INVESTMENT TRUST, N-30D, 1998-08-14

INVESTMENT TRUST
N-30D, 1998-08-14

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Scudder
Growth and
Income Fund

Semiannual Report
June 30, 1998

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
6/30/98: $8.28 billion
- --------------------------------------------------------------------------------

o Scudder Growth and Income Fund provided a total return of 9.94% for the
six-month period ended June 30, 1998.

o The Fund's investment strategy, which focuses on stocks with relatively high
dividend yields and attractive valuations, generally was not in favor,
especially during the last three months of the period.

o With valuations of growth stocks near historical highs for much of the six
months, management believes that the Fund's relative dividend yield strategy
will return to favor.

o Morningstar assigned the Fund an overall 4-star rating -- its second highest
- -- for its risk-adjusted performance among 2,545 domestic equity funds as of
June 30, 1998.^1

Table of Contents

3 Letter from the Fund's President 19 Financial Statements
4 Performance Update 22 Financial Highlights
5 Portfolio Summary 23 Notes to Financial Statements
6 Portfolio Management Discussion 28 Officers and Trustees
11 Glossary of Investment Terms 29 Investment Products and Services
12 Investment Portfolio 30 Scudder Solutions

^1 Source: Morningstar. Ratings are subject to change monthly and are
calculated from the Fund's three-, five-, and ten-year average annual
returns in excess of 90-day Treasury bill returns with appropriate fee
adjustments, and a risk factor that reflects Fund performance below 90-day
T-bill returns. The Fund received a 4-star rating for the three-, five-,
and 10-year periods among 2,545, 1,462, and 707 domestic equity funds,
respectively. In an investment category, the top 10% of funds receive 5
stars and the next 22.5% receive 4 stars. Past performance is no guarantee
of future results.

2 - Scudder Growth and Income Fund

<PAGE>

Letter from the Fund's President

Dear Shareholders,

For much of the first half of 1998, solid economic growth, low interest
rates, and a strong dollar provided a generally favorable environment for
domestic equities. Growth stocks with the largest market capitalizations --
so-called "mega-cap" stocks -- generally outperformed all other investment
styles -- including your Fund's relative dividend yield strategy -- for the
six-month reporting period.

As many investors know, no investment strategy leads the market
consistently over every possible time period. Relatively high valuations for
stocks and slowing profit growth at many companies lead us to believe that your
Fund's more conservative strategy that emphasizes value-oriented stocks will
return to favor. Your Fund's lead portfolio manager, Robert T. Hoffman,
discusses the environment over the six months and the growth and income team's
investment strategy beginning on page 6.

Considering the prolonged strong performance of the domestic equity
markets, now may be a good time to review your asset allocation among stocks,
bonds, and international securities. The rise of the U.S. stock market has had
the effect of increasing the weighting of U.S. equities in many investors'
portfolios. We encourage you to check your holdings periodically for adequate
exposure to other asset classes including small-cap, international, and fixed
income securities. We believe a diversified approach can provide the best
opportunity for attractive returns and reduced risk for many investors over the
long term.

For those of you who want to keep apprised of new Scudder products, we
would like to inform you of two new international funds which are expected to
commence operations on September 1: Scudder International Growth Fund and
Scudder International Value Fund. With the addition of these funds, Scudder
becomes one of the few to offer investors both an international growth and an
international value fund. For more information on these funds, please call
Scudder Investor Relations at 1-800-225-2470.

Thank you for your continued investment in Scudder Growth and Income Fund.
If you have any questions about your investment, please call Scudder Investor
Relations at the 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 June 30, 1998
- ----------------------------------------------------------------
FUND INDEX COMPARISONS
- ----------------------------------------------------------------

Total Return
Period Growth --------------
Ended of Average
6/30/98 $10,000 Cumulative Annual
- --------------------------------------
SCUDDER GROWTH AND INCOME FUND
- --------------------------------------
1 Year $12,066 20.66% 20.66%
5 Year $25,435 154.35% 20.53%
10 Year $49,059 390.59% 17.24%

- --------------------------------------
S&P 500 INDEX
- --------------------------------------
1 Year $13,017 30.17% 30.17%
5 Year $28,243 182.43% 23.06%
10 Year $54,892 448.92% 18.55%

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

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

Yearly periods ended June 30

SCUDDER GROWTH AND INCOME FUND
Year Amount
- ----------------------
'88 $10,000
'89 $12,268
'90 $13,114
'91 $14,023
'92 $16,862
'93 $19,288
'94 $20,762
'95 $24,650
'96 $30,512
'97 $40,660
'98 $49,059

S&P 500 INDEX
Year Amount
- ----------------------
'88 $10,000
'89 $12,053
'90 $14,042
'91 $15,078
'92 $17,103
'93 $19,435
'94 $19,709
'95 $24,845
'96 $31,303
'97 $42,170
'98 $54,892

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

- -----------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
- -----------------------------------------------------------------

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

Yearly periods Ended June 30

<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------
NET ASSET VALUE... $15.38 $ 13.56 $13.81 $16.04 $17.20 $17.00 $18.53 $21.85 $27.02 $29.50
INCOME DIVIDENDS.. $ .60 $ .71 $ .64 $ .52 $ .51 $ .47 $ .51 $ .56 $ .59 $ .74
CAPITAL GAINS
DISTRIBUTIONS..... $ -- $ 2.11 $ -- $ -- $ .54 $ 1.04 $ .94 $ .42 $ 1.18 $ 2.09
FUND TOTAL
RETURN (%)........ 22.68 6.89 6.93 20.25 14.39 7.64 18.72 23.78 33.26 20.66
INDEX TOTAL
RETURN (%)........ 20.52 16.50 7.38 13.43 13.65 1.40 26.07 26.00 34.72 30.17
</TABLE>

All performance is historical, assumes reinvestment of all dividends and capital
gains, and is not indicative of future results. Investment return and principal
value will fluctuate, so an investor's shares, when redeemed, may be worth more
or less than when purchased.

4 - Scudder Growth and Income Fund

<PAGE>

PORTFOLIO SUMMARY as of June 30, 1998
- ---------------------------------------------------------------------------
ASSET ALLOCATION
- ---------------------------------------------------------------------------
Common Stocks 96%
Convertible Bonds 2%
Convertible Preferred Stocks 1%
Cash Equivalents 1%
- --------------------------------------
100%
- --------------------------------------

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

Fund management pursued a fully
invested approach to selecting
stocks with attractive valuations
and relatively high dividend yields.

- --------------------------------------------------------------------------
SECTOR DIVERSIFICATION
(Excludes 1% of Cash Equivalents)
- --------------------------------------------------------------------------
Financial 24%
Manufacturing 14%
Durables 11%
Energy 10%
Communications 9%
Consumer Staples 8%
Utilities 7%
Health 5%
Consumer Discretionary 5%
Other 7%
- ---------------------------------------------
100%
- ---------------------------------------------

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

As volatility increased during the
period, stocks with defensive qualities
(energy, telecommunications, REITs
(real estate investment trusts) and
electric utilities) were increased.

- --------------------------------------------------------------------------
10 LARGEST EQUITY HOLDINGS
(22% OF PORTFOLIO)
- --------------------------------------------------------------------------
1. Ford Motor Co.
Leading automobile manufacturer

2. Chase Manhattan Corp.
Commercial banking

3. First Union Corp.
Commercial banking in the southeast

4. Xerox Corp.
Leading manufacturer of copiers
and duplicators

5. H. J. Heinz Co.
Major manufacturer of processed foods

6. Bell Atlantic Corp.
Telecommunication services

7. American Home Products Corp.
Major diversified pharmaceutical company

8. Briston-Myers Squibb Co.
Diversified pharmaceutical and consumer
products company

9. Unilever NV
Diversified conglomerate

10. Sprint Corp.
Diversified local and long distance
telecommunication services

The Fund especially
benefitted from its exposure
to consumer-oriented
holdings, including our two
largest holdings, Ford and
Chase Manhattan, which
were among the best
performers.

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

We interviewed lead portfolio manager, Robert T. Hoffman, about the market
environment and the Fund's performance for the six-month report period ended
June 30, 1998. Highlights of our discussion with Mr. Hoffman follow.

Q: The U.S. stock market delivered an impressive return for the six months ended
June 30, 1998, with the majority of gains achieved in the first quarter.^1 How
would you characterize the environment over this period?

A: Overall, the six-month returns of the major market indices were quite good.
The equity markets got off to a great start at the beginning of the year,
sputtered somewhat in the second quarter, and rebounded strongly in the final
weeks of the period. The U.S. equity markets posted double-digit returns across
all major sectors during the first three months of the year. In fact, the
unmanaged S&P 500 Index posted a 13.9% return for the first quarter, the best
performance for the first calendar quarter in ten years. In fact, the first
quarter's performance exceeded the expected return for the stock market for the
entire year. Stock prices were driven higher by a favorable backdrop of healthy
economic growth, low inflation and interest rates, and high consumer confidence
during this period.

In the second quarter, investor enthusiasm was tempered by falling commodity
prices, a strong U.S. dollar, and continued weakness in Asia. The prospect of
weakening international demand for U.S. products and fears of earnings
shortfalls among domestic companies sent the markets into a tailspin. Companies
with exposure to falling commodity prices and exposure to Asia, including
chemicals, steel, paper, and computer memory, experienced significant declines.
In contrast, consumer-oriented companies -- autos, retail, broadcasting, and
entertainment -- performed well. Investor negativity began to disappear in the
last two weeks of the period based on reports of continued strength in the
economy and no interest rate increase by the Federal Reserve. In addition, the
U.S. dollar has risen to an eight-year high versus the yen. The U.S. markets
effectively had become "safe havens" for foreign investors which contributed to
increased demand for domestic equities. By the end of the six months, the U.S.
stock market had come back strongly after a somewhat meandering path to record
impressive half year gains.

Q: How did the Fund perform over the period?

A: The Fund provided a 9.94% return, which trailed the 17.71% return of the S&P
500 Index for the same period. The Fund's strategy, which focuses on stocks with
relatively high dividend yields and attractive valuations, generally was not in
favor, as stocks with very large market capitalizations ("mega-cap" stocks)
provided top performance. As a result, the Fund's strong absolute return fell
short of the S&P 500 return due to the substantial component of mega-cap growth
stocks in the index.

Q: What is the Fund's longer term performance record?

A: The Fund's longer term track record is quite good. While the Fund ranked in
the 65th percentile among 668 growth and income funds for the one-year period,
it ranked in the top 24th percentile among 275 growth and income funds for the
five-year period, and in the top 18th percentile among 143 growth and income

- ----------
^1 As measured by the unmanaged S&P 500 Index.

6 - Scudder Growth and Income Fund

<PAGE>

funds for the 10-year period as of June 30, 1998 according to Lipper Analytical
Services. We think this solid performance provides a good measure of the Fund's
long term success.

Q: The stock market has increasingly been led by a handful of very large growth
stocks. How has this affected the investment environment?

A: During the six months, only the biggest fish were swimming far upstream. What
we have been seeing is market performance primarily led by mega-cap growth
stocks. This phenomenon is reminiscent of the "nifty-fifty" stocks of the 1970s
- -- a small group of blue chip stocks with relatively high valuations that
significantly outperformed the rest of the market. A closer look at the
underlying returns of the stocks in the S&P 500 (which are comprised of
approximately 60% growth stocks and 40% value stocks) reveals this narrow market
leadership. For the second quarter, the S&P 500 returned 3.3%. Yet, 65% of the
stocks in the index returned less than 3.3% and 57% had negative returns. The
picture is almost identical for the first half of the year. While the reported
return of the S&P 500 (an index whose returns are weighted according to market
capitalization) was 17.7%, the equal weighted (simple arithmetic average) return
was only 12.0%. The higher weighted average return versus the simple average
return reflects the significant influence large-cap stocks have had on the S&P
500's performance.

THE PRINTED DOCUMENT CONTAINS TWO BAR CHARTS, SIDE-BY-SIDE, HERE:

CHART TITLE:

For stocks, it helped to be big and growth-oriented

LEFT CHART SUBHEAD:

Large-caps lapped mid- and small-cap stocks

LEFT CHART DATA:

--------------------------------------------------------------
Russell 1000 Russell Midcap Russell 2000
Index Index Index
--------------------------------------------------------------
16.21% 9.13% 4.93%
--------------------------------------------------------------
Large-cap Mid-cap Small-cap
stocks stocks stocks
--------------------------------------------------------------

RIGHT CHART SUBHEAD:

Large growth beat large value stocks

RIGHT CHART DATA:

-----------------------------------------
Russell 1000 Russell 1000
Growth Index Value Index
-----------------------------------------
20.39% 12.16%
-----------------------------------------
Growth Value
stocks stocks
-----------------------------------------

CHART FOOTNOTE:

Total returns for the six-month period ended June 30, 1998. All indices are
unmanaged.

7 - Scudder Growth and Income Fund

<PAGE>

Q: Is a narrowing of market leadership bad?

A: Not if stock prices are supported by solid fundamentals and reasonable
valuations. Unfortunately, earnings growth rates have been decelerating and
valuations are relatively high for many of these mega-cap stocks. In this
environment, we are constantly asking ourselves: "What stocks are worth owning
and at what valuation?" Ponder this: General Electric, one of the best managed
companies in America, has a p/e (price/earnings ratio) of 37. Fully 40% of GE's
earnings come from financial services. Chase Manhattan Corp., a financial
services company, has a p/e of 12. Is GE's financial services business worth
three times Chase's (37/12=3.1)? If not, then the market valuation implies that
GE's other businesses (lighting, medical equipment, jet engine, etc.) are worth
more than 40 times earnings. Whichever way one looks at it, we would rather own
Chase at a p/e of 12, Dana at a p/e of 11.5, Xerox at a p/e of 20, and Lockheed
Martin at a p/e of 14. We believe our emphasis on stocks with lower p/e's and
attractive valuations will provide more sustainable performance as valuations
converge to more normal levels over the long term.

Q: How do you manage the Fund?

A: Our investing philosophy focuses on finding stocks with attractive valuations
and a dividend yield that exceeds the average yield of stocks in the S&P 500
Index. This relative dividend yield discipline seeks to identify stocks with at
least a 20% greater yield than the S&P 500 (see table). A holding becomes a sell
candidate when its relative yield falls to 75% of the S&P 500 Index yield or
when it has achieved our return objective. Often these stocks have outperformed
the S&P 500 by 50% or more over a two- to three-year period. As with any
investment style or discipline, a relative dividend yield approach does not
outperform over every time period, but it has proven successful over time.
During the period, the Fund's style was severely out of favor, as low and
non-dividend yielding stocks (primarily mega-cap growth stocks) provided the
best returns. Over time, our relative dividend yield approach tends to result in
lower volatility than the market, while still providing attractive returns. We
think many investors appreciate this approach and find the Fund's long-term
performance compelling.

THE PRINTED DOCUMENT CONTAINS A TABLE HERE

Higher Yields ...
...and Attractive Valuations
------------------------------------------------------

Fund S&P 500
Yield 2.7% 1.4%^1
The Fund's dividend yield
exceeded the market as measured
by the S&P 500.
------------------------------------------------------

Price-to-Earnings per share 17.9x 23.4x
(current calendar year as of
6/30/98)

In most environments, your Fund's
below average valuation tends to
provide downside protection.
- --------------------------------------------------------

^1 The S&P 500 yield does not reflect the effect of fund expenses and
transaction costs which would otherwise lower its yield.

Q: What worked well over the period and what didn't?

A: The Fund especially benefited from its exposure to consumer-oriented
holdings. Mercantile Stores, Unilever, Bristol-Myers Squibb, and American Home
Products delivered particularly strong returns for the period. In the retail

8 - Scudder Growth and Income Fund

<PAGE>

area, Mercantile Stores plans to acquire Dillard's Department Stores, while
Sears, RiteAid, and May all exceeded returns of the overall market. In the
consumer staples sector, Unilever recorded big gains for the period, while
tobacco and food stocks underperformed.

The weakest performers were cyclical, commodity-oriented companies, including
chemical companies BetzDearborn and Witco, paper companies Weyerhaeuser and
Temple Inland, and steel producer Allegheny Teledyne. In each case, these
underperforming stocks have been trading near their annual lows. We believe
their stock prices reflect an overly negative psychology and not the intrinsic
value or future prospects of the companies.

Q: What changes did you make to industry sector weights?

A: Our sector weightings did not change radically during the six-month period.
However, we did increase the defensiveness of the portfolio this year, but not
by adding to the consumer staples or pharmaceutical sectors, where we feel
premium valuations leave these groups vulnerable to even modest disappointment.
Rather, we added to the energy, telecommunications and REITs (real estate
investment trust) areas, where we believe valuations are truly low. We also made
changes within sectors, reflecting our belief that some stocks had reached fair
value, or simply where our conviction had changed.

Q: Tell us how changes you made in the telecommunications sector helped increase
the defensiveness of the portfolio.

A: The telecommunications sector, in our view, will be one of the least
vulnerable to negative developments in Asia (and the global domino effects of a
deepening crisis), while benefiting from an explosion in demand for high speed
data services. We increased our holdings of Sprint and Williams Companies.
Williams, which is mostly known as a gas pipeline company, also has an important
telecom network and services business that we believe will be an important
driver of future earnings. We also added to our position in Corning during the
period, the leading manufacturer of high capacity fiber optic cable used in
information and data networks. Corning is a direct beneficiary of the trend in
the telecom industry of upgrading global communications networks.

Q: Financial services continued to comprise the Fund's largest sector exposure,
at 24% of portfolio assets. What changes did you make there?

A: We realigned specific holdings, taking profits in most of our small regional
banks, and adding to existing positions in Chase, NationsBank, and First Union.
This was due to relative valuations as well as to a shifting competitive
landscape in the banking industry. We also added modestly to several REITs
because we believe the sector has been overly punished given our favorable
outlook for the real estate market. Our two largest holdings, Ford and Chase
Manhattan, were among the Fund's best performers.

9 - Scudder Growth and Income Fund

<PAGE>

Q: The manufacturing sector was the second largest industry weighting. How did
it perform?

A: We have reassessed our holdings in the manufacturing sector, which have been
a big source of underperformance this year. We eliminated TRW, because of
diminished confidence in its business strategy, and Philips Electronics, which
reached our valuation target. We also trimmed Olin and AMP, where even low
valuations may not offer adequate downside protection if the Asian crisis
worsens.

Q: With the price of oil dropping to $12-$13 a barrel, oil stocks received
renewed attention from value investors. Did you make any changes?

A: We increased our underweight position in the oil sector to about equal with
the 8% weighting of oil stocks in the S&P 500. With oil prices near record lows,
we are convinced that the potential returns outweigh the risks. Based on very
favorable valuations and above-average yields, we initiated new positions in
several major oil companies, including Atlantic Richfield and British Petroleum.

Q: What is your outlook?

A: So far this year, the stock market hasn't agreed with us, choosing instead a
"flight to quality" that has focused on high p/e and mega-cap growth stocks.
These stocks have been perceived as safe havens, without regard for the lofty
expectations already incorporated into their stock prices. However, we think the
current environment that favors mega-cap growth stocks will fade, especially as
earnings continue to slow and investors realize they can find more attractive
values at reasonable prices among stocks with relatively high dividend yields.

10 - Scudder Growth and Income Fund

<PAGE>
Glossary of Investment Terms

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

FUNDAMENTAL RESEARCH Analysis that examines a company's individual
financial results. Includes a review of the
projected impact of management, products,
sales, and earnings on balance sheets and
income statements. 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 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 (P/E) A widely used gauge of a stock's valuation,
(also "earnings multiple") that indicates what investors are paying for
a company's earning power at the current
stock price. May be based on a company's
projected earnings for the coming 12 months.
A higher "earnings multiple" indicates higher
expected earnings growth and greater risk; a
lower p/e is usually associated with mature
or out-of-favor companies, and lower stock
price volatility.

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

(Sources: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)

11 - Scudder Growth and Income Fund

<PAGE>

Investment Portfolio as of June 30, 1998 (Unaudited)

<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements 0.5%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 6/30/1998 at 5.75%,
to be repurchased at $40,063,398 on 7/1/1998, collateralized by a $39,210,000 -------------
U.S. Treasury Bond, 6%, 8/15/2000 (Cost $40,057,000) ................................. 40,057,000 40,057,000
-------------
Short-Term Investments 0.6%
- ------------------------------------------------------------------------------------------------------------------------------
Bell Atlantic Network Funding Corp., 5.53%, 7/14/1998** ................................. 25,000,000 24,950,076
Falcon Asset Securitization Corp., 5.55%, 7/16/1998** ................................... 11,955,000 11,927,354
Madison Funding Corp., 5.55%, 7/13/1998** ............................................... 10,000,000 9,981,500
- ------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments (Cost $46,858,930) 46,858,930
- ------------------------------------------------------------------------------------------------------------------------------

Convertible Bonds 1.8%
- ------------------------------------------------------------------------------------------------------------------------------
Consumer Discretionary 0.2%
Department & Chain Stores
Federated Department Stores, Inc., Debenture, 5%, 10/1/2003 ............................. 11,700,000 18,486,000
-------------
Consumer Staples 0.4%
Miscellaneous
Ralston Purina Group, 7%, 8/1/2000 ...................................................... 470,000 29,845,000
-------------
Financial 0.9%
Banks 0.7%
Deutsche Bank Financial Inc., Convertible to Daimler Benz AG shares, Zero
Coupon, 2/12/2017 ..................................................................... 97,410,000 54,306,075
-------------
Real Estate 0.2%
Security Capital Corp., Debenture, 6.5%, 3/29/2016 (b) (c) .............................. 16,750,000 17,954,325
-------------
Durables 0.1%
Automobiles
Magna International, Inc., 5%, 10/15/2002 ............................................... 6,700,000 8,492,250
-------------
Manufacturing 0.2%
Diversified Manufacturing 0.0%
Thermo Electron Corp., 4.25%, 1/1/2003 .................................................. 5,000,000 5,250,000
-------------
Industrial Specialty 0.2%
Omnicom Group Inc., 2.25%, 1/6/2013 ..................................................... 12,500,000 15,250,000
- ------------------------------------------------------------------------------------------------------------------------------
Total Convertible Bonds (Cost $126,063,566) 149,583,650
- ------------------------------------------------------------------------------------------------------------------------------

Shares
- ------------------------------------------------------------------------------------------------------------------------------
Convertible Preferred Stocks 1.3%
- ------------------------------------------------------------------------------------------------------------------------------
Consumer Staples 0.9%
Food & Beverage
Suiza Foods Corp. 2.7% .................................................................. 1,500,000 73,875,000
-------------
</TABLE>

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

12 - Scudder Growth and Income Fund
<PAGE>

<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Financial 0.1%
Consumer Finance 0.0%
Advanta Corp. 6.75% ..................................................................... 4,000 93,000
-------------
Real Estate 0.1%
ProLogis Trust "B", 7% .................................................................. 308,300 9,672,913
-------------
Manufacturing 0.2%
Containers & Paper 0.0%
International Paper Co. 5.25% ........................................................... 47,000 2,291,250
-------------
Industrial Specialty 0.1%
Cooper Industries, Inc. 6% .............................................................. 606,300 10,686,038
-------------
Office Equipment/Supplies 0.1%
Ikon Office Solutions, Inc., 5.04% ...................................................... 96,100 3,597,744
-------------
Metals & Minerals 0.1%
Precious Metals
Freeport McMoRan Copper & Gold, Inc., Cum. $1.25 ........................................ 500,000 9,750,000
- ------------------------------------------------------------------------------------------------------------------------------
Total Convertible Preferred Stocks (Cost $113,394,781) 109,965,945
- ------------------------------------------------------------------------------------------------------------------------------

Common Stocks 95.8%
- ------------------------------------------------------------------------------------------------------------------------------
Consumer Discretionary 4.4%
Department & Chain Stores
J.C. Penney Co., Inc. ................................................................... 1,811,300 130,979,631
May Department Stores ................................................................... 772,900 50,624,950
Rite Aid Corp. .......................................................................... 1,575,800 59,190,988
Sears, Roebuck & Co. .................................................................... 2,009,500 122,705,094
-------------
363,500,663
-------------
Consumer Staples 6.9%
Alcohol & Tobacco 1.5%
Philip Morris Companies, Inc. ........................................................... 2,694,300 106,088,063
RJR Nabisco Holdings Corp. .............................................................. 788,580 18,728,775
-------------
124,816,838
-------------
Food & Beverage 4.0%
H.J. Heinz Co. .......................................................................... 3,241,550 181,931,994
Unilever NV ............................................................................. 400,000 31,766,964
Unilever NV (New York shares) ........................................................... 1,402,500 110,709,844
-------------
324,408,802
-------------
Package Goods/Cosmetics 1.4%
Avon Products Inc. ...................................................................... 1,491,500 115,591,250
-------------
</TABLE>

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

13 - Scudder Growth and Income Fund
<PAGE>

<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Health 5.2%
Pharmaceuticals
American Home Products Corp. ............................................................ 2,937,200 152,000,100
Bristol-Myers Squibb Co. ................................................................ 1,281,000 147,234,938
SmithKline Beecham PLC (ADR) ............................................................ 1,180,400 71,414,200
Zeneca Group PLC ........................................................................ 1,356,100 58,237,284
-------------
428,886,522
-------------
Communications 8.8%
Telephone/Communications
Alltel Corp. ............................................................................ 1,825,400 84,881,100
Bell Atlantic Corp. ..................................................................... 3,646,896 166,389,630
BellSouth Corp. ......................................................................... 1,541,400 103,466,475
Frontier Corp. .......................................................................... 2,745,500 86,483,250
GTE Corp. ............................................................................... 2,504,700 139,323,938
Sprint Corp. ............................................................................ 1,990,700 140,344,350
Telecom Corp. of New Zealand ............................................................ 1,901,000 7,854,133
-------------
728,742,876
-------------
Financial 22.6%
Banks 12.8%
AmSouth Bancorp. ........................................................................ 528,750 20,786,484
Banc One Corp. .......................................................................... 1,496,230 83,508,337
BankAmerica Corp. ....................................................................... 223,000 19,275,563
Bankers Trust New York Corp. ............................................................ 570,200 66,178,838
Chase Manhattan Corp. ................................................................... 2,908,400 219,584,200
First Chicago NBD Corp. ................................................................. 273,600 24,247,800
First Union Corp. ....................................................................... 3,426,352 199,585,004
Fleet Financial Group Inc. .............................................................. 746,900 62,366,150
J.P. Morgan & Co., Inc. ................................................................. 798,800 93,559,450
KeyCorp ................................................................................. 1,822,800 64,937,250
NationsBank Corp. ....................................................................... 1,632,500 124,886,250
US Bancorp .............................................................................. 1,754,100 75,426,300
-------------
1,054,341,626
-------------
Insurance 3.8%
EXEL Ltd. (ADR) ......................................................................... 916,000 71,276,250
Lincoln National Corp. .................................................................. 1,059,500 96,811,813
</TABLE>

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

14 - Scudder Growth and Income Fund
<PAGE>

<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mid Ocean, Ltd. ......................................................................... 702,800 55,169,800
Safeco Corp. ............................................................................ 1,906,500 86,626,594
-------------
309,884,457
-------------
Other Financial Companies 0.5%
Federal National Mortgage Association ................................................... 649,900 39,481,425
-------------
Real Estate 5.5%
Arden Realty Group, Inc. ................................................................ 1,351,100 34,959,713
Avalon Bay Communities Inc. (REIT) ...................................................... 358,872 13,637,136
Boston Properties, Inc. (REIT) .......................................................... 1,018,200 35,127,900
Camden Property Trust (REIT) ............................................................ 338,500 10,070,375
Equity Office Properties Trust (REIT) ................................................... 1,818,300 51,594,263
General Growth Properties, Inc. (REIT) (d) .............................................. 1,939,800 72,500,025
Health Care Property Investment Inc. (REIT) ............................................. 359,300 12,957,256
Mark Centers Trust (REIT) ............................................................... 31,400 233,538
Meditrust Corp. SBI (REIT) .............................................................. 538,429 15,042,360
Nationwide Health Properties Inc. (REIT) ................................................ 804,800 19,214,600
Prentiss Properties Trust ............................................................... 1,365,100 33,188,994
ProLogis Trust (REIT) ................................................................... 2,935,645 73,391,125
ProLogis Trust Warrants (expire 9/18/98)* ............................................... 82,478 28,352
Security Capital Group, Inc. (b) (c) .................................................... 15,968 19,750,310
Security Capital US Realty (REIT) ....................................................... 2,889,152 38,425,722
Spieker Properties, Inc. ................................................................ 150,000 5,812,500
Vornado Realty Trust (REIT) ............................................................. 492,800 19,558,000
-------------
455,492,169
-------------
Miscellaneous 0.0%
Jardine Strategic Holdings Ltd. ......................................................... 2,015,611 3,930,441
-------------
Service Industries 1.1%
Environmental Services
Browning Ferris Industries .............................................................. 2,601,600 90,405,600
-------------
Durables 11.1%
Aerospace 2.8%
Lockheed Martin Corp. ................................................................... 1,075,428 113,860,940
Rockwell International Corp. ............................................................ 2,416,300 116,133,419
-------------
229,994,359
-------------
Automobiles 5.7%
Dana Corp. .............................................................................. 2,408,100 128,833,350
Echlin, Inc. ............................................................................ 774,500 37,998,906
</TABLE>

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

15 - Scudder Growth and Income Fund
<PAGE>

<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Ford Motor Co. .......................................................................... 4,253,400 250,950,600
Meritor Automotive, Inc. ................................................................ 2,245,900 53,901,600
-------------
471,684,456
-------------
Construction/Agricultural Equipment 1.2%
Caterpillar Inc. ........................................................................ 746,900 39,492,338
PACCAR, Inc. ............................................................................ 1,179,600 61,634,100
-------------
101,126,438
-------------
Tires 1.4%
Goodyear Tire & Rubber Co. .............................................................. 1,718,500 110,735,844
-------------
Manufacturing 13.5%
Chemicals 5.5%
Akzo-Nobel NV ........................................................................... 381,985 84,994,153
Dow Chemical Co. ........................................................................ 860,900 83,238,269
Eastman Chemical Co. .................................................................... 970,800 60,432,300
Imperial Chemical Industries PLC ........................................................ 8,357,000 134,234,426
Lyondell Petrochemical Co. .............................................................. 2,928,500 89,136,219
-------------
452,035,367
-------------
Containers & Paper 1.4%
Boise Cascade Corp. ..................................................................... 1,323,240 43,336,110
Temple-Inland, Inc. ..................................................................... 1,290,700 69,536,463
-------------
112,872,573
-------------
Diversified Manufacturing 0.8%
Olin Corp. .............................................................................. 1,336,100 55,698,669
St. Joe Paper Co. ....................................................................... 279,300 7,645,838
-------------
63,344,507
-------------
Electrical Products 0.5%
Thomas & Betts Corp. .................................................................... 830,800 40,916,900
-------------
Industrial Specialty 1.6%
Corning Inc. ............................................................................ 3,735,050 129,792,988
-------------
Machinery/Components/Controls 0.3%
S.K.F. AB "B" (Free) .................................................................... 1,705,000 31,011,666
-------------
Office Equipment/Supplies 2.4%
Xerox Corp. ............................................................................. 1,953,150 198,488,869
-------------
Specialty Chemicals 1.0%
ARCO Chemical Co. ....................................................................... 180,000 10,327,562
BetzDearborn Inc. ....................................................................... 613,800 25,395,975
</TABLE>

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

16 - Scudder Growth and Income Fund
<PAGE>

<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Witco Corp. ............................................................................. 1,537,500 44,971,875
-------------
80,695,412
-------------
Technology 0.1%
Electronic Components/Distributors
AMP Inc. ................................................................................ 300,300 10,322,813
-------------
Energy 10.0%
Oil Companies 8.7%
Amoco Corp. ............................................................................. 947,000 39,418,875
Atlantic Richfield Co. .................................................................. 1,063,200 83,062,500
British Petroleum PLC ................................................................... 5,652,959 82,494,635
Chevron Corp. ........................................................................... 471,800 39,188,888
Pennzoil Co. ............................................................................ 458,600 23,216,625
Royal Dutch Petroleum Co. (New York shares) ............................................. 815,600 44,705,075
Societe Nationale Elf Aquitaine ......................................................... 816,000 114,726,169
Texaco Inc. ............................................................................. 1,951,100 116,456,281
Total S.A. "B" .......................................................................... 510,323 66,346,970
Total SA (ADR) .......................................................................... 396,253 25,905,040
YPF S.A. "D" (ADR) ...................................................................... 2,753,400 82,774,088
-------------
718,295,146
-------------
Oil/Gas Transmission 1.3%
Williams Cos., Inc. ..................................................................... 3,227,800 108,938,250
-------------
Metals & Minerals 1.5%
Steel & Metals
Allegheny Teledyne Inc. ................................................................. 3,575,715 81,794,481
Freeport McMoRan Copper & Gold, Inc. "A" ................................................ 542,590 7,731,908
J & L Specialty Steel, Inc. ............................................................. 1,452,800 8,626,000
Phelps Dodge Corp. ...................................................................... 396,800 22,692,000
-------------
120,844,389
-------------
Construction 3.3%
Building Products 1.4%
Georgia Pacific Group ................................................................... 1,913,300 112,765,119
-------------
Forest Products 1.9%
Georgia Pacific Timber Group ............................................................ 1,289,200 29,732,175
Westvaco Corp. .......................................................................... 1,032,600 29,170,950
Weyerhaeuser Co. ........................................................................ 2,217,800 102,434,638
-------------
161,337,763
-------------
</TABLE>

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

17 - Scudder Growth and Income Fund
<PAGE>

* Non income producing.

** Annualized yield at time of purchase; not a coupon rate.

(a) The cost for federal income tax purposes was $6,175,708,916. At June 30,
1998, net unrealized appreciation for all securities based on tax cost was
$2,064,777,520. This consisted of aggregate gross unrealized appreciation
for all securities in which there was an excess of market value over tax
cost of $2,182,089,420 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$117,311,900.

(b) Securities valued in good faith by the Valuation Committee of the Board of
Trustees at fair value amounted to $37,704,635 (.46% of net assets). Their
values have been estimated by the Board of Trustees in the absence of
readily ascertainable market values. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly
from the values that would have been used had a ready market for the
securities existed, and the difference could be material. The cost of
these securities at June 30, 1998 aggregated $33,500,000. These securities
may also have certain restrictions as to resale.

(c) Restricted Securities are securities which have not been registered with
the Securities and Exchange Commission under the Securities Act of 1933.
The aggregate fair value of restricted securities at June 30, 1998,
amounted to $37,704,635 which represents .46% of net assets. Information
concerning such restricted securities at June 30, 1998 is as follows:

Security Acquisition Date Cost ($)
-------- ---------------- --------
Security Capital Corp., Debenture, 4/18/96 16,750,000
6.5%, 3/29/2016

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.

18 - Scudder Growth and Income Fund
<PAGE>

Financial Statements

Statement of Assets and Liabilities
as of June 30, 1998 (Unaudited)
<TABLE>
<S> <C> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at market:
Unaffiliated issuers (identified cost $6,130,629,581) .......... $ 8,167,986,411
Affiliated issuers (identified cost $48,641,912) ............... 72,500,025
------------------
Total investments, at market (identified cost $6,179,271,493) ..... 8,240,486,436
Cash .............................................................. 545
Receivable for investments sold ................................... 20,341,389
Dividends and interest receivable ................................. 18,255,400
Receivable for Fund shares sold ................................... 11,125,402
Receivable for foreign tax recoverable ............................ 2,320,666
Other assets ...................................................... 47,008
------------------
Total assets ...................................................... 8,292,576,846
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased ................................. 1,716,864
Payable for Fund shares redeemed .................................. 10,314,969
Accrued management fee ............................................ 2,869,860
Other payables and accrued expenses ............................... 1,235,178
------------------
Total liabilities ................................................. 16,136,871
-------------------------------------------------------------------------------------------
Net assets, at market value $ 8,276,439,975
-------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ............................... 12,849,462
Net unrealized appreciation (depreciation) on:
Investments .................................................... 2,061,214,943
Foreign currency related transactions .......................... (75,328)
Accumulated net realized gain (loss) .............................. 478,211,997
Paid-in capital ................................................... 5,724,238,901
-------------------------------------------------------------------------------------------
Net assets, at market value $ 8,276,439,975
-------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, offering and redemption price per share
($8,276,439,975 / 280,511,814 outstanding shares of
beneficial interest, $.01 par value, unlimited number of ------------------
shares authorized) .............................................. $29.50
------------------
</TABLE>

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

19 - Scudder Growth and Income Fund
<PAGE>

Statement of Operations
six months ended June 30, 1998 (Unaudited)
<TABLE>
<S> <C> <C>
Investment Income
- ----------------------------------------------------------------------------------------------------------------------------
Income:
Dividends -- Unaffiliated issuers (net of foreign taxes
withheld of $2,068,455) ......................................... $ 104,777,455
Dividends -- Affiliated issuers ................................... 1,784,616
Interest .......................................................... 10,131,101
----------------
116,693,172
----------------
Expenses:
Management fee .................................................... 17,251,564
Services to shareholders .......................................... 8,590,079
Custodian and accounting fees ..................................... 771,060
Trustees' fees and expenses ....................................... 26,969
Reports to shareholders ........................................... 387,702
Registration fees ................................................. 308,939
Auditing .......................................................... 29,865
Legal ............................................................. 22,082
Other ............................................................. 38,506
----------------
27,426,766
-------------------------------------------------------------------------------------------
Net investment income 89,266,406
-------------------------------------------------------------------------------------------

Realized and unrealized gain (loss) on investment transactions
- ----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ....................................................... 448,592,613
Futures ........................................................... 29,159,854
Foreign currency related transactions ............................. (127,636)
----------------
477,624,831
----------------
Net unrealized appreciation (depreciation) during the period on:
Investments ....................................................... 135,366,204
Foreign currency related transactions ............................. (47,593)
----------------
135,318,611
-------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions 612,943,442
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 702,209,848
-------------------------------------------------------------------------------------------
</TABLE>

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

20 - Scudder Growth and Income Fund
<PAGE>

Statements of Changes in Net Assets

<TABLE>
<CAPTION>
Six Months
Ended
June 30, Year Ended
1998 December 31,
Increase (Decrease) in Net Assets (Unaudited) 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) ............................... $ 89,266,406 $ 129,959,345
Net realized gain (loss) from investment transactions ...... 477,624,831 491,947,652
Net unrealized appreciation (depreciation) on
investment transactions during the period ................ 135,318,611 808,698,122
------------------ ------------------
Net increase (decrease) in net assets resulting from
operations ............................................... 702,209,848 1,430,605,119
------------------ ------------------
Distributions to shareholders from:
Net investment income ...................................... (82,233,345) (126,973,242)
------------------ ------------------
Net realized gains on investment transactions .............. (65,759,899) (499,553,699)
------------------ ------------------
Fund share transactions:
Proceeds from shares sold .................................. 1,480,272,326 2,222,518,008
Net asset value of shares issued to shareholders in
reinvestment of distributions ............................ 137,728,496 585,826,807
Cost of shares redeemed .................................... (729,361,573) (965,320,076)
------------------ ------------------
Net increase in net assets from Fund share
transactions ............................................. 888,639,249 1,843,024,739
------------------ ------------------
Increase (decrease) in net assets .......................... 1,442,855,853 2,647,102,917
Net assets at beginning of period .......................... 6,833,584,122 4,186,481,205
Net assets at end of period (including undistributed
net investment income of $12,849,462 and $5,816,401, ------------------ ------------------
respectively) ............................................ $ 8,276,439,975 $ 6,833,584,122
------------------ ------------------
Other Information
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period .................. 250,081,688 180,244,068
------------------ ------------------
Shares sold ................................................ 50,730,045 84,125,982
Shares issued to shareholders in reinvestment of
distributions ............................................ 4,579,045 22,057,223
Shares redeemed ............................................ (24,878,964) (36,345,585)
------------------ ------------------
Net increase (decrease) in Fund shares ..................... 30,430,126 69,837,620
------------------ ------------------
Shares outstanding at end of period ........................ 280,511,814 250,081,688
------------------ ------------------
</TABLE>

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

21 - Scudder Growth and Income Fund
<PAGE>

Financial Highlights

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

<TABLE>
<CAPTION>
Six Months
Ended June 30,
1998(a) Years Ended December 31,
(Unaudited) 1997(a) 1996(a) 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------
Net asset value, beginning of period ........... $ 27.33 $ 23.23 $ 20.23 $ 16.26 $ 17.24 $ 16.20
Income from investment operations: -------------------------------------------------------------------------
Net investment income .......................... .33 .62 .60 .55 .49 .49
Net realized and unrealized gain (loss) on
investment transactions ...................... 2.39 6.26 3.84 4.46 (.05) 2.01
-------------------------------------------------------------------------
Total from investment operations ............... 2.72 6.88 4.44 5.01 .44 2.50
Less distributions from: -------------------------------------------------------------------------
Net investment income .......................... (.30) (.58) (.57) (.56) (.51) (.45)
Net realized gains on investment transactions .. (.25) (2.20) (.87) (.48) (.91) (1.01)
-------------------------------------------------------------------------
Total distributions ............................ (.55) (2.78) (1.44) (1.04) (1.42) (1.46)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net asset value, end of period ................. $ 29.50 $ 27.33 $ 23.23 $ 20.23 $ 16.26 $ 17.24
-------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Total Return (%) ............................... 9.94** 30.31 22.18 31.18 2.60 15.59
Ratios and Supplemental Data
Net assets, end of period ($ millions) ......... 8,276 6,834 4,186 3,061 1,992 1,624
Ratio of operating expenses to average net
assets (%) ................................... .70* .76 .78 .80 .86 .86
Ratio of net investment income to average net
assets (%) ................................... 2.29* 2.31 2.77 3.10 2.98 2.93
Portfolio turnover rate (%) .................... 40.6* 22.2 26.6 26.9 42.3 35.5
</TABLE>

(a) Based on monthly average shares outstanding during the period.
* Annualized
** Not annualized

22 - Scudder Growth and Income Fund
<PAGE>

Notes to Financial Statements (Unaudited)

A. Significant Accounting Policies

Scudder Growth and Income Fund (the "Fund") is a diversified series of
Investment Trust (the "Trust") (formerly Scudder Investment Trust). The Trust is
organized as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as an 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 Stock Market, Inc.
("Nasdaq"), 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 Nasdaq 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, whose quotations reflect broker/dealer-supplied valuations and
electronic data processing techniques. If the pricing agents are unable to
provide such quotations, the most recent bid quotation supplied by a bona fide
market maker shall be used. Money market instruments purchased with an original
maturity of sixty days or less are valued at amortized cost. All other
securities are valued at their fair value as determined in good faith by the
Valuation Committee of the Board of Trustees.

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.

Futures Contracts. A futures contract is an agreement between a buyer or seller
and an established futures exchange or its clearinghouse in which the buyer or
seller agrees to take or make a delivery of a specific amount of an item at a
specified price on a specific date (settlement date). During the period, the
Fund purchased securities index futures as a temporary substitute for purchasing
selected investments.

Upon entering into a futures contract, the Fund is required to deposit with a
financial intermediary an amount ("initial margin") equal to a certain
percentage of the face value indicated in the futures contract. Subsequent
payments ("variation margin") are made or received by the Fund each day,
dependent on the daily fluctuations in the value of the underlying security, and
are recorded for financial reporting purposes as unrealized gains or losses by
the Fund. When entering into a closing transaction, the Fund will realize a gain
or loss equal to the difference between the value of the futures contract to
sell and the futures contract to buy. Futures contracts are valued at the most
recent settlement price.

Certain risks may arise upon entering into futures contracts including the risk
that an illiquid secondary market will limit the Fund's ability to close out a
futures contract prior to the settlement date and that a change in the value of
a futures contract may

23 - Scudder Growth and Income Fund
<PAGE>

not correlate exactly with changes in the value of the securities or currencies
hedged. When utilizing futures contracts to hedge, the Fund gives up the
opportunity to profit from favorable price movements in the hedged positions
during the term of the contract.

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.

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.

24 - Scudder Growth and Income Fund
<PAGE>

B. Purchases and Sales of Securities

For the six months ended June 30, 1998, purchases and sales of investment
securities (excluding short-term investments) aggregated $2,456,201,584 and
$1,543,877,866, respectively.

The aggregate face value of futures contracts opened and closed during the six
months ended June 30, 1998 was $694,036,813.

C. Related Parties

Under the Investment Management Agreement (the "Agreement") with Scudder Kemper
Investments, Inc. (the "Adviser"), the Adviser directs the investments of the
Fund in accordance with its investment objectives, policies, and restrictions.
The Adviser determines the securities, instruments, and other contracts relating
to investments to be purchased, sold or entered into by the Fund. In addition to
portfolio management services, the Adviser provides certain administrative
services in accordance with the Agreement. The management fee payable under the
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, 0.405% on
the next $1,500,000,000 and 0.3875% of such net assets in excess of
$6,000,000,000, computed and accrued daily and payable monthly. For the six
months ended June 30, 1998, the fee pursuant to the Agreement amounted to
$17,251,564, which was equivalent to an annual effective rate of 0.44% 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
six months ended June 30, 1998, the amount charged to the Fund by SSC aggregated
$3,676,401, of which $621,603 is unpaid at June 30, 1998.

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 six months ended June
30, 1998, the Special Servicing Agreement expense charged to the Fund amounted
to $144,981.

Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the six months ended June 30,
1998, the amount charged to the Fund by STC aggregated $3,403,103, of which
$601,493 is unpaid at June 30, 1998.

Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the six months
ended June 30, 1998, the amount charged to the Fund by SFAC aggregated $222,567,
of which $37,842 is unpaid at June 30, 1998.

The Fund pays each of its Trustees not affiliated with the Adviser an annual
retainer, plus specified amounts for attended board and committee meetings. For
the six months ended June 30, 1998, Trustees' fees and expenses aggregated
$26,969.

25 - Scudder Growth and Income Fund
<PAGE>

D. Transactions in Securities of Affiliated Issuers

An affiliated issuer is a company in which the Fund has ownership of at least 5%
of the voting securities. A summary of the Fund's transactions with companies
which are or were affiliates for the six months ended June 30, 1998 are as
follows:

<TABLE>
<S> <C> <C> <C> <C>
Purchases Sales Dividend Market
Affiliate Cost ($) Cost ($) Income ($) Value ($)
----------------------------------------------------------------------------------------------------------
General Growth Properties, Inc -- -- 1,784,616 72,500,025
========================================================================
</TABLE>

26 - Scudder Growth and Income Fund
<PAGE>
This Page
intentionally
left blank.

27 - Scudder Growth and Income Fund

<PAGE>

Officers and Trustees

Daniel Pierce*
President and Trustee

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

Dawn-Marie Driscoll
Trustee; President, Driscoll
Associates; Executive Fellow,
Center for Business Ethics,
Bentley College

Peter B. Freeman
Trustee, Corporate Director

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; Managing Partner,
Technology Equity Partners

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.

28 - Scudder Growth and Income Fund

<PAGE>
Investment Products and Services

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

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

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

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

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

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

U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Dividend & Growth Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
Scudder Real Estate Investment 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 Equity
- -------------
Worldwide
Scudder Global Fund
Scudder International Value Fund
Scudder International Growth and Income Fund
Scudder International Fund++
Scudder International Growth 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. ***Only the Scudder Shares of the Fund are part
of the Scudder Family of Funds. ++Only the International Shares of the Fund are
part of the Scudder Family of Funds. +++ +++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.

29 - Scudder Growth and Income Fund

<PAGE>

Scudder Solutions
<TABLE>
<CAPTION>

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

A convenient investment program in which 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.

Distributions Direct

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

30 - Scudder Growth and Income Fund
<PAGE>

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

Offers you access to a world of investments, A free service designed to help suggest ways investors like
including stocks, corporate bonds, Treasuries, plus you can diversify your portfolio among domestic and global,
over 8,000 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 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>

31 - 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

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