Filed with the Securities and Exchange Commission on
August 31, 1999.
File No. 33-32476
File 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. 13
--- / X /
And/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 14
--- / X /
Cash Account Trust
------------------
(Exact Name of Registrant as Specified in Charter)
222 South Riverside Plaza, Chicago, Illinois, 60606
---------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (312) 537-7000
Philip J. Collora
-----------------
Scudder Kemper Investments, Inc.
--------------------------------
222 South Riverside Plaza
-------------------------
Chicago, Illinois 60606
-----------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check
appropriate box):
<TABLE>
<S> <C>
/ / Immediately upon filing pursuant to paragraph (b) / / days after filing pursuant to paragraph (a) (1)
/ / days after filing pursuant to paragraph (a) (2) / / On (date) pursuant to paragraph (a) (2) of Rule 485.
/ / On (date) pursuant to paragraph (a) (1) / X / On September 1, 1999 pursuant to paragraph (b)
</TABLE>
/ / If Appropriate, check the following box:
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
<PAGE>
Cash
Account
Trust
PROSPECTUS September 1, 1999
Cash Account Trust
222 South Riverside Plaza, Chicago, Illinois 60606
Money Market Portfolio*
Government Securities Portfolio
Tax-Exempt Portfolio
Mutual funds:
o are not FDIC-insured
o have no bank guarantees
o may lose value
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
* Service Shares
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
About the Portfolios 1
- --------------------------------------------------------------------------------
Money Market Portfolio 1
- --------------------------------------------------------------------------------
Government Securities Portfolio 5
- --------------------------------------------------------------------------------
Tax-Exempt Portfolio 8
- --------------------------------------------------------------------------------
Investment Adviser 12
- --------------------------------------------------------------------------------
About Your Investment 14
- --------------------------------------------------------------------------------
Transaction Information 14
- --------------------------------------------------------------------------------
Buying Shares 15
- --------------------------------------------------------------------------------
Selling and Exchanging Shares 16
- --------------------------------------------------------------------------------
Distributions 17
- --------------------------------------------------------------------------------
Taxes 17
- --------------------------------------------------------------------------------
Financial Highlights 18
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<PAGE>
This page
intentionally
left blank.
<PAGE>
CASH ACCOUNT TRUST
ABOUT THE PORTFOLIOS
MONEY MARKET PORTFOLIO
Investment objective
The portfolio seeks maximum current income consistent with stability of capital.
The portfolio's investment objective and fundamental policies may not be changed
without a vote of shareholders.
Main investment strategies
The portfolio pursues its objective by investing primarily 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 portfolio's investment manager. Currently, only obligations in the top
two categories are considered to be rated high quality. The portfolio
focuses its investments in obligations rated in the highest category.
5. Repurchase agreements of obligations that are suitable for investment under
the categories set forth above. The maturities of the securities subject to
repurchase may be greater than 12 months.
The portfolio maintains a dollar-weighted average maturity of 90 days or less.
Also, the portfolio will normally invest at least 25% of its assets in
obligations issued by banks.
The portfolio may invest in floating and variable rate instruments (obligations
that do not bear interest at fixed rates). Accordingly, as interest rates
decrease or increase, the potential for capital appreciation or depreciation is
less than for fixed-rate obligations.
Securities are selected based on the investment manager's perception of monetary
conditions, the available supply of appropriate investments, and the investment
manager's projections for short-term interest rate movements. Sales of portfolio
holdings are typically made to implement investment strategy or meet shareholder
redemptions. Issues with short maturities are generally held until maturity.
Of course, there can be no guarantee that by following these investment
strategies, the portfolio will achieve its objective.
1
<PAGE>
Risk management strategies
The portfolio manages credit risk by investing primarily in high quality
securities, whose issuers are considered unlikely to default. The portfolio
manages interest rate risk by limiting the maturity of each of its individual
securities and the weighted average maturity of the portfolio overall.
For temporary defensive purposes, the portfolio may invest less than 25% of its
assets in obligations issued by banks. In such a case, the portfolio would not
be pursuing, and may not achieve, its investment goal.
Main risks
As with most money market funds, the major factor affecting the portfolio's
performance is fluctuations in short-term interest rates. If short-term interest
rates fall, the portfolio's yield is also likely to fall. Floating or variable
rate securities have yields which adjust with changes in interest rates.
Accordingly, to the extent the portfolio invests in floating or variable rate
securities, as interest rates decrease or increase, the potential for capital
appreciation or depreciation is less than that of fixed-rate obligations.
Moreover, the investment manager's strategy or choice of specific investments
may not perform as expected. The portfolio may have lower returns than other
funds that invest in longer-term or lower quality securities. It is also
possible that securities in the portfolio's investment portfolio could
deteriorate in quality or go into default.
Investments by the portfolio in Eurodollar certificates of deposit issued by
London branches of U.S. banks, and different obligations issued by foreign
entities, including foreign banks, involve additional risks than investments in
securities of domestic branches of U.S. banks. These risks include, but are not
limited to, future unfavorable political and economic developments, possible
withholding taxes on interest payments, seizure of foreign deposits, currency
controls, or 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.
An investment in the portfolio is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the
portfolio seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the portfolio.
2
<PAGE>
Past performance
The chart and table below provide some indication of the risks of investing in
the portfolio's Service Shares by illustrating how the portfolio's Service
Shares have performed. Of course, past performance is not necessarily an
indication of future performance. All figures on this page assume reinvestment
of dividends and distributions.
Annual total returns for years ended December 31
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
1991 5.36%
1992 2.99%
1993 2.39%
1994 3.51%
1995 5.13%
1996 4.64%
1997 4.80%
1998 4.69%
For the period included in the bar chart, the portfolio's Service Shares'
highest return for a calendar quarter was 1.58% (the first quarter of 1991), and
the portfolio's Service Shares' lowest return for a calendar quarter was 0.57%
(the second quarter of 1993).
The portfolio's Service Shares' year-to-date total return as of June 30, 1999
was 2.02%.
Average Annual Total Returns
For periods ended December 31, 1998 Money Market Portfolio -- Service Shares
- ----------------------------------- ----------------------------------------
One Year 4.69%
Five Years 4.54%
Since Portfolio Inception* 4.21%
- -----------
* Inception date for the portfolio's Service Shares is December 3, 1990.
7-Day Yield
On December 31, 1998 4.39%
3
<PAGE>
Fee and expense information
The following information is designed to help you understand the fees and
expenses that you may pay if you buy and hold Service Shares of the portfolio.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Shareholder Fees (fees paid directly from your investment):
- -----------------------------------------------------------------------------------------------
<S> <C>
Maximum sales charge (load) imposed on purchases (as % of offering price) NONE
- -----------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) (as % of redemption proceeds) NONE
- -----------------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested dividends/distribution NONE
- -----------------------------------------------------------------------------------------------
Redemption fee (as % of amount redeemed, if applicable) NONE
- -----------------------------------------------------------------------------------------------
Exchange fee NONE
- -----------------------------------------------------------------------------------------------
Annual portfolio operating expenses (expenses that are deducted from portfolio assets):
- -------------------------------------------------------------------------------------------------
Management fee 0.19%
- -----------------------------------------------------------------------------------------------
Distribution (12b-1) fees 0.60%
- -----------------------------------------------------------------------------------------------
Other expenses 0.31%
- -----------------------------------------------------------------------------------------------
Total annual portfolio operating expenses 1.10%
- -----------------------------------------------------------------------------------------------
Expense reimbursement 0.10%*
- -----------------------------------------------------------------------------------------------
Net expenses 1.00%*
- -----------------------------------------------------------------------------------------------
</TABLE>
* By contract, total Service Shares expenses will be capped at 1.00% through
August 31, 2000.
Example
This example is to help you compare the cost of investing in the Service Shares
of the portfolio with the cost of investing in other mutual funds.
This example illustrates the impact of the above fees and expenses on an account
with an initial investment of $10,000, based on the expenses shown above. It
assumes a 5% annual return, the reinvestment of all dividends and distributions,
and "Total annual portfolio operating expenses" remaining the same each year
except the first year in the periods shown below. The first year of your
investment will take into account the Service Shares' "Net expenses" as shown
above. The expenses would be the same whether you sold your shares at the end of
each period or continued to hold them. Actual expenses and returns vary from
year to year, and may be higher or lower than those shown.
- ------------------------------------------------------
One Year $ 102
- ------------------------------------------------------
Three Years $ 318
- ------------------------------------------------------
Five Years $ 552
- ------------------------------------------------------
Ten Years $ 1,225
- ------------------------------------------------------
4
<PAGE>
GOVERNMENT SECURITIES PORTFOLIO
Investment objective
The portfolio seeks to provide maximum current income consistent with stability
of capital.
The portfolio's investment objective and fundamental policies may not be changed
without a vote of shareholders.
Main investment strategies
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 related repurchase
agreements. All such securities purchased mature in 12 months or less. The
portfolio maintains a dollar-weighted average maturity of 90 days or less.
The portfolio may invest in repurchase agreements. Repurchase agreements are
instruments under which the portfolio acquires ownership of a U.S. Government
security from a broker-dealer or bank that agrees to repurchase such security at
a mutually agreed upon time and price, which price is higher than the purchase
price. The maturity of the securities subject to repurchase may exceed one year.
The portfolio may invest in floating and variable rate instruments (obligations
that do not bear interest at fixed rates). Accordingly, as interest rates
decrease or increase, the potential for capital appreciation or depreciation is
less than for fixed-rate obligations.
Securities are selected based on the investment manager's perception of monetary
conditions, the available supply of appropriate investments, and the investment
manager's projections for short-term interest rate movements. Sales of portfolio
holdings are typically made to implement investment strategy or meet shareholder
redemptions. Issues with short maturities are generally held until maturity.
Of course, there can be no guarantee that by following these investment
strategies, the portfolio will achieve its objective.
Main risks
As with most money market funds, the major factor affecting the portfolio's
performance is fluctuations in short-term interest rates. If short-term interest
rates fall, the portfolio's yield is also likely to fall. Floating or variable
rate securities have yields which adjust with changes in interest rates.
Accordingly, to the extent the portfolio invests in floating or variable rate
securities, as interest rates decrease or increase, the potential for capital
appreciation or depreciation is less than that of fixed-rate obligations.
Moreover, the investment manager's strategy or choice of specific investments
may not perform as expected. The portfolio may have lower returns than other
funds that invest in longer-term or lower quality securities.
Some securities issued by U.S. Government agencies or instrumentalities are
supported only by the credit of that agency or instrumentality, while other
securities have 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.
An investment in the portfolio is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the
portfolio seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the portfolio.
5
<PAGE>
Past performance
The chart and table below provide some indication of the risks of investing in
the portfolio by illustrating how the portfolio has performed. Of course, past
performance is not necessarily an indication of future performance.
All figures on this page assume reinvestment of dividends and distributions.
Annual total returns for years ended December 31
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
1991 5.29
1992 3.05
1993 2.42
1994 3.51
1995 5.19
1996 4.70
1997 4.79
1998 4.56
For the period included in the bar chart, the portfolio's highest return for a
calendar quarter was 1.46% (the first quarter of 1991), and the portfolio's
lowest return for a calendar quarter was 0.59% (the second quarter of 1993).
The portfolio's year-to-date total return as of June 30, 1999 was 1.97%.
Average Annual Total Returns
For periods ended
December 31, 1998 Government Securities Portfolio
----------------- -------------------------------
One Year 4.56%
Five Years 4.54%
Since Portfolio Inception* 4.21%
- -----------
* Inception date for the portfolio is December 3, 1990.
7-Day Yield
On December 31, 1998 4.16%
6
<PAGE>
Fee and expense information
The following information is designed to help you understand the fees and
expenses that you may pay if you buy and hold shares of the portfolio.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Shareholder Fees (fees paid directly from your investment):
- -----------------------------------------------------------------------------------------------
<S> <C>
Maximum sales charge (load) imposed on purchases (as % of offering price) NONE
- -----------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) (as % of redemption proceeds) NONE
- -----------------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested dividends/distribution NONE
- -----------------------------------------------------------------------------------------------
Redemption fee (as % of amount redeemed, if applicable) NONE
- -----------------------------------------------------------------------------------------------
Exchange fee NONE
- -----------------------------------------------------------------------------------------------
Annual portfolio operating expenses (expenses that are deducted from portfolio assets):
- -----------------------------------------------------------------------------------------------
Management fee 0.18%
- -----------------------------------------------------------------------------------------------
Distribution (12b-1) fees 0.60%
- -----------------------------------------------------------------------------------------------
Other expenses 0.23%
- -----------------------------------------------------------------------------------------------
Total annual portfolio operating expenses 1.01%
- -----------------------------------------------------------------------------------------------
Expense reimbursement 0.01%*
- -----------------------------------------------------------------------------------------------
Net expenses 1.00%*
- -----------------------------------------------------------------------------------------------
</TABLE>
* By contract, total portfolio expenses will be capped at 1.00% through
August 31, 2000.
Example
This example is to help you compare the cost of investing in the portfolio with
the cost of investing in other mutual funds.
This example illustrates the impact of the above fees and expenses on an account
with an initial investment of $10,000, based on the expenses shown above. It
assumes a 5% annual return, the reinvestment of all dividends and distributions,
and "Total annual portfolio operating expenses" remaining the same each year
except the first year in the periods shown below. The first year of your
investment will take into account the portfolio's "Net expenses" as shown above.
The expenses would be the same whether you sold your shares at the end of each
period or continued to hold them. Actual portfolio expenses and returns vary
from year to year, and may be higher or lower than those shown.
- ------------------------------------------------------
One Year $ 102
- ------------------------------------------------------
Three Years $ 321
- ------------------------------------------------------
Five Years $ 557
- ------------------------------------------------------
Ten Years $ 1,236
- ------------------------------------------------------
7
<PAGE>
TAX-EXEMPT PORTFOLIO
Investment objective
The portfolio seeks to provide maximum current income that is exempt from
Federal income taxes to the extent consistent with stability of capital.
The portfolio's investment objective and fundamental policies may not be changed
without a vote of shareholders.
Main investment strategies
The portfolio pursues its objective by investing primarily in a professionally
managed, diversified portfolio of short-term high quality tax-exempt municipal
obligations. All such securities purchased mature in 12 months or less. The
portfolio maintains a dollar-weighted average maturity of 90 days or less. 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. These are generally referred to as
"municipal securities." The portfolio does not consider bonds whose interest may
be subject to the alternative minimum tax as municipal securities for purposes
of this limitation.
The portfolio focuses its investments in first tier securities (securities
generally rated in the highest short-term category by at least two nationally
recognized rating services).
Municipal securities are debt obligations issued to obtain funds for various
purposes, including the construction of a wide range of public facilities such
as airports, bridges, highways, housing, hospitals, mass transportation,
schools, streets and water and sewer works. Other public purposes for which
municipal securities may be issued include:
o to refund outstanding obligations
o to obtain funds for general operating purposes, or
o to obtain funds to loan to other public institutions and facilities.
The two general classifications of municipal securities are "general obligation"
and "revenue" bonds. General obligation bonds are secured by the issuer's pledge
of its full faith, 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 or other specific revenue source. Industrial development
bonds, which are municipal securities, are in most cases revenue bonds and
generally do not constitute the pledge of the credit of the issuer of such
bonds. The 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.
The portfolio may invest in floating and variable rate instruments (obligations
that do not bear interest at fixed rates). Accordingly, as interest rates
decrease or increase, the potential for capital appreciation or depreciation is
less than for fixed-rate obligations.
Securities are selected based on the investment manager's perception of monetary
conditions, the available supply of appropriate investments, and the investment
manager's projections for short-term interest rate movements. Sales of portfolio
holdings are typically made to implement investment strategy or meet shareholder
redemptions. Issues with short maturities are generally held until maturity.
8
<PAGE>
Of course, there can be no guarantee that by following these investment
strategies, the portfolio will achieve its objective.
Risk management strategies
For temporary defensive purposes or when acceptable short-term municipal
securities are not available, the portfolio may invest its assets in cash, cash
equivalents, or taxable securities. Taxable interest income from these
investments may be taxable to shareholders as ordinary income. In such a case,
the portfolio would not be pursuing, and may not achieve, its investment
objective.
Main risks
As with most money market funds, the major factor affecting the portfolio's
performance is fluctuations in short-term interest rates. If short-term interest
rates fall, the portfolio's yield is also likely to fall. Floating or variable
rate securities have yields which adjust with changes in interest rates.
Accordingly, to the extent the portfolio invests in floating or variable rate
securities, as interest rates decrease or increase, the potential for capital
appreciation or depreciation is less than that of fixed-rate obligations.
Moreover, the investment manager's strategy or choice of specific investments
may not perform as expected. The portfolio may have lower returns than other
funds that invest in longer-term or lower quality securities. It is also
possible that securities in the portfolio's investment portfolio could
deteriorate in quality or go into default.
The municipal securities market is narrower and less liquid, with fewer
investors, issuers and market makers, than the taxable securities market. The
more limited marketability of municipal securities may make it more difficult in
certain circumstances to dispose of large investments advantageously. In
addition, certain municipal securities may lose their tax-exempt status in the
event of a change in the applicable tax laws.
Industrial development bonds, which are municipal securities, generally do not
constitute the pledge of the credit of the issuer of such bonds. The portfolio
may invest all or any part of its assets in municipal securities that are
industrial development bonds.
To the extent that the portfolio invests in taxable securities, a portion of its
income would be taxable.
An investment in the portfolio is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the
portfolio seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the portfolio.
9
<PAGE>
Past performance
The chart and table below provide some indication of the risks of investing in
the portfolio by illustrating how the portfolio has performed. Of course, past
performance is not necessarily an indication of future performance.
All figures on this page assume reinvestment of dividends and distributions.
Annual total returns for years ended December 31
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
1991 3.91%
1992 2.42%
1993 1.84%
1994 2.32%
1995 3.32%
1996 2.85%
1997 2.90%
1998 2.70%
For the period included in the bar chart, the portfolio's highest return for a
calendar quarter was 0.98% (the first quarter of 1991), and the portfolio's
lowest return for a calendar quarter was 0.45% (the second quarter of 1993).
The portfolio's year-to-date total return as of June 30, 1999 was 1.10%.
Average Annual Total Returns
For periods ended December 31, 1998 Tax-Exempt Portfolio
----------------------------------- --------------------
One Year 2.70%
Five Years 2.82%
Since Portfolio Inception* 2.81%
- -----------
* Inception date for the portfolio is December 3, 1990.
7-Day Yield
On December 31, 1998 2.81%
10
<PAGE>
Fee and expense information
The following information is designed to help you understand the fees and
expenses that you may pay if you buy and hold shares of the portfolio.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Shareholder Fees (fees paid directly from your investment):
- -----------------------------------------------------------------------------------------------
<S> <C>
Maximum sales charge (load) imposed on purchases (as % of offering price) NONE
- -----------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) (as % of redemption proceeds) NONE
- -----------------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested dividends/distribution NONE
- -----------------------------------------------------------------------------------------------
Redemption fee (as % of amount redeemed, if applicable) NONE
- -----------------------------------------------------------------------------------------------
Exchange fee NONE
- -----------------------------------------------------------------------------------------------
Annual portfolio operating expenses (expenses that are deducted from portfolio assets):
- -------------------------------------------------------------------------------------------------
Management fee 0.19%
- -----------------------------------------------------------------------------------------------
Distribution (12b-1) fees 0.50%
- -----------------------------------------------------------------------------------------------
Other expenses 0.22%
- -----------------------------------------------------------------------------------------------
Total annual portfolio operating expenses 0.91%
- -----------------------------------------------------------------------------------------------
Expense reimbursement NONE*
- -----------------------------------------------------------------------------------------------
Net expenses 0.91%*
- -----------------------------------------------------------------------------------------------
</TABLE>
* By contract, total portfolio expenses will be capped at 0.95% through
August 31, 2000.
Example
This example is to help you compare the cost of investing in the portfolio with
the cost of investing in other mutual funds.
This example illustrates the impact of the above fees and expenses on an account
with an initial investment of $10,000, based on the expenses shown above. It
assumes a 5% annual return, the reinvestment of all dividends and distributions,
and "Total annual portfolio operating expenses" remaining the same each year.
The expenses would be the same whether you sold your shares at the end of each
period or continued to hold them. Actual portfolio expenses and returns vary
from year to year, and may be higher or lower than those shown.
- ------------------------------------------------------
One Year $ 93
- ------------------------------------------------------
Three Years $ 298
- ------------------------------------------------------
Five Years $ 522
- ------------------------------------------------------
Ten Years $ 1,165
- ------------------------------------------------------
11
<PAGE>
INVESTMENT ADVISER
Each portfolio retains the investment management firm of Scudder Kemper
Investments, Inc., (the "Adviser"), 345 Park Avenue, New York, NY, to manage
each portfolio's daily investment and business affairs subject to the policies
established by the portfolios' Board. The Adviser actively manages each
portfolio's investments. Professional management can be an important advantage
for investors who do not have the time or expertise to invest directly in
individual securities. The Adviser is one of the largest and most experienced
investment management organizations worldwide, managing more than $290 billion
in assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, and private family and individual accounts.
Money Market Portfolio
The Adviser, the portfolio's Principal Underwriter, Kemper Distributors Inc.,
the portfolio's Shareholder Service Agent, Kemper Service Company, and the
portfolio's Accounting Agent, Scudder Fund Accounting Corporation, have
contractually agreed to maintain the total annualized expenses of the Service
Shares of the portfolio at no more than 1.00% of the average daily net assets of
the portfolio through August 31, 2000. The Adviser received an investment
management fee of 0.19% of the portfolio's average daily net assets on an annual
basis for the fiscal year ended April 30, 1999, reflecting the effect of expense
limitations and/or fee waivers then in effect.
Government Securities Portfolio
The Adviser, the portfolio's Principal Underwriter, Kemper Distributors Inc.,
the portfolio's Shareholder Service Agent, Kemper Service Company, and the
portfolio's Accounting Agent, Scudder Fund Accounting Corporation, have
contractually agreed to maintain the total annualized expenses of the portfolio
at no more than 1.00% of the average daily net assets of the portfolio through
August 31, 2000. The Adviser received an investment management fee of 0.18% of
the portfolio's average daily net assets on an annual basis for the fiscal year
ended April 30, 1999, reflecting the effect of expense limitations and/or fee
waivers then in effect.
Tax-Exempt Portfolio
The Adviser, the portfolio's Principal Underwriter, Kemper Distributors Inc.,
the portfolio's Shareholder Service Agent, Kemper Service Company, and the
portfolio's Accounting Agent, Scudder Fund Accounting Corporation, have
contractually agreed to maintain the total annualized expenses of the portfolio
at no more than 0.95% of the average daily net assets of the portfolio through
August 31, 2000. The Adviser received an investment management fee of 0.19% of
the portfolio's average daily net assets on an annual basis for the fiscal year
ended April 30, 1999.
12
<PAGE>
PORTFOLIO MANAGEMENT
The following investment professionals are associated with the portfolios as
indicated:
Money Market Portfolio
<TABLE>
<CAPTION>
Name & Title Joined the Portfolio Background
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Frank J. Rachwalski, Jr. 1990 Joined the Adviser in 1973 and began his investment career at
Lead Manager that time. He has been responsible for the trading and portfolio
management of money market funds since 1974.
Geoffrey Gibbs 1999 Joined the Adviser in 1996 as a trader for money market funds
Manager and began his investment career in 1994.
- ---------------------------------------------------------------------------------------------------------------------
Government Securities Portfolio
Name & Title Joined the Portfolio Background
- ---------------------------------------------------------------------------------------------------------------------
Frank J. Rachwalski, Jr. 1990 Joined the Adviser in 1973 and began his investment career at
Lead Manager that time. He has been responsible for the trading and portfolio
management of money market funds since 1974.
Dean Meddaugh 1999 Joined the Adviser in 1996 as a money market trader, and in 1998
Manager became a money market manager. He began his investment career in
1994 as an accountant for an unaffiliated investment management
firm.
- ---------------------------------------------------------------------------------------------------------------------
Tax-Exempt Portfolio
Name & Title Joined the Portfolio Background
- ---------------------------------------------------------------------------------------------------------------------
Frank J. Rachwalski, Jr. 1990 Joined the Adviser in 1973 and began his investment career at
Lead Manager that time. He has been responsible for the trading and portfolio
management of money market funds since 1974.
Jerri I. Cohen 1998 Joined the Adviser in 1981 as an accountant and began her
Manager investment career in 1992 as a money market trader.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Year 2000 readiness
Like all mutual funds, the portfolios could be affected by the inability of some
computer systems to recognize the year 2000. The Adviser has a year 2000
readiness program designed to address this problem, and is also researching the
readiness of suppliers and business partners as well as issuers of securities
the portfolios own. Still, there is some risk that the year 2000 problem could
materially affect the portfolios' operations (such as their ability to calculate
net asset value and process purchases and redemptions), their investments, or
securities markets in general.
13
<PAGE>
ABOUT YOUR INVESTMENT
TRANSACTION INFORMATION
Share price
Scudder Fund Accounting Corporation determines the net asset value per share of
each portfolio on each day the New York Stock Exchange is open for trading, at
11:00 a.m., 1:00 p.m. and 3:00 p.m. Central time for Money Market Portfolio, at
11:00 a.m., 1:00 p.m., 3:00 p.m. and 8:00 p.m. Central time for Government
Securities Portfolio and at 11:00 a.m. and 3:00 p.m. Central time for Tax-Exempt
Portfolio.
Each portfolio seeks to maintain a net asset value of $1.00 per share and values
its portfolio instruments at amortized cost. Calculations are made to compare
the value of each portfolio's investments, valued at amortized cost, with
market-based values. In order to value its investments at amortized cost, each
portfolio purchases only securities with a maturity of 12 months or less and
maintains a dollar-weighted average maturity of 90 days or less. In addition,
the portfolio limits its portfolio investments to securities that meet the
quality and diversification requirements of federal law.
The net asset value per share is the value of one share and is determined by
dividing the value of the total fund assets attributable to the applicable
class, less all liabilities attributable to that class, by the total number of
shares outstanding for that class.
Processing time
Payment for shares you sell will be made in cash as promptly as practicable but
in no event later than seven days after receipt of a properly executed request.
If you have share certificates, these must accompany your order in proper form
for transfer. When you place an order to sell shares for which a portfolio may
not yet have received good payment (i.e., purchases by check or certain
Automated Clearing House Transactions), a portfolio may delay transmittal of the
proceeds until it has determined that collected funds have been received for the
purchase of such shares. This may be up to 10 days from receipt by a portfolio
of the purchase amount. 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, the redemption of such shares by a portfolio may be subject to a
contingent deferred sales charge as explained in the prospectus for the other
fund.
Signature guarantees
A signature guarantee is required unless you sell shares worth $50,000 or less
and the proceeds are payable to the shareholder of record at the address of
record. You can obtain a guarantee from most brokerage houses and financial
institutions, although not from a notary public. The portfolios will normally
send you the proceeds within one business day following your request, but may
take up to seven business days (or longer in the case of shares recently
purchased by check).
Minimum balances
The minimum initial investment for each portfolio is $1,000 and the minimum
subsequent investment is $100, but such minimum amounts may be changed at any
time in management's discretion. Firms offering portfolio shares may set higher
minimums for accounts they service and may change such minimums at their
discretion.
Because of the high cost of maintaining small accounts, each portfolio reserves
the right to redeem an account with a balance below $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 a portfolio
redeems that shareholder account.
14
<PAGE>
Redemption-in-kind
The portfolios reserve the right to honor any request for redemption or
repurchase order by "redeeming in kind," that is, by making payment of
redemption proceeds in marketable securities (which typically will involve
brokerage costs for the shareholder to liquidate) rather than cash; in most
cases, the portfolio will not make a redemption-in-kind unless a shareholder's
requests over a 90-day period total more than $250,000 or 1% of a portfolio's
assets, whichever is less.
Rule 12b-1 plan
Each portfolio has adopted a plan under Rule 12b-1 for each portfolio
(applicable to the Service Shares only in the case of the Money Market
Portfolio) that provides for fees payable as an expense of a portfolio that are
used by the principal underwriter to pay for distribution and services for that
portfolio. Under the Rule 12b-1 plan, each portfolio pays an annual distribution
services fee, payable monthly, of 0.60% of that portfolio's average daily net
assets (except Tax-Exempt Portfolio, which pays 0.50%). Because 12b-1 fees are
paid out of the portfolios' assets on an ongoing basis, they will, over time,
increase the cost of investment and may cost more than paying other types of
sales charges.
Buying shares
Shares of each portfolio may be purchased at net asset value, with no sales
charge through selected financial services firms, such as broker-dealers and
banks. Investors must indicate the portfolio in which they wish to invest.
Each portfolio seeks to be as fully invested as possible at all times in order
to achieve maximum income. Since the portfolios 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), each portfolio has
adopted procedures for the convenience of its shareholders and to ensure that it
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. Central time net asset value determination for the Money
Market Portfolio and the Government Securities Portfolio and at or prior to the
11:00 a.m. Central 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. (for any portfolio) or 8:00 p.m. (for the Government Securities Portfolio)
Central time net asset value determination provided such payment is received by
3:00 p.m. Central time; or (iii) the dividend for the next business day if
effected at the 8:00 p.m. Central time net asset value determination and payment
is received after 3:00 p.m. Central time on such date for the Government
Securities Portfolio. Confirmed share purchases that are effective at the 8:00
p.m. Central 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. Central 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 of a portfolio will be purchased.
If payment is wired in Federal Funds, the payment should be directed to UMB Bank
N.A. (ABA #101-000-695), 10th and Grand Avenue, Kansas City, MO 64106 for credit
to the appropriate portfolio bank account (CAT Money Market Portfolio 46:
98-0119-980-3; CAT Government Securities Portfolio 47: 98-0119-983-8; CAT
Tax-Exempt Portfolio 48: 98-0119-985-4) and further credit to your account
number.
15
<PAGE>
Third party transactions
If you buy and sell shares of a portfolio through a member of the National
Association of Securities Dealers, Inc. (other than the portfolios'
distributor), that member may charge a fee for that service. This prospectus
should be read in connection with such firms' material regarding their fees and
services.
Other Information
Each portfolio reserves the right to withdraw all or any part of the offering
made by this prospectus or to reject purchase orders, without prior notice.
Also, from time to time, each portfolio may temporarily suspend the offering of
its shares to new investors. During the period of such suspension, persons who
are already shareholders normally are permitted to continue to purchase
additional shares and to have dividends reinvested. Each portfolio 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 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 portfolio. 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, the portfolio's Shareholder
Service Agent, 811 Main Street, Kansas City, Missouri 64105-2005.
For the Money Market Portfolio, the information in this prospectus applies only
to the Money Market Portfolio's Service Shares. The Money Market Portfolio does
have three other classes, which are described in separate prospectuses and which
have different fees, requirements and services.
Selling and exchanging shares
Upon receipt by Kemper Service Company of a request in the form described below,
shares of a portfolio will be redeemed by the portfolio at the next determined
net asset value. If processed at 3:00 p.m. (for all portfolios) or 8:00 p.m.
(for the Government Securities Portfolio) Central 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.
Shareholders should contact the financial services firm through which shares
were purchased for redemption instructions. Any shareholder may request that a
portfolio redeem his or her shares. When shares are held for the account of a
shareholder by the portfolios' transfer agent, the shareholder may redeem them
by sending a written request with signatures guaranteed to Kemper Service
Company, P.O. Box 219153, Kansas City, Missouri 64141-9153.
An exchange of shares entails the sale of portfolio shares and subsequent
purchase of shares of another Kemper Fund.
Shareholders may obtain additional information about other ways to redeem shares
such as telephone redemptions, expedited wire transfer redemptions, and
redemptions by draft by contacting their financial services firm.
16
<PAGE>
Checkwriting. You may redeem shares of any portfolio by writing checks against
your account for at least $250 and no more than $5,000,000.
Special Features. Certain firms that offer shares of the portfolios 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.
Distributions
The portfolios' dividends are declared daily and distributed monthly to
shareholders. Any dividends or capital gains distributions declared in October,
November or December with a record date in such month and paid during the
following January will be treated by shareholders for federal income tax
purposes as if received on December 31 of the calendar year declared. A
portfolio 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 Subchapter M of the Internal Revenue Code.
Income dividends and capital gain dividends, if any, of a portfolio will be
credited to shareholder accounts in full and fractional shares of the same
portfolio at net asset value, except that, upon written request to Kemper
Service Company, a shareholder may choose to receive income and capital gain
dividends in cash.
If an investment is in the form of a retirement plan, all dividends and capital
gains distributions must be reinvested into the shareholder's account.
Distributions are generally taxable whether received in cash or reinvested.
Exchanges among other mutual funds may also be taxable events.
Taxes
Generally, dividends from net investment income are taxable to shareholders as
ordinary income. Long-term capital gains distributions, if any, are taxable to
shareholders as long-term capital gains, regardless of the length of time
shareholders have owned shares. Short-term capital gains and any other taxable
income distributions are taxable as ordinary income. A portion of dividends from
ordinary income may qualify for the dividends-received deduction for
corporations. Distributions of tax-exempt interest income from Tax-Exempt
Portfolio are expected to be exempt from federal income taxation, except for the
possible applicability of the alternative minimum tax.
Each portfolio sends detailed tax information about the amount and type of its
distributions by January 31 of the following year.
Each portfolio may be required to withhold U.S. federal income tax at the rate
of 31% of all taxable distributions payable to shareholders who fail to provide
the portfolio with their correct taxpayer identification number or to make
required certifications, or who have been notified by the IRS that they are
subject to backup withholding. Any such withheld amounts may be credited against
the shareholder's U.S. federal income tax liability.
You may be subject to state, local and foreign taxes on portfolio distributions
and dispositions of portfolio shares. You should consult your tax adviser
regarding the particular tax consequences of an investment in a portfolio.
17
<PAGE>
Financial highlights
The financial highlights tables are intended to help you understand financial
performance for the periods indicated. The figures in the first part of each
table are for a single share. The total return figures show what an investor
would have earned on an investment in a portfolio assuming reinvestment of all
dividends and distributions. This information has been audited by Ernst & Young
LLP, whose report, along with the financial statements, is included in each
annual report, which is available upon request (see back cover).
Money Market Portfolio -- Service Shares
<TABLE>
<CAPTION>
Year ended April 30,
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
Per Share Operating Performance:
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $1.00 1.00 1.00 1.00 1.00
- ---------------------------------------------------------------------------------------------------------------------
Net investment income .04 .05 .05 .05 .04
- ---------------------------------------------------------------------------------------------------------------------
Less dividends declared .04 .05 .05 .05 .04
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $1.00 1.00 1.00 1.00 1.00
- ---------------------------------------------------------------------------------------------------------------------
Total Return 4.46% 4.85 4.60 4.96 4.38
- ---------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.00% 1.00 1.00 1.00 .99
- ---------------------------------------------------------------------------------------------------------------------
Net investment income 4.34% 4.71 4.51 4.83 4.54
- ---------------------------------------------------------------------------------------------------------------------
Other Ratios to Average Net Assets:
Expenses 1.10% 1.10 1.03 1.05 1.05
- ---------------------------------------------------------------------------------------------------------------------
Net investment income 4.24% 4.61 4.48 4.78 4.48
- ---------------------------------------------------------------------------------------------------------------------
Year ended April 30,
1999(a) 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
Supplemental Data For All Classes:
Net assets at end of year (in thousands) $3,343,860 1,995,057 378,551 584,947 455,025
- ---------------------------------------------------------------------------------------------------------------------
(a) Includes net assets of the Institutional, Premier, Retail, and Service
Share classes.
Note: 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.
Government Securities Portfolio
Year ended April 30,
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
Per Share Operating Performance:
Net asset value, beginning of year $1.00 1.00 1.00 1.00 1.00
- ---------------------------------------------------------------------------------------------------------------------
Net investment income .04 .05 .05 .05 .04
- ---------------------------------------------------------------------------------------------------------------------
Less dividends declared .04 .05 .05 .05 .04
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $1.00 1.00 1.00 1.00 1.00
- ---------------------------------------------------------------------------------------------------------------------
Total Return 4.34% 4.78 4.69 5.01 4.37
- ---------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.00% .98 .92 .90 .90
- ---------------------------------------------------------------------------------------------------------------------
Net investment income 4.24% 4.68 4.59 4.88 4.66
- ---------------------------------------------------------------------------------------------------------------------
Other Ratios to Average Net Assets:
Expenses 1.01% 1.02 .99 1.06 1.05
- ---------------------------------------------------------------------------------------------------------------------
Net investment income 4.23% 4.64 4.52 4.72 4.51
- ---------------------------------------------------------------------------------------------------------------------
Supplemental Data:
Net assets at end of year (in thousands) $793,170 804,565 544,501 189,919 138,020
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
Tax-Exempt Portfolio
<TABLE>
<CAPTION>
Year ended April 30,
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
Per Share Operating Performance:
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $1.00 1.00 1.00 1.00 1.00
- ---------------------------------------------------------------------------------------------------------------------
Net investment income .02 .03 .03 .03 .03
- ---------------------------------------------------------------------------------------------------------------------
Less dividends declared .02 .03 .03 .03 .03
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $1.00 1.00 1.00 1.00 1.00
- ---------------------------------------------------------------------------------------------------------------------
Total Return 2.50% 2.92 2.82 3.16 2.80
- ---------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses .91% .91 .81 .78 .76
- ---------------------------------------------------------------------------------------------------------------------
Net investment income 2.45% 2.87 2.78 3.10 3.00
- ---------------------------------------------------------------------------------------------------------------------
Other Ratios to Average Net Assets:
Expenses .91% .97 .96 .98 .93
- ---------------------------------------------------------------------------------------------------------------------
Net investment income 2.45% 2.84 2.63 2.90 2.83
- ---------------------------------------------------------------------------------------------------------------------
Supplemental Data:
Net assets at end of year (in thousands) $380,629 368,141 220,791 66,981 67,748
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Note for all portfolios: Scudder Kemper has agreed to temporarily waive certain
operating expenses. The Other Ratios to Average Net Assets are computed without
this expense waiver.
19
<PAGE>
Additional information about the portfolios may be found in the Statement of
Additional Information and in shareholder reports. Shareholder inquiries may be
made by calling the toll-free telephone number listed below. The Statement of
Additional Information contains more detailed information on each portfolio's
investments and operations. The semiannual and annual shareholder reports
include a listing of portfolio holdings and financial statements. These and
other portfolio documents may be obtained without charge from your financial
adviser, from the Shareholder Service Agent at 1-800-231-8568, from the
Securities and Exchange Commission Web site (http://www.sec.gov), and the
principal underwriter. You can also visit or write the SEC and obtain copies for
free: Public Reference Section, Securities and Exchange Commission, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, DC 20549 (1-800-SEC-0330).
The Statement of Additional Information dated September 1, 1999 is incorporated
by reference into this prospectus (is legally a part of this prospectus).
Investment Company Act file number:
Cash Account Trust 811-5970
20
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
September 1, 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
Service Shares of the Money Market Portfolio and shares of the Government
Portfolio and shares of the Tax-Exempt Portfolio (each a "Portfolio",
collectively the "Portfolios") offered by Cash Account Trust (the "Trust"). Cash
Account Trust is an open-end diversified management investment company. This
combined Statement of Additional Information is not a prospectus and should be
read in conjunction with the prospectus of Cash Account Trust dated September 1,
1999. The prospectus may be obtained without charge from the Trust at the
address or telephone number on this cover or the firm from which this Statement
of Additional Information was received and is also available along with other
related materials at the SEC's Internet web site (http://www.sec.gov). The
Portfolios' Annual Report, dated April 30, 1999 is incorporated by reference
into and is hereby deemed to be a part of this Statement of Additional
Information.
TABLE OF CONTENTS
INVESTMENT RESTRICTIONS...............................................2
INVESTMENT POLICIES AND TECHNIQUES....................................4
INVESTMENT MANAGER AND SHAREHOLDER SERVICES..........................10
PORTFOLIO TRANSACTIONS...............................................13
PURCHASE AND REDEMPTION OF SHARES....................................14
DIVIDENDS, NET ASSET VALUE AND TAXES.................................17
PERFORMANCE..........................................................19
OFFICERS AND TRUSTEES................................................21
SPECIAL FEATURES.....................................................24
SHAREHOLDER RIGHTS...................................................25
APPENDIX -- RATINGS OF INVESTMENTS...................................27
<PAGE>
INVESTMENT RESTRICTIONS
The Trust has adopted for the Portfolios certain investment restrictions which,
together with the investment objective and policies of each Portfolio (except
for policies designated as non-fundamental and limited in regard to the
Tax-Exempt Portfolio to the policies in the first and fifth paragraphs under
Investment Policies and Techniques- "Tax-Exempt Portfolio" below), 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 Trust 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 1940 Act.
2
<PAGE>
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.
With regard to restriction #13, for purposes of determining the percentage of
the Portfolio's total assets invested in securities of issuers having their
principal business activities in a particular industry, asset backed securities
will be classified separately, based on the nature of the underlying assets.
Currently, the following categories are used: captive auto, diversified, retail
and consumer loans, captive equipment and business, business trade receivables,
nuclear fuel and capital and mortgage lending.
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 Trust 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.
3
<PAGE>
(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.
(12) Issue senior securities as defined in the 1940 Act.
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 , 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 , 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.
INVESTMENT POLICIES AND TECHNIQUES
Descriptions in this Statement of Additional Information of a particular
investment practice or technique in which a Portfolio may engage or a financial
instrument which a Portfolio may purchase are meant to describe the spectrum of
investments that Scudder Kemper Investments, Inc. (the "Adviser"), in its
discretion, might, but is not required to, use in managing a Portfolio's assets.
The Adviser may, in its discretion, at any time, employ such practice, technique
or instrument for one or more funds but not for all funds advised by it.
Furthermore, it is possible that certain types of financial instruments or
investment techniques described herein may not be available, permissible,
economically feasible or effective for their intended purposes in all markets.
Certain practices, techniques, or instruments may not be principal activities of
a Portfolio, but, to the extent employed, could, from time to time, have a
material impact on a Portfolio's performance.
The Portfolios described in this Statement of Additional Information seek to
provide maximum current income consistent with the stability of capital. Each
Portfolio is managed to maintain a net asset value of $1.00 per share.
The Trust 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 Trust pools individual and institutional investors' money that it
uses to buy high quality money market instruments. The Trust is a series
investment company that is able to provide investors with a choice of separate
investment 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 Trust 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 Portfolios invest, are generally considered to be among the safest
available. Thus, each 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 a Portfolio will achieve its
objective or that it will maintain a net asset value of $1.00 per share.
4
<PAGE>
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 of the above ratings in the discretion of
the Portfolio'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 this 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 1940 Act.
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
Portfolio's 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 Section 4(2) paper, thus providing
liquidity. The Portfolio'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 Trust, 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
below. The Portfolio's investment manager monitors the liquidity of the
Portfolio's investments in Section 4(2) paper on a continuous basis.
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The 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 ("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
Portfolio'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 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.
Government Securities Portfolio. The 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 such 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 Fannie Mae, the Farm Credit System and the 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 Portfolio 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.
Tax-Exempt Portfolio. The 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 Portfolio does not consider "private
activity" bonds 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.
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 which the 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
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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.
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 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 Securities similar to the foregoing,
which are or may become available, including securities issued to pre-refund
other outstanding obligations of municipal issuers.
The 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 Portfolio'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 Portfolio'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."
Dividends representing net interest income received by the 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. 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. 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.
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 Portfolio are
in most cases revenue bonds and generally are not payable from the unrestricted
revenues of the issuer, and do not constitute the pledge of the credit of the
issuer of such bonds. 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. See "Appendix" for
a more detailed discussion of the Moody's and S&P ratings outlined above. The
Portfolio may invest in short-term "private activity" bonds.
The 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 Portfolio'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 Portfolio'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.
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The 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 Portfolio's investment manager considers these factors
as well as others, such as any quality ratings issued by the rating services
identified above, in reviewing the credit risk presented by a Certificate of
Participation and in determining whether the Certificate of Participation is
appropriate for investment by the Portfolio. It is anticipated by the
Portfolio'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 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
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.
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 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.
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
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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.
The Trust. Each Portfolio may invest in repurchase agreements, which are
instruments under which a Portfolio acquires ownership of a security from a
broker-dealer or bank that agrees to repurchase the security at a mutually
agreed upon time and price (which price is higher than the purchase price),
thereby determining the yield during the Portfolio's holding period. Maturity of
the securities subject to repurchase may exceed one year. In the event of a
bankruptcy or other default of a seller of a repurchase agreement, a Portfolio
might have expenses in enforcing its rights, and could experience losses,
including a decline in the value of the underlying securities and loss of
income. A Portfolio will not purchase illiquid securities, including time
deposits and repurchase agreements maturing in more than seven days if, as a
result thereof, more than 10% of such Portfolio's net assets valued at the time
of the transaction would be invested in such securities.
Each Portfolio may invest in Variable Rate Securities, 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. 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 each 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.
Repurchase Agreements. The Portfolios may enter into repurchase agreements with
any member bank of the Federal Reserve System or any domestic broker/dealer
which is recognized as a reporting Government securities dealer if the
creditworthiness of the bank or broker/dealer has been determined by the Adviser
to be at least as high as that of other obligations the Portfolios may purchase
or to be at least equal to that of issuers of commercial paper rated within the
two highest grades assigned by Moody's, S&P or Duff.
A repurchase agreement provides a means for a Portfolio to earn taxable income
on funds for periods as short as overnight. It is an arrangement under which the
purchaser (i.e., the Portfolio) acquires a security ("Obligation") and the
seller agrees, at the time of sale, to repurchase the Obligation at a specified
time and price. Securities subject to a repurchase agreement are held in a
segregated account and the value of such securities kept at least equal to the
repurchase price on a daily basis. The repurchase price may be higher than the
purchase price, the difference being income to the Portfolio, or the purchase
and repurchase prices may be the same, with interest at a stated rate due to the
Portfolio together with the repurchase price on the date of repurchase. In
either case, the income to a Portfolio (which is taxable) is unrelated to the
interest rate on the Obligation itself. Obligations will be held by the
custodian or in the Federal Reserve Book Entry system.
For purposes of the 1940 Act, a repurchase agreement is deemed to be a loan from
a Portfolio to the seller of the Obligation subject to the repurchase agreement
and is therefore subject to that Portfolio's investment restriction applicable
to loans. It is not clear whether a court would consider the Obligation
purchased by a Portfolio subject to a repurchase agreement as being owned by
that Portfolio or as being collateral for a loan by the Portfolio to the seller.
In the event of the commencement of
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bankruptcy or insolvency proceedings with respect to the seller of the
Obligation before repurchase of the Obligation under a repurchase agreement, a
Portfolio may encounter delay and incur costs before being able to sell the
security. Delays may involve loss of interest or decline in price of the
Obligation. If the court characterized the transaction as a loan and a Portfolio
has not perfected an interest in the Obligation, that Portfolio may be required
to return the Obligation to the seller's estate and be treated as an unsecured
creditor of the seller. As an unsecured creditor, a Portfolio is at risk of
losing some or all of the principal and income involved in the transaction. As
with any unsecured debt obligation purchased for each Portfolio, the Adviser
seeks to minimize the risk of loss through repurchase agreements by analyzing
the creditworthiness of the obligor, in this case the seller of the Obligation.
Apart from the risk of bankruptcy or insolvency proceedings, there is also the
risk that the seller may fail to repurchase the Obligation, in which case the
Portfolio may incur a loss if the proceeds to the Portfolio of the sale to a
third party are less than the repurchase price. However, if the market value of
the Obligation subject to the repurchase agreement becomes less than the
repurchase price (including interest), each Portfolio will direct the seller of
the Obligation to deliver additional securities so that the market value of all
securities subject to the repurchase agreement will equal or exceed the
repurchase price. It is possible that a Portfolio will be unsuccessful in
seeking to enforce the seller's contractual obligation to deliver additional
securities.
INVESTMENT MANAGER AND SHAREHOLDER SERVICES
Investment Adviser. Scudder Kemper Investments, Inc. ("Scudder Kemper") 345 Park
Avenue, New York, New York, is the investment adviser for each Fund. Scudder
Kemper is approximately 70% owned by Zurich Insurance Company, 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. The balance of Scudder Kemper is owned by
Scudder Kemper's officers and employees . Responsibility for overall management
of each Fund rests with the Trust's Board of Trustees and officers. Pursuant to
an investment management agreement (the "Agreement"), Scudder Kemper acts as
each Fund's Adviser, manages its investments, administers its business affairs,
furnishes office facilities and equipment, provides clerical and administrative
services, provides shareholder and information services and permits any of its
officers or employees to serve without compensation as trustees or officers of
the Trust if elected to such positions. The Trust pays the expenses of its
operations, including the fees and expenses of independent auditors, counsel,
custodian and transfer agent and the cost of share certificates, reports and
notices to shareholders, costs of calculating net asset value and maintaining
all accounting records related thereto, brokerage commissions or transaction
costs, taxes, registration fees, the fees and expenses of qualifying the Trust
and its shares for distribution under federal and state securities laws and
membership dues in the Investment Company Institute or any similar organization.
The Agreement provides that Scudder Kemper shall not be liable for any error of
judgment or of law, or for any loss suffered by the Trust 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 Scudder Kemper in the
performance of its obligations and duties, or by reason of its reckless
disregard of its obligations and duties under the agreement.
In certain cases the investments for the Funds are managed by the same
individuals who manage one or more other mutual funds advised by the Adviser
that have similar names, objectives and investment styles as the Funds. You
should be aware that the Funds are likely to differ from these other mutual
funds in size, cash flow pattern and tax matters. Accordingly, the holdings and
performance of the Funds can be expected to vary from those of the other mutual
funds.
On December 31, 1997, pursuant to the terms of an agreement, Scudder, Stevens &
Clark, Inc. ("Scudder"), and Zurich Insurance Company ("Zurich"), formed a new
global investment organization by combining Scudder with Zurich Kemper
Investments, Inc. ("ZKI") and Zurich Kemper Value Advisors, Inc. ("ZKVA"),
former subsidiaries of Zurich . ZKI was the former investment adviser for each
Fund. Upon completion of the transaction, Scudder changed its name to Scudder
Kemper Investments, Inc. As a result of the transaction, Zurich owns
approximately 70% of Scudder Kemper, with the balance owned by Scudder Kemper's
officers and employees.
In certain cases the investments for the Portfolios are managed by the same
individuals who manage one or more other mutual funds advised by the Adviser
that have similar names, objectives and investment styles as the Portfolios. You
should be aware that the Portfolios are likely to differ from these other mutual
funds in size, cash flow pattern and tax matters. Accordingly, the holdings and
performance of the Portfolios can be expected to vary from those of the other
mutual funds .
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
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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, each Fund's then current investment
management agreement with the Adviser was deemed to have been assigned and,
therefore, terminated. The Board approved the Agreement with the Adviser, which
is substantially identical to the prior investment management agreement, except
for the dates of execution and termination. The Agreement became effective on
September 7, 1998, upon the termination of the then current investment
management agreement, and was approved at a shareholder meeting held on December
17, 1998.
The Agreement, dated September 7, 1998, was approved by the trustees of the
Trust on August 11, 1998. The Agreement will continue in effect until September
30, 1999 and from year to year thereafter only if its continuance is approved
annually by the vote of a majority of those trustees who are not parties to such
Agreement or interested persons of the Adviser or the Trust, cast in person at a
meeting called for the purpose of voting on such approval, and either by a vote
of the Trust's trustees or of a majority of the outstanding voting securities of
the Trust. The Agreement may be terminated at any time without payment of
penalty by either party on sixty days' written notice, and automatically
terminate in the event of its assignment.
If additional Portfolios become subject to the Agreement, the provisions
concerning continuation, amendment and termination shall be on a Portfolio by
Portfolio basis and the management fee and the expense limitations shall be
computed based upon the average daily net assets of all Portfolios subject to
the agreement and shall be allocated among such Portfolios based upon the
relative net assets of such Portfolios. Additional Portfolios may be subject to
a different agreement.
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
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
$3,120,000, $1,167,000 and $699,000, respectively, for the fiscal year ended
April 30, 1999; $1,888,000, $1,020,000 and $530,000 respectively, for the fiscal
year ended April 30, 1998; and $975,000, and $483,000 and $69,000, respectively,
for the fiscal year ended April 30, 1997. The Adviser and certain affiliates
have agreed to limit certain operating expenses of the Portfolios to the extent
described in the prospectus. If expense limits had not been in effect the
Adviser would have received investment management fees from the Money Market,
Government Securities and Tax-Exempt Portfolios of $4,086,000, $1,270,000 and
$699,000, respectively, for the fiscal year ended April 30, 1999; $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. The Adviser absorbed operating expenses for the Money Market,
Government Securities and Tax-Exempt Portfolios of $2,233,000, $103,000 and $0,
respectively, for the fiscal year ended April 30, 1999; $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.
Certain officers or trustees of the Trust are also directors or officers of the
Adviser as indicated under "Officers and Trustees."
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Fund Accounting Agent. Scudder Fund Accounting Corporation ("SFAC"), Two
International Place, Boston, Massachusetts 02110, a subsidiary of Scudder
Kemper, is responsible for determining the daily net asset value per share of
the Portfolios and maintaining all accounting records related hereto. Currently,
SFAC receives no fee for its services to the Portfolos; 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"), 222 South Riverside Plaza, Chicago, Illinois 60606,
an affiliate of the Adviser, serves as primary administrator and principal
underwriter for the Portfolios 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 Portfolios. 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. Each Portfolio has adopted (for the Service Shares only in the case of
the Money Market Portfolio) a plan in accordance with Rule 12b-1 of the 1940 Act
(the "12b-1 Plans"). 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
Plans, each Portfolio pays KDI a distribution services fee, payable monthly, at
the annual rate of 0.60% of average daily net assets with respect to the Service
shares of the Money Market Portfolio and shares of the Government Securities
Portfolio 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 Portfolios, KDI acts as agent of each Portfolio
in the sale of that Portfolio's shares. KDI pays all its expenses under the
distribution agreement including, without limitation, services fees to firms.
The Trust 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 a Portfolio's 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 Portfolio shares of client account balances, answering routine
inquiries regarding a Portfolio, 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 Portfolio. 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 Service Shares
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, 1999, the
shares of the Money Market Portfolio, and shares of the Government Securities
Portfolio and Tax-Exempt Portfolio paid distribution services fees of
$12,373,000, $4,329,000 and $1,831,000, respectively. Of such amounts, KDI
remitted pursuant to related services agreements $19,750,000 as service fees to
firms. A portion of the aforesaid marketing, sales and operating expenses could
be considered overhead expense. In addition to the discounts or commissions
described above, KDI will, from time to time, pay or allow additional discounts,
commissions or promotional incentives, in the form of cash or other
compensation, to firms that sell shares of the Funds.
The distribution agreement and the 12b-1 Plans 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 Trust, including the Trustees who are not interested
persons of the Trust 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 Trust
or by KDI upon 60 days' written notice. Termination of the distribution
agreement by the Trust 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 Trust and who
have no direct or indirect financial interest in the agreement, or a "majority
of the outstanding voting securities" of the Trust as defined under the 1940
Act. The 12b-1 Plans may not be amended to increase the fee to be paid by a
Portfolio without approval by a majority of the outstanding voting securities of
the Portfolio 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 Plans. The 12b-1 Plans may be terminated at any time without
penalty by a vote of the majority of the Trustees who are not interested persons
of the Trust
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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 Trust. The
Portfolios of the Trust will vote separately with respect to the 12b-1 Plans.
Custodian, Transfer Agent and Shareholder Service Agent. State Street Bank and
Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, as custodian,
has custody of all securities and cash of the Trust. It attends to the
collection of principal and income, and payment for and collection of proceeds
of securities bought and sold by each Portfolio. Pursuant to a services
agreement with Investors Fiduciary Trust Company ("IFTC"), 801 Pennsylvania
Avenue, Kansas City, Missouri 64105, 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, 1999, IFTC remitted shareholder service fees for Money Market
Portfolio in the amount of $4,860,000, for Government Securities Portfolio of
$1,242,000, and for Tax-Exempt Portfolio of $698,000 to KSvC as Shareholder
Service Agent.
Independent Auditors and Reports to Shareholders. The Trust's independent
auditors, Ernst & Young LLP, 233 South Wacker Drive, Chicago, Illinois 60606,
audit and report on the Trust's annual financial statements, review certain
regulatory reports and the Trust's federal income tax return, and perform other
professional accounting, auditing, tax and advisory services when engaged to do
so by the Trust. 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 Trust.
PORTFOLIO TRANSACTIONS
Brokerage Commissions
Allocation of brokerage is supervised by the Adviser.
The primary objective of the Adviser in placing orders for the purchase and sale
of securities for a 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 the familiarity of
Scudder Investor Services, Inc. ("SIS") with commissions charged on comparable
transactions, as well as by comparing commissions paid by A Portfolio to
reported commissions paid by others. The Adviser routinely reviews commission
rates, execution and settlement services performed and makes internal and
external comparisons.
A Portfolio's purchases and sales of fixed-income securities are generally
placed by the Adviser with primary market makers for these securities on a net
basis, with out any brokerage commission being paid by a Portfolio. Trading
does, however, involve transaction costs. Transactions with dealers serving as
primary market makers reflect the spread between the bid and asked prices.
Purchases of underwritten issues may be made, which will include an underwriting
fee paid to the underwriter.
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 brokerage and research services to the Adviser or a
Portfolio. The term "research services" 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, if applicable, for a
Portfolio to pay a brokerage commission in excess of that which another broker
might charge for executing the same transaction on account of execution services
and the receipt of research services. The Adviser has negotiated arrangements,
which are not applicable to most fixed-income transactions, with certain
broker/dealers pursuant to which a broker/dealer will provide research services
to the Adviser or a Portfolio in exchange for the direction by the Adviser of
brokerage transactions to the broker/dealer. These arrangements regarding
receipt of research services generally apply to equity security transactions.
The Adviser may place orders with a broker/dealer on the basis that the
broker/dealer has or has not sold shares of a Portfolio. 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.
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To the maximum extent feasible, it is expected that the Adviser will place
orders for portfolio transactions through SIS, which is a corporation registered
as a broker/dealer and a subsidiary of the Adviser; SIS will place orders on
behalf of a Portfolio with issuers, underwriters or other brokers and dealers.
SIS will not receive any commission, fee or other remuneration from a Portfolio
for this service.
Although certain research services from broker/dealers may be useful to a
Portfolio and to the Adviser, it is the opinion of the Adviser that such
information only supplements the Adviser's 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 a Portfolio, and not all such information is used by the
Adviser in connection with a Portfolio. 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
Portfolio.
The Trustees review, from time to time, whether the recapture for the benefit of
a Portfolio of some portion of the brokerage commissions or similar fees paid by
a Portfolio 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 a Portfolio for such purchases. During the
last three fiscal years each Portfolio 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
Purchase of Shares
Shares of each Portfolio 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. Each Portfolio has
established a minimum initial investment for Shares of each Portfolio of
$1,000and $100 for subsequent investments, but these minimums may be changed at
anytime in management's discretion. Firms offering Portfolio shares may set
higher minimums for accounts they service and may change such minimums at their
discretion. The Trust may waive the minimum for purchases by trustees,
directors, officers or employees of the Trust or the Adviser and its affiliates.
Each Portfolio seeks to have their investment 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), each Portfolio has adopted procedures for the convenience of its
shareholders and to ensure that each Portfolio receives investable funds. An
investor wishing to open an account should use the Account Information Form
available from the Trust 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 a Portfolio 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.
Orders for purchase of shares of a Portfolio received by wire transfer in the
form of Federal Portfolios 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. Central time net asset value determination for the
Money Market Portfolio and the Government Securities Portfolio and at or prior
to the 11:00 a.m. Central time net asset value determination for the Tax-Exempt
Portfolio; (ii) the dividend for the next calendar day if effected at the
3:00p.m. or, for the Government Securities Portfolio, 8:00 p.m. Central time net
asset value determination provided such payment is received by 3:00 p.m. Central
time; or (iii) the dividend for the next business day if effected at the 8:00
p.m. Central time net asset value determination and payment is received after
3:00 p.m. Central time on such date for the Government Securities Portfolio.
Confirmed share purchases that are effective at the 8:00 p.m. Central 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. Central time on the next business day
following receipt and such shares will receive the dividend for the next
calendar day
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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.
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) and further credit to your account
number.
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 a Portfolio at the
next determined net asset value. If processed at 3:00 p.m. (or 8:00 p.m. for the
Government Securities Portfolio) Central 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.
Each Portfolio 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 a
Portfolio to determine the value of its net assets, or (c) for such other
periods as the Securities and Exchange Commission may by order permit for the
protection of the Trust's shareholders.
Although it is each Portfolio'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, a Portfolio will
pay the redemption price in part by a distribution of portfolio securities in
lieu of cash, in conformity with the applicable rules of the Securities and
Exchange Commission, taking such securities at the same value used to determine
net asset value, and selecting the securities in such manner as the Board of
Trustees may deem fair and equitable. If such a distribution occurs,
shareholders receiving securities and selling them could receive less than the
redemption value of such securities and in addition would incur certain
transaction costs. Such a redemption would not be as liquid as a redemption
entirely in cash. The Trust has elected to be governed by Rule 18f-1 under the
1940 Act pursuant to which the Trust 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
that Portfolio during any 90-day period for any one shareholder of record.
If shares of a Portfolio to be redeemed were purchased by check or through
certain Automated Clearing House ("ACH") transactions, the Portfolio 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 Portfolio of the purchase amount. Shareholders may not use
ACH or Redemption Checks (defined below) 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 a Portfolio 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
Trust 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 Trust or its agents reasonably believe, based upon reasonable
verification procedures, that the telephone instructions are genuine. The
shareholder will bear the risk of 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.
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Because of the high cost of maintaining small accounts, each Portfolio reserves
the right to redeem an account that falls below the minimum investment level.
Thus, a shareholder who makes only the minimum initial investment and then
redeems any portion thereof might have the account redeemed. 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 a Portfolio
redeems the shareholder account.
Financial services firms provide varying arrangements for their clients to
redeem Portfolio shares. Such firms may independently establish and charge
amounts to their clients for such services.
Regular Redemptions. When shares are held for the account of a shareholder by
the Trust'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, 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 certificate 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.
Each Portfolio 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. Central 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. A Portfolio is not responsible for the efficiency of
the federal wire system or the account holder's financial services firm or bank.
Each Portfolio 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 a Portfolio 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 certificate 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. Each Portfolio reserves the right to terminate or modify this
privilege at any time.
Redemptions By Draft. Upon request, shareholders will be provided with drafts to
be drawn on a Portfolio ("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
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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 a Portfolio receives the Redemption Check. A
shareholder wishing to use this method of redemption must complete and file an
Account Application which is available from each Portfolio 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. Each
Portfolio 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
each Portfolio. In addition, firms may impose minimum balance requirements in
order to offer this feature. Firms may also impose fees to investors for this
privilege or establish variations of minimum check amounts if approved by each
Portfolio.
Unless one signer is authorized on the Account Application, 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 a Portfolio's books for at least
10 days. Shareholders may not use this procedure to redeem shares held in
certificate form. Each Portfolio reserves the right to terminate or modify this
privilege at any time.
A Portfolio 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 Portfolio shares in excess of the value of a Portfolio 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 a 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.
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 a Portfolio at the net asset
value normally on the 21st day of each month if a business day, otherwise on the
next business day. A Portfolio 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 Portfolio 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 Portfolio dividends in shares of another Kemper Mutual Fund,
shareholders must maintain a minimum account value of $1,000 in this Portfolio
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 each Portfolio 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.
If the shareholder elects to receive dividends in cash, checks will be mailed
monthly, within five business days of the reinvestment date (described below),
to the shareholder or any person designated by the shareholder. At the option of
the shareholder, cash dividends may be sent by Federal Funds wire. Shareholders
may request to have dividends sent by wire on the Account Application or by
contacting the Shareholder Service Agent (see "Purchase of Shares"). The
Portfolio reinvests dividend checks (and future dividends) in shares of the
Portfolio if checks are returned as undeliverable. Dividends and other
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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.
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 Trust
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 Trust 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 Trust might supplement dividends in an effort to maintain the
net asset value at $1.00 per share. Orders received by dealers or other
financial services firms prior to the 8:00 p.m. determination of net asset value
for the Government Securities Portfolio and received by KDI 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. Redemption orders received in
connection with the administration of checkwriting programs by certain dealers
or other financial services firms prior to the determination of the Portfolio's
net asset value also may be processed on a confirmed basis in accordance with
the procedures established by KDI.
Taxes.
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.
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 Portfolio 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.
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 included 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
18
<PAGE>
Portfolio receives from private activity bonds, reduced by allowable deductions.
For the 1998 calendar year 19% 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.
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.
Interest on indebtedness which is incurred to purchase or carry shares of a
mutual fund which distributes exempt-interest dividends during the year is not
deductible for Federal income tax purposes. Further, the Tax-Exempt Portfolio
may not be an appropriate investment for persons who are "substantial users" of
facilities financed by industrial development bonds held by the Tax-Exempt
Portfolio or are "related persons" to such users; such persons should consult
their tax advisers before investing in the Tax-Exempt Portfolio.
The "Superfund Act of 1986" (the "Superfund Act") imposes a separate tax on
corporations at a rate of 0.12 percent of the excess of such corporation's
"modified alternative minimum taxable income" over $2 million. A portion of
tax-exempt interest, including exempt-interest dividends from the Tax-Exempt
Portfolio, may be 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.
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.
PERFORMANCE
From time to time, the Trust may advertise several types of performance
information for a Portfolio, including "yield" and "effective yield" and, in the
case of the Tax-Exempt Portfolio, "tax equivalent yield". Each of these figures
is based upon historical earnings and is not representative of the future
performance of a Portfolio. The yield of a Portfolio refers to the net
investment income generated by a hypothetical investment in the Portfolio over a
specific seven-day period. This net investment income is then annualized, which
means that the net investment income generated during the seven-day period is
assumed to be generated each week over an annual period and is shown as a
percentage of the investment. The effective yield
19
<PAGE>
is calculated similarly, but the net investment income earned by the investment
is assumed to be compounded when annualized. The effective yield will be
slightly higher than the yield due to this compounding effect.
The Adviser, the Portfolio's Principal Underwriter, Kemper Distributors, Inc.,
the Portfolio's Shareholder Service Agent, Kemper Service Company, and the
Portfolio's Accounting Agent, Scudder Fund Accounting Corporation, temporarily
have agreed to maintain certain operating expenses of each Portfolio to the
extent specified in the prospectus. The performance results noted herein for the
Money Market, Tax-Exempt and Government Securities Portfolios would have been
lower had certain expenses not been capped.
Each Portfolio's seven-day 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, 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
calculations. For the period ended April 30, 1999, the Money Market Portfolio's
seven-day yield was 3.93%, the Tax-Exempt Portfolio's seven-day yield was 2.63%
and the Government Securities Portfolio's seven-day yield was 3.86%.
Each Portfolio's effective seven-day yield is determined by taking the base
period return (computed as described above) and calculating the effect of
assumed compounding. The formula for the seven-day effective yield is:
(seven-day base period return +1)365/7 - 1. Each Portfolio may also advertise a
thirty-day effective yield in which case the formula is (thirty-day base period
return +1)365/30 - 1. For the period ended April 30, 1999, the Money Market
Portfolio's effective seven-day yield was 4.01%, the Tax-Exempt Portfolio's
effective seven-day yield was 2.67% and the Government Securities Portfolio's
effective seven-day yield was 3.93%.
The tax equivalent yield 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 Tax-Exempt Portfolio's yield computed as described above for the seven-day
period ended April 30, 1999, the Tax-Exempt Portfolio's tax equivalent yield for
the period was 4.18%. 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 a 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 a 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 a Portfolio with that of its competitors.
Past performance cannot be a guarantee of future results.
The Trust 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. A Portfolio 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 Portfolio.
Investors also may want to compare the 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. The Portfolio's yield will
fluctuate. Also, while the 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. In
addition, investors may
20
<PAGE>
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.
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 1999 tax rates schedules.
<TABLE>
<CAPTION>
Taxable Equivalent Yield Table For Persons Whose Adjusted Gross Income Is Under $126,600
Single Joint Your A Tax-Exempt Yield of:
2% 3% 4% 6% 7%
Marginal 5%
Taxable Income Federal Tax Rate Is Equivalent to a Taxable Yield of:
- -------------- ---------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$25,750-$62,450 $43,050-$104,050 28.0% 2.78 4.17 5.56 6.94 8.33 9.72
Over $62,450 Over $104,050 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 $126,600
</TABLE>
<TABLE>
<CAPTION>
Single Joint Your A Tax-Exempt Yield of:
2% 3% 4% 6% 7%
Marginal 5%
Taxable Income Federal Tax Rate Is Equivalent to a Taxable Yield of:
-------------- ---------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$62,450-$130,250 $104,050-$158,550 31.9% 2.94 4.41 5.87 7.34 8.81 10.28
$130,250-$283,150 $158,550-$283,150 37.1 3.18 4.77 6.36 7.95 9.54 11.13
Over $283,150 Over $283,150 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 $126,600. For a married couple with
adjusted gross income between $189,950 and $312,450 (single between
$126,600 and $249,100), add 0.7% to the above Marginal Federal Tax Rate
for each personal and dependency exemption. The taxable equivalent
yield is the tax-exempt yield divided by: 100% minus the adjusted tax
rate. For example, if the table tax rate is 37.1% and you are married
with no dependents, the adjusted tax rate is 38.5% (37.1% + 0.7% +
0.7%). For a tax-exempt yield of 6%, the taxable equivalent yield is
about 9.8% (6% / (100%-38.5%)).
OFFICERS AND TRUSTEES
The officers and trustees of the Trust, 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:
JOHN W. BALLANTINE (2/16/46), Trustee, 1500 North Lake Shore Drive, Chicago,
Illinois; First Chicago NBD Corporation/The First National Bank of Chicago:
1996-1998 Executive Vice President and Chief Risk Management Officer; 1995-1996
Executive Vice President and Head of International Banking; 1992-1995 Executive
Vice President, Chief Credit and Market Risk Officer.
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<PAGE>
LEWIS A. BURNHAM (1/8/33), Trustee, 16410 Avila Boulevard, Tampa, Florida;
Retired; formerly, Partner, Business Resources Group; formerly, Executive Vice
President, Anchor Glass Container Corporation.
DONALD L. DUNAWAY (3/8/37), Trustee, 7011 Green Tree Drive, Naples, Florida;
Retired; formerly, Executive Vice President, A. O. Smith Corporation
(diversified manufacturer).
ROBERT B. HOFFMAN (12/11/36), Trustee, 1530 North State Parkway, Chicago,
Illinois; Chairman, Harnischfeger Industries, Inc. (machinery for the mining and
paper industries); formerly, 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.
THOMAS W. LITTAUER (4/26/55), Vice President and Trustee*, Two International
Place, Boston, Massachusetts; Managing Director, Scudder Kemper; 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.
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 (Tax), U.S. Department of Justice; Director Bethlehem Steel
Corp.
CORNELIA M. SMALL (7/28/44), Trustee*, 345 Park Avenue, New York, NY; Managing
Director, Scudder Kemper.
WILLIAM P. SOMMERS (7/22/33), Trustee, 24717 Harbour View Drive, Ponte Vedra
Beach, Florida; Consultant and Director, SRI Consulting; prior thereto President
and Chief Executive Officer, SRI International (research and development); prior
thereto, Executive Vice President, Iameter (medical information and educational
service provider); prior thereto, Senior Vice President and Director, Booz,
Allen & Hamilton Inc. (management consulting firm); Director, PSI Inc.,
Evergreen Solar, Inc. and Litton Industries.
MARK S. CASADY (9/21/60), President*, 345 Park Avenue, New York, New York;
Managing Director, Scudder Kemper.
PHILIP J. COLLORA (11/15/45), Vice President and Secretary*, 222 South Riverside
Plaza, Chicago, Illinois; Senior Vice President, Scudder Kemper.
ANN M. McCREARY (11/6/56), Vice President*, 345 Park Avenue, New York, New York;
Managing Director, Scudder Kemper.
ROBERT C. PECK, JR. (10/1/46), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Managing Director, Scudder Kemper; formerly, Executive Vice
President and Chief Investment Officer with an unaffiliated investment
management firm from 1988 to June 997.
KATHRYN L. QUIRK (12/3/52), Vice President*, 345 Park Avenue, New York, New
York; Managing Director, Scudder Kemper.
FRANK J. RACHWALSKI, JR. (3/26/45), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Managing Director, Scudder Kemper.
LINDA J. WONDRACK (9/12/64), Vice President*, Two International Place, Boston,
Massachusetts; Senior Vice President, Scudder Kemper.
JOHN R. HEBBLE (6/27/58), Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Scudder Kemper.
22
<PAGE>
BRENDA LYONS (2/21/63), Assistant Treasurer*, Two International Place, Boston,
Massachusetts Senior Vice President, Scudder Kemper.
CAROLINE PEARSON (4/1/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Senior Vice President, Scudder Kemper; formerly,
Associate, Dechert Price & Rhoads (law firm), from 1989 to 1997.
MAUREEN E. KANE (2/14/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Vice President, Scudder Kemper; 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).
* Interested persons as defined in the Investment Company Act of 1940.
The trustees and officers who are "interested persons" as designated above
receive no compensation from the Trust. The table below shows amounts paid or
accrued to those trustees who are not designated "interested persons" during the
Trust's fiscal year ended April 30, 1999 . The information in the last column
indicates the total amounts paid or accrued for the calendar year 1998 for all
Scudder Kemper Funds.
<TABLE>
<CAPTION>
Total Compensation Scudder Kemper
Aggregate Funds Paid
Name of Trustee Compensation From Trust To Trustees(2)
- --------------- ----------------------- --------------
<S> <C> <C>
John W. Ballantine(3) $ 0 $ 0
Lewis A. Burnham $5,890 $117,800
Donald L. Dunaway (1) $5,780 $125,900
Robert B. Hoffman $6,000 $109,000
Donald R. Jones $5,480 $114,200
Shirley D. Peterson $5,480 $114,000
William P. Sommers $6,330 $109,000
</TABLE>
(1) Includes deferred fees pursuant to deferred compensation agreements with
the Trust. 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 from Cash Account Trust for the latest
and all prior fiscal years are $22,000 and $16,500 for Mr. Dunaway .
(2) Includes compensation for service on the Boards of 25 Kemper funds with 41
fund portfolios. Each trustee currently serves as trustee of 27 Kemper
Funds with 46 fund portfolios.
(3) John W. Ballantine became a Trustee on May 18, 1999.
The Board of Trustees is responsible for the general oversight of each Fund's
business. A majority of the Board's members are not affiliated with Scudder
Kemper Investments, Inc. These "Independent Trustees" have primary
responsibility for assuring that the Fund is managed in the best interests of
its shareholders.
The Board of Trustees reviews the investment performance of the Funds and other
operational matters, including policies and procedures designed to ensure
compliance with various regulatory requirements. At least annually, the
Independent Trustees review the fees paid to the Adviser and its affiliates for
investment advisory services and other administrative and shareholder services.
In this regard, they evaluate, among other things, each Fund's investment
performance, the quality and efficiency of the various other services provided,
costs incurred by the Adviser and its affiliates and comparative information
regarding fees and expenses of competitive funds. They are assisted in this
process by the Funds' independent public accountants and by independent legal
counsel selected by the Independent Trustees.
On July 31, 1999, the officers and trustees of the Trust, 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 Portfolio,
except the persons indicated in the chart below:
23
<PAGE>
Name and Address % Owned Portfolio
- ---------------- ---------
Roney & Co.
Omnibus Account 7.41 Money Market Portfolio
1 Griswold 51.97 Government Securities Portfolio
Detroit, MI 48226 17.86 Tax-Exempt Portfolio
Prudential Securities
1 New York Plaza
New York, NY 10004 9.84 Tax-Exempt Portfolio
SPECIAL FEATURES
Exchange Privilege. Subject to the limitations described below, Class A Shares
(or the equivalent) of the following Kemper Mutual Funds may be exchanged for
each other at their relative net asset values: Kemper Technology Fund, Kemper
Total Return Fund, Kemper Growth Fund, Kemper Small Capitalization Equity Fund,
Kemper Income and Capital Preservation Fund, Kemper Municipal Bond Fund, Kemper
Diversified Income Fund, Kemper High Yield Series, Kemper U.S. Government
Securities Fund, Kemper International Fund, Kemper State Tax-Free Income Series,
Kemper Adjustable Rate U.S. Government Fund, Kemper Blue Chip Fund, Kemper
Global Income Fund, Kemper Target Equity Fund (series are subject to a limited
offering period), Kemper Intermediate Municipal Bond Fund, Kemper Cash Reserves
Fund, Kemper U.S. Mortgage Fund, Kemper Short-Intermediate Government Fund,
Kemper Value Series, Inc., Kemper Value Plus Growth Fund, Kemper Quantitative
Equity Fund, Kemper Horizon Fund, Kemper Europe Fund, Kemper Asian Growth Fund,
Kemper Aggressive Growth Fund, Kemper Global/International Series, Inc., Kemper
Securities Trust 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"). In
addition to the current limits on exchanges of shares with a value over
$1,000,000, shares of a Kemper fund with a value of $1,000,000 or less (except
Kemper Cash Reserves Fund) acquired by exchange from another Kemper fund, or
from a money market fund, may not be exchanged thereafter until they have been
owned for 15 days, if, in the investment manager's judgment, the exchange
activity may have an adverse effect on the fund. In particular, a pattern of
exchanges that coincides with a "market timing" strategy may be disruptive to
the Kemper fund and therefore may be subject to 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,
24
<PAGE>
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 a Portfolio and may be terminated at any time by the
shareholder or a Portfolio. Firms provide varying arrangements for their clients
to redeem shares of a Portfolio 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.
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 Trust has
established several investment and redemption programs using electronic funds
transfer via the Automated Clearing House (ACH). There is currently no charge by
the Trust 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
account. Your bank's crediting policies of these transferred funds may vary.
These features may be amended or terminated at any time by the Trust.
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 Portfolios.
SHAREHOLDER RIGHTS
The Trust generally is not required to hold meetings of its shareholders. Under
the Agreement and Declaration of Trust ("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 Trust 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 Trust 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 Trust, or any registration of the Trust 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
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the shares entitled to vote (as described below) or a majority of the trustees.
In accordance with the 1940 Act (a) the Trust 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 Trust 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
Trust 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 a Portfolio 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 a Portfolio 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 Trust (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
Trust. The Declaration of Trust, however, disclaims shareholder liability for
acts or obligations of the Trust and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument entered into or executed by
the Trust or the trustees. Moreover, the Declaration of Trust provides for
indemnification out of Trust property for all losses and expenses of any
shareholder held personally liable for the obligations of the Trust and the
Trust 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 Trust itself is unable to meet its obligations.
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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.
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
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<PAGE>
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.
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Retail Money
Market Shares
Prospectus September 1, 1999
Money Market Portfolio -- Retail Shares
Mutual funds:
o are not FDIC-insured
o have no bank guarantees
o may lose value
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
CONTENTS
- --------------------------------------------------------------------------------
About The Portfolio 3
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Retail Money Market Shares 3
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Investment Adviser 7
- --------------------------------------------------------------------------------
About Your Investment 8
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Transaction Information 8
- --------------------------------------------------------------------------------
Buying Shares 9
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Selling and Exchanging Shares 10
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Distributions 10
- --------------------------------------------------------------------------------
Taxes 11
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Financial highlights 12
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This page
intentionally
left blank.
<PAGE>
ABOUT THE PORTFOLIO
RETAIL MONEY MARKET SHARES
Investment objective
The Money Market Portfolio (the "portfolio") seeks maximum current income
consistent with stability of capital.
The portfolio's investment objective and fundamental policies may not be changed
without a vote of shareholders.
Main investment strategies
The portfolio pursues its objective by investing primarily 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 portfolio's investment manager. Currently, only obligations in the top
two categories are considered to be rated high quality. The portfolio
focuses its investments in obligations rated in the highest category.
5. Repurchase agreements of obligations that are suitable for investment under
the categories set forth above. The maturities of the securities subject to
repurchase may be greater than 12 months.
The portfolio maintains a dollar-weighted average maturity of 90 days or less.
Also, the portfolio will normally invest at least 25% of its assets in
obligations issued by banks.
The portfolio may invest in floating and variable rate instruments (obligations
that do not bear interest at fixed rates). Accordingly, as interest rates
decrease or increase, the potential for capital appreciation or depreciation is
less than for fixed-rate obligations.
Securities are selected based on the investment manager's perception of monetary
conditions, the available supply of appropriate investments, and the investment
manager's projections for short-term interest rate movements. Sales of portfolio
holdings are typically made to implement investment strategy or meet shareholder
redemptions. Issues with short maturities are generally held until maturity.
Of course, there can be no guarantee that by following these investment
strategies, the portfolio will achieve its objective.
Risk management strategies
The portfolio manages credit risk by investing primarily in high quality
securities, whose issuers are considered unlikely to default. The portfolio
manages interest rate risk by limiting the maturity of each of its individual
securities and the weighted average maturity of the portfolio overall.
For temporary defensive purposes, the portfolio may invest less than 25% of its
assets in obligations issued by banks. In such a case, the portfolio would not
be pursuing, and may not achieve, its investment goal.
3
<PAGE>
Main risks
As with most money market funds, the major factor affecting the portfolio's
performance is fluctuations in short-term interest rates. If short-term interest
rates fall, the portfolio's yield is also likely to fall. Floating or variable
rate securities have yields which adjust with changes in interest rates.
Accordingly, to the extent the portfolio invests in floating or variable rate
securities, as interest rates decrease or increase, the potential for capital
appreciation or depreciation is less than that of fixed-rate obligations.
Moreover, the investment manager's strategy or choice of specific investments
may not perform as expected. The portfolio may have lower returns than other
funds that invest in longer-term or lower quality securities. It is also
possible that securities in the portfolio's investment portfolio could
deteriorate in quality or go into default.
Investments by the portfolio in Eurodollar certificates of deposit issued by
London branches of U.S. banks, and different obligations issued by foreign
entities, including foreign banks, involve additional risks than investments in
securities of domestic branches of U.S. banks. These risks include, but are not
limited to, future unfavorable political and economic developments, possible
withholding taxes on interest payments, seizure of foreign deposits, currency
controls, or 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.
An investment in the portfolio is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the
portfolio seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the portfolio.
4
<PAGE>
Past performance
No past performance data is provided for the Money Market Portfolio's Retail
Shares ("Retail Shares") since Retail Shares do not have a full calendar year of
performance. For reference, the chart and table below show how the total returns
for the Money Market Portfolio's Service Shares ("Service Shares") have varied
from year to year, which may give you some indication of risk. While Service
Shares are not offered in this prospectus, they have substantially similar gross
performance as Retail Shares because both are invested in the same portfolio of
securities. However, Retail Shares will generally have higher total returns to
the extent that Retail Shares have lower expenses.
All figures on this page assume reinvestment of dividends and distributions. Of
course, past performance of the Service Shares is not necessarily an indication
of future performance.
Annual total returns of the Service Shares for years ended December 31
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
1991 5.36%
1992 2.99%
1993 2.39%
1994 3.51%
1995 5.13%
1996 4.64%
1997 4.80%
1998 4.69%
For the period included in the bar chart, the portfolio's Service Shares'
highest return for a calendar quarter was 1.58% (the first quarter of 1991), and
the portfolio's Service Shares' lowest return for a calendar quarter was 0.57%
(the second quarter of 1993).
The portfolio's Service Shares' year-to-date total return as of June 30, 1999
was 2.02%.
Average Annual Total Returns
For periods ended December 31, 1998 Money Market Portfolio -- Service Shares
- ----------------------------------- ----------------------------------------
One Year 4.69%
Five Years 4.54%
Since Service Shares Inception* 4.21%
- -----------
* Inception date for the portfolio's Service Shares is December 3, 1990.
Current Retail Shares performance, including yield information, is available by
contacting your financial services firm from which you obtained this prospectus.
5
<PAGE>
Fee and expense information
The following information is designed to help you understand the fees and
expenses that you may pay if you buy and hold Retail Shares of the portfolio.
- --------------------------------------------------------------------------------
Shareholder Fees (fees paid directly from your investment):
- --------------------------------------------------------------------------------
Maximum sales charge (load) imposed on purchases (as % of offering NONE
price)
- --------------------------------------------------------------------------------
Maximum deferred sales charge (load) (as % of redemption proceeds) NONE
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Maximum sales charge (load) imposed on reinvested NONE
dividends/distribution
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Redemption fee (as % of amount redeemed, if applicable) NONE
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Exchange fee NONE
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Annual portfolio operating expenses (expenses that are deducted from portfolio
assets):
- --------------------------------------------------------------------------------
Management fee 0.19%
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Distribution (12b-1) fees NONE
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Other expenses 0.48%*
- --------------------------------------------------------------------------------
Total annual portfolio operating expenses 0.67%
- --------------------------------------------------------------------------------
* Other expenses are based on estimated amounts for the current fiscal year.
Example
This example is to help you compare the cost of investing in the Retail Shares
of the portfolio with the cost of investing in other mutual funds.
This example illustrates the impact of the above fees and expenses on an account
with an initial investment of $10,000, based on the expenses shown above. It
assumes a 5% annual return, the reinvestment of all dividends and distributions,
and "Total annual portfolio operating expenses" remaining the same each year.
The expenses would be the same whether you sold your shares at the end of each
period or continued to hold them. Actual expenses and returns vary from year to
year, and may be higher or lower than those shown.
- ------------------------------------------------------
One Year $ 68
- ------------------------------------------------------
Three Years $ 214
- ------------------------------------------------------
Five Years $ 373
- ------------------------------------------------------
Ten Years $ 835
- ------------------------------------------------------
6
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INVESTMENT ADVISER
The portfolio retains the investment management firm of Scudder Kemper
Investments, Inc., (the "Adviser"), 345 Park Avenue, New York, NY, to manage the
portfolio's daily investment and business affairs subject to the policies
established by the portfolio's Board. The Adviser actively manages the
portfolio's investments. Professional management can be an important advantage
for investors who do not have the time or expertise to invest directly in
individual securities. The Adviser is one of the largest and most experienced
investment management organizations worldwide, managing more than $290 billion
in assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, and private family and individual accounts.
The Adviser received an investment management fee of 0.19% of the portfolio's
average daily net assets on an annual basis for the fiscal year ended April 30,
1999.
Portfolio management
The following investment professionals are associated with the portfolio as
indicated:
Name & Title Joined the Portfolio Background
- --------------------------------------------------------------------------------
Frank J. Rachwalski, Jr. 1990 Joined the Adviser in 1973 and
Lead Manager began his investment career at
that time. He has been responsible
for the trading and portfolio
management of money market funds
since 1974.
Geoffrey Gibbs 1999 Joined the Adviser in 1996 as a
Manager trader for money market funds and
began his investment career in
1994.
- --------------------------------------------------------------------------------
Year 2000 readiness
Like all mutual funds, the portfolio could be affected by the inability of some
computer systems to recognize the year 2000. The Adviser has a year 2000
readiness program designed to address this problem, and is also researching the
readiness of suppliers and business partners as well as issuers of securities
the portfolio owns. Still, there is some risk that the year 2000 problem could
materially affect the portfolio's operations (such as the ability to calculate
net asset value and process purchases and redemptions), its investments, or
securities markets in general.
7
<PAGE>
ABOUT YOUR INVESTMENT
Transaction information
Share price
Scudder Fund Accounting Corporation determines the net asset value per share of
the portfolio on each day the New York Stock Exchange is open for trading, at
11:00 a.m., 1:00 p.m. and 3:00 p.m. Central time.
The portfolio seeks to maintain a net asset value of $1.00 per share and values
its portfolio instruments at amortized cost. Calculations are made to compare
the value of the portfolio's investments, valued at amortized cost, with
market-based values. In order to value its investments at amortized cost, the
portfolio purchases only securities with a maturity of 12 months or less and
maintains a dollar-weighted average maturity of 90 days or less. In addition,
the portfolio limits its portfolio investments to securities that meet the
quality and diversification requirements of federal law.
The net asset value per share is the value of one share and is determined by
dividing the value of the total fund assets attributable to the applicable
class, less all liabilities attributable to that class, by the total number of
shares outstanding for that class.
Processing time
Payment for shares you sell will be made in cash as promptly as practicable but
in no event later than seven days after receipt of a properly executed request.
If you have share certificates, these must accompany your order in proper form
for transfer. When you place an order to sell shares for which the portfolio may
not yet have received good payment (i.e., purchases by check or certain
Automated Clearing House Transactions), the portfolio may delay transmittal of
the proceeds until it has determined that collected funds have been received for
the purchase of such shares. This may be up to 10 days from receipt by the
portfolio of the purchase amount. 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, the redemption of such shares by the portfolio may be
subject to a contingent deferred sales charge as explained in the prospectus for
the other fund.
Signature guarantees
A signature guarantee is required unless you sell shares worth $50,000 or less
and the proceeds are payable to the shareholder of record at the address of
record. You can obtain a guarantee from most brokerage houses and financial
institutions, although not from a notary public. The portfolio will normally
send you the proceeds within one business day following your request, but may
take up to seven business days (or longer in the case of shares recently
purchased by check).
Minimum balances
The minimum initial investment for the portfolio is $1,000 and the minimum
subsequent investment is $100, but such minimum amounts may be changed at any
time in management's discretion. Firms offering portfolio shares may set higher
minimums for accounts they service and may change such minimums at their
discretion.
Because of the high cost of maintaining small accounts, the portfolio reserves
the right to redeem an account with a balance below $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
portfolio redeems that shareholder account.
8
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Redemption-in-kind
The portfolio reserves the right to honor any request for redemption or
repurchase order by "redeeming in kind," that is, by making payment of
redemption proceeds in marketable securities (which typically will involve
brokerage costs for the shareholder to liquidate) rather than cash; in most
cases, the portfolio will not make a redemption-in-kind unless a shareholder's
requests over a 90-day period total more than $250,000 or 1% of the portfolio's
assets, whichever is less.
Buying shares
Shares of the portfolio may be purchased at net asset value, with no sales
charge through selected financial services firms, such as broker-dealers and
banks.
The portfolio seeks to be 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 portfolio has
adopted procedures for the convenience of its shareholders and to ensure that it
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. Central time net asset value determination; or (ii) the
dividend for the next calendar day if effected at the 3:00 p.m. Central time net
asset value determination.
Orders for purchase accompanied by a check or other negotiable bank draft will
be accepted and effected as of 3:00 p.m. Central 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.
If payment is wired in Federal Funds, the payment should be directed to UMB Bank
N.A. (ABA #101-000-695), 10th and Grand Avenue, Kansas City, MO 64106 for credit
to Retail Money Market Shares (98-0119-980-3) and further credit to your money
market account number.
Third party transactions
If you buy and sell shares of the portfolio through a member of the National
Association of Securities Dealers, Inc. (other than the portfolio's
distributor), that member may charge a fee for that service. This prospectus
should be read in connection with such firms' material regarding their fees and
services.
Other Information
The portfolio reserves the right to withdraw all or any part of the offering
made by this prospectus or to reject purchase orders, without prior notice.
Also, from time to time, the portfolio may temporarily suspend the offering of
its shares to new investors. During the period of such suspension, persons who
are already shareholders normally are permitted to continue to purchase
additional shares and to have dividends reinvested. The portfolio 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 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 portfolio. 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.
9
<PAGE>
Shareholders should direct their inquiries to the firm from which they received
this prospectus or to Kemper Service Company, the portfolio's Shareholder
Service Agent, 811 Main Street, Kansas City, Missouri 64105-2005.
The information in this prospectus applies only to Retail Shares. The portfolio
does have three other classes, which are described in separate prospectuses and
which have different fees, requirements and services.
Selling and exchanging shares
Upon receipt by Kemper Service Company of a request in the form described below,
shares of the portfolio will be redeemed by the portfolio at the next determined
net asset value. If processed at 3:00 p.m. Central 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.
Shareholders should contact the financial services firm through which shares
were purchased for redemption instructions. Any shareholder may request that the
portfolio redeem his or her shares. When shares are held for the account of a
shareholder by the portfolio's transfer agent, the shareholder may redeem them
by sending a written request with signatures guaranteed to Kemper Service
Company, P.O. Box 219153, Kansas City, Missouri 64141-9153.
An exchange of shares entails the sale of portfolio shares and subsequent
purchase of shares of another Kemper fund.
Shareholders may obtain additional information about other ways to redeem
shares, such as telephone redemptions, expedited wire transfer redemptions and
redemptions by draft, by contacting their financial services firm.
Checkwriting. You may redeem Retail Shares of the portfolio by writing checks
against your account for at least $250 and no more than $5,000,000.
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.
Distributions
The portfolio's dividends are declared daily and distributed monthly to
shareholders. Any dividends or capital gains distributions declared in October,
November or December with a record date in such month and paid during the
following January will be treated by shareholders for federal income tax
purposes as if received on December 31 of the calendar year declared. The
portfolio 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 Subchapter M of the Internal Revenue Code.
Income dividends and capital gain dividends, if any, of the portfolio will be
credited to shareholder accounts in full and fractional shares of the portfolio
at net asset value, except that, upon written request to Kemper Service Company,
a shareholder may choose to receive income and capital gain dividends in cash.
If an investment is in the form of a retirement plan, all dividends and capital
gains distributions must be reinvested into the shareholder's account.
Distributions are generally taxable whether received in cash or reinvested.
Exchanges among other mutual funds may also be taxable events.
10
<PAGE>
TAXES
Generally, dividends from net investment income are taxable to shareholders as
ordinary income. Long-term capital gains distributions, if any, are taxable to
shareholders as long-term capital gains, regardless of the length of time
shareholders have owned shares. Short-term capital gains and any other taxable
income distributions are taxable as ordinary income. A portion of dividends from
ordinary income may qualify for the dividends-received deduction for
corporations.
The portfolio sends detailed tax information about the amount and type of its
distributions by January 31 of the following year.
The portfolio may be required to withhold U.S. federal income tax at the rate of
31% of all taxable distributions payable to shareholders who fail to provide the
portfolio with their correct taxpayer identification number or to make required
certifications, or who have been notified by the IRS that they are subject to
backup withholding. Any such withheld amounts may be credited against the
shareholder's U.S. federal income tax liability.
You may be subject to state, local and foreign taxes on portfolio distributions
and dispositions of portfolio shares. You should consult your tax adviser
regarding the particular tax consequences of an investment in the portfolio.
11
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand financial
performance for the periods indicated. The figures in the first part of the
table are for a single share. The total return figures show what an investor
would have earned on an investment in the portfolio assuming reinvestment of all
dividends and distributions. This information has been audited by Ernst & Young
LLP, whose report, along with the financial statements, is included in the
annual report, which is available upon request (see back cover).
Retail Money Market Shares
January 22, 1999
to April 30, 1999
- ------------------------------------------------------------------------------
Per Share Operating Performance:
Net asset value, beginning of period $1.00
- ------------------------------------------------------------------------------
Net investment income .01
- ------------------------------------------------------------------------------
Less dividends declared .01
- ------------------------------------------------------------------------------
Net asset value, end of period $1.00
- ------------------------------------------------------------------------------
Total Return (Not Annualized): 1.18%
- ------------------------------------------------------------------------------
Ratios to Average Net Assets (Annualized):
Expenses .67%
- ------------------------------------------------------------------------------
Net investment income 4.38%
- ------------------------------------------------------------------------------
12
<PAGE>
Additional information about the portfolio may be found in the Statement of
Additional Information and in shareholder reports. Shareholder inquiries may be
made by calling the toll-free telephone number listed below. The Statement of
Additional Information contains more detailed information on portfolio
investments and operations. The semiannual and annual shareholder reports
include a listing of portfolio holdings and financial statements. These and
other portfolio documents may be obtained without charge from your financial
adviser, from the Shareholder Service Agent, at 1-800-231-8568, from the
Securities and Exchange Commission Web site (http://www.sec.gov), and the
principal underwriter. You can also visit or write the SEC and obtain copies for
free: Public Reference Section, Securities and Exchange Commission, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, DC 20549 (1-800-SEC-0330).
The Statement of Additional Information dated September 1, 1999 is incorporated
by reference into this prospectus (is legally a part of this prospectus).
Investment Company Act file number:
Cash Account Trust 811-5970
<PAGE>
Premier Money
Market Shares
PROSPECTUS September 1, 1999
Money Market Portfolio -- Premier Shares
222 South Riverside Plaza, Chicago, Illinois 60606
Mutual funds:
o are not FDIC-insured
o have no bank guarantees
o may lose value
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
About the Portfolio 1
- --------------------------------------------------------------------------------
Premier Money Market Shares 1
- --------------------------------------------------------------------------------
Investment Adviser 5
- --------------------------------------------------------------------------------
About Your Investment 6
- --------------------------------------------------------------------------------
Transaction Information 6
- --------------------------------------------------------------------------------
Buying Shares 7
- --------------------------------------------------------------------------------
Selling and Exchanging Shares 8
- --------------------------------------------------------------------------------
Distributions 8
- --------------------------------------------------------------------------------
Taxes 9
- --------------------------------------------------------------------------------
Financial Highlights 10
- --------------------------------------------------------------------------------
<PAGE>
This page
intentionally
left blank.
<PAGE>
ABOUT THE PORTFOLIO
PREMIER MONEY MARKET SHARES
Investment objective
The Money Market Portfolio (the "portfolio") seeks maximum current income
consistent with stability of capital.
The portfolio's investment objective and fundamental policies may not be changed
without a vote of shareholders.
Main investment strategies
The portfolio pursues its objective by investing primarily 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 portfolio's investment manager. Currently, only obligations in the top
two categories are considered to be rated high quality. The portfolio
focuses its investments in obligations rated in the highest category.
5. Repurchase agreements of obligations that are suitable for investment under
the categories set forth above. The maturities of the securities subject to
repurchase may be greater than 12 months.
The portfolio maintains a dollar-weighted average maturity of 90 days or less.
Also, the portfolio will normally invest at least 25% of its assets in
obligations issued by banks.
The portfolio may invest in floating and variable rate instruments (obligations
that do not bear interest at fixed rates). Accordingly, as interest rates
decrease or increase, the potential for capital appreciation or depreciation is
less than for fixed-rate obligations.
Securities are selected based on the investment manager's perception of monetary
conditions, the available supply of appropriate investments, and the investment
manager's projections for short-term interest rate movements. Sales of portfolio
holdings are typically made to implement investment strategy or meet shareholder
redemptions. Issues with short maturities are generally held until maturity.
Of course, there can be no guarantee that by following these investment
strategies, the portfolio will achieve its objective.
1
<PAGE>
Risk management strategies
The portfolio manages credit risk by investing primarily in high quality
securities, whose issuers are considered unlikely to default. The portfolio
manages interest rate risk by limiting the maturity of each of its individual
securities and the weighted average maturity of the portfolio overall.
For temporary defensive purposes, the portfolio may invest less than 25% of its
assets in obligations issued by banks. In such a case, the portfolio would not
be pursuing, and may not achieve, its investment goal.
Main risks
As with most money market funds, the major factor affecting the portfolio's
performance is fluctuations in short-term interest rates. If short-term interest
rates fall, the portfolio's yield is also likely to fall. Floating or variable
rate securities have yields which adjust with changes in interest rates.
Accordingly, to the extent the portfolio invests in floating or variable rate
securities, as interest rates decrease or increase, the potential for capital
appreciation or depreciation is less than that of fixed-rate obligations.
Moreover, the investment manager's strategy or choice of specific investments
may not perform as expected. The portfolio may have lower returns than other
funds that invest in longer-term or lower quality securities. It is also
possible that securities in the portfolio's investment portfolio could
deteriorate in quality or go into default.
Investments by the portfolio in Eurodollar certificates of deposit issued by
London branches of U.S. banks, and different obligations issued by foreign
entities, including foreign banks, involve additional risks than investments in
securities of domestic branches of U.S. banks. These risks include, but are not
limited to, future unfavorable political and economic developments, possible
withholding taxes on interest payments, seizure of foreign deposits, currency
controls, or 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.
An investment in the portfolio is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the
portfolio seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the portfolio.
2
<PAGE>
Past performance
No past performance data is provided for the Money Market Portfolio's Premier
Shares ("Premier Shares") since Premier Shares do not have a full calendar year
of performance. For reference, the chart and table below show how the total
returns for the Money Market Portfolio's Service Shares ("Service Shares") have
varied from year to year, which may give you some indication of risk. While
Service Shares are not offered in this prospectus, they have substantially
similar gross performance as Premier Shares because both are invested in the
same portfolio of securities. However, Premier Shares will generally have higher
total returns to the extent that Premier Shares have lower expenses.
All figures on this page assume reinvestment of dividends and distributions. Of
course, past performance of the Service Shares is not necessarily an indication
of future performance.
Annual total returns of the Service Shares for years ended December 31
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
1991 5.36%
1992 2.99%
1993 2.39%
1994 3.51%
1995 5.13%
1996 4.64%
1997 4.80%
1998 4.69%
For the period included in the bar chart, the portfolio's Service Shares'
highest return for a calendar quarter was 1.58% (the first quarter of 1991), and
the portfolio's Service Shares' lowest return for a calendar quarter was 0.57%
(the second quarter of 1993).
The portfolio's Service Shares' year-to-date total return as of June 30, 1999
was 2.02%.
Average Annual Total Returns
For periods ended December 31, 1998 Money Market Portfolio -- Service Shares
- ----------------------------------- ----------------------------------------
One Year 4.69%
Five Years 4.54%
Since Service Shares Inception* 4.21%
- -----------
* Inception date for the portfolio's Service Shares is December 3, 1990.
Current Premier Shares performance, including yield information, is available by
contacting your financial services firm from which you obtained this prospectus.
3
<PAGE>
Fee and expense information
The following information is designed to help you understand the fees and
expenses that you may pay if you buy and hold Premier Shares of the portfolio.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
Shareholder Fees (fees paid directly from your investment):
-----------------------------------------------------------------------------------------------
<S> <C>
Maximum sales charge (load) imposed on purchases (as % of offering price) NONE
-----------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) (as % of redemption proceeds) NONE
-----------------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested dividends/distribution NONE
-----------------------------------------------------------------------------------------------
Redemption fee (as % of amount redeemed, if applicable) NONE
-----------------------------------------------------------------------------------------------
Exchange fee NONE
-----------------------------------------------------------------------------------------------
Annual portfolio operating expenses (expenses that are deducted from portfolio assets):
-----------------------------------------------------------------------------------------------
Management fee 0.19%
-----------------------------------------------------------------------------------------------
Distribution (12b-1) fees NONE
-----------------------------------------------------------------------------------------------
Other expenses 0.38%*
-----------------------------------------------------------------------------------------------
Total annual portfolio operating expenses 0.57%
-----------------------------------------------------------------------------------------------
</TABLE>
* Other expenses are based on estimated amounts for the current fiscal year.
Example
This example is to help you compare the cost of investing in the Premier Shares
of the portfolio with the cost of investing in other mutual funds.
This example illustrates the impact of the above fees and expenses on an account
with an initial investment of $10,000, based on the expenses shown above. It
assumes a 5% annual return, the reinvestment of all dividends and distributions,
and "Total annual portfolio operating expenses" remaining the same each year.
The expenses would be the same whether you sold your shares at the end of each
period or continued to hold them. Actual expenses and returns vary from year to
year, and may be higher or lower than those shown.
- ------------------------------------------------------
One Year $ 58
- ------------------------------------------------------
Three Years $ 183
- ------------------------------------------------------
Five Years $ 318
- ------------------------------------------------------
Ten Years $ 714
- ------------------------------------------------------
4
<PAGE>
INVESTMENT ADVISER
The portfolio retains the investment management firm of Scudder Kemper
Investments, Inc., (the "Adviser"), 345 Park Avenue, New York, NY, to manage the
portfolio's daily investment and business affairs subject to the policies
established by the portfolio's Board. The Adviser actively manages the
portfolio's investments. Professional management can be an important advantage
for investors who do not have the time or expertise to invest directly in
individual securities. The Adviser is one of the largest and most experienced
investment management organizations worldwide, managing more than $290 billion
in assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, and private family and individual accounts.
The Adviser received an investment management fee of 0.19% of the portfolio's
average daily net assets on an annual basis for the fiscal year ended April 30,
1999, reflecting the effect of expense limitations and/or fee waivers then in
effect.
PORTFOLIO MANAGEMENT
The following investment professionals are associated with the portfolio as
indicated:
<TABLE>
<CAPTION>
Name & Title Joined the Portfolio Background
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Frank J. Rachwalski, Jr. 1990 Joined the Adviser in 1973 and began his investment career at
Lead Manager that time. He has been responsible for the trading and
portfolio management of money market funds since 1974.
Geoffrey Gibbs 1999 Joined the Adviser in 1996 as a trader for money market funds
Manager and began his investment career in 1994.
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Year 2000 readiness
Like all mutual funds, the portfolio could be affected by the inability of some
computer systems to recognize the year 2000. The Adviser has a year 2000
readiness program designed to address this problem, and is also researching the
readiness of suppliers and business partners as well as issuers of securities
the portfolio owns. Still, there is some risk that the year 2000 problem could
materially affect the portfolio's operations (such as the ability to calculate
net asset value and process purchases and redemptions), its investments, or
securities markets in general.
5
<PAGE>
ABOUT YOUR INVESTMENT
Transaction information
Share price
Scudder Fund Accounting Corporation determines the net asset value per share of
the portfolio on each day the New York Stock Exchange is open for trading, at
11:00 a.m., 1:00 p.m. and 3:00 p.m. Central time.
The portfolio seeks to maintain a net asset value of $1.00 per share and values
its portfolio instruments at amortized cost. Calculations are made to compare
the value of the portfolio's investments, valued at amortized cost, with
market-based values. In order to value its investments at amortized cost, the
portfolio purchases only securities with a maturity of 12 months or less and
maintains a dollar-weighted average maturity of 90 days or less. In addition,
the portfolio limits its portfolio investments to securities that meet the
quality and diversification requirements of federal law.
The net asset value per share is the value of one share and is determined by
dividing the value of the total fund assets attributable to the applicable
class, less all liabilities attributable to that class, by the total number of
shares outstanding for that class.
Processing time
Payment for shares you sell will be made in cash as promptly as practicable but
in no event later than seven days after receipt of a properly executed request.
If you have share certificates, these must accompany your order in proper form
for transfer. When you place an order to sell shares for which the portfolio may
not yet have received good payment (i.e., purchases by check or certain
Automated Clearing House Transactions), the portfolio may delay transmittal of
the proceeds until it has determined that collected funds have been received for
the purchase of such shares. This may be up to 10 days from receipt by the
portfolio of the purchase amount. 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, the redemption of such shares by the portfolio may be
subject to a contingent deferred sales charge as explained in the prospectus for
the other fund.
Signature guarantees
A signature guarantee is required unless you sell shares worth $50,000 or less
and the proceeds are payable to the shareholder of record at the address of
record. You can obtain a guarantee from most brokerage houses and financial
institutions, although not from a notary public. The portfolio will normally
send you the proceeds within one business day following your request, but may
take up to seven business days (or longer in the case of shares recently
purchased by check).
Minimum balances
The minimum initial investment for the portfolio is $25,000 but such minimum
amount may be changed at any time in management's discretion. Subsequent
investments may be made in any amount. Firms offering portfolio shares may set
higher minimums for accounts they service and may change such minimums at their
discretion.
Because of the high cost of maintaining small accounts, the portfolio reserves
the right to redeem an account with a balance below $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
portfolio redeems that shareholder account.
6
<PAGE>
Redemption-in-kind
The portfolio reserves the right to honor any request for redemption or
repurchase order by "redeeming in kind," that is, by making payment of
redemption proceeds in marketable securities (which typically will involve
brokerage costs for the shareholder to liquidate) rather than cash; in most
cases, the portfolio will not make a redemption-in-kind unless a shareholder's
requests over a 90-day period total more than $250,000 or 1% of the portfolio's
assets, whichever is less.
Buying shares
Shares of the portfolio may be purchased at net asset value, with no sales
charge through selected financial services firms, such as broker-dealers and
banks.
The portfolio seeks to be 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 portfolio has
adopted procedures for the convenience of its shareholders and to ensure that it
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. Central time net asset value determination; or (ii) the
dividend for the next calendar day if effected at the 3:00 p.m. Central time net
asset value determination.
Orders for purchase accompanied by a check or other negotiable bank draft will
be accepted and effected as of 3:00 p.m. Central 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.
If payment is wired in Federal Funds, the payment should be directed to UMB Bank
N.A. (ABA #101-000-695), 10th and Grand Avenue, Kansas City, MO 64106 for credit
to Premier Money Market Shares (98-0119-980-3) and further credit to your money
market account number.
Third party transactions
If you buy and sell shares of the portfolio through a member of the National
Association of Securities Dealers, Inc. (other than the portfolio's
distributor), that member may charge a fee for that service. This prospectus
should be read in connection with such firms' material regarding their fees and
services.
Other Information
The portfolio reserves the right to withdraw all or any part of the offering
made by this prospectus or to reject purchase orders, without prior notice.
Also, from time to time, the portfolio may temporarily suspend the offering of
its shares to new investors. During the period of such suspension, persons who
are already shareholders normally are permitted to continue to purchase
additional shares and to have dividends reinvested. The portfolio 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 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 portfolio. 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.
7
<PAGE>
Shareholders should direct their inquiries to the firm from which they received
this prospectus or to Kemper Service Company, the portfolio's Shareholder
Service Agent, 811 Main Street, Kansas City, Missouri 64105-2005.
The information in this prospectus applies only to Premier Shares. The portfolio
does have three other classes, which are described in separate prospectuses and
which have different fees, requirements and services.
Selling and exchanging shares
Upon receipt by Kemper Service Company of a request in the form described below,
shares of the portfolio will be redeemed by the portfolio at the next determined
net asset value. If processed at 3:00 p.m. Central 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.
Shareholders should contact the financial services firm through which shares
were purchased for redemption instructions. Any shareholder may request that the
portfolio redeem his or her shares. When shares are held for the account of a
shareholder by the portfolio's transfer agent, the shareholder may redeem them
by sending a written request with signatures guaranteed to Kemper Service
Company, P.O. Box 219153, Kansas City, Missouri 64141-9153.
An exchange of shares entails the sale of portfolio shares and subsequent
purchase of shares of another Kemper fund.
Shareholders may obtain additional information about other ways to redeem shares
such as telephone redemptions, expedited wire transfer redemptions, and
redemptions by draft by contacting their financial services firm.
Checkwriting. You may redeem Premier Shares of the portfolio by writing checks
against your account for at least $250 and no more than $5,000,000.
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.
DISTRIBUTIONS
The portfolio's dividends are declared daily and distributed monthly to
shareholders. Any dividends or capital gains distributions declared in October,
November or December with a record date in such month and paid during the
following January will be treated by shareholders for federal income tax
purposes as if received on December 31 of the calendar year declared. The
portfolio 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 Subchapter M of the Internal Revenue Code.
Income dividends and capital gain dividends, if any, of the portfolio will be
credited to shareholder accounts in full and fractional shares of the portfolio
at net asset value, except that, upon written request to Kemper Service Company,
a shareholder may choose to receive income and capital gain dividends in cash.
If an investment is in the form of a retirement plan, all dividends and capital
gains distributions must be reinvested into the shareholder's account.
Distributions are generally taxable whether received in cash or reinvested.
Exchanges among other mutual funds may also be taxable events.
8
<PAGE>
Taxes
Generally, dividends from net investment income are taxable to shareholders as
ordinary income. Long-term capital gains distributions, if any, are taxable to
shareholders as long-term capital gains, regardless of the length of time
shareholders have owned shares. Short-term capital gains and any other taxable
income distributions are taxable as ordinary income. A portion of dividends from
ordinary income may qualify for the dividends-received deduction for
corporations.
The portfolio sends detailed tax information about the amount and type of its
distributions by January 31 of the following year.
The portfolio may be required to withhold U.S. federal income tax at the rate of
31% of all taxable distributions payable to shareholders who fail to provide the
portfolio with their correct taxpayer identification number or to make required
certifications, or who have been notified by the IRS that they are subject to
backup withholding. Any such withheld amounts may be credited against the
shareholder's U.S. federal income tax liability.
You may be subject to state, local and foreign taxes on portfolio distributions
and dispositions of portfolio shares. You should consult your tax adviser
regarding the particular tax consequences of an investment in the portfolio.
9
<PAGE>
Financial highlights
The financial highlights table is intended to help you understand financial
performance for the periods indicated. The figures in the first part of the
table are for a single share. The total return figures show what an investor
would have earned on an investment in the portfolio assuming reinvestment of all
dividends and distributions. This information has been audited by Ernst & Young
LLP, whose report, along with the financial statements, is included in the
annual report, which is available upon request (see back cover).
PREMIER MONEY MARKET SHARES
January 22, 1999
to April 30, 1999
- --------------------------------------------------------------------------------
Per Share Operating Performance:
Net asset value, beginning of period $1.00
- --------------------------------------------------------------------------------
Net investment income .01
- --------------------------------------------------------------------------------
Less dividends declared .01
- --------------------------------------------------------------------------------
Net asset value, end of period $1.00
- --------------------------------------------------------------------------------
Total Return (Not Annualized): 1.21%
- --------------------------------------------------------------------------------
Ratios to Average Net Assets (Annualized):
Expenses .57%
- --------------------------------------------------------------------------------
Net investment income 4.48%
- --------------------------------------------------------------------------------
<PAGE>
Additional information about the portfolio may be found in the Statement of
Additional Information and in shareholder reports. Shareholder inquiries may be
made by calling the toll-free telephone number listed below. The Statement of
Additional Information contains more detailed information on portfolio
investments and operations. The semiannual and annual shareholder reports
include a listing of portfolio holdings and financial statements. These and
other portfolio documents may be obtained without charge from your financial
adviser, from the Shareholder Service Agent at 1-800-231-8568, from the
Securities and Exchange Commission Web site (http://www.sec.gov), and the
principal underwriter. You can also visit or write the SEC and obtain copies for
free: Public Reference Section, Securities and Exchange Commission, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, DC 20549 (1-800-SEC-0330).
The Statement of Additional Information dated September 1, 1999 is incorporated
by reference into this prospectus (is legally a part of this prospectus).
Investment Company Act file number:
Cash Account Trust 811-5970
<PAGE>
Institutional
Money Market
Shares
PROSPECTUS September 1, 1999
Money Market Portfolio -- Institutional Shares
222 South Riverside Plaza, Chicago, Illinois 60606
Mutual funds:
o are not FDIC-insured
o have no bank guarantees
o may lose value
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
Table of Contents
- --------------------------------------------------------------------------------
About the Portfolio 1
- --------------------------------------------------------------------------------
Institutional Money Market Shares 1
- --------------------------------------------------------------------------------
Investment Adviser 5
- --------------------------------------------------------------------------------
About Your Investment 6
- --------------------------------------------------------------------------------
Transaction Information 6
- --------------------------------------------------------------------------------
Buying Shares 7
- --------------------------------------------------------------------------------
Selling and Exchanging Shares 8
- --------------------------------------------------------------------------------
Distributions 8
- --------------------------------------------------------------------------------
Taxes 9
- --------------------------------------------------------------------------------
Financial Highlights 10
- --------------------------------------------------------------------------------
<PAGE>
ABOUT THE PORTFOLIO
INSTITUTIONAL MONEY MARKET SHARES
Investment objective
The Money Market Portfolio (the "portfolio") seeks maximum current income
consistent with stability of capital.
The portfolio's investment objective and fundamental policies may not be changed
without a vote of shareholders.
Main investment strategies
The portfolio pursues its objective by investing primarily 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 portfolio's investment manager. Currently, only obligations in the top
two categories are considered to be rated high quality. The portfolio
focuses its investments in obligations rated in the highest category.
5. Repurchase agreements of obligations that are suitable for investment under
the categories set forth above. The maturities of the securities subject to
repurchase may be greater than 12 months.
The portfolio maintains a dollar-weighted average maturity of 90 days or less.
Also, the portfolio will normally invest at least 25% of its assets in
obligations issued by banks.
The portfolio may invest in floating and variable rate instruments (obligations
that do not bear interest at fixed rates). Accordingly, as interest rates
decrease or increase, the potential for capital appreciation or depreciation is
less than for fixed-rate obligations.
Securities are selected based on the investment manager's perception of monetary
conditions, the available supply of appropriate investments, and the investment
manager's projections for short-term interest rate movements. Sales of portfolio
holdings are typically made to implement investment strategy or meet shareholder
redemptions. Issues with short maturities are generally held until maturity.
Of course, there can be no guarantee that by following these investment
strategies, the portfolio will achieve its objective.
1
<PAGE>
Risk management strategies
The portfolio manages credit risk by investing primarily in high quality
securities, whose issuers are considered unlikely to default. The portfolio
manages interest rate risk by limiting the maturity of each of its individual
securities and the weighted average maturity of the portfolio overall.
For temporary defensive purposes, the portfolio may invest less than 25% of its
assets in obligations issued by banks. In such a case, the portfolio would not
be pursuing, and may not achieve, its investment goals.
Main risks
As with most money market funds, the major factor affecting the portfolio's
performance is fluctuations in short-term interest rates. If short-term interest
rates fall, the portfolio's yield is also likely to fall. Floating or variable
rate securities have yields which adjust with changes in interest rates.
Accordingly, to the extent the portfolio invests in floating or variable rate
securities, as interest rates decrease or increase, the potential for capital
appreciation or depreciation is less than that of fixed-rate obligations.
Moreover, the investment manager's strategy or choice of specific investments
may not perform as expected. The portfolio may have lower returns than other
funds that invest in longer-term or lower quality securities. It is also
possible that securities in the portfolio's investment portfolio could
deteriorate in quality or go into default.
Investments by the portfolio in Eurodollar certificates of deposit issued by
London branches of U.S. banks, and different obligations issued by foreign
entities, including foreign banks, involve additional risks than investments in
securities of domestic branches of U.S. banks. These risks include, but are not
limited to, future unfavorable political and economic developments, possible
withholding taxes on interest payments, seizure of foreign deposits, currency
controls, or 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.
An investment in the portfolio is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the
portfolio seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the portfolio.
2
<PAGE>
Past performance
No past performance data is provided for the Money Market Portfolio's
Institutional Shares ("Institutional Shares") since Institutional Shares do not
have a full calendar year of performance. For reference, the chart and table
below show how the total returns for the Money Market Portfolio's Service Shares
("Service Shares") have varied from year to year, which may give you some
indication of risk. While Service Shares are not offered in this prospectus,
they have substantially similar gross performance as Institutional Shares
because both are invested in the same portfolio of securities. However,
Institutional Shares will generally have higher total returns to the extent that
Institutional Shares have lower expenses.
All figures on this page assume reinvestment of dividends and distributions. Of
course, past performance of the Service Shares is not necessarily an indication
of future performance.
Annual total returns of the Service Shares for years ended December 31
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
1991 5.36%
1992 2.99%
1993 2.39%
1994 3.51%
1995 5.13%
1996 4.64%
1997 4.80%
1998 4.69%
For the period included in the bar chart, the portfolio's Service Shares'
highest return for a calendar quarter was 1.58% (the first quarter of 1991), and
the portfolio's Service Shares' lowest return for a calendar quarter was 0.57%
(the second quarter of 1993).
The portfolio's Service Shares' year-to-date total return as of June 30, 1999
was 2.02%.
Average Annual Total Returns
For periods ended December 31, 1998 Money Market Portfolio -- Service Shares
- ----------------------------------- ----------------------------------------
One Year 4.69%
Five Years 4.54%
Since Service Shares Inception* 4.21%
- -----------
* Inception date for the portfolio's Service Shares is December 3, 1990.
Current Institutional Shares performance, including yield information, is
available by contacting your financial services firm from which you obtained
this prospectus.
3
<PAGE>
Fee and expense information
The following information is designed to help you understand the fees and
expenses that you may pay if you buy and hold Institutional Shares of the
portfolio.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Shareholder Fees (fees paid directly from your investment):
- -----------------------------------------------------------------------------------------------
<S> <C>
Maximum sales charge (load) imposed on purchases (as % of offering price) NONE
- -----------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) (as % of redemption proceeds) NONE
- -----------------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested dividends/distribution NONE
- -----------------------------------------------------------------------------------------------
Redemption fee (as % of amount redeemed, if applicable) NONE
- -----------------------------------------------------------------------------------------------
Exchange fee NONE
- -----------------------------------------------------------------------------------------------
Annual portfolio operating expenses (expenses that are deducted from portfolio assets):
- -----------------------------------------------------------------------------------------------
Management fee 0.19%
- -----------------------------------------------------------------------------------------------
Distribution (12b-1) fees NONE
- -----------------------------------------------------------------------------------------------
Other expenses 0.19%*
- -----------------------------------------------------------------------------------------------
Total annual portfolio operating expenses 0.38%
- -----------------------------------------------------------------------------------------------
Expense reimbursement 0.13%**
- -----------------------------------------------------------------------------------------------
Net expenses 0.25%**
- -----------------------------------------------------------------------------------------------
</TABLE>
* Other expenses are based on estimated amounts for the current fiscal year.
** By contract, total Institutional Shares expenses will be capped at 0.25%
through August 31, 2000.
Example
This example is to help you compare the cost of investing in the Institutional
Shares of the portfolio with the cost of investing in other mutual funds.
This example illustrates the impact of the above fees and expenses on an account
with an initial investment of $10,000, based on the expenses shown above. It
assumes a 5% annual return, the reinvestment of all dividends and distributions,
and "Total annual portfolio operating expenses" remaining the same each year
except the first year in the periods shown below. The first year of your
investment will take into account the Institutional Shares' "Net expenses" as
shown above. The expenses would be the same whether you sold your shares at the
end of each period or continued to hold them. Actual expenses and returns vary
from year to year, and may be higher or lower than those shown.
- ------------------------------------------------------
One Year $ 26
- ------------------------------------------------------
Three Years $ 87
- ------------------------------------------------------
Five Years $ 155
- ------------------------------------------------------
Ten Years $ 353
- ------------------------------------------------------
4
<PAGE>
Investment adviser
The portfolio retains the investment management firm of Scudder Kemper
Investments, Inc., (the "Adviser"), 345 Park Avenue, New York, NY, to manage the
portfolio's daily investment and business affairs subject to the policies
established by the portfolio's Board. The Adviser actively manages the
portfolio's investments. Professional management can be an important advantage
for investors who do not have the time or expertise to invest directly in
individual securities. The Adviser is one of the largest and most experienced
investment management organizations worldwide, managing more than $290 billion
in assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, and private family and individual accounts.
The Adviser, the portfolio's Principal Underwriter, Kemper Distributors Inc.,
the portfolio's Shareholder Service Agent, Kemper Service Company, and the
portfolio's Accounting Agent, Scudder Fund Accounting Corporation, have
contractually agreed to maintain the total annualized expenses of the
Institutional Shares of the portfolio at no more than 0.25% of the average daily
net assets of the portfolio through August 31, 2000. The Adviser received an
investment management fee of 0.19% of the portfolio's average daily net assets
on an annual basis for the fiscal year ended April 30, 1999, reflecting the
effect of expense limitations and/or fee waivers then in effect.
Portfolio management
The following investment professionals are associated with the portfolio as
indicated:
<TABLE>
<CAPTION>
Name & Title Joined the Portfolio Background
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Frank J. Rachwalski, Jr. 1990 Joined the Adviser in 1973 and began his investment career at
Lead Manager that time. He has been responsible for the trading and
portfolio management of money market funds since 1974.
Geoffrey Gibbs 1999 Joined the Adviser in 1996 as a trader for money market funds
Manager and began his investment career in 1994.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Year 2000 readiness
Like all mutual funds, the portfolio could be affected by the inability of some
computer systems to recognize the year 2000. The Adviser has a year 2000
readiness program designed to address this problem, and is also researching the
readiness of suppliers and business partners as well as issuers of securities
the portfolio owns. Still, there is some risk that the year 2000 problem could
materially affect the portfolio's operations (such as the ability to calculate
net asset value and process purchases and redemptions), its investments, or
securities markets in general.
5
<PAGE>
ABOUT YOUR INVESTMENT
TRANSACTION INFORMATION
Share price
Scudder Fund Accounting Corporation determines the net asset value per share of
the portfolio on each day the New York Stock Exchange is open for trading, at
11:00 a.m., 1:00 p.m. and 3:00 p.m. Central time.
The portfolio seeks to maintain a net asset value of $1.00 per share and values
its portfolio instruments at amortized cost. Calculations are made to compare
the value of the portfolio's investments, valued at amortized cost, with
market-based values. In order to value its investments at amortized cost, the
portfolio purchases only securities with a maturity of 12 months or less and
maintains a dollar-weighted average maturity of 90 days or less. In addition,
the portfolio limits its portfolio investments to securities that meet the
quality and diversification requirements of federal law.
The net asset value per share is the value of one share and is determined by
dividing the value of the total fund assets attributable to the applicable
class, less all liabilities attributable to that class, by the total number of
shares outstanding for that class.
Processing time
Payment for shares you sell will be made in cash as promptly as practicable but
in no event later than seven days after receipt of a properly executed request.
If you have share certificates, these must accompany your order in proper form
for transfer. When you place an order to sell shares for which the portfolio may
not yet have received good payment (i.e., purchases by check or certain
Automated Clearing House Transactions), the portfolio may delay transmittal of
the proceeds until it has determined that collected funds have been received for
the purchase of such shares. This may be up to 10 days from receipt by the
portfolio of the purchase amount. 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, the redemption of such shares by the portfolio may be
subject to a contingent deferred sales charge as explained in the prospectus for
the other fund.
Signature guarantees
A signature guarantee is required unless you sell shares worth $50,000 or less
and the proceeds are payable to the shareholder of record at the address of
record. You can obtain a guarantee from most brokerage houses and financial
institutions, although not from a notary public. The portfolio will normally
send you the proceeds within one business day following your request, but may
take up to seven business days (or longer in the case of shares recently
purchased by check).
Minimum balances
The minimum initial investment for the portfolio is $250,000 but such minimum
amount may be changed at any time in management's discretion. Subsequent
investments may be made in any amount. Firms offering portfolio shares may set
higher minimums for accounts they service and may change such minimums at their
discretion.
Because of the high cost of maintaining small accounts, the portfolio reserves
the right to redeem an account with a balance 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
portfolio redeems that shareholder account.
6
<PAGE>
Redemption-in-kind
The portfolio reserves the right to honor any request for redemption or
repurchase order by "redeeming in kind," that is, by making payment of
redemption proceeds in marketable securities (which typically will involve
brokerage costs for the shareholder to liquidate) rather than cash; in most
cases, the portfolio will not make a redemption-in-kind unless a shareholder's
requests over a 90-day period total more than $250,000 or 1% of the portfolio's
assets, whichever is less.
Buying shares
Shares of the portfolio may be purchased at net asset value, with no sales
charge through selected financial services firms, such as broker-dealers and
banks.
The portfolio seeks to be 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 portfolio has
adopted procedures for the convenience of its shareholders and to ensure that it
receives investable funds.
Orders for purchase of shares of the portfolio will be accepted only by wire
transfer in the form of Federal Funds and 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. Central time net asset value
determination; or (ii) the dividend for the next calendar day if effected at the
3:00 p.m. Central time net asset value determination.
When payment is wired in Federal Funds, the payment should be directed to UMB
Bank N.A. (ABA #101-000-695), 10th and Grand Avenue, Kansas City, MO 64106 for
credit to Institutional Money Market Shares (146: 98-0119-980-3) and further
credit to your money market account number.
Third party transactions
If you buy and sell shares of the portfolio through a member of the National
Association of Securities Dealers, Inc. (other than the portfolio's
distributor), that member may charge a fee for that service. This prospectus
should be read in connection with such firms' material regarding their fees and
services.
Other information
The portfolio reserves the right to withdraw all or any part of the offering
made by this prospectus or to reject purchase orders, without prior notice.
Also, from time to time, the portfolio may temporarily suspend the offering of
its shares to new investors. During the period of such suspension, persons who
are already shareholders normally are permitted to continue to purchase
additional shares and to have dividends reinvested. The portfolio 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 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 portfolio. Share certificates are
issued only on request.
Shareholders should direct their inquiries to the firm from which they received
this prospectus or to Kemper Service Company, the portfolio's Shareholder
Service Agent, 811 Main Street, Kansas City, Missouri 64105-2005.
The information in this prospectus applies only to Institutional Shares. The
portfolio does have three other classes, which are described in separate
prospectuses and which have different fees, requirements and services.
7
<PAGE>
SELLING AND EXCHANGING SHARES
Upon receipt by Kemper Service Company of a request in the form described below,
shares of the portfolio will be redeemed by the portfolio at the next determined
net asset value. If processed at 3:00 p.m. Central 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.
Shareholders should contact the financial services firm through which shares
were purchased for redemption instructions. Any shareholder may request that the
portfolio redeem his or her shares. When shares are held for the account of a
shareholder by the portfolio's transfer agent, the shareholder may redeem them
by sending a written request with signatures guaranteed to Kemper Service
Company, P.O. Box 219153, Kansas City, Missouri 64141-9153.
An exchange of shares entails the sale of portfolio shares and subsequent
purchase of shares of another Kemper fund.
Shareholders may obtain additional information about other ways to redeem, such
as telephone redemptions and expedited wire transfer redemptions, by contacting
their financial services firm.
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.
DISTRIBUTIONS
The portfolio's dividends are declared daily and distributed monthly to
shareholders. Any dividends or capital gains distributions declared in October,
November or December with a record date in such month and paid during the
following January will be treated by shareholders for federal income tax
purposes as if received on December 31 of the calendar year declared. The
portfolio 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 Subchapter M of the Internal Revenue Code.
Income dividends and capital gain dividends, if any, of the portfolio will be
credited to shareholder accounts in full and fractional shares of the portfolio
at net asset value, except that, upon written request to Kemper Service Company,
a shareholder may choose to receive income and capital gain dividends in cash.
If an investment is in the form of a retirement plan, all dividends and capital
gains distributions must be reinvested into the shareholder's account.
Distributions are generally taxable whether received in cash or reinvested.
Exchanges among other mutual funds may also be taxable events.
8
<PAGE>
TAXES
Generally, dividends from net investment income are taxable to shareholders as
ordinary income. Long-term capital gains distributions, if any, are taxable to
shareholders as long-term capital gains, regardless of the length of time
shareholders have owned shares. Short-term capital gains and any other taxable
income distributions are taxable as ordinary income. A portion of dividends from
ordinary income may qualify for the dividends-received deduction for
corporations.
The portfolio sends detailed tax information about the amount and type of its
distributions by January 31 of the following year.
The portfolio may be required to withhold U.S. federal income tax at the rate of
31% of all taxable distributions payable to shareholders who fail to provide the
portfolio with their correct taxpayer identification number or to make required
certifications, or who have been notified by the IRS that they are subject to
backup withholding. Any such withheld amounts may be credited against the
shareholder's U.S. federal income tax liability.
You may be subject to state, local and foreign taxes on portfolio distributions
and dispositions of portfolio shares. You should consult your tax adviser
regarding the particular tax consequences of an investment in the portfolio.
9
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand financial
performance for the periods indicated. The figures in the first part of the
table are for a single share. The total return figures show what an investor
would have earned on an investment in the portfolio assuming reinvestment of all
dividends and distributions. This information has been audited by Ernst & Young
LLP, whose report, along with the financial statements, is included in the
annual report, which is available upon request (see back cover).
INSTITUTIONAL MONEY MARKET SHARES
January 22, 1999
to April 30, 1999
- --------------------------------------------------------------------------------
Per Share Operating Performance:
Net asset value, beginning of period $1.00
- --------------------------------------------------------------------------------
Net investment income .01
- --------------------------------------------------------------------------------
Less dividends declared .01
- --------------------------------------------------------------------------------
Net asset value, end of period $1.00
- --------------------------------------------------------------------------------
Total Return (Not Annualized): 1.29%
- --------------------------------------------------------------------------------
Ratios to Average Net Assets (Annualized):
Expenses .25%
- --------------------------------------------------------------------------------
Net investment income 4.75%
- --------------------------------------------------------------------------------
Other Ratios to Average Net Assets (Annualized):
Expenses .28%
- --------------------------------------------------------------------------------
Net investment income 4.72%
- --------------------------------------------------------------------------------
10
<PAGE>
Additional information about the portfolio may be found in the Statement of
Additional Information and in shareholder reports. Shareholder inquiries may be
made by calling the toll-free telephone number listed below. The Statement of
Additional Information contains more detailed information on portfolio
investments and operations. The semiannual and annual shareholder reports
include a listing of portfolio holdings and financial statements. These and
other portfolio documents may be obtained without charge from your financial
adviser, from the Shareholder Service Agent at 1-800-231-8568, from the
Securities and Exchange Commission Web site (http://www.sec.gov), and the
principal underwriter. You can also visit or write the SEC and obtain copies for
free: Public Reference Section, Securities and Exchange Commission, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, DC 20549 (1-800-SEC-0330).
The Statement of Additional Information dated September 1, 1999 is incorporated
by reference into this prospectus (is legally a part of this prospectus).
Investment Company Act file number:
Cash Account Trust 811-5970
11
<PAGE>
MONEY MARKET PORTFOLIO RETAIL SHARES
MONEY MARKET PORTFOLIO PREMIER SHARES
MONEY MARKET PORTFOLIO INSTITUTIONAL SHARES
STATEMENT OF ADDITIONAL INFORMATION
September 1, 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"), each
a class of the Money Market Portfolio (the "Portfolio") offered by Cash Account
Trust (the "Trust"). Cash Account Trust is an open-end diversified management
investment company. The Trust 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
appropriate prospectus of the Shares of the Portfolio dated September 1, 1999.
The prospectus may be obtained without charge from the Trust at the address or
telephone number on this cover or the firm from which this Statement of
Additional Information was received and is also available along with other
related materials at the SEC's Internet web site (http://www.sec.gov). The
Annual Report for the Shares of the Portfolio, dated April 30, 1999 is
incorporated by reference into and is hereby deemed to be a part of this
Statement of Additional Information.
TABLE OF CONTENTS
INVESTMENT RESTRICTIONS...................................................2
INVESTMENT MANAGER AND SHAREHOLDER SERVICES...............................6
PORTFOLIO TRANSACTIONS....................................................9
PURCHASE AND REDEMPTION OF SHARES.........................................9
DIVIDENDS, NET ASSET VALUE AND TAXES.....................................13
PERFORMANCE..............................................................14
OFFICERS AND TRUSTEES....................................................15
SPECIAL FEATURES.........................................................18
SHAREHOLDER RIGHTS.......................................................19
APPENDIX -- RATINGS OF INVESTMENTS.......................................21
<PAGE>
INVESTMENT RESTRICTIONS
The Trust has adopted for the Portfolio certain investment restrictions which
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 Portfolio's
shares 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
Portfolio's outstanding shares. Except as otherwise noted, the portfolio's
investment objective and other policies may be changed , without a vote of
shareholders.
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 Trust 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 1940 Act.
(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
2
<PAGE>
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.
With regard to restriction #13, for purposes of determining the percentage of
the Portfolio's total assets invested in securities of issuers having their
principal business activities in a particular industry, asset backed securities
will be classified separately, based on the nature of the underlying assets.
Currently, the following categories are used: captive auto, diversified, retail
and consumer loans, captive equipment and business, business trade receivables,
nuclear fuel and capital and mortgage lending.
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. In addition, 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 POLICIES AND TECHNIQUES
Descriptions in this Statement of Additional Information of a particular
investment practice or technique in which the Portfolio may engage or a
financial instrument which the Portfolio may purchase are meant to describe the
spectrum of investments that Scudder Kemper Investments, Inc. (the "Adviser"),
in its discretion, might, but is not required to, use in managing the
Portfolio's assets. The Adviser may, in its discretion, at any time, employ such
practice, technique or instrument for one or more funds but not for all funds
advised by it. Furthermore, it is possible that certain types of financial
instruments or investment techniques described herein may not be available,
permissible, economically feasible or effective for their intended purposes in
all markets. Certain practices, techniques, or instruments may not be principal
activities of the Portfolio, but, to the extent employed, could, from time to
time, have a material impact on the Portfolio's performance.
The Trust is a money market mutual fund designed to provide its shareholders
with professional management of short-term investment dollars. It is a series
investment company that is able to provide investors with a choice of separate
investment portfolios. The Trust currently offers three investment portfolios:
the Money Market Portfolio, the Government Securities Portfolio and the
Tax-Exempt Portfolio. It is designed for investors who seek maximum current
income consistent with stability of capital. It pools individual and
institutional investors' money that it uses to buy high quality money market
instruments. Because each portfolio combines its shareholders' money, each
portfolio can buy and sell large blocks of securities, which reduces transaction
costs and maximizes yields.
Money Market Portfolio.
The Portfolio is managed to maintain a net asset value of $1.00 per share. The
Portfolio 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.
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
<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 Portfolio'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 this 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").
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
Portfolio's 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 Section 4(2) paper, thus providing
liquidity. The Portfolio'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 Trust, 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
below. The Portfolio's 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 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
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such as the 30-day commercial paper rate ("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 Portfolio'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 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 Portfolio may invest in Variable Rate Securities, 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. 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 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 the Portfolio's net assets valued at the time of the
transaction would be invested in such securities.
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. The Portfolio will not borrow for leverage
purposes.
Repurchase Agreements. The Portfolio may enter into repurchase agreements with
any member bank of the Federal Reserve System or any domestic broker/dealer
which is recognized as a reporting Government securities dealer if the
creditworthiness of the bank or broker/dealer has been determined by the Adviser
to be at least as high as that of other obligations the Portfolio may purchase
or to be at least equal to that of issuers of commercial paper rated within the
two highest grades assigned by Moody's, S&P or Duff.
A repurchase agreement provides a means for the Portfolio to earn taxable income
on funds for periods as short as overnight. It is an arrangement under which the
purchaser (i.e., the Portfolio) acquires a security ("Obligation") and the
seller agrees, at the time of sale, to repurchase the Obligation at a specified
time and price. Securities subject to a repurchase agreement are held in a
segregated account and the value of such securities kept at least equal to the
repurchase price on a daily basis. The repurchase price may be higher than the
purchase price, the difference being income to the Portfolio, or the purchase
and
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repurchase prices may be the same, with interest at a stated rate due to the
Portfolio together with the repurchase price on the date of repurchase. In
either case, the income to the Portfolio (which is taxable) is unrelated to the
interest rate on the Obligation itself. Obligations will be held by the
custodian or in the Federal Reserve Book Entry system.
For purposes of the 1940 Act, a repurchase agreement is deemed to be a loan from
the Portfolio to the seller of the Obligation subject to the repurchase
agreement and is therefore subject to the Portfolio's investment restriction
applicable to loans. It is not clear whether a court would consider the
Obligation purchased by the Portfolio subject to a repurchase agreement as being
owned by the Portfolio or as being collateral for a loan by the Portfolio to the
seller. In the event of the commencement of bankruptcy or insolvency proceedings
with respect to the seller of the Obligation before repurchase of the Obligation
under a repurchase agreement, the Portfolio may encounter delay and incur costs
before being able to sell the security. Delays may involve loss of interest or
decline in price of the Obligation. If the court characterized the transaction
as a loan and the Portfolio has not perfected an interest in the Obligation, the
Portfolio may be required to return the Obligation to the seller's estate and be
treated as an unsecured creditor of the seller. As an unsecured creditor, the
Portfolio is at risk of losing some or all of the principal and income involved
in the transaction. As with any unsecured debt obligation purchased for the
Portfolio, the Adviser seeks to minimize the risk of loss through repurchase
agreements by analyzing the creditworthiness of the obligor, in this case the
seller of the Obligation. Apart from the risk of bankruptcy or insolvency
proceedings, there is also the risk that the seller may fail to repurchase the
Obligation, in which case the Portfolio may incur a loss if the proceeds to the
Portfolio of the sale to a third party are less than the repurchase price.
However, if the market value of the Obligation subject to the repurchase
agreement becomes less than the repurchase price (including interest), the
Portfolio will direct the seller of the Obligation to deliver additional
securities so that the market value of all securities subject to the repurchase
agreement will equal or exceed the repurchase price. It is possible that the
Portfolio will be unsuccessful in seeking to enforce the seller's contractual
obligation to deliver additional securities.
INVESTMENT MANAGER AND SHAREHOLDER SERVICES
Investment Adviser. Scudder Kemper Investments, Inc. ("Scudder Kemper") 345 Park
Avenue, New York, New York, is the investment adviser for the Portfolio. Scudder
Kemper is approximately 70% owned by Zurich Insurance Company, 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. The balance of Scudder Kemper is owned by
Scudder Kemper's officers and employees . Responsibility for overall management
of each Fund rests with the Trust's Board of Trustees and officers. Pursuant to
an investment management agreement (the "Agreement"), Scudder Kemper acts as
each Fund's Adviser, manages its investments, administers its business affairs,
furnishes office facilities and equipment, provides clerical and administrative
services, provides shareholder and information services and permits any of its
officers or employees to serve without compensation as trustees or officers of
the Trust if elected to such positions. The Trust pays the expenses of its
operations, including the fees and expenses of independent auditors, counsel,
custodian and transfer agent and the cost of share certificates, reports and
notices to shareholders, costs of calculating net asset value and maintaining
all accounting records related thereto, brokerage commissions or transaction
costs, taxes, registration fees, the fees and expenses of qualifying the Trust
and its shares for distribution under federal and state securities laws and
membership dues in the Investment Company Institute or any similar organization.
The Agreement provides that Scudder Kemper shall not be liable for any error of
judgment or of law, or for any loss suffered by the Trust 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 Scudder Kemper in the
performance of its obligations and duties, or by reason of its reckless
disregard of its obligations and duties under the agreement.
In certain cases the investments for the Funds are managed by the same
individuals who manage one or more other mutual funds advised by the Adviser
that have similar names, objectives and investment styles as the Funds. You
should be aware that the Funds are likely to differ from these other mutual
funds in size, cash flow pattern and tax matters. Accordingly, the holdings and
performance of the Funds can be expected to vary from those of the other mutual
funds.
On December 31, 1997, pursuant to the terms of an agreement, Scudder, Stevens &
Clark, Inc. ("Scudder"), and Zurich Insurance Company ("Zurich"), formed a new
global investment organization by combining Scudder with Zurich Kemper
Investments, Inc. ("ZKI") and Zurich Kemper Value Advisors, Inc. ("ZKVA"),
former subsidiaries of Zurich . ZKI was the former investment adviser for each
Fund. Upon completion of the transaction, Scudder changed its name to Scudder
Kemper Investments, Inc. As a result of the transaction, Zurich owns
approximately 70% of Scudder Kemper, with the balance owned by Scudder Kemper's
officers and employees.
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In certain cases the investments for the Portfolios are managed by the same
individuals who manage one or more other mutual funds advised by the Adviser
that have similar names, objectives and investment styles as the Portfolios. You
should be aware that the Portfolios are likely to differ from these other mutual
funds in size, cash flow pattern and tax matters. Accordingly, the holdings and
performance of the Portfolios can be expected to vary from those of the other
mutual funds.
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, each Fund's then current investment
management agreement with the Adviser was deemed to have been assigned and,
therefore, terminated. The Board approved the Agreement with the Adviser, which
is substantially identical to the prior investment management agreement, except
for the dates of execution and termination. The Agreement became effective on
September 7, 1998, upon the termination of the then current investment
management agreement, and was approved at a shareholder meeting held on December
17, 1998.
The Agreement, dated September 7, 1998, was approved by the trustees of the
Trust on August 11, 1998. The Agreement will continue in effect until September
30, 1999 and from year to year thereafter only if its continuance is approved
annually by the vote of a majority of those trustees who are not parties to such
Agreement or interested persons of the Adviser or the Trust, cast in person at a
meeting called for the purpose of voting on such approval, and either by a vote
of the Trust's trustees or of a majority of the outstanding voting securities of
the Trust. The Agreement may be terminated at any time without payment of
penalty by either party on sixty days' written notice, and automatically
terminate in the event of its assignment.
If additional Portfolios become subject to the Agreement, the provisions
concerning continuation, amendment and termination shall be on a Portfolio by
Portfolio basis and the management fee and the expense limitations shall be
computed based upon the average daily net assets of all Portfolios subject to
the agreement and shall be allocated among such Portfolios based upon the
relative net assets of such Portfolios. Additional Portfolios may be subject to
a different agreement. Currently, the Money Market Portfolio, the Government
Securities Portfolio and the Tax-Exempt Portfolio are subject to the agreement.
For the services and facilities furnished to the Trust, the Trust 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 Trust, 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 Trust over $3 billion. The
investment management fee is computed based on average daily net assets of the
Portfolios subject to the agreement and allocated among the Portfolios based
upon the relative net assets of each. Pursuant to the investment management
agreement, the Portfolio paid the Adviser fees of $3,120,000 for the fiscal year
ended April 30, 1999; $1,888,000 for the fiscal year ended April 30, 1998; and
$975,000 for the fiscal year ended April 30, 1997. The Adviser and certain
affiliates have agreed to limit certain operating expenses of the Portfolio to
the extent described in the prospectus. If expense limits had not been in effect
the Adviser would have received investment management fees from the Portfolio of
$4,086,000 for the fiscal year ended April 30, 1999; $2,463,000 for the fiscal
year ended April 30, 1998, and $1,150,000 for the fiscal year ended April 30,
1997. The Adviser absorbed operating expenses for the Portfolio of $2,233,000
for the fiscal year ended April 30, 1999; $1,253,000 for the year ended April
30, 1998; $175,000 for the fiscal year ended April 30, 1997.
Certain officers or trustees of the Trust are also directors or officers of the
Adviser and its affiliates as indicated under "Officers and Trustees."
Fund Accounting Agent. Scudder Fund Accounting Corporation ("SFAC"), Two
International Place, Boston, Massachusetts 02110, 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 to the Portfolio; however, subject to
Board approval, at some time in the future, SFAC may seek payment for its
services under this agreement.
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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 Trust 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 Trust.
As principal underwriter for the Trust, KDI acts as agent of the Trust in the
sale of its shares of the Portfolio. KDI pays all its expenses under the
distribution agreement including, without limitation, services fees to firms.
The Trust 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 selling group agreements with various firms
to provide distribution services for Fund shareholders. KDI receives no
compensation from the Trust 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 Trust, including the Trustees who are not interested persons of the Trust
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 Trust or by KDI upon 60
days' written notice. Termination of the distribution agreement by the Trust 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 Trust and who have no direct or indirect
financial interest in the agreement, or a "majority of the outstanding voting
securities" of the Trust 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. In addition to the discounts or commissions
described above, KDI will, from time to time, pay or allow additional discounts,
commissions or promotional incentives, in the form of cash or other
compensation, to firms that sell shares of the Funds. During the fiscal year
ended April 30, 1999, the shares of the Money Market Portfolio paid distribution
services fees of $12,373,000.
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 Portfolio's 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 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 Portfolio.
Custodian, Transfer Agent and Shareholder Service Agent. State Street Bank and
Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, as custodian,
has custody of all securities and cash of the Trust. It attends to the
collection of principal and income, and payment for and collection of proceeds
of securities bought and sold by the Portfolio. Pursuant to a services agreement
with Investors Fiduciary Trust Company ("IFTC"), 801 Pennsylvania Avenue, Kansas
City, Missouri 64105, the transfer agent for the Trust, Kemper Service Company
("KSvC"), an affiliate of the Adviser, serves as "Shareholder Service Agent."
IFTC receives from the Retail Shares , Premier and Institutional Shares, 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, 1999, IFTC remitted shareholder service fees for Money Market
Portfolio in the amount of $4,860,000 to KSvC as Shareholder Service Agent.
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Independent Auditors and Reports to Shareholders. The Trust's independent
auditors, Ernst & Young LLP, 233 South Wacker Drive, Chicago, Illinois 60606,
audit and report on the Trust's annual financial statements, review certain
regulatory reports and the Trust's federal income tax return, and perform other
professional accounting, auditing, tax and advisory services when engaged to do
so by the Trust. 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
Trust.
PORTFOLIO TRANSACTIONS
Brokerage Commissions
Allocation of brokerage is supervised by the Adviser.
The primary objective of the Adviser in placing orders for the purchase and sale
of securities for a 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 the familiarity of
Scudder Investor Services, Inc. ("SIS") with commissions charged on comparable
transactions, as well as by comparing commissions paid by A Portfolio to
reported commissions paid by others. The Adviser routinely reviews commission
rates, execution and settlement services performed and makes internal and
external comparisons.
A Portfolio's purchases and sales of fixed-income securities are generally
placed by the Adviser with primary market makers for these securities on a net
basis, with out any brokerage commission being paid by a Portfolio. Trading
does, however, involve transaction costs. Transactions with dealers serving as
primary market makers reflect the spread between the bid and asked prices.
Purchases of underwritten issues may be made, which will include an underwriting
fee paid to the underwriter.
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 brokerage and research services to the Adviser or a
Portfolio. The term "research services" 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, if applicable, for a
Portfolio to pay a brokerage commission in excess of that which another broker
might charge for executing the same transaction on account of execution services
and the receipt of research services. The Adviser has negotiated arrangements,
which are not applicable to most fixed-income transactions, with certain
broker/dealers pursuant to which a broker/dealer will provide research services
to the Adviser or a Portfolio in exchange for the direction by the Adviser of
brokerage transactions to the broker/dealer. These arrangements regarding
receipt of research services generally apply to equity security transactions.
The Adviser may place orders with a broker/dealer on the basis that the
broker/dealer has or has not sold shares of a Portfolio. 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.
To the maximum extent feasible, it is expected that the Adviser will place
orders for portfolio transactions through SIS, which is a corporation registered
as a broker/dealer and a subsidiary of the Adviser; SIS will place orders on
behalf of a Portfolio with issuers, underwriters or other brokers and dealers.
SIS will not receive any commission, fee or other remuneration from a Portfolio
for this service.
Although certain research services from broker/dealers may be useful to a
Portfolio and to the Adviser, it is the opinion of the Adviser that such
information only supplements the Adviser's 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 a Portfolio, and not all such information is used by the
Adviser in connection with a Portfolio. 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
Portfolio.
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The Trustees review, from time to time, whether the recapture for the benefit of
a Portfolio of some portion of the brokerage commissions or similar fees paid by
a Portfolio 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 a Portfolio for such purchases. During the
last three fiscal years each Portfolio 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.
PURCHASES AND REDEMPTION OF SHARES
Purchase 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 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 Portfolio may waive the minimum for
purchases by trustees, directors, officers or employees of the Trust or the
Adviser and its affiliates. An investor wishing to open an account should use
the Account Application available from the Portfolio 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 rocessed unless and until
the Portfolio 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.
Clients of Firms. Firms provide varying arrangements for their clients with
respect to the purchase and redemption of Portfolio 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
Portfolio shares in nominee or street name as agent for and on behalf of their
clients. In such instances, the Portfolio's Trust'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 Trust'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 Portfolio 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 Portfolio 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 Portfolio 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 Portfolio. 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 ("KSvC"), the Trust'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 the Portfolio will be redeemed by the Portfolio at
the next determined net asset value. If processed at 3:00 p.m. Central standard
time, the shareholder will receive that day's dividend. A shareholder may use
either the regular or expedited redemption procedures.
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<PAGE>
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.
The Portfolio 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 Portfolio to determine the value of its net assets, or (c)
for such other periods as the Securities and Exchange Commission may by order
permit for the protection of the Portfolio's shareholders.
Although it is the Portfolio'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 Portfolio will
pay the redemption price in part by a distribution of portfolio securities in
lieu of cash, in conformity with the applicable rules of the Securities and
Exchange Commission, taking such securities at the same value used to determine
net asset value, and selecting the securities in such manner as the Board of
Trustees may deem fair and equitable. If such a distribution occurs,
shareholders receiving securities and selling them could receive less than the
redemption value of such securities and in addition would incur certain
transaction costs. Such a redemption would not be as liquid as a redemption
entirely in cash. The Trust has elected to be governed by Rule 18f-1 under the
1940 Act pursuant to which the Trust 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.
If shares of the Portfolio to be redeemed were purchased by check or through
certain Automated Clearing House ("ACH") transactions, the Portfolio 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 Portfolio of the purchase amount. Shareholders may not use
ACH or Redemption Checks 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 Portfolio 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
Trust 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 Trust or its agents reasonably believe, based upon reasonable
verification procedures, that the telephone instructions are genuine. The
shareholder will bear the risk of 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 Portfolio reserves
the right to redeem an account that falls below the minimum investment level.
Thus, a shareholder who makes only the minimum initial investment and then
redeems any portion thereof might have the account redeemed. 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
Portfolio redeems the shareholder account.
Financial services firms provide varying arrangements for their clients to
redeem Portfolio shares. Such firms may independently establish and charge
amounts to their clients for such services.
Regular Redemptions. When shares are held for the account of a shareholder by
the Trust'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
11
<PAGE>
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, 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 certificate 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 Portfolio 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 p.m. Central 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. The Portfolio is not responsible for the efficiency of
the federal wire system or the account holder's financial services firm or bank.
The Portfolio 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 Portfolio were purchased. Except
for Institutional Shares, 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 certificate 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 Portfolio reserves the right
to terminate or modify this privilege at any time.
Redemptions By Draft. This section does not apply to Institutional Shares. Upon
request, shareholders will be provided with drafts to be drawn on the Portfolio
("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 Portfolio receives the Redemption Check. A shareholder
wishing to use this method of redemption must complete and file an Account
Application which is available from the Portfolio 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 Portfolio
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
Portfolio. In addition, firms may impose minimum balance requirements in order
to offer this feature. Firms may also impose fees to investors for this
privilege or establish variations of minimum check amounts if approved by the
Portfolio.
Unless one signer is authorized on the Account Application, 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
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<PAGE>
Portfolio's books for at least 10 days. Shareholders may not use this procedure
to redeem shares held in certificate form. The Portfolio reserves the right to
terminate or modify this privilege at any time.
The Portfolio 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 Portfolio shares in excess of the value of a Portfolio 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.
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 Portfolio 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 Portfolio 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 Portfolio 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 $250,000 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 Portfolio 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 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.
If the shareholder elects to receive dividends in cash, checks will be mailed
monthly, within five business days of the reinvestment date (described below),
to the shareholder or any person designated by the shareholder. At the option of
the shareholder, cash dividends may be sent by Federal Funds wire. Shareholders
may request to have dividends sent by wire on the Account Application or by
contacting the Shareholder Service Agent (see "Purchase of Shares"). 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.
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
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<PAGE>
value, or if there were any other deviation that the Board of Trustees of the
Trust 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 Trust 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 Trust might supplement
dividends in an effort to maintain the net asset value at $1.00 per share.
Redemption orders received in connection with the administration of checkwriting
programs by certain dealers or other financial services firms prior to the
determination of the Portfolio's net asset value also may be processed on a
confirmed basis in accordance with the procedures established by KDI.
Taxes. 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 Portfolio 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.
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.
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.
PERFORMANCE
From time to time, the Trust may advertise several types of performance
information for the Portfolio, including "yield" and "effective yield." Each of
these figures is based upon historical earnings and is not representative of the
future performance of the Portfolio. The yield of the 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
when annualized. The effective yield will be slightly higher than the yield due
to this compounding effect. The tax equivalent yield is similar to the effective
yield calculated on an after-tax basis.
14
<PAGE>
The Adviser, the Portfolio's Principal Underwriter, Kemper Distributors, Inc.,
the Portfolio's Shareholder Service Agent, Kemper Service Company, and the
Portfolio's Accounting Agent, Scudder Fund Accounting Corporation, temporarily
have agreed to maintain certain operating expenses of the Portfolio to the
extent specified in the prospectus. The performance results noted herein for the
Portfolio would have been lower had certain expenses not been capped.
The Portfolio's seven-day 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
calculations. For the period ended April 30, 1999, the Money Market Portfolio
Premier Shares' seven-day yield was 4.34%, the Money Market Portfolio Retail
Shares' seven-day yield was 4.24%, and the Money Market Portfolio Institutional
Shares' seven-day yield was 4.61%.
The Portfolio's effective seven-day yield is determined by taking the base
period return (computed as described above) and calculating the effect of
assumed compounding. The formula for the seven-day effective yield is:
(seven-day base period return +1)365/7 - 1. The Portfolio may also advertise a
thirty-day effective yield in which case the formula is (thirty-day base period
return +1)365/30 - 1. For the period ended April 30, 1999, the Money Market
Portfolio Premier Shares' effective seven-day yield was 4.43%, the Money Market
Portfolio Retail Shares' effective seven-day yield was 4.32%, and the Money
Market Portfolio Institutional Shares' effective seven-day yield was 4.71%.
The 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 Portfolio with that of its competitors.
Past performance cannot be a guarantee of future results.
The Trust 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 Trust may
also describe the Portfolio's 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 Portfolio.
Investors also may want to compare the 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. The Portfolio's yield will
fluctuate. Also, while the 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. 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.
OFFICERS AND TRUSTEES
The officers and trustees of the Trust, 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:
JOHN W. BALLANTINE (2/16/46), Trustee, 1500 North Lake Shore Drive, Chicago,
Illinois; First Chicago NBD Corporation/The First National Bank of Chicago:
1996-1998 Executive Vice President and Chief Risk Management Officer;
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<PAGE>
1995-1996 Executive Vice President and Head of International Banking; 1992-1995
Executive Vice President, Chief Credit and Market Risk Officer.
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, 7011 Green Tree Drive, Naples, Florida;
Retired; formerly, Executive Vice President, A. O. Smith Corporation
(diversified manufacturer).
ROBERT B. HOFFMAN (12/11/36), Trustee, 1530 North State Parkway, Chicago,
Illinois; Chairman, Harnischfeger Industries, Inc. (machinery for the mining and
paper industries); formerly, 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.
THOMAS W. LITTAUER (4/26/55), Vice President and Trustee*, Two International
Place, Boston, Massachusetts; Managing Director, Scudder Kemper; 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.
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 (Tax), U.S. Department of Justice; Director Bethlehem Steel
Corp.
CORNELIA M. SMALL (7/28/44), Trustee*, 345 Park Avenue, New York, NY; Managing
Director, Scudder Kemper.
WILLIAM P. SOMMERS (7/22/33), Trustee, 24717 Harbour View Drive, Ponte Vedra
Beach, Florida; Consultant and Director, SRI Consulting; prior thereto President
and Chief Executive Officer, SRI International (research and development); prior
thereto, Executive Vice President, Iameter (medical information and educational
service provider); prior thereto, Senior Vice President and Director, Booz,
Allen & Hamilton Inc. (management consulting firm); Director, PSI Inc.,
Evergreen Solar, Inc. and Litton Industries.
MARK S. CASADY (9/21/60), President*, 345 Park Avenue, New York, New York;
Managing Director, Scudder Kemper.
PHILIP J. COLLORA (11/15/45), Vice President and Secretary*, 222 South Riverside
Plaza, Chicago, Illinois; Senior Vice President, Scudder Kemper.
ANN M. McCREARY (11/6/56), Vice President*, 345 Park Avenue, New York, New York;
Managing Director, Scudder Kemper.
ROBERT C. PECK, JR. (10/1/46), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Managing Director, Scudder Kemper; 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, Scudder Kemper.
FRANK J. RACHWALSKI, JR. (3/26/45), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Managing Director, Scudder Kemper.
LINDA J. WONDRACK (9/12/64), Vice President*, Two International Place, Boston,
Massachusetts; Senior Vice President, Scudder Kemper.
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<PAGE>
JOHN R. HEBBLE (6/27/58), Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Scudder Kemper.
BRENDA LYONS (2/21/63), Assistant Treasurer*, Two International Place, Boston,
Massachusetts Senior Vice President, Scudder Kemper.
CAROLINE PEARSON (4/1/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Senior Vice President, Scudder Kemper; formerly,
Associate, Dechert Price & Rhoads (law firm), from 1989 to 1997.
MAUREEN E. KANE (2/14/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Vice President, Scudder Kemper; 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).
* Interested persons as defined in the Investment Company Act of 1940.
The trustees and officers who are "interested persons" as designated above
receive no compensation from the Trust. The table below shows amounts paid or
accrued to those trustees who are not designated "interested persons" during the
Trust's fiscal year ended April 30, 1999 and the total compensation that Kemper
Managed Funds paid to each trustee during the calendar year 1998.
<TABLE>
<CAPTION>
Aggregate Total Compensation Kemper Managed Funds
Name of Trustee Compensation From Trust Paid to Trustees (2)
- --------------- ----------------------- --------------------
<S> <C> <C>
John W. Ballantine(3) $ 0 $ 0
Lewis A. Burnham $5,890 $117,800
Donald L. Dunaway (1) $5,780 $125,900
Robert B. Hoffman $6,000 $109,000
Donald R. Jones $5,480 $114,200
Shirley D. Peterson $5,480 $114,000
William P. Sommers $6,330 $109,000
</TABLE>
(1) Includes deferred fees pursuant to deferred compensation agreements with
the Trust. 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 from Cash Account Trust for the latest
and all prior fiscal years are $16,500 for Mr. Dunaway .
(2) Includes compensation for service on the Boards of 25 Kemper funds with 41
fund portfolios. Each trustee currently serves as trustee of 27 Kemper
Funds with 46 fund portfolios.
(3) John W. Ballantine became a Trustee on May 18, 1999.
The Board of Trustees is responsible for the general oversight of each Fund's
business. A majority of the Board's members are not affiliated with Scudder
Kemper Investments, Inc. These "Independent Trustees" have primary
responsibility for assuring that the Fund is managed in the best interests of
its shareholders.
The Board of Trustees reviews the investment performance of the Funds and other
operational matters, including policies and procedures designed to ensure
compliance with various regulatory requirements. At least annually, the
Independent Trustees review the fees paid to the Adviser and its affiliates for
investment advisory services and other administrative and shareholder services.
In this regard, they evaluate, among other things, each Fund's investment
performance, the quality and efficiency of the various other services provided,
costs incurred by the Adviser and its affiliates and comparative information
regarding fees and expenses of competitive funds. They are assisted in this
process by the Funds' independent public accountants and by independent legal
counsel selected by the Independent Trustees.
On July 31, 1999, the officers and trustees of the Trust, 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 any class of the Portfolio,
except the persons indicated below:
<TABLE>
<CAPTION>
Name and Address % Owned Portfolio
- ---------------- ------- ---------
<S> <C> <C>
Scudder Kemper Investments, Inc. 13.02 Retail Shares
345 Park Avenue, Floor 16
New York, NY 10154
Dorothy P. Fisher 5.86 Retail Shares
10 Summit Drive
Windsor, CT
06095
Barbara F. Brehaut 7.66 Retail Shares
81 Bear Mountain Road
Ringwood, NJ 07456
Borough Company 6.18 Retail Shares
4470 Indianola Avenue
Columbus, OH 43214
Sharon H. Lasker 11.38 Retail Shares
331 Tunbridge Road
Baltimore, MD 21212
Asset Preservation, Inc. 63.3 Institutional Shares
8700 Auburn Folsom Road, Suite 600
Granite Bay, CA 95746
</TABLE>
17
<PAGE>
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 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"). In addition to the
current limits on exchanges of shares with a value over $1,000,000, shares of a
Kemper fund with a value of $1,000,000 or less (except Kemper Cash Reserves
Fund) acquired by exchange from another Kemper fund, or from a money market
fund, may not be exchanged thereafter until they have been owned for 15 days,
if, in the investment manager's judgment, the exchange activity may have an
adverse effect on the fund. In particular, a pattern of exchanges that coincides
with a "market timing" strategy may be disruptive to the Kemper fund and
therefore may be subject to 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 Portfolio and may be terminated at any time by the
shareholder or the Portfolio. Firms
18
<PAGE>
provide varying arrangements for their clients to redeem Portfolio 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.
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 Portfolio has
established several investment and redemption programs using electronic funds
transfer via the Automated Clearing House (ACH). There is currently no charge by
the Portfolio 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 Portfolio account. Your bank's crediting policies of
these transferred funds may vary. These features may be amended or terminated at
any time by the Portfolio. 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 Portfolio.
SHAREHOLDER RIGHTS
The Trust is an open-end, diversified management investment company, organized
as a business trust under the laws of Massachusetts on March 2, 1990. The Trust
may issue an unlimited number of shares of beneficial interest in one or more
series or "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. While only shares of the "Money Market Portfolio",
"Government Securities Portfolio" and "Treasury Portfolio" are presently being
offered, the Board of Trustees may authorize the issuance of additional
Portfolios if deemed desirable, each with its own investment objective, policies
and restrictions. Since the Trust offers multiple Portfolios, it is known as a
"series company." Furthermore, the Money Market Portfolio is currently divided
into four classes; the Retail Shares, Premier Shares, Institutional Shares, and
Service Shares. Shares of each 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 within 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 are fully paid and nonassessable when issued, are
transferable without restriction and have no preemptive or conversion rights.
The Trust is not required to hold annual shareholders' meetings and does not
intend to do so. Under the Agreements and Declaration of Trust of the Trust
("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 Trust 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 Trust 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 Trust, or
any registration of the Trust 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. Subject to the Agreements and Declaration of Trust of the Trust,
shareholders
19
<PAGE>
may remove trustees. 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
Trust 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.
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.
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 Trust 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
Trust 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 Trust 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 Trust 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 Trust (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
Trust. The Declaration of Trust, however, disclaims shareholder liability for
acts or obligations of the Trust and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument entered into or executed by
the Trust or the trustees. Moreover, the Declaration of Trust provides for
indemnification out of Trust property for all losses and expenses of any
shareholder held personally liable for the obligations of the Trust and the
Trust 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 Trust itself is unable to meet its obligations.
20
<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.
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
21
<PAGE>
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.
22
<PAGE>
CASH ACCOUNT TRUST
PART C.
-------
OTHER INFORMATION
-----------------
<TABLE>
<CAPTION>
Item 23. Exhibits:
- -------- ---------
<S> <C> <C>
(a) (a)(1) Amended and Restated Agreement and Declaration of Trust dated
March 17, 1990, is incorporated by reference to Post-Effective
Amendment No. 5 to the Registration Statement.
(a)(2) Establishment and Designation of Classes of Shares of Beneficial
Interest, $0.01 par value, with respect to Money Market Portfolio
Retail, Premier, Institutional, and Service Shares, is
incorporated by reference to Post-Effective Amendment No. 10 to
the Registration Statement.
(b) By-Laws of the Registrant are incorporated by reference to
Post-Effective Amendment No. 5 to the Registration Statement.
(c ) (c)(1) Establishment and Designation of Classes of Shares of Beneficial
Interest, $0.01 par value, with respect to Money Market Portfolio
Retail, Premier, Institutional, and Service Shares, is incorporated
by reference to Post-Effective Amendment No. 10 to the Registration
Statement.
(c)(2) Establishment and Designation of Classes of Shares of Beneficial
Interest, $0.01 par value, with respect to Tax Exempt Portfolio
Scudder Managed and Scudder Institutional Shares, to be filed by
subsequent amendment.
(d) Investment Management Agreement between the Registrant and Scudder
Kemper Investments, Inc., dated September 7, 1998, is incorporated
by reference to Post-Effective Amendment No. 9 to the Registration
Statement.
(e) Underwriting and Distribution Services Agreement between the
Registrant and Kemper Distributors, Inc., dated January 15, 1999,
is incorporated by reference to Post-Effective Amendment No. 10 to
the Registration Statement.
(f) Inapplicable.
(g) Custodian Agreement between the Registrant and State Street Bank
and Trust Company ("State Street Bank"), dated April 19, 1999, is
filed herein.
(h) (h)(1) Agency Agreement between the Registrant and Kemper Service
Company, dated September 6, 1990, is incorporated by reference to
Post-Effective Amendment No. 5 to the Registration Statement.
<PAGE>
(h)(2) Supplement, dated April 1, 1995, to Agency Agreement between the
Registrant and Kemper Service Company, is incorporated by
reference to Post-Effective Amendment No. 6 to the Registration
Statement.
(h)(3) Fund Accounting Services Agreement between the Registrant, on
behalf of Government Securities Portfolio, and Scudder Fund
Accounting Corporation, dated December 31, 1997, is incorporated
by reference to Post-Effective Amendment No. 8 to the Registration
Statement.
(h)(4) Fund Accounting Services Agreement between the Registrant, on
behalf of Money Market Portfolio, and Scudder Fund Accounting
Corporation dated December 31, 1997 is incorporated by reference
to Post-Effective Amendment No. 8 to the Registration Statement.
(h)(5) Fund Accounting Services Agreement between the Registrant, on
behalf of Tax-Exempt Portfolio, and Scudder Fund Accounting
Corporation, dated December 31, 1997, is incorporated by reference
to Post-Effective Amendment No. 8 to the Registration Statement.
(h)(6) Administration and Shareholder Services Agreement between the
Registrant, on behalf of Money Market Portfolio Premier Shares,
and Kemper Distributors, Inc., Inc., dated January 15, 1999, is
incorporated by reference to Post-Effective Amendment No. 10 to
the Registration Statement.
(h)(7) Administration and Shareholder Services Agreement between the
Registrant, on behalf of Money Market Portfolio Retail Shares, and
Kemper Distributors, Inc., Inc. dated January 15, 1999, is
incorporated by reference to Post-Effective Amendment No. 10 to
the Registration Statement.
(h)(8) Administration and Shareholder Services Agreement between the
Registrant, on behalf of Money Market Portfolio Institutional
Shares, and Kemper Distributors, Inc., Inc., dated January 15,
1999, is incorporated by reference to Post-Effective Amendment No.
10 to the Registration Statement.
(h)(9) Administration, Shareholder Services and Distribution Agreement
between the Registrant and Kemper Distributors, Inc., dated
December 31, 1997, incorporated by reference to Post-Effective No.
12 to the Registration Statement.
(i) Legal Opinion of Counsel is filed herein.
(j) Consent of Independent Accountants is filed herein.
(k) Inapplicable.
(l) Inapplicable.
2
<PAGE>
(m) (m)(1) Amended and Restated 12b-1 Plan between the Registrant, on behalf
of Tax-Exempt Portfolio, and Kemper Distributors, Inc. is
incorporated by reference to Post-Effective Amendment No. 9 to the
Registration Statement.
(m)(2) Amended and Restated 12b-1 Plan between the Registrant, on behalf
of Government Securities Portfolio, and Kemper Distributors, Inc.
is incorporated by reference to Post-Effective Amendment No. 9 to
the Registration Statement.
(m)(3) Amended and Restated 12b-1 Plan between the Registrant, on behalf
of Money Market Portfolio, and Kemper Distributors, Inc. is
incorporated by reference to Post-Effective Amendment No. 9 to the
Registration Statement.
(n) Inapplicable.
(o) Mutual Funds Multi-Distribution System Plan - Rule 18f-3 Plan, is
incorporated by reference to Post-Effective Amendment No. 10 to
the Registration Statement.
</TABLE>
Item 24. Persons Controlled by or under Common Control with Fund.
- -------- --------------------------------------------------------
None
Item 25. Indemnification.
- -------- ----------------
Article VIII of the Registrant's Agreement and Declaration of
Trust (Exhibit (a)(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.
Item 26. 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 26.
<TABLE>
<CAPTION>
Business and Other Connections of Board
Name of Directors of Registrant's Adviser
---- ------------------------------------
3
<PAGE>
<S> <C>
Stephen R. Beckwith Treasurer and Chief Financial Officer, Scudder Kemper Investments, Inc.**
Vice President and Treasurer, Scudder Fund Accounting Corporation*
Director, Scudder Stevens & Clark Corporation**
Director and Chairman, Scudder Defined Contribution Services, Inc.**
Director and President, Scudder Capital Asset Corporation**
Director and President, Scudder Capital Stock Corporation**
Director and President, Scudder Capital Planning Corporation**
Director and President, SS&C Investment Corporation**
Director and President, SIS Investment Corporation**
Director and President, SRV Investment Corporation**
Lynn S. Birdsong Director and Vice President, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark (Luxembourg) S.A.#
William H. Bolinder Director, Scudder Kemper Investments, Inc.**
Member Group Executive Board, Zurich Financial Services, Inc. ##
Chairman, Zurich-American Insurance Company o
Laurence W. Cheng Director, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland ##
Director, ZKI Holding Corporation xx
Gunther Gose Director, Scudder Kemper Investments, Inc.**
CFO, Member Group Executive Board, Zurich Financial Services, Inc. ##
CEO/Branch Offices, Zurich Life Insurance Company ##
Rolf Huppi Director, Chairman of the Board, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland##
Director, Chairman of the Board, Zurich Holding Company of America o
Director, ZKI Holding Corporation xx
Kathryn L. Quirk Chief Legal Officer, Chief Compliance Officer and Secretary, Scudder Kemper
Investments, Inc.**
Director, Senior Vice President & Assistant Clerk, Scudder Investor Services, Inc.*
Director, Vice President & Secretary, Scudder Fund Accounting Corporation*
Director, Vice President & Secretary, Scudder Realty Holdings Corporation*
Director & Assistant Clerk, Scudder Service Corporation*
Director, SFA, Inc.*
Vice President, Director & Assistant Secretary, Scudder Precious Metals, Inc.***
Director, Scudder, Stevens & Clark Japan, Inc.***
Director, Vice President and Secretary, Scudder, Stevens & Clark of Canada, Ltd.***
Director, Vice President and Secretary, Scudder Canada Investor Services Limited***
Director, Vice President and Secretary, Scudder Realty Advisers, Inc. x
Director and Secretary, Scudder, Stevens & Clark Corporation**
Director and Secretary, Scudder, Stevens & Clark Overseas Corporation oo
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 Financial Services, Inc.*
Director, Korea Bond Fund Management Co., Ltd.+
Cornelia M. Small Director and Vice President, Scudder Kemper Investments, Inc.**
4
<PAGE>
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
</TABLE>
* Two International Place, Boston, MA
x 333 South Hope Street, Los Angeles, CA
** 345 Park Avenue, New York, NY
# Societe Anonyme, 47, Boulevard Royal, L-2449 Luxembourg,
R.C. Luxembourg B 34.564
*** Toronto, Ontario, Canada
xxx Grand Cayman, Cayman Islands, British West Indies
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
Item 27. Principal Underwriters.
- -------- -----------------------
(a)
Kemper Distributors, Inc. acts as principal underwriter of the
Registrant's shares and also acts as principal underwriter for other
funds managed by Scudder Kemper Investments, Inc.
(b)
The Underwriter has employees who are denominated officers of an
operational area. Such persons do not have corporation-wide
responsibilities and are not considered officers for the purpose of
this Item 27.
<TABLE>
<CAPTION>
(1) (2) (3)
Positions and Offices with Positions and
Name Kemper Distributors, Inc. Offices with Registrant
---- ------------------------- -----------------------
<S> <C> <C>
James L. Greenawalt President None
Thomas W. Littauer Director, Chief Executive Officer and Vice President
Vice Chairman
Kathryn L. Quirk Director, Secretary, Chief Legal Vice President
Officer and Vice President
James J. McGovern Chief Financial Officer and Treasurer None
Linda J. Wondrack Vice President and Chief Compliance Vice President
Officer
Paula Gaccione Vice President None
Michael E. Harrington Vice President None
5
<PAGE>
Positions and Offices with Positions and
Name Kemper Distributors, Inc. Offices with Registrant
---- ------------------------- -----------------------
Robert A. Rudell Vice President None
William M. Thomas Vice President None
Todd N. Gierke Assistant Treasurer None
Philip J. Collora Assistant Secretary Vice President and Secretary
Paul J. Elmlinger Assistant Secretary None
Diane E. Ratekin Assistant Secretary None
Mark S. Casady Director, Chairman President
Stephen R. Beckwith Director None
</TABLE>
(c) Not applicable.
Item 28. 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, State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110 or, in the case of records
concerning transfer agency functions, at the offices of State Street
Bank and Trust Company and of the shareholder service agent, Kemper
Service Company, 811 Main Street, Kansas City, Missouri 64105.
Item 29. Management Services.
- -------- --------------------
Inapplicable.
Item 30. Undertakings.
- -------- -------------
Inapplicable.
6
<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
27th day of August, 1999.
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 August 27, 1999 on behalf of the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Mark S. Casady August 27, 1999
- --------------------------------------
Mark S. Casady President
/s/ Thomas W. Littauer August 27, 1999
- --------------------------------------
Thomas W. Littauer Chairman and Trustee
/s/ John W. Ballantine August 27, 1999
- --------------------------------------
John W. Ballantine* Trustee
/s/ Lewis A. Burnham August 27, 1999
- --------------------------------------
Lewis A. Burnham* Trustee
/s/ Donald L. Dunaway August 27, 1999
- --------------------------------------
Donald L. Dunaway* Trustee
/s/ Robert B. Hoffman August 27, 1999
- --------------------------------------
Robert B. Hoffman* Trustee
/s/ Donald R. Jones August 27, 1999
- --------------------------------------
Donald R. Jones* Trustee
/s/ Shirley D. Peterson August 27, 1999
- --------------------------------------
Shirley D. Peterson* Trustee
/s/ Cornelia M. Small
- --------------------------------------
Cornelia M. Small Trustee August 27, 1999
<PAGE>
/s/ William P. Sommers August 27, 1999
- --------------------------------------
William P. Sommers* Trustee
/s/ John R. Hebble August 27, 1999
- --------------------------------------
John R. Hebble Treasurer (Principal Financial and
Accounting Officer)
</TABLE>
*By: /s/ Philip J. Collora
----------------------------
Philip J. Collora**
** Philip J. Collora signs this document
pursuant to powers of attorney contained in
Post-Effective Amendment No. 8 to the
Registration Statement, filed on August 28,
1998 and Post-Effective Amendment No. 12 to
the Registration Statement, filed on
June 18, 1999.
2
<PAGE>
File No. 33-32476
File No. 811-5970
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM N-1A
POST-EFFECTIVE AMENDMENT NO. 13
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 14
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
CASH ACCOUNT TRUST
<PAGE>
CASH ACCOUNT TRUST
EXHIBIT INDEX
(g)
2
Exhibit (g)
CUSTODIAN CONTRACT
between
KEMPER CASH ACCOUNT TRUST
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
<S> <C> <C> <C>
1. Employment of Custodian and Property to be Held By It...........................................1
2. Duties of the Custodian with Respect to Property of
the Fund Held by the Custodian in the United States.............................................2
2.1 Holding Securities.....................................................................2
2.2 Delivery of Securities.................................................................2
2.3 Registration of Securities.............................................................4
2.4 Bank Accounts..........................................................................5
2.5 Availability of Federal Funds..........................................................5
2.6 Collection of Income...................................................................5
2.7 Payment of Fund Monies.................................................................6
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased...................................................................7
2.9 Appointment of Agents..................................................................7
2.10 Deposit of Securities in U.S. Securities System........................................7
2.11 Fund Assets Held in the Custodian's
Direct Paper System....................................................................8
2.12 Segregated Account.....................................................................9
2.13 Ownership Certificates for Tax Purposes ..............................................10
2.14 Proxies...............................................................................10
2.15 Communications Relating to Portfolio Securities.......................................10
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside the United States........................................................10
3.1 Appointment of Foreign Sub-Custodians.................................................10
3.2 Assets to be Held.....................................................................11
3.3 Foreign Securities Depositories.......................................................11
3.4 Agreements with Foreign Banking Institutions..........................................11
3.5 Access of Independent Accountants of the Fund.........................................11
3.6 Reports by Custodian..................................................................11
3.7 Transactions in Foreign Custody Account...............................................12
3.8 Liability of Foreign Sub-Custodians...................................................12
3.9 Liability of Custodian................................................................12
3.10 Reimbursement for Advances............................................................13
3.11 Monitoring Responsibilities...........................................................13
3.12 Branches of U.S. Banks................................................................13
3.13 Tax Law...............................................................................14
<PAGE>
TABLE OF CONTENTS
-----------------
Page
4. Payments for Sales or Repurchases or Redemptions
of Shares .....................................................................................14
5. Proper Instructions............................................................................14
6. Actions Permitted without Express Authority....................................................15
7. Evidence of Authority..........................................................................15
8. Duties of Custodian with Respect to the Books of Account
and Calculations of Net Asset Value and Net Income.............................................16
9. Records........................................................................................16
10. Opinion of Fund's Independent Accountants......................................................16
11. Reports to Fund by Independent Public Accountants..............................................16
12. Compensation of Custodian......................................................................17
13. Responsibility of Custodian....................................................................17
14. Effective Period, Termination and Amendment....................................................18
15. Successor Custodian............................................................................19
16. Interpretive and Additional Provisions........................................................ 19
17. Additional Funds...............................................................................20
18. Massachusetts Law to Apply.....................................................................20
19. Prior Contracts................................................................................20
20. Shareholder Communications Election............................................................20
</TABLE>
<PAGE>
CUSTODIAN CONTRACT
------------------
This Contract between Kemper Cash Account Trust, a business trust
organized and existing under the laws of The Commonwealth of Massachusetts and
having its principal place of business at 222 South Riverside Plaza, Chicago,
Illinois 60606 (the "Fund"), and State Street Bank and Trust Company, a
Massachusetts trust company having its principal place of business at 225
Franklin Street, Boston, Massachusetts 02110 (the "Custodian"),
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Fund currently intends to offer shares in two (2) series,
Government Securities Portfolio and Money Market Portfolio (such series together
with all other series subsequently established by the Fund and made subject to
this Contract in accordance with Article 17, being herein referred to as the
"Portfolio(s)");
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto do hereby agree as follows:
1. Employment of Custodian and Property to be Held by It
-----------------------------------------------------
The Fund hereby employs the Custodian as the custodian of the assets of
the Portfolios of the Fund, including securities which the Fund, on behalf of
the applicable Portfolio desires to be held in places within the United States
of America ("domestic securities") and securities it desires to be held outside
the United States of America ("foreign securities") pursuant to the provisions
of the Fund's declaration of trust (the "Declaration of Trust"). The Fund on
behalf of the Portfolio(s) agrees to deliver to the Custodian all securities and
cash of the Portfolios, and all payments of income, payments of principal or
capital distributions received by it with respect to all securities owned by the
Portfolio(s) from time to time, and the cash consideration received by it for
such new or treasury shares of beneficial interest of the Fund representing
interests in the Portfolios ("Shares") as may be issued or sold from time to
time. The Custodian shall not be responsible for any property of a Portfolio
held or received by the Fund on behalf of the Portfolio and not delivered to the
Custodian.
Upon receipt of "Proper Instructions" (as such term is defined in
Article 5 of this Contract), the Custodian shall on behalf of the applicable
Portfolio(s) from time to time employ one or more sub-custodians located in the
United States of America, including any state or political subdivision thereof
and any territory over which its political sovereignty extends (the "United
States" or "U.S."), but only in accordance with an applicable vote by the board
of trustees of the Fund (the "Board of Trustees") on behalf of the applicable
Portfolio(s) and provided that the Custodian shall
<PAGE>
have no more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian. The Custodian may employ as sub-custodians
for the Fund's foreign securities on behalf of the applicable Portfolio(s) the
foreign banking institutions and foreign securities depositories designated in
Schedule A hereto but only in accordance with the provisions of Article 3.
2. Duties of the Custodian with Respect to Property of the Fund Held By
--------------------------------------------------------------------
the Custodian in the United States
----------------------------------
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of each Portfolio all non-cash property to be held by
it in the United States including all domestic securities owned by such
Portfolio other than (a) securities which are maintained in a "U.S.
Securities System" (as such term is defined in Section 2.10 of this
Contract) and (b) commercial paper of an issuer for which State Street
Bank and Trust Company acts as issuing and paying agent ("Direct
Paper") which is deposited and/or maintained in the Custodian's Direct
Paper System pursuant to Section 2.11.
2.2 Delivery of Securities. The Custodian shall release and deliver
domestic securities owned by a Portfolio and held by the Custodian or
in a U.S. Securities System account of the Custodian, which account
shall not include any assets of the Custodian other than assets held as
a fiduciary, custodian or otherwise for its customers ("U.S. Securities
System Account") or in the Custodian's Direct Paper book-entry system
account, which account shall not include any assets of the Custodian
other than assets held as a fiduciary, custodian or otherwise for its
customers ("Direct Paper System Account") only upon receipt of Proper
Instructions from the Fund on behalf of the applicable Portfolio, which
may be continuing instructions when deemed appropriate by the parties,
and only in the following cases:
1) Upon sale of such securities for the account of the Portfolio
and receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Portfolio;
3) In the case of a sale effected through a U.S. Securities
System, in accordance with the provisions of Section 2.10
hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
2
<PAGE>
6) To the issuer thereof, or its agent, for transfer into the
name of the Portfolio or into the name of any nominee or
nominees of the Custodian or into the name or nominee name of
any agent appointed pursuant to Section 2.9 or into the name
or nominee name of any sub-custodian appointed pursuant to
Article 1; or for exchange for a different number of bonds,
certificates or other evidence representing the same aggregate
face amount or number of units; provided that, in any such
case, the new securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street delivery"
custom; provided that, in any such case, the Custodian shall
have no responsibility or liability for any loss arising from
the delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that,
in any such case, the new securities and cash, if any, are to
be delivered to the Custodian;
10) For delivery in connection with any loans of securities made
by the Portfolio, but only against receipt of adequate
collateral as agreed upon from time to time by the Custodian
and the Fund on behalf of the Portfolio, which may be in the
form of cash or obligations issued by the United States
government, its agencies or instrumentalities, except that in
connection with any loans for which collateral is to be
credited to the Custodian's U.S. Securities System Account,
the Custodian will not be held liable or responsible for the
delivery of securities owned by the Portfolio prior to the
receipt of such collateral;
11) For delivery as security in connection with any borrowings by
the Fund on behalf of the Portfolio requiring a pledge of
assets by the Fund on behalf of the Portfolio, but only
against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities
exchange, or of any similar organization or organizations,
regarding
3
<PAGE>
escrow or other arrangements in connection with transactions
by the Portfolio of the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian, and a Futures Commission Merchant registered under
the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any
Contract Market, or any similar organization or organizations,
regarding account deposits in connection with transactions by
the Portfolio of the Fund;
14) Upon receipt of instructions from the transfer agent for the
Fund (the "Transfer Agent"), for delivery to such Transfer
Agent or to the holders of shares in connection with
distributions in kind, as may be described from time to time
in the Fund's currently effective prospectus and statement of
additional information related to the Portfolio (the
"Prospectus"), in satisfaction of requests by holders of
Shares for repurchase or redemption; and
15) For any other proper corporate purpose, but only upon receipt
of, in addition to Proper Instructions from the Fund on behalf
of the applicable Portfolio, a certified copy of a resolution
of the Board of Trustees or of the executive committee thereof
signed by an officer of the Fund and certified by the Fund's
Secretary or Assistant Secretary specifying the securities of
the Portfolio to be delivered, setting forth the purpose for
which such delivery is to be made, declaring such purpose to
be a proper corporate purpose, and naming the person or
persons to whom delivery of such securities shall be made.
2.3 Registration of Securities. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the
Portfolio or of any nominee of the Custodian which nominee shall be
assigned exclusively to the Portfolio, unless the Fund has authorized
in writing the appointment of a nominee to be used in common with other
registered investment companies having the same investment adviser as
the Portfolio, or in the name or nominee name of any agent appointed
pursuant to Section 2.9 or in the name or nominee name of any
sub-custodian appointed pursuant to Article 1. All securities accepted
by the Custodian on behalf of the Portfolio under the terms of this
Contract shall be in "street name" or other good delivery form. If,
however, the Fund directs the Custodian to maintain securities in
"street name", the Custodian shall utilize reasonable efforts only to
(i) timely collect income due the Fund on such securities and (ii)
notify the Fund of relevant corporate actions including, without
limitation, pendency of calls, maturities, tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Portfolio
of the Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Contract, and shall hold in such account
or accounts, subject to the provisions hereof, all cash received by it
from or for the account of the Portfolio, other than cash maintained by
the Portfolio in a bank account
4
<PAGE>
established and used in accordance with Rule 17f-3 under the Investment
Company Act of 1940, as amended. Funds held by the Custodian for a
Portfolio may be deposited by it to its credit as Custodian in the
banking department of the Custodian or in such other banks or trust
companies as it may in its discretion deem necessary or desirable;
provided, however, that every such bank or trust company shall be
qualified to act as a custodian under the Investment Company Act of
1940, as amended (the "Investment Company Act") and that each such bank
or trust company and the funds to be deposited with each such bank or
trust company shall on behalf of each applicable Portfolio be approved
by vote of a majority of the Board of Trustees. Such funds shall be
deposited by the Custodian in its capacity as Custodian and shall be
withdrawable by the Custodian only in that capacity.
2.5 Availability of Federal Funds. Upon agreement between the Fund on
behalf of each applicable Portfolio and the Custodian, the Custodian
shall, upon the receipt of Proper Instructions from the Fund on behalf
of a Portfolio, make federal funds available to such Portfolio as of
specified times agreed upon from time to time by the Fund and the
Custodian in the amount of checks received in payment for Shares of
such Portfolio which are deposited into the Portfolio's account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to United States-registered securities held hereunder to
which each Portfolio shall be entitled either by law or pursuant to
custom in the securities business, and shall collect on a timely basis
all income and other payments with respect to domestic bearer
securities if, on the date of payment by the issuer, such securities
are held by the Custodian or its agent thereof and shall credit such
income, as collected, to such Portfolio's account. Without limiting the
generality of the foregoing, the Custodian shall detach and present for
payment all coupons and other income items requiring presentation as
and when they become due and shall collect interest when due on
securities held hereunder. Collection of income due each Portfolio on
domestic securities loaned pursuant to the provisions of Section 2.2
(10) shall be the responsibility of the Fund; the Custodian will have
no duty or responsibility in connection therewith, other than to
provide the Fund with such information or data in its possession as may
be necessary to assist the Fund in arranging for the timely delivery to
the Custodian of the income to which the Portfolio is properly
entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions from the
Fund on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, the Custodian
shall pay out monies of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of
the Portfolio but only (a) against the delivery of such
securities or evidence of title to such options, futures
contracts or options on futures contracts to the Custodian (or
any bank, banking firm or trust company doing business in the
United States or abroad which is qualified under the
Investment Company Act to act as a custodian and has been
designated by the Custodian as its agent for this purpose)
registered in the name of the Portfolio or in
5
<PAGE>
the name of a nominee of the Custodian referred to in Section
2.3 hereof or in proper form for transfer; (b) in the case of
a purchase effected through a U.S. Securities System, in
accordance with the conditions set forth in Section 2.10
hereof; (c) in the case of a purchase involving the Direct
Paper System, in accordance with the conditions set forth in
Section 2.11; (d) in the case of repurchase agreements entered
into between the Fund on behalf of the Portfolio and the
Custodian, or another bank, or a broker-dealer which is a
member of NASD, (i) against delivery of the securities either
in certificate form or through an entry crediting the
Custodian's account at the Federal Reserve Bank with such
securities or (ii) against delivery of the receipt evidencing
purchase by the Portfolio of securities owned by the Custodian
along with written evidence of the agreement by the Custodian
to repurchase such securities from the Portfolio or (e) for
transfer to a time deposit account of the Fund in any bank,
whether domestic or foreign; such transfer may be effected
prior to receipt of a confirmation from a broker and/or the
applicable bank pursuant to Proper Instructions from the Fund
as defined in Article 5;
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Shares issued by the
Portfolio as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments
for the account of the Portfolio: interest, taxes, management
fees, accounting fees, transfer agent fees, legal fees and
operating expenses of the Fund whether or not such expenses
are to be in whole or part capitalized or treated as deferred
expenses;
5) For the payment of any dividends on Shares of the Portfolio
declared pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions from the Fund on behalf of the
Portfolio, a certified copy of a resolution of the Board of
Trustees or of the executive committee thereof signed by an
officer of the Fund and certified by the Fund's Secretary or
an Assistant Secretary, specifying the amount of such payment,
setting forth the purpose for which such payment is to be
made, declaring such purpose to be a proper purpose, and
naming the person or persons to whom such payment is to be
made.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of domestic securities for the
account of a Portfolio is made by the Custodian in advance of
6
<PAGE>
receipt of the securities purchased in the absence of specific written
instructions from the Fund on behalf of such Portfolio to so pay in
advance, the Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been received by
the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act to
act as a custodian, as its agent to carry out such of the provisions of
this Article 2 as the Custodian may from time to time direct; provided,
however, that the appointment of any agent shall not relieve the
Custodian of its responsibilities or liabilities hereunder.
2.10 Deposit of Securities in U.S. Securities Systems. The Custodian may
deposit and/or maintain domestic securities owned by a Portfolio in a
clearing agency registered with the Securities and Exchange Commission
(the "SEC") under Section 17A of the Exchange Act, which acts as a
securities depository, or in the book-entry system authorized by the
U.S. Department of the Treasury and certain federal agencies (a "U.S.
Securities System") in accordance with applicable Federal Reserve Board
and SEC rules and regulations, if any, and subject to the following
provisions:
1) The Custodian may keep domestic securities of the Portfolio in
a U.S. Securities System provided that such securities are
represented in a U.S. Securities System Account;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a U.S. Securities System
shall identify by book-entry those securities belonging to the
Portfolio;
3) The Custodian shall pay for domestic securities purchased for
the account of the Portfolio upon (i) receipt of advice from
the U.S. Securities System that such securities have been
transferred to the U.S. Securities System Account and (ii) the
making of an entry on the records of the Custodian to reflect
such payment and transfer for the account of the Portfolio;
the Custodian shall transfer securities sold for the account
of the Portfolio upon (i) receipt of advice from the U.S.
Securities System that payment for such securities has been
transferred to the U.S. Securities System Account and (ii) the
making of an entry on the records of the Custodian to reflect
such transfer and payment for the account of the Portfolio.
Copies of all advices from the U.S. Securities System of
transfers of securities for the account of the Portfolio shall
identify the Portfolio, be maintained for the Portfolio by the
Custodian and be provided to the Fund at its request. Upon
request, the Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from the account
of the Portfolio in the form of a written advice or notice and
shall furnish to the Fund on behalf of the Portfolio copies of
daily transaction sheets reflecting each day's transactions in
the U.S. Securities System for the account of the Portfolio;
7
<PAGE>
4) The Custodian shall provide the Fund on behalf of the
Portfolio(s) with any report obtained by the Custodian on the
U.S. Securities System's accounting system, internal
accounting control and procedures for safeguarding securities
deposited in the U.S. Securities System;
5) The Custodian shall have received from the Fund on behalf of
the Portfolio the initial or annual certificate, as the case
may be, required by Article 14 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the
Portfolio for any loss or damage to the Portfolio resulting
from use of the U.S. Securities System by reason of any
negligence, misfeasance or misconduct of the Custodian or any
of its agents or of any of its or their employees or from
failure of the Custodian or any such agent to enforce
effectively such rights as it may have against the U.S.
Securities System; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with
respect to any claim against the U.S. Securities System or any
other person which the Custodian may have as a consequence of
any such loss or damage if and to the extent that the
Portfolio has not been made whole for any such loss or damage.
2.11 Fund Assets Held in the Custodian's Direct Paper System. The Custodian
may deposit and/or maintain securities owned by a Portfolio in the
Direct Paper System of the Custodian subject to the following
provisions:
1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper Instructions
from the Fund on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the
Direct Paper System only if such securities are represented in
the Direct Paper System Account which shall not include any
assets of the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System
shall identify by book-entry those securities belonging to the
Portfolio;
4) The Custodian shall pay for securities purchased for the
account of the Portfolio upon the making of an entry on the
records of the Custodian to reflect such payment and transfer
of securities to the account of the Portfolio. The Custodian
shall transfer securities sold for the account of the
Portfolio upon the making of an entry on the records of the
Custodian to reflect such transfer and receipt of payment for
the account of the Portfolio;
8
<PAGE>
5) The Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from the account
of the Portfolio, in the form of a written advice or notice,
of Direct Paper on the next business day following such
transfer and shall furnish to the Fund on behalf of the
Portfolio copies of daily transaction sheets reflecting each
day's transaction in the Direct Paper System for the account
of the Portfolio; and
6) Upon the reasonable request of the Fund, the Custodian shall
provide the Fund with any report on the Direct Paper System's
system of internal accounting controls which had been prepared
as of the time of such request.
2.12 Segregated Account. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for and on
behalf of each such Portfolio, into which account or accounts may be
transferred cash and/or securities, including securities maintained in
a U.S. Securities System Account by the Custodian pursuant to Section
2.10 hereof (i) in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Exchange Act and a member of the
NASD (or any futures commission merchant registered under the Commodity
Exchange Act), relating to compliance with the rules of The Options
Clearing Corporation and of any registered national securities exchange
(or the Commodity Futures Trading Commission or any registered Contract
Market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Portfolio, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or written by the
Portfolio or commodity futures contracts or options thereon purchased
or sold by the Portfolio, (iii) for the purposes of compliance by the
Portfolio with the procedures required by Investment Company Act
Release No. 10666, or any subsequent release or releases of the SEC
relating to the maintenance of segregated accounts by registered
investment companies and (iv) for other proper corporate purposes, but
only, in the case of this clause (iv), upon receipt of, in addition to
Proper Instructions from the Fund on behalf of the applicable
Portfolio, a certified copy of a resolution of the Board of Trustees or
of the executive committee thereof signed by an officer of the Fund and
certified by the Fund's Secretary or an Assistant Secretary, setting
forth the purpose or purposes of such segregated account and declaring
such purposes to be proper corporate purposes.
2.13 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of each Portfolio held by
it and in connection with transfers of such securities.
2.14 Proxies. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder
of such securities, if the securities are registered otherwise than in
the name of the Portfolio or a nominee of the Portfolio, all proxies,
without indication of the manner in which such proxies are to be voted,
and shall
9
<PAGE>
promptly deliver to the Fund on behalf of the Portfolio such proxies,
all proxy soliciting materials and all notices relating to such
securities.
2.15 Communications Relating to Portfolio Securities. Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly to the
Fund for each Portfolio all written information (including, without
limitation, pendency of calls and maturities of domestic securities and
expirations of rights in connection therewith and notices of exercise
of call and put options written by the Fund on behalf of the Portfolio
and the maturity of futures contracts purchased or sold by the
Portfolio) received by the Custodian from issuers of the securities
being held for the Portfolio. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Portfolio all
written information received by the Custodian from issuers of the
securities whose tender or exchange is sought and from the party (or
his agents) making the tender or exchange offer. If the Portfolio
desires to take action with respect to any tender offer, exchange offer
or any other similar transaction, the Portfolio shall notify the
Custodian at least three (3) business days prior to the date on which
the Custodian is to take such action.
3. Duties of the Custodian with Respect to Property of the Fund Held
-----------------------------------------------------------------
Outside of the United States
----------------------------
3.1 Appointment of Foreign Sub-Custodians. The Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for the Portfolio's
securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories
designated on Schedule A hereto (the "foreign sub-custodians"). Upon
receipt of Proper Instructions, together with a certified resolution of
the Board of Trustees, the Custodian and the Fund on behalf of the
Portfolio(s) may agree to amend Schedule A hereto from time to time to
designate additional foreign banking institutions and foreign
securities depositories to act as sub-custodian. Upon receipt of Proper
Instructions, the Fund may instruct the Custodian to cease the
employment of any one or more such foreign sub-custodians for
maintaining custody of the Portfolio's assets.
3.2 Assets to be Held. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5
under the Investment Company Act of 1940, and (b) cash and cash
equivalents in such amounts as the Custodian or the Fund may determine
to be reasonably necessary to effect the Fund's foreign securities
transactions. The Custodian shall identify on its books as belonging to
the Fund, the foreign securities of the Fund held by each foreign
sub-custodian.
3.3 Foreign Securities Depositories. Except as may otherwise be agreed upon
in writing by the Custodian and the Fund, assets of the Funds shall be
maintained in foreign securities depositories only through arrangements
implemented by the foreign banking institutions serving as
sub-custodians pursuant to the terms hereof. Where possible, such
arrangements shall include entry into agreements containing the
provisions set forth in Section 3.4 hereof.
10
<PAGE>
3.4 Agreements with Foreign Banking Institutions. Each agreement with a
foreign banking institution shall provide that (a) the assets of each
Portfolio will not be subject to any right, charge, security interest,
lien or claim of any kind in favor of the foreign banking institution
or its creditors or agent, except a claim of payment for their safe
custody or administration; (b) beneficial ownership of the assets of
each Portfolio will be freely transferable without the payment of money
or value other than for custody or administration; (c) adequate records
will be maintained identifying the assets as belonging to the Custodian
on behalf of its customers; (d) officers of or auditors employed by, or
other representatives of the Custodian, including to the extent
permitted under applicable law the independent public accountants for
the Fund, will be given access to the books and records of the foreign
banking institution relating to its actions under its agreement with
the Custodian; and (e) assets of the Portfolios held by the foreign
sub-custodian will be subject only to the instructions of the Custodian
or its agents.
3.5 Access of Independent Accountants of the Fund. Upon request of the
Fund, the Custodian will use reasonable efforts to arrange for the
independent accountants of the Fund to be afforded access to the books
and records of any foreign banking institution employed as a foreign
sub-custodian insofar as such books and records relate to the
performance of such foreign banking institution under its agreement
with the Custodian.
3.6 Reports by Custodian. The Custodian will supply to the Fund from time
to time, as mutually agreed upon, statements in respect of the
securities and other assets of the Portfolio(s) held by foreign
sub-custodians, including but not limited to an identification of
entities having possession of Portfolio securities and other assets and
advices or notifications of any transfers of securities to or from each
custodial account maintained by a foreign banking institution for the
Custodian on behalf of its customers indicating, as to securities
acquired for a Portfolio, the identity of the entity having physical
possession of such securities.
3.7 Transactions in Foreign Custody Account. (a) Except as otherwise
provided in paragraph (b) of this Section 3.7, the provision of
Sections 2.2 and 2.7 of this Contract shall apply, mutatis mutandis to
the foreign securities of the Portfolio(s) held outside the United
States by foreign sub-custodians.
(b) Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account of each
applicable Portfolio and delivery of securities maintained for the
account of each applicable Portfolio may be effected in accordance with
the customary established securities trading or securities processing
practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivering
securities to the purchaser thereof or to a dealer therefor (or an
agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such
purchaser or dealer.
11
<PAGE>
(c) Securities maintained in the custody of a foreign sub-custodian may
be maintained in the name of such entity's nominee to the same extent
as set forth in Section 2.3 of this Contract, and the Fund agrees to
hold any such nominee harmless from any liability as a holder of record
of such securities.
3.8 Liability of Foreign Sub-Custodians. Each agreement pursuant to which
the Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable care
in the performance of its duties and to indemnify, and hold harmless,
the Custodian and the Fund from and against any loss, damage, cost,
expense, liability or claim arising out of or in connection with the
institution's performance of such obligations. At the election of the
Fund on behalf of the Portfolio, it shall be entitled to be subrogated
to the rights of the Custodian with respect to any claims against a
foreign banking institution as a consequence of any such loss, damage,
cost, expense, liability or claim if and to the extent that the
Portfolio has not been made whole for any such loss, damage, cost,
expense, liability or claim.
3.9 Liability of Custodian. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a
U.S. bank as contemplated by Section 3.12 hereof, the Custodian shall
not be liable for any loss, damage, cost, expense, liability or claim
resulting from nationalization, expropriation, currency restrictions,
or acts of war or terrorism or any loss where the sub-custodian has
otherwise exercised reasonable care. Notwithstanding the foregoing
provisions of this Section 3.9, in delegating custody duties to State
Street London Ltd., the Custodian shall not be relieved of any
responsibility to the Fund for any loss due to such delegation, except
such loss as may result from (a) political risk (including, but not
limited to, exchange control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed hostilities) or
(b) other losses (excluding a bankruptcy or insolvency of State Street
London Ltd. not caused by political risk) due to Acts of God, nuclear
incident or other losses under circumstances where the Custodian and
State Street London Ltd. have exercised reasonable care.
3.10 Reimbursement for Advances. If the Fund requires the Custodian to
advance cash or securities for any purpose for the benefit of a
Portfolio including the purchase or sale of foreign exchange or of
contracts for foreign exchange, or in the event that the Custodian or
its nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance
of this Contract, except such as may arise from its or its nominee's
own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the applicable
Portfolio shall be security therefor and should the Fund fail to repay
the Custodian promptly, the Custodian shall be entitled to utilize
available cash and to dispose of such Portfolio's assets to the extent
necessary to obtain reimbursement.
12
<PAGE>
3.11 Monitoring Responsibilities. The Custodian shall furnish annually to
the Fund (during the month of June) information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection
with the initial approval of this Contract. In addition, the Custodian
will promptly inform the Fund in the event that the Custodian learns of
a material adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund or in the
case of any foreign sub-custodian not the subject of an exemptive order
from the SEC is notified by such foreign sub-custodian that there
appears to be a substantial likelihood that its shareholders' equity
will decline below $200 million (U.S. dollars or the local currency
equivalent thereof) or that its shareholders' equity has declined below
$200 million (in each case computed in accordance with generally
accepted U.S. accounting principles).
3.12 Branches of U.S. Banks. (a) Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the custody of
Portfolio assets are maintained in a foreign branch of a banking
institution which is a "bank" as defined by Section 2(a)(5) of the
Investment Company Act meeting the qualification set forth in Section
26(a) of said Act. The appointment of any such branch as a
sub-custodian shall be governed by Article 1 of this Contract.
(b) Cash held for each Portfolio of the Fund in the United Kingdom
shall be maintained in an interest bearing account established for the
Fund with the Custodian's London branch, which account shall be subject
to the direction of the Custodian, State Street London Ltd. or both.
3.13 Tax Law. The Custodian shall have no responsibility or liability for
any obligations now or hereafter imposed on the Fund or the Custodian
as custodian of the Fund by the tax law of the United States. It shall
be the responsibility of the Fund to notify the Custodian of the
obligations imposed on the Fund or the Custodian as custodian of the
Fund by the tax law of jurisdictions other than those mentioned in the
above sentence, including responsibility for withholding and other
taxes, assessments or other governmental charges, certifications and
governmental reporting. The sole responsibility of the Custodian with
regard to such tax law shall be to use reasonable efforts to assist the
Fund with respect to any claim for exemption or refund under the tax
law of jurisdictions for which the Fund has provided such information.
4. Payments for Sales or Repurchases or Redemptions of Shares
----------------------------------------------------------
The Custodian shall receive from the distributor for the Shares or from
the Transfer Agent and deposit into the account of the appropriate Portfolio
such payments as are received for Shares of that Portfolio issued or sold from
time to time by the Fund. The Custodian will provide timely notification to the
Fund on behalf of each Portfolio and the Transfer Agent of any receipt by it of
payments for Shares of such Portfolio.
13
<PAGE>
From such funds as may be available for the purpose but subject to the
limitations of the Declaration of Trust and any applicable votes of the Board of
Trustees pursuant thereto, the Custodian shall, upon receipt of instructions
from the Transfer Agent, make funds available for payment to holders of Shares
who have delivered to the Transfer Agent a request for redemption or repurchase
of their Shares. In connection with the redemption or repurchase of Shares, the
Custodian is authorized upon receipt of instructions from the Transfer Agent to
wire funds to or through a commercial bank designated by the redeeming
shareholders. In connection with the redemption or repurchase of Shares, the
Custodian shall honor checks drawn on the Custodian by a holder of Shares, which
checks have been furnished by the Fund to the holder of Shares, when presented
to the Custodian in accordance with such procedures and controls as are mutually
agreed upon from time to time between the Fund and the Custodian.
5. Proper Instructions
-------------------
Proper Instructions as used throughout this Contract means a writing
signed or initialed by one or more person or persons as the Board of Trustees
shall have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes them
to have been given by a person authorized to give such instructions with respect
to the transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing. If given pursuant to procedures to be agreed upon by the
Custodian and the Fund, Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices. For purposes of this
Section, Proper Instructions shall include instructions received by the
Custodian pursuant to any three - party agreement which requires a segregated
asset account in accordance with Section 2.12.
6. Actions Permitted without Express Authority
-------------------------------------------
The Custodian may in its discretion, without express authority from the
Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Contract, provided that all such payments
shall be accounted for to the Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Portfolio, checks,
drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property
of the Portfolio except as otherwise directed by the Board of
Trustees.
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<PAGE>
7. Evidence of Authority
---------------------
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed by or on behalf of the Fund.
The Custodian may receive and accept a certified copy of a vote of the Board of
Trustees as conclusive evidence (a) of the authority of any person to act in
accordance with such vote or (b) of any determination or of any action by the
Board of Trustees pursuant to the Declaration of Trust as described in such
vote, and such vote may be considered as in full force and effect until receipt
by the Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account and
------------------------------------------------------------
Calculation of Net Asset Value and Net Income
---------------------------------------------
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Trustees to keep the books of
account of each Portfolio and/or compute the net asset value per share of the
outstanding Shares of each Portfolio or, if directed in writing to do so by the
Fund on behalf of the Portfolio(s), shall itself keep such books of account
and/or compute such net asset value per share. If so directed, the Custodian
shall also calculate daily the net income of the Portfolio as described in the
Prospectus and shall advise the Fund and the Transfer Agent daily of the total
amount of such net income and, if instructed in writing by an officer of the
Fund to do so, shall advise the Transfer Agent periodically of the division of
such net income among its various components. The calculations of the net asset
value per share and the daily income of each Portfolio shall be made at the time
or times described from time to time in the Prospectus.
9. Records
-------
The Custodian shall with respect to each Portfolio create and maintain
all records relating to its activities and obligations under this Contract in
such manner as will meet the obligations of the Fund under the Investment
Company Act, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder. All such records shall be the property of the Fund and shall
at all times during the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of the Fund and
employees and agents of the SEC. The Custodian shall, at the Fund's request,
supply the Fund with a tabulation of securities owned by each Portfolio and held
by the Custodian and shall, when requested to do so by the Fund and for such
compensation as shall be agreed upon between the Fund and the Custodian, include
certificate numbers in such tabulations.
15
<PAGE>
10. Opinion of Fund's Independent Accountants
-----------------------------------------
The Custodian shall take all reasonable action, as the Fund on behalf
of each applicable Portfolio may from time to time request, to obtain from year
to year favorable opinions from the Fund's independent accountants with respect
to its activities hereunder in connection with the preparation of the Fund's
Form N-1A and N-SAR or other annual reports to the SEC and with respect to any
other SEC requirements.
11. Reports to Fund by Independent Public Accountants
-------------------------------------------------
The Custodian shall provide the Fund at such times as the Fund may
reasonably require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts, including
securities deposited and/or maintained in a Securities System, relating to the
services provided by the Custodian under this Contract; such reports shall be of
sufficient scope and in sufficient detail, as may reasonably be required by the
Fund to provide reasonable assurance that any material inadequacies would be
disclosed by such examination, and, if there are no such inadequacies, the
reports shall so state.
12. Compensation of Custodian
-------------------------
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian as agreed upon from time to time between the
Fund on behalf of each applicable Portfolio and the Custodian.
13. Responsibility of Custodian
---------------------------
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Contract, but
shall be kept indemnified by and shall be without liability to the Fund for any
action taken or omitted by it in good faith without negligence. It shall be
entitled to rely on and may act upon advice of counsel (who may be counsel for
the Fund) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution appointed pursuant to the provisions of Article 3 to the
same extent as set forth in Article 1 hereof
16
<PAGE>
with respect to sub-custodians located in the United States (except as
specifically provided in Section 3.9) and, regardless of whether assets are
maintained in the custody of a foreign banking institution, a foreign securities
depository or a branch of a U.S. bank as contemplated by Section 3.12 hereof,
the Custodian shall not be liable for any loss, damage, cost, expense, liability
or claim resulting from, or caused by, the direction of or authorization by the
Fund to maintain custody or any securities or cash of the Fund in a foreign
country including, but not limited to, losses resulting from nationalization,
expropriation, currency restrictions, or acts of war or terrorism.
If the Fund on behalf of a Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money or
which action may, in the opinion of the Custodian, result in the Custodian or
its nominee assigned to the Fund or the Portfolio being liable for the payment
of money or incurring liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
the Custodian.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not limited
to securities settlements, the purchase or sale of foreign exchange or of
contracts for foreign exchange, and assumed settlement) for the benefit of a
Portfolio, or in the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the applicable
Portfolio shall be security therefor and should the Fund fail to repay the
Custodian promptly, the Custodian shall be entitled to utilize available cash
and to dispose of such Portfolio's assets to the extent necessary to obtain
reimbursement.
14. Effective Period, Termination and Amendment
-------------------------------------------
This Contract shall become effective as of the date of its execution,
shall continue in full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of the parties hereto
and may be terminated by either party by an instrument in writing delivered or
mailed, postage prepaid to the other party, such termination to take effect not
sooner than thirty (30) days after the date of such delivery or mailing;
provided, however that the Custodian shall not with respect to a Portfolio act
under Section 2.10 hereof in the absence of receipt of an initial certificate of
the Secretary or an Assistant Secretary that the Board of Trustees has approved
the initial use of a particular Securities System by such Portfolio, as required
by Rule 17f-4 under the Investment Company Act and that the Custodian shall not
with respect to a Portfolio act under Section 2.11 hereof in the absence of
receipt of an initial certificate of the Secretary or an Assistant Secretary
that the Board of Trustees has approved the initial use of the Direct Paper
System by such Portfolio; provided further, however, that the Fund shall not
amend or terminate this Contract in contravention of any applicable federal or
state regulations, or any provision of the Declaration of Trust, and further
provided, that the Fund on behalf of one or more of the Portfolios may at any
time by action of the Board of Trustees (i) substitute another bank or trust
company for the Custodian by giving notice as described above to the Custodian
or (ii)
17
<PAGE>
immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the Currency or
upon the happening of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund on behalf of each applicable
Portfolio shall pay to the Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
15. Successor Custodian
-------------------
If a successor custodian shall be appointed by the Board of Trustees,
the Custodian shall, upon termination, deliver to such successor custodian at
the offices of the Custodian, duly endorsed and in the form for transfer, all
securities of each applicable Portfolio then held by it hereunder and shall
transfer to an account of the successor custodian all of the securities of each
such Portfolio held in a Securities System. If no such successor custodian shall
be appointed, the Custodian shall, in like manner, upon receipt of a certified
copy of a vote of the Board of Trustees, deliver at the offices of the Custodian
and transfer such securities, funds and other properties in accordance with such
vote. In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act, doing
business in Boston, Massachusetts, or New York, New York, of its own selection,
having an aggregate capital, surplus, and undivided profits, as shown by its
last published report, of not less than $25,000,000, all securities, funds and
other properties held by the Custodian on behalf of each applicable Portfolio
and all instruments held by the Custodian relative thereto and all other
property held by it under this Contract on behalf of each applicable Portfolio
and to transfer to an account of such successor custodian all of the securities
of each such Portfolio held in any Securities System. Thereafter, such bank or
trust company shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
16. Interpretive and Additional Provisions
--------------------------------------
In connection with the operation of this Contract, the Custodian and
the Fund on behalf of each of the Portfolios may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Contract as
may in their joint opinion be consistent with the general tenor of this
Contract. Any such interpretive or additional provisions shall be in a writing
signed by both
18
<PAGE>
parties and shall be annexed hereto, provided that no such interpretive or
additional provisions shall contravene any applicable federal or state
regulations or any provision of the Declaration of Trust. No interpretive or
additional provisions made as provided in the preceding sentence shall be deemed
to be an amendment of this Contract.
17. Additional Funds
----------------
In the event that the Fund establishes one or more series of Shares in
addition to Government Securities Portolio and Money Market Portfolio with
respect to which it desires to have the Custodian render services as custodian
under the terms hereof, it shall so notify the Custodian in writing, and if the
Custodian agrees in writing to provide such services, such series of Shares
shall become a Portfolio hereunder.
18. Massachusetts Law to Apply
--------------------------
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
19. Prior Contracts
---------------
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund and the Custodian relating to the custody of
the assets of the Portfolio(s).
20. Shareholder Communications Election
-----------------------------------
SEC Rule 14b-2 requires banks which hold securities for the account of
customers to respond to requests by issuers of securities for the names,
addresses and holdings of beneficial owners of securities of that issuer held by
the bank unless the beneficial owner has expressly objected to disclosure of
this information. In order to comply with the rule, the Custodian needs the Fund
to indicate whether it authorizes the Custodian to provide the Fund's name,
address, and share position to requesting companies whose securities the Fund
owns. If the Fund tells the Custodian "no", the Custodian will not provide this
information to requesting companies. If the Fund tells the Custodian "yes" or
does not check either "yes" or "no" below, the Custodian is required by the rule
to treat the Fund as consenting to disclosure of this information for all
securities owned by the Fund or any funds or accounts established by the Fund.
For the Fund's protection, the Rule prohibits the requesting company from using
the Fund's name and address for any purpose other than corporate communications.
Please indicate below whether the Fund consents or objects by checking one of
the alternatives below.
19
<PAGE>
YES [ ] The Custodian is authorized to release the Fund's name,
address, and share positions.
NO [ ] The Custodian is not authorized to release the Fund's name,
address, and share positions.
20
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of April 19, 1999.
ATTEST KEMPER CASH ACCOUNT TRUST
/s/ Maureen Kane By: /s/ Mark Casady
- ---------------- ---------------
Name: Maureen Kane Name: Mark Casady
Title: President
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ Marc L. Parsons By: /s/ Ronald E. Logue
- ------------------- -------------------
Marc L. Parsons Ronald E. Logue
Associate Counsel Vice Chairman
21
August 27, 1999
Cash Account Trust
222 South Riverside Plaza
Chicago, Illinois 60606
Ladies and Gentlemen:
Reference is made to Post-Effective Amendment No. 13 to the
Registration Statement on Form N-1A under the Securities Act of 1933 being filed
by Cash Account Trust (the "Fund") in connection with the public offering from
time to time of units of beneficial interest, no par value ("Shares"), in the
Money Market Portfolio, the Government Securities Portfolio and the Tax-Exempt
Portfolio (each, a "Portfolio" and collectively, the "Portfolios"). With regards
to the Money Market Portfolio, four classes of Shares have been designated as
follows: Service Shares, Retail Shares, Premier Shares and Institutional Shares.
We have acted as counsel to the Fund, and in such capacity are familiar
with the Fund's organization and have counseled the Fund regarding various legal
matters. We have examined such Fund records and other documents and certificates
as we have considered necessary or appropriate for the purposes of this opinion.
In our examination of such materials, we have assumed the genuineness of all
signatures and the conformity to original documents of all copies submitted to
us.
Based upon the foregoing and assuming that the Fund's Amended and
Restated Agreement and Declaration of Trust dated March 17, 1990, and the
By-Laws of the Fund adopted September 7, 1989, are presently in full force and
effect and have not been amended in any respect and that the resolutions adopted
by the Board of Trustees of the Fund on November 28, 1989 and November 17, 1998
relating to organizational matters, securities matters and the issuance of
shares are presently in full force and effect and have not been amended in any
respect, we advise you and opine that (a) the Fund is a validly existing
voluntary association with transferrable shares under the laws of the
Commonwealth of Massachusetts and is authorized to issue an unlimited number of
Shares in the Portfolios; and (b) presently and upon such further issuance of
the Shares in accordance with the Fund's Agreement and Declaration of Trust and
the receipt by the Fund of a purchase price not less than the net asset value
per Share, the Shares are and will be legally issued and outstanding, fully paid
and nonassessable.
<PAGE>
Cash Account Trust
August 27, 1999
Page 2
The Fund is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund or any
Portfolio. However, the Agreement and Declaration of Trust disclaims shareholder
liability for acts and obligations of the Fund or of a particular Portfolio and
requires that notice of such disclaimer be given in each note, bond, contract,
instrument, certificate share or undertaking made or issued by the Trustees or
officers of the Fund. The Agreement and Declaration of Trust provides for
indemnification out of the property of a particular Portfolio for all loss and
expense of any shareholder of that Portfolio held personally liable for the
obligations of such Portfolio. Thus, the risk of liability is limited to
circumstances in which the relevant Portfolio would be unable to meet its
obligations.
This opinion is solely for the benefit of the Fund, the Fund's Board of
Trustees and the Fund's officers and may not be relied upon by any other person
without our prior written consent. We hereby consent to the use of this opinion
in connection with said Post-Effective Amendment.
Very truly yours,
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
DAS/COK
2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" and "Independent Auditors and Reports to Shareholders" and to the
incorporation by reference of our report dated June 15, 1999 in the Registration
Statement of Cash Account Trust on Form N-1A filed with the Securities and
Exchange Commission in this Post-Effective Amendment No. 13 to the Registration
Statement under the Securities Act of 1933 (File No. 33-32476) and in this
Amendment No. 14 to the Registration Statement under the Investment Company Act
of 1940 (File No. 811-5970).
ERNST & YOUNG LLP
Chicago, Illinois
August 26, 1999
