UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-07507
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Scudder Investments VIT Funds
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(Exact name of registrant as specified in charter)
Two International Place
Boston, MA 02110-4103
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(Address of principal executive offices) (Zip code)
Sal Schiavone
Two International Place
Boston, MA 02110-4103
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(Name and address of agent for service)
registrant's telephone number, including area code: 617-295-2663
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Date of fiscal year end: December 31
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Date of reporting period: December 31, 2004
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
[LOGO OMITTED]
SCUDDER
INVESTMENTS
Scudder VIT Equity 500 Index Fund
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ANNUAL REPORT
December 31, 2004
Scudder VIT Equity 500 Index Fund
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TABLE OF CONTENTS
LETTER TO SHAREHOLDERS ................................................. 3
PERFORMANCE COMPARISON ................................................. 6
SCUDDER VIT EQUITY 500 INDEX FUND
Disclosure of Fund Expenses ......................................... 7
Schedule of Investments ............................................. 8
Statement of Assets and Liabilities ................................. 14
Statement of Operations ............................................. 15
Statements of Changes in Net Assets ................................. 16
Financial Highlights ................................................ 17
Notes to Financial Statements ....................................... 19
Report of Independent Registered Public Accounting Firm ............. 23
Trustees and Officers of the Trust .................................. 24
Tax Information, Proxy Voting and Form N-Q .......................... 28
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THIS REPORT MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS.
WE ADVISE YOU TO CONSIDER THE FUND'S OBJECTIVES, RISKS,
CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE
PROSPECTUS CONTAINS THIS AND OTHER IMPORTANT INFORMATION
ABOUT THE FUND. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE
YOU INVEST.
The Fund is not insured by the FDIC and is not a deposit,
obligation of or guaranteed by Deutsche Bank AG. The Fund is
subject to investment risks, including possible loss of
principal amount invested. There is no guarantee that the
Fund will be able to mirror the S&P 500(R) Index closely
enough to track its performance.
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2
Scudder VIT Equity 500 Index Fund
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LETTER TO SHAREHOLDERS
ALL PERFORMANCE QUOTED IN THIS REPORT IS PAST PERFORMANCE AND IS NO GUARANTEE OF
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE WITH
CHANGING MARKET CONDITIONS, SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR
LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN
THE RETURN FIGURES QUOTED. PERFORMANCE QUOTED FOR THE FUND DOES NOT INCLUDE THE
EFFECT OF CONTRACT CHARGES, WHICH WOULD LOWER THE RETURNS PRESENTED. RETURNS ARE
NET OF THE FUND'S MANAGEMENT FEES AND OTHER OPERATING EXPENSES. RETURNS WOULD
HAVE BEEN LOWER IF CERTAIN OF THE FUND'S FEES AND EXPENSES HAD NOT BEEN WAIVED.
FOR THE FUND'S MOST RECENT MONTH-END PERFORMANCE, CALL (800) 621-1048.
In the following interview, the portfolio management team discusses Scudder VIT
Equity 500 Index Fund's market environment and performance during the 12-month
period ended December 31, 2004.
Q: HOW DID SCUDDER VIT EQUITY 500 INDEX FUND PERFORM OVER THE ANNUAL PERIOD?
A: Scudder VIT Equity 500 Index Fund tracked its benchmark, the Standard &
Poor's 500(R) Index, 1 for the 12 months ended December 31, 2004. The fund
produced a total return of 10.59% (Class A shares) for the year, compared with
10.88% for the benchmark. (Past performance is no guarantee of future results.
Please see pages 4 and 6 for the performance of Class B and for more complete
performance information.) The fund outperformed the Lipper S&P 500 Index
Objective Funds category average annual return of 10.21%. 2
Q: WHAT WERE THE PRIMARY FACTORS AFFECTING THE MARKET DURING THE PAST 12 MONTHS?
A: In 2004, the US economy continued its now 13-quarter economic expansion.
Equity prices, which reached their low point in October 2002, have recovered
over the past nine quarters. Economic growth, shifted from being
consumption-driven to being one that is propelled by businesses and business
investment. Corporate executives remain cautiously optimistic: inflation is
still relatively under control (with the Consumer Price Index 3 running at
approximately 2.3%), and the Federal Reserve Board (the 'Fed') 4 is expected to
continue its 'measured pace' policy of interest rate increases. On a
trade-weighted basis, the dollar continues to decline, but the willingness of
those abroad to own US assets remains resilient, as return on capital and
profitability within the United States is superior to Europe and Japan.
The year 2004 began with some positive economic momentum from the previous year.
During the first quarter, gross domestic product was a healthy 4%, but for
investors, the one missing piece of the puzzle was significant job growth (a
leading indicator of the health of the US economy). According to the
government's nonfarm payroll reports, only 50,000 new jobs were created in the
first quarter. As the Fed pondered this statistic, it seemed ready to hold
interest rates steady for all of 2004.
As we moved into the second quarter, however, the rate of job growth picked up
substantially. The early April nonfarm payroll report indicating that 300,000
jobs had been added was what investors needed in order to feel that the economy
was in full recovery, and the Fed began a series of short-term interest rate
increases. Mixed in with relief that job growth had finally materialized was
anxiety that the Fed action would be prolonged. The Fed raised short-term
interest rates by 0.25% in June and at each of its four remaining meetings
through the end of the
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1 The 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. 'Standard & Poor's,' 'S&P 500,' 'Standard & Poor's 500' and '500'
are trademarks of The McGraw-Hill Companies Inc., and have been licensed for
use by the Fund's investment advisor. Index returns assume reinvestment of
dividends and, unlike Fund returns, do not reflect any fees or expenses. It is
not possible to invest directly in an index.
2 The Lipper S&P 500 Index Objective Funds category represents funds that are
passively managed and commit by prospectus language to replicate the
performance of the S&P 500 Index, including reinvested dividends. Lipper
figures represent the average of the total returns reported by all of the
mutual funds designated by Lipper Inc. as falling into the respective
categories indicated. These figures do not reflect sales charges.
3 The Consumer Price Index is an inflationary indicator that measures the change
in the cost of a fixed basket of products and services, including housing,
electricity, food, and transportation.
4 The 7-member Board of Governors that oversees Federal Reserve Banks
establishes monetary policy (interest rates, credit, etc.) and monitors the
economic health of the country.
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3
Scudder VIT Equity 500 Index Fund
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LETTER TO SHAREHOLDERS
year. In the second half of the year, the US economic expansion displayed
resiliency, maintaining a 4% growth rate while weathering a spike in oil prices
up to $55 per barrel. Job growth continued at a steady pace, and oil prices
began to recede by year-end.
Consumer spending was steady throughout 2004, though disappointing earnings
results persisted in business sectors such as retail, airlines and major drug
manufacturers. Home sales and equity continued to show strength, with
substantial price gains throughout the year. And job growth remained at a
sufficient pace to pick up some of the resource slack in the labor market. As we
moved into the fourth quarter, inflationary pressures began to take hold, and
concern over depreciation of the US dollar emerged as a factor. However, a
decisive conclusion to a tight presidential contest relieved a lot of the
uncertainty that investors had felt going into the fourth quarter. The market,
while not necessarily indicating a preference for either candidate beforehand,
was relieved that it would not have to adjust to the policies of a new
administration at a time when the economy was somewhat vulnerable. At the end of
December, we saw renewed confidence among investors that the economy was on a
firm footing.
After marking time for much of 2004, the stock market ended the year with a
strong finishing kick, securing a second consecutive year of gains for stocks.
The fourth quarter served as a classic example of how stock market gains
historically have tended to come in brief, intense bursts. If you subtract the
results of the final three months, the S&P 500 Index would have been up a
mere 1.65% for the year.
Much of the gain for 2004 can be credited to better-than-expected earnings, as
63% of the S&P 500 Index companies' most recent quarterly earnings reports
exceeded Wall Street analysts' expectations. Also driving results was a positive
change in market psychology. Early in the year, stock market investors were
notably fretful about several issues: the war on terrorism, rising oil prices,
rising short-term interest rates, uncertainty about the outcome of the
Bush-Kerry presidential race and mixed economic signals,
INVESTMENT REVIEW
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CUMULATIVE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
Periods Ended 1 Year 3 Years 5 Years Since 1 Year 3 Years 5 Years Since
December 31, 2004 Inception 1 Inception 1
Class A (inception 10-1-97)
Class B (inception 4-30-02)
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Scudder VIT Equity 500 Index Fund
Class A 10.59% 10.10% (12.24)% 38.57% 10.59% 3.26% (2.58)% 4.60%
Class B 10.32% n/a n/a 16.26% 10.32% n/a n/a 5.80%
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S&P 500 Index 2 10.88% 11.15% (10.98)% 42.53% 10.88% 3.59% (2.30)% 5.01%
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Lipper S&P 500 Index Objective
Fund Average 3 10.21% 9.14% (13.33)% 37.72% 10.21% 2.96% (2.82)% 4.51%
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ALL PERFORMANCE IN THIS REPORT IS HISTORICAL AND IS NO GUARANTEE OF FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE FLUCTUATE WITH CHANGING MARKETING
CONDITIONS, SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE RETURN
FIGURES QUOTED. FOR THE FUND'S MOST RECENT MONTH-END PERFORMANCE, CALL (800)
621-1048. PERFORMANCE QUOTED FOR THE FUND DOES NOT INCLUDE THE EFFECT OF
CONTRACT CHARGES, WHICH WOULD LOWER THE RETURNS PRESENTED. RETURNS ARE NET OF
THE FUND'S MANAGEMENT FEES AND OTHER OPERATING EXPENSES. RETURNS WOULD HAVE BEEN
LOWER IF CERTAIN OF THE FUND'S FEES AND EXPENSES HAD NOT BEEN WAIVED.
PERFORMANCE FIGURES FOR CLASSES A AND B DIFFER BECAUSE EACH CLASS MAINTAINS A
DISTINCT EXPENSE STRUCTURE. TOTAL RETURN IS BASED ON NET CHANGE IN NET ASSET
VALUE, ASSUMING THE REINVESTMENT OF ALL DISTRIBUTIONS.
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1 The Fund's inception dates are: Class A Shares: October 1, 1997, Class
B Shares: April 30, 2002. Benchmark returns are for comparative purposes
relative to Class A Shares and are for the period beginning September 30, 1997
for the S&P 500 Index and for the Lipper S&P 500 Index Objective Fund Average.
2 The S&P 500 Index is a capitalization-weighted index of 500 stocks. The
index is designed to measure performance of the broad domestic economy through
changes in the aggregate market value of 500 stocks representing all major
industries. Index returns assume reinvestment of dividends and, unlike Fund
returns, do not reflect any fees or expenses. It is not possible to invest
directly in an index.
3 Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Inc. as falling into the category
indicated.
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4
Scudder VIT Equity 500 Index Fund
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LETTER TO SHAREHOLDERS
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TEN LARGEST STOCK HOLDINGS
As of December 31, 2004
(percentages are based on total net assets of the Fund)
A Fund's holdings are subject to change.
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General Electric Co. ........................ 3.37%
Exxon Mobil Corp. ........................... 2.88
Microsoft Corp. ............................. 2.53
Citigroup, Inc. ............................. 2.18
Wal-Mart Stores, Inc. ....................... 1.95
Pfizer, Inc. ................................ 1.77
Bank of America Corp. ....................... 1.65
Johnson & Johnson Co. ....................... 1.64
American International Group, Inc. .......... 1.49
International Business Machines Corp. ....... 1.43
Information concerning portfolio holdings of the Fund as of the most recent
month end will be posted to scudder.com on the 15th of the following month.
among other issues. In the fourth quarter, however, oil prices stabilized, the
election was resolved, it became evident that the Federal Reserve would raise
rates at a moderate pace, and economic news turned more favorable. As a result,
bearishness gradually morphed into bullishness, and money increasingly flowed
into stocks.
Q: WHICH AREAS WITHIN THE S&P 500 INDEX WERE THE BEST AND WORST PERFORMERS?
A: The 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
Index1 rose 9.93% versus 8.51% for the S&P 500 Barra Growth Index.2 For the
year, value stocks, up 15.71%, outperformed growth stocks, up 6.13%, by 9.58%.
The small- and mid-cap segments continued their buoyant pace during the quarter
with the S&P MidCap 400 Index 3 up 12.16% and the S&P SmallCap 600 Index 4
increasing by 13.00%. This year, the performance differential across
capitalization segments was even more pronounced. For the year, the S&P MidCap
400 Index increased by 16.48%, while the S&P SmallCap 600 Index increased by
22.68%.
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%,
respectively, for the year.
Q: ANY FINAL THOUGHTS FOR INVESTORS?
A: Recent economic indicators point to both the manufacturing and
nonmanufacturing indices easing from their high rates of expansion to more
sustainable rates. In addition, US job growth continued at a moderate pace in
December (157,000 new jobs), as the unemployment rate remained steady at 5.4%.
And even though high energy costs and commodity inflation continued to have a
braking effect on both consumer spending and earnings growth of companies, it
would appear that US economic growth will continue at a moderate pace. While
underlying income and spending trends have remained positive for the US
consumer, some recent structural and directional changes, such as a low
household savings rate, growing consumer spending debt levels and high fuel
costs could constrain economic progress if job creation does not continue at a
significantly strong pace.
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SECTOR ALLOCATION
As of December 31, 2004
(percentages are based on market value* of total investments in the Fund)
A Fund's sector allocation is subject to change.
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Financials 20.66%
Information Technology 15.35
Industrials 12.65
Health Care 12.12
Consumer Discretionary 11.73
Consumer Staples 10.53
Energy 6.95
Telecommunication Services 3.27
Utilities 3.16
Other 3.58
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100.00%
======
*Excluding Cash Equivalents &Securities Lending Collateral.
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1 S&P 500 Barra Value Index is an unmanaged capitalization-weighted index of all
the stocks in the S&P 500 Index that have low price-to-book ratios.
2 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.
3 S&P MidCap 400 Index is an unmanaged index that tracks the stock movement of
400 mid-sized US companies.
4 S&P SmallCap 600 Index is an unmanaged index that tracks the stock movement of
600 small-cap US companies.
Index returns assume reinvestment of dividends and capital gains, and unlike
fund returns, do not reflect fees and expenses. A direct investment in an index
is not possible.
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 MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER
CONDITIONS AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION.
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5
Scudder VIT Equity 500 Index Fund
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PERFORMANCE COMPARISON
[GRAPHIC OMITTED]
PLOT POINTS FOLLOW:
Scudder VIT Equity 500 Index Fund--Class A Shares and S&P 500 Index
Growth of a $10,000 Investment (Since Inception)
Scudder VIT Equity
500 Index Fund S&P 500 Index
10/1/97 $10,000 $10,000
10/31/97 9,600 9,666
11/30/97 10,020 10,114
12/31/97 10,190 10,287
1/31/98 10,300 10,402
2/28/98 11,030 11,152
3/31/98 11,580 11,723
4/30/98 11,770 11,841
5/31/98 11,560 11,637
6/30/98 12,030 12,110
7/31/98 11,870 11,981
8/31/98 10,180 10,249
9/30/98 10,820 10,906
10/31/98 11,690 11,793
11/30/98 12,390 12,507
12/31/98 13,116 13,228
1/31/99 13,641 13,780
2/28/99 13,219 13,352
3/31/99 13,744 13,886
4/30/99 14,259 14,423
5/31/99 13,919 14,083
6/30/99 14,682 14,865
7/31/99 14,218 14,401
8/31/99 14,146 14,330
9/30/99 13,765 13,938
10/31/99 14,620 14,820
11/30/99 14,908 15,121
12/31/99 15,789 16,011
1/31/00 14,999 15,208
2/29/00 14,718 14,920
3/31/00 16,153 16,379
4/30/00 15,665 15,886
5/31/00 15,342 15,561
6/30/00 15,717 15,945
7/31/00 15,467 15,696
8/31/00 16,424 16,671
9/30/00 15,550 15,791
10/31/00 15,488 15,724
11/30/00 14,260 14,485
12/31/00 14,331 14,556
1/31/01 14,831 15,073
2/28/01 13,478 13,698
3/31/01 12,624 12,830
4/30/01 13,603 13,827
5/31/01 13,686 13,919
6/30/01 13,353 13,581
7/30/01 13,218 13,448
8/31/01 12,385 12,606
9/30/01 11,375 11,588
10/31/01 11,594 11,809
11/30/01 12,479 12,715
12/31/01 12,585 12,827
1/31/02 12,396 12,639
2/28/02 12,155 12,395
3/31/02 12,606 12,861
4/30/02 11,840 12,082
5/31/02 11,756 11,993
6/30/02 10,905 11,139
7/30/02 10,064 10,271
8/31/02 10,127 10,338
9/30/02 9,024 9,214
10/31/02 9,812 10,025
11/30/02 10,390 10,615
12/31/02 9,777 9,992
1/31/03 9,522 9,731
2/28/03 9,373 9,585
3/31/03 9,469 9,678
4/30/03 10,237 10,475
5/31/03 10,765 11,027
6/30/03 10,904 11,168
7/30/03 11,098 11,365
8/30/03 11,314 11,586
9./30/03 11,184 11,463
10/30/03 11,819 12,112
11/30/03 11,916 12,219
12/31/03 12,530 12,859
1/31/04 12,756 13,096
2/28/04 12,928 13,278
3/31/04 12,734 13,077
4/30/04 12,529 12,872
5/31/04 12,703 13,048
6/30/04 12,943 13,297
7/31/04 12,518 12,853
8/31/04 12,562 12,901
9/30/04 12,693 13,036
10/31/04 12,888 13,232
11/30/04 13,410 13,763
12/31/04 13,857 14,253
Graph start date for S&P 500 Index is 9/30/97.
Not depicted in graph: growth of $10,000 for B Shares from inception through
December 31, 2004:$11,626.
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AVERAGE ANNUAL TOTAL RETURNS
Since Inception
Periods Ended 1 Year 3 Years 5 Years Class A
December 31, 2004 10-1-97
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Scudder VIT Equity 500 Index Fund--Class A Shares 10.59% 3.26% (2.58)% 4.60%
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AVERAGE ANNUAL TOTAL RETURNS
Since Inception
Periods Ended 1 Year Class B
December 31, 2004 4-30-02
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Scudder VIT Equity 500 Index Fund--Class B Shares 10.32% 5.80%
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ALL PERFORMANCE IN THIS REPORT IS HISTORICAL AND IS NO GUARANTEE OF FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE FLUCTUATE WITH CHANGING MARKETING
CONDITIONS, SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE RETURN
FIGURES QUOTED. FOR THE FUND'S MOST RECENT MONTH-END PERFORMANCE, CALL (800)
621-1048. PERFORMANCE QUOTED FOR THE FUND DOES NOT INCLUDE THE EFFECT OF
CONTRACT CHARGES, WHICH WOULD LOWER THE RETURNS PRESENTED. RETURNS ARE NET OF
THE FUND'S MANAGEMENT FEES AND OTHER OPERATING EXPENSES. RETURNS WOULD HAVE BEEN
LOWER IF CERTAIN OF THE FUND'S FEES AND EXPENSES HAD NOT BEEN WAIVED.
PERFORMANCE FIGURES FOR CLASSES A AND B DIFFER BECAUSE EACH CLASS MAINTAINS A
DISTINCT EXPENSE STRUCTURE. TOTAL RETURN IS BASED ON NET CHANGE IN NET ASSET
VALUE, ASSUMING THE REINVESTMENT OF ALL DISTRIBUTIONS.
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1 The S&P 500 Index is a capitalization-weighted index of 500 stocks. The
index is designed to measure performance of the broad domestic economy through
changes in the aggregate market value of 500 stocks representing all major
industries. Index returns assume reinvestment of dividends and, unlike Fund
returns, do not reflect any fees or expenses. It is not possible to invest
directly in an index.
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6
Scudder VIT Equity 500 Index Fund
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DISCLOSURE OF FUND EXPENSES (Unaudited)
We believe it is important for you to understand the impact of fees regarding
your investment. All mutual funds have operating expenses. As a shareholder of a
mutual fund, you incur ongoing costs, which include costs for portfolio
management, administrative services, and shareholder reports (like this one),
among others. Operating expenses, which are deducted from a fund's gross income,
directly reduce the investment return of the fund. A fund's expenses are
expressed as a percentage of its average net assets. This figure is known as the
expense ratio. The following examples are intended to help you understand the
ongoing fees (in dollars) of investing in your fund and to compare these costs
with those of other mutual funds. The examples are based on an investment of
$1,000 made at the beginning of the period shown and held for the entire period.
This table illustrates your fund's costs in two ways:
ACTUAL FUND RETURN: This section helps you to estimate the actual expenses,
after any applicable fee waivers, that you paid over the period. The 'Ending
Account Value' shown is derived from the fund's ACTUAL return for the past six
month period, the 'Expense Ratio' column shows the period's annualized expense
ratio, and the 'Expenses Paid During Period' column shows the dollar amount that
would have been paid by an investor who started with $1,000 in the fund at the
beginning of the period.
You may use the information here, together with your account value, to estimate
the expenses that you paid over the period. To do so, 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 given for your fund in the first line
under the heading entitled 'Expenses Paid During Period.'
HYPOTHETICAL 5% RETURN: This section is intended to help you compare your fund's
costs with those of other mutual funds. It assumes that the fund had an annual
return of 5% before expenses, but that the expense ratio is unchanged. In this
case, because the return used is not the fund's actual return, the results do
not apply to your investment. This example is useful in making comparisons to
other mutual funds because the Securities and Exchange Commission requires
open-end mutual funds to calculate expenses based on an assumed 5% annual
return. You can assess your fund's costs by comparing this hypothetical example
with the hypothetical examples that appear in shareholder reports of other
funds.
Please note that the expense shown in the table are meant to highlight and help
you compare your ONGOING costs only and do not reflect any transactional costs
such as sales charges (loads), redemption fees, or exchange fees. The Scudder
VIT Equity 500 Index Fund does not charge any sales loads, redemption fees or
exchange fees, but these may be present in other funds to which you compare this
data. Therefore, the hypothetical portions of the table are useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds.
Expenses Paid
Beginning Ending During Period
Account Value Account Value Expense 7/01/04-
7/01/04 12/31/04 Ratio 1 12/31/04 2
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SCUDDER VIT EQUITY 500 INDEX FUND
- --------------------------------------------------------------------------------
ACTUAL FUND RETURN
Class A $1,000.00 $1,070.60 0.30% $1.56
Class B $1,000.00 $1,068.90 0.55% $2.86
HYPOTHETICAL 5% RETURN
Class A $1,000.00 $1,023.63 0.30% $1.53
Class B $1,000.00 $1,022.37 0.55% $2.80
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1 Annualized, based on the Class's most recent fiscal half-year expenses.
2 Expenses are equal to the Fund's annualized expense ratio multiplied by the
average account value over the period, multiplied by the number of days in the
most recent fiscal half-year, then divided by 366.
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7
Scudder VIT Equity 500 Index Fund
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SCHEDULE OF INVESTMENTS December 31, 2004
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS--98.74%
57,000 3M Co. .....................$ 4,677,990
116,400 Abbott Laboratories ........ 5,430,060
21,800 ACE Ltd. ................... 931,950
68,900 ADC Telecommunications,
Inc. 1 .................... 184,652
17,500 Adobe Systems, Inc. ........ 1,097,950
3,200 Adolph Coors Co.--Class B .. 242,144
28,800 Advanced Micro Devices,
Inc. 1 .................... 634,176
45,200 AES Corp. 1 ................ 617,884
10,800 Aetna, Inc. ................ 1,347,300
8,800 Affiliated Computer
Services, Inc.--
Class A 1 ................. 529,672
37,400 AFLAC, Inc. ................ 1,490,016
34,718 Agilent Technologies, Inc. 1 836,704
17,400 Air Products &
Chemicals, Inc. ........... 1,008,678
5,500 Alberto-Culver Co. ......... 267,135
27,142 Albertsons, Inc. ........... 648,151
64,276 Alcoa, Inc. ................ 2,019,552
8,000 Allegheny Energy, Inc. 1 ... 157,680
7,650 Allegheny Technologies, Inc. 165,775
9,200 Allergan, Inc. ............. 745,844
19,600 Allied Waste Industries,
Inc. 1 .................... 181,888
52,200 Allstate Corp. ............. 2,699,784
23,600 ALLTEL Corp. ............... 1,386,736
28,400 Altera Corp. 1 ............. 587,880
150,700 Altria Group, Inc. ......... 9,207,770
8,250 Ambac Financial Group, Inc. 677,572
6,300 Amerada Hess Corp. ......... 518,994
12,700 Ameren Corp. ............... 636,778
27,040 American Electric Power Co. 928,554
92,000 American Express Co. ....... 5,186,040
191,189 American International
Group, Inc. ............... 12,555,382
15,700 American Power
Conversion Corp. .......... 335,980
16,900 American Standard
Cos., Inc. 1 .............. 698,308
7,384 AmerisourceBergen Corp. .... 433,293
93,208 Amgen, Inc. 1 .............. 5,979,293
23,100 AmSouth Bancorp ............ 598,290
17,121 Anadarko Petroleum Co. ..... 1,109,612
26,700 Analog Devices, Inc. ....... 985,764
13,400 Andrew Corp. 1 ............. 182,642
59,400 Anheuser-Busch Cos., Inc. .. 3,013,362
25,100 AON Corp. .................. 598,886
24,312 Apache Corp. ............... 1,229,458
7,100 Apartment Investment &
Management Co.--Class A ... 273,634
14,163 Apollo Group, Inc.--
Class A 1 ................. 1,143,096
29,200 Apple Computer, Inc. 1 ..... 1,880,480
13,300 Applera Corp.--Applied
Biosystems Group .......... 278,103
122,900 Applied Materials, Inc. 1 .. 2,101,590
29,400 Applied Micro Circuits Corp. 1 123,774
50,575 Archer-Daniels-Midland Co. . 1,128,328
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
12,700 Archstone--Smith Trust .....$ 486,410
6,100 Ashland, Inc. .............. 356,118
58,004 AT&T Corp. ................. 1,105,556
17,800 AutoDesk, Inc. ............. 675,510
43,900 Automatic Data
Processing, Inc. .......... 1,946,965
18,200 AutoNation, Inc. 1 ......... 349,622
5,500 AutoZone, Inc. 1 ........... 502,205
34,430 Avaya, Inc. 1 .............. 592,196
7,500 Avery Dennison Corp. ....... 449,775
33,600 Avon Products, Inc. ........ 1,300,320
26,640 Baker Hughes, Inc. ......... 1,136,729
7,600 Ball Corp. ................. 334,248
296,310 Bank of America Corp. ...... 13,923,607
59,900 Bank of New York Co., Inc. . 2,001,858
6,900 Bard (C. R.), Inc. ......... 441,462
4,600 Bausch & Lomb .............. 296,516
47,200 Baxter International, Inc. . 1,630,288
40,900 BB&T Corp. ................. 1,719,845
7,072 Bear Stearns Cos., Inc. .... 723,536
19,800 Becton, Dickinson & Co. .... 1,124,640
23,300 Bed Bath & Beyond, Inc. 1 .. 928,039
135,800 BellSouth Corp. ............ 3,773,882
6,200 Bemis Co., Inc. ............ 180,358
23,350 Best Buy Co., Inc. ......... 1,387,457
6,800 Big Lots, Inc. 1 ........... 82,484
24,590 Biogen Idec, Inc. 1 ........ 1,637,940
19,825 Biomet, Inc. ............... 860,207
13,000 BJ Services Co. ............ 605,020
5,400 Black & Decker Corp. ....... 476,982
13,000 Block (H&R), Inc. .......... 637,000
15,900 BMC Software, Inc. 1 ....... 295,740
63,100 Boeing Co. ................. 3,266,687
63,400 Boston Scientific Corp. 1 .. 2,253,870
146,246 Bristol-Myers Squibb Co. ... 3,746,823
23,456 Broadcom Corp.--Class A 1 .. 757,160
7,400 Brown-Forman Corp. ......... 360,232
7,500 Brunswick Corp. ............ 371,250
28,500 Burlington Northern
Santa Fe Corp. ............ 1,348,335
30,200 Burlington Resources, Inc. . 1,313,700
45,889 Calpine Corp. 1,2 .......... 180,803
28,000 Campbell Soup Co. .......... 836,920
17,300 Capital One Financial Corp. 1,456,833
31,149 Cardinal Health, Inc. ...... 1,811,314
32,800 Caremark Rx, Inc. 1 ........ 1,293,304
47,000 Carnival Corp. ............. 2,708,610
25,000 Caterpillar, Inc. .......... 2,437,750
76,493 Cendant Corp. .............. 1,788,406
20,200 CenterPoint Energy, Inc. ... 228,260
9,000 Centex Corp. ............... 536,220
10,950 CenturyTel, Inc. ........... 388,396
154,866 ChevronTexaco Corp. ........ 8,132,014
14,900 Chiron Corp. 1 ............. 496,617
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
8
Scudder VIT Equity 500 Index Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS December 31, 2004
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
14,500 Chubb Corp. ................$ 1,115,050
47,900 Ciena Corp. 1 .............. 159,986
9,400 CIGNA Corp. ................ 766,758
10,665 Cincinnati Financial Corp. . 472,033
11,300 Cinergy Corp. .............. 470,419
13,500 Cintas Corp. ............... 592,110
16,000 Circuit City Stores, Inc. .. 250,240
488,500 Cisco Systems, Inc. 1,2 .... 9,428,050
14,900 CIT Group, Inc. ............ 682,718
381,274 Citigroup, Inc. ............ 18,369,781
26,300 Citizens Communications Co. 362,677
13,300 Citrix Systems, Inc. 1 ..... 326,249
41,834 Clear Channel Communications,
Inc. ...................... 1,401,021
12,400 Clorox Co. ................. 730,732
13,716 CMS Energy Corp. 1 ......... 143,332
13,200 Coach, Inc. 1 .............. 744,480
176,800 Coca-Cola Co. .............. 7,360,184
36,100 Coca-Cola Enterprises, Inc. 752,685
40,200 Colgate-Palmolive Co. ...... 2,056,632
165,986 Comcast Corp.--Class A 1 ... 5,524,014
13,400 Comerica, Inc. ............. 817,668
7,400 Compass Bancshares, Inc. ... 360,158
41,950 Computer Associates
International, Inc. ....... 1,302,967
14,800 Computer Sciences Corp. 1 .. 834,276
31,600 Compuware Corp. 1 .......... 204,452
15,698 Comverse Technology, Inc. 1 383,816
39,900 ConAgra Foods, Inc. ........ 1,175,055
51,544 ConocoPhillips ............. 4,475,566
18,500 Consolidated Edison Co. of
New York, Inc. ............ 809,375
13,300 Constellation Energy Group . 581,343
9,700 Convergys Corp. 1 .......... 145,403
6,300 Cooper Industries Ltd.--
Class A ................... 427,707
7,200 Cooper Tire & Rubber Co. ... 155,160
100,749 Corning, Inc. 1 ............ 1,185,816
35,400 Costco Cos., Inc. .......... 1,713,714
41,598 Countrywide Financial Corp. 1,539,542
14,500 CSX Corp. .................. 581,160
3,600 Cummins, Inc. .............. 301,644
28,300 CVS Corp. .................. 1,275,481
10,685 Dana Corp. ................. 185,171
23,200 Danaher Corp. .............. 1,331,912
11,050 Darden Restaurants, Inc. ... 306,527
18,300 Deere & Co. ................ 1,361,520
184,200 Dell, Inc. 1 ............... 7,762,188
35,973 Delphi Corp. ............... 324,476
9,500 Delta Air Lines, Inc. 1,2 .. 71,060
37,400 Devon Energy Corp. ......... 1,455,608
7,100 Dillard's, Inc.--Class A ... 190,777
24,847 Dollar General Corp. ....... 516,072
25,716 Dominion Resources, Inc. ... 1,742,002
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
15,700 Dover Corp. ................$ 658,458
70,316 Dow Chemical Co. ........... 3,481,345
4,700 Dow Jones & Co., Inc. ...... 202,382
11,900 DTE Energy Co. ............. 513,247
73,845 Du Pont (E.I.) de
Nemours & Co. ............. 3,622,097
69,800 Duke Energy Corp. 2 ........ 1,768,034
28,735 Dynegy, Inc.--Class A 1 .... 132,756
29,300 E*TRADE Financial Corp. 1 .. 438,035
6,400 Eastman Chemical Co. ....... 369,472
20,100 Eastman Kodak Co. .......... 648,225
10,200 Eaton Corp. ................ 738,072
48,581 eBay, Inc. 1 ............... 5,648,999
17,300 Ecolab, Inc. ............... 607,749
25,400 Edison International ....... 813,562
44,186 El Paso Corp. .............. 459,534
22,500 Electronic Arts, Inc. 1 .... 1,387,800
36,200 Electronic Data Systems Corp. 836,220
176,600 EMC Corp. 1 ................ 2,626,042
31,300 Emerson Electric Co. ....... 2,194,130
8,500 Engelhard Corp. ............ 260,695
17,600 Entergy Corp. .............. 1,189,584
8,000 EOG Resources, Inc. ........ 570,880
8,200 Equifax, Inc. .............. 230,420
32,000 Equity Office Properties
Trust ..................... 931,840
23,100 Equity Residential ......... 835,758
50,550 Exelon Corp. ............... 2,227,738
6,300 Express Scripts, Inc. 1 .... 481,572
474,517 Exxon Mobil Corp. .......... 24,323,741
13,726 Family Dollar Stores, Inc. . 428,663
71,700 Fannie Mae ................. 5,105,757
12,200 Federated Department
Stores, Inc. .............. 705,038
6,400 Federated Investors, Inc.--
Class B ................... 194,560
21,860 FedEx Corp. ................ 2,152,991
42,692 Fifth Third Bancorp ........ 2,018,478
62,519 First Data Corp. ........... 2,659,558
10,500 First Horizon National Corp. 452,655
26,284 FirstEnergy Corp. .......... 1,038,481
15,701 Fiserv, Inc. 1 ............. 631,023
8,600 Fisher Scientific
International, Inc. 1 ..... 536,468
7,000 Fluor Corp. ................ 381,570
138,902 Ford Motor Co. ............. 2,033,525
26,500 Forest Laboratories, Inc. 1 1,188,790
10,900 Fortune Brands, Inc. ....... 841,262
12,800 FPL Group, Inc. ............ 956,800
19,400 Franklin Resources, Inc. ... 1,351,210
51,800 Freddie Mac ................ 3,817,660
13,300 Freeport-McMoran Copper &
Gold, Inc.--Class B ....... 508,459
29,032 Freescale Semiconductor, Inc.--
Class B 1 ................. 533,028
20,300 Gannet Co., Inc. ........... 1,658,510
65,625 Gap, Inc. .................. 1,386,000
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
9
Scudder VIT Equity 500 Index Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS December 31, 2004
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
23,300 Gateway, Inc. 1 ............$ 140,033
15,000 General Dynamics Corp. ..... 1,569,000
778,100 General Electric Co. ....... 28,400,650
29,064 General Mills, Inc. ........ 1,444,771
40,230 General Motors Corp. ....... 1,611,614
11,200 Genuine Parts Co. .......... 493,472
17,700 Genzyme Corp. 1 ............ 1,027,839
17,677 Georgia-Pacific Corp. ...... 662,534
30,908 Gilead Sciences, Inc. 1 .... 1,081,471
74,200 Gillette Co. ............... 3,322,676
22,600 Golden West Financial Group 1,388,092
35,400 Goldman Sachs Group, Inc. .. 3,683,016
7,200 Goodrich Corp. ............. 235,008
14,700 Goodyear Tire &
Rubber Co. 1,2 ............ 215,502
5,700 Grainger (W.W.), Inc. ...... 379,734
3,600 Great Lakes Chemical Corp. . 102,564
22,900 Guidant Corp. .............. 1,651,090
31,300 Halliburton Co. ............ 1,228,212
21,700 Harley-Davidson, Inc. ...... 1,318,275
9,100 Harrah's Entertainment, Inc. 608,699
21,051 Hartford Financial
Services Group, Inc. ...... 1,459,045
14,359 Hasbro, Inc. ............... 278,277
30,700 HCA, Inc. .................. 1,226,772
19,700 Health Management Associates,
Inc.--Class A ............. 447,584
26,200 Heinz (H. J.) Co. .......... 1,021,538
6,400 Hercules, Inc. 1 ........... 95,040
17,600 Hershey Foods Corp. ........ 977,504
222,626 Hewlett-Packard Co. ........ 4,668,467
27,700 Hilton Hotels Corp. ........ 629,898
160,800 Home Depot, Inc. ........... 6,872,592
64,975 Honeywell International, Inc. 2,300,765
10,380 Hospira, Inc. 1 ............ 347,730
12,800 Humana, Inc. 1 ............. 380,032
15,650 Huntington Bancshares, Inc. 387,807
22,800 Illinois Tool Works, Inc. .. 2,113,104
15,400 IMS Health, Inc. ........... 357,434
13,300 Ingersoll-Rand Co.--
Class A ................... 1,067,990
466,100 Intel Corp. 2 .............. 10,902,079
122,155 International Business
Machines Corp. ............ 12,042,040
5,500 International Flavors &
Fragrances, Inc. .......... 235,620
24,168 International Game Technology 830,896
36,708 International Paper Co. .... 1,541,736
28,800 Interpublic Group of
Cos., Inc. 1 .............. 385,920
14,600 Intuit, Inc. 1 ............. 642,546
7,200 ITT Industries, Inc. ....... 608,040
13,300 Jabil Circuit, Inc. 1 ...... 340,214
14,800 Janus Capital Group, Inc. .. 248,788
114,755 JDS Uniphase Corp. 1 ....... 363,773
9,300 Jefferson-Pilot Corp. ...... 483,228
217,818 Johnson & Johnson Co. ...... 13,814,018
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
14,000 Johnson Controls, Inc. .....$ 888,160
7,897 Jones Apparel Group, Inc. .. 288,793
260,844 JPMorgan Chase & Co. ....... 10,175,524
3,900 KB HOME .................... 407,160
31,000 Kellogg Co. ................ 1,384,460
10,136 Kerr-McGee Corp. ........... 585,759
30,800 KeyCorp .................... 1,044,120
11,100 KeySpan Corp. .............. 437,895
37,000 Kimberly-Clark Corp. ....... 2,434,970
10,100 Kinder Morgan, Inc. ........ 738,613
16,321 King Pharmaceuticals, Inc. 1 202,380
15,000 KLA-Tencor Corp. 1 ......... 698,700
6,400 Knight-Ridder, Inc. ........ 428,416
24,600 Kohl's Corp. 1 ............. 1,209,582
54,700 Kroger Co.1 ................ 959,438
7,800 L-3 Communications
Holdings, Inc. ........... 571,272
10,100 Laboratory Corp. of
America Holdings 1 ....... 503,182
12,700 Leggett & Platt, Inc. ...... 361,061
19,122 Lehman Brothers
Holdings, Inc. ........... 1,672,793
9,000 Lexmark International, Inc. 1 765,000
84,400 Lilly (Eli) & Co. .......... 4,789,700
31,676 Limited Brands ............. 729,182
13,600 Lincoln National Corp. ..... 634,848
23,400 Linear Technology Corp. .... 906,984
7,400 Liz Claiborne, Inc. ........ 312,354
34,000 Lockheed Martin Corp. ...... 1,888,700
12,800 Loews Corp. ................ 899,840
9,500 Louisiana-Pacific Corp. .... 254,030
56,700 Lowe's Cos., Inc. .......... 3,265,353
32,300 LSI Logic Corp. 1 .......... 177,004
333,960 Lucent Technologies, Inc. 1 1,255,690
8,500 M&T Bank Corp. ............. 916,640
7,500 Manor Care, Inc. ........... 265,725
26,000 Marathon Oil Corp. ......... 977,860
17,500 Marriott International, Inc.--
Class A .................. 1,102,150
39,900 Marsh & McLennan Cos., Inc. 1,312,710
14,500 Marshall & Ilsley Corp. .... 640,900
34,700 Masco Corp. ................ 1,267,591
30,200 Mattel, Inc. ............... 588,598
23,000 Maxim Integrated
Products, Inc. ........... 974,970
22,850 May Department Stores Co. .. 671,790
6,700 Maytag Corp. ............... 141,370
11,300 MBIA, Inc. ................. 715,064
95,940 MBNA Corp. ................. 2,704,549
8,400 McCormick & Co., Inc. ...... 324,240
92,400 McDonald's Corp. ........... 2,962,344
14,800 McGraw-Hill Cos., Inc. ..... 1,354,792
20,525 McKesson Corp. ............. 645,716
13,365 MeadWestvaco Corp. ......... 452,940
19,166 Medco Health Solutions, Inc. 1 797,306
19,400 MedImmune, Inc. 1 .......... 525,934
89,200 Medtronic, Inc. 2 .......... 4,430,564
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10
Scudder VIT Equity 500 Index Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS December 31, 2004
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
28,600 Mellon Bank Corp. ..........$ 889,746
162,462 Merck & Co., Inc. .......... 5,221,529
7,000 Mercury Interactive Corp. 1 318,850
2,900 Meredith Corp. ............. 157,180
69,900 Merrill Lynch & Co., Inc. .. 4,177,923
56,100 MetLife, Inc. .............. 2,272,611
6,900 MGIC Investment ............ 475,479
42,439 Micron Technology, Inc. 1 .. 524,122
800,400 Microsoft Corp. ............ 21,378,684
2,800 Millipore Corp. 1 .......... 139,468
14,700 Molex, Inc. ................ 441,000
20,621 Monsanto Co. ............... 1,145,497
9,519 Monster Worldwide, Inc. 1 .. 320,219
11,600 Moody's Corp. .............. 1,007,460
82,000 Morgan Stanley ............. 4,552,640
177,481 Motorola, Inc. ............. 3,052,673
20,300 Mylan Laboratories, Inc. 2 . 358,904
10,094 Nabors Industries Ltd.1 .... 517,721
52,300 National City Corp. ........ 1,963,865
25,000 National Semiconductor Corp. 448,750
6,100 Navistar International Corp. 1 268,278
7,500 NCR Corp. 1 ................ 519,225
27,300 Network Appliance, Inc. 1 .. 906,906
9,500 New York Times Co.--Class A 387,600
17,524 Newell Rubbermaid, Inc. .... 423,906
32,000 Newmont Mining Corp. ....... 1,421,120
192,600 News Corp.--Class A ........ 3,593,916
80,800 Nextel Communication, Inc.--
Class A 1 ................. 2,424,000
2,700 Nicor, Inc. ................ 99,738
20,000 Nike, Inc.--Class B ........ 1,813,800
18,108 NiSource, Inc. ............. 412,500
11,200 Noble Corp. 1 .............. 557,088
10,800 Nordstrom, Inc. ............ 504,684
30,500 Norfolk Southern Corp. ..... 1,103,795
33,150 North Fork
Bancorporation, Inc. ...... 956,377
14,300 Northern Trust Corp. ....... 694,694
25,942 Northrop Grumman Corp. ..... 1,410,207
31,000 Novell, Inc. 1 ............. 209,250
11,300 Novellus Systems, Inc. 1 ... 315,157
11,800 Nucor Corp. ................ 617,612
13,500 NVIDIA Corp. 1 ............. 318,060
30,600 Occidental Petroleum Corp. . 1,785,816
24,800 Office Depot, Inc. 1 ....... 430,528
8,200 OfficeMax, Inc. ............ 257,316
13,700 Omnicom Group, Inc. ........ 1,155,184
376,800 Oracle Corp. 1 ............. 5,169,696
13,525 PACCAR, Inc. ............... 1,088,492
9,300 Pactiv Corp. 1 ............. 235,197
7,100 Pall Corp. ................. 205,545
15,000 Parametric Technology Corp. 1 88,350
9,500 Parker-Hannifin Corp. ...... 719,530
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
29,400 Paychex, Inc. ..............$ 1,001,952
19,900 Penney (J.C.) Co., Inc. .... 823,860
2,200 Peoples Energy Corp. ....... 96,690
16,592 Pepsi Bottling Group, Inc. . 448,648
124,560 PepsiCo, Inc. .............. 6,502,032
7,700 PerkinElmer, Inc. .......... 173,173
553,843 Pfizer, Inc. ............... 14,892,838
31,600 PG&E Corp. 1 ............... 1,051,648
6,620 Phelps Dodge Corp. ......... 654,850
5,300 Pinnacle West Capital Corp. 235,373
15,500 Pitney Bowes, Inc. ......... 717,340
11,700 Plum Creek Timber
Co., Inc., REIT ........... 449,748
15,024 PMC-Sierra, Inc. 1 ......... 169,020
22,000 PNC Financial Services Group 1,263,680
5,600 Power-One, Inc. 1 .......... 49,952
11,500 PPG Industries, Inc. ....... 783,840
13,760 PPL Corp. .................. 733,133
25,200 Praxair, Inc. .............. 1,112,580
20,900 Principal Financial
Group, Inc. ............... 855,646
185,727 Procter & Gamble Co. ....... 10,229,843
17,408 Progress Energy, Inc. ...... 787,538
15,100 Progressive Corp. .......... 1,281,084
11,800 ProLogis ................... 511,294
19,000 Providian Financial Corp. 1 312,930
39,200 Prudential Financial, Inc. . 2,154,432
18,800 Public Service Enterprise
Group, Inc. ............... 973,276
8,800 Pulte Homes, Inc. .......... 561,440
7,300 Qlogic Corp. 1 ............. 268,129
121,800 QUALCOMM, Inc. ............. 5,164,320
7,522 Quest Diagnostics, Inc. .... 718,727
128,791 Qwest Communications
International, Inc. 1 ..... 571,832
14,300 R.R. Donnelley & Sons Co. .. 504,647
12,900 RadioShack Corp. ........... 424,152
34,100 Raytheon Co. ............... 1,324,103
5,300 Reebok International Ltd. .. 233,200
31,926 Regions Financial Corp. .... 1,136,246
10,800 Reynolds American, Inc. .... 848,880
12,000 Robert Half
International, Inc. ....... 353,160
13,800 Rockwell Automation, Inc. .. 683,790
11,700 Rockwell Collins, Inc. ..... 461,448
15,042 Rohm & Haas Co. ............ 665,308
9,600 Rowan Cos., Inc. 1 ......... 248,640
4,200 Ryder System, Inc. ......... 200,634
8,290 Sabre Holdings Corp. ....... 183,706
10,600 SAFECO Corp. ............... 553,744
30,600 Safeway, Inc. 1 ............ 604,044
40,900 Sanmina--SCI Corp. 1 ....... 346,423
61,200 Sara Lee Corp. ............. 1,477,368
247,165 SBC Communications, Inc. ... 6,369,442
109,300 Schering-Plough Corp. ...... 2,282,184
42,700 Schlumberger Ltd. .......... 2,858,765
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
11
Scudder VIT Equity 500 Index Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS December 31, 2004
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
103,100 Schwab (Charles) Corp. .....$ 1,233,076
11,900 Scientific Atlanta, Inc. ... 392,819
5,353 Sealed Air Corp. 1 ......... 285,154
14,700 Sears, Roebuck & Co. ....... 750,141
18,910 Sempra Energy .............. 693,619
10,300 Sherwin-Williams Co. ....... 459,689
39,184 Siebel Systems, Inc. 1 ..... 411,432
6,000 Sigma-Aldrich Corp. ........ 362,760
17,400 Simon Property Group, Inc. . 1,125,258
32,700 SLM Corp. .................. 1,745,853
3,400 Snap-On, Inc. .............. 116,824
66,900 Solectron Corp. 1 .......... 356,577
56,200 Southern Co. ............... 1,883,824
57,525 Southwest Airlines Co. ..... 936,507
26,651 Sovereign Bancorp, Inc. .... 600,980
107,200 Sprint Corp. (FON Group) ... 2,663,920
25,244 St. Jude Medical, Inc. 1 ... 1,058,481
47,756 St. Paul Travelers Cos., Inc. 1,770,315
7,100 Stanley Works .............. 347,829
38,350 Staples, Inc. .............. 1,292,779
30,100 Starbucks Corp. 1 .......... 1,877,036
14,232 Starwood Hotels & Resorts
Worldwide, Inc. ........... 831,149
26,000 State Street Corp. ......... 1,277,120
30,702 Stryker Corp. .............. 1,481,372
254,400 Sun Microsystems, Inc. 1 ... 1,368,672
20,900 SunGard Data Systems, Inc. 1 592,097
6,100 Sunoco, Inc. ............... 498,431
28,500 SunTrust Banks, Inc. ....... 2,105,580
8,200 SuperValu, Inc. ............ 283,064
45,600 Symantec Corp. 1 ........... 1,174,656
15,550 Symbol Technologies, Inc. .. 269,015
20,150 Synovus Financial Corp. .... 575,887
48,500 Sysco Corp. ................ 1,851,245
10,600 T. Rowe Price Group, Inc. .. 659,320
66,400 Target Corp. ............... 3,448,152
10,900 TECO Energy, Inc. .......... 167,206
5,500 Tektronix, Inc. ............ 166,155
35,100 Tellabs, Inc. 1 ............ 301,509
4,500 Temple-Inland, Inc. ........ 307,800
30,650 Tenet Healthcare Corp. 1 ... 336,537
15,500 Teradyne, Inc. 1 ........... 264,585
125,791 Texas Instruments, Inc. .... 3,096,974
9,600 Textron, Inc. .............. 708,480
10,400 Thermo Electron Corp. 1 .... 313,976
9,500 Tiffany & Co. .............. 303,715
335,048 Time Warner, Inc. 1 ........ 6,513,333
34,400 TJX Cos., Inc. ............. 864,472
7,500 Torchmark Corp. ............ 428,550
17,500 Toys 'R' Us, Inc. 1 ........ 358,225
22,520 Transocean, Inc. 1 ......... 954,623
24,425 Tribune Co. ................ 1,029,270
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
18,300 TXU Corp. ..................$ 1,181,448
146,906 Tyco International Ltd. .... 5,250,420
140,470 U.S. Bancorp ............... 4,399,520
18,300 Union Pacific Corp. ........ 1,230,675
21,300 Unisys Corp. 1 ............. 216,834
83,472 United Parcel Service, Inc.--
Class B .................. 7,133,517
8,900 United States Steel Corp. .. 456,125
37,800 United Technologies Corp. .. 3,906,630
48,400 UnitedHealth Group, Inc. ... 4,260,652
23,900 Univision Communications, Inc.--
Class A 1 ................. 699,553
20,800 Unocal Corp. ............... 899,392
24,649 UnumProvident Corp. ........ 442,203
13,400 UST, Inc. .................. 644,674
7,900 V.F. Corp. ................. 437,502
18,400 Valero Energy Corp. ........ 835,360
31,436 VERITAS Software Corp. 1 ... 897,498
202,450 Verizon Communications, Inc. 8,201,250
125,825 Viacom, Inc.--Class B ...... 4,578,772
12,636 Visteon Corp. .............. 123,454
6,400 Vulcan Materials Co. ....... 349,504
119,821 Wachovia Corp. ............. 6,302,585
311,100 Wal-Mart Stores, Inc. ...... 16,432,302
76,400 Walgreen Co. ............... 2,931,468
150,400 Walt Disney Co. ............ 4,181,120
62,448 Washington Mutual, Inc. .... 2,640,301
42,197 Waste Management, Inc. ..... 1,263,378
8,200 Waters Corp. 1 383,678
8,400 Watson Pharmaceuticals, Inc. 1275,604
21,364 WellPoint, Inc. 1 .......... 2,456,860
126,200 Wells Fargo & Co. .......... 7,843,330
9,800 Wendy's International, Inc. 384,748
18,900 Weyerhaeuser Co. ........... 1,270,458
4,900 Whirlpool Corp. ............ 339,129
43,123 Williams Cos., Inc. ........ 702,474
16,700 Wrigley, (Wm.) Jr., Co. .... 1,155,473
99,700 Wyeth ...................... 4,246,223
28,015 Xcel Energy, Inc. .......... 509,873
72,800 Xerox Corp. 1 .............. 1,238,328
26,200 Xilinx, Inc. ............... 776,830
9,400 XL Capital Ltd.--Class A ... 729,910
19,200 XTO Energy, Inc. ........... 679,296
102,300 Yahoo!, Inc. 1 ............. 3,854,664
20,300 Yum! Brands, Inc. .......... 957,754
18,264 Zimmer Holdings, Inc. 1 .... 1,463,312
7,700 Zions Bancorp .............. 523,831
-----------
TOTAL COMMON STOCKS
(Cost $811,767,492) ................... 833,008,263
-----------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12
Scudder VIT Equity 500 Index Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS December 31, 2004
PRINCIPAL
AMOUNT SECURITY VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INSTRUMENTS--0.88%
U.S. TREASURY BILLS 3--0.88%
$ 36,000 1.85%, 01/06/05 ............$ 35,994
324,000 1.86%, 01/20/05 ............ 323,686
332,000 1.97%, 01/27/05 ............ 331,562
1,765,000 2.08%, 02/03/05 ............ 1,761,866
1,348,000 2.06%, 02/10/05 ............ 1,345,086
2,505,000 1.88%, 02/24/05 ............ 2,498,049
1,180,000 2.18%, 03/24/05 4 .......... 1,174,336
------------
TOTAL SHORT-TERM INSTRUMENTS
(Cost $7,470,178) ...................... 7,470,579
------------
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
SECURITIES LENDING COLLATERAL--1.08%
INVESTMENT IN AFFILIATED INVESTMENT COMPANIES--1.08%
9,095,050 Daily Assets Fund
Institutional 2.25% 5,6
(Cost $9,095,050) ..........$ 9,095,050
------------
TOTAL INVESTMENTS
(Cost $828,332,720) ........... 100.70% $849,573,892
LIABILITIES IN EXCESS
OF OTHER ASSETS ................ (0.70) (5,933,645)
------ ------------
NET ASSETS ....................... 100.00% $843,640,247
====== ============
- --------------------------------------------------------------------------------
1 Non-income producing security for the period ended
December 31, 2004.
2 All or a portion of this security was on loan. The value of all securities
loaned at December 31, 2004 amounted to $8,851,587, which is 1.05% of total
net assets.
3 Rates shown represent annualized yield at time of purchase, not a coupon rate.
4 Pledged as collateral for future contracts.
5 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.
6 Represents collateral held in connection with security lending.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
13
Scudder VIT Equity 500 Index Fund
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- ---------------------------------------------------------------------------------------------------
DECEMBER 31, 2004
- ---------------------------------------------------------------------------------------------------
ASSETS
Investments at value (cost $819,237,670) 1 .................................. $840,478,842
Investments in affiliated issuers, at value (cost $9,095,050) 2 ............. 9,095,050
Cash ........................................................................ 813,301
Receivable for securities sold .............................................. 724,713
Receivable for capital shares sold .......................................... 873,221
Dividends and interest receivable ........................................... 1,076,425
Other assets ................................................................ 1,656
------------
Total assets ................................................................... 853,063,208
------------
LIABILITIES
Payable upon return of securities loaned .................................... 9,095,050
Payable for capital shares redeemed ......................................... 102,050
Variation margin payable for futures contracts .............................. 10,523
Advisory fees payable ....................................................... 94,176
12b-1 fees payable .......................................................... 10,537
Accrued expenses and other .................................................. 110,625
------------
Total liabilities .............................................................. 9,422,961
------------
NET ASSETS ..................................................................... $843,640,247
============
COMPOSITION OF NET ASSETS
Paid-in capital ............................................................. $834,009,581
Undistributed net investment income ......................................... 12,401,640
Accumulated net realized loss on investments and futures transactions ....... (24,073,071)
Net unrealized appreciation on investments and futures contracts ............ 21,302,097
------------
NET ASSETS ..................................................................... $843,640,247
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(net assets divided by shares outstanding)
Class A 3 ................................................................... $ 12.73
============
Class B 4 ................................................................... $ 12.72
============
- --------------------------------------------------------------------------------
1 Including $8,851,587 of securities loaned.
2 Represents collateral on securities loaned.
3 Net asset value, redemption price and offering price per share (based on net
assets of $790,304,194 and 62,064,495 shares outstanding at December 31, 2004;
$0.001 par value, unlimited number of shares authorized).
4 Net asset value, redemption price and offering price per share (based on net
assets of $53,336,053 and 4,191,602 shares outstanding at December 31, 2004;
$0.001 par value, unlimited number of shares authorized).
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14
Scudder VIT Equity 500 Index Fund
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
FOR THE
YEAR ENDED
DECEMBER 31, 2004
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends ............................................. $14,787,346
Interest .............................................. 147,970
Securities lending income including income from
Daily Assets Fund Institutional ................... 10,959
-----------
TOTAL INVESTMENT INCOME .................................. 14,946,275
-----------
EXPENSES
Advisory fees ......................................... 1,449,209
Administration and services fees ...................... 239,676
Transfer agent fees ................................... 125,723
12b-1 fees (Class B Shares) ........................... 81,725
Professional fees ..................................... 66,365
Printing and shareholder reports ...................... 53,917
Trustees fees ......................................... 47,256
Custodian fees ........................................ 28,500
Insurance ............................................. 12,605
Miscellaneous ......................................... 6,112
-----------
TOTAL EXPENSES ........................................... 2,111,088
Plus: Recovery of expenses previously waived by Advisor 97,667
-----------
NET EXPENSES ............................................. 2,208,755
-----------
NET INVESTMENT INCOME .................................... 12,737,520
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FUTURES CONTRACTS
Net realized gain from:
Investment transactions ............................. 818,400
Futures transactions ................................ 1,110,275
Net change in unrealized appreciation/
depreciation of investments
and futures contracts ............................... 62,935,869
-----------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS AND FUTURES CONTRACTS .................... 64,864,544
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS ............... $77,602,064
===========
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
15
Scudder VIT Equity 500 Index Fund
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31,
2004 2003
- -------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM:
OPERATIONS
Net investment income ................................................. $ 12,737,520 $ 7,413,652
Net realized gain from investment and futures transactions ............ 1,928,675 911,531
Net change in unrealized appreciation/depreciation
of investments and futures contracts ................................ 62,935,869 121,448,564
------------ ------------
Net increase in net assets from operations ............................... 77,602,064 129,773,747
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income:
Class A Shares ........................................................ (7,389,469) (5,476,312)
Class B Shares ........................................................ (217,946) (46,303)
------------ ------------
Total Distributions ...................................................... (7,607,415) (5,522,615)
------------ ------------
CAPITAL SHARE TRANSACTIONS
Net increase resulting from Class A Shares ............................ 97,437,291 109,881,687
Net increase resulting from Class B Shares ............................ 31,918,831 12,363,800
------------ ------------
Net increase in net assets from capital share transactions ............ 129,356,122 122,245,487
------------ ------------
TOTAL INCREASE IN NET ASSETS .......................................... 199,350,771 246,496,619
------------ ------------
NET ASSETS
Beginning of year ..................................................... 644,289,476 397,792,857
------------ ------------
End of year (including undistributed net investment income
of $12,401,640 and $7,342,654, respectively) ........................ $843,640,247 $644,289,476
============ ============
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16
Scudder VIT Equity 500 Index Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
FOR THE YEARS ENDED DECEMBER 31,
2004 2003 2002 2001 2000
- -------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR ................... $11.64 $ 9.20 $11.98 $13.77 $15.18
------ ------ ------ ------ ------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
Net investment income 1 ........................... 0.21 0.15 0.14 0.09 0.13
Net realized and unrealized gain (loss) on
investments and futures contracts ............... 1.01 2.41 (2.81) (1.77) (1.53)
------ ------ ------ ------ ------
Total from investment operations ..................... 1.22 2.56 (2.67) (1.68) (1.40)
------ ------ ------ ------ ------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income ............................. (0.13) (0.12) (0.11) (0.10) --
Net realized gain on investment and
futures contracts ............................... -- -- -- (0.01) (0.01)
------ ------ ------ ------ ------
Total distributions .................................. (0.13) (0.12) (0.11) (0.11) (0.01)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR ......................... $12.73 $11.64 $ 9.20 $11.98 $13.77
====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN 2 ............................ 10.59% 28.16% 3 (22.31)% 3 (12.18)% 3 (9.24)% 3
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of year (000s omitted) ............$790,304 $626,970 $394,964 $465,836 $427,855
Ratios to average net assets:
Net investment income ........................... 1.76% 1.50% 1.33% 1.06% 1.00%
Expenses after waivers, reimbursements
and/or recoupments ........................... 0.29% 0.30% 0.30% 0.30% 0.30%
Expenses before waivers, reimbursements
and/or recoupments ........................... 0.28% 0.30% 0.32% 0.31% 0.34%
Portfolio turnover rate ........................... 1% 1% 10% 2% 4 3%
- --------------------------------------------------------------------------------
1 Calculated based on average shares.
2 Total investment return is calculated assuming an initial investment made at
the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period and
redemption on the last day of the period.
3 If fees for the advisor and administrator were not waived, the total return
would have been lower.
4 Portfolio turnover excludes the impact of redemption in kind.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
17
Scudder VIT Equity 500 Index Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------------------
CLASS B SHARES FOR THE PERIOD
APRIL 30, 2002 1
FOR THE YEARS ENDED DECEMBER 31, THROUGH
2004 2003 DECEMBER 31, 2002
- -------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD .................. $11.63 $ 9.20 $11.27
------ ------ ------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
Net investment income 2 ............................ 0.20 0.14 0.09
Net realized and unrealized gain (loss)
on investments and futures contracts ............. 0.99 2.40 (2.07)
------ ------ ------
Total from investment operations ...................... 1.19 2.54 (1.98)
------ ------ ------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income .............................. (0.10) (0.11) (0.09)
------ ------ ------
Total distributions ................................... (0.10) (0.11) (0.09)
------ ------ ------
NET ASSET VALUE, END OF PERIOD ........................ $12.72 $11.63 $ 9.20
====== ====== ======
TOTAL INVESTMENT RETURN 3 ............................. 10.32% 27.83% (17.56)%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period
(000s omitted) ................................... $53,336 $17,320 $2,829
Ratios to average net assets:
Net investment income ............................ 1.71% 1.29% 1.45% 4
Expenses after waivers, reimbursements
and/or recoupments ............................ 0.54% 0.55% 0.55% 4
Expenses before waivers, reimbursements
and/or recoupments ............................ 0.53% 0.55% 0.55% 4
Portfolio turnover rate ............................ 1% 1% 10%
- --------------------------------------------------------------------------------
1 Commencement of operations.
2 Calculated based on average shares.
3 Total investment return is calculated assuming an initial investment made at
the net asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period and redemption on the last
day of the period. Total return calculated for a period of less than one year
is not annualized.
4 Annualized.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
18
Scudder VIT Equity 500 Index Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1--ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION
Scudder Investments VIT Funds (the 'Trust') is registered under the Investment
Company Act of 1940 (the '1940 Act'), as amended, as a diversified, open-end
management investment company. The Trust is organized as a business trust under
the laws of the Commonwealth of Massachusetts. Scudder VIT Equity 500 Index Fund
(the 'Fund') is one of the series the Trust offers to investors.
The Fund offers two classes of shares to investors: Class A Shares and Class B
Shares. Class B Shares are subject to Rule 12b-1 fees under the 1940 Act equal
to an annual rate up to 0.25% of the Class B Shares average daily net assets.
All shares have equal rights with respect to voting except that shareholders
vote separately on matters affecting their rights as holders of a particular
class.
The investment objective of the Fund is to replicate, as closely as possible
(before the deduction of expenses), the performance of the S&P 500(R) Index,
which emphasizes stocks of large US companies.
B. VALUATION OF SECURITIES
The net asset value of shares of the Fund is computed as of the close of regular
trading on the New York Stock Exchange on each day the Exchange is open for
trading (the 'Value Time').
An equity security is valued at its most recent sale price on the relevant
exchange or over-the-counter ('OTC') market as of the Value Time. Lacking any
sales, the security is valued at the calculated mean between the most recent bid
quotation and the most recent asked quotation (the 'Calculated Mean') on such
exchange or OTC market as of the Value Time. If it is not possible to determine
the Calculated Mean, the security is valued at the most recent bid quotation on
such exchange or OTC market as of the Value Time. In the case of certain foreign
exchanges or OTC markets, the closing price reported by the exchange or OTC
market (which may sometimes be referred to as the 'official close' or the
'official closing price' or other similar term) will be considered the most
recent sale price. If a security is traded on more than one exchange, or upon
one or more exchanges and in the OTC market, quotations are taken from the
market in which the security is traded most extensively.
Money market instruments purchased with an original or remaining maturity of
sixty days or less, maturing at par, are valued at amortized cost.
If market quotations for a portfolio asset are not readily available or the
value of a portfolio asset as determined in accordance with Board approved
procedures does not represent the fair market value of the portfolio asset, the
value of the portfolio asset is taken to be an amount which, in the opinion of
the Fund's Pricing Committee (or, in some cases, the Board's Valuation
Committee), represents fair market value. The value of other portfolio holdings
owned by the Fund is determined in a manner which is intended to fairly reflect
the fair market value of the asset on the valuation date, based on valuation
procedures adopted by the Fund's Board and overseen primarily by the Fund's
Pricing Committee.
C. SECURITIES TRANSACTIONS, INVESTMENT INCOME AND OTHER
Securities transactions are recorded on trade date. Realized gains and losses
are determined by comparing the proceeds of a sale or the cost of a purchase
with a specific offsetting transaction.
Dividend income is recorded on the ex-dividend date. Interest income, including
amortization of premiums and accretion of discounts, is accrued daily. Estimated
expenses are also accrued daily.
Distribution fees specifically attributable to a class are allocated to that
class. All other expenses, income, gains and losses are allocated among the
classes based upon their relative net assets.
The Trust accounts separately for the assets, liabilities and operations of each
of the Funds. Expenses directly attributable to a Fund are charged to that Fund,
while the expenses that are attributable to the Trust are allocated among the
Funds based upon the relative net assets of each Fund.
D. DISTRIBUTIONS
The Fund pays annual dividends from its net investment income and makes annual
distributions of any net realized capital gains to the extent they exceed
capital loss carryforwards. The Fund records dividends and distributions on its
books on the ex-dividend date.
E. FEDERAL INCOME TAXES
It is the Fund's policy to continue to qualify as a regulated investment company
under the Internal Revenue Code of 1986, as amended, and to distribute
- --------------------------------------------------------------------------------
19
Scudder VIT Equity 500 Index Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
substantially all of its taxable income to shareholders. Therefore, no federal
income taxes have been accrued.
F. FUTURES CONTRACTS
The Fund may buy or sell financial futures contracts on established futures
exchanges. Under the terms of a financial futures contract, the Fund agrees to
receive or deliver a specific amount of a financial instrument at a specific
price on a specific date.
The Fund's investments in financial futures contracts are designed to closely
replicate the benchmark index used by the Fund.
When the Fund enters into a futures contract, it is required to make a margin
deposit equal to a percentage of the face value of the contract. While the
contract is outstanding, the Fund may be required to make additional deposits or
may have part of its deposit returned as a result of changes in the relationship
between the face value of the contract and the value of the underlying security.
The Fund records these payments as unrealized gains or losses. When entering
into a closing transaction, the Fund realizes a gain or loss.
Futures contracts are valued at the settlement price established each day by the
board of trade or exchange on which they are traded.
G. SECURITIES LENDING
The Fund may lend securities to financial institutions. The Fund retains
beneficial ownership of the securities it has loaned and continues to receive
interest and dividends paid by the securities and to participate in any changes
in their market value. The Fund requires the borrowers of the securities to
maintain collateral with the Fund in the form of cash and/or government
securities equal to 102% of the value of domestic securities and 105% of the
value of international securities. The Fund receives compensation for lending
its securities either in the form of fees or by earning income, net of
allocations to the lending agent and borrower, on invested cash collateral.
Either the Fund or the borrower may terminate the loan. The Fund is subject to
all risks associated with the investment of any cash collateral received,
including, but not limited to, interest rate, market, credit and liquidity risk
associated with such investments. At December 31, 2004, $9,095,050 of cash
collateral was invested in the Daily Assets Fund Institutional.
H. ESTIMATES
In preparing its financial statements in conformity with
US generally accepted accounting principles, management makes estimates and
assumptions. Actual results may be different.
NOTE 2--FEES AND TRANSACTIONS
WITH AFFILIATES
Deutsche Asset Management, Inc. ('Advisor' or 'DeAM, Inc.'), an indirect,
wholly-owned subsidiary of Deutsche Bank AG, is the Fund's Advisor. The Fund
pays the Advisor an annual fee based on its average daily net assets, which is
calculated daily and paid monthly at the annual rate of 0.20%.
Northern Trust Investments, N.A. ('NTI') acts as investment sub-advisor for the
Fund. As the Fund's investment sub-advisor, NTI makes the Fund's investment
decisions. It buys and sells securities for the Fund and conducts the research
that leads to these purchase and sale decisions. DeAM, Inc. pays a fee to NTI
for acting as investment sub-advisor to the Fund.
The Advisor has contractually agreed to waive its fees and/or reimburse expenses
of the Fund, to the extent necessary, to limit all expenses to 0.30% of average
daily net assets for Class A Shares and 0.55% of average daily net assets for
Class B Shares until April 30, 2005.
Effective May 1, 2002, the Advisor may recoup any of its waived investment
advisory fees within the following three years if the Fund is able to make the
repayment without exceeding its current expense limits. During the year ended
December 31, 2004, the Advisor recouped $97,667 of fees that were previously
waived. At December 31, 2004, there were no amounts subject to repayment to the
Advisor.
Certain officers and trustees of the Fund are also officers or directors of
DeAM, Inc. These persons are not paid by the Fund for serving in these
capacities.
The Fund 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 Fund in 2005 for the portion of
commissions (plus interest) paid to the affiliate of the Advisor attributable to
the premiums paid by the Fund. The amounts for 2002 and 2003 were $326 and $57
respectively.
- --------------------------------------------------------------------------------
20
Scudder VIT Equity 500 Index Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 3--OTHER FEES
PFPC Inc. ('Administrator') is the Fund's Administrator and Transfer Agent. The
Fund pays the Administrator an annual fee based on its average daily net assets,
which is calculated daily and paid monthly.
State Street Bank and Trust Company ('Custodian') is the Fund's Custodian. The
Fund pays the Custodian an annual fee.
The Fund pays PFPC Distributors, Inc. an annual fee pursuant to Rule 12b-1,
which is calculated daily and paid monthly at the annual rate of up to 0.25% of
the Class B Shares average daily net assets.
NOTE 4--CAPITAL SHARE TRANSACTIONS
Transactions in capital shares were as follows:
Class A Shares
-------------------------------------------------------
For the Year Ended For the Year Ended
December 31, 2004 December 31, 2003
--------------------------- --------------------------
Shares Amount Shares Amount
------------ ------------- ------------ ------------
Sold 17,356,257 $204,875,496 17,810,134 $177,657,325
Reinvested 638,123 7,389,469 575,243 5,476,312
Redeemed (9,772,333) (114,827,674) (7,470,751) (73,251,950)
---------- ------------ ---------- ------------
Net increase 8,222,047 $ 97,437,291 10,914,626 $109,881,687
========== ============ ========== ============
Class B Shares
-------------------------------------------------------
For the Year Ended For the Year Ended
December 31, 2004 December 31, 2003
--------------------------- --------------------------
Shares Amount Shares Amount
------------ ------------- ------------ ------------
Sold 4,853,521 $ 57,585,613 1,860,120 $ 19,453,549
Reinvested 18,805 217,946 4,859 46,303
Redeemed (2,169,348) (25,884,728) (683,869) (7,136,052)
---------- ------------ ---------- ------------
Net increase 2,702,978 $ 31,918,831 1,181,110 $ 12,363,800
========== ============ ========== ============
NOTE 5--PURCHASE AND SALE OF
INVESTMENT SECURITIES
The aggregate cost of purchases and proceeds from sales of investments, other
than short-term obligations, for the year ended December 31, 2004, were
$149,813,470 and $8,173,902, respectively.
NOTE 6--FEDERAL INCOME TAX
At December 31, 2004, capital contributions, accumulated undistributed net
investment income, and accumulated net realized gain/(loss) from investments
have been adjusted for current period permanent book/tax differences which arose
principally from adjustments related to dividends and other non-taxable
distributions received by the Fund. These reclassifications resulted in the
following increases/(decreases) in the components of net assets:
Undistributed Undistributed
Net Investment Net Realized Paid-in
Income Gain/Loss Capital
- -------------- ------------- -------
($71,119) $43,888 $27,231
For federal income tax purposes, the tax basis of investments held at December
31, 2004 was $835,815,881. The net unrealized appreciation for all securities
based on tax cost was $13,758,011. The aggregate gross unrealized appreciation
for all investments at December 31, 2004 was $125,462,086 and the aggregate
gross unrealized depreciation for all investments was $111,704,075. The
difference between book basis and tax-basis unrealized appreciation/depreciation
is primarily attributable to the tax deferral of losses on wash sales.
Income and capital gains distributions are determined in accordance with federal
income tax regulations, which may differ from US generally accepted accounting
principles.
Distributions during the years ended December 31, 2004 and 2003 were
characterized as follows for tax purposes:
Distributions paid from: 2004 2003
- ----------------------- ---- ----
Ordinary income $7,607,415 $5,522,615
At December 31, 2004, the components of distributable earnings on a tax basis
were as follows:
Undistributed ordinary income $12,401,640
Accumulated capital loss ($16,576,761)
Unrealized appreciation/(depreciation) $13,796,788
At December 31, 2004, the Fund had capital loss carryovers available as a
reduction against future net realized capital gains of $16,576,761, all of which
expires in 2011. This may be subject to certain limitations under sections
382-383 of the Internal Revenue Code. The Fund utilized $2,031,520 of its
capital loss carryovers in the current year to reduce net realized gains.
NOTE 7--EXPENSE REDUCTIONS
The Fund has entered into an arrangement with its custodian whereby credits
realized as a result of uninvested cash balances are used to reduce a portion of
the Fund's custodian expenses. During the year ended December 31, 2004, the
Fund's custodian fees were reduced by $64 for custody credits earned.
- --------------------------------------------------------------------------------
21
Scudder VIT Equity 500 Index Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 8--LINE OF CREDIT
The Fund and several other funds and portfolios advised or administered by the
Advisor or its affiliates (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%. The Fund may borrow up to a maximum of 33% of its net assets under
the agreement.
There were no significant borrowings during the year ended December 31, 2004.
NOTE 9--OPEN FUTURES
The Fund had the following open contracts at December 31, 2004:
Type of Market Unrealized
Future Expiration Contracts Position Value Appreciation
- ---------------------------------------------------------------------------
S&P 500 March
Index Future 2005 34 Long $10,316,450 $60,925
The use of futures contracts involves elements of market risk and risks in
excess of the amount recognized in the Statement of Assets and Liabilities. The
'market value' presented above represents the Fund's total exposure in such
contracts whereas only the net unrealized appreciation/(depreciation) is
reflected in the Fund's net assets. Risks inherent in the use of futures
contracts include 1) adverse changes in the value of such instruments, 2) an
imperfect correlation between the price of the contracts and the underlying
index and 3) the possibility of an illiquid secondary market.
At December 31, 2004, the Fund pledged securities with a value of $1,174,336 to
cover margin requirements on open futures contracts.
NOTE 10--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.
NOTE 11--SUBSEQUENT EVENT
Effective January 3, 2005, the Scudder VIT Equity 500 Index Fund ('VIT Fund')
terminated the Transfer Agency, Fund Accounting, and Administration agreements
with PFPC Inc. and the Distribution agreement with PFPC Distributors, Inc.
(collectively, the 'PFPC Agreements').
Contemporaneously with the termination of the PFPC Agreements, the VIT Fund
entered into new agreements to replace PFPC Inc. and PFPC Distributors, Inc. as
follows: Scudder Investments Service Company ('SISvC') became the VIT Fund's
transfer agent; Investment Company Capital Corporation ('ICCC') became the VIT
Fund's administrator and fund accounting agent; and Scudder Distributors Inc.
('SDI') became the VIT Fund's principal underwriter. ICCC has engaged State
Street Corporation to serve as the VIT Fund's sub-accounting agent.
The Board of Trustees of the VIT Fund approved the termination of the PFPC
Agreements and authorized the VIT Fund to enter into agreements with SISvC, ICCC
and SDI.
SISvC, ICCC and SDI are affiliated persons of the VIT Fund's investment advisor.
It is not expected that the new arrangements will increase the fees that were
paid by shareholders for services performed by PFPC Inc. and PFPC Distributors,
Inc.
- --------------------------------------------------------------------------------
22
Scudder VIT Equity 500 Index Fund
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees
Scudder Investments VIT Funds--
Scudder VIT Equity 500 Index Fund
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Scudder VIT Equity 500 Index Fund (the 'Fund')
as of December 31, 2004, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the two years in
the period then ended, and the financial highlights for each of the periods
indicated therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with 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, and 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. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder VIT Equity 500 Index Fund at December 31, 2004, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and its financial highlights for each of
the periods indicated therein, in conformity with US generally accepted
accounting principles.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
February 8, 2005
- --------------------------------------------------------------------------------
23
Scudder VIT Equity 500 Index Fund
- --------------------------------------------------------------------------------
TRUSTEES AND OFFICERS OF THE TRUST
The overall business and affairs of the Fund are supervised by its Board of
Trustees. The Board approves all significant agreements between the Fund and
persons or companies furnishing services to the Fund, including the Fund's
agreements with its investment advisor, administrator, distributor, custodian
and transfer agent. The Board of Trustees and the executive officers are
responsible for exercising the Fund's powers except those reserved for the
shareholders and those assigned to the Fund's advisor, DeAM, Inc., or other
service providers. Each Trustee holds office until he or she resigns, is removed
or a successor is elected and qualified. Each Officer is annually elected to
serve until he or she resigns, is removed or a successor has been duly elected
and qualified.
The following information is provided for each Trustee of the Fund. The first
section of the table lists information for each Trustee who is not an
'interested person' of the Fund (as defined in the 1940 Act) (an 'Independent
Trustee'). Information for each Non-Independent Trustee (an 'Interested
Trustee') follows. The Interested Trustee is considered to be an interested
person as defined by the 1940 Act because of his employment with either the
Fund's advisors and/or underwriter or their affiliates. The mailing address for
the Trustees and Officers with respect to Fund operations is One South Street,
Baltimore, Maryland, 21202.
NAME, DATE OF BIRTH, NUMBER OF
POSITION WITH THE FUNDS IN THE
TRUST AND LENGTH OF BUSINESS EXPERIENCE AND DIRECTORSHIPS FUND COMPLEX
TIME SERVED 1,2 DURING THE PAST 5 YEARS OVERSEEN
- ---------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ---------------------------------------------------------------------------------------------------
Joseph R. Hardiman Private Equity Investor (January 1997 to 54
5/27/37 present); Director, Corvis Corporation 3
Chairman since 2004 and (optical networking equipment) (July 2000 to
Trustee since 2002 present), Brown Investment Advisory & Trust
Company (investment advisor) (February 2001
to present), The Nevis Fund (registered
investment company) (July 1999 to present),
and ISI Family of Funds (registered
investment companies) (March 1998 to
present). Formerly, Director, Soundview
Technology Group Inc. (investment banking)
(July 1998 to January 2004) and Director,
Circon Corp.3 (medical instruments) (November
1998 to January 1999); President and Chief
Executive Officer, The National Association
of Securities Dealers, Inc. and The NASDAQ
Stock Market, Inc. (1987-1997); Chief
Operating Officer of Alex. Brown & Sons
Incorporated (now Deutsche Bank Securities
Inc.) (1985-1987); General Partner, Alex.
Brown & Sons Incorporated (now Deutsche Bank
Securities Inc.) (1976-1985).
- ---------------------------------------------------------------------------------------------------
Richard R. Burt Chairman, Diligence LLC (international 56
2/03/47 information collection and risk-management
Trustee since 2002 firm (September 2002 to present); Chairman,
IEP Advisors, Inc. (July 1998 to present);
Member of the Board, Hollinger International,
Inc.3 (publishing) (September 1995 to
present), HCL Technologies Limited
(information technology) (April 1999 to
present), UBS Mutual Funds (formerly known as
Brinson and Mitchell Hutchins families of
funds) (registered investment companies)
(September 1995 to present); and Member,
Textron Inc.3 International Advisory Council
(July 1996 to present). Formerly, Partner,
McKinsey & Company (consulting) (1991-1994)
and US Chief Negotiator in Strategic Arms
Reduction Talks (START) with former Soviet
Union and US Ambassador to the Federal
Republic of Germany (1985-1991); Member of
the Board, Homestake Mining 3 (mining and
exploration) (1998 to February 2001), Archer
Daniels Midland Company 3 (agribusiness
operations) (October 1996 to June 2001) and
Anchor Gaming (gaming software and equipment)
(March 1999 to December 2001); Chairman of
the Board, Weirton Steel Corporation 3 (April
1996-2004).
- ---------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
24
Scudder VIT Equity 500 Index Fund
- --------------------------------------------------------------------------------
TRUSTEES AND OFFICERS OF THE TRUST
NAME, DATE OF BIRTH, NUMBER OF
POSITION WITH THE FUNDS IN THE
TRUST AND LENGTH OF BUSINESS EXPERIENCE AND DIRECTORSHIPS FUND COMPLEX
TIME SERVED 1,2 DURING THE PAST 5 YEARS OVERSEEN
- ---------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ---------------------------------------------------------------------------------------------------
S. Leland Dill Trustee, Phoenix Euclid Market Neutral Funds 54
3/28/30 (since May 1998), Phoenix Funds (24
Trustee since 2002 portfolios) (since May 2004) (registered
investment companies); Retired (since 1986).
Formerly, Partner, KPMG Peat Marwick (June
1956 to June 1986); Director, Vintners
International Company Inc. (wine vintner)
(June 1989 to May 1992), Coutts (USA)
International (January 1992 to March 2000),
Coutts Trust Holdings Ltd., Coutts Group
(private bank) (March 1991 to March 1999);
General Partner, Pemco (investment company)
(June 1979 to June 1986); Trustee, Phoenix
Zweig Series Trust (September 1989 to May
2004).
- ---------------------------------------------------------------------------------------------------
Martin J. Gruber Nomura Professor of Finance, Leonard N. Stern 54
7/15/37 School of Business, New York University
Trustee since 2002 (since September 1964); Trustee (since
January 2000) and Chairman of the Board
(since February 2004), CREF (pension fund);
Trustee of the TIAA-CREF Mutual funds (53
portfolios) (since February 2004); Director,
Japan Equity Fund, Inc. (since January 1992),
Thai Capital Fund, Inc. (since January 2000)
and Singapore Fund, Inc. (since January 2000)
(registered investment companies). Formerly,
Trustee, TIAA (pension fund) (January
1996-January 2000); Director, S.G. Cowen
Mutual Funds (January 1985 to January 2001).
- ---------------------------------------------------------------------------------------------------
Richard J. Herring Jacob Safra Professor of International 54
2/18/46 Banking and Professor, Finance Department,
Trustee since 2002 The Wharton School, University of
Pennsylvania (since July 1972); Director,
Lauder Institute of International Management
Studies (since July 2000); Co-Director,
Wharton Financial Institutions Center (since
July 2000). Formerly, Vice Dean and Director,
Wharton Undergraduate Division (July 1995 to
June 2000).
- ---------------------------------------------------------------------------------------------------
Graham E. Jones Senior Vice President, BGK Realty, Inc. 54
1/31/33 (commercial real estate) (since 1995);
Trustee since 2002 Trustee, 8 open-end mutual funds managed by
Weiss, Peck & Greer (since 1985) and Trustee
of 18 open-end mutual funds managed by Sun
Capital Advisers, Inc. (since 1998).
- ---------------------------------------------------------------------------------------------------
Rebecca W. Rimel President and Chief Executive Officer, The 54
4/10/51 Pew Charitable Trusts (charitable foundation)
Trustee since 2002 (1994 to present); Executive Vice President,
The Glenmede Trust Company (investment trust
and wealth management) (1983 to present).
- ---------------------------------------------------------------------------------------------------
Philip Saunders, Jr. Principal, Philip Saunders Associates 54
10/11/35 (economic and financial consulting) (since
Trustee since 2002 November 1988). Formerly, Director, Financial
Industry Consulting, Wolf & Company
(consulting) (1987-1988); President, John
Hancock Home Mortgage Corporation
(1984-1986); Senior Vice President of
Treasury and Financial Services, John Hancock
Mutual Life Insurance Company, Inc.
(1982-1986).
- ---------------------------------------------------------------------------------------------------
William N. Searcy Private investor (since October 2003); 54
9/03/46 Trustee of 18 open-end mutual funds managed
Trustee since 2002 by Sun Capital Advisers, Inc. (since October
1998). Formerly, Pension & Savings Trust
Officer, Sprint Corporation 3
(telecommunications) (November 1989 to
October 2003).
- ---------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
25
Scudder VIT Equity 500 Index Fund
- --------------------------------------------------------------------------------
TRUSTEES AND OFFICERS OF THE TRUST
Scudder VIT Equity 500 Index Fund
- --------------------------------------------------------------------------------
TRUSTEES AND OFFICERS OF THE TRUST
NAME, DATE OF BIRTH, NUMBER OF
POSITION WITH THE FUNDS IN THE
TRUST AND LENGTH OF BUSINESS EXPERIENCE AND DIRECTORSHIPS FUND COMPLEX
TIME SERVED 1,2 DURING THE PAST 5 YEARS OVERSEEN
- ---------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES
- ---------------------------------------------------------------------------------------------------
William N. Shiebler 4 Chief Executive Officer in the Americas for 137
2/06/42 Deutsche Asset Management ('DeAM') and a
Trustee since 2004 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).
- ---------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NAME, DATE OF BIRTH,
POSITION WITH THE
TRUST AND LENGTH OF BUSINESS EXPERIENCE AND DIRECTORSHIPS
TIME SERVED 1,2 DURING THE PAST 5 YEARS
- --------------------------------------------------------------------------------
OFFICERS
- --------------------------------------------------------------------------------
Julian F. Sluyters 5 Managing Director, Deutsche Asset Management
7/14/60 (since May 2004); President and Chief
President and Chief Executive Executive Officer of The Germany Fund, Inc.,
Officer since 2004 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), Scudder
Global Commodities Stock Fund, Inc. (since
July 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.
- --------------------------------------------------------------------------------
Kenneth Murphy 6 Vice President, Deutsche Asset Management
10/13/63 (September 2000 to present). Formerly,
Vice President and Anti-Money Director, John Hancock Signature Services
Laundering Compliance Officer (1992-2000).
since 2002
- --------------------------------------------------------------------------------
Paul H. Schubert 5 Managing Director, Deutsche Asset Management
1/11/63 (since July 2004). Formerly, Executive
Chief Financial Officer Director, Head of Mutual Fund Services and
since 2004 Treasurer for UBS Family of Funds
(1998-2004); Vice President and Director of
Mutual Fund Finance at UBS Global Asset
Management (1994-1998).
- --------------------------------------------------------------------------------
Charles A. Rizzo 6 Managing Director, Deutsche Asset Management
8/05/57 (since April 2004). Formerly, Director,
Treasurer since 2002 Deutsche Asset Management (April 2000 to
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).
- --------------------------------------------------------------------------------
John Millette 6 Director, Deutsche Asset Management.
8/23/62
Secretary since 2003
- --------------------------------------------------------------------------------
Lisa Hertz 5 Assistant Vice President, Deutsche Asset
8/21/70 Management.
Assistant Secretary
since 2004
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
26
Scudder VIT Equity 500 Index Fund
- --------------------------------------------------------------------------------
TRUSTEES AND OFFICERS OF THE TRUST
- --------------------------------------------------------------------------------
NAME, DATE OF BIRTH,
POSITION WITH THE
TRUST AND LENGTH OF BUSINESS EXPERIENCE AND DIRECTORSHIPS
TIME SERVED 1,2 DURING THE PAST 5 YEARS
- --------------------------------------------------------------------------------
OFFICERS
- --------------------------------------------------------------------------------
Daniel O. Hirsch Managing Director, Deutsche Asset Management
3/27/54 (2002 to present). Formerly, Director,
Assistant Secretary Deutsche Asset Management (1999-2002),
since 2003 Principal, BT Alex. Brown Incorporated (now
Deutsche Bank Securities Inc.) (1998-1999);
Assistant General Counsel, United States
Securities and Exchange Commission
(1993-1998); Director, Deutsche Global Funds
Ltd. (2002-2004).
- --------------------------------------------------------------------------------
Caroline Pearson 6 Managing Director, Deutsche Asset Management.
4/01/62
Assistant Secretary
since 2002
- --------------------------------------------------------------------------------
Bruce A. Rosenblum Director, Deutsche Asset Management.
9/14/60
Vice President since 2003 and
Assistant Secretary
since 2002
- --------------------------------------------------------------------------------
Kevin M. Gay 6 Vice President, Deutsche Asset Management.
11/12/59
Assistant Treasurer
since 2004
- --------------------------------------------------------------------------------
Salvatore Schiavone 6 Director, Deutsche Asset Management.
11/03/65
Assistant Treasurer
since 2003
- --------------------------------------------------------------------------------
Kathleen Sullivan D'Eramo 6 Director, Deutsche Asset Management.
1/25/57
Assistant Treasurer since 2003
- --------------------------------------------------------------------------------
Philip Gallo 5 Managing Director, Deutsche Asset Management
8/02/62 (2003 to present). Formerly, Co-Head of
Chief Compliance Officer Goldman Sachs Asset Management Legal
since 2004 (1994-2003).
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1 Unless otherwise indicated, the mailing address of each Trustee and Officer
with respect to fund operations is One South Street, Baltimore, MD 21202.
2 Length of time served represents the date that each Trustee or Officer first
began serving in that position with Scudder Investments VIT Funds of which
this fund is a series.
3 A publicly held company with securities registered pursuant to Section 12 of
the Securities Exchange Act of 1934.
4 Mr. Shiebler is a Trustee who is an 'interested person' within the meaning of
Section 2(a)(19) of the 1940 Act. Mr. Shiebler is a Managing Director of
Deutsche Asset Management, the US asset management unit of Deutsche Bank AG
and its affiliates. Mr. Shiebler's business address is 280 Park Avenue, New
York, New York 10017.
5 Address: 345 Park Avenue, New York, New York 10154.
6 Address: Two International Place, Boston, Massachusetts 02110.
- --------------------------------------------------------------------------------
27
Scudder VIT Equity 500 Index Fund
- --------------------------------------------------------------------------------
TAX INFORMATION (Unaudited)
DIVIDENDS RECEIVED DEDUCTION: Of the ordinary income (including short-term
capital gain) distributions made by the Scudder VIT Equity 500 Index Fund during
the fiscal year ended December 31, 2004, 100% qualify for the dividend received
deduction available to corporate shareholders.
- --------------------------------------------------------------------------------
PROXY VOTING (Unaudited)
A description of the Fund's policies and procedures for voting proxies for
portfolio securities and information about how the Fund voted proxies related to
its portfolio securities during the 12-month period ended June 30, 2004 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
Fund's policies and procedures without charge, upon request, call us toll free
at (800) 621-1048.
- --------------------------------------------------------------------------------
FORM N-Q (Unaudited)
Following the Fund's fiscal first and third quarter-end, a complete portfolio
holdings listing is filed with theSEC 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
theSEC'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.
- --------------------------------------------------------------------------------
28
[THIS PAGE INTENTIONALLY LEFT BLANK]
[THIS PAGE INTENTIONALLY LEFT BLANK]
ABOUT THE FUND'S ADVISOR
Deutsche Asset Management, Inc., an indirect, wholly-owned subsidiary of
Deutsche Bank AG, is the Fund's Advisor.
Scudder Investments is part of Deutsche Asset Management, which is the marketing
name in the United States 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.
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.
Distributed by:
PFPC Distributors, Inc.
760 Moore Road
King of Prussia, PA 19406
[LOGO OMITTED]
SCUDDER
INVESTMENTS
A MEMBER OF
DEUTSCHE ASSET MANAGEMENT [GRAPHIC OMITTED]
Portfolio changes should not be considered
recommendations for action by individual investors.
VIT6SA (2/28/05) MARS#35896
[LOGO OMITTED] Printed on recycled paper
ITEM 2. CODE OF ETHICS.
As of the end of the period, December 31, 2004, Scudder VIT Equity 500 Index
Fund 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. S.
Leland Dill. 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 EQUITY 500 INDEX FUND
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 All
Ended Audit Fees Billed Audit-Related Tax Fees Billed to Other Fees Billed
December 31, to Fund Fees Billed to Fund Fund to Fund
- --------------------------------------------------------------------------------------------------------------------
2004 $32,300 $0 $4,200 $0
- --------------------------------------------------------------------------------------------------------------------
2003 $30,150 $0 $1,816 $0
- --------------------------------------------------------------------------------------------------------------------
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 All
Fees Billed to Tax Fees Billed to Other Fees Billed
Fiscal Year Adviser and Adviser and to Adviser and
Ended Affiliated Fund Affiliated Fund Affiliated Fund
December 31, Service Providers Service Providers Service 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
Service Providers Total Non-Audit Fees
(engagements related billed to Adviser
directly to the and Affiliated Fund
Total operations and Service Providers
Non-Audit Fees financial reporting (all other
Fiscal Year Billed to Fund of the Fund) engagements) Total of (A), (B)
Ended December 31, (A) (B) (C) and (C)
- -------------------------------------------------------------------------------------------------------------------
2004 $4,200 $0 $331,601 $335,801
- -------------------------------------------------------------------------------------------------------------------
2003 $1,816 $0 $3,742,000 $3,743,816
- -------------------------------------------------------------------------------------------------------------------
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 Nominating and Governance Committee evaluates and nominates Board member
candidates. Fund shareholders may also submit nominees that will be considered
by the Committee when a Board vacancy occurs. Submissions should be mailed to
the attention of the Secretary of the Fund, One South Street, Baltimore, MD
21202.
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, or any amendment thereto, that is the subject of
disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and
Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
Form N-CSR Item F
SIGNATURES
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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 VIT Equity 500 Index Fund
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 VIT Equity 500 Index Fund
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