% | ||
Hunter Douglas NV | 900 | 48,016 |
Internet & Catalog Retail 0.6% | ||
IAC/InterActiveCorp.* (d) | 67,800 | 1,872,636 |
Media 5.6% | ||
Comcast Corp. "A"* | 361,200 | 11,861,808 |
Gannett Co., Inc. | 21,000 | 1,715,700 |
Lagardere S.C.A. | 54,700 | 3,948,036 |
WPP Group PLC (ADR) (d) | 20,700 | 1,131,255 |
18,656,799 | ||
Specialty Retail 0.8% | ||
AutoZone, Inc.* | 31,400 | 2,867,134 |
Consumer Staples 11.7% | ||
Beverages 2.3% | ||
Diageo PLC (ADR) | 83,300 | 4,821,404 |
Heineken Holding NV "A" | 95,600 | 2,891,260 |
7,712,664 | ||
Food & Staples Retailing 3.2% | ||
Costco Wholesale Corp. | 216,700 | 10,490,447 |
Food Products 0.9% | ||
Hershey Foods Corp. | 55,600 | 3,088,024 |
Tobacco 5.3% | ||
Altria Group, Inc. | 290,600 | 17,755,660 |
Energy 8.4% | ||
Energy Equipment & Services 0.7% | ||
Transocean, Inc.* | 53,600 | 2,272,104 |
Oil & Gas 7.7% | ||
ConocoPhillips | 88,660 | 7,698,348 |
Devon Energy Corp. | 165,600 | 6,445,152 |
EOG Resources, Inc. | 70,400 | 5,023,744 |
Occidental Petroleum Corp. | 116,300 | 6,787,268 |
25,954,512 | ||
Financials 47.1% | ||
Banks 12.1% | ||
Fifth Third Bancorp. (d) | 86,500 | 4,089,720 |
Golden West Financial Corp. | 153,800 | 9,446,396 |
HSBC Holdings PLC | 631,210 | 10,652,259 |
Lloyds TSB Group PLC (ADR) (d) | 77,800 | 2,862,262 |
Takefuji Corp. | 37,900 | 2,563,160 |
Wells Fargo & Co. | 172,600 | 10,727,090 |
40,340,887 | ||
Capital Markets 1.0% | ||
Morgan Stanley | 47,500 | 2,637,200 |
State Street Corp. | 15,500 | 761,360 |
3,398,560 | ||
|
| Value ($) |
|
| |
Consumer Finance 7.3% | ||
American Express Co. | 407,100 | 22,948,226 |
Providian Financial Corp.* | 91,500 | 1,507,005 |
24,455,231 | ||
Diversified Financial Services 7.9% | ||
Citigroup, Inc. | 216,700 | 10,440,606 |
JPMorgan Chase & Co. | 269,484 | 10,512,571 |
Moody's Corp. | 48,200 | 4,186,170 |
Principal Financial Group, Inc. | 30,300 | 1,240,482 |
26,379,829 | ||
Insurance 17.1% | ||
American International Group, Inc. | 228,700 | 15,018,729 |
Aon Corp. (d) | 96,800 | 2,309,648 |
Berkshire Hathaway, Inc. "B"* | 5,005 | 14,694,680 |
Chubb Corp. | 13,100 | 1,007,390 |
Loews Corp. | 89,100 | 6,263,730 |
Markel Corp.* | 900 | 327,600 |
Marsh & McLennan Companies, Inc. | 107,900 | 3,549,910 |
Progressive Corp. | 104,300 | 8,848,812 |
Sun Life Financial, Inc. (d) | 18,200 | 610,428 |
Transatlantic Holdings, Inc. | 71,437 | 4,416,950 |
57,047,877 | ||
Real Estate 1.7% | ||
CenterPoint Properties Corp. (REIT) | 121,600 | 5,823,424 |
Health Care 4.0% | ||
Health Care Providers & Services 2.6% | ||
Cardinal Health, Inc. | 75,500 | 4,390,325 |
HCA, Inc. | 109,200 | 4,363,632 |
8,753,957 | ||
Pharmaceuticals 1.4% | ||
Eli Lilly & Co. | 55,700 | 3,160,975 |
Novartis AG (Registered) | 28,500 | 1,436,153 |
4,597,128 | ||
Industrials 8.5% | ||
Air Freight & Logistics 0.8% | ||
United Parcel Service, Inc. "B" | 32,800 | 2,803,088 |
Commercial Services & Supplies 3.8% | ||
D&B Corp.* | 49,900 | 2,976,535 |
H&R Block, Inc. | 106,300 | 5,208,700 |
Iron Mountain, Inc.* | 102,700 | 3,131,323 |
Rentokil Initial PLC | 446,600 | 1,266,850 |
12,583,408 | ||
Industrial Conglomerates 3.9% | ||
Tyco International Ltd. | 364,462 | 13,025,872 |
Information Technology 2.7% | ||
Communications Equipment 0.3% | ||
Nokia Oyj (ADR) | 62,600 | 980,942 |
Computers & Peripherals 1.4% | ||
Lexmark International, Inc. "A"* | 53,400 | 4,539,000 |
Software 1.0% | ||
Microsoft Corp. | 127,700 | 3,410,867 |
|
| Value ($) |
|
| |
Materials 4.1% | ||
Construction Materials 1.3% | ||
Martin Marietta Materials, Inc. | 42,500 | 2,280,550 |
Vulcan Materials Co. | 42,400 | 2,315,464 |
4,596,014 | ||
Containers & Packaging 2.8% | ||
Sealed Air Corp.* | 174,700 | 9,306,269 |
Telecommunication Services 0.5% | ||
Wireless Telecommunication Services | ||
SK Telecom Co., Ltd. (ADR) (d) | 71,600 | 1,593,100 |
Total Common Stocks (Cost $248,054,008) | 314,353,449 | |
| ||
|
| Value ($) |
|
| |
Securities Lending Collateral 3.1% | ||
Daily Assets Fund Institutional, 2.25% (c) (e) (Cost $10,435,680) | 10,435,680 | 10,435,680 |
| ||
Cash Equivalents 6.1% | ||
Scudder Cash Management QP Trust, 2.24% (b) (Cost $20,428,223) | 20,428,223 | 20,428,223 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $278,917,911) (a) | 103.2 | 345,217,352 |
Other Assets and Liabilities, Net | (3.2) | (10,679,504) |
Net Assets | 100.0 | 334,537,848 |
Notes to SVS Davis Venture Value Portfolio of Investments |
* Non-income producing security.
(a) The cost for federal income tax purposes was $279,729,834. At December 31, 2004, net unrealized appreciation for all securities based on tax cost was $65,487,518. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $69,049,069 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $3,561,551.
(b) Scudder Cash Management QP Trust is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
(c) Daily Assets Fund Institutional, an affiliated fund, is managed by Deutsche Asset Management, Inc. The rate shown is the annualized seven-day yield at period end.
(d) All or a portion of these securities were on loan (see Notes to Financials Statements). The value of all securities loaned at December 31, 2004 amounted to $10,214,640, which is 3.1% of total net assets.
(e) Represents collateral held in connection with securities lending.
ADR: American Depositary Receipt
REIT: Real Estate Investment Trust
The accompanying notes are an integral part of the financial statements.
Financial Statements |
|
Statement of Assets and Liabilities as of December 31, 2004 | |
Assets | |
Investments: Investments in securities, at value (cost $248,054,008) — including $10,214,640 of securities loaned | $ 314,353,449 |
Investment in Daily Assets Fund Institutional (cost $10,435,680)* | 10,435,680 |
Investment in Scudder Cash Management QP Trust (cost $20,428,223) | 20,428,223 |
Total investments in securities, at value (cost $278,917,911) | 345,217,352 |
Cash | 13,265 |
Foreign currency, at value (cost $161,215) | 171,550 |
Dividends receivable | 496,277 |
Interest receivable | 35,289 |
Receivable for Portfolio shares sold | 106,501 |
Foreign taxes recoverable | 4,518 |
Other assets | 11,523 |
Total assets | 346,056,275 |
Liabilities | |
Payable for investments purchased | 620,008 |
Payable upon return of securities loaned | 10,435,680 |
Payable for Portfolio shares redeemed | 63,713 |
Accrued management fee | 264,732 |
Other accrued expenses and payables | 134,294 |
Total liabilities | 11,518,427 |
Net assets, at value | $ 334,537,848 |
Net Assets | |
Net assets consist of: Undistributed net investment income | 1,834,272 |
Net unrealized appreciation (depreciation) on: Investments | 66,299,441 |
Foreign currency related transactions | 10,800 |
Accumulated net realized gain (loss) | (7,976,396) |
Paid-in capital | 274,369,731 |
Net assets, at value | $ 334,537,848 |
Class A Net Asset Value, offering and redemption price per share ($268,490,495 ÷ 23,386,408 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 11.48 |
Class B Net Asset Value, offering and redemption price per share ($66,047,353 ÷ 5,765,180 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 11.46 |
* Represents collateral on securities loaned.
Statement of Operations for the year ended December 31, 2004 | |
Investment Income | |
Income: Dividends (net of foreign taxes withheld of $116,150) | $ 4,881,133 |
Interest — Scudder Cash Management QP Trust | 266,599 |
Securities lending income, including income from Daily Assets Fund Institutional | 19,265 |
Total Income | 5,166,997 |
Expenses: Management fee | 2,725,496 |
Custodian and accounting fees | 130,028 |
Distribution service fees (Class B) | 121,863 |
Record keeping fees (Class B) | 61,763 |
Auditing | 73,419 |
Legal | 38,402 |
Trustee's fees and expenses | 4,000 |
Reports to shareholders | 54,191 |
Registration fees | 63 |
Other | 5,924 |
Total expenses, before expense reductions | 3,215,149 |
Expense reductions | (3,045) |
Total expenses, after expense reductions | 3,212,104 |
Net investment income (loss) | 1,954,893 |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from: Investments | (1,151,700) |
Foreign currency related transactions | (6,282) |
| (1,157,982) |
Net unrealized appreciation (depreciation) during the period on: Investments | 32,675,903 |
Foreign currency related transactions | 10,800 |
| 32,686,703 |
Net gain (loss) on investment transactions | 31,528,721 |
Net increase (decrease) in net assets resulting from operations | $ 33,483,614 |
The accompanying notes are an integral part of the financial statements.
|
Statement of Changes in Net Assets | ||
| Years Ended December 31, | |
Increase (Decrease) in Net Assets | 2004 | 2003 |
Operations: Net investment income (loss) | $ 1,954,893 | $ 1,171,027 |
Net realized gain (loss) on investment transactions | (1,157,982) | (1,944,206) |
Net unrealized appreciation (depreciation) on investment transactions during the period | 32,686,703 | 53,830,899 |
Net increase (decrease) in net assets resulting from operations | 33,483,614 | 53,057,720 |
Distributions to shareholders from: Net investment income Class A | (1,002,743) | (926,268) |
Class B | (15,708) | (13,751) |
Portfolio share transactions: Class A Proceeds from shares sold | 39,970,621 | 27,361,668 |
Reinvestment of distributions | 1,002,743 | 926,268 |
Cost of shares redeemed | (19,163,185) | (15,951,017) |
Net increase (decrease) in net assets from Class A share transactions | 21,810,179 | 12,336,919 |
Class B Proceeds from shares sold | 32,936,634 | 24,216,184 |
Reinvestment of distributions | 15,708 | 13,751 |
Cost of shares redeemed | (2,151,840) | (50,102) |
Net increase (decrease) in net assets from Class B share transactions | 30,800,502 | 24,179,833 |
Increase (decrease) in net assets | 85,075,844 | 88,634,453 |
Net assets at beginning of period | 249,462,004 | 160,827,551 |
Net assets at end of period (including undistributed net investment income of $1,834,272 and $964,815, respectively) | $ 334,537,848 | $ 249,462,004 |
Other Information | ||
Class A Shares outstanding at beginning of period | 21,351,155 | 20,031,383 |
Shares sold | 3,746,952 | 3,122,880 |
Shares issued to shareholder in reinvestment of distributions | 93,978 | 122,360 |
Shares redeemed | (1,805,677) | (1,925,468) |
Net increase (decrease) in Portfolio shares | 2,035,253 | 1,319,772 |
Shares outstanding at end of period | 23,386,408 | 21,351,155 |
Class B Shares outstanding at beginning of period | 2,848,268 | 100,387 |
Shares sold | 3,116,302 | 2,751,475 |
Shares issued to shareholder in reinvestment of distributions | 1,471 | 1,817 |
Shares redeemed | (200,861) | (5,411) |
Net increase (decrease) in Portfolio shares | 2,916,912 | 2,747,881 |
Shares outstanding at end of period | 5,765,180 | 2,848,268 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights |
|
Class A
Years Ended December 31, | 2004 | 2003 | 2002 | 2001a |
Selected Per Share Data | ||||
Net asset value, beginning of period | $ 10.31 | $ 7.99 | $ 9.50 | $ 10.00 |
Income (loss) from investment operations: Net investment income (loss)b | .08 | .06 | .05 | .03 |
Net realized and unrealized gain (loss) on investment transactions | 1.14 | 2.31 | (1.55) | (.53) |
Total from investment operations | 1.22 | 2.37 | (1.50) | (.50) |
Less distributions from: Net investment income | (.05) | (.05) | (.01) | — |
Net asset value, end of period | $ 11.48 | $ 10.31 | $ 7.99 | $ 9.50 |
Total Return (%) | 11.83 | 29.84 | (15.79) | (5.00)** |
Ratios to Average Net Assets and Supplemental Data | ||||
Net assets, end of period ($ millions) | 268 | 220 | 160 | 109 |
Ratio of expenses (%) | 1.05 | 1.01 | 1.02 | 1.09* |
Ratio of net investment income (loss) (%) | .74 | .62 | .62 | .48* |
Portfolio turnover rate (%) | 3 | 7 | 22 | 15* |
a For the period from May 1, 2001 (commencement of operations) to December 31, 2001.
b Based on average shares outstanding during the period.
* Annualized
** Not annualized
Class B
Years Ended December 31, | 2004 | 2003 | 2002a |
Selected Per Share Data | |||
Net asset value, beginning of period | $ 10.29 | $ 7.98 | $ 8.52 |
Income (loss) from investment operations: Net investment income (loss)b | .04 | .02 | .04 |
Net realized and unrealized gain (loss) on investment transactions | 1.13 | 2.32 | (.58) |
Total from investment operations | 1.17 | 2.34 | (.54) |
Less distributions from: Net investment income | —*** | (.03) | — |
Net asset value, end of period | $ 11.46 | $ 10.29 | $ 7.98 |
Total Return (%) | 11.42 | 29.42 | (6.34)** |
Ratios to Average Net Assets and Supplemental Data | |||
Net assets, end of period ($ millions) | 66 | 29 | .8 |
Ratio of expenses (%) | 1.44 | 1.40 | 1.27* |
Ratio of net investment income (loss) (%) | .36 | .23 | 1.06* |
Portfolio turnover rate (%) | 3 | 7 | 22 |
a For the period July 1, 2002 (commencement of operations of Class B shares) to December 31, 2002.
b Based on average shares outstanding during the period.
* Annualized
** Not annualized
*** Amount is less than $.005.
Performance Summary December 31, 2004 |
|
SVS Dreman Financial Services Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns.
This Portfolio is subject to stock market risk. It may focus its investments on certain economic sectors, thereby increasing its vulnerability to any single economic, political or regulatory development. This may result in greater share price volatility. Additionally, this Portfolio is non-diversified and can take larger positions in fewer companies, increasing its overall potential risk. Please read this Portfolio's prospectus for specific details regarding its investments and risk profile.
Growth of an Assumed $10,000 Investment in SVS Dreman Financial Services Portfolio from 5/4/1998 to 12/31/2004 | ||
[] SVS Dreman Financial Services Portfolio — Class A [] S&P 500 Index [] S&P Financial Index | ||
![]() |
| The Standard & Poor's (S&P) Financial Index is an unmanaged index generally representative of the financial stock market. The Standard & Poor's (S&P) 500 Index is a capitalization-weighted index of 500 stocks 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 reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
Yearly periods ended December 31 |
|
|
Comparative Results | |||||
SVS Dreman Financial Services Portfolio |
| 1-Year | 3-Year | 5-Year | Life of Portfolio* |
Class A | Growth of $10,000 | $11,200 | $13,130 | $15,870 | $14,735 |
Average annual total return | 12.00% | 9.50% | 9.68% | 5.99% | |
S&P 500 Index | Growth of $10,000 | $11,088 | $11,115 | $8,902 | $12,038 |
Average annual total return | 10.88% | 3.59% | -2.30% | 2.82% | |
S&P Financial Index | Growth of $10,000 | $11,089 | $12,403 | $14,195 | $14,420 |
Average annual total return | 10.89% | 7.44% | 7.26% | 5.64% | |
SVS Dreman Financial Services Portfolio |
|
|
| 1-Year | Life of Class** |
Class B | Growth of $10,000 |
|
| $11,150 | $13,177 |
Average annual total return |
|
| 11.50% | 11.65% | |
S&P 500 Index | Growth of $10,000 |
|
| $11,088 | $12,800 |
Average annual total return |
|
| 10.88% | 10.38% | |
S&P Financial Index | Growth of $10,000 |
|
| $11,089 | $12,953 |
Average annual total return |
|
| 10.89% | 10.90% |
The growth of $10,000 is cumulative.
* The Portfolio commenced operations on May 4, 1998. Index returns begin April 30, 1998. Total returns would have been lower for the 5-Year and Life of Portfolio periods for Class A shares if the Portfolio's expenses were not maintained.
** The Portfolio commenced offering Class B shares on July 1, 2002. Index returns begin June 30, 2002.
Information About Your Portfolio's Expenses |
|
SVS Dreman Financial Services Portfolio
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. The tables are based on an investment of $1,000 made at the beginning of the six-month period ended December 31, 2004.
The tables illustrate your Portfolio's expenses in two ways:
Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2004 | ||
Actual Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,098.50 | $ 1,096.10 |
Expenses Paid per $1,000* | $ 4.45 | $ 6.43 |
Hypothetical 5% Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,020.82 | $ 1,018.93 |
Expenses Paid per $1,000* | $ 4.29 | $ 6.19 |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365.
Annualized Expense Ratios | Class A | Class B |
Scudder Variable Series II — SVS Dreman Financial Services Portfolio | .85% | 1.22% |
For more information, please refer to the Portfolio's prospectus.
Management Summary December 31, 2004 |
|
SVS Dreman Financial Services Portfolio
Financial stocks posted strong gains in 2004, keeping pace with the broader stock market. The portfolio (Class A shares, unadjusted for contract charges) posted a total return of 12.00%, outperforming the 10.88% return of its benchmark, the Standard & Poor's 500, for the year ended December 31, 2004.
Individual stock selection proved more important than sub-sector positioning during the fiscal period ended December 31, 2004. The portfolio's top performers all were among its 10 largest holdings, including Bank of America Corp., American Express Co. and Freddie Mac. Bank of America rebounded steadily from temporary lows sustained after the company's ultimately successful bid to acquire FleetBoston at a substantial premium was announced in October 2003. American Express Co., benefited from increased customer credit card spending, higher balances and improved travel sales. Mortgage giant Freddie Mac, continued to recover from losses suffered after an investigation into the company's accounting practices was launched nearly two years ago. To date, no evidence of illegal action of any kind has been found.
Other portfolio holdings, unfortunately, did not fare as well. Mortgage provider Fannie Mae declined when its accounting practices came under investigation and were deemed improper by the SEC. Citigroup also suffered when, after a breach of securities regulations, it was forced to shut down its private banking business in Japan. We are disappointed by these events. However, the issuers have taken steps to address this situation and we expect the stocks to recover as the controversies abate.
We thank you for your continued investment. We will remain true to our contrarian philosophy of investing, in hopes of adding more value for shareholders over time.
David N. Dreman F. James Hutchinson
Lead Manager Portfolio Manager
Dreman Value Management, L.L.C., Subadvisor to the Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the portfolio or any variable life insurance policy or variable annuity contract for which the portfolio is an investment option. These charges and fees will reduce returns.
Risk Considerations
This portfolio is subject to stock market risk. It may focus its investments on certain economic sectors, thereby increasing its vulnerability to any single economic, political or regulatory development. This may result in greater share price volatility. Additionally, this portfolio is non-diversified and can take larger positions in fewer companies, increasing its overall potential risk. Please read this portfolio's prospectus for specific details regarding its investments and risk profile.
The Standard & Poor's (S&P) Financial Index is an unmanaged index generally representative of the financial stock market. The Standard & Poor's (S&P) 500 Index is a capitalization-weighted index of 500 stocks 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 reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
Portfolio management market commentary is as of December 31, 2004, and may not come to pass. This information is subject to change at any time based on market and other conditions.
Portfolio Summary |
SVS Dreman Financial Services Portfolio
Asset Allocation (Excludes Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Common Stocks | 100% | 96% |
Cash Equivalents | — | 4% |
| 100% | 100% |
Sector Diversification (Excludes Cash Equivalents and Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Banks | 45% | 46% |
Diversified Financial Services | 28% | 30% |
Insurance | 13% | 18% |
Capital Markets | 9% | 2% |
Consumer Finance | 5% | 4% |
| 100% | 100% |
Asset allocation and sector diversification are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 17. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Portfolio as of month end will be posted to scudder.com on the 15th of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio December 31, 2004 | ![]() | ![]() |
|
SVS Dreman Financial Services Portfolio
|
| Value ($) |
|
| |
Common Stocks 99.9% | ||
Financials 99.9% | ||
Banks 44.7% | ||
Bank of America Corp. | 276,120 | 12,974,879 |
Banknorth Group, Inc. | 52,511 | 1,921,903 |
Golden West Financial Corp. | 35,500 | 2,180,410 |
Independence Community Bank Corp. | 15,800 | 672,764 |
KeyCorp | 188,055 | 6,375,064 |
Mercantile Bankshares Corp. | 40,500 | 2,114,100 |
National Bank of Canada | 152,350 | 6,301,770 |
National City Corp. | 59,631 | 2,239,144 |
PNC Financial Services Group | 64,740 | 3,718,666 |
Popular, Inc. | 98,000 | 2,825,340 |
Regions Financial Corp. | 80,172 | 2,853,321 |
Sovereign Bancorp, Inc. | 120,875 | 2,725,731 |
Sterling Financial Corp.* | 1,034 | 40,595 |
US Bancorp | 190,120 | 5,954,558 |
Wachovia Corp. | 86,140 | 4,530,964 |
Washington Mutual, Inc. | 284,932 | 12,046,925 |
Wells Fargo & Co. | 48,610 | 3,021,112 |
| 72,497,246 | |
Capital Markets 8.6% | ||
Bear Stearns Companies, Inc. | 20,640 | 2,111,678 |
Franklin Resources, Inc. | 20,910 | 1,456,382 |
Goldman Sachs Group, Inc. | 19,700 | 2,049,588 |
Lehman Brothers Holdings, Inc. | 20,700 | 1,810,836 |
Merrill Lynch & Co., Inc. | 54,550 | 3,260,453 |
Morgan Stanley | 57,980 | 3,219,050 |
Piper Jaffray Companies, Inc.* | 1,842 | 88,324 |
| 13,996,311 | |
Consumer Finance 5.1% | ||
American Express Co. | 116,450 | 6,564,286 |
SLM Corp. | 30,230 | 1,613,980 |
| 8,178,266 | |
| ||
|
| Value ($) |
|
| |
Diversified Financial Services 28.2% | ||
Allied Capital Corp. (d) | 77,495 | 2,002,471 |
CIT Group, Inc. | 54,390 | 2,492,150 |
Citigroup, Inc. | 137,300 | 6,615,114 |
Fannie Mae | 136,480 | 9,718,741 |
Freddie Mac | 249,305 | 18,373,778 |
JPMorgan Chase & Co. | 165,024 | 6,437,586 |
| 45,639,840 | |
Insurance 13.2% | ||
Allstate Corp. | 39,595 | 2,047,855 |
American International Group, Inc. | 233,173 | 15,312,471 |
Chubb Corp. | 23,030 | 1,771,007 |
Prudential Financial, Inc. | 18,390 | 1,010,714 |
St. Paul Travelers Companies, Inc. | 32,705 | 1,212,374 |
| 21,354,421 | |
Real Estate 0.1% | ||
Government Properties Trust, Inc. (REIT) | 22,800 | 224,808 |
Total Common Stocks (Cost $121,124,627) | 161,890,892 | |
| ||
Securities Lending Collateral 1.1% | ||
Daily Assets Fund Institutional, 2.25% (c) (e) (Cost $1,834,875) | 1,834,875 | 1,834,875 |
| ||
Cash Equivalents 0.2% | ||
Scudder Cash Management QP Trust, 2.24% (b) (Cost $360,509) | 360,509 | 360,509 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $123,320,011) (a) | 101.2 | 164,086,276 |
Other Assets and Liabilities, Net | (1.2) | (1,939,904) |
Net Assets | 100.0 | 162,146,372 |
Notes to SVS Dreman Financial Services Portfolio of Investments |
* Non-income producing security.
(a) The cost for federal income tax purposes was $123,969,302. At December 31, 2004, net unrealized appreciation for all securities based on tax cost was $40,116,974. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $42,366,596 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $2,249,622.
(b) Scudder Cash Management QP Trust is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
(c) Daily Assets Fund Instutional, an affiliated fund, is managed by Deutsche Asset Management, Inc. The rate shown is the annualized seven-day yield at period end.
(d) A portion of this security was on loan. The value of the security loaned at December 31, 2004 amounted to $1,806,216, which is 1.1% of net assets.
(e) Represents collateral held in connection with securities lending.
REIT: Real Estate Investment Trust
The accompanying notes are an integral part of the financial statements.
Financial Statements |
|
Statement of Assets and Liabilities as of December 31, 2004 | |
Assets | |
Investments: Investments in securities, at value (cost $121,124,627) — including $1,806,216 of securities loaned | $ 161,890,892 |
Investment in Daily Assets Fund Institutional (cost $1,834,875)* | 1,834,875 |
Investment in Scudder Cash Management QP Trust (cost $360,509) | 360,509 |
Total investments in securities, at value (cost $123,320,011) | 164,086,276 |
Cash | 10,000 |
Dividends receivable | 143,670 |
Interest receivable | 12,760 |
Receivable for Portfolio shares sold | 25,266 |
Other assets | 10,882 |
Total assets | 164,288,854 |
Liabilities | |
Payable for Portfolio shares redeemed | 133,197 |
Payable upon return of securities loaned | 1,834,875 |
Accrued management fee | 99,842 |
Other accrued expenses and payables | 74,568 |
Total liabilities | 2,142,482 |
Net assets, at value | $ 162,146,372 |
Net Assets | |
Net assets consist of: Undistributed net investment income | 2,663,849 |
Net unrealized appreciation (depreciation) on: Investments | 40,766,265 |
Foreign currency related transactions | 1,558 |
Accumulated net realized gain (loss) | (6,301,571) |
Paid-in capital | 125,016,271 |
Net assets, at value | $ 162,146,372 |
Class A Net Asset Value, offering and redemption price per share ($144,759,973 ÷ 10,645,952 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 13.60 |
Class B Net Asset Value, offering and redemption price per share ($17,386,399 ÷ 1,281,273 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 13.57 |
* Represents collateral on securities loaned.
Statement of Operations for the year ended December 31, 2004 | |
Investment Income | |
Income: Dividends (net of foreign taxes withheld of $33,086) | $ 4,022,501 |
Interest — Scudder Cash Management QP Trust | 23,032 |
Securities lending income, including income from Daily Assets Fund Institutional | 60,833 |
Total Income | 4,106,366 |
Expenses: Management fee | 1,170,409 |
Custodian and accounting fees | 68,365 |
Distribution service fees (Class B) | 34,738 |
Record keeping fees (Class B) | 18,000 |
Auditing | 41,320 |
Legal | 19,946 |
Trustees' fees and expenses | 636 |
Reports to shareholders | 17,773 |
Total expenses, before expense reductions | 1,371,187 |
Expense reductions | (1,896) |
Total expenses, after expense reductions | 1,369,291 |
Net investment income (loss) | 2,737,075 |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from: Investments | 1,312,903 |
Foreign currency related transactions | 913 |
| 1,313,816 |
Net unrealized appreciation (depreciation) during the period on: Investments | 13,544,585 |
Foreign currency related transactions | 971 |
| 13,545,556 |
Net gain (loss) on investment transactions | 14,859,372 |
Net increase (decrease) in net assets resulting from operations | $ 17,596,447 |
The accompanying notes are an integral part of the financial statements.
|
Statement of Changes in Net Assets | ||
| Years Ended December 31, | |
Increase (Decrease) in Net Assets | 2004 | 2003 |
Operations: Net investment income (loss) | $ 2,737,075 | $ 2,369,818 |
Net realized gain (loss) on investment transactions | 1,313,816 | (2,049,136) |
Net unrealized appreciation (depreciation) on investment transactions during the period | 13,545,556 | 32,205,547 |
Net increase (decrease) in net assets resulting from operations | 17,596,447 | 32,526,229 |
Distributions to shareholders from: Net investment income Class A | (2,233,509) | (1,844,106) |
Class B | (138,571) | (20,489) |
Portfolio share transactions: Class A Proceeds from shares sold | 9,238,024 | 11,621,806 |
Reinvestment of distributions | 2,233,509 | 1,844,106 |
Cost of shares redeemed | (23,157,778) | (20,443,301) |
Net increase (decrease) in net assets from Class A share transactions | (11,686,245) | (6,977,389) |
Class B Proceeds from shares sold | 7,389,810 | 8,184,393 |
Reinvestment of distributions | 138,571 | 20,489 |
Cost of shares redeemed | (1,105,504) | (298,889) |
Net increase (decrease) in net assets from Class B share transactions | 6,422,877 | 7,905,993 |
Increase (decrease) in net assets | 9,960,999 | 31,590,238 |
Net assets at beginning of period | 152,185,373 | 120,595,135 |
Net assets at end of period (including undistributed net investment income of $2,663,849 and $2,297,941, respectively) | $ 162,146,372 | $ 152,185,373 |
Other Information | ||
Class A Shares outstanding at beginning of period | 11,569,224 | 12,274,256 |
Shares sold | 730,584 | 1,078,203 |
Shares issued to shareholders in reinvestment of distributions | 176,982 | 200,228 |
Shares redeemed | (1,830,838) | (1,983,463) |
Net increase (decrease) in Portfolio shares | (923,272) | (705,032) |
Shares outstanding at end of period | 10,645,952 | 11,569,224 |
Class B Shares outstanding at beginning of period | 771,080 | 39,762 |
Shares sold | 586,845 | 755,394 |
Shares issued to shareholders in reinvestment of distributions | 10,971 | 2,225 |
Shares redeemed | (87,623) | (26,301) |
Net increase (decrease) in Portfolio shares | 510,193 | 731,318 |
Shares outstanding at end of period | 1,281,273 | 771,080 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights |
|
Class A
Years Ended December 31, | 2004 | 2003 | 2002 | 2001 | 2000a |
Selected Per Share Data | |||||
Net asset value, beginning of period | $ 12.33 | $ 9.79 | $ 10.78 | $ 11.53 | $ 9.24 |
Income (loss) from investment operations: Net investment income (loss)b | .23 | .20 | .15 | .14 | .19 |
Net realized and unrealized gain (loss) on investment transactions | 1.23 | 2.50 | (1.06) | (.71) | 2.27 |
Total from investment operations | 1.46 | 2.70 | (.91) | (.57) | 2.46 |
Less distributions from: Net investment income | (.20) | (.16) | (.08) | (.13) | (.15) |
Net realized gains on investment transactions | — | — | — | (.05) | (.02) |
Total distributions | (.20) | (.16) | (.08) | (.18) | (.17) |
Net asset value, end of period | $ 13.60 | $ 12.33 | $ 9.79 | $ 10.78 | $ 11.53 |
Total Return (%) | 12.00 | 28.13 | (8.51) | (4.86) | 27.04c |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | 145 | 143 | 120 | 117 | 66 |
Ratio of expenses before expense reductions (%) | .84 | .86 | .83 | .86 | .91 |
Ratio of expenses after expense reductions (%) | .84 | .86 | .83 | .86 | .89 |
Ratio of net investment income (loss) (%) | 1.79 | 1.84 | 1.44 | 1.31 | 2.01 |
Portfolio turnover rate (%) | 8 | 7 | 13 | 22 | 13 |
a On June 18, 2001, the Portfolio implemented a 1 for 10 reverse stock split. Share information, for the period prior to December 31, 2001, has been restated to reflect the effect of the split. Shareholders received 1 share for every 10 shares owned and net asset value per share increased correspondingly.
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
Class B
Years Ended December 31, | 2004 | 2003 | 2002a |
Selected Per Share Data | |||
Net asset value, beginning of period | $ 12.31 | $ 9.78 | $ 10.57 |
Income (loss) from investment operations: Net investment income (loss)b | .18 | .14 | .06 |
Net realized and unrealized gain (loss) on investment transactions | 1.22 | 2.53 | (.85) |
Total from investment operations | 1.40 | 2.67 | (.79) |
Less distributions from: Net investment income | (.14) | (.14) | — |
Net asset value, end of period | $ 13.57 | $ 12.31 | $ 9.78 |
Total Return (%) | 11.50 | 27.73 | (7.47)** |
Ratios to Average Net Assets and Supplemental Data | |||
Net assets, end of period ($ millions) | 17 | 9 | .4 |
Ratio of expenses (%) | 1.22 | 1.25 | 1.08* |
Ratio of net investment income (loss) (%) | 1.41 | 1.45 | 1.33* |
Portfolio turnover rate (%) | 8 | 7 | 13 |
a For the period from July 1, 2002 (commencement of operations of Class B shares) to December 31, 2002.
b Based on average shares outstanding during the period.
* Annualized
** Not annualized
Performance Summary December 31, 2004 |
|
SVS Dreman High Return Equity Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns.
The Portfolio may focus its investments on certain economic sectors, thereby increasing its vulnerability to any single economic, political or regulatory development. This may result in greater share price volatility. Please read this Portfolio's prospectus for specific details regarding its investments and risk profile.
Growth of an Assumed $10,000 Investment in SVS Dreman High Return Equity Portfolio from 5/4/1998 to 12/31/2004 | ||
[] SVS Dreman High Return Equity Portfolio — Class A [] 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 reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
Yearly periods ended December 31 |
|
|
Comparative Results | |||||
SVS Dreman High Return Equity Portfolio |
| 1-Year | 3-Year | 5-Year | Life of Portfolio* |
Class A | Growth of $10,000 | $11,395 | $12,333 | $16,369 | $14,958 |
Average annual total return | 13.95% | 7.24% | 10.36% | 6.23% | |
S&P 500 Index | Growth of $10,000 | $11,088 | $11,115 | $8,902 | $12,038 |
Average annual total return | 10.88% | 3.59% | -2.30% | 2.82% | |
SVS Dreman High Return Equity Portfolio |
|
|
| 1-Year | Life of Class** |
Class B | Growth of $10,000 |
|
| $11,353 | $13,660 |
Average annual total return |
|
| 13.53% | 13.27% | |
S&P 500 Index | Growth of $10,000 |
|
| $11,088 | $12,800 |
Average annual total return |
|
| 10.88% | 10.38% |
The growth of $10,000 is cumulative.
* The Portfolio commenced operations on May 4, 1998. Index returns begin April 30, 1998.
** The Portfolio commenced offering Class B shares on July 1, 2002. Index returns begin June 30, 2002.
Information About Your Portfolio's Expenses |
|
SVS Dreman High Return Equity Portfolio
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent six-month period, the Portfolio limited these expenses; had it not done so, expenses would have been higher. The tables are based on an investment of $1,000 made at the beginning of the six-month period ended December 31, 2004.
The tables illustrate your Portfolio's expenses in two ways:
Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2004 | ||
Actual Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,108.70 | $ 1,106.90 |
Expenses Paid per $1,000* | $ 4.19 | $ 6.18 |
Hypothetical 5% Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,021.09 | $ 1,019.20 |
Expenses Paid per $1,000* | $ 4.02 | $ 5.93 |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365.
Annualized Expense Ratios | Class A | Class B |
Scudder Variable Series II — SVS Dreman High Return Equity Portfolio | .79% | 1.17% |
For more information, please refer to the Portfolio's prospectus.
Management Summary December 31, 2004 |
|
SVS Dreman High Return Equity Portfolio
We are pleased to announce that the portfolio (Class A shares, unadjusted for contract changes) posted a total return of 13.95% for the 12-month period ended December 31, 2004. The Class A shares of the portfolio also outperformed the 10.88% return of its benchmark, the Standard & Poor's 500 Index. The portfolio also outperformed the S&P 500 in the three- and five-year periods ended December 31, 2004.
The portfolio's two heaviest overweight positions relative to the benchmark S&P 500 — energy and tobacco companies — proved most advantageous. The strongest performance came from energy stocks, which were driven by historically high oil and natural gas prices. Among individual energy holdings, Transocean, Inc. a drilling company and diversified energy giants ConocoPhillips and Chevron Texaco Corp. were the largest gainers. In tobacco, increased sales and aggressive cost-cutting measures helped bolster profits of Reynolds American Inc., whose subsidiary R.J. Reynolds Tobacco Co. is one of the largest producers and marketers of cigarettes. Smokeless tobacco giant UST, Inc. benefited from increased sales and higher selling prices, which helped the company grow earnings beyond estimates. In order to lock in profits, we pared back the portfolio's position in these stocks as they appreciated.
Financial and pharmaceutical stocks were the most troublesome for the portfolio this year. Merck & Co., Inc. declined dramatically after pulling its osteoarthritis drug, Vioxx from pharmacy shelves when a study linked the medication to a higher incidence of stroke and heart attack. Mortgage provider Fannie Mae declined when its accounting practices came under investigation and were deemed improper by the SEC. While we're disappointed in the events that led to the declines in these holdings, we believe they are temporary setbacks. We continue to hold both stocks.
We're pleased with the portfolio's composition and believe it offers a great deal of value in the coming year. We thank you for your investment and look forward to continuing to serve your needs.
David N. Dreman
F. James Hutchinson
Co-Managers
Dreman Value Management L.L.C., Subadvisor to the Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the portfolio or any variable life insurance policy or variable annuity contract for which the portfolio is an investment option. These charges and fees will reduce returns.
Risk Considerations
The portfolio may focus its investments on certain economic sectors, thereby increasing its vulnerability to any single economic, political or regulatory development. This may result in greater share price volatility. Please read this portfolio's prospectus for specific details regarding its investments and risk profile.
TPortfolio management market commentary is as of December 31, 2004, and may not come to pass. This information is subject to change at any time based on market and other conditions.he 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 all distributions and do not reflect fees or expenses. It is not possible to invest directly into an index.
Portfolio Summary |
SVS Dreman High Return Equity Portfolio
Asset Allocation (Excludes Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Common Stocks | 92% | 90% |
Cash Equivalents | 8% | 10% |
| 100% | 100% |
Sector Diversification (Excludes Cash Equivalents and Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Financials | 34% | 32% |
Consumer Staples | 21% | 21% |
Health Care | 17% | 16% |
Energy | 14% | 10% |
Consumer Discretionary | 8% | 11% |
Industrials | 3% | 4% |
Information Technology | 3% | 5% |
Utilities | — | 1% |
| 100% | 100% |
Asset allocation and sector diversification are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 27. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Portfolio as of month end will be posted to scudder.com on the 15th of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio December 31, 2004 | ![]() | ![]() |
|
SVS Dreman High Return Equity Portfolio
| Shares | Value ($) |
|
| |
Common Stocks 91.6% | ||
Consumer Discretionary 7.1% | ||
Automobiles 0.6% | ||
Ford Motor Co. | 345,000 | 5,050,800 |
Multiline Retail 0.9% | ||
Federated Department Stores, Inc. | 129,505 | 7,484,094 |
Specialty Retail 5.6% | ||
Best Buy Co., Inc. | 47,225 | 2,806,109 |
Borders Group, Inc. | 712,900 | 18,107,660 |
Home Depot, Inc. | 388,455 | 16,602,567 |
Staples, Inc. | 334,165 | 11,264,702 |
48,781,038 | ||
Consumer Staples 19.4% | ||
Food & Staples Retailing 0.5% | ||
Safeway, Inc.* | 232,650 | 4,592,511 |
Tobacco 18.9% | ||
Altria Group, Inc. | 1,349,420 | 82,449,562 |
Imperial Tobacco Group (ADR) | 95,145 | 5,256,761 |
Reynolds American, Inc. (c) | 298,073 | 23,428,538 |
Universal Corp. | 266,570 | 12,752,709 |
UST, Inc. | 816,640 | 39,288,550 |
163,176,120 | ||
Energy 12.6% | ||
Energy Equipment & Services 0.7% | ||
Transocean, Inc.* | 154,200 | 6,536,538 |
Oil & Gas 11.9% | ||
Apache Corp. | 8,200 | 414,674 |
Burlington Resources, Inc. | 6,400 | 278,400 |
Chevron Texaco Corp. | 562,860 | 29,555,779 |
ConocoPhillips | 465,823 | 40,447,411 |
Devon Energy Corp. | 306,250 | 11,919,250 |
El Paso Corp. | 846,510 | 8,803,704 |
EnCana Corp. | 31,800 | 1,814,508 |
Kerr-McGee Corp. | 120,300 | 6,952,137 |
Occidental Petroleum Corp. | 44,279 | 2,584,122 |
102,769,985 | ||
Financials 30.9% | ||
Banks 13.0% | ||
Bank of America Corp. | 521,636 | 24,511,676 |
KeyCorp | 335,280 | 11,365,992 |
PNC Financial Services Group | 236,014 | 13,556,644 |
Sovereign Bancorp, Inc. | 501,910 | 11,318,070 |
US Bancorp | 265,700 | 8,321,724 |
Wachovia Corp. | 140,000 | 7,364,000 |
Washington Mutual, Inc. | 854,175 | 36,114,519 |
112,552,625 | ||
Capital Markets 0.0% | ||
Piper Jaffray Companies, Inc.* | 2,657 | 127,403 |
Diversified Financial Services 15.0% | ||
CIT Group, Inc. | 89,100 | 4,082,562 |
Fannie Mae | 652,073 | 46,434,118 |
Freddie Mac | 1,000,341 | 73,725,132 |
JPMorgan Chase & Co. | 132,864 | 5,183,025 |
129,424,837 | ||
| Shares | Value ($) |
|
| |
Insurance 2.9% | ||
American International Group, Inc. | 331,300 | 21,756,471 |
St. Paul Travelers Companies, Inc. | 98,405 | 3,647,874 |
25,404,345 | ||
Health Care 15.9% | ||
Health Care Equipment & Supplies 1.0% | ||
Becton, Dickinson & Co. | 145,055 | 8,239,124 |
Health Care Providers & Services 8.8% | ||
AmerisourceBergen Corp. | 218,000 | 12,792,240 |
Cardinal Health, Inc. | 119,400 | 6,943,110 |
HCA, Inc. | 296,200 | 11,836,152 |
Laboratory Corp. of America Holdings* | 343,075 | 17,091,996 |
Medco Health Solutions, Inc.* | 316,434 | 13,163,654 |
Quest Diagnostics, Inc. | 145,550 | 13,907,303 |
75,734,455 | ||
Pharmaceuticals 6.1% | ||
Bristol-Myers Squibb Co. | 875,560 | 22,431,847 |
Merck & Co., Inc. | 360,195 | 11,576,667 |
Pfizer, Inc. | 479,530 | 12,894,562 |
Schering-Plough Corp. | 134,905 | 2,816,817 |
Wyeth | 75,775 | 3,227,257 |
52,947,150 | ||
Industrials 2.6% | ||
Industrial Conglomerates | ||
General Electric Co. | 209,350 | 7,641,275 |
Tyco International Ltd. | 415,005 | 14,832,279 |
22,473,554 | ||
Information Technology 3.1% | ||
IT Consulting & Services | ||
Electronic Data Systems Corp. | 1,147,840 | 26,515,104 |
Utilities 0.0% | ||
Gas Utilities | ||
NiSource, Inc. | 5,303 | 120,802 |
Total Common Stocks (Cost $637,942,324) | 791,930,485 | |
| ||
Securities Lending Collateral 2.3% | ||
Daily Assets Fund Institutional, 2.25% (d) (e) (Cost $19,806,450) | 19,806,450 | 19,806,450 |
| ||
Cash Equivalents 8.0% | ||
Scudder Cash Management QP Trust, 2.24% (b) (Cost $68,968,040) | 68,968,040 | 68,968,040 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $726,716,814) (a) | 101.9 | 880,704,975 |
Other Assets and Liabilities, Net | (1.9) | (16,463,874) |
Net Assets | 100.0 | 864,241,101 |
Notes to SVS Dreman High Return Equity Portfolio of Investments |
* Non-income producing security.
(a) The cost for federal income tax purposes was $727,953,999. At December 31, 2004, net unrealized appreciation for all securities based on tax cost was $152,750,976. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $194,020,894 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $41,269,918.
(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) A portion of this security was on loan (see Notes to Financial Statements). The value of the security loaned at December 31, 2004 amounted to $19,352,752, which is 2.2% of net assets.
(d) Daily Assets Fund Institutional, an affiliated fund, is managed by Deutsche Asset Management, Inc. The rate shown is the annualized seven-day yield at period end.
(e) Represents collateral held in connection with securities lending.
At December 31, 2004, open futures contracts purchased were as follows:
Futures | Expiration Date | Contracts | Aggregated Face Value ($) | Value ($) | Net Unrealized Appreciation (Depreciation) ($) |
S&P 500 Index Future | 3/17/2005 | 121 | 35,911,288 | 36,714,425 | 803,137 |
ADR: American Depositary Receipts
The accompanying notes are an integral part of the financial statements.
Financial Statements |
|
Statement of Assets and Liabilities as of December 31, 2004 | |
Assets | |
Investments: Investments in securities, at value (cost $637,942,324) — including $19,352,752 of securities loaned | $ 791,930,485 |
Investment in Daily Assets Fund Institutional (cost $19,806,450)* | 19,806,450 |
Investment in Scudder Cash Management QP Trust (cost $68,968,040) | 68,968,040 |
Total investments in securities, at value (cost $726,716,814) | 880,704,975 |
Cash | 7,297 |
Margin deposit | 3,000,000 |
Dividends receivable | 1,722,982 |
Interest receivable | 123,092 |
Receivable for Portfolio shares sold | 109,312 |
Other assets | 24,681 |
Total assets | 885,692,339 |
Liabilities | |
Payable for Portfolio shares redeemed | 876,789 |
Payable upon return of securities loaned | 19,806,450 |
Payable for daily variation margin on open futures contracts | 30,250 |
Accrued management fee | 512,877 |
Other accrued expenses and payables | 224,872 |
Total liabilities | 21,451,238 |
Net assets, at value | $ 864,241,101 |
Net Assets | |
Net assets consist of: Undistributed net investment income | 14,597,599 |
Net unrealized appreciation (depreciation) on: Investments | 153,988,161 |
Futures | 803,137 |
Accumulated net realized gain (loss) | (21,350,049) |
Paid-in capital | 716,202,253 |
Net assets, at value | $ 864,241,101 |
Class A Net Asset Value, offering and redemption price per share ($746,974,983 ÷ 59,052,129 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 12.65 |
Class B Net Asset Value, offering and redemption price per share ($117,266,118 ÷ 9,286,484 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 12.63 |
* Represents collateral on securities loaned.
Statement of Operations for the year ended December 31, 2004 | |
Investment Income | |
Income: Dividends (net of foreign taxes withheld of $18,050) | $ 20,328,943 |
Interest — Scudder Cash Management QP Trust | 955,273 |
Securities lending income, including income from Daily Assets Fund Institutional | 11,345 |
Total Income | 21,295,561 |
Expenses: Management fee | 5,664,121 |
Custodian and accounting fees | 168,365 |
Distribution service fees (Class B) | 230,719 |
Record keeping fees (Class B) | 121,434 |
Auditing | 41,147 |
Legal | 17,553 |
Trustees' fees and expenses | 12,577 |
Reports to shareholders | 137,634 |
Registration fees | 610 |
Other | 26,773 |
Total expenses, before expense reductions | 6,420,933 |
Expense reductions | (6,809) |
Total expenses, after expense reductions | 6,414,124 |
Net investment income (loss) | 14,881,437 |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from: Investments | 6,959,277 |
Futures | 4,188,252 |
| 11,147,529 |
Net unrealized appreciation (depreciation) during the period on: Investments | 80,273,108 |
Futures | (1,410,615) |
| 78,862,493 |
Net gain (loss) on investment transactions | 90,010,022 |
Net increase (decrease) in net assets resulting from operations | $ 104,891,459 |
The accompanying notes are an integral part of the financial statements.
|
Statement of Changes in Net Assets | ||
| Years Ended December 31, | |
Increase (Decrease) in Net Assets | 2004 | 2003 |
Operations: Net investment income (loss) | $ 14,881,437 | $ 12,351,057 |
Net realized gain (loss) on investment transactions | 11,147,529 | 10,010,852 |
Net unrealized appreciation (depreciation) on investment transactions during the period | 78,862,493 | 149,662,562 |
Net increase (decrease) in net assets resulting from operations | 104,891,459 | 172,024,471 |
Distributions to shareholders from: Net investment income Class A | (11,297,007) | (11,229,274) |
Class B | (1,021,598) | (193,827) |
Portfolio share transactions: Class A Proceeds from shares sold | 38,718,500 | 51,591,121 |
Reinvestment of distributions | 11,297,007 | 11,229,274 |
Cost of shares redeemed | (55,620,546) | (50,121,722) |
Net increase (decrease) in net assets from Class A share transactions | (5,605,039) | 12,698,673 |
Class B Proceeds from shares sold | 42,816,407 | 52,862,147 |
Reinvestment of distributions | 1,021,598 | 193,827 |
Cost of shares redeemed | (4,506,330) | (584,554) |
Net increase (decrease) in net assets from Class B share transactions | 39,331,675 | 52,471,420 |
Increase (decrease) in net assets | 126,299,490 | 225,771,463 |
Net assets at beginning of period | 737,941,611 | 512,170,148 |
Net assets at end of period (including undistributed net investment income of $14,597,599 and $12,034,767, respectively) | $ 864,241,101 | $ 737,941,611 |
Other Information | ||
Class A Shares outstanding at beginning of period | 59,527,655 | 58,214,359 |
Shares sold | 3,370,933 | 5,422,760 |
Shares issued to shareholders in reinvestment of distributions | 1,011,370 | 1,398,415 |
Shares redeemed | (4,857,829) | (5,507,879) |
Net increase (decrease) in Portfolio shares | (475,526) | 1,313,296 |
Shares outstanding at end of period | 59,052,129 | 59,527,655 |
Class B Shares outstanding at beginning of period | 5,819,055 | 251,123 |
Shares sold | 3,763,080 | 5,599,747 |
Shares issued to shareholders in reinvestment of distributions | 91,377 | 24,108 |
Shares redeemed | (387,028) | (55,923) |
Net increase (decrease) in Portfolio shares | 3,467,429 | 5,567,932 |
Shares outstanding at end of period | 9,286,484 | 5,819,055 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights |
|
Class A
Years Ended December 31, | 2004 | 2003 | 2002 | 2001 | 2000a |
Selected Per Share Data | |||||
Net asset value, beginning of period | $ 11.29 | $ 8.76 | $ 10.81 | $ 10.77 | $ 8.96 |
Income (loss) from investment operations: Net investment income (loss)b | .23 | .20 | .21 | .19 | .26 |
Net realized and unrealized gain (loss) on investment transactions | 1.32 | 2.53 | (2.13) | (.01) | 2.25 |
Total from investment operations | 1.55 | 2.73 | (1.92) | .18 | 2.51 |
Less distributions from: Net investment income | (.19) | (.20) | (.09) | (.14) | (.20) |
Net realized gains on investment transactions | — | — | (.04) | — | (.50) |
Total distributions | (.19) | (.20) | (.13) | (.14) | (.70) |
Net asset value, end of period | $ 12.65 | $ 11.29 | $ 8.76 | $ 10.81 | $ 10.77 |
Total Return (%) | 13.95 | 32.04 | (18.03) | 1.69 | 30.52 |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | 747 | 672 | 510 | 443 | 168 |
Ratio of expenses before expense reductions (%) | .78 | .79 | .79 | .82 | .85 |
Ratio of expenses after expense reductions (%) | .78 | .79 | .79 | .82 | .84 |
Ratio of net investment income (loss) (%) | 1.96 | 2.14 | 2.21 | 1.78 | 2.85 |
Portfolio turnover rate (%) | 9 | 18 | 17 | 16 | 37 |
a On June 18, 2001, the Portfolio implemented a 1 for 10 reverse stock split. Per share information, for the period prior to December 31, 2001, has been restated to reflect the effect of the split. Shareholders received 1 share for every 10 shares owned and net asset value per share increased correspondingly.
b Based on average shares outstanding during the period.
Class B
Years Ended December 31, | 2004 | 2003 | 2002a |
Selected Per Share Data | |||
Net asset value, beginning of period | $ 11.27 | $ 8.75 | $ 9.57 |
Income (loss) from investment operations: Net investment income (loss)b | .18 | .16 | .18 |
Net realized and unrealized gain (loss) on investment transactions | 1.33 | 2.53 | (1.00) |
Total from investment operations | 1.51 | 2.69 | (.82) |
Less distributions from: Net investment income | (.15) | (.17) | — |
Net asset value, end of period | $ 12.63 | $ 11.27 | $ 8.75 |
Total Return (%) | 13.53 | 31.60 | (8.57)** |
Ratios to Average Net Assets and Supplemental Data | |||
Net assets, end of period ($ millions) | 117 | 66 | 2 |
Ratio of expenses (%) | 1.16 | 1.18 | 1.05* |
Ratio of net investment income (loss) (%) | 1.58 | 1.75 | 4.30* |
Portfolio turnover rate (%) | 9 | 18 | 17 |
a For the period from July 1, 2002 (commencement of operations of Class B shares) to December 31, 2002.
b Based on average shares outstanding during the period.
* Annualized
** Not annualized
Performance Summary December 31, 2004 |
|
SVS Dreman Small Cap Value Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns.
This Portfolio is subject to stock market risk. Stocks of small companies involve greater risk, as they often have limited product lines, markets or financial resources and may be exposed to more erratic and abrupt market movements than securities of larger, more-established companies. This may result in greater share price volatility. Please read this Portfolio's prospectus for specific details regarding its investments and risk profile.
Growth of an Assumed $10,000 Investment in SVS Dreman Small Cap Value Portfolio from 5/1/1996 to 12/31/2004 | ||
[] SVS Dreman Small Cap Value Portfolio — Class A [] Russell 2000 Value Index | ||
![]() |
| The Russell 2000 Value Index is an unmanaged index which measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. Index returns assume reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
Yearly periods ended December 31 |
|
Comparative Results | |||||
SVS Dreman Small Cap Value Portfolio |
| 1-Year | 3-Year | 5-Year | Life of Portfolio* |
Class A | Growth of $10,000 | $12,603 | $15,868 | $19,428 | $21,978 |
Average annual total return | 26.03% | 16.64% | 14.20% | 9.51% | |
Russell 2000 Value Index | Growth of $10,000 | $12,225 | $15,812 | $22,144 | $30,438 |
Average annual total return | 22.25% | 16.50% | 17.23% | 13.70% | |
SVS Dreman Small Cap Value Portfolio |
|
|
| 1-Year | Life of Class** |
Class B | Growth of $10,000 |
|
| $12,552 | $14,945 |
Average annual total return |
|
| 25.52% | 17.42% | |
Russell 2000 Value Index | Growth of $10,000 |
|
| $12,225 | $14,742 |
Average annual total return |
|
| 22.25% | 16.79% |
The growth of $10,000 is cumulative.
* The Portfolio commenced operations on May 1, 1996. Index returns begin April 30, 1996.
** The Portfolio commenced offering Class B shares on July 1, 2002. Index returns begin June 30, 2002.
Information About Your Portfolio's Expenses |
|
SVS Dreman Small Cap Value Portfolio
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. The tables are based on an investment of $1,000 made at the beginning of the six-month period ended December 31, 2004.
The tables illustrate your Portfolio's expenses in two ways:
Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2004 | ||
Actual Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,142.40 | $ 1,140.70 |
Expenses Paid per $1,000* | $ 4.19 | $ 6.19 |
Hypothetical 5% Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,021.29 | $ 1,019.29 |
Expenses Paid per $1,000* | $ 3.96 | $ 5.83 |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365.
Annualized Expense Ratios | Class A | Class B |
Scudder Variable Series II — SVS II Dreman Small Cap Value Portfolio | .78% | 1.15% |
For more information, please refer to the Portfolio's prospectus.
Management Summary December 31, 2004 |
|
SVS Dreman Small Cap Value Portfolio
The portfolio benefited from a market that continued to favor small capitalization stocks over their large cap counterparts and value- over growth-style investing. The Russell 2000 Value Index, generally a measure of the small cap value universe and the fund's benchmark, gained 22.25% for the year ended November 30, 2004.1 This compares with the Russell 1000 Value Index, generally a measure of the large cap value universe, which rose 16.49%; and the Russell 2000 Growth Index, generally a measure of the small cap growth universe, which advanced 10.83%, also for the period.2 The portfolio (Class A shares, unadjusted for contract charges) outperformed all of those indices, by posting a total return of 26.03% in 2004.
The portfolio's overweight position in energy, which climbed along with crude oil and natural gas prices, was a significant contributor. Strong performance came from Ultra Petroleum Corp., an independent producer of oil and gas that soared on the news of a major discovery of natural gas on one of its properties. The portfolio also benefited from its investment in merchant energy company Reliant Energy, Inc.
In 2004, the portfolio sustained only small losses in individual stocks. Stillwater Mining Co. is a metals and mining stock that trades like commodities. Its performance is closely tied to the health of the economy, making earnings volatile. A significant decline in the price of the commodities prompted the portfolio to take a small loss in the position as we eliminated the stock from the portfolio. Parallel Petroleum Corp. is engaged in the production of oil and natural gas. The fund held a small position in the stock, which it sold at a small loss in order to focus on other names in the energy space with greater potential.
David N. Dreman
Nelson Woodard
Co-Managers
Dreman Value Management, L.L.C., Subadvisor to the Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the portfolio or any variable life insurance policy or variable annuity contract for which the portfolio is an investment option. These charges and fees will reduce returns.
Risk Considerations
This portfolio is subject to stock market risk. Stocks of small companies involve greater risk than securities of larger, more-established companies, as they often have limited product lines, markets or financial resources and may be exposed to more erratic and abrupt market movements. This may result in greater share price volatility. Please read this portfolio's prospectus for specific details regarding its investments and risk profile.
1 The Russell 2000 Value Index is an unmanaged index that measures the performance of those Russell 2000 companies with lower price-to-book (P/B) ratios and lower forecasted growth values. P/B is equal to a stock's market capitalization divided by its book value. (This ratio compares the market's valuation of a company to the value of that company as indicated on its financial statements.)
2 The Russell 1000 Value Index is an unmanaged index, which consists of those stocks in the Russell 1000 Index with lower price-to-book (P/B) ratios and lower forecasted-growth values. The Russell 2000 Growth Index is an unmanaged index that measures the performance of those Russell 2000 companies with higher price-to-book (P/B) ratios and higher forecasted growth values. P/B is equal to a stock's market capitalization divided by its book value. (This ratio compares the market's valuation of a company to the value of that company as indicated on its financial statements.)
Index returns assume reinvested dividends and, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
Portfolio management market commentary is as of December 31, 2004, and may not come to pass. This information is subject to change at any time based on market and other conditions.
Portfolio Summary |
SVS Dreman Small Cap Value Portfolio
Asset Allocation | 12/31/04 | 12/31/03 |
| ||
Common Stocks | 95% | 96% |
Cash Equivalents | 3% | 3% |
Corporate Bonds | 1% | — |
Closed-End Investment Company | 1% | — |
Exchange Traded Funds | — | 1% |
| 100% | 100% |
Sector Diversification (Excludes Cash Equivalents) | 12/31/04 | 12/31/03 |
| ||
Financials | 28% | 36% |
Industrials | 21% | 18% |
Health Care | 10% | 8% |
Materials | 10% | 1% |
Utilities | 8% | 5% |
Energy | 7% | 10% |
Consumer Discretionary | 6% | 13% |
Information Technology | 5% | 3% |
Consumer Staples | 5% | 6% |
| 100% | 100% |
Asset allocation and sector diversification are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 37. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Portfolio as of month end will be posted to scudder.com on the 15th of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio December 31, 2004 | ![]() | ![]() |
|
SVS Dreman Small Cap Value Portfolio
|
| Value ($) |
|
| |
Common Stocks 94.2% | ||
Consumer Discretionary 5.8% | ||
Auto Components 0.2% | ||
Noble International Ltd. | 48,000 | 978,720 |
Hotels Restaurants & Leisure 1.9% | ||
Alliance Gaming Corp.* | 353,200 | 4,877,692 |
Bluegreen Corp.* | 40,700 | 807,081 |
CBRL Group, Inc. | 74,300 | 3,109,455 |
Navigant International, Inc.* | 114,100 | 1,388,597 |
10,182,825 | ||
Household Durables 0.3% | ||
Standard Pacific Corp. | 20,200 | 1,295,628 |
Leisure Equipment & Products 0.7% | ||
Lakes Entertainment, Inc.* | 237,800 | 3,873,762 |
Specialty Retail 1.9% | ||
Borders Group, Inc. | 90,600 | 2,301,240 |
Linens 'N Things, Inc.* | 99,800 | 2,475,040 |
Mettler-Toledo International, Inc.* | 105,900 | 5,433,729 |
10,210,009 | ||
Textiles, Apparel & Luxury Goods 0.8% | ||
Phillips-Van Heusen Corp. | 167,336 | 4,518,072 |
Consumer Staples 4.4% | ||
Food & Drug Retailing 0.7% | ||
B&G Foods, Inc.* | 265,600 | 3,978,688 |
Food Products 1.9% | ||
Chiquita Brands International, Inc.* | 203,000 | 4,478,180 |
Ralcorp Holdings, Inc. | 129,700 | 5,438,321 |
9,916,501 | ||
Personal Products 1.0% | ||
Helen of Troy Ltd.* | 157,100 | 5,280,131 |
Tobacco 0.8% | ||
Universal Corp. | 47,500 | 2,272,400 |
Vector Group Ltd. | 126,176 | 2,098,307 |
4,370,707 | ||
Energy 6.3% | ||
Energy Equipment & Services 3.2% | ||
Atwood Oceanics, Inc.* | 46,200 | 2,407,020 |
Grant Prideco, Inc.* | 175,800 | 3,524,790 |
Grey Wolf, Inc.* | 116,000 | 611,320 |
Offshore Logistics, Inc.* | 74,500 | 2,419,015 |
Oil States International, Inc.* | 156,800 | 3,024,672 |
Patterson-UTI Energy, Inc. | 168,300 | 3,273,435 |
Superior Energy Services, Inc.* | 151,700 | 2,337,697 |
17,597,949 | ||
Oil & Gas 3.1% | ||
ATP Oil & Gas Corp.* | 128,300 | 2,383,814 |
Denbury Resources, Inc.* | 99,400 | 2,728,530 |
Energy Partners Ltd.* | 84,600 | 1,714,842 |
Global Industries, Inc.* | 307,800 | 2,551,662 |
|
| Value ($) |
|
| |
Magnum Hunter Resources, Inc.* | 75,300 | 971,370 |
Penn Virginia Corp. | 59,300 | 2,405,801 |
Pioneer Drilling Co.* | 375,500 | 3,788,795 |
16,544,814 | ||
Financials 26.6% | ||
Banks 8.1% | ||
BankAtlantic Bancorp., Inc. "A" | 83,450 | 1,660,655 |
Capital Bancorp., Ltd. | 39,900 | 1,405,278 |
Centennial Bank Holdings, Inc.* | 400,000 | 4,200,000 |
Center Financial Corp. | 118,200 | 2,366,364 |
FirstFed Financial Corp.* | 23,850 | 1,237,100 |
Glacier Bancorp., Inc. | 58,156 | 1,979,630 |
Greater Bay Bancorp. | 108,100 | 3,013,828 |
Independence Community Bank Corp. | 66,500 | 2,831,570 |
IndyMac Bancorp., Inc. | 66,850 | 2,302,983 |
International Bancshares Corp. | 53,148 | 2,092,968 |
NewAlliance Bancshares, Inc. | 78,100 | 1,194,930 |
Oriental Finance Group, Inc. | 57,640 | 1,631,788 |
PFF Bancorp., Inc. | 66,100 | 3,062,413 |
Provident Bankshares Corp. | 97,550 | 3,547,894 |
R & G Financial Corp. "B" | 119,800 | 4,657,824 |
S&T Bancorp, Inc. | 26,300 | 991,247 |
Sterling Financial Corp. | 74,682 | 2,932,015 |
Webster Financial Corp. | 43,200 | 2,187,648 |
43,296,135 | ||
Diversified Financial Services 2.1% | ||
ACE Cash Express, Inc.* | 105,400 | 3,126,164 |
CMET Finance Holdings, Inc.* | 7,200 | 648,000 |
JER Investment Trust, Inc. 144A* | 149,900 | 2,263,490 |
Peoples Choice Financial Corp. | 229,900 | 2,299,000 |
Prospect Energy Corp. | 254,500 | 3,054,000 |
11,390,654 | ||
Insurance 5.5% | ||
Ceres Group, Inc.* | 259,390 | 1,338,452 |
Endurance Specialty Holdings Ltd. | 100,900 | 3,450,780 |
Meadowbrook Insurance Group, Inc.* | 476,500 | 2,377,735 |
PMA Capital Corp. "A"* | 139,200 | 1,440,720 |
ProCentury Corp. | 336,700 | 4,175,080 |
PXRE Group Ltd. | 18,600 | 468,906 |
Scottish Re Group Ltd. | 251,300 | 6,508,670 |
Selective Insurance Group, Inc. | 125,700 | 5,560,968 |
Specialty Underwriters' Alliance, Inc.* | 269,500 | 2,560,250 |
Tower Group, Inc. | 146,300 | 1,755,600 |
29,637,161 | ||
Real Estate 10.9% | ||
Aames Investment Corp. (REIT)* | 221,900 | 2,374,330 |
Capital Lease Funding, Inc. (REIT) | 232,300 | 2,903,750 |
Feldman Mall Properties, Inc. (REIT)* | 76,500 | 995,265 |
Fieldstone Investment Corp. (REIT) | 386,700 | 6,500,427 |
Highland Hospitality Corp. (REIT) | 62,500 | 702,500 |
KKR Financial Corp. (REIT) 144A | 982,300 | 10,314,150 |
Medical Properties of America (REIT) | 109,300 | 1,120,325 |
|
| Value ($) |
|
| |
Newcastle Investment Corp. (REIT) | 266,200 | 8,459,836 |
Novastar Financial, Inc. (REIT) | 289,800 | 14,345,100 |
Provident Senior Living Trust (REIT) 144A | 392,800 | 6,284,800 |
Saxon Capital, Inc. (REIT) | 66,900 | 1,604,931 |
Thomas Properties Group, Inc.* | 250,000 | 3,185,000 |
58,790,414 | ||
Health Care 9.6% | ||
Biotechnology 2.6% | ||
Axonyx, Inc.* | 471,100 | 2,920,820 |
Charles River Laboratories International, Inc.* | 142,400 | 6,551,824 |
Ciphergen Biosystems, Inc. | 28,500 | 122,550 |
Serologicals Corp.* | 200,200 | 4,428,424 |
14,023,618 | ||
Health Care Equipment & Supplies 1.2% | ||
Fisher Scientific International, Inc.* | 49,560 | 3,091,553 |
Zoll Medical Corp.* | 92,500 | 3,182,000 |
6,273,553 | ||
Health Care Providers & Services 4.3% | ||
Accredo Health, Inc.* | 109,800 | 3,043,656 |
Allied Healthcare International, Inc.* | 439,000 | 2,414,500 |
LabOne, Inc.* | 87,500 | 2,803,500 |
Odyssey Healthcare, Inc.* | 255,200 | 3,491,136 |
Pediatrix Medical Group, Inc.* | 42,600 | 2,728,530 |
Province Healthcare Co.* | 190,400 | 4,255,440 |
TLC Vision Corp.* | 103,500 | 1,079,505 |
Triad Hospitals, Inc.* | 89,300 | 3,322,853 |
23,139,120 | ||
Pharmaceuticals 1.5% | ||
King Pharmaceuticals, Inc.* | 173,200 | 2,147,680 |
Par Pharmaceutical Cos., Inc.* | 150,500 | 6,227,690 |
8,375,370 | ||
Industrials 20.5% | ||
Aerospace & Defense 5.3% | ||
CAE, Inc. | 595,600 | 2,531,300 |
Curtiss-Wright Corp. | 52,200 | 2,996,802 |
DRS Technologies, Inc.* | 81,200 | 3,468,052 |
GenCorp, Inc. | 193,000 | 3,584,010 |
Herley Industries, Inc.* | 141,800 | 2,884,212 |
Precision Castparts Corp. | 107,000 | 7,027,760 |
Triumph Group, Inc.* | 68,000 | 2,686,000 |
United Defense Industries, Inc.* | 66,100 | 3,123,225 |
28,301,361 | ||
Building Products 1.7% | ||
Levitt Corp. "A" | 169,500 | 5,181,615 |
NCI Building Systems, Inc.* | 60,900 | 2,283,750 |
York International Corp. | 52,000 | 1,796,080 |
9,261,445 | ||
Commercial Services & Supplies 2.4% | ||
Consolidated Graphics, Inc.* | 63,900 | 2,933,010 |
Duratek, Inc.* | 115,100 | 2,867,141 |
John H. Harland Co. | 59,500 | 2,147,950 |
Nobel Learning Communities, Inc.* | 40,900 | 307,977 |
|
| Value ($) |
|
| |
WCA Waste Corp.* | 467,800 | 4,888,510 |
13,144,588 | ||
Construction & Engineering 2.7% | ||
EMCOR Group, Inc.* | 78,200 | 3,533,076 |
Infrasource Services, Inc.* | 305,300 | 3,968,900 |
URS Corp.* | 217,000 | 6,965,700 |
14,467,676 | ||
Electrical Equipment 1.7% | ||
General Cable Corp.* | 447,700 | 6,200,645 |
Genlyte Group, Inc.* | 31,800 | 2,724,624 |
8,925,269 | ||
Machinery 3.0% | ||
AGCO Corp.* | 125,600 | 2,749,384 |
Albany International Corp. "A" | 72,500 | 2,549,100 |
Briggs & Stratton Corp. | 52,600 | 2,187,108 |
Harsco Corp. | 44,400 | 2,474,856 |
Oshkosh Truck Corp. | 51,400 | 3,514,732 |
Valmont Industries | 112,400 | 2,822,364 |
16,297,544 | ||
Marine 0.9% | ||
GulfMark Offshore, Inc.* | 39,100 | 870,757 |
Hornbeck Offshore Services, Inc.* | 57,700 | 1,113,610 |
OMI Corp. | 63,600 | 1,071,660 |
Tsakos Energy Navigation Ltd. | 51,300 | 1,836,027 |
4,892,054 | ||
Road & Rail 2.4% | ||
Genesee & Wyoming, Inc.* | 114,950 | 3,233,543 |
Laidlaw International, Inc.* | 186,400 | 3,988,960 |
RailAmerica, Inc.* | 168,100 | 2,193,705 |
Yellow Roadway Corp.* | 58,207 | 3,242,712 |
12,658,920 | ||
Trading Companies Distributors 0.4% | ||
WESCO International, Inc.* | 76,600 | 2,270,424 |
Information Technology 4.6% | ||
Communications Equipment 0.7% | ||
PC-Tel, Inc.* | 280,300 | 2,222,779 |
SpectraLink Corp. | 80,600 | 1,142,908 |
3,365,687 | ||
Computers & Peripherals 1.7% | ||
Applied Films Corp.* | 98,100 | 2,115,036 |
Covansys Corp.* | 95,800 | 1,465,740 |
CyberGuard Corp.* | 234,400 | 1,476,720 |
Komag, Inc.* | 114,200 | 2,144,676 |
Stratasys, Inc.* | 59,100 | 1,983,396 |
9,185,568 | ||
Electronic Equipment & Instruments 1.3% | ||
KEMET Corp.* | 59,200 | 529,840 |
Scansource, Inc.* | 40,900 | 2,542,344 |
Vishay Intertechnology, Inc.* | 264,000 | 3,965,280 |
7,037,464 | ||
IT Consulting & Services 0.6% | ||
BISYS Group, Inc.* | 91,200 | 1,500,240 |
CACI International, Inc. "A"* | 26,800 | 1,825,884 |
3,326,124 | ||
|
| Value ($) |
|
| |
Semiconductors & Semiconductor Equipment 0.3% | ||
MKS Instruments, Inc.* | 90,500 | 1,678,775 |
Materials 9.1% | ||
Chemicals 2.0% | ||
Georgia Gulf Corp. | 50,700 | 2,524,860 |
NOVA Chemicals Corp. | 70,400 | 3,329,920 |
Sensient Technologies Corp. | 200,100 | 4,800,399 |
10,655,179 | ||
Construction Materials 1.9% | ||
Florida Rock Industries, Inc. | 73,695 | 4,387,063 |
Headwaters, Inc.* | 211,600 | 6,030,600 |
10,417,663 | ||
Metals & Mining 5.2% | ||
AK Steel Holding Corp.* | 258,100 | 3,734,707 |
Aleris International, Inc.* | 133,800 | 2,263,896 |
Cleveland-Cliffs, Inc. | 62,100 | 6,449,706 |
Metal Management, Inc. | 176,000 | 4,729,120 |
Pan American Silver Corp.* | 202,500 | 3,235,950 |
Steel Technologies, Inc. | 76,600 | 2,107,266 |
Uranium Resources, Inc.* | 1,020,400 | 739,790 |
Wheaton River Minerals Ltd.* | 706,200 | 2,302,212 |
Worthington Industries, Inc. | 107,000 | 2,095,060 |
27,657,707 | ||
Utilities 7.3% | ||
Electric Utilities 2.4% | ||
Allegheny Energy, Inc.* | 181,700 | 3,581,307 |
Ormat Technologies, Inc.* | 124,600 | 2,028,488 |
Sierra Pacific Resources* | 210,600 | 2,211,300 |
TECO Energy, Inc. | 129,500 | 1,986,530 |
WPS Resources Corp. | 65,000 | 3,247,400 |
13,055,025 | ||
Gas Utilities 1.5% | ||
Southern Union Co.* | 341,500 | 8,189,170 |
Multi-Utilities 1.4% | ||
CMS Energy Corp.* | 315,100 | 3,292,795 |
|
| Value ($) |
|
| |
ONEOK, Inc. | 146,000 | 4,149,320 |
7,442,115 | ||
Multi-Utilities & Unregulated Power 2.0% | ||
Reliant Energy, Inc.* | 779,600 | 10,641,540 |
Total Common Stocks (Cost $383,239,005) | 506,545,129 |
| Principal | Value ($) |
|
| |
Corporate Bonds 0.8% | ||
Utilities | ||
Mirant Corp. 144A, 7.9%, 7/15/2009* (Cost $3,522,500) | 6,000,000 | 4,470,000 |
|
| Value ($) |
|
| |
Convertible Preferred Stocks 0.3% | ||
Energy | ||
Petrohawk Energy Corp., Series B (Cost $1,650,750) | 21,300 | 1,656,075 |
| ||
Closed-End Investment Company 0.7% | ||
Tortoise Energy Infrastructure Corp. (Cost $3,584,863) | 143,236 | 3,930,396 |
| ||
Cash Equivalents 3.3% | ||
Scudder Cash Management QP Trust, 2.24% (b) (Cost $17,642,655) | 17,642,655 | 17,642,655 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $409,639,773) (a) | 99.3 | 534,244,255 |
Other Assets and Liabilities, Net | 0.7 | 3,364,510 |
Net Assets | 100.0 | 537,608,765 |
Notes to SVS Dreman Small Cap Value Portfolio of Investments |
* Non-income producing security. In the case of a bond, generally denotes that the issuer has defaulted on the payment of principal or interest or has filed for bankruptcy.
Security | Coupon | Maturity Date | Principal Amount | Acquisition Cost | Value | |
Mirant Corp. | 7.9 | 7/15/2009 | USD | 6,000,000 | $ 3,522,500 | $ 4,470,000 |
(a) The cost for federal income tax purposes was $409,796,640. At December 31, 2004, net unrealized appreciation for all securities based on tax cost was $124,447,615. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $127,387,394 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $2,939,779.
(b) Scudder Cash Management QP Trust is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
REIT: Real Estate Investment Trust
The accompanying notes are an integral part of the financial statements.
Financial Statements |
|
Statement of Assets and Liabilities as of December 31, 2004 | |
Assets | |
Investments: Investments in securities, at value (cost $391,997,118) | $ 516,601,600 |
Investment in Scudder Cash Management QP Trust (cost $17,642,655) | 17,642,655 |
Total investments in securities, at value (cost $409,639,773) | 534,244,255 |
Receivable for investments sold | 12,567,786 |
Dividends receivable | 1,454,630 |
Interest receivable | 38,412 |
Receivable for Portfolio shares sold | 67,817 |
Other assets | 13,625 |
Total assets | 548,386,525 |
Liabilities | |
Due to custodian bank | 1,030,803 |
Payable for investments purchased | 8,574,285 |
Payable for Portfolio shares redeemed | 742,149 |
Accrued management fee | 329,048 |
Other accrued expenses and payables | 101,475 |
Total liabilities | 10,777,760 |
Net assets, at value | $ 537,608,765 |
Net Assets | |
Net assets consist of: Undistributed net investment income (loss) | 3,681,177 |
Net unrealized appreciation (depreciation) on: Investments | 124,604,482 |
Foreign currency related transactions | (68) |
Accumulated net realized gain (loss) | 46,974,310 |
Paid-in capital | 362,348,864 |
Net assets, at value | $ 537,608,765 |
Class A Net Asset Value, offering and redemption price per share ($466,945,435 ÷ 23,288,245 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 20.05 |
Class B Net Asset Value, offering and redemption price per share ($70,663,330 ÷ 3,531,644 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 20.01 |
Statement of Operations for the year ended December 31, 2004 | |
Investment Income | |
Income: Dividends (net of foreign taxes withheld of $17,277) | $ 7,432,575 |
Interest — Scudder Cash Management QP Trust | 273,301 |
Total Income | 7,705,876 |
Expenses: Management fee | 3,317,899 |
Custodian fees | 27,459 |
Distribution service fees (Class B) | 128,313 |
Record keeping fees (Class B) | 65,640 |
Auditing | 42,161 |
Legal | 21,003 |
Trustees' fees and expenses | 4,562 |
Reports to shareholders | 57,119 |
Other | 14,070 |
Total expenses, before expense reductions | 3,678,226 |
Expense reductions | (6,710) |
Total expenses, after expense reductions | 3,671,516 |
Net investment income (loss) | 4,034,360 |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from: Investments | 63,111,613 |
Foreign currency related transactions | 406 |
| 63,112,019 |
Net unrealized appreciation (depreciation) during the period on: Investments | 38,865,035 |
Foreign currency related transactions | (68) |
| 38,864,967 |
Net gain (loss) on investment transactions | 101,976,986 |
Net increase (decrease) in net assets resulting from operations | $ 106,011,346 |
The accompanying notes are an integral part of the financial statements.
|
Statement of Changes in Net Assets | ||
| Years Ended December 31, | |
Increase (Decrease) in Net Assets | 2004 | 2003 |
Operations: Net investment income (loss) | $ 4,034,360 | $ 4,178,048 |
Net realized gain (loss) on investment transactions | 63,112,019 | (4,032,299) |
Net unrealized appreciation (depreciation) on investment transactions during the period | 38,864,967 | 106,909,012 |
Net increase (decrease) in net assets resulting from operations | 106,011,346 | 107,054,761 |
Distributions to shareholders from: Net investment income Class A | (3,405,170) | (2,962,485) |
Class B | (212,277) | (46,780) |
Net realized gains Class A | — | (3,977,032) |
Class B | — | (77,506) |
Portfolio share transactions: Class A Proceeds from shares sold | 64,900,813 | 59,877,343 |
Reinvestment of distributions | 3,405,170 | 6,939,517 |
Cost of shares redeemed | (45,290,684) | (56,654,673) |
Net increase (decrease) in net assets from Class A share transactions | 23,015,299 | 10,162,187 |
Class B Proceeds from shares sold | 29,315,151 | 24,979,856 |
Reinvestment of distributions | 212,277 | 124,286 |
Cost of shares redeemed | (3,011,503) | (824,618) |
Net increase (decrease) in net assets from Class B share transactions | 26,515,925 | 24,279,524 |
Increase (decrease) in net assets | 151,925,123 | 134,432,669 |
Net assets at beginning of period | 385,683,642 | 251,250,973 |
Net assets at end of period (including undistributed net investment income of $3,681,177 and $3,552,152, respectively) | $ 537,608,765 | $ 385,683,642 |
Other Information | ||
Class A Shares outstanding at beginning of period | 22,038,819 | 21,449,028 |
Shares sold | 3,660,918 | 4,545,529 |
Shares issued to shareholders in reinvestment of distributions | 197,059 | 650,376 |
Shares redeemed | (2,608,551) | (4,606,114) |
Net increase (decrease) in Portfolio shares | 1,249,426 | 589,791 |
Shares outstanding at end of period | 23,288,245 | 22,038,819 |
Class B Shares outstanding at beginning of period | 1,977,912 | 98,769 |
Shares sold | 1,706,542 | 1,921,031 |
Shares issued to shareholders in reinvestment of distributions | 12,277 | 11,637 |
Shares redeemed | (165,087) | (53,525) |
Net increase (decrease) in Portfolio shares | 1,553,732 | 1,879,143 |
Shares outstanding at end of period | 3,531,644 | 1,977,912 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights |
|
Class A
Years Ended December 31, | 2004 | 2003 | 2002 | 2001 | 2000a |
Selected Per Share Data | |||||
Net asset value, beginning of period | $ 16.06 | $ 11.66 | $ 13.21 | $ 11.23 | $ 10.85 |
Income (loss) from investment operations: Net investment income (loss)b | .17 | .19 | .17 | .09 | .02 |
Net realized and unrealized gain (loss) on investment transactions | 3.98 | 4.55 | (1.67) | 1.89 | .42 |
Total from investment operations | 4.15 | 4.74 | (1.50) | 1.98 | .44 |
Less distributions from: Net investment income | (.16) | (.15) | (.05) | — | (.06) |
Net realized gains on investment transactions | — | (.19) | — | — | — |
Total distributions | (.16) | (.34) | (.05) | — | (.06) |
Net asset value, end of period | $ 20.05 | $ 16.06 | $ 11.66 | $ 13.21 | $ 11.23 |
Total Return (%) | 26.03 | 42.15 | (11.43) | 17.63 | 4.05 |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | 467 | 354 | 250 | 194 | 84 |
Ratio of expenses (%) | .79 | .80 | .81 | .79 | .82 |
Ratio of net investment income (loss) (%) | .96 | 1.46 | 1.28 | .77 | .15 |
Portfolio turnover rate (%) | 73 | 71 | 86 | 57 | 36 |
a On June 18, 2001, the Portfolio implemented 1 for 10 reverse stock split. Per share information, for the period prior to December 31, 2001, has been restated to reflect the effect of the split. Shareholders received 1 share for every 10 shares owned and net asset value per share increased correspondingly.
b Based on average shares outstanding during the period.
Class B
Years Ended December 31, | 2004 | 2003 | 2002a |
Selected Per Share Data | |||
Net asset value, beginning of period | $ 16.03 | $ 11.65 | $ 13.86 |
Income (loss) from investment operations: Net investment income (loss)b | .10 | .13 | .17 |
Net realized and unrealized gain (loss) on investment transactions | 3.97 | 4.56 | (2.38) |
Total from investment operations | 4.07 | 4.69 | (2.21) |
Less distributions from: Net investment income | (.09) | (.12) | — |
Net realized gains on investment transactions | — | (.19) | — |
Total distributions | (.09) | (.31) | — |
Net asset value, end of period | $ 20.01 | $ 16.03 | $ 11.65 |
Total Return (%) | 25.52 | 41.65 | (15.95)** |
Ratios to Average Net Assets and Supplemental Data | |||
Net assets, end of period ($ millions) | 71 | 32 | 1 |
Ratio of expenses (%) | 1.16 | 1.19 | 1.06* |
Ratio of net investment income (loss) (%) | .59 | 1.07 | 3.01* |
Portfolio turnover rate (%) | 73 | 71 | 86 |
a For the period from July 1, 2002 (commencement of operations of Class B shares) to December 31, 2003.
b Based on average shares outstanding during the period.
* Annualized
** Not annualized
Performance Summary December 31, 2004 |
|
SVS Eagle Focused Large Cap Growth Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns.
This Portfolio is subject to stock market risk, meaning stocks in the Portfolio may decline in value for extended periods of time due to the activities and financial prospects of individual companies, or due to general market and economic conditions. Please see this Portfolio's prospectus for specific details regarding its investments and risk profile.
Growth of an Assumed $10,000 Investment in SVS Eagle Focused Large Cap Growth Portfolio | ||
[] SVS Eagle Focused Large Cap Growth Portfolio — Class A [] Russell 1000 Growth Index |
| |
![]() |
| The Russell 1000 Growth Index is an unmanaged index composed of common stocks of larger US companies with higher price-to-book ratios and higher forecasted growth values. Index returns assume reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
Yearly periods ended December 31 |
|
|
Comparative Results | |||||
SVS Eagle Focused Large Cap Growth Portfolio |
| 1-Year | 3-Year | 5-Year | Life of Portfolio* |
Class A | Growth of $10,000 | $10,185 | $9,282 | $7,013 | $9,005 |
Average annual total return | 1.85% | -2.45% | -6.85% | -2.01% | |
Russell 1000 Growth Index | Growth of $10,000 | $10,630 | $9,946 | $6,140 | $7,145 |
Average annual total return | 6.30% | -.18% | -9.29% | -6.30% | |
SVS Eagle Focused Large Cap Growth Portfolio |
|
|
| 1-Year | Life of Class** |
Class B | Growth of $10,000 |
|
| $10,151 | $11,459 |
Average annual total return |
|
| 1.51% | 5.59% | |
Russell 1000 Growth Index | Growth of $10,000 |
|
| $10,630 | $12,555 |
Average annual total return |
|
| 6.30% | 9.53% |
The growth of $10,000 is cumulative.
* The Portfolio commenced operations on October 29, 1999. Index returns begin October 31, 1999. Total returns would have been lower for the 5-Year and Life of Portfolio periods for Class A shares if the Portfolio's expenses were not maintained.
** The Portfolio commenced offering Class B shares on July 1, 2002. Index returns begin June 30, 2002.
Information About Your Portfolio's Expenses |
|
SVS Eagle Focused Large Cap Growth Portfolio
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent six-month period, the Portfolio limited these expenses; had it not done so, expenses would have been higher. In the most recent six-month period, the Portfolio limited these expenses; had it not done so, expenses would have been higher. The tables are based on an investment of $1,000 made at the beginning of the six-month period ended December 31, 2004.
The tables illustrate your Portfolio's expenses in two ways:
Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2004 | ||
Actual Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,026.90 | $ 1,024.70 |
Expenses Paid per $1,000* | $ 5.15 | $ 7.04 |
Hypothetical 5% Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,020.12 | $ 1,018.25 |
Expenses Paid per $1,000* | $ 5.14 | $ 7.02 |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365.
Annualized Expense Ratios | Class A | Class B |
Scudder Variable Series II — SVS Eagle Focused Large Cap Growth Portfolio | 1.01% | 1.38% |
For more information, please refer to the Portfolio's prospectus.
Management Summary December 31, 2004 |
|
SVS Eagle Focused Large Cap Growth Portfolio
The portfolio was up 1.85% (Class A shares, unadjusted for contract charges) for the 12-month period ended December 31, 2004 while the benchmark Russell 1000 Growth Index was up 6.30%. The portfolio's relative underperformance for the year was attributable primarily to an overweighting in poorly performing semiconductor and media stocks. Fairchild Semiconductor International, Inc. and Intel Corp. were a drag on performance, as the semiconductor industry saw strong year-over-year revenue growth but lagging stock prices. In other areas of technology, Dell, Inc. and Microsoft Corp. were positive contributors to relative performance. In the consumer discretionary sector, positive contributions from eBay, Inc., Yahoo!, Inc. and Harrah's Entertainment, Inc. were not enough to overcome losses in Coca-Cola Co. and media companies Viacom, Inc. and Clear Channel Communications*. During the year, advertising dollars continued to migrate from traditional media companies (cable, newspapers, radio and television) to nontraditional media companies, which were more adept at leveraging the Internet, such as eBay. We strategically shifted assets out of traditional and into nontraditional media names. On the positive side, strength in financial services was led by CheckFree Corp., which benefited from strong reported earnings and increasing traction in sales of its financial products. Caremark Rx, Inc. and Genzyme Corp. bolstered the solid performance of the portfolio's health care holdings, as both companies improved their growth prospects via smart acquisitions. The global economy looks poised for what we expect will be continued and solid expansion in 2005, though the balance between inflation and growth remains a risk. We believe that solid top-line growth and high stable profit margins should drive earnings growth over the next year.
Ashi Parikh
Duane Eatherly
Portfolio Managers
Eagle Asset Management, Inc., Subadvisor to the Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the portfolio or any variable life insurance policy or variable annuity contract for which the portfolio is an investment option. These charges and fees will reduce returns.
Risk Considerations
This portfolio is subject to stock market risk, meaning stocks in the portfolio may decline in value for extended periods of time due to the activities and financial prospects of individual companies, or due to general market and economic conditions. Please see this portfolio's prospectus for specific details regarding its investments and risk profile.
The Russell 1000 Growth Index is an unmanaged index composed of common stocks of larger US companies with higher price-to-book ratios and higher forecasted growth values. Index returns assume reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
* Not held in the portfolio at the end of the reporting period.
Portfolio management market commentary is as of December 31, 2004, and may not come to pass. This information is subject to change at any time based on market and other conditions.
Portfolio Summary |
SVS Eagle Focused Large Cap Growth Portfolio
Asset Allocation | 12/31/04 | 12/31/03 |
| ||
Common Stocks | 98% | 99% |
Cash Equivalents | 2% | 1% |
| 100% | 100% |
Sector Diversification (Excludes Cash Equivalents) | 12/31/04 | 12/31/03 |
| ||
Information Technology | 41% | 39% |
Consumer Discretionary | 23% | 23% |
Health Care | 17% | 15% |
Consumer Staples | 7% | 3% |
Financials | 6% | 11% |
Industrials | 6% | 9% |
| 100% | 100% |
Asset allocation and sector diversification are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 49. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Portfolio as of month-end will be posted to scudder.com on the 15th of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio December 31, 2004 | ![]() | ![]() |
|
SVS Eagle Focused Large Cap Growth Portfolio
| Shares | Value ($) |
|
| |
Common Stocks 97.8% | ||
Consumer Discretionary 22.0% | ||
Hotels Restaurants & Leisure 5.6% | ||
Harrah's Entertainment, Inc. | 51,050 | 3,414,734 |
McDonald's Corp. | 100,200 | 3,212,412 |
6,627,146 | ||
Internet & Catalog Retail 4.3% | ||
eBay, Inc.* | 43,900 | 5,104,692 |
Media 8.2% | ||
Comcast Corp. "A"* | 56,200 | 1,845,608 |
EchoStar Communications Corp. "A" | 74,750 | 2,484,690 |
Time Warner, Inc.* | 108,700 | 2,113,128 |
Viacom, Inc. "B" | 46,700 | 1,699,413 |
Walt Disney Co. | 58,100 | 1,615,180 |
9,758,019 | ||
Multiline Retail 2.0% | ||
Target Corp. | 46,200 | 2,399,166 |
Specialty Retail 1.8% | ||
Home Depot, Inc. | 50,725 | 2,167,987 |
Consumer Staples 6.5% | ||
Beverages 3.0% | ||
Coca-Cola Co. | 84,900 | 3,534,387 |
Food & Drug Retailing 3.5% | ||
Wal-Mart Stores, Inc. | 78,900 | 4,167,498 |
Financials 6.2% | ||
Capital Markets 1.9% | ||
Goldman Sachs Group, Inc. | 22,100 | 2,299,284 |
Diversified Financial Services 2.0% | ||
Citigroup, Inc. | 48,466 | 2,335,092 |
Insurance 2.3% | ||
American International Group, Inc. | 42,250 | 2,774,557 |
Health Care 16.3% | ||
Biotechnology 2.2% | ||
Genzyme Corp.* | 45,600 | 2,647,992 |
Health Care Equipment & Supplies 2.0% | ||
Zimmer Holdings, Inc.* | 29,950 | 2,399,594 |
Health Care Providers & Services 2.5% | ||
Caremark Rx, Inc.* | 73,450 | 2,896,134 |
Pharmaceuticals 9.6% | ||
Abbott Laboratories | 43,200 | 2,015,280 |
Allergan, Inc. | 24,100 | 1,953,787 |
Johnson & Johnson | 48,000 | 3,044,160 |
Pfizer, Inc. | 162,200 | 4,361,558 |
11,374,785 | ||
| Shares | Value ($) |
|
| |
Industrials 6.4% | ||
Electrical Equipment 2.5% | ||
Emerson Electric Co. | 41,600 | 2,916,160 |
Industrial Conglomerates 3.9% | ||
General Electric Co. | 127,250 | 4,644,625 |
Information Technology 40.4% | ||
Communications Equipment 4.5% | ||
Cisco Systems, Inc.* | 188,500 | 3,638,050 |
Nokia Oyj (ADR) | 110,900 | 1,737,803 |
5,375,853 | ||
Computers & Peripherals 7.1% | ||
Dell, Inc.* | 154,650 | 6,516,951 |
EMC Corp.* | 128,300 | 1,907,821 |
8,424,772 | ||
Electronic Equipment & Instruments 2.6% | ||
Symbol Technologies, Inc. | 176,900 | 3,060,370 |
Internet Software & Services 2.9% | ||
Yahoo!, Inc.* | 91,450 | 3,445,836 |
IT Consulting & Services 3.0% | ||
CheckFree Corp.* | 40,250 | 1,532,720 |
First Data Corp. | 47,950 | 2,039,793 |
3,572,513 | ||
Semiconductors & Semiconductor Equipment 13.2% | ||
Broadcom Corp. "A"* | 121,200 | 3,912,336 |
Fairchild Semiconductor International, Inc.* | 88,400 | 1,437,384 |
Intel Corp. | 144,250 | 3,374,007 |
Maxim Integrated Products, Inc. | 56,600 | 2,399,274 |
National Semiconductor Corp.* | 125,500 | 2,252,725 |
Texas Instruments, Inc. | 89,650 | 2,207,183 |
15,582,909 | ||
Software 7.1% | ||
Microsoft Corp. | 219,100 | 5,852,161 |
Symantec Corp.* | 97,100 | 2,501,296 |
8,353,457 | ||
Total Common Stocks (Cost $101,267,812) | 115,862,828 | |
| ||
Cash Equivalents 2.6% | ||
Scudder Cash Management QP Trust, 2.24% (b) (Cost $3,050,051) | 3,050,051 | 3,050,051 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $104,317,863) (a) | 100.4 | 118,912,879 |
Other Assets and Liabilities, Net | (0.4) | (499,845) |
Net Assets | 100.0 | 118,413,034 |
Notes to SVS Eagle Focused Large Cap Growth Portfolio of Investments |
* Non-income producing security.
(a) The cost for federal income tax purposes was $107,342,716. At December 31, 2004, net unrealized appreciation for all securities based on tax cost was $11,570,163. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $14,639,514 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $3,069,351.
(b) Scudder Cash Management QP Trust is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
ADR: American Depositary Receipts
The accompanying notes are an integral part of the financial statements.
Financial Statements |
|
Statement of Assets and Liabilities as of December 31, 2004 | |
Assets | |
Investments: Investments in securities, at value (cost $101,267,812) | $ 115,862,828 |
Investment in Scudder Cash Management QP Trust (cost $3,050,051) | 3,050,051 |
Total investments in securities, at value (cost $104,317,863) | 118,912,879 |
Dividends receivable | 66,118 |
Interest receivable | 4,031 |
Receivable for investments sold | 1,376,012 |
Receivable for Portfolio shares sold | 36,708 |
Other assets | 4,231 |
Total assets | 120,399,979 |
Liabilities | |
Payable for Portfolio shares redeemed | 97,405 |
Payable for investments purchased | 1,723,549 |
Accrued management fee | 75,993 |
Other accrued expenses and payables | 89,998 |
Total liabilities | 1,986,945 |
Net assets, at value | $ 118,413,034 |
Net Assets | |
Net assets consist of: Undistributed net investment income | 404,661 |
Net unrealized appreciation (depreciation) on investments | 14,595,016 |
Accumulated net realized gain (loss) | (26,027,743) |
Paid-in capital | 129,441,100 |
Net assets, at value | $ 118,413,034 |
Class A Net Asset Value, offering and redemption price per share ($87,519,374 ÷ 9,955,815 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 8.79 |
Class B Net Asset Value, offering and redemption price per share ($30,893,660 ÷ 3,544,097 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 8.72 |
Statement of Operations for the year ended December 31, 2004 | |
Investment Income | |
Income: Dividends | $ 1,576,944 |
Securities lending income, including income from Daily Assets Fund Institutional | 1,104 |
Interest — Scudder Cash Management QP Trust | 35,449 |
Total Income | 1,613,497 |
Expenses: Management fee | 945,157 |
Custodian and accounting fees | 82,602 |
Distribution service fees (Class B) | 60,991 |
Record keeping fees (Class B) | 31,879 |
Auditing | 53,771 |
Legal | 14,279 |
Trustees' fees and expenses | 1,913 |
Reports to shareholders | 13,378 |
Other | 6,345 |
Total expenses, before expense reductions | 1,210,315 |
Expense reductions | (1,550) |
Total expenses, after expense reductions | 1,208,765 |
Net investment income (loss) | 404,732 |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from investments | (164,658) |
Net unrealized appreciation (depreciation) during the period on investments | 2,143,613 |
Net gain (loss) on investment transactions | 1,978,955 |
Net increase (decrease) in net assets resulting from operations | $ 2,383,687 |
The accompanying notes are an integral part of the financial statements.
|
Statement of Changes in Net Assets | ||
| Years Ended December 31, | |
Increase (Decrease) in Net Assets | 2004 | 2003 |
Operations: Net investment income (loss) | $ 404,732 | $ (51,955) |
Net realized gain (loss) on investment transactions | (164,658) | 2,310,457 |
Net unrealized appreciation (depreciation) on investment transactions during the period | 2,143,613 | 16,392,143 |
Net increase (decrease) in net assets resulting from operations | 2,383,687 | 18,650,645 |
Portfolio share transactions: Class A Proceeds from shares sold | 12,090,841 | 13,012,448 |
Cost of shares redeemed | (9,834,816) | (8,293,606) |
Net increase (decrease) in net assets from Class A share transactions | 2,256,025 | 4,718,842 |
Class B Proceeds from shares sold | 17,731,434 | 12,484,580 |
Cost of shares redeemed | (2,263,054) | (113,785) |
Net increase (decrease) in net assets from Class B share transactions | 15,468,380 | 12,370,795 |
Increase (decrease) in net assets | 20,108,092 | 35,740,282 |
Net assets at beginning of period | 98,304,942 | 62,564,660 |
Net assets at end of period (including undistributed net investment income and accumulated net investment loss of $404,661 and $71, respectively) | $ 118,413,034 | $ 98,304,942 |
Other Information | ||
Class A Shares outstanding at beginning of period | 9,695,116 | 9,100,995 |
Shares sold | 1,445,596 | 1,735,087 |
Shares redeemed | (1,184,897) | (1,140,966) |
Net increase (decrease) in Portfolio shares | 260,699 | 594,121 |
Shares outstanding at end of period | 9,955,815 | 9,695,116 |
Class B Shares outstanding at beginning of period | 1,703,581 | 77,032 |
Shares sold | 2,112,493 | 1,642,289 |
Shares redeemed | (271,977) | (15,740) |
Net increase (decrease) in Portfolio shares | 1,840,516 | 1,626,549 |
Shares outstanding at end of period | 3,544,097 | 1,703,581 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights |
|
Class A
Years Ended December 31, | 2004 | 2003 | 2002 | 2001 | 2000a |
Selected Per Share Data | |||||
Net asset value, beginning of period | $ 8.63 | 6.82 | $ 9.46 | $ 11.40 | $ 12.84 |
Income (loss) from investment operations: Net investment income (loss)b | .04 | —* | (.01) | (.02) | (.05) |
Net realized and unrealized gain (loss) on investment transactions | .12 | 1.81 | (2.63) | (1.92) | (1.04) |
Total from investment operations | .16 | 1.81 | (2.64) | (1.94) | (1.09) |
Less distributions from: Net realized gains on investment transactions | — | — | — | — | (.35) |
Net asset value, end of period | $ 8.79 | $ 8.63 | $ 6.82 | $ 9.46 | $ 11.40 |
Total Return (%) | 1.85 | 26.54 | (27.91) | (17.02) | (9.02)c |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | 88 | 84 | 62 | 60 | 28 |
Ratio of expenses before expense reductions (%) | 1.05 | 1.10 | 1.03 | 1.13 | 1.33 |
Ratio of expenses after expense reductions (%) | 1.04 | 1.10 | 1.03 | 1.11 | 1.02 |
Ratio of net investment income (loss) (%) | .47 | (.04) | (.08) | (.21) | (.37) |
Portfolio turnover rate (%) | 90 | 143 | 123 | 98 | 323 |
a On June 18, 2001, the Portfolio implemented a 1 for 10 reverse stock split. Per share information, for the period prior to December 31, 2001, has been restated to reflect the effect of the split. Shareholders received 1 share for every 10 shares owned and net asset value per share increased correspondingly.
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
* Amount is less than $.005.
Class B
Years Ended December 31, | 2004 | 2003 | 2002a |
Selected Per Share Data | |||
Net asset value, beginning of period | $ 8.59 | $ 6.81 | $ 7.61 |
Income (loss) from investment operations: Net investment income (loss)b | .01 | (.04) | .01 |
Net realized and unrealized gain (loss) on investment transactions | .12 | 1.82 | (.81) |
Total from investment operations | .13 | 1.78 | (.80) |
Net asset value, end of period | $ 8.72 | $ 8.59 | $ 6.81 |
Total Return (%) | 1.51 | 26.14 | (10.51)** |
Ratios to Average Net Assets and Supplemental Data | |||
Net assets, end of period ($ millions) | 31 | 15 | .5 |
Ratio of expenses (%) | 1.42 | 1.49 | 1.30* |
Ratio of net investment income (loss) (%) | .09 | (.43) | .21* |
Portfolio turnover rate (%) | 90 | 143 | 123 |
a For the period July 1, 2002 (commencement of operations of Class B shares) to December 31, 2002.
b Based on average shares outstanding during the period.
* Annualized
** Not annualized
Performance Summary December 31, 2004 |
|
SVS Focus Value+Growth Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns.
This Portfolio is subject to stock market risk. It is non-diversified and can take larger positions in fewer companies, increasing its overall potential risk. Please read this Portfolio's prospectus for specific details regarding its investments and risk profile.
Growth of an Assumed $10,000 Investment in SVS Focus Value+Growth Portfolio from 5/1/1996 to 12/31/2004 | ||
[] SVS Focus Value+Growth Portfolio — Class A [] 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 reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
Yearly periods ended December 31 |
|
|
Comparative Results | |||||
SVS Focus Value+Growth Portfolio |
| 1-Year | 3-Year | 5-Year | Life of Portfolio* |
Class A | Growth of $10,000 | $11,116 | $10,946 | $9,009 | $18,139 |
Average annual total return | 11.16% | 3.06% | -2.06% | 7.11% | |
S&P 500 Index | Growth of $10,000 | $11,088 | $11,115 | $8,902 | $21,250 |
Average annual total return | 10.88% | 3.59% | -2.30% | 9.09% | |
SVS Focus Value+Growth Portfolio |
|
|
| 1-Year | Life of Class** |
Class B | Growth of $10,000 |
|
| $11,082 | $13,155 |
Average annual total return |
|
| 10.82% | 11.58% | |
S&P 500 Index | Growth of $10,000 |
|
| $11,088 | $12,800 |
Average annual total return |
|
| 10.88% | 10.38% |
The growth of $10,000 is cumulative.
* The Portfolio commenced operations on May 1, 1996. Index returns begin April 30, 1996.
** The Portfolio commenced offering Class B shares on July 1, 2002. Index returns begin June 30, 2002.
Information About Your Portfolio's Expenses |
|
SVS Focus Value+Growth Portfolio
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. The tables are based on an investment of $1,000 made at the beginning of the six-month period ended December 31, 2004.
The tables illustrate your Portfolio's expenses in two ways:
Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2004 | ||
Actual Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,089.50 | $ 1,088.00 |
Expenses Paid per $1,000* | $ 4.24 | $ 6.23 |
Hypothetical 5% Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,021.14 | $ 1,019.24 |
Expenses Paid per $1,000* | $ 4.11 | $ 6.03 |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365.
Annualized Expense Ratios | Class A | Class B |
Scudder Variable Series II — SVS Focus Value+Growth Portfolio | .81% | 1.18% |
For more information, please refer to the Portfolio's prospectus.
Management Summary December 31, 2004 |
|
SVS Focus Value+Growth Portfolio
We are pleased to announce that in the 12-month period ended December 31, 2004 the portfolio (Class A shares, unadjusted for contract charges) posted a total return 11.16%, versus a 10.88% return by the S&P 500 index.
The period proved difficult for the portfolio's value holdings. In a highly concentrated portfolio, such as this, severe losses among core holdings can be very damaging. In this case, gains in the portfolio's largest position — Freddie Mac — and of top-10 holdings, including UST, Inc. and Altria Group, Inc. were not enough to offset losses sustained by Fannie Mae and Pfizer, Inc. which faced scrutiny during the period. Mortgage provider Fannie Mae declined when its accounting practices came under investigation and were deemed improper by the SEC. Pfizer, Inc. plummeted after clinical studies suggested that osteoarthritis drug, Celebrex, might increase the cardiovascular risks when taken in large doses. While we're disappointed in the events that led to the declines in these holdings, we believe they are temporary setbacks. We continue to hold both stocks.
The portfolio's growth sleeve performed well with every sector posting positive returns for the year. Consumer discretionary stocks made the greatest contribution to overall performance. Among them was top-10 holding eBay, Inc., a provider of online auction services, which continued to benefit from market dominance and valuable brand recognition. Starbucks Corp. also aided performance with revenues and unit sales growth that exceeded expectations. Within the energy area, BJ Services Co.*, rose in tandem with historically high oil prices and increased demand for drilling services. While the sleeve's technology sector advanced, several semiconductor stocks — Intel* and Texas Instruments* — produced negative returns as demand for semiconductors slowed, leading to inventory surpluses.
David N. Dreman Spiros Segalas
F. James Hutchinson Kathleen McCarragher
Co-Managers Co-Managers
Dreman Value Management L.L.C. Jennison Associates LLC
(Subadvisor for the Value portion of the Portfolio) (Subadvisor for the Growth portion of the Portfolio)
*This holding was not held in the portfolio at the end of the reporting period.
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the portfolio or any variable life insurance policy or variable annuity contract for which the portfolio is an investment option. These charges and fees will reduce returns.
Risk Considerations
This portfolio is subject to stock market risk. It is nondiversified and can take larger positions in fewer companies, increasing its overall potential risk. Please read this portfolio's prospectus for specific details regarding its investments and risk profile.
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 reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
Portfolio management market commentary is as of December 31, 2004, and may not come to pass. This information is subject to change at any time based on market and other conditions.
Portfolio Summary |
SVS Focus Value+Growth Portfolio
Asset Allocation | 12/31/04 | 12/31/03 |
| ||
Common Stocks | 99% | 96% |
Cash Equivalents | 1% | 4% |
| 100% | 100% |
Sector Diversification (Excludes Cash Equivalents) | 12/31/04 | 12/31/03 |
| ||
Financials | 28% | 30% |
Information Technology | 21% | 20% |
Health Care | 16% | 15% |
Consumer Staples | 14% | 8% |
Consumer Discretionary | 12% | 18% |
Industrials | 4% | 3% |
Energy | 3% | 5% |
Telecommunication Services | 2% | — |
Utilities | — | 1% |
| 100% | 100% |
Asset allocation and sector diversification are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 7. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Portfolio as of month end will be posted to scudder.com on the 15th of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio December 31, 2004 | ![]() | ![]() |
|
SVS Focus Value+Growth Portfolio
|
| Value ($) |
|
| |
Common Stocks 98.8% | ||
Consumer Discretionary 12.4% | ||
Hotels Restaurants & Leisure 2.9% | ||
Starbucks Corp.* | 58,000 | 3,616,880 |
Internet & Catalog Retail 3.7% | ||
eBay, Inc.* | 40,100 | 4,662,828 |
Multiline Retail 2.8% | ||
Target Corp. | 67,000 | 3,479,310 |
Specialty Retail 3.0% | ||
Borders Group, Inc. | 31,250 | 793,750 |
Home Depot, Inc. | 52,165 | 2,229,532 |
Staples, Inc. | 23,340 | 786,792 |
3,810,074 | ||
Consumer Staples 14.3% | ||
Food & Drug Retailing 2.3% | ||
Whole Foods Market, Inc. | 30,200 | 2,879,570 |
Personal Products 2.4% | ||
Estee Lauder Companies, Inc. "A" | 67,200 | 3,075,744 |
Tobacco 9.6% | ||
Altria Group, Inc. | 111,100 | 6,788,210 |
Reynolds American, Inc. | 8,825 | 693,645 |
UST, Inc. | 94,920 | 4,566,601 |
12,048,456 | ||
Energy 3.2% | ||
Oil & Gas | ||
Apache Corp. | 1,200 | 60,684 |
Burlington Resources, Inc. | 900 | 39,150 |
ChevronTexaco Corp. | 12,150 | 637,996 |
ConocoPhillips | 1,300 | 112,879 |
Devon Energy Corp. | 46,690 | 1,817,175 |
EnCana Corp. | 4,400 | 251,064 |
Kerr-McGee Corp. | 16,350 | 944,866 |
Occidental Petroleum Corp. | 3,099 | 180,858 |
4,044,672 | ||
Financials 27.7% | ||
Banks 7.1% | ||
Bank of America Corp. | 48,420 | 2,275,256 |
PNC Financial Services Group | 17,510 | 1,005,774 |
Sovereign Bancorp, Inc. | 48,810 | 1,100,666 |
US Bancorp. | 28,700 | 898,884 |
Washington Mutual, Inc. | 85,251 | 3,604,412 |
8,884,992 | ||
Capital Markets 2.8% | ||
Merrill Lynch & Co., Inc. | 59,300 | 3,544,361 |
Consumer Finance 2.6% | ||
American Express Co. | 59,300 | 3,342,741 |
Diversified Financial Services 14.0% | ||
Fannie Mae | 85,050 | 6,056,410 |
Freddie Mac | 112,150 | 8,265,455 |
JPMorgan Chase & Co. | 86,500 | 3,374,365 |
17,696,230 | ||
|
| Value ($) |
|
| |
Insurance 1.2% | ||
American International Group, Inc. | 22,500 | 1,477,575 |
Health Care 15.4% | ||
Biotechnology 4.7% | ||
Genentech, Inc.* | 74,800 | 4,072,112 |
Gilead Sciences, Inc.* | 53,600 | 1,875,464 |
| 5,947,576 | |
Health Care Equipment & Supplies 0.5% | ||
Becton, Dickinson & Co. | 10,675 | 606,340 |
Health Care Providers & Services 4.1% | ||
AmerisourceBergen Corp. | 15,050 | 883,134 |
Cardinal Health, Inc. | 5,750 | 334,363 |
HCA, Inc. | 20,875 | 834,165 |
Laboratory Corp. of America Holdings* | 23,890 | 1,190,200 |
Medco Health Solutions, Inc.* | 22,062 | 917,779 |
Quest Diagnostics, Inc. | 10,720 | 1,024,296 |
5,183,937 | ||
Pharmaceuticals 6.1% | ||
Bristol Myers Squibb Co. | 55,170 | 1,413,455 |
Eli Lilly & Co. | 35,600 | 2,020,300 |
Merck & Co., Inc. | 46,900 | 1,507,366 |
Pfizer, Inc. | 94,500 | 2,541,105 |
Wyeth | 5,525 | 235,310 |
7,717,536 | ||
Industrials 3.7% | ||
Industrial Conglomerates 3.7% | ||
General Electric Co. | 101,200 | 3,693,800 |
Tyco International Ltd. | 25,850 | 923,879 |
4,617,679 | ||
Information Technology 20.5% | ||
Computers & Peripherals 2.8% | ||
Apple Computer, Inc.* | 54,800 | 3,529,120 |
Electronic Equipment & Instruments 2.4% | ||
Agilent Technologies, Inc.* | 126,700 | 3,053,470 |
Internet Software & Services 6.0% | ||
Google, Inc. "A"* | 18,700 | 3,610,970 |
Yahoo!, Inc.* | 104,000 | 3,918,720 |
7,529,690 | ||
IT Consulting & Services 1.5% | ||
Electronic Data Systems Corp. | 82,525 | 1,906,328 |
Semiconductors & Semiconductor Equipment 2.0% | ||
Marvell Technology Group Ltd.* | 71,100 | 2,521,917 |
Software 5.8% | ||
Electronic Arts, Inc.* | 63,700 | 3,929,016 |
Microsoft Corp. | 123,300 | 3,293,343 |
7,222,359 | ||
Telecommunication Services 1.6% | ||
Wireless Telecommunication Services | ||
Nextel Communications, Inc. "A"* | 67,000 | 2,010,000 |
Total Common Stocks (Cost $103,076,220) | 124,409,385 | |
|
| Value ($) |
|
| |
Cash Equivalents 1.0% | ||
Scudder Cash Management QP Trust, 2.24% (b) (Cost $1,256,952) | 1,256,952 | 1,256,952 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $104,333,172) (a) | 99.8 | 125,666,337 |
Other Assets and Liabilities, Net | 0.2 | 229,302 |
Net Assets | 100.0 | 125,895,639 |
Notes to SVS Focus Value+Growth Portfolio of Investments |
* Non-income producing security.
(a) The cost for federal income tax purposes was $104,426,153. At December 31, 2004, net unrealized appreciation for all securities based on tax cost was $21,240,184. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $24,483,278 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $3,243,094.
(b) Scudder Cash Management QP Trust is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
The accompanying notes are an integral part of the financial statements.
Financial Statements |
|
Statement of Assets and Liabilities as of December 31, 2004 | |
Assets | |
Investments: Investments in securities, at value (cost $103,076,220) | $ 124,409,385 |
Investment in Scudder Cash Management QP Trust (cost $1,256,952) | 1,256,952 |
Total investments in securities, at value (cost $104,333,172) | 125,666,337 |
Cash | 79,047 |
Receivable for investments sold | 316,809 |
Dividends receivable | 152,268 |
Interest receivable | 2,706 |
Other assets | 3,721 |
Total assets | 126,220,888 |
Liabilities | |
Payable for Portfolio shares redeemed | 188,679 |
Accrued management fee | 83,203 |
Other accrued expenses and payables | 53,367 |
Total liabilities | 325,249 |
Net assets, at value | $ 125,895,639 |
Net Assets | |
Net assets consist of: Undistributed net investment income | 1,316,360 |
Net unrealized appreciation (depreciation) on investments | 21,333,165 |
Accumulated net realized gain (loss) | (29,983,699) |
Paid-in capital | 133,229,813 |
Net assets, at value | $ 125,895,639 |
Class A Net Asset Value, offering and redemption price per share ($114,746,163 ÷ 8,194,607 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 14.00 |
Class B Net Asset Value, offering and redemption price per share ($11,149,476 ÷ 798,374 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 13.97 |
Statement of Operations for the year ended December 31, 2004 | |
Investment Income | |
Income: Dividends (net of foreign taxes withheld of $66) | $ 2,355,322 |
Interest — Scudder Cash Management QP Trust | 28,530 |
Securities lending income, including income from Daily Assets Fund Institutional | 213 |
Total Income | 2,384,065 |
Expenses: Management fee | 918,970 |
Custodian fees | 15,016 |
Distribution service fees (Class B) | 22,563 |
Record keeping fees (Class B) | 12,161 |
Auditing | 40,476 |
Legal | 3,682 |
Reports to shareholders | 10,424 |
Other | 1,341 |
Total expenses, before expense reductions | 1,024,633 |
Expense reductions | (1,623) |
Total expenses, after expense reductions | 1,023,010 |
Net investment income (loss) | 1,361,055 |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from: Investments | 4,306,873 |
Futures | 116,366 |
| 4,423,239 |
Net unrealized appreciation (depreciation) during the period on: Investments | 6,929,650 |
Futures | (64,159) |
| 6,865,491 |
Net gain (loss) on investment transactions | 11,288,730 |
Net increase (decrease) in net assets resulting from operations | $ 12,649,785 |
The accompanying notes are an integral part of the financial statements.
|
Statement of Changes in Net Assets | ||
| Years Ended December 31, | |
Increase (Decrease) in Net Assets | 2004 | 2003 |
Operations: Net investment income (loss) | $ 1,361,055 | $ 1,010,016 |
Net realized gain (loss) on investment transactions | 4,423,239 | (762,388) |
Net unrealized appreciation (depreciation) on investment transactions during the period | 6,865,491 | 30,764,910 |
Net increase (decrease) in net assets resulting from operations | 12,649,785 | 31,012,538 |
Distributions to shareholders from: Net investment income Class A | (964,388) | (861,563) |
Class B | (34,623) | (12,687) |
Portfolio share transactions: Class A Proceeds from shares sold | 6,603,416 | 11,072,613 |
Reinvestment of distributions | 964,388 | 861,563 |
Cost of shares redeemed | (24,197,037) | (17,513,556) |
Net increase (decrease) in net assets from Class A share transactions | (16,629,233) | (5,579,380) |
Class B Proceeds from shares sold | 4,462,355 | 5,121,184 |
Reinvestment of distributions | 34,623 | 12,687 |
Cost of shares redeemed | (675,725) | (406,433) |
Net increase (decrease) in net assets from Class B share transactions | 3,821,253 | 4,727,438 |
Increase (decrease) in net assets | (1,157,206) | 29,286,346 |
Net assets at beginning of period | 127,052,845 | 97,766,499 |
Net assets at end of period (including undistributed net investment income of $1,316,360 and $954,315, respectively) | $ 125,895,639 | $ 127,052,845 |
Other Information | ||
Class A Shares outstanding at beginning of period | 9,513,858 | 10,089,997 |
Shares sold | 516,151 | 983,070 |
Shares issued to shareholders in reinvestment of distributions | 76,791 | 93,142 |
Shares redeemed | (1,912,193) | (1,652,351) |
Net increase (decrease) in Portfolio shares | (1,319,251) | (576,139) |
Shares outstanding at end of period | 8,194,607 | 9,513,858 |
Class B Shares outstanding at beginning of period | 495,365 | 39,304 |
Shares sold | 352,824 | 491,329 |
Shares issued to shareholders in reinvestment of distributions | 2,757 | 1,372 |
Shares redeemed | (52,572) | (36,640) |
Net increase (decrease) in Portfolio shares | 303,009 | 456,061 |
Shares outstanding at end of period | 798,374 | 495,365 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights |
|
Class A
Years Ended December 31, | 2004 | 2003 | 2002 | 2001 | 2000a |
Selected Per Share Data | |||||
Net asset value, beginning of period | $ 12.70 | $ 9.65 | $ 13.08 | $ 16.55 | $ 18.96 |
Income (loss) from investment operations: Net investment income (loss)b | .14 | .10 | .08 | .09 | .12 |
Net realized and unrealized gain (loss) on investment transactions | 1.27 | 3.04 | (3.45) | (2.41) | (.73) |
Total from investment operations | 1.41 | 3.14 | (3.37) | (2.32) | (.61) |
Less distributions from: Net investment income | (.11) | (.09) | (.06) | (.10) | (.10) |
Net realized gains on investment transactions | — | — | — | (1.05) | (1.70) |
Total distributions | (.11) | (.09) | (.06) | (1.15) | (1.80) |
Net asset value, end of period | $ 14.00 | $ 12.70 | $ 9.65 | $ 13.08 | $ 16.55 |
Total Return (%) | 11.16 | 32.87c | (25.89) | (14.35) | (3.90) |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | 115 | 121 | 97 | 140 | 153 |
Ratio of expenses before expense reductions (%) | .81 | .85 | .81 | .79 | .81 |
Ratio of expenses after expense reductions (%) | .81 | .84 | .81 | .79 | .81 |
Ratio of net investment income (loss) (%) | 1.14 | .96 | .73 | .64 | .66 |
Portfolio turnover rate (%) | 68 | 82 | 109 | 180 | 39 |
a On June 18, 2001, the Portfolio implemented a 1 for 10 reverse stock split. Per share information, for the period prior to June 30, 2001, has been restated to reflect the effect of the split. Shareholders received 1 share for every 10 shares owned and net asset value per share increased correspondingly.
b Based on average shares outstanding during the period.
c Total returns would have been lower had certain expenses not been reduced.
Class B
Years Ended December 31, | 2004 | 2003 | 2002a |
Selected Per Share Data | |||
Net asset value, beginning of period | $ 12.66 | $ 9.63 | $ 10.74 |
Income (loss) from investment operations: Net investment income (loss)b | .10 | .05 | .08 |
Net realized and unrealized gain (loss) on investment transactions | 1.26 | 3.04 | (1.19) |
Total from investment operations | 1.36 | 3.09 | (1.11) |
Less distributions from: Net investment income | (.05) | (.06) | — |
Net asset value, end of period | $ 13.97 | $ 12.66 | $ 9.63 |
Total Return (%) | 10.82 | 32.39c | (10.34)** |
Ratios to Average Net Assets and Supplemental Data | |||
Net assets, end of period ($ millions) | 11 | 6 | .4 |
Ratio of expenses before expense reductions (%) | 1.19 | 1.25 | 1.06* |
Ratio of expenses after expense reductions (%) | 1.19 | 1.24 | 1.06* |
Ratio of net investment income (loss) (%) | .76 | .56 | 1.64* |
Portfolio turnover rate (%) | 68 | 82 | 109 |
a For the period July 1, 2002 (commencement of operations of Class B shares) to December 31, 2002.
b Based on average shares outstanding during the period.
c Total returns would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
Performance Summary December 31, 2004 |
|
SVS Index 500 Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns.
This Portfolio is subject to stock market risk, meaning stocks in the Portfolio may decline in value for extended periods of time due to the activities and financial prospects of individual companies, or due to general market and economic conditions. Additionally, derivatives may be more volatile and less liquid than traditional securities and the Portfolio could suffer losses on its derivatives positions. Please read this Portfolio's prospectus for specific details regarding its investments and risk profile.
Growth of an Assumed $10,000 Investment in SVS Index 500 Portfolio from 9/1/1999 to 12/31/2004 | ||
[] SVS Index 500 Portfolio — Class A [] 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 reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
Yearly periods ended December 31 |
|
|
Comparative Results | |||||
SVS Index 500 Portfolio |
| 1-Year | 3-Year | 5-Year | Life of Portfolio* |
Class A | Growth of $10,000 | $11,038 | $10,966 | $8,687 | $9,517 |
Average annual total return | 10.38% | 3.12% | -2.78% | -.92% | |
S&P 500 Index | Growth of $10,000 | $11,088 | $11,115 | $8,902 | $9,947 |
Average annual total return | 10.88% | 3.59% | -2.30% | -.10% | |
SVS Index 500 Portfolio |
|
|
| 1-Year | Life of Class** |
Class B | Growth of $10,000 |
|
| $10,998 | $12,824 |
Average annual total return |
|
| 9.98% | 10.45% | |
S&P 500 Index | Growth of $10,000 |
|
| $11,088 | $12,800 |
Average annual total return |
|
| 10.88% | 10.38% |
The growth of $10,000 is cumulative.
* The Portfolio commenced operations on September 1, 1999. Index returns begin August 31, 1999. Total returns would have been lower for the 3-Year and Life of Portfolio periods for Class A shares if the Portfolio's expenses were not maintained.
** The Portfolio commenced offering Class B shares on July 1, 2002. Index returns begin June 30, 2002.
Information About Your Portfolio's Expenses |
|
SVS Index 500 Portfolio
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent six-month period, Class B shares of the Portfolio limited these expenses; had it not done so, expenses would have been higher. The tables are based on an investment of $1,000 made at the beginning of the six-month period ended December 31, 2004.
The tables illustrate your Portfolio's expenses in two ways:
Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2004 | ||
Actual Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,070.40 | $ 1,068.20 |
Expenses Paid per $1,000* | $ 1.91 | $ 3.73 |
Hypothetical 5% Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,023.29 | $ 1,021.53 |
Expenses Paid per $1,000* | $ 1.87 | $ 3.65 |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365.
Annualized Expense Ratios | Class A | Class B |
Scudder Variable Series II — SVS Index 500 Portfolio | .37% | .72% |
For more information, please refer to the Portfolio's prospectus.
Management Summary December 31, 2004 |
|
SVS Index 500 Portfolio
For the 12-month period ended December 31, 2004, the portfolio produced a total return of 10.38% (Class A shares, unadjusted for contract charges). The Standard & Poor's 500 (S&P 500) index concluded 2004 with a 10.88% return, which included a strong fourth quarter finish of 9.23%. Value stocks outpaced growth stocks both during the fourth quarter and year. During the quarter, the S&P 500 Barra Value index rose 9.93% versus 8.51% for the S&P 500 Barra Growth index.1 For the year, value stocks (+15.71%) outperformed growth stocks (+6.13%) by 958 basis points. As has been the case throughout the year, returns increased as market capitalization decreased. The small- and mid-cap segments continued their buoyant pace during the quarter with the S&P MidCap 400 up 12.16% and the S&P SmallCap 600 increasing by 13.00%.2 This year, the performance differential across capitalization segments was even more pronounced. The S&P MidCap 400 index increased by 16.48%, while the S&P SmallCap 600 index increased by 22.68%.
The US economy rallied again in the fourth quarter, continuing the 13-quarter economic expansion. Stock prices, which hit a low in October 2002, have recovered over the past nine quarters. Economic growth, changing from a consumption-driven trend to one that is driven by business and business investment, grew slightly above the 3.5 to 4 cent per share trend. At year end, corporate executives remain cautiously optimistic that inflation would remain under control, with core Consumer Price Index (an inflationary indicator that measures the change in the cost of a fixed basket of products and services) running at about 2.3%, and that the Federal Reserve Board would continue its measured pace of rate increases. The dollar, on a trade-weighted basis, is probably going to continue to decline, but the willingness of overseas investors to own our assets is still high. Our returns on capital and profitability remain superior to what's happening in Europe and Japan.
All S&P 500 index sectors generated positive results for the year with the energy sector increasing the sharpest at 31.54%. Other strong-performing sectors for the year included utilities, telecomm services and industrials, which advanced by 24.28%, 19.85% and 18.03%, respectively. Information technology and health care dampened the index's return advancing by only 2.54% and 1.67% for the year.
The Portfolio Management Team
Northern Trust Investments, N.A., Subadvisor to the Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the portfolio or any variable life insurance policy or variable annuity contract for which the portfolio is an investment option. These charges and fees will reduce returns.
Risk Considerations
The portfolio may not be able to mirror the S&P 500 index closely enough to track its performance for several reasons, including the portfolio's cost to buy and sell securities, as well as the flow of money into and out of the portfolio. This portfolio is subject to stock market risk, meaning stocks in the portfolio may decline in value for extended periods of time due to the activities and financial prospects of individual companies, or due to general market and economic conditions. Additionally, derivatives may be more volatile and less liquid than traditional securities and the portfolio could suffer losses on its derivatives positions. Please read this portfolio's prospectus for specific details regarding its investments and risk profile.
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 all distributions and do not reflect fees or expenses. It is not possible to invest directly into an index.
1 S&P 500 Barra Value index is an unmanaged, capitalization-weighted index of all the stock in the S&P 500 index that have low price-to-book ratios. The S&P 500 Barra Growth index is an unmanaged, capitalization-weighted index of all the stocks in the S&P 500 index that have high price-to-book ratios.
2 S&P MidCap 400 index is an unmanaged index that tracks the stock movement of 400 mid-sized US companies.
S&P SmallCap 600 index is an unmanaged index that tracks the stock movement of 600 small-cap US companies.
Portfolio management market commentary is as of December 31, 2004, and may not come to pass. This information is subject to change at any time based on market and other conditions.
Portfolio Summary |
SVS Index 500 Portfolio
Asset Allocation (Excludes Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Common Stocks | 99% | 98% |
Cash Equivalents | 1% | 2% |
| 100% | 100% |
Sector Diversification (Excludes Cash Equivalents and Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Financials | 21% | 21% |
Information Technology | 16% | 18% |
Health Care | 13% | 13% |
Consumer Discretionary | 12% | 11% |
Industrials | 12% | 11% |
Consumer Staples | 10% | 11% |
Energy | 7% | 6% |
Telecommunication Services | 3% | 3% |
Materials | 3% | 3% |
Utilities | 3% | 3% |
| 100% | 100% |
Asset allocation and sector diversification are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 18. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Portfolio as of month end will be posted to scudder.com on the 15th of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio December 31, 2004 | ![]() | ![]() |
|
SVS Index 500 Portfolio
| Shares | Value ($) |
|
| |
Common Stocks 98.4% | ||
Consumer Discretionary 11.7% | ||
Auto Components 0.2% | ||
Cooper Tire & Rubber Co. | 2,449 | 52,776 |
Dana Corp. | 5,357 | 92,837 |
Delphi Corp. | 18,383 | 165,815 |
Goodyear Tire & Rubber Co.* | 6,957 | 101,989 |
Johnson Controls, Inc. | 6,906 | 438,117 |
Visteon Corp. | 3,894 | 38,044 |
889,578 | ||
Automobiles 0.6% | ||
Ford Motor Co. | 64,203 | 939,932 |
General Motors Corp. | 19,491 | 780,810 |
Harley-Davidson, Inc. | 10,535 | 640,001 |
2,360,743 | ||
Distributors 0.1% | ||
Genuine Parts Co. | 5,509 | 242,727 |
Hotels Restaurants & Leisure 1.5% | ||
Carnival Corp. | 22,491 | 1,296,156 |
Darden Restaurants, Inc. | 5,275 | 146,328 |
Harrah's Entertainment, Inc. | 4,319 | 288,898 |
Hilton Hotels Corp. | 13,040 | 296,530 |
International Game Technology | 11,497 | 395,267 |
Marriott International, Inc. "A" | 7,817 | 492,315 |
McDonald's Corp. | 44,906 | 1,439,686 |
Starbucks Corp.* | 14,333 | 893,806 |
Starwood Hotels & Resorts Worldwide, Inc. | 6,846 | 399,806 |
Wendy's International, Inc. | 3,611 | 141,768 |
YUM! Brands, Inc. | 9,849 | 464,676 |
6,255,236 | ||
Household Durables 0.5% | ||
Black & Decker Corp. | 2,694 | 237,961 |
Centex Corp. | 4,056 | 241,656 |
Fortune Brands, Inc. | 5,187 | 400,333 |
KB Home | 1,769 | 184,684 |
Leggett & Platt, Inc. | 6,357 | 180,729 |
Maytag Corp. | 3,229 | 68,132 |
Newell Rubbermaid, Inc. | 9,046 | 218,823 |
Pulte Homes, Inc. | 4,196 | 267,705 |
Snap-On, Inc. | 1,893 | 65,043 |
The Stanley Works | 2,719 | 133,204 |
Whirlpool Corp. | 2,314 | 160,152 |
2,158,422 | ||
Internet & Catalog Retail 0.7% | ||
eBay, Inc.* | 23,235 | 2,701,766 |
Leisure Equipment & Products 0.2% | ||
Brunswick Corp. | 3,575 | 176,962 |
Eastman Kodak Co. | 10,459 | 337,303 |
Hasbro, Inc. | 5,527 | 107,113 |
Mattel, Inc. | 14,553 | 283,638 |
905,016 | ||
Media 3.9% | ||
Clear Channel Communications, Inc. | 20,659 | 691,870 |
Comcast Corp. "A"* | 77,777 | 2,588,419 |
| Shares | Value ($) |
|
| |
Dow Jones & Co., Inc. | 2,720 | 117,123 |
Gannett Co., Inc. | 8,946 | 730,888 |
Interpublic Group of Companies, Inc.* | 13,697 | 183,540 |
Knight-Ridder, Inc. | 3,034 | 203,096 |
McGraw-Hill Companies, Inc. | 6,869 | 628,788 |
Meredith Corp. | 1,700 | 92,140 |
New York Times Co. "A" | 4,882 | 199,186 |
News Corp. "A" | 91,400 | 1,705,524 |
Omnicom Group, Inc. | 6,782 | 571,858 |
Time Warner, Inc.* | 159,460 | 3,099,902 |
Tribune Co. | 10,806 | 455,365 |
Univision Communications, Inc. "A"* | 11,205 | 327,970 |
Viacom, Inc. "B" | 59,709 | 2,172,810 |
Walt Disney Co. | 70,937 | 1,972,049 |
15,740,528 | ||
Multiline Retail 1.1% | ||
Big Lots, Inc.* | 3,692 | 44,784 |
Dillard's, Inc. "A" | 3,351 | 90,041 |
Dollar General Corp. | 12,247 | 254,370 |
Family Dollar Stores, Inc. | 5,679 | 177,355 |
Federated Department Stores, Inc. | 6,209 | 358,818 |
J.C. Penny Co., Inc. | 9,683 | 400,876 |
Kohl's Corp.* | 11,781 | 579,272 |
May Department Stores Co. | 10,737 | 315,668 |
Nordstrom, Inc. | 4,524 | 211,407 |
Sears, Roebuck & Co. | 7,001 | 357,261 |
Target Corp. | 31,811 | 1,651,945 |
4,441,797 | ||
Specialty Retail 2.4% | ||
AutoNation, Inc.* | 8,500 | 163,285 |
AutoZone, Inc.* | 2,742 | 250,372 |
Bed Bath & Beyond, Inc.* | 10,776 | 429,208 |
Best Buy Co., Inc. | 10,997 | 653,442 |
Circuit City Stores, Inc. | 7,630 | 119,333 |
Home Depot, Inc. | 76,433 | 3,266,746 |
Limited Brands | 14,021 | 322,763 |
Lowe's Companies, Inc. | 27,536 | 1,585,798 |
Office Depot, Inc.* | 9,903 | 171,916 |
OfficeMax, Inc. | 3,441 | 107,979 |
RadioShack Corp. | 5,270 | 173,278 |
Sherwin-Williams Co. | 4,770 | 212,885 |
Staples, Inc. | 18,026 | 607,657 |
The Gap, Inc. | 30,825 | 651,024 |
Tiffany & Co. | 4,600 | 147,062 |
TJX Companies, Inc. | 17,493 | 439,599 |
Toys "R" Us, Inc.* | 8,117 | 166,155 |
9,468,502 | ||
Textiles, Apparel & Luxury Goods 0.5% | ||
Coach, Inc.* | 6,500 | 366,600 |
Jones Apparel Group, Inc. | 4,166 | 152,351 |
Liz Claiborne, Inc. | 3,766 | 158,963 |
NIKE, Inc. "B" | 9,063 | 821,923 |
Reebok International Ltd. | 2,518 | 110,792 |
VF Corp. | 4,121 | 228,221 |
1,838,850 | ||
| Shares | Value ($) |
|
| |
Consumer Staples 10.3% | ||
Beverages 2.2% | ||
Adolph Coors Co. "B" | 1,535 | 116,153 |
Anheuser-Busch Companies, Inc. | 28,190 | 1,430,079 |
Brown-Forman Corp. "B" | 3,780 | 184,010 |
Coca-Cola Co. | 84,204 | 3,505,413 |
Coca-Cola Enterprises, Inc. | 16,834 | 350,989 |
Pepsi Bottling Group, Inc. | 9,100 | 246,064 |
PepsiCo, Inc. | 59,478 | 3,104,752 |
8,937,460 | ||
Food & Staples Retailing 3.1% | ||
Albertsons, Inc. | 12,891 | 307,837 |
Costco Wholesale Corp. | 16,694 | 808,157 |
CVS Corp. | 14,096 | 635,307 |
Kroger Co.* | 26,149 | 458,653 |
Safeway, Inc.* | 14,637 | 288,934 |
SUPERVALU, Inc. | 4,270 | 147,400 |
Sysco Corp. | 22,826 | 871,268 |
Wal-Mart Stores, Inc. | 147,874 | 7,810,705 |
Walgreen Co. | 35,891 | 1,377,138 |
12,705,399 | ||
Food Products 1.3% | ||
Archer-Daniels-Midland Co. | 23,716 | 529,104 |
Campbell Soup Co. | 13,499 | 403,485 |
ConAgra Foods, Inc. | 17,361 | 511,282 |
General Mills, Inc. | 13,616 | 676,851 |
H.J. Heinz Co. | 12,190 | 475,288 |
Hershey Foods Corp. | 8,478 | 470,868 |
Kellogg Co. | 15,093 | 674,054 |
McCormick & Co, Inc. | 4,500 | 173,700 |
Sara Lee Corp. | 28,428 | 686,252 |
William Wrigley Jr. Co. | 7,470 | 516,849 |
5,117,733 | ||
Household Products 1.8% | ||
Clorox Co. | 5,230 | 308,204 |
Colgate-Palmolive Co. | 18,820 | 962,831 |
Kimberly-Clark Corp. | 17,669 | 1,162,797 |
Procter & Gamble Co. | 88,342 | 4,865,877 |
7,299,709 | ||
Personal Products 0.6% | ||
Alberto-Culver Co. "B" | 3,050 | 148,139 |
Avon Products, Inc. | 15,982 | 618,503 |
Gillette Co. | 35,192 | 1,575,898 |
2,342,540 | ||
Tobacco 1.3% | ||
Altria Group, Inc. | 71,547 | 4,371,522 |
Reynolds American, Inc. | 5,245 | 412,257 |
UST, Inc. | 6,211 | 298,811 |
5,082,590 | ||
Energy 7.0% | ||
Energy Equipment & Services 0.9% | ||
Baker Hughes, Inc. | 12,449 | 531,199 |
BJ Services Co. | 6,069 | 282,451 |
Halliburton Co. | 15,007 | 588,875 |
Nabors Industries Ltd.* | 4,998 | 256,347 |
Noble Corp.* | 4,440 | 220,846 |
Rowan Companies, Inc.* | 4,409 | 114,193 |
| Shares | Value ($) |
|
| |
Schlumberger Ltd. | 20,544 | 1,375,421 |
Transocean, Inc.* | 11,124 | 471,546 |
3,840,878 | ||
Oil & Gas 6.1% | ||
Amerada Hess Corp. | 2,950 | 243,021 |
Anadarko Petroleum Corp. | 8,327 | 539,673 |
Apache Corp. | 10,997 | 556,118 |
Ashland, Inc. | 2,315 | 135,150 |
Burlington Resources, Inc. | 14,196 | 617,526 |
ChevronTexaco Corp. | 73,802 | 3,875,343 |
ConocoPhillips | 24,347 | 2,114,050 |
Devon Energy Corp. | 17,572 | 683,902 |
El Paso Corp. | 21,441 | 222,987 |
EOG Resources, Inc. | 3,939 | 281,087 |
ExxonMobil Corp. | 225,486 | 11,558,412 |
Kerr-McGee Corp. | 4,970 | 287,216 |
Kinder Morgan, Inc. | 4,064 | 297,200 |
Marathon Oil Corp. | 12,523 | 470,990 |
Occidental Petroleum Corp. | 14,311 | 835,190 |
Sunoco, Inc. | 2,808 | 229,442 |
Unocal Corp. | 9,808 | 424,098 |
Valero Energy Corp. | 8,600 | 390,440 |
Williams Companies, Inc. | 20,143 | 328,130 |
XTO Energy, Inc. | 9,100 | 321,958 |
24,411,933 | ||
Financials 20.3% | ||
Banks 6.4% | ||
AmSouth Bancorp. | 11,645 | 301,605 |
Bank of America Corp. | 140,908 | 6,621,267 |
BB&T Corp. | 18,759 | 788,816 |
Comerica, Inc. | 6,346 | 387,233 |
Compass Bancshares, Inc. | 3,700 | 180,079 |
Fifth Third Bancorp. | 20,291 | 959,358 |
First Horizon National Corp. | 4,143 | 178,605 |
Golden West Financial Corp. | 10,906 | 669,847 |
Huntington Bancshares, Inc. | 9,010 | 223,268 |
KeyCorp. | 14,818 | 502,330 |
M&T Bank Corp. | 3,897 | 420,252 |
Marshall & Ilsley Corp. | 7,300 | 322,660 |
National City Corp. | 24,503 | 920,088 |
North Fork Bancorp., Inc. | 16,200 | 467,370 |
PNC Financial Services Group | 10,280 | 590,483 |
Regions Financial Corp. | 15,287 | 544,064 |
Sovereign Bancorp, Inc. | 10,967 | 247,306 |
SunTrust Banks, Inc. | 13,349 | 986,224 |
Synovus Financial Corp. | 10,082 | 288,144 |
US Bancorp. | 66,411 | 2,079,992 |
Wachovia Corp. | 56,560 | 2,975,056 |
Washington Mutual, Inc. | 30,177 | 1,275,884 |
Wells Fargo & Co. | 58,813 | 3,655,228 |
Zions Bancorp. | 3,565 | 242,527 |
25,827,686 | ||
Capital Markets 2.8% | ||
Bank of New York Co., Inc. | 28,087 | 938,668 |
Bear Stearns Companies, Inc. | 3,400 | 347,854 |
Charles Schwab Corp. | 48,497 | 580,024 |
E*TRADE Financial Corp.* | 12,000 | 179,400 |
Federated Investors, Inc. "B" | 3,500 | 106,400 |
Franklin Resources, Inc. | 9,012 | 627,686 |
| Shares | Value ($) |
|
| |
Goldman Sachs Group, Inc. | 16,795 | 1,747,352 |
Janus Capital Group, Inc. | 7,856 | 132,059 |
Lehman Brothers Holdings, Inc. | 9,383 | 820,825 |
Mellon Financial Corp. | 15,773 | 490,698 |
Merrill Lynch & Co., Inc. | 32,662 | 1,952,208 |
Morgan Stanley | 38,802 | 2,154,287 |
Northern Trust Corp. | 7,049 | 342,440 |
State Street Corp. | 12,153 | 596,955 |
T. Rowe Price Group, Inc. | 4,731 | 294,268 |
11,311,124 | ||
Consumer Finance 1.4% | ||
American Express Co. | 44,623 | 2,515,399 |
Capital One Financial Corp. | 8,273 | 696,669 |
MBNA Corp. | 45,213 | 1,274,554 |
Providian Financial Corp.* | 9,714 | 159,990 |
SLM Corp. | 15,425 | 823,541 |
5,470,153 | ||
Diversified Financial Services 5.0% | ||
CIT Group, Inc. | 7,300 | 334,486 |
Citigroup, Inc. | 181,277 | 8,733,926 |
Countrywide Financial Corp. | 19,948 | 738,275 |
Fannie Mae | 33,718 | 2,401,059 |
Freddie Mac | 24,487 | 1,804,692 |
JPMorgan Chase & Co. | 124,058 | 4,839,503 |
MGIC Investment Corp. | 3,177 | 218,927 |
Moody's Corp. | 5,252 | 456,136 |
Principal Financial Group, Inc. | 10,200 | 417,588 |
19,944,592 | ||
Insurance 4.2% | ||
ACE Ltd. | 9,500 | 406,125 |
AFLAC, Inc. | 17,900 | 713,136 |
Allstate Corp. | 24,749 | 1,280,018 |
Ambac Financial Group, Inc. | 3,586 | 294,518 |
American International Group, Inc. | 90,855 | 5,966,448 |
Aon Corp. | 10,283 | 245,352 |
Chubb Corp. | 6,864 | 527,842 |
Cincinnati Financial Corp. | 5,335 | 236,127 |
Hartford Financial Services Group, Inc. | 10,388 | 719,992 |
Jefferson-Pilot Corp. | 5,273 | 273,985 |
Lincoln National Corp. | 6,146 | 286,895 |
Loews Corp. | 6,730 | 473,119 |
Marsh & McLennan Companies, Inc. | 18,571 | 610,986 |
MBIA, Inc. | 5,264 | 333,106 |
MetLife, Inc. | 26,745 | 1,083,440 |
Progressive Corp. | 7,026 | 596,086 |
Prudential Financial, Inc. | 18,490 | 1,016,210 |
Safeco Corp. | 4,843 | 252,998 |
St. Paul Travelers Companies, Inc. | 23,271 | 862,656 |
Torchmark Corp. | 3,589 | 205,076 |
UnumProvident Corp. | 9,316 | 167,129 |
XL Capital Ltd. "A" | 4,841 | 375,904 |
16,927,148 | ||
Real Estate 0.5% | ||
Apartment Investment & Management Co. "A" (REIT) | 3,900 | 150,306 |
Archstone-Smith Trust (REIT) | 6,100 | 233,630 |
Equity Office Properties Trust (REIT) | 15,129 | 440,556 |
Equity Residential (REIT) | 9,300 | 336,474 |
| Shares | Value ($) |
|
| |
Plum Creek Timber Co., Inc. (REIT) | 5,800 | 222,952 |
ProLogis (REIT) | 5,700 | 246,981 |
Simon Property Group, Inc. (REIT) | 8,168 | 528,225 |
2,159,124 | ||
Health Care 12.5% | ||
Biotechnology 1.3% | ||
Amgen, Inc.* | 44,201 | 2,835,494 |
Applera Corp. — Applied Biosystems Group | 6,641 | 138,864 |
Biogen Idec, Inc.* | 11,807 | 786,464 |
Chiron Corp.* | 6,860 | 228,644 |
Genzyme Corp.* | 8,047 | 467,289 |
Gilead Sciences, Inc.* | 14,784 | 517,292 |
MedImmune, Inc.* | 9,045 | 245,210 |
5,219,257 | ||
Health Care Equipment & Supplies 2.2% | ||
Bausch & Lomb, Inc. | 1,782 | 114,868 |
Baxter International, Inc. | 21,651 | 747,826 |
Becton, Dickinson & Co. | 9,288 | 527,558 |
Biomet, Inc. | 9,153 | 397,149 |
Boston Scientific Corp.* | 29,616 | 1,052,849 |
C.R. Bard, Inc. | 3,416 | 218,556 |
Fisher Scientific International, Inc.* | 4,100 | 255,758 |
Guidant Corp. | 10,934 | 788,341 |
Hospira, Inc.* | 5,139 | 172,157 |
Medtronic, Inc. | 42,320 | 2,102,034 |
Millipore Corp.* | 1,631 | 81,240 |
PerkinElmer, Inc. | 4,220 | 94,908 |
St. Jude Medical, Inc.* | 12,124 | 508,359 |
Stryker Corp. | 14,456 | 697,502 |
Thermo Electron Corp.* | 6,105 | 184,310 |
Waters Corp.* | 3,900 | 182,481 |
Zimmer Holdings, Inc.* | 8,644 | 692,557 |
8,818,453 | ||
Health Care Providers & Services 2.2% | ||
Aetna, Inc. | 5,150 | 642,463 |
AmerisourceBergen Corp. | 3,744 | 219,698 |
Cardinal Health, Inc. | 14,969 | 870,447 |
Caremark Rx, Inc.* | 15,843 | 624,689 |
CIGNA Corp. | 4,645 | 378,893 |
Express Scripts, Inc.* | 2,905 | 222,058 |
HCA, Inc. | 14,547 | 581,298 |
Health Management Associates, Inc. "A" | 9,079 | 206,275 |
Humana, Inc.* | 6,142 | 182,356 |
IMS Health, Inc. | 7,716 | 179,088 |
Laboratory Corp. of America Holdings* | 4,800 | 239,136 |
Manor Care, Inc. | 2,838 | 100,550 |
McKesson Corp. | 9,678 | 304,470 |
Medco Health Solutions, Inc.* | 9,925 | 412,880 |
Quest Diagnostics, Inc. | 3,391 | 324,010 |
Tenet Healthcare Corp.* | 15,222 | 167,138 |
UnitedHealth Group, Inc. | 22,896 | 2,015,535 |
WellPoint Health Networks, Inc.* | 10,328 | 1,187,720 |
8,858,704 | ||
Pharmaceuticals 6.8% | ||
Abbott Laboratories | 54,995 | 2,565,517 |
Allergan, Inc. | 4,736 | 383,948 |
| Shares | Value ($) |
|
| |
Bristol-Myers Squibb Co. | 69,041 | 1,768,830 |
Eli Lilly & Co. (e) | 39,275 | 2,228,856 |
Forest Laboratories, Inc.* | 12,540 | 562,544 |
Johnson & Johnson | 103,606 | 6,570,693 |
King Pharmaceuticals, Inc.* | 8,965 | 111,166 |
Merck & Co., Inc. | 77,275 | 2,483,618 |
Mylan Laboratories, Inc. (e) | 9,800 | 173,264 |
Pfizer, Inc. | 263,128 | 7,075,512 |
Schering-Plough Corp. | 51,983 | 1,085,405 |
Watson Pharmaceuticals, Inc.* | 4,059 | 133,176 |
Wyeth | 46,568 | 1,983,331 |
27,125,860 | ||
Industrials 11.6% | ||
Aerospace & Defense 2.0% | ||
Boeing Co. | 29,760 | 1,540,675 |
General Dynamics Corp. | 6,876 | 719,230 |
Goodrich Corp. | 3,932 | 128,340 |
Honeywell International, Inc. | 30,103 | 1,065,947 |
L-3 Communications Holdings, Inc. | 3,700 | 270,988 |
Lockheed Martin Corp. | 15,622 | 867,802 |
Northrop Grumman Corp. | 12,818 | 696,786 |
Raytheon Co. | 16,426 | 637,822 |
Rockwell Collins, Inc. | 5,856 | 230,961 |
United Technologies Corp. | 18,219 | 1,882,934 |
8,041,485 | ||
Air Freight & Logistics 1.1% | ||
FedEx Corp. | 10,265 | 1,011,000 |
Ryder System, Inc. | 2,652 | 126,686 |
United Parcel Service, Inc. "B" | 39,411 | 3,368,064 |
4,505,750 | ||
Airlines 0.1% | ||
Delta Air Lines, Inc.* (e) | 5,870 | 43,908 |
Southwest Airlines Co. | 27,247 | 443,581 |
487,489 | ||
Building Products 0.2% | ||
American Standard Companies, Inc.* | 7,289 | 301,181 |
Masco Corp. | 16,216 | 592,371 |
893,552 | ||
Commercial Services & Supplies 1.0% | ||
Allied Waste Industries, Inc.* | 11,039 | 102,442 |
Apollo Group, Inc. "A"* | 6,611 | 533,574 |
Avery Dennison Corp. | 3,615 | 216,792 |
Cendant Corp. | 37,581 | 878,644 |
Cintas Corp. | 5,764 | 252,809 |
Equifax, Inc. | 4,524 | 127,124 |
H&R Block, Inc. | 5,778 | 283,122 |
Monster Worldwide, Inc.* | 4,533 | 152,490 |
Pitney Bowes, Inc. | 7,591 | 351,311 |
R.R. Donnelley & Sons Co. | 7,164 | 252,818 |
Robert Half International, Inc. | 5,600 | 164,808 |
Waste Management, Inc. | 20,485 | 613,321 |
3,929,255 | ||
Construction & Engineering 0.1% | ||
Fluor Corp. | 2,725 | 148,540 |
Electrical Equipment 0.4% | ||
American Power Conversion Corp. | 7,514 | 160,800 |
Cooper Industries, Ltd. "A" | 3,051 | 207,132 |
| Shares | Value ($) |
|
| |
Emerson Electric Co. | 14,963 | 1,048,906 |
Power-One, Inc.* | 2,782 | 24,816 |
Rockwell Automation, Inc. | 6,108 | 302,651 |
1,744,305 | ||
Industrial Conglomerates 4.6% | ||
3M Co. | 26,986 | 2,214,741 |
General Electric Co. | 369,601 | 13,490,436 |
Textron, Inc. | 4,982 | 367,672 |
Tyco International Ltd. | 69,934 | 2,499,441 |
18,572,290 | ||
Machinery 1.5% | ||
Caterpillar, Inc. | 11,950 | 1,165,244 |
Cummins, Inc. | 1,702 | 142,611 |
Danaher Corp. | 10,646 | 611,187 |
Deere & Co. | 8,750 | 651,000 |
Dover Corp. | 7,035 | 295,048 |
Eaton Corp. | 5,542 | 401,019 |
Illinois Tool Works, Inc. | 10,677 | 989,544 |
Ingersoll-Rand Co. "A" | 6,335 | 508,700 |
ITT Industries, Inc. | 3,473 | 293,295 |
Navistar International Corp.* | 2,271 | 99,879 |
PACCAR, Inc. | 6,386 | 513,945 |
Pall Corp. | 3,953 | 114,439 |
Parker-Hannifin Corp. | 4,098 | 310,383 |
6,096,294 | ||
Road & Rail 0.5% | ||
Burlington Northern Santa Fe Corp. | 13,515 | 639,395 |
CSX Corp. | 7,001 | 280,600 |
Norfolk Southern Corp. | 13,585 | 491,641 |
Union Pacific Corp. | 8,957 | 602,358 |
2,013,994 | ||
Trading Companies & Distributors 0.1% | ||
W.W. Grainger, Inc. | 2,974 | 198,128 |
Information Technology 15.8% | ||
Communications Equipment 2.7% | ||
ADC Telecommunications, Inc.* | 31,308 | 83,905 |
Andrew Corp.* | 6,180 | 84,233 |
Avaya, Inc.* | 15,715 | 270,298 |
CIENA Corp.* | 22,277 | 74,405 |
Cisco Systems, Inc.* | 230,632 | 4,451,198 |
Comverse Technologies, Inc.* | 7,308 | 178,681 |
Corning, Inc.* | 49,647 | 584,345 |
JDS Uniphase Corp.* | 52,034 | 164,948 |
Lucent Technologies, Inc.* | 157,488 | 592,155 |
Motorola, Inc. | 84,565 | 1,454,518 |
QUALCOMM, Inc. | 57,138 | 2,422,651 |
Scientific-Atlanta, Inc. | 5,668 | 187,101 |
Tellabs, Inc.* | 17,477 | 150,127 |
10,698,565 | ||
Computers & Peripherals 3.9% | ||
Apple Computer, Inc.* | 13,967 | 899,475 |
Dell, Inc.* | 87,046 | 3,668,118 |
EMC Corp.* | 85,224 | 1,267,281 |
Gateway, Inc.* | 11,777 | 70,780 |
Hewlett-Packard Co. | 106,253 | 2,228,125 |
International Business Machines Corp. | 58,035 | 5,721,090 |
Lexmark International, Inc. "A"* | 4,536 | 385,560 |
| Shares | Value ($) |
|
| |
NCR Corp.* | 3,094 | 214,198 |
Network Appliance, Inc.* | 12,814 | 425,681 |
QLogic Corp.* | 3,509 | 128,886 |
Sun Microsystems, Inc.* | 119,166 | 641,113 |
15,650,307 | ||
Electronic Equipment & Instruments 0.3% | ||
Agilent Technologies, Inc.* | 17,471 | 421,051 |
Jabil Circuit, Inc.* | 6,581 | 168,342 |
Molex, Inc. | 6,191 | 185,730 |
Sanmina-SCI Corp.* | 19,217 | 162,768 |
Solectron Corp.* | 31,507 | 167,932 |
Symbol Technologies, Inc. | 7,650 | 132,345 |
Tektronix, Inc. | 2,824 | 85,313 |
1,323,481 | ||
Internet Software & Services 0.5% | ||
Yahoo!, Inc.* | 48,444 | 1,825,370 |
IT Consulting & Services 1.1% | ||
Affiliated Computer Services, Inc. "A"* | 4,500 | 270,855 |
Automatic Data Processing, Inc. | 20,908 | 927,270 |
Computer Sciences Corp.* | 6,523 | 367,701 |
Convergys Corp.* | 4,747 | 71,158 |
Electronic Data Systems Corp. | 17,253 | 398,544 |
First Data Corp. | 29,635 | 1,260,673 |
Fiserv, Inc.* | 7,141 | 286,997 |
Paychex, Inc. | 13,451 | 458,410 |
Sabre Holdings Corp. | 4,362 | 96,662 |
SunGard Data Systems, Inc.* | 9,499 | 269,107 |
Unisys Corp.* | 10,880 | 110,758 |
4,518,135 | ||
Office Electronics 0.1% | ||
Xerox Corp.* | 34,217 | 582,031 |
Semiconductors & Semiconductor Equipment 3.0% | ||
Advanced Micro Devices, Inc.* | 13,913 | 306,364 |
Altera Corp.* | 13,465 | 278,726 |
Analog Devices, Inc. | 12,662 | 467,481 |
Applied Materials, Inc.* | 58,625 | 1,002,488 |
Applied Micro Circuits Corp.* | 12,600 | 53,046 |
Broadcom Corp. "A"* | 11,277 | 364,022 |
Freescale Semiconductor, Inc.* | 13,837 | 254,047 |
Intel Corp. | 221,945 | 5,191,294 |
KLA-Tencor Corp.* | 7,086 | 330,066 |
Linear Technology Corp. | 11,041 | 427,949 |
LSI Logic Corp.* | 12,513 | 68,571 |
Maxim Integrated Products, Inc. | 11,147 | 472,521 |
Micron Technology, Inc.* | 20,014 | 247,173 |
National Semiconductor Corp.* | 12,434 | 223,190 |
Novellus Systems, Inc.* | 5,532 | 154,288 |
NVIDIA Corp.* | 6,307 | 148,593 |
PMC-Sierra, Inc.* | 6,855 | 77,119 |
Teradyne, Inc.* | 7,305 | 124,696 |
Texas Instruments, Inc. | 59,957 | 1,476,141 |
Xilinx, Inc. | 11,811 | 350,196 |
12,017,971 | ||
Software 4.2% | ||
Adobe Systems, Inc. | 8,538 | 535,674 |
Autodesk, Inc. | 8,248 | 313,012 |
BMC Software, Inc.* | 7,308 | 135,929 |
Citrix Systems, Inc.* | 6,498 | 159,396 |
| Shares | Value ($) |
|
| |
Computer Associates International, Inc. | 20,052 | 622,815 |
Compuware Corp.* | 12,246 | 79,232 |
Electronic Arts, Inc.* | 10,746 | 662,813 |
Intuit, Inc.* | 6,937 | 305,297 |
Mercury Interactive Corp.* | 3,183 | 144,986 |
Microsoft Corp. | 380,162 | 10,154,127 |
Novell, Inc.* | 14,416 | 97,308 |
Oracle Corp.* | 178,469 | 2,448,595 |
Parametric Technology Corp.* | 7,591 | 44,711 |
Siebel Systems, Inc.* | 17,915 | 188,107 |
Symantec Corp.* | 21,574 | 555,746 |
VERITAS Software Corp.* | 14,686 | 419,285 |
16,867,033 | ||
Materials 3.1% | ||
Chemicals 1.7% | ||
Air Products & Chemicals, Inc. | 8,264 | 479,064 |
Dow Chemical Co. | 33,595 | 1,663,289 |
E.I. du Pont de Nemours & Co. | 35,350 | 1,733,918 |
Eastman Chemical Co. | 2,537 | 146,461 |
Ecolab, Inc. | 8,486 | 298,113 |
Engelhard Corp. | 4,300 | 131,881 |
Great Lakes Chemical Corp. | 1,700 | 48,433 |
Hercules, Inc.* | 3,707 | 55,049 |
International Flavors & Fragrances, Inc. | 3,111 | 133,275 |
Monsanto Co. | 9,558 | 530,947 |
PPG Industries, Inc. | 6,205 | 422,933 |
Praxair, Inc. | 11,263 | 497,261 |
Rohm & Haas Co. | 7,252 | 320,756 |
Sigma-Aldrich Corp. | 2,820 | 170,497 |
6,631,877 | ||
Construction Materials 0.0% | ||
Vulcan Materials Co. | 3,410 | 186,220 |
Containers & Packaging 0.2% | ||
Ball Corp. | 3,800 | 167,124 |
Bemis Co., Inc. | 3,512 | 102,164 |
Pactiv Corp.* | 4,998 | 126,399 |
Sealed Air Corp.* | 2,695 | 143,563 |
Temple-Inland, Inc. | 1,768 | 120,931 |
660,181 | ||
Metals & Mining 0.7% | ||
Alcoa, Inc. | 30,467 | 957,273 |
Allegheny Technologies, Inc. | 3,667 | 79,464 |
Freeport-McMoRan Copper & Gold, Inc. "B" | 6,109 | 233,547 |
Newmont Mining Corp. | 16,011 | 711,048 |
Nucor Corp. | 5,502 | 287,975 |
Phelps Dodge Corp. | 3,377 | 334,053 |
United States Steel Corp. | 3,959 | 202,899 |
2,806,259 | ||
Paper & Forest Products 0.5% | ||
Georgia-Pacific Corp. | 8,402 | 314,907 |
International Paper Co. | 17,090 | 717,780 |
Louisiana-Pacific Corp. | 4,297 | 114,902 |
MeadWestvaco Corp. | 6,593 | 223,436 |
Weyerhaeuser Co. | 8,699 | 584,747 |
1,955,772 | ||
| Shares | Value ($) |
|
| |
Telecommunication Services 3.2% | ||
Diversified Telecommunication Services 2.9% | ||
ALLTEL Corp. | 10,137 | 595,650 |
AT&T Corp. | 28,336 | 540,084 |
BellSouth Corp. | 64,564 | 1,794,234 |
CenturyTel, Inc. | 5,224 | 185,295 |
Citizens Communications Co. | 12,500 | 172,375 |
Qwest Communications International, Inc.* | 60,085 | 266,778 |
SBC Communications, Inc. | 116,106 | 2,992,052 |
Sprint Corp. | 52,266 | 1,298,810 |
Verizon Communications, Inc. | 96,385 | 3,904,556 |
11,749,834 | ||
Wireless Telecommunication Services 0.3% | ||
Nextel Communications, Inc. "A"* | 38,843 | 1,165,290 |
Utilities 2.9% | ||
Electric Utilities 2.0% | ||
Allegheny Energy, Inc.* | 4,410 | 86,921 |
Ameren Corp. | 6,269 | 314,328 |
American Electric Power Co. | 13,784 | 473,343 |
CenterPoint Energy, Inc. | 10,121 | 114,367 |
Cinergy Corp. | 5,749 | 239,331 |
Consolidated Edison, Inc. | 7,722 | 337,838 |
DTE Energy Co. | 5,757 | 248,299 |
Edison International | 11,867 | 380,100 |
Entergy Corp. | 8,356 | 564,782 |
Exelon Corp. | 23,600 | 1,040,052 |
FirstEnergy Corp. | 11,970 | 472,935 |
FPL Group, Inc. | 6,747 | 504,338 |
PG&E Corp.* | 14,726 | 490,081 |
Pinnacle West Capital Corp. | 3,008 | 133,585 |
PPL Corp. | 6,179 | 329,217 |
Progress Energy, Inc. | 7,923 | 358,437 |
Southern Co. | 26,317 | 882,146 |
TECO Energy, Inc. | 5,400 | 82,836 |
TXU Corp. | 8,524 | 550,309 |
Xcel Energy, Inc. | 13,087 | 238,183 |
7,841,428 | ||
| Shares | Value ($) |
|
| |
Gas Utilities 0.1% | ||
KeySpan Corp. | 5,532 | 218,237 |
Nicor, Inc. | 1,506 | 55,632 |
NiSource, Inc. | 10,100 | 230,078 |
Peoples Energy Corp. | 1,128 | 49,576 |
553,523 | ||
Multi-Utilities 0.8% | ||
AES Corp.* | 21,871 | 298,977 |
Calpine Corp.* | 20,401 | 80,380 |
CMS Energy Corp.* | 6,256 | 65,375 |
Constellation Energy Group, Inc. | 5,710 | 249,584 |
Dominion Resources, Inc. | 12,045 | 815,928 |
Duke Energy Corp. | 34,431 | 872,137 |
Dynegy, Inc. "A"* | 12,553 | 57,995 |
Public Service Enterprise Group, Inc. | 8,755 | 453,247 |
Sempra Energy | 8,687 | 318,639 |
3,212,262 | ||
Total Common Stocks (Cost $342,635,917) | 395,280,129 | |
| ||
US Government Backed 0.2% | ||
US Treasury Bill, 2.18%**, 3/24/2005 (c) (Cost $726,442) | 730,000 | 726,442 |
| ||
Securities Lending Collateral 0.2% | ||
Daily Assets Fund Institutional, 2.25% (d) (f) (Cost $962,450) | 962,450 | 962,450 |
| ||
Cash Equivalents 1.2% | ||
Scudder Cash Management QP Trust, 2.24% (b) (Cost $4,677,217) | 4,677,217 | 4,677,217 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $349,002,026) (a) | 100.0 | 401,646,238 |
Other Assets and Liabilities, Net | (0.0) | (136,536) |
Net Assets | 100.0 | 401,509,702 |
Notes to SVS Index 500 Portfolio of Investments |
* Non-income producing security.
** Annualized yield at time of purchase; not a coupon rate.
(a) The cost for federal income tax purposes was $374,533,283. At December 31, 2004, net unrealized appreciation for all securities based on tax cost was $27,112,955. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $65,853,112 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $38,740,157.
(b) Scudder Cash Management QP Trust is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
(c) At December 31, 2004, this security, in part or in whole, has been segregated to cover initial margin requirements for open futures contracts.
(d) Daily Assets Fund Institutional, an affiliated fund, is managed by Deutsche Asset Management, Inc. The rate shown is the annualized seven-day yield at period end.
(e) All or a portion of these securities were on loan (see Notes to Financial Statements). The value of all securities loaned at December 31, 2004 amounted to $932,230, which is 0.2% of total net assets.
(f) Represents collateral held in connection with securities lending.
REIT: Real Estate Investment Trust
At December 31, 2004, open futures contracts purchased were as follows:
Futures | Expiration Date | Contracts | Aggregated Face Value ($) | Value ($) | Net Unrealized Appreciation (Depreciation) ($) |
S&P 500 | 3/17/2005 | 21 | 6,215,901 | 6,371,925 | 156,024 |
The accompanying notes are an integral part of the financial statements.
Financial Statements |
|
Statement of Assets and Liabilities as of December 31, 2004 | |
Assets | |
Investments: Investments in securities, at value (cost $343,362,359) — including $932,230 of securities loaned | $ 396,006,571 |
Investment in Daily Assets Fund Institutional (cost $962,450)* | 962,450 |
Investment in Scudder Cash Management QP Trust (cost $4,677,217) | 4,677,217 |
Total investments in securities, at value (cost $349,002,026) | 401,646,238 |
Receivable for investments sold | 348,365 |
Dividends receivable | 510,329 |
Interest receivable | 14,892 |
Receivable for Portfolio shares sold | 181,626 |
Other assets | 11,965 |
Total assets | 402,713,415 |
Liabilities | |
Payable upon return of securities loaned | 962,450 |
Payable for Portfolio shares redeemed | 24,580 |
Payable for daily variation margin on open futures contracts | 16,282 |
Accrued management fee | 60,072 |
Other accrued expenses and payables | 140,329 |
Total liabilities | 1,203,713 |
Net assets, at value | $ 401,509,702 |
Net Assets | |
Net assets consist of: Undistributed net investment income | 5,567,259 |
Net unrealized appreciation (depreciation) on: Investments | 52,644,212 |
Futures | 156,024 |
Accumulated net realized gain (loss) | (46,088,532) |
Paid-in capital | 389,230,739 |
Net assets, at value | $ 401,509,702 |
Class A Net Asset Value, offering and redemption price per share ($332,957,896 ÷ 36,513,515 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 9.12 |
Class B Net Asset Value, offering and redemption price per share ($68,551,806 ÷ 7,543,430 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 9.09 |
* Represents collateral on securities loaned.
Statement of Operations for the year ended December 31, 2004 | |
Investment Income | |
Income: Dividends | $ 7,322,952 |
Interest | 7,694 |
Interest — Scudder Cash Management QP Trust | 81,741 |
Securities lending income, including income from Daily Assets Fund Institutional | 3,534 |
Total Income | 7,415,921 |
Expenses: Management fee | 1,145,237 |
Custodian and accounting fees | 169,405 |
Distribution service fees (Class B) | 128,429 |
Record keeping fees (Class B) | 67,396 |
Auditing | 47,500 |
Legal | 22,815 |
Trustees' fees and expenses | 6,150 |
Reports to shareholders | 43,270 |
Registration fees | 760 |
Other | 47,303 |
Total expenses, before expense reductions | 1,678,265 |
Expense reductions | (9,101) |
Total expenses, after expense reductions | 1,669,164 |
Net investment income (loss) | 5,746,757 |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from: Investments | (11,480,105) |
Futures | 843,542 |
| (10,636,563) |
Net unrealized appreciation (depreciation) during the period on: Investments | 41,973,365 |
Futures | (14,332) |
| 41,959,033 |
Net gain (loss) on investment transactions | 31,322,470 |
Net increase (decrease) in net assets resulting from operations | $ 37,069,227 |
The accompanying notes are an integral part of the financial statements.
|
Statement of Changes in Net Assets | ||
| Years Ended December 31, | |
Increase (Decrease) in Net Assets | 2004 | 2003 |
Operations: Net investment income (loss) | $ 5,746,757 | $ 3,524,386 |
Net realized gain (loss) on investment transactions | (10,636,563) | (12,180,785) |
Net unrealized appreciation (depreciation) on investment transactions during the period | 41,959,033 | 79,217,419 |
Net increase (decrease) in net assets resulting from operations | 37,069,227 | 70,561,020 |
Distributions to shareholders from: Net investment income Class A | (3,148,196) | (2,840,811) |
Class B | (262,259) | (39,707) |
Portfolio share transactions: Class A Proceeds from shares sold | 58,800,030 | 64,041,270 |
Reinvestment of distributions | 3,148,196 | 2,840,811 |
Cost of shares redeemed | (65,809,853) | (54,166,484) |
Net increase (decrease) in net assets from Class A share transactions | (3,861,627) | 12,715,597 |
Class B Proceeds from shares sold | 43,175,923 | 30,974,956 |
Reinvestment of distributions | 262,259 | 39,707 |
Cost of shares redeemed | (13,817,023) | (3,018,857) |
Net increase (decrease) in net assets from Class B share transactions | 29,621,159 | 27,995,806 |
Increase (decrease) in net assets | 59,418,304 | 108,391,905 |
Net assets at beginning of period | 342,091,398 | 233,699,493 |
Net assets at end of period (including undistributed net investment income of $5,567,259 and $3,279,886, respectively) | $ 401,509,702 | $ 342,091,398 |
Other Information | ||
Class A Shares outstanding at beginning of period | 36,967,597 | 35,202,430 |
Shares sold | 6,987,566 | 8,891,513 |
Shares issued to shareholders in reinvestment of distributions | 375,232 | 450,208 |
Shares redeemed | (7,816,880) | (7,576,554) |
Net increase (decrease) in Portfolio shares | (454,082) | 1,765,167 |
Shares outstanding at end of period | 36,513,515 | 36,967,597 |
Class B Shares outstanding at beginning of period | 4,013,326 | 175,906 |
Shares sold | 5,136,505 | 4,214,305 |
Shares issued to shareholders in reinvestment of distributions | 31,296 | 6,293 |
Shares redeemed | (1,637,697) | (383,178) |
Net increase (decrease) in Portfolio shares | 3,530,104 | 3,837,420 |
Shares outstanding at end of period | 7,543,430 | 4,013,326 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights |
|
Class A
Years Ended December 31, | 2004 | 2003 | 2002 | 2001 | 2000a |
Selected Per Share Data | |||||
Net asset value, beginning of period | $ 8.35 | $ 6.61 | $ 8.55 | $ 9.78 | $ 10.96 |
Income (loss) from investment operations: Net investment income (loss)b | .14 | .09 | .09 | .08 | .10 |
Net realized and unrealized gain (loss) on investment transactions | .72 | 1.73 | (1.99) | (1.26) | (1.18) |
Total from investment operations | .86 | 1.82 | (1.90) | (1.18) | (1.08) |
Less distributions from: Net investment income | (.09) | (.08) | (.04) | (.05) | (.05) |
Net realized gains on investment transactions | — | — | — | — | (.05) |
Total distributions | (.09) | (.08) | (.04) | (.05) | (.10) |
Net asset value, end of period | $ 9.12 | $ 8.35 | $ 6.61 | $ 8.55 | $ 9.78 |
Total Return (%) | 10.38 | 27.93 | (22.34) | (12.05)c | (9.93)c |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | 333 | 309 | 233 | 219 | 102 |
Ratio of expenses before expense reductions (%) | .41 | .49 | .48 | .65 | .88 |
Ratio of expenses after expense reductions (%) | .41 | .49 | .48 | .55 | .54 |
Ratio of net investment income (loss) (%) | 1.64 | 1.31 | 1.16 | .88 | .90 |
Portfolio turnover rate (%) | 13 | 8 | 6 | 13 | 20 |
a On June 18, 2001, the Portfolio implemented a 1 for 10 reverse stock split. Share information, for the periods prior to December 31, 2001, has been restated to reflect the effect of the split. Shareholders received 1 share for every 10 shares owned and net asset value per share increased correspondingly.
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
Class B
Years Ended December 31, | 2004 | 2003 | 2002a |
Selected Per Share Data | |||
Net asset value, beginning of period | $ 8.32 | $ 6.59 | $ 7.21 |
Income (loss) from investment operations: Net investment income (loss)b | .11 | .06 | .05 |
Net realized and unrealized gain (loss) on investment transactions | .72 | 1.74 | (.67) |
Total from investment operations | .83 | 1.80 | (.62) |
Less distributions from: Net investment income | (.06) | (.07) | — |
Net asset value, end of period | $ 9.09 | $ 8.32 | $ 6.59 |
Total Return (%) | 9.98c | 27.57 | (8.60)** |
Ratios to Average Net Assets and Supplemental Data | |||
Net assets, end of period ($ millions) | 69 | 33 | 1 |
Ratio of expenses before expense reductions (%) | .79 | .88 | .69* |
Ratio of expenses after expense reductions (%) | .78 | .88 | .69* |
Ratio of net investment income (loss) (%) | 1.28 | .92 | 1.42* |
Portfolio turnover rate (%) | 13 | 8 | 6 |
a For the period July 1, 2002 (commencement of operations of Class B shares) to December 31, 2002.
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
Performance Summary December 31, 2004 |
|
SVS INVESCO Dynamic Growth Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns.
Stocks of medium-sized companies involve greater risk as they often have limited product lines, markets, or financial resources and may be sensitive to erratic and abrupt market movements more so than securities of larger, more-established companies. Additionally, the Portfolio may also focus its investments on certain industry sectors, thereby increasing its vulnerability to any single industry or regulatory development. All of these factors may result in greater share price volatility. Please read this Portfolio's prospectus for specific details regarding its investments and risk profile.
The investment advisor has agreed to either limit, waive or reduce certain fees temporarily for this Portfolio; see the prospectus for complete details. Without such limits, waivers or reductions, the performance figures for this Portfolio would be lower.
Growth of an Assumed $10,000 Investment in SVS INVESCO Dynamic Growth Portfolio from 5/1/2001 to 12/31/2004 | ||
[] SVS INVESCO Dynamic Growth Portfolio — Class A [] Russell Midcap Growth Index | ||
![]() |
| The Russell MidCap Growth Index is an unmanaged index composed of common stocks of midcap companies with higher price-to-book ratios and higher forecasted growth values. Index returns assume reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
Yearly periods ended December 31 |
|
|
Comparative Results | ||||
SVS INVESCO Dynamic Growth Portfolio |
| 1-Year | 3-Year | Life of Portfolio* |
Class A | Growth of $10,000 | $11,201 | $10,489 | $9,230 |
Average annual total return | 12.01% | 1.60% | -2.16% | |
Russell Midcap Growth Index | Growth of $10,000 | $11,548 | $11,964 | $10,930 |
Average annual total return | 15.48% | 6.16% | 2.45% | |
SVS INVESCO Dynamic Growth Portfolio |
|
| 1-Year | Life of Class** |
Class B | Growth of $10,000 |
| $11,145 | $14,055 |
Average annual total return |
| 11.45% | 14.57% | |
Russell Midcap Growth Index | Growth of $10,000 |
| $11,548 | $14,900 |
Average annual total return |
| 15.48% | 17.29% |
The growth of $10,000 is cumulative.
* The Portfolio commenced operations on May 1, 2001. Index returns begin April 30, 2001.
** The Portfolio commenced offering Class B shares on July 1, 2002. Index returns begin June 30, 2002.
Information About Your Portfolio's Expenses |
|
SVS INVESCO Dynamic Growth Portfolio
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent six-month period, the Portfolio limited these expenses; had it not done so, expenses would have been higher. The tables are based on an investment of $1,000 made at the beginning of the six-month period ended December 31, 2004.
The tables illustrate your Portfolio's expenses in two ways:
Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2004 | ||
Actual Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,082.10 | $ 1,079.00 |
Expenses Paid per $1,000* | $ 6.80 | $ 8.88 |
Hypothetical 5% Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,018.68 | $ 1,016.66 |
Expenses Paid per $1,000* | $ 6.59 | $ 8.62 |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365.
Annualized Expense Ratios | Class A | Class B |
Scudder Variable Series II — SVS INVESCO Dynamic Growth Portfolio | 1.30% | 1.70% |
For more information, please refer to the Portfolio's prospectus.
Management Summary December 31, 2004 |
|
SVS INVESCO Dynamic Growth Portfolio
In the period ending December 31, 2004, SVS INVESCO Dynamic Growth Portfolio underperformed the 15.48% return of the Russell Midcap Growth Index , but still posted a solid gain for the year of 12.01% (Class A shares, unadjusted for contract charges). During 2004, the managers reduced the total number of holdings in the portfolio, but took steps to diversify the holdings across sectors. Specifically, the portfolio managers decreased exposure to the information technology sector, and added to their positions in the energy, industrials, materials and telecommunications sectors. By the end of the year, the portfolio held overweight positions in the financials, energy, telecommunications and materials sectors. It held underweight positions in the consumer discretionary, staples, health care and information technology sectors relative to the Russell Midcap Growth Index.
Stock selection in the information technology sector was the largest detractor from the portfolio's relative performance. Within the IT sector, the semiconductor stocks, in particular, detracted from the portfolio, as this was the worst-performing industry group in 2004. Stock selection and an underweight position in the health care sector also detracted from relative performance during the year. Stock selection in the industrials sector positively contributed to performance relative to the Russell Midcap Growth Index in 2004. Telecommunications holdings also boosted the portfolio's performance as shares of wireless telecommunications services companies posted solid gains.
Going forward, the portfolio management team will continue to utilize fundamental analysis to identify stocks with sustainable growth characteristics and attractive valuations. The managers will balance their high-quality core growth holdings with earnings momentum stocks that may have strong near-term prospects for appreciation. The portfolio should be well positioned to benefit from the current economic climate.
Paul J. Rasplicka Michael Chapman
Lead Manager Manager
INVESCO Institutional (N.A.), Inc., Subadvisor to the Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the portfolio or any variable life insurance policy or variable annuity contract for which the portfolio is an investment option. These charges and fees will reduce returns.
Returns during part or all of the periods shown reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns would have been lower.
Risk Considerations
Stocks of medium-sized companies involve greater risk as they often have limited product lines, markets, or financial resources and may be sensitive to erratic and abrupt market movements more so than securities of larger, more-established companies. Additionally, the portfolio may also focus its investments on certain industry sectors, thereby increasing its vulnerability to any single industry or regulatory development. All of these factors may result in greater share price volatility. Please read this portfolio's prospectus for specific details regarding its investments and risk profile.
The Russell Midcap Growth Index is an unmanaged index composed of common stocks of midcap companies with higher price-to-book ratios and higher forecasted growth values. Index returns assume reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
Portfolio management market commentary is as of December 31, 2004, and may not come to pass. This information is subject to change at any time based on market and other conditions.
Portfolio Summary |
SVS INVESCO Dynamic Growth Portfolio
Asset Allocation (Excludes Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Common Stocks | 94% | 95% |
Cash Equivalents | 5% | 4% |
Exchange Traded Fund | 1% | 1% |
| 100% | 100% |
Sector Diversification (Excludes Cash Equivalents and Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Information Technology | 22% | 33% |
Consumer Discretionary | 21% | 21% |
Health Care | 17% | 17% |
Industrials | 16% | 13% |
Financials | 11% | 7% |
Energy | 6% | 4% |
Materials | 3% | 2% |
Telecommunication Services | 3% | 2% |
Consumer Staples | 1% | 1% |
| 100% | 100% |
Asset allocation and sector diversification are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 33. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Portfolio as of month end will be posted to scudder.com on the 15th of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio December 31, 2004 | ![]() | ![]() |
|
SVS INVESCO Dynamic Growth Portfolio
| Shares | Value ($) |
|
| |
Common Stocks 94.6% | ||
Consumer Discretionary 19.5% | ||
Hotels Restaurants & Leisure 6.2% | ||
Hilton Hotels Corp. | 33,100 | 752,694 |
Royal Caribbean Cruises Ltd. (e) | 11,800 | 642,392 |
Starwood Hotels & Resorts Worldwide, Inc. | 11,800 | 689,120 |
Station Casinos, Inc. | 9,700 | 530,396 |
2,614,602 | ||
Household Durables 1.9% | ||
Garmin Ltd. (e) | 5,100 | 310,284 |
Pulte Homes, Inc. | 7,200 | 459,360 |
769,644 | ||
Media 2.1% | ||
Omnicom Group, Inc. | 5,100 | 430,032 |
The E.W. Scripps Co. "A" | 9,300 | 449,004 |
879,036 | ||
Multiline Retail 2.0% | ||
Dollar General Corp. (e) | 20,700 | 429,939 |
Kohl's Corp.* | 8,600 | 422,862 |
852,801 | ||
Specialty Retail 4.5% | ||
Abercrombie & Fitch Co. "A" | 10,200 | 478,890 |
Advance Auto Parts, Inc.* | 9,500 | 414,960 |
Ross Stores, Inc. | 15,300 | 441,711 |
Staples, Inc. | 16,900 | 569,699 |
1,905,260 | ||
Textiles, Apparel & Luxury Goods 2.8% | ||
Coach, Inc.* | 9,400 | 530,160 |
Polo Ralph Lauren Corp. | 15,400 | 656,040 |
1,186,200 | ||
Consumer Staples 0.9% | ||
Food & Staples Retailing | ||
BJ's Wholesale Club, Inc.* | 13,400 | 390,342 |
Energy 5.5% | ||
Energy Equipment & Services 2.1% | ||
Halliburton Co. | 10,900 | 427,716 |
Smith International, Inc.* | 8,100 | 440,721 |
868,437 | ||
Oil & Gas 3.4% | ||
Apache Corp. | 2 | 101 |
Murphy Oil Corp. | 5,300 | 426,385 |
Talisman Energy, Inc. | 15,700 | 423,272 |
Williams Companies, Inc. | 37,200 | 605,988 |
1,455,746 | ||
Financials 10.7% | ||
Banks 1.0% | ||
Zions Bancorp. | 6,100 | 414,983 |
Capital Markets 3.4% | ||
Investors Financial Services Corp. | 8,500 | 424,830 |
Legg Mason, Inc. | 7,750 | 567,765 |
| Shares | Value ($) |
|
| |
T. Rowe Price Group, Inc. | 7,600 | 472,720 |
1,465,315 | ||
Diversified Financial Services 1.7% | ||
CapitalSource, Inc.* (e) | 16,400 | 420,988 |
Moody's Corp. | 3,400 | 295,290 |
716,278 | ||
Insurance 1.1% | ||
Quanta Capital Holdings Ltd.* (e) | 4,700 | 43,334 |
Willis Group Holdings Ltd. | 10,100 | 415,817 |
459,151 | ||
Real Estate 3.5% | ||
Aames Investment Corp. (REIT) (e) | 37,700 | 403,390 |
CB Richard Ellis Group, Inc. "A"* | 14,200 | 476,410 |
New Century Financial Corp. (REIT) | 9,300 | 594,363 |
1,474,163 | ||
Health Care 16.1% | ||
Biotechnology 2.7% | ||
Genzyme Corp.* | 6,300 | 365,841 |
Gilead Sciences, Inc.* | 8,800 | 307,912 |
Invitrogen Corp.* | 3,600 | 241,668 |
Martek Biosciences Corp.* | 4,400 | 225,280 |
1,140,701 | ||
Health Care Equipment & Supplies 5.0% | ||
Cooper Companies, Inc. | 6,100 | 430,599 |
INAMED Corp.* | 5,300 | 335,225 |
Kinetic Concepts, Inc.* | 6,900 | 526,470 |
Nobel Biocare Holding AG | 1,900 | 344,209 |
Waters Corp.* | 9,600 | 449,184 |
2,085,687 | ||
Health Care Providers & Services 4.9% | ||
Aetna, Inc. | 3,900 | 486,525 |
Caremark Rx, Inc.* | 16,629 | 655,682 |
Express Scripts, Inc.* | 5,700 | 435,708 |
Henry Schein, Inc.* | 6,900 | 480,516 |
2,058,431 | ||
Pharmaceuticals 3.5% | ||
MGI Pharma, Inc.* | 11,800 | 330,518 |
Shire Pharmaceuticals Group PLC (ADR) (e) | 21,400 | 683,730 |
Valeant Pharmaceuticals International (e) | 17,900 | 471,665 |
1,485,913 | ||
Industrials 14.9% | ||
Air Freight & Couriers 0.9% | ||
C.H. Robinson Worldwide, Inc. | 6,500 | 360,880 |
Commercial Services & Supplies 8.4% | ||
Apollo Group, Inc. "A"* | 2,440 | 196,932 |
Career Education Corp.* | 12,300 | 492,000 |
Cintas Corp. | 8,900 | 390,354 |
Corrections Corp. of America* | 12,500 | 505,625 |
Iron Mountain, Inc.* | 14,500 | 442,105 |
Manpower, Inc. | 14,300 | 690,690 |
Republic Services, Inc. | 14,300 | 479,622 |
Stericycle, Inc.* | 7,700 | 353,815 |
3,551,143 | ||
| Shares | Value ($) |
|
| |
Construction & Engineering 0.7% | ||
Chicago Bridge & Iron Co., NV (New York Shares) (ADR) (e) | 7,100 | 284,000 |
Electrical Equipment 0.7% | ||
Cooper Industries, Ltd. "A" | 4,000 | 271,560 |
Machinery 2.9% | ||
Eaton Corp. | 6,600 | 477,576 |
Ingersoll-Rand Co. "A" | 6,300 | 505,890 |
PACCAR, Inc. | 3,050 | 245,464 |
1,228,930 | ||
Trading Companies & Distributors 1.0% | ||
Fastenal Co. (e) | 7,100 | 437,076 |
Transportation Infrastructure 0.3% | ||
Sirva, Inc.* | 7,200 | 138,384 |
Information Technology 20.9% | ||
Communications Equipment 4.6% | ||
Avaya, Inc.* | 38,500 | 662,200 |
Comverse Technologies, Inc.* | 20,800 | 508,560 |
Corning, Inc.* | 24,700 | 290,719 |
Juniper Networks, Inc.* | 8,563 | 232,828 |
Scientific-Atlanta, Inc. | 7,800 | 257,478 |
1,951,785 | ||
Computers & Peripherals 0.9% | ||
Storage Technology Corp.* | 12,300 | 388,803 |
Electronic Equipment & Instruments 1.8% | ||
Amphenol Corp. "A"* | 14,100 | 518,034 |
CDW Corp. | 3,250 | 215,638 |
733,672 | ||
Internet Software & Services 2.2% | ||
Ask Jeeves, Inc.* (e) | 7,900 | 211,325 |
VeriSign, Inc.* | 21,500 | 720,680 |
932,005 | ||
IT Consulting & Services 1.9% | ||
Alliance Data Systems Corp.* | 10,500 | 498,540 |
DST Systems, Inc.* | 6,100 | 317,932 |
816,472 | ||
Office Electronics 0.6% | ||
Zebra Technologies Corp. "A"* | 4,500 | 253,260 |
Semiconductors & Semiconductor Equipment 4.6% | ||
Altera Corp.* | 14,933 | 309,113 |
KLA-Tencor Corp.* | 5,200 | 242,216 |
Microchip Technology, Inc. | 16,450 | 438,557 |
National Semiconductor Corp.* | 27,800 | 499,010 |
| Shares | Value ($) |
|
| |
Novellus Systems, Inc.* | 16,500 | 460,185 |
1,949,081 | ||
Software 4.3% | ||
Amdocs Ltd.* | 19,800 | 519,750 |
Intuit, Inc.* | 9,100 | 400,491 |
Mercury Interactive Corp.* | 5,900 | 268,745 |
NAVTEQ Corp.* | 4,600 | 213,256 |
Novell, Inc.* | 60,000 | 405,000 |
1,807,242 | ||
Materials 3.1% | ||
Chemicals | ||
Ecolab, Inc. | 7,000 | 245,910 |
Nalco Holding Co.* | 17,800 | 347,456 |
Praxair, Inc. | 4,800 | 211,920 |
Rohm & Haas Co. | 11,300 | 499,799 |
1,305,085 | ||
Telecommunication Services 3.0% | ||
Wireless Telecommunication Services | ||
American Towers, Inc. "A"* (e) | 29,900 | 550,160 |
Nextel Partners, Inc. "A"* (e) | 23,100 | 451,372 |
SpectraSite, Inc.* | 4,800 | 277,920 |
1,279,452 | ||
Total Common Stocks (Cost $31,384,062) | 39,911,520 | |
| ||
Exchange Traded Fund 0.9% | ||
iShares Nasdaq Biotechnology Index Fund* (Cost $344,887) | 5,100 | 384,540 |
| ||
Securities Lending Collateral 7.6% | ||
Daily Assets Fund Institutional, 2.25% (c) (d) (Cost $3,190,356) | 3,190,356 | 3,190,356 |
| ||
Cash Equivalents 5.5% | ||
Scudder Cash Management QP Trust, 2.24% (b) (Cost $2,313,714) | 2,313,714 | 2,313,714 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $37,233,019) (a) | 108.6 | 45,800,130 |
Other Assets and Liabilities, Net | (8.6) | (3,606,223) |
Net Assets | 100.0 | 42,193,907 |
Notes to SVS INVESCO Dynamic Growth Portfolio of Investments |
* Non-income producing security.
(a) The cost for federal income tax purposes was $37,333,270. At December 31, 2004, net unrealized appreciation for all securities based on tax cost was $8,466,860. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $8,776,811 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $309,951.
(b) Scudder Cash Management QP Trust is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
(c) Daily Assets Fund Institutional, an affiliated fund, is managed by Deutsche Asset Management, Inc. The rate shown is the annualized seven-day yield at period end.
(d) Represents collateral held in connection with securities lending.
(e) All or a portion of these securities were on loan (see Notes to Financial Statements). The value of all securities loaned at December 31, 2004, amounted to $3,119,338, which is 7.4% of net assets.
REIT: Real Estate Investment Trust
ADR: American Depositary Receipts
The accompanying notes are an integral part of the financial statements.
Financial Statements |
|
Statement of Assets and Liabilities as of December 31, 2004 | |
Assets | |
Investments: Investments in securities, at value (cost $31,728,949) — including $3,119,338 of securities loaned | $ 40,296,060 |
Investment in Daily Assets Fund Institutional (cost $3,190,356)* | 3,190,356 |
Investment in Scudder Cash Management QP Trust (cost $2,313,714) | 2,313,714 |
Total investments in securities, at value (cost $37,233,019) | 45,800,130 |
Cash | 11,559 |
Receivable for investments sold | 121,840 |
Dividends receivable | 32,938 |
Interest receivable | 8,145 |
Receivable for Portfolio shares sold | 7,338 |
Foreign taxes recoverable | 593 |
Other assets | 1,399 |
Total assets | 45,983,942 |
Liabilities | |
Payable for investments purchased | 499,773 |
Payable upon return of securities loaned | 3,190,356 |
Payable for Portfolio shares redeemed | 29,116 |
Other accrued expenses and payables | 70,790 |
Total liabilities | 3,790,035 |
Net assets, at value | $ 42,193,907 |
Net Assets | |
Net assets consist of: Accumulated net investment loss | (213) |
Net unrealized appreciation (depreciation) on: Investments | 8,567,111 |
Foreign currency related transactions | 40 |
Accumulated net realized gain (loss) | (2,797,169) |
Paid-in capital | 36,424,138 |
Net assets, at value | $ 42,193,907 |
Class A Net Asset Value, offering and redemption price per share ($34,929,103 ÷ 3,784,410 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 9.23 |
Class B Net Asset Value, offering and redemption price per share ($7,264,804 ÷ 793,650 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 9.15 |
* Represents collateral on securities loaned.
Statement of Operations for the year ended December 31, 2004 | |
Investment Income | |
Income: Dividends (net of foreign taxes withheld of $1,704) | $ 191,259 |
Interest — Scudder Cash Management QP Trust | 28,345 |
Securities lending income, including income from Daily Assets Fund Institutional | 11,252 |
Total Income | 230,856 |
Expenses: Management fee | 389,667 |
Custodian and accounting fees | 112,196 |
Distribution service fees (Class B) | 14,375 |
Record keeping fees (Class B) | 7,766 |
Auditing | 44,886 |
Legal | 20,749 |
Trustees' fees and expenses | 939 |
Reports to shareholders | 5,761 |
Other | 2,942 |
Total expenses, before expense reductions | 599,281 |
Expense reductions | (69,866) |
Total expenses, after expense reductions | 529,415 |
Net investment income (loss) | (298,559) |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from: Investments | 4,623,604 |
Foreign currency related transactions | 19,597 |
| 4,643,201 |
Net unrealized appreciation (depreciation) during the period on: Investments | 85,635 |
Foreign currency related transactions | 37 |
| 85,672 |
Net gain (loss) on investment transactions | 4,728,873 |
Net increase (decrease) in net assets resulting from operations | $ 4,430,314 |
The accompanying notes are an integral part of the financial statements.
|
Statement of Changes in Net Assets | ||
| Years Ended December 31, | |
Increase (Decrease) in Net Assets | 2004 | 2003 |
Operations: Net investment income (loss) | $ (298,559) | $ (267,890) |
Net realized gain (loss) on investment transactions | 4,643,201 | 787,660 |
Net unrealized appreciation (depreciation) on investment transactions during the period | 85,672 | 8,947,748 |
Net increase (decrease) in net assets resulting from operations | 4,430,314 | 9,467,518 |
Portfolio share transactions: Class A Proceeds from shares sold | 4,190,288 | 4,799,111 |
Cost of shares redeemed | (7,454,938) | (4,360,153) |
Net increase (decrease) in net assets from Class A share transactions | (3,264,650) | 438,958 |
Class B Proceeds from shares sold | 3,116,161 | 3,887,012 |
Cost of shares redeemed | (1,201,557) | (110,618) |
Net increase (decrease) in net assets from Class B share transactions | 1,914,604 | 3,776,394 |
Increase (decrease) in net assets | 3,080,268 | 13,682,870 |
Net assets at beginning of period | 39,113,639 | 25,430,769 |
Net assets at end of period (including accumulated net investment loss of $213 and $208, respectively) | $ 42,193,907 | $ 39,113,639 |
Other Information | ||
Class A Shares outstanding at beginning of period | 4,185,184 | 4,165,073 |
Shares sold | 493,942 | 671,597 |
Shares redeemed | (894,716) | (651,486) |
Net increase (decrease) in Portfolio shares | (400,774) | 20,111 |
Shares outstanding at end of period | 3,784,410 | 4,185,184 |
Class B Shares outstanding at beginning of period | 562,802 | 15,737 |
Shares sold | 370,510 | 562,002 |
Shares redeemed | (139,662) | (14,937) |
Net increase (decrease) in Portfolio shares | 230,848 | 547,065 |
Shares outstanding at end of period | 793,650 | 562,802 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights |
|
Class A
Years Ended December 31, | 2004 | 2003 | 2002 | 2001a |
Selected Per Share Data | ||||
Net asset value, beginning of period | $ 8.24 | $ 6.08 | $ 8.80 | $ 10.00 |
Income (loss) from investment operations: Net investment income (loss)b | (.06) | (.06) | (.05) | (.02) |
Net realized and unrealized gain (loss) on investment transactions | 1.05 | 2.22 | (2.67) | (1.18) |
Total from investment operations | .99 | 2.16 | (2.72) | (1.20) |
Net asset value, end of period | $ 9.23 | $ 8.24 | $ 6.08 | $ 8.80 |
Total Return (%) | 12.01c | 35.53c | (30.91) | (12.00)c** |
Ratios to Average Net Assets and Supplemental Data | ||||
Net assets, end of period ($ millions) | 35 | 34 | 25 | 23 |
Ratio of expenses before expense reductions (%) | 1.48 | 1.46 | 1.14 | 1.97* |
Ratio of expenses after expense reductions (%) | 1.30 | 1.30 | 1.14 | 1.30* |
Ratio of net investment income (loss) (%) | (.71) | (.85) | (.71) | (.40)* |
Portfolio turnover rate (%) | 133 | 115 | 79 | 40* |
a For the period from May 1, 2001 (commencement of operations) to December 31, 2001.
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
Class B
Years Ended December 31, | 2004 | 2003 | 2002a |
Selected Per Share Data | |||
Net asset value, beginning of period | $ 8.21 | $ 6.07 | $ 6.51 |
Income (loss) from investment operations: Net investment income (loss)b | (.09) | (.09) | (.03) |
Net realized and unrealized gain (loss) on investment transactions | 1.03 | 2.23 | (.41) |
Total from investment operations | .94 | 2.14 | (.44) |
Net asset value, end of period | $ 9.15 | $ 8.21 | $ 6.07 |
Total Return (%) | 11.45c | 35.26c | (6.76)** |
Ratios to Average Net Assets and Supplemental Data | |||
Net assets, end of period ($ millions) | 7 | 5 | .1 |
Ratio of expenses before expense reductions (%) | 1.88 | 1.85 | 1.40* |
Ratio of expenses after expense reductions (%) | 1.70 | 1.69 | 1.40* |
Ratio of net investment income (loss) (%) | (1.11) | (1.24) | (.82)* |
Portfolio turnover rate (%) | 133 | 115 | 79 |
a For the period July 1, 2002 (commencement of operations of Class B shares) to December 31, 2002.
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
Performance Summary December 31, 2004 |
|
SVS Janus Growth and Income Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns.
The Portfolio is subject to stock market risk, meaning stocks in the Portfolio may decline in value for extended periods of time due to the activities and financial prospects of individual companies, or due to general market and economic conditions. The Portfolio also invests in individual bonds whose yields and market values fluctuate so that your investment may be worth more or less than its original cost. Please read this Portfolio's prospectus for specific details regarding its investments and risk profile.
Growth of an Assumed $10,000 Investment in SVS Janus Growth and Income Portfolio from 10/29/1999 to 12/31/2004 | ||
[] SVS Janus Growth and Income Portfolio — Class A [] Russell 1000 Growth Index |
| |
![]() |
| The Russell 1000 Growth Index is an unmanaged index composed of common stocks of larger US companies with higher price-to-book ratios and higher forecasted growth values. Index returns assume reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
|
|
|
Comparative Results | |||||
SVS Janus Growth and Income Portfolio |
| 1-Year | 3-Year | 5-Year | Life of Portfolio* |
Class A | Growth of $10,000 | $11,151 | $11,064 | $8,815 | $10,131 |
Average annual total return | 11.51% | 3.43% | -2.49% | .25% | |
Russell 1000 Growth Index | Growth of $10,000 | $10,630 | $9,946 | $6,140 | $7,145 |
Average annual total return | 6.30% | -.18% | -9.29% | -6.30% | |
SVS Janus Growth and Income Portfolio |
|
|
| 1-Year | Life of Class** |
Class B | Growth of $10,000 |
|
| $11,109 | $12,402 |
Average annual total return |
|
| 11.09% | 8.98% | |
Russell 1000 Growth Index | Growth of $10,000 |
|
| $10,630 | $12,555 |
Average annual total return |
|
| 6.30% | 9.53% |
The growth of $10,000 is cumulative.
* The Portfolio commenced operations October 29, 1999. Index returns begin October 31, 1999. Total returns would have been lower for the Life of Portfolio period for Class A shares if the Portfolio's expenses were not maintained.
** The Portfolio commenced offering Class B shares on July 1, 2002. Index returns begin June 30, 2002.
Information About Your Portfolio's Expenses |
|
SVS Janus Growth and Income Portfolio
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. The tables are based on an investment of $1,000 made at the beginning of the six-month period ended December 31, 2004.
The tables illustrate your Portfolio's expenses in two ways:
Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2004 | ||
Actual Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,089.30 | $ 1,087.50 |
Expenses Paid per $1,000* | $ 5.49 | $ 7.45 |
Hypothetical 5% Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,019.95 | $ 1,018.07 |
Expenses Paid per $1,000* | $ 5.31 | $ 7.20 |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365.
Annualized Expense Ratios | Class A | Class B |
Scudder Variable Series II — SVS Janus Growth and Income Portfolio | 1.04% | 1.42% |
For more information, please refer to the Portfolio's prospectus.
Management Summary December 31, 2004 |
|
SVS Janus Growth and Income Portfolio
SVS Janus Growth and Income Portfolio gained 11.51% (Class A shares, unadjusted for contract charges) for the fiscal year ended December 31, 2004, outperforming its benchmark, the Russell 1000 Growth Index, which returned 6.30% during the period. This performance owed its largest gains to the strong returns of a number of well-chosen health care stocks in the portfolio, in large part United Health Group, Inc. and Aetna, Inc. These HMOs are important holdings in the portfolio because their earnings outlook should benefit from several important trends such as membership growth. Both companies have above-average earnings growth prospects while trading at below-average valuations. Another strong contributor to the portfolio's performance was oil giant ExxonMobil Corp. The company's share price has followed the increase of its earnings in the current high oil price environment.
On the flip side, weak results posted by Samsung Electronics Co. and Texas Instruments, Inc. detracted from performance. Samsung Electronics is the second-largest semiconductor company in the world. Despite continued strength in its memory products, this Korean company's shares declined along with the broader technology industry due to concerns relating to the future profitability of the handset and flat-panel businesses. Portfolio management believes that Samsung's valuation is unsustainably cheap given the company's world-class status and maintains the portfolio's position. Texas Instruments is also a leading semiconductor company and has strong market positions in several subsectors. The stock has been a disappointing performer due to investor concerns regarding the sustainability of the semiconductor cycle upswing and specific weakness in the wireless business. Management believes that Texas Instrument's overall business fundamentals are solid and that the company is positioned to deliver steady revenue growth for the next few quarters. For these reasons, the stock remains in the portfolio.
Minyoung Sohn
Portfolio Manager, Janus Capital Management LLC, Subadvisor to the Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the portfolio or any variable life insurance policy or variable annuity contract for which the portfolio is an investment option. These charges and fees will reduce returns.
Risk Considerations
The portfolio is subject to stock market risk, meaning stocks in the portfolio may decline in value for extended periods of time due to the activities and financial prospects of individual companies, or due to general market and economic conditions. The portfolio also invests in individual bonds whose yields and market values fluctuate so that your investment may be worth more or less than its original cost. Please read this portfolio's prospectus for specific details regarding its investments and risk profile.
The Russell 1000 Growth Index is an unmanaged index composed of common stocks of larger US companies with higher price-to-book ratios and higher forecasted growth values. Index returns assume reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
Portfolio management market commentary is as of December 31, 2004, and may not come to pass. This information is subject to change at any time based on market and other conditions.
Portfolio Summary |
SVS Janus Growth and Income Portfolio
Asset Allocation (Excludes Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Common Stocks | 95% | 91% |
Preferred Stocks | 3% | 1% |
Cash Equivalents | 2% | 6% |
Corporate Bonds | — | 1% |
Convertible Preferred Stocks | — | 1% |
| 100% | 100% |
Sector Diversification (Excludes Cash Equivalents and Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Information Technology | 24% | 20% |
Consumer Discretionary | 18% | 21% |
Health Care | 15% | 13% |
Industrials | 14% | 15% |
Financials | 12% | 18% |
Energy | 9% | 5% |
Consumer Staples | 8% | 6% |
Utilities | — | 1% |
Materials | — | 1% |
| 100% | 100% |
Asset allocation and sector diversification are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 44. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Portfolio as of month-end will be posted to scudder.com on the 15th of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio December 31, 2004 | ![]() | ![]() |
|
SVS Janus Growth and Income Portfolio
|
| Value ($) |
|
| |
Common Stocks 94.9% | ||
Consumer Discretionary 17.1% | ||
Hotels Restaurants & Leisure 1.2% | ||
Four Seasons Hotels Ltd. (e) | 32,475 | 2,656,130 |
Household Durables 1.8% | ||
Harman International Industries, Inc. | 16,260 | 2,065,020 |
NVR, Inc.* | 2,290 | 1,761,926 |
3,826,946 | ||
Internet & Catalog Retail 0.4% | ||
Amazon.com, Inc.* | 20,305 | 899,308 |
Leisure Equipment & Products 1.1% | ||
Marvel Enterprises, Inc.* (e) | 116,007 | 2,375,823 |
Media 9.0% | ||
British Sky Broadcasting Group PLC | 444,341 | 4,794,371 |
Clear Channel Communications, Inc. | 111,255 | 3,725,930 |
Comcast Corp. Special "A"* | 98,970 | 3,250,175 |
Lamar Advertising Co.* | 39,700 | 1,698,366 |
Time Warner, Inc.* | 206,195 | 4,008,431 |
Viacom, Inc. "B" | 47,700 | 1,735,803 |
19,213,076 | ||
Multiline Retail 0.8% | ||
Kohl's Corp.* | 34,685 | 1,705,462 |
Specialty Retail 2.8% | ||
Best Buy Co., Inc. | 56,710 | 3,369,708 |
PETsMART, Inc. | 71,525 | 2,541,284 |
5,910,992 | ||
Consumer Staples 8.1% | ||
Beverages 2.0% | ||
Coca-Cola Co. | 17,210 | 716,452 |
PepsiCo, Inc. | 66,577 | 3,475,320 |
4,191,772 | ||
Food & Staples Retailing 0.8% | ||
Kroger Co.* | 17,340 | 304,143 |
Sysco Corp. | 38,140 | 1,455,804 |
1,759,947 | ||
Food Products 0.6% | ||
Dean Foods Co.* | 34,670 | 1,142,377 |
Household Products 2.6% | ||
Colgate-Palmolive Co. | 20,780 | 1,063,105 |
Procter & Gamble Co. | 81,175 | 4,471,119 |
5,534,224 | ||
Personal Products 1.1% | ||
Avon Products, Inc. | 62,415 | 2,415,460 |
Tobacco 1.0% | ||
Altria Group, Inc. | 35,080 | 2,143,388 |
Energy 8.7% | ||
Oil & Gas | ||
EnCana Corp. | 53,989 | 3,080,612 |
ExxonMobil Corp. | 156,275 | 8,010,657 |
Kinder Morgan, Inc. | 27,250 | 1,992,793 |
|
| Value ($) |
|
| |
Petro-Canada | 41,372 | 2,112,194 |
Suncor Energy, Inc. | 96,348 | 3,409,552 |
18,605,808 | ||
Financials 11.0% | ||
Banks 1.9% | ||
Fifth Third Bancorp. | 17,335 | 819,599 |
US Bancorp. | 103,242 | 3,233,539 |
4,053,138 | ||
Capital Markets 0.9% | ||
Goldman Sachs Group, Inc. | 17,745 | 1,846,190 |
Consumer Finance 0.4% | ||
Providian Financial Corp.* | 48,075 | 791,795 |
Diversified Financial Services 6.6% | ||
Citigroup, Inc. | 150,623 | 7,257,016 |
Countrywide Financial Corp. | 88,494 | 3,275,163 |
JPMorgan Chase & Co. | 94,670 | 3,693,077 |
14,225,256 | ||
Insurance 1.2% | ||
American International Group, Inc. | 39,870 | 2,618,263 |
Health Care 14.1% | ||
Biotechnology 0.4% | ||
Neurocrine Biosciences, Inc.* (e) | 17,420 | 858,806 |
Health Care Equipment & Supplies 1.9% | ||
Align Technology, Inc.* (e) | 102,325 | 1,099,994 |
Medtronic, Inc. | 58,610 | 2,911,159 |
4,011,153 | ||
Health Care Providers & Services 7.1% | ||
Aetna, Inc. | 31,940 | 3,984,515 |
Caremark Rx, Inc.* | 118,485 | 4,671,864 |
UnitedHealth Group, Inc. | 74,085 | 6,521,702 |
15,178,081 | ||
Pharmaceuticals 4.7% | ||
Eli Lilly & Co. | 34,675 | 1,967,806 |
Roche Holding AG | 50,408 | 5,802,838 |
Sanofi-Aventis | 28,600 | 2,285,823 |
10,056,467 | ||
Industrials 13.1% | ||
Aerospace & Defense 1.2% | ||
Honeywell International, Inc. | 69,110 | 2,447,185 |
Electrical Equipment 1.6% | ||
Rockwell Automation, Inc. | 70,705 | 3,503,433 |
Industrial Conglomerates 9.1% | ||
3M Co. | 33,935 | 2,785,045 |
General Electric Co. | 92,400 | 3,372,600 |
Smiths Group PLC | 127,661 | 2,014,694 |
Tyco International Ltd. | 313,820 | 11,215,927 |
19,388,266 | ||
Road & Rail 1.2% | ||
Canadian National Railway Co. | 42,637 | 2,611,516 |
|
| Value ($) |
|
| |
Information Technology 22.8% | ||
Communications Equipment 2.7% | ||
Cisco Systems, Inc.* | 220,045 | 4,246,869 |
Nokia Oyj (ADR) | 93,535 | 1,465,693 |
5,712,562 | ||
Computers & Peripherals 1.8% | ||
Dell, Inc.* | 41,875 | 1,764,612 |
International Business Machines Corp. | 22,310 | 2,199,320 |
3,963,932 | ||
Electronic Equipment & Instruments 2.6% | ||
Samsung Electronics Co., Ltd. (GDR), 144A | 25,065 | 5,489,235 |
Internet Software & Services 1.8% | ||
EarthLink, Inc.* | 76,255 | 878,458 |
Yahoo!, Inc.* | 81,905 | 3,086,180 |
3,964,638 | ||
Semiconductors & Semiconductor Equipment 8.6% | ||
Advanced Micro Devices, Inc.* (e) | 372,035 | 8,192,211 |
Linear Technology Corp. | 78,145 | 3,028,900 |
Maxim Integrated Products, Inc. | 83,840 | 3,553,977 |
Texas Instruments, Inc. | 145,190 | 3,574,578 |
18,349,666 | ||
Software 5.3% | ||
Computer Associates International, Inc. | 58,910 | 1,829,745 |
Electronic Arts, Inc.* | 53,520 | 3,301,114 |
Macromedia, Inc.* | 20,800 | 647,296 |
Microsoft Corp. | 181,250 | 4,841,187 |
Oracle Corp.* | 50,545 | 693,477 |
11,312,819 | ||
Total Common Stocks (Cost $160,717,419) | 202,763,114 |
| Principal Amount ($) | Value ($) |
|
| |
Convertible Bond 0.1% | ||
Lamar Advertising Co., 2.875%, 12/31/2010 (Cost $175,000) | 175,000 | 192,955 |
|
| Value ($) |
|
| |
Preferred Stocks 0.7% | ||
Porsche AG* (Cost $697,147) | 2,476 | 1,580,103 |
| ||
Convertible Preferred Stocks 2.3% | ||
Amerada Hess Corp., 7.0% | 20,700 | 1,530,765 |
Goldman Sachs Group, Inc., 6.25%, Series B | 35,200 | 876,199 |
Goldman Sachs Group, Inc., 8.125%, Series B | 24,215 | 911,283 |
Lehman Brothers Holdings, Inc., 6.25%, Series GIS | 13,850 | 373,950 |
XL Capital Ltd., 6.5% | 43,500 | 1,107,075 |
Total Convertible Preferred Stocks (Cost $4,422,909) | 4,799,272 | |
| ||
Securities Lending Collateral 5.9% | ||
Daily Assets Fund Institutional, 2.25% (c) (d) (Cost $12,640,857) | 12,640,857 | 12,640,857 |
| ||
Cash Equivalents 1.7% | ||
Scudder Cash Management QP Trust, 2.24% (b) (Cost $3,634,814) | 3,634,814 | 3,634,814 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $182,288,146) (a) | 105.6 | 225,611,115 |
Other Assets and Liabilities, Net | (5.6) | (11,939,776) |
Net Assets | 100.0 | 213,671,339 |
Notes to SVS Janus Growth and Income Portfolio of Investments |
* Non-income producing security. In the case of a bond, generally denotes that the issuer has defaulted on the payment of principal or interest or has filed for bankruptcy.
(a) The cost for federal income tax purposes was $183,985,755. At December 31, 2004, net unrealized appreciation for all securities based on tax cost was $41,625,360. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $44,069,377 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $2,444,017.
(b) Scudder Cash Management QP Trust is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
(c) Daily Assets Fund Institutional, an affiliated fund, is managed by Deutsche Asset Management, Inc. The rate shown is the annualized seven-day yield at period end.
(d) Represents collateral held in connection with securities lending.
(e) All or a portion of these securities were on loan (see Notes to Financial Statements). The value of all securities loaned at December 31, 2004 amounted to $12,356,745, which is 5.8% of total net assets.
ADR: American Depositary Receipts
GDR: Global Depositary Receipts
144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registrations, normally to qualified institutional buyers.
The accompanying notes are an integral part of the financial statements.
Financial Statements |
|
Statement of Assets and Liabilities as of December 31, 2004 | |
Assets | |
Investments: Investments in securities, at value (cost $166,012,475) — including $12,356,745 of securities loaned | $ 209,335,444 |
Investment in Daily Assets Fund Institutional (cost $12,640,857)* | 12,640,857 |
Investment in Scudder Cash Management QP Trust (cost $3,634,814) | 3,634,814 |
Total investments in securities, at value (cost $182,288,146) | 225,611,115 |
Cash | 10,000 |
Foreign currency, at value (cost $177,625) | 185,365 |
Receivable for investments sold | 102,172 |
Dividends receivable | 224,660 |
Interest receivable | 9,365 |
Receivable for Portfolio shares sold | 2,478 |
Due from broker | 868,000 |
Foreign taxes recoverable | 737 |
Other assets | 12,562 |
Total assets | 227,026,454 |
Liabilities | |
Unrealized depreciation on forward foreign currency exchange contracts | 303,575 |
Net payable on closed forward foreign currency exchange contracts | 45,768 |
Payable for Portfolio shares redeemed | 90,701 |
Payable upon return of securities loaned | 12,640,857 |
Accrued management fee | 165,699 |
Other accrued expenses and payables | 108,515 |
Total liabilities | 13,355,115 |
Net assets, at value | $ 213,671,339 |
Net Assets | |
Net assets consist of: Undistributed net investment income | 618,144 |
Net unrealized appreciation (depreciation) on: Investments | 43,322,969 |
Foreign currency related transactions | (295,654) |
Accumulated net realized gain (loss) | (51,052,155) |
Paid-in capital | 221,078,035 |
Net assets, at value | $ 213,671,339 |
Class A Net Asset Value, offering and redemption price per share ($186,581,095 ÷ 18,888,001 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 9.88 |
Class B Net Asset Value, offering and redemption price per share ($27,090,244 ÷ 2,758,937 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 9.82 |
* Represents collateral on securities loaned.
Statement of Operations for the year ended December 31, 2004 | |
Investment Income | |
Income: Dividends (net of foreign taxes withheld of $52,164) | $ 2,650,927 |
Interest | 67,361 |
Interest — Scudder Cash Management QP Trust | 80,209 |
Securities lending income, including income from Daily Assets Fund Institutional | 17,553 |
Total Income | 2,816,050 |
Expenses: Management fee | 1,912,915 |
Custodian and accounting fees | 97,919 |
Distribution service fees (Class B) | 53,141 |
Record keeping fees (Class B) | 27,962 |
Auditing | 43,423 |
Legal | 51,620 |
Trustees' fees and expenses | 1,962 |
Reports to shareholders | 20,850 |
Other | 7,291 |
Total expenses, before expense reductions | 2,217,083 |
Expense reductions | (2,269) |
Total expenses, after expense reductions | 2,214,814 |
Net investment income (loss) | 601,236 |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from: Investments | 9,015,350 |
Foreign currency related transactions | (218,840) |
| 8,796,510 |
Net unrealized appreciation (depreciation) during the period on: Investments | 12,788,925 |
Foreign currency related transactions | (60,746) |
| 12,728,179 |
Net gain (loss) on investment transactions | 21,524,689 |
Net increase (decrease) in net assets resulting from operations | $ 22,125,925 |
The accompanying notes are an integral part of the financial statements.
|
Statement of Changes in Net Assets | ||
| Years Ended December 31, | |
Increase (Decrease) in Net Assets | 2004 | 2003 |
Operations: Net investment income (loss) | $ 601,236 | $ 694,308 |
Net realized gain (loss) on investment transactions | 8,796,510 | (6,450,874) |
Net unrealized appreciation (depreciation) on investment transactions during the period | 12,728,179 | 46,205,428 |
Net increase (decrease) in net assets resulting from operations | 22,125,925 | 40,448,862 |
Distributions to shareholders from: Net investment income Class A | — | (1,260,686) |
Class B | — | (10,289) |
Portfolio share transactions: Class A Proceeds from shares sold | 6,502,623 | 34,880,490 |
Reinvestment of distributions | — | 1,260,686 |
Cost of shares redeemed | (28,062,645) | (52,309,879) |
Net increase (decrease) in net assets from Class A share transactions | (21,560,022) | (16,168,703) |
Class B Proceeds from shares sold | 11,312,331 | 15,708,908 |
Reinvestment of distributions | — | 10,289 |
Cost of shares redeemed | (1,739,333) | (3,045,507) |
Net increase (decrease) in net assets from Class B share transactions | 9,572,998 | 12,673,690 |
Increase (decrease) in net assets | 10,138,901 | 35,682,874 |
Net assets at beginning of period | 203,532,438 | 167,849,564 |
Net assets at end of period (including undistributed net investment income of $618,144 and $235,748, respectively) | $ 213,671,339 | $ 203,532,438 |
Other Information | ||
Class A Shares outstanding at beginning of period | 21,296,089 | 23,312,732 |
Shares sold | 722,385 | 4,876,864 |
Shares issued to shareholders in reinvestment of distributions | — | 180,614 |
Shares redeemed | (3,130,473) | (7,074,121) |
Net increase (decrease) in Portfolio shares | (2,408,088) | (2,016,643) |
Shares outstanding at end of period | 18,888,001 | 21,296,089 |
Class B Shares outstanding at beginning of period | 1,676,008 | 53,142 |
Shares sold | 1,276,437 | 2,051,610 |
Shares issued to shareholders in reinvestment of distributions | — | 1,472 |
Shares redeemed | (193,508) | (430,216) |
Net increase (decrease) in Portfolio shares | 1,082,929 | 1,622,866 |
Shares outstanding at end of period | 2,758,937 | 1,676,008 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights |
|
Class A
Years Ended December 31, | 2004 | 2003 | 2002*** | 2001a | 2000b |
Selected Per Share Data |
|
| (Restated) |
| |
Net asset value, beginning of period | $ 8.86 | $ 7.18 | $ 9.05 | $ 10.40 | $ 11.49 |
Income (loss) from investment operations: Net investment income (loss)c | .03 | .03 | .04 | .08 | .12 |
Net realized and unrealized gain (loss) on investment transactions | .99 | 1.71 | (1.86) | (1.36) | (1.16) |
Total from investment operations | 1.02 | 1.74 | (1.82) | (1.28) | (1.04) |
Less distributions from: Net investment income | — | (.06) | (.05) | (.07) | — |
Net realized gains on investment transactions | — | — | — | — | (.05) |
Total distributions | — | (.06) | (.05) | (.07) | (.05) |
Net asset value, end of period | $ 9.88 | $ 8.86 | $ 7.18 | $ 9.05 | $ 10.40 |
Total Return (%) | 11.51 | 24.37 | (20.22) | (12.28) | (9.18)d |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | 187 | 189 | 167 | 179 | 104 |
Ratio of expenses before expense reductions (%) | 1.06 | 1.07 | 1.04 | 1.05 | 1.10 |
Ratio of expenses after expense reductions (%) | 1.06 | 1.07 | 1.04 | 1.05 | 1.01 |
Ratio of net investment income (loss) (%) | .34 | .40 | .54 | .90 | 1.07 |
Portfolio turnover rate (%) | 52 | 46 | 57 | 48 | 39 |
a As required, effective January 1, 2001, the Portfolio has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium on debt securities. The effect of this change for the year ended December 31, 2001 was to decrease net investment income by $.01, increase net realized and unrealized gains and losses by $.01 and decrease the ratio of net investment income to average net assets from .92% to .90%. Per share, ratios and supplemental data for periods prior to January 1, 2001 have not been restated to reflect this change in presentation.
b On June 18, 2001, the Portfolio implemented a 1 for 10 reverse stock split. Per share information, for the period prior to December 31, 2001, has been restated to reflect the effect of the split. Shareholders received 1 share for every 10 shares owned and net asset value per share increased correspondingly.
c Based on average shares outstanding during the period.
d Total return would have been lower had certain expenses not been reduced.
*** Subsequent to December 31, 2002, these numbers have been restated to reflect an adjustment to the value of a security as of December 31, 2002. The effect of this adjustment for the year ended December 31, 2002 was to increase the net asset value per share by $0.03. The total return was also adjusted from -20.56% to -20.22% in accordance with this change.
Class B
Years Ended December 31, | 2004 | 2003 | 2002a*** |
Selected Per Share Data |
|
| (Restated) |
Net asset value, beginning of period | $ 8.84 | $ 7.17 | $ 7.96 |
Income (loss) from investment operations: Net investment income (loss)b | (.01) | —c | .02 |
Net realized and unrealized gain (loss) on investment transactions | .99 | 1.71 | (.81) |
Total from investment operations | .98 | 1.71 | (.79) |
Less distributions from: Net investment income | — | (.04) | — |
Net asset value, end of period | $ 9.82 | $ 8.84 | $ 7.17 |
Total Return (%) | 11.09 | 23.94 | (9.92)** |
Ratios to Average Net Assets and Supplemental Data | |||
Net assets, end of period ($ millions) | 27 | 15 | .4 |
Ratio of expenses (%) | 1.44 | 1.47 | 1.29* |
Ratio of net investment income (loss) (%) | (.04) | (.01) | .48* |
Portfolio turnover rate (%) | 52 | 46 | 57 |
a For the period July 1, 2002 (commencement of operations of Class B shares) to December 31, 2002.
b Based on average shares outstanding during the period.
c Amount is less than $.005 per share.
* Annualized
** Not annualized
*** Subsequent to December 31, 2002, these numbers have been restated to reflect an adjustment to the value of a security as of December 31, 2002. The effect of this adjustment for the year ended December 31, 2002 was to increase the net asset value per share by $0.03. The total return was also adjusted from -10.30% to -9.92% in accordance with this change.
Performance Summary December 31, 2004 |
|
SVS Janus Growth Opportunities Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns.
Portfolios that emphasize investments in smaller companies may experience greater price volatility. This Portfolio may at times have significant exposure to certain industry groups, which may react similarly to market developments (resulting in greater price volatility). The Portfolio also may have significant exposure to foreign markets (which include risks such as currency fluctuation and political uncertainty). Please read this Portfolio's prospectus for specific details regarding its investments and risk profile.
Growth of an Assumed $10,000 Investment in SVS Janus Growth Opportunities Portfolio from 10/29/1999 to 12/31/2004 | ||
[] SVS Janus Growth Opportunities Portfolio — Class A [] Russell 1000 Growth Index |
| |
![]() |
| The Russell 1000 Growth Index is an unmanaged index composed of common stocks of larger US companies with higher price-to-book ratios and higher forecasted growth values. Index returns assume reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
Yearly periods ended December 31 |
|
|
Comparative Results | |||||
SVS Janus Growth Opportunities Portfolio |
| 1-Year | 3-Year | 5-Year | Life of Portfolio* |
Class A | Growth of $10,000 | $11,257 | $9,898 | $6,691 | $7,790 |
Average annual total return | 12.57% | -.34% | -7.72% | -4.71% | |
Russell 1000 Growth Index | Growth of $10,000 | $10,630 | $9,946 | $6,140 | $7,145 |
Average annual total return | 6.30% | -.18% | -9.29% | -6.30% | |
SVS Janus Growth Opportunities Portfolio |
|
|
| 1-Year | Life of Class** |
Class B | Growth of $10,000 |
|
| $11,221 | $13,152 |
Average annual total return |
|
| 12.21% | 11.57% | |
Russell 1000 Growth Index | Growth of $10,000 |
|
| $10,630 | $12,555 |
Average annual total return |
|
| 6.30% | 9.53% |
The growth of $10,000 is cumulative.
* The Portfolio commenced operations on October 29, 1999. Index returns begin on October 31, 1999. Total returns would have been lower for the 5-Year and Life of Portfolio periods for Class A shares if the Portfolio's expenses were not maintained.
** The Portfolio commenced offering Class B shares on July 1, 2002. Index returns begin June 30, 2002.
Information About Your Portfolio's Expenses |
|
SVS Janus Growth Opportunities Portfolio
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. The tables are based on an investment of $1,000 made at the beginning of the six-month period ended December 31, 2004.
The tables illustrate your Portfolio's expenses in two ways:
Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2004 | ||
Actual Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,078.90 | $ 1,078.20 |
Expenses Paid per $1,000* | $ 5.62 | $ 7.65 |
Hypothetical 5% Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,019.66 | $ 1,017.71 |
Expenses Paid per $1,000* | $ 5.46 | $ 7.42 |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365.
Annualized Expense Ratios | Class A | Class B |
Scudder Variable Series II — SVS Janus Growth Opportunities Portfolio | 1.08% | 1.47% |
For more information, please refer to the Portfolio's prospectus.
Management Summary December 31, 2004 |
|
SVS Janus Growth Opportunities Portfolio
The portfolio gained 12.57% (Class A shares, unadjusted for contract charges) for the fiscal year ended December 31, 2004, outperforming its benchmark, the Russell 1000 Growth Index, which returned 6.30% during the period.
Among the portfolio's strongest contributors was package shipper FedEx Corp., which continued to fire on all cylinders despite the wild gyrations in the price of fuel and minimal expansion in its domestic unit.
Internet services leader Yahoo!, Inc. was also a top contributor. Although the initial public offering for search engine developer Google attracted much of the on-line world's attention in the second half of the year, I remained encouraged by Yahoo's positioning.
On the negative side, investor discomfort with the computer chip industry pulled down capital equipment maker Applied Materials, Inc. during the period. Although Applied Materials is one of the premier companies in the semiconductor equipment sector, I reduced the portfolio's stake in the company, redeploying assets from the sale in other, more attractive investment opportunities.
The market's somewhat pessimistic tone about the entire tech sector also pulled down holdings such as Cisco Systems, Inc. Cisco's stock took a particularly hard hit during the third quarter when the networking gear manufacturer offered conservative earnings guidance. Management may be seeing some weakness at the margins, but I believe the company is being cautious instead of hinting at a flaw in its business model and therefore I maintained a reduced the portfolio's position in the stock.
Detractors also included the large drug maker Pfizer, which we liquidated from the portfolio amid concerns over slowing revenue growth, legislative attacks and patent challenges.
Marc Pinto
Portfolio Manager, Janus Capital Management LLC, Subadvisor to the Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the portfolio or any variable life insurance policy or variable annuity contract for which the portfolio is an investment option. These charges and fees will reduce returns.
Risk Considerations
This portfolio is subject to stock market risk. The portfolio may at times have significant exposure to certain industry groups, which may react similarly to market developments (resulting in greater price volatility). The portfolio also may have significant exposure to foreign markets (which include risks such as currency fluctuation and political uncertainty). Please read this portfolio's prospectus for specific details regarding its investments and risk profile.
The Russell 1000 Growth Index is an unmanaged index composed of common stocks of larger US companies with higher price-to-book ratios and higher forecasted growth values. Index returns assume reinvested dividends and, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
Portfolio management market commentary is as of December 31, 2004, and may not come to pass. This information is subject to change at any time based on market and other conditions.
Portfolio Summary |
SVS Janus Growth Opportunities Portfolio
Asset Allocation | 12/31/04 | 12/31/03 |
| ||
Common Stocks | 96% | 98% |
Cash Equivalents | 4% | 2% |
| 100% | 100% |
Sector Diversification (Excludes Cash Equivalents) | 12/31/04 | 12/31/03 |
| ||
Information Technology | 25% | 34% |
Health Care | 21% | 17% |
Consumer Discretionary | 20% | 18% |
Industrials | 13% | 6% |
Financials | 10% | 17% |
Energy | 5% | 4% |
Consumer Staples | 4% | 4% |
Materials | 2% | — |
| 100% | 100% |
Asset allocation and sector diversification are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 55. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Portfolio as of month end will be posted to scudder.com on the 15th of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio December 31, 2004 | ![]() | ![]() |
|
SVS Janus Growth Opportunities Portfolio
|
| Value ($) |
|
| |
Common Stocks 95.9% | ||
Consumer Discretionary 19.4% | ||
Hotels Restaurants & Leisure 5.6% | ||
Hilton Hotels Corp. | 104,295 | 2,371,668 |
McDonald's Corp. | 75,910 | 2,433,675 |
Royal Caribbean Cruises Ltd. | 55,905 | 3,043,468 |
7,848,811 | ||
Media 3.9% | ||
Gemstar-TV Guide International, Inc.* | 178,190 | 1,054,885 |
Liberty Media Corp. "A"* | 109,543 | 1,202,782 |
Time Warner, Inc.* | 163,150 | 3,171,636 |
5,429,303 | ||
Multiline Retail 1.7% | ||
Target Corp. | 46,760 | 2,428,247 |
Specialty Retail 6.4% | ||
Best Buy Co., Inc. | 46,335 | 2,753,226 |
Home Depot, Inc. | 89,940 | 3,844,035 |
Staples, Inc. | 73,070 | 2,463,190 |
9,060,451 | ||
Textiles, Apparel & Luxury Goods 1.8% | ||
NIKE, Inc. "B" | 27,350 | 2,480,371 |
Consumer Staples 4.0% | ||
Beverages 1.5% | ||
PepsiCo, Inc. | 39,530 | 2,063,466 |
Household Products 2.5% | ||
Procter & Gamble Co. | 64,005 | 3,525,396 |
Energy 4.2% | ||
Energy Equipment & Services 1.3% | ||
Halliburton Co. | 46,965 | 1,842,907 |
Oil & Gas 2.9% | ||
ExxonMobil Corp. | 80,725 | 4,137,963 |
Financials 10.0% | ||
Capital Markets 1.8% | ||
Morgan Stanley | 45,180 | 2,508,393 |
Consumer Finance 4.6% | ||
American Express Co. | 78,055 | 4,399,960 |
SLM Corp. | 37,200 | 1,986,108 |
6,386,068 | ||
Diversified Financial Services 1.3% | ||
Countrywide Financial Corp. | 51,160 | 1,893,432 |
Insurance 2.3% | ||
Allstate Corp. | 15,665 | 810,194 |
American International Group, Inc. | 36,670 | 2,408,119 |
3,218,313 | ||
|
| Value ($) |
|
| |
Health Care 19.7% | ||
Biotechnology 5.5% | ||
Amgen, Inc.* | 29,635 | 1,901,086 |
Genentech, Inc.* | 106,350 | 5,789,694 |
7,690,780 | ||
Health Care Equipment & Supplies 4.5% | ||
Biomet, Inc. | 43,495 | 1,887,248 |
Medtronic, Inc. | 89,760 | 4,458,379 |
6,345,627 | ||
Health Care Providers & Services 6.5% | ||
Caremark Rx, Inc.* | 61,140 | 2,410,750 |
UnitedHealth Group, Inc. | 75,165 | 6,616,775 |
9,027,525 | ||
Pharmaceuticals 3.2% | ||
Eli Lilly & Co. | 13,115 | 744,276 |
Sanofi-Aventis (ADR) | 94,720 | 3,793,536 |
4,537,812 | ||
Industrials 12.4% | ||
Aerospace & Defense 0.7% | ||
Raytheon Co. | 26,435 | 1,026,471 |
Air Freight & Logistics 4.6% | ||
FedEx Corp. | 65,065 | 6,408,252 |
Commercial Services & Supplies 2.0% | ||
Apollo Group, Inc. "A"* | 34,060 | 2,748,982 |
Industrial Conglomerates 5.1% | ||
General Electric Co. | 99,335 | 3,625,728 |
Tyco International Ltd. | 100,045 | 3,575,608 |
7,201,336 | ||
Information Technology 24.4% | ||
Communications Equipment 5.1% | ||
Cisco Systems, Inc.* | 140,145 | 2,704,799 |
Motorola, Inc. | 256,810 | 4,417,132 |
7,121,931 | ||
Computers & Peripherals 4.1% | ||
Dell, Inc.* | 45,600 | 1,921,584 |
Lexmark International, Inc.* | 45,360 | 3,855,600 |
5,777,184 | ||
Electronic Equipment & Instruments 1.3% | ||
Samsung Electronics Co., Ltd. (GDR), 144A | 8,255 | 1,807,845 |
Internet Software & Services 3.7% | ||
Yahoo!, Inc.* | 137,530 | 5,182,130 |
Semiconductors & Semiconductor Equipment 4.9% | ||
Applied Materials, Inc.* | 79,615 | 1,361,416 |
Freescale Semiconductor, Inc. "B"* | 28,355 | 520,598 |
Texas Instruments, Inc. | 204,245 | 5,028,512 |
6,910,526 | ||
|
| Value ($) |
|
| |
Software 5.3% | ||
Intuit, Inc.* | 29,045 | 1,278,270 |
Microsoft Corp. | 229,260 | 6,123,535 |
7,401,805 | ||
Materials 1.8% | ||
Metals & Mining | ||
Rio Tinto PLC (ADR) | 21,085 | 2,513,543 |
Total Common Stocks (Cost $108,687,462) | 134,524,870 | |
| ||
|
| Value ($) |
|
| |
Cash Equivalents 4.2% | ||
Scudder Cash Management QP Trust, 2.24% (b) (Cost $5,926,269) | 5,926,269 | 5,926,269 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $114,613,731) (a) | 100.1 | 140,451,139 |
Other Assets and Liabilities, Net | (0.1) | (197,001) |
Net Assets | 100.0 | 140,254,138 |
Notes to SVS Janus Growth Opportunities Portfolio of Investments |
* Non-income producing security.
(a) The cost for federal income tax purposes was $115,485,699. At December 31, 2004, net unrealized appreciation for all securities based on tax cost was $24,965,440. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $26,327,500 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $1,362,060.
(b) Scudder Cash Management QP Trust is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
ADR: American Depositary Receipts
GDR: Global Depositary Receipts
144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registrations, normally to qualified institutional buyers.
The accompanying notes are an integral part of the financial statements.
Financial Statements |
|
Statement of Assets and Liabilities as of December 31, 2004 | |
Assets | |
Investments: Investments in securities, at value (cost $108,687,462) | $ 134,524,870 |
Investments in Scudder Cash Management QP Trust (cost $5,926,269) | 5,926,269 |
Total investments in securities, at value (cost $114,613,731) | 140,451,139 |
Receivable for Portfolio shares sold | 730 |
Dividends receivable | 86,876 |
Interest receivable | 9,917 |
Other assets | 4,402 |
Total assets | 140,553,064 |
Liabilities | |
Accrued management fee | 111,015 |
Payable for Portfolio shares redeemed | 97,087 |
Other accrued expenses and payables | 90,824 |
Total liabilities | 298,926 |
Net assets, at value | $ 140,254,138 |
Net Assets | |
Net assets consist of: Undistributed net investment income | 390,216 |
Net unrealized appreciation (depreciation) on investments | 25,837,408 |
Accumulated net realized gain (loss) | (94,273,346) |
Paid-in capital | 208,299,860 |
Net assets, at value | $ 140,254,138 |
Class A Net Asset Value, offering and redemption price per share ($131,904,867 ÷ 16,930,734 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 7.79 |
Class B Net Asset Value, offering and redemption price per share ($8,349,271 ÷ 1,081,562 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 7.72 |
Statement of Operations for the year ended December 31, 2004 | |
Investment Income | |
Income: Dividends (net of foreign taxes withheld of $22,429) | $ 1,777,664 |
Interest — Scudder Cash Management QP Trust | 62,780 |
Securities lending income, including income from Daily Assets Fund Institutional | 18,197 |
Total Income | 1,858,641 |
Expenses: Management fee | 1,285,655 |
Custodian and accounting fees | 74,542 |
Distribution service fees (Class B) | 17,186 |
Record keeping fees (Class B) | 9,344 |
Auditing | 50,258 |
Legal | 4,592 |
Trustees' fees and expenses | 5,629 |
Reports to shareholder | 6,741 |
Registration fees | 6,565 |
Other | 9,019 |
Total expenses, before expense reductions | 1,469,531 |
Expense reduction | (1,728) |
Total expenses, after expense reduction | 1,467,803 |
Net investment income (loss) | 390,838 |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from investments | 2,198,797 |
Net unrealized appreciation (depreciation) during the period on investments | 13,452,735 |
Net gain (loss) on investment transactions | 15,651,532 |
Net increase (decrease) in net assets resulting from operations | $ 16,042,370 |
The accompanying notes are an integral part of the financial statements.
|
Statement of Changes in Net Assets | ||
| Years Ended December 31, | |
Increase (Decrease) in Net Assets | 2004 | 2003 |
Operations: Net investment income (loss) | $ 390,838 | $ (226,725) |
Net realized gain (loss) on investment transactions | 2,198,797 | (16,015,858) |
Net unrealized appreciation (depreciation) on investment transactions during the period | 13,452,735 | 46,344,783 |
Net increase (decrease) in net assets resulting from operations | 16,042,370 | 30,102,200 |
Portfolio share transactions: Class A Proceeds from shares sold | 2,971,778 | 7,945,670 |
Cost of shares redeemed | (18,214,445) | (22,894,437) |
Net increase (decrease) in net assets from Class A share transactions | (15,242,667) | (14,948,767) |
Class B Proceeds from shares sold | 2,248,669 | 5,021,617 |
Cost of shares redeemed | (382,089) | (370,373) |
Net increase (decrease) in net assets from Class B share transactions | 1,866,580 | 4,651,244 |
Increase (decrease) in net assets | 2,666,283 | 19,804,677 |
Net assets at beginning of period | 137,587,855 | 117,783,178 |
Net assets at end of period (including undistributed net investment income and accumulated net investment loss of $390,216 and $622, respectively) | $ 140,254,138 | $ 137,587,855 |
Other Information | ||
Class A Shares outstanding at beginning of period | 19,085,611 | 21,572,540 |
Shares sold | 413,736 | 1,334,121 |
Shares redeemed | (2,568,613) | (3,821,050) |
Net increase (decrease) in Portfolio shares | (2,154,877) | (2,486,929) |
Shares outstanding at end of period | 16,930,734 | 19,085,611 |
Class B Shares outstanding at beginning of period | 812,791 | 31,870 |
Shares sold | 322,383 | 838,111 |
Shares redeemed | (53,612) | (57,190) |
Net increase (decrease) in Portfolio shares | 268,771 | 780,921 |
Shares outstanding at end of period | 1,081,562 | 812,791 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights |
|
Class A
Years Ended December 31, | 2004 | 2003 | 2002 | 2001 | 2000a |
Selected Per Share Data | |||||
Net asset value, beginning of period | $ 6.92 | $ 5.45 | $ 7.86 | $ 10.31 | $ 11.64 |
Income (loss) from investment operations: Net investment income (loss)b | .02 | (.01) | (.01) | (.03) | (.02) |
Net realized and unrealized gain (loss) on investment transactions | .85 | 1.48 | (2.40) | (2.42) | (1.31) |
Total from investment operations | .87 | 1.47 | (2.41) | (2.45) | (1.33) |
Net asset value, end of period | $ 7.79 | $ 6.92 | $ 5.45 | $ 7.86 | $ 10.31 |
Total Return (%) | 12.57 | 26.97 | (30.53) | (23.76) | (11.42)c |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | 132 | 132 | 118 | 164 | 139 |
Ratio of expenses before expense reductions (%) | 1.06 | 1.07 | 1.01 | 1.11 | 1.06 |
Ratio of expenses after expense reductions (%) | 1.06 | 1.07 | 1.01 | 1.10 | 1.01 |
Ratio of net investment income (loss) (%) | .31 | (.17) | (.10) | (.31) | (.20) |
Portfolio turnover rate (%) | 58 | 50 | 48 | 34 | 14 |
a On June 18, 2001, the Portfolio implemented a 1 for 10 reverse stock split. Share and per share information, for the period prior to December 31, 2001, have been restated to reflect the effect of the split. Shareholders received 1 share for every 10 shares owned and net asset value per share increased correspondingly.
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
Class B
Years Ended December 31, | 2004 | 2003 | 2002a |
Selected Per Share Data | |||
Net asset value, beginning of period | $ 6.88 | $ 5.44 | $ 5.87 |
Income (loss) from investment operations: Net investment income (loss)b | (.01) | (.04) | (.01) |
Net realized and unrealized gain (loss) on investment transactions | .85 | 1.48 | (.42) |
Total from investment operations | .84 | 1.44 | (.43) |
Net asset value, end of period | $ 7.72 | $ 6.88 | $ 5.44 |
Total Return (%) | 12.21 | 26.47 | (7.33)** |
Ratios to Average Net Assets and Supplemental Data | |||
Net assets, end of period ($ millions) | 8 | 6 | .2 |
Ratio of expenses (%) | 1.45 | 1.46 | 1.29* |
Ratio of net investment income (loss) (%) | (.08) | (.56) | (.49)* |
Portfolio turnover rate (%) | 58 | 50 | 48 |
a For the period July 1, 2002 (commencement of operations of Class B shares) to December 31, 2002.
b Based on average shares outstanding during the period.
* Annualized
** Not annualized
Performance Summary December 31, 2004 |
|
SVS MFS Strategic Value Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns.
The Portfolio is subject to stock market and equity risks, meaning stocks in the Portfolio may decline in value for extended periods of time due to the activities and financial prospects of individual companies, or due to general market and economic conditions. Please read this Portfolio's prospectus for specific details regarding its investments and risk profile.
The investment advisor has agreed to either limit, waive or reduce certain fees, temporarily for this Portfolio; see the prospectus for complete details. Without such limits, waivers or reductions, the performance figures for this Portfolio would be lower.
Growth of an Assumed $10,000 Investment in SVS MFS Strategic Value Portfolio from 5/1/2002 to 12/31/2004 | ||
[] SVS MFS Strategic Value Portfolio — Class A [] Russell 1000 Value Index | ||
![]() |
| Russell 1000 Value Index is an unmanaged index, which consists of those stocks in the Russell 1000 Index with lower price-to-book ratios and lower forecasted-growth values. Index returns assume reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
|
|
|
Comparative Results | |||
SVS MFS Strategic Value Portfolio |
| 1-Year | Life of Portfolio* |
Class A | Growth of $10,000 | $11,782 | $12,125 |
Average annual total return | 17.82% | 7.48% | |
Russell 1000 Value Index | Growth of $10,000 | $11,649 | $12,730 |
Average annual total return | 16.49% | 9.47% | |
SVS MFS Strategic Value Portfolio |
| 1-Year | Life of Class** |
Class B | Growth of $10,000 | $11,740 | $13,471 |
Average annual total return | 17.40% | 12.64% | |
Russell 1000 Value Index | Growth of $10,000 | $11,649 | $13,438 |
Average annual total return | 16.49% | 12.55% |
The growth of $10,000 is cumulative.
* The Portfolio commenced operations on May 1, 2002. Index returns begin April 30, 2002.
** The Portfolio commenced offering Class B shares on July 1, 2002. Index returns begin June 30, 2002.
Information About Your Portfolio's Expenses |
|
SVS MFS Strategic Value Portfolio
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent period, the Portfolio limited these expenses; had it not done so, expenses would have been higher. The tables are based on an investment of $1,000 made at the beginning of the six-month period ended December 31, 2004.
The tables illustrate your Portfolio's expenses in two ways:
Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment | ||
Actual Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,111.10 | $ 1,109.30 |
Expenses Paid per $1,000* | $ 6.06 | $ 7.95 |
Hypothetical 5% Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,019.47 | $ 1,017.67 |
Expenses Paid per $1,000* | $ 5.79 | $ 7.60 |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365.
Annualized Expense Ratios | Class A | Class B |
Scudder Variable Series II — SVS MFS Strategic Value Portfolio | 1.14% | 1.49% |
For more information, please refer to the Portfolio's prospectus.
Management Summary December 31, 2004 |
|
SVS MFS Strategic Value Portfolio
For stock investors, 2004 was a bumpy ride with a smooth finish. Improved corporate spending and earnings growth helped drive solid stock gains in 2004. The portfolio provided a total return of 17.82% (Class A shares, unadjusted for contract charges). This compares with a return of 16.49% over the same period for its benchmark, the Russell 1000 Value Index.
The portfolio's utilities and communications, materials, and energy sectors were the strongest contributors to relative performance. Within the utilities and telecommunications sector, AT&T Wireless Services* was the portfolio's strongest relative performer. Texas utility TXU* also provided strong returns. We have since sold these issues from the portfolio to lock in profits. Within the materials sector, packaging products company Owens-Illinois posted strong gains as did Brazilian mining company Companhia Vale Do Rio Doce (ADR). Oil service stocks Noble Corp., GlobalSantaFe Corp. and BJ Services Co. rallied with the energy sector as oil and natural gas prices rose to historical levels.
Stock selection within the leisure and retail sectors held back performance. In leisure, the portfolio's position in media giant Viacom, Inc. was the single biggest detractor. This declined in tandem with lower than anticipated advertising spending in the period. In retail, poor performance from Rite Aid Corp. was the primary detractor to performance during the period. Other individual issues that detracted from performance were pharmaceutical company Merck & Co., Inc., which suffered from a drug recall, and managed care company Tenet Healthcare Corp. Within the telecommunications area, Nortel Networks Corp.*, a global maker of telecommunications equipment, held back performance.
Kenneth J. Enright
Portfolio Manager
Massachusetts Financial Services Company, Subadvisor to the Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the portfolio or any variable life insurance policy or variable annuity contract for which the portfolio is an investment option. These charges and fees will reduce returns.
Returns during part or all of the periods shown reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns would have been lower.
Risk Considerations
The portfolio is subject to stock market and equity risks, meaning stocks in the portfolio may decline in value for extended periods of time due to the activities and financial prospects of individual companies, or due to general market and economic conditions. Please read this portfolio's prospectus for specific details regarding its investments and risk profile.
Russell 1000 Value Index is an unmanaged index which consists of those stocks in the Russell 1000 Index with lower price-to-book ratios and lower forecasted- growth values. Index returns assume the reinvestment of dividends and, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
* These securities were not held in the portfolio at the end of the reporting period.
Portfolio management market commentary is as of December 31, 2004, and may not come to pass. This information is subject to change at any time based on market and other conditions.
Portfolio Summary |
SVS MFS Strategic Value Portfolio
Asset Allocation (Excludes Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Common Stocks | 97% | 95% |
Cash Equivalents | 3% | 5% |
| 100% | 100% |
Sector Diversification (Excludes Cash Equivalents and Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Financials | 21% | 19% |
Health Care | 14% | 14% |
Consumer Discretionary | 14% | 14% |
Telecommunication Services | 12% | 14% |
Information Technology | 11% | 3% |
Energy | 8% | 13% |
Materials | 8% | 8% |
Industrials | 6% | 5% |
Consumer Staples | 4% | 5% |
Utilities | 2% | 5% |
| 100% | 100% |
Asset allocation and sector diversification are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 7. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Portfolio as of month end will be posted to scudder.com on the 15th of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio December 31, 2004 | ![]() | ![]() |
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SVS MFS Strategic Value Portfolio
| Shares | Value ($) |
|
| |
Common Stocks 98.0% | ||
Consumer Discretionary 13.9% | ||
Leisure Equipment & Products 1.3% | ||
Mattel, Inc. | 34,020 | 663,050 |
Media 9.9% | ||
Comcast Corp. "A"* | 49,210 | 1,616,056 |
Interpublic Group of Companies, Inc.* | 23,520 | 315,168 |
Viacom, Inc. "B" | 49,625 | 1,805,854 |
Walt Disney Co. | 40,180 | 1,117,004 |
4,854,082 | ||
Specialty Retail 2.7% | ||
Home Depot, Inc. | 13,100 | 559,894 |
The Gap, Inc. | 36,990 | 781,229 |
1,341,123 | ||
Consumer Staples 3.7% | ||
Beverages 0.9% | ||
PepsiCo, Inc. | 8,660 | 452,052 |
Food & Staples Retailing 1.0% | ||
Rite Aid Corp.* | 130,690 | 478,325 |
Food Products 1.8% | ||
General Mills, Inc. | 17,470 | 868,434 |
Energy 8.1% | ||
Energy Equipment & Services 6.7% | ||
BJ Services Co. | 10,940 | 509,148 |
Cooper Cameron Corp.* | 14,730 | 792,621 |
GlobalSantaFe Corp. | 32,330 | 1,070,446 |
Noble Corp.* | 18,860 | 938,097 |
3,310,312 | ||
Oil & Gas 1.4% | ||
Devon Energy Corp. | 17,460 | 679,543 |
Financials 20.7% | ||
Banks 3.4% | ||
Bank of America Corp. | 14,188 | 666,694 |
PNC Financial Services Group | 17,120 | 983,373 |
1,650,067 | ||
Capital Markets 4.6% | ||
Mellon Financial Corp. | 37,920 | 1,179,691 |
Merrill Lynch & Co., Inc. | 18,550 | 1,108,734 |
2,288,425 | ||
Consumer Finance 0.5% | ||
MBNA Corp. | 9,490 | 267,523 |
Diversified Financial Services 5.9% | ||
Freddie Mac | 15,940 | 1,174,778 |
JPMorgan Chase & Co. | 44,030 | 1,717,610 |
2,892,388 | ||
Insurance 6.3% | ||
Allstate Corp. | 22,500 | 1,163,700 |
Conseco, Inc.* | 54,760 | 1,092,462 |
| Shares | Value ($) |
|
| |
Hartford Financial Services Group, Inc. | 12,480 | 864,989 |
3,121,151 | ||
Health Care 14.3% | ||
Biotechnology 0.9% | ||
MedImmune, Inc.* | 15,760 | 427,253 |
Health Care Providers & Services 2.8% | ||
Apria Healthcare Group, Inc.* | 19,640 | 647,138 |
Tenet Healthcare Corp.* | 69,260 | 760,475 |
1,407,613 | ||
Pharmaceuticals 10.6% | ||
Abbott Laboratories | 16,180 | 754,797 |
Johnson & Johnson | 19,110 | 1,211,956 |
Merck & Co., Inc. | 54,330 | 1,746,166 |
Wyeth | 35,640 | 1,517,908 |
5,230,827 | ||
Industrials 5.7% | ||
Aerospace & Defense 2.6% | ||
Lockheed Martin Corp. | 22,980 | 1,276,539 |
Airlines 0.5% | ||
Southwest Airlines Co. | 16,480 | 268,294 |
Industrial Conglomerates 2.6% | ||
General Electric Co. | 32,490 | 1,185,885 |
Tyco International Ltd. | 2,020 | 72,195 |
1,258,080 | ||
Information Technology 10.6% | ||
Communications Equipment 6.5% | ||
Nokia Oyj (ADR) | 104,960 | 1,644,723 |
Nortel Networks Corp.* | 449,810 | 1,569,837 |
3,214,560 | ||
Software 4.1% | ||
Computer Associates International, Inc. | 25,820 | 801,969 |
Microsoft Corp. | 44,590 | 1,190,999 |
1,992,968 | ||
Materials 7.7% | ||
Chemicals 1.1% | ||
E.I. du Pont de Nemours & Co. | 11,490 | 563,585 |
Containers & Packaging 3.8% | ||
Owens-Illinois, Inc.* | 68,360 | 1,548,354 |
Smurfit-Stone Container Corp.* | 16,900 | 315,692 |
1,864,046 | ||
Metals & Mining 1.2% | ||
Companhia Vale do Rio Doce (ADR) | 19,740 | 572,657 |
Paper & Forest Products 1.6% | ||
Bowater, Inc. | 18,440 | 810,807 |
Telecommunication Services 11.5% | ||
Diversified Telecommunication Services 9.3% | ||
Sprint Corp. | 98,170 | 2,439,524 |
Verizon Communications, Inc. | 53,260 | 2,157,563 |
4,597,087 | ||
| Shares | Value ($) |
|
| |
Wireless Telecommunication Services 2.2% | ||
Vodafone Group PLC (ADR) | 38,479 | 1,053,555 |
Utilities 1.8% | ||
Multi-Utilities | ||
Calpine Corp.* (d) | 218,150 | 859,511 |
Total Common Stocks (Cost $42,406,825) | 48,263,857 | |
| ||
Securities Lending Collateral 1.8% | ||
Daily Assets Fund Institutional, 2.25% (c) (e) (Cost $900,000) | 900,000 | 900,000 |
| Shares | Value ($) |
|
| |
Cash Equivalents 3.1% | ||
Scudder Cash Management QP Trust, 2.24% (b) (Cost $1,510,711) | 1,510,711 | 1,510,711 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $44,817,536) (a) | 102.9 | 50,674,568 |
Other Assets and Liabilities, Net | (2.9) | (1,408,430) |
Net Assets | 100.0 | 49,266,138 |
Notes to SVS MFS Strategic Value Portfolio of Investments |
* Non-income producing security.
(a) The cost for federal income tax purposes was $44,925,927. At December 31, 2004, net unrealized appreciation for all securities based on tax cost was $5,748,641. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $6,420,135 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $671,494.
(b) Scudder Cash Management QP Trust is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
(c) Daily Assets Fund Institutional, an affiliated fund, is managed by Deutsche Asset Management, Inc. The rate shown is the annualized seven-day yield at period end.
(d) All or a portion of these securities were on loan (see Notes to Financials Statements). The value of all securities loaned at December 31, 2004 amounted to $709,200, which is 1.4% of total net assets.
(e) Represents collateral held in connection with securities lending.
ADR: American Depositary Receipt
The accompanying notes are an integral part of the financial statements.
Financial Statements |
|
Statement of Assets and Liabilities as of December 31, 2004 | |
Assets | |
Investments: Investments in securities, at value (cost $42,406,825) — including $709,200 of securities loaned | $ 48,263,857 |
Investment in Daily Assets Fund Institutional (cost $900,000)* | 900,000 |
Investment in Scudder Cash Management QP Trust (cost $1,510,711) | 1,510,711 |
Total investments in securities, at value (cost $44,817,536) | 50,674,568 |
Cash | 10,000 |
Receivable for investments sold | 23,482 |
Dividends receivable | 73,977 |
Interest receivable | 2,072 |
Receivable for Portfolio shares sold | 22,689 |
Due from Advisor | 9,753 |
Other assets | 1,471 |
Total assets | 50,818,012 |
Liabilities | |
Payable for investments purchased | 499,077 |
Payable upon return of securities loaned | 900,000 |
Payable for Portfolio shares redeemed | 106,169 |
Other accrued expenses and payables | 46,628 |
Total liabilities | 1,551,874 |
Net assets, at value | $ 49,266,138 |
Net Assets | |
Net assets consist of: Undistributed net investment income | 250,729 |
Net unrealized appreciation (depreciation) on investments | 5,857,032 |
Accumulated net realized gain (loss) | 2,256,840 |
Paid-in capital | 40,901,537 |
Net assets, at value | $ 49,266,138 |
Class A Net Asset Value, offering and redemption price per share ($15,264,785 ÷ 1,271,678 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 12.00 |
Class B Net Asset Value, offering and redemption price per share ($34,001,353 ÷ 2,837,941 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 11.98 |
* Represents collateral on securities loaned.
Statement of Operations for the year ended December 31, 2004 | |
Investment Income | |
Income: Dividends (net of foreign taxes withheld of $2,193) | $ 701,158 |
Interest — Scudder Cash Management QP Trust | 16,929 |
Securities lending income, including income from Daily Assets Fund Institutional | 5,687 |
Total Income | 723,774 |
Expenses: Management fee | 313,713 |
Custodian and accounting fees | 100,482 |
Distribution service fees (Class B) | 59,488 |
Record keeping fees (Class B) | 30,143 |
Auditing | 38,625 |
Legal | 13,508 |
Trustees' fees and expenses | 691 |
Other | 1,536 |
Total expenses, before expense reductions | 558,186 |
Expense reductions | (90,177) |
Total expenses, after expense reductions | 468,009 |
Net investment income (loss) | 255,765 |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from: Investments | 2,454,847 |
Net unrealized appreciation (depreciation) during the period on investments | 3,679,166 |
Net gain (loss) on investment transactions | 6,134,013 |
Net increase (decrease) in net assets resulting from operations | $ 6,389,778 |
The accompanying notes are an integral part of the financial statements.
|
Statement of Changes in Net Assets | ||
| Years Ended December 31, | |
Increase (Decrease) in Net Assets | 2004 | 2003 |
Operations: Net investment income (loss) | $ 255,765 | $ 49,544 |
Net realized gain (loss) | 2,454,847 | 173,186 |
Net unrealized appreciation (depreciation) on investment transactions during the period | 3,679,166 | 2,553,196 |
Net increase (decrease) in net assets resulting from operations | 6,389,778 | 2,775,926 |
Distributions to shareholders from: Net investment income: Class A | (35,768) | (20,827) |
Class B | (15,246) | (4,093) |
Net realized gains: Class A | (4,650) | — |
Class B | (10,656) | — |
Portfolio share transactions: Class A Proceeds from shares sold | 7,917,703 | 1,854,390 |
Reinvestment of distributions | 40,418 | 20,827 |
Cost of shares redeemed | (1,562,312) | (694,321) |
Net increase (decrease) in net assets from Class A share transactions | 6,395,809 | 1,180,896 |
Class B Proceeds from shares sold | 18,488,884 | 10,810,720 |
Reinvestment of distributions | 25,902 | 4,093 |
Cost of shares redeemed | (1,646,414) | (26,887) |
Net increase (decrease) in net assets from Class B share transactions | 16,868,372 | 10,787,926 |
Increase (decrease) in net assets | 29,587,639 | 14,719,828 |
Net assets at beginning of period | 19,678,499 | 4,958,671 |
Net assets at end of period (including undistributed net investment income of $250,729 and $45,978, respectively) | $ 49,266,138 | $ 19,678,499 |
Other Information | ||
Class A Shares outstanding at beginning of period | 688,664 | 568,433 |
Shares sold | 725,099 | 201,550 |
Shares issued to shareholders in reinvestment of distributions | 3,864 | 2,726 |
Shares redeemed | (145,949) | (84,045) |
Net increase in Portfolio shares | 583,014 | 120,231 |
Shares outstanding at end of period | 1,271,678 | 688,664 |
Class B Shares outstanding at beginning of period | 1,236,034 | 42,038 |
Shares sold | 1,749,677 | 1,196,368 |
Shares issued to shareholders in reinvestment of distributions | 2,474 | 536 |
Shares redeemed | (150,244) | (2,908) |
Net increase in Portfolio shares | 1,601,907 | 1,193,996 |
Shares outstanding at end of period | 2,837,941 | 1,236,034 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights |
|
Class A
Year Ended December 31, | 2004 | 2003 | 2002a |
Selected Per Share Data | |||
Net asset value, beginning of period | $ 10.24 | $ 8.12 | $ 10.00 |
Income (loss) from investment operations: Net investment income (loss)b | .11 | .06 | .05 |
Net realized and unrealized gain (loss) on investment transactions | 1.71 | 2.10 | (1.93) |
Total from investment operations | 1.82 | 2.16 | (1.88) |
Less distributions from: Net investment income | (.05) | (.04) | — |
Net realized gains | (.01) | — | — |
Total distributions | (.06) | (.04) | — |
Net asset value, end of period | $ 12.00 | $ 10.24 | $ 8.12 |
Total Return (%)c | 17.82 | 26.74 | (18.80)** |
Ratios to Average Net Assets and Supplemental Data | |||
Net assets, end of period ($ millions) | 15 | 7 | 5 |
Ratio of expenses before expense reductions (%) | 1.42 | 1.93 | 2.71* |
Ratio of expenses after expense reductions (%) | 1.14 | 1.15 | 1.15* |
Ratio of net investment income (loss) (%) | 1.05 | .67 | .82* |
Portfolio turnover rate (%) | 54 | 40 | 7 |
a For the period from May 1, 2002 (commencement of operations) to December 31, 2002.
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
* Annualized ** Not annualized
Class B
Year Ended December 31, | 2004 | 2003 | 2002a |
Selected Per Share Data | |||
Net asset value, beginning of period | $ 10.22 | $ 8.11 | $ 8.93 |
Income (loss) from investment operations: Net investment income (loss)b | .07 | .02 | .04 |
Net realized and unrealized gain (loss) on investment transactions | 1.71 | 2.11 | (.86) |
Total from investment operations | 1.78 | 2.13 | (.82) |
Less distributions from: Net investment income | (.01) | (.02) | — |
Net realized gains | (.01) | — | — |
Total distributions | (.02) | (.02) | — |
Net asset value, end of period | $ 11.98 | $ 10.22 | $ 8.11 |
Total Return (%)c | 17.40 | 26.35 | (9.18)** |
Ratios to Average Net Assets and Supplemental Data | |||
Net assets, end of period ($ millions) | 34 | 13 | .3 |
Ratio of expenses before expense reductions (%) | 1.79 | 2.32 | 2.96* |
Ratio of expenses after expense reductions (%) | 1.52 | 1.54 | 1.40* |
Ratio of net investment income (loss) (%) | .67 | .28 | .87* |
Portfolio turnover rate (%) | 54 | 40 | 7 |
a For the period from July 1, 2002 (commencement of operations of Class B shares) to December 31, 2002.
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
* Annualized ** Not annualized
Performance Summary December 31, 2004 |
|
SVS Oak Strategic Equity Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns.
The Portfolio may concentrate investments in specific sectors, which creates special risk considerations. Please read this Portfolio's prospectus for specific details regarding its investments and risk profile.
Growth of an Assumed $10,000 Investment in SVS Oak Strategic Equity Portfolio from 5/1/2001 to 12/31/2004 | ||
[] SVS Oak Strategic Equity Portfolio — Class A [] Russell 1000 Growth Index | ||
![]() |
| The Russell 1000 Growth Index is an unmanaged index which consists of those stocks in the Russell 1000 Index with higher price-to-book ratios and higher forecasted growth values. Index returns assume reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
|
|
Comparative Results | ||||
SVS Oak Strategic Equity Portfolio |
| 1-Year | 3-Year | Life of Portfolio* |
Class A | Growth of $10,000 | $10,131 | $9,145 | $6,950 |
Average annual total return | 1.31% | -2.94% | -9.44% | |
Russell 1000 Growth Index | Growth of $10,000 | $10,630 | $9,946 | $8,883 |
Average annual total return | 6.30% | -.18% | -3.18% | |
SVS Oak Strategic Equity Portfolio |
|
| 1-Year | Life of Class** |
Class B | Growth of $10,000 |
| $10,088 | $13,671 |
Average annual total return |
| .88% | 13.31% | |
Russell 1000 Growth Index | Growth of $10,000 |
| $10,630 | $12,555 |
Average annual total return |
| 6.30% | 9.53% |
The growth of $10,000 is cumulative.
* The Portfolio commenced operations on May 1, 2001. Index returns begin April 30, 2001. Total returns would have been lower for the 3-Year Life of Portfolio period for Class A shares if the Portfolio's expenses were not maintained.
** The Portfolio commenced offering Class B shares on July 1, 2002. Index returns begin June 30, 2002.
Information About Your Portfolio's Expenses |
|
SVS Oak Strategic Equity Portfolio
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent six-month period, the Portfolio limited these expenses; had it not done so, expenses would have been higher. The tables are based on an investment of $1,000 made at the beginning of the six-month period ended December 31, 2004.
The tables illustrate your Portfolio's expenses in two ways:
Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2004 | ||
Actual Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,019.10 | $ 1,016.20 |
Expenses Paid per $1,000* | $ 5.77 | $ 7.67 |
Hypothetical 5% Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,019.49 | $ 1,017.59 |
Expenses Paid per $1,000* | $ 5.77 | $ 7.68 |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365.
Annualized Expense Ratios | Class A | Class B |
Scudder Variable Series II — SVS Oak Strategic Equity Portfolio | 1.13% | 1.51% |
For more information, please refer to the Portfolio's prospectus.
Management Summary December 31, 2004 |
|
SVS Oak Strategic Equity Portfolio
Whereas the portfolio returned 1.31% (Class A shares, unadjusted for sales charges), its benchmark, the Russell 1000 Growth Index, returned 6.30% for the 12-month period ended December 31, 2004. The portfolio underperformed in 2004 due to its lack of exposure to the energy, materials and industrial sectors. These sectors benefited from the sharp rise in commodity prices that typically occurs in the early stages of an economic recovery. Oak Associates does not manage the portfolio in relationship to a benchmark and, therefore, did not have exposure to these groups. Oak has avoided these sectors as we believe their performance is tied to the short-term reinflation of commodities — which is inconsistent with our three-to-five year investment time horizon.
The relative performance disparity was also exacerbated by the portfolio's overweight in information technology compared with the benchmark Russell 1000 Growth Index. Within information technology, semiconductor stocks in particular weighed on performance as companies such as PMC-Sierra, Intersil and Xilinx* suffered from inventory surplus concerns following a robust 2003. Storage software vendor Veritas Software* also hampered performance after the company reported weak second-quarter sales during the third quarter. This announcement was not well received following recent management turnover in the company and concerns regarding management's credibility. Veritas was ultimately sold from the portfolio.
Despite being underweight in health care compared with the benchmark, weakness in Cardinal Health* caused the portfolio's health care weighting to underperform the benchmark. Cardinal, a drug distribution company, has struggled not only with meeting earnings forecasts, but also with the transition to a fee-for-service business model. Pfizer, Inc., along with other large pharmaceutical companies, suffered when the Food and Drug Administration raised a red flag on the Cox-2 class of arthritis drugs.
On a positive note, on-line auctioneer eBay, Inc. helped offset the weaknesses in technology and health care by propelling the portfolio's consumer discretionary sector performance significantly higher than that of the benchmark.
James D. Oelschlager
Portfolio Manager
Oak Associates, Ltd., Subadvisor to the Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the portfolio or any variable life insurance policy or variable annuity contract for which the portfolio is an investment option. These charges and fees will reduce returns.
Risk Considerations
The portfolio may concentrate investments in specific sectors, which creates special risk considerations. Please read this portfolio's prospectus for specific details regarding its investments and risk profile.
The Russell 1000 Growth Index is an unmanaged, capitalization-weighted index which consists of those securities in the Russell 1000 Index with higher price-to-book ratios and higher forecasted growth values. Index returns assume reinvestment of all distributions and do not reflect fees or expenses. It is not possible to invest directly into an index.
* This security was not held in the portfolio at the end of the reporting period.
Portfolio management market commentary is as of December 31, 2004, and may not come to pass. This information is subject to change at any time based on market and other conditions.
Portfolio Summary |
SVS Oak Strategic Equity Portfolio
Asset Allocation (Excludes Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Common Stocks | 99% | 97% |
Cash Equivalents | 1% | 3% |
| 100% | 100% |
Sector Diversification (Excludes Cash Equivalents and Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Information Technology | 56% | 56% |
Health Care | 15% | 18% |
Financials | 14% | 21% |
Consumer Discretionary | 9% | 5% |
Industrials | 6% | — |
| 100% | 100% |
Asset allocation and sector diversification are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 17. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Portfolio as of month end will be posted to scudder.com on the 15th of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio December 31, 2004 | ![]() |
|
SVS Oak Strategic Equity Portfolio
|
| Value ($) |
|
| |
Common Stocks 99.5% | ||
Consumer Discretionary 9.1% | ||
Household Durables 2.2% | ||
Harman International Industries, Inc. | 16,000 | 2,032,000 |
Internet & Catalog Retail 6.9% | ||
eBay, Inc.* | 55,500 | 6,453,540 |
Financials 14.2% | ||
Capital Markets 5.8% | ||
Charles Schwab Corp. | 451,400 | 5,398,744 |
Consumer Finance 4.5% | ||
MBNA Corp. | 147,300 | 4,152,387 |
Diversified Financial Services 3.9% | ||
Citigroup, Inc. | 74,000 | 3,565,320 |
Health Care 15.0% | ||
Biotechnology 6.6% | ||
Affymetrix, Inc.* (e) | 57,000 | 2,083,350 |
Amgen, Inc.* | 63,000 | 4,041,450 |
6,124,800 | ||
Health Care Equipment & Supplies 4.8% | ||
Medtronic, Inc. | 89,600 | 4,450,432 |
Pharmaceuticals 3.6% | ||
Pfizer, Inc. | 123,100 | 3,310,159 |
Industrials 5.8% | ||
Air Freight & Logistics 4.0% | ||
United Parcel Service, Inc. "B" | 43,000 | 3,674,780 |
Electrical Equipment 1.8% | ||
Rockwell Automation, Inc. | 34,000 | 1,684,700 |
Information Technology 55.4% | ||
Communications Equipment 11.6% | ||
Cisco Systems, Inc.* | 174,600 | 3,369,780 |
Juniper Networks, Inc.* | 145,300 | 3,950,707 |
QUALCOMM, Inc.* | 80,000 | 3,392,000 |
10,712,487 | ||
|
| Value ($) |
|
| |
Computers & Peripherals 12.0% | ||
Avid Technology, Inc.* | 33,000 | 2,037,750 |
Dell, Inc.* | 111,600 | 4,702,824 |
EMC Corp.* | 292,600 | 4,350,962 |
11,091,536 | ||
Electronic Equipment & Instruments 2.3% | ||
Symbol Technologies, Inc. | 124,000 | 2,145,200 |
IT Consulting & Services 5.1% | ||
Cognizant Technology Solutions Corp. "A"* | 110,600 | 4,681,698 |
Semiconductors & Semiconductor Equipment 11.8% | ||
Applied Materials, Inc.* | 206,700 | 3,534,570 |
Linear Technology Corp. | 102,400 | 3,969,024 |
Maxim Integrated Products, Inc. | 81,650 | 3,461,143 |
10,964,737 | ||
Software 12.6% | ||
Electronic Arts, Inc.* | 70,000 | 4,317,600 |
Microsoft Corp. | 157,300 | 4,201,484 |
Symantec Corp.* | 122,000 | 3,142,720 |
11,661,804 | ||
Total Common Stocks (Cost $79,704,014) | 92,104,324 | |
| ||
Securities Lending Collateral 2.1% | ||
Daily Assets Fund Institutional, 2.25% (c) (d) (Cost $1,936,575) | 1,936,575 | 1,936,575 |
| ||
Cash Equivalents 0.7% | ||
Scudder Cash Management QP Trust, 2.24% (b) (Cost $621,021) | 621,021 | 621,021 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $82,261,610) (a) | 102.3 | 94,661,920 |
Other Assets and Liabilities, Net | (2.3) | (2,150,741) |
Net Assets | 100.0 | 92,511,179 |
Notes to SVS Oak Strategic Equity Portfolio of Investments |
* Non-income producing security.
(a) The cost for federal income tax purposes was $82,256,010. At December 31, 2004, net unrealized appreciation for all securities based on tax cost was $12,405,910. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $14,706,981 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $2,301,071.
(b) Scudder Cash Management QP Trust is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
(c) Daily Assets Fund Institutional, an affiliated fund, is managed by Deutsche Asset Management, Inc. The rate shown is the annualized seven-day yield at period end.
(d) Represents collateral held in connection with securities lending.
(e) All or a portion of these securities were on loan (see Notes to Financial Statements). The value of all securities loaned at December 31, 2004 amounted to $1,875,015, which is 2.0% of net assets.
The accompanying notes are an integral part of the financial statements.
Financial Statements |
|
Statement of Assets and Liabilities | |
Assets | |
Investments: Investments in securities, at value (cost $79,704,014) — including $1,875,015 of securities loaned | $ 92,104,324 |
Investment in Daily Assets Fund Institutional (cost $1,936,575)* | 1,936,575 |
Investment in Scudder Cash Management QP Trust (cost $621,021) | 621,021 |
Total investments in securities, at value (cost $82,261,610) | 94,661,920 |
Receivable for investments sold | 3,976 |
Dividends receivable | 35,316 |
Interest receivable | 1,622 |
Other assets | 3,746 |
Total assets | 94,706,580 |
Liabilities | |
Payable for Portfolio shares redeemed | 109,757 |
Payable upon return of securities loaned | 1,936,575 |
Accrued management fee | 77,588 |
Other accrued expenses and payables | 71,481 |
Total liabilities | 2,195,401 |
Net assets, at value | $ 92,511,179 |
Net Assets | |
Net assets consist of: Undistributed net investment income | 3,260 |
Net unrealized appreciation (depreciation) on investments | 12,400,310 |
Accumulated net realized gain (loss) | (10,928,202) |
Paid-in capital | 91,035,811 |
Net assets, at value | $ 92,511,179 |
Class A Net Asset Value, offering and redemption price per share ($70,860,416 ÷ 10,189,476 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 6.95 |
Class B Net Asset Value, offering and redemption price per share ($21,650,763 ÷ 3,140,946 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 6.89 |
* Represents collateral on securities loaned.
Statement of Operations | |
Investment Income | |
Income: Dividends | $ 1,030,386 |
Interest — Scudder Cash Management QP Trust | 30,418 |
Securities lending income, including income from Daily Assets Fund Institutional | 4,504 |
Total Income | 1,065,308 |
Expenses: Management fee | 854,061 |
Custodian and accounting fees | 64,244 |
Distribution service fees (Class B) | 42,282 |
Record keeping fees (Class B) | 21,848 |
Auditing | 44,604 |
Legal | 14,366 |
Trustees' fees and expenses | 1,596 |
Reports to shareholders | 9,176 |
Other | 5,381 |
Total expenses, before expense reductions | 1,057,558 |
Expense reductions | (1,365) |
Total expenses, after expense reductions | 1,056,193 |
Net investment income (loss) | 9,115 |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from investments | (429,310) |
Net unrealized appreciation (depreciation) during the period on investments | 935,994 |
Net gain (loss) on investment transactions | 506,684 |
Net increase (decrease) in net assets resulting from operations | $ 515,799 |
The accompanying notes are an integral part of the financial statements.
|
Statement of Changes in Net Assets | ||
Increase (Decrease) in Net Assets | Years Ended December 31, | |
2004 | 2003 | |
Operations: Net investment income (loss) | $ 9,115 | $ (303,416) |
Net realized gain (loss) on investment transactions | (429,310) | (4,050,440) |
Net unrealized appreciation (depreciation) on investment transactions during the period | 935,994 | 27,866,046 |
Net increase (decrease) in net assets resulting from operations | 515,799 | 23,512,190 |
Portfolio share transactions: Class A Proceeds from shares sold | 11,773,909 | 23,109,017 |
Cost of shares redeemed | (16,798,283) | (9,960,954) |
Net increase (decrease) in net assets from Class A share transactions | (5,024,374) | 13,148,063 |
Class B Proceeds from shares sold | 12,325,908 | 8,766,882 |
Cost of shares redeemed | (1,539,908) | (230,435) |
Net increase (decrease) in net assets from Class B share transactions | 10,786,000 | 8,536,447 |
Increase (decrease) in net assets | 6,277,425 | 45,196,700 |
Net assets at beginning of period | 86,233,754 | 41,037,054 |
Net assets at end of period (including undistributed net investment income and accumulated net investment loss of $3,260 and $255, respectively) | $ 92,511,179 | $ 86,233,754 |
Other Information | ||
Class A Shares outstanding at beginning of period | 11,043,224 | 8,877,415 |
Shares sold | 1,718,999 | 3,930,253 |
Shares redeemed | (2,572,747) | (1,764,444) |
Net increase (decrease) in Portfolio shares | (853,748) | 2,165,809 |
Shares outstanding at end of period | 10,189,476 | 11,043,224 |
Class B Shares outstanding at beginning of period | 1,533,571 | 77,050 |
Shares sold | 1,851,499 | 1,494,172 |
Shares redeemed | (244,124) | (37,651) |
Net increase (decrease) in Portfolio shares | 1,607,375 | 1,456,521 |
Shares outstanding at end of period | 3,140,946 | 1,533,571 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights |
|
Class A
Years Ended December 31, | 2004 | 2003 | 2002 | 2001a |
Selected Per Share Data | ||||
Net asset value, beginning of period | $ 6.86 | $ 4.58 | $ 7.60 | $ 10.00 |
Income (loss) from investment operations: Net investment income (loss)b | .01 | (.03) | (.02) | (.02) |
Net realized and unrealized gain (loss) on investment transactions | .08 | 2.31 | (3.00) | (2.38) |
Total from investment operations | .09 | 2.28 | (3.02) | (2.40) |
Net asset value, end of period | $ 6.95 | $ 6.86 | $ 4.58 | $ 7.60 |
Total Return (%) | 1.31 | 49.78 | (39.74) | (24.00)c** |
Ratios to Average Net Assets and Supplemental Data | ||||
Net assets, end of period ($ millions) | 71 | 76 | 41 | 44 |
Ratio of expenses before expense reductions (%) | 1.10 | 1.13 | .96 | 1.44* |
Ratio of expenses after expense reductions (%) | 1.10 | 1.13 | .96 | 1.15* |
Ratio of net investment income (loss) (%) | .08 | (.48) | (.30) | (.43)* |
Portfolio turnover rate (%) | 39 | 6 | 16 | 3* |
a For the period from May 1, 2001 (commencement of operations) to December 31, 2001.
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
Class B
Years Ended December 31, | 2004 | 2003 | 2002a |
Selected Per Share Data | |||
Net asset value, beginning of period | $ 6.83 | $ 4.58 | $ 5.04 |
Income (loss) from investment operations: Net investment income (loss)b | (.02) | (.06) | (.02) |
Net realized and unrealized gain (loss) on investment transactions | .08 | 2.31 | (.44) |
Total from investment operations | .06 | 2.25 | (.46) |
Net asset value, end of period | $ 6.89 | $ 6.83 | $ 4.58 |
Total Return (%) | .88 | 49.13 | (9.13)** |
Ratios to Average Net Assets and Supplemental Data | |||
Net assets, end of period ($ millions) | 22 | 10 | .4 |
Ratio of expenses (%) | 1.49 | 1.52 | 1.21* |
Ratio of net investment income (loss) (%) | (.20) | (.87) | (.68)* |
Portfolio turnover rate (%) | 39 | 6 | 16 |
a For the period July 1, 2002 (commencement of operations of Class B shares) to December 31, 2002.
b Based on average shares outstanding during the period.
* Annualized
** Not annualized
Performance Summary December 31, 2004 |
|
SVS Turner Mid Cap Growth Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less then their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns.
Stocks of medium-sized companies involve greater than securities of larger, more-established companies risk, as they often have limited product lines, markets or financial resources and may be subject to more erratic and abrupt market movements. Please read this Portfolio's prospectus for specific details regarding its investments and risk profile.
Growth of an Assumed $10,000 Investment in SVS Turner Mid Cap Growth Portfolio from 5/1/2001 to 12/31/2004 | ||
[] SVS Turner Mid Cap Growth Portfolio — Class A [] Russell Midcap Growth Index | ||
![]() |
| Russell Midcap Growth Index is an unmanaged index composed of common stocks of midcap companies with higher price-to-book ratios and higher forecasted growth values. Index returns assume reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
|
|
|
Comparative Results | ||||
SVS Turner Mid Cap Growth Portfolio |
| 1-Year | 3-Year | Life of Portfolio* |
Class A | Growth of $10,000 | $11,104 | $11,166 | $9,860 |
Average annual total return | 11.04% | 3.75% | -.38% | |
Russell Midcap Growth Index | Growth of $10,000 | $11,548 | $11,964 | $10,930 |
Average annual total return | 15.48% | 6.16% | 2.45% | |
SVS Turner Mid Cap Growth Portfolio |
|
| 1-Year | Life of Class** |
Class B | Growth of $10,000 |
| $11,063 | $14,818 |
Average annual total return |
| 10.63% | 17.02% | |
Russell Midcap Growth Index | Growth of $10,000 |
| $11,548 | $14,900 |
Average annual total return |
| 15.48% | 17.29% |
The growth of $10,000 is cumulative.
* The Portfolio commenced operations on May 1, 2001. Index returns begin April 30, 2001. Total returns would have been lower for the 3-Year and Life of Portfolio period for Class A shares if the Portfolio's expenses were not maintained.
** The Portfolio commenced offering Class B shares on July 1, 2002. Index returns begin June 30, 2002.
Information About Your Portfolio's Expenses |
|
SVS Turner Mid Cap Growth Portfolio
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. The tables are based on an investment of $1,000 made at the beginning of the six-month period ended December 31, 2004.
The tables illustrate your Portfolio's expenses in two ways:
Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2004 | ||
Actual Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,081.10 | $ 1,079.50 |
Expenses Paid per $1,000* | $ 5.67 | $ 7.52 |
Hypothetical 5% Portfolio Return | Class A | Class B |
Beginning Account Value 7/1/04 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 12/31/04 | $ 1,019.75 | $ 1,017.97 |
Expenses Paid per $1,000* | $ 5.50 | $ 7.30 |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365.
Annualized Expense Ratios | Class A | Class B |
Scudder Variable Series II — SVS Turner Mid Cap Growth Portfolio | 1.08% | 1.43% |
For more information, please refer to the Portfolio's prospectus.
Management Summary December 31, 2004 |
|
SVS Turner Mid Cap Growth Portfolio
For the 12-month period ended December 31, 2004, the portfolio recorded a gain of 11.04% (Class A shares, unadjusted for contract charges), versus the 15.48% gain posted by the Russell Midcap Growth Index. Four of the portfolio's 10 sector positions beat their corresponding index sectors. Contributing the most to performance were growth-oriented holdings in the technology sector. Stocks that added value included VeriSign, Inc. and Monster Worldwide, Inc. The portfolio's holdings in the health care sector detracted the most from performance.
The stock market ended the period with a strong finishing kick. We think much of the gains for 2004 can be credited to better-than-expected earnings. Also driving results was a positive change in investor psychology. Early in the year, investors were notably fretful about several issues: the global war on terror, rising oil prices, the Federal Reserve Board's hiking of short-term interest rates, the presidential campaign and mixed economic signals, among others. However, as oil prices stabilized, as the Fed's five rate hikes proved temperate, as the US election proceeded with few snags and as economic news on balance remained favorable, bearishness gradually morphed into bullishness, and money flowed into stocks.
We think that a combination of moderate economic growth, low inflation, modest interest rates, reasonable equity valuations, corporate America's cash hoard of $1 trillion available for acquisitions and share buybacks, and steadily rising corporate profits should benefit the stock market in 2005.
Christopher K. McHugh
William C. McVail
Robert E. Turner
Co-Managers
Turner Investment Partners, Inc., Subadvisor to the Portfolio
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the product's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the portfolio or any variable life insurance policy or variable annuity contract for which the portfolio is an investment option. These charges and fees will reduce returns.
Risk Considerations
Stocks of medium-sized companies involve greater risks than securities of larger, more-established companies, as they often have limited product lines, markets or financial resources and may be subject to more erratic and abrupt market movements. Please read this portfolio's prospectus for specific details regarding its investments and risk profile.
Russell Midcap Growth Index is an unmanaged index composed of common stocks of midcap companies with higher price-to-book ratios and higher forecasted growth values. Index returns assume reinvested dividends and, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
Portfolio management market commentary is as of December 31, 2004, and may not come to pass. This information is subject to change at any time based on market and other conditions.
Portfolio Summary |
SVS Turner Mid Cap Growth Portfolio
Asset Allocation (Excludes Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Common Stocks | 99% | 97% |
Cash Equivalents | 1% | 3% |
| 100% | 100% |
Sector Diversification (Excludes Cash Equivalents and Securities Lending Collateral) | 12/31/04 | 12/31/03 |
| ||
Information Technology | 31% | 33% |
Health Care | 19% | 20% |
Consumer Discretionary | 18% | 16% |
Industrials | 11% | 11% |
Financials | 9% | 8% |
Energy | 5% | 3% |
Materials | 3% | 4% |
Telecommunication Services | 2% | 2% |
Consumer Staples | 2% | 2% |
Utilities | — | 1% |
| 100% | 100% |
Asset allocation and sector diversification are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 26. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Portfolio as of month end will be posted to scudder.com on the 15th of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio December 31, 2004 | ![]() | ![]() |
|
SVS Turner Mid Cap Growth Portfolio
|
| Value ($) |
|
| |
Common Stocks 99.5% | ||
Consumer Discretionary 18.0% | ||
Hotels Restaurants & Leisure 8.4% | ||
Marriott International, Inc. "A" | 35,390 | 2,228,862 |
MGM MIRAGE* | 19,610 | 1,426,431 |
P.F. Chang's China Bistro, Inc.* (e) | 12,310 | 693,669 |
Scientific Games Corp. "A"* | 37,170 | 886,133 |
Starwood Hotels & Resorts Worldwide, Inc. | 19,710 | 1,151,064 |
Station Casinos, Inc. | 23,840 | 1,303,571 |
WMS Industries, Inc.* (e) | 30,940 | 1,037,728 |
Wynn Resorts Ltd.* (e) | 15,670 | 1,048,636 |
YUM! Brands, Inc. | 42,970 | 2,027,325 |
11,803,419 | ||
Household Durables 0.5% | ||
Harman International Industries, Inc. | 5,370 | 681,990 |
Internet & Catalog Retail 0.5% | ||
Overstock.com, Inc.* (e) | 10,910 | 752,790 |
Media 1.1% | ||
DreamWorks Animation SKG, Inc. "A"* | 23,900 | 896,489 |
Sirius Satellite Radio, Inc.* (e) | 79,900 | 611,235 |
1,507,724 | ||
Specialty Retail 5.6% | ||
American Eagle Outfitters, Inc. | 15,960 | 751,716 |
Bed Bath & Beyond, Inc.* | 48,010 | 1,912,238 |
Chico's FAS, Inc.* | 36,720 | 1,671,862 |
RadioShack Corp. | 32,080 | 1,054,790 |
Urban Outfitters, Inc.* | 23,530 | 1,044,732 |
Williams-Sonoma, Inc.* | 42,350 | 1,483,944 |
7,919,282 | ||
Textiles, Apparel & Luxury Goods 1.9% | ||
Coach, Inc.* | 48,860 | 2,755,704 |
Consumer Staples 2.4% | ||
Beverages 0.5% | ||
Constellation Brands, Inc. "A"* | 14,860 | 691,139 |
Food & Staples Retailing 0.5% | ||
Whole Foods Market, Inc. | 7,630 | 727,520 |
Food Products 0.7% | ||
McCormick & Co, Inc. | 24,620 | 950,332 |
Household Products 0.7% | ||
Clorox Co. | 16,690 | 983,542 |
Energy 4.7% | ||
Energy Equipment & Services 2.2% | ||
BJ Services Co. | 15,180 | 706,477 |
Grant Prideco, Inc.* | 31,470 | 630,973 |
Smith International, Inc.* | 12,960 | 705,154 |
Transocean, Inc.* | 25,340 | 1,074,163 |
3,116,767 | ||
|
| Value ($) |
|
| |
Oil & Gas 2.5% | ||
Ashland, Inc. | 14,710 | 858,770 |
Range Resources Corp. (e) | 47,570 | 973,282 |
Ultra Petroleum Corp.* | 7,890 | 379,746 |
XTO Energy, Inc. | 36,942 | 1,307,008 |
3,518,806 | ||
Financials 8.6% | ||
Banks 2.5% | ||
City National Corp. | 11,300 | 798,345 |
Silicon Valley Bancshares* (e) | 17,100 | 766,422 |
Sovereign Bancorp, Inc. | 42,950 | 968,523 |
UCBH Holdings, Inc. | 23,120 | 1,059,358 |
3,592,648 | ||
Capital Markets 4.0% | ||
Bear Stearns Companies, Inc. | 6,220 | 636,368 |
E*TRADE Financial Corp.* | 116,650 | 1,743,917 |
Northern Trust Corp. | 17,360 | 843,349 |
SEI Investments Co. | 14,490 | 607,566 |
T. Rowe Price Group, Inc. | 28,220 | 1,755,284 |
5,586,484 | ||
Diversified Financial Services 2.1% | ||
Affiliated Managers Group, Inc.* (e) | 18,824 | 1,275,138 |
Ameritrade Holding Corp.* | 55,350 | 787,077 |
Doral Financial Corp. | 17,580 | 865,815 |
2,928,030 | ||
Health Care 19.0% | ||
Biotechnology 3.0% | ||
Eyetech Pharmaceuticals, Inc.* (e) | 15,800 | 718,900 |
Genzyme Corp.* | 27,950 | 1,623,057 |
MedImmune, Inc.* | 25,730 | 697,540 |
Neurocrine Biosciences, Inc.* (e) | 23,520 | 1,159,536 |
4,199,033 | ||
Health Care Equipment & Supplies 8.2% | ||
Bausch & Lomb, Inc. | 23,370 | 1,506,430 |
Biomet, Inc. | 31,610 | 1,371,558 |
C.R. Bard, Inc. | 31,700 | 2,028,166 |
Cooper Companies, Inc. (e) | 14,930 | 1,053,909 |
Dade Behring Holdings, Inc.* | 12,860 | 720,160 |
Fisher Scientific International, Inc.* | 32,180 | 2,007,388 |
INAMED Corp.* | 24,500 | 1,549,625 |
Waters Corp.* | 26,980 | 1,262,394 |
11,499,630 | ||
Health Care Providers & Services 5.4% | ||
AMERIGROUP Corp.* | 9,550 | 722,553 |
Laboratory Corp. of America Holdings* | 20,720 | 1,032,271 |
Manor Care, Inc. | 20,410 | 723,126 |
Medco Health Solutions, Inc.* | 19,820 | 824,512 |
PacifiCare Health Systems, Inc.* | 21,260 | 1,201,615 |
Patterson Companies, Inc.* (e) | 24,420 | 1,059,584 |
WellPoint, Inc.* | 18,330 | 2,107,950 |
7,671,611 | ||
|
| Value ($) |
|
| |
Pharmaceuticals 2.4% | ||
Elan Corp. PLC (ADR)* (e) | 24,970 | 680,432 |
Medicines Co.* (e) | 27,780 | 800,064 |
MGI Pharma, Inc.* (e) | 38,680 | 1,083,427 |
Sepracor, Inc.* (e) | 14,400 | 854,928 |
3,418,851 | ||
Industrials 10.6% | ||
Air Freight & Couriers 0.7% | ||
Expeditors International of Washington, Inc. | 18,690 | 1,044,397 |
Airlines 1.1% | ||
Southwest Airlines Co. | 96,870 | 1,577,044 |
Building Products 0.7% | ||
American Standard Companies, Inc.* | 23,430 | 968,128 |
Commercial Services & Supplies 3.2% | ||
ChoicePoint, Inc.* | 21,660 | 996,143 |
Monster Worldwide, Inc.* | 61,860 | 2,080,971 |
Robert Half International, Inc. | 48,810 | 1,436,478 |
4,513,592 | ||
Electrical Equipment 2.0% | ||
Rockwell Automation, Inc. | 33,830 | 1,676,276 |
Roper Industries, Inc. | 18,750 | 1,139,438 |
2,815,714 | ||
Machinery 1.5% | ||
Eaton Corp. | 10,130 | 733,007 |
Pentair, Inc. | 31,660 | 1,379,109 |
2,112,116 | ||
Marine 0.7% | ||
Teekay Shipping Corp. (e) | 21,570 | 908,313 |
Road & Rail 0.7% | ||
Yellow Roadway Corp.* | 16,750 | 933,142 |
Information Technology 31.1% | ||
Communications Equipment 5.2% | ||
Comverse Technologies, Inc.* | 73,400 | 1,794,630 |
Juniper Networks, Inc.* (e) | 113,330 | 3,081,443 |
Polycom, Inc.* | 73,880 | 1,722,881 |
Sonus Networks, Inc.* (e) | 127,700 | 731,721 |
7,330,675 | ||
Computers & Peripherals 2.6% | ||
Apple Computer, Inc.* | 36,850 | 2,373,140 |
Avid Technology, Inc.* | 21,360 | 1,318,980 |
3,692,120 | ||
Electronic Equipment & Instruments 3.2% | ||
Benchmark Electronics, Inc.* | 23,310 | 794,871 |
CDW Corp. | 20,760 | 1,377,426 |
Cogent, Inc.* (e) | 21,820 | 720,060 |
Sanmina-SCI Corp.* | 186,920 | 1,583,213 |
4,475,570 | ||
Internet Software & Services 4.3% | ||
Ask Jeeves, Inc.* (e) | 39,470 | 1,055,822 |
CNET Networks, Inc.* (e) | 101,320 | 1,137,824 |
|
| Value ($) |
|
| |
F5 Networks, Inc.* (e) | 34,010 | 1,656,967 |
VeriSign, Inc.* | 64,430 | 2,159,694 |
6,010,307 | ||
IT Consulting & Services 4.6% | ||
Alliance Data Systems Corp.* | 26,290 | 1,248,249 |
Ariba, Inc.* (e) | 60,430 | 1,003,138 |
CheckFree Corp.* | 32,710 | 1,245,597 |
Cognizant Technology Solutions Corp. "A"* | 30,300 | 1,282,599 |
Fiserv, Inc.* | 14,460 | 581,147 |
Global Payments, Inc. (e) | 17,920 | 1,049,037 |
6,409,767 | ||
Semiconductors & Semiconductor Equipment 6.9% | ||
Advanced Micro Devices, Inc.* | 67,230 | 1,480,405 |
Cymer, Inc.* (e) | 39,190 | 1,157,673 |
KLA-Tencor Corp.* | 33,680 | 1,568,814 |
Lam Research Corp.* | 65,910 | 1,905,458 |
Marvell Technology Group Ltd.* | 49,750 | 1,764,632 |
PMC-Sierra, Inc.* | 169,760 | 1,909,800 |
9,786,782 | ||
Software 4.3% | ||
Amdocs Ltd.* | 33,280 | 873,600 |
Citrix Systems, Inc.* | 41,610 | 1,020,693 |
Macromedia, Inc.* | 34,730 | 1,080,798 |
McAfee, Inc.* | 50,020 | 1,447,079 |
TIBCO Software, Inc.* | 122,740 | 1,637,351 |
6,059,521 | ||
Materials 2.6% | ||
Chemicals 1.2% | ||
Eastman Chemical Co. (e) | 11,780 | 680,059 |
Lyondell Chemical Co. | 34,030 | 984,148 |
1,664,207 | ||
Metals & Mining 1.4% | ||
AK Steel Holding Corp.* (e) | 55,560 | 803,953 |
Allegheny Technologies, Inc. | 32,140 | 696,474 |
Peabody Energy Corp. | 7,020 | 567,988 |
2,068,415 | ||
Telecommunication Services 2.5% | ||
Wireless Telecommunication Services | ||
Alamosa Holdings, Inc.* (e) | 59,630 | 743,586 |
American Tower, Inc. "A"* | 41,040 | 755,136 |
NII Holdings, Inc.* (e) | 20,640 | 979,368 |
Western Wireless Corp. "A"* | 35,070 | 1,027,551 |
3,505,641 | ||
Total Common Stocks (Cost $110,101,433) | 140,180,753 | |
| ||
Securities Lending Collateral 15.1% | ||
Daily Assets Fund Institutional, 2.25% (c) (d) (Cost $21,183,207) | 21,183,207 | 21,183,207 |
| ||
|
| Value ($) |
|
| |
Cash Equivalents 0.7% | ||
Scudder Cash Management QP Trust, 2.24% (b) (Cost $1,025,473) | 1,025,473 | 1,025,473 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $132,310,113) (a) | 115.3 | 162,389,433 |
Other Assets and Liabilities, Net | (15.3) | (21,504,076) |
Net Assets | 100.0 | 140,885,357 |
Notes to SVS Turner Mid Cap Growth Portfolio of Investments |
* Non-income producing security.
(a) The cost for federal income tax purposes was $132,689,192. At December 31, 2004, net unrealized appreciation for all securities based on tax cost was $29,700,241. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $30,177,447 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $477,206.
(b) Scudder Cash Management QP Trust is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
(c) Daily Assets Fund Institutional, an affiliated fund, is managed by Deutsche Asset Management, Inc. The rate shown is the annualized seven-day yield at period end.
(d) Represents collateral held in connection with securities lending.
(e) All or a portion of these securities were on loan (see Notes to Financial Statements). The value of all securities loaned at December 31, 2004 amounted to $20,716,371, which is 14.7% of net assets.
ADR: American Depositary Receipt
The accompanying notes are an integral part of the financial statements.
Financial Statements |
|
Statement of Assets and Liabilities as of December 31, 2004 | |
Assets | |
Investments: Investments in securities, at value (cost $110,101,433) — including $20,716,371 of securities on loan | $ 140,180,753 |
Investment in Daily Assets Fund Institutional (cost $21,183,207)* | 21,183,207 |
Investment in Scudder Cash Management QP Trust (cost $1,025,473) | 1,025,473 |
Total Investments in securities, at value | 162,389,433 |
Dividends receivable | 49,568 |
Interest receivable | 6,144 |
Receivable for Portfolio shares sold | 34,471 |
Other assets | 3,872 |
Total assets | 162,483,488 |
Liabilities | |
Payable upon return of securities loaned | 21,183,207 |
Payable for investments purchased | 151,354 |
Payable for Portfolio shares redeemed | 49,510 |
Accrued management fee | 121,563 |
Other accrued expenses and payables | 92,497 |
Total liabilities | 21,598,131 |
Net assets, at value | $ 140,885,357 |
Net Assets | |
Net assets consist of: Accumulated net investment loss | (301) |
Net unrealized appreciation (depreciation) on investments | 30,079,320 |
Accumulated net realized gain (loss) | (4,149,095) |
Paid-in capital | 114,955,433 |
Net assets, at value | $ 140,885,357 |
Class A Net Asset Value, offering and redemption price per share ($117,554,535 ÷ 11,918,058 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 9.86 |
Class B Net Asset Value, offering and redemption price per share ($23,330,822 ÷ 2,386,654 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 9.78 |
* Represents collateral on securities loaned.
Statement of Operations for the year ended December 31, 2004 | |
Investment Income | |
Income: Dividends (net of foreign taxes withheld of $483) | $ 409,768 |
Interest — Scudder Cash Management QP Trust | 38,767 |
Securities lending income, including income from Daily Assets Fund Institutional | 26,862 |
Total Income | 475,397 |
Expenses: Management fee | 1,295,883 |
Custodian and accounting fees | 119,636 |
Distribution service fees (Class B) | 46,764 |
Record keeping fees (Class B) | 24,766 |
Auditing | 74,545 |
Legal | 20,386 |
Trustees' fees and expenses | 2,194 |
Reports to shareholders | 21,943 |
Other | 9,751 |
Total expenses, before expense reductions | 1,615,868 |
Expense reductions | (1,685) |
Total expenses, after expense reductions | 1,614,183 |
Net investment income (loss) | (1,138,786) |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from investments | 10,201,612 |
Net unrealized appreciation (depreciation) during the period on investments | 4,371,388 |
Net gain (loss) on investment transactions | 14,573,000 |
Net increase (decrease) in net assets resulting from operations | $ 13,434,214 |
The accompanying notes are an integral part of the financial statements.
|
Statement of Changes in Net Assets | ||
Increase (Decrease) in Net Assets | Years Ended December 31, | |
2004 | 2003 | |
Operations: Net investment income (loss) | $ (1,138,786) | $ (800,151) |
Net realized gain (loss) on investment transactions | 10,201,612 | 10,584,885 |
Net unrealized appreciation (depreciation) on investment transactions during the period | 4,371,388 | 23,791,384 |
Net increase (decrease) in net assets resulting from operations | 13,434,214 | 33,576,118 |
Portfolio share transactions: Class A Proceeds from shares sold | 14,595,440 | 23,691,008 |
Cost of shares redeemed | (17,916,695) | (6,045,865) |
Net increase (decrease) in net assets from Class A share transactions | (3,321,255) | 17,645,143 |
Class B Proceeds from shares sold | 9,964,790 | 11,019,067 |
Cost of shares redeemed | (2,100,980) | (720,077) |
Net increase (decrease) in net assets from Class B share transactions | 7,863,810 | 10,298,990 |
Increase (decrease) in net assets | 17,976,769 | 61,520,251 |
Net assets at beginning of period | 122,908,588 | 61,388,337 |
Net assets at end of period (including accumulated net investment loss of $301 and $281, respectively) | $ 140,885,357 | $ 122,908,588 |
Other Information | ||
Class A Shares outstanding at beginning of period | 12,352,137 | 10,171,623 |
Shares sold | 1,622,749 | 3,071,391 |
Shares redeemed | (2,056,828) | (890,877) |
Net increase (decrease) in Portfolio shares | (434,079) | 2,180,514 |
Shares outstanding at end of period | 11,918,058 | 12,352,137 |
Class B Shares outstanding at beginning of period | 1,499,883 | 96,707 |
Shares sold | 1,126,297 | 1,496,481 |
Shares redeemed | (239,526) | (93,305) |
Net increase (decrease) in Portfolio shares | 886,771 | 1,403,176 |
Shares outstanding at end of period | 2,386,654 | 1,499,883 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights |
|
Class A
Years Ended December 31, | 2004 | 2003 | 2002 | 2001a |
Selected Per Share Data | ||||
Net asset value, beginning of period | $ 8.88 | $ 5.98 | $ 8.82 | $ 10.00 |
Income (loss) from investment operations: Net investment income (loss)b | (.07) | (.06) | (.06) | (.04) |
Net realized and unrealized gain (loss) on investment transactions | 1.05 | 2.96 | (2.78) | (1.14) |
Total from investment operations | .98 | 2.90 | (2.84) | (1.18) |
Net asset value, end of period | $ 9.86 | $ 8.88 | $ 5.98 | $ 8.82 |
Total Return (%) | 11.04 | 48.49 | (32.20) | (11.80)c** |
Ratios to Average Net Assets and Supplemental Data | ||||
Net assets, end of period ($ millions) | 118 | 110 | 61 | 48 |
Ratio of expenses before expense reductions (%) | 1.19 | 1.18 | 1.13 | 1.82* |
Ratio of expenses after expense reductions (%) | 1.19 | 1.18 | 1.13 | 1.30* |
Ratio of net investment income (loss) (%) | (.82) | (.90) | (.82) | (.76)* |
Portfolio turnover rate (%) | 174 | 155 | 225 | 205* |
a For the period from May 1, 2001 (commencement of operations) to December 31, 2001.
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
Class B
Years Ended December 31, | 2004 | 2003 | 2002a |
Selected Per Share Data | |||
Net asset value, beginning of period | $ 8.84 | $ 5.97 | $ 6.60 |
Income (loss) from investment operations: Net investment income (loss)b | (.10) | (.09) | (.02) |
Net realized and unrealized gain (loss) on investment transactions | 1.04 | 2.96 | (.61) |
Total from investment operations | .94 | 2.87 | (.63) |
Net asset value, end of period | $ 9.78 | $ 8.84 | $ 5.97 |
Total Return (%) | 10.63 | 48.07 | (9.55)** |
Ratios to Average Net Assets and Supplemental Data | |||
Net assets, end of period ($ millions) | 23 | 13 | .6 |
Ratio of expenses (%) | 1.56 | 1.57 | 1.38* |
Ratio of net investment income (loss) (%) | (1.19) | (1.29) | (.81)* |
Portfolio turnover rate (%) | 174 | 155 | 225 |
a For the period July 1, 2002 (commencement of operations of Class B shares) to December 31, 2002.
b Based on an average shares outstanding during the period.
* Annualized
** Not annualized
Notes to Financial Statements |
|
A. Significant Accounting Policies
Scudder Variable Series II (the "Trust") 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 Trust offers thirty-three portfolios (the "portfolio(s)"). During the period, Scudder Government Securities Portfolio changed its name to Scudder Government & Agency Securities Portfolio and Scudder Contrarian Value Portfolio changed its name to Scudder Large Cap Value Portfolio. Effective August 16, 2004, four portfolios commenced operations; Scudder Conservative Income Strategy Portfolio, Scudder Growth & Income Strategy Portfolio, Scudder Growth Strategy Portfolio and Scudder Income & Growth Strategy Portfolio. All four of the Portfolios invest primarily in existing Scudder Portfolios ("Underlying Portfolios"). Each Underlying Portfolio's accounting policies and investment holdings are outlined in the Underlying Portfolio's financials statements and are available upon request. Effective November 15, 2004, two portfolios commenced operations; Scudder Mercury Large Cap Core Portfolio and Scudder Templeton Foreign Value Portfolio.
Multiple Classes of Shares of Beneficial Interest. The Trust offers two classes of shares (Class A shares and Class B shares) except Scudder Conservative Income Strategy Portfolio, Scudder Growth & Income Strategy Portfolio, Scudder Growth Strategy Portfolio and Scudder Income & Growth Strategy Portfolio, which offer Class B shares only. Sales of Class B shares are subject to record keeping fees up to 0.15% and Rule 12b-1 fees under the 1940 Act equal to an annual rate of 0.25%, of the average daily net assets of the Class B shares of the applicable Portfolio. Class A shares are not subject to such fees.
Investment income, realized and unrealized gains and losses, and certain portfolio-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 (including the applicable 12b-1 fee and record keeping fee). Differences in class-level expenses may result in payment of different per share dividends by class. All shares have equal rights with respect to voting subject to class-specific arrangements.
The Trust'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 Trust in the preparation of its financial statements.
Security Valuation. Investments in securities and Underlying Portfolios 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 or official closing 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.
Debt securities are valued by independent pricing services approved by the Trustees of the Portfolios. If the pricing services are unable to provide valuations, the securities are valued at the most recent bid quotation or evaluated price, as applicable, obtained from a broker-dealer. Such services may use various pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as broker quotes.
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.
Investments in the Underlying Portfolios are valued at the net asset value per share of each class of the Underlying Portfolios as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading.
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. The Portfolios may use a fair valuation model to value international equity securities in order to adjust for events which may occur between the close of the foreign exchanges and the close of the New York Stock Exchange.
Foreign Currency Translations. The books and records of the Trust are maintained in US dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into US dollars at the prevailing exchange rates at period end. Purchases and sales of investment securities, income and expenses are translated into US 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 US 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.
Repurchase Agreements. The portfolios may enter into repurchase agreements with certain banks and broker/dealers whereby the portfolios, through their custodian or sub-custodian bank, receive 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 value is equal to at least the principal amount of the repurchase price plus accrued interest. The custodian bank holds the collateral in a separate account until the agreement matures. If the value of the securities falls below the principal amount of the repurchase agreement plus accrued interest, the financial institution deposits additional collateral by the following business day. If the financial institution either fails to deposit the required additional collateral or fails to repurchase the securities as agreed, the portfolios have the right to sell the securities and recover any resulting loss from the financial institution. If the financial institution enters into bankruptcy, the portfolios' claims on the collateral may be subject to legal proceedings.
Securities Lending. Each portfolio, except Scudder Money Market Portfolio, SVS Dreman Small Cap Value Portfolio, Scudder Conservative Income Strategy Portfolio, Scudder Growth & Income Strategy Portfolio, Scudder Growth Strategy Portfolio, Scudder Income & Growth Strategy Portfolio, Scudder Mercury Large Cap Core Portfolio and Scudder Templeton Foreign Value Portfolio, may lend securities to financial institutions. The portfolios retain beneficial ownership of the securities they have loaned and continue to receive interest and dividends paid by the securities and to participate in any changes in their market value. The portfolio requires the borrowers of the securities to maintain collateral with the portfolio consisting of liquid, unencumbered assets having a value at least equal to the value of the securities loaned. The portfolio may invest the cash collateral into a joint trading account in an affiliated money market fund pursuant to Exemptive Orders issued by the SEC. The portfolios receive compensation for lending their securities either in the form of fees or by earning interest on invested cash collateral net fees paid to a lending agent. Either the portfolios or the borrower may terminate the loan. The portfolios are subject to all investment risks associated with the value of any cash collateral received, including, but not limited to, interest rate, credit and liquidity risk associated with such investments.
Options. An option contract is a contract in which the writer of the option grants the buyer of the option the right to purchase from (call option), or sell to (put option), the writer a designated instrument at a specified price within a specified period of time. Certain options, including options on indices, will require cash settlement by the portfolio if the option is exercised. The portfolios may enter into option contracts in order to hedge against potential adverse price movements in the value of portfolio assets; as a temporary substitute for selling selected investments; to lock in the purchase price of a security or currency which it expects to purchase in the near future; as a temporary substitute for purchasing selected investments; and to enhance potential gain.
The liability representing the portfolio's obligation under an exchange traded written option or investment in a purchased option is valued at the last sale price or, in the absence of a sale, the mean between the closing bid and asked prices or at the most recent asked price (bid for purchased options) if no bid and asked price are available. Over-the-counter written or purchased options are valued using dealer-supplied quotations. Gain or loss is recognized when the option contract expires or is closed.
If the portfolio writes a covered call option, the portfolio foregoes, in exchange for the premium, the opportunity to profit during the option period from an increase in the market value of the underlying security above the exercise price. If the portfolio writes a put option it accepts the risk of a decline in the value of the underlying security below the exercise price. Over-the-counter options have the risk of the potential inability of counterparties to meet the terms of their contracts. The portfolio's maximum exposure to purchased options is limited to the premium initially paid. In addition, certain risks may arise upon entering into option contracts including the risk that an illiquid secondary market will limit the portfolio's ability to close out an option contract prior to the expiration date and that a change in the value of the option contract may not correlate exactly with changes in the value of the securities or currencies hedged.
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 portfolios 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 portfolio 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 portfolio 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 portfolio. When entering into a closing transaction, the portfolio 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 portfolio'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 portfolio gives up the opportunity to profit from favorable price movements in the hedged positions during the term of the contract.
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange contract (forward currency contract) is a commitment to purchase or sell a foreign currency at the settlement date at a negotiated rate. The portfolios may enter into forward currency contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign currency denominated portfolio holdings and to facilitate transactions in foreign currency denominated securities.
Forward currency contracts are valued at the prevailing forward exchange rate of the underlying currencies and unrealized gain (loss) is recorded daily. Sales and purchases of forward currency contracts having the same settlement date and broker are offset and any gain (loss) is realized on the date of offset; otherwise, gain (loss) is realized on settlement date. Realized and unrealized gains and losses which represent the difference between the value of a forward currency contract to buy and a forward currency contract to sell are included in net realized and unrealized gain (loss) from foreign currency related transactions.
Certain risks may arise upon entering into forward currency contracts from the potential inability of counterparties to meet the terms of their contracts. Additionally, when utilizing forward currency contracts to hedge, the portfolio gives up the opportunity to profit from favorable exchange rate movements during the term of the contract.
Mortgage Dollar Rolls. The Scudder Fixed Income Portfolio, Scudder Government & Agency Securities Portfolio and Scudder Total Return Portfolio entered into mortgage dollar rolls in which each portfolio sells to a bank or broker/dealer (the "counterparty") mortgage-backed securities for delivery in the current month and simultaneously contracts to repurchase similar, but not identical, securities on a fixed date. The counterparty receives all principal and interest payments, including prepayments, made on the security while it is the holder. Each portfolio receives compensation as consideration for entering into the commitment to repurchase. The compensation is paid in the form of a lower price for the security upon its repurchase, or alternatively, a fee. Mortgage dollar rolls may be renewed with a new sale and repurchase price and a cash settlement made at each renewal without physical delivery of the securities subject to the contract.
Mortgage dollar rolls may be treated for purposes of the 1940 Act as borrowings by each portfolio because they involve the sale of a security coupled with an agreement to repurchase. A mortgage dollar roll involves costs to each portfolio. For example, while each portfolio receives compensation as consideration for agreeing to repurchase the security, each portfolio forgoes the right to receive all principal and interest payments while the counterparty holds the security. These payments to the counterparty may exceed the compensation received by each portfolio, thereby effectively charging each portfolio interest on its borrowings. Further, although each portfolio can estimate the amount of expected principal prepayment over the term of the mortgage dollar roll, a variation in the actual amount of prepayment could increase or decrease the cost of each portfolio's borrowing.
Certain risks may arise upon entering into mortgage dollar rolls from the potential inability of counterparties to meet the terms of their commitments. Additionally, the value of such securities may change adversely before each portfolio is able to repurchase them. There can be no assurance that each portfolio's use of the cash that it receives from a mortgage dollar roll will provide a return that exceeds its borrowing costs.
When-Issued/Delayed Delivery Securities. Several of the portfolios may purchase securities with delivery or payment to occur at a later date beyond the normal settlement period. At the time the portfolio enters into a commitment to purchase a security, the transaction is recorded and the value of the security is reflected in the net asset value. The price of such security and the date when the security will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the security may vary with market fluctuations. No interest accrues to the portfolio until payment takes place. At the time the portfolio enters into this type of transaction it is required to segregate cash or other liquid assets at least equal to the amount of the commitment.
Certain risks may arise upon entering into when-issued or delayed delivery securities from the potential inability of counterparties to meet the terms of their contracts or if the issuer does not issue the securities due to political, economic, or other factors. Additionally, losses may arise due to changes in the value of the underlying securities.
Federal Income Taxes. The portfolios' 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 and tax-exempt income to its shareholders. Accordingly, the portfolios paid no federal income taxes and no federal income tax provision was required.
At December 31, 2004, the following portfolios had an approximate net tax basis capital loss carryforward which may be applied against any realized net taxable capital gains of each succeeding year until fully utilized or until the following expiration dates, whichever occurs first:
Portfolio | Capital Loss Carryforward ($) | Expiration |
Scudder Aggressive Growth Portfolio | 662,000 | 12/31/2008 |
| 5,489,000 | 12/31/2009 |
| 8,989,000 | 12/31/2010 |
| 23,998,000 | 12/31/2011 |
Scudder Blue Chip Portfolio | 16,525,000 | 12/31/2010 |
Scudder Global Blue Chip Portfolio | 2,280,000 | 12/31/2010 |
| 2,456,000 | 12/31/2011 |
Scudder Growth Portfolio* | 127,000 | 12/31/2007 |
| 94,269,000 | 12/31/2009 |
| 39,544,000 | 12/31/2010 |
| 24,621,000 | 12/31/2011 |
| 2,184,000 | 12/31/2012 |
Scudder High Income Portfolio | 4,823,000 | 12/31/2007 |
| 16,114,000 | 13/31/2008 |
| 22,935,000 | 12/31/2009 |
| 55,108,000 | 12/31/2010 |
| 13,877,000 | 12/31/2011 |
Scudder International Select Equity Portfolio* | 1,217,000 | 12/31/2008 |
| 23,867,000 | 12/31/2009 |
| 20,015,000 | 12/31/2010 |
| 4,400,000 | 12/31/2011 |
Scudder Large Cap Value Portfolio | 6,183,000 | 12/31/2008 |
| 11,765,000 | 12/31/2010 |
| 6,438,000 | 12/31/2011 |
Scudder Small Cap Growth Portfolio | 73,835,000 | 12/31/2009 |
| 62,668,000 | 12/31/2010 |
Scudder Technology Growth Portfolio | 1,211,000 | 12/31/2008 |
| 94,141,000 | 12/31/2009 |
| 93,499,000 | 12/31/2010 |
| 71,516,000 | 12/31/2011 |
Scudder Total Return Portfolio | 21,387,000 | 12/31/2009 |
| 8,813,000 | 12/31/2010 |
| 46,269,000 | 12/31/2011 |
SVS Davis Venture Value Portfolio | 127,000 | 12/31/2009 |
| 4,386,000 | 12/31/2010 |
| 1,390,000 | 12/31/2011 |
| 1,088,000 | 12/31/2012 |
SVS Dreman Financial Services Portfolio | 743,000 | 12/31/2009 |
| 2,479,000 | 12/31/2010 |
| 2,101,000 | 12/31/2011 |
SVS Dreman High Return Equity Portfolio | 11,267,000 | 12/31/2010 |
| 8,043,000 | 12/31/2011 |
SVS Eagle Focused Large Cap Growth Portfolio | 1,336,000 | 12/31/2008 |
| 7,024,000 | 12/31/2009 |
| 13,889,000 | 12/31/2010 |
| 334,000 | 12/31/2011 |
| 124,000 | 12/31/2012 |
SVS Focus Value+Growth Portfolio | 7,136,000 | 12/31/2009 |
| 15,209,000 | 12/31/2010 |
| 7,546,000 | 12/31/2011 |
SVS Index 500 Portfolio | 448,000 | 12/31/2008 |
| 3,267,000 | 12/31/2009 |
| 9,116,000 | 12/31/2010 |
| 3,518,000 | 12/21/2011 |
| 4,052,000 | 12/31/2012 |
SVS INVESCO Dynamic Growth Portfolio | 2,320,000 | 12/31/2010 |
| 377,000 | 12/31/2011 |
SVS Janus Growth and Income Portfolio | 12,514,000 | 12/31/2009 |
| 29,907,000 | 12/31/2010 |
| 6,934,000 | 12/31/2011 |
SVS Janus Growth Opportunities Portfolio | 130,000 | 12/31/2008 |
| 31,299,000 | 12/31/2009 |
| 42,499,00 | 12/31/2010 |
| 19,473,000 | 12/31/2011 |
SVS Oak Strategic Equity Portfolio | 322,000 | 12/31/2009 |
| 4,401,000 | 12/31/2010 |
| 2,522,000 | 12/31/2011 |
| 3,689,000 | 12/31/2012 |
SVS Turner Mid Cap Growth Portfolio | 3,770,000 | 12/31/2010 |
* Certain of these losses may be subject to limitations under Section 381-383 of the Internal Revenue Code.
For the period from November 1, 2004 through December 31, 2004, the following portfolios incurred approximate net realized capital losses as follows:
Portfolio | Net Realized Capital Loss ($) |
Scudder Aggressive Growth Portfolio | 12,000 |
Scudder Fixed Income Portfolio | 827,000 |
Scudder Strategic Income Portfolio | 266,000 |
SVS Davis Venture Value Portfolio | 576,000 |
SVS Dreman Financial Services Portfolio | 330,000 |
SVS Eagle Focused Large Cap Growth Portfolio | 297,000 |
As permitted by tax regulations, the portfolios intend to elect to defer these losses and treat them as arising in the fiscal year ended December 31, 2005.
Distribution of Income and Gains. Distributions of net investment income, if any, for all portfolios except the Scudder Money Market Portfolio, are made annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the portfolio if not distributed and, therefore, will be distributed to shareholders at least annually. All of the net investment income of the Scudder Money Market Portfolio is declared as a daily dividend and is distributed to shareholders monthly.
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. 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, a portfolio may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the portfolio.
At December 31, 2004, the portfolios' components of distributable earnings on a tax basis were as follows:
Portfolio | Undistributed ordinary income ($) | Undistributed net long-term capital gains ($) | Capital loss carryforwards ($) | Unrealized appreciation (depreciation) on investments ($) |
Scudder Aggressive Growth Portfolio | — | — | (39,138,000) | 10,247,249 |
Scudder Blue Chip Portfolio | 2,788,284 | — | (16,525,000) | 34,300,956 |
Scudder Conservative Income Strategy Portfolio | 4,048 | — | — | 27,404 |
Scudder Fixed Income Portfolio | 10,899,530 | 1,340,182 | — | 1,355,749 |
Scudder Global Blue Chip Portfolio | 176,419 | — | (4,736,000) | 12,789,938 |
Scudder Government & Agency Securities Portfolio | 13,236,546 | 22,888 | — | 2,026,301 |
Scudder Growth Portfolio | 2,087,025 | — | (160,745,000) | 68,325,507 |
Scudder Growth & Income Strategy Portfolio | 58,128 | — | — | 1,456,478 |
Scudder Growth Strategy Portfolio | 93,109 | — | — | 2,077,035 |
Scudder High Income Portfolio | 33,524,911 | — | (112,857,000) | 7,159,791 |
Scudder Income & Growth Strategy Portfolio | 33,651 | — | — | 434,561 |
Scudder International Select Equity Portfolio | 5,970,853 | — | (49,499,000) | 48,801,610 |
Scudder Large Cap Value Portfolio | 5,207,536 | — | (24,386,000) | 48,129,819 |
Scudder Mercury Large Cap Core Portfolio | 9,786 | — | — | 43,197 |
Scudder Small Cap Growth Portfolio | — | — | (136,503,000) | 44,274,203 |
Scudder Strategic Income Portfolio | 6,443,449 | 200,018 | — | 4,533,149 |
Scudder Technology Growth Portfolio | 950,788 | — | (260,367,000) | 13,492,296 |
Scudder Templeton Foreign Value Portfolio | — | — | — | 292,925 |
Scudder Total Return Portfolio | 13,347,018 | — | (76,469,000) | 60,467,278 |
SVS Davis Venture Value Portfolio | 2,236,932 | — | (6,991,000) | 65,487,518 |
SVS Dreman Financial Services Portfolio | 2,664,080 | — | (5,323,000) | 40,116,974 |
SVS Dreman High Return Equity Portfolio | 14,598,035 | — | (19,310,000) | 152,750,976 |
SVS Dreman Small Cap Value Portfolio | 3,681,177 | 47,131,177 | — | 124,447,615 |
SVS Eagle Focused Large Cap Growth Portfolio | 405,384 | — | (22,707,000) | 11,570,163 |
SVS Focus Value+Growth Portfolio | 1,317,035 | — | (29,891,000) | 21,240,184 |
SVS Index 500 Portfolio | 5,567,565 | — | (20,401,000) | 27,112,955 |
SVS INVESCO Dynamic Growth Portfolio | — | — | (2,697,000) | 8,466,860 |
SVS Janus Growth and Income Portfolio | 314,797 | — | (49,355,000) | 41,625,360 |
SVS Janus Growth Opportunities Portfolio | 390,282 | — | (93,401,000) | 24,965,440 |
SVS MFS Strategic Value Portfolio | 1,318,985 | 1,296,975 | — | 5,748,641 |
SVS Oak Strategic Equity Portfolio | 3,530 | — | (10,934,000) | 12,405,910 |
SVS Turner Mid Cap Growth Portfolio | — | — | (3,770,000) | 29,700,241 |
In addition, the tax character of distributions paid by the portfolios is summarized as follows:
| Distributions from ordinary income ($)* Years Ended December 31, | Distributions from long-term capital gains ($) Years Ended December 31, | ||
Portfolio | 2004 | 2003 | 2004 | 2003 |
Scudder Blue Chip Portfolio | 1,683,204 | 1,361,345 | — | — |
Scudder Fixed Income Portfolio | 11,368,699 | 7,994,594 | 1,643,431 | — |
Scudder Global Blue Chip Portfolio | 744,211 | 165,879 | — | — |
Scudder Government & Agency Securities Portfolio | 12,782,714 | 24,354,482 | — | 649,165 |
Scudder Growth Portfolio | 815,090 | 328,128 | — | — |
Scudder High Income Portfolio | 32,409,504 | 30,333,486 | — | — |
Scudder International Select Equity Portfolio | 1,778,472 | 1,550,011 | — | — |
Scudder Large Cap Value Portfolio | 4,405,034 | 4,373,416 | — | — |
Scudder Money Market Portfolio | 3,060,457 | 3,501,000 | — | — |
Scudder Strategic Income Portfolio | 2,582,795 | 853,600 | 787,439 | 28,838 |
Scudder Total Return Portfolio | 10,994,018 | 20,032,407 | — | — |
SVS Davis Venture Value Portfolio | 1,018,451 | 940,019 | — | — |
SVS Dreman Financial Services Portfolio | 2,372,080 | 1,864,595 | — | — |
SVS Dreman High Return Equity Portfolio | 12,318,605 | 11,423,101 | — | — |
SVS Dreman Small Cap Value Portfolio | 3,617,447 | 3,009,265 | — | 4,054,538 |
SVS Focus Value+Growth Portfolio | 999,011 | 874,250 | — | — |
SVS Index 500 Portfolio | 3,410,455 | 2,880,518 | — | — |
SVS Janus Growth and Income Portfolio | — | 1,270,975 | — | — |
SVS MFS Strategic Value Portfolio | 51,014 | 24,920 | 15,306 | — |
* For tax purposes short-term capital gains distributions are considered ordinary income distributions.
Expenses. Expenses arising in connection with a specific portfolio are allocated to that portfolio. Trust expenses are allocated between the portfolios in proportion to their relative net assets.
Offering Costs. Offering costs for Scudder Conservative Income Strategy Portfolio, Scudder Growth & Income Strategy Portfolio, Scudder Growth Strategy Portfolio, Scudder Income & Growth Strategy Portfolio, Scudder Mercury Large Cap Core Portfolio and Scudder Templeton Foreign Value Portfolio were paid in connection with the offering of shares and are being amortized over one year.
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 portfolio is informed of such dividends. Realized gains and losses from investment transactions are recorded on an identified cost basis. All discounts and premiums are accreted/amortized for both tax and financial reporting purposes for all portfolios, with the exception of securities in default of principal. Distributions of income and capital gains from the Underlying Portfolios are recorded on the ex-dividend date.
B. Investment Transactions
During the year ended December 31, 2004, purchases and sales of investment transactions (excluding short-term investments) were as follows:
Portfolio | Purchases ($) | Proceeds from Sales ($) |
Scudder Aggressive Growth Portfolio | 56,789,175 | 59,781,369 |
Scudder Blue Chip Portfolio | 693,404,785 | 674,933,893 |
Scudder Conservative Income Strategy Portfolio | 1,700,769 | 94,822 |
Scudder Fixed Income Portfolio excluding US Treasury Obligations and mortgage dollar roll transactions | 271,840,232 | 214,976,219 |
US Treasury Obligations | 286,946,849 | 263,430,754 |
mortgage dollar roll transactions | 50,004,606 | 47,982,413 |
Scudder Global Blue Chip Portfolio | 52,353,407 | 51,823,610 |
Scudder Government & Agency Securities Portfolio excluding US Treasury Obligations and mortgage dollar roll transactions | 673,022,650 | 805,435,745 |
US Treasury Obligations | 105,802,607 | 95,188,060 |
mortgage dollar roll transactions | 570,221,935 | 515,802,279 |
Scudder Growth Portfolio | 64,326,283 | 92,035,576 |
Scudder Growth Strategy Portfolio | 45,244,077 | 1,372,875 |
Scudder Growth & Income Strategy Portfolio | 37,028,786 | 1,002,585 |
Scudder High Income Portfolio excluding US Treasury Obligations | 656,002,457 | 668,430,471 |
US Treasury Obligations | 13,697,036 | 17,043,490 |
Scudder Income & Growth Strategy Portfolio | 13,349,817 | 569,463 |
Scudder International Select Equity Portfolio | 188,827,851 | 159,628,994 |
Scudder Large Cap Value Portfolio | 134,634,281 | 114,648,636 |
Scudder Mercury Large Cap Core Portfolio | 1,594,336 | 145,086 |
Scudder Small Cap Growth Portfolio | 253,177,444 | 261,463,174 |
Scudder Strategic Income Portfolio | 158,913,262 | 147,241,324 |
Scudder Technology Growth Portfolio | 265,414,116 | 304,666,293 |
Scudder Templeton Foreign Value Portfolio | 4,936,557 | — |
Scudder Total Return Portfolio excluding US Treasury Obligations and mortgage dollar roll transactions | 558,022,325 | 631,645,604 |
US Treasury Obligations | 297,525,532 | 296,723,105 |
mortgage dollar roll transactions | 58,904,675 | 59,144,410 |
SVS Davis Venture Value Portfolio | 59,128,954 | 7,649,794 |
SVS Dreman Financial Services Portfolio | 13,829,335 | 12,419,066 |
SVS Dreman High Return Equity Portfolio | 105,373,436 | 65,563,122 |
SVS Dreman Small Cap Value Portfolio | 354,408,253 | 313,377,535 |
SVS Eagle Focused Large Cap Growth Portfolio | 109,257,505 | 92,542,429 |
SVS Focus Value+Growth Portfolio | 81,980,488 | 90,750,723 |
SVS Index 500 Portfolio | 74,492,688 | 46,904,835 |
SVS INVESCO Dynamic Growth Portfolio | 49,541,484 | 51,766,862 |
SVS Janus Growth and Income Portfolio | 101,170,464 | 103,002,488 |
SVS Janus Growth Opportunities Portfolio | 75,487,064 | 91,418,044 |
SVS MFS Strategic Value Portfolio | 40,368,565 | 17,271,398 |
SVS Oak Strategic Equity Portfolio | 41,120,897 | 34,530,403 |
SVS Turner Mid Cap Growth Portfolio | 227,449,318 | 221,371,183 |
For the year ended December 31, 2004, transactions for written options were as follows for the Scudder Strategic Income Portfolio:
| Contract Amounts | Premium ($) |
Beginning of period | 49,656 | 13,199 |
Written | 10,267,865 | 322,408 |
Closed | (10,317,521) | (335,607) |
End of period | — | — |
For the year ended December 31, 2004, transactions for written options were as follows for the Scudder Technology Growth Portfolio:
| Contract Amounts | Premium ($) |
Beginning of period | — | — |
Written | 26,839 | 3,395,007 |
Closed | (10,806) | (1,623,411) |
Exercised | (8,174) | (970,465) |
Expired | (5,785) | (468,400) |
End of period | 2,074 | 332,731 |
C. Related Parties
Management Agreement. Under the Management Agreement with Deutsche Investment Management Americas Inc. ("DeIM" or the "Advisor"), an indirect, wholly owned subsidiary of Deutsche Bank AG, the Advisor directs the investments of the portfolios 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 portfolios. In addition to portfolio management services, the Advisor provides certain administrative services in accordance with the Management Agreement. Accordingly, for the year ended December 31, 2004, the fees pursuant to the Management Agreement were equivalent to the annual effective rates shown below of the portfolios' average daily net assets:
Portfolio | Annual Management Fee Rate |
Scudder Blue Chip Portfolio | 0.65% |
Scudder Fixed Income Portfolio | 0.60% |
Scudder Government & Agency Securities Portfolio | 0.55% |
Scudder Growth Portfolio | 0.60% |
Scudder High Income Portfolio | 0.60% |
Scudder International Select Equity Portfolio | 0.75% |
Scudder Large Cap Value Portfolio | 0.75% |
Scudder Small Cap Growth Portfolio | 0.65% |
Scudder Strategic Income Portfolio | 0.65% |
Scudder Total Return Portfolio | 0.55% |
SVS Dreman Small Cap Value Portfolio | 0.75% |
SVS Focus Value+Growth Portfolio | 0.75% |
For the period January 1, 2004 through September 30, 2004, the Scudder Money Market Portfolio paid a monthly investment management fee of 0.50%, based on the average daily net assets of the portfolio.
Effective October 1, 2004, the Scudder Money Market Portfolio pays a monthly investment management fee, based on the average daily net assets of the portfolio, computed and accrued daily and payable monthly, of 1/12 of the annual rates shown below:
Average Daily Net Assets of the Portfolio | Annual Management Fee Rate |
$0-$215 million | 0.500% |
next $335 million | 0.375% |
next $250 million | 0.300% |
over $800 million | 0.250% |
Accordingly, for the year ended December 31, 2004, the fee pursuant to the Management Agreement was equivalent to the annual effective rate of 0.49% of the Scudder Money Market Portfolio's average daily net assets.
The Scudder Aggressive Growth Portfolio, Scudder Technology Growth Portfolio, SVS Dreman Financial Services Portfolio and SVS Dreman High Return Equity Portfolio each pay a monthly investment management fee, based on the average daily net assets of the portfolio, computed and accrued daily and payable monthly, of 1/12 of the annual rates shown below:
Average Daily Net Assets of the Portfolio | Annual Management Fee Rate |
$0-$250 million | 0.75% |
next $750 million | 0.72% |
next $1.5 billion | 0.70% |
next $2.5 billion | 0.68% |
next $2.5 billion | 0.65% |
next $2.5 billion | 0.64% |
next $2.5 billion | 0.63% |
over $12.5 billion | 0.62% |
For the year ended December 31, 2004, the Advisor agreed to limit its fees and reimburse expenses of each class of the Scudder Aggressive Growth Portfolio to the extent necessary to maintain the annual expenses of Class A at 0.95% and Class B at 1.35%. For the year ended December 31, 2004, the Advisor waived $42,450 of management fees.
Accordingly, for the year ended December 31, 2004, the fees pursuant to the Management Agreement were equivalent to the annual effective rates shown below of the portfolios' average daily net assets:
Portfolio | Effective Rate |
Scudder Aggressive Growth Portfolio | 0.68% |
Scudder Technology Growth Portfolio | 0.75% |
SVS Dreman Financial Services Portfolio | 0.75% |
SVS Dreman High Return Equity Portfolio | 0.73% |
SVS INVESCO Dynamic Growth Portfolio and SVS Turner Mid Cap Growth Portfolio each pay a monthly investment management fee, based on the average daily net assets of the portfolio, computed and accrued daily and payable monthly, of 1/12 of the annual rates shown below:
Average Daily Net Assets of the Portfolio | Annual Management Fee Rate |
$0-$250 million | 1.000% |
next $250 million | 0.975% |
next $500 million | 0.950% |
next $1.5 billion | 0.925% |
Over $2.5 billion | 0.900% |
For the year ended December 31, 2004, the Advisor agreed to limit its fees and reimburse expenses of each class of the SVS INVESCO Dynamic Growth Portfolio to the extent necessary to maintain the annual expenses of Class A at 1.30% and Class B at 1.70%. For the year ended December 31, 2004, the Advisor waived $68,858 of management fees.
Accordingly, for the year ended December 31, 2004, the fees pursuant to the Management Agreement were equivalent to the annual effective rates shown below of the portfolios' average daily net assets:
Portfolio | Effective Rate |
SVS INVESCO Dynamic Growth Portfolio | 0.82% |
SVS Turner Mid Cap Growth Portfolio | 1.00% |
SVS Davis Venture Value Portfolio, SVS Janus Growth and Income Portfolio, SVS Janus Growth Opportunities Portfolio and SVS Oak Strategic Equity Portfolio each pay a monthly investment management fee, based on the average daily net assets of the portfolio, computed and accrued daily and payable monthly, of 1/12 of the annual rates shown below:
Average Daily Net Assets of the Portfolio | Annual Management Fee Rate |
$0-$250 million | 0.950% |
next $250 million | 0.925% |
next $500 million | 0.900% |
next $1.5 billion | 0.875% |
Over $2.5 billion | 0.850% |
For the period January 1, 2004 through September 30, 2004, the SVS Eagle Focused Large Cap Growth Portfolio paid a monthly investment management fee, based on the average daily net assets of the portfolio, computed and accrued daily and payable monthly, of 1/12 of the annual rates shown below:
Average Daily Net Assets of the Portfolio | Annual Management Fee Rate |
$0-$250 million | 0.950% |
next $250 million | 0.925% |
next $500 million | 0.900% |
next $1.5 billion | 0.875% |
Over $2.5 billion | 0.850% |
Effective October 1, 2004 through October 1, 2005, the SVS Eagle Focused Large Cap Growth Portfolio pays a monthly investment management fee, based on the average daily net assets of the portfolio, computed and accrued daily and payable monthly, of 1/12 of the annual rate shown below:
Average Daily Net Assets of the Portfolio | Annual Management Fee Rate |
SVS Eagle Focused Large Cap Growth Portfolio | 0.700% |
Accordingly, for the year ended December 31, 2004, the fees pursuant to the Management Agreement were equivalent to the annual effective rates shown below of the portfolios' average daily net assets:
Portfolio | Effective Rate |
SVS Davis Venture Value Portfolio | 0.95% |
SVS Eagle Focused Large Cap Growth Portfolio | 0.88% |
SVS Janus Growth and Income Portfolio | 0.95% |
SVS Janus Growth Opportunities Portfolio | 0.95% |
SVS Oak Strategic Equity Portfolio | 0.95% |
For the period January 1, 2004 through September 30, 2004, the SVS Index 500 Portfolio paid a monthly investment management fee, based on the average daily net assets of the portfolio, computed and accrued daily and payable monthly, of 1/12 of the annual rates shown below:
Average Daily Net Assets of the Portfolio | Annual Management Fee Rate |
$0-$250 million | 0.370% |
next $250 million | 0.330% |
next $500 million | 0.310% |
next $1.5 billion | 0.295% |
Over $2.5 billion | 0.270% |
Effective October 1, 2004, the SVS Index 500 Portfolio pays a monthly investment management fee, based on the average daily net assets of the portfolio, computed and accrued daily and payable monthly, of 1/12 of the annual rate shown below:
Average Daily Net Assets of the Portfolio | Annual Management Fee Rate |
SVS Index 500 Portfolio | 0.200% |
Accordingly, for the year ended December 31, 2004, the fee pursuant to the Management Agreement was equivalent to an annual effective rate of 0.32% of SVS Index 500 Portfolio's average daily net assets.
For the year ended December 31, 2004, the Advisor agreed to limit its fees and reimburse expenses of each class of the SVS Index 500 Portfolio to the extent necessary to maintain the annual expenses of Class A at 0.55% and Class B at 0.95%. Effective October 1, 2004 through September 30, 2005, the Advisor agreed to limit its fees and reimburse expenses of the SVS Index 500 Portfolio to the extent necessary to maintain the annual expenses of Class A at 0.377% and Class B at 0.627% (excluding certain expenses such as extraordinary expenses, taxes, brokerage, interest and fund accounting outsourcing fee savings). Accordingly, for the year ended December 31, 2004, the Advisor waived $5,655 of other expenses.
The Scudder Global Blue Chip Portfolio pays a monthly investment management fee, based on the average daily net assets of the portfolio, computed and accrued daily and payable monthly, of 1/12 of the annual rates shown below:
Average Daily Net Assets of the Portfolio | Annual Management Fee Rate |
$0-$250 million | 1.00% |
next $500 million | 0.95% |
next $750 million | 0.90% |
next $1.5 billion | 0.85% |
Over $3 billion | 0.80% |
Accordingly, for the year ended December 31, 2004, the fee pursuant to the Management Agreement was equivalent to an annual effective rate of 1.00% of Scudder Global Blue Chip Portfolio's average daily net assets.
The SVS MFS Strategic Value Portfolio pays a monthly investment management fee, based on the average daily net assets of the portfolio, computed and accrued daily and payable monthly, of 1/12 of the annual rates shown below:
Average Daily Net Assets of the Portfolio | Annual Management Fee Rate |
$0-$250 million | 0.950% |
next $250 million | 0.925% |
next $500 million | 0.900% |
next $500 million | 0.825% |
next $1 billion | 0.800% |
Over $2.5 billion | 0.775% |
For the year ended December 31, 2004, the Advisor agreed to limit its fees and reimburse expenses of each class of the SVS MFS Strategic Value Portfolio to the extent necessary to maintain the annualized expenses of Class A at 1.15% and Class B at 1.55%. Accordingly, for the year ended December 31, 2004, the Advisor waived $89,208 of management fee and the fees pursuant to the Management Agreement were equivalent to an annual effective rate of 0.68% of the Portfolio's average daily net assets.
The Scudder Mercury Large Cap Core Portfolio pays a monthly investment management fee based on the average daily net assets of the portfolio, computed and accrued daily and payable monthly, of 1/12 of the annual rates shown below:
Average Daily Net Assets of the Portfolio | Annual Management Fee Rate |
$0-$250 million | 0.900% |
next $250 million | 0.850% |
next $500 million | 0.800% |
next $1 billion | 0.750% |
next $500 million | 0.700% |
Over $2.5 billion | 0.650% |
For the year ended December 31, 2004, the Advisor agreed to limit its fees and reimburse expenses of each class of the Scudder Mercury Large Cap Core Portfolio to the extent necessary to maintain the annualized expenses of Class A at 1.00% and Class B at 1.20%. For the year ended December 31, 2004, the Advisor waived $1,398 of management fees.
Accordingly, for the year ended December 31, 2004 the fee pursuant to the Management Agreement was equivalent to an annual effective rate of 0.90% of Scudder Mercury Large Cap Core Portfolio's average daily net assets.
In addition, for the period ended December 31, 2004, the Advisor waived $26,726 of other expenses.
The Scudder Templeton Foreign Value Portfolio pays a monthly investment management fee based on the average daily net assets of the portfolio, computed and accrued daily and payable monthly, of 1/12 of the annual rates shown below:
Average Daily Net Assets of the Portfolio | Annual Management Fee Rate |
$0-$250 million | 0.950% |
next $250 million | 0.900% |
next $500 million | 0.850% |
next $1 billion | 0.750% |
next $500 million | 0.700% |
Over $2.5 billion | 0.650% |
For the year ended December 31, 2004, the Advisor agreed to limit its fees and reimburse expenses of each class of the Scudder Templeton Foreign Value Portfolio to the extent necessary to maintain the annualized expenses of Class A at 1.14% and Class B at 1.34%. For the year ended December 31, 2004, the Advisor waived $6,260 of management fees.
Accordingly, for the year ended December 31, 2004, the fee pursuant to the Management Agreement was equivalent to an annual effective rate of 0.00% of Scudder Templeton Foreign Value Portfolio's average daily net assets.
In addition, for the period ended December 31, 2004, the Advisor waived $26,622 of other expenses.
The Scudder Conservative Income Strategy Portfolio, Scudder Growth & Income Strategy Portfolio, Scudder Growth Strategy Portfolio and Scudder Income & Growth Strategy Portfolio pays a monthly investment management fee based on the average daily net assets of the portfolio, computed and accrued daily and payable monthly, of 1/12 of the annual rates shown below:
Average Daily Net Assets of the Portfolio | Annual Management Fee Rate |
$0-$500 million | 0.150% |
next $500 million | 0.140% |
next $500 million | 0.130% |
next $1 billion | 0.120% |
Over $2.5 billion | 0.110% |
For the year ended December 31, 2004, the Advisor agreed to limit its fees and reimburse expenses of Class B of the Scudder Conservative Income Strategy Portfolio, Scudder Growth & Income Strategy Portfolio, Scudder Growth Strategy Portfolio and Scudder Income & Growth Strategy Portfolio to the extent necessary to maintain the annualized expenses of Class B at 0.75%, 0.75%, 0.75% and 0.75%, respectively. For the year ended December 31, 2004, the Advisor waived $363, $9,387, $11,104 and $3,818 of management fees, respectively.
Accordingly, for the year ended December 31, 2004, the fee pursuant to the Management Agreement was equivalent to an annualized effective rate of 0.00%, 0.00%, 0.00% and 0.00% of Scudder Conservative Income Strategy Portfolio's, Scudder Growth & Income Strategy Portfolio's, Scudder Growth Strategy Portfolio's and Scudder Income & Growth Strategy Portfolio's average daily net assets, respectively.
In addition, for the year ended December 31, 2004, the Advisor waived $28,805, $9,381, $11,097 and $15,697 of other expenses for Scudder Conservative Income Strategy Portfolio, Scudder Growth & Income Strategy Portfolio, Scudder Growth Strategy Portfolio and Scudder Income & Growth Strategy Portfolio.
The Scudder Conservative Income Strategy Portfolio, Scudder Growth & Income Strategy Portfolio, Scudder Growth Strategy Portfolio and Scudder Income & Growth Strategy Portfolio do not invest in the Underlying Portfolios for the purpose of exercising management or control; however, investments within the set limits may represent a significant portion of an Underlying Portfolio. At December 31, 2004, the Scudder Portfolios held the following percentage of the Underlying Portfolios' outstanding shares as follows:
Portfolio | Scudder SVSII Fixed Income Portfolio |
Scudder Growth & Income Strategy Portfolio | 6% |
Portfolio | Scudder VIT Real Estate Portfolio |
Scudder Growth & Income Strategy Portfolio | 35% |
Scudder Growth Strategy Portfolio | 55% |
Scudder Income & Growth Strategy Portfolio | 10% |
Portfolio | Scudder SVSII MFS Strategic Value Portfolio |
Scudder Growth & Income Strategy Portfolio | 6% |
Scudder Growth Strategy Portfolio | 9% |
Deutsche Asset Management Investment Services Limited ("DeAMIS") serves as sub-advisor to the Scudder International Select Equity, Scudder Strategic Income and Scudder Total Return Portfolios and is paid by the Advisor for its services.
Dreman Value Management, L.L.C. serves as sub-advisor to the SVS Dreman Financial Services, SVS Dreman High Return Equity and SVS Dreman Small Cap Value Portfolios and is paid by the Advisor for its services.
INVESCO Institutional (N.A.) Inc. serves as sub-advisor to the SVS INVESCO Dynamic Growth Portfolio and is paid by the Advisor for its services.
Eagle Asset Management, Inc. serves as sub-advisor to the SVS Eagle Focused Large Cap Growth Portfolio and is paid by the Advisor for its services.
Janus Capital Management, L.L.C., formerly Janus Capital Corporation, serves as sub-advisor to the SVS Janus Growth and Income and SVS Janus Growth Opportunities Portfolios and is paid by the Advisor for its services.
Turner Investment Partners, Inc. serves as sub-advisor to the SVS Turner Mid Cap Growth Portfolio and is paid by the Advisor for its services.
Oak Associates, Ltd. serves as sub-advisor to the SVS Oak Strategic Equity Portfolio and is paid by the Advisor for its services.
Davis Selected Advisers, L.P., serves as sub-advisor to the SVS Davis Venture Value Portfolio and is paid by the Advisor for its services.
Jennison Associates, L.L.C. serves as sub-advisor to the "growth" portion and Dreman Value Management, L.L.C. serves as sub-advisor to the "value" portion of the of the SVS Focus Value+Growth Portfolio and are paid by the Advisor for their services.
Massachusetts Financial Services Company ("MFS") serves as sub-advisor to the SVS MFS Strategic Value Portfolio and is paid by the Advisor for its services.
Northern Trust Investments, N.A. ("NTI") serves as sub-advisor to SVS Index 500 Portfolio and is paid by the Advisor for its services.
Fund Asset Management, L.P., a division of Merrill Lynch Investment Managers ("MLIM"), serves as sub-advisor to the Scudder Mercury Large Cap Core Portfolio and is paid by the Advisor for its services.
Templeton Investment Counsel L.L.C. serves as sub-advisor to the Scudder Templeton Foreign Value Portfolio and is paid by the Advisor for its services.
The portfolios paid insurance premiums to an unaffiliated insurance broker in 2002 and 2003. This broker in turn paid a portion of its commissions to an affiliate of the Advisor, which performed certain insurance brokerage services for the broker. The Advisor has agreed to reimburse the portfolios in 2005 for the portion of commissions (plus interest) paid to the affiliate of the Advisor attributable to the premiums paid by the portfolios. The amounts for 2002 and 2003 are as follows:
Portfolio | Amount ($) | |
2002 | 2003 | |
Scudder Aggressive Growth Portfolio | 15 | 17 |
Scudder Blue Chip Portfolio | 64 | 74 |
Scudder Fixed Income Portfolio | 76 | 80 |
Scudder Global Blue Chip Portfolio | 15 | 16 |
Scudder Government & Agency Securities Portfolio | 187 | 136 |
Scudder Growth Portfolio | 90 | 95 |
Scudder High Income Portfolio | 104 | 121 |
Scudder International Select Equity Portfolio | 33 | 44 |
Scudder Large Cap Value Portfolio | 78 | 75 |
Scudder Money Market Portfolio | 223 | 162 |
Scudder Small Cap Growth Portfolio | 54 | 64 |
Scudder Strategic Income Portfolio | 19 | 20 |
Scudder Technology Growth Portfolio | 69 | 73 |
Scudder Total Return Portfolio | 243 | 211 |
SVS Davis Venture Value Portfolio | 55 | 66 |
SVS Dreman Financial Services Portfolio | 42 | 43 |
SVS Dreman High Return Equity Portfolio | 172 | 198 |
SVS Dreman Small Cap Value Portfolio | 94 | 100 |
SVS Eagle Focused Large Cap Growth Portfolio | 22 | 27 |
SVS Focus Value+Growth Portfolio | 35 | 35 |
SVS Index 500 Portfolio | 80 | 94 |
SVS INVESCO Dynamic Growth Portfolio | 8 | 11 |
SVS Janus Growth & Income Portfolio | 60 | 59 |
SVS Janus Growth Opportunities Portfolio | 42 | 41 |
SVS MFS Strategic Value Portfolio | 1 | 4 |
SVS Oak Strategic Equity Portfolio | 13 | 22 |
SVS Turner Mid Cap Growth Portfolio | 21 | 32 |
Service Provider Fees. Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Advisor, is responsible for determining the daily net asset value per share and maintaining the portfolio and general accounting records of each portfolio. In turn, SFAC has delegated certain fund accounting functions to a third-party service provider. For the year ended December 31, 2004, SFAC received the following fee for its services for the following portfolios:
Portfolio | Total Aggregated ($) | Waived ($) | Unpaid at December 31, 2004 ($) |
Scudder Aggressive Growth Portfolio | 72,186 | — | 15,331 |
Scudder Conservative Income Strategy Portfolio | 20,294 | 20,294 | — |
Scudder Global Blue Chip Portfolio | 100,052 | — | 21,687 |
Scudder Growth & Income Strategy Portfolio | 29,605 | 14,851 | 2,500 |
Scudder Growth Strategy Portfolio | 29,606 | 5,922 | 11,219 |
Scudder Income & Growth Strategy Portfolio | 29,606 | 29,606 | — |
Scudder Mercury Large Cap Core Portfolio | 4,692 | 4,692 | — |
Scudder Technology Growth Portfolio | 71,164 | — | 19,519 |
Scudder Templeton Foreign Value Portfolio | 8,188 | 8,188 | — |
SVS Davis Venture Value Portfolio | 88,473 | — | 20,793 |
SVS Dreman Financial Services Portfolio | 59,176 | — | 13,557 |
SVS Dreman High Return Equity Portfolio | 133,714 | — | 30,357 |
SVS Eagle Focused Large Cap Growth Portfolio | 71,185 | — | 17,799 |
SVS Index 500 Portfolio | 137,196 | — | 42,099 |
SVS INVESCO Dynamic Growth Portfolio | 98,193 | — | 24,100 |
SVS Janus Growth and Income Portfolio | 73,094 | — | 18,002 |
SVS Janus Growth Opportunities Portfolio | 64,004 | — | 14,898 |
SVS MFS Strategic Value Portfolio | 84,107 | — | — |
SVS Oak Strategic Equity Portfolio | 58,218 | — | 13,091 |
SVS Turner Mid Cap Growth Portfolio | 99,561 | — | 21,798 |
Distribution Service Agreement. Under the Distribution Service Agreement, in accordance with Rule 12b-1 under the 1940 Act, SISC, receives a fee ("Distribution Service Fee") of 0.25% of average daily net assets of Class B shares. For the year ended December 31, 2004, the Distribution Service Fee was as follows:
Portfolio | Total Aggregated ($) | Waived ($) | Unpaid at December 31, 2004 ($) |
Scudder Aggressive Growth Portfolio | 12,985 | — | 1,331 |
Scudder Blue Chip Portfolio | 67,530 | — | 7,396 |
Scudder Conservative Income Strategy Portfolio | 604 | 604 | — |
Scudder Fixed Income Portfolio | 175,814 | — | 16,456 |
Scudder Global Blue Chip Portfolio | 23,461 | — | 2,556 |
Scudder Government & Agency Securities Portfolio | 112,953 | — | 10,300 |
Scudder Growth Portfolio | 29,642 | — | 3,276 |
Scudder Growth & Income Strategy Portfolio | 15,635 | 15,635 | — |
Scudder Growth Strategy Portfolio | 18,496 | 18,496 | — |
Scudder High Income Portfolio | 116,895 | — | 11,765 |
Scudder Income & Growth Strategy Portfolio | 6,354 | 6,354 | — |
Scudder International Select Equity Portfolio | 78,650 | — | 9,313 |
Scudder Large Cap Value Portfolio | 81,071 | — | 8,287 |
Scudder Mercury Large Cap Core Portfolio | 229 | 229 | — |
Scudder Money Market Portfolio | 157,184 | — | 11,738 |
Scudder Small Cap Growth Portfolio | 55,527 | — | 5,777 |
Scudder Strategic Income Portfolio | 39,636 | — | 3,876 |
Scudder Technology Growth Portfolio | 34,701 | — | 3,348 |
Scudder Templeton Foreign Value Portfolio | 846 | 743 | — |
Scudder Total Return Portfolio | 66,432 | — | 6,595 |
SVS Davis Venture Value Portfolio | 121,863 | — | 13,276 |
SVS Dreman Financial Services Portfolio | 34,738 | — | 3,504 |
SVS Dreman High Return Equity Portfolio | 230,719 | — | 23,607 |
SVS Dreman Small Cap Value Portfolio | 128,313 | — | 13,939 |
SVS Eagle Focused Large Cap Growth Portfolio | 60,991 | — | 6,510 |
SVS Focus Value+Growth Portfolio | 22,563 | — | 2,275 |
SVS Index 500 Portfolio | 128,429 | — | 14,996 |
SVS INVESCO Dynamic Growth Portfolio | 14,375 | — | 1,359 |
SVS Janus Growth and Income Portfolio | 53,141 | — | 5,521 |
SVS Janus Growth Opportunities Portfolio | 17,186 | — | 1,709 |
SVS MFS Strategic Value Portfolio | 59,488 | — | — |
SVS Oak Strategic Equity Portfolio | 42,282 | — | 4,373 |
SVS Turner Mid Cap Growth Portfolio | 46,764 | — | 4,752 |
Trustees' Fees and Expenses. The portfolios pay 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 portfolios 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. Investing in High Yield Securities
Investing in high yield securities may involve greater risks and considerations not typically associated with investing in US Government bonds and other high quality fixed-income securities. These securities are non-investment grade securities, often referred to as "junk bonds." Economic downturns may disrupt the high yield market and impaired the ability of issuers to repay principal and interest. Also, an increase in interest rates would likely have an adverse impact on the value of such obligations. Moreover, high yield securities may be less liquid due to the extent that there is no established retail secondary market and because of a decline in the value of such securities.
E. Investing in Emerging Markets
Investing in emerging markets may involve special risks and considerations not typically associated with investing in the United States of America. These risks include revaluation of currencies, high rates of inflation, repatriation restrictions on income and capital, and future adverse political, social and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls, delayed settlements and their prices more volatile than those of comparable securities in the United States of America.
F. Expense Reductions
For the year ended December 31, 2004, the Advisor agreed to reimburse the Portfolios which represents a portion of the fee savings expected to be realized by the Advisor related to the outsourcing by the Advisor of certain administrative services to an unaffiliated service provider in the following amounts:
Portfolio | Amount ($) |
Scudder Aggressive Growth Portfolio | 1,090 |
Scudder Blue Chip Portfolio | 2,838 |
Scudder Fixed Income Portfolio | 2,780 |
Scudder Global Blue Chip Portfolio | 1,159 |
Scudder Government & Agency Securities Portfolio | 3,370 |
Scudder Growth Portfolio | 3,025 |
Scudder High Income Portfolio | 3,853 |
Scudder Income & Growth Strategy Portfolio | 1,273 |
Scudder International Select Equity Portfolio | 2,084 |
Scudder Large Cap Value Portfolio | 3,005 |
Scudder Money Market Portfolio | 3,903 |
Scudder Small Cap Growth Portfolio | 2,359 |
Scudder Strategic Income Portfolio | 1,248 |
Scudder Technology Growth Portfolio | 2,420 |
Scudder Total Return Portfolio | 5,835 |
SVS Davis Venture Value Portfolio | 2,965 |
SVS Dreman Financial Services Portfolio | 1,865 |
SVS Dreman High Return Equity Portfolio | 6,773 |
SVS Dreman Small Cap Value Portfolio | 4,133 |
SVS Eagle Focused Large Cap Growth Portfolio | 1,493 |
SVS Focus Value+Growth Portfolio | 1,595 |
SVS Index 500 Portfolio | 3,377 |
SVS INVESCO Dynamic Growth Portfolio | 951 |
SVS Janus Growth and Income Portfolio | 2,213 |
SVS Janus Growth Opportunities Portfolio | 1,698 |
SVS MFS Strategic Value Portfolio | 941 |
SVS Oak Strategic Equity Portfolio | 1,351 |
SVS Turner Mid Cap Growth Portfolio | 1,633 |
In addition, the portfolios have entered into arrangements with their custodian whereby credits realized as a result of uninvested cash balances were used to reduce a portion of the portfolios' expenses. During the year ended December 31, 2004, the portfolios' custodian fees were reduced under these arrangements as follows:
Portfolio | Amount ($) |
Scudder Aggressive Growth Portfolio | 228 |
Scudder Blue Chip Portfolio | 96 |
Scudder Fixed Income Portfolio | 1,290 |
Scudder Government & Agency Securities Portfolio | 607 |
Scudder Growth Portfolio | 18 |
Scudder High Income Portfolio | 5,056 |
Scudder Large Cap Value Portfolio | 29 |
Scudder Mercury Large Cap Core Portfolio | 18 |
Scudder Money Market Portfolio | 477 |
Scudder Small Cap Growth Portfolio | 225 |
Scudder Strategic Income Portfolio | 769 |
Scudder Technology Growth Portfolio | 190 |
Scudder Total Return Portfolio | 982 |
SVS Davis Venture Value Portfolio | 80 |
SVS Dreman Financial Services Portfolio | 31 |
SVS Dreman High Return Equity Portfolio | 36 |
SVS Dreman Small Cap Value Portfolio | 2,577 |
SVS Eagle Focused Large Cap Growth Portfolio | 57 |
SVS Focus Value+Growth Portfolio | 28 |
SVS Index 500 Portfolio | 69 |
SVS INVESCO Dynamic Growth Portfolio | 57 |
SVS Janus Growth and Income Portfolio | 56 |
SVS Janus Growth Opportunities Portfolio | 30 |
SVS MFS Strategic Value Portfolio | 28 |
SVS Oak Strategic Equity Portfolio | 14 |
SVS Turner Mid Cap Growth Portfolio | 52 |
G. Forward Foreign Currency Exchange Contracts
As of December 31, 2004, the following portfolios had entered into the following forward foreign currency exchange contracts resulting in the following:
Scudder High Income Portfolio |
|
|
|
|
| |||
Contracts to Deliver |
| In Exchange For |
| Settlement Date |
| Unrealized Depreciation (US$) | ||
EUR | 2,228,993 |
| USD | 2,735,509 |
| 3/9/2005 |
| $ (296,355) |
EUR | 988,923 |
| USD | 1,277,535 |
| 3/9/2005 |
| (67,593) |
EUR | 4,836,637 |
| USD | 6,107,888 |
| 3/9/2005 |
| (470,879) |
EUR | 155,813 |
| USD | 207,473 |
| 5/27/2005 |
| (4,773) |
MXN | 14,499,776 |
| USD | 1,240,211 |
| 3/9/2005 |
| (45,005) |
Total unrealized depreciation |
|
|
|
| $ (884,605) |
Scudder Strategic Income Portfolio | In Exchange For |
| Settlement Date |
| Unrealized Appreciation (US$) | |||
Contracts to Deliver |
| |||||||
USD | 184,193 |
| EUR | 146,000 |
| 1/25/2005 |
| $ 14,290 |
USD | 294,869 |
| EUR | 396,257 |
| 1/27/2005 |
| 4,616 |
USD | 92,053 |
| EUR | 73,000 |
| 1/27/2005 |
| 7,190 |
USD | 170,883 |
| EUR | 134,000 |
| 1/27/2005 |
| 11,289 |
USD | 159,960 |
| EUR | 120,000 |
| 1/27/2005 |
| 3,179 |
USD | 137,120 |
| MXN | 1,560,000 |
| 1/27/2005 |
| 2,161 |
USD | 130,000 |
| RUB | 3,711,500 |
| 1/27/2005 |
| 3,934 |
USD | 110,000 |
| TRL | 177,760,000,000 |
| 1/27/2005 |
| 67,760 |
USD | 100,000 |
| TRL | 149,800,000,000 |
| 1/27/2005 |
| 49,800 |
USD | 121,954 |
| TRL | 180,794,000,000 |
| 1/27/2005 |
| 58,839 |
USD | 130,000 |
| TWD | 4,192,500 |
| 1/27/2005 |
| 2,456 |
USD | 115,192 |
| ARS | 345,000 |
| 1/27/2005 |
| 1,460 |
USD | 235,000 |
| BRL | 716,162 |
| 1/28/2005 |
| 31,083 |
Total unrealized appreciation |
|
|
|
| $ 258,057 |
Contracts to Deliver |
| In Exchange For |
| Settlement Date |
| Unrealized Depreciation (US$) | ||
EUR | 1,839,002 |
| USD | 2,256,455 |
| 1/21/2005 |
| $ (243,560) |
EUR | 823,877 |
| USD | 1,099,999 |
| 1/21/2005 |
| (19,855) |
GBP | 1,019,863 |
| USD | 1,810,257 |
| 1/21/2005 |
| (144,887) |
EUR | 1,400,000 |
| USD | 1,766,100 |
| 1/27/2005 |
| (137,193) |
EUR | 110,000 |
| USD | 140,307 |
| 1/27/2005 |
| (9,237) |
EUR | 37,590 |
| USD | 50,000 |
| 1/27/2005 |
| (1,103) |
MXN | 1,144,040 |
| USD | 97,982 |
| 1/27/2005 |
| (4,161) |
MXN | 1,799,920 |
| USD | 160,000 |
| 1/27/2005 |
| (702) |
MXN | 2,928,328 |
| USD | 260,000 |
| 1/27/2005 |
| (1,449) |
TRL | 330,594,000,000 |
| USD | 211,851 |
| 1/27/2005 |
| (118,743) |
TRL | 177,760,000,000 |
| USD | 109,256 |
| 1/27/2005 |
| (68,504) |
BRL | 384,670 |
| USD | 130,000 |
| 1/28/2005 |
| (12,920) |
BRL | 331,492 |
| USD | 119,113 |
| 1/28/2005 |
| (4,049) |
EUR | 139,576 |
| USD | 171,293 |
| 3/9/2005 |
| (18,558) |
EUR | 19,412 |
| USD | 23,799 |
| 3/9/2005 |
| (2,605) |
EUR | 52,001 |
| USD | 63,129 |
| 3/9/2005 |
| (7,602) |
EUR | 51,657 |
| USD | 63,616 |
| 3/9/2005 |
| (6,648) |
EUR | 51,667 |
| USD | 64,042 |
| 3/9/2005 |
| (6,235) |
EUR | 56,094 |
| USD | 68,996 |
| 3/9/2005 |
| (7,303) |
EUR | 22,386 |
| USD | 28,456 |
| 3/9/2005 |
| (1,994) |
EUR | 54,251 |
| USD | 69,108 |
| 3/9/2005 |
| (4,683) |
EUR | 14,880 |
| USD | 19,140 |
| 3/9/2005 |
| (1,099) |
EUR | 115,504 |
| USD | 149,213 |
| 3/9/2005 |
| (7,895) |
EUR | 21,379 |
| USD | 27,870 |
| 3/9/2005 |
| (1,210) |
EUR | 15,341 |
| USD | 20,370 |
| 3/9/2005 |
| (497) |
EUR | 13,174 |
| USD | 17,730 |
| 3/9/2005 |
| (190) |
MXN | 1,111,737 |
| USD | 94,907 |
| 3/9/2005 |
| (3,634) |
MXN | 78,094 |
| USD | 6,622 |
| 3/9/2005 |
| (300) |
MXN | 85,204 |
| USD | 7,508 |
| 3/9/2005 |
| (44) |
EUR | 15,582 |
| USD | 20,748 |
| 5/27/2005 |
| (477) |
Total unrealized depreciation |
|
|
|
| $ (837,337) |
Scudder Total Return Portfolio | In Exchange For |
| Settlement Date |
| Unrealized Appreciation (US$) | |||
Contracts to Deliver |
| |||||||
AUD | 760,000 |
| NZD | 834,998 |
| 1/27/2005 |
| $ 3,475 |
NZD | 853,230 |
| AUD | 798,000 |
| 1/27/2005 |
| 18,700 |
EUR | 469,000 |
| USD | 623,796 |
| 1/27/2005 |
| 13,808 |
USD | 1,861,234 |
| JPY | 191,400,000 |
| 1/27/2005 |
| 10,181 |
USD | 623,110 |
| JPY | 65,100,000 |
| 1/27/2005 |
| 13,406 |
AUD | 760,000 |
| NZD | 834,998 |
| 1/27/2005 |
| 3,307 |
USD | 1,236,436 |
| SEK | 8,500,000 |
| 1/27/2005 |
| 42,955 |
EUR | 469,856 |
| SEK | 4,210,000 |
| 1/27/2005 |
| 7,652 |
USD | 614,292 |
| TWD | 19,900,000 |
| 1/27/2005 |
| 14,418 |
Total unrealized appreciation |
|
|
|
| $ 127,902 |
Contracts to Deliver |
| In Exchange For |
| Settlement Date |
| Unrealized Depreciation (US$) | ||
NZD | 2,619,711 |
| AUD | 2,365,000 |
| 1/27/2005 |
| $ (1,813) |
EUR | 147,700 |
| USD | 194,392 |
| 1/27/2005 |
| (6,406) |
EUR | 45,108 |
| USD | 60,000 |
| 1/27/2005 |
| (1,324) |
EUR | 469,859 |
| SEK | 4,210,000 |
| 1/27/2005 |
| (12,744) |
EUR | 460,000 |
| USD | 611,101 |
| 1/27/2005 |
| (14,267) |
GBP | 330,000 |
| USD | 610,566 |
| 1/27/2005 |
| (21,798) |
JPY | 64,000,000 |
| USD | 621,661 |
| 1/27/2005 |
| (4,099) |
MXN | 2,294,000 |
| USD | 201,502 |
| 1/27/2005 |
| (3,313) |
NZD | 2,619,710 |
| AUD | 2,365,000 |
| 1/27/2005 |
| (34,648) |
NZD | 853,230 |
| AUD | 798,000 |
| 1/27/2005 |
| (8,889) |
EUR | 231,151 |
| USD | 298,612 |
| 3/9/2005 |
| (15,799) |
EUR | 442,689 |
| USD | 574,818 |
| 3/9/2005 |
| (27,325) |
EUR | 20,520 |
| USD | 26,168 |
| 3/9/2005 |
| (1,744) |
MXN | 26,990,237 |
| USD | 2,319,945 |
| 3/9/2005 |
| (72,386) |
EUR | 25,969 |
| USD | 34,579 |
| 5/27/2005 |
| (796) |
Total unrealized depreciation |
|
|
|
| $ (227,351) |
SVS Janus Growth and Income Portfolio |
| Settlement Date |
| Unrealized Depreciation (US$) | ||||
Contracts to Deliver |
| In Exchange For | ||||||
CHF | 800,000 |
| USD | 641,849 |
| 4/15/2005 |
| $ (65,587) |
CHF | 925,000 |
| USD | 735,996 |
| 4/15/2005 |
| (81,977) |
CHF | 180,000 |
| USD | 154,089 |
| 4/15/2005 |
| (5,083) |
EUR | 915,000 |
| USD | 1,126,914 |
| 4/15/2005 |
| (118,433) |
EUR | 325,000 |
| USD | 409,841 |
| 4/15/2005 |
| (32,495) |
Total unrealized depreciation | $ (303,575) |
Currency Abbreviations:
ARS | Argentine Peso | JPY | Japanese Yen |
BRL | Brazilian Real | MXN | Mexican Peso |
CHF | Swiss Franc | RUB | Russian Ruble |
EUR | Euro | TRL | Turkish Lira |
GBP | British Pound | USD | United States Dollar |
AUD | Australian Dollar | SEK | Swedish Krona |
TWD | Taiwanese Dollar | NZD | New Zealand Dollar |
H. Ownership of the Portfolios
At December 31, 2004, the beneficial ownership in the portfolios was as follows:
Scudder Aggressive Growth Portfolio: Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 64% and 32%. Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class B shares of the Portfolio, each owning 86% and 14%.
Scudder Blue Chip Portfolio: Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 54% and 38%. Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class B shares of the Portfolio, each owning 82% and 18%.
Scudder Conservative Income Strategy Portfolio: Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class B shares of the Portfolio, each owning 53% and 42%.
Scudder Fixed Income Portfolio: Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 40% and 38%. One Participating Insurance Company was the owner of record of 10% or more of the total outstanding Class B shares of the Portfolio, owning 85%.
Scudder Global Blue Chip Portfolio: Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 57% and 41%. Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class B shares of the Portfolio, each owning 74% and 26%.
Scudder Government & Agency Securities Portfolio: Three Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 43%, 31% and 19%. One Participating Insurance Company was the owner of record of 10% or more of the total outstanding Class B shares of the Portfolio, owning 89%.
Scudder Growth Portfolio: Three Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 47%, 28% and 21%. Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class B shares of the Portfolio, each owning 83% and 16%.
Scudder Growth & Income Strategy Portfolio: Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class B shares of the Portfolio, each owning 80% and 21%.
Scudder Growth Strategy Portfolio: Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class B shares of the Portfolio, each owning 84% and 16%.
Scudder High Income Portfolio: Three Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 38%, 32% and 27%. Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class B shares of the Portfolio, each owning 84% and 16%.
Scudder Income & Growth Strategy Portfolio: Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class B shares of the Portfolio, each owning 70% and 30%.
Scudder International Select Equity Portfolio: Three Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 38%, 30% and 29%. Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class B shares of the Portfolio, each owning 67% and 33%.
Scudder Large Cap Value Portfolio: Three Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 43%, 37% and 17%. Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class B shares of the Portfolio, each owning 84% and 16%.
Scudder Mercury Large Cap Core Portfolio: One Participating Insurance Company was the owner of record of 10% or more of the total outstanding Class A shares of the Portfolio, owning 100%. Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class B shares of the Portfolio, each owning 53% and 47%.
Scudder Money Market Portfolio: Three Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 41%, 35% and 22%. Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class B shares of the Portfolio, each owning 61% and 34%.
Scudder Small Cap Growth Portfolio: Three Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 42%, 28% and 26%. One Participating Insurance Company was the owner of record of 10% or more of the total outstanding Class B shares of the Portfolio, owning 87%.
Scudder Strategic Income Portfolio: Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 48% and 48%. Two Participating Insurance Companies were owners of record of 10% or more of the outstanding Class B shares of the Portfolio, each owning 72% and 28%.
Scudder Technology Growth Portfolio: Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 60% and 35%. Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class B shares of the Portfolio, each owning 83% and 16%.
Scudder Templeton Foreign Value Portfolio: One Participating Insurance Company was owner of record of 10% or more of the total outstanding Class A shares of the Portfolio, owning 100%. One Participating Insurance Company was the owner of record of 10% or more of the total outstanding Class B shares of the Portfolio, owning 93%.
Scudder Total Return Portfolio: Three Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 48%, 32% and 19%. Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class B shares of the Portfolio, each owning 80% and 19%.
SVS Davis Venture Value Portfolio: Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 75% and 24%. Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class B shares of the Portfolio, each owning 77% and 22%.
SVS Dreman Financial Services Portfolio: Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 55% and 42%. Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class B shares of the Portfolio, each owning 81% and 19%.
SVS Dreman High Return Equity Portfolio: Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 67% and 29%. Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class B shares of the Portfolio, each owning 87% and 12%.
SVS Dreman Small Cap Value Portfolio: Three Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 55%, 30% and 13%. Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class B shares of the Portfolio, each owning 81% and 15%.
SVS Eagle Focused Large Cap Growth Portfolio: Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 68% and 26%. One Participating Insurance Company was the owner of record of 10% or more of the total outstanding Class B shares of the Portfolio, owning 88%.
SVS Focus Value+Growth Portfolio: Three Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 50%, 34% and 14%. Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class B shares of the Portfolio, each owning 89% and 11%.
SVS Index 500 Portfolio: Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 67% and 31%. Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class B shares of the Portfolio, each owning 85% and 15%.
SVS INVESCO Dynamic Growth Portfolio: Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 80% and 20%. One Participating Insurance Company was the owner of record of 10% or more of the total outstanding Class B shares of the Portfolio, owning 91%.
SVS Janus Growth and Income Portfolio: Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 69% and 30%. Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class B shares of the Portfolio, each owning 86% and 14%.
SVS Janus Growth Opportunities Portfolio: Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 69% and 31%. One Participating Insurance Company was the owner of record of 10% or more of the total outstanding Class B shares of the Portfolio, owning 92%.
SVS MFS Strategic Value Portfolio: Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 60% and 20%. Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class B shares of the Portfolio, each owning 87% and 13%.
SVS Oak Strategic Equity Portfolio: Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 80% and 20%. Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class B shares of the Portfolio, each owning 84% and 11%.
SVS Turner Mid Cap Growth Portfolio: Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, owning 81% and 19%. Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class B shares of the Portfolio, each owning 85% and 15%.
I. Line of Credit
The Trust 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, based upon net assets, among each of the Participants. Interest is calculated at the Federal Funds Rate plus 0.5 percent. The facility borrowing limit for each portfolio is as follows:
Portfolio | Facility Borrowing Limit |
Scudder Aggressive Growth Portfolio | 33% |
Scudder Blue Chip Portfolio | 33% |
Scudder Fixed Income Portfolio | 33% |
Scudder Global Blue Chip Portfolio | 33% |
Scudder Government & Agency Securities Portfolio | 33% |
Scudder Growth Portfolio | 33% |
Scudder High Income Portfolio | 33% |
Scudder International Select Equity Portfolio | 33% |
Scudder Large Cap Value Portfolio | 33% |
Scudder Money Market Portfolio | 33% |
Scudder Small Cap Growth Portfolio | 33% |
Scudder Strategic Income Portfolio | 33% |
Scudder Technology Growth Portfolio | 5% |
Scudder Total Return Portfolio | 33% |
SVS Davis Venture Value Portfolio | 33% |
SVS Dreman Financial Services Portfolio | 33% |
SVS Dreman High Return Equity Portfolio | 33% |
SVS Dreman Small Cap Value Portfolio | 33% |
SVS Eagle Focused Large Cap Growth Portfolio | 33% |
SVS Focus Value+Growth Portfolio | 33% |
SVS Index 500 Portfolio | 33% |
SVS INVESCO Dynamic Growth Portfolio | 33% |
SVS Janus Growth and Income Portfolio | 33% |
SVS Janus Growth Opportunities Portfolio | 33% |
SVS MFS Strategic Value Portfolio | 33% |
SVS Oak Strategic Equity Portfolio | 33% |
SVS Turner Mid Cap Growth Portfolio | 33% |
J. Regulatory Matters and Litigation
Since at least July 2003, federal, state and industry regulators have been conducting ongoing inquiries and investigations ("inquiries") into the mutual fund industry, and have requested information from numerous mutual fund companies, including Scudder Investments. It is not possible to determine what the outcome of these inquiries will be or what the effect, if any, would be on the funds or their advisors. Publicity about mutual fund practices arising from these industry-wide inquiries serves as the general basis of a number of private lawsuits against the Scudder funds. These lawsuits, which previously have been reported in the press, involve purported class action and derivative lawsuits, making various allegations and naming as defendants various persons, including certain Scudder funds, the funds' investment advisors and their affiliates, certain individuals, including in some cases fund Trustees/Directors, officers, and other parties. Each Scudder fund's investment advisor has agreed to indemnify the applicable Scudder funds in connection with these lawsuits, or other lawsuits or regulatory actions that may be filed making allegations similar to these lawsuits regarding market timing, revenue sharing, fund valuation or other subjects arising from or related to the pending inquiries. Based on currently available information, the funds' investment advisors believe the likelihood that the pending lawsuits will have a material adverse financial impact on a Scudder fund is remote and such actions are not likely to materially affect their ability to perform under their investment management agreements with the Scudder funds.
K. Payments Made by Affiliates
During the year ended December 31, 2004, the Advisor fully reimbursed the Government and Agency Securities Portfolio $2,420 for losses incurred in violation of investment restrictions.
L. Fund Mergers
On January 20, 2005, the Board of the following Acquired Portfolios approved, in principle, the merger of the Acquiring Portfolio into the Acquired Portfolio, a Scudder fund managed by the same portfolio management team.
Completion of the merger is subject to a number of conditions, including final approval by the Portfolio's Board and approval by the shareholders of the Portfolio at a shareholder meeting expected to be held within approximately the next five months.
Acquired Portfolios | Acquiring Portfolios |
SVS Focus Value+Growth Portfolio | SVSI Growth and Income Portfolio |
Scudder Growth Portfolio | SVSI Capital Growth Portfolio |
Report of Independent Registered Public Accounting Firm |
|
To the Shareholders and Board of Trustees of Scudder Variable Series II:
We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of Scudder Variable Series II (the "Trust") comprising the Scudder Aggressive Growth, Scudder Blue Chip, Scudder Conservative Income Strategy, Scudder Fixed Income, Scudder Global Blue Chip, Scudder Government & Agency Securities (formerly, Scudder Government Securities), Scudder Growth, Scudder Growth & Income Strategy, Scudder Growth Strategy, Scudder High Income, Scudder Income & Growth Strategy, Scudder International Select Equity, Scudder Large Cap Value (formerly, Scudder Contrarian Value), Scudder Mercury Large Cap Core, Scudder Money Market, Scudder Small Cap Growth, Scudder Strategic Income, Scudder Technology Growth, Scudder Templeton Foreign Value, Scudder Total Return, SVS Davis Venture Value, SVS Dreman Financial Services, SVS Dreman High Return Equity, SVS Dreman Small Cap Value, SVS Eagle Focused Large Cap Growth, SVS Focus Value+Growth, SVS Index 500, SVS INVESCO Dynamic Growth, SVS Janus Growth and Income, SVS Janus Growth Opportunities, SVS MFS Strategic Value, SVS Oak Strategic Equity, and SVS Turner Mid Cap Growth Portfolios (collectively, the "portfolios") as of December 31, 2004, and the related statements of operations, the statements of changes in net assets and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Trust'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 the standards of the Public Company Accounting Oversight Board (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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. 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 each of the portfolios of the Scudder Variable Series II at December 31, 2004, and the results of their operations, the changes in their net assets and their financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles.
Boston, Massachusetts
February 15, 2005
Tax Information (Unaudited) |
|
The following portfolios paid distributions from net long-term capital gains during the year ended December 31, 2004 as follows:
Portfolio | Distribution Per Share ($) | % Representing 15% Rate Gains |
Scudder Fixed Income Portfolio | .08 | 100 |
Scudder Strategic Income Portfolio | .013 | 100 |
SVS MFS Strategic Value Portfolio | .004 | 100 |
The following portfolios designated as capital gain dividends for its year ended December 31, 2004:
Portfolio | Capital Gain ($) | % Representing 15% Rate Gains |
Scudder Fixed Income Portfolio | 1,470,000 | 100 |
Scudder Government & Agency Securities Portfolio | 30,000 | 100 |
Scudder Strategic Income Portfolio | 270,000 | 100 |
SVS Dreman Small Cap Value Portfolio | 51,844,000 | 100 |
SVS MFS Strategic Value Portfolio | 1,427,000 | 100 |
For corporate shareholders, the following percentage of income dividends paid during the following portfolios' fiscal year ended December 31, 2004 qualified for the dividends received deduction:
Portfolio | % |
Scudder Blue Chip Portfolio | 100 |
Scudder Global Blue Chip Portfolio | 46 |
Scudder Growth Portfolio | 100 |
Scudder Large Cap Value Portfolio | 100 |
Scudder Total Return Portfolio | 53 |
SVS Davis Venture Value Portfolio | 100 |
SVS Dreman Financial Services Portfolio | 100 |
SVS Dreman High Return Equity Portfolio | 100 |
SVS Dreman Small Cap Value Portfolio | 100 |
SVS Focus Value+Growth Portfolio | 100 |
SVS Index 500 Portfolio | 100 |
SVS MFS Strategic Value Portfolio | 100 |
Scudder International Select Equity Portfolio paid foreign taxes of $537,188 and earned $3,892,991 of foreign source income during the year ended December 31, 2004. Pursuant to Section 853 of the Internal Revenue Code, Scudder International Select Equity Portfolio designates $0.03 per share as foreign taxes paid and $0.20 per share as income earned from foreign sources for the year ended December 31, 2004.
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 (800) 621-1048.
Proxy Voting |
|
A description of the Trust's policies and procedures for voting proxies for portfolio securities and information about how the Trust voted proxies related to its portfolio securities during the 12-month period ended June 30 is available 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 of the Trust's policies and procedures without charge, upon request, call us toll free at (800) 621-1048.
|
The following table presents certain information regarding the Trustees and Officers of the Trust as of December 31, 2004. 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, retires or is removed as provided in the governing documents of the Trust.
Independent Trustees | ||
Name, Year of Birth, Position(s) Held with the Fund and Length of Time Served1 | Principal Occupation(s) During Past 5 Years and | Number of Funds in Fund Complex Overseen |
Shirley D. Peterson (1941) Chairman, 2004-present 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); AK Steel (steel production); Goodyear Tire & Rubber Co. (April 2004-present) ; Champion Enterprises, Inc. (manufactured home building); Trustee, Bryn Mawr College. Former Directorship: Bethlehem Steel Corp. | 86 |
John W. Ballantine (1946) 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: First Oak Brook Bancshares, Inc.; Oak Brook Bank; American Healthways, Inc. (provider of disease and care management services); Portland General Electric (utility company) | 86 |
Lewis A. Burnham (1933) Trustee, 1977-present | Retired; formerly, Director of Management Consulting, McNulty & Company (1990-1998); prior thereto, Executive Vice President, Anchor Glass Container Corporation | 86 |
Donald L. Dunaway (1937) Trustee, 1980-present | Retired; formerly, Executive Vice President, A.O. Smith Corporation (diversified manufacturer) (1963-1994) | 86 |
James R. Edgar (1946) 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) | 86 |
Paul K. Freeman (1950) Trustee, 2002-present | President, Cook Street Holdings (consulting); Senior Visiting Research Scholar, Graduate School of International Studies, 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) | 86 |
Robert B. Hoffman (1936) 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). Directorships: RCP Advisors, LLC (a private equity investment advisory firm) | 86 |
William McClayton (1945) Trustee, 2004-present | Managing Director of Finance and Administration, DiamondCluster International, Inc. (global management consulting firm) (2001-present); formerly, Partner, Arthur Andersen LLP (1986-2001). Formerly: Trustee, Ravinia Festival; Board of Managers, YMCA of Metropolitan Chicago | 86 |
Robert H. Wadsworth (1940) Trustee, 2004-present | President, Robert H. Wadsworth Associates, Inc. (consulting firm) (May 1983-present). Formerly, President and Trustee, Trust for Investment Managers (registered investment company) (April 1999-June 2002); President, Investment Company Administration, L.L.C. (January 1992*-July 2001); President, Treasurer and Director, First Fund Distributors, Inc. (June 1990-January 2002); Vice President, Professionally Managed Portfolios (May 1991-January 2002) and Advisors Series Trust (October 1996-January 2002) (registered investment companies). * Inception date of the corporation which was the predecessor to the L.L.C. | 145 |
John G. Weithers (1933) 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 | 86 |
Interested Trustee and Officers2 | ||
Name, Year of Birth, Position(s) Held with the Fund and Length of Time Served1 | Principal Occupation(s) During Past 5 Years and | Number of Funds in Fund Complex Overseen |
William N. Shiebler3 (1942) Trustee, 2004-present | Chief Executive Officer in the Americas for Deutsche Asset Management ("DeAM") and a member of the DeAM Global Executive Committee (since 2002); Vice Chairman of Putnam Investments, Inc. (1999); Director and Senior Managing Director of Putnam Investments, Inc. and President, Chief Executive Officer, and Director of Putnam Mutual Funds Inc. (1990-1999) | 137 |
Julian F. Sluyters4 (1960) President and Chief Executive Officer, 2004-present | Managing Director, Deutsche Asset Management (since May 2004); President and Chief Executive Officer of The Germany Fund, Inc., The New Germany Fund, Inc., The Central Europe and Russia Fund, Inc., The Brazil Fund, Inc., The Korea Fund, Inc., Scudder Global High Income Fund, Inc. and Scudder New Asia Fund, Inc. (since May 2004); President and Chief Executive Officer, UBS Fund Services (2001-2003); Chief Administrative Officer (1998-2001) and Senior Vice President and Director of Mutual Fund Operations (1991-1998) UBS Global Asset Management | n/a |
Philip J. Collora (1945) Vice President and Assistant Secretary, 1986-present | Director, Deutsche Asset Management | n/a |
Kenneth Murphy5 (1963) Vice President, 2002-present | Vice President, Deutsche Asset Management (2000-present); formerly, Director, John Hancock Signature Services (1992-2000) | n/a |
Paul H. Schubert4 (1963) Chief Financial Officer, 2004-present | Managing Director, Deutsche Asset Management (since July 2004); formerly, Executive Director, Head of Mutual Fund Services and Treasurer for UBS Family of Funds at UBS Global Asset Management (1994-2004) | n/a |
Charles A. Rizzo5 (1957) Treasurer, 2002-present | Managing Director, Deutsche Asset Management (since April 2004); formerly, Director, Deutsche Asset Management (April 2000-March 2004); 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 |
John Millette5 (1962) Secretary, 2001-present | Director, Deutsche Asset Management | n/a |
Lisa Hertz4 (1970) Assistant Secretary, 2003-present | Assistant Vice President, Deutsche Asset Management | n/a |
Daniel O. Hirsch6 (1954) 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 |
Caroline Pearson5 (1962) Assistant Secretary, 1998-present | Managing Director, Deutsche Asset Management | n/a |
Kevin M. Gay5 (1959) Assistant Treasurer, 2004-present | Vice President, Deutsche Asset Management | n/a |
Salvatore Schiavone5 (1965) Assistant Treasurer, 2003-present | Director, Deutsche Asset Management | n/a |
Kathleen Sullivan D'Eramo5 (1957) Assistant Treasurer, 2003-present | Director, Deutsche Asset Management | n/a |
Philip Gallo4 (1962) Chief Compliance Officer, 2004-present | Managing Director, Deutsche Asset Management (2003-present); formerly, Co-Head of Goldman Sachs Asset Management Legal (1994-2003) | 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, the 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. Interested persons receive no compensation from the fund.
3 Address: 280 Park Avenue, New York, New York
4 Address: 345 Park Avenue, New York, New York
5 Address: Two International Place, Boston, Massachusetts
6 Address: One South Street, Baltimore, Maryland
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.
About the Fund's Advisor
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.
An investment in the Money Market Portfolio is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Money Market Portfolio seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Portfolio.
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.
Scudder Distributors, Inc.
222 South Riverside Plaza
Chicago, IL 60606
(800) 778-1482
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by individual investors.
Printed on recycled paper.
SVS2-2 (2/28/05) 35972
Form A
Printed in the U.S.A.
ITEM 2. CODE OF ETHICS. As of the end of the period, December 31, 2004, Scudder Variable Series II has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its Principal Executive Officer and Principal Financial Officer. There have been no amendments to, or waivers from, a provision of the code of ethics during the period covered by this report that would require disclosure under Item 2. 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. SCUDDER VARIABLE SERIES II FORM N-CSR DISCLOSURE RE: AUDIT FEES The following table shows the amount of fees that Ernst & Young, LLP ("E&Y"), the Fund's auditor, billed to the Fund during the Fund's last two fiscal years. For engagements with E&Y entered into on or after May 6, 2003, the Audit Committee approved in advance all audit services and non-audit services that E&Y provided to the Fund. The Audit Committee has delegated certain pre-approval responsibilities to its Chairman (or, in his absence, any other member of the Audit Committee). Services that the Fund's Auditor Billed to the Fund - -------------------------------------------------------------------------------- Fiscal Year Audit Fees Audit-Related Tax Fees All Other Ended Billed Fees Billed Billed to Fees Billed December 31, to Fund to Fund Fund to Fund - -------------------------------------------------------------------------------- 2004 $1,142,235 $0 $201,571 $0 - -------------------------------------------------------------------------------- 2003 $999,220 $0 $162,821 $9,828 - -------------------------------------------------------------------------------- The above "Tax Fees" were billed for professional services rendered for tax compliance and tax return preparation. Services that the Fund's Auditor Billed to the Adviser and Affiliated Fund Service Providers The following table shows the amount of fees billed by E&Y to Deutsche Investment Management Americas, Inc. ("DeIM" or the "Adviser"), and any entity controlling, controlled by or under common control with DeIM ("Control Affiliate") that provides ongoing services to the Fund ("Affiliated Fund Service Provider"), for engagements directly related to the Fund's operations and financial reporting, during the Fund's last two fiscal years. - -------------------------------------------------------------------------------- Audit-Related Tax Fees All Other Fees Billed Billed to Fees Billed to Adviser Adviser and to Adviser and Fiscal and Affiliated Affiliated Affiliated Year Ended Fund Service Fund Service Fund Service December 31, Providers Providers Providers - -------------------------------------------------------------------------------- 2004 $347,500 $0 $0 - -------------------------------------------------------------------------------- 2003 $112,900 $0 $0 - -------------------------------------------------------------------------------- The "Audit-Related Fees" were billed for services in connection with the assessment of internal controls and additional related procedures.Non-Audit Services The following table shows the amount of fees that E&Y billed during the Fund's last two fiscal years for non-audit services. For engagements entered into on or after May 6, 2003, the Audit Committee pre-approved all non-audit services that E&Y provided to the Adviser and any Affiliated Fund Service Provider that related directly to the Fund's operations and financial reporting. The Audit Committee requested and received information from E&Y about any non-audit services that E&Y rendered during the Fund's last fiscal year to the Adviser and any Affiliated Fund Service Provider. The Committee considered this information in evaluating E&Y's independence. - -------------------------------------------------------------------------------- Total Non-Audit Fees billed to Adviser and Affiliated Fund Total Service Providers Non-Audit (engagements Fees billed related to Adviser and directly to the Affiliated Fund Total operations and Service Non-Audit financial Providers Fees Billed reporting (all other Total of Fiscal to Fund of the Fund) engagements) (A), (B Year Ended December 31, (A) (B) (C) and (C) - -------------------------------------------------------------------------------- 2004 $201,571 $0 $331,601 $533,172 - -------------------------------------------------------------------------------- 2003 $172,649 $0 $3,742,000 $3,914,649 - -------------------------------------------------------------------------------- All other engagement fees were billed for services in connection with risk management and process improvement initiatives for DeIM and other related entities that provide support for the operations of the fund. *** E&Y recently advised the Fund's Audit Committee that various E&Y member firms provided certain non-audit services to Deutsche Bank entities and affiliates (collectively, the "DB entities") between 2003 and 2005 that raise issues under the SEC auditor independence rules. The DB entities are within the "Investment Company Complex" (as defined by SEC rules) and therefore covered by the SEC auditor independence rules applicable to the Fund. First, E&Y advised the Audit Committee that in connection with providing permitted expatriate tax compliance services for DB entities during 2003 and 2004, member firms in China and Japan ("E&Y China" and "E&Y Japan," respectively) received funds from the DB entities that went into E&Y "representative bank trust accounts" and were used to pay the foreign income taxes of the expatriates. E&Y has advised the Audit Committee that handling those funds was in violation of Rule 2-01 of Regulation S-X. (Rule 2-01(c)(4)(viii) provides that an accountant's independence is impaired if the accountant has custody of assets of the audit client.) Second, E&Y advised the Audit Committee that in connection with providing monthly payroll services to employees of certain DB entities from May 2003 to February 2005, a member firm in Chile ("E&Y Chile") received funds from the DB entities that went into an E&Y trust account and were used to pay the net salaries and social security taxes of executives of the DB entities. E&Y has advised the Audit Committee that handling those funds was in violation of Rule 2-01 of Regulation S-X. Third, E&Y advised the Audit Committee that in connection with providing certain services in assisting a DB entity with various regulatory reporting requirements, a member firm in France ("E&Y France") entered into an engagement with the DB entity that resulted in E&Y France staff functioning under the direct responsibility and direction of a DB entity supervisor. E&Y advised the Audit Committee that, although the services provided were "permitted services" under Rule 2-01 of Regulation S-X, the structure of the engagement was in violation of Rule 2-01 of Regulation S-X. (Rule 2-01(c)(4)(vi) provides that an accountant's independence is impaired if the accountant acts as an employee of an audit client.) The Audit Committee was informed that E&Y China received approximately $1,500, E&Y Japan received approximately $41,000, E&Y Chile received approximately $12,000 and E&Y France received approximately $100,000 for the services they provided to the DB entities. E&Y advised the Audit Committee that it conducted an internal review of the situation and, in view of the fact that similar expatriate tax compliance services were provided to a number of E&Y audit clients unrelated to DB or the Fund, E&Y has advised the SEC and the PCAOB of the independence issues arising from those services. E&Y advised the Audit Committee that E&Y believes its independence as auditors for the Fund was not impaired during the period the services were provided. In reaching this conclusion, E&Y noted a number of factors, including that none of the E&Y personnel who provided the non-audit services to the DB entities were involved in the provision of audit services to the Fund, the E&Y professionals responsible for the Fund's audits were not aware that these non-audit services took place, and that the fees charged were not significant to E&Y overall or to the fees charged to the Investment Company Complex. E&Y also noted that E&Y China, E&Y Japan and E&Y Chile are no longer providing these services and that the E&Y France engagement has been restructured. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS Not Applicable ITEM 6. SCHEDULE OF INVESTMENTS Not Applicable ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not Applicable ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS Not Applicable. ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The primary function of the Nominating and Governance Committee is to identify and recommend individuals for membership on the Board and oversee the administration of the Board Governance Procedures and Guidelines. Shareholders may recommend candidates for Board positions by forwarding their correspondence by U.S. mail or courier service to the Fund's Secretary for the attention of the Chairman of the Nominating and Governance Committee, Two International Place, Boston, MA 02110. Suggestions for candidates must include a resume of the candidate. ITEM 10. 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) There have been no changes in the registrant's internal control over financial reporting that occurred during the registrant's last half-year (the registrant's second fiscal half-year in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal controls over financial reporting. ITEM 11. 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 Variable Series II By: /s/Julian Sluyters --------------------------- Julian Sluyters Chief Executive Officer Date: February 28, 2005 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 Variable Series II By: /s/Julian Sluyters --------------------------- Julian Sluyters Chief Executive Officer Date: February 28, 2005 By: /s/Paul Schubert --------------------------- Paul Schubert Chief Financial Officer Date: February 28, 2005