<PAGE> 1
DEAR SHAREHOLDERS:
We are pleased to provide you with the Cash Equivalent Fund semiannual report
for the six-month period ended January 31, 1997. Your Fund's management greatly
appreciates your decision to invest in Cash Equivalent Fund. During the past
six months, each of the Fund's Portfolios--Money Market, Government Securities
and Tax-Exempt, registered solid performance. Please take a moment to review
the Portfolio Results which appear at the end of this letter.
ECONOMIC REVIEW AND OUTLOOK
Stability was the cornerstone of the money markets in 1996. In fact, there was
only one change in Fed policy during the entire calendar year, that is, a 25
basis point reduction in the Fed Funds target in January, 1996. In general, we
structured average life with a neutral to a defensive bias. This was based on
our expectations of moderate economic growth, subdued inflationary pressures,
and a stable interest rate environment to be followed by a re-emergence of
upward rate pressures.
1997 will pose interesting challenges and opportunities. The economy finished
1996 on a strong note with fourth quarter GDP growing by a robust 4.7% and
measures of inflation tilting modestly upward. Our forecast calls for modest Fed
tightening and some additional steepening in the yield curve for the rest of
1997. The reasons are attributed to the anticipation of continuing moderate
economic growth, and a modest increase in the pace of inflation. Accordingly,
our investment strategies will favor a defensive bias.
Money market funds such as Cash Equivalent Fund should offer the potential for
attractive yields and should continue to be an excellent place to invest your
money.
Sincerely,
/s/ John W. Stuebe
John W. Stuebe
Vice President and Portfolio Manager
February 6, 1997
John W. Stuebe is Vice President of Zurich Kemper Investments, Inc. and Vice
President and Portfolio Manager of Cash Equivalent Fund. Mr. Stuebe holds a B.S.
degree in finance from the University of Illinois and a M.S. degree in economics
from DePaul University.
PORTFOLIO RESULTS
For the six months ended January 31, 1997, the Fund's three Portfolios had the
following net annualized yields:
The Money Market Portfolio had a net annualized yield of 4.61%.
The Government Securities Portfolio had a net annualized yield of 4.70%.
The Tax-Exempt Portfolio had a net annualized yield of 2.93% and a
tax-equivalent yield of 4.66%.
NOTES
An investment in the Fund is neither insured nor guaranteed by the U.S.
Government, and there can be no assurance that a Portfolio will be able to
maintain a stable net asset value of $1.00 per share. Each Portfolio's net
annualized yield for the six months ended January 31, 1997, is the annualized
sum of the daily dividend rates for the period.
The tax-equivalent yield is based on a marginal tax rate of 37.1%. Income from
the Tax-Exempt Portfolio may be subject to state and local taxes, and, for some
investors, a portion of income may be subject to the alternative minimum tax.
Yields are historical and do not represent future yields, which will fluctuate.
The views expressed in this report reflect those of the portfolio manager only
through the end of the period of the report as stated above. The manager's views
are subject to change at any time, based on market and other conditions.
<PAGE> 2
Cash Equivalent Fund 2
- -------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
Investments at January 31, 1997
(Value in thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------
Corporate Obligations Value
<S> <C>
BANKING--4.8%
--------------------------------------------------------
(a)Bankers Trust New York Corp.
5.45%, 2/1/97 $ 24,992
--------------------------------------------------------
Credit Lyonnais N.A. Inc.
5.54%, 4/22/97 14,818
--------------------------------------------------------
Sumitomo Bank Capital Markets, Inc.
5.50%, 2/25/97 9,964
--------------------------------------------------------
49,774
BUSINESS LOANS--10.6%
--------------------------------------------------------
Eureka Securitization, Inc.
5.45%, 2/7/97 24,978
--------------------------------------------------------
Gotham Funding Corp.
5.52%, 4/24/97 14,814
--------------------------------------------------------
Jet Funding Corporation
5.52%, 4/30/97 9,867
--------------------------------------------------------
Monte Rosa Capital Corp.
5.47%, 2/13/97 19,964
--------------------------------------------------------
Strategic Asset Funding Corp.
5.49%, 3/31/97 9,913
--------------------------------------------------------
Windmill Funding Corp.
5.44%, 2/14/97 19,961
--------------------------------------------------------
Working Capital Management Co., L.P.
5.51%, 2/12/97 9,983
--------------------------------------------------------
109,480
CAPITAL AND EQUIPMENT LENDING--16.1%
--------------------------------------------------------
(a)American Honda Finance Corporation
5.53%, 2/11/97 25,000
--------------------------------------------------------
BTM Capital Corp.
5.49%, 4/15/97 24,725
--------------------------------------------------------
Ford Motor Credit Company
(a) 5.94%, 2/3/97 11,000
5.34%, 3/4/97 9,954
--------------------------------------------------------
IBM Credit Corp.
5.98%, 5/29/97 24,981
--------------------------------------------------------
Mitsubishi Motors Credit of America, Inc.
5.53%, 4/28/97 9,870
--------------------------------------------------------
SRD Finance Inc.
5.43%, 2/27/97 9,961
--------------------------------------------------------
(a)Sanwa Business Credit Corp.
5.56% - 5.58%, 2/4/97 - 2/18/97 50,000
--------------------------------------------------------
165,491
CAPTIVE BUSINESS LENDING--7.8%
--------------------------------------------------------
(a)FINOVA Capital Corporation
5.56%, 2/18/97 $ 35,000
--------------------------------------------------------
Oakland-Alameda County Coliseum, California
5.46%, 3/12/97 15,000
--------------------------------------------------------
Orix America, Inc.
5.48% - 5.50%, 2/3/97 - 2/19/97 29,955
--------------------------------------------------------
79,955
CONSUMER LENDING--6.3%
- ---------------------------------------------------------
(b)GMAC Mortgage Corporation of Pennsylvania
5.66%, 2/28/97 29,873
--------------------------------------------------------
(a)Household Finance Corp.
5.48%, 2/28/97 25,000
--------------------------------------------------------
(a)PHH Corporation
5.38%, 2/26/97 9,999
--------------------------------------------------------
64,872
DIVERSIFIED FINANCE--9.2%
--------------------------------------------------------
APEX Funding Corp.
5.52%, 4/30/97 19,734
--------------------------------------------------------
Associates Corporation of North America
5.42%, 4/1/97 24,781
--------------------------------------------------------
(a)CIT Group Holdings, Inc.
5.37%, 2/1/97 19,986
--------------------------------------------------------
General Electric Capital Corp.
5.43%, 4/16/97 14,835
--------------------------------------------------------
Old Line Funding Corp.
5.38%, 3/3/97 14,933
--------------------------------------------------------
94,269
FINANCIAL SERVICES--11.2%
--------------------------------------------------------
(a)Bear Stearns Companies Inc.
5.48% - 5.50%, 2/6/97 - 2/19/97 20,000
--------------------------------------------------------
(a)Goldman, Sachs Group, L.P.
5.50%, 2/25/97 35,000
--------------------------------------------------------
(a)(b)Lehman Brothers Holdings Inc.
5.57%, 2/19/97 30,000
--------------------------------------------------------
(a)Merrill Lynch & Co., Inc.
5.41%, 2/19/97 9,998
--------------------------------------------------------
Salomon Inc.
(a) 5.70%, 2/7/97 10,000
6.42%, 4/21/97 9,866
--------------------------------------------------------
114,864
</TABLE>
<PAGE> 3
Cash Equivalent Fund 3
- -------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
Investments at January 31, 1997
(Value in thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------
Value
<S> <C>
HEALTH CARE--1.4%
- --------------------------------------------------------
Columbia/HCA Healthcare Corp.
5.40%, 3/27/97 $ 14,880
- --------------------------------------------------------
UTILITIES--5.8%
- --------------------------------------------------------
Brazos River Authority, Texas
5.45%, 2/18/97 15,000
- --------------------------------------------------------
Frontier Corporation
5.46%, 2/11/97 9,985
- --------------------------------------------------------
Gulf Coast Waste Authority, Texas
5.39%, 3/10/97 15,000
- --------------------------------------------------------
NYNEX Corporation
5.37% - 5.50%, 2/27/97 - 3/28/97 19,879
- --------------------------------------------------------
59,864
- --------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS--73.2%
(average maturity: 33 days) 753,449
- --------------------------------------------------------
BANK OBLIGATIONS
CERTIFICATES OF DEPOSIT--U.S. BANKS--9.7%
- --------------------------------------------------------
Harris Trust & Savings Bank
6.10%, 6/17/97 9,998
- --------------------------------------------------------
(a)Key Bank of Maine
5.39%, 2/14/97 19,999
- --------------------------------------------------------
MBNA America Bank N.A.
5.50%, 3/17/97 20,000
- --------------------------------------------------------
(a)Old Kent Bank
5.45%, 2/1/97 25,000
- --------------------------------------------------------
(a)PNC Bank, N.A.
5.56%, 2/3/97 24,987
- --------------------------------------------------------
99,984
CERTIFICATES OF DEPOSIT--FOREIGN
BANKS--4.9%
- --------------------------------------------------------
Industrial Bank of Japan Ltd.
5.55%, 4/2/97 $ 25,000
- --------------------------------------------------------
Sumitomo Bank, Ltd.
5.60%, 4/10/97 24,997
- --------------------------------------------------------
49,997
- --------------------------------------------------------
TOTAL BANK OBLIGATIONS--14.6%
(average maturity: 38 days) 149,981
- --------------------------------------------------------
(c)REPURCHASE AGREEMENTS
(Dated 1/97, collateralized by Federal Home
Loan Mortgage Corporation and Federal
National Mortgage Association securities)
- --------------------------------------------------------
Chase Securities, Inc.
(held at The Chase Manhattan Bank)
5.45%, 2/10/97 25,000
- --------------------------------------------------------
Nomura Securities International, Inc.
(held at The Bank of New York)
5.43%, 4/2/97 - 4/11/97 85,000
- --------------------------------------------------------
Salomon Brothers Inc.
(held at The Bank of New York)
5.39%, 3/5/97 25,000
- --------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS--13.1%
(average maturity: 48 days) 135,000
- --------------------------------------------------------
TOTAL INVESTMENTS--100.9%
(average maturity: 36 days) 1,038,430
- --------------------------------------------------------
LIABILITIES, LESS
OTHER ASSETS--.9% (9,254)
- --------------------------------------------------------
NET ASSETS--100% $1,029,176
- --------------------------------------------------------
</TABLE>
See accompanying Notes to Portfolios of Investments.
<PAGE> 4
Cash Equivalent Fund 4
- -------------------------------------------------------------------------------
GOVERNMENT SECURITIES PORTFOLIO
Investments at January 31, 1997
(Value in thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------
Value
<S> <C>
SHORT-TERM NOTES
(Issued or guaranteed by U.S. government
agencies or instrumentalities)
- ----------------------------------------------------------
(a)Export-Import Bank of the United States
Cathay Pacific Airways Limited
5.56%, 2/13/97 $ 17,118
KA Leasing, Ltd.
5.56%, 2/15/97 12,287
Kuwait Investment Authority
5.56%, 2/15/97 15,037
VARIG Brazilian Airlines
5.56%, 4/15/97 17,862
- ----------------------------------------------------------
(a)Federal Home Loan Bank
5.26% - 5.45%, 2/2/97 - 2/24/97 25,597
- ----------------------------------------------------------
Federal Home Loan Mortgage Corporation
6.16%, 9/1/97 4,970
- ----------------------------------------------------------
Federal National Mortgage Association
(a) 5.33%, 2/4/97 21,818
6.10%, 9/3/97 3,990
- ----------------------------------------------------------
(a)Overseas Private Investment Corporation
International Paper Company
5.51%, 4/15/97 14,500
Omolon
5.50%, 2/4/97 5,000
- ----------------------------------------------------------
(a)Student Loan Marketing Association
5.39% - 5.87%, 2/4/97 - 6/30/97 120,634
- ----------------------------------------------------------
TOTAL SHORT-TERM NOTES--60.3%
(average maturity: 41 days) 258,813
- ----------------------------------------------------------
(c)REPURCHASE AGREEMENTS
(Dated 12/96 and 1/97, collateralized by Federal
Home Loan Mortgage Corporation and Federal
National Mortgage Association securities)
- ----------------------------------------------------------
Bear, Stearns & Co. Inc.
5.38% - 5.47%, 2/12/97 - 3/19/97 $ 39,029
- ----------------------------------------------------------
CS First Boston Inc.
(held at The Chase Manhattan Bank)
5.36% - 5.40%, 2/4/97 - 2/7/97 11,000
- ----------------------------------------------------------
Chase Securities, Inc.
(held at The Chase Manhattan Bank)
5.42%, 3/19/97 10,000
- ----------------------------------------------------------
Goldman, Sachs & Co.
(held at The Bank of New York)
5.35%, 2/3/97 5,000
- ----------------------------------------------------------
Morgan Stanley & Co. Incorporated
(held at The Bank of New York)
5.39%, 2/4/97 20,000
- ----------------------------------------------------------
Nomura Securities International, Inc.
(held at The Bank of New York)
5.40% - 5.43%, 2/12/97 - 3/19/97 60,000
- ----------------------------------------------------------
Salomon Brothers Inc.
(held at The Bank of New York)
5.40% - 5.65%, 2/3/97 - 2/19/97 20,000
- ----------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS--38.5%
(average maturity: 26 days) 165,029
- ----------------------------------------------------------
TOTAL INVESTMENTS--98.8%
(average maturity: 35 days) 423,842
- ----------------------------------------------------------
CASH AND OTHER ASSETS,
LESS LIABILITIES--1.2% 5,024
- ----------------------------------------------------------
NET ASSETS--100% $428,866
- ----------------------------------------------------------
</TABLE>
See accompanying Notes to Portfolios of Investments.
<PAGE> 5
Cash Equivalent Fund 5
- -------------------------------------------------------------------------------
TAX-EXEMPT PORTFOLIO
Investments at January 31, 1997
(Value in thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------
(a)Variable Rate Demand Securities Value
<S> <C>
ALASKA
- ----------------------------------------------------------
Industrial Development and Export Authority
3.75% $ 1,200
ARIZONA
- ----------------------------------------------------------
Health Facilities Authority
3.55% 5,000
- ----------------------------------------------------------
Maricopa County
Pollution Control Corporation
3.60% 9,400
CALIFORNIA
- ----------------------------------------------------------
Los Angeles
Harbor Improvement Corporation
3.70% 9,000
DISTRICT OF COLUMBIA
- ----------------------------------------------------------
General Obligation
3.70% 6,100
- ----------------------------------------------------------
National Children's Center, Inc.
3.55% 5,915
GEORGIA
- ----------------------------------------------------------
DeKalb County
Pollution Control Revenue
3.75% 5,000
ILLINOIS
- ----------------------------------------------------------
Alsip
Industrial Development Revenue
3.60% 3,750
- ----------------------------------------------------------
Development Finance Authority
3.81% 19,800
- ----------------------------------------------------------
Elgin
Judson College
3.64% 4,000
- ----------------------------------------------------------
Rockford
Industrial Project Revenue
3.75% 4,000
INDIANA
- ----------------------------------------------------------
Health Facility Financing Authority
3.57% 16,000
KANSAS
- ----------------------------------------------------------
Kansas City
Pollution Control Revenue
3.75% 17,835
KENTUCKY
- ----------------------------------------------------------
Boone County
Industrial Development Revenue
3.70% $ 4,700
Pollution Control Revenue
3.65% 8,000
- ----------------------------------------------------------
Mayfield
Multi-City Lease Revenue
3.75% 5,000
- ----------------------------------------------------------
Shelbyville
Industrial Building Revenue
4.00% 3,500
NEVADA
- ----------------------------------------------------------
Department of Business and Industry
3.75% 5,000
NEW MEXICO
- ----------------------------------------------------------
Farmington
Pollution Control Revenue
3.70% 5,000
OREGON
- ----------------------------------------------------------
Economic Development Revenue
3.75% 4,500
PENNSYLVANIA
- ----------------------------------------------------------
Delaware County
Redevelopment Authority
3.99% 13,000
- ----------------------------------------------------------
Delaware Valley
Regional Finance Authority
3.60% 15,700
- ----------------------------------------------------------
Lehigh County
Industrial Development Authority
3.65% 10,100
SOUTH CAROLINA
- ----------------------------------------------------------
Richland County
Hospital Revenue
3.90% 5,000
TENNESSEE
- ----------------------------------------------------------
Clarksville
Public Building Authority
3.55% 7,300
- ----------------------------------------------------------
Nashville and Davidson County
Multi-Family Housing Revenue
3.95% 5,000
- ----------------------------------------------------------
</TABLE>
<PAGE> 6
Cash Equivalent Fund 6
- -------------------------------------------------------------------------------
TAX-EXEMPT PORTFOLIO
Investments at January 31, 1997
(Value in thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------
Value
<S> <C>
Smyrna Housing Association
Multi-Family Housing Revenue
3.95% $ 3,000
TEXAS
- ----------------------------------------------------------
Port Arthur
Industrial Development Corporation
3.65% 10,000
UTAH
- ----------------------------------------------------------
Ogden City
Industrial Development Revenue
4.05% 3,660
VERMONT
- ----------------------------------------------------------
Economic Development Authority
4.05% 5,000
VIRGINIA
- ----------------------------------------------------------
Louisa County
Industrial Development Authority
3.55% 8,900
WASHINGTON
- ----------------------------------------------------------
Port Angeles
Industrial Development Corporation
4.00% 7,400
- ----------------------------------------------------------
TOTAL VARIABLE RATE
DEMAND SECURITIES--40.7%
(average maturity: 6 days) 236,760
- ----------------------------------------------------------
OTHER SECURITIES
ALASKA
- ----------------------------------------------------------
Valdez
Marine Terminal Revenue
3.45% - 3.70%, 2/13/97 - 5/13/97 25,600
ARIZONA
- ----------------------------------------------------------
Salt River Project
Agricultural Improvement and Power District
3.45% - 3.55%, 2/21/97 - 3/6/97 10,000
CALIFORNIA
- ----------------------------------------------------------
Revenue Anticipation Warrants
3.97%, 6/30/97 9,019
FLORIDA
- ----------------------------------------------------------
Orlando
Waste Water System Revenue
3.50%, 3/19/97 $ 8,750
- ----------------------------------------------------------
Sarasota County
Public Hospital District
3.55%, 2/24/97 6,250
GEORGIA
- ----------------------------------------------------------
Burke County
Pollution Control Revenue
3.55%, 2/18/97 4,000
- ----------------------------------------------------------
Municipal Electric Authority
3.60%, 3/10/97 17,150
ILLINOIS
- ----------------------------------------------------------
Development Finance Authority
3.60%, 2/20/97 6,200
- ----------------------------------------------------------
Educational Facilities Authority
3.55%, 2/20/97 7,000
INDIANA
- ----------------------------------------------------------
Jasper County
Pollution Control Revenue
3.50%, 2/24/97 - 2/26/97 22,400
- ----------------------------------------------------------
Mount Vernon
Pollution Control and Solid Waste Disposal
Revenue
3.55%, 2/20/97 6,400
- ----------------------------------------------------------
Sullivan
Pollution Control Revenue
3.45% - 3.55%, 2/20/97 - 5/13/97 11,955
KENTUCKY
- ----------------------------------------------------------
Danville
Multi-City Lease Revenue
3.50% - 3.60%, 3/20/97 - 4/4/97 19,375
- ----------------------------------------------------------
Pendleton County
Multi-County Lease Revenue
3.60%, 3/10/97 4,000
MINNESOTA
- ----------------------------------------------------------
University of Minnesota
3.45%, 3/10/97 2,500
NEBRASKA
- ----------------------------------------------------------
Public Power District
3.55%, 5/14/97 2,500
- ----------------------------------------------------------
</TABLE>
<PAGE> 7
Cash Equivalent Fund 7
- -------------------------------------------------------------------------------
TAX-EXEMPT PORTFOLIO
Investments at January 31, 1997
(Value in thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------
Value
<S> <C>
NEW HAMPSHIRE
- ----------------------------------------------------------
Business Finance Authority
3.40% - 3.70%, 2/11/97 - 2/21/97 $ 19,000
NEW YORK
- ----------------------------------------------------------
State Dormitory Authority
3.55%, 2/25/97 5,500
NORTH CAROLINA
- ----------------------------------------------------------
Municipal Power Agency
3.55%, 2/21/97 - 2/25/97 19,000
OHIO
- ----------------------------------------------------------
Air Quality Development Authority
3.50%, 3/13/97 5,500
- ----------------------------------------------------------
Water Development Authority
3.50%, 3/13/97 6,500
PENNSYLVANIA
- ----------------------------------------------------------
Allegheny County
Industrial Development Authority
3.50%, 3/13/97 5,300
- ----------------------------------------------------------
Delaware County
Industrial Development Authority
3.60%, 3/13/97 3,300
- ----------------------------------------------------------
Philadelphia School District
Tax and Revenue Anticipation Notes
4.00%, 6/30/97 11,021
TEXAS
- ----------------------------------------------------------
Brazoria County
Brazos River Harbor Navigation District
3.60%, 2/21/97 3,500
- ----------------------------------------------------------
Dallas
Area Rapid Transit
3.55%, 2/24/97 - 2/25/97 11,000
- ----------------------------------------------------------
Houston
Water and Sewer System
3.55% - 3.65%, 2/13/97 - 2/19/97 14,000
- ----------------------------------------------------------
Municipal Power Agency
3.55% - 3.60%, 2/20/97 - 2/25/97 25,000
- ----------------------------------------------------------
Public Finance Authority
3.55%, 2/24/97 $ 7,200
- ----------------------------------------------------------
San Antonio
Electric and Gas Systems
3.55%, 2/25/97 5,000
- ----------------------------------------------------------
Tax and Revenue Anticipation Notes
3.95%, 8/29/97 5,022
UTAH
- ----------------------------------------------------------
Intermountain Power Agency
3.55%, 2/21/97 10,000
- ----------------------------------------------------------
Tooele County
Waste Treatment Revenue
3.75%, 2/6/97 5,000
VIRGINIA
- ----------------------------------------------------------
Chesterfield County
Industrial Development Authority
3.65% - 3.70%, 2/7/97 - 2/13/97 9,850
- ----------------------------------------------------------
Norfolk County
Industrial Development Authority
3.55%, 2/21/97 10,315
- ----------------------------------------------------------
TOTAL OTHER
SECURITIES--59.1%
(average maturity: 41 days) 344,107
- ----------------------------------------------------------
TOTAL INVESTMENTS--99.8%
(average maturity: 26 days) 580,867
- ----------------------------------------------------------
OTHER ASSETS,
LESS LIABILITIES--.2% 1,457
- ----------------------------------------------------------
NET ASSETS--100% $ 582,324
- ----------------------------------------------------------
</TABLE>
See accompanying Notes to Portfolios of Investments.
<PAGE> 8
Cash Equivalent Fund 8
- -------------------------------------------------------------------------------
NOTES TO PORTFOLIOS OF INVESTMENTS
Interest rates represent annualized yield to date of maturity, except for
variable rate securities described in Note (a). For each security, cost (for
financial reporting and federal income tax purposes) and carrying value are the
same. Likewise, carrying value approximates principal amount.
(a) Variable rate securities. The rates shown are the current rates at January
31, 1997. The dates shown represent the demand date or the next interest rate
change date. Securities in the Tax-Exempt Portfolio shown without a date are
payable within five business days and are backed by credit support agreements
from banks or insurance institutions.
(b) Illiquid securities. At January 31, 1997, the aggregate value of illiquid
securities was $59,873,000 in the Money Market Portfolio, which represented 5.8%
of net assets.
(c) Repurchase agreements are fully collateralized by U.S. Government
securities. All collateral is held at the Fund's custodian bank, Investors
Fiduciary Trust Company, or at subcustodian banks, as indicated. The collateral
is monitored daily by the Fund so that its market value exceeds the carrying
value of the repurchase agreement.
See accompanying Notes to Financial Statements.
<PAGE> 9
Cash Equivalent Fund 9
- -------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
January 31, 1997
(in thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
MONEY GOVERNMENT
MARKET SECURITIES TAX-EXEMPT
ASSETS PORTFOLIO PORTFOLIO PORTFOLIO
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investments, at amortized cost:
Short-term securities $ 903,430 258,813 580,867
- --------------------------------------------------------------------------------------------------------
Repurchase agreements 135,000 165,029 --
- --------------------------------------------------------------------------------------------------------
Cash -- 3,968 --
- --------------------------------------------------------------------------------------------------------
Receivable for:
Interest 3,129 2,591 3,439
- --------------------------------------------------------------------------------------------------------
Securities sold -- -- 4,585
- --------------------------------------------------------------------------------------------------------
Total assets 1,041,559 430,401 588,891
- --------------------------------------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- --------------------------------------------------------------------------------------------------------
Cash overdraft 8,597 -- 5,078
- --------------------------------------------------------------------------------------------------------
Payable for:
Dividends 2,161 879 746
- --------------------------------------------------------------------------------------------------------
Management fee 182 78 107
- --------------------------------------------------------------------------------------------------------
Distribution services fee 318 133 162
- --------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 366 83 172
- --------------------------------------------------------------------------------------------------------
Trustees' fees and other 759 362 302
- --------------------------------------------------------------------------------------------------------
Total liabilities 12,383 1,535 6,567
- --------------------------------------------------------------------------------------------------------
Net assets applicable to shares outstanding $1,029,176 428,866 582,324
- --------------------------------------------------------------------------------------------------------
THE PRICING OF SHARES
- --------------------------------------------------------------------------------------------------------
Shares outstanding 1,029,176 428,866 582,324
- --------------------------------------------------------------------------------------------------------
Net asset value and redemption price per share $1.00 1.00 1.00
- --------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 10
Cash Equivalent Fund 10
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
Six months ended January 31, 1997
(in thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
MONEY GOVERNMENT
MARKET SECURITIES TAX-EXEMPT
PORTFOLIO PORTFOLIO PORTFOLIO
-----------------------------------------
<S> <C> <C> <C>
INTEREST INCOME $53,969 29,329 14,222
- -------------------------------------------------------------------------------------------------------
EXPENSES:
Management fee 1,766 957 823
- -------------------------------------------------------------------------------------------------------
Distribution services fee 3,694 2,001 1,275
- -------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 3,296 1,241 574
- -------------------------------------------------------------------------------------------------------
Reports to shareholders 70 29 33
- -------------------------------------------------------------------------------------------------------
Registration costs 45 75 57
- -------------------------------------------------------------------------------------------------------
Professional fees 30 17 10
- -------------------------------------------------------------------------------------------------------
Trustees' fees and other 50 29 21
- -------------------------------------------------------------------------------------------------------
Total expenses 8,951 4,349 2,793
- -------------------------------------------------------------------------------------------------------
Net investment income $45,018 24,980 11,429
- -------------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
Six months ended January 31, 1997 and year ended July 31, 1996
(in thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
MONEY MARKET GOVERNMENT SECURITIES TAX-EXEMPT
PORTFOLIO PORTFOLIO PORTFOLIO
-----------------------------------------------------------------------------
1997 1996 1997 1996 1997 1996
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS, DIVIDENDS AND CAPITAL
SHARE ACTIVITY
Net investment income $ 45,018 155,023 24,980 85,504 11,429 31,921
- -------------------------------------------------------------------------------------------------------------------------
Net realized loss -- (22,662) -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------
Change in unrealized depreciation -- 22,662 -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------
Dividends to shareholders from net
investment income (45,018) (155,023) (24,980) (85,504) (11,429) (31,921)
- -------------------------------------------------------------------------------------------------------------------------
Capital share transactions (dollar amounts
and number of shares are the same):
Shares sold 3,459,482 11,488,265 1,770,969 5,702,420 1,403,742 3,741,602
- -------------------------------------------------------------------------------------------------------------------------
Shares issued in reinvestment of dividends 43,673 156,119 23,910 85,164 11,145 32,004
- -------------------------------------------------------------------------------------------------------------------------
3,503,155 11,644,384 1,794,879 5,787,584 1,414,887 3,773,606
Shares redeemed (5,248,574) (12,463,083) (2,960,141) (5,978,554) (1,764,127) (3,951,903)
- -------------------------------------------------------------------------------------------------------------------------
Net decrease from capital share
transactions and total decrease in net
assets (1,745,419) (818,699) (1,165,262) (190,970) (349,240) (178,297)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 2,774,595 3,593,294 1,594,128 1,785,098 931,564 1,109,861
- -------------------------------------------------------------------------------------------------------------------------
End of period $ 1,029,176 2,774,595 428,866 1,594,128 582,324 931,564
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 11
Cash Equivalent Fund 11
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. DESCRIPTION OF THE FUND
Cash Equivalent Fund is an open-end management investment company organized as a
business trust under the laws of Massachusetts currently offering three series
of shares (Portfolios). The Money Market Portfolio invests primarily in
short-term high quality obligations of major banks and corporations. The
Government Securities Portfolio invests exclusively in obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and
repurchase agreements thereon. The Tax-Exempt Portfolio invests in short-term
high quality municipal securities.
2. SIGNIFICANT ACCOUNTING POLICIES
Investment valuation
Investments are stated at amortized cost, which approximates market value. In
the event that a deviation of 1/2 of 1% or more exists between a Portfolio's
$1.00 per share net asset value, calculated at amortized cost, and the net asset
value calculated by reference to market-based values, or if there is any other
deviation that the Board of Trustees believes would result in a material
dilution to shareholders or purchasers, the Board of Trustees will promptly
consider what action should be initiated.
Investment transactions and interest income
Investment transactions are accounted for on the trade date (date the order to
buy or sell is executed). Interest income is recorded on the accrual basis and
includes amortization of premium and discount on investments.
Expenses
Expenses arising in connection with a Portfolio are allocated to that Portfolio.
Other Fund expenses are allocated among the Portfolios in proportion to their
relative net assets.
Fund share valuation and dividends to shareholders
Fund shares are sold and redeemed on a continuous basis at net asset value. On
each day that the New York Stock Exchange is open for trading, each Portfolio
determines its net asset value per share (NAV) by dividing the total value of
the Portfolio's investments and other assets, less liabilities, by the number of
Portfolio shares outstanding. The NAV is determined at 11:00 a.m., 1:00 p.m. and
3:00 p.m. Chicago time for the Money Market and Government Securities Portfolios
and at 11:00 a.m. and 3:00 p.m. Chicago time for the Tax-Exempt Portfolio. Each
Portfolio declares a daily dividend, equal to its net investment income for that
day, payable monthly. Net investment income consists of all interest income plus
(minus) all taxable realized gains (losses) on portfolio securities, minus all
expenses of the Portfolio.
Federal income taxes
Each Portfolio has complied with the special provisions of the Internal Revenue
Code available to investment companies during the six months ended January 31,
1997.
3. TRANSACTIONS WITH AFFILIATES
Management agreement
The Fund has a management agreement with Zurich Kemper Investments, Inc. (ZKI)
and pays a management fee for the Money Market and Government Securities
Portfolios at an annual rate of .22% of the first $500 million of combined
average daily net assets of those Portfolios declining to .15% of combined
average daily net assets in excess of $3 billion. The Tax-Exempt Portfolio pays
a management fee at an annual rate of .22% of the first $500 million of average
daily net assets of such Portfolio declining to .15% of average daily net assets
in excess of $3 billion. During the six months ended January 31, 1997, the Fund
incurred management fees of $3,546,000.
<PAGE> 12
Cash Equivalent Fund 12
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NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Distribution agreement
The Fund also has an administration, shareholder services and distribution
agreement with Kemper Distributors, Inc. (KDI). For its services as primary
distributor, the Fund pays KDI an annual fee of .38% of average daily net assets
for the Money Market and Government Securities Portfolios and .33% of average
daily net assets for the Tax-Exempt Portfolio. For the six months ended January
31, 1997, the Fund incurred distribution fees of $6,970,000. KDI has related
service agreements with various firms to provide cash management and other
services for Fund shareholders. Under these agreements, KDI pays such firms
based on the average daily net assets of those accounts that they maintain and
service at an annual rate ranging from .15% to .40% for the Money Market and
Government Securities Portfolios, and from .15% to .33% for the Tax-Exempt
Portfolio. During the six months ended January 31, 1997, KDI paid fees of
$6,966,000 to various firms pursuant to the related service agreements.
Shareholder services agreement
Pursuant to a services agreement with the Fund's transfer agent, Kemper Service
Company (KSvC) is the shareholder service agent of the Fund. Under the
agreement, KSvC received shareholder services fees of $2,888,000 for the six
months ended January 31, 1997.
Officers and trustees
Certain officers or trustees of the Fund are also officers or directors of ZKI.
During the six months ended January 31, 1997, the Fund made no payments to its
officers and incurred trustees' fees of $33,000 to independent trustees.
<PAGE> 13
Cash Equivalent Fund 13
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FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED JULY 31,
MONEY MARKET PORTFOLIO JANUARY 31, 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $1.00 1.00 1.00 1.00 1.00
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income and dividends declared .02 .05 .05 .03 .03
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 1.00 1.00 1.00 1.00
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 2.35% 4.94 4.95 2.82 2.60
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Expenses .92% .89 .87 .88 .85
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income 4.59% 4.86 4.84 2.78 2.57
- ------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets at end of period (in thousands) $1,029,176 2,774,595 3,593,294 3,387,245 3,616,636
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note:
The Money Market Portfolio's total return for the year ended July 31, 1995
includes the effect of a capital contribution from the investment manager.
Without the capital contribution, the total return would have been 4.28%.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED JULY 31,
GOVERNMENT SECURITIES PORTFOLIO JANUARY 31, 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $1.00 1.00 1.00 1.00 1.00
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income and dividends declared .02 .05 .05 .03 .03
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 1.00 1.00 1.00 1.00
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 2.39% 5.00 4.96 2.82 2.60
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Expenses .82% .79 .81 .81 .78
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income 4.71% 4.90 4.87 2.72 2.57
- ------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets at end of period (in thousands) $428,866 1,594,128 1,785,098 1,538,011 2,825,357
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED JULY 31,
TAX-EXEMPT PORTFOLIO JANUARY 31, 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $1.00 1.00 1.00 1.00 1.00
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income and dividends declared .01 .03 .03 .02 .02
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 1.00 1.00 1.00 1.00
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 1.49% 3.11 3.21 2.05 2.12
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Expenses .72% .70 .68 .68 .64
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income 2.93% 3.08 3.15 2.02 2.09
- ------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets at end of period (in thousands) $582,324 931,564 1,109,861 1,136,901 1,417,307
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 14
Cash Equivalent Fund 14
- -------------------------------------------------------------------------------
NOTES
- -------------------------------------------------------------------------------
<PAGE> 15
Cash Equivalent Fund 15
- -------------------------------------------------------------------------------
NOTES
- -------------------------------------------------------------------------------
<PAGE> 16
Cash Equivalent
Fund
Semiannual Report
January 31, 1997
INVESTMENT MANAGER
Zurich Kemper Investments, Inc.
PRINCIPAL UNDERWRITER
Kemper Distributors, Inc.
222 South Riverside Plaza
Chicago, IL 60606
This report is not to be distributed unless preceded or
accompanied by a prospectus.
1029200 2/97 (RECYCLED LOGO) printed on recycled paper