As filed with the Securities and Exchange Commission on November 16, 1998
1933 Act Registration No. 33-32476
1940 Act Registration No. 811-5970
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
---------
Post-Effective Amendment No. 9
---------
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 10
---------
CASH ACCOUNT TRUST
------------------
(Exact name of Registrant as Specified in Charter)
222 South Riverside Plaza, Chicago, Illinois 60606
--------------------------------------------------
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (312) 537-7000
<TABLE>
<S> <C> <C>
Philip J. Collora, Vice President and Secretary With a copy to:
Cash Account Trust Cathy G. O'Kelly
222 South Riverside Plaza David A. Sturms
Chicago, Illinois 60606 Vedder, Price, Kaufman & Kammholz
(Name and Address of Agent for Service) 222 North LaSalle Street
Chicago, Illinois 60601
</TABLE>
It is proposed that this filing will become effective
Immediately upon filing pursuant to paragraph (b)
--------
on _________________ pursuant to paragraph (b)
--------
60 days after filing pursuant to paragraph (a)(i)
--------
X on January 15, 1999 pursuant to paragraph (a)(i)
--------
75 days after filing pursuant to paragraph (a)(ii)
--------
on ________________________ pursuant to paragraph (a)(ii) of
-------- Rule 485
If appropriate, check the following:
this post-effective amendment designates a new effective
-------- date for a previously filed post-Effective amendment
<PAGE>
CASH ACCOUNT TRUST
CROSS-REFERENCE SHEET
BETWEEN ITEMS ENUMERATED IN PART A
OF FORM N-1A AND PROSPECTUS
<TABLE>
<CAPTION>
Item No. Item Caption Prospectus Caption
-------- ------------ ------------------
<S> <C> <C> <C>
1. Cover Page COVER PAGE
2. Synopsis Summary; Summary of Expenses
3. Condensed Financial Financial Highlights; Performance
Information
4. General Description of Investment Objectives, Policies and Risk Factors; Capital
Registrant Structure
5. Management of the Fund Investment Manager and Shareholder Services
5A. Management's Discussion of Inapplicable
Fund Performance
6. Capital Stock and Other Purchase of Shares; Dividends and Taxes; Capital Structure
Securities
7. Purchase of Securities Being Purchase of Shares; Net Asset Value; Investment Manager and
Offered Shareholder Services; Special Features
8. Redemption or Repurchase Redemption of Shares; Special Features
9. Pending Legal Proceedings Inapplicable
Cross Reference - Page 1
<PAGE>
CASH ACCOUNT TRUST
CROSS-REFERENCE SHEET
BETWEEN ITEMS ENUMERATED IN PART B
OF FORM N-1A AND STATEMENT OF ADDITIONAL INFORMATION
Caption in Statement
Item No. Item Caption of Additional Information
-------- ------------ -------------------------
10. Cover Page COVER PAGE
11. Table of Contents Table of Contents
12. General Information and Inapplicable
History
13. Investment Objectives and Investment Restrictions; Municipal Securities;
Policies Appendix--Ratings of Investments
14. Management of the Fund Investment Manager and Shareholder Services; Officers and
Trustees
15. Control Persons and Principal Officers and Trustees
Holders of Securities
16. Investment Advisory and Other Investment Manager and Shareholder Services; Officers and
Services Trustees
17. Brokerage Allocation and Portfolio Transactions
Other Practices
18. Capital Stock and Other Shareholder Rights
Securities
19. Purchase, Redemption and Purchase and Redemption of Shares; Dividends, Net Asset Value
Pricing of Securities Being and Taxes
Offered
20. Tax Status Dividends, Net Asset Value and Taxes
21. Underwriters Investment Manager and Shareholder Services
22. Calculation of Performance Performance
Data
23. Financial Statements Financial Statements
</TABLE>
Cross Reference - Page 2
<PAGE>
Cash Account Trust
222 South Riverside Plaza
Chicago, Illinois 60606
TABLE OF CONTENTS
SUMMARY....................................................................3
SUMMARY OF EXPENSES........................................................4
FINANCIAL HIGHLIGHTS.......................................................5
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS...........................6
NET ASSET VALUE...........................................................11
PURCHASE OF SHARES........................................................12
REDEMPTION OF SHARES......................................................13
SPECIAL FEATURES..........................................................15
DIVIDENDS AND TAXES.......................................................15
INVESTMENT MANAGER AND SHAREHOLDER SERVICES...............................16
PERFORMANCE...............................................................19
CAPITAL STRUCTURE.........................................................19
<PAGE>
Cash
Account
Trust
PROSPECTUS January 15, 1999
CASH ACCOUNT TRUST
222 South Riverside Plaza, Chicago, Illinois 60606 1-800-231-8568.
This prospectus contains information about the Service shares ("Shares") of each
of the Money Market Portfolio, Government Portfolio and Tax-Exempt Portfolio
offered by Cash Account Trust (the "Fund") that a prospective investor should
know before investing and should be retained for future reference. A Statement
of Additional Information dated January 15, 1999 has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. It
is available upon request without charge from the Fund at the address or
telephone number on this cover or the firm from which this prospectus was
received.
The Fund offers a choice of investment portfolios and is designed for investors
who seek maximum current income to the extent consistent with stability of
capital. Each Portfolio invests exclusively in high quality money market
instruments.
An investment in the Fund is neither insured nor guaranteed by the U.S.
Government, the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other agency, and is not a deposit or obligation of, or guaranteed or
endorsed by, any bank. There can be no assurance that the Fund will be able to
maintain a stable net asset value of $1.00 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
2
<PAGE>
CASH ACCOUNT TRUST
222 South Riverside Plaza, Chicago, Illinois 60606, Telephone 1-800-231-8568
SUMMARY
Investment Objectives. Cash Account Trust (the "Fund") is an open-end
diversified management investment company. The Fund currently offers a choice of
three investment portfolios ("Portfolios"). Each Portfolio invests in a
portfolio of high quality short-term money market instruments consistent with
its specific objective. The Money Market Portfolio seeks maximum current income
to the extent consistent with stability of capital from a portfolio primarily of
commercial paper and bank obligations. The Government Securities Portfolio seeks
maximum current income to the extent consistent with stability of capital from a
portfolio of obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities. The Tax-Exempt Portfolio seeks maximum current
income that is exempt from federal income taxes to the extent consistent with
stability of capital from a portfolio of municipal securities. Each Portfolio
may use a variety of investment techniques, including the purchase of repurchase
agreements and variable rate securities. Each Portfolio seeks to maintain a net
asset value of $1.00 per share. There is no assurance that the objective of any
Portfolio will be achieved or that any Portfolio will be able to maintain a net
asset value of $1.00 per share. See "Investment Objectives, Policies and Risk
Factors."
Investment Manager and Shareholder Services. Scudder Kemper Investments, Inc.
(the "Adviser") is the investment manager for the Fund and provides the Fund
with continuous professional investment supervision. The Adviser is paid a
monthly investment management fee on a graduated basis ranging from 1/12 of
0.22% of the first $500 million of combined average daily net assets of all
Portfolios of the Fund to 0.15% of the combined average daily net assets of all
Portfolios of the Fund over $3 billion. Kemper Distributors, Inc. ("KDI"), an
affiliate of the Adviser, is the primary administrator, distributor and
principal underwriter of the Fund and, as such, provides information and
services for existing and potential shareholders and acts as agent of the Fund
in the sale of its shares. KDI receives a distribution services fee, payable
monthly, at an annual rate of 0.60% of average daily net assets of the Shares of
the Money Market and Government Securities Portfolios and 0.50% of average daily
net assets of the Shares of the Tax-Exempt Portfolio. As distributor, KDI
normally pays financial services firms that provide cash management and other
services for their customers at an annual rate of 0.60% of average daily net
assets attributable to the Shares of those accounts in the Money Market and
Government Securities Portfolios that they service and 0.50% of average daily
net assets attributable to the Shares of those accounts in the Tax-Exempt
Portfolio that they maintain and service. See "Investment Manager and
Shareholder Services."
Purchases and Redemptions. Shares of each Portfolio are available at net asset
value through selected financial services firms. The minimum initial investment
for each Portfolio is $1,000 and the minimum subsequent investment is $100. See
"Purchase of Shares." Shares may be redeemed at the net asset value next
determined after receipt by the Fund's Shareholder Service Agent of a request to
redeem in proper form. Shares may be redeemed by written request or by using one
of the Fund's expedited redemption procedures. See "Redemption of Shares."
Dividends. Dividends are declared daily and paid monthly. Dividends are
automatically reinvested in additional Shares of the same Portfolio, unless the
shareholder makes a different election. See "Dividends and Taxes."
General Information and Capital. The Fund is organized as a business trust under
the laws of Massachusetts and may issue an unlimited number of shares of
beneficial interest. Shares are fully paid and nonassessable when issued, are
transferable without restriction and have no preemptive or conversion rights.
The Fund is not required to hold annual shareholder meetings; but will hold
special meetings as required or deemed desirable for such purposes as electing
trustees, changing fundamental policies or approving an investment management
agreement. See "Capital Structure."
3
<PAGE>
SUMMARY OF EXPENSES
This information is designed to help you understand the various costs and
expenses of investing in the Shares of each of the Money Market Portfolio,
Government Portfolio and Tax-Exempt Portfolio. *
Shareholder Transaction Expenses(1).........................................None
<TABLE>
<CAPTION>
Annual Fund Operating Expenses Money Market Government Tax-Exempt
(after fee waiver and expense absorption) Portfolio Securities Portfolio Portfolio
(as a percentage of average net assets) --------- -------------------- ---------
<S> <C> <C> <C>
Management Fees.................................................... 0.10% 0.18% 0.19%
12b-1 Fees(2)...................................................... 0.60% 0.60% 0.50%
Other Expenses..................................................... 0.30% 0.22% 0.25%
----- ----- -----
Total Operating Expenses........................................... 1.00% 1.00% 0.94%
===== ===== =====
</TABLE>
* The information set forth on this page relates only to the Shares. The fund
also offers three other classes of shares, which have different fees and
expenses (which may affect performance), have different minimum investment
requirements and are entitled to different services.
(1) Investment dealers and other firms may independently charge shareholders
additional fees; please see their materials for details.
(2) As a result of the accrual of 12b-1 fees, long-term shareholders may pay
more than the economic equivalent of the maximum front-end sales charges
permitted by the National Association of Securities Dealers.
<TABLE>
<CAPTION>
Example Portfolio 1 Year 3 Years 5 Years 10 Years
- ------- --------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
You would pay the following expenses on a Money Market $10 $32 $55 $122
$1,000 investment in the Shares, assuming (1) 5% annual Government $10 $32 $55 $122
return and (2) redemption at the end of each time Securities
period: Tax-Exempt $10 $30 $52 $115
</TABLE>
The purpose of the preceding table is to assist investors in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. As discussed more fully under "Investment Manager and Shareholder
Services," the Fund's investment manager has agreed to waive temporarily its
management fee and reimburse or pay operating expenses of a Portfolio to the
extent, if any, that such expenses as defined, exceed the following percentages
of average daily net assets of the Portfolios: Money Market Portfolio (1.00%),
Government Securities Portfolio (1.00%) and Tax-Exempt Portfolio (0.95%).
Without such waiver and reimbursement during the fiscal year ended April 30,
1998, "Management Fees" for the Money Market Portfolio and the Government
Securities Portfolio would have been 0.19% and 0.19%, respectively, and "Total
Operating Expenses" would have been 1.10% and 1.02%, respectively. The actual
expenses for the Tax-Exempt Portfolio were lower than the expense limit of
0.95%, therefore, the numbers in the table do not reflect any waiver or
reimbursement. In addition, from time to time, the Adviser may voluntarily waive
fees or absorb certain additional operating expenses of the Portfolios. "Other
Expenses" does not reflect the effect of this additional expense absorption. The
Example assumes a 5% annual rate of return pursuant to requirements of the
Securities and Exchange Commission. This hypothetical rate of return is not
intended to be representative of past or future performance of any Portfolio of
the Fund. The Example should not be considered to be a representation of past or
future expenses. Actual expenses may be greater or lesser than those shown.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The tables below show financial information expressed in terms of one share of
the Shares of the Portfolios outstanding throughout the period. * The
information in the tables is covered by the report of the Fund's independent
auditors. The report is contained in the Fund's Registration Statement and is
available from the Fund. The financial statements contained in the Fund's 1998
Annual Report to Shareholders are incorporated herein by reference and may be
obtained by writing or calling the Fund.
<TABLE>
<CAPTION>
Year ended April 30,
---------------------------------------------------------------------------------------------
December
3, 1990 to
MONEY MARKET PORTFOLIO 1998 1997 1996 1995 1994 1993 1992 April 30,
----------------------
1991
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <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 1.00 1.00 1.00
-----------------------------------------------------------------------------------------------------------------------------------
Net investment income 0.05 0.05 0.05 0.04 0.02 0.02 0.04 0.03
-----------------------------------------------------------------------------------------------------------------------------------
Less dividends declared 0.05 0.05 0.05 0.04 0.02 0.02 0.04 0.03
-----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
-----------------------------------------------------------------------------------------------------------------------------------
Total Return 4.85% 4.60 4.96 4.38 2.42 2.65 4.44 2.63
Ratios to Average Net Assets:
Expenses after expense waiver 1.00% 1.00 1.00 0.99 0.93 0.84 0.93 1.00
-----------------------------------------------------------------------------------------------------------------------------------
Net investment income 4.71% 4.51 4.83 4.54 2.48 2.59 4.03 6.24
-----------------------------------------------------------------------------------------------------------------------------------
Other Ratios to Average Net Assets:
Expenses 1.10% 1.03 1.05 1.05 1.20 1.36 1.57 1.58
-----------------------------------------------------------------------------------------------------------------------------------
Net investment income 4.61% 4.48 4.78 4.48 2.21 2.07 3.39 5.66
-----------------------------------------------------------------------------------------------------------------------------------
Supplemental Data:
Net assets at end of period (in $1,995,057 584,947 455,025 378,551 156,153 34,267 27,905 6,105
thousands)
-----------------------------------------------------------------------------------------------------------------------------------
Year ended April 30,
---------------------------------------------------------------------------------------------
December
GOVERNMENT SECURITIES PORTFOLIO 3, 1990 to
- --------------------------------
1998 1997 1996 1995 1994 1993 1992 April 30,
1991
---------------------------------------------------------------------------------------------
Per Share Operating Performance:
Net asset value, beginning of period $1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
-----------------------------------------------------------------------------------------------------------------------------------
Net investment income 0.05 0.05 0.05 0.04 0.02 0.02 0.04 0.03
-----------------------------------------------------------------------------------------------------------------------------------
Less dividends declared 0.05 0.05 0.05 0.04 0.02 0.02 0.04 0.03
-----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
-----------------------------------------------------------------------------------------------------------------------------------
Total Return 4.78% 4.69 5.01 4.37 2.49 2.65 4.54 2.47
Ratios to Average Net Assets:
Expenses after expense waiver 0.98% 0.92 0.90 0.90 0.84 0.79 0.79 0.87
-----------------------------------------------------------------------------------------------------------------------------------
Net investment income 4.68% 4.59 4.88 4.66 2.47 2.63 4.41 5.95
-----------------------------------------------------------------------------------------------------------------------------------
Other Ratios to Average Net Assets:
Expenses 1.02% 0.99 1.06 1.05 1.22 1.18 1.20 1.44
-----------------------------------------------------------------------------------------------------------------------------------
Net investment income 4.64% 4.52 4.72 4.51 2.09 2.24 4.00 5.38
-----------------------------------------------------------------------------------------------------------------------------------
Supplemental Data:
Net assets at end of period (in $804,565 544,501 189,919 138,020 30,829 28,963 34,119 30,080
thousands)
-----------------------------------------------------------------------------------------------------------------------------------
5
<PAGE>
Year ended April 30,
---------------------------------------------------------------------------------------------
December
3, 1990 to
TAX-EXEMPT PORTFOLIO 1998 1997 1996 1995 1994 1993 1992 April 30,
--------------------
1991
---------------------------------------------------------------------------------------------
Per Share Operating Performance:
Net asset value, beginning of period $1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
-----------------------------------------------------------------------------------------------------------------------------------
Net investment income 0.03 0.03 0.03 0.03 0.02 0.02 0.03 0.02
-----------------------------------------------------------------------------------------------------------------------------------
Less dividends declared 0.03 0.03 0.03 0.03 0.02 0.02 0.03 0.02
-----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
-----------------------------------------------------------------------------------------------------------------------------------
Total Return 2.92% 2.82 3.16 2.80 1.84 2.13 3.46 1.76
Ratios to Average Net Assets:
Expenses after expense waiver 0.91% 0.81 0.78 0.76 0.74 0.71 0.67 0.75
-----------------------------------------------------------------------------------------------------------------------------------
Net investment income 2.87% 2.78 3.10 3.00 1.82 2.09 3.34 4.30
-----------------------------------------------------------------------------------------------------------------------------------
Other Ratios to Average Net Assets:
Expenses 0.94% 0.96 0.98 0.93 1.20 1.39 1.38 0.97
-----------------------------------------------------------------------------------------------------------------------------------
Net investment income 2.84% 2.63 2.90 2.83 1.36 1.41 2.63 4.08
-----------------------------------------------------------------------------------------------------------------------------------
Supplemental Data:
Net assets at end of period (in $368,141 220,791 66,981 67,748 16,991 10,014 7,097 3,904
thousands)
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Effective January 15, 1999, the shares of the Portfolios were divided
into four classes of shares, of which the Service shares is one. Shares
of the Portfolios outstanding on such date were redesignated as the
Service shares class of the Portfolios. The data set forth above
reflects the investment performance of the Portfolios prior to such
redesignation.
Notes:
(a) The Money Market Portfolio's total returns for the years ended April
30, 1996 and 1995 include the effect of a capital contribution from
the investment manager. Without the capital contribution, the total
returns would have been 4.80% and 4.16%, respectively.
(b) The Adviser has agreed to waive temporarily its management fee and
reimburse or pay certain operating expenses to the extent necessary to
limit expenses to specific levels. The Other Ratios to Average Net
Assets are computed without this waiver and expense absorption. Ratios
have been determined on an annualized basis. Total return is not
annualized.
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS
The Fund is a money market mutual fund designed to provide its shareholders with
professional management of short-term investment dollars. It is designed for
investors who seek maximum current income consistent with stability of capital.
The Fund pools individual and institutional investors' money that it uses to buy
high quality money market instruments. The Fund is a series investment company
that is able to provide investors with a choice of separate investment
portfolios ("Portfolios"). It currently offers three investment Portfolios: the
Money Market Portfolio, the Government Securities Portfolio and the Tax-Exempt
Portfolio. Because each Portfolio combines its shareholders' money, it can buy
and sell large blocks of securities, which reduces transaction costs and
maximizes yields. The Fund is managed by investment professionals who analyze
market trends to take advantage of changing conditions and who seek to minimize
risk by diversifying each Portfolio's investments. A Portfolio's investments are
subject to price fluctuations resulting from rising or declining interest rates
and are subject to the ability of the issuers of such investments to make
payment at maturity. However, because of their short maturities, liquidity and
high quality ratings, high quality money market instruments, such as those in
which the Fund invests, are generally considered to be among the safest
available. Thus, the Fund is designed for
6
<PAGE>
investors who want to avoid the fluctuations of principal commonly associated
with equity or long-term bond investments. There can be no guarantee that a
Portfolio will achieve its objective or that it will maintain a net asset value
of $1.00 per share.
Money Market Portfolio. The Money Market Portfolio seeks maximum current income
consistent with stability of capital. The Portfolio pursues its objective by
investing exclusively in the following types of U.S. Dollar-denominated money
market instruments that mature in 12 months or less:
1. Obligations of, or guaranteed by, the U.S. or Canadian governments,
their agencies or instrumentalities.
2. Bank certificates of deposit, time deposits or bankers' acceptances of
U.S. banks (including their foreign branches) and Canadian chartered
banks having total assets in excess of $1 billion.
3. Bank certificates of deposit, time deposits or bankers' acceptances of
foreign banks (including their U.S. and foreign branches) having total
assets in excess of $10 billion.
4. Commercial paper, notes, bonds, debentures, participation certificates
or other debt obligations that (i) are rated high quality by Moody's
Investors Service, Inc. ("Moody's"), Standard & Poor's Corporation
("S&P"), or Duff & Phelps, Inc. ("Duff"); or (ii) if unrated, are
determined to be at least equal in quality to one or more of the above
ratings in the discretion of the Fund's investment manager. Currently,
only obligations in the top two categories are considered to be rated
high quality. The two highest rating categories of Moody's, S&P and
Duff for commercial paper are Prime-1 and Prime-2, A-1 and A-2 and
Duff 1 and Duff 2, respectively. For other debt obligations, the two
highest rating categories for such services are Aaa and Aa, AAA and AA
and AAA and AA, respectively. For a description of these ratings, see
"Appendix-- Ratings of Investments" in the Statement of Additional
Information.
5. Repurchase agreements of obligations that are suitable for investment
under the categories set forth above. Repurchase agreements are
discussed below.
In addition, the Portfolio limits its investments to securities that meet the
quality and diversification requirements of Rule 2a-7 under the Investment
Company Act of 1940 (the "1940 Act"). See "Net Asset Value."
The Money Market Portfolio will normally invest at least 25% of its assets in
obligations issued by banks; provided, however, the Portfolio may in the
discretion of the Fund's investment manager temporarily invest less than 25% of
its assets in such obligations whenever the Portfolio assumes a defensive
posture. Investments by the Money Market Portfolio in Eurodollar certificates of
deposit issued by London branches of U.S. banks, or obligations issued by
foreign entities, including foreign banks, involve risks that are different from
investments in securities of domestic branches of U.S. banks. These risks may
include future unfavorable political and economic developments, possible
withholding taxes on interest payments, seizure of foreign deposits, currency
controls, interest limitations or other governmental restrictions that might
affect payment of principal or interest. The market for such obligations may be
less liquid and, at times, more volatile than for securities of domestic
branches of U.S. banks. Additionally, there may be less public information
available about foreign banks and their branches. The profitability of the
banking industry is dependent largely upon the availability and cost of funds
for the purpose of financing lending operations under prevailing money market
conditions. General economic conditions as well as exposure to credit losses
arising from possible financial difficulties of borrowers play an important part
in banking operations. As a result of Federal and state laws and regulations,
domestic banks are, among other things, required to maintain specified levels of
reserves, limited in the amounts they can loan to a single borrower and subject
to other regulations designed to promote financial soundness. However, not all
such laws and regulations apply to the foreign branches of domestic banks.
Foreign branches of foreign banks are not regulated by U.S. banking authorities,
and generally are not bound by accounting, auditing and financial reporting
standards comparable to U.S. banks. Bank obligations held by the Portfolio do
not benefit materially from insurance from the Federal Deposit Insurance
Corporation.
The Money Market Portfolio may invest in commercial paper issued by major
corporations under the Securities Act of 1933 in reliance on the exemption from
registration afforded by Section 3(a)(3) thereof. Such commercial paper may be
issued only to finance current transactions and must mature in nine months or
less. Trading of such commercial paper is conducted
7
<PAGE>
primarily by institutional investors through investment dealers and individual
investor participation in the commercial paper market is very limited. The
Portfolio also may invest in commercial paper issued in reliance on the
so-called "private placement" exemption from registration that is afforded by
Section 4(2) of the Securities Act of 1933 ("Section 4(2) paper"). Section 4(2)
paper is restricted as to disposition under the federal securities laws, and
generally is sold to institutional investors such as the Portfolio who agree
that they are purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) paper normally is resold to other institutional investors like the
Portfolio through or with the assistance of the issuer or investment dealers who
make a market in the Section 4(2) paper, thus providing liquidity. The Fund's
investment manager considers the legally restricted but readily saleable Section
4(2) paper to be liquid; however, pursuant to procedures approved by the Board
of Trustees of the Fund, if a particular investment in Section 4(2) paper is not
determined to be liquid, that investment will be included within the 10%
limitation on illiquid securities discussed under "The Fund" below. The Fund's
investment manager monitors the liquidity of the Portfolio's investments in
Section 4(2) paper on a continuous basis.
The Money Market Portfolio may invest in high quality participation certificates
("certificates") representing undivided interests in trusts that hold a
portfolio of receivables from consumer and commercial credit transactions, such
as transactions involving consumer revolving credit card accounts or commercial
revolving credit loan facilities. The receivables would include amounts charged
for goods and services, finance charges, late charges and other related fees and
charges. Interest payable on the certificates may be fixed or may be adjusted
periodically or "float" continuously according to a formula based upon an
objective standard such as the 30-day commercial paper rate. See "The Fund"
below for a discussion of "Variable Rate Securities." A trust may have the
benefit of a letter of credit from a bank at a level established to satisfy
rating agencies as to the credit quality of the assets supporting the payment of
principal and interest on the certificates. Payments of principal and interest
on the certificates would be dependent upon the underlying receivables in the
trust and may be guaranteed under a letter of credit to the extent of such
credit. The quality rating by a rating service of an issue of certificates is
based primarily upon the value of the receivables held by the trust and the
credit rating of the issuer of any letter of credit and of any other guarantor
providing credit support to the trust. The Fund's investment manager considers
these factors as well as others, such as any quality ratings issued by the
rating services identified above, in reviewing the credit risk presented by a
certificate and in determining whether the certificate is appropriate for
investment by the Portfolio. Collection of receivables in the trust may be
affected by various social, legal and economic factors affecting the use of
credit and repayment patterns, such as changes in consumer protection laws, the
rate of inflation, unemployment levels and relative interest rates. It is
anticipated that for most publicly offered certificates there will be a liquid
secondary market or there may be demand features enabling the Fund to readily
sell its certificates prior to maturity to the issuer or a third party. While
the Portfolio may invest without limit in certificates, it is currently
anticipated that such investments will not exceed 25% of the Portfolio's assets.
Government Securities Portfolio. The Government Securities Portfolio seeks
maximum current income consistent with stability of capital. The Portfolio
pursues its objective by investing exclusively in U.S. Treasury bills, notes,
bonds and other obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and repurchase agreements of such obligations. All
securities purchased mature in 12 months or less. Some securities issued by U.S.
Government agencies or instrumentalities are supported only by the credit of the
agency or instrumentality, such as those issued by the Federal Home Loan Bank,
and others have an additional line of credit with the U.S. Treasury, such as
those issued by the Federal National Mortgage Association, Farm Credit System
and Student Loan Marketing Association. Short-term U.S. Government obligations
generally are considered to be the safest short-term investment. The U.S.
Government guarantee of the securities owned by the Portfolio, however, does not
guarantee the net asset value of its shares, which the Fund seeks to maintain at
$1.00 per share. Also, with respect to securities supported only by the credit
of the issuing agency or instrumentality or by an additional line of credit with
the U.S. Treasury, there is no guarantee that the U.S. Government will provide
support to such agencies or instrumentalities and such securities may involve
risk of loss of principal and interest. Repurchase agreements are discussed
below.
Tax-Exempt Portfolio. The Tax-Exempt Portfolio seeks maximum current income that
is exempt from Federal income taxes to the extent consistent with stability of
capital. The Portfolio pursues its objective primarily through a professionally
managed, diversified portfolio of short-term high quality tax-exempt municipal
obligations. Under normal market conditions at least 80% of the Portfolio's
total assets will, as a fundamental policy, be invested in obligations issued by
or on behalf of states, territories and possessions of the United States and the
District of Columbia and their political subdivisions, agencies and
instrumentalities, the income from which is exempt from Federal income tax
("Municipal Securities"). In compliance with the position of the staff of the
Securities and Exchange Commission, the Fund does not consider "private
activity"
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bonds as described in "Dividends and Taxes -- Tax-Exempt Portfolio" to be
Municipal Securities for purposes of the 80% limitation. This is a fundamental
policy so long as the staff maintains its position, after which it would become
non-fundamental.
Dividends representing net interest income received by the Tax-Exempt Portfolio
on Municipal Securities will be exempt from federal income tax when distributed
to the Portfolio's shareholders. Such dividend income may be subject to state
and local taxes. See "Dividends and Taxes -- Tax-Exempt Portfolio." The
Portfolio's assets will consist of Municipal Securities, taxable temporary
investments as described below and cash. The Portfolio considers short-term
Municipal Securities to be those that mature in one year or less.
The Tax-Exempt Portfolio will invest only in Municipal Securities that at the
time of purchase: (a) are rated within the two highest-ratings for Municipal
Securities (Aaa or Aa) assigned by Moody's or (AAA or AA) assigned by S&P; (b)
are guaranteed or insured by the U.S. Government as to the payment of principal
and interest; (c) are fully collateralized by an escrow of U.S. Government
securities acceptable to the Fund's investment manager; (d) have at the time of
purchase Moody's short-term Municipal Securities rating of MIG-2 or higher or a
municipal commercial paper rating of P-2 or higher, or S&P's municipal
commercial paper rating of A-2 or higher; (e) are unrated, if longer term
Municipal Securities of that issuer are rated within the two highest rating
categories by Moody's or S&P; or (f) are determined to be at least equal in
quality to one or more of the above ratings in the discretion of the Fund's
investment manager. In addition, the Portfolio limits its investments to
securities that meet the quality requirements of Rule 2a-7 under the Investment
Company Act of 1940. See "Net Asset Value."
Municipal Securities generally are classified as "general obligation" or
"revenue" issues. General obligation bonds are secured by the issuer's pledge of
its full credit and taxing power for the payment of principal and interest.
Revenue bonds are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source such as the user of the
facility being financed. Industrial development bonds held by the Fund are in
most cases revenue bonds and are not payable from the unrestricted revenues of
the issuer. Among other types of instruments, the Portfolio may purchase
tax-exempt commercial paper, warrants and short-term municipal notes such as tax
anticipation notes, bond anticipation notes, revenue anticipation notes,
construction loan notes and other forms of short-term loans. Such notes are
issued with a short-term maturity in anticipation of the receipt of tax
payments, the proceeds of bond placements or other revenues. A more detailed
discussion of Municipal Securities and the Moody's and S&P ratings outlined
above is contained in the Statement of Additional Information. As indicated
under "Dividends and Taxes -- Tax-Exempt Portfolio," the Portfolio may invest in
short-term "private activity" bonds.
The Tax-Exempt Portfolio may purchase securities that provide for the right to
resell them to an issuer, bank or dealer at an agreed upon price or yield within
a specified period prior to the maturity date of such securities. Such a right
to resell is referred to as a "Standby Commitment." Securities may cost more
with Standby Commitments than without them. Standby Commitments will be entered
into solely to facilitate portfolio liquidity. A Standby Commitment may be
exercised before the maturity date of the related Municipal Security if the
Fund's investment adviser revises its evaluation of the creditworthiness of the
underlying security or of the entity issuing the Standby Commitment. The
Portfolio's policy is to enter into Standby Commitments only with issuers, banks
or dealers that are determined by the Fund's investment manager to present
minimal credit risks. If an issuer, bank or dealer should default on its
obligation to repurchase an underlying security, the Portfolio might be unable
to recover all or a portion of any loss sustained from having to sell the
security elsewhere.
The Tax-Exempt Portfolio may purchase high quality Certificates of Participation
in trusts that hold Municipal Securities. A Certificate of Participation gives
the Portfolio an undivided interest in the Municipal Security in the proportion
that the Portfolio's interest bears to the total principal amount of the
Municipal Security. These Certificates of Participation may be variable rate or
fixed rate with remaining maturities of one year or less. A Certificate of
Participation may be backed by an irrevocable letter of credit or guarantee of a
financial institution that satisfies rating agencies as to the credit quality of
the Municipal Security supporting the payment of principal and interest on the
Certificate of Participation. Payments of principal and interest would be
dependent upon the underlying Municipal Security and may be guaranteed under a
letter of credit to the extent of such credit. The quality rating by a rating
service of an issue of Certificates of Participation is based primarily upon the
rating of the Municipal Security held by the trust and the credit rating of the
issuer of any letter of credit and of any other guarantor providing credit
support to the issue. The Fund's investment manager considers these factors as
well as others, such as any quality ratings issued by the rating services
identified above, in reviewing the credit risk presented by a
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Certificate of Participation and in determining whether the Certificate of
Participation is appropriate for investment by the Portfolio. It is anticipated
by the Fund's investment manager that, for most publicly offered Certificates of
Participation, there will be a liquid secondary market or there may be demand
features enabling the Portfolio to readily sell its Certificates of
Participation prior to maturity to the issuer or a third party. As to those
instruments with demand features, the Portfolio intends to exercise its right to
demand payment from the issuer of the demand feature only upon a default under
the terms of the Municipal Security, as needed to provide liquidity to meet
redemptions, or to maintain a high quality investment portfolio.
The Tax-Exempt Portfolio may purchase and sell Municipal Securities on a
when-issued or delayed delivery basis. A when-issued or delayed delivery
transaction arises when securities are bought or sold for future payment and
delivery to secure what is considered to be an advantageous price and yield to
the Portfolio at the time it enters into the transaction. In determining the
maturity of portfolio securities purchased on a when-issued or delayed delivery
basis, the Portfolio will consider them to have been purchased on the date when
it committed itself to the purchase.
A security purchased on a when-issued basis, like all securities held by the
Tax-Exempt Portfolio, is subject to changes in market value based upon changes
in the level of interest rates and investors' perceptions of the
creditworthiness of the issuer. Generally such securities will appreciate in
value when interest rates decline and decrease in value when interest rates
rise. Therefore if, in order to achieve higher interest income, the Portfolio
remains substantially fully invested at the same time that it has purchased
securities on a when-issued basis, there will be a greater possibility that the
market value of the Portfolio's assets will vary from $1.00 per share because
the value of a when-issued security is subject to market fluctuation and no
interest accrues to the purchaser prior to settlement of the transaction. See
"Net Asset Value."
The Portfolio will only make commitments to purchase Municipal Securities on a
when-issued or delayed delivery basis with the intention of actually acquiring
the securities, but the Portfolio reserves the right to sell these securities
before the settlement date if deemed advisable. The sale of these securities may
result in the realization of gains that are not exempt from federal income tax.
In seeking to achieve its investment objective, the Tax-Exempt Portfolio may
invest all or any part of its assets in Municipal Securities that are industrial
development bonds. Moreover, although the Portfolio does not currently intend to
do so on a regular basis, it may invest more than 25% of its assets in Municipal
Securities that are repayable out of revenue streams generated from economically
related projects or facilities, if such investment is deemed necessary or
appropriate by the Portfolio's investment manager. To the extent that the
Portfolio's assets are concentrated in Municipal Securities payable from
revenues on economically related projects and facilities, the Portfolio will be
subject to the risks presented by such projects to a greater extent than it
would be if the Portfolio's assets were not so concentrated.
From time to time, as a defensive measure or when acceptable short-term
Municipal Securities are not available, the Tax-Exempt Portfolio may invest in
taxable "temporary investments" that include: obligations of the U.S.
Government, its agencies or instrumentalities; debt securities rated within the
two highest grades by Moody's or S&P; commercial paper rated in the two highest
grades by either of such rating services; certificates of deposit of domestic
banks with assets of $1 billion or more; and any of the foregoing temporary
investments subject to repurchase agreements. Repurchase agreements are
discussed below. Interest income from temporary investments is taxable to
shareholders as ordinary income. Although the Portfolio is permitted to invest
in taxable securities (limited under normal market conditions to 20% of the
Portfolio's total assets), it is the Portfolio's primary intention to generate
income dividends that are not subject to federal income taxes. See "Dividends
and Taxes." For a description of the ratings, see "Appendix -- Ratings of
Investments" in the Statement of Additional Information.
The Fund. Each Portfolio may invest in repurchase agreements, which are
instruments under which a Portfolio acquires ownership of a security from a
broker-dealer or bank that agrees to repurchase the security at a mutually
agreed upon time and price (which price is higher than the purchase price),
thereby determining the yield during the Portfolio's holding period. Maturity of
the securities subject to repurchase may exceed one year. In the event of a
bankruptcy or other default of a seller of a repurchase agreement, a Portfolio
might have expenses in enforcing its rights, and could experience losses,
including a decline in the value of the underlying securities and loss of
income. A Portfolio will not purchase illiquid securities, including time
deposits and repurchase agreements maturing in more than seven days if, as a
result thereof, more than 10% of such Portfolio's net assets valued at the time
of the transaction would be invested in such securities.
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Each Portfolio may invest in instruments having rates of interest that are
adjusted periodically or that "float" continuously according to formulae
intended to minimize fluctuation in values of the instruments ("Variable Rate
Securities"). The interest rate of Variable Rate Securities ordinarily is
determined by reference to or is a percentage of an objective standard such as a
bank's prime rate, the 90-day U.S. Treasury Bill rate, or the rate of return on
commercial paper or bank certificates of deposit. Generally, the changes in the
interest rate on Variable Rate Securities reduce the fluctuation in the market
value of such securities. Accordingly, as interest rates decrease or increase,
the potential for capital appreciation or depreciation is less than for
fixed-rate obligations. Some Variable Rate Securities ("Variable Rate Demand
Securities") have a demand feature entitling the purchaser to resell the
securities at an amount approximately equal to amortized cost or the principal
amount thereof plus accrued interest. As is the case for other Variable Rate
Securities, the interest rate on Variable Rate Demand Securities varies
according to some objective standard intended to minimize fluctuation in the
values of the instruments. Each Portfolio determines the maturity of Variable
Rate Securities in accordance with Rule 2a-7, which allows the Portfolio to
consider certain of such instruments as having maturities shorter than the
maturity date on the face of the instrument.
A Portfolio may not borrow money except as a temporary measure for extraordinary
or emergency purposes, and then only in an amount up to one-third of the value
of its total assets, in order to meet redemption requests without immediately
selling any portfolio securities. Any such borrowings under this provision will
not be collateralized. No Portfolio will borrow for leverage purposes.
The Fund has adopted for each Portfolio certain investment restrictions that are
presented in the Statement of Additional Information and that, together with the
investment objective and policies of such Portfolio (except for policies
designated as non-fundamental and limited in regard to the Tax-Exempt Portfolio
to the policies in the first and third paragraphs under "Tax-Exempt Portfolio"
above), cannot be changed without approval by holders of a majority of its
outstanding voting shares. As defined in the 1940 Act, this means with respect
to a Portfolio the lesser of the vote of (a) 67% of the shares of such Portfolio
present at a meeting where more than 50% of the outstanding shares of the
Portfolio are present in person or by proxy or (b) more than 50% of the
outstanding shares of the Portfolio.
NET ASSET VALUE
The net asset value per share of the Shares of each Portfolio is calculated by
dividing the total assets attributable to the Shares of such Portfolio less its
liabilities attributable to the Shares by the total number of its Shares
outstanding. The net asset value per share of the Shares of each Portfolio is
determined on each day the New York Stock Exchange ("Exchange") is open for
trading; at 11:00 a.m., 1:00 p.m., 3:00 p.m. and 8:00 p.m. Chicago time for the
Money Market Portfolio and the Government Securities Portfolio and at 11:00 a.m.
and 3:00 p.m. Chicago time for the Tax-Exempt Portfolio. Fund shares are sold at
the net asset value next determined after an order and payment are received in
the form described under "Purchase of Shares." Orders received by dealers or
other financial services firms prior to the 8:00 p.m. determination of net asset
value for the Money Market Portfolio and the Government Securities Portfolio and
received by KDI, the primary administrator, distributor and principal
underwriter for the Funds, prior to the close of its business day can be
confirmed at the 8:00 p.m. determination of net asset value for that day. Such
transactions are settled by payment of Federal funds in accordance with
procedures established by KDI. Each Portfolio seeks to maintain its net asset
value at $1.00 per share.
Each Portfolio values its portfolio instruments at amortized cost in accordance
with Rule 2a-7 under the 1940 Act, which means that they are valued at their
acquisition cost (as adjusted for amortization of premium or accretion of
discount) rather than at current market value. Calculations are made to compare
the value of each Portfolio's investments valued at amortized cost with
market-based values. Market-based valuations are obtained by using actual
quotations provided by market makers, estimates of market value, or values
obtained from yield data relating to classes of money market instruments
published by reputable sources at the mean between the bid and asked prices for
the instruments. If a deviation of 1/2 of 1% or more were to occur between a
Portfolio's net asset value per share calculated by reference to market-based
values and the Portfolio's $1.00 per share net asset value, or if there were any
other deviation that the Board of Trustees believed would result in a material
dilution to shareholders or purchasers, the Board of Trustees would promptly
consider what action, if any, should be initiated. In order to value its
investments at amortized cost, the Portfolios purchase only securities with a
maturity of one year or less and maintain a dollar-weighted average portfolio
maturity of 90 days or less. In addition, the Portfolios limit their portfolio
investments to securities that meet the quality and diversification requirements
of Rule 2a-7.
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PURCHASE OF SHARES
Shares of each Portfolio of the Fund are sold at net asset value through
selected financial services firms, such as broker-dealers and banks ("firms").
Investors must indicate the Portfolio in which they wish to invest. The Fund has
established a minimum initial investment for Shares of each Portfolio of $1,000
and $100 for subsequent investments, but these minimums may be changed at any
time in management's discretion. Firms offering Fund shares may set higher
minimums for accounts they service and may change such minimums at their
discretion.
The Fund seeks to have its Portfolios as fully invested as possible at all times
in order to achieve maximum income. Since each Portfolio will be investing in
instruments that normally require immediate payment in Federal Funds (monies
credited to a bank's account with its regional Federal Reserve Bank), the Fund
has adopted procedures for the convenience of its shareholders and to ensure
that each Portfolio receives investable funds.
Orders for purchase of Shares of a Portfolio received by wire transfer in the
form of Federal Funds will be effected at the next determined net asset value.
Shares purchased by wire will receive (i) that day's dividend if effected at or
prior to the 1:00 p.m. Chicago time net asset value determination for the Money
Market and the Government Securities Portfolio and at or prior to the 11:00 a.m.
Chicago time net asset value determination for the Tax-Exempt Portfolio; (ii)
the dividend for the next calendar day if effected at the 3:00 p.m. or 8:00 p.m.
Chicago time net asset value determination provided such payment is received by
3:00 p.m. Chicago time; or (iii) the dividend for the next business day if
effected at the 8:00 p.m. Chicago time net asset value calculation and payment
is received after 3:00 p.m. Chicago time on such date for the Government
Securities Portfolio. Confirmed share purchases that are effective at the 8:00
p.m. Chicago time net asset value determination for the Government Securities
Portfolio will receive dividends upon receipt of payment for such transactions
in the form of Federal Funds in accordance with the time provisions immediately
above. Orders for purchase accompanied by a check or other negotiable bank draft
will be accepted and effected as of 3:00 p.m. Chicago time on the next business
day following receipt and such Shares will receive the dividend for the next
calendar day following the day the purchase is effected. If an order is
accompanied by a check drawn on a foreign bank, funds must normally be collected
on such check before Shares will be purchased. See "Purchase and Redemption of
Shares" in the Statement of Additional Information.
If payment is wired in Federal Funds, the payment should be directed to United
Missouri Bank of Kansas City, N.A. (ABA #101-000-695), 10th and Grand Avenue,
Kansas City, MO 64106 for credit to appropriate Fund bank account (CAT Money
Market Fund 46: 98-0119-980-3; CAT Government Securities Fund 47: 98-0119-983-8;
CAT Tax-Exempt Fund 48: 98-0119-985-4).
Clients of Firms. Firms provide varying arrangements for their clients with
respect to the purchase and redemption of Fund shares and the confirmation
thereof and may arrange with their clients for other investment or
administrative services. Such firms are responsible for the prompt transmission
of purchase and redemption orders. Some firms may establish higher minimum
investment requirements than set forth above. Such firms may independently
establish and charge additional amounts to their clients for their services,
which charges would reduce their clients' yield or return. Firms may also hold
Fund shares in nominee or street name as agent for and on behalf of their
clients. In such instances, the Fund's transfer agent will have no information
with respect to or control over the accounts of specific shareholders. Such
shareholders may obtain access to their accounts and information about their
accounts only from their firm. Certain of these firms may receive compensation
through the Fund's Shareholder Service Agent for record-keeping and other
expenses relating to these nominee accounts. In addition, certain privileges
with respect to the purchase and redemption of shares (such as check writing
redemptions) or the reinvestment of dividends may not be available through such
firms or may only be available subject to certain conditions or limitations.
Some firms may participate in a program allowing them access to their clients'
accounts for servicing including, without limitation, transfers of registration
and dividend payee changes; and may perform functions such as generation of
confirmation statements and disbursement of cash dividends. The prospectus
should be read in connection with such firm's material regarding its fees and
services.
Other Information. The Fund reserves the right to withdraw all or any part of
the offering made by this prospectus or to reject purchase orders, without prior
notice. The Fund also reserves the right at any time to waive or increase the
minimum investment requirements. All orders to purchase shares of a Portfolio
are subject to acceptance by the Fund and are not binding until confirmed or
accepted in writing. Any purchase that would result in total account balances
for a single shareholder in excess of $3 million is subject to prior approval by
the Fund. Share certificates are issued only on request. A
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$10 service fee will be charged when a check for the purchase of shares is
returned because of insufficient or uncollected funds or a stop payment order.
Shareholders should direct their inquiries to the firm from which they received
this prospectus or to Kemper Service Company ("KSvC"), the Fund's "Shareholder
Service Agent," 811 Main Street, Kansas City, Missouri 64105-2005.
REDEMPTION OF SHARES
General. Upon receipt by the Shareholder Service Agent of a request in the form
described below, Shares of a Portfolio will be redeemed by the Fund at the next
determined net asset value. If processed at 3:00 p.m. or 8:00 p.m. (for the
Money Market Portfolio and the Government Securities Portfolio) Chicago time,
the shareholder will receive that day's dividend. A shareholder may use either
the regular or expedited redemption procedures. Shareholders who redeem all
their Shares of a Portfolio will receive the net asset value of such Shares and
all declared but unpaid dividends on such Shares.
If Shares of a Portfolio to be redeemed were purchased by check or through
certain Automated Clearing House ("ACH") transactions, the Fund may delay
transmittal of redemption proceeds until it has determined that collected funds
have been received for the purchase of such shares, which will be up to 10 days
from receipt by the Fund of the purchase amount. Shareholders may not use
expedited redemption procedures (wire transfer or Redemption Check) until the
shares being redeemed have been owned for at least 10 days, and shareholders may
not use such procedures to redeem shares held in certificated form. There is no
delay when shares being redeemed were purchased by wiring Federal Funds.
If Shares being redeemed were acquired from an exchange of shares of a mutual
fund that were offered subject to a contingent deferred sales charge as
described in the prospectus for that other fund, the redemption of such shares
by the Fund may be subject to a contingent deferred sales charge as explained in
such prospectus.
Shareholders can request the following telephone privileges: expedited wire
transfer redemptions, ACH transactions and exchange transactions for individual
and institutional accounts and pre-authorized telephone redemption transactions
for certain institutional accounts. Shareholders may choose these privileges on
the account application or by contacting the Shareholder Service Agent for
appropriate instructions. Please note that the telephone exchange privilege is
automatic unless the shareholder refuses it on the account application. The Fund
or its agents may be liable for any losses, expenses or costs arising out of
fraudulent or unauthorized telephone requests pursuant to these privileges,
unless the Fund or its agents reasonably believe, based upon reasonable
verification procedures, that the telephone instructions are genuine. The
shareholder will bear the risk of loss, including loss resulting from fraudulent
or unauthorized transactions, as long as the reasonable verification procedures
are followed. The verification procedures include recording instructions,
requiring certain identifying information before acting upon instructions and
sending written confirmations.
Because of the high cost of maintaining small accounts, the Fund reserves the
right to redeem an account that falls below the minimum investment level,
currently $1,000. A shareholder will be notified in writing and will be allowed
60 days to make additional purchases to bring the account value up to the
minimum investment level before the Fund redeems the shareholder account.
Firms provide varying arrangements for their clients to redeem Fund shares. Such
firms may independently establish and charge additional amounts to their clients
for such services.
Regular Redemptions. When shares are held for the account of a shareholder by
the Fund's transfer agent, the shareholder may redeem them by sending a written
request with signatures guaranteed to Kemper Service Company ("KSvC"), P.O. Box
419153, Kansas City, Missouri 64141-6153. When certificates for shares have been
issued, they must be mailed to or deposited with the Shareholder Service Agent,
along with a duly endorsed stock power and accompanied by a written request for
redemption. Redemption requests and a stock power must be endorsed by the
account holder with signatures guaranteed by a commercial bank, trust company,
savings and loan association, federal savings bank, member firm of a national
securities exchange or other eligible financial institution. The redemption
request and stock power must be signed exactly as the account is registered
including any special capacity of the registered owner. Additional documentation
may be requested,
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and a signature guarantee is normally required, from institutional and fiduciary
account holders, such as corporations, custodians (e.g., under the Uniform
Transfers to Minors Act), executors, administrators, trustees, or guardians.
Telephone Redemptions. If the proceeds of the redemption are $50,000 or less and
the proceeds are payable to the shareholder of record at the address of record,
normally a telephone request or a written request by any one account holder
without a signature guarantee is sufficient for redemptions by individual or
joint account holders, and trust, executor,guardian or custodian account holders
provided the trustee, executor, guardian or custodian is named in the account
registration. Other institutional account holders may exercise this special
privilege of redeeming shares by telephone request or written request without
signature guarantee subject to the same conditions as individual account holders
and subject to the limitations on liability described under "General" above,
provided that this privilege has been pre-authorized by the institutional
account holder or guardian account holder by written instruction to the
Shareholder Service Agent with signatures guaranteed. Telephone requests may be
made by calling 1-800-231-8568. Shares purchased by check or through certain ACH
transactions may not be redeemed under this privilege of redeeming shares by
telephone request until such shares have been owned for at least 10 days. This
privilege of redeeming shares by telephone request or by written request without
a signature guarantee may not be used to redeem shares held in certificated form
and may not be used if the shareholder's account has had an address change
within 30 days of the redemption request. During periods when it is difficult to
contact the Shareholder Service Agent by telephone, it may be difficult to use
the telephone redemption privilege, although investors can still redeem by mail.
The Fund reserves the right to terminate or modify this privilege at any time.
Expedited Wire Transfer Redemptions. If the account holder has given
authorization for expedited wire redemption to the account holder's brokerage or
bank account, shares can be redeemed and proceeds sent by a federal wire
transfer to a single previously designated account. Requests received by the
Shareholder Service Agent prior to 11:00 a.m. Chicago time will result in shares
being redeemed that day and normally the proceeds will be sent to the designated
account that day. Once authorization is on file, the Shareholder Service Agent
will honor requests by telephone at 1-800-231-8568 or in writing, subject to the
limitations on liability described under "General" above. The Fund is not
responsible for the efficiency of the federal wire system or the account
holder's financial services firm or bank. The Fund currently does not charge the
account holder for wire transfers. The account holder is responsible for any
charges imposed by the account holder's firm or bank. There is a $1,000 wire
redemption minimum. To change the designated account to receive wire redemption
proceeds, send a written request to the Shareholder Service Agent with
signatures guaranteed as described above or contact the firm through which
shares of the Fund were purchased. Shares purchased by check or through certain
ACH transactions may not be redeemed by wire transfer until the shares have been
owned for at least 10 days. Account holders may not use this procedure to redeem
shares held in certificated form. During periods when it is difficult to contact
the Shareholder Service Agent by telephone, it may be difficult to use the
expedited wire transfer redemption privilege. The Fund reserves the right to
terminate or modify this privilege at any time.
Expedited Redemptions by Draft. Upon request, shareholders will be provided with
drafts to be drawn on the Fund ("Redemption Checks"). These Redemption Checks
may be made payable to the order of any person for not more than $5 million.
Shareholders should not write Redemption Checks in an amount less than $250
since a $10 service fee will be charged as described below. When a Redemption
Check is presented for payment, a sufficient number of full and fractional
shares in the shareholder's account will be redeemed as of the next determined
net asset value to cover the amount of the Redemption Check. This will enable
the shareholder to continue earning dividends until the Fund receives the
Redemption Check. A shareholder wishing to use this method of redemption must
complete and file an Account Information Form which is available from the Fund
or firms through which shares were purchased. Redemption Checks should not be
used to close an account since the account normally includes accrued but unpaid
dividends. The Fund reserves the right to terminate or modify this privilege at
any time. This privilege may not be available through some firms that distribute
shares of the Fund. In addition, firms may impose minimum balance requirements
in order to obtain this feature. Firms may also impose fees to investors for
this privilege or establish variations of minimum check amounts if approved by
the Fund.
Unless one signer is authorized on the Account Information Form, Redemption
Checks must be signed by all account holders. Any change in the signature
authorization must be made by written notice to the Shareholder Service Agent.
Shares purchased by check or through certain ACH transactions may not be
redeemed by Redemption Check until the shares have been on the Fund's books for
at least 10 days. Shareholders may not use this procedure to redeem shares held
in certificated form. The Fund reserves the right to terminate or modify this
privilege at any time.
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The Fund may refuse to honor Redemption Checks whenever the right of redemption
has been suspended or postponed, or whenever the account is otherwise impaired.
A $10 service fee will be charged when a Redemption Check is presented to redeem
Fund shares in excess of the value of a Fund account or in an amount less than
$250; when a Redemption Check is presented that would require redemption of
shares that were purchased by check or certain ACH transactions within 10 days;
or when "stop payment" of a Redemption Check is requested.
SPECIAL FEATURES
Certain firms that offer shares of the Fund also provide special redemption
features through charge or debit cards and checks that redeem Fund shares.
Various firms have different charges for their services. Shareholders should
obtain information from their firm with respect to any special redemption
features, applicable charges, minimum balance requirements and special rules of
the cash management program being offered.
Information about the following special features is contained in the Statement
of Additional Information; and further information may be obtained without
charge from KDI: Tax Sheltered Retirement Programs; Systematic Withdrawal
Program; Exchange Privilege and Automated Clearing House Programs.
DIVIDENDS AND TAXES
Dividends are declared daily and paid monthly. Shareholders may select one of
the following ways to receive dividends.
1. Reinvest Dividends at net asset value into additional Shares of the
same Portfolio. Dividends are normally reinvested on the 21st of each
month if a business day, otherwise on the next business day. Dividends
will be reinvested unless the shareholder elects to receive them in
cash.
2. Receive Dividends in Cash, if so requested. Checks will be mailed
monthly to the shareholder or any person designated by the
shareholder.
The Fund reinvests dividend checks (and future dividends) in Shares of the same
Portfolio if checks are returned as undeliverable. Dividends and other
distributions in the aggregate amount of $10 or less are automatically
reinvested in Shares of the same Portfolio unless the shareholder requests that
such policy not be applied to the shareholder's account.
Taxable Portfolios. The Money Market Portfolio and the Government Securities
Portfolio each intend to continue to qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code (the "Code") and, if so
qualified, will not be subject to Federal income taxes to the extent its
earnings are distributed. Dividends derived from interest and short-term capital
gains are taxable as ordinary income whether received in cash or reinvested in
additional shares. Long-term capital gains distributions, if any, are taxable as
long-term capital gains regardless of the length of time shareholders have owned
their shares . Dividends from these Portfolios do not qualify for the dividends
received deduction available to corporate shareholders.
Tax-Exempt Portfolio. The Tax-Exempt Portfolio intends to continue to qualify
under the Code as a regulated investment company and, if so qualified, will not
be liable for Federal income taxes to the extent its earnings are distributed.
This Portfolio also intends to meet the requirements of the Code applicable to
regulated investment companies distributing tax-exempt interest dividends and,
accordingly, dividends representing net interest received on Municipal
Securities will not be includable by shareholders in their gross income for
Federal income tax purposes, except to the extent such interest is subject to
the alternative minimum tax as discussed below. Dividends representing taxable
net investment income (such as net interest income from temporary investments in
obligations of the U.S. Government) and net short-term capital gains, if any,
are taxable to shareholders as ordinary income.
Net interest on certain "private activity bonds" issued on or after August 8,
1986 is treated as an item of tax preference and may, therefore, be subject to
both the individual and corporate alternative minimum tax. To the extent
provided by regulations to be issued by the Secretary of the Treasury,
exempt-interest dividends from the Tax-Exempt Portfolio are to be treated as
interest on private activity bonds in proportion to the interest income the
Portfolio receives from private activity
15
<PAGE>
bonds, reduced by allowable deductions. For the 1997 calendar year 17% of the
net interest income was derived from "private activity bonds."
Exempt-interest dividends, except to the extent of interest from "private
activity bonds," are not treated as a tax-preference item. For a corporate
shareholder, however, such dividends will be included in determining such
corporate shareholder's "adjusted current earnings." Seventy-five percent of the
excess, if any, of "adjusted current earnings" over the corporate shareholder's
other alternative minimum taxable income with certain adjustments will be a
tax-preference item. Corporate shareholders are advised to consult their tax
advisers with respect to alternative minimum tax consequences.
Shareholders will be required to disclose on their Federal income tax returns
the amount of tax-exempt interest earned during the year, including
exempt-interest dividends received from the Tax-Exempt Portfolio.
Individuals whose modified income exceeds a base amount will be subject to
Federal income tax on up to 85% of their Social Security benefits. Modified
income includes adjusted gross income, tax-exempt interest, including
exempt-interest dividends from the Tax-Exempt Portfolio, and 50% of Social
Security benefits.
The tax exemption of dividends from the Tax-Exempt Portfolio for Federal income
tax purposes does not necessarily result in exemption under the income or other
tax laws of any state or local taxing authority. The laws of the several states
and local taxing authorities vary with respect to the taxation of such income
and shareholders of the Portfolios are advised to consult their own tax advisers
as to the status of their accounts under state and local tax laws.
The Fund. Dividends declared in October, November or December to shareholders of
record as of a date in one of those months and paid during the following January
are treated as paid on December 31 of the calendar year in which declared for
Federal income tax purposes. The Fund may adjust its schedule for dividend
reinvestment for the month of December to assist in complying with the reporting
and minimum distribution requirements contained in the Code.
Each Portfolio is required by law to withhold 31% of taxable dividends paid to
certain shareholders who do not furnish a correct taxpayer identification number
(in the case of individuals a social security number) and in certain other
circumstances. Trustees of qualified retirement plans and 403(b)(7) accounts are
required by law to withhold 20% of the taxable portion of any distribution that
is eligible to be "rolled over." The 20% withholding requirement does not apply
to distributions from IRAs or any part of a distribution that is transferred
directly to another qualified retirement plan, 403(b)(7) account, or IRA.
Shareholders should consult their tax advisers regarding the 20% withholding
requirement.
Shareholders normally will receive monthly confirmations of dividends and of
purchase and redemption transactions except that confirmations of dividend
reinvestment for IRAs and other fiduciary accounts for which Investors Fiduciary
Trust Company serves as trustee will be sent quarterly. Firms may provide
varying arrangements with their clients with respect to confirmations. Tax
information will be provided annually. Shareholders are encouraged to retain
copies of their account confirmation statements or year-end statements for tax
reporting purposes. However, those who have incomplete records may obtain
historical account transaction information at a reasonable fee.
INVESTMENT MANAGER AND SHAREHOLDER SERVICES
Investment Manager. Scudder Kemper Investments, Inc. (the "Adviser"), 345 Park
Avenue, New York, New York, is the investment manager of the Fund and provides
the Fund with continuous professional investment supervision. The Adviser is one
of the largest investment managers in the country with more than $230 billion in
assets under management.
Scudder Kemper is an indirect subsidiary of Zurich Financial Services, Inc., a
newly formed global insurance and financial services company. Zurich Financial
Services, Inc. owns approximately 70% of Scudder Kemper, with the balance owned
by the Adviser's officers and employees. In connection with the formation of
Zurich Financial Services, Inc., each Fund's existing investment management
agreement with Scudder Kemper was deemed to have been assigned and, therefore,
16
<PAGE>
terminated. The Board has approved a new investment management agreement with
the Adviser, which is substantially identical to the current investment
management agreement, except for the dates of execution and termination. This
agreement became effective upon the termination of the then current investment
management agreement and will be submitted for shareholder approval at a special
meeting currently scheduled to conclude in December 1998.
Responsibility for overall management of the Fund rests with its Board of
Trustees and officers. Professional investment supervision is provided by the
Adviser. The investment management agreement provides that the Adviser shall act
as the Fund's investment adviser, manage its investments and provide it with
various services and facilities. For the services and facilities furnished to
the Money Market, Government Securities and Tax-Exempt Portfolios, the Fund pays
the Adviser a monthly investment management fee on a graduated basis at 1/12 of
0.22% of the first $500 million of combined average daily net assets of such
Portfolios, 0.20% of the next $500 million, 0.175% of the next $1 billion, 0.16%
of the next $1 billion and 0.15% of combined average daily net assets of such
Portfolios over $3 billion. The Adviser has agreed to waive temporarily its
management fee and/or absorb operating expenses of each Portfolio to the extent,
if any, that they exceed the following percentages of average daily net assets
of the Portfolios: Money Market Portfolio (1.00%), Government Securities
Portfolio (1.00%) and Tax-Exempt Portfolio (0.95%). For this purpose, Portfolio
operating expenses do not include taxes, interest, extraordinary expenses,
brokerage commissions or transaction costs. Upon notice to the Fund, the Adviser
may at any time terminate this waiver or absorption of operating expenses. In
addition, from time to time, the Adviser may voluntarily absorb certain
additional operating expenses of the Portfolios. The level of this voluntary
expense absorption shall be in the Adviser's discretion and is in addition to
the Adviser's agreement to absorb temporarily certain operating expenses of the
Portfolios described above. For its services as investment adviser and manager
and for facilities furnished during the fiscal year ended April 30, 1998, the
Money Market Portfolio, Government Securities Portfolio and Tax-Exempt Portfolio
paid the Adviser fees of $1,888,000, $1,020,000 and $530,000 respectively, which
includes the effect of the fee waiver.
Fund Accounting Agent. Scudder Fund Accounting Corporation ("SFAC"), a
subsidiary of the Adviser, is responsible for determining the daily net asset
value per share of each Portfolio and maintaining all accounting records related
thereto. Currently, SFAC receives no fee for its services; however, subject to
Board approval, at some time in the future SFAC may seek payment for its
services under its agreement with the Fund.
Year 2000 Compliance. Like other mutual funds and financial and business
organizations worldwide, the Fund could be adversely affected if computer
systems on which the Fund relies, which primarily include those used by the
Adviser, its affiliates or other service providers, are unable to process
correctly date-related information on and after January 1, 2000. This risk is
commonly called the Year 2000 Issue. Failure to address successfully the Year
2000 Issue could result in interruptions to and other material adverse effects
on the Fund's business and operations. The Adviser has commenced a review of the
Year 2000 Issue as it may affect the Fund and is taking steps it believes are
reasonably designed to address the Year 2000 Issue, although there can be no
assurances that these steps will be sufficient. In addition, there can be no
assurances that the Year 2000 Issue will not have an adverse effect on the
companies whose securities are held by the Fund or on global markets or
economies generally.
17
<PAGE>
Distributor and Administrator. Pursuant to an underwriting and distribution
agreement ("distribution agreement"), KDI, 222 South Riverside Plaza, Chicago,
Illinois 60606, an affiliate of the Adviser, serves as distributor and principal
underwriter for the Fund to provide information and services for existing and
potential shareholders. The distribution agreement provides that KDI shall
appoint various financial services firms to provide a cash management service
for their customers or clients through the Fund. The Fund has adopted a plan in
accordance with Rule 12b-1 of the 1940 Act (the "12b-1 Plan"). This rule
regulates the manner in which an investment company may, directly or indirectly,
bear the expenses of distributing its shares. For its services under the
distribution agreement and pursuant to the 12b-1 Plan, KDI receives a
distribution services fee, payable monthly, at the annual rate of 0.60% of
average daily net assets from the Money Market and Government Securities
Portfolios attributable to the Shares and 0.50% of average daily net assets from
the Tax-Exempt Portfolio attributable to the Shares. The fee is accrued daily as
an expense of the Shares of the Portfolios. As principal underwriter for the
Fund, KDI acts as agent of the Fund in the sale of its shares.
KDI has related administration services and selling group agreements ("services
agreements") with various firms to provide cash management and other services
for Fund shareholders. The firms are to provide such office space and equipment,
telephone facilities, personnel and literature distribution as is necessary or
appropriate for providing information and services to the firms' clients. KDI
normally pays such firms for services at an annual rate of 0.60% of average
daily net assets attributable to the Shares of those accounts in the Money
Market and Government Securities Portfolios that they maintain and service and
0.50% of average daily net assets attributable to the Shares of those accounts
in the Tax-Exempt Portfolio that they maintain and service. In addition, KDI
may, from time to time, from its own resources pay certain firms additional
amounts for such services including, without limitation, fixed dollar amounts
and amounts based upon a percentage of net assets or increased net assets in
those Fund accounts that said firms maintain and service.
Since the fee payable to KDI under the 12b-1 Plan is based upon percentages of
the average daily net assets of the Shares of the Portfolios as provided above
and not upon the actual expenditures of KDI, the expenses of KDI, which may
include overhead expense, may be more or less than the fees received by it under
the 12b-1 Plan. For example, during the fiscal year ended April 30, 1998, KDI
incurred expenses under the 12b-1 Plan of approximately $14,389,000, while it
received an aggregate fee under the 12b-1 Plan of $13,029,000 after the expense
waiver. If the 12b-1 Plan is terminated in accordance with its terms, the
obligation of the Fund to make payments to KDI pursuant to the 12b-1 Plan will
cease and the Fund will not be required to make any payments past the
termination date. Thus, there is no legal obligation for the Fund to pay any
expenses incurred by KDI in excess of its fees under the 12b-1 Plan, if for any
reason the 12b-1 Plan is terminated in accordance with its terms. Future fees
under the 12b-1 Plan may or may not be sufficient to reimburse KDI for its
cumulative expenses incurred.
KDI also has agreements with banking firms to provide administrative and other
services, except for certain underwriting or distribution services that banks
may be prohibited from providing under the Glass-Steagall Act, for their clients
who wish to invest in the Fund. If the Glass-Steagall Act should prevent banking
firms from acting in any capacity or providing any of the described services,
management will consider what action, if any, is appropriate. Management does
not believe that termination of a relationship with a bank would result in any
material adverse consequences to the Fund. Banks or other financial services
firms may be subject to various state laws regarding the services described
above and may be required to register as dealers pursuant to state law.
Custodian, Transfer Agent and Shareholder Service Agent. Investors Fiduciary
Trust Company ("IFTC"), 801 Pennsylvania Avenue, Kansas City, Missouri 64105, as
custodian, and State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, as sub-custodian, have custody of all securities and cash
of the Fund. They attend to the collection of principal and income, and payment
for and collection of proceeds of securities bought and sold by the Fund. IFTC
also is the Fund's transfer and dividend-paying agent. Pursuant to a services
agreement with IFTC, Kemper Service Company, 811 Main Street, Kansas City,
Missouri 64105, an affiliate of the Adviser, serves as Shareholder Service Agent
of the Fund.
18
<PAGE>
PERFORMANCE
The Fund may advertise several types of performance information including
"yield," "effective yield" and, for the Tax-Exempt Portfolio only, "tax
equivalent yield." Each of these figures is based upon historical earnings and
is not representative of the future performance of the Shares a Portfolio. The
yield of a Portfolio refers to the net investment income generated by a
hypothetical investment in the Portfolio over a specific seven-day period. This
net investment income is then annualized, which means that the net investment
income generated during the seven-day period is assumed to be generated each
week over an annual period and is shown as a percentage of the investment. The
effective yield is calculated similarly, but the net investment income earned by
the investment is assumed to be compounded weekly when annualized. The effective
yield will be slightly higher than the yield due to this compounding effect. Tax
equivalent yield is the yield that a taxable investment must generate in order
to equal the Tax-Exempt Portfolio's yield for an investor in a stated Federal
income tax bracket (normally assumed to be the maximum tax rate). Tax equivalent
yield is based upon, and will be higher than, the portion of the Tax-Exempt
Portfolio's yield that is tax-exempt.
The performance of a Portfolio's shares may be compared to that of other money
market mutual funds or mutual fund indexes as reported by independent mutual
fund reporting services such as Lipper Analytical Services, Inc. The performance
of a Portfolio's shares and its relative size may be compared to other money
market mutual funds as reported by IBC/Financial Data, Inc.(R) or Money Market
Insight(R), reporting services on money market funds. Investors may want to
compare a Portfolio's performance to that of various bank products as reported
by BANK RATE MONITORTM, a financial reporting service that weekly publishes
average rates of bank and thrift institution money market deposit accounts and
interest bearing checking accounts or various certificate of deposit indexes.
The performance of a Portfolio's shares also may be compared to that of U.S.
Treasury bills and notes. Certain of these alternative investments may offer
fixed rates of return and guaranteed principal and may be insured. In addition,
investors may want to compare a Portfolio's shares performance to the Consumer
Price Index either directly or by calculating its "real rate of return," which
is adjusted for the effects of inflation.
Information may be quoted from publications such as Morningstar, Inc., The Wall
Street Journal, Money Magazine, Forbes, Barron's, Fortune, The Chicago Tribune,
USA Today, Institutional Investor and Registered Representative. The Fund may
depict the historical performance of the securities in which a Portfolio may
invest over periods reflecting a variety of market or economic conditions either
alone or in comparison with alternative investments, performance indexes of
those investments or economic indicators. The Fund may also describe its
portfolio holdings and depict its size or relative size compared to other mutual
funds, the number and make-up of its shareholder base and other descriptive
factors concerning the Fund.
Each Portfolio's yield will fluctuate. Shares of the Fund are not insured.
Additional information concerning a Portfolio's shares performance appears in
the Statement of Additional Information.
CAPITAL STRUCTURE
The Fund is an open-end, diversified, management investment company, organized
as a business trust under the laws of Massachusetts on September 7, 1989. The
Fund may issue an unlimited number of shares of beneficial interest in one or
more series ("Portfolios"), all having no par value, which may be divided by the
Board of Trustees into classes of shares, subject to compliance with the
Securities and Exchange Commission regulations permitting the creation of
separate classes of shares. The Board of Trustees may authorize the issuance of
additional Portfolios if deemed desirable. Since the Fund offers multiple
Portfolios, it is known as a "series company." Currently, the Fund offers only
the Service shares class of shares of each Portfolio and three other classes of
shares of the Money Market Portfolio of the Fund. These other classes are
Premier shares, Retail shares and Institutional shares, which have different
expenses, that may effect performance. Shares of each Portfolio have equal
noncumulative voting rights except that the S shares class has separate and
exclusive voting rights with respect to the Portfolios' Rule 12b-1 Plan. Shares
of each class also have equal rights with respect to dividends, assets and
liquidation of such Portfolio and are subject to any preferences, rights or
privileges of any classes of shares of the Portfolios. Generally, each class of
shares issued by a particular Portfolio would differ as to the allocation of
certain expenses of the Portfolio, such as distribution and administrative
expenses, permitting, among other things, different levels of services or
methods of distribution among various classes. Shares of the Portfolios are
fully paid and nonassessable when issued, are transferable without restriction
and have no preemptive or conversion rights.
19
<PAGE>
As of August 7, 1998, Roney & Co. owned more than 25% of the outstanding shares
of the Government Securities and Tax-Exempt Portfolios. The Fund is not required
to hold annual shareholders' meetings and does not intend to do so. However, it
will hold special meetings as required or deemed desirable for such purposes as
electing trustees, changing fundamental policies or approving an investment
management agreement. Subject to the Agreement and Declaration of Trust of the
Fund, shareholders may remove trustees. Shareholders will vote by Portfolio and
not in the aggregate or by class except when voting in the aggregate is required
under the Investment Company Act of 1940, such as for the election of trustees,
or when the Board of Trustees determines that voting by class is appropriate.
20
<PAGE>
Cash Account Trust
222 South Riverside Plaza
Chicago, Illinois 60606
TABLE OF CONTENTS
SUMMARY.....................................................................3
SUMMARY OF EXPENSES.........................................................3
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS............................4
NET ASSET VALUE.............................................................6
PURCHASE OF SHARES..........................................................7
REDEMPTION OF SHARES........................................................8
SPECIAL FEATURES...........................................................10
DIVIDENDS AND TAXES........................................................10
INVESTMENT MANAGER AND SHAREHOLDER SERVICES................................11
PERFORMANCE................................................................12
CAPITAL STRUCTURE..........................................................13
<PAGE>
Cash
Account
Trust
PROSPECTUS January 15, 1999
CASH ACCOUNT TRUST
222 South Riverside Plaza, Chicago, Illinois 60606; 1-800-231-8568.
This prospectus contains information about the Retail Shares (the "Shares") of
the Money Market Portfolio (the "Portfolio") offered by Cash Account Trust (the
"Fund") that a prospective investor should know before investing and should be
retained for future reference. A Statement of Additional Information dated
January 15, 1999, has been filed with the Securities and Exchange Commission and
is incorporated herein by reference. It is available upon request without charge
from the Fund at the address or telephone number on this cover or the firm from
which this prospectus was received.
The Fund is designed for investors who seek maximum current income to the extent
consistent with stability of capital. The Money Market Portfolio invests
exclusively in high quality money market instruments.
An investment in the Fund is neither insured nor guaranteed by the U.S.
Government, the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other agency, and is not a deposit or obligation of, or guaranteed or
endorsed by, any bank. There can be no assurance that the Fund will be able to
maintain a stable net asset value of $1.00 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
2
<PAGE>
Money Market Portfolio
222 South Riverside Plaza, Chicago, Illinois 60606; Telephone 1-800-231-8568
SUMMARY
Investment Objectives. Cash Account Trust is an open-end diversified management
investment company. The Fund currently offers three investment portfolios,
including the Money Market Portfolio (the "Portfolio"). The Portfolio is divided
into separate classes including the Retail Shares, which are offered herein. The
Portfolio invests in a portfolio of high quality short-term money market
instruments consistent with its specific objective. The Portfolio seeks maximum
current income to the extent consistent with stability of capital from a
portfolio primarily of commercial paper and bank obligations. The Portfolio may
use a variety of investment techniques, including the purchase of repurchase
agreements and variable rate securities. The Portfolio seeks to maintain a net
asset value of $1.00 per share. There is no assurance that the objective of the
Portfolio will be achieved or that the Portfolio will be able to maintain a net
asset value of $1.00 per share. See "Investment Objectives, Policies and Risk
Factors."
Investment Manager and Shareholder Services. Scudder Kemper Investments, Inc.
(the "Adviser") is the investment manager for the Fund and provides the Fund
with continuous professional investment supervision. The Adviser is paid a
monthly investment management fee on a graduated basis ranging from 1/12 of
0.22% of the first $500 million of combined average daily net assets of all
investment portfolios of the Fund to 0.15% of the combined average daily net
assets of all investment portfolios of the Fund over $3 billion. Kemper
Distributors, Inc. ("KDI"), an affiliate of the Adviser, is the primary
administrator, distributor and principal underwriter of the Fund and, as such,
provides information and services for existing and potential shareholders and
acts as agent of the Fund in the sale of its shares.
Purchases and Redemptions. Shares of the Portfolio are available at net asset
value through selected financial services firms. The minimum initial investment
for the Portfolio is $1,000 and the minimum subsequent investment is $100. See
"Purchase of Shares." Shares may be redeemed at the net asset value next
determined after receipt by Kemper Service Company, ("KSvC," or the "Shareholder
Service Agent") the Fund's Shareholder Service Agent of a request to redeem in
proper form. Shares may be redeemed by written request or by using one of the
Funds expedited redemption procedures. See "Redemption of Shares."
Dividends. Dividends are declared daily and paid monthly. Dividends are
automatically reinvested in additional Shares of the Portfolio, unless the
shareholder makes a different election. See "Dividends and Taxes."
General Information and Capital. The Fund is organized as a business trust under
the laws of Massachusetts and may issue an unlimited number of shares of
beneficial interest. Shares are fully paid and nonassessable when issued, are
transferable without restriction and have no preemptive or conversion rights.
The Fund is not required to hold annual shareholder meetings; but will hold
special meetings as required or deemed desirable for such purposes as electing
trustees, changing fundamental policies or approving an investment management
agreement. See "Capital Structure."
SUMMARY OF EXPENSES
This information is designed to help you understand the various costs and
expenses of investing in the Shares of the Portfolio.(1)
Shareholder Transaction Expenses (2)........................................None
Annual Fund Operating Expenses Money Market
(after fee waiver and expense absorption) Portfolio Retail
(as a percentage of average net assets) Shares
Management Fees............................................. 0.10%
Other Expenses (including an administrative services
fee of 0.25%).......................................... %
-----
Total Operating Expenses.................................... %
=====
3
<PAGE>
(1) The information set forth on this page relates only to the Shares. The Fund
also offers three other classes of shares in the Portfolio, which have
different fees and expenses (which may affect performance), have different
minimum investment requirements and are entitled to different services.
(2) Investment dealers and other firms may independently charge shareholders
additional fees; please see their materials for details.
<TABLE>
<CAPTION>
Example 1 Year 3 Years 5 Years 10 Years
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
Investment in the Retail Shares, assuming (1) 5% annual
return and (2) redemption at the end of each time period: $ $ $ $
</TABLE>
The purpose of the preceding table is to assist investors in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. As discussed more fully under "Investment Manager and Shareholder
Services," the Fund's investment manager has agreed to waive temporarily its
management fee and reimburse or pay operating expenses of the Portfolio to the
extent, if any, that such expenses as defined, exceed 1.00% of average daily net
assets of the Portfolio. From time to time, the Adviser may voluntarily waive
fees and absorb certain additional operating expenses of the Portfolio. "Other
Expenses" does not reflect the effect of this additional expense absorption. The
example assumes a 5% annual rate of return pursuant to requirements of the
Securities and Exchange Commission. This hypothetical rate of return is not
intended to be representative of past or future performance of the Portfolio.
The example should not be considered to be a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS
The Fund is a money market mutual fund designed to provide its shareholders with
professional management of short-term investment dollars. It is designed for
investors who seek maximum current income consistent with stability of capital.
The Fund pools individual and institutional investors' money that it uses to buy
high quality money market instruments. The Fund is a series investment company
that is able to provide investors with a choice of separate investment
portfolios. The Fund currently offers three investment portfolios, including the
Money Market Portfolio. The Portfolio is divided into separate classes including
the Retail Shares, which are offered herein. Because the Fund combines its
shareholders' money, it can buy and sell large blocks of securities, which
reduces transaction costs and maximizes yields. The Fund is managed by
investment professionals who analyze market trends to take advantage of changing
conditions and who seek to minimize risk by diversifying the Portfolio's
investments. The Portfolio's investments are subject to price fluctuations
resulting from rising or declining interest rates and are subject to the ability
of the issuers of such investments to make payment at maturity. However, because
of their short maturities, liquidity and high quality ratings, high quality
money market instruments, such as those in which the Portfolio invests, are
generally considered to be among the safest available. Thus, the Portfolio is
designed for investors who want to avoid the fluctuations of principal commonly
associated with equity or long-term bond investments. There can be no guarantee
that the Portfolio will achieve its objective or that it will maintain a net
asset value of $1.00 per share.
Money Market Portfolio. The Portfolio seeks maximum current income consistent
with stability of capital. The Portfolio pursues its objective by investing
exclusively in the following types of U.S. Dollar-denominated money market
instruments that mature in 12 months or less:
1. Obligations of, or guaranteed by, the U.S. or Canadian governments,
their agencies or instrumentalities.
2. Bank certificates of deposit, time deposits or bankers' acceptances of
U.S. banks (including their foreign branches) and Canadian chartered
banks having total assets in excess of $1 billion.
3. Bank certificates of deposit, time deposits or bankers' acceptances of
foreign banks (including their U.S. and foreign branches) having total
assets in excess of $10 billion.
4
<PAGE>
4. Commercial paper, notes, bonds, debentures, participation certificates
or other debt obligations that (i) are rated high quality by Moody's
Investors Service, Inc. ("Moody's"), Standard & Poor's Corporation
("S&P"), or Duff & Phelps, Inc. ("Duff"); or (ii) if unrated, are
determined to be at least equal in quality to one or more of the above
ratings in the discretion of the Fund's investment manager. Currently,
only obligations in the top two categories are considered to be rated
high quality. The two highest rating categories of Moody's, S&P and
Duff for commercial paper are Prime-1 and Prime-2, A-1 and A-2 and
Duff 1 and Duff 2, respectively. For other debt obligations, the two
highest rating categories for such services are Aaa and Aa, AAA and AA
and AAA and AA, respectively. For a description of these ratings, see
"Appendix -- Ratings of Investments" in the Statement of Additional
Information.
5. Repurchase agreements of obligations that are suitable for investment
under the categories set forth above. Repurchase agreements are
discussed below.
In addition, the Portfolio limits its investments to securities that meet the
quality and diversification requirements of Rule 2a-7 under the Investment
Company Act of 1940 (the "1940 Act"). See "Net Asset Value."
The Portfolio will normally invest at least 25% of its assets in obligations
issued by banks; provided, however, the Portfolio may in the discretion of the
investment manager temporarily invest less than 25% of its assets in such
obligations whenever the Portfolio assumes a defensive posture. Investments by
the Portfolio in Eurodollar certificates of deposit issued by London branches of
U.S. banks, or obligations issued by foreign entities, including foreign banks,
involve risks that are different from investments in securities of domestic
branches of U.S. banks. These risks may include future unfavorable political and
economic developments, possible withholding taxes on interest payments, seizure
of foreign deposits, currency controls, interest limitations or other
governmental restrictions that might affect payment of principal or interest.
The market for such obligations may be less liquid and, at times, more volatile
than for securities of domestic branches of U.S. banks. Additionally, there may
be less public information available about foreign banks and their branches. The
profitability of the banking industry is dependent largely upon the availability
and cost of funds for the purpose of financing lending operations under
prevailing money market conditions. General economic conditions as well as
exposure to credit losses arising from possible financial difficulties of
borrowers play an important part in banking operations. As a result of Federal
and state laws and regulations, domestic banks are, among other things, required
to maintain specified levels of reserves, limited in the amounts they can loan
to a single borrower and subject to other regulations designed to promote
financial soundness. However, not all such laws and regulations apply to the
foreign branches of domestic banks. Foreign branches of foreign banks are not
regulated by U.S. banking authorities, and generally are not bound by
accounting, auditing and financial reporting standards comparable to U.S. banks.
Bank obligations held by the Portfolio do not benefit materially from insurance
from the Federal Deposit Insurance Corporation.
The Portfolio may invest in commercial paper issued by major corporations under
the Securities Act of 1933 in reliance on the exemption from registration
afforded by Section 3(a)(3) thereof. Such commercial paper may be issued only to
finance current transactions and must mature in nine months or less. Trading of
such commercial paper is conducted primarily by institutional investors through
investment dealers and individual investor participation in the commercial paper
market is very limited. The Portfolio also may invest in commercial paper issued
in reliance on the so-called "private placement" exemption from registration
that is afforded by Section 4(2) of the Securities Act of 1933 ("Section 4(2)
paper"). Section 4(2) paper is restricted as to disposition under the federal
securities laws, and generally is sold to institutional investors such as the
Portfolio who agree that they are purchasing the paper for investment and not
with a view to public distribution. Any resale by the purchaser must be in an
exempt transaction. Section 4(2) paper normally is resold to other institutional
investors like the Portfolio through or with the assistance of the issuer or
investment dealers who make a market in the Section 4(2) paper, thus providing
liquidity. The investment manager considers the legally restricted but readily
saleable Section 4(2) paper to be liquid; however, pursuant to procedures
approved by the Board of Trustees of the Fund, if a particular investment in
Section 4(2) paper is not determined to be liquid, that investment will be
included within the 10% limitation on illiquid securities discussed under "The
Fund" below. The investment manager monitors the liquidity of the Portfolio's
investments in Section 4(2) paper on a continuous basis.
The Portfolio may invest in high quality participation certificates
("certificates") representing undivided interests in trusts that hold the
Portfolio of receivables from consumer and commercial credit transactions, such
as transactions involving consumer revolving credit card accounts or commercial
revolving credit loan facilities. The receivables would include
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amounts charged for goods and services, finance charges, late charges and other
related fees and charges. Interest payable on the certificates may be fixed or
may be adjusted periodically or "float" continuously according to a formula
based upon an objective standard such as the 30-day commercial paper rate. See
"The Fund" below for a discussion of "Variable Rate Securities." A trust may
have the benefit of a letter of credit from a bank at a level established to
satisfy rating agencies as to the credit quality of the assets supporting the
payment of principal and interest on the certificates. Payments of principal and
interest on the certificates would be dependent upon the underlying receivables
in the trust and may be guaranteed under a letter of credit to the extent of
such credit. The quality rating by a rating service of an issue of certificates
is based primarily upon the value of the receivables held by the trust and the
credit rating of the issuer of any letter of credit and of any other guarantor
providing credit support to the trust. The investment manager considers these
factors as well as others, such as any quality ratings issued by the rating
services identified above, in reviewing the credit risk presented by a
certificate and in determining whether the certificate is appropriate for
investment by the Portfolio. Collection of receivables in the trust may be
affected by various social, legal and economic factors affecting the use of
credit and repayment patterns, such as changes in consumer protection laws, the
rate of inflation, unemployment levels and relative interest rates. It is
anticipated that for most publicly offered certificates there will be a liquid
secondary market or there may be demand features enabling the Portfolio to
readily sell its certificates prior to maturity to the issuer or a third party.
While the Portfolio may invest without limit in certificates, it is currently
anticipated that such investments will not exceed 25% of the Portfolio's assets.
The Fund. The Portfolio may invest in repurchase agreements, which are
instruments under which the Portfolio acquires ownership of a security from a
broker-dealer or bank that agrees to repurchase the security at a mutually
agreed upon time and price (which price is higher than the purchase price),
thereby determining the yield during the Portfolio's holding period. Maturity of
the securities subject to repurchase may exceed one year. In the event of a
bankruptcy or other default of a seller of a repurchase agreement, the Portfolio
might have expenses in enforcing its rights, and could experience losses,
including a decline in the value of the underlying securities and loss of
income. The Portfolio will not purchase illiquid securities, including time
deposits and repurchase agreements maturing in more than seven days if, as a
result thereof, more than 10% of such Portfolio's net assets valued at the time
of the transaction would be invested in such securities.
The Portfolio may invest in instruments having rates of interest that are
adjusted periodically or that "float" continuously according to formulae
intended to minimize fluctuation in values of the instruments ("Variable Rate
Securities"). The interest rate of Variable Rate Securities ordinarily is
determined by reference to or is a percentage of an objective standard such as a
bank's prime rate, the 90-day U.S. Treasury Bill rate, or the rate of return on
commercial paper or bank certificates of deposit. Generally, the changes in the
interest rate on Variable Rate Securities reduce the fluctuation in the market
value of such securities. Accordingly, as interest rates decrease or increase,
the potential for capital appreciation or depreciation is less than for
fixed-rate obligations. Some Variable Rate Securities ("Variable Rate Demand
Securities") have a demand feature entitling the purchaser to resell the
securities at an amount approximately equal to amortized cost or the principal
amount thereof plus accrued interest. As is the case for other Variable Rate
Securities, the interest rate on Variable Rate Demand Securities varies
according to some objective standard intended to minimize fluctuation in the
values of the instruments. The Portfolio determines the maturity of Variable
Rate Securities in accordance with Rule 2a-7, which allows the Portfolio to
consider certain of such instruments as having maturities shorter than the
maturity date on the face of the instrument.
The Portfolio may not borrow money except as a temporary measure for
extraordinary or emergency purposes, and then only in an amount up to one-third
of the value of its total assets, in order to meet redemption requests without
immediately selling any portfolio securities. Any such borrowings under this
provision will not be collateralized. No Portfolio will borrow for leverage
purposes.
The Fund has adopted for the Portfolio certain investment restrictions that are
presented in the Statement of Additional Information and that, together with the
investment objective and policies of the Portfolio cannot be changed without
approval by holders of a majority of its outstanding voting shares. As defined
in the 1940 Act, this means with respect to the Portfolio the lesser of the vote
of (a) 67% of the shares of the Portfolio present at a meeting where more than
50% of the outstanding shares of the Portfolio are present in person or by proxy
or (b) more than 50% of the outstanding shares of the Portfolio.
NET ASSET VALUE
The net asset value per share of the Shares of the Portfolio is calculated by
dividing the total assets attributable to the Shares of the Portfolio less its
liabilities by the total number of its Shares outstanding. The net asset value
per share of the Shares of
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the Portfolio is determined on each day the New York Stock Exchange ("Exchange")
is open for trading, at 11:00 a.m., 1:00 p.m. and 3:00 p.m. Shares of the
Portfolio are sold at the net asset value next determined after an order and
payment are received in the form described under "Purchase of Shares." Orders
received by dealers or other financial services firms prior to the 8:00 p.m.
determination of net asset value for the Money Market Portfolio and received by
KDI, the primary administrator, distributor and principal underwriter for the
Fund, prior to the close of its business day can be confirmed at the 8:00 p.m.
determination of net asset value for that day. Such transactions are settled by
payment of Federal funds in accordance with procedures established by KDI. The
Portfolio seeks to maintain its net asset value at $1.00 per share.
The Portfolio values its portfolio instruments at amortized cost in accordance
with Rule 2a-7 under the 1940 Act, which means that they are valued at their
acquisition cost (as adjusted for amortization of premium or accretion of
discount) rather than at current market value. Calculations are made to compare
the value of the Portfolio's investments valued at amortized cost with
market-based values. Market-based valuations are obtained by using actual
quotations provided by market makers, estimates of market value, or values
obtained from yield data relating to classes of money market instruments
published by reputable sources at the mean between the bid and asked prices for
the instruments. If a deviation of 1/2 of 1% or more were to occur between the
Portfolio's net asset value per share calculated by reference to market-based
values and the Portfolio's $1.00 per share net asset value, or if there were any
other deviation that the Board of Trustees believed would result in a material
dilution to shareholders or purchasers, the Board of Trustees would promptly
consider what action, if any, should be initiated. In order to value its
investments at amortized cost, the Portfolio purchases only securities with a
maturity of one year or less and maintain a dollar-weighted average portfolio
maturity of 90 days or less. In addition, the Portfolio limits its portfolio
investments to securities that meet the quality and diversification requirements
of Rule 2a-7.
PURCHASE OF SHARES
Shares of the Portfolio are sold at net asset value through selected financial
services firms, such as broker-dealers and banks ("firms"). The Fund has
established a minimum initial investment for Shares of the Portfolio of $1,000
and $100 for subsequent investments, but these minimums may be changed at any
time in management's discretion. Firms offering Fund shares may set higher
minimums for accounts they service and may change such minimums at their
discretion.
The Fund seeks to have its Portfolio as fully invested as possible at all times
in order to achieve maximum income. Since the Portfolio will be investing in
instruments that normally require immediate payment in Federal Funds (monies
credited to a bank's account with its regional Federal Reserve Bank), the Fund
has adopted procedures for the convenience of its shareholders and to ensure
that the Portfolio receives investable funds.
Orders for purchase of Shares of the Portfolio received by wire transfer in the
form of Federal Funds will be effected at the next determined net asset value.
Shares purchased by wire will receive (i) that day's dividend if effected at or
prior to the 1:00 p.m. Chicago time net asset value determination; (ii) the
dividend for the next calendar day if effected at the 3:00 p.m. or 8:00 p.m.
Chicago time net asset value determination provided such payment is received by
3:00 p.m. Chicago time; or (iii) the dividend for the next business day if
effected at the 8:00 p.m. determination of net asset value for that day. Orders
for purchases accompanied by a check or other negotiable bank draft will be
accepted and effected as of 3:00 p.m. Chicago time on the next business day
following receipt and such Shares will receive the dividend for the next
calendar day following the day the purchase is effected. If an order is
accompanied by a check drawn on a foreign bank, funds must normally be collected
on such check before Shares will be purchased. See "Purchase and Redemption of
Shares" in the Statement of Additional Information.
If payment is wired in Federal Funds, the payment should be directed to United
Missouri Bank of Kansas City, N.A. (ABA #101-000-695), 10th and Grand Avenue,
Kansas City, MO 64106 for credit to appropriate Fund bank account (CAT Money
Market Fund 46: 98-0119-980-3).
Clients of Firms. Firms provide varying arrangements for their clients with
respect to the purchase and redemption of Fund shares and the confirmation
thereof and may arrange with their clients for other investment or
administrative services. Such firms are responsible for the prompt transmission
of purchase and redemption orders. Some firms may establish higher minimum
investment requirements than set forth above. Such firms may independently
establish and charge additional amounts to their clients for their services,
which charges would reduce their clients' yield or return. Firms may also hold
Fund shares in nominee or street name as agent for and on behalf of their
clients. In such instances, the Fund's transfer agent
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will have no information with respect to or control over the accounts of
specific shareholders. Such shareholders may obtain access to their accounts and
information about their accounts only from their firm. Certain of these firms
may receive compensation through the Fund's Shareholder Service Agent for
record-keeping and other expenses relating to these nominee accounts. In
addition, certain privileges with respect to the purchase and redemption of
shares (such as check writing redemptions) or the reinvestment of dividends may
not be available through such firms or may only be available subject to certain
conditions or limitations. Some firms may participate in a program allowing them
access to their clients' accounts for servicing including, without limitation,
transfers of registration and dividend payee changes; and may perform functions
such as generation of confirmation statements and disbursement of cash
dividends. The prospectus should be read in connection with such firm's material
regarding its fees and services.
Other Information. The Fund reserves the right to withdraw all or any part of
the offering made by this prospectus or to reject purchase orders, without prior
notice. The Fund also reserves the right at any time to waive or increase the
minimum investment requirements. All orders to purchase shares of the Portfolio
are subject to acceptance by the Fund and are not binding until confirmed or
accepted in writing. Any purchase that would result in total account balances
for a single shareholder in excess of $3 million is subject to prior approval by
the Fund. Share certificates are issued only on request. A $10 service fee will
be charged when a check for the purchase of shares is returned because of
insufficient or uncollected funds or a stop payment order.
Shareholders should direct their inquiries to the firm from which they received
this prospectus or to Kemper Service Company, 811 Main Street, Kansas City,
Missouri 64105-2005.
REDEMPTION OF SHARES
General. Upon receipt by the Shareholder Service Agent of a request in the form
described below, Shares of the Portfolio will be redeemed by the Fund at the
next determined net asset value. If processed at 3:00 p.m. Chicago time, the
shareholder will receive that day's dividend. A shareholder may use either the
regular or expedited redemption procedures. Shareholders who redeem all their
Shares of the Portfolio will receive the net asset value of such Shares and all
declared but unpaid dividends on such Shares.
If Shares of the Portfolio to be redeemed were purchased by check or through
certain Automated Clearing House ("ACH") transactions, the Fund may delay
transmittal of redemption proceeds until it has determined that collected funds
have been received for the purchase of such shares, which will be up to 10 days
from receipt by the Fund of the purchase amount. Shareholders may not use
expedited redemption procedures (wire transfer or Redemption Check) until the
shares being redeemed have been owned for at least 10 days, and shareholders may
not use such procedures to redeem shares held in certificated form. There is no
delay when shares being redeemed were purchased by wiring Federal Funds.
If Shares being redeemed were acquired from an exchange of shares of a mutual
fund that were offered subject to a contingent deferred sales charge as
described in the prospectus for that other fund, the redemption of such shares
by the Fund may be subject to a contingent deferred sales charge as explained in
such prospectus.
Shareholders can request the following telephone privileges: expedited wire
transfer redemptions, ACH transactions and exchange transactions for individual
and institutional accounts and pre-authorized telephone redemption transactions
for certain institutional accounts. Shareholders may choose these privileges on
the account application or by contacting the Shareholder Service Agent for
appropriate instructions. Please note that the telephone exchange privilege is
automatic unless the shareholder refuses it on the account application. The Fund
or its agents may be liable for any losses, expenses or costs arising out of
fraudulent or unauthorized telephone requests pursuant to these privileges,
unless the Fund or its agents reasonably believe, based upon reasonable
verification procedures, that the telephone instructions are genuine. The
shareholder will bear the risk of loss, including loss resulting from fraudulent
or unauthorized transactions, as long as the reasonable verification procedures
are followed. The verification procedures include recording instructions,
requiring certain identifying information before acting upon instructions and
sending written confirmations.
Because of the high cost of maintaining small accounts, the Fund reserves the
right to redeem an account that falls below the minimum investment level,
currently $1,000. A shareholder will be notified in writing and will be allowed
60 days to make
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additional purchases to bring the account value up to the minimum investment
level before the Fund redeems the shareholder account.
Firms provide varying arrangements for their clients to redeem Fund shares. Such
firms may independently establish and charge additional amounts to their clients
for such services.
Regular Redemptions. When shares are held for the account of a shareholder by
the Fund's transfer agent, the shareholder may redeem them by sending a written
request with signatures guaranteed to Kemper Service Company, P.O. Box 419153,
Kansas City, Missouri 64141-6153. When certificates for shares have been issued,
they must be mailed to or deposited with the Shareholder Service Agent, along
with a duly endorsed stock power and accompanied by a written request for
redemption. Redemption requests and a stock power must be endorsed by the
account holder with signatures guaranteed by a commercial bank, trust company,
savings and loan association, federal savings bank, member firm of a national
securities exchange or other eligible financial institution. The redemption
request and stock power must be signed exactly as the account is registered
including any special capacity of the registered owner. Additional documentation
may be requested, and a signature guarantee is normally required, from
institutional and fiduciary account holders, such as corporations, custodians
(e.g., under the Uniform Transfers to Minors Act), executors, administrators,
trustees, or guardians.
Telephone Redemptions. If the proceeds of the redemption are $50,000 or less and
the proceeds are payable to the shareholder of record at the address of record,
normally a telephone request or a written request by any one account holder
without a signature guarantee is sufficient for redemptions by individual or
joint account holders, and trust, executor, guardian and custodian account
holders provided the trustee, executor, guardian or custodian is named in the
account registration. Other institutional account holders may exercise this
special privilege of redeeming shares by telephone request or written request
without signature guarantee subject to the same conditions as individual account
holders and subject to the limitations on liability described under "General"
above, provided that this privilege has been pre-authorized by the institutional
account holder or guardian account holder by written instruction to the
Shareholder Service Agent with signatures guaranteed. Telephone requests may be
made by calling 1-800-231-8568. Shares purchased by check or through certain ACH
transactions may not be redeemed under this privilege of redeeming shares by
telephone request until such shares have been owned for at least 10 days. This
privilege of redeeming shares by telephone request or by written request without
a signature guarantee may not be used to redeem shares held in certificated form
and may not be used if the shareholder's account has had an address change
within 30 days of the redemption request. During periods when it is difficult to
contact the Shareholder Service Agent by telephone, it may be difficult to use
the telephone redemption privilege, although investors can still redeem by mail.
The Fund reserves the right to terminate or modify this privilege at any time.
Expedited Wire Transfer Redemptions. If the account holder has given
authorization for expedited wire redemption to the account holder's brokerage or
bank account, shares can be redeemed and proceeds sent by a federal wire
transfer to a single previously designated account. Requests received by the
Shareholder Service Agent prior to 11:00 a.m. Chicago time will result in shares
being redeemed that day and normally the proceeds will be sent to the designated
account that day. Once authorization is on file, the Shareholder Service Agent
will honor requests by telephone at 1-800-231-8568 or in writing, subject to the
limitations on liability described under "General" above. The Fund is not
responsible for the efficiency of the federal wire system or the account
holder's financial services firm or bank. The Fund currently does not charge the
account holder for wire transfers. The account holder is responsible for any
charges imposed by the account holder's firm or bank. There is a $1,000 wire
redemption minimum. To change the designated account to receive wire redemption
proceeds, send a written request to the Shareholder Service Agent with
signatures guaranteed as described above or contact the firm through which
shares of the Fund were purchased. Shares purchased by check or through certain
ACH transactions may not be redeemed by wire transfer until the shares have been
owned for at least 10 days. Account holders may not use this procedure to redeem
shares held in certificated form. During periods when it is difficult to contact
the Shareholder Service Agent by telephone, it may be difficult to use the
expedited wire transfer redemption privilege. The Fund reserves the right to
terminate or modify this privilege at any time.
Expedited Redemptions by Draft. Upon request, shareholders will be provided with
drafts to be drawn on the Fund ("Redemption Checks"). These Redemption Checks
may be made payable to the order of any person for not more than $5 million.
Shareholders should not write Redemption Checks in an amount less than $250
since a $10 service fee will be charged as described below. When a Redemption
Check is presented for payment, a sufficient number of full and fractional
shares in the shareholder's account will be redeemed as of the next determined
net asset value to cover the amount of the
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Redemption Check. This will enable the shareholder to continue earning dividends
until the Fund receives the Redemption Check. A shareholder wishing to use this
method of redemption must complete and file an Account Information Form which is
available from the Fund or firms through which shares were purchased. Redemption
Checks should not be used to close an account since the account normally
includes accrued but unpaid dividends. The Fund reserves the right to terminate
or modify this privilege at any time. This privilege may not be available
through some firms that distribute shares of the Fund. In addition, firms may
impose minimum balance requirements in order to obtain this feature. Firms may
also impose fees to investors for this privilege or establish variations of
minimum check amounts if approved by the Fund.
Unless one signer is authorized on the Account Information Form, Redemption
Checks must be signed by all account holders. Any change in the signature
authorization must be made by written notice to the Shareholder Service Agent.
Shares purchased by check or through certain ACH transactions may not be
redeemed by Redemption Check until the shares have been on the Fund's books for
at least 10 days. Shareholders may not use this procedure to redeem shares held
in certificated form. The Fund reserves the right to terminate or modify this
privilege at any time.
The Fund may refuse to honor Redemption Checks whenever the right of redemption
has been suspended or postponed, or whenever the account is otherwise impaired.
A $10 service fee will be charged when a Redemption Check is presented to redeem
Fund shares in excess of the value of a Fund account or in an amount less than
$250; when a Redemption Check is presented that would require redemption of
shares that were purchased by check or certain ACH transactions within 10 days;
or when "stop payment" of a Redemption Check is requested.
SPECIAL FEATURES
Certain firms that offer shares of the Portfolio also provide special redemption
features through charge or debit cards and checks that redeem Portfolio shares.
Various firms have different charges for their services. Shareholders should
obtain information from their firm with respect to any special redemption
features, applicable charges, minimum balance requirements and special rules of
the cash management program being offered.
Information about the following special features is contained in the Statement
of Additional Information; and further information may be obtained without
charge from KDI: Tax Sheltered Retirement Programs; Systematic Withdrawal
Program; Exchange Privilege and Automated Clearing House Programs.
DIVIDENDS AND TAXES
Dividends are declared daily and paid monthly. Shareholders may select one of
the following ways to receive dividends.
1. Reinvest Dividends at net asset value into additional Shares of the
Portfolio. Dividends are normally reinvested on the 21st of each month
if a business day, otherwise on the next business day. Dividends will
be reinvested unless the shareholder elects to receive them in cash.
2. Receive Dividends in Cash, if so requested. Checks will be mailed
monthly to the shareholder or any person designated by the
shareholder.
The Portfolio reinvests dividend checks (and future dividends) in Shares of the
Portfolio if checks are returned as undeliverable. Dividends and other
distributions in the aggregate amount of $10 or less are automatically
reinvested in Shares of the Portfolio unless the shareholder requests that such
policy not be applied to the shareholder's account.
The Portfolio intends to continue to qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code (the "Code") and, if so
qualified, will not be subject to Federal income taxes to the extent its
earnings are distributed. Dividends derived from interest and short-term capital
gains are taxable as ordinary income whether received in cash or reinvested in
additional shares. Long-term capital gains distributions, if any, are taxable as
long-term capital gains regardless of the length of time shareholders have owned
their shares. Dividends from the Portfolio do not qualify for the dividends
received deduction available to corporate shareholders.
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Dividends declared in October, November or December to shareholders of record as
of a date in one of those months and paid during the following January are
treated as paid on December 31 of the calendar year in which declared for
Federal income tax purposes. The Fund may adjust its schedule for dividend
reinvestment for the month of December to assist in complying with the reporting
and minimum distribution requirements contained in the Code.
The Portfolio is required by law to withhold 31% of taxable dividends paid to
certain shareholders who do not furnish a correct taxpayer identification number
(in the case of individuals a social security number) and in certain other
circumstances. Trustees of qualified retirement plans and 403(b)(7) accounts are
required by law to withhold 20% of the taxable portion of any distribution that
is eligible to be "rolled over." The 20% withholding requirement does not apply
to distributions from IRAs or any part of a distribution that is transferred
directly to another qualified retirement plan, 403(b)(7) account, or IRA.
Shareholders should consult their tax advisers regarding the 20% withholding
requirement.
Shareholders normally will receive monthly confirmations of dividends and of
purchase and redemption transactions except that confirmations of dividend
reinvestment for IRAs and other fiduciary accounts for which Investors Fiduciary
Trust Company serves as trustee will be sent quarterly. Firms may provide
varying arrangements with their clients with respect to confirmations.
Tax information will be provided annually. Shareholders are encouraged to retain
copies of their account confirmation statements or year-end statements for tax
reporting purposes. However, those who have incomplete records may obtain
historical account transaction information at a reasonable fee.
INVESTMENT MANAGER AND SHAREHOLDER SERVICES
Investment Manager. Scudder Kemper Investments, Inc. (the "Adviser"), 345 Park
Avenue, New York, New York, is the investment manager of the Fund and provides
the Fund with continuous professional investment supervision. The Adviser has
been engaged in the management of investment funds for more than seventy years
and is one of the largest investment managers in the country with more than $230
billion in assets under management.
Scudder Kemper is an indirect subsidiary of Zurich Financial Services, Inc., a
newly formed global insurance and financial services company. Zurich Financial
Services, Inc. owns approximately 70% of Scudder Kemper, with the balance owned
by the Adviser's officers and employees. In connection with the formation of
Zurich Financial Services, Inc., each Fund's existing investment management
agreement with Scudder Kemper was deemed to have been assigned and, therefore,
terminated. The Board has approved a new investment management agreement with
the Adviser, which is substantially identical to the current investment
management agreement, except for the dates of execution and termination. This
agreement became effective upon the termination of the then current investment
management agreement and will be submitted for shareholder approval at a special
meeting currently scheduled to conclude in December 1998.
Responsibility for overall management of the Fund rests with its Board of
Trustees and officers. The Adviser provides professional investment supervision.
The investment management agreement provides that the Adviser shall act as the
Fund's investment adviser, manage its investments and provide it with various
services and facilities. For the services and facilities furnished to the Fund,
the Fund pays the Adviser a monthly investment management fee on a graduated
basis at 1/12 of 0.22% of the first $500 million of combined average daily net
assets of all the investment portfolios of the Fund, 0.20% of the next $500
million, 0.175% of the next $1 billion, 0.16% of the next $1 billion and 0.15%
of combined average daily net assets of all the investment portfolios of the
Fund over $3 billion. The Adviser has agreed to waive temporarily its management
fee and/or absorb operating expenses of the Portfolio to the extent, if any,
that they exceed 1.00% of the Portfolio's average daily net assets. For this
purpose, Portfolio operating expenses do not include taxes, interest,
extraordinary expenses, brokerage commissions or transaction costs. Upon notice
to the Fund, the Adviser may at any time terminate this waiver or absorption of
operating expenses. In addition, from time to time, the Adviser may voluntarily
absorb certain additional operating expenses of the Portfolios. The level of
this voluntary expense absorption shall be in the Adviser's discretion and is in
addition to the Adviser's agreement to absorb temporarily certain operating
expenses of the Portfolios described above.
On September 7, 1998, the businesses of Zurich (including Zurich's 70% interest
in The Adviser) and the financial services businesses of B.A.T Industries p.l.c.
("B.A.T") were combined to form a new global insurance and financial services
company known as Zurich Financial Services Group. By way of a dual holding
company structure, former Zurich shareholders initially owned approximately 57%
of Zurich Financial Services Group, with the balance initially owned by former
B.A.T shareholders.
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Fund Accounting Agent. Scudder Fund Accounting Corporation ("SFAC"), a
subsidiary of the Adviser, is responsible for determining the daily net asset
value per share of the Portfolio and maintaining all accounting records related
thereto. Currently, SFAC receives no fee for its services; however, subject to
Board approval, at some time in the future SFAC may seek payment for its
services under its agreement with the Fund.
Year 2000 Compliance. Like other mutual funds and financial and business
organizations worldwide, the Fund could be adversely affected if computer
systems on which the Fund relies, which primarily include those used by the
Adviser, its affiliates or other service providers, are unable to process
correctly date-related information on and after January 1, 2000. This risk is
commonly called the Year 2000 Issue. Failure to address successfully the Year
2000 Issue could result in interruptions to and other material adverse effects
on the Fund's business and operations. The Adviser has commenced a review of the
Year 2000 Issue as it may affect the Fund and is taking steps it believes are
reasonably designed to address the Year 2000 Issue, although there can be no
assurances that these steps will be sufficient. In addition, there can be no
assurances that the Year 2000 Issue will not have an adverse effect on the
companies whose securities are held by the Fund or on global markets or
economies generally.
Distributor and Administrator. Pursuant to an underwriting and distribution
agreement ("distribution agreement"), Kemper Distributors, Inc. ("KDI"), 222
South Riverside Plaza, Chicago, Illinois 60606, an affiliate of the Adviser,
serves as distributor and principal underwriter for the Fund to provide
information and services for existing and potential shareholders. The
distribution agreement provides that KDI shall appoint various financial
services firms to provide cash management service for their customers or clients
through the Fund. KDI receives no compensation from the Fund as principal
underwriter for the Shares and pays all expenses of distribution of the Shares
not otherwise paid by dealers and other financial services firms.
KDI also provides information and administrative services for shareholders of
the Shares pursuant to an administration and shareholder services agreement. For
services under the administrative agreement, the Portfolio pays KDI a fee,
payable monthly, at the annual rate of up to 0.25% of average daily net assets
of the Portfolio. KDI may engage firms to provide information and administrative
services for shareholders of the Portfolio. The firms are to provide such office
space and equipment, telephone facilities and personnel as is necessary or
appropriate for providing information and services to the firms' clients. KDI
pays each such firm a service fee at an annual rate of up to 0.25% of net assets
of Shares maintained and serviced by the firm. Firms to which service fees may
be paid include broker-dealers affiliated with KDI.
KDI also has agreements with banking firms to provide administrative and other
services, except for certain underwriting or distribution services that banks
may be prohibited from providing under the Glass-Steagall Act, for their clients
who wish to invest in the Fund. If the Glass-Steagall Act should prevent banking
firms from acting in any capacity or providing any of the described services,
management will consider what action, if any, is appropriate. Management does
not believe that termination of a relationship with a bank would result in any
material adverse consequences to the Fund. Banks or other financial services
firms may be subject to various state laws regarding the services described
above and may be required to register as dealers pursuant to state law.
Custodian, Transfer Agent and Shareholder Service Agent. Investors Fiduciary
Trust Company ("IFTC"), 801 Pennsylvania Avenue, Kansas City, Missouri 64105, as
custodian, and State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, as sub-custodian, have custody of all securities and cash
of the Fund. They attend to the collection of principal and income, and payment
for and collection of proceeds of securities bought and sold by the Fund. IFTC
also is the Fund's transfer and dividend-paying agent. Pursuant to a services
agreement with IFTC, Kemper Service Company, 811 Main Street, Kansas City,
Missouri 64105, an affiliate of the Adviser, serves as Shareholder Service Agent
of the Fund.
PERFORMANCE
The Fund may advertise several types of performance information including
"yield" and "effective yield" for the Retail Shares. Each of these figures is
based upon historical earnings and is not representative of the future
performance of the Shares. The yield of the Shares refers to the net investment
income generated by a hypothetical investment in the Shares over a specific
seven-day period. This net investment income is then annualized, which means
that the net investment income generated during the seven-day period is assumed
to be generated each week over an annual period and is shown as a
12
<PAGE>
percentage of the investment. The effective yield is calculated similarly, but
the net investment income earned by the investment is assumed to be compounded
weekly when annualized. The effective yield will be slightly higher than the
yield due to this compounding effect.
The performance of the Shares may be compared to that of other money market
mutual funds or mutual fund indexes as reported by independent mutual fund
reporting services such as Lipper Analytical Services, Inc. The performance of
the Shares and its relative size may be compared to other money market mutual
funds as reported by IBC/Financial Data, Inc.(R) or Money Market Insight(R),
reporting services on money market funds. Investors may want to compare the
performance of the Shares to that of various bank products as reported by BANK
RATE MONITOR(TM), a financial reporting service that weekly publishes average
rates of bank and thrift institution money market deposit accounts and interest
bearing checking accounts or various certificate of deposit indexes. The
performance of the Shares also may be compared to that of U.S. Treasury bills
and notes. Certain of these alternative investments may offer fixed rates of
return and guaranteed principal and may be insured. In addition, investors may
want to compare the Portfolio's performance to the Consumer Price Index either
directly or by calculating its "real rate of return," which is adjusted for the
effects of inflation.
Information may be quoted from publications such as Morningstar, Inc., The Wall
Street Journal, Money Magazine, Forbes, Barron's, Fortune, The Chicago Tribune,
USA Today, Institutional Investor and Registered Representative. The Fund may
depict the historical performance of the securities in which the Portfolio may
invest over periods reflecting a variety of market or economic conditions either
alone or in comparison with alternative investments, performance indexes of
those investments or economic indicators. The Fund may also describe its
portfolio holdings and depict its size or relative size compared to other mutual
funds, the number and make-up of its shareholder base and other descriptive
factors concerning the Fund.
The yield of the Shares will fluctuate. Fund shares are not insured. Additional
information concerning the performance of the Shares appears in the Statement of
Additional Information.
CAPITAL STRUCTURE
The Fund is an open-end, diversified, management investment company, organized
as a business trust under the laws of Massachusetts on September 7, 1989. The
Fund may issue an unlimited number of shares of beneficial interest in one or
more series ("Portfolios"), all having no par value, which may be divided by the
Board of Trustees into classes of shares, subject to compliance with the
Securities and Exchange Commission regulations permitting the creation of
separate classes of shares. The Board of Trustees may authorize the issuance of
additional Portfolios if deemed desirable. Since the Fund offers multiple
Portfolios, it is known as a "series company." Currently, the Fund offers the
Shares of the Portfolio and three other classes of shares of the Portfolio.
These other classes consist of Service Shares, Premium Shares and Institutional
Money Market Shares, which have different expenses that may affect performance.
In addition, the Fund also offers Service Shares of two other portfolios: the
Government Portfolio and the Tax-Exempt Portfolio. Shares of a Portfolio have
equal noncumulative voting rights and equal rights with respect to dividends,
assets and liquidation of such Portfolio subject to any preferences, rights or
privileges of any classes of shares of the Portfolio. Generally, each class of
shares issued by a particular Portfolio would differ as to the allocation of
certain expenses of the Portfolio, such as distribution and administrative
expenses, permitting, among other things, different levels of services or
methods of distribution among various classes. Shares of a Portfolio are fully
paid and nonassessable when issued, are transferable without restriction and
have no preemptive or conversion rights. The Fund is not required to hold annual
shareholders' meetings and does not intend to do so. However, it will hold
special meetings as required or deemed desirable for such purposes as electing
trustees, changing fundamental policies or approving an investment management
agreement. Subject to the Agreement and Declaration of Trust of the Fund,
shareholders may remove trustees. Shareholders will vote by Portfolio and not in
the aggregate or by class except when voting in the aggregate is required under
the Investment Company Act of 1940, such as for the election of trustees, or
when the Board of Trustees determines that voting by class is appropriate.
13
<PAGE>
Cash Account Trust
222 South Riverside Plaza
Chicago, Illinois 60606
TABLE OF CONTENTS
SUMMARY........................................................................3
SUMMARY OF EXPENSES............................................................3
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS...............................4
NET ASSET VALUE................................................................6
PURCHASE OF SHARES.............................................................7
REDEMPTION OF SHARES...........................................................8
SPECIAL FEATURES...............................................................9
DIVIDENDS AND TAXES............................................................9
INVESTMENT MANAGER AND SHAREHOLDER SERVICES...................................10
PERFORMANCE...................................................................11
CAPITAL STRUCTURE.............................................................12
<PAGE>
Cash
Account
Trust
PROSPECTUS January 15, 1999
CASH ACCOUNT TRUST
222 South Riverside Plaza, Chicago, Illinois 60606; 1-800-231-8568.
This prospectus contains information about the Institutional Shares (the
"Shares") of the Money Market Portfolio (the "Portfolio") offered by Cash
Account Trust (the "Fund") that a prospective investor should know before
investing and should be retained for future reference. A Statement of Additional
Information dated January 15, 1999, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. It is available
upon request without charge from the Fund at the address or telephone number on
this cover or the firm from which this prospectus was received.
The Fund is designed for investors who seek maximum current income to the extent
consistent with stability of capital. The Money Market Portfolio invests
exclusively in high quality money market instruments.
An investment in the Fund is neither insured nor guaranteed by the U.S.
Government, the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other agency, and is not a deposit or obligation of, or guaranteed or
endorsed by, any bank. There can be no assurance that the Fund will be able to
maintain a stable net asset value of $1.00 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
2
<PAGE>
CASH ACCOUNT TRUST
222 South Riverside Plaza, Chicago, Illinois 60606; Telephone 1-800-231-8568
SUMMARY
Investment Objectives. Cash Account Trust (the "Fund") is an open-end
diversified management investment company. The Fund currently offers three
investment portfolios including the Money Market Portfolio (the "Portfolio").
The Portfolio is divided into separate classes including the Institutional
Shares which are offered herein. The Portfolio invests in a portfolio of high
quality short-term money market instruments consistent with its specific
objective. The Portfolio seeks maximum current income to the extent consistent
with stability of capital from a portfolio primarily of commercial paper and
bank obligations. The Portfolio may use a variety of investment techniques,
including the purchase of repurchase agreements and variable rate securities.
The Portfolio seeks to maintain a net asset value of $1.00 per share. There is
no assurance that the objective of the Portfolio will be achieved or that the
Portfolio will be able to maintain a net asset value of $1.00 per share. See
"Investment Objectives, Policies and Risk Factors."
Investment Manager and Shareholder Services. Scudder Kemper Investments, Inc.
(the "Adviser") is the investment manager for the Fund and provides the Fund
with continuous professional investment supervision. The Adviser is paid a
monthly investment management fee on a graduated basis ranging from 1/12 of
0.22% of the first $500 million of combined average daily net assets of all
investment portfolios of the Fund to 0.15% of the combined average daily net
assets of the Shares of the Portfolio over $3 billion. Kemper Distributors, Inc.
("KDI"), an affiliate of the Adviser, is the primary administrator, distributor
and principal underwriter of the Fund and, as such, provides information and
services for existing and potential shareholders and acts as agent of the Fund
in the sale of its shares.
Purchases and Redemptions. Shares of the Portfolio are available at net asset
value through selected financial services firms. The minimum initial investment
for the Portfolio is $250,000 and the minimum subsequent investment is $100. See
"Purchase of Shares." Shares may be redeemed at the net asset value next
determined after receipt by Kemper Service Company, ("KSvC," or the "Shareholder
Service Agent") the Fund's Shareholder Service Agent of a request to redeem in
proper form. Shares may be redeemed by written request or by using one of the
Fund's expedited redemption procedures. See "Redemption of Shares."
Dividends. Dividends are declared daily and paid monthly. Dividends are
automatically reinvested in additional Shares of the Portfolio, unless the
shareholder makes a different election. See "Dividends and Taxes."
General Information and Capital. The Fund is organized as a business trust under
the laws of Massachusetts and may issue an unlimited number of shares of
beneficial interest. Shares are fully paid and nonassessable when issued, are
transferable without restriction and have no preemptive or conversion rights.
The Fund is not required to hold annual shareholder meetings; but will hold
special meetings as required or deemed desirable for such purposes as electing
trustees, changing fundamental policies or approving an investment management
agreement. See "Capital Structure."
SUMMARY OF EXPENSES
This information is designed to help you understand the various costs and
expenses of investing in the Shares of the Portfolio.(1)
Shareholder Transaction Expenses (2)........................................None
Annual Fund Operating Expenses Money Market
(after fee waiver and expense absorption) Portfolio
(as a percentage of average net assets) Institutional
Shares
Management Fees............................................ 0.10%
Other Expenses.(including an administrative services
fee of 0.15%............................................. %
-----
3
<PAGE>
Total Operating Expenses................................... %
=====
(1) The information set forth on this page relates only to the Shares. The Fund
also offers three other classes of shares in the Portfolio, which have
different fees and expenses (which may affect performance), have different
minimum investment requirements and are entitled to different services.
(2) Investment dealers and other firms may independently charge shareholders
additional fees; please see their materials for details.
<TABLE>
<CAPTION>
Example 1 Year 3 Years 5 Years 10 Years
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment in Institutional Shares, assuming (1) 5%
annual return and (2) redemption at the end of each time $ $ $ $
period:
</TABLE>
The purpose of the preceding table is to assist investors in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. As discussed more fully under "Investment Manager and Shareholder
Services," the Fund's investment manager has agreed to waive temporarily its
management fee and reimburse or pay operating expenses of the Portfolio to the
extent, if any, that such expenses as defined, exceed 1.00% of average daily net
assets of the Portfolio. From time to time, the Adviser may voluntarily waive
fees and absorb certain additional operating expenses of the Portfolio. "Other
Expenses" does not reflect the effect of this additional expense absorption. The
example assumes a 5% annual rate of return pursuant to requirements of the
Securities and Exchange Commission. This hypothetical rate of return is not
intended to be representative of past or future performance of the Portfolio.
The example should not be considered to be a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS
The Fund is a money market mutual fund designed to provide its shareholders with
professional management of short-term investment dollars. It is designed for
investors who seek maximum current income consistent with stability of capital.
The Fund pools individual and institutional investors' money that it uses to buy
high quality money market instruments. The Fund is a series investment company
that is able to provide investors with a choice of separate investment
portfolios. It currently offers three investment Portfolios including the Money
Market Portfolio. The Portfolio is divided into separate shares including
Institutional Shares which are offered herein. Because the Fund combines its
shareholders' money, it can buy and sell large blocks of securities, which
reduces transaction costs and maximizes yields. The Fund is managed by
investment professionals who analyze market trends to take advantage of changing
conditions and who seek to minimize risk by diversifying the Portfolio's
investments. The Portfolio's investments are subject to price fluctuations
resulting from rising or declining interest rates and are subject to the ability
of the issuers of such investments to make payment at maturity. However, because
of their short maturities, liquidity and high quality ratings, high quality
money market instruments, such as those in which the Portfolio invests, are
generally considered to be among the safest available. Thus, the Portfolio is
designed for investors who want to avoid the fluctuations of principal commonly
associated with equity or long-term bond investments. There can be no guarantee
that the Portfolio will achieve its objective or that it will maintain a net
asset value of $1.00 per share.
Money Market Portfolio. The Portfolio seeks maximum current income consistent
with stability of capital. The Portfolio pursues its objective by investing
exclusively in the following types of U.S. Dollar-denominated money market
instruments that mature in 12 months or less:
1. Obligations of, or guaranteed by, the U.S. or Canadian governments,
their agencies or instrumentalities.
2. Bank certificates of deposit, time deposits or bankers' acceptances of
U.S. banks (including their foreign branches) and Canadian chartered
banks having total assets in excess of $1 billion.
4
<PAGE>
3. Bank certificates of deposit, time deposits or bankers' acceptances of
foreign banks (including their U.S. and foreign branches) having total
assets in excess of $10 billion.
4. Commercial paper, notes, bonds, debentures, participation certificates
or other debt obligations that (i) are rated high quality by Moody's
Investors Service, Inc. ("Moody's"), Standard & Poor's Corporation
("S&P"), or Duff & Phelps, Inc. ("Duff"); or (ii) if unrated, are
determined to be at least equal in quality to one or more of the above
ratings in the discretion of the Fund's investment manager. Currently,
only obligations in the top two categories are considered to be rated
high quality. The two highest rating categories of Moody's, S&P and
Duff for commercial paper are Prime-1 and Prime-2, A-1 and A-2 and
Duff 1 and Duff 2, respectively. For other debt obligations, the two
highest rating categories for such services are Aaa and Aa, AAA and AA
and AAA and AA, respectively. For a description of these ratings, see
"Appendix-- Ratings of Investments" in the Statement of Additional
Information.
5. Repurchase agreements of obligations that are suitable for investment
under the categories set forth above. Repurchase agreements are
discussed below.
In addition, the Portfolio limits its investments to securities that meet the
quality and diversification requirements of Rule 2a-7 under the Investment
Company Act of 1940 (the "1940 Act"). See "Net Asset Value."
The Portfolio will normally invest at least 25% of its assets in obligations
issued by banks; provided, however, the Portfolio may in the discretion of the
investment manager temporarily invest less than 25% of its assets in such
obligations whenever the Portfolio assumes a defensive posture. Investments by
the Portfolio in Eurodollar certificates of deposit issued by London branches of
U.S. banks, or obligations issued by foreign entities, including foreign banks,
involve risks that are different from investments in securities of domestic
branches of U.S. banks. These risks may include future unfavorable political and
economic developments, possible withholding taxes on interest payments, seizure
of foreign deposits, currency controls, interest limitations or other
governmental restrictions that might affect payment of principal or interest.
The market for such obligations may be less liquid and, at times, more volatile
than for securities of domestic branches of U.S. banks. Additionally, there may
be less public information available about foreign banks and their branches. The
profitability of the banking industry is dependent largely upon the availability
and cost of funds for the purpose of financing lending operations under
prevailing money market conditions. General economic conditions as well as
exposure to credit losses arising from possible financial difficulties of
borrowers play an important part in banking operations. As a result of Federal
and state laws and regulations, domestic banks are, among other things, required
to maintain specified levels of reserves, limited in the amounts they can loan
to a single borrower and subject to other regulations designed to promote
financial soundness. However, not all such laws and regulations apply to the
foreign branches of domestic banks. Foreign branches of foreign banks are not
regulated by U.S. banking authorities, and generally are not bound by
accounting, auditing and financial reporting standards comparable to U.S. banks.
Bank obligations held by the Portfolio do not benefit materially from insurance
from the Federal Deposit Insurance Corporation.
The Portfolio may invest in commercial paper issued by major corporations under
the Securities Act of 1933 in reliance on the exemption from registration
afforded by Section 3(a)(3) thereof. Such commercial paper may be issued only to
finance current transactions and must mature in nine months or less. Trading of
such commercial paper is conducted primarily by institutional investors through
investment dealers and individual investor participation in the commercial paper
market is very limited. The Portfolio also may invest in commercial paper issued
in reliance on the so-called "private placement" exemption from registration
that is afforded by Section 4(2) of the Securities Act of 1933 ("Section 4(2)
paper"). Section 4(2) paper is restricted as to disposition under the federal
securities laws, and generally is sold to institutional investors such as the
Portfolio who agree that they are purchasing the paper for investment and not
with a view to public distribution. Any resale by the purchaser must be in an
exempt transaction. Section 4(2) paper normally is resold to other institutional
investors like the Portfolio through or with the assistance of the issuer or
investment dealers who make a market in the Section 4(2) paper, thus providing
liquidity. The investment manager considers the legally restricted but readily
saleable Section 4(2) paper to be liquid; however, pursuant to procedures
approved by the Board of Trustees of the Fund, if a particular investment in
Section 4(2) paper is not determined to be liquid, that investment will be
included within the 10% limitation on illiquid securities discussed under "The
Fund" below. The investment manager monitors the liquidity of the Portfolio's
investments in Section 4(2) paper on a continuous basis.
5
<PAGE>
The Portfolio may invest in high quality participation certificates
("certificates") representing undivided interests in trusts that hold the
Portfolio of receivables from consumer and commercial credit transactions, such
as transactions involving consumer revolving credit card accounts or commercial
revolving credit loan facilities. The receivables would include amounts charged
for goods and services, finance charges, late charges and other related fees and
charges. Interest payable on the certificates may be fixed or may be adjusted
periodically or "float" continuously according to a formula based upon an
objective standard such as the 30-day commercial paper rate. See "The Fund"
below for a discussion of "Variable Rate Securities." A trust may have the
benefit of a letter of credit from a bank at a level established to satisfy
rating agencies as to the credit quality of the assets supporting the payment of
principal and interest on the certificates. Payments of principal and interest
on the certificates would be dependent upon the underlying receivables in the
trust and may be guaranteed under a letter of credit to the extent of such
credit. The quality rating by a rating service of an issue of certificates is
based primarily upon the value of the receivables held by the trust and the
credit rating of the issuer of any letter of credit and of any other guarantor
providing credit support to the trust. The investment manager considers these
factors as well as others, such as any quality ratings issued by the rating
services identified above, in reviewing the credit risk presented by a
certificate and in determining whether the certificate is appropriate for
investment by the Portfolio. Collection of receivables in the trust may be
affected by various social, legal and economic factors affecting the use of
credit and repayment patterns, such as changes in consumer protection laws, the
rate of inflation, unemployment levels and relative interest rates. It is
anticipated that for most publicly offered certificates there will be a liquid
secondary market or there may be demand features enabling the Portfolio to
readily sell its certificates prior to maturity to the issuer or a third party.
While the Portfolio may invest without limit in certificates, it is currently
anticipated that such investments will not exceed 25% of the Portfolio's assets.
The Fund. The Portfolio may invest in repurchase agreements, which are
instruments under which the Portfolio acquires ownership of a security from a
broker-dealer or bank that agrees to repurchase the security at a mutually
agreed upon time and price (which price is higher than the purchase price),
thereby determining the yield during the Portfolio's holding period. Maturity of
the securities subject to repurchase may exceed one year. In the event of a
bankruptcy or other default of a seller of a repurchase agreement, the Portfolio
might have expenses in enforcing its rights, and could experience losses,
including a decline in the value of the underlying securities and loss of
income. The Portfolio will not purchase illiquid securities, including time
deposits and repurchase agreements maturing in more than seven days if, as a
result thereof, more than 10% of such Portfolio's net assets valued at the time
of the transaction would be invested in such securities.
The Portfolio may invest in instruments having rates of interest that are
adjusted periodically or that "float" continuously according to formulae
intended to minimize fluctuation in values of the instruments ("Variable Rate
Securities"). The interest rate of Variable Rate Securities ordinarily is
determined by reference to or is a percentage of an objective standard such as a
bank's prime rate, the 90-day U.S. Treasury Bill rate, or the rate of return on
commercial paper or bank certificates of deposit. Generally, the changes in the
interest rate on Variable Rate Securities reduce the fluctuation in the market
value of such securities. Accordingly, as interest rates decrease or increase,
the potential for capital appreciation or depreciation is less than for
fixed-rate obligations. Some Variable Rate Securities ("Variable Rate Demand
Securities") have a demand feature entitling the purchaser to resell the
securities at an amount approximately equal to amortized cost or the principal
amount thereof plus accrued interest. As is the case for other Variable Rate
Securities, the interest rate on Variable Rate Demand Securities varies
according to some objective standard intended to minimize fluctuation in the
values of the instruments. The Portfolio determines the maturity of Variable
Rate Securities in accordance with Rule 2a-7, which allows the Portfolio to
consider certain of such instruments as having maturities shorter than the
maturity date on the face of the instrument.
The Portfolio may not borrow money except as a temporary measure for
extraordinary or emergency purposes, and then only in an amount up to one-third
of the value of its total assets, in order to meet redemption requests without
immediately selling any portfolio securities. Any such borrowings under this
provision will not be collateralized. No Portfolio will borrow for leverage
purposes.
The Fund has adopted for the Portfolio certain investment restrictions that are
presented in the Statement of Additional Information and that, together with the
investment objective and policies of the Portfolio cannot be changed without
approval by holders of a majority of its outstanding voting shares. As defined
in the 1940 Act, this means with respect to the Portfolio the lesser of the vote
of (a) 67% of the shares of the Portfolio present at a meeting where more than
50% of the outstanding shares of the Portfolio are present in person or by proxy
or (b) more than 50% of the outstanding shares of the Portfolio.
6
<PAGE>
NET ASSET VALUE
The net asset value per share of the Shares of the Portfolio is calculated by
dividing the total assets attributable to the Shares of the Portfolio less its
liabilities by the total number of its Shares outstanding. The net asset value
per share of the Shares of the Portfolio is determined on each day the New York
Stock Exchange ("Exchange") is open for trading, at 11:00 a.m., 1:00 p.m. and
3:00 p.m. Shares of the Portfolio are sold at the net asset value next
determined after an order and payment are received in the form described under
"Purchase of Shares." Orders received by dealers or other financial services
firms prior to the 8:00 p.m. determination of net asset value for the Portfolio
and received by KDI, the primary administrator, distributor and principal
underwriter for the Fund, prior to the close of its business day can be
confirmed at the 8:00 p.m. determination of net asset value for that day. Such
transactions are settled by payment of Federal funds in accordance with
procedures established by KDI. The Portfolio seeks to maintain its net asset
value at $1.00 per share.
The Portfolio values its portfolio instruments at amortized cost in accordance
with Rule 2a-7 under the 1940 Act, which means that they are valued at their
acquisition cost (as adjusted for amortization of premium or accretion of
discount) rather than at current market value. Calculations are made to compare
the value of the Portfolio's investments valued at amortized cost with
market-based values. Market-based valuations are obtained by using actual
quotations provided by market makers, estimates of market value, or values
obtained from yield data relating to classes of money market instruments
published by reputable sources at the mean between the bid and asked prices for
the instruments. If a deviation of 1/2 of 1% or more were to occur between the
Portfolio's net asset value per share calculated by reference to market-based
values and the Portfolio's $1.00 per share net asset value, or if there were any
other deviation that the Board of Trustees believed would result in a material
dilution to shareholders or purchasers, the Board of Trustees would promptly
consider what action, if any, should be initiated. In order to value its
investments at amortized cost, the Portfolio purchases only securities with a
maturity of one year or less and maintain a dollar-weighted average portfolio
maturity of 90 days or less. In addition, the Portfolio limits its portfolio
investments to securities that meet the quality and diversification requirements
of Rule 2a-7.
PURCHASE OF SHARES
Shares of the Portfolio are sold at net asset value through selected financial
services firms, such as broker-dealers and banks ("firms"). The Fund has
established a minimum initial investment for Shares of the Portfolio of $250,000
and $100 for subsequent investments, but these minimums may be changed at any
time in management's discretion. Firms offering Fund shares may set higher
minimums for accounts they service and may change such minimums at their
discretion.
The Fund seeks to have its Portfolio as fully invested as possible at all times
in order to achieve maximum income. Since the Portfolio will be investing in
instruments that normally require immediate payment in Federal Funds (monies
credited to a bank's account with its regional Federal Reserve Bank), the Fund
has adopted procedures for the convenience of its shareholders and to ensure
that the Portfolio receives investable funds.
Orders for purchase of Shares of the Portfolio will be accepted only by wire
transfer in the form of Federal Funds. Purchases will be effected at the next
determined net asset value. Shares purchased by wire will receive (i) that day's
dividend if effected at or prior to the 4:00 p.m. Eastern Standard Time ("EST");
(ii) the dividend for the next calendar day if effected at the 3:00 p.m. or 8:00
p.m. Chicago time net asset value determination provided such payment is
received by 3:00 p.m. Chicago time; or (iii) the dividend for the next business
day if effected at the 8:00 p.m. Chicago time net asset value determination for
that day. See "Purchase and Redemption of Shares" in the Statement of Additional
Information.
Federal Funds wires should be directed to United Missouri Bank of Kansas City,
N.A. (ABA #101-000-695), 10th and Grand Avenue, Kansas City, MO 64106 for credit
to appropriate Fund bank account (CAT Money Market Fund 46: 98-0119-980-3).
Clients of Firms. Firms provide varying arrangements for their clients with
respect to the purchase and redemption of Fund shares and the confirmation
thereof and may arrange with their clients for other investment or
administrative services. Such firms are responsible for the prompt transmission
of purchase and redemption orders. Some firms may establish higher minimum
investment requirements than set forth above. Such firms may independently
establish and charge additional amounts to their clients for their services,
which charges would reduce their clients' yield or return. Firms may also hold
Fund shares in nominee or street name as agent for and on behalf of their
clients. In such instances, the Fund's transfer agent
7
<PAGE>
will have no information with respect to or control over the accounts of
specific shareholders. Such shareholders may obtain access to their accounts and
information about their accounts only from their firm. Certain of these firms
may receive compensation through the Fund's Shareholder Service Agent for
record-keeping and other expenses relating to these nominee accounts. In
addition, certain privileges with respect to the purchase and redemption of
shares (such as check writing redemptions) or the reinvestment of dividends may
not be available through such firms or may only be available subject to certain
conditions or limitations. Some firms may participate in a program allowing them
access to their clients' accounts for servicing including, without limitation,
transfers of registration and dividend payee changes; and may perform functions
such as generation of confirmation statements and disbursement of cash
dividends. The prospectus should be read in connection with such firm's material
regarding its fees and services.
Other Information. The Fund reserves the right to withdraw all or any part of
the offering made by this prospectus or to reject purchase orders, without prior
notice. The Fund also reserves the right at any time to waive or increase the
minimum investment requirements. All orders to purchase shares of the Portfolio
are subject to acceptance by the Fund and are not binding until confirmed or
accepted in writing. Any purchase that would result in total account balances
for a single shareholder in excess of $3 million is subject to prior approval by
the Fund. Share certificates are issued only on request. A $10 service fee will
be charged when a check for the purchase of shares is returned because of
insufficient or uncollected funds or a stop payment order.
Shareholders should direct their inquiries to the firm from which they received
this prospectus or to Kemper Service Company, 811 Main Street, Kansas City,
Missouri 64105-2005.
REDEMPTION OF SHARES
General. Upon receipt by the Shareholder Service Agent of a request in the form
described below, Shares of the Portfolio will be redeemed by the Fund at the
next determined net asset value. If processed at 4:00 p.m. EST, the shareholder
will receive that day's dividend. A shareholder may use either the regular or
expedited redemption procedures. Shareholders who redeem all their Shares of the
Portfolio will receive the net asset value of such Shares and all declared but
unpaid dividends on such Shares.
If Shares being redeemed were acquired from an exchange of shares of a mutual
fund that were offered subject to a contingent deferred sales charge as
described in the prospectus for that other fund, the redemption of such shares
by the Fund may be subject to a contingent deferred sales charge as explained in
such prospectus.
Shareholders can request the following telephone privileges: expedited wire
transfer redemptions and exchange transactions for individual and institutional
accounts and pre-authorized telephone redemption transactions for certain
institutional accounts. Shareholders may choose these privileges on the account
application or by contacting the Shareholder Service Agent for appropriate
instructions. Please note that the telephone exchange privilege is automatic
unless the shareholder refuses it on the account application. The Fund or its
agents may be liable for any losses, expenses or costs arising out of fraudulent
or unauthorized telephone requests pursuant to these privileges, unless the Fund
or its agents reasonably believe, based upon reasonable verification procedures,
that the telephone instructions are genuine. The shareholder will bear the risk
of loss, including loss resulting from fraudulent or unauthorized transactions,
as long as the reasonable verification procedures are followed. The verification
procedures include recording instructions, requiring certain identifying
information before acting upon instructions and sending written confirmations.
Because of the high cost of maintaining small accounts, the Fund reserves the
right to redeem an account that falls below $100,000. A shareholder will be
notified in writing and will be allowed 60 days to make additional purchases to
bring the account value up to the minimum investment level before the Fund
redeems the shareholder account.
Firms provide varying arrangements for their clients to redeem Fund shares. Such
firms may independently establish and charge additional amounts to their clients
for such services.
Regular Redemptions. When shares are held for the account of a shareholder by
the Fund's transfer agent, the shareholder may redeem them by sending a written
request with signatures guaranteed to Kemper Service Company, P.O. Box 419153,
Kansas City, Missouri 64141-6153. When certificates for shares have been issued,
they must be mailed to or deposited with
8
<PAGE>
the Shareholder Service Agent, along with a duly endorsed stock power and
accompanied by a written request for redemption. Redemption requests and a stock
power must be endorsed by the account holder with signatures guaranteed by a
commercial bank, trust company, savings and loan association, federal savings
bank, member firm of a national securities exchange or other eligible financial
institution. The redemption request and stock power must be signed exactly as
the account is registered including any special capacity of the registered
owner. Additional documentation may be requested, and a signature guarantee is
normally required, from institutional and fiduciary account holders, such as
corporations, custodians (e.g., under the Uniform Transfers to Minors Act),
executors, administrators, trustees, or guardians.
Telephone Redemptions. If the proceeds of the redemption are $50,000 or less and
the proceeds are payable to the shareholder of record at the address of record,
normally a telephone request or a written request by any one account holder
without a signature guarantee is sufficient for redemptions by individual or
joint account holders, and trust, executor, guardian and custodian account
holders provided the trustee, executor, guardian or custodian is named in the
account registration. Other institutional account holders may exercise this
special privilege of redeeming shares by telephone request or written request
without signature guarantee subject to the same conditions as individual account
holders and subject to the limitations on liability described under "General"
above, provided that this privilege has been pre-authorized by the institutional
account holder or guardian account holder by written instruction to the
Shareholder Service Agent with signatures guaranteed. Telephone requests may be
made by calling 1-800-231-8568. Shares purchased by check or through certain ACH
transactions may not be redeemed under this privilege of redeeming shares by
telephone request until such shares have been owned for at least 10 days. This
privilege of redeeming shares by telephone request or by written request without
a signature guarantee may not be used to redeem shares held in certificated form
and may not be used if the shareholder's account has had an address change
within 30 days of the redemption request. During periods when it is difficult to
contact the Shareholder Service Agent by telephone, it may be difficult to use
the telephone redemption privilege, although investors can still redeem by mail.
The Fund reserves the right to terminate or modify this privilege at any time.
Expedited Wire Transfer Redemptions. If the account holder has given
authorization for expedited wire redemption to the account holder's brokerage or
bank account, shares can be redeemed and proceeds sent by a federal wire
transfer to a single previously designated account. Requests received by the
Shareholder Service Agent prior to 11:00 a.m. Chicago time will result in shares
being redeemed that day and normally the proceeds will be sent to the designated
account that day. Once authorization is on file, the Shareholder Service Agent
will honor requests by telephone at 1-800-231-8568 or in writing, subject to the
limitations on liability described under "General" above. The Fund is not
responsible for the efficiency of the federal wire system or the account
holder's financial services firm or bank. The Fund currently does not charge the
account holder for wire transfers. The account holder is responsible for any
charges imposed by the account holder's firm or bank. There is a $1,000 wire
redemption minimum. To change the designated account to receive wire redemption
proceeds, send a written request to the Shareholder Service Agent with
signatures guaranteed as described above or contact the firm through which
shares of the Fund were purchased. Shares purchased by check or through certain
ACH transactions may not be redeemed by wire transfer until the shares have been
owned for at least 10 days. Account holders may not use this procedure to redeem
shares held in certificated form. During periods when it is difficult to contact
the Shareholder Service Agent by telephone, it may be difficult to use the
expedited wire transfer redemption privilege. The Fund reserves the right to
terminate or modify this privilege at any time.
SPECIAL FEATURES
Certain firms that offer shares of the Portfolio also provide special redemption
features through charge or debit cards and checks that redeem Portfolio shares.
Various firms have different charges for their services. Shareholders should
obtain information from their firm with respect to any special redemption
features, applicable charges, minimum balance requirements and special rules of
the cash management program being offered.
Information about the following special features is contained in the Statement
of Additional Information; and further information may be obtained without
charge from KDI: Tax Sheltered Retirement Programs; Systematic Withdrawal
Program; Exchange Privilege and Automated Clearing House Programs.
DIVIDENDS AND TAXES
Dividends are declared daily and paid monthly. Shareholders may select one of
the following ways to receive dividends.
9
<PAGE>
1. Reinvest Dividends at net asset value into additional Shares of the
Portfolio. Dividends are normally reinvested on the 21st of each month if a
business day, otherwise on the next business day. Dividends will be
reinvested unless the shareholder elects to receive them in cash.
2. Receive Dividends in Cash, if so requested. Checks will be mailed monthly
to the shareholder or any person designated by the shareholder.
The Portfolio reinvests dividend checks (and future dividends) in Shares of the
Portfolio if checks are returned as undeliverable. Dividends and other
distributions in the aggregate amount of $10 or less are automatically
reinvested in Shares of the Portfolio unless the shareholder requests that such
policy not be applied to the shareholder's account.
The Portfolio intends to continue to qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code (the "Code") and, if so
qualified, will not be subject to Federal income taxes to the extent its
earnings are distributed. Dividends derived from interest and short-term capital
gains are taxable as ordinary income whether received in cash or reinvested in
additional shares. Long-term capital gains distributions, if any, are taxable as
long-term capital gains regardless of the length of time shareholders have owned
their shares. Dividends from the Portfolio do not qualify for the dividends
received deduction available to corporate shareholders.
Dividends declared in October, November or December to shareholders of record as
of a date in one of those months and paid during the following January are
treated as paid on December 31 of the calendar year in which declared for
Federal income tax purposes. The Fund may adjust its schedule for dividend
reinvestment for the month of December to assist in complying with the reporting
and minimum distribution requirements contained in the Code.
The Portfolio is required by law to withhold 31% of taxable dividends paid to
certain shareholders who do not furnish a correct taxpayer identification number
(in the case of individuals a social security number) and in certain other
circumstances. Trustees of qualified retirement plans and 403(b)(7) accounts are
required by law to withhold 20% of the taxable portion of any distribution that
is eligible to be "rolled over." The 20% withholding requirement does not apply
to distributions from IRAs or any part of a distribution that is transferred
directly to another qualified retirement plan, 403(b)(7) account, or IRA.
Shareholders should consult their tax advisers regarding the 20% withholding
requirement.
Shareholders normally will receive monthly confirmations of dividends and of
purchase and redemption transactions except that confirmations of dividend
reinvestment for IRAs and other fiduciary accounts for which Investors Fiduciary
Trust Company serves as trustee will be sent quarterly. Firms may provide
varying arrangements with their clients with respect to confirmations. Tax
information will be provided annually. Shareholders are encouraged to retain
copies of their account confirmation statements or year-end statements for tax
reporting purposes. However, those who have incomplete records may obtain
historical account transaction information at a reasonable fee.
INVESTMENT MANAGER AND SHAREHOLDER SERVICES
Investment Manager. Scudder Kemper Investments, Inc. ("Scudder Kemper"), 345
Park Avenue, New York, New York, is the investment manager of the Funds and
provides the Funds with continuous professional investment supervision. Scudder
Kemper has been engaged in the management of investment funds for more than
seventy years and is one of the largest investment managers in the country with
more than $230 billion in assets under management.
Scudder Kemper is an indirect subsidiary of Zurich Financial Services, Inc., a
newly formed global insurance and financial services company. Zurich Financial
Services, Inc. owns approximately 70% of Scudder Kemper, with the balance owned
by Scudder Kemper's officers and employees. The Zurich family of companies
manages over $[___] billion in assets worldwide.
Responsibility for overall management of the Fund rests with its Board of
Trustees and officers. Professional investment supervision is provided by the
Adviser. The investment management agreement provides that the Adviser shall act
as the Fund's investment adviser, manage its investments and provide it with
various services and facilities. For the services and facilities furnished to
the Fund, the Fund pays the Adviser a monthly investment management fee on a
graduated basis at 1/12 of 0.22% of the first $500 million of combined average
daily net assets of all the investment portfolios of the Fund, 0.20% of the next
$500 million, 0.175% of the next $1 billion, 0.16% of the next $1 billion and
0.15% of combined average
10
<PAGE>
daily net assets of all the investment portfolios of the Fund over $3 billion.
The Adviser has agreed to waive temporarily its management fee and/or absorb
operating expenses of the Portfolio to the extent, if any, that they exceed
1.00% of the Portfolio's average daily net assets. For this purpose, Portfolio
operating expenses do not include taxes, interest, extraordinary expenses,
brokerage commissions or transaction costs. Upon notice to the Fund, the Adviser
may at any time terminate this waiver or absorption of operating expenses. In
addition, from time to time, the Adviser may voluntarily absorb certain
additional operating expenses of the Portfolios. The level of this voluntary
expense absorption shall be in the Adviser's discretion and is in addition to
the Adviser's agreement to absorb temporarily certain operating expenses of the
Portfolios described above.
On September 7, 1998, the businesses of Zurich (including Zurich's 70% interest
in The Adviser) and the financial services businesses of B.A.T Industries p.l.c.
("B.A.T") were combined to form a new global insurance and financial services
company known as Zurich Financial Services Group. By way of a dual holding
company structure, former Zurich shareholders initially owned approximately 57%
of Zurich Financial Services Group, with the balance initially owned by former
B.A.T shareholders.
Fund Accounting Agent. Scudder Fund Accounting Corporation ("SFAC"), a
subsidiary of the Adviser, is responsible for determining the daily net asset
value per share of the Portfolio and maintaining all accounting records related
thereto. Currently, SFAC receives no fee for its services; however, subject to
Board approval, at some time in the future SFAC may seek payment for its
services under its agreement with the Fund.
Year 2000 Compliance. Like other mutual funds and financial and business
organizations worldwide, the Fund could be adversely affected if computer
systems on which the Fund relies, which primarily include those used by the
Adviser, its affiliates or other service providers, are unable to process
correctly date-related information on and after January 1, 2000. This risk is
commonly called the Year 2000 Issue. Failure to address successfully the Year
2000 Issue could result in interruptions to and other material adverse effects
on the Fund's business and operations. The Adviser has commenced a review of the
Year 2000 Issue as it may affect the Fund and is taking steps it believes are
reasonably designed to address the Year 2000 Issue, although there can be no
assurances that these steps will be sufficient. In addition, there can be no
assurances that the Year 2000 Issue will not have an adverse effect on the
companies whose securities are held by the Fund or on global markets or
economies generally.
Distributor and Administrator. Pursuant to an underwriting and distribution
agreement ("distribution agreement"), Kemper Distributors, Inc. ("KDI"), 222
South Riverside Plaza, Chicago, Illinois 60606, an affiliate of the Adviser,
serves as distributor and principal underwriter for the Fund to provide
information and services for existing and potential shareholders. The
distribution agreement provides that KDI shall appoint various financial
services firms to provide a cash management service for their customers or
clients through the Fund. KDI receives no compensation from the Fund as
principal underwriter for the Shares and pays all expenses of distributions of
the Shares not otherwise paid by dealers and other firms.
KDI also provides information and administrative services for shareholders of
the Shares pursuant to an administration services agreement. For services under
the administrative agreement, the Portfolio pays KDI a fee, payable monthly, at
the annual rate of up to 0.15% of average daily net assets of the Portfolio. KDI
may engage other firms to provide information and administrative services for
shareholders of the Portfolio. The firms are to provide such office space and
equipment, telephone facilities, personnel and literature distribution as is
necessary or appropriate for providing information and services to the firms'
clients. KDI pays each such firm a service fee at an annual rate of up to 0.15%
of net assets of Shares maintained and serviced by the firm. Firms to which
service fees may be paid include broker-dealers affiliated with KDI.
KDI also has agreements with banking firms to provide administrative and other
services, except for certain underwriting or distribution services that banks
may be prohibited from providing under the Glass-Steagall Act, for their clients
who wish to invest in the Fund. If the Glass-Steagall Act should prevent banking
firms from acting in any capacity or providing any of the described services,
management will consider what action, if any, is appropriate. Management does
not believe that termination of a relationship with a bank would result in any
material adverse consequences to the Fund. Banks or other financial services
firms may be subject to various state laws regarding the services described
above and may be required to register as dealers pursuant to state law.
11
<PAGE>
Custodian, Transfer Agent and Shareholder Service Agent. Investors Fiduciary
Trust Company ("IFTC"), 801 Pennsylvania Avenue, Kansas City, Missouri 64105, as
custodian, and State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, as sub-custodian, have custody of all securities and cash
of the Fund. They attend to the collection of principal and income, and payment
for and collection of proceeds of securities bought and sold by the Fund. IFTC
also is the Fund's transfer and dividend-paying agent. Pursuant to a services
agreement with IFTC, Kemper Service Company, 811 Main Street, Kansas City,
Missouri 64105, an affiliate of the Adviser, serves as Shareholder Service Agent
of the Fund.
PERFORMANCE
The Fund may advertise several types of performance information including
"yield" and "effective yield" for Institutional Shares. Each of these figures is
based upon historical earnings and is not representative of the future
performance of the Shares. The yield of the Shares refers to the net investment
income generated by a hypothetical investment in the Shares over a specific
seven-day period. This net investment income is then annualized, which means
that the net investment income generated during the seven-day period is assumed
to be generated each week over an annual period and is shown as a percentage of
the investment. The effective yield is calculated similarly, but the net
investment income earned by the investment is assumed to be compounded weekly
when annualized. The effective yield will be slightly higher than the yield due
to this compounding effect.
The performance of the Shares may be compared to that of other money market
mutual funds or mutual fund indexes as reported by independent mutual fund
reporting services such as Lipper Analytical Services, Inc. The performance of
the Shares and its relative size may be compared to other money market mutual
funds as reported by IBC/Financial Data, Inc.(R) or Money Market Insight(R),
reporting services on money market funds. Investors may want to compare the
performance of the Shares to that of various bank products as reported by BANK
RATE MONITOR(TM), a financial reporting service that weekly publishes average
rates of bank and thrift institution money market deposit accounts and interest
bearing checking accounts or various certificate of deposit indexes. The
performance of the Shares also may be compared to that of U.S. Treasury bills
and notes. Certain of these alternative investments may offer fixed rates of
return and guaranteed principal and may be insured. In addition, investors may
want to compare the Portfolio's performance to the Consumer Price Index either
directly or by calculating its "real rate of return," which is adjusted for the
effects of inflation.
Information may be quoted from publications such as Morningstar, Inc., The Wall
Street Journal, Money Magazine, Forbes, Barron's, Fortune, The Chicago Tribune,
USA Today, Institutional Investor and Registered Representative. The Fund may
depict the historical performance of the securities in which the Portfolio may
invest over periods reflecting a variety of market or economic conditions either
alone or in comparison with alternative investments, performance indexes of
those investments or economic indicators. The Fund may also describe its
portfolio holdings and depict its size or relative size compared to other mutual
funds, the number and make-up of its shareholder base and other descriptive
factors concerning the Fund.
The yield of the Shares will fluctuate. Fund Shares are not insured. Additional
information concerning the performance of the Shares appears in the Statement of
Additional Information.
CAPITAL STRUCTURE
The Fund is an open-end, diversified, management investment company, organized
as a business trust under the laws of Massachusetts on September 7, 1989. The
Fund may issue an unlimited number of shares of beneficial interest in one or
more series ("Portfolios"), all having no par value, which may be divided by the
Board of Trustees into classes of shares, subject to compliance with the
Securities and Exchange Commission regulations permitting the creation of
separate classes of shares. The Board of Trustees may authorize the issuance of
additional Portfolios if deemed desirable. Since the Fund offers multiple
Portfolios, it is known as a "series company." Currently, the Fund offers the
Shares of the Portfolio and three other classes of shares of the Portfolio.
These other classes consist of the Service Shares, Retail Shares and Premier
Shares, which have different expenses that may affect performance. In addition,
the Fund offers Service Shares of two other portfolios: the Government Portfolio
and the Tax-Exempt Portfolio. Shares of a Portfolio have equal noncumulative
voting rights and equal rights with respect to dividends, assets and liquidation
of such Portfolio subject to any preferences, rights or privileges of any
classes of shares of the Portfolio. Generally, each class of shares issued by a
particular Portfolio would
12
<PAGE>
differ as to the allocation of certain expenses of the Portfolio, such as
distribution and administrative expenses, permitting, among other things,
different levels of services or methods of distribution among various classes.
Shares of a Portfolio are fully paid and nonassessable when issued, are
transferable without restriction and have no preemptive or conversion rights.
The Fund is not required to hold annual shareholders' meetings and does not
intend to do so. However, it will hold special meetings as required or deemed
desirable for such purposes as electing trustees, changing fundamental policies
or approving an investment management agreement. Subject to the Agreement and
Declaration of Trust of the Fund, shareholders may remove trustees. Shareholders
will vote by Portfolio and not in the aggregate or by class except when voting
in the aggregate is required under the Investment Company Act of 1940, such as
for the election of trustees, or when the Board of Trustees determines that
voting by class is appropriate.
13
<PAGE>
Cash Account Trust
222 South Riverside Plaza
Chicago, Illinois 60606
TABLE OF CONTENTS
SUMMARY.....................................................................3
SUMMARY OF EXPENSES.........................................................3
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS............................4
NET ASSET VALUE.............................................................6
PURCHASE OF SHARES..........................................................7
REDEMPTION OF SHARES........................................................8
SPECIAL FEATURES...........................................................10
DIVIDENDS AND TAXES........................................................10
INVESTMENT MANAGER AND SHAREHOLDER SERVICES................................11
PERFORMANCE................................................................12
CAPITAL STRUCTURE..........................................................13
<PAGE>
Cash
Account
Trust
PROSPECTUS January 15, 1999
CASH ACCOUNT TRUST
222 South Riverside Plaza, Chicago, Illinois 60606; 1-800-231-8568.
This prospectus contains information about the Premier Shares (the "Shares") of
the Money Market Portfolio (the "Portfolio") offered by Cash Account Trust (the
"Fund") that a prospective investor should know before investing and should be
retained for future reference. A Statement of Additional Information dated
January 15, 1999, has been filed with the Securities and Exchange Commission and
is incorporated herein by reference. It is available upon request without charge
from the Fund at the address or telephone number on this cover or the firm from
which this prospectus was received.
The Fund is designed for investors who seek maximum current income to the extent
consistent with stability of capital. The Money Market Portfolio invests
exclusively in high quality money market instruments.
An investment in the Fund is neither insured nor guaranteed by the U.S.
Government, the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other agency, and is not a deposit or obligation of, or guaranteed or
endorsed by, any bank. There can be no assurance that the Fund will be able to
maintain a stable net asset value of $1.00 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
2
<PAGE>
CASH ACCOUNT TRUST
222 South Riverside Plaza, Chicago, Illinois 60606; Telephone 1-800-231-8568
SUMMARY
Investment Objectives. Cash Account Trust (the "Fund") is an open-end
diversified management investment company. The Fund currently offers three
investment portfolios including the Money Market Portfolio (the "Portfolio").
The Portfolio is divided into separate classes including the Premier Shares
which are offered herein. The Portfolio invests in a portfolio of high quality
short-term money market instruments consistent with its specific objective. The
Portfolio seeks maximum current income to the extent consistent with stability
of capital from a portfolio primarily of commercial paper and bank obligations.
The Portfolio may use a variety of investment techniques, including the purchase
of repurchase agreements and variable rate securities. The Portfolio seeks to
maintain a net asset value of $1.00 per share. There is no assurance that the
objective of the Portfolio will be achieved or that the Portfolio will be able
to maintain a net asset value of $1.00 per share. See "Investment Objectives,
Policies and Risk Factors."
Investment Manager and Shareholder Services. Scudder Kemper Investments, Inc.
(the "Adviser") is the investment manager for the Fund and provides the Fund
with continuous professional investment supervision. The Adviser is paid a
monthly investment management fee on a graduated basis ranging from 1/12 of
0.22% of the first $500 million of combined average daily net assets of all
investment portfolios of the Fund to 0.15% of the combined average daily net
assets of all investment portfolios of the Fund over $3 billion. Kemper
Distributors, Inc. ("KDI"), an affiliate of the Adviser, is the primary
administrator, distributor and principal underwriter of the Fund and, as such,
provides information and services for existing and potential shareholders and
acts as agent of the Fund in the sale of its shares. See "Investment Manager and
Shareholder Services."
Purchases and Redemptions. Shares of the Portfolio are available at net asset
value through selected financial services firms. The minimum initial investment
for the Portfolio is $25,000 [and the minimum subsequent investment is $100].
See "Purchase of Shares." Shares may be redeemed at the net asset value next
determined after receipt by Kemper Service Company, ("KSvC," or the "Shareholder
Service Agent") the Fund's Shareholder Service Agent of a request to redeem in
proper form. Shares may be redeemed by written request or by using one of the
Fund's expedited redemption procedures. See "Redemption of Shares."
Dividends. Dividends are declared daily and paid monthly. Dividends are
automatically reinvested in additional Shares of the Portfolio, unless the
shareholder makes a different election. See "Dividends and Taxes."
General Information and Capital. The Fund is organized as a business trust under
the laws of Massachusetts and may issue an unlimited number of shares of
beneficial interest. Shares are fully paid and nonassessable when issued, are
transferable without restriction and have no preemptive or conversion rights.
The Fund is not required to hold annual shareholder meetings; but will hold
special meetings as required or deemed desirable for such purposes as electing
trustees, changing fundamental policies or approving an investment management
agreement. See "Capital Structure."
SUMMARY OF EXPENSES
This information is designed to help you understand the various costs and
expenses of investing in the Shares of the Portfolio.(1)
Shareholder Transaction Expenses (2)........................................None
Annual Fund Operating Expenses Money Market
(after fee waiver and expense absorption) Portfolio Premier
(as a percentage of average net assets) Shares
Management Fees............................................. 0.10%
Other Expenses (including an administrative services fee
of 0.25%).............................................. %
-----
Total Operating Expenses.................................... %
=====
3
<PAGE>
(1) The information set forth on this page relates only to the Shares. The Fund
also offers three other classes of shares in the Portfolio, which have
different fees and expenses (which may affect performance), have different
minimum investment requirements and are entitled to different services.
(2) Investment dealers and other firms may independently charge shareholders
additional fees; please see their materials for details.
<TABLE>
<CAPTION>
Example 1 Year 3 Years 5 Years 10 Years
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
Portfolio investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period: $ $ $ $
</TABLE>
The purpose of the preceding table is to assist investors in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. As discussed more fully under "Investment Manager and Shareholder
Services," the Fund's investment manager has agreed to waive temporarily its
management fee and reimburse or pay operating expenses of the Portfolio to the
extent, if any, that such expenses as defined, exceed 1.00% of average daily net
assets of the Portfolio. From time to time, the Adviser may voluntarily waive
fees and absorb certain additional operating expenses of the Portfolio. "Other
Expenses" does not reflect the effect of this additional expense absorption. The
example assumes a 5% annual rate of return pursuant to requirements of the
Securities and Exchange Commission. This hypothetical rate of return is not
intended to be representative of past or future performance of the Portfolio.
The example should not be considered to be a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS
The Fund is a money market mutual fund designed to provide its shareholders with
professional management of short-term investment dollars. It is designed for
investors who seek maximum current income consistent with stability of capital.
The Fund pools individual and institutional investors' money that it uses to buy
high quality money market instruments. The Fund is a series investment company
that is able to provide investors with a choice of separate investment
portfolios. It currently offers three investment Portfolios including the Money
Market Portfolio. The Portfolio is divided into separate shares including the
Premier Shares which are offered herein. Because the Fund combines its
shareholders' money, it can buy and sell large blocks of securities, which
reduces transaction costs and maximizes yields. The Fund is managed by
investment professionals who analyze market trends to take advantage of changing
conditions and who seek to minimize risk by diversifying the Portfolio's
investments. The Portfolio's investments are subject to price fluctuations
resulting from rising or declining interest rates and are subject to the ability
of the issuers of such investments to make payment at maturity. However, because
of their short maturities, liquidity and high quality ratings, high quality
money market instruments, such as those in which the Portfolio invests, are
generally considered to be among the safest available. Thus, the Portfolio is
designed for investors who want to avoid the fluctuations of principal commonly
associated with equity or long-term bond investments. There can be no guarantee
that the Portfolio will achieve its objective or that it will maintain a net
asset value of $1.00 per share.
Money Market Portfolio. The Portfolio seeks maximum current income consistent
with stability of capital. The Portfolio pursues its objective by investing
exclusively in the following types of U.S. Dollar-denominated money market
instruments that mature in 12 months or less:
1. Obligations of, or guaranteed by, the U.S. or Canadian governments,
their agencies or instrumentalities.
2. Bank certificates of deposit, time deposits or bankers' acceptances of
U.S. banks (including their foreign branches) and Canadian chartered
banks having total assets in excess of $1 billion.
3. Bank certificates of deposit, time deposits or bankers' acceptances of
foreign banks (including their U.S. and foreign branches) having total
assets in excess of $10 billion.
4. Commercial paper, notes, bonds, debentures, participation certificates
or other debt obligations that (i) are rated high quality by Moody's
Investors Service, Inc. ("Moody's"), Standard & Poor's Corporation
("S&P"), or Duff & Phelps, Inc. ("Duff"); or (ii) if unrated, are
determined to be at least equal in quality to one or more
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of the above ratings in the discretion of the Fund's investment
manager. Currently, only obligations in the top two categories are
considered to be rated high quality. The two highest rating categories
of Moody's, S&P and Duff for commercial paper are Prime-1 and Prime-2,
A-1 and A-2 and Duff 1 and Duff 2, respectively. For other debt
obligations, the two highest rating categories for such services are
Aaa and Aa, AAA and AA and AAA and AA, respectively. For a description
of these ratings, see "Appendix -- Ratings of Investments" in the
Statement of Additional Information.
5. Repurchase agreements of obligations that are suitable for investment
under the categories set forth above. Repurchase agreements are
discussed below.
In addition, the Portfolio limits its investments to securities that meet the
quality and diversification requirements of Rule 2a-7 under the Investment
Company Act of 1940 (the "1940 Act"). See "Net Asset Value."
The Portfolio will normally invest at least 25% of its assets in obligations
issued by banks; provided, however, the Portfolio may in the discretion of the
investment manager temporarily invest less than 25% of its assets in such
obligations whenever the Portfolio assumes a defensive posture. Investments by
the Portfolio in Eurodollar certificates of deposit issued by London branches of
U.S. banks, or obligations issued by foreign entities, including foreign banks,
involve risks that are different from investments in securities of domestic
branches of U.S. banks. These risks may include future unfavorable political and
economic developments, possible withholding taxes on interest payments, seizure
of foreign deposits, currency controls, interest limitations or other
governmental restrictions that might affect payment of principal or interest.
The market for such obligations may be less liquid and, at times, more volatile
than for securities of domestic branches of U.S. banks. Additionally, there may
be less public information available about foreign banks and their branches. The
profitability of the banking industry is dependent largely upon the availability
and cost of funds for the purpose of financing lending operations under
prevailing money market conditions. General economic conditions as well as
exposure to credit losses arising from possible financial difficulties of
borrowers play an important part in banking operations. As a result of Federal
and state laws and regulations, domestic banks are, among other things, required
to maintain specified levels of reserves, limited in the amounts they can loan
to a single borrower and subject to other regulations designed to promote
financial soundness. However, not all such laws and regulations apply to the
foreign branches of domestic banks. Foreign branches of foreign banks are not
regulated by U.S. banking authorities, and generally are not bound by
accounting, auditing and financial reporting standards comparable to U.S. banks.
Bank obligations held by the Portfolio do not benefit materially from insurance
from the Federal Deposit Insurance Corporation.
The Portfolio may invest in commercial paper issued by major corporations under
the Securities Act of 1933 in reliance on the exemption from registration
afforded by Section 3(a)(3) thereof. Such commercial paper may be issued only to
finance current transactions and must mature in nine months or less. Trading of
such commercial paper is conducted primarily by institutional investors through
investment dealers and individual investor participation in the commercial paper
market is very limited. The Portfolio also may invest in commercial paper issued
in reliance on the so-called "private placement" exemption from registration
that is afforded by Section 4(2) of the Securities Act of 1933 ("Section 4(2)
paper"). Section 4(2) paper is restricted as to disposition under the federal
securities laws, and generally is sold to institutional investors such as the
Portfolio who agree that they are purchasing the paper for investment and not
with a view to public distribution. Any resale by the purchaser must be in an
exempt transaction. Section 4(2) paper normally is resold to other institutional
investors like the Portfolio through or with the assistance of the issuer or
investment dealers who make a market in the Section 4(2) paper, thus providing
liquidity. The investment manager considers the legally restricted but readily
saleable Section 4(2) paper to be liquid; however, pursuant to procedures
approved by the Board of Trustees of the Fund, if a particular investment in
Section 4(2) paper is not determined to be liquid, that investment will be
included within the 10% limitation on illiquid securities discussed under "The
Fund" below. The investment manager monitors the liquidity of the Portfolio's
investments in Section 4(2) paper on a continuous basis.
The Portfolio may invest in high quality participation certificates
("certificates") representing undivided interests in trusts that hold the
Portfolio of receivables from consumer and commercial credit transactions, such
as transactions involving consumer revolving credit card accounts or commercial
revolving credit loan facilities. The receivables would include amounts charged
for goods and services, finance charges, late charges and other related fees and
charges. Interest payable on the certificates may be fixed or may be adjusted
periodically or "float" continuously according to a formula based upon an
objective standard such as the 30-day commercial paper rate. See "The Fund"
below for a discussion of "Variable Rate Securities." A trust may have the
benefit of a letter of credit from a bank at a level established to satisfy
rating agencies as to the credit quality of the assets supporting the payment of
principal and interest on the certificates. Payments of principal and interest
on the certificates would be dependent upon the underlying receivables in the
trust and may be guaranteed under a letter of credit to the extent of such
credit. The quality
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rating by a rating service of an issue of certificates is based primarily upon
the value of the receivables held by the trust and the credit rating of the
issuer of any letter of credit and of any other guarantor providing credit
support to the trust. The investment manager considers these factors as well as
others, such as any quality ratings issued by the rating services identified
above, in reviewing the credit risk presented by a certificate and in
determining whether the certificate is appropriate for investment by the
Portfolio. Collection of receivables in the trust may be affected by various
social, legal and economic factors affecting the use of credit and repayment
patterns, such as changes in consumer protection laws, the rate of inflation,
unemployment levels and relative interest rates. It is anticipated that for most
publicly offered certificates there will be a liquid secondary market or there
may be demand features enabling the Portfolio to readily sell its certificates
prior to maturity to the issuer or a third party. While the Portfolio may invest
without limit in certificates, it is currently anticipated that such investments
will not exceed 25% of the Portfolio's assets.
The Fund. The Portfolio may invest in repurchase agreements, which are
instruments under which the Portfolio acquires ownership of a security from a
broker-dealer or bank that agrees to repurchase the security at a mutually
agreed upon time and price (which price is higher than the purchase price),
thereby determining the yield during the Portfolio's holding period. Maturity of
the securities subject to repurchase may exceed one year. In the event of a
bankruptcy or other default of a seller of a repurchase agreement, the Portfolio
might have expenses in enforcing its rights, and could experience losses,
including a decline in the value of the underlying securities and loss of
income. The Portfolio will not purchase illiquid securities, including time
deposits and repurchase agreements maturing in more than seven days if, as a
result thereof, more than 10% of such Portfolio's net assets valued at the time
of the transaction would be invested in such securities.
The Portfolio may invest in instruments having rates of interest that are
adjusted periodically or that "float" continuously according to formulae
intended to minimize fluctuation in values of the instruments ("Variable Rate
Securities"). The interest rate of Variable Rate Securities ordinarily is
determined by reference to or is a percentage of an objective standard such as a
bank's prime rate, the 90-day U.S. Treasury Bill rate, or the rate of return on
commercial paper or bank certificates of deposit. Generally, the changes in the
interest rate on Variable Rate Securities reduce the fluctuation in the market
value of such securities. Accordingly, as interest rates decrease or increase,
the potential for capital appreciation or depreciation is less than for
fixed-rate obligations. Some Variable Rate Securities ("Variable Rate Demand
Securities") have a demand feature entitling the purchaser to resell the
securities at an amount approximately equal to amortized cost or the principal
amount thereof plus accrued interest. As is the case for other Variable Rate
Securities, the interest rate on Variable Rate Demand Securities varies
according to some objective standard intended to minimize fluctuation in the
values of the instruments. The Portfolio determines the maturity of Variable
Rate Securities in accordance with Rule 2a-7, which allows the Portfolio to
consider certain of such instruments as having maturities shorter than the
maturity date on the face of the instrument.
The Portfolio may not borrow money except as a temporary measure for
extraordinary or emergency purposes, and then only in an amount up to one-third
of the value of its total assets, in order to meet redemption requests without
immediately selling any portfolio securities. Any such borrowings under this
provision will not be collateralized. No Portfolio will borrow for leverage
purposes.
The Fund has adopted for the Portfolio certain investment restrictions that are
presented in the Statement of Additional Information and that, together with the
investment objective and policies of the Portfolio cannot be changed without
approval by holders of a majority of its outstanding voting shares. As defined
in the 1940 Act, this means with respect to the Portfolio the lesser of the vote
of (a) 67% of the shares of the Portfolio present at a meeting where more than
50% of the outstanding shares of the Portfolio are present in person or by proxy
or (b) more than 50% of the outstanding shares of the Portfolio.
NET ASSET VALUE
The net asset value per share of the Shares of the Portfolio is calculated by
dividing the total assets attributable to the Shares of the Portfolio less its
liabilities by the total number of its Shares outstanding. The net asset value
per share of the Shares of the Portfolio is determined on each day the New York
Stock Exchange ("Exchange") is open for trading, at 11:00 a.m., 1:00 p.m. and
3:00 p.m. Shares of the Portfolio are sold at the net asset value next
determined after an order and payment are received in the form described under
"Purchase of Shares." Orders received by dealers or other financial services
firms prior to the 8:00 p.m. determination of net asset value for the Portfolio
and received by KDI, the primary administrator, distributor and principal
underwriter for the Fund, prior to the close of its business day can be
confirmed at the 8:00 p.m. determination of net asset value
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for that day. Such transactions are settled by payment of Federal funds in
accordance with procedures established by KDI. The Portfolio seeks to maintain
its net asset value at $1.00 per share.
The Portfolio values its portfolio instruments at amortized cost in accordance
with Rule 2a-7 under the 1940 Act, which means that they are valued at their
acquisition cost (as adjusted for amortization of premium or accretion of
discount) rather than at current market value. Calculations are made to compare
the value of the Portfolio's investments valued at amortized cost with
market-based values. Market-based valuations are obtained by using actual
quotations provided by market makers, estimates of market value, or values
obtained from yield data relating to classes of money market instruments
published by reputable sources at the mean between the bid and asked prices for
the instruments. If a deviation of 1/2 of 1% or more were to occur between the
Portfolio's net asset value per share calculated by reference to market-based
values and the Portfolio's $1.00 per share net asset value, or if there were any
other deviation that the Board of Trustees believed would result in a material
dilution to shareholders or purchasers, the Board of Trustees would promptly
consider what action, if any, should be initiated. In order to value its
investments at amortized cost, the Portfolio purchases only securities with a
maturity of one year or less and maintain a dollar-weighted average portfolio
maturity of 90 days or less. In addition, the Portfolio limits its portfolio
investments to securities that meet the quality and diversification requirements
of Rule 2a-7.
PURCHASE OF SHARES
Shares of the Portfolio are sold at net asset value through selected financial
services firms, such as broker-dealers and banks ("firms"). The Fund has
established a minimum initial investment for Shares of the Portfolio of $25,000
and [$100 for subsequent investments], but these minimums may be changed at any
time in management's discretion. Firms offering Fund shares may set higher
minimums for accounts they service and may change such minimums at their
discretion.
The Fund seeks to have its Portfolio as fully invested as possible at all times
in order to achieve maximum income. Since the Portfolio will be investing in
instruments that normally require immediate payment in Federal Funds (monies
credited to a bank's account with its regional Federal Reserve Bank), the Fund
has adopted procedures for the convenience of its shareholders and to ensure
that the Portfolio receives investable funds.
Orders for purchase of Shares of the Portfolio received by wire transfer in the
form of Federal Funds will be effected at the next determined net asset value.
Shares purchased by wire will receive (i) that day's dividend if effected at or
prior to the 1:00 p.m. Chicago time net asset value determination; (ii) the
dividend for the next calendar day if effected at the 3:00 p.m. or 8:00 p.m.
Chicago time net asset value determination provided such payment is received by
3:00 p.m. Chicago time; or (iii) the dividend for the next business day if
effected at the 8:00 p.m. Chicago time net asset value determination for that
day. Orders for purchase accompanied by a check or other negotiable bank draft
will be accepted and effected as of 3:00 p.m. Chicago time on the next business
day following receipt and such Shares will receive the dividend for the next
calendar day following the day the purchase is effected. If an order is
accompanied by a check drawn on a foreign bank, funds must normally be collected
on such check before Shares will be purchased. See "Purchase and Redemption of
Shares" in the Statement of Additional Information.
If payment is wired in Federal Funds, the payment should be directed to United
Missouri Bank of Kansas City, N.A. (ABA #101-000-695), 10th and Grand Avenue,
Kansas City, MO 64106 for credit to appropriate Fund bank account (CAT Money
Market Fund 46: 98-0119-980-3).
Clients of Firms. Firms provide varying arrangements for their clients with
respect to the purchase and redemption of Fund shares and the confirmation
thereof and may arrange with their clients for other investment or
administrative services. Such firms are responsible for the prompt transmission
of purchase and redemption orders. Some firms may establish higher minimum
investment requirements than set forth above. Such firms may independently
establish and charge additional amounts to their clients for their services,
which charges would reduce their clients' yield or return. Firms may also hold
Fund shares in nominee or street name as agent for and on behalf of their
clients. In such instances, the Fund's transfer agent will have no information
with respect to or control over the accounts of specific shareholders. Such
shareholders may obtain access to their accounts and information about their
accounts only from their firm. Certain of these firms may receive compensation
through the Fund's Shareholder Service Agent for record-keeping and other
expenses relating to these nominee accounts. In addition, certain privileges
with respect to the purchase and redemption of shares (such as check writing
redemptions) or the reinvestment of dividends may not be available through such
firms or may only be available subject to certain conditions or limitations.
Some firms may participate in a program allowing them access to their clients'
accounts for servicing including, without limitation,
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transfers of registration and dividend payee changes; and may perform functions
such as generation of confirmation statements and disbursement of cash
dividends. The prospectus should be read in connection with such firm's material
regarding its fees and services.
Other Information. The Fund reserves the right to withdraw all or any part of
the offering made by this prospectus or to reject purchase orders, without prior
notice. The Fund also reserves the right at any time to waive or increase the
minimum investment requirements. All orders to purchase shares of the Portfolio
are subject to acceptance by the Fund and are not binding until confirmed or
accepted in writing. Any purchase that would result in total account balances
for a single shareholder in excess of $3 million is subject to prior approval by
the Fund. Share certificates are issued only on request. A $10 service fee will
be charged when a check for the purchase of shares is returned because of
insufficient or uncollected funds or a stop payment order.
Shareholders should direct their inquiries to the firm from which they received
this prospectus or to Kemper Service Company, 811 Main Street, Kansas City,
Missouri 64105-2005.
REDEMPTION OF SHARES
General. Upon receipt by the Shareholder Service Agent of a request in the form
described below, Shares of the Portfolio will be redeemed by the Fund at the
next determined net asset value. If processed at 3:00 p.m. Chicago time, the
shareholder will receive that day's dividend. A shareholder may use either the
regular or expedited redemption procedures. Shareholders who redeem all their
Shares of the Portfolio will receive the net asset value of such Shares and all
declared but unpaid dividends on such Shares.
If Shares of the Portfolio to be redeemed were purchased by check or through
certain Automated Clearing House ("ACH") transactions, the Fund may delay
transmittal of redemption proceeds until it has determined that collected funds
have been received for the purchase of such shares, which will be up to 10 days
from receipt by the Fund of the purchase amount. Shareholders may not use
expedited redemption procedures (wire transfer or Redemption Check) until the
shares being redeemed have been owned for at least 10 days, and shareholders may
not use such procedures to redeem shares held in certificated form. There is no
delay when shares being redeemed were purchased by wiring Federal Funds.
If Shares being redeemed were acquired from an exchange of shares of a mutual
fund that were offered subject to a contingent deferred sales charge as
described in the prospectus for that other fund, the redemption of such shares
by the Fund may be subject to a contingent deferred sales charge as explained in
such prospectus.
Shareholders can request the following telephone privileges: expedited wire
transfer redemptions, ACH transactions and exchange transactions for individual
and institutional accounts and pre-authorized telephone redemption transactions
for certain institutional accounts. Shareholders may choose these privileges on
the account application or by contacting the Shareholder Service Agent for
appropriate instructions. Please note that the telephone exchange privilege is
automatic unless the shareholder refuses it on the account application. The Fund
or its agents may be liable for any losses, expenses or costs arising out of
fraudulent or unauthorized telephone requests pursuant to these privileges,
unless the Fund or its agents reasonably believe, based upon reasonable
verification procedures, that the telephone instructions are genuine. The
shareholder will bear the risk of loss, including loss resulting from fraudulent
or unauthorized transactions, as long as the reasonable verification procedures
are followed. The verification procedures include recording instructions,
requiring certain identifying information before acting upon instructions and
sending written confirmations.
Because of the high cost of maintaining small accounts, the Fund reserves the
right to redeem an account that falls below the minimum investment level,
currently $25,000. A shareholder will be notified in writing and will be allowed
60 days to make additional purchases to bring the account value up to the
minimum investment level before the Fund redeems the shareholder account.
Firms provide varying arrangements for their clients to redeem Fund shares. Such
firms may independently establish and charge additional amounts to their clients
for such services.
Regular Redemptions. When shares are held for the account of a shareholder by
the Fund's transfer agent, the shareholder may redeem them by sending a written
request with signatures guaranteed to Kemper Service Company, P.O. Box 419153,
Kansas City, Missouri 64141-6153. When certificates for shares have been issued,
they must be mailed to or deposited with the
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Shareholder Service Agent, along with a duly endorsed stock power and
accompanied by a written request for redemption. Redemption requests and a stock
power must be endorsed by the account holder with signatures guaranteed by a
commercial bank, trust company, savings and loan association, federal savings
bank, member firm of a national securities exchange or other eligible financial
institution. The redemption request and stock power must be signed exactly as
the account is registered including any special capacity of the registered
owner. Additional documentation may be requested, and a signature guarantee is
normally required, from institutional and fiduciary account holders, such as
corporations, custodians (e.g., under the Uniform Transfers to Minors Act),
executors, administrators, trustees, or guardians.
Telephone Redemptions. If the proceeds of the redemption are $50,000 or less and
the proceeds are payable to the shareholder of record at the address of record,
normally a telephone request or a written request by any one account holder
without a signature guarantee is sufficient for redemptions by individual or
joint account holders, and trust, executor, guardian or custodian account
holders provided the trustee, executor, guardian or custodian is named in the
account registration. Other institutional account holders may exercise this
special privilege of redeeming shares by telephone request or written request
without signature guarantee subject to the same conditions as individual account
holders and subject to the limitations on liability described under "General"
above, provided that this privilege has been pre-authorized by the institutional
account holder or guardian account holder by written instruction to the
Shareholder Service Agent with signatures guaranteed. Telephone requests may be
made by calling 1-800-231-8568. Shares purchased by check or through certain ACH
transactions may not be redeemed under this privilege of redeeming shares by
telephone request until such shares have been owned for at least 10 days. This
privilege of redeeming shares by telephone request or by written request without
a signature guarantee may not be used to redeem shares held in certificated form
and may not be used if the shareholder's account has had an address change
within 30 days of the redemption request. During periods when it is difficult to
contact the Shareholder Service Agent by telephone, it may be difficult to use
the telephone redemption privilege, although investors can still redeem by mail.
The Fund reserves the right to terminate or modify this privilege at any time.
Expedited Wire Transfer Redemptions. If the account holder has given
authorization for expedited wire redemption to the account holder's brokerage or
bank account, shares can be redeemed and proceeds sent by a federal wire
transfer to a single previously designated account. Requests received by the
Shareholder Service Agent prior to 11:00 a.m. Chicago time will result in shares
being redeemed that day and normally the proceeds will be sent to the designated
account that day. Once authorization is on file, the Shareholder Service Agent
will honor requests by telephone at 1-800-231-8568 or in writing, subject to the
limitations on liability described under "General" above. The Fund is not
responsible for the efficiency of the federal wire system or the account
holder's financial services firm or bank. The Fund currently does not charge the
account holder for wire transfers. The account holder is responsible for any
charges imposed by the account holder's firm or bank. There is a $1,000 wire
redemption minimum. To change the designated account to receive wire redemption
proceeds, send a written request to the Shareholder Service Agent with
signatures guaranteed as described above or contact the firm through which
shares of the Fund were purchased. Shares purchased by check or through certain
ACH transactions may not be redeemed by wire transfer until the shares have been
owned for at least 10 days. Account holders may not use this procedure to redeem
shares held in certificated form. During periods when it is difficult to contact
the Shareholder Service Agent by telephone, it may be difficult to use the
expedited wire transfer redemption privilege. The Fund reserves the right to
terminate or modify this privilege at any time.
Expedited Redemptions by Draft. Upon request, shareholders will be provided with
drafts to be drawn on the Fund ("Redemption Checks"). These Redemption Checks
may be made payable to the order of any person for not more than $5 million.
When a Redemption Check is presented for payment, a sufficient number of full
and fractional shares in the shareholder's account will be redeemed as of the
next determined net asset value to cover the amount of the Redemption Check.
This will enable the shareholder to continue earning dividends until the Fund
receives the Redemption Check. A shareholder wishing to use this method of
redemption must complete and file an Account Information Form which is available
from the Fund or firms through which shares were purchased. Redemption Checks
should not be used to close an account since the account normally includes
accrued but unpaid dividends. The Fund reserves the right to terminate or modify
this privilege at any time. This privilege may not be available through some
firms that distribute shares of the Fund. In addition, firms may impose minimum
balance requirements in order to obtain this feature. Firms may also impose fees
to investors for this privilege or establish variations of minimum check amounts
if approved by the Fund.
Unless one signer is authorized on the Account Information Form, Redemption
Checks must be signed by all account holders. Any change in the signature
authorization must be made by written notice to the Shareholder Service Agent.
Shares purchased by check or through certain ACH transactions may not be
redeemed by Redemption Check until the shares have been on the Fund's
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books for at least 10 days. Shareholders may not use this procedure to redeem
shares held in certificated form. The Fund reserves the right to terminate or
modify this privilege at any time.
The Fund may refuse to honor Redemption Checks whenever the right of redemption
has been suspended or postponed, or whenever the account is otherwise impaired.
A $10 service fee will be charged when a Redemption Check is presented to redeem
Fund shares in excess of the value of a Fund account; when a Redemption Check is
presented that would require redemption of shares that were purchased by check
or certain ACH transactions within 10 days; or when "stop payment" of a
Redemption Check is requested.
SPECIAL FEATURES
Certain firms that offer shares of the Portfolio also provide special redemption
features through charge or debit cards and checks that redeem Portfolio shares.
Various firms have different charges for their services. Shareholders should
obtain information from their firm with respect to any special redemption
features, applicable charges, minimum balance requirements and special rules of
the cash management program being offered.
Information about the following special features is contained in the Statement
of Additional Information; and further information may be obtained without
charge from KDI: Tax Sheltered Retirement Programs; Systematic Withdrawal
Program; Exchange Privilege and Automated Clearing House Programs.
DIVIDENDS AND TAXES
Dividends are declared daily and paid monthly. Shareholders may select one of
the following ways to receive dividends.
1. Reinvest Dividends at net asset value into additional Shares of the
Portfolio. Dividends are normally reinvested on the 21st of each month
if a business day, otherwise on the next business day. Dividends will
be reinvested unless the shareholder elects to receive them in cash.
2. Receive Dividends in Cash, if so requested. Checks will be mailed
monthly to the shareholder or any person designated by the
shareholder.
The Portfolio reinvests dividend checks (and future dividends) in Shares of the
Portfolio if checks are returned as undeliverable. Dividends and other
distributions in the aggregate amount of $10 or less are automatically
reinvested in Shares of the Portfolio unless the shareholder requests that such
policy not be applied to the shareholder's account.
The Portfolio intends to continue to qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code (the "Code") and, if so
qualified, will not be subject to Federal income taxes to the extent its
earnings are distributed. Dividends derived from interest and short-term capital
gains are taxable as ordinary income whether received in cash or reinvested in
additional shares. Long-term capital gains distributions, if any, are taxable as
long-term capital gains regardless of the length of time shareholders have owned
their shares. Dividends from the Portfolio do not qualify for the dividends
received deduction available to corporate shareholders.
Dividends declared in October, November or December to shareholders of record as
of a date in one of those months and paid during the following January are
treated as paid on December 31 of the calendar year in which declared for
Federal income tax purposes. The Fund may adjust its schedule for dividend
reinvestment for the month of December to assist in complying with the reporting
and minimum distribution requirements contained in the Code.
The Portfolio is required by law to withhold 31% of taxable dividends paid to
certain shareholders who do not furnish a correct taxpayer identification number
(in the case of individuals a social security number) and in certain other
circumstances. Trustees of qualified retirement plans and 403(b)(7) accounts are
required by law to withhold 20% of the taxable portion of any distribution that
is eligible to be "rolled over." The 20% withholding requirement does not apply
to distributions from IRAs or any part of a distribution that is transferred
directly to another qualified retirement plan, 403(b)(7) account, or IRA.
Shareholders should consult their tax advisers regarding the 20% withholding
requirement.
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Shareholders normally will receive monthly confirmations of dividends and of
purchase and redemption transactions except that confirmations of dividend
reinvestment for IRAs and other fiduciary accounts for which Investors Fiduciary
Trust Company serves as trustee will be sent quarterly. Firms may provide
varying arrangements with their clients with respect to confirmations. Tax
information will be provided annually. Shareholders are encouraged to retain
copies of their account confirmation statements or year-end statements for tax
reporting purposes. However, those who have incomplete records may obtain
historical account transaction information at a reasonable fee.
INVESTMENT MANAGER AND SHAREHOLDER SERVICES
Investment Manager. Scudder Kemper Investments, Inc. ("Scudder Kemper"), 345
Park Avenue, New York, New York, is the investment manager of the Funds and
provides the Funds with continuous professional investment supervision. Scudder
Kemper has been engaged in the management of investment funds for more than
seventy years and is one of the largest investment managers in the country with
more than $230 billion in assets under management.
Scudder Kemper is an indirect subsidiary of Zurich Financial Services, Inc., a
newly formed global insurance and financial services company. Zurich Financial
Services, Inc. owns approximately 70% of Scudder Kemper, with the balance owned
by Scudder Kemper's officers and employees. The Zurich family of companies
manages over $[___] billion in assets worldwide.
Responsibility for overall management of the Fund rests with its Board of
Trustees and officers. Professional investment supervision is provided by the
Adviser. The investment management agreement provides that the Adviser shall act
as the Fund's investment adviser, manage its investments and provide it with
various services and facilities. For the services and facilities furnished to
the Fund, the Fund pays the Adviser a monthly investment management fee on a
graduated basis at 1/12 of 0.22% of the first $500 million of combined average
daily net assets of all the investment portfolios of the Fund, 0.20% of the next
$500 million, 0.175% of the next $1 billion, 0.16% of the next $1 billion and
0.15% of combined average daily net assets of all the investment portfolios of
the Fund over $3 billion. The Adviser has agreed to waive temporarily its
management fee and/or absorb operating expenses of the Portfolio to the extent,
if any, that they exceed 1.00% of the Portfolio's average daily net assets. For
this purpose, Portfolio operating expenses do not include taxes, interest,
extraordinary expenses, brokerage commissions or transaction costs. Upon notice
to the Fund, the Adviser may at any time terminate this waiver or absorption of
operating expenses. In addition, from time to time, the Adviser may voluntarily
absorb certain additional operating expenses of the Portfolios. The level of
this voluntary expense absorption shall be in the Adviser's discretion and is in
addition to the Adviser's agreement to absorb temporarily certain operating
expenses of the Portfolios described above.
On September 7, 1998, the businesses of Zurich (including Zurich's 70% interest
in The Adviser) and the financial services businesses of B.A.T Industries p.l.c.
("B.A.T") were combined to form a new global insurance and financial services
company known as Zurich Financial Services Group. By way of a dual holding
company structure, former Zurich shareholders initially owned approximately 57%
of Zurich Financial Services Group, with the balance initially owned by former
B.A.T shareholders.
Fund Accounting Agent. Scudder Fund Accounting Corporation ("SFAC"), a
subsidiary of the Adviser, is responsible for determining the daily net asset
value per share of the Portfolio and maintaining all accounting records related
thereto. Currently, SFAC receives no fee for its services; however, subject to
Board approval, at some time in the future SFAC may seek payment for its
services under its agreement with the Fund.
Year 2000 Compliance. Like other mutual funds and financial and business
organizations worldwide, the Fund could be adversely affected if computer
systems on which the Fund relies, which primarily include those used by the
Adviser, its affiliates or other service providers, are unable to process
correctly date-related information on and after January 1, 2000. This risk is
commonly called the Year 2000 Issue. Failure to address successfully the Year
2000 Issue could result in interruptions to and other material adverse effects
on the Fund's business and operations. The Adviser has commenced a review of the
Year 2000 Issue as it may affect the Fund and is taking steps it believes are
reasonably designed to address the Year 2000 Issue, although there can be no
assurances that these steps will be sufficient. In addition, there can be no
assurances that the Year 2000 Issue will not have an adverse effect on the
companies whose securities are held by the Fund or on global markets or
economies generally.
Distributor and Administrator. Pursuant to an underwriting and distribution
agreement ("distribution agreement"), Kemper Distributors, Inc. ("KDI"), 222
South Riverside Plaza, Chicago, Illinois 60606, an affiliate of the Adviser,
serves as distributor and principal underwriter for the Fund to provide
information and services for existing and potential shareholders. The
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distribution agreement provides that KDI shall appoint various financial
services firms to provide a cash management service for their customers or
clients through the Fund. KDI receives no compensation from the Fund as
principal underwriter for the Shares and pays all expenses of distributions of
the Shares not otherwise paid by dealers and other firms.
KDI also provides information and administrative services for shareholders of
the Shares pursuant to an administration services agreement. For services under
the administrative agreement, the Portfolio pays KDI a fee, payable monthly, at
the annual rate of up to 0.15% of average daily net assets of the Portfolio. KDI
may engage other firms to provide information and administrative services for
shareholders of the Portfolio. The firms are to provide such office space and
equipment, telephone facilities, personnel and literature distribution as is
necessary or appropriate for providing information and services to the firms'
clients. KDI pays each such firm a service fee at an annual rate of up to 0.15%
of net assets of Shares maintained and serviced by the firm. Firms to which
service fees may be paid include broker-dealers affiliated with KDI.
KDI also has agreements with banking firms to provide administrative and other
services, except for certain underwriting or distribution services that banks
may be prohibited from providing under the Glass-Steagall Act, for their clients
who wish to invest in the Fund. If the Glass-Steagall Act should prevent banking
firms from acting in any capacity or providing any of the described services,
management will consider what action, if any, is appropriate. Management does
not believe that termination of a relationship with a bank would result in any
material adverse consequences to the Fund. Banks or other financial services
firms may be subject to various state laws regarding the services described
above and may be required to register as dealers pursuant to state law.
Custodian, Transfer Agent and Shareholder Service Agent. Investors Fiduciary
Trust Company ("IFTC"), 801 Pennsylvania Avenue, Kansas City, Missouri 64105, as
custodian, and State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, as sub-custodian, have custody of all securities and cash
of the Fund. They attend to the collection of principal and income, and payment
for and collection of proceeds of securities bought and sold by the Fund. IFTC
also is the Fund's transfer and dividend-paying agent. Pursuant to a services
agreement with IFTC, Kemper Service Company, 811 Main Street, Kansas City,
Missouri 64105, an affiliate of the Adviser, serves as Shareholder Service Agent
of the Fund.
PERFORMANCE
The Fund may advertise several types of performance information including
"yield" and "effective yield" of Premier Shares. Each of these figures is based
upon historical earnings and is not representative of the future performance of
the Shares. The yield of the Shares refers to the net investment income
generated by a hypothetical investment in the Shares over a specific seven-day
period. This net investment income is then annualized, which means that the net
investment income generated during the seven-day period is assumed to be
generated each week over an annual period and is shown as a percentage of the
investment. The effective yield is calculated similarly, but the net investment
income earned by the investment is assumed to be compounded weekly when
annualized. The effective yield will be slightly higher than the yield due to
this compounding effect.
The performance of the Shares may be compared to that of other money market
mutual funds or mutual fund indexes as reported by independent mutual fund
reporting services such as Lipper Analytical Services, Inc. The performance of
the Shares and its relative size may be compared to other money market mutual
funds as reported by IBC/Financial Data, Inc.(R) or Money Market Insight(R),
reporting services on money market funds. Investors may want to compare the
performance of the Shares to that of various bank products as reported by BANK
RATE MONITOR(TM), a financial reporting service that weekly publishes average
rates of bank and thrift institution money market deposit accounts and interest
bearing checking accounts or various certificate of deposit indexes. The
performance of the Shares also may be compared to that of U.S. Treasury bills
and notes. Certain of these alternative investments may offer fixed rates of
return and guaranteed principal and may be insured. In addition, investors may
want to compare the Portfolio's performance to the Consumer Price Index either
directly or by calculating its "real rate of return," which is adjusted for the
effects of inflation.
Information may be quoted from publications such as Morningstar, Inc., The Wall
Street Journal, Money Magazine, Forbes, Barron's, Fortune, The Chicago Tribune,
USA Today, Institutional Investor and Registered Representative. The Fund may
depict the historical performance of the securities in which the Portfolio may
invest over periods reflecting a variety of market or economic conditions either
alone or in comparison with alternative investments, performance indexes of
those investments or economic indicators. The Fund may also describe its
portfolio holdings and depict its size or relative size compared to other mutual
funds, the number and make-up of its shareholder base and other descriptive
factors concerning the Fund.
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The yield of the Shares will fluctuate. Fund Shares are not insured. Additional
information concerning the Portfolio's performance appears in the Statement of
Additional Information.
CAPITAL STRUCTURE
The Fund is an open-end, diversified, management investment company, organized
as a business trust under the laws of Massachusetts on September 7, 1989. The
Fund may issue an unlimited number of shares of beneficial interest in one or
more series ("Portfolios"), all having no par value, which may be divided by the
Board of Trustees into classes of shares, subject to compliance with the
Securities and Exchange Commission regulations permitting the creation of
separate classes of shares. The Board of Trustees may authorize the issuance of
additional Portfolios if deemed desirable. Since the Fund offers multiple
Portfolios, it is known as a "series company." Currently, the Fund offers the
Shares of the Portfolio and three other classes of shares of the Portfolio.
These other classes consist of Service Shares, Retail Shares and Institutional
Money Market Shares, which have different expenses that may affect performance.
In addition, the Fund also offers Service Shares of two other Portfolios: the
Government Portfolio and the Tax-Exempt Portfolio. Shares of a Portfolio have
equal noncumulative voting rights and equal rights with respect to dividends,
assets and liquidation of such Portfolio subject to any preferences, rights or
privileges of any classes of shares of the Portfolio. Generally, each class of
shares issued by a particular Portfolio would differ as to the allocation of
certain expenses of the Portfolio, such as distribution and administrative
expenses, permitting, among other things, different levels of services or
methods of distribution among various classes. Shares of a Portfolio are fully
paid and nonassessable when issued, are transferable without restriction and
have no preemptive or conversion rights. The Fund is not required to hold annual
shareholders' meetings and does not intend to do so. However, it will hold
special meetings as required or deemed desirable for such purposes as electing
trustees, changing fundamental policies or approving an investment management
agreement. Subject to the Agreement and Declaration of Trust of the Fund,
shareholders may remove trustees. Shareholders will vote by Portfolio and not in
the aggregate or by class except when voting in the aggregate is required under
the Investment Company Act of 1940, such as for the election of trustees, or
when the Board of Trustees determines that voting by class is appropriate.
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STATEMENT OF ADDITIONAL INFORMATION
January 15, 1999
CASH ACCOUNT TRUST
222 South Riverside Plaza, Chicago, Illinois 60606
1-800-231-8568
This Statement of Additional Information contains information about the Service
Shares ("Shares") class of each of the Money Market Portfolio, Government
Portfolio and Tax-Exempt Portfolio offered by Cash Account Trust (the "Fund").
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the prospectus of Cash Account Trust dated January 15, 1999.
The prospectus may be obtained without charge from the Fund.
TABLE OF CONTENTS
INVESTMENT RESTRICTIONS.......................................................2
MUNICIPAL SECURITIES..........................................................4
INVESTMENT MANAGER AND SHAREHOLDER SERVICES...................................5
PORTFOLIO TRANSACTIONS........................................................8
PURCHASE AND REDEMPTION OF SHARES.............................................9
DIVIDENDS, NET ASSET VALUE AND TAXES.........................................10
PERFORMANCE..................................................................11
OFFICERS AND TRUSTEES........................................................14
SPECIAL FEATURES.............................................................16
SHAREHOLDER RIGHTS...........................................................18
APPENDIX -- RATINGS OF INVESTMENTS...........................................19
The financial statements appearing in the Fund's 1998 Annual Report to
Shareholders are incorporated herein by reference. The Fund's Annual Report
accompanies this Statement of Additional Information.
<PAGE>
INVESTMENT RESTRICTIONS
The Fund has adopted for the Money Market Portfolio, the Government Securities
Portfolio and the Tax-Exempt Portfolio certain investment restrictions which,
together with the investment objective and policies of each Portfolio, cannot be
changed for a Portfolio without approval by holders of a majority of its
outstanding voting shares. As defined in the Investment Company Act of 1940 (the
"1940 Act"), this means the lesser of the vote of (a) 67% of the shares of the
Portfolio present at a meeting where more than 50% of the outstanding shares are
present in person or by proxy or (b) more than 50% of the outstanding shares of
the Portfolio.
The Money Market Portfolio and the Government Securities Portfolio individually
may not:
(1) Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its agencies or
instrumentalities) if, as a result, more than 5% of the value of the
Portfolio's assets would be invested in securities of that issuer.
(2) Purchase more than 10% of any class of securities of any issuer. All
debt securities and all preferred stocks are each considered as one
class.
(3) Make loans to others (except through the purchase of debt obligations
or repurchase agreements in accordance with its investment objective
and policies).
(4) Borrow money except as a temporary measure for extraordinary or
emergency purposes and then only in an amount up to one-third of the
value of its total assets, in order to meet redemption requests
without immediately selling any money market instruments (any such
borrowings under this section will not be collateralized). If, for any
reason, the current value of the Portfolio's total assets falls below
an amount equal to three times the amount of its indebtedness from
money borrowed, the Portfolio will, within three days (not including
Sundays and holidays), reduce its indebtedness to the extent
necessary. The Portfolio will not borrow for leverage purposes.
(5) Make short sales of securities, or purchase any securities on margin
except to obtain such short-term credits as may be necessary for the
clearance of transactions.
(6) Write, purchase or sell puts, calls or combinations thereof.
(7) Purchase or retain the securities of any issuer if any of the
officers, trustees or directors of the Fund or its investment adviser
owns beneficially more than 1/2 of 1% of the securities of such issuer
and together own more than 5% of the securities of such issuer.
(8) Invest for the purpose of exercising control or management of another
issuer.
(9) Invest in commodities or commodity futures contracts or in real estate
(or real estate limited partnerships), although it may invest in
securities which are secured by real estate and securities of issuers
which invest or deal in real estate.
(10) Invest in interests in oil, gas or other mineral exploration or
development programs or leases, although it may invest in the
securities of issuers which invest in or sponsor such programs.
(11) Underwrite securities issued by others except to the extent the
Portfolio may be deemed to be an underwriter, under the federal
securities laws, in connection with the disposition of portfolio
securities.
(12) Issue senior securities as defined in the Investment Company Act of
1940.
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Additionally, the Money Market Portfolio may not:
(13) Concentrate 25% or more of the value of the Portfolio's assets in any
one industry; provided, however, that (a) the Portfolio reserves
freedom of action to invest up to 100% of its assets in obligations
of, or guaranteed by, the United States Government, its agencies or
instrumentalities in accordance with its investment objective and
policies and (b) the Portfolio will invest at least 25% of its assets
in obligations issued by banks in accordance with its investment
objective and policies. However, the Portfolio may, in the discretion
of its investment adviser, invest less than 25% of its assets in
obligations issued by banks whenever the Portfolio assumes a temporary
defensive posture.
The Tax-Exempt Portfolio may not:
(1) Purchase securities if as a result of such purchase more than 25% of
the Portfolio's total assets would be invested in any industry or in
any one state. Municipal Securities and obligations of, or guaranteed
by, the U.S. Government, its agencies or instrumentalities are not
considered an industry for purposes of this restriction.
(2) Purchase securities of any issuer (other than obligations of, or
guaranteed by, the U.S. Government, its agencies or instrumentalities)
if as a result more than 5% of the value of the Portfolio's assets
would be invested in the securities of such issuer. For purposes of
this limitation, the Portfolio will regard the entity that has the
primary responsibility for the payment of interest and principal as
the issuer.
(3) Make loans to others (except through the purchase of debt obligations
or repurchase agreements in accordance with its investment objective
and policies).
(4) Borrow money except as a temporary measure for extraordinary or
emergency purposes and then only in an amount up to one-third of the
value of its total assets, in order to meet redemption requests
without immediately selling any money market instruments (any such
borrowings under this section will not be collateralized). If, for any
reason, the current value of the Portfolio's total assets falls below
an amount equal to three times the amount of its indebtedness from
money borrowed, the Portfolio will, within three days (not including
Sundays and holidays), reduce its indebtedness to the extent
necessary. The Portfolio will not borrow for leverage purposes.
(5) Make short sales of securities or purchase securities on margin,
except to obtain such short-term credits as may be necessary for the
clearance of transactions.
(6) Write, purchase or sell puts, calls or combinations thereof, although
the Portfolio may purchase Municipal Securities subject to Standby
Commitments in accordance with its investment objective and policies.
(7) Purchase or retain the securities of any issuer if any of the
officers, trustees or directors of the Fund or its investment adviser
owns beneficially more than 1/2 of 1% of the securities of such issuer
and together own more than 5% of the securities of such issuer.
(8) Invest for the purpose of exercising control or management of another
issuer.
(9) Invest in commodities or commodity futures contracts or in real estate
(or real estate limited partnerships) except that the Portfolio may
invest in Municipal Securities secured by real estate or interests
therein.
(10) Invest in interests in oil, gas or other mineral exploration or
development programs or leases, although it may invest in Municipal
Securities of issuers which invest in or sponsor such programs or
leases.
(11) Underwrite securities issued by others except to the extent the
Portfolio may be deemed to be an underwriter, under the federal
securities laws, in connection with the disposition of portfolio
securities.
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(12) Issue senior securities as defined in the Investment Company Act of
1940.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The
Portfolios did not borrow in the latest fiscal period and have no present
intention of borrowing during the coming year as permitted for each Portfolio by
investment restriction number 4. In any event, borrowings would only be made as
permitted by such restrictions. The Tax-Exempt Portfolio may invest more than
25% of its total assets in industrial development bonds. The Money Market
Portfolio and the Government Securities Portfolio of the Fund, as a
non-fundamental policy that may be changed without shareholder vote,
individually may not:
(i) Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or
acquisition of assets.
In addition, the Tax-Exempt Portfolio of the Fund, as a non-fundamental policy
that may be changed without shareholder vote, may not:
(i) Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or
acquisition of assets.
MUNICIPAL SECURITIES
Municipal Securities which the Tax-Exempt Portfolio may purchase include,
without limitation, debt obligations issued to obtain funds for various public
purposes, including the construction of a wide range of public facilities such
as airports, bridges, highways, housing, hospitals, mass transportation, public
utilities, schools, streets, and water and sewer works. Other public purposes
for which Municipal Securities may be issued include refunding outstanding
obligations, obtaining funds for general operating expenses and obtaining funds
to loan to other public institutions and facilities.
Municipal Securities, such as industrial development bonds, are issued by or on
behalf of public authorities to obtain funds for purposes including privately
operated airports, housing, conventions, trade shows, ports, sports, parking or
pollution control facilities or for facilities for water, gas, electricity or
sewage and solid waste disposal. Such obligations, which may include lease
arrangements, are included within the term Municipal Securities if the interest
paid thereon qualifies as exempt from federal income tax. Other types of
industrial development bonds, the proceeds of which are used for the
construction, equipment, repair or improvement of privately operated industrial
or commercial facilities, may constitute Municipal Securities, although current
Federal tax laws place substantial limitations on the size of such issues.
Municipal Securities generally are classified as "general obligation" or
"revenue." General obligation notes are secured by the issuer's pledge of its
full credit and taxing power for the payment of principal and interest. Revenue
notes are payable only from the revenues derived from a particular facility or
class of facilities or, in some cases, from the proceeds of a special excise or
other specific revenue source. Industrial development bonds that are Municipal
Securities are in most cases revenue bonds and generally do not constitute the
pledge of the credit of the issuer of such bonds.
Examples of Municipal Securities that are issued with original maturities of one
year or less are short-term tax anticipation notes, bond anticipation notes,
revenue anticipation notes, construction loan notes, pre-refunded municipal
bonds, warrants and tax-free commercial paper.
Tax anticipation notes typically are sold to finance working capital needs of
municipalities in anticipation of receiving property taxes on a future date.
Bond anticipation notes are sold on an interim basis in anticipation of a
municipality issuing a longer term bond in the future. Revenue anticipation
notes are issued in expectation of receipt of other types of revenue such as
those available under the Federal Revenue Sharing Program. Construction loan
notes are instruments insured by the Federal Housing Administration with
permanent financing by "Fannie Mae" (the Federal National Mortgage Association)
or "Ginnie Mae" (the Government National Mortgage Association) at the end of the
project construction period. Pre-refunded municipal bonds are bonds which are
not yet refundable, but for which securities have been placed in escrow to
refund an original municipal bond issue when it becomes refundable. Tax-free
commercial paper is an unsecured promissory obligation issued or guaranteed by a
municipal issuer. The Tax-Exempt Portfolio may purchase other Municipal
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<PAGE>
Securities similar to the foregoing, which are or may become available,
including securities issued to pre-refund other outstanding obligations of
municipal issuers.
The Federal bankruptcy statutes relating to the adjustments of debts of
political subdivisions and authorities of states of the United States provide
that, in certain circumstances, such subdivisions or authorities may be
authorized to initiate bankruptcy proceedings without prior notice to or consent
of creditors, which proceedings could result in material adverse changes in the
rights of holders of obligations issued by such subdivisions or authorities.
Litigation challenging the validity under state constitutions of present systems
of financing public education has been initiated or adjudicated in a number of
states and legislation has been introduced to effect changes in public school
finances in some states. In other instances, there has been litigation
challenging the issuance of pollution control revenue bonds or the validity of
their issuance under state or Federal law that ultimately could affect the
validity of those Municipal Securities or the tax-free nature of the interest
thereon.
INVESTMENT MANAGER AND SHAREHOLDER SERVICES
Investment Manager. Scudder Kemper Investments, Inc. (the "Adviser"), 345 Park
Avenue, New York, New York, is the Fund's investment manager. The Adviser is
approximately 70% owned by Zurich Financial Services, Inc., a newly formed
global insurance and financial services company. Its officers and employees own
the balance of the Adviser. Pursuant to the investment management agreement, the
Adviser acts as the Fund's investment adviser, manages its investments,
administers its business affairs, furnishes office facilities and equipment,
provides clerical and administrative services and permits any of its officers or
employees to serve without compensation as trustees or officers of the Fund if
elected to such positions. The Fund pays the expenses of its operations,
including the fees and expenses of its independent auditors, counsel, custodian
and transfer agent and the cost of share certificates, reports and notices to
shareholders, costs of calculating net asset value and maintaining all
accounting records thereto, brokerage commissions or transaction costs, taxes,
registration fees, the fees and expenses of qualifying the Fund and its shares
for distribution under federal and state securities laws and membership dues in
the Investment Company Institute or any similar organization. The Fund's
expenses generally are allocated among the Portfolios on the basis of relative
net assets at the time of allocation, except that expenses directly attributable
to a particular Portfolio are charged to that Portfolio.
The investment management agreement provides that the Adviser shall not be
liable for any error of judgment or of law, or for any loss suffered by the Fund
in connection with the matters to which the agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
the Adviser in the performance of its obligations and duties, or by reason of
its reckless disregard of its obligations and duties under the agreement.
The investment management agreement continues in effect from year to year for
each Portfolio subject thereto so long as its continuation is approved at least
annually by (a) a majority vote of the trustees who are not parties to such
agreement or interested persons of any such party except in their capacity as
trustees of the Fund, cast in person at a meeting called for such purpose, and
(b) the shareholders of each Portfolio subject thereto or the Board of Trustees.
If continuation is not approved for a Portfolio, the investment management
agreement nevertheless may continue in effect for any Portfolio for which it is
approved and the Adviser may continue to serve as investment manager for the
Portfolio for which it is not approved to the extent permitted by the Investment
Company Act of 1940. The agreement may be terminated at any time upon 60 days
notice by either party, or by a majority vote of the outstanding shares of a
Portfolio subject thereto with respect to that Portfolio, and will terminate
automatically upon assignment. Additional Portfolios may be subject to different
agreements.
At December 31, 1997, pursuant to the terms of an agreement, Scudder, Stevens &
Clark, Inc. ("Scudder"), and Zurich Insurance Company ("Zurich"), formed a new
global organization by combining Scudder with Zurich Kemper Investments, Inc.
("ZKI"), a former subsidiary of Zurich and the former investment manager to the
Fund and Scudder changed its name to Scudder Kemper Investments, Inc. As a
result of the transaction, Zurich owns approximately 70% of the Adviser, with
the balance owned by the Adviser's officers and employees. Zurich is a leading
internationally recognized provider of insurance and financial services in
property/casualty and life insurance, reinsurance and structured financial
solutions as well as asset management.
5
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On September 7, 1998, the businesses of Zurich (including Zurich's 70% interest
in The Adviser) and the financial services businesses of B.A.T Industries p.l.c.
("B.A.T") were combined to form a new global insurance and financial services
company known as Zurich Financial Services Group. By way of a dual holding
company structure, former Zurich shareholders initially owned approximately 57%
of Zurich Financial Services Group, with the balance initially owned by former
B.A.T shareholders.
Upon consummation of this transaction, the Fund's existing investment management
agreement with the Adviser was deemed to have been assigned and, therefore,
terminated. The Board has approved a new investment management agreement with
the Adviser, which is substantially identical to the current investment
management agreement, except for the date of execution and termination. This
agreement became effective upon the termination of the then current investment
management agreement and will be submitted for shareholder approval at a special
meeting currently scheduled to conclude in December 1998.
For the services and facilities furnished to the Money Market, Government
Securities and Tax-Exempt Portfolios, the Portfolios pay a monthly investment
management fee on a graduated basis at 1/12 of 0.22% of the first $500 million
of combined average daily net assets of such Portfolios, 0.20% of the next $500
million 0.175% of the next $1 billion, 0.16% of the next $1 billion and 0.15% of
combined average daily net assets of such Portfolios over $3 billion. The
Adviser has agreed to reimburse the Fund should all operating expenses of the
Fund, including the investment management fees of the Adviser but excluding
taxes, interest, distribution services fees, extraordinary expenses, brokerage
commissions or transaction costs and any other properly excludable expenses,
exceed the applicable state expense limitations. Currently, there are no state
expense limitations in effect. The investment management fee is computed based
on average daily net assets of the Portfolios and allocated among the Portfolios
based upon the relative net assets of each. Pursuant to the investment
management agreement, the Money Market, Government Securities and Tax-Exempt
Portfolios paid the Adviser fees of $1,888,000, $1,020,000 and $530,,000
respectively, for the fiscal year ended April 30, 1998; $975,000, $483,000 and
$69,000, respectively, for the fiscal year ended April 30, 1997 and $677,000,
$102,000 and $26,000, respectively, for the fiscal year ended April 30, 1996.
The Adviser has agreed to waive temporarily its management fee and absorb
certain operating expenses of the Portfolios to the extent described in the
prospectus. See "Investment Manager and Shareholder Services" in the prospectus.
If the fee waiver had not been in effect the Adviser would have received
investment management fees from the Money Market, Government Securities and
Tax-Exempt Portfolios of $2,463,000, $1,301,000 and $630,000, respectively, for
the fiscal year ended April 30, 1998, and $1,150,000, $744,000 and $212,000,
respectively, for the fiscal year ended April 30, 1997 and $891,000, $386,000
and $153,000, respectively, for the fiscal year ended April 30, 1996. The
Adviser waived or absorbed operating expenses for the Money Market, Government
Securities and Tax-Exempt Portfolios of $1,253,000, $281,000 and $100,000,
respectively, for the year ended April 30, 1998; $175,000, $261,000 and
$143,000,
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<PAGE>
respectively, for the fiscal year ended April 30, 1997; and $214,000, $288,000
and $139,000, respectively, for the fiscal year ended April 30, 1996.
Certain officers or trustees of the Fund are also directors or officers of the
Adviser as indicated under "Officers and Trustees."
Fund Accounting Agent. Scudder Fund Accounting Corporation ("SFAC"), a
subsidiary of the Adviser, is responsible for determining the daily net asset
value per share of the Fund and maintaining all accounting records related
thereto. Currently, SFAC receives no fee for its services to the Fund; however,
subject to Board approval, at some time in the future, SFAC may seek payment for
its services under this agreement.
Distributor and Administrator. Pursuant to an administration, shareholder
services and distribution agreement ("distribution agreement"), Kemper
Distributors, Inc. ("KDI") serves as primary administrator and principal
underwriter for the Fund to provide information and services for existing and
potential shareholders. The distribution agreement provides that KDI shall
appoint various firms to provide cash management services for their customers or
clients through the Fund. The firms are to provide such office space and
equipment, telephone facilities, personnel and literature distribution as is
necessary or appropriate for providing information and services to the firms'
clients. The Fund has adopted a plan in accordance with Rule 12b-1 of the 1940
Act (the "12b-1 Plan"). This rule regulates the manner in which an investment
company may, directly or indirectly, bear the expenses of distributing shares.
For its services under the distribution agreement and pursuant to the 12b-1
Plan, the Fund pays KDI a distribution services fee, payable monthly, at the
annual rate of 0.60% of average daily net assets with respect to the Shares of
the Money Market and Government Securities Portfolios and 0.50% of average daily
net assets with respect to the Shares of the Tax-Exempt Portfolio. Expenditures
by KDI on behalf of the Portfolios need not be made on the same basis that such
fees are allocated. The fees are accrued daily as an expense of the Portfolios.
As principal underwriter for the Fund, KDI acts as agent of the Fund in the sale
of its Shares. KDI pays all its expenses under the distribution agreement
including, without limitation, services fees to firms. The Fund pays the cost
for the prospectus and shareholder reports to be set in type and printed for
existing shareholders, and KDI pays for the printing and distribution of copies
thereof used in connection with the offering of shares to prospective investors.
KDI also pays for supplementary sales literature and advertising costs.
KDI has related administration services and selling group agreements ("services
agreements") with various firms to provide cash management and other services
for Fund shareholders. Such services and assistance may include, but may not be
limited to, establishing and maintaining shareholder accounts and records,
processing purchase and redemption transactions, providing automatic investment
in Fund shares of client account balances, answering routine inquiries regarding
the Fund, assisting clients in changing account options, designations and
addresses, and such other services as may be agreed upon from time to time and
as may be permitted by applicable statute, rule or regulation. KDI also may
provide some of the above services for the Fund. KDI normally pays such firms
for services at a maximum annual rate of 0.60% of average daily net assets of
those accounts in the Shares of the Money Market and Government Securities
Portfolios that they maintain and service and 0.50% of average daily net assets
of those accounts in the Shares of the Tax-Exempt Portfolio that they maintain
and service. KDI in its discretion may pay certain firms additional amounts.
During the fiscal year ended April 30, 1998, the Shares of the Money Market,
Government Securities and Tax-Exempt Portfolios paid distribution services fees
of $7,193,000, $4,158,000 and $1,678,000, respectively. Of such amounts, KDI
remitted pursuant to related services agreements $13,739,000 as service fees to
firms. During the fiscal year ended April 30, 1998, KDI incurred underwriting,
distribution and administrative expenses in the approximate amounts noted:
service fees to firms ($13,739,000); advertising and literature ($0); prospectus
printing ($0); marketing and sales expenses ($650,000) and other expenses ($0);
for a total of $14,389,000. A portion of the aforesaid marketing, sales and
operating expenses could be considered overhead expense.
The distribution agreement and the 12b-1 Plan continue in effect from year to
year so long as such continuance is approved at least annually by a vote of the
Board of Trustees of the Fund, including the Trustees who are not interested
persons of the Fund and who have no direct or indirect financial interest in the
agreement. The distribution agreement automatically terminates in the event of
its assignment and may be terminated at any time without penalty by the Fund or
by KDI upon 60 days' written notice. Termination of the distribution agreement
by the Fund may be by vote of a majority of the Board of Trustees, or a majority
of the Trustees who are not interested persons of the Fund and who have no
direct or indirect financial
7
<PAGE>
interest in the agreement, or a "majority of the outstanding voting securities"
of the Fund as defined under the 1940 Act. The 12b-1 Plan may not be amended to
increase the fee to be paid by the Fund without approval by a majority of the
outstanding voting securities of the Fund and all material amendments must in
any event be approved by the Board of Trustees in the manner described above
with respect to the continuation of the 12b-1 Plan. The 12b-1 Plan may be
terminated at any time without penalty by a vote of the majority of the Trustees
who are not interested persons of the Fund and who have no direct or indirect
financial interest in the Plan, or by a vote of the majority of the outstanding
voting securities of the Fund. The Portfolios of the Fund will vote separately
with respect to the 12b-1 Plan.
Custodian, Transfer Agent and Shareholder Service Agent. Investors Fiduciary
Trust Company ("IFTC"), 801 Pennsylvania Avenue, Kansas City, Missouri 64105, as
custodian, and State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, as sub-custodian, have custody of all securities and cash
of the Fund. They attend to the collection of principal and income, and payment
for and collection of proceeds of securities bought and sold by the Fund.
Pursuant to a services agreement with IFTC, Kemper Service Company ("KSvC"), an
affiliate of the Adviser, serves as "Shareholder Service Agent." IFTC receives,
as transfer agent, and pays to KSvC annual account fees of a maximum of $13 per
account plus out-of-pocket expense reimbursement. During the fiscal year ended
April 30, 1998, IFTC remitted shareholder service fees in the amount of
$4,230,000 to KSvC as Shareholder Service Agent.
Independent Auditors and Reports to Shareholders. The Fund's independent
auditors, Ernst & Young LLP, 233 South Wacker Drive, Chicago, Illinois 60606,
audit and report on the Fund's annual financial statements, review certain
regulatory reports and the Fund's federal income tax return, and perform other
professional accounting, auditing, tax and advisory services when engaged to do
so by the Fund. Shareholders will receive annual audited financial statements
and semi-annual unaudited financial statements.
Legal Counsel. Vedder, Price, Kaufman & Kammholz, 222 North LaSalle Street,
Chicago, Illinois 60601, serves as legal counsel for the Fund.
PORTFOLIO TRANSACTIONS
Portfolio transactions are undertaken principally to pursue the objective of
each Portfolio in relation to movements in the general level of interest rates,
to invest money obtained from the sale of Fund Shares, to reinvest proceeds from
maturing portfolio securities and to meet redemptions of Fund Shares. This may
increase or decrease the yield of a Portfolio depending upon the Adviser's
ability to correctly time and execute such transactions. Since a Portfolio's
assets are invested in securities with short maturities, its portfolio will turn
over several times a year. Securities with maturities of less than one year are
excluded from required portfolio turnover rate calculations, each Portfolio's
portfolio turnover rate for reporting purposes should generally be zero.
The primary objective of the Adviser in placing orders for the purchase and sale
of securities for a Fund's portfolio is to obtain the most favorable net results
taking into account such factors as price, commission where applicable, size of
order, difficulty of execution and skill required of the executing
broker/dealer. The Adviser seeks to evaluate the overall reasonableness of
brokerage commissions paid (to the extent applicable) through its familiarity
with commissions charged on comparable transactions, as well as by comparing
commissions paid by a Fund to reported commissions paid by others. The Adviser
reviews on a routine basis commission rates, execution and settlement services
performed, making internal and external comparisons.
When it can be done consistently with the policy of obtaining the most favorable
net results, it is the Adviser's practice to place such orders with
broker/dealers who supply research, market and statistical information to a
Fund. The term "research, market and statistical information" includes advice as
to the value of securities: the advisability of investing in, purchasing or
selling securities; the availability of securities or purchasers or sellers of
securities; and analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts.
The Adviser is authorized when placing portfolio transactions for a Fund to pay
a brokerage commission in excess of that which another broker might charge for
executing the same transaction solely on account of the receipt of research,
market or statistical information. In effecting transactions in over-the-counter
securities, orders are placed with the principal market makers for the security
being traded unless, after exercising care, it appears that more favorable
results are available elsewhere.
8
<PAGE>
In selecting among firms believed to meet the criteria for handling a particular
transaction, the Adviser may give consideration to those firms that have sold or
are selling shares of a Fund managed by the Adviser.
To the maximum extent feasible, it is expected that the Adviser will place
orders for portfolio transactions through Scudder Investor Services, Inc.
("SIS"), a corporation registered as a broker-dealer and a subsidiary of the
Adviser. SIS will place orders on behalf of the Fund with issuers, underwriters
or other brokers and dealers. SIS will not receive any commission, fee or other
remuneration from the Fund for this service.
Although certain research, market and statistical information from
broker/dealers may be useful to a Fund and to the Adviser, it is the opinion of
the Adviser that such information only supplements its own research effort since
the information must still be analyzed, weighed and reviewed by the Adviser's
staff. Such information may be useful to the Adviser in providing services to
clients other than the Fund and not all such information is used by the Adviser
in connection with the Fund. Conversely, such information provided to the
Adviser by broker/dealers through whom other clients of the Adviser effect
securities transactions may be useful to the Adviser in providing services to a
Fund.
The Board members for a Fund review from time to time whether the recapture for
the benefit of a Fund of some portion of the brokerage commissions or similar
fees paid by a Fund on portfolio transactions is legally permissible and
advisable.
Money market instruments are normally purchased in principal transactions
directly from the issuer or from an underwriter or market maker. There usually
are no brokerage commissions paid by the Fund for such purchases. During the
last three fiscal years the Fund paid no portfolio brokerage commissions.
Purchases from underwriters will include a commission or concession paid by the
issuer to the underwriter, and purchases from dealers serving as market makers
will include the spread between the bid and asked prices.
PURCHASE AND REDEMPTION OF SHARES
Shares of a Portfolio are sold at their net asset value next determined after an
order and payment are received in the form described in the Fund's prospectus.
The minimum initial investment is $1,000 and the minimum subsequent investment
is $100 but such minimum amounts may be changed at any time. The Fund may waive
the minimum for purchases by trustees, directors, officers or employees of the
Fund or the Adviser and its affiliates. An investor wishing to open an account
should use the Account Information Form available from the Fund or financial
services firms. Orders for the purchase of shares that are accompanied by a
check drawn on a foreign bank (other than a check drawn on a Canadian bank in
U.S. Dollars) will not be considered in proper form and will not be processed
unless and until the Fund determines that it has received payment of the
proceeds of the check. The time required for such a determination will vary and
cannot be determined in advance.
The Fund may suspend the right of redemption or delay payment more than seven
days (a) during any period when the New York Stock Exchange ("Exchange") is
closed other than customary weekend and holiday closings or during any period in
which trading on the Exchange is restricted, (b) during any period when an
emergency exists as a result of which (i) disposal of a Portfolio's investments
is not reasonably practicable, or (ii) it is not reasonably practicable for the
Fund to determine the value of its net assets, or (c) for such other periods as
the Securities and Exchange Commission may by order permit for the protection of
the Fund's shareholders.
Although it is the Fund's present policy to redeem in cash, if the Board of
Trustees determines that a material adverse effect would be experienced by the
remaining shareholders if payment were made wholly in cash, the Fund will pay
the redemption price in whole or in part by a distribution of portfolio
securities in lieu of cash, in conformity with the applicable rules of the
Securities and Exchange Commission, taking such securities at the same value
used to determine net asset value, and selecting the securities in such manner
as the Board of Trustees deems fair and equitable. If such a distribution
occurred, shareholders receiving securities and selling them could receive less
than the redemption value of such securities and in addition could incur certain
transaction costs. Such a redemption would not be so liquid as a redemption
entirely in cash. The Fund has elected to be governed by Rule 18f-1 under the
1940 Act pursuant to which the Fund is obligated to redeem shares of a Portfolio
solely in cash up to the lesser of $250,000 or 1% of the net assets of the
Portfolio during any 90-day period for any one shareholder of record.
9
<PAGE>
DIVIDENDS, NET ASSET VALUE AND TAXES
Dividends. Dividends are declared daily and paid monthly. Shareholders will
receive dividends in additional shares unless they elect to receive cash.
Dividends will be reinvested monthly in shares of the Portfolio at the net asset
value normally on the 21st day of each month if a business day, otherwise on the
next business day. The Fund will pay shareholders who redeem their entire
accounts all unpaid dividends at the time of the redemption not later than the
next dividend payment date. Upon written request to the Shareholder Service
Agent, a shareholder may elect to have Fund dividends invested without sales
charge in shares of another Kemper Mutual Fund offering this privilege at the
net asset value of such other fund. See "Special Features -- Exchange Privilege"
for a list of such other Kemper Mutual Funds. To use this privilege of investing
Fund dividends in shares of another Kemper Mutual Fund, shareholders must
maintain a minimum account value of $1,000 in this Fund and must maintain a
minimum account value of $1,000 in the fund in which dividends are reinvested.
Each Portfolio calculates its dividends based on its daily net investment
income. For this purpose, the net investment income of the Portfolio consists of
(a) accrued interest income plus or minus amortized discount or premium
(excluding market discount for the Tax-Exempt Portfolio), (b) plus or minus all
short-term realized gains and losses on investments and (c) minus accrued
expenses allocated to the Portfolio. Expenses of the Fund are accrued each day.
While each Portfolio's investments are valued at amortized cost, there will be
no unrealized gains or losses on such investments. However, should the net asset
value of a Portfolio deviate significantly from market value, the Board of
Trustees could decide to value the investments at market value and then
unrealized gains and losses would be included in net investment income above.
Dividends are reinvested monthly and shareholders will receive monthly
confirmations of dividends and of purchase and redemption transactions except
that confirmations of dividend reinvestment for Individual Retirement Accounts
and other fiduciary accounts for which Investors Fiduciary Trust Company acts as
trustee will be sent quarterly.
Net Asset Value. As described in the prospectus, each Portfolio values its
portfolio instruments at amortized cost, which does not take into account
unrealized capital gains or losses. This involves initially valuing an
instrument at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. While this method provides
certainty in valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the price the Portfolio
would receive if it sold the instrument. Calculations are made to compare the
value of a Portfolio's investments valued at amortized cost with market values.
Market valuations are obtained by using actual quotations provided by market
makers, estimates of market value, or values obtained from yield data relating
to classes of money market instruments published by reputable sources at the
mean between the bid and asked prices for the instruments. If a deviation of 1/2
of 1% or more were to occur between the net asset value per share calculated by
reference to market values and a Portfolio's $1.00 per share net asset value, or
if there were any other deviation that the Board of Trustees of the Fund
believed would result in a material dilution to shareholders or purchasers, the
Board of Trustees would promptly consider what action, if any, should be
initiated. If a Portfolio's net asset value per share (computed using market
values) declined, or were expected to decline, below $1.00 (computed using
amortized cost), the Board of Trustees of the Fund might temporarily reduce or
suspend dividend payments in an effort to maintain the net asset value at $1.00
per share. As a result of such reduction or suspension of dividends or other
action by the Board of Trustees, an investor would receive less income during a
given period than if such a reduction or suspension had not taken place. Such
action could result in investors receiving no dividend for the period during
which they hold their shares and receiving, upon redemption, a price per share
lower than that which they paid. On the other hand, if a Portfolio's net asset
value per share (computed using market values) were to increase, or were
anticipated to increase above $1.00 (computed using amortized cost), the Board
of Trustees of the Fund might supplement dividends in an effort to maintain the
net asset value at $1.00 per share.
Taxes. Interest on indebtedness which is incurred to purchase or carry shares of
a mutual fund portfolio which distributes exempt-interest dividends during the
year is not deductible for Federal income tax purposes. Further, the Tax-Exempt
Portfolio may not be an appropriate investment for persons who are "substantial
users" of facilities financed by industrial development bonds held by the
Tax-Exempt Portfolio or are "related persons" to such users; such persons should
consult their tax advisers before investing in the Tax-Exempt Portfolio.
The "Superfund Act of 1986" (the "Superfund Act") imposes a separate tax on
corporations at a rate of 0.12 percent of the excess of such corporation's
"modified alternative minimum taxable income" over $2 million. A portion of
tax-exempt
10
<PAGE>
interest, including exempt-interest dividends from the Tax-Exempt Portfolio, may
be includable in modified alternative minimum taxable income. Corporate
shareholders are advised to consult their tax advisers with respect to the
consequences of the Superfund Act.
PERFORMANCE
As reflected in the prospectus, the historical performance calculation for a
Portfolio may be shown in the form of "yield," "effective yield" and, for the
Shares of the Tax-Exempt Portfolio only, "tax equivalent yield." These various
measures of performance are described below. The Adviser has agreed to absorb
temporarily certain operating expenses of the Portfolios to the extent described
in the prospectus. Without this expense absorption, the performance results
noted herein would have been lower.
Each Portfolio's yield is computed in accordance with a standardized method
prescribed by rules of the Securities and Exchange Commission. Under that
method, the yield quotation is based on a seven-day period and is computed for
each Portfolio as follows. The first calculation is net investment income per
share, which is accrued interest on portfolio securities, plus or minus
amortized discount or premium (excluding market discount for the Tax-Exempt
Portfolio), less accrued expenses. This number is then divided by the price per
share (expected to remain constant at $1.00) at the beginning of the period
("base period return"). The result is then divided by 7 and multiplied by 365
and the resulting yield figure is carried to the nearest one-hundredth of one
percent. Realized capital gains or losses and unrealized appreciation or
depreciation of investments are not included in the calculation. For the seven
day period ended April 30, 1998, the Money Market Portfolio's yield was 4.61%;
the Government Securities Portfolio's yield was 4.59%; and the Tax-Exempt
Portfolio's yield was 3.20%.
Each Portfolio's effective yield is determined by taking the base period return
(computed as described above) and calculating the effect of assumed compounding.
The formula for the effective yield is: (base period return +1)^365/7-1. For the
seven-day period ended April 30, 1998, the Money Market Portfolio's effective
yield was 4.72%; the Government Securities Portfolio's effective yield was
4.70%; and the Tax-Exempt Portfolio's effective yield was 3.25%.
The tax equivalent yield of the Shares of the Tax-Exempt Portfolio is computed
by dividing that portion of the Portfolio's yield (computed as described above)
which is tax-exempt by (one minus the stated Federal income tax rate) and adding
the product to that portion, if any, of the yield of the Portfolio that is not
tax-exempt. Based upon an assumed marginal Federal income tax rate of 37.1% and
the Shares of the Tax-Exempt Portfolio's yield computed as described above for
the seven-day period ended April 30, 1998, the Tax-Exempt Portfolio's tax
equivalent effective yield for the period was 5.17%. For additional information
concerning tax-exempt yields, see "Tax-Exempt versus Taxable Yield" below.
Each Portfolio's yield fluctuates, and the publication of an annualized yield
quotation is not a representation as to what an investment in the Portfolio will
actually yield for any given future period. Actual yields will depend not only
on changes in interest rates on money market instruments during the period in
which the investment in the Portfolio is held, but also on such matters as
Portfolio expenses.
Investors have an extensive choice of money market funds and money market
deposit accounts and the information below may be useful to investors who wish
to compare the past performance of the Shares of the Money Market Portfolio, the
Government Securities Portfolio and the Tax-Exempt Portfolio with that of their
competitors. Past performance cannot be a guarantee of future results.
As indicated in the prospectus (see "Performance"), the performance of the
Fund's Portfolios may be compared to that of other mutual funds tracked by
Lipper Analytical Services, Inc. ("Lipper"). Lipper performance calculations
include the reinvestment of all capital gain and income dividends for the
periods covered by the calculations. A Portfolio's performance also may be
compared to other money market funds as reported by IBC Financial Data, Inc.
Money Fund Report(R) or Money Market Insight(R), reporting services on money
market funds. As reported by IBC, all investment results represent total return
(annualized results for the period net of management fees and expenses) and
one-year investment results would be effective annual yields assuming
reinvestment of dividends.
Lipper and IBC Financial Data, Inc. reported the following results for the Money
Market Portfolio and the Government Securities Portfolio.
11
<PAGE>
<TABLE>
<CAPTION>
Lipper Analytical Services, Inc. IBC Financial Data, Inc.
Money Market Portfolio's Average Yield All
Period ended Ranking vs. Money Market Money Market Taxable Money Market
4/30/98 Instrument Funds Period Portfolio's Yield Funds
------- ---------------- ------ ----------------- -----
4.65% 5.02%
<S> <C> <C> <C> <C>
3 Months 239 out of 310 30 Days ended 4/30/98
1 Month 236 out of 311 7 Days ended 4/28/98 4.63 5.00
Government Securities Average Yield All
Period ended Portfolio's Ranking vs. U.S. Government Taxable Government
4/30/98 Government Money Securities Money Funds
------- Market Funds Period Portfolio's Yield -----------
------------ ------ -----------------
4.58% 4.85%
3 Months 99 out of 114 30 Days ended 4/30/98
1 Month 92 out of 115 7 Days ended 4/28/98 4.57 4.82
The following investment comparisons are based upon information reported by
Lipper and IBC Financial Data, Inc. In the comparison of the Tax-Exempt
Portfolio's performance to the IBC Financial Data, Inc. Average Yield for All
Taxable Money Market Funds and to the Lipper Money Market Instrument Funds
Average, the performance of that Portfolio has been adjusted on a taxable
equivalent basis assuming a marginal Federal tax rate of 37.1% (see "Tax-Exempt
versus Taxable Yield" below for more information concerning taxable equivalent
performance).
Lipper Analytical Services, Inc. IBC Financial Data, Inc.
Tax Exempt Portfolio's Average Yield All
Period ended Ranking vs. Tax-Exempt Money Tax Exempt Tax-Free Money
4/30/98 Market Funds Period Portfolio Market Funds
------- ------------ ------ --------- ------------
2.99% 3.23%
3 Months 109 out of 135 30 Days ended 4/30/98
1 Month 90 out of 135 7 Days ended 4/28/98 3.22 3.47
Lipper
Tax-Exempt Money Tax-Exempt
Lipper Portfolio Market Portfolio Average Yield
Tax-Exempt Taxable Instrument Taxable All Taxable
Period Tax-Exempt Money Market Equivalent Funds Equivalent Money Market
ended Portfolio Fund Average Basis** Average Period Basis** Funds
4/30/98 --------- ------------ ------- ------- ------ ------- -----
-------
1 Month* 0.25% 0.26% 0.40% 0.40% 30 Days ended 4.75% 5.02%
4/30/98
7 Days ended 5.12 5.00
4/28/98***
</TABLE>
* These results are not annualized.
** Source: Scudder Kemper Investments (not reported in IBC or Lipper).
*** Yield shown for taxable funds is for the 7 days ended 4/28/98A
Portfolio's performance also may be compared on a before or after-tax basis to
various bank products, including the average rate of bank and thrift institution
money market deposit accounts, interest bearing checking accounts and 6-month
maturity certificates of deposit as reported in the BANK RATE MONITOR National
Index(TM) of 100 leading bank and thrift institutions as published by the BANK
RATE MONITOR(TM), N. Palm Beach, Florida 33408. The rates published by the BANK
RATE MONITOR National Index(TM) are averages of the personal account rates
offered on the Wednesday prior to the date of publication by 100 large bank and
thrifts in the top ten Consolidated Standard Metropolitan Statistical Areas.
With respect to money market deposit accounts and interest bearing checking
accounts, account minimums range upward from $2,000 in each institution and
compounding methods vary. Interest bearing checking accounts generally offer
unlimited checkwriting while money market deposit accounts generally restrict
the number of checks that may be written. If more than one rate is offered, the
lowest rate is used. Rates are determined by the financial institution and are
subject to change at any
12
<PAGE>
time specified by the institution. Generally, the rates offered for these
products take market conditions and competitive product yields into
consideration when set. Bank products represent a taxable alternative income
producing product. Bank and thrift institution account deposits may be insured.
Shareholder accounts in the Fund are not insured. Bank passbook savings accounts
share some liquidity features with money market mutual fund accounts but they
may not offer all of the features available from a money market mutual fund,
such as checkwriting. Bank passbook savings accounts normally offer a fixed rate
of interest, while the yield of each Portfolio of the Fund fluctuates. Bank
checking accounts normally do not pay interest but share some liquidity features
with money market mutual fund accounts (e.g., the ability to write checks
against the account). Bank certificates of deposit may offer fixed or variable
rates for a set term. (Normally, a variety of terms are available.) Withdrawal
of these deposits prior to maturity normally will be subject to a penalty. In
contrast, shares of a Portfolio are redeemable at the net asset value (normally
$1.00 per share) next determined after a request is received, without charge.
Investors also may want to compare a Portfolio's performance to that of U.S.
Treasury bills or notes because such instruments represent alternative income
producing products. Treasury obligations are issued in selected denominations.
Rates of U.S. Treasury obligations are fixed at the time of issuance and payment
of principal and interest is backed by the full faith and credit of the U.S.
Treasury. The market value of such instruments generally will fluctuate
inversely with interest rates prior to maturity and will equal par value at
maturity. Generally, the values of obligations with shorter maturities will
fluctuate less than those with longer maturities. Each Portfolio's yield will
fluctuate. Also, while each Portfolio seeks to maintain a net asset value per
share of $1.00, there is no assurance that it will be able to do so.
Tax-Exempt versus Taxable Yield. You may want to determine which investment --
tax-exempt or taxable -- will provide you with a higher after-tax return. To
determine the taxable equivalent yield, simply divide the yield from the
tax-exempt investment by the sum of [1 minus your marginal tax rate]. The tables
below are provided for your convenience in making this calculation for selected
tax-exempt yields and taxable income levels. These yields are presented for
purposes of illustration only and are not representative of any yield that the
Tax-Exempt Portfolio may generate. Both tables are based upon current law as to
the 1998 tax rate schedules.
Taxable Equivalent Yield Table for Persons Whose Adjusted Gross Income
is Under $124,500
<TABLE>
<CAPTION>
Your
Taxable Income Marginal A Tax-Exempt Yield of:
Federal Tax
2% 3% 4% 5% 6% 7%
Single Joint Rate Is Equivalent to a Taxable Yield of:
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$25,350 - $61,400 $42,350 - $102,300 28.0% 2.78 4.17 5.56 6.94 8.33 9.72
- --------------------------------------------------------------------------------------------------------------- ----------
Over $61,400 Over $102,300 31.0 2.90 4.35 5.80 7.25 8.70 10.14
Taxable Equivalent Yield Table for Persons Whose Adjusted Gross Income is Over $124,500*
Your A Tax-Exempt Yield of:
Marginal
Federal Tax 2% 3% 4% 5% 6% 7%
Single Joint Rate Is Equivalent to a Taxable Yield of:
- -------------------------------------------------------------------------------------------------------------------------------
$61,400-$128,100 $ 102,300 - $155,950 31.9% 2.94 4.41 5.87 7.34 8.81 10.28
- -------------------------------------------------------------------------------------------------------------------------------
$128,100-$278,450 $155,950 - $278,450 37.1 3.18 4.77 6.36 7.95 9.54 11.13
- -------------------------------------------------------------------------------------------------------------------------------
Over $278,450 Over $278,450 40.8 3.38 5.07 6.76 8.45 10.14 11.82
</TABLE>
* This table assumes a decrease of $3.00 of itemized deductions for each
$100 of adjusted gross income over $124,500. For a married couple with
adjusted gross income between $186,800 and $309,300 (single between
$124,500 and $247,000), add 0.7% to the above Marginal Federal Tax Rate
for each personal and dependency
13
<PAGE>
exemption. The taxable equivalent yield is the tax-exempt yield
divided by: 100% minus the adjusted tax rate. For example, if the
table tax rate is 37.1% and you are married with no dependents, the
adjusted tax rate is 38.5% (37.1% + 0.7% + 0.7%). For a tax-exempt
yield of 6%, the taxable equivalent yield is about 9.8% (6% / (100% -
38.5%)).
** Effective January 15, 1999, the shares of the Portfolios were divided
into four classes of shares, of which the Service Shares is one. Shares
of the Portfolios outstanding on such date were redesignated as the
Service shares class of the Portfolios. The data set forth above
reflects the investment performance of the Portfolios prior to such
redesignation.
OFFICERS AND TRUSTEES
The officers and trustees of the Fund, their birthdates, their principal
occupations and their affiliations, if any, with the Adviser and KDI, are listed
below. All persons named as officers and trustees also serve in similar
capacities for other funds advised by the Adviser. :
DAVID W. BELIN (6/20/28), Trustee, 2000 Financial Center, 7th and Walnut, Des
Moines, Iowa; Member, Belin Lamson McCormick Zumbach Flynn, P.C. (attorneys).
LEWIS A. BURNHAM (1/8/33), Trustee, 16410 Avila Boulevard, Tampa, Florida;
Retired; formerly, Partner, Business Resources Group; formerly, Executive Vice
President, Anchor Glass Container Corporation.
DONALD L. DUNAWAY (3/8/37), Trustee, 7515 Pelican Bay Boulevard, Naples,
Florida; Retired; formerly, Executive Vice President, A.O. Smith Corporation
(diversified manufacturer).
ROBERT B. HOFFMAN (12/11/36), Trustee, 800 North Lindbergh Boulevard, St. Louis,
Missouri; Vice Chairman and Chief Financial Officer, Monsanto Company
(agricultural, pharmaceutical and nutritional/food products); formerly, Vice
President, Head of International Operations, FMC Corporation (manufacturer of
machinery and chemicals).
DONALD R. JONES (1/17/30), Trustee, 182 Old Wick Lane, Inverness, Illinois;
Retired; Director, Motorola, Inc. (manufacturer of electronic equipment and
components); formerly, Executive Vice President and Chief Financial Officer,
Motorola, Inc.
SHIRLEY D. PETERSON (9/3/41), Trustee, 401 Rosemont Avenue, Frederick, Maryland;
President, Hood College; formerly, Partner, Steptoe & Johnson (attorneys); prior
thereto, Commissioner, Internal Revenue Service; prior thereto, Assistant
Attorney General, U.S. Department of Justice; Director, Bethlehem Steel Corp.
DANIEL PIERCE (3/18/34), Trustee*, Two International Place, Boston,
Massachusetts; Managing Director, Adviser.
WILLIAM P. SOMMERS (7/22/33), Trustee, 333 Ravenswood Avenue, Menlo Park,
California; President and Chief Executive Officer, SRI International (research
and development); formerly, Executive Vice President, Iameter (medical
information and educational service provider); prior thereto, Senior Vice
President and Director, Booz, Allen & Hamilton Inc. (management consulting
firm)(retired); Director, Rohr, Inc., Therapeutic Discovery Corp. and Litton
Industries.
EDMOND D. VILLANI (3/4/47), Trustee*, 345 Park Avenue, New York, New York;
President, Chief Executive Officer and Managing Director, Adviser.
MARK S. CASADY (9/21/60), President*, 345 Park Avenue, New York, New York;
Managing Director, Adviser; formerly, Institutional Sales Manager of an
unaffiliated mutual fund distributor.
PHILIP J. COLLORA (11/15/45), Vice President and Secretary*, 222 South Riverside
Plaza, Chicago, Illinois; Senior Vice President and Assistant Secretary,
Adviser.
14
<PAGE>
THOMAS W. LITTAUER (4/26/55), Vice President*, Two International Place, Boston,
Massachusetts; Managing Director, Adviser; formerly, Head of Broker Dealer
Division of an unaffiliated investment management firm during 1997; prior
thereto, President of Client Management Services of an unaffiliated investment
management firm from 1991 to 1996.
ANN M. McCREARY (11/6/56), Vice President*, 345 Park Avenue, New York, New York;
Managing Director, Adviser.
ROBERT C. PECK, JR. (10/1/46), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Managing Director, Adviser; formerly, Executive Vice
President and Chief Investment Officer with an unaffiliated investment
management firm from 1988 to June 1997.
KATHRYN L. QUIRK (12/3/52), Vice President*, 345 Park Avenue, New York, New
York; Managing Director, Adviser.
FRANK J. RACHWALSKI, JR. (3/26/45), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Managing Director, Adviser.
LINDA J. WONDRACK (9/12/64), Vice President*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.
JOHN R. HEBBLE (6/27/58), Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.
BRENDA LYONS (2/21/63), Assistant Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.
CAROLINE PEARSON (4/1/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Senior Vice President, Adviser; formerly, Associate,
Dechert Price & Rhoads (law firm) 1989 to 1997.
MAUREEN E. KANE (2/14/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Vice President, Adviser; formerly, Assistant Vice
President of an unaffiliated investment management firm; prior thereto,
Associate Staff Attorney of an unaffiliated investment management firm;
Associate, Peabody & Arnold (law firm).
JOHN W. STUEBE (1/7/49), Vice President*(2), 222 South Riverside Plaza, Chicago,
Illinois; Vice President, Adviser and KDI.
ELIZABETH C. WERTH (10/1/47), Assistant Secretary*, 222 South Riverside Plaza,
Chicago, Illinois; Vice President, Adviser and KDI.
* Interested persons as defined in the 1940 Act.
The trustees and officers who are "interested persons" as designated above
receive no compensation from the Fund. The table below shows amounts paid or
accrued to those trustees who are not designated "interested persons" during the
Fund's fiscal year ended April 30, 1998 and the total compensation that Kemper
Managed Funds paid to each trustee during the calendar year 1997.
<TABLE>
<CAPTION>
Aggregate Total Compensation Kemper Managed Funds
Name of Trustee Compensation From Fund Paid to Trustees (2)
- --------------- ---------------------- --------------------
<S> <C> <C> <C>
David W. Belin (1) $4,100 $168,100
Lewis A. Burnham 3,500 117,800
Donald L. Dunaway (1) 4,700 162,700
Robert B. Hoffman 3,500 109,400
Donald R. Jones 3,700 114,200
Shirley D. Peterson 3,300 114,000
William P. Sommers 3,300 109,400
</TABLE>
15
<PAGE>
(1) Includes deferred fees and interest thereon pursuant to deferred
compensation agreements with the Fund. Deferred amounts accrue interest
monthly at a rate approximate to the yield of Zurich Money Funds -- Zurich
Money Market Fund. Total deferred fees and interest accrued for the latest
and all prior fiscal years are $17,200 for Mr. Belin and $15,600 for Mr.
Dunaway from Cash Account Trust.
(2) Includes compensation for service on the Boards of 25 Kemper funds with 43
fund portfolios. Each trustee currently serves as trustee of 26 Kemper
Funds with 48 fund portfolios. Total compensation does not reflect amounts
paid by the Adviser to the trustees for meeting regarding the combination
of Scudder, Stevens & Clark, Inc. and Zurich Kemper Investments, Inc. Such
amounts totaled $21,900, $25,400, $21,900, $17,300, $20,800, $24,200 and
$21,900 for Messrs. Belin, Burnham, Dunaway, Hoffman, Jones, Ms. Peterson
and Mr. Sommers, respectively.
On December 15, 1998, the officers and trustees of the Fund, as a group, owned
less than 1% of the then outstanding Shares of each Portfolio. No person owned
of record 5% or more of the outstanding shares of any class of any Fund, except
the persons indicated in the chart below:
Name and Address % Owned Portfolio
- ---------------- ------- ---------
Roney & Co 15.79 Money Market
1 Griswold 59.16 Government Securities
Detroit, MI 48226 26.62 Tax-Exempt
May Financial Corp. 6.04 Government Securities
8333 Douglas Ave.
Dallas, TX 75225
SPECIAL FEATURES
Exchange Privilege. Subject to the limitations described below, Class A Shares
(or the equivalent) of the following Kemper Mutual Funds may be exchanged for
each other at their relative net asset values: Kemper Technology Fund, Kemper
Total Return Fund, Kemper Growth Fund, Kemper Small Capitalization Equity Fund,
Kemper Income and Capital Preservation Fund, Kemper Municipal Bond Fund, Kemper
Diversified Income Fund, Kemper High Yield Series, Kemper U.S. Government
Securities Fund, Kemper International Fund, Kemper State Tax-Free Income Series,
Kemper Adjustable Rate U.S. Government Fund, Kemper Blue Chip Fund, Kemper
Global Income Fund, Kemper Target Equity Fund (series are subject to a limited
offering period), Kemper Intermediate Municipal Bond Fund, Kemper Cash Reserves
Fund, Kemper U.S. Mortgage Fund, Kemper Short-Intermediate Government Fund,
Kemper Value Series, Inc., Kemper Value Plus Growth Fund, Kemper Quantitative
Equity Fund, Kemper Horizon Fund, Kemper Europe Fund, Kemper Asian Growth Fund,
Kemper Aggressive Growth Fund, Kemper Global/International Series, Inc., Kemper
Securities Trust and Kemper Equity Trust ("Kemper Mutual Funds") and certain
"Money Market Funds" (Zurich Money Funds, Zurich Yieldwise Money Fund, Cash
Equivalent Fund, Tax-Exempt California Money Market Fund, Cash Account Trust,
Investors Municipal Cash Fund and Investors Cash Trust). Shares of Money Market
Funds and Kemper Cash Reserves Fund that were acquired by purchase (not
including shares acquired by dividend reinvestment) are subject to the
applicable sales charge on exchange. In addition, shares of a Kemper Mutual Fund
in excess of $1,000,000 (except Zurich Yieldwise Money Fund and Kemper Cash
Reserves Fund) acquired by exchange from another Fund may not be exchanged
thereafter until they have been owned for 15 days (the "15-Day Hold Policy").
For purposes of determining whether the 15-Day Hold Policy applies to a
particular exchange, the value of the shares to be exchanged shall be computed
by aggregating the value of shares being exchanged for all accounts under common
control, discretion or advice, including without limitation accounts
administered by a financial services firm offering market timing, asset
allocation or similar services. Series of Kemper Target Equity Fund will be
available on exchange only during the Offering Period for such series as
described in the prospectus for such series. Cash Equivalent Fund, Tax-Exempt
California Money Market Fund, Cash Account Trust, Investors Municipal Cash Fund
and Investors Cash Trust are available on exchange but only through a financial
services firm having a services agreement with KDI with respect to such funds.
Exchanges may only be made for funds that are available for sale in the
shareholder's state of residence. Currently, Tax-Exempt California Money Market
Fund is available for sale only in California and the portfolios of Investors
Municipal Cash Fund are available for sale in certain states.
The total value of shares being exchanged must at least equal the minimum
investment requirement of the fund into which they are being exchanged.
Exchanges are made based on relative dollar values of the shares involved in the
exchange. There
16
<PAGE>
is no service fee for an exchange; however, financial services firms may charge
for their services in expediting exchange transactions. Exchanges will be
effected by redemption of shares of the fund held and purchase of shares of the
other fund. For federal income tax purposes, any such exchange constitutes a
sale upon which a gain or loss may be realized, depending upon whether the value
of the shares being exchanged is more or less than the shareholder's adjusted
cost basis. Shareholders interested in exercising the exchange privilege may
obtain an exchange form and prospectuses of the other funds from financial
services firms or KDI. Exchanges also may be authorized by telephone if the
shareholder has given authorization. Once the authorization is on file, the
Shareholder Service Agent will honor requests by telephone at 1-800-231-8568 or
in writing subject to the limitations on liability described in the prospectus.
Any share certificates must be deposited prior to any exchange of such shares.
During periods when it is difficult to contact the Shareholder Service Agent by
telephone, it may be difficult to implement the telephone exchange privilege.
The exchange privilege is not a right and may be suspended, terminated or
modified at any time. Except as otherwise permitted by applicable regulation, 60
days' prior written notice of any termination or material change will be
provided.
Systematic Withdrawal Program. An owner of $5,000 or more of a Portfolio's
Shares may provide for the payment from the owner's account of any requested
dollar amount up to $50,000 to be paid to the owner or the owner's designated
payee monthly, quarterly, semi-annually or annually. The $5,000 minimum account
size is not applicable to Individual Retirement Accounts. Dividend distributions
will be reinvested automatically at net asset value. A sufficient number of full
and fractional shares will be redeemed to make the designated payment. Depending
upon the size of the payments requested, redemptions for the purpose of making
such payments may reduce or even exhaust the account. The program may be amended
on thirty days notice by the Fund and may be terminated at any time by the
shareholder or the Fund. Firms provide varying arrangements for their clients to
redeem Fund Shares on a periodic basis. Such firms may independently establish
minimums for such services.
Tax-Sheltered Retirement Programs. The Shareholder Service Agent provides
retirement plan services and documents and KDI can establish your account in any
of the following types of retirement plans:
o ndividual Retirement Accounts (IRAs) trusteed by Investors
Fiduciary Trust Company ("IFTC"). This includes Simplified
Employee Pension Plan (SEP) IRA accounts and prototype documents.
o 403(b) Custodial Accounts also trusteed by IFTC. This type of
plan is available to employees of most non-profit organizations.
o Prototype money purchase pension and profit-sharing plans may be
adopted by employers. The maximum contribution per participant is
the lesser of 25% of compensation or $30,000.
Brochures describing the above plans as well as providing model defined benefit
plans, target benefit plans, 457 plans, 401(k) plans and materials for
establishing them are available from the Shareholder Service Agent upon request.
The brochures for plans trusteed by IFTC describe the current fees payable to
IFTC for its services as trustee. Investors should consult with their own tax
advisers before establishing a retirement plan.
Electronic Funds Transfer Programs. For your convenience, the Fund has
established several investment and redemption programs using electronic funds
transfer via the Automated Clearing House (ACH). There is currently no charge by
the Fund for these programs. To use these features, your financial institution
(your employer's financial institution in the case of payroll deposit) must be
affiliated with an Automated Clearing House (ACH). This ACH affiliation permits
the Shareholder Service Agent to electronically transfer money between your bank
account, or employer's payroll bank in the case of Direct Deposit, and your Fund
account. Your bank's crediting policies of these transferred funds may vary.
These features may be amended or terminated at any time by the Fund.
Shareholders should contact Kemper Service Company at 1-800-621-1048 or the
financial services firm through which their account was established for more
information. These programs may not be available through some firms that
distribute shares of the Fund.
SHAREHOLDER RIGHTS
The Fund generally is not required to hold meetings of its shareholders. Under
the Agreement and Declaration of Trust of the Fund ("Declaration of Trust"),
however, shareholder meetings will be held in connection with the following
matters: (a) the
17
<PAGE>
election or removal of trustees if a meeting is called for such purpose; (b) the
adoption of any contract for which shareholder approval is required by the 1940
Act; (c) any termination of the Fund to the extent and as provided in the
Declaration of Trust; (d) any amendment of the Declaration of Trust (other than
amendments changing the name of the Fund or any Portfolio, establishing a
Portfolio, supplying any omission, curing any ambiguity or curing, correcting or
supplementing any defective or inconsistent provision thereof); and (e) such
additional matters as may be required by law, the Declaration of Trust, the
By-laws of the Fund, or any registration of the Fund with the Securities and
Exchange Commission or any state, or as the trustees may consider necessary or
desirable. The shareholders also would vote upon changes in fundamental
investment objectives, policies or restrictions.
Each trustee serves until the next meeting of shareholders, if any, called for
the purpose of electing trustees and until the election and qualification of a
successor or until such trustee sooner dies, resigns, retires or is removed by a
majority vote of the shares entitled to vote (as described below) or a majority
of the trustees. In accordance with the 1940 Act (a) the Fund will hold a
shareholder meeting for the election of trustees at such time as less than a
majority of the trustees have been elected by shareholders, and (b) if, as a
result of a vacancy in the Board of Trustees, less than two-thirds of the
trustees have been elected by the shareholders, that vacancy will be filled only
by a vote of the shareholders.
Trustees may be removed from office by a vote of the holders of a majority of
the outstanding shares at a meeting called for that purpose, which meeting shall
be held upon the written request of the holders of not less than 10% of the
outstanding shares. Upon the written request of ten or more shareholders who
have been such for at least six months and who hold shares constituting at least
1% of the outstanding shares of the Fund stating that such shareholders wish to
communicate with the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider removal of a trustee, the
Fund has undertaken to disseminate appropriate materials at the expense of the
requesting shareholders.
The Declaration of Trust provides that the presence at a shareholder meeting in
person or by proxy of at least 30% of the shares entitled to vote on a matter
shall constitute a quorum. Thus, a meeting of shareholders of the Fund could
take place even if less than a majority of the shareholders were represented on
its scheduled date. Shareholders would in such a case be permitted to take
action which does not require a larger vote than a majority of a quorum, such as
the election of trustees and ratification of the selection of auditors. Some
matters requiring a larger vote under the Declaration of Trust, such as
termination or reorganization of the Fund and certain amendments of the
Declaration of Trust, would not be affected by this provision; nor would matters
which under the 1940 Act require the vote of a "majority of the outstanding
voting securities" as defined in the 1940 Act.
The Declaration of Trust specifically authorizes the Board of Trustees to
terminate the Fund (or any Portfolio or class) by notice to the shareholders
without shareholder approval.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for obligations of the
Fund. The Declaration of Trust, however, disclaims shareholder liability for
acts or obligations of the Fund and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument entered into or executed by
the Fund or the trustees. Moreover, the Declaration of Trust provides for
indemnification out of Fund property for all losses and expenses of any
shareholder held personally liable for the obligations of the Fund and the Fund
will be covered by insurance which the trustees consider adequate to cover
foreseeable tort claims. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is considered by the Adviser remote and
not material, since it is limited to circumstances in which a disclaimer is
inoperative and the Fund itself is unable to meet its obligations.
18
<PAGE>
APPENDIX -- RATINGS OF INVESTMENTS
COMMERCIAL PAPER RATINGS
A-1, A-2, Prime-1, Prime-2 and Duff 1, Duff 2 Commercial Paper Ratings
Commercial paper rated by Standard & Poor's Corporation has the following
characteristics: Liquidity ratios are adequate to meet cash requirements.
Long-term senior debt is rated "A" or better. The issuer has access to at least
two additional channels of borrowing. Basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances. Typically, the
issuer's industry is well established and the issuer has a strong position
within the industry. The reliability and quality of management are unquestioned.
Relative strength or weakness of the above factors determine whether the
issuer's commercial paper is rated A-1, A-2 or A-3.
The ratings Prime-1 and Prime-2 are the two highest commercial paper ratings
assigned by Moody's Investors Service, Inc. Among the factors considered by them
in assigning ratings are the following: (1) evaluation of the management of the
issuer; (2) economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain areas; (3)
evaluation of the issuer's products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend
of earnings over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and (8) recognition
by the management of obligations which may be present or may arise as a result
of public interest questions and preparations to meet such obligations. Relative
strength or weakness of the above factors determines whether the issuer's
commercial paper is rated Prime-1, 2 or 3.
The rating Duff-1 is the highest commercial paper rating assigned by Duff &
Phelps Inc. Paper rated Duff-1 is regarded as having very high certainty of
timely payment with excellent liquidity factors that are supported by ample
asset protection. Risk factors are minor. Paper rated Duff-2 is regarded as
having good certainty of timely payment, good access to capital markets and
sound liquidity factors and company fundamentals. Risk factors are small.
MIG-1 and MIG-2 Municipal Notes
Moody's Investors Service, Inc.'s ratings for state and municipal notes and
other short-term loans will be designated Moody's Investment Grade (MIG). This
distinction is in recognition of the differences between short-term credit risk
and long-term risk. Factors affecting the liquidity of the borrower are
uppermost in importance in short-term borrowing, while various factors of the
first importance in bond risk are of lesser importance in the short run. Loans
designated MIG-1 are of the best quality, enjoying strong protection from
established cash flows of funds for their servicing or from established and
broad-based access to the market for refinancing, or both. Loans designated
MIG-2 are of high quality, with margins of protection ample although not so
large as in the preceding group.
STANDARD & POOR'S CORPORATION BOND RATINGS, CORPORATE BONDS
AAA. This is the highest rating assigned by Standard & Poor's Corporation to a
debt obligation and indicates an extremely strong capacity to pay principal and
interest.
AA. Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
MOODY'S INVESTORS SERVICE, INC. BOND RATINGS
Aaa. Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
19
<PAGE>
Aa. Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
DUFF & PHELP'S INC. BOND RATINGS
AAA -- Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA -- High credit quality. Protection factors are strong. Risk is modest but may
vary slightly from time to time because of economic conditions.
20
<PAGE>
MONEY MARKET PORTFOLIO RETAIL SHARES
MONEY MARKET PORTFOLIO PREMIER SHARES
MONEY MARKET PORTFOLIO INSTITUTIONAL SHARES
STATEMENT OF ADDITIONAL INFORMATION
January 15, 1999
CASH ACCOUNT TRUST
222 South Riverside Plaza, Chicago, Illinois 60606
1-800-231-8568
This combined Statement of Additional Information contains information about the
Retail Shares ("Retail Shares"), Premier Shares ("Premier Shares") and
Institutional Shares ("Institutional Shares") (collectively, the "Shares")
classes of the Money Market Portfolio (the "Portfolio") offered by Cash Account
Trust (the "Fund"). Cash Account Trust is an open-end diversified management
investment company. The Fund currently offers three investment portfolios,
including the Money Market Portfolio. This combined Statement of Additional
Information is not a prospectus and should be read in conjunction with the
prospectus of the Fund dated January 15, 1999. The prospectus may be obtained
without charge from the Fund.
TABLE OF CONTENTS
INVESTMENT RESTRICTIONS.....................................................2
INVESTMENT MANAGER AND SHAREHOLDER SERVICES.................................3
PORTFOLIO TRANSACTIONS......................................................6
PURCHASE AND REDEMPTION OF SHARES...........................................6
DIVIDENDS, NET ASSET VALUE AND TAXES........................................7
PERFORMANCE.................................................................8
OFFICERS AND TRUSTEES.......................................................9
SPECIAL FEATURES...........................................................11
SHAREHOLDER RIGHTS.........................................................13
APPENDIX --RATINGS OF INVESTMENTS..........................................15
<PAGE>
INVESTMENT RESTRICTIONS
The Fund has adopted for the Portfolio certain investment restrictions which,
together with the investment objective and policies of the Portfolio, cannot be
changed for the Portfolio without approval by holders of a majority of its
outstanding voting shares. As defined in the Investment Company Act of 1940 (the
"1940 Act"), this means the lesser of the vote of (a) 67% of the shares of the
Portfolio present at a meeting where more than 50% of the outstanding shares are
present in person or by proxy or (b) more than 50% of the outstanding shares of
the Portfolio.
The Shares of the Portfolio may not:
(1) Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its agencies or
instrumentalities) if, as a result, more than 5% of the value of the
Portfolio's assets would be invested in securities of that issuer.
(2) Purchase more than 10% of any class of securities of any issuer. All
debt securities and all preferred stocks are each considered as one
class.
(3) Make loans to others (except through the purchase of debt obligations
or repurchase agreements in accordance with its investment objective
and policies).
(4) Borrow money except as a temporary measure for extraordinary or
emergency purposes and then only in an amount up to one-third of the
value of its total assets, in order to meet redemption requests
without immediately selling any money market instruments (any such
borrowings under this section will not be collateralized). If, for any
reason, the current value of the Portfolio's total assets falls below
an amount equal to three times the amount of its indebtedness from
money borrowed, the Portfolio will, within three days (not including
Sundays and holidays), reduce its indebtedness to the extent
necessary. The Portfolio will not borrow for leverage purposes.
(5) Make short sales of securities, or purchase any securities on margin
except to obtain such short-term credits as may be necessary for the
clearance of transactions.
(6) Write, purchase or sell puts, calls or combinations thereof.
(7) Purchase or retain the securities of any issuer if any of the
officers, trustees or directors of the Fund or its investment adviser
owns beneficially more than 1/2 of 1% of the securities of such issuer
and together own more than 5% of the securities of such issuer.
(8) Invest for the purpose of exercising control or management of another
issuer.
(9) Invest in commodities or commodity futures contracts or in real estate
(or real estate limited partnerships), although it may invest in
securities which are secured by real estate and securities of issuers
which invest or deal in real estate.
(10) Invest in interests in oil, gas or other mineral exploration or
development programs or leases, although it may invest in the
securities of issuers which invest in or sponsor such programs.
(11) Underwrite securities issued by others except to the extent the
Portfolio may be deemed to be an underwriter, under the federal
securities laws, in connection with the disposition of portfolio
securities.
(12) Issue senior securities as defined in the Investment Company Act of
1940.
(13) Concentrate 25% or more of the value of the Portfolio's assets in any
one industry; provided, however, that (a) the Portfolio Retails
freedom of action to invest up to 100% of its assets in obligations
of, or guaranteed
2
<PAGE>
by, the United States Government, its agencies or instrumentalities in
accordance with its investment objective and policies and (b) the
Portfolio will invest at least 25% of its assets in obligations issued
by banks in accordance with its investment objective and policies.
However, the Portfolio may, in the discretion of its investment
adviser, invest less than 25% of its assets in obligations issued by
banks whenever the Portfolio assumes a temporary defensive posture.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The Portfolio
has no present intention of borrowing during the coming year as permitted for
the Portfolio by investment restriction number 4. In any event, borrowings would
only be made as permitted by such restrictions. The Portfolio may not, as a
non-fundamental policy that may be changed without shareholder vote:
(i) Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or
acquisition of assets.
INVESTMENT MANAGER AND SHAREHOLDER SERVICES
Investment Manager. Scudder Kemper Investments, Inc. (the "Adviser"), 345 Park
Avenue, New York, New York, is the Fund's investment manager. The Adviser is
approximately 70% owned by Zurich Financial Services, Inc., a newly formed
global insurance and financial services company. Its officers and employees own
the balance of the Adviser. Pursuant to an investment management agreement, the
Adviser acts as the Fund's investment adviser, manages its investments,
administers its business affairs, furnishes office facilities and equipment,
provides clerical and administrative services and permits any of its officers or
employees to serve without compensation as trustees or officers of the Fund if
elected to such positions. The Fund pays the expenses of its operations,
including the fees and expenses of its independent auditors, counsel, custodian
and transfer agent and the cost of share certificates, reports and notices to
shareholders, costs of calculating net asset value and maintaining all
accounting records thereto, brokerage commissions or transaction costs, taxes,
registration fees, the fees and expenses of qualifying the Fund and its shares
for distribution under federal and state securities laws and membership dues in
the Investment Company Institute or any similar organization. The Fund's
expenses generally are allocated among the Portfolios on the basis of relative
net assets at the time of allocation, except that expenses directly attributable
to the Portfolio are charged to the Portfolio.
The investment management agreement provides that the Adviser shall not be
liable for any error of judgment or of law, or for any loss suffered by the Fund
in connection with the matters to which the agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
the Adviser in the performance of its obligations and duties, or by reason of
its reckless disregard of its obligations and duties under the agreement.
The investment management agreement continues in effect from year to year for
the Portfolio subject thereto so long as its continuation is approved at least
annually by (a) a majority vote of the trustees who are not parties to such
agreement or interested persons of any such party except in their capacity as
trustees of the Fund, cast in person at a meeting called for such purpose, and
(b) the shareholders of the Shares of the Portfolio subject thereto or the Board
of Trustees. If continuation is not approved for the Portfolio, the investment
management agreement nevertheless may continue in effect for the Portfolio and
the Adviser may continue to serve as investment manager for the Portfolio to the
extent permitted by the Investment Company Act of 1940. The agreement may be
terminated at any time upon 60 days notice by either party, or by a majority
vote of the outstanding shares of the Portfolio subject thereto, and will
terminate automatically upon assignment.
At December 31, 1997, pursuant to the terms of an agreement, Scudder, Stevens &
Clark, Inc. ("Scudder"), and Zurich Insurance Company ("Zurich"), formed a new
global organization by combining Scudder with Zurich Kemper Investments, Inc.
("ZKI"), a former subsidiary of Zurich and the former investment manager to the
Fund and Scudder changed its name to Scudder Kemper Investments, Inc. As a
result of the transaction, Zurich owns approximately 70% of the Adviser, with
the balance owned by the Adviser's officers and employees.
On September 7, 1998, the businesses of Zurich (including Zurich's 70% interest
in the Adviser) and the financial services businesses of B.A.T Industries p.l.c.
("B.A.T") were combined to form a new global insurance and financial services
company known as Zurich Financial Services, Inc. By way of a dual holding
company structure, former Zurich shareholders
3
<PAGE>
initially owned approximately 57% of Zurich Financial Services, Inc., with the
balance initially owned by former B.A.T shareholders.
Upon consummation of this transaction, the Fund's existing investment management
agreement with the Adviser was deemed to have been assigned and, therefore,
terminated. The Board has approved a new investment management agreement with
the Adviser, which is substantially identical to the current investment
management agreement, except for the date of execution and termination. This
agreement became effective upon the termination of the then current investment
management agreement and will be submitted for shareholder approval at a special
meeting currently scheduled to conclude in December 1998.
For the services and facilities furnished to the Portfolio, the Portfolio pays a
monthly investment management fee on a graduated basis at 1/12 of 0.22% of the
first $500 million of combined average daily net assets of the Portfolio, 0.20%
of the next $500 million 0.175% of the next $1 billion, 0.16% of the next $1
billion and 0.15% of combined average daily net assets of the Portfolio over $3
billion. The Adviser has agreed to reimburse the Fund should all operating
expenses of the Fund, including the investment management fees of the Adviser
but excluding taxes, interest, distribution services fees, extraordinary
expenses, brokerage commissions or transaction costs and any other properly
excludable expenses, exceed the applicable state expense limitations. Currently,
there are no state expense limitations in effect. The investment management fee
is computed based on average daily net assets of all of the Portfolios and
allocated based upon its net assets. Pursuant to the investment management
agreement, Portfolios paid the Adviser fees of $1,888,000, $1,020,000 and
$530,,000 respectively, for the fiscal year ended April 30, 1998; $975,000,
$483,000 and $69,000, respectively, for the fiscal year ended April 30, 1997 and
$677,000, $102,000 and $26,000, respectively, for the fiscal year ended April
30, 1996. The Adviser has agreed to waive temporarily its management fee and
absorb certain operating expenses of the Portfolios to the extent described in
the prospectus. See "Investment Manager and Shareholder Services" in the
prospectus. If the fee waiver had not been in effect the Adviser would have
received investment management fees from the Portfolios of $2,463,000,
$1,301,000 and $630,000, respectively, for the fiscal year ended April 30, 1998,
and $1,150,000, $744,000 and $212,000, respectively, for the fiscal year ended
April 30, 1997 and $891,000, $386,000 and $153,000, respectively, for the fiscal
year ended April 30, 1996. The Adviser waived or absorbed operating expenses for
the Portfolios of $1,253,000, $281,000 and $100,000, respectively, for the year
ended April 30, 1998; $175,000, $261,000 and $143,000, respectively, for the
fiscal year ended April 30, 1997; and $214,000, $288,000 and $139,000,
respectively, for the fiscal year ended April 30, 1996.
Certain officers or trustees of the Fund are also directors or officers of the
Adviser as indicated under "Officers and Trustees."
Fund Accounting Agent. Scudder Fund Accounting Corporation ("SFAC"), a
subsidiary of the Adviser, is responsible for determining the daily net asset
value per share of the Fund and maintaining all accounting records related
thereto. Currently, SFAC receives no fee for its services to the Fund; however,
subject to Board approval, at some time in the future, SFAC may seek payment for
its services under this agreement.
Distributor and Administrator. Pursuant to an underwriting and distribution
agreement ("distribution agreement"), Kemper Distributors, Inc. ("KDI") serves
as distributor and principal underwriter for the Fund to provide information and
services for existing and potential shareholders. The distribution agreement
provides that KDI shall appoint various firms to provide cash management
services for their customers or clients through the Fund.
As principal underwriter for the Fund, KDI acts as agent of the Fund in the sale
of its shares. KDI pays all its expenses under the distribution agreement
including, without limitation, services fees to firms. The Fund pays the cost
for the prospectus and shareholder reports to be set in type and printed for
existing shareholders, and KDI pays for the printing and distribution of copies
thereof used in connection with the offering of shares to prospective investors.
KDI also pays for supplementary sales literature and advertising costs.
KDI has related administration service agreement and selling group agreements
("services agreements") with various firms to provide cash management and other
services for Fund shareholders. Such services and assistance may include, but
may not be limited to, establishing and maintaining shareholder accounts and
records, processing purchase and redemption transactions, providing automatic
investment in Fund shares of client account balances, answering routine
inquiries regarding the Fund, assisting clients in changing account options,
designations and addresses, and such other services as may be agreed upon from
time to time and as may be permitted by applicable statute, rule or regulation.
KDI also may provide some of the
4
<PAGE>
above services for the Fund. The firms are to provide such office space and
equipment, telephone facilities and personnel as is necessary or appropriate for
providing information and services to the firms' clients. KDI receives no
compensation from the Fund as principal underwriter for the Shares and pays all
expenses of distribution of the Shares not otherwise paid by dealers and other
financial services firms.
The distribution agreement continues in effect from year to year so long as such
continuance is approved at least annually by a vote of the Board of Trustees of
the Fund, including the Trustees who are not interested persons of the Fund and
who have no direct or indirect financial interest in the agreement. The
distribution agreement automatically terminates in the event of its assignment
and may be terminated at any time without penalty by the Fund or by KDI upon 60
days' written notice. Termination of the distribution agreement by the Fund may
be by vote of a majority of the Board of Trustees, or a majority of the Trustees
who are not interested persons of the Fund and who have no direct or indirect
financial interest in the agreement, or a "majority of the outstanding voting
securities" of the Fund as defined under the 1940 Act.
Administrative services are provided to the Portfolio under an administration
services agreement ("administration agreement") with KDI. KDI bears all its
expenses of providing services pursuant to the administration agreement between
KDI and the Portfolio, including the payment of service fees. Retail Shares and
Premier Shares of the Portfolio each pay KDI an administrative services fee,
payable monthly, at an annual rate of up to 0.25% of average daily net assets of
the Portfolio. Institutional Shares of the Portfolio pays KDI an administrative
services fee, payable monthly, at an annual rate of up to 0.15% of average daily
net assets of the Portfolio.
KDI has entered into related arrangements with various broker-dealer firms and
other service or administrative firms ("firms") that provide services and
facilities for their customers or clients who are investors in Shares of the
Portfolio. The firms provide such office space and equipment, telephone
facilities and personnel as is necessary or beneficial for providing information
and services to their clients. Such services and assistance may include, but are
not limited to, establishing and maintaining accounts and records, processing
purchase and redemption transactions, answering routine inquiries regarding the
Portfolio, assistance to clients in changing dividend and investment options,
account designations and addresses and such other administrative services as may
be agreed upon from time to time and permitted by applicable statute, rule or
regulation. KDI pays each firm a service fee, normally payable quarterly, at an
annual rate of up to 0.25% of the net assets in the Portfolios' accounts that it
maintains and services, commencing with the month after investment. After the
first year, a firm becomes eligible for the quarterly service fee and the fee
continues until terminated by KDI or the Shares of the Portfolio. Firms to which
service fees may be paid may include affiliates of KDI.
KDI also may provide some of the above services and may retain any portion of
the fee under the administrative agreement not paid to firms to compensate
itself for administrative functions performed for the Shares of the Portfolio.
Currently, the administrative services fee payable to KDI is based only upon
Portfolio assets in accounts for which a firm provides administrative services
and it is intended that KDI will pay all the administrative services fee that it
receives from the Shares of the Portfolio to firms in the form of service fees.
The effective administrative services fee rate to be charged against all assets
of the Shares of the Portfolio while this procedure is in effect will depend
upon the proportion of Portfolio's assets that is in accounts for which a firm
of record provides administrative services.
Custodian, Transfer Agent and Shareholder Service Agent. Investors Fiduciary
Trust Company ("IFTC"), 801 Pennsylvania Avenue, Kansas City, Missouri 64105, as
custodian, and State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, as sub-custodian, have custody of all securities and cash
of the Fund. They attend to the collection of principal and income, and payment
for and collection of proceeds of securities bought and sold by the Fund.
Pursuant to a services agreement with IFTC, Kemper Service Company ("KSvC"), an
affiliate of the Adviser, serves as "Shareholder Service Agent." IFTC receives
from the Retail Shares and Premier Shares, as transfer agent, and pays to KSvC
annual account fees of a maximum of $13 per account plus out-of-pocket expense
reimbursement. IFTC receives, as transfer agent, and pays to KSvC annual account
fees of a maximum of 0.03% of the Portfolio's Institutional Shares average daily
net assets.
Independent Auditors and Reports to Shareholders. The Fund's independent
auditors, Ernst & Young LLP, 233 South Wacker Drive, Chicago, Illinois 60606,
audit and report on the Fund's annual financial statements, review certain
regulatory reports and the Fund's federal income tax return, and perform other
professional accounting, auditing, tax and advisory
5
<PAGE>
services when engaged to do so by the Fund. Shareholders will receive annual
audited financial statements and semi-annual unaudited financial statements.
Legal Counsel. Vedder, Price, Kaufman & Kammholz, 222 North LaSalle Street,
Chicago, Illinois 60601, serves as legal counsel for the Fund.
PORTFOLIO TRANSACTIONS
Portfolio transactions are undertaken principally to pursue the objective of the
Portfolio in relation to movements in the general level of interest rates, to
invest money obtained from the sale of Fund shares, to reinvest proceeds from
maturing portfolio securities and to meet redemptions of Fund shares. This may
increase or decrease the yield of a Portfolio depending upon the Adviser's
ability to correctly time and execute such transactions. Since a Portfolio's
assets are invested in securities with short maturities, its portfolio will turn
over several times a year. Securities with maturities of less than one year are
excluded from required portfolio turnover rate calculations, each Portfolio's
portfolio turnover rate for reporting purposes should generally be zero.
The primary objective of the Adviser in placing orders for the purchase and sale
of securities for a Fund's portfolio is to obtain the most favorable net results
taking into account such factors as price, commission where applicable, size of
order, difficulty of execution and skill required of the executing
broker/dealer. The Adviser seeks to evaluate the overall reasonableness of
brokerage commissions paid (to the extent applicable) through its familiarity
with commissions charged on comparable transactions, as well as by comparing
commissions paid by a Fund to reported commissions paid by others. The Adviser
reviews on a routine basis commission rates, execution and settlement services
performed, making internal and external comparisons.
When it can be done consistently with the policy of obtaining the most favorable
net results, it is the Adviser's practice to place such orders with
broker/dealers who supply research, market and statistical information to a
Fund. The term "research, market and statistical information" includes advice as
to the value of securities: the advisability of investing in, purchasing or
selling securities; the availability of securities or purchasers or sellers of
securities; and analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts.
The Adviser is authorized when placing portfolio transactions for a Fund to pay
a brokerage commission in excess of that which another broker might charge for
executing the same transaction solely on account of the receipt of research,
market or statistical information. In effecting transactions in over-the-counter
securities, orders are placed with the principal market makers for the security
being traded unless, after exercising care, it appears that more favorable
results are available elsewhere.
In selecting among firms believed to meet the criteria for handling a particular
transaction, the Adviser may give consideration to those firms that have sold or
are selling shares of a Fund managed by the Adviser.
To the maximum extent feasible, it is expected that the Adviser will place
orders for portfolio transactions through Scudder Investor Services, Inc.
("SIS"), a corporation registered as a broker-dealer and a subsidiary of the
Adviser. SIS will place orders on behalf of the Fund with issuers, underwriters
or other brokers and dealers. SIS will not receive any commission, fee or other
remuneration from the Fund for this service.
Although certain research, market and statistical information from
broker/dealers may be useful to a Fund and to the Adviser, it is the opinion of
the Adviser that such information only supplements its own research effort since
the information must still be analyzed, weighed and reviewed by the Adviser's
staff. Such information may be useful to the Adviser in providing services to
clients other than the Fund and not all such information is used by the Adviser
in connection with the Fund. Conversely, such information provided to the
Adviser by broker/dealers through whom other clients of the Adviser effect
securities transactions may be useful to the Adviser in providing services to a
Fund.
The Board members for a Fund review from time to time whether the recapture for
the benefit of a Fund of some portion of the brokerage commissions or similar
fees paid by a Fund on portfolio transactions is legally permissible and
advisable.
Money market instruments are normally purchased in principal transactions
directly from the issuer or from an underwriter or market maker. There usually
are no brokerage commissions paid by the Fund for such purchases. During the
last three
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<PAGE>
fiscal years the Fund paid no portfolio brokerage commissions. Purchases from
underwriters will include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers serving as market makers will include
the spread between the bid and asked prices.
PURCHASE AND REDEMPTION OF SHARES
Shares of the Portfolio are sold at their net asset value next determined after
an order and payment are received in the form described in the Fund's
prospectus. For Retail Shares, the minimum initial investment is $1,000 and the
minimum subsequent investment is $100. For Premier Shares, the minimum initial
investment is $25,000 and the minimum subsequent investment is $100. For
Institutional Shares, the minimum initial investment is $250,000. Such minimum
amounts may be changed at any time. The Fund may waive the minimum for purchases
by trustees, directors, officers or employees of the Fund or the Adviser and its
affiliates. An investor wishing to open an account should use the Account
Information Form available from the Fund or financial services firms. Orders for
the purchase of shares that are accompanied by a check drawn on a foreign bank
(other than a check drawn on a Canadian bank in U.S. Dollars) will not be
considered in proper form and will not be processed unless and until the Fund
determines that it has received payment of the proceeds of the check. The time
required for such a determination will vary and cannot be determined in advance.
The Fund may suspend the right of redemption or delay payment more than seven
days (a) during any period when the New York Stock Exchange ("Exchange") is
closed other than customary weekend and holiday closings or during any period in
which trading on the Exchange is restricted, (b) during any period when an
emergency exists as a result of which (i) disposal of the Portfolio's
investments is not reasonably practicable, or (ii) it is not reasonably
practicable for the Fund to determine the value of its net assets, or (c) for
such other periods as the Securities and Exchange Commission may by order permit
for the protection of the Fund's shareholders.
Although it is the Fund's present policy to redeem in cash, if the Board of
Trustees determines that a material adverse effect would be experienced by the
remaining shareholders if payment were made wholly in cash, the Fund will pay
the redemption price in whole or in part by a distribution of portfolio
securities in lieu of cash, in conformity with the applicable rules of the
Securities and Exchange Commission, taking such securities at the same value
used to determine net asset value, and selecting the securities in such manner
as the Board of Trustees deems fair and equitable. If such a distribution
occurred, shareholders receiving securities and selling them could receive less
than the redemption value of such securities and in addition could incur certain
transaction costs. Such a redemption would not be so liquid as a redemption
entirely in cash. The Fund has elected to be governed by Rule 18f-1 under the
1940 Act pursuant to which the Fund is obligated to redeem shares of the
Portfolio solely in cash up to the lesser of $250,000 or 1% of the net assets of
the Portfolio during any 90-day period for any one shareholder of record.
DIVIDENDS, NET ASSET VALUE AND TAXES
Dividends. Dividends are declared daily and paid monthly. Shareholders will
receive dividends in additional shares unless they elect to receive cash.
Dividends will be reinvested monthly in Shares of the Portfolio at the net asset
value normally on the 21st day of each month if a business day, otherwise on the
next business day. The Fund will pay shareholders that redeem their entire
accounts all unpaid dividends at the time of the redemption not later than the
next dividend payment date. Upon written request to the Shareholder Service
Agent, a shareholder may elect to have Fund dividends invested without sales
charge in shares of another Kemper Mutual Fund offering this privilege at the
net asset value of such other fund. See "Special Features -- Exchange Privilege"
for a list of such other Kemper Mutual Funds. To use this privilege of investing
Fund dividends in shares of another Kemper Mutual Fund, shareholders must
maintain a minimum account value of $1,000 in Retail Shares, $25,000 in Premier
Shares and $100,000 in Institutional Shares, and must maintain a minimum account
value of $1,000 in the fund in which dividends are reinvested.
The Shares of the Portfolio calculates their dividends based on its daily net
investment income. For this purpose, the net investment income of the Shares of
the Portfolio consists of (a) accrued interest income plus or minus amortized
discount or premium, (b) plus or minus all short-term realized gains and losses
on investments and (c) minus accrued expenses allocated to the Shares of the
Portfolio. Expenses of the Fund are accrued each day. While the Shares of the
Portfolio's investments are valued at amortized cost, there will be no
unrealized gains or losses on such investments. However, should the net asset
value
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<PAGE>
of the Shares of the Portfolio deviate significantly from market value, the
Board of Trustees could decide to value the investments at market value and then
unrealized gains and losses would be included in net investment income above.
Dividends are reinvested monthly and shareholders will receive monthly
confirmations of dividends and of purchase and redemption transactions except
that confirmations of dividend reinvestment for Individual Retirement Accounts
and other fiduciary accounts for which Investors Fiduciary Trust Company acts as
trustee will be sent quarterly.
Net Asset Value. As described in the prospectus, the Portfolio values its
portfolio instruments at amortized cost, which does not take into account
unrealized capital gains or losses. This involves initially valuing an
instrument at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. While this method provides
certainty in valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the price the Portfolio
would receive if it sold the instrument. Calculations are made to compare the
value of the Shares of the Portfolio's investments valued at amortized cost with
market values. Market valuations are obtained by using actual quotations
provided by market makers, estimates of market value, or values obtained from
yield data relating to classes of money market instruments published by
reputable sources at the mean between the bid and asked prices for the
instruments. If a deviation of 1/2 of 1% or more were to occur between the net
asset value per share calculated by reference to market values and the
Portfolio's $1.00 per share net asset value, or if there were any other
deviation that the Board of Trustees of the Fund believed would result in a
material dilution to shareholders or purchasers, the Board of Trustees would
promptly consider what action, if any, should be initiated. If the Shares of the
Portfolio's net asset value per share (computed using market values) declined,
or were expected to decline, below $1.00 (computed using amortized cost), the
Board of Trustees of the Fund might temporarily reduce or suspend dividend
payments in an effort to maintain the net asset value at $1.00 per share. As a
result of such reduction or suspension of dividends or other action by the Board
of Trustees, an investor would receive less income during a given period than if
such a reduction or suspension had not taken place. Such action could result in
investors receiving no dividend for the period during which they hold their
shares and receiving, upon redemption, a price per share lower than that which
they paid. On the other hand, if the Shares of the Portfolio's net asset value
per share (computed using market values) were to increase, or were anticipated
to increase above $1.00 (computed using amortized cost), the Board of Trustees
of the Fund might supplement dividends in an effort to maintain the net asset
value at $1.00 per share.
Taxes. Interest on indebtedness which is incurred to purchase or carry shares of
a mutual fund portfolio which distributes exempt-interest dividends during the
year is not deductible for Federal income tax purposes.
The "Superfund Act of 1986" (the "Superfund Act") imposes a separate tax on
corporations at a rate of 0.12 percent of the excess of such corporation's
"modified alternative minimum taxable income" over $2 million. A portion of
tax-exempt interest may be includable in modified alternative minimum taxable
income. Corporate shareholders are advised to consult their tax advisers with
respect to the consequences of the Superfund Act.
PERFORMANCE
As reflected in the prospectus, the historical performance calculation for the
Shares of the Portfolio may be shown in the form of "yield" and "effective
yield." These various measures of performance are described below. The Adviser
has agreed to absorb temporarily certain operating expenses of the Portfolio to
the extent described in the prospectus. Without this expense absorption, the
performance results noted herein would have been lower.
Each Shares' yield is computed in accordance with a standardized method
prescribed by rules of the Securities and Exchange Commission. Under that
method, the yield quotation is based on a seven-day period and is computed for
the Portfolio as follows. The first calculation is net investment income per
share, which is accrued interest on portfolio securities, plus or minus
amortized discount or premium, less accrued expenses. This number is then
divided by the price per share (expected to remain constant at $1.00) at the
beginning of the period ("base period return"). The result is then divided by 7
and multiplied by 365 and the resulting yield figure is carried to the nearest
one-hundredth of one percent. Realized capital gains or losses and unrealized
appreciation or depreciation of investments are not included in the calculation.
Each Shares' effective yield is determined by taking the base period return
(computed as described above) and calculating the effect of assumed compounding.
The formula for the effective yield is: (base period return +1)^365/7-1.
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Each Shares' yield fluctuates, and the publication of an annualized yield
quotation is not a representation as to what an investment in the Shares of the
Portfolio will actually yield for any given future period. Actual yields will
depend not only on changes in interest rates on money market instruments during
the period in which the investment in the Shares is held, but also on such
matters as Portfolio expenses.
Investors have an extensive choice of money market funds and money market
deposit accounts and the information below may be useful to investors who wish
to compare the past performance of the Shares with that of its competitors. Past
performance cannot be a guarantee of future results.
As indicated in the prospectus (see "Performance"), the performance of each
class of Shares may be compared to that of other mutual funds tracked by Lipper
Analytical Services, Inc. ("Lipper"). Lipper performance calculations include
the reinvestment of all capital gain and income dividends for the periods
covered by the calculations. The Shares of the Portfolio's performance also may
be compared to other money market funds as reported by IBC Financial Data, Inc.
Money Fund Report(R) or Money Market Insight(R), reporting services on money
market funds. As reported by IBC, all investment results represent total return
(annualized results for the period net of management fees and expenses) and
one-year investment results would be effective annual yields assuming
reinvestment of dividends.
The performance of the Shares also may be compared on a before or after-tax
basis to various bank products, including the average rate of bank and thrift
institution money market deposit accounts, interest bearing checking accounts
and 6-month maturity certificates of deposit as reported in the BANK RATE
MONITOR National Index(TM) of 100 leading bank and thrift institutions as
published by the BANK RATE MONITOR(TM), N. Palm Beach, Florida 33408. The rates
published by the BANK RATE MONITOR National Index(TM) are averages of the
personal account rates offered on the Wednesday prior to the date of publication
by 100 large bank and thrifts in the top ten Consolidated Standard Metropolitan
Statistical Areas. With respect to money market deposit accounts and interest
bearing checking accounts, account minimums range upward from $2,000 in each
institution and compounding methods vary. Interest bearing checking accounts
generally offer unlimited checkwriting while money market deposit accounts
generally restrict the number of checks that may be written. If more than one
rate is offered, the lowest rate is used. Rates are determined by the financial
institution and are subject to change at any time specified by the institution.
Generally, the rates offered for these products take market conditions and
competitive product yields into consideration when set. Bank products represent
a taxable alternative income producing product. Bank and thrift institution
account deposits may be insured. Shareholder accounts in the Fund are not
insured. Bank passbook savings accounts share some liquidity features with money
market mutual fund accounts but they may not offer all of the features available
from a money market mutual fund, such as checkwriting. Bank passbook savings
accounts normally offer a fixed rate of interest, while the yields of the Shares
of the Portfolio fluctuate. Bank checking accounts normally do not pay interest
but share some liquidity features with money market mutual fund accounts (e.g.,
the ability to write checks against the account). Bank certificates of deposit
may offer fixed or variable rates for a set term. (Normally, a variety of terms
are available.) Withdrawal of these deposits prior to maturity normally will be
subject to a penalty. In contrast, shares of the Portfolio are redeemable at the
net asset value (normally $1.00 per share) next determined after a request is
received, without charge.
Investors also may want to compare the performance of each class of Shares to
that of U.S. Treasury bills or notes because such instruments represent
alternative income producing products. Treasury obligations are issued in
selected denominations. Rates of U.S. Treasury obligations are fixed at the time
of issuance and payment of principal and interest is backed by the full faith
and credit of the U.S. Treasury. The market value of such instruments generally
will fluctuate inversely with interest rates prior to maturity and will equal
par value at maturity. Generally, the values of obligations with shorter
maturities will fluctuate less than those with longer maturities. Each Shares'
yield will fluctuate. Also, while the Portfolio seek to maintain a net asset
value per share of $1.00, there is no assurance that it will be able to do so.
OFFICERS AND TRUSTEES
The officers and trustees of the Fund, their birthdates, their principal
occupations and their affiliations, if any, with the Adviser and KDI, are listed
below. All persons named as officers and trustees also serve in similar
capacities for other funds advised by the Adviser:
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<PAGE>
DAVID W. BELIN (6/20/28), Trustee, 2000 Financial Center, 7th and Walnut, Des
Moines, Iowa; Member, Belin Lamson McCormick Zumbach Flynn, P.C. (attorneys).
LEWIS A. BURNHAM (1/8/33), Trustee, 16410 Avila Boulevard, Tampa, Florida;
Retired; formerly, Partner, Business Resources Group; formerly, Executive Vice
President, Anchor Glass Container Corporation.
DONALD L. DUNAWAY (3/8/37), Trustee, 7515 Pelican Bay Boulevard, Naples,
Florida; Retired; formerly, Executive Vice President, A.O. Smith Corporation
(diversified manufacturer).
ROBERT B. HOFFMAN (12/11/36), Trustee, 800 North Lindbergh Boulevard, St. Louis,
Missouri; Vice Chairman and Chief Financial Officer, Monsanto Company
(agricultural, pharmaceutical and nutritional/food products); formerly, Vice
President, Head of International Operations, FMC Corporation (manufacturer of
machinery and chemicals).
DONALD R. JONES (1/17/30), Trustee, 182 Old Wick Lane, Inverness, Illinois;
Retired; Director, Motorola, Inc. (manufacturer of electronic equipment and
components); formerly, Executive Vice President and Chief Financial Officer,
Motorola, Inc.
SHIRLEY D. PETERSON (9/3/41), Trustee, 401 Rosemont Avenue, Frederick, Maryland;
President, Hood College; formerly, Partner, Steptoe & Johnson (attorneys); prior
thereto, Commissioner, Internal Revenue Service; prior thereto, Assistant
Attorney General, U.S. Department of Justice; Director, Bethlehem Steel Corp.
DANIEL PIERCE (3/18/34), Trustee*, Two International Place, Boston,
Massachusetts; Managing Director, Adviser.
WILLIAM P. SOMMERS (7/22/33), Trustee, 333 Ravenswood Avenue, Menlo Park,
California; President and Chief Executive Officer, SRI International (research
and development); formerly, Executive Vice President, Iameter (medical
information and educational service provider); prior thereto, Senior Vice
President and Director, Booz, Allen & Hamilton Inc. (management consulting
firm)(retired); Director, Rohr, Inc., Therapeutic Discovery Corp. and Litton
Industries.
EDMOND D. VILLANI (3/4/47), Trustee*, 345 Park Avenue, New York, New York;
President, Chief Executive Officer and Managing Director, Adviser.
MARK S. CASADY (9/21/60), President*, 345 Park Avenue, New York, New York;
Managing Director, Adviser; formerly, Institutional Sales Manager of an
unaffiliated mutual fund distributor.
PHILIP J. COLLORA (11/15/45), Vice President and Secretary*, 222 South Riverside
Plaza, Chicago, Illinois; Senior Vice President and Assistant Secretary,
Adviser.
THOMAS W. LITTAUER (4/26/55), Vice President*, Two International Place, Boston,
Massachusetts; Managing Director, Adviser; formerly, Head of Broker Dealer
Division of an unaffiliated investment management firm during 1997; prior
thereto, President of Client Management Services of an unaffiliated investment
management firm from 1991 to 1996.
ANN M. McCREARY (11/6/56), Vice President*, 345 Park Avenue, New York, New York;
Managing Director, Adviser.
ROBERT C. PECK, JR. (10/1/46), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Managing Director, Adviser; formerly, Executive Vice
President and Chief Investment Officer with an unaffiliated investment
management firm from 1988 to June 1997.
KATHRYN L. QUIRK (12/3/52), Vice President*, 345 Park Avenue, New York, New
York; Managing Director, Adviser.
FRANK J. RACHWALSKI, JR. (3/26/45), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Managing Director, Adviser.
LINDA J. WONDRACK (9/12/64), Vice President*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.
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JOHN R. HEBBLE (6/27/58), Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.
BRENDA LYONS (2/21/63), Assistant Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.
CAROLINE PEARSON (4/1/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Senior Vice President, Adviser; formerly, Associate,
Dechert Price & Rhoads (law firm) 1989 to 1997.
MAUREEN E. KANE (2/14/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Vice President, Adviser; formerly, Assistant Vice
President of an unaffiliated investment management firm; prior thereto,
Associate Staff Attorney of an unaffiliated investment management firm;
Associate, Peabody & Arnold (law firm).
JOHN W. STUEBE (1/7/49), Vice President*(2), 222 South Riverside Plaza, Chicago,
Illinois; Vice President, Adviser and KDI.
ELIZABETH C. WERTH (10/1/47), Assistant Secretary*, 222 South Riverside Plaza,
Chicago, Illinois; Vice President, Adviser and KDI.
* Interested persons as defined in the 1940 Act.
The trustees and officers who are "interested persons" as designated above
receive no compensation from the Fund. The table below shows amounts paid or
accrued to those trustees who are not designated "interested persons" during the
Fund's fiscal year ended April 30, 1998 and the total compensation that Kemper
Managed Funds paid to each trustee during the calendar year 1997.
<TABLE>
<CAPTION>
Aggregate Total Compensation Kemper Managed Funds
Name of Trustee Compensation From Fund Paid to Trustees (2)
- --------------- ---------------------- --------------------
<S> <C> <C>
David W. Belin (1) $4,100 $168,100
Lewis A. Burnham 3,500 117,800
Donald L. Dunaway (1) 4,700 162,700
Robert B. Hoffman 3,500 109,400
Donald R. Jones 3,700 114,200
Shirley D. Peterson 3,300 114,000
William P. Sommers 3,300 109,400
</TABLE>
(1) Includes deferred fees and interest thereon pursuant to deferred
compensation agreements with the Fund. Deferred amounts accrue interest
monthly at a rate approximate to the yield of Zurich Money Funds -- Zurich
Money Market Fund. Total deferred fees and interest accrued for the latest
and all prior fiscal years are $17,200 for Mr. Belin and $15,600 for Mr.
Dunaway from Cash Account Trust.
(2) Includes compensation for service on the Boards of 25 Kemper funds with 43
fund portfolios. Each trustee currently serves as trustee of 26 Kemper
Funds with 48 fund portfolios. Total compensation does not reflect amounts
paid by the Adviser to the trustees for meeting regarding the combination
of Scudder, Stevens & Clark, Inc. and Zurich Kemper Investments, Inc. Such
amounts totaled $21,900, $25,400, $21,900, $17,300, $20,800, $24,200 and
$21,900 for Messrs. Belin, Burnham, Dunaway, Hoffman, Jones, Ms. Peterson
and Mr. Sommers, respectively.
On December 15, 1998, the officers and trustees of the Fund, as a group, owned
less than 1% of the then outstanding Shares of the Portfolio. No person owned of
record 5% or more of the outstanding Shares of the Portfolio.
SPECIAL FEATURES
Exchange Privilege. Subject to the limitations described below, Class A Shares
(or the equivalent) of the following Kemper Mutual Funds may be exchanged for
each other at their relative net asset values: Kemper Technology Fund, Kemper
Total Return Fund, Kemper Growth Fund, Kemper Small Capitalization Equity Fund,
Kemper Income and Capital Preservation
11
<PAGE>
Fund, Kemper Municipal Bond Fund, Kemper Diversified Income Fund, Kemper High
Yield Series, Kemper U.S. Government Securities Fund, Kemper International Fund,
Kemper State Tax-Free Income Series, Kemper Adjustable Rate U.S. Government
Fund, Kemper Blue Chip Fund, Kemper Global Income Fund, Kemper Target Equity
Fund (series are subject to a limited offering period), Kemper Intermediate
Municipal Bond Fund, Kemper Cash Retails Fund, Kemper U.S. Mortgage Fund, Kemper
Short-Intermediate Government Fund, Kemper Value Series, Inc., Kemper Value Plus
Growth Fund, Kemper Quantitative Equity Fund, Kemper Horizon Fund, Kemper Europe
Fund, Kemper Asian Growth Fund, Kemper Aggressive Growth Fund, Kemper
Global/International Series, Inc., Kemper Securities Trust and Kemper Equity
Trust ("Kemper Mutual Funds") and certain "Money Market Funds" (Zurich Money
Funds, Zurich Yieldwise Money Fund, Cash Equivalent Fund, Tax-Exempt California
Money Market Fund, Cash Account Trust, Investors Municipal Cash Fund and
Investors Cash Trust). Shares of Money Market Funds and Kemper Cash Retails Fund
that were acquired by purchase (not including shares acquired by dividend
reinvestment) are subject to the applicable sales charge on exchange. In
addition, shares of a Kemper Mutual Fund in excess of $1,000,000 (except Zurich
Yieldwise Money Fund and Kemper Cash Retails Fund) acquired by exchange from
another Fund may not be exchanged thereafter until they have been owned for 15
days (the "15-Day Hold Policy"). For purposes of determining whether the 15-Day
Hold Policy applies to a particular exchange, the value of the shares to be
exchanged shall be computed by aggregating the value of shares being exchanged
for all accounts under common control, discretion or advice, including without
limitation accounts administered by a financial services firm offering market
timing, asset allocation or similar services. Series of Kemper Target Equity
Fund will be available on exchange only during the Offering Period for such
series as described in the prospectus for such series. Cash Equivalent Fund,
Tax-Exempt California Money Market Fund, Cash Account Trust, Investors Municipal
Cash Fund and Investors Cash Trust are available on exchange but only through a
financial services firm having a services agreement with KDI with respect to
such funds. Exchanges may only be made for funds that are available for sale in
the shareholder's state of residence. Currently, Tax-Exempt California Money
Market Fund is available for sale only in California and the portfolios of
Investors Municipal Cash Fund are available for sale in certain states.
The total value of shares being exchanged must at least equal the minimum
investment requirement of the fund into which they are being exchanged.
Exchanges are made based on relative dollar values of the shares involved in the
exchange. There is no service fee for an exchange; however, financial services
firms may charge for their services in expediting exchange transactions.
Exchanges will be effected by redemption of shares of the fund held and purchase
of shares of the other fund. For federal income tax purposes, any such exchange
constitutes a sale upon which a gain or loss may be realized, depending upon
whether the value of the shares being exchanged is more or less than the
shareholder's adjusted cost basis. Shareholders interested in exercising the
exchange privilege may obtain an exchange form and prospectuses of the other
funds from financial services firms or KDI. Exchanges also may be authorized by
telephone if the shareholder has given authorization. Once the authorization is
on file, the Shareholder Service Agent will honor requests by telephone at
1-800-231-8568 or in writing subject to the limitations on liability described
in the prospectus. Any share certificates must be deposited prior to any
exchange of such shares. During periods when it is difficult to contact the
Shareholder Service Agent by telephone, it may be difficult to implement the
telephone exchange privilege. The exchange privilege is not a right and may be
suspended, terminated or modified at any time. Except as otherwise permitted by
applicable regulation, 60 days' prior written notice of any termination or
material change will be provided.
Systematic Withdrawal Program. An owner of $5,000 or more of the Portfolio's
Shares may provide for the payment from the owner's account of any requested
dollar amount up to $50,000 to be paid to the owner or the owner's designated
payee monthly, quarterly, semi-annually or annually. The $5,000 minimum account
size is not applicable to Individual Retirement Accounts. Dividend distributions
will be reinvested automatically at net asset value. A sufficient number of full
and fractional shares will be redeemed to make the designated payment. Depending
upon the size of the payments requested, redemptions for the purpose of making
such payments may reduce or even exhaust the account. The program may be amended
on thirty days notice by the Fund and may be terminated at any time by the
shareholder or the Fund. Firms provide varying arrangements for their clients to
redeem Fund shares on a periodic basis. Such firms may independently establish
minimums for such services.
Tax-Sheltered Retirement Programs. The Shareholder Service Agent provides
retirement plan services and documents and KDI can establish your account in any
of the following types of retirement plans:
o Individual Retirement Accounts (IRAs) trusteed by Investors Fiduciary
Trust Company ("IFTC"). This includes Simplified Employee Pension Plan
(SEP) IRA accounts and prototype documents.
12
<PAGE>
o 403(b) Custodial Accounts also trusteed by IFTC. This type of plan is
available to employees of most non-profit organizations.
o Prototype money purchase pension and profit-sharing plans may be
adopted by employers. The maximum contribution per participant is the
lesser of 25% of compensation or $30,000.
Brochures describing the above plans as well as providing model defined benefit
plans, target benefit plans, 457 plans, 401(k) plans and materials for
establishing them are available from the Shareholder Service Agent upon request.
The brochures for plans trusteed by IFTC describe the current fees payable to
IFTC for its services as trustee. Investors should consult with their own tax
advisers before establishing a retirement plan.
Electronic Funds Transfer Programs. For your convenience, the Fund has
established several investment and redemption programs using electronic funds
transfer via the Automated Clearing House (ACH). There is currently no charge by
the Fund for these programs. To use these features, your financial institution
(your employer's financial institution in the case of payroll deposit) must be
affiliated with an Automated Clearing House (ACH). This ACH affiliation permits
the Shareholder Service Agent to electronically transfer money between your bank
account, or employer's payroll bank in the case of Direct Deposit, and your Fund
account. Your bank's crediting policies of these transferred funds may vary.
These features may be amended or terminated at any time by the Fund.
Shareholders should contact Kemper Service Company at 1-800-621-1048 or the
financial services firm through which their account was established for more
information. These programs may not be available through some firms that
distribute shares of the Fund.
SHAREHOLDER RIGHTS
The Fund generally is not required to hold meetings of its shareholders. Under
the Agreement and Declaration of Trust of the Fund ("Declaration of Trust"),
however, shareholder meetings will be held in connection with the following
matters: (a) the election or removal of trustees if a meeting is called for such
purpose; (b) the adoption of any contract for which shareholder approval is
required by the 1940 Act; (c) any termination of the Fund to the extent and as
provided in the Declaration of Trust; (d) any amendment of the Declaration of
Trust (other than amendments changing the name of the Fund or any Portfolio,
establishing the Portfolio, supplying any omission, curing any ambiguity or
curing, correcting or supplementing any defective or inconsistent provision
thereof); and (e) such additional matters as may be required by law, the
Declaration of Trust, the By-laws of the Fund, or any registration of the Fund
with the Securities and Exchange Commission or any state, or as the trustees may
consider necessary or desirable. The shareholders also would vote upon changes
in fundamental investment objectives, policies or restrictions.
Each trustee serves until the next meeting of shareholders, if any, called for
the purpose of electing trustees and until the election and qualification of a
successor or until such trustee sooner dies, resigns, retires or is removed by a
majority vote of the shares entitled to vote (as described below) or a majority
of the trustees. In accordance with the 1940 Act (a) the Fund will hold a
shareholder meeting for the election of trustees at such time as less than a
majority of the trustees have been elected by shareholders, and (b) if, as a
result of a vacancy in the Board of Trustees, less than two-thirds of the
trustees have been elected by the shareholders, that vacancy will be filled only
by a vote of the shareholders.
Trustees may be removed from office by a vote of the holders of a majority of
the outstanding shares at a meeting called for that purpose, which meeting shall
be held upon the written request of the holders of not less than 10% of the
outstanding shares. Upon the written request of ten or more shareholders who
have been such for at least six months and who hold shares constituting at least
1% of the outstanding shares of the Fund stating that such shareholders wish to
communicate with the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider removal of a trustee, the
Fund has undertaken to disseminate appropriate materials at the expense of the
requesting shareholders.
The Declaration of Trust provides that the presence at a shareholder meeting in
person or by proxy of at least 30% of the shares entitled to vote on a matter
shall constitute a quorum. Thus, a meeting of shareholders of the Fund could
take place even if less than a majority of the shareholders were represented on
its scheduled date. Shareholders would in such a case be permitted to take
action which does not require a larger vote than a majority of a quorum, such as
the election of trustees and ratification of the selection of auditors. Some
matters requiring a larger vote under the Declaration of Trust, such as
termination or reorganization of the Fund and certain amendments of the
Declaration of Trust, would not be affected by this
13
<PAGE>
provision; nor would matters which under the 1940 Act require the vote of a
"majority of the outstanding voting securities" as defined in the 1940 Act.
The Declaration of Trust specifically authorizes the Board of Trustees to
terminate the Fund (or Portfolio or Shares) by notice to the shareholders
without shareholder approval.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for obligations of the
Fund. The Declaration of Trust, however, disclaims shareholder liability for
acts or obligations of the Fund and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument entered into or executed by
the Fund or the trustees. Moreover, the Declaration of Trust provides for
indemnification out of Fund property for all losses and expenses of any
shareholder held personally liable for the obligations of the Fund and the Fund
will be covered by insurance which the trustees consider adequate to cover
foreseeable tort claims. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is considered by the Adviser remote and
not material, since it is limited to circumstances in which a disclaimer is
inoperative and the Fund itself is unable to meet its obligations.
14
<PAGE>
APPENDIX -- RATINGS OF INVESTMENTS
COMMERCIAL PAPER RATINGS
A-1, A-2, Prime-1, Prime-2 and Duff 1, Duff 2 Commercial Paper Ratings
Commercial paper rated by Standard & Poor's Corporation has the following
characteristics: Liquidity ratios are adequate to meet cash requirements.
Long-term senior debt is rated "A" or better. The issuer has access to at least
two additional channels of borrowing. Basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances. Typically, the
issuer's industry is well established and the issuer has a strong position
within the industry. The reliability and quality of management are unquestioned.
Relative strength or weakness of the above factors determine whether the
issuer's commercial paper is rated A-1, A-2 or A-3.
The ratings Prime-1 and Prime-2 are the two highest commercial paper ratings
assigned by Moody's Investors Service, Inc. Among the factors considered by them
in assigning ratings are the following: (1) evaluation of the management of the
issuer; (2) economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain areas; (3)
evaluation of the issuer's products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend
of earnings over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and (8) recognition
by the management of obligations which may be present or may arise as a result
of public interest questions and preparations to meet such obligations. Relative
strength or weakness of the above factors determines whether the issuer's
commercial paper is rated Prime-1, 2 or 3.
The rating Duff-1 is the highest commercial paper rating assigned by Duff &
Phelps Inc. Paper rated Duff-1 is regarded as having very high certainty of
timely payment with excellent liquidity factors that are supported by ample
asset protection. Risk factors are minor. Paper rated Duff-2 is regarded as
having good certainty of timely payment, good access to capital markets and
sound liquidity factors and company fundamentals. Risk factors are small.
MIG-1 and MIG-2 Municipal Notes
Moody's Investors Service, Inc.'s ratings for state and municipal notes and
other short-term loans will be designated Moody's Investment Grade (MIG). This
distinction is in recognition of the differences between short-term credit risk
and long-term risk. Factors affecting the liquidity of the borrower are
uppermost in importance in short-term borrowing, while various factors of the
first importance in bond risk are of lesser importance in the short run. Loans
designated MIG-1 are of the best quality, enjoying strong protection from
established cash flows of funds for their servicing or from established and
broad-based access to the market for refinancing, or both. Loans designated
MIG-2 are of high quality, with margins of protection ample although not so
large as in the preceding group.
STANDARD & POOR'S CORPORATION BOND RATINGS, CORPORATE BONDS
AAA. This is the highest rating assigned by Standard & Poor's Corporation to a
debt obligation and indicates an extremely strong capacity to pay principal and
interest.
AA. Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
MOODY'S INVESTORS SERVICE, INC. BOND RATINGS
Aaa. Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
15
<PAGE>
Aa. Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
DUFF & PHELP'S INC. BOND RATINGS
AAA -- Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA -- High credit quality. Protection factors are strong. Risk is modest but may
vary slightly from time to time because of economic conditions.
16
<PAGE>
CASH ACCOUNT TRUST
PART C.
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(i) Financial Statements and Financial Highlights included in
the Annual Report, for Money Market, Government Securities and Tax-Exempt
Portfolios for the fiscal year ended April 30, 1998, are incorporated herein by
reference to the fund's Statement of Additional Information and were filed on
June 25, 1998 for Cash Account Trust (No. 811-05970) pursuant to Rule 30d-1
under the Investment Company Act of 1940 and are incorporated herein by
reference.
(ii) Financial Statements and Financial Highlights included in
the Annual Report, for Money Market, Government Securities and Tax-Exempt
Portfolios for the fiscal year ended April 30, 1998, are incorporated herein by
reference to the fund's Statement of Additional Information and were filed on
June 25, 1998 for Cash Account Trust (No. 811-05970) pursuant to Rule 30d-1
under the Investment Company Act of 1940 and are incorporated herein by
reference.
Statements, schedules and historical information other than those
listed above have been omitted since they are either not applicable or are not
required.
(b) Exhibits
<TABLE>
<S> <C>
99.b1. Amended and Restated Agreement and Declaration of Trust.(1)
99.b2. By-Laws.(1)
99.b3. Inapplicable.
99.b4. Text of Share Certificate.(1)
99.b5. Investment Management Agreement.
99.b6.(a) Administration, Shareholder Services and Distribution Agreement: to be filed by amendment
99.b6.(b) Administration Services and Selling Group Agreement.(1)
99.b6(c) Underwriting and Distribution Services Agreement: to be filed by amendment
99.b7. Inapplicable.
99.b8. Custody Agreement.(1)
99.b9.(a) Agency Agreement.(1)
99.b9.(b) Supplement to Agency Agreement.(2)
99.b9.(c) Fund Accounting Agreements.(3)
99.b10. Inapplicable.
99.b11. Report and Consent of Independent Auditors: to be filed by amendment
99.b12. Inapplicable.
99.b13. Inapplicable.
99.b14. Inapplicable.
99.b15. Amended and Restated 12b-1 Plans.
99.b16. Performance Calculations.(1)
99.b18. Multi-Distribution System Plan: to be filed by amendment
99.b24. Powers of Attorney.(3)
27. Financial Data Schedule: to be filed by amendment
</TABLE>
(1) Incorporated herein by reference to Post-Effective Amendment No. 5 to
the Registration Statement of Registrant on Form N-1A filed on or about
July 28, 1995.
(2) Incorporated herein by reference to Post-Effective Amendment No. 6 to
the Registration Statement of Registrant on Form N-1A filed on or about
July 26, 1996.
Part C - Page 1
<PAGE>
(3) Incorporated herein by reference to Post-Effective Amendment No. 8 to
the Registration Statement of Registrant on Form N-1A filed on or about
August 28, 1998.
Item 25. Persons Controlled by or Under Common Control with Registrant
Not applicable.
Item 26. Number of Holders of Securities
As of November 10, 1998, there were 29,207, 4,959 and 9,270 holders of
record of the Money Market Portfolio, the Government Securities Portfolio and
the Tax-Exempt Portfolio, respectively.
Item 27. Indemnification
Article VIII of the Registrant's Agreement and Declaration of Trust
(Exhibit 1 hereto, which is incorporated herein by reference) provides in effect
that the Registrant will indemnify its officers and trustees under certain
circumstances. However, in accordance with Section 17(h) and 17(i) of the
Investment Company Act of 1940 and its own terms, said Article of the Agreement
and Declaration of Trust does not protect any person against any liability to
the Registrant or its shareholders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers, and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such trustee, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question as to whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
On June 26, 1997, Zurich Insurance Company ("Zurich"), ZKI Holding
Corp. ("ZKIH"), Zurich Kemper Investments, Inc. ("ZKI"), Scudder, Stevens &
Clark, Inc. ("Scudder") and the representatives of the beneficial owners of the
capital stock of Scudder ("Scudder Representatives") entered into a transaction
agreement ("Transaction Agreement") pursuant to which Zurich became the majority
stockholder in Scudder with an approximately 70% interest, and ZKI was combined
with Scudder ("Transaction"). In connection with the trustees' evaluation of the
Transaction, Zurich agreed to indemnify the Registrant and the trustees who were
not interested persons of ZKI or Scudder (the "Independent Trustees") for and
against any liability and expenses based upon any action or omission by the
Independent Trustees in connection with their consideration of and action with
respect to the Transaction. In addition, Scudder has agreed to indemnify the
Registrant and the Independent Trustees for and against any liability and
expenses based upon any misstatements or omissions by Scudder to the Independent
Trustees in connection with their consideration of the Transaction.
Item 28. Business or Other Connections of Investment Adviser
Scudder Kemper Investments, Inc. has stockholders and employees who are
denominated officers but do not as such have corporation-wide responsibilities.
Such persons are not considered officers for the purpose of this Item 28.
<TABLE>
<CAPTION>
Business and Other Connections of Board
Name of Directors of Registrant's Adviser
---- ------------------------------------
<S> <C>
Stephen R. Beckwith Treasurer and Chief Financial Officer, Scudder Kemper Investments, Inc.**
Vice President and Treasurer, Scudder Fund Accounting Corporation*
Director, Scudder Stevens & Clark Corporation**
Director and Chairman, Scudder Defined Contribution Services, Inc.**
Director and President, Scudder Capital Asset Corporation**
Part C - Page 2
<PAGE>
Director and President, Scudder Capital Stock Corporation**
Director and President, Scudder Capital Planning Corporation**
Director and President, SS&C Investment Corporation**
Director and President, SIS Investment Corporation**
Director and President, SRV Investment Corporation**
Lynn S. Birdsong Director and Vice President, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark (Luxembourg) S.A.#
Laurence W. Cheng Director, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland##
Director, ZKI Holding Corporation xx
Rolf Huppi Director, Chairman of the Board, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland##
Director, Chairman of the Board, Zurich Holding Company of America o
Director, ZKI Holding Corporation xx
Kathryn L. Quirk Director, Chief Legal Officer, Chief Compliance Officer and Secretary, Scudder Kemper
Investments, Inc.**
Director, Senior Vice President & Assistant Clerk, Scudder Investor Services, Inc.*
Director, Vice President & Secretary, Scudder Fund Accounting Corporation*
Director, Vice President & Secretary, Scudder Realty Holdings Corporation*
Director & Assistant Clerk, Scudder Service Corporation*
Director, SFA, Inc.*
Vice President, Director & Assistant Secretary, Scudder Precious Metals, Inc.***
Director, Scudder, Stevens & Clark Japan, Inc.***
Director, Vice President and Secretary, Scudder, Stevens & Clark of Canada, Ltd.***
Director, Vice President and Secretary, Scudder Canada Investor Services Limited***
Director, Vice President and Secretary, Scudder Realty Advisers, Inc. x
Director and Secretary, Scudder, Stevens & Clark Corporation**
Director and Secretary, Scudder, Stevens & Clark Overseas Corporation oo
Director and Secretary, SFA, Inc.*
Director, Vice President and Secretary, Scudder Defined Contribution Services, Inc.**
Director, Vice President and Secretary, Scudder Capital Asset Corporation**
Director, Vice President and Secretary, Scudder Capital Stock Corporation**
Director, Vice President and Secretary, Scudder Capital Planning Corporation**
Director, Vice President and Secretary, SS&C Investment Corporation**
Director, Vice President and Secretary, SIS Investment Corporation**
Director, Vice President and Secretary, SRV Investment Corporation**
Director, Vice President and Secretary, Scudder Brokerage Services, Inc.*
Director, Korea Bond Fund Management Co., Ltd.+
Cornelia M. Small Director , Scudder Kemper Investments, Inc.**
Edmond D. Villani Director, President and Chief Executive Officer, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark Japan, Inc.###
President and Director, Scudder, Stevens & Clark Overseas Corporation oo
President and Director, Scudder, Stevens & Clark Corporation**
Director, Scudder Realty Advisors, Inc.x
Director, IBJ Global Investment Management S.A. Luxembourg, Grand-Duchy of Luxembourg
* Two International Place, Boston, MA
Part C - Page 3
<PAGE>
x 333 South Hope Street, Los Angeles, CA
** 345 Park Avenue, New York, NY
# Societe Anonyme, 47, Boulevard Royal, L-2449 Luxembourg, R.C. Luxembourg B 34.564
*** Toronto, Ontario, Canada
oo 20-5, Ichibancho, Chiyoda-ku, Tokyo, Japan
### 1-7, Kojimachi, Chiyoda-ku, Tokyo, Japan
xx 222 S. Riverside, Chicago, IL
o Zurich Towers, 1400 American Ln., Schaumburg, IL
+ P.O. Box 309, Upland House, S. Church St., Grand Cayman, British West Indies
## Mythenquai-2, P.O. Box CH-8022, Zurich, Switzerland
</TABLE>
Item 29. Principal Underwriters.
(a)
Kemper Distributors, Inc. acts as principal underwriter of the
Registrant's shares and acts as principal underwriter of the Kemper
Funds.
(b)
Information on the officers and directors of Kemper Distributors, Inc.,
principal underwriter for the Registrant is set forth below. The
principal business address is 222 South Riverside Plaza, Chicago,
Illinois 60606.
<TABLE>
<CAPTION>
(1) (2) (3)
Position and Offices with Positions and
Name Kemper Distributors, Inc. Offices with Registrant
---- ------------------------- -----------------------
<S> <C> <C> <C>
James L. Greenawalt President None
Thomas W. Littauer Director, Chief Executive Officer Vice President
Kathryn L. Quirk Director, Secretary, Chief Legal Vice President
Officer & Vice President
James J. McGovern Chief Financial Officer & Vice None
President
Linda J. Wondrack Vice President & Chief Compliance None
Officer
Paula Gaccione Vice President None
Michael E. Harrington Vice President None
Robert A. Rudell Vice President None
William M. Thomas Vice President None
Elizabeth C. Werth Vice President Assistant Secretary
Todd N. Gierke Assistant Treasurer None
Part C - Page 4
<PAGE>
Position and Offices with Positions and
Name Kemper Distributors, Inc. Offices with Registrant
---- ------------------------- -----------------------
Philip J. Collora Assistant Secretary Vice President and
Secretary
Paul J. Elmlinger Assistant Secretary None
Diane E. Ratekin Assistant Secretary None
Daniel Pierce Director, Chairman Trustee
Mark S. Casady Director, Vice Chairman President
Stephen R. Beckwith Director None
</TABLE>
(c) Not applicable
Item 30. Location of Accounts and Records
Accounts, books and other documents are maintained at the offices of
the Registrant, the offices of Registrant's investment adviser, Scudder Kemper
Investments, Inc., 222 South Riverside Plaza, Chicago, Illinois 60606, at the
offices of the Registrant's principal underwriter, Kemper Distributors, Inc.,
222 South Riverside Plaza, Chicago, Illinois 60606 or, in the case of records
concerning custodial functions, at the offices of the custodian, Investors
Fiduciary Trust Company ("IFTC"), 801 Pennsylvania Avenue, Kansas City, Missouri
64105 or, in the case of records concerning transfer agency functions, at the
offices of IFTC and of the shareholder service agent, Kemper Service Company,
811 Main Street, Kansas City, Missouri 64105.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Not applicable.
(b) Not applicable.
(c) The Registrant undertakes to furnish to each person to whom a
prospectus is delivered a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
Part C - 5
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this amendment to its Registration
Statement under the Securities Act of 1933 and has duly caused this amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Chicago and State of Illinois, on the
13th day of November, 1998.
CASH ACCOUNT TRUST
By /s/ Mark S. Casady
--------------------------
Mark S. Casady, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on November 13, 1998 on behalf of
the following persons in the capacities indicated.
SIGNATURE TITLE
- --------- -----
/s/ Mark S. Casady President
- -------------------------------
Mark S. Casady
/s/ Daniel Pierce* Chairman and Trustee
- -------------------------------
Daniel Pierce
/s/ David W. Belin* Trustee
- -------------------------------
David W. Belin
/s/ Lewis A. Burnham* Trustee
- -------------------------------
Lewis A. Burnham
/s/ Donald L. Dunaway* Trustee
- -------------------------------
Donald L. Dunaway
/s/ Robert B. Hoffman Trustee
- -------------------------------
Robert B. Hoffman
/s/ Donald R. Jones* Trustee
- -------------------------------
Donald R. Jones
/s/ Shirley D. Peterson* Trustee
- -------------------------------
Shirley D. Peterson
/s/ William P. Sommers* Trustee
- -------------------------------
William P. Sommers
/s/ Edmond D. Villani* Trustee
- -------------------------------
Edmond D. Villani
/s/ John R. Hebble Treasurer (Principal Financial
- ------------------------------- and Accounting Officer)
John R. Hebble
*Philip J. Collora signs this document pursuant to powers of attorney filed
herewith.
/s/Philip J. Collora
- ------------------------------------
Philip J. Collora
<PAGE>
INDEX TO EXHIBITS
Exhibits
<TABLE>
<S> <C>
99.b1. Amended and Restated Agreement and Declaration of Trust.(1)
99.b2. By-Laws.(1)
99.b3. Inapplicable.
99.b4. Text of Share Certificate.(1)
99.b5. Investment Management Agreement.
99.b6.(a) Administration, Shareholder Services and Distribution Agreement: to be filed by amendment
99.b6.(b) Form of Administration Services and Selling Group Agreement.(1)
99.b6(c) Underwriting and Distribution Services Agreement: to be filed by amendment
99.b7. Inapplicable.
99.b8. Custody Agreement.(1)
99.b9.(a) Agency Agreement.(1)
99.b9.(b) Supplement to Agency Agreement.(2)
99.b9.(c) Fund Accounting Agreements.(3)
99.b10. Inapplicable.
99.b11. Report and Consent of Independent Auditors: to be filed by amendment
99.b12. Inapplicable.
99.b13. Inapplicable.
99.b14. Inapplicable.
99.b15. Amended and Restated Rule 12b-1 Plans.
99.b16. Performance Calculations.(1)
99.b18. Multi-Distribution System Plan: to be filed by amendment
99.b24. Powers of Attorney.(3)
27. Financial Data Schedule: to be filed by amendment
</TABLE>
(1) Incorporated herein by reference to Post-Effective Amendment No. 5 to
the Registration Statement of Registrant on Form N-1A filed on or about
July 28, 1995.
(2) Incorporated herein by reference to Post-Effective Amendment No. 6 to
the Registration Statement of Registrant on Form N-1A filed on or about
July 26, 1996.
(3) Incorporated herein by reference to Post-Effective Amendment No. 8 to
the Registration Statement of Registrant on Form N-1A filed on or about
August 28, 1998.
Exhibit (b)(5)
INVESTMENT MANAGEMENT AGREEMENT
Cash Account Trust
222 South Riverside Plaza
Chicago, Illinois 60606
September 7, 1998
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Money Market Portfolio
Government Securities Portfolio
Tax-Exempt Portfolio
Ladies and Gentlemen:
CASH ACCOUNT TRUST (the "Trust") has been established as a Massachusetts
business trust to engage in the business of an investment company. Pursuant to
the Trust's Declaration of Trust, as amended from time-to-time (the
"Declaration"), the Board of Trustees is authorized to issue the Trust's shares
of beneficial interest (the "Shares"), in separate series, or funds. The Board
of Trustees has authorized the Money Market Portfolio, the Government Securities
Portfolio and the Tax-Exempt Portfolio each a "Fund" and collectively, the
"Funds". Series may be abolished and dissolved, and additional series
established, from time to time by action of the Trustees.
The Trust, on behalf of the Funds, has selected you to act as the investment
manager of the Funds and to provide certain other services, as more fully set
forth below, and you have indicated that you are willing to act as such
investment manager and to perform such services under the terms and conditions
hereinafter set forth. In the event the Trust establishes one or more additional
series with respect to which it desires to retain you to render the services
described hereunder, it shall notify you in writing. If you are willing to
render such services, you shall notify the Trust in writing, whereupon such
series shall become a Fund hereunder. Accordingly, the Trust on behalf of the
Funds agrees with you as follows:
1. Delivery of Documents. The Trust engages in the business of investing and
reinvesting the assets of each Fund in the manner and in accordance with the
investment objectives, policies and restrictions specified in the currently
effective Prospectus (the "Prospectus") and Statement of Additional Information
(the "SAI") relating to each Fund included in the Trust's Registration Statement
on Form N-1A, as amended from time to time, (the "Registration Statement") filed
by the Trust under the Investment Company Act of 1940, as amended, (the "1940
Act") and the Securities Act of 1933, as amended. Copies of the documents
referred to in the preceding sentence have been furnished to you by the Trust.
The Trust has also furnished you with copies properly certified or authenticated
of each of the following additional documents related to the Trust and the
Funds:
(a) The Declaration, as amended to date.
(b) By-Laws of the Trust as in effect on the date hereof (the "By-
Laws").
(c) Resolutions of the Trustees of the Trust and the shareholders
of each Fund selecting you as investment manager and approving
the form of this Agreement.
(d) Establishment and Designation of Series of Shares of
Beneficial Interest relating to the Funds, as
<PAGE>
applicable.
The Trust will furnish you from time to time with copies, properly certified or
authenticated, of all amendments of or supplements, if any, to the foregoing,
including the Prospectus, the SAI and the Registration Statement.
2. Portfolio Management Services. As manager of the assets of the Funds, you
shall provide continuing investment management of the assets of the Funds in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations thereunder; and all other
applicable federal and state laws and regulations of which you have knowledge;
subject always to policies and instructions adopted by the Trust's Board of
Trustees. In connection therewith, you shall use reasonable efforts to manage
the Fund so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Funds shall have
the benefit of the investment analysis and research, the review of current
economic conditions and trends and the consideration of long-range investment
policy generally available to your investment advisory clients. In managing the
Funds in accordance with the requirements set forth in this section 2, you shall
be entitled to receive and act upon advice of counsel to the Trust. You shall
also make available to the Trust promptly upon request all of the Funds'
investment records and ledgers as are necessary to assist the Trust in complying
with the requirements of the 1940 Act and other applicable laws. To the extent
required by law, you shall furnish to regulatory authorities having the
requisite authority any information or reports in connection with the services
provided pursuant to this Agreement which may be requested in order to ascertain
whether the operations of the Trust are being conducted in a manner consistent
with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by each Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
each Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Trust's Board of Trustees periodic reports on the
investment performance of each Fund and on the performance of your obligations
pursuant to this Agreement, and you shall supply such additional reports and
information as the Trust's officers or Board of Trustees shall reasonably
request.
3. Administrative Services. In addition to the portfolio management services
specified above in section 2, you shall furnish at your expense for the use of
the Funds such office space and facilities in the United States as the Funds may
require for its reasonable needs, and you (or one or more of your affiliates
designated by you) shall render to the Trust administrative services on behalf
of the Funds necessary for operating as an open end investment company and not
provided by persons not parties to this Agreement including, but not limited to,
preparing reports to and meeting materials for the Trust's Board of Trustees and
reports and notices to Fund shareholders; supervising, negotiating contractual
arrangements with, to the extent appropriate, and monitoring the performance of,
accounting agents, custodians, depositories, transfer agents and pricing agents,
accountants, attorneys, printers, underwriters, brokers and dealers, insurers
and other persons in any capacity deemed to be necessary or desirable to Fund
operations; preparing and making filings with the Securities and Exchange
Commission (the "SEC") and other regulatory and self-regulatory organizations,
including, but not limited to, preliminary and definitive proxy materials,
post-effective amendments to the Registration Statement, semi-annual reports on
Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act; overseeing the
tabulation of proxies by the Funds' transfer agent; assisting in the preparation
and filing of each Fund's federal, state and local tax returns; preparing and
filing each Fund's federal excise tax return pursuant to Section 4982 of the
Code; providing assistance with investor and public relations matters;
monitoring the valuation of portfolio securities and the calculation of net
asset value;
2
<PAGE>
monitoring the registration of Shares of each Fund under applicable federal and
state securities laws; maintaining or causing to be maintained for the Funds all
books, records and reports and any other information required under the 1940
Act, to the extent that such books, records and reports and other information
are not maintained by the Funds' custodian or other agents of the Funds;
assisting in establishing the accounting policies of the Fund; assisting in the
resolution of accounting issues that may arise with respect to the Funds'
operations and consulting with the Fund's independent accountants, legal counsel
and the Fund's other agents as necessary in connection therewith; establishing
and monitoring each Fund's operating expense budgets; reviewing each Fund's
bills; processing the payment of bills that have been approved by an authorized
person; assisting the Funds in determining the amount of dividends and
distributions available to be paid by each Fund to its shareholders, preparing
and arranging for the printing of dividend notices to shareholders, and
providing the transfer and dividend paying agent, the custodian, and the
accounting agent with such information as is required for such parties to effect
the payment of dividends and distributions; and otherwise assisting the Trust as
it may reasonably request in the conduct of the Funds' business, subject to the
direction and control of the Trust's Board of Trustees. Nothing in this
Agreement shall be deemed to shift to you or to diminish the obligations of any
agent of the Funds or any other person not a party to this Agreement which is
obligated to provide services to the Funds.
4. Allocation of Charges and Expenses. Except as otherwise specifically provided
in this section 4, you shall pay the compensation and expenses of all Trustees,
officers and executive employees of the Trust (including each Fund's share of
payroll taxes) who are affiliated persons of you, and you shall make available,
without expense to the Funds, the services of such of your directors, officers
and employees as may duly be elected officers of the Trust, subject to their
individual consent to serve and to any limitations imposed by law. You shall
provide at your expense the portfolio management services described in section 2
hereof and the administrative services described in section 3 hereof.
You shall not be required to pay any expenses of the Funds other than those
specifically allocated to you in this section 4. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Funds' Trustees and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of each Fund: organization expenses of each
Fund (including out of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Funds' custodian or
other agents of the Trust; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Funds in connection with membership in investment company trade
organizations; fees and expenses of the Funds' accounting agent for which the
Trust is responsible pursuant to the terms of the Fund Accounting Services
Agreement, custodians, subcustodians, transfer agents, dividend disbursing
agents and registrars; payment for portfolio pricing or valuation services to
pricing agents, accountants, bankers and other specialists, if any; expenses of
preparing share certificates and, except as provided below in this section 4,
other expenses in connection with the issuance, offering, distribution, sale,
redemption or repurchase of securities issued by each Fund; expenses relating to
investor and public relations; expenses and fees of registering or qualifying
Shares of each Fund for sale; interest charges, bond premiums and other
insurance expense; freight, insurance and other charges in connection with the
shipment of each Fund's portfolio securities; the compensation and all expenses
(specifically including travel expenses relating to Trust business) of Trustees,
officers and employees of the Trust who are not affiliated persons of you;
brokerage commissions or other costs of acquiring or disposing of any portfolio
securities of the Funds; expenses of printing and distributing reports, notices
and dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of each Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Trustees and officers of the Trust; and costs of
shareholders' and other meetings.
You shall not be required to pay expenses of any activity which is primarily
intended to result in sales of Shares of a Fund if and to the extent that (i)
such expenses are required to be borne by a principal underwriter which acts as
the
3
<PAGE>
distributor of a Fund's Shares pursuant to an underwriting agreement which
provides that the underwriter shall assume some or all of such expenses, or (ii)
the Trust on behalf of a Fund shall have adopted a plan in conformity with Rule
12b-1 under the 1940 Act providing that a Fund (or some other party) shall
assume some or all of such expenses. You shall be required to pay such of the
foregoing sales expenses as are not required to be paid by the principal
underwriter pursuant to the underwriting agreement or are not permitted to be
paid by a Fund (or some other party) pursuant to such a plan.
5. Management Fee. For all services to be rendered, payments to be made and
costs to be assumed by you as provided in sections 2, 3, and 4 hereof, the Trust
on behalf of the Funds shall pay you in United States Dollars on the last day of
each month the unpaid balance of a fee equal to the excess of (a) 1/12 of .22 of
1 percent of the combined average daily net assets as defined below of the Funds
for such month; provided that, for any calendar month during which the average
of such values exceeds $500,000,000, the fee payable for that month based on the
portion of the average of such values in excess of $500,000,000 shall be 1/12 of
.20 of 1 percent of such portion; provided that, for any calendar month during
which the average of such values exceeds $1 billion, the fee payable for that
month based on the portion of the average of such values in excess of $1 billion
shall be 1/12 of .175 of 1 percent of such portion; provided that, for any
calendar month during which the average of such values exceeds $2 billion, the
fee payable for that month based on the portion of the average of such values in
excess of $2 billion shall be 1/12 of .16 of 1 percent of such portion; and
provided that, for any calendar month during which the average of such values
exceeds $3 billion, the fee payable for that month based on the portion of the
average of such values in excess of $3 billion shall be 1/12 of .15 of 1 percent
of such portion; over (b) any compensation waived by you from time to time (as
more fully described below). You shall be entitled to receive during any month
such interim payments of your fee hereunder as you shall request, provided that
no such payment shall exceed 75 percent of the amount of your fee then accrued
on the books of the Funds and unpaid.
The "average daily net assets" of a Fund shall mean the average of the values
placed on a Fund's net assets as of 4:00 p.m. (New York time) on each day on
which the net asset value of a Fund is determined consistent with the provisions
of Rule 22c-1 under the 1940 Act or, if a Fund lawfully determines the value of
its net assets as of some other time on each business day, as of such time. The
value of the net assets of a Fund shall always be determined pursuant to the
applicable provisions of the Declaration and the Registration Statement. If the
determination of net asset value does not take place for any particular day,
then for the purposes of this section 5, the value of the net assets of such
Fund as last determined shall be deemed to be the value of its net assets as of
4:00 p.m. (New York time), or as of such other time as the value of the net
assets of the Fund's portfolio may be lawfully determined on that day. If a Fund
determines the value of the net assets of its portfolio more than once on any
day, then the last such determination thereof on that day shall be deemed to be
the sole determination thereof on that day for the purposes of this section 5.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Funds' expenses, as if such waiver
or limitation were fully set forth herein.
6. Avoidance of Inconsistent Position; Services Not Exclusive. In connection
with purchases or sales of portfolio securities and other investments for the
account of the Funds, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for each Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of a Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
such Fund.
Your services to the Funds pursuant to this Agreement are not to be deemed to be
exclusive and it is understood that
4
<PAGE>
you may render investment advice, management and services to others. In acting
under this Agreement, you shall be an independent contractor and not an agent of
the Trust. Whenever a Fund and one or more other accounts or investment
companies advised by you have available funds for investment, investments
suitable and appropriate for each shall be allocated in accordance with
procedures believed by you to be equitable to each entity. Similarly,
opportunities to sell securities shall be allocated in a manner believed by you
to be equitable. The Funds recognize that in some cases this procedure may
adversely affect the size of the position that may be acquired or disposed of
for the Funds.
7. Limitation of Liability of Manager. As an inducement to your undertaking to
render services pursuant to this Agreement, the Trust agrees that you shall not
be liable under this Agreement for any error of judgment or mistake of law or
for any loss suffered by a Fund in connection with the matters to which this
Agreement relates, provided that nothing in this Agreement shall be deemed to
protect or purport to protect you against any liability to the Trust, the Funds
or their shareholders to which you would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of your
duties, or by reason of your reckless disregard of your obligations and duties
hereunder.
8. Duration and Termination of This Agreement. This Agreement shall remain in
force until December 1, 1998, and continue in force from year to year thereafter
with respect to each Fund, but only so long as such continuance is specifically
approved for each Fund at least annually (a) by the vote of a majority of the
Trustees who are not parties to this Agreement or interested persons of any
party to this Agreement, cast in person at a meeting called for the purpose of
voting on such approval, and (b) by the Trustees of the Trust, or by the vote of
a majority of the outstanding voting securities of such Fund. The aforesaid
requirement that continuance of this Agreement be "specifically approved at
least annually" shall be construed in a manner consistent with the 1940 Act and
the rules and regulations thereunder and any applicable SEC exemptive order
therefrom.
This Agreement may be terminated with respect to a Fund at any time, without the
payment of any penalty, by the vote of a majority of the outstanding voting
securities of such Fund or by the Trust's Board of Trustees on 60 days' written
notice to you, or by you on 60 days' written notice to the Trust. This Agreement
shall terminate automatically in the event of its assignment.
This Agreement may be terminated with respect to a Fund at any time without the
payment of any penalty by the Board of Trustees or by vote of a majority of the
outstanding voting securities of such Fund in the event that it shall have been
established by a court of competent jurisdiction that you or any of your
officers or directors has taken any action which results in a breach of your
covenants set forth herein.
9. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
10. Limitation of Liability for Claims. The Declaration, a copy of which,
together with all amendments thereto, is on file in the Office of the Secretary
of the Commonwealth of Massachusetts, provides that the name "Cash Account
Trust" refers to the Trustees under the Declaration collectively as Trustees and
not as individuals or personally, and that no shareholder of a Fund, or Trustee,
officer, employee or agent of the Trust, shall be subject to claims against or
obligations of the Trust or of a Fund to any extent whatsoever, but that the
Trust estate only shall be liable.
You are hereby expressly put on notice of the limitation of liability as set
forth in the Declaration and you agree that the obligations assumed by the Trust
on behalf of each Fund pursuant to this Agreement shall be limited in all cases
5
<PAGE>
to each Fund and its assets, and you shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of a Fund or any other
series of the Trust, or from any Trustee, officer, employee or agent of the
Trust. You understand that the rights and obligations of each Fund, or series,
under the Declaration are separate and distinct from those of any and all other
series.
11. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
In interpreting the provisions of this Agreement, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner which would cause a
Fund to fail to comply with the requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Trust on behalf of the Funds.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
CASH ACCOUNT TRUST, on behalf of
Money Market Portfolio
Government Securities Portfolio
Tax-Exempt Portfolio
By:
---------------------------------
President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By:
---------------------------------
Treasurer
6
<PAGE>
Exhibit (b)(15)
Fund: Cash Account Trust (the "Fund")
------------------
Series: Government Securities Portfolio (the "Series")
-------------------------------
AMENDED AND RESTATED 12b-1 PLAN
Pursuant to the provisions of Rule 12b-1 under the Investment Company
Act of 1940 (the "Act"), this Amended and Restated 12b-1 Plan (the "Plan") has
been adopted for the Fund on behalf of the Series (both as noted and defined
above) by a majority of the members of the Fund's Board of Trustees, including a
majority of the trustees who are not "interested persons" of the Fund and who
have no direct or indirect financial interest in the operation of the Plan or in
any agreements related to the Plan (the "Qualified Trustees") at a meeting
called for the purpose of voting on this Plan.
1. Compensation. The Fund will pay to Kemper Distributors, Inc. ("KDI")
at the end of each calendar month a distribution services fee computed at the
annual rate .60% of the Fund's average daily net assets attributable to the
Series. KDI may compensate various financial services firms appointed by KDI
("Firms") in accordance with the provisions of the Fund's Administration,
Shareholder Services and Distribution Agreement (the "Distribution Agreement")
for sales of shares at the fee levels provided in the Fund's prospectus from
time to time. KDI may pay other commissions, fees or concessions to Firms, and
may pay them to others in its discretion, in such amounts as KDI may determine
from time to time. The distribution services fee for the Series shall be based
upon the average daily net assets of the Series, and such fee shall be charged
only to the Series. For the month and year in which this Plan becomes effective
or terminates, there shall be an appropriate proration of the distribution
services fee set forth herein on the basis of the number of days that the Plan,
the Distribution Agreement, and any other agreement related to the Plan, is in
effect during the month and year, respectively.
2. Periodic Reporting. KDI shall prepare reports for the Board of
Trustees of the Fund on a quarterly basis showing amounts paid to the various
Firms and such other information as from time to time shall be reasonably
requested by the Board of Trustees.
3. Continuance. This Plan shall continue in effect indefinitely,
provided that such continuance is approved at least annually by a vote of a
majority of the trustees, and of the Qualified Trustees, cast in person at a
meeting called for such purpose or by vote of at least a majority of the
outstanding voting securities of the Series.
4. Termination. This Plan may be terminated at any time without penalty
with respect to the Series by vote of a majority of the Qualified Trustees or by
vote of the majority of the outstanding voting securities of the Series.
5. Amendment. This Plan may not be amended to increase materially the
amount to be paid to KDI by the Fund for distribution services with respect to
the Series without the vote of
<PAGE>
a majority of the outstanding voting securities of the Series. All material
amendments to this Plan must in any event be approved by a vote of a majority of
the trustees, and of the Qualified Trustees, cast in person at a meeting called
for such purpose.
6. Selection of Non-Interested Trustees. So long as this Plan is in
effect, the selection and nomination of those trustees who are not interested
persons of the Fund will be committed to the discretion of the trustees who are
not themselves interested persons.
7. Recordkeeping. The Fund will preserve copies of this Plan, the
Distribution Agreement, and all reports made pursuant to Paragraph 2 above for a
period of not less than six (6) years from the date of this Plan, the
Distribution Agreement, or any such report, as the case may be, the first two
(2) years in an easily accessible place.
8. Limitation of Liability. Any obligation of the Fund hereunder shall
be binding only upon the assets of the Series and shall not be binding on any
trustee, officer, employee, agent, or shareholder of the Fund. Neither the
authorization of any action by the trustees or shareholders of the Fund nor the
adoption of the Plan on behalf of the Fund shall impose any liability upon any
trustee or upon any shareholder.
9. Definitions. The terms "interested person" and "vote of a majority
of the outstanding voting securities" shall have the meanings set forth in the
Act and the rules and regulations thereunder.
10. Severability; Separate Action. If any provision of this Plan shall
be held or made invalid by a court decision, rule or otherwise, the remainder of
this Plan shall not be affected thereby. Action shall be taken separately for
the Series as the Act or the rules thereunder so require.
(Amended and restated August 1, 1998)
<PAGE>
Fund: Cash Account Trust (the "Fund")
------------------
Series: Money Market Portfolio (the "Series")
----------------------
AMENDED AND RESTATED 12b-1 PLAN
Pursuant to the provisions of Rule 12b-1 under the Investment Company
Act of 1940 (the "Act"), this Amended and Restated 12b-1 Plan (the "Plan") has
been adopted for the Fund on behalf of the Series (both as noted and defined
above) by a majority of the members of the Fund's Board of Trustees, including a
majority of the trustees who are not "interested persons" of the Fund and who
have no direct or indirect financial interest in the operation of the Plan or in
any agreements related to the Plan (the "Qualified Trustees") at a meeting
called for the purpose of voting on this Plan.
1. Compensation. The Fund will pay to Kemper Distributors, Inc. ("KDI")
at the end of each calendar month a distribution services fee computed at the
annual rate .60% of the Fund's average daily net assets attributable to the
Series. KDI may compensate various financial services firms appointed by KDI
("Firms") in accordance with the provisions of the Fund's Administration,
Shareholder Services and Distribution Agreement (the "Distribution Agreement")
for sales of shares at the fee levels provided in the Fund's prospectus from
time to time. KDI may pay other commissions, fees or concessions to Firms, and
may pay them to others in its discretion, in such amounts as KDI may determine
from time to time. The distribution services fee for the Series shall be based
upon the average daily net assets of the Series, and such fee shall be charged
only to the Series. For the month and year in which this Plan becomes effective
or terminates, there shall be an appropriate proration of the distribution
services fee set forth herein on the basis of the number of days that the Plan,
the Distribution Agreement, and any other agreement related to the Plan, is in
effect during the month and year, respectively.
2. Periodic Reporting. KDI shall prepare reports for the Board of
Trustees of the Fund on a quarterly basis showing amounts paid to the various
Firms and such other information as from time to time shall be reasonably
requested by the Board of Trustees.
3. Continuance. This Plan shall continue in effect indefinitely,
provided that such continuance is approved at least annually by a vote of a
majority of the trustees, and of the Qualified Trustees, cast in person at a
meeting called for such purpose or by vote of at least a majority of the
outstanding voting securities of the Series.
4. Termination. This Plan may be terminated at any time without penalty
with respect to the Series by vote of a majority of the Qualified Trustees or by
vote of the majority of the outstanding voting securities of the Series.
5. Amendment. This Plan may not be amended to increase materially the
amount to be paid to KDI by the Fund for distribution services with respect to
the Series without the vote of
<PAGE>
a majority of the outstanding voting securities of the Series. All material
amendments to this Plan must in any event be approved by a vote of a majority of
the trustees, and of the Qualified Trustees, cast in person at a meeting called
for such purpose.
6. Selection of Non-Interested Trustees. So long as this Plan is in
effect, the selection and nomination of those trustees who are not interested
persons of the Fund will be committed to the discretion of the trustees who are
not themselves interested persons.
7. Recordkeeping. The Fund will preserve copies of this Plan, the
Distribution Agreement, and all reports made pursuant to Paragraph 2 above for a
period of not less than six (6) years from the date of this Plan, the
Distribution Agreement, or any such report, as the case may be, the first two
(2) years in an easily accessible place.
8. Limitation of Liability. Any obligation of the Fund hereunder shall
be binding only upon the assets of the Series and shall not be binding on any
trustee, officer, employee, agent, or shareholder of the Fund. Neither the
authorization of any action by the trustees or shareholders of the Fund nor the
adoption of the Plan on behalf of the Fund shall impose any liability upon any
trustee or upon any shareholder.
9. Definitions. The terms "interested person" and "vote of a majority
of the outstanding voting securities" shall have the meanings set forth in the
Act and the rules and regulations thereunder.
10. Severability; Separate Action. If any provision of this Plan shall
be held or made invalid by a court decision, rule or otherwise, the remainder of
this Plan shall not be affected thereby. Action shall be taken separately for
the Series as the Act or the rules thereunder so require.
(Amended and restated August 1, 1998)
<PAGE>
Fund: Cash Account Trust (the "Fund")
------------------
Series: Tax-Exempt Portfolio (the "Series")
--------------------
AMENDED AND RESTATED 12b-1 PLAN
Pursuant to the provisions of Rule 12b-1 under the Investment Company
Act of 1940 (the "Act"), this Amended and Restated 12b-1 Plan (the "Plan") has
been adopted for the Fund on behalf of the Series (both as noted and defined
above) by a majority of the members of the Fund's Board of Trustees, including a
majority of the trustees who are not "interested persons" of the Fund and who
have no direct or indirect financial interest in the operation of the Plan or in
any agreements related to the Plan (the "Qualified Trustees") at a meeting
called for the purpose of voting on this Plan.
1. Compensation. The Fund will pay to Kemper Distributors, Inc. ("KDI")
at the end of each calendar month a distribution services fee computed at the
annual rate .50% of the Fund's average daily net assets attributable to the
Series. KDI may compensate various financial services firms appointed by KDI
("Firms") in accordance with the provisions of the Fund's Administration,
Shareholder Services and Distribution Agreement (the "Distribution Agreement")
for sales of shares at the fee levels provided in the Fund's prospectus from
time to time. KDI may pay other commissions, fees or concessions to Firms, and
may pay them to others in its discretion, in such amounts as KDI may determine
from time to time. The distribution services fee for the Series shall be based
upon the average daily net assets of the Series, and such fee shall be charged
only to the Series. For the month and year in which this Plan becomes effective
or terminates, there shall be an appropriate proration of the distribution
services fee set forth herein on the basis of the number of days that the Plan,
the Distribution Agreement, and any other agreement related to the Plan, is in
effect during the month and year, respectively.
2. Periodic Reporting. KDI shall prepare reports for the Board of
Trustees of the Fund on a quarterly basis showing amounts paid to the various
Firms and such other information as from time to time shall be reasonably
requested by the Board of Trustees.
3. Continuance. This Plan shall continue in effect indefinitely,
provided that such continuance is approved at least annually by a vote of a
majority of the trustees, and of the Qualified Trustees, cast in person at a
meeting called for such purpose or by vote of at least a majority of the
outstanding voting securities of the Series.
4. Termination. This Plan may be terminated at any time without penalty
with respect to the Series by vote of a majority of the Qualified Trustees or by
vote of the majority of the outstanding voting securities of the Series.
5. Amendment. This Plan may not be amended to increase materially the
amount to be paid to KDI by the Fund for distribution services with respect to
the Series without the vote of
<PAGE>
a majority of the outstanding voting securities of the Series. All material
amendments to this Plan must in any event be approved by a vote of a majority of
the trustees, and of the Qualified Trustees, cast in person at a meeting called
for such purpose.
6. Selection of Non-Interested Trustees. So long as this Plan is in
effect, the selection and nomination of those trustees who are not interested
persons of the Fund will be committed to the discretion of the trustees who are
not themselves interested persons.
7. Recordkeeping. The Fund will preserve copies of this Plan, the
Distribution Agreement, and all reports made pursuant to Paragraph 2 above for a
period of not less than six (6) years from the date of this Plan, the
Distribution Agreement, or any such report, as the case may be, the first two
(2) years in an easily accessible place.
8. Limitation of Liability. Any obligation of the Fund hereunder shall
be binding only upon the assets of the Series and shall not be binding on any
trustee, officer, employee, agent, or shareholder of the Fund. Neither the
authorization of any action by the trustees or shareholders of the Fund nor the
adoption of the Plan on behalf of the Fund shall impose any liability upon any
trustee or upon any shareholder.
9. Definitions. The terms "interested person" and "vote of a majority
of the outstanding voting securities" shall have the meanings set forth in the
Act and the rules and regulations thereunder.
10. Severability; Separate Action. If any provision of this Plan shall
be held or made invalid by a court decision, rule or otherwise, the remainder of
this Plan shall not be affected thereby. Action shall be taken separately for
the Series as the Act or the rules thereunder so require.
(Amended and restated August 1, 1998)
<PAGE>
