ANNUAL REPORT
--------------------------------------------------------------------------------
Cash Equivalent
Fund
July 31, 2000
Principal Underwriter
Kemper Distributors, Inc.
222 S. Riverside Plaza
Chicago, IL 60606
This report is not to be distributed unless preceded or accompanied by a
prospectus.
<PAGE>
Dear Shareholder:
We appreciate your decision to invest in Cash Equivalent Fund. To provide you
with an update of holdings, on the following pages you'll find the Fund's annual
report for the year ended July 31, 2000 for the following portfolios:
o Money Market Portfolio
o Government Securities Portfolio
o Tax-Exempt Portfolio
Briefly, for the year ending July 31, 2000 the Fund's portfolios registered
performance and achieved their stated objectives of providing maximum current
income while maintaining stability of principal.
Portfolio Performance
As of July 31, 2000
-------------------------------------------------------------------
Annualized Net Yield
12-Month SEC 7-Day
-------------------------------------------------------------------
Money Market Portfolio 5.19% 5.93%
-------------------------------------------------------------------
Government Securities Portfolio 5.04% 5.76%
-------------------------------------------------------------------
Tax-Exempt Portfolio 3.20% 3.64%
-------------------------------------------------------------------
Tax-Exempt Portfolio
(equivalent taxable yield) 5.09% 5.79%
-------------------------------------------------------------------
Thank you again for your investment. We look forward to serving your investment
needs for years to come.
/s/Frank J. Rachwalski
Frank J. Rachwalski
Vice President and Lead Portfolio Manager
September 8, 2000
Frank Rachwalski is a Managing Director of Scudder Kemper Investments, Inc. and
is Vice President and Lead Portfolio Manager of all Scudder Kemper Money Market
Funds. Mr. Rachwalski holds B.B.A. and M.B.A. degrees from Loyola University,
Chicago.
Notes
Yields are historical, may fluctuate, and do not guarantee future performance.
The Portfolios' net yields are the sum of the daily dividend rates for the
period.
The equivalent taxable yield allows you to compare the performance of taxable
money market funds. For the Tax-Exempt Portfolio, the equivalent taxable yield
is based upon the marginal income tax rate of 37.1%. Income may be subject to
local taxes and for some investors, the alternative minimum tax.
Like all money market 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 your investment at $1.00 per share,
it is possible to lose money.
The views expressed in this report reflect those of the portfolio manager only
through the end of the period stated above. The manager's views are subject to
change at any time, based on market and other conditions.
1
<PAGE>
Portfolio of Investments at July 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
---------------------------------------------------------------------------------------------------------
Money Market Portfolio
Repurchase Agreements -- 0.7%
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
State Street Bank and Trust Company, 6.53%, to be repurchased at
$5,586,013 on 8/1/2000** (Cost $5,585,000) $ 5,585,000 $ 5,585,000
---------------------------------------------------------------------------------------------------------
Commercial Paper -- 79.6%
---------------------------------------------------------------------------------------------------------
Alpine Securitization Corp., 6.65%, 8/10/2000 8,000,000 7,986,700
---------------------------------------------------------------------------------------------------------
American Honda Finance Corp., 6.7%*, 10/26/2000 10,000,000 10,000,000
---------------------------------------------------------------------------------------------------------
Amsterdam Funding Corp., 6.65%, 8/4/2000 15,000,000 14,991,688
---------------------------------------------------------------------------------------------------------
Asset Portfolio Funding, 6.55%, 10/23/2000 15,000,000 14,773,479
---------------------------------------------------------------------------------------------------------
Associates Corp., 6.77%*, 9/15/2000 10,000,000 10,000,000
---------------------------------------------------------------------------------------------------------
Barton Capital Corp., 6.55%, 9/8/2000 14,440,000 14,340,163
---------------------------------------------------------------------------------------------------------
Baxter International Inc., 6.6%, 8/14/2000 5,000,000 4,988,083
---------------------------------------------------------------------------------------------------------
Bavaria Universal Funding, 6.55%, 8/4/2000 15,000,000 14,991,812
---------------------------------------------------------------------------------------------------------
Brazos River Authority, TX, 6.66%*, 8/16/2000 15,000,000 15,000,000
---------------------------------------------------------------------------------------------------------
CIT Group Holdings, Inc., 6.65%-6.68%*, 8/1/2000-10/16/2000 20,000,000 19,986,829
---------------------------------------------------------------------------------------------------------
Cooper Industries Inc., 6.6%, 8/14/2000 24,000,000 23,942,800
---------------------------------------------------------------------------------------------------------
Countrywide Home Loans, Inc., 6.7%*, 8/21/2000 20,000,000 20,000,000
---------------------------------------------------------------------------------------------------------
Forrestal Funding Master Trust, 6.62%, 9/15/2000 20,000,000 19,834,500
---------------------------------------------------------------------------------------------------------
Fortis Finance, NV, 6.54%, 8/9/2000 20,000,000 19,970,933
---------------------------------------------------------------------------------------------------------
Fountain Square Commercial Funding, 6.56%, 9/25/2000 10,933,000 10,823,427
---------------------------------------------------------------------------------------------------------
GTE Capital Corp., 6.3%*, 9/10/2000 20,000,000 19,993,333
---------------------------------------------------------------------------------------------------------
Galaxy Funding Corp., 6.56%, 9/7/2000 15,000,000 14,898,867
---------------------------------------------------------------------------------------------------------
Giro Funding US Corp., 6.55%, 10/13/2000 15,000,000 14,800,771
---------------------------------------------------------------------------------------------------------
Goldman Sachs Group, L.P., 6.64%-6.65%*, 8/1/2000-8/5/2000 20,000,000 20,000,000
---------------------------------------------------------------------------------------------------------
Heller Financial, Inc., 6.25%-6.93%*, 10/17/2000-3/1/2001 26,000,000 25,968,856
---------------------------------------------------------------------------------------------------------
International Securitization Corp., 6.52%, 8/30/2000 15,000,000 14,921,217
---------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., 6.61%*, 8/22/2000 15,000,000 14,998,946
---------------------------------------------------------------------------------------------------------
Moat Funding, LLC, 6.7%, 10/2/2000 15,000,000 14,826,917
---------------------------------------------------------------------------------------------------------
Monte Rosa Capital Corp., 6.55%, 9/18/2000 1,882,000 1,865,564
---------------------------------------------------------------------------------------------------------
National Rural Utilities Cooperative Finance Corp., 6.71%*, 10/20/2000 15,000,000 15,000,000
---------------------------------------------------------------------------------------------------------
Northern Indiana Public Service, 6.53%, 8/8/2000 10,000,000 9,987,303
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
Principal
Amount Value
---------------------------------------------------------------------------------------------------------
Old Line Funding Corp., 6.55%, 8/1/2000 $ 14,042,000 $ 14,042,000
---------------------------------------------------------------------------------------------------------
Park Avenue Receivables, 6.52%, 8/15/2000 14,393,000 14,356,506
---------------------------------------------------------------------------------------------------------
Prudential Funding Corp., 6.86%*, 9/18/2000 10,000,000 10,007,213
---------------------------------------------------------------------------------------------------------
Quincy Capital Corp., 6.52%, 8/9/2000 15,000,000 14,978,267
---------------------------------------------------------------------------------------------------------
Scaldis Capital, LLC, 6.73%, 12/1/2000 30,057,000 29,371,483
---------------------------------------------------------------------------------------------------------
Sigma Finance, Inc., 6.55%, 10/11/2000 15,000,000 14,806,229
---------------------------------------------------------------------------------------------------------
Stellar Funding Group, 6.55%, 8/4/2000 13,456,000 13,448,655
---------------------------------------------------------------------------------------------------------
Superior Funding Capital Corp., 6.55%, 8/7/2000-8/29/2000 30,000,000 29,907,208
---------------------------------------------------------------------------------------------------------
Surrey Funding Corp., 6.53%, 8/22/2000 15,000,000 14,942,863
---------------------------------------------------------------------------------------------------------
Sweetwater Capital Corp., 6.54%, 8/14/2000 15,000,000 14,964,575
---------------------------------------------------------------------------------------------------------
Thunder Bay Funding, Inc., 6.55%, 9/8/2000 15,000,000 14,896,292
---------------------------------------------------------------------------------------------------------
Variable Funding Corp., 6.54%, 10/13/2000 15,000,000 14,801,075
---------------------------------------------------------------------------------------------------------
WCP Funding Inc., 6.53%, 9/8/2000 15,000,000 14,896,608
---------------------------------------------------------------------------------------------------------
Total Commercial Paper (Cost $604,311,162) 604,311,162
---------------------------------------------------------------------------------------------------------
Certificates of Deposit and Bank Notes -- 19.7%
---------------------------------------------------------------------------------------------------------
American Express Centurian Bank, 6.6%-6.61%*, 8/5/2000-8/19/2000 20,000,000 19,998,314
---------------------------------------------------------------------------------------------------------
Bank of Novia Scotia, 6.65%*, 8/14/2000 30,000,000 30,000,000
---------------------------------------------------------------------------------------------------------
Comerica Bank, 6.64%*, 8/1/2000 15,000,000 14,995,129
---------------------------------------------------------------------------------------------------------
CIBC, 6.65%*, 8/1/2000 10,000,000 9,995,167
---------------------------------------------------------------------------------------------------------
First Union National Bank, 6.67%*, 8/1/2000 10,000,000 10,000,000
---------------------------------------------------------------------------------------------------------
Key Bank Corp., 6.76%*, 8/25/2000 15,000,000 14,995,601
---------------------------------------------------------------------------------------------------------
Mellon Bank, NA, 6.82%*, 8/30/2000 10,000,000 9,999,762
---------------------------------------------------------------------------------------------------------
Merita Bank, 6.62%*, 8/29/2000 10,000,000 10,000,000
---------------------------------------------------------------------------------------------------------
Skandinaviska Enskilda Banken, 6.63%*, 8/29/2000 15,000,000 14,999,548
---------------------------------------------------------------------------------------------------------
U.S. Bank, NA, North Dakota, 6.68%*, 8/1/2000 15,000,000 15,000,000
---------------------------------------------------------------------------------------------------------
Total Certificates of Deposit and Bank Notes (Cost $149,983,521) 149,983,521
---------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $759,879,683) (a) $ 759,879,683
---------------------------------------------------------------------------------------------------------
</TABLE>
Interest rates represent annualized yield to date of maturity, except for
floating rate securities described below.
* Floating rate notes are securities whose yields vary with a designated
market index or market rate, such as the coupon-equivalent of the U.S.
Treasury bill rate. These securities are shown at their rate as of July
31, 2000. The dates shown represent the demand date or next interest
rate change date.
** Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities.
(a) Cost for federal income tax purposes was $759,879,683.
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
Portfolio of Investments at July 31, 2000
<TABLE>
<CAPTION>
Principal Value
Amount
---------------------------------------------------------------------------------------------------------------------
Government Securities Portfolio
Repurchase Agreements** -- 48.3%
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Bear Stearns, Inc., 6.53%, to be repurchased at $35,019,046 on 8/3/2000 $ 35,000,000 $ 35,000,000
---------------------------------------------------------------------------------------------------------------------
First Boston, Inc., 6.5%, to be repurchased at $20,003,611 on 8/1/2000 20,000,000 20,000,000
---------------------------------------------------------------------------------------------------------------------
Goldman Sachs, Inc., 6.55%, to be repurchased at $35,044,576 on 8/7/2000 35,000,000 35,000,000
---------------------------------------------------------------------------------------------------------------------
Lehman Bros., Inc., 6.51%, to be repurchased at $25,018,083 on 8/4/2000 25,000,000 25,000,000
---------------------------------------------------------------------------------------------------------------------
Merrill Lynch, Inc., 6.5%, to be repurchased at $45,024,375 on 8/3/2000 45,000,000 45,000,000
---------------------------------------------------------------------------------------------------------------------
Salomon Bros., Inc., 6.65%, to be repurchased at $40,007,389 on 8/1/2000 40,000,000 40,000,000
---------------------------------------------------------------------------------------------------------------------
State Street Bank and Trust Company, 6.53%, to be repurchased at $14,421,615 on
8/1/2000 14,419,000 14,419,000
---------------------------------------------------------------------------------------------------------------------
Total Repurchase Agreements (Cost $214,419,000) 214,419,000
---------------------------------------------------------------------------------------------------------------------
Short-Term Notes -- 51.7%
---------------------------------------------------------------------------------------------------------------------
Federal Agricultural Mortgage Corporation, 6.59%*, 8/1/2000 23,000,000 23,000,148
---------------------------------------------------------------------------------------------------------------------
Federal Farm Credit Bank, 6.52%*, 8/1/2000 10,000,000 9,996,554
---------------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank, 5.14%-6.68%*, 8/2/2000-8/27/2000 105,500,000 105,433,614
---------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 6.4%-6.53%*, 9/21/2000-2/8/2001 25,000,000 24,887,612
---------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Association, 6.48%-7.26%*, 8/1/2000-5/24/2001 42,500,000 42,492,598
---------------------------------------------------------------------------------------------------------------------
Overseas Private Investment Corp., 6.84%*, 8/1/2000 1,667,000 1,667,000
---------------------------------------------------------------------------------------------------------------------
Student Loan Marketing Association, 6.45%-6.84%*, 8/1/2000 22,500,000 22,491,444
---------------------------------------------------------------------------------------------------------------------
Total Short-Term Notes (Cost $229,968,970) 229,968,970
---------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $444,387,970) (a) $ 444,387,970
---------------------------------------------------------------------------------------------------------------------
</TABLE>
Interest rates represent annualized yield to date of maturity, except for
floating rate securities described below.
* Floating rate notes are securities whose yields vary with a designated
market index or market rate, such as the coupon-equivalent of the U.S.
Treasury bill rate. These securities are shown at their current rate as
of July 31, 2000. The dates shown represents the demand date or next
interest rate change date.
** Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities.
(a) Cost for federal income tax purposes was $444,387,970.
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Portfolio of Investments at July 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
---------------------------------------------------------------------------------------------------------------------
Tax-Exempt Portfolio
Variable Rate Demand Securities* -- 62.3%
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Alabama
---------------------------------------------------------------------------------------------------------------------
Birmingham
Special Care Facilities Finance Authority, 4.5% $ 2,000,000 $ 2,000,000
---------------------------------------------------------------------------------------------------------------------
Mobile
Special Care Facilities Finance Authority, 4.5% 2,000,000 2,000,000
---------------------------------------------------------------------------------------------------------------------
California
---------------------------------------------------------------------------------------------------------------------
Edison
California Pollution Control Revenue, 4.35% 1,200,000 1,200,000
---------------------------------------------------------------------------------------------------------------------
Los Angeles
Regal Airports Improvement Corp. Revenue, 4.4% 2,000,000 2,000,000
Harbor Improvement Corp., 4.4% 6,900,000 6,900,000
---------------------------------------------------------------------------------------------------------------------
Florida
---------------------------------------------------------------------------------------------------------------------
Collier County
Health Facilities Hospital Revenue, 4.35% 2,900,000 2,900,000
---------------------------------------------------------------------------------------------------------------------
Housing Finance Agency, 4.3% 2,000,000 2,000,000
---------------------------------------------------------------------------------------------------------------------
Orange County
Presbyterian Retirement Community, 4.3% 3,700,000 3,700,000
---------------------------------------------------------------------------------------------------------------------
Sunshine State Government Finance Committee Revenue, 4.3% 2,000,000 2,000,000
---------------------------------------------------------------------------------------------------------------------
University of N. Florida Capital Improvement Revenue, 4.35% 4,000,000 4,000,000
---------------------------------------------------------------------------------------------------------------------
Georgia
---------------------------------------------------------------------------------------------------------------------
Laurens County
Development Authority Revenue, 4.4% 5,000,000 5,000,000
---------------------------------------------------------------------------------------------------------------------
Illinois
---------------------------------------------------------------------------------------------------------------------
Chicago
O'Hare Airport -- American Airlines, Inc. Project, 4.3% 2,300,000 2,300,000
---------------------------------------------------------------------------------------------------------------------
Development Finance Authority
Grecian Delights Foods, Inc. Project, 4.35% 8,300,000 8,300,000
---------------------------------------------------------------------------------------------------------------------
Quad Cities
Watts Trucking Service Project, 4.5% 3,500,000 3,500,000
---------------------------------------------------------------------------------------------------------------------
Indiana
---------------------------------------------------------------------------------------------------------------------
Fort Wayne
General Motors Corp. Project, 4.4% 2,480,000 2,480,000
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Principal
Amount Value
---------------------------------------------------------------------------------------------------------------------
Health Facilities Finance Authority, 4.5% $ 5,000,000 $ 5,000,000
---------------------------------------------------------------------------------------------------------------------
Jasper County
Northern Indiana Public Services Project, 4.25% 3,300,000 3,300,000
---------------------------------------------------------------------------------------------------------------------
Kentucky
---------------------------------------------------------------------------------------------------------------------
Boone County
Pollution Control Revenue, 4.45% 8,000,000 8,000,000
---------------------------------------------------------------------------------------------------------------------
Glasgow
Ply-Tech Corp. Project, 4.5% 3,180,000 3,180,000
---------------------------------------------------------------------------------------------------------------------
Mason County
Pollution Control Revenue, 4.35% 8,300,000 8,300,000
---------------------------------------------------------------------------------------------------------------------
Mayfield
Multi-City Lease Revenue, 4.4% 2,280,000 2,280,000
---------------------------------------------------------------------------------------------------------------------
Lousiana
---------------------------------------------------------------------------------------------------------------------
Offshore Term Authority Revenue, 4.2% 2,000,000 2,000,000
---------------------------------------------------------------------------------------------------------------------
Michigan
---------------------------------------------------------------------------------------------------------------------
Sterling Heights
Kunath Enterprises, LLC, 4.5% 2,700,000 2,700,000
---------------------------------------------------------------------------------------------------------------------
Strategic Fund Revenue, 4.45%-4.5% 6,850,000 6,850,000
---------------------------------------------------------------------------------------------------------------------
Missouri
---------------------------------------------------------------------------------------------------------------------
Environmental Improvement and Energy Reserve Authority, 4.35% 2,460,000 2,460,000
---------------------------------------------------------------------------------------------------------------------
Nevada
---------------------------------------------------------------------------------------------------------------------
Dept. of Business and Industrial Development, 4.4% 3,300,000 3,300,000
---------------------------------------------------------------------------------------------------------------------
New York
---------------------------------------------------------------------------------------------------------------------
New York City
General Obligation, 4.4% 7,200,000 7,200,000
---------------------------------------------------------------------------------------------------------------------
Ohio
---------------------------------------------------------------------------------------------------------------------
Higher Education Facilities Authority, 4.4% 2,260,000 2,260,000
---------------------------------------------------------------------------------------------------------------------
Oklahoma
---------------------------------------------------------------------------------------------------------------------
Development Finance Authority, 4.5% 2,990,000 2,990,000
---------------------------------------------------------------------------------------------------------------------
Oregon
---------------------------------------------------------------------------------------------------------------------
Clackams County
Health Facilities Authority, 4.4% 3,000,000 3,000,000
---------------------------------------------------------------------------------------------------------------------
Economic Development Authority, 4.4% 4,000,000 4,000,000
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
Principal
Amount Value
---------------------------------------------------------------------------------------------------------------------
Pennsylvania
---------------------------------------------------------------------------------------------------------------------
Emmaus
General Authority Revenue, 4.31% $ 4,000,000 $ 4,000,000
---------------------------------------------------------------------------------------------------------------------
Lehigh County
Allegheny Electric Corp. Project, 4.75% 4,600,000 4,600,000
General Purpose Authority Hospital Revenue, 4.35% 1,700,000 1,700,000
---------------------------------------------------------------------------------------------------------------------
State Public School Building Authority, 4.31% 2,400,000 2,400,000
---------------------------------------------------------------------------------------------------------------------
Tennessee
---------------------------------------------------------------------------------------------------------------------
Clarksville
Public Building Authority, 4.25% 5,845,000 5,845,000
---------------------------------------------------------------------------------------------------------------------
Texas
---------------------------------------------------------------------------------------------------------------------
Brazos River Authority
Pollution Control Revenue, 4.4% 2,000,000 2,000,000
---------------------------------------------------------------------------------------------------------------------
Camp County
Industrial Development Corp., 4.4% 2,500,000 2,500,000
---------------------------------------------------------------------------------------------------------------------
Harris County
Health Facilities Authority, 4.4% 2,000,000 2,000,000
---------------------------------------------------------------------------------------------------------------------
Small Business Industrial Development Corp.
Industrial Development Revenue, 4.35% 5,000,000 5,000,000
---------------------------------------------------------------------------------------------------------------------
Trinity River Authority
Pollution Control Revenue, 4.45% 2,000,000 2,000,000
---------------------------------------------------------------------------------------------------------------------
Utah
---------------------------------------------------------------------------------------------------------------------
Heber
Industrial Parkway Project, 4.5% 3,650,000 3,650,000
---------------------------------------------------------------------------------------------------------------------
Vermont
---------------------------------------------------------------------------------------------------------------------
Student Association Corp., 4.45% 5,000,000 5,000,000
---------------------------------------------------------------------------------------------------------------------
West Virginia
---------------------------------------------------------------------------------------------------------------------
Preston County
Allegheny Wood Project, 4.5% 3,130,000 3,130,000
---------------------------------------------------------------------------------------------------------------------
Wisconsin
---------------------------------------------------------------------------------------------------------------------
Franklin
All-Glass Aquarium, 4.5% 2,390,000 2,390,000
---------------------------------------------------------------------------------------------------------------------
Health and Educational Facilities Authority, 4.25% 4,000,000 4,000,000
---------------------------------------------------------------------------------------------------------------------
Total Variable Rate Demand Securities (Cost $167,315,000) 167,315,000
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
Principal
Amount Value
---------------------------------------------------------------------------------------------------------------------
Other Securities -- 37.7%
---------------------------------------------------------------------------------------------------------------------
Alaska
---------------------------------------------------------------------------------------------------------------------
City of Valdez
Atlantic Richfield Project, 4.1%, 8/8/2000 $ 4,000,000 $ 4,000,000
---------------------------------------------------------------------------------------------------------------------
Arizona
---------------------------------------------------------------------------------------------------------------------
Salt River Project
Agricultural Improvement and Power District, 4.6%, 8/10/2000 4,000,000 4,000,000
---------------------------------------------------------------------------------------------------------------------
Colorado
---------------------------------------------------------------------------------------------------------------------
Platte River Power Authority, 4.3%, 8/24/2000 4,000,000 4,000,000
---------------------------------------------------------------------------------------------------------------------
Florida
---------------------------------------------------------------------------------------------------------------------
Orange County
Health Facilities Authority, 4.35%, 8/15/2000 2,800,000 2,800,000
---------------------------------------------------------------------------------------------------------------------
Illinois
---------------------------------------------------------------------------------------------------------------------
Education Facilities Authority, 4.2%, 9/8/2000 2,000,000 2,000,000
---------------------------------------------------------------------------------------------------------------------
Indiana
---------------------------------------------------------------------------------------------------------------------
Jasper County
Industrial Pollution Control Revenue, 4.3%-4.5%, 8/7/2000 7,000,000 7,000,000
---------------------------------------------------------------------------------------------------------------------
Kentucky
---------------------------------------------------------------------------------------------------------------------
Danville County
Multi-City Lease Revenue, 4.25%, 10/10/2000 6,000,000 6,000,000
---------------------------------------------------------------------------------------------------------------------
Pendleton County
Multi-City Lease Revenue, 4.25%, 10/10/2000 2,000,000 2,000,000
---------------------------------------------------------------------------------------------------------------------
Maryland
---------------------------------------------------------------------------------------------------------------------
Anne Arundel County
Baltimore Gas and Electric, 4.3%, 8/11/2000 2,420,000 2,420,000
---------------------------------------------------------------------------------------------------------------------
Michigan
---------------------------------------------------------------------------------------------------------------------
Strategic Fund, 4.1%-4.7%, 8/11/2000-9/13/2000 5,100,000 5,100,000
---------------------------------------------------------------------------------------------------------------------
Nevada
---------------------------------------------------------------------------------------------------------------------
Las Vegas
Valley Water Project, 4.7%, 8/14/2000 2,000,000 2,000,000
---------------------------------------------------------------------------------------------------------------------
New Hampshire
---------------------------------------------------------------------------------------------------------------------
General Obligation, 4.7%, 8/14/2000 3,000,000 3,000,000
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Principal
Amount Value
---------------------------------------------------------------------------------------------------------------------
New York
---------------------------------------------------------------------------------------------------------------------
Long Island Power Service, 4.65%, 9/13/2000 $ 2,100,000 $ 2,100,000
---------------------------------------------------------------------------------------------------------------------
Nassau County
Tax Anticipation Note, 4%, 8/31/2000 2,501,494 2,501,494
---------------------------------------------------------------------------------------------------------------------
New York City
Municipal Water Finance Authority, 4.75%, 8/31/2000 3,300,000 3,300,000
---------------------------------------------------------------------------------------------------------------------
Ohio
---------------------------------------------------------------------------------------------------------------------
Air Quality Development Authority, 4.25%, 10/11/2000 3,000,000 3,000,000
---------------------------------------------------------------------------------------------------------------------
Texas
---------------------------------------------------------------------------------------------------------------------
Municipal Power Agency, 4.55%-4.7%, 8/23/2000-9/13/2000 5,000,000 5,000,000
---------------------------------------------------------------------------------------------------------------------
San Antonio
Electric and Gas Revenue, 4.35%-4.45%, 8/15/2000-8/23/2000 11,000,000 11,000,000
---------------------------------------------------------------------------------------------------------------------
Tax and Revenue Anticipation Notes, 3.7%-3.73%, 8/31/2000 11,857,377 11,857,377
---------------------------------------------------------------------------------------------------------------------
University of Texas, 4.65%, 9/13/2000 3,000,000 3,000,000
---------------------------------------------------------------------------------------------------------------------
Utah
---------------------------------------------------------------------------------------------------------------------
Intermountain Power Agency, 4.3%-4.6%, 8/16/2000-8/23/2000 8,000,000 8,000,000
---------------------------------------------------------------------------------------------------------------------
Virginia
---------------------------------------------------------------------------------------------------------------------
Louisa County
Industrial Development Authority, 4.45%-4.75%, 8/11/2000-8/18/2000 7,000,000 7,000,000
---------------------------------------------------------------------------------------------------------------------
Total Other Securities (Cost $101,078,871) 101,078,871
---------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $268,393,871) (a) $ 268,393,871
---------------------------------------------------------------------------------------------------------------------
</TABLE>
Interest rates represent annualized yield to date of maturity, except for
variable rate demand securities described below.
* Variable rate demand securities are securities whose yields vary with a
designated market or market rate, such as the coupon equivalent of the
U.S. Treasury bill rate. These securities are shown at their current
rate as of July 31, 2000, and are payable within five business days.
(a) The cost for federal income tax purposes was $268,393,871.
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Financial Statements
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Government
Money Market Securities Tax-Exempt
As of July 31, 2000 Portfolio Portfolio Portfolio
---------------------------------------------------------------------------------------------------------------------
Assets
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investments in securities, at amortized cost:
Short-term securities $ 754,294,683 $ 229,968,970 $ 268,393,871
---------------------------------------------------------------------------------------------------------------------
Repurchase agreements 5,585,000 214,419,000 --
---------------------------------------------------------------------------------------------------------------------
Cash -- 3,058,643 37,110
---------------------------------------------------------------------------------------------------------------------
Interest receivable 2,046,057 2,714,778 1,673,383
---------------------------------------------------------------------------------------------------------------------
Receivable for Portfolio shares sold 10,179,757 14,921,028 4,431,768
---------------------------------------------------------------------------------------------------------------------
Total assets 772,105,497 465,082,419 274,536,132
---------------------------------------------------------------------------------------------------------------------
Liabilities
---------------------------------------------------------------------------------------------------------------------
Due to custodian bank 1,926,080 -- --
---------------------------------------------------------------------------------------------------------------------
Dividends payable 1,717,428 984,847 365,431
---------------------------------------------------------------------------------------------------------------------
Payable for Portfolio shares redeemed 7,365,479 18,462,437 3,324,569
---------------------------------------------------------------------------------------------------------------------
Accrued management fee 126,910 76,711 47,600
---------------------------------------------------------------------------------------------------------------------
Other accrued expenses and payables 834,120 284,849 100,580
---------------------------------------------------------------------------------------------------------------------
Total liabilities 11,970,017 19,808,844 3,838,180
---------------------------------------------------------------------------------------------------------------------
Net assets, at value $ 760,135,480 $ 445,273,575 $ 270,697,952
---------------------------------------------------------------------------------------------------------------------
Net Assets
---------------------------------------------------------------------------------------------------------------------
Shares outstanding 760,135,480 445,273,575 270,697,952
---------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share (Net asset
value / outstanding shares of beneficial interest, $.01 par value,
unlimited number of shares authorized) $ 1.00 $ 1.00 $ 1.00
---------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
Statement of Operations
<TABLE>
<CAPTION>
Government
Money Market Securities Tax-Exempt
Year ended July 31, 2000 Portfolio Portfolio Portfolio
---------------------------------------------------------------------------------------------------------------------
Investment Income
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest $ 49,796,672 $ 26,727,650 $ 11,462,869
---------------------------------------------------------------------------------------------------------------------
Total Income 49,796,672 26,727,650 11,462,869
---------------------------------------------------------------------------------------------------------------------
Expenses:
---------------------------------------------------------------------------------------------------------------------
Management fee 1,645,321 919,080 656,767
---------------------------------------------------------------------------------------------------------------------
Services to shareholders 1,312,280 808,859 147,506
---------------------------------------------------------------------------------------------------------------------
Custodian fees 47,585 28,033 27,883
---------------------------------------------------------------------------------------------------------------------
Distribution services fees 3,177,526 1,730,825 985,153
---------------------------------------------------------------------------------------------------------------------
Auditing 40,341 32,280 25,993
---------------------------------------------------------------------------------------------------------------------
Legal 4,998 6,191 19,971
---------------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 31,773 20,331 13,718
---------------------------------------------------------------------------------------------------------------------
Reports to shareholders 504,013 217,392 46,021
---------------------------------------------------------------------------------------------------------------------
Registration fees 111,741 47,964 66,313
---------------------------------------------------------------------------------------------------------------------
Other 94,525 6,801 20,187
---------------------------------------------------------------------------------------------------------------------
Total expenses, before expense reductions 6,970,103 3,817,756 2,009,512
---------------------------------------------------------------------------------------------------------------------
Expense reductions (16,243) (10,898) (6,339)
---------------------------------------------------------------------------------------------------------------------
Total expenses, after expense reductions 6,953,860 3,806,858 2,003,173
---------------------------------------------------------------------------------------------------------------------
Net investment income 42,842,812 22,920,792 9,459,696
---------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on investment transactions
---------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from investments (8,495) (13,664) (33)
---------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions (8,495) (13,664) (33)
---------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 42,834,317 $ 22,907,128 $ 9,459,663
---------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
Statements of Changes in Net Assets -- Money Market Portfolio
<TABLE>
<CAPTION>
Year ended July 31,
2000 1999
---------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
---------------------------------------------------------------------------------------------------------------------
Operations:
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income $ 42,842,812 $ 41,936,558
---------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions (8,495) --
---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 42,834,317 41,936,558
---------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (42,834,317) (41,936,558)
---------------------------------------------------------------------------------------------------------------------
Fund share transactions at net asset value of $1.00 per share:
---------------------------------------------------------------------------------------------------------------------
Proceeds from shares sold 3,921,455,216 5,167,352,553
---------------------------------------------------------------------------------------------------------------------
Reinvestment of distributions 42,826,751 41,555,021
---------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (4,242,462,446)(5,022,184,071)
---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from Fund share transactions and total increase (decrease) in
net assets (278,180,479) 186,723,503
---------------------------------------------------------------------------------------------------------------------
Net assets at beginning of period 1,038,315,959 851,592,456
---------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 760,135,480 $1,038,315,959
---------------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets -- Government Securities Portfolio
Year ended July 31,
2000 1999
---------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
---------------------------------------------------------------------------------------------------------------------
Operations:
---------------------------------------------------------------------------------------------------------------------
Net investment income $ 22,920,792 $ 19,226,609
---------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions (13,664) --
---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 22,907,128 19,226,609
---------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from: (22,907,128) (19,226,609)
Net investment income
---------------------------------------------------------------------------------------------------------------------
Fund share transactions at net asset value of $1.00 per share:
---------------------------------------------------------------------------------------------------------------------
Proceeds from shares sold 2,416,144,164 2,213,704,201
---------------------------------------------------------------------------------------------------------------------
Reinvestment of distributions 22,682,977 19,057,353
---------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (2,448,083,415)(2,170,092,701)
---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from Fund share transactions and total increase (decrease) in
net assets (9,256,274) 62,668,853
---------------------------------------------------------------------------------------------------------------------
Net assets at beginning of period 454,529,849 391,860,996
---------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 445,273,575 $ 454,529,849
---------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
Statements of Changes in Net Assets -- Tax-Exempt Portfolio
<TABLE>
<CAPTION>
Year ended July 31,
2000 1999
---------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
---------------------------------------------------------------------------------------------------------------------
Operations:
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income $ 9,459,696 $ 10,156,562
---------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions (33) --
---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 9,459,663 10,156,562
---------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (9,459,663) (10,156,562)
---------------------------------------------------------------------------------------------------------------------
Fund share transactions at net asset value of $1.00 per share:
---------------------------------------------------------------------------------------------------------------------
Proceeds from shares sold 1,119,950,506 1,169,311,949
---------------------------------------------------------------------------------------------------------------------
Reinvestment of distributions 9,438,342 10,086,903
---------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (1,240,819,870)(1,130,697,172)
---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from Fund share transactions and total increase (decrease) in
net assets (111,431,022) 48,701,680
---------------------------------------------------------------------------------------------------------------------
Net assets at beginning of period 382,128,974 333,427,294
---------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 270,697,952 $ 382,128,974
---------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
Financial Highlights
The following tables include selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements and market price data.
<TABLE>
<CAPTION>
Money Market Portfolio
Year ended July 31, 2000 1999 1998 1997 1996
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 1.00 1.00 1.00 1.00 1.00
---------------------------------------------------------------------------------------------------------------------
Net investment income .05 .04 .05 .05 .05
---------------------------------------------------------------------------------------------------------------------
Less distributions from net investment
income (.05) (.04) (.05) (.05) (.05)
---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 1.00 1.00 1.00 1.00
---------------------------------------------------------------------------------------------------------------------
Total Return (%) 5.31 4.43 4.93 4.78 4.94
---------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
---------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 760 1,038 852 971 2,775
---------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) .83 .89 .91 .93 .89
---------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) .83 .89 .91 .93 .89
---------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (%) 5.13 4.34 4.83 4.64 4.86
---------------------------------------------------------------------------------------------------------------------
Government Securities Portfolio
Year ended July 31, 2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------
Per Share Operating Performance:
Net asset value, beginning of period $ 1.00 1.00 1.00 1.00 1.00
------------------------------------------------------------------------------------------------------------------
Net investment income .05 .04 .05 .05 .05
------------------------------------------------------------------------------------------------------------------
Less distributions from net investment
income (.05) (.04) (.05) (.05) (.05)
------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 1.00 1.00 1.00 1.00
------------------------------------------------------------------------------------------------------------------
Total Return (%) 5.16 4.37 4.89 4.85 5.00
------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 445 455 392 404 1,594
------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) .84 .85 .85 .83 .79
------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) .84 .85 .85 .83 .79
------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (%) 5.03 4.29 4.79 4.73 4.90
------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Tax-Exempt Portfolio
Year ended July 31, 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 1.00 1.00 1.00 1.00 1.00
-------------------------------------------------------------------------------------------------------------
Net investment income .03 .03 .03 .03 .03
-------------------------------------------------------------------------------------------------------------
Less distributions from net investment
income (.03) (.03) (.03) (.03) (.03)
-------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 1.00 1.00 1.00 1.00
-------------------------------------------------------------------------------------------------------------
Total Return (%) 3.25 2.68 3.13 3.03 3.11
-------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
-------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 271 382 333 445 932
-------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) .67 .62 .66 .71 .70
-------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) .67 .62 .66 .71 .70
-------------------------------------------------------------------------------------------------------------
Ratio of net investment income (%) 3.17 2.65 3.09 2.97 3.08
-------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
Notes to Financial Statements
1. Significant Accounting Policies
Cash Equivalent Fund (the "Fund") is registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), as an open-end, diversified management
investment company organized as a Massachusetts business trust. The Fund
currently offers 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; and the Tax-Exempt
Portfolio invests in short-term high quality municipal securities.
The Fund's financial statements are prepared in accordance with accounting
principles generally accepted in the United States, which require the use of
management estimates. The policies described below are followed consistently by
the Fund in the preparation of its financial statements.
Security Valuation. The Fund values all portfolio securities utilizing the
amortized cost method permitted in accordance with Rule 2a-7 under the 1940 Act
and pursuant to which the Fund must adhere to certain conditions. Under this
method, which does not take into account unrealized gains or losses on
securities, an instrument is initially valued at its cost and thereafter assumes
a constant accretion/amortization to maturity of any discount/premium.
Repurchase Agreements. Each Portfolio may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian or
sub-custodian bank, receives delivery of the underlying securities, the amount
of which at the time of purchase and each subsequent business day is required to
be maintained at such a level that the market value is equal to at least the
principal amount of the repurchase price plus accrued interest.
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.
Distribution of Income and Gains. All of the net investment income of each
Portfolio is declared as a daily dividend and is distributed to shareholders
monthly. Net investment income includes all realized gains (losses) on portfolio
securities.
Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. Interest income is recorded on the accrual
basis. All discounts and premiums are accreted/amortized for both tax and
financial reporting purposes. Realized gains and losses from investment
transactions are recorded on an identified cost basis.
Expenses. Expenses arising in connection with a specific portfolio are allocated
to that portfolio. Other Fund expenses are allocated between the portfolios in
proportion to their relative net assets.
2. 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 0.22% of the first $500 million of combined average daily net
assets of those portfolios declining to 0.15% of combined averaged daily net
assets in excess of $3 billion. The Tax-Exempt Portfolio pays a monthly
investment
16
<PAGE>
management fee of 1/12 of the annual rate of 0.22% of the first $500
million of average daily net assets of such portfolio declining to 0.15% of
average daily net assets in excess of $3 billion. During the year ended July 31,
2000, the Fund incurred the following management fees:
Management
Fee Effective
Portfolio Imposed ($) Rate (%)
------------------------------------------------------------------------
Money Market Portfolio 1,645,321 .20
------------------------------------------------------------------------
Government Securities Portfolio 919,080 .20
------------------------------------------------------------------------
Tax-Exempt Portfolio 656,767 .22
------------------------------------------------------------------------
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 0.38% of
average daily net assets for the Money Market and Government Securities
Portfolios and 0.33% of average daily net assets for the Tax-Exempt Portfolio
pursuant to separate Rule 12b-1 plans for these portfolios. For the year ended
July 31, 2000, the Fund incurred distribution fees as follows:
Unpaid at
July 31,
Portfolio Fees ($) 2000 ($)
--------------------------------------------------------------------------
Money Market Portfolio 3,177,526 231,938
--------------------------------------------------------------------------
Government Securities Portfolio 1,730,825 142,022
--------------------------------------------------------------------------
Tax-Exempt Portfolio 985,153 71,215
--------------------------------------------------------------------------
KDI has related service agreements with various firms to provide cash management
and other services for fund shareholders.
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. For the year ended July 31, 2000, KSvC received shareholder
services fees as follows:
Shareholder Unpaid at
Services July 31,
Portfolio Fees ($) 2000 ($)
--------------------------------------------------------------------------
Money Market Portfolio 1,290,914 --
--------------------------------------------------------------------------
Government Securities Portfolio 798,815 --
--------------------------------------------------------------------------
Tax-Exempt Portfolio 113,690 --
--------------------------------------------------------------------------
Officers and Trustees. Certain officers or trustees of the Fund are also
officers or directors of Scudder Kemper. For the year ended July 31, 2000, the
Fund made no payments to its officers and incurred trustees' fees of $65,822 to
independent trustees.
3. Expense Off-Set Arrangements
The Fund has entered into an arrangement with its custodian and transfer agent
whereby credits realized as a result of uninvested cash balances are used to
reduce a portion of the Fund's expenses. During the year ended July 31, 2000,
the Fund's custodian and transfer agent fees were reduced as follows:
Transfer
Custodian Agent Fee
Portfolio Fee ($) ($)
--------------------------------------------------------------------------
Money Market Portfolio 11,918 4,325
--------------------------------------------------------------------------
Government Securities Portfolio 8,338 2,560
--------------------------------------------------------------------------
Tax-Exempt Portfolio 4,860 1,479
--------------------------------------------------------------------------
4. Line of Credit
The Fund and several Kemper funds (the "Participants") share in a $750 million
revolving credit facility with Chase Manhattan Bank for temporary or emergency
purposes, including the meeting of redemption requests that otherwise might
require the untimely disposition of securities. The Participants are charged an
annual commitment fee which is allocated, pro rata based on net assets, among
each of the Participants. Interest is calculated based on the market rates at
the time of the borrowing. The Fund may borrow up to a maximum of 33 percent of
its net assets under the agreement.
17
<PAGE>
Report of Independent Auditors
The Board of Trustees and Shareholders
Cash Equivalent Fund
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of the Money Market, Government Securities and
Tax-Exempt Portfolios, comprising the Cash Equivalent Fund (the "Fund"), as of
July 31, 2000, the related statements of operations for the year then ended, the
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the fiscal years since 1996. 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 auditing standards generally accepted
in the United States. 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, 2000, 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 respective portfolios comprising Cash Equivalent Fund at July 31, 2000,
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 years since 1996, in conformity with
accounting principles generally accepted in the United States.
Chicago, Illinois /s/Ernst & Young LLP
September 7, 2000
18
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