CASH ACCOUNT TRUST, 485BPOS, 1999-01-22

CASH ACCOUNT TRUST
485BPOS, 1999-01-22

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As filed with the Securities and Exchange Commission on January 22, 1999

1933 Act Registration No. 33-32476
1940 Act Registration No. 811-5970

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Pre-Effective Amendment No.
--
Post-Effective Amendment No. 11
--
and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

Amendment No. 12
--

CASH ACCOUNT TRUST
------------------
(Exact name of Registrant as Specified in Charter)

222 South Riverside Plaza, Chicago, Illinois 60606
--------------------------------------------------
(Address of Principal Executive Office) (Zip Code)

Registrant's Telephone Number, including Area Code: (312) 537-7000
<TABLE>
<CAPTION>

<S> <C>
Philip J. Collora, Vice President and Secretary With a copy to:
Cash Account Trust Cathy G. O'Kelly
222 South Riverside Plaza David A. Sturms
Chicago, Illinois 60606 Vedder, Price, Kaufman & Kammholz
(Name and Address of Agent for Service) 222 North LaSalle Street
Chicago, Illinois 60601
</TABLE>

It is proposed that this filing will become effective

-------- Immediately upon filing pursuant to paragraph (b)

X on January 22, 1999 pursuant to paragraph (b)
--------

60 days after filing pursuant to paragraph (a)(i)
--------

on ________________________ pursuant to paragraph (a)(i)
--------

75 days after filing pursuant to paragraph (a)(ii)
--------

on ________________________ pursuant to paragraph (a)(ii) of
-------- Rule 485

If appropriate, check the following:

this post-effective amendment designates a new effective
-------- date for a previously filed post- effective amendment

<PAGE>

CASH ACCOUNT TRUST

CROSS-REFERENCE SHEET
BETWEEN ITEMS ENUMERATED IN PART A
OF FORM N-1A AND PROSPECTUS

Item No. Item Caption Prospectus Caption
-------- ------------ ------------------

<S> <C> <C>
1. Cover Page COVER PAGE

2. Synopsis Summary; Summary of Expenses

3. Condensed Financial Financial Highlights; Performance
Information

4. General Description of Investment Objectives, Policies and Risk Factors; Capital
Registrant Structure

5. Management of the Fund Investment Manager and Shareholder Services

5A. Management's Discussion of Inapplicable
Fund Performance

6. Capital Stock and Other Purchase of Shares; Dividends and Taxes; Capital Structure
Securities

7. Purchase of Securities Being Purchase of Shares; Net Asset Value; Investment Manager and
Offered Shareholder Services; Special Features

8. Redemption or Repurchase Redemption of Shares; Special Features

9. Pending Legal Proceedings Inapplicable

<PAGE>

CASH ACCOUNT TRUST

CROSS-REFERENCE SHEET
BETWEEN ITEMS ENUMERATED IN PART B
OF FORM N-1A AND STATEMENT OF ADDITIONAL INFORMATION

Caption in Statement
Item No. Item Caption of Additional Information
-------- ------------ -------------------------

10. Cover Page COVER PAGE

11. Table of Contents Table of Contents

12. General Information and Inapplicable
History

13. Investment Objectives and Investment Restrictions; Municipal Securities;
Policies Appendix--Ratings of Investments

14. Management of the Fund Investment Manager and Shareholder Services; Officers and
Trustees

15. Control Persons and Principal Officers and Trustees
Holders of Securities

16. Investment Advisory and Other Investment Manager and Shareholder Services; Officers and
Services Trustees

17. Brokerage Allocation and Portfolio Transactions
Other Practices

18. Capital Stock and Other Shareholder Rights
Securities

19. Purchase, Redemption and Purchase and Redemption of Shares; Dividends, Net Asset Value
Pricing of Securities Being and Taxes
Offered

20. Tax Status Dividends, Net Asset Value and Taxes

21. Underwriters Investment Manager and Shareholder Services

22. Calculation of Performance Performance
Data

23. Financial Statements Financial Statements
</TABLE>

2
<PAGE>
CASH ACCOUNT TRUST
222 South Riverside Plaza
Chicago, Illinois 60606

Table of Contents
- ------------------------------------------------------
Summary 1
- ------------------------------------------------------
Summary of Expenses 2
- ------------------------------------------------------
Financial Highlights 3
- ------------------------------------------------------
Investment Objectives, Policies
and Risk Factors 5
- ------------------------------------------------------
Net Asset Value 11
- ------------------------------------------------------
Purchase of Shares 11
- ------------------------------------------------------
Redemption of Shares 13
- ------------------------------------------------------
Special Features 15
- ------------------------------------------------------
Dividends and Taxes 15
- ------------------------------------------------------
Investment Manager and
Shareholder Services 17
- ------------------------------------------------------
Performance 19
- ------------------------------------------------------
Capital Structure 20
- ------------------------------------------------------

This prospectus contains information about the Service Shares of the Money
Market Portfolio and the shares of the Government Portfolio and Tax-Exempt
Portfolio ("Shares") offered by Cash Account Trust (the "Fund") that a
prospective investor should know before investing and should be retained for
future reference. A Statement of Additional Information dated January 22, 1999
has been filed with the Securities and Exchange Commission and is incorporated
herein by reference. It is available upon request without charge from the Fund
at the address or telephone number on this cover or the firm from which this
prospectus was received.

Cash
Account
Trust

PROSPECTUS January 22, 1999

CASH ACCOUNT TRUST
222 South Riverside Plaza, Chicago, Illinois 60606
1-800-231-8568.

The Fund offers a choice of investment portfolios and is designed for investors
who seek maximum current income to the extent consistent with stability of
capital. Each Portfolio invests exclusively in high quality money market
instruments.

An investment in the Fund is neither insured nor guaranteed by the U.S.
Government, the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other agency, and is not a deposit or obligation of, or guaranteed or
endorsed by, any bank. There can be no assurance that the Fund will be able to
maintain a stable net asset value of $1.00 per share.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

<PAGE>

CASH ACCOUNT TRUST

222 South Riverside Plaza, Chicago, Illinois 60606,
Telephone 1-800-231-8568

SUMMARY

Investment Objectives. Cash Account Trust (the "Fund") is an open-end
diversified management investment company. The Fund currently offers a choice of
three investment portfolios ("Portfolios"). Each Portfolio invests in a
portfolio of high quality short-term money market instruments consistent with
its specific objective. The Money Market Portfolio is divided into separate
classes of shares including the Service Shares which are offered herein together
with the other two Portfolios. The Money Market Portfolio seeks maximum current
income to the extent consistent with stability of capital from a portfolio
primarily of commercial paper and bank obligations. The Government Securities
Portfolio seeks maximum current income to the extent consistent with stability
of capital from a portfolio of obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. The Tax-Exempt Portfolio seeks
maximum current income that is exempt from federal income taxes to the extent
consistent with stability of capital from a portfolio of municipal securities.
Each Portfolio may use a variety of investment techniques, including the
purchase of repurchase agreements and variable rate securities. Each Portfolio
seeks to maintain a net asset value of $1.00 per share. There is no assurance
that the objective of any Portfolio will be achieved or that any Portfolio will
be able to maintain a net asset value of $1.00 per share. See "Investment
Objectives, Policies and Risk Factors."

Investment Manager and Shareholder Services. Scudder Kemper Investments, Inc.
(the "Adviser") is the investment manager for the Fund and provides the Fund
with continuous professional investment supervision. The Adviser is paid a
monthly investment management fee on a graduated basis at annual rates ranging
from 0.22% of the first $500 million of combined average daily net assets of all
Portfolios of the Fund to 0.15% of the combined average daily net assets of all
Portfolios of the Fund over $3 billion. Kemper Distributors, Inc. ("KDI"), an
affiliate of the Adviser, is the primary administrator, distributor and
principal underwriter of the Fund and, as such, provides information and
services for existing and potential shareholders and acts as agent of the Fund
in the sale of its shares. KDI receives a distribution services fee, payable
monthly, at an annual rate of 0.60% of average daily net assets of the Shares of
the Money Market and Government Securities Portfolios and 0.50% of average daily
net assets of the Shares of the Tax-Exempt Portfolio. As distributor, KDI
normally pays financial services firms that provide cash management and other
services for their customers at an annual rate of 0.60% of average daily net
assets attributable to the Shares of those accounts in the Money Market and
Government Securities Portfolios that they service and 0.50% of average daily
net assets attributable to the Shares of those accounts in the Tax-Exempt
Portfolio that they maintain and service. See "Investment Manager and
Shareholder Services."

Purchases and Redemptions. Shares of each Portfolio are available at net asset
value through selected financial services firms. The minimum initial investment
for each Portfolio is $1,000 and the minimum subsequent investment is $100. See
"Purchase of Shares." Shares may be redeemed at the net asset value next
determined after receipt by the Fund's Shareholder Service Agent of a request to
redeem in proper form. Shares may be redeemed by written request or by using one
of the Fund's expedited redemption procedures. See "Redemption of Shares."

Dividends. Dividends are declared daily and paid monthly. Dividends are
automatically reinvested in additional Shares of the same Portfolio, unless the
shareholder makes a different election. See "Dividends and Taxes."

1
<PAGE>

issued, are transferable without restriction and have no preemptive or
conversion rights. The Fund is not required to hold annual shareholder meetings;
but will hold special meetings as required or deemed desirable for such purposes
as electing trustees, changing fundamental policies or approving an investment
management agreement. See "Capital Structure."

SUMMARY OF EXPENSES

This information is designed to help you understand the various costs and
expenses of investing in the Shares of each of the Money Market Portfolio,
Government Portfolio and Tax-Exempt Portfolio. *

<TABLE>
<S> <C> <C> <C>
Shareholder Transaction Expenses (1)................................................................ None

Annual Fund Operating Expenses Money Market Government Tax-Exempt
(after fee waiver and expense absorption) Portfolio Securities Portfolio Portfolio
(as a percentage of average net assets) --------- -------------------- ---------

Management Fees................................................ 0.19% 0.19% 0.19%

12b-1 Fees(2).................................................. 0.51% 0.59% 0.50%

Other Expenses................................................. 0.30% 0.22% 0.25%

Total Operating Expenses....................................... 1.00% 1.00% 0.94%
===== ===== =====
</TABLE>
- -----------
* The information set forth on this page relates only to the Shares. The
Money Market Portfolio also offers three other classes of shares, which
have different fees and expenses (which may affect performance), have
different minimum investment requirements and are entitled to different
services.
(1) Investment dealers and other firms may independently charge shareholders
additional fees; please see their materials for details.
(2) As a result of the accrual of 12b-1 fees, long-term shareholders may pay
more than the economic equivalent of the maximum front-end sales charges
permitted by the National Association of Securities Dealers.
<TABLE>
<CAPTION>

Example Portfolio 1 Year 3 Years 5 Years 10 Years
- ------- --------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
You would pay the following expenses on a Money Market $10 $32 $55 $122
$1,000 investment in the Shares, assuming
(1) 5% annual return and (2) redemption at Government Securities $10 $32 $55 $122
the end of each time period:
Tax-Exempt $10 $30 $52 $115

</TABLE>

The purpose of the preceding table is to assist investors in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. As discussed more fully under "Investment Manager and Shareholder
Services," KDI has agreed to waive temporarily its 12-1b fee to the extent, if
any, that total operating expenses attributable to the Shares as defined, exceed
the following percentages of average daily net assets of the Portfolios
attributable to the Shares: Money Market Portfolio (1.00%), Government
Securities Portfolio (1.00%) and Tax-Exempt Portfolio (0.95%). Prior to January
22, 1999, the Adviser waived the management fee for each Portfolio rather than
KDI waiving the 12b-1 fee, to the extent necessary to limit "Total Operating
Expenses" to the aforementioned levels of 1.00% for the Money Market Portfolio
and Government Securities Portfolio and 0.95% for the Tax-Exempt Portfolio.
Without such waiver and reimbursement during the fiscal year ended April 30,
1998, "Management Fees" for the Money Market Portfolio and the Government
Securities Portfolio would have been 0.19% and 0.19%, respectively, "12b-1 Fees"
would have been 0.60%, 0.60% and 0.50%, respectively, and "Total Operating
Expenses" would have been 1.10% and 1.02%, respectively. The actual expenses for
the Tax-Exempt Portfolio were lower than the expense limit of 0.95%, therefore,
the numbers in the table do not reflect any waiver or reimbursement. In
addition, from time to time, the Adviser or KDI may voluntarily waive fees or
absorb certain additional operating expenses of the Portfolios. "Other Expenses"
does

2
<PAGE>

not reflect the effect of this additional expense absorption. The Example
assumes a 5% annual rate of return pursuant to requirements of the Securities
and Exchange Commission. This hypothetical rate of return is not intended to be
representative of past or future performance of any Portfolio of the Fund. The
Example should not be considered to be a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.

FINANCIAL HIGHLIGHTS

The tables below show financial information expressed in terms of one share of
the Shares of the Portfolios outstanding throughout the period.* The information
(excluding the six months ended October 31, 1998) in the tables is covered by
the report of the Fund's independent auditors. The report is contained in the
Fund's Registration Statement and is available from the Fund. The financial
statements contained in the Fund's 1998 Annual and Semiannual Reports to
Shareholders are incorporated herein by reference and may be obtained by writing
or calling the Fund.

Money Market Portfolio
<TABLE>
<CAPTION>

Six months December
ended 3, 1990 to
October 31, Year ended April 30, April 30,
1998 1998 1997 1996 1995 1994 1993 1992 1991
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>

Net investment income .02 0.05 0.05 0.05 0.04 0.02 0.02 0.04 0.03
-------------------------------------------------------------------------------------------------------------------

Less dividends declared .02 0.05 0.05 0.05 0.04 0.02 0.02 0.04 0.03
-------------------------------------------------------------------------------------------------------------------

Net asset value, end
of period $1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
-------------------------------------------------------------------------------------------------------------------

Total Return 2.36% 4.85 4.60 4.96 4.38 2.42 2.65 4.44 2.63
-------------------------------------------------------------------------------------------------------------------

Ratios to Average Net Assets:
Expenses after expense
waiver 1.00% 1.00 1.00 1.00 0.99 0.93 0.84 0.93 1.00
-------------------------------------------------------------------------------------------------------------------

Net investment income 4.67% 4.71 4.51 4.83 4.54 2.48 2.59 4.03 6.24

-------------------------------------------------------------------------------------------------------------------

Other Ratios to Average
Net Assets:
Expenses 1.09% 1.10 1.03 1.05 1.05 1.20 1.36 1.57 1.58
-------------------------------------------------------------------------------------------------------------------

Net investment income 4.58% 4.61 4.48 4.78 4.48 2.21 2.07 3.39 5.66
-------------------------------------------------------------------------------------------------------------------

Supplemental Data:
Net assets at end of
period (in
thousands) $2,109,323 1,995,057 584,947 455,025 378,551 156,153 34,267 27,905 6,105
-------------------------------------------------------------------------------------------------------------------
</TABLE>

3
<PAGE>

Government Securities Portfolio
<TABLE>
<CAPTION>

Per Share Operating Performance:
Net asset value,
beginning of period $1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
-------------------------------------------------------------------------------------------------------------------
Net investment income .02 0.05 0.05 0.05 0.04 0.02 0.02 0.04 0.03
-------------------------------------------------------------------------------------------------------------------
Less dividends declared .02 0.05 0.05 0.05 0.04 0.02 0.02 0.04 0.03
-------------------------------------------------------------------------------------------------------------------
Net asset value, end of
period $1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
-------------------------------------------------------------------------------------------------------------------
Total Return 2.29% 4.78 4.69 5.01 4.37 2.49 2.65 4.54 2.47
-------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses after expense
waiver 1.00% 0.98 0.92 0.90 0.90 0.84 0.79 0.79 0.87
-------------------------------------------------------------------------------------------------------------------
Net investment income 4.54% 4.68 4.59 4.88 4.66 2.47 2.63 4.41 5.95
-------------------------------------------------------------------------------------------------------------------
Other Ratios to Average Net Assets:
Expenses 1.04% 1.02 0.99 1.06 1.05 1.22 1.18 1.20 1.44
-------------------------------------------------------------------------------------------------------------------
Net investment income 4.50% 4.64 4.52 4.72 4.51 2.09 2.24 4.00 5.38
-------------------------------------------------------------------------------------------------------------------
Supplemental Data:
Net assets at end of
period (in thousands $690,884 804,565 544,501 189,919 138,020 30,829 28,963 34,119 30,080
-------------------------------------------------------------------------------------------------------------------
</TABLE>

Tax-Exempt Portfolio

Per Share Operating Performance:
Net asset value,
beginning of period $1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
----------------------------------------------------------------------------------------------------------------------
Net investment income .01 0.03 0.03 0.03 0.03 0.02 0.02 0.03 0.02
----------------------------------------------------------------------------------------------------------------------
Less dividends declared .01 0.03 0.03 0.03 0.03 0.02 0.02 0.03 0.02
----------------------------------------------------------------------------------------------------------------------
Net asset value, end of
period $1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
----------------------------------------------------------------------------------------------------------------------
Total Return 1.39% 2.92 2.82 3.16 2.80 1.84 2.13 3.46 1.76
----------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses after expense
waiver .91% 0.91 0.81 0.78 0.76 0.74 0.71 0.67 0.75
----------------------------------------------------------------------------------------------------------------------
Net investment income 2.75% 2.87 2.78 3.10 3.00 1.82 2.09 3.34 4.30
----------------------------------------------------------------------------------------------------------------------
Other Ratios to Average Net Assets:
Expenses .91% 0.94 0.96 0.98 0.93 1.20 1.39 1.38 0.97
----------------------------------------------------------------------------------------------------------------------
Net investment income 2.75% 2.84 2.63 2.90 2.83 1.36 1.41 2.63 4.08
----------------------------------------------------------------------------------------------------------------------
Supplemental Data:
Net assets at end of
period (in thousands) $356,364 368,141 220,791 66,981 67,748 16,991 10,014 7,097 3,904
----------------------------------------------------------------------------------------------------------------------
</TABLE>

* Effective January 22, 1999, the shares of the Money Market Portfolio were
divided into four classes of shares, of which the Service Shares is one.
Shares of the Money Market Portfolio outstanding on such date were
redesignated as the Service Shares class of the Money Market Portfolio. The
data set forth above reflects the operations of the Money Market Portfolio
prior to such redesignation.

4
<PAGE>

Notes:

1. 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.

2. The Adviser has agreed to waive temporarily its management fee and
reimburse or pay certain operating expenses to the extent necessary to
limit expenses to specific levels. The Other Ratios to Average Net Assets
are computed without this waiver and expense absorption. Ratios have been
determined on an annualized basis. Total return is not annualized.

INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS

The Fund is a money market mutual fund designed to provide its shareholders with
professional management of short-term investment dollars. It is designed for
investors who seek maximum current income consistent with stability of capital.
The Fund pools individual and institutional investors' money that it uses to buy
high quality money market instruments. The Fund is a series investment company
that is able to provide investors with a choice of separate investment
portfolios ("Portfolios"). It currently offers three investment Portfolios: the
Money Market Portfolio, the Government Securities Portfolio and the Tax-Exempt
Portfolio. The Money Market Portfolio is divided into separate classes of shares
including the Service Shares, which are offered herein together with the other
two Portfolios. Because each Portfolio combines its shareholders' money, it can
buy and sell large blocks of securities, which reduces transaction costs and
maximizes yields. The Fund is managed by investment professionals who analyze
market trends to take advantage of changing conditions and who seek to minimize
risk by diversifying each Portfolio's investments. A Portfolio's investments are
subject to price fluctuations resulting from rising or declining interest rates
and are subject to the ability of the issuers of such investments to make
payment at maturity. However, because of their short maturities, liquidity and
high quality ratings, high quality money market instruments, such as those in
which the Fund invests, are generally considered to be among the safest
available. Thus, the Fund is designed for investors who want to avoid the
fluctuations of principal commonly associated with equity or long-term bond
investments. There can be no guarantee that a Portfolio will achieve its
objective or that it will maintain a net asset value of $1.00 per share.

Money Market Portfolio. The Money Market Portfolio seeks maximum current income
consistent with stability of capital. The Portfolio pursues its objective by
investing exclusively in the following types of U.S. Dollar-denominated money
market instruments that mature in 12 months or less:

1. Obligations of, or guaranteed by, the U.S. or Canadian governments, their
agencies or instrumentalities.

2. Bank certificates of deposit, time deposits or bankers' acceptances of U.S.
banks (including their foreign branches) and Canadian chartered banks
having total assets in excess of $1 billion.

3. Bank certificates of deposit, time deposits or bankers' acceptances of
foreign banks (including their U.S. and foreign branches) having total
assets in excess of $10 billion.

5
<PAGE>

Prime-2, A-1 and A-2 and Duff 1 and Duff 2, respectively. For other debt
obligations, the two highest rating categories for such services are Aaa
and Aa, AAA and AA and AAA and AA, respectively. For a description of these
ratings, see "Appendix-- Ratings of Investments" in the Statement of
Additional Information.

5. Repurchase agreements of obligations that are suitable for investment under
the categories set forth above. Repurchase agreements are discussed below.

In addition, the Portfolio limits its investments to securities that meet the
quality and diversification requirements of Rule 2a-7 under the Investment
Company Act of 1940 (the "1940 Act"). See "Net Asset Value."

The Money Market Portfolio will normally invest at least 25% of its assets in
obligations issued by banks; provided, however, the Portfolio may in the
discretion of the Fund's investment manager temporarily invest less than 25% of
its assets in such obligations whenever the Portfolio assumes a defensive
posture. Investments by the Money Market Portfolio in Eurodollar certificates of
deposit issued by London branches of U.S. banks, or obligations issued by
foreign entities, including foreign banks, involve risks that are different from
investments in securities of domestic branches of U.S. banks. These risks may
include future unfavorable political and economic developments, possible
withholding taxes on interest payments, seizure of foreign deposits, currency
controls, interest limitations or other governmental restrictions that might
affect payment of principal or interest. The market for such obligations may be
less liquid and, at times, more volatile than for securities of domestic
branches of U.S. banks. Additionally, there may be less public information
available about foreign banks and their branches. The profitability of the
banking industry is dependent largely upon the availability and cost of funds
for the purpose of financing lending operations under prevailing money market
conditions. General economic conditions as well as exposure to credit losses
arising from possible financial difficulties of borrowers play an important part
in banking operations. As a result of Federal and state laws and regulations,
domestic banks are, among other things, required to maintain specified levels of
reserves, limited in the amounts they can loan to a single borrower and subject
to other regulations designed to promote financial soundness. However, not all
such laws and regulations apply to the foreign branches of domestic banks.
Foreign branches of foreign banks are not regulated by U.S. banking authorities,
and generally are not bound by accounting, auditing and financial reporting
standards comparable to U.S. banks. Bank obligations held by the Portfolio do
not benefit materially from insurance from the Federal Deposit Insurance
Corporation.

The Money Market Portfolio may invest in commercial paper issued by major
corporations under the Securities Act of 1933 in reliance on the exemption from
registration afforded by Section 3(a)(3) thereof. Such commercial paper may be
issued only to finance current transactions and must mature in nine months or
less. Trading of such commercial paper is conducted primarily by institutional
investors through investment dealers and individual investor participation in
the commercial paper market is very limited. The Portfolio also may invest in
commercial paper issued in reliance on the so-called "private placement"
exemption from registration that is afforded by Section 4(2) of the Securities
Act of 1933 ("Section 4(2) paper"). Section 4(2) paper is restricted as to
disposition under the federal securities laws, and generally is sold to
institutional investors such as the Portfolio who agree that they are purchasing
the paper for investment and not with a view to public distribution. Any resale
by the purchaser must be in an exempt transaction. Section 4(2) paper normally
is resold to other institutional investors like the Portfolio through or with
the assistance of the issuer or investment dealers who make a market in the
Section 4(2) paper, thus providing liquidity. The Fund's investment manager
considers the legally restricted but readily saleable Section 4(2) paper to be
liquid; however, pursuant to procedures approved by the Board of Trustees of the
Fund, if a particular investment in Section 4(2) paper is not determined to be
liquid, that investment will be included within the 10% limitation on illiquid
securities discussed under "The Fund" below. The Fund's investment manager
monitors the liquidity of the Portfolio's investments in Section 4(2) paper on a
continuous basis.

6
<PAGE>

The Money Market Portfolio may invest in high quality participation certificates
("certificates") representing undivided interests in trusts that hold a
portfolio of receivables from consumer and commercial credit transactions, such
as transactions involving consumer revolving credit card accounts or commercial
revolving credit loan facilities. The receivables would include amounts charged
for goods and services, finance charges, late charges and other related fees and
charges. Interest payable on the certificates may be fixed or may be adjusted
periodically or "float" continuously according to a formula based upon an
objective standard such as the 30-day commercial paper rate. See "The Fund"
below for a discussion of "Variable Rate Securities." A trust may have the
benefit of a letter of credit from a bank at a level established to satisfy
rating agencies as to the credit quality of the assets supporting the payment of
principal and interest on the certificates. Payments of principal and interest
on the certificates would be dependent upon the underlying receivables in the
trust and may be guaranteed under a letter of credit to the extent of such
credit. The quality rating by a rating service of an issue of certificates is
based primarily upon the value of the receivables held by the trust and the
credit rating of the issuer of any letter of credit and of any other guarantor
providing credit support to the trust. The Fund's investment manager considers
these factors as well as others, such as any quality ratings issued by the
rating services identified above, in reviewing the credit risk presented by a
certificate and in determining whether the certificate is appropriate for
investment by the Portfolio. Collection of receivables in the trust may be
affected by various social, legal and economic factors affecting the use of
credit and repayment patterns, such as changes in consumer protection laws, the
rate of inflation, unemployment levels and relative interest rates. It is
anticipated that for most publicly offered certificates there will be a liquid
secondary market or there may be demand features enabling the Fund to readily
sell its certificates prior to maturity to the issuer or a third party. While
the Portfolio may invest without limit in certificates, it is currently
anticipated that such investments will not exceed 25% of the Portfolio's assets.

Government Securities Portfolio. The Government Securities Portfolio seeks
maximum current income consistent with stability of capital. The Portfolio
pursues its objective by investing exclusively in U.S. Treasury bills, notes,
bonds and other obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and repurchase agreements of such obligations. All
securities purchased mature in 12 months or less. Some securities issued by U.S.
Government agencies or instrumentalities are supported only by the credit of the
agency or instrumentality, such as those issued by the Federal Home Loan Bank,
and others have an additional line of credit with the U.S. Treasury, such as
those issued by the Federal National Mortgage Association, Farm Credit System
and Student Loan Marketing Association. Short-term U.S. Government obligations
generally are considered to be the safest short-term investment. The U.S.
Government guarantee of the securities owned by the Portfolio, however, does not
guarantee the net asset value of its shares, which the Fund seeks to maintain at
$1.00 per share. Also, with respect to securities supported only by the credit
of the issuing agency or instrumentality or by an additional line of credit with
the U.S. Treasury, there is no guarantee that the U.S. Government will provide
support to such agencies or instrumentalities and such securities may involve
risk of loss of principal and interest. Repurchase agreements are discussed
below.

Tax-Exempt Portfolio. The Tax-Exempt Portfolio seeks maximum current income that
is exempt from Federal income taxes to the extent consistent with stability of
capital. The Portfolio pursues its objective primarily through a professionally
managed, diversified portfolio of short-term high quality tax-exempt municipal
obligations. Under normal market conditions at least 80% of the Portfolio's
total assets will, as a fundamental policy, be invested in obligations issued by
or on behalf of states, territories and possessions of the United States and the
District of Columbia and their political subdivisions, agencies and
instrumentalities, the income from which is exempt from Federal income tax
("Municipal Securities"). In compliance with the position of the staff of the
Securities and Exchange Commission, the Fund does not consider "private
activity" bonds as described in "Dividends and Taxes -- Tax-Exempt Portfolio" to
be Municipal Securities for purposes of the 80% limitation.

7
<PAGE>

This is a fundamental policy so long as the staff maintains its position, after
which it would become non-fundamental.

Dividends representing net interest income received by the Tax-Exempt Portfolio
on Municipal Securities will be exempt from federal income tax when distributed
to the Portfolio's shareholders. Such dividend income may be subject to state
and local taxes. See "Dividends and Taxes -- Tax-Exempt Portfolio." The
Portfolio's assets will consist of Municipal Securities, taxable temporary
investments as described below and cash. The Portfolio considers short-term
Municipal Securities to be those that mature in one year or less.

The Tax-Exempt Portfolio will invest only in Municipal Securities that at the
time of purchase: (a) are rated within the two highest-ratings for Municipal
Securities (Aaa or Aa) assigned by Moody's or (AAA or AA) assigned by S&P; (b)
are guaranteed or insured by the U.S. Government as to the payment of principal
and interest; (c) are fully collateralized by an escrow of U.S. Government
securities acceptable to the Fund's investment manager; (d) have at the time of
purchase Moody's short-term Municipal Securities rating of MIG-2 or higher or a
municipal commercial paper rating of P-2 or higher, or S&P's municipal
commercial paper rating of A-2 or higher; (e) are unrated, if longer term
Municipal Securities of that issuer are rated within the two highest rating
categories by Moody's or S&P; or (f) are determined to be at least equal in
quality to one or more of the above ratings in the discretion of the Fund's
investment manager. In addition, the Portfolio limits its investments to
securities that meet the quality requirements of Rule 2a-7 under the Investment
Company Act of 1940. See "Net Asset Value."

Municipal Securities generally are classified as "general obligation" or
"revenue" issues. General obligation bonds are secured by the issuer's pledge of
its full credit and taxing power for the payment of principal and interest.
Revenue bonds are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source such as the user of the
facility being financed. Industrial development bonds held by the Fund are in
most cases revenue bonds and are not payable from the unrestricted revenues of
the issuer. Among other types of instruments, the Portfolio may purchase
tax-exempt commercial paper, warrants and short-term municipal notes such as tax
anticipation notes, bond anticipation notes, revenue anticipation notes,
construction loan notes and other forms of short-term loans. Such notes are
issued with a short-term maturity in anticipation of the receipt of tax
payments, the proceeds of bond placements or other revenues. A more detailed
discussion of Municipal Securities and the Moody's and S&P ratings outlined
above is contained in the Statement of Additional Information. As indicated
under "Dividends and Taxes -- Tax-Exempt Portfolio," the Portfolio may invest in
short-term "private activity" bonds.

The Tax-Exempt Portfolio may purchase securities that provide for the right to
resell them to an issuer, bank or dealer at an agreed upon price or yield within
a specified period prior to the maturity date of such securities. Such a right
to resell is referred to as a "Standby Commitment." Securities may cost more
with Standby Commitments than without them. Standby Commitments will be entered
into solely to facilitate portfolio liquidity. A Standby Commitment may be
exercised before the maturity date of the related Municipal Security if the
Fund's investment adviser revises its evaluation of the creditworthiness of the
underlying security or of the entity issuing the Standby Commitment. The
Portfolio's policy is to enter into Standby Commitments only with issuers, banks
or dealers that are determined by the Fund's investment manager to present
minimal credit risks. If an issuer, bank or dealer should default on its
obligation to repurchase an underlying security, the Portfolio might be unable
to recover all or a portion of any loss sustained from having to sell the
security elsewhere.

The Tax-Exempt Portfolio may purchase high quality Certificates of Participation
in trusts that hold Municipal Securities. A Certificate of Participation gives
the Portfolio an undivided interest in the Municipal Security in the proportion
that the Portfolio's interest bears to the total principal amount of the
Municipal Security. These Certificates of Participation may be variable rate or
fixed rate with remaining maturities of one year or less. A Certificate of
Participation may be backed by an irrevocable letter of credit or guarantee of a
financial institution

8
<PAGE>

that satisfies rating agencies as to the credit quality of the Municipal
Security supporting the payment of principal and interest on the Certificate of
Participation. Payments of principal and interest would be dependent upon the
underlying Municipal Security and may be guaranteed under a letter of credit to
the extent of such credit. The quality rating by a rating service of an issue of
Certificates of Participation is based primarily upon the rating of the
Municipal Security held by the trust and the credit rating of the issuer of any
letter of credit and of any other guarantor providing credit support to the
issue. The Fund's investment manager considers these factors as well as others,
such as any quality ratings issued by the rating services identified above, in
reviewing the credit risk presented by a Certificate of Participation and in
determining whether the Certificate of Participation is appropriate for
investment by the Portfolio. It is anticipated by the Fund's investment manager
that, for most publicly offered Certificates of Participation, there will be a
liquid secondary market or there may be demand features enabling the Portfolio
to readily sell its Certificates of Participation prior to maturity to the
issuer or a third party. As to those instruments with demand features, the
Portfolio intends to exercise its right to demand payment from the issuer of the
demand feature only upon a default under the terms of the Municipal Security, as
needed to provide liquidity to meet redemptions, or to maintain a high quality
investment portfolio.

The Tax-Exempt Portfolio may purchase and sell Municipal Securities on a
when-issued or delayed delivery basis. A when-issued or delayed delivery
transaction arises when securities are bought or sold for future payment and
delivery to secure what is considered to be an advantageous price and yield to
the Portfolio at the time it enters into the transaction. In determining the
maturity of portfolio securities purchased on a when-issued or delayed delivery
basis, the Portfolio will consider them to have been purchased on the date when
it committed itself to the purchase.

A security purchased on a when-issued basis, like all securities held by the
Tax-Exempt Portfolio, is subject to changes in market value based upon changes
in the level of interest rates and investors' perceptions of the
creditworthiness of the issuer. Generally such securities will appreciate in
value when interest rates decline and decrease in value when interest rates
rise. Therefore if, in order to achieve higher interest income, the Portfolio
remains substantially fully invested at the same time that it has purchased
securities on a when-issued basis, there will be a greater possibility that the
market value of the Portfolio's assets will vary from $1.00 per share because
the value of a when-issued security is subject to market fluctuation and no
interest accrues to the purchaser prior to settlement of the transaction. See
"Net Asset Value."

The Portfolio will only make commitments to purchase Municipal Securities on a
when-issued or delayed delivery basis with the intention of actually acquiring
the securities, but the Portfolio reserves the right to sell these securities
before the settlement date if deemed advisable. The sale of these securities may
result in the realization of gains that are not exempt from federal income tax.

In seeking to achieve its investment objective, the Tax-Exempt Portfolio may
invest all or any part of its assets in Municipal Securities that are industrial
development bonds. Moreover, although the Portfolio does not currently intend to
do so on a regular basis, it may invest more than 25% of its assets in Municipal
Securities that are repayable out of revenue streams generated from economically
related projects or facilities, if such investment is deemed necessary or
appropriate by the Portfolio's investment manager. To the extent that the
Portfolio's assets are concentrated in Municipal Securities payable from
revenues on economically related projects and facilities, the Portfolio will be
subject to the risks presented by such projects to a greater extent than it
would be if the Portfolio's assets were not so concentrated.

From time to time, as a defensive measure or when acceptable short-term
Municipal Securities are not available, the Tax-Exempt Portfolio may invest in
taxable "temporary investments" that include: obligations of the U.S.
Government, its agencies or instrumentalities; debt securities rated within the
two highest grades by Moody's or S&P; commercial paper rated in the two highest
grades by either of such rating services; certificates of deposit

9
<PAGE>

of domestic banks with assets of $1 billion or more; and any of the foregoing
temporary investments subject to repurchase agreements. Repurchase agreements
are discussed below. Interest income from temporary investments is taxable to
shareholders as ordinary income. Although the Portfolio is permitted to invest
in taxable securities (limited under normal market conditions to 20% of the
Portfolio's total assets), it is the Portfolio's primary intention to generate
income dividends that are not subject to federal income taxes. See "Dividends
and Taxes." For a description of the ratings, see "Appendix -- Ratings of
Investments" in the Statement of Additional Information.

The Fund. Each Portfolio may invest in repurchase agreements, which are
instruments under which a Portfolio acquires ownership of a security from a
broker-dealer or bank that agrees to repurchase the security at a mutually
agreed upon time and price (which price is higher than the purchase price),
thereby determining the yield during the Portfolio's holding period. Maturity of
the securities subject to repurchase may exceed one year. In the event of a
bankruptcy or other default of a seller of a repurchase agreement, a Portfolio
might have expenses in enforcing its rights, and could experience losses,
including a decline in the value of the underlying securities and loss of
income. A Portfolio will not purchase illiquid securities, including time
deposits and repurchase agreements maturing in more than seven days if, as a
result thereof, more than 10% of such Portfolio's net assets valued at the time
of the transaction would be invested in such securities.

Each Portfolio may invest in instruments having rates of interest that are
adjusted periodically or that "float" continuously according to formulae
intended to minimize fluctuation in values of the instruments ("Variable Rate
Securities"). The interest rate of Variable Rate Securities ordinarily is
determined by reference to or is a percentage of an objective standard such as a
bank's prime rate, the 90-day U.S. Treasury Bill rate, or the rate of return on
commercial paper or bank certificates of deposit. Generally, the changes in the
interest rate on Variable Rate Securities reduce the fluctuation in the market
value of such securities. Accordingly, as interest rates decrease or increase,
the potential for capital appreciation or depreciation is less than for
fixed-rate obligations. Some Variable Rate Securities ("Variable Rate Demand
Securities") have a demand feature entitling the purchaser to resell the
securities at an amount approximately equal to amortized cost or the principal
amount thereof plus accrued interest. As is the case for other Variable Rate
Securities, the interest rate on Variable Rate Demand Securities varies
according to some objective standard intended to minimize fluctuation in the
values of the instruments. Each Portfolio determines the maturity of Variable
Rate Securities in accordance with Rule 2a-7, which allows the Portfolio to
consider certain of such instruments as having maturities shorter than the
maturity date on the face of the instrument.

A Portfolio may not borrow money except as a temporary measure for extraordinary
or emergency purposes, and then only in an amount up to one-third of the value
of its total assets, in order to meet redemption requests without immediately
selling any portfolio securities. Any such borrowings under this provision will
not be collateralized. No Portfolio will borrow for leverage purposes.

The Fund has adopted for each Portfolio certain investment restrictions that are
presented in the Statement of Additional Information and that, together with the
investment objective and policies of such Portfolio (except for policies
designated as non-fundamental and limited in regard to the Tax-Exempt Portfolio
to the policies in the first and third paragraphs under "Tax-Exempt Portfolio"
above), cannot be changed without approval by holders of a majority of its
outstanding voting shares. As defined in the 1940 Act, this means with respect
to a Portfolio the lesser of the vote of (a) 67% of the shares of such Portfolio
present at a meeting where more than 50% of the outstanding shares of the
Portfolio are present in person or by proxy or (b) more than 50% of the
outstanding shares of the Portfolio.

10
<PAGE>

NET ASSET VALUE

The net asset value per share of the Shares of each Portfolio is calculated by
dividing the total assets attributable to the Shares of such Portfolio less its
liabilities attributable to the Shares by the total number of its Shares
outstanding. The net asset value per share of the Shares of each Portfolio is
determined on each day the New York Stock Exchange ("Exchange") is open for
trading, at 11:00 a.m., 1:00 p.m. and 3:00 p.m. Chicago time for the Money
Market Portfolio and at 11:00 a.m., 1:00 p.m., 3:00 p.m. and 8:00 p.m. Chicago
time for the Government Securities Portfolio and at 11:00 a.m. and 3:00 p.m.
Chicago time for the Tax-Exempt Portfolio. Fund shares are sold at the net asset
value next determined after an order and payment are received in the form
described under "Purchase of Shares." Orders received by dealers or other
financial services firms prior to the 8:00 p.m. determination of net asset value
for the Government Securities Portfolio and received by KDI, the primary
administrator, distributor and principal underwriter for the Fund, prior to the
close of its business day can be confirmed at the 8:00 p.m. determination of net
asset value for that day. Such transactions are settled by payment of Federal
funds in accordance with procedures established by KDI. 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 Fund's net asset value also may be processed on a confirmed basis in
accordance with the procedures established by KDI. Each Portfolio seeks to
maintain its net asset value at $1.00 per share.

Each Portfolio values its portfolio instruments at amortized cost in accordance
with Rule 2a-7 under the 1940 Act, which means that they are valued at their
acquisition cost (as adjusted for amortization of premium or accretion of
discount) rather than at current market value. Calculations are made to compare
the value of each Portfolio's investments valued at amortized cost with
market-based values. Market-based valuations are obtained by using actual
quotations provided by market makers, estimates of market value, or values
obtained from yield data relating to classes of money market instruments
published by reputable sources at the mean between the bid and asked prices for
the instruments. If a deviation of 1/2 of 1% or more were to occur between a
Portfolio's net asset value per share calculated by reference to market-based
values and the Portfolio's $1.00 per share net asset value, or if there were any
other deviation that the Board of Trustees believed would result in a material
dilution to shareholders or purchasers, the Board of Trustees would promptly
consider what action, if any, should be initiated. In order to value its
investments at amortized cost, the Portfolios purchase only securities with a
maturity of one year or less and maintain a dollar-weighted average portfolio
maturity of 90 days or less. In addition, the Portfolios limit their portfolio
investments to securities that meet the quality and diversification requirements
of Rule 2a-7.

PURCHASE OF SHARES

Shares of each Portfolio of the Fund are sold at net asset value through
selected financial services firms, such as broker-dealers and banks ("firms").
Investors must indicate the Portfolio in which they wish to invest. The Fund has
established a minimum initial investment for Shares of each Portfolio of $1,000
and $100 for subsequent investments, but these minimums may be changed at any
time in management's discretion. Firms offering Fund shares may set higher
minimums for accounts they service and may change such minimums at their
discretion.

The Portfolios seek to have their portfolios as fully invested as possible at
all times in order to achieve maximum income. Since each Portfolio will be
investing in instruments that normally require immediate payment in Federal
Funds (monies credited to a bank's account with its regional Federal Reserve
Bank), the Fund has adopted procedures for the convenience of its shareholders
and to ensure that each Portfolio receives investable funds.

Orders for purchase of Shares of a Portfolio received by wire transfer in the
form of Federal Funds will be effected at the next determined net asset value.
Shares purchased by wire will receive (i) that day's dividend if effected at

11
<PAGE>

or prior to the 1:00 p.m. Chicago 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. Chicago time net asset value determination for the Tax-Exempt
Portfolio; (ii) the dividend for the next calendar day if effected at the 3:00
p.m. or 8:00 p.m. (for the Government Securities Portfolio) Chicago time net
asset value determination provided such payment is received by 3:00 p.m. Chicago
time; or (iii) the dividend for the next business day if effected at the 8:00
p.m. Chicago time net asset value determination and payment is received after
3:00 p.m. Chicago time on such date for the Government Securities Portfolio.
Confirmed share purchases that are effective at the 8:00 p.m. Chicago time net
asset value determination for the Government Securities Portfolio will receive
dividends upon receipt of payment for such transactions in the form of Federal
Funds in accordance with the time provisions immediately above.

Orders for purchase accompanied by a check or other negotiable bank draft will
be accepted and effected as of 3:00 p.m. Chicago time on the next business day
following receipt and such Shares will receive the dividend for the next
calendar day following the day the purchase is effected. If an order is
accompanied by a check drawn on a foreign bank, funds must normally be collected
on such check before Shares will be purchased. See "Purchase and Redemption of
Shares" in the Statement of Additional Information.

If payment is wired in Federal Funds, the payment should be directed to United
Missouri Bank of Kansas City, N.A. (ABA #101-000-695), 10th and Grand Avenue,
Kansas City, MO 64106 for credit to appropriate Fund bank account (CAT Money
Market Fund 46: 98-0119-980-3; CAT Government Securities Fund 47: 98-0119-983-8;
CAT Tax-Exempt Fund 48: 98-0119-985-4) and further credit to your account
number.

Clients of Firms. Firms provide varying arrangements for their clients with
respect to the purchase and redemption of Fund shares and the confirmation
thereof and may arrange with their clients for other investment or
administrative services. Such firms are responsible for the prompt transmission
of purchase and redemption orders. Some firms may establish higher minimum
investment requirements than set forth above. Such firms may independently
establish and charge additional amounts to their clients for their services,
which charges would reduce their clients' yield or return. Firms may also hold
Fund shares in nominee or street name as agent for and on behalf of their
clients. In such instances, the Fund's transfer agent will have no information
with respect to or control over the accounts of specific shareholders. Such
shareholders may obtain access to their accounts and information about their
accounts only from their firm. Certain of these firms may receive compensation
through the Fund's Shareholder Service Agent for record-keeping and other
expenses relating to these nominee accounts. In addition, certain privileges
with respect to the purchase and redemption of shares (such as check writing
redemptions) or the reinvestment of dividends may not be available through such
firms or may only be available subject to certain conditions or limitations.
Some firms may participate in a program allowing them access to their clients'
accounts for servicing including, without limitation, transfers of registration
and dividend payee changes; and may perform functions such as generation of
confirmation statements and disbursement of cash dividends. The prospectus
should be read in connection with such firm's material regarding its fees and
services.

Other Information. The Fund reserves the right to withdraw all or any part of
the offering made by this prospectus or to reject purchase orders, without prior
notice. The Fund also reserves the right at any time to waive or increase the
minimum investment requirements. All orders to purchase Shares of a Portfolio
are subject to acceptance by the Fund and are not binding until confirmed or
accepted in writing. Any purchase that would result in total account balances
for a single shareholder in excess of $3 million is subject to prior approval by
the Fund. Share certificates are issued only on request. A $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.

12
<PAGE>

Shareholders should direct their inquiries to the firm from which they received
this prospectus or to Kemper Service Company ("KSvC"), the Fund's "Shareholder
Service Agent," 811 Main Street, Kansas City, Missouri 64105-2005.

REDEMPTION OF SHARES

General. Upon receipt by the Shareholder Service Agent of a request in the form
described below, Shares of a Portfolio will be redeemed by the Fund at the next
determined net asset value. If processed at 3:00 p.m. or 8:00 p.m. (for the
Money Market Portfolio and the Government Securities Portfolio) Chicago time,
the shareholder will receive that day's dividend. A shareholder may use either
the regular or expedited redemption procedures. Shareholders who redeem all
their Shares of a Portfolio will receive the net asset value of such Shares and
all declared but unpaid dividends on such Shares.

If Shares of a Portfolio to be redeemed were purchased by check or through
certain Automated Clearing House ("ACH") transactions, the Fund may delay
transmittal of redemption proceeds until it has determined that collected funds
have been received for the purchase of such shares, which will be up to 10 days
from receipt by the Fund of the purchase amount. Shareholders may not use
expedited redemption procedures (wire transfer or Redemption Check) until the
Shares being redeemed have been owned for at least 10 days, and shareholders may
not use such procedures to redeem Shares held in certificated form. There is no
delay when Shares being redeemed were purchased by wiring Federal Funds.

If Shares being redeemed were acquired from an exchange of shares of a mutual
fund that were offered subject to a contingent deferred sales charge as
described in the prospectus for that other fund, the redemption of such Shares
by the Fund may be subject to a contingent deferred sales charge as explained in
such prospectus.

Shareholders can request the following telephone privileges: expedited wire
transfer redemptions, ACH transactions and exchange transactions for individual
and institutional accounts and pre-authorized telephone redemption transactions
for certain institutional accounts. Shareholders may choose these privileges on
the account application or by contacting the Shareholder Service Agent for
appropriate instructions. Please note that the telephone exchange privilege is
automatic unless the shareholder refuses it on the account application. The Fund
or its agents may be liable for any losses, expenses or costs arising out of
fraudulent or unauthorized telephone requests pursuant to these privileges,
unless the Fund or its agents reasonably believe, based upon reasonable
verification procedures, that the telephone instructions are genuine. The
shareholder will bear the risk of loss, including loss resulting from fraudulent
or unauthorized transactions, as long as the reasonable verification procedures
are followed. The verification procedures include recording instructions,
requiring certain identifying information before acting upon instructions and
sending written confirmations.

Because of the high cost of maintaining small accounts, the Fund reserves the
right to redeem an account that falls below the minimum investment level,
currently $1,000. A shareholder will be notified in writing and will be allowed
60 days to make additional purchases to bring the account value up to the
minimum investment level before the Fund redeems the shareholder account.

Firms provide varying arrangements for their clients to redeem Fund shares. Such
firms may independently establish and charge additional amounts to their clients
for such services.

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<PAGE>

stock power and accompanied by a written request for redemption. Redemption
requests and a stock power must be endorsed by the account holder with
signatures guaranteed by a commercial bank, trust company, savings and loan
association, federal savings bank, member firm of a national securities exchange
or other eligible financial institution. The redemption request and stock power
must be signed exactly as the account is registered including any special
capacity of the registered owner. Additional documentation may be requested, and
a signature guarantee is normally required, from institutional and fiduciary
account holders, such as corporations, custodians (e.g., under the Uniform
Transfers to Minors Act), executors, administrators, trustees, or guardians.

Telephone Redemptions. If the proceeds of the redemption are $50,000 or less and
the proceeds are payable to the shareholder of record at the address of record,
normally a telephone request or a written request by any one account holder
without a signature guarantee is sufficient for redemptions by individual or
joint account holders, and trust, executor,guardian or custodian account holders
provided the trustee, executor, guardian or custodian is named in the account
registration. Other institutional account holders may exercise this special
privilege of redeeming shares by telephone request or written request without
signature guarantee subject to the same conditions as individual account holders
and subject to the limitations on liability described under "General" above,
provided that this privilege has been pre-authorized by the institutional
account holder or guardian account holder by written instruction to the
Shareholder Service Agent with signatures guaranteed. Telephone requests may be
made by calling 1-800-231-8568. Shares purchased by check or through certain ACH
transactions may not be redeemed under this privilege of redeeming shares by
telephone request until such Shares have been owned for at least 10 days. This
privilege of redeeming Shares by telephone request or by written request without
a signature guarantee may not be used to redeem Shares held in certificated form
and may not be used if the shareholder's account has had an address change
within 30 days of the redemption request. During periods when it is difficult to
contact the Shareholder Service Agent by telephone, it may be difficult to use
the telephone redemption privilege, although investors can still redeem by mail.
The Fund reserves the right to terminate or modify this privilege at any time.

Expedited Wire Transfer Redemptions. If the account holder has given
authorization for expedited wire redemption to the account holder's brokerage or
bank account, Shares can be redeemed and proceeds sent by a federal wire
transfer to a single previously designated account. Requests received by the
Shareholder Service Agent prior to 11:00 a.m. Chicago time will result in Shares
being redeemed that day and normally the proceeds will be sent to the designated
account that day. Once authorization is on file, the Shareholder Service Agent
will honor requests by telephone at 1-800-231-8568 or in writing, subject to the
limitations on liability described under "General" above. The Fund is not
responsible for the efficiency of the federal wire system or the account
holder's financial services firm or bank. The Fund currently does not charge the
account holder for wire transfers. The account holder is responsible for any
charges imposed by the account holder's firm or bank. There is a $1,000 wire
redemption minimum. To change the designated account to receive wire redemption
proceeds, send a written request to the Shareholder Service Agent with
signatures guaranteed as described above or contact the firm through which
Shares of the Fund were purchased. Shares purchased by check or through certain
ACH transactions may not be redeemed by wire transfer until the Shares have been
owned for at least 10 days. Account holders may not use this procedure to redeem
Shares held in certificated form. During periods when it is difficult to contact
the Shareholder Service Agent by telephone, it may be difficult to use the
expedited wire transfer redemption privilege. The Fund reserves the right to
terminate or modify this privilege at any time.

Expedited Redemptions by Draft. Upon request, shareholders will be provided with
drafts to be drawn on the Fund ("Redemption Checks"). These Redemption Checks
may be made payable to the order of any person for not more than $5 million.
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

14
<PAGE>

sufficient number of full and fractional shares in the shareholder's account
will be redeemed as of the next determined net asset value to cover the amount
of the Redemption Check. This will enable the shareholder to continue earning
dividends until the Fund receives the Redemption Check. A shareholder wishing to
use this method of redemption must complete and file an Account Information Form
which is available from the Fund or firms through which shares were purchased.
Redemption Checks should not be used to close an account since the account
normally includes accrued but unpaid dividends. The Fund reserves the right to
terminate or modify this privilege at any time. This privilege may not be
available through some firms that distribute shares of the Fund. In addition,
firms may impose minimum balance requirements in order to obtain this feature.
Firms may also impose fees to investors for this privilege or establish
variations of minimum check amounts if approved by the Fund.

Unless one signer is authorized on the Account Information Form, Redemption
Checks must be signed by all account holders. Any change in the signature
authorization must be made by written notice to the Shareholder Service Agent.
Shares purchased by check or through certain ACH transactions may not be
redeemed by Redemption Check until the Shares have been on the Fund's books for
at least 10 days. Shareholders may not use this procedure to redeem Shares held
in certificated form. The Fund reserves the right to terminate or modify this
privilege at any time.

The Fund may refuse to honor Redemption Checks whenever the right of redemption
has been suspended or postponed, or whenever the account is otherwise impaired.
A $10 service fee will be charged when a Redemption Check is presented to redeem
Fund Shares in excess of the value of a Fund account or in an amount less than
$250; when a Redemption Check is presented that would require redemption of
shares that were purchased by check or certain ACH transactions within 10 days;
or when "stop payment" of a Redemption Check is requested.

SPECIAL FEATURES

Certain firms that offer Shares of the Fund also provide special redemption
features through charge or debit cards and checks that redeem Fund Shares.
Various firms have different charges for their services. Shareholders should
obtain information from their firm with respect to any special redemption
features, applicable charges, minimum balance requirements and special rules of
the cash management program being offered.

Information about the following special features is contained in the Statement
of Additional Information; and further information may be obtained without
charge from KDI: Tax Sheltered Retirement Programs; Systematic Withdrawal
Program; Exchange Privilege and Automated Clearing House Programs.

DIVIDENDS AND TAXES

Dividends are declared daily and paid monthly. Shareholders may select one of
the following ways to receive dividends.

1. Reinvest Dividends at net asset value into additional Shares of the same
Portfolio. Dividends are normally reinvested on the 21st of each month if a
business day, otherwise on the next business day. Dividends will be
reinvested unless the shareholder elects to receive them in cash.

2. Receive Cash Dividends. Checks will be mailed monthly to the shareholder or
any person designated by the shareholder.

The Fund reinvests dividend checks (and future dividends) in Shares of the same
Portfolio if checks are returned as undeliverable. Dividends and other
distributions in the aggregate amount of $10 or less are automatically

15
<PAGE>

reinvested in Shares of the same Portfolio unless the shareholder requests that
such policy not be applied to the shareholder's account.

Taxable Portfolios. The Money Market Portfolio and the Government Securities
Portfolio each intend to continue to qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code (the "Code") and, if so
qualified, will not be subject to Federal income taxes to the extent its
earnings are distributed. Dividends derived from interest and short-term capital
gains are taxable as ordinary income whether received in cash or reinvested in
additional shares. Long-term capital gains distributions, if any, are taxable as
long-term capital gains regardless of the length of time shareholders have owned
their shares. Dividends from these Portfolios do not qualify for the dividends
received deduction available to corporate shareholders.

Tax-Exempt Portfolio. The Tax-Exempt Portfolio intends to continue to qualify
under the Code as a regulated investment company and, if so qualified, will not
be liable for Federal income taxes to the extent its earnings are distributed.
This Portfolio also intends to meet the requirements of the Code applicable to
regulated investment companies distributing tax-exempt interest dividends and,
accordingly, dividends representing net interest received on Municipal
Securities will not be includable by shareholders in their gross income for
Federal income tax purposes, except to the extent such interest is subject to
the alternative minimum tax as discussed below. Dividends representing taxable
net investment income (such as net interest income from temporary investments in
obligations of the U.S. Government) and net short-term capital gains, if any,
are taxable to shareholders as ordinary income.

Net interest on certain "private activity bonds" issued on or after August 8,
1986 is treated as an item of tax preference and may, therefore, be subject to
both the individual and corporate alternative minimum tax. To the extent
provided by regulations to be issued by the Secretary of the Treasury,
exempt-interest dividends from the Tax-Exempt Portfolio are to be treated as
interest on private activity bonds in proportion to the interest income the
Portfolio receives from private activity bonds, reduced by allowable deductions.
For the 1997 calendar year 17% of the net interest income was derived from
"private activity bonds."

Exempt-interest dividends, except to the extent of interest from "private
activity bonds," are not treated as a tax-preference item. For a corporate
shareholder, however, such dividends will be included in determining such
corporate shareholder's "adjusted current earnings." Seventy-five percent of the
excess, if any, of "adjusted current earnings" over the corporate shareholder's
other alternative minimum taxable income with certain adjustments will be a
tax-preference item. Corporate shareholders are advised to consult their tax
advisers with respect to alternative minimum tax consequences.

Shareholders will be required to disclose on their Federal income tax returns
the amount of tax-exempt interest earned during the year, including
exempt-interest dividends received from the Tax-Exempt Portfolio.

Individuals whose modified income exceeds a base amount will be subject to
Federal income tax on up to 85% of their Social Security benefits. Modified
income includes adjusted gross income, tax-exempt interest, including
exempt-interest dividends from the Tax-Exempt Portfolio, and 50% of Social
Security benefits.

The tax exemption of dividends from the Tax-Exempt Portfolio for Federal income
tax purposes does not necessarily result in exemption under the income or other
tax laws of any state or local taxing authority. The laws of the several states
and local taxing authorities vary with respect to the taxation of such income
and shareholders of the Portfolios are advised to consult their own tax advisers
as to the status of their accounts under state and local tax laws.

The Fund. Dividends declared in October, November or December to shareholders of
record as of a date in one of those months and paid during the following January
are treated as paid on December 31 of the calendar year

16
<PAGE>

in which declared for Federal income tax purposes. The Fund may adjust its
schedule for dividend reinvestment for the month of December to assist in
complying with the reporting and minimum distribution requirements contained in
the Code.

Each Portfolio is required by law to withhold 31% of taxable dividends paid to
certain shareholders who do not furnish a correct taxpayer identification number
(in the case of individuals a social security number) and in certain other
circumstances. Trustees of qualified retirement plans and 403(b)(7) accounts are
required by law to withhold 20% of the taxable portion of any distribution that
is eligible to be "rolled over." The 20% withholding requirement does not apply
to distributions from IRAs or any part of a distribution that is transferred
directly to another qualified retirement plan, 403(b)(7) account, or IRA.
Shareholders should consult their tax advisers regarding the 20% withholding
requirement.

Shareholders normally will receive monthly confirmations of dividends and of
purchase and redemption transactions except that confirmations of dividend
reinvestment for IRAs and other fiduciary accounts for which Investors Fiduciary
Trust Company serves as trustee will be sent quarterly. Firms may provide
varying arrangements with their clients with respect to confirmations. Tax
information will be provided annually. Shareholders are encouraged to retain
copies of their account confirmation statements or year-end statements for tax
reporting purposes. However, those who have incomplete records may obtain
historical account transaction information at a reasonable fee.

INVESTMENT MANAGER AND SHAREHOLDER SERVICES

Investment Manager. Scudder Kemper Investments, Inc. (the "Adviser"), 345 Park
Avenue, New York, New York, is the investment manager of the Fund and provides
the Fund with continuous professional investment supervision. The Adviser has
been engaged in the management of investment funds for more than seventy years
with more than $230 billion in assets under management.

The Adviser is an indirect subsidiary of Zurich Financial Services, Inc., a
newly formed global insurance and financial services company. Zurich Financial
Services, Inc. owns approximately 70% of the Adviser, with the balance owned by
the Adviser's officers and employees.

Responsibility for overall management of the Fund rests with its Board of
Trustees and officers. The Adviser provides professional investment supervision.
The investment management agreement provides that the Adviser shall act as the
Fund's investment manager, manage its investments and provide it with various
services and facilities. For the services and facilities furnished to the Money
Market, Government Securities and Tax-Exempt Portfolios, the Fund pays the
Adviser a monthly investment management fee on a graduated basis at the
following annual rates: 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. Prior to January 22, 1999,
the Adviser agreed to waive temporarily its management fee and/or absorb
operating expenses of each Portfolio (attributed to the Shares) to the extent,
if any, that they exceed the following percentages of average daily net assets
of the Portfolios (attributed to the Shares): Money Market Portfolio (Service
Shares only) (1.00%), Government Securities Portfolio (1.00%) and Tax-Exempt
Portfolio (0.95%). For this purpose, Portfolio operating expenses do not include
taxes, interest, extraordinary expenses, brokerage commissions or transaction
costs. Effective January 22, 1999, KDI has agreed to waive a portion of its
distribution services fee for each Portfolio and/or to absorb operating expenses
of each Portfolio (attributable to the Shares) to the extent necessary that
"total operating expenses" attributable to the Shares, as defined exceed the
foregoing amounts. Upon notice to the Fund, the Adviser or KDI may at any time
terminate this waiver or absorption of operating expenses. In addition, from
time to time, the Adviser or KDI may voluntarily

17
<PAGE>

absorb certain other operating expenses of the Portfolios. The level of this
voluntary waiver and/or expense absorption shall be in the Adviser's discretion
and is in addition to KDI's agreement to absorb temporarily certain operating
expenses of the Portfolios described above. For its services as investment
adviser and manager and for facilities furnished during the fiscal year ended
April 30, 1998, the Money Market Portfolio, Government Securities Portfolio and
Tax-Exempt Portfolio paid the Adviser fees of $1,888,000, $1,020,000 and
$530,000 respectively, which includes the effect of the fee waiver.

Fund Accounting Agent. Scudder Fund Accounting Corporation ("SFAC"), a
subsidiary of the Adviser, is responsible for determining the daily net asset
value per share of each Portfolio and maintaining all accounting records related
thereto. Currently, SFAC receives no fee for its services; however, subject to
Board approval, at some time in the future SFAC may seek payment for its
services under its agreement with the Fund.

Year 2000 Readiness. Like other mutual funds and financial and business
organizations worldwide, the Fund could be adversely affected if computer
systems on which the Fund relies, which primarily include those used by the
Adviser, its affiliates or other service providers, are unable to correctly
process date-related information on and after January 1, 2000. The risk is
commonly called the Year 2000 issue. Failure to successfully address the Year
2000 issue could result in interruptions to and other material adverse effects
on the Fund's business and operations, such as problems with calculating net
asset value and difficulties in implementing the Fund's purchase and redemption
procedures. The Adviser has commenced a review of the Year 2000 issue as it may
affect the Fund and is taking steps it believes are reasonably designed to
address the Year 2000 issue, although there can be no assurances that these
steps will be sufficient. In addition, there can be no assurances that the Year
2000 issue will not have an adverse effect on the issuers whose securities are
held by the Fund or on global markets or economies generally.

Distributor and Administrator. Pursuant to an underwriting and distribution
agreement ("distribution agreement"), KDI, 222 South Riverside Plaza, Chicago,
Illinois 60606, an affiliate of the Adviser, serves as distributor and principal
underwriter for the Fund to provide information and services for existing and
potential shareholders. The distribution agreement provides that KDI shall
appoint various financial services firms to provide a cash management service
for their customers or clients through the Fund. The Fund has adopted a plan in
accordance with Rule 12b-1 of the 1940 Act (the "12b-1 Plan") for each Portfolio
(applicable to the Service Shares only in the case of the Money Market
Portfolio). This rule regulates the manner in which an investment company may,
directly or indirectly, bear the expenses of distributing its shares. For its
services under the distribution agreement and pursuant to the 12b-1 Plan, KDI
receives a distribution services fee, payable monthly, at the annual rate of
0.60% of average daily net assets from the Money Market and Government
Securities Portfolios attributable to the Shares and 0.50% of average daily net
assets from the Tax-Exempt Portfolio attributable to the Shares. The fee is
accrued daily as an expense of the Shares of the Portfolios. As principal
underwriter for the Fund, KDI acts as agent of the Fund in the sale of its
shares.

KDI has related administration services and selling group agreements ("services
agreements") with various firms to provide cash management and other services
for Fund shareholders. The firms are to provide such office space and equipment,
telephone facilities, personnel and literature distribution as is necessary or
appropriate for providing information and services to the firms' clients. KDI
normally pays such firms for services at an annual rate of 0.60% of average
daily net assets attributable to the Shares of those accounts in the Money
Market and Government Securities Portfolios that they maintain and service and
0.50% of average daily net assets attributable to the Shares of those accounts
in the Tax-Exempt Portfolio that they maintain and service. In addition, KDI
may, from time to time, from its own resources pay certain firms additional
amounts for such services including, without limitation, fixed dollar amounts
and amounts based upon a percentage of net assets or increased net assets in
those Fund accounts that said firms maintain and service.

18
<PAGE>

Since the fee payable to KDI under the 12b-1 Plan is based upon percentages of
the average daily net assets of the Shares of the Portfolios as provided above
and not upon the actual expenditures of KDI, the expenses of KDI, which may
include overhead expense, may be more or less than the fees received by it under
the 12b-1 Plan. For example, during the fiscal year ended April 30, 1998, KDI
incurred expenses under the 12b-1 Plan of approximately $14,389,000, while it
received an aggregate fee under the 12b-1 Plan of $13,029,000 after the expense
waiver. If the 12b-1 Plan is terminated in accordance with its terms, the
obligation of the Fund to make payments to KDI pursuant to the 12b-1 Plan will
cease and the Fund will not be required to make any payments past the
termination date. Thus, there is no legal obligation for the Fund to pay any
expenses incurred by KDI in excess of its fees under the 12b-1 Plan, if for any
reason the 12b-1 Plan is terminated in accordance with its terms. Future fees
under the 12b-1 Plan may or may not be sufficient to reimburse KDI for its
cumulative expenses incurred.

KDI also has agreements with banking firms to provide administrative and other
services, except for certain underwriting or distribution services that banks
may be prohibited from providing under the Glass-Steagall Act, for their clients
who wish to invest in the Fund. If the Glass-Steagall Act should prevent banking
firms from acting in any capacity or providing any of the described services,
management will consider what action, if any, is appropriate. Management does
not believe that termination of a relationship with a bank would result in any
material adverse consequences to the Fund. Banks or other financial services
firms may be subject to various state laws regarding the services described
above and may be required to register as dealers pursuant to state law.

Custodian, Transfer Agent and Shareholder Service Agent. State Street Bank and
Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, as custodian,
has custody of all securities and cash of the Fund. It attends to the collection
of principal and income, and payment for and collection of proceeds of
securities bought and sold by the Fund. Investors Fiduciary Trust Company
("IFTC"), 801 Pennsylvania Avenue, Kansas City, Missouri 64105, is the Fund's
transfer and dividend-paying agent. Pursuant to a services agreement with IFTC,
Kemper Service Company, 811 Main Street, Kansas City, Missouri 64105, an
affiliate of the Adviser, serves as Shareholder Service Agent of the Fund.

PERFORMANCE

The Fund may advertise several types of performance information including
"yield," "effective yield" and, for the Tax-Exempt Portfolio only, "tax
equivalent yield." Each of these figures is based upon historical earnings and
is not representative of the future performance of the Shares a Portfolio. The
yield of a Portfolio refers to the net investment income generated by a
hypothetical investment in the Portfolio over a specific seven-day period. This
net investment income is then annualized, which means that the net investment
income generated during the seven-day period is assumed to be generated each
week over an annual period and is shown as a percentage of the investment. The
effective yield is calculated similarly, but the net investment income earned by
the investment is assumed to be compounded weekly when annualized. The effective
yield will be slightly higher than the yield due to this compounding effect. Tax
equivalent yield is the yield that a taxable investment must generate in order
to equal the Tax-Exempt Portfolio's yield for an investor in a stated Federal
income tax bracket (normally assumed to be the maximum tax rate). Tax equivalent
yield is based upon, and will be higher than, the portion of the Tax-Exempt
Portfolio's yield that is tax-exempt.

The performance of a Portfolio's shares may be compared to that of other money
market mutual funds or mutual fund indexes as reported by independent mutual
fund reporting services such as Lipper Analytical Services, Inc. The performance
of a Portfolio's shares and its relative size may be compared to other money
market mutual funds as reported by IBC Financial Data, Inc.(R) or Money Market
Insight(R), reporting services on money market funds.

19
<PAGE>

Investors may want to compare a Portfolio's performance to that of various bank
products as reported by BANK RATE MONITOR(TM), a financial reporting service
that weekly publishes average rates of bank and thrift institution money market
deposit accounts and interest bearing checking accounts or various certificate
of deposit indexes. The performance of a Portfolio's shares also may be compared
to that of U.S. Treasury bills and notes. Certain of these alternative
investments may offer fixed rates of return and guaranteed principal and may be
insured. In addition, investors may want to compare a Portfolio's shares
performance to the Consumer Price Index either directly or by calculating its
"real rate of return," which is adjusted for the effects of inflation.

Information may be quoted from publications such as Morningstar, Inc., The Wall
Street Journal, Money Magazine, Forbes, Barron's, Fortune, The Chicago Tribune,
USA Today, Institutional Investor and Registered Representative. The Fund may
depict the historical performance of the securities in which a Portfolio may
invest over periods reflecting a variety of market or economic conditions either
alone or in comparison with alternative investments, performance indexes of
those investments or economic indicators. The Fund may also describe its
portfolio holdings and depict its size or relative size compared to other mutual
funds, the number and make-up of its shareholder base and other descriptive
factors concerning the Fund.

Each Portfolio's yield will fluctuate. Shares of the Fund are not insured.
Additional information concerning a Portfolio's shares performance appears in
the Statement of Additional Information.

CAPITAL STRUCTURE

The Fund is an open-end, diversified, management investment company, organized
as a business trust under the laws of Massachusetts on September 7, 1989. The
Fund may issue an unlimited number of shares of beneficial interest in one or
more series ("Portfolios"), all having no par value, which may be divided by the
Board of Trustees into classes of shares, subject to compliance with the
Securities and Exchange Commission regulations permitting the creation of
separate classes of shares. The Board of Trustees may authorize the issuance of
additional Portfolios if deemed desirable. Since the Fund offers multiple
Portfolios, it is known as a "series company." Currently, the Fund offers only
one class of shares of the Government Securities Portfolio and Tax-Exempt
Portfolio and four classes of shares of the Money Market Portfolio of the Fund.
In addition to the Service Shares, these other classes of the Money Market
Portfolio are the Premier Shares, Retail Shares and Institutional Shares, which
have different expenses, that may effect performance. Shares of each Portfolio
have equal noncumulative voting rights except each class of shares of the Money
Market Portfolio has separate and exclusive voting rights with respect to the
Rule 12b-1 Plan for each such class. Shares of each class of the Money Market
Portfolio also have equal rights with respect to dividends, assets and
liquidation of such Portfolio and are subject to any preferences, rights or
privileges of any of the other classes of shares of the Portfolio. Each class of
shares issued by the Money Market Portfolio differ as to the allocation of
certain expenses of the Portfolio, such as distribution and administrative
expenses, permitting, among other things, different levels of services or
methods of distribution among various classes. Shares of the Portfolios are
fully paid and nonassessable when issued, are transferable without restriction
and have no preemptive or conversion rights. As of August 7, 1998, Roney & Co.
owned more than 25% of the outstanding shares of the Government Securities and
Tax-Exempt Portfolios. The Fund is not required to hold annual shareholders'
meetings and does not intend to do so. However, it will hold special meetings as
required or deemed desirable for such purposes as electing trustees, changing
fundamental policies or approving an investment management agreement. Subject to
the Agreement and Declaration of Trust of the Fund, shareholders may remove
trustees. Shareholders will vote by Portfolio and not in the aggregate or by
class except when voting in the aggregate is required under the Investment
Company Act of 1940, such as for the election of trustees, or when the Board of
Trustees determines that voting by class is appropriate.

20
<PAGE>

PREMIER MONEY MARKET SHARES
222 South Riverside Plaza
Chicago, Illinois 60606

Table of Contents
- -------------------------------------------------------
Summary 1
- -------------------------------------------------------
Summary of Expenses 2
- -------------------------------------------------------
Investment Objectives, Policies
and Risk Factors 2
- -------------------------------------------------------
Net Asset Value 5
- -------------------------------------------------------
Purchase of Shares 6
- -------------------------------------------------------
Redemption of Shares 7
- -------------------------------------------------------
Special Features 9
- -------------------------------------------------------
Dividends and Taxes 9
- -------------------------------------------------------
Investment Manager and
Shareholder Services 10
- -------------------------------------------------------
Performance 12
- -------------------------------------------------------
Capital Structure 13
- -------------------------------------------------------

This prospectus contains information about the Premier Shares (the "Shares") of
the Money Market Portfolio (the "Fund") offered by Cash Account Trust (the
"Trust") that a prospective investor should know before investing and should be
retained for future reference. A Statement of Additional Information dated
January 22, 1999 has been filed with the Securities and Exchange Commission and
is incorporated herein by reference. It is available upon request without charge
from the Fund at the address or telephone number on the cover or the firm from
which this prospectus was received.

Premier Money
Market Shares

PROSPECTUS January 22, 1999

MONEY MARKET PORTFOLIO
222 South Riverside Plaza, Chicago, Illinois 60606

The Fund is designed for investors who seek maximum current income to the extent
consistent with stability of capital. The Fund invests exclusively in high
quality money market instruments.

<PAGE>

PREMIER MONEY MARKET SHARES

222 South Riverside Plaza, Chicago, Illinois 60606

SUMMARY

Investment Objectives. The Money Market Portfolio (the "Fund") is a series of
Cash Account Trust (the "Trust"), an open-end diversified management investment
company, which currently offers three investment portfolios, including the Fund.
The Fund is divided into separate classes including the Premier Shares (the
"Shares") which are offered herein. The Fund invests in a portfolio of high
quality short-term money market instruments. The Fund seeks maximum current
income to the extent consistent with stability of capital from a portfolio
primarily of commercial paper and bank obligations. The Fund may use a variety
of investment techniques, including the purchase of repurchase agreements and
variable rate securities. The Fund seeks to maintain a net asset value of $1.00
per share. There is no assurance that the objective of the Fund will be achieved
or that the Fund will be able to maintain a net asset value of $1.00 per share.
See "Investment Objectives, Policies and Risk Factors."

Purchases and Redemptions. Shares of the Fund are available at net asset value
through selected financial services firms. The minimum initial investment for
Shares of the Fund is $25,000. See "Purchase of Shares." Shares may be redeemed
at the net asset value next determined after receipt by Kemper Service Company
(the "Shareholder Service Agent"), the Fund's Shareholder Service Agent of a
request to redeem in proper form. Shares may be redeemed by written request or
by using one of the Fund's expedited redemption procedures. See "Redemption of
Shares."

Dividends. Dividends are declared daily and paid monthly. Dividends are
automatically reinvested in additional Shares of the Fund, unless the
shareholder makes a different election. See "Dividends and Taxes."

General Information and Capital. The Fund is organized as a business trust under
the laws of Massachusetts and may issue an unlimited number of shares of
beneficial interest. Shares are fully paid and nonassessable when issued, are
transferable without restriction and have no preemptive or conversion rights.
The Fund is not required to hold annual shareholder meetings; but will hold
special meetings as required or deemed desirable for such purposes as electing
trustees, changing fundamental policies or approving an investment management
agreement. See "Capital Structure."

1
<PAGE>

SUMMARY OF EXPENSES

This information is designed to help you understand the various costs and
expenses of investing in the Shares of the Fund.(1)

Shareholder Transaction Expenses(2) .......................................None

Annual Fund Operating Expenses Premier Shares
(as a percentage of average net assets) --------------

Management Fees ...................................................0.19%
Other Expenses ....................................................0.38%
-----
Total Operating Expenses ..........................................0.57%
=====
- -----------
1 The information set forth on this page relates only to the Shares. The Fund
also offers three other classes of shares in the Fund, which have different
fees and expenses (which may affect performance), have different minimum
investment requirements and are entitled to different services.

2 Investment dealers and other firms may independently charge shareholders
additional fees; please see their materials for details.

Example

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 $6 $18 $32 $71
Fund investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period:
</TABLE>

The purpose of the preceding table is to assist investors in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. From time to time, the Adviser or the Distributor may voluntarily
waive fees or absorb certain operating expenses of the Fund. The example assumes
a 5% annual rate of return pursuant to requirements of the Securities and
Exchange Commission. This hypothetical rate of return is not intended to be
representative of past or future performance of the Fund. The example should not
be considered to be a representation of past or future expenses. Actual expenses
may be greater or lesser than those shown.

INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS

The Fund is a money market mutual fund designed to provide its shareholders with
professional management of short-term investment dollars. It is designed for
investors who seek maximum current income consistent with stability of capital.
The Fund pools individual and institutional investors' money that it uses to buy
high quality money market instruments. The Fund is divided into separate shares
including the Premier Shares, which are offered herein. Because the Fund
combines its shareholders' money, it can buy and sell large blocks of
securities, which reduces transaction costs and maximizes yields. The Fund is
managed by investment professionals who analyze market trends to take advantage
of changing conditions and who seek to minimize risk by diversifying the Fund's
investments. The Fund's investments are subject to price fluctuations resulting
from rising or declining interest rates and are subject to the ability of the
issuers of such investments to make payment at maturity. However, because of
their short maturities, liquidity and high quality ratings, high quality money
market instruments, such as those in which the Fund invests, are generally
considered to be among the safest available. Thus, the Fund is designed for
investors who want to avoid the fluctuations of principal commonly associated
with equity or long-term bond investments. There can be no guarantee that the
Fund will achieve its objective or that it will maintain a net asset value of
$1.00 per share.

2
<PAGE>

The Fund seeks maximum current income consistent with stability of capital. The
Fund pursues its objective by investing exclusively in the following types of
U.S. Dollar-denominated money market instruments that mature in 12 months or
less:

1. Obligations of, or guaranteed by, the U.S. or Canadian governments,
their agencies or instrumentalities.

2. Bank certificates of deposit, time deposits or bankers' acceptances of
U.S. banks (including their foreign branches) and Canadian chartered
banks having total assets in excess of $1 billion.

3. Bank certificates of deposit, time deposits or bankers' acceptances of
foreign banks (including their U.S. and foreign branches) having total
assets in excess of $10 billion.

4. Commercial paper, notes, bonds, debentures, participation certificates
or other debt obligations that (i) are rated high quality by Moody's
Investors Service, Inc. ("Moody's"), Standard & Poor's Corporation
("S&P"), or Duff & Phelps, Inc. ("Duff"); or (ii) if unrated, are
determined to be at least equal in quality to one or more of the above
ratings in the discretion of the Fund's investment manager. Currently,
only obligations in the top two categories are considered to be rated
high quality. The two highest rating categories of Moody's, S&P and
Duff for commercial paper are Prime-1 and Prime-2, A-1 and A-2 and Duff
1 and Duff 2, respectively. For other debt obligations, the two highest
rating categories for such services are Aaa and Aa, AAA and AA and AAA
and AA, respectively. For a description of these ratings, see
"Appendix-- Ratings of Investments" in the Statement of Additional
Information.

5. Repurchase agreements of obligations that are suitable for investment
under the categories set forth above. Repurchase agreements are
discussed below.

In addition, the Fund limits its investments to securities that meet the quality
and diversification requirements of Rule 2a-7 under the Investment Company Act
of 1940 (the "1940 Act"). See "Net Asset Value."

The Fund will normally invest at least 25% of its assets in obligations issued
by banks; provided, however, the Fund may in the discretion of the investment
manager temporarily invest less than 25% of its assets in such obligations
whenever the Fund assumes a defensive posture. Investments by the Fund 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 Fund do not benefit materially from insurance from
the Federal Deposit Insurance Corporation.

3
<PAGE>

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 Fund 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 Fund 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 Fund through or with the
assistance of the issuer or investment dealers who make a market in the Section
4(2) paper, thus providing liquidity. The investment manager considers the
legally restricted but readily saleable Section 4(2) paper to be liquid;
however, pursuant to procedures approved by the Board of Trustees of the Fund,
if a particular investment in Section 4(2) paper is not determined to be liquid,
that investment will be included within the 10% limitation on illiquid
securities discussed under "The Fund" below. The investment manager monitors the
liquidity of the Fund's investments in Section 4(2) paper on a continuous basis.

The Fund may invest in high quality participation certificates ("certificates")
representing undivided interests in trusts that hold the Fund of receivables
from consumer and commercial credit transactions, such as transactions involving
consumer revolving credit card accounts or commercial revolving credit loan
facilities. The receivables would include amounts charged for goods and
services, finance charges, late charges and other related fees and charges.
Interest payable on the certificates may be fixed or may be adjusted
periodically or "float" continuously according to a formula based upon an
objective standard such as the 30-day commercial paper rate. See below for a
discussion of "Variable Rate Securities." A trust may have the benefit of a
letter of credit from a bank at a level established to satisfy rating agencies
as to the credit quality of the assets supporting the payment of principal and
interest on the certificates. Payments of principal and interest on the
certificates would be dependent upon the underlying receivables in the trust and
may be guaranteed under a letter of credit to the extent of such credit. The
quality rating by a rating service of an issue of certificates is based
primarily upon the value of the receivables held by the trust and the credit
rating of the issuer of any letter of credit and of any other guarantor
providing credit support to the trust. The investment manager considers these
factors as well as others, such as any quality ratings issued by the rating
services identified above, in reviewing the credit risk presented by a
certificate and in determining whether the certificate is appropriate for
investment by the Fund. Collection of receivables in the trust may be affected
by various social, legal and economic factors affecting the use of credit and
repayment patterns, such as changes in consumer protection laws, the rate of
inflation, unemployment levels and relative interest rates. It is anticipated
that for most publicly offered certificates there will be a liquid secondary
market or there may be demand features enabling the Fund to readily sell its
certificates prior to maturity to the issuer or a third party. While the Fund
may invest without limit in certificates, it is currently anticipated that such
investments will not exceed 25% of the Fund's assets.

The Fund may invest in repurchase agreements, which are instruments under which
the Fund 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 Fund'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 Fund 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 Fund 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 Fund's net assets
valued at the time of the transaction would be invested in such securities.

4
<PAGE>

The Fund may invest in instruments having rates of interest that are adjusted
periodically or that "float" continuously according to formulae intended to
minimize fluctuation in values of the instruments ("Variable Rate Securities").
The interest rate of Variable Rate Securities ordinarily is determined by
reference to or is a percentage of an objective standard such as a bank's prime
rate, the 90-day U.S. Treasury Bill rate, or the rate of return on commercial
paper or bank certificates of deposit. Generally, the changes in the interest
rate on Variable Rate Securities reduce the fluctuation in the market value of
such securities. Accordingly, as interest rates decrease or increase, the
potential for capital appreciation or depreciation is less than for fixed-rate
obligations. Some Variable Rate Securities ("Variable Rate Demand Securities")
have a demand feature entitling the purchaser to resell the securities at an
amount approximately equal to amortized cost or the principal amount thereof
plus accrued interest. As is the case for other Variable Rate Securities, the
interest rate on Variable Rate Demand Securities varies according to some
objective standard intended to minimize fluctuation in the values of the
instruments. The Fund determines the maturity of Variable Rate Securities in
accordance with Rule 2a-7, which allows the Fund to consider certain of such
instruments as having maturities shorter than the maturity date on the face of
the instrument.

The Fund 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 Fund will not borrow for leverage purposes.

The Trust has adopted for the Fund certain investment restrictions that are
presented in the Statement of Additional Information and that, together with the
investment objective and policies of the Fund cannot be changed without approval
by holders of a majority of its outstanding voting shares. As defined in the
1940 Act, this means with respect to the Fund the lesser of the vote of (a) 67%
of the shares of the Fund present at a meeting where more than 50% of the
outstanding shares of the Fund are present in person or by proxy or (b) more
than 50% of the outstanding shares of the Fund.

NET ASSET VALUE

The net asset value per share of the Shares of the Fund is calculated by
dividing the total assets attributable to the Shares of the Fund less its
liabilities by the total number of its Shares outstanding. The net asset value
per share of the Shares of the Fund is determined on each day the New York Stock
Exchange ("Exchange") is open for trading, at 11:00 a.m., 1:00 p.m. and 3:00
p.m. Chicago time. Shares of the Fund are sold at the net asset value next
determined after an order and payment are received in the form described under
"Purchase of Shares." 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 Fund's net asset value also may
be processed on a confirmed basis in accordance with the procedures established
by the Distributor. The Fund seeks to maintain its net asset value at $1.00 per
share.

5
<PAGE>

shareholders or purchasers, the Board of Trustees would promptly consider what
action, if any, should be initiated. In order to value its investments at
amortized cost, the Fund purchases only securities with a maturity of one year
or less and maintain a dollar-weighted average portfolio maturity of 90 days or
less. In addition, the Fund limits its portfolio investments to securities that
meet the quality and diversification requirements of Rule 2a-7.

PURCHASE OF SHARES

Shares of the Fund are sold at net asset value through selected financial
services firms, such as broker-dealers and banks ("firms"). The Fund has
established a minimum initial investment for Shares of the Fund of $25,000, but
this minimum may be changed at any time in management's discretion. Firms
offering Fund shares may set higher minimums for accounts they service and may
change such minimums at their discretion.

The Fund seeks to have its portfolio as fully invested as possible at all times
in order to achieve maximum income. Since the Fund will be investing in
instruments that normally require immediate payment in Federal Funds (monies
credited to a bank's account with its regional Federal Reserve Bank), the Fund
has adopted procedures for the convenience of its shareholders and to ensure
that the Fund receives investable funds.

Orders for purchase of Shares of the Fund received by wire transfer in the form
of Federal Funds will be effected at the next determined net asset value. Shares
purchased by wire will receive (i) that day's dividend if effected at or prior
to the 1:00 p.m. Chicago time net asset value determination; (ii) the dividend
for the next calendar day if effected at the 3:00 p.m. Chicago time net asset
value determination.

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 Premier Money Market Shares (49:
98-0119-980-3) and for further credit to your money market account number.

6
<PAGE>

Other Information. The Fund reserves the right to withdraw all or any part of
the offering made by this prospectus or to reject purchase orders, without prior
notice. The Fund also reserves the right at any time to waive or increase the
minimum investment requirements. All orders to purchase Shares of the Fund are
subject to acceptance by the Fund and are not binding until confirmed or
accepted in writing. Any purchase that would result in total account balances
for a single shareholder in excess of $3 million is subject to prior approval by
the Fund. Share certificates are issued only on request. A $10 service fee will
be charged when a check for the purchase of Shares is returned because of
insufficient or uncollected funds or a stop payment order.

Shareholders should direct their inquiries to the firm from which they received
this prospectus or to Kemper Service Company, 811 Main Street, Kansas City,
Missouri 64105-2005.

REDEMPTION OF SHARES

General. Upon receipt by the Shareholder Service Agent of a request in the form
described below, Shares of the Fund will be redeemed by the Fund at the next
determined net asset value. If processed at 3:00 p.m. or 8:00 p.m. Chicago time,
the shareholder will receive that day's dividend. A shareholder may use either
the regular or expedited redemption procedures. Shareholders who redeem all
their Shares of the Fund will receive the net asset value of such Shares and all
declared but unpaid dividends on such Shares.

If Shares of the Fund to be redeemed were purchased by check or through certain
Automated Clearing House ("ACH") transactions, the Fund may delay transmittal of
redemption proceeds until it has determined that collected funds have been
received for the purchase of such Shares, which will be up to 10 days from
receipt by the Fund of the purchase amount. Shareholders may not use expedited
redemption procedures (wire transfer or Redemption Check) until the Shares being
redeemed have been owned for at least 10 days, and shareholders may not use such
procedures to redeem Shares held in certificated form. There is no delay when
Shares being redeemed were purchased by wiring Federal Funds.

Because of the high cost of maintaining small accounts, the Fund reserves the
right to redeem an account that falls below the minimum investment level,
currently $25,000. A shareholder will be notified in writing and will be allowed
60 days to make additional purchases to bring the account value up to the
minimum investment level before the Fund redeems the shareholder account.

Firms provide varying arrangements for their clients to redeem Fund shares. Such
firms may independently establish and charge additional amounts to their clients
for such services.

7
<PAGE>

Regular Redemptions. When Shares are held for the account of a shareholder by
the Fund's transfer agent, the shareholder may redeem them by sending a written
request with signatures guaranteed to Kemper Service Company, P.O. Box 419153,
Kansas City, Missouri 64141-6153. When certificates for shares have been issued,
they must be mailed to or deposited with the Shareholder Service Agent, along
with a duly endorsed stock power and accompanied by a written request for
redemption. Redemption requests and a stock power must be endorsed by the
account holder with signatures guaranteed by a commercial bank, trust company,
savings and loan association, federal savings bank, member firm of a national
securities exchange or other eligible financial institution. The redemption
request and stock power must be signed exactly as the account is registered
including any special capacity of the registered owner. Additional documentation
may be requested, and a signature guarantee is normally required, from
institutional and fiduciary account holders, such as corporations, custodians
(e.g., under the Uniform Transfers to Minors Act), executors, administrators,
trustees, or guardians.

Telephone Redemptions. If the proceeds of the redemption are $50,000 or less and
the proceeds are payable to the shareholder of record at the address of record,
normally a telephone request or a written request by any one account holder
without a signature guarantee is sufficient for redemptions by individual or
joint account holders, and trust, executor, guardian or custodian account
holders provided the trustee, executor, guardian or custodian is named in the
account registration. Other institutional account holders may exercise this
special privilege of redeeming Shares by telephone request or written request
without signature guarantee subject to the same conditions as individual account
holders and subject to the limitations on liability described under "General"
above, provided that this privilege has been pre-authorized by the institutional
account holder or guardian account holder by written instruction to the
Shareholder Service Agent with signatures guaranteed. Telephone requests may be
made by calling the number on the cover of the prospectus. Shares purchased by
check or through certain ACH transactions may not be redeemed under this
privilege of redeeming Shares by telephone request until such shares have been
owned for at least 10 days. This privilege of redeeming Shares by telephone
request or by written request without a signature guarantee may not be used to
redeem Shares held in certificated form and may not be used if the shareholder's
account has had an address change within 30 days of the redemption request.
During periods when it is difficult to contact the Shareholder Service Agent by
telephone, it may be difficult to use the telephone redemption privilege,
although investors can still redeem by mail. The Fund reserves the right to
terminate or modify this privilege at any time.

Expedited Wire Transfer Redemptions. If the account holder has given
authorization for expedited wire redemption to the account holder's brokerage or
bank account, Shares can be redeemed and proceeds sent by a federal wire
transfer to a single previously designated account. Requests received by the
Shareholder Service Agent prior to 11:00 a.m. Chicago time will result in Shares
being redeemed that day and normally the proceeds will be sent to the designated
account that day. Once authorization is on file, the Shareholder Service Agent
will honor requests by telephone at the number provided on the cover of the
prospectus or in writing, subject to the limitations on liability described
under "General" above. The Fund is not responsible for the efficiency of the
federal wire system or the account holder's financial services firm or bank. The
Fund currently does not charge the account holder for wire transfers. The
account holder is responsible for any charges imposed by the account holder's
firm or bank. There is a $1,000 wire redemption minimum. To change the
designated account to receive wire redemption proceeds, send a written request
to the Shareholder Service Agent with signatures guaranteed as described above
or contact the firm through which Shares of the Fund were purchased. Shares
purchased by check or through certain ACH transactions may not be redeemed by
wire transfer until the Shares have been owned for at least 10 days. Account
holders may not use this procedure to redeem Shares held in certificated form.
During periods when it is difficult to contact the Shareholder Service Agent by
telephone, it may be difficult to

8
<PAGE>

use the expedited wire transfer redemption privilege. The Fund reserves the
right to terminate or modify this privilege at any time.

Expedited Redemptions by Draft. Upon request, shareholders will be provided with
drafts to be drawn on the Fund ("Redemption Checks"). These Redemption Checks
may be made payable to the order of any person for not more than $5 million.
When a Redemption Check is presented for payment, a sufficient number of full
and fractional shares in the shareholder's account will be redeemed as of the
next determined net asset value to cover the amount of the Redemption Check.
This will enable the shareholder to continue earning dividends until the Fund
receives the Redemption Check. A shareholder wishing to use this method of
redemption must complete and file an Account Information Form which is available
from the Fund or firms through which shares were purchased. Redemption Checks
should not be used to close an account since the account normally includes
accrued but unpaid dividends. The Fund reserves the right to terminate or modify
this privilege at any time. This privilege may not be available through some
firms that distribute shares of the Fund. In addition, firms may impose minimum
balance requirements in order to obtain this feature. Firms may also impose fees
to investors for this privilege or establish variations of minimum check amounts
if approved by the Fund.

Unless one signer is authorized on the Account Information Form, Redemption
Checks must be signed by all account holders. Any change in the signature
authorization must be made by written notice to the Shareholder Service Agent.
Shares purchased by check or through certain ACH transactions may not be
redeemed by Redemption Check until the shares have been on the Fund's books for
at least 10 days. Shareholders may not use this procedure to redeem Shares held
in certificated form. The Fund reserves the right to terminate or modify this
privilege at any time.

The Fund may refuse to honor Redemption Checks whenever the right of redemption
has been suspended or postponed, or whenever the account is otherwise impaired.
A $10 service fee will be charged when a Redemption Check is presented to redeem
Fund Shares in excess of the value of a Fund account; when a Redemption Check is
presented that would require redemption of shares that were purchased by check
or certain ACH transactions within 10 days; or when "stop payment" of a
Redemption Check is requested.

SPECIAL FEATURES

Information about the following special features is contained in the Statement
of Additional Information; and further information may be obtained without
charge from the Distributor: Tax Sheltered Retirement Programs; Systematic
Withdrawal Program; Exchange Privilege and Automated Clearing House Programs.

DIVIDENDS AND TAXES

Dividends are declared daily and paid monthly. Shareholders may select one of
the following ways to receive dividends.

1. Reinvest Dividends at net asset value into additional Shares of the
Fund. Dividends are normally reinvested on the 21st of each month if a
business day, otherwise on the next business day. Dividends will be
reinvested unless the shareholder elects to receive them in cash.

2. Receive Cash Dividends. Checks will be mailed monthly to the
shareholder or any person designated by the shareholder.

9
<PAGE>

The Fund reinvests dividend checks (and future dividends) in Shares of the Fund
if checks are returned as undeliverable. Dividends and other distributions in
the aggregate amount of $10 or less are automatically reinvested in Shares of
the Fund unless the shareholder requests that such policy not be applied to the
shareholder's account.

The Fund 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 Fund do not qualify for the dividends received
deduction available to corporate shareholders.

Dividends declared in October, November or December to shareholders of record as
of a date in one of those months and paid during the following January are
treated as paid on December 31 of the calendar year in which declared for
Federal income tax purposes. The Fund may adjust its schedule for dividend
reinvestment for the month of December to assist in complying with the reporting
and minimum distribution requirements contained in the Code.

The Fund 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.

INVESTMENT MANAGER AND SHAREHOLDER SERVICES

10
<PAGE>

management fee on a graduated basis at the following annual rates: 0.22% of the
first $500 million of combined average daily net assets of all the investment
portfolios 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 all the investment portfolios of the Trust over $3 billion. From time
to time, the Adviser or the Distributor may voluntarily waive temporarily its
fees and/or absorb certain operating expenses of the Fund. The level of this
voluntary waiver and/or expense absorption shall be in the Adviser's discretion.

Fund Accounting Agent. Scudder Fund Accounting Corporation ("SFAC"), a
subsidiary of the Adviser, is responsible for determining the daily net asset
value per share of the Fund and maintaining all accounting records related
thereto. Currently, SFAC receives no fee for its services; however, subject to
Board approval, at some time in the future SFAC may seek payment for its
services under its agreement with the Trust.

Distributor and Administrator. Pursuant to an underwriting and distribution
agreement ("distribution agreement"), Kemper Distributors, Inc. ("the
Distributor"), 222 South Riverside Plaza, Chicago, Illinois 60606, an affiliate
of the Adviser, serves as distributor and principal underwriter for the Fund to
provide information and services for existing and potential shareholders. The
distribution agreement provides that the Distributor shall appoint various
financial services firms to provide a cash management service for their
customers or clients through the Fund. The Distributor receives no compensation
from the Fund as principal underwriter for the Shares and pays all expenses of
distributions of the Shares not otherwise paid by dealers and other firms.

The Distributor also provides information and administrative services for
shareholders of the Shares pursuant to an administration and shareholder
services agreement. For services under the agreement, the Fund pays the
Distributor a fee, payable monthly, at the annual rate of up to 0.25% of average
daily net assets of the Fund. The Distributor may engage other firms to provide
information and administrative services for shareholders of the Fund. The firms
are to provide such office space and equipment, telephone facilities, personnel
and literature distribution as is necessary or appropriate for providing
information and services to the firms' clients. The Distributor pays each such
firm a service fee at an annual rate of up to 0.25% of net assets of Shares
maintained and serviced by the firm. Firms to which service fees may be paid
include broker-dealers affiliated with the Distributor.

The Distributor also has agreements with banking firms to provide administrative
and other services, except for certain underwriting or distribution services
that banks may be prohibited from providing under the Glass-Steagall Act, for
their clients who wish to invest in the Fund. If the Glass-Steagall Act should
prevent banking firms from acting in any capacity or providing any of the
described services, management will consider what action, if any, is
appropriate. Management does not believe that termination of a relationship with
a bank would result in any material adverse consequences to the Fund. Banks or
other financial services firms may be

11
<PAGE>

subject to various state laws regarding the services described above and may be
required to register as dealers pursuant to state law.

Custodian, Transfer Agent and Shareholder Service Agent. State Street Bank and
Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, as custodian,
has custody of all securities and cash of the Fund. It attends to the collection
of principal and income, and payment for and collection of proceeds of
securities bought and sold by the Fund. Investors Fiduciary Trust Company
("IFTC"), 801 Pennsylvania Avenue, Kansas City, Missouri 64105 is the Fund's
transfer and dividend-paying agent. Pursuant to a services agreement with IFTC,
Kemper Service Company, 811 Main Street, Kansas City, Missouri 64105, an
affiliate of the Adviser, serves as Shareholder Service Agent of the Fund.

PERFORMANCE

The Fund may advertise several types of performance information including
"yield" and "effective yield" for Premier Shares. Each of these figures is based
upon historical earnings and is not representative of the future performance of
the Shares. The yield of the Shares refers to the net investment income
generated by a hypothetical investment in the Shares over a specific seven-day
period. This net investment income is then annualized, which means that the net
investment income generated during the seven-day period is assumed to be
generated each week over an annual period and is shown as a percentage of the
investment. The effective yield is calculated similarly, but the net investment
income earned by the investment is assumed to be compounded weekly when
annualized. The effective yield will be slightly higher than the yield due to
this compounding effect.

The performance of the Shares may be compared to that of other money market
mutual funds or mutual fund indexes as reported by independent mutual fund
reporting services such as Lipper Analytical Services, Inc. The performance of
the Shares and its relative size may be compared to other money market mutual
funds as reported by IBC Financial Data, Inc.(R) or Money Market Insight(R),
reporting services on money market funds. Investors may want to compare the
performance of the Shares to that of various bank products as reported by BANK
RATE MONITOR(TM), a financial reporting service that weekly publishes average
rates of bank and thrift institution money market deposit accounts and interest
bearing checking accounts or various certificate of deposit indexes. The
performance of the Shares also may be compared to that of U.S. Treasury bills
and notes. Certain of these alternative investments may offer fixed rates of
return and guaranteed principal and may be insured. In addition, investors may
want to compare the Fund's performance to the Consumer Price Index either
directly or by calculating its "real rate of return," which is adjusted for the
effects of inflation.

Information may be quoted from publications such as Morningstar, Inc., The Wall
Street Journal, Money Magazine, Forbes, Barron's, Fortune, The Chicago Tribune,
USA Today, Institutional Investor and Registered Representative. The Fund may
depict the historical performance of the securities in which the Fund may invest
over periods reflecting a variety of market or economic conditions either alone
or in comparison with alternative investments, performance indexes of those
investments or economic indicators. The Fund may also describe its portfolio
holdings and depict its size or relative size compared to other mutual funds,
the number and make-up of its shareholder base and other descriptive factors
concerning the Fund.

The yield of the Shares will fluctuate. Fund Shares are not insured. Additional
information concerning the performance of the Shares appears in the Statement of
Additional Information.

12
<PAGE>

CAPITAL STRUCTURE

The Trust is an open-end, diversified, management investment company, organized
as a business trust under the laws of Massachusetts on September 7, 1989. The
Trust may issue an unlimited number of shares of beneficial interest in one or
more series ("Portfolios"), all having no par value, which may be divided by the
Board of Trustees into classes of shares, subject to compliance with the
Securities and Exchange Commission regulations permitting the creation of
separate classes of shares. The Board of Trustees may authorize the issuance of
additional Portfolios if deemed desirable. Since the Trust offers multiple
Portfolios, it is known as a "series company." Currently, the Trust offers the
Shares of the Fund and three other classes of shares of the Fund. These other
classes consist of Service Shares, Retail Shares and Institutional Shares, which
have different expenses that may affect performance. In addition, the Trust
offers two other Portfolios: the Government Portfolio and the Tax-Exempt
Portfolio. Shares of each class of the Money Market 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 of the other classes of shares of the Portfolio. Each class of
shares issued by the Money Market Portfolio differ as to the allocation of
certain expenses of the Portfolio, such as distribution and administrative
expenses, permitting, among other things, different levels of services or
methods of distribution among various classes. Shares of the Portfolio 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. However, it will
hold special meetings as required or deemed desirable for such purposes as
electing trustees, changing fundamental policies or approving an investment
management agreement. Subject to the Agreement and Declaration of Trust of the
Trust, shareholders may remove trustees. Shareholders will vote by Portfolio and
not in the aggregate or by class except when voting in the aggregate is required
under the Investment Company Act of 1940, such as for the election of trustees,
or when the Board of Trustees determines that voting by class is appropriate.

13
<PAGE>

Premier Money
Market Shares

Prospectus

January 22, 1999

<PAGE>
INSTITUTIONAL MONEY MARKET SHARES
222 South Riverside Plaza
Chicago, Illinois 60606

Table of Contents
- -------------------------------------------------------
Summary 1
- -------------------------------------------------------
Summary of Expenses 2
- -------------------------------------------------------
Investment Objectives, Policies
and Risk Factors 2
- -------------------------------------------------------
Net Asset Value 5
- -------------------------------------------------------
Purchase of Shares 6
- -------------------------------------------------------
Redemption of Shares 7
- -------------------------------------------------------
Special Features 8
- -------------------------------------------------------
Dividends and Taxes 9
- -------------------------------------------------------
Investment Manager and
Shareholder Services 10
- -------------------------------------------------------
Performance 11
- -------------------------------------------------------
Capital Structure 12
- -------------------------------------------------------

This prospectus contains information about the Institutional Shares (the
"Shares") of the Money Market Portfolio (the "Fund") offered by Cash Account
Trust (the "Trust") that a prospective investor should know before investing and
should be retained for future reference. A Statement of Additional Information
dated January 22, 1999, has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. It is available upon request
without charge from the Fund at the address or telephone number on the cover or
the firm from which this prospectus was received.

Institutional Money Market
Shares

PROSPECTUS January 22, 1999

INSTITUTIONAL MONEY MARKET SHARES
222 South Riverside Plaza, Chicago, Illinois 60606

The Fund is designed for investors who seek maximum current income to the extent
consistent with stability of capital. The Fund invests exclusively in high
quality money market instruments.

<PAGE>

INSTITUTIONAL MONEY MARKET SHARES

222 South Riverside Plaza, Chicago, Illinois 60606

SUMMARY

Investment Objectives. The Money Market Portfolio (the "Fund") is a series of
Cash Account Trust (the "Trust"), an open-end diversified management investment
company, which currently offers three investment portfolios, including the Fund.
The Fund is divided into separate classes including the Institutional Shares
(the "Shares"), which are offered herein. The Fund invests in a portfolio of
high quality short-term money market instruments. The Fund seeks maximum current
income to the extent consistent with stability of capital from a portfolio
primarily of commercial paper and bank obligations. The Fund may use a variety
of investment techniques, including the purchase of repurchase agreements and
variable rate securities. The Fund seeks to maintain a net asset value of $1.00
per share. There is no assurance that the objective of the Fund will be achieved
or that the Fund will be able to maintain a net asset value of $1.00 per share.
See "Investment Objectives, Policies and Risk Factors."

Purchases and Redemptions. Shares of the Fund are available at net asset value
through financial services firms. The minimum initial investment for Shares of
the Fund is $250,000. See "Purchase of Shares." Shares may be redeemed at the
net asset value next determined after receipt by Kemper Service Company (the
"Shareholder Service Agent"), the Fund's Shareholder Service Agent, of a request
to redeem in proper form. Shares may be redeemed by written request or by using
one of the Fund's expedited redemption procedures. See "Redemption of Shares."

1
<PAGE>

SUMMARY OF EXPENSES

This information is designed to help you understand the various costs and
expenses of investing in the Shares of the Fund.(1)

<TABLE>
<S> <C>
Shareholder Transaction Expenses(2).........................................................................None

Annual Fund Operating Expenses
(after fee waiver) (as a percentage of average net assets) Institutional Shares
--------------------

Management Fees............................................................................. 0.19%
Other Expenses.............................................................................. 0.07%
-----
Total Operating Expenses.................................................................... 0.26%
=====
</TABLE>
- -----------

1 The information set forth on this page relates only to the Shares. The Fund
also offers three other classes of shares in the Fund, which have different
fees and expenses (which may affect performance), have different minimum
investment requirements and are entitled to different services.

2 Investment dealers and other firms may independently charge shareholders
additional fees; please see their materials for details.

Example
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------

<S> <C> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 $3 $8 $15 $33
Fund investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period:

</TABLE>

The purpose of the preceding table is to assist investors in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. As discussed under "Investment Manager and Shareholder Services,"
the Distributor has agreed to waive temporarily a portion of its administrative
services fee. Without the effect of this waiver, "Other Expenses" would be 0.10%
and "Total Operating Expenses" would be 0.29%. "Other Expenses" is an estimate
for the current fiscal year. From time to time, the Adviser or Distributor may
voluntarily waive fees or absorb certain additional operating expenses of the
Fund. The example assumes a 5% annual rate of return pursuant to requirements of
the Securities and Exchange Commission. This hypothetical rate of return is not
intended to be representative of past or future performance of the Fund. The
example should not be considered to be a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.

INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS

2
<PAGE>

instruments, such as those in which the Fund invests, are generally considered
being among the safest available. Thus, the Fund 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 Fund will achieve
its objective or that it will maintain a net asset value of $1.00 per share.

1. Obligations of, or guaranteed by, the U.S. or Canadian governments, their
agencies or instrumentalities.

2. Bank certificates of deposit, time deposits or bankers' acceptances of U.S.
banks (including their foreign branches) and Canadian chartered banks
having total assets in excess of $1 billion.

3. Bank certificates of deposit, time deposits or bankers' acceptances of
foreign banks (including their U.S. and foreign branches) having total
assets in excess of $10 billion.

4. Commercial paper, notes, bonds, debentures, participation certificates or
other debt obligations that (i) are rated high quality by Moody's Investors
Service, Inc. ("Moody's"), Standard & Poor's Corporation ("S&P"), or Duff &
Phelps, Inc. ("Duff"); or (ii) if unrated, are determined to be at least
equal in quality to one or more of the above ratings in the discretion of
the Fund's investment manager. Currently, only obligations in the top two
categories are considered to be rated high quality. The two highest rating
categories of Moody's, S&P and Duff for commercial paper are Prime-1 and
Prime-2, A-1 and A-2 and Duff 1 and Duff 2, respectively. For other debt
obligations, the two highest rating categories for such services are Aaa
and Aa, AAA and AA and AAA and AA, respectively. For a description of these
ratings, see "Appendix -- Ratings of Investments" in the Statement of
Additional Information.

5. Repurchase agreements of obligations that are suitable for investment under
the categories set forth above. Repurchase agreements are discussed below.

3
<PAGE>

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 Fund do not benefit materially from insurance from the Federal
Deposit Insurance Corporation.

The Fund 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 Fund 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
Fund 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 Fund through or with the assistance of the issuer or
investment dealers who make a market in the Section 4(2) paper, thus providing
liquidity. The investment manager considers the legally restricted but readily
saleable Section 4(2) paper to be liquid; however, pursuant to procedures
approved by the Board of Trustees of the Fund, if a particular investment in
Section 4(2) paper is not determined to be liquid, that investment will be
included within the 10% limitation on illiquid securities discussed below. The
investment manager monitors the liquidity of the Fund's investments in Section
4(2) paper on a continuous basis.

4
<PAGE>

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 Fund 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 Fund 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 Fund's net assets valued at the time of
the transaction would be invested in such securities.

NET ASSET VALUE

5
<PAGE>

asked prices for the instruments. If a deviation of 1/2 of 1% or more were to
occur between the Fund's net asset value per share calculated by reference to
market-based values and the Fund's $1.00 per share net asset value, or if there
were any other deviation that the Board of Trustees believed would result in a
material dilution to shareholders or purchasers, the Board of Trustees would
promptly consider what action, if any, should be initiated. In order to value
its investments at amortized cost, the Fund purchases only securities with a
maturity of one year or less and maintain a dollar-weighted average portfolio
maturity of 90 days or less. In addition, the Fund limits its portfolio
investments to securities that meet the quality and diversification requirements
of Rule 2a-7.

PURCHASE OF SHARES

Shares of the Fund are sold at net asset value through selected financial
services firms, such as broker-dealers and banks ("firms"). The Fund has
established a minimum initial investment for Shares of the Fund of $250,000 but
this minimum may be changed at any time in management's discretion. Firms
offering Fund shares may set higher minimums for accounts they service and may
change such minimums at their discretion.

Orders for purchase of Shares of the Fund will be accepted only by wire transfer
in the form of Federal Funds. Purchases will be effected at the next determined
net asset value. Shares purchased by wire will receive (i) that day's dividend
if effected at or prior to the 2:00 p.m. EST net asset value determination; (ii)
the dividend for the next calendar day if effected at the 4:00 p.m. EST net
asset value determination. See "Purchase and Redemption of Shares" in the
Statement of Additional Information.

Federal Funds wires should be directed to United Missouri Bank of Kansas City,
N.A. (ABA #101-000-695), 10th and Grand Avenue, Kansas City, MO 64106 for credit
to Institutional Money Market Shares (546: 98-0119-980-3) and for further credit
to your money market account number.

6
<PAGE>

the minimum investment requirements. All orders to purchase Shares of the Fund
are subject to acceptance by the Fund and are not binding until confirmed or
accepted in writing. Any purchase that would result in total account balances
for a single shareholder in excess of $3 million is subject to prior approval by
the Fund. Share certificates are issued only on request. A $10 service fee will
be charged when a check for the purchase of Shares is returned because of
insufficient or uncollected funds or a stop payment order.

Shareholders should direct their inquiries to the firm from which they received
this prospectus or to Kemper Service Company, 811 Main Street, Kansas City,
Missouri 64105-2005.

REDEMPTION OF SHARES

General. Upon receipt by the Shareholder Service Agent of a request in the form
described below, Shares of the Fund will be redeemed by the Fund at the next
determined net asset value. If processed at 4:00 p.m. or 9:00 p.m. EST, the
shareholder will receive that day's dividend. A shareholder may use either the
regular or expedited redemption procedures. Shareholders who redeem all their
Shares of the Fund will receive the net asset value of such Shares and all
declared but unpaid dividends on such Shares.

If Shares being redeemed were acquired from an exchange of shares of a mutual
fund that were offered subject to a contingent deferred sales charge as
described in the prospectus for that other fund, the redemption of such shares
by the Fund may be subject to a contingent deferred sales charge as explained in
such prospectus.

Shareholders can request the following telephone privileges: expedited wire
transfer redemptions and exchange transactions and pre-authorized telephone
redemption transactions. Shareholders may choose these privileges on the account
application or by contacting the Shareholder Service Agent for appropriate
instructions. Please note that the telephone exchange privilege is automatic
unless the shareholder refuses it on the account application. The Fund or its
agents may be liable for any losses, expenses or costs arising out of fraudulent
or unauthorized telephone requests pursuant to these privileges, unless the Fund
or its agents reasonably believe, based upon reasonable verification procedures,
that the telephone instructions are genuine. The shareholder will bear the risk
of loss, including loss resulting from fraudulent or unauthorized transactions,
as long as the reasonable verification procedures are followed. The verification
procedures include recording instructions, requiring certain identifying
information before acting upon instructions and sending written confirmations.

Because of the high cost of maintaining small accounts, the Fund reserves the
right to redeem an account that falls below $100,000. A shareholder will be
notified in writing and will be allowed 60 days to make additional purchases to
bring the account value up to the minimum investment level before the Fund
redeems the shareholder account.

Firms provide varying arrangements for their clients to redeem Fund shares. Such
firms may independently establish and charge additional amounts to their clients
for such services.

Written Redemptions. When shares are held for the account of a shareholder by
the Fund's transfer agent, the shareholder may redeem them by sending a written
request with signatures guaranteed to Kemper Service Company, P.O. Box 419153,
Kansas City, Missouri 64141-6153. When certificates for shares have been issued,
they must be mailed to or deposited with the Shareholder Service Agent, along
with a duly endorsed stock power and accompanied by a written request for
redemption. Redemption requests and a stock power must be endorsed by the
account holder with signatures guaranteed by a commercial bank, trust company,
savings and loan association, federal savings bank, member firm of a national
securities exchange or other eligible financial institution. The redemption
request and stock power must be signed exactly as the account is registered
including any special capacity of the registered owner. Additional documentation
may be requested, and a signature guarantee is normally required.

7
<PAGE>

Telephone Redemptions. If the proceeds of the redemption are $50,000 or less and
the proceeds are payable to the shareholder of record at the address of record,
normally a telephone request or a written request by any one account holder
without a signature guarantee is sufficient for redemptions by individual or
joint account holders, and trust, executor, guardian and custodian account
holders provided the trustee, executor, guardian or custodian is named in the
account registration. Other institutional account holders may exercise this
special privilege of redeeming shares by telephone request or written request
without signature guarantee subject to the same conditions as individual account
holders and subject to the limitations on liability described under "General"
above, provided that this privilege has been pre-authorized by the institutional
account holder or guardian account holder by written instruction to the
Shareholder Service Agent with signatures guaranteed. Telephone requests may be
made by calling the number on the back cover of the prospectus. This privilege
of redeeming Shares by telephone request or by written request without a
signature guarantee may not be used to redeem Shares held in certificated form
and may not be used if the shareholder's account has had an address change
within 30 days of the redemption request. During periods when it is difficult to
contact the Shareholder Service Agent by telephone, it may be difficult to use
the telephone redemption privilege, although investors can still redeem by mail.
The Fund reserves the right to terminate or modify this privilege at any time.

Expedited Wire Transfer Redemptions. If the account holder has given
authorization for expedited wire redemption to the account holder's brokerage or
bank account, shares can be redeemed and proceeds sent by a federal wire
transfer to a single previously designated account. Requests received by the
Shareholder Service Agent prior to 12:00 p.m. (noon) EST 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 the number on the back cover of the
prospectus or in writing, subject to the limitations on liability described
under "General" above. The Fund is not responsible for the efficiency of the
federal wire system or the account holder's financial services firm or bank. The
Fund currently does not charge the account holder for wire transfers. The
account holder is responsible for any charges imposed by the account holder's
firm or bank. There is a $1,000 wire redemption minimum. To change the
designated account to receive wire redemption proceeds, send a written request
to the Shareholder Service Agent with signatures guaranteed as described above
or contact the firm through which shares of the Fund were purchased. Account
holders may not use this procedure to redeem shares held in certificated form.
During periods when it is difficult to contact the Shareholder Service Agent by
telephone, it may be difficult to use the expedited wire transfer redemption
privilege. The Fund reserves the right to terminate or modify this privilege at
any time.

SPECIAL FEATURES

DIVIDENDS AND TAXES

Dividends are declared daily and paid monthly. Shareholders may select one of
the following ways to receive dividends.

1. Reinvest Dividends at net asset value into additional Shares of the Fund.
Dividends are normally reinvested on the 21st of each month if a business
day, otherwise on the next business day. Dividends will be reinvested
unless the shareholder elects to receive them in cash.

2. Receive Cash Dividends by Mail, with checks mailed monthly to the
shareholder or any person designated by the shareholder.

8
<PAGE>

3. Receive Cash Dividends by Wire, with wire transfers sent to the primary
account designated for redemption proceeds.

INVESTMENT MANAGER AND SHAREHOLDER SERVICES

9
<PAGE>

shall act as the Fund's investment adviser, manage its investments and provide
it with various services and facilities. For the services and facilities
furnished to the Fund, the Fund pays the Adviser a monthly investment management
fee on a graduated basis at the following annual rates: 0.22% of the first $500
million of combined average daily net assets of all the investment portfolios 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 all the
investment portfolios of the Trust over $3 billion. From time to time, the
Adviser may voluntarily waive temporarily fees and/or absorb certain operating
expenses of the Fund. The level of this voluntary waiver/and or expense
absorption shall be in the Adviser's discretion.

Distributor and Administrator. Pursuant to an underwriting and distribution
agreement ("distribution agreement"), Kemper Distributors, Inc. (the
"Distributor"), 222 South Riverside Plaza, Chicago, Illinois 60606, an affiliate
of the Adviser, serves as distributor and principal underwriter for the Fund to
provide information and services for existing and potential shareholders. The
distribution agreement provides that the Distributor shall appoint various
financial services firms to provide a cash management service for their
customers or clients through the Fund. The Distributor receives no compensation
from the Fund as principal underwriter for the Shares and pays all expenses of
distributions of the Shares not otherwise paid by dealers and other firms.

The Distributor also provides information and administrative services for
shareholders of the Shares pursuant to an administration and shareholder
services agreement. For services under the agreement, the Fund pays the
Distributor a fee, payable monthly, at the annual rate of up to 0.15% of average
daily net assets of the Fund. The Distributor has agreed to waive temporarily a
portion of its administrative services fee and may, from time to time, waive
additional amounts. The Distributor may engage other firms to provide
information and administrative services for shareholders of the Fund. The firms
are to provide such office space and equipment, telephone facilities, personnel
and literature distribution as is necessary or appropriate for providing
information and services to the firms' clients. The Distributor pays each such
firm a service fee at an annual rate of up to 0.15% of net assets of Shares
maintained and serviced by the firm. Firms to which service fees may be paid
include broker-dealers affiliated with the Distributor.

10
<PAGE>

what action, if any, is appropriate. Management does not believe that
termination of a relationship with a bank would result in any material adverse
consequences to the Fund. Banks or other financial services firms may be subject
to various state laws regarding the services described above and may be required
to register as dealers pursuant to state law.

PERFORMANCE

The Fund may advertise several types of performance information including
"yield" and "effective yield" for Institutional Shares. Each of these figures is
based upon historical earnings and is not representative of the future
performance of the Shares. The yield of the Shares refers to the net investment
income generated by a hypothetical investment in the Shares over a specific
seven-day period. This net investment income is then annualized, which means
that the net investment income generated during the seven-day period is assumed
to be generated each week over an annual period and is shown as a percentage of
the investment. The effective yield is calculated similarly, but the net
investment income earned by the investment is assumed to be compounded weekly
when annualized. The effective yield will be slightly higher than the yield due
to this compounding effect.

The performance of the Shares may be compared to that of other money market
mutual funds or mutual fund indexes as reported by independent mutual fund
reporting services such as Lipper Analytical Services, Inc. The performance of
the Shares and its relative size may be compared to other money market mutual
funds as reported by IBC Financial Data, Inc.(R) or Money Market Insight(R),
reporting services on money market funds. Investors may want to compare the
performance of the Shares to that of various bank products as reported by BANK
RATE MONITORTM, a financial reporting service that weekly publishes average
rates of bank and thrift institution money market deposit accounts and interest
bearing checking accounts or various certificate of deposit indexes. The
performance of the Shares also may be compared to that of U.S. Treasury bills
and notes. Certain of these alternative investments may offer fixed rates of
return and guaranteed principal and may be insured. In addition, investors may
want to compare the Fund's performance to the Consumer Price Index either
directly or by calculating its "real rate of return," which is adjusted for the
effects of inflation.

Information may be quoted from publications such as Morningstar, Inc., The Wall
Street Journal, Money Magazine, Forbes, Barron's, Fortune, The Chicago Tribune,
USA Today, Institutional Investor and Registered Representative. The Fund may
depict the historical performance of the securities in which the Fund may invest
over periods reflecting a variety of market or economic conditions either alone
or in comparison with alternative investments, performance indexes of those
investments or economic indicators. The Fund may also describe its portfolio
holdings and depict its size or relative size compared to other mutual funds,
the number and make-up of its shareholder base and other descriptive factors
concerning the Fund.

The yield of the Shares will fluctuate. Fund Shares are not insured. Additional
information concerning the performance of the Shares appears in the Statement of
Additional Information.

11
<PAGE>

CAPITAL STRUCTURE

The Trust is an open-end, diversified, management investment company, organized
as a business trust under the laws of Massachusetts on September 7, 1989. The
Trust may issue an unlimited number of shares of beneficial interest in one or
more series ("Portfolios"), all having no par value, which may be divided by the
Board of Trustees into classes of shares, subject to compliance with the
Securities and Exchange Commission regulations permitting the creation of
separate classes of shares. The Board of Trustees may authorize the issuance of
additional Portfolios if deemed desirable. Since the Trust offers multiple
Portfolios, it is known as a "series company." Currently, the Trust offers the
Institutional Shares of the Fund and three other classes of shares of the Fund.
These other classes consist of the Service Shares, Retail Shares and Premier
Shares, which have different expenses that may affect performance. In addition,
the Trust offers two other Portfolios: the Government Portfolio and the
Tax-Exempt Portfolio. Shares of each class of the Money Market 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 of the other classes of shares of the Portfolio. Each class of
shares issued by the Money Market Portfolio differs as to the allocation of
certain expenses of the Portfolio, such as distribution and administrative
expenses, permitting, among other things, different levels of services or
methods of distribution among various classes. Shares of a Portfolio are fully
paid and nonassessable when issued, are transferable without restriction and
have no preemptive or conversion rights. The Trust is not required to hold
annual shareholders' meetings and does not intend to do so. However, it will
hold special meetings as required or deemed desirable for such purposes as
electing trustees, changing fundamental policies or approving an investment
management agreement. Subject to the Agreement and Declaration of Trust of the
Trust, shareholders may remove trustees. Shareholders will vote by Portfolio and
not in the aggregate or by class except when voting in the aggregate is required
under the Investment Company Act of 1940, such as for the election of trustees,
or when the Board of Trustees determines that voting by class is appropriate.

12
<PAGE>
Retail Money Market Shares

PROSPECTUS January 22, 1999

MONEY MARKET PORTFOLIO
222 South Riverside Plaza, Chicago, Illinois 60606

This prospectus contains information about the Retail Shares (the "Shares") of
the Money Market Portfolio (the "Fund") offered by Cash Account Trust (the
"Trust") that a prospective investor should know before investing and should be
retained for future reference. A Statement of Additional Information dated
January 22, 1999 has been filed with the Securities and Exchange Commission and
is incorporated herein by reference. It is available upon request without charge
from the Fund at the address or telephone number on the cover or the firm from
which this prospectus was received.

The Fund is designed for investors who seek maximum current income to the extent
consistent with stability of capital. The Fund invests exclusively in high
quality money market instruments.

<PAGE>

Summary

Investment Objectives

The Money Market Portfolio (the "Fund") is a series of Cash Account Trust (the
"Trust"), an open-end diversified management investment company, which currently
offers three investment portfolios, including the Fund. The Fund is divided into
separate classes including the Retail Shares (the "Shares"), which are offered
herein. The Fund invests in a portfolio of high quality short-term money market
instruments. The Fund seeks maximum current income to the extent consistent with
stability of capital from a portfolio primarily of commercial paper and bank
obligations. The Fund may use a variety of investment techniques, including the
purchase of repurchase agreements and variable rate securities. The Fund seeks
to maintain a net asset value of $1.00 per share. There is no assurance that the
objective of the Fund will be achieved or that the Fund will be able to maintain
a net asset value of $1.00 per share. See "Investment Objectives, Policies and
Risk Factors."

Investment Manager and Shareholder Services

Scudder Kemper Investments, Inc. (the "Adviser") is the investment manager for
the Fund and provides the Fund with continuous professional investment
supervision. The Adviser is paid a monthly investment management fee on a
graduated basis at annual rates ranging from 0.22% of the first $500 million of
combined average daily net assets of all investment portfolios of the Trust to
0.15% of the combined average daily net assets of all investment portfolios of
the Trust over $3 billion. Kemper Distributors, Inc. (the "Distributor"), an
affiliate of the Adviser, is the primary administrator, distributor and
principal underwriter of the Fund and, as such, provides information and
services for existing and potential shareholders and acts as agent of the Fund
in the sale of its Shares.

Purchases and Redemptions

Shares of the Fund are available at net asset value through selected financial
services firms. The minimum initial investment for Shares of the Fund is $1,000
and the minimum subsequent investment is $100. See "Purchase of Shares." Shares
may be redeemed at the net asset value next determined after receipt by Kemper
Service Company (the "Shareholder Service Agent"), the Fund's Shareholder
Service Agent of a request to redeem in proper form. Shares may be redeemed by
written request or by using one of the Funds expedited redemption procedures.
See "Redemption of Shares."

Dividends

Dividends are declared daily and paid monthly. Dividends are automatically
reinvested in additional Shares of the Fund, unless the shareholder makes a
different election. See "Dividends and Taxes."

2
<PAGE>

General Information and Capital

The Fund is organized as a business trust under the laws of Massachusetts and
may issue an unlimited number of Shares of beneficial interest. Shares are fully
paid and nonassessable when issued, are transferable without restriction and
have no preemptive or conversion rights. The Fund is not required to hold annual
shareholder meetings; but will hold special meetings as required or deemed
desirable for such purposes as electing trustees, changing fundamental policies
or approving an investment management agreement. See "Capital Structure."

Summary of Expenses

This information is designed to help you understand the various costs and
expenses of investing in the Shares of the Fund^(1)

Shareholder Transaction Expenses^(2) .......................................None

Annual Fund Operating Expenses
(as a percentage of average net assets)

Retail Shares
-------------
Management Fees ....................................... 0.19%
Other Expenses ........................................ 0.48%
-----
Total Operating Expenses .............................. 0.67%
=====
- -----------

(1) The information set forth on this page relates only to the Shares. The Fund
also offers three other classes of Shares in the Fund, which have different
fees and expenses (which may affect performance), have different minimum
investment requirements and are entitled to different services.

(2) Investment dealers and other firms may independently charge shareholders
additional fees; please see their materials for details.

Example
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
You would pay the following $7 $21 $37 $83
expenses on a $1,000 Investment
in the Retail Shares, assuming
(1) 5% annual return and (2)
redemption at the end of each
time period:

3
<PAGE>

Investment Objectives, Policies and Risk Factors

The Fund is a money market mutual fund designed to provide its shareholders with
professional management of short-term investment dollars. It is designed for
investors who seek maximum current income consistent with stability of capital.
The Fund pools individual and institutional investors' money that it uses to buy
high quality money market instruments. The Fund is divided into separate classes
including the Retail Shares, which are offered herein. Because the Fund combines
its shareholders' money, it can buy and sell large blocks of securities, which
reduces transaction costs and maximizes yields. The Fund is managed by
investment professionals who analyze market trends to take advantage of changing
conditions and who seek to minimize risk by diversifying the Fund's investments.
The Fund's investments are subject to price fluctuations resulting from rising
or declining interest rates and is subject to the ability of the issuers of such
investments to make payment at maturity. However, because of their short
maturities, liquidity and high quality ratings, high quality money market
instruments, such as those in which the Fund invests, are generally considered
being among the safest available. Thus, the Fund 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 Fund will achieve
its objective or that it will maintain a net asset value of $1.00 per share.

1. Obligations of, or guaranteed by, the U.S. or Canadian governments, their
agencies or instrumentalities.

2. Bank certificates of deposit, time deposits or bankers' acceptances of U.S.
banks (including their foreign branches) and Canadian chartered banks
having total assets in excess of $1 billion.

3. Bank certificates of deposit, time deposits or bankers' acceptances of
foreign banks (including their U.S. and foreign branches) having total
assets in excess of $10 billion.

4. Commercial paper, notes, bonds, debentures, participation certificates or
other debt obligations that (i) are rated high quality by Moody's Investors
Service, Inc. ("Moody's"), Standard & Poor's Corporation ("S&P"), or Duff &
Phelps, Inc. ("Duff"); or (ii) if unrated, are determined to be at least
equal in quality to one or more of the above ratings in the discretion of
the Fund's investment manager. Currently, only obligations in the top two
categories are considered to be rated high quality. The two highest rating
categories of Moody's, S&P and Duff for commercial paper are Prime-1 and
Prime-2, A-1 and A-2 and Duff 1 and Duff 2, respectively. For other debt
obligations, the two highest rating categories for such services are Aaa
and Aa, AAA and AA and AAA and AA, respectively. For a description of these
ratings, see "Appendix-- Ratings of Investments" in the Statement of
Additional Information.

4
<PAGE>

5. Repurchase agreements of obligations that are suitable for investment under
the categories set forth above. Repurchase agreements are discussed below.

5
<PAGE>

institutional investors like the Fund through or with the assistance of the
issuer or investment dealers who make a market in the Section 4(2) paper, thus
providing liquidity. The investment manager considers the legally restricted but
readily saleable Section 4(2) paper to be liquid; however, pursuant to
procedures approved by the Board of Trustees of the Fund, if a particular
investment in Section 4(2) paper is not determined to be liquid, that investment
will be included within the 10% limitation on illiquid securities discussed
below. The investment manager monitors the liquidity of the Fund's investments
in Section 4(2) paper on a continuous basis.

6
<PAGE>

agreements maturing in more than seven days if, as a result thereof, more than
10% of such Fund's net assets valued at the time of the transaction would be
invested in such securities.

The Trust has adopted for the Fund certain investment restrictions that are
presented in the Statement of Additional Information and that, together with the
investment objective and policies of the Fund cannot be changed without approval
by holders of a majority of its outstanding voting Shares. As defined in the
1940 Act, this means with respect to the Fund the lesser of the vote of (a) 67%
of the Shares of the Fund present at a meeting where more than 50% of the
outstanding Shares of the Fund are present in person or by proxy or (b) more
than 50% of the outstanding Shares of the Fund.

Net Asset Value

7
<PAGE>

other financial services firms prior to the determination of the Fund's net
asset value also may be processed on a confirmed basis in accordance with the
procedures established by the Distributor. The Fund seeks to maintain its net
asset value at $1.00 per share.

The Fund values its portfolio instruments at amortized cost in accordance with
Rule 2a-7 under the 1940 Act, which means that they are valued at their
acquisition cost (as adjusted for amortization of premium or accretion of
discount) rather than at current market value. Calculations are made to compare
the value of the Fund's investments valued at amortized cost with market-based
values. Market-based valuations are obtained by using actual quotations provided
by market makers, estimates of market value, or values obtained from yield data
relating to classes of money market instruments published by reputable sources
at the mean between the bid and asked prices for the instruments. If a deviation
of 1/2 of 1% or more were to occur between the Fund's net asset value per share
calculated by reference to market-based values and the Fund's $1.00 per share
net asset value, or if there were any other deviation that the Board of Trustees
believed would result in a material dilution to shareholders or purchasers, the
Board of Trustees would promptly consider what action, if any, should be
initiated. In order to value its investments at amortized cost, the Fund
purchases only securities with a maturity of one year or less and maintain a
dollar-weighted average portfolio maturity of 90 days or less. In addition, the
Fund limits its portfolio investments to securities that meet the quality and
diversification requirements of Rule 2a-7.

Purchase of Shares

Shares of the Fund are sold at net asset value through selected financial
services firms, such as broker-dealers and banks ("firms"). The Fund has
established a minimum initial investment for Shares of the Fund of $1,000 and
$100 for subsequent investments, but these minimums may be changed at any time
in management's discretion. Firms offering Fund Shares may set higher minimums
for accounts they service and may change such minimums at their discretion.

The Fund seeks to have its portfolio as fully invested as possible at all times
in order to achieve maximum income. Since the Fund 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 Trust
has adopted procedures for the convenience of its shareholders and to ensure
that the Fund receives investable funds.

Orders for purchases accompanied by a check or other negotiable bank draft will
be accepted and effected as of 3:00 p.m. Chicago time on the next business day
following

8
<PAGE>

receipt and such Shares will receive the dividend for the next calendar day
following the day the purchase is effected. If an order is accompanied by a
check drawn on a foreign bank, funds must normally be collected on such check
before Shares will be purchased. See "Purchase and Redemption of Shares" in the
Statement of Additional Information.

If payment is wired in Federal Funds, the payment should be directed to United
Missouri Bank of Kansas City, N.A. (ABA #101-000-695), 10th and Grand Avenue,
Kansas City, MO 64106 for credit to Retail Money Market Shares (98-0119-980-3)
and for further credit to your money market account number.

Clients of Firms

Firms provide varying arrangements for their clients with respect to the
purchase and redemption of Fund Shares and the confirmation thereof and may
arrange with their clients for other investment or administrative services. Such
firms are responsible for the prompt transmission of purchase and redemption
orders. Some firms may establish higher minimum investment requirements than set
forth above. Such firms may independently establish and charge additional
amounts to their clients for their services, which charges would reduce their
clients' yield or return. Firms may also hold Fund Shares in nominee or street
name as agent for and on behalf of their clients. In such instances, the Fund's
transfer agent will have no information with respect to or control over the
accounts of specific shareholders. Such shareholders may obtain access to their
accounts and information about their accounts only from their firm. Certain of
these firms may receive compensation through the Fund's Shareholder Service
Agent for record-keeping and other expenses relating to these nominee accounts.
In addition, certain privileges with respect to the purchase and redemption of
Shares (such as check writing redemptions) or the reinvestment of dividends may
not be available through such firms or may only be available subject to certain
conditions or limitations. Some firms may participate in a program allowing them
access to their clients' accounts for servicing including, without limitation,
transfers of registration and dividend payee changes; and may perform functions
such as generation of confirmation statements and disbursement of cash
dividends. The prospectus should be read in connection with such firm's material
regarding its fees and services.

Other Information

The Fund reserves the right to withdraw all or any part of the offering made by
this prospectus or to reject purchase orders, without prior notice. The Fund
also reserves the right at any time to waive or increase the minimum investment
requirements. All orders to purchase Shares of the Fund are subject to
acceptance by the Fund and are not binding until confirmed or accepted in
writing. Any purchase that would result in total account balances for a single
shareholder in excess of $3 million is subject to prior approval by the Fund.
Share certificates are issued only on request. A $10 service fee will be charged
when a check for the purchase of Shares is returned because of insufficient or
uncollected funds or a stop payment order.

9
<PAGE>

Shareholders should direct their inquiries to the firm from which they received
this prospectus or to Kemper Service Company, 811 Main Street, Kansas City,
Missouri 64105-2005.

Redemption of Shares

General

Upon receipt by the Shareholder Service Agent of a request in the form described
below, Shares of the Fund will be redeemed by the Fund at the next determined
net asset value. If processed at 3:00 p.m. or 8:00 p.m. Chicago time, the
shareholder will receive that day's dividend. A shareholder may use either the
regular or expedited redemption procedures. Shareholders who redeem all their
Shares of the Fund will receive the net asset value of such Shares and all
declared but unpaid dividends on such Shares.

If Shares being redeemed were acquired from an exchange of Shares of a mutual
fund that were offered subject to a contingent deferred sales charge as
described in the prospectus for that other fund, the redemption of such Shares
by the Fund may be subject to a contingent deferred sales charge as explained in
such prospectus.

10
<PAGE>

Firms provide varying arrangements for their clients to redeem Fund Shares. Such
firms may independently establish and charge additional amounts to their clients
for such services.

Regular Redemptions

When Shares are held for the account of a shareholder by the Fund's transfer
agent, the shareholder may redeem them by sending a written request with
signatures guaranteed to Retail Money Market Shares, P.O. Box 419153, Kansas
City, Missouri 64141-6153. When certificates for Shares have been issued, they
must be mailed to or deposited with the Shareholder Service Agent, along with a
duly endorsed stock power and accompanied by a written request for redemption.
Redemption requests and a stock power must be endorsed by the account holder
with signatures guaranteed by a commercial bank, trust company, savings and loan
association, federal savings bank, member firm of a national securities exchange
or other eligible financial institution. The redemption request and stock power
must be signed exactly as the account is registered including any special
capacity of the registered owner. Additional documentation may be requested, and
a signature guarantee is normally required, from institutional and fiduciary
account holders, such as corporations, custodians (e.g., under the Uniform
Transfers to Minors Act), executors, administrators, trustees, or guardians.

Telephone Redemptions

If the proceeds of the redemption are $50,000 or less and the proceeds are
payable to the shareholder of record at the address of record, normally a
telephone request or a written request by any one account holder without a
signature guarantee is sufficient for redemptions by individual or joint account
holders, and trust, executor, guardian and custodian account holders provided
the trustee, executor, guardian or custodian is named in the account
registration. Other institutional account holders may exercise this special
privilege of redeeming Shares by telephone request or written request without
signature guarantee subject to the same conditions as individual account holders
and subject to the limitations on liability described under "General" above,
provided that this privilege has been pre-authorized by the institutional
account holder or guardian account holder by written instruction to the
Shareholder Service Agent with signatures guaranteed. Telephone requests may be
made by calling the number on the back cover of the prospectus. Shares purchased
by check or through certain ACH transactions may not be redeemed under this
privilege of redeeming Shares by telephone request until such Shares have been
owned for at least 10 days. This privilege of redeeming Shares by telephone
request or by written request without a signature guarantee may not be used to
redeem Shares held in certificated form and may not be used if the shareholder's
account has had an address change within 30

11
<PAGE>

days of the redemption request. During periods when it is difficult to contact
the Shareholder Service Agent by telephone, it may be difficult to use the
telephone redemption privilege, although investors can still redeem by mail. The
Fund reserves the right to terminate or modify this privilege at any time.

Expedited Wire Transfer Redemptions

If the account holder has given authorization for expedited wire redemption to
the account holder's brokerage or bank account, Shares can be redeemed and
proceeds sent by a federal wire transfer to a single previously designated
account. Requests received by the Shareholder Service Agent prior to 11:00 a.m.
Chicago time will result in Shares being redeemed that day and normally the
proceeds will be sent to the designated account that day. Once authorization is
on file, the Shareholder Service Agent will honor requests by telephone at the
number on the back cover of the prospectus or in writing, subject to the
limitations on liability described under "General" above. The Fund is not
responsible for the efficiency of the federal wire system or the account
holder's financial services firm or bank. The Fund currently does not charge the
account holder for wire transfers. The account holder is responsible for any
charges imposed by the account holder's firm or bank. There is a $1,000 wire
redemption minimum. To change the designated account to receive wire redemption
proceeds, send a written request to the Shareholder Service Agent with
signatures guaranteed as described above or contact the firm through which
Shares of the Fund were purchased. Shares purchased by check or through certain
ACH transactions may not be redeemed by wire transfer until the Shares have been
owned for at least 10 days. Account holders may not use this procedure to redeem
Shares held in certificated form. During periods when it is difficult to contact
the Shareholder Service Agent by telephone, it may be difficult to use the
expedited wire transfer redemption privilege. The Fund reserves the right to
terminate or modify this privilege at any time.

Expedited Redemptions by Draft

Upon request, shareholders will be provided with drafts to be drawn on the Fund
("Redemption Checks"). These Redemption Checks may be made payable to the order
of any person for not more than $5 million. Shareholders should not write
Redemption Checks in an amount less than $250 since a $10 service fee will be
charged as described below. When a Redemption Check is presented for payment, a
sufficient number of full and fractional Shares in the shareholder's account
will be redeemed as of the next determined net asset value to cover the amount
of the Redemption Check. This will enable the shareholder to continue earning
dividends until the Fund receives the Redemption Check. A shareholder wishing to
use this method of redemption must complete and file an Account Information
Form, which is available from the Fund, or firms through which Shares were
purchased. Redemption Checks should not be used to close an account since the
account normally includes accrued but unpaid dividends. The Fund reserves the
right to terminate or modify this privilege at any time. This privilege may not
be available through some firms that distribute Shares of the Fund. In addition,
firms may impose minimum balance requirements in order to obtain this feature.
Firms may also impose

12
<PAGE>

fees to investors for this privilege or establish variations of minimum check
amounts if approved by the Fund.

The Fund may refuse to honor Redemption Checks whenever the right of redemption
has been suspended or postponed, or whenever the account is otherwise impaired.
A $10 service fee will be charged when a Redemption Check is presented to redeem
Fund Shares in excess of the value of a Fund account or in an amount less than
$250; when a Redemption Check is presented that would require redemption of
Shares that were purchased by check or certain ACH transactions within 10 days;
or when "stop payment" of a Redemption Check is requested.

Special Features

Dividends and Taxes

Dividends are declared daily and paid monthly. Shareholders may select one of
the following ways to receive dividends.

1. Reinvest Dividends at net asset value into additional Shares of the Fund.
Dividends are normally reinvested on the 21st of each month if a business
day, otherwise on the next business day. Dividends will be reinvested
unless the shareholder elects to receive them in cash.

2. Receive Cash Dividends. Checks will be mailed monthly to the shareholder or
any person designated by the shareholder.

13
<PAGE>

The Fund 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 Fund do not qualify for the dividends received
deduction available to corporate shareholders.

Investment Manager and Shareholder Services

Investment Manager

Scudder Kemper Investments, Inc. (the "Adviser"), 345 Park Avenue, New York, New
York, is the investment manager of the Fund and provides the Fund with
continuous

14
<PAGE>

professional investment supervision. The Adviser has been engaged in the
management of investment funds for more than seventy years with more than $230
billion in assets under management.

Fund Accounting Agent

Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share of the Fund and
maintaining all accounting records related thereto. Currently, SFAC receives no
fee for its services; however, subject to Board approval, at some time in the
future SFAC may seek payment for its services under its agreement with the Fund.

Year 2000 Readiness

Like other mutual funds and financial and business organizations worldwide, the
Fund could be adversely affected if computer systems on which the Fund relies,
which primarily include those used by the Adviser, its affiliates or other
service providers, are unable to correctly process date-related information on
and after January 1, 2000. The risk is commonly called the Year 2000 issue.
Failure to successfully address the Year 2000 issue could result in
interruptions to and other material adverse effects on the Fund's business and
operations, such as problems with calculating net asset value and difficulties
in implementing the Fund's purchase and redemption procedures. The Adviser has
commenced a review of the Year 2000 issue as it may affect the Fund and is
taking steps it believes are reasonably designed to address the Year 2000 issue,
although there can be no assurances that these steps will be sufficient. In
addition, there can be no assurances that the Year 2000 issue will not have an
adverse effect on the issuers whose securities are held by the Fund or on global
markets or economies generally.

15
<PAGE>

Distributor and Administrator

Pursuant to an underwriting and distribution agreement ("distribution
agreement"), Kemper Distributors, Inc. (the "Distributor"), 222 South Riverside
Plaza, Chicago, Illinois 60606, an affiliate of the Adviser, serves as
distributor and principal underwriter for the Fund to provide information and
services for existing and potential shareholders. The distribution agreement
provides that the Distributor shall appoint various financial services firms to
provide cash management service for their customers or clients through the Fund.
The Distributor receives no compensation from the Fund as principal underwriter
for the Shares and pays all expenses of distribution of the Shares not otherwise
paid by dealers and other financial services firms.

The Distributor also provides information and administrative services for
shareholders of the Shares pursuant to an administration and shareholder
services agreement. For services under the agreement, the Fund pays the
Distributor a fee, payable monthly, at the annual rate of up to 0.25% of average
daily net assets of the Fund. The Distributor may engage firms to provide
information and administrative services for shareholders of the Fund. The firms
are to provide such office space and equipment, telephone facilities and
personnel as is necessary or appropriate for providing information and services
to the firms' clients. The Distributor pays each such firm a service fee at an
annual rate of up to 0.25% of net assets of Shares maintained and serviced by
the firm. Firms to which service fees may be paid include broker-dealers
affiliated with the Distributor.

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 Fund. It
attends to the collection of principal and income, and payment for and
collection of proceeds of securities bought and sold by the Fund. Investors
Fiduciary Trust Company ("IFTC"), 801 Pennsylvania Avenue, Kansas City, Missouri
64105, is the Fund's transfer and dividend-paying agent. Pursuant to a services
agreement with IFTC, Kemper Service Company, 811 Main Street, Kansas City,
Missouri 64105, an affiliate of the Adviser, serves as Shareholder Service Agent
of the Fund.

16
<PAGE>

Performance

The Fund may advertise several types of performance information including
"yield" and "effective yield" for the Retail Shares. Each of these figures is
based upon historical earnings and is not representative of the future
performance of the Shares. The yield of the Shares refers to the net investment
income generated by a hypothetical investment in the Shares over a specific
seven-day period. This net investment income is then annualized, which means
that the net investment income generated during the seven-day period is assumed
to be generated each week over an annual period and is shown as a percentage of
the investment. The effective yield is calculated similarly, but the net
investment income earned by the investment is assumed to be compounded weekly
when annualized. The effective yield will be slightly higher than the yield due
to this compounding effect.

Information may be quoted from publications such as Morningstar, Inc., The Wall
Street Journal, Money Magazine, Forbes, Barron's, Fortune, The Chicago Tribune,
USA Today, Institutional Investor and Registered Representative. The Fund may
depict the historical performance of the securities in which the Fund may invest
over periods reflecting a variety of market or economic conditions either alone
or in comparison with alternative investments, performance indexes of those
investments or economic indicators. The Fund may also describe its portfolio
holdings and depict its size or relative size compared to other mutual funds,
the number and make-up of its shareholder base and other descriptive factors
concerning the Fund.

The yield of the Shares will fluctuate. Fund Shares are not insured. Additional
information concerning the performance of the Shares appears in the Statement of
Additional Information.

Capital Structure

The Trust is an open-end, diversified, management investment company, organized
as a business trust under the laws of Massachusetts on September 7, 1989. The
Trust

17
<PAGE>

may issue an unlimited number of Shares of beneficial interest in one or more
series ("Portfolios"), all having no par value, which may be divided by the
Board of Trustees into classes of Shares, subject to compliance with the
Securities and Exchange Commission regulations permitting the creation of
separate classes of Shares. The Board of Trustees may authorize the issuance of
additional Portfolios if deemed desirable. Since the Trust offers multiple
Portfolios, it is known as a "series company." Currently, the Trust offers the
Shares of the Fund and three other classes of Shares of the Fund. These other
classes consist of Service Shares, Premier Shares and Institutional Shares,
which have different expenses that may affect performance. In addition, the
Trust offers two other portfolios: the Government Portfolio and the Tax-Exempt
Portfolio. Shares of each class of the Money Market 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 of the other classes of Shares of the Portfolio. Each class of
Shares issued by the Money Market Portfolio differs as to the allocation of
certain expenses of a Portfolio, such as distribution and administrative
expenses, permitting, among other things, different levels of services or
methods of distribution among various classes. Shares of a Portfolio are fully
paid and nonassessable when issued, are transferable without restriction and
have no preemptive or conversion rights. The Trust is not required to hold
annual shareholders' meetings and does not intend to do so. However, it will
hold special meetings as required or deemed desirable for such purposes as
electing trustees, changing fundamental policies or approving an investment
management agreement. Subject to the Agreement and Declaration of Trust of the
Trust, shareholders may remove trustees. Shareholders will vote by Portfolio and
not in the aggregate or by class except when voting in the aggregate is required
under the Investment Company Act of 1940, such as for the election of trustees,
or when the Board of Trustees determines that voting by class is appropriate.

18
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION
January 22, 1999

CASH ACCOUNT TRUST
222 South Riverside Plaza, Chicago, Illinois 60606
1-800-231-8568

This Statement of Additional Information contains information about the Service
Shares of the Money Market Portfolio and the shares of the Government Portfolio
and Tax-Exempt Portfolio ("Shares") offered by Cash Account Trust (the "Fund").
The Fund is an open-end diversified management investment company. The Fund
currently offers three investment portfolios ("Portfolios"). The Money Market
Portfolio is divided into four classes including the Services Shares contained
herein. This Statement of Additional Information is not a prospectus and should
be read in conjunction with the prospectus of the Fund dated January 22, 1999.
The prospectus may be obtained without charge from the Fund.

TABLE OF CONTENTS

INVESTMENT RESTRICTIONS........................................................2
MUNICIPAL SECURITIES...........................................................4
INVESTMENT MANAGER AND SHAREHOLDER SERVICES....................................5
PORTFOLIO TRANSACTIONS.........................................................8
PURCHASE AND REDEMPTION OF SHARES..............................................9
DIVIDENDS, NET ASSET VALUE AND TAXES...........................................9
PERFORMANCE...................................................................10
OFFICERS AND TRUSTEES.........................................................13
SPECIAL FEATURES..............................................................16
SHAREHOLDER RIGHTS............................................................17
APPENDIX --RATINGS OF INVESTMENTS.............................................19

The financial statements appearing in the Fund's 1998 Annual Report to
Shareholders are incorporated herein by reference. The Fund's Annual Report
accompanies this Statement of Additional Information.

<PAGE>

INVESTMENT RESTRICTIONS

The Fund has adopted for the Money Market Portfolio, the Government Securities
Portfolio and the Tax-Exempt Portfolio certain investment restrictions which,
together with the investment objective and policies of each Portfolio, cannot be
changed for a Portfolio without approval by holders of a majority of its
outstanding voting shares. As defined in the Investment Company Act of 1940 (the
"1940 Act"), this means the lesser of the vote of (a) 67% of the shares of the
Portfolio present at a meeting where more than 50% of the outstanding shares are
present in person or by proxy or (b) more than 50% of the outstanding shares of
the Portfolio.

The Money Market Portfolio and the Government Securities Portfolio individually
may not:

(1) Purchase securities of any issuer (other than obligations of, or guaranteed
by, the United States Government, its agencies or instrumentalities) if, as
a result, more than 5% of the value of the Portfolio's assets would be
invested in securities of that issuer.

(2) Purchase more than 10% of any class of securities of any issuer. All debt
securities and all preferred stocks are each considered as one class.

(3) Make loans to others (except through the purchase of debt obligations or
repurchase agreements in accordance with its investment objective and
policies).

(4) Borrow money except as a temporary measure for extraordinary or emergency
purposes and then only in an amount up to one-third of the value of its
total assets, in order to meet redemption requests without immediately
selling any money market instruments (any such borrowings under this
section will not be collateralized). If, for any reason, the current value
of the Portfolio's total assets falls below an amount equal to three times
the amount of its indebtedness from money borrowed, the Portfolio will,
within three days (not including Sundays and holidays), reduce its
indebtedness to the extent necessary. The Portfolio will not borrow for
leverage purposes.

(5) Make short sales of securities, or purchase any securities on margin except
to obtain such short-term credits as may be necessary for the clearance of
transactions.

(6) Write, purchase or sell puts, calls or combinations thereof.

(7) Purchase or retain the securities of any issuer if any of the officers,
trustees or directors of the Fund or its investment adviser owns
beneficially more than 1/2 of 1% of the securities of such issuer and
together own more than 5% of the securities of such issuer.

(8) Invest for the purpose of exercising control or management of another
issuer.

(9) Invest in commodities or commodity futures contracts or in real estate (or
real estate limited partnerships), although it may invest in securities
which are secured by real estate and securities of issuers which invest or
deal in real estate.

(10) Invest in interests in oil, gas or other mineral exploration or development
programs or leases, although it may invest in the securities of issuers
which invest in or sponsor such programs.

(11) Underwrite securities issued by others except to the extent the Portfolio
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities.

(12) Issue senior securities as defined in the Investment Company Act of 1940.

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.

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).

(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.

(8) Invest for the purpose of exercising control or management of another
issuer.

(9) Invest in commodities or commodity futures contracts or in real estate (or
real estate limited partnerships) except that the Portfolio may invest in
Municipal Securities secured by real estate or interests therein.

(10) Invest in interests in oil, gas or other mineral exploration or development
programs or leases, although it may invest in Municipal Securities of
issuers which invest in or sponsor such programs or leases.

3
<PAGE>

(12) Issue senior securities as defined in the Investment Company Act of 1940.

If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The
Portfolios did not borrow in the latest fiscal period and have no present
intention of borrowing during the coming year as permitted for each Portfolio by
investment restriction number 4. In any event, borrowings would only be made as
permitted by such restrictions. The Tax-Exempt Portfolio may invest more than
25% of its total assets in industrial development bonds. The Money Market
Portfolio and the Government Securities Portfolio of the Fund, as a
non-fundamental policy that may be changed without shareholder vote,
individually may not:

(i) Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition
of assets.

In addition, the Tax-Exempt Portfolio of the Fund, as a non-fundamental policy
that may be changed without shareholder vote, may not:

(i) Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition
of assets.

MUNICIPAL SECURITIES

Municipal Securities which the Tax-Exempt Portfolio may purchase include,
without limitation, debt obligations issued to obtain funds for various public
purposes, including the construction of a wide range of public facilities such
as airports, bridges, highways, housing, hospitals, mass transportation, public
utilities, schools, streets, and water and sewer works. Other public purposes
for which Municipal Securities may be issued include refunding outstanding
obligations, obtaining funds for general operating expenses and obtaining funds
to loan to other public institutions and facilities.

Municipal Securities, such as industrial development bonds, are issued by or on
behalf of public authorities to obtain funds for purposes including privately
operated airports, housing, conventions, trade shows, ports, sports, parking or
pollution control facilities or for facilities for water, gas, electricity or
sewage and solid waste disposal. Such obligations, which may include lease
arrangements, are included within the term Municipal Securities if the interest
paid thereon qualifies as exempt from federal income tax. Other types of
industrial development bonds, the proceeds of which are used for the
construction, equipment, repair or improvement of privately operated industrial
or commercial facilities, may constitute Municipal Securities, although current
Federal tax laws place substantial limitations on the size of such issues.

Municipal Securities generally are classified as "general obligation" or
"revenue." General obligation notes are secured by the issuer's pledge of its
full credit and taxing power for the payment of principal and interest. Revenue
notes are payable only from the revenues derived from a particular facility or
class of facilities or, in some cases, from the proceeds of a special excise or
other specific revenue source. Industrial development bonds that are Municipal
Securities are in most cases revenue bonds and generally do not constitute the
pledge of the credit of the issuer of such bonds.

Examples of Municipal Securities that are issued with original maturities of one
year or less are short-term tax anticipation notes, bond anticipation notes,
revenue anticipation notes, construction loan notes, pre-refunded municipal
bonds, warrants and tax-free commercial paper.

Tax anticipation notes typically are sold to finance working capital needs of
municipalities in anticipation of receiving property taxes on a future date.
Bond anticipation notes are sold on an interim basis in anticipation of a
municipality issuing a longer term bond in the future. Revenue anticipation
notes are issued in expectation of receipt of other types of revenue such as
those available under the Federal Revenue Sharing Program. Construction loan
notes are instruments insured by the Federal Housing Administration with
permanent financing by "Fannie Mae" (the Federal National Mortgage Association)
or "Ginnie Mae" (the Government National Mortgage Association) at the end of the
project construction period. Pre-refunded municipal bonds are bonds which are
not yet refundable, but for which securities have been placed in escrow to
refund an original municipal bond issue when it becomes refundable. Tax-free
commercial paper is an unsecured promissory obligation issued or guaranteed by a
municipal issuer. The Tax-Exempt Portfolio may purchase other Municipal
Securities similar

4
<PAGE>

to the foregoing, which are or may become available, including securities issued
to pre-refund other outstanding obligations of municipal issuers.

The Federal bankruptcy statutes relating to the adjustments of debts of
political subdivisions and authorities of states of the United States provide
that, in certain circumstances, such subdivisions or authorities may be
authorized to initiate bankruptcy proceedings without prior notice to or consent
of creditors, which proceedings could result in material adverse changes in the
rights of holders of obligations issued by such subdivisions or authorities.

Litigation challenging the validity under state constitutions of present systems
of financing public education has been initiated or adjudicated in a number of
states and legislation has been introduced to effect changes in public school
finances in some states. In other instances, there has been litigation
challenging the issuance of pollution control revenue bonds or the validity of
their issuance under state or Federal law that ultimately could affect the
validity of those Municipal Securities or the tax-free nature of the interest
thereon.

INVESTMENT MANAGER AND SHAREHOLDER SERVICES

Investment Manager. Scudder Kemper Investments, Inc. (the "Adviser"), 345 Park
Avenue, New York, New York, is the Fund's investment manager. The Adviser is
approximately 70% owned by Zurich Financial Services, Inc., a newly formed
global insurance and financial services company. Its officers and employees own
the balance of the Adviser. Pursuant to the investment management agreement, the
Adviser acts as the Fund's investment adviser, manages its investments,
administers its business affairs, furnishes office facilities and equipment,
provides clerical and administrative services and permits any of its officers or
employees to serve without compensation as trustees or officers of the Fund if
elected to such positions. The Fund pays the expenses of its operations,
including the fees and expenses of its independent auditors, counsel, custodian
and transfer agent and the cost of share certificates, reports and notices to
shareholders, costs of calculating net asset value and maintaining all
accounting records thereto, brokerage commissions or transaction costs, taxes,
registration fees, the fees and expenses of qualifying the Fund and its shares
for distribution under federal and state securities laws and membership dues in
the Investment Company Institute or any similar organization. The Fund's
expenses generally are allocated among the Portfolios on the basis of relative
net assets at the time of allocation, except that expenses directly attributable
to a particular Portfolio are charged to that Portfolio.

The investment management agreement provides that the Adviser shall not be
liable for any error of judgment or of law, or for any loss suffered by the Fund
in connection with the matters to which the agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
the Adviser in the performance of its obligations and duties, or by reason of
its reckless disregard of its obligations and duties under the agreement.

The investment management agreement continues in effect from year to year for
each Portfolio subject thereto so long as its continuation is approved at least
annually by (a) a majority vote of the trustees who are not parties to such
agreement or interested persons of any such party except in their capacity as
trustees of the Fund, cast in person at a meeting called for such purpose, and
(b) the shareholders of each Portfolio subject thereto or the Board of Trustees.
If continuation is not approved for a Portfolio, the investment management
agreement nevertheless may continue in effect for any Portfolio for which it is
approved and the Adviser may continue to serve as investment manager for the
Portfolio for which it is not approved to the extent permitted by the Investment
Company Act of 1940. The agreement may be terminated at any time upon 60 days
notice by either party, or by a majority vote of the outstanding shares of a
Portfolio subject thereto with respect to that Portfolio, and will terminate
automatically upon assignment. Additional Portfolios may be subject to different
agreements.

At December 31, 1997, pursuant to the terms of an agreement, Scudder, Stevens &
Clark, Inc. ("Scudder"), and Zurich Insurance Company ("Zurich"), formed a new
global organization by combining Scudder with Zurich Kemper Investments, Inc.
("ZKI"), a former subsidiary of Zurich and the former investment manager to the
Fund and Scudder changed its name to Scudder Kemper Investments, Inc. As a
result of the transaction, Zurich owns approximately 70% of the Adviser, with
the balance owned by the Adviser's officers and employees. Zurich is a leading
internationally recognized provider of insurance and financial services in
property/casualty and life insurance, reinsurance and structured financial
solutions as well as asset management.

5
<PAGE>

On September 7, 1998, the businesses of Zurich (including Zurich's 70% interest
in The Adviser) and the financial services businesses of B.A.T Industries p.l.c.
("B.A.T") were combined to form a new global insurance and financial services
company known as Zurich Financial Services Group. By way of a dual holding
company structure, former Zurich shareholders initially owned approximately 57%
of Zurich Financial Services Group, with the balance initially owned by former
B.A.T shareholders.

Upon consummation of this transaction, the Fund's existing investment management
agreement with the Adviser was deemed to have been assigned and, therefore,
terminated. The Board has approved a new investment management agreement with
the Adviser, which is substantially identical to the current investment
management agreement, except for the date of execution and termination.
Theagreement became effective on September 7, 1998 and was approved at a special
shareholder meeting held on December 17, 1998.

For the services and facilities furnished to the Money Market, Government
Securities and Tax-Exempt Portfolios, the Portfolios pay a monthly investment
management fee on a graduated basis at the following annual rates: 0.22% of the
first $500 million of combined average daily net assets of such Portfolios,
0.20% of the next $500 million 0.175% of the next $1 billion, 0.16% of the next
$1 billion and 0.15% of combined average daily net assets of such Portfolios
over $3 billion. The Adviser has agreed to reimburse the Fund should all
operating expenses of the Fund, including the investment management fees of the
Adviser but excluding taxes, interest, distribution services fees, extraordinary
expenses, brokerage commissions or transaction costs and any other properly
excludable expenses, exceed the applicable state expense limitations. Currently,
there are no state expense limitations in effect. The investment management fee
is computed based on average daily net assets of the Portfolios and allocated
among the Portfolios based upon the relative net assets of each. Pursuant to the
investment management agreement, the Money Market, Government Securities and
Tax-Exempt Portfolios paid the Adviser fees of $1,888,000, $1,020,000 and
$530,000 respectively, for the fiscal year ended April 30, 1998; $975,000,
$483,000 and $69,000, respectively, for the fiscal year ended April 30, 1997 and
$677,000, $102,000 and $26,000, respectively, for the fiscal year ended April
30, 1996. The Adviser has agreed to waive temporarily its management fee and
absorb certain operating expenses of the Portfolios to the extent described in
the prospectus. See "Investment Manager and Shareholder Services" in the
prospectus. If the fee waiver had not been in effect the Adviser would have
received investment management fees from the Money Market, Government Securities
and Tax-Exempt Portfolios of $2,463,000, $1,301,000 and $630,000, respectively,
for the fiscal year ended April 30, 1998, and $1,150,000, $744,000 and $212,000,
respectively, for the fiscal year ended April 30, 1997 and $891,000, $386,000
and $153,000, respectively, for the fiscal year ended April 30, 1996. The
Adviser waived or absorbed operating expenses for the Money Market, Government
Securities and Tax-Exempt Portfolios of $1,253,000, $281,000 and $100,000,
respectively, for the year ended April 30, 1998; $175,000, $261,000 and
$143,000, respectively, for the fiscal year ended April 30, 1997; and $214,000,
$288,000 and $139,000, respectively, for the fiscal year ended April 30, 1996.

Certain officers or trustees of the Fund are also directors or officers of the
Adviser as indicated under "Officers and Trustees."

Fund Accounting Agent. Scudder Fund Accounting Corporation ("SFAC"), a
subsidiary of the Adviser, is responsible for determining the daily net asset
value per share of the Fund and maintaining all accounting records related
thereto. Currently, SFAC receives no fee for its services to the Fund; however,
subject to Board approval, at some time in the future, SFAC may seek payment for
its services under this agreement.

Distributor and Administrator. Pursuant to an administration, shareholder
services and distribution agreement ("distribution agreement"), Kemper
Distributors, Inc. ("KDI") serves as primary administrator and principal
underwriter for the Fund to provide information and services for existing and
potential shareholders. The distribution agreement provides that KDI shall
appoint various firms to provide cash management services for their customers or
clients through the Fund. The firms are to provide such office space and
equipment, telephone facilities, personnel and literature distribution as is
necessary or appropriate for providing information and services to the firms'
clients. The Fund has adopted a plan in accordance with Rule 12b-1 of the 1940
Act (the "12b-1 Plan") for each Portfolio (applicable to the Service Shares only
in the case of the Money Market Portfolio). This rule regulates the manner in
which an investment company may, directly or indirectly, bear the expenses of
distributing shares. For its services under the distribution agreement and
pursuant to the 12b-1 Plan, the Fund pays KDI a distribution services fee,
payable monthly, at the annual rate of 0.60% of average daily net assets with
respect to the Shares of the Money Market and Government Securities Portfolios
and 0.50% of average daily net

6
<PAGE>

assets with respect to the Shares of the Tax-Exempt Portfolio. Expenditures by
KDI on behalf of the Portfolios need not be made on the same basis that such
fees are allocated. The fees are accrued daily as an expense of the Portfolios.

As principal underwriter for the Fund, KDI acts as agent of the Fund in the sale
of its Shares. KDI pays all its expenses under the distribution agreement
including, without limitation, services fees to firms. The Fund pays the cost
for the prospectus and shareholder reports to be set in type and printed for
existing shareholders, and KDI pays for the printing and distribution of copies
thereof used in connection with the offering of shares to prospective investors.
KDI also pays for supplementary sales literature and advertising costs.

KDI has related administration services and selling group agreements ("services
agreements") with various firms to provide cash management and other services
for Fund shareholders. Such services and assistance may include, but may not be
limited to, establishing and maintaining shareholder accounts and records,
processing purchase and redemption transactions, providing automatic investment
in Fund shares of client account balances, answering routine inquiries regarding
the Fund, assisting clients in changing account options, designations and
addresses, and such other services as may be agreed upon from time to time and
as may be permitted by applicable statute, rule or regulation. KDI also may
provide some of the above services for the Fund. KDI normally pays such firms
for services at a maximum annual rate of 0.60% of average daily net assets of
those accounts in the Shares of the Money Market and Government Securities
Portfolios that they maintain and service and 0.50% of average daily net assets
of those accounts in the Shares of the Tax-Exempt Portfolio that they maintain
and service. KDI in its discretion may pay certain firms additional amounts.
During the fiscal year ended April 30, 1998, the Shares of the Money Market,
Government Securities and Tax-Exempt Portfolios paid distribution services fees
of $7,193,000, $4,158,000 and $1,678,000, respectively. Of such amounts, KDI
remitted pursuant to related services agreements $13,739,000 as service fees to
firms. During the fiscal year ended April 30, 1998, KDI incurred underwriting,
distribution and administrative expenses in the approximate amounts noted:
service fees to firms ($13,739,000); advertising and literature ($0); prospectus
printing ($0); marketing and sales expenses ($650,000) and other expenses ($0);
for a total of $14,389,000. A portion of the aforesaid marketing, sales and
operating expenses could be considered overhead expense.

The distribution agreement and the 12b-1 Plan continue in effect from year to
year so long as such continuance is approved at least annually by a vote of the
Board of Trustees of the Fund, including the Trustees who are not interested
persons of the Fund and who have no direct or indirect financial interest in the
agreement. The distribution agreement automatically terminates in the event of
its assignment and may be terminated at any time without penalty by the Fund or
by KDI upon 60 days' written notice. Termination of the distribution agreement
by the Fund may be by vote of a majority of the Board of Trustees, or a majority
of the Trustees who are not interested persons of the Fund and who have no
direct or indirect financial interest in the agreement, or a "majority of the
outstanding voting securities" of the Fund as defined under the 1940 Act. The
12b-1 Plan may not be amended to increase the fee to be paid by the Fund without
approval by a majority of the outstanding voting securities of the Fund and all
material amendments must in any event be approved by the Board of Trustees in
the manner described above with respect to the continuation of the 12b-1 Plan.
The 12b-1 Plan may be terminated at any time without penalty by a vote of the
majority of the Trustees who are not interested persons of the Fund and who have
no direct or indirect financial interest in the Plan, or by a vote of the
majority of the outstanding voting securities of the Fund. The Portfolios of the
Fund will vote separately with respect to the 12b-1 Plan.

Custodian, Transfer Agent and Shareholder Service Agent. State Street Bank and
Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, as custodian
has custody of all securities and cash of the Fund. They attend to the
collection of principal and income, and payment for and collection of proceeds
of securities bought and sold by the Fund. Investors Fiduciary Trust Company
("IFTC"), 801 Pennsylvania Avenue, Kansas City, Missouri 64105, is the Fund's
transfer and dividend-paying agent. Pursuant to a services agreement with IFTC,
Kemper Service Company ("KSvC"), an affiliate of the Adviser, serves as
"Shareholder Service Agent." IFTC receives, as transfer agent, and pays to KSvC
annual account fees of a maximum of $13 per account plus out-of-pocket expense
reimbursement. During the fiscal year ended April 30, 1998, IFTC remitted
shareholder service fees in the amount of $4,230,000 to KSvC as Shareholder
Service Agent.

Independent Auditors and Reports to Shareholders. The Fund's independent
auditors, Ernst & Young LLP, 233 South Wacker Drive, Chicago, Illinois 60606,
audit and report on the Fund's annual financial statements, review certain
regulatory reports and the Fund's federal income tax return, and perform other
professional accounting, auditing, tax and advisory services when engaged to do
so by the Fund. Shareholders will receive annual audited financial statements
and semi-annual unaudited financial statements.

7
<PAGE>

Legal Counsel. Vedder, Price, Kaufman & Kammholz, 222 North LaSalle Street,
Chicago, Illinois 60601, serve as legal counsel for the Fund.

PORTFOLIO TRANSACTIONS

Portfolio transactions are undertaken principally to pursue the objective of
each Portfolio in relation to movements in the general level of interest rates,
to invest money obtained from the sale of Fund Shares, to reinvest proceeds from
maturing portfolio securities and to meet redemptions of Fund Shares. This may
increase or decrease the yield of a Portfolio depending upon the Adviser's
ability to correctly time and execute such transactions. Since a Portfolio's
assets are invested in securities with short maturities, its portfolio will turn
over several times a year. Securities with maturities of less than one year are
excluded from required portfolio turnover rate calculations, each Portfolio's
portfolio turnover rate for reporting purposes should generally be zero.

The primary objective of the Adviser in placing orders for the purchase and sale
of securities for a Fund's portfolio is to obtain the most favorable net results
taking into account such factors as price, commission where applicable, size of
order, difficulty of execution and skill required of the executing
broker/dealer. The Adviser seeks to evaluate the overall reasonableness of
brokerage commissions paid (to the extent applicable) through its familiarity
with commissions charged on comparable transactions, as well as by comparing
commissions paid by a Fund to reported commissions paid by others. The Adviser
reviews on a routine basis commission rates, execution and settlement services
performed, making internal and external comparisons.

When it can be done consistently with the policy of obtaining the most favorable
net results, it is the Adviser's practice to place such orders with
broker/dealers who supply research, market and statistical information to a
Fund. The term "research, market and statistical information" includes advice as
to the value of securities: the advisability of investing in, purchasing or
selling securities; the availability of securities or purchasers or sellers of
securities; and analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts.
The Adviser is authorized when placing portfolio transactions for a Fund to pay
a brokerage commission in excess of that which another broker might charge for
executing the same transaction solely on account of the receipt of research,
market or statistical information. In effecting transactions in over-the-counter
securities, orders are placed with the principal market makers for the security
being traded unless, after exercising care, it appears that more favorable
results are available elsewhere.

In selecting among firms believed to meet the criteria for handling a particular
transaction, the Adviser may give consideration to those firms that have sold or
are selling shares of a Fund managed by the Adviser.

To the maximum extent feasible, it is expected that the Adviser will place
orders for portfolio transactions through Scudder Investor Services, Inc.
("SIS"), a corporation registered as a broker-dealer and a subsidiary of the
Adviser. SIS will place orders on behalf of the Fund with issuers, underwriters
or other brokers and dealers. SIS will not receive any commission, fee or other
remuneration from the Fund for this service.

Although certain research, market and statistical information from
broker/dealers may be useful to a Fund and to the Adviser, it is the opinion of
the Adviser that such information only supplements its own research effort since
the information must still be analyzed, weighed and reviewed by the Adviser's
staff. Such information may be useful to the Adviser in providing services to
clients other than the Fund and not all such information is used by the Adviser
in connection with the Fund. Conversely, such information provided to the
Adviser by broker/dealers through whom other clients of the Adviser effect
securities transactions may be useful to the Adviser in providing services to a
Fund.

The Board members for a Fund review from time to time whether the recapture for
the benefit of a Fund of some portion of the brokerage commissions or similar
fees paid by a Fund on portfolio transactions is legally permissible and
advisable.

Money market instruments are normally purchased in principal transactions
directly from the issuer or from an underwriter or market maker. There usually
are no brokerage commissions paid by the Fund for such purchases. During the
last three fiscal years the Fund paid no portfolio brokerage commissions.
Purchases from underwriters will include a commission or concession paid by the
issuer to the underwriter, and purchases from dealers serving as market makers
will include the spread between the bid and asked prices.

8
<PAGE>

PURCHASE AND REDEMPTION OF SHARES

Shares of a Portfolio are sold at their net asset value next determined after an
order and payment are received in the form described in the Fund's prospectus.
The minimum initial investment is $1,000 and the minimum subsequent investment
is $100 but such minimum amounts may be changed at any time. The Fund may waive
the minimum for purchases by trustees, directors, officers or employees of the
Fund or the Adviser and its affiliates. An investor wishing to open an account
should use the Account Information Form available from the Fund or financial
services firms. Orders for the purchase of shares that are accompanied by a
check drawn on a foreign bank (other than a check drawn on a Canadian bank in
U.S. Dollars) will not be considered in proper form and will not be processed
unless and until the Fund determines that it has received payment of the
proceeds of the check. The time required for such a determination will vary and
cannot be determined in advance.

The Fund may suspend the right of redemption or delay payment more than seven
days (a) during any period when the New York Stock Exchange ("Exchange") is
closed other than customary weekend and holiday closings or during any period in
which trading on the Exchange is restricted, (b) during any period when an
emergency exists as a result of which (i) disposal of a Portfolio's investments
is not reasonably practicable, or (ii) it is not reasonably practicable for the
Fund to determine the value of its net assets, or (c) for such other periods as
the Securities and Exchange Commission may by order permit for the protection of
the Fund's shareholders.

Although it is the Fund's present policy to redeem in cash, if the Board of
Trustees determines that a material adverse effect would be experienced by the
remaining shareholders if payment were made wholly in cash, the Fund will pay
the redemption price in whole or in part by a distribution of portfolio
securities in lieu of cash, in conformity with the applicable rules of the
Securities and Exchange Commission, taking such securities at the same value
used to determine net asset value, and selecting the securities in such manner
as the Board of Trustees deems fair and equitable. If such a distribution
occurred, shareholders receiving securities and selling them could receive less
than the redemption value of such securities and in addition could incur certain
transaction costs. Such a redemption would not be so liquid as a redemption
entirely in cash. The Fund has elected to be governed by Rule 18f-1 under the
1940 Act pursuant to which the Fund is obligated to redeem shares of a Portfolio
solely in cash up to the lesser of $250,000 or 1% of the net assets of the
Portfolio during any 90-day period for any one shareholder of record.

DIVIDENDS, NET ASSET VALUE AND TAXES

Dividends. Dividends are declared daily and paid monthly. Shareholders will
receive dividends in additional shares unless they elect to receive cash.
Dividends will be reinvested monthly in shares of the Portfolio at the net asset
value normally on the 21st day of each month if a business day, otherwise on the
next business day. The Fund will pay shareholders who redeem their entire
accounts all unpaid dividends at the time of the redemption not later than the
next dividend payment date. Upon written request to the Shareholder Service
Agent, a shareholder may elect to have Fund dividends invested without sales
charge in shares of another Kemper Mutual Fund offering this privilege at the
net asset value of such other fund. See "Special Features -- Exchange Privilege"
for a list of such other Kemper Mutual Funds. To use this privilege of investing
Fund dividends in shares of another Kemper Mutual Fund, shareholders must
maintain a minimum account value of $1,000 in this Fund and must maintain a
minimum account value of $1,000 in the fund in which dividends are reinvested.

Each Portfolio calculates its dividends based on its daily net investment
income. For this purpose, the net investment income of the Portfolio consists of
(a) accrued interest income plus or minus amortized discount or premium
(excluding market discount for the Tax-Exempt Portfolio), (b) plus or minus all
short-term realized gains and losses on investments and (c) minus accrued
expenses allocated to the Portfolio. Expenses of the Fund are accrued each day.
While each Portfolio's investments are valued at amortized cost, there will be
no unrealized gains or losses on such investments. However, should the net asset
value of a Portfolio deviate significantly from market value, the Board of
Trustees could decide to value the investments at market value and then
unrealized gains and losses would be included in net investment income above.

Dividends are reinvested monthly and shareholders will receive monthly
confirmations of dividends and of purchase and redemption transactions except
that confirmations of dividend reinvestment for Individual Retirement Accounts
and other fiduciary accounts for which Investors Fiduciary Trust Company acts as
trustee will be sent quarterly.

9
<PAGE>

Net Asset Value. As described in the prospectus, each Portfolio values its
portfolio instruments at amortized cost, which does not take into account
unrealized capital gains or losses. This involves initially valuing an
instrument at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. While this method provides
certainty in valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the price the Portfolio
would receive if it sold the instrument. Calculations are made to compare the
value of a Portfolio's investments valued at amortized cost with market values.
Market valuations are obtained by using actual quotations provided by market
makers, estimates of market value, or values obtained from yield data relating
to classes of money market instruments published by reputable sources at the
mean between the bid and asked prices for the instruments. If a deviation of 1/2
of 1% or more were to occur between the net asset value per share calculated by
reference to market values and a Portfolio's $1.00 per share net asset value, or
if there were any other deviation that the Board of Trustees of the Fund
believed would result in a material dilution to shareholders or purchasers, the
Board of Trustees would promptly consider what action, if any, should be
initiated. If a Portfolio's net asset value per share (computed using market
values) declined, or were expected to decline, below $1.00 (computed using
amortized cost), the Board of Trustees of the Fund might temporarily reduce or
suspend dividend payments in an effort to maintain the net asset value at $1.00
per share. As a result of such reduction or suspension of dividends or other
action by the Board of Trustees, an investor would receive less income during a
given period than if such a reduction or suspension had not taken place. Such
action could result in investors receiving no dividend for the period during
which they hold their shares and receiving, upon redemption, a price per share
lower than that which they paid. On the other hand, if a Portfolio's net asset
value per share (computed using market values) were to increase, or were
anticipated to increase above $1.00 (computed using amortized cost), the Board
of Trustees of the Fund might supplement dividends in an effort to maintain the
net asset value at $1.00 per share.

Taxes. Interest on indebtedness which is incurred to purchase or carry shares of
a mutual fund portfolio which distributes exempt-interest dividends during the
year is not deductible for Federal income tax purposes. Further, the Tax-Exempt
Portfolio may not be an appropriate investment for persons who are "substantial
users" of facilities financed by industrial development bonds held by the
Tax-Exempt Portfolio or are "related persons" to such users; such persons should
consult their tax advisers before investing in the Tax-Exempt Portfolio.

The "Superfund Act of 1986" (the "Superfund Act") imposes a separate tax on
corporations at a rate of 0.12 percent of the excess of such corporation's
"modified alternative minimum taxable income" over $2 million. A portion of
tax-exempt interest, including exempt-interest dividends from the Tax-Exempt
Portfolio, may be includable in modified alternative minimum taxable income.
Corporate shareholders are advised to consult their tax advisers with respect to
the consequences of the Superfund Act.

PERFORMANCE

As reflected in the prospectus, the historical performance calculation for
Shares of a Portfolio may be shown in the form of "yield," "effective yield"
and, for the Shares of the Tax-Exempt Portfolio only, "tax equivalent yield."
These various measures of performance are described below. The Adviser has
agreed to absorb temporarily certain operating expenses of the Portfolios to the
extent described in the prospectus. Without this expense absorption, the
performance results noted herein would have been lower.

Each Portfolio's yield is computed in accordance with a standardized method
prescribed by rules of the Securities and Exchange Commission. Under that
method, the yield quotation is based on a seven-day period and is computed for
each Portfolio as follows. The first calculation is net investment income per
share, which is accrued interest on portfolio securities, plus or minus
amortized discount or premium (excluding market discount for the Tax-Exempt
Portfolio), less accrued expenses. This number is then divided by the price per
share (expected to remain constant at $1.00) at the beginning of the period
("base period return"). The result is then divided by 7 and multiplied by 365
and the resulting yield figure is carried to the nearest one-hundredth of one
percent. Realized capital gains or losses and unrealized appreciation or
depreciation of investments are not included in the calculation. For the seven
day period ended April 30, 1998, the Money Market Portfolio's yield was 4.61%;
the Government Securities Portfolio's yield was 4.59%; and the Tax-Exempt
Portfolio's yield was 3.20%.

Each Portfolio's effective yield is determined by taking the base period return
(computed as described above) and calculating the effect of assumed compounding.
The formula for the effective yield is: (base period return +1)^365/7--1. For
the seven-day

10
<PAGE>

period ended April 30, 1998, the Money Market Portfolio's effective yield was
4.72%; the Government Securities Portfolio's effective yield was 4.70%; and the
Tax-Exempt Portfolio's effective yield was 3.25%.

The tax equivalent yield of the Shares of the Tax-Exempt Portfolio is computed
by dividing that portion of the Portfolio's yield (computed as described above)
which is tax-exempt by (one minus the stated Federal income tax rate) and adding
the product to that portion, if any, of the yield of the Portfolio that is not
tax-exempt. Based upon an assumed marginal Federal income tax rate of 37.1% and
the Shares of the Tax-Exempt Portfolio's yield computed as described above for
the seven-day period ended April 30, 1998, the Tax-Exempt Portfolio's tax
equivalent effective yield for the period was 5.17%. For additional information
concerning tax-exempt yields, see "Tax-Exempt versus Taxable Yield" below.

Each Portfolio's yield fluctuates, and the publication of an annualized yield
quotation is not a representation as to what an investment in the Portfolio will
actually yield for any given future period. Actual yields will depend not only
on changes in interest rates on money market instruments during the period in
which the investment in the Portfolio is held, but also on such matters as
Portfolio expenses.

Investors have an extensive choice of money market funds and money market
deposit accounts and the information below may be useful to investors who wish
to compare the past performance of the Shares of the Money Market Portfolio, the
Government Securities Portfolio and the Tax-Exempt Portfolio with that of their
competitors. Past performance cannot be a guarantee of future results.

As indicated in the prospectus (see "Performance"), the performance of the
Fund's Portfolios may be compared to that of other mutual funds tracked by
Lipper Analytical Services, Inc. ("Lipper"). Lipper performance calculations
include the reinvestment of all capital gain and income dividends for the
periods covered by the calculations. A Portfolio's performance also may be
compared to other money market funds as reported by IBC Financial Data, Inc.
Money Fund Report(R) or Money Market Insight(R), reporting services on money
market funds. As reported by IBC, all investment results represent total return
(annualized results for the period net of management fees and expenses) and
one-year investment results would be effective annual yields assuming
reinvestment of dividends.

Lipper and IBC Financial Data, Inc. reported the following results for the Money
Market Portfolio and the Government Securities Portfolio.

<TABLE>
<CAPTION>
Lipper Analytical Services, Inc. IBC Financial Data, Inc.
Money Market Portfolio's Average Yield All
Period ended Ranking vs. Money Market Money Market Taxable Money Market
4/30/98 Instrument Funds Period Portfolio's Yield Funds
------- ---------------- ------ ----------------- -----
<S> <C> <C> <C> <C>
4.65% 5.02%
3 Months 239 out of 310 30 Days ended 4/30/98
1 Month 236 out of 311 7 Days ended 4/28/98 4.63 5.00

Government Securities Average Yield All
Period ended Portfolio's Ranking vs. U.S. Government Taxable
4/30/98 Government Money Securities Government
------- Market Funds Period Portfolio's Yield Money Funds
------------ ------ ----------------- -----------
4.58% 4.85%
3 Months 99 out of 114 30 Days ended 4/30/98
1 Month 92 out of 115 7 Days ended 4/28/98 4.57 4.82

</TABLE>
The following investment comparisons are based upon information reported by
Lipper and IBC Financial Data, Inc. In the comparison of the Tax-Exempt
Portfolio's performance to the IBC Financial Data, Inc. Average Yield for All
Taxable Money Market Funds and to the Lipper Money Market Instrument Funds
Average, the performance of that Portfolio has been adjusted on a taxable
equivalent basis assuming a marginal Federal tax rate of 37.1% (see "Tax-Exempt
versus Taxable Yield" below for more information concerning taxable equivalent
performance).

<TABLE>
<CAPTION>
Lipper Analytical Services, Inc. IBC Financial Data, Inc.
Tax Exempt Portfolio's Average Yield All

11
<PAGE>

Period ended Ranking vs. Tax-Exempt Money Tax Exempt Tax-Free Money
4/30/98 Market Funds Period Portfolio Market Funds
------- ------------ ------ --------- ------------
2.99% 3.23%
<S> <C> <C> <C> <C> <C>
3 Months 109 out of 135 30 Days ended 4/30/98
1 Month 90 out of 135 7 Days ended 4/28/98 3.22 3.47

Tax- Lipper
Lipper Exempt Money Tax-Exempt
Tax-Exempt Portfolio Market Portfolio Average Yield
Period Money Taxable Instrument Taxable All Taxable
ended Tax-Exempt Market Fund Equivalent Funds Equivalent Money Market
4/30/98 Portfolio Average Basis** Average Period Basis** Funds
------- --------- ------- ------- ------- ------ ------- -----
4.75% 5.02%
1 Month* 0.25% 0.26% 0.40% 0.40% 30 Days ended
4/30/98
7 Days ended 5.12 5.00
4/28/98***

</TABLE>
* These results are not annualized.

** Source: Scudder Kemper Investments (not reported in IBC or Lipper).

*** Yield shown for taxable funds is for the 7 days ended 4/28/98A Portfolio's
performance also may be compared on a before or after-tax basis to various bank
products, including the average rate of bank and thrift institution money market
deposit accounts, interest bearing checking accounts and 6-month maturity
certificates of deposit as reported in the BANK RATE MONITOR National IndexTM of
100 leading bank and thrift institutions as published by the BANK RATE
MONITOR(TM), N. Palm Beach, Florida 33408. The rates published by the BANK RATE
MONITOR National Index(TM) are averages of the personal account rates offered on
the Wednesday prior to the date of publication by 100 large bank and thrifts in
the top ten Consolidated Standard Metropolitan Statistical Areas. With respect
to money market deposit accounts and interest bearing checking accounts, account
minimums range upward from $2,000 in each institution and compounding methods
vary. Interest bearing checking accounts generally offer unlimited checkwriting
while money market deposit accounts generally restrict the number of checks that
may be written. If more than one rate is offered, the lowest rate is used. Rates
are determined by the financial institution and are subject to change at any
time specified by the institution. Generally, the rates offered for these
products take market conditions and competitive product yields into
consideration when set. Bank products represent a taxable alternative income
producing product. Bank and thrift institution account deposits may be insured.
Shareholder accounts in the Fund are not insured. Bank passbook savings accounts
share some liquidity features with money market mutual fund accounts but they
may not offer all of the features available from a money market mutual fund,
such as checkwriting. Bank passbook savings accounts normally offer a fixed rate
of interest, while the yield of each Portfolio of the Fund fluctuates. Bank
checking accounts normally do not pay interest but share some liquidity features
with money market mutual fund accounts (e.g., the ability to write checks
against the account). Bank certificates of deposit may offer fixed or variable
rates for a set term. (Normally, a variety of terms are available.) Withdrawal
of these deposits prior to maturity normally will be subject to a penalty. In
contrast, shares of a Portfolio are redeemable at the net asset value (normally
$1.00 per share) next determined after a request is received, without charge.

Investors also may want to compare a Portfolio's performance to that of U.S.
Treasury bills or notes because such instruments represent alternative income
producing products. Treasury obligations are issued in selected denominations.
Rates of U.S. Treasury obligations are fixed at the time of issuance and payment
of principal and interest is backed by the full faith and credit of the U.S.
Treasury. The market value of such instruments generally will fluctuate
inversely with interest rates prior to maturity and will equal par value at
maturity. Generally, the values of obligations with shorter maturities will
fluctuate less than those with longer maturities. Each Portfolio's yield will
fluctuate. Also, while each Portfolio seeks to maintain a net asset value per
share of $1.00, there is no assurance that it will be able to do so.

Tax-Exempt versus Taxable Yield. You may want to determine which investment --
tax-exempt or taxable -- will provide you with a higher after-tax return. To
determine the taxable equivalent yield, simply divide the yield from the
tax-exempt investment by the sum of [1 minus your marginal tax rate]. The tables
below are provided for your convenience in making this calculation for selected
tax-exempt yields and taxable income levels. These yields are presented for
purposes of

12
<PAGE>

illustration only and are not representative of any yield that the Tax-Exempt
Portfolio may generate. Both tables are based upon current law as to the 1998
tax rate schedules.
<TABLE>
<CAPTION>

Taxable Equivalent Yield Table for Persons Whose Adjusted Gross Income
is Under $124,500
Your
Taxable Income Marginal A Tax-Exempt Yield of:
Federal
Tax 2% 3% 4% 5% 6% 7%
Single Joint Rate Is Equivalent to a Taxable Yield of:
- --------------------------------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$25,350 - $61,400 $42,350 - $102,300 28.0% 2.78 4.17 5.56 6.94 8.33 9.72
- --------------------------------------------------------------------------------------------------------------- ----------
Over $61,400 Over $102,300 31.0 2.90 4.35 5.80 7.25 8.70 10.14

Taxable Equivalent Yield Table for Persons Whose Adjusted Gross Income is Over $124,500*
Your
Marginal A Tax-Exempt Yield of:
Federal
Tax 2% 3% 4% 5% 6% 7%
Single Joint Rate Is Equivalent to a Taxable Yield of:
- --------------------------------------------------------------------------------------------------------------- ----------

$61,400-$128,100 $ 102,300 - $155,950 31.9% 2.94 4.41 5.87 7.34 8.81 10.28
- --------------------------------------------------------------------------------------------------------------- ----------
$128,100-$278,450 $155,950 - $278,450 37.1 3.18 4.77 6.36 7.95 9.54 11.13
- --------------------------------------------------------------------------------------------------------------- ----------
Over $278,450 Over $278,450 40.8 3.38 5.07 6.76 8.45 10.14 11.82

</TABLE>
* This table assumes a decrease of $3.00 of itemized deductions for each
$100 of adjusted gross income over $124,500. For a married couple with
adjusted gross income between $186,800 and $309,300 (single between
$124,500 and $247,000), add 0.7% to the above Marginal Federal Tax Rate
for each personal and dependency exemption. The taxable equivalent
yield is the tax-exempt yield divided by: 100% minus the adjusted tax
rate. For example, if the table tax rate is 37.1% and you are married
with no dependents, the adjusted tax rate is 38.5% (37.1% + 0.7% +
0.7%). For a tax-exempt yield of 6%, the taxable equivalent yield is
about 9.8% (6% / (100% - 38.5%)).

** Effective January 22, 1999, the shares of the Money Market Portfolio
were divided into four classes of shares, of which the Service Shares
is one. Shares of the Money Market Portfolio outstanding on such date
were redesignated as the Service Shares class of the Money Market
Portfolio. The data set forth above reflects the investment performance
of the Money Market Portfolio prior to such redesignation.

OFFICERS AND TRUSTEES

The officers and trustees of the Fund, their birthdates, their principal
occupations and their affiliations, if any, with the Adviser and KDI, are listed
below. All persons named as officers and trustees also serve in similar
capacities for other funds advised by the Adviser. :

DAVID W. BELIN (6/20/28), Trustee, 2000 Financial Center, 7th and Walnut, Des
Moines, Iowa; Member, Belin Lamson McCormick Zumbach
Flynn, P.C. (attorneys).

LEWIS A. BURNHAM (1/8/33), Trustee, 16410 Avila Boulevard, Tampa, Florida;
Retired; formerly, Partner, Business Resources Group; formerly, Executive Vice
President, Anchor Glass Container Corporation.

13
<PAGE>

DONALD L. DUNAWAY (3/8/37), Trustee, 7515 Pelican Bay Boulevard, Naples,
Florida; Retired; formerly, Executive Vice President, A.O. Smith Corporation
(diversified manufacturer).

ROBERT B. HOFFMAN (12/11/36), Trustee, 800 North Lindbergh Boulevard, St. Louis,
Missouri; Vice Chairman and Chief Financial Officer, Monsanto Company
(agricultural, pharmaceutical and nutritional/food products); formerly, Vice
President, Head of International Operations, FMC Corporation (manufacturer of
machinery and chemicals).

DONALD R. JONES (1/17/30), Trustee, 182 Old Wick Lane, Inverness, Illinois;
Retired; Director, Motorola, Inc. (manufacturer of electronic equipment and
components); formerly, Executive Vice President and Chief Financial Officer,
Motorola, Inc.

THOMAS W. LITTAUER (4/26/55), Trustee and Vice President*, Two International
Place, Boston, Massachusetts; Managing Director, Adviser; formerly, Head of
Broker Dealer Division of an unaffiliated investment management firm during
1997; prior thereto, President of Client Management Services of an unaffiliated
investment management firm from 1991 to 1996.

SHIRLEY D. PETERSON (9/3/41), Trustee, 401 Rosemont Avenue, Frederick, Maryland;
President, Hood College; formerly, Partner, Steptoe & Johnson (attorneys); prior
thereto, Commissioner, Internal Revenue Service; prior thereto, Assistant
Attorney General, U.S. Department of Justice; Director, Bethlehem Steel Corp.

DANIEL PIERCE (3/18/34), Trustee*, Two International Place, Boston,
Massachusetts; Managing Director, Adviser.

WILLIAM P. SOMMERS (7/22/33), Trustee, 333 Ravenswood Avenue, Menlo Park,
California; President and Chief Executive Officer, SRI International (research
and development); formerly, Executive Vice President, Iameter (medical
information and educational service provider); prior thereto, Senior Vice
President and Director, Booz, Allen & Hamilton Inc. (management consulting
firm)(retired); Director, Rohr, Inc., Therapeutic Discovery Corp. and Litton
Industries.

MARK S. CASADY (9/21/60), President*, 345 Park Avenue, New York, New York;
Managing Director, Adviser; formerly, Institutional Sales Manager of an
unaffiliated mutual fund distributor.

PHILIP J. COLLORA (11/15/45), Vice President and Secretary*, 222 South Riverside
Plaza, Chicago, Illinois; Senior Vice President and Assistant Secretary,
Adviser.

ANN M. McCREARY (11/6/56), Vice President*, 345 Park Avenue, New York, New York;
Managing Director, Adviser.

ROBERT C. PECK, JR. (10/1/46), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Managing Director, Adviser; formerly, Executive Vice
President and Chief Investment Officer with an unaffiliated investment
management firm from 1988 to June 1997.

KATHRYN L. QUIRK (12/3/52), Vice President*, 345 Park Avenue, New York, New
York; Managing Director, Adviser.

FRANK J. RACHWALSKI, JR. (3/26/45), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Managing Director, Adviser.

LINDA J. WONDRACK (9/12/64), Vice President*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.

JOHN R. HEBBLE (6/27/58), Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.

BRENDA LYONS (2/21/63), Assistant Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.

CAROLINE PEARSON (4/1/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Senior Vice President, Adviser; formerly, Associate,
Dechert Price & Rhoads (law firm) 1989 to 1997.

14
<PAGE>

MAUREEN E. KANE (2/14/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Vice President, Adviser; formerly, Assistant Vice
President of an unaffiliated investment management firm; prior thereto,
Associate Staff Attorney of an unaffiliated investment management firm;
Associate, Peabody & Arnold (law firm).

JOHN W. STUEBE (1/7/49), Vice President*(2), 222 South Riverside Plaza, Chicago,
Illinois; Vice President, Adviser and KDI.

ELIZABETH C. WERTH (10/1/47), Assistant Secretary*, 222 South Riverside Plaza,
Chicago, Illinois; Vice President, Adviser and KDI.

* Interested persons as defined in the 1940 Act.

The trustees and officers who are "interested persons" as designated above
receive no compensation from the Fund. The table below shows amounts paid or
accrued to those trustees who are not designated "interested persons" during the
Fund's fiscal year ended April 30, 1998 and the total compensation that Kemper
Managed Funds paid to each trustee during the calendar year 1997.
<TABLE>
<CAPTION>

Aggregate Compensation From

Total Compensation Kemper Funds Paid to

Name of Trustee Cash Account Trust Trustees **
- --------------- ------------------ -----------
<S> <C> <C>
David W. Belin* $4,100 $168,100
Lewis A. Burnham $3,500 $117,800
Donald L. Dunaway* $4,700 $162,700
Robert B. Hoffman $3,500 $109,400
Donald R. Jones $3,700 $114,200
Shirley D. Peterson $3,300 $114,000
William P. Sommers $3,300 $109,400

</TABLE>

* Includes deferred fees and interest thereon pursuant to deferred
compensation agreements with the Fund. Deferred amounts accrue interest
monthly at a rate approximate to the yield of Zurich Money Funds -- Zurich
Money Market Fund. Total deferred fees and interest accrued for the latest
and all prior fiscal years are $17,200 for Mr. Belin and $15,600 for Mr.
Dunaway from Cash Account Trust.

** Includes compensation for service on the Boards of 25 Kemper funds with 43
fund portfolios. Each trustee currently serves as trustee of 26 Kemper
Funds with 48 fund portfolios. Total compensation does not reflect amounts
paid by the Adviser to the trustees for meeting regarding the combination
of Scudder, Stevens & Clark, Inc. and Zurich Kemper Investments, Inc. Such
amounts totaled $21,900, $25,400, $21,900, $17,300, $20,800, $24,200 and
$21,900 for Messrs. Belin, Burnham, Dunaway, Hoffman, Jones, Ms. Peterson
and Mr. Sommers, respectively.

15
<PAGE>

On December 31, 1998, the officers and trustees of the Fund, as a group, owned
less than 1% of the then outstanding shares of each Portfolio. No person owned
of record 5% or more of the outstanding shares of any class of any Portfolio,
except the persons indicated in the chart below:

Name and Address % Owned Portfolio
- ---------------- ---------
Roney & Co 10.99 Money Market
1 Griswold 57.05 Government Securities
Detroit, MI 48226 23.97 Tax-Exempt

May Financial Corp. 5.06 Government Securities
8333 Douglas Ave.
Dallas, TX 75225
Arthur S. Mintz 13.45 Tax-Exempt
1 New York Plaza
New York, NY 10004

SPECIAL FEATURES

Exchange Privilege. Subject to the limitations described below, Class A Shares
(or the equivalent) of the following Kemper Mutual Funds may be exchanged for
each other at their relative net asset values: Kemper Technology Fund, Kemper
Total Return Fund, Kemper Growth Fund, Kemper Small Capitalization Equity Fund,
Kemper Income and Capital Preservation Fund, Kemper Municipal Bond Fund, Kemper
Diversified Income Fund, Kemper High Yield Series, Kemper U.S. Government
Securities Fund, Kemper International Fund, Kemper State Tax-Free Income Series,
Kemper Adjustable Rate U.S. Government Fund, Kemper Blue Chip Fund, Kemper
Global Income Fund, Kemper Target Equity Fund (series are subject to a limited
offering period), Kemper Intermediate Municipal Bond Fund, Kemper Cash Reserves
Fund, Kemper U.S. Mortgage Fund, Kemper Short-Intermediate Government Fund,
Kemper Value Series, Inc., Kemper Value Plus Growth Fund, Kemper Quantitative
Equity Fund, Kemper Horizon Fund, Kemper Europe Fund, Kemper Asian Growth Fund,
Kemper Aggressive Growth Fund, Kemper Global/International Series, Inc., Kemper
Securities Trust Kemper Equity Trust and Kemper Income Funds ("Kemper Mutual
Funds") and certain "Money Market Funds" (Zurich Money Funds, Zurich Yieldwise
Funds, 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 Funds and Kemper Cash
Reserves Fund) acquired by exchange from another Fund may not be exchanged
thereafter until they have been owned for 15 days (the "15-Day Hold Policy").
For purposes of determining whether the 15-Day Hold Policy applies to a
particular exchange, the value of the shares to be exchanged shall be computed
by aggregating the value of shares being exchanged for all accounts under common
control, discretion or advice, including without limitation accounts
administered by a financial services firm offering market timing, asset
allocation or similar services. Series of Kemper Target Equity Fund will be
available on exchange only during the Offering Period for such series as
described in the prospectus for such series. Cash Equivalent Fund, Tax-Exempt
California Money Market Fund, Cash Account Trust, Investors Municipal Cash Fund
and Investors Cash Trust are available on exchange but only through a financial
services firm having a services agreement with KDI with respect to such funds.
Exchanges may only be made for funds that are available for sale in the
shareholder's state of residence. Currently, Tax-Exempt California Money Market
Fund is available for sale only in California and the portfolios of Investors
Municipal Cash Fund are available for sale in certain states.

16
<PAGE>

Once the authorization is on file, the Shareholder Service Agent will honor
requests by telephone at 1-800-231-8568 or in writing subject to the limitations
on liability described in the prospectus. Any share certificates must be
deposited prior to any exchange of such shares. During periods when it is
difficult to contact the Shareholder Service Agent by telephone, it may be
difficult to implement the telephone exchange privilege. The exchange privilege
is not a right and may be suspended, terminated or modified at any time. Except
as otherwise permitted by applicable regulation, 60 days' prior written notice
of any termination or material change will be provided.

Systematic Withdrawal Program. An owner of $5,000 or more of a Portfolio's
Shares may provide for the payment from the owner's account of any requested
dollar amount up to $50,000 to be paid to the owner or the owner's designated
payee monthly, quarterly, semi-annually or annually. The $5,000 minimum account
size is not applicable to Individual Retirement Accounts. Dividend distributions
will be reinvested automatically at net asset value. A sufficient number of full
and fractional shares will be redeemed to make the designated payment. Depending
upon the size of the payments requested, redemptions for the purpose of making
such payments may reduce or even exhaust the account. The program may be amended
on thirty days notice by the Fund and may be terminated at any time by the
shareholder or the Fund. Firms provide varying arrangements for their clients to
redeem Fund Shares on a periodic basis. Such firms may independently establish
minimums for such services.

Tax-Sheltered Retirement Programs. The Shareholder Service Agent provides
retirement plan services and documents and KDI can establish your account in any
of the following types of retirement plans:

o Individual Retirement Accounts (IRAs) trusteed by Investors Fiduciary
Trust Company ("IFTC"). This includes Simplified Employee Pension Plan
(SEP) IRA accounts and prototype documents.

o 403(b) Custodial Accounts also trusteed by IFTC. This type of plan is
available to employees of most non-profit organizations.

o Prototype money purchase pension and profit-sharing plans may be
adopted by employers. The maximum contribution per participant is the
lesser of 25% of compensation or $30,000.

Brochures describing the above plans as well as providing model defined benefit
plans, target benefit plans, 457 plans, 401(k) plans and materials for
establishing them are available from the Shareholder Service Agent upon request.
The brochures for plans trusteed by IFTC describe the current fees payable to
IFTC for its services as trustee. Investors should consult with their own tax
advisers before establishing a retirement plan.

Electronic Funds Transfer Programs. For your convenience, the Fund has
established several investment and redemption programs using electronic funds
transfer via the Automated Clearing House (ACH). There is currently no charge by
the Fund for these programs. To use these features, your financial institution
(your employer's financial institution in the case of payroll deposit) must be
affiliated with an Automated Clearing House (ACH). This ACH affiliation permits
the Shareholder Service Agent to electronically transfer money between your bank
account, or employer's payroll bank in the case of Direct Deposit, and your Fund
account. Your bank's crediting policies of these transferred funds may vary.
These features may be amended or terminated at any time by the Fund.
Shareholders should contact Kemper Service Company at 1-800-621-1048 or the
financial services firm through which their account was established for more
information. These programs may not be available through some firms that
distribute shares of the Fund.

SHAREHOLDER RIGHTS

The Fund generally is not required to hold meetings of its shareholders. Under
the Agreement and Declaration of Trust of the Fund ("Declaration of Trust"),
however, shareholder meetings will be held in connection with the following
matters: (a) the election or removal of trustees if a meeting is called for such
purpose; (b) the adoption of any contract for which shareholder approval is
required by the 1940 Act; (c) any termination of the Fund to the extent and as
provided in the Declaration of Trust; (d) any amendment of the Declaration of
Trust (other than amendments changing the name of the Fund or any Portfolio,
establishing a Portfolio, supplying any omission, curing any ambiguity or
curing, correcting or supplementing any defective or inconsistent provision
thereof); and (e) such additional matters as may be required by law, the
Declaration of Trust, the By-laws of the Fund, or any registration of the Fund
with the Securities and Exchange Commission or any state, or

17
<PAGE>

as the trustees may consider necessary or desirable. The shareholders also would
vote upon changes in fundamental investment objectives, policies or
restrictions.

Each trustee serves until the next meeting of shareholders, if any, called for
the purpose of electing trustees and until the election and qualification of a
successor or until such trustee sooner dies, resigns, retires or is removed by a
majority vote of the shares entitled to vote (as described below) or a majority
of the trustees. In accordance with the 1940 Act (a) the Fund will hold a
shareholder meeting for the election of trustees at such time as less than a
majority of the trustees have been elected by shareholders, and (b) if, as a
result of a vacancy in the Board of Trustees, less than two-thirds of the
trustees have been elected by the shareholders, that vacancy will be filled only
by a vote of the shareholders.

Trustees may be removed from office by a vote of the holders of a majority of
the outstanding shares at a meeting called for that purpose, which meeting shall
be held upon the written request of the holders of not less than 10% of the
outstanding shares. Upon the written request of ten or more shareholders who
have been such for at least six months and who hold shares constituting at least
1% of the outstanding shares of the Fund stating that such shareholders wish to
communicate with the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider removal of a trustee, the
Fund has undertaken to disseminate appropriate materials at the expense of the
requesting shareholders.

The Declaration of Trust provides that the presence at a shareholder meeting in
person or by proxy of at least 30% of the shares entitled to vote on a matter
shall constitute a quorum. Thus, a meeting of shareholders of the Fund could
take place even if less than a majority of the shareholders were represented on
its scheduled date. Shareholders would in such a case be permitted to take
action which does not require a larger vote than a majority of a quorum, such as
the election of trustees and ratification of the selection of auditors. Some
matters requiring a larger vote under the Declaration of Trust, such as
termination or reorganization of the Fund and certain amendments of the
Declaration of Trust, would not be affected by this provision; nor would matters
which under the 1940 Act require the vote of a "majority of the outstanding
voting securities" as defined in the 1940 Act.

The Declaration of Trust specifically authorizes the Board of Trustees to
terminate the Fund (or any Portfolio or class) by notice to the shareholders
without shareholder approval.

Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for obligations of the
Fund. The Declaration of Trust, however, disclaims shareholder liability for
acts or obligations of the Fund and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument entered into or executed by
the Fund or the trustees. Moreover, the Declaration of Trust provides for
indemnification out of Fund property for all losses and expenses of any
shareholder held personally liable for the obligations of the Fund and the Fund
will be covered by insurance which the trustees consider adequate to cover
foreseeable tort claims. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is considered by the Adviser remote and
not material, since it is limited to circumstances in which a disclaimer is
inoperative and the Fund itself is unable to meet its obligations.

18
<PAGE>

APPENDIX -- RATINGS OF INVESTMENTS

COMMERCIAL PAPER RATINGS

A-1, A-2, Prime-1, Prime-2 and Duff 1, Duff 2 Commercial Paper Ratings

Commercial paper rated by Standard & Poor's Corporation has the following
characteristics: Liquidity ratios are adequate to meet cash requirements.
Long-term senior debt is rated "A" or better. The issuer has access to at least
two additional channels of borrowing. Basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances. Typically, the
issuer's industry is well established and the issuer has a strong position
within the industry. The reliability and quality of management are unquestioned.
Relative strength or weakness of the above factors determine whether the
issuer's commercial paper is rated A-1, A-2 or A-3.

The ratings Prime-1 and Prime-2 are the two highest commercial paper ratings
assigned by Moody's Investors Service, Inc. Among the factors considered by them
in assigning ratings are the following: (1) evaluation of the management of the
issuer; (2) economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain areas; (3)
evaluation of the issuer's products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend
of earnings over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and (8) recognition
by the management of obligations which may be present or may arise as a result
of public interest questions and preparations to meet such obligations. Relative
strength or weakness of the above factors determines whether the issuer's
commercial paper is rated Prime-1, 2 or 3.

The rating Duff-1 is the highest commercial paper rating assigned by Duff &
Phelps Inc. Paper rated Duff-1 is regarded as having very high certainty of
timely payment with excellent liquidity factors that are supported by ample
asset protection. Risk factors are minor. Paper rated Duff-2 is regarded as
having good certainty of timely payment, good access to capital markets and
sound liquidity factors and company fundamentals. Risk factors are small.

MIG-1 and MIG-2 Municipal Notes

Moody's Investors Service, Inc.'s ratings for state and municipal notes and
other short-term loans will be designated Moody's Investment Grade (MIG). This
distinction is in recognition of the differences between short-term credit risk
and long-term risk. Factors affecting the liquidity of the borrower are
uppermost in importance in short-term borrowing, while various factors of the
first importance in bond risk are of lesser importance in the short run. Loans
designated MIG-1 are of the best quality, enjoying strong protection from
established cash flows of funds for their servicing or from established and
broad-based access to the market for refinancing, or both. Loans designated
MIG-2 are of high quality, with margins of protection ample although not so
large as in the preceding group.

STANDARD & POOR'S CORPORATION BOND RATINGS, CORPORATE BONDS

AAA. This is the highest rating assigned by Standard & Poor's Corporation to a
debt obligation and indicates an extremely strong capacity to pay principal and
interest.

AA. Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.

MOODY'S INVESTORS SERVICE, INC. BOND RATINGS

Aaa. Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

19
<PAGE>

Aa. Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.

DUFF & PHELP'S INC. BOND RATINGS

AAA -- Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.

AA -- High credit quality. Protection factors are strong. Risk is modest but may
vary slightly from time to time because of economic conditions.

20
<PAGE>
RETAIL MONEY MARKET SHARES
PREMIER MONEY MARKET SHARES
INSTITUTIONAL MONEY MARKET SHARES

STATEMENT OF ADDITIONAL INFORMATION

January 22, 1999

CASH ACCOUNT TRUST
222 South Riverside Plaza, Chicago, Illinois 60606
1-800-231-8568

This combined Statement of Additional Information contains information about the
Retail Shares ("Retail Shares"), Premier Shares ("Premier Shares") and
Institutional Shares ("Institutional Shares") (collectively, the "Shares")
classes of the Money Market Portfolio (the "Fund") 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
("Portfolios"), including the Money Market Portfolio. The Money Market Portfolio
is divided into four classes including Retail, Premier and Institutional Shares
contained herein. This combined Statement of Additional Information is not a
prospectus and should be read in conjunction with the prospectus of the dated
January 22, 1999. The prospectus may be obtained without charge from the Fund.

TABLE OF CONTENTS

INVESTMENT RESTRICTIONS........................................................2
INVESTMENT MANAGER AND SHAREHOLDER SERVICES....................................3
PORTFOLIO TRANSACTIONS.........................................................6
PURCHASE AND REDEMPTION OF SHARES..............................................6
DIVIDENDS, NET ASSET VALUE AND TAXES...........................................7
PERFORMANCE....................................................................8
OFFICERS AND TRUSTEES..........................................................9
SPECIAL FEATURES..............................................................12
SHAREHOLDER RIGHTS............................................................13
APPENDIX -- RATINGS OF INVESTMENTS............................................15

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INVESTMENT RESTRICTIONS

The Trust has adopted for the Fund certain investment restrictions which,
together with the investment objective and policies of the Fund, cannot be
changed for the Fund 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
Fund 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 Fund.

The Shares of the Fund 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 Fund'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 Fund's total assets falls below an amount equal to three times the
amount of its indebtedness from money borrowed, the Fund will, within three
days (not including Sundays and holidays), reduce its indebtedness to the
extent necessary. The Fund 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 Trustor 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.

(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 Fund may be
deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities.

(12) Issue senior securities as defined in the Investment Company Act of 1940.

(13) Concentrate 25% or more of the value of the Fund's assets in any one
industry; provided, however, that (a) the Fund reserves freedom of action
to invest up to 100% of its assets in obligations of, or guaranteed by,

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the United States Government, its agencies or instrumentalities in
accordance with its investment objective and policies and (b) the Fund will
invest at least 25% of its assets in obligations issued by banks in
accordance with its investment objective and policies. However, the Fund
may, in the discretion of its investment adviser, invest less than 25% of
its assets in obligations issued by banks whenever the Fund assumes a
temporary defensive posture

If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The Fund has
no present intention of borrowing during the coming year as permitted for the
Fund by investment restriction number 4. In any event, borrowings would only be
made as permitted by such restrictions. The Fund may not, as a non-fundamental
policy that may be changed without shareholder vote:

(i) Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition
of assets.

INVESTMENT MANAGER AND SHAREHOLDER SERVICES

Investment Manager. Scudder Kemper Investments, Inc. (the "Adviser"), 345 Park
Avenue, New York, New York, is the Fund's investment manager. The Adviser is
approximately 70% owned by Zurich Financial Services, Inc., a newly formed
global insurance and financial services company. Its officers and employees own
the balance of the Adviser. Pursuant to an investment management agreement, the
Adviser acts as the Fund's investment adviser, manages its investments,
administers its business affairs, furnishes office facilities and equipment,
provides clerical and administrative services and permits any of its officers or
employees to serve without compensation as trustees or officers of the Trust if
elected to such positions. The Trust pays the expenses of its operations,
including the fees and expenses of its independent auditors, counsel, custodian
and transfer agent and the cost of share certificates, reports and notices to
shareholders, costs of calculating net asset value and maintaining all
accounting records thereto, brokerage commissions or transaction costs, taxes,
registration fees, the fees and expenses of qualifying the Fund and its shares
for distribution under federal and state securities laws and membership dues in
the Investment Company Institute or any similar organization. The Trust's
expenses generally are allocated among the Portfolios on the basis of relative
net assets at the time of allocation, except that expenses directly attributable
to the Fund are charged to the Fund.

The investment management agreement provides that the Adviser shall not be
liable for any error of judgment or of law, or for any loss suffered by the
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 the Adviser in the performance of its obligations and duties, or by
reason of its reckless disregard of its obligations and duties under the
agreement.

The investment management agreement continues in effect from year to year for
the Fund subject thereto so long as its continuation is approved at least
annually by (a) a majority vote of the trustees who are not parties to such
agreement or interested persons of any such party except in their capacity as
trustees of the Trust , cast in person at a meeting called for such purpose, and
(b) the shareholders of the Fund subject thereto or the Board of Trustees. If
continuation is not approved for the Fund, the investment management agreement
nevertheless may continue in effect for the Fund and the Adviser may continue to
serve as investment manager for the Fund to the extent permitted by the
Investment Company Act of 1940. The agreement may be terminated at any time upon
60 days notice by either party, or by a majority vote of the outstanding shares
of the Fund subject thereto, and will terminate automatically upon assignment.

On September 7, 1998, the businesses of Zurich (including Zurich's 70% interest
in the Adviser) and the financial services businesses of B.A.T Industries p.l.c.
("B.A.T") were combined to form a new global insurance and financial services
company known as Zurich Financial Services, Inc. By way of a dual holding
company structure, former Zurich shareholders

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<PAGE>

initially owned approximately 57% of Zurich Financial Services, Inc., with the
balance initially owned by former B.A.T shareholders.

Upon consummation of this transaction, the Trust 's existing investment
management agreement with the Adviser was deemed to have been assigned and,
therefore, terminated. The Board has approved a new investment management
agreement with the Adviser, which is substantially identical to the current
investment management agreement, except for the date of execution and
termination. The agreement became effective on September 7, 1998 and was
approved at a special shareholder meeting held on December 17, 1998.

For the services and facilities furnished to the Fund, the Fund pays a monthly
investment management fee on a graduated basis at the following annual rates:
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 Adviser has agreed to reimburse the Trust should all
operating expenses of the Trust , including the investment management fees of
the Adviser but excluding taxes, interest, distribution services fees,
extraordinary expenses, brokerage commissions or transaction costs and any other
properly excludable expenses, exceed the applicable state expense limitations.
Currently, there are no state expense limitations in effect. The investment
management fee is computed based on average daily net assets of the Portfolios
and allocated among the Portfolios based upon the relative net assets of each.
Pursuant to the investment management agreement, the Fund paid the Adviser a fee
of $1,888,000 for the fiscal year ended April 30, 1998; $975,000 for the fiscal
year ended April 30, 1997; and $677,000 for the fiscal year ended April 30,
1996. The Adviser has agreed to waive temporarily its management fee and absorb
certain operating expenses of the Fund to the extent described in the
prospectus. See "Investment Manager and Shareholder Services" in the prospectus.
If the fee waiver had not been in effect the Adviser would have received an
investment management fee from the Fund of $2,463,000 for the fiscal year ended
April 30, 1998; $1,150,000 for the fiscal year ended April 30, 1997; and
$891,000 for the fiscal year ended April 30, 1996. The Adviser waived or
absorbed operating expenses for the Fund of $1,253,000 for the year ended April
30, 1998; $175,000 for the fiscal year ended April 30, 1997; and $214,000 for
the fiscal year ended April 30, 1996.

Certain officers or trustees of the Trust are also directors or officers of the
Adviser as indicated under "Officers and Trustees."

Fund Accounting Agent. Scudder Fund Accounting Corporation ("SFAC"), a
subsidiary of the Adviser, is responsible for determining the daily net asset
value per share of the Trust and maintaining all accounting records related
thereto. Currently, SFAC receives no fee for its services to the Fund; however,
subject to Board approval, at some time in the future, SFAC may seek payment for
its services under this agreement.

Distributor and Administrator. Pursuant to an underwriting and distribution
agreement ("distribution agreement"), Kemper Distributors, Inc. ("KDI") serves
as distributor and principal underwriter for the Fund to provide information and
services for existing and potential shareholders. The distribution agreement
provides that KDI shall appoint various firms to provide cash management
services for their customers or clients through the Fund.

As principal underwriter for the Trust, KDI acts as agent of the Trust in the
sale of its 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 selling group agreements with various firms to provide distribution
services for Fund shareholders. KDI receives no compensation from the Fund as
principal underwriter for the Shares and pays all expenses of distribution of
the Shares not otherwise paid by dealers and other financial services firms.

The distribution agreement continues in effect from year to year so long as such
continuance is approved at least annually by a vote of the Board of Trustees of
the 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

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<PAGE>

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 Fund under an administration and
shareholder services agreement ("administration agreement") with KDI for each of
the Retail Shares, the Premier Shares and the Institutional Shares classes. KDI
bears all its expenses of providing services pursuant to the administration
agreement between KDI and the Fund for each share class, including the payment
of service fees. Retail Shares and Premier Shares of the Fund 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 Retail Shares and Premier Shares classes,
respectively. Institutional Shares of the Fund pay KDI an administrative
services fee, payable monthly, at an annual rate of up to 0.15% of average daily
net assets with respect to such class.

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
Fund. 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
Fund, 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 Fund's accounts that it
maintains and services for the Retail Shares and Premier Shares and 0.15% of the
net assets in the Fund's accounts that it maintains and services for the
Institutional Shares. After a firm becomes eligible for the quarterly service
fee,the fee continues until terminated by KDI or the Shares of the Fund. Firms
to which service fees may be paid may include affiliates of KDI.

KDI also may provide some of the above services and may retain any portion of
the fee under the administrative agreement not paid to firms to compensate
itself for administrative functions performed for the Shares of the Fund.

Custodian, Transfer Agent and Shareholder Service Agent. State Street Bank and
Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, as custodian,
have custody of all securities and cash of the Trust. They attend to the
collection of principal and income, and payment for and collection of proceeds
of securities bought and sold by the Trust. Investors Fiduciary Trust Company
("IFTC"), 801 Pennsylvania Avenue, Kansas City, Missouri 64105, is the Fund's
transfer and dividend-paying agent. Pursuant to a services agreement with IFTC,
Kemper Service Company ("KSvC"), an affiliate of the Adviser, serves as
"Shareholder Service Agent." IFTC receives from the Shares, as transfer agent,
and pays to KSvC annual account fees of a maximum of $13 per account plus
out-of-pocket expense reimbursement.

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.

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PORTFOLIO TRANSACTIONS

Portfolio transactions are undertaken principally to pursue the objective of the
Fund in relation to movements in the general level of interest rates, to invest
money obtained from the sale of Fund shares, to reinvest proceeds from maturing
portfolio securities and to meet redemptions of Fund shares. This may increase
or decrease the yield of a Portfolio depending upon the Adviser's ability to
correctly time and execute such transactions. Since the Fund's assets are
invested in securities with short maturities, its portfolio will turn over
several times a year. Securities with maturities of less than one year are
excluded from required portfolio turnover rate calculations, the Fund's
portfolio turnover rate for reporting purposes should generally be zero.

The primary objective of the Adviser in placing orders for the purchase and sale
of securities for the Fund's portfolio is to obtain the most favorable net
results taking into account such factors as price, commission where applicable,
size of order, difficulty of execution and skill required of the executing
broker/dealer. The Adviser seeks to evaluate the overall reasonableness of
brokerage commissions paid (to the extent applicable) through its familiarity
with commissions charged on comparable transactions, as well as by comparing
commissions paid by the Fund to reported commissions paid by others. The Adviser
reviews on a routine basis commission rates, execution and settlement services
performed, making internal and external comparisons.

When it can be done consistently with the policy of obtaining the most favorable
net results, it is the Adviser's practice to place such orders with
broker/dealers who supply research, market and statistical information to the
Fund. The term "research, market and statistical information" includes advice as
to the value of securities: the advisability of investing in, purchasing or
selling securities; the availability of securities or purchasers or sellers of
securities; and analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts.
The Adviser is authorized when placing portfolio transactions for the Fund to
pay a brokerage commission in excess of that which another broker might charge
for executing the same transaction solely on account of the receipt of research,
market or statistical information. In effecting transactions in over-the-counter
securities, orders are placed with the principal market makers for the security
being traded unless, after exercising care, it appears that more favorable
results are available elsewhere.

To the maximum extent feasible, it is expected that the Adviser will place
orders for portfolio transactions through KDI, a corporation registered as a
broker-dealer and a subsidiary of the Adviser. KDI will place orders on behalf
of the Fund with issuers, underwriters or other brokers and dealers. KDI will
not receive any commission, fee or other remuneration from the Fund for this
service.

6
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PURCHASE AND REDEMPTION OF SHARES

Shares of the Fund are sold at their net asset value next determined after an
order and payment is received in the form described in the Fund's prospectus.
For Retail Shares, the minimum initial investment is $1,000 and the minimum
subsequent investment is $100. For Premier Shares, the minimum initial
investment is $25,000 and the minimum subsequent investment is $100. For
Institutional Shares, the minimum initial investment is $250,000. Such minimum
amounts may be changed at any time. The Fund may waive the minimum for purchases
by trustees, directors, officers or employees of the Trust or the Adviser and
its affiliates. An investor wishing to open an account should use the Account
Information Form available from the Fund or financial services firms. Orders for
the purchase of shares that are accompanied by a check drawn on a foreign bank
(other than a check drawn on a Canadian bank in U.S. Dollars) will not be
considered in proper form and will not be processed unless and until the Fund
determines that it has received payment of the proceeds of the check. The time
required for such a determination will vary and cannot be determined in advance.

The Trust 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 Fund's investments is
not reasonably practicable, or (ii) it is not reasonably practicable for the
Fund to determine the value of its net assets, or (c) for such other periods as
the Securities and Exchange Commission may by order permit for the protection of
the Fund's shareholders.

Although it is the Trust'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 Trust will pay
the redemption price in whole or in part by a distribution of portfolio
securities in lieu of cash, in conformity with the applicable rules of the
Securities and Exchange Commission, taking such securities at the same value
used to determine net asset value, and selecting the securities in such manner
as the Board of Trustees deems fair and equitable. If such a distribution
occurred, shareholders receiving securities and selling them could receive less
than the redemption value of such securities and in addition could incur certain
transaction costs. Such a redemption would not be so liquid as a redemption
entirely in cash. The 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 Fund
solely in cash up to the lesser of $250,000 or 1% of the net assets of the Fund
during any 90-day period for any one shareholder of record.

DIVIDENDS, NET ASSET VALUE AND TAXES

Dividends. Dividends are declared daily and paid monthly. Shareholders will
receive dividends in additional shares unless they elect to receive cash.
Dividends will be reinvested monthly in Shares of the Fund at the net asset
value normally on the 21st day of each month if a business day, otherwise on the
next business day. The Fund will pay shareholders that redeem their entire
accounts all unpaid dividends at the time of the redemption not later than the
next dividend payment date. Upon written request to the Shareholder Service
Agent, certain shareholders may elect to have Fund dividends invested without
sales charge in shares of a Kemper Funds offering this privilege at the net
asset value of such other fund. See "Special Features -- Exchange Privilege" for
a list of such other Kemper Funds. To use this privilege of investing Fund
dividends in shares of a Kemper Funds, shareholders must maintain a minimum
account value of $1,000 in Retail Shares, $25,000 in Premier Shares and $100,000
in Institutional Shares, and must maintain a minimum account value of $1,000 in
the fund in which dividends are reinvested. This feature may not be available to
all Fund shareholders. See "Special Features".

The Shares of the Fund calculates their dividends based on its daily net
investment income. For this purpose, the net investment income of the Shares of
the Fund 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
Fund. Expenses of the Fund are accrued each day. While the Shares of the Fund'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 Fund 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.

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<PAGE>

Net Asset Value. As described in the prospectus, the Fund 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 Fund would receive if it sold the instrument.
Calculations are made to compare the value of the Shares of the Fund'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 Fund'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 the Shares of the
Fund'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 Fund'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.

The "Superfund Act of 1986" (the "Superfund Act") imposes a separate tax on
corporations at a rate of 0.12 percent of the excess of such corporation's
"modified alternative minimum taxable income" over $2 million. A portion of
tax-exempt interest may be includable in modified alternative minimum taxable
income. Corporate shareholders are advised to consult their tax advisers with
respect to the consequences of the Superfund Act.

PERFORMANCE

As reflected in the prospectus, the historical performance calculation for the
Shares of the Fund may be shown in the form of "yield" and "effective yield."
These various measures of performance are described below. The Adviser has
agreed to absorb temporarily certain operating expenses of the Fund to the
extent described in the prospectus. Without this expense absorption, the
performance results noted herein would have been lower.

Each Shares' yield is computed in accordance with a standardized method
prescribed by rules of the Securities and Exchange Commission. Under that
method, the yield quotation is based on a seven-day period and is computed for
the Fund as follows. The first calculation is net investment income per share,
which is accrued interest on portfolio securities, plus or minus amortized
discount or premium, less accrued expenses. This number is then divided by the
price per share (expected to remain constant at $1.00) at the beginning of the
period ("base period return"). The result is then divided by 7 and multiplied by
365 and the resulting yield figure is carried to the nearest one-hundredth of
one percent. Realized capital gains or losses and unrealized appreciation or
depreciation of investments are not included in the calculation.

Each Shares' effective yield is determined by taking the base period return
(computed as described above) and calculating the effect of assumed compounding.
The formula for the effective yield is: (base period return +1)^365/7--1.

Each Shares' yield fluctuates, and the publication of an annualized yield
quotation is not a representation as to what an investment in the Shares of the
Fund will actually yield for any given future period. Actual yields will depend
not only on

8
<PAGE>

changes in interest rates on money market instruments during the period in which
the investment in the Shares is held, but also on such matters as Fund expenses.

Investors have an extensive choice of money market funds and money market
deposit accounts and the information below may be useful to investors who wish
to compare the past performance of the Shares with that of its competitors. Past
performance cannot be a guarantee of future results.

As indicated in the prospectus (see "Performance"), the performance of each
class of Shares may be compared to that of other mutual funds tracked by Lipper
Analytical Services, Inc. ("Lipper"). Lipper performance calculations include
the reinvestment of all capital gain and income dividends for the periods
covered by the calculations. The Shares of the Fund's performance also may be
compared to other money market funds as reported by IBC Financial Data, Inc.
Money Fund Report(R) or Money Market Insight(R), reporting services on money
market funds. As reported by IBC, all investment results represent total return
(annualized results for the period net of management fees and expenses) and
one-year investment results would be effective annual yields assuming
reinvestment of dividends.

The performance of the Shares also may be compared on a before or after-tax
basis to various bank products, including the average rate of bank and thrift
institution money market deposit accounts, interest bearing checking accounts
and 6-month maturity certificates of deposit as reported in the BANK RATE
MONITOR National Index(TM) of 100 leading bank and thrift institutions as
published by the BANK RATE MONITOR(TM), N. Palm Beach, Florida 33408. The rates
published by the BANK RATE MONITOR National Index(TM) are averages of the
personal account rates offered on the Wednesday prior to the date of publication
by 100 large banks and thrifts in the top ten Consolidated Standard Metropolitan
Statistical Areas. With respect to money market deposit accounts and interest
bearing checking accounts, account minimums range upward from $2,000 in each
institution and compounding methods vary. Interest bearing checking accounts
generally offer unlimited checkwriting while money market deposit accounts
generally restrict the number of checks that may be written. If more than one
rate is offered, the lowest rate is used. Rates are determined by the financial
institution and are subject to change at any time specified by the institution.
Generally, the rates offered for these products take market conditions and
competitive product yields into consideration when set. Bank products represent
a taxable alternative income producing product. Bank and thrift institution
account deposits may be insured. Shareholder accounts in the Trust are not
insured. Bank passbook savings accounts share some liquidity features with money
market mutual fund accounts but they may not offer all of the features available
from a money market mutual fund, such as checkwriting. Bank passbook savings
accounts normally offer a fixed rate of interest, while the yields of the Shares
of the Fund fluctuate. Bank checking accounts normally do not pay interest but
share some liquidity features with money market mutual fund accounts (e.g., the
ability to write checks against the account). Bank certificates of deposit may
offer fixed or variable rates for a set term. (Normally, a variety of terms are
available.) Withdrawal of these deposits prior to maturity normally will be
subject to a penalty. In contrast, shares of the Fund are redeemable at the net
asset value (normally $1.00 per share) next determined after a request is
received, without charge.

Investors also may want to compare the performance of each class of Shares to
that of U.S. Treasury bills or notes because such instruments represent
alternative income producing products. Treasury obligations are issued in
selected denominations. Rates of U.S. Treasury obligations are fixed at the time
of issuance and payment of principal and interest is backed by the full faith
and credit of the U.S. Treasury. The market value of such instruments generally
will fluctuate inversely with interest rates prior to maturity and will equal
par value at maturity. Generally, the values of obligations with shorter
maturities will fluctuate less than those with longer maturities. Each Shares'
yield will fluctuate. Also, while the Fund seek to maintain a net asset value
per share of $1.00, there is no assurance that it will be able to do so.

OFFICERS AND TRUSTEES

The officers and trustees of the 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:

DAVID W. BELIN (6/20/28), Trustee, 2000 Financial Center, 7th and Walnut, Des
Moines, Iowa; Member, Belin Lamson McCormick Zumbach Flynn, P.C. (attorneys).