Filed with the Securities and Exchange Commission on February 16, 1996.

                                                               File No. 2-96461
                                                               File No. 811-4257

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM N-1A

     REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

          Pre-Effective Amendment No.
                                      -----

          Post-Effective Amendment No. 17
                                      -----

                                       and

     REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

          Amendment No. 21
                       -----

                      Scudder Variable Life Investment Fund
                      -------------------------------------
               (Exact Name of Registrant as Specified in Charter)

                 Two International Place, Boston, MA 02110-4103
                 ----------------------------------------------
               (Address of Principal Executive Offices) (Zip Code)

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

                               Thomas F. McDonough
                         Scudder, Stevens & Clark, Inc.
                 Two International Place, Boston, MA 02110-4103
                 ----------------------------------------------
                       (Name Address of Agent for Service)

It is proposed that this filing will become effective

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

          -----   on May 1, 1995 pursuant to paragraph (b)

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

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

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

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

If appropriate, check the following box:
                  This post-effective amendment designates a new effective date
         -------     for a previously filed post-effective amendment.


The Registrant has filed a declaration registering an indefinite amount of
securities pursuant to Rule 24f-2 under the Investment Company Act of 1940, as
amended. The Registrant intends to file the notice required by Rule 24f-2 for
its most recent fiscal year on or about February 28, 1996.


<PAGE>


<TABLE>
<CAPTION>
                      SCUDDER VARIABLE LIFE INVESTMENT FUND
                           GLOBAL DISCOVERY PORTFOLIO
                              CROSS-REFERENCE SHEET

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


PART A
------

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

        <S>          <C>                            <C>                                                  
        1.           Cover Page                     COVER PAGE

        2.           Synopsis                       NOT APPLICABLE

        3.           Condensed Financial            NOT APPLICABLE
                     Information

        4.           General Description of         INVESTMENT CONCEPT OF THE FUND;
                     Registrant                     INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIO; SPECIAL RISK
                                                    CONSIDERATIONS; POLICIES AND TECHNIQUES APPLICABLE TO THE
                                                    PORTFOLIO;
                                                    INVESTMENT RESTRICTIONS

        5.           Management of the Fund         INVESTMENT ADVISER; PORTFOLIO MANAGEMENT;
                                                    ADDITIONAL INFORMATION

        5A.          Management's Discussion of     NOT APPLICABLE
                     Fund Performance

        6.           Capital Stock and Other        TAX STATUS, DIVIDENDS AND DISTRIBUTIONS;
                     Securities                     SHAREHOLDER COMMUNICATIONS; ADDITIONAL INFORMATION

        7.           Purchase of Securities         DISTRIBUTOR; PURCHASES AND REDEMPTIONS;
                     Being Offered                  NET ASSET VALUE

        8.           Redemption or Repurchase       PURCHASES AND REDEMPTIONS;
                                                    NET ASSET VALUE

        9.           Pending Legal Proceedings      NOT APPLICABLE



                         Cross Reference - Page 1

<PAGE>


                      SCUDDER VARIABLE LIFE INVESTMENT FUND
                              CROSS-REFERENCE SHEET

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

PART B
------

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

       10.          Cover Page                         COVER PAGE

       11.          Table of Contents                  TABLE OF CONTENTS

       12.          General Information and History    ORGANIZATION AND CAPITALIZATION

       13.          Investment Objectives and          INVESTMENT OBJECTIVE AND POLICIES;
                    Policies                           POLICIES AND TECHNIQUES APPLICABLE TO THE PORTFOLIO; INVESTMENT
                                                       RESTRICTIONS; PORTFOLIO TURNOVER

       14.          Management of the Fund             MANAGEMENT

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

       16.          Investment Advisory and Other      INVESTMENT ADVISER AND DISTRIBUTOR; EXPERTS
                    Services

       17.          Brokerage Allocation               ALLOCATION OF PORTFOLIO BROKERAGE

       18.          Capital Stock and Other            ORGANIZATION AND CAPITALIZATION;
                    Securities                         ADDITIONAL INFORMATION

       19.          Purchase, Redemption and           PURCHASES AND REDEMPTIONS;
                    Pricing of Securities Being        NET ASSET VALUE;
                    Offered                            DIVIDENDS AND DISTRIBUTIONS

       20.          Tax Status                         TAX STATUS; DIVIDENDS AND DISTRIBUTIONS

       21.          Underwriters                       INVESTMENT ADVISER AND DISTRIBUTOR

       22.          Calculations of                    PERFORMANCE INFORMATION
                    Performance Data

       23.          Financial Statements               FINANCIAL STATEMENTS


                         Cross Reference - Page 2

</TABLE>
<PAGE>
                     SCUDDER VARIABLE LIFE INVESTMENT FUND

                           GLOBAL DISCOVERY PORTFOLIO

                             Two International Place

                        Boston, Massachusetts 02110-4103

                                 (A Mutual Fund)

Scudder  Variable Life  Investment  Fund (the "Fund") is an open-end  management
investment  company  which  offers  shares  of  beneficial   interest  of  seven
diversified  Portfolios,  one of which is offered herein.  The Global  Discovery
Portfolio (the "Portfolio") seeks  above-average  capital  appreciation over the
long term by investing  primarily in the equity  securities  of small  companies
located throughout the world.

This prospectus  sets forth concisely the information  about the Fund as well as
the  Portfolio  that a  prospective  investor  should know before  applying  for
certain variable annuity contracts and variable life insurance  policies offered
in  the  separate  accounts  of  certain  insurance  companies   ("Participating
Insurance  Companies").  Please  read it  carefully  and  retain  it for  future
reference.  If you require more detailed information,  a Statement of Additional
Information  dated May 1, 1996, as supplemented  from time to time, is available
upon  request  without  charge and may be  obtained  by calling a  Participating
Insurance Company or by writing to  broker/dealers  offering the above mentioned
variable  annuity  contracts and variable life  insurance  policies,  or Scudder
Investor  Services,   Inc.,  Two  International  Place,  Boston,   Massachusetts
02110-4103.  The Statement of Additional  Information,  which is incorporated by
reference into this prospectus,  has been filed with the Securities and Exchange
Commission.

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.

SHARES OF THE FUND ARE AVAILABLE AND ARE BEING MARKETED  EXCLUSIVELY AS A POOLED
FUNDING VEHICLE FOR LIFE INSURANCE  COMPANIES WRITING ALL TYPES OF VARIABLE LIFE
INSURANCE POLICIES AND VARIABLE ANNUITY CONTRACTS.

                                   PROSPECTUS

                                   May 1, 1996

                      CLASS A SHARES OF BENEFICIAL INTEREST
                      CLASS B SHARES OF BENEFICIAL INTEREST


<PAGE>
                                                                        Scudder
-------------------------------------------------------------------------------
                                TABLE OF CONTENTS

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


                                                                           Page

INVESTMENT CONCEPT OF THE FUND                                               1
INVESTMENT OBJECTIVE AND POLICIES OF THE PORTFOLIO                           1 
SPECIAL RISK CONSIDERATIONS                                                  2 
POLICIES AND TECHNIQUES APPLICABLE TO THE PORTFOLIO                          3
     Repurchase Agreements                                                   3
     Special Situation Securities                                            3
     Convertible Securities                                                  3
     Loans of Portfolio Securities                                           3 
     Strategic Transactions and Derivatives                                  4
INVESTMENT RESTRICTIONS                                                      5
INVESTMENT ADVISER                                                           6
     Portfolio Management                                                    6
DISTRIBUTOR                                                                  6
     Class A Shares                                                          7
     Class B Shares                                                          8
     Class A Shares and Class B Shares                                       8
PURCHASES AND REDEMPTIONS                                                    8
NET ASSET VALUE                                                              8
PERFORMANCE INFORMATION                                                      9
VALUATION OF PORTFOLIO SECURITIES                                            9
TAX STATUS, DIVIDENDS AND DISTRIBUTIONS                                      9 
SHAREHOLDER COMMUNICATIONS                                                   10
ADDITIONAL INFORMATION                                                       10
     Fund Organization and Shareholder Indemnification                       10
     Other Information                                                       11
TRUSTEES AND OFFICERS                                                        12
<PAGE>

                                                                        Scudder
-------------------------------------------------------------------------------

                         INVESTMENT CONCEPT OF THE FUND
-------------------------------------------------------------------------------


Scudder  Variable Life Investment  Fund (the "Fund") is an open-end,  registered
management investment company comprised of seven diversified series.  Additional
Portfolios  and classes of shares may be created from time to time.  The Fund is
intended  to  be  the  funding  vehicle  for  variable  annuity  contracts  ("VA
contracts") and variable life insurance  policies ("VLI policies") to be offered
by the separate  accounts of certain life  insurance  companies  ("Participating
Insurance  Companies").  Two classes of shares of the Fund currently are offered
by Participating  Insurance  Companies.  Class A shares are offered at net asset
value and are not subject to a Distribution  Plan. Class B shares are offered at
net asset value and are subject to fees imposed pursuant to a Distribution Plan.
The Fund  currently  does not  foresee  any  disadvantages  to the holders of VA
contracts  and VLI  policies  arising  from the fact that the  interests  of the
holders of such  contracts  and  policies may differ.  Nevertheless,  the Fund's
Trustees   intend  to  monitor   events  in  order  to  identify   any  material
irreconcilable  conflicts which may possibly arise and to determine what action,
if any,  should  be taken in  response  thereto.  The VA  contracts  and the VLI
policies are described in the separate  prospectuses issued by the Participating
Insurance  Companies.  The Fund assumes no responsibility for such prospectuses.

Individual VA contract holders and VLI policyholders are not the  "shareholders"
of the Fund.  Rather, the Participating  Insurance  Companies and their separate
accounts are the shareholders or investors (the  "Shareholders"),  although such
companies  may  pass  through  voting  rights  to  their  VA  contract  and  VLI
policyholders.

-------------------------------------------------------------------------------
                            INVESTMENT OBJECTIVE AND
                            POLICIES OF THE PORTFOLIO
-------------------------------------------------------------------------------

The Global Discovery  Portfolio (the "Portfolio")  seeks  above-average  capital
appreciation over the long term by investing  primarily in the equity securities
of small companies  located  throughout the world. The Portfolio is designed for
investors looking for above-average  appreciation  potential (when compared with
the  overall  domestic  stock  market as  reflected  by  Standard  & Poor's  500
Composite  Price  Index) and the  benefits of  investing  globally,  but who are
willing to accept  above-average  stock  market  risk,  the  impact of  currency
fluctuation and little or no current income.

In pursuit of its objective,  the Portfolio generally invests in small,  rapidly
growing companies that offer the potential for above-average returns relative to
larger  companies,  yet are frequently  overlooked  and thus  undervalued by the
market.  The Portfolio has the flexibility to invest in any region of the world.
It can invest in companies based in emerging markets, typically in 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
in Western Europe.

Scudder, Stevens & Clark, Inc. (the "Adviser") invests the Portfolio's assets in
companies it believes offer  above-average  earnings,  cash flow or asset growth
potential.  It also  invests  in  companies  that  may  receive  greater  market
recognition  over time.  The Adviser  believes  these factors offer  significant
opportunity  for  long-term   capital   appreciation.   The  Adviser   evaluates
investments  for the  Portfolio  from  both a  macroeconomic  and  microeconomic
perspective,  using fundamental analysis,  including field research. The Adviser
analyzes the growth potential and relative value of possible  investments.  When
evaluating an individual company, the Adviser takes into consideration  numerous
factors,  including  the depth and quality of  management;  a company's  product
line,  business  strategy and  competitive  position;  research and  development
efforts;  financial  strength,  including  degree of leverage;  cost  structure;
revenue and earnings  growth  potential;  price-earnings  ratios and other stock
valuation  measures.  Secondarily,  the Adviser weighs the attractiveness of the
country and region in which a company is located.

Under  normal  circumstances  the  Portfolio  invests  at least 65% of its total
assets in the equity  securities of small  issuers.  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  Portfolio  expects,  under usual market
conditions,  to diversify its portfolio widely by company, industry and country.
The Portfolio intends to allocate  investments among at least three countries at
all times, including the United States.

                                       1
<PAGE>

The Portfolio  may invest up to 35% of its total assets in equity  securities of
larger  companies  throughout  the world and in debt  securities  if the Adviser
determines that the capital  appreciation of debt securities is likely to exceed
the capital  appreciation  of equity  securities.  The  Portfolio  may  purchase
investment-grade  bonds,  those rated Aaa, Aa, A or Baa by Moody's or AAA, AA, A
or BBB by S&P or,  if  unrated,  of  equivalent  quality  as  determined  by the
Adviser.  The  Portfolio  may also  invest  up to 5% of its net  assets  in debt
securities  rated below  investment-grade.  Securities  rated below  Baa/BBB are
commonly  referred  to as "junk  bonds."  The  lower  the  ratings  of such debt
securities,  the greater  their risks  render them like equity  securities.  The
Portfolio may invest in securities rated D by S&P at the time of purchase, which
may be in default with respect to payment of principal or interest.

The Portfolio  invests  primarily in companies  whose  individual  equity market
capitalizations  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  Portfolio
typically  will  have  individual  equity  market   capitalizations  of  between
approximately $50 million and $2 billion (although the Portfolio will be free to
invest in smaller  capitalization  issues  that  satisfy  the  Portfolio's  size
standard).  Furthermore,  the median market capitalization of the Portfolio will
not exceed $750 million.

The  equity  securities  in which the  Portfolio  may  invest  consist of common
stocks,  preferred  stocks (either  convertible or  nonconvertible),  rights and
warrants.  These  securities  may be listed on the U.S.  or  foreign  securities
exchanges or traded  over-the-counter.  For capital appreciation  purposes,  the
Portfolio may purchase notes, bonds, debentures,  government securities and zero
coupon bonds (any of which may be convertible or nonconvertible).  The Portfolio
may invest in foreign securities and American  Depositary  Receipts which may be
sponsored or unsponsored. The Portfolio may also invest in closed-end investment
companies holding foreign securities,  and engage in strategic transactions.  In
addition,  the Portfolio may invest in illiquid or  restricted  securities.  For
temporary  defensive  purposes,  the  Portfolio  may,  during  periods  in which
conditions in securities markets warrant,  invest without limit in cash and cash
equivalents.

The Global Discovery  Portfolio cannot guarantee a gain or eliminate the risk of
loss.  The net asset  value of the  shares of the  Portfolio  will  increase  or
decrease  with changes in the market price of the  Portfolio's  investments  and
changes in  foreign  currency  exchange  rates.  The  investment  objective  and
policies of the Portfolio may, unless otherwise  specifically stated, be changed
by the  Trustees  of the Fund  without a vote of the  Shareholders.  There is no
assurance that the objective of the Portfolio will be achieved.

-------------------------------------------------------------------------------
                           SPECIAL RISK CONSIDERATIONS
-------------------------------------------------------------------------------

The Portfolio is designed for long-term  investors who can accept  international
investment  risk.  Since the  Portfolio  normally  will invest in both U.S.  and
foreign  securities  markets,  changes in the Portfolio's share price may have a
low  correlation  with  movements  in  the  U.S.  markets,  which  enhances  the
Portfolio's  appeal as a diversification  tool. The Portfolio's share price will
reflect the movements of the different stock markets in which it is invested and
the different currencies in which the investments are denominated.  The strength
or weakness of the U.S. dollar against  foreign  currencies is likely to account
for  part  of the  Portfolio's  investment  performance,  although  the  Adviser
believes that,  over the long term, the impact of currency  changes on Portfolio
performance will not be as significant as changes in the underlying investments.
As with any long-term investment, the value of shares when sold may be higher or
lower than when purchased.

Global investing  involves economic and political  considerations  not typically
found in U.S. markets. These considerations,  which may favorably or unfavorably
affect  the  Portfolio's  performance,  include  changes in  exchange  rates and
exchange rate controls (which may include  suspension of the ability to transfer
currency  from  a  given  country),   costs  incurred  in  conversions   between
currencies, nonnegotiable brokerage commissions, different accounting standards,
lower trading volume and greater market volatility,  the difficulty of enforcing
obligations  in other  countries,  less  securities  regulation,  different  tax
provisions  (including  withholding  on  interest  and  dividends  paid  to  the
Portfolio), war, expropriation, political and social instability, and diplomatic
developments.

Further, the settlement period of securities transactions in foreign markets may
be longer than in domestic markets. These considerations generally are more of a
concern in  developing  countries.  For example,  the  possibility  of political

                                       2
<PAGE>

upheaval and the  dependence on foreign  economic  assistance  may be greater in
these countries than in developed  countries.  The Adviser seeks to mitigate the
risks associated with these  considerations  through  diversification and active
professional  management.  The Portfolio will limit investments in securities of
issuers located in Eastern Europe to 5% of its total assets.

There is typically less publicly  available  information  concerning foreign and
smaller companies than for domestic and larger, more established companies. Some
small companies have limited product lines,  distribution channels and financial
and managerial  resources.  Also,  because smaller companies normally have fewer
shares  outstanding than larger  companies and trade less frequently,  it may be
more  difficult  for the Portfolio to buy and sell  significant  amounts of such
shares without an unfavorable  impact on prevailing  market prices.  Some of the
companies  in which the  Portfolio  may invest may  distribute,  sell or produce
products  which have recently been brought to market and may be dependent on key
personnel with varying degrees of experience.

-------------------------------------------------------------------------------
                             POLICIES AND TECHNIQUES
                           APPLICABLE TO THE PORTFOLIO
-------------------------------------------------------------------------------

REPURCHASE AGREEMENTS

As a means of earning  income for periods as short as  overnight,  the Fund,  on
behalf of the  Portfolio,  may enter into  repurchase  agreements  with U.S. and
foreign  banks,  and  any  broker-dealer  which  is  recognized  as a  reporting
government   securities  dealer,  if  the   creditworthiness   of  the  bank  or
broker-dealer  has been  determined by the Adviser to be of a sufficiently  high
quality.  Under a  repurchase  agreement,  the  Portfolio  acquires  securities,
subject to the seller's  agreement to repurchase those securities at a specified
time and price.  Securities  subject  to a  repurchase  agreement  are held in a
segregated  account and the seller  agrees to maintain  the market value of such
securities at least equal to 100.5% of the repurchase price on a daily basis. If
the seller  under a  repurchase  agreement  becomes  insolvent  and the Fund has
failed to perfect its interest in the underlying  securities,  the Fund might be
deemed an  unsecured  creditor of the seller and may  encounter  delay and incur
costs before being able to sell the security.  Also, if a seller  defaults,  the
value of such  securities  might  decline  before the Fund is able to dispose of
them.  The Trustees  have set  standards of  counterparty  creditworthiness  and
monitor compliance with such standards. 

SPECIAL SITUATION SECURITIES

From time to time, the Portfolio 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.

CONVERTIBLE SECURITIES

The Portfolio may invest in convertible securities which may offer higher income
than the  common  stocks  into  which  they  are  convertible.  The  convertible
securities in which the Portfolio may invest consist of bonds, notes, debentures
and  preferred  stocks  which  may be  converted  or  exchanged  at a stated  or
determinable  exchange ratio into  underlying  shares of common stock.  Prior to
their conversion,  convertible  securities may have  characteristics  similar to
nonconvertible  securities.  While convertible  securities generally offer lower
yields than nonconvertible debt securities of similar quality,  their prices may
reflect  changes  in the  value  of the  underlying  common  stock.  Convertible
securities entail less credit risk than the issuer's common stock.

LOANS OF PORTFOLIO SECURITIES

The Fund may lend the portfolio  securities of the Portfolio  provided:  (1) the
loan is  secured  continuously  by  collateral  consisting  of  U.S.  Government
securities, or cash or cash equivalents adjusted daily to have a market value at
least equal to the current market value of the securities  loaned;  (2) the Fund
may at any time  call  the  loan  and  regain  the  securities  loaned;  (3) the
Portfolio will receive any interest or dividends paid on the loaned  securities;
and (4) the  aggregate  market value of  securities  loaned will not at any time
exceed  one-third  of the total  assets of the  Portfolio.  In  addition,  it is
anticipated that the Portfolio may share with the borrower some of the income

                                       3
<PAGE>

received  on the  collateral  for the loan or that it will be paid a premium for
the loan.  Before the Portfolio  enters into a loan,  the Adviser  considers all
relevant facts and circumstances including the creditworthiness of the borrower.

STRATEGIC TRANSACTIONS AND DERIVATIVES

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

In the  course of  pursuing  these  investment  strategies,  the  Portfolio  may
purchase and sell  exchange-listed and  over-the-counter put and call options on
securities,  equity and  fixed-income  indices and other financial  instruments,
purchase and sell financial  futures  contracts and options thereon,  enter into
various interest rate transactions such as swaps,  caps, floors or collars,  and
enter into various currency  transactions  such as currency  forward  contracts,
currency futures contracts,  currency swaps or options on currencies or currency
futures (collectively, all the above are called "Strategic Transactions").

Strategic  Transactions  may be used without limit to attempt to protect against
possible changes in the market value of securities held in or to be purchased by
the  Portfolio  resulting  from  securities  markets or currency  exchange  rate
fluctuations,  to protect the Portfolio's  unrealized  gains in the value of its
portfolio  securities,  to facilitate the sale of such securities for investment
purposes,   to  manage  the  effective  maturity  or  duration  of  fixed-income
securities  in the  portfolio,  or to  establish a position  in the  derivatives
markets  as  a  temporary   substitute  for  purchasing  or  selling  particular
securities.  Some Strategic  Transactions may also be used to enhance  potential
gain  although no more than 5% of the  Portfolio's  assets will be  committed to
Strategic  Transactions  entered into for  non-hedging  purposes.  Any or all of
these investment techniques may be used at any time and in any combination,  and
there is no particular  strategy  that dictates the use of one technique  rather
than  another,  as use of any  Strategic  Transaction  is a function of numerous
variables  including market conditions.  The ability of the Portfolio to utilize
these Strategic  Transactions  successfully will depend on the Adviser's ability
to predict  pertinent market movements,  which cannot be assured.  The Portfolio
will comply with applicable  regulatory  requirements  when  implementing  these
strategies,   techniques  and  instruments.   Strategic  Transactions  involving
financial  futures and options  thereon will be purchased,  sold or entered into
only for bona fide hedging, risk management or portfolio management purposes and
not for speculative 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 the  Portfolio,  force the sale or purchase of portfolio
securities  at  inopportune  times or for prices higher than (in the case of put
options)  or lower than (in the case of call  options)  current  market  values,
limit the amount of appreciation the Portfolio can realize on its investments or
cause the  Portfolio  to hold a security  it might  otherwise  sell.  The use of
currency  transactions can result in the Portfolio  incurring losses as a result
of a number of factors including the imposition of exchange controls, suspension
of settlements or the inability to deliver or receive a specified currency.  The
use of  options  and  futures  transactions  entails  certain  other  risks.  In
particular,  the  variable  degree of  correlation  between  price  movements of
futures contracts and price movements in the related  portfolio  position of the
Portfolio  creates the possibility that losses on the hedging  instrument may be
greater  than  gains in the  value of the  Portfolio's  position.  In  addition,
futures and options markets may not be liquid in all  circumstances  and certain
over-the-counter  options may have no markets.  As a result, in certain markets,
the  Portfolio  might not be able to close out a transaction  without  incurring
substantial losses, if at all. Although the use of futures contracts and options
transactions  for  hedging  should  tend to  minimize  the risk of loss due to a
decline in the value of the hedged position, at the same time they tend to limit
any  potential  gain  which  might  result  from an  increase  in  value of such
position. Finally, the daily variation margin requirements for futures contracts
would create a greater ongoing potential  financial risk than would purchases of
options,  where the  exposure  is  limited to the cost of the  initial  premium.
Losses resulting from the use of Strategic  Transactions  would reduce net asset
value, and possibly income, and such losses can be greater than if the Strategic
Transactions  had  not  been  utilized.  The  Strategic  Transactions  that  the

                                       4
<PAGE>

Portfolio may use and some of their risks are described more fully in the Fund's
Statement of Additional Information.

-------------------------------------------------------------------------------
                             INVESTMENT RESTRICTIONS
-------------------------------------------------------------------------------

Unless specified to the contrary,  the following restrictions may not be changed
with  respect  to  the  Portfolio  without  the  approval  of  the  majority  of
outstanding  voting  securities of the Portfolio  (which,  under the  Investment
Company Act of 1940, as amended (the "1940 Act"),  and the rules  thereunder and
as used in this  prospectus,  means the  lesser of (1) 67% of the  shares of the
Portfolio  present  at a  meeting  if  the  holders  of  more  than  50%  of the
outstanding  shares of the Portfolio  are present in person or by proxy,  or (2)
more  than 50% of the  outstanding  shares  of the  Portfolio).  Any  investment
restrictions  which  involve a maximum  percentage of securities or assets shall
not be considered  to be violated  unless an excess over the  percentage  occurs
immediately after, and is caused by, an acquisition or encumbrance of securities
or assets of, or borrowings by or on behalf of, the Portfolio.

The Fund may not, on behalf of the Portfolio:

    (1) borrow money except as a temporary measure for extraordinary or
        emergency purposes or except in connection with reverse repurchase
        agreements provided that the Portfolio maintains asset coverage of 300%
        for all borrowings;

    (2) purchase or sell real estate (except that the Portfolio may invest in
        (i) securities of companies which deal in real estate or mortgages, and
        (ii) securities secured by real estate or interests therein, and that
        the Portfolio reserves freedom of action to hold and to sell real estate
        acquired as a result of the Portfolio's ownership of securities); or
        purchase or sell physical commodities or contracts relating to physical
        commodities;

    (3) act as an underwriter of securities issued by others, except to the
        extent that it may be deemed an underwriter in connection with the
        disposition of portfolio securities of the Portfolio;

    (4) issue senior securities, except as appropriate to evidence indebtedness
        which it is permitted to incur, and except for shares of the separate
        classes or series of the Fund; provided that collateral arrangements
        with respect to currency-related contracts, futures contracts, options
        or other permitted investments, including deposits of initial and
        variation margin, are not considered to be the issuance of senior
        securities for purposes of this restriction;

    (5) purchase any securities which would cause more than 25% of the market
        value of its total assets at the time of such purchase to be invested in
        the securities of one or more issuers having their principal business
        activities in the same industry, provided that there is no limitation
        with respect to investments in obligations issued or guaranteed by the
        U.S. Government, its agencies or instrumentalities (for the purposes of
        this restriction, telephone companies are considered to be in a separate
        industry from gas and electric public utilities, wholly-owned finance
        companies are considered to be in the same industry of their parents if
        their activities are primarily related to financing the activities of
        their parents and each foreign government, its agencies or
        instrumentalities as well as supranational organizations as a group, are
        each considered to be a separate industry);

    (6) with respect to 75% of its total assets taken at market value purchase
        more than 10% of the voting securities of any one issuer, or invest more
        than 5% of the value of its total assets in the securities of any one
        issuer, except obligations issued or guaranteed by the U.S. Government,
        its agencies or instrumentalities and except securities of closed end
        investment companies;

    (7) make loans to other persons, except (a) loans of portfolio securities,
        provided collateral is maintained at not less than 100% by marking to
        market daily, and (b) to the extent the entry into repurchase agreements
        and the purchase of debt securities in accordance with its investment
        objective and investment policies may be deemed to be loans;

"Value" for the purposes of all investment restrictions shall mean the value
used in determining the Portfolio's net asset value (see "NET ASSET VALUE").

                                       5
<PAGE>

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

                               INVESTMENT ADVISER
 -------------------------------------------------------------------------------

The Fund retains the investment advisory firm of Scudder, Stevens & Clark, Inc.,
a  Delaware   corporation,   Two  International  Place,  Boston,   Massachusetts
02110-4103,  to manage the  Portfolio's  daily  investment and business  affairs
subject to the policies  established by the Trustees.  The Trustees have overall
responsibility  for the  management  of the Fund under  Massachusetts  law.  The
Adviser is one of the most  experienced  investment  counsel firms in the United
States.  It was  established  in 1919 and  pioneered  the  practice of providing
investment counsel to individual clients on a fee basis. The principal source of
the Adviser's  income is  professional  fees received from providing  continuing
investment advice,  and the firm derives no income from brokerage,  insurance or
underwriting  of  securities.  Today,  it provides  investment  counsel for many
individuals  and  institutions,   including   insurance   companies,   colleges,
industrial  corporations,  and financial and banking organizations.  Directly or
through  affiliates,  the Adviser provides  investment  advice to over 50 mutual
fund portfolios.

For its advisory  services to the Portfolio,  the Adviser receives an investment
advisory fee at an annual rate of 0.975% of the average  daily net assets of the
Portfolio.

The investment  advisory fee for the Portfolio is higher than those charged many
funds which invest primarily in U.S.  securities,  but is not necessarily higher
than those charged to funds with investment objectives similar to the investment
objective of this Portfolio.

Under the  investment  advisory  agreement  between  the Fund,  on behalf of the
Portfolio,  and the Adviser, the Fund is responsible for all its other expenses,
including  clerical  salaries;  fees and expenses  incurred in  connection  with
membership in investment company  organizations;  brokers'  commissions;  legal,
auditing and accounting  expenses;  taxes and governmental  fees; the charges of
custodians,  transfer  agents and other agents;  any other  expenses,  including
clerical expenses,  of issue, sale,  underwriting,  distribution,  redemption or
repurchase  of shares;  the expenses of and fees for  registering  or qualifying
securities  for sale;  the fees and expenses of the Trustees of the Fund who are
not affiliated with the Adviser;  the cost of preparing and distributing reports
and  notices to  shareholders.  The Fund is also  responsible  for its  expenses
incurred in connection  with  litigation,  proceedings  and claims and the legal
obligation  it may have to indemnify  its  officers  and  Trustees  with respect
thereto. The Adviser,  through Scudder Investor Services,  Inc., a subsidiary of
the Adviser,  places  portfolio  transactions on behalf of the Portfolio.  In so
doing,  the Adviser seeks to obtain the most  favorable net results.  Subject to
the  foregoing,  the  Adviser may  consider  sales of  variable  life  insurance
policies  and variable  annuity  contracts  for which the Fund is an  investment
option, as a factor in the selection of firms to execute portfolio transactions.

In  addition  to  payments  for  investment  advisory  services  provided by the
Adviser, the Trustees,  consistent with the Fund's investment advisory agreement
and  underwriting  agreement,  have  approved  payments to the Adviser,  Scudder
Investor  Services,  Inc. and Scudder Fund Accounting  Corporation for clerical,
accounting and certain other services they may provide the Fund.

Until April 30, 1998, the Adviser has agreed to waive part or all of its fee for
the Portfolio to the extent that the Portfolio's  expenses will be maintained at
1.50% of the average daily net assets of the Portfolio.

PORTFOLIO MANAGEMENT

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

-------------------------------------------------------------------------------
                                   DISTRIBUTOR
-------------------------------------------------------------------------------

The Fund has underwriting  agreements with Scudder Investor Services,  Inc. (the
"Distributor"),  a subsidiary of Scudder,  Stevens & Clark,  Inc. Located at Two
International  Place,  Boston,  Massachusetts  02110-4103,  the Distributor is a
Massachusetts corporation formed in 1947.

                                       6
<PAGE>

CLASS A SHARES

Under  the  principal  underwriting  agreement  for  Class A shares  of the Fund
between the Fund and the Distributor, the Fund is responsible for the payment of
all fees and  expenses  in  connection  with the  preparation  and filing of any
registration  statement  and  prospectus  covering the issue and sale of Class A
shares,  and the registration and  qualification of Class A shares for sale with
the Securities  and Exchange  Commission  and in the various  states,  including
registering the Fund as a broker or dealer.  The Fund will also pay the fees and
expenses of preparing,  printing and mailing  prospectuses  annually to existing
Class A shareholders  and any notice,  proxy  statement,  report,  prospectus or
other  communication  to Class A shareholders of the Fund,  printing and mailing
confirmations  of  purchases  of Class A shares,  any issue taxes or any initial
transfer  taxes,  a  portion  of  toll-free   telephone   service  for  Class  A
shareholders,  wiring funds for Class A share purchases and redemptions  (unless
paid by the shareholder who initiates the transaction),  printing and postage of
business  reply  envelopes and a portion of the computer  terminals used by both
the Fund and the Distributor.

The Distributor will pay for printing and  distributing  prospectuses or reports
prepared for its use in connection with the offering of the Class A shares,  and
preparing,   printing  and  mailing  any  other  literature  or  advertising  in
connection  with  the  offering  of the  Class  A  shares  to the  Participating
Insurance  Companies.  The  Distributor  will  pay  all  fees  and  expenses  in
connection with its  qualification  and registration as a broker or dealer under
Federal  and state laws,  a portion of the  toll-free  telephone  service and of
computer terminals, and of any activity which is primarily intended to result in
the sale of Class A shares  issued by the Fund,  unless a Plan  pursuant to Rule
12b-1 under the 1940 Act, as amended,  is in effect which provides that the Fund
shall bear some or all of such expenses.

CLASS B SHARES

Under  the  principal  underwriting  agreement  for  Class B shares  of the Fund
between the Fund and the Distributor, the Fund is responsible for the payment of
all fees and  expenses  in  connection  with the  preparation  and filing of any
registration  statement  and  prospectus  covering the issue and sale of Class B
shares,  and the registration and  qualification of Class B shares for sale with
the Securities  and Exchange  Commission  and in the various  states,  including
registering the Fund as a broker or dealer.  The Fund will also pay the fees and
expenses of preparing,  printing and mailing  prospectuses  annually to existing
Class B shareholders  and any notice,  proxy  statement,  report,  prospectus or
other  communication  to Class B shareholders of the Fund,  printing and mailing
confirmations  of  purchases  of Class B shares,  any issue taxes or any initial
transfer  taxes,  a  portion  of  toll-free   telephone   service  for  Class  B
shareholder,  writing funds for Class B share purchases and redemptions  (unless
paid by the shareholder who initiates the transaction),  printing and postage of
business  reply  envelopes and a portion of the computer  terminals used by both
the Fund and the Distributor.

Subject to the Fund's  reimbursing the Distributor for such fees and expenses as
may be permitted by the Fund pursuant to the Rule 12b-1 plan in effect for Class
B shares of the Fund (as discussed below), the Distributor will pay for printing
and distributing prospectuses or reports prepared for its use in connection with
the  offering of the Class B shares,  and  preparing,  printing  and mailing any
other  literature or advertising in connection  with the offering of the Class B
shares to the Participating  Insurance  Companies.  The Distributor will pay all
fees and expenses in connection  with its  qualification  and  registration as a
broker or dealer  under  Federal  and state  laws,  a portion  of the  toll-free
telephone  service  and of  computer  terminals,  and of any  activity  which is
primarily intended to result in the sale of Class B shares issued by the Fund.

The Fund has adopted a plan  pursuant to Rule 12b-1 under the 1940 Act for Class
B shares  of the  Fund  (the  "Plan").  Pursuant  to the  Plan,  each  Portfolio
participating  in  the  Plan  may  pay  the  Distributor  (for  remittance  to a
Participating  Insurance  Company)  for various  costs  incurred or paid by such
company in connection with the distribution of Class B shares of that Portfolio.
Depending on the  Participating  Insurance  Company's  corporate  structure  and
applicable  state law, the Distributor  may remit payments to the  Participating
Insurance Company's affiliated  broker-dealer or other affiliated company rather
than the Participating Insurance Company itself.

The Plan provides that the Fund, on behalf of Class B shares of each  Portfolio,
shall pay the  Distributor  in its  capacity as  principal  underwriter  of Fund
shares,  a fee of up to 0.25% of the  average  daily net  assets of a  Portfolio
attributable  to its  Class B shares.  Under the terms of the Plan,  the Fund is
authorized to make payments  quarterly to the  Distributor  for  remittance to a
Participating Insurance Company, in order to pay or reimburse such Participating
Insurance  Company for distribution and shareholder  servicing-related  expenses
incurred  or  paid  by such  Participating  Insurance  Company.  The  Plan  also
provides,  however,  that no such  payment  shall be made  with  respect  to any

                                       7
<PAGE>

quarterly  period in excess  of an  amount  determined  for such a period at the
annual  rate of 0.25% of the  average  daily net assets of Class B shares of the
Portfolios  attributable to that Participating  Insurance Company's VA contracts
and VLI policies during that quarterly period.

Expenses  payable  pursuant to this Plan may  include,  but are not  necessarily
limited to: (a) the printing  and mailing of Fund  prospectuses,  statements  of
additional  information,  any supplements  thereto and  shareholder  reports for
existing and  prospective VA contract and VLI policy owners;  (b) those relating
to the development,  preparation,  printing and mailing of Fund  advertisements,
sales literature and other promotional  materials  describing and/or relating to
the Fund and  including  materials  intended  for use within  the  Participating
Insurance  Company,  or for  broker-dealer  only use or retail use;  (c) holding
seminars and sales meetings designed to promote the distribution of Fund shares;
(d)  obtaining  information  and providing  explanations  to VA contract and VLI
policy  owners  regarding  Fund  investment  objectives  and  policies and other
information about the Fund and its Portfolios,  including the performance of the
Portfolios;  (e) training sales personnel  regarding the Fund; (f)  compensating
sales personnel in connection with the allocation of cash values and premiums of
the VA contracts  and VLI  policies to the Fund;  (g)  personal  service  and/or
maintenance  of VA contract and VLI policy owner  accounts  with respect to Fund
shares attributable to such accounts;  and (h) financing any other activity that
the Fund's Board of Trustees  determines is primarily  intended to result in the
sale of Class B shares.

CLASS A SHARES AND CLASS B SHARES

As agent, the Distributor currently offers shares of the Portfolio  continuously
to the separate accounts of Participating  Insurance  Companies in all states in
which it is registered or where  permitted by applicable  law. The  underwriting
agreements  provide that the Distributor  accepts orders for shares at net asset
value.  The  Distributor  has made no firm  commitment to acquire  shares of the
Fund.

-------------------------------------------------------------------------------
                            PURCHASES AND REDEMPTIONS
-------------------------------------------------------------------------------

The Fund offers two  classes of shares:  Class A shares are offered at net asset
value and are not subject to a Distribution  Plan. Class B shares are offered at
net asset value and are subject to fees imposed pursuant to a Distribution Plan.

The separate accounts of the Participating  Insurance  Companies place orders to
purchase and redeem  shares of the Portfolio  based on, among other things,  the
amount of premium payments to be invested and surrender and transfer requests to
be  effected on that day  pursuant  to VA  contracts  and VLI  policies.  Orders
received  by the Fund or its  agent are  effected  on days on which the New York
Stock Exchange (the "Exchange") is open for trading.  For orders received before
the close of regular  trading on the Exchange  (normally 4 p.m.,  eastern time),
such  purchases and  redemptions  of the shares of the Portfolio are effected at
the net asset value per share  determined as of the close of regular  trading on
the Exchange on that same day (see "NET ASSET VALUE").  Payment for  redemptions
will be made by Brown  Brothers  Harriman  & Co.  on  behalf of the Fund and the
Portfolio within seven days thereafter.  No fee is charged the shareholders when
they redeem Portfolio shares.

The Fund may suspend the right of  redemption of shares of the Portfolio and may
postpone payment for any period: (i) during which the Exchange is closed,  other
than  customary  weekend and holiday  closings  or during  which  trading on the
Exchange  is  restricted;  (ii)  when the  Securities  and  Exchange  Commission
determines  that a state of emergency  exists which may make payment or transfer
not reasonably practicable;  (iii) as the Securities and Exchange Commission may
by order permit for the protection of the security  holders of the Fund; or (iv)
at any time when the Fund may, under  applicable laws and  regulations,  suspend
payment on the redemption of its shares.

Should any conflict between VA contract and VLI policy holders arise which would
require  that a  substantial  amount of net assets be  withdrawn  from the Fund,
orderly  portfolio  management could be disrupted to the potential  detriment of
such contract and policy holders.

-------------------------------------------------------------------------------
                                 NET ASSET VALUE
-------------------------------------------------------------------------------

Scudder Fund Accounting Corporation, a subsidiary of the Adviser, 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

                                       8
<PAGE>

asset  value per share is  calculated  for  purchases  and  redemptions  for the
Portfolio by dividing the current market value of total Portfolio  assets,  plus
other assets, less all liabilities, by the total number of shares outstanding.

-------------------------------------------------------------------------------
                             PERFORMANCE INFORMATION
-------------------------------------------------------------------------------

From time to time, quotations of the Portfolio's total return may be included in
advertisements,  sales  literature  or reports to  shareholders  or  prospective
investors.  Total  return  figures are based on  historical  performance  of the
Portfolio and show the  performance  of a  hypothetical  investment  and are not
intended to  indicate  future  performance.  The total  return of the  Portfolio
refers to return  assuming an investment  has been held in the Portfolio for the
life of the Portfolio (the ending date of the period will be stated).  The total
return  quotations  may be  expressed in terms of average  annual or  cumulative
rates of return for all periods  quoted.  Average  annual total return refers to
the average  annual  compound rate of return of an investment in the  Portfolio.
Cumulative  total  return  represents  the  cumulative  change  in  value  of an
investment  in the  Portfolio.  Both will assume that all  dividends and capital
gains distributions were reinvested.

Total return for the Portfolio  will vary based on, among other things,  changes
in market conditions and the level of the Portfolio's expenses.

-------------------------------------------------------------------------------
                        VALUATION OF PORTFOLIO SECURITIES
-------------------------------------------------------------------------------

An  exchange-traded  equity  security  (not subject to resale  restrictions)  is
valued at its most recent  sale price as of the close of regular  trading on the
Exchange on each day the  Exchange is open for trading.  Lacking any sales,  the
security is valued at the calculated  mean between the most recent bid quotation
and the most recent asked quotation. An unlisted equity security which is traded
on the NASDAQ system is valued at the most recent sale price or, if there are no
such  sales,  the  security  is valued  at the high or  "inside"  bid  quotation
supplied through such system. Debt securities, other than short-term securities,
are valued at prices supplied by the Fund's pricing agent. Short-term securities
with remaining maturities of sixty days or less are valued by the amortized cost
method,  which the Trustees believe  approximates market value. Foreign currency
forward  contracts  are valued at the value of the  underlying  currency  at the
prevailing   currency  exchange  rate.   Securities  for  which  current  market
quotations  are not readily  available are valued at fair value as determined in
good faith by the  Trustees,  although  the actual  calculations  may be made by
persons  acting  pursuant to the direction of the Trustees.  Please refer to the
section  entitled  "NET  ASSET  VALUE" in the  Fund's  Statement  of  Additional
Information for more information concerning valuation of portfolio securities.

-------------------------------------------------------------------------------
                     TAX STATUS, DIVIDENDS AND DISTRIBUTIONS
-------------------------------------------------------------------------------

The Internal Revenue Code of 1986 (the "Code") provides that each portfolio of a
series fund is to be treated as a separate taxpayer.  Accordingly, the Portfolio
intends to qualify as a separate regulated investment company under Subchapter M
of the Code.

The Portfolio  intends to comply with the  diversification  requirements of Code
Section  817(h).  By  meeting  this and other  requirements,  the  Participating
Insurance  Companies,  rather than the holders of VA contracts and VLI policies,
should be subject to tax on  distributions  received  with  respect to Portfolio
shares. For further  information  concerning federal income tax consequences for
the holders of the VA contracts and VLI policies,  such holders  should  consult
the  prospectus  used in  connection  with  the  issuance  of  their  particular
contracts or policies.

As a regulated  investment company,  the Portfolio generally will not be subject
to tax on its ordinary income and net realized  capital gains to the extent such
income and gains are  distributed  in conformity  with  applicable  distribution
requirements  under  the  Code to the  separate  accounts  of the  Participating
Insurance  Companies  which  hold its  shares.  Distributions  of income and the

                                       9
<PAGE>

excess of net  short-term  capital gain over net long-term  capital loss will be
treated as  ordinary  income and  distributions  of the excess of net  long-term
capital  gain over net  short-term  capital  loss will be treated  as  long-term
capital gain by the Participating  Insurance Companies.  Participating Insurance
Companies should consult their own tax advisers as to whether such distributions
are  subject  to  federal  income  tax if they are  retained  as part of  policy
reserves.

The Portfolio  intends to distribute its net investment  income  annually within
three months of December 31, its fiscal year-end.  The Portfolio will distribute
its capital  gains,  if any,  within three  months of the end of each year.  All
distributions  will be reinvested in shares of the Portfolio  unless an election
is made on  behalf of a  separate  account  to  receive  distributions  in cash.
Dividends declared in October, November or December with a record date in such a
month will be deemed to have been  received  by  shareholders  on December 31 if
paid during January of the following  year.  Participating  Insurance  Companies
will be  informed  about the  amount and  character  of  distributions  from the
Portfolio for federal income tax purposes.  Distributions  paid by the Fund with
respect to Class A shares will generally be greater than those paid with respect
to Class B shares because expenses attributable to Class B shares will generally
be higher.

-------------------------------------------------------------------------------
                           SHAREHOLDER COMMUNICATIONS
-------------------------------------------------------------------------------

Owners of policies and contracts issued by Participating Insurance Companies for
which shares of the Portfolio are the  investment  vehicle will receive from the
Participating Insurance Companies unaudited semi-annual financial statements and
audited year-end financial statements certified by the Fund's independent public
accountants.  Each  report will show the  investments  owned by the Fund and the
market  values  thereof as  determined  by the Trustees  and will provide  other
information about the Fund and its operations.

Participating Insurance Companies with inquiries regarding the Fund may call the
Fund's underwriter,  Scudder Investor Services,  Inc. at 1-617-295-1000 or write
Scudder Investor Services, Inc., Two International Place, Boston,  Massachusetts
02110-4103.

-------------------------------------------------------------------------------
                             ADDITIONAL INFORMATION
-------------------------------------------------------------------------------

FUND ORGANIZATION AND SHAREHOLDER INDEMNIFICATION

The Fund was organized in the  Commonwealth of Massachusetts as a "Massachusetts
business trust" on March 15, 1985. The Fund's shares of beneficial  interest are
presently  divided into seven separate series.  Additional series and classes of
shares may be created from time to time. The Fund has adopted a plan pursuant to
Rule 18f-3 under the 1940 Act to permit the Fund to  establish a multiple  class
distribution  system for all of its Portfolios,  except Money Market  Portfolio.
The plan was  approved by the Fund's  Board of Trustees at a special  meeting on
October 5, 1995.

Under the  Fund's  multi-class  system,  shares of each  class of a  multi-class
Portfolio represent an equal pro rata interest in that Portfolio and, generally,
shall  have  identical  voting,   dividend,   liquidation,   and  other  rights,
preferences,  powers,  restrictions,  limitations,  qualifications and terms and
conditions,  except that: (1) each class shall have a different designation; (2)
each class of shares shall bear its "class  expenses;" (3) each class shall have
exclusive  voting rights on any matter  submitted to  shareholders  that relates
solely to its  distribution  arrangement;  (4) each class  shall  have  separate
voting rights on any matter  submitted to shareholders in which the interests of
one class differ from the interests of any other class;  (5) each class may have
separate exchange  privileges;  and (6) each class may have different conversion
features, although a conversion feature is not currently contemplated.  Expenses
currently  designated as "Class  Expenses" by the Fund's Board of Trustees under
the  plan  pursuant  to  Rule  18f-3  include,  for  example,  payments  to  the
Distributor  pursuant to the  distribution  plan for that class,  Fund  transfer
agent fees attributable to a specific class, and certain securities registration
fees.

The  Portfolio  has two  classes of shares,  designated  as "Class A" shares and
"Class B" shares,  each of which is offered at net asset  value.  Class A shares
will not be sold  subject  to a Rule  12b-1  fee and are  available  to  certain
Participating  Insurance  Companies.  Class B shares  will be offered to certain
Participating Insurance Companies in the future and such shares would be subject
to Rule 12b-1 fees.

Under  Massachusetts  law,  shareholders  of such a  trust  may,  under  certain
circumstances,  be held personally liable as partners for the obligations of the
trust.  The  Declaration of Trust contains an express  disclaimer of shareholder
liability  in  connection  with the Fund  property or the acts,  obligations  or

                                       10
<PAGE>

affairs of the Fund. The Declaration of Trust also provides for  indemnification
out of the Fund  property  of any  shareholder  held  personally  liable for the
claims and  liabilities  to which a shareholder  may become subject by reason of
being or having been a shareholder.  Thus,  the risk of a shareholder  incurring
financial loss on account of shareholder  liability is limited to  circumstances
in which the Fund itself would be unable to meet its  obligations.  The Trustees
believe  that,  in  view  of the  above,  the  risk  of  personal  liability  of
shareholders is remote.

OTHER INFORMATION (SECTION TO BE UPDATED)

The activities of the Fund are supervised by the Trustees.

Although the Fund does not intend to hold annual  meetings,  shareholders of the
Fund have certain rights,  as set forth in the Declaration of Trust of the Fund,
including the right to call a meeting of shareholders  for the purpose of voting
on the  removal  of one or more  Trustees.  Shareholders  have one vote for each
share held. Fractional shares have fractional votes.

As of December 31, 1994,  Aetna Life Insurance and Annuity  Company owned 9.58%,
American  Skandia Life Assurance  Corporation  owned 4.53%,  AUSA Life Insurance
Company owned 0.08%, Banner Life Insurance Company owned 0.53%, Charter National
Life Insurance  Company owned 45.29%,  Fortis  Benefits Life  Insurance  Company
owned 0.05%,  Intramerica  Life Insurance  Company owned 3.59%,  Lincoln Benefit
Life Insurance  Company owned 0.04%,  Mutual of America Life  Insurance  Company
owned 19.96%,  Paragon Life Insurance Company owned 0.03%,  Providentmutual Life
and Annuity  Company of America  owned 0.18%,  Safeco Life  Insurance  Companies
owned 0.55%, The Union Central Life Insurance Company owned 15.52% and United of
Omaha owned 0.07% of the Fund's outstanding shares.

The Portfolio has a December 31 fiscal year end.

Portfolio  securities of the Fund are held  separately,  pursuant to a custodian
agreement,   by  Brown  Brothers  Harriman  &  Co.,  40  Water  Street,  Boston,
Massachusetts 02109, as custodian.

Scudder Service Corporation, P.O. Box 2291, Boston, Massachusetts 02107-2291, is
the transfer and dividend paying agent for the Fund.

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.

The firm of Dechert Price & Rhoads,  Boston,  Massachusetts,  is counsel for the
Fund.

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


                                       11
<PAGE>

-------------------------------------------------------------------------------
                              TRUSTEES AND OFFICERS
-------------------------------------------------------------------------------


David B. Watts*
  President and Trustee

Daniel Pierce*
  Vice President and Trustee

Dr. Kenneth Black, Jr.
  Trustee; Regents' Professor Emeritus of Insurance, Georgia State University

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

Peter B. Freeman
  Trustee; Corporate Director and Trustee

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

Thomas S. Crain*
  Vice President

Jerard K. Hartman*
  Vice President

Richard A. Holt*
  Vice President

Thomas W. Joseph*
  Vice President

David S. Lee*
  Vice President

Steven M. Meltzer*
  Vice President

Randall K. Zeller*
  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*
  Vice President and Assistant Secretary

Coleen Downs Dinneen*
  Assistant Secretary

*Scudder, Stevens & Clark, Inc.

                                       12
<PAGE>




                      SCUDDER VARIABLE LIFE INVESTMENT FUND

                           GLOBAL DISCOVERY PORTFOLIO

                             Two International Place

                        Boston, Massachusetts 02110-4103


     An open-end management investment company which currently offers shares
     of beneficial interest of seven diversified Portfolios, one of which is
                                 offered herein,
        which seeks above-average capital appreciation over the long term
               by investing primarily in the equity securities of
                  small companies located throughout the world

                                 (A Mutual Fund)


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

                       STATEMENT OF ADDITIONAL INFORMATION

                                   May 1, 1996

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


         This Statement of Additional Information is not a prospectus and should
be read in conjunction with the prospectus of the Global Discovery  Portfolio of
Scudder  Variable Life Investment Fund dated May 1, 1996, as may be amended from
time to time,  a copy of which  may be  obtained  without  charge  by  calling a
Participating Insurance Company or by writing to broker/dealers offering certain
variable  annuity  contracts and variable life  insurance  policies,  or Scudder
Investor  Services,   Inc.,  Two  International  Place,  Boston,   Massachusetts
02110-4103.




<PAGE>

<TABLE>
<CAPTION>
                                      TABLE OF CONTENTS
                                                                                                                   Page


<S>                                                                                                                  <C>
INVESTMENT OBJECTIVE AND POLICIES.....................................................................................1
         Risk Factors.................................................................................................2

POLICIES AND TECHNIQUES APPLICABLE TO THE PORTFOLIO...................................................................8
         Debt Securities..............................................................................................8
         High Yield, High Risk Securities.............................................................................8
         Convertible Securities.......................................................................................9
         Illiquid Securities..........................................................................................9
         Repurchase Agreements.......................................................................................10
         When-Issued Securities......................................................................................11
         Strategic Transactions and Derivatives......................................................................11

INVESTMENT RESTRICTIONS..............................................................................................18

PURCHASES AND REDEMPTIONS............................................................................................19

INVESTMENT ADVISER AND DISTRIBUTOR...................................................................................20
         Investment Adviser..........................................................................................20
         Personal Investments by Employees of the Adviser............................................................22
         Distributor.................................................................................................22

MANAGEMENT OF THE FUND...............................................................................................24
         Trustees and Officers.......................................................................................24
         Remuneration................................................................................................26

NET ASSET VALUE......................................................................................................27

TAX STATUS...........................................................................................................28

DIVIDENDS AND DISTRIBUTIONS..........................................................................................32

PERFORMANCE INFORMATION..............................................................................................32
         Comparison of Portfolio Performance.........................................................................33

SHAREHOLDER COMMUNICATIONS...........................................................................................36

ORGANIZATION AND CAPITALIZATION......................................................................................36
         General.....................................................................................................36
         Shareholder and Trustee Liability...........................................................................38

ALLOCATION OF PORTFOLIO BROKERAGE....................................................................................38

PORTFOLIO TURNOVER...................................................................................................39

EXPERTS..............................................................................................................39

COUNSEL..............................................................................................................39

ADDITIONAL INFORMATION...............................................................................................39

FINANCIAL STATEMENTS.................................................................................................40

APPENDIX
</TABLE>


<PAGE>
                        INVESTMENT OBJECTIVE AND POLICIES

                    (See "INVESTMENT CONCEPT OF THE FUND" and
              "INVESTMENT OBJECTIVE AND POLICIES OF THE PORTFOLIO"
                           in the Fund's prospectus.)

         Scudder  Variable  Life  Investment  Fund (the  "Fund") is an open-end,
diversified   registered   management   investment  company   established  as  a
Massachusetts  business  trust.  The Fund is a series fund  consisting  of seven
diversified   series,  one  of  which,  the  Global  Discovery   Portfolio  (the
"Portfolio"), is included herein. Additional portfolios may be created from time
to time.  The Fund is intended to be the funding  vehicle for  variable  annuity
contracts ("VA contracts") and variable life insurance policies ("VLI policies")
to be offered to the  separate  accounts  of certain  life  insurance  companies
("Participating Insurance Companies").

         The Portfolio seeks  above-average  capital  appreciation over the long
term by investing  primarily in the equity securities of small companies located
throughout  the world.  The  Portfolio  is designed  for  investors  looking for
above-average  appreciation  potential (when compared with the overall  domestic
stock market as reflected  by Standard & Poor's 500  Composite  Price Index) and
the benefits of investing globally,  but who are willing to accept above-average
stock market risk, the impact of currency  fluctuation  and little or no current
income.

         In pursuit of its objective,  the Portfolio generally invests in small,
rapidly  growing  companies that offer the potential for  above-average  returns
relative to larger companies, yet are frequently overlooked and thus undervalued
by the market.  The Portfolio has the flexibility to invest in any region of the
world.  It can invest in companies based in emerging  markets,  typically in 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.

         Scudder,  Stevens & Clark, Inc. (the "Adviser") invests the Portfolio's
assets in companies it believes offer above-average earnings, cash flow or asset
growth  potential.  It also invests in companies that may receive greater market
recognition  over time.  The Adviser  believes  these factors offer  significant
opportunity  for  long-term   capital   appreciation.   The  Adviser   evaluates
investments  for the  Portfolio  from  both a  macroeconomic  and  microeconomic
perspective,  using fundamental analysis,  including field research. The Adviser
analyzes the growth potential and relative value of possible  investments.  When
evaluating an individual company, the Adviser takes into consideration  numerous
factors,  including  the depth and quality of  management;  a company's  product
line,  business  strategy and  competitive  position;  research and  development
efforts;  financial  strength,  including  degree of leverage;  cost  structure;
revenue and earnings  growth  potential;  price-earnings  ratios and other stock
valuation  measures.  Secondarily,  the Adviser weighs the attractiveness of the
country and region in which a company is located.

         Under normal  circumstances  the Portfolio  invests at least 65% of its
total  assets in the  equity  securities  of small  issuers.  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 Portfolio expects, under usual market
conditions,  to diversify its portfolio widely by company, industry and country.
The Portfolio intends to allocate  investments among at least three countries at
all times, including the United States.

         The  Portfolio  may  invest  up to 35% of its  total  assets  in equity
securities of larger  companies  throughout the world and in debt  securities if
the Adviser  determines  that the capital  appreciation  of debt  securities  is
likely to exceed the capital  appreciation of equity  securities.  The Portfolio
may purchase investment-grade bonds, those rated Aaa, Aa, A or Baa by Moody's or
AAA, AA, A or BBB by S&P or, if unrated,  of equivalent quality as determined by
the Adviser.  The  Portfolio  may also invest up to 5% of its net assets in debt
securities  rated below  investment-grade.  Securities  rated below  Baa/BBB are
commonly  referred  to as "junk  bonds."  The  lower  the  ratings  of such debt
securities,  the greater  their risks  render them like equity  securities.  The
Portfolio may invest in securities rated D by S&P at the time of purchase, which
may be in default with respect to payment of principal or interest.

         The  Portfolio  selects  its  portfolio   investments   primarily  from
companies whose individual equity market capitalizations would place them in the
same  size  range  as  companies  in  approximately  the  lowest  20% of  market
capitalization  as  represented by the Salomon  Brothers Broad Market Index,  an
index  comprised of global equity  securities of companies with total  available
market  capitalization  greater than $100  million.  Based on this  policy,  the

<PAGE>

companies  held by the Portfolio  typically will have  individual  equity market
capitalizations  of between  approximately  $50 million and $2 billion (although
the  Portfolio  will be free to invest in  smaller  capitalization  issues  that
satisfy  the  Portfolio's  size  standard).   Furthermore,   the  median  market
capitalization of the Portfolio will not exceed $750 million.

         Because the Portfolio applies a U.S. size standard on a global basis, a
small  company  investment  outside the U.S.  might rank above the lowest 20% by
market  capitalization  in local markets and, in fact,  might in some  countries
rank among the largest companies in terms of capitalization.

         The equity  securities  in which the  Portfolio  may invest  consist of
common stocks,  preferred stocks (either convertible or nonconvertible),  rights
and warrants.  These securities may be listed on the U.S. or foreign  securities
exchanges or traded  over-the-counter.  For capital appreciation  purposes,  the
Portfolio may purchase notes, bonds, debentures,  government securities and zero
coupon bonds (any of which may be convertible or nonconvertible).  The Portfolio
may invest in foreign securities and American  Depositary  Receipts which may be
sponsored or unsponsored. The Portfolio may also invest in closed-end investment
companies holding foreign securities,  and engage in strategic transactions.  In
addition,  the Portfolio may invest in illiquid or  restricted  securities.  For
temporary  defensive  purposes,  the  Portfolio  may,  during  periods  in which
conditions in securities markets warrant,  invest without limit in cash and cash
equivalents.

         The Global Discovery Portfolio cannot guarantee a gain or eliminate the
risk of loss.  The net asset value of the shares of the Portfolio  will increase
or decrease with changes in the market price of the Portfolio's  investments and
changes in  foreign  currency  exchange  rates.  The  investment  objective  and
policies of the Portfolio may, unless otherwise  specifically stated, be changed
by the  Trustees  of the Fund  without a vote of the  Shareholders.  There is no
assurance that the objective of the Portfolio will be achieved.

Risk Factors

Small Company Risk. The Adviser  believes that small  companies often have sales
and earnings growth rates which exceed those of larger companies,  and that such
growth  rates may in turn be  reflected  in more rapid share price  appreciation
over time.  However,  investing in smaller company stocks involves  greater risk
than is  customarily  associated  with  investing  in larger,  more  established
companies.  For  example,  smaller  companies  can have limited  product  lines,
markets,  or financial and managerial  resources.  Smaller companies may also be
dependent on one or a few key persons, and may be more susceptible to losses and
risks of bankruptcy.  Also,  the  securities of smaller  companies may be thinly
traded (and  therefore  have to be sold at a discount from current market prices
or sold in small lots over an  extended  period of time).  Transaction  costs in
smaller company stocks may be higher than those of larger companies.

Foreign  Securities.  The  Portfolio  is intended to provide  investors  with an
opportunity  to invest a portion of their assets in a  diversified  portfolio of
securities of U.S. and foreign  companies  located worldwide and is designed for
long-term investors who can accept international  investment risk. The Portfolio
is  designed  for  investors  who  can  accept   currency  and  other  forms  of
international  investment  risk.  The Adviser  believes  that  allocation of the
Portfolio's assets on a global basis decreases the degree to which events in any
one country,  including the U.S.,  will affect an investor's  entire  investment
holdings.  In the period since World War II, many leading foreign economies have
grown more rapidly than the U.S. economy and from time to time have had interest
rate  levels  that  had  a  higher  real  return  than  the  U.S.  bond  market.
Consequently, the securities of foreign issuers have provided attractive returns
relative to the returns  provided by the  securities of U.S.  issuers,  although
there can be no assurance that this will be true in the future.

         Investors  should  recognize  that  investing  in  foreign   securities
involves certain special considerations,  including those set forth below, which
are not typically  associated  with  investing in U.S.  securities and which may
affect  the  Portfolio's  performance  favorably  or  unfavorably.   As  foreign
companies  are  not  generally  subject  to  uniform  accounting,  auditing  and
financial reporting  standards,  practices and requirements  comparable to those
applicable  to  domestic  companies,   there  may  be  less  publicly  available
information about a foreign company than about a domestic company.  Many foreign
stock markets,  while growing in volume of trading activity,  have substantially
less volume than that of the New York Stock  Exchange,  and  securities  of some
foreign  issuers are less liquid and more volatile  than  securities of domestic
issuers.  Similarly,  volume and  liquidity in most foreign bond markets is less
than that in the U.S.  market and at times,  volatility  of price can be greater
than  in  the  U.S.  Further,  foreign  markets  have  different  clearance  and


                                       2
<PAGE>

settlement  procedures  and in  certain  markets  there  have  been  times  when
settlements  have  been  unable  to keep  pace  with the  volume  of  securities
transactions,  making it  difficult  to  conduct  such  transactions.  Delays in
settlement  could result in temporary  periods when assets of the  Portfolio are
uninvested  and no return is earned  thereon.  The inability of the Portfolio to
make intended  security  purchases due to  settlement  problems  could cause the
Portfolio to miss attractive investment  opportunities.  Inability to dispose of
portfolio securities due to settlement problems either could result in losses to
the Portfolio due to subsequent  declines in value of the portfolio security or,
if the Portfolio has entered into a contract to sell the security,  could result
in possible  liability  to the  purchaser.  Fixed  commissions  on some  foreign
securities  exchanges are generally  higher than negotiated  commissions on U.S.
exchanges,  although the Adviser will endeavor to achieve the most favorable net
results on the Portfolio's  portfolio  transactions.  Further, the Portfolio may
encounter difficulties or be unable to pursue legal remedies and obtain judgment
in foreign courts. There is generally less government supervision and regulation
of business and industry  practices,  securities  exchanges,  brokers and listed
companies than in the U.S. It may be more difficult for the  Portfolio's  agents
to keep currently  informed about  corporate  actions such as stock dividends or
other   matters   which  may  affect  the   prices  of   portfolio   securities.
Communications  between the U.S. and foreign countries may be less reliable than
within the U.S.,  thus  increasing the risk of delayed  settlements of portfolio
transactions or loss of certificates for portfolio securities. In addition, with
respect  to   certain   foreign   countries,   there  is  the   possibility   of
nationalization,  expropriation,  the imposition of  confiscatory or withholding
taxation,  political, social or economic instability, or diplomatic developments
which could affect U.S.  investments in those countries.  Investments in foreign
securities may also entail certain risks, such as possible currency blockages or
transfer  restrictions,   and  the  difficulty  of  enforcing  rights  in  other
countries.  Moreover,  individual  foreign  economies  may differ  favorably  or
unfavorably  from the U.S.  economy in such respects as growth of gross national
product, rate of inflation, capital reinvestment,  resource self-sufficiency and
balance of payments  position.  The Adviser  seeks to mitigate  the risks to the
Portfolio  associated  with  the  foregoing  considerations  through  investment
variation and continuous professional management.

Limitations on Holdings of Foreign Securities.  The Portfolio shall invest in no
less than five  foreign  countries;  provided  that,  (i) if foreign  securities
comprise less than 80% of the value of the Portfolio's net assets, the Portfolio
shall invest in no less than four foreign countries;  (ii) if foreign securities
comprise less than 60% of the value of the Portfolio's net assets, the Portfolio
shall  invest  in no  less  than  three  foreign  countries;  (iii)  if  foreign
securities  comprise less than 40% of the value of the  Portfolio's  net assets,
the Portfolio  shall invest in no less than two foreign  countries;  and (iv) if
foreign  securities  comprise less than 20% of the value of the  Portfolio's net
assets the Portfolio may invest in a single foreign country.

         The  Portfolio  shall  invest  no more than 20% of the value of its net
assets in  securities  of issuers  located in any one country;  provided that an
additional  15% of the value of the  Portfolio's  net assets may be  invested in
securities of issuers located in any one of the following countries:  Australia,
Canada, France, Japan, the United Kingdom and Germany; and provided further that
100% of the Portfolio's  assets may be invested in securities of issuers located
in the United States.

Eastern Europe. Investments in companies domiciled in Eastern European countries
may be subject to potentially greater risks than those of other foreign issuers.
These  risks  include  (i)  potentially  less  social,  political  and  economic
stability;  (ii) the small current size of the markets for such  securities  and
the low volume of trading,  which result in less  liquidity and in greater price
volatility;  (iii) certain national  policies which may restrict the Portfolio's
investment  opportunities,  including  restrictions  on investment in issuers or
industries deemed sensitive to national  interests;  (iv) foreign taxation;  (v)
the  absence  of  developed  legal  structures   governing  private  or  foreign
investment or allowing for judicial redress for injury to private property; (vi)
the absence, until recently in certain Eastern European countries,  of a capital
market  structure or  market-oriented  economy;  and (vii) the possibility  that
recent  favorable  economic  developments  in  Eastern  Europe  may be slowed or
reversed by  unanticipated  political or social events in such countries,  or in
the countries of the former  Soviet Union.  The Portfolio may invest up to 5% of
its total assets in the  securities  of issuers  domiciled  in Eastern  European
countries.

         Investments  in  such  countries  involve  risks  of   nationalization,
expropriation and confiscatory  taxation.  The Communist governments of a number
of East European countries expropriated large amounts of private property in the
past, in many cases without adequate compensation, and there may be no assurance
that  such  expropriation  will not  occur in the  future.  In the event of such
expropriation,  the Fund could lose a substantial  portion of any investments it
has made in the affected countries.  Further,  no accounting  standards exist in


                                       3
<PAGE>

East European countries.  Finally,  even though certain East European currencies
may be convertible into U.S. dollars,  the conversion rates may be artificial to
the actual market values and may be adverse to the Portfolio's shareholders.

Foreign  Currencies.  Investments  in foreign  securities  usually  will involve
currencies of foreign countries.  Moreover,  the Portfolio  temporarily may hold
funds in bank deposits in foreign currencies during the completion of investment
programs and may purchase forward foreign currency  contracts,  foreign currency
futures contracts and options on such contracts.  Because of these factors,  the
value of the assets of the Portfolio as measured in U.S. dollars may be affected
favorably  or  unfavorably  by changes in foreign  currency  exchange  rates and
exchange  control  regulations,  and the Portfolio may incur costs in connection
with conversions between various currencies.  Although the Portfolio's custodian
values  each Fund's  assets  daily in terms of U.S.  dollars,  none of the Funds
intends to convert its  holdings of foreign  currencies  into U.S.  dollars on a
daily basis. The Portfolio will do so from time to time, and investors should be
aware of the costs of currency conversion.  Although foreign exchange dealers do
not  charge  a fee for  conversion,  they  do  realize  a  profit  based  on the
difference  (the  "spread")  between  the  prices at which  they are  buying and
selling various currencies.  Thus, a dealer may offer to sell a foreign currency
to the Portfolio at one rate,  while  offering a lesser rate of exchange  should
the Portfolio  desire to resell that currency to the dealer.  The Portfolio will
conduct its foreign currency exchange transactions either on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign currency  exchange  market,  or
through  entering into forward or futures  contracts to purchase or sell foreign
currencies.

         Because  the  Portfolio  normally  will be  invested  in both U.S.  and
foreign  securities  markets,  changes in the Portfolio's share price may have a
low correlation with movements in the U.S. markets.  The Portfolio's share price
will reflect the movements of both the different stock and bond markets in which
it is invested and of the currencies in which the investments  are  denominated;
the  strength or weakness of the U.S.  dollar  against  foreign  currencies  may
account for part of the  Portfolio's  investment  performance.  U.S. and foreign
securities  markets do not always  move in step with each  other,  and the total
returns from different markets may vary significantly.  The Portfolio invests in
many  securities  markets  around the world in an attempt to take  advantage  of
opportunities wherever they may arise.

Investing  in  Emerging  Markets.  Most  emerging  securities  markets  may have
substantially  less volume and are subject to less government  supervision  than
U.S. securities  markets.  Securities of many issuers in emerging markets may be
less liquid and more volatile than securities of comparable domestic issuers. In
addition, there is less regulation of securities exchanges,  securities dealers,
and listed and unlisted companies in emerging markets than in the United States.

          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.  Delays in
settlement could result in temporary periods when a portion of the assets of the
Portfolio is  uninvested  and no cash is earned  thereon.  The  inability of the
Portfolio to make intended security  purchases due to settlement  problems could
cause the Portfolio to miss attractive  investment  opportunities.  Inability to
dispose of portfolio  securities due to settlement  problems could result either
in losses to the Portfolio due to subsequent  declines in value of the portfolio
security or, if the Fund has entered into a contract to sell the security, could
result  in  possible   liability  to  the  purchaser.   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.

         Foreign  investment  in certain  emerging  market debt  obligations  is
restricted or controlled to varying degrees.  These restrictions or controls may
at times limit or preclude  foreign  investment in certain emerging markets debt
obligations  and  increase  the costs and  expenses  of the  Portfolio.  Certain
emerging markets require prior  governmental  approval of investments by foreign
persons,  limit the  amount of  investment  by foreign  persons in a  particular
company,  limit the  investment by foreign  persons only to a specific  class of
securities of a company that may have less advantageous  rights than the classes
available  for  purchase  by   domiciliaries  of  the  countries  and/or  impose
additional  taxes  on  foreign  investors.  Certain  emerging  markets  may also
restrict  investment  opportunities in issuers in industries deemed important to
national interest.

         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.  The Portfolio


                                       4
<PAGE>

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 the Portfolio of any restrictions on investments.

         Many emerging markets 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 may  continue  to have  adverse
effects on the  economies  and  securities  markets of certain  emerging  market
countries. In an attempt to control inflation, wage and price controls have been
imposed in certain  countries.  Of these countries,  some, in recent years, have
begun to control inflation through prudent economic policies.

Investing in Latin America.  Investing in securities of Latin  American  issuers
may entail risks relating to the potential political and economic instability of
certain   Latin   American   countries   and   the   risks   of   expropriation,
nationalization,  confiscation  or the  imposition  of  restrictions  on foreign
investment  and  on   repatriation  of  capital   invested.   In  the  event  of
expropriation,  nationalization  or  other  confiscation  by  any  country,  the
Portfolio could lose its entire investment in any such country.

         The securities  markets of Latin American  countries are  substantially
smaller, less developed, less liquid and more volatile than the major securities
markets in the U.S.  Disclosure  and  regulatory  standards are in many respects
less  stringent  than U.S.  standards.  Furthermore,  there is a lower  level of
monitoring and regulation of the markets and the activities of investors in such
markets.

         The limited size of many Latin American  securities markets and limited
trading volume in the securities of Latin American issuers compared to volume of
trading in the  securities of U.S.  issuers could cause prices to be erratic for
reasons apart from factors that affect the soundness and  competitiveness of the
securities  issuers.  For  example,  limited  market size may cause prices to be
unduly influenced by traders who control large positions.  Adverse publicity and
investors'  perceptions,  whether or not based on in-depth fundamental analysis,
may decrease the value and liquidity of portfolio securities.

         The  Portfolio  may  invest  a  portion  of its  assets  in  securities
denominated in currencies of Latin American countries.  Accordingly,  changes in
the  value  of  these   currencies   against  the  U.S.  dollar  may  result  in
corresponding  changes  in the  U.S.  dollar  value  of the  Portfolio's  assets
denominated in those currencies.

         Some Latin American countries also may have managed  currencies,  which
are not free floating against the U.S. dollar.  In addition,  there is risk that
certain  Latin  American  countries  may restrict the free  conversion  of their
currencies into other currencies. Further, certain Latin American currencies may
not be  internationally  traded.  Certain of these currencies have experienced a
steep  devaluation  relative  to  the  U.S.  dollar.  Any  devaluations  in  the
currencies  in  which  the  Portfolio  securities  are  denominated  may  have a
detrimental impact on the Portfolio's net asset value.

         The  economies  of  individual  Latin  American  countries  may  differ
favorably or unfavorably  from the U.S.  economy in such respects as the rate of
growth of gross domestic product, the rate of inflation,  capital  reinvestment,
resource  self-sufficiency  and  balance of  payments  position.  Certain  Latin
American  countries have  experienced  high levels of inflation which can have a
debilitating effect on an economy, although some have begun to control inflation
in recent years through prudent economic  policies.  Furthermore,  certain Latin
American  countries  may impose  withholding  taxes on dividends  payable to the
Portfolio at a higher rate than those imposed by other foreign  countries.  This
may reduce the  Portfolio's  investment  income  available for  distribution  to
shareholders.

         Certain Latin American  countries such as Argentina,  Brazil and Mexico
are  among  the  world's  largest  debtors  to  commercial   banks  and  foreign
governments.  At times, certain Latin American countries have declared moratoria
on the payment of principal and/or interest on outstanding debt.

         Latin  America  is a  region  rich in  natural  resources  such as oil,
copper, tin, silver, iron ore, forestry, fishing, livestock and agriculture. The
region  has a  large  population  (roughly  300  million)  representing  a large
domestic  market.  Economic growth was strong in the 1960s and 1970s, but slowed
dramatically  (and in some  instances  was negative) in the 1980s as a result of
poor economic policies,  higher international  interest rates, and the denial of
access to new foreign capital. Although a number of Latin American countries are
currently  experiencing lower rates of inflation and higher rates of real growth


                                       5
<PAGE>

in gross  domestic  product  than they have in the past,  other  Latin  American
countries continue to experience significant problems,  including high inflation
rates and high interest  rates.  Capital flight has proven a persistent  problem
and  external  debt has been  forcibly  restructured.  Political  turmoil,  high
inflation,  capital repatriation restrictions,  and nationalization have further
exacerbated conditions.

         Governments  of  many  Latin  American  countries  have  exercised  and
continue  to exercise  substantial  influence  over many  aspects of the private
sector through the ownership or control of many companies, including some of the
largest in those countries. As a result,  government actions in the future could
have a significant  effect on economic  conditions  which may  adversely  affect
prices of certain portfolio securities.  Expropriation,  confiscatory  taxation,
nationalization,  political,  economic or social  instability  or other  similar
developments,  such as military coups,  have occurred in the past and could also
adversely affect the Fund's investments in this region.

         Changes in political leadership,  the implementation of market oriented
economic policies,  such as privatization,  trade reform and fiscal and monetary
reform are among the recent steps taken to renew economic growth.  External debt
is being  restructured and flight capital  (domestic  capital that has left home
country)  has  begun  to  return.  Inflation  control  efforts  have  also  been
implemented.  Free Trade Zones are being  discussed in various  areas around the
region, the most notable being a free zone among Mexico, the U.S. and Canada and
another zone among four  countries in the  southernmost  point of Latin America.
Currencies are typically weak, but most are now relatively free floating, and it
is not unusual for the  currencies  to undergo wide  fluctuations  in value over
short periods of time due to changes in the market.

Investing in the Pacific Basin.  Economies of individual Pacific Basin countries
may differ  favorably or unfavorably  from the U.S.  economy in such respects as
growth of gross  national  product,  rate of  inflation,  capital  reinvestment,
resource  self-sufficiency,  interest  rate  levels,  and  balance  of  payments
position. Of particular importance,  most of the economies in this region of the
world are heavily dependent upon exports,  particularly to developed  countries,
and,  accordingly,  have been and may continue to be adversely affected by trade
barriers,   managed   adjustments  in  relative   currency  values,   and  other
protectionist  measures  imposed or negotiated  by the U.S. and other  countries
with which they trade.  These  economies  also have been and may  continue to be
negatively  impacted  by  economic  conditions  in the U.S.  and  other  trading
partners, which can lower the demand for goods produced in the Pacific Basin.

         With  respect to the  Peoples  Republic  of China and other  markets in
which the Fund may  participate,  there is the  possibility of  nationalization,
expropriation   or  confiscatory   taxation,   political   changes,   government
regulation,  social instability or diplomatic  developments that could adversely
impact a Pacific Basin country or the Portfolio's investment in the debt of that
country.

         Foreign companies, including Pacific Basin companies, are not generally
subject to uniform  accounting,  auditing  and  financial  reporting  standards,
practices and  disclosure  requirements  comparable to those  applicable to U.S.
companies.  Consequently, there may be less publicly available information about
such  companies  than about U.S.  companies.  Moreover,  there is generally less
government supervision and regulation in the Pacific Basin than in the U.S.

Investing in Europe. Most Eastern European nations,  including Hungary,  Poland,
Czechoslovakia,  and Romania have had  centrally  planned,  socialist  economies
since shortly after World War II. A number of their governments, including those
of  Hungary,  the Czech  Republic,  and Poland  are  currently  implementing  or
considering reforms directed at political and economic liberalization, including
efforts to foster multi-party political systems, decentralize economic planning,
and move toward free market economies.  At present,  no Eastern European country
has a developed stock market, but Poland,  Hungary,  and the Czech Republic have
small securities markets in operation.  Ethnic and civil conflict currently rage
through the former Yugoslavia. The outcome is uncertain.

         Both the European  Community (the "EC") and Japan,  among others,  have
made  overtures to  establish  trading  arrangements  and assist in the economic
development  of the Eastern  European  nations.  A great deal of  interest  also
surrounds  opportunities  created by the reunification of East and West Germany.
Following reunification, the Federal Republic of Germany has remained a firm and
reliable  member  of the EC  and  numerous  other  international  alliances  and
organizations.  To reduce  inflation  caused by the unification of East and West
Germany,  Germany has adopted a tight monetary  policy which has led to weakened
exports and a reduced  domestic demand for goods and services.  However,  in the
long-term,   reunification  could  prove  to  be  an  engine  for  domestic  and
international growth.

                                       6
<PAGE>

         The  conditions  that  have  given  rise  to  these   developments  are
changeable,  and there is no assurance  that reforms will continue or that their
goals will be achieved.

         Portugal is a genuinely  emerging  market which has  experienced  rapid
growth  since  the  mid-1980s,  except  for a brief  period of  stagnation  over
1990-91.  Portugal's  government  remains  committed  to  privatization  of  the
financial  system  away from one  dependent  upon the  banking  system to a more
balanced  structure  appropriate  for  the  requirements  of a  modern  economy.
Inflation continues to be about three times the EC average.

         Economic  reforms  launched in the 1980s  continue to benefit Turkey in
the 1990s.  Turkey's economy has grown steadily since the early 1980s, with real
growth in per capita Gross Domestic Product (the "GDP")  increasing more than 6%
annually.  Agriculture  remains the most important  economic  sector,  employing
approximately  55% of the labor force,  and accounting for nearly 20% of GDP and
20% of exports.  Inflation  and interest  rates remain high,  and a large budget
deficit   will   continue  to  cause   difficulties   in  Turkey's   substantial
transformation to a dynamic free market economy.

         Like many other Western  economies,  Greece suffered  severely from the
global oil price hikes of the 1970s,  with annual GDP growth plunging from 8% to
2% in the  1980s,  and  inflation,  unemployment,  and  budget  deficits  rising
sharply.  The fall of the socialist  government in 1989 and the inability of the
conservative  opposition  to  obtain  a  clear  majority  have  led to  business
uncertainty  and the continued  prospects for flat  economic  performance.  Once
Greece  has  sorted  out  its  political  situation,  it will  have to face  the
challenges posed by the steadily increasing integration of the EC, including the
progressive  lowering of trade and investment  barriers.  Tourism continues as a
major industry, providing a vital offset to a sizable commodity trade deficit.

         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 of which have not been entirely  settled.  There can be no assurance that
the  Portfolio's  investments in Eastern Europe would not also be  expropriated,
nationalized  or otherwise  confiscated.  Finally,  any change in  leadership or
policies of Eastern European countries, or 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.

Investing in Africa.  Africa is a continent of roughly 50 countries with a total
population of approximately  840 million people.  Literacy rates (the percentage
of  people  who are  over 15  years  of age and who  can  read  and  write)  are
relatively low,  ranging from 20% to 60%. The primary  industries  include crude
oil, natural gas, manganese ore,  phosphate,  bauxite,  copper,  iron,  diamond,
cotton, coffee, cocoa, timber, tobacco, sugar, tourism, and cattle.

         Many of the countries are fraught with political instability.  However,
there has been a trend over the past five  years  toward  democratization.  Many
countries are moving from a military style,  Marxist, or single party government
to a multi-party  system.  Still, there remain many countries that do not have a
stable political  process.  Other countries have been enmeshed in civil wars and
border clashes.

         Economically, the Northern Rim countries (including Morocco, Egypt, and
Algeria) and Nigeria,  Zimbabwe and South Africa are the wealthier  countries on
the continent.  The market  capitalization  of these  countries has been growing
recently as more international companies invest in Africa and as local companies
start to list on the exchanges.  However, religious and ethnic strife has been a
significant source of instability.

         On the  other  end of the  economic  spectrum  are  countries,  such as
Burkinafaso, Madagascar, and Malawi, that are considered to be among the poorest
or least  developed in the world.  These  countries are generally  landlocked or
have poor natural resources. The economies of many African countries are heavily
dependent on international  oil prices. Of all the African  industries,  oil has
been the  most  lucrative,  accounting  for 40% to 60% of many  countries'  GDP.
However,  general  decline  in oil  prices  has had an  adverse  impact  on many
economies.

                                       7
<PAGE>

         Foreign  securities  such as those  purchased by the  Portfolio  may be
subject  to  foreign  government  taxes  which  could  reduce  the yield on such
securities,  although a  shareholder  of the Portfolio  may,  subject to certain
limitations,  be entitled to claim a credit or deduction for U.S. federal income
tax purposes for his or her  proportionate  share of such foreign  taxes paid by
the Portfolio. (See "TAX STATUS.")

               POLICIES AND TECHNIQUES APPLICABLE TO THE PORTFOLIO

                 (See "POLICIES AND TECHNIQUES APPLICABLE TO THE
                      PORTFOLIO" in the Fund's prospectus.)

Debt Securities

         If the  Adviser  determines  that  the  capital  appreciation  on  debt
securities is likely to exceed that of common  stocks,  the Portfolio may invest
in debt securities of foreign and U.S. issuers.  Portfolio debt investments will
be selected on the basis of capital appreciation potential, by evaluating, among
other things,  potential  yield,  if any,  credit  quality,  and the fundamental
outlooks for currency and interest rate trends in different  parts of the world,
taking  into  account  the  ability to hedge a degree of  currency or local bond
price risk. The Portfolio may purchase "investment-grade" bonds, which are those
rated Aaa,  Aa, A or Baa by Moody's or AAA,  AA, A or BBB by S&P or, if unrated,
judged to be of equivalent quality as determined by the Adviser. Bonds rated Baa
or  BBB  may   have   speculative   elements   as   well   as   investment-grade
characteristics.  The  Portfolio  may also  invest up to 5% of its net assets in
debt securities which are rated below investment-grade, that is, rated below Baa
by Moody's or below BBB by S&P and in unrated securities of equivalent quality.

High Yield, High Risk Securities

         Below investment-grade securities (rated Ba and lower by Moody's and BB
and lower by S&P) or unrated  securities  of  equivalent  quality,  in which the
Portfolio  may invest up to 5% of its net  assets,  carry a high  degree of risk
(including  the  possibility  of default or  bankruptcy  of the  issuers of such
securities), generally involve greater volatility of price and risk of principal
and  income,  and may be less  liquid,  than  securities  in the  higher  rating
categories  and are considered  speculative.  The lower the ratings of such debt
securities,  the greater their risks render them like equity securities. See the
Appendix  to  this  Statement  of  Additional  Information  for a more  complete
description  of  the  ratings  assigned  by  ratings   organizations  and  their
respective characteristics.

         Economic  downturns  may disrupt  the high yield  market and impair the
ability of  issuers to repay  principal  and  interest.  Also,  an  increase  in
interest  rates would likely have a greater  adverse impact on the value of such
obligations  than on  comparable  higher  quality  debt  securities.  During  an
economic  downturn or period of rising interest rates,  highly  leveraged issues
may experience  financial  stress which could adversely  affect their ability to
service their principal and interest payment  obligations.  Prices and yields of
high yield  securities  will fluctuate over time and, during periods of economic
uncertainty,  volatility  of high  yield  securities  may  adversely  affect the
Portfolio's net asset value. In addition,  investments in high yield zero coupon
or pay-in-kind bonds, rather than  income-bearing high yield securities,  may be
more  speculative  and may be subject to  greater  fluctuations  in value due to
changes in interest rates.

         The trading market for high yield  securities may be thin to the extent
that there is no established  retail secondary market or because of a decline in
the value of such securities. A thin trading market may limit the ability of the
Portfolio to accurately value high yield securities held by the Portfolio and to
dispose of those  securities.  Adverse  publicity and investor  perceptions  may
decrease the values and liquidity of high yield securities. These securities may
also involve special registration  responsibilities,  liabilities and costs, and
liquidity and valuation difficulties.

         Credit quality in the high yield securities  market can change suddenly
and unexpectedly,  and even recently issued credit ratings may not fully reflect
the actual risks posed by a particular  high-yield security.  For these reasons,
it is the policy of the Adviser  not to rely  exclusively  on ratings  issued by
established credit rating agencies,  but to supplement such ratings with its own
independent  and  on-going  review of credit  quality.  The  achievement  of the
Portfolio's  investment  objective by investment in such  securities may be more
dependent on the Adviser's  credit  analysis than is the case for higher quality
bonds. Should the rating of a portfolio security be downgraded, the Adviser will
determine  whether  it is in the best  interest  of the  Portfolio  to retain or
dispose of such security.

                                       8
<PAGE>

         Prices  for  below  investment-grade  securities  may  be  affected  by
legislative and regulatory developments.  For example, new federal rules require
savings and loan institutions to gradually reduce their holdings of this type of
security.  Also,  Congress has from time to time  considered  legislation  which
would restrict or eliminate the corporate tax deduction for interest payments in
these  securities and regulate  corporate  restructurings.  Such legislation may
significantly  depress the prices of  outstanding  securities of this type.  For
more information regarding tax issues related to high yield securities, see "TAX
STATUS."

Convertible Securities

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

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

         As  debt  securities,  convertible  securities  are  investments  which
provide  for a  stream  of  income  (or in the case of zero  coupon  securities,
accretion of income) with generally higher yields than common stocks. Of course,
like all debt  securities,  there can be no  assurance  of  income or  principal
payments because the issuers of the convertible  securities may default on their
obligations.   Convertible   securities   generally   offer  lower  yields  than
non-convertible  securities of similar  quality  because of their  conversion or
exchange features.

         Convertible  securities generally are subordinated to other similar but
non-convertible  securities of the same issuer,  although  convertible bonds, as
corporate debt  obligations,  enjoy  seniority in right of payment to all equity
securities,  and  convertible  preferred stock is senior to common stock, of the
same issuer.  However,  because of the subordination feature,  convertible bonds
and  convertible  preferred  stock  typically  have lower  ratings  than similar
non-convertible securities. Convertible securities may be issued as fixed income
obligations that pay current income or as zero coupon notes and bonds, including
Liquid Yield Option Notes ("LYONs"(TM)).

Illiquid Securities

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

                                       9
<PAGE>

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

Repurchase Agreements

         The Portfolio may enter into repurchase agreements with member banks of
the Federal Reserve System, with any domestic or foreign  broker/dealer which is
recognized as a reporting government securities dealer, any foreign bank, if the
repurchase agreement is fully secured by government securities of the particular
foreign  jurisdiction,  if the creditworthiness of the bank or broker/dealer has
been  determined  by the  Adviser  to be at  least  as high  as  that  of  other
obligations  the  Portfolio  may  purchase,  or to be at least  equal to that of
issuers of  commercial  paper rated  within the two highest  grades  assigned by
Moody's or S&P. In addition,  the Portfolio may enter into repurchase agreements
with any foreign  bank or with any  domestic or foreign  broker/dealer  which is
recognized as a reporting government  securities dealer, if the creditworthiness
of the bank or  broker/dealer  has been determined by the Adviser to be at least
as high as that of other obligations the Portfolio may purchase.

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

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

                                       10
<PAGE>

When-Issued Securities

         The  Portfolio  may  from  time  to  time  purchase   securities  on  a
"when-issued" or "forward  delivery" basis. The price of such securities,  which
may be expressed in yield terms, is fixed at the time the commitment to purchase
is made,  but  delivery  and payment  for the  when-issued  or forward  delivery
securities  takes place at a later date.  During the period between purchase and
settlement,  no payment is made by the  Portfolio  to the issuer and no interest
accrues to the Portfolio. To the extent that assets of the Portfolio are held in
cash pending the  settlement of a purchase of  securities,  the Portfolio  would
earn no income; however, it is the Portfolio's intention to be fully invested to
the  extent  practicable  and  subject  to  the  policies  stated  above.  While
when-issued or forward  delivery  securities may be sold prior to the settlement
date,  the  Portfolio  intends to purchase such  securities  with the purpose of
actually acquiring them unless a sale appears desirable for investment  reasons.
At the time the  Portfolio  makes the  commitment  to  purchase a security  on a
when-issued  or forward  delivery  basis,  it will  record the  transaction  and
reflect the value of the security in determining its net asset value. The market
value of the when-issued or forward delivery securities may be more or less than
the purchase  price.  The Portfolio does not believe that its net asset value or
income will be adversely affected by its purchase of securities on a when-issued
or forward delivery basis.

Loans of Portfolio Securities

         The Fund may lend the portfolio  securities of the Portfolio  provided:
(1) the loan is secured continuously by collateral consisting of U.S. Government
securities,  cash or cash  equivalents  adjusted  daily to have market  value at
least equal to the current market value of the securities  loaned;  (2) the Fund
may at any time  call  the  loan  and  regain  the  securities  loaned;  (3) the
Portfolio will receive any interest or dividends paid on the loaned  securities;
and (4) the  aggregate  market value of  securities  loaned will not at any time
exceed  one-third  of the total  assets of the  Portfolio.  In  addition,  it is
anticipated  that the  Portfolio  may share with the borrower some of the income
received  on the  collateral  for the loan or that it will be paid a premium for
the loan.  Before the Portfolio  enters into a loan,  the Adviser  considers all
relevant facts and circumstances including the creditworthiness of the borrower.

Depositary Receipts

         The  Portfolio may invest  indirectly in securities of foreign  issuers
through sponsored or unsponsored  American Depositary Receipts ("ADRs"),  Global
Depositary  Receipts ("GDRs"),  International  Depositary  Receipts ("IDRs") and
other types of Depositary Receipts (which, together with ADRs, GDRs and IDRs are
hereinafter referred to as "Depositary  Receipts").  Depositary Receipts may not
necessarily be  denominated  in the same currency as the  underlying  securities
into which  they may be  converted.  In  addition,  the  issuers of the stock of
unsponsored   Depositary   Receipts  are  not  obligated  to  disclose  material
information in the United States and, therefore,  there may not be a correlation
between such information and the market value of the Depositary  Receipts.  ADRs
are typically  issued by a United  States bank or trust  company which  evidence
ownership of underlying  securities  issued by a foreign  corporation.  GDRs are
typically issued by foreign banks or trust companies,  although they also may be
issued by United  States banks or trust  companies,  and  evidence  ownership of
underlying securities issued by either a foreign or a United States corporation.
Generally,  Depositary  Receipts in registered  form are designed for use in the
United  States  securities  markets and  Depositary  Receipts in bearer form are
designed for use in securities  markets outside the United States.  For purposes
of the Portfolio's  investment  policies,  the Portfolios'  investments in ADRs,
GDRs and other types of Depositary  Receipts will be deemed to be investments in
the underlying  securities.  Depositary Receipts other than those denominated in
U.S.  dollars will be subject to foreign  currency  exchange rate risk.  Certain
Depositary  Receipts  may not be  listed on an  exchange  and  therefore  may be
illiquid securities.

Strategic Transactions and Derivatives

         The  Portfolio  may,  but is not  required to,  utilize  various  other
investment  strategies as described below to hedge various market risks (such as
interest  rates,  currency  exchange  rates,  and  broad or  specific  equity or
fixed-income market movements),  to manage the effective maturity or duration of
fixed-income  securities in the Portfolio'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.

                                       11
<PAGE>

         In the course of pursuing these  investment  strategies,  the Portfolio
may purchase and sell  exchange-listed and over-the-counter put and call options
on securities,  equity and fixed-income indices and other financial instruments,
purchase and sell financial  futures  contracts and options thereon,  enter into
various interest rate transactions such as swaps,  caps, floors or collars,  and
enter into various currency  transactions  such as currency  forward  contracts,
currency futures contracts,  currency swaps or options on currencies or currency
futures  (collectively,  all the above  are  called  "Strategic  Transactions").
Strategic  Transactions  may be used without limit to attempt to protect against
possible  changes in the market value of  securities  held in or to be purchased
for the Portfolio  resulting from securities  markets or currency  exchange rate
fluctuations,  to protect the Portfolio's  unrealized  gains in the value of its
portfolio securities in the Portfolio, to facilitate the sale of such securities
for  investment  purposes,  to manage the  effective  maturity  or  duration  of
fixed-income  securities  in the  Portfolio,  or to  establish a position in the
derivatives  markets  as  a  temporary  substitute  for  purchasing  or  selling
particular  securities.  Some Strategic Transactions may also be used to enhance
potential  gain  although  no more  than 5% of the  Portfolio's  assets  will be
committed to Strategic  Transactions entered into for non-hedging purposes.  Any
or all of  these  investment  techniques  may be  used  at any  time  and in any
combination  and there is no  particular  strategy  that dictates the use of one
technique rather than another, as use of any Strategic Transaction is a function
of numerous variables including market conditions.  The ability of the Portfolio
to  utilize  these  Strategic  Transactions  successfully  will  depend  on  the
Adviser's  ability  to  predict  pertinent  market  movements,  which  cannot be
assured. The Portfolio will comply with applicable regulatory  requirements when
implementing   these   strategies,   techniques   and   instruments.   Strategic
Transactions  involving financial futures and options thereon will be purchased,
sold or entered into only for bona fide  hedging,  risk  management or portfolio
management purposes and not for speculative 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 the Portfolio, force the sale or
purchase of portfolio  securities at inopportune times or for prices higher than
(in the case of put options) or lower than (in the case of call options) current
market values, limit the amount of appreciation the Portfolio can realize on its
investments or cause the Portfolio to hold a security it might  otherwise  sell.
The use of currency transactions can result in the Portfolio incurring losses as
a result of a number of factors  including the imposition of exchange  controls,
suspension  of  settlements,  or the inability to deliver or receive a specified
currency.  The use of options and futures  transactions  entails  certain  other
risks. In particular, the variable degree of correlation between price movements
of futures  contracts and price movements in the related  portfolio  position of
the Portfolio creates the possibility that losses on the hedging  instrument may
be greater  than gains in the value of the  Portfolio's  position.  In addition,
futures and options markets may not be liquid in all  circumstances  and certain
over-the-counter  options may have no markets.  As a result, in certain markets,
the  Portfolio  might not be able to close out a transaction  without  incurring
substantial  losses,  if at  all.  Although  the  use  of  futures  and  options
transactions  for  hedging  should  tend to  minimize  the risk of loss due to a
decline in the value of the hedged position, at the same time they tend to limit
any  potential  gain  which  might  result  from an  increase  in  value of such
position. Finally, the daily variation margin requirements for futures contracts
would create a greater ongoing potential  financial risk than would purchases of
options,  where the  exposure  is  limited to the cost of the  initial  premium.
Losses resulting from the use of Strategic  Transactions  would reduce net asset
value, and possibly income, and such losses can be greater than if the Strategic
Transactions had not been utilized.

General  Characteristics of Options. Put options and call options typically have
similar structural  characteristics and operational  mechanics regardless of the
underlying  instrument on which they are purchased or sold.  Thus, the following
general  discussion relates to each of the particular types of options discussed
in greater  detail below.  In addition,  many Strategic  Transactions  involving
options  require  segregation  of  Portfolio  assets  in  special  accounts,  as
described below under "Use of Segregated and Other Special Accounts."

         A put option  gives the  purchaser  of the  option,  upon  payment of a
premium, the right to sell, and the writer the obligation to buy, the underlying
security,  commodity, index, currency or other instrument at the exercise price.
For instance,  the  Portfolio's  purchase of a put option on a security might be
designed  to protect  its  holdings in the  underlying  instrument  (or, in some
cases, a similar  instrument)  against a substantial decline in the market value
by giving the Portfolio the right to sell such instrument at the option exercise
price.  A call  option,  upon payment of a premium,  gives the  purchaser of the


                                       12
<PAGE>

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

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

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

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

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

         Unless the  parties  provide  for it,  there is no central  clearing or
guaranty function in an OTC option.  As a result,  if the Counterparty  fails to
make or take delivery of the security,  currency or other instrument  underlying
an OTC option it has  entered  into with the  Portfolio  or fails to make a cash
settlement  payment  due in  accordance  with  the  terms  of that  option,  the
Portfolio  will  lose  any  premium  it  paid  for  the  option  as  well as any
anticipated benefit of the transaction. Accordingly, the Adviser must assess the
creditworthiness   of  each  such   Counterparty  or  any  guarantor  or  credit
enhancement of the  Counterparty's  credit to determine the likelihood  that the
terms of the OTC option  will be  satisfied.  The  Portfolio  will engage in OTC
option transactions only with U.S.  government  securities dealers recognized by
the Federal  Reserve Bank of New York as "primary  dealers",  or broker dealers,
domestic or foreign banks or other  financial  institutions  which have received
(or the guarantors of the obligation of which have received) a short-term credit
rating of A-1 from S&P or P-1 from  Moody's  or an  equivalent  rating  from any
other nationally recognized statistical rating organization ("NRSRO") or, in the
case of OTC currency  transactions,  are  determined to be of equivalent  credit
quality by the Adviser.  The staff of the SEC currently  takes the position that


                                       13
<PAGE>

OTC options purchased by the Portfolio,  and portfolio securities "covering" the
amount of the Portfolio's  obligation  pursuant to an OTC option sold by it (the
cost of the sell-back plus the in-the-money  amount,  if any) are illiquid,  and
are subject to the  Portfolio's  limitation on investing no more than 10% of its
assets in illiquid securities.

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

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

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

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

         The  Portfolio's  use of financial  futures and options thereon will in
all  cases  be  consistent  with  applicable  regulatory   requirements  and  in
particular the rules and regulations of the Commodity Futures Trading Commission
and will be entered into only for bona fide hedging,  risk management (including
duration  management)  or  other  portfolio   management  purposes.   Typically,
maintaining  a futures  contract  or  selling  an option  thereon  requires  the
Portfolio  to  deposit  with  a  financial  intermediary  as  security  for  its
obligations an amount of cash or other specified  assets (initial  margin) which
initially is typically 1% to 10% of the face amount of the contract  (but may be
higher in some circumstances).  Additional cash or assets (variation margin) may
be required to be  deposited  thereafter  on a daily basis as the mark to market
value of the contract fluctuates. The purchase of an option on financial futures
involves  payment of a premium for the option without any further  obligation on
the part of the  Portfolio.  If the  Portfolio  exercises an option on a futures
contract it will be obligated to post initial margin (and  potential  subsequent
variation  margin) for the resulting  futures  position just as it would for any
position.  Futures  contracts  and  options  thereon  are  generally  settled by
entering into an offsetting  transaction  but there can be no assurance that the
position can be offset prior to settlement at an  advantageous  price,  nor that
delivery will occur.

         The Portfolio will not enter into a futures  contract or related option
(except for closing  transactions) if,  immediately  thereafter,  the sum of the
amount of its initial margin and premiums on open futures  contracts and options
thereon  would  exceed 5% of the  Portfolio's  total  assets  (taken at  current
value);  however,  in the case of an option that is  in-the-money at the time of


                                       14
<PAGE>

the purchase,  the  in-the-money  amount may be excluded in  calculating  the 5%
limitation.  The segregation  requirements with respect to futures contracts and
options thereon are described below.

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

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

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

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

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

         To reduce the effect of currency  fluctuations on the value of existing
or anticipated holdings of portfolio  securities,  the Portfolio may also engage
in proxy  hedging.  Proxy  hedging is often used when the  currency to which the
Portfolio's  portfolio is exposed is difficult to hedge or to hedge  against the
dollar.  Proxy  hedging  entails  entering into a commitment or option to sell a
currency  whose changes in value are generally  considered to be correlated to a
currency  or  currencies  in  which  some  or all of the  Portfolio's  portfolio
securities are or are expected to be denominated,  in exchange for U.S. dollars.
The  amount of the  commitment  or  option  would  not  exceed  the value of the
Portfolio's securities denominated in correlated currencies. For example, if the
Adviser  considers  that the  Austrian  schilling  is  correlated  to the German
deutschemark  (the  "D-mark"),  the Portfolio  holds  securities  denominated in
schillings  and the Adviser  believes that the value of schillings  will decline
against the U.S.  dollar,  the Adviser may enter into a commitment  or option to
sell D-marks and buy dollars.  Currency  hedging involves some of the same risks


                                       15
<PAGE>

and  considerations  as other  transactions with similar  instruments.  Currency
transactions  can result in losses to the Portfolio if the currency being hedged
fluctuates  in value  to a degree  or in a  direction  that is not  anticipated.
Further,  there  is the risk  that the  perceived  correlation  between  various
currencies may not be present or may not be present  during the particular  time
that the Portfolio is engaging in proxy hedging.  If the Portfolio enters into a
currency  hedging  transaction,   the  Portfolio  will  comply  with  the  asset
segregation requirements described below.

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

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

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

         The Portfolio  will usually enter into swaps on a net basis,  i.e., the
two payment  streams are netted out in a cash  settlement on the payment date or
dates specified in the instrument,  with the Portfolio  receiving or paying,  as
the case may be,  only the net  amount of the two  payments.  Inasmuch  as these
swaps,  caps,  floors  and  collars  are  entered  into for good  faith  hedging
purposes,  the  Adviser  and  the  Portfolio  believe  such  obligations  do not
constitute senior securities under the 1940 Act and, accordingly, will not treat
them as being subject to its  borrowing  restrictions.  The  Portfolio  will not
enter into any swap,  cap, floor or collar  transaction  unless,  at the time of
entering  into  such   transaction,   the  unsecured   long-term   debt  of  the
Counterparty,  combined with any credit enhancements, is rated at least A by S&P
or Moody's or has an  equivalent  rating from an NRSRO or is determined to be of
equivalent  credit  quality  by  the  Adviser.  If  there  is a  default  by the
Counterparty,  the  Portfolio  may have  contractual  remedies  pursuant  to the


                                       16
<PAGE>

agreements related to the transaction.  The swap market has grown  substantially
in recent years with a large number of banks and investment banking firms acting
both as principals and as agents utilizing standardized swap documentation. As a
result, the swap market has become relatively  liquid.  Caps, floors and collars
are more recent  innovations for which  standardized  documentation  has not yet
been fully developed and, accordingly, they are less liquid than swaps.

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

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

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

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

         OTC  options  entered  into  by  the  Portfolio,   including  those  on
securities,  currency,  financial  instruments  or  indices  and OCC  issued and
exchange listed index options, will generally provide for cash settlement.  As a
result,  when the Portfolio  sells these  instruments  it will only segregate an
amount  of  assets  equal  to  its  accrued  net  obligations,  as  there  is no
requirement  for  payment or  delivery  of amounts in excess of the net  amount.
These  amounts  will  equal  100% of the  exercise  price  in the  case of a non
cash-settled  put,  the  same as an OCC  guaranteed  listed  option  sold by the
Portfolio,  or the in-the-money  amount plus any sell-back formula amount in the
case of a cash-settled put or call. In addition, when the Portfolio sells a call
option on an index at a time when the  in-the-money  amount exceeds the exercise
price, the Portfolio will segregate,  until the option expires or is closed out,
cash or cash equivalents equal in value to such excess.  OCC issued and exchange
listed  options sold by the Portfolio  other than those above  generally  settle
with physical delivery,  or with an election of either physical delivery or cash
settlement  and the  Portfolio  will  segregate an amount of assets equal to the
full value of the option. OTC options settling with physical  delivery,  or with


                                       17
<PAGE>

an election of either  physical  delivery or cash settlement will be treated the
same as other options settling with physical delivery.

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

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

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

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

                             INVESTMENT RESTRICTIONS

            (See "INVESTMENT RESTRICTIONS" in the Fund's prospectus.)

         Any investment  restrictions  herein which involve a maximum percentage
of securities or assets shall not be considered to be violated  unless an excess
over the percentage occurs  immediately  after, and is caused by, an acquisition
or encumbrance of securities or assets of, or borrowings by, the Portfolios.

         In  addition  to the  investment  restrictions  set forth in the Fund's
prospectus, as a matter of nonfundamental policy, the Fund may not, on behalf of
the Portfolio:

          (1)     purchase  or  retain  securities  of any  open-end  investment
                  company,  or  securities of  closed-end  investment  companies
                  except by purchase in the open market where no  commission  or
                  profit to a sponsor or dealer results from such purchases,  or
                  except when such purchase, though not made in the open market,
                  is part of a plan of merger, consolidation,  reorganization or
                  acquisition  of  assets;  in any event the  Portfolio  may not
                  purchase more than 3% of the outstanding  voting securities of
                  another investment company, may not invest more than 5% of its
                  total assets in another investment company, and may not invest
                  more  than  10%  of  its  total  assets  in  other  investment
                  companies;

         (2)      invest more than 10% of its net assets in securities which are
                  not readily marketable, the disposition of which is restricted
                  under Federal securities laws, or in repurchase agreements not
                  terminable  within 7 days,  and the Portfolio  will not invest
                  more than 5% of its total assets in restricted securities;

         (3)      buy options on securities or financial instruments, unless the
                  aggregate  premiums  paid  on all  such  options  held  by the
                  Portfolio at any time do not exceed 20% of its net assets;  or
                  sell put options on securities if, as a result,  the aggregate
                  value of the  obligations  underlying  such put options  would
                  exceed 50% of the Portfolio's net assets;

                                       18
<PAGE>

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

         (5)      borrow  other  than from  banks,  or borrow  money  (including
                  reverse  repurchase  agreements) in excess of 10% of its total
                  assets  (taken at market  value)  except that for temporary or
                  emergency  purposes the  Portfolio may borrow up to 25% of its
                  total assets;

         (6)      purchase  securities on margin or make short sales unless,  by
                  virtue of its ownership of other securities,  it has the right
                  to  obtain  securities  equivalent  in kind and  amount to the
                  securities  sold  at no  added  cost  and,  if  the  right  is
                  conditional, the sale is made upon the same conditions, except
                  in connection with arbitrage  transactions and except that the
                  Fund may obtain such  short-term  credits as may be  necessary
                  for the clearance of purchases and sales of securities;

         (7)      purchase  warrants if as a result  warrants taken at the lower
                  of cost or market value would  represent  more than 10% of the
                  value of the Portfolio's net assets or more than 2% of its net
                  assets  in  warrants  that are not  listed  on the New York or
                  American  Stock  Exchanges or on an exchange  with  comparable
                  listing  requirements (for this purpose,  warrants attached to
                  securities will be deemed to have no value).

         If a percentage  restriction  on investment or utilization of assets as
set forth under "Investment  Restrictions" and "Other Investment Policies" above
is adhered to at the time an  investment  is made, a later change in  percentage
resulting from changes in the value or the total cost of the Portfolio's  assets
will not be considered a violation of the restriction.

                            PURCHASES AND REDEMPTIONS

           (See "PURCHASES AND REDEMPTIONS" in the Fund's prospectus.)

         The separate accounts of the Participating Insurance Companies purchase
and redeem shares of the Portfolio  based on, among other things,  the amount of
premium  payments to be  invested  and  surrender  and  transfer  requests to be
effected on that day pursuant to variable  annuity  contracts  and variable life
insurance  policies but only on days on which the New York Stock  Exchange  (the
"Exchange") is open for trading. Such purchases and redemptions of the shares of
the  Portfolio  are effected at the net asset values per share  determined as of
the close of regular trading on the Exchange  (normally 4 p.m.  eastern time) on
that same day. (See "NET ASSET VALUE.")  Payment for redemptions will be made by
Brown  Brothers  Harriman & Co. on behalf of the Fund and the  Portfolio  within
seven  days  thereafter.  No  fee  is  charged  the  separate  accounts  of  the
Participating Insurance Companies when they redeem Fund shares.

         The Fund may suspend the right of redemption of shares of the Portfolio
and may postpone payment for any period: (i) during which the Exchange is closed
other than customary weekend and holiday closings or during which trading on the
Exchange is restricted;  (ii) when the SEC determines  that a state of emergency
exists which may make payment or transfer not reasonably  practicable,  (iii) as
the SEC may by order permit for the  protection  of the security  holders of the
Fund or (iv) at any  other  time when the Fund may,  under  applicable  laws and
regulations, suspend payment on the redemption of its shares.

         Should any conflict  between VA contract and VLI policy  holders  arise
which would  require that a substantial  amount of net assets be withdrawn  from
the Fund,  orderly  portfolio  management  could be disrupted  to the  potential
detriment of such contract and policy holders.

                                       19
<PAGE>

                       INVESTMENT ADVISER AND DISTRIBUTOR

            (See "INVESTMENT ADVISER" and "DISTRIBUTOR" in the Fund's
                                  prospectus.)

Investment Adviser

         The Fund has an investment  advisory  agreement for the Portfolio  (the
"Agreement") with the investment counsel firm of Scudder, Stevens & Clark, Inc.,
a Delaware corporation,  doing business under the name Scudder, Stevens & Clark.
This organization is one of the most experienced investment counsel firms in the
United States.  It currently manages in excess of $100 billion in assets for its
clients,  including:  more than $___ billion in U.S. and foreign bonds, and over
$___ billion in balanced  portfolios  for over 3,000  institutional  and private
accounts. In addition, the assets of Scudder's international  investment company
clients exceed $___ billion.  Scudder,  Stevens & Clark, Inc. was established in
1919 and  pioneered the practice of providing  investment  counsel to individual
clients on a fee basis.  In 1928, it introduced the first no-load mutual fund to
the public. The Adviser has been a leader in international investment management
and trading for over 40 years.

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

         The Adviser also provides  investment  advisory  services to the mutual
funds  which  comprise  the  AARP  Investment  Program  from  Scudder.  The AARP
Investment  Program  from  Scudder has assets over $11 billion and  includes the
AARP Growth Trust,  AARP Income Trust,  AARP Tax Free Income Trust and AARP Cash
Investment Funds.

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

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

                                       20
<PAGE>

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

         The  Adviser  pays the  compensation  and  expenses  of all  affiliated
Trustees  and  executive  employees  of the Fund and  makes  available,  without
expense to the Fund,  the  services  of such  affiliated  persons as may duly be
elected Trustees of the Fund,  subject to their individual  consent to serve and
to any limitations  imposed by law, and pays the Fund's office rent and provides
investment  advisory,  research  and  statistical  facilities  and all  clerical
services relating to research, statistical and investment work. For its advisory
services the Adviser receives  compensation  monthly an annual rate of 0.975% of
the average daily net asset value of the  Portfolio.  Until April 30, 1998,  the
Adviser  has  agreed to waive  part or all of its fee for the  Portfolio  to the
extent that the Portfolio's expenses will be maintained at 1.50%.

         Under the Agreement the Fund is responsible for all its other expenses,
including  clerical  salaries;  fees and expenses  incurred in  connection  with
membership in investment company  organizations;  brokers'  commissions;  legal,
auditing and accounting  expenses;  taxes and governmental  fees; the charges of
custodians,  transfer  agents and other agents;  any other  expenses,  including
clerical expenses,  of issue, sale,  underwriting,  distribution,  redemption or
repurchase  of shares;  the expenses of and fees for  registering  or qualifying
securities  for sale;  the fees and expenses of the Trustees of the Fund who are
not  affiliated  with the Adviser;  and the cost of preparing  and  distributing
reports and notices to shareholders.  The Fund may arrange to have third parties
assume all or part of the expense of sale,  underwriting and distribution of its
shares. (See "Distributor" for expenses paid by Scudder Investor Services, Inc.)
The Fund is also  responsible  for its  expenses  incurred  in  connection  with
litigation,  proceedings  and  claims  and the legal  obligation  it may have to
indemnify its officers and Trustees with respect thereto.

         In addition to payments for investment  advisory  services  provided by
the  Adviser,  the  Trustees,  consistent  with the Funds'  investment  advisory
agreement and underwriting agreement,  have approved payments to the Adviser and
Scudder  Investor  Services,  Inc. for  clerical,  accounting  and certain other
services  they may provide the Fund.  Effective  October 1, 1994,  the  Trustees
authorized  the  elimination  of  these  administrative  expenses.  Under  a new
agreement,  effective  October 1, 1994,  the Trustees  authorized  the Fund,  on
behalf  of  each  Portfolio,  to pay  Scudder  Fund  Accounting  Corporation,  a
subsidiary of the Adviser,  for  determining the daily net asset value per share
and maintaining the portfolio and general accounting records of the Fund.

         The Agreement  dated _______ will remain in effect until  _______.  The
Agreement  will  continue  in effect  from year to year  thereafter  only if its
continuance is approved annually by the vote of a majority of those Trustees who
are not parties to the Agreement or  "interested  persons" of the Adviser or the
Fund  cast in  person  at a meeting  called  for the  purpose  of voting on such
approval  and either by vote of a majority of the  Trustees or a majority of the
outstanding  securities  of the  Portfolio.  The Agreement for the Portfolio was
last approved by the Trustees  (including a majority of the Trustees who are not
such  "interested  persons") on ___________.  The Agreement may be terminated at
any time  without  payment  of penalty by either  party on sixty  days'  written
notice, and automatically terminates in the event of its assignment.

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

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

         The  Agreement  provides  that the Adviser  shall not be liable for any
error of  judgment  or  mistake of law or for any loss  suffered  by the Fund in
connection with matters to which the Agreement relates,  except a loss resulting


                                       21
<PAGE>

from  willful  misfeasance,  bad  faith or gross  negligence  on the part of the
Adviser in the  performance  of its  duties or from  reckless  disregard  by the
Adviser of its obligations and duties under the Agreement.

         Each  Participating  Insurance  Company  has agreed with the Adviser to
reimburse  the  Adviser  for a  period  of five  years  to the  extent  that the
aggregate  annual  advisory fee paid on behalf of the Portfolio  with respect to
the average  daily net asset value of the shares of the  Portfolio  held in that
Participating  Insurance  Company's  general or  separate  account  (or those of
affiliates)  is less than  $25,000 in any year.  It is expected  that  insurance
companies which become  Participating  Insurance Companies in the future will be
required to enter into similar arrangements.

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

         None of the Trustees or officers of the Fund may have dealings with the
Fund as principals in the purchase or sale of securities.

Personal Investments by Employees of the Adviser

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

Distributor

         The Fund has underwriting  agreements with Scudder  Investor  Services,
Inc. (the "Distributor"),  a subsidiary of the Adviser, Two International Place,
Boston,  Massachusetts 02110-4103. The Fund's underwriting agreements dated July
12, 1985,  will remain in effect until September 30, 1996, and from year to year
thereafter only if their  continuance is approved  annually by a majority of the
Trustees who are not parties to such  agreements or "interested  persons" of any
such party and either by vote of a majority of the Trustees or a majority of the
outstanding voting securities of the Fund.

         Under the  principal  underwriting  agreement  between the Fund and the
Distributor, the Fund is responsible for the payment of all fees and expenses in
connection  with the preparation  and filing of any  registration  statement and
prospectus  covering  the issue and sale of  shares,  and the  registration  and
qualification  of shares for sale with the SEC in the various states,  including
registering the Fund as a broker or dealer.  The Fund will also pay the fees and
expenses of preparing,  printing and mailing  prospectuses  annually to existing
shareholders  and any  notice,  proxy  statement,  report,  prospectus  or other
communication to shareholders of the Fund, printing and mailing confirmations of
purchases of shares, any issue taxes or any initial transfer taxes, a portion of
toll-free  telephone service for shareholders,  wiring funds for share purchases
and redemptions  (unless paid by the shareholder who initiates the transaction),
printing and postage of business  reply  envelopes and a portion of the computer
terminals used by both the Fund and the Distributor.

         The Distributor will pay for printing and distributing  prospectuses or
reports  prepared for its use in  connection  with the offering of the shares to
the  public  and  preparing,  printing  and  mailing  any  other  literature  or
advertising  in  connection  with the offering of the shares to the public.  The
Distributor will pay all fees and expenses in connection with its  qualification
and  registration  as a broker or dealer under Federal and state laws, a portion
of the  toll-free  telephone  service  and  of  computer  terminals,  and of any
activity  which is primarily  intended to result in the sale of shares issued by
the Fund,  unless a 12b-l Plan is in effect which  provides  that the Fund shall
bear some or all of such expenses.  The  Distributor has entered into agreements
with  broker-dealers  authorized to offer and sell VA contracts and VLI policies


                                       22
<PAGE>

on behalf of the  Participating  Insurance  Companies under which agreements the
broker-dealers  have agreed to be  responsible  for the fees and expenses of any
prospectus,   statement  of  additional   information  and  printed  information
supplemental  thereto of the Fund  distributed in connection with their offer of
VA contracts and VLI policies.

         As agent, the Distributor currently offers shares of the Portfolio on a
continuous basis to the separate accounts of Participating  Insurance  Companies
in all  states  in which  the  Portfolio  or the  Fund may from  time to time be
registered or where  permitted by  applicable  law. The  underwriting  agreement
provides that the Distributor  accepts orders for shares at net asset value. The
Distributor has made no firm commitment to acquire shares of any Portfolio.

         A  description  of the  Rule  12b-1  plan  for  Class B  shares  of the
Portfolio (the "Plan") and related  services and fees  thereunder is provided in
the  prospectus.  On  October  5,  1995,  the  Board  of  Trustees  of the  Fund
unanimously approved the Plan. In connection with its consideration of the Plan,
the  Board of  Trustees  was  furnished  with  drafts  of the  Plan and  related
materials,  including information related to the advantages and disadvantages of
Rule 12b-1 plans currently being used in the mutual fund industry. Legal counsel
for the Fund provided additional  information,  summarized the provisions of the
proposed Plan and discussed the legal and regulatory  considerations in adopting
such Plan.

         The Board considered various factors in connection with its decision as
to  whether  to  approve  the Plan,  including  (a) the nature and causes of the
circumstances  which make  implementation of the Plan necessary and appropriate;
(b) the way in which the Plan would address those  circumstances,  including the
nature and potential amount of  expenditures;  (c) the nature of the anticipated
benefits;  (d) the possible benefits of the Plan to any other person relative to
those of the Fund; (e) the effect of the Plan on existing owners of VA contracts
and VLI  policies;  (f) the  merits of  possible  alternative  plans or  pricing
structures; (g) competitive conditions in the variable products industry and (h)
the relationship of the Plan to other distribution efforts of the Fund.

         Based  upon its  review  of the  foregoing  factors  and the  materials
presented to it, and in light of its fiduciary  duties under  relevant state law
and the  1940  Act,  the  Board  determined,  in the  exercise  of its  business
judgment,  that the Fund's Plan is reasonably likely to benefit the Fund and the
VA contract and VLI policy owners in at least one of several ways. Specifically,
the Board concluded that the Participating  Insurance  Companies would have less
incentive  to  educate  VA  contract  and VLI  policy  owners  and sales  people
concerning the Fund if expenses  associated with such services were not paid for
by the Fund. In addition,  the Board determined that the payment of distribution
fees to  insurers  should  motivate  them to  maintain  and enhance the level of
services  relating to the Fund  provided to VA contract  and VLI policy  owners,
which would, of course, benefit such VA contract and VLI policy owners. Further,
the  adoption  of the Plan  would  likely  help to  maintain  and may lead to an
increase  in net  assets  under  management  given  the  distribution  financing
alternatives  available through the multi-class  structure.  The Board also took
into account expense  structures of other competing  products and administrative
compensation  arrangements  between  other funds,  their  advisers and insurance
companies that currently are in use in the variable products industry.  Further,
it is anticipated  that Plan fees may be used to educate  potential and existing
owners of VA contracts  and VLI policies  concerning  the Fund,  the  securities
markets and related  risks. A better  educated  investor,  in the  Distributor's
view,  is less likely to surrender  his or her VA contract or VLI policy  early,
thereby avoiding the costs associated with such an event. Accordingly,  the Plan
may help the Fund and Participating  Insurance Companies meet investor education
needs.

         The Board realizes that there is no assurance  that the  expenditure of
Fund assets to finance  distribution  of Fund  shares will have the  anticipated
results.  However, the Board believes there is a reasonable  likelihood that one
or more of such benefits will result,  and since the Board will be in a position
to monitor the  distribution  expenses of the Fund,  it will be able to evaluate
the benefit of such expenditures in deciding whether to continue the Plan.

         The Plan and any Rule  12b-1-related  agreement that is entered into by
the Fund or the  Distributor in connection with the Plan will continue in effect
for a period of more than one year only so long as continuance  is  specifically
approved  at least  annually  by a vote of a  majority  of the  Fund's  Board of
Trustees,  and of a majority of the Trustees who are not interested  persons (as
defined in the 1940 Act) of the Fund or a  Portfolio  ("Independent  Trustees"),


                                       23
<PAGE>

cast in person at a meeting called for the purpose of voting on the Plan, or the
Rule 12b-1 related agreement, as applicable.  In addition, the Plan and any Rule
12b-1 related  agreement,  may be terminated as to Class B shares of a Portfolio
at any time,  without penalty,  by vote of a majority of the outstanding Class B
shares of that Portfolio or by vote of a majority of the  Independent  Trustees.
The Plan also  provides  that it may not be amended to increase  materially  the
amount  that may be spent  for  distribution  of Class B shares  of a  Portfolio
without the approval of Class B shareholders of that Portfolio.

                                   MANAGEMENT OF THE FUND

                                       [TO BE UPDATED]
Trustees and Officers
<TABLE>
<CAPTION>

                                                                                               Position with
                                                                                               Underwriter, Scudder
                                                                                               Investor Services,
Name and Address                    Position with Fund       Principal Occupation**            Inc.
----------------                    ------------------       ----------------------            ---------------------
<S>                                 <C>                      <C>                               <C>
David B. Watts*@+                   President and Trustee    Managing Director                 Assistant Treasurer
                                                             of Scudder, Stevens
                                                             & Clark, Inc.



Daniel Pierce*@+                    Vice President and       Chairman of the                   Vice President,
                                    Trustee                  Board and                         Director and Assistant
                                                             Managing Director                 Treasurer
                                                             of Scudder, Stevens
                                                             & Clark, Inc.

Dr. Kenneth Black, Jr.              Trustee                  Regents' Professor                   ----
Educational Foundation, Inc.                                 Emeritus of Insurance, Georgia
35 Broad Street                                              State University
11th Floor, Room 1144
Atlanta, GA  30303

Rosita P. Chang                     Trustee                  Professor of Finance,               ----
Department of Finance and                                    University of Rhode Island
Insurance, College of Business
Administration
University of Rhode Island
Kingston, RI  02881-0802

Peter B. Freeman@                   Trustee                  Corporate Director                  ----
100 Alumni Avenue                                            and Trustee
Providence, RI  02906

Dr. J. D. Hammond                   Trustee                  Dean, Smeal College                 ----
801 Business                                                 of Business
Administration Bldg.                                         Administration, Pennsylvania
Pennsylvania State University                                State University
University Park, PA  16802

Thomas S. Crain++                   Vice President           Managing Director                   ----
                                                             of Scudder, Stevens
                                                             & Clark, Inc.

                                       24
<PAGE>

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

Jerard K. Hartman#                  Vice President           Managing Director                   ----
                                                             of Scudder, Stevens
                                                             & Clark, Inc.

Richard A. Holt***                  Vice President           Managing Director                   ----
                                                             of Scudder, Stevens
                                                             & Clark, Inc.

Thomas W. Joseph+                   Vice President           Principal of Scudder, Stevens &   Vice President,
                                                             Clark, Inc.                       Director, Treasurer
                                                                                               and Assistant Clerk

David S. Lee+                       Vice President           Managing Director                 President, Assistant
                                                             of Scudder, Stevens               Treasurer and Director
                                                             & Clark, Inc.

Steven M. Meltzer+                  Vice President           Principal of Scudder, Stevens &      ----
                                                             Clark, Inc.

Randall K. Zeller#                  Vice President           Managing Director                    ----
                                                             of Scudder, Stevens
                                                             & Clark, Inc.

Thomas F. McDonough+                Secretary                Principal of Scudder, Stevens &   Clerk
                                                             Clark, Inc.

Pamela A. McGrath+                  Vice President and       Managing Director of Scudder,        ----
                                    Treasurer                Stevens & Clark, Inc.

Edward J. O'Connell#                Vice President and       Principal of Scudder, Stevens &   Assistant Treasurer
                                    Assistant Treasurer      Clark, Inc.

Kathryn L. Quirk#                   Vice President and       Managing Director                 Vice President
                                    Assistant Secretary      of Scudder, Stevens
                                                             & Clark, Inc.

Coleen Downs Dinneen+               Assistant Secretary      Vice President of                 Assistant Clerk
                                                             Scudder, Stevens &
                                                             Clark, Inc.


         *        Messrs. Watts and Pierce are considered by the Fund and its counsel to be Trustees who are "interested
                  persons" of the Adviser or of the Fund (within the meaning of the 1940 Act, as amended).

         **       Unless otherwise stated, all the officers and Trustees have been associated with their respective
                  companies for more than five years, but not necessarily in the same capacity.

         @        Peter B. Freeman, Daniel Pierce and David B. Watts are members of the Executive Committee, which has
                  the power to declare dividends from ordinary income and distributions of realized capital gains to the
                  same extent as the Board is so empowered.

         +        Address: Two International Place, Boston, Massachusetts 02110-4103

         #        Address: 345 Park Avenue, New York, New York 10154

                                                           25
<PAGE>

         ++       Address: 600 Vine Street - Suite 2000, Cincinnati, Ohio 45202

         ***      Address: 111 E. Wacker Drive - Suite 2200, Chicago, Illinois 60601
</TABLE>

         Certain of the  Trustees and officers of the Fund also serve in similar
         capacities with other Scudder Funds.

Remuneration

         Several of the  officers  and Trustees of the Fund may also be officers
of the Adviser,  the  Distributor,  Scudder Service  Corporation,  Scudder Trust
Company or Scudder Fund  Accounting  Corporation  which receive fees paid by the
Fund. The Fund pays no direct  remuneration to any officer of the Fund. However,
each of the Trustees who is not affiliated  with the Adviser will be paid by the
Fund. Of these unaffiliated  Trustees, Ms. Chang and Drs. Black and Hammond each
receive an annual  Trustee's  fee of $2,000 per  Portfolio and a fee of $200 per
Portfolio for each Trustees'  meeting  attended or for each meeting held for the
purpose of considering  arrangements between the Fund and the Adviser, while Mr.
Freeman   receives  fees  of  $1,250  per  Portfolio  and  $125  per  Portfolio,
respectively.  Ms.  Chang  and Drs.  Black and  Hammond  also  receive  $100 per
Portfolio per committee meeting attended (other than audit committee,  for which
each receives a fee of $200 per Portfolio),  while Mr. Freeman  receives fees of
$75 per Portfolio and $125 per  Portfolio,  respectively.  A total of $_____ was
paid for Trustees' fees and expenses,  including  legal counsel to the Trustees,
in the year ended December 31, 1995.

         The  following  Compensation  Table,  provides  in  tabular  form,  the
following data.

Column (1) All Trustees who receive compensation from the Fund.
Column (2) Aggregate  compensation  received by a Trustee from all series of the
Fund,  which is comprised of Money Market  Portfolio,  Bond Portfolio,  Balanced
Portfolio,  Growth and Income Portfolio,  Capital Growth Portfolio, Global Small
Company  Portfolio and International  Portfolio.  
Columns (3) and (4) Pension or retirement benefits accrued or proposed to be
paid by the Fund. The Fund does not pay its Trustees such benefits.
Column (5) Total compensation received by a Trustee from Money Market Portfolio,
Bond Portfolio, Balanced Portfolio, Growth and Income Portfolio, Capital Growth
Portfolio, Global Small Company Portfolio and International Portfolio, plus
compensation received from all funds managed by the Adviser for which a Trustee
serves. The total number of funds from which a Trustee receives such
compensation is also provided in column (5).

                                       26
<PAGE>
<TABLE>
<CAPTION>

                                                Compensation Table
                              for the year ended December 31, 1995 to be updated
=========================== ============================= =================== ================= ====================
           (1)                          (2)                      (3)                (4)                 (5)
                                                              Pension or                        
                                                              Retirement                        Total Compensation 
                             Aggregate Compensation from   Benefits Accrued      Estimated       From the Fund and 
      Name of Person,          the Scudder Variable Life    As Part of Fund    Annual Benefits    Fund Complex Paid 
          Position                 Investment Fund*            Expenses       Upon Retirement       to Trustee     
=========================== ============================= =================== ================= ====================

<S>                                   <C>                       <C>                 <C>             <C>     
Dr. Kenneth Black, Jr.,               $ ______                   N/A                N/A              $ ______
Trustee                                                                                             (__ funds)

Rosita P. Chang, Trustee              $ ______                   N/A                N/A              $ ______
                                                                                                    (__ funds)
Peter B. Freeman, Trustee             $ ______                   N/A                N/A              $ ______
                                                                                                    (__ funds)
Dr. J.D. Hammond,                     $ ______                   N/A                N/A              $ ______
Trustee                                                                                             (__ funds)


*        Scudder Variable Life Investment Fund consists of seven Portfolios:  Money Market
         Portfolio, Bond Portfolio, Balanced Portfolio, Growth and Income Portfolio,
         Capital Growth Portfolio, Global Discovery Portfolio and International Portfolio.
</TABLE>

                                 NET ASSET VALUE

         (See "NET ASSET VALUE" and "VALUATION OF PORTFOLIO SECURITIES"
                            in the Fund's prospectus)

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

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

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

                                       27
<PAGE>

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

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

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

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

                                   TAX STATUS

          (See "TAX STATUS, DIVIDENDS AND DISTRIBUTIONS" in the Fund's
                                  prospectus.)

         The  Portfolio  has  elected to be treated  as a  regulated  investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code").  Such  qualification  does  not  involve  governmental  supervision  or
management of investment practices or policy.

         The Portfolio  intends to comply with the  provisions of Section 817(h)
of the Code  relating to  diversification  requirements  for  variable  annuity,
endowment and life insurance contracts.  Specifically,  the Portfolio intends to
comply with either (i) the requirement of Section 817(h)(1) of the Code that its
assets be adequately diversified,  or (ii) the "Safe Harbor for Diversification"
specified  in  Section  817(h)(2)  of the  Code,  or (iii)  the  diversification
requirement of Section 817(h)(1) of the Code by having all or part of its assets
invested in U.S.  Treasury  securities  which  qualify for the "Special Rule for
Investments in United States Obligations"  specified in Section 817(h)(3) of the
Code.

         A regulated  investment  company  qualifying  under Subchapter M of the
Code is required to  distribute to its  shareholders  at least 90 percent of its
investment company taxable income and generally is not subject to federal income
tax to the extent that it distributes  annually its investment  company  taxable
income and net realized capital gains in the manner required under the Code.

         The  Portfolio  will be  subject  to a 4%  nondeductible  excise tax on
amounts  required to be but not  distributed  under a  prescribed  formula.  The
formula requires payment to shareholders during a calendar year of distributions
representing  at least 98% of the  Portfolio's  ordinary income for the calendar
year,  at least 98% of the  excess of its  capital  gains  over  capital  losses
(adjusted  for certain  ordinary  losses)  realized  during the one-year  period
ending  October 31 of such year,  and all ordinary  income and capital gains for
previous years that were not previously  distributed.  Investment companies with
taxable  years  ending on November  30 or  December  31 may make an  irrevocable
election to measure the required  capital gain  distribution  using their actual
taxable year, and the Portfolio will consider  making such an election.  This 4%
excise tax will not apply to the  Portfolio  for any calendar year if throughout
such calendar  year each  shareholder  of the  Portfolio was a segregated  asset
account of a life  insurance  company  held in  connection  with  variable  life
insurance or annuity contracts  (disregarding,  for this purpose,  shares of the


                                       28
<PAGE>

Portfolio  which are  attributable  to  investments  of up to  $250,000  made in
connection with the organization of the Portfolio).

         Investment company taxable income of the Portfolio generally is made up
of dividends,  interest,  certain  currency gains and losses and  net-short-term
capital gains in excess of net long-term  capital  losses,  less  expenses.  Net
realized capital gains of the Portfolio for a fiscal year are computed by taking
into account any capital loss carryforward of the Portfolio.

         If any net realized  long-term  capital gains in excess of net realized
short-term  capital  losses are  retained  by the  Portfolio  for  reinvestment,
requiring  federal  income  taxes  to be  paid  thereon  by the  Portfolio,  the
Portfolio  intends  to  elect  to  treat  such  capital  gains  as  having  been
distributed to  shareholders.  As a result,  each  shareholder  will report such
capital  gains as long-term  capital  gains,  will be able to claim its share of
federal income taxes paid by the Portfolio on such gains as a credit against its
own federal income tax liability,  and will be entitled to increase the adjusted
tax basis of its shares of the Portfolio by the difference  between its pro rata
share of such gains and its tax credit.  If the Fund makes such an election,  it
may not be treated as having met the excise tax distribution requirement.

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

         Distributions  of the  excess of net  long-term  capital  gain over net
short-term  capital loss are taxable to shareholders as long-term  capital gain,
regardless of the length of time the shares of the  Portfolio  have been held by
such  shareholders.  Any loss realized upon the redemption of shares held at the
time of redemption for six months or less will be treated as a long-term capital
loss to the extent of any amounts treated as distributions of long-term  capital
gain during such six-month period.

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

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

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

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

                                       29
<PAGE>

         Proposed regulations have been issued which will allow the Portfolio to
make an  election  to mark to  market  its  shares of these  foreign  investment
companies in lieu of being taxed in the manner  described  above.  At the end of
each taxable year to which the election  applies,  the Portfolio will include in
its income the amount by which the fair market  value of the  foreign  company's
stock exceeds the Portfolio's  adjusted basis in these shares. No mark to market
losses may be recognized.  Distributions  and gain on dispositions of such stock
will be treated as ordinary income  distributable  to  shareholders  rather than
being subject to a portfolio  level tax when  distributed to  shareholders  as a
dividend.  The Portfolio intends to make this election if it is determined to be
appropriate and in the best interest of the shareholders.

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

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

         Subchapter M of the Code requires that the Portfolio  realize less than
30% of its annual  gross  income  from the sale or other  disposition  of stock,
securities and certain options, futures and forward contracts held for less than
three months.  Certain options,  futures and forward activities of the Portfolio
may increase the amount of gains  realized by the Portfolio  that are subject to
the 30%  limitation.  Accordingly,  the  amount  of such  transactions  that the
Portfolio may undertake may be limited.

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

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

                                       30
<PAGE>

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

         If the Portfolio holds zero coupon securities or other securities which
are issued at a discount, a portion of the difference between the issue price of
zero coupon  securities and their face value ("original issue discount") will be
treated as income to the Portfolio each year, even though the Portfolio will not
receive cash  interest  payments  from these  securities.  This  original  issue
discount (imputed income) will comprise a part of the investment company taxable
income of the Portfolio  which must be distributed to  shareholders  in order to
maintain the  qualification of the Portfolio as a regulated  investment  company
and to avoid federal  income tax at the Portfolio  level.  Shareholders  will be
subject to income tax on such original issue discount, whether or not they elect
to  receive  their  distributions  in cash.  If the  Portfolio  acquires  a debt
instrument at a market discount,  a portion of the gain  recognized,  if any, on
disposition of such instrument may be treated as ordinary income.

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

         The  Portfolio  will be  required  to  report to the  Internal  Revenue
Service all distributions of investment company taxable income and capital gains
as well as gross proceeds from the  redemption or exchange of shares,  except in
the case of certain exempt shareholders,  which include most corporations. Under
the backup withholding provisions of Section 3406 of the Code,  distributions of
taxable income and capital gains and proceeds from the redemption or exchange of
the shares of a regulated  investment  company may be subject to  withholding of
federal income tax at the rate of 31% in the case of non-exempt shareholders who
fail to  furnish  the  investment  company  with their  taxpayer  identification
numbers  and with  required  certifications  regarding  their  status  under the
federal  income tax law.  Withholding  may also be required if the  Portfolio is
notified  by  the  IRS or a  broker  that  the  taxpayer  identification  number
furnished by the shareholder is incorrect or that the shareholder has previously
failed to report interest or dividend income.  Participating Insurance Companies
that are corporations should furnish their taxpayer  identification  numbers and
certify  their  status  as  corporations  in order to avoid  possible  erroneous
application of backup withholding.

         Shareholders  of the  Portfolio may be subject to state and local taxes
on distributions received from the Portfolio and on redemptions of their shares.

         Each distribution is accompanied by a brief explanation of the form and
character of the distribution.

         The Fund is organized as a Massachusetts  business  trust,  and neither
the Fund nor the  Portfolio  is liable  for any income or  franchise  tax in the
Commonwealth of Massachusetts  providing the Portfolio continues to qualify as a
regulated investment company under Subchapter M of the Code.

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

         For further information  concerning federal income tax consequences for
the holders of the VA contracts and VLI policies,  shareholders  should  consult
the  prospectus  used in  connection  with  the  issuance  of  their  particular
contracts or policies.  Shareholders should consult their tax advisers about the
application  of the  provisions  of tax  law  described  in  this  statement  of
additional information in light of their particular tax situations.

                                       31
<PAGE>

                           DIVIDENDS AND DISTRIBUTIONS

          (See "TAX STATUS, DIVIDENDS AND DISTRIBUTIONS" in the Fund's
                                  prospectus.)

         The Portfolio  will follow the practice of  distributing  substantially
all  of  its  investment  company  taxable  income.  The  Portfolio  intends  to
distribute the excess of net realized  long-term capital gains over net realized
short-term capital losses.

         Distributions of investment  company taxable income and any net capital
gain will be made within  three months of the end of the Fund's  fiscal  taxable
year.  Both  distributions  will  be  reinvested  in  additional  shares  of the
Portfolio unless a shareholder has elected to receive cash.

                             PERFORMANCE INFORMATION

            (See "Performance Information" in the Fund's prospectus)

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

         A.       Average  Annual  Total Return is the average  annual  compound
                  rate of return for the  periods of one year and five years (or
                  such  shorter  periods as may be  applicable  dating  from the
                  commencement of the  Portfolio's  operations) all ended on the
                  date of a recent calendar quarter.

                  Average annual total return quotations  reflect changes in the
                  price of the Portfolio's  shares and assume that all dividends
                  and capital gains distributions  during the respective periods
                  were  reinvested  in Portfolio  shares.  Average  annual total
                  return is  calculated by finding the average  annual  compound
                  rates  of  return  of  a  hypothetical  investment  over  such
                  periods,  according to the following  formula  (average annual
                  total return is then expressed as a percentage):

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

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

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

                                       32
<PAGE>

                                       C = (ERV/P) - 1
                  Where:

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

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

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

Comparison of Portfolio Performance

         From  time to  time,  in  marketing  and  other  fund  literature,  the
performance of the Portfolio may be compared to the  performance of broad groups
of mutual funds which are used in conjunction  with variable  annuities and have
with similar  investment goals, as tracked by independent  organizations.  Among
these organizations, Lipper Analytical Services, Inc., Morningstar, Inc. and the
Variable Annuity Research and Data Service  (V.A.R.D.S.(R))  may be cited.  When
independent  tracking  results  are used,  the  Portfolio  will be  compared  to
Lipper's  appropriate  fund  category,  that is,  by  investment  objective  and
portfolio  holdings.  For instance,  growth Portfolios will be compared to funds
within Lipper's  growth fund category.  Rankings may be listed among one or more
of the asset-size classes as determined by Lipper.

         Lipper, Morningstar and V.A.R.D.S.(R) track and rank the performance of
variable  annuities  in each of the  major  investment  categories.  Performance
comparisons and rankings by Lipper,  Morningstar and  V.A.R.D.S.(R) are based on
total return and assume  reinvestment  of income and capital  gains,  but do not
take into account  sales  charges,  redemption  fees or certain  other  expenses
charged at the separate account level.

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

         Comparison  of  the  quoted  non-standardized  performance  of  various
investments is valid only if performance is calculated in the same manner. Since
there  are  different  methods  of  calculating  performance,  investors  should
consider the effect of the methods used to calculate  performance when comparing
performance  of the  Portfolio  with  performance  quoted with  respect to other
investment companies or types of investments.

         From  time to  time,  in  marketing  and  other  Fund  literature,  the
Portfolio's  performance  may be compared to the  performance of broad groups of
comparable  mutual  funds  or  unmanaged   indexes  of  comparable   securities.
Evaluations  of  performance  made by  independent  sources  may also be used in
advertisements  concerning the Portfolio,  including  reprints of, or selections
from, editorials or articles about the Portfolio.

         The Global Discovery  Portfolio may invest in foreign  securities.  The
following graph illustrates the historical risks and returns of selected indices
which  track the  performance  of  various  combinations  of United  States  and
international  securities  for the ten year  period  ended  December  31,  1995;
results  for  other  periods  may  vary.  The  graph  uses ten  year  annualized
international  returns  represented by the Morgan Stanley Capital  International
Europe,  Australia  and Far East  (EAFE)  Index and ten year  annualized  United
States  returns  represented  by the S&P 500  Index.  Risk  is  measured  by the
standard   deviation  in  overall  portfolio   performance  within  each  index.
Performance of an index is historical, and does not represent the performance of
a Fund, and is not a guarantee of future results.

                                       33
<PAGE>

(X-Y SCATTER CHART TITLE)
           ---------------------------------------------------------
                               EFFICIENT FRONTIER
                S&P 500 vs. MSCI EAFE Index (12/31/85-12/31/95)
           ---------------------------------------------------------

(X-Y SCATTER CHART DATA)
   Total Return              Standard Deviation
    (Reward)            (Portfolio Volatility-Risk)
     13.63                         19.37         100% Int'l MSCI EAFE
     13.92                         18.14         10 US/90 Int'l
     14.18                         17.02         20/80
      14.4                         16.04         30 U.S./70 Int'l
     14.58                         15.23         40/60
     14.73                         14.61         50 U.S./50Int'l
     14.83                          14.2         60/40
      14.9                         14.03         70 U.S./30 Int'l
     14.92                          14.1         80/20
     14.91                         14.41         90 U.S./10 Int'l
     14.86                         14.95         100% U.S. S&P 500

Source:  Lipper Analytical Services, Inc. (Data as of 12/31/95)

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

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

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

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

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

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

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

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

                                       34
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Morningstar,  Inc., a company that, among other activities,  analyzes, ranks and
rates mutual funds and variable annuities.

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

Mutual Funds, a monthly magazine devoted to mutual fund investing.

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

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

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

                                       35
<PAGE>

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

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

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

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

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

USA Today, a leading national daily newspaper.

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

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

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

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

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

Your Money, a bimonthly magazine featuring articles about personal investing and
money management.

                           SHAREHOLDER COMMUNICATIONS

         Owners of policies  and  contracts  issued by  Participating  Insurance
Companies  for which shares of the  Portfolio  are the  investment  vehicle will
receive  from  the  Participating   Insurance  Companies  unaudited  semi-annual
financial  statements and audited year-end financial statements certified by the
Fund's  independent  public  accountants.  Each report will show the investments
owned by the Fund and the market  values  thereof as  determined by the Trustees
and will provide other information about the Fund and its operations.

         Participating Insurance Companies with inquiries regarding the Fund may
call the Fund's underwriter, Scudder Investor Services, Inc., at 617-295-1000 or
write  Scudder  Investor  Services,   Inc.,  Two  International  Place,  Boston,
Massachusetts 02110-4103.

                         ORGANIZATION AND CAPITALIZATION

                   (See "ADDITIONAL INFORMATION - Shareholder
                   Indemnification" in the Fund's prospectus.)

General

         The Fund is an open-end  investment company  established under the laws
of The  Commonwealth  of  Massachusetts  by Declaration of Trust dated March 15,
1985.

                                       36
<PAGE>

to be updated[ As of December 31, 1994, AEtna Life Insurance and Annuity Company
(151  Farmington  Avenue  PPH3,  Hartford,   CT  06156),  owned  of  record  and
beneficially  40.36% of the  International  Portfolio;  they owned of record and
beneficially 9.58% of the Fund's total outstanding  shares; and American Skandia
Life Assurance  Corporation (1 Corporation Drive,  Shelton, CT 06484),  owned of
record  and  beneficially  37.69% of the Bond  Portfolio,  0.05% of the  Capital
Growth Portfolio, 0.14% of the Balanced Portfolio and 0.28% of the International
Portfolio;  they owned of record  and  beneficially  4.53% of the  Fund's  total
outstanding  shares;  and AUSA Life Insurance  Company (4  Manhattanville  Road,
Purchase,  NY 10577) owned of record and beneficially 0.33% of the International
Portfolio;  they owned of record  and  beneficially  0.08% of the  Fund's  total
outstanding  shares;  and Banner Life Insurance  Company of Rockville,  MD (1701
Research Blvd.,  Rockville,  MD 20850) owned of record and beneficially 0.16% of
the Money Market Portfolio,  0.35% of the Bond Portfolio,  6.84% of the Balanced
Portfolio,  0.44% of the International Portfolio, 0.01% of the Growth and Income
Portfolio and 1.09% of the Capital  Growth  Portfolio;  they owned of record and
beneficially 0.53% of the Fund's total outstanding  shares; and Charter National
Life Insurance  Company (8301 Maryland  Avenue,  St. Louis, MO 63105, a Missouri
corporation)  and its  subsidiary,  Intramerica  Life Insurance  Company (1 Blue
Hills Plaza, Pearl River, NY 10965),  owned of record and beneficially 71.43% of
the Money Market Portfolio, 12.96% of the Bond Portfolio, 86.16% of the Balanced
Portfolio,  29.73% of the  Capital  Growth  Portfolio,  99.97% of the Growth and
Income Portfolio and 21.59% of the International Portfolio; they owned of record
and beneficially 48.88% of the Fund's total outstanding shares. In 1991, Charter
National Life Insurance Company  purchased the Colonial Penn Group,  Inc., which
indirectly owns  Intramerica,  a New York domestic life insurer.  On November 1,
1992, First Charter Life Insurance  Company ("First  Charter"),  a subsidiary of
Charter National Life Insurance  Company,  was merged with and into Intramerica.
As the company surviving the merger, Intramerica acquired legal ownership of all
of  First  Charter's  assets,   including  the  Variable  Account,   and  became
responsible for all of First Charter's liabilities and obligations.  As a result
of the merger,  all Contracts  issued by First Charter  before the merger became
Contracts  issued by Intramerica  after the merger.  Fortis  Benefits  Insurance
Company (Norwest Bank, Sixth and Marquette-MS0063,  Minneapolis, MN 55479) owned
of record and beneficially 0.21% of the International  Portfolio;  they owned of
record  and  beneficially  0.05% of the Fund's  total  outstanding  shares;  and
Lincoln  Benefit Life  Insurance  Company (134 South 13th  Street,  Lincoln,  NE
68508) owned of record and beneficially 0.06% of the Bond Portfolio and 1.16% of
the  Balanced  Portfolio;  they  owned of record and  beneficially  0.04% of the
Fund's total outstanding shares; and Mutual of America Life Insurance Company of
New York (666 5th Avenue,  New York, NY 10103, a New York  corporation)  and its
subsidiary,  American  Life  Insurance  Company  (666 5th Avenue,  New York,  NY
10103), owned of record and beneficially 47.43% of the Bond Portfolio, 65.04% of
the Capital Growth  Portfolio and 29.55% of the  International  Portfolio;  they
owned of record and beneficially  19.96% of the Fund's total outstanding shares;
and Paragon Life Insurance  Company (100 South  Brentwood,  St. Louis, MO 63105)
owned of record and beneficially  0.01% of the Money Market Portfolio,  0.02% of
the Bond Portfolio, 0.07% of the Capital Growth Portfolio, 0.21% of the Balanced
Portfolio,  0.03% of the  International  Portfolio  and 0.02% of the  Growth and
Income  Portfolio;  they  owned of record and  beneficially  0.03% of the Fund's
total  outstanding  shares;  and  Providentmutual  Life and  Annuity  Company of
America,  (300  Continental  Drive,  Newark,  DE  19713)  owned  of  record  and
beneficially 1.49% of the Bond Portfolio;  they owned of record and beneficially
0.18%  of the  Fund's  total  outstanding  shares;  and  Safeco  Life  Insurance
Companies  (15411 N.E.  51st  Street,  Redmond,  WA 98052),  owned of record and
beneficially  5.49% of the  Balanced  Portfolio  and 1.69% of the  International
Portfolio;  they owned of record  and  beneficially  0.55% of the  Fund's  total
outstanding  shares; and The Union Central Life Insurance Company (1876 Waycross
Road, Cincinnati, OH 45240) owned of record and beneficially 28.25% of the Money
Market  Portfolio,  4.02%  of the  Capital  Growth  Portfolio  and  5.52% of the
International  Portfolio;  they owned of record and  beneficially  15.52% of the
Fund's total  outstanding  shares;  and United of Omaha Life  Insurance  Company
(Mutual of Omaha Plaza, Law Division,  3301 Dodge Street, Omaha, NE 68131) owned
of record and beneficially  0.15% of the Money Market  Portfolio;  they owned of
record and beneficially 0.07% of the Fund's total outstanding shares.]

       Shares  entitle  their holders to one vote per share;  however,  separate
votes  will be  taken by each  Portfolio  on  matters  affecting  an  individual
Portfolio. For example, a change in investment policy for the Portfolio would be
voted upon only by shareholders of the Portfolio. Additionally,  approval of the
investment  advisory  agreement  covering  the  Portfolio  is  a  matter  to  be
determined  separately by each  Portfolio.  Approval by the  shareholders of the
Portfolio is effective as to the  Portfolio.  Shares have  noncumulative  voting
rights,  which means that holders of more than 50% of the shares  voting for the
election of Trustees can elect all Trustees  and, in such event,  the holders of
the  remaining  shares  voting for the election of Trustees  will not be able to
elect  any  person  or  persons  as  Trustees.  Shares  have  no  preemptive  or
subscription  rights, and are transferable.  Each share of each of Class of that


                                       37
<PAGE>

Portfolio  shall be  entitled to one vote (or  fraction  thereof in respect of a
fractional  share) on matters  which such  shares (or Class of shares)  shall be
entitled to vote.  Shareholders  of each  Portfolio  shall vote  together on any
matter, except to the extent otherwise required by the Investment Company Act of
1940, as amended (the "1940 Act"), or when the Trustees have determined that the
matter  affects only the interest of  shareholders  of one or more  Classes,  in
which case only the  shareholders  of such Class or Classes shall be entitled to
vote  thereon.  Any matter shall be deemed to have been  effectively  acted upon
with respect to each Portfolio if acted upon as provided in Rule 18f-2 under the
1940 Act or any successor rule and in the Declaration of Trust.

         Shareholders  have certain  rights,  as set forth in the Declaration of
Trust of the Fund, including the right to call a meeting of shareholders for the
purpose of voting on the removal of one or more  Trustees.  Such  removal can be
effected upon the action of two-thirds of the  outstanding  shares of beneficial
interest of the Fund.

Shareholder and Trustee Liability

         The Fund is an entity of the type  commonly  known as a  "Massachusetts
business  trust." Under  Massachusetts  law,  shareholders  of such a trust may,
under  certain  circumstances,  be held  personally  liable as partners  for the
obligations  of  the  trust.  The  Declaration  of  Trust  contains  an  express
disclaimer of shareholder  liability for acts or obligations of the Fund. Notice
of such  disclaimer  will normally be given in each  agreement,  obligation,  or
instrument entered into or executed by the Fund or the Trustees. The Declaration
of  Trust  provides  for  indemnification  out  of  the  Fund  property  of  any
shareholder  held  personally  liable  for  the  obligations  of the  Fund.  The
Declaration of Trust also provides that the Fund shall, upon request, assume the
defense of any claim made against any  shareholder  for any act or obligation of
the Fund and satisfy  any  judgment  thereon.  Thus,  the risk of a  shareholder
incurring  financial  loss on account  of  shareholder  liability  is limited to
circumstances  in which the Fund itself would be unable to meet its obligations.
The Trustees believe that, in view of the above, the risk of personal  liability
of shareholders is remote.

         The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment  or  mistakes  of fact or law,  but nothing in the
Declaration of Trust protects a Trustee  against any liability to which he would
otherwise  be  subject  by reason  of  willful  misfeasance,  bad  faith,  gross
negligence,  or reckless  disregard of the duties involved in the conduct of his
office.

                        ALLOCATION OF PORTFOLIO BROKERAGE

         To the maximum extent feasible, the Adviser places orders for portfolio
transactions through its affiliate, the Distributor, which in turn places orders
on  behalf  of the Fund  with the  issuer,  underwriters  or other  brokers  and
dealers. The Distributor will receive no commissions, fees or other remuneration
for this service. Allocation of brokerage is supervised by the Adviser.

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

         The primary objective of the Adviser in placing orders for the purchase
and sale of  securities  for the  Portfolio is to obtain the most  favorable net
results taking into account such factors as price, commission (negotiable in the
case of U.S. stock  exchange  transactions  but which is generally  fixed in the
case of foreign  exchange  transactions),  if any, size of order,  difficulty of
execution  and skill  required of the  executing  broker/dealer.  Subject to the
foregoing,  the Adviser may consider sales of variable life  insurance  policies
and variable annuity  contracts for which the Fund is an investment  option as a
factor in the selection of firms to execute portfolio transactions.  The Adviser
seeks to evaluate  the overall  reasonableness  of  brokerage  commissions  paid
through  the  familiarity  of  the  Distributor  with  commissions   charged  on
comparable transactions, as well as by comparing commissions paid by the Fund to
reported  commissions  paid by others.  The Adviser  reviews on a routine  basis
commission rates,  execution and settlement services performed,  making internal
and external comparisons.

                                       38
<PAGE>

         When it can be done  consistently with the policy of obtaining the most
favorable net results,  it is the  Adviser's  practice to place such orders with
brokers and dealers who supply  market  quotations  to the custodian of the Fund
for  valuation  purposes,  or  who  supply  research,   market  and  statistical
information  to  the  Adviser.  The  term  "research,   market  and  statistical
information" includes advice as to the value of securities,  the advisability of
investing  in,  purchasing  or  selling  securities;  and  the  availability  of
securities or purchasers or sellers of securities;  and furnishing  analyses and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio  strategy  and  the  performance  of  accounts.  The  Adviser  is  not
authorized when placing  portfolio  transactions for the Fund to pay a brokerage
commission  (to the extent  applicable)  in excess of that which another  broker
might have charged for effecting the same  transaction  solely on account of the
receipt  of  research,  market  or  statistical  information.   Subject  to  the
foregoing,  the Adviser may consider sales of variable life  insurance  policies
and variable annuity contracts for which the Fund is an investment  option, as a
factor in the selection of firms to execute portfolio  transactions.  Except for
implementing  the policy stated above,  there is no intention to place portfolio
transactions  with any  particular  brokers  or dealers  or groups  thereof.  In
effecting  transactions in over-the-counter  securities,  orders are placed with
the principal  market-makers  for the  securities  being traded  unless,  in the
opinion of the Adviser,  after  exercising  care, it appears that more favorable
results are available otherwise.

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

         The Trustees  will  periodically  review  whether the recapture for the
benefit of the Fund of some portion of the brokerage commissions or similar fees
paid by the Fund on portfolio transactions is legally permissible and advisable.
No recapture arrangements are currently in effect.

                               PORTFOLIO TURNOVER

         The average  annual  portfolio  turnover  rate for the Portfolio is the
ratio of the lesser of annual sales or purchases to the monthly average value of
the  portfolio   excluding  all  securities  with  maturities  at  the  time  of
acquisition  of one  year or less.  A higher  rate  involves  greater  brokerage
transaction  expenses to the Portfolio.  Purchases and sales, for the Portfolio,
are made for the Portfolio whenever necessary,  in management's opinion, to meet
the Portfolio's objective. Under normal investment conditions, it is anticipated
that the portfolio  turnover rate for the Portfolio  will not exceed __% for the
initial fiscal year.

                                     EXPERTS

         The  Financial  Highlights  of the  Portfolio  will be  included in the
prospectus  and the  Financial  Statements  incorporated  by  reference  in this
Statement  of  Additional  Information  in  reliance  on the report of Coopers &
Lybrand L.L.P., One Post Office Square, Boston, Massachusetts 02109, independent
accountants,  and given on the  authority of that firm as experts in  accounting
and auditing.

                                     COUNSEL

         The firm of Dechert Price & Rhoads, Ten Post Office Square, Suite 1230,
Boston, Massachusetts 02109, is counsel for the Fund.

                             ADDITIONAL INFORMATION

         The  activities of the Fund are  supervised  by its  Trustees,  who are
elected  by  shareholders.  Shareholders  have one vote  for  each  share  held.
Fractional shares have fractional votes.

                                       39
<PAGE>

         Portfolio securities of the Portfolio are held separately,  pursuant to
a  custodian  agreement,  by Brown  Brothers  Harriman & Co.,  40 Water  Street,
Boston, Massachusetts, 02109, as custodian.

         Scudder Fund Accounting  Corporation ("SFAC"), Two International Place,
Boston,  Massachusetts  02110-4103,  a subsidiary  of the Adviser,  computes net
asset value for the  Portfolio.  The Portfolio  pays SFAC an annual fee equal to
0.065% of the first $150  million of average  daily net  assets,  0.040% of such
assets in  excess  of $150  million  and  0.020% of such  assets in excess of $1
billion, plus holding and transaction charges for this service.

         Scudder  Service  Corporation,  P.O.  Box 2291,  Boston,  Massachusetts
02107-2291, is the transfer and dividend paying agent for the Fund.

         The Fund has a December 31 fiscal year end.

         The name "Scudder  Variable Life Investment Fund" is the designation of
the  Trustees  for the time being under a  Declaration  of Trust dated March 15,
1985, as amended from time to time,  and all persons  dealing with the Fund must
look  solely  to the  property  of the Fund for the  enforcement  of any  claims
against  the Fund as neither  the  Trustees,  officers,  agents or  shareholders
assume any  personal  liability  for  obligations  entered into on behalf of the
Fund. Upon the initial purchase of shares, the shareholder agrees to be bound by
the Fund's  Declaration of Trust,  as amended from time to time. The Declaration
of Trust is on file at the Massachusetts  Secretary of State's Office in Boston,
Massachusetts.

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

                              FINANCIAL STATEMENTS

         The  Statement  of Assets  and  Liabilities  as of _____,  1996 and the
Report of Independent Accountants will be filed by amendment.


                                       40
<PAGE>

                                    APPENDIX

Description of Bond Ratings

Moody's Investors Service, Inc.

         Aaa:  Bonds  that 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  edged."  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.

         Aa:  Bonds  that 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  fluctuations  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.

         A: Bonds that 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 some time in the future.

         Baa:   Bonds  that  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.

         Ba:  Bonds that 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 well
safeguarded  during  both good and bad times  over the  future.  Uncertainty  of
position characterizes bonds in this class.

         B:  Bonds  that  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.

Standard & Poor's

         AAA:  Bonds rated AAA are highest grade debt  obligations.  This rating
indicates an extremely strong capacity to pay principal and interest.

         AA: Bonds rated AA also qualify as high-quality  obligations.  Capacity
to pay principal  and interest is very strong,  and in the majority of instances
they differ from AAA issues only in small degree.

         A: Bonds rated A have a strong  capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.

         BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal.  Whereas they normally exhibit 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.

         Bonds rated BB and B are regarded as having  predominantly  speculative
characteristics with respect to capacity to pay interest and repay principal. BB


<PAGE>

indicates the least degree of speculation. While such debt will likely have some
quality  and   protective   characteristics,   these  are  outweighed  by  large
uncertainties or major risk exposures to adverse conditions.

         BB: Bonds rated BB have less  near-term  vulnerability  to default than
other  speculative  issues.  However,  they face 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.

         B: Bonds rated B have a greater  vulnerability to default but currently
have 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.

Description of Commercial Paper Ratings

Moody's Investors Service, Inc.

         P-1:     Moody's  Commercial  Paper ratings are opinions of the ability
                  of issuers to repay punctually  senior debt obligations  which
                  have  an  original   maturity  not  exceeding  one  year.  The
                  designation  "Prime-1" or "P-1"  indicates the highest quality
                  repayment capacity of the rated issue.

Standard & Poor's

         A-1:     Standard  &  Poor's   Commercial  Paper  ratings  are  current
                  assessments  of the  likelihood  of  timely  payment  of debts
                  considered   short-term  in  the  relevant  market.   The  A-1
                  designation  indicates the degree of safety  regarding  timely
                  payment  is  strong.   Those  issues   determined  to  possess
                  extremely  strong  safety  characteristics  are denoted with a
                  plus (+) sign designation.

<PAGE>
<TABLE>
<CAPTION>
                                     SCUDDER VARIABLE LIFE INVESTMENT FUND

                                           PART C. OTHER INFORMATION

<S>               <C>                                           
Item 24.          Financial Statements and Exhibits
--------          ---------------------------------

                  a.       Financial Statements

                           Included in Part A of this Registration Statement:

                                    Financial Highlights for: the period July 16, 1985 (commencement of
                                    operations) to June 30, 1986, the six months ended December 31, 1986 and
                                    the nine years ended December 31, 1995 for the Money Market Portfolio, the
                                    Bond Portfolio, the Capital Growth Portfolio and the Balanced Portfolio;
                                    the period May 2, 1994 (commencement of operations) to December 31, 1994
                                    and for the one year ended December 31, 1995 for the Growth and Income
                                    Portfolio; the period May 1, 1987 (commencement of operations) to December
                                    31, 1987 and the eight years ended December 31, 1995 for the International
                                    Portfolio.

                                    (To be filed by amendment).

                                    For Global Discovery Portfolio:

                                    Financial Highlights (to be filed by amendment).

                           Included in Part B of this Registration Statement:

                                    Investment Portfolios as of December 31, 1995
                                    Statements of Assets and Liabilities as of December 31, 1995
                                    Statements of Operations for the year ended December 31, 1995
                                    Statements of Changes in Net Assets for the two years ended December 31,
                                    1995
                                    Financial Highlights for: the period July 16, 1985 (commencement of
                                    operations) to June 30, 1986, the six months ended December 31, 1986 and
                                    the nine years ended December 31, 1995 for the Money Market Portfolio, the
                                    Bond Portfolio, the Capital Growth Portfolio and the Balanced Portfolio;
                                    the period May 2, 1994 (commencement of operations) to December 31, 1995
                                    for the Growth and Income Portfolio; the period May 1, 1987 (commencement
                                    of operations) to December 31, 1987 and the eight years ended December 31,
                                    1995 for the International Portfolio.
                                    Notes to Financial Statements
                                    Report of Independent Accountants

                                    (To be filed by amendment).

                                    For Global Discovery Portfolio:

                                    Statement of Assets and Liabilities as of __________, 1996 and related
                                    notes (to be filed by amendment).

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

                   b.        Exhibits:

                             1.    (a)        Declaration of Trust of the Registrant dated March 15, 1985.
                                              (Previously filed as Exhibit (a) to Pre-Effective Amendment No. 4 to
                                              this Registration Statement.)



                                                    Part C - Page 1
<PAGE>

                                   (b)        Amendment to the Declaration of Trust dated March 10, 1988.
                                              (Previously filed as Exhibit 1(b) to Post-Effective Amendment No. 9 to
                                              this Registration Statement.)

                                   (c)        Establishment and Designation of Series of Shares of Beneficial
                                              Interest, without Par Value.
                                              (Previously filed as Exhibit 1(b) to Pre-Effective Amendment No. 4 to
                                              this Registration Statement.)

                                   (d)        Establishment and Designation of Series of Shares of Beneficial
                                              Interest, without Par Value.
                                              (Previously filed as Exhibit 1(c) to Post-Effective Amendment No. 2 to
                                              this Registration Statement.)

                                   (e)        Establishment and Designation of Series of Shares of Beneficial
                                              Interest, without Par Value, with respect to the Managed International
                                              Portfolio.
                                              (Previously filed as Exhibit 1(d) to Post-Effective Amendment No. 7 to
                                              this Registration Statement.)

                                   (f)        Amended Establishment and Designation of Series of Shares of
                                              Beneficial Interest, without Par Value dated April 15, 1988.
                                              (Previously filed as Exhibit 1(f) to Post-Effective Amendment No. 9 to
                                              this Registration Statement.)

                                   (g)        Amended Establishment and Designation of Series of Shares of
                                              Beneficial Interest, without Par Value dated April 30, 1993.
                                              (Previously filed as Exhibit 1(g) to Post-Effective Amendment No. 13
                                              to this Registration Statement.)

                                   (h)        Abolition of Series.
                                              (Previously filed as Exhibit 1(h) to Post-Effective Amendment No. 13
                                              to this Registration Statement.)

                                   (i)        Amended Establishment and Designation of Series of Shares of
                                              Beneficial Interest, without Par Value, with respect to the Growth and
                                              Income Portfolio dated February 11, 1994.
                                              (Previously filed as Exhibit 1(i) to Post-Effective Amendment No. 14
                                              to this Registration Statement.)

                             2.    (a)        By-Laws of the Registrant dated March 15, 1985.
                                              (Previously filed as Exhibit 2 to Pre-Effective Amendment No. 4 to
                                              this Registration Statement.)

                                   (b)        Amendment to the By-Laws of the Registrant dated November 13, 1991.
                                              (Previously filed as Exhibit 2(b) to Post-Effective Amendment No. 12
                                              to this Registration Statement.)

                             3.    Inapplicable.

                             4.    Inapplicable.



                                                    Part C - Page 2
<PAGE>

                             5.    (a)        Investment Advisory Agreement between the Registrant and Scudder,
                                              Stevens & Clark Ltd. dated November 14, 1986.
                                              (Previously filed as Exhibit 5(a) to Post-Effective Amendment No. 5 to
                                              this Registration Statement.)

                                   (b)        Investment Advisory Agreement between the Registrant and Scudder,
                                              Stevens & Clark, Inc. with respect to the Managed International
                                              Portfolio.
                                              (Previously filed as Exhibit 5(b) to Post-Effective Amendment No. 8 to
                                              this Registration Statement.)

                                   (c)        Investment Advisory Agreement between the Registrant and Scudder,
                                              Stevens & Clark, Inc. with respect to the Growth and Income Portfolio
                                              dated May 1, 1994.
                                              (Previously filed as Exhibit 5(c) to Post-Effective Amendment No. 15
                                              to this Registration Statement.)

                                   (d)        Form of an Investment Advisory Agreement between the Registrant and
                                              Scudder, Stevens & Clark, Inc. with respect to the Global Discovery
                                              Portfolio dated May 1,1996 is filed herein.

                             6.    (a)        Underwriting Agreement between the Registrant and Scudder Investor
                                              Services, Inc., dated July 12, 1985.
                                              (Previously filed as Exhibit 6(a) to Post-Effective Amendment No. 1 to
                                              this Registration Statement.)

                                   (b)        Participating Contract and Policy Agreement between Scudder Investor
                                              Services, Inc. and Participating Insurance Companies.
                                              (Previously filed as Exhibit 6(b) to Post-Effective Amendment No. 1 to
                                              this Registration Statement).

                                   (c)        Participating Contract and Policy Agreement between Scudder Investor
                                              Services, Inc. and Carillon Investments, Inc. dated February 18, 1992.
                                              (Previously filed as Exhibit 6(c) to Post-Effective Amendment No. 13
                                              to this Registration Statement.)

                                   (d)        Participating Contract and Policy Agreement between Scudder Investor
                                              Services, Inc. and AEtna Life Insurance and Annuity Company dated
                                              April 27, 1992.
                                              (Previously filed as Exhibit 6(d) to Post-Effective Amendment No. 13
                                              to this Registration Statement.)

                                   (e)        Participating Contract and Policy Agreement between Scudder Investor
                                              Services, Inc. and PNMR Securities, Inc. dated December 1, 1992.
                                              (Previously filed as Exhibit 6(e) to Post-Effective Amendment No. 13
                                              to this Registration Statement.)

                                   (f)        Prototype Participating Contract and Policy Agreement.
                                              (Previously filed as Exhibit 6(f) to Post-Effective Amendment No. 14
                                              to this Registration Statement.)

                             7.    Inapplicable.



                                                    Part C - Page 3
<PAGE>

                             8.    (a)        Custodian Contract between the Registrant and State Street Bank and
                                              Trust Company dated August 22, 1985.
                                              (Previously filed as Exhibit 8(a) to Post-Effective Amendment No. 1 to
                                              this Registration Statement.)

                                   (b)        Fee schedule for Exhibit 8(a).
                                              (Previously filed as Exhibit 8(b) to Post-Effective Amendment No. 9 to
                                              this Registration Statement.)

                                   (c)        Amendment to the Custodian Contract dated February 17, 1987
                                              (Previously filed as Exhibit 8(c) to Post-Effective Amendment No. 9 to
                                              this Registration Statement.)

                                   (d)        Amendment to the Custodian Contract dated February 17, 1987.
                                              (Previously filed as Exhibit 8(d) to Post-Effective Amendment No. 9 to
                                              this Registration Statement.)

                                   (e)        Amendment to the Custodian Contract dated August 13, 1987.
                                              (Previously filed as Exhibit 8(e) to Post-Effective Amendment No. 9 to
                                              this Registration Statement.)

                                   (f)        Amendment to the Custodian Contract dated August 12, 1988.
                                              (Previously filed as Exhibit 8(f) to Post-Effective Amendment No. 9 to
                                              this Registration Statement.)

                                   (g)        Amendment to the Custodian Contract dated August 9, 1991.
                                              (Previously filed as Exhibit 8(g) to Post-Effective Amendment No. 12
                                              to this Registration Statement.)

                                   (h)        Fee Schedule for Exhibit 8(a).
                                              (Previously filed as Exhibit 8(h) to Post-Effective Amendment No. 15
                                              to this Registration Statement.)

                             9.    (a)(1)     Transfer, Dividend Disbursing and Plan Agency Agreement between the
                                              Registrant and State Street Bank and Trust Company dated July 12, 1985.
                                              (Previously filed as Exhibit 9(a)(1) to Post-Effective Amendment No. 1
                                              to this Registration Statement.)

                                   (a)(2)     Fee schedule for Exhibit 9(a)(1).
                                              (Previously filed as Exhibit 9(a)(2) to Post-Effective Amendment No. 1
                                              to this Registration Statement.)

                                   (a)(3)     Transfer Agency and Service Agreement between the Registrant and
                                              Scudder Service Corporation dated April 6, 1992.
                                              (Previously filed as Exhibit 9(a)(3) to Post-Effective Amendment No.
                                              13 to this Registration Statement.)

                                   (b)(1)     Participation Agreement between the Registrant and Security Equity
                                              Life Insurance Company dated September 10, 1985.
                                              (Previously filed as Exhibit 9(b) to Post-Effective Amendment No. 1 to
                                              this Registration Statement.)

                                   (b)(2)     Amendment to Participation Agreement between the Registrant and
                                              Security Equity Life Insurance Company dated July 21, 1987.
                                              (Previously filed as Exhibit 9(b)(2) to Post-Effective Amendment No. 8
                                              to this Registration Statement.)



                                                    Part C - Page 4
<PAGE>

                                   (c)(1)     Participation Agreement between the Registrant and Charter National
                                              Life Insurance Company dated June 9, 1986.
                                              (Previously filed as Exhibit 9(c)(1) to Post- Effective Amendment No.
                                              8 to this Registration Statement.)

                                   (c)(2)     Amendment to Participation Agreement between the Registrant and
                                              Charter National Life Insurance Company dated July 20, 1987.
                                              (Previously filed as Exhibit 9(c)(2) to Post- Effective Amendment No.
                                              8 to this Registration Statement.)

                                   (c)(3)     Amendment to Participation Agreement between the Registrant and
                                              Charter National Life Insurance Company dated May 2, 1988.
                                              (Previously filed as Exhibit 9(c)(3) to Post-Effective Amendment No. 9
                                              to this Registration Statement.)

                                   (c)(4)     Amendment to Participation Agreement between the Registrant and
                                              Charter National Life Insurance Company dated June 30, 1991.
                                              (Previously filed as Exhibit 9(c)(4) to Post-Effective Amendment No.
                                              12 to this Registration Statement.)

                                   (c)(5)     Participation Agreement between the Registrant and The Union Central
                                              Life Insurance Company dated February 18, 1992.
                                              (Previously filed as Exhibit 9(c)(5) to Post-Effective Amendment No.
                                              13 to this Registration Statement.)

                                   (c)(6)     Participation Agreement between the Registrant and AEtna Life
                                              Insurance and Annuity Company dated April 27, 1992.
                                              (Previously filed as Exhibit 9(c)(6) to Post-Effective Amendment No.
                                              13 to this Registration Statement.)

                                   (c)(7)     Participation Agreement between the Registrant and Safeco Life
                                              Insurance Companies dated December 31, 1992.
                                              (Previously filed as Exhibit 9(c)(7) to Post-Effective Amendment No.
                                              13 to this Registration Statement.)

                                   (c)(8)     Prototype Participation Agreement - Form A.
                                              (Previously filed as Exhibit 9(c)(8) to Post-Effective Amendment No.
                                              14 to this Registration Statement.)

                                   (c)(9)     Prototype Participation Agreement - Form B.
                                              (Previously filed as Exhibit 9(c)(9) to Post-Effective Amendment No.
                                              14 to this Registration Statement.)

                                   (c)(10)    First Amendment to the Fund Participation Agreement between AEtna Life
                                              Insurance and Annuity Company and the Fund dated February 19, 1993.
                                              (Previously filed as Exhibit 9(c)(10) to Post-Effective Amendment No.
                                              14 to this Registration Statement.)

                                   (c)(11)    Second Amendment to the Fund Participation Agreement between AEtna
                                              Life Insurance and Annuity Company and the Fund dated August 13, 1993.
                                              (Previously filed as Exhibit 9(c)(11) to Post-Effective Amendment No.
                                              14 to this Registration Statement.)



                                                    Part C - Page 5
<PAGE>

                                   (c)(12)    First Amendment to the Participation Agreement between Mutual of
                                              America Life Insurance Company, The American Life Insurance Company of
                                              New York and the Fund dated August 13, 1993.
                                              (Previously filed as Exhibit 9(c)(12) to Post-Effective Amendment No.
                                              14 to this Registration Statement.)

                                   (c)(13)    First Amendment to the Participation Agreement between The Union
                                              Central Life Insurance Company and the Fund dated September 30, 1993.
                                              (Previously filed as Exhibit 9(c)(13) to Post-Effective Amendment No.
                                              14 to this Registration Statement.)

                                   (c)(14)    Participation Agreement between the Registrant and American Life
                                              Assurance Corporation dated May 3, 1993.
                                              (Previously filed as Exhibit 9(c)(14) to Post-Effective Amendment No.
                                              16 to this Registration Statement).

                                   (c)(15)    Participation Agreement between the Registrant and AUSA Life Insurance
                                              Company, Inc. dated October 21, 1993.
                                              (Previously filed as Exhibit 9(c)(15) to Post-Effective Amendment No.
                                              16 to this Registration Statement).

                                   (c)(16)    Participation Agreement between the Registrant and Banner Life
                                              Insurance Company dated January 18, 1990.
                                              (Previously filed as Exhibit 9(c)(16) to Post-Effective Amendment No.
                                              16 to this Registration Statement).

                                   (c)(17)    Participation Agreement between the Registrant and Banner Life
                                              Insurance Company dated January 18, 1995.
                                              (Previously filed as Exhibit 9(c)(17) to Post-Effective Amendment No.
                                              16 to this Registration Statement).

                                   (c)(18)    Participation Agreement between the Registrant and Fortis Benefits
                                              Insurance Company dated June 1, 1994.
                                              (Previously filed as Exhibit 9(c)(18) to Post-Effective Amendment No.
                                              16 to this Registration Statement).

                                   (c)(19)    Participation Agreement between the Registrant and Lincoln Benefit
                                              Life Company dated December 30, 1993.
                                              (Previously filed as Exhibit 9(c)(19) to Post-Effective Amendment No.
                                              16 to this Registration Statement).

                                   (c)(20)    Participation Agreement between the Registrant and Charter National
                                              Life Insurance Company dated September 3, 1993.
                                              (Previously filed as Exhibit 9(c)(20)to Post-Effective Amendment No.
                                              16 to this Registration Statement).

                                   (c)(21)    Participation Agreement between the Registrant and Mutual of America
                                              Life Insurance Company dated December 30, 1988.
                                              (Previously filed as Exhibit 9(c)(21) to Post-Effective Amendment No.
                                              16 to this Registration Statement).

                                   (c)(22)    First Amendment to Participation Agreement between the Registrant and
                                              Mutual of America Life Insurance Company dated August 13, 1993.
                                              (Previously filed as Exhibit 9(c)(22) to Post-Effective Amendment No.
                                              16 to this Registration Statement).



                                                    Part C - Page 6
<PAGE>

                                   (c)(23)    Participation Agreement between the Registrant and Mutual of America
                                              Life Insurance Company dated December 30, 1988.
                                              (Previously filed as Exhibit 9(c)(23) to Post-Effective Amendment No.
                                              16 to this Registration Statement).

                                   (c)(24)    First Amendment to Participation Agreement between the Registrant and
                                              Mutual of America Life Insurance Company dated August 13, 1993.
                                              (Previously filed as Exhibit 9(c)(24) to Post-Effective Amendment No.
                                              16 to this Registration Statement).

                                   (c)(25)    Participation Agreement between the Registrant and Mutual of America
                                              Life Insurance Company dated December 30, 1993.
                                              (Previously filed as Exhibit 9(c)(25) to Post-Effective Amendment No.
                                              16 to this Registration Statement).

                                   (c)(26)    Participation Agreement between the Registrant and Paragon Life
                                              Insurance Company dated April 30, 1993.
                                              (Previously filed as Exhibit 9(c)(26) to Post-Effective Amendment No.
                                              16 to this Registration Statement).

                                   (c)(27)    Participation Agreement between the Registrant and Provident Mutual
                                              Life Insurance Company of Philadelphia dated July 21, 1993.
                                              (Previously filed as Exhibit 9(c)(27) to Post-Effective Amendment No.
                                              16 to this Registration Statement).

                                   (c)(28)    Participation Agreement between the Registrant and United of Omaha
                                              Life Insurance Company dated May 15, 1994.
                                              (Previously filed as Exhibit 9(c)(28) to Post-Effective Amendment No.
                                              16 to this Registration Statement).

                                   (c)(29)    First Amendment to the Participation Agreement between the Registrant
                                              and United of Omaha Life Insurance Company dated January 23, 1995.
                                              (Previously filed as Exhibit 9(c)(29) to Post-Effective Amendment No.
                                              16 to this Registration Statement).

                                   (c)(30)    Participation Agreement between the Registrant and USAA Life Insurance
                                              Company dated February 3, 1995.
                                              (Previously filed as Exhibit 9(c)(30) to Post-Effective Amendment No.
                                              16 to this Registration Statement).

                                   (c)(31)    Amendment to the Participation Agreement, the Reimbursement Agreement
                                              and the Participating Contract and Policy Agreement dated February 3,
                                              1995.
                                              (Previously filed as Exhibit 9(c)(31) to Post-Effective Amendment No.
                                              16 to this Registration Statement).

                                   (d)        Accounting Services Agreement between the Registrant and Scudder
                                              Investor Services, Inc. dated August 1, 1989.
                                              (Previously filed as Exhibit 9(d) to Post-Effective Amendment No. 15
                                              to this Registration Statement.)



                                                    Part C - Page 7
<PAGE>

                                   (e)(1)     Fund Accounting Services Agreement between the Registrant, on behalf
                                              of the Money Market Portfolio, and Scudder Fund Accounting Corporation
                                              dated October 1, 1994.
                                              (Previously filed as Exhibit 9(e)(1) to Post-Effective Amendment No.
                                              15 to this Registration Statement.)

                                   (e)(2)     Fund Accounting Services Agreement between the Registrant, on behalf
                                              of the Bond Portfolio, and Scudder Fund Accounting Corporation dated
                                              October 1, 1994.
                                              (Previously filed as Exhibit 9(e)(2) to Post-Effective Amendment No.
                                              15 to this Registration Statement.)

                                   (e)(3)     Fund Accounting Services Agreement between the Registrant, on behalf
                                              of the Balanced Portfolio, and Scudder Fund Accounting Corporation
                                              dated October 1, 1994.
                                              (Previously filed as Exhibit 9(e)(3) to Post-Effective Amendment No.
                                              15 to this Registration Statement.)

                                   (e)(4)     Fund Accounting Services Agreement between the Registrant, on behalf
                                              of the Growth and Income Portfolio, and Scudder Fund Accounting
                                              Corporation dated October 1, 1994.
                                              (Previously filed as Exhibit 9(e)(4) to Post-Effective Amendment No.
                                              15 to this Registration Statement.)

                                   (e)(5)     Fund Accounting Services Agreement between the Registrant, on behalf
                                              of the Capital Growth Portfolio, and Scudder Fund Accounting
                                              Corporation dated October 1, 1994.
                                              (Previously filed as Exhibit 9(e)(5) to Post-Effective Amendment No.
                                              15 to this Registration Statement.)

                                   (e)(6)     Fund Accounting Services Agreement between the Registrant, on behalf
                                              of the International Portfolio, and Scudder Fund Accounting
                                              Corporation dated October 1, 1994.
                                              (Previously filed as Exhibit 9(e)(6) to Post-Effective Amendment No.
                                              15 to this Registration Statement.)

                             10.   Inapplicable.

                             11.   Inapplicable.

                             12.   Inapplicable.

                             13.   Inapplicable.

                             14.   Inapplicable.

                             15.   Inapplicable.

                             16.   Schedule of Computation of Performance Calculation.
                                   (Previously filed as Exhibit 16 to Post-Effective Amendment No. 9 to Registration
                                   Statement.)



                                                    Part C - Page 8
<PAGE>

Item 25.          Persons Controlled by or under Common Control with Registrant
--------          -------------------------------------------------------------
[to be updated]
                  As of December 31, 1994, 45.29% of the outstanding shares of beneficial interest of the
                  Registrant are owned by Charter National Life Insurance Company of Missouri ("CNL").  CNL
                  is a wholly-owned subsidiary of Leucadia National Corporation.  Leucadia National
                  Corporation is a New York corporation.

Item 26.          Number of Holders of Securities (as of December 31, 1995)
--------          ---------------------------------------------------------

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

                   Shares of beneficial interest,
                   of no par value
                   Money Market Portfolio                                                (6)

                   Shares of beneficial interest,
                   of no par value
                   Bond Portfolio                                                        (9)

                   Shares of beneficial interest,
                   of no par value
                   Balanced Portfolio                                                    (6)

                   Shares of beneficial interest,
                   of no par value
                   Growth and Income Portfolio                                           (4)

                   Shares of beneficial interest,
                   of no par value
                   Capital Growth Portfolio                                              (7)

                   Shares of beneficial interest,
                   of no par value
                   International Portfolio                                               (13)

Item 27.          Indemnification.
--------          ----------------

                  A policy of insurance covering Scudder, Stevens & Clark, Inc., its subsidiaries including
                  Scudder Investor Services, Inc., and all of the registered investment companies advised by
                  Scudder, Stevens & Clark, Inc. insures the Registrant's Trustees and officers and others
                  against liability arising by reason of an alleged breach of duty caused by any negligent
                  act, error or accidental omission in the scope of their duties.

                           Article IV, Sections 4.1 - 4.3 of Registrant's Declaration of Trust provide as
                           follows:

                           Section 4.1. No Personal Liability of Shareholders, Trustees, etc. No Shareholder
                           shall be subject to any personal liability whatsoever to any Person in connection
                           with Fund Property or the acts, obligations or affairs of the Fund.  No Trustee,
                           officer, employee or agent of the Fund shall be subject to any personal liability
                           whatsoever to any Person, other than to the Fund or its Shareholders, in connection
                           with Fund Property or the affairs of the Fund, save only that arising from bad
                           faith, willful misfeasance, gross negligence or reckless disregard of his duties
                           with respect to such Person; and all such Persons shall look solely to the Fund
                           Property for satisfaction of claims of any nature arising in connection with the
                           affairs of the Fund.  If any Shareholder, Trustee, officer, employee, or agent, as
                           such, of the Fund, is made a party to any suit or proceeding to enforce any such
                           liability of the Fund, he shall not, on account thereof, be held to any personal
                           liability.  The Fund shall indemnify and hold each Shareholder harmless from and
                           against all claims and liabilities, to which such Shareholder may become subject by


                                                    Part C - Page 9
<PAGE>

                           reason of his being or having been a Shareholder, and shall reimburse such
                           Shareholder for all legal and other expenses reasonably incurred by him in
                           connection with any such claim or liability.  The rights accruing to a Shareholder
                           under this Section 4.l shall not exclude any other right to which such Shareholder
                           may be lawfully entitled, nor shall anything herein contained restrict the right of
                           the Fund to indemnify or reimburse a Shareholder in any appropriate situation even
                           though not specifically provided herein.

                           Section 4.2. Non-Liability of Trustees, etc. No Trustee, officer, employee or agent
                           of the Fund shall be liable to the Fund, its Shareholders, or to any Shareholder,
                           Trustee, officer, employee, or agent thereof for any action or failure to act
                           (including without limitation the failure to compel in any way any former or acting
                           Trustee to redress any breach of trust) except for his own bad faith, willful
                           misfeasance, gross negligence or reckless disregard of the duties involved in the
                           conduct of his office.

                           Section 4.3 Mandatory Indemnification. (a) Subject to the exceptions and
                           limitations contained in paragraph (b) below:

                                    (i)     every person who is, or has been, a Trustee or officer of the
                                            Fund shall be indemnified by the Fund to the fullest extent
                                            permitted by law against all liability and against all expenses
                                            reasonably incurred or paid by him in connection with any claim,
                                            action, suit or proceeding in which he becomes involved as a
                                            party or otherwise by virtue of his being or having been a
                                            Trustee or officer and against amounts paid or incurred by him in
                                            the settlement thereof;

                                    (ii)    the words "claim," "action," "suit," or "proceeding" shall apply
                                            to all claims, actions, suits or proceedings (civil, criminal, or
                                            other, including appeals), actual or threatened; and the words
                                            "liability" and "expenses" shall include, without limitation,
                                            attorneys' fees, costs, judgments, amounts paid in settlement,
                                            fines, penalties and other liabilities.

                           (b)      No indemnification shall be provided hereunder to a Trustee or officer:

                                    (i)     against any liability to the Fund or the Shareholders by reason
                                            of willful misfeasance, bad faith, gross negligence or reckless
                                            disregard of the duties involved in the conduct of his office;

                                    (ii)    with respect to any matter as to which he shall have been finally
                                            adjudicated not to have acted in good faith in the reasonable
                                            belief that his action was in the best interest of the Fund;

                                    (iii)   in the event of a settlement or other disposition not involving a
                                            final adjudication as provided in paragraph (b)(i) resulting in a
                                            payment by a Trustee or officer, unless there has been a
                                            determination that such Trustee or officer did not engage in
                                            willful misfeasance, bad faith, gross negligence or reckless
                                            disregard of the duties involved in the conduct of his office;

                                            (A)      by the court or other body approving the settlement or
                                                     other disposition; or

                                            (B)      based upon a review of readily available facts (as
                                                     opposed to a full trial-type inquiry) by (x) vote of a
                                                     majority of the Disinterested Trustees acting on the
                                                     matter (provided that a majority of the Disinterested
                                                     Trustees then in office act on the matter) or (y)
                                                     written opinion of independent legal counsel.

                                                    Part C - Page 10
<PAGE>

                           (c)      The rights of indemnification herein provided may be insured against by
                                    policies maintained by the Fund, shall be severable, shall not affect any
                                    other rights to which any Trustee or officer may now or hereafter be
                                    entitled, shall continue as to a person who has ceased to be such Trustee
                                    or officer and shall inure to the benefit of the heirs, executors,
                                    administrators and assigns of such a person.  Nothing contained herein
                                    shall affect any rights to indemnification to which personnel of the Fund
                                    other than Trustees and officers may be entitled by contract or otherwise
                                    under law.

                           (d)      Expenses of preparation and presentation of a defense to any claim,
                                    action, suit, or proceeding of the character described in paragraph (a) of
                                    this Section 4.3 shall be advanced by the Fund prior to final disposition
                                    thereof upon receipt of an undertaking by or on behalf of the recipient,
                                    to repay such amount if it is ultimately determined that he is not
                                    entitled to indemnification under this Section 4.3, provided that either:

                                    (i)     such undertaking is secured by a surety bond or some other
                                            appropriate security provided by the recipient, or the Fund shall
                                            be insured against losses arising out of any such advances; or

                                    (ii)    a majority of the Disinterested Trustees acting on the matter
                                            (provided that a majority of the Disinterested Trustees act on
                                            the matter) or an independent legal counsel in a written opinion
                                            shall determine, based upon a review of readily available facts
                                            (as opposed to a full trial-type inquiry), that there is reason
                                            to believe that the recipient ultimately will be found entitled
                                            to indemnification.

                           As used in this Section 4.3, a "Disinterested Trustee" is one who is not (i) an
                           "Interested Person" of the Trust (including anyone who has been exempted from being
                           an "Interested Person" by any rule, regulation or order of the Commission), or (ii)
                           involved in the claim, action, suit or proceeding.

Item 28.          Business or Other Connections of Investment Adviser
--------          ---------------------------------------------------

                  The Adviser has stockholders and employees who are denominated officers but do not as such
                  have corporation-wide responsibilities.  Such persons are not considered officers for the
                  purpose of this Item 28.

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

Stephen R. Beckwith        Director, Scudder, Stevens & Clark, Inc. (investment adviser)**

Lynn S. Birdsong           Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
                           Supervisory Director, The Latin America Income and Appreciation Fund N.V. (investment
                                 company) +
                           Supervisory Director, The Venezuela High Income Fund N.V. (investment company) xx
                           Supervisory Director, Scudder Mortgage Fund (investment company) +
                           Supervisory Director, Scudder Floating Rate Funds for Fannie Mae  Mortgage Securities I
                                 & II (investment company) +
                           Director, Scudder, Stevens & Clark (Luxembourg) S.A. (investment manager) #
                           Trustee, Scudder Funds Trust (investment company)*
                           President & Director, The Latin America Dollar Income Fund, Inc.  (investment company)**
                           President & Director, Scudder World Income Opportunities Fund, Inc.  (investment
                                 company)**


                                                    Part C - Page 11
<PAGE>

                           Director, Inverlatin Dollar Income Fund, Inc. (investment company) Georgetown, Grand
                                 Cayman, Cayman Islands
                           Director, ProMexico Fixed Income Dollar Fund, Inc. (investment company) Georgetown,
                                 Grand Cayman, Cayman Islands
                           Director, Canadian High Income Fund (investment company)#
                           Director, Hot Growth Companies Fund (investment company)#
                           Partner, George Birdsong Co., Rye, NY

Nicholas Bratt             Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
                           President & Director, Scudder New Europe Fund, Inc. (investment company)**
                           President & Director, The Brazil Fund, Inc. (investment company)**
                           President & Director, The First Iberian Fund, Inc. (investment company)**
                           President & Director, Scudder International Fund, Inc.  (investment company)**
                           President & Director, Scudder Global Fund, Inc. (Director only on Scudder Global Fund,
                                 a series of Scudder Global Fund, Inc.) (investment company)**
                           President & Director, The Korea Fund, Inc. (investment company)**
                           President & Director, Scudder New Asia Fund, Inc. (investment company)**
                           President, The Argentina Fund, Inc. (investment company)**
                           Vice President, Scudder, Stevens & Clark Corporation (Delaware) (investment adviser)**
                           Vice President, Scudder, Stevens & Clark Japan, Inc. (investment adviser)###
                           Vice President, Scudder, Stevens & Clark of Canada Ltd. (Canadian investment adviser)
                                 Toronto, Ontario, Canada
                           Vice President, Scudder, Stevens & Clark Overseas Corporationoo

Linda C. Coughlin          Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
                           Director, Scudder Investor Services, Inc. (broker/dealer)**
                           President & Trustee, AARP Cash Investment Funds  (investment company)**
                           President & Trustee, AARP Growth Trust (investment company)**
                           President & Trustee, AARP Income Trust (investment company)**
                           President & Trustee, AARP Tax Free Income Trust  (investment company)**
                           Director, SFA, Inc. (advertising agency)*

Margaret D. Hadzima        Director, Scudder, Stevens & Clark, Inc. (investment adviser)*
                           Assistant Treasurer, Scudder Investor Services, Inc. (broker/dealer)*

Jerard K. Hartman          Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
                           Vice President, Scudder California Tax Free Trust (investment company)*
                           Vice President, Scudder Equity Trust (investment company)*
                           Vice President, Scudder Cash Investment Trust (investment company)*
                           Vice President, Scudder Global Fund, Inc. (investment company)**
                           Vice President, Scudder GNMA Fund (investment company)*
                           Vice President, Scudder Portfolio Trust (investment company)*
                           Vice President, Scudder International Fund, Inc. (investment company)**
                           Vice President, Scudder Investment Trust (investment company)*
                           Vice President, Scudder Municipal Trust (investment company)*
                           Vice President, Scudder Mutual Funds, Inc. (investment company)**
                           Vice President, Scudder New Asia Fund, Inc. (investment company)**
                           Vice President, Scudder New Europe Fund, Inc. (investment company)**
                           Vice President, Scudder Securities Trust (investment company)*
                           Vice President, Scudder State Tax Free Trust (investment company)*
                           Vice President, Scudder Funds Trust (investment company)*
                           Vice President, Scudder Tax Free Money Fund (investment company)*
                           Vice President, Scudder Tax Free Trust (investment company)*
                           Vice President, Scudder U.S. Treasury Money Fund (investment company)*
                           Vice President, Scudder Variable Life Investment Fund (investment company)*
                           Vice President, The Brazil Fund, Inc. (investment company)**


                                                    Part C - Page 12
<PAGE>

                           Vice President, The Korea Fund, Inc. (investment company)**
                           Vice President, The Argentina Fund, Inc. (investment company)**
                           Vice President & Director, Scudder, Stevens & Clark of Canada, Ltd. (Canadian
                                 investment adviser) Toronto, Ontario, Canada
                           Vice President, The First Iberian Fund, Inc. (investment company)**
                           Vice President, The Latin America Dollar Income Fund, Inc. (investment company)**
                           Vice President, Scudder World Income Opportunities Fund, Inc. (investment company)**

Richard A. Holt            Director, Scudder, Stevens & Clark, Inc. (investment adviser)++
                           Vice President, Scudder Variable Life Investment Fund (investment company)*

Dudley H. Ladd             Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
                           Senior Vice President & Director, Scudder Investor Services, Inc. (broker/dealer)*
                           President & Director, SFA, Inc. (advertising agency)*
                           Vice President & Trustee, Scudder Cash Investment Trust  (investment company)*
                           Trustee, Scudder Investment Trust (investment company)*
                           Trustee, Scudder Portfolio Trust (investment company)*
                           Trustee, Scudder Municipal Trust (investment company)*
                           Trustee, Scudder State Tax Free Trust (investment company)*
                           Vice President, Scudder U.S. Treasury Money Fund  (investment company)*

Douglas M. Loudon          Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
                           Vice President & Trustee, Scudder Equity Trust (investment company)*
                           Vice President, Scudder Global Fund, Inc. (investment company)**
                           Vice President, Scudder Investment Trust (investment company)*
                           Vice President & Director, Scudder Mutual Funds, Inc. (investment company)**
                           Vice President & Trustee, Scudder Securities Trust (investment company)*
                           Vice President, AARP Cash Investment Funds (investment company)**
                           Vice President, AARP Growth Trust (investment company)**
                           Vice President, AARP Income Trust (investment company)**
                           Vice President, AARP Tax Free Income Trust (investment company)**
                           Vice President, Scudder, Stevens & Clark Corporation (Delaware) (investment adviser)**
                           Senior Vice President, Scudder Investor Services, Inc. (broker/dealer)*
                           Vice President, Scudder, Stevens & Clark of Canada Ltd. (Canadian investment adviser)
                                 Toronto, Ontario, Canada
                           Chairman, World Capital Fund (investment company) Luxembourg ##
                           Managing Director, Kankaku - Scudder Capital Asset Management Corporation (investment
                                 adviser)**
                           Chairman & Director, Scudder, Stevens & Clark Japan, Inc. (investment adviser)###
                           President, The Japan Fund, Inc. (investment company)**
                           Trustee, Scudder, Stevens & Clark Supplemental Retirement Income Plan
                           Trustee, Scudder, Stevens & Clark Profit Sharing Plan **
                           Chairman & Director, The World Capital Fund (investment company) Luxembourg
                           Chairman & Director, Scudder, Stevens & Clark (Luxembourg), S.A., Luxembourg#
                           Chairman, Canadian High Income Fund (investment company) #
                           Chairman, Hot Growth Companies Fund (investment company) #
                           Vice President & Director, Scudder Precious Metals, Inc. xxx
                           Director, Berkshire Farm & Services for Youth
                           Board of Governors & President, Investment Counsel Association of America

John T. Packard            Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
                           President, Montgomery Street Income Securities, Inc. (investment company) o
                           Director, Scudder Realty Advisors, Inc. (realty investment adviser) x

                                                    Part C - Page 13
<PAGE>

Juris Padegs               Secretary & Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
                           Chairman & Director, The Brazil Fund, Inc.  (investment company)**
                           Vice President & Trustee, Scudder Equity Trust (investment company)*
                           Chairman & Director, The First Iberian Fund, Inc. (investment company)**
                           Trustee, Scudder Funds Trust (investment company)*
                           Vice President & Assistant Secretary, Scudder Global Fund, Inc. (investment company)**
                           Trustee, Scudder Investment Trust (investment company)*
                           Vice President, Assistant Secretary & Director, Scudder International Fund, Inc.
                                 (investment company)**
                           Vice President, The Latin America Dollar Income Fund, Inc. (investment company)**
                           Trustee, Scudder Municipal Trust (investment company)*
                           Vice President & Assistant Secretary, Scudder Mutual Funds, Inc. (investment company)**
                           Vice President & Director, Scudder New Europe Fund, Inc. (investment company)**
                           Trustee, Scudder State Tax Free Trust (investment company)*
                           Vice President, Assistant Secretary & Director, Scudder New Asia Fund, Inc. (investment
                                 company)**
                           Trustee, Scudder Securities Trust (investment company)*
                           Vice President & Trustee, Scudder Tax Free Money Fund (investment company)*
                           Trustee, Scudder Tax Free Trust (investment company)*
                           Chairman & Director, The Korea Fund, Inc. (investment company)**
                           Vice President & Director, The Argentina Fund, Inc. (investment company)**
                           Secretary, Scudder, Stevens & Clark of Canada Ltd. (Canadian investment adviser),
                                 Toronto, Ontario, Canada
                           Vice President & Director, Scudder Realty Advisors, Inc. (realty investment adviser) x
                           Assistant Secretary, SFA, Inc. (advertising agency)*
                           Vice President & Director, Scudder Investor Services, Inc. (broker/dealer)**
                           Assistant Treasurer & Director, Kankaku - Scudder Capital Asset Management (investment
                                 adviser)**
                           Chairman & Director, Scudder, Stevens & Clark Japan, Inc. (investment adviser)###
                           Chairman & Director, Scudder, Stevens & Clark Corporation (Delaware) (investment
                                 adviser)**
                           Chairman & Supervisory Director, Sovereign High Yield Investment Company N.V.
                                 (investment company) +
                           Director, President Investment Trust Corporation (Joint Venture)***
                           Vice President, Scudder World Income Opportunities Fund, Inc. (investment company)**
                           Director, Vice President & Assistant Secretary, Scudder Precious Metals, Inc. xxx
                           Vice President & Director, Scudder Service Corporation (in-house transfer agent)*
                           Chairman, Scudder, Stevens & Clark Overseas Corporationoo
                           Director, Scudder Trust (Cayman) Ltd. (trust services company)xxx
                           Director, ICI Mutual Insurance Company, Inc., Washington, D.C.
                           Director, Baltic International USA
                           Director, Baltic International Airlines (a limited liability company) Riga, Latvia

Daniel Pierce              Chairman & Director, Scudder New Europe Fund, Inc. (investment company)**
                           Trustee, California Tax Free Trust (investment company)*
                           President & Trustee, Scudder Equity Trust (investment company)**
                           Director, The First Iberian Fund, Inc. (investment company)**
                           President & Trustee, Scudder GNMA Fund (investment company)*
                           President & Trustee, Scudder Portfolio Trust (investment company)*
                           President & Trustee, Scudder Funds Trust (investment company)*
                           President & Director, Scudder Institutional Fund, Inc. (investment company)**
                           President & Director, Scudder Fund, Inc. (investment company)**
                           Director, Scudder International Fund, Inc. (investment company)**
                           President & Trustee, Scudder Investment Trust (investment company)*


                                                    Part C - Page 14
<PAGE>

                           Vice President & Trustee, Scudder Municipal Trust (investment company)*
                           President & Director, Scudder Mutual Funds, Inc. (investment company)**
                           Director, Scudder New Asia Fund, Inc. (investment company)**
                           President & Trustee, Scudder Securities Trust (investment company)**
                           Trustee, Scudder State Tax Free Trust (investment company)*
                           Vice President & Trustee, Scudder Variable Life Investment Fund (investment company)*
                           Director, The Brazil Fund, Inc. (until 7/94) (investment company)**
                           Vice President & Assistant Treasurer, Montgomery Street Income Securities, Inc.
                                 (investment company)o
                           Vice President & Director, Scudder Global Fund, Inc.  (investment company)**
                           Vice President, Director & Assistant Treasurer, Scudder Investor Services, Inc.
                                 (broker/dealer)*
                           President & Director, Scudder Service Corporation (in-house transfer agent)*
                           Chairman & President, Scudder, Stevens & Clark of Canada, Ltd. (Canadian investment
                                 adviser), Toronto, Ontario, Canada
                           Chairman, Assistant Treasurer & Director, Scudder, Stevens & Clark, Inc. (investment
                                 adviser)**
                           President & Director, Scudder Precious Metals, Inc. xxx
                           Chairman & Director, Scudder Global Opportunities Funds (investment company) Luxembourg
                           Chairman, Scudder, Stevens & Clark, Ltd. (investment adviser) London, England
                           Director, Scudder Fund Accounting Corporation (in-house fund accounting agent)*
                           Director, Scudder Realty Holdings Corporation (a real estate holding company)*
                           Director, Scudder Latin America Investment Trust PLC (investment company)@
                           Incorporator, Scudder Trust Company (a trust company)+++
                           Director, Fiduciary Trust Company (banking & trust company) Boston, MA
                           Director, Fiduciary Company Incorporated (banking & trust company) Boston, MA
                           Trustee, New England Aquarium, Boston, MA

Cornelia M. Small          Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
                           Vice President, Scudder Global Fund, Inc. (investment company)**
                           Vice President, AARP Cash Investment Funds (investment company)*
                           Vice President, AARP Growth Trust (investment company)*
                           Vice President, AARP Income Trust (investment company)*
                           Vice President, AARP Tax Free Income Trust (investment company)*

Edmond D. Villani          President & Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
                           Chairman & Director, Scudder Global Fund, Inc. (investment company)**
                           Chairman & Director, Scudder International Fund, Inc. (investment company)**
                           Chairman & Director, Scudder New Asia Fund, Inc. (investment company)**
                           Trustee, Scudder Securities Trust (investment company)*
                           Chairman & Director, The Argentina Fund, Inc. (investment company)**
                           Director, Scudder Realty Advisors, Inc. (realty investment adviser) x
                           Supervisory Director, Scudder Mortgage Fund (investment company) +
                           Chairman & Director, The Latin America Dollar Income Fund, Inc. (investment company)**
                           Director, Scudder, Stevens & Clark Japan, Inc. (investment adviser)###
                           Chairman & Director, Scudder World Income Opportunities Fund, Inc.  (investment
                                 company)**
                           Supervisory Director, Scudder Floating Rate Funds for Fannie Mae Mortgage Securities I
                                 & II (investment company)+
                           Director, The Brazil Fund, Inc. (investment company)**
                           Director, Indosuez High Yield Bond Fund (investment company) Luxembourg
                           President & Director, Scudder, Stevens & Clark Overseas Corporationoo
                           President & Director, Scudder, Stevens & Clark Corporation (Delaware) (investment
                                 adviser)**


                                                    Part C - Page 15
<PAGE>

                           Director, IBJ Global Investment Manager S.A., (Luxembourg investment management
                                 company) Luxembourg, Grand-Duchy of Luxembourg

         *        Two International Place, Boston, MA
         x        333 South Hope Street, Los Angeles, CA
         **       345 Park Avenue, New York, NY
         ++       Two Prudential Plaza, 180 N. Stetson Avenue, Chicago, IL
         +++      5 Industrial Way, Salem, NH
         o        101 California Street, San Francisco, CA
         #        11, rue Aldringen, L-1118 Luxembourg, Grand-Duchy of Luxembourg
         +        John B. Gorsiraweg 6, Willemstad Curacao, Netherlands Antilles
         xx       De Ruyterkade 62, P.O. Box 812, Willemstad Curacao, Netherlands Antilles
         ##       2 Boulevard Royal, Luxembourg
         ***      B1 2F3F 248 Section 3, Nan King East Road, Taipei, Taiwan
         xxx      Grand Cayman, Cayman Islands, British West Indies
         oo       20-5, Ichibancho, Chiyoda-ku, Tokyo, Japan
         ###      1-7, Kojimachi, Chiyoda-ku, Tokyo, Japan
         @        c/o Sinclair Hendersen Limited, 23 Cathedral Yard, Exeter, Devon

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

         (a)      Scudder California Tax Free Trust
                  Scudder Cash Investment Trust
                  Scudder Equity Trust
                  Scudder Fund, Inc.
                  Scudder Funds Trust
                  Scudder Global Fund, Inc.
                  Scudder GNMA Fund
                  Scudder Institutional Fund, Inc.
                  Scudder International Fund, Inc.
                  Scudder Investment Trust
                  Scudder Municipal Trust
                  Scudder Mutual Funds, Inc.
                  Scudder Portfolio Trust
                  Scudder Securities Trust
                  Scudder State Tax Free Trust
                  Scudder Tax Free Money Fund
                  Scudder Tax Free Trust
                  Scudder U.S. Treasury Money Fund
                  Scudder Variable Life Investment Fund
                  AARP Cash Investment Funds
                  AARP Growth Trust
                  AARP Income Trust
                  AARP Tax Free Income Trust
                  The Japan Fund, Inc.

         (b)

         (1)                               (2)                                     (3)

         Name and Principal                Position and Offices with               Positions and
         Business Address                  Scudder Investor Services, Inc.         Offices with Registrant
         ----------------                  -------------------------------         -----------------------

         E. Michael Brown                  Assistant Treasurer                     None
         Two International Place
         Boston, MA  02110

                                                    Part C - Page 16
<PAGE>
         Name and Principal                Position and Offices with               Positions and
         Business Address                  Scudder Investor Services, Inc.         Offices with Registrant
         ----------------                  -------------------------------         -----------------------

         Mark S. Casady                    Vice President and Director             None
         Two International Place
         Boston, MA  02110

         Linda Coughlin                    Director                                None
         345 Park Avenue
         New York, NY  10154

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

         Coleen Downs Dinneen              Assistant Clerk                         Assistant Secretary
         Two International Place
         Boston, MA  02110

         Paul J. Elmlinger                 Vice President                          None
         345 Park Avenue
         New York, NY  10154

         Cuyler W. Findlay                 Senior Vice President                   None
         345 Park Avenue
         New York, NY 10154

         Margaret D. Hadzima               Assistant Treasurer                     None
         Two International Place
         Boston, MA  02110

         Thomas W. Joseph                  Vice President, Director,               Vice President
         Two International Place           Treasurer and Assistant Clerk
         Boston, MA 02110

         Dudley H. Ladd                    Senior Vice President and               None
         Two International Place           Director
         Boston, MA 02110

         David S. Lee                      President, Assistant                    Vice President
         Two International Place           Treasurer and Director
         Boston, MA 02110

         Douglas M. Loudon                 Senior Vice President                   None
         345 Park Avenue
         New York, NY  10154

         Thomas F. McDonough               Clerk                                   Secretary
         Two International Place
         Boston, MA 02110

         Thomas H. O'Brien                 Assistant Treasurer                     None
         345 Park Avenue
         New York, NY  10154

                                                    Part C - Page 17
<PAGE>
         Name and Principal                Position and Offices with               Positions and
         Business Address                  Scudder Investor Services, Inc.         Offices with Registrant
         ----------------                  -------------------------------         -----------------------

         Edward J. O'Connell               Assistant Treasurer                     Vice President and
         345 Park Avenue                                                           Assistant Secretary
         New York, NY 10154

         Juris Padegs                      Vice President and Director             None
         345 Park Avenue
         New York, NY 10154

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

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

         Edmund J. Thimme                  Vice President and Director             None
         345 Park Avenue
         New York, NY  10154

         David B. Watts                    Assistant Treasurer                     President and Trustee
         Two International Place
         Boston, MA 02110

         Linda J. Wondrack                 Vice President                          None
         Two International Place
         Boston, MA 02110

         The Underwriter has employees who are denominated officers of an operational area.  Such persons do
         not have corporation-wide responsibilities and are not considered officers for the purpose of this
         Item 29.

         (c)

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

               Scudder Investor              None                None                None               None
                Services, Inc.

Item 30.          Location of Accounts and Records.
--------          ---------------------------------

                  Certain accounts, books and other documents required to be maintained by Section 31(a) of
                  the 1940 Act and the Rules promulgated thereunder are maintained by Scudder, Stevens &
                  Clark, Inc., Two International Place, Boston, MA 02110-4103.  Records relating to the
                  duties of the Registrant's custodian are maintained by State Street Bank and Trust Company,
                  Heritage Drive, North Quincy, Massachusetts.  Records relating to the duties of the
                  Registrant's transfer agent are maintained by Scudder Service Corporation, Two
                  International Place, Boston, Massachusetts 02110-4103.

Item 31.          Management Services.
--------          --------------------

                  Inapplicable.

                                                    Part C - Page 18
<PAGE>

Item 32.          Undertakings.
--------          -------------

                  The Registrant hereby undertakes to file a post-effective amendment, using reasonably
                  current financial statements of Global Discovery Portfolio, within four to six months from
                  the effective date of the Registrant's Registration Statement under the 1933 Act.

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

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

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


                                                    Part C - Page 19

</TABLE>
<PAGE>
                                                               File No. 2-96461
                                                               File No. 811-4257


                       SECURITIES AND EXCHANGE COMMISSION


                             Washington, D.C. 20549



                                    EXHIBITS


                                       TO


                                    FORM N-1A



                         POST-EFFECTIVE AMENDMENT NO. 17

                            TO REGISTRATION STATEMENT

                                      UNDER

                           THE SECURITIES ACT OF 1933


                                       AND


                                AMENDMENT NO. 21

                            TO REGISTRATION STATEMENT

                                      UNDER

                       THE INVESTMENT COMPANY ACT OF 1940


                      SCUDDER VARIABLE LIFE INVESTMENT FUND


<PAGE>


                      SCUDDER VARIABLE LIFE INVESTMENT FUND

                                  EXHIBIT INDEX


                                  Exhibit 5(d)





<PAGE>
                            SIGNATURES
                            ----------

     Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that
it meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(a) under the Securities
Act of 1933 and has duly caused this amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Boston and the Commonwealth of
Massachusetts on the 14th day of February, 1996.

                                   SCUDDER VARIABLE LIFE INVESTMENT FUND

                                   By /s/ Thomas F. McDonough
                                     ------------------------------
                                     Thomas F. McDonough, Secretary



     Pursuant to the requirements of the Securities Act of 1933,
this amendment to its Registration Statement has been signed below
by the following persons in the capacities and on the dates
indicated.

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


/s/ David B. Watts
------------------
David B. Watts*         President (Principal      February 14, 1996
                        Executive Officer)
                        and Trustee


/s/ Daniel Pierce
-----------------
Daniel Pierce*          Vice President and        February 14, 1996
                        Trustee


/s/ Dr. Kenneth Black, Jr.
-------------------------
Dr. Kenneth Black, Jr*  Trustee                   February 14, 1996



------------------      Trustee                   February 14, 1996
Rosita P. Chang

/s/ Peter B. Freeman
--------------------
Peter B. Freeman*       Trustee                   February 14, 1996





<PAGE>
/s/ Dr. J. D. Hammond
---------------------
Dr. J. D. Hammond*      Trustee                   February 14, 1996


----------------------
Pamela A. McGrath       Treasurer (Principal      February 14, 1996
                        Financial and
                        Accounting Officer)
                        and Vice President


*By: /s/ Thomas F. McDonough
     ----------------------------
     Thomas F. McDonough**

**   Attorney-in-fact pursuant to a
     power of attorney contained in
     the signature page of
     Post-Effective Amendment No. 9 to
     the Registration Statement filed
     March 3, 1989.


                                       2