Filed electronically with the Securities and Exchange
Commission on November 27, 1998
File No. 2-63522
File No. 811-2899
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. 23 / X /
--
And/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 25 / X /
--
CASH EQUIVALENT FUND
(Exact Name of Registrant as Specified in Charter)
222 South Riverside Plaza Chicago, Illinois 60606
-------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (312) 537-7000
--------------
Philip J. Collora, Vice President and Secretary
Cash Equivalent Fund
222 South Riverside Plaza
Chicago, Illinois 60606
(Name and Address of Agent for Service)
With a copy to:
Cathy G. O'Kelly
David A. Sturms
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, Illinois 60601
It is proposed that this filing will become effective (check appropriate box):
/ / Immediately upon filing pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a) (1)
/ / 75 days after filing pursuant to paragraph (a) (2)
/ X / On November 30, 1998 pursuant to paragraph (b)
/ / On __________________ pursuant to paragraph (a) (1)
/ / On __________________ pursuant to paragraph (a) (2) 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
<PAGE>
CASH EQUIVALENT FUND
MONEY MARKET PORTFOLIO
GOVERNMENT SECURITIES PORTFOLIO
TAX-EXEMPT PORTFOLIO
CROSS-REFERENCE SHEET
Items Required By Form N-1A
---------------------------
<TABLE>
<CAPTION>
PART A
- ------
Item No. Item Caption Prospectus Caption
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<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Summary; Summary of Expenses
3. Condensed Financial Information Financial Highlights; Performance
4. General Description of Registrant Investment Objectives, Policies and Factors; Capital Structure
5. Management of the Fund Investment Manager and Shareholder Services
5. (a) Management's Discussion of Fund
Performance Inapplicable
6. Capital Stock and Other Securities Purchase of Shares; Dividends and Taxes; Capital Structure
7. Purchase of Securities Being Purchases of Shares; Net Asset Value; Investment Manager and
Offered Shareholder Services; Special Features
8. Redemption or Repurchase Redemption of Shares; Special Features
9. Pending Legal Proceedings Inapplicable
Cross Reference - Page 1
<PAGE>
CASH EQUIVALENT FUND
MONEY MARKET PORTFOLIO
GOVERNMENT SECURITIES PORTFOLIO
TAX-EXEMPT PORTFOLIO
CROSS-REFERENCE SHEET
(continued)
Items Required By Form N-1A
---------------------------
PART B
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Item No. Item Caption Caption in Statement of Additional Information
-------- ------------ ----------------------------------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Inapplicable
13. Investment Objectives and Investment Restrictions; Municipal Securities; Appendix
Policies - Ratings of Investments
14. Management of the Fund Investment Manager and Shareholder Services; Officers
and Trustees
15. Control Persons and Principal Officers and Trustees
Holders of Securities
16. Investment Advisory and Other Investment Manager and Shareholder Services; Officers
Services and Trustees
17. Brokerage Allocation and Other Portfolio Transactions
Practices
18. Capital Stock and Other Securities Shareholder Rights
19. Purchase, Redemption and Pricing Purchase and Redemption of Shares; Dividends, Net Asset
of Securities Being Offered Value and Taxes
20. Tax Status Dividends, Net Asset Value and Taxes
21. Underwriters Investment Manager and Shareholder Services
22. Calculation of Performance Data Performance
23. Financial Statements Financial Statements
</TABLE>
Cross Reference - Page 2
<PAGE>
CASH EQUIVALENT FUND
222 South Riverside Plaza
Chicago, Illinois 60606
Table of Contents
- --------------------------------------------------------
Summary 1
- --------------------------------------------------------
Summary of Expenses 2
- --------------------------------------------------------
Financial Highlights 2
- --------------------------------------------------------
Investment Objectives, Policies
and Risk Factors 5
- --------------------------------------------------------
Net Asset Value 10
- --------------------------------------------------------
Purchase of Shares 10
- --------------------------------------------------------
Redemption of Shares 11
- --------------------------------------------------------
Special Features 14
- --------------------------------------------------------
Dividends and Taxes 14
- --------------------------------------------------------
Investment Manager and
Shareholder Services 16
- --------------------------------------------------------
Performance 18
- --------------------------------------------------------
Capital Structure 19
- --------------------------------------------------------
This prospectus contains information about the Fund that a prospective investor
should know before investing and should be retained for future reference. A
Statement of Additional Information dated November 30, 1998, which is
incorporated herein by reference, has been filed with the Securities and
Exchange Commission (the "SEC") and is available along with other related
materials on the SEC's Internet Web site (http//www.sec.gov). It may also be
obtained upon request without charge from the Fund at the address or telephone
number on this cover or the firm from which this prospectus was received.
Cash
Equivalent
Fund
PROSPECTUS November 30, 1998
CASH EQUIVALENT FUND
222 South Riverside Plaza, Chicago, Illinois 60606
1-800-231-8568.
The Fund offers a choice of investment portfolios and is designed for investors
who seek maximum current income to the extent consistent with stability of
capital. The Fund currently offers the Money Market Portfolio, the Government
Securities Portfolio and the Tax-Exempt Portfolio. Each Portfolio invests
exclusively in high quality money market instruments.
An investment in the Fund is neither insured nor guaranteed by the U.S.
Government, the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other agency, and is not a deposit or obligation of, or guaranteed or
endorsed by, any bank. There can be no assurance that the Fund will be able to
maintain a stable net asset value of $1.00 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
CASH EQUIVALENT FUND
222 South Riverside Plaza, Chicago, Illinois 60606, Telephone 1-800-231-8568
SUMMARY
Investment Objectives. Cash Equivalent Fund (the "Fund") is an open-end,
diversified, management investment company. The Fund currently offers a choice
of three investment portfolios ("Portfolios"). Each Portfolio invests in a
portfolio of high quality short-term money market instruments consistent with
its specific objective. The Money Market Portfolio seeks maximum current income
to the extent consistent with stability of capital from a portfolio primarily of
commercial paper and bank obligations. The Government Securities Portfolio seeks
maximum current income to the extent consistent with stability of capital from a
portfolio of obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities. The Tax-Exempt Portfolio seeks maximum current
income that is exempt from federal income taxes to the extent consistent with
stability of capital from a portfolio of municipal securities. Each Portfolio
may use a variety of investment techniques, including the purchase of repurchase
agreements and variable rate securities. Each Portfolio seeks to maintain a net
asset value of $1.00 per share. There is no assurance that the objective of any
Portfolio will be achieved or that any Portfolio will be able to maintain a net
asset value of $1.00 per share. See "Investment Objectives, Policies and Risk
Factors."
Investment Manager and Services. Scudder Kemper Investments, Inc. ("Scudder
Kemper" or "the Adviser") is the investment manager for the Fund and provides
the Fund with continuous professional investment supervision. With respect to
the Money Market and Government Securities Portfolios, the Adviser is paid an
investment management fee monthly, on a graduated basis at an annual rate
ranging from 0.22% of the first $500 million of combined average daily net
assets of such Portfolios to 0.15% of combined average daily net assets of such
Portfolios over $3 billion. With respect to the Tax-Exempt Portfolio, the
Adviser is paid an investment management fee monthly, on a graduated basis at an
annual rate ranging from 0.22% of the first $500 million of average daily net
assets of such Portfolio to 0.15% of average daily net assets of such Portfolio
over $3 billion. Kemper Distributors, Inc. ("KDI"), an affiliate of the Adviser,
is primary administrator, distributor and principal underwriter of the Fund and,
as such, provides information and services for existing and potential
shareholders and acts as agent of the Fund in the sale of its shares. As
distributor, KDI receives an annual fee, payable monthly, of 0.38% of average
daily net assets of the Money Market and Government Securities Portfolios and
0.33% of average daily net assets of the Tax-Exempt Portfolio. KDI pays
financial services firms that provide cash management and other services for
their customers through the Fund a fee ranging from 0.15% to 0.40% annually of
average daily net assets of those accounts in the Fund that they maintain and
service. See "Investment Manager and Shareholder Services."
Purchases and Redemptions. Shares of each Portfolio are available at net asset
value through selected financial services firms. The minimum initial investment
for each Portfolio is $1,000 and the minimum subsequent investment is $100. See
"Purchase of Shares." Shares may be redeemed at the net asset value next
determined after receipt by the Fund's Shareholder Service Agent of a request to
redeem in proper form. Shares may be redeemed by written request or by using one
of the Fund's expedited redemption procedures. See "Redemption of Shares."
Dividends. Dividends are declared daily and paid monthly. Dividends are
automatically reinvested in additional shares of the same Portfolio, unless the
shareholder makes a different election. See "Dividends and Taxes."
1
<PAGE>
General Information and Capital. The Fund is organized as a business trust under
the laws of Massachusetts and may issue an unlimited number of shares of
beneficial interest. Shares are fully paid and nonassessable when issued, are
transferable without restriction and have no preemptive or conversion rights.
The Fund is not required to hold annual shareholder meetings; but it will hold
special meetings as required or deemed desirable for such purposes as electing
trustees, changing fundamental policies or approving an investment management
agreement. See "Capital Structure."
SUMMARY OF EXPENSES
Shareholder Transaction Expenses............................................None
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Annual Fund Operating Expenses Money Market Government Securities Tax-Exempt
(as a percentage of average net assets) Portfolio Portfolio Portfolio
--------- --------- ---------
Management Fees 0.20% 0.20% 0.22%
12b-1 Fees 0.38% 0.38% 0.33%
Other Expenses 0.33% 0.27% 0.11%
Total Operating Expenses 0.91% 0.85% 0.66%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Example Portfolio 1 Year 3 Years 5 Years 10 Years
--------- ------ ------- ------- --------
You would pay the following expenses on a Money Market $9 $29 $50 $112
$1,000 investment, assuming (1) 5% annual Government Securities $9 $27 $47 $105
return and (2) redemption at the end of Tax-Exempt $7 $21 $37 $ 82
each time period:
</TABLE>
The purpose of the preceding table is to assist investors in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. Investment dealers and other firms may independently charge
shareholders additional fees; please see their materials for details. As a
result of the accrual of 12b-1 fees, long-term shareholders may pay more than
the economic equivalent of the maximum front-end sales charges permitted by the
National Association of Securities Dealers. The Example assumes a 5% annual rate
of return pursuant to requirements of the Securities and Exchange Commission.
This hypothetical rate of return is not intended to be representative of past or
future performance of any Portfolio of the Fund. The Example should not be
considered to be a representation of past or future expenses. Actual expenses
may be greater or lesser than those shown.
FINANCIAL HIGHLIGHTS
The tables below show financial information for each Portfolio expressed in
terms of one share outstanding throughout the period. The information in the
tables is covered by the report of the Fund's independent auditors. The report
is contained in the Fund's Registration Statement and is available from the
Fund. The financial statements contained in the Fund's 1998 Annual Report to
Shareholders are incorporated herein by reference and may be obtained by writing
or calling the Fund.
2
<PAGE>
<TABLE>
<CAPTION>
Money Market Portfolio
Year ended July 31,
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
Per Share Operating Performance:
Net asset value, beginning of year $1.00 1.00 1.00 1.00 1.00
- ---------------------------------------------------------------------------------------------------------------------
Net investment income .05 .05 .05 .05 .03
- ---------------------------------------------------------------------------------------------------------------------
Less dividends declared .05 .05 .05 .05 .03
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $1.00 1.00 1.00 1.00 1.00
- ---------------------------------------------------------------------------------------------------------------------
Total Return 4.93% 4.78 4.94 4.95 2.82
- ---------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses .91% .93 .89 .87 .88
- ---------------------------------------------------------------------------------------------------------------------
Net investment income 4.83% 4.64 4.86 4.84 2.78
- ---------------------------------------------------------------------------------------------------------------------
Supplemental Data:
Net assets at end of year (in thousands) $851,592 970,516 2,774,595 3,593,294 3,387,245
- ---------------------------------------------------------------------------------------------------------------------
Money Market Portfolio (continued)
Year ended July 31,
1993 1992 1991 1990 1989
- ---------------------------------------------------------------------------------------------------------------------
Per Share Operating Performance:
Net asset value, beginning of year $ 1.00 1.00 1.00 1.00 1.00
- ---------------------------------------------------------------------------------------------------------------------
Net investment income .03 .04 .07 .08 .08
- ---------------------------------------------------------------------------------------------------------------------
Less dividends declared .03 .04 .07 .08 .08
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 1.00 1.00 1.00 1.00 1.00
- ---------------------------------------------------------------------------------------------------------------------
Total Return 2.60% 4.09 6.76 8.11 8.60
- ---------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses .85% .82 .84 .83 .88
- ---------------------------------------------------------------------------------------------------------------------
Net investment income 2.57% 4.01 6.57 7.87 8.31
- ---------------------------------------------------------------------------------------------------------------------
Supplemental Data:
Net assets at end of year (in thousands) $3,616,636 3,916,708 3,719,927 4,040,918 6,716,008
- ---------------------------------------------------------------------------------------------------------------------
Government Securities Portfolio
Year ended July 31,
1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
Per Share Operating Performance:
Net asset value, beginning of year $1.00 1.00 1.00 1.00 1.00
- ---------------------------------------------------------------------------------------------------------------------
Net investment income .05 .05 .05 .05 .03
- ---------------------------------------------------------------------------------------------------------------------
Less dividends declared .05 .05 .05 .05 .03
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $1.00 1.00 1.00 1.00 1.00
- ---------------------------------------------------------------------------------------------------------------------
Total Return 4.89% 4.85 5.00 4.96 2.82
- ---------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses .85% .83 .79 .81 .81
- ---------------------------------------------------------------------------------------------------------------------
Net investment income 4.79% 4.73 4.90 4.87 2.72
- ---------------------------------------------------------------------------------------------------------------------
Supplemental Data:
Net assets at end of year (in thousands) $391,861 404,037 1,594,128 1,785,098 1,538,011
- ---------------------------------------------------------------------------------------------------------------------
3
<PAGE>
Government Securities Portfolio (continued)
Year ended July 31,
1993 1992 1991 1990 1989
- ---------------------------------------------------------------------------------------------------------------------
Per Share Operating Performance:
Net asset value, beginning of year $ 1.00 1.00 1.00 1.00 1.00
- ---------------------------------------------------------------------------------------------------------------------
Net investment income .03 .04 .06 .08 .08
- ---------------------------------------------------------------------------------------------------------------------
Less dividends declared .03 .04 .06 .08 .08
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 1.00 1.00 1.00 1.00 1.00
- ---------------------------------------------------------------------------------------------------------------------
Total Return 2.60% 4.12 6.62 8.18 8.72
- ---------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses .78% .75 .72 .69 .70
- ---------------------------------------------------------------------------------------------------------------------
Net investment income 2.57% 4.06 6.38 7.90 8.53
- ---------------------------------------------------------------------------------------------------------------------
Supplemental Data:
Net assets at end of year (in thousands) $2,825,357 3,000,890 3,239,272 2,779,707 2,986,780
- ---------------------------------------------------------------------------------------------------------------------
Tax-Exempt Portfolio
Year ended July 31,
1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
Per Share Operating Performance:
Net asset value, beginning of year $1.00 1.00 1.00 1.00 1.00
- ---------------------------------------------------------------------------------------------------------------------
Net investment income .03 .03 .03 .03 .02
- ---------------------------------------------------------------------------------------------------------------------
Less dividends declared .03 .03 .03 .03 .02
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $1.00 1.00 1.00 1.00 1.00
- ---------------------------------------------------------------------------------------------------------------------
Total Return 3.13% 3.03 3.11 3.21 2.05
- ---------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses .66% .71 .70 .68 .68
- ---------------------------------------------------------------------------------------------------------------------
Net investment income 3.09% 2.97 3.08 3.15 2.02
- ---------------------------------------------------------------------------------------------------------------------
Supplemental Data:
Net assets at end of year (in thousands) $333,427 444,939 931,564 1,109,861 1,136,901
- ---------------------------------------------------------------------------------------------------------------------
Tax-Exempt Portfolio (continued)
Year ended July 31,
1993 1992 1991 1990 1989
- ---------------------------------------------------------------------------------------------------------------------
Per Share Operating Performance:
Net asset value, beginning of year $ 1.00 1.00 1.00 1.00 1.00
- ---------------------------------------------------------------------------------------------------------------------
Net investment income .02 .03 .05 .05 .06
- ---------------------------------------------------------------------------------------------------------------------
Less dividends declared .02 .03 .05 .05 .06
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 1.00 1.00 1.00 1.00 1.00
- ---------------------------------------------------------------------------------------------------------------------
Total Return 2.12% 3.29 4.75 5.55 5.96
- ---------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses .64% .64 .64 .63 .63
- ---------------------------------------------------------------------------------------------------------------------
Net investment income 2.09% 3.21 4.65 5.44 5.82
- ---------------------------------------------------------------------------------------------------------------------
Supplemental Data:
Net assets at end of year (in thousands) $1,417,307 1,289,560 1,129,368 1,195,736 2,164,784
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
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%.
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS
The Fund is a mutual fund designed to provide its shareholders with professional
management of short-term investment dollars. It is designed for investors who
seek maximum current income consistent with stability of capital. The Fund pools
individual and institutional investors' money which it uses to buy high quality
money market instruments. The Fund is a series investment company that is able
to provide investors with a choice of separate investment portfolios
("Portfolios"). It currently offers three investment Portfolios: the Money
Market Portfolio, the Government Securities Portfolio and the Tax-Exempt
Portfolio. Because each Portfolio combines its shareholders' money, it can buy
and sell large blocks of securities, which reduces transaction costs and
maximizes yields. The Fund is managed by investment professionals who analyze
market trends to take advantage of changing conditions and who seek to minimize
risk by diversifying each Portfolio's investments. A Portfolio's investments are
subject to price fluctuations resulting from rising or declining interest rates
and are subject to the ability of the issuers of such investments to make
payment at maturity. However, because of their short maturities, liquidity and
high quality ratings, high quality money market instruments, such as those in
which the Fund invests, are generally considered to be among the safest
available. Thus, the Fund is designed for investors who want to avoid the
fluctuations of principal commonly associated with equity and long-term bond
investments. There can be no guarantee that a Portfolio will achieve its
objective or that it will maintain a net asset value of $1.00 per share. The net
asset value of $1.00 per share has, however, been maintained for each Portfolio
since its inception.
Money Market Portfolio. The Money Market Portfolio seeks maximum current income
consistent with stability of capital. The Portfolio pursues its objective by
investing exclusively in the following types of U.S. Dollar denominated money
market instruments that mature in 12 months or less:
1. Obligations of, or guaranteed by, the U.S. or Canadian Governments, their
agencies or instrumentalities.
2. Bank certificates of deposit, time deposits or bankers' acceptances limited
to domestic banks (including their foreign branches) and Canadian chartered
banks having total assets in excess of $1 billion.
3. Certificates of deposit and time deposits of domestic savings and loan
associations having total assets in excess of $1 billion.
4. Bank certificates of deposit, time deposits or bankers' acceptances of U.S.
branches of foreign banks having total assets in excess of $10 billion.
5. Commercial paper rated Prime-1 or Prime-2 by Moody's Investors Service,
Inc. ("Moody's") or A-1 or A-2 by Standard & Poor's Corporation ("S&P"), or
commercial paper or notes issued by companies with an unsecured debt issue
outstanding currently rated A or higher by Moody's or S&P where the
obligation is on the same or a higher level of priority as the rated issue,
and investments in other corporate obligations such as publicly traded
bonds, debentures and notes rated A or higher by Moody's or S&P. For a
description of these ratings, see "Appendix -- Ratings of Investments" in
the Statement of Additional Information.
6. Commercial paper secured by a letter of credit issued by a domestic or
Canadian chartered bank having total assets in excess of $1 billion and
rated Prime-1 by Moody's.
7. Repurchase agreements of obligations that are suitable for investment under
the categories set forth above. Repurchase agreements are discussed below.
5
<PAGE>
In addition, the Portfolio limits its investments to securities that meet the
quality and diversification requirements of Rule 2a-7 under the Investment
Company Act of 1940 (the "1940 Act"). See "Net Asset Value."
To the extent the Money Market Portfolio purchases Eurodollar certificates of
deposit issued by London branches of U.S. banks, or commercial paper issued by
foreign entities, consideration will be given to their marketability and
possible restrictions on international currency transactions and to regulations
imposed by the domicile country of the foreign issuer. Eurodollar certificates
of deposit may not be subject to the same regulatory requirements as
certificates of deposit issued by U.S. banks and associated income may be
subject to the imposition of foreign taxes.
The Money Market Portfolio may invest in commercial paper issued by major
corporations under the Securities Act of 1933 in reliance on the exemption from
registration afforded by Section 3(a)(3) thereof. Such commercial paper may be
issued only to finance current transactions and must mature in nine months or
less. Trading of such commercial paper is conducted primarily by institutional
investors through investment dealers and individual investor participation in
the commercial paper market is very limited.
The Portfolio also may invest in commercial paper issued in reliance on the
so-called "private placement" exemption from registration which is afforded by
Section 4(2) of the Securities Act of 1933 ("Section 4(2) paper"). Section 4(2)
paper is restricted as to disposition under the federal securities laws, and
generally is sold to institutional investors such as the Portfolio that agree
that they are purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) paper normally is resold to other institutional investors like the
Portfolio through or with the assistance of the issuer or investment dealers who
make a market in the Section 4(2) paper, thus providing liquidity. The Fund's
investment manager considers the legally restricted but readily saleable Section
4(2) paper to be liquid; however, pursuant to procedures approved by the Board
of Trustees of the Fund, if a particular investment in Section 4(2) paper is not
determined to be liquid, that investment will be included within the 10%
limitation on illiquid securities discussed under "The Fund" below. The Fund's
investment manager monitors the liquidity of the Portfolio's investments in
Section 4(2) paper on a continuous basis.
The Money Market Portfolio may concentrate more than 25% of its assets in bank
certificates of deposit or banker's acceptances of United States banks in
accordance with its investment objective and policies. Accordingly, the
Portfolio may be more adversely affected by changes in market or economic
conditions and other circumstances affecting the banking industry than it would
be if the Portfolio's assets were not so concentrated.
Government Securities Portfolio. The Government Securities Portfolio seeks
maximum current income consistent with stability of capital. The Portfolio
pursues its objective by investing exclusively in U.S. Treasury bills, notes,
bonds and other obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and repurchase agreements of such obligations. All
securities purchased mature within 12 months or less. In addition, the Portfolio
limits its investments to securities that meet the quality and diversification
requirements of Rule 2a-7 under the 1940 Act. See "Net Asset Value." Some
securities issued by U.S. Government agencies or instrumentalities are supported
only by the credit of the agency or instrumentality, such as those issued by the
Federal Home Loan Bank, and others have an additional line of credit with the
U.S. Treasury, such as those issued by the Federal National Mortgage
Association, Farm Credit System and Student Loan Marketing Association.
Short-term U.S. Government obligations generally are considered to be the safest
short-term investment. The U.S. Government guarantee of the securities owned by
the Portfolio, however, does not guarantee the net asset value of its shares
which the Fund seeks to maintain at $1.00 per share. Also, with respect to
securities supported only by the credit of the issuing agency or instrumentality
or by an additional line of credit with the U.S. Treasury, there is no guarantee
that the U.S. Government will provide support to such agencies or
instrumentalities and such securities may involve risk of loss of principal and
interest. Repurchase agreements are discussed below.
6
<PAGE>
Tax-Exempt Portfolio. The Tax-Exempt Portfolio seeks maximum current income that
is exempt from federal income taxes to the extent consistent with stability of
capital. The Portfolio pursues its objective primarily through a professionally
managed, diversified portfolio of short-term high quality tax-exempt municipal
obligations. Under normal market conditions at least 80% of the Portfolio's
total assets will, as a fundamental policy, be invested in obligations issued by
or on behalf of states, territories and possessions of the United States and the
District of Columbia and their political subdivisions, agencies and
instrumentalities, the income from which is exempt from federal income tax
("Municipal Securities").
Dividends representing net interest income received by the Tax-Exempt Portfolio
on Municipal Securities will be exempt from federal income tax when distributed
to the Portfolio's shareholders. Such dividend income may be subject to state
and local taxes. See "Dividends and Taxes -- Tax-Exempt Portfolio." The
Portfolio's assets will consist of Municipal Securities, temporary investments
as described below and cash. The Portfolio considers short-term Municipal
Securities to be those that mature in one year or less.
The Tax-Exempt Portfolio will invest only in Municipal Securities which at the
time of purchase: (a) are rated within the two highest-ratings for Municipal
Securities (Aaa or Aa) assigned by Moody's or (AAA or AA) assigned by S&P; (b)
are guaranteed or insured by the U.S. Government as to the payment of principal
and interest; (c) are fully collateralized by an escrow of U.S. Government
securities acceptable to the Fund's investment manager; (d) have at the time of
purchase Moody's short-term Municipal Securities rating of MIG-2 or higher or a
municipal commercial paper rating of P-2 or higher, or S&P's municipal
commercial paper rating of A-2 or higher; (e) are unrated, if longer term
Municipal Securities of that issuer are rated within the two highest rating
categories by Moody's or S&P; or (f) are determined to be at least equal in
quality to one or more of the above ratings in the discretion of the Fund's
investment manager. In addition, the Portfolio limits its investment to
securities that meet the quality and diversification requirements of Rule 2a-7
under the 1940 Act. See "Net Asset Value."
Municipal Securities generally are classified as "general obligation" or
"revenue" issues. General obligation bonds are secured by the issuer's pledge of
its full credit and taxing power for the payment of principal and interest.
Revenue bonds are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source such as the user of the
facility being financed. Industrial development bonds held by the Fund are in
most cases revenue bonds and are not payable from the unrestricted revenues of
the issuer. Among other types of instruments, the Portfolio may purchase
tax-exempt commercial paper, warrants and short-term municipal notes such as tax
anticipation notes, bond anticipation notes, revenue anticipation notes,
construction loan notes and other forms of short-term loans. Such notes are
issued with a short-term maturity in anticipation of the receipt of tax
payments, the proceeds of bond placements or other revenues. A more detailed
discussion of Municipal Securities and the Moody's and S&P ratings outlined
above is contained in the Statement of Additional Information. As indicated
above and under "Dividends and Taxes -- Tax-Exempt Portfolio," the Portfolio may
invest in short-term "private activity" bonds.
The Tax-Exempt Portfolio may purchase high quality Certificates of Participation
in trusts that hold Municipal Securities. A Certificate of Participation gives
the Portfolio an undivided interest in the Municipal Security in the proportion
that the Portfolio's interest bears to the total principal amount of the
Municipal Security. These Certificates of Participation may be variable rate or
fixed rate with remaining maturities of one year or less. A Certificate of
Participation may be backed by an irrevocable letter of credit or guarantee of a
financial institution that satisfies rating agencies as to the credit quality of
the Municipal Security supporting the payment of principal and interest on the
Certificate of Participation. Payments of principal and interest would be
dependent upon the underlying Municipal Security and may be guaranteed under a
letter of credit to the extent of such credit. The quality rating by a rating
service of an issue of Certificates of Participation is based primarily upon the
rating of the Municipal Security held by the trust and the credit rating of the
issuer of any letter of credit and of any other
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guarantor providing credit support to the issue. The Fund's investment manager
considers these factors as well as others, such as any quality ratings issued by
the rating services identified above, in reviewing the credit risk presented by
a Certificate of Participation and in determining whether the Certificate of
Participation is appropriate for investment by the Portfolio. It is anticipated
by the Fund's investment manager that, for most publicly offered Certificates of
Participation, there will be a liquid secondary market or there may be demand
features enabling the Portfolio to readily sell its Certificates of
Participation prior to maturity to the issuer or a third party. As to those
instruments with demand features, the Portfolio intends to exercise its right to
demand payment from the issuer of the demand feature only upon a default under
the terms of the Municipal Security, as needed to provide liquidity to meet
redemptions, or to maintain a high quality investment portfolio.
The Tax-Exempt Portfolio may purchase securities that provide for the right to
resell them to an issuer, bank or dealer at an agreed upon price or yield within
a specified period prior to the maturity date of such securities. Such a right
to resell is referred to as a "Standby Commitment." Securities may cost more
with Standby Commitments than without them. Standby Commitments will be entered
into solely to facilitate portfolio liquidity. A Standby Commitment may be
exercised before the maturity date of the related Municipal Security if the
Fund's investment manager revises its evaluation of the creditworthiness of the
underlying security or of the entity issuing the Standby Commitment. The
Portfolio's policy is to enter into Standby Commitments only with issuers, banks
or dealers that are determined by the Fund's investment manager to present
minimal credit risks. If an issuer, bank or dealer should default on its
obligation to repurchase an underlying security, the Portfolio might be unable
to recover all or a portion of any loss sustained from having to sell the
security elsewhere. For purposes of valuing the Portfolio's securities at
amortized cost, the stated maturity of Municipal Securities subject to Standby
Commitments is not changed.
The Tax-Exempt Portfolio may purchase and sell Municipal Securities on a
when-issued or delayed delivery basis. A when-issued or delayed delivery
transaction arises when securities are bought or sold for future payment and
delivery to secure what is considered to be an advantageous price and yield to
the Portfolio at the time it enters into the transaction. In determining the
maturity of portfolio securities purchased on a when-issued or delayed delivery
basis, the Portfolio will consider them to have been purchased on the date when
it committed itself to the purchase.
A security purchased on a when-issued basis, like all securities held by the
Tax-Exempt Portfolio, is subject to changes in market value based upon changes
in the level of interest rates and investors' perceptions of the
creditworthiness of the issuer. Generally such securities will appreciate in
value when interest rates decline and decrease in value when interest rates
rise. Therefore if, in order to achieve higher interest income, the Portfolio
remains substantially fully invested at the same time that it has purchased
securities on a when-issued basis, there will be a greater possibility that the
market value of the Portfolio's assets will vary from $1.00 per share, since the
value of a when-issued security is subject to market fluctuation and no interest
accrues to the purchaser prior to settlement of the transaction. See "Net Asset
Value."
The Portfolio will only make commitments to purchase Municipal Securities on a
when-issued or delayed delivery basis with the intention of actually acquiring
the securities, but the Portfolio reserves the right to sell these securities
before the settlement date if deemed advisable. The sale of these securities may
result in the realization of gains that are not exempt from federal income tax.
In seeking to achieve its investment objective, the Tax-Exempt Portfolio may
invest all or any part of its assets in Municipal Securities that are industrial
development bonds. Moreover, although the Portfolio does not currently intend to
do so on a regular basis, it may invest more than 25% of its assets in Municipal
Securities that are repayable out of revenue streams generated from economically
related projects or facilities, if such investment
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is deemed necessary or appropriate by the Portfolio's investment manager. To the
extent that the Portfolio's assets are concentrated in Municipal Securities
payable from revenues on economically related projects and facilities, the
Portfolio will be subject to the risks presented by such projects to a greater
extent than it would be if the Portfolio's assets were not so concentrated.
From time to time, as a defensive measure or when acceptable short-term
Municipal Securities are not available, the Tax-Exempt Portfolio may invest in
taxable "temporary investments" which include: obligations of the U.S.
Government, its agencies or instrumentalities; debt securities rated within the
two highest grades by Moody's or S&P; commercial paper rated in the two highest
grades by either of such rating services; certificates of deposit of domestic
banks with assets of $1 billion or more; and any of the foregoing temporary
investments subject to repurchase agreements. Repurchase agreements are
discussed below. Interest income from temporary investments is taxable to
shareholders as ordinary income. Although the Portfolio is permitted to invest
in taxable securities, it is the Portfolio's primary intention to generate
income dividends that are not subject to federal income taxes. See "Dividends
and Taxes." For a description of the ratings, see "Appendix -- Ratings of
Investments" in the Statement of Additional Information.
The Fund. Each Portfolio may invest in repurchase agreements, which are
instruments under which a Portfolio acquires ownership of a security from a
broker-dealer or bank that agrees to repurchase the security at a mutually
agreed upon time and price (which price is higher than the purchase price),
thereby determining the yield during the Portfolio's holding period. Maturity of
the securities subject to repurchase may exceed one year. In the event of a
bankruptcy or other default of a seller of a repurchase agreement, a Portfolio
might have expenses in enforcing its rights, and could experience losses,
including a decline in the value of the underlying securities and loss of
income. A Portfolio will not purchase illiquid securities, including time
deposits and repurchase agreements maturing in more than seven days if, as a
result thereof, more than 10% of such Portfolio's net assets valued at the time
of the transaction would be invested in such securities.
Each Portfolio may invest in instruments having rates of interest that are
adjusted periodically or that "float" continuously according to formulae
intended to minimize fluctuation in values of the instruments ("Variable Rate
Securities"). The interest rate of Variable Rate Securities ordinarily is
determined by reference to or is a percentage of an objective standard such as a
bank's prime rate, the 90-day U.S. Treasury bill rate, or the rate of return on
commercial paper or bank certificates of deposit. Generally, the changes in the
interest rate on Variable Rate Securities reduce the fluctuation in the market
value of such securities. Accordingly, as interest rates decrease or increase,
the potential for capital appreciation or depreciation is less than for
fixed-rate obligations. Some Variable Rate Securities ("Variable Rate Demand
Securities") have a demand feature entitling the purchaser to resell the
securities at an amount approximately equal to amortized cost or the principal
amount thereof plus accrued interest. As is the case for other Variable Rate
Securities, the interest rate on Variable Rate Demand Securities varies
according to some objective standard intended to minimize fluctuation in the
values of the instruments. Each Portfolio determines the maturity of Variable
Rate Securities in accordance with Rule 2a-7, which allows the Portfolio to
consider certain of such instruments as having maturities shorter than the
maturity date on the face of the instrument.
A Portfolio may not borrow money except as a temporary measure for extraordinary
or emergency purposes, and then only in an amount up to one-third of the value
of its total assets, in order to meet redemption requests without immediately
selling any portfolio securities. Any such borrowings under this provision will
not be collateralized except that the Tax-Exempt Portfolio may pledge up to 10%
of its net assets to secure such borrowings. No Portfolio will borrow for
leverage purposes.
The Fund has adopted for each Portfolio certain investment restrictions that are
presented in the Statement of Additional Information and that, together with the
investment objective and policies of such Portfolio (limited
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in regard to the Tax-Exempt Portfolio to the policies in the first and third
paragraphs under "Tax-Exempt Portfolio" above), cannot be changed without
approval by holders of a majority of its outstanding voting shares. As defined
in the 1940 Act, this means with respect to a Portfolio the lesser of the vote
of (a) 67% of the shares of such Portfolio present at a meeting where more than
50% of the outstanding shares of the Portfolio are present in person or by proxy
or (b) more than 50% of the outstanding shares of the Portfolio.
NET ASSET VALUE
The net asset value per share of each Portfolio is calculated by dividing the
total assets of such Portfolio less its liabilities by the total number of its
shares outstanding. The net asset value per share of each Portfolio is
determined on each day the New York Stock Exchange is open for trading, 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. Fund shares are sold at the net asset value next
determined after an order and payment are received in the form described under
"Purchase of Shares." Each Portfolio seeks to maintain its net asset value at
$1.00 per share.
Each Portfolio values its portfolio instruments at amortized cost in accordance
with Rule 2a-7 under the 1940 Act, which means that they are valued at their
acquisition cost (as adjusted for amortization of premium or accretion of
discount) rather than at current market value. Calculations are made to compare
the value of each Portfolio's investments valued at amortized cost with
market-based values. Market-based valuations are obtained by using actual
quotations provided by market makers, estimates of market value, or values
obtained from yield data relating to classes of money market instruments
published by reputable sources at the mean between the bid and asked prices for
the instruments. If a deviation of 1/2 of 1% or more were to occur between a
Portfolio's net asset value per share calculated by reference to market-based
values and the Portfolio's $1.00 per share net asset value, or if there were any
other deviation that the Board of Trustees believed would result in a material
dilution to shareholders or purchasers, the Board of Trustees would promptly
consider what action, if any, should be initiated. In order to value its
investments at amortized cost, the Portfolios purchase only securities with a
maturity of one year or less and maintain a dollar-weighted average portfolio
maturity of 90 days or less. In addition, the Portfolios limit their portfolio
investments to securities that meet the quality and diversification requirements
of Rule 2a-7.
PURCHASE OF SHARES
Shares of each Portfolio of the Fund are sold at net asset value through
selected financial services firms, such as broker-dealers and banks ("firms").
Investors must indicate the Portfolio in which they wish to invest. The Fund has
established a minimum initial investment for each Portfolio of $1,000 and $100
for subsequent investments, but these minimums may be changed at any time in
management's discretion. Firms offering Fund shares may set higher minimums for
accounts they service and may change such minimums at their discretion.
The Fund seeks to have its Portfolios as fully invested as possible at all times
in order to achieve maximum income. Since each Portfolio will be investing in
instruments that normally require immediate payment in Federal Funds (monies
credited to a bank's account with its regional Federal Reserve Bank), the Fund
has adopted procedures for the convenience of its shareholders and to ensure
that each Portfolio receives investable funds. Orders for purchase of shares of
a Portfolio received by wire transfer in the form of Federal Funds will be
effected at the next determined net asset value. Shares purchased by wire will
receive that day's dividend if effected at or prior to the 1:00 p.m. Chicago
time net asset value determination for the Money Market and the Government
Securities Portfolios and at or prior to the 11:00 a.m. Chicago time net asset
value determination for the Tax-Exempt
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Portfolio, otherwise such shares will receive the dividend for the next calendar
day if effected at 3:00 p.m. Chicago time. Orders for purchase accompanied by a
check or other negotiable bank draft will be accepted and effected as of 3:00
p.m. Chicago time on the next business day following receipt and such shares
will receive the dividend for the calendar day following the day the purchase is
effected. If an order is accompanied by a check drawn on a foreign bank, funds
must normally be collected on such check before shares will be purchased. See
"Purchase and Redemption of Shares" in the Statement of Additional Information.
If payment is wired in Federal Funds, the payment should be directed to United
Missouri Bank of Kansas City, N.A. (ABA #101-000-695), 10th and Grand Avenue,
Kansas City, M0 64106 for credit to the appropriate Portfolio bank account (CEF
Money Market Portfolio 17: 98-0103-348-4; CEF Government Securities Portfolio
23: 98-0103-378-6; CEF Tax-Exempt Portfolio 45: 98-0103-380-8).
Clients of Firms. Firms provide varying arrangements for their clients with
respect to the purchase and redemption of Fund shares and the confirmation
thereof and may arrange with their clients for other investment or
administrative services. Such firms are responsible for the prompt transmission
of purchase and redemption orders. Some firms may establish higher minimum
investment requirements than set forth above. Such firms may independently
establish and charge additional amounts to their clients for their services,
which charges would reduce their clients' yield or return. Firms may also hold
Fund shares in nominee or street name as agent for and on behalf of their
clients. In such instances, the Fund's transfer agent will have no information
with respect to or control over the accounts of specific shareholders. Such
shareholders may obtain access to their accounts and information about their
accounts only from their firm. Certain of these firms may receive compensation
from the Fund's Shareholder Service Agent for recordkeeping and other expenses
relating to these nominee accounts. In addition, certain privileges with respect
to the purchase and redemption of shares (such as check writing redemptions) or
the reinvestment of dividends may not be available through such firms or may
only be available subject to certain conditions or limitations. Some firms may
participate in a program allowing them access to their clients' accounts for
servicing including, without limitation, transfers of registration and dividend
payee changes; and may perform functions such as generation of confirmation
statements and disbursement of cash dividends. The prospectus should be read in
connection with such firm's material regarding its fees and services.
Other Information. The Fund reserves the right to withdraw all or any part of
the offering made by this prospectus or to reject purchase orders. The Fund also
reserves the right at any time to waive or increase the minimum investment
requirements. All orders to purchase shares of a Portfolio are subject to
acceptance by the Fund and are not binding until confirmed or accepted in
writing. Any purchase which would result in total account balances for a single
shareholder in excess of $3 million is subject to prior approval by the Fund.
Share certificates are issued only on request to the Fund and may not be
available for certain types of accounts. A $10 service fee will be charged when
a check for the purchase of shares is returned because of insufficient or
uncollected funds or a stop payment order. Firms may charge different service
fees.
Shareholders should direct their inquiries to the firm from which they received
this prospectus or to Kemper Service Company ("KSvC"), the Fund's Shareholder
Service Agent, 811 Main Street, Kansas City, Missouri 64105-2005.
REDEMPTION OF SHARES
General. Upon receipt by the Shareholder Service Agent of a request in the form
described below, shares of a Portfolio will be redeemed by the Fund at the next
determined net asset value. If processed at 3 p.m. Chicago time, the shareholder
will receive that day's dividend. A shareholder may use either the regular or
expedited redemption procedures. Shareholders who redeem all their shares of a
Portfolio will receive the net asset value of such shares and all declared but
unpaid dividends on such shares.
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If shares of a Portfolio to be redeemed were purchased by check or through
certain Automated Clearing House ("ACH") transactions, the Fund may delay
transmittal of redemption proceeds until it has determined that collected funds
have been received for the purchase of such shares, which will be up to 10 days
from receipt by the Fund of the purchase amount. Shareholders may not use
expedited redemption procedures (wire transfer or Redemption Check) until the
shares being redeemed have been owned for at least 10 days, and shareholders may
not use such procedures to redeem shares held in certificated form. There is no
delay when shares being redeemed were purchased by wiring Federal Funds.
If shares being redeemed were acquired from an exchange of shares of a mutual
fund that were offered subject to a contingent deferred sales charge as
described in the prospectus for that other fund, the redemption of such shares
by the Fund may be subject to a contingent deferred sales charge as explained in
such prospectus.
Shareholders can request the following telephone privileges: expedited wire
transfer redemptions, ACH transactions and exchange transactions for individual
and institutional accounts and pre-authorized telephone redemption transactions
for certain institutional accounts. Shareholders may choose these privileges on
the account application or by contacting the Shareholder Service Agent for
appropriate instructions. Please note that the telephone exchange privilege is
automatic unless the shareholder refuses it on the account application. The Fund
or its agents may be liable for any losses, expenses or costs arising out of
fraudulent or unauthorized telephone requests pursuant to these privileges,
unless the Fund or its agents reasonably believe, based upon reasonable
verification procedures, that the telephonic instructions are genuine. The
shareholder will bear the risk of loss, including loss resulting from fraudulent
or unauthorized transactions, as long as the reasonable verification procedures
are followed. The verification procedures include recording instructions,
requiring certain identifying information before acting upon instructions and
sending written confirmations.
Because of the high cost of maintaining small accounts, the Fund reserves the
right to redeem an account that falls below the minimum investment level,
currently $1,000. A shareholder will be notified in writing and will be allowed
60 days to make additional purchases to bring the account value up to the
minimum investment level before the Fund redeems the shareholder account.
Firms provide varying arrangements for their clients to redeem Fund shares. Such
firms may independently establish minimums and maximums and charge additional
amounts to their clients for such services.
Regular Redemptions. Shareholders should contact the firm through which shares
were purchased for redemption instructions. However, when shares are held for
the account of a shareholder by the Fund's transfer agent, the shareholder may
redeem them by sending a written request with signatures guaranteed to Kemper
Service Company, P.O. Box 419153, Kansas City, Missouri 64141-6153. When
certificates for shares have been issued, they must be mailed to or deposited
with the Shareholder Service Agent, along with a duly endorsed stock power and
accompanied by a written request for redemption. Redemption requests and a stock
power must be endorsed by the account holder with signatures guaranteed by a
commercial bank, trust company, savings and loan association, federal savings
bank, member firm of a national securities exchange or other eligible financial
institution. The redemption request and stock power must be signed exactly as
the account is registered including any special capacity of the registered
owner. Additional documentation may be requested, and a signature guarantee is
normally required, from institutional and fiduciary account holders, such as
corporations, custodians (e.g., under the Uniform Transfers to Minors Act),
executors, administrators, trustees, or guardians.
Telephone Redemptions. If the proceeds of the redemption are $50,000 or less and
the proceeds are payable to the shareholder of record at the address of record,
normally a telephone request or a written request by any one account holder
without a signature guarantee is sufficient for redemptions by individual or
joint account holders, and trust, executor, guardian and custodian account
holders, provided the trustee, executor, guardian or
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<PAGE>
custodian is named in the account registration. Other institutional account
holders and guardian account holders of custodial accounts for gifts and
transfers to minors may exercise this special privilege of redeeming shares by
telephone request or written request without signature guarantee subject to the
same conditions as individual account holders and subject to the limitations on
liability described under "General" above, provided that this privilege has been
pre-authorized by the institutional account holder or guardian account holder by
written instruction to the Shareholder Service Agent with signatures guaranteed.
Shares purchased by check or through certain ACH transactions may not be
redeemed under this privilege of redeeming shares by telephone request until
such shares have been owned for at least 10 days. This privilege of redeeming
shares by telephone request or by written request without a signature guarantee
may not be used to redeem shares held in certificated form and may not be used
if the shareholder's account has had an address change within 30 days of the
redemption request. During periods when it is difficult to contact the
Shareholder Service Agent by telephone, it may be difficult to use the telephone
redemption privilege, although investors can still redeem by mail. The Fund
reserves the right to terminate or modify this privilege at any time.
Expedited Wire Transfer Redemptions. If the account holder has given
authorization for expedited wire redemption to the account holder's brokerage or
bank account, shares can be redeemed and proceeds sent by a federal wire
transfer to a single previously designated account. Requests received by the
Shareholder Service Agent prior to 11:00 a.m. Chicago time will result in shares
being redeemed that day and normally the proceeds will be sent to the designated
account that day. Once authorization is on file, the Shareholder Service Agent
will honor requests by telephone or in writing, subject to the limitations on
liability described under "General" above. The Fund is not responsible for the
efficiency of the federal wire system or the account holder's financial services
firm or bank. The Fund currently does not charge the account holder for wire
transfers. The account holder is responsible for any charges imposed by the
account holder's firm or bank. There is a $1,000 wire redemption minimum. To
change the designated account to receive wire redemption proceeds, contact the
firm through which shares of the Fund were purchased or send a written request
to the Shareholder Service Agent with signatures guaranteed as described above.
Shares purchased by check or through certain ACH transactions may not be
redeemed by wire transfer until the shares have been owned for at least 10 days.
Account holders may not use this procedure to redeem shares held in certificated
form. During periods when it is difficult to contact the Shareholder Service
Agent by telephone, it may be difficult to use the expedited wire transfer
redemption privilege. The Fund reserves the right to terminate or modify this
privilege at any time.
Expedited Redemptions by Draft. Upon request, shareholders will be provided with
drafts to be drawn on the Fund ("Redemption Checks"). These Redemption Checks
may be made payable to the order of any person for not more than $5 million.
Shareholders should not write Redemption Checks in an amount less than $250
since a $10 service fee will be charged as described below. When a Redemption
Check is presented for payment, a sufficient number of full and fractional
shares in the shareholder's account will be redeemed as of the next determined
net asset value to cover the amount of the Redemption Check. This will enable
the shareholder to continue earning dividends until the Fund receives the
Redemption Check. A shareholder wishing to use this method of redemption must
complete and file an Account Information Form which is available from the Fund
or firms through which shares were purchased. Redemption Checks should not be
used to close an account since the account normally includes accrued but unpaid
dividends. The Fund reserves the right to terminate or modify this privilege at
any time. This privilege may not be available through some firms that distribute
shares of the Fund. In addition, firms may impose minimum balance requirements
in order to obtain this feature. Firms may also impose fees to investors for
this privilege or, if approved by the Fund, establish variations of minimum
check amounts.
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Unless one signer is authorized on the Account Information Form, Redemption
Checks must be signed by all account holders. Any change in the signature
authorization must be made by written notice to the Shareholder Service Agent.
Shares purchased by check or through certain ACH transactions may not be
redeemed by Redemption Check until the shares have been on the Fund's books for
at least 10 days. Shareholders may not use this procedure to redeem shares held
in certificated form. The Fund reserves the right to terminate or modify this
privilege at any time.
The Fund may refuse to honor Redemption Checks whenever the right of redemption
has been suspended or postponed, or whenever the account is otherwise impaired.
A $10 service fee will be charged when a Redemption Check is presented to redeem
Fund shares in excess of the value of a Fund account or in an amount less than
$250; when a Redemption Check is presented that would require redemption of
shares that were purchased by check or certain ACH transactions within 10 days;
or when "stop payment" of a Redemption Check is requested. Firms may charge
different service fees.
SPECIAL FEATURES
Certain firms that offer shares of the Fund also provide special redemption
features through charge or debit cards, Automatic Teller Machines and checks
that redeem Fund shares. Various firms have different charges for their
services. Shareholders should obtain information from their firm with respect to
any special redemption features, applicable charges, minimum balance
requirements and special rules of the cash management program being offered.
Information about Tax Sheltered Retirement Programs, Systematic Withdrawal
Programs, the Exchange Privilege and Electronic Funds Transfer Programs is
contained in the Statement of Additional Information; and further information
may be obtained without charge from KDI.
DIVIDENDS AND TAXES
Dividends are declared daily and paid monthly. Shareholders may select one of
the following ways to receive dividends.
1. Reinvest Dividends at net asset value into additional shares of the same
Portfolio. Dividends are normally reinvested on the 15th of each month if a
business day, otherwise on the next business day. Dividends will be
reinvested unless the shareholder elects to receive them in cash.
2. Receive Dividends in Cash, if so requested. Checks will be mailed monthly
to the shareholder or any person designated by the shareholder.
The Fund reinvests dividend checks (and future dividends) in shares of the Fund
if checks are returned as undeliverable. Dividends and other distributions in
the aggregate amount of $10 or less are automatically reinvested in shares of
the Fund unless the shareholder requests that such policy not be applied to the
shareholder's account.
Taxable Portfolios. The Money Market Portfolio and the Government Securities
Portfolio each intend to continue to qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code (the "Code") and, if so
qualified, will not be subject to federal income taxes to the extent its
earnings are distributed. Dividends derived from interest and short-term capital
gains are taxable as ordinary income whether received in cash or reinvested in
additional shares. Dividends from these Portfolios do not qualify for the
dividends received deduction available to corporate shareholders.
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Tax-Exempt Portfolio. The Tax-Exempt Portfolio intends to continue to qualify
under the Code as a regulated investment company and, if so qualified, will not
be liable for federal income taxes to the extent its earnings are distributed.
This Portfolio also intends to meet the requirements of the Code applicable to
regulated investment companies distributing tax-exempt interest dividends and,
accordingly, dividends representing net interest received on Municipal
Securities will not be includable by shareholders in their gross income for
federal income tax purposes, except to the extent such interest is subject to
the alternative minimum tax as discussed below. Dividends representing taxable
net investment income (such as net interest income from temporary investments in
obligations of the U.S. Government) and net short-term capital gains, if any,
are taxable to shareholders as ordinary income.
Net interest on certain "private activity bonds" issued on or after August 8,
1986 is treated as an item of tax preference and may, therefore, be subject to
both the individual and corporate alternative minimum tax. To the extent
provided by regulations to be issued by the Secretary of the Treasury,
exempt-interest dividends from the Tax-Exempt Portfolio are to be treated as
interest on private activity bonds in proportion to the interest income the
Portfolio receives from private activity bonds, reduced by allowable deductions.
For the 1996 calendar year, 20% of the net interest income of the Tax-Exempt
Portfolio was derived from "private activity bonds."
Exempt-interest dividends, except to the extent of interest from "private
activity bonds," are not treated as a tax preference item. For a corporate
shareholder, however, such dividends will be included in determining such
corporate shareholder's "adjusted current earnings." Seventy-five percent of the
excess, if any, of "adjusted current earnings" over the corporate shareholder's
other alternative minimum taxable income with certain adjustments will be a tax
preference item. Corporate shareholders are advised to consult their tax
advisers with respect to alternative minimum tax consequences.
Shareholders will be required to disclose on their federal income tax returns
the amount of tax-exempt interest earned during the year, including
exempt-interest dividends received from the Tax-Exempt Portfolio.
Individuals whose modified income exceeds a base amount will be subject to
federal income tax on up to 85% of their Social Security benefits. Modified
income includes adjusted gross income, tax-exempt interest, including
exempt-interest dividends from the Tax-Exempt Portfolio and 50% of Social
Security benefits. Individuals are advised to consult their tax advisers with
respect to the taxation of Social Security benefits.
The tax exemption of dividends from the Tax-Exempt Portfolio for federal income
tax purposes does not necessarily result in exemption under the income or other
tax laws of any state or local taxing authority. The laws of the several states
and local taxing authorities vary with respect to the taxation of such income
and shareholders of the Portfolio are advised to consult their own tax adviser
as to the status of their accounts under state and local tax laws.
The Fund. Dividends declared in October, November or December to shareholders of
record as of a date in one of those months and paid during the following January
are treated as paid on December 31 of the calendar year in which declared for
federal income tax purposes. The Fund may adjust its schedule for dividend
reinvestment for the month of December to assist it in complying with reporting
and minimum distribution requirements contained in the Code.
Each Portfolio is required by law to withhold 31% of taxable dividends paid to
certain shareholders who do not furnish a correct taxpayer identification number
(in the case of individuals a social security number) and in certain other
circumstances. Trustees of qualified retirement plans and 403(b)(7) accounts are
required by law to withhold 20% of the taxable portion of any distribution that
is eligible to be "rolled over." The 20% withholding requirement does not apply
to distributions from Individual Retirement Accounts (IRAs) or any part of a
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<PAGE>
distribution that is transferred directly to another qualified retirement plan,
403(b)(7) account, or IRA. Shareholders should consult their tax advisers
regarding the 20% withholding requirement.
Shareholders normally will receive monthly confirmations of dividends and of
purchase and redemption transactions except that confirmations of dividend
reinvestment for IRAs and other fiduciary accounts for which Investors Fiduciary
Trust Company serves as trustee will be sent quarterly. Firms may provide
varying arrangements with their clients with respect to confirmations (see
"Purchase of Shares -- Clients of Firms"). Tax information will be provided
annually. Shareholders are encouraged to retain copies of their account
confirmation statements or year-end statements for tax reporting purposes.
However, those who have incomplete records may obtain historical account
transaction information at a reasonable fee.
INVESTMENT MANAGER AND SHAREHOLDER SERVICES
Investment Manager. Scudder Kemper Investments, Inc. ("Scudder Kemper" or "the
Adviser"), 345 Park Avenue, New York, New York, is the investment manager of the
Fund and provides the Fund with continuous professional investment supervision.
The Adviser has been engaged in the management of investment funds for more than
seventy years, with more than $230 billion in assets under management.
The Adviser is an indirect subsidiary of Zurich Financial Services, Inc., a
newly formed global insurance and financial services company. Zurich Financial
Services, Inc. owns approximately 70% of the Adviser, with the balance owned by
the Adviser's officers and employees.
In connection with the formation of Zurich Financial Services, Inc., each Fund's
existing investment management agreement with the Adviser was deemed to have
been assigned and, therefore, terminated. The Board has approved a new
investment management agreement with the Adviser, which is substantially
identical to the current investment management agreement except for the dates of
execution and termination. This agreement became effective upon the termination
of the then current investment management agreement and will be submitted for
shareholder approval at a special meeting currently scheduled to conclude in
December 1998.
Responsibility for overall management of the Fund rests with its Board of
Trustees and officers. Professional investment supervision is provided by the
Adviser. The investment management agreement provides that the Adviser shall act
as the Fund's investment adviser, manage its investments and provide the Fund
with various services and facilities. For the services and facilities furnished
to the Money Market and Government Securities Portfolios, the Fund pays the
Adviser an investment management fee monthly, on a graduated basis at an annual
rate ranging from 0.22% of the first $500 million of combined average daily net
assets of such Portfolios to 0.15% of combined average daily net assets of such
Portfolios over $3 billion. For the services and facilities furnished to the
Tax-Exempt Portfolio, the Fund pays the Adviser an investment management fee
monthly, on a graduated basis at an annual rate ranging from 0.22% of the first
$500 million of average daily net assets of such Portfolio to 0.15% of average
daily net assets of such Portfolio over $3 billion.
Fund Accounting Agent. Scudder Fund Accounting Corporation ("SFAC"), a
subsidiary of the Adviser, is responsible for determining the daily net asset
value per share of the Fund and maintaining all accounting records related
thereto. Currently, SFAC receives no fee for its services to the Fund; however,
subject to Board approval, at some time in the future, SFAC may seek payment for
its services under this agreement.
Year 2000 Readiness. Like other mutual funds and financial and business
organizations worldwide, the Portfolios could be adversely affected if computer
systems on which the Portfolios rely, which primarily include those used by
Scudder Kemper, its affiliates or other service providers, are unable to process
correctly date-related information on and after January 1, 2000. This risk is
commonly called the Year 2000 Issue. Failure to address
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<PAGE>
successfully the Year 2000 Issue could result in interruptions to and other
material adverse effects on the Portfolios' business and operations. Scudder
Kemper had commenced a review of the Year 2000 Issue as it may affect the
Portfolios and is taking steps it believes are reasonably designed to address
the Year 2000 Issue, although there can be no assurances that these steps will
be sufficient. In addition, there can be no assurances that the Year 2000 Issue
will not have an adverse effect on the companies whose securities are held by
the Portfolios or on global markets or economies generally.
Distributor and Administrator. Pursuant to an administration, shareholder
services and distribution agreement and an underwriting agreement (collectively
"distribution agreement"), Kemper Distributors, Inc. ("KDI"), 222 South
Riverside, Chicago, Illinois 60606, an affiliate of the Adviser, serves as
primary administrator, distributor and principal underwriter to the Fund to
provide information and services for existing and potential shareholders. The
distribution agreement provides that KDI shall appoint various financial
services firms, such as broker-dealers or banks, to provide cash management
services for their customers or clients through the Fund. The firms are to
provide such office space and equipment, telephone facilities, personnel and
literature distribution as is necessary or appropriate for providing information
and services to the firms' clients. The Fund has adopted a plan in accordance
with Rule 12b-1 of the 1940 Act (the "12b-1 Plan"). This rule regulates the
manner in which an investment company may directly or indirectly bear the
expenses of distributing its shares. For its services under the distribution
agreement and pursuant to the 12b-1 Plan, KDI receives annual fees, payable
monthly, of 0.38% of average daily net assets from the Money Market and
Government Securities Portfolios and 0.33% of average daily net assets from the
Tax-Exempt Portfolio. Expenditures by KDI on behalf of the Portfolios need not
be made on the same basis that such fees are allocated. The fees are accrued
daily as an expense of the Portfolios. As principal underwriter for the Fund,
KDI acts as agent of the Fund in the sale of its shares.
KDI has related services agreements with various broker-dealer firms to provide
cash management and other services for Fund shareholders. KDI also has services
agreements with banking firms to provide such services, except for certain
underwriting or distribution services that the banks may be prohibited from
providing under the Glass-Steagall Act, for their clients who wish to invest in
the Fund. If the Glass-Steagall Act should prevent banking firms from acting in
any capacity or providing any of the described services, management will
consider what action, if any, is appropriate. Management does not believe that
termination of a relationship with a bank would result in any material adverse
consequences to the Fund. Banks or other financial services firms may be subject
to various state laws regarding the services described above and may be required
to register as dealers pursuant to state law. KDI normally pays such firms at
annual rates ranging from 0.15% to 0.40% of average daily net assets of those
accounts in the Money Market and Government Securities Portfolios that they
maintain and service and ranging from 0.15% to 0.33% of average daily net assets
of those accounts in the Tax-Exempt Portfolio that they maintain and service. In
addition, KDI may, from time to time, from its own resources pay certain firms
additional amounts for such services including, without limitation, fixed dollar
amounts and amounts based upon a percentage of net assets or increased net
assets in those portfolio accounts that said firms maintain and service. KDI may
elect to keep a portion of the total distribution fee to compensate itself for
functions performed for the Fund or to pay for sales materials or other
promotional activities.
Since the fees payable to KDI under the 12b-1 Plan are based upon percentages of
the average daily net assets of the Portfolios as provided above and not upon
the actual expenditures of KDI, the expenses of KDI, which may include overhead
expense, may be more or less than the fees received by it under the 12b-1 Plan.
For example, during the fiscal year ended July 31, 1998, KDI incurred expenses
under the 12b-1 Plan of approximately $6,256,000 while it received from the
Money Market Portfolio, the Government Securities Portfolio and the
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<PAGE>
Tax-Exempt Portfolio, $3,530,000, $1,577,000 and $1,416,000, respectively, for
an aggregate fee under the 12b-1 Plan of $6,523,000. If the 12b-1 Plan is
terminated in accordance with its terms, the obligation of the Fund to make
payments to KDI pursuant to the 12b-1 Plan will cease and the Fund will not be
required to make any payments past the termination date. Thus, there is no legal
obligation for the Fund to pay any expenses incurred by KDI in excess of its
fees under the 12b-1 Plan, if for any reason the 12b-1 Plan is terminated in
accordance with its terms. Future fees under the 12b-1 Plan may or may not be
sufficient to reimburse KDI for its cumulative expenses incurred.
Custodian, Transfer Agent and Shareholder Service Agent. Investors Fiduciary
Trust Company ("IFTC"), 801 Pennsylvania Avenue, Kansas City, Missouri 64105, as
custodian, and State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, as sub-custodian, have custody of all securities and cash
of the Fund. They attend to the collection of principal and income, and payment
for and collection of proceeds of securities bought and sold by the Fund. IFTC
also is the Fund's transfer and dividend-paying agent. Pursuant to a services
agreement with IFTC, KSvC, an affiliate of the Adviser, serves as Shareholder
Service Agent of the Fund.
PERFORMANCE
The Fund may advertise several types of performance information for a Portfolio,
including "yield," "effective yield" and, for the Tax-Exempt Portfolio only,
"tax equivalent yield." Each of these figures is based upon historical earnings
and is not representative of the future performance of a Portfolio. The yield of
a Portfolio refers to the net investment income generated by a hypothetical
investment in the Portfolio over a specific seven-day period. This net
investment income is then annualized, which means that the net investment income
generated during the seven-day period is assumed to be generated each week over
an annual period and is shown as a percentage of the investment. The effective
yield is calculated similarly, but the net investment income earned by the
investment is assumed to be compounded weekly when annualized. The effective
yield will be slightly higher than the yield due to this compounding effect. Tax
equivalent yield is the yield that a taxable investment must generate in order
to equal the Tax-Exempt Portfolio's yield for an investor in a stated federal
income tax bracket (normally assumed to be the maximum tax rate). Tax equivalent
yield is based upon, and will be higher than, the portion of the Tax-Exempt
Portfolio's yield that is tax-exempt.
The performance of a Portfolio may be compared to that of other money market
mutual funds or mutual fund indexes as reported by independent mutual fund
reporting services such as Lipper Analytical Services, Inc. A Portfolio's
performance and its relative size also may be compared to other money market
mutual funds as reported by IBC Financial Data, Inc.'s or Money Market Insightr,
reporting services on money market funds. Investors may want to compare a
Portfolio's performance to that of various bank products as reported by BANK
RATE MONITOR(TM), a financial reporting service that weekly publishes average
rates of bank and thrift institution money market deposit accounts and interest
bearing checking accounts or various certificate of deposit indexes. The
performance of a Portfolio also may be compared to that of U.S. Treasury bills
and notes. Certain of these alternative investments may offer fixed rates of
return and guaranteed principal and may be insured. In addition, investors may
want to compare a Portfolio's performance to the Consumer Price Index either
directly or by calculating its "real rate of return," which is adjusted for the
effects of inflation.
Information may be quoted from publications such as Morningstar, Inc., The Wall
Street Journal, Money Magazine, Forbes, Barron's, Fortune, The Chicago Tribune,
USA Today, Institutional Investor and Registered Representative. The Fund may
also describe its portfolio holdings and depict its size or relative size
compared to other mutual funds, the number and make-up of its shareholder base
and other descriptive factors concerning the Fund.
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Each Portfolio's yield will fluctuate. Shares of the Fund are not insured.
Additional information concerning each Portfolio's performance appears in the
Statement of Additional Information.
CAPITAL STRUCTURE
The Fund is an open-end, diversified, management investment company, organized
as a business trust under the laws of Massachusetts on August 9, 1985. Effective
November 29, 1985, the Money Market and Government Securities Portfolios
pursuant to a reorganization succeeded to the assets and liabilities of the two
Portfolios of Cash Equivalent Fund, Inc., a Maryland corporation organized on
February 2, 1979. The Money Market and Government Securities Portfolios
commenced operations on March 16, 1979 and December 1, 1981, respectively.
Effective October 14, 1988, the Tax-Exempt Portfolio succeeded to the assets and
liabilities of Tax-Exempt Money Market Fund, a Massachusetts business trust
organized October 25, 1985. Effective January 31, 1986, Tax-Exempt Money Market
Fund succeeded to the assets and liabilities of Tax-Exempt Money Market Fund,
Inc., a Maryland corporation that was organized January 27, 1982 and commenced
operations on July 9, 1982. The Fund may issue an unlimited number of shares of
beneficial interest in one or more series ("Portfolios"), all having no par
value. While only shares of the three previously described Portfolios are
presently being offered, the Board of Trustees may authorize the issuance of
additional Portfolios if deemed desirable. Since the Fund offers multiple
Portfolios, it is known as a "series company." Shares of each Portfolio have
equal noncumulative voting rights and equal rights with respect to dividends,
assets and liquidation of such Portfolio. Shares are fully paid and
nonassessable when issued, are transferable without restriction and have no
preemptive or conversion rights. The Fund is not required to hold annual
shareholders' meetings and does not intend to do so. However, it will hold
special meetings as required or deemed desirable for such purposes as electing
trustees, changing fundamental policies or approving an investment management
agreement. Subject to the Agreement and Declaration of Trust of the Fund,
shareholders may remove trustees. Shareholders will vote by Portfolio and not in
the aggregate except when voting in the aggregate is required under the 1940
Act, such as for the election of trustees.
The Tax-Exempt Portfolio may in the future seek to achieve its investment
objective by pooling its assets with assets of other mutual funds for investment
in another investment company having the same investment objective and
substantially the same investment policies and restrictions as the Portfolio.
The purpose of such an arrangement is to achieve greater operational
efficiencies and to reduce costs. It is expected that any such investment
company will be managed by the Adviser in substantially the same manner as the
Portfolio. Shareholders of the Portfolio will be given at least 30 days' prior
notice of any such investment, although they will not be entitled to vote on the
action. Such investment would be made only if the Trustees determine it to be in
the best interests of the Portfolio and its shareholders.
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Cash Equivalent
Fund
Prospectus
November 30, 1998
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
November 30, 1998
CASH EQUIVALENT FUND
222 South Riverside Plaza, Chicago, Illinois 60606
1-800-231-8568
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the prospectus of Cash Equivalent Fund (the "Fund") dated
November 30, 1998. The prospectus may be obtained without charge from the Fund.
TABLE OF CONTENTS
INVESTMENT RESTRICTIONS.......................................................2
MUNICIPAL SECURITIES..........................................................5
INVESTMENT MANAGER AND SHAREHOLDER SERVICES...................................5
PORTFOLIO TRANSACTIONS........................................................9
PURCHASE AND REDEMPTION OF SHARES............................................10
DIVIDENDS, NET ASSET VALUE AND TAXES.........................................11
PERFORMANCE..................................................................12
OFFICERS AND TRUSTEES........................................................15
SPECIAL FEATURES.............................................................18
SHAREHOLDER RIGHTS...........................................................19
APPENDIX -- RATINGS OF INVESTMENT............................................21
The financial statements appearing in the Fund's 1998 Annual Report to
Shareholders are incorporated herein by reference. The Fund's Annual Report
accompanies this Statement of Additional Information.
<PAGE>
INVESTMENT RESTRICTIONS
The Fund has adopted for the Money Market Portfolio, the Government Securities
Portfolio and the Tax-Exempt Portfolio certain investment restrictions which,
together with the investment objective and policies of each Portfolio, cannot be
changed for a Portfolio without approval by holders of a majority of its
outstanding voting shares. As defined in the Investment Company Act of 1940,
this means the lesser of the vote of (a) 67% of the shares of the Portfolio
present at a meeting where more than 50% of the outstanding shares are present
in person or by proxy or (b) more than 50% of the outstanding shares of the
Portfolio.
The Money Market Portfolio and the Government Securities Portfolio individually
may not:
(1) Purchase securities or make investments other than in accordance with
its investment objective and policies.
(2) Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its agencies or
instrumentalities) if, as a result, more than 5% of the value of the
Portfolio's assets would be invested in securities of that issuer
(3) Purchase, in the aggregate with all other Portfolios, more than 10% of
any class of securities of any issuer. All debt securities and all
preferred stocks are each considered as one class.
(4) Invest more than 5% of the Portfolio's total assets in securities of
issuers (other than obligations of, or guaranteed by, the United
States Government, its agencies or instrumentalities) which with their
predecessors have a record of less than three years continuous
operation.
(5) Enter into repurchase agreements if, as a result thereof, more than
10% of the Portfolio's total assets valued at the time of the
transaction would be subject to repurchase agreements maturing in more
than seven days.
(6) Make loans to others (except through the purchase of debt obligations
or repurchase agreements in accordance with its investment objective
and policies).
(7) Borrow money except as a temporary measure for extraordinary or
emergency purposes and then only in an amount up to one-third of the
value of its total assets, in order to meet redemption requests
without immediately selling any money market instruments (any such
borrowings under this section will not be collateralized). If, for any
reason, the current value of the Portfolio's total assets falls below
an amount equal to three times the amount of its indebtedness from
money borrowed, the Portfolio will, within three business days, reduce
its indebtedness to the extent necessary. The Portfolio will not
borrow for leverage purposes.
(8) Make short sales of securities, or purchase any securities on margin
except to obtain such short-term credits as may be necessary for the
clearance of transactions.
(9) Write, purchase or sell puts, calls or combinations thereof.
(10) Concentrate more than 25% of the value of the Portfolio's assets in
any one industry; provided, however, that the Portfolio reserves
freedom of action to invest up to 100% of its assets in certificates
of deposit or bankers' acceptances or U.S. Government securities in
accordance with its investment objective and policies.
(11) Purchase or retain the securities of any issuer if any of the
officers, trustees or directors of the Fund or its investment adviser
owns beneficially more than 1/2 of 1% of the securities of such issuer
and together own more than 5% of the securities of such issuer.
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(12) Invest more than 5% of the Portfolio's total assets in securities
restricted as to disposition under the federal securities laws (except
commercial paper issued under Section 4(2) of the Securities Act of
1933).
(13) Invest for the purpose of exercising control or management of another
issuer.
(14) Invest in commodities or commodity futures contracts or in real
estate, although it may invest in securities which are secured by real
estate and securities of issuers which invest or deal in real estate.
(15) Invest in interests in oil, gas or other mineral exploration or
development programs, although it may invest in the securities of
issuers which invest in or sponsor such programs.
(16) Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition
of assets.
(17) Underwrite securities issued by others except to the extent the
Portfolio may be deemed to be an underwriter, under the federal
securities laws, in connection with the disposition of portfolio
securities.
(18) Issue senior securities as defined in the Investment Company Act of
1940.
The Tax-Exempt Portfolio may not:
(1) Purchase securities or make investments other than in accordance with
its investment objective and policies, except that all or
substantially all of the assets of the Portfolio may be invested in
another registered investment company having the same investment
objective and substantially similar investment policies as the
Portfolio.
(2) Purchase securities (other than securities of the U.S. Government, its
agencies or instrumentalities) if as a result of such purchase more
than 25% of the Portfolio's total assets would be invested in any
industry or in any one state, nor may it enter into a repurchase
agreement if more than 10% of its assets would be subject to
repurchase agreements maturing in more than seven days.
(3) Purchase securities of any issuer (other than obligations of, or
guaranteed by, the U.S. Government, its agencies or instrumentalities)
if as a result more than 5% of the value of the Portfolio's assets
would be invested in the securities of such issuer. For purposes of
this limitation, the Portfolio will regard the entity which has the
primary responsibility for the payment of interest and principal as
the issuer.
(4) Invest more than 5% of the Portfolio's total assets in industrial
development bonds sponsored by companies which with their predecessors
have less than three years' continuous operation.
(5) Make loans to others (except through the purchase of debt obligations
or repurchase agreements in accordance with its investment objective
and policies).
(6) Borrow money except from banks for temporary purposes (but not for the
purpose of purchase of investments) and then only in an amount not to
exceed one-third of the value of the Portfolio's total assets
(including the amount borrowed) in order to meet redemption requests
which otherwise might result in the untimely disposition of
securities; or pledge the Portfolio's securities or receivables or
transfer or assign or otherwise encumber them in an amount to exceed
10% of the Portfolio's net assets to secure borrowings. Reverse
repurchase agreements made by the Portfolio are permitted within the
limitations of this paragraph. The Portfolio will not purchase
securities or make investments while reverse repurchase agreements or
borrowings are outstanding.
(7) Make short sales of securities or purchase securities on margin,
except to obtain such short-term credits as may be necessary for the
clearance of transactions.
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<PAGE>
(8) Write, purchase or sell puts, calls or combinations thereof, although
the Portfolio may purchase Municipal Securities subject to Standby
Commitments, Variable Rate Demand Notes or Repurchase Agreements in
accordance with its investment objective and policies.
(9) Purchase or retain the securities of any issuer if any of the
officers, trustees or directors of the Fund or its investment adviser
owns beneficially more than 1/2 of 1% of the securities of such issuer
and together own more than 5% of the securities of such issuer, except
that all or substantially all of the assets of the Portfolio may be
invested in another registered investment company having the same
investment objective and substantially similar investment policies as
the Portfolio.
(10) Invest more than 5% of the Portfolio's total assets in securities
restricted as to disposition under the federal securities laws.
(11) Invest for the purpose of exercising control or management of another
issuer.
(12) Invest in commodities or commodity futures contracts or in real estate
except that the Portfolio may invest in Municipal Securities secured
by real estate or interests therein.
(13) Invest in interests in oil, gas or other mineral exploration or
development programs, although it may invest in Municipal Securities
of issuers which invest in or sponsor such programs.
(14) Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition
of assets, and except that all or substantially all of the assets of
the Portfolio may be invested in another registered investment company
having the same investment objective and substantially similar
investment policies as the Portfolio.
(15) Underwrite securities issued by others except to the extent the
Portfolio may be deemed to be an underwriter, under the federal
securities laws, in connection with the disposition of portfolio
securities, and except that all or substantially all of the assets of
the Portfolio may be invested in another registered investment company
having the same investment objective and substantially similar
investment policies as the Portfolio.
(16) Issue senior securities as defined in the Investment Company Act of
1940.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The
Portfolios did not borrow money as permitted by investment restriction number 7
(Money Market and Government Securities Portfolios) and number 6 (Tax-Exempt
Portfolio), in the latest fiscal year of the Fund, and they have no present
intention of borrowing during the coming year. In any event, borrowings would
only be made as permitted by such restrictions. The Tax-Exempt Portfolio may
invest more than 25% of its total assets in industrial development bonds.
Master/Feeder Fund Structure. At a special meeting of shareholders, a majority
of the shareholders of the Tax-Exempt Portfolio approved a proposal which gives
the Board of Trustees the discretion to retain the current distribution
arrangement for the Portfolio while investing in a master fund in a
master/feeder fund structure as described below.
A master/feeder fund structure is one in which a fund (a "feeder fund"), instead
of investing directly in a portfolio of securities, invests most or all of its
investment assets in a separate registered investment company (the "master
fund") with substantially the same investment objective and policies as the
feeder fund. Such a structure permits the pooling of assets of two or more
feeder funds, preserving separate identities or distribution channels at the
feeder fund level. Based on the premise that certain of the expenses of
operating an investment portfolio are relatively fixed, a larger investment
portfolio may eventually achieve a lower ratio of operating expenses to average
net assets. An existing investment company is able to convert to a feeder fund
by selling all of its investments, which involves brokerage and other
transaction costs and realization of a taxable gain or loss, or by contributing
its assets to the master fund and avoiding transaction costs and, if proper
procedures are followed, the realization of taxable gain or loss.
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<PAGE>
MUNICIPAL SECURITIES
Municipal Securities that the Tax-Exempt Portfolio may purchase include, without
limitation, debt obligations issued to obtain funds for various public purposes,
including the construction of a wide range of public facilities such as
airports, bridges, highways, housing, hospitals, mass transportation, public
utilities, schools, streets, and water and sewer works. Other public purposes
for which Municipal Securities may be issued include refunding outstanding
obligations, obtaining funds for general operating expenses and obtaining funds
to loan to other public institutions and facilities.
Municipal Securities, such as industrial development bonds, are issued by or on
behalf of public authorities to obtain funds for purposes including privately
operated airports, housing, conventions, trade shows, ports, sports, parking or
pollution control facilities or for facilities for water, gas, electricity or
sewage and solid waste disposal. Such obligations, which may include lease
arrangements, are included within the term Municipal Securities if the interest
paid thereon qualifies as exempt from federal income tax. Other types of
industrial development bonds, the proceeds of which are used for the
construction, equipment, repair or improvement of privately operated industrial
or commercial facilities, may constitute Municipal Securities, although current
federal tax laws place substantial limitations on the size of such issues.
Municipal Securities generally are classified as "general obligation" or
"revenue." General obligation notes are secured by the issuer's pledge of its
full credit and taxing power for the payment of principal and interest. Revenue
notes are payable only from the revenues derived from a particular facility or
class of facilities or, in some cases, from the proceeds of a special excise or
other specific revenue source. Industrial development bonds which are Municipal
Securities are in most cases revenue bonds and generally do not constitute the
pledge of the credit of the issuer of such bonds.
Examples of Municipal Securities that are issued with original maturities of one
year or less are short-term tax anticipation notes, bond anticipation notes,
revenue anticipation notes, construction loan notes, pre-refunded municipal
bonds, warrants and tax-free commercial paper.
Tax anticipation notes typically are sold to finance working capital needs of
municipalities in anticipation of receiving property taxes on a future date.
Bond anticipation notes are sold on an interim basis in anticipation of a
municipality issuing a longer term bond in the future. Revenue anticipation
notes are issued in expectation of receipt of other types of revenue such as
those available under the Federal Revenue Sharing Program. Construction loan
notes are instruments insured by the Federal Housing Administration with
permanent financing by "Fannie Mae" (the Federal National Mortgage Association)
or "Ginnie Mae" (the Government National Mortgage Association) at the end of the
project construction period. Pre-refunded municipal bonds are bonds that are not
yet refundable, but for which securities have been placed in escrow to refund an
original municipal bond issue when it becomes refundable. Tax-free commercial
paper is an unsecured promissory obligation issued or guaranteed by a municipal
issuer. The Tax-Exempt Portfolio may purchase other Municipal Securities similar
to the foregoing, that are or may become available, including securities issued
to pre-refund other outstanding obligations of municipal issuers.
The federal bankruptcy statutes relating to the adjustments of debts of
political subdivisions and authorities of states of the United States provide
that, in certain circumstances, such subdivisions or authorities may be
authorized to initiate bankruptcy proceedings without prior notice to or consent
of creditors, which proceedings could result in material adverse changes in the
rights of holders of obligations issued by such subdivisions or authorities.
Litigation challenging the validity under state constitutions of present systems
of financing public education has been initiated or adjudicated in a number of
states, and legislation has been introduced to effect changes in public school
finances in some states. In other instances there has been litigation
challenging the issuance of pollution control revenue bonds or the validity of
their issuance under state or federal law which ultimately could affect the
validity of those Municipal Securities or the tax-free nature of the interest
thereon.
INVESTMENT MANAGER AND SHAREHOLDER SERVICES
Investment Manager. Scudder Kemper Investments, Inc. ("Scudder Kemper" or the
"Adviser"), 345 Park Avenue, New York, New York, is the Fund's investment
manager.
5
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The Adviser is approximately 70% owned by Zurich Financial Services, Inc., a
newly formed global insurance and financial services company. The balance of the
Adviser is owned by its officers and employees. Pursuant to an investment
management agreement, Scudder Kemper Adviser acts as each Portfolio's investment
adviser, manages its investments, administers its business affairs, furnishes
office facilities and equipment, provides clerical, and administrative services,
and permits any of its officers or employees to serve without compensation as
trustees or officers of the Fund if elected to such positions. The Fund pays the
expenses of its operations, including the fees and expenses of independent
auditors, counsel, custodian and transfer agent and the cost of share
certificates, reports and notices to shareholders, costs of calculating net
asset value and maintaining all accounting records thereto, brokerage
commissions or transaction costs, taxes, registration fees, the fees and
expenses of qualifying the Fund and its shares for distribution under federal
and state securities laws and membership dues in the Investment Company
Institute or any similar organization. Fund expenses generally are allocated
among the Portfolios on the basis of net assets at the time of the allocation,
except that expenses directly attributable to a particular Portfolio are charged
to that Portfolio.
There is one investment management agreement for the Money Market Portfolio and
the Government Securities Portfolio and a separate investment management
agreement for the Tax-Exempt Portfolio. These agreements are substantially the
same except that the graduated fee schedule under a particular agreement is
applied only to the Portfolio or Portfolios subject to that agreement and the
expense limitations contained in the agreements are different.
Each of the investment management agreements continues in effect from year to
year for each Portfolio subject thereto so long as its continuation is approved
at least annually by a majority vote of the trustees who are not parties to such
agreement or interested persons of any such party except in their capacity as
trustees of the Fund, cast in person at a meeting called for such purpose, and
by the shareholders of each Portfolio subject thereto or the Board of Trustees.
If continuation is not approved for a Portfolio, an investment management
agreement nevertheless may continue in effect for any Portfolio for which it is
approved and the Adviser may continue to serve as investment manager for the
Portfolio for which it is not approved to the extent permitted by the Investment
Company Act of 1940. Each agreement may be terminated at any time upon 60 days
notice by either party, or by a majority vote of the outstanding shares of a
Portfolio subject thereto with respect to that Portfolio, and will terminate
automatically upon assignment. Additional Portfolios may be subject to different
agreements.
The investment management agreements provide that the Adviser shall not be
liable for any error of judgment or of law, or for any loss suffered by the Fund
in connection with the matters to which the agreements relate, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
the Adviser in the performance of its obligations and duties, or by reason of
its reckless disregard of its obligations and duties under the agreements.
At December 31, 1997, pursuant to the terms of an agreement, Scudder, Stevens &
Clark, Inc. ("Scudder") and Zurich Insurance Company ("Zurich") formed a new
global organization by combining Scudder with Zurich Kemper Investments, Inc., a
former subsidiary of Zurich and the former investment manager to each Fund, and
Scudder changed its name to Scudder Kemper Investments, Inc. As a result of the
transaction, Zurich owned approximately 70% of the Adviser, with the balance
owned by the Adviser's officers and employees.
On September 7, 1998, the businesses of Zurich (including Zurich's 70% interest
in Scudder Kemper) and the financial services businesses of B.A.T Industries
p.l.c. ("B.A.T") were combined to form a new global insurance and financial
services company known as Zurich Financial Services, Inc. By way of a dual
holding company structure, former Zurich shareholders initially owned
approximately 57% of Zurich Financial Services, Inc., with the balance initially
owned by former B.A.T shareholders.
6
<PAGE>
Upon consummation of this transaction, the Portfolios' existing investment
management agreements with Scudder Kemper were deemed to have been assigned and,
therefore, terminated. The Board has approved new investment management
agreements with Scudder Kemper, which are substantially identical to the current
investment management agreements except for the dates of execution and
termination. These agreements became effective upon the termination of the then
current investment management agreements and will be submitted for shareholder
approval at a special meeting currently scheduled to conclude in December 1998.
For the services and facilities furnished to the Money Market and Government
Securities Portfolios, such Portfolios pay an annual investment management fee
monthly, on a graduated basis at the following rate: 0.22% of the first $500
million of combined average daily net assets of such Portfolios, 0.20% of the
next $500 million, 0.175% of the next $1 billion, 0.16% of the next $1 billion
and 0.15% of combined average daily net assets of such Portfolios over $3
billion. The Adviser has agreed to reimburse the Money Market and Government
Securities Portfolios should all operating expenses of the Money Market and
Government Securities Portfolios, including the investment management fee of the
Adviser but excluding taxes, interest, the distribution fee of Kemper
Distributors, Inc. ("KDI"), extraordinary expenses (as determined by the Board
of Trustees) and brokerage commissions or transaction costs, exceed 0.90% of the
first $500 million, 0.80% of the next $500 million, 0.75% of the next $1 billion
and 0.70% of average daily net assets of the Money Market and Government
Securities Portfolios in excess of $2 billion on an annual basis. The investment
management fee and the expense limitation for the Money Market and Government
Securities Portfolios are computed based on average daily net assets of such
Portfolios and are allocated among such Portfolios based upon the relative net
assets of each.
For the services and facilities furnished to the Tax-Exempt Portfolio, such
Portfolio pays an annual investment management fee monthly, on a graduated basis
at the following annual rate: 0.22% of the first $500 million of average daily
net assets, 0.20% of the next $500 million, 0.175% of the next $1 billion, 0.16%
on the next $1 billion and 0.15% of average daily net assets of such Portfolio
over $3 billion. The Adviser has agreed to reimburse the Tax-Exempt Portfolio
should all operating expenses of such Portfolio, 1including the compensation of
the Adviser but excluding taxes, interest, extraordinary expenses and brokerage
commissions or transaction costs exceed 1 1/2% of the first $30 million of
average daily net assets and 1% of average daily net assets of the Tax-Exempt
Portfolio over $30 million on an annual basis.
For its services as investment adviser and manager and for facilities furnished
the Fund during the fiscal year ended July 31, 1998, the Fund incurred
investment management fees aggregating $1,868,000 for the Money Market
Portfolio, $834,000 for the Government Securities Portfolio and $945,000 for the
Tax-Exempt Portfolio. During the fiscal year ended July 31, 1997, the Fund
incurred investment management fees aggregating $2,795,000 for the Money Market
Portfolio, $1,393,000 for the Government Securities Portfolio and $1,377,000 for
the Tax-Exempt Portfolio. The Fund incurred investment management fees
aggregating $5,401,000 for the Money Market Portfolio, $2,163,000 for the
Government Securities Portfolio and $2,953,000 for the Tax-Exempt Portfolio
during the fiscal year ended July 31, 1996.
Fund Accounting Agent. Scudder Fund Accounting Corporation ("SFAC"), a
subsidiary of the Adviser, is responsible for determining the net asset value
per share of the Fund and maintaining all accounting records related thereto.
Currently, SFAC receives no fee for its services to the Fund; however, subject
to Board approval, at some time in the future, SFAC may seek payment for its
services under this agreement.
Distributor and Administrator. Pursuant to an administration, shareholder
services and distribution agreement and an underwriting agreement (collectively
"distribution agreement"), KDI serves as primary administrator, distributor and
principal underwriter to the Fund to provide information and services for
existing and potential shareholders. The distribution agreement provides that
KDI shall appoint various firms to provide a cash management service for their
customers or clients through the Fund. The firms are to provide such office
space and equipment, telephone facilities, personnel and literature distribution
as is necessary or appropriate for providing information and services to the
firms' clients. The Fund has adopted a plan in accordance with Rule 12b-1 of the
Investment Company Act of 1940 (the "12b-1 Plan"). The rule regulates the manner
in which an investment company may, directly or indirectly, bear the expenses of
distributing shares. The distribution agreement and the 12b-1 Plan continue in
effect from year to year so long as such continuance is approved at least
annually by a vote of the Board of Trustees of the Fund, including the Trustees
who are not interested persons of the Fund and who have no direct or indirect
financial interest in the agreement. The distribution agreement automatically
7
<PAGE>
terminates in the event of its assignment and may be terminated at any time
without penalty by the Fund or by KDI upon 60 days' written notice. Termination
by the Fund may be by vote of a majority of the Board of Trustees, or a majority
of the Trustees who are not interested persons of the Fund and who have no
direct or indirect financial interest in the agreement, or a "majority of the
outstanding voting securities" of the Fund as defined under the Investment
Company Act of 1940. The 12b-1 Plan may not be amended to increase the fee to be
paid by the Fund without approval by a majority of the outstanding voting
securities of the Fund and all material amendments must in any event be approved
by the Board of Trustees in the manner described above with respect to the
continuation of the 12b-1 Plan. The Portfolios of the Fund will vote separately
with respect to the 12b-1Plan. For its services under the distribution
agreement, and pursuant to the 12b-1 Plan, the Fund pays KDI an annual
distribution fee, payable monthly, of 0.38% of average daily net assets with
respect to the Money Market and Government Securities Portfolios and 0.33% of
average daily net assets with respect to the Tax-Exempt Portfolio.
KDI is the principal underwriter for shares of the Fund and acts as agent of the
Fund in the sale of its shares. The Fund pays the cost for the prospectus and
shareholder reports to be set in type and printed for existing shareholders, and
KDI pays for the printing and distribution of copies thereof used in connection
with the offering of shares to prospective investors. KDI also pays for
supplementary sales literature and advertising costs.
KDI has related services agreements with various broker-dealer firms to provide
cash management and other services for the Fund shareholders. Such services and
assistance may include, but may not be limited to, establishment and maintenance
of shareholder accounts and records, processing purchase and redemption
transactions, providing automatic investment in Fund shares of client account
balances, answering routine inquiries regarding the Fund, assisting clients in
changing account options, designations and addresses, and such other services as
may be agreed upon from time to time and as may be permitted by applicable
statute, rule or regulation. KDI also has services agreements with banking firms
to provide the above listed services, except for certain distribution services
that the banks may be prohibited from providing, for their clients who wish to
invest in the Fund. KDI also may provide some of the above services for the
Fund. KDI normally pays such firms at an annual rate ranging from 0.15% to 0.40%
of average net assets of those accounts in the Money Market and Government
Securities Portfolios that they maintain and service and ranging from 0.15% to
0.33% of average daily net assets of those accounts in the Tax-Exempt Portfolio
that they maintain and service. KDI in its discretion may pay certain firms
additional amounts. KDI may elect to keep a portion of the total distribution
fee to compensate itself for functions performed for the Fund or to pay for
sales materials or other promotional activities.
For the fiscal year ended July 31, 1998, the Fund incurred distribution fees in
the Money Market Portfolio, the Government Securities Portfolio and the
Tax-Exempt Portfolio of $3,508,466, $1,384,374 and $1,452,070, respectively, for
a total amount of $6,545,110. KDI remitted $3,442,693, $1,561,427 and
$1,251,870, respectively, to various firms, pursuant to the related services
agreements. For the fiscal year ended July 31, 1998, KDI incurred expenses for
underwriting, distribution and administration in the approximate amounts noted:
fees to firms $6,255,990; advertising and literature $0; prospectus printing $0
and marketing and sales expenses $572,748, for a total of $6,828,738. A portion
of the aforesaid marketing, sales and operating expenses could be considered
overhead expense; however, KDI has made no attempt to differentiate between
expenses that are overhead and those that are not.
Certain officers or trustees of the Fund are also directors or officers of the
Adviser and KDI as indicated under "Officers and Trustees."
Custodian, Transfer Agent and Shareholder Service Agent. Investors Fiduciary
Trust Company ("IFTC"), 801 Pennsylvania Avenue, Kansas City, Missouri 64105, as
custodian, and State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, as sub-custodian, have custody of all securities and cash
of the Fund. They attend to the collection of principal and income, and payment
for and collection of proceeds of securities bought and sold by the Fund.
Pursuant to a services agreement with IFTC, Kemper Service Company ("KSvC"), an
affiliate of the Adviser, serves as "Shareholder Service Agent" and, as such,
performs all of IFTC's duties as transfer agent and dividend paying agent. IFTC
receives, as transfer agent, and pays to KSvC annual account fees of a maximum
of $13 per
8
<PAGE>
account plus out-of-pocket expense reimbursement. During the fiscal year ended
July 31, 1998, IFTC remitted shareholder service fees in the amount of
$2,948,000 to KSvC as Shareholder Service Agent.
Independent Auditors and Reports to Shareholders. The Fund's independent
auditors, Ernst & Young LLP, 233 South Wacker Drive, Chicago, Illinois 60606,
audit and report on the Fund's annual financial statements, review certain
regulatory reports and the Fund's federal income tax return, and perform other
professional accounting, auditing, tax and advisory services when engaged to do
so by the Fund. Shareholders will receive annual audited financial statements
and semi-annual unaudited financial statements.
Legal Counsel. Vedder, Price, Kaufman & Kammholz, 222 North LaSalle Street,
Chicago, Illinois 60601, serves as legal counsel to the Fund.
PORTFOLIO TRANSACTIONS
Portfolio transactions are undertaken principally to pursue the objective of
each Portfolio in relation to movements in the general level of interest rates,
to invest money obtained from the sale of Fund shares, to reinvest proceeds from
maturing portfolio securities and to meet redemptions of Fund shares. This may
increase or decrease the yield of a Portfolio depending upon management's
ability to correctly time and execute such transactions. Since a Portfolio's
assets are invested in securities with short maturities, its portfolio will turn
over several times a year. Securities with maturities of less than one year are
excluded from required portfolio turnover rate calculations, therefore, each
Portfolio's portfolio turnover rate for reporting purposes will be zero.
The primary objective of the Adviser in placing orders for the purchase and sale
of securities for a Fund's portfolio is to obtain the most favorable net results
taking into account such factors as price, commission where applicable, size of
order, difficulty of execution and skill required of the executing
broker/dealer. The Adviser seeks to evaluate the overall reasonableness of
brokerage commissions paid (to the extent applicable) through its familiarity
with commissions charged on comparable transactions, as well as by comparing
commissions paid by a Fund to reported commissions paid by others. The Adviser
reviews on a routine basis commission rates, execution and settlement services
performed, making internal and external comparisons.
When it can be done consistently with the policy of obtaining the most favorable
net results, it is the Adviser's practice to place such orders with
broker/dealers who supply research, market and statistical information to a
Fund. The term "research, market and statistical information" includes advice as
to the value of securities: the advisability of investing in, purchasing or
selling securities; the availability of securities or purchasers or sellers of
securities; and analyses and reports concerning
9
<PAGE>
issuers, industries, securities, economic factors and trends, portfolio strategy
and the performance of accounts. The Adviser is authorized when placing
portfolio transactions for a Fund to pay a brokerage commission in excess of
that which another broker might charge for executing the same transaction solely
on account of the receipt of research, market or statistical information. In
effecting transactions in over-the-counter securities, orders are placed with
the principal market makers for the security being traded unless, after
exercising care, it appears that more favorable results are available elsewhere.
In selecting among firms believed to meet the criteria for handling a particular
transaction, the Adviser may give consideration to those firms that have sold or
are selling shares of a Fund managed by the Adviser.
To the maximum extent feasible, it is expected that the Adviser will place
orders for portfolio transactions through Scudder Investor Services, Inc.
("SIS"), a corporation registered as a broker-dealer and a subsidiary of the
Adviser. SIS will place orders on behalf of the Fund with issuers, underwriters
or other brokers and dealers. SIS will not receive any commission, fee or other
remuneration from the Fund for this service.
Although certain research, market and statistical information from
broker/dealers may be useful to a Fund and to the Adviser, it is the opinion of
the Adviser that such information only supplements its 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 broker/dealers through whom other clients of the Adviser effect
securities transactions may be useful to the Adviser in providing services to a
Fund.
The Board members for a Fund review from time to time whether the recapture for
the benefit of a Fund of some portion of the brokerage commissions or similar
fees paid by a Fund on portfolio transactions is legally permissible and
advisable.
Money market instruments are normally purchased in principal transactions
directly from the issuer or from an underwriter or market maker. There usually
are no brokerage commissions paid by the Fund for such purchases. During the
last three fiscal years the Fund paid no portfolio brokerage commissions.
Purchases from underwriters will include a commission or concession paid by the
issuer to the underwriter, and purchases from dealers serving as market makers
will include the spread between the bid and asked prices.
PURCHASE AND REDEMPTION OF SHARES
Shares of a Portfolio are sold at their net asset value next determined after an
order and payment are received in the form described in the Fund's prospectus.
The minimum initial investment is $1,000 and the minimum subsequent investment
is $100 but such minimum amounts may be changed at any time. The Fund may waive
the minimum for purchases by trustees, directors, officers or employees of the
Fund or the Adviser and its affiliates. An investor wishing to open an account
should use the Account Information Form available from the Fund or financial
services firms. Orders for the purchase of shares that are accompanied by a
check drawn on a foreign bank (other than a check drawn on a Canadian bank in
U.S. Dollars) will not be considered in proper form and will not be processed
unless and until the Fund determines that it has received payment of the
proceeds of the check. The time required for such a determination will vary and
cannot be determined in advance.
Upon receipt by the Fund's Shareholder Service Agent (see "Purchase of Shares"
in the prospectus) of a request for redemption in proper form, shares will be
redeemed by the Fund at the applicable net asset value as described in the
Fund's prospectus. A shareholder may elect to use either the regular or
expedited redemption procedures.
The Fund may suspend the right of redemption or delay payment more than seven
days (a) during any period when the New York Stock Exchange ("Exchange") is
closed other than customary weekend and holiday closings or during any period in
which trading on the Exchange is restricted, (b) during any period when an
emergency exists as a result of which (i) disposal of a Portfolio's investments
is not reasonably practicable, or (ii) it is not reasonably practicable for the
Portfolio to determine the value of its net assets, or (c) for such other
periods as the Securities and Exchange Commission may by order permit for the
protection of the Fund's shareholders.
10
<PAGE>
Although it is the Fund's present policy to redeem in cash, if the Board of
Trustees determines that a material adverse effect would be experienced by the
remaining shareholders if payment were made wholly in cash, the Fund will pay
the redemption price in whole or in part by a distribution of portfolio
securities in lieu of cash, in conformity with the applicable rules of the
Securities and Exchange Commission, taking such securities at the same value
used to determine net asset value, and selecting the securities in such manner
as the Board of Trustees may deem fair and equitable. If such a distribution
occurred, shareholders receiving securities and selling them could receive less
than the redemption value of such securities and in addition could incur certain
transaction costs. Such a redemption would not be so liquid as a redemption
entirely in cash. The Fund has elected to be governed by Rule 18f-1 under the
Investment Company Act of 1940 pursuant to which the Fund is obligated to redeem
shares of a Portfolio solely in cash up to the lesser of $250,000 or 1% of the
net assets of the Portfolio during any 90-day period for any one shareholder of
record.
DIVIDENDS, NET ASSET VALUE AND TAXES
Dividends. Dividends are declared daily and paid monthly. Shareholders will
receive dividends in additional shares unless they elect to receive cash.
Dividends will be reinvested monthly in shares of the Portfolio at the net asset
value normally on the fifteenth day of each month if a business day, otherwise
on the next business day. The Fund will pay shareholders who redeem their entire
accounts all unpaid dividends at the time of the redemption not later than the
next dividend payment date. Upon written request to the Shareholder Service
Agent, a shareholder may elect to have Fund dividends invested without sales
charge in shares of another Kemper Mutual Fund offering this privilege at the
net asset value of such other fund. See "Special Features -- Exchange Privilege"
for a list of such other Kemper Mutual Funds. To use this privilege of investing
Fund dividends in shares of another Kemper Mutual Fund, shareholders must
maintain a minimum account value of $1,000 in this Fund.
Each Portfolio calculates its dividends based on its daily net investment
income. For this purpose, the net investment income of the Portfolio consists of
(a) accrued interest income plus or minus amortized discount or premium
(excluding market discount for the Tax-Exempt Portfolio), (b) plus or minus all
short-term realized gains and losses on investments and (c) minus accrued
expenses allocated to the Portfolio. Expenses of the Fund are accrued each day.
While each Portfolio's investments are valued at amortized cost, there will be
no unrealized gains or losses on such investments. However, should the net asset
value of a Portfolio deviate significantly from market value, the Board of
Trustees could decide to value the investments at market value and then
unrealized gains and losses would be included in net investment income above.
Net Asset Value. As described in the prospectus, each Portfolio values its
portfolio instruments at amortized cost, which does not take into account
unrealized capital gains or losses. This involves initially valuing an
instrument at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. While this method provides
certainty in valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the price the Portfolio
would receive if it sold the instrument. Calculations are made to compare the
value of a Portfolio's investments valued at amortized cost with market values.
Market valuations are obtained by using actual quotations provided by market
makers, estimates of market value, or values obtained from yield data relating
to classes of money market instruments published by reputable sources at the
mean between the bid and asked prices for the instruments. If a deviation of 1/2
of 1% or more were to occur between the net asset value per share calculated by
reference to market values and a Portfolio's $1.00 per share net asset value, or
if there were any other deviation which the Board of Trustees of the Fund
believed would result in a material dilution to shareholders or purchasers, the
Board of Trustees would promptly consider what action, if any, should be
initiated. If a Portfolio's net asset value per share (computed using market
values) declined, or were expected to decline, below $1.00 (computed using
amortized cost), the Board of Trustees of the Fund might temporarily reduce or
suspend dividend payments in an effort to maintain the net asset value at $1.00
per share. As a result of such reduction or suspension of dividends or other
action by the Board of Trustees, an investor would receive less income during a
given period than if such a reduction or suspension had not taken place. Such
action could result in investors receiving no dividend for the period during
which they hold their shares and receiving, upon redemption, a price per share
lower than that which they paid. On the other hand, if a Portfolio's net asset
value per share (computed using market values) were to increase, or were
anticipated to increase above $1.00 (computed using amortized cost), the Board
of Trustees of the Fund might supplement dividends in an effort to maintain the
net asset value at $1.00 per share.
11
<PAGE>
Taxes. Interest on indebtedness that is incurred to purchase or carry shares of
a mutual fund portfolio which distributes exempt-interest dividends during the
year is not deductible for federal income tax purposes. Further, the Tax-Exempt
Portfolio may not be an appropriate investment for persons who are "substantial
users" of facilities financed by industrial development bonds held by the
Tax-Exempt Portfolio or are "related persons" to such users; such persons should
consult their tax advisers before investing in the Tax-Exempt Portfolio.
The "Superfund Act of 1986" (the "Superfund Act") imposes a separate tax on
corporations at a rate of 0.12 percent of the excess of such corporation's
"modified alternative minimum taxable income" over $2 million. A portion of
tax-exempt interest, including exempt-interest dividends from the Tax-Exempt
Portfolio, may be includible in modified alternative minimum taxable income.
Corporate shareholders are advised to consult their tax advisers with respect to
the consequences of the Superfund Act.
PERFORMANCE
As reflected in the prospectus, the historical performance calculation for a
Portfolio may be shown in the form of "yield," "effective yield" and, for the
Tax-Exempt Portfolio only, "tax equivalent yield." These various measures of
performance are described below.
Each Portfolio's yield is computed in accordance with a standardized method
prescribed by rules of the Securities and Exchange Commission. Under that
method, the yield quotation is based on a seven-day period and is computed for
each Portfolio as follows. The first calculation is net investment income per
share, which is accrued interest on portfolio securities, plus or minus
amortized discount or premium (excluding market discount for the Tax-Exempt
Portfolio), less accrued expenses. This number is then divided by the price per
share (expected to remain constant at $1.00) at the beginning of the period
("base period return"). The result is then divided by 7 and multiplied by 365
and the resulting yield figure is carried to the nearest one-hundredth of one
percent. Realized capital gains or losses and unrealized appreciation or
depreciation of investments are not included in the calculation. For the
seven-day period ended July 31, 1998, the Money Market Portfolio's yield was
4.79%, the Government Securities Portfolio's yield was 4.79%, and the Tax-Exempt
Portfolio's yield was 3.06%.
Each Portfolio's effective yield is determined by taking the base period return
(computed as described above) and calculating the effect of assumed compounding.
The formula for the effective yield is: (base period return +1)365/7 - 1. For
the seven-day period ended July 31, 1998, the Money Market Portfolio's effective
yield was 4.90%, the Government Securities Portfolio's effective yield was
4.90%, and the Tax-Exempt Portfolio's effective yield was 3.11%.
The tax equivalent yield of the Tax-Exempt Portfolio is computed by dividing
that portion of the Portfolio's yield (computed as described above) that is
tax-exempt by (one minus the stated federal income tax rate) and adding the
product to that portion, if any, of the yield of the Portfolio that is not
tax-exempt. Based upon a marginal federal income tax rate of 37.1% and the
Tax-Exempt Portfolio's yield computed as described above for the seven-day
period ended July 31, 1998, the Tax-Exempt Portfolio's tax-equivalent yield was
4.86%. For additional information concerning tax-exempt yields, see "Tax-Exempt
versus Taxable Yield" below.
Each Portfolio's yield fluctuates, and the publication of an annualized yield
quotation is not a representation as to what an investment in the Portfolio will
actually yield for any given future period. Actual yields will depend not only
on changes in interest rates on money market instruments during the period in
which the investment in the Portfolio is held, but also on such matters as
Portfolio expenses.
Investors have an extensive choice of money market funds and money market
deposit accounts and the information below may be useful to investors who wish
to compare the past performance of the Money Market Portfolio, the Government
Securities Portfolio and the Tax-Exempt Portfolio with that of their
competitors. Past performance cannot be a guarantee of future results.
As indicated in the prospectus (see "Performance"), the performance of the
Fund's Portfolios may be compared to that of other money market mutual funds
tracked by Lipper Analytical Services, Inc. ("Lipper"). Lipper performance
calculations include the reinvestment of all capital gain and income dividends
for the periods covered by the calculations. A Portfolio's performance also may
be compared to other money market funds reported by IBC Financial Data, Inc.'s,
or Money Market Insight+, reporting
12
<PAGE>
services on money market funds. As reported by IBC, all investment results
represent yield (annualized results for the period net of management fees and
expenses) and one year investment results are effective annual yields assuming
reinvestment of dividends
13
<PAGE>
Investors may also want to compare a Portfolio's performance to that of U.S.
Treasury bills or notes because such instruments represent alternative income
producing products. Treasury obligations are issued in selected denominations.
Rates of U.S. Treasury obligations are fixed at the time of issuance and payment
of principal and interest is backed by the full faith and credit of the U.S.
Treasury. The market value of such instruments will generally fluctuate
inversely with interest rates prior to maturity and will equal par value at
maturity. Generally, the values of obligations with shorter maturities will
fluctuate less than those with longer maturities. A Portfolio's yield will
fluctuate. Also, while each Portfolio seeks to maintain a net asset value per
share of $1.00, there is no assurance that it will be able to do so.
14
<PAGE>
From time to time the Fund may include in its sales communications, ranking and
rating information received from various organizations, to include but not be
limited to, ratings from Morningstar, Inc. and rankings from Lipper Analytical
Services, Inc.
Tax-Exempt versus Taxable Yield. You may want to determine which investment --
tax-exempt or taxable -- will provide you with a higher after-tax return. To
determine the tax equivalent yield, simply divide the yield from the tax-exempt
investment by the sum of [1 minus your marginal tax rate]. The table below is
provided for your convenience in making this calculation for selected tax-exempt
yields and taxable income levels. These yields are presented for purposes of
illustration only and are not representative of any yield that the Tax-Exempt
Portfolio may generate. Both tables are based upon current law as to the 1998
federal tax rate schedules.
Taxable Equivalent Yield Table for Persons Whose Adjusted Gross Income is Under
$124,500
[To Be Updated]
---------------
<TABLE>
<CAPTION>
A Tax-Exempt Yield of:
Taxable Income Your Marginal 2% 3% 4% 5% 6% 7%
Single Joint Federal Tax Rate Is Equivalent to a Taxable Yield of:
------ ----- ---------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$25,350-$61,400 $42,350-102,300 28.0% 2.78 4.17 5.56 6.94 8.33 9.72
Over $61,400 Over $102,300 31.0 2.90 4.35 5.80 7.25 8.70 10.14
Taxable Equivalent Yield Table for Persons Whose Adjusted Gross Income is Over $124,500*
A Tax-Exempt Yield of:
Taxable Income Your Marginal 2% 3% 4% 5% 6% 7%
Single Joint Federal Tax Rate Is Equivalent to a Taxable Yield of:
------ ----- ---------------- ----------------------------------------------
$61,400-$128,100 $99,600-$151,750 31.9% 2.94 4.41 5.87 7.34 8.81 10.28
$128,100-$278,450 $151,750-$271,050 37.1 3.18 4.77 6.36 7.95 9.54 11.13
Over $278,450 Over $271,050 40.8 3.38 5.07 6.76 8.45 10.14 11.82
</TABLE>
* This table assumes a decrease of $3.00 of itemized deductions for each $100
of adjusted gross income over $124,500. For a married couple with adjusted
gross income between $186,800 and $309,300 (single between $124,500 and
$247,000), add 0.7% to the above Marginal Federal Tax Rate for each
personal and dependency exemption. The taxable equivalent yield is the
tax-exempt yield divided by: 100% minus the adjusted tax rate. For example,
if the table tax rate is 37.1% and you are married with no dependents, the
adjusted tax rate is 38.5% (37.1% + 0.7% + 0.7%). For a tax-exempt yield of
6%, the taxable equivalent yield is about 9.8% (6% / (100% - 38.5%)).
OFFICERS AND TRUSTEES
The officers and trustees of the Fund, their birthdates, their principal
occupations and their affiliations, if any, with the Adviser are listed below.
All persons named as trustees also serve in similar capacities for other funds
advised by the Adviser.
DAVID W. BELIN (6/20/28), Trustee , 2000 Financial Center, 7th and Walnut, Des
Moines, Iowa; Member, Belin Lamson McCormick Zumbach Flynn, P.C. (attorneys).
15
<PAGE>
LEWIS A. BURNHAM (1/8/33), Trustee , 16410 Avila Boulevard, Tampa, Florida;
Retired; formerly, Partner, Business Resources Group;
formerly, Executive Vice President, Anchor Glass Container Corporation.
DONALD L. DUNAWAY (3/8/37), Trustee , 7515 Pelican Bay Boulevard, #903, Naples,
Florida; Retired; formerly, Executive Vice President, A. O. Smith Corporation
(diversified manufacturer).
ROBERT B. HOFFMAN (12/11/36), Trustee , 800 North Lindbergh Boulevard, St.
Louis, Missouri; Vice Chairman and Chief Financial Officer, Monsanto Company
(agricultural, pharmaceutical and nutritional food products); formerly Vice
President and Head of International Operations, FMC corporation (manufacturer of
machinery and chemicals).
DONALD R. JONES (1/17/30), Trustee , 182 Old Wick Lane, Inverness, Illinois;
Retired; Director, Motorola, Inc. (manufacturer of electronic equipment and
components); formerly, Executive Vice President and Chief Financial Officer,
Motorola, Inc.
SHIRLEY D. PETERSON (9/3/41), Trustee , 401 Rosemont Avenue, Frederick,
Maryland; President, Hood College, Maryland; formerly, Partner, Steptoe &
Johnson (attorneys); prior thereto, Commissioner, Internal Revenue Service;
prior thereto, Assistant Attorney General, U.S. Department of Justice; Director,
Bethlehem Steel Corp.
DANIEL PIERCE (3/18/34), Trustee*, Two International Place, Boston,
Massachusetts; Managing Director, Adviser.
WILLIAM P. SOMMERS (7/22/33), Trustee , 333 Ravenswood Avenue, Menlo Park,
California; President and Chief Executive Officer, SRI International (research
and development); formerly, Executive Vice President, Iameter (medical
information and educational service provider); prior thereto, Senior Vice
President and Director, Booz, Allen & Hamilton, Inc. (management consulting
firm) (retired); Director, Rohr, Inc., Therapeutic Discovery Corp. and Litton
Industries.
EDMOND VILLANI (3/4/47), Trustee*, 345 Park Avenue, New York, New York;
President, Chief Executive Officer and Managing Director, Adviser.
MARK S. CASADY (9/21/60), President*, 345 Park Avenue, New York, New York;
Managing Director, Adviser; formerly, Institutional Sales Manager of an
unaffiliated mutual fund distributor.
PHILIP J. COLLORA (11/15/45), Vice President and Secretary* , 222 South
Riverside Plaza, Chicago, Illinois; Attorney, Senior Vice President and
Assistant Secretary, Adviser.
THOMAS W. LITTAUER (4/26/55), Vice President*, Two International Place, Boston,
Massachusetts; Managing Director, Adviser; formerly, Head of Broker Dealer
Division of an unaffiliated investment management firm during 1997; prior
thereto, President of Client Management Services of an unaffiliated investment
management firm from 1991 to 1996.
KDIANN M. McCREARY (11/6/56), Vice President*, 345 Park Avenue, New York, New
York; Managing Director, Adviser.
16
<PAGE>
ROBERT C. PECK, JR. (10/1/46), Vice President*, , 222 South Riverside Plaza,
Chicago, Illinois; Managing Director, Adviser; formerly, Executive Vice
President and Chief Investment Officer with an unaffiliated investment
management firm from 1988 to June 1997.
KATHRYN L. QUIRK (12/3/52), Vice President*, 345 Park Avenue, New York, New
York; Managing Director, Adviser.
FRANK J. RACHWALSKI, JR. (3/26/45), Vice President* , 222 South Riverside Plaza,
Chicago, Illinois; Senior Vice President, Adviser.
LINDA J. WONDRACK (9/12/64), Vice President*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.
JOHN R. HEBBLE (6/27/58), Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.
BRENDA LYONS (2/21/63), Assistant Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser
CAROLINE PEARSON (4/1/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Senior Vice President, Adviser; formerly, Associate,
Dechert Price & Rhoads (law firm) 1989 to 1997.
MAUREEN E. KANE (2/14/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Vice President, Adviser; formerly, Assistant Vice
President of an unaffiliated investment management firm; prior thereto,
Associate Staff Attorney of an unaffiliated investment management firm;
Associate, Peabody & Arnold (law firm).
JOHN W. STUEBE (1/7/49), Vice President* , 222 South Riverside Plaza, Chicago,
Illinois; First Vice President, Adviser.
ELIZABETH C. WERTH (10/1/47), Assistant Secretary* , 222 South Riverside Plaza,
Chicago, Illinois; Vice President, Adviser and KDI.
* Interested persons as defined in the Investment Company Act of 1940.
The trustees and officers who are "interested persons" as designated above
receive no compensation from the Fund. The table below shows amounts paid or
accrued to those trustees who are not designated "interested persons" during the
Fund's 1998 fiscal year except that the information in the last column is for
calendar year 1997.
<TABLE>
<CAPTION>
Total Compensation from
Fund and Kemper
Name of Trustee Aggregate Compensation From Fund Fund Complex Paid to Trustees**
<S> <C> <C>
David W. Belin* $15,400 $168,100
Lewis A. Burnham 7,200 117,800
Donald L. Dunaway* 12,100 162,700
Robert B. Hoffman 6,800 109,400
Donald R. Jones 7,300 114,200
Shirley D. Peterson 6,400 114,000
William P. Sommers 6,400 109,400
</TABLE>
* Includes deferred fees and interest thereon pursuant to deferred
compensation agreements with Kemper funds. Deferred amounts accrue interest
monthly at a rate equal to the yield of Zurich Money Funds -- Zurich Money
Market Fund. Total deferred amounts and interest accrued through July 31,
1998 are $182,000 for Mr. Belin and $62,000 for Mr. Dunaway.
17
<PAGE>
** Includes compensation for service on the boards of twenty-four Kemper funds
with forty-one fund portfolios. Each trustee currently serves as a trustee
of twenty-six Kemper funds and forty-seven fund portfolios. Total
compensation does not reflect amounts paid by Scudder Kemper to the
trustees for meetings regarding the combination of Scudder and ZKI. Such
amounts totaled $21,900, $25,400, $21,900, $17,300, $20,800, $24,200 and
$21,900 for Messrs. Belin, Burnham, Dunaway, Hoffman, Jones, Peterson and
Sommers, respectively.
On November 2, 1998, the officers and trustees of the Fund, as a group, owned
less than 1% of the then outstanding shares of each Portfolio and the following
persons owned of record 5% or more of the outstanding shares of the Portfolios
of the Fund: ABN AMRO Chicago Corporation, 208 S. LaSalle Street, Chicago, IL
60604 (9.88% of the Money Market Portfolio, 6.19% of the Government Securities
Portfolio and 6.26% of the Tax-Exempt Portfolio); Custody Account for The
Exclusive Benefit of Customers of Hilliard Lyons, 4th Avenue and Muhammed Ali
Boulevard, Louisville, KY 40202 (36.75% of the Money Market Portfolio and 29.91%
of the Tax-Exempt Portfolio); D.A. Davidson & Co., P.O. Box 5015, Great Falls,
MT 59403 (29.32% of the Money Market Portfolio) and IDEX Funds, P.O. Box 9015,
Clearwater, FL 33758 (5.72% of the Money Market Portfolio).
SPECIAL FEATURES
Exchange Privilege. Subject to the limitations described below, Class A Shares
(or the equivalent) of the following Kemper Mutual Funds may be exchanged for
each other at their relative net asset values: Kemper Technology Fund, Kemper
Total Return Fund, Kemper Growth Fund, Kemper Small Capitalization Equity Fund,
Kemper Income and Capital Preservation Fund, Kemper Municipal Bond Fund, Kemper
Diversified Income Fund, Kemper High Yield Series, Kemper U.S. Government
Securities Fund, Kemper International Fund, Kemper State Tax-Free Income Series,
Kemper Adjustable Rate U.S. Government Fund, Kemper Blue Chip Fund, Kemper
Global Income Fund, Kemper Target Equity Fund (series are subject to a limited
offering period), Kemper Intermediate Municipal Bond Fund, Kemper Cash Reserves
Fund, Kemper U.S. Mortgage Fund, Kemper Short-Intermediate Government Fund,
Kemper Value Series, Inc., Kemper Value Plus Growth Fund, Kemper Quantitative
Equity Fund, Kemper Horizon Fund, Kemper Europe Fund, Kemper Asian Growth Fund,
Kemper Aggressive Growth Fund, Kemper Global/International Series, Inc., Kemper
Securities Trust, Kemper Value Fund, Kemper Classic Growth Fund, Kemper Global
Discovery Fund, Kemper Equity Trust and Kemper Income Trust ("Kemper Mutual
Funds") and certain "Money Market Funds" (Zurich Money Funds, Zurich Yieldwise
Money Fund, Cash Equivalent Fund, Tax-Exempt California Money Market Fund, Cash
Account Trust, Investors Municipal Cash Fund and Investors Cash Trust). Shares
of Money Market Funds and Kemper Cash Reserves Fund that were acquired by
purchase (not including shares acquired by dividend reinvestment) are subject to
the applicable sales charge on exchange. In addition, shares of a Kemper Mutual
Fund in excess of $1,000,000 (except Zurich Yieldwise Money Fund and Kemper Cash
Reserves Fund) acquired by exchange from another Fund may not be exchanged
thereafter until they have been owned for 15 days (the "15-Day Hold Policy").
For purposes of determining whether the 15-Day Hold Policy applies to a
particular exchange, the value of the shares to be exchanged shall be computed
by aggregating the value of shares being exchanged for all accounts under common
control, discretion or advice, including without limitation accounts
administered by a financial services firm offering market timing, asset
allocation or similar services. Series of Kemper Target Equity Fund will be
available on exchange only during the Offering Period for such series as
described in the prospectus for such series. Cash Equivalent Fund, Tax-Exempt
California Money Market Fund, Cash Account Trust, Investors Municipal Cash Fund
and Investors Cash Trust are available on exchange but only through a financial
services firm having a services agreement with KDI with respect to such funds.
Exchanges may only be made for funds that are available for sale in the
shareholder's state of residence. Currently, Tax-Exempt California Money Market
Fund is available for sale only in California and the portfolios of Investors
Municipal Cash Fund are available for sale in certain states.
The total value of shares being exchanged must at least equal the minimum
investment requirement of the fund into which they are being exchanged.
Exchanges are made based on relative dollar values of the shares involved in the
exchange. There is no service fee for an exchange; however, financial services
firms may charge for their services in expediting exchange transactions.
Exchanges will be effected by redemption of shares of the fund held and purchase
of shares of the other fund. For federal income tax purposes, any such exchange
constitutes a sale upon which a gain or loss may be realized, depending upon
whether the value of the shares being exchanged is more or less than the
shareholder's adjusted cost basis. Shareholders interested in exercising the
exchange privilege may obtain an exchange form and prospectuses of the other
funds from financial services firms or KDI. Exchanges also may be authorized by
telephone if the shareholder has
18
<PAGE>
given authorization. Once the authorization is on file, the Shareholder Service
Agent will honor requests by telephone at 1-800-231-8568 or in writing, subject
to the limitations on liability described in the prospectus. Any share
certificates must be deposited prior to any exchange of such shares. During
periods when it is difficult to contact the Shareholder Service Agent by
telephone, it may be difficult to implement the telephone exchange privilege.
The exchange privilege is not a right and may be suspended, terminated or
modified at any time. Except as otherwise permitted by applicable regulation, 60
days' prior written notice of any termination or material change will be
provided.
Systematic Withdrawal Program. An owner of $5,000 or more of a Portfolio's
shares may provide for the payment from the owner's account of any requested
dollar amount up to $50,000 to be paid to the owner or the owner's designated
payee monthly, quarterly, semi-annually or annually. The $5,000 minimum account
size is not applicable to Individual Retirement Accounts. Dividend distributions
will be reinvested automatically at net asset value. A sufficient number of full
and fractional shares will be redeemed to make the designated payment. Depending
upon the size of the payments requested, redemptions for the purpose of making
such payments may reduce or even exhaust the account. The program may be amended
on thirty days notice by the Fund and may be terminated at any time by the
shareholder or the Fund. Firms provide varying arrangements for their clients to
redeem Fund shares on a periodic basis. Such firms may independently establish
minimums for such services.
Tax-Sheltered Retirement Programs. The Shareholder Service Agent provides
retirement plan services and documents and KDI can establish your account in any
of the following types of retirement plans:
o Individual Retirement Accounts (IRAs) with Investors Fiduciary Trust
Company as custodian. This includes Savings Incentive
MatchPlan for Employees of Small Employers ("SIMPLE"), IRA accounts
and Simplified Employee Pension Plan (SEP) IRA accounts and prototype
documents.
o 403(b) Custodial Accounts with IFTC as custodian. This type of plan is
available to employees of most non-profit organizations.
o Prototype money purchase pension and profit-sharing plans may be
adopted by employers. The maximum contribution per participant is the
lesser of 25% of compensation or $30,000.
Brochures describing the above plans as well as providing model defined benefit
plans, target benefit plans, 457 plans, 401(k) plans, SIMPLE 401(k) plans and
materials for establishing them are available from the Shareholder Service Agent
upon request. The brochures for plans with IFTC as custodian describe the
current fees payable to IFTC for its services as custodian. Investors should
consult with their own tax advisers before establishing a retirement plan.
Electronic Funds Transfer Programs. For your convenience, the Fund has
established several investment and redemption programs using electronic funds
transfer via the Automated Clearing House (ACH). There is currently no charge by
the Fund for these programs. To use these features, your financial institution
(your employer's financial institution in the case of payroll deposit) must be
affiliated with an Automated Clearing House (ACH). This ACH affiliation permits
the Shareholder Service Agent to electronically transfer money between your bank
account, or employer's payroll bank in the case of Direct Deposit, and your Fund
account. Your bank's crediting policies of these transferred funds may vary.
These features may be amended or terminated at any time by the Fund.
Shareholders should contact KSvC at 1-800-231-8568 or the financial services
firm through which their account was established for more information. These
programs may not be available through some firms that distribute shares of the
Fund.
SHAREHOLDER RIGHTS
The Fund generally is not required to hold meetings of its shareholders. Under
the Agreement and Declaration of Trust of the Fund ("Declaration of Trust"),
however, shareholder meetings will be held in connection with the following
matters: (a) the election or removal of trustees if a meeting is called for such
purpose; (b) the adoption of any contract for which shareholder approval is
required by the Investment Company Act of 1940 ("1940 Act"); (c) any termination
of the Fund to the extent and as provided in the Declaration of Trust; (d) any
amendment of the Declaration of Trust (other than amendments changing the name
of the Fund or any Portfolio, establishing a Portfolio, supplying any omission,
curing any ambiguity or curing, correcting or supplementing any defective or
inconsistent provision thereof); (e) as to whether a court action, proceeding or
19
<PAGE>
claim should or should not be brought or maintained derivatively or as a class
action on behalf of the Fund or the shareholders, to the same extent as the
stockholders of a Massachusetts business corporation; and (f) such additional
matters as may be required by law, the Declaration of Trust, the By-laws of the
Fund, or any registration of the Fund with the Securities and Exchange
Commission or any state, or as the trustees may consider necessary or desirable.
The shareholders also would vote upon changes in fundamental investment
objectives, policies or restrictions.
Each trustee serves until the next meeting of shareholders, if any, called for
the purpose of electing trustees and until the election and qualification of his
successor or until such trustee sooner dies, resigns, retires or is removed by a
majority vote of the shares entitled to vote (as described below) or a majority
of the trustees. In accordance with the 1940 Act (a) the Fund will hold a
shareholder meeting for the election of trustees at such time as less than a
majority of the trustees have been elected by shareholders, and (b) if, as a
result of a vacancy in the Board of Trustees, less than two-thirds of the
trustees have been elected by the shareholders, that vacancy will be filled only
by a vote of the shareholders.
Trustees may be removed from office by a vote of the holders of a majority of
the outstanding shares at a meeting called for that purpose, which meeting shall
be held upon the written request of the holders of not less than 10% of the
outstanding shares. Upon the written request of ten or more shareholders who
have been such for at least six months and who hold shares constituting at least
1% of the outstanding shares of the Fund stating that such shareholders wish to
communicate with the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider removal of a trustee, the
Fund has undertaken to disseminate appropriate materials at the expense of the
requesting shareholders.
The Declaration of Trust provides that the presence at a shareholder meeting in
person or by proxy of at least 30% of the shares entitled to vote on a matter
shall constitute a quorum. Thus, a meeting of shareholders of the Fund could
take place even if less than a majority of the shareholders were represented on
its scheduled date. Shareholders would in such a case be permitted to take
action which does not require a larger vote than a majority of a quorum, such as
the election of trustees and ratification of the selection of auditors. Some
matters requiring a larger vote under the Declaration of Trust, such as
termination or reorganization of the Fund and certain amendments of the
Declaration of Trust, would not be affected by this provision; nor would matters
which under the 1940 Act require the vote of a "majority of the outstanding
voting securities" as defined in the 1940 Act.
The Declaration of Trust specifically authorizes the Board of Trustees to
terminate the Fund (or any Portfolio) by notice to the shareholders without
shareholder approval.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for obligations of the
Fund. The Declaration of Trust, however, disclaims shareholder liability for
acts or obligations of the Fund and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument entered into or executed by
the Fund or the trustees. Moreover, the Declaration of Trust provides for
indemnification out of Fund property for all losses and expenses of any
shareholder held personally liable for the obligations of the Fund and the Fund
will be covered by insurance which the trustees consider adequate to cover
foreseeable tort claims. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is considered by the Adviser remote and
not material, since it is limited to circumstances in which a disclaimer is
inoperative and the Fund itself is unable to meet its obligations.
20
<PAGE>
APPENDIX -- RATINGS OF INVESTMENTS
COMMERCIAL PAPER RATINGS
A-1, A-2 and Prime-1, Prime-2 Commercial Paper Ratings
Commercial paper rated by Standard & Poor's Corporation has the following
characteristics: Liquidity ratios are adequate to meet cash requirements.
Long-term senior debt is rated "A" or better. The issuer has access to at least
two additional channels of borrowing. Basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances. Typically, the
issuer's industry is well established and the issuer has a strong position
within the industry. The reliability and quality of management are unquestioned.
Relative strength or weakness of the above factors determine whether the
issuer's commercial paper is rated A-1, A-2 or A-3.
The ratings Prime-1 and Prime-2 are the two highest commercial paper ratings
assigned by Moody's Investors Service, Inc. Among the factors considered by them
in assigning ratings are the following: (1) evaluation of the management of the
issuer; (2) economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain areas; (3)
evaluation of the issuer's products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend
of earnings over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and (8) recognition
by the management of obligations which may be present or may arise as a result
of public interest questions and preparations to meet such obligations. Relative
strength or weakness of the above factors determines whether the issuer's
commercial paper is rated Prime-1, 2 or 3.
MIG-1 and MIG-2 Municipal Notes
Moody's Investors Service, Inc.'s ratings for state and municipal notes and
other short-term loans will be designated Moody's Investment Grade (MIG). This
distinction is in recognition of the differences between short-term credit risk
and long-term risk. Factors affecting the liquidity of the borrower are
uppermost in importance in short- term borrowing, while various factors of the
first importance in bond risk are of lesser importance in the short run. Loans
designated MIG-1 are of the best quality, enjoying strong protection from
established cash flows of funds for their servicing or from established and
broad-based access to the market for refinancing, or both. Loans designated
MIG-2 are of high quality, with margins of protection ample although not so
large as in the preceding group.
STANDARD & POOR'S CORPORATION BOND RATINGS, CORPORATE BONDS
AAA. This is the highest rating assigned by Standard & Poor's Corporation to a
debt obligation and indicates an extremely strong capacity to pay principal and
interest.
AA. Bonds rated AA also qualify as high-quality debt 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.
21
<PAGE>
MOODY'S INVESTORS SERVICE, INC. BOND RATINGS
Aaa. Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa. Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
A. Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
22
<PAGE>
CASH EQUIVALENT FUND
PART C. OTHER INFORMATION
<TABLE>
<CAPTION>
Item 24. Financial Statements and Exhibits
- -------- ---------------------------------
<S> <C> <C>
a. Financial Statements
Included in Part A:
-------------------
For Money Market Portfolio, Government Securities Portfolio and Tax-Exempt
Portfolio, respectively:
Financial Highlights for the ten fiscal years ended July 31, 1998
Included in Part B:
-------------------
For Money Market Portfolio, Government Securities Portfolio and Tax-Exempt
Portfolio, respectively:
Investment Portfolio at July 31, 1998*
Statement of Assets and Liabilities at July 31, 1998*
Statement of Operations for the fiscal year ended July 31, 1998*
Statement of Changes in Net Assets for the two fiscal years ended July 31, 1998*
Financial Highlights for the five fiscal years ended July 31, 1998*
b. Exhibits
1. (a) Amended and Restated Agreement and Declaration of Trust^(1)
(b) Written Instrument Amending Agreement and Declaration of Trust^(1)
2. By-laws^(1)
3. Inapplicable
4. Text of Share Certificate^(1)
5. (a) Investment Management Agreement between the Registrant, on behalf of Money
Market Portfolio and Government Securities Portfolio, and Kemper Financial
Services, Inc., dated January 4, 1996^(2)
(b) Investment Management Agreement between the Registrant, on behalf of Tax-Exempt
Portfolio, and Kemper Financial Services, Inc., dated January 4, 1996^(2)
(c) Investment Management Agreement between the Registrant, on behalf of Money
Market Portfolio and Government Securities Portfolio, and Scudder Kemper
Investments, Inc., dated December 31, 1997; filed herein.
(d) Investment Management Agreement between the Registrant, on behalf of Tax-Exempt
Portfolio, and Scudder Kemper Investments, Inc., dated December 31, 1997; filed
herein
- -----------------------
* Incorporated by reference to the Registrant's Annual Report dated July
31, 1998, filed with the Securities and Exchange Commission on October
15, 1998.
(1) Incorporated by reference to the Registrant's Post-Effective Amendment
No. 21, filed with the Securities and Exchange Commission on November
17, 1995.
(2) Incorporated by reference to the Registrant's Post-Effective Amendment
No. 23, filed with the Securities and Exchange Commission on November
26, 1996.
Part C - Page 1
<PAGE>
(e) Investment Management Agreement between the Registrant, on behalf of Money
Market Portfolio and Government Securities Portfolio, and Scudder Kemper
Investments, Inc., dated September 7, 1998; filed herein
(f) Investment Management Agreement between the Registrant, on behalf of Tax-Exempt
Portfolio, and Scudder Kemper Investments, Inc., dated September 7, 1998; filed
herein
CASH EQUIVALENT FUND
PART C. OTHER INFORMATION
(continued)
6. (a) Administration, Shareholder Services and Distribution Agreement between the
Registrant and Kemper Distributors, Inc., dated January 4, 1996^(2)
(b) Form of Administration, Services and Selling Group Agreement^(1)
(c) Administration, Shareholder Services and Distribution Agreement between the
Registrant and Kemper Distributors, Inc., dated December 31, 1997; filed herein
(d) Administration, Shareholder Services and Distribution Agreement between the
Registrant and Kemper Distributors, Inc., dated September 7, 1998; filed herein
7. Inapplicable
8. Custody Agreement^(1)
9. (a) Agency Agreement^(1)
(b) Fund Accounting Services Agreement between the Registrant, on behalf of Money
Market Portfolio, and Scudder Fund Accounting Corporation, dated December 31,
1997; filed herein
(c) Fund Accounting Services Agreement between the Registrant, on behalf of
Government Securities Portfolio, and Scudder Fund Accounting Corporation, dated
December 31, 1997; filed herein
(d) Fund Accounting Services Agreement between the Registrant, on behalf of
Tax-Exempt Portfolio, and Scudder Fund Accounting Corporation, dated December
31, 1997; filed herein
10. Inapplicable
11. Report and Consent of Independent Auditors; filed herein
12. Inapplicable
13. Inapplicable
14. (a) Kemper Retirement Plan Prototype^(1)
(b) Model Individual Retirement Account^(1)
15. (a) Amended and Restated 12b-1 Plan between the Registrant, on behalf of Money
Market Portfolio, and Kemper Distributors, Inc., dated August 1, 1998; filed
herein
(b) Amended and Restated 12b-1 Plan between the Registrant, on behalf of Government
Securities Portfolio, and Kemper Distributors, Inc., dated August 1, 1998; filed
herein
(c) Amended and Restated 12b-1 Plan between the Registrant, on behalf of Tax-Exempt
Portfolio, and Kemper Distributors, Inc., dated August 1, 1998; filed herein
16. Schedule of Computation of Performance^(1)
27. Financial Data Schedules for Money Market Securities Portfolio, for the fiscal
year ended July 31, 1998; filed herein
27. Financial Data Schedules for Government Securities Portfolio, for the fiscal
year ended July 31, 1998; filed herein
27. Financial Data Schedules for Tax-Exempt Securities Portfolio, for the fiscal
year ended July 31, 1998; filed herein
</TABLE>
Part C - Page 2
<PAGE>
Powers of Attorney for all Trustees excluding Messrs. Pierce and Villani are
incorporated by reference to the Registrant's Post-Effective Amendment No. 21,
filed with the Securities and Exchange Commission on November 17, 1995. Powers
of Attorney for Messrs. Pierce and Villani are filed herein.
Item 25. Persons Controlled by or under Common Control with Fund.
- -------- --------------------------------------------------------
None
Item 26. Number of Holders of Securities (as of November 2, 1998):
- -------- --------- -----------------------------------------------
<TABLE>
<CAPTION>
(1) (2)
Title of Class Number of Record Shareholders
-------------- -----------------------------
<S> <C> <C>
Shares of beneficial interest
($0.01 par value):
Money Market Portfolio 12,023
Government Securities Portfolio 3,932
Tax-Exempt Portfolio 3,342
</TABLE>
Item 27. Indemnification.
- -------- ----------------
Article VIII of the Registrant's Agreement and Declaration of Trust
(Exhibit 1 hereto, which is incorporated herein by reference) provides in effect
that the Registrant will indemnify its officers and trustees under certain
circumstances. However, in accordance with Section 17(h) and 17(i) of the
Investment Company Act of 1940 and its own terms, said Article of the Agreement
and Declaration of Trust does not protect any person against any liability to
the Registrant or its shareholders 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.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers, and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such trustee, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question as to 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.
On June 26, 1997, Zurich Insurance Company ("Zurich"), ZKI Holding
Corp. ("ZKIH"), Zurich Kemper Investments, Inc. ("ZKI"), Scudder, Stevens &
Clark, Inc. ("Scudder") and the representatives of the beneficial owners of the
capital stock of Scudder ("Scudder Representatives") entered into a transaction
agreement ("Transaction Agreement") pursuant to which Zurich became the majority
stockholder in Scudder with an approximately 70% interest, and ZKI was combined
with Scudder ("Transaction"). In connection with the trustees' evaluation of the
Transaction, Zurich agreed to indemnify the Registrant and the trustees who were
not interested persons of ZKI or Scudder (the "Independent Trustees") for and
against any liability and expenses based upon any action or omission by the
Independent Trustees in connection with their consideration of and action with
respect to the Transaction. In addition, Scudder has agreed to indemnify the
Registrant and the Independent Trustees for and against any liability and
expenses based upon any misstatements or omissions by Scudder to the Independent
Trustees in connection with their consideration of the Transaction.
Part C - Page 3
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
- -------- ----------------------------------------------------
Scudder Kemper Investments, Inc. has stockholders and
employees who are denominated officers but do not as such have
corporation-wide responsibilities. Such persons are not
considered officers for the purpose of this Item 26.
<TABLE>
<CAPTION>
Business and Other Connections of Board
Name Of Directors of Registrant's Adviser
---- ------------------------------------
<S> <C>
Stephen R. Beckwith Treasurer and Chief Financial Officer, Scudder Kemper Investments, Inc.**
Vice President and Treasurer, Scudder Fund Accounting Corporation*
Director, Scudder Stevens & Clark Corporation**
Director and Chairman, Scudder Defined Contribution Services, Inc.**
Director and President, Scudder Capital Asset Corporation**
Director and President, Scudder Capital Stock Corporation**
Director and President, Scudder Capital Planning Corporation**
Director and President, SS&C Investment Corporation**
Director and President, SIS Investment Corporation**
Director and President, SRV Investment Corporation**
Lynn S. Birdsong Director and Vice President, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark (Luxembourg) S.A.#
Laurence W. Cheng Director, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland##
Director, ZKI Holding Corporation xx
William H. Bolinder Director, Scudder Kemper Investments, Inc.**
Member, Group Executive Board, Zurich Financial Services, Inc.##
Chairman, Zurich-American Insurance Company o
Gunther Gose Director, Scudder Kemper Investments, Inc.**
CFO and Member, Group Executive Board, Zurich Financial Services, Inc.##
CEO/Branch Offices, Zurich Life Insurance Company##
Rolf Huppi Director, Chairman of the Board, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland##
Director, Chairman of the Board, Zurich Holding Company of America o
Director, ZKI Holding Corporation xx
Kathryn L. Quirk Chief Legal Officer, Chief Compliance Officer and Secretary, Scudder Kemper
Investments, Inc.**
Director, Senior Vice President & Assistant Clerk, Scudder Investor Services, Inc.*
Director, Vice President & Secretary, Scudder Fund Accounting Corporation*
Director, Vice President & Secretary, Scudder Realty Holdings Corporation*
Director & Assistant Clerk, Scudder Service Corporation*
Director, SFA, Inc.*
Vice President, Director & Assistant Secretary, Scudder Precious Metals, Inc.***
Director, Scudder, Stevens & Clark Japan, Inc.***
Director, Vice President and Secretary, Scudder, Stevens & Clark of Canada, Ltd.***
Director, Vice President and Secretary, Scudder Canada Investor Services Limited***
Director, Vice President and Secretary, Scudder Realty Advisers, Inc. x
Director and Secretary, Scudder, Stevens & Clark Corporation**
Director and Secretary, Scudder, Stevens & Clark Overseas Corporation oo
Part C - Page 4
<PAGE>
Director and Secretary, SFA, Inc.*
Director, Vice President and Secretary, Scudder Defined Contribution Services, Inc.**
Director, Vice President and Secretary, Scudder Capital Asset Corporation**
Director, Vice President and Secretary, Scudder Capital Stock Corporation**
Director, Vice President and Secretary, Scudder Capital Planning Corporation**
Director, Vice President and Secretary, SS&C Investment Corporation**
Director, Vice President and Secretary, SIS Investment Corporation**
Director, Vice President and Secretary, SRV Investment Corporation**
Director, Vice President and Secretary, Scudder Brokerage Services, Inc.*
Director, Korea Bond Fund Management Co., Ltd.+
Cornelia M. Small Director and Vice President, Scudder Kemper Investments, Inc.**
Edmond D. Villani Director, President and Chief Executive Officer, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark Japan, Inc.###
President and Director, Scudder, Stevens & Clark Overseas Corporation oo
President and Director, Scudder, Stevens & Clark Corporation**
Director, Scudder Realty Advisors, Inc.x
Director, IBJ Global Investment Management S.A. Luxembourg, Grand-Duchy of Luxembourg
* Two International Place, Boston, MA
x 333 South Hope Street, Los Angeles, CA
** 345 Park Avenue, New York, NY
# Societe Anonyme, 47, Boulevard Royal, L-2449 Luxembourg, R.C. Luxembourg B 34.564
*** Toronto, Ontario, Canada
oo 20-5, Ichibancho, Chiyoda-ku, Tokyo, Japan
### 1-7, Kojimachi, Chiyoda-ku, Tokyo, Japan
xx 222 S. Riverside, Chicago, IL
o Zurich Towers, 1400 American Ln., Schaumburg, IL
+ P.O. Box 309, Upland House, S. Church St., Grand Cayman, British West Indies
## Mythenquai-2, P.O. Box CH-8022, Zurich, Switzerland
</TABLE>
Item 29. Principal Underwriters.
- -------- -----------------------
(a)
Kemper Distributors, Inc. acts as principal underwriter of the
Registrant's shares and acts as principal underwriter of the Kemper
Funds.
(b)
Information on the officers and directors of Kemper Distributors, Inc.,
principal underwriter for the Registrant is set forth below. The
principal business address is 222 South Riverside Plaza, Chicago,
Illinois 60606.
<TABLE>
<CAPTION>
(1) (2) (3)
Positions and Offices with Positions and
Name Kemper Distributors, Inc. Offices with Registrant
---- ------------------------- -----------------------
<S> <C> <C>
James L. Greenawalt President None
Thomas W. Littauer Director, Chief Executive Officer Vice President
Part C - Page 5
<PAGE>
Positions and Offices with Positions and
Name Kemper Distributors, Inc. Offices with Registrant
---- ------------------------- -----------------------
Kathryn L. Quirk Director, Secretary, Chief Legal
Officer and Vice President Vice President
James J. McGovern Chief Financial Officer and Vice
President None
Linda J. Wondrack Vice President and Chief Compliance
Officer None
Paula Gaccione Vice President None
Michael E. Harrington Vice President None
Robert A. Rudell Vice President None
William M. Thomas Vice President None
Elizabeth C. Werth Vice President Assistant Secretary
Todd N. Gierke Assistant Treasurer None
Philip J. Collora Assistant Secretary Vice President and Secretary
Paul J. Elmlinger Assistant Secretary None
Diane E. Ratekin Assistant Secretary None
Daniel Pierce Director, Chairman Trustee
Mark S. Casady Director, Vice Chairman President
Stephen R. Beckwith Director None
(c) Not applicable
</TABLE>
Item 30. Location of Accounts and Records
- -------- --------------------------------
Accounts, books and other documents are maintained at the offices of
the Registrant, the offices of Registrant's investment adviser, Scudder Kemper
Investments, Inc., 222 South Riverside Plaza, Chicago, Illinois 60606, at the
offices of the Registrant's principal underwriter, Kemper Distributors, Inc.,
222 South Riverside Plaza, Chicago, Illinois 60606 or, in the case of records
concerning custodial functions, at the offices of the custodian, Investors
Fiduciary Trust Company ("IFTC"), 801 Pennsylvania Avenue, Kansas City, Missouri
64105 or, in the case of records concerning transfer agency functions, at the
offices of IFTC and of the shareholder service agent, Kemper Service Company,
811 Main Street, Kansas City, Missouri 64105.
Item 31. Management Services.
- -------- --------------------
Inapplicable.
Part C - Page 6
<PAGE>
Item 32. Undertakings.
- -------- -------------
Inapplicable.
Part C - Page 7
<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(b) under the Securities Act of 1933 and has duly caused this amendment
to its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Chicago and State of Illinois, on the
23rd day of November, 1998.
CASH EQUIVALENT FUND
By /s/Mark S. Casady
------------------------------
Mark S. Casady, President
Pursuant to the requirements of the Securities Act of 1933, this
amendment to its Registration Statement has been signed below on November 23,
1998 on behalf of the following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/Daniel Pierce November 23, 1998
- --------------------------------------
Daniel Pierce* Chairman and Trustee
/s/David W. Belin November 23, 1998
- --------------------------------------
David W. Belin* Trustee
/s/Lewis A. Burnham November 23, 1998
- --------------------------------------
Lewis A. Burnham* Trustee
/s/Donald L. Dunaway November 23, 1998
- --------------------------------------
Donald L. Dunaway* Trustee
/s/Robert B. Hoffman November 23, 1998
- --------------------------------------
Robert B. Hoffman* Trustee
/s/Donald R. Jones November 23, 1998
- --------------------------------------
Donald R. Jones* Trustee
/s/ Shirley D. Peterson November 23, 1998
- --------------------------------------
Shirley D. Peterson* Trustee
/s/ William P. Sommers November 23, 1998
- --------------------------------------
William P. Sommers* Trustee
<PAGE>
SIGNATURE TITLE DATE
- --------- ----- ----
/s/Edmond D. Villani November 23, 1998
- --------------------------------------
Edmond D. Villani* Trustee
/s/John R. Hebble November 23, 1998
- --------------------------------------
John R. Hebble Treasurer (Principal Financial and
Accounting Officer)
</TABLE>
*By: /s/Philip J. Collora
-----------------------------
Philip J. Collora**
** Philip J. Collora signs this document
pursuant to powers of attorney contained
in Post-Effective Amendment No. 21 to
the Registration Statement, filed on
November 17, 1995.
2
<PAGE>
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints Kathryn L. Quirk,
Caroline Pearson, and Philip J. Collora and each of them, any of whom may act
without the joinder of the others, as such person's attorney-in-fact to sign and
file on such person's behalf individually and in the capacity stated below such
registration statements, amendments, post-effective amendments, exhibits,
applications and other documents with the Securities and Exchange Commission or
any other regulatory authority as may be desirable or necessary in connection
with the public offering of shares of Kemper Target Equity Fund.
Signature Title Date
/s/_Edmond D. Villani Trustee July 15, 1998
- ---------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints Kathryn L. Quirk,
Caroline Pearson, and Philip J. Collora and each of them, any of whom may act
without the joinder of the others, as such person's attorney-in-fact to sign and
file on such person's behalf individually and in the capacity stated below such
registration statements, amendments, post-effective amendments, exhibits,
applications and other documents with the Securities and Exchange Commission or
any other regulatory authority as may be desirable or necessary in connection
with the public offering of shares of Kemper Target Equity Fund.
Signature Title Date
/s/_Daniel Pierce Trustee July 15, 1998
- -----------------
2
<PAGE>
File No. 2-63522
File No. 811-2899
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
FORM N-1A
POST-EFFECTIVE AMENDMENT NO. 23
--
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 25
--
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
CASH EQUIVALENT FUND
<PAGE>
CASH EQUIVALENT FUND
EXHIBIT INDEX
5(c)
5(d)
5(e)
5(f)
6(c)
6(d)
9(b)
9(c)
9(d)
11
15(a)
15(b)
15(c)
27
INVESTMENT MANAGEMENT AGREEMENT
Cash Equivalent Fund
222 South Riverside Plaza
Chicago, Illinois 60606
December 31, 1997
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Money Market Portfolio
Government Securities Portfolio
Ladies and Gentlemen:
CASH EQUIVALENT FUND (the "Trust") has been established as a Massachusetts
business trust to engage in the business of an investment company. Pursuant to
the Trust's Declaration of Trust, as amended from time-to-time (the
"Declaration"), the Board of Trustees is authorized to issue the Trust's shares
of beneficial interest (the "Shares"), in separate series, or funds. The Board
of Trustees has authorized the Money Market Portfolio and the Government
Securities Portfolio (each a "Fund" and collectively, the "Funds"). Series may
be abolished and dissolved, and additional series established, from time to time
by action of the Trustees.
The Trust, on behalf of the Funds, has selected you to act as the investment
manager of the Funds and to provide certain other services, as more fully set
forth below, and you have indicated that you are willing to act as such
investment manager and to perform such services under the terms and conditions
hereinafter set forth. In the event the Trust establishes one or more additional
series with respect to which it desires to retain you to render the services
described hereunder, it shall notify you in writing. If you are willing to
render such services, you shall notify the Trust in writing, whereupon such
series shall become a fund hereunder. Accordingly, the Trust on behalf of the
Funds agrees with you as follows:
1. Delivery of Documents. The Trust engages in the business of investing and
reinvesting the assets of each Fund in the manner and in accordance with the
investment objectives, policies and restrictions specified in the currently
effective Prospectus (the "Prospectus") and Statement of Additional Information
(the "SAI") relating to each Fund included in the Trust's Registration Statement
on Form N-1A, as amended from time to time, (the "Registration Statement") filed
by the Trust under the Investment Company Act of 1940, as amended, (the "1940
Act") and the Securities Act of 1933, as amended. Copies of the documents
referred to in the preceding sentence have been furnished to you by the Trust.
The Trust has also furnished you with copies properly certified or authenticated
of each of the following additional documents related to the Trust and the
Funds:
(1) The Declaration, as amended to date.
(2) By-Laws of the Trust as in effect on the date hereof (the "By- Laws").
(3) Resolutions of the Trustees of the Trust and the shareholders of each
Fund selecting you as investment manager and approving the form of
this Agreement.
(4) Establishment and Designation of Series of Shares of Beneficial
Interest relating to the Funds, as applicable.
<PAGE>
The Trust will furnish you from time to time with copies, properly certified or
authenticated, of all amendments of or supplements, if any, to the foregoing,
including the Prospectus, the SAI and the Registration Statement.
2. Portfolio Management Services. As manager of the assets of the Funds, you
shall provide continuing investment management of the assets of the Funds in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations thereunder; and all other
applicable federal and state laws and regulations of which you have knowledge;
subject always to policies and instructions adopted by the Trust's Board of
Trustees. In connection therewith, you shall use reasonable efforts to manage
each Fund so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Funds shall have
the benefit of the investment analysis and research, the review of current
economic conditions and trends and the consideration of long-range investment
policy generally available to your investment advisory clients. In managing the
Funds in accordance with the requirements set forth in this section 2, you shall
be entitled to receive and act upon advice of counsel to the Trust. You shall
also make available to the Trust promptly upon request all of the Funds'
investment records and ledgers as are necessary to assist the Trust in complying
with the requirements of the 1940 Act and other applicable laws. To the extent
required by law, you shall furnish to regulatory authorities having the
requisite authority any information or reports in connection with the services
provided pursuant to this Agreement which may be requested in order to ascertain
whether the operations of the Trust are being conducted in a manner consistent
with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by each Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
each Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Trust's Board of Trustees periodic reports on the
investment performance of each Fund and on the performance of your obligations
pursuant to this Agreement, and you shall supply such additional reports and
information as the Trust's officers or Board of Trustees shall reasonably
request.
3. Administrative Services. In addition to the portfolio management services
specified above in section 2, you shall furnish at your expense for the use of
the Funds such office space and facilities in the United States as the Funds may
require for its reasonable needs, and you (or one or more of your affiliates
designated by you) shall render to the Trust administrative services on behalf
of the Funds necessary for operating as an open end investment company and not
provided by persons not parties to this Agreement including, but not limited to,
preparing reports to and meeting materials for the Trust's Board of Trustees and
reports and notices to Fund shareholders; supervising, negotiating contractual
arrangements with, to the extent appropriate, and monitoring the performance of,
accounting agents, custodians, depositories, transfer agents and pricing agents,
accountants, attorneys, printers, underwriters, brokers and dealers, insurers
and other persons in any capacity deemed to be necessary or desirable to Fund
operations; preparing and making filings with the Securities and Exchange
Commission (the "SEC") and other regulatory and self-regulatory organizations,
including, but not limited to, preliminary and definitive proxy materials,
post-effective amendments to the Registration Statement, semi-annual reports on
Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act; overseeing the
tabulation of proxies by the Funds' transfer agent; assisting in the preparation
and filing of each Fund's federal, state and local tax returns; preparing and
filing each Fund's federal excise tax return pursuant to Section 4982 of the
Code; providing assistance with investor and public relations matters;
monitoring the valuation of portfolio securities and the calculation of net
asset value; monitoring the registration of Shares of each Fund under applicable
federal and state securities laws; maintaining or causing to be maintained for
the Funds all books, records and reports and any other information required
under the 1940 Act, to the extent that such books, records and reports and other
information are not maintained by the Funds' custodian or other agents of the
Funds; assisting in establishing the accounting policies of the Funds; assisting
in the resolution of accounting issues that may arise with respect to the Funds'
operations and consulting with the Funds' independent accountants, legal counsel
and the Funds' other agents as necessary in connection therewith; establishing
and monitoring each Fund's operating expense budgets; reviewing
2
<PAGE>
each Fund's bills; processing the payment of bills that have been approved by an
authorized person; assisting the Funds in determining the amount of dividends
and distributions available to be paid by each Fund to its shareholders,
preparing and arranging for the printing of dividend notices to shareholders,
and providing the transfer and dividend paying agent, the custodian, and the
accounting agent with such information as is required for such parties to effect
the payment of dividends and distributions; and otherwise assisting the Trust as
it may reasonably request in the conduct of the Funds' business, subject to the
direction and control of the Trust's Board of Trustees. Nothing in this
Agreement shall be deemed to shift to you or to diminish the obligations of any
agent of the Funds or any other person not a party to this Agreement which is
obligated to provide services to the Funds.
4. Allocation of Charges and Expenses. Except as otherwise specifically provided
in this section 4, you shall pay the compensation and expenses of all Trustees,
officers and executive employees of the Trust (including each Fund's share of
payroll taxes) who are affiliated persons of you, and you shall make available,
without expense to the Funds, the services of such of your directors, officers
and employees as may duly be elected officers of the Trust, subject to their
individual consent to serve and to any limitations imposed by law. You shall
provide at your expense the portfolio management services described in section 2
hereof and the administrative services described in section 3 hereof.
You shall not be required to pay any expenses of the Funds other than those
specifically allocated to you in this section 4. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Funds' Trustees and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of each Fund: organization expenses of each
Fund (including out of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Funds' custodian or
other agents of the Trust; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Funds in connection with membership in investment company trade
organizations; fees and expenses of the Funds' accounting agent for which the
Trust is responsible pursuant to the terms of the Fund Accounting Services
Agreement, custodians, subcustodians, transfer agents, dividend disbursing
agents and registrars; payment for portfolio pricing or valuation services to
pricing agents, accountants, bankers and other specialists, if any; expenses of
preparing share certificates and, except as provided below in this section 4,
other expenses in connection with the issuance, offering, distribution, sale,
redemption or repurchase of securities issued by each Fund; expenses relating to
investor and public relations; expenses and fees of registering or qualifying
Shares of each Fund for sale; interest charges, bond premiums and other
insurance expense; freight, insurance and other charges in connection with the
shipment of each Fund's portfolio securities; the compensation and all expenses
(specifically including travel expenses relating to Trust business) of Trustees,
officers and employees of the Trust who are not affiliated persons of you;
brokerage commissions or other costs of acquiring or disposing of any portfolio
securities of the Funds; expenses of printing and distributing reports, notices
and dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of each Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Trustees and officers of the Trust; and costs of
shareholders' and other meetings.
You shall not be required to pay expenses of any activity which is primarily
intended to result in sales of Shares of a Fund if and to the extent that (i)
such expenses are required to be borne by a principal underwriter which acts as
the distributor of a Fund's Shares pursuant to an underwriting agreement which
provides that the underwriter shall assume some or all of such expenses, or (ii)
the Trust on behalf of a Fund shall have adopted a plan in conformity with Rule
12b-1 under the 1940 Act providing that a Fund (or some other party) shall
assume some or all of such expenses. You shall be required to pay such of the
foregoing sales expenses as are not required to be paid by the principal
underwriter pursuant to the underwriting agreement or are not permitted to be
paid by a Fund (or some other party) pursuant to such a plan.
3
<PAGE>
5. Management Fee. For all services to be rendered, payments to be made and
costs to be assumed by you as provided in sections 2, 3, and 4 hereof, the Trust
on behalf of the Funds shall pay you in United States Dollars on the last day of
each month the unpaid balance of a fee equal to the excess of (a) 1/12 of .22 of
1 percent of the combined average daily net assets as defined below of the Funds
for such month; provided that, for any calendar month during which the average
of such values exceeds $500,000,000, the fee payable for that month based on the
portion of the average of such values in excess of $500,000,000 shall be 1/12 of
.20 of 1 percent of such portion; provided that, for any calendar month during
which the average of such values exceeds $1 billion, the fee payable for that
month based on the portion of the average of such values in excess of $1 billion
shall be 1/12 of .175 of 1 percent of such portion; provided that, for any
calendar month during which the average of such values exceeds $2 billion, the
fee payable for that month based on the portion of the average of such values in
excess of $2 billion shall be 1/12 of .16 of 1 percent of such portion; and
provided that, for any calendar month during which the average of such values
exceeds $3 billion, the fee payable for that month based on the portion of the
average of such values in excess of $3 billion shall be 1/12 of .15 of 1 percent
of such portion; over (b) the greater of (i) the amount by which the Funds'
aggregate expenses exceed .90 of 1% of the Funds' combined average daily net
assets up to $500 million, .80 of 1% of the next $500 million, .75 of 1% of the
next $1 billion and .70 of 1% of combined average daily net assets over $2
billion or (ii) any compensation waived by you from time to time (as more fully
described below). You shall be entitled to receive during any month such interim
payments of your fee hereunder as you shall request, provided that no such
payment shall exceed 75 percent of the amount of your fee then accrued on the
books of the Funds and unpaid.
The "average daily net assets" of a Fund shall mean the average of the values
placed on a Fund's net assets as of 4:00 p.m. (New York time) on each day on
which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of a Fund shall always be determined
pursuant to the applicable provisions of the Declaration and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 5, the value of the net
assets of such Fund as last determined shall be deemed to be the value of its
net assets as of 4:00 p.m. (New York time), or as of such other time as the
value of the net assets of the Fund's portfolio may be lawfully determined on
that day. If a Fund determines the value of the net assets of its portfolio more
than once on any day, then the last such determination thereof on that day shall
be deemed to be the sole determination thereof on that day for the purposes of
this section 5.
You agree that your gross compensation for any fiscal year shall not be greater
than an amount which, when added to other expenses of the Funds, shall cause the
aggregate expenses of the Funds to exceed on an annual basis .90 of 1% of the
Funds' combined average daily net assets up to $500 million, .80 of 1% of the
next $500 million, .75 of 1% of the next $1 billion and .70 of 1% of combined
average daily net assets over $2 billion. Except to the extent that such amount
has been reflected in reduced payments to you, you shall refund to the Funds the
amount of any payment received in excess of the limitation pursuant to this
section 5 as promptly as practicable after the end of such fiscal year, provided
that you shall not be required to pay the Funds an amount greater than the fee
paid to you in respect of such year pursuant to this Agreement. As used in this
section 5, "expenses" shall mean those expenses included in the applicable
expense limitation having the broadest specifications thereof, and "expense
limitation" means a limit on the maximum annual expenses which may be incurred
by an investment company determined (i) by multiplying a fixed percentage by the
average, or by multiplying more than one such percentage by different specified
amounts of the average, of the values of an investment company's net assets for
a fiscal year or (ii) by multiplying a fixed percentage by an investment
company's net investment income for a fiscal year.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Funds' expenses, as if such waiver
or limitation were fully set forth herein.
6. Avoidance of Inconsistent Position; Services Not Exclusive. In connection
with purchases or sales of portfolio securities and other investments for the
account of the Funds, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for each Fund's account with
brokers
4
<PAGE>
or dealers selected by you in accordance with Fund policies as expressed in the
Registration Statement. If any occasion should arise in which you give any
advice to clients of yours concerning the Shares of a Fund, you shall act solely
as investment counsel for such clients and not in any way on behalf of such
Fund.
Your services to the Funds pursuant to this Agreement are not to be deemed to be
exclusive and it is understood that you may render investment advice, management
and services to others. In acting under this Agreement, you shall be an
independent contractor and not an agent of the Trust. Whenever a Fund and one or
more other accounts or investment companies advised by you have available funds
for investment, investments suitable and appropriate for each shall be allocated
in accordance with procedures believed by you to be equitable to each entity.
Similarly, opportunities to sell securities shall be allocated in a manner
believed by you to be equitable. The Funds recognize that in some cases this
procedure may adversely affect the size of the position that may be acquired or
disposed of for the Funds.
7. Limitation of Liability of Manager. As an inducement to your undertaking to
render services pursuant to this Agreement, the Trust agrees that you shall not
be liable under this Agreement for any error of judgment or mistake of law or
for any loss suffered by a Fund in connection with the matters to which this
Agreement relates, provided that nothing in this Agreement shall be deemed to
protect or purport to protect you against any liability to the Trust, the Funds
or their shareholders to which you would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of your
duties, or by reason of your reckless disregard of your obligations and duties
hereunder.
8. Duration and Termination of This Agreement. This Agreement shall remain in
force until December 1, 1998, and continue in force from year to year thereafter
with respect to each Fund, but only so long as such continuance is specifically
approved for each Fund at least annually (a) by the vote of a majority of the
Trustees who are not parties to this Agreement or interested persons of any
party to this Agreement, cast in person at a meeting called for the purpose of
voting on such approval, and (b) by the Trustees of the Trust, or by the vote of
a majority of the outstanding voting securities of such Fund. The aforesaid
requirement that continuance of this Agreement be "specifically approved at
least annually" shall be construed in a manner consistent with the 1940 Act and
the rules and regulations thereunder and any applicable SEC exemptive order
therefrom.
This Agreement may be terminated with respect to a Fund at any time, without the
payment of any penalty, by the vote of a majority of the outstanding voting
securities of such Fund or by the Trust's Board of Trustees on 60 days' written
notice to you, or by you on 60 days' written notice to the Trust. This Agreement
shall terminate automatically in the event of its assignment.
This Agreement may be terminated with respect to a Fund at any time without the
payment of any penalty by the Board of Trustees or by vote of a majority of the
outstanding voting securities of such Fund in the event that it shall have been
established by a court of competent jurisdiction that you or any of your
officers or directors has taken any action which results in a breach of your
covenants set forth herein.
9. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
10. Limitation of Liability for Claims. The Declaration, a copy of which,
together with all amendments thereto, is on file in the Office of the Secretary
of the Commonwealth of Massachusetts, provides that the name "Cash Equivalent
Fund" refers to the Trustees under the Declaration collectively as Trustees and
not as individuals or personally, and that no shareholder of a Fund, or Trustee,
officer, employee or agent of the Trust, shall be subject to claims against or
obligations of the Trust or of a Fund to any extent whatsoever, but that the
Trust estate only shall be liable.
5
<PAGE>
You are hereby expressly put on notice of the limitation of liability as set
forth in the Declaration and you agree that the obligations assumed by the Trust
on behalf of each Fund pursuant to this Agreement shall be limited in all cases
to each Fund and its assets, and you shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of a Fund or any other
series of the Trust, or from any Trustee, officer, employee or agent of the
Trust. You understand that the rights and obligations of each Fund, or series,
under the Declaration are separate and distinct from those of any and all other
series.
11. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
In interpreting the provisions of this Agreement, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner which would cause a
Fund to fail to comply with the requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Trust on behalf of the Funds.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
CASH EQUIVALENT FUND, on behalf of
Money Market Portfolio
Government Securities Portfolio
By:/s/Jack E. Neal
------------------
Vice President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By:/s/Lynn S. Birdsong
----------------------
President
6
INVESTMENT MANAGEMENT AGREEMENT
Cash Equivalent Fund
222 South Riverside Plaza
Chicago, Illinois 60606
December 31, 1997
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Tax-Exempt Portfolio
Ladies and Gentlemen:
CASH EQUIVALENT FUND (the "Trust") has been established as a Massachusetts
business trust to engage in the business of an investment company. Pursuant to
the Trust's Declaration of Trust, as amended from time-to-time (the
"Declaration"), the Board of Trustees is authorized to issue the Trust's shares
of beneficial interest (the "Shares"), in separate series, or funds. The Board
of Trustees has authorized Tax-Exempt Portfolio (the "Fund"). Series may be
abolished and dissolved, and additional series established, from time to time by
action of the Trustees.
The Trust, on behalf of the Fund, has selected you to act as the investment
manager of the Fund and to provide certain other services, as more fully set
forth below, and you have indicated that you are willing to act as such
investment manager and to perform such services under the terms and conditions
hereinafter set forth. Accordingly, the Trust on behalf of the Fund agrees with
you as follows:
1. Delivery of Documents. The Trust engages in the business of investing and
reinvesting the assets of the Fund in the manner and in accordance with the
investment objectives, policies and restrictions specified in the currently
effective Prospectus (the "Prospectus") and Statement of Additional Information
(the "SAI") relating to the Fund included in the Trust's Registration Statement
on Form N-1A, as amended from time to time, (the "Registration Statement") filed
by the Trust under the Investment Company Act of 1940, as amended, (the "1940
Act") and the Securities Act of 1933, as amended. Copies of the documents
referred to in the preceding sentence have been furnished to you by the Trust.
The Trust has also furnished you with copies properly certified or authenticated
of each of the following additional documents related to the Trust and the Fund:
(1) The Declaration, as amended to date.
(2) By-Laws of the Trust as in effect on the date hereof (the "By- Laws").
(3) Resolutions of the Trustees of the Trust and the shareholders of the
Fund selecting you as investment manager and approving the form of
this Agreement.
(4) Establishment and Designation of Series of Shares of Beneficial
Interest relating to the Fund, as applicable.
The Trust will furnish you from time to time with copies, properly certified or
authenticated, of all amendments of or supplements, if any, to the foregoing,
including the Prospectus, the SAI and the Registration Statement.
2. Portfolio Management Services. As manager of the assets of the Fund, you
shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
<PAGE>
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations thereunder; and all other
applicable federal and state laws and regulations of which you have knowledge;
subject always to policies and instructions adopted by the Trust's Board of
Trustees. In connection therewith, you shall use reasonable efforts to manage
the Fund so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Fund shall have
the benefit of the investment analysis and research, the review of current
economic conditions and trends and the consideration of long-range investment
policy generally available to your investment advisory clients. In managing the
Fund in accordance with the requirements set forth in this section 2, you shall
be entitled to receive and act upon advice of counsel to the Trust. You shall
also make available to the Trust promptly upon request all of the Fund's
investment records and ledgers as are necessary to assist the Trust in complying
with the requirements of the 1940 Act and other applicable laws. To the extent
required by law, you shall furnish to regulatory authorities having the
requisite authority any information or reports in connection with the services
provided pursuant to this Agreement which may be requested in order to ascertain
whether the operations of the Trust are being conducted in a manner consistent
with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
the Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Trust's Board of Trustees periodic reports on the
investment performance of the Fund and on the performance of your obligations
pursuant to this Agreement, and you shall supply such additional reports and
information as the Trust's officers or Board of Trustees shall reasonably
request.
3. Administrative Services. In addition to the portfolio management services
specified above in section 2, you shall furnish at your expense for the use of
the Fund such office space and facilities in the United States as the Fund may
require for its reasonable needs, and you (or one or more of your affiliates
designated by you) shall render to the Trust administrative services on behalf
of the Fund necessary for operating as an open end investment company and not
provided by persons not parties to this Agreement including, but not limited to,
preparing reports to and meeting materials for the Trust's Board of Trustees and
reports and notices to Fund shareholders; supervising, negotiating contractual
arrangements with, to the extent appropriate, and monitoring the performance of,
accounting agents, custodians, depositories, transfer agents and pricing agents,
accountants, attorneys, printers, underwriters, brokers and dealers, insurers
and other persons in any capacity deemed to be necessary or desirable to Fund
operations; preparing and making filings with the Securities and Exchange
Commission (the "SEC") and other regulatory and self-regulatory organizations,
including, but not limited to, preliminary and definitive proxy materials,
post-effective amendments to the Registration Statement, semi-annual reports on
Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act; overseeing the
tabulation of proxies by the Fund's transfer agent; assisting in the preparation
and filing of the Fund's federal, state and local tax returns; preparing and
filing the Fund's federal excise tax return pursuant to Section 4982 of the
Code; providing assistance with investor and public relations matters;
monitoring the valuation of portfolio securities and the calculation of net
asset value; monitoring the registration of Shares of the Fund under applicable
federal and state securities laws; maintaining or causing to be maintained for
the Fund all books, records and reports and any other information required under
the 1940 Act, to the extent that such books, records and reports and other
information are not maintained by the Fund's custodian or other agents of the
Fund; assisting in establishing the accounting policies of the Fund; assisting
in the resolution of accounting issues that may arise with respect to the Fund's
operations and consulting with the Fund's independent accountants, legal counsel
and the Fund's other agents as necessary in connection therewith; establishing
and monitoring the Fund's operating expense budgets; reviewing the Fund's bills;
processing the payment of bills that have been approved by an authorized person;
assisting the Fund in determining the amount of dividends and distributions
available to be paid by the Fund to its shareholders, preparing and arranging
for the printing of dividend notices to shareholders, and providing the transfer
and dividend paying agent, the custodian, and the accounting agent with such
information as is required for such parties to effect the payment of dividends
and distributions; and otherwise assisting the Trust as it may reasonably
request in the conduct of the Fund's
2
<PAGE>
business, subject to the direction and control of the Trust's Board of Trustees.
Nothing in this Agreement shall be deemed to shift to you or to diminish the
obligations of any agent of the Fund or any other person not a party to this
Agreement which is obligated to provide services to the Fund.
4. Allocation of Charges and Expenses. Except as otherwise specifically provided
in this section 4, you shall pay the compensation and expenses of all Trustees,
officers and executive employees of the Trust (including the Fund's share of
payroll taxes) who are affiliated persons of you, and you shall make available,
without expense to the Fund, the services of such of your directors, officers
and employees as may duly be elected officers of the Trust, subject to their
individual consent to serve and to any limitations imposed by law. You shall
provide at your expense the portfolio management services described in section 2
hereof and the administrative services described in section 3 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 4. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Trustees and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Trust; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent for which the
Trust is responsible pursuant to the terms of the Fund Accounting Services
Agreement, custodians, subcustodians, transfer agents, dividend disbursing
agents and registrars; payment for portfolio pricing or valuation services to
pricing agents, accountants, bankers and other specialists, if any; expenses of
preparing share certificates and, except as provided below in this section 4,
other expenses in connection with the issuance, offering, distribution, sale,
redemption or repurchase of securities issued by the Fund; expenses relating to
investor and public relations; expenses and fees of registering or qualifying
Shares of the Fund for sale; interest charges, bond premiums and other insurance
expense; freight, insurance and other charges in connection with the shipment of
the Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Trust business) of Trustees, officers and
employees of the Trust who are not affiliated persons of you; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
of the Fund; expenses of printing and distributing reports, notices and
dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of the Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Trustees and officers of the Trust; and costs of
shareholders' and other meetings.
You shall not be required to pay expenses of any activity which is primarily
intended to result in sales of Shares of the Fund if and to the extent that (i)
such expenses are required to be borne by a principal underwriter which acts as
the distributor of the Fund's Shares pursuant to an underwriting agreement which
provides that the underwriter shall assume some or all of such expenses, or (ii)
the Trust on behalf of the Fund shall have adopted a plan in conformity with
Rule 12b-1 under the 1940 Act providing that the Fund (or some other party)
shall assume some or all of such expenses. You shall be required to pay such of
the foregoing sales expenses as are not required to be paid by the principal
underwriter pursuant to the underwriting agreement or are not permitted to be
paid by the Fund (or some other party) pursuant to such a plan.
3
<PAGE>
5. Management Fee. For all services to be rendered, payments to be made and
costs to be assumed by you as provided in sections 2, 3, and 4 hereof, the Trust
on behalf of the Fund shall pay you in United States Dollars on the last day of
each month the unpaid balance of a fee equal to the excess of (a) 1/12 of .22 of
1 percent of the average daily net assets as defined below of the Fund for such
month; provided that, for any calendar month during which the average of such
values exceeds $500,000,000, the fee payable for that month based on the portion
of the average of such values in excess of $500,000,000 shall be 1/12 of .20 of
1 percent of such portion; provided that, for any calendar month during which
the average of such values exceeds $1 billion, the fee payable for that month
based on the portion of the average of such values in excess of $1 billion shall
be 1/12 of .175 of 1 percent of such portion; provided that, for any calendar
month during which the average of such values exceeds $2 billion, the fee
payable for that month based on the portion of the average of such values in
excess of $2 billion shall be 1/12 of .16 of 1 percent of such portion; and
provided that, for any calendar month during which the average of such values
exceeds $3 billion, the fee payable for that month based on the portion of the
average of such values in excess of $3 billion shall be 1/12 of .15 of 1 percent
of such portion; over (b) the greater of (i) the amount by which the Fund's
expenses exceed 1.5% of average daily net assets up to $30 million and 1% of
average daily net assets over $30 million or (ii) any compensation waived by you
from time to time (as more fully described below). You shall be entitled to
receive during any month such interim payments of your fee hereunder as you
shall request, provided that no such payment shall exceed 75 percent of the
amount of your fee then accrued on the books of the Fund and unpaid.
The "average daily net assets" of the Fund shall mean the average of the values
placed on the Fund's net assets as of 4:00 p.m. (New York time) on each day on
which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of the Fund shall always be determined
pursuant to the applicable provisions of the Declaration and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 5, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of 4:00 p.m. (New York time), or as of such other time as the value of
the net assets of the Fund's portfolio may be lawfully determined on that day.
If the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of this
section 5.
You agree that your gross compensation for any fiscal year shall not be greater
than an amount which, when added to other expenses of the Fund, shall cause the
aggregate expenses of the Fund to exceed on an annual basis 1.5% of average
daily net assets up to $30 million and 1% of average daily net assets over $30
million. Except to the extent that such amount has been reflected in reduced
payments to you, you shall refund to the Fund the amount of any payment received
in excess of the limitation pursuant to this section 5 as promptly as
practicable after the end of such fiscal year, provided that you shall not be
required to pay the Fund an amount greater than the fee paid to you in respect
of such year pursuant to this Agreement. As used in this section 5, "expenses"
shall mean those expenses included in the applicable expense limitation having
the broadest specifications thereof, and "expense limitation" means a limit on
the maximum annual expenses which may be incurred by an investment company
determined (i) by multiplying a fixed percentage by the average, or by
multiplying more than one such percentage by different specified amounts of the
average, of the values of an investment company's net assets for a fiscal year
or (ii) by multiplying a fixed percentage by an investment company's net
investment income for a fiscal year.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Fund's expenses, as if such waiver
or limitation were fully set forth herein.
6. Avoidance of Inconsistent Position; Services Not Exclusive. In connection
with purchases or sales of portfolio securities and other investments for the
account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise
4
<PAGE>
in which you give any advice to clients of yours concerning the Shares of the
Fund, you shall act solely as investment counsel for such clients and not in any
way on behalf of the Fund.
Your services to the Fund pursuant to this Agreement are not to be deemed to be
exclusive and it is understood that you may render investment advice, management
and services to others. In acting under this Agreement, you shall be an
independent contractor and not an agent of the Trust. Whenever the Fund and one
or more other accounts or investment companies advised by you have available
funds for investment, investments suitable and appropriate for each shall be
allocated in accordance with procedures believed by you to be equitable to each
entity. Similarly, opportunities to sell securities shall be allocated in a
manner believed by you to be equitable. The Fund recognizes that in some cases
this procedure may adversely affect the size of the position that may be
acquired or disposed of for the Fund.
7. Limitation of Liability of Manager. As an inducement to your undertaking to
render services pursuant to this Agreement, the Trust agrees that you shall not
be liable under this Agreement for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the matters to which this
Agreement relates, provided that nothing in this Agreement shall be deemed to
protect or purport to protect you against any liability to the Trust, the Fund
or its shareholders to which you would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of your duties, or
by reason of your reckless disregard of your obligations and duties hereunder.
8. Duration and Termination of This Agreement. This Agreement shall remain in
force until December 1, 1998, and continue in force from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually (a) by the vote of a majority of the Trustees who are not parties
to this Agreement or interested persons of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
by the Trustees of the Trust, or by the vote of a majority of the outstanding
voting securities of the Fund. The aforesaid requirement that continuance of
this Agreement be "specifically approved at least annually" shall be construed
in a manner consistent with the 1940 Act and the rules and regulations
thereunder and any applicable SEC exemptive order therefrom.
This Agreement may be terminated with respect to the Fund at any time, without
the payment of any penalty, by the vote of a majority of the outstanding voting
securities of the Fund or by the Trust's Board of Trustees on 60 days' written
notice to you, or by you on 60 days' written notice to the Trust. This Agreement
shall terminate automatically in the event of its assignment.
This Agreement may be terminated with respect to the Fund at any time without
the payment of any penalty by the Board of Trustees or by vote of a majority of
the outstanding voting securities of the Fund in the event that it shall have
been established by a court of competent jurisdiction that you or any of your
officers or directors has taken any action which results in a breach of your
covenants set forth herein.
9. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
10. Limitation of Liability for Claims. The Declaration, a copy of which,
together with all amendments thereto, is on file in the Office of the Secretary
of the Commonwealth of Massachusetts, provides that the name "Cash Equivalent
Fund" refers to the Trustees under the Declaration collectively as Trustees and
not as individuals or personally, and that no shareholder of the Fund, or
Trustee, officer, employee or agent of the Trust, shall be subject to claims
against or obligations of the Trust or of the Fund to any extent whatsoever, but
that the Trust estate only shall be liable.
You are hereby expressly put on notice of the limitation of liability as set
forth in the Declaration and you agree that the obligations assumed by the Trust
on behalf of the Fund pursuant to this Agreement shall be limited in all cases
to
5
<PAGE>
the Fund and its assets, and you shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Fund or any other
series of the Trust, or from any Trustee, officer, employee or agent of the
Trust. You understand that the rights and obligations of each Fund, or series,
under the Declaration are separate and distinct from those of any and all other
series.
11. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
In interpreting the provisions of this Agreement, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner which would cause the
Fund to fail to comply with the requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Trust on behalf of the Fund.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
CASH EQUIVALENT FUND, on behalf of Tax-Exempt
Portfolio
By:/s/Jack E. Neal
----------------------
President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By:/s/Lynn S. Birdsong
----------------------
President
6
INVESTMENT MANAGEMENT AGREEMENT
Cash Equivalent Fund
222 South Riverside Plaza
Chicago, Illinois 60606
September 7, 1998
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Money Market Portfolio
Government Securities Portfolio
Ladies and Gentlemen:
CASH EQUIVALENT FUND (the "Trust") has been established as a Massachusetts
business trust to engage in the business of an investment company. Pursuant to
the Trust's Declaration of Trust, as amended from time-to-time (the
"Declaration"), the Board of Trustees is authorized to issue the Trust's shares
of beneficial interest (the "Shares"), in separate series, or funds. The Board
of Trustees has authorized the Money Market Portfolio and the Government
Securities Portfolio (each a "Fund" and collectively, the "Funds"). Series may
be abolished and dissolved, and additional series established, from time to time
by action of the Trustees.
The Trust, on behalf of the Funds, has selected you to act as the investment
manager of the Funds and to provide certain other services, as more fully set
forth below, and you have indicated that you are willing to act as such
investment manager and to perform such services under the terms and conditions
hereinafter set forth. In the event the Trust establishes one or more additional
series with respect to which it desires to retain you to render the services
described hereunder, it shall notify you in writing. If you are willing to
render such services, you shall notify the Trust in writing, whereupon such
series shall become a fund hereunder. Accordingly, the Trust on behalf of the
Funds agrees with you as follows:
1. Delivery of Documents. The Trust engages in the business of investing and
reinvesting the assets of each Fund in the manner and in accordance with the
investment objectives, policies and restrictions specified in the currently
effective Prospectus (the "Prospectus") and Statement of Additional Information
(the "SAI") relating to each Fund included in the Trust's Registration Statement
on Form N-1A, as amended from time to time, (the "Registration Statement") filed
by the Trust under the Investment Company Act of 1940, as amended, (the "1940
Act") and the Securities Act of 1933, as amended. Copies of the documents
referred to in the preceding sentence have been furnished to you by the Trust.
The Trust has also furnished you with copies properly certified or authenticated
of each of the following additional documents related to the Trust and the
Funds:
(a) The Declaration, as amended to date.
(b) By-Laws of the Trust as in effect on the date hereof (the "By-
Laws").
(c) Resolutions of the Trustees of the Trust and the shareholders
of each Fund selecting you as investment manager and approving
the form of this Agreement.
(d) Establishment and Designation of Series of Shares of
Beneficial Interest relating to the Funds, as applicable.
<PAGE>
The Trust will furnish you from time to time with copies, properly certified or
authenticated, of all amendments of or supplements, if any, to the foregoing,
including the Prospectus, the SAI and the Registration Statement.
2. Portfolio Management Services. As manager of the assets of the Funds, you
shall provide continuing investment management of the assets of the Funds in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations thereunder; and all other
applicable federal and state laws and regulations of which you have knowledge;
subject always to policies and instructions adopted by the Trust's Board of
Trustees. In connection therewith, you shall use reasonable efforts to manage
each Fund so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Funds shall have
the benefit of the investment analysis and research, the review of current
economic conditions and trends and the consideration of long-range investment
policy generally available to your investment advisory clients. In managing the
Funds in accordance with the requirements set forth in this section 2, you shall
be entitled to receive and act upon advice of counsel to the Trust. You shall
also make available to the Trust promptly upon request all of the Funds'
investment records and ledgers as are necessary to assist the Trust in complying
with the requirements of the 1940 Act and other applicable laws. To the extent
required by law, you shall furnish to regulatory authorities having the
requisite authority any information or reports in connection with the services
provided pursuant to this Agreement which may be requested in order to ascertain
whether the operations of the Trust are being conducted in a manner consistent
with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by each Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
each Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Trust's Board of Trustees periodic reports on the
investment performance of each Fund and on the performance of your obligations
pursuant to this Agreement, and you shall supply such additional reports and
information as the Trust's officers or Board of Trustees shall reasonably
request.
3. Administrative Services. In addition to the portfolio management services
specified above in section 2, you shall furnish at your expense for the use of
the Funds such office space and facilities in the United States as the Funds may
require for its reasonable needs, and you (or one or more of your affiliates
designated by you) shall render to the Trust administrative services on behalf
of the Funds necessary for operating as an open end investment company and not
provided by persons not parties to this Agreement including, but not limited to,
preparing reports to and meeting materials for the Trust's Board of Trustees and
reports and notices to Fund shareholders; supervising, negotiating contractual
arrangements with, to the extent appropriate, and monitoring the performance of,
accounting agents, custodians, depositories, transfer agents and pricing agents,
accountants, attorneys, printers, underwriters, brokers and dealers, insurers
and other persons in any capacity deemed to be necessary or desirable to Fund
operations; preparing and making filings with the Securities and Exchange
Commission (the "SEC") and other regulatory and self-regulatory organizations,
including, but not limited to, preliminary and definitive proxy materials,
post-effective amendments to the Registration Statement, semi-annual reports on
Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act; overseeing the
tabulation of proxies by the Funds' transfer agent; assisting in the preparation
and filing of each Fund's federal, state and local tax returns; preparing and
filing each Fund's federal excise tax return pursuant to Section 4982 of the
Code; providing assistance with investor and public relations matters;
monitoring the valuation of portfolio securities and the calculation of net
asset value; monitoring the registration of Shares of each Fund under applicable
federal and state securities laws; maintaining or
2
<PAGE>
causing to be maintained for the Funds all books, records and reports and any
other information required under the 1940 Act, to the extent that such books,
records and reports and other information are not maintained by the Funds'
custodian or other agents of the Funds; assisting in establishing the accounting
policies of the Funds; assisting in the resolution of accounting issues that may
arise with respect to the Funds' operations and consulting with the Funds'
independent accountants, legal counsel and the Funds' other agents as necessary
in connection therewith; establishing and monitoring each Fund's operating
expense budgets; reviewing each Fund's bills; processing the payment of bills
that have been approved by an authorized person; assisting the Funds in
determining the amount of dividends and distributions available to be paid by
each Fund to its shareholders, preparing and arranging for the printing of
dividend notices to shareholders, and providing the transfer and dividend paying
agent, the custodian, and the accounting agent with such information as is
required for such parties to effect the payment of dividends and distributions;
and otherwise assisting the Trust as it may reasonably request in the conduct of
the Funds' business, subject to the direction and control of the Trust's Board
of Trustees. Nothing in this Agreement shall be deemed to shift to you or to
diminish the obligations of any agent of the Funds or any other person not a
party to this Agreement which is obligated to provide services to the Funds.
4. Allocation of Charges and Expenses. Except as otherwise specifically provided
in this section 4, you shall pay the compensation and expenses of all Trustees,
officers and executive employees of the Trust (including each Fund's share of
payroll taxes) who are affiliated persons of you, and you shall make available,
without expense to the Funds, the services of such of your directors, officers
and employees as may duly be elected officers of the Trust, subject to their
individual consent to serve and to any limitations imposed by law. You shall
provide at your expense the portfolio management services described in section 2
hereof and the administrative services described in section 3 hereof.
You shall not be required to pay any expenses of the Funds other than those
specifically allocated to you in this section 4. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Funds' Trustees and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of each Fund: organization expenses of each
Fund (including out of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Funds' custodian or
other agents of the Trust; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Funds in connection with membership in investment company trade
organizations; fees and expenses of the Funds' accounting agent for which the
Trust is responsible pursuant to the terms of the Fund Accounting Services
Agreement, custodians, subcustodians, transfer agents, dividend disbursing
agents and registrars; payment for portfolio pricing or valuation services to
pricing agents, accountants, bankers and other specialists, if any; expenses of
preparing share certificates and, except as provided below in this section 4,
other expenses in connection with the issuance, offering, distribution, sale,
redemption or repurchase of securities issued by each Fund; expenses relating to
investor and public relations; expenses and fees of registering or qualifying
Shares of each Fund for sale; interest charges, bond premiums and other
insurance expense; freight, insurance and other charges in connection with the
shipment of each Fund's portfolio securities; the compensation and all expenses
(specifically including travel expenses relating to Trust business) of Trustees,
officers and employees of the Trust who are not affiliated persons of you;
brokerage commissions or other costs of acquiring or disposing of any portfolio
securities of the Funds; expenses of printing and distributing reports, notices
and dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of each Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Trustees and officers of the Trust; and costs of
shareholders' and other meetings.
You shall not be required to pay expenses of any activity which is primarily
intended to result in sales of Shares of a Fund if and to the extent that (i)
such expenses are required to be borne by a principal underwriter which acts as
the distributor of a Fund's Shares pursuant to an underwriting agreement which
provides that the underwriter shall assume some or all of such expenses, or (ii)
the Trust on behalf of a Fund shall have adopted a plan in conformity
3
<PAGE>
with Rule 12b-1 under the 1940 Act providing that a Fund (or some other party)
shall assume some or all of such expenses. You shall be required to pay such of
the foregoing sales expenses as are not required to be paid by the principal
underwriter pursuant to the underwriting agreement or are not permitted to be
paid by a Fund (or some other party) pursuant to such a plan.
5. Management Fee. For all services to be rendered, payments to be made and
costs to be assumed by you as provided in sections 2, 3, and 4 hereof, the Trust
on behalf of the Funds shall pay you in United States Dollars on the last day of
each month the unpaid balance of a fee equal to the excess of (a) 1/12 of .22 of
1 percent of the combined average daily net assets as defined below of the Funds
for such month; provided that, for any calendar month during which the average
of such values exceeds $500,000,000, the fee payable for that month based on the
portion of the average of such values in excess of $500,000,000 shall be 1/12 of
.20 of 1 percent of such portion; provided that, for any calendar month during
which the average of such values exceeds $1 billion, the fee payable for that
month based on the portion of the average of such values in excess of $1 billion
shall be 1/12 of .175 of 1 percent of such portion; provided that, for any
calendar month during which the average of such values exceeds $2 billion, the
fee payable for that month based on the portion of the average of such values in
excess of $2 billion shall be 1/12 of .16 of 1 percent of such portion; and
provided that, for any calendar month during which the average of such values
exceeds $3 billion, the fee payable for that month based on the portion of the
average of such values in excess of $3 billion shall be 1/12 of .15 of 1 percent
of such portion; over (b) the greater of (i) the amount by which the Funds'
aggregate expenses exceed .90 of 1% of the Funds' combined average daily net
assets up to $500 million, .80 of 1% of the next $500 million, .75 of 1% of the
next $1 billion and .70 of 1% of combined average daily net assets over $2
billion or (ii) any compensation waived by you from time to time (as more fully
described below). You shall be entitled to receive during any month such interim
payments of your fee hereunder as you shall request, provided that no such
payment shall exceed 75 percent of the amount of your fee then accrued on the
books of the Funds and unpaid.
The "average daily net assets" of a Fund shall mean the average of the values
placed on a Fund's net assets as of 4:00 p.m. (New York time) on each day on
which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of a Fund shall always be determined
pursuant to the applicable provisions of the Declaration and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 5, the value of the net
assets of such Fund as last determined shall be deemed to be the value of its
net assets as of 4:00 p.m. (New York time), or as of such other time as the
value of the net assets of the Fund's portfolio may be lawfully determined on
that day. If a Fund determines the value of the net assets of its portfolio more
than once on any day, then the last such determination thereof on that day shall
be deemed to be the sole determination thereof on that day for the purposes of
this section 5.
You agree that your gross compensation for any fiscal year shall not be greater
than an amount which, when added to other expenses of the Funds, shall cause the
aggregate expenses of the Funds to exceed on an annual basis .90 of 1% of the
Funds' combined average daily net assets up to $500 million, .80 of 1% of the
next $500 million, .75 of 1% of the next $1 billion and .70 of 1% of combined
average daily net assets over $2 billion. Except to the extent that such amount
has been reflected in reduced payments to you, you shall refund to the Funds the
amount of any payment received in excess of the limitation pursuant to this
section 5 as promptly as practicable after the end of such fiscal year, provided
that you shall not be required to pay the Funds an amount greater than the fee
paid to you in respect of such year pursuant to this Agreement. As used in this
section 5, "expenses" shall mean those expenses included in the applicable
expense limitation having the broadest specifications thereof, and "expense
limitation" means a limit on the maximum annual expenses which may be incurred
by an investment company determined (i) by multiplying a fixed percentage by the
average, or by multiplying more than one such percentage by different specified
amounts of the average, of the values of an investment company's net assets for
a fiscal year or (ii) by multiplying a fixed percentage by an investment
company's net investment income for a fiscal year.
4
<PAGE>
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Funds' expenses, as if such waiver
or limitation were fully set forth herein.
6. Avoidance of Inconsistent Position; Services Not Exclusive. In connection
with purchases or sales of portfolio securities and other investments for the
account of the Funds, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for each Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of a Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
such Fund.
Your services to the Funds pursuant to this Agreement are not to be deemed to be
exclusive and it is understood that you may render investment advice, management
and services to others. In acting under this Agreement, you shall be an
independent contractor and not an agent of the Trust. Whenever a Fund and one or
more other accounts or investment companies advised by you have available funds
for investment, investments suitable and appropriate for each shall be allocated
in accordance with procedures believed by you to be equitable to each entity.
Similarly, opportunities to sell securities shall be allocated in a manner
believed by you to be equitable. The Funds recognize that in some cases this
procedure may adversely affect the size of the position that may be acquired or
disposed of for the Funds.
7. Limitation of Liability of Manager. As an inducement to your undertaking to
render services pursuant to this Agreement, the Trust agrees that you shall not
be liable under this Agreement for any error of judgment or mistake of law or
for any loss suffered by a Fund in connection with the matters to which this
Agreement relates, provided that nothing in this Agreement shall be deemed to
protect or purport to protect you against any liability to the Trust, the Funds
or their shareholders to which you would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of your
duties, or by reason of your reckless disregard of your obligations and duties
hereunder.
8. Duration and Termination of This Agreement. This Agreement shall remain in
force until December 1, 1998, and continue in force from year to year thereafter
with respect to each Fund, but only so long as such continuance is specifically
approved for each Fund at least annually (a) by the vote of a majority of the
Trustees who are not parties to this Agreement or interested persons of any
party to this Agreement, cast in person at a meeting called for the purpose of
voting on such approval, and (b) by the Trustees of the Trust, or by the vote of
a majority of the outstanding voting securities of such Fund. The aforesaid
requirement that continuance of this Agreement be "specifically approved at
least annually" shall be construed in a manner consistent with the 1940 Act and
the rules and regulations thereunder and any applicable SEC exemptive order
therefrom.
This Agreement may be terminated with respect to a Fund at any time, without the
payment of any penalty, by the vote of a majority of the outstanding voting
securities of such Fund or by the Trust's Board of Trustees on 60 days' written
notice to you, or by you on 60 days' written notice to the Trust. This Agreement
shall terminate automatically in the event of its assignment.
This Agreement may be terminated with respect to a Fund at any time without the
payment of any penalty by the Board of Trustees or by vote of a majority of the
outstanding voting securities of such Fund in the event that it shall have been
established by a court of competent jurisdiction that you or any of your
officers or directors has taken any action which results in a breach of your
covenants set forth herein.
9. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the
5
<PAGE>
change, waiver, discharge or termination is sought, and no amendment of this
Agreement shall be effective until approved in a manner consistent with the 1940
Act and rules and regulations thereunder and any applicable SEC exemptive order
therefrom.
10. Limitation of Liability for Claims. The Declaration, a copy of which,
together with all amendments thereto, is on file in the Office of the Secretary
of the Commonwealth of Massachusetts, provides that the name "Cash Equivalent
Fund" refers to the Trustees under the Declaration collectively as Trustees and
not as individuals or personally, and that no shareholder of a Fund, or Trustee,
officer, employee or agent of the Trust, shall be subject to claims against or
obligations of the Trust or of a Fund to any extent whatsoever, but that the
Trust estate only shall be liable.
You are hereby expressly put on notice of the limitation of liability as set
forth in the Declaration and you agree that the obligations assumed by the Trust
on behalf of each Fund pursuant to this Agreement shall be limited in all cases
to each Fund and its assets, and you shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of a Fund or any other
series of the Trust, or from any Trustee, officer, employee or agent of the
Trust. You understand that the rights and obligations of each Fund, or series,
under the Declaration are separate and distinct from those of any and all other
series.
11. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
In interpreting the provisions of this Agreement, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner which would cause a
Fund to fail to comply with the requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Trust on behalf of the Funds.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
CASH EQUIVALENT FUND, on behalf of
Money Market Portfolio
Government Securities Portfolio
By:/s/Mark S. Casady
---------------------------------------
President
The foregoing Agreement is hereby accepted as of the date hereof.
6
<PAGE>
SCUDDER KEMPER INVESTMENTS, INC.
By:/s/S.R. Beckwith
---------------------------------------
Treasurer
7
INVESTMENT MANAGEMENT AGREEMENT
Cash Equivalent Fund
222 South Riverside Plaza
Chicago, Illinois 60606
September 7, 1998
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Tax-Exempt Portfolio
Ladies and Gentlemen:
CASH EQUIVALENT FUND (the "Trust") has been established as a Massachusetts
business trust to engage in the business of an investment company. Pursuant to
the Trust's Declaration of Trust, as amended from time-to-time (the
"Declaration"), the Board of Trustees is authorized to issue the Trust's shares
of beneficial interest (the "Shares"), in separate series, or funds. The Board
of Trustees has authorized Tax-Exempt Portfolio (the "Fund"). Series may be
abolished and dissolved, and additional series established, from time to time by
action of the Trustees.
The Trust, on behalf of the Fund, has selected you to act as the investment
manager of the Fund and to provide certain other services, as more fully set
forth below, and you have indicated that you are willing to act as such
investment manager and to perform such services under the terms and conditions
hereinafter set forth. Accordingly, the Trust on behalf of the Fund agrees with
you as follows:
1. Delivery of Documents. The Trust engages in the business of investing and
reinvesting the assets of the Fund in the manner and in accordance with the
investment objectives, policies and restrictions specified in the currently
effective Prospectus (the "Prospectus") and Statement of Additional Information
(the "SAI") relating to the Fund included in the Trust's Registration Statement
on Form N-1A, as amended from time to time, (the "Registration Statement") filed
by the Trust under the Investment Company Act of 1940, as amended, (the "1940
Act") and the Securities Act of 1933, as amended. Copies of the documents
referred to in the preceding sentence have been furnished to you by the Trust.
The Trust has also furnished you with copies properly certified or authenticated
of each of the following additional documents related to the Trust and the Fund:
(a) The Declaration, as amended to date.
(b) By-Laws of the Trust as in effect on the date hereof (the "By-
Laws").
(c) Resolutions of the Trustees of the Trust and the shareholders
of the Fund selecting you as investment manager and approving
the form of this Agreement.
(d) Establishment and Designation of Series of Shares of
Beneficial Interest relating to the Fund, as applicable.
The Trust will furnish you from time to time with copies, properly certified or
authenticated, of all amendments of or supplements, if any, to the foregoing,
including the Prospectus, the SAI and the Registration Statement.
2. Portfolio Management Services. As manager of the assets of the Fund, you
shall provide continuing
<PAGE>
investment management of the assets of the Fund in accordance with the
investment objectives, policies and restrictions set forth in the Prospectus and
SAI; the applicable provisions of the 1940 Act and the Internal Revenue Code of
1986, as amended, (the "Code") relating to regulated investment companies and
all rules and regulations thereunder; and all other applicable federal and state
laws and regulations of which you have knowledge; subject always to policies and
instructions adopted by the Trust's Board of Trustees. In connection therewith,
you shall use reasonable efforts to manage the Fund so that it will qualify as a
regulated investment company under Subchapter M of the Code and regulations
issued thereunder. The Fund shall have the benefit of the investment analysis
and research, the review of current economic conditions and trends and the
consideration of long-range investment policy generally available to your
investment advisory clients. In managing the Fund in accordance with the
requirements set forth in this section 2, you shall be entitled to receive and
act upon advice of counsel to the Trust. You shall also make available to the
Trust promptly upon request all of the Fund's investment records and ledgers as
are necessary to assist the Trust in complying with the requirements of the 1940
Act and other applicable laws. To the extent required by law, you shall furnish
to regulatory authorities having the requisite authority any information or
reports in connection with the services provided pursuant to this Agreement
which may be requested in order to ascertain whether the operations of the Trust
are being conducted in a manner consistent with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
the Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Trust's Board of Trustees periodic reports on the
investment performance of the Fund and on the performance of your obligations
pursuant to this Agreement, and you shall supply such additional reports and
information as the Trust's officers or Board of Trustees shall reasonably
request.
3. Administrative Services. In addition to the portfolio management services
specified above in section 2, you shall furnish at your expense for the use of
the Fund such office space and facilities in the United States as the Fund may
require for its reasonable needs, and you (or one or more of your affiliates
designated by you) shall render to the Trust administrative services on behalf
of the Fund necessary for operating as an open end investment company and not
provided by persons not parties to this Agreement including, but not limited to,
preparing reports to and meeting materials for the Trust's Board of Trustees and
reports and notices to Fund shareholders; supervising, negotiating contractual
arrangements with, to the extent appropriate, and monitoring the performance of,
accounting agents, custodians, depositories, transfer agents and pricing agents,
accountants, attorneys, printers, underwriters, brokers and dealers, insurers
and other persons in any capacity deemed to be necessary or desirable to Fund
operations; preparing and making filings with the Securities and Exchange
Commission (the "SEC") and other regulatory and self-regulatory organizations,
including, but not limited to, preliminary and definitive proxy materials,
post-effective amendments to the Registration Statement, semi-annual reports on
Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act; overseeing the
tabulation of proxies by the Fund's transfer agent; assisting in the preparation
and filing of the Fund's federal, state and local tax returns; preparing and
filing the Fund's federal excise tax return pursuant to Section 4982 of the
Code; providing assistance with investor and public relations matters;
monitoring the valuation of portfolio securities and the calculation of net
asset value; monitoring the registration of Shares of the Fund under applicable
federal and state securities laws; maintaining or causing to be maintained for
the Fund all books, records and reports and any other information required under
the 1940 Act, to the extent that such books, records and reports and other
information are not maintained by the Fund's custodian or other agents of the
Fund; assisting in establishing the accounting policies of the Fund; assisting
in the resolution of accounting issues that may arise with respect to the Fund's
operations and consulting with the Fund's independent accountants, legal counsel
and the Fund's other agents as necessary in connection therewith; establishing
and monitoring the Fund's operating expense budgets; reviewing the Fund's bills;
processing the payment of bills that have been approved by an authorized person;
assisting the Fund in determining the amount of
<PAGE>
dividends and distributions available to be paid by the Fund to its
shareholders, preparing and arranging for the printing of dividend notices to
shareholders, and providing the transfer and dividend paying agent, the
custodian, and the accounting agent with such information as is required for
such parties to effect the payment of dividends and distributions; and otherwise
assisting the Trust as it may reasonably request in the conduct of the Fund's
business, subject to the direction and control of the Trust's Board of Trustees.
Nothing in this Agreement shall be deemed to shift to you or to diminish the
obligations of any agent of the Fund or any other person not a party to this
Agreement which is obligated to provide services to the Fund.
4. Allocation of Charges and Expenses. Except as otherwise specifically provided
in this section 4, you shall pay the compensation and expenses of all Trustees,
officers and executive employees of the Trust (including the Fund's share of
payroll taxes) who are affiliated persons of you, and you shall make available,
without expense to the Fund, the services of such of your directors, officers
and employees as may duly be elected officers of the Trust, subject to their
individual consent to serve and to any limitations imposed by law. You shall
provide at your expense the portfolio management services described in section 2
hereof and the administrative services described in section 3 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 4. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Trustees and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Trust; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent for which the
Trust is responsible pursuant to the terms of the Fund Accounting Services
Agreement, custodians, subcustodians, transfer agents, dividend disbursing
agents and registrars; payment for portfolio pricing or valuation services to
pricing agents, accountants, bankers and other specialists, if any; expenses of
preparing share certificates and, except as provided below in this section 4,
other expenses in connection with the issuance, offering, distribution, sale,
redemption or repurchase of securities issued by the Fund; expenses relating to
investor and public relations; expenses and fees of registering or qualifying
Shares of the Fund for sale; interest charges, bond premiums and other insurance
expense; freight, insurance and other charges in connection with the shipment of
the Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Trust business) of Trustees, officers and
employees of the Trust who are not affiliated persons of you; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
of the Fund; expenses of printing and distributing reports, notices and
dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of the Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Trustees and officers of the Trust; and costs of
shareholders' and other meetings.
You shall not be required to pay expenses of any activity which is primarily
intended to result in sales of Shares of the Fund if and to the extent that (i)
such expenses are required to be borne by a principal underwriter which acts as
the distributor of the Fund's Shares pursuant to an underwriting agreement which
provides that the underwriter shall assume some or all of such expenses, or (ii)
the Trust on behalf of the Fund shall have adopted a plan in conformity with
Rule 12b-1 under the 1940 Act providing that the Fund (or some other party)
shall assume some or all of such expenses. You shall be required to pay such of
the foregoing sales expenses as are not required to be paid by the principal
underwriter pursuant to the underwriting agreement or are not permitted to be
paid by the Fund (or some other party) pursuant to such a plan.
5. Management Fee. For all services to be rendered, payments to be made and
costs to be assumed by you as provided in sections 2, 3, and 4 hereof, the Trust
on behalf of the Fund shall pay you in United States Dollars on the last day of
each month the unpaid balance of a fee equal to the excess of (a) 1/12 of .22 of
1 percent of the average
<PAGE>
daily net assets as defined below of the Fund for such month; provided that, for
any calendar month during which the average of such values exceeds $500,000,000,
the fee payable for that month based on the portion of the average of such
values in excess of $500,000,000 shall be 1/12 of .20 of 1 percent of such
portion; provided that, for any calendar month during which the average of such
values exceeds $1 billion, the fee payable for that month based on the portion
of the average of such values in excess of $1 billion shall be 1/12 of .175 of 1
percent of such portion; provided that, for any calendar month during which the
average of such values exceeds $2 billion, the fee payable for that month based
on the portion of the average of such values in excess of $2 billion shall be
1/12 of .16 of 1 percent of such portion; and provided that, for any calendar
month during which the average of such values exceeds $3 billion, the fee
payable for that month based on the portion of the average of such values in
excess of $3 billion shall be 1/12 of .15 of 1 percent of such portion; over (b)
the greater of (i) the amount by which the Fund's expenses exceed 1.5% of
average daily net assets up to $30 million and 1% of average daily net assets
over $30 million or (ii) any compensation waived by you from time to time (as
more fully described below). You shall be entitled to receive during any month
such interim payments of your fee hereunder as you shall request, provided that
no such payment shall exceed 75 percent of the amount of your fee then accrued
on the books of the Fund and unpaid.
The "average daily net assets" of the Fund shall mean the average of the values
placed on the Fund's net assets as of 4:00 p.m. (New York time) on each day on
which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of the Fund shall always be determined
pursuant to the applicable provisions of the Declaration and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 5, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of 4:00 p.m. (New York time), or as of such other time as the value of
the net assets of the Fund's portfolio may be lawfully determined on that day.
If the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of this
section 5.
You agree that your gross compensation for any fiscal year shall not be greater
than an amount which, when added to other expenses of the Fund, shall cause the
aggregate expenses of the Fund to exceed on an annual basis 1.5% of average
daily net assets up to $30 million and 1% of average daily net assets over $30
million. Except to the extent that such amount has been reflected in reduced
payments to you, you shall refund to the Fund the amount of any payment received
in excess of the limitation pursuant to this section 5 as promptly as
practicable after the end of such fiscal year, provided that you shall not be
required to pay the Fund an amount greater than the fee paid to you in respect
of such year pursuant to this Agreement. As used in this section 5, "expenses"
shall mean those expenses included in the applicable expense limitation having
the broadest specifications thereof, and "expense limitation" means a limit on
the maximum annual expenses which may be incurred by an investment company
determined (i) by multiplying a fixed percentage by the average, or by
multiplying more than one such percentage by different specified amounts of the
average, of the values of an investment company's net assets for a fiscal year
or (ii) by multiplying a fixed percentage by an investment company's net
investment income for a fiscal year.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Fund's expenses, as if such waiver
or limitation were fully set forth herein.
6. Avoidance of Inconsistent Position; Services Not Exclusive. In connection
with purchases or sales of portfolio securities and other investments for the
account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
<PAGE>
Your services to the Fund pursuant to this Agreement are not to be deemed to be
exclusive and it is understood that you may render investment advice, management
and services to others. In acting under this Agreement, you shall be an
independent contractor and not an agent of the Trust. Whenever the Fund and one
or more other accounts or investment companies advised by you have available
funds for investment, investments suitable and appropriate for each shall be
allocated in accordance with procedures believed by you to be equitable to each
entity. Similarly, opportunities to sell securities shall be allocated in a
manner believed by you to be equitable. The Fund recognizes that in some cases
this procedure may adversely affect the size of the position that may be
acquired or disposed of for the Fund.
7. Limitation of Liability of Manager. As an inducement to your undertaking to
render services pursuant to this Agreement, the Trust agrees that you shall not
be liable under this Agreement for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the matters to which this
Agreement relates, provided that nothing in this Agreement shall be deemed to
protect or purport to protect you against any liability to the Trust, the Fund
or its shareholders to which you would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of your duties, or
by reason of your reckless disregard of your obligations and duties hereunder.
8. Duration and Termination of This Agreement. This Agreement shall remain in
force until December 1, 1998, and continue in force from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually (a) by the vote of a majority of the Trustees who are not parties
to this Agreement or interested persons of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
by the Trustees of the Trust, or by the vote of a majority of the outstanding
voting securities of the Fund. The aforesaid requirement that continuance of
this Agreement be "specifically approved at least annually" shall be construed
in a manner consistent with the 1940 Act and the rules and regulations
thereunder and any applicable SEC exemptive order therefrom.
This Agreement may be terminated with respect to the Fund at any time, without
the payment of any penalty, by the vote of a majority of the outstanding voting
securities of the Fund or by the Trust's Board of Trustees on 60 days' written
notice to you, or by you on 60 days' written notice to the Trust. This Agreement
shall terminate automatically in the event of its assignment.
This Agreement may be terminated with respect to the Fund at any time without
the payment of any penalty by the Board of Trustees or by vote of a majority of
the outstanding voting securities of the Fund in the event that it shall have
been established by a court of competent jurisdiction that you or any of your
officers or directors has taken any action which results in a breach of your
covenants set forth herein.
9. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
10. Limitation of Liability for Claims. The Declaration, a copy of which,
together with all amendments thereto, is on file in the Office of the Secretary
of the Commonwealth of Massachusetts, provides that the name "Cash Equivalent
Fund" refers to the Trustees under the Declaration collectively as Trustees and
not as individuals or personally, and that no shareholder of the Fund, or
Trustee, officer, employee or agent of the Trust, shall be subject to claims
against or obligations of the Trust or of the Fund to any extent whatsoever, but
that the Trust estate only shall be liable.
You are hereby expressly put on notice of the limitation of liability as set
forth in the Declaration and you agree that the obligations assumed by the Trust
on behalf of the Fund pursuant to this Agreement shall be limited in all cases
<PAGE>
to the Fund and its assets, and you shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Fund or any other
series of the Trust, or from any Trustee, officer, employee or agent of the
Trust. You understand that the rights and obligations of each Fund, or series,
under the Declaration are separate and distinct from those of any and all other
series.
11. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
In interpreting the provisions of this Agreement, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner which would cause the
Fund to fail to comply with the requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Trust on behalf of the Fund.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
CASH EQUIVALENT FUND, on behalf of Tax-
Exempt Portfolio
By:/s/Mark S. Casady
-------------------------------------
President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By:/s/S.R. Beckwith
------------------------------------
Treasurer
ADMINISTRATION, SHAREHOLDER SERVICES AND
DISTRIBUTION AGREEMENT
AGREEMENT made this 31st day of December, 1997, by and between CASH EQUIVALENT
FUND, a Massachusetts business trust (the "Fund"), and KEMPER DISTRIBUTORS,
INC., a Delaware corporation ("KDI").
In consideration of the mutual covenants hereinafter contained, it is hereby
agreed by and between the parties hereto as follows:
1. The Fund hereby appoints KDI to act as administrator, distributor and
principal underwriter for the distribution of shares of beneficial interest
(hereinafter called "shares") of the Fund in jurisdictions wherein shares of the
Fund may legally be offered for sale; provided, however, that the Fund in its
absolute discretion may (a) issue or sell shares directly to holders of shares
of the Fund upon such terms and conditions and for such consideration, if any,
as it may determine, whether in connection with the distribution of subscription
or purchase rights, the payment or reinvestment of dividends or distributions,
or otherwise; or (b) issue or sell shares at net asset value to the shareholders
of any other investment company, for which KDI shall act as exclusive
distributor, who wish to exchange all or a portion of their investment in shares
of such other investment company for shares of the Fund.
KDI shall appoint various broker-dealers and other financial services firms
("Firms") to provide a cash management service for their clients through the
Fund. The Firms shall provide such office space and equipment, telephone
facilities, personnel, literature distribution, advertising and promotion as is
necessary or beneficial for providing information and services to potential and
existing shareholders of the Fund and to assist the Fund's shareholder service
agent in servicing accounts of the Firm's clients who own Fund shares
("clients"). Such services and assistance may include, but are not limited to,
establishment and maintenance of shareholder accounts and records, processing
purchase and redemption transactions, automatic investment in Fund shares of
client account cash balances, answering routine client inquiries regarding the
Fund, assistance to clients in changing dividend options, account designations
and addresses, and such other services as the Fund or KDI may reasonably
request. KDI may also provide some of the above services for the Fund directly.
KDI accepts such appointment and agrees during the term hereof to render such
services and to assume the obligations herein set forth for the compensation
herein provided. KDI shall for all purposes herein provided be deemed to be an
independent contractor and, unless otherwise expressly provided or
<PAGE>
authorized, shall have no authority to act for or represent the Fund in any way
or otherwise be deemed an agent of the Fund. It is understood and agreed that
KDI, by separate agreement with the Fund, may also serve the Fund in other
capacities. The services of KDI to the Fund under this Agreement are not to be
deemed exclusive, and KDI shall be free to render similar services or other
services to others.
In carrying out its duties and responsibilities hereunder, KDI will, pursuant to
separate administration services and selling group agreements ("services
agreements"), appoint various Firms to provide administrative, distribution and
other services contemplated hereunder directly to or for the benefit of existing
and potential shareholders who may be clients of such Firms. Such Firms shall at
all times be deemed to be independent contractors retained by KDI and not the
Fund. KDI and not the Fund will be responsible for the payment of compensation
to such Firms for such services.
KDI will use its best efforts with reasonable promptness to sell such part of
the authorized shares of the Fund remaining unissued as from time to time shall
be effectively registered under the Securities Act of 1933 ("Securities Act"),
at prices determined as hereinafter provided and on terms hereinafter set forth,
all subject to applicable Federal and state laws and regulations and to the
Agreement and Declaration of Trust of the Fund. The price the Fund shall receive
for all shares purchased from the Fund shall be the net asset value used in
determining the public offering price applicable to the sale of such shares.
2. KDI shall sell shares of the Fund to or through qualified Firms in such
manner, not inconsistent with the provisions hereof and the then effective
registration statement of the Fund under the Securities Act (and related
prospectus), as KDI may determine from time to time, provided that no Firm or
other person shall be appointed or authorized to act as agent of the Fund
without the prior consent of the Fund. In addition to sales made by it as agent
of the Fund, KDI may, in its discretion, also sell shares of the Fund as
principal to persons with whom it does not have services agreements.
Shares of the Fund offered for sale or sold by KDI shall be so offered or sold
at a price per share determined in accordance with the then current prospectus
relating to the sale of such shares except as departure from such prices shall
be permitted by the rules and regulations of the Securities and Exchange
Commission; provided, however, that any public offering price for shares of the
Fund shall be the net asset value per share. The net asset value per share of
the Fund shall be determined in the manner and at the times set forth in the
then current prospectus of the Fund relating to such shares.
2
<PAGE>
KDI will require each Firm to conform to the provisions hereof and the
Registration Statement (and related prospectus) at the time in effect under the
Securities Act with respect to the public offering price of the Fund's shares,
and neither KDI nor any such Firms shall withhold the placing of purchase orders
so as to make a profit thereby.
3. The Fund will use its best efforts to keep effectively registered under the
Securities Act for sale as herein contemplated such shares as KDI shall
reasonably request and as the Securities and Exchange Commission shall permit to
be so registered. Notwithstanding any other provision hereof, the Fund may
terminate, suspend or withdraw the offering of shares whenever, in its sole
discretion, it deems such action to be desirable.
4. The Fund will execute any and all documents and furnish any and all
information which may be reasonably necessary in connection with the
qualification of its shares for sale (including the qualification of the Fund as
a dealer where necessary or advisable) in such states as KDI may reasonably
request (it being understood that the Fund shall not be required without its
consent to comply with any requirement which in its opinion is unduly
burdensome). The Fund will furnish to KDI from time to time such information
with respect to the Fund and its shares as KDI may reasonably request for use in
connection with the sale of shares of the Fund.
5. KDI shall issue and deliver or shall arrange for various Firms to issue and
deliver on behalf of the Fund such confirmations of sales made by it as agent
pursuant to this Agreement as may be required. At or prior to the time of
issuance of shares, KDI will pay or cause to be paid to the Fund the amount due
the Fund for the sale of such shares. Certificates shall be issued or shares
registered on the transfer books of the Fund in such names and denominations as
KDI may specify.
6. KDI shall order shares of the Fund from the Fund only to the extent that it
shall have received purchase orders therefor. KDI will not make, or authorize
any Firms or others to make, any short sales of shares of the Fund. KDI, as
agent of and for the account of the Fund, may repurchase the shares of the Fund
at such prices and upon such terms and conditions as shall be specified in the
current prospectus of the Fund. In selling or reacquiring shares of the Fund for
the account of the Fund, KDI will in all respects conform to the requirements of
all state and Federal laws and the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., relating to such sale or reacquisition,
as the case may be, and will indemnify and save harmless the Fund from any
damage or expense on account of any
3
<PAGE>
wrongful act by KDI or any employee, representative or agent of KDI. KDI will
observe and be bound by all the provisions of the Agreement and Declaration of
Trust of the Fund (and of any fundamental policies adopted by the Fund pursuant
to the Investment Company Act of 1940, notice of which shall have been given to
KDI) which at the time in any way require, limit, restrict or prohibit or
otherwise regulate any action on the part of KDI.
7. The Fund shall assume and pay all charges and expenses of its operations not
specifically assumed or otherwise to be provided by KDI under this Agreement.
The Fund will pay or cause to be paid expenses (including the fees and
disbursements of its own counsel) and all taxes and fees payable to the Federal,
state or other governmental agencies on account of the registration or
qualification of securities issued by the Fund or otherwise. The Fund will also
pay or cause to be paid expenses incident to the issuance of shares of
beneficial interest, such as the cost of share certificates, issue taxes, and
fees of the transfer agent. KDI will pay all expenses (other than expenses which
one or more Firms may bear pursuant to any agreement with KDI) incident to the
sale and distribution of the shares issued or sold hereunder including, without
limiting the generality of the foregoing, all expenses of printing and
distributing any prospectus and of preparing, printing and distributing or
disseminating any other literature, advertising and selling aids in connection
with the offering of the shares for sale (except that such expenses need not
include expenses incurred by the Fund in connection with the preparation,
typesetting, printing and distribution of any registration statement, prospectus
or report or other communication to shareholders in their capacity as such) and
expenses of advertising in connection with such offering.
8. For the services and facilities described herein, the Fund will pay to KDI at
the end of each calendar month a distribution services fee computed at an annual
rate of .38% of the average daily net assets of the Money Market Portfolio and
the Government Securities Portfolio and at an annual rate of .33% of the average
daily net assets of the Tax-Exempt Portfolio. The fees shall be charged to each
series of shares of the fund ("Portfolio") subject to this Agreement based upon
the average daily net assets of such Portfolio and at the annual rate applicable
to such Portfolio as provided above.
For the month and year in which this Agreement becomes effective or terminates,
there shall be an appropriate proration on the basis of the number of days that
the Agreement is in effect during the month and year, respectively.
The net asset value of each Portfolio shall be calculated in accordance with the
provisions of the Fund's current prospectus.
4
<PAGE>
On each day when net asset value is not calculated, the net asset value of a
share of any Portfolio shall be deemed to be the net asset value of such a share
as of the close of business on the last day on which such calculation was made
for the purpose of the foregoing computations.
9. KDI shall prepare reports for the Board of Trustees of the Fund on a
quarterly basis showing amounts paid to the various Firms, the basis for any
discretionary payments made to such Firms and such other information as from
time to time shall be reasonably requested by the Board of Trustees.
This Agreement shall become effective on the date hereof and shall continue
until December 1, 1998 and shall continue from year to year thereafter with
respect to each Portfolio, but only so long as such continuance is specifically
approved for each Portfolio at least annually by a vote of the Board of Trustees
of the Fund including the trustees who are not interested persons of the Fund
and who have no direct or indirect financial interest in this Agreement or in
any agreement related to this Agreement.
This Agreement may not be amended to increase the amount to be paid to KDI for
services hereunder without the vote of a majority of the outstanding voting
securities of each Portfolio of the Fund. All material amendments to this
Agreement must in any event be approved by a vote of the Board of Trustees of
the Fund including the trustees who are not interested persons of the Fund and
who have no direct or indirect financial interest in this Agreement or in any
agreement related to this Agreement, cast in person at a meeting called for such
purpose.
10. This Agreement shall automatically terminate in the event of its assignment
and may be terminated at any time without the payment of any penalty by the Fund
or by KDI on sixty (60) days written notice to the other party. The Fund may
effect termination with respect to any Portfolio by a vote of (i) a majority of
the Board of Trustees, (ii) a majority of the trustees who are not interested
persons of the Fund and who have no direct or indirect financial interest in
this Agreement or in any agreement related to this Agreement, or (iii) a
majority of the outstanding voting securities of a Portfolio.
The terms "assignment", "interested" and "vote of a majority of the outstanding
voting securities" shall have the meanings set forth in the Investment Company
Act of 1940 and the rules and regulations thereunder.
Termination of this Agreement shall not affect the right of KDI to receive
payments on any unpaid balance of the compensation described in Section 8 earned
prior to such termination.
5
<PAGE>
11. KDI will not use or distribute or authorize the use, distribution or
dissemination by Firms or others in connection with the sale of the shares any
statements, other than those contained in the Fund's current prospectus, except
such supplemental literature or advertising as shall be lawful under Federal and
state securities laws and regulations, and will furnish the Fund with copies of
all such material.
12. If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder shall not be thereby
affected.
13. Any notice under this Agreement shall be in writing, addressed and delivered
or mailed, postage prepaid, to the other party at such address as such other
party may designate for the receipt of such notice.
14. All parties hereto are expressly put on notice of the Fund's Agreement and
Declaration of Trust and all amendments thereto, all of which are on file with
the Secretary of The Commonwealth of Massachusetts, and the limitation of
shareholder and trustee liability contained therein. This Agreement has been
executed by and on behalf of the Fund by its representatives as such
representatives and not individually, and the obligations of the Fund hereunder
are not binding upon any of the trustees, officers or shareholders of the Fund
individually but are binding upon only the assets and property of the Fund. With
respect to any claim by KDI for recovery of that portion of the distribution
services fees (or any other liability of the Fund arising hereunder) allocated
to a particular Portfolio, whether in accordance with the express terms hereof
or otherwise, KDI shall have recourse solely against the assets of that
Portfolio to satisfy such claim and shall have no recourse against the assets of
any other Portfolio for such purpose.
15. This Agreement shall be construed in accordance with applicable federal law
and the laws of The Commonwealth of Massachusetts.
6
<PAGE>
16. This Agreement is the entire contract between the parties relating to the
subject matter hereof and supersedes all prior agreements between the parties
relating to the subject matter hereof.
IN WITNESS WHEREOF, the Fund and KDI have caused this Agreement to be executed
as of the day and year first above written.
CASH EQUIVALENT FUND
By: /s/Mark S. Casady
--------------------------
Title: President
-----------------------
ATTEST:
/s/Maureen E. Kane
- ---------------------------
Title: Assistant Secretary
--------------------
KEMPER DISTRIBUTORS, INC.
By: /s/James L. Greenawalt
--------------------------
Title: President
-----------------------
ATTEST:
/s/Joan V. Pearson
- ---------------------------
Title: Executive Assistant
--------------------
7
ADMINISTRATION, SHAREHOLDER SERVICES AND
DISTRIBUTION AGREEMENT
AGREEMENT made this 7th day of September, 1998, by and between CASH EQUIVALENT
FUND, a Massachusetts business trust (the "Fund"), and KEMPER DISTRIBUTORS,
INC., a Delaware corporation ("KDI").
In consideration of the mutual covenants hereinafter contained, it is hereby
agreed by and between the parties hereto as follows:
1. The Fund hereby appoints KDI to act as administrator,
distributor and principal underwriter for the distribution of shares of
beneficial interest (hereinafter called "shares") of the Fund in
jurisdictions wherein shares of the Fund may legally be offered for
sale; provided, however, that the Fund in its absolute discretion may
(a) issue or sell shares directly to holders of shares of the Fund upon
such terms and conditions and for such consideration, if any, as it may
determine, whether in connection with the distribution of subscription
or purchase rights, the payment or reinvestment of dividends or
distributions, or otherwise; or (b) issue or sell shares at net asset
value to the shareholders of any other investment company, for which
KDI shall act as exclusive distributor, who wish to exchange all or a
portion of their investment in shares of such other investment company
for shares of the Fund.
KDI shall appoint various broker-dealers and other financial
services firms ("Firms") to provide a cash management service for their
clients through the Fund. The Finns shall provide such office space and
equipment, telephone facilities, personnel, literature distribution,
advertising and promotion as is necessary or beneficial for providing
information and services to potential and existing shareholders of the
Fund and to assist the Fund's shareholder service agent in servicing
accounts of the Firm's clients who own Fund shares ("clients"). Such
services and assistance may include, but are not limited to,
establishment and maintenance of shareholder accounts and records,
processing purchase and redemption transactions, automatic investment
in Fund shares of client account cash balances, answering routine
client inquiries regarding the Fund, assistance to clients in changing
dividend options, account designations and addresses, and such other
services as the Fund or KDI may reasonably request. KDI may also
provide some of the above services for the Fund directly.
KDI accepts such appointment and agrees during the term hereof
to render such services and to assume the obligations herein set forth
for the compensation herein provided. KDI shall for all purposes herein
provided be deemed to be an independent contractor and, unless
otherwise expressly provided or authorized, shall have no authority to
act for or represent the Fund in any way or otherwise be deemed an
agent of the Fund. It is understood and agreed that KDI, by separate
agreement with the Fund, may also serve the Fund in other capacities.
The services of KDI to the Fund under this Agreement are not to be
deemed exclusive, and KDI shall be free to render similar services or
other services to others so long as its services hereunder are not
impaired thereby.
<PAGE>
In carrying out its duties and responsibilities hereunder, KDI
will, pursuant to separate administration services and selling group
agreements ("services agreements"), appoint various Firms to provide
administrative, distribution and other services contemplated hereunder
directly to or for the benefit of existing and potential shareholders
who may be clients of such Firms Such Firms shall at all times be
deemed to be independent contractors retained by KDI and not the Fund.
KDI and not the Fund will be responsible for the payment of
compensation to such Firms for such services.
KDI will use its best efforts with reasonable promptness to
sell such part of the authorized shares of the Fund remaining unissued
as from time to time shall be effectively registered under the
Securities Act of 1933 ("Securities Act"), at prices determined as
hereinafter provided and on terms hereinafter set forth, all subject to
applicable federal and state laws and regulations and to the Fund's
Agreement and Declaration of Trust. The price the Fund shall receive
for all shares purchased from the Fund shall be the net asset value
used in determining the public offering price applicable to the sale of
such shares.
2. KDI shall sell shares of the Fund to or through qualified
Firms in such manner, not inconsistent with the provisions hereof and
the then effective registration statement of the Fund under the
Securities Act (and related prospectus), as KDI may determine from time
to time, provided that no Firm or other person shall be appointed and
authorized to act as agent of the Fund without the prior consent of the
Fund. In addition to sales made by it as agent of the Fund, KDI may, in
its discretion, also sell shares of the Fund as principal to persons
with whom it does not have services agreements.
Shares of any series of the Fund offered for sale or sold by
KDI shall be so offered or sold at a price per share determined in
accordance with the then current prospectus relating to the sale of
such shares except as departure from such prices shall be permitted by
the rules and regulations of the Securities and Exchange Commission;
provided, however, that any public offering price for shares of the
Fund shall be the net asset value per share. The net asset value per
share of the Fund shall be determined in the manner and at the times
set forth in the then current prospectus of the Fund relating to such
shares.
KDI will require each Finn to conform to the provisions hereof
and the Registration Statement (and related prospectus) at the time in
effect under the Securities Act with respect to the public offering
price of the Fund's shares, and neither KDI nor any such Firms shall
withhold the placing of purchase orders so as to make a profit thereby.
3. The Fund will use its best efforts to keep effectively
registered under the Securities Act for sale as herein contemplated
such shares as KDI shall reasonably request and as the Securities and
Exchange Commission shall permit to be so registered. Notwithstanding
any other provision hereof, the Fund may terminate, suspend or withdraw
the offering of shares whenever, in its sole discretion, it deems such
action to be desirable.
4. The Fund will execute any and all documents and furnish any
and all information that may be reasonably necessary in connection with
the qualification of its shares for sale (including the qualification
2
<PAGE>
of the Fund as a dealer where necessary or advisable) in such states as
KDI may reasonably request (it being understood that the Fund shall not
be required without its consent to comply with any requirement which in
its opinion is unduly burdensome). The Fund will furnish to KDI from
time to time such information with respect to the Fund and its shares
as KDI may reasonably request for use in connection with the sale of
shares of the Fund.
5. KDI shall issue and deliver or shall arrange for various Firms
to issue and deliver on behalf of the Fund such confirmations of sales
made by it pursuant to this Agreement as may be required. At or prior
to the time of issuance of shares, KDI will pay or cause to be paid to
the Fund the amount due the Fund for the sale of such shares.
Certificates shall be issued or shares registered on the transfer books
of the Fund in such names and denominations as KDI may specify.
6. KDI shall order shares of the Fund from the Fund only to the
extent that it shall have received purchase orders therefor. KDI will
not make, or authorize Firms or others to make, any short sales of
shares of the Fund. KDI, as agent of and for the account of the Fund,
may repurchase the shares of the Fund at such prices and upon such
terms and conditions as shall be specified in the current prospectus of
the Fund. In selling or reacquiring shares of the Fund for the account
of the Fund, KDI will in all respects conform to the requirements of
all state and federal laws and the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., relating to such sale
or reacquisition, as the case may be, and will indemnify and save
harmless the Fund from any damage or expense on account of any wrongful
act by KDI or any employee, representative or agent of KDI. KDI will
observe and be bound by all the provisions of the Fund's Agreement and
Declaration of Trust (and of any fundamental policies adopted by the
Fund pursuant to the Investment Company Act of 1940 (the "Investment
Company Act"), notice of which shall have been given to KDI) which at
the time in any way require, limit, restrict, prohibit or otherwise
regulate any action on the part of KDI hereunder.
7. The Fund shall assume and pay all charges and expenses of its
operations not specifically assumed or otherwise to be provided by KDI
under this Agreement or the Fund's Amended and Restated 12b- I Plan
(the "Plan"). The Fund will pay or cause to be paid expenses (including
the fees and disbursements of its own counsel) and all taxes and fees
payable to the federal, state or other governmental agencies on account
of the registration or qualification of securities issued by the Fund
or otherwise. The Fund will also pay or cause to be paid expenses
incident to the issuance of shares of beneficial interest, such as the
cost of share certificates, issue taxes, and fees of the transfer
agent. KDI will pay all expenses (other than expenses which one or more
Firms may bear pursuant to any agreement with KDI) incident to the sale
and distribution of the shares issued or sold hereunder including,
without limiting the generality of the foregoing, all expenses of
printing and distributing any prospectus and of preparing, printing and
distributing or disseminating any other literature, advertising and
selling aids in connection with the offering of the shares for sale
(except that such expenses need not include expenses incurred by the
Fund in connection with the preparation, typesetting, printing and
distribution of any registration statement, prospectus or report or
other
3
<PAGE>
communication to shareholders in their capacity as such) and expenses
of advertising in connection with such offering.
8. This Agreement shall become effective on the date hereof and
shall continue until December 1, 1998 and shall continue from year to
year thereafter only so long as such continuance is approved in the
manner required by the Investment Company Act.
This Agreement shall automatically terminate in the event of
its assignment and may be terminated at any time without the payment of
any penalty by the Fund or by KDI on (60) days' written notice to the
other party. The Fund may effect termination by a vote of (i) a
majority of the trustees who are not interested persons of the Fund and
who have no direct or indirect financial interest in the operation of
the Plan, this Agreement or in any other agreement related to the Plan,
or (ii) a majority of the outstanding voting securities of the Fund.
All material amendments to this Agreement must be approved by
a vote of a majority of the Board of Trustees of the Fund, including
the trustees who are not interested persons of the Fund and who have no
direct or indirect financial interest in the operation of the Plan,
this Agreement or in any other agreement related to the Plan, cast in
person at a meeting called for such purpose.
The terms "assignment," "interested person" and "vote of a
majority of the outstanding voting securities" shall have the meanings
set forth in the Investment Company Act and the rules and regulations
thereunder.
KDI shall receive such compensation for its distribution
services as set forth in the Plan. Termination of this Agreement shall
not affect the right of KDI to receive payments on any unpaid balance
of the compensation earned prior to such termination, as set forth in
the Plan.
9. KDI will not use or distribute or authorize the use,
distribution or dissemination by Firms or others in connection with the
sale of Fund shares any statements, other than those contained in the
Fund's current prospectus, except such supplemental literature or
advertising as shall be lawful under federal and state securities laws
and regulations. KDI will furnish the Fund with copies of all such
material.
10. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder
shall not be thereby affected.
11. Any notice under this Agreement shall be in writing, addressed
and delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate for the receipt of such
notice.
12. All parties hereto are expressly put on notice of the Fund's
Agreement and Declaration of Trust and all amendments thereto, all of
which are on file with the Secretary of The Commonwealth of
Massachusetts, and the limitation of shareholder and
4
<PAGE>
trustee liability contained therein. This Agreement has been executed
by and on behalf of the Fund by its representatives as such
representatives and not individually, and the obligations of the Fund
hereunder are not binding upon any of the trustees, officers or
shareholders of the Fund individually but are binding upon only the
assets and property of the Fund. With respect to any claim by KDI for
recovery of any liability of the Fund arising hereunder allocated to a
particular series, whether in accordance with the express terms hereof
or otherwise, KDI shall have no recourse against the assets of any
other series for such purpose.
13. This Agreement shall be construed in accordance with
applicable federal law and with the laws of The Commonwealth of
Massachusetts.
14. This Agreement is the entire contract between the parties
relating to the subject matter hereof and supersedes all prior
agreements between the parties relating to the subject matter hereof.
[SIGNATURES APPEAR ON NEXT PAGE]
5
<PAGE>
IN WITNESS WHEREOF, the Fund and KDI have caused this Agreement to be executed
as of the day and year first above written.
CASH EQUIVALENT FUND
By: /s/Mark S. Casady
-------------------------------
Title: President
----------------------------
ATTEST:
By: /s/Maureen Kane
-----------------------------
Title: Assistant Secretary
--------------------------
KEMPER DISTRIBUTORS, INC.
By: /s/James L. Greenawalt
-------------------------------
Title: President
----------------------------
ATTEST:
By: /s/Joan V. Pearson
-----------------------------
Title: Executive Assistant
--------------------------
6
FUND ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT is made on the 31st day of December, 1997 between Cash Equivalent
Fund (the "Fund"), on behalf of Money Market Portfolio (hereinafter called the
"Portfolio"), a registered open-end management investment company with its
principal place of business in 222 South Riverside Plaza, Chicago, Illinois
60606 and Scudder Fund Accounting Corporation, with its principal place of
business in Boston, Massachusetts (hereinafter called "FUND ACCOUNTING").
WHEREAS, the Portfolio has need to determine its net asset value which service
FUND ACCOUNTING is willing and able to provide;
NOW THEREFORE in consideration of the mutual promises herein made, the Fund and
FUND ACCOUNTING agree as follows:
Section 1. Duties of FUND ACCOUNTING - General
FUND ACCOUNTING is authorized to act under the terms of this Agreement
to calculate the net asset value of the Portfolio as provided in the
prospectus of the Portfolio and in connection therewith shall:
a. Maintain and preserve all accounts, books, financial records
and other documents as are required of the Fund under Section
31 of the Investment Company Act of 1940 (the "1940 Act") and
Rules 31a-1, 31a-2 and 31a-3 thereunder, applicable federal
and state laws and any other law or administrative rules or
procedures which may be applicable to the Fund on behalf of
the Portfolio, other than those accounts, books and financial
records required to be maintained by the Fund's investment
adviser, custodian or transfer agent and/or books and records
maintained by all other service providers necessary for the
Fund to conduct its business as a registered open-end
management investment company. All such books and records
shall be the property of the Fund and shall at all times
during regular business hours be open for inspection by, and
shall be surrendered promptly upon request of, duly authorized
officers of the Fund. All such books and records shall at all
times during regular business hours be open for inspection,
upon request of duly authorized officers of the Fund, by
employees or agents of the Fund and employees and agents of
the Securities and Exchange Commission.
b. Record the current day's trading activity and such other
proper bookkeeping entries as are necessary for determining
that day's net asset value and net income.
<PAGE>
c. Render statements or copies of records as from time to time
are reasonably requested by the Fund.
d. Facilitate audits of accounts by the Fund's independent public
accountants or by any other auditors employed or engaged by
the Fund or by any regulatory body with jurisdiction over the
Fund.
e. Compute the Portfolio's public offering price and/or its daily
dividend rates and money market yields, if applicable, in
accordance with Section 3 of the Agreement and notify the Fund
and such other persons as the Fund may reasonably request of
the net asset value per share, the public offering price
and/or its daily dividend rates and money market yields. f.
Perform a mark-to-market appraisal in accordance with
procedures by the Board of Trustees pursuant to Rule 2a-7
under the 1940 Act.
Section 2. Valuation of Securities
Securities shall be valued in accordance with (a) the Fund's
Registration Statement, as amended or supplemented from time to time
(hereinafter referred to as the "Registration Statement"); (b) the
resolutions of the Board of Trustees of the Fund at the time in force
and applicable, as they may from time to time be delivered to FUND
ACCOUNTING, and (c) Proper Instructions from such officers of the Fund
or other persons as are from time to time authorized by the Board of
Trustees of the Fund to give instructions with respect to computation
and determination of the net asset value. FUND ACCOUNTING may use one
or more external pricing services, including broker-dealers, provided
that an appropriate officer of the Fund shall have approved such use in
advance.
Section 3. Computation of Net Asset Value, Public Offering Price, Daily Dividend
Rates and Yields
FUND ACCOUNTING shall compute the Portfolio's net asset value,
including net income, in a manner consistent with the specific
provisions of the Registration Statement. Such computation shall be
made as of the time or times specified in the Registration Statement.
FUND ACCOUNTING shall compute the daily dividend rates and money market
yields, if applicable, in accordance with the methodology set forth in
the Registration Statement.
Section 4. FUND ACCOUNTING's Reliance on Instructions and Advice
2
<PAGE>
In maintaining the Portfolio's books of account and making the
necessary computations FUND ACCOUNTING shall be entitled to receive,
and may rely upon, information furnished it by means of Proper
Instructions, including but not limited to:
a. The manner and amount of accrual of expenses to be recorded on
the books of the Portfolio;
b. The source of quotations to be used for such securities as may
not be available through FUND ACCOUNTING's normal pricing
services;
c. The value to be assigned to any asset for which no price
quotations are readily available;
d. If applicable, the manner of computation of the public
offering price and such other computations as may be
necessary;
e. Transactions in portfolio securities;
f. Transactions in capital shares.
FUND ACCOUNTING shall be entitled to receive, and shall be entitled to
rely upon, as conclusive proof of any fact or matter required to be
ascertained by it hereunder, a certificate, letter or other instrument
signed by an authorized officer of the Fund or any other person
authorized by the Fund's Board of Trustees.
FUND ACCOUNTING shall be entitled to receive and act upon advice of
Counsel for the Fund at the reasonable expense of the Portfolio and
shall be without liability for any action taken or thing done in good
faith in reliance upon such advice.
FUND ACCOUNTING shall be entitled to receive, and may rely upon,
information received from the Transfer Agent.
Section 5. Proper Instructions
"Proper Instructions" as used herein means any certificate, letter or
other instrument or telephone call reasonably believed by FUND
ACCOUNTING to be genuine and to have been properly made or signed by
any authorized officer of the Fund or person certified to FUND
ACCOUNTING as being authorized by the Board of Trustees. The Fund, on
behalf of the Portfolio, shall cause oral instructions to be confirmed
in writing. Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices as from time
to time agreed to by an authorized officer of the Fund and FUND
ACCOUNTING.
3
<PAGE>
The Fund, on behalf of the Portfolio, agrees to furnish to the
appropriate person(s) within FUND ACCOUNTING a copy of the Registration
Statement as in effect from time to time. FUND ACCOUNTING may
conclusively rely on the Fund's most recently delivered Registration
Statement for all purposes under this Agreement and shall not be liable
to the Portfolio or the Fund in acting in reliance thereon.
Section 6. Standard of Care
FUND ACCOUNTING shall exercise reasonable care and diligence in the
performance of its duties hereunder. The Fund agrees that FUND
ACCOUNTING shall not be liable under this Agreement for any error of
judgment or mistake of law made in good faith and consistent with the
foregoing standard of care, provided that nothing in this Agreement
shall be deemed to protect or purport to protect FUND ACCOUNTING
against any liability to the Fund, the Portfolio or its shareholders to
which FUND ACCOUNTING would otherwise be subject by reason of willful
misfeasance, bad faith or negligence in the performance of its duties,
or by reason of its reckless disregard of its obligations and duties
hereunder.
Section 7. Compensation and FUND ACCOUNTING Expenses
FUND ACCOUNTING shall be paid as compensation for its services pursuant
to this Agreement such compensation as may from time to time be agreed
upon in writing by the two parties. FUND ACCOUNTING shall be entitled,
if agreed to by the Fund on behalf of the Portfolio, to recover its
reasonable telephone, courier or delivery service, and all other
reasonable out-of-pocket, expenses as incurred, including, without
limitation, reasonable attorneys' fees and reasonable fees for pricing
services.
Section 8. Amendment and Termination
This Agreement shall continue in full force and effect until terminated
as hereinafter provided, may be amended at any time by mutual agreement
of the parties hereto and may be terminated by an instrument in writing
delivered or mailed to the other party. Such termination shall take
effect not sooner than sixty (60) days after the date of delivery or
mailing of such notice of termination. Any termination date is to be no
earlier than four months from the effective date hereof. Upon
termination, FUND ACCOUNTING will turn over to the Fund or its designee
and cease to retain in FUND
4
<PAGE>
ACCOUNTING files, records of the calculations of net asset value and
all other records pertaining to its services hereunder; provided,
however, FUND ACCOUNTING in its discretion may make and retain copies
of any and all such records and documents which it determines
appropriate or for its protection.
Section 9. Services Not Exclusive
FUND ACCOUNTING's services pursuant to this Agreement are not to be
deemed to be exclusive, and it is understood that FUND ACCOUNTING may
perform fund accounting services for others. In acting under this
Agreement, FUND ACCOUNTING shall be an independent contractor and not
an agent of the Fund or the Portfolio.
Section 10. Limitation of Liability for Claims
The Fund's Amended and Restated Declaration of Trust, as amended to
date (the "Declaration"), a copy of which, together with all amendments
thereto, is on file in the Office of the Secretary of State of the
Commonwealth of Massachusetts, provides that the name "Cash Equivalent
Fund" refers to the Trustees under the Declaration collectively as
trustees and not as individuals or personally, and that no shareholder
of the Fund or the Portfolio, or Trustee, officer, employee or agent of
the Fund shall be subject to claims against or obligations of the Trust
or of the Portfolio to any extent whatsoever, but that the Trust estate
only shall be liable.
FUND ACCOUNTING is expressly put on notice of the limitation of
liability as set forth in the Declaration and FUND ACCOUNTING agrees
that the obligations assumed by the Fund and/or the Portfolio under
this Agreement shall be limited in all cases to the Portfolio and its
assets, and FUND ACCOUNTING shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Fund or the
Portfolio or any other series of the Fund, or from any Trustee,
officer, employee or agent of the Fund. FUND ACCOUNTING understands
that the rights and obligations of the Portfolio under the Declaration
are separate and distinct from those of any and all other series of the
Fund.
Section 11. Notices
Any notice shall be sufficiently given when delivered or mailed to the
other party at the address of such party set
5
<PAGE>
forth below or to such other person or at such other address as such
party may from time to time specify in writing to the other party.
If to FUND ACCOUNTING: Scudder Fund Accounting Corporation
Two International Place
Boston, Massachusetts 02110
Attn: Vice President
If to the Fund - Portfolio: Cash Equivalent Fund
222 South Riverside Plaza
Chicago, Illinois 60606
Attn: President, Secretary
or Treasurer
6
<PAGE>
Section 12. Miscellaneous
This Agreement may not be assigned by FUND ACCOUNTING without the
consent of the Fund as authorized or approved by resolution of its
Board of Trustees.
In connection with the operation of this Agreement, the Fund and FUND
ACCOUNTING may agree from time to time on such provisions interpretive
of or in addition to the provisions of this Agreement as in their joint
opinions may be consistent with this Agreement. Any such interpretive
or additional provisions shall be in writing, signed by both parties
and annexed hereto, but no such provisions shall be deemed to be an
amendment of this Agreement.
This Agreement shall be governed and construed in accordance with the
laws of the Commonwealth of Massachusetts.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
This Agreement constitutes the entire agreement between the parties
concerning the subject matter hereof, and supersedes any and all prior
understandings.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunto duly authorized and its seal to be
hereunder affixed as of the date first written above.
[SEAL] CASH EQUIVALENT FUND
on behalf of Money Market Portfolio
By:/s/Mark S. Casady
--------------------
President
[SEAL] SCUDDER FUND ACCOUNTING CORPORATION
By:/s/John R. Hebble
--------------------
Treasurer
8
Exhibit (9)(d)
FUND ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT is made on the 31st day of December, 1997 between Cash Equivalent
Fund (the "Fund"), on behalf of Government Securities Portfolio (hereinafter
called the "Portfolio"), a registered open-end management investment company
with its principal place of business in 222 South Riverside Plaza, Chicago,
Illinois 60606 and Scudder Fund Accounting Corporation, with its principal place
of business in Boston, Massachusetts (hereinafter called "FUND ACCOUNTING").
WHEREAS, the Portfolio has need to determine its net asset value which service
FUND ACCOUNTING is willing and able to provide;
NOW THEREFORE in consideration of the mutual promises herein made, the Fund and
FUND ACCOUNTING agree as follows:
Section 1. Duties of FUND ACCOUNTING - General
FUND ACCOUNTING is authorized to act under the terms of this Agreement
to calculate the net asset value of the Portfolio as provided in the
prospectus of the Portfolio and in connection therewith shall:
a. Maintain and preserve all accounts, books, financial records and
other documents as are required of the Fund under Section 31 of
the Investment Company Act of 1940 (the "1940 Act") and Rules
31a-1, 31a-2 and 31a-3 thereunder, applicable federal and state
laws and any other law or administrative rules or procedures
which may be applicable to the Fund on behalf of the Portfolio,
other than those accounts, books and financial records required
to be maintained by the Fund's investment adviser, custodian or
transfer agent and/or books and records maintained by all other
service providers necessary for the Fund to conduct its business
as a registered open-end management investment company. All such
books and records shall be the property of the Fund and shall at
all times during regular business hours be open for inspection
by, and shall be surrendered promptly upon request of, duly
authorized officers of the Fund. All such books and records
shall at all times during regular business hours be open for
inspection, upon request of duly authorized officers of the Fund,
by employees or agents of the Fund and employees and agents of
the Securities and Exchange Commission.
b. Record the current day's trading activity and such other
proper bookkeeping entries as are necessary for determining
that day's net asset value and net income.
<PAGE>
c. Render statements or copies of records as from time to time are
reasonably requested by the Fund.
d. Facilitate audits of accounts by the Fund's independent
public accountants or by any other auditors employed or engaged
by the Fund or by any regulatory body with jurisdiction over the
Fund.
e. Compute the Portfolio's public offering price and/or its daily
dividend rates and money market yields, if applicable, in
accordance with Section 3 of the Agreement and notify the Fund
and such other persons as the Fund may reasonably request of
the net asset value per share, the public offering price
and/or its daily dividend rates and money market yields.
f. Perform a mark-to-market appraisal in accordance with
procedures by the Board of Trustees pursuant to Rule 2a-7
under the 1940 Act.
Section 2. Valuation of Securities
Securities shall be valued in accordance with (a) the Fund's
Registration Statement, as amended or supplemented from time to time
(hereinafter referred to as the "Registration Statement"); (b) the
resolutions of the Board of Trustees of the Fund at the time in force
and applicable, as they may from time to time be delivered to FUND
ACCOUNTING, and (c) Proper Instructions from such officers of the Fund
or other persons as are from time to time authorized by the Board of
Trustees of the Fund to give instructions with respect to computation
and determination of the net asset value. FUND ACCOUNTING may use one
or more external pricing services, including broker-dealers, provided
that an appropriate officer of the Fund shall have approved such use in
advance.
Section 3. Computation of Net Asset Value, Public Offering Price, Daily
Dividend Rates and Yields
FUND ACCOUNTING shall compute the Portfolio's net asset value,
including net income, in a manner consistent with the specific
provisions of the Registration Statement. Such computation shall be
made as of the time or times specified in the Registration Statement.
FUND ACCOUNTING shall compute the daily dividend rates and money market
yields, if applicable, in accordance with the methodology set forth in
the Registration Statement.
Section 4. FUND ACCOUNTING's Reliance on Instructions and Advice
2
<PAGE>
In maintaining the Portfolio's books of account and making the
necessary computations FUND ACCOUNTING shall be entitled to receive,
and may rely upon, information furnished it by means of Proper
Instructions, including but not limited to:
a. The manner and amount of accrual of expenses to be recorded on
the books of the Portfolio;
b. The source of quotations to be used for such securities as may
not be available through FUND ACCOUNTING's normal pricing
services;
c. The value to be assigned to any asset for which no price
quotations are readily available;
d. If applicable, the manner of computation of the public offering
price and such other computations as may be necessary;
e. Transactions in portfolio securities;
f. Transactions in capital shares.
FUND ACCOUNTING shall be entitled to receive, and shall be entitled to
rely upon, as conclusive proof of any fact or matter required to be
ascertained by it hereunder, a certificate, letter or other instrument
signed by an authorized officer of the Fund or any other person
authorized by the Fund's Board of Trustees.
FUND ACCOUNTING shall be entitled to receive and act upon advice of
Counsel for the Fund at the reasonable expense of the Portfolio and
shall be without liability for any action taken or thing done in good
faith in reliance upon such advice.
FUND ACCOUNTING shall be entitled to receive, and may rely upon,
information received from the Transfer Agent.
Section 5. Proper Instructions
"Proper Instructions" as used herein means any certificate, letter or
other instrument or telephone call reasonably believed by FUND
ACCOUNTING to be genuine and to have been properly made or signed by
any authorized officer of the Fund or person certified to FUND
ACCOUNTING as being authorized by the Board of Trustees. The Fund, on
behalf of the Portfolio, shall cause oral instructions to be confirmed
in writing. Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices as from time
to time agreed to by an authorized officer of the Fund and FUND
ACCOUNTING.
3
<PAGE>
The Fund, on behalf of the Portfolio, agrees to furnish to the
appropriate person(s) within FUND ACCOUNTING a copy of the Registration
Statement as in effect from time to time. FUND ACCOUNTING may
conclusively rely on the Fund's most recently delivered Registration
Statement for all purposes under this Agreement and shall not be liable
to the Portfolio or the Fund in acting in reliance thereon.
Section 6. Standard of Care
FUND ACCOUNTING shall exercise reasonable care and diligence in the
performance of its duties hereunder. The Fund agrees that FUND
ACCOUNTING shall not be liable under this Agreement for any error of
judgment or mistake of law made in good faith and consistent with the
foregoing standard of care, provided that nothing in this Agreement
shall be deemed to protect or purport to protect FUND ACCOUNTING
against any liability to the Fund, the Portfolio or its shareholders to
which FUND ACCOUNTING would otherwise be subject by reason of willful
misfeasance, bad faith or negligence in the performance of its duties,
or by reason of its reckless disregard of its obligations and duties
hereunder.
Section 7. Compensation and FUND ACCOUNTING Expenses
FUND ACCOUNTING shall be paid as compensation for its services pursuant
to this Agreement such compensation as may from time to time be agreed
upon in writing by the two parties. FUND ACCOUNTING shall be entitled,
if agreed to by the Fund on behalf of the Portfolio, to recover its
reasonable telephone, courier or delivery service, and all other
reasonable out-of-pocket, expenses as incurred, including, without
limitation, reasonable attorneys' fees and reasonable fees for pricing
services.
Section 8. Amendment and Termination
This Agreement shall continue in full force and effect until terminated
as hereinafter provided, may be amended at any time by mutual agreement
of the parties hereto and may be terminated by an instrument in writing
delivered or mailed to the other party. Such termination shall take
effect not sooner than sixty (60) days after the date of delivery or
mailing of such notice of termination. Any termination date is to be no
earlier than four months from the effective date hereof. Upon
termination, FUND ACCOUNTING will turn over to the Fund or its designee
and cease to retain in FUND
4
<PAGE>
ACCOUNTING files, records of the calculations of net asset value and
all other records pertaining to its services hereunder; provided,
however, FUND ACCOUNTING in its discretion may make and retain copies
of any and all such records and documents which it determines
appropriate or for its protection.
Section 9. Services Not Exclusive
FUND ACCOUNTING's services pursuant to this Agreement are not to be
deemed to be exclusive, and it is understood that FUND ACCOUNTING may
perform fund accounting services for others. In acting under this
Agreement, FUND ACCOUNTING shall be an independent contractor and not
an agent of the Fund or the Portfolio.
Section 10. Limitation of Liability for Claims
The Fund's Amended and Restated Declaration of Trust, as amended to
date (the "Declaration"), a copy of which, together with all amendments
thereto, is on file in the Office of the Secretary of State of the
Commonwealth of Massachusetts, provides that the name "Cash Equivalent
Fund" refers to the Trustees under the Declaration collectively as
trustees and not as individuals or personally, and that no shareholder
of the Fund or the Portfolio, or Trustee, officer, employee or agent of
the Fund shall be subject to claims against or obligations of the Trust
or of the Portfolio to any extent whatsoever, but that the Trust estate
only shall be liable.
FUND ACCOUNTING is expressly put on notice of the limitation of
liability as set forth in the Declaration and FUND ACCOUNTING agrees
that the obligations assumed by the Fund and/or the Portfolio under
this Agreement shall be limited in all cases to the Portfolio and its
assets, and FUND ACCOUNTING shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Fund or the
Portfolio or any other series of the Fund, or from any Trustee,
officer, employee or agent of the Fund. FUND ACCOUNTING understands
that the rights and obligations of the Portfolio under the Declaration
are separate and distinct from those of any and all other series of the
Fund.
Section 11. Notices
Any notice shall be sufficiently given when delivered or mailed to the
other party at the address of such party set
5
<PAGE>
forth below or to such other person or at such other address as such
party may from time to time specify in writing to the other party.
If to FUND ACCOUNTING: Scudder Fund Accounting Corporation
Two International Place
Boston, Massachusetts 02110
Attn: Vice President
If to the Fund - Portfolio: Cash Equivalent Fund
222 South Riverside Plaza
Chicago, Illinois 60606
Attn: President, Secretary
or Treasurer
6
<PAGE>
Section 12. Miscellaneous
This Agreement may not be assigned by FUND ACCOUNTING without the
consent of the Fund as authorized or approved by resolution of its
Board of Trustees.
In connection with the operation of this Agreement, the Fund and FUND
ACCOUNTING may agree from time to time on such provisions interpretive
of or in addition to the provisions of this Agreement as in their joint
opinions may be consistent with this Agreement. Any such interpretive
or additional provisions shall be in writing, signed by both parties
and annexed hereto, but no such provisions shall be deemed to be an
amendment of this Agreement.
This Agreement shall be governed and construed in accordance with the
laws of the Commonwealth of Massachusetts.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
This Agreement constitutes the entire agreement between the parties
concerning the subject matter hereof, and supersedes any and all prior
understandings.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunto duly authorized and its seal to be
hereunder affixed as of the date first written above.
[SEAL] CASH EQUIVALENT FUND
on behalf of Government Securities
Portfolio
By: /s/Mark S. Casady
--------------------
President
[SEAL] SCUDDER FUND ACCOUNTING CORPORATION
By: /s/John R. Hebble
--------------------
Treasurer
8
FUND ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT is made on the 31st day of December, 1997 between Cash Equivalent
Fund (the "Fund"), on behalf of Tax-Exempt Portfolio (hereinafter called the
"Portfolio"), a registered open-end management investment company with its
principal place of business in 222 South Riverside Plaza, Chicago, Illinois
60606 and Scudder Fund Accounting Corporation, with its principal place of
business in Boston, Massachusetts (hereinafter called "FUND ACCOUNTING").
WHEREAS, the Portfolio has need to determine its net asset value which service
FUND ACCOUNTING is willing and able to provide;
NOW THEREFORE in consideration of the mutual promises herein made, the Fund and
FUND ACCOUNTING agree as follows:
Section 1. Duties of FUND ACCOUNTING - General
FUND ACCOUNTING is authorized to act under the terms of this Agreement
to calculate the net asset value of the Portfolio as provided in the
prospectus of the Portfolio and in connection therewith shall:
a. Maintain and preserve all accounts, books, financial records
and other documents as are required of the Fund under Section
31 of the Investment Company Act of 1940 (the "1940 Act") and
Rules 31a-1, 31a-2 and 31a-3 thereunder, applicable federal
and state laws and any other law or administrative rules or
procedures which may be applicable to the Fund on behalf of
the Portfolio, other than those accounts, books and financial
records required to be maintained by the Fund's investment
adviser, custodian or transfer agent and/or books and records
maintained by all other service providers necessary for the
Fund to conduct its business as a registered open-end
management investment company. All such books and records
shall be the property of the Fund and shall at all times
during regular business hours be open for inspection by, and
shall be surrendered promptly upon request of, duly authorized
officers of the Fund. All such books and records shall at all
times during regular business hours be open for inspection,
upon request of duly authorized officers of the Fund, by
employees or agents of the Fund and employees and agents of
the Securities and Exchange Commission.
b. Record the current day's trading activity and such other
proper bookkeeping entries as are necessary for determining
that day's net asset value and net income.
<PAGE>
c. Render statements or copies of records as from time to time
are reasonably requested by the Fund.
d. Facilitate audits of accounts by the Fund's independent public
accountants or by any other auditors employed or engaged by
the Fund or by any regulatory body with jurisdiction over the
Fund.
e. Compute the Portfolio's public offering price and/or its daily
dividend rates and money market yields, if applicable, in
accordance with Section 3 of the Agreement and notify the Fund
and such other persons as the Fund may reasonably request of
the net asset value per share, the public offering price
and/or its daily dividend rates and money market yields.
f. Perform a mark-to-market appraisal in accordance with
procedures by the Board of Trustees pursuant to Rule 2a-7
under the 1940 Act.
Section 2. Valuation of Securities
Securities shall be valued in accordance with (a) the Fund's
Registration Statement, as amended or supplemented from time to time
(hereinafter referred to as the "Registration Statement"); (b) the
resolutions of the Board of Trustees of the Fund at the time in force
and applicable, as they may from time to time be delivered to FUND
ACCOUNTING, and (c) Proper Instructions from such officers of the Fund
or other persons as are from time to time authorized by the Board of
Trustees of the Fund to give instructions with respect to computation
and determination of the net asset value. FUND ACCOUNTING may use one
or more external pricing services, including broker-dealers, provided
that an appropriate officer of the Fund shall have approved such use in
advance.
Section 3. Computation of Net Asset Value, Public Offering Price, Daily Dividend
Rates and Yields
FUND ACCOUNTING shall compute the Portfolio's net asset value,
including net income, in a manner consistent with the specific
provisions of the Registration Statement. Such computation shall be
made as of the time or times specified in the Registration Statement.
FUND ACCOUNTING shall compute the daily dividend rates and money market
yields, if applicable, in accordance with the methodology set forth in
the Registration Statement.
Section 4. FUND ACCOUNTING's Reliance on Instructions and Advice
2
<PAGE>
In maintaining the Portfolio's books of account and making the
necessary computations FUND ACCOUNTING shall be entitled to receive,
and may rely upon, information furnished it by means of Proper
Instructions, including but not limited to:
a. The manner and amount of accrual of expenses to be recorded on
the books of the Portfolio;
b. The source of quotations to be used for such securities as may
not be available through FUND ACCOUNTING's normal pricing
services;
c. The value to be assigned to any asset for which no price
quotations are readily available;
d. If applicable, the manner of computation of the public
offering price and such other computations as may be
necessary;
e. Transactions in portfolio securities;
f. Transactions in capital shares.
FUND ACCOUNTING shall be entitled to receive, and shall be entitled to
rely upon, as conclusive proof of any fact or matter required to be
ascertained by it hereunder, a certificate, letter or other instrument
signed by an authorized officer of the Fund or any other person
authorized by the Fund's Board of Trustees.
FUND ACCOUNTING shall be entitled to receive and act upon advice of
Counsel for the Fund at the reasonable expense of the Portfolio and
shall be without liability for any action taken or thing done in good
faith in reliance upon such advice.
FUND ACCOUNTING shall be entitled to receive, and may rely upon,
information received from the Transfer Agent.
Section 5. Proper Instructions
"Proper Instructions" as used herein means any certificate, letter or
other instrument or telephone call reasonably believed by FUND
ACCOUNTING to be genuine and to have been properly made or signed by
any authorized officer of the Fund or person certified to FUND
ACCOUNTING as being authorized by the Board of Trustees. The Fund, on
behalf of the Portfolio, shall cause oral instructions to be confirmed
in writing. Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices as from time
to time agreed to by an authorized officer of the Fund and FUND
ACCOUNTING.
3
<PAGE>
The Fund, on behalf of the Portfolio, agrees to furnish to the
appropriate person(s) within FUND ACCOUNTING a copy of the Registration
Statement as in effect from time to time. FUND ACCOUNTING may
conclusively rely on the Fund's most recently delivered Registration
Statement for all purposes under this Agreement and shall not be liable
to the Portfolio or the Fund in acting in reliance thereon.
Section 6. Standard of Care
FUND ACCOUNTING shall exercise reasonable care and diligence in the
performance of its duties hereunder. The Fund agrees that FUND
ACCOUNTING shall not be liable under this Agreement for any error of
judgment or mistake of law made in good faith and consistent with the
foregoing standard of care, provided that nothing in this Agreement
shall be deemed to protect or purport to protect FUND ACCOUNTING
against any liability to the Fund, the Portfolio or its shareholders to
which FUND ACCOUNTING would otherwise be subject by reason of willful
misfeasance, bad faith or negligence in the performance of its duties,
or by reason of its reckless disregard of its obligations and duties
hereunder.
Section 7. Compensation and FUND ACCOUNTING Expenses
FUND ACCOUNTING shall be paid as compensation for its services pursuant
to this Agreement such compensation as may from time to time be agreed
upon in writing by the two parties. FUND ACCOUNTING shall be entitled,
if agreed to by the Fund on behalf of the Portfolio, to recover its
reasonable telephone, courier or delivery service, and all other
reasonable out-of-pocket, expenses as incurred, including, without
limitation, reasonable attorneys' fees and reasonable fees for pricing
services.
Section 8. Amendment and Termination
This Agreement shall continue in full force and effect until terminated
as hereinafter provided, may be amended at any time by mutual agreement
of the parties hereto and may be terminated by an instrument in writing
delivered or mailed to the other party. Such termination shall take
effect not sooner than sixty (60) days after the date of delivery or
mailing of such notice of termination. Any termination date is to be no
earlier than four months from the effective date hereof. Upon
termination, FUND ACCOUNTING will turn over to the Fund or its designee
and cease to retain in FUND
4
<PAGE>
ACCOUNTING files, records of the calculations of net asset value and
all other records pertaining to its services hereunder; provided,
however, FUND ACCOUNTING in its discretion may make and retain copies
of any and all such records and documents which it determines
appropriate or for its protection.
Section 9. Services Not Exclusive
FUND ACCOUNTING's services pursuant to this Agreement are not to be
deemed to be exclusive, and it is understood that FUND ACCOUNTING may
perform fund accounting services for others. In acting under this
Agreement, FUND ACCOUNTING shall be an independent contractor and not
an agent of the Fund or the Portfolio.
Section 10. Limitation of Liability for Claims
The Fund's Amended and Restated Declaration of Trust, as amended to
date (the "Declaration"), a copy of which, together with all amendments
thereto, is on file in the Office of the Secretary of State of the
Commonwealth of Massachusetts, provides that the name "Cash Equivalent
Fund" refers to the Trustees under the Declaration collectively as
trustees and not as individuals or personally, and that no shareholder
of the Fund or the Portfolio, or Trustee, officer, employee or agent of
the Fund shall be subject to claims against or obligations of the Trust
or of the Portfolio to any extent whatsoever, but that the Trust estate
only shall be liable.
FUND ACCOUNTING is expressly put on notice of the limitation of
liability as set forth in the Declaration and FUND ACCOUNTING agrees
that the obligations assumed by the Fund and/or the Portfolio under
this Agreement shall be limited in all cases to the Portfolio and its
assets, and FUND ACCOUNTING shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Fund or the
Portfolio or any other series of the Fund, or from any Trustee,
officer, employee or agent of the Fund. FUND ACCOUNTING understands
that the rights and obligations of the Portfolio under the Declaration
are separate and distinct from those of any and all other series of the
Fund.
Section 11. Notices
Any notice shall be sufficiently given when delivered or mailed to the
other party at the address of such party set
5
<PAGE>
forth below or to such other person or at such other address as such
party may from time to time specify in writing to the other party.
If to FUND ACCOUNTING: Scudder Fund Accounting Corporation
Two International Place
Boston, Massachusetts 02110
Attn: Vice President
If to the Fund - Portfolio: Cash Equivalent Fund
222 South Riverside Plaza
Chicago, Illinois 60606
Attn: President, Secretary
or Treasurer
6
<PAGE>
Section 12. Miscellaneous
This Agreement may not be assigned by FUND ACCOUNTING without the
consent of the Fund as authorized or approved by resolution of its
Board of Trustees.
In connection with the operation of this Agreement, the Fund and FUND
ACCOUNTING may agree from time to time on such provisions interpretive
of or in addition to the provisions of this Agreement as in their joint
opinions may be consistent with this Agreement. Any such interpretive
or additional provisions shall be in writing, signed by both parties
and annexed hereto, but no such provisions shall be deemed to be an
amendment of this Agreement.
This Agreement shall be governed and construed in accordance with the
laws of the Commonwealth of Massachusetts.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
This Agreement constitutes the entire agreement between the parties
concerning the subject matter hereof, and supersedes any and all prior
understandings.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunto duly authorized and its seal to be
hereunder affixed as of the date first written above.
[SEAL] CASH EQUIVALENT FUND
on behalf of Tax-Exempt Portfolio
By:/s/Mark S. Casady
--------------------
President
[SEAL] SCUDDER FUND ACCOUNTING CORPORATION
By:/s/John R. Hebble
--------------------
Treasurer
8
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" and "Independent Auditors and Reports to Shareholders" and to the
use of our report dated September 17, 1998 in the Registration Statement (Form
N-1A) of Cash Equivalent Fund and its incorporation by reference in the related
Prospectus and Statement of Additional Information filed with the Securities and
Exchange Commission in this Post-Effective Amendment No. 25 to the Registration
Statement under the Securities Act of 1933 (File No. 2-63522) and in this
Amendment No. 25 to the Registration Statement under the Investment Company Act
of 1940 (File No. 811-2899).
ERNST & YOUNG LLP
Chicago, Illinois
November 23, 1998
Fund: Cash Equivalent Fund (the "Fund")
--------------------
Series: Money Market Portfolio (the "Series")
----------------------
AMENDED AND RESTATED 12b-1 PLAN
Pursuant to the provisions of Rule 12b-1 under the Investment Company Act
of 1940 (the "Act"), this Amended and Restated 12b-1 Plan (the "Plan") has been
adopted for the Fund on behalf of the Series (both as noted and defined above)
by a majority of the members of the Fund's Board of Trustees, including a
majority of the trustees who are not "interested persons" of the Fund and who
have no direct or indirect financial interest in the operation of the Plan or in
any agreements related to the Plan (the "Qualified Trustees") at a meeting
called for the purpose of voting on this Plan.
1. Compensation. The Fund will pay to Kemper Distributors, Inc. ("KDI") at
the end of each calendar month a distribution services fee computed at the
annual rate .38% of the Fund's average daily net assets attributable to the
Series. KDI may compensate various financial services firms appointed by KDI
("Firms") in accordance with the provisions of the Fund's Administration,
Shareholder Services and Distribution Agreement (the "Distribution Agreement")
for sales of shares at the fee levels provided in the Fund's prospectus from
time to time. KDI may pay other commissions, fees or concessions to Firms, and
may pay them to others in its discretion, in such amounts as KDI may determine
from time to time. The distribution services fee for the Series shall be based
upon the average daily net assets of the Series, and such fee shall be charged
only to the Series. For the month and year in which this Plan becomes effective
or terminates, there shall be an appropriate proration of the distribution
services fee set forth herein on the basis of the number of days that the Plan,
the Distribution Agreement, and any other agreement related to the Plan, is in
effect during the month and year, respectively.
2. Periodic Reporting. KDI shall prepare reports for the Board of Trustees
of the Fund on a quarterly basis showing amounts paid to the various Firms and
such other information as from time to time shall be reasonably requested by the
Board of Trustees.
3. Continuance. This Plan shall continue in effect indefinitely, provided
that such continuance is approved at least annually by a vote of a majority of
the trustees, and of the Qualified Trustees, cast in person at a meeting called
for such purpose or by vote of at least a majority of the outstanding voting
securities of the Series.
4. Termination. This Plan may be terminated at any time without penalty
with respect to the Series by vote of a majority of the Qualified Trustees or by
vote of the majority of the outstanding voting securities of the Series.
5. Amendment. This Plan may not be amended to increase materially the
amount to be paid to KDI by the Fund for distribution services with respect to
the Series without the vote of
<PAGE>
a majority of the outstanding voting securities of the Series. All material
amendments to this Plan must in any event be approved by a vote of a majority of
the trustees, and of the Qualified Trustees, cast in person at a meeting called
for such purpose.
6. Selection of Non-Interested Trustees. So long as this Plan is in effect,
the selection and nomination of those trustees who are not interested persons of
the Fund will be committed to the discretion of the trustees who are not
themselves interested persons.
7. Recordkeeping. The Fund will preserve copies of this Plan, the
Distribution Agreement, and all reports made pursuant to Paragraph 2 above for a
period of not less than six (6) years from the date of this Plan, the
Distribution Agreement, or any such report, as the case may be, the first two
(2) years in an easily accessible place.
8. Limitation of Liability. Any obligation of the Fund hereunder shall be
binding only upon the assets of the Series and shall not be binding on any
trustee, officer, employee, agent, or shareholder of the Fund. Neither the
authorization of any action by the trustees or shareholders of the Fund nor the
adoption of the Plan on behalf of the Fund shall impose any liability upon any
trustee or upon any shareholder.
9. Definitions. The terms "interested person" and "vote of a majority of
the outstanding voting securities" shall have the meanings set forth in the Act
and the rules and regulations thereunder.
10. Severability; Separate Action. If any provision of this Plan shall be
held or made invalid by a court decision, rule or otherwise, the remainder of
this Plan shall not be affected thereby. Action shall be taken separately for
the Series as the Act or the rules thereunder so require.
(Amended and restated August 1, 1998)
Exhibit (15)(b)
Fund: Cash Equivalent Fund (the "Fund")
--------------------
Series: Government Securities Portfolio (the "Series")
-------------------------------
AMENDED AND RESTATED 12b-1 PLAN
Pursuant to the provisions of Rule 12b-1 under the Investment Company
Act of 1940 (the "Act"), this Amended and Restated 12b-1 Plan (the "Plan") has
been adopted for the Fund on behalf of the Series (both as noted and defined
above) by a majority of the members of the Fund's Board of Trustees, including a
majority of the trustees who are not "interested persons" of the Fund and who
have no direct or indirect financial interest in the operation of the Plan or in
any agreements related to the Plan (the "Qualified Trustees") at a meeting
called for the purpose of voting on this Plan.
1. Compensation. The Fund will pay to Kemper Distributors, Inc. ("KDI")
at the end of each calendar month a distribution services fee computed at the
annual rate .38% of the Fund's average daily net assets attributable to the
Series. KDI may compensate various financial services firms appointed by KDI
("Firms") in accordance with the provisions of the Fund's Administration,
Shareholder Services and Distribution Agreement (the "Distribution Agreement")
for sales of shares at the fee levels provided in the Fund's prospectus from
time to time. KDI may pay other commissions, fees or concessions to Firms, and
may pay them to others in its discretion, in such amounts as KDI may determine
from time to time. The distribution services fee for the Series shall be based
upon the average daily net assets of the Series, and such fee shall be charged
only to the Series. For the month and year in which this Plan becomes effective
or terminates, there shall be an appropriate proration of the distribution
services fee set forth herein on the basis of the number of days that the Plan,
the Distribution Agreement, and any other agreement related to the Plan, is in
effect during the month and year, respectively.
2. Periodic Reporting. KDI shall prepare reports for the Board of
Trustees of the Fund on a quarterly basis showing amounts paid to the various
Firms and such other information as from time to time shall be reasonably
requested by the Board of Trustees.
3. Continuance. This Plan shall continue in effect indefinitely,
provided that such continuance is approved at least annually by a vote of a
majority of the trustees, and of the Qualified Trustees, cast in person at a
meeting called for such purpose or by vote of at least a majority of the
outstanding voting securities of the Series.
4. Termination. This Plan may be terminated at any time without penalty
with respect to the Series by vote of a majority of the Qualified Trustees or by
vote of the majority of the outstanding voting securities of the Series.
5. Amendment. This Plan may not be amended to increase materially the
amount to be paid to KDI by the Fund for distribution services with respect to
the Series without the vote of
<PAGE>
a majority of the outstanding voting securities of the Series. All material
amendments to this Plan must in any event be approved by a vote of a majority of
the trustees, and of the Qualified Trustees, cast in person at a meeting called
for such purpose.
6. Selection of Non-Interested Trustees. So long as this Plan is in
effect, the selection and nomination of those trustees who are not interested
persons of the Fund will be committed to the discretion of the trustees who are
not themselves interested persons.
7. Recordkeeping. The Fund will preserve copies of this Plan, the
Distribution Agreement, and all reports made pursuant to Paragraph 2 above for a
period of not less than six (6) years from the date of this Plan, the
Distribution Agreement, or any such report, as the case may be, the first two
(2) years in an easily accessible place.
8. Limitation of Liability. Any obligation of the Fund hereunder shall
be binding only upon the assets of the Series and shall not be binding on any
trustee, officer, employee, agent, or shareholder of the Fund. Neither the
authorization of any action by the trustees or shareholders of the Fund nor the
adoption of the Plan on behalf of the Fund shall impose any liability upon any
trustee or upon any shareholder.
9. Definitions. The terms "interested person" and "vote of a majority
of the outstanding voting securities" shall have the meanings set forth in the
Act and the rules and regulations thereunder.
10. Severability; Separate Action. If any provision of this Plan shall
be held or made invalid by a court decision, rule or otherwise, the remainder of
this Plan shall not be affected thereby. Action shall be taken separately for
the Series as the Act or the rules thereunder so require.
(Amended and restated August 1, 1998)
Exhibit (15)(C
Fund: Cash Equivalent Fund (the "Fund")
--------------------
Series: Tax-Exempt Portfolio (the "Series")
--------------------
AMENDED AND RESTATED 12b-1 PLAN
Pursuant to the provisions of Rule 12b-1 under the Investment Company
Act of 1940 (the "Act"), this Amended and Restated 12b-1 Plan (the "Plan") has
been adopted for the Fund on behalf of the Series (both as noted and defined
above) by a majority of the members of the Fund's Board of Trustees, including a
majority of the trustees who are not "interested persons" of the Fund and who
have no direct or indirect financial interest in the operation of the Plan or in
any agreements related to the Plan (the "Qualified Trustees") at a meeting
called for the purpose of voting on this Plan.
1. Compensation. The Fund will pay to Kemper Distributors, Inc. ("KDI")
at the end of each calendar month a distribution services fee computed at the
annual rate .33% of the Fund's average daily net assets attributable to the
Series. KDI may compensate various financial services firms appointed by KDI
("Firms") in accordance with the provisions of the Fund's Administration,
Shareholder Services and Distribution Agreement (the "Distribution Agreement")
for sales of shares at the fee levels provided in the Fund's prospectus from
time to time. KDI may pay other commissions, fees or concessions to Firms, and
may pay them to others in its discretion, in such amounts as KDI may determine
from time to time. The distribution services fee for the Series shall be based
upon the average daily net assets of the Series, and such fee shall be charged
only to the Series. For the month and year in which this Plan becomes effective
or terminates, there shall be an appropriate proration of the distribution
services fee set forth herein on the basis of the number of days that the Plan,
the Distribution Agreement, and any other agreement related to the Plan, is in
effect during the month and year, respectively.
2. Periodic Reporting. KDI shall prepare reports for the Board of
Trustees of the Fund on a quarterly basis showing amounts paid to the various
Firms and such other information as from time to time shall be reasonably
requested by the Board of Trustees.
3. Continuance. This Plan shall continue in effect indefinitely,
provided that such continuance is approved at least annually by a vote of a
majority of the trustees, and of the Qualified Trustees, cast in person at a
meeting called for such purpose or by vote of at least a majority of the
outstanding voting securities of the Series.
4. Termination. This Plan may be terminated at any time without penalty
with respect to the Series by vote of a majority of the Qualified Trustees or by
vote of the majority of the outstanding voting securities of the Series.
5. Amendment. This Plan may not be amended to increase materially the
amount to be paid to KDI by the Fund for distribution services with respect to
the Series without the vote of
<PAGE>
a majority of the outstanding voting securities of the Series. All material
amendments to this Plan must in any event be approved by a vote of a majority of
the trustees, and of the Qualified Trustees, cast in person at a meeting called
for such purpose.
6. Selection of Non-Interested Trustees. So long as this Plan is in
effect, the selection and nomination of those trustees who are not interested
persons of the Fund will be committed to the discretion of the trustees who are
not themselves interested persons.
7. Recordkeeping. The Fund will preserve copies of this Plan, the
Distribution Agreement, and all reports made pursuant to Paragraph 2 above for a
period of not less than six (6) years from the date of this Plan, the
Distribution Agreement, or any such report, as the case may be, the first two
(2) years in an easily accessible place.
8. Limitation of Liability. Any obligation of the Fund hereunder shall
be binding only upon the assets of the Series and shall not be binding on any
trustee, officer, employee, agent, or shareholder of the Fund. Neither the
authorization of any action by the trustees or shareholders of the Fund nor the
adoption of the Plan on behalf of the Fund shall impose any liability upon any
trustee or upon any shareholder.
9. Definitions. The terms "interested person" and "vote of a majority
of the outstanding voting securities" shall have the meanings set forth in the
Act and the rules and regulations thereunder.
10. Severability; Separate Action. If any provision of this Plan shall
be held or made invalid by a court decision, rule or otherwise, the remainder of
this Plan shall not be affected thereby. Action shall be taken separately for
the Series as the Act or the rules thereunder so require.
(Amended and restated August 1, 1998)
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINERS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
1998 ANNUAL REPORT TO SHAREHOLDERS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000310030
<NAME> CASH EQUIVALENT FUND
<SERIES>
<NUMBER> 01
<NAME> MONEY MARKET PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1998
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 865,588
<INVESTMENTS-AT-VALUE> 865,588
<RECEIVABLES> 2,444
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 868,032
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 16,440
<TOTAL-LIABILITIES> 16,440
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 851,592
<SHARES-COMMON-STOCK> 851,592
<SHARES-COMMON-PRIOR> 970,516
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 851,592
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 53,253
<OTHER-INCOME> 0
<EXPENSES-NET> (8,423)
<NET-INVESTMENT-INCOME> 44,830
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 44,830
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (44,830)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,846,037
<NUMBER-OF-SHARES-REDEEMED> (4,009,859)
<SHARES-REINVESTED> 44,898
<NET-CHANGE-IN-ASSETS> (118,924)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,868
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8,423
<AVERAGE-NET-ASSETS> 928,914
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .91
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
1998 ANNUAL REPORT TO SHAREHOLDERS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000310030
<NAME> CASH EQUIVALENT FUND
<SERIES>
<NUMBER> 02
<NAME> GOVERNMENT SECURITIES PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1998
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 388,174
<INVESTMENTS-AT-VALUE> 388,174
<RECEIVABLES> 2,306
<ASSETS-OTHER> 2,981
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 393,461
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,600
<TOTAL-LIABILITIES> 1,600
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 391,861
<SHARES-COMMON-STOCK> 391,861
<SHARES-COMMON-PRIOR> 404,037
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 391,861
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 23,387
<OTHER-INCOME> 0
<EXPENSES-NET> (3,514)
<NET-INVESTMENT-INCOME> 19,873
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 19,873
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (19,873)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,401,622
<NUMBER-OF-SHARES-REDEEMED> (3,433,559)
<SHARES-REINVESTED> 19,761
<NET-CHANGE-IN-ASSETS> (12,176)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 834
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,514
<AVERAGE-NET-ASSETS> 415,277
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
1998 ANNUAL REPORT TO SHAREHOLDERS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000310030
<NAME> CASH EQUIVALENT FUND
<SERIES>
<NUMBER> 03
<NAME> TAX-EXEMPT PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1998
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 332,193
<INVESTMENTS-AT-VALUE> 332,193
<RECEIVABLES> 1,663
<ASSETS-OTHER> 645
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 334,501
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,074
<TOTAL-LIABILITIES> 1,074
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 333,427
<SHARES-COMMON-STOCK> 333,427
<SHARES-COMMON-PRIOR> 444,939
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 333,427
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 16,070
<OTHER-INCOME> 0
<EXPENSES-NET> 2,828
<NET-INVESTMENT-INCOME> 13,242
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 13,242
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (13,242)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,244,764
<NUMBER-OF-SHARES-REDEEMED> (1,369,517)
<SHARES-REINVESTED> 13,241
<NET-CHANGE-IN-ASSETS> (111,512)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 945
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,828
<AVERAGE-NET-ASSETS> 428,955
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.03)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .66
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
