<PAGE> 1
- --------------------------------------------------------------------------------
DEAR SHAREHOLDERS:
- --------------------------------------------------------------------------------
We are pleased to provide you with the Cash Equivalent Fund annual report for
the year ended July 31, 1998.
Your fund's management greatly appreciates your decision to invest in Cash
Equivalent Fund. During the past year, the fund registered solid performance and
achieved its objective of providing maximum current income consistent with
stability of principal.
ECONOMIC REVIEW AND OUTLOOK
Since March 1997, monetary policy has been on hold with a target for Federal
Funds at 5.50%. The domestic economy remains strong, although second calendar
quarter GDP growth was softer at 1.6%. Key contributing elements were inventory
reductions and an auto strike. However, the process of inventory adjustment is
well under way and the strike was resolved in early August. Accordingly, a
rebound in production and economic growth is likely during the remainder of
1998.
Developments to watch are: continuing, well-publicized Asian difficulties,
financial and economic turbulence in other foreign countries, and the recent
volatility in our domestic stock market. Nevertheless, we expect monetary policy
to remain on hold because of a background of domestic economic strength.
Money market funds such as Cash Equivalent Fund offer the opportunity for
attractive yields and should continue to be an excellent place to invest your
money.
Your fund's management thanks you for the vote of confidence you have shown
through your investment and continues its dedication to performance. We look
forward to serving your investment needs for years to come.
Sincerely,
Frank Rachwalski
Frank Rachwalski
Vice President and Portfolio Manager
September 8, 1998
Frank Rachwalski is a Managing Director of Scudder Kemper Investments, Inc. and
Vice President and Lead Portfolio Manager of Cash Equivalent Fund. Mr.
Rachwalski holds B.B.A. and M.B.A. degrees from Loyola University.
PORTFOLIO RESULTS
For the year ended July 31, 1998, the fund's three Portfolios had the following
net yields:
The Money Market Portfolio had a net yield of 4.82%.
The Government Securities Portfolio had a net yield of 4.79%.
The Tax-Exempt Portfolio had a net yield of 3.09% and a tax-equivalent yield of
4.91%.
NOTES
Like all money funds, an investment in the Fund is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government agency.
Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund.
Each Portfolio's net yield for the year ended July 31, 1998, is the sum of the
daily dividend rates for the period. The tax-equivalent yield for the Tax-
Exempt Portfolio is based on a marginal federal income tax rate of 37.1%. Income
from the Tax-Exempt Portfolio may be subject to state and local taxes, and, for
some investors, a portion of income may be subject to the alternative minimum
tax. Yields are historical and do not represent future yields, which will
fluctuate.
The views expressed in this report reflect those of the portfolio manager only
through the end of the period of the report as stated above. The manager's views
are subject to change at any time, based on market and other conditions.
<PAGE> 2
Cash Equivalent Fund 2
- --------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
INVESTMENTS AT JULY 31, 1998
(VALUE IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------
CORPORATE OBLIGATIONS VALUE
<S> <C>
BANKING--3.5%
- ---------------------------------------------------------
Merita, N.A.
5.58%, 9/21/98 $ 4,961
- ---------------------------------------------------------
Nordbanken N.A., Inc.
5.57%, 9/8/98 9,942
- ---------------------------------------------------------
(a)Societe Generale
5.59%, 10/16/98 14,997
- ---------------------------------------------------------
29,900
BUSINESS LOANS--16.3%
- ---------------------------------------------------------
Broadway Capital Corp.
5.78%, 10/28/98 9,861
- ---------------------------------------------------------
Corporate Receivables Corp.
5.59%, 9/24/98 9,917
- ---------------------------------------------------------
Falcon Asset Securitization Corp.
5.55% - 5.59%, 8/21/98 - 9/11/98 19,906
- ---------------------------------------------------------
Gotham Capital Corp.
5.77%, 10/13/98 19,769
- ---------------------------------------------------------
International Securitization Corp.
5.57%, 9/3/98 4,975
- ---------------------------------------------------------
Madison Funding Corp.
5.57%, 8/17/98 9,975
- ---------------------------------------------------------
Monte Rosa Capital Corp.
5.63%, 8/21/98 9,969
- ---------------------------------------------------------
Old Line Funding Corp.
5.60%, 8/26/98 9,961
- ---------------------------------------------------------
Preferred Receivables Funding Corp.
5.59%, 9/23/98 9,918
- ---------------------------------------------------------
Quincy Capital Corp.
5.58%, 9/21/98 9,922
- ---------------------------------------------------------
Sheffield Receivables Corp.
5.59%, 8/10/98 9,986
- ---------------------------------------------------------
Wood Street Funding Corp.
5.58%, 8/4/98 - 8/5/98 14,992
- ---------------------------------------------------------
139,151
CAPITAL AND EQUIPMENT LENDING--7.0%
- ---------------------------------------------------------
Ace Overseas Corp.
5.60%, 8/6/98 4,996
- ---------------------------------------------------------
(a)American Honda Finance Corp.
5.64%, 8/14/98 14,999
- ---------------------------------------------------------
(a)Caterpillar Financial Services Corp.
5.63%, 8/17/98 10,000
- ---------------------------------------------------------
<CAPTION>
VALUE
<S> <C>
Centric Capital Corp.
5.60%, 10/1/98 $ 9,906
- ---------------------------------------------------------
(a)John Deere Capital Corp.
5.56%, 8/10/98 9,997
- ---------------------------------------------------------
Sanwa Business Credit Corp.
5.68%, 8/6/98 9,992
- ---------------------------------------------------------
59,890
CAPTIVE BUSINESS LENDING--6.5%
- ---------------------------------------------------------
Enterprise Capital Funding Corp.
5.56%, 8/14/98 14,970
- ---------------------------------------------------------
(a)FINOVA Capital Corp.
5.74%, 9/11/98 10,000
- ---------------------------------------------------------
Golden Manager's Acceptance Corp.
5.58%, 8/14/98 14,970
- ---------------------------------------------------------
Sony Capital Corp.
5.54%, 8/4/98 14,993
- ---------------------------------------------------------
54,933
CONSUMER LENDING--8.2%
- ---------------------------------------------------------
(a)Beneficial Corp.
5.63%, 8/12/98 10,000
- ---------------------------------------------------------
(a)(b)GMAC Mortgage Corporation of Pennsylvania
5.82%, 8/3/98 9,997
- ---------------------------------------------------------
(a)Household Finance Corp.
5.56%, 8/31/98 9,995
- ---------------------------------------------------------
J.C. Penney Funding Corp.
5.57%, 9/25/98 24,789
- ---------------------------------------------------------
Sears Roebuck Acceptance Corp.
5.60%, 9/4/98 14,922
- ---------------------------------------------------------
69,703
CONSUMER PRODUCTS AND SERVICES--2.9%
- ---------------------------------------------------------
Coca-Cola Enterprises, Inc.
5.59% - 5.60%, 8/17/98 - 8/20/98 24,934
- ---------------------------------------------------------
DIVERSIFIED FINANCE--13.4%
- ---------------------------------------------------------
Barton Capital Corp.
5.61%, 10/5/98 14,850
- ---------------------------------------------------------
(a)CIT Group Holdings, Inc.
5.57%, 8/3/98 9,996
- ---------------------------------------------------------
Clipper Receivables Corp.
5.57%, 8/19/98 19,945
- ---------------------------------------------------------
</TABLE>
<PAGE> 3
Cash Equivalent Fund 3
- --------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
INVESTMENTS AT JULY 31, 1998
(VALUE IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------
VALUE
<S> <C>
Commercial Credit Co.
5.59%, 10/8/98 $ 9,895
- ------------------------------------------------------------
Eureka Securitization, Inc.
5.59%, 8/10/98 9,986
- ------------------------------------------------------------
General Electric Capital Corp.
5.57%, 9/17/98 9,928
- ------------------------------------------------------------
Heller Financial, Inc.
5.83%, 8/18/98 9,973
- ------------------------------------------------------------
Thunder Bay Funding, Inc.
5.60%, 8/20/98 9,971
- ------------------------------------------------------------
Twin Towers, Inc.
5.60%, 8/10/98 9,986
- ------------------------------------------------------------
Windmill Funding Corp.
5.61%, 10/14/98 9,886
- ------------------------------------------------------------
114,416
FINANCIAL SERVICES--10.0%
- ------------------------------------------------------------
(a)Bear Stearns Cos., Inc.
5.64%, 8/6/98 10,000
- ------------------------------------------------------------
(a)CS First Boston, Inc.
5.61%, 8/3/98 9,999
- ------------------------------------------------------------
(a)Goldman Sachs Group, L.P.
5.60%, 8/7/98 10,000
- ------------------------------------------------------------
(a)Lehman Brothers Holdings, Inc.
5.71%, 8/20/98 10,000
- ------------------------------------------------------------
(a)Merrill Lynch & Co., Inc.
5.62%, 8/4/98 10,000
- ------------------------------------------------------------
(a)Morgan Stanley, Dean Witter & Co.
5.61%, 9/18/98 10,000
- ------------------------------------------------------------
Salomon Smith Barney Holdings, Inc.
5.59%, 8/4/98 14,979
(a) 5.74%, 8/4/98 10,000
- ------------------------------------------------------------
84,978
HEALTH CARE--2.9%
- ------------------------------------------------------------
Baxter International, Inc.
5.60%, 8/14/98 - 9/23/98 24,857
- ------------------------------------------------------------
MANUFACTURING/INDUSTRIAL--3.5%
- ------------------------------------------------------------
Cooper Industries, Inc.
5.68%, 8/3/98 9,997
- ------------------------------------------------------------
Monsanto Co.
5.57% - 5.59%, 9/16/98 - 9/21/98 19,851
- ------------------------------------------------------------
29,848
<CAPTION>
VALUE
<S> <C>
MUNICIPAL OBLIGATION--1.2%
- ------------------------------------------------------------
California, Pollution Control Revenue
5.62%, 9/11/98 $ 10,000
- ------------------------------------------------------------
UTILITIES--1.2%
- ------------------------------------------------------------
Brazos River Authority, Texas
5.62%, 9/10/98 10,000
- ------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS--76.6%
(average maturity: 31 days) 652,610
- ------------------------------------------------------------
BANK OBLIGATIONS
CERTIFICATES OF DEPOSIT AND BANK NOTES--U.S. BANKS--16.8%
- ------------------------------------------------------------
(a)Amex Centurian Bank
5.62%, 8/5/98 10,000
- ------------------------------------------------------------
(a)AmSouth Bank of Alabama
5.54%, 8/24/98 9,999
- ------------------------------------------------------------
Bank of America, N.A.
5.58%, 8/24/98 10,000
- ------------------------------------------------------------
(a)Bank One
5.60%, 8/4/98 9,999
- ------------------------------------------------------------
(a)Bankers Trust Co.
5.58%, 8/3/98 9,996
- ------------------------------------------------------------
(a)Comerica Bank
5.55%, 9/22/98 9,999
- ------------------------------------------------------------
(a)FCC National Bank
5.55%, 8/3/98 9,994
- ------------------------------------------------------------
(a)First USA Bank
5.99%, 9/28/98 10,013
- ------------------------------------------------------------
Harris Trust and Savings Bank
5.56%, 9/9/98 10,000
- ------------------------------------------------------------
(a)Key Bank, N.A.
5.57%, 8/3/98 7,999
- ------------------------------------------------------------
MBNA America Bank, N.A.
5.65%, 9/14/98 10,000
- ------------------------------------------------------------
(a)Mellon Bank Corp.
5.60%, 8/7/98 9,999
- ------------------------------------------------------------
(a)J.P. Morgan & Co., Inc.
5.55%, 8/7/98 9,995
- ------------------------------------------------------------
Nationsbank, N.A.
5.58%, 11/2/98 15,000
- ------------------------------------------------------------
142,993
</TABLE>
<PAGE> 4
Cash Equivalent Fund 4
- --------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
INVESTMENTS AT JULY 31, 1998
(VALUE IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------
VALUE
CERTIFICATES OF DEPOSIT--FOREIGN BANKS--4.1%
- ---------------------------------------------------------
<S> <C>
(a)Banque Nationale de Paris
5.62%, 8/3/98 $ 10,000
- ---------------------------------------------------------
(a)National Bank of Canada
5.60%, 8/5/98 9,999
- ---------------------------------------------------------
(a)Svenska Handelsbanken
5.54%, 8/3/98 14,991
- ---------------------------------------------------------
34,990
- ---------------------------------------------------------
TOTAL BANK OBLIGATIONS--20.9%
(average maturity: 24 days) 177,983
- ---------------------------------------------------------
(C)REPURCHASE AGREEMENTS--1.8%
(average maturity: 46 days)
(Dated 7/98, collateralized by Federal Home
Loan Mortgage Corporation and Federal National
Mortgage Association securities)
- ---------------------------------------------------------
Goldman Sachs Group, L.P.
(held at The Bank of New York)
5.55%, 9/15/98 15,000
- ---------------------------------------------------------
<CAPTION>
VALUE
<S> <C>
U.S. GOVERNMENT AGENCY NOTE--2.3%
(average maturity: 4 days)
(a)Student Loan Marketing Association
5.45%, 8/4/98 $ 19,995
- ---------------------------------------------------------
TOTAL INVESTMENTS--101.6%
(average maturity: 29 days) 865,588
- ---------------------------------------------------------
LIABILITIES, LESS OTHER ASSETS--(1.6)% (13,996)
- ---------------------------------------------------------
NET ASSETS--100% $851,592
- ---------------------------------------------------------
</TABLE>
See accompanying Notes to Portfolios of Investments.
<PAGE> 5
Cash Equivalent Fund 5
- --------------------------------------------------------------------------------
GOVERNMENT SECURITIES PORTFOLIO
INVESTMENTS AT JULY 31, 1998
(VALUE IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------
SHORT-TERM NOTES VALUE
(Issued or guaranteed by U.S. Government
agencies or instrumentalities)
- -----------------------------------------------------------
<S> <C>
(a)Export-Import Bank of the United States
Cathay Pacific Airways Limited
5.75%, 10/16/98 $ 7,262
KA Leasing, Ltd.
5.81%, 8/13/98 12,286
Kuwait Investment Authority
5.72%, 8/13/98 7,519
VARIG Brazilian Airlines
5.81%, 10/15/98 4,700
- -----------------------------------------------------------
(a)Federal Farm Credit Banks
5.61%, 8/13/98 10,000
- -----------------------------------------------------------
(a)Federal Home Loan Bank
5.67%, 8/2/98 15,600
- -----------------------------------------------------------
(a)Federal National Mortgage Association
5.22%, 8/4/98 13,959
- -----------------------------------------------------------
(a)Overseas Private Investment Corp.
International Paper Co.
5.64%, 10/15/98 10,150
Omolon
5.55%, 8/4/98 3,889
- -----------------------------------------------------------
(a)Student Loan Marketing Association
5.27%, 8/4/98 85,809
- -----------------------------------------------------------
TOTAL SHORT-TERM NOTES--43.7%
(average maturity: 14 days) 171,174
- -----------------------------------------------------------
<CAPTION>
(c)REPURCHASE AGREEMENTS VALUE
(Dated 4/98 - 7/98, collateralized by Federal
Home Loan Mortgage Corporation, Federal National
Mortgage Association and Government National
Mortgage Association securities)
- -----------------------------------------------------------
<S> <C>
Bear, Stearns Cos., Inc.
(held at The Bank of New York)
5.55% - 5.58%, 8/5/98 - 10/14/98 $ 50,000
- -----------------------------------------------------------
CS First Boston, Inc.
(held at The Chase Manhattan Bank)
5.58% - 5.63%, 8/5/98 - 9/23/98 15,000
- -----------------------------------------------------------
Chase Securities, Inc.
(held at The Chase Manhattan Bank)
5.56% - 5.59%, 8/12/98 - 9/28/98 25,000
- -----------------------------------------------------------
Goldman Sachs Group, L.P.
(held at The Bank of New York)
5.55% - 5.56%, 8/26/98 - 9/30/98 9,000
- -----------------------------------------------------------
Lehman Government Securities, Inc.
(held at The Chase Manhattan Bank)
5.65%, 8/3/98 8,000
- -----------------------------------------------------------
Morgan Stanley Dean Witter & Co.
(held at The Bank of New York)
5.54% - 5.56%, 8/3/98 - 8/19/98 23,000
- -----------------------------------------------------------
Nomura Securities International, Inc.
(held at The Bank of New York)
5.57% - 5.60%, 10/1/98 - 10/21/98 56,000
- -----------------------------------------------------------
Salomon Smith Barney Holdings, Inc.
(held at The Bank of New York)
5.55% - 5.63%, 8/5/98 - 10/1/98 31,000
- -----------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS--55.4%
(average maturity: 44 days) 217,000
- -----------------------------------------------------------
TOTAL INVESTMENTS--99.1%
(average maturity: 31 days) 388,174
- -----------------------------------------------------------
CASH AND OTHER ASSETS,
LESS LIABILITIES--.9% 3,687
- -----------------------------------------------------------
NET ASSETS--100% $391,861
- -----------------------------------------------------------
</TABLE>
See accompanying Notes to Portfolios of Investments.
<PAGE> 6
Cash Equivalent Fund 6
- --------------------------------------------------------------------------------
TAX-EXEMPT PORTFOLIO
INVESTMENTS AT JULY 31, 1998
(VALUE IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------
(a)VARIABLE RATE DEMAND SECURITIES VALUE
<S> <C>
CALIFORNIA
- -----------------------------------------------------------
Los Angeles
Harbor Improvement Corp.
3.75% $ 6,000
Regional Airports Improvement Corp.
Lease Revenue
3.75% 3,845
DISTRICT OF COLUMBIA
- -----------------------------------------------------------
General Obligation
3.55% 5,720
GEORGIA
- -----------------------------------------------------------
Gainesville
Redevelopment Authority Revenue
3.60% 4,000
Laurens County
Solid Waste Disposal Revenue
3.65% 5,000
ILLINOIS
- -----------------------------------------------------------
Alsip
Industrial Development Revenue
3.55% 3,750
- -----------------------------------------------------------
Development Finance Authority
Adventist Health System
3.60% 7,000
Grecian Delight Foods Project
3.65% 8,300
Pollution Control Revenue
3.50% 3,000
- -----------------------------------------------------------
Rockford
Industrial Project Revenue
3.65% 4,000
- -----------------------------------------------------------
Student Assistance Commission
3.55% 4,800
INDIANA
- -----------------------------------------------------------
Ossian
Economic Development Revenue
3.70% 3,200
KANSAS
- -----------------------------------------------------------
Kansas City
Pollution Control Revenue
3.70% 17,835
KENTUCKY
- -----------------------------------------------------------
Boone County
Pollution Control Revenue
3.55% 8,000
<CAPTION>
VALUE
<S> <C>
MICHIGAN
- -----------------------------------------------------------
Strategic Fund Limited Obligation Revenue
Alpha Technology Corp.
4.15% $ 3,500
Continental Aluminum Project
3.65% 4,200
MINNESOTA
- -----------------------------------------------------------
Owatonna
Hospital Revenue
3.65% 5,500
NEVADA
- -----------------------------------------------------------
Department of Business and Industry
3.70% 4,700
NORTH CAROLINA
- -----------------------------------------------------------
Wake County
Pollution Control Financing Authority Revenue
4.25% 3,000
- -----------------------------------------------------------
Winston-Salem
Multi-Family Housing
3.60% 4,000
OHIO
- -----------------------------------------------------------
Butler County
Industrial Development Revenue
3.70% 4,025
- -----------------------------------------------------------
Medina County
Health Care Facilities Revenue
3.60% 3,000
OKLAHOMA
- -----------------------------------------------------------
Development Finance Authority Revenue
3.70% 3,200
PENNSYLVANIA
- -----------------------------------------------------------
Delaware County
Redevelopment Authority
4.27% 8,000
- -----------------------------------------------------------
Delaware Valley
Regional Finance Authority
3.45% 7,500
- -----------------------------------------------------------
Emmaus
General Authority Revenue
3.50% 9,900
- -----------------------------------------------------------
Lehigh County
Industrial Development Authority
3.55% 4,900
TENNESSEE
- -----------------------------------------------------------
Coffee County
Eagle-Picher Hillsdale Tool Project
3.75% 4,000
</TABLE>
<PAGE> 7
Cash Equivalent Fund 7
- --------------------------------------------------------------------------------
TAX-EXEMPT PORTFOLIO
INVESTMENTS AT JULY 31, 1998
(VALUE IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------
VALUE
<S> <C>
TEXAS
- -----------------------------------------------------------
Waxahachie
Industrial Development Authority
3.95% $ 4,100
VERMONT
- -----------------------------------------------------------
Economic Development Authority
4.00% 5,000
WASHINGTON
- -----------------------------------------------------------
Port of Vancouver
3.55% 5,000
- -----------------------------------------------------------
TOTAL VARIABLE RATE
DEMAND SECURITIES--50.4%
(average maturity: 7 days) 167,975
- -----------------------------------------------------------
OTHER SECURITIES
ALASKA
- -----------------------------------------------------------
Valdez
Marine Terminal Revenue
3.55% - 3.75%, 8/13/98 - 9/14/98 5,600
ARIZONA
- -----------------------------------------------------------
Salt River Project
Agricultural Improvement and Power District
3.55%, 9/18/98 7,700
FLORIDA
- -----------------------------------------------------------
Jacksonville
Electric Authority
3.55% - 3.65%, 8/12/98 - 9/17/98 11,600
- -----------------------------------------------------------
Orlando
Capital Improvement Revenue
3.60%, 9/23/98 2,600
- -----------------------------------------------------------
Sunshine State
Governmental Financing Commission
3.60%, 9/23/98 3,100
GEORGIA
- -----------------------------------------------------------
Municipal Electric Authority
3.60% - 3.65%, 9/22/98 - 9/23/98 7,400
ILLINOIS
- -----------------------------------------------------------
Decatur
Water Revenue
4.25%, 8/20/98 3,000
- -----------------------------------------------------------
Educational Facilities Authority
3.60% - 3.75%, 9/24/98 - 10/20/98 8,500
- -----------------------------------------------------------
Health Facilities Authority
3.80%, 8/14/98 7,700
<CAPTION>
VALUE
<S> <C>
INDIANA
- -----------------------------------------------------------
Jasper County
Pollution Control Revenue
3.60%, 10/20/98 $ 8,000
KANSAS
- -----------------------------------------------------------
Burlington
Pollution Control Revenue
3.65%, 8/13/98 - 11/13/98 7,025
KENTUCKY
- -----------------------------------------------------------
Danville
Multi-City Lease Revenue
3.55% - 3.75%, 8/13/98 - 10/14/98 10,570
LOUISIANA
- -----------------------------------------------------------
Industrial District of West Baton Rouge
Pollution Conrol Revenue
3.70%, 8/11/98 5,000
- -----------------------------------------------------------
Public Facilities Authority
3.65%, 8/11/98 6,100
MARYLAND
- -----------------------------------------------------------
Anne Arundel County
Port Facilities Revenue
3.65%, 9/23/98 3,380
NEBRASKA
- -----------------------------------------------------------
Omaha
Public Power District
3.65% - 3.75%, 9/15/98 - 11/13/98 4,000
NEW YORK
- -----------------------------------------------------------
Long Island Power Authority
3.70% - 3.75%, 8/13/98 - 9/9/98 8,000
- -----------------------------------------------------------
Power Authority of New York
3.75%, 9/11/98 5,000
TEXAS
- -----------------------------------------------------------
Austin
Combined Utility System
3.80%, 8/14/98 2,747
- -----------------------------------------------------------
Dallas
Area Rapid Transit
3.65% - 3.75%, 8/13/98 - 9/14/98 7,400
- -----------------------------------------------------------
Houston
Water and Sewer System
3.75%, 8/12/98 - 9/17/98 9,000
- -----------------------------------------------------------
Municipal Power Agency
3.65%, 8/14/98 7,000
</TABLE>
<PAGE> 8
Cash Equivalent Fund 8
- --------------------------------------------------------------------------------
TAX-EXEMPT PORTFOLIO
INVESTMENTS AT JULY 31, 1998
(VALUE IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------
VALUE
<S> <C>
Public Finance Authority
3.65%, 8/12/98 $ 3,500
- -----------------------------------------------------------
Tax and Revenue Anticipation Notes
3.69%, 8/31/98 3,002
UTAH
- -----------------------------------------------------------
General Obligation
3.75%, 9/11/98 3,500
VIRGINIA
- -----------------------------------------------------------
Chesterfield County
Industrial Development Authority
3.55%, 8/13/98 4,000
- -----------------------------------------------------------
Louisa County
Industrial Development Authority
3.65%, 8/17/98 - 9/22/98 5,400
<CAPTION>
VALUE
<S> <C>
WISCONSIN
- -----------------------------------------------------------
Transportation Revenue
3.75%, 8/12/98 $ 4,394
- -----------------------------------------------------------
TOTAL OTHER
SECURITIES--49.2%
(average maturity: 38 days) 164,218
- -----------------------------------------------------------
TOTAL INVESTMENTS--99.6%
(average maturity: 22 days) 332,193
- -----------------------------------------------------------
CASH AND OTHER ASSETS,
LESS LIABILITIES--.4% 1,234
- -----------------------------------------------------------
NET ASSETS--100% $333,427
- -----------------------------------------------------------
</TABLE>
See accompanying Notes to Portfolios of Investments.
<PAGE> 9
Cash Equivalent Fund 9
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIOS OF INVESTMENTS
Interest rates represent annualized yield to date of maturity, except for
variable rate securities described in Note (a). For each security, cost (for
financial reporting and federal income tax purposes) and carrying value are the
same. Likewise, carrying value approximates principal amount.
(a) Variable rate securities. The rates shown are the current rates at July 31,
1998. The dates shown represent the demand date or the next interest rate change
date. Securities in the Tax-Exempt Portfolio shown without a date are payable
within five business days and are backed by credit support agreements from banks
or insurance institutions.
(b) Illiquid securities. At July 31, 1998, the value of illiquid securities was
$9,997,000 in the Money Market Portfolio, which represented 1.2% of net assets.
(c) Repurchase agreements are fully collateralized by U.S. government
securities. All collateral is held at the Fund's custodian bank, Investors
Fiduciary Trust Company, or at subcustodian banks, as indicated. The collateral
is monitored daily by the Fund so that its market value exceeds the carrying
value of the repurchase agreement.
See accompanying Notes to Financial Statements.
<PAGE> 10
Cash Equivalent Fund 10
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
THE BOARD OF TRUSTEES AND SHAREHOLDERS
CASH EQUIVALENT FUND
We have audited the accompanying statement of assets and liabilities, including
the portfolios of investments, of the Money Market, Government Securities and
Tax-Exempt Portfolios, comprising Cash Equivalent Fund, as of July 31, 1998, and
the related statements of operations for the year then ended and changes in net
assets for each of the two years in the period then ended, and the financial
highlights for each of the fiscal periods since 1994. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of July
31, 1998, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the Portfolios comprising Cash Equivalent Fund at July 31, 1998, the results
of their operations for the year then ended, the changes in their net assets for
each of the two years in the period then ended and the financial highlights for
each of the fiscal periods since 1994, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
September 17, 1998
<PAGE> 11
Cash Equivalent Fund 11
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
MONEY GOVERNMENT
MARKET SECURITIES TAX-EXEMPT
ASSETS PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
Investments, at amortized cost:
Short-term securities $850,588 171,174 332,193
- -------------------------------------------------------------------------------------------------------
Repurchase agreements 15,000 217,000 --
- -------------------------------------------------------------------------------------------------------
Cash -- 2,981 645
- -------------------------------------------------------------------------------------------------------
Receivable for:
Interest 2,195 2,306 1,663
- -------------------------------------------------------------------------------------------------------
Fund shares sold 249 -- --
- -------------------------------------------------------------------------------------------------------
Total assets 868,032 393,461 334,501
- -------------------------------------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- -------------------------------------------------------------------------------------------------------
Cash overdraft 11,950 -- --
- -------------------------------------------------------------------------------------------------------
Payable for:
Dividends 1,779 810 459
- -------------------------------------------------------------------------------------------------------
Fund shares redeemed 1,495 341 209
- -------------------------------------------------------------------------------------------------------
Management fee 143 66 64
- -------------------------------------------------------------------------------------------------------
Distribution services fee 267 124 96
- -------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 279 107 100
- -------------------------------------------------------------------------------------------------------
Trustees' fees and other 527 152 146
- -------------------------------------------------------------------------------------------------------
Total liabilities 16,440 1,600 1,074
- -------------------------------------------------------------------------------------------------------
Net assets applicable to shares outstanding $851,592 391,861 333,427
- -------------------------------------------------------------------------------------------------------
THE PRICING OF SHARES
- -------------------------------------------------------------------------------------------------------
Shares outstanding 851,592 391,861 333,427
- -------------------------------------------------------------------------------------------------------
Net asset value and redemption price per share $1.00 1.00 1.00
- -------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 12
Cash Equivalent Fund 12
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
MONEY GOVERNMENT
MARKET SECURITIES TAX-EXEMPT
PORTFOLIO PORTFOLIO PORTFOLIO
-----------------------------------------
<S> <C> <C> <C>
INTEREST INCOME $53,253 23,387 16,070
- -------------------------------------------------------------------------------------------------------
EXPENSES:
Management fee 1,868 834 945
- -------------------------------------------------------------------------------------------------------
Distribution services fee 3,530 1,577 1,416
- -------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 2,689 949 321
- -------------------------------------------------------------------------------------------------------
Reports to shareholders 81 34 42
- -------------------------------------------------------------------------------------------------------
Registration costs 100 46 50
- -------------------------------------------------------------------------------------------------------
Professional fees 47 20 21
- -------------------------------------------------------------------------------------------------------
Trustees' fees and other 108 54 33
- -------------------------------------------------------------------------------------------------------
Total expenses 8,423 3,514 2,828
- -------------------------------------------------------------------------------------------------------
Net investment income $44,830 19,873 13,242
- -------------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED JULY 31, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
MONEY MARKET GOVERNMENT SECURITIES TAX-EXEMPT
PORTFOLIO PORTFOLIO PORTFOLIO
-----------------------------------------------------------------------------
1998 1997 1998 1997 1998 1997
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS, DIVIDENDS AND
CAPITAL SHARE ACTIVITY
Net investment income $ 44,830 68,545 19,873 34,785 13,242 18,954
- -----------------------------------------------------------------------------------------------------------------------------
Dividends to shareholders from net
investment income (44,830) (68,545) (19,873) (34,785) (13,242) (18,954)
- -----------------------------------------------------------------------------------------------------------------------------
Capital share transactions (dollar amounts
and number of shares are the same):
Shares sold 3,846,037 5,384,970 3,401,622 3,223,496 1,244,764 2,237,435
- -----------------------------------------------------------------------------------------------------------------------------
Shares issued in reinvestment of dividends 44,898 66,935 19,761 33,510 13,241 18,560
- -----------------------------------------------------------------------------------------------------------------------------
3,890,935 5,451,905 3,421,383 3,257,006 1,258,005 2,255,995
Shares redeemed (4,009,859) (7,255,984) (3,433,559) (4,447,097) (1,369,517) (2,742,620)
- -----------------------------------------------------------------------------------------------------------------------------
Net decrease from capital share transactions
and total decrease in net assets (118,924) (1,804,079) (12,176) (1,190,091) (111,512) (486,625)
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 970,516 2,774,595 404,037 1,594,128 444,939 931,564
- -----------------------------------------------------------------------------------------------------------------------------
End of year $ 851,592 970,516 391,861 404,037 333,427 444,939
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 13
Cash Equivalent Fund 13
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 DESCRIPTION OF THE
FUND Cash Equivalent Fund is an open-end management
investment company organized as a business
trust under the laws of Massachusetts
currently offering three series of shares
(Portfolios). The Money Market Portfolio
invests primarily in short-term high quality
obligations of major banks and corporations.
The Government Securities Portfolio invests
exclusively in obligations issued or
guaranteed by the U.S. Government, its
agencies or instrumentalities and repurchase
agreements thereon. The Tax-Exempt Portfolio
invests in short-term high quality municipal
securities.
2 SIGNIFICANT
ACCOUNTING POLICIES INVESTMENT VALUATION
Investments are stated at amortized cost,
which approximates market value. In the event
that a deviation of 1/2 of 1% or more exists
between a Portfolio's $1.00 per share net
asset value, calculated at amortized cost, and
the net asset value calculated by reference to
market-based values, or if there is any other
deviation that the Board of Trustees believes
would result in a material dilution to
shareholders or purchasers, the Board of
Trustees will promptly consider what action
should be initiated.
INVESTMENT TRANSACTIONS AND INTEREST INCOME
Investment transactions are accounted for on
the trade date (date the order to buy or sell
is executed). Interest income is recorded on
the accrual basis and includes amortization of
premium and discount on investments.
EXPENSES
Expenses arising in connection with a
Portfolio are allocated to that Portfolio.
Other Fund expenses are allocated among the
Portfolios in proportion to their relative net
assets.
FUND SHARE VALUATION AND DIVIDENDS TO
SHAREHOLDERS
Fund shares are sold and redeemed on a
continuous basis at net asset value. On each
day that the New York Stock Exchange is open
for trading, each Portfolio determines its net
asset value per share (NAV) by dividing the
total value of the Portfolio's investments and
other assets, less liabilities, by the number
of Portfolio shares outstanding. The NAV is
determined at 11:00 a.m., 1:00 p.m. and 3:00
p.m. Chicago time for the Money Market and
Government Securities Portfolios and at 11:00
a.m. and 3:00 p.m. Chicago time for the
Tax-Exempt Portfolio. Each Portfolio declares
a daily dividend, equal to its net investment
income for that day, payable monthly. Net
investment income consists of all interest
income plus (minus) all realized gains
(losses) on portfolio securities, minus all
expenses of the Portfolio.
FEDERAL INCOME TAXES
Each Portfolio's policy is to comply with the
requirements of the Internal Revenue Code, as
amended, which are applicable to regulated
investment companies, and to distribute all of
its taxable income to its shareholders.
Accordingly, each Portfolio paid no federal
income taxes and no federal income tax
provision was required.
3 TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT
The Fund has a management agreement with
Scudder Kemper Investments, Inc. (Scudder
Kemper) and pays a monthly investment
management fee for the Money Market and
Government Securities Portfolios of 1/12 of
the annual rate of .22% of the first $500
million of combined average daily net assets
of those Portfolios declining to .15% of
combined average daily net assets in excess of
$3 billion. The Tax-Exempt Portfolio pays a
monthly investment management fee of 1/12 of
the annual rate of .22% of the first $500
million of average daily net assets of such
Portfolio declining
<PAGE> 14
Cash Equivalent Fund 14
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
to .15% of average daily net assets in
excess of $3 billion. During the year
ended July 31, 1998, the Fund incurred
management fees of $3,647,000.
DISTRIBUTION AGREEMENT
The Fund also has an administration,
shareholder services and distribution
agreement with Kemper Distributors, Inc.
(KDI). For its services as primary
distributor, the Fund pays KDI an annual fee
of .38% of average daily net assets for the
Money Market and Government Securities
Portfolios and .33% of average daily net
assets for the Tax-Exempt Portfolio. For the
year ended July 31, 1998, the Fund incurred
distribution fees of $6,523,000. KDI has
related service agreements with various firms
to provide cash management and other services
for Fund shareholders. Under these agreements,
KDI pays such firms based on the average daily
net assets of those accounts that they
maintain and service at an annual rate ranging
from .15% to .40% for the Money Market and
Government Securities Portfolios, and from
.15% to .33% for the Tax-Exempt Portfolio.
During the year ended July 31, 1998, KDI paid
fees of $6,256,000 to various firms pursuant
to the related service agreements.
SHAREHOLDER SERVICES AGREEMENT
Pursuant to a services agreement with the
Fund's transfer agent, Kemper Service Company
(KSvC) is the shareholder service agent of the
Fund. Under the agreement, KSvC received
shareholder services fees of $2,948,000 for
the year ended July 31, 1998.
OFFICERS AND TRUSTEES
Certain officers or trustees of the Fund are
also officers or directors of Scudder Kemper.
During the year ended July 31, 1998, the Fund
made no payments to its officers and incurred
trustees' fees of $74,000 to independent
trustees.
<PAGE> 15
Cash Equivalent Fund 15
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JULY 31,
MONEY MARKET PORTFOLIO 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note:
The Money Market Portfolio's total return for the year ended July 31, 1995
includes the effect of a capital contribution from the investment manager.
Without the capital contribution, the total return would have been 4.28%.
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
GOVERNMENT SECURITIES PORTFOLIO 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
TAX-EXEMPT PORTFOLIO 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 16
Cash Equivalent Fund 16
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
TAX INFORMATION
All of the dividends from the Money Market and Government Securities Portfolios
are taxable as ordinary income. These dividends, whether received in cash or
reinvested in shares, must be included in your federal income tax return and
must be reported by the Portfolio to the Internal Revenue Service in accordance
with U.S. Treasury Department Regulations.
Of the dividends paid from the Tax-Exempt Portfolio for the taxable year ended
July 31, 1998, 100% are designated as exempt interest dividends for federal
income tax purposes. However, a portion of the dividends may be includable in
the alternative minimum tax calculation.
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns.
<PAGE> 17
Cash Equivalent
Fund
Annual Report
July 31, 1998
INVESTMENT MANAGER
Scudder Kemper Investments, Inc.
PRINCIPAL UNDERWRITER
Kemper Distributors, Inc.
222 South Riverside Plaza
Chicago, IL 60606
This report is not to be distributed unless preceded or
accompanied by a prospectus.
CEF-2 1057670 9/98 [LOGO] printed on recycled paper
