SCUDDER INVESTMENT TRUST, N-30D, 1997-08-26

SCUDDER INVESTMENT TRUST
N-30D, 1997-08-26

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Scudder
Growth and
Income Fund

Semiannual Report
June 30, 1997

Pure No-Load(TM) Funds

A fund with a disciplined approach to common stock investing offering
opportunities for long-term growth of capital, current income, and growth of
income.

A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.

<PAGE>

Table of Contents
2 In Brief
3 Letter from the Fund's President
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
9 Glossary of Investment Terms
10 Investment Portfolio
18 Financial Statements
21 Financial Highlights
22 Notes to Financial Statements
25 Investment Products and Services
26 Scudder Solutions

In Brief

o For the six-month period ended June 30, 1997, Scudder Growth and Income Fund
provided a total return of 18.73%, a performance that ranked the Fund in the top
14% (87th) of 626 growth and income funds tracked by Lipper Analytical Services,
Inc.

o While taking advantage of most of the stock market's exceptional returns over
the first six months, the Fund's value-oriented, relative-yield approach helped
mitigate the effects of the market's early spring downturn.

o The Fund's disciplined approach to stock selection led to an emphasis on the
manufacturing and health care sectors -- two areas that outperformed the market.

o Morningstar assigned the Fund an overall 5-star rating for its risk-adjusted
performance among 1,997 domestic equity funds as of June 30, 1997.^1

^1 Source: Morningstar. Ratings are subject to change monthly and are calculated
from the Fund's three-, five-, and ten-year average annual returns in excess
of 90-day Treasury bill returns with appropriate fee adjustments, and a risk
factor that reflects Fund performance below 90-day T-bill returns. The Fund
received a 5 star rating for the three-, five-, and ten-year periods among
1,997, 1,134, and 618 domestic equity funds, respectively. In an investment
category, the top 10% of funds receive 5 stars.
Past performance is no guarantee of future results.

2 - Scudder Growth and Income Fund
<PAGE>

Letter From the Fund's President

Dear Shareholders,

We are witnessing a remarkable period in the U.S. stock market. The
six-year rally in stocks continued through the first half of 1997, pausing only
momentarily in March to digest an increase in interest rates before resuming its
rise. Expanding corporate earnings, healthy economic growth, and benign
inflation reports were the primary drivers of the favorable environment, which
has been responsible for an unprecedented rise in stock prices -- especially for
larger capitalization issues. The question on every investor's mind seems to be:
"How long can stocks continue to rise?" The answer is, we do not know.

After such a prolonged upward move, some form or correction would seem
logical. Yet, if the Goldilocks economy persists as "not too hot and not too
cold," U.S. stocks may continue to rise for some time. The keys to this ideal
environment seem to lie in low inflation, stable-to-falling interest rates, and
improving corporate profits. Any change in these factors could threaten the
favorable environment for stocks.

What should investors do in this environment?

Careful Portfolio Diversification

Exposure to sectors that have a lower correlation to the S&P 500 can
provide improved diversification and reduced price volatility over the long
term. Small-cap, international, emerging markets, and fixed income sectors have
not had as a dramatic price run-up and are attractively valued relative to many
U.S. stocks. Adding representation in each of these areas and maintaining cash
reserves can provide balance to your investment portfolio.

I am pleased to announce the addition of Deborah A. Chaplin as a Vice
President and Portfolio Manager in the growth and income investment group.
Before joining Scudder in 1996, Ms. Chaplin spent four years as an analyst and
portfolio manager at a San Francisco-based "relative-yield" driven firm. We are
confident that her experience will be an excellent complement to the Fund's
disciplined investment strategy.

Thank you for your continued investment in Scudder Growth and Income Fund.
If you have any questions about your investment, please call Scudder Investor
Relations at 1-800-225-2470 or visit our Internet Web site at
http://funds.scudder.com.

Sincerely,

/s/Daniel Pierce

President,
Scudder Growth and Income Fund

3 - Scudder Growth and Income Fund
<PAGE>

PERFORMANCE UPDATE as of June 30, 1997
- ----------------------------------------------------------------
FUND INDEX COMPARISONS
- ----------------------------------------------------------------

Total Return
Period Growth --------------
Ended of Average
6/30/97 $10,000 Cumulative Annual
- --------------------------------------
SCUDDER GROWTH AND INCOME FUND
- --------------------------------------
1 Year $13,326 33.26% 33.26%
5 Year $24,114 141.14% 19.25%
10 Year $38,603 286.03% 14.46%

- --------------------------------------
S&P 500 INDEX
- --------------------------------------
1 Year $13,472 34.72% 34.72%
5 Year $24,657 146.57% 19.77%
10 Year $39,260 292.60% 14.64%

- -----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------

A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:

Yearly periods ended June 30

SCUDDER GROWTH AND INCOME FUND
Year Amount
- ----------------------
'87 $10,000
'88 $ 9,494
'89 $11,647
'90 $12,450
'91 $13,313
'92 $16,009
'93 $18,312
'94 $19,711
'95 $23,402
'96 $28,968
'97 $38,603

S&P 500 INDEX
Year Amount
- ----------------------
'87 $10,000
'88 $ 9,310
'89 $11,221
'90 $13,073
'91 $14,037
'92 $15,923
'93 $18,094
'94 $18,349
'95 $23,130
'96 $29,143
'97 $39,260

The Standard & Poor's (S&P) 500 Index is an unmanaged capitalization-weighted
measure of 500 widely held common stocks listed on the New York Stock Exchange,
American Stock Exchange, and Over-The-Counter market. Index returns assume
reinvestment of dividends and, unlike Fund returns, do not reflect any fees
or expenses.
- -----------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
- -----------------------------------------------------------------

A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.

Yearly periods Ended June 30

<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------
NET ASSET VALUE... $13.11 $ 15.38 $13.56 $13.81 $16.04 $17.20 $17.00 $18.53 $21.85 $27.02
INCOME DIVIDENDS.. $ .50 $ .60 $ .71 $ .64 $ .52 $ .51 $ .47 $ .51 $ .56 $ .59
CAPITAL GAINS
DISTRIBUTIONS..... $ 2.36 $ - $ 2.11 $ - $ - $ .54 $ 1.04 $ .94 $ .42 $ 1.18
FUND TOTAL
RETURN (%)........ -5.04 22.68 6.89 6.93 20.25 14.39 7.64 18.72 23.78 33.26
INDEX TOTAL
RETURN (%)........ -6.89 20.52 16.50 7.38 13.43 13.65 1.40 26.07 26.00 34.72
</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.

4 - Scudder Growth and Income Fund

<PAGE>

PORTFOLIO SUMMARY as of June 30, 1997
- ---------------------------------------------------------------------------
ASSET ALLOCATION
- ---------------------------------------------------------------------------
Common Stocks 92%
Convertible Bonds 3%
Convertible Stocks 3%
Cash Equivalents 2%
- --------------------------------------
100%
- --------------------------------------

A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.

We pursue a fully-invested
approach to selecting stocks with
above-average dividends and
attractive valuations.
- --------------------------------------------------------------------------
SECTOR DIVERSIFICATION
(Excludes 3% of Cash Equivalents)
- --------------------------------------------------------------------------
Financial 20%
Manufacturing 20%
Consumer Staples 11%
Health 7%
Energy 7%
Durables 7%
Communications 7%
Utilities 6%
Consumer Discretionary 5%
Other 10%
- ---------------------------------------------
100%
- ---------------------------------------------

A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.

Healthcare was the best
performing sector followed by
finance, manufacturing and
consumer staples.
- --------------------------------------------------------------------------
10 LARGEST EQUITY HOLDINGS
(22% OF PORTFOLIO)
- --------------------------------------------------------------------------
1. XEROX CORP.
Leading manufacturer of copiers and duplicators

2. PHILIPS ELECTRONICS NV
Leading manufacturer of electrical equipment

3. PHILIP MORRIS COMPANIES INC.
Tobacco, food products and brewing

4. UNILEVER NV
Diversified conglomerate

5. H. J. HEINZ CO.
Major manufacturer of processed foods

6. STUDENT LOAN MARKETING ASSOCIATION
Student loan financing programs

7. TRW INC.
Defense electronics, automotive parts and systems

8. IMPERIAL CHEMICAL INDUSTRIES PLC
Leading international chemical producer

9. POWERGEN PLC
Electric utility in the United Kingdom

10. GTE CORP.
Nationwide telecommunications company

The Fund's top holdings were
important contributors to
performance as Xerox
returned 51% and Philips
Electronics returned 83% for
the six months.

For more complete details about the Fund's investment portfolio,
see page 10. A monthly Investment Portfolio Summary and quarterly Portfolio
Holdings are available upon request.

5 - Scudder Growth and Income Fund

<PAGE>

Portfolio Management Discussion

An Interview with Robert T. Hoffman
Lead Portfolio Manager,
Scudder Growth and Income Fund

Mr. Hoffman joined Scudder in 1990 and heads Scudder's growth and income
investment group. He holds an AB in economics from Dartmouth College and an MM
from the Kellogg School at Northwestern University. Other team members include
Lori J. Ensinger, Deborah A. Chaplin, Benjamin W. Thorndike, and Kathleen T.
Millard.

Q. How has the Fund performed?

A. Although the Fund's approach can lag the market somewhat during a strong bull
market, the Fund performed very well, returning 18.73% for the six-month period
ended June 30, 1997. This return resulted in a ranking in the top 14% (87th) of
626 growth and income funds as tracked by Lipper Analytical Services, Inc. This
performance was roughly in keeping with the 20.61% return of the S&P 500 Index
for the same period. The Fund's total return represents an increase in its net
asset value from $23.23 at the end of 1996 to $27.02 on June 30, 1997, and
income distributions of 14 cents per share and a capital gains distribution of
36 cents per share. Because the Fund invests in stocks with attractive
valuations and above-average market yields, it tends to have lower volatility
than the market.

Q. How does the Fund stack up over the longer term?

A. The Fund's longer-term performance has been quite good. For the trailing
twelve-month period that ended June 30, the Fund returned 33.26%. This return
placed the Fund among the top 15% (81st) of 547 growth and income funds as
measured by Lipper Analytical Services, Inc. Longer-term, the Fund ranked among
the top 19% (40th) of 216 funds for the five-year period and among the top 13%
(17th) of 127 funds for the ten-year period.

Q. That's consistently above-average performance. What do you attribute it to?

A. We believe that one of the primary reasons for the success of our growth and
income strategy is strict adherence to a well-defined investment discipline.
This discipline is dictated by two core components: attractive valuations and
fundamental research. Stocks become potential buy candidates for the Fund when
their yield reaches a minimum 20% premium to the S&P 500 Index yield. Sell
candidates have yields that have declined to about 75% of the S&P. We consider
these valuation indicators along with fundamental factors provided by our global
industry analysts, who evaluate each company's long-term growth prospects. Our
emphasis is on stocks with expectations that are already low and that have
opportunity to benefit as the company recovers from a temporary slump. While we
wait, shareholders collect above-average dividends. Stocks with these
characteristics have provided our shareholders with attractive long-term total
returns and relatively low price volatility.

Q. What was the investment environment like over the six-month period?

A. If the last six months could be characterized as a movie title, we might call
it: "The Best of All Worlds, Part 6," reflecting the six-year bull market which
has resulted in several new records for the Dow Jones and S&P indices. We say
"the best of all worlds" because reports of strong corporate earnings and benign

6 - Scudder Growth and Income Fund
<PAGE>

inflation have provided a potent and positive environment for investing. The
economy's robust 4.9% growth rate in the first quarter raised concerns about
accelerating inflation, which encouraged the Federal Reserve (the Fed) to
increase short-term interest rates on March 25. While stocks and bonds initially
declined on this news, the economy has subsequently slowed, inflation has
continued to moderate, and the Fed has passed up two opportunities since March
to raise rates. Against this backdrop, and supported by another quarter of
strong corporate earnings, the market rebounded in the second quarter for one of
its strongest quarterly returns in history.

Q. Are stocks overvalued?

A. Since the end of June, stocks have continued to rise, and while the major
stock market indices may have climbed above their fair market valuations, the
overall level of the market is not our primary concern. In managing the Fund, we
stay fully invested and focus on buying stocks that are attractively valued
relative to the market.

Q. What has been the key contributor to the Fund's performance?

A. The driver of portfolio performance centered in the manufacturing sector. For
example, Xerox, our largest holding, returned 51% for the six-month period. This
was due to key, company-specific events, namely an impressive new product
introduction in modular-based digital office copiers, and an announcement that
the company was acquiring the remaining 20% interest in Rank Xerox, which had
been the cornerstone of Xerox's European strategy. Another manufacturing stock,
Philips Electronics, returned 83% for the period, both on news that it had
acquired Lucent's consumer communications division and as investors began to
believe that the company's plans for asset restructuring would improve returns
on capital and lead to better focus on their core businesses.

Q. Health care has been the strongest performing sector of the S&P 500 for the
first half of 1997. What has driven returns here?

A. Drug stocks, which are included in the health care sector, were primarily
responsible for the sector's excellent performance, gaining 31% in the first
half. Earnings acceleration from new product introductions, favorable long-term
demographic trends, and seemingly inexhaustible streams of free cash flow have
made this group one of the strongest performing market sectors over the last
couple of years. The Fund benefited from this strong performance, as portfolio
holdings were concentrated in drug stocks. The Fund's largest holding in this
sector has been Warner-Lambert, an excellent performer during the period. This
kind of dramatic outperformance always forces one to ask how much higher the
stocks can rise and whether their current levels are sustainable. As drug stocks
have become more fully valued, we have been gradually reducing our holdings.

Q. The Fund's finance holdings have also provided strong returns, but lagged
the sector average. Why?

A. The mixed results in this sector were due to our real estate investment trust
(REIT) holdings, which, despite strong absolute returns, have continued to lag
banking and insurance stocks. During the past several months, we have been

7 - Scudder Growth and Income Fund
<PAGE>

scaling back REITs that have posted strong gains, such as Equity Residential
Properties. Although we remain confident about the strength of their management
teams, we also recognize that current growth expectations may not be
sustainable, which could mute further expansion of price-to-earnings multiples.
We did, however, see admirable returns in our insurance holdings, led by Exel
Limited and Lincoln National, as well as Sallie Mae, one of our top ten
holdings.

Q. How likely is it that the market will continue to steam ahead at full
throttle?

A. It's possible, especially if the inflationary data continues to support
manageable economic growth. However, we should point out that the market appears
rather sensitive to new news, whether it is related to corporate earnings or
economic activity. Any reversal of data, any major earnings disappointments, or
a renewed desire by the Fed to apply further restraint on the economy -- and on
the capital markets -- could add some bumps to the road ahead. We believe our
relative-yield strategy is one that can take advantage of the healthy economic
environment while providing some downside protection should conditions become
less favorable.

8 - Scudder Growth and Income Fund
<PAGE>

Glossary of Investment Terms

DIVIDEND YIELD With stocks, a company's payment out of earnings
to shareholders divided by its share price. For
example, a stock that sells for $10 and pays annual
dividends totaling $1 has a yield of 10%; if the stock
price goes up to $20, the yield would fall to 5%.

FUNDAMENTAL Analysis of the projected impact of management,
RESEARCH products, sales, and earnings on corporate balance
sheets and income statements. Distinct from technical
analysis, which evaluates the attractiveness of a stock
based on historical price and trading volume movements,
rather than the financial results of the underlying
company.

LIQUIDITY A stock that is liquid has enough shares outstanding
and a substantial enough market capitalization to allow
large purchases and sales to occur without causing a
significant move in its market price. Investors who
believe that the stock market is near a peak often
prize liquidity.

MARKET The value of a company's outstanding shares of common
CAPITALIZATION stock, determined by the number of shares outstanding
multiplied by the share price (shares x price = market
capitalization). The universe of publicly-traded
companies is frequently divided into large-, mid-, and
small-capitalizations. "Large-cap" stocks tend to be
more liquid and less volatile, while "small-cap" stocks
in the aggregate have more potential for earnings
growth and are more volatile.

OVER/UNDER Refers to the allocation of assets -- usually by
WEIGHTING sector, industry, or country -- within an investment
portfolio, relative to a benchmark index or investment
universe.

PRICE/EARNINGS A widely used gauge of a stock's valuation, that
RATIO indicates what investors are paying for a company's
earning power at the current stock price. May be based
on a company's projected earnings for the coming 12
months. A higher "earnings multiple" indicates higher
expected earnings growth and greater risk; a lower p/e
is usually associated with mature or out-of-favor
companies, and lower stock price volatility.

VALUE STOCK A company whose stock price does not fully reflect its
intrinsic value, as indicated by price/earnings ratio,
price/book value ratio, dividend yield, or some other
valuation measure, relative to its industry or the
market overall. Value stocks tend to display lower
price volatility and carry higher dividend yields.

9 - Scudder Growth and Income Fund
<PAGE>
Investment Portfolio as of June 30, 1997 (Unaudited)

<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements 0.5%
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 6/30/97 at 5.9%, to
be repurchased at $28,257,630 on 7/1/97, collateralized by a $24,288,000 U.S.
Treasury Note, 6.625%, 7/31/01 and by a $3,207,000 U.S. Treasury Note, 6.50%, -------------
8/31/01 (Cost $28,253,000) ............................................................ 28,253,000 28,253,000
-------------

Commercial Paper 2.3%
- ------------------------------------------------------------------------------------------------------------------------------
Bank of Montreal Discount Note, 7/16/97 ................................................. 30,000,000 29,931,063
Centric Funding Corp. Discount Note, 7/10/97 ............................................ 15,000,000 14,979,000
Dresdner US Finance Inc. Discount Note, 7/2/97 .......................................... 50,000,000 49,992,278
Preferred Receivables Funding Corp. Discount Note, 7/17/97 .............................. 6,775,000 6,758,258
Private Export Funding Corp. Discount Note, 7/3/97 ...................................... 4,000,000 3,998,784
Private Export Funding Corp. Discount Note, 7/24/97 ..................................... 12,700,000 12,655,211
Virginia Electric & Power Co. Discount Note, 7/21/97 .................................... 13,000,000 12,959,772
- ------------------------------------------------------------------------------------------------------------------------------
Total Commercial Paper (Cost $131,274,366) 131,274,366
- ------------------------------------------------------------------------------------------------------------------------------

Corporate Bonds 0.1%
- ------------------------------------------------------------------------------------------------------------------------------
Technology -------------
Adaptec Inc., 4.75%, 2/1/04 (Cost $5,500,000) ........................................... 5,500,000 5,458,750
-------------

Convertible Bonds 3.5%
- ------------------------------------------------------------------------------------------------------------------------------
Consumer Discretionary 0.6%
Department & Chain Stores
Federated Department Stores, Inc., Debenture, 5%, 10/1/03 ............................... 11,700,000 13,893,750
Home Depot Inc., 3.25%, 10/1/01 ......................................................... 16,500,000 18,810,000
------------
32,703,750
------------
Health 0.2%
Pharmaceuticals
Sandoz Capital BVI Ltd., Debenture, 2%, 10/6/02 ......................................... 5,810,000 8,685,950
------------
Financial 1.6%
Banks 1.1%
Deutsche Bank Financial Inc., Convertible to Daimler Benz AG, 2/12/17 ................... 97,410,000 44,662,485
MBL International Finance Bermuda, 3%, 11/30/02 ......................................... 16,140,000 17,673,300
------------
62,335,785
------------
Other Financial Companies 0.2%
First Financial Management Corp., Debenture, 5%, 12/15/99 ............................... 4,560,000 9,262,500
------------
Real Estate 0.3%
Security Capital Corp., Debenture, 6.5%, 3/29/16 (b) (c) ................................ 16,750,000 18,364,700
------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

10 - Scudder Growth and Income Fund
<PAGE>

<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Service Industries 0.8%
Miscellaneous Commercial Services 0.5%
ADT Operations Inc., Liquid Yield Option Note, 7/6/10 ................................... 24,000,000 22,740,000
Jardine Strategic Holdings Ltd., Debenture, 7.5%, 5/7/49 ................................ 6,151,000 7,565,730
------------
30,305,730
------------
Miscellaneous Consumer Services 0.3%
CUC International Inc., 3%, 2/15/02 ..................................................... 14,000,000 14,857,500
------------
Durables 0.1%
Automobiles
Magna International, Inc., Debenture, 5%, 10/15/02 ...................................... 6,700,000 7,989,750
------------
Manufacturing 0.1%
Diversified Manufacturing
Thermo Electron Corp., 4.25%, 1/1/03 .................................................... 5,000,000 5,437,500
------------
Technology 0.1%
Electronic Components/Distributors
HMT Technology Corp., 5.75%, 1/15/04 .................................................... 5,300,000 4,465,250
- ------------------------------------------------------------------------------------------------------------------------------
Total Convertible Bonds (Cost $161,691,425) 194,408,415
- ------------------------------------------------------------------------------------------------------------------------------

Shares
- ------------------------------------------------------------------------------------------------------------------------------
Convertible Preferred Stocks 1.7%
- ------------------------------------------------------------------------------------------------------------------------------
Consumer Discretionary 0.7%
Department & Chain Stores
K Mart, 7.75% ........................................................................... 744,100 40,832,487
------------
Financial 0.2%
Consumer Finance 0.0%
Advanta Corp., 6.75% .................................................................... 7,500 256,875
------------
Real Estate 0.2%
Security Capital Industrial Trust "B", 7% ............................................... 308,300 8,593,862
------------
Manufacturing 0.4%
Containers & Paper 0.1%
Boise Cascade Corp. "G", Cum $1.58 ...................................................... 60,100 1,712,850
International Paper Co., 5.25% .......................................................... 47,000 2,491,000
------------
4,203,850
------------
Industrial Specialty 0.2%
Cooper Industries, Inc. 6% .............................................................. 606,300 13,944,900
------------
Office Equipment/Supplies 0.1%
Ikon Office Solutions, Inc., 5.04% ...................................................... 96,100 6,186,437
------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

11 - Scudder Growth and Income Fund
<PAGE>

<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Energy 0.2%
Oil & Gas Production
Parker & Parsley Capital Corp., 6.25% ................................................... 180,500 11,540,719
------------
Metals & Minerals 0.2%
Precious Metals
Freeport McMoRan Copper & Gold, Inc., Cum. $1.25 ........................................ 500,000 13,687,500
- ------------------------------------------------------------------------------------------------------------------------------
Total Convertible Preferred Stocks (Cost $89,720,532) 99,246,630
- ------------------------------------------------------------------------------------------------------------------------------

Common Stocks 91.9%
- ------------------------------------------------------------------------------------------------------------------------------
Consumer Discretionary 3.8%
Department & Chain Stores
J.C. Penney Co., Inc. ................................................................... 745,600 38,911,000
May Department Stores ................................................................... 713,800 33,727,050
Mercantile Stores, Inc. ................................................................. 104,800 6,595,850
Rite Aid Corp. .......................................................................... 1,488,700 74,248,912
Sears, Roebuck & Co. .................................................................... 1,205,500 64,795,625
------------
218,278,437
------------
Consumer Staples 10.7%
Alcohol & Tobacco 3.4%
Anheuser-Busch Companies, Inc. .......................................................... 1,030,400 43,212,400
Philip Morris Companies, Inc. ........................................................... 2,855,100 126,695,062
RJR Nabisco Holdings Corp. .............................................................. 788,580 26,023,140
------------
195,930,602
------------
Consumer Electronic & Photographic Products 1.1%
Whirlpool Corp. ......................................................................... 1,116,500 60,919,031
------------
Food & Beverage 4.9%
General Mills, Inc. ..................................................................... 559,500 36,437,437
H.J. Heinz Co. .......................................................................... 2,616,650 120,692,981
Unilever NV ............................................................................. 100,000 21,050,487
Unilever NV (New York shares) ........................................................... 471,300 102,743,400
------------
280,924,305
------------
Package Goods/Cosmetics 1.3%
Kimberly-Clark Corp. .................................................................... 1,439,600 71,620,100
------------
Health 7.1%
Pharmaceuticals
American Home Products Corp. ............................................................ 705,800 53,993,700
Baxter International Inc. ............................................................... 1,088,100 56,853,225
</TABLE>

The accompanying notes are an integral part of the financial statements.

12 - Scudder Growth and Income Fund
<PAGE>

<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Bristol-Myers Squibb Co. ................................................................ 1,023,600 82,911,600
Schering-Plough Corp. ................................................................... 1,689,000 80,860,875
SmithKline Beecham PLC (ADR) ............................................................ 590,200 54,077,075
Warner-Lambert Co. ...................................................................... 249,800 31,037,650
Zeneca Group PLC ........................................................................ 1,356,100 44,850,133
------------
404,584,258
------------
Communications 7.0%
Telephone/Communications
Alltel Corp. ............................................................................ 1,825,400 61,036,813
Bell Atlantic Corp. ..................................................................... 755,700 57,338,738
BellSouth Corp. ......................................................................... 996,700 46,221,963
Frontier Corp. .......................................................................... 1,168,800 23,302,950
GTE Corp. ............................................................................... 2,061,100 90,430,763
NYNEX Corp. ............................................................................. 973,500 56,097,937
Sprint Corp. ............................................................................ 1,058,100 55,682,512
Telecom Corp. of New Zealand ............................................................ 1,901,000 9,684,407
------------
399,796,083
------------
Financial 17.8%
Banks 7.5%
AmSouth Bancorp. ........................................................................ 352,500 13,328,906
Banc One Corp. .......................................................................... 1,169,300 56,637,969
BankAmerica Corp. ....................................................................... 223,000 14,397,438
Bankers Trust New York Corp. ............................................................ 594,000 51,678,000
Chase Manhattan Corp. ................................................................... 607,400 58,955,763
CoreStates Financial Corp. .............................................................. 877,800 47,181,750
First Bank System Inc. .................................................................. 584,700 49,918,763
First Chicago NBD Corp. ................................................................. 273,600 16,552,800
J.P. Morgan & Co., Inc. ................................................................. 503,300 52,531,937
KeyCorp ................................................................................. 869,800 48,600,075
NationsBank Corp. ....................................................................... 214,600 13,841,700
------------
423,625,101
------------
Insurance 3.6%
EXEL, Ltd. .............................................................................. 916,000 48,319,000
Lincoln National Corp. .................................................................. 968,200 62,327,875
Mid Ocean, Ltd. ......................................................................... 702,800 36,853,075
Safeco Corp. ............................................................................ 1,077,700 50,315,119
</TABLE>

The accompanying notes are an integral part of the financial statements.

13 - Scudder Growth and Income Fund
<PAGE>

<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Transamerica Corp. ...................................................................... 45,200 4,229,025
------------
202,044,094
------------
Other Financial Companies 2.9%
Federal National Mortgage Association ................................................... 1,044,400 45,561,950
Student Loan Marketing Association ...................................................... 942,800 119,735,600
------------
165,297,550
------------
Real Estate 3.8%
Avalon Properties, Inc. (REIT) .......................................................... 217,100 6,214,488
Camden Property Trust (REIT) ............................................................ 338,500 10,705,063
Charles E. Smith Residential Realty, Inc. (REIT) ........................................ 73,800 2,130,975
Developers Diversified Realty Corp. ..................................................... 224,700 8,988,000
General Growth Properties, Inc. (REIT) (d) .............................................. 1,588,600 53,218,100
Health Care Property Investment Inc. (REIT) ............................................. 359,300 12,665,325
Mark Centers Trust (REIT) ............................................................... 31,400 302,225
Meditrust SBI (REIT) .................................................................... 468,400 18,677,450
Nationwide Health Properties Inc. (REIT) ................................................ 604,800 13,305,600
Post Properties Inc. (REIT) ............................................................. 61,900 2,510,819
Security Capital Corp. (b) (c) .......................................................... 15,968 20,198,999
Security Capital Industrial Trust (REIT) ................................................ 1,261,925 27,131,387
Security Capital US Realty (REIT) ....................................................... 1,854,670 27,634,583
Spieker Properties, Inc. ................................................................ 150,000 5,278,125
Vornado Realty Trust (REIT) ............................................................. 88,800 6,404,700
------------
215,365,839
------------
Durables 6.6%
Aerospace 3.0%
Lockheed Martin Corp. ................................................................... 472,328 48,915,468
Rockwell International Corp. ............................................................ 1,149,600 67,826,400
United Technologies Corp. ............................................................... 628,700 52,182,100
------------
168,923,968
------------
Automobiles 2.9%
Dana Corp. .............................................................................. 1,401,100 53,241,800
Eaton Corp. ............................................................................. 326,800 28,533,725
Ford Motor Co. .......................................................................... 2,233,200 84,303,300
------------
166,078,825
------------
Construction/Agricultural Equipment 0.7%
PACCAR, Inc. ............................................................................ 899,200 41,756,600
------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

14 - Scudder Growth and Income Fund
<PAGE>

<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Manufacturing 18.7%
Chemicals 5.5%
Akzo-Nobel NV ........................................................................... 277,030 37,964,782
Dow Chemical Co. ........................................................................ 484,700 42,229,488
E.I. du Pont de Nemours & Co. ........................................................... 684,400 43,031,650
Eastman Chemical Co. .................................................................... 852,100 54,108,350
Imperial Chemical Industries PLC ........................................................ 8,357,000 116,067,125
Lyondell Petrochemical Co. .............................................................. 948,900 20,697,881
------------
314,099,276
------------
Containers & Paper 0.6%
Westvaco Corp. .......................................................................... 1,090,300 34,276,306
------------
Diversified Manufacturing 3.1%
Olin Corp. .............................................................................. 1,351,200 52,781,250
St. Joe Paper Co. ....................................................................... 93,100 7,797,125
TRW Inc. ................................................................................ 2,044,400 116,147,475
------------
176,725,850
------------
Electrical Products 3.5%
Philips Electronics NV .................................................................. 1,737,800 124,476,377
Philips Electronics NV (New York shares) ................................................ 387,700 27,865,937
Thomas & Betts Corp. .................................................................... 830,800 43,668,925
------------
196,011,239
------------
Industrial Specialty 0.3%
Corning Inc. ............................................................................ 320,300 17,816,688
------------
Machinery/Components/Controls 0.4%
S.K.F. AB "B" (Free) .................................................................... 785,000 20,296,038
------------
Office Equipment/Supplies 3.4%
Xerox Corp. ............................................................................. 2,459,600 194,000,950
------------
Specialty Chemicals 1.9%
ARCO Chemical Co. ....................................................................... 180,000 8,561,250
BetzDearborn Inc. ....................................................................... 613,800 40,510,800
Witco Corp. ............................................................................. 1,537,500 58,328,906
------------
107,400,956
------------
Technology 0.5%
Electronic Components/Distributors
AMP Inc. ................................................................................ 652,100 27,225,175
------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

15 - Scudder Growth and Income Fund
<PAGE>

<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Energy 6.0%
Oil Companies
Exxon Corp. ............................................................................. 589,600 36,260,400
Pennzoil Co. ............................................................................ 131,200 10,069,600
Royal Dutch Petroleum Co. (New) ......................................................... 916,000 49,807,500
Societe Nationale Elf Aquitaine ......................................................... 731,000 78,862,967
Texaco Inc. ............................................................................. 407,700 44,337,375
Total SA "B" ............................................................................ 510,323 51,581,987
Total SA (ADR) .......................................................................... 396,253 20,060,308
YPF S.A. "D" (ADR) ...................................................................... 1,580,200 48,591,150
------------
339,571,287
------------
Metals & Minerals 1.9%
Steel & Metals
Allegheny Teledyne Inc. ................................................................. 1,879,015 50,733,405
Freeport McMoRan Copper & Gold, Inc. "A" ................................................ 542,590 15,870,758
J & L Specialty Steel, Inc. ............................................................. 1,709,700 20,516,400
Phelps Dodge Corp. ...................................................................... 268,400 22,864,325
------------
109,984,888
------------
Construction 2.4%
Building Materials 0.4%
Martin Marietta Materials, Inc. ......................................................... 733,399 23,743,793
------------
Forest Products 2.0%
Georgia Pacific Corp. ................................................................... 761,200 64,987,450
Louisiana-Pacific Corp. ................................................................. 461,900 9,757,637
Weyerhaeuser Co. ........................................................................ 766,600 39,863,200
------------
114,608,287
------------
Transportation 2.4%
Railroads
CSX Corp. ............................................................................... 908,100 50,399,550
Canadian National Railway ............................................................... 809,800 35,301,756
Norfolk Southern Corp. .................................................................. 120,100 12,100,075
Union Pacific Corp. ..................................................................... 577,700 40,727,850
------------
138,529,231
------------
Utilities 7.0%
Electric Utilities
Boston Edison Co. ....................................................................... 124,700 3,288,963
CINergy Corp. ........................................................................... 494,500 17,214,781
</TABLE>

The accompanying notes are an integral part of the financial statements.

16 - Scudder Growth and Income Fund
<PAGE>

(a) The cost for federal income tax purposes was $3,897,015,093. At June 30,
1997, net unrealized appreciation for all securities based on tax cost was
$1,791,663,342. This consisted of aggregate gross unrealized appreciation
for all securities in which there was an excess of market value over tax
cost of $1,805,712,449 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$14,049,107.

(b) Securities valued in good faith by the Valuation Committee of the Board of
Trustees at fair value amounted to $38,563,699 (.68% of net assets). Their
values have been estimated by the Board of Trustees in the absence of
readily ascertainable market values. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly
from the values that would have been used had a ready market for the
securities existed, and the difference could be material. The cost of
these securities at June 30, 1997 aggregated $33,500,000. These securities
may also have certain restrictions as to resale.

(c) Restricted Securities -- securities which have not been registered with
the Securities and Exchange Commission under the Securities Act of 1933.
Information concerning such restricted securities at June 30, 1997 is as
follows:

Security Acquisition Date Cost ($)
-------- ---------------- --------
Security Capital Corp., Debenture, 6.5%,
3/29/16 4/18/96 16,750,000
Security Capital Corp. 4/18/96 16,750,000

(d) Affiliated Issuer (See Notes to Financial Statements)

The accompanying notes are an integral part of the financial statements.

17 - Scudder Growth and Income Fund
<PAGE>

Financial Statements

Statement of Assets and Liabilities

as of June 30, 1997 (Unaudited)

<TABLE>
<S> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at market:
Unaffiliated issuers (identified cost $3,863,165,541) .............. $5,635,460,335
Affiliated issuers (identified cost $36,525,512) ................... 53,218,100
----------------
Total investments, at market (identified cost $3,899,691,053) ......... $5,688,678,435
Collateral held for securities loaned ................................. 272,270,200
Dividends and interest receivables .................................... 17,321,562
Receivable for Fund shares sold ....................................... 10,077,145
Receivable for foreign tax recoverable ................................ 2,321,693
Other assets .......................................................... 77,326
----------------
Total assets .......................................................... 5,990,746,361
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Collateral on securities loaned ....................................... 272,270,200
Payable for investments purchased ..................................... 92,087
Payable for Fund shares redeemed ...................................... 26,932,421
Accrued management fee ................................................ 2,116,188
Other payables and accrued expenses ................................... 1,977,658
----------------
Total liabilities ..................................................... 303,388,554
-------------------------------------------------------------------------------------------
Net assets, at market value $5,687,357,807
-------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ................................... 41,822,449
Net unrealized appreciation (depreciation) on:
Investments ........................................................ 1,788,987,382
Foreign currency related transactions .............................. (44,823)
Accumulated net realized gain ......................................... 125,608,750
Paid-in capital ....................................................... 3,730,984,049
-------------------------------------------------------------------------------------------
Net assets, at market value $5,687,357,807
-------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, offering and redemption price per share
($5,687,357,807 / 210,477,109 shares of capital stock
outstanding, $.01 par value, unlimited ------------------
number of shares authorized) ....................................... $27.02
------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

18 - Scudder Growth and Income Fund
<PAGE>

Statement of Operations

six months ended June 30, 1997 (Unaudited)

<TABLE>
<S> <C>
Investment Income
- ----------------------------------------------------------------------------------------------------------------------------
Income:
Dividends -- Unaffiliated issuers (net of foreign taxes
withheld of $1,195,576) ............................................ $ 73,673,930
Dividends -- Affiliated issuers ....................................... 714,870
Interest .............................................................. 8,224,867
----------------
82,613,667
----------------
Expenses:
Management fee ........................................................ 11,471,637
Services to shareholders .............................................. 6,185,632
Custodian and accounting fees ......................................... 549,643
Trustees' fees and expenses ........................................... 22,950
Reports to shareholders ............................................... 393,332
Registration fees ..................................................... 297,840
Auditing .............................................................. 27,150
Legal ................................................................. 10,644
Other ................................................................. 46,206
----------------
19,005,034
-------------------------------------------------------------------------------------------
Net investment income 63,608,633
-------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ........................................................... 125,340,576
Foreign currency related transactions ................................. (263,933)
----------------
125,076,643
----------------
Net unrealized appreciation (depreciation) during the period on:
Investments ........................................................... 671,878,857
Foreign currency related transactions ................................. (59,180)
----------------
671,819,677
-------------------------------------------------------------------------------------------
Net gain on investment transactions 796,896,320
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 860,504,953
-------------------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

19 - Scudder Growth and Income Fund
<PAGE>

Statements of Changes in Net Assets

<TABLE>
<CAPTION>
Six Months
Ended
June 30, Year Ended
1997 December 31,
Increase (Decrease) in Net Assets (Unaudited) 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ....................................... $ 63,608,633 $ 99,189,004
Net realized gain from investment transactions .............. 125,076,643 212,741,586
Net unrealized appreciation on investment
transactions during the period ............................ 671,819,677 415,550,751
---------------- -----------------
Net increase in net assets resulting from operations ........ 860,504,953 727,481,341
---------------- -----------------
Distributions to shareholders from:
Net investment income ....................................... (28,187,981) (95,258,805)
---------------- -----------------
Net realized gains on investment transactions ............... (69,849,234) (149,937,532)
---------------- ----------------
Fund share transactions:
Proceeds from shares sold ................................... 1,101,007,812 1,116,527,351
Net asset value of shares issued to shareholders in
reinvestment of distributions ............................. 90,936,914 224,992,117
Cost of shares redeemed ..................................... (453,535,862) (698,530,847)
---------------- -----------------
Net increase in net assets from Fund share transactions ..... 738,408,864 642,988,621
---------------- -----------------
Increase in net assets ...................................... 1,500,876,602 1,125,273,625
Net assets at beginning of period ........................... 4,186,481,205 3,061,207,580
Net assets at end of period (including undistributed net
investment income of $41,822,449 and $6,401,797, ----------------- ------------------
respectively) ............................................. $5,687,357,807 $4,186,481,205
----------------- ------------------
Other Information
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ................... 180,244,068 151,318,741
---------------- -----------------
Shares sold ................................................. 44,845,183 51,282,565
Shares issued to shareholders in reinvestment
of distributions .......................................... 3,767,974 9,848,328
Shares redeemed ............................................. (18,380,116) (32,205,566)
---------------- -----------------
Net increase in Fund shares ................................. 30,233,041 28,925,327
----------------- ------------------
Shares outstanding at end of period ......................... 210,477,109 180,244,068
----------------- ------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

20 - Scudder Growth and Income Fund

<PAGE>

Financial Highlights

The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.

<TABLE>
<CAPTION>
Six Months
Ended
June 30,
1997(d) Years Ended December 31,
(Unaudited) 1996(d) 1995 1994 1993(b) 1992 1991 1990 1989 1988 1987
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning ----------------------------------------------------------------------------------------------------
of period ................ $23.23 $20.23 $16.26 $17.24 $16.20 $15.76 $12.77 $14.14 $13.18 $12.31 $15.02
----------------------------------------------------------------------------------------------------
Income from investment
operations: .............. .32 .60 .55 .49 .49 .57 .57 .65 .67 .60 .68
Net investment income
Net realized and unrealized
gain (loss) on
investment transactions .. 3.97 3.84 4.46 (.05) 2.01 .90 2.97 (1.01) 2.75 .86 (.07)
Total from investment ----------------------------------------------------------------------------------------------------
operations ............... 4.29 4.44 5.01 .44 2.50 1.47 3.54 (.36) 3.42 1.46 .61
----------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income ...... (.14) (.57) (.56) (.51) (.45) (.53) (.55) (.67) (.69) (.59) (.68)
Net realized gains on
investment transactions .. (.36) (.87) (.48) (.91) (1.01) (.50) -- (.34) (1.77) -- (2.64)
----------------------------------------------------------------------------------------------------
Total distributions ........ (.50) (1.44) (1.04) (1.42) (1.46) (1.03) (.55) (1.01) (2.46) (.59) (3.32)
----------------------------------------------------------------------------------------------------
Net asset value, ----------------------------------------------------------------------------------------------------
end of period ............ $27.02 $23.23 $20.23 $16.26 $17.24 $16.20 $15.76 $12.77 $14.14 $13.18 $12.31
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return (%) ........... 18.73* 22.18 31.18 2.60 15.59 9.57 28.16 (2.33) 26.36 12.01 3.50
Ratios and Supplemental Data
Net assets, end of period
($ millions) ............. 5,687 4,186 3,061 1,992 1,624 1,166 723 491 490 402 392
Ratio of operating expenses .79** .78 .80 .86 .86 .94(a) .97 .95 .87 .92 .89
to average net assets (%)
Ratio of net investment
income to average net
assets (%) ............... 2.64** 2.77 3.10 2.98 2.93 3.60 4.03 5.03 4.47 4.63 4.24
Portfolio turnover rate (%) 19.4** 26.6 26.9 42.3 35.5 27.5 44.7 64.7 76.6 47.6 59.5
Average commission rate .... $.0671 $.0572 $-- $-- $-- $-- $-- $-- $-- $-- $--
paid (c)
</TABLE>

(a) The Adviser did not impose a portion of its management fee amounting to $.02
per share for the year ended December 31, 1992. If all expenses, including
the management fee not imposed, had been incurred by the Fund, the
annualized ratio of expenses to average net assets for such year would have
been 1.08% and the total return would have been lower. This ratio includes
costs associated with the acquisition of certain assets of Niagara Share
Corporation on July 27, 1992; exclusive of these charges the ratio would
have been .92%.
(b) Effective January 1, 1993, the Fund discontinued using equalization
accounting.
(c) Average commission rate paid per share of common and preferred stocks is
calculated for fiscal years beginning on or after September 1, 1995.
(d) Based on monthly average shares outstanding during the period.
* Not Annualized
** Annualized

21 - Scudder Growth and Income Fund
<PAGE>

Notes to Financial Statements (Unaudited)

A. Significant Accounting Policies

Scudder Growth and Income Fund (the "Fund") is a diversified series of Scudder
Investment Trust (the "Trust"). The Trust is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. The Fund's
financial statements are prepared in accordance with generally accepted
accounting principles which require the use of management estimates. The
policies described below are followed consistently by the Fund in the
preparation of its financial statements.

Security Valuation. Portfolio 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 System, for which
there have been sales, are valued at the most recent sale price reported on such
system. If there are no such sales, the value is the high or "inside" bid
quotation. Securities which are not quoted on the Nasdaq System but are traded
in another over-the-counter market are valued at the most recent sale price on
such market. 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 shall be used.

Portfolio debt securities with remaining maturities greater than sixty days are
valued by pricing agents approved by the officers of the Fund, which 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.
Short-term investments having a 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.

Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
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, depending on the maturity of the repurchase
agreement, is equal to at least 100.5% of the repurchase price.

Security Lending. The Fund may seek to increase its income by lending portfolio
securities. Such loans may be made through the Fund's authorized agent to
registered broker/dealers and are required to be collateralized by cash, U.S
Government securities or liquid high grade debt obligations in an amount at
least equal to the market value plus accrued interest of the securities loaned.
The collateral is invested, and a negotiated percentage of the interest earned
is remitted to the Fund. This income is included as a component of interest
income. At June 30, 1997, the Fund loaned securities with an aggregate market
value of $265,564,282 which represents 4.7% of total net assets.

Restricted Securities. The Fund may not purchase restricted securities (for
these purposes, restricted security means a security which cannot be sold to the
public without registration under the Securities Act of 1933, as amended, or the
availability of an exemption from registration, or which is subject to other
legal or contractual delays in or restrictions on resale), if, as a result
thereof, more than 5% of the value of the Fund's total assets would be invested
in restricted securities. The aggregate fair value of restricted securities at
June 30, 1997, amounted to $38,563,699 which represents .68% of net assets.

Foreign Currency Translations. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency transactions are translated into U.S. dollars
on the following basis:

22 - Scudder Growth and Income Fund
<PAGE>

(i) market value of investment securities, other assets and liabilities at the
daily rates of exchange, and

(ii) purchases and sales of investment securities, dividend and interest income
and certain expenses at the daily rates of exchange prevailing on the
respective dates of such transactions.

The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes in
market prices of the investments. Such fluctuations are included with the net
realized and unrealized gains and losses from investments.

Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on dividends,
interest, and foreign withholding taxes.

Federal Income Taxes. The Fund's policy is 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 its shareholders. The Fund
accordingly paid no federal income taxes and no provision for federal income
taxes was required.

Distribution of Income and Gains. Distributions of net investment income are
made quarterly. During any particular year, net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed and, therefore, will be distributed to
shareholders. An additional distribution may be made to the extent necessary to
avoid the payment of a four percent federal excise tax.

The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. These
differences relate primarily to non-taxable distributions and certain securities
sold at a loss. As a result, net investment income and net realized gain (loss)
on investment transactions for a reporting period may differ significantly from
distributions during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.

The Fund uses the specific identified cost method for determining realized gain
or loss on investments for both financial and federal income tax reporting
purposes.

Other. Investment security transactions are accounted for on a trade date basis.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis.

B. Purchases and Sales of Securities

For the six months ended June 30, 1997, purchases and sales of investment
securities (excluding short-term investments) aggregated $1,050,271,488 and
$454,724,035, respectively.

C. Related Parties

On April 8, 1997, the Fund's Board of Trustees approved a new Investment
Management Agreement (the "Management Agreement") with Scudder, Stevens & Clark,
Inc. (the "Adviser"). Under the Management Agreement the Adviser directs the
investments of the Fund in accordance with its investment objective, policies,
and restrictions. The Adviser determines the

23 - Scudder Growth and Income Fund
<PAGE>

securities, instruments, and other contracts relating to investments to be
purchased, sold or entered into by the Fund. In addition to portfolio management
services, the Adviser provides certain administrative services in accordance
with the Management Agreement. The management fee payable under the Management
Agreement is equal to an annual rate of approximately 0.60% on the first
$500,000,000 of the Fund's average daily net assets, 0.55% on the next
$500,000,000, 0.50% on the next $500,000,000, 0.475% on the next $500,000,000,
0.45% on the next $1,000,000,000, 0.425% on the next $1,500,000,000, and 0.405%
of such net assets in excess of $4,500,000,000, computed and accrued daily and
payable monthly.

Under the Investment Management Agreement between the Fund and the Adviser which
was in effect prior to May 1, 1997 (the "Agreement"), the Fund agreed to pay the
Adviser an annual rate of approximately 0.60% on the first $500,000,000 of the
Fund's average daily net assets, 0.55% on the next $500,000,000, 0.50% on the
next $500,000,000, 0.475% on the next $500,000,000, 0.45% on the next
$1,000,000,000, and 0.425% of such net assets in excess of $3,000,000,000,
computed and accrued daily and payable monthly. For the six months ended June
30, 1997, the fee pursuant to both the Management Agreement and the Agreement
amounted to $11,471,637, which was equivalent to an annual effective rate of
.48% of the Fund's average daily net assets.

On June 26, 1997, the Adviser entered into an agreement with The Zurich
Insurance Company ("Zurich"), an international insurance and financial services
organization, pursuant to which Zurich will acquire a majority interest in the
Adviser, and the Adviser will form a new global investment organization by
combining with Zurich's subsidiary, Zurich Kemper Investments, Inc. and change
its name to Scudder Kemper Investments, Inc. Subject to the receipt of the
required regulatory and shareholder approvals, the transaction is expected to
close in the fourth quarter of 1997.

Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
six months ended June 30, 1997, the amount charged to the Fund by SSC aggregated
$3,014,445, of which $512,942 is unpaid at June 30, 1997.

The Fund is one of several Scudder Funds (the "Underlying Funds") in which the
Scudder Pathway Series Portfolios (the "Portfolios") invest. In accordance with
the Special Servicing Agreement entered into by the Adviser, the Portfolios, the
Underlying Funds, SSC, SFAC, STC, and Scudder Investor Services, Inc., expenses
from the operation of the Portfolios are borne by the Underlying Funds based on
each Underlying Fund's proportionate share of assets owned by the Portfolios. No
Underlying Funds will be charged expenses that exceed the estimated savings to
each respective Underlying Fund. These estimated savings result from the
elimination of separate shareholder accounts which either currently are or have
potential to be invested in the Underlying Funds. At June 30, 1997, the Special
Servicing Agreement expense charged to the Fund amounted to $14,075.

Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the six months ended June 30,
1997, the amount charged to the Fund by STC aggregated $2,093,348, of which
$361,509 is unpaid at June 30, 1997.

Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the six months
ended June 30, 1997, the amount charged to the Fund by SFAC aggregated $153,039,
of which $27,958 is unpaid at June 30, 1997.

The Fund pays each Trustee not affiliated with the Adviser $4,000 annually, plus
specified amounts for attended board and committee meetings. For the six months
ended June 30, 1997, Trustees' fees and expenses aggregated $22,950.

24 - Scudder Growth and Income Fund
<PAGE>

D. Transactions in Securities of Affiliated Issuers

An affiliated issuer is a company in which the Fund has ownership of at least 5%
of the voting securities. A summary of the Fund's transactions with companies
which are or were affiliates for the six months ended June 30, 1997 are as
follows:

Purchases Sales Dividend Market
Affiliate Cost ($) Cost ($) Income ($) Value ($)
- --------------------------------------------------------------------------------
General Growth
Properties, Inc -- -- 714,870 53,218,100
----------------------------------------------------------

25 - Scudder Growth and Income Fund

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27 - Scudder Growth and Income Fund

<PAGE>
Officers and Trustees

Daniel Pierce*
President and Trustee

Henry P. Becton, Jr.
Trustee; President and General
Manager, WGBH Educational
Foundation

Dudley H. Ladd*
Trustee

George M. Lovejoy, Jr.
Trustee; President and Director,
Fifty Associates

Wesley W. Marple, Jr.
Trustee; Professor of Business
Administration, Northeastern
University

Kathryn L. Quirk*
Trustee

Jean C. Tempel
Trustee; General Partner,
TL Ventures

Bruce F. Beaty*
Vice President

William F. Gadsden*
Vice President

Jerard K. Hartman*
Vice President

Robert T. Hoffman*
Vice President

Thomas W. Joseph*
Vice President

David S. Lee*
Vice President

Valerie F. Malter*
Vice President

Thomas F. McDonough*
Vice President, Secretary and
Assistant Treasurer

Pamela A. McGrath*
Vice President and Treasurer

Edward J. O'Connell*
Vice President and Assistant
Treasurer

*Scudder, Stevens & Clark, Inc.

28 - Scudder Growth and Income Fund

<PAGE>

Investment Products and Services

The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series --
Premium Shares*
Managed Shares*
Scudder Government Money Market Series --
Managed Shares*

Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--
Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**

Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund**
Scudder Massachusetts Limited Term Tax Free Fund**
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund**
Scudder Ohio Tax Free Fund**
Scudder Pennsylvania Tax Free Fund**

U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund

Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund

Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio

U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund

U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund

Growth
Scudder Classic Growth Fund
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund

Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Growth and Income Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Emerging Markets Growth Fund
Scudder Gold Fund

Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.

Retirement Programs
- -------------------
IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan**+++ +++
(a variable annuity)

Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal Fund, Inc.
Scudder World Income Opportunities
Fund, Inc.

For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +++Funds within categories are listed in order from
expected least risk to most risk. +A portion of the income from the tax-free
funds may be subject to federal, state, and local taxes. *A class of shares of
the Fund. **Not available in all states. +++ +++A no-load variable annuity
contract provided by Charter National Life Insurance Company and its affiliate,
offered by Scudder's insurance agencies, 1-800-225-2470. #These funds, advised
by Scudder, Stevens & Clark, Inc., are traded on various stock exchanges.

29 - Scudder Growth and Income Fund

<PAGE>

Scudder Solutions
<TABLE>
<CAPTION>

Convenient ways to invest, quickly and reliably:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Automatic Investment Plan QuickBuy

A convenient investment program in which you designate Lets you purchase Scudder fund shares
the purchase details and the bank account, and money is electronically, avoiding potential mailing delays;
electronically debited from that account monthly to designate a bank account and the transaction
regularly purchase fund shares and "dollar cost average" details, and money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from that account.
fewer when it's higher, which can reduce your average
purchase price over time.

Automatic Dividend Transfer Payroll Deduction and Direct Deposit

The most timely, reliable, and convenient way to Have all or part of your paycheck -- even government
purchase shares -- use distributions from one Scudder checks -- invested in up to four Scudder funds at
fund to purchase shares in another, automatically one time.
(accounts with identical registrations or the same
social security or tax identification number).

Dollar cost averaging involves continuous investment in securities regardless of price
fluctuations and does not assure a profit or protect against loss in declining markets.
Investors should consider their ability to continue such a plan through periods of low price
levels.

Around-the-clock electronic account service and information, including some transactions:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Automated Information Line: SAIL(TM) -- Scudder's Web Site -- http://funds.scudder.com
1-800-343-2890
Scudder Electronic Account Services: Offering
Personalized account information, the ability to account information and transactions, interactive
exchange or redeem shares, and information on other worksheets, prospectuses and applications for all
Scudder funds and services via touchtone telephone. Scudder funds, plus your current asset allocation,
whenever you need them. Scudder's Site also
provides news about Scudder funds, retirement
planning information, and more.

Retirees and those who depend on investment proceeds for living expenses can enjoy these convenient,
timely, and reliable automated withdrawal programs:
- ------------------------------------------------------------------------------------------------------------------------------
Automatic Withdrawal Plan QuickSell

You designate the bank account, determine the schedule Provides speedy access to your money by
(as frequently as once a month) and amount of the electronically crediting your redemption proceeds
redemptions, and Scudder does the rest. to the bank account you designate.

DistributionsDirect

Automatically deposits your fund distributions into the
bank account you designate within three business days
after each distribution is paid.

30 - Scudder Growth and Income Fund
<PAGE>

Mutual Funds and More -- Brokerage and Guidance Services:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Brokerage Services Scudder Portfolio Builder

Offers you access to a world of investments, A free service designed to help suggest ways investors like
including stocks, corporate bonds, Treasuries, plus you can diversify your portfolio among domestic and global,
over 6,000 mutual funds from at least 150 mutual as well as equity, fixed-income, and money market funds,
fund companies. And Scudder Fund Folio(SM) provides using Scudder funds.
investors with access to a marketplace of more than
500 no-load funds from well-known companies--with no Personal Counsel from Scudder(SM)
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder Developed for investors who prefer the benefits of no-load
Brokerage account already reserved for them, with Scudder funds but want ongoing professional assistance in
no minimum investment. For information about managing a portfolio. Personal Counsel(SM) is a highly
Scudder Brokerage Services, call 1-800-700-0820. customized, fee-based asset management service for
individuals investing $100,000 or more.

Fund Folio funds held less than six months will be charged a fee for redemptions. You can buy
shares directly from the fund itself or its principal underwriter or distributor without
paying this fee. Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061.
Member SIPC.

Personal Counsel From Scudder(SM) and Personal Counsel(SM) are service marks of and represent a
program offered by Scudder Investor Services, Inc., Adviser.

For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
Additional Information on How to Contact Scudder:
- ------------------------------------------------------------------------------------------------------------------------------
For existing account services and transactions Please address all written correspondence to
Scudder Investor Relations -- 1-800-225-5163 The Scudder Funds
P.O. Box 2291
For establishing 401(k) and 403(b) plans Boston, Massachusetts
Scudder Defined Contribution Services -- 02107-2291
1-800-323-6105
Or Stop by a Scudder Investor Center

For information about The Scudder Funds, including Many shareholders enjoy the personal, one-on-one service of
additional applications and prospectuses, or for the Scudder Investor Centers. Check for an Investor Center near
answers to investment questions you -- they can be found in the following cities:

Scudder Investor Relations -- 1-800-225-2470 Boca Raton Chicago San Francisco
[email protected] Boston New York

- ------------------------------------------------------------------------------------------------------------------------------
New From Scudder: Scudder International Growth and Income Fund

Scudder International Growth and Income Fund takes a yield-oriented approach to investing in international equities. The
Fund seeks to provide long-term growth of capital plus current income. Investors who desire international exposure but
who wish to take a more conservative approach may appreciate the Fund's emphasis on the dividend paying stocks of
well-established companies outside the United States.
- ------------------------------------------------------------------------------------------------------------------------------
The share price of Scudder International Growth and Income Fund will fluctuate. International investing involves special
risks including currency fluctuation and political instability. Contact Scudder Investor Services, Inc., Distributor,
for a prospectus which contains more complete information, including management fees and other expenses. Please read it
carefully before you invest or send money.

</TABLE>

31 - Scudder Growth and Income Fund
<PAGE>

Celebrating Over 75 Years of Serving Investors

Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven Clark,
Scudder, Stevens & Clark was the first independent investment counsel firm in
the United States. Since its birth, Scudder's pioneering spirit and commitment
to professional long-term investment management have helped shape the investment
industry. In 1928, we introduced the nation's first no-load mutual fund. Today
we offer over 40 pure no load(TM) funds, including the first international
mutual fund offered to U.S. investors.

Over the years, Scudder's global investment perspective and dedication to
research and fundamental investment disciplines have helped us become one of the
largest and most respected investment managers in the world. Though times have
changed since our beginnings, we remain committed to our long-standing
principles: managing money with integrity and distinction; keeping the interests
of our clients first; providing access to investments and markets that may not
be easily available to individuals; and making investing as simple and
convenient as possible through friendly, comprehensive service.

This information must be preceded or accompanied by a
current prospectus.

Portfolio changes should not be considered recommendations
for action by individual investors.

SCUDDER

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