SCUDDER INVESTMENT TRUST, 485APOS, 1998-03-02

SCUDDER INVESTMENT TRUST
485APOS, 1998-03-02

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Filed electronically with the Securities and Exchange Commission on
March 2, 1998.

File No. 2-13628
File No. 811-43

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Pre-Effective Amendment No.
---------
Post-Effective Amendment No. 92
--------

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

Amendment No. 44
---------

Scudder Investment Trust
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)

Two International Place, Boston, MA 02110
--------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code: (617) 295-2567
--------------

Thomas F. McDonough
Scudder Kemper Investments, Inc.
Two International Place, Boston, MA 02110
--------------------------------------------------
(Name and Address of Agent for Service)

It is proposed that this filing will become effective

immediately upon filing pursuant to paragraph (b)
----

on ____________ pursuant to paragraph (b)
----

60 days after filing pursuant to paragraph (a)(i)
----

X on May 1, 1998 pursuant to paragraph (a)(i)
----

75 days after filing pursuant to paragraph (a)(ii)
----

on _____________ pursuant to paragraph (a)(ii) of Rule 485.
----

<PAGE>

SCUDDER INVESTMENT TRUST
SCUDDER GROWTH AND INCOME FUND
CROSS-REFERENCE SHEET

Items Required By Form N-1A
PART A

Item No. Item Caption Prospectus Caption
-------- ------------ ------------------

1. Cover Page COVER PAGE

2. Synopsis EXPENSE INFORMATION

3. Condensed FINANCIAL HIGHLIGHTS
Financial
Information

4. General INVESTMENT OBJECTIVE AND POLICIES
Description of WHY INVEST IN THE FUND?
Registrant ADDITIONAL INFORMATION ABOUT POLICIES AND
INVESTMENTS
FUND ORGANIZATION

5. Management of the A MESSAGE FROM SCUDDER'S CHAIRMAN
Fund FUND ORGANIZATION--Investment adviser and
Transfer agent
TRUSTEES AND OFFICERS
SHAREHOLDER BENEFITS--A team approach to
investing

5A. Management NOT APPLICABLE
Discussion of Fund
Performance

6. Capital Stock and DISTRIBUTION AND PERFORMANCE INFORMATION--
Other Securities Dividends and capital gains distributions
FUND ORGANIZATION
TRANSACTION INFORMATION--Tax Information
SHAREHOLDER BENEFITS--SAIL(TM)--Scudder
Automated Information Line, Dividend
reinvestment plan, T.D.D. service for
the hearing impaired

HOW TO CONTACT SCUDDER

7. Purchase of PURCHASES
Securities Being FUND ORGANIZATION--Underwriter
Offered TRANSACTION INFORMATION--Purchasing shares,
Share price, Processing time, Minimum
balances, Third party transactions
SHAREHOLDER BENEFITS--Dividend reinvestment
plan
SCUDDER TAX-ADVANTAGED RETIREMENT PLANS

8. Redemption or EXCHANGES AND REDEMPTIONS
Repurchase TRANSACTION INFORMATION--Redeeming shares,
Tax identification number, Minimum
balances

9. Pending Legal NOT APPLICABLE
Proceedings

1
<PAGE>

SCUDDER GROWTH AND INCOME FUND
CROSS-REFERENCE SHEET
(continued)
PART B

Caption in Statement of
Item No. Item Caption Additional Information
-------- ------------ ----------------------

10. Cover Page COVER PAGE

11. Table of Contents TABLE OF CONTENTS

12. General Information FUND ORGANIZATION
and History

13. Investment Objectives THE FUND'S INVESTMENT OBJECTIVE AND
and Policies POLICIES
PORTFOLIO TRANSACTIONS--Portfolio turnover

14. Management of the Fund INVESTMENT ADVISER
TRUSTEES AND OFFICERS
REMUNERATION

15. Control Persons and TRUSTEES AND OFFICERS
Principal Holders of
Securities

16. Investment Advisory INVESTMENT ADVISER
and Other Services DISTRIBUTOR
ADDITIONAL INFORMATION--Experts and Other
Information

17. Brokerage Allocation PORTFOLIO TRANSACTIONS--Brokerage,
and Other Practices Portfolio Turnover

18. Capital Stock and FUND ORGANIZATION
Other Securities DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS

19. Purchase, Redemption PURCHASES
and Pricing of EXCHANGES AND REDEMPTIONS
Securities Being FEATURES AND SERVICES OFFERED BY THE
Offered FUND--Dividend and Capital Gain
Distribution Options
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE

20. Tax Status DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
TAXES

21. Underwriters DISTRIBUTOR

22. Calculation of PERFORMANCE INFORMATION
Performance Data

23. Financial Statements FINANCIAL STATEMENTS

2
<PAGE>

SCUDDER INVESTMENT TRUST
SCUDDER LARGE COMPANY GROWTH FUND
CROSS-REFERENCE SHEET

Items Required By Form N-1A
PART A

Item No. Item Caption Prospectus Caption
-------- ------------ ------------------

1. Cover Page COVER PAGE

2. Synopsis EXPENSE INFORMATION

3. Condensed FINANCIAL HIGHLIGHTS
Financial DISTRIBUTION AND FINANCIAL INFORMATION
Information

4. General INVESTMENT OBJECTIVE AND POLICIES
Description of WHY INVEST IN THE FUND?
Registrant ADDITIONAL INFORMATION ABOUT POLICIES AND
INVESTMENTS
FUND ORGANIZATION

5. Management of the FINANCIAL HIGHLIGHTS
Fund A MESSAGE FROM SCUDDER'S CHAIRMAN
FUND ORGANIZATION--Investment adviser and
Transfer agent
TRUSTEES AND OFFICERS

5A. Management SHAREHOLDER BENEFITS--A team approach to
Discussion of Fund investing
Performance

6. Capital Stock and DISTRIBUTION AND PERFORMANCE INFORMATION--
Other Securities Dividends and capital gains
distributions
FUND ORGANIZATION
TRANSACTION INFORMATION--Tax information
SHAREHOLDER BENEFITS--SAIL(TM)--Scudder
Automated Information Line, Dividend
reinvestment plan, T.D.D. service for
the hearing impaired

HOW TO CONTACT SCUDDER

8. Redemption or EXCHANGES AND REDEMPTIONS
Repurchase TRANSACTION INFORMATION--Redeeming shares,
Tax identification number and Minimum
balances

9. Pending Legal NOT APPLICABLE
Proceedings

3
<PAGE>

SCUDDER LARGE COMPANY GROWTH FUND
CROSS-REFERENCE SHEET
(continued)

PART B
Caption in Statement of
Item No. Item Caption Additional Information
-------- ------------ ----------------------

10. Cover Page COVER PAGE

11. Table of Contents TABLE OF CONTENTS

12. General Information FUND ORGANIZATION
and History

13. Investment Objectives THE FUND'S INVESTMENT OBJECTIVE AND
and Policies POLICIES
PORTFOLIO TRANSACTIONS--Portfolio turnover

14. Management of the Fund INVESTMENT ADVISER
TRUSTEES AND OFFICERS
REMUNERATION

15. Control Persons and TRUSTEES AND OFFICERS
Principal Holders of
Securities

16. Investment Advisory INVESTMENT ADVISER
and Other Services DISTRIBUTOR
ADDITIONAL INFORMATION--Experts and Other
Information

17. Brokerage Allocation PORTFOLIO TRANSACTIONS--Brokerage
and Other Practices commissions

18. Capital Stock and FUND ORGANIZATION
Other Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

20. Tax Status DIVIDENDS
TAXES

21. Underwriters DISTRIBUTOR

22. Calculation of PERFORMANCE INFORMATION
Performance Data

23. Financial Statements FINANCIAL STATEMENTS

4
<PAGE>

SCUDDER INVESTMENT TRUST
SCUDDER CLASSIC GROWTH FUND
CROSS-REFERENCE SHEET

Items Required By Form N-1A
PART A

Item No. Item Caption Prospectus Caption
-------- ------------ ------------------

1. Cover Page COVER PAGE

2. Synopsis EXPENSE INFORMATION

3. Condensed FINANCIAL HIGHLIGHTS
Financial
Information

4. General INVESTMENT OBJECTIVES AND POLICIES
Description of WHY INVEST IN THE FUND?
Registrant ADDITIONAL INFORMATION ABOUT POLICIES AND
INVESTMENTS
FUND ORGANIZATION

5. Management of the A MESSAGE FROM SCUDDER'S CHAIRMAN
Fund FUND ORGANIZATION--Investment adviser and
Transfer agent
TRUSTEES AND OFFICERS
SHAREHOLDER BENEFITS--A team approach to
investing

5A. Management NOT APPLICABLE
Discussion of Fund
Performance

6. Capital Stock and DISTRIBUTION AND PERFORMANCE INFORMATION--
Other Securities Dividends and capital gains
distributions
FUND ORGANIZATION
TRANSACTION INFORMATION--Tax information
SHAREHOLDER BENEFITS--SAIL(TM)--Scudder
Automated Information Line, Dividend
reinvestment plan, T.D.D. service for
the hearing impaired
HOW TO CONTACT SCUDDER

8. Redemption or EXCHANGES AND REDEMPTIONS
Repurchase TRANSACTION INFORMATION--Redeeming shares,
Tax identification number, Minimum
balances

9. Pending Legal NOT APPLICABLE
Proceedings

5
<PAGE>

SCUDDER CLASSIC GROWTH FUND
CROSS-REFERENCE SHEET
(continued)

PART B
Caption in Statement of
Item No. Item Caption Additional Information
-------- ------------ ----------------------

10. Cover Page COVER PAGE

11. Table of Contents TABLE OF CONTENTS

12. General Information FUND ORGANIZATION
and History

13. Investment Objectives THE FUND'S INVESTMENT OBJECTIVE AND
and Policies POLICIES
PORTFOLIO TRANSACTIONS--Portfolio turnover

14. Management of the Fund INVESTMENT ADVISER
TRUSTEES AND OFFICERS
REMUNERATION

15. Control Persons and TRUSTEES AND OFFICERS
Principal Holders of
Securities

16. Investment Advisory INVESTMENT ADVISER
and Other Services DISTRIBUTOR
ADDITIONAL INFORMATION--Experts and Other
Information

17. Brokerage Allocation PORTFOLIO TRANSACTIONS--Brokerage,
and Other Practices Portfolio Turnover

18. Capital Stock and FUND ORGANIZATION
Other Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

20. Tax Status DIVIDENDS
TAXES

21. Underwriters DISTRIBUTOR

22. Calculation of PERFORMANCE INFORMATION
Performance Data

23. Financial Statements FINANCIAL STATEMENTS

6
<PAGE>

SCUDDER INVESTMENT TRUST
SCUDDER S&P 500 INDEX FUND
CROSS-REFERENCE SHEET

Items Required By Form N-1A
PART A

Item No. Item Caption Prospectus Caption
-------- ------------ ------------------

1. Cover Page COVER PAGE

2. Synopsis EXPENSE INFORMATION

3. Condensed FINANCIAL HIGHLIGHTS
Financial
Information

4. General INVESTMENT OBJECTIVES AND POLICIES
Description of WHY INVEST IN THE FUND?
Registrant ADDITIONAL INFORMATION ABOUT POLICIES AND
INVESTMENTS
FUND AND PORTFOLIO ORGANIZATION

5. Management of the A MESSAGE FROM SCUDDER'S CHAIRMAN
Fund FUND AND PORTFOLIO ORGANIZATION--Investment
adviser and Transfer agent
TRUSTEES AND OFFICERS OF THE FUND
SHAREHOLDER BENEFITS--A team approach to
investing

5A. Management NOT APPLICABLE
Discussion of Fund
Performance

6. Capital Stock and DISTRIBUTION AND PERFORMANCE INFORMATION--
Other Securities Dividends and capital gains
distributions
FUND AND PORTFOLIO ORGANIZATION
TRANSACTION INFORMATION--Tax information
SHAREHOLDER BENEFITS--SAIL(TM)--Scudder
Automated Information Line, Dividend
reinvestment plan, T.D.D. service for
the hearing impaired
HOW TO CONTACT SCUDDER

7. Purchase of PURCHASES
Securities Being FUND AND PORTFOLIO ORGANIZATION--Underwriter
Offered TRANSACTION INFORMATION--Purchasing shares,
Share price, Processing time, Minimum
balances, Third party transactions
SHAREHOLDER BENEFITS--Dividend reinvestment
plan
SCUDDER TAX-ADVANTAGED RETIREMENT PLANS

8. Redemption or EXCHANGES AND REDEMPTIONS
Repurchase TRANSACTION INFORMATION--Redeeming shares,
Tax identification number, Minimum
balances

9. Pending Legal NOT APPLICABLE
Proceedings

7
<PAGE>

SCUDDER S&P 500 INDEX FUND
CROSS-REFERENCE SHEET
(continued)

PART B
Caption in Statement of
Item No. Item Caption Additional Information
-------- ------------ ----------------------

10. Cover Page COVER PAGE

11. Table of Contents TABLE OF CONTENTS

12. General Information FUND ORGANIZATION
and History

13. Investment Objectives THE FUND'S INVESTMENT OBJECTIVE AND
and Policies POLICIES
PORTFOLIO TRANSACTIONS--Portfolio turnover

14. Management of the Fund INVESTMENT ADVISER AND ADMINISTRATOR
INVESTMENT MANAGER AND ADMINISTRATOR
TRUSTEES AND OFFICERS OF THE FUND
REMUNERATION

15. Control Persons and TRUSTEES AND OFFICERS OF THE FUND
Principal Holders of
Securities

16. Investment Advisory INVESTMENT ADVISER AND ADMINISTRATOR
and Other Services INVESTMENT MANAGER AND ADMINISTRATOR
DISTRIBUTOR
ADDITIONAL INFORMATION--Experts and Other
Information

17. Brokerage Allocation PORTFOLIO TRANSACTIONS--Brokerage,
and Other Practices Portfolio Turnover

18. Capital Stock and FUND ORGANIZATION
Other Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

20. Tax Status DIVIDENDS
TAXES

21. Underwriters DISTRIBUTOR

22. Calculation of PERFORMANCE INFORMATION
Performance Data

23. Financial Statements FINANCIAL STATEMENTS

8
<PAGE>

SCUDDER INVESTMENT TRUST
SCUDDER REAL ESTATE INVESTMENT FUND
CROSS-REFERENCE SHEET

Items Required By Form N-1A
PART A

Item No. Item Caption Prospectus Caption
-------- ------------ ------------------

1. Cover Page COVER PAGE

2. Synopsis EXPENSE INFORMATION

3. Condensed FINANCIAL HIGHLIGHTS
Financial
Information

4. General INVESTMENT OBJECTIVE AND POLICIES
Description of WHY INVEST IN THE FUND?
Registrant ADDITIONAL INFORMATION ABOUT POLICIES AND
INVESTMENTS
FUND ORGANIZATION

5. Management of the A MESSAGE FROM SCUDDER'S PRESIDENT
Fund FUND ORGANIZATION--Investment adviser and
Transfer agent
TRUSTEES AND OFFICERS
SHAREHOLDER BENEFITS--A team approach to
investing

5A. Management NOT APPLICABLE
Discussion of Fund
Performance

6. Capital Stock and DISTRIBUTION AND PERFORMANCE INFORMATION--
Other Securities Dividends and capital gains
distributions
FUND ORGANIZATION
TRANSACTION INFORMATION--Tax Information
SHAREHOLDER BENEFITS--SAIL(TM)--Scudder
Automated Information Line, Dividend
reinvestment plan, T.D.D. service for
the hearing impaired
HOW TO CONTACT SCUDDER

8. Redemption or EXCHANGES AND REDEMPTIONS
Repurchase TRANSACTION INFORMATION--Redeeming shares,
Tax identification number, Minimum
balances

9. Pending Legal NOT APPLICABLE
Proceedings

<PAGE>

SCUDDER REAL ESTATE INVESTMENT FUND
CROSS-REFERENCE SHEET
(continued)
PART B

Caption in Statement of
Item No. Item Caption Additional Information
-------- ------------ ----------------------

10. Cover Page COVER PAGE

11. Table of Contents TABLE OF CONTENTS

12. General Information FUND ORGANIZATION
and History

13. Investment Objectives THE FUND'S INVESTMENT OBJECTIVE AND
and Policies POLICIES
PORTFOLIO TRANSACTIONS--Portfolio turnover

14. Management of the Fund INVESTMENT ADVISER
TRUSTEES AND OFFICERS
REMUNERATION

15. Control Persons and TRUSTEES AND OFFICERS
Principal Holders of
Securities

16. Investment Advisory INVESTMENT ADVISER
and Other Services DISTRIBUTOR
ADDITIONAL INFORMATION--Experts and Other
Information

17. Brokerage Allocation PORTFOLIO TRANSACTIONS--Brokerage,
and Other Practices Portfolio Turnover

18. Capital Stock and FUND ORGANIZATION
Other Securities DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS

20. Tax Status DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
TAXES

21. Underwriters DISTRIBUTOR

22. Calculation of PERFORMANCE INFORMATION
Performance Data

23. Financial Statements FINANCIAL STATEMENTS

2
<PAGE>

This prospectus sets forth concisely the information about Scudder Growth and
Income Fund, a diversified series of Scudder Investment Trust, an open-end
management investment company, that a prospective investor should know before
investing. Please retain it for future reference.

If you require more detailed information, a Statement of Additional Information
dated May 1, 1998, as amended from time to time, may be obtained without charge
by writing Scudder Investor Services, Inc., Two International Place, Boston, MA
02110-4103 or calling 1-800-225-2470. The Statement, which is incorporated by
reference into this prospectus, has been filed with the Securities and Exchange
Commission and is available along with other related materials on the SEC's
Internet Web Site (http://www.sec.gov).

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

Contents--see page 4.

- -----------------------------
NOT FDIC- MAY LOSE VALUE
INSURED NO BANK GUARANTEE
- -----------------------------

SCUDDER [LOGO]

Scudder
Growth and Income Fund

Prospectus
May 1, 1998

A pure no-load(TM) (no sales charges) mutual fund seeking long-term growth of
capital, current income, and growth of income.
<PAGE>

Expense information

- --------------------------------------------------------------------------------
How to compare a Scudder pure no-load(TM) fund

This information is designed to help you understand the various costs and
expenses of investing in Scudder Growth and Income Fund (the "Fund"). By
reviewing this table and those in other mutual funds' prospectuses, you can
compare the Fund's fees and expenses with those of other funds. With Scudder's
pure no-load(TM) funds, you pay no commissions to purchase or redeem shares, or
to exchange from one fund to another. As a result, all of your investment goes
to work for you.

1) Shareholder transaction expenses: Expenses charged directly to your
individual account in the Fund for various transactions.

Sales commissions to purchase shares (sales load) NONE
Commissions to reinvest dividends NONE
Redemption fees NONE*
Fees to exchange shares NONE

2) Annual Fund operating expenses: Expenses paid by the Fund before it
distributes its net investment income, expressed as a percentage of the
Fund's average daily net assets for the year ended December 31, 1997.

Investment management fee _____%
12b-1 fees NONE
Other expenses _____%
------
Total Fund operating expenses _____%
======

Example

Based on the level of total Fund operating expenses listed above, the total
expenses relating to a $1,000 investment, assuming a 5% annual return and
redemption at the end of each period, are listed below. Investors do not pay
these expenses directly; they are paid by the Fund before it distributes its net
investment income to shareholders. (As noted above, the Fund has no redemption
fees of any kind.)

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$--- $--- $--- $---

See "Fund organization--Investment adviser" for further information about the
investment management fee. This example assumes reinvestment of all dividends
and distributions and that the percentage amounts listed under "Annual Fund
operating expenses" remain the same each year. This example should not be
considered a representation of past or future expenses or return. Actual Fund
expenses and return vary from year to year and may be higher or lower than those
shown.

* You may redeem by writing or calling the Fund. If you wish to receive
redemption proceeds via wire, there is a $5 wire service fee. For additional
information, please refer to "Transaction information--Redeeming shares."

- --------------------------------------------------------------------------------

- --
2
<PAGE>

Financial highlights

- --------------------------------------------------------------------------------

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

If you would like more detailed information concerning the Fund's
performance, a complete portfolio listing and audited financial statements are
available in the Fund's Annual Report dated December 31, 1997, which may be
obtained without charge by writing or calling Scudder Investor Services, Inc.

[TABLE TO BE UPDATED]

(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.

- --------------------------------------------------------------------------------

--
3
<PAGE>

A message from the President

[Photo of Edmond D. Villani]
Edmond D. Villani, President
and CEO, Scudder Kemper
Investments, Inc.

Scudder Kemper Investments, Inc., investment adviser to the Scudder Family of
Funds, is one of the largest and most experienced investment management
organizations worldwide, managing more than $200 billion in assets globally for
mutual fund investors, retirement and pension plans, institutional and corporate
clients, and private family and individual accounts. It is one of the ten
largest mutual fund companies in the U.S.

We offered America's first no-load mutual fund in 1928, and today the Scudder
Family of Funds includes over 45 no-load mutual fund portfolios. We also manage
the mutual funds in a special program for the American Association of Retired
Persons, as well as the fund options available through Scudder Horizon Plan, a
tax-advantaged variable annuity. We also advise The Japan Fund, and numerous
other open and closed-end funds that invest in this country and other countries
around the world.

The Scudder Family of Funds is designed to make investing easy and less costly.
It includes money market, tax free, income and growth funds as well as IRAs,
401(k)s, Keoghs and other retirement plans.

Services available to shareholders include toll-free access to the professional
service representatives of Scudder Investor Relations, easy exchange among
funds, shareholder reports, informative newsletters and the walk-in convenience
of Scudder Investor Centers.

The Scudder Family of Funds includes those Funds, or classes of Funds, advised
by Scudder Kemper Investments, Inc., that are offered without commissions to
purchase or redeem shares or to exchange from one fund to another. There are no
12b-1 fees either, which many other funds now charge to support their marketing
efforts. All of your investment goes to work for you. We look forward to
welcoming you as a shareholder.

/s/ Edward D. Villani

Scudder Growth and Income Fund

Investment objective

o long-term growth of capital, current income and growth of income

Investment characteristics

o an actively managed portfolio consisting primarily of common stocks and
securities convertible into common stocks

o an emphasis on companies with good prospects for earnings growth over time

o opportunity to share in the long-term growth of the U.S. stock market as
well as stock market risk

Contents

Investment objective and policies ....................... 7
Why invest in the Fund? ................................. 7
Additional information about policies
and investments ....................................... 8
Distribution and performance information ................ 12
Fund organization ....................................... 13
Transaction information ................................. 14
Shareholder benefits .................................... 18
Purchases ............................................... 21
Exchanges and redemptions ............................... 23
Trustees and Officers ................................... 26
Investment products and services
How to contact Scudder .................................. 30

- --
4
<PAGE>

Investment objective and policies

Scudder Growth and Income Fund (the "Fund"), a diversified series of Scudder
Investment Trust, seeks long-term growth of capital, current income and growth
of income. The Fund invests primarily in common stocks, preferred stocks, and
securities convertible into common stocks of companies which offer the prospect
for growth of earnings while paying current dividends. Over time, continued
growth of earnings tends to lead to higher dividends and enhancement of capital
value. The Fund allocates its investments among different industries and
companies, and adjusts its portfolio securities for investment considerations
and not for trading purposes.

Except as otherwise indicated, the Fund's investment objective and policies are
not fundamental and may be changed without a vote of shareholders. If there is a
change in investment objective, shareholders should consider whether the Fund
remains an appropriate investment in light of their then current financial
position and needs. There can be no assurance that the Fund's objective will be
met.

Investments

The Fund attempts to achieve its investment objective by investing primarily in
dividend-paying common stocks, preferred stocks and securities convertible into
common stocks. The Fund may also purchase such securities which do not pay
current dividends but which offer prospects for growth of capital and future
income. Convertible securities (which may be current coupon or zero coupon
securities) are bonds, notes, debentures, preferred stocks and other securities
which may be converted or exchanged at a stated or determinable exchange ratio
into underlying shares of common stock. The Fund may also invest in
nonconvertible preferred stocks consistent with the Fund's objective. From time
to time, for temporary defensive purposes, when the Fund's investment adviser,
Scudder Kemper Investments, Inc. (the "Adviser") feels such a position is
advisable in light of economic or market conditions, the Fund may invest,
without limit, in cash and cash equivalents. It is impossible to predict how
long such alternative strategies will be utilized. The Fund may invest in
foreign securities, illiquid securities, repurchase agreements and reverse
repurchase agreements. It may also loan securities and may engage in strategic
transactions. More information about investment techniques is provided under
"Additional information about policies and investments."

The Fund's share price fluctuates with changes in interest rates and market
conditions. These fluctuations may cause the value of shares to be higher or
lower than when purchased.

Why invest in the Fund?

The Fund seeks to provide participation in the long-term growth of the economy
through the potential investment returns offered by common stocks and securities
convertible into common stocks. It maintains a diversified portfolio consisting
primarily of common stocks, preferred stocks and convertible securities of
companies with long-standing records of earnings growth. These companies, many
of which are mainstays of the U.S. economy, offer prospects for future growth of
earnings and profits, and therefore may offer investors attractive long-term
investment opportunities. This strategy, with an emphasis on income, may be more
appropriate for the conservative portions of your equity portfolio.

Additional information about policies and investments

Investment restrictions

The Fund has certain investment restrictions which are designed to reduce the
Fund's investment risk. Fundamental investment restrictions may not be changed
without a vote of shareholders; non-fundamental investment

--
5
<PAGE>

restrictions may be changed by a vote of the Fund's Board of Trustees. A
complete listing of investment restrictions is contained under "Investment
Restrictions" in the Fund's Statement of Additional Information.

As a matter of fundamental policy, the Fund may not borrow money, except as
permitted under Federal law. Further, as a matter of non-fundamental policy, the
Fund may not borrow money in an amount greater than 5% of total assets, except
for temporary or emergency purposes, although the Fund may engage up to 5% of
total assets in reverse repurchase agreements or dollar rolls.

As a matter of fundamental policy, the Fund may not make loans except through
the lending of portfolio securities, the purchase of debt securities or
interests in indebtedness or through repurchase agreements. The Fund has adopted
a non-fundamental policy restricting the lending of portfolio securities to no
more than 5% of total assets.

A complete description of these and other policies and restrictions is contained
under "Investment Restrictions" in the Fund's Statement of Additional
Information.

Common stocks

Common stock is issued by companies to raise cash for business purposes and
represents a proportionate interest in the issuing companies. Therefore, the
Fund participates in the success or failure of any company in which it holds
stock. The market values of common stock can fluctuate significantly, reflecting
the business performance of the issuing company, investor perception and general
economic or financial market movements. Smaller companies are especially
sensitive to these factors and may even become valueless. Despite the risk of
price volatility, however, common stocks also offer the greatest potential for
gain on investment, compared to other classes of financial assets such as bonds
or cash equivalents.

Illiquid securities

The Fund may invest in securities for which there is not an active trading
market, or which have resale restrictions. These types of securities generally
offer a higher return than more readily marketable securities, but carry the
risk that the Fund may not be able to dispose of them at an advantageous time or
price.

Securities lending

The Fund may lend portfolio securities to registered broker/dealers as a means
of increasing its income. These loans may not exceed 33 1/3% of the Fund's total
assets taken at market value. Loans of portfolio securities will be secured
continuously by collateral consisting of U.S. Government securities or
fixed-income obligations that are maintained at all times in an amount at least
equal to the current market value of the loaned securities. The Fund will earn
any interest or dividends paid on the loaned securities and may share with the
borrower some of the income received on the collateral for the loan or will be
paid a premium for the loan.

Repurchase agreements

As a means of earning income for periods as short as overnight, the Fund may
enter into repurchase agreements with selected banks and broker/dealers. Under a
repurchase agreement, the Fund acquires securities, subject to the seller's
agreement to repurchase them at a specified time and price.

Convertible securities

The Fund may invest in convertible securities which may offer higher income than
the common stocks into which they are convertible. The convertible securities in
which the Fund may invest include fixed-income or zero coupon debt securities,
which may be converted or exchanged at a stated or determinable exchange ratio
into underlying shares of common stock. Prior to their conversion, convertible
securities may have characteristics similar to both nonconvertible debt
securities and equity securities.

- --
6
<PAGE>

Foreign securities

While the Fund generally emphasizes investments in companies domiciled in the
U.S., it may invest in listed and unlisted foreign securities that meet the same
criteria as the Fund's domestic holdings. The Fund may invest in foreign
securities when the anticipated performance of the foreign securities is
believed by the Adviser to offer more return potential than domestic
alternatives in keeping with the investment objective of the Fund. The Fund may
enter into forward foreign currency exchange contracts in connection with the
purchase and sale of securities denominated in a foreign currency.

Real estate investment trusts

The Fund may purchase real estate investment trusts ("REITs"), which pool
investors' funds for investment primarily in income-producing real estate or
real estate-related loans or interests. REITs can generally be classified as
equity REITs, mortgage REITs and hybrid REITs. Equity REITs, which invest the
majority of their assets directly in real property, derive their income
primarily from rents. Equity REITs can also realize capital gains by selling
properties that have appreciated in value. Mortgage REITs, which invest the
majority of their assets in real estate mortgages, derive their income primarily
from interest payments on real estate mortgages in which they are invested.
Hybrid REITs combine the characteristics of both equity REITs and mortgage
REITs.

Strategic Transactions and derivatives

The Fund may, but is not required to, utilize various other investment
strategies as described below to hedge various market risks (such as interest
rates, currency exchange rates, and broad or specific equity or fixed-income
market movements), to manage the effective maturity or duration of fixed-income
securities in the Fund's portfolio or to enhance potential gain. These
strategies may be executed through the use of derivative contracts. Such
strategies are generally accepted as a part of modern portfolio management and
are regularly utilized by many mutual funds and other institutional investors.
Techniques and instruments may change over time as new instruments and
strategies are developed or regulatory changes occur.

Strategic Transactions may be used without limit to attempt to protect against
possible changes in the market value of securities held in or to be purchased
for the Fund's portfolio resulting from securities markets or currency exchange
rate fluctuations, to protect the Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of fixed-income
securities in the Fund's portfolio, or to establish a position in the
derivatives markets as a temporary substitute for purchasing or selling
particular securities. Some Strategic Transactions may also be used to enhance
potential gain although no more than 5% of the Fund's assets will be committed
to Strategic Transactions entered into for non-hedging purposes. Any or all of
these investment techniques may be used at any time and in any combination, and
there is no particular strategy that dictates the use of one technique rather
than another, as use of any Strategic Transaction is a function of numerous
variables including market conditions. The ability of the Fund to utilize these
Strategic

--
7
<PAGE>

Transactions successfully will depend on the Adviser's ability to predict
pertinent market movements, which cannot be assured. The Fund will comply with
applicable regulatory requirements when implementing these strategies,
techniques and instruments. Strategic Transactions involving financial futures
and options thereon will be purchased, sold or entered into only for bona fide
hedging, risk management or portfolio management purposes and not to create
leveraged exposure in the Fund. Please refer to "Risk factors--Strategic
Transactions and derivatives" for more information.

Risk factors

The Fund's risks are determined by the nature of the securities held and the
portfolio management strategies used by the Adviser. The following are
descriptions of certain risks related to the investments and techniques that the
Fund may use from time to time.

Securities lending. From time to time the Fund may lend its portfolio securities
to registered broker/dealers as described above. The risks of lending portfolio
securities, as with other extensions of secured credit, consist of possible
delays in receiving additional collateral or in the recovery of the securities
or possible loss of rights in the collateral should the borrower fail
financially. Loans will be made to registered broker/dealers deemed by the
Adviser to be of good standing and will not be made unless, in the judgment of
the Adviser, the consideration to be earned from such loans would justify the
risk.

Repurchase agreements. If the seller under a repurchase agreement becomes
insolvent, the Fund's right to dispose of the securities may be restricted, or
the value of the securities may decline before the Fund is able to dispose of
them. In the event of the commencement of bankruptcy or insolvency proceedings
with respect to the seller of the securities before repurchase of the securities
under a repurchase agreement, the Fund may encounter delay and incur costs,
including a decline in the value of the securities, before being able to sell
the securities.

Convertible securities. While convertible securities generally offer lower
yields than nonconvertible debt securities of similar quality, their prices may
reflect changes in the value of the underlying common stock. Convertible
securities entail less credit risk than the issuer's common stock.

Illiquid securities. The absence of a trading market can make it difficult to
ascertain a market value for these investments. Disposing of illiquid
investments may involve time-consuming negotiation and legal expenses, and it
may be difficult or impossible for the Fund to sell them promptly at an
acceptable price.

Foreign securities. Investments in foreign securities involve special
considerations due to limited information, higher brokerage costs, different
accounting standards, thinner trading markets as compared to domestic markets
and the likely impact of foreign taxes on the yield from debt securities. They
may also entail other risks, such as the possibility of one or more of the
following: imposition of dividend or interest withholding or confiscatory taxes;
currency blockages or transfer restrictions; expropriation, nationalization or
other adverse political or economic developments; less government supervision
and regulation of securities exchanges, brokers and listed companies; and the
difficulty of enforcing obligations in other countries. Purchases of foreign
securities are usually made in foreign currencies and, as a result, the Fund may
incur currency conversion costs and may be affected favorably or unfavorably by
changes in the value of foreign currencies against the U.S. dollar.

Further, it may be more difficult for the Fund's agents to keep currently
informed about corporate actions which may affect the prices of portfolio
securities. Communications between the U.S. and foreign countries may be less
reliable than within the U.S., increasing the risk

- --
8
<PAGE>

of delayed settlements of portfolio transactions or loss of certificates for
portfolio securities. The Fund's ability and decisions to purchase and sell
portfolio securities may be affected by laws or regulations relating to the
convertibility of currencies and repatriation of assets. Some countries restrict
the extent to which foreigners may invest in their securities markets.

Real estate investment trusts. Investment in REITs may subject the Fund to risks
similar to those associated with the direct ownership of real estate (in
addition to securities markets risks). REITs are sensitive to factors such as
changes in real estate values and property taxes, interest rates, cash flow of
underlying real estate assets, supply and demand, and the management skill and
creditworthiness of the issuer. REITs may also be affected by tax and regulatory
requirements.

Strategic Transactions and derivatives. Strategic Transactions, including
derivative contracts, have risks associated with them including possible default
by the other party to the transaction, illiquidity and, to the extent the
Adviser's view as to certain market movements is incorrect, the risk that the
use of such Strategic Transactions could result in losses greater than if they
had not been used. Use of put and call options may result in losses to the Fund,
force the sale or purchase of portfolio securities at inopportune times or for
prices higher than (in the case of put options) or lower than (in the case of
call options) current market values, limit the amount of appreciation the Fund
can realize on its investments or cause the Fund to hold a security it might
otherwise sell. The use of currency transactions can result in the Fund
incurring losses as a result of a number of factors including the imposition of
exchange controls, suspension of settlements or the inability to deliver or
receive a specified currency. The use of options and futures transactions
entails certain other risks. In particular, the variable degree of correlation
between price movements of futures contracts and price movements in the related
portfolio position of the Fund creates the possibility that losses on the
hedging instrument may be greater than gains in the value of the Fund's
position.

In addition, futures and options markets may not be liquid in all circumstances
and certain over-the-counter options may have no markets.

As a result, in certain markets, the Fund might not be able to close out a
transaction without incurring substantial losses, if at all. Although the use of
futures contracts and options transactions for hedging should tend to minimize
the risk of loss due to a decline in the value of the hedged position, at the
same time they tend to limit any potential gain which might result from an
increase in value of such position. Finally, the daily variation margin
requirements for futures contracts would create a greater ongoing potential
financial risk than would purchases of options, where the exposure is limited to
the cost of the initial premium. Losses resulting from the use of Strategic
Transactions would reduce net asset value, and possibly income, and such losses
can be greater than if the Strategic Transactions had not been utilized. The
Strategic Transactions that the Fund may use and some of their risks are
described more fully in the Fund's Statement of Additional Information.

Zero coupon securities. Zero coupon securities are subject to greater market
value fluctuations from changing interest rates than debt obligations of
comparable maturities that make current cash distributions of interest.

Distribution and performance information

Dividends and capital gains distributions

The Funds intend to distribute any dividends from their net investment income
quarterly in March, June, September and December. The Fund intends to distribute
net realized capital gains after utilization of capital loss carryforwards, if
any, in November or December to prevent application of a federal excise tax. An
additional

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9
<PAGE>

distribution may be made at a later date, if necessary. Any dividends or capital
gains distributions declared in October, November or December with a record date
in such a month and paid during the following January will be treated by
shareholders for federal income tax purposes as if received on December 31 of
the calendar year declared.

According to preference, shareholders may receive distributions in cash or have
them reinvested in additional shares of a Fund. If an investment is in the form
of a retirement plan, all dividends and capital gains distributions must be
reinvested into the shareholder's account.

Generally, dividends from net investment income are taxable to shareholders as
ordinary income. Long-term capital gains distributions, if any, are taxable to
individual shareholders at a maximum 20% or 28% capital gains rate (depending on
the Fund's holding period for the assets giving rise to the gain), regardless of
the length of time shareholders have owned shares. Short-term capital gains and
any other taxable income distributions are taxable as ordinary income. A portion
of dividends from ordinary income may qualify for the dividends-received
deduction for corporations.

The Fund sends detailed tax information to its shareholders about the amount and
type of its distributions by January 31 of the following year.

Performance information

From time to time, quotations of the Fund's performance may be included in
advertisements, sales literature or shareholder reports. All performance figures
are historical, show the performance of a hypothetical investment and are not
intended to indicate future performance. "Total return" is the change in value
of an investment in the Fund for a specified period. The "average annual total
return" of the Fund is the average annual compound rate of return of an
investment in the Fund assuming the investment has been held for one year, five
years and ten years as of a stated ending date. "Cumulative total return"
represents the cumulative change in value of an investment in the Fund for
various periods. All types of total return calculations assume that all
dividends and capital gains distributions during the period were reinvested in
shares of the Fund. "Capital change" measures return from capital, including
reinvestment of any capital gains distributions but does not include the
reinvestment of dividends. Performance will vary based upon, among other things,
changes in market conditions and the level of the Fund's expenses.

Fund organization

Scudder Growth and Income Fund is a diversified series of Scudder Investment
Trust (the "Trust"), an open-end management investment company registered under
the Investment Company Act of 1940 (the "1940 Act"). The Trust, formerly known
as Scudder Growth and Income Fund, was organized as a Massachusetts business
trust in September 1984 and on December 31, 1984 assumed the business of its
predecessor, which was organized as a Massachusetts corporation in May 1929.

The Fund's activities are supervised by the Trust's Board of Trustees.
Shareholders have one vote for each share held on matters on which they are
entitled to vote. The Trust is not required to hold and has no current intention
of holding annual shareholder meetings, although special meetings may be called
for purposes such as electing or removing Trustees, changing fundamental
investment policies or approving an investment management contract. Shareholders
will be assisted in communicating with other shareholders in connection with
removing a Trustee as if Section 16(c) of the 1940 Act were applicable.

Investment adviser

The Fund retains the investment management firm of Scudder Kemper Investments,
Inc., a Delaware corporation, to manage the Fund's daily

- --
10
<PAGE>

investment and business affairs subject to the policies established by the Board
of Trustees. The Trustees have overall responsibility for the management of the
Fund under Massachusetts law.

Scudder, Stevens & Clark, Inc. ("Scudder"), and Zurich Insurance Company
("Zurich"), an international insurance and financial services organization, have
formed a new global investment organization by combining Scudder's business with
that of Zurich's subsidiary, Zurich Kemper Investments, Inc. and Scudder has
changed its name to Scudder Kemper Investments, Inc. As a result of the
transaction, Zurich owns approximately 70% of the Adviser, with the balance
owned by the Adviser's officers and employees.

The Adviser receives an investment management fee for these services. As of May
1, 1997, the Fund pays the Adviser an annual fee of 0.60% of the first $500
million of average daily net assets, 0.55% of such assets in excess of $500
million, 0.50% of such assets in excess of $1 billion, 0.475% of such assets in
excess of $1.5 billion, 0.45% of such assets in excess of $2 billion, 0.425% of
such assets in excess of $3 billion and 0.405% of such assets in excess of $4.5
billion. The fee is graduated so that increases in the Fund's net assets may
result in a lower annual fee rate and decreases in the Fund's net assets may
result in a higher annual fee rate. The fee is payable monthly, provided that
the Fund will make such interim payments as may be requested by the Adviser not
to exceed 75% of the amount of the fee then accrued on the books of the Fund and
unpaid.

For the fiscal year ended December 31, 1997, the Adviser received an investment
management fee of ____% of the Fund's average daily net assets on an annual
basis.

All of the Fund's expenses are paid out of gross investment income. Shareholders
pay no direct charges or fees for investment or administrative services.

Scudder Kemper Investments, Inc. is located at Two International Place, Boston,
Massachusetts.

Transfer agent

Scudder Service Corporation, P.O. Box 2291, Boston, Massachusetts 02107-2291, a
subsidiary of the Adviser, is the transfer, shareholder servicing and
dividend-paying agent for the Fund.

Underwriter

Scudder Investor Services, Inc., a subsidiary of the Adviser, is the Fund's
principal underwriter. Scudder Investor Services, Inc. confirms, as agent, all
purchases of shares of the Fund. Scudder Investor Relations is a telephone
information service provided by Scudder Investor Services, Inc.

Fund accounting agent

Scudder Fund Accounting Corporation, a subsidiary of the Adviser, is responsible
for determining the daily net asset value per share and maintaining the general
accounting records of the Fund.

Custodian

State Street Bank and Trust Company is the Fund's custodian.

Transaction information

Purchasing shares

Purchases are executed at the next calculated net asset value per share after
the Fund's transfer agent receives the purchase request in good order. Purchases
are made in full and fractional shares. (See "Share price.")

By check. If you purchase shares with a check that does not clear, your purchase
will be canceled and you will be subject to any losses or fees incurred in the
transaction. Checks must be drawn on or payable through a U.S. bank. If you
purchase shares by check and redeem them within seven business days of purchase,
the Fund may hold redemption proceeds until the purchase check has cleared. If
you purchase shares by federal funds wire, you may avoid this delay. Redemption
requests by telephone prior to the

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11
<PAGE>

expiration of the seven-day period will not be accepted.

By wire. To open a new account by wire, first call Scudder at 1-800-225-5163 to
obtain an account number. A representative will instruct you to send a
completed, signed application to the transfer agent. Accounts cannot be opened
without a completed, signed application and a Scudder fund account number.
Contact your bank to arrange a wire transfer to:

The Scudder Funds
State Street Bank and Trust Company
Boston, MA 02101
ABA Number 011000028
DDA Account 9903-5552

Your wire instructions must also include:
- -- the name of the fund in which the money is to be invested,
- -- the account number of the fund, and
- -- the name(s) of the account holder(s).

The account will be established once the application and money order are
received in good order.

You may also make additional investments of $100 or more to your existing
account by wire.

By telephone order. Existing shareholders may purchase shares at a certain day's
price by calling 1-800-225-5163 before the close of regular trading on the New
York Stock Exchange (the "Exchange"), normally 4 p.m. eastern time, on that day.
Orders must be for $10,000 or more and cannot be for an amount greater than four
times the value of your account at the time the order is placed. A confirmation
with complete purchase information is sent shortly after your order is received.
You must include with your payment the order number given at the time the order
is placed. If payment by check or wire is not received within three business
days, the order is subject to cancellation and the shareholder will be
responsible for any loss to the Fund resulting from this cancellation. Telephone
orders are not available for shares held in Scudder IRA accounts and most other
Scudder retirement plan accounts.

By "QuickBuy." If you elected "QuickBuy" for your account, you can call
toll-free to purchase shares. The money will be automatically transferred from
your predesignated bank checking account. Your bank must be a member of the
Automated Clearing House for you to use this service. If you did not elect
"QuickBuy," call 1-800-225-5163 for more information.

To purchase additional shares, call 1-800-225-5163. Purchases may not be for
more than $250,000. Proceeds in the amount of your purchase will be transferred
from your bank checking account in two or three business days following your
call. For requests received by the close of regular trading on the Exchange,
shares will be purchased at the net asset value per share calculated at the
close of trading on the day of your call. "QuickBuy" requests received after the
close of regular trading on the Exchange will begin their processing and be
purchased at the net asset value calculated the following business day.

If you purchase shares by "QuickBuy" and redeem them within seven days of the
purchase, the Fund may hold the redemption proceeds for a period of up to seven
business days. If you purchase shares and there are insufficient funds in your
bank account, the purchase will be canceled and you will be subject to any
losses or fees incurred in the transaction. "QuickBuy" transactions are not
available for most retirement plan accounts. However, "QuickBuy" transactions
are available for Scudder IRA accounts.

By exchange. The Fund may be exchanged for shares of other funds in the Scudder
Family of Funds unless otherwise determined by the Board of Trustees. Your new
account will have the same registration and address as your existing account.

The exchange requirements for corporations, other organizations, trusts,
fiduciaries, agents, institutional investors and retirement plans may be
different from those for regular accounts.

- --
12
<PAGE>

Please call 1-800-225-5163 for more information, including information about the
transfer of special account features.

You can also make exchanges among your Scudder fund accounts on SAIL, the
Scudder Automated Information Line, by calling 1-800-343-2890.

Redeeming shares

The Fund allows you to redeem shares (i.e., sell them back to the Fund) without
redemption fees.

By telephone. This is the quickest and easiest way to sell Fund shares. If you
provided your banking information on your application, you can call to request
that federal funds be sent to your authorized bank account. If you did not
include your banking information on your application, call 1-800-225-5163 for
more information.

Redemption proceeds will be wired to your bank unless otherwise requested. If
your bank cannot receive federal reserve wires, redemption proceeds will be
mailed to your bank. There will be a $5 charge for all wire redemptions.

You can also make redemptions from your Scudder fund account on SAIL by calling
1-800-343-2890.

If you open an account by wire, you cannot redeem shares by telephone until the
Fund's transfer agent has received your completed and signed application.
Telephone redemption is not available for shares held in Scudder IRA accounts
and most other Scudder retirement plan accounts.

In the event that you are unable to reach the Fund by telephone, you should
write to the Fund; see "How to contact Scudder" for the address.

By "QuickSell." If you elected "QuickSell" for your account, you can call
toll-free to redeem shares. The money will be automatically transferred to your
predesignated bank checking account. Your bank must be a member of the Automated
Clearing House for you to use this service. If you did not elect "QuickSell,"
call 1-800-225-5163 for more information.

To redeem shares, call 1-800-225-5163. Redemptions must be for at least $250.
Proceeds in the amount of your redemption will be transferred to your bank
checking account in two or three business days following your call. For requests
received by the close of regular trading on the Exchange, shares will be
redeemed at the net asset value per share calculated at the close of trading on
the day of your call. "QuickSell" requests received after the close of regular
trading on the Exchange will begin their processing and be redeemed at the net
asset value calculated the following business day.

"QuickSell" transactions are not available for Scudder IRA accounts and most
other retirement plan accounts.

Signature guarantees. For your protection and to prevent fraudulent redemptions,
on written redemption requests in excess of $100,000 we require an original
signature and an original signature guarantee for each person in whose name the
account is registered. (The Fund reserves the right, however, to require a
signature guarantee for all redemptions.) You can obtain a signature guarantee
from most banks, credit unions or savings associations, or from broker/dealers,
municipal securities broker/dealers, government securities broker/dealers,
national securities exchanges, registered securities associations or clearing
agencies deemed eligible by the SEC. Signature guarantees by notaries public are
not acceptable. Redemption requirements for corporations, other organizations,
trusts, fiduciaries, agents, institutional investors and retirement plans may be
different from those for regular accounts. For more information, please call
1-800-225-5163.

Telephone transactions

Shareholders automatically receive the ability to exchange by telephone and the
right to redeem by telephone up to $100,000 to their address of record.
Shareholders also may, by telephone, request that redemption proceeds be sent to
a predesignated bank account. The Fund uses

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13
<PAGE>

procedures designed to give reasonable assurance that telephone instructions are
genuine, including recording telephone calls, testing a caller's identity and
sending written confirmation of telephone transactions. If the Fund does not
follow such procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. The Fund will not be liable for acting upon
instructions communicated by telephone that it reasonably believes to be
genuine.

Share price

Purchases and redemptions, including exchanges, are made at net asset value.
Scudder Fund Accounting Corporation determines net asset value per share as of
the close of regular trading on the Exchange, normally 4 p.m. eastern time, on
each day the Exchange is open for trading.

Net asset value per share is calculated by dividing the value of total Fund
assets, less all liabilities, by the total number of shares outstanding.

Processing time

All purchase and redemption requests must be received in good order by the
Fund's transfer agent. Those requests received by the close of regular trading
on the Exchange are executed at the net asset value per share calculated at the
close of trading that day. Purchase and redemption requests received after the
close of regular trading on the Exchange will be executed the following business
day.

If you wish to make a purchase of $500,000 or more, you should notify Scudder
Investor Relations by calling 1-800-225-5163.

The Fund will normally send redemption proceeds within one business day
following the redemption request, but may take up to seven business days (or
longer in the case of shares recently purchased by check).

Purchase restrictions

Purchases and sales should be made for long-term investment purposes only. The
Fund and Scudder Investor Services, Inc. each reserves the right to reject
purchases of Fund shares (including exchanges) for any reason including when a
pattern of frequent purchases and sales made in response to short-term
fluctuations in the Fund's share price appears evident.

Tax information

A redemption of shares, including an exchange into another Scudder fund, is a
sale of shares and may result in a gain or loss for income tax purposes.

Tax identification number

Be sure to complete the Tax Identification Number section of the Fund's
application when you open an account. Federal tax law requires the Fund to
withhold 31% of taxable dividends, capital gains distributions and redemption
and exchange proceeds from accounts (other than those of certain exempt payees)
without a correct certified Social Security or tax identification number and
certain other certified information or upon notification from the IRS or a
broker that withholding is required. The Fund reserves the right to reject new
account applications without a correct certified Social Security or tax
identification number. The Fund also reserves the right, following 30 days'
notice, to redeem all shares in accounts without a correct certified Social
Security or tax identification number. A shareholder may avoid involuntary
redemption by providing the Fund with a tax identification number during the
30-day notice period.

Minimum balances

Shareholders should maintain a share balance worth at least $2,500, which amount
may be changed by the Board of Trustees. Scudder retirement plans and certain
other accounts have similar or lower minimum share balance requirements. A
shareholder may open an account with at least $1,000, if an automatic investment
plan of $100/month is established.

Shareholders who maintain a non-fiduciary account balance of less than $2,500 in
the Fund, without establishing an automatic investment plan, will be assessed an
annual $10.00 per fund

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14
<PAGE>

charge with the fee to be paid to the Fund. The $10.00 charge will not apply to
shareholders with a combined household account balance in any of the Scudder
Funds of $25,000 or more. The Fund reserves the right, following 60 days'
written notice to shareholders, to redeem all shares in accounts below $250,
including accounts of new investors, where a reduction in value has occurred due
to a redemption or exchange out of the account. The Fund will mail the proceeds
of the redeemed account to the shareholder. Reductions in value that result
solely from market activity will not trigger an involuntary redemption.
Retirement accounts and certain other accounts will not be assessed the $10.00
charge or be subject to automatic liquidation.

Please refer to "Exchanges and Redemptions--Other Information" in the Fund's
Statement of Additional Information for more information.

Third party transactions

If purchases and redemptions of Fund shares are arranged and settlement is made
at an investor's election through a member of the National Association of
Securities Dealers, Inc., other than Scudder Investor Services, Inc., that
member may, at its discretion, charge a fee for that service.

Redemption-in-kind

The Fund reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption or repurchase order by making
payment in whole or in part in readily marketable securities chosen by the Fund
and valued as they are for purposes of computing the Fund's net asset value (a
redemption-in-kind). If payment is made in securities, a shareholder may incur
transaction expenses in converting these securities to cash. The Trust has
elected, however, to be governed by Rule 18f-1 under the 1940 Act as a result of
which the Fund is obligated to redeem shares, with respect to any one
shareholder during any 90-day period, solely in cash up to the lesser of
$250,000 or 1% of the net asset value of the Fund at the beginning of the
period.

Shareholder benefits

Experienced professional management

Scudder Kemper Investments, Inc., one of the nation's most experienced
investment management firms, actively manages your fund investment. Professional
management is an important advantage for investors who do not have the time or
expertise to invest directly in individual securities.

A team approach to investing

Scudder Growth and Income Fund is managed by a team of Scudder investment
professionals, who each play an important role in the Fund's management process.
Team members work together to develop investment strategies and select
securities for the Fund's portfolio. They are supported by Scudder's large staff
of economists, research analysts, traders and other investment specialists who
work in Scudder's offices across the United Stated and abroad. Scudder believes
its team approach benefits Fund investors by bringing together many disciplines
and leveraging Scudder's extensive resources.

Lead Portfolio Manager, Robert T. Hoffman leads a team of investment
professionals responsible for the management of the Fund and other portfolios
managed in a similar fashion. Mr. Hoffman has had responsibility for setting
the Fund's stock investing strategy and overseeing the Fund's day-to-day
operations since 1991. Mr. Hoffman, who joined Scudder in 1990 as a portfolio
manager, has 13 years of experience in the investment industry, including ___
years of pension fund management experience.

Lori Ensinger, Portfolio Manager joined the Adviser's portfolio management team
in 1993, and the Fund in 1996. Ms. Ensinger focuses on stock selection and
investment strategy. She has worked as a portfolio manager since 1983.

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15
<PAGE>

Benjamin W. Thorndike, Portfolio Manager, is the Fund's chief analyst and
strategist for convertible securities. Mr Thorndike, who has 18 years of
investment experience, joined Scudder in 1983 as a portfolio manager, and the
Fund in 1986.

Kathleen T. Millard, Portfolio Manager, has been involved in the investment
industry since 1983 and has worked as a portfolio manager since 1986. Ms.
Millard, who joined the portfolio management team and Scudder in 1991, focuses
on strategy and stock selection.

SAIL(TM)--Scudder Automated Information Line

For personalized account information including fund prices, yields and account
balances, to perform transactions in existing Scudder fund accounts, or to
obtain information on any Scudder fund, shareholders can call Scudder's
Automated Information Line (SAIL) at 1-800-343-2890, 24 hours a day. During
periods of extreme economic or market changes, or other conditions, it may be
difficult for you to effect telephone transactions in your account. In such an
event you should write to the Fund; please see "How to contact Scudder" for the
address.

Investment flexibility

Scudder offers toll-free telephone exchange between funds at current net asset
value. You can move your investments among money market, income, growth,
tax-free and growth and income funds with a simple toll-free call or, if you
prefer, by sending your instructions through the mail or by fax. (The exchange
privilege may not be available for certain Scudder funds or class thereof. For
more information, please call 1-800-225-5163.) Telephone and fax redemptions and
exchanges are subject to termination and their terms are subject to change at
any time by the Fund or the transfer agent. In some cases, the transfer agent or
Scudder Investor Services, Inc. may impose additional conditions on telephone
transactions.

Personal Counsel(SM) -- A Managed Fund Portfolio Program

If you would like to receive direct guidance and management of your overall
mutual fund portfolio to help you pursue your investment goals, you may be
interested in Personal Counsel from Scudder. Personal Counsel, a program of
Scudder Investor Services, Inc., a registered investment adviser and a
subsidiary of Scudder Kemper Investments, Inc., combines the benefits of a
customized portfolio of pure no-load Scudder Funds with ongoing portfolio
monitoring and individualized service, for an annual fee of generally 1% or less
of assets (with a $1,000 minimum). In addition, it draws upon the Adviser's more
than 75-year heritage of providing investment counsel to large corporate and
private clients. If you have $100,000 or more to invest initially and would like
more information about Personal Counsel, please call 1-800-700-0183.

Dividend reinvestment plan

You may have dividends and distributions automatically reinvested in additional
Fund shares. Please call 1-800-225-5163 to request this feature.

Shareholder statements

You will receive a detailed statement summarizing account activity, including
dividend and capital gain reinvestment, purchases and redemptions. All of your
statements should be retained to help you keep track of account activity and the
cost of shares for tax purposes.

Shareholder reports

In addition to account statements, you receive periodic shareholder reports
highlighting relevant information, including investment results and a review of
portfolio changes.

To reduce the volume of mail you receive, only one copy of most Fund reports,
such as the Fund's Annual Report, may be mailed to your household (same surname,
same address). Please call

- --
16
<PAGE>

1-800-225-5163 if you wish to receive additional shareholder reports.

Newsletters

Four times a year, Scudder sends you Perspectives, an informative newsletter
covering economic and investment developments, service enhancements and other
topics of interest to Scudder fund investors.

Scudder Investor Centers

As a convenience to shareholders who like to conduct business in person,
Scudder Investor Services, Inc. maintains Investor Centers in Boca Raton,
Boston, Chicago, New York and San Francisco.

T.D.D. service for the hearing impaired

Scudder's full range of investor information and shareholder services is
available to hearing impaired investors through a toll-free T.D.D. (Telephone
Device for the Deaf) service. If you have access to a T.D.D., call
1-800-543-7916 for investment information or specific account questions and
transactions.

--
17
<PAGE>

Purchases

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Opening Minimum initial investment: $2,500; IRAs $1,000
an account Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums.
See appropriate plan literature.

<S> <C> <C>
Make checks o By Mail Send your completed and signed application and check
payable to "The
Scudder Funds." by regular mail to: or by express, registered,
or certified mail to:

The Scudder Funds The Scudder Funds
P.O. Box 2291 66 Brooks Drive
Boston, MA Braintree, MA 02184
02107-2291

o By Wire Please see Transaction information--Purchasing shares--
By wire for details, including the ABA wire transfer number.
Then call 1-800-225-5163 for instructions.

o In Person Visit one of our Investor Centers to complete your application with the
help of a Scudder representative. Investor Center locations are listed
under Shareholder benefits.

<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Purchasing Minimum additional investment: $100; IRAs $50
additional Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums.
shares See appropriate plan literature.

<S> <C> <C>
Make checks o By Mail Send a check with a Scudder investment slip, or with a letter of
payable to "The instruction including your account number and the
Scudder Funds." complete Fund name, to the appropriate address listed above.

o By Wire Please see Transaction information--Purchasing shares--
By wire for details, including the ABA wire transfer number.

o In Person Visit one of our Investor Centers to make an additional
investment in your Scudder fund account. Investor Center
locations are listed under Shareholder benefits.

o By Telephone Please see Transaction information--Purchasing shares--
By QuickBuy or By telephone order for more details.

o By Automatic You may arrange to make investments on aregular basis regular basis
Investment Plan through automatic deductions from your bank checking
($50 minimum) account. Please call 1-800-225-5163 for more information and an
enrollment form.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

- --
18
<PAGE>

Exchanges and redemptions

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Exchanging Minimum investments: $2,500 to establish a new account;
shares $100 to exchange among existing accounts

<S> <C> <C>
o By Telephone To speak with a service representative, call 1-800-225-5163 from
8 a.m. to 8 p.m. eastern time or to access SAIL(TM), Scudder's Automated
Information Line, call 1-800-343-2890 (24 hours a day).

o By Mail Print or type your instructions and include:
or Fax the name of the Fund and the account number you are exchanging from;
your name(s) and address as they appear on your account;
the dollar amount or number of shares you wish to exchange;
the name of the Fund you are exchanging into;
your signature(s) as it appears on your account; and
a daytime telephone number.

Send your instructions
by regular mail to: or by express, registered, or by fax to:
or certified mail to:

The Scudder Funds The Scudder Funds 1-800-821-6234
P.O. Box 2291 66 Brooks Drive
Boston, MA Braintree, MA 02184
02107-2291
- ------------------------------------------------------------------------------------------------------------------------
Redeeming shares o By Telephone To speak with a service representative, call 1-800-225-5163 from
8 a.m. to 8 p.m. eastern time or to access SAIL(TM), Scudder's Automated
Information Line, call 1-800-343-2890 (24 hours a day). You may
have redemption proceeds sent to your predesignated bank account, or
redemption proceeds of up to $100,000 sent to your address of record.

o By Mail Send your instructions for redemption to the appropriate address or fax number
or Fax above and include:
the name of the Fund and account number you are redeeming from;
your name(s) and address as they appear on your account;
the dollar amount or number of shares you wish to redeem;
your signature(s) as it appears on your account; and
a daytime telephone number.

A signature guarantee is required for redemptions over $100,000.
See Transaction information--Redeeming shares.

o By Automatic You may arrange to receive automatic cash payments periodically.
Withdrawal Call 1-800-225-5163 for more information and an enrollment form.
Plan
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

--
19
<PAGE>

Scudder tax-advantaged retirement plans

Scudder offers a variety of tax-advantaged retirement plans for individuals,
businesses and non-profit organizations. These flexible plans are designed for
use with the Scudder Family of Funds (except Scudder tax-free funds, which are
inappropriate for such plans). Scudder Funds offer a broad range of investment
objectives and can be used to seek almost any investment goal. Using Scudder's
retirement plans can help shareholders save on current taxes while building
their retirement savings.

o Scudder No-Fee IRAs. These retirement plans allow a maximum annual
contribution of up to $2,000 per person for anyone with earned income (up to
$2,000 per individual for married couples filing jointly, even if only one
spouse has earned income). Many people can deduct all or part of their
contributions from their taxable income, and all investment earnings accrue
on a tax-deferred basis. The Scudder No-Fee IRA charges you no annual
custodial fee.

o Scudder Roth No-Fee IRAs. Similar to the traditional IRA in many respects,
these retirement plans provide a unique opportunity for qualifying
individuals to accumulate investment earnings tax free. Unlike a traditional
IRA, with a Roth IRA, if you meet the distribution requirements, you can
withdraw your money without paying any taxes on the earnings. No tax
deduction is allowed for contributions to a Roth IRA. The Scudder Roth IRA
charges you no annual custodial fee.

o 401(k) Plans. 401(k) plans allow employers and employees to make
tax-deductible retirement contributions. Scudder offers a full service
program that includes recordkeeping, prototype plan, employee communications
and trustee services, as well as investment options.

o Profit Sharing and Money Purchase Pension Plans. These plans allow
corporations, partnerships and people who are self-employed to make annual,
tax-deductible contributions of up to $30,000 for each person covered by the
plans. Plans may be adopted individually or paired to maximize
contributions. These are sometimes known as Keogh plans.

o 403(b) Plans. Retirement plans for tax-exempt organizations and school
systems to which employers and employees may both contribute.

o SEP-IRAs. Easily administered retirement plans for small businesses and
self-employed individuals. The maximum annual contribution to SEP-IRA
accounts is adjusted each year for inflation. The Scudder SEP-IRA charges
you no annual custodial fee.

o Scudder Horizon Plan. A no-load variable annuity that lets you build assets
by deferring taxes on your investment earnings. You can start with $2,500 or
more.

Scudder Trust Company (an affiliate of the Adviser) is Trustee or Custodian for
some of these plans and is paid an annual fee for some of the above retirement
plans. For information about establishing a Scudder No-Fee IRA, SEP-IRA, Profit
Sharing Plan, Money Purchase Pension Plan or a Scudder Horizon Plan, please call
1-800-225-2470. For information about 401(k)s or 403(b)s please call
1-800-323-6105. To effect transactions in existing IRA, SEP-IRA and most Profit
Sharing or Pension Plan accounts, call 1-800-225-5163.

The variable annuity contract is provided by Charter National Life Insurance
Company (in New York State, Intramerica Life Insurance Company [S 1802]). The
contract is offered by Scudder Insurance Agency, Inc. (in New York State,
Nevada and Montana, Scudder Insurance Agency of New York, Inc.). CNL, Inc. is
the Principal Underwriter. Scudder Horizon Plan is not available in all states.

Scudder Investor Relations is a service provided through Scudder Investor
Services, Inc., Distributor.

- --
20
<PAGE>

Trustees and Officers

Daniel Pierce*
President and Trustee

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

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

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

Jean C. Tempel
Trustee; General Partner,
TL Ventures

Kathryn L. Quirk*
Trustee, Vice President and
Assistant Secretary

Bruce F. Beaty*
Vice President

Philip S. Fortuna
Vice President

William F. Gadsden
Vice President

Jerard K. Hartman*
Vice President

Robert T. Hoffman*
Vice President

Thomas W. Joseph*
Vice President

Valerie F. Malter*
Vice President

Thomas F. McDonough*
Vice President, Secretary and
Treasurer

John R. Hebble*
Assistant Treasurer

Caroline Pearson*
Assistant Secretary

* Scudder Kemper Investments, Inc.

--
21
<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
Scudder S&P 500 Index 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.

Industry Sector Funds

Choice Series
Scudder Financial Services Fund
Scudder Health Care Fund
Scudder Technology Fund

Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------

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

Education Accounts
Education IRA
UGMA/UTMA

Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal 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. Certain Scudder funds may not be available for
purchase or exchange. +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 Kemper Investments, Inc., are traded on the New York Stock Exchange and,
in some cases, on various foreign stock exchanges.

- --
22
<PAGE>

How to contact Scudder

Account Service and Information:

For existing account service and transactions

Scudder Investor Relations -- 1-800-225-5163

For 24 hour account information, fund information, exchanges, and an
overview of all the services available to you

Scudder Electronic Account Services -- http://funds.scudder.com

For personalized information about your Scudder accounts, exchanges and
redemptions

Scudder Automated Information Line (SAIL) -- 1-800-343-2890

Investment Information:

For information about the Scudder funds, including additional applications
and prospectuses, or for answers to investment questions

Scudder Investor Relations -- 1-800-225-2470
[email protected]
Scudder's World Wide Web Site -- http://funds.scudder.com

For establishing 401(k) and 403(b) plans

Scudder Defined Contribution Services -- 1-800-323-6105

Scudder Brokerage Services:

To receive information about this discount brokerage service and to obtain
an application

Scudder Brokerage Services* -- 1-800-700-0820

Personal Counsel(SM) -- A Managed Fund Portfolio Program:

To receive information about this mutual fund portfolio guidance and
management program

Personal Counsel from Scudder -- 1-800-700-0183

Please address all correspondence to:

The Scudder Funds
P.O. Box 2291
Boston, Massachusetts
02107-2291

Or Stop by a Scudder Investor Center:

Many shareholders enjoy the personal, one-on-one service of the Scudder
Investor Centers. Check for an Investor Center near you--they can be found
in the following cities:

Boca Raton Chicago San Francisco
Boston New York

Scudder Investor Relations and Scudder Investor Centers are services provided
through Scudder Investor Services, Inc., Distributor.

* Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061 --
Member NASD/SIPC.

--
23

<PAGE>

SCUDDER GROWTH AND INCOME FUND

A Pure No-Load(TM) (No Sales Charges) Diversified
Mutual Fund Seeking Long-Term Growth of
Capital, Current Income and
Growth of Income

- --------------------------------------------------------------------------------

STATEMENT OF ADDITIONAL INFORMATION

May 1, 1998

- --------------------------------------------------------------------------------

This Statement of Additional Information is not a prospectus and should be
read in conjunction with the prospectus of Scudder Growth and Income Fund dated
May 1, 1998, as amended from time to time, a copy of which may be obtained
without charge by writing to Scudder Investor Services, Inc., Two International
Place, Boston, Massachusetts 02110-4103.

<PAGE>

TABLE OF CONTENTS
Page

THE FUND'S INVESTMENT OBJECTIVE AND POLICIES...................................1
General Investment Objective and Policies................................1
Investment Process.......................................................1
Master/feeder structure..................................................2
Investment Restrictions.................................................13

PURCHASES.....................................................................15
Additional Information About Opening An Account.........................15
Additional Information About Making Subsequent Investments..............15
Additional Information About Making Subsequent Investments by QuickBuy..15
Checks..................................................................16
Wire Transfer of Federal Funds..........................................16
Share Price.............................................................16
Share Certificates......................................................16
Other Information.......................................................17

EXCHANGES AND REDEMPTIONS.....................................................17
Exchanges...............................................................17
Redemption by Telephone.................................................18
Redemption By QuickSell.................................................19
Redemption-In-Kind......................................................20
Other Information.......................................................20

FEATURES AND SERVICES OFFERED BY THE FUND.....................................21
The Pure No-Load(TM) Concept............................................21
Internet access.........................................................22
Dividend and Capital Gain Distribution Options..........................23
Diversification.........................................................23
Scudder Investor Centers................................................23
Reports to Shareholders.................................................23
Transaction Summaries...................................................23

THE SCUDDER FAMILY OF FUNDS...................................................24

SPECIAL PLAN ACCOUNTS.........................................................28
Scudder Retirement Plans: Profit-Sharing and Money Purchase Pension
Plans for Corporations and Self-Employed Individuals.................29
Scudder 401(k): Cash or Deferred Profit-Sharing Plan for Corporations
and Self-Employed Individuals........................................29
Scudder IRA: Individual Retirement Account.............................29
Scudder Roth IRA: Individual Retirement Account........................30
Scudder 403(b) Plan.....................................................31
Automatic Withdrawal Plan...............................................31
Group or Salary Deduction Plan..........................................31
Automatic Investment Plan...............................................31
Uniform Transfers/Gifts to Minors Act...................................32

DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS......................................32

PERFORMANCE INFORMATION.......................................................32
Average Annual Total Return.............................................32
Cumulative Total Return.................................................33
Total Return............................................................34
Capital Change..........................................................34
Comparison of Fund Performance..........................................34

i
<PAGE>

TABLE OF CONTENTS (continued)

Page

FUND ORGANIZATION.............................................................37

INVESTMENT ADVISER............................................................38
Personal Investments by Employees of the Adviser........................41

TRUSTEES AND OFFICERS.........................................................42

REMUNERATION..................................................................43
Responsibilities of the Board--Board and Committee Meetings.............43
Compensation of Officers and Trustees...................................44

DISTRIBUTOR...................................................................45

TAXES.........................................................................46

PORTFOLIO TRANSACTIONS........................................................49
Brokerage...............................................................49
Portfolio Turnover......................................................50

NET ASSET VALUE...............................................................51

ADDITIONAL INFORMATION........................................................52
Experts.................................................................52
Shareholder Indemnification.............................................52
Other Information.......................................................52

FINANCIAL STATEMENTS..........................................................53

ii
<PAGE>

THE FUND'S INVESTMENT OBJECTIVE AND POLICIES

(See "Investment objectives and policies" and "Additional information
about policies and investments" in the Fund's prospectus.)

General Investment Objective and Policies

Scudder Growth and Income Fund (the "Fund"), a series of Scudder
Investment Trust (the "Trust"), is a pure no-load(TM), diversified, open-end
management investment company which continuously offers and redeems its shares.
It is a company of the type commonly known as a mutual fund.

The Fund seeks long-term growth of capital, current income and growth of
income.

The Fund invests primarily in common stocks, preferred stocks and
securities convertible into common stocks of companies which offer the prospect
for growth of earnings while paying current dividends. Over time, continued
growth of earnings tends to lead to higher dividends and enhancement of capital
value. The Fund allocates its investments among different industries and
companies and adjusts portfolio securities for investment considerations and not
for trading purposes.

The Fund attempts to achieve its investment objective by investing
primarily in dividend-paying common stocks, preferred stocks and securities
convertible into common stocks. The Fund may purchase securities of real estate
investment trusts ("REITs"). The Fund may also purchase such securities which do
not pay current dividends but which offer prospects for growth of capital and
future income. Convertible securities (which may be current coupon or zero
coupon securities) are bonds, notes, debentures, preferred stocks and other
securities which may be converted or exchanged at a stated or determinable
exchange ratio into underlying shares of common stock. The Fund may also invest
in nonconvertible preferred stocks consistent with the Fund's objective. From
time to time, for temporary defensive purposes, when the Fund's investment
adviser, Scudder Kemper Investments, Inc. (the "Adviser") feels such a position
is advisable in light of economic or market conditions, the Fund may invest a
portion of its assets in cash and cash equivalents. The Fund may invest in
foreign securities. It may also invest in repurchase agreements and loan
securities and may engage in strategic transactions.

Investment Process

The Adviser applies a disciplined investment approach for selecting stocks
for the Fund. The first stage of this process involves analyzing a selected pool
of dividend-paying equity securities, to identify the stocks that have high
yields relative to the yield of the Standard & Poor 500 Index, a
commonly-accepted benchmark for the U.S. stock market. Also, the Adviser screens
for stocks that have yields at the upper end of the stock's historical yield
range. The Fund's portfolio will consist primarily of stocks of established,
dividend-paying U.S. companies, but it may include foreign stocks which meet its
relative yield criteria.

In the Adviser's opinion, this subset of higher-yielding stocks identified
by applying these criteria offers the potential for returns that are greater
than or equal to the S&P 500, at less risk than that market index. In the
Adviser's opinion, these favorable risk and return characteristics exist because
the higher dividends offered by these stocks may act as a "cushion" when markets
are volatile and because stocks with higher yields tend to sell at more
attractive valuations (e.g., lower price-to-earning ratios and lower
price-to-book ratios).

Once this subset of higher-yielding stocks is identified, the Adviser
conducts a fundamental analysis of each company's financial strength,
profitability, projected earnings, sustainability of dividends, and ability of
management. The Fund's portfolio may include stocks which are out of favor in
the market, but which, in the opinion of the Adviser, offer compelling
valuations and potential for long-term appreciation in price and dividends. In
order to diversify the Fund's portfolio among different industry sectors, the
Adviser evaluates how each sector reacts to economic factors such as interest
rates, inflation, Gross Domestic Product, and consumer spending. The Fund's
portfolio is constructed by attaining a proper balance of stocks in these
sectors based on the Adviser's economic forecasts.

<PAGE>

The Adviser applies a disciplined criteria for selling stocks in the
Fund's portfolio as well. When the Adviser determines that the relative yield of
a stock has declined excessively below the yield of the S&P 500, or that the
yield is at the lower end of the stock's historic range, the stock generally is
sold from the Fund's portfolio. Similarly, if the Adviser's fundamental analysis
determines that the payment of the stock's dividend is at risk, or that market
expectations for the stock are unreasonable, the stock is targeted for potential
sale. In summary, the Adviser applies disciplined buy and sell criteria,
fundamental company and industry analysis, and economic forecasts in managing
the Fund to pursue long-term price appreciation and income with a tendency for
lower overall volatility than the market, as measured by the S&P 500.

The Fund cannot guarantee a gain or eliminate the risk of loss. The net
asset value of the Fund's shares will increase or decrease with changes in the
market prices of the Fund's investments and there is no assurance that the
Fund's objective will be achieved. Except as otherwise noted, the Fund's
investment objective and policies may be changed by the Trustees without a vote
of the shareholders.

Master/feeder structure

The Board of Trustees has the discretion to retain the current
distribution arrangement for the Fund while investing in a master fund in a
master/feeder structure as described below.

A master/feeder fund structure is one in which a fund (a "feeder fund"),
instead of investing directly in a portfolio of securities, invests most or all
of its investment assets in a separate registered investment company (the
"master fund") with substantially the same investment objective and policies as
the feeder fund. Such a structure permits the pooling of assets of two or more
feeder funds, preserving separate identities or distribution channels at the
feeder fund level. Based on the premise that certain of the expenses of
operating an investment portfolio are relatively fixed, a larger investment
portfolio may eventually achieve a lower ratio of operating expenses to average
net assets. An existing investment company is able to convert to a feeder fund
by selling all of its investments, which involves brokerage and other
transaction costs and realization of a taxable gain or loss, or by contributing
its assets to the master fund and avoiding transaction costs and, if proper
procedures are followed, the realization of taxable gain or loss.

Convertible Securities. The Fund may invest in convertible securities; that is,
bonds, notes, debentures, preferred stocks, and other securities which are
convertible into common stocks. Investments in convertible securities may
provide income through interest and dividend payments and/or an opportunity for
capital appreciation by virtue of their conversion or exchange features.

The convertible securities in which the Fund may invest include
fixed-income or zero coupon debt securities which may be converted or exchanged
at a stated or determinable exchange ratio into underlying shares of common
stock. The exchange ratio for any particular convertible security may be
adjusted from time to time due to stock splits, dividends, spin-offs, other
corporate distributions, or scheduled changes in the exchange ratio. Convertible
debt securities and convertible preferred stocks, until converted, have general
characteristics similar to both debt and equity securities. Although to a lesser
extent than with debt securities generally, the market value of convertible
securities tends to decline as interest rates increase and, conversely, tends to
increase as interest rates decline. In addition, because of the conversion or
exchange feature, the market value of convertible securities typically changes
as the market value of the underlying common stocks changes, and, therefore,
also tends to follow movements in the general market for equity securities. A
unique feature of convertible securities is that as the market price of the
underlying common stock declines, convertible securities tend to trade
increasingly on a yield basis and so may not experience market value declines to
the same extent as the underlying common stock. When the market price of the
underlying common stock increases, the prices of the convertible securities tend
to rise as a reflection of the value of the underlying common stock, although
typically not as much as the underlying common stock. While no securities
investments are without risk, investments in convertible securities generally
entail less risk than investments in common stock of the same issuer.

As debt securities, convertible securities are investments which provide
for a stream of income (or in the case of zero coupon securities, accretion of
income) with generally higher yields than common stocks. Of course, like all
debt securities, there can be no assurance of income or principal payments
because the issuers of the convertible

2
<PAGE>

securities may default on their obligations. Convertible securities generally
offer lower yields than non-convertible securities of similar quality because of
their conversion or exchange features.

Convertible securities generally are subordinated to other similar but
non-convertible securities of the same issuer, although convertible bonds, as
corporate debt obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common stock, of the
same issuer. However, because of the subordination feature, convertible bonds
and convertible preferred stock typically have lower ratings than similar
non-convertible securities.

Convertible securities may be issued as fixed income obligations that pay
current income or as zero coupon notes and bonds, including Liquid Yield Option
Notes (LYONS). Zero coupon securities pay no cash income and are sold at
substantial discounts from their value at maturity. When held to maturity, their
entire income, which consists of accretion of discount, comes from the
difference between the issue price and their value at maturity. Zero coupon
convertible securities offer the opportunity for capital appreciation as
increases (or decreases) in market value of such securities closely follow the
movements in the market value of the underlying common stock. Zero coupon
convertible securities generally are expected to be less volatile than the
underlying common stocks as they usually are issued with shorter maturities (15
years or less) and are issued with options and/or redemption features
exercisable by the holder of the obligation entitling the holder to redeem the
obligation and receive a defined cash payment.

ILLIQUID SECURITIES. The Fund may occasionally purchase securities other than in
the open market. While such purchases may often offer attractive opportunities
for investment not otherwise available on the open market, the securities so
purchased are often "restricted securities," "not readily marketable," or
"illiquid" restricted securities, i.e., which cannot be sold to the public
without registration under the Securities Act of 1933 (the "1933 Act") or the
availability of an exemption from registration (such as Rules 144 or 144A) or
because they are subject to other legal or contractual delays in or restrictions
on resale.

The absence of a trading market can make it difficult to ascertain a
market value for illiquid securities. Disposing of illiquid securities may
involve time-consuming negotiation and legal expenses, and it may be difficult
or impossible for the Fund to sell them promptly at an acceptable price. The
Fund may have to bear the extra expense of registering such securities for
resale and the risk of substantial delay in effecting such registration. Also
market quotations are less readily available. The judgment of the Adviser may at
times play a greater role in valuing these securities than in the case of
illiquid securities.

Generally speaking, restricted securities may be sold in the U.S. only to
qualified institutional buyers, or in a privately negotiated transaction to a
limited number of purchasers, or in limited quantities after they have been held
for a specified period of time and other conditions are met pursuant to an
exemption from registration, or in a public offering for which a registration
statement is in effect under the 1933 Act. The Fund may be deemed to be an
"underwriter" for purposes of the 1933 Act when selling restricted securities to
the public, and in such event the Fund may be liable to purchasers of such
securities if the registration statement prepared by the issuer, or the
prospectus forming a part of it, is materially inaccurate or misleading.

ZERO COUPON SECURITIES. The Fund may invest in zero coupon securities which pay
no cash income and are sold at substantial discounts from their value at
maturity. When held to maturity, their entire income, which consists of
accretion of discount, comes from the difference between the issue price and
their value at maturity. Zero coupon securities are subject to greater market
value fluctuations from changing interest rates than debt obligations of
comparable maturities which make current distributions of interest (cash). Zero
coupon securities which are convertible into common stock offer the opportunity
for capital appreciation as increases (or decreases) in the market value of such
securities closely follow the movements in the market value of the underlying
common stock. Zero coupon convertible securities generally are expected to be
less volatile than the underlying common stocks, as they usually are issued with
maturities of 15 years or less and are issued with options and/or redemption
features exercisable by the holder of the obligation entitling the holder to
redeem the obligation and receive a defined cash payment.

Zero coupon securities include securities issued directly by the U.S.
Treasury, and U.S. Treasury bonds or notes and their unmatured interest coupons
and receipts for their underlying principal ("coupons") which have been

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<PAGE>

separated by their holder, typically a custodian bank or investment brokerage
firm. A holder will separate the interest coupons from the underlying principal
(the "corpus") of the U.S. Treasury security. A number of securities firms and
banks have stripped the interest coupons and receipts and then resold them in
custodial receipt programs with a number of different names, including "Treasury
Income Growth Receipts" (TIGRS(TM)) and Certificate of Accrual on Treasuries
(CATS(TM)). The underlying U.S. Treasury bonds and notes themselves are held in
book-entry form at the Federal Reserve Bank or, in the case of bearer securities
(i.e., unregistered securities which are owned ostensibly by the bearer or
holder thereof), in trust on behalf of the owners thereof. Counsel to the
underwriters of these certificates or other evidences of ownership of the U.S.
Treasury securities have stated that, for federal tax and securities purposes,
in their opinion purchasers of such certificates, such as the Fund, most likely
will be deemed the beneficial holder of the underlying U.S. Government
securities. The Fund understands that the staff of the Division of Investment
Management of the Securities and Exchange Commission (the "SEC") no longer
considers such privately stripped obligations to be U.S. Government securities,
as defined in the 1940 Act; therefore, the Fund intends to adhere to this staff
position and will not treat such privately stripped obligations to be U.S.
Government securities for the purpose of determining if the Global Fund is
"diversified" under the 1940 Act.

The U.S. Treasury has facilitated transfers of ownership of zero coupon
securities by accounting separately for the beneficial ownership of particular
interest coupon and corpus payments on Treasury securities through the Federal
Reserve book-entry record keeping system. The Federal Reserve program as
established by the Treasury Department is known as "STRIPS" or "Separate Trading
of Registered Interest and Principal of Securities." Under the STRIPS program,
the Fund will be able to have its beneficial ownership of zero coupon securities
recorded directly in the book-entry record-keeping system in lieu of having to
hold certificates or other evidences of ownership of the underlying U.S.
Treasury securities.

When U.S. Treasury obligations have been stripped of their unmatured
interest coupons by the holder, the principal or corpus is sold at a deep
discount because the buyer receives only the right to receive a future fixed
payment on the security and does not receive any rights to periodic interest
(cash) payments. Once stripped or separated, the corpus and coupons may be sold
separately. Typically, the coupons are sold separately or grouped with other
coupons with like maturity dates and sold bundled in such form. Purchasers of
stripped obligations acquire, in effect, discount obligations that are
economically identical to the zero coupon securities that the Treasury sells
itself (see "TAXES").

Foreign Securities. While the Fund generally emphasizes investments in companies
domiciled in the U.S., it may invest in listed and unlisted foreign securities
that meet the same criteria as the Fund's domestic holdings. The Fund may invest
in foreign securities when the anticipated performance of the foreign securities
is believed by the Adviser to offer more potential than domestic alternatives in
keeping with the investment objective of the Fund.

Investors should recognize that investing in foreign securities involves
certain special considerations, including those set forth below, which are not
typically associated with investing in U.S. securities and which may favorably
or unfavorably affect the Fund's performance. As foreign companies are not
generally subject to uniform accounting and auditing and financial reporting
standards, practices and requirements comparable to those applicable to domestic
companies, there may be less publicly available information about a foreign
company than about a domestic company. Many foreign stock markets, while growing
in volume of trading activity, have substantially less volume than the New York
Stock Exchange (the "Exchange") and securities of some foreign companies are
less liquid and more volatile than securities of domestic companies. Similarly,
volume and liquidity in most foreign bond markets are less than the volume and
liquidity in the U.S. and at times, volatility of price can be greater than in
the U.S. Further, foreign markets have different clearance and settlement
procedures and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when assets of the Fund are uninvested and no return is earned
thereon. The inability of the Fund to make intended security purchases due to
settlement problems could cause the Fund to miss attractive investment
opportunities. Inability to dispose of portfolio securities due to settlement
problems either could result in losses to the Fund due to subsequent declines in
value of the portfolio security or, if the Fund has entered into a contract to
sell the security, could result in possible liability to the purchaser. Fixed
commissions on some foreign stock exchanges are generally higher than negotiated
commissions on U.S. exchanges, although the Fund will endeavor to achieve the
most favorable net results on its portfolio transactions. Further, the Fund may
encounter difficulties or be unable to pursue legal remedies and obtain
judgments in foreign courts. There is

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<PAGE>

generally less government supervision and regulation of business and industry
practices, stock exchanges, brokers and listed companies than in the U.S. It may
be more difficult for the Fund's agents to keep currently informed about
corporate actions such as stock dividends or other matters which may affect the
prices of portfolio securities. Communications between the U.S. and foreign
countries may be less reliable than within the U.S., thus increasing the risk of
delayed settlements of portfolio transactions or loss of certificates for
portfolio securities. In addition, with respect to certain foreign countries,
there is the possibility of nationalization, expropriation, the imposition of
withholding or confiscatory taxes, political, social, or economic instability or
diplomatic developments which could affect U.S. investments in those countries.
Investments in foreign securities may also entail certain risks, such as
possible currency blockages or transfer restrictions and the difficulty of
enforcing rights in other countries. Moreover, individual foreign economies may
differ favorably or unfavorably from the U.S. economy in such respects as growth
of gross national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position.

These considerations generally are more of a concern in developing
countries. For example, the possibility of revolution and the dependence on
foreign economic assistance may be greater in these countries than in developed
countries. The management of the Fund seeks to mitigate the risks associated
with these considerations through diversification and active professional
management. Although investments in companies domiciled in developing countries
may be subject to potentially greater risks than investments in developed
countries, the Fund will not invest in any securities of issuers located in
developing countries if the securities, in the judgment of the Adviser, are
speculative.

Investments in foreign securities usually will involve currencies of
foreign countries. Moreover, the Fund may temporarily hold funds in bank
deposits in foreign currencies during the completion of investment programs and
the value of these assets for the Fund as measured in U.S. dollars may be
affected favorably or unfavorably by changes in foreign currency exchange rates
and exchange control regulations and the Fund may incur costs in connection with
conversions between various currencies. Although the Fund values its assets
daily in terms of U.S. dollars, it does not intend to convert its holdings of
foreign currencies, if any, into U.S. dollars on a daily basis. It may do so
from time to time and investors should be aware of the costs of currency
conversion. Although foreign exchange dealers do not charge a fee for
conversion, they do realize a profit based on the difference (the "spread")
between the prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the Fund at one rate
while offering a lesser rate of exchange should the Fund desire to resell that
currency to the dealer. The Fund will conduct its foreign currency exchange
transactions, if any, either on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market or through forward foreign
currency exchange contracts. (See "Currency Transactions" for more information.)

To the extent that the Fund invests in foreign securities, the Fund's
share price could reflect the movements of both the different stock and bond
markets in which it is invested and the currencies in which the investments are
denominated; the strength or weakness of the U.S. dollar against foreign
currencies could account for part of that Fund's investment performance.

Lending of Portfolio Securities. The Fund may seek to increase its income by
lending portfolio securities. Such loans may be made to registered
broker/dealers and are required to be secured continuously by collateral in
cash, U.S. Government Securities and liquid high grade debt obligations
maintained on a current basis at an amount at least equal to the market value
and accrued interest of the securities loaned. The Fund has the right to call a
loan and obtain the securities loaned on no more than five days' notice. During
the existence of a loan, the Fund will continue to receive the equivalent of any
distributions paid by the issuer on the securities loaned and will also receive
compensation based on investment of the collateral. As with other extensions of
credit there are risks of delay in recovery or even loss of rights in the
collateral should the borrower of the securities fail financially. However, the
loans will be made only to firms deemed by the Adviser to be of good standing.
The value of the securities loaned will not exceed 33 1/3% of the value of
the Fund's total assets at the time any loan is made.

Repurchase Agreements. The Fund may enter into repurchase agreements with any
member bank of the Federal Reserve System and any broker/dealer which is
recognized as a reporting government securities dealer if the creditworthiness
of the bank or broker/dealer has been determined by the Adviser to be at least
as high as that of other

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<PAGE>

obligations the Fund may purchase or to be at least equal to that of issuers of
commercial paper rated within the two highest grades assigned by Moody's
Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P").

A repurchase agreement provides a means for the Fund to earn income on
funds for periods as short as overnight. It is an arrangement under which the
Fund acquires a security ("Obligation") and the seller agrees, at the time of
sale, to repurchase the Obligation at a specified time and price. Obligations
subject to a repurchase agreement are held in a segregated account and the value
of such obligations kept at least equal to the repurchase price on a daily
basis. The repurchase price may be higher than the purchase price, the
difference being income to the Fund, or the purchase and repurchase prices may
be the same, with interest at a stated rate due to the Fund together with the
repurchase price on repurchase. In either case, the income to the Fund is
unrelated to the interest rate on the Obligation itself. Obligations will be
held by the Fund's custodian or in the Federal Reserve Book Entry System.

For purposes of the Investment Company Act of 1940, as amended (the "1940
Act"), a repurchase agreement is deemed to be a loan from the Fund to the seller
of the Obligation subject to the repurchase agreement and is therefore subject
to the Fund's investment restriction applicable to loans. It is not clear
whether a court would consider the Obligation purchased by the Fund subject to a
repurchase agreement as being owned by the Fund or as being collateral for a
loan by the Fund to the seller. In the event of the commencement of bankruptcy
or insolvency proceedings with respect to the seller of the Obligation before
repurchase of the Obligation under a repurchase agreement, the Fund may
encounter delay and incur costs before being able to sell the security. Delays
may result in loss of interest or decline in price of the Obligation. If the
court characterizes the transaction as a loan and the Fund has not perfected a
security interest in the Obligation, the Fund may be required to return the
Obligation to the seller's estate and be treated as an unsecured creditor of the
seller. As an unsecured creditor, the Fund would be at the risk of losing some
or all of the principal and income involved in the transaction. As with any
unsecured debt instrument purchased for the Fund, the Adviser seeks to minimize
the risk of loss through repurchase agreements by analyzing the creditworthiness
of the obligor, in this case the seller of the Obligation. Apart from the risk
of bankruptcy or insolvency proceedings, there is also the risk that the seller
may fail to repurchase the Obligation, in which case the Fund may incur a loss
if the proceeds to the Fund of its sale of the securities underlying the
repurchase agreement to a third party are less than the repurchase price. To
protect against such potential loss, if the market value (including interest) of
the Obligation subject to the repurchase agreement becomes less than the
repurchase price (including interest), the Fund will direct the seller of the
Obligation to deliver additional securities so that the market value (including
interest) of all securities subject to the repurchase agreement will equal or
exceed the repurchase price. It is possible that the Fund will be unsuccessful
in seeking to enforce the seller's contractual obligation to deliver additional
securities.

Real Estate Investment Trusts. The Fund may invest in REITs. REITs are sometimes
informally characterized as equity REITs, mortgage REITs and hybrid REITs.
Investment in REITs may subject the Fund to risks associated with the direct
ownership of real estate, such as decreases in real estate values, overbuilding,
increased competition and other risks related to local or general economic
conditions, increases in operating costs and property taxes, changes in zoning
laws, casualty or condemnation losses, possible environmental liabilities,
regulatory limitations on rent and fluctuations in rental income. Equity REITs
generally experience these risks directly through fee or leasehold interests,
whereas mortgage REITs generally experience these risks indirectly through
mortgage interests, unless the mortgage REIT forecloses on the underlying real
estate. Changes in interest rates may also affect the value of the Fund's
investment in REITs. For instance, during periods of declining interest rates,
certain mortgage REITs may hold mortgages that the mortgagors elect to prepay,
which prepayment may diminish the yield on securities issued by those REITs.

Certain REITs have relatively small market capitalization, which may tend
to increase the volatility of the market price of their securities. Furthermore,
REITs are dependent upon specialized management skills, have limited
diversification and are, therefore, subject to risks inherent in operating and
financing a limited number of projects. REITs are also subject to heavy cash
flow dependency, defaults by borrowers and the possibility of failing to qualify
for tax-free pass-through of income under the Internal Revenue Code of 1986, as
amended (the "Code") and to maintain exemption from the registration
requirements of the 1940 Act. By investing in REITs indirectly through the Fund,
a shareholder will bear not only his or her proportionate share of the expenses
of the Fund, but also, indirectly, similar expenses of the REITs. In addition,
REITs depend generally on their ability to generate cash flow to make
distributions to shareholders.

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<PAGE>

Strategic Transactions and Derivatives. The Fund may, but is not required to,
utilize various other investment strategies as described below to hedge various
market risks (such as interest rates, currency exchange rates, and broad or
specific equity or fixed-income market movements), to manage the effective
maturity or duration of the Fund's portfolio, or to enhance potential gain.
These strategies may be executed through the use of derivative contracts. Such
strategies are generally accepted as a part of modern portfolio management and
are regularly utilized by many mutual funds and other institutional investors.
Techniques and instruments may change over time as new instruments and
strategies are developed or regulatory changes occur.

In the course of pursuing these investment strategies, the Fund may
purchase and sell exchange-listed and over-the-counter put and call options on
securities, equity and fixed-income indices and other financial instruments,
purchase and sell financial futures contracts and options thereon, enter into
various interest rate transactions such as swaps, caps, floors or collars, and
enter into various currency transactions such as currency forward contracts,
currency futures contracts, currency swaps or options on currencies or currency
futures (collectively, all the above are called "Strategic Transactions").
Strategic Transactions may be used without limit to attempt to protect against
possible changes in the market value of securities held in or to be purchased
for the Fund's portfolio resulting from securities markets or currency exchange
rate fluctuations, to protect the Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of fixed-income
securities in the Fund's portfolio, or to establish a position in the
derivatives markets as a temporary substitute for purchasing or selling
particular securities. Some Strategic Transactions may also be used to enhance
potential gain although no more than 5% of the Fund's assets will be committed
to Strategic Transactions entered into for non-hedging purposes. Any or all of
these investment techniques may be used at any time and in any combination, and
there is no particular strategy that dictates the use of one technique rather
than another, as use of any Strategic Transaction is a function of numerous
variables including market conditions. The ability of the Fund to utilize these
Strategic Transactions successfully will depend on the Adviser's ability to
predict pertinent market movements, which cannot be assured. The Fund will
comply with applicable regulatory requirements when implementing these
strategies, techniques and instruments. Strategic Transactions involving
financial futures and options thereon will be purchased, sold or entered into
only for bona fide hedging, risk management or portfolio management purposes and
not to create leveraged exposure in the Fund.

Strategic Transactions, including derivative contracts, have risks
associated with them including possible default by the other party to the
transaction, illiquidity and, to the extent the Adviser's view as to certain
market movements is incorrect, the risk that the use of such Strategic
Transactions could result in losses greater than if they had not been used. Use
of put and call options may result in losses to the Fund, force the sale or
purchase of portfolio securities at inopportune times or for prices higher than
(in the case of put options) or lower than (in the case of call options) current
market values, limit the amount of appreciation the Fund can realize on its
investments or cause the Fund to hold a security it might otherwise sell. The
use of currency transactions can result in the Fund incurring losses as a result
of a number of factors including the imposition of exchange controls, suspension
of settlements, or the inability to deliver or receive a specified currency. The
use of options and futures transactions entails certain other risks. In
particular, the variable degree of correlation between price movements of
futures contracts and price movements in the related portfolio position of the
Fund creates the possibility that losses on the hedging instrument may be
greater than gains in the value of the Fund's position. In addition, futures and
options markets may not be liquid in all circumstances and certain
over-the-counter options may have no markets. As a result, in certain markets,
the Fund might not be able to close out a transaction without incurring
substantial losses, if at all. Although the use of futures and options
transactions for hedging should tend to minimize the risk of loss due to a
decline in the value of the hedged position, at the same time they tend to limit
any potential gain which might result from an increase in value of such
position. Finally, the daily variation margin requirements for futures contracts
would create a greater ongoing potential financial risk than would purchases of
options, where the exposure is limited to the cost of the initial premium.
Losses resulting from the use of Strategic Transactions would reduce net asset
value, and possibly income, and such losses can be greater than if the Strategic
Transactions had not been utilized.

General Characteristics of Options. Put options and call options typically have
similar structural characteristics and operational mechanics regardless of the
underlying instrument on which they are purchased or sold. Thus, the following
general discussion relates to each of the particular types of options discussed
in greater detail below. In

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<PAGE>

addition, many Strategic Transactions involving options require segregation of
Fund assets in special accounts, as described below under "Use of Segregated and
Other Special Accounts."

A put option gives the purchaser of the option, upon payment of a premium,
the right to sell, and the writer the obligation to buy, the underlying
security, commodity, index, currency or other instrument at the exercise price.
For instance, the Fund's purchase of a put option on a security might be
designed to protect its holdings in the underlying instrument (or, in some
cases, a similar instrument) against a substantial decline in the market value
by giving the Fund the right to sell such instrument at the option exercise
price. A call option, upon payment of a premium, gives the purchaser of the
option the right to buy, and the seller the obligation to sell, the underlying
instrument at the exercise price. The Fund's purchase of a call option on a
security, financial future, index, currency or other instrument might be
intended to protect the Fund against an increase in the price of the underlying
instrument that it intends to purchase in the future by fixing the price at
which it may purchase such instrument. An American style put or call option may
be exercised at any time during the option period while a European style put or
call option may be exercised only upon expiration or during a fixed period prior
thereto. The Fund is authorized to purchase and sell exchange listed options and
over-the-counter options ("OTC options"). Exchange listed options are issued by
a regulated intermediary such as the Options Clearing Corporation ("OCC"), which
guarantees the performance of the obligations of the parties to such options.
The discussion below uses the OCC as an example, but is also applicable to other
financial intermediaries.

With certain exceptions, OCC issued and exchange listed options generally
settle by physical delivery of the underlying security or currency, although in
the future cash settlement may become available. Index options and Eurodollar
instruments are cash settled for the net amount, if any, by which the option is
"in-the-money" (i.e., where the value of the underlying instrument exceeds, in
the case of a call option, or is less than, in the case of a put option, the
exercise price of the option) at the time the option is exercised. Frequently,
rather than taking or making delivery of the underlying instrument through the
process of exercising the option, listed options are closed by entering into
offsetting purchase or sale transactions that do not result in ownership of the
new option.

The Fund's ability to close out its position as a purchaser or seller of
an OCC or exchange listed put or call option is dependent, in part, upon the
liquidity of the option market. Among the possible reasons for the absence of a
liquid option market on an exchange are: (i) insufficient trading interest in
certain options; (ii) restrictions on transactions imposed by an exchange; (iii)
trading halts, suspensions or other restrictions imposed with respect to
particular classes or series of options or underlying securities including
reaching daily price limits; (iv) interruption of the normal operations of the
OCC or an exchange; (v) inadequacy of the facilities of an exchange or OCC to
handle current trading volume; or (vi) a decision by one or more exchanges to
discontinue the trading of options (or a particular class or series of options),
in which event the relevant market for that option on that exchange would cease
to exist, although outstanding options on that exchange would generally continue
to be exercisable in accordance with their terms.

The hours of trading for listed options may not coincide with the hours
during which the underlying financial instruments are traded. To the extent that
the option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.

OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct bilateral
agreement with the Counterparty. In contrast to exchange listed options, which
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term, exercise price,
premium, guarantees and security, are set by negotiation of the parties. The
Fund will only sell OTC options (other than OTC currency options) that are
subject to a buy-back provision permitting the Fund to require the Counterparty
to sell the option back to the Fund at a formula price within seven days. The
Fund expects generally to enter into OTC options that have cash settlement
provisions, although it is not required to do so.

Unless the parties provide for it, there is no central clearing or
guaranty function in an OTC option. As a result, if the Counterparty fails to
make or take delivery of the security, currency or other instrument underlying
an OTC option it has entered into with the Fund or fails to make a cash
settlement payment due in accordance with the

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<PAGE>

terms of that option, the Fund will lose any premium it paid for the option as
well as any anticipated benefit of the transaction. Accordingly, the Adviser
must assess the creditworthiness of each such Counterparty or any guarantor or
credit enhancement of the Counterparty's credit to determine the likelihood that
the terms of the OTC option will be satisfied. The Fund will engage in OTC
option transactions only with U.S. government securities dealers recognized by
the Federal Reserve Bank of New York as "primary dealers" or broker/dealers,
domestic or foreign banks or other financial institutions which have received
(or the guarantors of the obligation of which have received) a short-term credit
rating of A-1 from S&P or P-1 from Moody's or an equivalent rating from any
nationally recognized statistical rating organization ("NRSRO") or, in the case
of OTC currency transactions, are determined to be of equivalent credit quality
by the Adviser. The staff of the SEC currently takes the position that OTC
options purchased by the Fund, and portfolio securities "covering" the amount of
the Fund's obligation pursuant to an OTC option sold by it (the cost of the
sell-back plus the in-the-money amount, if any) are illiquid, and are subject to
the Fund's limitation on investing no more than 10% of its assets in illiquid
securities.

If the Fund sells a call option, the premium that it receives may serve as
a partial hedge, to the extent of the option premium, against a decrease in the
value of the underlying securities or instruments in its portfolio or will
increase the Fund's income. The sale of put options can also provide income.

The Fund may purchase and sell call options on securities including U.S.
Treasury and agency securities, mortgage-backed securities, corporate debt
securities, equity securities (including convertible securities) and Eurodollar
instruments that are traded on U.S. and foreign securities exchanges and in the
over-the-counter markets, and on securities indices, currencies and futures
contracts. All calls sold by the Fund must be "covered" (i.e., the Fund must own
the securities or futures contract subject to the call) or must meet the asset
segregation requirements described below as long as the call is outstanding.
Even though the Fund will receive the option premium to help protect it against
loss, a call sold by the Fund exposes the Fund during the term of the option to
possible loss of opportunity to realize appreciation in the market price of the
underlying security or instrument and may require the Fund to hold a security or
instrument which it might otherwise have sold.

The Fund may purchase and sell put options on securities including U.S.
Treasury and agency securities, mortgage-backed securities, corporate debt
securities, equity securities (including convertible securities) and Eurodollar
instruments (whether or not it holds the above securities in its portfolio), and
on securities, indices, currencies and futures contracts other than futures on
individual corporate debt and individual equity securities. The Fund will not
sell put options if, as a result, more than 50% of the Fund's assets would be
required to be segregated to cover its potential obligations under such put
options other than those with respect to futures and options thereon. In selling
put options, there is a risk that the Fund may be required to buy the underlying
security at a disadvantageous price above the market price.

General Characteristics of Futures. The Fund may enter into financial futures
contracts or purchase or sell put and call options on such futures as a hedge
against anticipated interest rate, currency or equity market changes, for
duration management and for risk management purposes. Futures are generally
bought and sold on the commodities exchanges where they are listed with payment
of initial and variation margin as described below. The sale of a futures
contract creates a firm obligation by the Fund, as seller, to deliver to the
buyer the specific type of financial instrument called for in the contract at a
specific future time for a specified price (or, with respect to index futures
and Eurodollar instruments, the net cash amount). Options on futures contracts
are similar to options on securities except that an option on a futures contract
gives the purchaser the right in return for the premium paid to assume a
position in a futures contract and obligates the seller to deliver such
position.

The Fund's use of financial futures and options thereon will in all cases
be consistent with applicable regulatory requirements and in particular the
rules and regulations of the Commodity Futures Trading Commission and will be
entered into only for bona fide hedging, risk management (including duration
management) or other portfolio management purposes. Typically, maintaining a
futures contract or selling an option thereon requires the Fund to deposit with
a financial intermediary as security for its obligations an amount of cash or
other specified assets (initial margin) which initially is typically 1% to 10%
of the face amount of the contract (but may be higher in some circumstances).
Additional cash or assets (variation margin) may be required to be deposited
thereafter on a daily basis as the mark to market value of the contract
fluctuates. The purchase of an option on financial futures involves payment

9
<PAGE>

of a premium for the option without any further obligation on the part of the
Fund. If the Fund exercises an option on a futures contract it will be obligated
to post initial margin (and potential subsequent variation margin) for the
resulting futures position just as it would for any position. Futures contracts
and options thereon are generally settled by entering into an offsetting
transaction but there can be no assurance that the position can be offset prior
to settlement at an advantageous price, nor that delivery will occur.

The Fund will not enter into a futures contract or related option (except
for closing transactions) if, immediately thereafter, the sum of the amount of
its initial margin and premiums on open futures contracts and options thereon
would exceed 5% of the Fund's total assets (taken at current value); however, in
the case of an option that is in-the-money at the time of the purchase, the
in-the-money amount may be excluded in calculating the 5% limitation. The
segregation requirements with respect to futures contracts and options thereon
are described below.

Options on Securities Indices and Other Financial Indices. The Fund also may
purchase and sell call and put options on securities indices and other financial
indices and in so doing can achieve many of the same objectives it would achieve
through the sale or purchase of options on individual securities or other
instruments. Options on securities indices and other financial indices are
similar to options on a security or other instrument except that, rather than
settling by physical delivery of the underlying instrument, they settle by cash
settlement, i.e., an option on an index gives the holder the right to receive,
upon exercise of the option, an amount of cash if the closing level of the index
upon which the option is based exceeds, in the case of a call, or is less than,
in the case of a put, the exercise price of the option (except if, in the case
of an OTC option, physical delivery is specified). This amount of cash is equal
to the excess of the closing price of the index over the exercise price of the
option, which also may be multiplied by a formula value. The seller of the
option is obligated, in return for the premium received, to make delivery of
this amount. The gain or loss on an option on an index depends on price
movements in the instruments making up the market, market segment, industry or
other composite on which the underlying index is based, rather than price
movements in individual securities, as is the case with respect to options on
securities.

Currency Transactions. The Fund may engage in currency transactions with
Counterparties in order to hedge the value of portfolio holdings denominated in
particular currencies against fluctuations in relative value. Currency
transactions include forward currency contracts, exchange listed currency
futures, exchange listed and OTC options on currencies, and currency swaps. A
forward currency contract involves a privately negotiated obligation to purchase
or sell (with delivery generally required) a specific currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. A currency swap is
an agreement to exchange cash flows based on the notional difference among two
or more currencies and operates similarly to an interest rate swap, which is
described below. The Fund may enter into currency transactions with
Counterparties which have received (or the guarantors of the obligations which
have received) a credit rating of A-1 or P-1 by S&P or Moody's, respectively, or
that have an equivalent rating from a NRSRO or are determined to be of
equivalent credit quality by the Adviser.

The Fund's dealings in forward currency contracts and other currency
transactions such as futures, options, options on futures and swaps will be
limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is entering into a currency transaction with
respect to specific assets or liabilities of the Fund, which will generally
arise in connection with the purchase or sale of its portfolio securities or the
receipt of income therefrom. Position hedging is entering into a currency
transaction with respect to portfolio security positions denominated or
generally quoted in that currency.

The Fund will not enter into a transaction to hedge currency exposure to
an extent greater, after netting all transactions intended wholly or partially
to offset other transactions, than the aggregate market value (at the time of
entering into the transaction) of the securities held in its portfolio that are
denominated or generally quoted in or currently convertible into such currency,
other than with respect to proxy hedging or cross hedging as described below.

The Fund may also cross-hedge currencies by entering into transactions to
purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which the Fund has or in which the Fund expects
to have portfolio exposure.

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<PAGE>

To reduce the effect of currency fluctuations on the value of existing or
anticipated holdings of portfolio securities, the Fund may also engage in proxy
hedging. Proxy hedging is often used when the currency to which the Fund's
portfolio is exposed is difficult to hedge or to hedge against the dollar. Proxy
hedging entails entering into a commitment or option to sell a currency whose
changes in value are generally considered to be correlated to a currency or
currencies in which some or all of the Fund's portfolio securities are or are
expected to be denominated, in exchange for U.S. dollars. The amount of the
commitment or option would not exceed the value of the Fund's securities
denominated in correlated currencies. For example, if the Adviser considers that
the Austrian schilling is correlated to the German deutschemark (the "D-mark"),
the Fund holds securities denominated in schillings and the Adviser believes
that the value of schillings will decline against the U.S. dollar, the Adviser
may enter into a commitment or option to sell D-marks and buy dollars. Currency
hedging involves some of the same risks and considerations as other transactions
with similar instruments. Currency transactions can result in losses to the Fund
if the currency being hedged fluctuates in value to a degree or in a direction
that is not anticipated. Further, there is the risk that the perceived
correlation between various currencies may not be present or may not be present
during the particular time that the Fund is engaging in proxy hedging. If the
Fund enters into a currency hedging transaction, the Fund will comply with the
asset segregation requirements described below.

Risks of Currency Transactions. Currency transactions are subject to risks
different from those of other portfolio transactions. Because currency control
is of great importance to the issuing governments and influences economic
planning and policy, purchases and sales of currency and related instruments can
be negatively affected by government exchange controls, blockages, and
manipulations or exchange restrictions imposed by governments. These can result
in losses to the Fund if it is unable to deliver or receive currency or funds in
settlement of obligations and could also cause hedges it has entered into to be
rendered useless, resulting in full currency exposure as well as incurring
transaction costs. Buyers and sellers of currency futures are subject to the
same risks that apply to the use of futures generally. Further, settlement of a
currency futures contract for the purchase of most currencies must occur at a
bank based in the issuing nation. Trading options on currency futures is
relatively new, and the ability to establish and close out positions on such
options is subject to the maintenance of a liquid market which may not always be
available. Currency exchange rates may fluctuate based on factors extrinsic to
that country's economy.

Combined Transactions. The Fund may enter into multiple transactions, including
multiple options transactions, multiple futures transactions, multiple currency
transactions (including forward currency contracts) and multiple interest rate
transactions and any combination of futures, options, currency and interest rate
transactions ("component" transactions), instead of a single Strategic
Transaction, as part of a single or combined strategy when, in the opinion of
the Adviser, it is in the best interests of the Fund to do so. A combined
transaction will usually contain elements of risk that are present in each of
its component transactions. Although combined transactions are normally entered
into based on the Adviser's judgment that the combined strategies will reduce
risk or otherwise more effectively achieve the desired portfolio management
goal, it is possible that the combination will instead increase such risks or
hinder achievement of the portfolio management objective.

Swaps, Caps, Floors and Collars. Among the Strategic Transactions into which the
Fund may enter are interest rate, currency and index swaps and the purchase or
sale of related caps, floors and collars. The Fund expects to enter into these
transactions primarily to preserve a return or spread on a particular investment
or portion of its portfolio, to protect against currency fluctuations, as a
duration management technique or to protect against any increase in the price of
securities the Fund anticipates purchasing at a later date. The Fund intends to
use these transactions as hedges and not as speculative investments and will not
sell interest rate caps or floors where it does not own securities or other
instruments providing the income stream the Fund may be obligated to pay.
Interest rate swaps involve the exchange by the Fund with another party of their
respective commitments to pay or receive interest, e.g., an exchange of floating
rate payments for fixed rate payments with respect to a notional amount of
principal. A currency swap is an agreement to exchange cash flows on a notional
amount of two or more currencies based on the relative value differential among
them and an index swap is an agreement to swap cash flows on a notional amount
based on changes in the values of the reference indices. The purchase of a cap
entitles the purchaser to receive payments on a notional principal amount from
the party selling such cap to the extent that a specified index exceeds a
predetermined interest rate or amount. The purchase of a floor entitles the
purchaser to receive payments on a notional principal amount from the party
selling such floor to the extent that a specified index falls below a
predetermined interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain return within a predetermined range of interest
rates or values.

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<PAGE>

The Fund will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. Inasmuch as these swaps, caps,
floors and collars are entered into for good faith hedging purposes, the Adviser
and the Fund believe such obligations do not constitute senior securities under
the 1940 Act and, accordingly, will not treat them as being subject to its
borrowing restrictions. The Fund will not enter into any swap, cap, floor or
collar transaction unless, at the time of entering into such transaction, the
unsecured long-term debt of the Counterparty, combined with any credit
enhancements, is rated at least A by S&P or Moody's or has an equivalent rating
from a NRSRO or is determined to be of equivalent credit quality by the Adviser.
If there is a default by the Counterparty, the Fund may have contractual
remedies pursuant to the agreements related to the transaction. The swap market
has grown substantially in recent years with a large number of banks and
investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid. Caps, floors and collars are more recent innovations for
which standardized documentation has not yet been fully developed and,
accordingly, they are less liquid than swaps.

Eurodollar Instruments. The Fund may make investments in Eurodollar instruments.
Eurodollar instruments are U.S. dollar-denominated futures contracts or options
thereon which are linked to the London Interbank Offered Rate ("LIBOR"),
although foreign currency-denominated instruments are available from time to
time. Eurodollar futures contracts enable purchasers to obtain a fixed rate for
the lending of funds and sellers to obtain a fixed rate for borrowings. The Fund
might use Eurodollar futures contracts and options thereon to hedge against
changes in LIBOR, to which many interest rate swaps and fixed income instruments
are linked.

Risks of Strategic Transactions Outside the U.S. When conducted outside the
U.S., Strategic Transactions may not be regulated as rigorously as in the U.S.,
may not involve a clearing mechanism and related guarantees, and are subject to
the risk of governmental actions affecting trading in, or the prices of, foreign
securities, currencies and other instruments. The value of such positions also
could be adversely affected by: (i) other complex foreign political, legal and
economic factors, (ii) lesser availability than in the U.S. of data on which to
make trading decisions, (iii) delays in the Fund's ability to act upon economic
events occurring in foreign markets during non-business hours in the U.S., (iv)
the imposition of different exercise and settlement terms and procedures and
margin requirements than in the U.S., and (v) lower trading volume and
liquidity.

Use of Segregated and Other Special Accounts. Many Strategic Transactions, in
addition to other requirements, require that the Fund segregate cash or liquid
assets with its custodian to the extent Fund obligations are not otherwise
"covered" through ownership of the underlying security, financial instrument or
currency. In general, either the full amount of any obligation by the Fund to
pay or deliver securities or assets must be covered at all times by the
securities, instruments or currency required to be delivered, or, subject to any
regulatory restrictions, an amount of cash or liquid securities at least equal
to the current amount of the obligation must be segregated with the custodian.
The segregated assets cannot be sold or transferred unless equivalent assets are
substituted in their place or it is no longer necessary to segregate them. For
example, a call option written by the Fund will require the Fund to hold the
securities subject to the call (or securities convertible into the needed
securities without additional consideration) or to segregate cash or liquid
securities sufficient to purchase and deliver the securities if the call is
exercised. A call option sold by the Fund on an index will require the Fund to
own portfolio securities which correlate with the index or to segregate cash or
liquid assets equal to the excess of the index value over the exercise price on
a current basis. A put option written by the Fund requires the Fund to segregate
cash or liquid assets equal to the exercise price.

Except when the Fund enters into a forward contract for the purchase or
sale of a security denominated in a particular currency, which requires no
segregation, a currency contract which obligates the Fund to buy or sell
currency will generally require the Fund to hold an amount of that currency or
liquid securities denominated in that currency equal to the Fund's obligations
or to segregate cash or liquid assets equal to the amount of the Fund's
obligation.

OTC options entered into by the Fund, including those on securities,
currency, financial instruments or indices and OCC issued and exchange listed
index options, will generally provide for cash settlement. As a result, when the
Fund sells these instruments it will only segregate an amount of assets equal to
its accrued net obligations, as there is no requirement for payment or delivery
of amounts in excess of the net amount. These amounts will equal 100% of the

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<PAGE>

exercise price in the case of a non cash-settled put, the same as an OCC
guaranteed listed option sold by the Fund, or the in-the-money amount plus any
sell-back formula amount in the case of a cash-settled put or call. In addition,
when the Fund sells a call option on an index at a time when the in-the-money
amount exceeds the exercise price, the Fund will segregate, until the option
expires or is closed out, cash or cash equivalents equal in value to such
excess. OCC issued and exchange listed options sold by the Fund other than those
above generally settle with physical delivery, or with an election of either
physical delivery or cash settlement and the Fund will segregate an amount of
assets equal to the full value of the option. OTC options settling with physical
delivery, or with an election of either physical delivery or cash settlement
will be treated the same as other options settling with physical delivery.

In the case of a futures contract or an option thereon, the Fund must
deposit initial margin and possible daily variation margin in addition to
segregating assets sufficient to meet its obligation to purchase or provide
securities or currencies, or to pay the amount owed at the expiration of an
index-based futures contract. Such assets may consist of cash, cash equivalents,
liquid debt or equity securities or other acceptable assets.

With respect to swaps, the Fund will accrue the net amount of the excess,
if any, of its obligations over its entitlements with respect to each swap on a
daily basis and will segregate an amount of cash or liquid securities having a
value equal to the accrued excess. Caps, floors and collars require segregation
of assets with a value equal to the Fund's net obligation, if any.

Strategic Transactions may be covered by other means when consistent with
applicable regulatory policies. The Fund may also enter into offsetting
transactions so that its combined position, coupled with any segregated assets,
equals its net outstanding obligation in related options and Strategic
Transactions. For example, the Fund could purchase a put option if the strike
price of that option is the same or higher than the strike price of a put option
sold by the Fund. Moreover, instead of segregating assets if the Fund held a
futures or forward contract, it could purchase a put option on the same futures
or forward contract with a strike price as high or higher than the price of the
contract held. Other Strategic Transactions may also be offset in combinations.
If the offsetting transaction terminates at the time of or after the primary
transaction no segregation is required, but if it terminates prior to such time,
assets equal to any remaining obligation would need to be segregated.

The Fund's activities involving Strategic Transactions may be limited by
the requirements of Subchapter M of the Code for qualification as a regulated
investment company. (See "TAXES.")

Investment Restrictions

Unless specified to the contrary, the following restrictions may not be
changed without the approval of a majority of the outstanding voting securities
of the Fund involved which, under the 1940 Act and the rules thereunder and as
used in this Statement of Additional Information, means the lesser of (1) 67% or
more of the voting securities present at a meeting, if the holders of more than
50% of the outstanding voting securities of the Fund are present or represented
by proxy; or (2) more than 50% of the outstanding voting securities of the Fund.

Any investment restrictions herein which involve a maximum percentage of
securities or assets shall not be considered to be violated unless an excess
over the percentage occurs immediately after, and is caused by, an acquisition
or encumbrance of securities or assets of, or borrowings by, a Fund. The Fund is
under no restriction as to the amount of portfolio securities which may be
bought or sold.

As a matter of fundamental policy, the Fund may not:

(a) borrow money, except as permitted under the 1940 Act and as
interpreted or modified by regulatory authority having jurisdiction
from time to time;

(b) issue senior securities, except as permitted under the 1940 Act and
as interpreted or modified by regulatory authority having
jurisdiction, from time to time;

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<PAGE>

(d) engage in the business of underwriting securities issued by others,
except to the extent that the Fund may be deemed to be an
underwriter in connection with the disposition of portfolio
securities;

(e) purchase or sell real estate, which term does not include securities
of companies which deal in real estate or mortgages or investments
secured by real estate or interests therein, except that the Fund
reserves freedom of action to hold and to sell real estate acquired
as a result of the Fund's ownership of securities;

(f) make loans to other persons except (i) loans of portfolio
securities, and (ii) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests in
indebtedness in accordance with the Fund's investment objective and
policies may be deemed to be loans; or;

(g) concentrate its investments in a particular industry, as that term
is used in the 1940 Act, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time.

If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage beyond that specified limit
resulting from a change in values or net assets will not be considered a
violation.

The Fund may not, as a nonfundamental policy:

(1) borrow money in an amount greater than 5% of its total assets,
except (i) for temporary or emergency purposes and (ii) by engaging
in reverse repurchase agreements, dollar rolls, or other investments
or transactions described in the Fund's registration statement which
may be deemed to be borrowings;

(2) enter into either of reverse repurchase agreements or dollar rolls
in an amount greater than 5% of its total assets;

(3) purchase securities on margin or make short sales, except (i) short
sales against the box, (ii) in connection with arbitrage
transactions, (iii) for margin deposits in connection with futures
contracts, options or other permitted investments, (iv) that
transactions in futures contracts and options shall not be deemed to
constitute selling securities short, and (v) that the Fund may
obtain such short-term credits as may be necessary for the clearance
of securities transactions;

(4) purchase options, unless the aggregate premiums paid on all such
options held by the Fund at any time do not exceed 20% of its total
assets; or sell put options, if as a result, the aggregate value of
the obligations underlying such put options would exceed 50% of its
total assets;

(5) enter into futures contracts or purchase options thereon unless
immediately after the purchase, the value of the aggregate initial
margin with respect to such futures contracts entered into on behalf
of the Fund and the premiums paid for such options on futures
contracts does not exceed 5% of the fair market value of the Fund's
total assets; provided that in the case of an option that is
in-the-money at the time of purchase, the in-the-money amount may be
excluded in computing the 5% limit;

(6) purchase warrants if as a result, such securities, taken at the
lower of cost or market value, would represent more than 5% of the
value of the Fund's total assets (for this purpose, warrants
acquired in units or attached to securities will be deemed to have
no value); and

(7) lend portfolio securities in an amount greater than 30% of its total
assets.

If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage beyond the specified limit
resulting from a change in values or net assets will not be considered a
violation.

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<PAGE>

PURCHASES

(See "Purchases" and "Transaction information" in the Fund's prospectus.)

Additional Information About Opening An Account

Clients having a regular investment counsel account with the Adviser or
its affiliates and members of their immediate families, officers and employees
of the Adviser or of any affiliated organization and their immediate families,
members of the National Association of Securities Dealers, Inc. ("NASD") and
banks may, if they prefer, subscribe initially for at least $2,500 of Fund
shares through Scudder Investor Services, Inc. (the "Distributor") by letter,
fax, TWX or telephone.

Shareholders of other Scudder funds who have submitted an account
application and have a certified taxpayer identification number, clients having
a regular investment counsel account with the Adviser or its affiliates and
members of their immediate families, officers and employees of the Adviser or of
any affiliated organization and their immediate families, members of the NASD
and banks may open an account by wire. These investors must call 1-800-225-5163
to get an account number. During the call the investor will be asked to indicate
the Fund name, amount to be wired ($2,500 minimum), name of bank or trust
company from which the wire will be sent, the exact registration of the new
account, the taxpayer identification or Social Security number, address and
telephone number. The investor must then call the bank to arrange a wire
transfer to The Scudder Funds, State Street Bank and Trust Company, Boston, MA
02101, ABA Number 011000028, DDA Account Number 9903-5552. The investor must
give the Scudder fund name, account name and new account number. Finally, the
investor must send the completed and signed application to the Fund promptly.

The minimum initial purchase amount is less than $2,500 under certain
special plan accounts.

Additional Information About Making Subsequent Investments

Subsequent purchase orders for $10,000 or more, and for an amount not
greater than four times the value of the shareholder's account, may be placed by
telephone, fax, etc. by members of the NASD, by banks, and by established
shareholders [except by Scudder Individual Retirement Account (IRA), Scudder
Profit Sharing and Money Purchase Pension Plans, and Scudder 401(k) and Scudder
403(b) Plan holders]. Orders placed in this manner may be directed to any office
of the Distributor listed in the Fund's prospectus. A two-part invoice of the
purchase will be mailed out promptly following receipt of a request to buy.
Payment should be attached to a copy of the invoice for proper identification.
Federal regulations require that payment be received within seven business days.
If payment is not received within that time, the shares may be canceled. In the
event of such cancellation or cancellation at the purchaser's request, the
purchaser will be responsible for any loss incurred by the Fund or the principal
underwriter by reason of such cancellation. If the purchaser is a shareholder,
the Fund shall have the authority, as agent of the shareholder, to redeem shares
in the account in order to reimburse the Fund or the principal underwriter for
the loss incurred. Net losses on such transactions which are not recovered from
the purchaser will be absorbed by the principal underwriter. Any net profit on
the liquidation of unpaid shares will accrue to the Fund.

Additional Information About Making Subsequent Investments by QuickBuy

Shareholders, whose predesignated bank account of record is a member of
the Automated Clearing House Network (ACH) and who have elected to participate
in the QuickBuy program, may purchase shares of the Fund by telephone. Through
this service shareholders may purchase up to $250,000. To purchase shares by
QuickBuy, shareholders should call before 4 p.m. eastern time. Proceeds in the
amount of your purchase will be transferred from your bank checking account two
or three business days following your call. For requests received by the close
of regular trading on the Exchange, shares will be purchased at the net asset
value per share calculated at the close of trading on the day of your call.
QuickBuy requests received after the close of regular trading on the Exchange
will begin their processing and be purchased at the net asset value calculated
the following business day. If you purchase shares by QuickBuy and redeem them
within seven days of the purchase, the Fund may hold the redemption proceeds for
a period of up to seven business days. If you purchase shares and there are
insufficient funds in your bank account the purchase

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<PAGE>

will be canceled and you will be subject to any losses or fees incurred in the
transaction. QuickBuy transactions are not available for most retirement plan
accounts. However, QuickBuy transactions are available for Scudder IRA accounts.

In order to request purchases by QuickBuy, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account from which the purchase payment will be debited.
New investors wishing to establish QuickBuy may so indicate on the application.
Existing shareholders who wish to add QuickBuy to their account may do so by
completing an QuickBuy Enrollment Form. After sending in an enrollment form
shareholders should allow for 15 days for this service to be available.

The Fund employs procedures, including recording telephone calls, testing
a caller's identity, and sending written confirmation of telephone transactions,
designed to give reasonable assurance that instructions communicated by
telephone are genuine, and to discourage fraud. To the extent that the Fund does
not follow such procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. The Fund will not be liable for acting upon
instructions communicated by telephone that it reasonably believes to be
genuine.

Checks

A certified check is not necessary but checks are only accepted subject to
collection at full face value in U.S. funds and must be drawn on, or payable
through, a U.S. bank.

If shares of the Fund are purchased by a check which proves to be
uncollectible, the Trust reserves the right to cancel the purchase immediately
and the purchaser will be responsible for any loss incurred by the Trust or the
principal underwriter by reason of such cancellation. If the purchaser is a
shareholder, the Trust will have the authority, as agent of the shareholder, to
redeem shares in the account in order to reimburse the Fund or the principal
underwriter for the loss incurred. Investors whose orders have been canceled may
be prohibited from, or restricted in, placing future orders in any of the
Scudder funds.

Wire Transfer of Federal Funds

To obtain the net asset value determined as of the close of regular
trading on the Exchange on a selected day, your bank must forward federal funds
by wire transfer and provide the required account information so as to be
available to the Fund prior to the close of regular trading on the Exchange
(normally 4 p.m., eastern time).

The bank sending an investor's federal funds by bank wire may charge for
the service. Presently the Distributor pays a fee for receipt by State Street
Bank and Trust Company (the "Custodian") of "wired funds," but the right to
charge investors for this service is reserved.

Boston banks are closed on certain holidays although the Exchange may be
open. These holidays include Martin Luther King, Jr. Day (the 3rd Monday in
January), Columbus Day (the 2nd Monday in October) and Veterans' Day (November
11). Investors are not able to purchase shares by wiring federal funds on such
holidays because the Custodian is not open to receive such federal funds on
behalf of the Fund.

Share Price

Purchases will be filled without sales charge at the net asset value next
computed after receipt of the application in good order. Net asset value
normally will be computed as of the close of regular trading on the Exchange on
each day during which the Exchange is open for trading. Orders received after
the close of regular trading on the Exchange will receive the next day's net
asset value. If the order has been placed by a member of the NASD, other than
the Distributor, it is the responsibility of that member broker, rather than the
Fund, to forward the purchase order to the Fund's transfer agent in Boston by
the close of regular trading on the Exchange.

Share Certificates

Due to the desire of the Trust's management to afford ease of redemption,
certificates will not be issued to indicate ownership in the Fund. Share
certificates now in a shareholder's possession may be sent to Scudder Service

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<PAGE>

Corporation (the "Transfer Agent") for cancellation and credit to such
shareholder's account. Shareholders who prefer may hold the certificates in
their possession until they wish to exchange or redeem such shares. (See
"Redeeming shares" in the Fund's prospectus.)

Other Information

The Fund has authorized certain members of the NASD other than the
Distributor to accept purchase and redemption orders for the Fund's shares.
Those brokers may also designate other parties to accept purchase and redemption
orders on the Fund's behalf. Orders for purchase or redemption will be deemed to
have been received by the Fund when such brokers or their authorized designees
accept the orders. Subject to the terms of the contract between the Fund and the
broker, ordinarily orders will be priced at the Fund's net asset value next
computed after acceptance by such brokers or their authorized designees.
Further, if purchases or redemptions of the Fund's shares are arranged and
settlement is made at an investor's election through any other authorized NASD
member, that member may, at its discretion, charge a fee for that service. The
Board of Trustees and the Distributor, also the Fund's principal underwriter,
each has the right to limit the amount of purchases by, and to refuse to sell
to, any person. The Trustees and the Distributor may suspend or terminate the
offering of shares of the Fund at any time for any reason.

The Board of Trustees and the Distributor, the Trust's principal
underwriter, each has the right to limit the amount of purchases by, and to
refuse to sell to, any person. The Trustees and the Distributor may suspend or
terminate the offering of shares of the Fund at any time.

The Tax Identification Number section of the application must be completed
when opening an account. Applications and purchase orders without a certified
tax identification number and certain other certified information (e.g., from
exempt organizations, certification of exempt status) will be returned to the
investor.

The Trust may issue shares of the Fund at net asset value in connection
with any merger or consolidation with, or acquisition of the assets of, any
investment company (or series thereof) or personal holding company, subject to
the requirements of the 1940 Act.

EXCHANGES AND REDEMPTIONS

(See "Exchanges and redemptions" and "Transaction
information" in the Fund's prospectus.)

Exchanges

Exchanges are comprised of a redemption from one Scudder fund and a
purchase into another Scudder fund. The purchase side of the exchange may be
either an additional investment into an existing account or may involve opening
a new account in another fund. When an exchange involves a new account, the new
account will be established with the same registration, tax identification
number, address, telephone redemption option, "Scudder Automated Information
Line" (SAIL) and dividend option as the existing account. Other features will
not carry over automatically to the new account. Exchanges into a new fund
account must be for a minimum of $2,500. When an exchange represents an
additional investment into an existing account, the account receiving the
exchange proceeds must have identical registration, tax identification number,
address, and account options/features as the account of origin. Exchanges into
an existing account must be for $100 or more. If the account receiving the
exchange proceeds is different in any respect, the exchange request must be in
writing and must contain an original signature guarantee as described under
"Transaction information--Redeeming shares--Signature guarantee" in the Fund's
prospectus.

Exchange orders received before the close of regular trading on the
Exchange on any business day ordinarily will be executed at the respective net
asset value determined on that day. Exchange orders received after the close of
regular trading on the Exchange will be executed on the following business day.

Investors may also request, at no extra charge, to have exchanges
automatically executed on a predetermined schedule from one Scudder fund to an
existing account in another Scudder fund, at current net asset value, through
Scudder's Automatic Exchange Program. Exchanges must be for a minimum of $50.
Shareholders may add this free feature over the telephone or in writing.
Automatic Exchanges will continue until the shareholder requests by

17
<PAGE>

telephone or in writing to have the feature removed, or until the originating
account is depleted. The Trust and the Transfer Agent each reserves the right to
suspend or terminate the privilege of the Automatic Exchange Program at any
time.

There is no charge to the shareholder for any exchange described above. An
exchange into another Scudder fund is a redemption of shares, and therefore may
result in tax consequences (gain or loss) to the shareholder and the proceeds of
such exchange may be subject to backup withholding. (See "TAXES.")

Investors currently receive the exchange privilege, including exchange by
telephone, automatically without having to elect it. The Trust employs
procedures, including recording telephone calls, testing a caller's identity,
and sending written confirmation of telephone transactions, designed to give
reasonable assurance that instructions communicated by telephone are genuine,
and to discourage fraud. To the extent that the Trust does not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Trust will not be liable for acting upon
instructions communicated by telephone that it reasonably believes to be
genuine. The Trust and the Transfer Agent each reserves the right to suspend or
terminate the privilege of exchanging by telephone or fax at any time.

The Scudder funds into which investors may make an exchange are listed
under "THE SCUDDER FAMILY OF FUNDS" herein. Before making an exchange,
shareholders should obtain from the Distributor a prospectus of the Scudder fund
into which the exchange is being contemplated. The exchange privilege may not be
available for certain Scudder funds. For more information, please call
1-800-225-5163.

Scudder retirement plans may have different exchange requirements. Please
refer to appropriate plan literature.

Redemption by Telephone

Shareholders currently receive the right, automatically without having to
elect it, to redeem by telephone up to $100,000 to their address of record.
Shareholders may also request by telephone to have the proceeds mailed or wired
to their pre-designated bank account. In order to request wire redemptions by
telephone, shareholders must have completed and returned to the Transfer Agent
the application, including the designation of a bank account to which the
redemption proceeds are to be sent.

(a) NEW INVESTORS wishing to establish telephone redemption to a
predesignated bank account must complete the appropriate section on
the application.

(b) EXISTING SHAREHOLDERS (except those who are Scudder IRA, Scudder
Pension and Profit Sharing, Scudder 401(k) and Scudder 403(b) plan
holders) who wish to establish telephone redemption to a
predesignated bank account or who want to change the bank account
previously designated to receive redemption proceeds should either
return a Telephone Redemption Option Form (available upon request)
or send a letter identifying the account and specifying the exact
information to be changed. The letter must be signed exactly as the
shareholder's name(s) appears on the account. An original signature
and an original signature guarantee are required for each person in
whose name the account is registered.

Telephone redemption is not available with respect to shares represented
by share certificates or shares held in retirement accounts.

If a request for redemption to a shareholder's bank account is made by
telephone or fax, payment will be made by Federal Reserve Bank wire to the bank
account designated on the application unless a request is made that the
redemption check be mailed to the designated bank account. There will be a $5.00
charge for all wire redemptions.

Note: Investors designating that a savings bank receive their telephone
redemption proceeds are advised that if the savings bank is not a participant in
the Federal Reserve System, redemption proceeds must be wired through a

18
<PAGE>

commercial bank which is a correspondent of the savings bank. As this may delay
receipt by the shareholder's account, it is suggested that investors wishing to
use a savings bank discuss wire procedures with their banks and submit any
special wire transfer information with the telephone redemption authorization.
If appropriate wire information is not supplied, redemption proceeds will be
mailed to the designated bank.

The Trust employs procedures, including recording telephone calls, testing
a caller's identity, and sending written confirmation of telephone transactions,
designed to give reasonable assurance that instructions communicated by
telephone are genuine, and to discourage fraud. To the extent that the Trust
does not follow such procedures, it may be liable for losses due to unauthorized
or fraudulent telephone instructions. The Trust will not be liable for acting
upon instructions communicated by telephone that it reasonably believes to be
genuine.

Redemption requests by telephone (technically a repurchase by agreement
between the Trust and the shareholder) of shares purchased by check will not be
accepted until the purchase check has cleared, which may take up to seven
business days.

Redemption By QuickSell

Shareholders, whose predesignated bank account of record is a member of
the Automated Clearing House Network (ACH) and who have elected to participate
in the QuickSell program may sell shares of the Fund by telephone. To sell
shares by QuickSell, shareholders should call before 4 p.m. eastern time.
Redemptions must be for at least $250. Proceeds in the amount of your redemption
will be transferred to your bank checking account two or three business days
following your call. For requests received by the close of regular trading on
the Exchange, shares will be redeemed at the net asset value per share
calculated at the close of trading on the day of your call. QuickSell requests
received after the close of regular trading on the Exchange will begin their
processing and be redeemed at the net asset value calculated the following
business day. QuickSell transactions are not available for Scudder IRA accounts
and most other retirement plan accounts.

In order to request redemptions by QuickSell, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account from which the purchase payment will be debited.
New investors wishing to establish QuickSell may so indicate on the application.
Existing shareholders who wish to add QuickSell to their account may do so by
completing an QuickSell Enrollment Form. After sending in an enrollment form,
shareholders should allow for 15 days for this service to be available.

Redemption by Mail or Fax

Any existing share certificates representing shares being redeemed must
accompany a request for redemption and be duly endorsed or accompanied by a
proper stock assignment form with signature(s) guaranteed as explained in the
Fund's prospectus.

In order to ensure proper authorization before redeeming shares, the
Transfer Agent may request additional documents such as, but not restricted to,
stock powers, trust instruments, certificates of death, appointments as
executor, certificates of corporate authority and waivers of tax (required in
some states when settling estates).

It is suggested that shareholders holding share certificates or shares
registered in other than individual names contact the Transfer Agent prior to
redemptions to ensure that all necessary documents accompany the request. When
shares are held in the name of a corporation, trust, fiduciary agent, attorney
or partnership, the Transfer Agent requires, in addition to the stock power,
certified evidence of authority to sign. These procedures are for the protection
of shareholders and should be followed to ensure prompt payment. Redemption
requests must not be conditional as to date or price of the redemption. Proceeds
of a redemption will be sent within five business days after receipt by the

19
<PAGE>

Transfer Agent of a request for redemption that complies with the above
requirements. Delays in payment of more than seven days for shares tendered for
repurchase or redemption may result but only until the purchase check has
cleared.

The requirements for IRA redemptions are different from those for regular
accounts. For more information please call 1-800-225-5163.

Redemption-In-Kind

The Trust reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption or repurchase order by making
payment in whole or in part in readily marketable securities chosen by the Trust
and valued as they are for purposes of computing the Fund's net asset value (a
redemption-in-kind). If payment is made in securities, a shareholder may incur
transaction expenses in converting these securities into cash. The Fund has
elected, however, to be governed by Rule 18f-1 under the 1940 Act as a result of
which the Trust is obligated to redeem shares, with respect to any one
shareholder during any 90 day period, solely in cash up to the lesser of
$250,000 or 1% of the net asset value of the Fund at the beginning of the
period.

Other Information

Clients, officers or employees of the Adviser or of an affiliated
organization and members of such clients', officers' or employees' immediate
families, banks and members of the NASD may direct repurchase requests to the
Trust through the Distributor at Two International Place, Boston, Massachusetts
02110-4103 by letter, fax or telephone. A two-part confirmation will be mailed
out promptly after receipt of the redemption request. A written request in good
order as described above and any certificates with a proper signature
guarantee(s), as described in the Fund's prospectus under "Transaction
information--Redeeming shares--Signature guarantee", should be sent with a copy
of the invoice to Scudder Service Corporation, Confirmed Processing Department,
Two International Place, Boston, Massachusetts 02110-4103. Failure to deliver
shares or required documents (see above) by the settlement date may result in
cancellation of the trade and the shareholder will be responsible for any loss
incurred by the Fund or the principal underwriter by reason of such
cancellation. The Trust will have the authority, as agent of the shareholder, to
redeem shares in the account in order to reimburse the Fund or the principal
underwriter for the loss incurred. Net losses on such transactions which are not
recovered from the shareholder will be absorbed by the principal underwriter.
Any net gains so resulting will accrue to the Fund. For this group, repurchases
will be carried out at the net asset value next computed after such repurchase
requests have been received. The arrangements described in this paragraph for
repurchasing shares are discretionary and may be discontinued at any time.

If a shareholder redeems all shares in the account after the record date
of a dividend, the shareholder will receive in addition to the net asset value
thereof, all declared but unpaid dividends thereon. The value of shares redeemed
or repurchased may be more or less than the shareholder's cost depending on the
net asset value at the time of redemption or repurchase. The Trust does not
impose a redemption or repurchase charge although a wire charge may be
applicable for redemption proceeds wired to an investor's bank account.
Redemption of shares, including an exchange into another Scudder fund, may
result in tax consequences (gain or loss) to the shareholder and the proceeds of
such redemptions may be subject to backup withholding. (See "TAXES.")

Shareholders who wish to redeem shares from Special Plan Accounts should
contact the employer, trustee or custodian of the Plan for the requirements.

The determination of net asset value may be suspended at times and a
shareholder's right to redeem shares and to receive payment may be suspended at
times during which (a) the Exchange is closed, other than customary weekend and
holiday closings, (b) trading on the Exchange is restricted, (c) an emergency
exists as a result of which disposal by the Trust of securities owned by it is
not reasonably practicable or it is not reasonably practicable for the Fund
fairly to determine the value of its net assets or (d) a governmental body
having jurisdiction over the Fund may by order permit such a suspension for the
protection of the Trust's shareholders; provided that applicable rules and
regulations of the SEC (or any succeeding governmental authority) will govern as
to whether the conditions prescribed in (b), (c) or (d) exist.

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<PAGE>

If transactions at any time reduce a shareholder's account balance in the
Fund to below $2,500 in value, the Trust may notify the shareholder that, unless
the account balance is brought up to at least $2,500, the Trust will redeem all
shares and close the account by making payment to the shareholder. The
shareholder has sixty days to bring the account balance up to $2,500 before any
action will be taken by the Fund. No transfer from an existing account to a new
fund account may be for less than $2,500 or the new account will be redeemed as
described above. (This policy applies to accounts of new shareholders, but does
not apply to certain Special Plan Accounts.) The Trustees have the authority to
change the minimum account size.

FEATURES AND SERVICES OFFERED BY THE FUND

(See "Shareholder benefits" in the Fund's prospectus.)

The Pure No-Load(TM) Concept

Investors are encouraged to be aware of the full ramifications of mutual
fund fee structures, and of how Scudder distinguishes its funds from the vast
majority of mutual funds available today. The primary distinction is between
load and no-load funds.

Load funds generally are defined as mutual funds that charge a fee for the
sale and distribution of fund shares. There are three types of loads: front-end
loads, back-end loads, and asset-based 12b-1 fees. 12b-1 fees are
distribution-related fees charged against fund assets and are distinct from
service fees, which are charged for personal services and/or maintenance of
shareholder accounts. Asset-based sales charges and service fees are typically
paid pursuant to distribution plans adopted under 12b-1 under the 1940 Act.

A front-end load is a sales charge, which can be as high as 8.50% of the
amount invested. A back-end load is a contingent deferred sales charge, which
can be as high as 8.50% of either the amount invested or redeemed. The maximum
front-end or back-end load varies, and depends upon whether or not a fund also
charges a 12b-1 fee and/or a service fee or offers investors various
sales-related services such as dividend reinvestment. The maximum charge for a
12b-1 fee is 0.75% of a fund's average annual net assets, and the maximum charge
for a service fee is 0.25% of a fund's average annual net assets.

A no-load fund does not charge a front-end or back-end load, but can
charge a small 12b-1 fee and/or service fee against fund assets. Under the
National Association of Securities Dealers Rules of Fair Practice, a mutual fund
can call itself a "no-load" fund only if the 12b-1 fee and/or service fee does
not exceed 0.25% of a fund's average annual net assets.

Because Scudder funds do not pay any asset-based sales charges or service
fees, Scudder developed and trademarked the phrase pure no-load(TM) to
distinguish Scudder funds from other no-load mutual funds. Scudder pioneered the
no-load concept when it created the nation's first no-load fund in 1928, and
later developed the nation's first family of no-load mutual funds.

The following chart shows the potential long-term advantage of investing
$10,000 in a Scudder pure no-load fund over investing the same amount in a load
fund that collects an 8.50% front-end load, a load fund that collects only a
0.75% 12b-1 and/or service fee, and a no-load fund charging only a 0.25% 12b-1
and/or service fee. The hypothetical figures in the chart show the value of an
account assuming a constant 10% rate of return over the time periods indicated
and reinvestment of dividends and distributions.

21
<PAGE>

================================================================================

Scudder No-Load Fund
YEARS Pure No-Load(TM) 8.50% Load Load Fund with with 0.25%
Fund Fund 0.75% 12b-1 Fee 12b-1 Fee
- --------------------------------------------------------------------------------

10 $ 25,937 $ 23,733 $ 24,222 $ 25,354
- --------------------------------------------------------------------------------

15 41,772 38,222 37,698 40,371
- --------------------------------------------------------------------------------

20 67,275 61,557 58,672 64,282
===============================================================================

Investors are encouraged to review the fee tables on page 2 of the Fund's
prospectus for more specific information about the rates at which management
fees and other expenses are assessed.

Internet access

World Wide Web Site -- The address of the Scudder Funds site is
http://funds.scudder.com. The site offers guidance on global investing and
developing strategies to help meet financial goals and provides access to the
Scudder investor relations department via e-mail. The site also enables users to
access or view fund prospectuses and profiles with links between summary
information in Profiles and details in the Prospectus. Users can fill out new
account forms on-line, order free software, and request literature on funds.

The site is designed for interactivity, simplicity and maneuverability. A
section entitled "Planning Resources" provides information on asset allocation,
tuition, and retirement planning to users who fill out interactive "worksheets."
Investors can easily establish a "Personal Page," that presents price
information, updated daily, on funds they're interested in following. The
"Personal Page" also offers easy navigation to other parts of the site. Fund
performance data from both Scudder and Lipper Analytical Services, Inc. are
available on the site. Also offered on the site is a news feature, which
provides timely and topical material on the Scudder Funds.

Scudder has communicated with shareholders and other interested parties on
Prodigy since 1988 and has participated since 1994 in GALT's Networth "financial
marketplace" site on the Internet. The firm made Scudder Funds information
available on America Online in early 1996.

Account Access -- Scudder is among the first mutual fund families to allow
shareholders to manage their fund accounts through the World Wide Web. Scudder
Fund shareholders can view a snapshot of current holdings, review account
activity and move assets between Scudder Fund accounts.

Scudder's personal portfolio capabilities -- known as SEAS (Scudder
Electronic Account Services) -- are accessible only by current Scudder Fund
shareholders who have set up a Personal Page on Scudder's Web site. Using a
secure Web browser, shareholders sign on to their account with their Social
Security number and their SAIL password. As an additional security measure,
users can change their current password or disable access to their portfolio
through the World Wide Web.

An Account Activity option reveals a financial history of transactions for
an account, with trade dates, type and amount of transaction, share price and
number of shares traded. For users who wish to trade shares between Scudder
Funds, the Fund Exchange option provides a step-by-step procedure to exchange
shares among existing fund accounts or to new Scudder Fund accounts.

A Call Me(TM) feature enables users to speak with a Scudder Investor
Relations telephone representative while viewing their account on the Web site.
In order to use the Call Me(TM) feature, an individual must have two phone lines

22
<PAGE>

and enter on the screen the phone number that is not being used to connect to
the Internet. They are connected to the next available Scudder Investor
Relations representative from 8 a.m. to 8 p.m. eastern time.

Dividend and Capital Gain Distribution Options

Investors have freedom to choose whether to receive cash or to reinvest
any dividends from net investment income or distributions from realized capital
gains in additional shares of the Fund. A change of instructions for the method
of payment must be received by the Transfer Agent at least five days prior to a
dividend record date. Shareholders may change their dividend option either by
calling 1-800-225-5163 or by sending written instructions to the Transfer Agent.
Please include your account number with your written request. See "How to
contact Scudder" in the prospectus for the address.

Reinvestment is usually made at the closing net asset value determined on
the day following the record date. Investors may leave standing instructions
with the Transfer Agent designating their option for either reinvestment or cash
distribution of any income dividends or capital gains distributions. If no
election is made, dividends and distributions will be invested in additional
shares of the Fund.

Investors may also have dividends and distributions automatically
deposited to their predesignated bank account through Scudder's
DistributionsDirect Program. Shareholders who elect to participate in the
DistributionsDirect Program, and whose predesignated checking account of record
is with a member bank of the Automated Clearing House Network (ACH) can have
income and capital gain distributions automatically deposited to their personal
bank account usually within three business days after the Fund pays its
distribution. A DistributionsDirect request form can be obtained by calling
1-800-225-5163.

Investors choosing to participate in Scudder's Automatic Investment
Withdrawal Plan must reinvest any dividends or capital gains. For most
retirement plan accounts, the reinvestment of dividends and capital gains is
also required.

Diversification

Your investment represents an interest in a large, diversified portfolio
of carefully selected securities. Diversification may protect you against the
possible risks associated with concentrating in fewer securities or in a
specific market sector.

Scudder Investor Centers

Investors may visit any of the Centers maintained by the Distributor. The
Centers are designed to provide individuals with services during any business
day. Investors may pick up literature or find assistance with opening an
account, adding monies or special options to existing accounts, making exchanges
within the Scudder Family of Funds, redeeming shares, or opening retirement
plans. Checks should not be mailed to the Centers but to "The Scudder Funds" at
the address listed under "How to Contact Scudder" in the Prospectus.

Reports to Shareholders

The Trust issues shareholders financial statements examined by independent
accountants on a semi-annual basis and audited annually. These include a list of
investments held and statements of assets and liabilities, operations, changes
in net assets and supplementary information.

Transaction Summaries

Annual summaries of all transactions in each Fund account are available to
shareholders. The summaries may be obtained by calling 1-800-225-5163.

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<PAGE>

THE SCUDDER FAMILY OF FUNDS

(See "Investment products and services" in the Funds' prospectuses.)

The Scudder Family of Funds is America's first family of mutual funds and
the nation's oldest family of no-load mutual funds. To assist investors in
choosing a Scudder fund, descriptions of the Scudder funds' objectives follow.

MONEY MARKET

Scudder U.S. Treasury Money Fund seeks to provide safety, liquidity and
stability of capital and, consistent therewith, to provide current income.
The Fund seeks to maintain a constant net asset value of $1.00 per share,
although in certain circumstances this may not be possible, and declares
dividends daily.

Scudder Cash Investment Trust ("SCIT") seeks to maintain the stability of
capital and, consistent therewith, to maintain the liquidity of capital
and to provide current income. SCIT seeks to maintain a constant net asset
value of $1.00 per share, although in certain circumstances this may not
be possible, and declares dividends daily.

Scudder Money Market Series seeks to provide investors with as high a
level of current income as is consistent with its investment polices and
with preservation of capital and liquidity. The Fund seeks to maintain a
constant net asset value of $1.00 per share, but there is no assurance
that it will be able to do so. The institutional class of shares of this
Fund is not within the Scudder Family of Funds.

Scudder Government Money Market Series seeks to provide investors with as
high a level of current income as is consistent with its investment
polices and with preservation of capital and liquidity. The Fund seeks to
maintain a constant net asset value of $1.00 per share, but there is no
assurance that it will be able to do so. The institutional class of shares
of this Fund is not within the Scudder Family of Funds.

TAX FREE MONEY MARKET

Scudder Tax Free Money Fund ("STFMF") seeks to provide income exempt from
regular federal income tax and stability of principal through investments
primarily in municipal securities. STFMF seeks to maintain a constant net
asset value of $1.00 per share, although in extreme circumstances this may
not be possible.

Scudder Tax Free Money Market Series seeks to provide investors with as
high a level of current income that cannot be subjected to federal income
tax by reason of federal law as is consistent with its investment policies
and with preservation of capital and liquidity. The Fund seeks to maintain
a constant net asset value of $1.00 per share, but there is no assurance
that it will be able to do so. The institutional class of shares of this
Fund is not within the Scudder Family of Funds.

Scudder California Tax Free Money Fund* seeks stability of capital and the
maintenance of a constant net asset value of $1.00 per share while
providing California taxpayers income exempt from both California State
personal and regular federal income taxes. The Fund is a professionally
managed portfolio of high quality, short-term California municipal
securities. There can be no assurance that the stable net asset value will
be maintained.

Scudder New York Tax Free Money Fund* seeks stability of capital and the
maintenance of a constant net asset value of $1.00 per share, while
providing New York taxpayers income exempt from New York State and New
York City personal income taxes and regular federal income tax. There can
be no assurance that the stable net asset value will be maintained.

----------
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.

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<PAGE>

TAX FREE

Scudder Limited Term Tax Free Fund seeks to provide as high a level of
income exempt from regular federal income tax as is consistent with a high
degree of principal stability.

Scudder Medium Term Tax Free Fund seeks to provide a high level of income
free from regular federal income taxes and to limit principal fluctuation.
The Fund will invest primarily in high-grade, intermediate-term bonds.

Scudder Managed Municipal Bonds seeks to provide income exempt from
regular federal income tax primarily through investments in high-grade,
long-term municipal securities.

Scudder High Yield Tax Free Fund seeks to provide a high level of interest
income, exempt from regular federal income tax, from an actively managed
portfolio consisting primarily of investment-grade municipal securities.

Scudder California Tax Free Fund* seeks to provide California taxpayers
with income exempt from both California State personal income and regular
federal income tax. The Fund is a professionally managed portfolio
consisting primarily of California municipal securities.

Scudder Massachusetts Limited Term Tax Free Fund* seeks to provide
Massachusetts taxpayers with as high a level of income exempt from
Massachusetts personal income tax and regular federal income tax, as is
consistent with a high degree of price stability, through a professionally
managed portfolio consisting primarily of investment-grade municipal
securities.

Scudder Massachusetts Tax Free Fund* seeks to provide Massachusetts
taxpayers with income exempt from both Massachusetts personal income tax
and regular federal income tax. The Fund is a professionally managed
portfolio consisting primarily of investment-grade municipal securities.

Scudder New York Tax Free Fund* seeks to provide New York taxpayers with
income exempt from New York State and New York City personal income taxes
and regular federal income tax. The Fund is a professionally managed
portfolio consisting primarily of New York municipal securities.

Scudder Ohio Tax Free Fund* seeks to provide Ohio taxpayers with income
exempt from both Ohio personal income tax and regular federal income tax.
The Fund is a professionally managed portfolio consisting primarily of
investment-grade municipal securities.

Scudder Pennsylvania Tax Free Fund* seeks to provide Pennsylvania
taxpayers with income exempt from both Pennsylvania personal income tax
and regular federal income tax. The Fund is a professionally managed
portfolio consisting primarily of investment-grade municipal securities.

U.S. INCOME

Scudder Short Term Bond Fund seeks to provide a high level of income
consistent with a high degree of principal stability by investing
primarily in high quality short-term bonds.

Scudder Zero Coupon 2000 Fund seeks to provide as high an investment
return over a selected period as is consistent with investment in U.S.
Government securities and the minimization of reinvestment risk.

Scudder GNMA Fund seeks to provide high current income primarily from U.S.
Government guaranteed mortgage-backed (Ginnie Mae) securities.

----------
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.

25
<PAGE>

Scudder Income Fund seeks a high level of income, consistent with the
prudent investment of capital, through a flexible investment program
emphasizing high-grade bonds.

Scudder High Yield Bond Fund seeks a high level of current income and,
secondarily, capital appreciation through investment primarily in below
investment-grade domestic debt securities.

GLOBAL INCOME

Scudder Global Bond Fund seeks to provide total return with an emphasis on
current income by investing primarily in high-grade bonds denominated in
foreign currencies and the U.S. dollar. As a secondary objective, the Fund
will seek capital appreciation.

Scudder International Bond Fund seeks to provide income primarily by
investing in a managed portfolio of high-grade international bonds. As a
secondary objective, the Fund seeks protection and possible enhancement of
principal value by actively managing currency, bond market and maturity
exposure and by security selection.

Scudder Emerging Markets Income Fund seeks to provide high current income
and, secondarily, long-term capital appreciation through investments
primarily in high-yielding debt securities issued by governments and
corporations in emerging markets.

ASSET ALLOCATION

Scudder Pathway Series: Conservative Portfolio seeks primarily current
income and secondarily long-term growth of capital. In pursuing these
objectives, the Portfolio, under normal market conditions, will invest
substantially in a select mix of Scudder bond mutual funds, but will have
some exposure to Scudder equity mutual funds.

Scudder Pathway Series: Balanced Portfolio seeks to provide investors with
a balance of growth and income by investing in a select mix of Scudder
money market, bond and equity mutual funds.

Scudder Pathway Series: Growth Portfolio seeks to provide investors with
long-term growth of capital. In pursuing this objective, the Portfolio
will, under normal market conditions, invest predominantly in a select mix
of Scudder equity mutual funds designed to provide long-term growth.

Scudder Pathway Series: International Portfolio seeks maximum total return
for investors. Total return consists of any capital appreciation plus
dividend income and interest. To achieve this objective, the Portfolio
invests in a select mix of established international and global Scudder
funds.

U.S. GROWTH AND INCOME

Scudder Balanced Fund seeks a balance of growth and income from a
diversified portfolio of equity and fixed-income securities. The Fund also
seeks long-term preservation of capital through a quality-oriented
approach that is designed to reduce risk.

Scudder Growth and Income Fund seeks long-term growth of capital, current
income, and growth of income.

Scudder S&P 500 Index Fund seeks to provide investment results that,
before expenses, correspond to the total return of common stocks publicly
traded in the United States, as represented by the Standard & Poor's 500
Composite Stock Price Index.

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<PAGE>

U.S. GROWTH

Value

Scudder Large Company Value Fund seeks to maximize long-term capital
appreciation through a value-driven investment program.

Scudder Value Fund seeks long-term growth of capital through investment in
undervalued equity securities.

Scudder Small Company Value Fund invests for long-term growth of capital
by seeking out undervalued stocks of small U.S. companies.

Scudder Micro Cap Fund seeks long-term growth of capital by investing
primarily in a diversified portfolio of U.S. micro-capitalization
("micro-cap") common stocks.

Growth

Scudder Classic Growth Fund seeks to provide long-term growth of capital
with reduced share price volatility compared to other growth mutual funds.

Scudder Large Company Growth Fund seeks to provide long-term growth of
capital through investment primarily in the equity securities of seasoned,
financially strong U.S. growth companies.

Scudder Development Fund seeks long-term growth of capital by investing
primarily in securities of small and medium-size growth companies.

Scudder 21st Century Growth Fund seeks long-term growth of capital by
investing primarily in the securities of emerging growth companies poised
to be leaders in the 21st century.

SCUDDER CHOICE SERIES

Scudder Financial Services Fund seeks long-term growth of capital
primarily through investment in equity securities of financial services
companies.

Scudder Health Care Fund seeks long-term growth of capital primarily
through investment in securities of companies that are engaged in the
development, production or distribution of products or services related to
the treatment or prevention of diseases and other medical problems.

Scudder Technology Fund seeks long-term growth of capital primarily
through investment in securities of companies engaged in the development,
production or distribution of technology-related products or services.

GLOBAL GROWTH

Worldwide

Scudder Global Fund seeks long-term growth of capital through a
diversified portfolio of marketable securities, primarily equity
securities, including common stocks, preferred stocks and debt securities
convertible into common stocks.

Scudder International Growth and Income Fund seeks long-term growth of
capital and current income primarily from foreign equity securities.

Scudder International Fund seeks long-term growth of capital primarily
through a diversified portfolio of marketable foreign equity securities.

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Scudder Global Discovery Fund seeks above-average capital appreciation
over the long term by investing primarily in the equity securities of
small companies located throughout the world.

Scudder Emerging Markets Growth Fund seeks long-term growth of capital
primarily through equity investment in emerging markets around the globe.

Scudder Gold Fund seeks maximum return (principal change and income)
consistent with investing in a portfolio of gold-related equity securities
and gold.

Regional

Scudder Greater Europe Growth Fund seeks long-term growth of capital
through investments primarily in the equity securities of European
companies.

Scudder Pacific Opportunities Fund seeks long-term growth of capital
through investment primarily in the equity securities of Pacific Basin
companies, excluding Japan.

Scudder Latin America Fund seeks to provide long-term capital appreciation
through investment primarily in the securities of Latin American issuers.

The Japan Fund, Inc. seeks long-term capital appreciation by investing
primarily in equity securities (including American Depository Receipts) of
Japanese companies.

The net asset values of most Scudder funds can be found daily in the
"Mutual Funds" section of The Wall Street Journal under "Scudder Funds," and in
other leading newspapers throughout the country. Investors will notice the net
asset value and offering price are the same, reflecting the fact that no sales
commission or "load" is charged on the sale of shares of the Scudder funds. The
latest seven-day yields for the money-market funds can be found every Monday and
Thursday in the "Money-Market Funds" section of The Wall Street Journal. This
information also may be obtained by calling the Scudder Automated Information
Line (SAIL) at 1-800-343-2890.

The Scudder Family of Funds offers many conveniences and services,
including: active professional investment management; broad and diversified
investment portfolios; pure no-load funds with no commissions to purchase or
redeem shares or Rule 12b-1 distribution fees; individual attention from a
service representative of Scudder Investor Relations; and easy telephone
exchanges into other Scudder funds. Certain Scudder funds may not be available
for purchase or exchange. For more information, please call 1-800-225-5163.

SPECIAL PLAN ACCOUNTS

(See "Scudder tax-advantaged retirement plans," "Purchases--By Automatic
Investment Plan" and "Exchanges and redemptions--By Automatic
Withdrawal Plan" in the Fund's prospectus.)

Detailed information on any Scudder investment plan, including the
applicable charges, minimum investment requirements and disclosures made
pursuant to Internal Revenue Service (the "IRS") requirements, may be obtained
by contacting Scudder Investor Services, Inc., Two International Place, Boston,
Massachusetts 02110-4103 or by calling toll free, 1-800-225-2470. It is
advisable for an investor considering the funding of the investment plans
described below to consult with an attorney or other investment or tax adviser
with respect to the suitability requirements and tax aspects thereof.

Shares of the Fund may also be a permitted investment under profit sharing
and pension plans and IRA's other than those offered by the Fund's distributor
depending on the provisions of the relevant plan or IRA.

None of the plans assures a profit or guarantees protection against
depreciation, especially in declining markets.

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Scudder Retirement Plans: Profit-Sharing and Money Purchase
Pension Plans for Corporations and Self-Employed Individuals

Shares of the Fund may be purchased as the investment medium under a plan
in the form of a Scudder Profit-Sharing Plan (including a version of the Plan
which includes a cash-or-deferred feature) or a Scudder Money Purchase Pension
Plan (jointly referred to as the Scudder Retirement Plans) adopted by a
corporation, a self-employed individual or a group of self-employed individuals
(including sole proprietorships and partnerships), or other qualifying
organization. Each of these forms was approved by the IRS as a prototype. The
IRS's approval of an employer's plan under Section 401(a) of the Internal
Revenue Code will be greatly facilitated if it is in such approved form. Under
certain circumstances, the IRS will assume that a plan, adopted in this form,
after special notice to any employees, meets the requirements of Section 401(a)
of the Internal Revenue Code.

Scudder 401(k): Cash or Deferred Profit-Sharing Plan
for Corporations and Self-Employed Individuals

Shares of the Fund may be purchased as the investment medium under a plan
in the form of a Scudder 401(k) Plan adopted by a corporation, a self-employed
individual or a group of self-employed individuals (including sole proprietors
and partnerships), or other qualifying organization. This plan has been approved
as a prototype by the IRS.

Scudder IRA: Individual Retirement Account

Shares of the Fund may be purchased as the underlying investment for an
Individual Retirement Account which meets the requirements of Section 408(a) of
the Internal Revenue Code.

A single individual who is not an active participant in an
employer-maintained retirement plan, a simplified employee pension plan, or a
tax-deferred annuity program (a "qualified plan"), and a married individual who
is not an active participant in a qualified plan and whose spouse is also not an
active participant in a qualified plan, are eligible to make tax deductible
contributions of up to $2,000 to an IRA prior to the year such individual
attains age 70 1/2. In addition, certain individuals who are active participants
in qualified plans (or who have spouses who are active participants) are also
eligible to make tax-deductible contributions to an IRA; the annual amount, if
any, of the contribution which such an individual will be eligible to deduct
will be determined by the amount of his, her, or their adjusted gross income for
the year. Whenever the adjusted gross income limitation prohibits an individual
from contributing what would otherwise be the maximum tax-deductible
contribution he or she could make, the individual will be eligible to contribute
the difference to an IRA in the form of nondeductible contributions.

An eligible individual may contribute as much as $2,000 of qualified
income (earned income or, under certain circumstances, alimony) to an IRA each
year (up to $2,000 per individual for married couples if only one spouse has
earned income). All income and capital gains derived from IRA investments are
reinvested and compound tax-deferred until distributed. Such tax-deferred
compounding can lead to substantial retirement savings.

The table below shows how much individuals would accumulate in a fully
tax-deductible IRA by age 65 (before any distributions) if they contribute
$2,000 at the beginning of each year, assuming average annual returns of 5, 10,
and 15%. (At withdrawal, accumulations in this table will be taxable.)

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<PAGE>

Value of IRA at Age 65
Assuming $2,000 Deductible Annual Contribution

- -------------------------------------------------------------------------
Starting Annual Rate of Return
Age of --------------------------------------------------------
Contributions 5% 10% 15%
- -------------------------------------------------------------------------
25 $253,680 $973,704 $4,091,908
35 139,522 361,887 999,914
45 69,439 126,005 235,620
55 26,414 35,062 46,699

This next table shows how much individuals would accumulate in non-IRA
accounts by age 65 if they start with $2,000 in pretax earned income at the
beginning of each year (which is $1,380 after taxes are paid), assuming average
annual returns of 5, 10 and 15%. (At withdrawal, a portion of the accumulation
in this table will be taxable.)

Value of a Non-IRA Account at
Age 65 Assuming $1,380 Annual Contributions
(post tax, $2,000 pretax) and a 31% Tax Bracket

- -------------------------------------------------------------------------
Starting Annual Rate of Return
Age of --------------------------------------------------------
Contributions 5% 10% 15%
- -------------------------------------------------------------------------
25 $119,318 $287,021 $741,431
35 73,094 136,868 267,697
45 40,166 59,821 90,764
55 16,709 20,286 24,681

Scudder Roth IRA: Individual Retirement Account

Shares of the Fund(s) may be purchased as the underlying investment for an
individual Retirement Account which meets the requirements of Section 408A of
the Internal Revenue Code.

A single individual earning below $95,000 can contribute up to $2,000 per
year to a Roth IRA. The maximum contribution amount diminishes and gradually
falls to zero for single filers with adjusted gross incomes ranging from $95,000
to $110,000. Married couples earning less than $150,000 combined, and filing
jointly, can contribute a full $4,000 per year ($2,000 per IRA). The maximum
contribution amount for married couples filing jointly phases out from $150,000
to $160,000.

An eligible individual can contribute money to a traditional IRA and a
Roth IRA as long as the total contribution to all IRAs does not exceed $2,000.
No tax deduction is allowed under Section 219 of the Internal Revenue Code for
contributions to a Roth IRA. Contributions to a Roth IRA may be made even after
the individual for whom the account is maintained has attained age 70 1/2.

All income and capital gains derived from Roth IRA investments are
reinvested and compounded tax-free. Such tax-free compounding can lead to
substantial retirement savings. No distributions are required to be taken prior
to the death of the original account holder. If a Roth IRA has been established
for a minimum of five years, distributions can be taken tax-free after reaching
age 59 1/2, for a first-time home purchase ($10,000 maximum, one-time use) or
upon death or disability. All other distributions from a Roth IRA are taxable
and subject to a 10% tax penalty unless an exception applies. Exceptions to the
10% penalty include: disability, excess medical expenses, the purchase of health
insurance for an unemployed individual and education expenses.

An individual with an income of less than $100,000 (who is not married
filing separately) can roll his or her existing IRA into a Roth IRA. However,
the individual must pay taxes on the taxable amount in his or her traditional

30
<PAGE>

IRA. Individuals who complete the rollover in 1998 will be allowed to spread the
tax payments over a four-year period. After 1998, all taxes on such a rollover
will have to be paid in the tax year in which the rollover is made.

Scudder 403(b) Plan

Shares of the Fund may also be purchased as the underlying investment for
tax sheltered annuity plans under the provisions of Section 403(b)(7) of the
Internal Revenue Code. In general, employees of tax-exempt organizations
described in Section 501(c)(3) of the Internal Revenue Code (such as hospitals,
churches, religious, scientific, or literary organizations and educational
institutions) or a public school system are eligible to participate in a 403(b)
plan.

Automatic Withdrawal Plan

Non-retirement plan shareholders may establish an Automatic Withdrawal
Plan to receive monthly, quarterly or periodic redemptions from his or her
account for any designated amount of $50 or more. Shareholders may designate
which day they want the automatic withdrawal to be processed. Payments are
mailed at the end of each month. The check amounts may be based on the
redemption of a fixed dollar amount, fixed share amount, percent of account
value or declining balance. The Plan provides for income dividends and capital
gains distributions, if any, to be reinvested in additional shares. Shares are
then liquidated as necessary to provide for withdrawal payments. Since the
withdrawals are in amounts selected by the investor and have no relationship to
yield or income, payments received cannot be considered as yield or income on
the investment and the resulting liquidations may deplete or possibly extinguish
the initial investment. Requests for increases in withdrawal amounts or to
change payee must be submitted in writing, signed exactly as the account is
registered and contain signature guarantee(s) as described under "Transaction
information--Redeeming shares--Signature guarantees" in the Fund's prospectus.
Any such requests must be received by the Fund's transfer agent 10 days prior to
the date of the first automatic withdrawal. An Automatic Withdrawal Plan may be
terminated at any time by the shareholder, the Trust, or its agent on written
notice, and will be terminated when all shares of the Fund under the Plan have
been liquidated or upon receipt by the Trust of notice of death of the
shareholder.

An Automatic Withdrawal Plan request form can be obtained by calling
1-800-225-5163.

Group or Salary Deduction Plan

An investor may join a Group or Salary Deduction Plan where satisfactory
arrangements have been made with Scudder Investor Services, Inc. for forwarding
regular investments through a single source. The minimum annual investment is
$240 per investor which may be made in monthly, quarterly, semiannual or annual
payments. The minimum monthly deposit per investor is $20. Except for trustees
or custodian fees for certain retirement plans, at present there is no separate
charge for maintaining group or salary deduction plans; however, the Trust, and
its agents reserve the right to establish a maintenance charge in the future
depending on the services required by the investor.

The Trust reserves the right, after notice has been given to the
shareholder, to redeem and close a shareholder's account in the event that the
shareholder ceases participating in the group plan prior to investment of $1,000
per individual or in the event of a redemption which occurs prior to the
accumulation of that amount or which reduces the account value to less than
$1,000 and the account value is not increased to $1,000 within a reasonable time
after notification. An investor in a plan who has not purchased shares for six
months shall be presumed to have stopped making payments under the plan.

Automatic Investment Plan

Shareholders may arrange to make periodic investments through automatic
deductions from checking accounts by completing the appropriate form and
providing the necessary documentation to establish this service. The minimum
investment is $50.

The Automatic Investment Plan involves an investment strategy called
dollar cost averaging. Dollar cost averaging is a method of investing whereby a
specific dollar amount is invested at regular intervals. By investing the same
dollar amount each period, when shares are priced low the investor will purchase
more shares than when the

31
<PAGE>

share price is higher. Over a period of time this investment approach may allow
the investor to reduce the average price of the shares purchased. However, this
investment approach does not assure a profit or protect against loss. This type
of regular investment program may be suitable for various investment goals such
as, but not limited to, college planning or saving for a home.

Uniform Transfers/Gifts to Minors Act

Grandparents, parents or other donors may set up custodian accounts for
minors. The minimum initial investment is $1,000 unless the donor agrees to
continue to make regular share purchases for the account through Scudder's
Automatic Investment Plan (AIP). In this case, the minimum initial investment is
$500.

The Trust reserves the right, after notice has been given to the
shareholder and custodian, to redeem and close a shareholder's account in the
event that regular investments to the account cease before the $1,000 minimum is
reached.

DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS

(See Distribution and performance information--Dividends and capital
gains distributions" in the Fund's prospectus.)

The Fund intends to follow the practice of distributing substantially all
of its investment company taxable income which includes any excess of net
realized short-term capital gains over net realized long-term capital losses.
The Fund may follow the practice of distributing the entire excess of net
realized long-term capital gains over net realized short-term capital losses.
However, the Fund may retain all or part of such gain for reinvestment, after
paying the related federal taxes for which shareholders may then be able to
claim a credit against their federal tax liability. If the Fund does not
distribute the amount of capital gain and/or net investment income required to
be distributed by an excise tax provision of the Internal Revenue Code, the Fund
may be subject to that excise tax. In certain circumstances, the Fund may
determine that it is in the interest of shareholders to distribute less than the
required amount. (See "TAXES.")

The Fund intends to distribute investment company taxable income,
exclusive of net short-term capital gains in excess of net long-term capital
losses, in March, June, September and December each year. Distributions of net
capital gains realized during each fiscal year will be made annually before the
end of the Fund's fiscal year on December 31. Additional distributions,
including distributions of net short-term capital gains in excess of net
long-term capital losses, may be made, if necessary.

Both types of distributions will be made in shares of the Fund and
confirmations will be mailed to each shareholder unless a shareholder has
elected to receive cash, in which case a check will be sent.

PERFORMANCE INFORMATION

(See "Distribution and performance information--Performance
information" in the Fund's prospectus.)

From time to time, quotations of the Fund's performance may be included in
advertisements, sales literature or reports to shareholders or prospective
investors. These performance figures are calculated in the following manners:

Average Annual Total Return

Average annual total return is the average annual compound rate of return
for periods of one year, five years and ten years (or such shorter periods as
may be applicable dating from the commencement of the Fund's operations under
its current investment objective), all ended on the last day of a recent
calendar quarter. Average annual total return quotations reflect changes in the
price of the Fund's shares and assume that all dividends and capital gains
distributions during the respective periods were reinvested in Fund shares.
Average annual total return is calculated by finding the average annual compound
rates of return of a hypothetical investment, over such periods, according to
the following formula (average annual total return is then expressed as a
percentage):

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<PAGE>

T = (ERV/P)^1/n - 1

Where:

T = Average Annual Total Return.
P = a hypothetical initial investment of $1,000.
n = number of years.
ERV = ending redeemable value: ERV is the value, at the end of
the applicable period, of a hypothetical $1,000
investment made at the beginning of the applicable
period.

Average Annual Total Return for periods ended December 31, 1997

One Year Five Years Ten Years

As described above, average annual total return is based on historical
earnings and is not intended to indicate future performance. Average annual
total return for the Fund will vary based on changes in market conditions and
the level of the Fund's expenses.

In connection with communicating its average annual total return to
current or prospective shareholders, the Fund also may compare these figures to
the performance of other mutual funds tracked by mutual fund rating services or
to unmanaged indices which may assume reinvestment of dividends but generally do
not reflect deductions for administrative and management costs.

Cumulative Total Return

Cumulative total return is the cumulative rate of return on a hypothetical
initial investment of $1,000 for a specified period. Cumulative total return
quotations reflect changes in the price of a Fund's shares and assume that all
dividends and capital gains distributions during the period were reinvested in
Fund shares. Cumulative total return is calculated by finding the cumulative
rates of a return of a hypothetical investment over such periods, according to
the following formula (cumulative total return is then expressed as a
percentage):

C = (ERV/P)-1

Where:

C = Cumulative Total Return.
P = a hypothetical initial investment of $1,000.
ERV = ending redeemable value: ERV is the value, at the
end of the applicable period, of a hypothetical
$1,000 investment made at the beginning of the
applicable period.

Cumulative Total Return for periods ended December 31, 1997

One Year Five Years Ten Years

33
<PAGE>

Total Return

Total return is the rate of return on an investment for a specified period
of time calculated in the same manner as cumulative total return.

Capital Change

Capital change measures the return from invested capital including
reinvested capital gains distributions. Capital change does not include the
reinvestment of income dividends.

Quotations of the Fund's performance are based on historical earnings,
show the performance of a hypothetical investment and are not intended to
indicate future performance of the Fund. An investor's shares when redeemed may
be worth more or less than their original cost. Performance of the Fund will
vary based on changes in market conditions and the level of the Fund's expenses.

Because some of the Fund's investments are denominated in foreign
currencies, the strength or weakness of the U.S. dollar against these currencies
may account for part of the Fund's investment performance. Historical
information on the value of the dollar versus foreign currencies may be used
from time to time in advertisements concerning the Fund. Such historical
information is not indicative of future performance.

Comparison of Fund Performance

A comparison of the quoted non-standard performance offered for various
investments is valid only if performance is calculated in the same manner. Since
there are different methods of calculating performance, investors should
consider the effects of the methods used to calculate performance when comparing
performance of the Fund with performance quoted with respect to other investment
companies or types of investments.

In connection with communicating its performance to current or prospective
shareholders, the Fund also may compare these figures to the performance of
unmanaged indices which may assume reinvestment of dividends or interest but
generally do not reflect deductions for administrative and management costs.
Examples include, but are not limited to the Dow Jones Industrial Average, the
Consumer Price Index, Standard & Poor's 500 Composite Stock Price Index (S&P
500), the Nasdaq OTC Composite Index, the Nasdaq Industrials Index, the Russell
2000 Index, and statistics published by the Small Business Administration.

From time to time, in advertising and marketing literature, this Fund's
performance may be compared to the performance of broad groups of mutual funds
with similar investment goals, as tracked by independent organizations such as,
Investment Company Data, Inc. ("ICD"), Lipper Analytical Services, Inc.
("Lipper"), CDA Investment Technologies, Inc. ("CDA"), Morningstar, Inc., Value
Line Mutual Fund Survey and other independent organizations. When these
organizations' tracking results are used, the Fund will be compared to the
appropriate fund category, that is, by fund objective and portfolio holdings, or
to the appropriate volatility grouping, where volatility is a measure of a
fund's risk. For instance, a Scudder growth fund will be compared to funds in
the growth fund category; a Scudder income fund will be compared to funds in the
income fund category; and so on. Scudder funds (except for money market funds)
may also be compared to funds with similar volatility, as measured statistically
by independent organizations.

From time to time, in marketing and other Fund literature,
(Trustees)(Directors) and officers of the Fund, the Fund's portfolio manager, or
members of the portfolio management team may be depicted and quoted to give
prospective and current shareholders a better sense of the outlook and approach
of those who manage the Fund. In addition, the amount of assets that the Adviser
has under management in various geographical areas may be quoted in advertising
and marketing materials.

The Fund may be advertised as an investment choice in Scudder's college
planning program. The description may contain illustrations of projected future
college costs based on assumed rates of inflation and examples of hypothetical
fund performance, calculated as described above.

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<PAGE>

Statistical and other information, as provided by the Social Security
Administration, may be used in marketing materials pertaining to retirement
planning in order to estimate future payouts of social security benefits.
Estimates may be used on demographic and economic data.

Marketing and other Fund literature may include a description of the
potential risks and rewards associated with an investment in the Fund. The
description may include a "risk/return spectrum" which compares the Fund to
other Scudder funds or broad categories of funds, such as money market, bond or
equity funds, in terms of potential risks and returns. Money market funds are
designed to maintain a constant $1.00 share price and have a fluctuating yield.
Share price, yield and total return of a bond fund will fluctuate. The share
price and return of an equity fund also will fluctuate. The description may also
compare the Fund to bank products, such as certificates of deposit. Unlike
mutual funds, certificates of deposit are insured up to $100,000 by the U.S.
government and offer a fixed rate of return.

Because bank products guarantee the principal value of an investment and
money market funds seek stability of principal, these investments are considered
to be less risky than investments in either bond or equity funds, which may
involve the loss of principal. However, all long-term investments, including
investments in bank products, may be subject to inflation risk, which is the
risk of erosion of the value of an investment as prices increase over a long
time period. The risks/returns associated with an investment in bond or equity
funds depend upon many factors. For bond funds these factors include, but are
not limited to, a fund's overall investment objective, the average portfolio
maturity, credit quality of the securities held, and interest rate movements.
For equity funds, factors include a fund's overall investment objective, the
types of equity securities held and the financial position of the issuers of the
securities. The risks/returns associated with an investment in international
bond or equity funds also will depend upon currency exchange rate fluctuation.

A risk/return spectrum generally will position the various investment
categories in the following order: bank products, money market funds, bond funds
and equity funds. Shorter-term bond funds generally are considered less risky
and offer the potential for less return than longer-term bond funds. The same is
true of domestic bond funds relative to international bond funds, and bond funds
that purchase higher quality securities relative to bond funds that purchase
lower quality securities. Growth and income equity funds are generally
considered to be less risky and offer the potential for less return than growth
funds. In addition, international equity funds usually are considered more risky
than domestic equity funds but generally offer the potential for greater return.

Risk/return spectrums also may depict funds that invest in both domestic
and foreign securities or a combination of bond and equity securities.

Evaluation of Fund performance or other relevant statistical information
made by independent sources may also be used in advertisements concerning the
Fund, including reprints of, or selections from, editorials or articles about
this Fund. Sources for Fund performance information and articles about the Fund
include the following:

American Association of Individual Investors' Journal, a monthly publication of
the AAII that includes articles on investment analysis techniques.

Asian Wall Street Journal, a weekly Asian newspaper that often reviews U.S.
mutual funds investing internationally.

Banxquote, an on-line source of national averages for leading money market and
bank CD interest rates, published on a weekly basis by Masterfund, Inc. of
Wilmington, Delaware.

Barron's, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance data.

Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds investing abroad.

CDA Investment Technologies, Inc., an organization which provides performance
and ranking information through examining the dollar results of hypothetical
mutual fund investments and comparing these results against appropriate market
indices.

35
<PAGE>

Consumer Digest, a monthly business/financial magazine that includes a "Money
Watch" section featuring financial news.

Financial Times, Europe's business newspaper, which features from time to time
articles on international or country-specific funds.

Financial World, a general business/financial magazine that includes a "Market
Watch" department reporting on activities in the mutual fund industry.

Forbes, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.

Fortune, a national business publication that periodically rates the performance
of a variety of mutual funds.

The Frank Russell Company, a West-Coast investment management firm that
periodically evaluates international stock markets and compares foreign equity
market performance to U.S. stock market performance.

Global Investor, a European publication that periodically reviews the
performance of U.S. mutual funds investing internationally.

IBC Money Fund Report, a weekly publication of IBC Financial Data, Inc.,
reporting on the performance of the nation's money market funds, summarizing
money market fund activity and including certain averages as performance
benchmarks, specifically "IBC's Money Fund Average," and "IBC's Government Money
Fund Average."

Ibbotson Associates, Inc., a company specializing in investment research and
data.

Investment Company Data, Inc., an independent organization which provides
performance ranking information for broad classes of mutual funds.

Investor's Business Daily, a daily newspaper that features financial, economic,
and business news.

Kiplinger's Personal Finance Magazine, a monthly investment advisory publication
that periodically features the performance of a variety of securities.

Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis, a weekly
publication of industry-wide mutual fund averages by type of fund.

Money, a monthly magazine that from time to time features both specific funds
and the mutual fund industry as a whole.

Morgan Stanley International, an integrated investment banking firm that
compiles statistical information.

Mutual Fund Values, a biweekly Morningstar, Inc. publication that provides
ratings of mutual funds based on fund performance, risk and portfolio
characteristics.

Ned Davis Research, an independent research and brokerage firm that specializes
in quantitative research and publishes quarterly statistics pertaining to the
investment industry.

The New York Times, a nationally distributed newspaper which regularly covers
financial news.

The No-Load Fund Investor, a monthly newsletter, published by Sheldon Jacobs,
that includes mutual fund performance data and recommendations for the mutual
fund investor.

36
<PAGE>

No-Load Fund*X, a monthly newsletter, published by DAL Investment Company, Inc.,
that reports on mutual fund performance, rates funds and discusses investment
strategies for the mutual fund investor.

Personal Investing News, a monthly news publication that often reports on
investment opportunities and market conditions.

Personal Investor, a monthly investment advisory publication that includes a
"Mutual Funds Outlook" section reporting on mutual fund performance measures,
yields, indices and portfolio holdings.

SmartMoney, a national personal finance magazine published monthly by Dow Jones
and Company, Inc. and The Hearst Corporation. Focus is placed on ideas for
investing, spending and saving.

Success, a monthly magazine targeted to the world of entrepreneurs and growing
business, often featuring mutual fund performance data.

United Mutual Fund Selector, a semi-monthly investment newsletter, published by
Babson United Investment Advisors, that includes mutual fund performance data
and reviews of mutual fund portfolios and investment strategies.

USA Today, a leading national daily newspaper.

U.S. News and World Report, a national news weekly that periodically reports
mutual fund performance data.

Value Line Mutual Fund Survey, an independent organization that provides
biweekly performance and other information on mutual funds.

The Wall Street Journal, a Dow Jones and Company, Inc. newspaper which regularly
covers financial news.

Wiesenberger Investment Companies Services, an annual compendium of information
about mutual funds and other investment companies, including comparative data on
funds' backgrounds, management policies, salient features, management results,
income and dividend records and price ranges.

Working Woman, a monthly publication that features a "Financial Workshop"
section reporting on the mutual fund/financial industry.

Worth, a national publication issued 10 times per year by Capital Publishing
Company, a subsidiary of Fidelity Investments. Focus is placed on personal
financial journalism.

Ned Davis Research, an independent research and brokerage firm that specializes
in quantitative research and publishes quarterly statistics pertaining to the
investment industry.

FUND ORGANIZATION

(See "Fund organization" in the Fund's prospectus.)

The Fund is a series of Scudder Investment Trust, a Massachusetts business
trust established under a Declaration of Trust dated September 20, 1984, as
amended. The name of the Trust was changed on May 15, 1991 from Scudder Growth
and Income Fund. The other series of the Trust are Scudder Large Company Growth
Fund, and Scudder Classic Growth Fund.

On November 4, 1987, the par value of the shares of beneficial interest of
the Trust was changed from no par value to $0.01 par value per share. The
Trust's authorized capital consists of an unlimited number of shares of
beneficial interest of $0.01 par value, all of which are of one class and have
equal rights as to voting, dividends and liquidation. The Trustees have the
authority to issue two or more series of shares and to designate the relative
rights and preferences as between the different series. All shares issued and
outstanding will be fully paid and non-assessable by the Trust and redeemable as
described in this Statement of Additional Information and in the Fund's
prospectus.

37
<PAGE>

The assets of the Trust received for the issue or sale of the shares of
each series and all income, earnings, profits and proceeds thereof, subject only
to the rights of creditors, are specifically allocated to such series and
constitute the underlying assets of such series. The underlying assets of each
series are segregated on the books of account and are to be charged with the
liabilities in respect to such series and with a proportionate share of the
general liabilities of the Trust. If a series were unable to meet its
obligations, the assets of all other series may in some circumstances be
available to creditors for that purpose, in which case the assets of such other
series could be used to meet liabilities which are not otherwise properly
chargeable to them. Expenses with respect to any two or more series are to be
allocated in proportion to the asset value of the respective series except where
allocations of direct expenses can otherwise be fairly made. The officers of the
Trust, subject to the general supervision of the Trustees, have the power to
determine which liabilities are allocable to a given series, or which are
general or allocable to two or more series. In the event of the dissolution or
liquidation of the Trust or any series, the holders of the shares of any series
are entitled to receive as a class the underlying assets of such shares
available for distribution to shareholders.

Shares of the Trust entitle their holders to one vote per share; however,
separate votes are taken by each series on matters affecting an individual
series. For example, a change in investment policy for a series would be voted
upon only by shareholders of the series involved. Additionally, approval of the
investment advisory agreement is a matter to be determined separately by each
series. Approval by the shareholders of one series is effective as to that
series whether or not enough votes are received from the shareholders of the
other series to approve such agreement as to other series.

The Trustees, in their discretion, may authorize the division of shares of
the Fund (or shares of a series) into different classes, permitting shares of
different classes to be distributed by different methods. Although shareholders
of different classes of a series would have an interest in the same portfolio of
assets, shareholders of different classes may bear different expenses in
connection with different methods of distribution. The Trustees have no present
intention of taking the action necessary to effect the division of shares into
separate classes nor of changing the method of distribution of shares of the
Fund.

The Declaration of Trust provides that obligations of the Trust are not
binding upon the Trustees individually but only upon the property of the Trust,
that the Trustees and officers will not be liable for errors of judgment or
mistakes of fact or law and that the Trust will indemnify its Trustees and
officers against liabilities and expenses incurred in connection with litigation
in which they may be involved because of their offices with the Trust except if
it is determined in the manner provided in the Declaration of Trust that they
have not acted in good faith in the reasonable belief that their actions were in
the best interests of the Trust. However, nothing in the Declaration of Trust
protects or indemnifies a Trustee or officer against any liability to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.

INVESTMENT ADVISER

(See "Fund organization--Investment adviser" in the Fund's prospectus.)

Scudder Kemper Investments, Inc. (the "Adviser"), an investment counsel
firm, acts as investment adviser to the Fund. This organization, the predecessor
of which is Scudder, Stevens & Clark, Inc., is one of the most experienced
investment counsel firms in the U. S. It was established as a partnership in
1919 and pioneered the practice of providing investment counsel to individual
clients on a fee basis. In 1928 it introduced the first no-load mutual fund to
the public. In 1953 the Adviser introduced Scudder International Fund, Inc., the
first mutual fund available in the U.S. investing internationally in securities
of issuers in several foreign countries. The predecessor firm reorganized from a
partnership to a corporation on June 28, 1985. On June 26, 1997, Scudder,
Stevens & Clark, Inc. ("Scudder") entered into an agreement with Zurich
Insurance Company ("Zurich") pursuant to which Scudder and Zurich agreed to form
an alliance. On December 31, 1997, Zurich acquired a majority interest in
Scudder, and Zurich Kemper Investments, Inc., a Zurich subsidiary, became part
of Scudder. Scudder's name has been changed to Scudder Kemper Investments, Inc.

Founded in 1872, Zurich is a multinational, public corporation organized
under the laws of Switzerland. Its home office is located at Mythenquai 2, 8002
Zurich, Switzerland. Historically, Zurich's earnings have resulted from its
operations as an insurer as well as from its ownership of its subsidiaries and
affiliated companies (the "Zurich

38
<PAGE>

Insurance Group"). Zurich and the Zurich Insurance Group provide an extensive
range of insurance products and services and have branch offices and
subsidiaries in more than 40 countries throughout the world.

The principal source of the Adviser's income is professional fees received
from providing continuous investment advice, and the firm derives no income from
brokerage or underwriting of securities. Today, it provides investment counsel
for many individuals and institutions, including insurance companies, colleges,
industrial corporations, and financial and banking organizations. In addition,
it manages Montgomery Street Income Securities, Inc., Scudder California Tax
Free Trust, Scudder Cash Investment Trust, Scudder Equity Trust, Scudder Fund,
Inc., Scudder Funds Trust, Scudder Global Fund, Inc., Scudder GNMA Fund, Scudder
Portfolio Trust, Scudder Institutional Fund, Inc., Scudder International Fund,
Inc., Scudder Investment Trust, Scudder Municipal Trust, Scudder Mutual Funds,
Inc., Scudder New Asia Fund, Inc., Scudder New Europe Fund, Inc., Scudder
Pathway Series, Scudder Securities Trust, Scudder State Tax Free Trust, Scudder
Tax Free Money Fund, Scudder Tax Free Trust, Scudder U.S. Treasury Money Fund,
Scudder Variable Life Investment Fund, Scudder World Income Opportunities Fund,
Inc., The Argentina Fund, Inc., The Brazil Fund, Inc., The Korea Fund, Inc., The
Japan Fund, Inc., The Latin America Dollar Income Fund, Inc. and Scudder Spain
and Portugal Fund, Inc. Some of the foregoing companies or trusts have two or
more series.

The Adviser also provides investment advisory services to the mutual funds
which comprise the AARP Investment Program from Scudder. The AARP Investment
Program from Scudder has assets over $13 billion and includes the AARP Growth
Trust, AARP Income Trust, AARP Tax Free Income Trust, AARP Managed Investment
Portfolios Trust and AARP Cash Investment Funds.

Pursuant to an Agreement between Scudder, Stevens & Clark, Inc. and AMA
Solutions, Inc., a subsidiary of the American Medical Association (the "AMA"),
dated May 9, 1997, Scudder has agreed, subject to applicable state regulations,
to pay AMA Solutions, Inc. royalties in an amount equal to 5% of the management
fee received by Scudder with respect to assets invested by AMA members in
Scudder funds in connection with the AMA InvestmentLink(SM) Program. Scudder
will also pay AMA Solutions, Inc. a general monthly fee, currently in the amount
of $833. The AMA and AMA Solutions, Inc. are not engaged in the business of
providing investment advice and neither is registered as an investment adviser
or broker/dealer under federal securities laws. Any person who participates in
the AMA InvestmentLink(SM) Program will be a customer of Scudder (or of a
subsidiary thereof) and not the AMA or AMA Solutions, Inc. AMA
InvestmentLink(SM) is a service mark of AMA Solutions, Inc.

The Adviser maintains a large research department, which conducts ongoing
studies of the factors that affect the position of various industries, companies
and individual securities. In this work, the Adviser utilizes certain reports
and statistics from a wide variety of sources, including brokers and dealers who
may execute portfolio transactions for the Fund and for clients of the Adviser,
but conclusions are based primarily on investigations and critical analyses by
its own research specialists.

Certain investments may be appropriate for the Fund and also for other
clients advised by the Adviser. Investment decisions for the Fund and other
clients are made with a view toward achieving their respective investment
objectives and after consideration of such factors as their current holdings,
availability of cash for investment and the size of their investments generally.
Frequently, a particular security may be bought or sold for only one client or
in different amounts and at different times for more than one but less than all
clients. Likewise, a particular security may be bought for one or more clients
when one or more other clients are selling the security. In addition, purchases
or sales of the same security may be made for two or more clients on the same
date. In such event, such transactions will be allocated among the clients in a
manner believed by the Adviser to be equitable to each. In some cases, this
procedure could have an adverse effect on the price or amount of the securities
purchased or sold by the Fund. Purchase and sale orders for the Fund may be
combined with those of other clients of the Adviser in the interest of achieving
the most favorable net results to the Fund.

The Investment Management Agreement (the "Agreement") between the Trust,
on behalf of the Fund, and the Adviser was approved by the Trustees of the Trust
on _____________. The Agreement is dated _____________and will continue in
effect until _____________and from year to year thereafter only if its
continuance is approved annually by the vote of a majority of those Trustees who
are not parties to such Agreement or interested persons of the Adviser or the
Fund, cast in person at a meeting called for the purpose of voting on such
approval, and by a majority vote either of

39
<PAGE>

the Fund's Trustees or of the outstanding voting securities of the Fund. The
Agreement may be terminated at any time without payment of penalty by either
party on sixty days' written notice, and automatically terminates in the event
of its assignment.

Under the Agreement, the Adviser provides the Fund with continuing
investment management for the Fund's portfolio consistent with the Fund's
investment objectives, policies and restrictions and determines what securities
shall be purchased for the portfolio of the Fund, what portfolio securities
shall be held or sold by the Fund and what portion of the Fund's assets shall be
held uninvested, subject always to the provisions of the Fund's Declaration of
Trust and By-Laws, the 1940 Act and the Code and to the Fund's investment
objectives, policies and restrictions and subject, further, to such policies and
instructions as the Trustees of the Trust may from time to time establish. The
Adviser also advises and assists the officers of the Trust in taking such steps
as are necessary or appropriate to carry out the decisions of its Trustees and
the appropriate committees of the Trustees regarding the conduct of the business
of the Fund.

The Adviser also renders significant administrative services (not
otherwise provided by third parties) necessary for the Fund's operations as an
open-end investment company including, but not limited to, preparing reports and
notices to the Trustees and shareholders; supervising, negotiating contractual
arrangements with, and monitoring various third-party service providers to the
Fund (such as the Fund's transfer agent, pricing agents, custodian, accountants
and others); preparing and making filings with the SEC and other regulatory
agencies; assisting in the preparation and filing of the Fund's federal, state
and local tax returns; preparing and filing the Fund's federal excise tax
returns; assisting with investor and public relations matters; monitoring the
valuation of securities and the calculation of net asset value; monitoring the
registration of shares of the Fund under applicable federal and state securities
laws; maintaining the Fund's books and records to the extent not otherwise
maintained by a third party; assisting in establishing accounting policies of
the Fund; assisting in the resolution of accounting and legal issues;
establishing and monitoring the Fund's operating budget; processing the payment
of the Fund's bills; assisting the Fund in, and otherwise arranging for, the
payment of distributions and dividends; and otherwise assisting the Fund in the
conduct of its business, subject to the direction and control of the Trustees.

The Adviser pays the compensation and expenses (except those for attending
Board and Committee meetings outside New York, New York and Boston,
Massachusetts) of all Trustees, officers and executive employees of the Trust
affiliated with the Adviser and makes available, without expense to the Trust,
the services of such Trustees, officers and employees of the Adviser as may duly
be elected officers or Trustees of the Trust, subject to their individual
consent to serve and to any limitations imposed by law, and provides the Trust's
office space and facilities.

For the Adviser's services from August 13, 1996 to May 1, 1997, The Fund
paid the Adviser the annual fee of 0.60% of the first $500 million of average
daily net assets, 0.55% of such assets in excess of $500 million, 0.50% of such
assets in excess of $1 billion, 0.475% of such assets in excess of $1.5 billion,
0.45% of such assets in excess of $2 billion, 0.425% of such assets in excess of
$3 billion.

For the Adviser's services after May 1, 1997, the Fund paid the Adviser
the annual fee of 0.60% of the first $500 million of average daily net asset,
0.55% of such assets in excess of $500 million, 0.50% of such assets in excess
of $1 billion, 0.475% of such assets in excess of $1.5 billion, 0.45% of such
assets in excess of $2 billion, 0.425% of such assets in excess of $3 billion
and 0.405% of such assets in excess of $4.5 billion.

For the years ended December 31, 1997, 1996, and 1995, the Fund was
charged by the Adviser aggregate fees pursuant to its then effective investment
advisory agreement of $__________, $17,628,873, and $13,054,200, respectively.
The Adviser waived approximately $1.3 million of management fees otherwise
payable to it in 1992 by the Fund. The $1.3 million resulted from the one-time
assumption of substantially all of the Niagara Share Corporation's ("Niagara")
severance plan liability by the Fund during the Fund's acquisition of certain
assets of Niagara. Net assets as of December 31, 1997 were $_____________.

Under the Agreement the Fund is responsible for all of its other expenses
including organizational costs, fees and expenses incurred in connection with
membership in investment company organizations; brokers' commissions; legal,
auditing and accounting expenses; the calculation of Net Asset Value; taxes and
governmental fees; the fees and expenses of the transfer agent; the cost of
preparing stock certificates and any other expenses including clerical expenses
of issue, redemption or repurchase of shares; the expenses of and the fees for
registering or qualifying securities

40
<PAGE>

for sale; the fees and expenses of Trustees, officers and employees of the Trust
who are not affiliated with the Adviser; the cost of printing and distributing
reports and notices to shareholders; and the fees and disbursements of
custodians. The Fund may arrange to have third parties assume all or part of the
expenses of sale, underwriting and distribution of shares of the Fund. The Fund
is also responsible for its expenses incurred in connection with litigation,
proceedings and claims and the legal obligation it may have to indemnify its
officers and Trustees with respect thereto.

The Agreement expressly provides that the Adviser shall not be required to
pay a pricing agent of the Fund for portfolio pricing services, if any.

On July 27, 1992, the Fund acquired certain assets with a fair value of
$208,411,296 (including unrealized appreciation of $52,317,307) from Niagara, a
closed-end investment company, in a tax free exchange for 13,249,287 shares of
the Fund and the assumption by the Fund of substantially all of Niagara's
severance plan liability of $1,300,000. The Fund and its shareholders did not
bear the economic burden of the assumption of such Niagara liability because the
Adviser waived approximately $1,300,000 of management fees otherwise payable to
it in 1992 by the Fund. In addition to the severance plan liability, costs of
$207,541 were incurred by the Fund as a result of the acquisition. These costs,
which were borne by the Fund are included as Fund expenses for the year ended
December 31, 1992.

The Agreement also provides that the Fund may use any name derived from
the name "Scudder, Stevens & Clark" only as long as the Agreement extension or
any renewal or amendment thereof remains in effect.

In reviewing the terms of the Agreement and in discussions with the
Adviser concerning such Agreement, the Trustees of the Trust who are not
"interested persons" of the Trust have been represented by independent counsel
at the Fund's expense.

The Agreement provides that the Adviser shall not be liable for any error
of judgment or mistake of law or for any loss suffered by the Fund in connection
with matters to which the Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of the Adviser in
the performance of its duties or from reckless disregard by the Adviser of its
obligations and duties under the Agreement.

Officers and employees of the Adviser from time to time may have
transactions with various banks, including the Fund's custodian bank. It is the
Adviser's opinion that the terms and conditions of those transactions which have
occurred were not influenced by existing or potential custodial or other Fund
relationships.

None of the officers or Trustees of the Trust may have dealings with the
Trust as principals in the purchase or sale of securities, except as individual
subscribers or holders of shares of the Trust.

Personal Investments by Employees of the Adviser

Employees of the Adviser are permitted to make personal securities
transactions, subject to requirements and restrictions set forth in the
Adviser's Code of Ethics. The Code of Ethics contains provisions and
requirements designed to identify and address certain conflicts of interest
between personal investment activities and the interests of investment advisory
clients such as the Fund. Among other things, the Code of Ethics, which
generally complies with standards recommended by the Investment Company
Institute's Advisory Group on Personal Investing, prohibits certain types of
transactions absent prior approval, imposes time periods during which personal
transactions may not be made in certain securities, and requires the submission
of duplicate broker confirmations and monthly reporting of securities
transactions. Additional restrictions apply to portfolio managers, traders,
research analysts and others involved in the investment advisory process.
Exceptions to these and other provisions of the Code of Ethics may be granted in
particular circumstances after review by appropriate personnel.

41
<PAGE>

TRUSTEES AND OFFICERS
Position with
Position Principal Underwriter, Scudder
Name, Age and Address with Fund Occupation** Investor Services, Inc.
- --------------------- --------- ------------ -----------------------

Daniel Pierce+*= (64) President and Chairman of the Director, Vice President
Trustee Board and and Assistant Treasurer
Managing Director
of Scudder Kemper
Investments, Inc.

Henry P. Becton, Jr. Trustee President and --
(54) General Manager,
125 Western Avenue WGBH Educational
Allston, MA 02134 Foundation

George M. Lovejoy, Trustee President and --
Jr.= (68) Former Director,
160 Federal Street Fifty Associates
Boston, MA 02110 (real estate
corporation)

Wesley W. Marple, Trustee Professor of --
Jr.= (66) Business
413 Hayden Hall Administration
360 Huntington Ave. Northeastern
Boston, MA 02115 University,
College of
Business
Administration

Kathryn L. Quirk*# Trustee, Vice Managing Director Director, Senior Vice
(45) President and of Scudder Kemper President and Clerk
Assistant Investments, Inc.
Secretary
--
Dawn-Marie Driscoll Trustee
(--)

Peter B. Freeman (__) Trustee --

Jean C. Tempel (55) Trustee General Partner, --
Ten Post Office Square TL Ventures
Suite 1325 (venture capital
Boston, MA 02109 funds)

Bruce F. Beaty# (39) Vice President Principal of --
Scudder Kemper
Investments, Inc.

William F. Gadsden*# Vice President Managing Director --
(43) of Scudder Kemper
Investments, Inc.

Jerard K. Hartman# Vice President Managing Director --
(65) of Scudder Kemper
Investments, Inc.

Robert T. Hoffman# Vice President Managing Director --
(39) of Scudder Kemper
Investments, Inc.

Thomas W. Joseph+ (59) Vice President Principal of Director, Vice
Scudder Kemper President, Treasurer
Investments, Inc. and Assistant Clerk

42
<PAGE>

Position with
Position Principal Underwriter, Scudder
Name, Age and Address with Fund Occupation** Investor Services, Inc.
- --------------------- --------- ------------ -----------------------

Valerie F. Malter# Vice President Principal of __
(39) Scudder Kemper
Investments, Inc.

Thomas F. McDonough+ Vice Principal of Assistant Clerk
(51) President, Scudder Kemper
Secretary and Investments, Inc.
Treasurer

Caroline Pearson+ (35) Assistant Vice President, __
Secretary Scudder Kemper
Investments, Inc.

John R. Hebble+ (39) Assistant Senior Vice __
Treasurer President,
Scudder Kemper
Investments, Inc.

* Messrs. Gadsden, Pierce and Ms. Quirk are considered by the Fund and its
counsel to be persons who are "interested persons" of the Adviser or of
the Fund (within the meaning of the Investment Company Act of 1940, as
amended).
** Unless otherwise stated, all the officers and directors have been
associated with their respective companies for more than five years, but
not necessarily in the same capacity.
= Messrs. Lovejoy, Pierce, Marple and Ms. Quirk are members of the Executive
Committee, which has the power to declare dividends from ordinary income
and distributions of realized capital gains to the same extent as the
Board is so empowered.
+ Address: Two International Place, Boston, Massachusetts
# Address: 345 Park Avenue, New York, New York

As of March 31, 1998, all Trustees and officers of the Fund as a group
owned beneficially (as that term is defined in Section 13(d) of the Securities
Exchange Act of 1934) less than 1% of the Fund.

As of March 31, 1998, 10,255,839 shares in the aggregate, 5.15% of the
outstanding shares of the Fund, were held in the name of Charles Schwab & Co.,
101 Montgomery Street, San Francisco, CA 94104, who may be deemed to be the
beneficial owner of certain of these shares, but disclaims any beneficial
ownership therein.

To the best of the Fund's knowledge, as of March 31, 1998 no person owned
beneficially more than 5% of the Fund's outstanding shares except as stated
above.

The Trustees and officers of the Fund also serve in similar capacities
with other Scudder funds.

REMUNERATION

Responsibilities of the Board--Board and Committee Meetings

The Board of Trustees is responsible for the general oversight of each
Fund's business. A majority of the Board's members are not affiliated with
Scudder Kemper Investments, Inc. These "Independent Trustees" have primary
responsibility for assuring that each Fund is managed in the best interests of
its shareholders.

The Board of Trustees meets at least quarterly to review the investment
performance of each Fund and other operational matters, including policies and
procedures designated to assure compliance with various regulatory requirements.
At least annually, the Independent Trustees review the fees paid to the Adviser
and its affiliates for investment advisory services and other administrative and
shareholder services. In this regard, they evaluate, among other things, each
Funds' investment performance, the quality and efficiency of the various other
services provided, costs incurred by the Adviser and its affiliates, and
comparative information regarding fees and expenses of competitive

43
<PAGE>

funds. They are assisted in this process by each Fund's independent public
accountants and by independent legal counsel selected by the Independent
Trustees.

All of the Independent Trustees serve on the Committee on Independent
Trustees, which nominates Independent Trustees and considers other related
matters, and the Audit Committee, which selects each Fund's independent public
accountants and reviews accounting policies and controls. In addition,
Independent Trustees from time to time have established and served on task
forces and subcommittees focusing on particular matters such as investment,
accounting and shareholder service issues.

The Independent Trustees met _________ times during 1997, including Board
and Committee meetings and meetings to review each Fund's contractual
arrangements as described above. The Scudder Growth and Income Fund also held
_____ Special Meetings in 1997. All of the Independent Trustees attended ___% of
all such meetings.

Compensation of Officers and Trustees

The Independent Trustees receive the following compensation from the
Funds: an annual trustee's fee of $_____; a fee of $___ for attendance at each
Board meeting, audit committee meeting, or other meeting held for the purposes
of considering arrangements between the Funds and the Adviser or any affiliate
of the Adviser; $___ for any other committee meeting (although in some cases the
Independent Trustees have waived committee meeting fees); and reimbursement of
expenses incurred for travel to and from Board Meetings. No additional
compensation is paid to any Independent Trustee for travel time to meetings,
attendance at directors' educational seminars or conferences, service on
industry or association committees, participation as speakers at directors'
conferences, service on special trustee task forces or subcommittees or service
as lead or liaison trustee. Independent Trustees do not receive any employee
benefits such as pension, retirement or health insurance.

The Independent Trustees also serve in the same capacity for other funds
managed by the Adviser. These funds differ broadly in type an complexity and in
some cases have substantially different Trustee fee schedules. The following
table shows the aggregate compensation received by each Independent Trustee
during 1997 from the Trust and from all of Scudder funds as a group.

The following table shows the aggregate compensation received by each
unaffiliated Trustee during 1997 from the Registrant and from all other Scudder
Funds as a group.

44
<PAGE>

Scudder
Name Investment Trust* All Scudder Funds
---- ----------------- -----------------

Henry P. Becton, Jr. $ $(funds)
Trustee

George M. Lovejoy, Jr. $ $(funds)
Trustee

Wesley W. Marple, Jr. $ $(funds)
Trustee

Jean C. Tempel $ $(funds)
Trustee

* Scudder Investment Trust consists of three funds: Scudder Growth and
Income Fund, Scudder Large Company Growth Fund and Scudder Classic Growth
Fund.

DISTRIBUTOR

The Fund has an underwriting agreement with Scudder Investor Services,
Inc. (the "Distributor"), a Massachusetts corporation, which is a subsidiary of
the Adviser. The Fund's underwriting agreement dated September 10, 1985 will
remain in effect until __________________ and from year to year thereafter only
if its continuance is approved annually by a majority of the Trustees who are
not parties to such agreement or interested persons of any such party and either
by vote of a majority of the Board of Trustees or a majority of the outstanding
voting securities of the Fund. The underwriting agreement was approved by the
Trustees on __________________.

Under the underwriting agreement, the Fund is responsible for: the payment
of all fees and expenses in connection with the preparation and filing with the
Commission of its registration statement and prospectus and any amendments and
supplements thereto; the registration and qualification of shares for sale in
the various states, including registering the Fund as a broker/dealer in various
states, as required; the fees and expenses of preparing, printing and mailing
prospectuses annually to existing shareholders (see below for expenses relating
to prospectuses paid by the Distributor), notices, proxy statements, reports or
other communications to shareholders of the Fund; the cost of printing and
mailing confirmations of purchases of shares and the prospectuses accompanying
such confirmations; any issuance taxes and/or any initial transfer taxes; a
portion of shareholder toll-free telephone charges and expenses of customer
service representatives; the cost of wiring funds for share purchases and
redemptions (unless paid by the shareholder who initiates the transaction); the
cost of printing and postage of business reply envelopes; and a portion of the
cost of computer terminals used by both the Fund and the Distributor.

The Distributor will pay for printing and distributing prospectuses or
reports prepared for its use in connection with the offering of the Fund's
shares to the public and preparing, printing and mailing any other literature or
advertising in connection with the offering of shares of the Fund to the public.
The Distributor will pay all fees and expenses in connection with its
qualification and registration as a broker or dealer under federal and state
laws, a portion of the cost of toll-free telephone service and expenses of
service representatives, a portion of the cost of computer terminals and
expenses of any activity which is primarily intended to result in the sale of
shares issued by the Fund, unless a Rule 12b-1 plan is in effect which provides
that each Fund shall bear some or all of such expenses.

NOTE: Although the Trust currently has no 12b-1 Plan and the Trustees have
no current intention of adopting one, the Fund will also pay those fees
and expenses permitted to be paid or assumed by the Trust pursuant to a
12b-1 Plan, if any, adopted by the Trust, notwithstanding any other
provision to the contrary in the underwriting agreement.

45
<PAGE>

As agent, the Distributor currently offers the Fund's shares on a
continuous basis to investors in all states. The Underwriting Agreement provides
that the Distributor accepts orders for shares at net asset value as no sales
commission or load is charged the investor. The Distributor has made no firm
commitment to acquire shares of the Fund.

TAXES

(See "Fund organization--Dividends and capital gains distributions" and
"Transaction information--Tax information and Tax identification
number" in the Fund's prospectus.)

The Fund has elected to be treated as a regulated investment company under
Subchapter M of the Code or a predecessor statute and has qualified as such
since its inception. It intends to continue to qualify for such treatment. Such
qualification does not involve governmental supervision or management of
investment practices or policy.

As a regulated investment company qualifying under Subchapter M of the
Code, the Fund is required to distribute to its shareholders at least 90 percent
of its investment company taxable income (including net short-term capital gain)
and is not generally subject to federal income tax to the extent that it
distributes annually its investment company taxable income and net realized
capital gains in the manner required under the Code.

The Fund is subject to a 4% nondeductible excise tax on amounts required
to be but not distributed under a prescribed formula. The formula requires the
Fund to distribute to shareholders during a calendar year an amount equal to at
least 98% of the Fund's ordinary income for the calendar year, at least 98% of
the excess of its capital gains over capital losses (adjusted for certain
ordinary losses) realized during the one-year period ending October 31 during
such year and all ordinary income and capital gains for prior years that were
not previously distributed. Investment companies with taxable years ending on
November 30 or December 31 may make an irrevocable election to measure the
required capital gain distribution for excise tax purposes, using their actual
taxable year, rather than the one year period ending October 31.

The Fund's investment company taxable income includes dividends, interest
and net short-term capital gains in excess of net long-term capital losses, less
expenses. Net realized capital gains for a fiscal year are computed by taking
into account any capital loss carryforward of the Fund.

If any net realized long-term capital gains in excess of net realized
short-term capital losses are retained by the Fund for reinvestment, requiring
federal income taxes to be paid thereon by the Fund, the Fund intends to elect
to treat such capital gains as having been distributed to shareholders. As a
result, each shareholder will report such capital gains as long-term capital
gains taxable to individual shareholders at a maximum 20% or 28% capital gains
rate (depending on the Fund's holding period for the assets giving rise to the
gain), will be able to claim a relative share of federal income taxes paid by
the Fund on such gains as a credit against personal federal income tax
liabilities and will be entitled to increase the adjusted tax basis of Fund
shares by the difference between a pro rata share of such gains and the
individual tax credit.

Distributions of investment company taxable income are taxable to
shareholders as ordinary income.

Dividends from domestic corporations are expected to comprise a
substantial part of the Fund's gross income. To the extent that such dividends
constitute a portion of the Fund's gross income, a portion of the income
distributions of the Fund may be eligible for the deduction for dividends
received by corporations. Shareholders will be informed of the portion of
dividends which so qualify. The dividends-received deduction is reduced to the
extent the shares of the Fund, with respect to which the dividends are received,
are treated as debt-financed under federal income tax law and is eliminated if
either those shares or the shares of the Fund are deemed to have been held by
the Fund or the shareholder, as the case may be, for less than 46 days during
the 90-day period beginning 45 days before the shares become ex-dividend.

Distributions of the excess of net long-term capital gains over net
short-term capital losses, which the Fund designates as "capital gain
dividends," are taxable to individual shareholders at a maximum 20% or 28%
capital gains rate (depending on the Fund's holding period for the assets giving
rise to the gain)-, regardless of the length of time the shares of the Fund have
been held by such shareholders. Such distributions are not eligible for the
dividends-received

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<PAGE>

deduction. Any loss realized upon the redemption of shares held at the time of
redemption for six months or less will be treated as a long-term capital loss to
the extent of any amounts treated as distributions of long-term capital gains
during such six-month period.

Distributions of investment company taxable income and net realized
capital gains will be taxable as described above, whether received in shares or
in cash. Shareholders electing to receive distributions in the form of
additional shares will have a cost basis for federal income tax purposes in each
share so received equal to the net asset value of a share on the reinvestment
date.

All distributions of investment company taxable income and net realized
capital gains, whether received in shares or in cash, must be reported by each
shareholder on his or her federal income tax return. Dividends and capital gains
distributions declared in October, November or December and payable to
shareholders of record in such a month will be deemed to have been received by
shareholders on December 31 if paid during January of the following year.
Redemptions of shares, including exchanges for shares of another Scudder fund,
may result in tax consequences (gain or loss) to the shareholder and are also
subject to these reporting requirements.

An individual may make a deductible IRA contribution of up to $2,000 or,
if less, the amount of the individual's earned income for any taxable year only
if (i) neither the individual nor his or her spouse (unless filing separate
returns) is an active participant in an employer's retirement plan, or (ii) the
individual (and his or her spouse, if applicable) has an adjusted gross income
below a certain level ($40,050 for married individuals filing a joint return,
with a phase-out of the deduction for adjusted gross income between $40,050 and
$50,000; $25,050 for a single individual, with a phase-out for adjusted gross
income between $25,050 and $35,000). However, an individual not permitted to
make a deductible contribution to an IRA for any such taxable year may
nonetheless make nondeductible contributions up to $2,000 to an IRA for that
year. There are special rules for determining how withdrawals are to be taxed if
an IRA contains both deductible and nondeductible amounts. In general, a
proportionate amount of each withdrawal will be deemed to be made from
nondeductible contributions; amounts treated as a return of nondeductible
contributions will not be taxable. Also, annual contributions may be made to a
spousal IRA even if the spouse has earnings in a given year if the spouse elects
to be treated as having no earnings (for IRA contribution purposes) for the
year.

Distributions by the Fund result in a reduction in the net asset value of
the Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above even though,
from an investment standpoint, it may constitute a partial return of capital. In
particular, investors should consider the tax implications of buying shares just
prior to a distribution. The price of shares purchased at that time includes the
amount of the forthcoming distribution. Those purchasing just prior to a
distribution will then receive a partial return of capital upon the
distribution, which will nevertheless be taxable to them.

If the Fund invests in stock of certain foreign investment companies the
Fund may be subject to U.S. federal income taxation on a portion of any "excess
distribution" with respect to, or gain from, the disposition of, such stock. The
tax would be determined by allocating such distribution or gain ratably to each
day of the Fund's holding period for the stock. The distribution or gain so
allocated to any taxable year of the Fund, other than the taxable year of the
excess distribution or disposition, would be taxed to the Fund at the highest
ordinary income rate in effect for such year and the tax would be further
increased by an interest charge to reflect the value of the tax deferral deemed
to have resulted from the ownership of the foreign company's stock. Any amount
of distribution or gain allocated to the taxable year of the distribution or
disposition would be included in the Fund's investment company taxable income
and, accordingly, would not be taxable to the Fund to the extent distributed by
the Fund as a dividend to its shareholders.

Proposed regulations have been issued which may allow the Fund to make an
election to mark to market its shares of these foreign investment companies in
lieu of being subject to U.S. federal income taxation. At the end of each
taxable year to which the election applies, the Fund would report as ordinary
income the amount by which the fair market value of the foreign company's stock
exceeds the Fund's adjusted basis in these shares. No mark to market losses may
be recognized. The effect of the election would be to treat excess distributions
and gain on dispositions as ordinary income which is not subject to a fund level
tax when distributed to shareholders as a dividend. Alternatively,

47
<PAGE>

the Fund may elect to include as income and gain its share of the ordinary
earnings and net capital gain of certain foreign investment companies in lieu of
being taxed in the manner described above.

Equity options (including covered call options on portfolio stock) written
or purchased by the Fund will be subject to tax under Section 1234 of the Code.
In general, no loss is recognized by the Fund upon payment of a premium in
connection with the purchase of a put or call option. The character of any gain
or loss recognized (i.e., long-term or short-term) will generally depend, in the
case of a lapse or sale of the option, on the Fund's holding period for the
option and, in the case of an exercise of the option, on the Fund's holding
period for the underlying security. The purchase of a put option may constitute
a short sale for federal income tax purposes, causing an adjustment in the
holding period of the underlying security or substantially identical security in
the Fund's portfolio. If the Fund writes a call option, no gain is recognized
upon its receipt of a premium. If the option lapses or is closed out, any gain
or loss is treated as a short-term capital gain or loss. If a call option is
exercised, any resulting gain or loss is short-term or long-term capital gain or
loss depending on the holding period of the underlying security. The exercise of
a put option written by the Fund is not a taxable transaction for the Fund.

Many futures and forward contracts entered into by the Fund and all listed
nonequity options written or purchased by the Fund (including covered call
options written on debt securities and options purchased or written on futures
contracts) will be governed by Section 1256 of the Code. Absent a tax election
to the contrary, gain or loss attributable to the lapse, exercise or closing out
of any such position will be treated as 60% long-term and 40% short-term, and on
the last trading day of the Fund's fiscal year (and generally, on October 31 for
purposes of the 4% excise tax), all outstanding Section 1256 positions will be
marked to market (i.e., treated as if such positions were closed out at their
closing price on such day), with any resulting gain or loss recognized as 60%
long-term and 40% short-term. Under Section 988 of the Code, discussed below,
foreign currency gain or loss from foreign currency-related forward contracts,
certain futures and options, and similar financial instruments entered into or
acquired by the Fund will be treated as ordinary income or loss. Under certain
circumstances, entry into a futures contract to sell a security may constitute a
short sale for federal income tax purposes, causing an adjustment in the holding
period of the underlying security or a substantially identical security in the
Fund's portfolio.

Positions of the Fund consisting of at least one stock and at least one
stock option or other position with respect to a related security which
substantially diminishes the Fund's risk of loss with respect to such stock
could be treated as a "straddle" which is governed by Section 1092 of the Code,
the operation of which may cause deferral of losses, adjustments in the holding
periods of stock or securities and conversion of short-term capital losses into
long-term capital losses. An exception to these straddle rules exists for any
"qualified covered call options" on stock written by the Fund.

Positions of the Fund consisting of at least one position not governed by
Section 1256 and at least one future, forward, or nonequity option contract
which is governed by Section 1256 which substantially diminishes the Fund's risk
of loss with respect to such other position will be treated as a "mixed
straddle." Although mixed straddles are subject to the straddle rules of Section
1092 of the Code, certain tax elections exist for them which reduce or eliminate
the operation of these rules. The Fund will monitor its transactions in options
and futures and may make certain tax elections in connection with these
investments.

Under the Code, gains or losses attributable to fluctuations in exchange
rates which occur between the time the Fund accrues receivables or liabilities
denominated in a foreign currency and the time the Fund actually collects such
receivables or pays such liabilities generally are treated as ordinary income or
ordinary loss. Similarly, on disposition of debt securities denominated in a
foreign currency, and on disposition of certain futures, forward or options
contracts, gains or losses attributable to fluctuations in the value of foreign
currency between the date of acquisition of the security or contracts and the
date of disposition are also treated as ordinary gain or loss. These gains or
losses, referred to under the Code as "Section 988" gains or losses, may
increase or decrease the amount of the Fund's investment company taxable income
to be distributed to its shareholders as ordinary income.

If the Fund holds zero coupon securities or other securities which are
issued at a discount a portion of the difference between the issue price and the
face value of such securities ("original issue discount") will be treated as
income to the Fund each year, even though the Fund will not receive cash
interest payments from these securities. This original issue discount (imputed
income) will comprise a part of the investment company taxable income of the
Fund

48
<PAGE>

which must be distributed to shareholders in order to maintain the qualification
of the Fund as a regulated investment company and to avoid federal income tax at
the Fund level. If the Fund acquires a debt instrument at a market discount, a
portion of the gain recognized (if any) on disposition of such instrument may be
treated as ordinary income.

The Fund will be required to report to the IRS all distributions of
taxable income and capital gains as well as gross proceeds from the redemption
or exchange of Fund shares, except in the case of certain exempt shareholders.
Under the backup withholding provisions of Section 3406 of the Code,
distributions of taxable income and capital gains and proceeds from the
redemption or exchange of the shares of a regulated investment company may be
subject to withholding of federal income tax at the rate of 31% in the case of
non-exempt shareholders who fail to furnish the investment company with their
taxpayer identification numbers and with required certifications regarding their
status under the federal income tax law. Withholding may also be required if the
Fund is notified by the IRS or a broker that the taxpayer identification number
furnished by the shareholder is incorrect or that the shareholder has previously
failed to report interest or dividend income. If the withholding provisions are
applicable, any such distributions and proceeds, whether taken in cash or
reinvested in additional shares, will be reduced by the amounts required to be
withheld.

Shareholders of the Fund may be subject to state and local taxes on
distributions received from the Fund and on redemptions of the Fund's shares.

Each distribution is accompanied by a brief explanation of the form and
character of the distribution. In January of each year the Fund issues to each
shareholder a statement of the federal income tax status of all distributions.

The Fund is organized as a Massachusetts business trust and is not liable
for any income or franchise tax in the Commonwealth of Massachusetts, provided
that the Fund continues to be treated as a regulated investment company under
Subchapter M of the Code.

The foregoing discussion of U.S. federal income tax law relates solely to
the application of that law to U.S. persons, i.e., U.S. citizens and residents
and U.S. corporations, partnerships, trusts and estates. Each shareholder who is
not a U.S. person should consider the U.S. and foreign tax consequences of
ownership of shares of the Fund, including the possibility that such a
shareholder may be subject to a U.S. withholding tax at a rate of 30% (or at a
lower rate under an applicable income tax treaty) on amounts constituting
ordinary income received by him or her, where such amounts are treated as income
from U.S. sources under the Code.

Dividend and interest income received by the Fund from sources outside the
U.S. may be subject to withholding and other taxes imposed by such foreign
jurisdictions. Tax conventions between certain countries and the U.S. may reduce
or eliminate these foreign taxes, however, and foreign countries generally do
not impose taxes on capital gains respecting investments by foreign investors.

Shareholders should consult their tax advisers about the application of
the provisions of tax law in light of their particular tax situations.

PORTFOLIO TRANSACTIONS

Brokerage

To the maximum extent feasible the Adviser places orders for portfolio
transactions through the Distributor which in turn places orders on behalf of
the Fund with other broker/dealers. The Distributor receives no commissions,
fees or other remuneration from the Fund for this service. Allocation of
brokerage is supervised by the Adviser.

The primary objective of the Adviser in placing orders for the purchase
and sale of securities for the Fund's portfolio is to obtain the most favorable
net results taking into account such factors as price, commission where
applicable, size of order, difficulty of execution and skill required of the
executing broker/dealer. The Adviser seeks to evaluate the overall
reasonableness of brokerage commissions paid (to the extent applicable) through
the familiarity of the Distributor with commissions charged on comparable
transactions, as well as by comparing commissions paid by

49
<PAGE>

the Fund to reported commissions paid by others. The Adviser reviews on a
routine basis commission rates, execution and settlement services performed,
making internal and external comparisons.

The Fund's purchases and sales of fixed-income securities are generally
placed by the Adviser with primary market makers for these securities on a net
basis, without any brokerage commission being paid by the Fund. Trading does,
however, involve transaction costs. Transactions with dealers serving as primary
market makers reflect the spread between the bid and asked prices. Purchases of
underwritten issues may be made, which will include an underwriting fee paid to
the underwriter.

When it can be done consistently with the policy of obtaining the most
favorable net results, it is the Adviser's practice to place such orders with
broker/dealers who supply research, market and statistical information to the
Fund. The term "research, market and statistical information" includes advice as
to the value of securities; the advisability of investing in, purchasing or
selling securities; the availability of securities or purchasers or sellers of
securities; and analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts.
The Adviser is not authorized when placing portfolio transactions for the Fund
to pay a brokerage commission in excess of that which another broker might
charge for executing the same transaction solely on account of the receipt of
research, market or statistical information. The Adviser does not place orders
with broker/dealers on the basis that the broker/dealer has or has not sold
shares of the Fund. In effecting transactions in over-the-counter securities,
orders are placed with the principal market makers for the security being traded
unless, after exercising care, it appears that more favorable results are
available elsewhere.

Subject also to obtaining the most favorable net results, the Adviser may
place brokerage transactions through the Custodian and a credit against the
custodian fee due to State Street Bank equal to one-half of the commission on
any such transaction will be given on any such transaction. Except for
implementing the policy stated above, there is no intention to place portfolio
transactions with particular broker/dealers or groups thereof.

Although certain research, market and statistical information from
broker/dealers may be useful to the Fund and to the Adviser, it is the opinion
of the Adviser that such information only supplements its own research effort
since the information must still be analyzed, weighed and reviewed by the
Adviser's staff. Such information may be useful to the Adviser in providing
services to clients other than the Fund and not all such information is used by
the Adviser in connection with the Fund. Conversely, such information provided
to the Adviser by broker/dealers through whom other clients of the Adviser
effect securities transactions may be useful to the Adviser in providing
services to the Fund.

In the fiscal years ended December 31, 1997, 1996 and 1995, the Fund paid
brokerage commissions of $_________, $3,595,644 and $2,371,881, respectively. In
the fiscal year ended December 31, 1996, the Fund paid brokerage commissions of
$3,170,480 (88% of the total brokerage commissions), resulting from orders
placed, consistent with the policy of seeking to obtain the most favorable net
results, for transactions placed with brokers and dealers who provided
supplementary research, market and statistical information to the Trust or
Adviser. The amount of such transactions aggregated $1,814,275,642 (76% of all
brokerage transactions). The balance of such brokerage was not allocated to any
particular broker or dealer or with regard to the above-mentioned or any other
special factors.

The Adviser is authorized when placing portfolio transactions for the Fund
to pay a brokerage commission in excess of that which another broker might have
charged for executing the same transaction solely on account of the receipt of
research, market or statistical analysis.

The Trustees of the Fund review from time to time whether the recapture
for the benefit of the Fund of some portion of the brokerage commissions or
similar fees paid by the Fund on portfolio transactions is legally permissible
and advisable. Within the past three years no such recapture has been effected.

Portfolio Turnover

The Fund's average annual portfolio turnover rates, i.e. the ratio of the
lesser of sales or purchases to the monthly average value of the portfolio
(excluding from both the numerator and the denominator all securities with
maturities at the time of acquisition of one year or less), for the fiscal years
ended December 31, 1997, 1996 and 1995

50
<PAGE>

were ____%, 26.6% and 26.9%, respectively. Purchases and sales are made for the
Fund's portfolio whenever necessary, in management's opinion, to meet the Fund's
objective.

NET ASSET VALUE

The net asset value of shares of the Fund is computed as of the close of
regular trading on the Exchange on each day the Exchange is open for trading.
The Exchange is scheduled to be closed on the following holidays: New Year's
Day, Presidents Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas. Net asset value per share is determined by dividing
the value of the total assets of the Fund, less all liabilities, by the total
number of shares outstanding.

An exchange-traded equity security is valued at its most recent sale
price. Lacking any sales, the security is valued at the calculated mean between
the most recent bid quotation and the most recent asked quotation (the
"Calculated Mean"). Lacking a Calculated Mean, the security is valued at the
most recent bid quotation. An equity security which is traded on the National
Association of Securities Dealers Automated Quotation ("NASDAQ") system is
valued at its most recent sale price. Lacking any sales, the security is valued
at the high or "inside" bid quotation. The value of an equity security not
quoted on the NASDAQ System, but traded in another over-the-counter market, is
its most recent sale price. Lacking any sales, the security is valued at the
Calculated Mean. Lacking a Calculated Mean, the security is valued at the most
recent bid quotation.

Debt securities, other than short-term securities, are valued at prices
supplied by the Fund's pricing agent(s) which reflect broker/dealer supplied
valuations and electronic data processing techniques. Short-term securities with
remaining maturities of sixty days or less are valued by the amortized cost
method, which the Board believes approximates market value. If it is not
possible to value a particular debt security pursuant to these valuation
methods, the value of such security is the most recent bid quotation supplied by
a bona fide marketmaker. If it is not possible to value a particular debt
security pursuant to the above methods, the Adviser may calculate the price of
that debt security, subject to limitations established by the Board.

An exchange traded options contract on securities, currencies, futures and
other financial instruments is valued at its most recent sale price on such
exchange. Lacking any sales, the options contract is valued at the Calculated
Mean. Lacking any Calculated Mean, the options contract is valued at the most
recent bid quotation in the case of a purchased options contract, or the most
recent asked quotation in the case of a written options contract. An options
contract on securities, currencies and other financial instruments traded
over-the-counter is valued at the most recent bid quotation in the case of a
purchased options contract and at the most recent asked quotation in the case of
a written options contract. Futures contracts are valued at the most recent
settlement price. Foreign currency exchange forward contracts are valued at the
value of the underlying currency at the prevailing exchange rate.

If a security is traded on more than one exchange, or upon one or more
exchanges and in the over-the-counter market, quotations are taken from the
market in which the security is traded most extensively.

If, in the opinion of the Fund's Valuation Committee, the value of a
portfolio asset as determined in accordance with these procedures does not
represent the fair market value of the portfolio asset, the value of the
portfolio asset is taken to be an amount which, in the opinion of the Valuation
Committee, represents fair market value on the basis of all available
information. The value of other portfolio holdings owned by the Fund is
determined in a manner which, in the discretion of the Valuation Committee most
fairly reflects fair market value of the property on the valuation date.

Following the valuations of securities or other portfolio assets in terms
of the currency in which the market quotation used is expressed ("Local
Currency"), the value of these portfolio assets in terms of U.S. dollars is
calculated by converting the Local Currency into U.S. dollars at the prevailing
currency exchange rate on the valuation date.

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<PAGE>

ADDITIONAL INFORMATION

Experts

The financial highlights of the Fund included in the Prospectus and the
financial statements incorporated by reference in this Statement of Additional
Information have been audited by Coopers & Lybrand L.L.P., One Post Office
Square, Boston, MA 02109, independent accountants, and are included or
incorporated by reference in the Prospectus and this Statement of Additional
Information, in reliance upon the accompanying report of said firm, which report
is given upon their authority as experts in accounting and auditing.

Shareholder Indemnification

The Fund is an organization of the type commonly known as a Massachusetts
business trust. Under Massachusetts law, shareholders of such a trust may, under
certain circumstances, be held personally liable as partners for the obligations
of the Fund. The Declaration of Trust contains an express disclaimer of
shareholder liability in connection with the Fund property or the acts,
obligations or affairs of the Fund. The Declaration of Trust also provides for
indemnification out of the Fund property of any shareholder held personally
liable for the claims and liabilities to which a shareholder may become subject
by reason of being or having been a shareholder. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Fund itself would be unable to meet its obligations.

Other Information

The CUSIP number of the Fund is 811167-10-5.

The Fund has a fiscal year ending December 31.

Many of the investment changes in the Fund will be made at prices
different from those prevailing at the time they may be reflected in a regular
report to shareholders of the Fund. These transactions will reflect investment
decisions made by the Adviser in light of the Fund's investment objectives and
policies, its other portfolio holdings and tax considerations, and should not be
construed as recommendations for similar action by other investors.

Portfolio securities of the Fund are held separately pursuant to a
custodian agreement, by the Fund's custodian, State Street Bank and Trust
Company, 225 Franklin Street, Boston, Massachusetts 02110.

The law firm of Dechert Price & Rhoads is counsel to the Fund.

The name "Scudder Growth and Income Fund" is the designation of the Trust
for the time being under a Declaration of Trust dated September 20, 1984, as
amended from time to time, and all persons dealing with the Fund must look
solely to the property of the Fund for the enforcement of any claims against the
Fund as neither the Trustees, officers, agents, shareholders nor other series of
the Trust assume any personal liability for obligations entered into on behalf
of the Fund. No other series of the Trust assumes any liabilities for
obligations entered into on behalf of the Fund. Upon the initial purchase of
shares, the shareholder agrees to be bound by the Fund's Declaration of Trust,
as amended from time to time. The Declaration of Trust is on file at the
Massachusetts Secretary of State's Office in Boston, Massachusetts.

Scudder Fund Accounting Corporation, Two International Place, Boston,
Massachusetts, 02110-4103, a subsidiary of the Adviser, computes net asset value
for the Fund. The Fund pays Scudder Fund Accounting Corporation an annual fee
equal to 0.025% of the first $150 million of average daily net assets, 0.0075%
of such assets in excess of $150 million, 0.0045% of such assets in excess of $1
billion, plus holding and transaction charges for this service. For the fiscal
years ended December 31, 1996, 1995, and 1994, Scudder Fund Accounting
Corporation's fee amounted to $249,566, $198,521, and $39,116, respectively, of
which $23,174 is unpaid at December 31, 1996.

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<PAGE>

Scudder Service Corporation (the "Service Corporation"), P.O. Box 2291,
Boston, Massachusetts 02107-2291, a subsidiary of the Adviser, is the transfer,
dividend-paying and shareholder service agent for the Fund. The Fund pays
Service Corporation an annual fee of $26.00 for each account maintained for a
participant.

The Fund, or the Adviser (including any affiliate of the Adviser), or
both, may pay unaffiliated third parties for providing recordkeeping and other
administrative services with respect to accounts of participants in retirement
plans or other beneficial owners of Fund shares whose interests are held in an
omnibus account.

Scudder Trust Company, an affiliate of the Adviser, provides subaccounting
and recordkeeping services for shareholder accounts in certain retirement and
employee benefit plans. Annual service fees are paid by the Fund to Scudder
Trust Company, Two International Place, Boston, Massachusetts 02110-4103, an
affiliate of the Adviser, for such accounts. The Fund pays Scudder Trust Company
an annual fee of $29.00 per shareholder account. The Fund incurred fees of
$2,482,721, $1,518,972, and $1,122,704 during the fiscal years ended December
31, 1996, 1995 and 1994, respectively, of which $273,253 is unpaid at December
31, 1996.

The Fund's prospectus and this Statement of Additional Information omit
certain information contained in the Registration Statement and its amendments
which the Fund has filed with the SEC under the Securities Act of 1933 and
reference is hereby made to the Registration Statement for further information
with respect to the Fund and the securities offered hereby. The Registration
Statement and its amendments, are available for inspection by the public at the
SEC in Washington, D.C.

FINANCIAL STATEMENTS

The financial statements, including the investment portfolio of Scudder
Growth and Income Fund together with the Report of Independent Accountants,
Financial Highlights and notes to financial statements are incorporated by
reference and attached hereto in the Annual Report to the Shareholders of the
Fund dated December 31, 1997 and are hereby deemed to be a part of this
Statement of Additional Information.

<PAGE>

Scudder
Growth and
Income Fund

Annual Report
December 31, 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.

SCUDDER (logo)

<PAGE>

Scudder Growth and Income Fund

- --------------------------------------------------------------------------------
Date of Inception: 1929 Total Net Assets as of Ticker Symbol: SCDGX
12/31/97: $6.83 billion
- --------------------------------------------------------------------------------

o For the 12-month period ended December 31, 1997, Scudder Growth and Income
Fund returned 30.31%, reflecting another strong year for the U.S. stock market.

o The Fund's ability to nearly keep pace with the market over the period is
impressive given its defensive characteristics.

o A continuing emphasis on stocks with above-average dividend yields helped the
Fund weather increased market volatility during the second half of 1997.

o The Fund maintained its overall 4 star risk-adjusted rating from Morningstar
among 2,332 domestic equity funds as of December 31, 1997.^1

Table of Contents

3 Letter from the Fund's President 24 Notes to Financial Statements
4 Performance Update 28 Report of Independent Accountants
5 Portfolio Summary 29 Tax Information
6 Portfolio Management Discussion 30 Shareholder Meeting Results
11 Glossary of Investment Terms 32 Officers and Trustees
12 Investment Portfolio 33 Investment Products and Services
20 Financial Statements 34 Scudder Solutions
23 Financial Highlights

^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. In an investment category, 10% of funds receive 5 stars and
the next 22.5% receive 4 stars. In the domestic equity category, the Fund
received a 4 star rating for the three-year period, a 4 star rating for the
five-year period, and a 4 star rating for the ten-year period. Past
performance is no guarantee of future results.

2 - Scudder Growth and Income Fund
<PAGE>

Letter from the Fund's President

Dear Shareholders,

This report marks Scudder Growth and Income Fund's 69th year of operations,
and one of its most impressive. This 12-month period is the third consecutive
year that the Fund has returned more than 20%. However, the favorable investment
environment appears to have changed during the second half of 1997, with the
currency crisis in Asia and the prospect of slowing profit growth in the United
States. While we think the investment environment continues to remain healthy, a
return to performance that is closer to the 10% average long-term return for
stocks is more realistic going forward. We think you should keep this in mind
as you read the detailed discussion of the Fund's activities which begins on
page 6.

As you may know, the Fund's investment adviser has changed its name to
Scudder Kemper Investments, Inc. from Scudder, Stevens & Clark, Inc., reflecting
the acquisition of a majority interest in Scudder by Zurich Insurance Company,
and the combining of Scudder's business with that of Zurich Kemper Investments,
Inc. We think these changes are positive and should broaden our resources in
managing the Fund.

For those of you who are interested in new Scudder products, we recently
introduced a new industry sector fund, Scudder Financial Services Fund, one of
Scudder's Choice Series funds. The Fund seeks long-term growth by investing in
financial services companies in the U.S. and abroad. In addition, two other
Choice Series funds will be launched on March 2: Scudder Health Care Fund,
seeking long-term growth from health care companies located around the world,
and Scudder Technology Fund, pursuing long-term growth by investing in companies
that develop, produce, or distribute technology. For further information on
these new funds, please call 1-800-225-2470.

Thank you for your continued investment in Scudder Growth and Income Fund.
If you have any questions about your account, please call Scudder Investor
Relations at the toll-free number above, or visit our Internet Web site at
http://funds.scudder.com.

Sincerely,

/s/Daniel Pierce

Daniel Pierce
President,
Scudder Growth and Income Fund

3 - Scudder Growth and Income Fund
<PAGE>

PERFORMANCE UPDATE as of December 31, 1997
- ----------------------------------------------------------------
FUND INDEX COMPARISONS
- ----------------------------------------------------------------

Total Return
Period Growth --------------
Ended of Average
12/31/97 $10,000 Cumulative Annual
- --------------------------------------
SCUDDER GROWTH AND INCOME FUND
- --------------------------------------
1 Year $13,031 30.31% 30.31%
5 Year $24,768 147.68% 19.89%
10 Year $48,077 380.77% 17.00%

- --------------------------------------
S&P 500 INDEX
- --------------------------------------
1 Year $13,338 33.38% 33.38%
5 Year $25,160 151.60% 20.25%
10 Year $52,566 425.66% 18.04%

- -----------------------------------------------------------------
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 December 31

SCUDDER GROWTH AND INCOME FUND
Year Amount
- ----------------------
'87 $10,000
'88 $11,201
'89 $14,153
'90 $13,824
'91 $17,716
'92 $19,411
'93 $22,438
'94 $23,021
'95 $30,197
'96 $36,895
'97 $48,077

S&P 500 INDEX
Year Amount
- ----------------------
'87 $10,000
'88 $11,659
'89 $15,352
'90 $14,876
'91 $19,407
'92 $20,893
'93 $22,996
'94 $23,299
'95 $32,054
'96 $39,412
'97 $52,566

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 December 31

<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... $13.18 $ 14.14 $12.77 $15.76 $16.20 $17.24 $16.26 $20.23 $23.23 $27.33
INCOME DIVIDENDS.. $ .59 $ .69 $ .67 $ .55 $ .53 $ .45 $ .51 $ .56 $ .57 $ .58
CAPITAL GAINS
DISTRIBUTIONS..... $ - $ 1.77 $ .34 $ - $ .50 $ 1.01 $ .91 $ .48 $ .87 $ 2.20
FUND TOTAL
RETURN (%)........ 12.01 26.36 -2.33 28.16 9.57 15.59 2.60 31.18 22.18 30.31
INDEX TOTAL
RETURN (%)........ 16.56 31.63 -3.11 30.40 7.61 10.06 1.32 37.58 22.96 33.38
</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 December 31, 1997
- ---------------------------------------------------------------------------
ASSET ALLOCATION
- ---------------------------------------------------------------------------
Common Stocks 92%
Convertible Bonds 4%
Convertible Stocks 3%
Cash Equivalents 1%
- --------------------------------------
100%
- --------------------------------------

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

The Fund's approach to selecting
stocks with above-average
dividend yields provided
downside protection as volatility
increased during the second half
of the year.

- --------------------------------------------------------------------------
SECTOR DIVERSIFICATION
(Excludes 3% of Cash Equivalents)
- --------------------------------------------------------------------------
Financial 22%
Manufacturing 17%
Consumer Staples 11%
Utilities 9%
Communications 9%
Durables 8%
Energy 7%
Health 6%
Consumer Discretionary 5%
Other 6%
- ---------------------------------------------
100%
- ---------------------------------------------

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

Healthcare, energy, utilities, and
manufacturing sector holdings
outperformed the market over the
year.

- --------------------------------------------------------------------------
10 LARGEST EQUITY HOLDINGS
(20% OF PORTFOLIO)
- --------------------------------------------------------------------------
1. XEROX CORP.
Leading manufacturer of copiers and duplicators

2. Bell Atlantic Corp.
Telecommunications services

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

4. UNILEVER NV
Diversified conglomerate

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

6. Ford Motor Co.
Leading automobile manufacturer

7. GTE CORP.
Nationwide telecommunications company

8. IMPERIAL CHEMICAL INDUSTRIES PLC
Leading international chemical producer

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

10. Chase Manhattan Corp.
Commercial banking

Xerox a strong performer in
the first half--declined on
worries over the potential of
the currency crisis in
Southeast Asia.

For more complete details about the Fund's investment portfolio, see page 12. 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

Q: How would you sum up the year?

A: Given the shifting mood of the market in 1997, it's difficult. The first half
of the year was essentially a continuation of 1996 -- investors enjoyed the bull
market, but kept looking over their shoulders for signs of inflation. In March,
when the Federal Reserve (Fed) increased a key short-term interest rate, fears
of higher rates persisted given the Fed's history of taking multiple actions.

Q: What about the second half?

A: Several things changed in the second half. Inflation concerns were replaced
by concerns about a global slowdown in growth, driven by the economic collapse
and liquidity crunch in Asia, which threw local markets into a tailspin. By
October, no one seemed to have any conviction about the extent of the effect, if
any, the Asian contagion would have on markets closer to home. U.S. investors
overreacted to the news, resulting in almost daily market gyrations in both
directions.

Q: This sounds a bit grim.

A: I wouldn't say grim, but the "best of all worlds" environment has definitely
changed. Despite significant selloffs in August, October, and December, the S&P
still ended the year with a 30%-plus gain for the year. At the same time,
certain market sectors remained depressed, as investors rotated into more
defensive issues, and as shareholders pondered the long-term implications of the
Asian crisis. Questions centered on whether this was a temporary phenomenon, or
the beginning of a much longer, protracted period of global deflation. Also,
many wondered if the S&P price-to-earnings multiple of 22 could be sustained in
a slower growth environment.

Q: How did the Fund perform for the 12-month period ended December 31, 1997?

A: The Fund performed very well, in my opinion, returning 30.31% for the 12
months. This return represents an increase in the Fund's net asset value from
$23.23 at the end of 1996 to $27.33 on December 31, 1997, and includes income
distributions of $0.58 per share and a capital gain distribution of $2.20 per
share. This ranks the Fund among the top 26% (160th) of 611 growth and income
funds, as tracked by Lipper Analytical Services. Relative to the market, the
Fund's performance was roughly in keeping with the 33.38% return of the S&P 500
Index, a significant achievement, I think, considering the Fund's tendency to
only outperform in weak markets.

Q: Why invest in the Fund if it is only matching the performance of the markets?

A: You raise an important point. As you may know, performance numbers do not
tell the whole story about the Fund or investing in general, for that matter. If
all you are seeking is to match the returns of the stock market, then an index
fund may be what you need. However, Scudder Growth and Income Fund is not
designed to just mirror the market. We pursue a disciplined, relative yield
strategy that seeks to provide attractive returns in relation to the U.S. stock
market, that has resulted in lower risk than the market overall. We believe that

6 - Scudder Growth and Income Fund

<PAGE>

this strategy is appropriate for many investors, especially those who are
seeking lower volatility and consistent returns over the long term. The
environment has been ideal for stock investors over the last seven years;
however, when we enter a more difficult environment, we believe many investors
will be looking for funds that hold up better than the market indexes.

Q: How did the Fund's top holdings perform?

A: The majority of our largest holdings significantly outperformed the S&P
during the year. Near the close of the period, three of our top performers gave
back some of their gains, most notably Philips Electronics and Xerox. Although
we had been taking profits in both names to reduce our exposure, we were not
aggressive enough to dampen the negative impact these holdings had on the Fund's
returns. We would stress, however, that despite the recent weakness, both
stocks, as well as the majority of our top holdings, still dramatically
outperformed the market for the 12-month period.

Q: How did the Fund's "relative yield" discipline hold up in this environment?

A: Excluding the impact of the two stocks listed above, the strategy benefited
the portfolio. A lack of technology holdings (due to their characteristically
low dividend yields) cushioned the Fund from many of the profit warnings out of
Silicon Valley that stemmed from the crisis in Asia. Our strategy of increasing
the electric utility weighting, in response to a 10-year peak in the industry's
relative yield, proved timely as these companies, with largely domestically
generated earnings, were immune from the multiple contractions from slower
overseas growth forecasts. We continue to believe that if 1998 proves a
difficult year for profits, our strategy of investing in companies with low
expectations, evidenced by high relative yields, should help to provide a
degree of protection from further downdrafts.

Q: Expanding profit growth contributed to the prolonged rise in U.S. stock
prices. How long can it continue?

A: The key to long-term sustainable growth eventually rests on top line revenue
growth. Internal restructuring efforts, asset swaps, and financial engineering
are only short-term measures for boosting profits. If one believes that slower
growth overseas will not only dampen demand for U.S. goods, but that it will
also bring continued pricing pressure (as the U.S. is flooded with cheap imports
in the wake of Asian currency devaluations), we may not have seen the last of
the bumps in the road.

Q: What areas contributed the most to Fund performance over the year?

A: Despite the sector's weak performance in 1997, the Fund's health care
selections performed very well, due primarily to our weighting in drug stocks.
As prices rose, we reduced our weighting by eliminating Warner Lambert and
trimming our position in Schering-Plough. The Fund benefited from the fact that
all but one of our health care holdings significantly outperformed the S&P for
the year. I should point out, however, that many U.S. drug companies have

7 - Scudder Growth and Income Fund
<PAGE>

-------------------------------------------------------
Higher Yields ...
...and Attractive Valuations
-------------------------------------------------------
Fund S&P 500

Yield 2.1% 1.6%^1

The Fund's dividend yield
exceeded the market as measured
by the S&P 500.
-------------------------------------------------------

Price-to-Earnings per share 17.6x 21.8x
(current calendar year as of 12/31/97)

The Fund's below-average valuation
provided downside protection as
volatility increased during the period.
-------------------------------------------------------
^1 The S&P 500 yield does not reflect the effect of fund
expenses and transaction costs which would otherwise lower
its yield.

reached full valuation, as market hype over new product-driven growth has worked
its way into a number of stocks. As enthusiasm increases, so does the risk of
disappointment.

Q: Energy stocks were another solid contributor to portfolio performance.
What worked well?

A: Our foreign energy holdings -- Elf Aquitaine, Total, and YPF -- outperformed
the market for the full year, while one of our newer holdings, Williams
Companies, with a 22.4% return in the fourth quarter, provided a haven in a
nervous market. As Williams Companies' domestic earnings base cushioned the
portfolio from negative news overseas, investors began to take notice of its
growing communications subsidiary, sporting growth rates twice that of the core
business.

Q: Last year at this time you mentioned building up the Fund's underweighting
in electric utilities. How has this strategy been working?

A: Electric utilities were a modest drag on portfolio performance for most of
the year, but our increasingly overweight position in this area proved
particularly rewarding, especially toward the end of the year. Not only did this
weighting (at 8% of assets at year-end) provide defensive benefits during the
market corrections, but our individual stock selection had a meaningfully
positive impact for the year. The resolution of regulatory uncertainty in
California and Illinois boosted the share prices of Pacific Gas & Electric and
Unicom. Despite the recent outperformance of the utility sector, we would point
out that overall valuations remain well below normal. Thus, we have continued to
add to this group in aggregate.

Q: How did the manufacturing sector perform?

A: This sector held back performance, due primarily to price weakness in two of
the largest holdings, Philips Electronics and Xerox, as mentioned earlier. These
stocks did, however, outperform for the 12 months with returns of 53% and 43%,
respectively. We had been trimming both positions in the second half of the year
as both a risk control measure (specifically to reduce a large portfolio
weighting that had become even larger through outperformance) and based in part
on relatively full valuations. Ultimately, we believe that both stocks offer

8 - Scudder Growth and Income Fund
<PAGE>

attractive upside opportunity through new product rollouts, in the case of
Xerox, and asset restructuring, in the case of Philips.

Q: The Fund's holdings of financial stocks held back performance somewhat,
despite the strong performance of this sector. Why?

A: Our REIT (real estate investment trust) holdings lagged other companies in
the financial sector, specifically U.S. banks, which provided very strong
returns. However, securities such as REITs were not hit as hard by concerns over
the Asian crisis because of their earnings leverage to the U.S. market. We
believe that the Fund's REIT holdings will continue to provide both downside
protection from further market volatility and upside potential through
consolidation and acquisition-driven growth.

Q: How did you manage the portfolio in the increasingly volatile market?

A: Our investment discipline has been an important tool in controlling exposure
to price volatility. It has helped to steer us toward undervalued stocks that
have defensive characteristics in volatile and declining markets. Our model's
"buy" signals in the electric utility and REIT sectors are evidence of this. In
a more general sense, however, we continue to ask ourselves what each stock
price is reflecting, both from a "big picture" perspective and on an individual,
company-by-company basis.

9 - Scudder Growth and Income Fund

<PAGE>

Q: Are we entering a period of slower global growth?

A: Our short answer is, yes. Is this expectation adequately reflected in the
U.S. equity market? Probably not. While slower global growth may have immediate
implications for corporate profitability and stock prices, we take the long view
when it comes to investing the portfolio. As a result, we continue to remain
focused on those stocks which we believe already reflect a difficult operating
environment, since they are less likely to disappoint further. We think our
relative yield approach, supported by the fundamental research of our analysts,
will ultimately benefit the Fund in a variety of market environments by
providing downside protection and the potential for upside surprises.

Scudder Growth and
Income Fund:
A Team Approach to Investing

Scudder Growth and Income Fund is managed by a team of Scudder Kemper
Investments, Inc. (SKI) professionals who each play an important role in the
Fund's management process. Team members work together to develop investment
strategies and select securities for the Fund's portfolio. They are supported
by a large staff of economists, research analysts, traders, and other
investment specialists who work in our offices across the United States and
abroad. We believe our team approach benefits Fund investors by bringing
together many disciplines and leveraging SKI's extensive resources.

Lead Portfolio Manager Robert T. Hoffman has had responsibility for setting
the Fund's stock investing strategy and overseeing the Fund's day-to-day
operations since 1991. Rob joined SKI in 1990 and has 13 years of investment
industry experience. Kathleen T. Millard, Portfolio Manager, has focused on
strategy and stock selection since she joined the firm and the team in 1991.
Benjamin W. Thorndike, Portfolio Manager, is the Fund's chief analyst and
strategist for convertible securities. Ben joined SKI in 1983 as a portfolio
manager and the Fund in 1986. Lori Ensinger, Portfolio Manager, joined the
Fund in 1996 and focuses on stock selection and investment strategy. Lori has
worked in the investment industry since 1983 and at SKI since 1993.

10 - Scudder Growth and Income Fund

<PAGE>

Glossary of Investment Terms

DIVIDEND YIELD With stocks, a company's payment 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 RESEARCH Analysis of a company's financial statements to
project future stock price changes. Considers
past records of sales and earnings as well as
the future impact of products, consumer markets,
and management in weighting a company's
prospects. Distinct from technical analysis,
which evaluates the attractiveness of a stock
based on historical price and trading volume
movements.

MARKET CAPITALIZATION The value of a company's outstanding shares of
common stock, determined by multiplying the
number of shares outstanding 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 typically
more volatile.

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

PRICE-EARNINGS RATIO A widely used gauge of a stock's valuation that
indicates what investors are (P-E or earnings
multiple) paying for a company's earning power
at the current stock price. Often 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 multiple 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. A stock's relative
value is often measured 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.

(Sources: SKI; Barron's Dictionary of Finance and Investment Terms)

11 - Scudder Growth and Income Growth

<PAGE>

Investment Portfolio as of December 31, 1997
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreement 0.1%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 12/31/97 at 6.5%,
to be repurchased at $3,082,113 on 1/2/98, collateralized by a $2,287,000 U.S. ------------
Treasury Bond, 8.75%, 8/15/20 (Cost $3,081,000) ....................................... 3,081,000 3,081,000
------------
Short-Term Investments 2.6%
- ------------------------------------------------------------------------------------------------------------------------------
Dresdner US Finance Inc., 5.74%, 1/5/98 ................................................. 40,000,000 39,974,489
FCar Owner Trust I, 5.61%, 1/8/98 ....................................................... 50,000,000 49,945,458
JP Morgan, 5.80%, 1/8/98 ................................................................ 30,000,000 29,966,167
New Center Asset Trust, 5.89%, 1/16/98 .................................................. 40,000,000 39,901,833
Ford Motor Credit Co., 5.71%, 1/8/98 .................................................... 20,000,000 19,977,794
- ------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments (Cost $179,765,741) 179,765,741
- ------------------------------------------------------------------------------------------------------------------------------

Corporate Bonds 0.2%
- ------------------------------------------------------------------------------------------------------------------------------
Miscellaneous ------------
Omnicom Group Inc, 1/6/13 (Cost $12,539,063) ............................................ 12,500,000 13,125,000
------------
Convertible Bonds 3.6%
- ------------------------------------------------------------------------------------------------------------------------------
Consumer Discretionary 0.5%
Department & Chain Stores
Federated Department Stores, Inc. Debenture, 5%, 10/1/03 ................................ 11,700,000 15,795,000
Home Depot Inc., 3.25%, 10/1/01 ......................................................... 16,500,000 22,316,250
------------
38,111,250
------------
Health 0.1%
Pharmaceuticals
Sandoz Capital BVI Ltd., Debenture, 2%, 10/6/02 ......................................... 5,810,000 8,874,775
------------
Financial 1.2%
Banks 0.9%
Deutsche Bank Financial Inc., Convertible to Daimler Benz AG shares, Zero Coupon, 2/12/17 97,410,000 43,347,450
MBL International Finance Bermuda Trust, 3%, 11/30/02 ................................... 16,140,000 16,753,320
------------
60,100,770
------------
Real Estate 0.3%
Security Capital Corp., Debenture, 6.5%, 3/29/16 (b) (c) ................................ 16,750,000 20,183,031
------------
Service Industries 0.7%
Miscellaneous Commercial Services 0.4%
Tyco International, Ltd., Liquid Yield Option Note, 7/6/10 .............................. 24,000,000 29,370,000
------------
Miscellaneous Consumer Services 0.3%
CUC International Inc., 3%, 2/15/02 ..................................................... 14,000,000 17,482,500
------------
</TABLE>

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

12 - Scudder Growth and Income Growth
<PAGE>

<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Durables 0.1%
Automobiles
Magna International, Inc., Debenture, 5%, 10/15/02 ...................................... 6,700,000 7,989,750
------------
Manufacturing 1.0%
Diversified Manufacturing
Loews Corp., 3.125%, 9/15/07 ............................................................ 60,021,000 60,471,158
Thermo Electron Corp., 4.25%, 1/1/03 .................................................... 5,000,000 6,275,000
------------
66,746,158
- ------------------------------------------------------------------------------------------------------------------------------
Total Convertible Bonds (Cost $206,770,373) 248,858,234
- ------------------------------------------------------------------------------------------------------------------------------

Shares
- ------------------------------------------------------------------------------------------------------------------------------
Convertible Preferred Stocks 1.4%
- ------------------------------------------------------------------------------------------------------------------------------
Consumer Discretionary 0.3%
Department & Chain Stores
Kmart 7.75% ............................................................................. 386,000 19,927,250
------------
Financial 0.1%
Consumer Finance 0.0%
Advanta Corp. 6.75% ..................................................................... 7,500 201,563
------------
Real Estate 0.1%
Security Capital Industrial Trust "B", 7% ............................................... 308,300 9,827,063
------------
Manufacturing 0.3%
Containers & Paper 0.0%
International Paper Co. 5.25% ........................................................... 47,000 2,279,500
------------
Industrial Specialty 0.2%
Cooper Industries, Inc. 6% .............................................................. 606,300 11,064,975
------------
Office Equipment/Supplies 0.1%
Ikon Office Solutions, Inc., 5.04% ...................................................... 96,100 6,510,775
------------
Metals & Minerals 0.2%
Precious Metals
Freeport McMoRan Copper & Gold, Inc., Cum. $1.25 ........................................ 500,000 10,843,750
------------
Consumer Staples 0.5%
Food & Beverage
Ralston Purina Group, 7%, 8/1/00 ........................................................ 470,000 32,723,750
- ------------------------------------------------------------------------------------------------------------------------------
Total Convertible Preferred Stocks (Cost $87,352,946) 93,378,626
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

13 - Scudder Growth and Income Growth
<PAGE>

<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------

Common Stocks 92.1%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Consumer Discretionary 4.3%
Department & Chain Stores
J.C. Penney Co., Inc. ................................................................... 1,287,700 77,664,406
May Department Stores ................................................................... 772,900 40,722,169
Mercantile Stores, Inc. ................................................................. 1,012,900 61,660,288
Rite Aid Corp. .......................................................................... 987,600 57,959,775
Sears, Roebuck & Co. .................................................................... 1,205,500 54,548,875
------------
292,555,513
------------
Consumer Staples 10.6%
Alcohol & Tobacco 2.3%
Philip Morris Companies, Inc. ........................................................... 2,855,100 129,371,719
RJR Nabisco Holdings Corp. .............................................................. 788,580 29,571,750
------------
158,943,469
------------
Consumer Electronic & Photographic Products 1.0%
Whirlpool Corp. ......................................................................... 1,244,000 68,420,000
------------
Food & Beverage 4.8%
General Mills, Inc. ..................................................................... 559,500 40,074,188
H.J. Heinz Co. .......................................................................... 2,858,750 145,260,234
Unilever NV ............................................................................. 400,000 24,658,480
Unilever NV (New York shares) ........................................................... 1,885,200 117,707,175
------------
327,700,077
------------
Package Goods/Cosmetics 2.5%
Avon Products, Inc. ..................................................................... 1,070,100 65,677,388
Kimberly-Clark Corp. .................................................................... 2,084,000 102,767,250
------------
168,444,638
------------
Health 5.5%
Pharmaceuticals
American Home Products Corp. ............................................................ 705,800 53,993,700
Baxter International, Inc. .............................................................. 1,088,100 54,881,044
Bristol-Myers Squibb Co. ................................................................ 1,023,600 96,858,150
Schering-Plough Corp. ................................................................... 1,002,200 62,261,675
SmithKline Beecham PLC (ADR) ............................................................ 1,180,400 60,716,825
Zeneca Group PLC ........................................................................ 1,356,100 48,030,458
------------
376,741,852
------------
</TABLE>

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

14 - Scudder Growth and Income Growth
<PAGE>

<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Communications 8.3%
Telephone/Communications
Alltel Corp. ............................................................................ 1,825,400 74,955,488
Bell Atlantic Corp. ..................................................................... 1,623,348 147,724,668
BellSouth Corp. ......................................................................... 1,541,400 86,800,088
Frontier Corp. .......................................................................... 2,033,100 48,921,469
GTE Corp. ............................................................................... 2,504,700 130,870,575
Sprint Corp. ............................................................................ 1,154,100 67,659,113
Telecom Corp. of New Zealand ............................................................ 1,901,000 9,216,860
------------
566,148,261
------------
Financial 20.2%
Banks 10.6%
AmSouth Bancorp ......................................................................... 352,500 19,145,156
Banc One Corp. .......................................................................... 1,169,300 63,507,606
BankAmerica Corp. ....................................................................... 223,000 16,279,000
Bankers Trust New York Corp. ............................................................ 570,200 64,111,863
Chase Manhattan Corp. ................................................................... 1,168,300 127,928,850
CoreStates Financial Corp. .............................................................. 1,239,600 99,245,475
First Chicago NBD Corp. ................................................................. 273,600 22,845,600
First Union Corp. ....................................................................... 1,274,600 65,323,250
J.P. Morgan & Co., Inc. ................................................................. 503,300 56,809,988
KeyCorp ................................................................................. 869,800 61,592,713
NationsBank Corp. ....................................................................... 1,073,400 65,276,138
US Bancorp .............................................................................. 584,700 65,449,856
------------
727,515,495
------------
Insurance 3.7%
EXEL, Ltd. (ADR) ........................................................................ 916,000 58,051,500
Lincoln National Corp. .................................................................. 968,200 75,640,625
Mid Ocean, Ltd. ......................................................................... 702,800 38,126,900
Safeco Corp. ............................................................................ 1,700,300 82,889,625
------------
254,708,650
------------
Other Financial Companies 1.0%
Federal National Mortgage Association ................................................... 649,900 37,084,919
Fleet Financial Group, Inc. ............................................................. 473,200 35,460,425
------------
72,545,344
------------
Real Estate 4.8%
Avalon Properties, Inc. (REIT) .......................................................... 467,100 14,450,906
</TABLE>

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

15 - Scudder Growth and Income Growth
<PAGE>

<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Camden Property Trust (REIT) ............................................................ 338,500 10,493,500
Charles E. Smith Residential Realty, Inc. (REIT) ........................................ 73,800 2,619,900
General Growth Properties, Inc. (REIT) (d) .............................................. 1,939,800 70,075,275
Health Care Property Investment Inc. (REIT) ............................................. 359,300 13,586,031
Mark Centers Trust (REIT) ............................................................... 31,400 282,600
Meditrust Corp. (Paired Stock) (REIT) ................................................... 562,829 20,613,612
Nationwide Health Properties Inc. (REIT) ................................................ 804,800 20,522,400
Prentiss Properties Trust (REIT) ........................................................ 1,000,000 27,937,500
Post Properties Inc. (REIT) ............................................................. 61,900 2,514,688
Security Capital Corp. (b) (c) .......................................................... 15,968 22,201,334
Security Capital Industrial Trust (REIT) ................................................ 2,611,645 64,964,669
Security Capital Industrial Trust Warrants (expire 9/18/98)* ............................ 82,478 433,010
Security Capital US Realty .............................................................. 2,889,152 41,025,958
Spieker Properties, Inc. (REIT) ......................................................... 150,000 6,431,250
Vornado Realty Trust (REIT) ............................................................. 177,600 8,336,100
------------
326,488,733
------------
Miscellaneous 0.1%
Jardine Strategic Holdings Ltd. ......................................................... 2,015,611 5,240,589
------------
Service Industries 0.3%
EDP Services 0.1%
First Data Corp. ........................................................................ 209,606 6,130,976
------------
Environmental Services 0.2%
Browning Ferris Industries .............................................................. 378,600 14,008,200
------------
Durables 7.3%
Aerospace 1.5%
Lockheed Martin Corp. ................................................................... 472,328 46,524,308
Rockwell International Corp. ............................................................ 1,149,600 60,066,600
------------
106,590,908
------------
Automobiles 4.8%
Dana Corp. .............................................................................. 1,867,800 88,720,500
Echlin, Inc. ............................................................................ 1,538,800 55,685,325
Ford Motor Co. .......................................................................... 2,748,200 133,802,988
Meritor Automotive, Inc. ................................................................ 2,245,900 47,304,269
------------
325,513,082
------------
Construction/Agricultural Equipment 1.0%
PACCAR, Inc. ............................................................................ 1,288,100 67,625,250
------------
</TABLE>

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

16 - Scudder Growth and Income Growth
<PAGE>

<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Manufacturing 14.8%
Chemicals 4.5%
Akzo-Nobel NV ........................................................................... 461,645 79,593,180
Dow Chemical Co. ........................................................................ 484,700 49,197,050
Eastman Chemical Co. .................................................................... 852,100 50,753,206
Imperial Chemical Industries PLC ........................................................ 8,357,000 130,525,798
------------
310,069,234
------------
Containers & Paper 0.5%
Boise Cascade Corp. ..................................................................... 48,140 1,456,235
Westvaco Corp. .......................................................................... 1,090,300 34,276,306
------------
35,732,541
------------
Diversified Manufacturing 3.1%
Olin Corp. .............................................................................. 1,351,200 63,337,500
St. Joe Paper Co. ....................................................................... 93,100 8,425,550
TRW Inc. ................................................................................ 2,568,000 137,067,000
------------
208,830,050
------------
Electrical Products 2.4%
Philips Electronics NV .................................................................. 1,720,300 103,165,399
Philips Electronics NV (New York shares) ................................................ 387,700 23,455,850
Thomas & Betts Corp. .................................................................... 830,800 39,255,300
------------
165,876,549
------------
Industrial Specialty 0.2%
Corning Inc. ............................................................................ 320,300 11,891,138
------------
Machinery/Components/Controls 0.2%
SKF AB "B" (Free) ....................................................................... 785,000 16,711,385
------------
Office Equipment/Supplies 2.3%
Xerox Corp. ............................................................................. 2,114,400 156,069,150
------------
Specialty Chemicals 1.6%
ARCO Chemical Co. ....................................................................... 180,000 8,403,750
BetzDearborn Inc. ....................................................................... 613,800 37,480,163
Witco Corp. ............................................................................. 1,537,500 62,749,219
------------
108,633,132
------------
Technology 0.4%
Electronic Components/Distributors
AMP Inc. ................................................................................ 652,100 27,388,200
------------
</TABLE>

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

17 - Scudder Growth and Income Growth

<PAGE>

<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Energy 6.6%
Oil Companies 5.9%
Lyondell Petrochemical Co. .............................................................. 948,900 25,145,850
Pennzoil Co. ............................................................................ 458,600 30,640,213
Royal Dutch Petroleum Co. (New) ......................................................... 815,600 44,195,325
Societe Nationale Elf Aquitaine ......................................................... 731,000 85,000,000
Texaco Inc. ............................................................................. 1,567,800 85,249,125
Total S.A. "B" .......................................................................... 510,323 55,525,177
Total S.A. (ADR) ........................................................................ 396,253 21,992,042
YPF S.A. "D" (ADR) ...................................................................... 1,580,200 54,023,088
------------
401,770,820
------------
Oil/Gas Transmission 0.7%
Williams Cos., Inc. ..................................................................... 1,778,800 50,473,450
------------
Metals & Minerals 1.5%
Steel & Metals
Allegheny Teledyne Inc. ................................................................. 2,398,315 62,056,389
Freeport McMoRan Copper & Gold, Inc. "A" ................................................ 542,590 8,308,409
J & L Specialty Steel, Inc. ............................................................. 1,709,700 17,203,856
Phelps Dodge Corp. ...................................................................... 268,400 16,707,900
------------
104,276,554
------------
Construction 2.9%
Building Materials 0.4%
Martin Marietta Materials, Inc. ......................................................... 660,000 24,131,250
Forest Products 2.5%
Georgia Pacific (Timber Group) .......................................................... 1,146,100 26,002,144
Georgia Pacific Corp. ................................................................... 1,207,200 73,337,400
Louisiana-Pacific Corp. ................................................................. 417,200 7,926,800
Weyerhaeuser Co. ........................................................................ 1,323,400 64,929,313
------------
172,195,657
------------
Transportation 1.1%
Railroads
CSX Corp. ............................................................................... 1,162,400 62,769,600
Norfolk Southern Corp. .................................................................. 360,300 11,101,744
------------
73,871,344
------------
Utilities 8.3%
Electric Utilities
CINergy Corp. ........................................................................... 2,159,100 82,720,519
</TABLE>

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

18 - Scudder Growth and Income Growth
<PAGE>

<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CMS Energy Corp. ........................................................................ 227,600 10,028,625
Duke Energy Co. ......................................................................... 1,794,436 99,366,894
Entergy Corp. ........................................................................... 828,200 24,794,238
Long Island Lighting Co. ................................................................ 982,100 29,585,763
Pacific Gas & Electric Co. .............................................................. 1,773,200 53,971,775
PacifiCorp .............................................................................. 2,147,400 58,650,863
PowerGen PLC ............................................................................ 5,012,710 65,202,343
PowerGen PLC (ADR) ...................................................................... 500,100 26,567,813
Southern Company ........................................................................ 587,200 15,193,800
Unicom Corp. ............................................................................ 2,155,100 66,269,325
Wisconsin Energy Corp. .................................................................. 1,206,700 34,692,625
------------
567,044,583
- ------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $4,423,136,813) 6,300,286,074
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $4,912,645,936) (a) 6,838,494,675
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

* Non income producing.

(a) The cost for federal income tax purposes was $4,908,855,927. At December
31, 1997, net unrealized appreciation for all securities based on tax cost
was $1,929,638,748. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of market
value over tax cost of $1,949,785,900 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax cost
over market value of $20,147,152.

(b) Securities valued in good faith by the Valuation Committee of the Board of
Trustees at fair value amounted to $42,384,365 (.62% 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 December 31, 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 December 31, 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.

19 - Scudder Growth and Income Growth
<PAGE>

Financial Statements

Statement of Assets and Liabilities
as of December 31, 1997

<TABLE>
<CAPTION>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investments, at market:
Unaffiliated issuers (identified cost $4,864,004,024) ............ $6,768,419,400
Affiliated issuers (identified cost $48,641,912) ................. 70,075,275
Total investments, at market value ----------------
(identified cost $4,912,645,936) ................................. 6,838,494,675
Receivable for investments sold ..................................... 5,297,223
Dividends and interest receivable ................................... 19,970,878
Receivable for Fund shares sold ..................................... 13,019,077
Receivable for foreign tax recoverable .............................. 1,176,256
Other assets ........................................................ 62,132
----------------
Total assets ........................................................ 6,878,020,241
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased ................................... 30,994,705
Payable for Fund shares redeemed .................................... 8,059,245
Accrued management fee .............................................. 2,547,917
Other payables and accrued expenses ................................. 2,834,252
----------------
Total liabilities ................................................... 44,436,119
-------------------------------------------------------------------------------------------
Net assets, at market value $6,833,584,122
-------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ................................. 5,816,401
Net unrealized appreciation (depreciation) on:
Investments ...................................................... 1,925,848,739
Foreign currency related transactions ............................ (27,735)
Accumulated net realized gain ....................................... 66,347,065
Paid-in capital ..................................................... 4,835,599,652
-------------------------------------------------------------------------------------------
Net assets, at market value $6,833,584,122
-------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, offering and redemption price per share
($6,833,584,122 / 250,081,688 outstanding shares of beneficial
interest, $.01 par value, unlimited number of shares ---------------
authorized) ...................................................... $27.33
---------------
</TABLE>

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

20 - Scudder Growth and Income Growth
<PAGE>

Statement of Operations
year ended December 31, 1997

<TABLE>
<CAPTION>
Investment Income
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Income:
Dividends--Unaffiliated issuers (net of foreign taxes withheld of
$3,182,189) ...................................................... $ 149,288,227
Dividends--Affiliated issuers ....................................... 2,985,748
Interest ............................................................ 20,259,034
-----------------
172,533,009
-----------------
Expenses:
Management fee ...................................................... 26,072,293
Services to shareholders ............................................ 13,568,308
Custodian and accounting fees ....................................... 1,232,691
Trustees' fees and expenses ......................................... 43,737
Reports to shareholders ............................................. 799,110
Registration fees ................................................... 648,393
Auditing ............................................................ 56,292
Legal ............................................................... 46,728
Other ............................................................... 106,112
-----------------
42,573,664
--------------------------------------------------------------------------------------------
Net investment income 129,959,345
--------------------------------------------------------------------------------------------

Realized and unrealized gain (loss) on investment transactions
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ......................................................... 492,380,210
Foreign currency related transactions ............................... (432,558)
-----------------
491,947,652
-----------------
Net unrealized appreciation (depreciation) during the period on:
Investments ......................................................... 808,740,214
Foreign currency related transactions ............................... (42,092)
-----------------
808,698,122
--------------------------------------------------------------------------------------------
Net gain on investment transactions 1,300,645,774
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $1,430,605,119
--------------------------------------------------------------------------------------------
</TABLE>

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

21 - Scudder Growth and Income Growth
<PAGE>

Statements of Changes in Net Assets

<TABLE>
<CAPTION>
Years Ended December 31,
Increase (Decrease) in Net Assets 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income .................................................. $ 129,959,345 $ 99,189,004
Net realized gain from investment transactions ......................... 491,947,652 212,741,586
Net unrealized appreciation on investment transactions during
the period .......................................................... 808,698,122 415,550,751
---------------- -----------------
Net increase in net assets resulting from operations ................... 1,430,605,119 727,481,341
---------------- -----------------
Distributions to shareholders from:
Net investment income .................................................. (126,973,242) (95,258,805)
---------------- -----------------
Net realized gains on investment transactions .......................... (499,553,699) (149,937,532)
---------------- -----------------
Fund share transactions:
Proceeds from shares sold .............................................. 2,222,518,008 1,116,527,351
Net asset value of shares issued to shareholders in
reinvestment of distributions ....................................... 585,826,807 224,992,117

Cost of shares redeemed ................................................ (965,320,076) (698,530,847)
---------------- -----------------
Net increase in net assets from Fund share transactions ................ 1,843,024,739 642,988,621
---------------- -----------------
Increase in net assets ................................................. 2,647,102,917 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 $5,816,401 and $6,401,797, respectively) ....... $6,833,584,122 $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 ............................................................ 84,125,982 51,282,565
Shares issued to shareholders in reinvestment of distributions ......... 22,057,223 9,848,328
Shares redeemed ........................................................ (36,345,585) (32,205,566)
---------------- -----------------
Net increase in Fund shares ............................................ 69,837,620 28,925,327
---------------- -----------------
Shares outstanding at end of period .................................... 250,081,688 180,244,068
---------------- -----------------
</TABLE>

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

22 - Scudder Growth and Income Growth
<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>
Years Ended December 31,
1997(d) 1996(d) 1995 1994 1993(b) 1992 1991 1990 1989 1988
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <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
Income from investment ----------------------------------------------------------------------------------------------
operations:
Net investment income .............. .62 .60 .55 .49 .49 .57 .57 .65 .67 .60
Net realized and unrealized gain
(loss) on investment
transactions .................... 6.26 3.84 4.46 (.05) 2.01 .90 2.97 (1.01) 2.75 .86
----------------------------------------------------------------------------------------------
Total from investment operations ... 6.88 4.44 5.01 .44 2.50 1.47 3.54 (.36) 3.42 1.46
Less distributions from: ----------------------------------------------------------------------------------------------
Net investment income .............. (.58) (.57) (.56) (.51) (.45) (.53) (.55) (.67) (.69) (.59)
Net realized gains on investment
transactions .................... (2.20) (.87) (.48) (.91) (1.01) (.50) -- (.34) (1.77) --
----------------------------------------------------------------------------------------------
Total distributions ................ (2.78) (1.44) (1.04) (1.42) (1.46) (1.03) (.55) (1.01) (2.46) (.59)
----------------------------------------------------------------------------------------------
Net asset value, ----------------------------------------------------------------------------------------------
end of period ................... $27.33 $23.23 $20.23 $16.26 $17.24 $16.20 $15.76 $12.77 $14.14 $13.18
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return (%) ................... 30.31 22.18 31.18 2.60 15.59 9.57 28.16 (2.33) 26.36 12.01
Ratios and Supplemental Data
Net assets, end of period
($ millions) .................... 6,834 4,186 3,061 1,992 1,624 1,166 723 491 490 402
Ratio of operating expenses to
average net assets (%) .......... .76 .78 .80 .86 .86 .94(a) .97 .95 .87 .92
Ratio of net investment income to
average net assets (%) .......... 2.31 2.77 3.10 2.98 2.93 3.60 4.03 5.03 4.47 4.63
Portfolio turnover rate (%) ........ 22.2 26.6 26.9 42.3 35.5 27.5 44.7 64.7 76.6 47.6
Average commission rate paid (c) ... $.0605 $.0572 -- -- -- -- -- -- -- --
</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 years beginning on or after January 1, 1996.
(d) Based on monthly average shares outstanding during the period.

23 - Scudder Growth and Income Growth
<PAGE>

Notes to Financial Statements

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 most recent 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 other than money market securities with an original
maturity over 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. 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.

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.

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 10% of the value of the Fund's total assets would be invested
in restricted securities. The aggregate fair value of restricted securities at
December 31, 1997, amounted to $42,384,365 which represents .62% 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:

(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.

24 - Scudder Growth and Income Growth
<PAGE>

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, as amended, 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 year ended December 31, 1997, purchases and sales of investment
securities (excluding short-term investments) aggregated $2,411,425,070 and
$1,194,595,274, respectively.

C. Related Parties

Under the Investment Management Agreement between the Fund and Scudder, Stevens
& Clark, Inc. ("Scudder" or 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.

Effective May 1, 1997, the Fund, as approved by the Fund's Board of Trustees,
adopted a new Investment Management Agreement (the "Management Agreement") with
Scudder. Under the Management Agreement the Adviser directs the

25 - Scudder Growth and Income Growth
<PAGE>

investments of the Fund in accordance with its investment objective, policies,
and restrictions. The Adviser determines the securities, instruments, and other
contracts relating to investments to be purchased, sold or entered into by the
Fund. In addition to portfolio management services, the 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.

Effective December 31, 1997, Scudder and The Zurich Insurance Company
("Zurich"), an international insurance and financial services organization,
formed a new global investment organization by combining Scudder's business with
that of Zurich's subsidiary, Zurich Kemper Investments, Inc. As a result of the
transaction, Scudder changed its name to Scudder Kemper Investments Inc.
("Scudder Kemper"). The transaction between Scudder and Zurich resulted in the
termination of the Fund's Investment Management Agreement with Scudder. However,
a new Investment Management Agreement between the Fund and Scudder Kemper was
approved by the Fund's Board of Trustees and by the Fund's Shareholders. The
Management Agreement, which is effective December 31, 1997, is the same in all
material respects as the corresponding previous Investment Management Agreement,
except that Scudder Kemper is the new investment adviser to the Fund. For the
year ended December 31, 1997, the fee pursuant to these agreements amounted to
$26,072,293, which was equivalent to an annual effective rate of 0.46% of the
Fund's average daily net assets.

Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
year ended December 31, 1997, the amount charged to the Fund by SSC aggregated
$6,262,085, of which $541,140 is unpaid at December 31, 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. For the year ended December
31, 1997, the Special Servicing Agreement expense charged to the Fund amounted
to $241,803.

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 year ended December 31,
1997, the amount charged to the Fund by STC aggregated $4,655,851, of which
$469,097 is unpaid at December 31, 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 year ended
December 31, 1997, the amount charged to the Fund by SFAC aggregated $338,966,
of which $32,524 is unpaid at December 31, 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 year ended
December 31, 1997, Trustees' fees and expenses aggregated $43,737.

26 - Scudder Growth and Income Growth
<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 year ended December 31, 1997 are as
follows:

<TABLE>
<CAPTION>
Purchases Sales Dividend Market
Affiliate Cost ($) Cost ($) Income ($) Value ($)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
General Growth Properties, Inc 12,116,400 -- 2,985,748 70,075,275
==========================================================
</TABLE>

27 - SCUDDER GROWTH AND INCOME FUND
<PAGE>

Report of Independent Accountants

To the Trustees of Scudder Investment Trust and the Shareholders of Scudder
Growth and Income Fund:

We have audited the accompanying statement of assets and liabilities of Scudder
Growth and Income Fund, including the investment portfolio, as of December 31,
1997, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the ten years in the period then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder Growth and Income Fund as of December 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the ten years in the period then ended in conformity with generally accepted
accounting principles.

Boston, Massachusetts COOPERS & LYBRAND L.L.P.
February 3, 1998

28 - Scudder Growth and Income Growth
<PAGE>

Tax Information

By now shareholders for whom year-end tax reporting is required by the IRS
should have received their Form 1099-DIV and tax information letter from the
Fund.

The Fund paid distributions of $2.12 per share from net long-term capital gains
during its year ended December 31, 1997, of which 65% represents 20% rate gains.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$477,651,988 as capital gain dividends for its year ended December 31, 1997, of
which 78.6% represents 20% rate gains.

For corporate shareholders, 98.03% of the income dividends paid during the
Fund's year ended December 31, 1997 qualified for the dividends received
deduction.

Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your Scudder Fund account, please call a Scudder Investor Relations
Representative at 1-800-225-5163.

29 - Scudder Growth and Income Growth

<PAGE>

Shareholder Meeting Results

A Special Meeting of Shareholders (the "Meeting") of Scudder Growth and Income
Fund (the "Fund") was held on October 24, 1997, at the office of Scudder Kemper
Investments, Inc. (formerly Scudder, Stevens & Clark, Inc.), Two International
Place, Boston, Massachusetts 02110. At the Meeting, as adjourned and reconvened,
the following matters were voted upon by the shareholders (the resulting votes
for each matter are presented below). With regard to certain proposals, it was
recommended that the Meeting be reconvened in order to provide shareholders with
an additional opportunity to return their proxies. The date of the reconvened
meeting at which the matters were decided is noted after the proposed matter.

1. To approve the new Investment Management Agreement between the Fund and
Scudder Kemper Investments, Inc.

Number of Votes:
----------------

For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------

114,362,502 4,718,851 3,418,684 5,962,317

2. To elect Trustees.

Number of Votes:
----------------

Trustee For Withheld
------- --- --------

Henry P. Becton, Jr. 118,701,742 3,798,295

Dawn-Marie Driscoll 118,685,587 3,814,450

Peter B. Freeman 118,669,156 3,830,881

George M. Lovejoy, Jr. 118,687,298 3,812,739

Dr. Wesley W. Marple, Jr. 118,705,297 3,794,740

Daniel Pierce 118,709,012 3,791,025

Kathryn L. Quirk 118,612,723 3,887,314

Jean C. Tempel 118,699,665 3,800,372

3. To approve the Board's discretionary authority to convert the Fund to a
master/feeder fund structure through a sale or transfer of assets or
otherwise. (Approved on December 2, 1997.)

Number of Votes:
----------------

For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------

123,316,265 11,355,389 7,682,785 248,061

30 - Scudder Growth and Income Fund
<PAGE>

4. To approve certain amendments to the Declaration of Trust. Sufficient
proxies had not been received by December 2, 1997 to approve the
amendments to the Declaration of Trust. Management has determined not to
continue to seek shareholder approval for this item.

Number of Votes:
----------------

For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------

125,439,639 9,537,814 7,625,047 0

5. To approve the revision of certain fundamental investment policies.

<TABLE>
<CAPTION>
Number of Votes:
----------------
Broker
Fundamental Policies For Against Abstain Non-Votes*
-------------------- --- ------- ------- ---------

5.1 Diversification 102,323,047 7,289,769 6,924,904 5,962,317

5.2 Borrowing 101,558,540 8,011,062 6,968,118 5,962,317

5.3 Senior securities 102,071,234 7,503,754 6,962,732 5,962,317

5.4 Concentration 102,092,863 7,486,775 6,958,082 5,962,317

5.5 Underwriting of securities 102,186,604 6,350,308 8,000,808 5,962,317

5.6 Investment in real estate 100,001,983 6,438,760 10,096,977 5,962,317

5.7 Purchase of physical 99,745,061 6,691,104 10,101,555 5,962,317
commodities

5.8 Lending 99,910,539 6,518,743 10,108,438 5,962,317
</TABLE>

6. To ratify the selection of Coopers & Lybrand L.L.P. as the Fund's independent
accountants.

Number of Votes:
----------------

For Against Abstain
--- ------- -------

113,749,148 2,052,180 6,698,709

* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary power
to vote on a particular matter.

31 - 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

Dawn-Marie Driscoll
Trustee; Executive Fellow, Center
for Business Ethics

Peter B. Freeman
Trustee, Corporate Director and
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, Vice President and
Assistant Secretary

Jean C. Tempel
Trustee; General Partner,
TL Ventures

Bruce F. Beaty*
Vice President

Philip S. Fortuna*
Vice President

William F. Gadsden*
Vice President

Jerard K. Hartman*
Vice President

Robert T. Hoffman*
Vice President

Thomas W. Joseph*
Vice President

Valerie F. Malter*
Vice President

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

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

Caroline Pearson*
Assistant Secretary

*Scudder Kemper Investments, Inc.

32 - 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
Scudder S&P 500 Index 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
- -------------------
Traditional IRA
Roth IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan**+++ +++
(a variable annuity)

Education Accounts
- ------------------
Education IRA
UGMA/UTMA

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. Certain Scudder funds may not be
available for purchase or exchange. +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 Kemper Investments, Inc., are traded on the New York Stock Exchange
and, in some cases, on various other stock exchanges.

33 - 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 money is Lets you purchase Scudder fund shares
electronically debited from your bank account monthly to electronically, avoiding potential mailing delays;
regularly purchase fund shares and "dollar cost average" money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from a previously designated bank
fewer when it's higher, which can reduce your average account.
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 previously designated.

DistributionsDirect

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

34 - 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

</TABLE>

35 - Scudder Growth and Income Fund
<PAGE>
About the Fund's Adviser

Scudder Kemper Investments, Inc., is one of the largest and most experienced
investment management oganizations worldwide, managing more than $200 billion in
assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts. It is one of the ten largest mutual fund companies in the
U.S.

Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 79
years ago as one of the nation's first investment counsel organizations, joined
the Zurich 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 Group. The Zurich Group is an internationally recognized leader in
financial services, including property/casualty and life insurance, reinsurance,
and asset management.

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

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

SCUDDER

[LOGO]
<PAGE>

SCUDDER INVESTMENT TRUST

PART C. OTHER INFORMATION

Item 24. Financial Statements and Exhibits

a. Financial Statements

Included in Part A:

For Scudder Growth and Income Fund:
Financial highlights for the ten fiscal years ended
December 31, 1997
(Incorporated by reference to Post-Effective Amendment
No. 75 to the Registration Statement.)
To be filed by amendment.

For Scudder Large Company Growth Fund:
Financial Highlights for the period May 15, 1991
(commencement of operations) to October 31, 1991 and for
the six fiscal years ended October 31, 1997
(Incorporated by Reference to Post-Effective Amendment
No. 90 to the Registration Statement.)

For Scudder Classic Growth Fund:
Financial Highlights for the period September 9, 1996
(commencement of operations) to February 28, 1997.
(Incorporated by reference to Post-Effective Amendment
No. 80 to the Registration Statement.)

For Scudder S&P 500 Index Fund - Equity 500 Index
Portfolio:
Financial Highlights for the period August 29, 1997
(commencement of operations) to December 31, 1997.
(Incorporated by reference to Post - Effective Amendment
No. 91 to the Registration Statement.)

Included in the Part B:

For Scudder Growth and Income Fund:
Investment Portfolio as of December 31, 1997
To be filed by amendment.
Statement of Assets and Liabilities as of December 31,
1997
To be filed by amendment.
Statement of Operations for the year ended December 31,
1997
To be filed by amendment.
Statements of Changes in Net Assets for the two fiscal
years ended December 31, 1997
To be filed by amendment.
Financial Highlights for the ten fiscal years ended
December 31, 1997
To be filed by amendment.
Notes to Financial Statements
To be filed by amendment.
Report of Independent Accountants
To be filed by amendment.

For Scudder Large Company Growth Fund:
Investment Portfolio as of October 31, 1997
Statement of Assets and Liabilities as of October 31,
1997

3
<PAGE>

Statement of Operations for the fiscal year ended
October 31, 1997
Statements of Changes in Net Assets for the three fiscal
years ended October 31, 1997
Financial Highlights for the period May 15, 1991
(commencement of operations) to October 31, 1991 and for
the six fiscal years ended October 31, 1997
Notes to Financial Statements
Report of Independent Accountants

For Scudder Classic Growth Fund:
Investment Portfolio as of February 28, 1997
Statement of Assets and Liabilities as of February 28,
1997
Statement of Operations for the period September 9, 1996
(commencement of operations) to February 28, 1997
Statement of Changes in Net Assets for the period
September 9, 1996 (commencement of operations) to
February 28, 1997
Financial Highlights for the period September 9, 1996
(commencement of operations) to February 28, 1997
Notes to Financial Statements
Report of Independent Accountants
(Incorporated by reference to Post-Effective Amendment
No. 80 to the Registration Statement.)

For Scudder S&P 500 Index Fund - Equity 500 Index
Portfolio:
Investment Portfolio as of December 31, 1997
Statement of Assets and Liabilities for the period
August 29, 1997 (commencement of operations) to December
31, 1997
Statement of Operations for the period August 29, 1997
(commencement of operations) to December 31, 1997
Statement of Changes in Net Assets for the period August
29, 1997 (commencement of operations) to December 31,
1997
Financial Highlights for the period August 29, 1997
(commencement of operations) to December 31, 1997
Notes to Financial Statements
Report of Independent Accountants
(Incorporated by reference to Post - Effective Amendment
No. 91 to the Registration Statement.)

For Scudder Real Estate Investment Fund:
Statement of Assets and Liabilities as of February 25,
1998.
(Incorporated by reference to Post - Effective Amendment
No. 91 to the Registration Statement.)

Statements, schedules and historical information other than
those listed above have been omitted since they are either not
applicable or are not required.

b. Exhibits:

All references are to the Registrant's
Registration Statement on Form N-1A filed with
the Securities and Exchange Commission. File
Nos. 2-13628 and 811-43. ("Registration
Statement").

4
<PAGE>

1. (a)(1) Amended and Restated Declaration of Trust
dated November 4, 1987 is incorporated by
reference to Post-Effective Amendment No. 78
to the Registration Statement ("Post-Effective
Amendment No. 78").

(a)(2) Amendment to Amended and Restated Declaration
of Trust dated November 14, 1990 is
incorporated by reference to Post-Effective
Amendment No. 78 to the Registration Statement
("Post-Effective Amendment No. 78").

(a)(3) Certificate of Amendment of Declaration of
Trust dated February 12, 1991 is incorporated
by reference to Post-Effective Amendment No.
78 to the Registration Statement
("Post-Effective Amendment No. 78").

(b)(1) Establishment and Designation of Series of
Shares of Beneficial Interest, $0.01 par
value, with respect to Scudder Growth and
Income Fund and Scudder Quality Growth Fund is
incorporated by reference to Post-Effective
Amendment No. 78 to the Registration Statement
("Post-Effective Amendment No. 78").

(b)(2) Establishment and Designation of Series of
Shares of Beneficial Interest, $0.01 par
value, with respect to Scudder Classic Growth
Fund is incorporated by reference to
Post-Effective Amendment No. 76 to the
Registration Statement ("Post-Effective
Amendment No. 76").

(b)(3) Establishment and Designation of Series of
Shares of Beneficial Interest, $0.01 par
value, with respect to Scudder Growth and
Income Fund, Scudder Large Company Growth
Fund, and Scudder Classic Growth Fund is
incorporated by reference to Post-Effective
Amendment No. 81 to the Registration Statement
("Post-Effective Amendment No. 81").

2. (a) By-Laws of the Registrant dated September 20,
1984 are incorporated by reference to
Post-Effective Amendment No. 78 to the
Registration Statement ("Post-Effective
Amendment No. 78").

(b) Amendment to By-Laws of the Registrant dated
August 13, 1991 is incorporated by reference
to Post-Effective Amendment No. 78 to the
Registration Statement ("Post-Effective
Amendment No. 78").

(c) Amendment to By-Laws of the Registrant dated
November 12, 1991 is incorporated by reference
to Post-Effective Amendment No. 78 to the
Registration Statement ("Post-Effective
Amendment No. 78").

3. Inapplicable.

4. Specimen certificate representing shares of
beneficial interest with $0.01 par value of
Scudder Growth and Income Fund is incorporated
by reference to Post-Effective Amendment No.
59 to the Registration Statement
("Post-Effective Amendment No. 59").

5
<PAGE>

5. (a) Investment Management Agreement between the
Registrant (on behalf of Scudder Growth and
Income Fund) and Scudder, Stevens & Clark,
Inc. ("Scudder") dated November 14, 1990 is
incorporated by reference to Post-Effective
Amendment No. 78 to the Registration Statement
("Post-Effective Amendment No. 78").

(b) Investment Management Agreement between the
Registrant (on behalf of Scudder Quality
Growth Fund) and Scudder dated May 9, 1991 is
incorporated by reference to Post-Effective
Amendment No. 78 to the Registration Statement
("Post-Effective Amendment No. 78").

(c) Investment Management Agreement between the
Registrant (on behalf of Scudder Growth and
Income Fund) and Scudder dated August 10, 1993
is incorporated by reference to Post-Effective
Amendment No. 78 to the Registration Statement
("Post-Effective Amendment No. 78").

(d) Investment Management Agreement between the
Registrant (on behalf of Scudder Growth and
Income Fund) and Scudder dated August 8, 1995
is incorporated by reference to Post-Effective
Amendment No. 75 to the Registration Statement
("Post-Effective Amendment No. 75").

(e) Investment Management Agreement between the
Registrant, on behalf of Scudder Classic
Growth Fund, and Scudder, Stevens & Clark,
Inc. dated August 13, 1996 is incorporated by
reference to Post-Effective Amendment No. 81
to the Registration Statement ("Post-Effective
Amendment No. 81").

(f) Investment Management Agreement between the
Registrant, on behalf of Scudder Growth and
Income Fund, and Scudder, Stevens & Clark,
Inc. dated May 1, 1997 is incorporated by
reference to Post-Effective Amendment No. 84
to the Registration Statement.

(g) Investment Management Agreement between the
Registrant, on behalf of Scudder Large Company
Growth Fund, and Scudder Kemper Investments,
Inc. dated December 31, 1998 is incorporated
by reference to Post-Effective Amendment No.
90 to the Registration Statement.

(h) Investment Management Agreement between the
Registrant, on behalf of Scudder Real Estate
Invesment Fund, and Scudder Kemper
Investments, Inc. dated March 2, 1998 to be
filed by amendment.

(i) Investment Management Agreement between the
Registrant, on behalf of Scudder S&P 500 Index
Fund, and Scudder Kemper Investments, Inc.
dated December 31, 1997 is incorporated by
reference to Post-Effective Amendment No. 91
to the Registration Statement.

(j) Investment Management Agreement between the
Registrant, on behalf of Scudder Growth and
Income Fund, and Scudder Kemper Investments,
Inc. dated December 31, 1997 is filed herein.

6. (a) Underwriting Agreement between the Registrant
and Scudder Investor Services, Inc., formerly
Scudder Fund Distributors, Inc., dated
September 10, 1985 is incorporated by
reference to Post-Effective Amendment No. 78
to the Registration Statement ("Post-Effective
Amendment No. 78").

6
<PAGE>

7. Inapplicable.

8. (a)(1) Custodian Agreement between the Registrant (on
behalf of Scudder Growth and Income Fund) and
State Street Bank and Trust Company ("State
Street Bank") dated December 31, 1984 is
incorporated by reference to Post-Effective
Amendment No. 78 to the Registration Statement
("Post-Effective Amendment No. 78").

(a)(2) Amendment dated April 1, 1985 to the Custodian
Agreement between the Registrant and State
Street Bank is incorporated by reference to
Post-Effective Amendment No. 78 to the
Registration Statement ("Post-Effective
Amendment No. 78").

(a)(3) Amendment dated August 8, 1987 to the
Custodian Agreement between the Registrant and
State Street Bank is incorporated by reference
to Post-Effective Amendment No. 78 to the
Registration Statement ("Post-Effective
Amendment No. 78").

(a)(4) Amendment dated August 9, 1988 to the
Custodian Agreement between the Registrant and
State Street Bank is incorporated by reference
to Post-Effective Amendment No. 78 to the
Registration Statement ("Post-Effective
Amendment No. 78").

(a)(5) Amendment dated July 29, 1991 to the Custodian
Agreement between the Registrant and State
Street Bank is incorporated by reference to
Post-Effective Amendment No. 78 to the
Registration Statement ("Post-Effective
Amendment No. 78").

(a)(6) Custodian fee schedule for Scudder Growth and
Income Fund is incorporated by reference to
Post-Effective Amendment No. 78 to the
Registration Statement ("Post-Effective
Amendment No. 78").

(a)(7) Custodian fee schedule for Scudder Quality
Growth Fund is incorporated by reference to
Post-Effective Amendment No. 78 to the
Registration Statement ("Post-Effective
Amendment No. 78").

(a)(8) Custodian fee schedule for Scudder S&P 500
Index Fund is incorporated by reference to
Post-Effective Amendment No. 84 to the
Registration Statement.

(b)(1) Subcustodian Agreement with fee schedule
between State Street Bank and The Bank of New
York, London office, dated December 31, 1978
is incorporated by reference to Post-Effective
Amendment No. 78 to the Registration Statement
("Post-Effective Amendment No. 78").

(c)(1) Subcustodian Agreement between State Street
Bank and The Chase Manhattan Bank, N.A. dated
September 1, 1986 is incorporated by reference
to Post-Effective Amendment No. 78 to the
Registration Statement ("Post-Effective
Amendment No. 78").

(d) Custodian fee schedule for Scudder Quality
Growth Fund and Scudder Growth and Income Fund
is incorporated by reference to Post-Effective
Amendment No. 72 to the Registration Statement
("Post-Effective Amendment No. 72").

7
<PAGE>

(e) Form of Custodian fee schedule for Scudder
Classic Growth Fund is incorporated by
reference to Post-Effective Amendment No. 77
to the Registration Statement ("Post-Effective
Amendment No. 77").

9. (a)(1) Transfer Agency and Service Agreement with fee
schedule between the Registrant and Scudder
Service Corporation dated October 2, 1989 is
incorporated by reference to Post-Effective
Amendment No. 78 to the Registration Statement
("Post-Effective Amendment No. 78").

(a)(2) Revised fee schedule dated October 6, 1995 for
Exhibit 9(a)(1) is incorporated by reference
to Post-Effective Amendment No. 76
("Post-Effective Amendment No. 76").

(a)(3) Form of revised fee schedule for Exhibit
9(a)(1) dated October 1, 1996 is incorporated
by reference to Post-Effective Amendment No.
78 to the Registration Statement
("Post-Effective Amendment No. 78").

(b)(1) COMPASS Service Agreement and fee schedule
with Scudder Trust Company dated January 1,
1990 is incorporated by reference to
Post-Effective Amendment No. 78 to the
Registration Statement ("Post-Effective
Amendment No. 78").

(b)(2) COMPASS and TRAK 2000 Service Agreement
between Scudder Trust Company and the
Registrant dated October 1, 1995 is
incorporated by reference to Post-Effective
Amendment No. 74 ("Post-Effective Amendment
No. 74").

(b)(3) Form of revised fee schedule for Exhibit
9(b)(1) dated October 1, 1996 is incorporated
by reference to Post-Effective Amendment No.
78 to the Registration Statement
("Post-Effective Amendment No. 78").

(c) Fund Accounting Services Agreement between the
Registrant, on behalf of Scudder Quality
Growth Fund and Scudder Fund Accounting
Corporation dated November 1, 1994 is
incorporated by reference to Post-Effective
Amendment No. 72.

(d) Fund Accounting Services Agreement between the
Registrant, on behalf of Scudder Growth and
Income Fund and Scudder Fund Accounting
Corporation dated October 17, 1994 is
incorporated by reference to Post-Effective
Amendment No. 73.

(e) Form of Fund Accounting Services Agreement
between the Registrant, on behalf of Scudder
Classic Growth Fund, and Scudder Fund
Accounting Corporation is incorporated by
reference to Post-Effective Amendment No. 77
to the Registration Statement ("Post-Effective
Amendment No. 77").

(f)(1) Shareholder Services Agreement between the
Registrant and Charles Schwab & Co., Inc.
dated June 1, 1990 is incorporated by
reference to Post-Effective Amendment No. 78
to the Registration Statement ("Post-Effective
Amendment No. 78").

8
<PAGE>

(f)(2) Service Agreement between Copeland Associates,
Inc. and Scudder Service Corporation (on
behalf of Scudder Quality Growth Fund and
Scudder Growth and Income Fund) dated June 8,
1995 is incorporated by reference to
Post-Effective Amendment No. 74
("Post-Effective Amendment No. 74").

10. Inapplicable.

11. Inapplicable.

12. Inapplicable.

13. Inapplicable.

14. (a) Scudder Flexi-Plan for Corporations and
Self-Employed Individuals is incorporated by
reference to Post-Effective Amendment No. 78
to the Registration Statement ("Post-Effective
Amendment No. 78").

(b) Scudder Individual Retirement Plan is
incorporated by reference to Post-Effective
Amendment No. 78 to the Registration Statement
("Post-Effective Amendment No. 78").

(c) SEP-IRA is incorporated by reference to
Post-Effective Amendment No. 78 to the
Registration Statement ("Post-Effective
Amendment No. 78").

(d) Scudder Funds 403(b) Plan is incorporated by
reference to Post-Effective Amendment No. 78
to the Registration Statement ("Post-Effective
Amendment No. 78").

(e) Scudder Cash or Deferred Profit Sharing Plan
under Section 401(k) is incorporated by
reference to Post-Effective Amendment No. 78
to the Registration Statement ("Post-Effective
Amendment No. 78").

(f) Scudder Roth IRA Custodian Disclosure
Statement and Plan Agreement is incorporated
by reference to Post-Effective Amendment No.
91 to the Registration Statement.

15. Inapplicable.

16. Schedule for Computation of Performance
Quotation is filed herein. Power of Attorney
is incorporated by reference to Post-Effective
Amendment No. 78 to the Registration Statement
("Post-Effective Amendment No. 78").

17. Inapplicable.

18. Rule 18f-3 Plan to be filed by amendment

Item 25. Persons Controlled by or under Common Control with Registrant.

None

9
<PAGE>

Item 26. Number of Holders of Securities (as of February 23, 1998).

(1) (2)
Title of Class Number of Record Shareholders
-------------- -----------------------------

Shares of beneficial interest
($0.01 par value):

Scudder Growth and Income Fund 422,225
Scudder Large Company Growth Fund 29,629
Scudder Classic Growth Fund 5,055
Scudder S&P 500 Index Fund 2,756

Item 27. Indemnification.

A policy of insurance covering Scudder, Stevens & Clark, Inc. its
subsidiaries including Scudder Investor Services, Inc., and all of
the registered investment companies advised by Scudder, Stevens &
Clark, Inc. insures the Registrant's Trustees and officers and
others against liability arising by reason of an alleged breach of
duty caused by any negligent act, error or accidental omission in
the scope of their duties.

Article IV, Sections 4.1-4.3 of Registrant's Declaration of Trust
provide as follows:

Section 4.1. No Personal Liability of Shareholders, Trustees,
etc. No Shareholder shall be subject to any personal liability
whatsoever to any Person in connection with Trust Property or
the acts, obligations or affairs of the Trust. No Trustee,
officer, employee or agent of the Trust shall be subject to
any personal liability whatsoever to any Person, other than to
the Trust or its Shareholders, in connection with Trust
Property or the affairs of the Trust, save only that arising
from bad faith, willful misfeasance, gross negligence or
reckless disregard of his duties with respect to such Person;
and all such Persons shall look solely to the Trust Property
for satisfaction of claims of any nature arising in connection
with the affairs of the Trust. If any Shareholder, Trustee,
officer, employee, or agent, as such, of the Trust, is made a
party to any suit or proceeding to enforce any such liability
of the Trust, he shall not, on account thereof, be held to any
personal liability. The Trust shall indemnify and hold each
Shareholder harmless from and against all claims and
liabilities, to which such Shareholder may become subject by
reason of his being or having been a Shareholder, and shall
reimburse such Shareholder for all legal and other expenses
reasonably incurred by him in connection with any such claim
or liability. The indemnification and reimbursement required
by the preceding sentence shall be made only out of the assets
of the one or more series of which the shareholder who is
entitled to indemnification or reimbursement was a Shareholder
at the time the act or event occurred which gave rise to the
claim against or liability of said shareholder. The rights
accruing to a Shareholder under this Section 4.1 shall not
impair any other right to which such Shareholder may be
lawfully entitled, nor shall anything herein contained
restrict the right of the Trust to indemnify or reimburse a
Shareholder in any appropriate situation even though not
specifically provided herein.

Section 4.2. Non-Liability of Trustees, etc. No Trustee,
officer, employee or agent of the Trust shall be liable to the
Trust, its Shareholders, or to any Shareholder, Trustee,
officer, employee, or agent thereof for any action or failure
to act (including without limitation the failure to compel in
any way any former or acting Trustee to redress any breach of
trust) except for his own bad faith, willful misfeasance,
gross negligence or reckless disregard of the duties involved
in the conduct of his office.

Section 4.3 Mandatory Indemnification. (a) Subject to the
exceptions and limitations contained in paragraph (b) below:

10
<PAGE>

(i) every person who is, or has been, a Trustee or
officer of the Trust shall be indemnified by the Trust
to the fullest extent permitted by law against all
liability and against all expenses reasonably incurred
or paid by him in connection with any claim, action,
suit or proceeding in which he becomes involved as a
party or otherwise by virtue of his being or having been
a Trustee or officer and against amounts paid or
incurred by him in the settlement thereof;

(ii) the words "claim," "action," "suit," or
"proceeding" shall apply to all claims, actions, suits
or proceedings (civil, criminal, administrative, or
other, including appeals), actual or threatened; and the
words "liability" and "expenses" shall include, without
limitation, attorneys' fees, costs, judgments, amounts
paid in settlement, fines, penalties and other
liabilities.

(b) No indemnification shall be provided hereunder to a
Trustee or officer:

(i) against any liability to the Trust, a Series
thereof, or the Shareholders by reason of a final
adjudication by a court or other body before which a
proceeding was brought that he engaged in willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his
office;

(ii) with respect to any matter as to which he shall
have been finally adjudicated not to have acted in good
faith in the reasonable belief that his action was in
the best interest of the Trust;

(iii) in the event of a settlement or other disposition
not involving a final adjudication as provided in
paragraph (b)(i) or (b)(ii) resulting in a payment by a
Trustee or officer, unless there has been a
determination that such Trustee or officer did not
engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved
in the conduct of his office;

(A) by the court or other body approving the
settlement or other disposition; or

(B) based upon a review of readily available facts
(as opposed to a full trial-type inquiry) by (x)
vote of a majority of the Disinterested Trustees
acting on the matter (provided that a majority of
the Disinterested Trustees then in office act on
the matter) or (y) written opinion of independent
legal counsel.

(c) The rights of indemnification herein provided may be
insured against by policies maintained by the Trust, shall be
severable, shall not affect any other rights to which any
Trustee or officer may now or hereafter be entitled, shall
continue as to a person who has ceased to be such Trustee or
officer and shall inure to the benefit of the heirs,
executors, administrators and assigns of such a person.
Nothing contained herein shall affect any rights to
indemnification to which personnel of the Trust other than
Trustees and officers may be entitled by contract or otherwise
under law.

(d) Expenses of preparation and presentation of a defense to
any claim, action, suit, or proceeding of the character
described in paragraph (a) of this Section 4.3 may be advanced
by the Trust prior to final disposition thereof upon receipt
of an undertaking by or on behalf of the recipient, to repay
such amount if it is ultimately determined that he is not
entitled to indemnification under this Section 4.3, provided
that either:

11
<PAGE>

(i) such undertaking is secured by a surety bond or some
other appropriate security provided by the recipient, or
the Trust shall be insured against losses arising out of
any such advances; or

(ii) a majority of the Disinterested Trustees acting on
the matter (provided that a majority of the
Disinterested Trustees act on the matter) or an
independent legal counsel in a written opinion shall
determine, based upon a review of readily available
facts (as opposed to a full trial-type inquiry), that
there is reason to believe that the recipient ultimately
will be found entitled to indemnification.

As used in this Section 4.3, a "Disinterested Trustee"
is one who is not (i) an "Interested Person" of the
Trust (including anyone who has been exempted from being
an "Interested Person" by any rule, regulation or order
of the Commission), or (ii) involved in the claim,
action, suit or proceeding.

Item 28. Business or Other Connections of Investment Adviser

Scudder Kemper Investments, Inc. has stockholders and employees who
are denominated officers but do not as such have corporation-wide
responsibilities. Such persons are not considered officers for the
purpose of this Item 28.

Business and Other Connections of Board
Name of Directors of Registrant's Adviser
---- ------------------------------------

Stephen R. Treasurer and Chief Financial Officer, Scudder Kemper
Beckwith Investments, Inc.**
Vice President and Treasurer, Scudder Fund Accounting
Corporation*
Director, Scudder Stevens & Clark Corporation**
Director and Chairman, Scudder Defined Contribution
Services, Inc.**
Director and President, Scudder Capital Asset Corporation**
Director and President, Scudder Capital Stock Corporation**
Director and President, Scudder Capital Planning
Corporation**
Director and President, SS&C Investment Corporation**
Director and President, SIS Investment Corporation**
Director and President, SRV Investment Corporation**

Lynn S. Birdsong Director and Vice President, Scudder Kemper Investments,
Inc.**
Director, Scudder, Stevens & Clark (Luxembourg) S.A. #

Laurence W. Director, Scudder Kemper Investments, Inc.**
Cheng Member, Corporate Executive Board, Zurich Insurance Company
of Switzerland ##
Director, ZKI Holding Corporation xx

Steven Director, Scudder Kemper Investments, Inc.**
Gluckstern Member, Corporate Executive Board, Zurich Insurance Company
of Switzerland ##
Director, Zurich Holding Company of America o

Rolf Huppi Director, Chairman of the Board, Scudder Kemper
Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company
of Switzerland ##
Director, Chairman of the Board, Zurich Holding Company of
America o
Director, ZKI Holding Corporation xx

Kathryn L. Quirk Director, Chief Legal Officer, Chief Compliance Officer and
Secretary, Scudder Kemper Investments, Inc.**
Director, Senior Vice President & Assistant Clerk, Scudder
Investor Services, Inc.*

12
<PAGE>

Director, Vice President & Secretary, Scudder Fund
Accounting Corporation*
Director, Vice President & Secretary, Scudder Realty
Holdings Corporation*
Director & Assistant Clerk, Scudder Service Corporation*
Director, SFA, Inc.*
Vice President, Director & Assistant Secretary, Scudder
Precious Metals, Inc.***
Director, Scudder, Stevens & Clark Japan, Inc.***
Director, Vice President and Secretary, Scudder, Stevens &
Clark of Canada, Ltd.***
Director, Vice President and Secretary, Scudder Canada
Investor Services Limited***
Director, Vice President and Secretary, Scudder Realty
Advisers, Inc. x
Director and Secretary, Scudder, Stevens & Clark
Corporation**
Director and Secretary, Scudder, Stevens & Clark Overseas
Corporation oo
Director and Secretary, SFA, Inc.*
Director, Vice President and Secretary, Scudder Defined
Contribution Services, Inc.**
Director, Vice President and Secretary, Scudder Capital
Asset Corporation**
Director, Vice President and Secretary, Scudder Capital
Stock Corporation**
Director, Vice President and Secretary, Scudder Capital
Planning Corporation**
Director, Vice President and Secretary, SS&C Investment
Corporation**
Director, Vice President and Secretary, SIS Investment
Corporation**
Director, Vice President and Secretary, SRV Investment
Corporation**
Director, Vice President and Secretary, Scudder Brokerage
Services, Inc.*
Director, Korea Bond Fund Management Co., Ltd.+

Markus Director, Scudder Kemper Investments, Inc.**
Rohrbasser Member Corporate Executive Board, Zurich Insurance Company
of Switzerland ##
President, Director, Chairman of the Board, ZKI Holding
Corporation xx

Cornelia M. Vice President, Scudder Kemper Investments, Inc.**
Small

Edmond D. Director, President and Chief Executive Officer, Scudder
Villani Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark Japan, Inc. ###
President and Director, Scudder, Stevens & Clark Overseas
Corporation oo
President and Director, Scudder, Stevens & Clark
Corporation**
Director, Scudder Realty Advisors, Inc.x
Director, IBJ Global Investment Management S.A. Luxembourg,
Grand-Duchy of Luxembourg

* Two International Place, Boston, MA
x 333 South Hope Street, Los Angeles, CA
** 345 Park Avenue, New York, NY
# Societe Anonyme, 47, Boulevard Royal, L-2449 Luxembourg, R.C.
Luxembourg B 34.564
*** Toronto, Ontario, Canada
xxx Grand Cayman, Cayman Islands, British West Indies
oo 20-5, Ichibancho, Chiyoda-ku, Tokyo, Japan
### 1-7, Kojimachi, Chiyoda-ku, Tokyo, Japan
xx 222 S. Riverside, Chicago, IL
o Zurich Towers, 1400 American Ln., Schaumburg, IL
+ P.O. Box 309, Upland House, S. Church St., Grand Cayman,
British West Indies
## Mythenquai-2, P.O. Box CH-8022, Zurich, Switzerland

Item 29. Principal Underwriters.

13
<PAGE>

(a)

Scudder Investor Services, Inc. acts as principal underwriter of the
Registrant's shares and also acts as principal underwriter for other funds
managed by Scudder Kemper Investments, Inc.

(b)

The Underwriter has employees who are denominated officers of an
operational area. Such persons do not have corporation-wide
responsibilities and are not considered officers for the purpose of this
Item 29.

(1) (2) (3)

Positions and
Name and Principal Position and Offices with Offices with
Business Address Scudder Investor Services, Inc. Registrant
---------------- ------------------------------- ----------

William S. Baughman Vice President None
Two International Place
Boston, MA 02110

Lynn S. Birdsong Senior Vice President None
345 Park Avenue
New York, NY 10154

Mary Elizabeth Beams Vice President None
Two International Place
Boston, MA 02110

Mark S. Casady Director, President and None
Two International Place Assistant Treasurer
Boston, MA 02110

Linda Coughlin Director and Senior Vice None
Two International Place President
Boston, MA 02110

Richard W. Desmond Vice President None
345 Park Avenue
New York, NY 10154

Paul J. Elmlinger Senior Vice President and None
345 Park Avenue Assistant Clerk
New York, NY 10154

Philip S. Fortuna Vice President Vice President
101 California Street
San Francisco, CA 94111

14
<PAGE>

Positions and
Name and Principal Position and Offices with Offices with
Business Address Scudder Investor Services, Inc. Registrant
---------------- ------------------------------- ----------

William F. Glavin Vice President None
Two International Place
Boston, MA 02110

Margaret D. Hadzima Assistant Treasurer None
Two International Place
Boston, MA 02110

Thomas W. Joseph Director, Vice President, Vice President
Two International Place Treasurer
Boston, MA 02110 and Assistant Clerk

Thomas F. McDonough Clerk Vice
Two International Place President,
Boston, MA 02110 Secretary and
Treasurer

Daniel Pierce Director, Vice President President and
Two International Place and Assistant Treasurer Trustee
Boston, MA 02110

Kathryn L. Quirk Director, Senior Vice President Trustee, Vice
345 Park Avenue and Assistant Clerk President and
New York, NY 10154 Assistant
Secretary

Robert A. Rudell Vice President None
Two International Place
Boston, MA 02110

William M. Thomas Vice President None
Two International Place
Boston, MA 02110

Benjamin Thorndike Vice President None
Two International Place
Boston, MA 02110

Sydney S. Tucker Vice President None
Two International Place
Boston, MA 02110

Linda J. Wondrack Vice President None
Two International Place
Boston, MA 02110

(c)

<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Net
Name of Principal Underwriting Compensation on
Name of Principal Discounts and Redemptions Brokerage Other
Underwriter Commissions and Repurchases Commissions Compensation
----------- ----------- --------------- ----------- ------------
<S> <C> <C> <C> <C>

15
<PAGE>

Scudder Investor None None None None
Services, Inc.
</TABLE>

Item 30. Location of Accounts and Records.

Certain accounts, books and other documents required to be
maintained by Section 31(a) of the 1940 Act and the Rules
promulgated thereunder are maintained by Scudder, Stevens & Clark,
Two International Place, Boston, MA 02110. Records relating to the
duties of the Registrant's custodian are maintained by State Street
Bank and Trust Company, Heritage Drive, North Quincy, Massachusetts.
Records relating to the duties of the Registrant's transfer agent
are maintained by Scudder Service Corporation, Two International
Place, Boston, Massachusetts.

Item 31. Management Services.

Inapplicable.

Item 32. Undertakings.

Inapplicable.

16
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this amendment to its Registration
Statement pursuant to Rule 485(a) under the Securities Act of 1933 and has duly
caused this amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereto duly authorized, in the City of Boston and the
Commonwealth of Massachusetts on the 11th day of February, 1998.

SCUDDER INVESTMENT TRUST

By/s/Thomas F. McDonough
--------------------------------
Thomas F. McDonough, Vice President,
Secretary and Treasurer
(Principal Accounting Officer)

Pursuant to the requirements of the Securities Act of 1933, this
amendment to its Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.

SIGNATURE TITLE DATE

/s/Daniel Pierce
- --------------------------------------
Daniel Pierce* President (Principal Executive February 11, 1998
Officer) and Trustee

/s/Henry P. Becton, Jr.
- --------------------------------------
Henry P. Becton, Jr.* Trustee February 11, 1998

/s/Dawn-Marie Driscoll
- --------------------------------------
Dawn-Marie Driscoll* Trustee February 11, 1998

/s/Peter B. Freeman
- --------------------------------------
Peter B. Freeman* Trustee February 11, 1998

/s/George M. Lovejoy, Jr.
- --------------------------------------
George M. Lovejoy, Jr.* Trustee February 11, 1998

/s/Wesley W. Marple, Jr.
- --------------------------------------
Wesley W. Marple, Jr.* Trustee February 11, 1998

/s/Jean C. Tempel
- --------------------------------------
Jean C. Tempel* Trustee February 11, 1998

<PAGE>

/s/Kathryn L. Quirk
- --------------------------------------
Kathryn L. Quirk* Trustee, Vice President February 11, 1998
and Assistant Secretary

</TABLE>

*By:/s/Thomas F. McDonough
-----------------------
Thomas F. McDonough**

** Attorney-in-fact pursuant to a power of attorney contained in the
signature page of Post-Effective Amendment No. 61 to the Registration
Statement filed April 22, 1991 and pursuant to a power of attorney
contained in the signature page of Post-Effective Amendment No. 72 to
the Registration Statement filed April 28, 1995 and pursuant to a
power of attorney contained in the signature page of Post-Effective
Amendment No. 79 filed February 26, 1997 and pursuant to a power of
attorney contained in the signature page of Post-Effective Amendment
No. 85 filed October 31, 1997.

2
<PAGE>

File No. 2-13628
File No. 811-43

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

EXHIBITS

FORM N-1A

POST-EFFECTIVE AMENDMENT NO. 92
TO REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

AND

AMENDMENT NO. 44

TO REGISTRATION STATEMENT

UNDER

THE INVESTMENT COMPANY ACT OF 1940

SCUDDER INVESTMENT TRUST

<PAGE>

SCUDDER INVESTMENT TRUST

EXHIBIT INDEX

Exhibit 5 (j)

Scudder Investment Trust
Two International Place
Boston, Massachusetts 02110

December 31, 1997

Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154

Investment Management Agreement
Scudder Growth and Income Fund

Ladies and Gentlemen:

Scudder Investment Trust (the "Trust") has been established as a
Massachusetts business trust to engage in the business of an investment company.
Pursuant to the Trust's Declaration of Trust, as amended from time-to-time (the
"Declaration"), the Board of Trustees has divided the Trust's shares of
beneficial interest, par value $.01 per share, (the "Shares") into separate
series, or funds, including Scudder Growth and Income Fund (the "Fund"). Series
may be abolished and dissolved, and additional series established, from time to
time by action of the Trustees.

The Trust, on behalf of the Fund, has selected you to act as the sole
investment manager of the Fund and to provide certain other services, as more
fully set forth below, and you have indicated that you are willing to act as
such investment manager and to perform such services under the terms and
conditions hereinafter set forth. Accordingly, the Trust on behalf of the Fund
agrees with you as follows:

1. Delivery of Documents. The Trust engages in the business of investing
and reinvesting the assets of the Fund in the manner and in accordance with the
investment objectives, policies and restrictions specified in the currently
effective Prospectus (the "Prospectus") and Statement of Additional Information
(the "SAI") relating to the Fund included in the Trust's Registration Statement
on Form N-1A, as amended from time to time, (the "Registration Statement") filed
by the Trust under the Investment Company Act of 1940, as amended, (the "1940
Act") and the Securities Act of 1933, as amended. Copies of the documents
referred to in the preceding sentence have been furnished to you by the Trust.
The Trust has also furnished you with copies properly certified or authenticated
of each of the following additional documents related to the Trust and the Fund:

(a) The Declaration dated November 3, 1987, as amended to date.

(b) By-Laws of the Trust as in effect on the date hereof (the "By-Laws").

(c) Resolutions of the Trustees of the Trust and the shareholders of the Fund
selecting you as investment manager and approving the form of this
Agreement.

<PAGE>

(d) Establishment and Designation of Series of Shares of Beneficial Interest
dated February 12, 1991 relating to the Fund.

The Trust will furnish you from time to time with copies, properly
certified or authenticated, of all amendments of or supplements, if any, to the
foregoing, including the Prospectus, the SAI and the Registration Statement.

2. Sublicense to Use the Scudder Trademarks. As exclusive licensee of the
rights to use and sublicense the use of the "Scudder," "Scudder Kemper
Investments, Inc." and "Scudder, Stevens & Clark, Inc." trademarks (together,
the "Scudder Marks"), you hereby grant the Trust a nonexclusive right and
sublicense to use (i) the "Scudder" name and mark as part of the Trust's name
(the "Fund Name"), and (ii) the Scudder Marks in connection with the Trust's
investment products and services, in each case only for so long as this
Agreement, any other investment management agreement between you and the Trust,
or any extension, renewal or amendment hereof or thereof remains in effect, and
only for so long as you are a licensee of the Scudder Marks, provided however,
that you agree to use your best efforts to maintain your license to use and
sublicense the Scudder Marks. The Trust agrees that it shall have no right to
sublicense or assign rights to use the Scudder Marks, shall acquire no interest
in the Scudder Marks other than the rights granted herein, that all of the
Trust's uses of the Scudder Marks shall inure to the benefit of Scudder Trust
Company as owner and licensor of the Scudder Marks (the "Trademark Owner"), and
that the Trust shall not challenge the validity of the Scudder Marks or the
Trademark Owner's ownership thereof. The Trust further agrees that all services
and products it offers in connection with the Scudder Marks shall meet
commercially reasonable standards of quality, as may be determined by you or the
Trademark Owner from time to time, provided that you acknowledge that the
services and products the Trust rendered during the one-year period preceding
the date of this Agreement are acceptable. At your reasonable request, the Trust
shall cooperate with you and the Trademark Owner and shall execute and deliver
any and all documents necessary to maintain and protect (including but not
limited to in connection with any trademark infringement action) the Scudder
Marks and/or enter the Trust as a registered user thereof. At such time as this
Agreement or any other investment management agreement shall no longer be in
effect between you (or your successor) and the Trust, or you no longer are a
licensee of the Scudder Marks, the Trust shall (to the extent that, and as soon
as, it lawfully can) cease to use the Fund Name or any other name indicating
that it is advised by, managed by or otherwise connected with you (or any
organization which shall have succeeded to your business as investment manager)
or the Trademark Owner. In no event shall the Trust use the Scudder Marks or any
other name or mark confusingly similar thereto (including, but not limited to,
any name or mark that includes the name "Scudder") if this Agreement or any
other investment advisory agreement between you (or your successor) and the Fund
is terminated.

3. Portfolio Management Services. As manager of the assets of the Fund,
you shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations thereunder; and all other
applicable federal and state laws and regulations of which you have knowledge;
subject always to policies and instructions adopted by the Trust's Board of
Trustees. In connection therewith, you shall use reasonable efforts to manage
the Fund so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Fund shall have
the benefit of the investment analysis and research, the review of current
economic conditions and trends and the consideration of long-range investment
policy generally available to your investment advisory clients. In managing the
Fund in accordance with the requirements set forth in this section 3, you shall
be entitled to receive and act upon advice of counsel to the Trust or counsel to
you. You shall also make available to the Trust promptly upon request all of the
Fund's investment records and

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ledgers as are necessary to assist the Trust in complying with the requirements
of the 1940 Act and other applicable laws. To the extent required by law, you
shall furnish to regulatory authorities having the requisite authority any
information or reports in connection with the services provided pursuant to this
Agreement which may be requested in order to ascertain whether the operations of
the Trust are being conducted in a manner consistent with applicable laws and
regulations.

You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
the Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.

You shall furnish to the Trust's Board of Trustees periodic reports on the
investment performance of the Fund and on the performance of your obligations
pursuant to this Agreement, and you shall supply such additional reports and
information as the Trust's officers or Board of Trustees shall reasonably
request.

4. Administrative Services. In addition to the portfolio management
services specified above in section 3, you shall furnish at your expense for the
use of the Fund such office space and facilities in the United States as the
Fund may require for its reasonable needs, and you (or one or more of your
affiliates designated by you) shall render to the Trust administrative services
on behalf of the Fund necessary for operating as an open-end investment company
and not provided by persons not parties to this Agreement including, but not
limited to, preparing reports to and meeting materials for the Trust's Board of
Trustees and reports and notices to Fund shareholders; supervising, negotiating
contractual arrangements with, to the extent appropriate, and monitoring the
performance of, accounting agents, custodians, depositories, transfer agents and
pricing agents, accountants, attorneys, printers, underwriters, brokers and
dealers, insurers and other persons in any capacity deemed to be necessary or
desirable to Fund operations; preparing and making filings with the Securities
and Exchange Commission (the "SEC") and other regulatory and self-regulatory
organizations, including, but not limited to, preliminary and definitive proxy
materials, post-effective amendments to the Registration Statement, semi-annual
reports on Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act;
overseeing the tabulation of proxies by the Fund's transfer agent; assisting in
the preparation and filing of the Fund's federal, state and local tax returns;
preparing and filing the Fund's federal excise tax return pursuant to Section
4982 of the Code; providing assistance with investor and public relations
matters; monitoring the valuation of portfolio securities and the calculation of
net asset value; monitoring the registration of Shares of the Fund under
applicable federal and state securities laws; maintaining or causing to be
maintained for the Fund all books, records and reports and any other information
required under the 1940 Act, to the extent that such books, records and reports
and other information are not maintained by the Fund's custodian or other agents
of the Fund; assisting in establishing the accounting policies of the Fund;
assisting in the resolution of accounting issues that may arise with respect to
the Fund's operations and consulting with the Fund's independent accountants,
legal counsel and the Fund's other agents as necessary in connection therewith;
establishing and monitoring the Fund's operating expense budgets; reviewing the
Fund's bills; processing the payment of bills that have been approved by an
authorized person; assisting the Fund in determining the amount of dividends and
distributions available to be paid by the Fund to its shareholders, preparing
and arranging for the printing of dividend notices to shareholders, and
providing the transfer and dividend paying agent, the custodian, and the
accounting agent with such information as is required for such parties to effect
the payment of dividends and distributions; and otherwise assisting the Trust as
it may reasonably request in the conduct of the Fund's business, subject to the
direction and control of the Trust's Board of Trustees.

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Nothing in this Agreement shall be deemed to shift to you or to diminish the
obligations of any agent of the Fund or any other person not a party to this
Agreement which is obligated to provide services to the Fund.

5. Allocation of Charges and Expenses. Except as otherwise specifically
provided in this section 5, you shall pay the compensation and expenses of all
Trustees, officers and executive employees of the Trust (including the Fund's
share of payroll taxes) who are affiliated persons of you, and you shall make
available, without expense to the Fund, the services of such of your directors,
officers and employees as may duly be elected officers of the Trust, subject to
their individual consent to serve and to any limitations imposed by law. You
shall provide at your expense the portfolio management services described in
section 3 hereof and the administrative services described in section 4 hereof.

You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 5. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Trustees and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out-of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Trust; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent, custodians,
subcustodians, transfer agents, dividend disbursing agents and registrars;
payment for portfolio pricing or valuation services to pricing agents,
accountants, bankers and other specialists, if any; expenses of preparing share
certificates and, except as provided below in this section 5, other expenses in
connection with the issuance, offering, distribution, sale, redemption or
repurchase of securities issued by the Fund; expenses relating to investor and
public relations; expenses and fees of registering or qualifying Shares of the
Fund for sale; interest charges, bond premiums and other insurance expense;
freight, insurance and other charges in connection with the shipment of the
Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Trust business) of Trustees, officers and
employees of the Trust who are not affiliated persons of you; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
of the Fund; expenses of printing and distributing reports, notices and
dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of the Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Trustees and officers of the Trust; costs of
shareholders' and other meetings; and travel expenses (or an appropriate portion
thereof) of Trustees and officers of the Trust who are directors, officers or
employees of you to the extent that such expenses relate to attendance at
meetings of the Board of Trustees of the Trust or any committees thereof or
advisors thereto held outside of Boston, Massachusetts or New York, New York.

You shall not be required to pay expenses of any activity which is
primarily intended to result in sales of Shares of the Fund if and to the extent
that (i) such expenses are required to be borne by a principal underwriter which
acts as the distributor of the Fund's Shares pursuant to an underwriting
agreement which provides that the underwriter shall assume some or all of such
expenses, or (ii) the Trust on behalf of the Fund shall have adopted a plan in
conformity with Rule 12b-1 under the 1940 Act providing that the Fund (or some
other party) shall assume some or all of such expenses. You shall be required to
pay such of the foregoing sales expenses as are not required to be paid by the
principal underwriter pursuant to the underwriting agreement or are not
permitted to be paid by the Fund (or some other party) pursuant to such a plan.

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6. Management Fee. For all services to be rendered, payments to be made
and costs to be assumed by you as provided in sections 3, 4 and 5 hereof, the
Trust on behalf of the Fund shall pay you in United States Dollars on the last
day of each month the unpaid balance of a fee equal to the excess of 1/12 of
0.60 of 1 percent of the average daily net assets as defined below of the Fund
for such month; provided that, for any calendar month during which the average
of such values exceeds $500 million, the fee payable for that month based on the
portion of the average of such values in excess of $500 million shall be 1/12 of
0.55 of 1 percent of such portion; and provided that, for any calendar month
during which the average of such values exceeds $1 billion the fee payable for
that month based on the portion of the average of such values in excess of $1
billion shall be 1/12 of 0.50 of 1 percent of such portion; provided that, for
any calendar month during which the average of such values exceeds $1.5 billion,
the fee payable for that month based on the portion of the average of such
values in excess of $1.5 billion shall be 1/12 of 0.475 of 1 percent of such
portion; and provided that, for any calendar month during which the average of
such values exceeds $2 billion, the fee payable for that month based on the
portion of the average of such values in excess of $2 billion shall be 1/12 of
0.45 of 1 percent of such portion; provided that, for any calendar month during
which the average of such values exceeds $3 billion, the fee payable for that
month based on the portion of the average of such values in excess of $3 billion
shall be 1/12 of 0.425 of 1 percent of such portion; and provided that, for any
calendar month during which the average of such values exceeds $4.5 billion, the
fee payable for that month based on the portion of the average of such values in
excess of $4.5 billion shall be 1/12 of 0.405 of 1 percent of such portion over
any compensation waived by you from time to time (as more fully described
below). You shall be entitled to receive during any month such interim payments
of your fee hereunder as you shall request, provided that no such payment shall
exceed 75 percent of the amount of your fee then accrued on the books of the
Fund and unpaid.

The "average daily net assets" of the Fund shall mean the average of the
values placed on the Fund's net assets as of 4:00 p.m. (New York time) on each
day on which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of the Fund shall always be determined
pursuant to the applicable provisions of the Declaration and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 6, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of 4:00 p.m. (New York time), or as of such other time as the value of
the net assets of the Fund's portfolio may be lawfully determined on that day.
If the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of this
section 6.

You may waive all or a portion of your fees provided for hereunder and
such waiver shall be treated as a reduction in purchase price of your services.
You shall be contractually bound hereunder by the terms of any publicly
announced waiver of your fee, or any limitation of the Fund's expenses, as if
such waiver or limitation were fully set forth herein.

7. Avoidance of Inconsistent Position; Services Not Exclusive. In
connection with purchases or sales of portfolio securities and other investments
for the account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any

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advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.

Your services to the Fund pursuant to this Agreement are not to be deemed
to be exclusive and it is understood that you may render investment advice,
management and services to others. In acting under this Agreement, you shall be
an independent contractor and not an agent of the Trust. Whenever the Fund and
one or more other accounts or investment companies advised by the Manager have
available funds for investment, investments suitable and appropriate for each
shall be allocated in accordance with procedures believed by the Manager to be
equitable to each entity. Similarly, opportunities to sell securities shall be
allocated in a manner believed by the Manager to be equitable. The Fund
recognizes that in some cases this procedure may adversely affect the size of
the position that may be acquired or disposed of for the Fund.

8. Limitation of Liability of Manager. As an inducement to your
undertaking to render services pursuant to this Agreement, the Trust agrees that
you shall not be liable under this Agreement for any error of judgment or
mistake of law or for any loss suffered by the Fund in connection with the
matters to which this Agreement relates, provided that nothing in this Agreement
shall be deemed to protect or purport to protect you against any liability to
the Trust, the Fund or its shareholders to which you would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence in the
performance of your duties, or by reason of your reckless disregard of your
obligations and duties hereunder. Any person, even though also employed by you,
who may be or become an employee of and paid by the Fund shall be deemed, when
acting within the scope of his or her employment by the Fund, to be acting in
such employment solely for the Fund and not as your employee or agent.

9. Duration and Termination of This Agreement. This Agreement shall remain
in force until September 30, 1998, and continue in force from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually (a) by the vote of a majority of the Trustees who are not parties
to this Agreement or interested persons of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
by the Trustees of the Trust, or by the vote of a majority of the outstanding
voting securities of the Fund. The aforesaid requirement that continuance of
this Agreement be "specifically approved at least annually" shall be construed
in a manner consistent with the 1940 Act and the rules and regulations
thereunder and any applicable SEC exemptive order therefrom.

This Agreement may be terminated with respect to the Fund at any time,
without the payment of any penalty, by the vote of a majority of the outstanding
voting securities of the Fund or by the Trust's Board of Trustees on 60 days'
written notice to you, or by you on 60 days' written notice to the Trust. This
Agreement shall terminate automatically in the event of its assignment.

10. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement shall be
effective until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.

11. Limitation of Liability for Claims. The Declaration, a copy of which,
together with all amendments thereto, is on file in the Office of the Secretary
of the Commonwealth of Massachusetts,

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provides that the name "Scudder Investment Trust" refers to the Trustees under
the Declaration collectively as Trustees and not as individuals or personally,
and that no shareholder of the Fund, or Trustee, officer, employee or agent of
the Trust, shall be subject to claims against or obligations of the Trust or of
the Fund to any extent whatsoever, but that the Trust estate only shall be
liable.

You are hereby expressly put on notice of the limitation of liability as
set forth in the Declaration and you agree that the obligations assumed by the
Trust on behalf of the Fund pursuant to this Agreement shall be limited in all
cases to the Fund and its assets, and you shall not seek satisfaction of any
such obligation from the shareholders or any shareholder of the Fund or any
other series of the Trust, or from any Trustee, officer, employee or agent of
the Trust. You understand that the rights and obligations of each Fund, or
series, under the Declaration are separate and distinct from those of any and
all other series.

12. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

In interpreting the provisions of this Agreement, the definitions
contained in Section 2(a) of the 1940 Act (particularly the definitions of
"affiliated person," "assignment" and "majority of the outstanding voting
securities"), as from time to time amended, shall be applied, subject, however,
to such exemptions as may be granted by the SEC by any rule, regulation or
order.

This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner which would cause the
Fund to fail to comply with the requirements of Subchapter M of the Code.

This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Trust on behalf of the Fund.

If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.

Yours very truly,

SCUDDER INVESTMENT TRUST, on behalf
of

Scudder Growth and Income Fund

By: ______________________________
President

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The foregoing Agreement is hereby accepted as of the date hereof.

SCUDDER KEMPER INVESTMENTS, INC.

By: ______________________________
Managing Director