SCUDDER PATHWAY SERIES /NEW/, 497, 1998-02-05

SCUDDER PATHWAY SERIES /NEW/
497, 1998-02-05

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This prospectus sets forth concisely the information about Scudder Pathway
Series: International Portfolio (the "Portfolio"), a diversified open-end
management investment company, that a prospective investor should know before
investing. Scudder Pathway Series is composed of four separate Portfolios with
distinctly different investment objectives. Each Portfolio, one of which is
offered herein, seeks to accomplish its objective by investing in a number of
other funds in the Scudder Family of Funds (the "Underlying Scudder Funds").
Please retain this prospectus for future reference.

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

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

Contents--see page 5.

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

[PRINTED WITH SOY INK LOGO] [RECYCLE LOGO] Printed on recycled paper

345-2-28
MIS83P
PRO830298

SCUDDER [LOGO]

Scudder
Pathway Series:
International
Portfolio

Prospectus
February 1, 1998

A pure no-load(TM) (no sales charges) mutual fund which seeks maximum total
return by investing in a select mix of international and global funds in the
Scudder Family of Funds.

<PAGE>

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Expense information
- ----------------------------------------

- --------------------------------------------------------------------------------
This information is designed to help you understand the various costs and
expenses that an investor in Scudder Pathway Series: International Portfolio
will bear directly or indirectly. With Scudder's pure no-load(TM) portfolios and
funds, you pay no commissions to purchase or redeem shares, or to exchange from
one portfolio or fund to another. As a result, all of your investment goes to
work for you.

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

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

2) Annual Portfolio operating expenses: Expenses paid by the Portfolio before it
distributes its net investment income, expressed as a percentage of the
Portfolio's average daily net assets for the most recent fiscal year.

Investment management fee NONE
12b-1 fees NONE
Other expenses NONE
Total Portfolio operating expenses** NONE

The Portfolio is expected to operate at a zero expense level. However, the
Portfolio's shareholders will indirectly bear the Portfolio's pro rata share of
fees and expenses incurred by the Underlying Scudder Funds in which the
Portfolio is invested. The investment returns of the Portfolio, therefore, will
be net of the Portfolio's share of the expenses of the Underlying Scudder Funds
in which the Portfolio is invested. The chart on page 3 shows the expense ratios
of each Underlying Scudder Fund after fee waiver or reimbursement where
applicable, as of its most recent fiscal year end.

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* You may redeem by writing or calling the Portfolio. 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."
** The payment of the Portfolio's pro rata share of expenses is subject to the
Special Servicing Agreement. Please refer to "Portfolio organization--Special
Servicing Agreement."

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2
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Expense Ratios of the
Underlying Scudder Funds
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Underlying Scudder Funds Expense Ratio
- ------------------------ -------------
Money Market Fund
Scudder Cash Investment Trust+ 0.86%

Bond Mutual Funds
Scudder Emerging Markets Income Fund 1.49%
Scudder Global Bond Fund+ 1.00%
Scudder International Bond Fund 1.55%
Scudder Short Term Bond Fund 0.86%

Underlying Scudder Funds Expense Ratio
- ------------------------ -------------
Equity Mutual Funds
Scudder Emerging Markets Growth Fund+ 2.00%
Scudder Global Discovery Fund 1.63%
Scudder Global Fund 1.37%
Scudder Gold Fund 1.60%
Scudder Greater Europe Growth Fund+ 1.66%
Scudder International Fund 1.15%
Scudder International Growth and Income Fund+ 1.75%
Scudder Latin America Fund 1.89%
Scudder Pacific Opportunities Fund 1.94%
The Japan Fund 1.21%

Based on the foregoing, the range for the average weighted expense ratio borne
by the Portfolio is expected to be 1.05% to 2.00%. A range is provided since the
average assets of the Portfolio invested in each of the Underlying Scudder Funds
will fluctuate.

Example
Using the midpoint of the ratios set forth above, the total pro rata expenses
relating to a $1,000 investment in the Portfolio, assuming a 5% annual return
and redemption at the end of each period, are listed below. Investors do not pay
these expenses directly; they are paid by each Underlying Scudder Fund before it
distributes its net investment income to the Portfolio. (As noted above, the
Portfolio has no redemption fees of any kind.)
1 Year 3 Years
------ -------
$16 $48

See "Portfolio organization--Special Servicing Agreement" for an explanation of
the Special Servicing Agreement. This example assumes that the Portfolio
reinvests all dividends and distributions paid by the Underlying Scudder Funds.
This example should not be considered a representation of past or future
expenses or returns. Actual expenses and returns of each Underlying Scudder Fund
vary from year to year and may be higher or lower than those shown.

+The following funds maintained their expenses at the following rates for
their respective fiscal periods: Scudder Cash Investment Trust: 0.85%,
Scudder Emerging Markets Growth Fund: 2.00%, Scudder Global Bond Fund: 1.00%,
Scudder Greater Europe Growth Fund: 1.50%, Scudder International Bond Fund:
1.50%, and Scudder International Growth and Income Fund: 1.75%. If the
Adviser had not maintained the Funds' expenses, the total return for each
such fund for the period would have been lower. Please see the appropriate
Underlying Scudder Fund prospectus for details.

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3
<PAGE>

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

If you would like more detailed information concerning the Portfolio's
performance, a complete portfolio listing and audited financial statements are
available in the Portfolio's Annual Report dated September 30, 1997 which may
be obtained without charge by writing or calling Scudder Investor Services,
Inc.

For the Period
November 15, 1996
(commencement of
operations)to
September 30, 1997
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Net asset value, beginning of period .................. $12.00
-----------------
Income from investment operations:
Net investment income ................................ .31
Net realized and unrealized gain on investment
transactions ....................................... 1.63(a)

Total from investment operations -----------------
..................................................... 1.94
Less distributions: -----------------
From net investment income
From net realized gain on investments (.25)
(.10)
Total distributions -----------------
(.35)
Net asset value, end of period -----------------
$13.59
- --------------------------------------------------------------------------------
Total Return (%) 16.58**
Ratios and Supplemental Data
Net assets, end of period ($ millions) 12
Ratio of operating expenses to average daily net --
assets (%)(b)
Ratio of net investment income to average daily net 1.23*
assets (%)
Portfolio turnover rate (%) 35.1*
(a) The amount shown for a share outstanding throughout the period does not
accord with the change in the aggregate gains and losses in the portfolio
securities during the period because of the timing of sales and repurchases
of Portfolio shares in relation to fluctuating market values during the
period.
(b) This Portfolio invests in other Scudder Funds, and although the Portfolio
did not incur any direct expenses for the period, the Portfolio did bear its
share of the operating, administrative and advisory expenses of the
Underlying Scudder Funds.
* Annualized
** Not annualized
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4
<PAGE>

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A message from the President
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[PHOTO OMITTED]

Edmond D. Villani, President
and CEO, Scudder Kemper
Investments, Inc.

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

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

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

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

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

/s/ Edmond D. Villani

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Scudder Pathway Series:
International Portfolio
- ----------------------------------------

Investment Objective

o maximum total return

Investment Characteristics

o a professionally managed portfolio which allocates its investments among
select international and global funds in the Scudder Family of Funds

o provides exposure to a wide range of asset classes, securities and markets
around the globe
o no added fees or expenses associated with the operation of Scudder Pathway
Series: International Portfolio
o appropriate for IRA, 401(k) and other retirement plans

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Contents
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Investment objective and policies 9
Why invest in the Portfolio? 10
Description of the Underlying
Scudder Funds 12
Information about policies,
investments and risks 19
Investment restrictions of the
Portfolio 22
Risks of investing in the Portfolio 22
Distribution and performance
information 23
Portfolio organization 23
Transaction information
Shareholder benefits 30
Trustees and Officers
Investment products and services
How to contact Scudder 50
Purchases 47
Exchanges and redemptions 49
Appendix

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5
<PAGE>

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Investment objective and policies
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Scudder Pathway Series: International Portfolio (the "Portfolio") is one of four
professionally managed, diversified portfolios of Scudder Pathway Series (the
"Trust") (also known as "the Series"). The Portfolio's investment objective is
to maximize 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 funds
in the Scudder Family of Funds.

The Scudder Funds in which the Portfolio may invest are referred to as the
"Underlying Scudder Funds," (see below). Some of these Underlying Scudder Funds
are equity mutual funds which invest largely in stocks to achieve growth. Other
Underlying Scudder Funds held by the Portfolio are bond mutual funds which focus
primarily on seeking total return. Moreover, the Underlying Scudder Funds
represent both multiple and single regions of the world as well as established
versus emerging markets and economies.

The portfolio management team for the Portfolio allocates investments based on
the outlook of the Portfolio's investment adviser, Scudder Kemper Investments,
Inc. (the "Adviser"), for the financial markets, world economies and the
relative performance potential of the Underlying Scudder Funds.

Under normal market conditions, at least 65% of the Portfolio's total assets
will be invested in Underlying Scudder Funds investing primarily in non-domestic
securities. The Portfolio defines "non-domestic" securities as securities of
companies neither domiciled in the U.S. nor organized under the laws of the U.S.
and for which the U.S. trading market is not a primary market. Under normal
market conditions, the International Portfolio will invest at least 60% of total
assets in equity mutual funds. The balance of the Portfolio's total assets will
be invested in bond mutual funds or held in a money market fund, cash or cash
equivalents. If, as a result of appreciation or depreciation, the percentage of
the Portfolio's assets invested in the above categories exceeds or is less than
the applicable range, the Adviser will consider, in its discretion, whether to
reallocate the assets of the Portfolio to comply with the stated ranges.

The Portfolio will purchase or sell shares of Underlying Scudder Funds to: (a)
accommodate purchases and sales of the Portfolio's shares, (b) change the
percentages of the Portfolio's assets invested in each of the Underlying Scudder
Funds in response to changing market conditions, and (c) maintain or modify the
allocation of the Portfolio's assets in accordance with the investment mix
described above. To provide for redemptions or for temporary defensive purposes,
the Portfolio may invest without limit in cash or cash equivalents, including
repurchase agreements, reverse repurchase agreements, commercial paper and other
types of money market instruments.

Except as otherwise indicated, the Portfolio's investment objective and
policies are not

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Underlying Scudder Funds in which
the Pathway International Portfolio
may invest
- -------------------------------------
Equity Mutual Funds
Scudder Emerging Markets Growth Fund
Scudder Global Discovery Fund
Scudder Global Fund
Scudder Gold Fund
Scudder Greater Europe Growth Fund
Scudder International Fund
Scudder International Growth and Income Fund
Scudder Latin America Fund
Scudder Pacific Opportunities Fund
The Japan Fund

Bond Mutual Funds
Scudder Emerging Markets Income Fund
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Short Term Bond Fund

Money Market
Fund Scudder Cash Investment Trust
- -------------------------------------

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6
<PAGE>

fundamental and may be changed without a vote of shareholders. If there is a
change in investment objective, shareholders should consider whether the
Portfolio remains an appropriate investment in light of their then current
financial position and needs. There can be no assurance that the Portfolio's
objective will be met.

For information about the investment objectives of each of the Underlying
Scudder Funds, please refer to "Description of the Underlying Funds." For
information about purchasing, exchanging or redeeming shares, refer to
"Transaction information," "Purchases" and "Exchanges and redemptions."

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Why invest in the Portfolio?
- ----------------------------------------

The Pathway Series Portfolios are designed for individuals and institutions who
prefer to have their asset allocation decisions made by professional money
managers, are looking for core investments for their investment portfolio and
appreciate the advantages of broad diversification. Scudder Pathway Series:
International Portfolio seeks maximum total return (i.e., any capital
appreciation plus dividend income and interest). Investing to achieve this goal,
the International Portfolio's assets are carefully allocated among a wide
selection of international and global mutual funds offered by the Scudder Family
of Funds.

The Portfolio is designed to meet the needs of investors seeking to add--through
a single pure no-load(TM) investment--diversified international exposure to
their investment portfolio. The Portfolio may be most appropriate for long-term
investors, including those planning for retirement using tax-advantaged
retirement accounts including IRAs, 401(k) corporate employee savings plans and
403(b) non-profit organization savings plans.

The proliferation of mutual funds over the last several years and the increased
responsibilities shouldered by employees for managing their retirement plan
assets have left many investors in search of a simple means to manage their
long-term investments. With new investment categories emerging each year and
with each mutual fund reacting differently to political, economic and business
events, many investors are forced to make complex investment decisions with
limited experience, time and personal resources.

The Portfolio should appeal to those investors interested in an actively
managed, broad approach to international investing. The allocation of assets
within the Portfolio is determined by the Adviser according to fundamental and
quantitative analysis. Shifts will be made among Underlying Scudder Funds and
asset classes based on the Adviser's then current outlook for the financial
markets and the world's economies. Because the Portfolio's assets will be
adjusted only periodically and within the investment ranges described above,
there should not be any sudden large-scale changes in the Portfolio's asset
allocation. The Portfolio is not designed as a market timing vehicle, but rather
as a cost-effective, simple approach to helping investors participate in a range
of international opportunities with a goal of maximum total return.

International investing offers the investor the dual benefits of enhanced return
potential and greater overall portfolio diversification. Today, markets outside
the U.S. represent well over half the world's public companies and equity
values, and the economies of many foreign countries are growing faster than the
U.S. economy. Further, foreign markets don't always move in step with each other
and the U.S., so adding international exposure, such as through the Portfolio,
can reduce overall portfolio volatility over time.

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7
<PAGE>

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Description of the Underlying
Scudder Funds
- ----------------------------------------

The following is a concise description of the investment objectives and
practices for each of the Underlying Scudder Funds. There can be no assurance
that the Underlying Scudder Funds' objectives will be met. Additional
information regarding the investment practices of the Underlying Scudder Funds
is located in the section entitled "Additional information about policies and
investments," in the Appendix to this prospectus, in the sections entitled "The
Fund's Investment Objectives and Policies" and "Glossary" in the Statement of
Additional Information and in the prospectus of each of the Underlying Scudder
Funds. Prospectuses for the Underlying Scudder Funds may be obtained without
charge by writing Scudder Investor Services, Inc., Two International Place,
Boston, MA 02110-4103 or by calling 1-800-225-2470. No offer is made in this
prospectus of shares of any of the Underlying Scudder Funds.

The following Underlying Scudder Fund is the money market fund in which the
Portfolio may invest and will likely serve as the primary cash reserve portion
of the Portfolio.

Scudder Cash Investment Trust is a diversified investment company which seeks to
maintain stability of capital and, consistent therewith, to maintain liquidity
of capital and to provide current income. The Fund seeks to maintain a constant
net asset value of $1.00 per share. Shares of the Fund are not insured or
guaranteed by the U.S. Government and there can be no assurance that a stable
net asset value will be maintained.

The Fund purchases U.S. dollar-denominated money market securities. All of the
Fund's portfolio securities must meet certain quality criteria at the time of
purchase. Generally, the Fund may purchase only securities which are rated, or
issued by a company with comparable securities rated, within the two highest
quality rating categories of one or more of the following rating agencies:
Moody's Investor Services, Inc. ("Moody's"), Standard & Poor's Corporation
("S&P") and Fitch Investors Service, Inc. ("Fitch") or, if unrated, the credit
quality of the security is deemed equivalent, in the opinion of the Adviser, to
the rated securities mentioned above. Amendments have been adopted to the
federal rules regulating quality, maturity and diversification requirements of
money market funds, like the Fund. Money market funds must comply with the
revised rule by July 1, 1998. The Fund intends to be in compliance with the
amended requirements by that date.

The maturity of each investment in the Fund's portfolio is 397 calendar days or
less, except in the case of U.S. Government securities which may have maturities
of up to 762 calendar days. The dollar-weighted average maturity of the Fund's
portfolio varies with money market conditions, but is always 90 days or less. As
a money market fund with a short-term maturity, the Fund's income fluctuates
with changes in interest rates but its price is expected to remain fixed at
$1.00 per share.

The following Underlying Scudder Funds are bond mutual funds which primarily
seek to provide current income or total return.

The Fund considers "emerging markets" to include any country that is defined as
an emerging or developing economy by any one of the following: International
Bank for Reconstruction and Development (i.e., the World Bank), the
International Finance Corporation or the United Nations or its authorities.

To reduce currency risk, the Fund invests at least 65% of its assets in U.S.
dollar-denominated debt

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8
<PAGE>

securities. Therefore, no more than 35% of the Fund's assets may be invested in
debt securities denominated in foreign currencies. By focusing on fixed-income
instruments issued in emerging markets, the Fund invests predominantly in debt
securities that are rated below investment-grade. The Fund may invest up to 5%
of its net assets in non-performing securities whose quality is comparable to
securities rated as low as D by S&P or C by Moody's. Please refer to the
attached Appendix for further information.

The Fund involves above-average bond fund risk and can invest entirely in high
yield/high risk bonds (commonly referred to as junk bonds). Investments in
emerging markets can be volatile. The Fund's share price and yield can fluctuate
daily in response to political events, changes in the perceived creditworthiness
of emerging nations, fluctuations in interest rates and, to a certain extent,
movements in foreign currencies.

The Fund will invest principally in a managed portfolio of high-grade
intermediate- and long-term bonds denominated in the U.S. dollar and foreign
currencies, including bonds denominated in the European Currency Unit (ECU).
(Intermediate-term bonds generally have maturities between three and eight
years, and long-term bonds generally have maturities of greater than eight
years.) Portfolio investments will be selected on the basis of, among other
things, yields, credit quality, and the fundamental outlooks for currency and
interest rate trends in different parts of the globe, taking into account the
ability to hedge a degree of currency or local bond price risk. At least 65% of
the Fund's investments will consist of high-grade debt securities, which are
those rated in one of the three highest rating categories of one of the major
U.S. rating services or, if unrated, considered to be of equivalent quality in
local currency terms as determined by the Adviser. The Fund may also invest up
to 15% of its net assets in debt securities rated BBB by S&P or Baa by Moody's
and lower, or unrated securities considered to be of equivalent quality by the
Adviser. Securities rated below Baa by Moody's or BBB by S&P are commonly
referred to as "junk bonds." The Fund will not invest in any securities rated B
or lower.

The Fund may invest in debt securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities; obligations issued or guaranteed
by foreign national governments, their agencies, instrumentalities or political
subdivisions; and debt securities issued or guaranteed by supranational
organizations such as the European Investment Bank, Inter-American Development
Bank and The World Bank. The Fund may also invest in non-government securities
including corporate debt securities, bank or bank holding company obligations
(e.g., certificates of deposit and bankers acceptances), and mortgage and other
asset-backed issues.

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9
<PAGE>

different parts of the globe, taking into account the ability to hedge a degree
of currency or local bond price risk. The Fund will normally invest at least 65%
of its total assets in bonds denominated in foreign currencies. The Fund will
invest no more than 35% of the value of its total assets in U.S. debt
securities. The Fund will invest no more than 15% of its total assets in debt
securities rated below investment-grade, but no lower than B.

Scudder Short Term Bond Fund is a diversified investment company which 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. The
dollar-weighted average effective maturity of the Fund's portfolio may not
exceed three years. The net asset value of the Fund is expected to fluctuate
with changes in interest rates and bond market conditions, although this
fluctuation should be more moderate than that of a fund with a longer average
maturity. The Adviser, however, will attempt to minimize principal fluctuation
through, among other things, diversification, credit analysis and security
selection, and adjustment of the Fund's average portfolio maturity.

The Fund emphasizes high quality investments. Under normal market conditions, at
least 65% of the Fund's net assets will be invested in (1) obligations of the
U.S. Government, its agencies or instrumentalities, and (2) debt securities
rated, at the time of purchase, in one of the two highest categories of S&P or
Moody's.

In addition, the Fund will not invest in any debt security rated at the time of
purchase below investment-grade.

The following Underlying Scudder Funds are equity mutual funds which seek
long-term growth of capital.

Scudder Emerging Markets Growth Fund is a non-diversified investment company
which seeks long-term growth of capital primarily through equity investment in
emerging markets around the globe. The Fund will invest in the Asia-Pacific
region, Latin America, less developed nations in Europe, the Middle East and
Africa, focusing investments in countries and regions where there appear to be
the best value and appreciation potential, subject to considerations of
portfolio diversification and liquidity. At least 65% of the Fund's total assets
will be invested in the equity securities of emerging market issuers. The Fund
considers "emerging markets" to include any country that is defined as an
emerging or developing economy by any one of the International Bank for
Reconstruction and Development (i.e., the World Bank), the International Finance
Corporation or the United Nations or its authorities. The Fund intends to
allocate its investments among at least three countries at all times, and does
not expect to concentrate in any particular industry. The Fund deems an issuer
to be located in an emerging market if:

o the issuer is organized under the laws of an emerging market country;
the issuer's principal securities trading market is in an emerging market; or
o at least 50% of the issuer's non-current assets, capitalization, gross
revenue or profit in any one of the two most recent fiscal years is derived
(directly or indirectly through subsidiaries) from assets or activities
located in emerging markets.

The Fund's equity investments are common stock, preferred stock (either
convertible or non-convertible), depository receipts and warrants. Equity
securities may also be purchased through rights. Securities may be listed on
securities exchanges, traded over-the-counter, or have no organized market. The
Fund may invest in illiquid securities.

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10
<PAGE>

securities. Under normal market conditions, the Fund may invest up to 35%
of its assets in equity securities of issuers in the U.S. and other developed
markets.

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

In pursuit of its objective, the Fund generally invests in small, rapidly
growing companies which offer the potential for above-average returns relative
to larger companies, yet are frequently overlooked and thus undervalued by the
market. The Fund has the flexibility to invest in any region of the world. It
can invest in companies based in emerging markets, typically the Far East, Latin
America and lesser developed countries in Europe, as well as in firms operating
in developed economies, such as those of the United States, Japan and Western
Europe.

Under normal circumstances, the Fund invests at least 65% of its total assets in
the equity securities of small companies. While the Adviser believes that
smaller, lesser-known companies can offer greater growth potential than larger,
more established firms, the former also involve greater risk and price
volatility. To help reduce risk, the Fund expects, under normal market
conditions, to diversify its portfolio widely by company, industry and country.
The Fund intends to allocate investments among at least three countries at all
times, one of which may be the U.S. The Fund invests primarily in companies
whose individual equity market capitalization would place them in the same size
range as companies in approximately the lowest 20% of world market
capitalization as represented by the Salomon Brothers Broad Market Index, an
index comprised of equity securities of more than 6,500 small-, medium- and
large-sized companies based in 22 markets around the globe. Based on this
policy, the companies held by the Fund typically will have individual equity
market capitalizations of between approximately $50 million and $2 billion
(although the Fund will be free to invest in smaller capitalization issues that
satisfy the Fund's size standard). Furthermore, the median market capitalization
of the companies in which the Fund invests will not exceed $750 million.

The Fund may invest up to 35% of its total assets in equity securities of larger
companies located throughout the world and in investment-grade debt securities
if the Adviser determines that the capital appreciation of debt securities is
likely to exceed the capital appreciation of equity securities. The Fund may
invest up to 5% of its net assets in debt securities rated below
investment-grade.

Scudder Global Fund is a diversified investment company which 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. The Fund invests on a worldwide basis
in equity securities of companies which are incorporated in the U.S. or in
foreign countries. It also may invest in the debt securities of U.S. and foreign
issuers.

The Fund will be invested usually in securities of issuers located in at least
three countries, one of which may be the U.S. It is expected that investments
will include companies of varying size as measured by assets, sales or
capitalization. The Fund generally invests in equity securities of established
companies listed on U.S. or foreign securities exchanges, but also may invest in
securities traded over-the-counter. It also may invest in debt securities
convertible into common stock, convertible and non-convertible preferred stock,
and fixed-income securities of governments, government agencies, supranational
agencies and companies when the Adviser believes the potential for appreciation
will equal or exceed that available from investments in equity securities. These
debt and fixed-income securities will be investment-grade,

--
11
<PAGE>

except that the Fund may invest up to 5% of its total assets in debt securities
rated below investment-grade.

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

The Fund pursues its objective primarily through a portfolio of gold-related
investments. Under normal market conditions, at least 65% of the Fund's total
assets will be invested in (1) equity securities (defined as common stock,
investment-grade preferred stock and debt securities that are convertible into
or exchangeable for common stock) of U.S. and foreign companies primarily
engaged in the exploration, mining, fabrication, processing or distribution of
gold, (2) gold bullion, and (3) gold coins. A company will be considered
"primarily engaged" in a business or an activity if it devotes or derives at
least 50% of its assets, revenues and/or operating earnings from that business
or activity. The remaining 35% of the Fund's assets may be invested in any
precious metals other than gold; in equity securities of companies engaged in
activities primarily relating to precious metals and minerals other than gold;
in investment-grade debt securities, including zero coupon bonds, of companies
engaged in activities relating to gold or other precious metals and minerals;
warrants; and in certain debt securities, a portion of the return on which is
indexed to the price of precious metals. In addition, the Fund may engage in
Strategic Transactions and, to a limited extent, may invest in illiquid and
restricted securities.

Consistent with applicable state securities laws, up to 10% of the Fund's total
assets may be invested directly in gold, silver, platinum and palladium bullion
and in gold and silver coins. In addition, the Fund's assets may be invested in
wholly owned subsidiaries of the Scudder Mutual Funds, Inc., of which the Fund
is a series, that invest in gold, silver, platinum and palladium bullion and in
gold and silver coins.

Scudder Greater Europe Growth Fund is a non-diversified investment company which
seeks long-term growth of capital through investments primarily in the equity
securities of European companies. Although its focus is on long-term growth, the
Fund may provide current income principally through holdings in dividend-paying
securities.

The Fund will invest, under normal market conditions, at least 80% of its total
assets in the equity securities of European companies. The Fund defines a
European company as follows:

o A company organized under the laws of a European country or for which the
principal securities trading market is in Europe; or
o A company, wherever organized, where at least 50% of the company's
non-current assets, capitalization, gross revenue or profit in its most
recent fiscal year represents (directly or indirectly through subsidiaries)
assets or activities located in Europe.

When, in the opinion of the Adviser, market conditions warrant, the Fund may
hold foreign or U.S. debt instruments as well as cash or cash equivalents,
including foreign and domestic money market instruments, short-term government
and corporate obligations, and repurchase agreements without limit for temporary
defensive purposes and up to 20% to maintain liquidity.

Scudder International Fund is a diversified investment company which seeks
long-term growth of capital primarily through a diversified portfolio of
marketable foreign equity securities. The Fund invests in companies, wherever
organized, which do business primarily outside

- --
12
<PAGE>

the United States. The Fund intends to diversify investments among several
countries and to have represented in the portfolio, in substantial proportions,
business activities in not less than three different countries. The Fund does
not intend to concentrate investments in any particular industry.

The Fund's investments are generally denominated in foreign currencies. The
strength or weakness of the U.S. dollar against these currencies is responsible
for part of the Fund's investment performance.

The Fund may invest up to 20% of its total assets in investment-grade debt
securities except that the Fund may not invest more than 5% of its total assets
in debt securities which are rated below investment-grade.

Scudder International Growth and Income Fund is a diversified investment company
which seeks long-term growth of capital and current income primarily from
foreign equity securities. The Fund invests generally in common stocks of
established companies listed on foreign exchanges, which offer prospects for
growth of earnings while paying relatively high current dividends. The Fund can
also invest in other types of equity securities, including preferred stocks and
securities convertible into common stock. The Fund can invest throughout the
world, but will emphasize investments in developed economies other than the U.S.
In pursuing its dual objective, at least 80% of the Fund's net assets will be
invested in the equity securities of established non-U.S. companies. The Fund
generally invests in equity securities of established companies listed on
foreign securities exchanges, but also may invest in securities traded
over-the-counter. The Fund's equity investments include common stock,
convertible and non-convertible preferred stock, sponsored and unsponsored
depository receipts, and warrants.

Scudder Latin America Fund is a non-diversified investment company which seeks
to provide long-term capital appreciation through investment primarily in the
securities of Latin American issuers.

The Fund involves above-average investment risk. The Fund seeks to benefit from
economic and political trends emerging throughout Latin America. These trends
are supported by governmental initiatives designed to promote freer trade and
market-oriented economies. The Adviser believes that efforts by Latin American
countries to, among other things, reduce government spending and deficits,
control inflation, lower trade barriers, stabilize currency exchange rates,
increase foreign and domestic investment and privatize state-owned companies,
will set the stage for attractive investment returns over time.

At least 65% of the Fund's total assets will be invested in the securities of
Latin American issuers, and 50% of the Fund's total assets will be invested in
Latin American equity securities. To meet its objective to provide long-term
capital appreciation, the Fund normally invests at least 65% of its total assets
in equity securities. The Fund considers Latin American countries to include
Mexico, Central America, South America and the Spanish-speaking islands of the
Caribbean. The Fund defines securities of Latin American issuers as follows:

o Securities of companies organized under the laws of a Latin American country
or for which the principal securities trading market is in Latin America;
o Securities issued or guaranteed by the government of a country in Latin
America, its agencies or instrumentalities, political subdivisions or the
central bank of such country;
o Securities of companies, wherever organized, when at least 50% of an issuer's
non-current assets, capitalization, gross revenue or profit in

--
13
<PAGE>

any one of the two most recent fiscal years represents (directly or
indirectly through subsidiaries) assets or activities located in Latin
America; or
o Securities of Latin American issuers, as defined above, in the form of
depositary shares.

The Fund may invest in debt securities when management anticipates that the
potential for capital appreciation is likely to equal or exceed that of equity
securities, and which are unrated, rated or the equivalent of those rated below
investment-grade although the Fund will not invest more than 10% of its net
assets in securities rated B or lower by Moody's and S&P and may invest in
securities rated C by Moody's or D by S&P. Please refer to the attached Appendix
for further information.

The Fund invests, under normal market conditions, at least 65% of its assets in
the equity securities of Pacific Basin companies. Pacific Basin countries
include Australia, the Peoples Republic of China, India, Indonesia, Malaysia,
New Zealand, the Philippines, Sri Lanka, Pakistan and Thailand, as well as Hong
Kong, Singapore, South Korea and Taiwan--the so-called "four tigers." The Fund
may invest in other countries in the Pacific Basin when their markets become
sufficiently developed. The Fund will not, however, invest in Japanese
securities. The Fund intends to allocate investments among at least three
countries at all times and does not expect to concentrate investments in any
particular industry. The Fund defines securities of Pacific Basin companies as
follows:

o Securities of companies organized under the laws of a Pacific Basin country
or for which the principal securities trading market is in the Pacific Basin;
or
o Securities of companies, wherever organized, when at least 50% of a company's
non-current assets, capitalization, gross revenue or profit in any one of the
two most recent fiscal years represents (directly or indirectly through
subsidiaries) assets or activities located in the Pacific Basin.

Under normal market conditions, the Fund may invest up to 35% of its assets in
equity securities of U.S. and other non-Pacific Basin issuers (excluding Japan).
The Fund may invest up to 35% of its total assets in foreign and domestic
high-grade debt securities if the Adviser determines that the capital
appreciation of debt securities is likely to equal or exceed the capital
appreciation of equity securities.

Under normal conditions, the Fund will invest at least 80% of its assets in
Japanese securities, that is, securities issued by entities that are organized
under the laws of Japan ("Japanese companies"), securities of affiliates of
Japanese companies, wherever organized or traded, and securities of issuers not
organized under the laws of Japan but deriving 50% or more of their revenues
from Japan. These securities may include debt securities (Japanese government
debt securities and debt securities of Japanese companies) when the Adviser
believes that the potential for capital appreciation from investment in debt
securities equals or exceeds that available from investment in equity
securities.

The Fund may also invest up to 30% of its net assets in equity securities of
Japanese companies which are traded in an over-the-counter market.

- --
14
<PAGE>

These are generally securities of relatively small or little-known companies
that the Adviser believes have above-average earnings growth potential. The Fund
may invest up to 20% of its assets in cash or short-term government or other
short-term prime obligations in order to have funds readily available for
general corporate purposes, including the payment of operating expenses,
dividends and redemptions, or the investment in securities through exercise of
rights or otherwise, or in repurchase agreements. Where the Adviser determines
that market or economic conditions so warrant, the Fund may, for temporary
defensive purposes, invest more than 20% of its assets in cash or such
securities.

- ----------------------------------------
Information about policies,
investments and risks
- ----------------------------------------

In pursuing their investment objectives, each of the Underlying Scudder Funds is
permitted to engage in a wide range of investment policies. The Underlying
Scudder Funds' risks are determined by the nature of the securities held and the
portfolio management strategies used by the Adviser. Certain of these policies
are described below. Further information about the Underlying Scudder Funds is
contained in the Appendix to this prospectus, and in the Statement of Additional
Information. Also, detailed information is presented in the prospectuses of the
Underlying Scudder Funds.

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

Further, it may be more difficult for an Underlying Scudder Fund's agents to
keep currently informed about corporate actions which may affect the prices of
portfolio securities. Communications between the U.S. and foreign countries may
be less reliable than within the U.S., thus increasing the risk of delayed
settlements of portfolio transactions or loss of certificates for portfolio
securities. Certain markets may require payment for securities before delivery.
An Underlying Scudder Fund's ability and decisions to purchase and sell
portfolio securities may be affected by laws or regulations relating to the
convertibility of currencies and repatriation of assets. These risks are greater
in emerging markets.

Debt securities. In general, the prices of debt securities rise when interest
rates fall, and vice versa. This effect is usually more pronounced for longer
term securities. The debt securities in which certain of the Underlying Scudder
Funds may invest are rated, or determined by the Adviser to be the equivalent of
those rated, by two nationally recognized rating organizations, Moody's and S&P.
High quality securities are those rated in the two highest categories by Moody's
(Aaa or Aa) or S&P (AAA or AA). High-grade securities are those rated in the
three highest categories by Moody's (Aaa, Aa, or A) or by S&P (AAA, AA, or A).
Investment-grade

--
15
<PAGE>

securities are those rated in the four highest categories by Moody's (Aaa, Aa,
A, or Baa) or by S&P (AAA, AA, A or BBB).

Certain Underlying Scudder Funds may invest in debt securities which are rated
below investment-grade; that is, rated below Baa by Moody's or BBB by S&P
(commonly referred to as "junk bonds"). The lower the ratings of such debt
securities, the greater their risks render them like equity securities. Moody's
considers bonds it rates Baa to have speculative elements as well as
investment-grade characteristics. Certain Underlying Scudder Funds may also
invest in securities which are rated D by S&P or, if unrated, are of equivalent
quality. Securities rated D may be in default with respect to payment of
principal or interest. Additional information regarding the ratings of debt
securities and the identity of those Underlying Scudder Funds that can invest in
investment-grade or below investment-grade debt securities may be found in the
section entitled "Description of the Underlying Scudder Funds" and in the
Appendix to this prospectus.

To the extent an Underlying Scudder Fund invests in high-grade securities, it
will be unable to avail itself of opportunities for higher income which may be
available with lower grade investments. Conversely, although some lower-grade
securities have produced higher yields in the past than the investment-grade
securities, lower-grade securities are considered to be predominantly
speculative and, therefore, carry greater risk. Please refer to the attached
Appendix for further information.

Illiquid securities. Certain Underlying Scudder Funds 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 Underlying Scudder Fund (except for
Scudder Cash Investment Trust) 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 each Underlying Scudder 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, each Underlying Scudder
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"). Some Strategic Transactions may also be used to enhance
potential gain although no more than 5% of an Underlying Scudder Fund's assets
will be committed to Strategic Transactions entered into for non-hedging
purposes.

Strategic Transactions, including derivatives 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

- --
16
<PAGE>

Transactions could result in losses greater than if they had not been used. Use
of put and call options may result in losses to an Underlying Scudder 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 an
Underlying Scudder Fund can realize on its investments or cause an Underlying
Scudder Fund to hold a security it might otherwise sell. The use of currency
transactions can result in the Underlying Scudder 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 an
Underlying Scudder Fund creates the possibility that losses on the hedging
instrument may be greater than gains in the value of an Underlying Scudder
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, an Underlying Scudder Fund might not be able to
close out a transaction without incurring substantial losses, if at all.
Although the use of futures contracts and options transactions for hedging
should tend to minimize the risk of loss due to a decline in the value of the
hedged position, at the same time they tend to limit any potential gain which
might result from an increase in value of such position. Finally, the daily
variation margin requirements for futures contracts would create a greater
ongoing potential financial risk than would purchases of options, where the
exposure is limited to the cost of the initial premium. Losses resulting from
the use of Strategic Transactions would reduce net asset value, and possibly
income, and such losses can be greater than if the Strategic Transactions had
not been utilized. The Strategic Transactions that an Underlying Scudder Fund
may use and some of their risks are described more fully in Pathway Series'
Statement of Additional Information and the Statement of Additional Information
of certain Underlying Scudder Funds.

- ----------------------------------------
Investment restrictions of the
Portfolio
- ----------------------------------------

The Portfolio has certain investment restrictions which are designed to reduce
the Portfolio's investment risk. 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. A complete listing of
investment restrictions is contained under "Investment Restrictions" in the
Portfolio's Statement of Additional Information.

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

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

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

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17
<PAGE>

- ----------------------------------------
Risks of investing in the Portfolio
- ----------------------------------------

The Portfolio's risks are determined by the nature of the securities held by the
Underlying Scudder Funds as well as the proportion of investment in each
Underlying Scudder Fund pursuant to the portfolio management strategies used by
the Adviser. The following are descriptions of certain risks related to
investments in the Portfolio.

o As the investments in the Portfolio are concentrated within a group of
Underlying Scudder Funds, the performance of the Portfolio is directly related
to the investment performance of those Underlying Scudder Funds. The ability
of the Portfolio to meet its investment objective is directly related to the
ability of the Underlying Scudder Funds to meet their objectives as well as
the allocation among those Underlying Scudder Funds by the Portfolio's
portfolio management team.
o The Portfolio's share price will fluctuate in response to various market and
economic factors related to both the stock and bond markets. Certain of the
Underlying Scudder Funds invest in debt securities making them subject to
credit risk, interest rate risk and pre-payment risk. Also, the Portfolio
invests in Underlying Scudder Funds that are in turn invested in international
securities and thus are subject to the additional risks of these investments
including changes in foreign currency exchange rates and political risk.

For information about the investment techniques and the risks involved in each
Underlying Scudder Fund, please refer to "Information about policies,
investments and risks" and the Appendix to this prospectus.

- ----------------------------------------
Distribution and performance information
- ----------------------------------------

The Portfolio intends to distribute net investment income and net realized
capital gains in November or December to prevent application of federal excise
tax, although an additional distribution may be made within three months of the
Portfolio's fiscal year end, if necessary. Any dividends or capital gains
distributions declared in October, November or December with a record date in
such a month and paid during the following January will be treated by
shareholders for federal income tax purposes as if received on December 31 of
the calendar year declared.

According to preference, shareholders may receive distributions in cash or have
them reinvested in additional shares of the Portfolio. If an investment in the
Portfolio is in the form of a retirement plan, then all distributions will
automatically be reinvested in additional shares of the Portfolio.

Generally, dividends from net investment income are taxable to shareholders as
ordinary income. Long-term capital gains distributions, if any, are taxable at a
maximum 20% or 28% capital gains rate (depending on the Portfolio'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. Distributions
received by the Portfolio from an Underlying Scudder Fund generally will be
ordinary income dividends, includible in the Portfolio's net investment income,
if paid from the Underlying Scudder Fund's net investment income, short-term
capital gains or other taxable income. Distributions paid from an Underlying
Scudder Fund's long-term capital gains, however, generally will be treated by
the Portfolio as long-term capital gains taxable at a maximum 20% or 28% capital
gains rate (depending on the Underlying Scudder Fund's holding period for the
assets giving rise to the gain), regardless of how long the Portfolio held the
Underlying Scudder Fund's shares.

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

- --
18
<PAGE>

Performance information

From time to time, quotations of the Portfolio's performance may be included in
advertisements, sales literature, or shareholder reports. All performance
figures are historical, show the performance of a hypothetical investment and
are not intended to indicate future performance. "Total return" is the change in
value of an investment in the Portfolio for a specified period. The "average
annual total return" of the Portfolio is the average annual compound rate of
return of an investment in the Portfolio assuming the investment has been held
for one year, and the life of the Portfolio as of a stated ending date.
"Cumulative total return" represents the cumulative change in value of an
investment in the Portfolio for various periods. Total return calculations
assume that all dividends and capital gains distributions during the period were
reinvested in shares of the Portfolio.

Performance will vary based upon, among other things, changes in market
conditions and the level of the Underlying Scudder Funds' expenses.

- ----------------------------------------
Portfolio organization
- ----------------------------------------

Scudder Pathway Series is a diversified, open-end management investment company,
commonly referred to as a "mutual fund," registered under the Investment Company
Act of 1940 (the "1940 Act"). The Trust was organized as a Massachusetts
business trust on July 1, 1994.

The Trust offers four portfolios: Conservative Portfolio, Balanced Portfolio,
Growth Portfolio and International Portfolio. The Declaration of Trust provides
that each Portfolio can offer additional classes of shares and the Board of
Trustees has the ability to offer additional portfolios. Each Portfolio
represents a separate series of shares and has different objectives and
investment policies. Each Portfolio intends to qualify separately as a regulated
investment company for the purposes of Subchapter M of the Internal Revenue
Code.

The Portfolio's activities are supervised by the Trust's Board of Trustees.
Shareholders have one vote for each share held on matters on which they are
entitled to vote. The Portfolio is not required to hold, and has no current
intention of holding, annual shareholder meetings, although special meetings may
be called for purposes such as electing or removing Trustees, changing
fundamental investment policies or approving an investment management contract.

Special Servicing Agreement

All the expenses of the Portfolio will be paid for in accordance with a Special
Servicing Agreement (the "Agreement") entered into by the Adviser, the
Underlying Scudder Funds, Scudder Service Corporation, Scudder Fund Accounting
Corporation, Scudder Investor Services, Inc., Scudder Trust Company and the
Portfolio. Under the Agreement, the Adviser will arrange for all services
pertaining to the operation of the Portfolio including the services of Scudder
Service Corporation and Scudder Fund Accounting Corporation as the Shareholder
Servicing Agent and the Accounting Agent, respectively, for the Portfolio. If
the officers of an Underlying Scudder Fund determine that the aggregate expenses
of the Portfolio are less than the estimated savings to the Underlying Scudder
Fund from the operation of the Portfolio, the Underlying Scudder Fund will bear
those expenses in proportion to the average daily value of its shares owned by
the Portfolio. Consequently, no Underlying Scudder Fund will be expected to
carry expenses that are in excess of the estimated savings to it. The estimated
savings are expected to result from the reduction of shareholder servicing costs
due to the elimination of separate shareholder accounts which either currently
are or have potential to be invested in the Underlying Scudder Funds. The
estimated savings produced by the operation of the Portfolio will most likely
suffice to offset

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19
<PAGE>

most, if not all, the expenses incurred by the Portfolio.

In the event that the aggregate financial benefits to the Underlying Scudder
Funds do not exceed the costs of the Portfolio, the Adviser will pay, on behalf
of the Portfolio, that portion of costs determined to be greater than the
benefits.

All expenses of the Portfolio, excluding certain non-recurring and extraordinary
expenses, will be paid for in accordance with the Agreement, including fees and
expenses incurred in connection with membership in investment company
organizations; fees and expenses of the Portfolio's accounting agent; brokers'
commissions; legal, auditing and accounting expenses; taxes and 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 Portfolio 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.

Certain Underlying Scudder Funds impose a fee upon the redemption or exchange of
shares held less than one year. The fees, which range between 1% and 2% of the
net asset value of the shares being redeemed or exchanged, are assessed and
retained by the Underlying Scudder Funds for the benefit of the remaining
shareholders. The fee is intended to encourage long-term investment in the Fund.
The fee is not a deferred sales charge, is not a commission paid to the Adviser
of its subsidiary and does not benefit the Adviser in any way. Each such Fund
reserves the right to modify the terms of or terminate this fee at any time. As
a shareholder of such Underlying Scudder Funds, the Portfolio will be subject to
such fees. Under normal market conditions, the Portfolio will seek to avoid
taking action that would result in the imposition of such a fee. However, in the
event that a fee is incurred, the net assets of the Portfolio would be reduced
by the amount of such fees that are assessed and retained by the Underlying
Scudder Funds for the benefit of their shareholders.

Investment adviser

The Portfolio retains the investment management firm of Scudder Kemper
Investments, Inc., a Delaware corporation formerly known as Scudder, Stevens &
Clark, Inc., 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 Portfolio under Massachusetts law.

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

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

Transfer agent

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

Underwriter

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

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20
<PAGE>

Accounting agent

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

Custodian

State Street Bank and Trust Company is the custodian for the Portfolio.

- ----------------------------------------
Transaction information
- ----------------------------------------

For concise instruction on how to purchase, exchange or redeem shares, refer to
pages and .

Purchasing shares

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

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

Redemption requests by telephone prior to the 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 the Portfolio account number.
Contact your bank to arrange a wire transfer to:

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

Your wire instructions must also include:

- -- the name of the Portfolio in which the money is to be invested,

- -- the account number of the Portfolio, 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 Portfolio 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.

--
21
<PAGE>

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

If you purchase shares by "QuickBuy" and redeem them within seven days of the
purchase, the Portfolio 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 Scudder IRA accounts and most other retirement plan accounts.

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

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

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

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

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

In the event that you are unable to reach the Portfolio by telephone, you should
write to the Portfolio; 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

- --
22
<PAGE>

transferred to your bank checking account in two or three business days
following your call. For requests received by the close of regular trading on
the Exchange, shares will be redeemed at the net asset value per share
calculated at the close of trading on the day of your call. "QuickSell" requests
received after the close of regular trading on the Exchange will begin their
processing and be redeemed at the net asset value calculated the following
business day.

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

Signature guarantees. For your protection and to prevent fraudulent redemptions,
on written redemption requests in excess of $100,000 we require an original
signature and an original signature guarantee for each person in whose name the
account is registered. (The Portfolio reserves the right, however, to require a
signature guarantee for all redemptions.) You can obtain a signature guarantee
from most banks, credit unions or savings associations, or from broker/dealers,
municipal securities broker/dealers, government securities broker/dealers,
national securities exchanges, registered securities associations, or clearing
agencies deemed eligible by the 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 wired
to a predesignated bank account. The Portfolio 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 the Portfolio does not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Portfolio 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 the Portfolio's net
asset value. Scudder Fund Accounting Corporation determines net asset value per
share as of the close of regular trading on the Exchange, normally 4 p.m.
eastern time, on each day the Exchange is open for trading. Net asset value per
share is calculated by dividing the value of total assets of the Portfolio, less
its liabilities, by the total number of shares of the Portfolio outstanding.

Processing time

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

Purchase and redemption requests received after the close of regular trading on
the Exchange will be executed the following business day.

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

The Portfolio 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
Trust and Scudder Investor Services, Inc. each reserves the right to reject
purchases of Portfolio shares (including

--
23
<PAGE>

exchanges) for any reason including when a pattern of frequent purchases and
sales made in response to short-term fluctuations in the Portfolio's share price
appears evident.

Tax information

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

Minimum balances

Shareholders should maintain a share balance worth at least $2,500, which amount
may be changed by the Board of Trustees. Scudder retirement plans and certain
other accounts have similar or lower minimum balance requirements. The initial
investment and minimum account balance for fiduciary accounts such as IRAs will
increase from $500 to $1,000 per fund account, while the subsequent minimum
investment will remain at $50. A shareholder may open a regular account with a
minimum of $1,000, if an investment program of at least $100 per month is
established.

Shareholders with non-fiduciary accounts who maintain an account balance of less
than $2,500 in the Portfolio without establishing a regular investment program
may be assessed an annual $10.00 per fund charge with the fee to be paid to the
Portfolio. The $10.00 charge will not apply to shareholders with a combined
household account balance (same surname, same address) in any of the Scudder
Funds of $25,000 or more. The Portfolio reserves the right, following 60 days'
written notice to shareholders, to redeem all shares in accounts below $250,
where a reduction in value has occurred due to a redemption or exchange out of
the account. The shareholder may restore the share balance to $250 or more
during the 60-day notice period and must maintain it at no lower than that
minimum to avoid an involuntary redemption. The Portfolio will mail the proceeds
of the redeemed account to the shareholder. Reductions in value that result
solely from market activity will not trigger an involuntary redemption.
Retirement accounts and certain other accounts will not be assessed the $10.00
charge or be subject to automatic liquidation. Please refer to "Exchanges and
Redemptions -- Other information" in the Portfolio's Statement of Additional
Information.

Third party transactions

If purchases and redemptions of Portfolio 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.

- ----------------------------------------
Shareholder benefits
- ----------------------------------------

Experienced professional management

Scudder Kemper Investments, Inc., one of the nation's most experienced
investment management firms, actively manages your

- --
24
<PAGE>

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 Pathway Series: International Portfolio is managed by a team of
investment professionals who each play an important role in the Portfolio's
management process. Team members work together to develop investment strategies
and select Underlying Funds for the Portfolio. They are supported by the
Adviser's large staff of portfolio managers, economists, research analysts,
traders and other investment specialists. The Adviser believes its team approach
benefits the Portfolio's investors by bringing together many disciplines and
leveraging its extensive resources. All members of the Pathway investment team
are members of the Adviser's Global Asset Allocation Committee. This group is
responsible for analyzing the global economy and capital markets, integrating
information from the firm's equity and fixed income specialists, and developing
the outlook for the investment characteristics of the major markets in which the
Portfolio invests.

Lead Portfolio Manager Benjamin W. Thorndike, who has 18 years of investment
experience, joined the Adviser in 1983 as a portfolio manager. Since 1986, he
has served as a portfolio manager for Scudder Growth and Income Fund. Mr.
Thorndike will develop portfolio strategy utilizing the research, analysis and
guidance provided by other members of the investment team. Cornelia Small,
Portfolio Manager, is Director of Global Equity Investments and Chairman of the
Capital Markets Group, and has also served as Director of Global Equity
Research. Margaret (Peg) Hadzima, Portfolio Manager, is Director of the
Adviser's Institutional Group, which includes a focus on asset allocation
strategy. Ms. Hadzima has 24 years of experience in fixed-income investing
during which she has served as Director of Global Bond Research and Chairman of
Global Bond Strategy. Philip Fortuna, Portfolio Manager, joined the Adviser in
1986 as manager of institutional equity accounts. He has served as Director of
Quantitative Research and Director of Investment Operations. Mr. Fortuna is Lead
Portfolio Manager for Scudder Small Company Value Fund, as well as a portfolio
manager for Scudder Micro Cap Fund. Maureen Allyn, Portfolio Manager, is the
Adviser's Chief Economist, a position she has held since 1989, and is
responsible for analyzing both the world and U.S. economies.

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 Portfolio; 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. 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.

--
25
<PAGE>

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

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

Dividend reinvestment plan

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

Shareholder statements

You receive a detailed account statement every time you purchase or redeem
shares. 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 Portfolio
reports, such as the Portfolio'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.

- --
26
<PAGE>

- ----------------------------------------
Scudder Kemper tax-advantaged
retirement plans
- ----------------------------------------

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

o Scudder No-Fee IRAs. These retirement plans allow a maximum annual
contribution of up to $2,000 per person for anyone with earned income (up to
$2,000 per individual for married couples if only one spouse has earned
income). Many people can deduct all or part of their contributions from their
taxable income, and all investment earnings accrue on a tax-deferred basis.
The Scudder No-Fee IRA charges you no annual custodial fee.
o Scudder Roth No-Fee IRAs. Similar to the traditional IRA in many respects,
these retirement plans provide a unique opportunity for qualifying individuals
to accumulate investment earnings tax free. Unlike a traditional IRA, with a
Roth IRA, if you meet the distribution requirements, you can withdraw your
money without paying any taxes on the earnings. The Scudder Roth IRA charges
you no annual custodial fee.
o 401(k) Plans. 401(k) plans allow employers and employees to make
tax-deductible retirement contributions. Scudder offers a full service program
that includes recordkeeping, prototype plan, employee communications and
trustee services, as well as investment options.
o Profit Sharing and Money Purchase Pension Plans. These plans allow
corporations, partnerships and people who are self-employed to make annual,
tax-deductible contributions of up to $30,000 for each person covered by the
plans. Plans may be adopted individually or paired to maximize contributions.
These are sometimes known as Keogh plans. The Scudder Keogh charges you no
annual custodial fee.
o 403(b) Plans. Retirement plans for tax-exempt organizations and school
systems to which employers and employees may both contribute.
o SEP-IRAs. Easily administered retirement plans for small businesses and
self-employed individuals. The maximum annual contribution to SEP-IRA accounts
is adjusted each year for inflation. The Scudder SEP-IRA charges you no annual
custodial fee.
o Scudder Horizon Plan. A no-load variable annuity that lets you build assets
by deferring taxes on your investment earnings. You can start with $2,500 or
more.

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

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27
<PAGE>

- ----------------------------------------
Trustees and Officers
- ----------------------------------------

Daniel Pierce*
President

Dr. Rosita P. Chang
Trustee; Professor of Finance, University of Rhode Island

Edgar R. Fiedler
Trustee; Vice President and Economic Counsellor, The Conference Board, Inc.

Peter B. Freeman
Trustee; Corporate Director and Trustee

Dr. J.D. Hammond
Trustee; Dean, Smeal College of Business Administration, Pennsylvania State
University

Richard M. Hunt
Trustee; University Marshal and Senior Lecturer, Harvard University

Jerard K. Hartman*
Vice President

Thomas W. Joseph*
Vice President

Thomas F. McDonough*
Vice President, Treasurer and Secretary

Kathryn L. Quirk*
Vice President and Assistant Secretary

John R. Hebble*
Assistant Treasurer

Caroline Pearson*
Assistant Secretary

*Scudder Kemper Investments, Inc.

- --
28
<PAGE>

- ----------------------------------------
Investment products and services
- ----------------------------------------

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

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

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

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

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

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

U.S. Growth and Income
Scudder Balanced Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund

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

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

Global Growth

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

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

Industry Sector Funds

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

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

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

Education Accounts

Education IRA
UGMA/UTMA

Closed-End Funds
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal Fund, Inc.

For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. [Funds within categories are listed in order from
expected least risk to most risk. Certain Scudder funds 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. [[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.

updated 11.20.97 LR

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29

<PAGE>

- --------------------------------------------------------------------------------
How to contact Scudder
- --------------------------------------------------------------------------------

Account Service and Information:

For existing account service and transactions

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

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

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

For personalized information about your Scudder accounts, exchanges and
redemptions

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

Investment Information:

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

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

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

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

Scudder Brokerage Services:

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

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

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

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

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

Please address all correspondence to:

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

Or Stop by a Scudder Investor Center:

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

Boca Raton Chicago San Francisco
Boston New York

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

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

- --
30
<PAGE>

- ---------------------------------------
Purchases
- ---------------------------------------

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

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

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

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

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

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

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

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

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

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

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

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31
<PAGE>

- ---------------------------------------
Exchanges and redemptions
- ---------------------------------------

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

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

There may be a o By Mail Print or type your instructions and include:
1% fee payable or Fax - the name of the Fund and the account number you are exchanging from;
to 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 shares o By Telephone To speak with a service representative, call 1-800-225-5163 from
8 a.m. to 8 p.m. eastern time or to access SAIL(TM), Scudder's Automated
Information Line, call 1-800-343-2890 (24 hours a day). You may
have redemption proceeds sent to your predesignated bank account, or
redemption proceeds of up to $100,000 sent to your address of record.

There may be a o By Mail Send your instructions for redemption to the appropriate address or fax number
1% fee payable or Fax above and include:
to the Fund for - the name of the Fund and account number you are redeeming from;
redemption 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 Call 1-800-225-5163 for more information and an enrollment form.
Plan
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

- --
32
<PAGE>

Appendix

Descriptions Of Certain Risks Related To Various Securities Invested In,
And Investment Techniques Employed By, The Underlying Scudder Funds In Which
Scudder Pathway Series: International Portfolio May Invest

Repurchase agreements. If the seller under a repurchase agreement becomes
insolvent, an Underlying Scudder Fund's right to dispose of the securities may
be restricted. 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, an Underlying Scudder Fund may
encounter delay and incur costs before being able to sell the securities. Also,
if a seller defaults, the value of such securities may decline before an
Underlying Scudder Fund is able to dispose of them. Some repurchase commitment
transactions may not provide the Underlying Scudder Fund with collateral
marked-to-market during the terms of the commitment.

Convertible securities. While convertible securities generally offer lower
yields than non-convertible 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.

Non-diversified investment company. Certain Underlying Scudder Funds are
classified as non-diversified investment companies under the Investment Company
Act of 1940 (the "1940 Act"), which means that an Underlying Scudder Fund is not
limited by the 1940 Act in the proportion of its assets that it may invest in
the obligations of a single issuer. The investment of a large percentage of an
Underlying Scudder Fund's assets in the securities of a small number of issuers
may cause an Underlying Scudder Fund's share price to fluctuate more than that
of a diversified investment company.

Common stocks. Under normal circumstances, certain Underlying Scudder Funds
invest primarily 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, an Underlying Scudder Fund may participate in the
success or failure of any company in which it holds stock. The market values of
common stock can fluctuate significantly, reflecting the business performance of
the issuing company, investor perception and general economic or financial
market movements. Smaller companies are especially sensitive to these factors
and may even become valueless. Despite the risk of price volatility, however,
common stocks also offer the greatest potential for gain on investment, compared
to other classes of financial assets such as bonds or cash equivalents.

Investment company securities. Securities of other investment companies may be
acquired by certain Underlying Scudder Funds 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 an
Underlying Scudder Fund in shares of other investment companies may be subject
to such duplicate expenses.

Dollar roll transactions. If the broker/dealer to whom an Underlying Scudder
Fund sells the securities underlying a dollar roll transaction becomes
insolvent, an Underlying Scudder Fund's right to purchase or repurchase the
securities may be restricted; the value of the securities may change adversely
over the term of the dollar roll; the securities that an Underlying Scudder Fund
is

A-1
<PAGE>

required to repurchase may be worth less than securities that an Underlying
Scudder Fund originally held, and the return earned by an Underlying Scudder
Fund with the proceeds of a dollar roll may not exceed transaction costs.

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

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 an Underlying Scudder Fund to sell them
promptly at an acceptable price.

Indexed securities. Indexed securities may be positively or negatively indexed,
so that appreciation of the reference instrument may produce an increase or a
decrease in the interest rate or value of the security at maturity. In addition,
the change in the interest rate or value of the security at maturity may be some
multiple of the change in the value of the reference instrument. Thus, in
addition to the credit risk of the security's issuer, an Underlying Scudder Fund
will bear the market risk of the reference instrument.

Mortgage and other asset-backed securities. Unscheduled or early payments on the
underlying mortgages may shorten the securities' effective maturities and lessen
their growth potential. An Underlying Scudder Fund may agree to purchase or sell
these securities with payment and delivery taking place at a future date. A
decline in interest rates may lead to a faster rate of repayment of the
underlying mortgages, and expose an Underlying Scudder Fund to a lower rate of
return upon reinvestment. To the extent that such mortgage-backed securities are
held by an Underlying Scudder Fund, the prepayment right of mortgagors may limit
the increase in net asset value of an Underlying Scudder Fund because the value
of the mortgage-backed securities held by an Underlying Scudder Fund may not
appreciate as rapidly as the price of non-callable debt securities. Asset-backed
securities are subject to the risk of prepayment and the risk that the
underlying loans will not be repaid.

When-issued securities. An Underlying Scudder Fund may purchase securities on a
when-issued or forward delivery basis, for payment and delivery at a later date.
The price and yield are generally fixed on the date of commitment to purchase.
During the period between purchase and settlement, no interest accrues to the
Underlying Scudder Fund. At the time of settlement, the market value of the
security may be more or less than the purchase price.

Special situation securities. From time to time, an Underlying Scudder Fund may
invest in equity or debt securities issued by companies that are determined by
the Adviser to possess "special situation" characteristics. In general, a
special situation company is a company whose securities are expected to increase
in value solely by reason of a development particularly or uniquely applicable
to the company. Developments that may create special situations include, among
others, a liquidation, reorganization, recapitalization or merger, material
litigation, technological breakthrough and new management or management
policies. The principal risk associated with investments in special situation
companies is that the anticipated development thought to create the special
situation may not occur and the investments therefore may not appreciate in
value or may decline in value.

A-2
<PAGE>

under a debt restructuring plan introduced by former U.S. Secretary of the
Treasury, Nicholas F. Brady (the "Brady Plan"). Brady Plan debt restructurings
have been implemented to date in Argentina, Brazil, Bulgaria, Costa Rica, the
Dominican Republic, Ecuador, Mexico, Morocco, Nigeria, the Philippines, Poland
and Uruguay.

Brady Bonds have been issued only recently, and for that reason do not have a
long payment history. Brady Bonds may be collateralized or uncollateralized, are
issued in various currencies (but primarily the dollar) and are actively traded
in over-the-counter secondary markets. Dollar- denominated, collateralized Brady
Bonds, which may be fixed-rate bonds or floating-rate bonds, are generally
collateralized in full as to principal by U.S. Treasury zero coupon bonds having
the same maturity as the bonds.

Brady Bonds are often viewed as having three or four valuation components: the
collateralized repayment of principal at final maturity; the collateralized
interest payments; the uncollateralized interest payments; and any
uncollateralized repayment of principal at maturity, (these uncollateralized
amounts constituting the "residual risk"). In light of the residual risk of
Brady Bonds and the history of defaults of countries issuing Brady Bonds with
respect to commercial bank loans by public and private entities, investments in
Brady Bonds may be viewed as speculative.

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

Investing in emerging markets. Securities of many issuers in emerging markets
may be less liquid and more volatile than securities of comparable domestic
issuers. Emerging markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when a portion of the assets of an Underlying Scudder Fund is
uninvested and no return is earned thereon. The inability of an Underlying
Scudder Fund to make intended security purchases due to settlement problems
could cause an Underlying Scudder Fund to miss attractive investment
opportunities. Inability to dispose of portfolio securities due to settlement
problems could result either in losses to an Underlying Scudder Fund due to
subsequent declines in value of the portfolio security or, if an Underlying
Scudder Fund has entered into a contract to sell the security, in possible
liability to the purchaser. Costs associated with transactions in foreign
securities are generally higher than costs associated with transactions in U.S.
securities. Such transactions also involve additional costs for the purchase or
sale of foreign currency.

A-3
<PAGE>

additional taxes on foreign investors. These markets may also restrict
investment opportunities in issuers in industries deemed important to national
interests.

Certain emerging markets may require governmental approval for the repatriation
of investment income, capital or the proceeds of sales of securities by foreign
investors. In addition, if a deterioration occurs in an emerging market's
balance of payments or for other reasons, a country could impose temporary
restrictions on foreign capital remittances. An Underlying Scudder Fund could be
adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation of capital, as well as by the application
to an Underlying Scudder Fund of any restrictions on investments.

Individual foreign economies may differ favorably or unfavorably from the U.S.
economy in such respects as growth of gross domestic product, rate of inflation,
capital reinvestment, resources, self-sufficiency and balance of payments
position. The securities markets, values of securities, yields and risks
associated with securities markets in different countries may change
independently of each other.

Investment in sovereign debt can involve a high degree of risk. Holders of
sovereign debt (including an Underlying Scudder Fund) may be requested to
participate in the rescheduling of such debt and to extend further loans to
governmental entities. There is no bankruptcy proceeding by which sovereign debt
on which governmental entities have defaulted may be collected in whole or in
part. Securities traded in certain emerging European securities markets may be
subject to risks due to the inexperience of financial intermediaries, the lack
of modern technology and the lack of a sufficient capital base to expand
business operations. Additionally, former Communist regimes of a number of
Eastern European countries had expropriated a large amount of property, the
claims on which have not been entirely settled. There can be no assurance that
an Underlying Scudder Fund's investments in Eastern Europe would not also be
expropriated, nationalized or otherwise confiscated. Finally, any change in the
leadership or policies of Eastern European countries, or the countries that
exercise a significant influence over those countries, may halt the expansion of
or reverse the liberalization of foreign investment policies now occurring and
adversely affect existing investment opportunities.

High yield/high risk securities. Certain Underlying Scudder Funds may invest in
debt securities which are rated below investment-grade (hereinafter referred to
as "lower rated securities") or which are unrated, but deemed equivalent to
those rated below investment-grade by the Underlying Scudder Fund's adviser. The
lower the ratings of such debt securities, the greater their risks render them
like equity securities. These debt instruments generally offer a higher current
yield than that available from higher grade issues, but typically involve
greater risk and lesser liquidity.

The lack of a liquid secondary market for certain securities may also make it
more difficult for an Underlying Scudder Fund to obtain accurate market
quotations for purposes of valuing its portfolio and calculating its net asset
value. Lower rated and unrated securities are especially subject to adverse
changes in general economic conditions, to changes in the financial condition of
their issuers, and to price fluctuation in

A-4
<PAGE>

response to changes in interest rates. During periods of economic downturn
or rising interest rates, issuers of these instruments may experience financial
stress that could adversely affect their ability to make payments of principal
and interest and increase the possibility of default. Adverse publicity and
investor perceptions, whether or not based on fundamental analysis, may also
decrease the values and liquidity of these securities especially in a market
characterized by only a small amount of trading. Perceived credit quality in
this market can change suddenly and unexpectedly, and may not fully reflect the
actual risk posed by a particular lower rated or unrated security.

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

Investing in emerging growth companies. The investment risk associated with
emerging growth companies is higher than that normally associated with larger,
older companies due to the greater business risks of small size, the relative
age of the company, limited product lines, distribution channels and financial
and managerial resources. Further, there is typically less publicly available
information concerning smaller companies than for larger, more established ones.

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, an Underlying Scudder Fund
may need to discount the securities from recent prices or dispose of the
securities over a long period of time. The prices of this type of security may
be more volatile than those of larger companies which are often traded on a
national securities exchange.

Precious metals. Investments in precious metals and in precious metals-related
securities and companies involve a relatively high degree of risk. Prices of
gold and other precious metals can be influenced by a variety of global
economic, financial and political factors and may fluctuate markedly over short
periods of time. Among other things, precious metals values can be affected by
changes in inflation, investment speculation, metal sales by governments or
central banks, changes in industrial and commercial demand, and any governmental
restrictions on private ownership of gold or other precious metals.

Correlation of gold and gold securities. The Adviser believes that the value of
the securities of firms that deal in gold will correspond generally, over time,
with the prices of the underlying metal. At any given time, however, changes in
the price of gold may not strongly correlate with changes in the value of
securities related to gold, which are expected to constitute part of certain
Underlying Scudder Funds' assets. In fact, there may be periods in which the
price of gold stocks and gold will move in different directions. The reason for
this potential disparity is that political and economic factors, including
behavior of the stock market, may have differing impacts on gold versus gold
stocks.

Investing in Europe. An Underlying Scudder Fund's performance may be susceptible
to political, social and economic factors affecting issuers in European
countries. Such factors may include, but are not limited to: growth of GDP or
GNP, rate of inflation, capital reinvestment, resource self-sufficiency and
balance of payments

A-5
<PAGE>

position, as well as interest and monetary exchange rates among European
countries.

Eastern European countries and certain Southern European countries are
considered to be emerging markets. Securities traded in certain emerging
European markets may be subject to additional risks due to political and
economic reforms including efforts to decentralize the economic decision-making
process and move toward a market-oriented economy. Additionally, the
inexperience of financial intermediaries, lack of modern technology and the
possibility of permanent or temporary termination of trading of securities may
affect an Underlying Scudder Fund's performance. To the extent that an
Underlying Scudder Fund purchases equity securities of smaller companies, such
securities may experience greater volatility and have limited liquidity.

Former communist regimes of a number of Eastern European countries had
expropriated a large amount of property, the claims on which have not been
entirely settled. There can be no assurance that an Underlying Scudder Fund's
investments in Eastern Europe would not also be expropriated, nationalized or
otherwise confiscated. Finally, any change in the leadership or policies of
Eastern European countries, or the countries that exercise a significant
influence over those countries, may halt the expansion of or reverse the
liberalization of foreign investment policies now occurring and adversely affect
existing investment opportunity.

Although the governments of certain Eastern European countries currently are
implementing or considering reforms directed at political and economic
liberalization, there can be no assurance that these reforms will continue or
achieve their goals.

Investing in Latin America. The Adviser believes that investment opportunities
may result from recent trends in Latin America encouraging greater market
orientation and less governmental intervention in economic affairs. Investors,
however, should be aware that the Latin American economies have experienced
considerable difficulties in the past decade. Although there have been
significant improvements in recent years, the Latin American economies continue
to experience challenging problems, including high inflation rates and high
interest rates relative to the U.S. The emergence of the Latin American
economies and securities markets will require continued economic and fiscal
discipline which has been lacking at times in the past, as well as stable
political and social conditions. Recovery may also be influenced by
international economic conditions, particularly those in the U.S., and by world
prices for oil and other commodities. There is no assurance that recent economic
initiatives will be successful.

Certain risks associated with international investments and investing in
smaller, developing capital markets are heightened for investments in Latin
American countries. For example, some of the currencies of Latin American
countries have experienced steady devaluations relative to the U.S. dollar, and
major adjustments have been made in certain of these currencies periodically. In
addition, although there is a trend toward less government involvement in
commerce, governments of many Latin American countries have exercised and
continue to exercise substantial influence over many aspects of the private
sector. In certain cases, the government still owns or controls many companies,
including some of the largest in the country. Accordingly, government actions in
the future could have a significant effect on economic conditions in Latin
American countries, which could affect private sector companies and an
Underlying Scudder Fund, as well as the value of securities in an Underlying
Scudder Fund's portfolio.

Most Latin American countries have experienced substantial, and in some periods,
extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and

A-6
<PAGE>

may continue to have negative effects on the economies and securities markets of
certain Latin American countries.

Certain Latin American countries are among the largest debtors to commercial
banks and foreign governments. Some of these countries have in the past
defaulted on their sovereign debt. Holders of sovereign debt (including an
Underlying Scudder Fund) may be requested to participate in the rescheduling of
such debt and to extend further loans to governmental entities. There is no
bankruptcy proceeding by which sovereign debt on which governmental entities
have defaulted may be collected in whole or in part.

The limited size of many Latin American securities markets and limited trading
volume in issuers compared to the volume of trading in U.S. securities could
cause prices to be erratic for reasons apart from factors that affect the
quality of securities.

The portion of an Underlying Scudder Fund's assets invested directly in Chile
may be less than the portions invested in other countries in Latin America
because, at present, capital invested in Chile normally cannot be repatriated
for as long as five years.

Investing in the Pacific Basin. Certain Underlying Scudder Funds are susceptible
to political and economic factors affecting issuers in Pacific Basin countries.
Many of the countries of the Pacific Basin are developing both economically and
politically. Pacific Basin countries may have relatively unstable governments,
economies based on only a few commodities or industries, and securities markets
trading infrequently or in low volumes. Some Pacific Basin countries restrict
the extent to which foreigners may invest in their securities markets.
Securities of issuers located in some Pacific Basin countries tend to have
volatile prices and may offer significant potential for loss as well as gain.
Further, certain companies in the Pacific Basin may not have firmly established
product markets, may lack depth of management, or may be more vulnerable to
political or economic developments such as nationalization of their own
industries.

Borrowing. Although the principal of an Underlying Scudder Fund's borrowing will
be fixed, an Underlying Scudder Fund's assets may change in value during the
time a borrowing is outstanding, increasing exposure to capital risk.

Corporate and Municipal Bond Ratings. The following is a description of the
ratings given by S&P and Moody's to corporate and municipal bonds. Should the
rating of a portfolio security held by an Underlying Scudder Fund be downgraded,
the Adviser will determine whether it is in the best interest of the Underlying
Scudder Fund to retain or dispose of such security.

S&P:

Debt rated AAA has the highest rating assigned by S&P. Capacity to pay interest
and repay principal is extremely strong. Debt rated AA has a very strong
capacity to pay interest and repay principal and differs from the highest rated
issues only in small degree. Debt rated A has a strong capacity to pay interest
and repay principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt in higher
rated categories. Debt rated BBB is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than in higher rated categories.

Debt rated BB, B, CCC, CC and C is regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal. BB
indicates the least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics, these are
outweighted

A-7
<PAGE>

by large uncertainties or major exposures to adverse conditions.

Debt rated BB has less near-term vulnerability to default than other speculative
issues. However, it faces major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which could lead to inadequate
capacity to meet timely interest and principal payments. The BB rating category
is also used for debt subordinated to senior debt that is assigned an actual or
implied BBB- rating. Debt rated B has a greater vulnerability to default but
currently has the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely impair capacity
or willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied BB or BB- rating.

Debt rated CCC has a currently identifiable vulnerability to default, and is
dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating. The rating CC typically is applied to debt subordinated to
senior debt that is assigned an actual or implied CCC rating. The rating C
typically is applied to debt subordinated to senior debt which is assigned an
actual or implied CCC- debt rating. The C rating may be used to cover a
situation where a bankruptcy petition has been filed, but debt service payments
are continued. The rating C1 is reserved for income bonds on which no interest
is being paid. Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date due even
if the applicable grace period had not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.

Moody's:

Bonds which are rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues. Bonds which are rated Aa are
judged to be of high quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long term risks appear
somewhat larger than in Aaa securities. Bonds which are rated A possess many
favorable investment attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment sometime in the future.

Bonds which are rated Baa are considered as medium grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well. Bonds which are rated Ba are judged to have
speculative elements; their future cannot be considered as well assured. Often
the protection of interest and principal payments may be very moderate and
thereby not

A-8
<PAGE>

well safeguarded during other good and bad times over the future. Uncertainty of
position characterizes bonds in this class. Bonds which are rated B generally
lack characteristics of the desirable investment. Assurance of interest and
principal payments or of maintenance of other terms of the contract over any
long period of time may be small.

Bonds which are rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
Bonds which are rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.

A-9

<PAGE>

This prospectus sets forth concisely the information about Scudder Pathway
Series: Conservative Portfolio, Balanced Portfolio and Growth Portfolio (each, a
"Portfolio," collectively the "Portfolios"), each a diversified open-end
management investment company, that a prospective investor should know before
investing. Scudder Pathway Series is composed of four separate Portfolios, three
of which are offered herein, with distinctly different investment objectives.
Each Portfolio seeks to accomplish its objective by investing primarily in a
number of other funds in the Scudder Family of Funds (the "Underlying Scudder
Funds"). Please retain this prospectus for future reference.

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

Contents--see page 7.

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

[LOGO] PRINTED WITH [LOGO] Printed on recycled paper
SOY INK

SCUDDER [LOGO]

Scudder
Pathway Series:

Conservative
Portfolio

Balanced Portfolio

Growth Portfolio

Prospectus
February 1, 1998

Three pure no-load(TM) (no sales charges) mutual funds offering a broad range of
investment opportunities each by investing in a select mix of funds in the
Scudder Family of Funds.

<PAGE>

- ---------------------------------------
Expense information
- ---------------------------------------

This information is designed to help you understand the various costs and
expenses that an investor in the Portfolios will bear directly or indirectly.
With Scudder's pure no-load(TM) portfolios and funds, you pay no commissions to
purchase or redeem shares, or to exchange from one portfolio or 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 each Portfolio for various transactions.

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

2) Annual Portfolio operating expenses: Expenses paid by a Portfolio before it
distributes its net investment income, expressed as a percentage of the
Portfolio's average daily net assets for the most recent fiscal year.

Investment management fee NONE
12b-1 fees NONE
Other expenses NONE
----
Total Portfolio operating expenses** NONE

Each Portfolio is expected to operate at a zero expense level. However, each
Portfolio's shareholders will indirectly bear that Portfolio's pro rata share of
fees and expenses incurred by the Underlying Scudder Funds in which the
Portfolio is invested. The investment returns of each Portfolio, therefore, will
be net of that Portfolio's share of the expenses of the Underlying Scudder Funds
in which the Portfolio is invested. The chart on page 3 shows the expense ratios
of each Underlying Scudder Fund after fee waiver or reimbursement where
applicable, as of its most recent fiscal year end.

- ----------
* You may redeem by writing or calling a Portfolio. 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."

** The payment of each Portfolio's pro rata share of expenses is subject to
the Special Servicing Agreement. Please refer to "Portfolio
organization--Special Servicing Agreement."

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

- --
2
<PAGE>

- ---------------------------------------
Expense Ratios of the
Underlying Scudder Funds
- ---------------------------------------

- --------------------------------------------------------------------------------
Underlying Scudder Funds Expense Ratio
------------------------ -------------

Money Market Fund
Scudder Cash Investment Trust+ 0.86%

Bond Mutual Funds
Scudder Emerging Markets Income Fund 1.49%
Scudder Global Bond Fund+ 1.00%
Scudder GNMA Fund 0.96%
Scudder High Yield Bond Fund+ 0.25%
Scudder Income Fund 1.18%
Scudder International Bond Fund+ 1.55%
Scudder Short Term Bond Fund 0.86%

Underlying Scudder Funds Expense Ratio
------------------------ -------------

Equity Mutual Funds

Scudder Classic Growth Fund+ 1.25%
Scudder Development Fund 1.36%
Scudder Emerging Markets Growth Fund+ 2.00%
Scudder Global Discovery Fund 1.63%
Scudder Global Fund 1.37%
Scudder Gold Fund 1.60%
Scudder Greater Europe Growth Fund+ 1.66%
Scudder Growth and Income Fund 0.76%
Scudder International Fund 1.15%
Scudder International Growth and Income Fund+ 1.75%
Scudder Large Company Growth Fund 1.21%
Scudder Large Company Value Fund 0.93%
Scudder Latin America Fund 1.89%
Scudder Micro Cap Fund+ 1.75%
Scudder Pacific Opportunities Fund 1.94%
Scudder Small Company Value Fund+ 1.50%
Scudder 21st Century Growth Fund+ 1.75%
Scudder Value Fund+ 1.24%
The Japan Fund 1.21%

Based on the foregoing, the ranges for the average weighted expense ratio borne
by the Conservative Portfolio, Balanced Portfolio and Growth Portfolio are
expected to be 0.35% to 1.78%, 0.45% to 1.87% and 0.56% to 1.96%, respectively.
Ranges are provided since the average assets of the Portfolios invested in each
of the Underlying Scudder Funds will fluctuate.

Example

Using the midpoint of the ratios set forth above, the total pro rata expenses
relating to a $1,000 investment in each Portfolio, assuming a 5% annual return
and redemption at the end of each period, are listed below. Investors do not pay
these expenses directly; they are paid by each Underlying Scudder Fund before it
distributes its net investment income to a Portfolio. (As noted above, the
Portfolios have no redemption fees of any kind.)

Portfolio 1 Year 3 Years
--------- ------ -------
Conservative $11 $33
Portfolio
Balanced Portfolio 12 37
Growth Portfolio 13 40

See "Portfolio organization--Special Servicing Agreement" for an explanation of
the Special Servicing Agreement. This example assumes that each Portfolio
reinvests all dividends and distributions paid by the Underlying Scudder Funds.
This example should not be considered a representation of past or future
expenses or returns. Actual expenses and returns of each Underlying Scudder Fund
vary from year to year and may be higher or lower than those shown.

+ The following funds maintained their expenses at the following rates for
their respective fiscal periods: Scudder Cash Investment Trust: 0.85%,
Scudder Classic Growth Fund: 1.25%, Scudder Emerging Markets Growth Fund:
2.00%, Scudder Global Bond Fund: 1.00%, Scudder Greater Europe Growth Fund:
1.50%, Scudder High Yield Bond Fund: 0.14%, Scudder International Bond
Fund: 1.50%, Scudder International Growth and Income Fund: 1.75%, Scudder
Micro Cap Fund: 1.75%, Scudder Small Company Value Fund: 1.50%, Scudder
21st Century Growth Fund: 1.75% and Scudder Value Fund: 1.25%. If the
Adviser had not maintained the Funds' expenses, the total return for each
such fund for the period would have been lower. Please see the appropriate
Underlying Scudder Fund prospectus for details.

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

--
3
<PAGE>

- ---------------------------------------
Financial Highlights
Pathway Conservative Portfolio
- ---------------------------------------

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

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

If you would like more detailed information concerning the Portfolio's
performance, a complete portfolio listing and audited financial statements are
available in the Portfolio's Annual Report dated September 30, 1997 which may be
obtained without charge by writing or calling Scudder Investor Services, Inc.

For the Period
November 15, 1996
(commencement of
operations) to
September 30,
1997
- --------------------------------------------------------------------------------
-------------
Net asset value, beginning of period ............................. $12.00
-------------
Income from investment operations:
Net investment income ............................................ .39
Net realized and unrealized gain on investment transactions ...... 1.36
-------------
Total from investment operations ................................. 1.75
-------------
Less distributions:
From net investment income ....................................... (.33)
From net realized gain on investments ............................ (.15)
-------------
Total distributions .............................................. (.48)
-------------

-------------
Net asset value, end of period ................................... $13.27
-------------
- --------------------------------------------------------------------------------
Total Return (%) ................................................. 14.99**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ........................... 17
Ratio of operating expenses to average daily net assets (%) (a) .. --
Ratio of net investment income to average daily net assets (%) ... 3.67*
Portfolio turnover rate (%) ...................................... 42.0*

(a) This Portfolio invests in other Scudder Funds, and although the Portfolio
did not incur any direct expenses for the period, the Portfolio did bear
its share of the operating, administrative and advisory expenses of the
Underlying Scudder Funds.
* Annualized
** Not annualized

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

- --
4
<PAGE>

- ---------------------------------------
Financial Highlights
Pathway Balanced Portfolio
- ---------------------------------------

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

If you would like more detailed information concerning the Portfolio's
performance, a complete portfolio listing and audited financial statements are
available in the Portfolio's Annual Report dated September 30, 1997 which may be
obtained without charge by writing or calling Scudder Investor Services, Inc.

For the Period
November 15, 1996
(commencement of
operations) to
September 30,
1997
- --------------------------------------------------------------------------------
-------------
Net asset value, beginning of period ............................. $12.00
-------------
Income from investment operations:
Net investment income ............................................ .37
Net realized and unrealized gain on investment transactions ...... 1.59
-------------
Total from investment operations ................................. 1.96
-------------
Less distributions:
From net investment income ....................................... (.33)
From net realized gain on investments ............................ (.07)
-------------
Total distributions .............................................. (.40)
-------------

-------------
Net asset value, end of period ................................... $13.56
-------------
- --------------------------------------------------------------------------------
Total Return (%) ................................................. 16.67**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ........................... 192
Ratio of operating expenses to average daily net assets (%) (a) .. --
Ratio of net investment income to average daily net assets (%) ... 2.96*
Portfolio turnover rate (%) ...................................... 24.3*

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

--
5
<PAGE>

- ---------------------------------------
Financial Highlights
Pathway Growth Portfolio
- ---------------------------------------

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

If you would like more detailed information concerning the Portfolio's
performance, a complete portfolio listing and audited financial statements are
available in the Portfolio's Annual Report dated September 30, 1997 which may be
obtained without charge by writing or calling Scudder Investor Services, Inc.

For the Period
November 15, 1996
(commencement of
operations) to
September 30,
1997
- --------------------------------------------------------------------------------
-------------
Net asset value, beginning of period ............................. $12.00
-------------
Income from investment operations:
Net investment income ............................................ .29
Net realized and unrealized gain on investment transactions ...... 2.15
-------------
Total from investment operations ................................. 2.44
-------------
Less distributions:
From net investment income ....................................... (.16)
From net realized gain on investments ............................ (.13)
-------------
Total distributions .............................................. (.29)
-------------

-------------
Net asset value, end of period ................................... $14.15
-------------
- --------------------------------------------------------------------------------
Total Return (%) ................................................. 20.79**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ........................... 50
Ratio of operating expenses to average daily net assets (%) (a) .. --
Ratio of net investment income to average daily net assets (%) ... 2.09*
Portfolio turnover rate (%) ...................................... 15.1*

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

- --
6
<PAGE>

- ---------------------------------------
A message from Scudder's President
- ---------------------------------------

[PHOTO]

Edmond D. Villani, President
and CEO, Scudder Kemper
Investments, Inc.

/s/ Edmond D. Villani

- ---------------------------------------
Scudder Pathway Series
- ---------------------------------------

Investment Objective for Conservative Portfolio

o primarily current income and secondarily long-term growth of capital

Investment Objective for Balanced Portfolio

o a balance of growth and income

Investment Objective for Growth Portfolio

o long-term growth of capital

Investment Characteristics of Scudder Pathway Series

o professionally managed portfolios which allocate their investments among
select funds in the Scudder Family of Funds

o provides exposure to a wide range of asset classes, securities and markets
around the globe

o no added fees or expenses associated with the operation of Scudder Pathway
Series

o appropriate for IRA, 401(k) and other retirement plans

- ---------------------------------------
Contents
- ---------------------------------------

Investment objectives and policies .................... 10
Why invest in the Portfolios? ......................... 12
Description of the Underlying Scudder Funds ........... 13
Information about policies, investments and risks ..... 25
Investment restrictions of the Portfolios ............. 27
Risks of investing in the Portfolios .................. 28
Distribution and performance information .............. 28
Portfolio organization ................................ 29
Transaction information ............................... 31
Shareholder benefits .................................. 36
Trustees and Officers
Investment products and services
How to contact Scudder ................................ 53
Purchases ............................................. 55
Exchanges and redemptions ............................. 56
Appendix

--
7
<PAGE>

- ---------------------------------------
Investment objectives and policies
- ---------------------------------------

Scudder Pathway Series ("the Trust") (also known as "the Series") consists of
four professionally managed, diversified portfolios, three of which are
described in this prospectus. The Portfolios invest primarily in a select mix of
funds in the Scudder Family of Funds. The Portfolios' investment objectives are
as follows:

o Pathway Conservative Portfolio seeks to provide current income and,
secondarily, long-term growth of capital. In pursuit of these objectives,
the Portfolio, under normal market conditions, will invest substantially in
bond mutual funds, but will have some exposure to equity mutual funds.

o Pathway Balanced Portfolio seeks to provide investors with a balance of
growth and income. It seeks this objective by investing in a mix of money
market, bond and equity mutual funds.

o Pathway 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 equity mutual funds designed to
provide long-term growth. Many of the Portfolio's bond mutual fund holdings
offer the potential for capital appreciation as well as income.

The Scudder Funds in which the Portfolios may invest are referred to as the
"Underlying Scudder Funds," (see table). Some of these Underlying Scudder Funds
are equity mutual funds, which invest primarily in stocks to achieve growth.
Other Underlying Scudder Funds are bond mutual funds, which invest for income
and, in some cases, appreciation as well. The portfolio management team for each
Portfolio allocates investments based on the outlook of the Portfolios'
investment adviser, Scudder Kemper Investments, Inc. ("the Adviser"), for the
financial markets, world economies and the relative performance potential of the
Underlying Scudder Funds.

Under normal market conditions, the Portfolios will invest according to the
following guidelines:

o Pathway Conservative Portfolio will invest 40-80% of total assets in bond
mutual funds; 20-50% of total assets in equity mutual funds; and 0-15% of
total assets in a money market fund, cash, or cash equivalents.

o Pathway Balanced Portfolio will invest 40-70% of total assets in equity
mutual funds; 25-60% of total assets in bond mutual funds; and 0-10% of
total assets in a money market fund, cash, or cash equivalents.

o Pathway Growth Portfolio will invest 60-90% of total assets in equity
mutual funds; 10-40% of total assets in bond mutual funds; and 0-5% of
total assets in a money market fund, cash, or cash equivalents.

- --------------------------------------------------------------------------------
Underlying Scudder Funds in which the Portfolios may invest
- --------------------------------------------------------------------------------
Equity Mutual Funds
Scudder Classic Growth Fund
Scudder Development Fund
Scudder Emerging Markets Growth Fund
Scudder Global Discovery Fund
Scudder Global Fund
Scudder Gold Fund
Scudder Greater Europe Growth Fund
Scudder Growth and Income Fund
Scudder International Fund
Scudder International Growth and Income Fund
Scudder Large Company Growth Fund
Scudder Large Company Value Fund
Scudder Latin America Fund
Scudder Micro Cap Fund
Scudder Pacific Opportunities Fund
Scudder Small Company Value Fund
Scudder 21st Century Growth Fund
Scudder Value Fund
The Japan Fund

Bond Mutual Funds
Scudder Emerging Markets Income Fund
Scudder Global Bond Fund
Scudder GNMA Fund
Scudder High Yield Bond Fund
- --------------------------------------------------------------------------------

- --
8
<PAGE>

- --------------------------------------------------------------------------------
Scudder Income Fund
Scudder International Bond Fund
Scudder Short Term Bond Fund

Money Market Fund
Scudder Cash Investment Trust
- --------------------------------------------------------------------------------

The Portfolios will purchase or sell shares of Underlying Scudder Funds to: (a)
accommodate purchases and sales of a Portfolio's shares, (b) change the
percentages of a Portfolio's assets invested in each of the Underlying Scudder
Funds in response to changing market conditions, and (c) maintain or modify the
allocation of a Portfolio's assets in accordance with the investment mix
described above. If, as a result of appreciation or depreciation, the percentage
of a Portfolio's assets invested in the above categories exceeds or is less than
the applicable range, the Adviser will consider, in its discretion, whether to
reallocate the assets of the Portfolio to comply with the stated ranges.
Further, to provide for redemptions or for temporary defensive purposes, the
Portfolios may invest without limit in cash or cash equivalents, including
repurchase agreements, reverse repurchase agreements, commercial paper and other
types of money market instruments.

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

For information about the investment objective(s) of each of the Underlying
Scudder Funds, please refer to "Description of the Underlying Scudder Funds."
For information about purchasing, exchanging or redeeming shares, refer to
"Transaction information," "Purchases" and "Exchanges and redemptions."

- ---------------------------------------
Why invest in the Portfolios?
- ---------------------------------------

The Portfolios of Scudder Pathway Series are designed for individuals and
institutions who prefer to have their asset allocation decisions made by
professional money managers, appreciate the advantages of broad diversification,
and are looking for a core investment for their retirement portfolio.

The primary advantages of Scudder Pathway Series for investors are convenience
and economy. Pathway provides an investor access to many funds in the Scudder
Family of Funds without the required minimum investment for each. Through a
single pure no-load(TM) investment, investors will be able to achieve broad
diversification in pursuit of one of three distinct objectives.

o Pathway Conservative Portfolio is comprised mainly of investments in
Scudder domestic and global bond funds, and, to a lesser extent, equity
funds. This combination of investments can provide income and modest growth
potential for Pathway investors. The Conservative Portfolio is designed to
meet the needs of investors with a time horizon of 3-5 years or more.

o Pathway Balanced Portfolio allocates assets among Scudder domestic and
global equity and bond funds, seeking a blend of current income and capital
appreciation. The Balanced Portfolio is designed to meet the needs of
investors with a time horizon of at least 5-10 years.

o Pathway Growth Portfolio pursues long-term growth by allocating assets
primarily among Scudder's growth-oriented equity funds, and, to a lesser
extent, bond funds. The Growth Portfolio is designed to meet the needs of
investors with a time horizon of 10 years or more.

--
9
<PAGE>

These three Pathway Portfolios are managed so that each can serve as a complete
investment program or as a core part of a larger portfolio, and may be most
appropriate for long-term investors planning for retirement, particularly
investors in tax-advantaged retirement accounts including IRAs, 401(k) corporate
employee savings plans and 403(b) non-profit organization savings plans.

The proliferation of mutual funds over the last several years and the increased
responsibilities shouldered by employees for managing their retirement and other
long-term assets have left many investors in search of a simple means to manage
their investments. With new investment categories emerging each year and with
each mutual fund reacting differently to political, economic and business
events, many investors are forced to make complex investment decisions with
limited experience, time or personal resources. The Portfolios offer broad
diversification and ongoing professional asset allocation.

Each of the Pathway Portfolios invests in a select group of pure no-load(TM)
funds in the Scudder Family of Funds suited to the Portfolio's particular
investment objective(s). The allocation of assets within each Portfolio is
determined by the Adviser according to fundamental and quantitative investment
analysis. Shifts will be made among Underlying Scudder Funds and asset classes
based on the Adviser's then current outlook for the financial markets and the
world's economies. Because the assets will be adjusted only periodically and
only within pre-determined ranges designed to ensure broad diversification,
there should not be any sudden large-scale changes in asset allocation. The
Series is not designed as a market timing vehicle, but rather as a
cost-effective and simple approach to helping investors meet retirement and
other long-term goals.

The Portfolios can invest in a variety of existing international and global
Underlying Scudder Funds and expect to invest some portion of assets in foreign
markets at all times. The Adviser believes this ongoing commitment to global
investment management differentiates the Series from other funds of funds and
asset allocation products. Adding an international component to a long-term
portfolio can increase diversification and lower volatility, while enhancing and
providing the most consistent returns over time.

- ---------------------------------------
Description of the Underlying
Scudder Funds
- ---------------------------------------

The following is a concise description of the investment objectives and
practices for each of the Underlying Scudder Funds. There can be no assurance
that the Underlying Scudder Funds' objectives will be met. Additional
information regarding the investment practices of the Underlying Scudder Funds
is located in the section entitled "Additional information about policies and
investments," in the Appendix to this prospectus, in the sections entitled "The
Fund's Investment Objectives and Policies" and "Glossary" in the Statement of
Additional Information and in the prospectus of each of the Underlying Scudder
Funds. Prospectuses for the Underlying Scudder Funds may be obtained without
charge by writing Scudder Investor Services, Inc., Two International Place,
Boston, MA 02110-4103 or calling 1-800-225-2470. No offer is made in this
prospectus of shares of any of the Underlying Scudder Funds.

The following Underlying Scudder Fund is the money market fund in which a
Portfolio may invest and will likely serve as the primary cash reserve portion
of each Portfolio.

- --
10
<PAGE>

The following Underlying Scudder Funds are bond mutual funds which primarily
seek to provide current income or total return.

To reduce currency risk, the Fund invests at least 65% of its assets in U.S.
dollar-denominated debt securities. Therefore, no more than 35% of the Fund's
assets may be invested in debt securities denominated in foreign currencies. By
focusing on fixed-income instruments issued in emerging markets, the Fund
invests predominantly in debt securities that are rated below investment-grade.
The Fund may invest up to 5% of its net assets in non-performing securities
whose quality is comparable to securities rated as low as D by S&P or C by
Moody's. Please refer to the attached Appendix for further information.

--
11
<PAGE>

long-term bonds generally have maturities of greater than eight years.)
Portfolio investments will be selected on the basis of, among other things,
yields, credit quality, and the fundamental outlooks for currency and interest
rate trends in different parts of the globe, taking into account the ability to
hedge a degree of currency or local bond price risk. At least 65% of the Fund's
investments will consist of high-grade debt securities, which are those rated in
one of the three highest rating categories of one of the major U.S. rating
services or, if unrated, considered to be of equivalent quality in local
currency terms as determined by the Adviser. The Fund may also invest up to 15%
of its net assets in debt securities rated BBB by S&P or Baa by Moody's and
lower, or unrated securities considered to be of equivalent quality by the
Adviser. Securities rated below Baa by Moody's or BBB by S&P are commonly
referred to as "junk bonds." The Fund will not invest in any securities rated B
or lower.

Scudder GNMA Fund is a diversified investment company which seeks to provide
high current income and safety of principal from a portfolio of high quality,
U.S. Government guaranteed mortgage-backed securities and U.S. Treasury
securities. Under normal conditions, the Fund invests at least 65% of its total
assets in mortgage-backed securities issued or guaranteed by the Government
National Mortgage Association ("GNMA" or "Ginnie Mae"). Such guarantees are
supported by the full faith and credit of the U.S. Government. These guarantees
apply only to the timely payment of both principal and interest of the GNMA
securities held in the Fund's portfolio. Up to 35% of the Fund's total assets
may be held in cash, cash equivalents or invested in securities issued or
directly guaranteed by the U.S. Government, including U.S. Treasury bills, notes
and bonds.

The market values of the Fund's investments and correspondingly the Fund's share
price will vary inversely with changes in prevailing interest rates and in
response to other bond market factors, such as changes in the supply and demand
for mortgage-backed securities.

Scudder High Yield Bond Fund is a diversified investment company which seeks a
high level of current income and, secondarily, capital appreciation through
investment primarily in below investment-grade domestic debt securities. In
pursuit of its investment objectives, the Fund, under normal market conditions,
invests at least 65% of its total assets in high yield, below investment-grade
domestic debt securities, sometimes referred to as "junk" bonds. Such bonds
involve a greater risk of default and price volatility than U.S. Government
bonds and other high quality fixed-income securities. Please refer to the
attached Appendix for further information.

The Fund defines "domestic debt securities" as securities of companies domiciled
in the U.S. or organized under the laws of the U.S. or for which the U.S.
trading market is a primary market. The Fund may invest up to 25% of its total
assets in foreign securities, including those of emerging markets. The Fund
considers "emerging markets" to include any country that is defined as an
emerging or developing economy by any one of the International Bank for
Reconstruction and Development (i.e., the World Bank), the International Finance
Corporation or the United

- --
12
<PAGE>

Nations or its authorities. The Fund invests primarily in medium- and long-term
fixed- income securities. However, there is no limitation as to weighted average
maturity of the Fund's portfolio and no restriction on the maturity of any
individual security held in the portfolio.

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

The Fund invests primarily in a broad range of high-grade, income-producing
securities such as corporate bonds and government securities. Under normal
market conditions, the Fund will invest at least 65% of its assets in securities
rated within the three highest quality rating categories of Moody's (Aaa, Aa and
A) or S&P (AAA, AA and A), or if unrated in bonds judged by the Adviser to be of
comparable quality at the time of purchase. The Fund may invest up to 20% of its
assets in debt securities rated lower than Baa or BBB or, if unrated, of
equivalent quality as determined by the Adviser, but will not purchase bonds
rated below B by Moody's or S&P or their equivalent.

To achieve its objectives, the Fund primarily invests in a managed portfolio of
high-grade debt securities denominated in foreign currencies, including bonds
denominated in the European Currency Unit (ECU). Portfolio investments will be
selected on the basis of, among other things, yield, credit quality, and the
fundamental outlooks for currency and interest rate trends in different parts of
the globe, taking into account the ability to hedge a degree of currency or
local bond price risk. The Fund will normally invest at least 65% of its total
assets in bonds denominated in foreign currencies. The Fund will invest no more
than 35% of the value of its total assets in U.S. debt securities. The Fund will
invest no more than 15% of its total assets in debt securities rated below
investment-grade, but no lower than B.

Please refer to the attached Appendix for further information.

In addition, the Fund will not invest in any debt security rated at the time of
purchase below investment-grade. The following Underlying Scudder Funds are
equity mutual funds which seek a
combination of income and growth of capital.

Scudder Growth and Income Fund is a diversified investment company which seeks
long-term

--
13
<PAGE>

growth of capital, current income and growth of income. The Fund attempts to
achieve its investment objective by investing primarily in dividend-paying
common stocks, preferred stocks and securities convertible into common stocks of
companies with long-standing records of earnings growth. The Fund may also
purchase securities which do not pay current dividends but which offer prospects
for growth of capital and future income. Convertible securities (which may be
current coupon or zero coupon securities) are bonds, notes, debentures,
preferred stocks and other securities which may be converted or exchanged at a
stated or determinable exchange ratio into underlying shares of common stock.
The Fund may also invest in nonconvertible preferred stocks consistent with its
objective.

The following Underlying Scudder Funds are equity mutual funds which seek
long-term growth of capital.

Scudder Classic Growth Fund is a diversified investment company which seeks to
provide long-term growth of capital and to keep the value of its shares more
stable than other growth mutual funds.

Under normal market conditions, the Fund invests primarily in a diversified
portfolio of common stocks which the Adviser believes offers above-average
appreciation potential yet, as a portfolio, offers the potential for less share
price volatility than other growth mutual funds.

In seeking such investments, the Adviser focuses its investment in high quality,
medium-to-large sized U.S. companies with leading competitive positions.

The Fund allocates its investments widely among different industries and
companies, and adjusts its portfolio securities based on long-term investment
considerations as opposed to short-term trading. While the Fund emphasizes U.S.
investments, it can commit a portion of assets to the equity securities of
foreign growth companies that meet the criteria applicable to domestic
investments.The Fund can purchase other types of equity securities including
securities convertible into common stocks, preferred stocks, rights and
warrants. The Fund may invest up to 20% of its net assets in debt securities
when the Adviser anticipates that the capital appreciation on debt securities is
likely to equal or exceed the capital appreciation on common stocks over a
selected time, such as during periods of unusually high interest rates.

Scudder Development Fund is a diversified investment company which seeks
long-term growth of capital by investing primarily in securities of small- and
medium-size growth companies. The Fund generally invests in equity

- --
14
<PAGE>

securities, including common stocks and convertible securities, of small- and
medium-size companies, commonly referred to as emerging growth companies, that
the Adviser believes have above-average earnings growth potential and/or may
receive greater market recognition. Both factors are believed to offer
significant opportunity for capital appreciation and the Adviser will attempt to
identify these opportunities before their potential is recognized by investors
in general. Generally, small and medium-size companies are those with $50
million to $5 billion in total market capitalization.

To help reduce risk, the Fund allocates its investments among many companies and
different industries. In selecting industries and companies for investment, the
Adviser will consider overall growth prospects, financial condition, competitive
position, technology, research and development, productivity, labor costs, raw
material costs and sources, profit margins, return on investment, structural
changes in local economies, capital resources, the degree of governmental
regulation or deregulation, management and other factors.

While the Fund generally emphasizes investments in companies domiciled in the
U.S., it may invest in listed and unlisted foreign securities that meet the same
criteria as the Fund's domestic holdings when the anticipated performance of
foreign securities is believed by the Adviser to offer equal or more potential
than domestic alternatives in keeping with the investment objective of the Fund.
However, the Fund has no current intention of investing more than 20% of its net
assets in foreign securities.

Scudder Emerging Markets Growth Fund is a non-diversified investment company
which seeks long-term growth of capital primarily through equity investment in
emerging markets around the globe. The Fund will invest in the Asia-Pacific
region, Latin America, less developed nations in Europe, the Middle East and
Africa, focusing investments in countries and regions where there appears to be
the best value and appreciation potential, subject to considerations of
portfolio diversification and liquidity. At least 65% of the Fund's total assets
will be invested in the equity securities of emerging market issuers. The Fund
considers "emerging markets" to include any country that is defined as an
emerging or developing economy by any one of the International Bank for
Reconstruction and Development (i.e., the World Bank), the International Finance
Corporation or the United Nations or its authorities. The Fund intends to
allocate its investments among at least three countries at all times, and does
not expect to concentrate in any particular industry. The Fund deems an issuer
to be located in an emerging market if:

o the issuer is organized under the laws of an emerging market country;

o the issuer's principal securities trading market is in an emerging market;
or

o at least 50% of the issuer's non-current assets, capitalization, gross
revenue or profit in any one of the two most recent fiscal years is derived
(directly or indirectly through subsidiaries) from assets or activities
located in emerging markets.

The Fund may invest up to 35% of its total assets in emerging market and
domestic debt securities if the Adviser determines that the capital appreciation
of debt securities is likely to equal or exceed the capital appreciation of
equity securities. Under normal market conditions, the Fund may invest up to 35%
of its assets in equity

--
15
<PAGE>

securities of issuers in the U.S. and other developed markets.

- --
16
<PAGE>

total assets in debt securities rated below investment-grade.

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

The Fund pursues its objective primarily through a portfolio of gold-related
investments. Under normal market conditions, at least 65% of the Fund's total
assets will be invested in (1) equity securities (defined as common stock,
investment-grade preferred stock and debt securities that are convertible into
or exchangeable for common stock) of U.S. and foreign companies primarily
engaged in the exploration, mining, fabrication, processing or distribution of
gold, (2) gold bullion, and (3) gold coins. A company will be considered
"primarily engaged" in a business or an activity if it devotes or derives at
least 50% of its assets, revenues and/or operating earnings from that business
or activity. The remaining 35% of the Fund's assets may be invested in any
precious metals other than gold; in equity securities of companies engaged in
activities primarily relating to precious metals and minerals other than gold;
in investment-grade debt securities, including zero coupon bonds, of companies
engaged in activities relating to gold or other precious metals and minerals; in
certain debt securities, a portion of the return on which is indexed to the
price of precious metals. In addition, the Fund may engage in Strategic
Transactions and, to a limited extent, may invest in illiquid and restricted
securities.

Up to 10% of the Fund's total assets may be invested directly in gold, silver,
platinum and palladium bullion and in gold and silver coins. In addition, the
Fund's assets may be invested in wholly owned subsidiaries of the Scudder Mutual
Funds, Inc., of which the Fund is a series, that invest in gold, silver,
platinum and palladium bullion and in gold and silver coins.

The Fund will invest, under normal market conditions, at least 80% of its total
assets in the equity securities of European companies. The Fund defines a
European company as follows:

o A company organized under the laws of a European country or for which the
principal securities trading market is in Europe; or

o A company, wherever organized, where at least 50% of the company's
non-current assets, capitalization, gross revenue or profit in its most
recent fiscal year represents (directly or indirectly through subsidiaries)
assets or activities located in Europe.

--
17
<PAGE>

represented in the portfolio, in substantial proportions, business activities in
not less than three different countries. The Fund does not intend to concentrate
investments in any particular industry.

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

The Fund's equity investments consist of common stocks, preferred stocks and
securities convertible into common stocks of companies which are of
above-average financial quality and offer the prospect for above-average growth
in earnings, cash flow or assets relative to the overall market as defined by
the Standard & Poor's 500 Composite Price Index ("S&P 500").

The Fund invests at least 65% of its total assets in the equity securities of
seasoned, financially- strong U.S. growth companies which are considered to be
of above-average financial quality. The common stocks issued by these companies
qualify, at the time of purchase, for one of the three highest equity ranking
categories (A+, A or A-) of S&P or, if not ranked by S&P, are judged to be of
comparable quality by the Adviser. Rankings by S&P are not an appraisal of a
company's creditworthiness, as is true for S&P's debt security ratings, nor are
these rankings intended as a forecast of future stock market performance. In
addition to using S&P rankings of earnings and dividends of common stocks, the
Adviser conducts its own analysis of a company's history, current financial
position, and earnings prospects.

The Fund allocates its investments among different industries and companies, and
adjusts its portfolio securities based on long-term investment considerations as
opposed to short-term trading. While the Fund emphasizes U.S. investments, it
can commit a portion of assets to the equity securities of foreign growth
companies which meet the criteria applicable to domestic investments. The Fund
may invest in convertible securities that must be investment-grade.

Scudder Large Company Value Fund is a diversified investment company which seeks
to maximize long-term capital appreciation through a value-driven investment
program. The Fund invests in marketable securities, principally common stocks
and, consistent with its objective of long-term capital appreciation, preferred
stocks. The Fund is free to invest in a wide range of marketable securities
which the Adviser believes offer the potential for long-term, above-average
appreciation. The Fund will normally invest at least 65% of its assets in the
equity securities of large U.S. companies, i.e. those with $1 billion or more in
total market capitalization. The Fund looks for companies whose securities
appear to present a favorable relationship between market price and opportunity.
These may include securities of companies whose fundamentals or products may be
of only average promise. The Fund may invest up to 20% of its net assets in debt
securities when management anticipates that the capital appreciation on debt
securities is likely to equal or exceed the capital appreciation on common
stocks over a selected time, such as during periods of unusually high interest
rates. Such debt securities may be rated below investment-grade, or of
equivalent quality as determined by the Adviser. However, the Fund will invest
no more than 10% of its net assets in

- --
18
<PAGE>

securities rated B or lower, but may invest in securities rated C by Moody's or
D by S&P, which may be in default with respect to payment of principal or
interest.

Scudder Latin America Fund is a non-diversified investment company which seeks
to provide long-term capital appreciation through investment primarily in the
securities of Latin American issuers.

o Securities of companies organized under the laws of a Latin American
country or for which the principal securities trading market is in Latin
America;

o Securities issued or guaranteed by the government of a country in Latin
America, its agencies or instrumentalities, political subdivisions or the
central bank of such country;

o Securities of companies, wherever organized, when at least 50% of an
issuer's non-current assets, capitalization, gross revenue or profit in any
one of the two most recent fiscal years represents (directly or indirectly
through subsidiaries) assets or activities located in Latin America; or

o Securities of Latin American issuers, as defined above, in the form of
depositary shares.

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

The Fund seeks to provide long-term growth of capital by investing, under normal
market conditions, at least 80% of its assets in common stocks issued by U.S.
micro-cap companies. The Fund will typically invest in companies that, at the
time of purchase, are smaller than the smallest stocks in the Russell 2000 Index
at its annual reconstitution. The median market capitalization (i.e., current
stock price times shares outstanding) of the portfolio is not expected to exceed
$125 million.

While the Fund invests predominantly in common stocks, it can purchase other
types of securities, including preferred stocks, convertible or non-convertible
securities, rights and warrants. Securities may be listed on national exchanges
or traded over-the-counter. The Fund may invest up to 20% of its assets in U.S.
Treasuries, agency and instrumentality

--
19
<PAGE>

obligations, may enter into repurchase agreements and may engage in strategic
transactions to increase stock market participation, enhance liquidity and
manage transaction costs.

o Securities of companies organized under the laws of a Pacific Basin country
or for which the principal securities trading market is in the Pacific
Basin; or

o Securities of companies, wherever organized, when at least 50% of a
company's non-current assets, capitalization, gross revenue or profit in
any one of the two most recent fiscal years represents (directly or
indirectly through subsidiaries) assets or activities located in the
Pacific Basin.

Scudder Small Company Value Fund is a diversified investment company which
invests for long-term growth of capital by seeking out undervalued stocks of
small U.S. companies. In pursuit of long-term growth of capital, the Fund
invests, under normal circumstances, at least 80% of its assets in the common
stock of small U.S. companies. The Fund will invest in securities of companies
that are similar in size to those in the Russell 2000(R) Index of small stocks.
The median market capitalization (i.e., current stock price times shares
outstanding) of the portfolio will be below $500 million. The Fund may continue
to hold securities which have grown in market capitalization above the Russell
2000(R) Index, but will generally not add to these holdings.

Companies represented in the portfolio of the Fund typically have the following
characteristics:

o Attractive valuations relative to the Russell 2000 Index--a widely used
benchmark of small stock performance--based on measures such as price to
earnings, price to book value and price to cash flow ratios.

o Favorable trends in earnings growth rates and stock price momentum.

While the Fund invests predominantly in common stocks, it can purchase other
types of equity securities including preferred stocks (either convertible or
nonconvertible), rights and warrants. Securities may be listed on national
exchanges or, more commonly, traded over-the-counter. The Fund may invest up to
20% of its assets in U.S. Treasury, agency and instrumentality obligations, may
enter into repurchase agreements and may engage in strategic transactions, using
such derivatives contracts as index options and futures, to

- --
20
<PAGE>

increase stock market participation, enhance liquidity and manage transaction
costs.

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

The Fund generally invests in equity securities, including common stocks and
convertible securities, of relatively small or little-known companies, commonly
referred to as emerging growth companies, with market capitalization typically
below $750 million. The Adviser believes these companies are well-positioned for
above-average earnings growth and/or greater market recognition. Such favorable
prospects may be a result of new or innovative products or services a given
company is developing or provides, products or services that have the potential
to impact significantly the industry in which the company competes or to change
dramatically customer behavior into the 21st century.

To help reduce risk in its search for high quality, emerging growth companies,
the Adviser allocates the Fund's investments among many companies and different
industries in the U. S. and, where opportunity warrants, abroad as well.
Emerging growth companies are those with the ability, in the Adviser's opinion,
to expand earnings per share by at least 15% per annum over the next three to
five years at a minimum.

Scudder Value Fund is a diversified investment company which seeks long-term
growth of capital through investment in undervalued equity securities. The Fund
invests primarily in the equity securities of medium- to large-sized domestic
companies with annual revenues or market capitalization of at least $600
million. The Adviser uses in-depth fundamental research and a proprietary
computerized quantitative model to identify companies that are currently
undervalued in relation to current and estimated future earnings and dividends.
The investment process also involves an assessment of business risk, including
the Adviser's analysis of the strength of a company's balance sheet, the
accounting practices a company follows, the volatility of a company's earnings
over time, and the vulnerability of earnings to changes in external factors,
such as the general economy, the competitive environment, governmental action,
and technological change. The Fund invests in the securities of companies that,
in the opinion of its Adviser, are undervalued in the marketplace in relation to
current and estimated future earnings and dividends. These companies generally
sell at price-earnings ratios below the market average, as defined by the S&P
500. The Fund invests at least 80% of its assets in equity securities, which
consist of common stocks, preferred stocks and securities convertible into
common stocks. While the Fund emphasizes U.S. investments, it can invest its
assets in securities of foreign companies which meet the same criteria
applicable to domestic investments. The Fund may invest up to 20% of its total
assets in debt obligations, including zero coupon securities and commercial
paper and reverse repurchase agreements. In addition, the Fund may engage in
strategic transactions and invest in illiquid and restricted securities.

The debt securities in which the Fund may invest may be rated below
investment-grade, although the Fund will invest no more than 10% of its net
assets in securities rated B or lower by S&P or Moody's, and may not invest more
than 5% of its net assets in securities rated C by Moody's or D by S&P.

--
21
<PAGE>

debentures") and common stock purchase warrants.

The Fund may also invest up to 30% of its net assets in equity securities of
Japanese companies which are traded in an over-the-counter market. These are
generally securities of relatively small or little-known companies that the
Adviser believes have above-average earnings growth potential. The Fund may
invest up to 20% of its assets in cash or short-term government or other
short-term prime obligations in order to have funds readily available for
general corporate purposes, including the payment of operating expenses,
dividends and redemptions, or the investment in securities through exercise of
rights or otherwise, or in repurchase agreements. Where the Adviser determines
that market or economic conditions so warrant, the Fund may, for temporary
defensive purposes, invest more than 20% of its assets in cash or such
securities.

- ---------------------------------------
Information about policies,
investments and risks
- ---------------------------------------

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

- --
22
<PAGE>

portfolio securities may be affected by laws or regulations relating to the
convertibility and repatriation of assets. These risks are greater in emerging
markets.

Debt securities. In general, the prices of debt securities rise when interest
rates fall, and vice versa. This effect is usually more pronounced for longer
term debt securities.

The debt securities in which certain of the Underlying Scudder Funds may invest
are rated, or determined by the Adviser to be the equivalent of those rated, by
two nationally recognized rating organizations, Moody's and S&P. High quality
securities are those rated in the two highest categories by Moody's (Aaa or Aa)
or S&P (AAA or AA). High-grade securities are those rated in the three highest
categories by Moody's (Aaa, Aa, or A) or by S&P (AAA, AA, or A).
Investment-grade securities are those rated in the four highest categories by
Moody's (Aaa, Aa, A, or Baa) or by S&P (AAA, AA, A or BBB).

--
23
<PAGE>

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"). Some Strategic Transactions may also be used
to enhance potential gain although no more than 5% of an Underlying Scudder
Fund's assets will be committed to Strategic Transactions entered into for
non-hedging purposes.

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

- ---------------------------------------
Investment restrictions of the
Portfolios
- ---------------------------------------

The Portfolios have certain investment restrictions which are designed to reduce
the Portfolios' investment risk. 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. A complete listing of
investment restrictions is contained under "Investment Restrictions" in the
Portfolios' Statement of Additional Information.

As a matter of fundamental policy, the Portfolios may not borrow money, except
as permitted under Federal law. Further, as a matter of non-fundamental policy,
the Portfolios may not borrow money in an amount greater than 5% of total
assets, except for temporary or emergency

- --
24
<PAGE>

purposes, although the Portfolios may engage up to 5% of total assets in reverse
repurchase agreements or dollar rolls.

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

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

- ---------------------------------------
Risks of investing in the Portfolios
- ---------------------------------------

The Portfolios' risks are determined by the nature of the securities held by the
Underlying Scudder Funds as well as the proportion of investment in each
Underlying Scudder Fund pursuant to the portfolio management strategies used by
the Adviser. The following are descriptions of certain risks related to
investments in the Portfolios.

o As the investments in each Portfolio are concentrated within a group of
Underlying Scudder Funds, the performance of that Portfolio is directly
related to the investment performance of those Underlying Scudder Funds.
The ability of a Portfolio to meet its investment objective is directly
related to the ability of the Underlying Scudder Funds to meet their
objectives as well as the allocation among those Underlying Scudder Funds
by the Portfolios' portfolio management team.

o Each Portfolio's share price and yield will fluctuate in response to
various market and economic factors related to both the stock and bond
markets. Some of the Underlying Scudder Funds invest in debt securities
making them subject to credit risk, interest rate risk and pre-payment
risk. Also, each Portfolio invests in Underlying Scudder Funds that are in
turn invested in international securities and thus are subject to
additional risks of these investments including changes in foreign currency
exchange rates and political risk.

For information about the investment techniques and the risks involved in the
Underlying Scudder Funds, please refer to "Additional Information about
policies, investments and risks" and the Appendix to this prospectus.

- ---------------------------------------
Distribution and performance
information
- ---------------------------------------

Dividends and capital gains distributions

The Conservative Portfolio and Balanced Portfolio each intend to distribute
dividends from net investment income quarterly in April, July, October and
December. The Growth Portfolio intends to distribute net investment income in
November or December. Each Portfolio intends to distribute net realized capital
gains, if any, in November or December to prevent application of federal excise
tax, although an additional distribution may be made within three months of a
Portfolio's fiscal year end, if necessary. Any dividends or capital gains
distributions declared in October, November or December with a record date in
such a month and paid during the following January will be treated by
shareholders for federal income tax purposes as if received on December 31 of
the calendar year declared.

According to preference, shareholders may receive distributions in cash or have
them reinvested in additional shares of a Portfolio. If an investment in a
Portfolio is in the form of a retirement plan, then all distributions will
automatically be reinvested in additional shares of that Portfolio.

--
25
<PAGE>

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. Distributions
received by a Portfolio from an Underlying Scudder Fund generally will be
ordinary income dividends, includible in that Portfolio's net investment income,
if paid from the Underlying Scudder Fund's net investment income, short-term
capital gains or other taxable income. Distributions paid from an Underlying
Scudder Fund's long-term capital gains, however, generally will be treated by a
Portfolio as long-term capital gains taxable at a maximum 20% or 28% capital
gains rate (depending on the Underlying Scudder Fund's holding period for the
assets giving rise to the gain), regardless of how long that Portfolio held the
Underlying Scudder Fund's shares.

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

Performance information

From time to time, quotations of a Portfolio's performance may be included in
advertisements, sales literature, or shareholder reports.

All performance figures are historical, show the performance of a hypothetical
investment and are not intended to indicate future performance.

For the Conservative Portfolio and Balanced Portfolio, the "SEC yield" is an
annualized expression of the net income generated by a Portfolio over a
specified 30-day (one month) period, as a percentage of a Portfolio's share
price on the last day of that period. This yield is calculated according to
methods required by the Securities and Exchange Commission (the "SEC"), and
therefore may not equate to the level of income paid to shareholders. Yield is
expressed as an annualized percentage. For all Portfolios, "total return" is the
change in value of an investment in a Portfolio for a specified period. The
"average annual total return" of a Portfolio is the average annual compound rate
of return of an investment in a Portfolio assuming the investment has been held
for one year, and the life of a Portfolio as of a stated ending date.
"Cumulative total return" represents the cumulative change in value of an
investment in a Portfolio for various periods. Total return calculations assume
that all dividends and capital gains distributions during the period were
reinvested in shares of a Portfolio.

Performance will vary based upon, among other things, changes in market
conditions and the level of the Underlying Scudder Funds' expenses.

- ---------------------------------------
Portfolio organization
- ---------------------------------------

The Trust offers four portfolios: Conservative Portfolio, Balanced Portfolio,
Growth Portfolio and International Portfolio. The Declaration of Trust provides
that each Portfolio can offer additional classes of shares and the Board of
Trustees has the ability to offer additional portfolios. Each Portfolio
represents a separate series of shares and has different objectives and
investment policies. Each Portfolio intends to qualify separately as a regulated
investment company for purposes of Subchapter M of the Internal Revenue Code.

The Portfolios' activities are supervised by its Board of Trustees. Shareholders
have one vote for each share held on matters on which they are entitled to vote.
The Portfolios are not required to hold, and have no current intention of
holding, annual shareholder meetings, although special meetings may be called
for purposes such as electing or removing Trustees, changing fundamental
investment policies or approving an investment management contract.

- --
26
<PAGE>

Special Servicing Agreement

All the expenses of the Portfolios will be paid for in accordance with a Special
Servicing Agreement (the "Agreement") entered into by the Adviser, the
Underlying Scudder Funds, Scudder Service Corporation, Scudder Fund Accounting
Corporation, Scudder Investor Services, Inc., Scudder Trust Company and the
Portfolios. Under the Agreement, the Adviser will arrange for all services
pertaining to the operation of the Portfolios including the services of Scudder
Service Corporation and Scudder Fund Accounting Corporation as the Shareholder
Servicing Agent and the Accounting Agent, respectively, for the Portfolios. If
the officers of an Underlying Scudder Fund determine that the aggregate expenses
of a Portfolio are less than the estimated savings to the Underlying Scudder
Fund from the operation of that Portfolio, the Underlying Scudder Fund will bear
those expenses in proportion to the average daily value of its shares owned by
the Portfolio. Consequently, no Underlying Scudder Fund will be expected to
carry expenses that are in excess of the estimated savings to it. The estimated
savings are expected to result from the reduction of shareholder servicing costs
due to the elimination of separate shareholder accounts which either currently
are or have potential to be invested in the Underlying Scudder Funds. The
estimated savings produced by the operation of a Portfolio will most likely
suffice to offset most, if not all, of the expenses incurred by that Portfolio.

All expenses of the Portfolios, excluding certain non-recurring and
extraordinary expenses, will be paid for in accordance with the Agreement,
including fees and expenses incurred in connection with membership in investment
company organizations; fees and expenses of the Portfolios' accounting agent;
brokers' commissions; legal, auditing and accounting expenses; taxes and
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.

Certain Underlying Scudder Funds impose a fee upon the redemption or exchange of
shares held less than one year. The fees, which range between 1% and 2% of the
net asset value of the shares being redeemed or exchanged, are assessed and
retained by the Underlying Scudder Funds for the benefit of the remaining
shareholders. The fee is intended to encourage long-term investment in the Fund.
The fee is not a deferred sales charge, is not a commission paid to the Adviser
of its subsidiary and does not benefit the Adviser in any way. The Fund reserves
the right to modify the terms of or terminate this fee at any time. As a
shareholder of such Underlying Scudder Funds, the Portfolios will be subject to
such fees. Under normal market conditions, each Portfolio will seek to avoid
taking action that would result in the imposition of such a fee. However, in the
event that a fee is incurred, the net assets of a Portfolio would be reduced by
the amount of such fees that are assessed and retained by an Underlying Scudder
Fund for the benefit of their shareholders.

Investment adviser

Each Portfolio retains the investment management firm of Scudder Kemper
Investments, Inc., a Delaware corporation formerly known as Scudder, Stevens &
Clark, Inc., 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 each Portfolio under Massachusetts law.

--
27
<PAGE>

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

Transfer agent

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

Underwriter

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

Portfolio accounting agent

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

Custodian

State Street Bank and Trust Company is the custodian for the Portfolios.

- ---------------------------------------
Transaction information
- ---------------------------------------

For concise instruction on how to purchase, exchange or redeem shares, refer to
pages 55 and 56.

Purchasing shares

Purchases are executed at the next calculated net asset value per share after
the Portfolios' 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 Portfolio may hold redemption proceeds until the purchase check has cleared.
If you purchase shares by federal funds wire, you may avoid this delay.

Redemption requests by telephone prior to the expiration of the seven-day period
will not be accepted.

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 Portfolio in which the money is to be invested,
- -- the account number of the Portfolio, 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

- --
28
<PAGE>

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 a Portfolio resulting from this cancellation. Telephone orders are
not available for shares held in Scudder IRA accounts and most other Scudder
retirement plan accounts.

If you purchase shares by "QuickBuy" and redeem them within seven days of the
purchase, a Portfolio 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 Scudder IRA accounts and most other retirement plan accounts.

By exchange. The Portfolios 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.

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

Redeeming shares

The Portfolios allow you to redeem shares (i.e., sell them back to a Portfolio)
without redemption fees.

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

If you open an account by wire, you cannot redeem shares by telephone until the
Portfolio's transfer agent has received your completed and signed application.
Telephone redemption is not

--
29
<PAGE>

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 Portfolio by telephone, you should
write to the Portfolio; see "How to contact Scudder" for the address.

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

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

Signature guarantees. For your protection and to prevent fraudulent redemptions,
on written redemption requests in excess of $100,000 we require an original
signature and an original signature guarantee for each person in whose name the
account is registered. (The Portfolios reserve the right, however, to require a
signature guarantee for all redemptions.) You can obtain a signature guarantee
from most banks, credit unions or savings associations, or from broker/dealers,
municipal securities broker/dealers, government securities broker/dealers,
national securities exchanges, registered securities associations, or clearing
agencies deemed eligible by the 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 wired
to a predesignated bank account. Each Portfolio 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 Portfolio does not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Portfolios will not be liable for acting upon
instructions communicated by telephone that they reasonably believe to be
genuine.

Share price

Purchases and redemptions, including exchanges, are made at each Portfolio's net
asset value. Scudder Fund Accounting Corporation determines net asset value per
share as of the close of regular trading on the Exchange, normally 4 p.m.
eastern time, on each day the Exchange is open for trading. Net asset value per
share is calculated by dividing the value of total assets of a Portfolio, less
its liabilities, by the total number of shares of that Portfolio outstanding.

Processing time

All purchase and redemption requests must be received in good order by the
Portfolios' transfer agent. Those requests received by the close of regular
trading on the Exchange are executed at

- --
30
<PAGE>

the net asset value per share calculated at the close of trading that day.

Purchase and redemption requests received after the close of regular trading on
the Exchange will be executed the following business day.

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

Each Portfolio 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
Trust and Scudder Investor Services, Inc. each reserves the right to reject
purchases of Portfolio shares (including exchanges) for any reason including
when a pattern of frequent purchases and sales made in response to short-term
fluctuations in a Portfolio's share price appears evident.

Tax information

A redemption of shares, including an exchange into another Portfolio or 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 Portfolios'
application when you open an account. Federal tax law requires each Portfolio to
withhold 31% of taxable dividends, capital gains distributions and redemption
and exchange proceeds from accounts (other than those of certain exempt payees)
without a correct certified Social Security or tax identification number and
certain other certified information or upon notification from the IRS or a
broker that withholding is required. Each Portfolio reserves the right to reject
new account applications without a correct certified Social Security or tax
identification number. Each Portfolio 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 Portfolio with a tax identification number
during the 30-day notice period.

Minimum balances

Shareholders should maintain a share balance worth at least $2,500, which amount
may be changed by the Board of Trustees. Scudder retirement plans and certain
other accounts have similar or lower minimum balance requirements. The initial
investment and minimum account balance for fiduciary accounts such as IRAs is
$1,000 per fund account, and the subsequent minimum investment is $50. A
shareholder may open a regular account with a minimum of $1,000, if an
investment program of at least $100 per month is established.

Shareholders with non-fiduciary accounts who maintain an account balance of less
than $2,500 in a Portfolio without establishing a regular investment program may
be assessed an annual $10.00 per fund charge with the fee to be paid to that
Portfolio. The $10.00 charge will not apply to shareholders with a combined
household account balance (same surname, same address) in any of the Scudder
Funds of $25,000 or more. Each Portfolio reserves the right, following 60 days'
written notice to shareholders, to redeem all shares in accounts below $250,
where a reduction in value has occurred due to a redemption or exchange out of
the account. The shareholder may restore the share balance to $250 or more
during the 60-day notice period and must maintain it at no lower than that
minimum to avoid an involuntary redemption. Each Portfolio will mail the
proceeds of the redeemed account to the shareholder. Reductions in value that
result solely from market activity will not trigger an involuntary redemption.
Retirement accounts and certain other accounts will not be assessed the $10.00
charge or be subject to automatic liquidation. Please refer to "Exchanges

--
31
<PAGE>

and Redemptions -- Other information" in the Portfolio's Statement of Additional
Information.

Third party transactions

- ---------------------------------------
Shareholder benefits
- ---------------------------------------

Experienced professional management

Scudder Kemper Investments, Inc., one of the nation's most experienced
investment management firms, actively manages your 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

The Portfolios are managed by a team of investment professionals who each play
an important role in the Portfolios' management process. Team members work
together to develop investment strategies and select Underlying Scudder Funds
for each Portfolio. They are supported by the Adviser's large staff of portfolio
managers, economists, research analysts, traders and other investment
specialists. The Adviser believes its team approach benefits the Portfolios'
investors by bringing together many disciplines and leveraging its extensive
resources. All members of the Pathway investment team are members of Scudder
Kemper's Global Asset Allocation Committee. This group is responsible for
analyzing the global economy and capital markets, integrating information from
the firm's equity and fixed income specialists, and developing the outlook for
the investment characteristics of the major markets in which a Portfolio
invests.

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 applicable Portfolio; please see "How to contact
Scudder" for the address.

- --
32
<PAGE>

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. 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 a
Portfolio or the transfer agent. In some cases, the transfer agent or Scudder
Investor Services, Inc. may impose additional conditions on telephone
transactions.

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

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

Dividend reinvestment plan

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

Shareholder statements

Shareholder reports

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

Newsletters

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

--
33
<PAGE>

- ---------------------------------------
Scudder Kemper tax-advantaged
retirement plans
- ---------------------------------------

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

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

o Profit Sharing and Money Purchase Pension Plans. These plans allow
corporations, partnerships and people who are self-employed to make annual,
tax-deductible contributions of up to $30,000 for each person covered by
the plans. Plans may be adopted individually or paired to maximize
contributions. These are sometimes known as Keogh plans. The Scudder Keogh
charges you no annual custodial fee.

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

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

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

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

- --
34
<PAGE>

- --------------------------------------------------------------------------------
Trustees and Officers
- --------------------------------------------------------------------------------

Daniel Pierce*
President

Dr. Rosita P. Chang
Trustee; Professor of Finance, University of Rhode Island

Edgar R. Fiedler
Trustee; Vice President and Economic Counsellor, The Conference Board, Inc.

Peter B. Freeman
Trustee; Corporate Director and Trustee

Dr. J.D. Hammond
Trustee; Dean, Smeal College of Business Administration, Pennsylvania State
University

Richard M. Hunt
Trustee; University Marshal and Senior Lecturer, Harvard University

Jerard K. Hartman*
Vice President

Thomas W. Joseph*
Vice President

Thomas F. McDonough*
Vice President, Treasurer and Secretary

Kathryn L. Quirk*
Vice President and Assistant Secretary

John R. Hebble*
Assistant Treasurer

Caroline Pearson*
Assistant Secretary

*Scudder Kemper Investments, Inc.

--
35
<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**

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

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

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

U.S. Growth and Income
Scudder Balanced Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund

U.S. Growth
Value
Scudder Large Company Value Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund

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

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

Industry Sector Funds
Choice Series
Scudder Financial Services Fund
Scudder Health Care Fund
Scudder Technology Fund

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

Retirement Programs
Traditional IRA
Roth IRA
SEP-IRA

Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan **+++
(a variable annuity)

Education Accounts
Education IRA
UGMA/UTMA

Closed-End Funds#
- --------------------------------------------------------------------------------

The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.

Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.

Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal Fund, Inc.

For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. ++Funds within categories are listed in order from
expected least risk to most risk. Certain Scudder funds 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. +++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.

- --
36
<PAGE>

- --------------------------------------------------------------------------------
How to contact Scudder
- --------------------------------------------------------------------------------

Account Service and Information:

For existing account service and transactions
Scudder Investor Relations -- 1-800-225-5163

For 24 hour account information, fund information, exchanges, and an
overview of all the services available to you
Scudder Electronic Account Services --

For personalized information about your Scudder accounts, exchanges and
redemptions
Scudder Automated Information Line (SAIL) -- 1-800-343-2890

Investment Information:

For information about the Scudder funds, including additional
applications and prospectuses, or for answers to investment questions
Scudder Investor Relations -- 1-800-225-2470
[email protected]
Scudder's World Wide Web Site -- http://funds.scudder.com

For establishing 401(k) and 403(b) plans
Scudder Defined Contribution Services -- 1-800-323-6105

Scudder Brokerage Services:
To receive information about this discount brokerage service and to
obtain an application
Scudder Brokerage Services* -- 1-800-700-0820

Personal Counsel(SM) -- A Managed Fund Portfolio Program:
To receive information about this mutual fund portfolio guidance and
management program
Personal Counsel from Scudder -- 1-800-700-0183

Please address all correspondence to:

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

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

Boca Raton Chicago San Francisco
Boston New York

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

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

--
37
<PAGE>

- --------------------------------------------------------------------------------
Purchases
- --------------------------------------------------------------------------------

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

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

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

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

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

- --
38
<PAGE>

- --------------------------------------------------------------------------------
Exchanges and redemptions
- --------------------------------------------------------------------------------

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

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

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

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

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

--
39
<PAGE>

Appendix

Descriptions Of Certain Risks Related To Various Securities Invested In,
And Investment Techniques Employed By, The Underlying Scudder Funds
In Which The Portfolios May Invest

A-1
<PAGE>

Special situation securities. From time to time, an Underlying Scudder Fund may
invest in equity or debt securities issued by companies that are determined by
the Adviser to possess "special situation" characteristics. In general, a
special situation company is a company whose securities are expected to increase
in value solely by reason of a development particularly or uniquely applicable
to the company. Developments that may create special situations include, among
others, a liquidation, reorganization, recapitalization or merger, material
litigation, technological breakthrough and new management or management
policies. The principal risk with investments in special situation companies is
that the anticipated development thought to create the special situation may not
occur and the investments therefore may not appreciate in value or may decline
in value.

A-2
<PAGE>

Brady Bonds have been issued only recently, and for that reason do not have a
long payment history. Brady Bonds may be collateralized or uncollateralized, are
issued in various currencies (but primarily the dollar) and are actively traded
in over-the-counter secondary markets. Dollar-denominated, collateralized Brady
Bonds, which may be fixed-rate bonds or floating-rate bonds, are generally
collateralized in full as to principal by U.S. Treasury zero coupon bonds having
the same maturity as the bonds.

A-3
<PAGE>

additional taxes on foreign investors. These markets may also restrict
investment opportunities in issuers in industries deemed important to national
interests.

Throughout the last decade many emerging markets have experienced and continue
to experience high rates of inflation. In certain countries inflation has at
times accelerated rapidly to hyperinflationary levels, creating a negative
interest rate environment and sharply eroding the value of outstanding financial
assets in those countries. Increases in inflation could have an adverse effect
on an Underlying Scudder Fund's non-dollar denominated securities and on the
issuers of debt obligations generally. Individual foreign economies may differ
favorably or unfavorably from the U.S. economy in such respects as growth of
gross domestic product, rate of inflation, capital reinvestment, resources,
self-sufficiency and balance of payments position. The securities markets,
values of securities, yields and risks associated with securities markets in
different countries may change independently of each other.

High yield/high risk securities. Certain Underlying Scudder Funds may invest in
debt securities which are rated below investment-grade (hereinafter referred to
as "lower rated securities") or which are unrated, but deemed equivalent to
those rated below investment-grade by the Underlying Scudder Fund's adviser
(commonly referred to as "junk"). The lower the ratings of such debt securities,
the greater their risks render them like equity securities. These debt
instruments generally offer a higher current yield than that available from
higher grade issues, but typically involve greater risk and lesser liquidity.

A-4
<PAGE>

of their issuers, and to price fluctuation in response to changes in interest
rates. During periods of economic downturn or rising interest rates, issuers of
these instruments may experience financial stress that could adversely affect
their ability to make payments of principal and interest and increase the
possibility of default. Adverse publicity and investor perceptions, whether or
not based on fundamental analysis, may also decrease the values and liquidity of
these securities especially in a market characterized by only a small amount of
trading. Perceived credit quality in this market can change suddenly and
unexpectedly, and may not fully reflect the actual risk posed by a particular
lower rated or unrated security.

Investing in Europe. An Underlying Scudder Fund's performance may be
susceptible to political, social and economic factors affecting issuers in
European countries. Such factors may include, but are not limited to: growth of
GDP or GNP, rate of inflation, capital reinvestment, resource self-sufficiency
and balance of payments

A-5
<PAGE>

position, as well as interest and monetary exchange rates among European
countries. Eastern European countries and certain Southern European countries
are considered to be emerging markets. Securities traded in certain emerging
European markets may be subject to additional risks due to political and
economic reforms including efforts to decentralize the economic decision-making
process and move toward a market-oriented economy. Additionally, the
inexperience of financial intermediaries, lack of modern technology and the
possibility of permanent or temporary termination of trading of securities may
affect an Underlying Scudder Fund's performance. To the extent that an
Underlying Scudder Fund purchases equity securities of smaller companies, such
securities may experience greater volatility and have limited liquidity.

Most Latin American countries have experienced substantial, and in some periods,
extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and

A-6
<PAGE>

may continue to have negative effects on the economies and securities markets of
certain Latin American countries.

S&P:

A-7
<PAGE>

uncertainties or major exposures to adverse conditions.

Moody's:

A-8
<PAGE>

A-9

<PAGE>

Scudder
Pathway Series:

International Portfolio

Annual Report
September 30, 1997

Pure No-Load(TM) Funds

A mutual fund which seeks maximum total return by investing in a select mix of
international and global Scudder Funds.

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

SCUDDER [logo]

<PAGE>

In Brief

o For the abbreviated fiscal period ended September 30, 1997, Scudder Pathway
International Portfolio returned 16.58%, surpassing by a wide margin the
Portfolio's custom benchmark.

o The international markets provided positive returns overall for the period,
with Europe, and especially Latin America, providing outstanding returns, while
Southeast Asia and Japan reported negative returns.

o The diverging performance of the world markets during this period highlighted
the importance of diversification and asset allocation in the international
markets.

Table of Contents

3 Letter from the Series' President

4 Performance Update

5 Portfolio Summary

6 Portfolio Management Discussion

8 Glossary of Investment Terms

9 Portfolio Highlights

10 Investment Portfolio

11 Financial Statements

14 Financial Highlights

15 Notes to Financial Statements

17 Report of Independent Accountants

18 Tax Information

20 Officers and Trustees

21 Investment Products and Services

22 Scudder Solutions

2-SCUDDER PATHWAY SERIES: INTERNATIONAL PORTFOLIO
<PAGE>

Letter from the Series' President

Dear Shareholders,

We are pleased to present the first annual report for Scudder Pathway
Series: International Portfolio for the abbreviated fiscal period ended
September 30, 1997.

The strong performance of Pathway Series Portfolios is gratifying,
especially given an increase in market volatility towards the end of the period.
After the close of the fiscal period, volatility accelerated, as the ripple
effects from the currency crisis in Southeast Asia were felt across the globe.
For the U.S. stock market, which had been viewed by some as amply priced, these
events helped to trigger a 554 point decline in the Dow Jones Industrial Average
on October 27. While the Dow recovered more than 330 points the next day, these
events serve as reminders to investors of the truly global nature of the
investment markets and the price volatility, which can occur.

In this context, volatility provides many opportunities for the underlying
funds in which Pathway Portfolios invest. In this environment, we believe a
sound approach to building an investment portfolio designed to weather a range
of market conditions is based on careful diversification with exposure to
small-cap, foreign, emerging market, and fixed income securities in addition to
large-cap U.S. stocks. The Pathway Series Portfolios provide this type of
investment program, which, when combined with the habit of investing regularly
and a long-term perspective, can help many investors meet their goals.

For those of you who are interested in new Scudder products, we recently
introduced Scudder International Growth and Income Fund, which pursues a
yield-oriented approach to investing in international equities. The Fund seeks
to provide long-term growth of capital plus current income. Investors who desire
international exposure but wish to take a conservative approach may appreciate
the Fund's emphasis on dividend-paying stocks of established companies listed on
foreign exchanges. For further information on this new fund, please turn to
page 23.

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

Sincerely,

/s/Daniel Pierce

Daniel Pierce
President,
Scudder Pathway Series

3-SCUDDER PATHWAY SERIES: INTERNATIONAL PORTFOLIO

<PAGE>

Performance Update as of September 30, 1997
- -----------------------------------------------------------------
Portfolio Index Comparison
- -----------------------------------------------------------------
Total Return
- -----------------------------------------------------------------
Period Ended Growth of
9/30/97 $10,000 Cumulative
- -----------------------------------------------------------------
SCUDDER PATHWAY SERIES: INTERNATIONAL PORTFOLIO
TICKER SYMBOL: SPIPX
- -----------------------------------------------------------------
Life of
Portfolio* $11,658 16.58%
- -----------------------------------------------------------------
MSCI ALL COUNTRY EX U.S. INDEX (75%),
JP MORGAN NON-U.S. GLOBAL GOVERNMENT BOND
INDEX (20%), 3-MONTH T-BILL (5%)
- -----------------------------------------------------------------
Total Return
Period Ended Growth of
9/30/97 $10,000 Cumulative
- -----------------------------------------------------------------
Life of
Portfolio* $10,734 7.34%

*The Portfolio commenced operations on November 15, 1996.
Index comparisons begin November 30, 1996.

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

Yearly periods ended September 30

Scudder Pathway Series: International Portfolio
Year Amount
- ----------------------
11/96* $10,000
12/96 $10,151
1/97 $10,277
2/97 $10,439
3/97 $10,387
4/97 $10,481
5/97 $10,984
6/97 $10,470
7/97 $11,837
8/97 $11,958
9/97 $11,581

MSCI All Country (ex U.S.) Index
Year Amount
- ----------------------
11/96* $10,000
12/96 $ 9,861
1/97 $ 9,553
2/97 $ 9,699
3/97 $ 9,708
4/97 $ 9,767
5/97 $10,411
6/97 $10,967
7/97 $11,169
8/97 $10,346
9/97 $10,926

MSCI All Country ex U.S. Index (75%),
JP Morgan Non-U.S. Global Government Bond
Index (20%), 3-month T-Bill (5%)
Year Amount
- ----------------------
11/96* $10,000
12/96 $ 9,886
1/97 $ 9,576
2/97 $ 9,665
3/97 $ 9,662
4/97 $ 9,672
5/97 $10,217
6/97 $10,651
7/97 $10,747
8/97 $10,166
9/97 $10,648

The MSCI All Country (ex U.S.) Index is a market value-weighted
measure of stocks of 46 countries. The JP Morgan Non-U.S. Global
Government Bond Index is a market value-weighted measure of bonds
excluding U.S. bonds. Index returns assume reinvestment of
dividends and do not reflect any fees or expenses.

- -----------------------------------------------------------------
Returns and Per Share Information
- -----------------------------------------------------------------

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

Yearly periods ended September 30
- ---------------------------------
<TABLE>
<S> <C>
1997*
----------
Net Asset Value... $13.59
Income Dividends.. $ .25
Capital Gains
Distributions..... $ .10
Portfolio Total
Return (%)........ 16.58
Blended Index Total
Return (%)........ 7.34
</TABLE>

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

4 -- SCUDDER PATHWAY SERIES: INTERNATIONAL PORTFOLIO

<PAGE>

PORTFOLIO SUMMARY as of September 30, 1997

- ---------------------------------------------------------------------------
ASSET ALLOCATION
- ---------------------------------------------------------------------------
Money Market 1%
Fix Income 11%
Equity 88%
- --------------------------------------
100%
- --------------------------------------

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

Assets were broadly diversified in
international equity and fixed income
funds with exposure to established
and emerging markets securities.
- --------------------------------------------------------------------------
ASSET CLASS RANGES
- --------------------------------------------------------------------------

INTERNATIONAL PORTFOLIO

Money Market 0-20%
Fixed Income Funds 0-40%
Equity Funds 60-100%

Portfolio allocations are derived from
the risk profile for the Fund, changes
are expected to be modest and infrequent.

- --------------------------------------------------------------------------
PORTFOLIO HOLDINGS BY FUND
- --------------------------------------------------------------------------
- --------------------------------------------
Scudder International Fund 66%
- --------------------------------------------
Scudder Emerging Markets Growth Fund 10%
- --------------------------------------------
Scudder Emerging Markets Income Fund 6%
- --------------------------------------------
Scudder Latin America Fund 5%
- --------------------------------------------
Scudder Greater Europe Growth Fund 5%
- --------------------------------------------
Scudder International Bond Fund 5%
- --------------------------------------------
Scudder Pacific Opportunities Fund 2%
- --------------------------------------------
Scudder Cash Investment Trust 1%
- --------------------------------------------
100%
- --------------------------------------------

The strong performance of Latin America Fund
more than offset the weak performance of
Pacific Opportunities Fund, while International
Fund continued to anchor the Portfolio with a
solid return for the period.
- -----------------------------------------------------------------------------
For more complete details about the Fund's investment portfolio,
see page 10. A monthly Investment Portfolio Summary is available
upon request.

5 -- SCUDDER PATHWAY SERIES: INTERNATIONAL PORTFOLIO

<PAGE>

Portfolio Management Discussion

We asked Benjamin W. Thorndike, lead portfolio manager of Scudder Pathway
Series: International Portfolio, to discuss the market environment and Scudder's
current investment strategy.

Q: How would you describe the environment for the 10-1/2 month fiscal period
which ended September 30, 1997?

A: The environment was generally unsettled. We saw a currency devaluation in
Thailand which triggered a crisis that spread like wildfire through Southeast
Asia, gutting local equity markets and crippling regional growth prospects.
Meanwhile, Japan's fragile recovery buckled under the weight of new taxes
introduced in April. Despite rising Japanese exports, second quarter growth fell
at an 11.2% annual rate, the worst performance in 23 years. In contrast, low
interest rates and weaker currencies have had a positive effect on growth in
Europe, causing Germany's central bank to take the lead in raising interest
rates, a move that might have been a political statement as much as an economic
one, as Europe heads toward currency union.

Q: How did the foreign markets perform?

A: Performance has been mixed, with Latin American and European markets
providing excellent returns, while the emerging markets indices suffered from
weakness in Southeast Asia and Japan. Clearly, the benefits of diversification
are more pronounced when performance diverges sharply, as we have seen during
the fiscal period.

Q: What caused the crisis in Southeast Asia?

A: Currency turmoil in Southeast Asia is due, in part, to failed efforts to tie
local currencies to the U.S. dollar in an effort to stabilize domestic inflation
and boost financial market credibility. In the early 1990s, as the U.S. dollar

- -------------------------------------------------------
Country/Market Index
Year-to-date returns
- -------------------------------------------------------
Latin America 44.43%
- -------------------------------------------------------
USA 27.74%
- -------------------------------------------------------
Europe 22.02%
- -------------------------------------------------------
Pathway International Portfolio 14.20%
- -------------------------------------------------------
Europe, Australia, and Far East (EAFE) 9.18%
- -------------------------------------------------------
Emerging Markets Free 5.40%
- -------------------------------------------------------
Japan -5.33%
- -------------------------------------------------------
Far East -22.18%
- -------------------------------------------------------
Source: Morgan Stanley Capital International indices in U.S. dollars, including
dividends for the nine-month period from December 31, 1996 to September 30,
1997.

depreciated against the Japanese yen and European currencies, Southeast Asian
economies benefited from improved competitiveness and huge capital inflows,
leading to rapid export and investment-led growth. However, the dollar's
reversal and slower worldwide growth have combined to reveal substantial excess
capacity, weak banking systems, and misguided or corrupt economic policies.

Q: What triggered the event?

A: Political turmoil ultimately lit the spark in Thailand, but many of the same
fundamental problems have existed to varying degrees in other economies across
the region. Once Thailand devalued in July, investors scrambled for the exits in
Malaysia, Indonesia and the Philippines, knocking currencies down by more than

6-SCUDDER PATHWAY SERIES: INTERNATIONAL PORTFOLIO
<PAGE>

20% against the U.S. dollar. Local policymakers are hoping that weaker
currencies will help restore competitiveness, and ultimately growth. The
immediate effects, however, include higher inflation and slower growth as
interest rates are increased to stabilize the newly floating currencies.

Q: The strong performance of the Latin American markets has been a sharp
contrast. What is different there?

A: This region has staged a remarkable comeback from the days of the 1994-95
Mexican financial crisis. The combination of an improved macroeconomic
environment, a favorable flow of funds, and generally attractive starting
valuations has given rise to strong stock market performance. Governments are
paying far more attention to the financing of current account deficits, the
health of their commercial banking systems, and the necessity of encouraging
higher rates of domestic savings. In many ways, they have learned from previous
missteps, and it is paying off.

Q: What is Scudder's outlook?

A: With valuations of U.S. stocks higher than in many other countries, the
foreign markets look especially attractive. However, one of the key supports to
the positive environment has been ample liquidity. While liquidity will continue
as a concern for the emerging markets, we will also be monitoring it in more
established markets. Restraint could come in the form of increases in interest
rates by central banks (as we have recently witnessed in Germany). Yet, the
environment remains healthy in many markets, including Latin America and much of
Europe.

Pathway Series:
International Portfolio
A team approach to investing

The Portfolios are managed by a team of Scudder investment professionals who
each play an important role in the Portfolios' management process. Team
members work together to develop investment strategies and select underlying
Funds for each Portfolio. They are supported by Scudder's large staff of
portfolio managers, economists, research analysts, traders and other
investment specialists. All members of the Pathway investment team are members
of Scudder's Global Asset Allocation Committee. This group is responsible for
analyzing the global economy and capital markets, integrating information from
the firm's equity and fixed income specialists, and developing the outlook for
the major markets in which a Portfolio invests.

Lead Portfolio Manager Benjamin W. Thorndike, who has 18 years of investment
experience, joined Scudder in 1983 as a portfolio manager. Since 1986, he has
served as a portfolio manager for Scudder Growth and Income Fund. Cornelia
Small, Portfolio Manager, is Director of Global Equity Investments and
Chairman of the Capital Markets Group. Margaret (Peg) Hadzima, Portfolio
Manager, is Director of Scudder's Institutional Group, which includes a focus
on asset allocation strategy. Philip Fortuna, Portfolio Manager, joined
Scudder in 1986 as manager of institutional equity accounts. Maureen Allyn,
Portfolio Manager, is Scudder's Chief Economist, a position she has held since
1989, and is responsible for analyzing both the world and U.S. economies.

7-SCUDDER PATHWAY SERIES: INTERNATIONAL PORTFOLIO

<PAGE>
Glossary of Investment Terms

CURRENCY DEVALUATION A significant decline of a currency's
value relative to other currencies, such as the U.S.
dollar. This may be prompted by currency trading or
foreign central bank intervention (or the lack of
intervention). For U.S. dollar investors who are
investing overseas, a devaluation of a foreign
currency can have the effect of reducing an
investment's total return.

DIVERSIFICATION The spreading of risk by investing in several asset
categories, industry sectors, or individual
securities. An investor with a broadly diversified
portfolio will receive some protection from the price
declines of an individual asset class.

MARKET CAPITALIZATION The value of a company's outstanding
shares of common stock, determined by the number of
shares outstanding multiplied by the share price
(Shares x Price = Market Capitalization). The
universe of publicly traded companies is frequently
divided into large-, mid-, and small-capitalizations.
In general, "large-cap" stocks tend to be more liquid
than "small-cap" stocks.

OVER/UNDER WEIGHTING Refers to the allocation of assets --
usually by sector, industry, or country -- within a
portfolio relative to a benchmark index, (i.e. the
S&P 500) or an investment universe. For example, an
investment portfolio that overweights financial
stocks holds a higher percentage of finance stocks
than the comparative benchmark.

PRICE-EARNINGS RATIO (P/E) A widely used gauge of a stock's
(also "earnings multiple") valuation that indicates what
investors are paying for a company's earnings on a
per share basis. A higher "earnings multiple"
indicates a higher expected growth rate and the
potential for greater price fluctuations.

(Sources: Scudder; Barron's Dictionary of Finance and Investment Terms)

8-SCUDDER PATHWAY SERIES: INTERNATIONAL PORTFOLIO
<PAGE>

Portfolio Highlights
Pathway International Portfolio

Pathway International Portfolio seeks to maximize total return by investing in a
select mix of established international mutual funds.

Performance

This report covers the abbreviated fiscal period from the Portfolio's
commencement of operations on November 15, 1996 to September 30, 1997. During
this 10-1/2 month period, the Portfolio provided a total return of 16.58%,
exceeding its custom benchmark by a wide margin, and the unmanaged MSCI All
Country excluding U.S. Index return of 10.41%. Returns and the components of
this benchmark are listed on page 4.

The foreign markets provided diverging performance, with Latin America and much
of Europe providing the best returns while Southeast Asia and Japan delivered
negative results. The benefit of the Portfolio's diversification among eight
funds was pronounced during this period, as returns varied significantly by
region. The Portfolio's broad diversification helped to dampen the effects of
price declines in selected markets.

The Portfolio was anchored by its core holding in International Fund, at 66% of
assets at period end. The Fund's broad diversification, primarily among
established foreign companies, was an important and strong contributor to
returns throughout the period. Emerging Markets Growth Fund was also a strong
performer, despite weakness in Southeast Asia, due in part, to the Fund's
significant underweighting in that region. Latin America Fund was the
Portfolio's strongest single performer for the period, more than offsetting the
weak performance of Pacific Opportunities Fund. Both funds individually
represented 5% or less of assets at the end of the period. In the fixed income
portion of the portfolio (11% of assets), Emerging Markets Income Fund continued
to provide very good returns, more than compensating for the marginally negative
return of International Bond Fund.

Portfolio Strategy

Over the period, the Portfolio's equity fund holdings were increased and fixed
income holdings were decreased, reflecting improved return expectations in the
foreign equity markets. Asset allocations were held steady until June when we
decreased holdings of Emerging Markets Income Fund from 10% to 6% of assets and
increased equity holdings. This was accomplished by boosting Emerging Markets
Growth Fund (where relative valuation and opportunity appears more favorable)
and adding a new equity position, Greater Europe Growth Fund. This Fund, which
seeks long-term growth of capital through investment primarily in equity
securities of European companies, was added based on its solid performance
record and expectations of improving prospects in Europe. In September, the
small position in Pacific Opportunities was reduced in favor of Emerging Markets
Growth Fund and Greater Europe Growth Fund.

9-SCUDDER PATHWAY SERIES: INTERNATIONAL PORTFOLIO

<PAGE>

Investment Portfolio as of September 30, 1997

<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Money Market 1.2%
- ------------------------------------------------------------------------------------------------------------------------------------
Scudder Cash Investment Trust (Cost $136,103) ........................................... 136,103 136,103
------------

Fixed Income 10.8%
- ------------------------------------------------------------------------------------------------------------------------------------
Scudder Emerging Markets Income Fund .................................................... 51,053 686,669
Scudder International Bond Fund ......................................................... 55,445 576,079
- ------------------------------------------------------------------------------------------------------------------------------------
Total Fixed Income (Cost $1,242,032) 1,262,748
- ------------------------------------------------------------------------------------------------------------------------------------

Equity 88.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Scudder Emerging Markets Growth Fund .................................................... 71,143 1,157,498
Scudder Greater Europe Growth Fund ...................................................... 24,332 531,899
Scudder International Fund .............................................................. 141,423 7,735,859
Scudder Latin America Fund .............................................................. 19,535 606,948
Scudder Pacific Opportunities Fund ...................................................... 19,450 279,686
- ------------------------------------------------------------------------------------------------------------------------------------
Total Equity(Cost $9,605,733) 10,311,890
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $10,983,868) (a) 11,710,741
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) The cost for federal income tax purposes was $11,006,970. At September 30,
1997, net unrealized appreciation for all securities based on tax cost was
$703,771. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $772,252 and aggregate gross unrealized depreciation for all securities
in which there was an excess of tax cost over market value of $68,481.

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

10 -- SCUDDER PATHWAY SERIES: INTERNATIONAL PORTFOLIO
<PAGE>

Financial Statements

Statement of Assets and Liabilities
as of September 30, 1997

<TABLE>
<S> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $10,983,868) ................... $ 11,710,741
Receivable on Portfolio shares sold .................................... 17,862
Income receivable ...................................................... 3,082
----------------
Total assets ........................................................... 11,731,685
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased ...................................... 3,002
Payable for Portfolio shares redeemed .................................. 638
----------------
Total liabilities ...................................................... 3,640
--------------------------------------------------------------------------------------------
Net assets, at market value $ 11,728,045
--------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income .................................... 53,602
Net unrealized appreciation on investments ............................. 726,873
Accumulated net realized gain .......................................... 41,774
Paid-in capital ........................................................ 10,905,796
--------------------------------------------------------------------------------------------
Net assets, at market value $ 11,728,045
--------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($11,728,045 / 863,241 outstanding shares of beneficial
interest, $.01 par value, unlimited number of shares
authorized) .......................................................... $13.59
</TABLE>

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

11 -- SCUDDER PATHWAY SERIES: INTERNATIONAL PORTFOLIO
<PAGE>

Statement of Operations
for the period November 15, 1996 (commencement
of operations) to September 30, 1997

<TABLE>
<S> <C>
Investment Income
- -----------------------------------------------------------------------------------------------------------------------------
Income:
Income distributions from Underlying Funds ............................. $ 61,993
--------------------------------------------------------------------------------------------
Net investment income .................................................. 61,993
--------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 833,996
--------------------------------------------------------------------------------------------
</TABLE>

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

12 -- SCUDDER PATHWAY SERIES: INTERNATIONAL PORTFOLIO
<PAGE>

Statement of Changes in Net Assets

<TABLE>
<CAPTION>
For the Period
Nov. 15, 1996
(commencement
of operations)
to September 30,
Increase (Decrease) in Net Assets 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Operations:
Net investment income ................................................... $ 61,993
Net realized gains ...................................................... 45,130
Net unrealized appreciation on investments during the period ............ 726,873
------------------
Net increase in net assets resulting from operations .................... 833,996
------------------
Distributions to shareholders from:
Net investment income ................................................... (8,391)
------------------
Net realized gains on investment transactions ........................... (3,356)
------------------
Portfolio share transactions:
Proceeds from shares sold ............................................... 12,327,560
Net asset value of shares issued to shareholders in reinvestment
of distributions ...................................................... 10,929
Cost of shares redeemed ................................................. (1,457,693)
------------------
Net increase in net assets from Portfolio share transactions ............ 10,880,796
------------------
Increase in net assets .................................................. 11,703,045
Net assets at beginning of period ....................................... 25,000
Net assets at end of period (including undistributed net investment ------------------
income of $53,602) .................................................... $11,728,045
------------------

Other Information
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Portfolio shares
Shares outstanding at beginning of period ............................... 2,083
------------------
Shares sold ............................................................. 971,043
Shares issued to shareholders in reinvestment of distributions .......... 918
Shares redeemed ......................................................... (110,803)
------------------
Net increase in Portfolio shares ........................................ 861,158
------------------
Shares outstanding at end of period ..................................... 863,241
------------------
</TABLE>

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

13 -- SCUDDER PATHWAY SERIES: INTERNATIONAL PORTFOLIO
<PAGE>

Financial Highlights

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

<TABLE>
<CAPTION>
For the Period
November 15, 1996
(commencement of
operations) to
September 30, 1997
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
------------------
Net asset value, beginning of period .................................................... $12.00
------------------
Income from investment operations: ...................................................... .31
Net investment income
Net realized and unrealized gain on investment transactions ............................. 1.63(a)
------------------
Total from investment operations ........................................................ 1.94
------------------
Less distributions:
From net investment income .............................................................. (.25)
From net realized gain on investments ................................................... (.10)
------------------
Total distributions ..................................................................... (.35)
------------------

------------------
Net asset value, end of period .......................................................... $13.59
------------------
- ---------------------------------------------------------------------------------------------------------------------
Total Return (%) ........................................................................ 16.58**
Ratios and Supplemental Data
Net assets, end of period ($ millions) .................................................. 12
Ratio of operating expenses to average daily net assets (%)(b) .......................... --
Ratio of net investment income to average daily net assets (%) .......................... 1.23*
Portfolio turnover rate (%) ............................................................. 35.1*
</TABLE>

(a) The amount shown for a share outstanding throughout the period does not
accord with the change in the aggregate gains and losses in the portfolio
securities during the period because of the timing of sales and
repurchases of Portfolio shares in relation to fluctuating market values
during the period.
(b) This Portfolio invests in other Scudder Funds, and although the Portfolio
did not incur any direct expenses for the period, the Portfolio did bear
its share of the operating, administrative and advisory expenses of the
Underlying Scudder Funds.
* Annualized
** Not annualized

14 -- SCUDDER PATHWAY SERIES: INTERNATIONAL PORTFOLIO

<PAGE>

Notes to Financial Statements

A. Significant Accounting Policies

The International Portfolio (the "Portfolio") is a diversified series of Scudder
Pathway Series (the "Trust"). The Trust is organized as a Massachusetts business
trust and is registered under the Investment Company Act of 1940, as amended, as
an open-end management investment company. The series is composed of six
separate diversified portfolios, four of which are currently offered. These
portfolios invest primarily in existing Scudder Funds (the "Underlying Scudder
Funds').

The Portfolio's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed by the Portfolio in the preparation of
its financial statements.

Security Valuation. Investments in the Underlying Scudder Funds are valued at
the net asset value per share of each Underlying Scudder Fund as of the close of
regular trading on the New York Stock Exchange. Short-term investments having a
maturity of sixty days or less are valued at amortized cost.

Federal Income Taxes. The Portfolio's policy is to comply with the requirements
of the Internal Revenue Code which are applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, the Portfolio paid no federal income taxes and no provision for
federal income taxes was required.

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

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

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

Other. Investment security transactions are accounted for on a trade date basis.
Distributions of income and capital gains from the Underlying Scudder Funds are
recorded on the ex-dividend date. Income is recorded on the accrual basis.

B. Purchases and Sales of Securities

During the period November 15, 1996 (commencement of operations) to September
30, 1997, purchases and sales of investment securities (excluding money market
investments) aggregated $12,706,458 and $1,896,531, respectively.

15 -- SCUDDER PATHWAY SERIES: INTERNATIONAL PORTFOLIO
<PAGE>

C. Related Parties

In accordance with the Portfolio's Investment Management Agreement (the
"Agreement") with Scudder, Stevens & Clark, Inc. (the "Adviser"), the Adviser
regularly provides the Portfolio with continuing investment management
consistent with the Portfolio's investment objective.

Under the Special Servicing Agreement entered into by the Adviser, the
Underlying Scudder Funds, Scudder Service Corporation, Scudder Fund Accounting
Corporation, Scudder Investor Services, Inc., Scudder Trust Company and the
Portfolio, the Adviser arranges for all services pertaining to the operations of
the Portfolio. If the Trustees determine that the aggregate expenses of the
Portfolio are less than the estimated savings to the Underlying Scudder Funds
from the operation of the Portfolio, each of the Underlying Scudder Funds will
bear those expenses in proportion to the average daily value of its shares owned
by the Portfolio. Consequently, no underlying Scudder Funds will be expected to
carry expenses that are in excess of the estimate of savings to the respective
Funds. These estimated savings result from the elimination of separate
shareholder accounts which either currently are or have potential to be invested
in the Underlying Scudder Funds. In the event that the financial benefits to the
Underlying Scudder Funds do not exceed aggregate expenses of the Portfolio, the
Adviser will pay certain costs, on behalf of the Portfolio. For the period
November 15, 1996 (commencement of operations) to September 30, 1997, the
Adviser paid expenses in the amount of $79,178. In accordance with the Special
Servicing Agreement, no expenses were charged to the Portfolio during the
period. The Adviser has assumed the Portfolio's organizational costs.

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

16 -- SCUDDER PATHWAY SERIES: INTERNATIONAL PORTFOLIO
<PAGE>

Report of Independent Accountants

To the Board of Trustees of Scudder Pathway Series and to the Shareholders of
Scudder Pathway Series: International Portfolio:

We have audited the accompanying statement of assets and liabilities of Scudder
Pathway Series: International Portfolio (one of the portfolios constituting the
Scudder Pathway Series), including the investment portfolio, as of September 30,
1997, and the related statement of operations for the period November 15, 1996
(commencement of operations) through September 30, 1997, the statements of
changes in net assets for the period November 15, 1996 (commencement of
operations) through September 30, 1997, and the financial highlights for the
period November 15, 1996 (commencement of operations) through September 30,
1997. These financial statements and financial highlights are the responsibility
of the Portfolio's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of September 30, 1997 by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder Pathway Series: International Portfolio as of September 30, 1997, the
results of its operations for the period November 15, 1996 (commencement of
operations) through September 30, 1997, the changes in its net assets for the
period November 15, 1996 (commencement of operations) through September 30,
1997, and the financial highlights for the period November 15, 1996
(commencement of operations) through September 30, 1997, in conformity with
generally accepted accounting principles.

Boston, Massachusetts COOPERS & LYBRAND L.L.P.
October 30, 1997

17 -- SCUDDER PATHWAY SERIES: INTERNATIONAL PORTFOLIO
<PAGE>

Tax Information

Pursuant to Section 852 of the Internal Revenue Code, the Fund designates $4,228
as long-term capital gain dividends for its fiscal year ended September 30,
1997.

Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your Scudder Fund account, please call a Scudder Investor Relations
Representative at 1-800-225-5163.

18 -- SCUDDER PATHWAY SERIES: INTERNATIONAL PORTFOLIO

<PAGE>

This Page
intentionally
left blank.

19-SCUDDER PATHWAY SERIES: INTERNATIONAL PORTFOLIO

<PAGE>

Officers and Trustees

David S. Lee*
President and Trustee

Daniel Pierce*
Vice President and Trustee

Edgar R. Fiedler
Trustee; Vice President and Economic Counsellor, The Conference Board, Inc.

Dr. J. D. Hammond
Trustee; Dean, Smeal College of Business Administration, Pennsylvania State
University

Richard M. Hunt
Trustee; University Marshal and Senior Lecturer, Harvard University

Jerard K. Hartman*
Vice President

Thomas W. Joseph*
Vice President

Thomas F. McDonough*
Vice President and Secretary

Pamela A. McGrath*
Vice President and Treasurer

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

Kathryn L. Quirk*
Assistant Secretary

*Scudder, Stevens & Clark, Inc.

20-SCUDDER PATHWAY SERIES: INTERNATIONAL PORTFOLIO

<PAGE>
Investment Products and Services

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

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

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

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

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

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

U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund

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

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

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

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

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

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

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

21-SCUDDER PATHWAY SERIES: INTERNATIONAL PORTFOLIO

<PAGE>

Scudder Solutions
<TABLE>
<CAPTION>

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

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

Automatic Dividend Transfer Payroll Deduction and Direct Deposit

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

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

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

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

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

DistributionsDirect

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

22-SCUDDER PATHWAY SERIES: INTERNATIONAL PORTFOLIO
<PAGE>

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

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

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

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

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

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

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

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

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

</TABLE>

23-SCUDDER PATHWAY SERIES: INTERNATIONAL PORTFOLIO
<PAGE>
Celebrating Over 75 Years of Serving Investors

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

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

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

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

SCUDDER

[LOGO]
<PAGE>

Scudder
Pathway Series:

Conservative Portfolio

Balanced Portfolio

Growth Portfolio

Annual Report
September 30, 1997

Pure No-Load(TM) Funds

For investors seeking professionally managed and diversified portfolios from
investment in a select mix of Scudder Funds.

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

SCUDDER [logo]

<PAGE>

In Brief

o For the abbreviated fiscal period ended September 30, 1997, Scudder Pathway
Series Portfolios provided strong total returns that were in line with, or
exceeded, the returns of their respective composite benchmarks.

o Stocks provided strong performance for the period, while fixed income
securities delivered comparatively modest, but respectable, total returns.

o As market volatility increased for domestic stocks during the period, each
Portfolio's broad diversification and strategic asset allocation helped to
mitigate the effects of price fluctuations.

Table of Contents

3 Letter from the Series' President

4 Portfolio Management Discussion

6 Glossary of Investment Terms

Conservative Portfolio
7 Portfolio Highlights

8 Performance Update

9 Portfolio Summary

16 Investment Portfolio

22 Financial Highlights

Balanced Portfolio
10 Portfolio Highlights

11 Performance Update

12 Portfolio Summary

17 Investment Portfolio

23 Financial Highlights

Growth Portfolio
13 Portfolio Highlights

14 Performance Update

15 Portfolio Summary

18 Investment Portfolio

24 Financial Highlights

19 Financial Statements

25 Notes to Financial Statements

27 Report of Independent Accountants

28 Tax Information

28 Officers and Trustees

29 Investment Products and Services

30 Scudder Solutions

2-SCUDDER PATHWAY SERIES
<PAGE>

Letter from the Series' President
Dear Shareholders,

We are pleased to present the first annual report for Scudder Pathway
Series for the abbreviated fiscal period ended September 30, 1997.

The good news, we believe, is that U.S. businesses and the economy are
still healthy. In this context, volatility provides many opportunities for the
underlying funds in which Pathway Portfolios invest. In this environment, we
believe a sound approach to building an investment portfolio designed to weather
a range of market conditions is based on careful diversification with exposure
to small-cap, foreign, emerging market, and fixed income securities in addition
to large-cap U.S. stocks. The Pathway Series Portfolios provide this type of
investment program, which, when combined with the habit of investing regularly
and a long-term perspective, can help many investors meet their goals.

For those of you who are interested in new Scudder products, we recently
introduced Scudder International Growth and Income Fund, which pursues a
yield-oriented approach to investing in international equities. The Fund seeks
to provide long-term growth of capital plus current income. Investors who desire
international exposure but wish to take a more conservative approach may
appreciate the Fund's emphasis on dividend paying stocks of established
companies listed on foreign exchanges. For further information on this new fund,
please turn to page 31.

Sincerely,

/s/Daniel Pierce

Daniel Pierce
President,
Scudder Pathway Series

3-SCUDDER PATHWAY SERIES
<PAGE>

Portfolio Management Discussion

We asked Benjamin W. Thorndike, lead portfolio manager of Scudder Pathway
Series, to discuss the market environment and Scudder's investment strategy for
the Pathway Series.

Q: How would you summarize the investment environment for the 10-1/2 month
fiscal period ended September 30, 1997?

A: This was a positive environment. Overall, the stock and bond markets moved
higher, bolstered by a favorable economy, and investors responded with
enthusiasm. Despite this strength, returns for various asset classes diverged
and overall volatility increased. The Pathway Series Portfolios produced solid
returns during this time period while offering some refuge from the swings that
impacted certain asset classes. (Portfolio Highlights containing individual
strategies begin on page 7.)

Q: How did the markets perform?

A: Very well. If you had been away on sabbatical during the period you would
have been delighted on returning to discover that the prices for financial
assets (especially U.S. stocks) had soared. Bond yields moved lower (while
prices moved higher), inflation was a non-factor, the Federal Reserve stayed on
the sidelines and economic growth remained on track. Responding to all of this,
and more, the S&P 500 produced a three-month return of 17.5% for the second
quarter of 1997 (which registers in the top 4% of all quarterly stock market
returns calculated since 1926) and 7.5% for the third quarter. Looking at these
returns you would likely be rested, relaxed and feeling wealthier.

We have no quarrels with "rested" and "wealthy," but the "relaxed" part might be
short lived when you consider the current environment. Beneath the surface, much
changed, and a good deal of it was of the sort that likely raised stress levels
for investors.

Q: What has changed?

A: In particular, the environment outside of the U.S. grew more unsettled. Many
Southeast Asian economies were battered during this period by poorly focused
economic policies and currency instability, and their stock markets tumbled. The
imposition of higher taxes in Japan was a blow to that fragile economy. This
factor, combined with broad exposure on the part of Japanese exporters to
Southeast Asia, sent Japan's stock market lower. In Europe, governments weighed
growth versus austerity, as the pros and cons of European Monetary Union were
debated in political circles and on street corners. Political uncertainty in
that region was the norm. European markets actually performed well, as decent
fundamentals and improvements from restructurings spurred higher equity prices.

Q: How did this affect U.S. investors?

A: For U.S.-focused investors, this might seem like someone else's problem. But,
such a view is naive. The same global dynamic that has opened trade and helped
propel the earnings of U.S. Fortune 500 companies to new heights over the last
few years has raised the vulnerability of U.S. companies to overseas
disappointments. If the rest of the world loses its appetite for our goods, then
the earnings of U.S. companies will suffer. This factor, in conjunction with the
stronger dollar, is already being felt by some exporters, and earnings

4-SCUDDER PATHWAY SERIES

<PAGE>
disappointments for such market stalwarts as Coke and Gillette led to increased
volatility for investors in large U.S. growth stocks.

Q: What is Scudder's outlook for the economy?

A: We expect U.S. economic growth to slow as we near the end of 1997, in synch
with our expectations for a slowing of corporate earnings growth. Inflation
should remain benign and interest rates should continue trending down. And,
after some turmoil abroad over the last few months, we anticipate improving
growth prospects in a number of foreign economies.

Q: And, for the markets?

A: We expect to see the performance of the major asset classes diverge in the
months ahead. The U.S. large-cap stock sector will likely not dominate as the
top performer, as has been the case over the last few years, while small-cap
stocks appear to have better relative growth prospects. We also continue to see
opportunities in the international arena, which we believe offer favorable
diversification benefits. In addition, bonds currently offer attractive values,
and our bond holdings should help to cushion swings in equity prices.

Q: How do you expect to manage the Portfolios in this environment?

A: We will continue to manage each Portfolio according to its objective. We will
also pursue consistent, long-term returns through careful diversification and
asset allocation. Multiple fund holdings in each Portfolio, together with the
diversification of underlying funds, should help smooth out volatility and
provide exposure to a variety of opportunities.

Pathway Series:
A team approach to investing

5-SCUDDER PATHWAY SERIES
<PAGE>

Glossary of Investment Terms

ASSET ALLOCATION The distribution of an investment
portfolio's assets among the major asset classes,
such as stocks, bonds, and money market instruments.
The asset allocation decision is based on an
investor's objective, investment horizon, and risk
tolerance. An investor with a long-term investment
horizon who is comfortable assuming additional risk
in seeking higher returns may decide to allocate
assets with a higher proportion invested in stocks
than bonds or money markets.

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

PRICE-EARNINGS RATIO (P/E) A widely used gauge of a stock's valuation that
(also "earnings multiple") indicates what investors are paying for a
company's earnings on a per share basis.
A higher "earnings multiple"indicates a higher
expected growth rate and the potential for greater
price fluctuations.

(Sources: Scudder; Barron's Dictionary of Finance and Investment Terms)

6-SCUDDER PATHWAY SERIES
<PAGE>

Portfolio Highlights

Pathway Conservative Portfolio

Pathway Conservative Portfolio seeks current income and secondarily long-term
growth of capital by investing substantially in bond mutual funds, with some
exposure to equity mutual funds.

Performance

This report covers the abbreviated fiscal period from the Portfolio's
commencement of operations on November 15, 1996 to September 30, 1997. During
this 10-1/2 month period, the Portfolio provided a total return of 14.99%,
outperforming its custom benchmark. Returns and the components of this benchmark
are listed on pag 8.

The investment environment was generally favorable, which benefited the
Portfolio's holdings, especially its holdings of domestic stock funds. However,
the strong overall performance of U.S. stocks was accompanied by an increasing
level of price volatility. The Portfolio's conservative approach and
diversification among 11 Scudder funds helped to dampen the effects of this
volatility.

The Portfolio's fixed income holdings benefited as interest rates moved somewhat
lower over the period, despite persistent concerns about accelerating inflation.
Income Fund, at 40% of assets, anchored the fixed income position and
contributed to the Portfolio's income and price appreciation. Smaller positions
in Emerging Markets Income Fund and High Yield Bond Fund also contributed income
and diversification.

Throughout the period, the Portfolio's exposure to the equity markets made a
significant contribution to total return. Large-cap domestic stock funds
provided some of the best returns, and the Portfolio had a significant
two-thirds of the equity fund position invested in this area.

Portfolio Strategy

Over the period, the weighting of fixed income funds was modestly increased and
diversification was broadened in both the equity and fixed income areas. As
concerns of rising interest rates mounted in the first quarter of 1997, the
Portfolio's exposure to bond funds was temporarily reduced from 50% to 45% of
assets in favor of U.S. equity funds. As the relative attractiveness of fixed
income securities increased, the Portfolio's weighting was increased to 55% of
assets by adding to holdings of Income Fund.

Portfolio diversification and exposure to investment opportunity was increased
with the addition of a new fund in both the fixed income and equity portions of
the portfolio. A small position (3% of assets) in High Yield Bond Fund was added
in February. Compared to high quality bonds, high yield bonds typically offer
enhanced income and the opportunity for price appreciation as credit quality
improves. In the equity area, Classic Growth Fund was added in the third
quarter. This Fund, with its focus on well-established leading U.S. companies,
was deemed attractive within the current environment that favors such companies.

7-SCUDDER PATHWAY SERIES
<PAGE>
Performance Update as of September 30, 1997
- -----------------------------------------------------------------
Portfolio Index Comparisons
- -----------------------------------------------------------------
Total Return
- -----------------------------------------------------------------
Period Ended Growth of
9/30/97 $10,000 Cumulative
- -----------------------------------------------------------------
SCUDDER PATHWAY SERIES: CONSERVATIVE PORTFOLIO
- -----------------------------------------------------------------
Life of
Portfolio* $11,499 14.99%

LBAB INDEX (60%), S&P 500 INDEX (25%),
MSCI ALL COUNTRY EX U.S. INDEX (5%),
3-MONTH T-BILL (10%)
- -----------------------------------------------------------------
Total Return
Period Ended Growth of
9/30/97 $10,000 Cumulative
- -------- ------- ----------
Life of
Portfolio* $11,088 10.88%

*The Portfolio commenced operations on November 15, 1996.
Index comparisons begin November 30, 1996.

Yearly periods ended September 30

Scudder Pathway Series: Conservative Portfolio
Year Amount
- ----------------------
11/96* $10,000
12/96 $10,000
1/97 $10,143
2/97 $10,236
3/97 $10,092
4/97 $10,261
5/97 $10,566
6/97 $10,847
7/97 $11,254
8/97 $11,006
9/97 $11,357

LBAB Index (60%), S&P 500 Index (25%),
MSCI All Country ex U.S. Index (5%),
3-month T-Bill (10%)
Year Amount
- ----------------------
11/96* $10,000
12/96 $ 9,892
1/97 $10,054
2/97 $10,100
3/97 $ 9,938
4/97 $10,211
5/97 $10,462
6/97 $10,687
7/97 $11,087
8/97 $10,839
9/97 $11,113

The Lehman Brothers Aggregate Bond (LBAB) Index is a market
value-weighted measure of treasury issues, agency issues, corporate
bond issues and mortgage securities. The S&P 500 Index is an unmanaged
capitalization-weighted measure of 500 widely held common stocks listed
on the New York Stock Exchange, American Stock Exchange, and Over-The-Counter
market. The MSCI All Country (ex U.S.) Index is a market value-weighted
measure of stocks of 46 countries. Index returns assume reinvestment
of dividends and do not reflect any fees or expenses.

- -----------------------------------------------------------------
Returns and Per Share Information
- -----------------------------------------------------------------

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

Yearly periods ended September 30
- ---------------------------------
1997*
----------
Net Asset Value... $13.27
Income Dividends.. $ .33
Capital Gains
Distributions..... $ .15
Portfolio Total
Return (%)........ 14.99
Blended Index Total
Return (%)........ 10.88

8 -- SCUDDER PATHWAY SERIES

<PAGE>

PORTFOLIO SUMMARY as of September 30, 1997

PATHWAY CONSERVATIVE PORTFOLIO
- ---------------------------------------------------------------------------
ASSET ALLOCATION
- ---------------------------------------------------------------------------
Money Market 9%
Fix Income 55%
Equity 36%
- --------------------------------------
100%
- --------------------------------------

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

Assets were broadly diversified in fixed
income funds with exposure to money market,
investment grade, government, high yield,
and emerging markets securities in addition
to U.S. and international equity securities.
- --------------------------------------------------------------------------
ASSET CLASS RANGES
- --------------------------------------------------------------------------

CONSERVATIVE PORTFOLIO

Money Market 0-15%
Fixed Income Funds 40-80%
Equity Funds 20-50%

Portfolio allocations are derived from
the risk profile for the Fund, changes
are expected to be modest and infrequent.

- --------------------------------------------------------------------------
PORTFOLIO HOLDINGS
- --------------------------------------------------------------------------
- --------------------------------------------
Scudder Income Fund 40%
- --------------------------------------------
Scudder GNMA Fund 10%
- --------------------------------------------
Scudder Growth and Income Fund 9%
- --------------------------------------------
Scudder Cash Investment Trust 9%
- --------------------------------------------
Scudder Large Company Value Fund 7%
- --------------------------------------------
Scudder International Fund 7%
- --------------------------------------------
Scudder Classic Growth Fund 7%
- --------------------------------------------
Scudder Emerging Markets Growth Fund 3%
- --------------------------------------------
Scudder High Yield Bond Fund 3%
- --------------------------------------------
Scudder Small Company Value Fund 3%
- --------------------------------------------
Scudder Emerging Markets Income Fund 2%
- --------------------------------------------
100%
- --------------------------------------------

Fixed income funds made a solid contribution
to total returns, and were bolstered by the
strong performance of equity funds holdings
for the period.
- -----------------------------------------------------------------------------
For more complete details about the Portfolio's investments, see page 16.
A monthly Investment Portfolio Summary is available upon request.

9 -- SCUDDER PATHWAY SERIES

<PAGE>

Portfolio Highlights

Pathway Balanced Portfolio

Pathway Balanced Portfolio seeks a balance of growth and income by investing in
a mix of money market, bond, and equity mutual funds.

Performance

This report covers the 10-1/2 month fiscal period from the Portfolio's
commencement of operations on November 15, 1996 to September 30, 1997. During
this period, the Portfolio provided a total return of 16.67%, in line with its
custom benchmark. Returns and the components of this benchmark are listed on
page 11.

Of the Portfolio's 61% of assets invested in equity funds, domestic equity funds
- -- in particular -- delivered excellent returns. These funds have benefited from
the continuing rally in large-cap stocks. Growth and Income and Classic Growth
funds provided above-average returns while Development Fund, hurt by volatility
in healthcare and technology holdings earlier in the year, trailed the market
averages for the period. The strong performance of domestic equity funds
overshadowed the solid, but more modest returns of International Fund and
Emerging Markets Growth Fund, which provided valuable diversification to the
Portfolio.

The balance of the Portfolio was invested in fixed income funds and the money
market fund -- Cash Investment Trust. Our fixed income holdings benefited as
interest rates moved somewhat lower over the period, despite persistent concerns
about accelerating inflation. Income Fund, at 26% of assets at period end,
remained a key component of the fixed income position and contributed to income
and price appreciation.

Portfolio Strategy

Over the fiscal period, the weighting of fixed income funds was reduced modestly
in the first and third quarters of 1997, as concerns of rising interest rates
mounted. As a result, the Portfolio's exposure to bond funds was reduced to 36%
of assets, primarily by decreasing holdings of GNMA Fund.

While still comprising a significant position within the Portfolio,
International Fund was reduced in February in favor of Growth and Income Fund,
reflecting the continuing momentum of the U.S. stock market. At mid-year,
increases were made to the overall equity position by adding to Growth and
Income, Classic Growth, and Emerging Markets Growth funds, which brought the
equity fund weighting to 61% of assets.

At the end of the period, we initiated a small position in Micro Cap Fund, which
is expected to provide strong long-term total return potential, as well as
additional diversification due to its relatively low correlation to the broader
U.S. stock market as represented by the S&P 500.

10-SCUDDER PATHWAY SERIES

<PAGE>

Performance Update as of September 30, 1997
- -----------------------------------------------------------------
Portfolio Index Comparisons
- -----------------------------------------------------------------
Total Return
- -----------------------------------------------------------------
Period Ended Growth of
9/30/97 $10,000 Cumulative
- -----------------------------------------------------------------
SCUDDER PATHWAY SERIES: BALANCED PORTFOLIO
TICKER SYMBOL: SPBAX
- -----------------------------------------------------------------
Life of
Portfolio* $11,667 16.67%
- -----------------------------------------------------------------
LBAB INDEX (60%), S&P 500 INDEX (25%),
MSCI ALL COUNTRY EX U.S. INDEX (5%),
3-MONTH T-BILL (10%)
- -----------------------------------------------------------------
Total Return
Period Ended Growth of
9/30/97 $10,000 Cumulative
- -------- ------- ----------
Life of
Portfolio* $11,654 16.54%

*The Portfolio commenced operations on November 15, 1996.
Index comparisons begin November 30, 1996.

Yearly periods ended September 30

Scudder Pathway Series: Balanced Portfolio
Year Amount
- ----------------------
11/96* $10,000
12/96 $10,016
1/97 $10,167
2/97 $10,235
3/97 $10,042
4/97 $10,222
5/97 $10,645
6/97 $10,992
7/97 $11,474
8/97 $11,073
9/97 $11,542

LBAB Index (60%), S&P 500 Index (25%),
MSCI All Country ex U.S. Index (5%),
3-month T-Bill (10%)
Year Amount
- ----------------------
11/96* $10,000
12/96 $ 9,857
1/97 $10,147
2/97 $10,213
3/97 $ 9,975
4/97 $10,389
5/97 $10,810
6/97 $11,158
7/97 $11,730
8/97 $11,282
9/97 $11,713

The Lehman Brothers Aggregate Bond (LBAB)Index is a market
value-weighted measure of treasury issues, agency issues, corporate
bond issues and mortgage securities. The S&P 500 Index is an unmanaged
capitalization-weighted measure of 500 widely held common stocks listed
on the New York Stock Exchange, American Stock Exchange, and Over-The-Counter
market. The MSCI All Country (ex U.S.) Index is a market value-weighted
measure of stocks of 46 countries. Index returns assume reinvestment
of dividends and do not reflect any fees or expenses.

- -----------------------------------------------------------------
Returns and Per Share Information
- -----------------------------------------------------------------

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

Yearly periods ended September 30
- ---------------------------------
1997*
----------
Net Asset Value... $13.56
Income Dividends.. $ .33
Capital Gains
Distributions..... $ .07
Portfolio Total
Return (%)........ 16.67
Blended Index Total
Return (%)........ 16.54

11 -- SCUDDER PATHWAY SERIES

<PAGE>
PORTFOLIO SUMMARY as of September 30, 1997

PATHWAY BALANCED PORTFOLIO
- ---------------------------------------------------------------------------
ASSET ALLOCATION
- ---------------------------------------------------------------------------
Money Market 3%
Fix Income 36%
Equity 61%
- --------------------------------------
100%
- --------------------------------------

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

Assets were broadly diversified in equity
funds with exposure to U.S. large- and
small-cap, value, and international stocks,
and in fixed income funds with exposure to
money market, investment grade, high yield,
and emerging markets securities.
- --------------------------------------------------------------------------
ASSET CLASS RANGES
- --------------------------------------------------------------------------

BALANCED PORTFOLIO

Money Market 0-10%
Fixed Income Funds 25-60%
Equity Funds 40-70%

Portfolio allocations are derived from
the risk profile for the Fund, changes
are expected to be modest and infrequent.

- --------------------------------------------------------------------------
PORTFOLIO HOLDINGS
- --------------------------------------------------------------------------
- --------------------------------------------
Scudder Income Fund 26%
- --------------------------------------------
Scudder International Fund 20%
- --------------------------------------------
Scudder Classic Growth Fund 15%
- --------------------------------------------
Scudder Growth and Income Fund 14%
- --------------------------------------------
Scudder Emerging Markets Growth Fund 7%
- --------------------------------------------
Scudder Development Fund 5%
- --------------------------------------------
Scudder High Yield Bond Fund 5%
- --------------------------------------------
Scudder Emerging Markets Income Fund 3%
- --------------------------------------------
Scudder Cash Investment Trust 3%
- --------------------------------------------
Scudder GNMA Fund 2%
- --------------------------------------------
Scudder Micro Cap Fund 0%
- --------------------------------------------
100%
- --------------------------------------------

Equity funds that invest in U.S. stocks of
established companies, such as Classic Growth
Fund and Growth and Income Fund, provided
some of the best returns for the period.
- -----------------------------------------------------------------------------
For more complete details about the Portfolio's investments, see page 17.
A monthly Investment Portfolio Summary is available upon request.

12 -- SCUDDER PATHWAY SERIES

<PAGE>

Portfolio Highlights

Pathway Growth Portfolio

Pathway Growth Portfolio seeks long-term growth of capital by investing
primarily in equity mutual funds designed to provide long-term growth. The
Portfolio will also invest a portion of assets in bond funds, which offer the
potential for capital appreciation as well as income.

Performance

This report covers the 10-1/2 month fiscal period from the Portfolio's
commencement of operations on November 15, 1996 to September 30, 1997. During
this period, the Portfolio provided a total return of 20.79%, outperforming its
custom benchmark. Returns and the components of this benchmark are listed on
page 14.

The generally favorable investment environment benefited the Portfolio's
holdings, especially its holdings of domestic stock funds. However, the strong
performance of U.S. stocks was accompanied by an increasing level of price
volatility. The Portfolio's diversification among nine Scudder equity and fixed
income funds helped to dampen the effects of this volatility.

Domestic equities provided excellent returns to investors during the period. The
Portfolio's equity funds, comprising 80% of assets, benefited from the
continuing rally primarily in large-cap stocks. Large Company Growth Fund and
Micro Cap Fund provided returns in the 30-40% range while 21st Century Growth
Fund lagged the market's returns. The strong performance of domestic equity
funds overshadowed the solid, but more modest returns of International Fund and
Emerging Markets Growth Fund, which also provided valuable diversification to
the Portfolio.

The Portfolio's holdings of fixed income funds helped to dampen the effects of
increasing volatility in the domestic equity markets. High Yield Bond Fund (9%
of assets), enjoyed the benefits of increased investor enthusiasm for corporate
bonds that have improving credit quality. A small position in Emerging Markets
Income Fund also delivered outstanding returns, while Income Fund contributed
respectable returns.

Portfolio Strategy

Over the fiscal period, the already modest weighting of fixed income funds was
reduced and equity fund holdings were increased. This reallocation of fund
holdings took place in June by decreasing the weighting of Emerging Markets
Income Fund and increasing exposure to Emerging Markets Growth Fund, as the
latter area appeared to offer more favorable total return potential. In July, a
small reduction in High Yield Bond Fund holdings in favor of Large Company
Growth Fund completed the shift to an increased equity fund exposure.

13-SCUDDER PATHWAY SERIES

<PAGE>

S&P 500 INDEX (25%), MSCI ALL COUNTRY EX U.S. INDEX (5%),
LBAB INDEX (60%), 3-MONTH T-BILL (10%)
- -----------------------------------------------------------------
Total Return
--------------
Period Ended Growth of
9/30/97 $10,000 Cumulative
- -------- ------- ----------
Life of
Portfolio* $11,924 19.24%

*The Portfolio commenced operations on November 15, 1996.
Index comparisons begin November 30, 1996.

Yearly periods ended September 30

Scudder Pathway Series: Growth Portfolio
Year Amount
- ----------------------
11/96* $10,000
12/96 $10,057
1/97 $10,302
2/97 $10,336
3/97 $10,058
4/97 $10,285
5/97 $10,909
6/97 $11,357
7/97 $11,855
8/97 $11,340
9/97 $11,939

LBAB Index (60%), S&P 500 Index (25%),
MSCI All Country ex U.S. Index (5%),
3-month T-Bill (10%)
Year Amount
- ----------------------
11/96* $10,000
12/96 $ 9,841
1/97 $10,156
2/97 $10,240
3/97 $ 9,993
4/97 $10,498
5/97 $11,037
6/97 $11,474
7/97 $12,112
8/97 $11,514
9/97 $12,047

The Lehman Brothers Aggregate Bond (LBAB)Index is a market
value-weighted measure of treasury issues, agency issues, corporate
bond issues and mortgage securities. The S&P 500 Index is an unmanaged
capitalization-weighted measure of 500 widely held common stocks listed
on the New York Stock Exchange, American Stock Exchange, and Over-The-Counter
market. The MSCI All Country (ex U.S.) Index is a market value-weighted
measure of stocks of 46 countries. Index returns assume reinvestment
of dividends and do not reflect any fees or expenses.

- -----------------------------------------------------------------
Returns and Per Share Information
- -----------------------------------------------------------------

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

Yearly periods ended September 30
- ---------------------------------
1997*
----------
Net Asset Value... $14.15
Income Dividends.. $ .16
Capital Gains
Distributions..... $ .13
Portfolio Total
Return (%)........ 20.79
Blended Index Total
Return (%)........ 19.24

14 -- SCUDDER PATHWAY SERIES

<PAGE>

PORTFOLIO SUMMARY as of September 30, 1997

PATHWAY GROWTH PORTFOLIO
- ---------------------------------------------------------------------------
ASSET ALLOCATION
- ---------------------------------------------------------------------------
Money Market 1%
Fix Income 19%
Equity 80%
- --------------------------------------
100%
- --------------------------------------

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

Assets were broadly diversified in equity funds
with exposure to U.S. large- and small-cap growth,
and international stocks; and in fixed income funds
with exposure to money market, investment grade,
government, high yield, emerging markets securities.
- --------------------------------------------------------------------------
ASSET CLASS RANGES
- --------------------------------------------------------------------------

GROWTH PORTFOLIO

Money Market 0-5%
Fixed Income Funds 10-40%
Equity Funds 60-90%

Portfolio allocations are derived from
the risk profile for the Fund, changes
are expected to be modest and infrequent.

- --------------------------------------------------------------------------
PORTFOLIO HOLDINGS
- --------------------------------------------------------------------------
- --------------------------------------------
Scudder Large Company Growth Fund 26%
- --------------------------------------------
Scudder International Fund 25%
- --------------------------------------------
Scudder Emerging Markets Growth Fund 14%
- --------------------------------------------
Scudder High Yield Bond Fund 9%
- --------------------------------------------
Scudder 21st Century Growth Fund 8%
- --------------------------------------------
Scudder Micro Cap Fund 7%
- --------------------------------------------
Scudder Emerging Markets Income Fund 6%
- --------------------------------------------
Scudder Income Fund 4%
- --------------------------------------------
Scudder Cash Investment Trust 1%
- --------------------------------------------
100%
- --------------------------------------------

Equity funds that invest in U.S. stocks, such
as Micro Cap Fund and Large Company Growth Fund,
provided some of the best returns for the period.
- -----------------------------------------------------------------------------
For more complete details about the Fund's investment portfolio,
see page 18. A monthly Investment Portfolio Summary is available
upon request.

15 -- SCUDDER PATHWAY SERIES

<PAGE>
Investment Portfolio as of September 30, 1997

Pathway Conservative Portfolio

<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Money Market 8.8%
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Cash Investment Trust (Cost $1,492,453) ......................................... 1,492,453 1,492,453
----------

Fixed Income 54.8%
- ------------------------------------------------------------------------------------------------------------------------------
Scudder GNMA Fund ....................................................................... 114,079 1,681,526
Scudder Emerging Markets Income Fund .................................................... 25,225 339,271
Scudder Income Fund ..................................................................... 501,176 6,770,893
Scudder High Yield Bond Fund ............................................................ 38,547 504,198
- ------------------------------------------------------------------------------------------------------------------------------
Total Fixed Income (Cost $9,091,682) 9,295,888
- ------------------------------------------------------------------------------------------------------------------------------

Equity 36.4%
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Large Company Value Fund ........................................................ 41,237 1,195,038
Scudder Classic Growth Fund ............................................................. 65,167 1,197,121
Scudder Emerging Markets Growth Fund .................................................... 30,807 501,237
Scudder Growth and Income Fund .......................................................... 52,997 1,553,332
Scudder International Fund .............................................................. 21,803 1,192,603
Scudder Small Company Value Fund ........................................................ 25,599 543,219
- ------------------------------------------------------------------------------------------------------------------------------
Total Equity(Cost $5,405,191) 6,182,550
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $15,989,326) (a) 16,970,891
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) The cost for federal income tax purposes was $16,000,015. At September 30,
1997, net unrealized appreciation for all securities based on tax cost was
$970,876. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $970,876.

During the period November 15, 1996 (commencement of operations) to
September 30, 1997, purchases and sales of investment securities
(excluding money market investments) aggregated $17,446,416 and
$3,171,000, respectively.

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

16 -- SCUDDER PATHWAY SERIES
<PAGE>

Investment Portfolio as of September 30, 1997

Pathway Balanced Portfolio

<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Money Market 3.1%
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Cash Investment Trust (Cost $5,857,992) ......................................... 5,857,992 5,857,992
-----------

Fixed Income 35.8%
- ------------------------------------------------------------------------------------------------------------------------------
Scudder GNMA Fund ....................................................................... 257,522 3,795,878
Scudder Emerging Markets Income Fund .................................................... 426,941 5,742,362
Scudder Income Fund ..................................................................... 3,677,192 49,678,857
Scudder High Yield Bond Fund ............................................................ 728,643 9,530,646
- ------------------------------------------------------------------------------------------------------------------------------
Total Fixed Income (Cost $66,876,325) 68,747,743
- ------------------------------------------------------------------------------------------------------------------------------

Equity 61.1%
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Classic Growth Fund ............................................................. 1,556,309 28,589,396
Scudder Development Fund ................................................................ 217,041 9,790,724
Scudder Emerging Markets Growth Fund .................................................... 816,516 13,284,712
Scudder Growth and Income Fund .......................................................... 918,173 26,911,644
Scudder International Fund .............................................................. 704,952 38,560,885
Scudder Micro Cap Fund .................................................................. 5,814 105,756
- ------------------------------------------------------------------------------------------------------------------------------
Total Equity(Cost $101,607,674) 117,243,117
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $174,341,991) (a) 191,848,852
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) The cost for federal income tax purposes was $174,397,794. At September
30, 1997, net unrealized appreciation for all securities based on tax cost
was $17,451,058. This consisted of aggregate gross unrealized appreciation
for all securities in which there was an excess of market value over tax
cost of $17,451,058.

During the period November 15, 1996 (commencement of operations) to
September 30, 1997, purchases and sales of investment securities
(excluding money market investments) aggregated $190,501,683 and
$23,022,500, respectively.

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

17 -- SCUDDER PATHWAY SERIES
<PAGE>

Investment Portfolio as of September 30, 1997

Pathway Growth Portfolio

<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Money Market 1.1%
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Cash Investment Trust (Cost $539,977) 539,977 539,977
----------

Fixed Income 18.9%
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Emerging Markets Income Fund 222,751 2,996,005
Scudder Income Fund 143,503 1,938,727
Scudder High Yield Bond Fund 340,191 4,449,696
- ------------------------------------------------------------------------------------------------------------------------------
Total Fixed Income (Cost $9,080,638) 9,384,428
- ------------------------------------------------------------------------------------------------------------------------------

Equity 80.0%
- ------------------------------------------------------------------------------------------------------------------------------
Scudder 21st Century Growth Fund 282,760 3,964,293
Scudder Emerging Markets Growth Fund 424,477 6,906,246
Scudder International Fund 226,974 12,415,487
Scudder Micro Cap Fund 189,672 3,450,133
Scudder Large Company Growth Fund 497,083 12,899,299
- ------------------------------------------------------------------------------------------------------------------------------
Total Equity(Cost $34,443,844) 39,635,458
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $44,064,459) (a) 49,559,863
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) The cost for federal income tax purposes was $44,081,245. At September 30,
1997, net unrealized appreciation for all securities based on tax cost was
$5,478,618. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $5,478,618.

During the period November 15, 1996 (commencement of operations) to
September 30, 1997, purchases and sales of investment securities
(excluding money market investments) aggregated $47,077,499 and
$3,737,518, respectively.

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

18 -- SCUDDER PATHWAY SERIES
<PAGE>

Financial Statements

Statement of Assets and Liabilities
as of September 30, 1997

<TABLE>
<CAPTION>
Conservative Balanced Growth
Portfolio Portfolio Portfolio
Assets
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investments, at market (for identified cost, see
accompanying investment portfolios) .............. $ 16,970,891 $191,848,852 $ 49,559,863
Receivable for investments sold .................... -- 200,000 75,000
Receivable on Portfolio shares sold ................ 10,173 404,733 93,829
Income receivable .................................. 18,320 111,017 33,138
--------------- --------------- ----------------
Total assets ....................................... 16,999,384 192,564,602 49,761,830
Liabilities
- -------------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased .................. 18,313 310,848 107,925
Payable for Portfolio shares redeemed .............. 9,390 107,581 79,649
--------------- --------------- ----------------
Total liabilities .................................. 27,703 418,429 187,574
------------------------------------------------------ --------------- --------------- ----------------
Net assets, at market value $ 16,971,681 $192,146,173 $ 49,574,256
------------------------------------------------------ --------------- --------------- ----------------
Net Assets
- -------------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ................ 78,162 584,477 443,915
Net unrealized appreciation on investments ......... 981,565 17,506,861 5,495,404
Accumulated net realized gain ...................... 249,870 1,339,738 206,721
Paid-in capital .................................... 15,662,084 172,715,097 43,428,216
------------------------------------------------------ --------------- --------------- ----------------
Net assets, at market value $ 16,971,681 $192,146,173 $ 49,574,256
------------------------------------------------------ --------------- --------------- ----------------
Net Asset Value
- -------------------------------------------------------------------------------------------------------------------------------
--------------- --------------- ----------------
Net Asset Value, offering and redemption price per $13.27 $13.56 $14.15
share (outstanding shares of beneficial interest, --------------- --------------- ----------------
$.01 par value, unlimited number of shares
authorized) ...................................... 1,279,306 14,166,739 3,503,263
</TABLE>

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

19 -- SCUDDER PATHWAY SERIES
<PAGE>

Statement of Operations
For the period November 15, 1996 (commencement
of operations) to September 30,1997

<TABLE>
<CAPTION>
Conservative Balanced Growth
Portfolio Portfolio Portfolio
Investment Income
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income:
Income distributions from Underlying Funds ......... $ 283,047 $ 2,647,994 $ 452,702
------------------------------------------------------- ---------------- --------------- ---------------
Net investment income 283,047 2,647,994 452,702
------------------------------------------------------- ---------------- --------------- ---------------

Realized and unrealized gain (loss) on investments
- -----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss):
Investments ........................................ 221,457 1,004,816 184,501
Capital gain distributions from Underlying Funds ... 36,736 339,186 29,431
---------------- --------------- ---------------
258,193 1,344,002 213,932
---------------- --------------- ---------------
Net unrealized appreciation on investments during
the period ....................................... 981,565 17,506,861 5,495,404
------------------------------------------------------- ---------------- --------------- ---------------
Net gain on investment transactions 1,239,758 18,850,863 5,709,336
------------------------------------------------------- ---------------- --------------- ---------------
------------------------------------------------------- ---------------- --------------- ---------------
Net increase in net assets resulting from operations $ 1,522,805 $ 21,498,857 $ 6,162,038
------------------------------------------------------- ---------------- --------------- ---------------
</TABLE>

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

20 -- SCUDDER PATHWAY SERIES
<PAGE>

Statement of Changes in Net Assets

<TABLE>
<CAPTION>
For the Period November 15, 1996
(commencement of operations)
to September 30, 1997
Conservative Balanced Growth
Increase (Decrease) in Net Assets Portfolio Portfolio Portfolio
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income ................................ $ 283,047 $ 2,647,994 $ 452,702
Net realized gains ................................... 258,193 1,344,002 213,932
Net unrealized appreciation on investments during
the period ......................................... 981,565 17,506,861 5,495,404
--------------- --------------- ----------------
Net increase in net assets resulting from operations. 1,522,805 21,498,857 6,162,038
--------------- --------------- ----------------
Distributions to shareholders from:
Net investment income ................................ (204,885) (2,063,517) (8,787)
--------------- --------------- ----------------
Net realized gain on investment transactions ......... (8,323) (4,264) (7,211)
--------------- --------------- ----------------
Portfolio share transactions:
Proceeds from shares sold ............................ 17,529,919 188,966,219 49,883,396
Net asset value of shares issued to shareholders in
reinvestment of distributions ...................... 206,449 2,061,385 15,997
Cost of shares redeemed .............................. (2,099,284) (18,337,507) (6,496,177)
--------------- --------------- ----------------
Net increase in net assets from Portfolio share
transactions ....................................... 15,637,084 172,690,097 43,403,216
--------------- --------------- ----------------
Increase in net assets ............................... 16,946,681 192,121,173 49,549,256
Net assets at beginning of period .................... 25,000 25,000 25,000
--------------- --------------- ----------------
Net assets at end of period (a) ...................... $ 16,971,681 $192,146,173 $ 49,574,256
--------------- --------------- ----------------
Other Information
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Portfolio shares
Shares outstanding at beginning of period ............ 2,083 2,083 2,083
--------------- --------------- ----------------
Shares sold .......................................... 1,426,617 15,422,187 3,994,728
Shares issued to shareholders in reinvestment
of distributions ................................... 16,301 160,369 1,342
Shares redeemed ...................................... (165,695) (1,417,900) (494,890)
--------------- --------------- ----------------
Net increase in Portfolio shares ..................... 1,277,223 14,164,656 3,501,180
--------------- --------------- ----------------
Shares outstanding at end of period .................. 1,279,306 14,166,739 3,503,263
--------------- --------------- ----------------

(a) Includes undistributed net investment income of .. $ 78,162 $ 584,477 $ 443,915
</TABLE>

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

21 -- SCUDDER PATHWAY SERIES
<PAGE>

Financial Highlights

Pathway Conservative Portfolio

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

<TABLE>
<CAPTION>
For the Period
November 15, 1996
(commencement
of operations) to
September 30, 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
-----------------
Net asset value, beginning of period .............................................. $12.00
-----------------
Income from investment operations:
Net investment income ............................................................. .39
Net realized and unrealized gain on investment transactions ....................... 1.36
-----------------
Total from investment operations .................................................. 1.75
-----------------
Less distributions:
From net investment income ........................................................ (.33)
From net realized gain on investments ............................................. (.15)
-----------------
Total distributions ............................................................... (.48)
-----------------

-----------------
Net asset value, end of period .................................................... $13.27
- ---------------------------------------------------------------------------------------------------------------
Total Return (%) .................................................................. 14.99**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ............................................ 17
Ratio of operating expenses to average daily net assets (%) (a) ................... --
Ratio of net investment income to average daily net assets (%) .................... 3.67*
Portfolio turnover rate (%) ....................................................... 42.0*
</TABLE>

22 -- SCUDDER PATHWAY SERIES
<PAGE>

Financial Highlights

Pathway Balanced Portfolio

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

<TABLE>
<CAPTION>
For the Period
November 15, 1996
(commencement of
operations) to
September 30, 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
-----------------
Net asset value, beginning of period .............................................. $12.00
-----------------
Income from investment operations:
Net investment income ............................................................. .37
Net realized and unrealized gain on investment transactions ....................... 1.59
-----------------
Total from investment operations .................................................. 1.96
-----------------
Less distributions:
From net investment income ........................................................ (.33)
From net realized gain on investments ............................................. (.07)
-----------------
Total distributions ............................................................... (.40)
-----------------

-----------------
Net asset value, end of period .................................................... $13.56
- ---------------------------------------------------------------------------------------------------------------
Total Return (%) .................................................................. 16.67**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ............................................ 192
Ratio of operating expenses to average daily net assets (%) (a) ................... --
Ratio of net investment income to average daily net assets (%) .................... 2.96*
Portfolio turnover rate (%) ....................................................... 24.3*
</TABLE>

23 -- SCUDDER PATHWAY SERIES
<PAGE>

Financial Highlights

Pathway Growth Portfolio

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

<TABLE>
<CAPTION>
For the Period
November 15, 1996
(commencement of
operations) to
September 30, 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
-----------------
Net asset value, beginning of period ............................................... $12.00
-----------------
Income from investment operations:
Net investment income .............................................................. .29
Net realized and unrealized gain on investment transactions ........................ 2.15
-----------------
Total from investment operations ................................................... 2.44
-----------------
Less distributions:
From net investment income ......................................................... (.16)
From net realized gain on investments .............................................. (.13)
-----------------
Total distributions ................................................................ (.29)
-----------------

-----------------
Net asset value, end of period ..................................................... $14.15
- ---------------------------------------------------------------------------------------------------------------
Total Return (%) ................................................................... 20.79**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ............................................. 50
Ratio of operating expenses to average daily net assets (%) (a) .................... --
Ratio of net investment income to average daily net assets (%) ..................... 2.09*
Portfolio turnover rate (%) ........................................................ 15.1*
</TABLE>

24 -- SCUDDER PATHWAY SERIES
<PAGE>

Notes to Financial Statements

A. Significant Accounting Policies

The Conservative, Balanced, and Growth Portfolios (the "Portfolios") are each
diversified series of Scudder Pathway Series (the "Trust"). The Trust is
organized as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company. The series is composed of six separate diversified portfolios, four of
which are currently offered. These portfolios invest primarily in existing
Scudder Funds (the "Underlying Scudder Funds").

These financial statements are prepared in accordance with generally accepted
accounting principles which require the use of management estimates. The
policies described below are followed by each Portfolio in the preparation of
its financial statements.

Federal Income Taxes. Each Portfolio is treated as a single corporate taxpayer,
as provided for in the Internal Revenue Code of 1986, as amended. It is each
Portfolio's policy to comply with the requirements of the Internal Revenue Code
which are applicable to regulated investment companies and to distribute all of
its taxable income to its shareholders. Accordingly, the Portfolios paid no
federal income taxes and no provision for federal income taxes was required.

Distribution of Income and Gains. Distributions from net investment income from
the Conservative and Balanced Portfolios are declared and paid quarterly in
April, July, October and December. Distributions of net investment income and
net realized gains from the Growth Portfolio are made annually. During any
particular year net realized gains, in excess of available capital loss
carryforwards, would be taxable to each such Portfolio if not distributed and,
therefore, will be distributed to shareholders annually. An additional
distribution may be made to the extent necessary to avoid the payment of a four
percent federal excise tax.

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

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

B. Related Parties

In accordance with the Portfolios' Investment Management Agreement (the
"Agreement") with Scudder, Stevens & Clark, Inc. (the "Adviser"), the Adviser
regularly provides the Portfolios with continuing investment management
consistent with each Portfolio's investment objective.

25 -- SCUDDER PATHWAY SERIES
<PAGE>

Under the Special Servicing Agreement entered into by the Adviser, the
Underlying Scudder Funds, Scudder Service Corporation, Scudder Fund Accounting
Corporation, Scudder Investor Services, Inc., Scudder Trust Company and the
Portfolios, the Adviser arranges for all services pertaining to the operations
of the Portfolios. If the Trustees determine that the aggregate expenses of a
Portfolio are less than the estimated savings to the Underlying Scudder Funds
from the operation of such Portfolio, each of the Underlying Scudder Funds will
bear those expenses in proportion to the average daily value of its shares owned
by the respective Portfolio. Consequently, no Underlying Scudder Funds will be
expected to carry expenses that are in excess of the estimate of savings to the
respective Funds. These estimated savings result from the elimination of
separate shareholder accounts which either currently are or have potential to be
invested in the Underlying Scudder Funds. In the event that the financial
benefits to the Underlying Scudder Funds do not exceed aggregate expenses of any
Portfolio, the Adviser will pay certain costs on behalf of the respective
Portfolio. For the period November 15, 1996 (commencement of operations) to
September 30, 1997, the Adviser paid expenses in the amount of $31, 641 on
behalf of the Conservative Portfolio. In accordance with the Special Servicing
Agreement, no expenses were charged to the Portfolios during the period. The
Adviser has assumed the organization costs of each Portfolio.

The Portfolios do not invest in the Underlying Scudder Funds for the purpose of
exercising management or control; however, investments within the set limits may
represent a significant portion of an Underlying Fund's net assets. At September
30, 1997, the Balanced Portfolio held the following Underlying Funds'
outstanding shares: approximately 47% of the Scudder Classic Growth Fund, 8% of
the Scudder Income Fund, 7% of the Scudder High Yield Bond Fund, and 5% of the
Scudder Emerging Markets Growth Fund. The Growth Portfolio held approximately
13% of the outstanding shares of the Scudder 21st Century Fund at September 30,
1997.

26 -- SCUDDER PATHWAY SERIES
<PAGE>

Report of Independent Accountants

To the Board of Trustees of Scudder Pathway Series and to the Shareholders of
Scudder Pathway Series: Conservative, Balanced and Growth Portfolios:

We have audited the accompanying statement of assets and liabilities of Scudder
Pathway Series: Conservative, Balanced and Growth Portfolios (three of the
portfolios constituting the Scudder Pathway Series), including the investment
portfolios, as of September 30, 1997, and the related statements of operations
for the period November 15, 1996 (commencement of operations) through September
30, 1997, the statements of changes in net assets for the period November 15,
1996 (commencement of operations) through September 30, 1997, and the financial
highlights for the period November 15, 1996 (commencement of operations) through
September 30, 1997. These financial statements and financial highlights are the
responsibility of the Portfolios' management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1997 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder Pathway Series: Conservative, Balanced and Growth Portfolios as of
September 30, 1997, the results of their operations for the period November 15,
1996 (commencement of operations) through September 30, 1997, the changes in
their net assets for the period November 15, 1996 (commencement of operations)
through September 30, 1997, and the financial highlights for the period November
15, 1996 (commencement of operations) through September 30, 1997, in conformity
with generally accepted accounting principles.

Boston, Massachusetts COOPERS & LYBRAND, L.L.P.
October 30, 1997

27 -- SCUDDER PATHWAY SERIES
<PAGE>

Tax Information

Pursuant to Section 852 of the Internal Revenue Code, the Conservative,
Balanced, and Growth Portfolios designate long-term capital gain dividends for
the fiscal year ended September 30, 1997 in the amount of $26,918, $288,542, and
$15,495, respectively.

Officers and Trustees

David S. Lee*
President and Trustee

Daniel Pierce*
Vice President and Trustee

Edgar R. Fiedler
Trustee; Vice President and
Economic Counsellor, The
Conference Board, Inc.

Dr. J. D. Hammond
Trustee; Dean, Smeal College of
Business Administration,
Pennsylvania State University

Richard M. Hunt
Trustee; University Marshal and
Senior Lecturer, Harvard University

Jerard K. Hartman*
Vice President

Thomas W. Joseph*
Vice President

Thomas F. McDonough*
Vice President and Secretary

Pamela A. McGrath*
Vice President and Treasurer

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

Kathryn L. Quirk*
Assistant Secretary

*Scudder, Stevens & Clark, Inc.

28 -- SCUDDER PATHWAY SERIES

<PAGE>

Officers and Trustees

David S. Lee*
President and Trustee

Daniel Pierce*
Vice President and Trustee

Edgar R. Fiedler
Trustee; Vice President and Economic Counsellor, The Conference Board, Inc.

Dr. J. D. Hammond
Trustee; Dean, Smeal College of Business Administration, Pennsylvania State
University

Richard M. Hunt
Trustee; University Marshal and Senior Lecturer, Harvard University

Jerard K. Hartman*
Vice President

Thomas W. Joseph*
Vice President

Thomas F. McDonough*
Vice President and Secretary

Pamela A. McGrath*
Vice President and Treasurer

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

Kathryn L. Quirk*
Assistant Secretary

*Scudder, Stevens & Clark, Inc.

28-SCUDDER PATHWAY SERIES
<PAGE>
Investment Products and Services