INVESTMENT TRUST, 485BPOS, 1998-07-31

INVESTMENT TRUST
485BPOS, 1998-07-31

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Filed electronically with the Securities and Exchange Commission on
July 31, 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. 98
----------

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

Amendment No. 50
----------

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)
------

X on July 31, 1998 pursuant to paragraph (b)
------

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

on ___________ pursuant to paragraph (a)(i)
------

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

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

<PAGE>
INVESTMENT TRUST
SCUDDER GROWTH AND INCOME FUND
CROSS-REFERENCE SHEET

Items Required By Form N-1A
---------------------------
PART A
- ------

<TABLE>
<S> <C> <C>
<CAPTION>
Item No. Item Caption Prospectus Caption
-------- ------------ ------------------

1. Cover Page COVER PAGE

2. Synopsis EXPENSE INFORMATION

3. Condensed Financial FINANCIAL HIGHLIGHTS
Information

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

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

5A. Management Discussion of NOT APPLICABLE
Fund Performance

6. Capital Stock and Other DISTRIBUTION AND PERFORMANCE INFORMATION-- Dividends and capital
Securities 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 Securities PURCHASES
Being Offered FUND ORGANIZATION--Underwriter
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 Repurchase EXCHANGES AND REDEMPTIONS
TRANSACTION INFORMATION--Redeeming shares, Tax identification
number, Minimum balances

9. Pending Legal Proceedings NOT APPLICABLE

Cross Reference - Page 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 and History FUND ORGANIZATION

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

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

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

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

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

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

19. Purchase, Redemption and PURCHASES
Pricing of Securities Being EXCHANGES AND REDEMPTIONS
Offered FEATURES AND SERVICES OFFERED BY THE 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 Data PERFORMANCE INFORMATION

23. Financial Statements FINANCIAL STATEMENTS

Cross Reference - Page 2
<PAGE>

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 FINANCIAL HIGHLIGHTS
Information DISTRIBUTION AND FINANCIAL INFORMATION

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

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

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

6. Capital Stock and Other DISTRIBUTION AND PERFORMANCE INFORMATION-- Dividends and capital
Securities 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 Repurchase EXCHANGES AND REDEMPTIONS
TRANSACTION INFORMATION--Redeeming shares, Tax identification
number and Minimum balances

9. Pending Legal Proceedings NOT APPLICABLE

Cross Reference - Page 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 and History FUND ORGANIZATION

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

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

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

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

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

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

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

20. Tax Status DIVIDENDS
TAXES

21. Underwriters DISTRIBUTOR

22. Calculation of Performance Data PERFORMANCE INFORMATION

23. Financial Statements FINANCIAL STATEMENTS

Cross Reference - Page 4
<PAGE>

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 FINANCIAL HIGHLIGHTS
Information

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

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

5A. Management Discussion of NOT APPLICABLE
Fund Performance

6. Capital Stock and Other DISTRIBUTION AND PERFORMANCE INFORMATION-- Dividends and capital
Securities 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 Repurchase EXCHANGES AND REDEMPTIONS
TRANSACTION INFORMATION--Redeeming shares, Tax identification
number, Minimum balances

9. Pending Legal Proceedings NOT APPLICABLE

Cross Reference - Page 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 and History FUND ORGANIZATION

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

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

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

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

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

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

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

20. Tax Status DIVIDENDS
TAXES

21. Underwriters DISTRIBUTOR

22. Calculation of Performance Data PERFORMANCE INFORMATION

23. Financial Statements FINANCIAL STATEMENTS

Cross Reference - Page 6
<PAGE>

INVESTMENT TRUST
KEMPER 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 SUMMARY OF EXPENSES

3. Condensed Financial FINANCIAL HIGHLIGHTS
Information

4. General Description of INVESTMENT OBJECTIVE, POLICIES AND RISK FACTORS
Registrant INVESTMENT ADVISER AND UNDERWRITER

5. Management of the Fund INVESTMENT OBJECTIVE, POLICIES AND RISK FACTORS
INVESTMENT ADVISER AND UNDERWRITER
SPECIAL FEATURES

5A. Management Discussion of NOT APPLICABLE
Fund Performance

6. Capital Stock and Other DIVIDENDS, DISTRIBUTION AND TAXES
Securities NET ASSET VALUE
PURCHASE OF SHARES
REDEMPTION OR REPURCHASE OF SHARES
SPECIAL FEATURES
PERFORMANCE
CAPITAL STRUCTURE

7. Purchase of Securities DIVIDENDS, DISTRIBUTION AND TAXES
Being Offered NET ASSET VALUE
PURCHASE OF SHARES
REDEMPTION OR REPURCHASE OF SHARES
SPECIAL FEATURES
PERFORMANCE
CAPITAL STRUCTURE

8. Redemption or Repurchase REDEMPTION OR REPURCHASE OF SHARES
SPECIAL FEATURES

9. Pending Legal Proceedings NOT APPLICABLE

Cross Reference - Page 7
<PAGE>

KEMPER 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 and History INAPPLICABLE

13. Investment Objectives and INVESTMENT RESTRICTIONS; INVESTMENT POLICIES
Policies

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

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

16. Investment Advisory and Other INVESTMENT ADVISER AND UNDERWRITER
Services TRUSTEES AND OFFICERS

17. Brokerage Allocation and Other PORTFOLIO TRANSACTIONS
Practices

18. Capital Stock and Other DIVIDENDS, DISTRIBUTIONS AND TAXES;
Securities SHAREHOLDER RIGHTS

19. Purchase, Redemption and PURCHASES AND REDEMPTION OF SHARES
Pricing of Securities Being
Offered

20. Tax Status DIVIDENDS AND TAXES

21. Underwriters INVESTMENT ADVISER AND UNDERWRITER

22. Calculation of Performance Data PERFORMANCE

23. Financial Statements FINANCIAL STATEMENTS

Cross Reference - Page 8
<PAGE>

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 FINANCIAL HIGHLIGHTS
Information

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

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

5A. Management Discussion of NOT APPLICABLE
Fund Performance

6. Capital Stock and Other DISTRIBUTION AND PERFORMANCE INFORMATION-- Dividends and capital
Securities 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 Securities PURCHASES
Being Offered FUND AND PORTFOLIO ORGANIZATION--Underwriter
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 Repurchase EXCHANGES AND REDEMPTIONS
TRANSACTION INFORMATION--Redeeming shares, Tax identification
number, Minimum balances

9. Pending Legal Proceedings NOT APPLICABLE

Cross Reference - Page 9
<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 and History FUND ORGANIZATION

13. Investment Objectives and THE FUND'S INVESTMENT OBJECTIVE 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 Principal TRUSTEES AND OFFICERS OF THE FUND
Holders of Securities

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

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

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

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

20. Tax Status DIVIDENDS
TAXES

21. Underwriters DISTRIBUTOR

22. Calculation of Performance Data PERFORMANCE INFORMATION

23. Financial Statements FINANCIAL STATEMENTS

Cross Reference - Page 10
<PAGE>

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 FINANCIAL HIGHLIGHTS
Information

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

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

5A. Management Discussion of NOT APPLICABLE
Fund Performance

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

9. Pending Legal Proceedings NOT APPLICABLE

Cross Reference - Page 11
<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 and History FUND ORGANIZATION

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

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

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

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

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

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

20. Tax Status DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
TAXES

21. Underwriters DISTRIBUTOR

22. Calculation of Performance Data PERFORMANCE INFORMATION

23. Financial Statements FINANCIAL STATEMENTS

Cross Reference - Page 12
<PAGE>

INVESTMENT TRUST
SCUDDER DIVIDEND & 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 FINANCIAL HIGHLIGHTS
Information

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

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

5A. Management Discussion of NOT APPLICABLE
Fund Performance

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

9. Pending Legal Proceedings NOT APPLICABLE

Cross Reference - Page 13
<PAGE>

SCUDDER DIVIDEND & 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 and History FUND ORGANIZATION

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

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

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

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

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

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

20. Tax Status DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
TAXES

21. Underwriters DISTRIBUTOR

22. Calculation of Performance Data PERFORMANCE INFORMATION

23. Financial Statements FINANCIAL STATEMENTS

Cross Reference - Page 14
<PAGE>

INVESTMENT TRUST
SCUDDER TAX MANAGED 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 FINANCIAL HIGHLIGHTS
Information

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

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

5A. Management Discussion of NOT APPLICABLE
Fund Performance

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

9. Pending Legal Proceedings NOT APPLICABLE

Cross Reference - Page 15
<PAGE>

SCUDDER TAX MANAGED 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 and History FUND ORGANIZATION

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

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

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

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

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

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

20. Tax Status DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
TAXES

21. Underwriters DISTRIBUTOR

22. Calculation of Performance Data PERFORMANCE INFORMATION

23. Financial Statements FINANCIAL STATEMENTS

Cross Reference - Page 16
<PAGE>

INVESTMENT TRUST
SCUDDER TAX MANAGED SMALL COMPANY 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 FINANCIAL HIGHLIGHTS
Information

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

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

5A. Management Discussion of NOT APPLICABLE
Fund Performance

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

9. Pending Legal Proceedings NOT APPLICABLE

Cross Reference - Page 17
<PAGE>

SCUDDER TAX MANAGED SMALL COMPANY 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 and History FUND ORGANIZATION

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

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

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

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

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

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

20. Tax Status DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
TAXES
</TABLE>

21. Underwriters DISTRIBUTOR

22. Calculation of Performance Data PERFORMANCE INFORMATION

23. Financial Statements FINANCIAL STATEMENTS

Cross Reference - Page 18
<PAGE>

This combined prospectus sets forth concisely the information a prospective
investor should know before investing in Scudder Tax Managed Growth Fund and
Scudder Tax Managed Small Company Fund, each a diversified series of Investment
Trust, an open-end management investment company. Please retain it for future
reference.

If you require more detailed information, a combined Statement of Additional
Information dated July 31, 1998 for Scudder Tax Managed Growth Fund and Scudder
Tax Managed Small Company Fund, 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 NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

Contents--see page 3.

NOT FDIC- MAY LOSE VALUE
INSURED NO BANK GUARANTEE

SCUDDER
PREFERRED SERIES [LOGO]

Scudder Tax Managed
Growth Fund
- ------------------------------

Scudder Tax Managed
Small Company Fund

Prospectus
July 31, 1998

Two pure no-load(TM) (no sales charges) mutual funds, each seeking long-term
growth of capital on an after-tax basis through diversified investment in U.S.
equity securities.

<PAGE>

Expense information

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

This information is designed to help you understand the various costs and
expenses of investing in Scudder Tax Managed Growth Fund and Scudder Tax Managed
Small Company Fund. By reviewing this table and those in other mutual funds'
prospectuses, you can compare each 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 either Fund for various transactions.

<TABLE>
<S> <C> <C>
<CAPTION>
Scudder Scudder
Tax Managed Tax Managed
Growth Fund Small Company Fund
----------- ------------------

Sales commissions to purchase shares (sales load) NONE NONE
Commissions to reinvest dividends NONE NONE
Redemption fees 2.00%* 2.00% *
Fees to exchange shares 2.00%* 2.00% *

2) Annual Fund operating expenses: Estimated expenses to be paid by either
Fund before it distributes its net investment income, expressed as a
percentage of its average daily net assets for the initial fiscal year
ending October 31, 1998.

Investment management fee (after waiver) 0.20%** 0.37%***
12b-1 fees NONE NONE
Other expenses (after reimbursements) 1.05%** 1.13%***
----- -----
Total Fund operating expenses (after waiver and reimbursements) 1.25%** 1.50%***
===== =====
Example

Based on the estimated 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.

One year $33 $36
Three years 40 47
</TABLE>

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.

* There is a 2% fee retained by each Fund which is imposed only on
redemptions or exchanges of shares held less than one year. You may redeem
by writing or calling a Fund. If you wish to receive your redemption
proceeds via wire, there is a $5 wire service fee. For additional
information, please refer to "Transaction information--Redeeming shares."

** Until February 28, 1999, the Adviser and certain of its subsidiaries have
agreed to waive and reimburse, respectively, their fees payable by Scudder
Tax Managed Growth Fund to the extent necessary so that the total
annualized expenses of the Fund do not exceed 1.25% of average daily net
assets. If the Adviser and certain of its subsidiaries had not agreed to
waive and reimburse, respectively, their fees, estimated annualized Fund
expenses would be: investment management fee 0.80%, other expenses 1.05%
and total operating expenses 1.85% for the initial fiscal period ending
October 31, 1998. Estimates are based on a full fiscal year.

*** Until February 28, 1999, the Adviser and certain of its subsidiaries have
agreed to waive and reimburse, respectively, their fees payable by Scudder
Tax Managed Small Company Fund to the extent necessary so that the total
annualized expenses of the Fund do not exceed 1.50% of average daily net
assets. If the Adviser and certain of its subsidiaries had not agreed to
waive and reimburse, respectively, their fees, estimated annualized Fund
expenses would be: investment management fee 0.90%, other expenses 1.13%
and total operating expenses 2.03% for the initial fiscal period ending
October 31, 1998. Estimates are based on a full fiscal year.

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<PAGE>

A message from the President

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 50 no-load mutual fund portfolios or classes of
shares. 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 professional
representatives, easy exchange among the Scudder Family of Funds, shareholder
reports, informative newsletters and the walk-in convenience of Scudder Investor
Centers.

Funds or fund classes in the Scudder Family of Funds 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/Edmond D. Villani

Scudder Tax Managed Growth Fund
Scudder Tax Managed Small Company Fund

Two pure no-load(TM) (no sales charges) mutual funds, each seeking long-term
growth of capital on an after-tax basis through diversified investment in U.S.
equity securities.

Investment objective

Scudder Tax Managed Growth Fund

o long-term growth of capital on an after-tax basis primarily through equity
investment in established, medium- to large-sized U.S. companies.

Scudder Tax Managed Small Company Fund

o long-term growth of capital on an after-tax basis primarily through
investment in undervalued stocks of small U.S. companies.

Investment characteristics of the Funds

o diversified stock portfolios, actively managed to maximize risk-adjusted
after-tax returns

o systematic, proprietary investment approaches to selection of U.S. stocks

o $10,000 minimum initial investment

Contents

Introduction to Scudder Tax Managed Funds 4
Investment objectives and policies 5
Investments 5
Investment strategies 6
Why invest in these Funds? 6
Special Risks of Scudder Tax Managed Small
Company Fund 7
Additional information about policies
and investments 7
Distribution and performance information 10
Fund organization 11
Transaction information 12
Shareholder benefits 16
Purchases 19
Exchanges and redemptions 20
Trustees and Officers 22
Investment products and services 23
How to contact Scudder Back cover

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<PAGE>

Introduction to Scudder
Tax Managed Funds

Scudder Tax Managed Growth Fund and Scudder Tax Managed Small Company Fund (each
a "Fund," collectively the "Funds"), each a diversified series of Investment
Trust (the "Trust"), are mutual funds advised by Scudder Kemper Investments,
Inc. (the "Adviser"). The two Funds' prospectuses are presented together so you
can understand each Fund's important differences and suitability for your
long-term investment needs.

Each Fund is managed with the objective of seeking long-term growth of capital
on an after-tax basis through diversified investment in U.S. equity securities.
A discussion of the Funds' investment policies and strategies is provided below.

Most mutual funds are managed for pre-tax return without regard to the tax
consequences of portfolio activity that may result in sizable annual
distributions taxable to shareholders. A significant part of an investor's total
return from a mutual fund investment held outside of group or individual
retirement plans may be subject each year to federal income tax rates as high as
39.6% on distributions of dividends and short-term capital gains, and as high as
20% on distributions of long-term capital gains.

Each Fund is designed for long-term investors who seek growth of capital on an
after-tax basis. Effective tax-sensitive investing requires trading off complex
and occasionally conflicting factors. Each Fund evaluates these tradeoffs using
the following tax-sensitive management techniques:

o Each Fund maintains a long-term investment horizon for selecting equity
securities. Each Fund is actively managed and will likely have higher
portfolio turnover than passively managed funds, but the portfolio turnover
for each Fund is expected to be significantly lower than the average
actively managed diversified growth fund.

o The Adviser uses a tax-sensitive portfolio optimization model to
efficiently keep each Fund focused on stocks with above-average long-term
return potential, while managing the tax consequences of selling securities
where the future return potential has diminished. Holdings are analyzed on
a lot-by-lot basis for before- and after-tax return potential and risk
impact on the portfolio. Based on this comparison, stocks are sold when the
after-tax return potential of the portfolio can be improved by making this
sale. The analysis incorporates the effect of higher taxes on dividend
income and short-term capital gains.

o The Adviser will sell securities to realize capital losses to offset
accumulated or future capital gains when suitable replacements with similar
or better return and risk characteristics can be found. Each Fund uses
these "harvested" capital losses to offset accumulated realized gains or
gains on future transactions.

o Each Fund has a 2% redemption fee applied to shares held for less than one
year to encourage long-term investing.

While each Fund seeks to provide a high level of after-tax total returns over
time, it may realize some capital gains and earn dividends, from time to time,
that will be distributed to shareholders. This may occur, for instance, when the
Adviser determines that the risk of remaining in a security with a lower
expected return outweighs the tax benefit of continuing to hold it. In addition,
shareholders may also be required to pay federal and state taxes if they realize
a capital gain upon the sale of their shares of a Fund. The Funds are not
designed for IRAs and other tax-deferred retirement accounts, where annual
earnings are not subject to taxes. The Funds are each managed for long-term
growth on an after-tax basis.

4
<PAGE>

Investment objectives and policies

Scudder Tax Managed Growth Fund seeks long-term growth of capital on an
after-tax basis. The Fund invests primarily in established, medium- to
large-sized U.S. companies with leading competitive positions. While the Fund is
broadly diversified and invested in stocks of financially sound companies, its
share price will move up and down with changes in the general level of the
financial markets, particularly the U.S. stock market. Investors should be
comfortable with stock market risk and view the Fund only as a long-term
investment.

Scudder Tax Managed Small Company Fund seeks long-term growth of capital on an
after-tax basis through investment primarily in undervalued stocks of small U.S.
companies. Although the Fund will invest in a large number of securities and
pursue a value-oriented investment strategy, investment in small company stocks
does entail above-average investment risk in comparison to larger stocks. Shares
of the Fund should be purchased with a long-term investment horizon in mind.

To encourage long-term investing and to facilitate their tax-sensitive
management style, each Fund has a redemption fee of 2% which will apply for
sales and exchanges of shares held for less than one year. The fee will be
assessed and retained by each Fund for the benefit of the remaining
shareholders, helping to offset the tax costs that can occur when a Fund is
forced to sell portfolio securities and realize capital gains as a result of
short-term investor activity.

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

Investments

Scudder Tax Managed Growth Fund, under normal market conditions, will invest at
least 80% of its assets in equity securities of established, medium- to
large-sized U.S. companies that, in the opinion of the Adviser, offer potential
for long-term growth of capital.

Scudder Tax Managed Small Company Fund, under normal circumstances, will invest
at least 80% of its assets in equity securities of small U.S. companies. The
Fund will invest in securities of companies that are similar in size or smaller
than those in the Russell 2000 Index of small stocks. The Fund will sell
securities of companies that have grown in market capitalization above the
maximum of the Russell 2000 Index, as necessary, to keep the Fund focused on
smaller companies.

Each Fund allocates its investments among different industries and companies and
adjusts its portfolio securities based on investment considerations and the
effect of portfolio adjustments on the after-tax total returns of the Fund.

While each Fund invests predominantly in equity securities, they can purchase
other types of equity securities including preferred stocks, convertible
securities, rights, warrants and illiquid securities. Securities may be listed
on national exchanges or traded over-the-counter. Each Fund also may invest up
to 20% of its assets in U.S. Treasury, agency and instrumentality obligations on
a temporary basis, may enter into repurchase agreements and reverse repurchase
agreements and may engage in strategic transactions, using such derivatives
contracts as index options and futures, to increase stock market participation,
enhance liquidity and manage transaction costs. Each Fund currently

5
<PAGE>

intends to borrow only for temporary or emergency purposes, such as providing
for redemptions or distributions, and not for investment leverage purposes.

For temporary defensive purposes, a Fund may invest without limit in cash and
cash equivalents when the Adviser deems such a position advisable in light of
economic or market conditions. It is impossible to predict accurately how long
such alternate strategies may be utilized. More information about these
investment techniques is provided under "Additional information about policies
and investments."

Investment strategies

The Funds are actively managed and use disciplined investment approaches. The
Adviser uses proprietary computerized models to evaluate and rate each security
for risk and return potential based on characteristics such as relative
valuation, growth trends, price momentum and volatility. A tax-sensitive
portfolio optimization system is designed to manage risk and the tax
implications of trading securities.

Scudder Tax Managed Growth Fund seeks to invest in established, medium- to
large-sized U.S. companies in the Russell 1000 Index. A quantitative model
assigns proprietary ratings to companies in order to identify those with strong
and sustainable earnings growth, a proven ability to add value to shareholders
over time and favorable stock price momentum. In addition to rating a company's
growth prospects, the model analyzes its relative valuation from multiple
perspectives. The Adviser's emphasis on investing in companies with attractive
valuations and promising growth may result in the Fund experiencing lower
average price volatility than other growth mutual fund investments.

Scudder Tax Managed Small Company Fund seeks to identify undervalued small,
public U.S. companies with above-average potential for stock price appreciation
and to manage portfolio transactions to produce attractive after-tax total
returns for shareholders. The Fund will invest in securities of companies with
favorable valuations relative to the Russell 2000 Index, stable and improving
growth rates and improving stock price momentum. The Fund takes a diversified
approach to investing in small capitalization holdings. The Fund will typically
invest in securities of more than one hundred small companies representing a
variety of U.S. industries. The Fund involves above-average equity risk due to
investment in small companies, but its value-oriented, systematic approach to
investing is designed to potentially mitigate volatility of the Fund's share
price relative to other funds investing in small companies.

Why invest in these Funds?

Scudder Preferred Series Funds are available to all investors, yet due to each
Fund's minimum initial investment of $10,000, may be most suitable for investors
with substantial assets. The Funds may be most attractive to high tax bracket
investors who have already made their maximum allowable contribution to
tax-deferred group or individual retirement accounts.

Scudder Tax Managed Growth Fund is designed for investors seeking long-term
after-tax growth of capital from investment in stocks of leading U.S. companies.
The Fund invests principally in the common stock of larger, financially sound
companies with strong competitive positions in their industries. With its
emphasis on selecting attractively valued companies, the Fund will pursue
long-term growth opportunities while seeking to reduce the overall impact of
fluctuations in the stock market and individual security price volatility. The
Fund may serve

6
<PAGE>

as a core equity investment for the taxable portion of an investor's portfolio.

Scudder Tax Managed Small Company Fund is designed for investors seeking the
growth potential of small company stocks in a portfolio designed to provide
after-tax capital appreciation. U.S. small capitalization stocks have
outperformed large capitalization stocks over time, albeit with greater
volatility in returns. Since the Fund involves both long-term opportunity and
risk, the Fund is most suitable for long-term goals such as accumulating assets
for retirement or funding a child's college education. While not a complete
investment program, the Fund may help to diversify an investment portfolio
already balanced with other stock and bond investments. The Fund may offer
individual investors a low cost, convenient and tax-sensitive way to access a
sector of the U.S. stock market with long-term growth potential.

Special Risks of Scudder Tax Managed Small Company Fund

While, historically, small company stocks have outperformed the stocks of large
companies, the former have customarily involved more risk, as well. Small
companies may have limited product lines, markets or financial resources; may
lack management depth or experience; and may be more vulnerable to adverse
general market or economic developments than large companies. The prices of
small company securities are often more volatile than prices associated with
large company issues, and can display abrupt or erratic movements at times, due
to limited trading volumes and less publicly available information.

Also, because small companies normally have fewer shares outstanding and these
shares trade less frequently than large companies, it may be more difficult for
the Fund to buy and sell significant amounts of such shares without an
unfavorable impact on prevailing market prices.

Some of the companies in which the Fund may invest may distribute, sell or
produce products which have recently been brought to market and may be dependent
on key personnel.

The securities of small companies are often traded over-the-counter and may not
be traded in the volumes typical of those on a national securities exchange.
Consequently, in order to sell this type of holding, the Fund may need to
discount the securities from recent prices or dispose of the securities over a
long period of time.

Additional information about policies and investments

Investment restrictions

Each Fund has certain investment restrictions which are designed to reduce
investment risks. Fundamental investment restrictions may not be changed without
a vote of shareholders; non-fundamental investment restrictions may be changed
by a vote of the Trust's Board of Trustees.

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

As a matter of fundamental policy, each Fund may not make loans except through
the lending of portfolio securities, the purchase of debt securities and
interests in indebtedness or through repurchase agreements. Each 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

7
<PAGE>

"Investment Restrictions" in the Funds' combined Statement of Additional
Information.

Common stocks

Under normal circumstances, each Fund invests in common stocks. Common stock is
issued by companies to raise cash for business purposes and represents a
proportionate interest in the issuing companies. Therefore, each Fund
participates in the success or failure of any company in which it holds stock.
The market values of common stocks 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.

Convertible securities

The convertible securities in which each Fund may invest consist of bonds,
notes, debentures and preferred stocks 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 nonconvertible securities of the same type.

Repurchase agreements

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

Each Fund may enter into repurchase commitments with any party deemed
creditworthy by the Adviser if the transaction is entered into for investment
purposes and the counterparty's creditworthiness is at least equal to that of
issuers of securities which each Fund may purchase.

Illiquid securities

Each 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.

Strategic Transactions and derivatives

Each Fund may, but is not required to, utilize various other investment
strategies as described below to hedge various market risks or to seek 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, each Fund may purchase
and sell exchange-listed and over-the-counter put and call options on
securities, equity and other financial instruments, and purchase and sell
financial futures contracts and options thereon (collectively, all of 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 each Fund's portfolio resulting from securities market fluctuations, to
protect each Fund's unrealized gains in the value of its portfolio securities,
to facilitate the sale of such securities for investment purposes, 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 each Fund's
assets will be

8
<PAGE>

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 each Fund to
utilize these Strategic Transactions successfully will depend on the Adviser's
ability to predict pertinent market movements, which cannot be assured. Each
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 a Fund. Please refer to "Risk
factors--Strategic Transactions and derivatives" for more information.

Risk factors

Each 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 a
Fund may use from time to time.

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.

Repurchase agreements. If the seller under a repurchase agreement becomes
insolvent, a Fund's right to dispose of the securities may be restricted, or the
value of the securities may decline before a 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, a Fund may encounter delay and incur costs,
including a decline in the value of the securities, before being able to sell
the securities. Some repurchase commitment transactions may not provide a Fund
with collateral marked-to-market during the term of the commitment.

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 a Fund to sell them promptly at an acceptable
price.

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 a 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 a Fund can
realize on its investments or cause a Fund to hold a security it might otherwise
sell. 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 a
Fund creates the possibility that losses on the hedging instrument may be
greater than gains in the value of a 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, a
Fund might not be able to close out a transaction without incurring substantial
losses, if at all. Although the use of

9
<PAGE>

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 a Fund may use and some of their risks are described
more fully in the Funds' combined Statement of Additional Information.
Distribution and performance information

Dividends and capital gains distributions

Each Fund intends to distribute any dividends from its net investment income and
any net realized capital gains after utilization of capital loss carryforwards,
if any, in November or December, although an additional distribution may be made
if necessary. Any dividends or capital gains distributions declared in October,
November or December with a record date in such month and paid 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 the applicable 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
a Fund's holding period for the assets giving rise to the gain), regardless of
the length of time shareholders have owned their shares. Short-term capital
gains and any other taxable income distributions are taxable as ordinary income.
A portion of such dividends from net investment income may qualify for the
dividends-received deduction for corporations.

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

Under normal investment conditions, it is anticipated that each Fund's portfolio
turnover rate will not exceed 50% for the initial fiscal year. However, economic
and market conditions may necessitate more active trading, resulting in a higher
portfolio turnover rate. A higher rate involves greater brokerage expenses to a
Fund and may result in the realization of net capital gains, which would be
taxable to shareholders when distributed.

Performance information

From time to time, quotations of the Funds' 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 a Fund for a specified period. The "average annual total
return" of a Fund is the average annual compound rate of return of an investment
in a Fund assuming the investment has been held for one year and the life of a
Fund as of a stated ending date. "Cumulative total return" represents the
cumulative change in value of an investment in a 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 applicable
Fund. Performance will vary based upon, among other things, changes in market
conditions and the level of the applicable Fund's expenses.

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<PAGE>

Fund organization

Scudder Tax Managed Growth Fund and Scudder Tax Managed Small Company Fund are
each diversified series of 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 Investment Trust and
as Scudder Growth and Income Fund, was organized as a Massachusetts business
trust in September 1984.

The Funds' 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 agreement.
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.

The prospectuses of both Funds are combined in this prospectus. Each Fund offers
only its own shares, yet it is possible that a Fund might become liable for a
misstatement or omission in the prospectus with respect to the other Fund. The
Trustees of the Trust have considered this and approved the use of a combined
prospectus.

Investment adviser

Each Fund retains the investment management firm of Scudder Kemper Investments,
Inc., a Delaware corporation formerly known as Scudder, Stevens & Clark, Inc.
("Scudder"), to manage its daily investment and business affairs subject to the
policies established by the Board of Trustees. The Trustees have overall
responsibility for the management of the Funds under Massachusetts law.

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.

Scudder Tax Managed Growth Fund pays the Adviser an annual investment management
fee of 0.80% of the Fund's average daily net assets. Scudder Tax Managed Small
Company Fund pays the Adviser an annual investment management fee of 0.90% of
the Fund's average daily net assets. Each fee is payable monthly, provided that
each 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. Each fee is higher than the average management fee charged by many funds
that invest primarily in U.S. securities, but not necessarily higher than that
charged by funds with investment objectives similar to that of each Fund.

The Adviser has agreed to maintain the annualized expenses of Scudder Tax
Managed Growth Fund at no more than 1.25% of the average daily net assets of the
Fund until February 28, 1999. The Adviser has agreed to maintain the annualized
expenses of Scudder Tax Managed Small Company Fund at no more than 1.50% of the
average daily net assets of the Fund until February 28, 1999.

Under each Fund's Investment Management Agreement with the Adviser, each Fund is
responsible for all of its expenses, including fees and expenses incurred in
connection with membership in investment company organizations; fees and
expenses of each Fund's accounting agent; brokers' commissions; legal, auditing
and accounting expenses; taxes and

11
<PAGE>

governmental fees; the fees and expenses of the transfer agent; the expenses of
and the fees for registering or qualifying securities 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.

All of a 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.

Like other mutual funds and financial and business organizations worldwide, the
Funds could be adversely affected if computer systems on which the Funds rely,
which primarily include those used by the Adviser, its affiliates or other
service providers, are unable to correctly process date-related information on
and after January 1, 2000. This risk is commonly called the Year 2000 Issue.
Failure to successfully address the Year 2000 Issue could result in
interruptions to and other material adverse effects on the Funds' business and
operations. The Adviser has commenced a review of the Year 2000 Issue as it may
affect the Funds and is taking steps it believes are reasonably designed to
address the Year 2000 Issue, although there can be no assurances that these
steps will be sufficient. In addition, there can be no assurances that the Year
2000 Issue will not have an adverse effect on the companies whose securities are
held by the Funds or on global markets or economies generally.

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 each Fund.

Underwriter

Scudder Investor Services, Inc., a subsidiary of the Adviser, is the Funds'
principal underwriter. Scudder Investor Services, Inc. confirms, as agent, all
purchases of shares of each 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 each Fund.

Custodian

State Street Bank and Trust Company is the custodian for each Fund.

Transaction information

Purchasing shares

Purchases are executed at the next calculated net asset value per share after a
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,
a 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 or
exchange requests by telephone prior to the 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:

12
<PAGE>

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 applicable 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, a 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.

Exchanging and redeeming shares

Upon the redemption or exchange of shares held less than one year, a fee of 2%
of the current net asset value of the shares will be assessed and retained by a
Fund for the benefit of the remaining shareholders. This fee is intended to
encourage long-term investment in a Fund, to avoid transaction and other
expenses caused by early redemptions, and to facilitate portfolio management.
The fee is not a deferred sales charge, is not a commission paid to the Adviser
or its subsidiaries, and does not benefit the Adviser in any way. Each Fund
reserves the right to modify the terms of or terminate this fee at any time.

The fee applies to redemptions from a Fund and exchanges to other Scudder funds,
but not to dividend or capital gains distributions which have been automatically
reinvested in a Fund.

13
<PAGE>

The fee is applied to the shares being redeemed or exchanged in the order in
which they were purchased. See "Exchanges and Redemptions" in the Funds'
combined Statement of Additional Information for a more detailed description of
the redemption fee.

Exchanges. Each 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. 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 Funds will have redemption fees to encourage long-term investing. A
redemption fee of 2% will apply for sales and exchanges of shares held less than
one year. The fees will be assessed and retained by the Funds for the benefit of
the remaining shareholders, indirectly helping to offset the tax costs long term
investors incur when a Fund is forced to realize capital gains as a result of
short term investor activity.

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 a
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 a 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. (Each Fund reserves the right, however, to require a
signature

14
<PAGE>

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 Securities and Exchange Commission. 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. Each Fund uses 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 a Fund does not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. Each 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.
There is a 2% fee on shares held for less than one year, payable to a Fund for
exchanges or redemptions of shares. 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 for a Fund is calculated by dividing the
value of total Fund assets, less all liabilities, by the total number of shares
of that Fund outstanding.

Processing time

All purchase and redemption requests must be received in good order by a 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 regular 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.

Each Fund will normally send your 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
Funds 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 a 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 application
when you open an account. Federal tax law requires a 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

15
<PAGE>

certain other certified information or upon notification from the IRS or a
broker that withholding is required. Each Fund reserves the right to reject new
account applications without a correct certified Social Security or tax
identification number. Each 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 a Fund with a tax identification number during the
30-day notice period.

Minimum balances

Shareholders should maintain a share balance worth at least $10,000, which
minimum amount may be changed by the Board of Trustees.

Each 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 applicable 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. Please refer to
"Exchanges and Redemptions--Other information" in the Funds' combined 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

Each 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.

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 Tax Managed Growth Fund and Scudder Tax Managed Small Company Fund are
each managed by a team of investment professionals each of whom play an
important role in the Funds' management process. Team members work together to
develop investment strategies and select securities for each Fund's portfolio.
They are supported by the Adviser's large staff of economists, research
analysts, traders and other investment specialists who work in the Adviser's
offices across the United States and abroad. We believe our team approach
benefits investors by bringing together many disciplines and leveraging our
extensive resources.

Scudder Tax Managed Growth Fund

Lead Portfolio Manager Philip S. Fortuna has responsibility for the Fund's
day-to-day management and investment strategies. Mr. Fortuna joined the Adviser
in 1986 as a manager of institutional equity accounts, and served as director of
quantitative operations from 1993 to 1995. From 1995 to 1997, Mr. Fortuna was
involved in global planning and new product development in addition to his
portfolio management responsibilities. Mr. Fortuna is currently director of the
Adviser's quantitative group.

16
<PAGE>

Portfolio Manager James M. Eysenbach joined the Adviser in 1991 as a senior
quantitative analyst, served as director of quantitative services from 1993 to
1997 and has been managing quantitative equity products at the Adviser since
1995. He is currently managing portfolios full-time. Mr. Eysenbach has more than
10 years of investment management experience, specializing in quantitative
research, analysis and portfolio management.

Portfolio Manager Robert Tymoczko joined the Adviser in 1997 as a quantitative
analyst. Mr. Tymoczko has five years of experience in quantitative research and
econometric modeling, and co-developed the Adviser's proprietary approach to
managing tax-sensitive equity mutual funds.

Scudder Tax Managed Small Company Fund

Lead Portfolio Manager James M. Eysenbach has responsibility for the Fund's
day-to-day management and investment strategies. Mr. Eysenbach joined the
Adviser in 1991 as a senior quantitative analyst, served as director of
quantitative services from 1993 to 1997 and has been co-manager of quantitative
equity products since 1995. He is currently managing portfolios full-time. Mr.
Eysenbach has more than 10 years of investment management experience,
specializing in quantitative research, analysis and portfolio management.

Portfolio Manager Philip S. Fortuna joined the Adviser in 1986 as a manager of
institutional equity accounts, and served as director of quantitative operations
from 1993 to 1995. From 1995 to 1997, Mr. Fortuna was involved in global
planning and new product development in addition to his portfolio management
responsibilities. Mr. Fortuna is currently director of the Adviser's
quantitative group.

Portfolio Manager Calvin S. Young joined the Adviser in 1990 as a quantitative
analyst. Since 1995, Mr. Young has been providing analytical support for the
Adviser's quantitative equity products. Mr. Young has more than nine years of
investment industry experience with a special focus on small companies.

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 classes 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

17
<PAGE>

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 no-load mutual funds with ongoing portfolio monitoring
and individualized service, for an annual fee of generally 1.25% or less of
assets. 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 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.

18
<PAGE>

Purchases

<TABLE>
<S> <C>
<CAPTION>
Opening Minimum initial investment: $10,000
an account Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums.
See appropriate plan literature.

Make checks o By Mail Send your completed and signed application and check
payable to "The
Scudder Funds." by regular mail 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.
- -----------------------------------------------------------------------------------------------------------------------

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

Make checks o By Mail Send a check with a Scudder investment slip, or with a
payable to letter of "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 a
regular basis through automatic Investment Plan
deductions from your bank checking account. Please call
1-800-225-5163 ($50 minimum) for more information and an
enrollment form.
</TABLE>

19
<PAGE>

Exchanges and redemptions

<TABLE>
<S> <C>
<CAPTION>
Exchanging Minimum investments: $10,000 to establish a new account;
shares $100 to exchange among existing accounts

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).

There is a 2% o By Mail Print or type your instructions and include:
fee payable to or Fax - the name of the Fund and the account number you are exchanging from;
the Fund for - your name(s) and address as they appear on your account;
exchanges of - the dollar amount or number of shares you wish to exchange;
shares held less - the name of the Fund you are exchanging into;
than one year. - 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 02107-2291 Braintree, MA 02184
- -----------------------------------------------------------------------------------------------------------------------

Redeeming o By Telephone To speak with a service representative, call 1-800-225-5163 from
shares 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.

There is a 2% o By Mail Send your instructions for redemption to the appropriate address or fax number
fee payable to or Fax above and include:
the Fund for - the name of the Fund and account number you are redeeming from;
exchanges of - your name(s) and address as they appear on your account;
shares held less - the dollar amount or number of shares you wish to redeem;
than one year. - 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 Plan Call 1-800-225-5163 for more information and an enrollment form.

</TABLE>

20
<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 Tax Managed Growth Fund and Scudder Tax
Managed Small Company Fund are not designed for investment by tax-advantaged
plans, as each Fund is managed for long-term growth on an after-tax basis.
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 IRA
o Scudder Roth No-Fee IRA
o Keogh Plans
o 401(k) Plans
o Profit Sharing and Money Purchase Pension Plans
o 403(b) Plans
o SEP-IRA
o Scudder Horizon Plan (a variable annuity)

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.

21
<PAGE>

Trustees and Officers

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;
President, Driscoll Associates

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; Managing Partner, Technology Equity Partners

Bruce F. Beaty*
Vice President

Philip S. Fortuna*
Vice President

William F. Gadsden*
Vice President

Thomas W. Joseph*
Vice President

Valerie F. Malter*
Vice President

Stephen Wohler*
Vice President

Thomas F. McDonough*
Treasurer, Vice President
and Secretary

John R. Hebble*
Assistant Treasurer

Caroline Pearson*
Assistant Secretary

*Scudder Kemper Investments, Inc.

22
<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 or classes thereof 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 foreign stock exchanges.

23
<PAGE>

How to contact Scudder

Account Service and Information:
<S> <C>

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

<PAGE>
SCUDDER [LOGO]

Scudder Tax Managed Growth Fund
Scudder Tax Managed Small Company Fund

Supplement to Prospectus
Dated July 31, 1998

The distributor of Scudder Tax Managed Growth Fund and Scudder Tax Managed Small
Company Fund (each a "Fund" or collectively the "Funds"), Scudder Investor
Services, Inc., is soliciting subscriptions for shares of each Fund during an
initial offering period currently scheduled from July 31, 1998 to September 18,
1998 (the "Subscription Period"). The subscription price for each Fund will be
the Fund's initial net asset value of $12 per share. Orders to purchase shares
of a Fund received during the Subscription Period will be accepted when the
Funds commence operations. Checks accompanying orders must be received in good
order during the Subscription Period and will be held uninvested until 4:00 p.m.
on September 18, 1998.

July 31, 1998

<PAGE>
SCUDDER TAX MANAGED GROWTH FUND
SCUDDER TAX MANAGED SMALL COMPANY FUND

Two Pure No-Load(TM) (No Sales Charges) Mutual Funds, Each Seeking
Long-Term Growth of Capital on an After-Tax Basis Through
Diversified Investment in U.S. Equity Securities.

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

STATEMENT OF ADDITIONAL INFORMATION

July 31, 1998

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

This Statement of Additional Information is not a prospectus and should
be read in conjunction with the prospectus for Scudder Tax Managed Growth Fund
and Scudder Tax Managed Small Company Fund dated July 31, 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

<TABLE>
<S> <C>
<CAPTION>
Page

THE FUNDS' INVESTMENT OBJECTIVE AND POLICIES..........................................................................1
Introduction to Scudder Tax Managed Growth Fund and Scudder Tax Managed Small Company
Growth Fund.............................................................................................1
General Investment Objective and Policies....................................................................2
Investments..................................................................................................2
Investment Strategies........................................................................................3
Master/feeder structure......................................................................................3
Investment Restrictions.....................................................................................11

PURCHASES............................................................................................................12
Additional Information About Opening An Account.............................................................12
Additional Information About Making Subsequent Investments..................................................13
Additional Information About Making Subsequent Investments by QuickBuy......................................13
Checks......................................................................................................13
Wire Transfer of Federal Funds..............................................................................14
Share Price.................................................................................................14
Share Certificates..........................................................................................14
Other Information...........................................................................................14

EXCHANGES AND REDEMPTIONS............................................................................................15
Exchanges...................................................................................................15
Special Redemption and Exchange Information.................................................................15
Redemption By Telephone.....................................................................................16
Redemption by QuickSell.....................................................................................17
Redemption by Mail or Fax...................................................................................17
Redemption-in-Kind..........................................................................................17
Other Information...........................................................................................17

FEATURES AND SERVICES OFFERED BY THE FUND............................................................................18
The Pure No-Load(TM) Concept................................................................................18
Internet access.............................................................................................19
Dividends and Capital Gains Distribution Options............................................................20
Scudder Investor Centers....................................................................................20
Reports to Shareholders.....................................................................................20
Transaction Summaries.......................................................................................20

THE SCUDDER FAMILY OF FUNDS..........................................................................................21

SPECIAL PLAN ACCOUNTS................................................................................................26
Scudder Retirement Plans: Profit-Sharing and Money Purchase Pension Plans for Corporations and

Self-Employed Individuals..............................................................................26
Scudder 401(k): Cash or Deferred Profit-Sharing Plan for Corporations and Self-Employed Individuals.........26
Scudder IRA: Individual Retirement Account.................................................................26
Scudder Roth IRA: Individual Retirement Account............................................................27
Scudder 403(b) Plan.........................................................................................28
Automatic Withdrawal Plan...................................................................................28
Group or Salary Deduction Plan..............................................................................28
Automatic Investment Plan...................................................................................29
Uniform Transfers/Gifts to Minors Act.......................................................................29

DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS............................................................................29

PERFORMANCE INFORMATION..............................................................................................30
Average Annual Total Return.................................................................................30
Cumulative Total Return.....................................................................................30
Total Return................................................................................................30

i
<PAGE>

TABLE OF CONTENTS (continued)
Page

Comparison of Fund Performance..............................................................................30

FUND ORGANIZATION....................................................................................................34

INVESTMENT ADVISER...................................................................................................35
Personal Investments by Employees of the Adviser............................................................37

TRUSTEES AND OFFICERS................................................................................................38

REMUNERATION.........................................................................................................40
Responsibilities of the Board -- Board and Committee Meetings..............................................40
Compensation of Officers and Trustees.......................................................................40

DISTRIBUTOR..........................................................................................................41

TAXES................................................................................................................42

PORTFOLIO TRANSACTIONS...............................................................................................45
Brokerage Commissions.......................................................................................45
Portfolio Turnover..........................................................................................46

NET ASSET VALUE......................................................................................................46

ADDITIONAL INFORMATION...............................................................................................47
Experts.....................................................................................................47
Other Information...........................................................................................47

FINANCIAL STATEMENTS.................................................................................................48
</TABLE>

<PAGE>

THE FUNDS' INVESTMENT OBJECTIVE AND POLICIES

(See "Investment objective and policies" and "Additional information about
policies and investments" in the Funds' prospectus.)

Introduction to Scudder Tax Managed Growth Fund and Scudder Tax Managed Small
Company Growth Fund

Scudder Tax Managed Growth Fund and Scudder Tax Managed Small Company
Fund (each a "Fund," collectively, the "Funds") are each a pure no-load(TM)
diversified series of Investment Trust (the "Trust") and each an open-end
management investment company which continuously offers and redeems shares at
net asset value. The Funds are each a company of the type commonly known as a
mutual fund and are each advised by Scudder Kemper Investments, Inc. (the
"Adviser").

Each Fund is managed with the objective of seeking long-term growth of
capital on an after-tax basis through diversified investment in U.S. equity
securities. A discussion of the Funds' investment policies and strategies is
provided below.

Most mutual funds are managed for pre-tax return without regard to the
tax consequences of portfolio activity that may result in sizable annual
distributions taxable to shareholders. A significant part of an investor's total
return from a mutual fund investment held outside of group or individual
retirement plans may be subject each year to federal income tax rates as high as
39.6% on distributions of dividends and short-term capital gains, and as high as
20% on distributions of long-term capital gains.

Each Fund is designed for long-term investors who seek growth of
capital on an after-tax basis. Effective tax-sensitive investing requires
trading off complex and occasionally conflicting factors. Each Fund evaluates
these tradeoffs using the following tax-sensitive management techniques:

o Each Fund maintains a long-term investment horizon for selecting equity
securities. Each Fund is actively managed and will likely have higher
portfolio turnover than passively managed funds, but the portfolio
turnover for each Fund is expected to be significantly lower than the
average actively managed diversified growth fund.

o The Adviser uses a tax-sensitive portfolio optimization model to
efficiently keep each Fund focused on stocks with above-average
long-term return potential, while managing the tax consequences of
selling securities where the future return potential has diminished.
Holdings are analyzed on a lot-by-lot basis for before- and after-tax
return potential and risk impact on the portfolio. Based on this
comparison, stocks are sold when the after-tax return potential of the
portfolio can be improved by making this sale. The analysis
incorporates the effect of higher taxes on dividend income and
short-term capital gains.

o The Adviser will sell securities to realize capital losses to offset
accumulated or future capital gains when suitable replacements with
similar or better return and risk characteristics can be found. Each
Fund uses these "harvested" capital losses to offset accumulated
realized gains or gains on future transactions.

o Each Fund has a 2% redemption fee applied to shares held for less than
one year to encourage long-term investing.

While each Fund seeks to provide a high level of after-tax total
returns over time, it may realize some capital gains and earn dividends, from
time to time, that will be distributed to shareholders. This may occur, for
instance, when the Adviser determines that the risk of remaining in a security
with a lower expected return outweighs the tax benefit of continuing to hold it.
In addition, shareholders may also be required to pay federal and state taxes if
they realize a capital gain upon the sale of their shares of a Fund. The Funds
are not designed for IRAs and other tax-deferred retirement accounts, where
annual earnings are not subject to taxes. The Funds are each managed for
long-term growth on an after-tax basis.

<PAGE>

General Investment Objective and Policies

Except as otherwise indicated, each Fund's investment objective and
policies are not fundamental and may be changed without a vote of shareholders.
If there is a change in a Fund's investment objective, shareholders should
consider whether the Fund remains an appropriate investment in light of their
then financial position and needs.

There can be no assurance that either Fund's objective will be met.

Investments

Scudder Tax Managed Growth Fund, under normal market conditions, will invest at
least 80% of its assets in equity securities of established, medium- to-large
sized U.S. companies that, in the opinion of the Adviser, offer potential for
long-term growth of capital.

Each Fund allocates its investments among different industries and
companies and adjusts its portfolio securities based on investment
considerations and the effect of portfolio adjustments on the after-tax total
returns of the Fund.

While each Fund invests predominantly in common stocks, they can
purchase other types of equity securities including preferred stocks
(convertible securities), rights, warrants, and illiquid securities. Securities
may be listed on national exchanges or traded over-the-counter. Each Fund also
may invest up to 20% of their assets in U.S. Treasury, agency and
instrumentality obligations on a temporary basis, may enter into repurchase
agreements and reverse repurchase agreements and may engage in strategic
transactions, using such derivatives contracts as index options and futures, to
increase stock market participation, enhance liquidity and manage transaction
costs. Each Fund currently intends to borrow only for temporary or emergency
purposes, such as providing for redemptions or distributions, and not for
investment leverage purposes.

2
<PAGE>

Investment Strategies

The Funds are actively managed and use disciplined investment approaches.
The Adviser uses proprietary computerized models to evaluate and rate each
security for risk and return potential based on characteristics such as relative
valuation, growth trends, price momentum and volatility. A tax-sensitive
portfolio optimization system is designed to manage risk and the tax
implications of trading securities.

Scudder Tax Managed Small Company Fund seeks to identify small, public U.S.
companies with above average potential for stock price appreciation and to
manage portfolio transactions to produce attractive after-tax total returns for
shareholders. The Fund will invest in securities of companies with favorable
valuations relative to the Russell 2000 Index, stable and improving growth
rates, and improving stock price momentum. The Fund takes a diversified approach
to investing in small capitalization holdings. The Fund will typically invest in
securities of more than one hundred small companies representing a variety of
U.S. industries. The Fund involves above average equity risk due to investment
in small companies, but its value-oriented, systematic approach to investing is
designed to potentially mitigate volatility of the Fund's share price relative
to other funds investing in small companies.

Special Risks of Scudder Tax Managed Small Company Fund. While, historically,
small company stocks have outperformed the stocks of large companies, the former
have customarily involved more risk, as well. Small companies may have limited
product lines, markets or financial resources; may lack management depth or
experience; and may be more vulnerable to adverse general market or economic
developments than large companies. The prices of small company securities are
often more volatile than prices associated with large company issues, and can
display abrupt or erratic movements at times, due to limited trading volumes and
less publicly available information.

Also, because small companies normally have fewer shares outstanding
and these shares trade less frequently than large companies, it may be more
difficult for the Fund to buy and sell significant amounts of such shares
without an unfavorable impact on prevailing market prices.

Some of the companies in which the Fund may invest may distribute, sell
or produce products which have recently been brought to market and may be
dependent on key personnel.

The securities of small companies are often traded over-the-counter and
may not be traded in the volumes typical on a national securities exchange.
Consequently, in order to sell this type of holding, the Fund may need to
discount the securities from recent prices or dispose of the securities over a
long period of time.

Master/feeder structure

The Board of Trustees has the discretion to retain the current
distribution arrangement for the Funds 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

3
<PAGE>

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.

Repurchase Agreements. Each 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 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 and Poor's
Corporation ("S&P").

A repurchase agreement provides a means for a Fund to earn income on
funds for periods as short as overnight. It is an arrangement under which the
purchaser (i.e., a Fund) acquires a security ("Obligation") and the seller
agrees, at the time of sale, to repurchase the Obligation at a specified time
and price. Securities subject to a repurchase agreement are held in a segregated
account and the value of such securities 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 a 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 upon repurchase. In either case, the income to a Fund
is unrelated to the interest rate on the Obligation itself. Obligations will be
held by the 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 a Fund's investment restriction applicable to loans. It is not clear
whether a court would consider the Obligation purchased by a 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, a Fund may encounter
delay and incur costs before being able to sell the security. Delays may involve
loss of interest or decline in price of the Obligation. If the court
characterizes the transaction as a loan and a 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, a Fund would be at risk of losing some or all of the
principal and income involved in the transaction. As with any unsecured debt
instrument purchased for a 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 a Fund may incur a loss if the proceeds
to the Fund of the sale to a third party are less than the repurchase price.
However, if the market value of the Obligation subject to the repurchase
agreement becomes less than the repurchase price (including interest), a Fund
will direct the seller of the Obligation to deliver additional securities so
that the market value of all securities subject to the repurchase agreement will
equal or exceed the repurchase price. It is possible that a Fund will be
unsuccessful in seeking to enforce the seller's contractual obligation to
deliver additional securities.

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

The convertible securities in which a Fund may invest are either
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

4
<PAGE>

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 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"(TM)).

Illiquid Securities. Each 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" or "not readily
marketable," i.e., securities which cannot be sold to the public without
registration under the Securities Act of 1933 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.

Reverse Repurchase Agreements. In a reverse repurchase agreement, a Fund sells a
portfolio instrument to another party, such as a bank or broker-dealer, in
return for cash and agrees to repurchase the instrument at a particular price
and time. While a reverse repurchase agreement is outstanding, a Fund will
maintain liquid assets in a segregated custodial account to cover its obligation
under the agreement. A Fund will enter into reverse repurchase agreements only
with parties whose creditworthiness has been found satisfactory by the Adviser.
Such transactions may increase fluctuations in the market value of a Fund's
assets and may be viewed as a form of leverage.

Investment Company Securities. Securities of other investment companies may be
acquired by the Fund to the extent permitted under the 1940 Act. Investment
companies incur certain expenses such as management, custodian, and transfer
agency fees, and, therefore, any investment by the Fund in shares of other
investment companies may be subject to such duplicate expenses.

Short Sales Against the Box. Each Fund may make short sales of common stocks if,
at all times when a short position is open, the applicable Fund owns the stock
or owns preferred stocks or debt securities convertible or exchangeable, without
payment of further consideration, into the shares of common stock sold short.
Short sales of this kind are referred to as short sales "against the box." The
broker/dealer that executes a short sale generally invests cash proceeds of the
sale until they are paid to a Fund. Arrangements may be made with the
broker/dealer to obtain a portion of the interest earned by the broker on the
investment of short sale proceeds.

Lending of Portfolio Securities. Each Fund may seek to increase its net income
by lending portfolio securities. Such loans may be made to registered
broker/dealers or other financial institutions and are required to be secured
continuously by collateral in cash or liquid assets maintained on a current
basis at an amount at least equal to the market value and accrued interest of
the securities loaned. A Fund has the right to call a loan and obtain the
securities loaned on five days notice or, in connection with securities trading
on foreign markets, within such longer period of time which coincides with the
normal settlement period for purchases and sales of such securities in such
foreign markets. During the existence of a loan, a 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. The
risks in lending securities, as with other extensions of secured credit, consist
of a possible delay in recovery or even a loss of rights in the collateral
should the borrower of the securities fail financially. Loans will only be made
to firms 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. The value of the securities loaned will not exceed
5% of the value of a Fund's total assets at the time any loan is made.

5
<PAGE>

Borrowing. Each Fund may not borrow money, except as permitted under Federal
law. Each Fund will borrow only when the Adviser believes that borrowing will
benefit the Funds after taking into account considerations such as the costs of
the borrowing. Each Fund does not expect to borrow for investment purposes, to
increase return or leverage the portfolio. Borrowing by a Fund will involve
special risk considerations. Although the principal of a Fund's borrowings will
be fixed, a Fund's assets may change in value during the time a borrowing is
outstanding, thus increasing exposure to capital risk.

Warrants. Each Fund may invest in warrants up to 5% of the value of its
respective net assets. The holder of a warrant has the right, until the warrant
expires, to purchase a given number of shares of a particular issuer at a
specified price. Such investments can provide a greater potential for profit or
loss than an equivalent investment in the underlying security. Prices of
warrants do not necessarily move, however, in tandem with the prices of the
underlying securities and are, therefore, considered speculative investments.
Warrants pay no dividends and confer no rights other than a purchase option.
Thus, if a warrant held by a Fund were not exercised by the date of its
expiration, the Fund would lose the entire purchase price of the warrant.

Strategic Transactions and Derivatives. Each 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.

In the course of pursuing these investment strategies, a 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 a 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 a Fund to utilize these
Strategic Transactions successfully will depend on the Adviser's ability to
predict pertinent market movements, which cannot be assured. Each 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 a 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 a 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 a 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 a
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

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<PAGE>

all circumstances and certain over-the-counter options may have no markets. As a
result, in certain markets, a 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 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, a 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
a 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. A 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. A 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.

A 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,

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<PAGE>

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.
A 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. A 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 a Fund or fails to make a cash settlement
payment due in accordance with the 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. A 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 a 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 15% of its total assets in illiquid securities.

If a 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.

A 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 a 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 a 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.

A Fund may purchase and sell put options on securities including U.S.
Treasury and agency securities, mortgage-backed securities, foreign sovereign
debt, 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. A 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. Each 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 a 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.

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<PAGE>

A 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 of a
premium for the option without any further obligation on the part of a Fund. If
a 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.

A 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. Each 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.

Combined Transactions. Each 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
each Fund may enter are interest rate, currency and index swaps and the purchase
or sale of related caps, floors and collars. Each 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. Each 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 a 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

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<PAGE>

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.

A 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. A 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.

Use of Segregated and Other Special Accounts. Many Strategic Transactions, in
addition to other requirements, require that each 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 a 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 a 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 a 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 a Fund requires a Fund to segregate
cash or liquid assets equal to the exercise price.

Except when a 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 a 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 a
Fund sells these instruments it will only segregate an amount of cash or liquid
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 exercise price in the case of a non cash-settled put, the same
as an OCC guaranteed listed option sold by a 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 a 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 a 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 cash or liquid 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, a Fund must
deposit initial margin and possible daily variation margin in addition to
segregating cash or liquid 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 liquid assets may consist of cash, cash
equivalents, liquid debt or equity securities or other acceptable assets.

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<PAGE>

With respect to swaps, a 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 assets having a value
equal to the accrued excess. Caps, floors and collars require segregation of
assets with a value equal to a Fund's net obligation, if any.

Strategic Transactions may be covered by other means when consistent
with applicable regulatory policies. A 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, a 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 cash or liquid assets if a
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, cash or liquid assets equal to any remaining obligation would need
to be segregated.

Investment Restrictions

The policies set forth below are fundamental policies of the Funds and
may not be changed without the approval of a majority of each Fund's outstanding
shares. As used in this Statement of Additional Information, a "majority of the
outstanding voting securities of the Fund" means the lesser of (1) 67% or more
of the voting securities present at such 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.
Each Fund has elected to be classified as a diversified series of an open-end
investment company.

In addition, as a matter of fundamental policy, each Fund will not:

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

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

(3) purchase physical commodities or contracts relating to
physical commodities;

(4) concentrate its investments in a particular industry, as that
term is used in the Investment Company Act of 1940, as
amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time;

(5) 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;

(6) 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; and

(7) 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.

As a matter of nonfundamental policy, each Fund currently does not
intend to:

(a) 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;

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<PAGE>

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

(c) 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;

(d) 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;

(e) 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;

(f) 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

(g) lend portfolio securities in an amount greater than 5% of its
total assets.

The foregoing nonfundamental policies are in addition to policies
otherwise stated in the Prospectus or Statement of Additional Information.

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.

PURCHASES

(See "Purchases" and "Transaction information" in the Funds' 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 $10,000 of Fund
shares through Scudder Investor Services, Inc. by letter, telegram, fax, TWX, or
telephone.

Shareholders of other Scudder funds who have submitted an account
application and have certified a tax 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 ($10,000 minimum), name of bank or trust
company from which the wire will be sent, the exact registration of the new
account, the tax identification number or Social Security number, address and
telephone number. The investor must then call the bank to arrange a wire
transfer to The Scudder Funds, Boston, MA 02101, ABA Number 011000028, DDA
Account 9903-5552. The investor must give the Scudder fund name, account name
and the new account number. Finally, the investor must send a completed and
signed application to the Fund promptly.

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<PAGE>

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, telegram, etc. by established shareholders (except by Scudder
Individual Retirement Account (IRA), Scudder pension and profit sharing, Scudder
401(k) and Scudder 403(b) Plan holders), members of the NASD, and banks. Orders
placed in this manner may be directed to any Scudder Investor Services, Inc.
office listed in the Funds' 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 three (3) 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 a Fund or the principal underwriter by
reason of such cancellation. If the purchaser is a shareholder, a 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 a Fund by telephone. Through
this service shareholders may purchase up to $250,000. To purchase shares by
QuickBuy, shareholders should call before the close of regular trading on the
Exchange, normally 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, a 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.

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 a QuickBuy Enrollment Form. After sending in an enrollment form
shareholders should allow 15 days for this service to be available.

Each 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 a Fund does not follow such procedures, it may be liable for losses due to
unauthorized or fraudulent telephone instructions. A 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 a Fund are purchased by a check which proves to be
uncollectible, the Fund reserves the right to cancel the purchase immediately
and 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, a 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

13
<PAGE>

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 a Fund prior to the regular close of 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, a Fund pays a fee for receipt by the Custodian of
"wired funds," but the right to charge investors for this service is reserved.

Boston banks are presently closed on certain holidays although the
Exchange may be open. These holidays are 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 a Fund.

Share Price

Purchases will be filled without sales charge at the net asset value
next computed after receipt of the purchase order in good order. Net asset value
normally will be computed as of the close of regular trading on each day the
Exchange is open for trading. Orders received after the close of regular trading
on the Exchange will be executed at the next business day's net asset value. If
the order has been placed by a member of the NASD, other than Scudder Investor
Services, Inc., it is the responsibility of that member broker, rather than the
Fund, to forward the purchase order to Scudder Service Corporation (the
"Transfer Agent") in Boston by the close of regular trading on the Exchange.

Share Certificates

Due to the desire of the Funds' management to afford ease of
redemption, certificates will not be issued to indicate ownership in a Fund.

Other Information

The Funds have authorized certain members of the NASD other than the
Distributor to accept purchase and redemption orders for the Funds' shares.
Those brokers may also designate other parties to accept purchase and redemption
orders on each Fund's behalf. Orders for purchase or redemption will be deemed
to have been received by a Fund when such brokers or their authorized designees
accept the orders. Subject to the terms of the contract between a Fund and the
broker, ordinarily orders will be priced at that Fund's net asset value next
computed after acceptance by such brokers or their authorized designees.
Further, if purchases or redemptions of a 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 Funds' 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 a Fund at any time for any reason.

The Board of Trustees of the Trust and Scudder Investor Services, Inc.,
the Funds' principal underwriter, each has the right to limit the amount of
purchases by and to refuse to sell to any person and each may suspend or
terminate the offering of shares of a Fund at any time for any reason.

The "Tax Identification Number" section of the Application must be
completed when opening an account. Applications and purchase orders without a
correct certified tax identification number and certain other certified
information (e.g., from exempt organizations a certification of exempt status),
may be returned to the investor if a correct, certified tax identification
number and certain other required certificates are not supplied.

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

14
<PAGE>

EXCHANGES AND REDEMPTIONS

(See "Exchanges and redemptions" and "Transaction information" in the Funds'
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 either may
be an additional investment into an existing account or may involve opening a
new account in the other 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) transaction authorization and dividend option as the existing
account. Other features will not carry over automatically to the new account.
When an exchange represents an additional investment into an existing account,
the account receiving the exchange proceeds must have identical registration,
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 to be 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 guarantees" in the
Funds' 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 values 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 telephone or
in writing to have the feature removed, or until the originating account is
depleted. The Corporation and the Transfer Agent each reserves the right to
suspend or terminate the privilege of the Automatic Exchange Program at any
time.

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 an 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 Funds employ
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 Funds do not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Funds will not be liable for acting upon
instructions communicated by telephone that it reasonably believes to be
genuine. The Funds 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 or classes of 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.

Special Redemption and Exchange Information

In general, shares of each Fund may be exchanged or redeemed at net
asset value. However, shares of a Fund held for less than one year are
redeemable at a price equal to 98%. This 2% discount, referred to in the
prospectus and

15
<PAGE>

this combined Statement of Additional Information as a redemption fee, directly
affects the amount a shareholder who is subject to the discount receives upon
exchange or redemption. It is intended to encourage long-term investment in a
Fund, to avoid transaction and other expenses caused by early redemptions and to
facilitate portfolio management. The fee is not a deferred sales charge, is not
a commission paid to the Adviser or its subsidiaries, and does not benefit the
Adviser in any way. Each Fund reserves the right to modify the terms of or
terminate this fee at any time.

A redemption fee will not be applied to (a) a redemption of any shares
of a Fund outstanding for one year or more, (b) a redemption of reinvestment
shares (i.e., shares purchased through the reinvestment of dividends or capital
gains distributions paid by a Fund), (c) a redemption of shares by a Fund upon
exercise of its right to liquidate accounts (i) falling below the minimum
account size by reason of shareholder redemptions or (ii) when the shareholder
has failed to provide tax identification information or (d) a redemption of
shares due to the death of the registered shareholder of a Fund account or due
to the death of all registered shareholders of a Fund account with more than one
registered shareholder, (i.e. joint tenant account), upon receipt from Scudder
Service Corporation of appropriate written instructions and documentation
satisfactory to Scudder Service Corporation. However, if shares are purchased
for a retirement plan account through a broker, financial institution or
recordkeeper maintaining an omnibus account for the shares, such waiver may not
apply. For this purpose and without regard to the shares actually redeemed,
shares will be redeemed as follows: first, reinvestment shares; second,
purchased shares held one year or more; and third, purchased shares held for
less than one year. Finally, if a shareholder enters into a transaction in Fund
shares which, although it may technically be treated as a redemption and
purchase for recordkeeping purposes, does not involve the termination of
economic interest in a Fund, no redemption fee will apply and applicability of
the redemption fee, if any, on any subsequent redemption or exchange will be
determined by reference to the date the shares were originally purchased, and
not the date of the transaction.

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 predesignated 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 the telephone redemption
privilege 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) Planholders) 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.

If a request for a redemption to a shareholder's bank account is made
by telephone or fax, payment will be 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
charge for all wire redemptions.

Note: Investors designating a savings bank to 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
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 bank 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.

16
<PAGE>

by telephone are genuine, and to discourage fraud. To the extent that the Funds
do not follow such procedures, it may be liable for losses due to unauthorized
or fraudulent telephone instructions. The Funds will not be liable for acting
upon instructions communicated by telephone that it reasonably believes to be
genuine.

Redemption by QuickSell

Shareholders, whose predesignated bank account of record is a member of
the Automated Clearing House Network (ACH) and have elected to participate in
the QuickSell program may sell shares of a Fund by telephone. To sell shares by
QuickSell, shareholders should call before the close of regular trading on the
Exchange, normally 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 in two or three business days following your call. 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 after the close of regular trading
on the Exchange will begin their processing 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 to which the redemption proceeds will be credited.
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.

The Funds employ 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 Funds do not follow such procedures, it may be liable for losses due to
unauthorized or fraudulent telephone instructions. The Funds will not be liable
for acting upon instructions communicated by telephone that it reasonably
believes to be genuine.

Redemption by Mail or Fax

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
any 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 seven (7) business days
after receipt by the Transfer Agent of a request for redemption that complies
with the above requirements. Delays of more than seven (7) days of payment 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 call 1-800-225-5163.

Redemption-in-Kind

The Funds reserve 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
each Fund and valued as they are for purposes of computing each 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.

Other Information

If a shareholder redeems all shares in the account after the record
date of a dividend, the shareholder receives in addition to the net asset value
thereof, all declared but unpaid dividends thereon. The value of shares redeemed
or

17
<PAGE>

repurchased may be more or less than the shareholder's cost depending on the net
asset value at the time of redemption or repurchase. A wire charge may be
applicable for redemption proceeds wired to an investor's bank account.
Redemption of shares, including redemptions undertaken to effect an exchange for
shares of 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 therefore may be
suspended at times (a) during which the Exchange is closed, other than customary
weekend and holiday closings, (b) during which trading on the Exchange is
restricted for any reason, (c) during which an emergency exists as a result of
which disposal by a Fund 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) during which the Securities and Exchange Commission
(the "Commission"), by order permits a suspension of the right of redemption or
a postponement of the date of payment or of redemption; provided that applicable
rules and regulations of the Commission (or any succeeding governmental
authority) shall govern as to whether the conditions prescribed in (b), (c) or
(d) exist.

Shareholders should maintain a share balance worth at least $10,000,
which minimum amount may be changed by the Board of Trustees.

Shareholders must maintain an account balance of $10,000 in a Fund.
Each 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. Each Fund will mail the proceeds of the redeemed
account to the shareholder at the address of record. Reductions in value that
result solely from market activity will not trigger an involuntary redemption.

FEATURES AND SERVICES OFFERED BY THE FUND

(See "Shareholder benefits" in the Funds' 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 Scudder Family
of 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 Conduct Rules, 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.

18
<PAGE>

Because funds in the Scudder Family of Funds do not pay any asset-based
sales charges or service fees, Scudder Family of Funds 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.

<TABLE>
<S> <C> <C> <C> <C> <C>
<CAPTION>
====================================================================================================================
YEARS ScudderPure No-Load(TM) 8.50% Load Fund Load Fund with 0.75% No-Load Fund with
Fund 12b-1 Fee 0.25% 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
====================================================================================================================
</TABLE>

Investors are encouraged to review the fee tables on pages 2 and 3 of
the Funds' 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.

19
<PAGE>

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
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.

Dividends and Capital Gains 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 applicable 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 also 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 Funds' prospectuses for the
address.

Reinvestment is usually made at the closing net asset value determined
on the business 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 applicable Fund.

Investors may also have dividends and distributions automatically
deposited in 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 a Fund pays its
distribution. A DistributionsDirect request form can be obtained by calling
1-800-225-5163. Confirmation statements will be mailed to shareholders as
notification that distributions have been deposited.

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

Scudder Investor Centers

Investors may visit any of the Investor Centers maintained by the
Distributor listed in the Funds' prospectus. The Centers are designed to provide
individuals with services during any business day. Investors may pick up
literature or obtain 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 should be mailed to "The Scudder Funds" at the address
listed under "How to contact Scudder" in the prospectus.

Reports to Shareholders

The Trust issues shareholders unaudited semiannual financial statements
and annual financial statements audited by independent accountants, including a
list of investments held and statements of assets and liabilities, operations,
changes in net assets and financial highlights. The Trust presently intends to
distribute to shareholders informal quarterly reports during the intervening
quarters, containing a statement of the investments of the Funds.

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.

20
<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.

21
<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.

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.

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

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

22
<PAGE>

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 Dividend & Growth Fund seeks high current income and long-term
growth of capital through investment in income paying equity
securities.

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.

Scudder Real Estate Investment Fund seeks long-term capital growth and
current income by investing primarily in equity securities of companies
in the real estate industry.

23
<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 EQUITY

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.

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

** Only the Scudder Shares are part of the Scudder Family of Funds.

24
<PAGE>

Scudder International Value Fund seeks long-term capital appreciation
through investment primarily in undervalued foreign equity securities.

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.

Scudder International Growth Fund seeks long-term capital appreciation
through investment primarily in the equity securities of foreign
companies with high growth potential.

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 or classes thereof may
not be available for purchase or exchange. For more information, please call
1-800-225-5163.

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

** Only the Scudder Shares are part of the Scudder Family of Funds.
*** Only the International Shares are part of the Scudder Family of Funds.

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.

25
<PAGE>

SPECIAL PLAN ACCOUNTS

(See "Scudder tax-advantaged retirement plans," "Purchases -- By
Automatic Investment Plan" and "Exchanges and redemptions -- By
Automatic Withdrawal Plan" in the Funds' 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. The
discussions of the plans below describe only certain aspects of the federal
income tax treatment of the plans. The state tax treatment may be different and
may vary from state to state. 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 each 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.

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

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

26
<PAGE>

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.)

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

<TABLE>
<S> <C> <C> <C> <C>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Starting Annual Rate of Return
Age if ------------------------------------------------------------------------------
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
</TABLE>

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

<TABLE>
<S> <C> <C> <C> <C>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Starting Annual Rate of Return
Age if ------------------------------------------------------------------------------
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
</TABLE>

Scudder Roth IRA: Individual Retirement Account

Shares of the Funds 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-

27
<PAGE>

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
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 each Fund may also be purchased as the underlying investment
for tax sheltered annuity plans under the provisions of Section 403(b)(7) of the
Code. In general, employees of tax-exempt organizations described in Section
501(c)(3) of the 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. 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 and any
reinvested dividends and capital gains distributions. Requests for increases in
withdrawal amounts or to change the 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 each Funds' prospectus. Any such requests must be received by
each Fund's transfer agent ten 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.

28
<PAGE>

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 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 GAINS DISTRIBUTIONS

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

Each Fund intends to follow the practice of distributing 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 Funds
may follow the practice of distributing the entire excess of net realized
long-term capital gains over net realized short-term capital losses. However, a
Fund may retain all or part of such gain for reinvestment after paying the
related federal income taxes for which the shareholders may then be asked to
claim a credit against their federal income tax liability. (See "TAXES.") If a
Fund does not distribute the amount of capital gain and/or ordinary income
required to be distributed by an excise tax provision of the Code, that 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.")

Earnings and profits distributed to shareholders on redemptions of Fund
shares may be utilized by the Fund, to the extent permissible, as part of the
Fund's dividends paid deduction on its federal tax return.

The Funds intend to distribute dividends from their net investment
income annually in December. The Funds intend 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
distribution may be made, if necessary.

Both types of distributions will be made in shares of a 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. Distributions of
investment company taxable income and net realized capital gains are taxable
(See "TAXES"), whether made in shares or cash.

Each distribution is accompanied by a brief explanation of the form and
character of the distribution. The characterization of distributions on such
correspondence may differ from the characterization for federal tax purposes. In
January of each year a Fund issues to each shareholder a statement of the
federal income tax status of all distributions in the prior calendar year.

29
<PAGE>

PERFORMANCE INFORMATION

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

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

Average Annual Total Return

Average Annual Total Return is the average annual compound rate of
return for the periods of one year and the life of a Fund, ended on the last day
of a recent calendar quarter. Average annual total return quotations reflect
changes in the price of a 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):

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

Where:

P = a hypothetical initial investment of $1,000
T = Average Annual Total Return
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.

Cumulative Total Return

Cumulative Total Return is the compound 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 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.

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.

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 a Fund with performance quoted with respect to other investment
companies or types of investments.

30
<PAGE>

In connection with communicating its performance to current or
prospective shareholders, a 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 Corporation 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, a 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, a 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 and
officers of the Trust, the Funds' 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
Funds. 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 Funds 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.

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 Funds. The
description may include a "risk/return spectrum" which compares the Funds 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 Funds 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

31
<PAGE>

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 Funds, including reprints of, or selections from, editorials or
articles about these Funds. Sources for Fund performance information and
articles about the Funds 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.

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.

32
<PAGE>

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.

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.

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.

33
<PAGE>

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.

FUND ORGANIZATION

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

Each Fund is a diversified series of 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, effective May 15, 1991,
from Scudder Growth and Income Fund. The Trust's authorized capital consists of
an unlimited number of shares of beneficial interest, par value $0.01 per share.
The Trust's shares are currently divided into eight series, Scudder Growth and
Income Fund, Scudder Large Company Growth Fund, Classic Growth Fund, Scudder S&P
500 Index Fund, Scudder Real Estate Investment Fund, Scudder Dividend & Growth
Fund, Scudder Tax Managed Growth Fund and Scudder Tax Managed Small Company
Fund.

The Trustees have the authority to issue additional series of shares
and to designate the relative rights and preferences as between the different
series. Each share of a Fund has equal rights with each other share of a Fund as
to voting, dividends and liquidation. All shares issued and outstanding will be
fully paid and nonassessable by the Trust, and redeemable as described in this
combined Statement of Additional Information and in the Funds' prospectus.

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 a 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 Declaration of Trust provides that obligations of a Fund are not
binding upon the Trustees individually but only upon the property of a Fund,
that the Trustees and officers will not be liable for errors of judgment or
mistakes of fact or law and that a Fund 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 a Fund, 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 a Fund. Nothing in the Declaration of Trust, however, protects or
indemnifies a Trustee or officer against any liability to which that person
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of that
person's office.

34
<PAGE>

INVESTMENT ADVISER

(See "Fund organization -- Investment adviser" in the Funds' 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 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, Value
Equity Trust, Scudder Fund, Inc., Scudder Funds Trust, Global/International
Fund, Inc., Scudder Global High Income Fund, Inc., Scudder GNMA Fund, Scudder
Portfolio Trust, Scudder Institutional Fund, Inc., Scudder International Fund,
Inc., 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, The Argentina Fund, Inc., The Brazil Fund, Inc.,
The Korea Fund, Inc., The Japan 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 the Adviser and AMA Solutions, Inc., a
subsidiary of the American Medical Association (the "AMA"), dated May 9, 1997,
the Adviser 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 the Adviser with respect to assets invested by AMA members in
Scudder funds in connection with the AMA InvestmentLinkSM Program. The Adviser
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 InvestmentLinkSM Program will be a customer of the Adviser (or of a
subsidiary thereof) and not the AMA or AMA Solutions, Inc. AMA InvestmentLinkSM
is a service mark of AMA Solutions, Inc.

The Adviser maintains a large research department, which conducts
continuous studies of the factors that affect the position of various
industries, companies and individual securities. The Adviser receives published
reports and statistical compilations from issuers and other sources, as well as
analyses from brokers and dealers who may execute portfolio transactions for the
Adviser's clients. However, the Adviser regards this information and material as
an adjunct to its own research activities. The Adviser's international
investment management team travels the world,

35
<PAGE>

researching hundreds of companies. In selecting the securities in which each
Fund may invest, the conclusions and investment decisions of the Adviser with
respect to a Fund are based primarily on the analyses of its own research
department.

Certain investments may be appropriate for a Fund and also for other
clients advised by the Adviser. Investment decisions for the Fund and other
clients are made with a view to 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 day. 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 a Fund. Purchase and sale orders for a 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.

For Scudder Tax Managed Growth Fund and Scudder Tax Managed Small
Company Fund the Investment Management Agreements (the "Agreements") dated
August 31, 1998 were approved by the initial shareholder of each Fund on
____________, and by the Trustees of the Trust on June 9, 1998. Each Agreement
will continue in effect until September 30, 1998 and from year to year
thereafter only if their continuance is approved annually by the vote of a
majority of those Trustees who are not parties to such Agreements or interested
persons of the Adviser or the Trust, cast in person at a meeting called for the
purpose of voting on such approval, and either by a vote of the Trust's Trustees
or of a majority of the outstanding voting securities of the Funds. The
Agreements 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 Agreements, the Adviser regularly provides each Fund with
continuing investment management for each Fund's portfolio consistent with each
Fund's investment objectives, policies and restrictions and determines what
securities shall be purchased, held or sold and what portion of the Fund's
assets shall be held uninvested, subject to the Trust's Declaration of Trust,
By-Laws, the 1940 Act, the Code and to the Fund's investment objectives,
policies and restrictions, and subject, further, to such policies and
instructions as the Board of Trustees of the Trust may from time to time
establish.

Under the Agreements, the Adviser renders significant administrative
services (not otherwise provided by third parties) necessary for each 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 Funds (such as the Funds' transfer agent, pricing
agents, custodian, accountants and others); preparing and making filings with
the Commission and other regulatory agencies; assisting in the preparation and
filing of the Funds' federal, state and local tax returns; preparing and filing
the Funds' 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 each Fund under
applicable federal and state securities laws; maintaining each Fund's books and
records to the extent not otherwise maintained by a third party; assisting in
establishing accounting policies of each Fund; assisting in the resolution of
accounting and legal issues; establishing and monitoring each Fund's operating
budget; processing the payment of each Fund's bills; assisting each 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 of
attending Board and committee meetings outside New York, New York or Boston,
Massachusetts) of all Trustees, officers and executive employees of the Trust
affiliated with the Adviser and makes available, without expense to the Fund,
the services of such Trustees, officers and employees of the Adviser as may duly
be elected officers of the Trust, subject to their individual consent to serve
and to any limitations imposed by law, and provides the Fund's office space and
facilities.

For these services Scudder Tax Managed Growth Fund and Scudder Tax
Managed Small Company Growth Fund pay the Adviser 0.80% and 0.90%, respectively,
payable monthly, provided each 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

36
<PAGE>

each Fund and unpaid. The Adviser has agreed to voluntarily waive management
fees to the extent necessary so that the total annualized expenses of Scudder
Tax Managed Growth Fund and Scudder Tax Managed Small Company Fund do not exceed
1.25% and 1.50%, respectively, of each Fund's average daily net assets until
February 28, 1999. These expense limitation arrangements can decrease the Funds'
expenses and improve its performance.

Under the Agreements each Fund is responsible for all of its other
expenses including: 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 share
certificates or any other expenses of issue, sale, underwriting, distribution,
redemption or repurchase of shares; the expenses of and the fees for registering
or qualifying securities for sale; the fees and expenses of Trustees, officers
and employees of the Fund who are not affiliated with the Adviser; the cost of
printing and distributing reports and notices to stockholders; and the fees and
disbursements of custodians. Each Fund may arrange to have third parties assume
all or part of the expenses of sale, underwriting and distribution of shares of
the Fund. Each Fund is also responsible for its expenses of shareholders'
meetings, the cost of responding to shareholders' inquiries, and its expenses
incurred in connection with litigation, proceedings and claims and the legal
obligation it may have to indemnify its officers and Trustees of the Trust with
respect thereto.

The Agreement identifies the Adviser as the exclusive licensee of the
rights to use and sublicense the names "Scudder," "Scudder Kemper Investments,
Inc." and "Scudder Stevens and Clark, Inc." (together, the "Scudder Marks").
Under this license, the Corporation, with respect to the Fund, has the
non-exclusive right to use and sublicense the Scudder name and marks as part of
its name, and to use the Scudder Marks in the Trusts' investment products and
services.

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

Each Agreement provides that the Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by each 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 each Agreement.

Officers and employees of the Adviser from time to time may have
transactions with various banks, including each 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.

The Adviser may serve as adviser to other funds with investment
objectives and policies similar to those of the Funds that may have different
distribution arrangements or expenses, which may affect performance.

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

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 Funds. 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.

37
<PAGE>

TRUSTEES AND OFFICERS

<TABLE>
<S> <C> <C>
<CAPTION>
Position with
Underwriter,
Name, Date of Birth Position with Scudder Investor
and Address Trust Principal Occupation** Services, Inc.
- ----------- ----- ---------------------- --------------

Daniel Pierce (3/18/34)+*= President and Trustee Managing Director of Scudder Director, Vice President
Kemper Investments, Inc. and Assistant Treasurer

Henry P. Becton, Jr. Trustee President and General Manager, --
(10/16/43) WGBH Educational Foundation
125 Western Avenue
Allston, MA 02134

Dawn-Marie Driscoll Trustee Executive Fellow, Center for --
(11/5/46) Business Ethics, Bentley
4909 SW 9th Place College; President, Driscoll
Cape Coral, FL 33914 Associates

Peter B. Freeman (8/4/32) Trustee Director, The A.H. Belo --
100 Alumni Avenue Company; Trustee, Eastern
Providence, RI 02906 Utilities Associates (public
utility holding company);
Director, AMICA Life Insurance
Co.; Director, AMICA Insurance
Co.

George M. Lovejoy, Jr. Trustee President and Director, Fifty --
(4/15/30)= Associates (real estate
50 Congress Street investment trust)
Suite 543
Boston, MA 02109

Wesley W. Marple, Jr. Trustee Professor of Business --
(2/22/32)= Administration, Northeastern
413 Hayden Hall University, College of Business
360 Huntington Ave. Administration
Boston, MA 02115

Kathryn L. Quirk Trustee, Vice President Managing Director of Scudder Director, Assistant
(12/3/52)++*= and Assistant Secretary Kemper Investments, Inc. Treasurer and Senior
Vice President

Jean C. Tempel (3/24/43) Trustee Managing Partner,Technology --
Ten Post Office Square Equity Partners
Suite 1325
Boston, MA 02109

Bruce F. Beaty (11/24/58)++ Vice President Senior Vice President of --
Scudder Kemper Investments, Inc.

Philip S. Fortuna (11/30/57)++ Vice President Managing Director of Scudder Vice President
Kemper Investments, Inc.

38
<PAGE>

Position with
Underwriter,
Name, Date of Birth Position with Scudder Investor
and Address Trust Principal Occupation** Services, Inc.
- ----------- ----- ---------------------- --------------

William F. Gadsden Vice President Managing Director of Scudder --
(2/9/55)++ Kemper Investments, Inc.

Jerard K. Hartman + Vice President Managing Director of Scudder --
(3/1/33)+ Kemper Investments, Inc.

Robert T. Hoffman Vice President Managing Director of Scudder --
(12/7/58)++ Kemper Investments, Inc.

Thomas W. Joseph Vice President Senior Vice President of Director, Vice
(4/22/39)+ Scudder Kemper Investments, Inc. President, Treasurer and
Assistant Clerk

Valerie F. Malter Vice President Senior Vice President of --
(7/25/58)++ Scudder Kemper Investments, Inc.

Thomas F. McDonough Treasurer, Vice Senior Vice President of Clerk
(1/20/47)+ President and Secretary Scudder Kemper Investments, Inc.

John R. Hebble (6/27/58)+ Assistant Treasurer Senior Vice President of --
Scudder Kemper Investments, Inc.

Caroline Pearson (4/1/62)+ Assistant Secretary Senior Vice President, Scudder --
Kemper Investments, Inc.;
Associate, Dechert Price &
Rhoads (law firm), 1989 to 1997

</TABLE>

* Mr. Pierce and Ms. Quirk are considered by the Fund and counsel to be
persons who are "interested persons" of the Adviser or of the Trust,
within the meaning of the Investment Company Act of 1940, as amended.

** Unless otherwise stated, all the Trustees and officers 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 for the Trust, 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

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

To the knowledge of the Trust, all Trustees and officers as a group
owned less than 1% of each Fund's outstanding shares as of the commencement of
operations.

39
<PAGE>

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 designed to ensure 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
Fund's 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 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 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.

Compensation of Officers and Trustees

The Independent Trustees receive the following compensation from the
Funds of Investment Trust: an annual trustee's fee of $2,400 for a Fund in which
total net assets do not exceed $100 million, $4,800 for a Fund in which total
net assets exceed $100 million but do not exceed $1 billion and $7,200 for a
Fund in which total net assets exceed $1 billion; a fee of $150 for attendance
at each board meeting, audit committee meeting or other meeting held for the
purposes of considering arrangements between the Trust for the Fund and the
Adviser or any affiliate of the Adviser; $75 for attendance at any other
committee meeting; and reimbursement of expenses incurred for travel to and from
Board Meetings. The Independent Trustee who serves as lead or liaison trustee
receives an additional annual retainer fee of $500 from each Fund. 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 or service on special trustee task forces or subcommittees .
Independent Trustees do not receive any employee benefits such as pension,
retirement or health insurance. Notwithstanding the schedule of fees, the
Independent Trustees have in the past and may in the future waive a portion of
their compensation.

The Independent Trustees also serve in the same capacity for other
funds managed by the Adviser. These funds differ broadly in type and 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 the Scudder funds as a group.

<TABLE>
<S> <C> <C> <C> <C> <C>
<CAPTION>
Investment Trust(1) All Scudder Funds
------------------- -----------------
Paid by Paid by the Paid by Paid by the
Name the Trust Adviser(2) the Funds Adviser(2)
---- --------- ---------- --------- ----------

Henry P. Becton $27,782 $2,100 $114,554 $9,500 (24 funds)
Trustee

Dawn-Marie $3,450 $0 $107,722 $8,800 (24 funds)
Driscoll(3)Trustee

Peter B. Freeman(3)Trustee $3,164 $0 $137,011 $14,625 (42 funds)
</TABLE>

40
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
<CAPTION>

Investment Trust(1) All Scudder Funds
------------------- -----------------
Paid by Paid by the Paid by Paid by the
Name the Trust Adviser(2) the Funds Adviser(2)
---- --------- ---------- --------- ----------

George M. Lovejoy, Jr. $27,757 $2,100 $139,113 $10,700 (22 funds)
Trustee

Wesley W. Marple, Jr. $27,757 $2,100 $121,129 $10,100 (23 funds)
Trustee

Jean C. Tempel $27,982 $2,100 $122,504 $10,100 (23 funds)
Trustee
</TABLE>

(1) Until August 29, 1997, Investment Trust consisted of four
funds: Scudder Growth and Income Fund, Scudder Large Company
Growth Fund, Scudder Classic Growth Fund and Scudder S&P 500
Index. Scudder S&P 500 Index commenced operations on August
29, 1997. Scudder Real Estate Investment Fund commenced
operations on March 2, 1998. Scudder Dividend & Growth Fund
commenced operations on June 1, 1998. Scudder Tax Managed
Growth Fund and Scudder Tax Managed Small Company Growth Fund
each commenced operations on July 31, 1998.

(2) Meetings associated with the Adviser's alliance with Zurich
Insurance Company. See "Investment Adviser" for additional
information.

(3) Elected as Trustee on October 24, 1997.

Members of the Board of Trustees who are employees of the Adviser or
its affiliates receive no direct compensation from the Trust, although they are
compensated as employees of the Adviser, or its affiliates, as a result of which
they may be deemed to participate in fees paid by each Fund.

DISTRIBUTOR

The Trust has an underwriting agreement with Scudder Investor Services,
Inc. (the "Distributor"), a Massachusetts corporation, which is a subsidiary of
the Adviser. The underwriting agreement dated September 10, 1985 will remain in
effect until September 30, 1998 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 a Fund. The underwriting agreement was approved by the
Trustees on August 12, 1997.

Under the underwriting agreement, each 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 a 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 a 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 a Fund's shares
to the public and preparing, printing and mailing any other literature or
advertising in connection with the offering of shares of a 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

41
<PAGE>

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.

As agent, the Distributor currently offers a 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 a Fund.

TAXES

(See "Distribution and performance information -- Dividends and capital gains
distributions" and "Transaction information -- Tax information,
Tax identification number" in the Funds' prospectuses.)

Each 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.

A regulated investment company qualifying under Subchapter M of the
Code is required to distribute to its shareholders at least 90 percent of its
investment company taxable income (including net short-term capital gain) and
generally is not 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.

Each Fund is subject to a 4% nondeductible excise tax on amounts
required to be but not distributed under a prescribed formula. The formula
requires payment to shareholders during a calendar year of distributions
representing at least 98% of a 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 company taxable income generally is made up of 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 a Fund.

If any net realized long-term capital gains in excess of net realized
short-term capital losses are retained by a Fund for reinvestment, requiring
federal income taxes to be paid thereon by a Fund, that 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 individuals 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 proportionate share of federal income taxes paid by a
Fund on such gains as a credit against the shareholder's federal income tax
liability, and will be entitled to increase the adjusted tax basis of the
shareholder's Fund shares by the difference between the shareholder's pro rata
share of such gains and the shareholder's tax credit. If a Fund makes such an
election, it may not be treated as having met the excise tax distribution
requirement.

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

Dividends from domestic corporations are not expected to comprise a
substantial part of a Fund's gross income. If any such dividends constitute a
portion of a Fund's gross income, a portion of the income distributions of that
Fund may be eligible for the 70% 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
a 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 shares of the Fund are deemed to have been held by the Fund or the
shareholder, as

42
<PAGE>

the case may be, for less than 46 days during the 90-day period beginning 45
days before the shares become ex-dividend.

Properly designated distributions of the excess of net long-term
capital gain over net short-term capital loss 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 a Fund have been held by such individual shareholders.
Such distributions are not eligible for the dividends-received 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 gain 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 gain, whether received in shares or in cash, must be reported by each
shareholder on his or her federal income tax return. Dividends declared in
October, November or December with a record date 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 (up to
$2,000 per individual for married couples if only one spouse has earned income)
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 a Fund result in a reduction in the net asset value of
that 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.

Equity options (including covered call options written on portfolio
stock) and over-the-counter options on debt securities written or purchased by a
Fund will be subject to tax under Section 1234 of the Code. In general, no loss
will be recognized by a 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 a Fund's holding period for the option, and in the case
of the exercise of a put option, on a Fund's holding period for the underlying
property. The purchase of a put option may constitute a short sale for federal
income tax purposes, causing an adjustment in the holding period of any property
in a Fund's portfolio similar to the property underlying the put option. If a
Fund writes an 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 short-term
capital gain or loss. If a call option is exercised, the character of the gain
or loss depends on the holding period of the underlying stock.

43
<PAGE>

Positions of a Fund which consist of at least one stock and at least
one stock option or other position with respect to a related security which
substantially diminishes that 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 stocks or securities and conversion of short-term capital losses into
long-term capital losses. An exception to these straddle rules exists for
certain "qualified covered call options" on stock written by the relevant Fund.

Many futures and forward contracts entered into by a Fund and listed
nonequity options written or purchased by a Fund (including options on debt
securities, options on futures contracts, options on securities indices and
options on currencies), 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 generally will be treated as 60% long-term
and 40% short-term capital gain or loss, and on the last trading day of the
Fund's fiscal year, 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 capital gain or loss. Under Section 988 of the Code, foreign
currency gain or loss from foreign currency-related forward contracts, certain
futures and options and similar financial instruments entered into or acquired
by a Fund will be treated as ordinary income or loss.

Positions of a Fund which consist of at least one position not governed
by Section 1256 and at least one futures or forward contract or nonequity option
or other position governed by Section 1256 which substantially diminishes that
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, the operation of which may cause deferral of losses,
adjustments in the holding periods of securities and conversion of short-term
capital losses into long-term capital losses, certain tax elections exist for
them which reduce or eliminate the operation of these rules. Each Fund will
monitor its transactions in options, foreign currency futures and forward
contracts and may make certain tax elections in connection with these
investments.

Notwithstanding any of the foregoing, recent tax law changes may
require the Fund to recognize gain (but not loss) from a constructive sale of
certain "appreciated financial positions" if the Fund enters into a short sale,
offsetting notional principal contract, futures or forward contract transaction
with respect to the appreciated position or substantially identical property.
Appreciated financial positions subject to this constructive sale treatment are
interests (including options, futures and forward contracts and short sales) in
stock, partnership interests, certain actively traded trust instruments and
certain debt instruments. Constructive sale treatment of appreciated financial
positions does not apply to certain transactions closed in the 90-day period
ending with the 30th day after the close of the Fund's taxable year, if certain
conditions are met.

Similarly, if a Fund enters into a short sale of property that becomes
substantially worthless, the Fund will be required to recognize gain at that
time as though it had closed the short sale. Future regulations may apply
similar treatment to other strategic transactions with respect to property that
becomes substantially worthless.

Each Fund will be required to report to the Internal Revenue Service
all distributions of investment company 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 investment company 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 a 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 each Fund may be subject to state and local taxes on
distributions received from a Fund and on redemptions of a Fund's shares.

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

44
<PAGE>

who is not a U.S. person should consider the U.S. and foreign tax consequences
of ownership of shares of a 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.

Shareholders should consult their tax advisers about the application of
the provisions of tax law described in this statement of additional information
in light of their particular tax situations.

PORTFOLIO TRANSACTIONS

Brokerage Commissions

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 a Fund 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 a 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 Funds' 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 a 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 market quotations to Scudder Fund Accounting
Corporation for appraisal purposes, or who supply research, market and
statistical information to a Fund or the Adviser. The term "research, market and
statistical information" includes advice as to the value of securities, the
advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities, and
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts.
The Adviser is authorized when placing portfolio transactions for a Fund to pay
a brokerage commission (to the extent applicable) in excess of that which
another broker might charge for executing the same transaction on account of the
receipt of research, market or statistical information. The Adviser will not
place orders with broker/dealers on the basis that the broker/dealer has or has
not sold shares of a Fund. Except for implementing the policy stated above,
there is no intention to place portfolio transactions with particular brokers or
dealers or groups thereof. 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.

To the maximum extent feasible, it is expected that the Adviser will
place orders for portfolio transactions through the Distributor, which is a
corporation registered as a broker-dealer and a subsidiary of the Adviser; the
Distributor will place orders on behalf of the Funds with issuers, underwriters
or other brokers and dealers. The Distributor will not receive any commission,
fee or other remuneration from the Funds for this service.

Although certain research, market and statistical information from
broker/dealers may be useful to a Fund and to the Adviser, it is the opinion of
the Adviser that such information only supplements the Adviser's 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 a Fund, and not all such information is used by
the Adviser in connection with a 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 a
Fund.

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<PAGE>

The Trustees review from time to time whether the recapture for the
benefit of a Fund of some portion of the brokerage commissions or similar fees
paid by a Fund on portfolio transactions is legally permissible and advisable.

Portfolio Turnover

Each Fund's average annual portfolio turnover rate is the ratio of the
lesser of sales or purchases to the monthly average value of the portfolio
securities owned during the year, excluding all securities with maturities or
expiration dates at the time of acquisition of one year or less. A higher rate
involves greater brokerage transaction expenses to the Fund and may result in
the realization of net capital gains, which would be taxable to shareholders
when distributed. Purchases and sales are made for the Fund's portfolio whenever
necessary, in management's opinion, to meet the Fund's objective. Under normal
investment conditions, it is anticipated that the portfolio turnover rate for
each Fund during its initial fiscal year will not exceed 50%.

NET ASSET VALUE

The net asset value of shares of a 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, Dr. Martin Luther King, Jr. 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 money market instruments, are valued at
prices supplied by the Funds' pricing agent(s) which reflect broker/dealer
supplied valuations and electronic data processing techniques. Short-term
securities purchased with remaining maturities of sixty days or less shall be
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 Trust'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 a Fund is determined
in a

46
<PAGE>

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.

ADDITIONAL INFORMATION

Experts

Pricewaterhouse Coopers LLP, One Post Office Square, Boston,
Massachusetts 02109, is the Funds' independent accountant.

Other Information

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

The CUSIP number of Scudder Tax Managed Growth Fund is 460965-86-6.

The CUSIP number of Scudder Tax Managed Small Company Fund is
460965-87-4.

Each Fund has a fiscal year end of October 31.

Each Fund employs State Street Bank and Trust Company as Custodian.

Costs estimated at $___________ incurred by Scudder Tax Managed Growth
Fund in conjunction with its organization are amortized over a five year period
beginning at the commencement of operations of the Fund.

Costs estimated at $___________ incurred by Scudder Tax Managed Small
Company Fund in conjunction with its organization are amortized over a five year
period beginning at the commencement of operations of the Fund.

The law firm of Dechert Price & Rhoads acts as general counsel to the
Funds.

Scudder Service Corporation ("Service Corporation"), P.O. Box 2291,
Boston, Massachusetts, 02107-2291, a subsidiary of the Adviser, is the transfer
and dividend disbursing agent for each Fund. Service Corporation also serves as
shareholder service agent and provides subaccounting and recordkeeping services
for shareholder accounts in certain retirement and employee benefit plans. Each
Fund pays Service Corporation an annual fee for each account maintained for a
participant.

The Funds 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 Fund Accounting Corporation ("SFAC"), Two International Place,
Boston, Massachusetts, 02110-4103, a subsidiary of the Adviser, computes net
asset value for each Fund. Each Fund pays SFAC an annual fee equal to 0.065% of
the first $150 million of average daily net assets, 0.04% of such assets in
excess of $150 million and 0.02% of such assets in excess of $1 billion, plus
holding and transaction charges for this service.

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. Each Fund pays
Scudder Trust Company an annual fee of $17.55 per shareholder account.

47
<PAGE>

The Funds' prospectus and this Statement of Additional Information omit
certain information contained in the Registration Statement which each Fund has
filed with the Commission 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. This Registration Statement and
its amendments are available for inspection by the public at the Commission in
Washington, D.C.

This Statement of Additional Information combines the information of
both Scudder Tax Managed Growth Fund and Scudder Tax Managed Small Company Fund.
Each Fund, through its individual prospectus, offers only its own shares, yet it
is possible that one Fund might become liable for a misstatement regarding the
other Fund. The Trustees of each Fund have considered this, and have approved
the use of a combined Statement of Additional Information.

FINANCIAL STATEMENTS

The Statement of Assets and Liabilities as of ___________ and the
Report of Independent Accountants for each Fund is included herein.

48
<PAGE>

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

SCUDDER TAX MANAGED GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES

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

July 27, 1998

Assets
Cash........................................................... $1,200
------

Total assets................................................... 1,200
------
Net assets..................................................... $1,200
======

Net Assets consist of:
Shares of beneficial interest.................................. 1
Additional paid-in capital..................................... 1,199
------

Net Assets......................................................... $1,200
======

Net asset value, offering and redemption price
per share ($1,200/100 outstanding shares of beneficial
interest, $.01 par value, unlimited number
of shares authorized).................................... $12.00
======

The accompanying note is an integral part of the financial statement.

Scudder Tax Managed Growth Fund (the "Fund") is a diversified series of
Investment Trust (the "Trust"), formerly known as Scudder Investment Trust, an
open-end management investment company registered under the Investment Company
Act of 1940, as amended (the "1940 Act"). The Trust was organized as a
Massachusetts business trust under a Declaration of Trust dated September 20,
1984, as amended. The Trust assumed the business of its predecessor on May 15,
1991. The Trust's authorized capital consists of an unlimited number of shares
of beneficial interest of $0.01 par value. The Trust's shares are currently
divided into eight series: Scudder Growth and Income Fund, Scudder Large Company
Growth Fund, Scudder Classic Growth Fund, Scudder S&P 500 Index Fund, Scudder
Real Estate Investment Fund, Scudder Dividend and Growth Fund, Scudder Tax
Managed Small Company Fund, and Scudder Tax Managed Growth Fund. The Trustees
have the authority to issue additional series of shares and to designate the
relative rights and preferences as between the different series. Each share of
the Fund has equal rights with each other share of the Fund as to voting,
dividends and liquidation. The Fund has had no operations to date other than
matters relating to its organization and registration as a diversified series.
The Fund has a redemption fee of 2% applied to shares held for less than one
year. This Financial Statement is prepared in accordance with generally accepted
accounting principles which require the use of management estimates.

Offering costs, including initial registration costs, will be charged to expense
during the Fund's first year of operations.

<PAGE>
INVESTMENT TRUST

PART C. OTHER INFORMATION

<TABLE>
<S> <C>
<CAPTION>
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. 96 to the Registration
Statement.)

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 Classic Growth Fund - Scudder Shares:
Financial Highlights for the period September 9, 1996 (commencement of operations)
to February 28, 1997
(Incorporated by reference to Post-Effective Amendment No. 96 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. 96 to the Registration
Statement.)

Included in the Part B:
-----------------------

For Scudder Growth and Income Fund:
Investment Portfolio as of December 31, 1997
Statement of Assets and Liabilities as of December 31, 1997
Statement of Operations for the year ended December 31, 1997
Statements of Changes in Net Assets for the two fiscal years
ended December 31, 1997
Financial Highlights for the ten fiscal years ended December 31, 1997
Notes to Financial Statements
Report of Independent Accountants
(Incorporated by reference to Post-Effective Amendment No. 96 to the Registration
Statement.)

For Scudder Large Company Growth Fund:
Investment Portfolio as of October 31, 1997
Statement of Assets and Liabilities as of October 31, 1997
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

Part C - Page 1
<PAGE>

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
(Incorporated by reference to Post-Effective Amendment No. 90 to the Registration
Statement.)

For Classic Growth Fund - Scudder Shares:
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
Are filed herein.

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.)

For Scudder Dividend & Growth Fund: Statement of Assets and Liabilities dated May
26, 1998 is filed herein.

For Scudder Tax Managed Growth Fund: Statement of Assets and Liabilities dated
July 27, 1998 is filed herein.

For Scudder Tax Managed Small Company Fund: Statement of Assets dated July 27,
1998 is filed herein.

Statements, schedules and historical information other than those listed above have been
omitted since they are either not applicable or are not required.

Part C - Page 2
<PAGE>

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").

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").

(b)(4) Establishment and Designation of Classes of Shares of Beneficial
Interest, $0.01 Par Value - Kemper A, B & C Shares, and Scudder S
Shares is incorporated by reference to Post-Effective Amendment No.
94 to the Registration Statement.

(c)(1) Redesignation of Series, Scudder Classic Growth Fund to Classic
Growth Fund, is incorporated by reference to Post-Effective
Amendment No. 94 to the Registration Statement.

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").

Part C - Page 3
<PAGE>

(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. (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 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 dated May 1, 1997 is
incorporated by reference to Post-Effective Amendment No. 84 to the
Registration Statement.

Part C - Page 4
<PAGE>

(g) Investment Management Agreement between the Registrant (on behalf of
Scudder Large Company Growth Fund) and Scudder Kemper Investments,
Inc. dated December 31, 1997 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 Investment Fund) and Scudder Kemper Investments,
Inc. dated March 2, 1998 is incorporated by reference to
Post-Effective Amendment No. 93 to the Registration Statement.

(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 incorporated by reference to
Post-Effective Amendment No. 92 to the Registration Statement.

(k) Form of Investment Management Agreement between the Registrant (on
behalf of Scudder Dividend & Growth Fund) and Scudder Kemper
Investments, Inc. dated June 1, 1998 is incorporated by reference to
Post-Effective Amendment No. 97 to the Registration Statement.

(l) Investment Management Agreement between the Registrant (on behalf of
Scudder Tax Managed Growth Fund) and Scudder Kemper Investments,
Inc. dated July 30, 1998 to be filed by amendment.

(m) Investment Management Agreement between the Registrant (on behalf of
Scudder Tax Managed Small Company Fund) and Scudder Kemper
Investments, Inc. dated July 30, 1998 to be filed by amendment.

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").

(b) Form of Underwriting Agreement and Distribution Services Agreement
between the Registrant on behalf of Classic Growth Fund and Kemper
Distributors, Inc. dated April 1998, incorporated by reference to
Post-Effective Amendment No. 94 to the Registration Statement.

7. Inapplicable.

Part C - Page 5
<PAGE>

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.

(a)(9) Custodian fee schedule for Scudder Dividend & Growth Fund to be
filed by amendment.

(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").

Part C - Page 6
<PAGE>

(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").

(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").

(a)(4) Form of Agency Agreement between the Registrant on behalf of Classic
Growth Fund and Kemper Service Company dated April 1998,
incorporated by reference to Post-Effective Amendment No. 94 to the
Registration Statement.

(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.

Part C - Page 7
<PAGE>

(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").

(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").

(f)(3) Form of Administrative Services Agreement between the Registrant on
behalf of Classic Growth Fund, and Kemper Distributors, Inc., dated
April 1998, incorporated by reference to Post-Effective Amendment
No. 94 to the Registration Statement.

10. Inapplicable.

11. Consent of Independent Accountants is filed herein

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.

Part C - Page 8
<PAGE>

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. Mutual Funds Multi-Distribution System Plan - Rule 18f-3 Plan is
incorporated by reference to Post-Effective Amendment No. 94 to the
Registration Statement.

Item 25. Persons Controlled by or under Common Control with Registrant.
- -------- --------------------------------------------------------------

None

Item 26. Number of Holders of Securities (as of July 17, 1998).
- -------- ------------------------------------------------------

(1) (2)
Title of Class Number of Record Shareholders
-------------- -----------------------------

Shares of beneficial interest
($0.01 par value):

Scudder Growth and Income Fund 472,176
Scudder Large Company Growth Fund 33,229
Classic Growth Fund 8,848
Scudder S&P 500 Index Fund 5,904
Scudder Real Estate Investment Fund 3,279

</TABLE>
Item 27. Indemnification.
- -------- ----------------

A policy of insurance covering Scudder Kemper Investments,
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

Part C - Page 9
<PAGE>

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:

(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

Part C - Page 10
<PAGE>

(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:

(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.
<TABLE>
<S> <C> <C>
<CAPTION>

Business and Other Connections of Board
Name of Directors of Registrant's Adviser
---- ------------------------------------

Stephen R. Beckwith Treasurer and Chief Financial Officer, Scudder Kemper 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**

Part C - Page 11
<PAGE>

Lynn S. Birdsong Director and Vice President, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark (Luxembourg) S.A.#

Laurence W. Cheng Director, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland##
Director, ZKI Holding Corporation xx

Steven Gluckstern Director, Scudder Kemper Investments, Inc.**
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.*
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 Rohrbasser Director, Scudder Kemper Investments, Inc.**
Member Corporate Executive Board, Zurich Insurance Company of Switzerland##
President, Director, Chairman of the Board, ZKI Holding Corporation xx

Cornelia M. Small Vice President, Scudder Kemper Investments, Inc.**

Edmond D. Villani Director, President and Chief Executive Officer, Scudder 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

Part C - Page 12
<PAGE>

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
</TABLE>

Item 29. Principal Underwriters.
- -------- -----------------------

(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.

<TABLE>
<S> <C> <C> <C>
<CAPTION>
(1) (2) (3)

Name and Principal Position and Offices with Positions and
Business Address Scudder Investor Services, Inc. Offices with 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 Assistant None
Two International Place Treasurer
Boston, MA 02110

Linda Coughlin Director and Senior Vice President None
Two International Place
Boston, MA 02110

Part C - Page 13
<PAGE>

Richard W. Desmond Vice President None
345 Park Avenue
New York, NY 10154

Paul J. Elmlinger Senior Vice President and Assistant None
345 Park Avenue Clerk
New York, NY 10154

Philip S. Fortuna Vice President Vice President
101 California Street
San Francisco, CA 94111

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, Treasurer Vice President
Two International Place and Assistant Clerk
Boston, MA 02110

Thomas F. McDonough Clerk Vice President, Secretary
Two International Place and Treasurer
Boston, MA 02110

Daniel Pierce Director, Vice President President and Trustee
Two International Place and Assistant Treasurer
Boston, MA 02110

Kathryn L. Quirk Director, Senior Vice President and Trustee, Vice President
345 Park Avenue Assistant Clerk and Assistant Secretary
New York, NY 10154

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

Part C - Page 14
<PAGE>

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)

(1) (2) (3) (4) (5)
Net Underwriting Compensation on
Name of Principal Discounts and Redemptions Brokerage Other
Underwriter Commissions and Repurchases Commissions Compensation
----------- ----------- --------------- ----------- ------------

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 Kemper
Investments, Inc., 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.
- -------- -------------

The Registrant hereby undertakes to file a post-effective
amendment, using reasonably current financial statements of
Scudder Dividend & Growth Fund within four to six months from
the effectiveness date of Registrant's initial Registration
Statement under the 1933 Act.

The Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of such Fund's
latest annual report to shareholders upon request and without
charge.

The Registrant hereby undertakes to call a meeting of
shareholders for the purpose of voting on the question of
removal of a Trustee or Trustees when requested to do so by
the holders of at least 10% of the Registrant's outstanding
shares and in connection with such meeting to comply with the
provisions of Section 16(c) of the Investment Company Act of
1940 relating to shareholder communications.

The Registrant hereby undertakes to file an amendment to the
registration statement with certified financial statements
showing the initial capital received before accepting
subscriptions from any persons in excess of 25, pursuant to
Section 14(a)(3) of the 1940 Act.

Part C - Page 15
<PAGE>

The Registrant hereby undertakes, insofar as indemnification
for liability arising under the Securities Act of 1933 may be
permitted to Trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a
Trustee, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is
asserted by such Trustee, officer or controlling person in
connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.

Part C - Page 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(b) 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 29th day of July, 1998.

INVESTMENT TRUST

By /s/Thomas F. McDonough
------------------------------
Thomas F. McDonough, Treasurer,
Vice President and Secretary
(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.

<TABLE>
<S> <C> <C>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----

/s/Daniel Pierce
- --------------------------------------
Daniel Pierce* President (Principal Executive July 29, 1998
Officer) and Trustee

/s/Henry P. Becton, Jr.
- --------------------------------------
Henry P. Becton, Jr.* Trustee July 29, 1998

/s/Dawn-Marie Driscoll
- --------------------------------------
Dawn-Marie Driscoll* Trustee July 29, 1998

/s/Peter B. Freeman
- --------------------------------------
Peter B. Freeman* Trustee July 29, 1998

/s/George M. Lovejoy, Jr.
- --------------------------------------
George M. Lovejoy, Jr.* Trustee July 29, 1998

/s/Wesley W. Marple, Jr.
- --------------------------------------
Wesley W. Marple, Jr.* Trustee July 29, 1998

<PAGE>

SIGNATURE TITLE DATE
- --------- ----- ----

/s/Kathryn L. Quirk
- --------------------------------------
Kathryn L. Quirk* Trustee, Vice President July 29, 1998
and Assistant Secretary

/s/Jean C. Tempel
- --------------------------------------
Jean C. Tempel* Trustee July 29, 1998

</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.

<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. 98
TO REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

AND

AMENDMENT NO. 50

TO REGISTRATION STATEMENT

UNDER

THE INVESTMENT COMPANY ACT OF 1940

INVESTMENT TRUST

<PAGE>

INVESTMENT TRUST

EXHIBIT INDEX

Exhibit 11

PricewaterhouseCoopers LLP

Consent of Independent Accountants

To the Trustees of Investment Trust:

We consent to the inclusion in Post-Effective Amendment No. 98 to the
Registration Statement of Investment Trust (formerly Scudder Investment Trust)
on Form N-1A, of our reports dated July 28, 1998 on our audits of the Statements
of Assets and Liabilities of Scudder Tax Managed Growth Fund and Scudder Tax
Managed Small Company Fund as of July 27, 1998, which are included in the
Post-Effective Amendment to the Registration Statement. We also consent to the
reference to our Firm under the caption, "Experts."

/s/PricewaterhouseCoopers LLP
Boston, Massachusetts PricewaterhouseCoopers LLP
July 29, 1998