SCUDDER
INVESTMENTS(SM)
[LOGO]
Scudder Variable Life
Investment Fund
Semiannual Report
June 30, 2000
An open-end management investment company that offers shares of beneficial
interest in nine types of diversified portfolios.
<PAGE>
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Contents
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<S> <C> <C>
2 Letter from the Fund's President Large Company Growth Portfolio
48 Portfolio Management Discussion
Money Market Portfolio
49 Performance Update
3 Portfolio Management Discussion
50 Portfolio Summary
4 Investment Portfolio
51 Investment Portfolio
5 Financial Statements
54 Financial Statements
7 Financial Highlights
57 Financial Highlights
Bond Portfolio
21st Century Growth Portfolio
8 Portfolio Management Discussion
58 Portfolio Management Discussion
9 Portfolio Summary
59 Performance Update
10 Investment Portfolio
60 Portfolio Summary
13 Financial Statements
61 Investment Portfolio
15 Financial Highlights
65 Financial Statements
Balanced Portfolio
68 Financial Highlights
16 Portfolio Management Discussion
Global Discovery Portfolio
17 Portfolio Summary
69 Portfolio Management Discussion
18 Investment Portfolio
70 Performance Update
23 Financial Statements
71 Portfolio Summary
26 Financial Highlights
72 Investment Portfolio
Growth and Income Portfolio
76 Financial Statements
27 Portfolio Management Discussion
79 Financial Highlights
28 Performance Update
International Portfolio
29 Portfolio Summary
80 Portfolio Management Discussion
30 Investment Portfolio
81 Performance Update
34 Financial Statements
82 Portfolio Summary
37 Financial Highlights
83 Investment Portfolio
Capital Growth Portfolio
87 Financial Statements
38 Portfolio Management Discussion
90 Financial Highlights
39 Performance Update
40 Portfolio Summary 91 Notes to Financial Statements
41 Investment Portfolio
44 Financial Statements
47 Financial Highlights
</TABLE>
<PAGE>
Letter from the Fund's President
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Dear Shareholders,
We are pleased to report the results of the Scudder Variable Life Investment
Fund for the six-month period ended June 30, 2000. The global financial markets
experienced unusual volatility during the first half of the year. A powerful
first-quarter rally in growth stocks gave way to a violent correction during
April and May, as concerns built that the Fed would be forced to raise interest
rates several times in order to stem inflation pressures. Just as market
sentiment reached its nadir, however, the U.S. economy began to show signs of
cooling to a more manageable rate of growth. Taking this to mean that the Fed
would be less likely to raise rates over the second half of the year, investors
moved back into equities during June. The net result of these fluctuations was
that the U.S. market, as measured by the S&P 500, finished the period virtually
unchanged.
We believe that the lesson from the last six months is that no matter
what is taking place in the financial markets, it is essential to stay focused
on your goals and ensure that your investments are appropriately suited for your
needs. For many investors, however, the strong performance of the U.S. stock
market during the second half of the 1990s diminished the attractiveness of
diversification. But as the events of the first half of 2000 demonstrated,
diversification remains as important as ever. In a period in which stocks
experienced significant volatility, investors who abandoned their investment
plan in favor of a heavy weighting in more aggressive sectors generally saw
their portfolios lose substantial ground. On the other hand, portfolios with
exposure to stocks (both international and domestic), fixed income securities,
and money market funds were generally better positioned to ride out the market's
fluctuations.
Unless you plan to devote your energies to investing every day, we think that
you will benefit from taking a long-term approach that includes exposure to
several asset classes. As a shareholder of the Scudder Variable Life Investment
Fund Portfolios, you already have access to a wide range of investment products
that can help you build a well-rounded portfolio. In the most recent six-month
reporting period, six of the nine portfolios beat the average return for other
funds in their respective categories, according to Lipper Analytical Services.
On the following pages, you will find summaries of each portfolio's performance
and investment strategy over the six-month reporting period. Thank you for your
continued investment in Scudder Variable Life Investment Fund.
Sincerely,
/s/ Lin Coughlin
Linda C. Coughlin
President,
Scudder Variable Life Investment Fund
2
<PAGE>
Portfolio Management Discussion
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June 30, 2000
Money Market Portfolio
Dear Shareholders,
The Money Market Portfolio provided shareholders with a stable $1.00 share price
and a competitive yield during its most recent semiannual period ended June 30,
2000. The portfolio's 30-day net annualized yield was 6.13% as of June 30. For
the six months ended June 30, 2000, the portfolio posted a 2.92% total return.
This performance surpassed the 2.80% average return for funds in the Variable
Life Money Market Category for the same period, according to Lipper Analytical
Services, Inc. Among its peers, the portfolio ranked in the top 15% of 106 funds
in its Lipper category for total return performance.
Money market securities are directly impacted by changes in short-term rates,
especially the federal funds rate, an important benchmark that is closely
watched by fixed income investors. With the U.S. economy strong, unemployment
near an all time low, and consumer confidence high, concerns over a possible
acceleration of the inflation rate continued to take center stage during the
first six months of 2000. In light of these economic conditions, the Federal
Reserve continued to raise the federal funds rate, up to 6.50% as of June 30.
The Fed's actions have created a favorable environment for money market
investors because short-term interest rates are rising and real yields (taking
inflation into account) are providing investors with attractive returns.
In managing the portfolio, we focus on maintaining its average life within a
target range and selecting securities that will benefit the portfolio given
current interest rate trends. As a result, we generally do not make significant
asset allocation shifts within the portfolio. We attempt to maintain exposure to
a broad selection of securities, including high quality commercial paper,
variable- and floating-rate securities, U.S. government agency obligations,
certificates of deposit, and repurchase agreements. As Y2K concerns diminished
at the beginning of this year, we pursued higher yielding securities and, in
terms of maturity, maintained a flexible stance in order to be able to react to
changing market conditions. The portfolio's maturity remained significantly
shorter than those of its peers, however, given our expectations that rates
would continue to rise. At the end of the period, the portfolio had an average
maturity of 24 days, compared to about 34 days for the average high quality
money market fund as compiled by Lipper.
As the Fed worries about unflagging consumer confidence, it may maintain its
upward bias on interest rates for the near term, but we believe it will probably
take a cautious approach prior to the November elections. Based on this outlook,
we expect to maintain the portfolio's current positioning while seeking to
capitalize on attractive opportunities as they arise. The portfolio's management
team will continue to collect and analyze economic data and carefully monitor
the investment climate as we position the Money Market Portfolio for current
income, and stability and liquidity of capital.
Sincerely,
Your Portfolio Management Team
/s/Frank J. Rachwalski, Jr. /s/Geoffrey A. Gibbs
Frank J. Rachwalski, Jr. Geoffrey A. Gibbs
Lead Portfolio Manager Portfolio Manager
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
--------------------------------------------------------------------------------
The portfolio's average maturity remained significantly shorter than its peers
over the period, given our expectation that interest rates would continue to
rise.
SCUDDER VARIABLE LIFE INVESTMENT FUND -- | 3
MONEY MARKET PORTFOLIO
<PAGE>
Investment Portfolio as of June 30, 2000 (Unaudited)
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Money Market Portfolio
<TABLE>
<CAPTION>
Principal
Amount ($) Value ($)
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Repurchase Agreements 9.9%
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<S> <C> <C>
State Street Bank and Trust Company, 6.48%, to be
repurchased at $11,157,022 on 7/3/2000***
(Cost $11,151,000) ..................................... 11,151,000 11,151,000
[GRAPHIC OMITTED]
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Commercial Paper 50.0%
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Barton Capital Corp., 6.55%*, 7/7/2000 .................... 8,000,000 7,991,267
Bavaria Univer FDG, 6.56%*, 7/13/2000 ..................... 8,000,000 7,982,507
Galaxy Funding Inc., 6.17%*, 7/10/2000 .................... 8,000,000 7,987,660
International Securitization Corp., 6.22%*, 7/5/2000 ...... 8,139,000 8,133,375
Merrill Lynch & Co., 6.631%*, 4/20/2001 ................... 5,000,000 4,999,607
Moat Funding LLC, 6.7%*, 7/7/2000 ......................... 3,000,000 2,948,075
Preferred Receivables Funding Corp., 6.58%*, 7/7/2000 ..... 8,000,000 7,991,227
Thunder Bay Funding Corp., 6.55%*, 7/11/2000 .............. 8,000,000 7,985,444
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Total Commercial Paper (Cost $56,019,162) 56,019,162
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Short-Term Notes 40.1%
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Bayerische Landesbank, 6.103%, 3/1/2001** ................. 5,000,000 4,997,655
Beneficial Corp., 6.221%, 9/5/2000** ...................... 9,000,000 9,000,342
First Union National Bank, 6.501%, 7/26/2000** ............ 8,000,000 8,000,000
GTE Corp., 6.129%, 1/5/2001** ............................. 7,000,000 6,997,206
Heller Financial Inc., 6.35%, 7/7/2000** .................. 5,000,000 5,000,093
John Deere Capital Corp., 6.425%, 11/9/2000** ............. 5,000,000 5,003,497
U.S. Bank NA, 6.513%, 7/19/2000** ......................... 6,000,000 5,999,788
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Total Short-Term Notes (Cost $44,998,581) 44,998,581
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Total Investment Portfolio -- 100.0% (Cost $112,168,743) (a) 112,168,743
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</TABLE>
* Annualized yield at time of purchase; not a coupon rate. (Unaudited)
** Floating rate notes are securities whose interest rates vary with a
designated market index or market rate, such as the coupon-equivalent
of the U.S. Treasury Bill rate. These securities are shown at their
rate as of June 30, 2000. Date shown is next reset date.
*** Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities.
(a) Cost for federal income tax purposes is $112,168,743.
The accompanying notes are an integral part of the financial statements.
SCUDDER VARIABLE LIFE INVESTMENT FUND -- | 4
MONEY MARKET PORTFOLIO
<PAGE>
Financial Statements
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Money Market Portfolio
--------------------------------------------------------------------------------
Statement of Assets and Liabilities as of June 30, 2000 (Unaudited)
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Assets
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<S> <C>
Investments in securities, at value (cost $112,168,743) ...................... $ 112,168,743
Cash ......................................................................... 2,433
Interest receivable .......................................................... 325,972
Other assets ................................................................. 1,237
----------------
Total assets ................................................................. 112,498,385
Liabilities
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Payable for Portfolio shares redeemed ........................................ 12,691,037
Accrued management fee ....................................................... 52,264
Accrued accounting fees ...................................................... 6,730
Other accrued expenses and payables .......................................... 34,085
----------------
Total liabilities ............................................................ 12,784,116
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Net assets, at value $ 99,714,269
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Net Assets
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Net assets consist of:
Paid-in capital .............................................................. 99,714,269
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Net assets, at value $ 99,714,269
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Net Asset Value, offering and redemption price per share
($99,714,269 / 99,696,296 outstanding shares of ----------------
beneficial interest, $.01 par value, unlimited number of shares authorized) $ 1.00
----------------
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Statement of Operations for the six months ended June 30, 2000 (Unaudited)
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Investment Income
----------------------------------------------------------------------------------------------
Income:
Interest ..................................................................... $ 5,538,312
----------------
Expenses:
Management fee ............................................................... 327,758
Custodian fees ............................................................... 4,283
Accounting fees .............................................................. 19,474
Auditing ..................................................................... 25,116
Trustees' fees and expenses .................................................. 6,370
Reports to shareholders ...................................................... 8,190
Other ........................................................................ 18,684
----------------
Total expenses, before expense reductions .................................... 409,875
Expense reductions ........................................................... (97)
----------------
Total expenses, after expense reductions ..................................... 409,778
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Net investment income 5,128,534
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Net increase (decrease) in net assets resulting from operations $ 5,128,534
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</TABLE>
The accompanying notes are an integral part of the financial statements.
SCUDDER VARIABLE LIFE INVESTMENT FUND -- | 5
MONEY MARKET PORTFOLIO
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<TABLE>
<CAPTION>
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Statements of Changes in Net Assets
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Six Months
Ended Year Ended
June 30, 2000 December 31,
Increase (Decrease) in Net Assets (Unaudited) 1999
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Operations:
<S> <C> <C>
Net investment income ........................................................... $ 5,128,534 $ 8,452,569
--------------- ---------------
Net increase (decrease) in net assets resulting from operations ................. 5,128,534 8,452,569
--------------- ---------------
Distributions to shareholders from net investment income ........................ (5,128,534) (8,452,569)
--------------- ---------------
Portfolio share transactions at net asset value of $1.00 per share:
Proceeds from shares sold ....................................................... 482,696,226 507,640,208
Net asset value of shares issued to shareholders in reinvestment of distributions 5,128,534 8,452,569
Cost of shares redeemed ......................................................... (567,071,519) (485,284,178)
--------------- ---------------
Net increase (decrease) in net assets from Portfolio share transactions ......... (79,246,759) 30,808,599
--------------- ---------------
Increase (decrease) in net assets ............................................... (79,246,759) 30,808,599
Net assets at beginning of period ............................................... 178,961,028 148,152,429
--------------- ---------------
Net assets at end of period ..................................................... $ 99,714,269 $ 178,961,028
--------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
SCUDDER VARIABLE LIFE INVESTMENT FUND -- | 6
MONEY MARKET PORTFOLIO
<PAGE>
Financial Highlights
Money Market Portfolio
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
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Years Ended December 31, 2000(a) 1999 1998 1997 1996 1995
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<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
-----------------------------------------------------
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Income from investment operations:
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Net investment income .029 .049 .052 .051 .050 .055
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Less distributions from:
--------------------------------------------------------------------------------------------------------------
Net investment income (.029) (.049) (.052) (.051) (.050) (.055)
-----------------------------------------------------
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Net asset value, end of period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
-----------------------------------------------------
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Total Return (%) 2.92** 4.99 5.29 5.25 5.09 5.65
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Ratios to Average Net Assets and Supplemental Data
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Net assets, end of period ($ millions) 100 179 148 103 98 80
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Ratio of expenses (%) .46* .43 .44 .46 .46 .50
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Ratio of net investment income (%) 5.80* 4.90 5.17 5.15 4.98 5.51
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</TABLE>
(a) For the six months ended June 30, 2000 (Unaudited).
* Annualized
** Not annualized
SCUDDER VARIABLE LIFE INVESTMENT FUND -- | 7
MONEY MARKET PORTFOLIO
<PAGE>
Portfolio Management Discussion
--------------------------------------------------------------------------------
June 30, 2000
Bond Portfolio
Dear Shareholders,
During the first half of 2000, bond market performance was driven by a variety
of countervailing forces. In the Treasury market, short-term bonds were affected
by the Federal Reserve's interest rate increases and the belief among investors
that several more may be necessary to slow the pace of economic growth. At the
same time, longer-term Treasuries were boosted by the government's plan to
reduce its outstanding debt. As a result, long-term issues actually offered
lower yields than their short-term counterparts for much of the period, a
phenomenon that is known as an "inverted yield curve." The net result of these
events is that the Treasury market, as a whole, outperformed other sectors of
the bond market by a wide margin. In addition, shorter duration corporate bonds
(or those with less interest rate sensitivity) beat longer-duration corporates,
high-quality bonds generally outperformed those of lesser quality, and liquid
issues bested non-liquid issues. This environment proved beneficial for the Bond
Portfolio, which is focused on liquid, higher-quality issues, and holds an
overweight position in Treasuries. For the six-month period ended June 30, 2000
the Bond Portfolio produced a total return of 3.23%, which trailed the 3.98%
return of its unmanaged benchmark, the Lehman Brothers Aggregate Bond Index.
We continue to hold a large weighting in corporate bonds, which make up almost
half of the portfolio. About a quarter of this position is in high yield debt,
with a concentration in stronger credits that are rated just below investment
grade. Within the corporate sector, we are overweighted in bonds issued by
companies in the telecommunications, media, and energy groups, where we see the
possibility for the most impressive earnings results. The portfolio is also
overweight in utilities and underweight in financials, a combination that proved
beneficial to performance. We kept duration neutral to that of the benchmark, at
a level of approximately 4.75-5.25 years. This has been achieved by employing a
"barbell" strategy, where we have concentrated fund holdings in both long- and
short-term bonds at the expense of intermediate-term issues.
Looking ahead, we believe that the bond market will remain on hold for the near
term as investors strive to determine the extent to which the economy is
slowing, and the amount of Fed rate hikes that are in store over the remainder
of the year. Given this unsettled environment, we plan to maintain a neutral
duration strategy, stay overweighted in Treasuries, and continue to take
advantage of pricing exaggerations in the market.
Sincerely,
Your Portfolio Manager
/s/Robert S. Cessine
Robert S. Cessine
Lead Portfolio Manager
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
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Management continues to find attractive opportunities in corporate bonds.
SCUDDER VARIABLE LIFE INVESTMENT FUND -- | 8
BOND PORTFOLIO
<PAGE>
Portfolio Summary
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June 30, 2000
Bond Portfolio
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Growth of a $10,000 Investment
--------------------------------------------------------------------------------
The Lehman Brothers Aggregate Bond (LBAB) Index is an unmanaged market
value-weighted measure of treasury issues, agency issues, corporate bond issues
and mortgage securities. Index returns assume reinvestment of dividends and,
unlike Portfolio returns, do not reflect any fees Yearly periods ended June 30
or expenses.
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
Bond Portfolio --
Class A LBAB Index
'90 10000 10000
'91 11001 11069
'92 12636 12624
'93 14424 14113
'94 14092 13927
'95 15701 15675
'96 16441 16460
'97 17813 17803
'98 19512 19678
'99 19839 20294
'00 20542 21218
<TABLE>
<CAPTION>
Bond Portfolio LBAB Index
------------------------------------------------------------- ------------------------------------------------------------
Total Return Total Return
--------------------------- ---------------------------
Period Ended Growth of Average Period Ended Growth of Average
6/30/2000 $10,000 Cumulative Annual 6/30/2000 $10,000 Cumulative Annual
------------------------------------------------------------- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 10,355 3.55% 3.55% 1 Year $ 10,455 4.55% 4.55%
------------------------------------------------------------- ------------------------------------------------------------
5 Year $ 13,084 30.84% 5.52% 5 Year $ 13,536 35.36% 6.24%
------------------------------------------------------------- ------------------------------------------------------------
10 Year $ 20,542 105.42% 7.46% 10 Year $ 21,218 112.18% 7.81%
------------------------------------------------------------- ------------------------------------------------------------
</TABLE>
All performance is historical, assumes reinvestment of all dividends and capital
gains, and is not indicative of future results. Investment return and principal
value will fluctuate, so an investor's shares, when redeemed, may be worth more
or less than when purchased.
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Asset Quality
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A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
U.S. Government & Agencies 49% The portfolio's position in bonds issued by
AAA* 8% the U.S. Government and its agencies has
AA 2% increased significantly over the past six
A 18% months.
BBB 12%
BB 8%
B 3%
----------------------------------
100%
----------------------------------
Average Quality: AA
*Category includes cash equivalents
<TABLE>
<CAPTION>
------------------------------------------------------------- ------------------------------------------------------------
Effective Maturity Diversification
------------------------------------------------------------- ------------------------------------------------------------
<S> <C> <C> <C>
Corporate Bonds 45%
Less than 1 year 12% U.S. Treasuries 30%
1 < 5 years 31% Short Term Investments 11%
5 < 8 years 14% U.S. Government Agency Pass-Thrus 7%
8 < 15 years 30% Asset-Backed Securities 3%
15 years or greater 13% Government National Mortgage Assoc. 3%
Collateralized Mortgage Obligations 1%
------------------------------------------------------------- ------------------------------------------------------------
100% 100%
------------------------------------------------------------- ------------------------------------------------------------
</TABLE>
Weighted average effective maturity: 8.8 years
SCUDDER VARIABLE LIFE INVESTMENT FUND -- | 9
BOND PORTFOLIO
<PAGE>
Investment Portfolio as of June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
Bond Portfolio
<TABLE>
<CAPTION>
Principal
Amount ($) Value ($)
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Repurchase Agreements 9.5%
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<S> <C> <C>
State Street Bank and Trust Company, 6.48%, to be repurchased at $8,531,605 on 7/3/2000* -----------
(Cost $8,527,000) ................................................................... 8,527,000 8,527,000
-----------
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U.S. Treasuries 30.8%
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U.S. Treasury Bond, 6.5%, 2/15/2010 .................................................... 3,950,000 4,085,169
U.S. Treasury Bond, 6.125%, 8/15/2029 .................................................. 4,225,000 4,267,250
U.S. Treasury Bond, 6.25%, 5/15/2030 ................................................... 7,000,000 7,344,540
U.S. Treasury Inflationary Index Note, 3.975, 1/15/2009 ................................ 2,000,000 2,055,791
U.S. Treasury Inflationary Index Note, 3.791%, 4/15/2028 ............................... 2,000,000 2,017,708
U.S. Treasury Note, 6.625%, 5/31/2002 .................................................. 1,000,000 1,003,750
U.S. Treasury Note, 6.75%, 5/15/2005 ................................................... 6,575,000 6,728,066
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Total U.S. Treasuries (Cost $27,625,941) 27,502,274
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Government National Mortgage Association 3.1%
------------------------------------------------------------------------------------------------------------------
Government National Mortgage Association Pass-thru, 7%, 5/1/2029 (a) -----------
(Cost $2,881,574) ................................................................... 2,843,805 2,762,045
-----------
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U.S. Government Agency Pass-Thrus 7.0%
------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Association, 5.125%, 2/13/2004 (a) ........................... 1,175,000 1,102,843
Federal National Mortgage Association, 7.125%, 2/15/2005 (a) ........................... 925,000 928,756
Federal National Mortgage Association, 8%, 12/1/2012 (a) ............................... 14,459 14,609
Federal National Mortgage Association, 6.5% with various maturities to 3/1/2028 (a) .... 4,450,768 4,199,017
------------------------------------------------------------------------------------------------------------------
Total U.S. Government Agency Pass-Thrus (Cost $6,519,356) 6,245,225
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
Collateralized Mortgage Obligations 1.6%
------------------------------------------------------------------------------------------------------------------
Residential Accredit Loans, Inc., Series 1997-A7, 7.25%, 11/25/2027 (a) -----------
(Cost $1,513,117) ................................................................... 1,488,007 1,434,066
-----------
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Foreign Bonds -- U.S.$ Denominated 1.0%
------------------------------------------------------------------------------------------------------------------
-----------
PacifiCorp Australia LLC, 6.15%, 1/15/2008 (Cost $992,070) ............................. 1,000,000 922,290
-----------
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Asset Backed 2.7%
------------------------------------------------------------------------------------------------------------------
Automobile Receivables 1.1%
First Security Auto Owner Trust, Series 1999-2 A3, 6%, 10/15/2003 (a) .................. 1,000,000 992,344
-----------
Credit Card Receivables 1.6%
MBNA Master Credit Card Trust, 5.8%, 12/15/2005 ........................................ 1,500,000 1,445,625
-----------
------------------------------------------------------------------------------------------------------------------
Total Asset Backed (Cost $2,496,688) 2,437,969
------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
SCUDDER VARIABLE LIFE INVESTMENT FUND -- | 10
BOND PORTFOLIO
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount ($) Value ($)
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Corporate Bonds 44.3%
-------------------------------------------------------------------------------------
<S> <C> <C>
Consumer Discretionary 2.2%
Federated Department Stores, 8.5%, 6/15/2003 ............. 750,000 756,878
MGM Grand Inc., 9.75%, 6/1/2007 .......................... 400,000 406,000
Park Place Entertainment, Inc., 8.5%, 11/15/2006 ......... 300,000 294,777
Tricon Global Restaurants, 7.65%, 5/15/2008 .............. 600,000 538,932
------------
1,996,587
------------
Consumer Staples 2.1%
Bass North America Inc., 6.625%, 3/1/2003 ................ 1,000,000 975,880
Safeway Inc., 7.25%, 9/15/2004 ........................... 900,000 885,294
------------
1,861,174
------------
Communications 3.1%
Deutsche Telekom International Financial, 7.75%, 6/15/2005 825,000 823,565
Nextel Communications, 9.375%, 11/15/2009 ................ 600,000 579,000
Qwest Communications International, 7.5%, 11/1/2008 ...... 550,000 526,356
Sprint Capital Corp., 6.125%, 11/15/2008 ................. 925,000 824,517
------------
2,753,438
------------
Financial 13.7%
Bank of America, 7.8%, 2/15/2010 ......................... 925,000 920,264
BankBoston NA, 6.375%, 4/15/2008 ......................... 500,000 455,570
Bell Atlantic Financial Services, 7.6%, 3/15/2007 ........ 700,000 698,572
Capital One Bank, 8.25%, 6/15/2005 ....................... 600,000 596,844
Chase Manhattan Corp., 5.75%, 4/15/2004 .................. 1,000,000 941,160
Firststar Bank, 7.125%, 12/1/2009 ........................ 500,000 474,410
Ford Motor Credit Co., 7.375%, 10/28/2009 ................ 1,100,000 1,063,997
GS Escrow Corp., 7%, 8/1/2003 ............................ 1,000,000 913,520
General Electric Capital Corp., 7%, 2/3/2003 ............. 1,000,000 995,650
General Motors Acceptance Corp., 6.15%, 4/5/2007 ......... 300,000 276,207
Goldman Sachs Group, Inc., 7.8%, 1/28/2010 ............... 925,000 915,454
Merrill Lynch & Co., Inc., 6%, 2/17/2009 ................. 1,125,000 1,003,129
National Westminster Bank, 7.375%, 10/1/2009 ............. 400,000 388,756
PNC Funding Corp., 7%, 9/1/2004 .......................... 550,000 533,451
Prudential Insurance Co., 6.375%, 7/23/2006 .............. 1,250,000 1,153,000
Wells Fargo & Co. Bank, NA, 7.55%, 6/21/2010 ............. 950,000 940,462
------------
12,270,446
------------
Media 10.1%
AMFM Inc., 8%, 11/1/2008 ................................. 1,000,000 1,003,750
AT&T Corp.-- Liberty Media Group, 7.875%, 7/15/2009 ...... 400,000 382,636
British Sky Broadcasting, 6.875%, 2/23/2009 .............. 1,450,000 1,273,840
CSC Holdings, Inc., 7.875%, 12/15/2007 ................... 1,050,000 1,008,000
Charter Communications Holdings LLC, 8.25%, 4/1/2007 ..... 1,000,000 885,000
News America Holdings, Inc., 9.25%, 2/1/2013 ............. 1,000,000 1,080,610
Outdoor Systems, Inc., 8.875%, 6/15/2007 ................. 1,000,000 1,010,000
TCI Communications, Inc., 8%, 8/1/2005 ................... 1,250,000 1,276,375
Time Warner, Inc., 9.125%, 1/15/2013 ..................... 1,000,000 1,095,900
------------
9,016,111
------------
Durables 1.6%
Daimler-Chrysler NA Holdings, 7.375%, 9/15/2006 .......... 1,000,000 983,540
Lear Corp, 7.96%, 5/15/2005 .............................. 500,000 468,970
------------
1,452,510
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
SCUDDER VARIABLE LIFE INVESTMENT FUND -- | 11
BOND PORTFOLIO
<PAGE>
Principal
Amount ($) Value ($)
-------------------------------------------------------------------------------
Manufacturing 1.1%
International Paper Co., 8.125%, 7/8/2005 .......... 925,000 931,299
-----------
Energy 6.0%
Barrett Resources Corp., 7.55%, 2/1/2007 ........... 750,000 705,000
Conoco, Inc., 6.35%, 4/15/2009 ..................... 925,000 860,454
Petroleum Geo-Services, 7.5%, 3/31/2007 ............ 550,000 527,951
Philips Petroleum Co., 8.75%, 5/25/2010 ............ 925,000 974,414
Pioneer Natural Resources, 6.5%, 1/15/2008 ......... 300,000 252,000
Pioneer Natural Resources, 9.625%, 4/1/2010 ........ 600,000 618,000
Texas Eastern Transmission Corp., 10%, 8/15/2001 ... 1,000,000 1,023,230
Williams Gas Pipeline Center, 7.375%, 11/15/2006 ... 400,000 389,408
-----------
5,350,457
-----------
Transportation 0.3%
Delta Air Lines, 7.9%, 12/15/2009 .................. 250,000 233,650
-----------
Utilities 4.1%
Alabama Power Co., 7.125%, 8/15/2004 ............... 1,000,000 989,200
Cleveland Electric Illumination Co., 7.67%, 7/1/2004 850,000 837,548
Detroit Edison Co., 7.5%, 2/1/2005 ................. 900,000 891,135
Niagara Mohawk Power Corp., 6.625%, 7/1/2005 ....... 1,000,000 951,480
-----------
3,669,363
-----------
-------------------------------------------------------------------------------
Total Corporate Bonds (Cost $40,273,979) 39,535,035
-------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $90,829,725) (b) 89,365,904
-------------------------------------------------------------------------------
* Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities.
(a) Effective maturities may be shorter due to prepayments.
(b) At June 30, 2000, the net unrealized depreciation on investments based
on cost for federal income tax purposes of $90,829,725 was as follows:
<TABLE>
<S> <C>
Aggregate gross unrealized appreciation for all investments in which
there is an excess of value over tax cost .......................... $ 348,447
Aggregate gross unrealized depreciation for all investments in which
there is an excess of tax cost over value .......................... 1,812,268
-----------
Net unrealized depreciation ........................................ $1,463,821
-----------
</TABLE>
--------------------------------------------------------------------------------
Purchases and sales of investment securities (excluding short-term
investments and direct U.S. Government obligations), for the six months ended
June 30, 2000, aggregated $53,415,455 and $72,291,709, respectively.
Purchases and sales of direct U.S. Government obligations for the six months
ended June 30, 2000 aggregated $55,043,952 and $44,613,799, respectively.
--------------------------------------------------------------------------------
At December 31, 1999, the Portfolio had a net tax basis capital loss
carryforward of approximately $1,178,000 which may be applied against any
realized net taxable capital gains of each succeeding year until fully
utilized or until December 31, 2007, the expiration date. In addition, from
November 1 through December 31, 1999, the Bond Portfolio incurred
approximately $1,111,000 of net realized capital losses. As permitted by tax
regulations, the Portfolio intends to elect to defer these losses and treat
them as arising in the year ending December 31, 2000.
The accompanying notes are an integral part of the financial statements.
SCUDDER VARIABLE LIFE INVESTMENT FUND -- | 12
BOND PORTFOLIO
<PAGE>
Financial Statements
--------------------------------------------------------------------------------
Bond Portfolio
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities as of June 30, 2000 (Unaudited)
-----------------------------------------------------------------------------------------------------------------------
Assets
-----------------------------------------------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value (cost $90,829,725) ................................................. $ 89,365,904
Receivable for investments sold ........................................................................ 2,567,115
Interest receivable .................................................................................... 1,307,997
Receivable for Portfolio shares sold ................................................................... 23,869
Other assets ........................................................................................... 142
----------------
Total assets ........................................................................................... 93,265,027
Liabilities
-----------------------------------------------------------------------------------------------------------------------
Due to custodian bank .................................................................................. 68,225
Payable for investments purchased ...................................................................... 1,261,439
Accrued management fee ................................................................................. 35,452
Accrued accounting fee ................................................................................. 6,250
Other accrued expenses and payables .................................................................... 21,072
----------------
Total liabilities ...................................................................................... 1,392,438
-----------------------------------------------------------------------------------------------------------------------
Net assets, at value $ 91,872,589
-----------------------------------------------------------------------------------------------------------------------
Net Assets
-----------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income .................................................................... 2,930,830
Net unrealized appreciation (depreciation) on investments .............................................. (1,463,821)
Accumulated net realized gain (loss) ................................................................... (5,889,145)
Paid-in capital ........................................................................................ 96,294,725
-----------------------------------------------------------------------------------------------------------------------
Net assets, at value $ 91,872,589
-----------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share ($91,872,589 / 14,485,205 outstanding shares of ------------
beneficial interest, no par value, unlimited number of shares authorized) ........................... $ 6.34
------------
-----------------------------------------------------------------------------------------------------------------------
Statement of Operations for the six months ended June 30, 2000 (Unaudited)
-----------------------------------------------------------------------------------------------------------------------
Investment Income
-----------------------------------------------------------------------------------------------------------------------
Income:
Interest ............................................................................................... $ 3,278,404
----------------
Expenses:
Management fee ......................................................................................... 215,183
Custodian fees ......................................................................................... 5,213
Accounting fees ........................................................................................ 18,951
Auditing ............................................................................................... 13,426
Legal .................................................................................................. 800
Trustees' fees and expenses ............................................................................ 8,343
Reports to shareholders ................................................................................ 1,409
Other .................................................................................................. 1,735
----------------
Total expenses, before expense reductions .............................................................. 265,060
Expense reductions ..................................................................................... (517)
----------------
Total expenses, after expense reductions ............................................................... 264,543
-----------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 3,013,861
-----------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
-----------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from investments .............................................................. (3,496,263)
----------------
Net unrealized appreciation (depreciation) during the period on investments ............................ 3,359,075
-----------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions (137,188)
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 2,876,673
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
SCUDDER VARIABLE LIFE INVESTMENT FUND -- | 13
BOND PORTFOLIO
<PAGE>
--------------------------------------------------------------------------------
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
June 30, 2000 December 31,
Increase (Decrease) in Net Assets (Unaudited) 1999
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) ........................................................... $ 3,013,861 $ 6,540,634
Net realized gain (loss) on investment transactions .................................... (3,496,263) (2,152,373)
Net unrealized appreciation (depreciation) on investment transactions during the period 3,359,075 (5,473,870)
--------------- ---------------
Net increase (decrease) in net assets resulting from operations ........................ 2,876,673 (1,085,609)
--------------- ---------------
Distributions to shareholders from:
Net investment income .................................................................. (4,869,457) (3,437,261)
--------------- ---------------
Net realized gains ..................................................................... -- (1,738,743)
--------------- ---------------
Portfolio share transactions:
Proceeds from shares sold .............................................................. 11,944,391 33,898,160
Reinvestment of distributions .......................................................... 4,869,457 5,176,004
Cost of shares redeemed ................................................................ (17,267,268) (44,918,349)
--------------- ---------------
Net increase (decrease) in net assets from Portfolio share transactions ................ (453,420) (5,844,185)
--------------- ---------------
Increase (decrease) in net assets ...................................................... (2,446,204) (12,105,798)
Net assets at beginning of period ...................................................... 94,318,793 106,424,591
Net assets at end of period (including undistributed net investment income of --------------- ---------------
$2,930,830 and $4,786,426, respectively) ............................................ $ 91,872,589 $ 94,318,793
--------------- ---------------
Other Information
------------------------------------------------------------------------------------------------------------------------
Shares outstanding at beginning of period .............................................. 14,528,870 15,463,236
--------------- ---------------
Shares sold ............................................................................ 1,844,807 5,138,095
Shares issued to shareholders in reinvestment of distributions ......................... 777,868 776,741
Shares redeemed ........................................................................ (2,666,340) (6,849,202)
--------------- ---------------
Net increase (decrease) in Portfolio shares ............................................ (43,665) (934,366)
--------------- ---------------
Shares outstanding at end of period .................................................... 14,485,205 14,528,870
--------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
SCUDDER VARIABLE LIFE INVESTMENT FUND -- | 14
BOND PORTFOLIO
<PAGE>
Financial Highlights
--------------------------------------------------------------------------------
Bond Portfolio
The following table includes selected data for a share outstanding throughout
each period (a) and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 2000(b) 1999 1998 1997 1996 1995
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 6.49 $ 6.88 $ 6.87 $ 6.73 $ 7.16 $ 6.48
-----------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
-----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .21 .42 .43 .44 .41 .44
-----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment transactions -- (.48) .01 .15 (.22) .69
-----------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Total from investment operations .21 (.06) .44 .59 .19 1.13
-----------------------------------------------------------------------------------------------------------------------------
Less distributions from:
-----------------------------------------------------------------------------------------------------------------------------
Net investment income (.36) (.22) (.40) (.43) (.62) (.45)
-----------------------------------------------------------------------------------------------------------------------------
Net realized gains on investment transactions -- (.11) (.03) (.02) -- --
-----------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Total distributions (.36) (.33) (.43) (.45) (.62) (.45)
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 6.34 $ 6.49 $ 6.88 $ 6.87 $ 6.73 $ 7.16
-----------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Total Return (%) 3.23** (.95) 6.57 9.10 2.82 18.17
-----------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
-----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 92 94 106 81 66 73
-----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses (%) .59* .57 .57 .62 .61 .56
-----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) 6.67* 6.38 6.34 6.55 6.20 6.29
-----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 261* 86 115 56 85 177
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) For the six months ended June 30, 2000 (Unaudited).
* Annualized
** Not annualized
The accompanying notes are an integral part of the financial statements.
SCUDDER VARIABLE LIFE INVESTMENT FUND -- | 15
BOND PORTFOLIO
<PAGE>
Portfolio Management Discussion
--------------------------------------------------------------------------------
June 30, 2000
Balanced Portfolio
Dear Shareholders,
Concerns over rising interest rates led to significant stock market volatility
during the first half of the year, but bond prices were boosted by the
government's plan to reduce its outstanding debt. The performance of our stock
portfolio was mixed, with many companies posting positive double-digit returns
at the same time that others weakened significantly. The net result was slightly
negative returns for the equity portion of the portfolio. Our fixed income
position, which performed well amid a favorable environment for bonds, provided
added stability in periods when stocks were enduring sharp fluctuations. For the
six months ended June 30, 2000, the Balanced Portfolio returned 0.68%, slightly
behind the 1.45% return of its unmanaged benchmark, which is a combination of
the S&P 500 (60%) and the Lehman Brothers Aggregate Bond Index (40%). Over the
long term, the fund has held up well against its peers, finishing in the top 20%
of variable life balanced funds over the one-, three-, five-, and ten-year
periods.^1
Our target mix of stocks and bonds remains at 65% and 35%, respectively. We
believe that an overweight position in equities is warranted given their
tendency to outperform bonds over the long term. During the first half of 2000,
the most significant contributor to performance was the portfolio's weighting in
technology stocks, in which we held 28% of net assets as of the end of the
period. Several stocks provided double digit returns, including Xilinx (+86%),
Intel (+60%), Oracle (+51%), and Applied Materials (+46%). Another positive was
our weighting in pharmaceutical stocks, which generally respond well when a
slowdown in the economy appears imminent. On the down side, the fund was hurt by
its positions in financials and retailers, both of which were hurt by rising
interest rates. In general, we have been using market volatility as an
opportunity to trim our holdings in stocks that have reached our target prices
and to take advantage of values that have fallen due to declines in the broader
market.
In the fixed income portion of the portfolio, we benefited from an overweighting
in Treasuries -- the best performing sector of the bond market -- and a
concurrent underweighting in corporate bonds, which were hurt by concerns over
the effect that slower economic growth would have on the financial strength of
U.S. corporations. As the period drew to a close, we began to look at
opportunities among asset-backed issues, which, in our view, offer attractive
yields in relation to Treasuries.
Looking ahead, we believe that the combination of a slowing economy, low
inflation, stable interest rates, and solid corporate earnings will form the
basis for favorable performance from both stocks and bonds. As we move through
the third quarter, it is likely that political issues will move to the forefront
of investors' attention. We believe that the continuation of a split government
(which occurs when Congress and the presidency are controlled by opposing
parties) will be the ideal outcome for the financial markets.
Sincerely,
Your Portfolio Management Team
/s/Gary A. Langbaum /s/Robert S. Cessine
Gary A. Langbaum Robert S. Cessine
Lead Portfolio Manager Portfolio Manager
/s/Tracy McCormick
Tracy McCormick
Portfolio Manager
^1 Source: Lipper Analytical Services, Inc., an independent analyst of
investment performance. Performance includes reinvestment of dividends
and capital gains. For the period ended June 30, 2000, Scudder Variable
Life Investment Fund: Balanced Portfolio's Lipper ranking was 12 out of
66 funds for the one-year period, 8 out of 46 funds for the three-year
period, 4 out of 32 for the five-year period, and 2 out of 11 for the
ten-year period. Past performance is no guarantee of future results.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
--------------------------------------------------------------------------------
The Balanced Portfolio has finished in the top 20% of its peer group over all
applicable time periods.
SCUDDER VARIABLE LIFE INVESTMENT FUND -- | 16
BALANCED PORTFOLIO
<PAGE>
Portfolio Summary
--------------------------------------------------------------------------------
June 30, 2000
Balanced Portfolio
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
The Standard & Poor's 500 Index is a capitalization-weighted index of 500
stocks. The index is designed to measure performance of the broad domestic
economy through changes in the aggregate market value of 500 stocks representing
all major industries. The Lehman Brothers Aggregate Bond (LBAB) Index is an
unmanaged market value-weighted measure of treasury issues, agency issues,
corporate bond issues and mortgage securities. Index returns assume reinvestment
of dividends and, unlike Portfolio returns, do not reflect any fees or expenses.
Balanced Portfolio --
Class A S&P 500 Index LBAB Index
'90 10000 10000 10000
'91 10226 10738 11069
'92 11965 12180 12624
'93 13293 13841 14113
'94 13253 14036 13927
'95 15783 17694 15675
'96 18400 22293 16460
'97 22267 30032 17803
'98 27342 39092 19678
'99 31404 47991 20294
'00 34487 51474 21218
Yearly periods ended June 30
<TABLE>
<CAPTION>
Balanced Portfolio S&P 500 Index (60%) and LBAB Index (40%)
--------------------------------------------------------------- ------------------------------------------------------------
Total Return Total Return
----------------------------- ---------------------------
Period Ended Growth of Cumulative Average Period Ended Growth of Cumulative Average
6/30/2000 $10,000 Annual 6/30/2000 $10,000 Annual
------------------------------------------------------------- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 10,982 9.82% 9.82% 1 Year $ 10,643 6.43% 6.43%
------------------------------------------------------------- ------------------------------------------------------------
5 Year $ 21,851 118.51% 16.92% 5 Year $ 21,719 117.19% 16.76%
------------------------------------------------------------- ------------------------------------------------------------
10 Year $ 34,487 244.87% 13.18% 10 Year $ 36,817 268.17% 13.91%
------------------------------------------------------------- ------------------------------------------------------------
</TABLE>
All performance is historical, assumes reinvestment of all dividends and capital
gains, and is not indicative of future results. Investment return and principal
value will fluctuate, so an investor's shares, when redeemed, may be worth more
or less than when purchased. Total returns during the 10 Year period would have
been lower if the Portfolio's expenses were not maintained. The Balanced
Portfolio, with its current name and investment objective, commenced operations
on May 1, 1993. Performance figures include the performance of its predecessor,
the Managed Diversified Portfolio. Since adopting its current objectives, the
cumulative and average annual returns are 162.64% and 14.43%, respectively.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
Equity Holdings
--------------------------------------------------------------------------------------------------------------------------------
Sector breakdown of the Portfolio's equity holdings Five Largest Equity Holdings
<S> <C> <C> <C>
Technology 28% 1. Intel Corp.
Financial 17% Producer of semiconductor memory circuits
Health 16%
Media 7% 2. Microsoft Corp.
Consumer Discretionary 6% Developer of computer software
Energy 6%
Manufacturing 6% 3. General Electric Co.
Consumer Staples 6% Producer of electrical equipment
Durables 3%
Other 5% 4. Cisco Systems, Inc.
------------------------------------------------------------- Manufacturer of computer network products
100%
------------------------------------------------------------- 5. PepsiCo, Inc.
Provider of soft drinks, snack foods and food services
--------------------------------------------------------------------------------------------------------------------------------
Fixed Income Holdings
--------------------------------------------------------------------------------------------------------------------------------
By Asset Type By Quality
U.S. Treasuries 54%
Corporate Bonds 20% U.S. Government & Agencies 62%
Short-Term Investments 12% AAA* 9%
U.S. Government Agency Pass-Thrus 6% AA 1%
Asset-Backed Securities 3% A 11%
Government National Mortgage Association 2% BBB 6%
Foreign Bonds-- U.S. Dollar Denominated 2% BB 2%
Collateralized Mortgage Obligations 1% NR 9%
------------------------------------------------------------- ------------------------------------------------------------
100% 100%
------------------------------------------------------------- ------------------------------------------------------------
*Category includes cash equivalents
</TABLE>
SCUDDER VARIABLE LIFE INVESTMENT FUND -- | 17
BALANCED PORTFOLIO
<PAGE>
Investment Portfolio as of June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
Balanced Portfolio
<TABLE>
<CAPTION>
Principal
Amount ($) Value ($)
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Repurchase Agreements 4.3%
--------------------------------------------------------------------------------------------------------------
<S> <C> <C>
State Street Bank and Trust Company, 2.8%, to be
repurchased at $8,421,545 on 7/3/2000** ------------
(Cost $8,417,000) .............................................................. 8,417,000 8,417,000
------------
--------------------------------------------------------------------------------------------------------------
U.S. Treasuries 19.5%
--------------------------------------------------------------------------------------------------------------
U.S. Treasury Bond, 6.5%, 2/15/2010 ............................................... 3,900,000 4,033,458
U.S. Treasury Bond, 8%, 11/15/2021 ................................................ 4,500,000 5,440,095
U.S. Treasury Bond, 6.125%, 8/15/2029 ............................................. 2,600,000 2,626,000
U.S. Treasury Inflationary Index Note, 3.975%, 1/15/2009 .......................... 1,000,000 1,027,896
U.S. Treasury Inflationary Index Note, 3.791%, 4/15/2028 .......................... 1,250,000 1,261,068
U.S. Treasury Note, 6.625%, 5/31/2002 ............................................. 14,300,000 14,353,615
U.S. Treasury Note, 7.25%, 8/15/2004 .............................................. 6,700,000 6,927,197
U.S. Treasury Note, 6.75%, 5/15/2005 .............................................. 2,025,000 2,072,142
--------------------------------------------------------------------------------------------------------------
Total U.S. Treasuries (Cost $37,616,649) 37,741,471
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Government National Mortgage Association 1.0%
--------------------------------------------------------------------------------------------------------------
Government National Mortgage Association Pass-thru,
7% with various maturities to 4/15/2029 (a) ------------
(Cost $1,920,897) .............................................................. 1,895,720 1,841,218
------------
--------------------------------------------------------------------------------------------------------------
U.S. Government Agency Pass-Thrus 2.1%
--------------------------------------------------------------------------------------------------------------
Federal National Mortgage Association, 5.125%, 2/13/2004 (a) ...................... 900,000 844,731
Federal National Mortgage Association, 7.125%, 2/15/2005 (a) ...................... 700,000 702,842
Federal National Mortgage Association, 6.5% with various maturities to 3/1/2028 (a) 2,638,913 2,489,649
--------------------------------------------------------------------------------------------------------------
Total U.S. Government Agency Pass-Thrus (Cost $4,198,743) 4,037,222
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Collateralized Mortgage Obligations 0.5%
--------------------------------------------------------------------------------------------------------------
Residential Accredit Loans, Inc., Series 1997-A7, 7.25%, 11/25/2027 (a) ------------
(Cost $984,884) ................................................................ 968,540 933,430
------------
--------------------------------------------------------------------------------------------------------------
Foreign Bonds -- U.S.$ Denominated 0.7%
--------------------------------------------------------------------------------------------------------------
PacifiCorp Australia LLC, 6.15%, 1/15/2008 ------------
(Cost $1,493,505) .............................................................. 1,500,000 1,383,435
------------
--------------------------------------------------------------------------------------------------------------
Asset Backed 1.0%
--------------------------------------------------------------------------------------------------------------
Automobile Receivables 0.5%
First Security Auto Owner Trust, Series 1999-2 A3, 6%, 10/15/2003 (a) ............. 1,000,000 992,344
------------
Credit Card Receivables 0.5%
MBNA Master Credit Card Trust, 5.8%, 12/15/2005 ................................... 1,000,000 963,750
------------
--------------------------------------------------------------------------------------------------------------
Total Asset Backed (Cost $1,997,792) 1,956,094
--------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
SCUDDER VARIABLE LIFE INVESTMENT FUND -- | 18
BALANCED PORTFOLIO
<PAGE>
Principal
Amount ($) Value ($)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Corporate Bonds 7.2%
----------------------------------------------------------------------------
Consumer Discretionary 0.2%
MGM Grand Inc., 9.75%, 6/1/2007 ................. 300,000 304,500
Park Place Entertainment, Inc., 8.5%, 11/15/2006* 200,000 196,518
-----------
501,018
-----------
Consumer Staples 0.4%
Bass America Inc., 6.625%, 3/1/2003 ............. 750,000 731,910
-----------
Communications 0.8%
Sprint Capital Corp., 6.375%, 5/1/2009 .......... 1,000,000 902,820
Vodafone Airtouch plc, 7.75%, 2/15/2010 ......... 750,000 731,595
-----------
1,634,415
-----------
Financial 3.4%
Firststar Bank NA, 7.125%, 12/1/2009 ............ 750,000 711,615
Ford Motor Credit Co., 6.7%, 7/16/2004 .......... 1,575,000 1,525,955
Ford Motor Credit Co., 7.375%, 10/28/2009 ....... 800,000 773,816
General Electric Capital Corp., 7%, 2/3/2003 .... 700,000 696,955
General Motors Acceptance Corp., 6.15%, 4/5/2007 240,000 220,966
Merrill Lynch & Co., Inc., 6%, 2/17/2009 ........ 400,000 356,668
PNC Funding Corp., 7%, 9/1/2004 ................. 400,000 387,964
PNC Funding Corp., 7.5%, 11/1/2009 .............. 700,000 681,226
Prudential Insurance Co., 6.375%, 7/23/2006* .... 750,000 691,800
Wells Fargo & Co., 6.875%, 4/1/2006 ............. 500,000 481,950
-----------
6,528,915
-----------
Media 1.5%
CSC Holdings Inc., 7.875%, 12/15/2007 ........... 800,000 768,000
News America Holdings, Inc., 9.25%, 2/1/2013 .... 500,000 540,305
TCI-Communications, Inc., 8%, 8/1/2005 .......... 500,000 510,550
Time Warner, Inc., 9.125%, 1/15/2013 ............ 1,000,000 1,095,900
-----------
2,914,755
-----------
Durables 0.2%
Daimler-Chrysler NA Holdings, 7.375%, 9/15/2006 . 325,000 319,651
-----------
Energy 0.2%
Petroleum Geo-Services, 7.5%, 3/31/2007 ......... 450,000 431,960
-----------
Transportation 0.1%
Delta Air Lines, 7.9%, 12/15/2009 ............... 200,000 186,920
-----------
Utilities 0.4%
Alabama Power Co., 7.125%, 8/15/2004 ............ 250,000 247,300
Detroit Edison Co., 7.5%, 2/1/2005 .............. 500,000 495,075
-----------
742,375
-----------
----------------------------------------------------------------------------
Total Corporate Bonds (Cost $14,130,042) 13,991,919
----------------------------------------------------------------------------
Shares
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Common Stocks 63.7%
---------------------------------------------------------------------------
Consumer Discretionary 4.0%
Department & Chain Stores
Home Depot, Inc. ................................ 39,600 1,977,525
The accompanying notes are an integral part of the financial statements.
SCUDDER VARIABLE LIFE INVESTMENT FUND -- | 19
BALANCED PORTFOLIO
<PAGE>
Shares Value ($)
---------------------------------------------------------------
Kohl's Corp.* .......................... 24,100 1,340,563
Target Corp. ........................... 23,400 1,357,200
Wal-Mart Stores, Inc. .................. 53,900 3,105,988
-----------
7,781,276
-----------
Consumer Staples 3.5%
Food & Beverage 2.5%
H.J. Heinz Co. ......................... 39,700 1,736,875
PepsiCo, Inc. .......................... 73,000 3,243,938
-----------
4,980,813
-----------
Package Goods/Cosmetics 1.0%
The Clorox Co. ......................... 13,800 618,413
Colgate-Palmolive Co. .................. 20,900 1,251,388
-----------
1,869,801
-----------
Health 10.4%
Biotechnology 1.4%
Amgen Inc.* ............................ 18,000 1,264,500
Genentech, Inc.* ....................... 4,200 722,400
PE Corp-PE Biosystems Group ............ 9,900 652,163
-----------
2,639,063
-----------
Medical Supply & Specialty 2.0%
Baxter International, Inc. ............. 36,800 2,587,500
Becton, Dickinson & Co. ................ 42,000 1,204,875
-----------
3,792,375
-----------
Pharmaceuticals 7.0%
Abbott Laboratories .................... 52,300 2,330,619
Allergan, Inc. ......................... 20,000 1,490,000
ALZA Corp.* ............................ 14,000 827,750
Eli Lilly & Co. ........................ 18,900 1,887,638
Forest Laboratories, Inc.* ............. 7,700 777,700
Merck & Co., Inc. ...................... 25,100 1,923,288
Pfizer, Inc. ........................... 64,750 3,108,000
Schering-Plough Corp. .................. 26,200 1,323,100
-----------
13,668,095
-----------
Communications 1.8%
Telephone/Communications
Bell Atlantic Corp.* ................... 18,000 914,625
BroadWing, Inc. ........................ 44,100 1,143,844
Qwest Communications International Inc.* 26,800 1,331,625
-----------
3,390,094
-----------
Financial 10.5%
Banks 0.9%
FleetBoston Financial Corp. ............ 25,000 850,000
Wells Fargo Co. ........................ 23,100 895,125
-----------
1,745,125
-----------
Insurance 4.4%
American International Group, Inc. ..... 24,440 2,871,700
Aon Corp. .............................. 35,300 1,096,506
CIGNA Corp. ............................ 11,500 1,075,250
Hartford Financial Services Group, Inc. 21,900 1,225,031
Jefferson-Pilot Corp. .................. 16,000 903,000
St. Paul Companies, Inc. ............... 40,000 1,365,000
-----------
8,536,487
-----------
Consumer Finance 3.2%
American Express Co. ................... 28,800 1,501,200
The accompanying notes are an integral part of the financial statements.
SCUDDER VARIABLE LIFE INVESTMENT FUND -- | 20
BALANCED PORTFOLIO
<PAGE>
Shares Value ($)
-------------------------------------------------------------
Capital One Financial Corp. .......... 30,300 1,352,138
Citigroup, Inc. ...................... 32,500 1,958,125
Household International, Inc. ........ 33,300 1,384,031
-----------
6,195,494
-----------
Other Financial Companies 2.0%
Federal National Mortgage Association 22,000 1,148,125
Marsh & McLennan Companies, Inc. ..... 10,800 1,127,925
Morgan Stanley Dean Witter & Co. ..... 20,000 1,665,000
-----------
3,941,050
-----------
Media 4.7%
Advertising 0.5%
Omnicom Group, Inc. .................. 10,600 944,063
-----------
Broadcasting & Entertainment 3.6%
Clear Channel Communications, Inc.* .. 17,200 1,290,000
Infinity Broadcasting Corp. "A"* ..... 45,381 1,653,570
Univision Communication, Inc.* ....... 8,700 900,450
Viacom, Inc. "B"* .................... 28,370 1,934,479
The Walt Disney Co. .................. 30,600 1,187,663
-----------
6,966,162
-----------
Cable Television 0.6%
AT&T Corp.-- Liberty Media Group* .... 52,800 1,280,400
-----------
Service Industries 1.8%
EDP Services 0.5%
First Data Corp. ..................... 17,700 878,363
-----------
Environmental Services 0.6%
Transocean Sedo Forex, Inc. .......... 22,081 1,179,953
-----------
Miscellaneous Commercial Services 0.2%
Siebel Systems, Inc.* ................ 2,900 474,331
-----------
Printing/Publishing 0.5%
McGraw-Hill, Inc. .................... 16,200 874,800
-----------
Durables 1.8%
Aerospace
The Boeing Co. ....................... 31,000 1,296,188
United Technologies Corp. ............ 36,000 2,119,500
-----------
3,415,688
-----------
Manufacturing 3.7%
Diversified Manufacturing 2.9%
General Electric Co. ................. 89,300 4,732,900
Tyco International Ltd. (New) ........ 17,900 848,013
-----------
5,580,913
-----------
Machinery/Components/Controls 0.3%
Parker-Hannifin Corp. ................ 17,800 609,650
-----------
Office Equipment/Supplies 0.5%
Lexmark International, Inc.* ......... 15,200 1,022,200
-----------
Technology 17.6%
Computer Software 3.7%
Microsoft Corp.* ..................... 59,500 4,760,000
The accompanying notes are an integral part of the financial statements.
SCUDDER VARIABLE LIFE INVESTMENT FUND -- | 21
BALANCED PORTFOLIO
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
--------------------------------------------------------------------------------------
<S> <C> <C>
Oracle Corp.* ............................................. 29,200 2,454,625
-----------
7,214,625
-----------
Diverse Electronic Products 4.1%
Applied Materials, Inc.* .................................. 14,400 1,305,000
Dell Computer Corp.* ...................................... 40,700 2,007,019
General Motors Corp. "H"* ................................. 12,050 1,057,388
Motorola Inc. ............................................. 34,700 1,008,469
Solectron Corp.* .......................................... 39,200 1,641,500
Teradyne, Inc.* ........................................... 12,900 948,150
-----------
7,967,526
-----------
EDP Peripherals 0.3%
VERITAS Software Corp.* ................................... 5,000 565,078
-----------
Electronic Components/Distributors 2.4%
Cisco Systems, Inc.* ...................................... 73,100 4,646,419
-----------
Electronic Data Processing 3.0%
International Business Machines Corp. ..................... 17,900 1,961,169
RadioShack Corp. .......................................... 40,800 1,932,900
Sun Microsystems, Inc.* ................................... 19,500 1,773,281
-----------
5,667,350
-----------
Semiconductors 4.1%
Intel Corp. ............................................... 39,300 5,253,919
Linear Technology Corp. ................................... 10,400 664,950
Texas Instruments, Inc. ................................... 21,600 1,483,650
Xilinx, Inc.* ............................................. 6,900 569,681
-----------
7,972,200
-----------
Energy 3.9%
Oil & Gas Production 2.3%
Burlington Resources, Inc. ................................ 23,300 891,225
Exxon Mobil Corp. ......................................... 31,501 2,472,829
Royal Dutch Petroleum Co. (New York shares) ............... 18,700 1,151,219
-----------
4,515,273
-----------
Oilfield Services/Equipment 1.6%
Halliburton Co. ........................................... 26,500 1,250,469
Schlumberger Ltd. ......................................... 24,700 1,843,238
-----------
3,093,707
-----------
--------------------------------------------------------------------------------------
Total Common Stocks (Cost $95,746,917) 123,408,374
--------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $166,506,429) (b) 193,710,163
--------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
** Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities.
(a) Effective maturities may be shorter due to prepayments.
(b) At June 30, 2000, the net unrealized appreciation on investments based
on cost for federal income tax purposes of $166,508,327 was as follows:
<TABLE>
<S> <C>
Aggregate gross unrealized appreciation for all investments in which there is an excess of value over
tax cost ........................................................................................... $ 31,015,697
Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost
over value ......................................................................................... 3,813,861
--------------
Net unrealized appreciation $ 27,201,836
--------------
</TABLE>
--------------------------------------------------------------------------------
Purchases and sales of investment securities (excluding short-term
investments and direct U.S. Government obligations), for the six months ended
June 30, 2000, aggregated $69,790,744 and $88,227,953, respectively.
Purchases and sales of direct U.S. Government obligations for the six months
ended June 30, 2000 aggregated $50,465,046 and $37,411,950, respectively.
The accompanying notes are an integral part of the financial statements.
SCUDDER VARIABLE LIFE INVESTMENT FUND -- | 22
BALANCED PORTFOLIO
<PAGE>
Financial Statements
--------------------------------------------------------------------------------
Balanced Portfolio
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
Statement of Assets and Liabilities as of June 30, 2000 (Unaudited)
-------------------------------------------------------------------------------------------
Assets
-------------------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value (cost $166,506,429) .................... $193,710,163
Cash ....................................................................... 876
Receivable for investments sold ............................................ 2,379,690
Dividends receivable ....................................................... 65,631
Interest receivable ........................................................ 937,097
Other assets ............................................................... 803
----------------
Total assets ............................................................... 197,094,260
Liabilities
-------------------------------------------------------------------------------------------
Payable for investments purchased
1,159,401
Payable for Portfolio shares redeemed ...................................... 359,018
Accrued management fee ..................................................... 77,711
Accrued accounting fees .................................................... 14,168
Other accrued expenses and payables ........................................ 13,612
----------------
Total liabilities .......................................................... 1,623,910
-------------------------------------------------------------------------------------------
Net assets, at value $195,470,350
-------------------------------------------------------------------------------------------
Net Assets
-------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ........................................ 2,127,115
Net unrealized appreciation (depreciation) on investments .................. 27,203,734
Accumulated net realized gain (loss) ....................................... 3,616,109
Paid-in capital ............................................................ 162,523,392
-------------------------------------------------------------------------------------------
Net assets, at value $195,470,350
-------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($195,470,350 / 14,204,529 outstanding shares of ------------
beneficial interest, no par value, unlimited number of shares authorized) $ 13.76
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
SCUDDER VARIABLE LIFE INVESTMENT FUND --
BALANCED PORTFOLIO
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Statement of Operations for the six months ended June 30, 2000 (Unaudited)
-----------------------------------------------------------------------------------------
Investment Income
-----------------------------------------------------------------------------------------
<S> <C>
Income:
Dividends (net of foreign taxes withheld of $2,848) ....................... $ 459,419
Interest .................................................................. 2,224,327
----------------
Total Income .............................................................. 2,683,746
----------------
Expenses:
Management fee ............................................................ 455,187
Custodian fees ............................................................ 6,683
Accounting fees ........................................................... 33,488
Auditing .................................................................. 5,096
Legal ..................................................................... 2,548
Trustees' fees and expenses ............................................... 9,282
Reports to shareholders ................................................... 728
Other ..................................................................... 4,556
----------------
Total expenses, before expense reductions ................................. 517,568
Expense reductions ........................................................ (310)
----------------
Total expenses, after expense reductions .................................. 517,258
Net investment income (loss) .............................................. 2,166,488
Realized and unrealized gain (loss) on investment transactions
-----------------------------------------------------------------------------------------
Net realized gain (loss) from investments ................................. 3,898,579
----------------
Net unrealized appreciation (depreciation) during the period on investments (4,796,402)
-----------------------------------------------------------------------------------------
Net gain (loss) on investment transactions (897,823)
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 1,268,665
-----------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
SCUDDER VARIABLE LIFE INVESTMENT FUND -- | 24
BALANCED PORTFOLIO
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets
----------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended
June 30, 2000 December 31,
Increase (Decrease) in Net Assets (Unaudited) 1999
----------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) .................................... $ 2,166,488 $ 4,252,830
Net realized gain (loss) on investment transactions ............. 3,898,579 25,826,434
Net unrealized appreciation (depreciation) on investment
transactions during the period .............................. (4,796,402) (3,802,128)
--------------- ---------------
Net increase (decrease) in net assets resulting from operations . 1,268,665 26,277,136
--------------- ---------------
Distributions to shareholders from:
Net investment income ........................................... (3,312,588) (2,004,275)
--------------- ---------------
Net realized gains .............................................. (26,018,869) (12,845,342)
--------------- ---------------
Portfolio share transactions:
Proceeds from shares sold ....................................... 24,824,929 54,478,502
Reinvestment of distributions ................................... 29,331,457 14,849,617
Cost of shares redeemed ......................................... (29,467,843) (43,542,988)
--------------- ---------------
Net increase (decrease) in net assets from
Portfolio share transactions ................................ 24,688,543 25,785,131
--------------- ---------------
Increase (decrease) in net assets ............................... (3,374,249) 37,212,650
Net assets at beginning of period ............................... 198,844,599 161,631,949
Net assets at end of period (including undistributed net --------------- ---------------
investment income of $2,127,115 and $3,273,215, respectively) $ 195,470,350 $ 198,844,599
--------------- ---------------
Other Information
--------------------------------------------------------------------------------------------------
Shares outstanding at beginning of period ....................... 12,343,386 10,629,925
--------------- ---------------
Shares sold ..................................................... 1,687,367 3,610,443
Shares issued to shareholders in reinvestment of distributions .. 2,153,558 1,012,436
Shares redeemed ................................................. (1,979,782) (2,909,418)
--------------- ---------------
Net increase (decrease) in Portfolio shares ..................... 1,861,143 1,713,461
--------------- ---------------
Shares outstanding at end of period ............................. 14,204,529 12,343,386
--------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
SCUDDER VARIABLE LIFE INVESTMENT FUND -- | 25
BALANCED PORTFOLIO
<PAGE>
Financial Highlights
Balanced Portfolio
The following table includes selected data for a share outstanding throughout
each period (a) and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 2000(b) 1999 1998 1997 1996 1995
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $16.11 $15.21 $13.30 $11.61 $10.95 $ 8.97
-----------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
-----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .17 .35 .37 .34 .31 .30
-----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment transactions (.08) 1.85 2.56 2.32 .95 2.04
-----------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Total from investment operations .09 2.20 2.93 2.66 1.26 2.34
-----------------------------------------------------------------------------------------------------------------------------
Less distributions from:
-----------------------------------------------------------------------------------------------------------------------------
Net investment income (.28) (.18) (.36) (.33) (.30) (.30)
-----------------------------------------------------------------------------------------------------------------------------
Net realized gains on investment transactions (2.16) (1.12) (.66) (.64) (.30) (.06)
-----------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Total distributions (2.44) (1.30) (1.02) (.97) (.60) (.36)
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.76 $16.11 $15.21 $13.30 $11.61 $10.95
-----------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Total Return (%) .68** 15.32 23.19 24.21 11.89 26.67
-----------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
-----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 195 199 162 118 88 68
-----------------------------------------------------------------------------------------------------------------------------
Ratio of operating expenses (%) .54* .55 .56 .57 .60 .65
-----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) 2.26* 2.36 2.71 2.73 2.82 3.01
-----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 128* 98 74 43 68 88
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) For the six months ended June 30, 2000 (Unaudited).
* Annualized
** Not annualized
The accompanying notes are an integral part of the financial statements.
SCUDDER VARIABLE LIFE INVESTMENT FUND -- | 26
BALANCED PORTFOLIO
<PAGE>
Portfolio Management Discussion
--------------------------------------------------------------------------------
June 30, 2000
Growth and Income Portfolio
Dear Shareholders,
We are pleased to report that in a difficult period for the global equity
markets, the 1.20% return of the Growth and Income Portfolio -- A Shares
outperformed the -0.41% return of its benchmark, the S&P 500 Index. We believe
that the portfolio's favorable relative performance in the first half is a
reflection of our disciplined value framework. Our quantitative valuations
screens helped during the second quarter as momentum strategies -- those that
focus on investing in the market's most recent winners regardless of their
valuation -- quickly fell out of favor in late March and April. As the market
once again recognizes the importance of valuation characteristics such as low
price/earnings, low price/cash flow, and high relative dividend yield, we
believe that investors will be rewarded for decisions based on rational
investment criteria. We feel that this approach has helped the fund outperform
amid the recent volatility by allowing it to provide strong relative performance
during the periods in which the stock market was falling.
The portfolio benefited from its underweighted position in the technology
sector, along with strong stock selection within the group. Our two largest
positions, Intel and Corning, were both down much less than the sector as a
whole during the spring correction. The portfolio's holdings in the consumer
staples area -- namely, Anheuser-Busch, PepsiCo, and Avon -- also performed well
over the first half of the year as a volatile environment prompted investors to
seek more defensive holdings. Health care stocks, a sector in which we have been
adding throughout the first half of the year, contributed positively to
performance. We moved into health care during the first quarter on the theory
that the sector's valuations were extremely attractive in relation to its growth
rate. In addition, health care stocks tend to outperform when growth is expected
to slow, since their earnings are less vulnerable to fluctuations in the
economy. Stocks that have performed well for us in this area include Amgen and
American Home Products. Within the financial services sector, our strategy has
been to tilt the portfolio toward insurance stocks and large global financial
services companies with diversified, fee-oriented revenue streams. Our
hypothesis is that these groups will outperform the average financial services
stock as interest rates rise, credit conditions deteriorate, and traditional
lending businesses become increasingly commoditized. The portfolio's largest
positions in the financial sector are American International Group, Marsh &
McLennan, and Citigroup.
We are pleased with the portfolio's positioning and this year's trend in
relative performance. We continue to focus on generating returns through
individual stock selection, while diligently managing our risk profile. Our
investment discipline has been consistently applied, as we have adhered to our
value-oriented style through extremely volatile market conditions. The pace of
change in the markets and the economy is moving at a blistering rate, but we
believe that with a sound process and a strong investment organization, we will
continue to deliver a superior value-based investment product to our
shareholders.
Sincerely,
Your Portfolio Management Team
/s/Kathleen T. Millard /s/Gregory S. Adams
Kathleen T. Millard Gregory S. Adams
Lead Portfolio Manager Portfolio Manager
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
--------------------------------------------------------------------------------
In a difficult environment for equities, the portfolio's value-oriented approach
enabled it to outperform its benchmark index, the S&P 500.
SCUDDER VARIABLE LIFE INVESTMENT FUND -- | 27
GROWTH AND INCOME PORTFOLIO
<PAGE>
Performance Update
--------------------------------------------------------------------------------
June 30, 2000
Growth and Income Portfolio
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
Growth and Income
Portfolio -- Class A* S&P 500 Index
--------------------- -------------
5/94* 10000 10000
'94 9854 9915
'95 11817 12498
'96 14645 15747
'97 19528 21214
'98 23650 27614
'99 25749 33900
'00 24662 36360
Yearly periods ended June 30
The Standard & Poor's 500 Index is a capitalization-weighted index of 500
stocks. The index is designed to measure performance of the broad domestic
economy through changes in the aggregate market value of 500 stocks representing
all major industries. Index returns assume reinvestment of dividends and, unlike
Portfolio returns, do not reflect any fees or expenses.
<TABLE>
<CAPTION>
Growth and Income Portfolio -- Class A* S&P 500 Index
------------------------------------------------------------- ------------------------------------------------------------
Total Return Total Return
--------------------------- ---------------------------
Period Ended Growth of Average Period Ended Growth of Average
6/30/2000 $10,000 Cumulative Annual 6/30/2000 $10,000 Cumulative Annual
------------------------------------------------------------- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 9,578 -4.22% -4.22% 1 Year $ 10,726 7.26% 7.26%
------------------------------------------------------------- ------------------------------------------------------------
5 Year $ 20,869 108.69% 15.85% 5 Year $ 29,092 190.92% 23.78%
------------------------------------------------------------- ------------------------------------------------------------
Life of Portfolio* $ 25,279 152.79% 16.23% Life of Portfolio* $ 36,360 263.60% 23.26%
------------------------------------------------------------- ------------------------------------------------------------
</TABLE>
* The Portfolio commenced operations on May 2, 1994. On May 1, 1997, existing
shares were redesignated as Class A shares.
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
Growth and Income
Portfolio -- Class B S&P 500 Index
-------------------- -------------
5/1/97* 10000 10000
6/97 10540 11085
12/97 11601 12258
6/98 12745 14430
12/98 12407 15762
6/99 13841 17714
12/99 13087 19079
6/00 13226 19000
The Standard & Poor's 500 Index is a capitalization-weighted index of 500
stocks. The index is designed to measure performance of the broad domestic
economy through changes in the aggregate market value of 500 stocks representing
all major industries. Index returns assume reinvestment of dividends and, unlike
Portfolio returns, do not reflect any fees or expenses.
<TABLE>
<CAPTION>
Growth and Income Portfolio -- Class B S&P 500 Index
--------------------------------------------------------------------- -------------------------------------------------------------
Total Return Total Return
----------------------------- -----------------------------
Period Ended Growth of Average Period Ended Growth of Average
6/30/2000 $10,000 Cumulatove Annual 6/30/2000 $10,000 Cumulative Annual
------------------------------------------------------------- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 9,556 -4.44% -4.44% 1 Year $ 10,726 7.26% 7.26%
------------------------------------------------------------- ------------------------------------------------------------
Life of Portfolio** $ 14,011 40.11% 11.24% Life of Portfolio** $ 19,000 90.00% 22.44%
------------------------------------------------------------- ------------------------------------------------------------
</TABLE>
** The Portfolio commenced selling Class B shares on May 1, 1997.
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results. Investment return
and principal value will fluctuate, so an investor's shares, when redeemed,
may be worth more or less than when purchased. Total returns for the Life
of the Portfolio for Class A would have been lower if the Portfolio's
expenses were not maintained.
28 | SCUDDER VARIABLE LIFE INVESTMENT FUND --
GROWTH AND INCOME PORTFOLIO
<PAGE>
Portfolio Summary
--------------------------------------------------------------------------------
June 30, 2000
Growth and Income Portfolio
--------------------------------------------------------------------------------
Diversification
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A PIE CHART HERE
<TABLE>
<S> <C> <C>
Equity Securities 95% Sector breakdown of the The portfolio's
Cash Equivalents 5% Portfolio's equity holdings holdings in technology
----------------------------------- and health care stocks
100% Technology 20% contributed positively
----------------------------------- Financial 17% to performance.
Health 12%
Manufacturing 11%
Energy 9%
Communications 8%
Consumer Staples 7%
Media 4%
Service Industries 3%
Other 9%
-----------------------------------
100%
-----------------------------------
</TABLE>
--------------------------------------------------------------------------------
Ten Largest Equity Holdings
--------------------------------------------------------------------------------
(33% of Portfolio)
1. Corning, Inc.
Specialty glass manufacturer
2. Intel Corp.
Producer of semiconductor memory circuits
3. Oracle Corp.
Provider of database management software
4. Exxon Mobil Corp.
International oil company
5. General Electric Co.
Producer of electrical equipment
6. Citigroup, Inc.
Diversified financial services company
7. American Home Products Corp.
Diversified pharmaceutical company
8. PepsiCo, Inc.
Provider of soft drinks, snack foods and food services
9. American International Group, Inc.
International insurance holding company
10. Marsh & McLennan Companies, Inc.
Insurance, brokerage, consulting and investment management services
SCUDDER VARIABLE LIFE INVESTMENT FUND -- | 29
GROWTH AND INCOME PORTFOLIO
<PAGE>
Investment Portfolio as of June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
Growth and Income Portfolio
<TABLE>
<CAPTION>
Principal
Amount ($) Value ($)
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements 5.4%
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
State Street Bank and Trust Company, 6.48%, to be repurchased at $10,993,934 on 7/3/2000** ----------
(Cost $10,988,000) .................................................................................. 10,988,000 10,988,000
----------
Shares
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
Common Stocks 94.6%
-----------------------------------------------------------------------------------------------------------------------------------
Consumer Discretionary 2.0%
Department & Chain Stores
Wal-Mart Stores, Inc. .................................................................................. 72,500 4,177,812
----------
Consumer Staples 6.4%
Alcohol & Tobacco 1.9%
Anheuser-Busch Companies, Inc. ......................................................................... 50,800 3,794,125
----------
Food & Beverage 2.5%
PepsiCo, Inc. .......................................................................................... 114,400 5,083,650
----------
Package Goods/Cosmetics 2.0%
Avon Products, Inc. .................................................................................... 94,400 4,200,800
----------
Health 11.7%
Biotechnology 0.8%
Amgen Inc.* ............................................................................................ 24,100 1,693,025
----------
Medical Supply & Specialty 2.2%
Becton, Dickinson & Co. ................................................................................ 35,600 1,021,275
Medtronic, Inc. ........................................................................................ 69,200 3,447,025
----------
4,468,300
----------
Pharmaceuticals 8.7%
American Home Products Corp. ........................................................................... 92,900 5,457,875
Bristol-Myers Squibb Co. ............................................................................... 49,500 2,883,375
Eli Lilly & Co. ........................................................................................ 31,700 3,166,038
Johnson & Johnson ...................................................................................... 28,700 2,923,813
Merck & Co., Inc. ...................................................................................... 45,100 3,455,788
----------
17,886,889
----------
Communications 7.2%
Telephone/Communications
Bell Atlantic Corp. .................................................................................... 56,050 2,848,041
BellSouth Corp. ........................................................................................ 72,400 3,086,050
GTE Corp. .............................................................................................. 50,100 3,118,725
SBC Communications, Inc. ............................................................................... 75,080 3,247,210
Sprint Corp. ........................................................................................... 48,700 2,483,700
----------
14,783,726
----------
Financial 16.0%
Banks 3.5%
Chase Manhattan Corp. .................................................................................. 75,300 3,468,506
FleetBoston Financial Corp. ............................................................................ 64,400 2,189,600
</TABLE>
The accompanying notes are an integral part of the financial statements.
30 - SCUDDER VARIABLE LIFE INVESTMENT FUND --
GROWTH AND INCOME PORTFOLIO
<PAGE>
Shares Value ($)
--------------------------------------------------------------------------------
US Bancorp ...................................... 77,100 1,484,175
----------
7,142,281
----------
Insurance 2.4%
American International Group, Inc. .............. 42,400 4,982,013
----------
Consumer Finance 4.2%
American Express Co. ............................ 27,600 1,438,650
Citigroup, Inc. ................................. 92,600 5,579,150
Mellon Financial Corp. .......................... 43,900 1,599,606
----------
8,617,406
----------
Other Financial Companies 5.9%
Federal National Mortgage Association ........... 77,900 4,065,406
Marsh & McLennan Companies, Inc. ................ 47,000 4,908,563
Morgan Stanley Dean Witter & Co. ................ 36,300 3,021,975
----------
11,995,944
----------
Media 3.8%
Advertising 1.0%
Interpublic Group of Companies, Inc. ............ 46,000 1,978,000
----------
Broadcasting & Entertainment 1.9%
The Walt Disney Co. ............................. 101,200 3,927,825
----------
Cable Television 0.9%
Comcast Corp. Special Class A* .................. 46,700 1,891,350
----------
Service Industries 2.8%
EDP Services 1.2%
First Data Corp. ................................ 48,700 2,416,738
----------
Printing/Publishing 1.6%
McGraw-Hill, Inc. ............................... 60,100 3,245,400
----------
Durables 2.5%
Aerospace 1.1%
The Boeing Co. .................................. 24,300 1,016,028
Rockwell International Corp. .................... 37,500 1,181,250
----------
2,197,278
----------
Automobiles 0.7%
Ford Motor Co. .................................. 33,200 1,427,600
----------
Construction/Agricultural Equipment 0.7%
Deere & Co. ..................................... 40,400 1,494,800
----------
Manufacturing 10.9%
Chemicals 1.5%
Dow Chemical Co. ................................ 101,400 3,061,013
----------
Diversified Manufacturing 2.8%
General Electric Co. ............................ 109,400 5,798,200
----------
The accompanying notes are an integral part of the financial statements.
SCUDDER VARIABLE LIFE INVESTMENT FUND -- | 31
GROWTH AND INCOME PORTFOLIO
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
-----------------------------------------------------------------------------------------
<S> <C> <C>
Industrial Specialty 5.4%
Corning, Inc. .............................................. 40,900 11,037,888
----------
Machinery/Components/Controls 1.2%
Parker-Hannifin Corp. ...................................... 69,200 2,370,100
Visteon Corporation ........................................ 1 7
----------
2,370,107
----------
Technology 19.0%
Computer Software 7.7%
America Online, Inc.* ...................................... 31,400 1,656,350
Computer Associates International, Inc. .................... 33,300 1,704,544
Intuit, Inc.* .............................................. 24,100 997,138
Microsoft Corp.* ........................................... 46,100 3,688,000
Oracle Corp.* .............................................. 92,700 7,792,594
----------
15,838,626
Electronic Components/Distributors 1.8%
Cisco Systems, Inc.* ....................................... 58,300 3,705,694
----------
Electronic Data Processing 3.5%
Compaq Computer Corp. ...................................... 86,800 2,218,825
Hewlett-Packard Co. ........................................ 16,900 2,110,388
International Business Machines Corp. ...................... 25,600 2,804,800
----------
7,134,013
----------
Semiconductors 5.7%
Intel Corp. ................................................ 79,000 10,561,313
Texas Instruments, Inc. .................................... 15,400 1,057,788
----------
11,619,101
----------
Miscellaneous 0.3%
Agilent Technologies, Inc.* ................................ 7,056 520,373
----------
Energy 9.0%
Oil & Gas Production 7.3%
Exxon Mobil Corp. .......................................... 75,907 5,958,700
Royal Dutch Petroleum Co. (New York shares) ................ 57,600 3,546,000
Texaco, Inc. ............................................... 36,800 1,959,600
Total Fina ELF SA (ADR) .................................... 44,890 3,456,530
----------
14,920,830
----------
Oil Companies 0.7%
Chevron Corp. .............................................. 17,500 1,484,219
----------
Oilfield Services/Equipment 1.0%
Schlumberger Ltd. .......................................... 26,000 1,940,250
----------
Metals & Minerals 0.7%
Steel & Metals
Alcoa, Inc. ................................................ 51,800 1,502,200
----------
Transportation 0.2%
Airlines
AMR Corp. .................................................. 18,900 499,669
----------
Utilities 2.4%
Electric Utilities
FPL Group, Inc. ............................................ 42,400 2,098,800
</TABLE>
The accompanying notes are an integral part of the financial statements
32 | SCUDDER VARIABLE LIFE INVESTMENT FUND --
GROWTH AND INCOME PORTFOLIO
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
-----------------------------------------------------------------------------------------
<S> <C> <C>
Unicom Corp. .............................................. 71,800 2,777,763
-----------
4,876,563
-----------
-----------------------------------------------------------------------------------------
Total Common Stocks (Cost $162,369,514) 193,713,708
-----------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $173,357,514) (a) 204,701,708
-----------------------------------------------------------------------------------------
* Non-income producing security.
** Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities.
(a) At June 30, 2000, the net unrealized appreciation on investments based on
cost for federal income tax purposes of $173,461,426 was as follows:
Aggregate gross unrealized appreciation for all investments in
which there is an excess of value over tax cost ................... $37,645,050
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value ...................... 6,404,768
-----------
Net unrealized appreciation .......................................... $31,240,282
-----------
--------------------------------------------------------------------------------------------
Purchases and sales of investment securities (excluding short-term
investments), for the six months ended June 30, 2000, aggregated $66,797,675
and $62,116,634, respectively.
--------------------------------------------------------------------------------------------
</TABLE>
From November 1, 1999 through December 31, 1999 the Portfolio incurred
approximately $3,839,000 of net realized capital losses. As permitted by tax
regulations, the Portfolio intends to defer these losses and treat them as
arising in the fiscal year ended December 31, 2000.
The accompanying notes are an integral part of the financial statements.
SCUDDER VARIABLE LIFE INVESTMENT FUND -- | 33
GROWTH AND INCOME PORTFOLIO
<PAGE>
Financial Statements
--------------------------------------------------------------------------------
Growth and Income Portfolio
--------------------------------------------------------------------------------
Statement of Assets and Liabilities as of June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
Assets
--------------------------------------------------------------------------------
Investments in securities, at value (cost $173,357,514) $204,701,708
Receivable for investments sold ....................... 497,687
Dividends receivable .................................. 199,426
Interest receivable ................................... 1,978
Receivable for Portfolio shares sold .................. 215,022
Foreign taxes recoverable ............................. 21,506
Other assets .......................................... 118,937
------------
Total assets .......................................... 205,756,264
Liabilities
--------------------------------------------------------------------------------
Due to custodian bank ................................. 609
Payable for investments purchased ..................... 2,094,911
Payable for Portfolio shares redeemed ................. 6,680
Accrued management fee ................................ 77,400
Accrued accounting fee ................................ 133,137
Other accrued expenses and payables ................... 61,973
------------
Total liabilities ..................................... 2,374,710
--------------------------------------------------------------------------------
Net assets, at value $203,381,554
--------------------------------------------------------------------------------
Net Assets
--------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ................... 1,108,041
Net unrealized appreciation (depreciation) on investments 31,344,194
Accumulated net realized gain (loss) .................. (2,265,969)
Paid-in capital ....................................... 173,195,288
------------
--------------------------------------------------------------------------------
Net assets, at value $ 203,381,554
--------------------------------------------------------------------------------
Class A
Net Asset Value, offering and redemption price per share
($189,615,221 / 17,672,925 outstanding shares of
beneficial interest, no par value, unlimited number --------------
of shares authorized) ............................ $ 10.73
--------------
Class B
Net Asset Value, offering and redemption price per
share ($13,766,333 / 1,285,819 outstanding shares
of beneficial interest, no par value, --------------
unlimited number of shares authorized) ........... $ 10.71
--------------
The accompanying notes are an integral part of the financial statements.
34 | SCUDDER VARIABLE LIFE INVESTMENT FUND--
GROWTH AND INCOME PORTFOLIO
<PAGE>
--------------------------------------------------------------------------------
Statement of Operations for the six months ended June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investment Income
-----------------------------------------------------------------------------------------
<S> <C>
Income:
Dividends (net of foreign taxes withheld of $1,218) ....................... $ 1,400,537
Interest .................................................................. 277,058
-----------
Total Income .............................................................. 1,677,595
-----------
Expenses:
Management fee ............................................................ 474,425
Custodian fees ............................................................ 9,816
Accounting fees ........................................................... 35,779
Trustees' fees and expenses ............................................... 9,282
Auditing .................................................................. 6,734
Legal ..................................................................... 3,640
Distribution fees (Class B) ............................................... 15,975
Other ..................................................................... 6,888
-----------
Total expenses, before expense reductions ................................. 562,539
Expense reductions ........................................................ (7,198)
-----------
Total expenses, after expense reductions .................................. 555,341
-----------------------------------------------------------------------------------------
Net investment income (loss) 1,122,254
-----------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
-----------------------------------------------------------------------------------------
Net realized gain (loss) from investments ................................. 1,775,492
-----------
Net unrealized appreciation (depreciation) during the period on investments (1,053,284)
-----------------------------------------------------------------------------------------
Net gain (loss) on investment transactions 722,208
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 1,844,462
-----------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
SCUDDER VARIABLE LIFE INVESTMENT FUND -- 35
GROWTH AND INCOME PORTFOLIO
<PAGE>
--------------------------------------------------------------------------------
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
June 30, 2000 December 31,
Increase (Decrease) in Net Assets (Unaudited) 1999
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) ........................................................... $ 1,122,254 $ 4,053,528
Net realized gain (loss) on investment transactions .................................... 1,775,492 (425,923)
Net unrealized appreciation (depreciation) on investment transactions during the period (1,053,284) 7,061,426
------------- -------------
Net increase (decrease) in net assets resulting from operations ........................ 1,844,462 10,689,031
------------- -------------
Distributions to shareholders from:
Net investment income:
Class A ................................................................................ (2,616,021) (2,084,300)
------------- -------------
Class B ................................................................................ (162,390) (145,438)
------------- -------------
Net realized gains:
Class A ................................................................................ (3,459,899) (13,310,859)
------------- -------------
Class B ................................................................................ (256,077) (1,061,031)
------------- -------------
Portfolio share transactions:
Class A
Proceeds from shares sold .............................................................. 32,137,168 84,060,024
Reinvestment of distributions .......................................................... 6,075,919 15,395,159
Cost of shares redeemed ................................................................ (44,214,824) (78,589,880)
------------- -------------
Net increase (decrease) in net assets from Class A share transactions .................. (6,001,737) 20,865,303
------------- -------------
Class B
Proceeds from shares sold .............................................................. 3,392,704 2,289,092
Reinvestment of distributions .......................................................... 418,468 1,206,469
Cost of shares redeemed ................................................................ (3,481,978) (3,472,243)
------------- -------------
Net increase (decrease) in net assets from Class B share transactions .................. 329,194 23,318
------------- -------------
Increase (decrease) in net assets ...................................................... (10,322,468) 14,976,024
Net assets at beginning of period ...................................................... 213,704,022 198,727,998
Net assets at end of period (including undistributed net investment income of $1,108,041 ------------- -------------
and $2,764,198, respectively) $ 203,381,554 $ 213,704,022
------------- -------------
Other Information
-----------------------------------------------------------------------------------------------------------------------------
Class A
Shares outstanding at beginning of period .............................................. 18,237,831 16,394,977
------------- -------------
Shares sold ............................................................................ 3,006,923 7,593,339
Shares issued to shareholders in reinvestment of distributions ......................... 568,374 1,356,967
Shares redeemed ........................................................................ (4,140,203) (7,107,452)
------------- -------------
Net increase (decrease) in Portfolio shares ............................................ (564,906) 1,842,854
------------- -------------
Shares outstanding at end of period .................................................... 17,672,925 18,237,831
------------- -------------
Class B
Shares outstanding at beginning of period .............................................. 1,266,642 1,267,444
------------- -------------
Shares sold ............................................................................ 307,455 207,208
Shares issued to shareholders in reinvestment of distributions ......................... 39,219 106,495
Shares redeemed ........................................................................ (327,497) (314,505)
------------- -------------
Net increase (decrease) in Portfolio shares ............................................ 19,177 (802)
------------- -------------
Shares outstanding at end of period .................................................... 1,285,819 1,266,642
------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
36 | SCUDDER VARIABLE LIFE INVESTMENT FUND --
GROWTH AND INCOME PORTFOLIO
<PAGE>
Financial Highlights
--------------------------------------------------------------------------------
Growth and Income Portfolio
The following tables include selected data for a share outstanding throughout
each period (a) and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Class A (b)
-----------------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 2000(d) 1999 1998 1997 1996 1995
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.96 $11.25 $11.48 $ 9.37 $ 7.98 $ 6.26
-----------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
-----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .06 .22 .27 .27 .27 .23
-----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment transactions .07 .46 .54 2.47 1.46 1.72
-----------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Total from investment operations .13 .68 .81 2.74 1.73 1.95
-----------------------------------------------------------------------------------------------------------------------------
Less distributions from:
-----------------------------------------------------------------------------------------------------------------------------
Net investment income (.15) (.13) (.25) (.26) (.23) (.19)
-----------------------------------------------------------------------------------------------------------------------------
Net realized gains on investment transactions (.21) (.84) (.79) (.37) (.11) (.04)
-----------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Total distributions (.36) (.97) (1.04) (.63) (.34) (.23)
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.73 $10.96 $11.25 $11.48 $ 9.37 $ 7.98
-----------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Total Return (%) 1.20** 5.80 7.18 30.47 22.17 31.74
-----------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
-----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 190 200 184 157 91 52
-----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) .55* .55 .56 .58 .66 .75
-----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) .54* .55 .56 .58 .66 .75
-----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) 1.14* 2.01 2.41 2.54 3.14 3.18
-----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 64* 65 39 28 32 24
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class B
-----------------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 2000(d) 1999 1998 1997(c)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.93 $11.24 $11.47 $ 9.44
-----------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
-----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .05 .19 .25 .14
Net realized and unrealized gain (loss) on investment transactions .07 .46 .54 2.02
-----------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Total from investment operations .12 .65 .79 2.16
-----------------------------------------------------------------------------------------------------------------------------
Less distributions from:
-----------------------------------------------------------------------------------------------------------------------------
Net investment income (.13) (.12) (.23) (.13)
-----------------------------------------------------------------------------------------------------------------------------
Net realized gains on investment transactions (.21) (.84) (.79) --
-----------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Total distributions (.34) (.96) (1.02) (.13)
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.71 $10.93 $11.24 $11.47
-----------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Total Return (%) 1.06** 5.48 6.95 22.89**
-----------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
-----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 14 14 14 7
-----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) .80* .80 .79 .80*
-----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) .79* .80 .79 .80*
-----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) .88* 1.76 2.20 2.13*
-----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 64* 65 39 28
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) On May 1, 1997 existing shares were redesignated as Class A shares.
(c) For the period May 1, 1997 (commencement of sale of Class B shares) to
December 31, 1997.
(d) For the six months ended June 30, 2000 (Unaudited).
* Annualized
** Not annualized
SCUDDER VARIABLE LIFE INVESTMENT FUND -- | 37
GROWTH AND INCOME PORTFOLIO
<PAGE>
Portfolio Management Discussion
--------------------------------------------------------------------------------
June 30, 2000
Capital Growth Portfolio
Dear Shareholders,
After rallying to new highs in the last month of the first quarter, the stock
market declined precipitously at the very start of the second quarter, sparked
in part by news that settlement talks between the government and Microsoft had
broken off. This triggered a sharp downturn in Microsoft stock and on the
Nasdaq. At its nadir, the Nasdaq had fallen nearly 28% from its all-time high,
reached less than one month earlier. Particularly hard hit were very highly
valued technology and Internet companies.
The extraordinary day-to-day volatility of the market continued in the second
quarter, as did abrupt sector rotation. Many of the top contributors to the S&P
500 in the second quarter were health care companies such as Pfizer and Merck,
while many of the poorest performers were technology stocks, including Microsoft
and Cisco Systems. In many ways, the first quarter's laggards took the lead in
the second quarter. So, what had changed? Valuation and earnings re-entered the
investment lexicon in the second quarter, as investors shied away from companies
seen as having excessive valuations, seeking out more reasonably valued
companies.
For the portfolio, relative performance was primarily a function of individual
stock selection and weightings. While large capitalization growth stocks have
done well relative to other sectors, the portfolio's objective of dampening
downside volatility again helped relative performance in this weak environment.
For the six months ended June 30, 2000, Class A shares returned 3.38%, compared
with the -0.41% return of the portfolio's unmanaged benchmark, the S&P 500. The
portfolio's return placed it ahead of the 1.27% average of the Lipper large-cap
core fund category.
Warner-Lambert was one of the largest contributors to the portfolio's return
during the period, as investors recognized the high prospective earnings growth
of the Warner/Pfizer combination. Corning Inc., PepsiCo, and EMC were all
overweighted in the portfolio, relative to the portfolio's benchmark, and thus
were substantial contributors to overall returns.
Most transactions were driven by company-specific developments and were not a
result of any shift in overall portfolio strategy. However, within the health
care sector, we increased the portfolio's exposure to large-capitalization
pharmaceuticals, as their valuations appeared favorable relative to other areas
of health care. Merck, an existing holding, was increased, and an initial
position of Eli Lilly was established. The portfolio holding of Amgen was sold
due to litigation uncertainties, and the proceeds reinvested in MedImmune,
another biotech name which has benefited the portfolio in the past.
Given the uncertainty over whether the Federal Reserve Board has completed its
current round of monetary tightening, we believe the stock market will be very
discriminatory, rewarding only those companies that are able to demonstrate
dependable above-average earnings growth. The period of "growth at any price,"
experienced in 1999 and earlier this year, appears to have faded and a refocus
on "growth at a reasonable price" has returned. This is an environment where we
believe our attention to relative valuation and quality should position the
portfolio for superior performance.
Sincerely,
Your Portfolio Management Team
/s/William F. Gadsden /s/Bruce F. Beaty
William F. Gadsden Bruce F. Beaty
Co-Lead Portfolio Manager Co-Lead Portfolio Manager
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
--------------------------------------------------------------------------------
Most transactions were driven by company-specific developments and were not a
result of any shift in overall portfolio strategy.
38 | SCUDDER VARIABLE LIFE INVESTMENT FUND --
CAPITAL INCOME PORTFOLIO
<PAGE>
Performance Update
--------------------------------------------------------------------------------
June 30, 2000
Capital Growth Portfolio
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
Capital Growth
Portfolio -- Class A* S&P 500 Index
--------------------- -------------
'90 10000 10000
'91 10275 10738
'92 12173 12180
'93 14380 13841
'94 14253 14036
'95 17148 17694
'96 20660 22293
'97 28215 30032
'98 35794 39092
'99 42264 47991
'00 53208 51474
Yearly periods ended June 30
The Standard & Poor's 500 Index is a capitalization-weighted index of 500
stocks. The index is designed to measure performance of the broad domestic
economy through changes in the aggregate market value of 500 stocks representing
all major industries. Index returns assume reinvestment of dividends and, unlike
Portfolio returns, do not reflect any fees or expenses.
<TABLE>
<CAPTION>
Capital Growth Portfolio -- Class A* S&P 500 Index
--------------------------------------------------------------- --------------------------------------------------------------
Total Return Total Return
----------------------------- -----------------------------
Period Ended Growth of Average Period Ended Growth of Average
6/30/2000 $10,000 Cumulative Annual 6/30/2000 $10,000 Cumulative Annual
------------------------------------------------------------- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 12,589 25.89% 25.89% 1 Year $ 10,726 7.26% 7.26%
------------------------------------------------------------- ------------------------------------------------------------
5 Year $ 31,029 210.29% 25.42% 5 Year $ 29,092 190.92% 23.78%
------------------------------------------------------------- ------------------------------------------------------------
10 Year $ 53,208 432.08% 18.19% 10 Year $ 51,474 414.74% 17.79%
------------------------------------------------------------- ------------------------------------------------------------
</TABLE>
* On May 12, 1997, existing shares were redesignated as Class A shares.
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
Capital Growth
Portfolio -- Class B S&P 500 Index
-------------------- -------------
5/97** 10000 10000
6/97 10581 10449
12/97 11569 11554
6/98 13391 13601
12/98 14222 14857
6/99 15776 16697
12/99 19183 17984
6/00 19803 17909
The Standard & Poor's 500 Index is a capitalization-weighted index of 500
stocks. The index is designed to measure performance of the broad domestic
economy through changes in the aggregate market value of 500 stocks representing
all major industries. Index returns assume reinvestment of dividends and, unlike
Portfolio returns, do not reflect any fees or expenses.
<TABLE>
<CAPTION>
Capital Growth Portfolio -- Class B S&P 500 Index
--------------------------------------------------------------- --------------------------------------------------------------
Total Return Total Return
----------------------------- -----------------------------
Period Ended Growth of Cumulative Average Period Ended Growth of Cumulative Average
6/30/2000 $10,000 Annual 6/30/2000 $10,000 Annual
------------------------------------------------------------- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 12,553 25.53% 25.53% 1 Year $ 10,726 7.26% 7.26%
------------------------------------------------------------- ------------------------------------------------------------
Life of Portfolio** $ 20,198 101.98% 25.12% Life of Portfolio** $ 17,909 79.09% 20.79%
------------------------------------------------------------- ------------------------------------------------------------
</TABLE>
** The Portfolio commenced selling Class B shares on May 12, 1997. Index
comparisons begin May 31, 1997.
All performance is historical, assumes reinvestment of all dividends
and capital gains, and is not indicative of future results. Investment
return and principal value will fluctuate, so an investor's shares,
when redeemed, may be worth more or less than when purchased.
SCUDDER VARIABLE LIFE INVESTMENT FUND -- 39
CAPITAL INCOME PORTFOLIO
<PAGE>
Portfolio Summary
--------------------------------------------------------------------------------
June 30, 2000
Capital Growth Portfolio
--------------------------------------------------------------------------------
Diversification
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A PIE CHART HERE
<TABLE>
<S> <C> <C> <C>
Equity Securities 97% Sector breakdown of the The portfolio's
Cash Equivalents 3% Portfolio's equity holdings objective of dampening
---------------------------------- downside volatility
100% Technology 31% helped performance in
---------------------------------- Health 17% a weak investment
Financial 9% environment.
Consumer Staples 8%
Communications 8%
Media 7%
Manufacturing 7%
Consumer Discretionary 5%
Energy 5%
Other 3%
----------------------------------
100%
----------------------------------
</TABLE>
--------------------------------------------------------------------------------
Ten Largest Equity Holdings
(32% of Portfolio)
--------------------------------------------------------------------------------
1. Intel Corp.
Producer of semiconductor memory circuits
2. General Electric Co.
Producer of electrical equipment
3. Pfizer, Inc.
International pharmaceutical company
4. Microsoft Corp.
Developer of computer software
5. Cisco Systems, Inc.
Manufacturer of computer network products
6. EMC Corp.
Provider of enterprise storage systems, software, networks and services
7. American Express Co.
Provider of travel-related, financial advisory and international banking
services
8. Oracle Corp.
Provider of database management software
9. PepsiCo, Inc.
Provider of soft drinks, snack foods and food services
10. Merck & Co., Inc.
Drug manufacturer
40 | SCUDDER VARIABLE LIFE INVESTMENT FUND --
CAPITAL GROWTH PORTFOLIO
<PAGE>
Investment Portfolio as of June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
Capital Growth Portfolio
<TABLE>
<CAPTION>
Principal
Amount ($) Value ($)
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements 3.0%
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
State Street Bank and Trust Company, 6.48%, to be repurchased at $38,723,890 on 7/3/2000** -----------
(Cost $38,703,000) ........................................................................... 38,703,000 38,703,000
-----------
Shares
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Common Stocks 97.0%
-----------------------------------------------------------------------------------------------------------------------------
Consumer Discretionary 5.2%
Department & Chain Stores 4.8%
Home Depot, Inc. ................................................................................ 489,250 24,431,922
Target Corp. .................................................................................... 210,300 12,197,400
Wal-Mart Stores, Inc. ........................................................................... 451,600 26,023,450
-----------
62,652,772
-----------
Recreational Products 0.4%
Six Flags, Inc.* ................................................................................ 264,900 6,026,475
-----------
Consumer Staples 7.7%
Alcohol & Tobacco 1.2%
Anheuser-Busch Companies, Inc. .................................................................. 208,200 15,549,938
-----------
Food & Beverage 3.9%
Bestfoods ....................................................................................... 94,200 6,523,350
Coca-Cola Co. ................................................................................... 264,700 15,203,706
PepsiCo, Inc. ................................................................................... 664,900 29,546,494
-----------
51,273,550
-----------
Package Goods/Cosmetics 2.6%
Colgate-Palmolive Co. ........................................................................... 281,200 16,836,850
Gillette Co. .................................................................................... 507,500 17,730,781
-----------
34,567,631
-----------
Health 16.1%
Biotechnology 2.6%
Genentech, Inc.* ................................................................................ 89,400 15,376,800
Immunex Corp.* .................................................................................. 175,500 8,676,281
MedImmune, Inc.* ................................................................................ 141,600 10,478,400
-----------
34,531,481
-----------
Medical Supply & Specialty 4.6%
Baxter International, Inc. ...................................................................... 366,700 25,783,594
Becton, Dickinson & Co. ......................................................................... 386,000 11,073,375
Medtronic, Inc. ................................................................................. 307,500 15,317,344
PE Corp.-PE Biosystems Group .................................................................... 112,800 7,430,700
-----------
59,605,013
-----------
Pharmaceuticals 8.9%
Allergan, Inc. .................................................................................. 27,400 2,041,300
Bristol-Myers Squibb Co. ........................................................................ 171,000 9,960,750
Eli Lilly & Co. ................................................................................. 238,700 23,840,163
Merck & Co., Inc. ............................................................................... 379,600 29,086,850
Pfizer, Inc. .................................................................................... 1,079,375 51,810,000
-----------
116,739,063
</TABLE>
The accompanying notes are an integral part of the financial statements.
SCUDDER VARIABLE LIFE INVESTMENT FUND -- 41
CAPITAL GROWTH PORTFOLIO
<PAGE>
Shares Value ($)
--------------------------------------------------------------------------------
Communications 6.2%
Cellular Telephone 3.2%
AT&T Wireless Group* ................. 404,200 11,267,075
Nokia Oyj (ADR) ...................... 320,800 16,019,950
Vodafone AirTouch plc (ADR) .......... 346,700 14,366,381
----------
41,653,406
----------
Telephone/Communications 3.0%
Bell Atlantic Corp.* ................. 243,100 12,352,519
BroadWing, Inc.* ..................... 455,400 11,811,938
US West, Inc. ........................ 172,200 14,766,150
----------
38,930,607
----------
Financial 8.4%
Insurance 3.0%
American International Group, Inc. ... 214,068 25,152,990
Marsh & McLennan Companies, Inc. ..... 139,300 14,548,144
----------
39,701,134
----------
Consumer Finance 4.5%
American Express Co. ................. 626,800 32,671,950
Citigroup, Inc. ...................... 448,875 27,044,719
----------
59,716,669
----------
Other Financial Companies 0.9%
Federal National Mortgage Association 215,900 11,267,281
----------
Media 6.8%
Advertising 1.7%
Interpublic Group of Companies, Inc. . 253,300 10,891,900
Omnicom Group, Inc. .................. 122,000 10,865,625
----------
21,757,525
----------
Broadcasting & Entertainment 1.9%
Infinity Broadcasting Corp.* ......... 278,200 10,136,913
Viacom, Inc. "B"* .................... 229,000 15,614,938
----------
25,751,851
----------
Cable Television 3.2%
AT&T Corp.-- Liberty Media Group "A"* 1,131,000 27,426,750
Comcast Corp. "A"* ................... 364,800 14,774,400
----------
42,201,150
----------
Service Industries 2.4%
EDP Services 0.9%
Electronic Data Systems Corp. ........ 284,900 11,752,125
----------
Miscellaneous Commercial Services 1.1%
Siebel Systems, Inc.* ................ 84,500 13,821,031
----------
Miscellaneous Consumer Services 0.4%
eBay, Inc.* .......................... 98,900 5,371,506
----------
Durables 1.6%
Aerospace
United Technologies Corp. ............ 354,500 20,871,188
----------
Manufacturing 7.8%
Diversified Manufacturing 4.4%
General Electric Co. ................. 1,075,300 56,990,900
----------
The accompanying notes are an integral part of the financial statements.
42 | SCUDDER VARIABLE LIFE INVESTMENT FUND --
CAPITAL GROWTH PORTFOLIO
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
-------------------------------------------------------------------------------------------
<S> <C> <C>
Industrial Specialty 3.4%
Corning, Inc. ............................................ 99,300 26,798,588
JDS Uniphase Corp.* ...................................... 155,500 18,640,563
-------------
45,439,151
-------------
Technology 29.8%
Computer Software 8.9%
America Online, Inc.* .................................... 375,100 19,786,525
i2 Technologies Inc.* .................................... 40,200 4,191,478
Intuit, Inc.* ............................................ 331,300 13,707,538
Microsoft Corp.* ......................................... 614,700 49,176,000
Oracle Corp.* ............................................ 352,500 29,632,031
-------------
116,493,572
-------------
Diverse Electronic Products 3.5%
Applied Materials, Inc.* ................................. 146,100 13,240,313
Dell Computer Corp.* ..................................... 360,700 17,787,019
Motorola Inc. ............................................ 240,200 6,980,813
Teradyne, Inc.* .......................................... 108,700 7,989,450
-------------
45,997,595
-------------
EDP Peripherals 2.9%
EMC Corp.* ............................................... 496,800 38,222,550
-------------
Electronic Components/Distributors 3.7%
Cisco Systems, Inc.* ..................................... 768,500 48,847,781
-------------
Electronic Data Processing 4.5%
Apple Computer, Inc.* .................................... 206,800 10,831,150
International Business Machines Corp. .................... 188,600 20,663,488
Sun Microsystems, Inc.* .................................. 298,500 27,144,844
-------------
58,639,482
-------------
Semiconductors 6.3%
Intel Corp. .............................................. 445,300 59,531,044
Vitesse Semiconductor Corp.* ............................. 156,800 11,534,600
Xilinx, Inc.* ............................................ 146,100 12,062,381
-------------
83,128,025
-------------
Energy 5.0%
Oil & Gas Production 1.8%
Exxon Mobil Corp. ........................................ 295,141 23,168,569
-------------
Oilfield Services/Equipment 3.2%
BJ Services Company* ..................................... 95,800 5,987,500
Nabors Industries, Inc.* ................................. 201,800 8,387,306
Schlumberger Ltd. ........................................ 371,500 27,723,188
42,097,994
-------------
-------------------------------------------------------------------------------------------
Total Common Stocks (Cost $906,622,874) 1,272,767,015
-------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $945,325,874) (a) 1,311,470,015
-------------------------------------------------------------------------------------------
* Non-income producing security.
** Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities.
(a) At June 30, 2000, the net unrealized appreciation on investments based on
cost for federal income tax purposes of $946,333,956 was as follows:
Aggregate gross unrealized appreciation for all investments in
which there is an excess of value over tax cost .... $ 399,521,102
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value .... 34,385,043
-------------
Net unrealized appreciation $ 365,136,059
-------------
-------------------------------------------------------------------------------------------
</TABLE>
Purchases and sales of investment securities (excluding short-term
investments), for the six months ended June 30, 2000, aggregated
$499,770,964 and $487,831,192, respectively.
The accompanying notes are an integral part of the financial statements.
SCUDDER VARIABLE LIFE INVESTMENT FUND -- | 43
CAPITAL GROWTH PORTFOLIO
<PAGE>
Financial Statements
--------------------------------------------------------------------------------
Capital Growth Portfolio
--------------------------------------------------------------------------------
Statement of Assets and Liabilities as of June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
Assets
--------------------------------------------------------------------------------
Investments in securities, at value (cost $945,325,874) ..... $1,311,470,015
Cash ........................................................ 3,579
Receivable for investments sold ............................. 8,406,258
Dividends receivable ........................................ 332,884
Interest receivable ......................................... 7,111
--------------
Total assets ................................................ 1,320,219,847
Liabilities
--------------------------------------------------------------------------------
Payable for investments purchased ........................... 14,422,411
Payable for Portfolio shares redeemed ....................... 1,215,675
Accrued management fee ...................................... 479,397
Accrued accounting fees ..................................... 12,688
Other accrued expenses and payables ......................... 47,149
--------------
Total liabilities ........................................... 16,177,320
--------------------------------------------------------------------------------
Net assets, at value $1,304,042,527
--------------------------------------------------------------------------------
Net Assets
--------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ......................... 1,674,814
Net unrealized appreciation (depreciation) on investments ... 366,144,141
Accumulated net realized gain (loss) ........................ 94,996,960
Paid-in capital ............................................. 841,226,612
--------------------------------------------------------------------------------
Net assets, at value $1,304,042,527
--------------------------------------------------------------------------------
Class A
Net Asset Value, offering and redemption price per share
($1,302,530,956 / 49,206,530 outstanding shares of
beneficial interest, no par value, unlimited number --------------
of shares authorized) .................................... $ 26.47
--------------
Class B
Net Asset Value, offering and redemption price per share
($1,511,571 / 57,204 outstanding shares of beneficial
interest, no par value, unlimited number of --------------
shares authorized) ....................................... $ 26.42
--------------
The accompanying notes are an integral part of the financial statements.
44 | SCUDDER VARIABLE LIFE INVESTMENT FUND --
CAPITAL GROWTH PORTFOLIO
<PAGE>
--------------------------------------------------------------------------------
Statement of Operations for the six months ended June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
Investment Income
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
Income:
<S> <C>
Dividends (net of foreign taxes withheld of $37,216) ...................... $ 3,794,214
Interest .................................................................. 975,601
------------
Total Income .............................................................. 4,769,815
------------
Expenses:
Management fee ............................................................ 2,815,585
Custodian fees ............................................................ 22,146
Accounting fees ........................................................... 75,166
Distribution fees (Class B) ............................................... 1,793
Auditing .................................................................. 28,574
Legal ..................................................................... 14,742
Trustees' fees and expenses ............................................... 9,282
Reports to shareholders ................................................... 4,004
Other ..................................................................... 10,610
------------
Total expenses, before expense reductions ................................. 2,981,902
Expense reductions ........................................................ (852)
------------
Total expenses, after expense reductions .................................. 2,981,050
------------------------------------------------------------------------------------------
Net investment income (loss) 1,788,765
------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
------------------------------------------------------------------------------------------
Net realized gain (loss) from investments ................................. 96,207,594
------------
Net unrealized appreciation (depreciation) during the period on investments (55,447,096)
------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions ................................ 40,760,498
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations ........... $ 42,549,263
------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
SCUDDER VARIABLE LIFE INVESTMENT FUND -- | 45
CAPITAL GROWTH PORTFOLIO
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets
------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended
June 30, 2000 December 31,
Increase (Decrease) in Net Assets (Unaudited) 1999
------------------------------------------------------------------------------------------------------------------------------
Operations:
<S> <C> <C>
Net investment income (loss) ........................................................... $ 1,788,765 $ 4,335,201
Net realized gain (loss) on investment transactions .................................... 96,207,594 149,905,463
Net unrealized appreciation (depreciation) on investment transactions during the period (55,447,096) 170,488,185
--------------- ---------------
Net increase (decrease) in net assets resulting from operations ........................ 42,549,263 324,728,849
--------------- ---------------
Distributions to shareholders from:
Net investment income:
Class A ................................................................................ (3,035,212) (2,669,192)
--------------- ---------------
Class B ................................................................................ -- (1,420)
--------------- ---------------
Net realized gains:
Class A ................................................................................ (149,151,554) (95,714,159)
--------------- ---------------
Class B ................................................................................ (177,202) (90,868)
--------------- ---------------
Portfolio share transactions:
Class A
Proceeds from shares sold .............................................................. 149,459,495 250,685,427
Reinvestment of distributions .......................................................... 152,186,766 98,383,351
Cost of shares redeemed ................................................................ (143,228,433) (221,798,743)
--------------- ---------------
Net increase (decrease) in net assets from Class A share transactions .................. 158,417,828 127,270,035
--------------- ---------------
Class B
Proceeds from shares sold .............................................................. 303,818 147,712
Reinvestment of distributions .......................................................... 177,202 92,288
Cost of shares redeemed ................................................................ (127,797) (15,571)
--------------- ---------------
Net increase (decrease) in net assets from Class B share transactions .................. 353,223 224,429
--------------- ---------------
Increase (decrease) in net assets ...................................................... 48,956,346 353,747,674
Net assets at beginning of period ...................................................... 1,255,086,181 901,338,507
Net assets at end of period (including undistributed net investment income of --------------- ---------------
$1,674,814 and $2,921,261, respectively) ............................................ $ 1,304,042,527 $ 1,255,086,181
--------------- ---------------
Other Information
------------------------------------------------------------------------------------------------------------------------------
Class A
Shares outstanding at beginning of period .............................................. 43,044,031 37,591,894
--------------- ---------------
Shares sold ............................................................................ 5,405,488 10,268,993
Shares issued to shareholders in reinvestment of distributions ......................... 5,968,108 4,293,111
Shares redeemed ........................................................................ (5,211,097) (9,109,967)
--------------- ---------------
Net increase (decrease) in Portfolio shares ............................................ 6,162,499 5,452,137
--------------- ---------------
Shares outstanding at end of period .................................................... 49,206,530 43,044,031
--------------- ---------------
Class B
Shares outstanding at beginning of period .............................................. 44,161 34,617
--------------- ---------------
Shares sold ............................................................................ 10,953 6,164
Shares issued to shareholders in reinvestment of distributions ......................... 6,957 4,032
Shares redeemed ........................................................................ (4,867) (652)
--------------- ---------------
Net increase (decrease) in Portfolio shares ............................................ 13,043 9,544
--------------- ---------------
Shares outstanding at end of period .................................................... 57,204 44,161
--------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
46 | SCUDDER VARIABLE LIFE INVESTMENT FUND --
CAPITAL GROWTH PORTFOLIO
<PAGE>
Financial Highlights
--------------------------------------------------------------------------------
Capital Growth Portfolio
The following table includes selected data for a share outstanding throughout
each period (a) and other performance information derived from the financial
statements.
Class A (b)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 2000(d) 1999 1998 1997 1996 1995
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $29.13 $23.95 $20.63 $16.50 $15.08 $12.23
----------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
-----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .04 .10 .16 .18 .19 .14
-----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment transactions .81 7.64 4.46 5.39 2.68 3.25
-----------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Total from investment operations .85 7.74 4.62 5.57 2.87 3.39
-----------------------------------------------------------------------------------------------------------------------------
Less distributions from:
-----------------------------------------------------------------------------------------------------------------------------
Net investment income (.07) (.07) (.17) (.19) (.19) (.11)
-----------------------------------------------------------------------------------------------------------------------------
Net realized gains on investment transactions (3.44) (2.49) (1.13) (1.25) (1.26) (.43)
-----------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Total distributions (3.51) (2.56) (1.30) (1.44) (1.45) (.54)
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $26.47 $29.13 $23.95 $20.63 $16.50 $15.08
-----------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Total Return (%) 3.38** 35.23 23.23 35.76 20.13 28.65
-----------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
-----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 1,303 1,254 901 676 440 338
-----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses (%) .48* .49 .50 .51 .53 .57
-----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) .29* .43 .75 .96 1.27 1.06
-----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 80* 66 55 42 66 119
-----------------------------------------------------------------------------------------------------------------------------
Class B
-----------------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 2000(d) 1999 1998 1997(c)
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $29.05 $23.92 $20.61 $17.54
-------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
-----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .01 .04 .11 .08
-----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment transactions .80 7.62 4.45 3.08
-----------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Total from investment operations .81 7.66 4.56 3.16
-----------------------------------------------------------------------------------------------------------------------------
Less distributions from:
-----------------------------------------------------------------------------------------------------------------------------
Net investment income -- (.04) (.12) (.09)
-----------------------------------------------------------------------------------------------------------------------------
Net realized gains on investment transactions (3.44) (2.49) (1.13) --
-----------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Total distributions (3.44) (2.53) (1.25) (.09)
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $26.42 $29.05 $23.92 $20.61
-----------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Total Return (%) 3.23** 34.88 22.94 18.00**
-----------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 1.51 1.28 .83 .55
-----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses (%) .73* .74 .75 .75*
-----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) .04* .18 .49 .64*
-----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 80* 66 55 42
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) On May 12, 1997 existing shares were redesignated as Class A shares.
(c) For the period May 12, 1997 (commencement of sale of Class B shares) to
December 31, 1997.
(d) For the six months ended June 30, 2000 (Unaudited).
* Annualized
** Not annualized
The accompanying notes are an integral part of the financial statements.
SCUDDER VARIABLE LIFE INVESTMENT FUND -- | 47
CAPITAL GROWTH PORTFOLIO
<PAGE>
Portfolio Management Discussion
--------------------------------------------------------------------------------
June 30, 2000
Large Company Growth Portfolio
Dear Shareholders,
Large company growth stocks posted volatile performance in the first half of the
year, as interest rate concerns sparked rapid shifts in leadership among the
various sectors of the market. In this environment, our efforts to keep the fund
closely in line with the sector weightings of its benchmark really paid off,
particularly when technology stocks crumbled midway through the period. While
our investment strategy is not quite sector neutral, we are committed to
controlling risk through diversification. This discipline prevents us from
trying to guess the next hot sector or momentum stock. In addition, it helps
ensure that the fund will be positioned to capture gains when sectors bounce
back, as many did during the second quarter. Over the six months ended June 30,
2000, this approach proved beneficial to performance, as the Class A shares of
the portfolio returned 5.24% versus a return of 4.23% for its unmanaged
benchmark, the Russell 1000 Growth Index. According to Lipper Analytical
Services, the portfolio has also performed well in comparison to its peers,
finishing in the top fifth of the category over the twelve-month period.^1
Our goal is to invest in stocks with superior fundamentals and earnings
potential, since such characteristics tend to produce favorable results over
time. Our focus on earnings growth led us to establish a marginal overweighting
in the health care sector, where we benefited from the strong performance of
pharmaceuticals (Pfizer) and biotech stocks (Allergan, MedImmune). The
portfolio's holdings in the technology stocks also helped performance over the
full period, despite the sector's spring correction. We took advantage of the
volatility of April and May to add to our positions in Aether Systems, Broadcom,
Siebel Systems, i2, Juniper Networks, and Ariba, a decision that allowed us to
benefit from the June rally in tech stocks. On the negative side, performance
was hurt by our holdings in retail stocks, which were hurt by earnings
disappointments and concerns over a potential slowdown in the U.S. economy. We
are confident that the portfolio is well-positioned in this area, since it is
focused on value-end retailers such as Wal-Mart, Target, and Kohl's, companies
whose emphasis on consumer staples generally makes them less vulnerable to
fluctuations in the economy.
Despite the market's recent challenges, we remain committed to our pure growth
investment philosophy. We believe that over time, companies with strong
franchises, skilled management, and stable, consistent earnings growth will
produce superior long-term returns. Although it is likely that the second half
of the year will bring additional volatility and rapid sector rotations,
investors should remain focused on the long term. We continue to believe that
quality large-cap growth stocks offer excellent prospects for fund investors.
Sincerely,
Your Portfolio Manager
/s/Valerie F. Malter
Valerie F. Malter
Lead Portfolio Manager
1 Source: Lipper Analytical Services, Inc., an independent analyst of
investment performance. Performance includes reinvestment of dividends
and capital gains. For the period ended June 30, 2000, Scudder Variable
Life Investment Fund: Large Company Growth Portfolio's Lipper ranking
was 39 out of 205 funds for the one-year period. Past performance is no
guarantee of future results.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
--------------------------------------------------------------------------------
In a difficult environment for equities, the portfolio's value-oriented approach
enabled it to outperform its benchmark index, the S&P 500. Management's
disciplined, diversified approach enabled the portfolio to outperform both its
benchmark and its peers.
48 | SCUDDER VARIABLE LIFE INVESTMENT FUND --
LARGE COMPANY GROWTH PORTFOLIO
<PAGE>
Performance Update
--------------------------------------------------------------------------------
June 30, 2000
Large Company Growth Portfolio
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTANS A LINE CHART HERE
LINE CHART DATA:
Large Company Growth Russell 1000
Portfolio -- Class A Growth Index
5/99* 10000 10000
6/99 10797 10700
9/99 10781 10308
12/99 13555 12898
3/00 14601 13818
6/00 14265 13444
The Russell 1000 Growth Index is an unmanaged capitalization-weighted price
index of the 1000 largest U.S. growth companies traded on the NYSE, AMEX, and
Nasdaq. Index returns assume reinvestment of dividends and, unlike Portfolio
returns, do not reflect any fees or expenses.
<TABLE>
<CAPTION>
Large Company Growth Portfolio -- Class A Russell 1000 Growth Index
--------------------------------------------------------------- --------------------------------------------------------------
Total Return Total Return
--------------------------- ---------------------------
Period Ended Growth of Average Period Ended Growth of Average
6/30/2000 $10,000 Cumulative Annual 6/30/2000 $10,000 Cumulative Annual
------------------------------------------------------------- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 13,211 32.11% 32.11% 1 Year $ 12,565 25.65% 25.65%
------------------------------------------------------------- ------------------------------------------------------------
Life of Portfolio* $ 14,312 43.12% 36.16% Life of Portfolio* $ 13,444 34.44% 31.36%
------------------------------------------------------------- ------------------------------------------------------------
</TABLE>
* The Portfolio commenced operations on May 3, 1999. Index comparisons
begin May 31, 1999.
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTANS A LINE CHART HERE
LINE CHART DATA:
Large Company Growth Russell 1000
Portfolio -- Class B Growth Index
5/99* 10000 10000
6/99 10781 10700
9/99 10748 10308
12/99 13505 12898
3/00 14502 13818
6/00 14132 13444
The Russell 1000 Growth Index is an unmanaged capitalization-weighted price
index of the 1000 largest U.S. growth companies traded on the NYSE, AMEX, and
Nasdaq. Index returns assume reinvestment of dividends and, unlike Portfolio
returns, do not reflect any fees or expenses.
<TABLE>
<CAPTION>
Large Company Growth Portfolio -- Class B Russell 1000 Growth Index
--------------------------------------------------------------- --------------------------------------------------------------
Total Return Total Return
----------------------------- -----------------------------
Period Ended Growth of Cumulative Average Period Ended Growth of Cumulative Average
6/30/2000 $10,000 Annual 6/30/2000 $10,000 Annual
------------------------------------------------------------- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 13,108 31.08% 31.08% 1 Year $ 12,565 25.65% 25.65%
------------------------------------------------------------- ------------------------------------------------------------
Life of Portfolio* $ 14,179 41.79% 35.06% Life of Portfolio* $ 13,444 34.44% 31.36%
------------------------------------------------------------- ------------------------------------------------------------
</TABLE>
* The Portfolio commenced operations on May 3, 1999. Index comparisons
begin May 31, 1999.
All performance is historical, assumes reinvestment of all dividends
and capital gains, and is not indicative of future results. Investment
return and principal value will fluctuate, so an investor's shares,
when redeemed, may be worth more or less than when purchased. Total
returns would have been lower if the Portfolio's expenses were not
maintained.
SCUDDER VARIABLE LIFE INVESTMENT FUND -- 49
LARGE COMPANY GROWTH PORTFOLIO
<PAGE>
Portfolio Summary
--------------------------------------------------------------------------------
June 30, 2000
Large Company Growth Portfolio
--------------------------------------------------------------------------------
Diversification
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A PIE CHART HERE
<TABLE>
<S> <C> <C> <C>
Equity Securities 91% Sector breakdown of the Despite the recent
Cash Equivalents 9% Portfolio's equity holdings volatility of the
------------------------------------ technology sector,
100% Technology 45% management continues to
------------------------------------ Health 15% find a wealth of
Consumer Discretionary 7% attractive long-term
Consumer Staples 7% opportunities
Media 7% in that area.
Manufacturing 6%
Communications 5%
Financial 3%
Service Industries 3%
Other 2%
-----------------------------------
100%
-----------------------------------
</TABLE>
--------------------------------------------------------------------------------
Ten Largest Equity Holdings
--------------------------------------------------------------------------------
(39% of Portfolio)
1. Intel Corp.
Producer of semiconductor memory circuits
2. Cisco Systems, Inc.
Manufacturer of computer network products
3. Pfizer, Inc.
International pharmaceutical company
4. General Electric Co.
Producer of electrical equipment
5. Microsoft Corp.
Developer of computer software
6. Sun Microsystems, Inc.
Manufacturer of high-performance workstations, servers and software
7. Medtronic, Inc.
Manufacturer of cardiac pacemakers
8. Applied Materials, Inc.
Producer of reactors used to manufacture thin film
9. Merck & Co., Inc.
Drug manufacturer
10. Colgate-Palmolive Co.
Manufacturer of household and personal care products
50 | SCUDDER VARIABLE LIFE INVESTMENT FUND --
LARGE COMPANY GROWTH PORTFOLIO
<PAGE>
Investment Portfolio as of June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
Large Company Growth Portfolio
<TABLE>
<CAPTION>
Principal
Amount ($) Value ($)
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements 8.9%
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
State Street Bank and Trust Company, 6.48%, to be repurchased at $1,000,540 on 7/3/2000** ---------
(Cost $1,000,000) ................................................................................... 1,000,000 1,000,000
---------
Shares
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
Common Stocks 91.1%
--------------------------------------------------------------------------------------------------------------------------------
Consumer Discretionary 6.4%
Department & Chain Stores 5.7%
Gap, Inc. .............................................................................................. 2,405 75,156
Home Depot, Inc. ....................................................................................... 3,115 155,555
Kohl's Corp.* .......................................................................................... 1,960 109,025
Target Corp. ........................................................................................... 1,400 81,200
Wal-Mart Stores, Inc. .................................................................................. 3,740 215,518
---------
636,454
---------
Specialty Retail 0.7%
Circuit City Stores, Inc. .............................................................................. 2,250 74,672
---------
Consumer Staples 6.3%
Food & Beverage 1.8%
PepsiCo, Inc. .......................................................................................... 4,490 199,524
---------
Package Goods/Cosmetics 4.5%
Colgate-Palmolive Co. .................................................................................. 3,600 215,550
Estee Lauder Companies Inc. "A" ........................................................................ 3,030 149,796
Gillette Co. ........................................................................................... 3,920 136,955
---------
502,301
---------
Health 14.0%
Biotechnology 2.2%
Genentech, Inc.* ....................................................................................... 930 159,960
MedImmune, Inc.* ....................................................................................... 1,180 87,320
---------
247,280
---------
Medical Supply & Specialty 2.5%
Medtronic, Inc. ........................................................................................ 5,610 279,448
---------
Pharmaceuticals 9.3%
Allergan, Inc. ......................................................................................... 1,430 106,535
Johnson & Johnson ...................................................................................... 1,020 103,912
Merck & Co., Inc. ...................................................................................... 2,860 219,148
Pfizer, Inc. ........................................................................................... 12,882 618,336
---------
1,047,931
---------
Communications 4.2%
Cellular Telephone 2.3%
American Tower Corp. "A"* .............................................................................. 1,500 62,531
Nokia Oyj (ADR) ........................................................................................ 2,180 108,864
Vodafone AirTouch plc (ADR) ............................................................................ 2,110 87,433
---------
258,828
---------
Telephone/Communications 1.9%
JDS Uniphase Corp.* .................................................................................... 1,770 212,179
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
SCUDDER VARIABLE LIFE INVESTMENT FUND -- | 51
LARGE COMPANY GROWTH PORTFOLIO
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
-------------------------------------------------------------------------------------------------
<S> <C> <C>
Financial 2.7%
Insurance 1.0%
American International Group, Inc. ...................................... 992 116,560
-------
Consumer Finance 0.8%
American Express Co. .................................................... 1,730 90,176
-------
Other Financial Companies 0.9%
Morgan Stanley Dean Witter & Co. ........................................ 1,210 100,733
-------
Media 6.2%
Advertising 0.9%
Omnicom Group, Inc. ..................................................... 1,080 96,188
-------
Broadcasting & Entertainment 4.2%
Clear Channel Communications, Inc.* ..................................... 1,900 142,500
Univision Communication, Inc.* .......................................... 1,010 104,535
Viacom, Inc. "B"* ....................................................... 1,860 126,829
Walt Disney Co. ......................................................... 2,660 103,241
-------
477,105
-------
Cable Television 1.1%
AT&T Corp. -- Liberty Media Group* ...................................... 5,080 123,190
-------
Service Industries 2.4%
EDP Services 0.7%
Electronic Data Systems Corp. ........................................... 1,940 80,025
-------
Investment 0.8%
Charles Schwab Corp. .................................................... 2,805 94,318
-------
Miscellaneous Commercial Services 0.9%
Siebel Systems, Inc.* ................................................... 610 99,773
-------
Durables 1.4%
Telecommunications Equipment
Lucent Technologies, Inc. ............................................... 2,580 152,865
-------
Manufacturing 5.7%
Diversified Manufacturing
General Electric Co. .................................................... 9,350 495,550
Textron, Inc. ........................................................... 2,710 147,187
-------
642,737
-------
Technology 40.5%
Computer Software 8.7%
America Online, Inc.* ................................................... 3,950 208,362
Computer Associates International, Inc. ................................. 1,590 81,388
i2 Technologies Inc.* ................................................... 610 63,602
Microsoft Corp.* ........................................................ 5,750 460,000
Oracle Corp.* ........................................................... 1,960 164,763
-------
978,115
-------
Diverse Electronic Products 6.6%
Aether Systems, Inc.* ................................................... 770 157,850
Applied Materials, Inc.* ................................................ 2,670 241,969
Dell Computer Corp.* .................................................... 1,870 92,214
General Motors Corp. "H" ................................................ 1,150 100,912
The accompanying notes are an integral part of the financial statements.
</TABLE>
52 | SCUDDER VARIABLE LIFE INVESTMENT FUND --
LARGE COMPANY GROWTH PORTFOLIO
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
--------------------------------------------------------------------------------------
<S> <C> <C>
Teradyne, Inc.* ......................................... 2,070 152,145
----------
745,090
----------
EDP Peripherals 2.8%
Ariba, Inc.* ............................................ 1,500 147,070
EMC Corp.* .............................................. 2,200 169,263
----------
316,333
----------
Electronic Components/Distributors 8.1%
Broadcom Corp.* ......................................... 490 107,279
Cisco Systems, Inc.* .................................... 11,160 709,357
Juniper Networks, Inc.* ................................. 610 88,793
----------
905,429
----------
Electronic Data Processing 4.6%
International Business Machines Corp. ................... 1,000 109,562
Sun Microsystems, Inc.* ................................. 4,470 406,491
----------
516,053
----------
Semiconductors 9.7%
Intel Corp. ............................................. 5,470 731,271
Linear Technology Corp. ................................. 2,830 180,943
Vitesse Semiconductor Corp.* ............................ 2,360 173,608
----------
1,085,822
----------
Energy 1.3%
Oilfield Services/Equipment
Schlumberger Ltd. ....................................... 1,870 139,549
----------
--------------------------------------------------------------------------------------
Total Common Stocks (Cost $9,522,682) 10,218,678
--------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $10,522,682) (a) 11,218,678
--------------------------------------------------------------------------------------
* Non-income producing security.
** Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities.
(a) At June 30, 2000, the net unrealized appreciation on investments based
on cost for federal income tax purposes of $10,560,253 was as follows:
Aggregate gross unrealized appreciation for all investments in
which there is an excess of value over tax cost ........... $1,121,631
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over value ......... 463,206
----------
Net unrealized appreciation ............................... $ 658,425
----------
</TABLE>
--------------------------------------------------------------------------------
Purchases and sales of investment securities (excluding short-term investments),
for the six months ended June 30, 2000, aggregated $8,190,541 and $3,373,756,
respectively.
The accompanying notes are an integral part of the financial statements.
SCUDDER VARIABLE LIFE INVESTMENT FUND -- 53
LARGE COMPANY GROWTH PORTFOLIO
<PAGE>
Financial Statements
--------------------------------------------------------------------------------
Large Company Growth Portfolio
--------------------------------------------------------------------------------
Statement of Assets and Liabilities as of June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
Assets
--------------------------------------------------------------------------------
Investments in securities, at value (cost $10,522,682) .. $ 11,218,678
Cash .................................................... 474,920
Receivable for investments sold ......................... 66,303
Dividends receivable .................................... 2,725
Interest receivable ..................................... 180
Receivable for Portfolio shares sold .................... 7,242
Other assets ............................................ 2,400
------------
Total assets ............................................ 11,772,448
Liabilities
--------------------------------------------------------------------------------
Accrued management fee .................................. 10,797
Accrued accounting fees ................................. 24,938
Other accrued expenses and payables ..................... 15,444
------------
Total liabilities ....................................... 51,179
--------------------------------------------------------------------------------
Net assets, at value $ 11,721,269
--------------------------------------------------------------------------------
Net Assets
--------------------------------------------------------------------------------
Net assets consist of:
Accumulated net investment loss ......................... (16,865)
Net unrealized appreciation (depreciation) on investments 695,996
Accumulated net realized gain (loss) .................... 302,732
Paid-in capital ......................................... 10,739,406
--------------------------------------------------------------------------------
Net assets, at value $ 11,721,269
--------------------------------------------------------------------------------
Class A
Net Asset Value, offering and redemption price per share
($11,720,414 / 1,386,078 outstanding shares of
beneficial interest, no par value, unlimited number -------------
of shares authorized) .............................. $ 8.46
------------
Class B
NetAsset Value, offering and redemption price per share
($855 / 102 outstanding shares of beneficial interest,
no par value, unlimited number of shares -------------
authorized) ........................................ $ 8.38
------------
The accompanying notes are an integral part of the financial statements.
54 | SCUDDER VARIABLE LIFE INVESTMENT FUND --
LARGE COMPANY GROWTH PORTFOLIO
<PAGE>
--------------------------------------------------------------------------------
Statement of Operations for the six months ended June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investment Income
--------------------------------------------------------------------------------
Income:
<S> <C> <C>
Dividends (net of foreign taxes withheld of $20) .......................... $ 14,899
Interest .................................................................. 20,967
---------
Total Income .............................................................. 35,866
---------
Expenses:
Management fee ............................................................ 27,392
Custodian fees ............................................................ 2,403
Accounting fees ........................................................... 24,938
Auditing .................................................................. 10,831
Legal ..................................................................... 318
Trustees' fees and expenses ............................................... 13,555
Registration fees ......................................................... 3,350
Other ..................................................................... 5,530
---------
Total expenses, before expense reductions ................................. 88,317
Expense reductions ........................................................ (33,235)
Total expenses, after expense reductions .................................. 55,082
----------------------------------------------------------------------------------------
Net investment income (loss) (19,216)
----------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
----------------------------------------------------------------------------------------
Net realized gain (loss) from investments ................................. 385,530
---------
Net unrealized appreciation (depreciation) during the period on investments (408,603)
----------------------------------------------------------------------------------------
Net gain (loss) on investment transactions (23,073)
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ (42,289)
----------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
SCUDDER VARIABLE LIFE INVESTMENT FUND -- | 55
LARGE COMPANY GROWTH PORTFOLIO
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets
------------------------------------------------------------------------------------------------------------------------------
For the Period
Six Months May 3, 1999
Ended June 30, (commencement of
2000 operations) to
Increase (Decrease) in Net Assets (Unaudited) December 31, 1999
------------------------------------------------------------------------------------------------------------------------------
Operations:
<S> <C> <C>
Net investment income (loss) .......................................................... $ (19,216) $ 2,351
Net realized gain (loss) on investment transactions ................................... 385,530 72,405
Net unrealized appreciation (depreciation) on investment transactions during the period (408,603) 1,104,599
------------ ------------
Net increase (decrease) in net assets resulting from operations ....................... (42,289) 1,179,355
------------ ------------
Distribution to shareholders from:
Net realized gains:
Class A ............................................................................... (155,190) --
------------ ------------
Class B ............................................................................... (13) --
------------ ------------
Portfolio share transactions:
Class A
Proceeds from shares sold ............................................................. 17,514,403 9,134,300
Reinvestment of distributions ......................................................... 155,190 --
Cost of shares redeemed ............................................................... (11,776,112) (5,288,392)
------------ ------------
Net increase (decrease) in net assets from Class A share transactions ................. 5,893,481 3,845,908
------------ ------------
Class B
Proceeds from shares sold ............................................................. 4 --
Reinvestment of distributions ......................................................... 13 --
------------ ------------
Net increase (decrease) in net assets from Class B share transactions ................. 17 --
------------ ------------
Increase (decrease) in net assets ..................................................... 5,696,006 5,025,263
Net assets at beginning of period ..................................................... 6,025,263 1,000,000
Net assets at end of period (including accumulated net investment loss of $16,865 and ------------ ------------
undistributed net investment income of $2,351, respectively) ....................... $ 11,721,269 $ 6,025,263
------------ ------------
Other Information
------------------------------------------------------------------------------------------------------------------------------
Class A
Shares outstanding at beginning of period ............................................. 737,872 166,567
------------ ------------
Shares sold ........................................................................... 2,120,509 1,387,332
Shares issued to shareholders in reinvestment of distributions ........................ 18,699 --
Shares redeemed ....................................................................... (1,491,002) (816,027)
------------ ------------
Net increase (decrease) in Portfolio shares ........................................... 648,206 571,305
------------ ------------
Shares outstanding at end of period ................................................... 1,386,078 737,872
------------ ------------
Class B
Shares outstanding at beginning of period ............................................. 100 100
------------ ------------
Shares sold ........................................................................... 2 --
------------ ------------
Net increase (decrease) in Portfolio shares ........................................... 2 --
------------ ------------
Shares outstanding at end of period ................................................... 102 100
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
56 | SCUDDER VARIABLE LIFE INVESTMENT FUND --
LARGE COMPANY GROWTH PORTFOLIO
<PAGE>
Financial Highlights
--------------------------------------------------------------------------------
Large Company Growth Portfolio
The following table includes selected data for a share outstanding throughout
each period (a) and other performance information derived from the financial
statements.
Class A
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
2000(e) 1999(b)
------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 8.16 $6.00(d)
------------------
------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
------------------------------------------------------------------------------------------------
Net investment income (loss) (.02) .00
------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment transactions .45 2.16
------------------
------------------------------------------------------------------------------------------------
Total from investment operations .43 2.16
------------------------------------------------------------------------------------------------
Less distributions from:
------------------------------------------------------------------------------------------------
Net realized gains on investment transactions (.13) --
------------------
------------------------------------------------------------------------------------------------
Net asset value, end of period $ 8.46 $ 8.16
------------------------------------------------------------------------------------------------
Total Return (%) (c) 5.24** 36.00**
------------------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 12 6
------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 2.01* 3.47*
------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 1.25* 1.25*
------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.44)* .09*
------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 80* 119*
------------------------------------------------------------------------------------------------
Class B
------------------------------------------------------------------------------------------------
2000(e) 1999(b)
------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.13 $6.00(d)
------------------
------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
------------------------------------------------------------------------------------------------
Net investment income (loss) (.05) .00
------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment transactions .43 2.13
------------------
------------------------------------------------------------------------------------------------
Total from investment operations .38 2.13
------------------------------------------------------------------------------------------------
Less distributions from:
------------------------------------------------------------------------------------------------
Net realized gains on investment transactions (.13) --
------------------
------------------------------------------------------------------------------------------------
Net asset value, end of period $ 8.38 $ 8.13
------------------------------------------------------------------------------------------------
Total Return (%) (c) 4.64** 35.50**
------------------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) -- --
------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 2.26* 3.72*
------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 1.50* 1.50*
------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.69)* (.16)*
------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 80* 119*
------------------------------------------------------------------------------------------------
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) For the period May 3, 1999 (commencement of operations) to December 31,
1999.
(c) Total return would have been lower had certain expenses not been
reduced.
(d) Original capital.
(e) For the six months ended June 30, 2000 (Unaudited).
* Annualized
** Not annualized
SCUDDER VARIABLE LIFE INVESTMENT FUND -- | 57
LARGE COMPANY GROWTH PORTFOLIO
<PAGE>
Portfolio Management Discussion
--------------------------------------------------------------------------------
June 30, 2000
21st Century Growth Portfolio
Dear Shareholders,
The past six months have proven to be a challenging period for investors. This
was particularly true in the second quarter, when there was almost nowhere to
hide. Large company, small company, growth, or value -- almost all stocks in
U.S. markets struggled. The persistence of the Federal Reserve Board has begun
to pay off as retail sales, housing starts, and job creation began to cool and
caused investors to pause. While we believe strength in technology and capital
equipment will help moderate any slowdown, even in these sectors, the
sustainability of what had been stratospheric growth came into question.
The portfolio outperformed its benchmark, as Class A shares returned 2.93%,
compared to a 1.23% return for the unmanaged Russell 2000 Growth Index.
While some of the portfolio's larger positions corrected sharply in price, many
others did quite well. Mercury Computer, a developer of high performance,
real-time digital signal processing systems, declined sharply in the second
quarter, as did Asyst Technologies, the leader in isolation systems for material
tracking and automation in semiconductor manufacturing. Pacific Sunwear, a
mall-based retailer selling casual clothes to teenagers, also fell, as its
comparable-store sales were below expectations.
At the same time, Swift Energy, a U.S. onshore natural gas producer, and Mercury
Interactive, a developer of testing tools for Web-based systems and critical
business applications, contributed to performance. Polycom, a builder of video
and voice conferencing products, also advanced. Each of these companies has a
leadership position in its respective market and has shown an ability to meet or
exceed expectations.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
--------------------------------------------------------------------------------
Rather than trying to invest in a portfolio of more defensive holdings, we
prefer to find pockets of strength.
--------------------------------------------------------------------------------
Going forward, we believe that the possibility of one or more increases in
interest rates, slower growth and weaker earnings combined with market valuation
levels that are still high has heightened the risk for equities in general. Yet,
within this framework, we expect to see pockets of strength. For example, the
semiconductor and natural gas industries are facing a substantial need to expand
capacity. Both industries require massive capital and considerable time to
expand. In addition, innovation in biotechnology and technology is not closely
linked to cycles in the economy.
Thus, rather than trying to invest in a portfolio of more defensive holdings, we
prefer to find pockets of strength. In times like this, we believe we can add
value by owning stocks of quality companies that meet or exceed expectations,
that grow when everything else is slowing, and that control their own destiny
through innovation.
Sincerely,
Your Portfolio Management Team
/s/Peter Chin /s/Roy C. McKay
Peter Chin Roy C. McKay
Lead Portfolio Manager Portfolio Manager
Scudder Variable Life Investment Fund | 58
21st Century Growth Portfolio
<PAGE>
Performance Update
--------------------------------------------------------------------------------
June 30, 2000
21st Century Growth Portfolio
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
The Russell 2000 Growth Index is an unmanaged capitalization-weighted measure of
the 2000 smallest capitalized U.S. companies with a greater-than-average growth
orientation and whose common stocks trade on the NYSE, AMEX, and Nasdaq. Index
returns assume reinvestment of dividends and, unlike Portfolio returns, do not
reflect any fees or expenses.
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
21st Century Growth Russell 2000
Portfolio -- Class A Growth Index
5/99* 10000 10000
6/99 11074 10527
9/99 12083 10010
12/99 17521 13352
3/00 19967 14592
6/00 18034 13516
<TABLE>
<CAPTION>
21st Century Growth Portfolio -- Class A Russell 2000 Growth Index
--------------------------------------------------------------- --------------------------------------------------------
Total Return Total Return
----------------------------- -----------------------------
Period Ended Growth of Cumulative Average Period Ended Growth of Cumulative Average
6/30/2000 $10,000 Annual 6/30/2000 $10,000 Annual
--------------------------------------------------------------- --------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 16,285 62.85% 62.85% 1 Year $ 12,839 28.39% 28.39%
--------------------------------------------------------------- --------------------------------------------------------
Life of Portfolio* $ 18,185 81.85% 67.33% Life of
Portfolio* $ 13,516 35.16% 32.01%
--------------------------------------------------------------- --------------------------------------------------------
</TABLE>
* The Portfolio commenced operations on May 3, 1999. Index comparisons begin
May 31, 1999.
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
The Russell 2000 Growth Index is an unmanaged capitalization-weighted measure of
the 2000 smallest capitalized U.S. companies with a greater-than-average growth
orientation and whose common stocks trade on the NYSE, AMEX, and Nasdaq. Index
returns assume reinvestment of dividends and, unlike Portfolio returns, do not
reflect any fees or expenses.
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
21st Century Growth Russell 2000
Portfolio -- Class B Growth Index
5/99* 10000 10000
6/99 11058 10527
9/99 12033 10010
12/99 17438 13352
3/00 19851 14592
6/00 17902 13516
<TABLE>
<CAPTION>
21st Century Growth Portfolio -- Class B Russell 2000 Growth Index
--------------------------------------------------------------- --------------------------------------------------------
Total Return Total Return
----------------------------- -----------------------------
Period Ended Growth of Cumulative Average Period Ended Growth of Cumulative Average
6/30/2000 $10,000 Annual 6/30/2000 $10,000 Annual
--------------------------------------------------------------- --------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 16,189 61.89% 61.89% 1 Year $ 12,839 28.39% 28.39%
--------------------------------------------------------------- --------------------------------------------------------
Life of Portfolio* $ 18,051 80.51% 66.27% Life of
Portfolio* $ 13,516 35.16% 32.01%
--------------------------------------------------------------- --------------------------------------------------------
</TABLE>
* The Portfolio commenced operations on May 3, 1999. Index comparisons begin
May 31, 1999.
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results. Investment return
and principal value will fluctuate, so an investor's shares, when redeemed,
may be worth more or less than when purchased. Total returns would have
been lower if the Portfolio's expenses were not maintained.
Scudder Variable Life Investment Fund | 59
21st Century Growth Portfolio
<PAGE>
Portfolio Summary
--------------------------------------------------------------------------------
June 30, 2000
21st Century Growth Portfolio
--------------------------------------------------------------------------------
Diversification
--------------------------------------------------------------------------------
We believe strength in technology and capital equipment will help moderate the
effects of any economic slowdown.
A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA POINTS IN THE TABLE BELOW.
Sector breakdown of the
Portfolio's equity holdings
Equity Securities 98% Technology 37%
Cash Equivalents 2% Manufacturing 13%
--------------------------------------- Health 9%
100% Energy 9%
--------------------------------------- Service Industries 7%
Durables 7%
Communications 5%
Consumer Discretionary 4%
Construction 3%
Other 6%
-----------------------------------
100%
-----------------------------------
--------------------------------------------------------------------------------
Ten Largest Equity Holdings
--------------------------------------------------------------------------------
(26% of Portfolio)
1. Power-One, Inc.
Manufacturer of power supplies for electronic equipment manufacturers
2. Silicon Storage Technology, Inc.
Designer of memory chips
3. ISS Group, Inc.
Provider of network security monitoring, detection and response software
4. Mercator Software, Inc.
Provider of e-business software
5. Pinnacle Systems, Inc.
Manufacturer of video post-production workstations
6. Mercury Interactive Corp.
Producer of automated software testing tools
7. Trex Company, Inc.
Manufacturer of non-wood decking alternative products
8. Polycom, Inc.
Manufacturer of audio and data conferencing products
9. Advent Software, Inc.
Provider of stand-alone and client/server software products
10. Antec Corp.
Developer and supplier of optical transmission equipment for cable TV
Scudder Variable Life Investment Fund | 60
21st Century Growth Portfolio
<PAGE>
Investment Portfolio as of June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
21st Century Growth Portfolio
Principal
Amount ($) Value ($)
--------------------------------------------------------------------------------
Repurchase Agreements 2.2%
--------------------------------------------------------------------------------
State Street Bank and Trust Company, 6.48%,
to be repurchased at $500,270 on 7/3/200** -----------------
(Cost $500,000) ............................ 500,000 500,000
-----------------
Shares
--------------------------------------------------------------------------------
Common Stocks 97.8%
--------------------------------------------------------------------------------
Consumer Discretionary 4.2%
Department & Chain Stores 1.4%
Pacific Sunwear of California, Inc.* .......... 4,600 86,250
Rent-A-Center, Inc.* .......................... 10,000 225,000
-----------------
311,250
-----------------
Restaurants 0.5%
The Cheesecake Factory Inc.* .................. 4,500 123,750
-----------------
Specialty Retail 2.3%
Cost Plus, Inc.* .............................. 8,400 240,975
David's Bridal, Inc.* ......................... 3,700 42,781
Gildan Activewear, Inc.* ...................... 6,800 249,900
-----------------
533,656
-----------------
Consumer Staples 3.0%
Consumer Specialties 1.0%
Duane Reade Inc.* ............................. 8,700 224,025
-----------------
Food & Beverage 0.6%
Wild Oats Markets Inc.* ....................... 11,100 139,444
-----------------
Miscellaneous 1.4%
Hain Celestial Group Inc.* .................... 9,185 336,975
-----------------
Health 9.2%
Biotechnology 4.8%
Alexion Pharmaceuticals, Inc.* ................ 4,200 300,300
CryoLife, Inc.* ............................... 11,500 264,500
Gene Logic, Inc.* ............................. 6,100 217,694
QLT Inc.* ..................................... 4,100 318,430
-----------------
1,100,924
-----------------
Health Industry Services 0.3%
MedQuist, Inc.* ............................... 2,013 68,442
-----------------
Medical Supply & Specialty 2.3%
Aclara Biosciences Inc.* ...................... 2,600 132,438
Cytyc Corp.* .................................. 5,300 282,888
Fusion Medical Technologies, Inc.* ............ 7,400 117,938
-----------------
533,264
-----------------
Pharmaceuticals 1.8%
Biovail Corp.* ................................ 4,800 266,100
Charles River Laboratories International, Inc.* 5,800 128,688
QLT PhotoTherapeutics, Inc.* .................. 300 23,194
-----------------
417,982
-----------------
The accompanying notes are an integral part of the financial statements.
Scudder Variable Life Investment Fund | 61
21st Century Growth Portfolio
<PAGE>
Shares Value ($)
--------------------------------------------------------------------------------
Communications 4.4%
Cellular Telephone 0.9%
Research in Motion Ltd.* ............. 4,700 211,717
---------
Telephone/Communications 2.7%
Lightbridge, Inc.* ................... 12,300 293,663
Proxim, Inc.* ........................ 700 69,278
SBA Communications Corp.* ............ 5,000 259,688
---------
622,629
---------
Miscellaneous 0.8%
Exfo Electro-Optical Engineering Inc.* 600 24,000
Netopia, Inc.* ....................... 4,100 165,025
---------
189,025
---------
Financial 1.1%
Banks
Hudson United Bancorp ................ 11,100 249,056
---------
Media 1.7%
Broadcasting & Entertainment 0.7%
Cumulus Media, Inc. "A"* ............. 19,000 173,375
---------
Cable Television 1.0%
Insight Communications Co., Inc.* .... 14,800 231,250
---------
Service Industries 6.9%
EDP Services 2.2%
Micromuse, Inc.* ..................... 2,500 413,711
Ultimate Software Group, Inc.* ....... 10,000 91,250
---------
504,961
---------
Investment 0.6%
Multex.com Inc.* ..................... 5,500 138,531
---------
Miscellaneous Commercial Services 3.9%
AnswerThink, Inc.* ................... 8,000 133,000
Copart, Inc.* ........................ 16,400 262,400
Cornell Corrections, Inc.* ........... 6,100 48,800
Korn/Ferry International* ............ 7,400 234,488
Newgen Results Corp.* ................ 5,000 82,500
Vicinity Corp.* ...................... 7,000 137,375
---------
898,563
---------
Miscellaneous Consumer Services 0.2%
Steiner Leisure Ltd.* ................ 2,800 63,350
---------
Durables 6.5%
Aerospace 0.3%
REMEC, Inc.* ......................... 1,700 71,188
---------
Telecommunications Equipment 6.2%
Antec Corp.* ......................... 11,000 457,188
Com21, Inc.* ......................... 7,500 187,500
Polycom, Inc.* ....................... 5,200 489,288
Spectrasite Holdings, Inc.* .......... 10,400 295,100
---------
1,429,076
---------
The accompanying notes are an integral part of the financial statements.
Scudder Variable Life Investment Fund | 62
21st Century Growth Portfolio
<PAGE>
Shares Value ($)
--------------------------------------------------------------------------------
Manufacturing 12.4%
Chemicals 2.8%
Albany Molecular Research, Inc.* .. 4,700 255,856
Cabot Microelectronics Corp.* ..... 8,300 379,725
---------
635,581
---------
Electrical Products 5.3%
ATMI, Inc.* ....................... 6,000 279,000
Power-One, Inc.* .................. 8,300 945,675
---------
1,224,675
---------
Industrial Specialty 0.9%
American Superconductor Corp.* .... 4,100 197,825
---------
Machinery/Components/Controls 2.7%
Asyst Technologies, Inc.* ......... 1,800 61,650
Brooks Automation Inc.* ........... 4,300 274,931
RadiSys Corp.* .................... 5,300 300,775
---------
637,356
---------
Miscellaneous 0.7%
Jakks Pacific, Inc.* .............. 11,100 163,725
---------
Technology 36.1%
Computer Software 17.0%
Advent Software, Inc.* ............ 7,100 457,950
BSQUARE Corp.* .................... 12,300 275,981
Braun Consulting, Inc.* ........... 8,300 175,338
Cobalt Networks, Inc.* ............ 6,400 370,400
Digital Courier Technologies, Inc.* 23,900 152,363
FirstWorld Communications Inc. "B"* 5,100 53,550
ISS Group, Inc.* .................. 6,500 641,773
ITXC Corp.* ....................... 700 24,784
Information Architects Corp.* ..... 12,300 85,331
Internet Pictures Corp.* .......... 1 20
Mercator Software Inc.* ........... 9,200 632,500
Numerical Technologies, Inc.* ..... 1,000 48,625
Precise Software Solutions* ....... 2,500 60,000
Quintus Corp.* .................... 10,800 214,481
RSA Security, Inc.* ............... 1,400 96,950
Viador, Inc.* ..................... 13,600 215,900
VocalTec, Ltd.* ................... 6,300 144,900
Watchgaurd Technologies, Inc.* .... 5,300 291,169
---------
3,942,015
---------
EDP Peripherals 2.4%
Mercury Interactive Corp.* ........ 5,800 561,150
---------
Office/Plant Automation 4.1%
Mercury Computer Systems, Inc.* ... 5,200 168,025
National Computer Corp.* .......... 4,300 211,775
Pinnacle Systems, Inc.* ........... 25,000 562,109
---------
941,909
---------
Precision Instruments 1.1%
Molecular Devices Corp.* .......... 3,700 255,994
---------
Semiconductors 9.5%
Alpha Industries, Inc.* ........... 6,900 304,031
Burr-Brown Corp.* ................. 4,000 346,750
The accompanying notes are an integral part of the financial statements.
Scudder Variable Life Investment Fund | 63
21st Century Growth Portfolio
<PAGE>
Shares Value ($)
--------------------------------------------------------------------------------
Pixelworks, Inc.* .................... 900 20,475
Silicon Image, Inc.* ................. 4,100 204,488
Silicon Storage Technology, Inc.* .... 7,800 688,838
SpeedFam-IPEC, Inc.* ................. 10,100 183,694
Therma-Wave, Inc.* ................... 5,300 118,256
Transwitch Corp.* .................... 4,150 320,328
---------
2,186,860
---------
Miscellaneous 2.0%
National Information Consortium, Inc.* 24,100 274,138
SonoSite, Inc.* ...................... 6,500 187,281
---------
461,419
---------
Energy 9.0%
Oil & Gas Production 3.8%
3TEC Energy Corporation* ............. 7,200 72,000
Barrett Resources Corp.* ............. 5,800 176,538
Key Production Co., Inc.* ............ 13,300 232,750
Swift Energy Co.* .................... 14,100 400,088
---------
881,376
---------
Oil Companies 1.6%
Stone Energy Corp.* .................. 6,000 358,500
---------
Oilfield Services/Equipment 3.6%
National-Oilwell, Inc.* .............. 8,400 276,150
Precision Drilling Corp. "A"* ........ 6,300 243,338
Universal Compression Holdings, Inc.* 9,500 318,250
---------
837,738
---------
Construction 3.3%
Building Materials 0.4%
Simpson Manufacturing Co., Inc.* ..... 1,900 90,844
---------
Building Products 2.9%
CoStar Group, Inc.* .................. 6,700 167,919
Trex Company, Inc.* .................. 10,000 500,000
---------
667,919
---------
--------------------------------------------------------------------------------
Total Common Stocks (Cost $19,722,150) 22,617,319
--------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0%
(Cost $20,222,150) (a) 23,117,319
--------------------------------------------------------------------------------
* Non-income producing security.
** Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities.
(a) At June 30, 2000, the net unrealized appreciation on investments based on
cost for federal income tax purposes of $20,222,150 was as follows:
Aggregate gross unrealized appreciation for all investments
in which there is an excess of value over tax cost .......... $5,350,896
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over value ........... 2,455,727
----------
Net unrealized appreciation .................................... $2,895,169
----------
--------------------------------------------------------------------------------
Purchases and sales of investment securities (excluding short-term
investments), for the six months ended June 30, 2000, aggregated
$20,392,085 and $12,046,581, respectively.
The accompanying notes are an integral part of the financial statements.
Scudder Variable Life Investment Fund | 64
21st Century Growth Portfolio
<PAGE>
Financial Statements
21st Century Growth Portfolio
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities as of June 30, 2000 (Unaudited)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Assets
-----------------------------------------------------------------------------------------------------------------------------
Investments in securities, at value (cost $20,222,150) ................................................ $ 23,117,319
Cash .................................................................................................. 1,805,562
Receivable for investments sold ....................................................................... 215,929
Interest receivable ................................................................................... 90
------------
Total assets .......................................................................................... 25,138,900
Liabilities
-----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased ..................................................................... 101,180
Payable for Portfolio shares redeemed ................................................................. 74,322
Accrued management fee ................................................................................ 72,603
Accrued accounting fees ............................................................................... 48,360
Other accrued expenses and payables ................................................................... 16,988
------------
Total liabilities ..................................................................................... 313,453
-----------------------------------------------------------------------------------------------------------------------------
Net assets, at value $ 24,825,447
-----------------------------------------------------------------------------------------------------------------------------
Net Assets
-----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Accumulated net investment loss ....................................................................... (128,882)
Net unrealized appreciation (depreciation) on investments ............................................. 2,895,169
Accumulated net realized gain (loss) .................................................................. 1,081,041
Paid-in capital ....................................................................................... 20,978,119
-----------------------------------------------------------------------------------------------------------------------------
Net assets, at value $ 24,825,447
-----------------------------------------------------------------------------------------------------------------------------
Class A
Net Asset Value, offering and redemption price per share ($24,824,367 / 2,304,232 outstanding shares of ------------
beneficial interest, no par value, unlimited number of shares authorized) $ 10.77
------------
Class B
Net Asset Value, offering and redemption price per share ($1,080 / 101
outstanding shares of beneficial interest, no par value, unlimited number of ------------
shares authorized) $ 10.69
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Scudder Variable Life Investment Fund | 65
21st Century Growth Portfolio
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Statement of Operations for the six months ended June 30, 2000 (Unaudited)
-----------------------------------------------------------------------------------------
Investment Income
-----------------------------------------------------------------------------------------
<S> <C>
Income:
Dividends ................................................................. $ 4,490
Interest .................................................................. 16,642
-----------
Total Income .............................................................. 21,132
-----------
Expenses:
Management fee ............................................................ 87,514
Custodian fees ............................................................ 10,599
Accounting fees ........................................................... 26,318
Auditing .................................................................. 10,744
Legal ..................................................................... 2,548
Trustees' fees and expenses ............................................... 13,650
Reports to shareholders ................................................... 730
Other ..................................................................... 4,979
-----------
Total expenses, before expense reductions ................................. 157,082
Expense reductions ........................................................ (7,068)
-----------
Total expenses, after expense reductions .................................. 150,014
-----------------------------------------------------------------------------------------
Net investment income (loss) (128,882)
-----------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
-----------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ............................................................... 1,097,255
Foreign currency related transactions ..................................... (230)
-----------
1,097,025
-----------
Net unrealized appreciation (depreciation) during the period on investments (1,540,230)
-----------------------------------------------------------------------------------------
Net gain (loss) on investment transactions (443,205)
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ (572,087)
-----------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Scudder Variable Life Investment Fund | 66
21st Century Growth Portfolio
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets
-----------------------------------------------------------------------------------------------------------------------------
For the Period
Six Months Ended May 3, 1999
(Unaudited) (commencement of
June 30, 2000 operations) to
Increase (Decrease) in Net Assets (Unaudited) December 31, 1999
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) .......................................................... $ (128,882) $ (38,859)
Net realized gain (loss) on investment transactions ................................... 1,097,025 245,202
Net unrealized appreciation (depreciation) on investment transactions during the period (1,540,230) 4,435,399
------------ ------------
Net increase (decrease) in net assets resulting from operations ....................... (572,087) 4,641,742
------------ ------------
Distributions to shareholders from:
Net realized gains:
Class A ............................................................................... (222,315) --
------------ ------------
Class B ............................................................................... (12) --
------------ ------------
Portfolio share transactions:
Class A
Proceeds from shares sold ............................................................. 22,818,400 12,105,114
Reinvestment of distributions ......................................................... 222,315 --
Cost of shares redeemed ............................................................... (12,858,402) (3,309,320)
------------ ------------
Net increase (decrease) in net assets from Class A share transactions ................. 10,182,313 8,795,794
------------ ------------
Class B
Reinvestment of distributions ......................................................... 12 --
------------ ------------
Net increase (decrease) in net assets from Class B share transactions ................. 12 --
------------ ------------
Increase (decrease) in net assets ..................................................... 9,387,911 13,437,536
Net assets at beginning of period (original capital) .................................. 15,437,536 2,000,000
Net assets at end of period (including accumulated net investment loss of $128,882 at ------------ ------------
June 30, 2000) ..................................................................... $ 24,825,447 $ 15,437,536
------------ ------------
Other Information
-----------------------------------------------------------------------------------------------------------------------------
Class A
Shares outstanding at beginning of period ............................................. 1,462,745 333,233
------------ ------------
Shares sold ........................................................................... 1,973,997 1,569,398
Shares issued to shareholders in reinvestment of distributions ........................ 24,217 --
Shares redeemed ....................................................................... (1,156,727) (439,886)
------------ ------------
Net increase (decrease) in Portfolio shares ........................................... 841,487 1,129,512
------------ ------------
Shares outstanding at end of period ................................................... 2,304,232 1,462,745
------------ ------------
Class B
Shares outstanding at beginning of period ............................................. 100 100
Shares issued to shareholders in reinvestment of distributions ........................ 1 --
------------ ------------
Net increase (decrease) in Portfolio shares ........................................... 1 --
------------ ------------
Shares outstanding at end of period ................................................... 101 100
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Scudder Variable Life Investment Fund | 67
21st Century Growth Portfolio
<PAGE>
Financial Highlights
--------------------------------------------------------------------------------
21st Century Growth Portfolio
The following table includes selected data for a share outstanding throughout
each period (a) and other performance information derived from the financial
statements.
Class A
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
2000(e) 1999(b)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $10.55 $6.00(d)
------------------
-----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
-----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.07) (.04)
-----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment transactions .41 4.59
------------------
-----------------------------------------------------------------------------------------------------------------------------
Total from investment operations .34 4.55
-----------------------------------------------------------------------------------------------------------------------------
Less distributions from:
-----------------------------------------------------------------------------------------------------------------------------
Net realized gains on investment transactions (.12) --
------------------
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.77 $10.55
-----------------------------------------------------------------------------------------------------------------------------
Total Return (%) (c) 2.93** 75.83**
-----------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
-----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 25 15
-----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 1.57* 2.90*
-----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 1.50* 1.50*
-----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (1.29)* (.95)*
-----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 128* 61
-----------------------------------------------------------------------------------------------------------------------------
Class B
-----------------------------------------------------------------------------------------------------------------------------
2000(e) 1999(b)
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.51 $6.00(d)
------------------
-----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
-----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.11) (.06)
-----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment transactions .41 4.57
------------------
-----------------------------------------------------------------------------------------------------------------------------
Total from investment operations .30 4.51
-----------------------------------------------------------------------------------------------------------------------------
Less distributions from:
-----------------------------------------------------------------------------------------------------------------------------
Net realized gains on investment transactions (.12) --
------------------
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.69 $10.51
-----------------------------------------------------------------------------------------------------------------------------
Total Return (%) (c) 2.66** 75.17**
-----------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
-----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) -- --
-----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 1.82* 3.15*
-----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 1.75* 1.75*
-----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (1.54)* (1.20)*
-----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 128* 61
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) For the period May 3, 1999 (commencement of operations) to December 31,
1999.
(c) Total return would have been lower had certain expenses not been reduced.
(d) Original capital.
(e) For the six months ended June 30, 2000 (Unaudited).
* Annualized
** Not annualized
Scudder Variable Life Investment Fund | 68
21st Century Growth Portfolio
<PAGE>
Portfolio Management Discussion
--------------------------------------------------------------------------------
June 30, 2000
Global Discovery Portfolio
Dear Shareholders,
After posting a strong performance in the first three months of the year on the
strength of the outstanding returns of its holdings in the technology sector,
the Global Discovery Portfolio retraced most of its gains in the second quarter
as the shockwaves emanating from the Nasdaq decline extended to smaller
tech-related stocks both here and abroad. Over the six months ended June 30,
2000, Class A shares returned 2.93%, versus 4.62% for its unmanaged benchmark,
the Salomon Brothers World Equity Extended Market Index. Although the
portfolio's focus on growth stocks caused it to underperform its benchmark
during the six-month period, Lipper Analytical Services ranks it in the top
third of 55 funds within its peer group over the one-year period, and ninth out
of 40 over the three-year period.^1
Over the first half of the year, we sought to diversify the portfolio through
changes to our holdings in the technology and health care sectors. As a result,
turnover has been higher than normal and the sector composition of the portfolio
has changed in a fairly dramatic fashion. The health care position, which was 7%
of the portfolio at the beginning of the year, is now up to 20%. Conversely,
technology now represents 21% of the portfolio, down from 29% at the start of
2000. Major sales in the tech sector include two very successful companies
specializing in Internet security: Check Point Software Technologies, an Israeli
leader in corporate firewalls, and Baltimore Technologies, an emerging U.K.
company that focuses on Private Key Infrastructure (PKI) and Virtual Private
Networks (VPN). Profits from both exceeded four times our original cost. More
than half of the cash flows from money made available from security sales went
into the health care sector. The other significant area of increase was energy
stocks. Within that sector, we are positioning the portfolio to take advantage
of gas shortages in North America, which should prompt improved pricing and
increases in drilling and related services.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
--------------------------------------------------------------------------------
Management increased the portfolio's position in technology stocks, while
trimming its weighting in health care.
--------------------------------------------------------------------------------
We are investing on the basis that the U.S. economy will slow, Europe will grow
more quickly, and Japan's economy will begin to turn around. This overview only
serves as a backdrop, however. We are far more influenced by what we perceive to
be the long-term secular changes resulting from the revolution in communications
(e.g., wireless), the acceleration of discoveries in the health care field, and
the continued prosperity of companies that have found or created special niches.
While valuations are still high for many companies, the positive side of the
valuation picture is that "dot com madness" is no longer infecting the
investment landscape. The current environment is much more favorable to our
style than it was a few months ago, and we intend to take advantage of it by
building up positions in those companies where we have the highest level of
confidence.
Sincerely,
Your Portfolio Management Team
/s/Gerald J. Moran /s/Steven T. Stokes
Gerald J. Moran Steven T. Stokes
Lead Portfolio Manager Portfolio Manager
^1 Source: Lipper Analytical Services, Inc., an independent analyst of
investment performance. Performance includes reinvestment of dividends and
capital gains. For the period ended June 30, 2000, Scudder Variable Life
Investment Fund: Global Discovery Portfolio's Lipper ranking was 13 out of
55 funds for the one-year period, and 9 out of 40 funds for the three-year
period. Past performance is no guarantee of future results.
Scudder Variable Life Investment Fund | 69
Global Discovery Portfolio
<PAGE>
Performance Update
--------------------------------------------------------------------------------
June 30, 2000
Global Discovery Portfolio
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
The Salomon Brothers World Equity Extended Market Index is an unmanaged small
capitalization stock universe of 22 countries. Index returns assume reinvestment
of dividends and, unlike Portfolio returns, do not reflect any fees or expenses.
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
Global Discovery Salomon Brothers World
Portfolio -- Class A Equity EMI Index
5/96* 10000 10000
6/96 9967 9871
12/96 10343 10120
6/97 11378 10927
12/97 11624 10969
6/98 13569 12110
12/98 13536 11620
6/99 14992 12564
12/99 22453 14216
6/00 23112 14873
<TABLE>
<CAPTION>
Global Discovery Portfolio -- Class A Salomon Brothers World Equity EMI Index
--------------------------------------------------------------- --------------------------------------------------------
Total Return Total Return
----------------------------- -----------------------------
Period Ended Growth of Cumulative Average Period Ended Growth of Cumulative Average
6/30/2000 $10,000 Annual 6/30/2000 $10,000 Annual
--------------------------------------------------------------- --------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 15,417 54.17% 54.17% 1 Year $ 11,837 18.37% 18.37%
--------------------------------------------------------------- --------------------------------------------------------
Life of Portfolio* $ 23,575 135.75% 22.85% Life of
Portfolio* $ 14,873 48.73% 10.20%
--------------------------------------------------------------- --------------------------------------------------------
</TABLE>
* The Portfolio commenced operations on May 1, 1996. On May 2, 1997, existing
shares were redesignated as Class A shares. Index comparisons begin May 31,
1996.
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
The Salomon Brothers World Equity Extended Market Index is an unmanaged small
capitalization stock universe of 22 countries. Index returns assume reinvestment
of dividends and, unlike Portfolio returns, do not reflect any fees or expenses.
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
Global Discovery Salomon Brothers World
Portfolio -- Class B Equity EMI Index
5/96* 10000 10000
6/96 10452 10330
12/96 10664 10370
6/97 12435 11449
12/97 12389 10985
6/98 13695 11878
12/98 20520 13440
6/99 21100 14060
12/99
6/00
<TABLE>
<CAPTION>
Global Discovery Portfolio -- Class B Salomon Brothers World Equity EMI Index
--------------------------------------------------------------- --------------------------------------------------------
Total Return Total Return
----------------------------- -----------------------------
Period Ended Growth of Cumulative Average Period Ended Growth of Cumulative Average
6/30/2000 $10,000 Annual 6/30/2000 $10,000 Annual
--------------------------------------------------------------- --------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 15,407 54.07% 54.07% 1 Year $ 11,837 18.37% 18.37%
--------------------------------------------------------------- --------------------------------------------------------
Life of Life of
Portfolio** $ 22,563 125.63% 29.32% Portfolio** $ 14,060 40.60% 11.68%
--------------------------------------------------------------- --------------------------------------------------------
</TABLE>
** The Portfolio commenced selling Class B shares on May 12, 1997. Index
comparisons begin May 31, 1997.
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results. Investment return
and principal value will fluctuate, so an investor's shares, when redeemed,
may be worth more or less than when purchased. Total returns would have
been lower if the Portfolio's expenses were not maintained.
Scudder Variable Life Investment Fund | 70
Global Discovery Portfolio
<PAGE>
Portfolio Summary
--------------------------------------------------------------------------------
June 30, 2000
Global Discovery Portfolio
--------------------------------------------------------------------------------
Diversification
--------------------------------------------------------------------------------
A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA POINTS IN THE TABLE BELOW.
By Region The portfolio's technology weighting
(Excluding 3% Cash Equivalents) has fallen from 29% on December 31,
1999, while its weighting in health
U.S. & Canada 54% care has increased from 7% of
Europe 34% net assets.
Japan 9%
Other 3%
-------------------------------------------------
100%
-------------------------------------------------
A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA POINTS IN THE TABLE BELOW.
By Sector
(Excluding 3% Cash Equivalents)
Technology 21%
Health 20%
Service Industries 17%
Financial 15%
Energy 8%
Consumer Discretionary 6%
Manufacturing 4%
Communications 3%
Media 2%
Other 4%
---------------------------------------------
100%
---------------------------------------------
--------------------------------------------------------------------------------
Ten Largest Equity Holdings
--------------------------------------------------------------------------------
(28% of Portfolio)
1. Symbol Technologies, Inc.
Manufacturer of bar code laser scanners
2. Serco Group plc
Facilities management company
3. QLT Photo Therapeutics, Inc.
Developer of pharmaceutical products
4. Mercator Software, Inc.
Provider of e-business software
5. Altran Technologies S.A.
Provider of engineering and consulting services
6. Marschollek, Lautenschlaeger und Partner AG
Independent life insurance company
7. Shinko Securities Co., Ltd.
Provider of financial services
8. Legg Mason, Inc.
Provider of various financial services
9. JOT Automation Group Oyj
Manufacturer of high technology production automation systems
and equipment
10. ISS Group, Inc.
Provider of network security monitoring, detection and response software
Scudder Variable Life Investment Fund | 71
Global Discovery Portfolio
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
Investment Portfolio as of June 30, 2000 (Unaudited)
----------------------------------------------------------------------------------------------
Global Discovery Portfolio
Principal
Amount ($) Value ($)
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
Repurchase Agreements 3.1%
----------------------------------------------------------------------------------------------
<S> <C> <C>
Donaldson, Lufkin & Jenrette, 6.53%, to be repurchased at
$4,372,378 on 7/3/2000** ---------
(Cost $4,370,000) ............................................ 4,370,000 4,370,000
---------
Shares
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
Common Stocks 96.9%
----------------------------------------------------------------------------------------------
Austria 0.1%
Schoeller-Bleckmann Oilfield Equipment AG (Manufacturer of parts
for drilling technology) ...................................... 13,008 115,331
---------
Brazil 0.1%
PT Multimedia Servicos* (Provider of an Internet portal in
Portugal and Brazil) .......................................... 11,800 90,334
---------
Canada 6.6%
Berkley Petroleum Corp.* (Oil and gas producer) .................. 110,100 695,235
Creo Products Inc.* (Manufacturer of printing related products) .. 5,200 118,300
Exfo Electro-Optical Engineering Inc.* (Designer and manufacturer
of fiber optics) .............................................. 5,200 228,150
Mosaic Group Inc.* (Provider of sales, marketing and corporate
communications services) ...................................... 85,000 1,033,295
QLT Inc.* (Developer of pharmaceutical products) ................. 56,800 4,411,427
QLT PhotoTherapeutics, Inc.* (Pharmaceutical company) ............ 4,300 332,444
Talisman Energy Inc.* (Explorer and producer of oil and gas) ..... 72,700 2,408,276
---------
9,227,127
---------
Finland 2.2%
JOT Automation Group Oyj (Manufacturer of high technology
production automation systems and equipment) .................. 424,100 2,826,166
Perlos Oyj (Manufacturer of injection moulds, electromechanical
connectors and assembly equipment) ............................ 7,300 230,358
---------
3,056,524
---------
France 4.8%
Altran Technologies S.A.* (Provider of engineering and consulting
services) ..................................................... 19,890 3,889,132
Dassault Systemes S.A. (Computer aided design, manufacturing and
engineering software) ......................................... 13,586 1,265,431
Trader.com N.V. NY Reg, "A"* (Publisher of advertising newspapers) 16,600 234,475
Transiciel S.A. (Developer of computer software) ................. 20,420 1,310,156
---------
6,699,194
---------
Germany 4.4%
Epcos AG* (Producer of electronic components and integrated
circuits) ..................................................... 10,899 1,096,204
Hawesko Holding AG (Marketer of wines and liqueurs and related
products) ..................................................... 3,016 58,656
Marschollek, Lautenschlaeger und Partner AG (Independent life
insurance company) ............................................ 8,783 4,387,594
Pfeiffer Vacuum Technology AG (ADR) (Manufacturer of various pumps
and vacuum systems) ........................................... 9,372 368,437
Telesens AG* (Producer of billing systems) ....................... 6,686 264,525
---------
6,175,416
---------
Hong Kong 2.5%
Legend Holdings Ltd. (Manufacturer of computers and related
products) ..................................................... 1,368,000 1,324,901
Li & Fung Ltd. (Exporter of consumer products) ................... 409,000 2,046,154
Sunevision Holdings Ltd.* (Provider of Internet infrastructure and
services) ..................................................... 103,000 83,900
---------
3,454,955
---------
Ireland 5.7%
Anglo Irish Bank Corp. plc (Provider of financial services for
business and private sectors) ................................. 1,079,222 2,325,260
</TABLE>
The accompanying notes are an integral part of the financial statements.
Scudder Variable Life Investment Fund | 72
Global Discovery Portfolio
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Elan Corp. plc "A" (Warrants) (expire 12/31/2001)* (Developer of
controlled-absorption drug delivery systems) ............................. 30,500 1,860,500
Elan Corp. plc (ADR)* (Research and development of drug delivery
technology) .............................................................. 3,400 164,688
Irish Continental Group plc (Transporter of passengers, freight
and containers between Ireland, the U.K. and the continent) .............. 35,560 288,159
Irish Life & Permanent plc (Operator of retail financial services
group) ................................................................... 269,610 2,269,598
Jury's Hotel Group plc (Hotel operator) ..................................... 104,350 621,763
Ryan Hotels plc* (Owner and operator of hotel chain) ........................ 318,700 361,561
----------
7,891,529
----------
Italy 1.4%
Bulgari SpA (Manufacturer and retailer of fine jewelry, luxury
watches and perfumes) .................................................... 145,470 1,941,573
----------
Japan 8.5%
Benesse Corp. (Provider of educational services) ............................ 21,400 1,485,480
Chugai Pharmaceutical Co., Ltd. (Pharmaceutical company) .................... 123,000 2,329,083
Internet Initiative Japan Inc.* (Provider of Internet services) ............. 5,700 337,725
Japan Securities Finance Co., Ltd. (Provider of securities related
financing services) ...................................................... 63,000 357,586
Kyorin Pharmaceutical Co., Ltd. (Retailer of prescription
medicines) ............................................................... 37,000 1,537,517
Shinko Securities Co., Ltd. (Provider of financial services) ................ 856,000 3,840,015
Toys "R" Us-Japan (Operator of retail toy stores throughout Japan) .......... 1,000 169,996
Uni-Charm Co. (Manufacturer of sanitary napkins, diapers and body
care goods) .............................................................. 29,700 1,800,765
----------
11,858,167
----------
Luxembourg 1.3%
Carrier 1 International S.A.* (Provider of voice, Internet and
related telecommunications services) ..................................... 2,174 122,282
Millicom International Cellular S.A.* (Developer and operator of
cellular telephone networks) ............................................. 32,900 1,151,500
Thiel Logistik AG* (Producer of decision support software) .................. 5,029 468,892
----------
1,742,674
----------
Netherlands 1.1%
Versatel Telecom International NV* (Telecommunication services) ............. 34,830 1,461,028
----------
Norway 0.2%
Stepstone ASA* (Provider of job listings on the Internet) ................... 85,500 281,571
----------
Portugal 0.8%
Jeronimo Martins SGPS, S.A. (Food producer and retailer) .................... 30,140 495,948
PT Multimedia Servicos* (Provider of cable television, Internet
and e-commerce services) ................................................. 11,800 584,975
----------
1,080,923
----------
Spain 0.4%
Promotora de Informaciones, S.A.* (Prisa) (Media company) ................... 9,134 211,602
Sogecable S.A.* (Provider of cable television) .............................. 6,240 221,418
Telefonica Publicidad e Informacion, S.A. (Publisher of telephone
directories) ............................................................. 18,607 175,439
----------
608,459
----------
Sweden 1.4%
Au System AB* (Delivers consulting services and solutions for the development
of advanced Internet and wireless technologies, applications and
related services) ........................................................ 28,600 162,690
Enlight Interactive AB "B"* (Developer of educational software) ............. 26,900 321,340
Framtidsfabriken AB* (Internet consulting company) .......................... 14,700 203,197
Modern Times Group MTG AB* (Group of media companies) ....................... 14,700 702,409
SwitchCore AB* (Designer and developer of high-speed switches for
the network market) ...................................................... 14,300 149,674
Telelogic AB* (Developer of software for the telecommunications
industry) ................................................................ 63,200 467,362
----------
2,006,672
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Scudder Variable Life Investment Fund | 73
Global Discovery Portfolio
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
---------------------------------------------------------------------------------------------------
<S> <C> <C>
Switzerland 0.3%
Fantastic Corp.* (Provider of multimedia related software
solutions) ..................................................... 42,330 407,588
----------
Taiwan 0.4%
GigaMedia Ltd.* (Provider of broadband Internet access services
and content) ................................................... 42,900 520,163
----------
United Kingdom 9.2%
Guardian IT plc (Provider of business continuity and disaster
recovery services) ............................................. 13,905 288,516
Matalan plc* (Clothing retailer) .................................. 257,238 2,029,599
Misys plc* (Provider of computer, support and data services) ...... 120,729 1,022,157
NDS Group plc* (ADR) (Provider of open solutions that enable data
to be transferred digitally) ................................... 11,600 707,600
NSB Retail Systems plc* (Provider of decision support software) ... 72,500 275,011
PizzaExpress plc (Operator of pizza restaurants) .................. 65,564 627,721
RM plc* (Information technology solutions to educational markets) . 106,450 1,085,392
Serco Group plc (Facilities management company) ................... 748,784 5,851,073
Shire Pharmaceuticals Group plc* (Pharmaceutical company) ......... 24,634 429,838
Taylor Nelson Sofres plc* (Market research company) ............... 114,210 459,221
----------
12,776,128
----------
United States 45.5%
Adelphia Business Solutions, Inc.* (Provider of communication
services) ...................................................... 48,200 1,117,638
Alexion Pharmaceuticals, Inc.* (Developer of immunoregulatory
compounds) ..................................................... 15,600 1,115,400
Alkermes, Inc.* (Neuropharmaceutical company developing products
to aid treatment of central nervous system) .................... 58,400 2,752,100
Alpharma Inc. (Manufacturer and marketer of human pharmaceutical
and animal health products) .................................... 39,300 2,446,425
Anadarko Petroleum Corp. (Explorer and producer of crude oil and
natural gas) ................................................... 42,600 2,100,713
AnswerThink Consulting Group, Inc.* (Provider of consulting and
technology-enabled solutions focused on the Internet and
Web-enabled commerce) .......................................... 45,300 753,113
Barrett Resources Corp.* (Explorer and producer of oil and gas) ... 33,000 1,004,438
Biomet, Inc.* (Manufacturer of surgical implant devices) .......... 59,700 2,294,719
CTS Corp. (Manufacturer of electronic and electromechanical
components) .................................................... 9,300 418,500
Citadel Communications Corp.* (Radio broadcaster) ................. 12,500 436,719
Concord EFS, Inc.* (Provider of electronic transaction
authorization, processing, settlement and transfer services) ... 80,050 2,081,300
Cumulus Media, Inc. "A"* (Radio broadcasting company) ............. 31,400 286,525
Diamond Offshore Drilling, Inc. (Offshore oil and gas well
drilling) ...................................................... 40,300 1,415,538
Elcor Corp. (Manufacturer of roofing and other industrial products) 44,400 1,021,200
Fiserv Inc.* (Provider of data processing services) ............... 62,000 2,681,500
H & R Block, Inc. (Tax consulting and preparation) ................ 29,300 948,588
Hain Celestial Group Inc.* (Distributes and sells natural, organic
and specialty food products) ................................... 22,100 810,794
ISS Group, Inc.* (Provider of network security monitoring,
detection, and response software) .............................. 26,300 2,596,714
ITXC Corp.* (Provider of Internet-based voice and fax services) ... 24,100 853,291
Invitrogen Corp.* (Developer of research kits) .................... 14,500 1,090,445
Legg Mason, Inc. (Provider of various financial services) ......... 64,500 3,224,995
MIH Ltd.* (Provider of pay-TV services) ........................... 21,400 642,669
Maxim Pharmaceuticals, Inc.* (Pharmaceutical company) ............. 17,400 893,925
Mercator Software Inc.* (Provider of e-business software) ......... 60,100 4,131,875
Nabors Industries, Inc.* (Land drilling contractor) ............... 80,700 3,354,094
OpenTV Corp.* (Developer of interactive television software) ...... 3,900 175,013
Polycom, Inc.* (Manufacturer of audio and data conferencing
products) ...................................................... 8,400 790,388
PurchasePro.com, Inc. (Provider of Internet business-to-business
electronic commerce services) .................................. 28,400 1,164,400
Rational Software Corp.* (Software products and services for
development of software applications) .......................... 23,500 2,184,031
S & P Mid-Cap 400 Depository Receipts (Security that represents
ownership in
the Mid-Cap SPDR Trust) ........................................ 15,900 1,411,125
St. Jude Medical, Inc. (Manufacturer of heart valves) ............. 66,800 3,064,450
Symbol Technologies, Inc. (Manufacturer of bar code laser scanners) 127,663 6,893,774
</TABLE>
The accompanying notes are an integral part of the financial statements.
Scudder Variable Life Investment Fund | 74
Global Discovery Portfolio
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
---------------------------------------------------------------------------------------------------
<S> <C> <C>
Tiffany & Co. (Retailer of jewelry and gift items) ............... 30,600 2,065,500
USinternetworking, Inc.* (Developer of management software used on
the Internet) ................................................. 35,000 715,313
VIA NET.WORKS, Inc.* (Provider of Internet access to businesses) . 2,700 41,681
Vitesse Semiconductor Corp.* (Manufacturer of digital integrated
circuits) ..................................................... 12,800 941,600
WatchGuard Technologies, Inc.* (Provider of Internet security
products) ..................................................... 13,600 747,150
Waters Corp.* (Provider of high-performance liquid chromatography
products and services) ........................................ 20,600 2,571,138
-----------
63,238,781
-----------
---------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $118,243,385) 134,634,137
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Total Investment Portfolio-- 100.0% (Cost $122,613,385) (a) 139,004,137
---------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
** Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities.
(a) At June 30, 2000, the net unrealized appreciation on investments based on
cost for federal income tax purposes of $122,615,273 was as follows:
Aggregate gross unrealized appreciation for all investments
in which there is an excess of value over tax cost ..... $ 25,574,783
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over value .... 9,185,919
--------------
Net unrealized appreciation ............................... $ 16,388,864
--------------
--------------------------------------------------------------------------------
Purchases and sales of investment securities (excluding short-term investments),
for the six months ended June 30, 2000, aggregated $115,534,230 and $48,036,783,
respectively.
The accompanying notes are an integral part of the financial statements.
Scudder Variable Life Investment Fund | 75
Global Discovery Portfolio
<PAGE>
Financial Statements
--------------------------------------------------------------------------------
Global Discovery Portfolio
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities as of June 30, 2000 (Unaudited)
-----------------------------------------------------------------------------------------------------------------------------
Assets
-----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value (cost $122,613,385) ................................................. $ 139,004,137
Cash .................................................................................................... 21,515,781
Foreign currency, at value (cost $65,183) ............................................................... 65,183
Receivable for investments sold ......................................................................... 3,505,549
Dividends receivable .................................................................................... 90,313
Interest receivable ..................................................................................... 793
Receivable for Portfolio shares sold .................................................................... 1,236,906
Foreign taxes recoverable ............................................................................... 22,496
Other assets ............................................................................................ 61,489
-------------
Total assets ............................................................................................ 165,502,647
Liabilities
-----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased ....................................................................... 13,977,373
Accrued management fee .................................................................................. 113,063
Accrued accounting fee .................................................................................. 116,179
Other accrued expenses and payables ..................................................................... 20,711
-------------
Total liabilities ....................................................................................... 14,227,326
-----------------------------------------------------------------------------------------------------------------------------
Net assets, at value $ 151,275,321
-----------------------------------------------------------------------------------------------------------------------------
Net Assets
-----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Accumulated net investment loss ......................................................................... $ (267,256)
Net unrealized appreciation (depreciation) on:
Investments ........................................................................................... 16,390,752
Foreign currency related transactions ................................................................. (10,465)
Accumulated net realized gain (loss) .................................................................... 5,652,558
Paid-in capital ......................................................................................... 129,509,732
-----------------------------------------------------------------------------------------------------------------------------
Net assets, at value $ 151,275,321
-----------------------------------------------------------------------------------------------------------------------------
Class A
Net Asset Value, offering and redemption price per share ($141,424,909 / 11,075,381 outstanding shares of -------------
beneficial interest, no par value, unlimited number of shares authorized) ............................ $ 12.77
-------------
Class B
Net Asset Value, offering and redemption price per share ($9,850,412 / 774,870
outstanding shares of beneficial interest, no par value, unlimited number of -------------
shares authorized) ................................................................................... $ 12.71
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Scudder Variable Life Investment Fund | 76
Global Discovery Portfolio
<PAGE>
--------------------------------------------------------------------------------
Statement of Operations for the six months ended June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
Investment Income
--------------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $15,148) ........... $ 269,252
Interest ....................................................... 326,803
-----------
Total Income ................................................... 596,055
-----------
Expenses:
Management fee ................................................. 570,898
Custodian fees ................................................. 134,787
Accounting fees ................................................ 91,341
Distribution fees (Class B) .................................... 10,611
Auditing ....................................................... 10,937
Legal .......................................................... 1,083
Trustees' fees and expenses .................................... 8,208
Reports to shareholders ........................................ 2,030
Other .......................................................... 7,375
-----------
Total expenses, before expense reductions ...................... 837,270
Expense reductions ............................................. (33,773)
-----------
Total expenses, after expense reductions ....................... 803,497
--------------------------------------------------------------------------------
Net investment income (loss) (207,442)
--------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
--------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments .................................................... 7,119,538
Foreign currency related transactions .......................... (37,377)
-----------
7,082,161
-----------
Net unrealized appreciation (depreciation) during the period on:
Investments .................................................... (8,242,873)
Foreign currency related transactions .......................... (10,296)
-----------
(8,253,169)
--------------------------------------------------------------------------------
Net gain (loss) on investment transactions (1,171,008)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $(1,378,450)
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
Scudder Variable Life Investment Fund | 77
Global Discovery Portfolio
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets
-----------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended
June 30, 2000 December 31,
Increase (Decrease) in Net Assets (Unaudited) 1999
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) .......................................................... $ (207,442) $ (267,553)
Net realized gain (loss) on investment transactions ................................... 7,082,161 6,427,361
Net unrealized appreciation (depreciation) on investment transactions during the period (8,253,169) 18,887,330
------------- -------------
Net increase (decrease) in net assets resulting from operations ....................... (1,378,450) 25,047,138
------------- -------------
Distributions to shareholders from:
Net investment income:
Class A ............................................................................... (986,284) --
------------- -------------
Class B ............................................................................... (49,881) --
------------- -------------
Net realized gains:
Class A ............................................................................... (5,917,706) (336,073)
------------- -------------
Class B ............................................................................... (438,954) (38,072)
------------- -------------
Portfolio share transactions:
Class A
Proceeds from shares sold ............................................................. 115,129,668 47,977,272
Reinvestment of distributions ......................................................... 6,903,991 336,073
Cost of shares redeemed ............................................................... (42,868,986) (25,592,178)
------------- -------------
Net increase (decrease) in net assets from Class A share transactions ................. 79,164,673 22,721,167
------------- -------------
Class B
Proceeds from shares sold ............................................................. 4,600,330 2,115,662
Reinvestment of distributions ......................................................... 488,835 38,073
Cost of shares redeemed ............................................................... (1,433,197) (1,824,969)
------------- -------------
Net increase (decrease) in net assets from Class B share transactions ................. 3,655,968 328,766
------------- -------------
Increase (decrease) in net assets ..................................................... 74,049,366 47,722,926
Net assets at beginning of period ..................................................... 77,225,955 29,503,029
Net assets at end of period (including accumulated net investment loss of $267,256 and ------------- -------------
undistributed net investment income of $976,351, respectively) ..................... $ 151,275,321 $ 77,225,955
------------- -------------
Other Information
-----------------------------------------------------------------------------------------------------------------------------
Class A
Shares outstanding at beginning of period ............................................. 5,348,352 3,172,540
------------- -------------
Shares sold ........................................................................... 8,335,966 4,926,169
Shares issued to shareholders in reinvestment of distributions ........................ 559,481 40,056
Shares redeemed ....................................................................... (3,168,418) (2,790,413)
------------- -------------
Net increase (decrease) in Portfolio shares ........................................... 5,727,029 2,175,812
------------- -------------
Shares outstanding at end of period ................................................... 11,075,381 5,348,352
------------- -------------
Class B
Shares outstanding at beginning of period ............................................. 512,155 500,409
------------- -------------
Shares sold ........................................................................... 326,280 217,938
Shares issued to shareholders in reinvestment of distributions ........................ 39,775 4,560
Shares redeemed ....................................................................... (103,340) (210,752)
------------- -------------
Net increase (decrease) in Portfolio shares ........................................... 262,715 11,746
------------- -------------
Shares outstanding at end of period ................................................... 774,870 512,155
------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Scudder Variable Life Investment Fund | 78
Global Discovery Portfolio
<PAGE>
Financial Highlights
--------------------------------------------------------------------------------
Global Discovery Portfolio
The following table includes selected data for a share outstanding throughout
each period (a) and other performance information derived from the financial
statements.
Class A (b)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 2000(g) 1999 1998 1997 1996(c)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $13.18 $ 8.04 $ 7.08 $ 6.33 $6.00(d)
-----------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
-----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.02) (.06) (.03) (.03) (.01)
-----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment transactions .38 5.30 1.18 .81 .34
-----------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Total from investment operations .36 5.24 1.15 .78 .33
-----------------------------------------------------------------------------------------------------------------------------
Less distributions from:
-----------------------------------------------------------------------------------------------------------------------------
Net investment income (.11) -- (.12) (.02) --
-----------------------------------------------------------------------------------------------------------------------------
Net realized gains on investment transactions (.66) (.10) (.07) (.01) --
-----------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Total distributions (.77) (.10) (.19) (.03) --
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.77 $13.18 $ 8.04 $ 7.08 $ 6.33
-----------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Total Return (%) 2.93(e)** 65.88 16.44(e) 12.38(e)5.50(e)**
-----------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
-----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 141 71 25 18 17
-----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 1.42* 1.63 1.72 1.50 1.50*
-----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 1.36* 1.63 1.79 1.79 2.32*
-----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.34)* (.66) (.40) (.44) (.13)*
-----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 93* 70 54 83 50*
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class B
-----------------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 2000(g) 1999 1998 1997(f)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $13.11 $ 8.01 $ 7.07 $ 6.20
--------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
-----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.04) (.08) (.05) (.04)
-----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment transactions .38 5.28 1.18 .91
--------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Total from investment operations .34 5.20 1.13 .87
-----------------------------------------------------------------------------------------------------------------------------
Less distributions from:
-----------------------------------------------------------------------------------------------------------------------------
Net investment income (.08) -- (.12) --
-----------------------------------------------------------------------------------------------------------------------------
Net realized gains on investment transactions (.66) (.10) (.07) --
--------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Total distributions (.74) (.10) (.19) --
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.71 $13.11 $ 8.01 $ 7.07
--------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Total Return (%) 2.83(e)** 65.63 16.18(e) 14.03(e)**
-----------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
-----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 10 7 4 2
-----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 1.67* 1.88 1.98 1.75*
-----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions(%) 1.61* 1.88 2.04 2.00*
-----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.59)* (.91) (.69) (.89)*
-----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 93* 70 54 83
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) On May 2, 1997 existing shares were redesignated as Class A shares.
(c) For the period May 1, 1996 (commencement of operations) to December 31,
1996.
(d) Original capital.
(e) Total returns would have been lower had certain expenses not been reduced.
(f) For the period May 2, 1997 (commencement of sale of Class B shares) to
December 31, 1997.
(g) For the six months ended June 30, 2000 (Unaudited).
* Annualized
** Not annualized
Scudder Variable Life Investment Fund | 79
Global Discovery Portfolio
<PAGE>
Portfolio Management Discussion
--------------------------------------------------------------------------------
June 30, 2000
International Portfolio
Dear Shareholders,
The broad correction in global equity markets that began toward the end of the
first quarter continued into the second, with high-growth "new economy" sectors
such as technology, media, and telecommunications ("TMT") suffering a
particularly sharp sell-off. Worries about interest rate hikes in the U.S.,
Europe, and even Japan combined with uncertain growth prospects in these markets
to lead to a more cautious investment environment worldwide. This dynamic
generally helped the performance of a number of traditionally defensive sectors
such as pharmaceuticals, food producers, and utilities.
Over the six-month period ended June 30, 2000, Class A Shares of the
International Portfolio returned -10.89%, which trailed the -2.97% return of its
unmanaged benchmark, the MSCI EAFE & Canada Index. The portfolio's
underperformance is largely attributable to the declines in our holdings within
the TMT group. The unexpectedly high price paid in the U.K. for the next
generation telecommunications licensing had a significant impact on most
European telecom operators. Portfolio holdings that were affected by this
development include Vodafone AirTouch (U.K.), KPN (Netherlands), and Deutsche
Telekom (Germany). On the plus side, our positions in pharmaceuticals,
commodities producers, and financials helped performance. Despite its
underperformance in the first half of 2000, the portfolio continues to rank well
against its peers over the long term. According to Lipper Analytical Services,
the portfolio has finished in the top 30% of international variable life funds
over the three- and five-year periods.^1
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
--------------------------------------------------------------------------------
The portfolio is well diversified among both "new economy" and "old economy"
companies.
--------------------------------------------------------------------------------
We continued to reduce exposure to areas where valuations had become less
fundamentally grounded, a process we started early in the first quarter. While
our sales were concentrated in the TMT area, this action does not reflect a view
that the strong global wave of technology innovation is about to end. We
continue to commit funds to this area, but are placing greater emphasis on blue
chip companies with strong market positions and sustainable cash flows, where we
feel growth prospects are still undervalued. We also reduced our exposure to the
more economically sensitive areas of our portfolio, as it became clearer that
the central banks in the U.S., and to a lesser extent Europe, are committed to
slowing economic growth. Funds from these sales were largely redeployed into the
European financial sector, in both insurance and banking stocks.
The portfolio remains a blend of growth and value stocks as we enter the third
quarter. We are focused on beneficiaries of the new economy growth sectors, as
well as those we expect to survive as winners in the restructuring and
adaptation of the old economy. While the combination of steady growth and the
impact of restructuring and reform should provide a firm foundation for equities
over the second half of the year, risks remain. Most notably, a pick-up in
inflation on a global basis could result in continued higher interest rates and
a "hard landing" for the global economy. As a result, we expect market
volatility to remain a factor in the second half of the year.
Sincerely,
Your Portfolio Management Team
/s/Irene T. Cheng /s/Nicholas Bratt
Irene T. Cheng Nicholas Bratt
Lead Portfolio Manager Portfolio Manager
/s/Carol L. Franklin /s/Marc J. Slendebroek
Carol L. Franklin Marc J. Slendebroek
Portfolio Manager Portfolio Manager
^1 Source: Lipper Analytical Services, Inc., an independent analyst of
investment performance. Performance includes reinvestment of dividends and
capital gains. For the period ended June 30, 2000, Scudder Variable Life
Investment Fund: International Portfolio's Lipper ranking was 60 out of 129
funds for the one-year period, 24 out of 94 funds for the three-year
period, 18 out of 61 for the five-year period, and 5 out of 8 for the
ten-year period. Past performance is no guarantee of future results.
Scudder Variable Life Investment Fund | 80
International Portfolio
<PAGE>
Performance Update
--------------------------------------------------------------------------------
June 30, 2000
International Portfolio
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
The Morgan Stanley Capital International (MSCI) Europe, Australia, the Far East
(EAFE) & Canada Index is an unmanaged capitalization-weighted measure of stock
markets in Europe, Australia, the Far East and Canada. Index returns assume
reinvestment of dividends net of withholding tax and, unlike Portfolio returns,
do not reflect any fees or expenses.
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
International Portfolio MSCI EAFE &
-- Class A* Canada Index
'90 10000 10000
'91 8989 8908
'92 9787 8839
'93 10675 10562
'94 12933 12271
'95 13272 12549
'96 15452 14224
'97 18525 16146
'98 21372 17161
'99 23080 18425
'00 28890 21882
Yearly periods ended June 30
<TABLE>
<CAPTION>
International Portfolio -- Class A* MSCI EAFE & Canada Index
--------------------------------------------------------------- --------------------------------------------------------
Total Return Total Return
----------------------------- -----------------------------
Period Ended Growth of Cumulative Average Period Ended Growth of Cumulative Average
6/30/2000 $10,000 Annual 6/30/2000 $10,000 Annual
--------------------------------------------------------------- --------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 12,518 25.18% 25.18% 1 Year $ 11,877 18.77% 18.77%
--------------------------------------------------------------- --------------------------------------------------------
5 Year $ 21,768 117.68% 16.83% 5 Year $ 17,438 74.38% 11.75%
--------------------------------------------------------------- --------------------------------------------------------
10 Year* $ 28,890 188.90% 11.19% 10 Year* $ 21,882 118.82% 8.14%
--------------------------------------------------------------- --------------------------------------------------------
</TABLE>
* On May 8, 1997, existing shares were redesignated as Class A shares.
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
The Morgan Stanley Capital International (MSCI) Europe, Australia, the Far East
(EAFE) & Canada Index is an unmanaged capitalization-weighted measure of stock
markets in Europe, Australia, the Far East and Canada. Index returns assume
reinvestment of dividends net of withholding tax and, unlike Portfolio returns,
do not reflect any fees or expenses.
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
International Portfolio MSCI EAFE &
-- Class B Canada Index
10000 10000
10513 10534
10036 9686
12107 11196
11870 11503
13043 12021
18294 14714
16293 14277
<TABLE>
<CAPTION>
International Portfolio -- Class B MSCI EAFE & Canada Index
--------------------------------------------------------------- --------------------------------------------------------
Total Return Total Return
----------------------------- -----------------------------
Period Ended Growth of Cumulative Average Period Ended Growth of Cumulative Average
6/30/2000 $10,000 Annual 6/30/2000 $10,000 Annual
--------------------------------------------------------------- --------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 12,492 24.92% 24.92% 1 Year $ 11,877 18.77% 18.77%
--------------------------------------------------------------- --------------------------------------------------------
Life of $ 16,613 66.13% 17.50% Life of $ 14,277 42.77% 12.23%
Portfolio** Portfolio**
--------------------------------------------------------------- --------------------------------------------------------
</TABLE>
** The Portfolio commenced selling Class B shares on May 8, 1997. Index
comparisons begin May 31, 1997.
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results. Investment return
and principal value will fluctuate, so an investor's shares, when redeemed,
may be worth more or less than when purchased.
Scudder Variable Life Investment Fund | 81
International Portfolio
<PAGE>
Portfolio Summary
--------------------------------------------------------------------------------
June 30, 2000
International Portfolio
--------------------------------------------------------------------------------
Diversification
--------------------------------------------------------------------------------
By Region
(Excluding 3% Cash Equivalents)
Europe 64% Over the past six months,
Japan 25% management has boosted the portfolio's
Pacific Basin 9% weighting in Europe, while trimming
U.S. & Canada 2% its holdings in Japan. The
portfolio's holdings in financials
--------------------------------------- have also increased significantly,
100% up from 15% of net assets on
--------------------------------------- December 31, 1999.
A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA POINTS IN THE TABLE BELOW.
By Sector
(Excluding 3% Cash Equivalents)
Financial 23%
Technology 16%
Communications 14%
Manufacturing 12%
Energy 6%
Health 5%
Service Industries 5%
Consumer Staples 5%
Utilities 4%
Other 10%
----------------------------------------
100%
----------------------------------------
A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA POINTS IN THE TABLE BELOW.
--------------------------------------------------------------------------------
Ten Largest Equity Holdings
--------------------------------------------------------------------------------
(18% of Portfolio)
1. Total Fina ELF S.A.
Explorer, developer, producer, transporter and marketer of oil and natural
gas
2. Vodafone AirTouch plc
Provider of mobile telecommunication services
3. VEBA AG
Electric utility, distributor of oil and chemicals
4. Aventis S.A.
Manufacturer of life science products
5. STMicroelectronics N.V.
Manufacturer of semiconductor integrated circuits
6. Alcatel
Manufacturer of telecommunications equipment
7. SK Telecom Co., Ltd.
Provider of mobile telecommunications services
8. Samsung Electronics Co.
Electronics manufacturer
9. BP Amoco plc
Integrated world oil company
10. Siemens AG
Electrical engineering and electronics company
Scudder Variable Life Investment Fund | 82
International Portfolio
<PAGE>
Investment Portfolio as of June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International Portfolio
Principal
Amount ($) Value ($)
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
Repurchase Agreements 3.2%
----------------------------------------------------------------------------------------------
<S> <C> <C>
Donaldson, Lufkin & Jenrette, 6.53%, to be repurchased at ------------
$26,619,478 on 7/3/2000** (Cost $26,605,000) .................... 26,605,000 26,605,000
------------
----------------------------------------------------------------------------------------------
Bonds 0.0%
----------------------------------------------------------------------------------------------
United Kingdom
British Aerospace plc, 7.45%, 11/30/2003 (Producer of military ------------
aircraft) (Cost $0) ............................................. 82,371 121,232
------------
----------------------------------------------------------------------------------------------
Participating Loan Note 0.3%
----------------------------------------------------------------------------------------------
Luxembourg
Eurotunnel Finance Ltd., Step-up Coupon, 1.0% to 12/31/2005, 1% plus
26.45% of net available cash flow to 4/30/2040 ------------
(Cost $2,218,612) ............................................... 1,700 2,058,282
-----------
Shares
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
Common Stocks 96.5%
----------------------------------------------------------------------------------------------
Australia 1.5%
Broken Hill Proprietary Co., Ltd. (Petroleum, mineral and steel
exploration and production) ................................... 523,200 6,173,571
WMC Ltd. (Mineral exploration and production) .................... 903,983 4,036,053
Woodside Petroleum, Ltd. (Producer of oil and gas) ............... 298,500 2,318,405
-----------
12,528,029
-----------
Canada 1.7%
Canadian National Railway Co. (Railroad operator) ................ 247,300 7,198,372
Nortel Networks Corp. (Provider of telephony, data, wireless
products) ..................................................... 98,600 6,838,806
-----------
14,037,178
-----------
Finland 1.5%
Nokia Oyj (International telecommunications company) ............. 242,400 12,351,866
-----------
France 18.4%
AXA S.A. (Insurance group providing insurance, finance and real
estate services) .............................................. 49,441 7,777,203
Alcatel (Manufacturer of telecommunications equipment) ........... 210,820 13,807,683
Aventis S.A. (Manufacturer of life science products) ............. 226,754 16,526,645
BNP Paribas (Bank) ............................................... 100,437 9,651,760
Bouygues S.A.* (Conglomerate: public works, real estate and
industrial development, engineering services, television
and motion pictures) .......................................... 8,882 5,927,357
Christian Dior S.A. (Fashion house) .............................. 31,001 7,019,264
Credit Lyonnais S.A. (Provider of diversified banking services) .. 157,366 7,471,237
Dassault Systemes S.A. (Computer aided design, manufacturing and
engineering software) ......................................... 32,787 3,053,856
Etablissements Economiques du Casino Guichard-Perrachon S.A ......
(Operator of supermarkets and convenience stores) ............. 68,800 4,220,746
Eurotunnel S.A.* (Designer, financer and constructor of a tunnel
that runs under the English Channel and
connects England to France) ................................... 3,989,287 3,613,026
Lafarge S.A. (Warrant) (expires 3/20/2001)* (Producer of building
materials) .................................................... 1 3
Lagardere S.C.A. (Holding company with interests in publishing,
defense, audiovisual production and services, telecommunications
and media) .................................................... 46,214 3,524,648
Pinault-Printemps-Redoute S.A. (Operator of department stores) ... 38,810 8,609,784
Rhodia S.A. (Drug manufacturer and chemicals specialist) ......... 361,871 6,071,817
STMicroelectronics N.V. (Manufacturer of semiconductor integrated
circuits) ..................................................... 233,067 14,664,828
Schneider Electric S.A. (Manufacturer of electronic components and
automated manufacturing systems) .............................. 56,331 3,920,330
</TABLE>
The accompanying notes are an integral part of the financial statements.
Scudder Variable Life Investment Fund | 83
International Portfolio
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
-------------------------------------------------------------------------------------------------
<S> <C> <C>
Societe BIC S.A. (Manufacturer of office supplies) ............... 105,719 5,170,382
Suez Lyonnaise des Eaux S.A. (Water and electric utility) ........ 62,606 10,952,273
Total Fina ELF S.A. "B" (Explorer, developer, producer,
transporter and marketer of oil and natural gas) .............. 127,484 19,518,816
------------
151,501,658
------------
Germany 11.1%
Allianz AG (Multi-line insurance company) ........................ 24,936 9,021,751
Bayer AG (Chemical producer) ..................................... 176,105 6,849,898
Celanese AG (Manufacturer and distributor of industrial chemicals) 15,526 300,475
Commerzbank AG (Provider of banking services) .................... 85,400 3,020,536
Deutsche Telekom AG (Telecommunication services) ................. 58,613 3,324,782
Dresdner Bank AG (Provider of banking services) .................. 102,553 4,243,169
Ergo Versicherungs Gruppe AG (Insurance provider) ................ 34,247 3,875,480
Epcos AG* (Producer of electronic components and integrated
circuits) ..................................................... 81,944 8,241,796
Heidelberger Druckmaschinen AG (Manufacturer of commercial
printing presses) ............................................. 20,125 1,218,321
HypoVereinsbank AG (Bank) ........................................ 131,569 8,541,870
Muenchener Rueckversicherungs-Gesellschaft AG (Registered)
(Insurance company) ........................................... 28,191 8,895,917
SAP AG (Manufacturer of computer software) ....................... 21,708 4,014,891
Siemens AG (Electrical engineering and electronics company) ...... 82,699 12,417,468
VEBA AG (Electric utility, distributor of oil and chemicals) ..... 349,075 17,105,435
------------
91,071,789
------------
Hong Kong 1.4%
China Mobile Ltd.* (Provider of cellular telecommunication
services) ..................................................... 584,000 5,150,341
Hutchison Whampoa Ltd. (Diversified investment holding company) .. 290,400 3,650,675
Legend Holdings Ltd. (Manufacturer of computers and related
products) ..................................................... 1,616,000 1,565,088
Li & Fung Ltd. (Exporter of consumer products) ................... 220,000 1,100,621
------------
11,466,725
------------
Italy 6.0%
Alleanza Assicurazioni SpA (Life insurance company) .............. 232,200 3,088,081
Assicurazioni Generali (Multi-line insurance and financial
services company) ............................................. 270,200 9,247,664
Banco Intesa SpA (Bank) .......................................... 1,585,471 7,088,974
Holding di Partecipazioni Industriali SpA* (Holding company) ..... 1,561,300 2,083,851
Mediobanca SpA (Provider of loans and credit to manufacturing and
service firms) ................................................ 869,500 8,952,526
Riunione Adriatica di Sicurta SpA (Insurance company) ............ 307,700 3,373,476
San Paolo - IMI SpA* (Personal, investment and commercial banking) 390,500 6,920,742
Seat Pagine Gialle SpA (Publisher of telecommunications
directories) .................................................. 2,445,800 8,440,764
------------
49,196,078
------------
Japan 24.3%
Advantest Corp. (Producer of measuring instruments and
semiconductor testing devices) ................................ 19,900 4,444,775
Benesse Corp. (Provider of educational services) ................. 24,800 1,721,490
Chugai Pharmaceutical Co., Ltd. (Pharmaceutical company) ......... 399,000 7,555,319
DDI Corp. (Provider of telecommunication services) ............... 327 3,150,021
Daiwa Securities Group, Inc. (Provider of brokerage and other
financial services) ........................................... 399,000 5,275,535
East Japan Railway Co. (Railroad operator) ....................... 1,345 7,824,715
Fuji Bank, Ltd. (Provider of commercial banking services) ........ 886,000 6,744,260
Fujisawa Pharmaceutical Co. (Manufacturer and marketer of
antibiotics) .................................................. 52,000 2,106,814
Fujitsu, Ltd. (Manufacturer of computers) ........................ 329,000 11,403,220
Kyocera Corp. (Manufacturer of ceramic packaging) ................ 54,000 9,174,671
Matsushita Electric Industrial Co., Ltd. (Manufacturer of consumer
electronic products) .......................................... 355,000 9,219,908
Mitsubishi Estate Co., Ltd. (Real estate company) ................ 417,000 4,914,917
Mitsui Fudosan Co., Ltd. (Real estate company) ................... 485,000 5,267,507
Murata Manufacturing Co., Ltd. (Manufacturer of ceramic applied
electronic computers) ......................................... 55,000 7,905,747
NEC Corp. (Manufacturer of telecommunication and computer
equipment) .................................................... 347,000 10,912,877
NTT Mobile Communications Network, Inc. (Provider of various
telecommunication
services and equipment) ....................................... 320 8,673,561
</TABLE>
The accompanying notes are an integral part of the financial statements.
Scudder Variable Life Investment Fund | 84
International Portfolio
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
-------------------------------------------------------------------------------------------------
<S> <C> <C>
Nikko Securities Co., Ltd. (Securities broker and dealer) ......... 503,000 4,987,959
Nintendo Co., Ltd. (Manufacturer of game equipment) ............... 40,800 7,136,195
Nippon Telegraph & Telephone Corp.* (Provider of telecommunication
services) ...................................................... 428 5,699,391
Nissan Motor Co., Ltd.* (Manufacturer of motor vehicles) .......... 823,000 4,857,865
Nomura Securities Co., Ltd. (Financial advisor, securities broker
and underwriter) ............................................... 395,000 9,680,550
Ricoh Co., Ltd. (Manufacturer of copiers and information equipment) 245,000 5,194,551
Sakura Bank, Ltd. (Provider of banking services) .................. 1,141,000 7,898,692
Sankyo Co., Ltd. (Leading ethical drug producer) .................. 310,000 7,011,852
Sanyo Electric Co., Ltd. (Manufacturer of consumer electronics) ... 474,000 4,270,633
Softbank Corp. (Provider of electronic commerce, software and
peripheral hardware equipment) ................................. 13,600 1,849,554
Sony Corp. (Manufacturer of consumer and industrial electronic
equipment) ..................................................... 59,400 5,553,761
Sony Corp. (ADR) (Manufacturer of consumer electronics) ........... 18,600 1,754,213
Sumitomo Electric Industries, Ltd. (Manufacturer of electric wires
and cables) .................................................... 349,000 5,992,180
Tokyo Electron Ltd. (Manufacturer of semiconductor production
equipment) ..................................................... 29,000 3,976,767
Toshiba Corp. (Manufacturer of electric machinery) ................ 857,000 9,688,143
Yamanouchi Pharmaceutical Co., Ltd. (Manufacturer and marketer of
a wide variety of pharmaceuticals) ............................. 143,000 7,819,521
------------
199,667,164
------------
Korea 3.1%
SK Telecom Co., Ltd. (Provider of mobile telecommunications
services) ...................................................... 39,900 13,061,142
Samsung Electronics Co. (Electronics manufacturer) ................ 38,660 12,793,919
------------
25,855,061
------------
Netherlands 4.4%
ABN AMRO Holding N.V. (Diversified financial services) ............ 339,800 8,312,512
Akzo Nobel N.V. (Producer and marketer of healthcare products,
coatings, chemicals and fibers) ................................ 90,320 3,831,741
ASM Lithography Holding N.V.* (Developer, manufacturer and
marketer of photolithography projections systems) .............. 115,230 4,945,649
Gucci Group N.V. (New York Shares) (Designer and producer of
personal luxury accessories and apparel) ....................... 66,700 6,319,825
Koninklinjke Kpn NV (Provider of telecommunications services) ..... 162,200 7,244,571
Laurus NV (International food retailer) ........................... 136,520 1,633,399
VNU NV (International publishing company) ......................... 75,320 3,884,721
------------
36,172,418
------------
Singapore 0.4%
Chartered Semiconductor Manufacturing Ltd. (ADR)* (Provider of
wafer fabrication services to semiconductor suppliers) ......... 36,100 3,249,000
------------
Spain 0.9%
Telefonica S.A.* (Provider of telecommunication services) ......... 366,007 7,850,985
------------
Sweden 1.4%
Telefonaktiebolaget LM Ericsson AB (Producer of advanced systems
and products for wired and mobile communications.) ............. 598,000 11,871,896
------------
Switzerland 3.2%
Nestle S.A.* (Registered) (Food manufacturer) ..................... 5,314 10,623,445
Roche Holding AG* (Developer and manufacturer of pharmaceutical
and chemical products) ......................................... 507 4,929,684
Swiss Re (Registered) (Life, accident and health insurance company) 1,939 3,947,572
UBS AG (Registered) (Provider of banking and asset management
services) ...................................................... 45,145 6,606,451
------------
26,107,152
------------
Taiwan 2.2%
Far Eastern Textile Ltd. (Manufacturer of natural and synthetic
textile products) .............................................. 1,907,560 2,371,645
GigaMedia Ltd.* (Provider of broadband Internet access services
and content) ................................................... 65,200 790,550
Hon Hai Precision Industry Co., Ltd.* (Manufacturer of electronic
products) ...................................................... 339,200 3,069,084
Taiwan Semiconductor Manufacturing Co.* (Manufacturer of
integrated circuits) ........................................... 1,088,857 5,174,064
</TABLE>
The accompanying notes are an integral part of the financial statements.
Scudder Variable Life Investment Fund | 85
International Portfolio
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
----------------------------------------------------------------------------------------------
<S> <C> <C>
United Microelectronics Corp., Ltd.* (Manufacturer of integrated
circuits) .................................................... 2,349,600 6,538,350
------------
17,943,693
------------
United Kingdom 15.0%
ARM Holdings PLC* (Designer of RISC microprocessors and related
technology) .................................................. 206,955 2,223,213
BOC Group PLC (Divisified chemical company) ..................... 370,246 5,336,859
BP Amoco PLC (Integrated world oil company) ..................... 1,304,901 12,552,741
Billiton PLC (Resource group that explores, produces and markets
aluminum and other metal products) ........................... 672,262 2,743,865
British Aerospace PLC (Producer of military aircraft) ........... 1,004,588 6,279,961
British Airways PLC (Provider of passenger and cargo airline
services) .................................................... 681,890 3,931,604
Cable & Wireless PLC (International telecommunication services in
the United Kingdom and Hong Kong) ............................ 396,882 6,738,500
Glaxo Wellcome PLC (Pharmaceutical company) ..................... 141,951 4,150,419
Lasmo PLC (Oil production and exploration) ...................... 5 11
Prudential Corp. PLC (Provider of a broad range of financial
services) .................................................... 467,357 6,864,294
Reed International PLC (Publisher of scientific, professional and
business-to-business materials) .............................. 1,093,783 9,542,689
Rentokil Initial PLC (Environmental services company) ........... 856,406 1,949,139
Reuters Group PLC (International news and information agency) ... 610,913 10,446,602
Rio Tinto PLC (Mining company) .................................. 652,558 10,693,371
Shell Transport & Trading PLC (Petroleum company) ............... 1,386,834 11,604,909
SmithKline Beecham PLC (Manufacturer of ethical drugs and health
care products) ............................................... 314,266 4,124,633
Standard Chartered PLC (International banking group) ............ 424,769 5,304,255
Vodafone AirTouch PLC (Provider of mobile telecommunication
services) .................................................... 4,694,178 19,017,025
------------
123,504,090
------------
----------------------------------------------------------------------------------------------
Total Common Stocks (Cost $680,460,452) 794,374,782
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $709,284,064) (a) 823,159,296
----------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
** Repurchase agreements are fully collateralized by US Treasury or Government
agency securities.
(a) At June 30, 2000, the net unrealized appreciation on investments based on
cost for federal income tax purposes of $709,378,018 was as follows:
Aggregate gross unrealized appreciation for all investments
in which there is an excess of value over tax cost ...... $ 154,961,749
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over value ...... 41,180,471
--------------
Net unrealized appreciation ............................... $ 113,781,278
--------------
--------------------------------------------------------------------------------
Purchases and sales of investment securities (excluding short-term
investments), for the six months ended June 30, 2000, aggregated
$440,587,028 and $377,874,093, respectively.
The accompanying notes are an integral part of the financial statements.
Scudder Variable Life Investment Fund | 86
International Portfolio
<PAGE>
Financial Statements
--------------------------------------------------------------------------------
International Portfolio
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities as of June 30, 2000 (Unaudited)
------------------------------------------------------------------------------------------------
Assets
------------------------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value (cost $709,284,064) ....................... $ 823,159,296
Foreign currency, at value (cost $4,414,287) .................................. 4,405,967
Receivable for investments sold ............................................... 10,252,009
Dividends receivable .......................................................... 315,978
Interest receivable ........................................................... 19,318
Receivable for Portfolio shares sold .......................................... 43,379,578
Foreign taxes recoverable ..................................................... 1,004,733
Other assets .................................................................. 379
-------------
Total assets .................................................................. 882,537,258
Liabilities
------------------------------------------------------------------------------------------------
Due to custodian bank ......................................................... 223,733
Payable for investments purchased ............................................. 15,198,694
Accrued management fee ........................................................ 552,728
Accrued accounting fee ........................................................ 101,610
Other accrued expenses and payables ........................................... 163,035
-------------
Total liabilities ............................................................. 16,239,800
------------------------------------------------------------------------------------------------
Net assets, at value $ 866,297,458
------------------------------------------------------------------------------------------------
Net Assets
------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income 3,057,986 Net unrealized appreciation
(depreciation) on:
Investments ................................................................. 113,875,232
Foreign currency related transactions ....................................... (43,212)
Accumulated net realized gain (loss) .......................................... 108,916,202
Paid-in capital ............................................................... 640,491,250
------------------------------------------------------------------------------------------------
Net assets, at value $ 866,297,458
------------------------------------------------------------------------------------------------
Class A
NetAsset Value and redemption price per share ($865,409,990 / 53,334,986
outstanding shares of beneficial interest, no par value, unlimited number of -------------
shares authorized) ......................................................... $ 16.23
-------------
Class B
Net Asset Value, offering and redemption price per share ($887,468 / 54,860
outstanding shares of beneficial interest, no par value, unlimited number of -------------
shares authorized) $ 16.18
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Scudder Variable Life Investment Fund | 87
International Portfolio
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
Statement of Operations for the six months ended June 30, 2000 (Unaudited)
---------------------------------------------------------------------------------
Investment Income
---------------------------------------------------------------------------------
<S> <C>
Income:
Dividends (net of foreign taxes withheld of $312,292) .......... $ 6,176,795
Interest ....................................................... 1,591,210
-------------
Total Income ................................................... 7,768,005
-------------
Expenses:
Management fee ................................................. 3,474,437
Custodian fees ................................................. 468,566
Accounting fees ................................................ 108,747
Distribution fees (Class B) .................................... 1,024
Auditing ....................................................... 14,366
Legal .......................................................... 7,704
Trustees' fees and expenses .................................... 7,292
Reports to shareholders ........................................ 8,984
Registration fees .............................................. 65,441
Other .......................................................... 6,854
-------------
Total expenses ................................................. 4,163,415
---------------------------------------------------------------------------------
Net investment income (loss) 3,604,590
---------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
---------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments .................................................... 115,935,617
Foreign currency related transactions .......................... 297,680
-------------
116,233,297
-------------
Net unrealized appreciation (depreciation) during the period on:
Investments .................................................... (196,474,676)
Foreign currency related transactions .......................... (25,766)
-------------
(196,500,442)
---------------------------------------------------------------------------------
Net gain (loss) on investment transactions (80,267,145)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ (76,662,555)
---------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Scudder Variable Life Investment Fund | 88
International Portfolio
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets
-----------------------------------------------------------------------------------------------------------------------------
Six Months Year Ended
Ended June 30, December 31,
Increase (Decrease) in Net Assets 2000 (Unaudited) 1999
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) ........................................................... $ 3,604,590 $ 4,542,149
Net realized gain (loss) on investment transactions .................................... 116,233,297 79,382,785
Net unrealized appreciation (depreciation) on investment transactions during the period. (196,500,442) 221,137,282
--------------- ---------------
Net increase (decrease) in net assets resulting from operations ........................ (76,662,555) 305,062,216
--------------- ---------------
Distributions to shareholders from:
Net investment income:
Class A ................................................................................ (4,323,565) (722,598)
--------------- ---------------
Class B ................................................................................ (1,773) --
--------------- ---------------
Net realized gains:
Class A ................................................................................ (87,912,485) (53,833,552)
--------------- ---------------
Class B ................................................................................ (81,114) (42,651)
--------------- ---------------
Portfolio share transactions:
Class A
Proceeds from shares sold .............................................................. 2,189,354,062 2,032,640,835
Reinvestment of distributions .......................................................... 92,236,050 54,556,150
Cost of shares redeemed ................................................................ (2,121,675,119) (1,971,986,035)
--------------- ---------------
Net increase (decrease) in net assets from Class A share transactions .................. 159,914,993 115,210,950
--------------- ---------------
Class B
Proceeds from shares sold .............................................................. 375,314 116,161
Reinvestment of distributions .......................................................... 82,887 42,651
Cost of shares redeemed ................................................................ (85,922) (33,017)
--------------- ---------------
Net increase (decrease) in net assets from Class B share transactions .................. 372,279 125,795
--------------- ---------------
Increase (decrease) in net assets ...................................................... (8,694,220) 365,800,160
Net assets at beginning of period ...................................................... 874,991,678 509,191,518
Net assets at end of period (including undistributed net investment income of $3,057,986 --------------- ---------------
and $3,778,734, respectively) $ 866,297,458 $ 874,991,678
--------------- ---------------
Other Information
-----------------------------------------------------------------------------------------------------------------------------
Class A
Shares outstanding at beginning of period .............................................. 42,980,529 34,950,563
--------------- ---------------
Shares sold ............................................................................ 123,603,201 130,483,172
Shares issued to shareholders in reinvestment of distributions ......................... 5,610,465 3,831,190
Shares redeemed ........................................................................ (118,859,209) (126,284,396)
--------------- ---------------
Net increase (decrease) in Portfolio shares ............................................ 10,354,457 8,029,966
--------------- ---------------
Shares outstanding at end of period .................................................... 53,334,986 42,980,529
--------------- ---------------
Class B
Shares outstanding at beginning of period .............................................. 33,910 25,342
--------------- ---------------
Shares sold ............................................................................ 20,333 7,601
Shares issued to shareholders in reinvestment of distributions ......................... 5,057 3,004
Shares redeemed ........................................................................ (4,440) (2,037)
--------------- ---------------
Net increase (decrease) in Portfolio shares ............................................ 20,950 8,568
--------------- ---------------
Shares outstanding at end of period .................................................... 54,860 33,910
--------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Scudder Variable Life Investment Fund | 89
International Portfolio
<PAGE>
Financial Highlights
International Portfolio
The following table includes selected data for a share outstanding throughout
each period (a) and other performance information derived from the financial
statements.
Class A (b)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 2000(f) 1999 1998 1997 1996 1995
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $20.34 $14.56 $14.11 $13.25 $11.82 $10.69
-----------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
-----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .07 .12(e) .13 .14 .12 .11
-----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment transactions (2.26) 7.17 2.29 1.04 1.60 1.07
-----------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Total from investment operations (2.19) 7.29 2.42 1.18 1.72 1.18
-----------------------------------------------------------------------------------------------------------------------------
Less distributions from:
-----------------------------------------------------------------------------------------------------------------------------
Net investment income (.09) (.02) (.26) (.21) (.29) (.01)
Net realized gains on investment transactions (1.83) (1.49) (1.71) (.11) -- (.04)
-----------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Total distributions (1.92) (1.51) (1.97) (.32) (.29) (.05)
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $16.23 $20.34 $14.56 $14.11 $13.25 $11.82
-----------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Total Return (%) (10.89)** 54.51 18.49 9.07 14.78 11.11
-----------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
-----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 865 874 509 427 726 548
-----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses (%) .97* 1.03 1.04 1.00 1.05 1.08
-----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) .84* .76 .90 .94 .95 .95
-----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 94* 86 71 61 33 46
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Class B
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 2000(f) 1999 1998 1997(c)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $20.24 $14.51 $14.08 $13.76
-------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
-----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .07 .08(e) .10 (.00)(d)
-----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment transactions (2.26) 7.14 2.29 .32
-------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Total from investment operations (2.19) 7.22 2.39 .32
-----------------------------------------------------------------------------------------------------------------------------
Less distributions from:
-----------------------------------------------------------------------------------------------------------------------------
Net investment income (.04) -- (.25) --
-----------------------------------------------------------------------------------------------------------------------------
Net realized gains on investment transactions (1.83) (1.49) (1.71) --
-------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Total distributions (1.87) (1.49) (1.96) --
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $16.18 $20.24 $14.51 $14.08
-------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Total Return (%) (10.94)** 54.13 18.28 2.33**
-----------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
-----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) .89 .69 .37 .35
-----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses (%) 1.22* 1.28 1.28 1.24*
-----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) .59* .53 .69 (.00)(d)*
-----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 94* 86 71 61**
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) On May 8, 1997, existing shares were designated as Class A shares.
(c) For the period May 8, 1997 (commencement of sale of Class B shares) to
December 31, 1997.
(d) Amount shown is less than one half of $.005.
(e) Net investment income per share includes non-recurring dividend income
amounting to $.03 per share.
(f) For the six months ended June 30, 2000 (Unaudited).
* Annualized
** Not annualized
Scudder Variable Life Investment Fund | 90
International Portfolio
<PAGE>
Notes to Financial Statements (Unaudited)
--------------------------------------------------------------------------------
A. Significant Accounting Policies
Scudder Variable Life Investment Fund (the "Fund") is organized as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940 (the "1940 Act"), as amended, as an open-end, diversified management
investment company. Its shares are divided into nine separate diversified
series, called "Portfolios." The Portfolios are comprised of the Money Market
Portfolio, Bond Portfolio, Balanced Portfolio, Growth and Income Portfolio,
Capital Growth Portfolio, Large Company Growth Portfolio, 21st Century Growth
Portfolio (formerly Small Company Growth Portfolio), Global Discovery Portfolio
and International Portfolio. The Fund is intended to be the funding vehicle for
variable annuity contracts and variable life insurance policies to be offered by
the separate accounts of certain life insurance companies ("Participating
Insurance Companies").
The Fund's financial statements are prepared in accordance with accounting
principles generally accepted in the United States, which require the use of
management estimates. The policies described below are followed consistently by
the Fund in the preparation of the financial statements for its Portfolios.
Multiple Classes of Shares of Beneficial Interest. The Fund offers one class of
shares for the Money Market Portfolio and two classes of shares (Class A shares
and Class B shares) for each of the other Portfolios. Class B shares are subject
to a Rule 12b-1 fee under the 1940 Act, equal to an annual rate of up to 0.25%
of the average daily net asset value of the Class B shares of the applicable
Portfolio. Class A shares are not subject to such fees. In accordance with the
Master Distribution Plan, the 12b-1 fees are remitted to the Participating
Insurance Companies for various costs incurred or paid by the Participating
Insurance Companies in connection with the distribution of Class B shares. Class
B shares for certain Portfolios have not been funded, and thus are not shown in
these financial statements.
Investment income, realized and unrealized gains and losses, and certain
fund-level expenses and expense reductions, if any, are borne pro rata on the
basis of relative net assets by the holders of all classes of shares except that
each class bears certain expenses unique to that class (including the applicable
12b-1 fee). Differences in class expenses may result in payment of different per
share dividends by class. All shares have equal rights with respect to voting
subject to class specific arrangements.
Security Valuation. The Money Market Portfolio values all portfolio securities
utilizing the amortized cost method permitted in accordance with Rule 2a-7 under
the 1940 Act and pursuant to which the Portfolio must adhere to certain
conditions. Under this method, which does not take into account unrealized gains
or losses on securities, an instrument is initially valued at its cost and
thereafter assumes a constant accretion/amortization to maturity of any
discount/premium.
Securities in each of the remaining Portfolios are valued in the following
manner:
Investments are stated at value determined as of the close of regular trading on
the New York Stock Exchange. Securities which are traded on U.S. or foreign
stock exchanges are valued at the most recent sale price reported on the
exchange on which the security is traded most extensively. If no sale occurred,
the security is then valued at the calculated mean between the most recent bid
and asked quotations. If there are no such bid and asked quotations, the most
recent bid quotation is used. Securities quoted on the Nasdaq Stock Market
("Nasdaq"), for which there have been sales, are valued at the most recent sale
price reported. If there are no such sales, the value is the most recent bid
quotation. Securities which are not quoted on Nasdaq but are traded in another
over-the-counter market are valued at the most recent sale price, or if no sale
occurred, at the calculated mean between the most recent bid and asked
quotations on such market. If there are no such bid and asked quotations, the
most recent bid quotation shall be used.
Portfolio debt securities purchased with an original maturity greater than sixty
days are valued by pricing agents approved by the officers of the Fund, whose
quotations reflect broker/dealer-supplied valuations and electronic data
processing techniques. If the pricing agents are unable to provide such
quotations, the most recent bid quotation supplied by a bona fide market maker
shall be used. Money market instruments purchased with an original maturity of
sixty days or less are valued at amortized cost.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Trustees.
Foreign Currency Translations. The books and records of the Portfolios are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S. dollars
at the
Scudder Variable Life Investment Fund | 91
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prevailing exchange rates at period end. Purchases and sales of investment
securities, income and expenses are translated into U.S. dollars at the
prevailing exchange rates on the respective dates of the transactions.
Net realized and unrealized gains and losses on foreign currency transactions
represent net gains and losses between trade and settlement dates on securities
transactions, the disposition of forward foreign currency exchange contracts and
foreign currencies, and the difference between the amount of net investment
income accrued and the U.S. dollar amount actually received. That portion of
both realized and unrealized gains and losses on investments that results from
fluctuations in foreign currency exchange rates is not separately disclosed but
is included with net realized and unrealized gains and losses on investment
securities.
Repurchase Agreements. Each of the Portfolios may enter into repurchase
agreements with certain banks and broker/dealers whereby the Portfolio, through
its custodian or sub-custodian bank, receives delivery of the underlying
securities, the amount of which at the time of purchase and each subsequent
business day is required to be maintained at such a level that the market value
is equal to at least the principal amount of the repurchase price plus accrued
interest.
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange
contract (forward contract) is a commitment to purchase or sell a foreign
currency at the settlement date at a negotiated rate. During the period, the
International Portfolio utilized forward contracts as a hedge against changes in
the exchange rates relating to foreign currency denominated assets.
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Sales and
purchases of forward contracts having the same settlement date and broker are
offset and any gain (loss) is realized on the date of offset; otherwise, gain
(loss) is realized on settlement date. Realized and unrealized gains and losses
which represent the difference between the value of a forward contract to buy
and a forward contract to sell are included in net realized and unrealized gain
(loss) from foreign currency related transactions.
Certain risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their contracts. Additionally,
when utilizing forward contracts to hedge, the Portfolio gives up the
opportunity to profit from favorable exchange rate movements during the term of
the contract.
When Issued/Delayed Delivery Securities. Each Portfolio may purchase securities
with delivery or payment to occur at a later date beyond the normal settlement
period. At the time a Portfolio enters into a commitment to purchase a security,
the transaction is recorded and the value of the security is reflected in the
net asset value. The value of the security may vary with market fluctuations. No
interest accrues to the Portfolio until payment takes place. At the time the
Portfolio enters into this type of transaction it is required to segregate cash
or other liquid assets at least equal to the amount of the commitment.
Federal Income Taxes. Each Portfolio is treated as a single corporate taxpayer
as provided for in the Internal Revenue Code of 1986, as amended. It is each
Portfolio's policy to comply with the requirements of the Internal Revenue Code,
which are applicable to regulated investment companies, and to distribute all of
its taxable income to the separate accounts of the Participating Insurance
Companies which hold its shares. Accordingly, the Portfolios paid no federal
income taxes and no federal income tax provision was required.
Distribution of Income and Gains. All of the net investment income of the Money
Market Portfolio is declared as a daily dividend and is distributed to
shareholders monthly. All other Portfolios will declare and distribute dividends
from their net investment income, if any, in April, although an additional
distribution may be made if necessary. Net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to each Portfolio if not distributed, and, therefore, will be
distributed to shareholders at least annually.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from accounting principles generally accepted in the United
States. These differences primarily relate to investments in forward contracts,
passive foreign investment companies, post October loss deferral, non-taxable
distributions, and certain securities sold at a loss. As a result, net
investment income (loss) and net realized gain (loss) on investment transactions
for a reporting period may differ significantly from distributions during such
period. Accordingly, each Portfolio may periodically make reclassifications
among certain of its capital accounts without impacting the net asset value of
the Portfolio.
Scudder Variable Life Investment Fund | 92
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Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. Interest income is recorded on the accrual
basis. Dividend income is recorded on the ex-dividend date. Certain dividends
from foreign securities may be recorded subsequent to the ex-dividend date as
soon as the Portfolio is informed of such dividends. Realized gains and losses
from investment transactions are recorded on an identified cost basis.
Original issue discounts are accreted for both tax and financial reporting
purposes.
Expenses. Each Portfolio is charged for those expenses which are directly
attributable to it, such as management fees and custodian fees, while other
expenses (reports to shareholders, legal and audit fees) are allocated among the
Portfolios.
B. Ownership of the Portfolios
At the end of the period, the beneficial ownership in the Portfolios was as
follows:
Money Market Portfolio: Two Participating Insurance Companies were owners of
record of 10% or more of the total outstanding shares of the Portfolio, each
owning 72% and 13%, respectively.
Bond Portfolio: Four Participating Insurance Companies were owners of record of
10% or more of the total outstanding shares of the Portfolio, each owning 20%,
11%, 36% and 14%, respectively.
Balanced Portfolio: Three Participating Insurance Companies were owners of
record of 10% or more of the total outstanding shares of the Portfolio, each
owning 38%, 13% and 40%, respectively.
Growth and Income Portfolio: Three Participating Insurance Companies were owners
of record of 10% or more of the total outstanding Class A shares of the
Portfolio, each owning 21%, 41% and 12%, respectively. One Participating
Insurance Company was owner of record of 95% of the total outstanding Class B
shares of the Portfolio.
Capital Growth Portfolio: Two Participating Insurance Companies were owners of
record of 10% or more of the total outstanding Class A shares of the Portfolio,
each owning 16% and 56%, respectively. One Participating Insurance Company was
owner of record of 100% of the total outstanding Class B shares of the
Portfolio.
Large Company Growth Portfolio: Two Participating Insurance Companies were
owners of record of 10% or more of the total outstanding Class A shares of the
Portfolio, each owning 79% and 12%, respectively. One Participating Insurance
Company was owner of record of 100% of the total outstanding Class B shares of
the Portfolio.
21st Century Growth Portfolio: Two Participating Insurance Companies were owners
of record of 10% or more of the total outstanding Class A shares of the
Portfolio, each owning 79% and 15%, respectively. One Participating Insurance
Company was owner of record of 100% of the total outstanding Class B shares of
the Portfolio.
Global Discovery Portfolio: Three Participating Insurance Companies were owners
of record of 10% or more of the total outstanding Class A shares of the
Portfolio, each owning 40%, 32% and 21%, respectively. One Participating
Insurance Company was owner of record of 99% of the total outstanding Class B
shares of the Portfolio.
International Portfolio: Three Participating Insurance Companies were owners of
record of 10% or more of the total outstanding Class A shares of the Portfolio,
each owning 14%, 35% and 16%, respectively. Two Participating Insurance Company
were owners of record of 10% or more of the total outstanding Class B shares of
the Portfolio, each owning 19% and 79%, respectively.
C. Related Parties
Under the Fund's Investment Management Agreement (the "Agreement") with Scudder
Kemper Investments, Inc. (the "Adviser"), the Fund agrees to pay the Adviser a
fee, based on average daily net assets, equal to an annual rate of .370% for the
Money Market Portfolio, .475% for the Bond Portfolio, .475% for the Balanced
Portfolio, .475% for the Growth and Income Portfolio, .975% for the Global
Discovery Portfolio, .625% for the Large Company Growth Portfolio, .875% for the
21st Century Growth Portfolio, .475% for the first $500,000,000, .450% for the
next $500,000,000, and .425% over $1,000,000,000 for the Capital Growth
Portfolio, and .875% for the first $500,000,000, .725% over $500,000,000 for the
International Portfolio, computed and accrued daily and payable
Scudder Variable Life Investment Fund | 93
<PAGE>
monthly. The equivalent annual effective rate for the Capital Growth Portfolio
and the International Portfolio was 0.46% and 0.81%, respectively. As manager of
the assets of each Portfolio, the Adviser directs the investments of the
Portfolios in accordance with their respective investment objectives, policies,
and restrictions. The Adviser determines the securities, instruments, and other
contracts relating to investments to be purchased, sold or entered into by the
Portfolios. In addition to portfolio management services, the Adviser provides
certain administrative services in accordance with the Agreement.
The Trustees authorized the Fund on behalf of each Portfolio to pay Scudder Fund
Accounting Corp., a subsidiary of the Adviser, for determining the daily net
asset value per share and maintaining the portfolio and general accounting
records of the Fund.
Related fees for such services are detailed in each Portfolio's statement of
operations.
Until April 30, 2001, the Adviser has agreed to maintain the expenses for the
Large Company Growth Portfolio and the 21st Century Growth Portfolio, excluding
12b-1 fees, to the extent necessary so that the Portfolios' expenses are
maintained at 1.25% and 1.50% of average daily net assets, respectively.
Effective May 1, 2000 and until April 30, 2001, the Adviser has agreed to
maintain the expenses for the Global Discovery Portfolio, excluding 12b-1 fees,
to the extent necessary so that the Portfolio's expenses are maintained at 1.25%
of average daily net assets.
The Fund pays each Trustee not affiliated with the Adviser an annual retainer
plus specified amounts for attended board and committee meetings. Allocated
Trustees' fees and expenses for each Portfolio for the six months ended June 30,
2000 are detailed in each Portfolio's statement of operations.
D. Line of Credit
The Fund and several other Scudder Funds (the "Participants") share in a $1
billion revolving credit facility for temporary or emergency purposes, including
the meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated pro rata based on net assets among each of the Participants.
Interest is calculated based on the market rates at the time of the borrowing.
Each Portfolio may borrow up to a maximum of 33 percent of its net assets under
the agreement.
E. Expense Off-Set Arrangements
The Money Market Portfolio, Bond Portfolio, Balanced Portfolio, Growth and
Income Portfolio, Capital Growth Portfolio, Large Company Growth Portfolio and
21st Century Growth Portfolio have entered into an arrangement with their
custodian whereby credits as a result of uninvested cash balances were used to
reduce a portion of the Portfolios' expense. During the six months ended June
30, 2000, the custodian fees were reduced as follows:
Custody
Credits ($)
-------------------------------------------------------------------------------
Money Market Portfolio ......................................... 97
Bond Portfolio ................................................. 517
Balanced Portfolio ............................................. 310
Growth and Income Portfolio .................................... 7,198
Capital Growth Portfolio ....................................... 852
Large Company Growth Portfolio ................................. 1,732
21st Century Growth Portfolio .................................. 7,068
Scudder Variable Life Investment Fund | 94
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Notes
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Notes
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Notes
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Notes
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Notes
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Notes
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About the Fund's Adviser
SCUDDER
INVESTMENTS (SM)
[LOGO]
PO Box 2291
Boston, MA 02107-2291
1-800-SCUDDER
www.scudder.com
A member of the [LOGO] Zurich Financial Services Group
Scudder Kemper Investments, Inc. is one of the largest and most experienced
investment management organizations worldwide, managing more than $290 billion
in assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded over 80
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Financial Services Group. As a result, Zurich's subsidiary, Zurich
Kemper Investments, Inc., with 50 years of mutual fund and investment management
experience, was combined with Scudder. Headquartered in New York, Scudder Kemper
Investments offers a full range of investment counsel and asset management
capabilities, based on a combination of proprietary research and disciplined,
long-term investment strategies. With its global investment resources and
perspective, the firm seeks opportunities in markets throughout the world to
meet the needs of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Financial Services Group. The Zurich Financial Services Group is
an internationally recognized leader in financial services, including
property/casualty and life insurance, reinsurance, and asset management.
An investment in the Money Market Portfolio is neither insured nor guaranteed by
the United States Government and there can be no assurance that the Portfolio
will be able to maintain a stable net asset value of $1.00 per share.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
