Filed with the Securities and Exchange Commission on August 1, 2000.
File No. 33-32476
File No. 811-5970
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 / /
Pre-Effective Amendment No
-- / /
Post-Effective Amendment No. 20
-- / X /
And/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 21
-- / X /
Cash Account Trust
------------------
(Exact Name of Registrant as Specified in Charter)
222 South Riverside Plaza, Chicago, Illinois, 60606
---------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (312) 537-7000
Philip J. Collora
------------------
Scudder Kemper Investments, Inc.
-------------------------------
222 South Riverside Plaza
Chicago, Illinois 60606
-----------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
/ / Immediately upon filing pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a) (1)
/ / 75 days after filing pursuant to paragraph (a) (2)
/ X / On August 1, 2000 pursuant to paragraph (b)
/ / On ______________ pursuant to paragraph (a) (1)
/ / On __________________ pursuant to paragraph (a) (2) of Rule 485
If Appropriate, check the following box:
/ X / This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
<PAGE>
Cash Account Trust
Service Shares
P R O S P E C T U S
August 1, 2000
Money Market Portfolio
Government Securities Portfolio
Tax-Exempt Portfolio
As with all mutual funds, the Securities and Exchange Commission (SEC) does not
approve or disapprove these shares or determine whether the information in this
prospectus is truthful or complete. It is a criminal offense for anyone to
inform you otherwise.
<PAGE>
--------------------------------------------------------------------------------
Table of Contents
CASH ACCOUNT TRUST
The Fund And Its Portfolios Your Investment In The Portfolios
1 Money Market Portfolio 16 Policies You Should Know About
5 Government Securities Portfolio 20 Understanding Distributions And Taxes
9 Tax-Exempt Portfolio
13 Other Policies And Risks
13 Who Manages The Portfolios
14 Financial Highlights
<PAGE>
--------------------------------------------------------------------------------
TICKER SYMBOL CSAXX
Money Market Portfolio
The Portfolio's Goal And Main
Strategy
The portfolio seeks maximum current income consistent with stability of capital.
The portfolio pursues its goal by investing primarily in high quality short-term
securities, as well as certain repurchase agreements.
The portfolio may buy securities from many types of issuers, including the U.S.
government, banks (both U.S. banks and U.S. branches of foreign banks),
corporations, and municipalities. The portfolio will normally invest at least
25% of total assets in bank obligations. However, everything the portfolio buys
must meet the rules for money market portfolio investments (see sidebar). In
addition, the portfolio focuses its investments on securities that are in the
top credit grade for short-term debt securities.
Working in conjunction with credit analysts, the portfolio managers screen
potential securities and develop a list of those that the portfolio may buy. The
managers then decide which securities on this list to buy, looking for
attractive yield and weighing considerations such as credit quality, economic
outlooks, and possible interest rate movements.
The managers may adjust the portfolio's exposure to interest rate risk,
typically seeking to take advantage of possible rises in interest rates and to
preserve yield when interest rates appear likely to fall.
--------------------------------------------------------------------------------
Money Fund Rules
To be called a money market fund, a mutual fund must operate within strict
federal rules. Designed to help maintain a stable $1.00 share price, these rules
limit money funds to particular types of securities. Some of the rules:
o individual securities must have remaining maturities of no more than 397
days
o the dollar-weighted average maturity of the portfolio's holdings cannot
exceed 90 days
o all securities must be in the top two credit grades for short-term debt
securities and be denominated in U.S. dollars
1 | Money Market Portfolio
<PAGE>
Main Risks to Investors
There are several risk factors that could reduce the yield you get from the
portfolio or make it perform less well than other investments.
As with most money market portfolios, the most important factor is short-term
market interest rates. The portfolio's yield tends to reflect current interest
rates, which means that when these rates fall, the portfolio's yield generally
falls as well.
Investments by the portfolio in Eurodollar certificates of deposit issued by
London branches of U.S. banks, and different obligations issued by foreign
entities, including U.S. branches of foreign banks, involve additional risks
than investments in securities of domestic branches of U.S. banks. These risks
include, but are not limited to, future unfavorable political and economic
developments, possible withholding taxes on interest payments, seizure of
foreign deposits, currency controls, or interest limitations or other
governmental restrictions that might affect payment of principal or interest.
The market for such obligations may be less liquid and, at times, more volatile
than for securities of domestic branches of U.S. banks. Additionally, there may
be less public information available about foreign banks and their branches.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of interest rate trends,
credit quality or other factors
o the counterparty to a repurchase agreement or other transaction could
default on its obligations
o over time, the real value of the portfolio's yield may be eroded by
inflation
An investment in the portfolio is not insured or guaranteed by the FDIC or any
other government agency. Although the portfolio seeks to preserve the value of
your investment at $1.00 per share, this share price isn't guaranteed and you
could lose money by investing in the portfolio.
2 | Money Market Portfolio
<PAGE>
Performance
The bar chart shows how the total returns for the portfolio's Service Shares
have varied from year to year, which may give some idea of risk. The table shows
how the portfolio's Service Shares returns over different periods average out.
All figures on this page assume reinvestment of dividends and distributions. As
always, past performance is no guarantee of future results.
--------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year
--------------------------------------------------------------------------------
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
5.36 2.99 2.39 3.51 5.13 4.64 4.80 4.69 4.38
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1991 1992 1993 1994 1995 1996 1997 1998 1999
--------------------------------------------------------------------------------
Best Quarter: 1.58%, Q1 1991
Worst Quarter: 0.57%, Q2 1993
Year-to-date return as of 6/30/2000: 2.62%
--------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/1999
--------------------------------------------------------------------------------
1 Year 5 Years Since Inception*
-------------------------------------------------------
4.38% 4.72% 4.23%
-------------------------------------------------------
* Inception date for the Service Shares of the portfolio is
December 3, 1990.
In the chart, total returns for 1991 through 1999 would have been lower if
operating expenses hadn't been reduced.
In the table, total returns from inception through 1999 would have been lower if
operating expenses hadn't been reduced.
7-day yield as of 12/31/1999: 5.05%
3 | Money Market Portfolio
<PAGE>
How Much Investors Pay
The fee table describes the fees and expenses that you may pay if you buy and
hold Service Shares of this portfolio. This information doesn't include any fees
that may be charged by your financial services firm.
--------------------------------------------------------------------------------
Fee Table
--------------------------------------------------------------------------------
Shareholder Fees (%)
(paid directly from your investment) None
-------------------------------------------------------------------------------
Annual Operating Expenses (%)
(deducted from portfolio assets)
-------------------------------------------------------------------------------
Management Fee 0.17%
-------------------------------------------------------------------------------
Distribution (12b-1) Fee 0.60%
-------------------------------------------------------------------------------
Other Expenses* 0.31%
-------------------------------------------------------------------------------
Total Annual Operating Expenses** 1.08%
-------------------------------------------------------------------------------
* Includes costs of shareholder servicing, custody and similar expenses,
which may vary with fund size and other factors.
** By contract, total annual operating expenses are capped at 1.00% through
August 31, 2000. Additionally, the advisor will cap expenses voluntarily at
1.00%. This cap may be terminated at any time at the option of the advisor.
--------------------------------------------------------------------------------
Example
--------------------------------------------------------------------------------
Based on the figures above, this example helps you compare the portfolio's
Service Shares' expenses to those of other mutual funds. The example assumes the
expenses above remain the same, that you invested $10,000, earned 5% annual
returns, reinvested all dividends and distributions and sold your shares at the
end of each period. This is only an example; actual expenses will be different.
1 Year 3 Years 5 Years 10 Years
-------------------------------------------------------------------------------
$110 $343 $595 $1,317
-------------------------------------------------------------------------------
4 | Money Market Portfolio
<PAGE>
--------------------------------------------------------------------------------
TICKER SYMBOL CAGXX
Government Securities Portfolio
The Portfolio's Goal And Main Strategy
The portfolio seeks to provide maximum current income consistent with stability
of capital.
The portfolio pursues its goal 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 backed by these
securities.
Working in conjunction with credit analysts, the portfolio managers screen
potential securities and develop a list of those that the portfolio may buy. The
managers then decide which securities on this list to buy, looking for
attractive yield and weighing considerations such as economic outlook and
possible interest rate movements. The managers may adjust the portfolio's
exposure to interest rate risk, typically seeking to take advantage of possible
rises in interest rates and to preserve yield when interest rates appear likely
to fall.
--------------------------------------------------------------------------------
Money Fund Rules
To be called a money market fund, a mutual fund must operate within strict
federal rules. Designed to help maintain a stable $1.00 share price, these rules
limit money funds to particular types of securities. Some of the rules:
o individual securities must have remaining maturities of no more than 397
days
o the dollar-weighted average maturity of the portfolio's holdings cannot
exceed 90 days
o all securities must be in the top two credit grades for short-term debt
securities and be denominated in U.S. dollars
5 | Government Securities Portfolio
<PAGE>
Main Risks to Investors
There are several risk factors that could reduce the yield you get from the
portfolio or make it perform less well than other investments.
As with most money market portfolios, the most important factor is short-term
market interest rates. The portfolio's yield tends to reflect current interest
rates, which means that when these rates fall, the portfolio's yield generally
falls as well.
Some securities issued by U.S. Government agencies or instrumentalities are
supported only by the credit of that agency or instrumentality, while other
securities are backed by the full faith and credit of the U. S. Government.
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.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of interest rate trends,
credit quality or other factors
o the counterparty to a repurchase agreement or other transaction could
default on its obligations
o over time, the real value of the portfolio's yield may be eroded by
inflation
An investment in the portfolio is not insured or guaranteed by the FDIC or any
other government agency. Although the portfolio seeks to preserve the value of
your investment at $1.00 per share, this share price isn't guaranteed and you
could lose money by investing in the portfolio.
6 | Government Securities Portfolio
<PAGE>
Performance
The bar chart shows how the total returns for the portfolio's Service Shares
have varied from year to year, which may give some idea of risk. The table shows
how the portfolio's Service Shares returns over different periods average out.
All figures on this page assume reinvestment of dividends and distributions. As
always, past performance is no guarantee of future results.
--------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year
--------------------------------------------------------------------------------
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE BAR CHART DATA:
5.29 3.05 2.42 3.51 5.19 4.70 4.79 4.56 4.21
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1991 1992 1993 1994 1995 1996 1997 1998 1999
--------------------------------------------------------------------------------
Best Quarter: 1.46%, Q1 1991
Worst Quarter: 0.59%, Q2 1993
Year-to-date return as of 6/30/2000: 2.54%
--------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/1999
--------------------------------------------------------------------------------
1 Year 5 Years Since Inception*
------------------------------------------------------
4.21% 4.69% 4.21%
------------------------------------------------------
* Inception date for the Service Shares of the portfolio is December 3, 1990.
In the chart, total returns for 1991 through 1999 would have been lower if
operating expenses hadn't been reduced.
In the table, total returns from inception through 1999 would have been lower if
operating expenses hadn't been reduced.
7-day yield as of 12/31/1999: 4.73%
7 | Government Securities Portfolio
<PAGE>
How Much Investors Pay
The fee table describes the fees and expenses that you may pay if you buy and
hold Service Shares of this portfolio. This information doesn't include any fees
that may be charged by your financial services firm.
--------------------------------------------------------------------------------
Fee Table
--------------------------------------------------------------------------------
Shareholder Fees (%)
(paid directly from your investment) None
-------------------------------------------------------------------------------
Annual Operating Expenses (%)
(deducted from portfolio assets)
-------------------------------------------------------------------------------
Management Fee 0.17%
-------------------------------------------------------------------------------
Distribution (12b-1) Fee 0.60%
-------------------------------------------------------------------------------
Other Expenses* 0.31%
-------------------------------------------------------------------------------
Total Annual Operating Expenses** 1.08%
-------------------------------------------------------------------------------
* Includes costs of shareholder servicing, custody and similar expenses,
which may vary with fund size and other factors.
** By contract, total annual operating expenses expenses are capped at 1.00%
through August 31, 2000. Additionally, the advisor will cap expenses
voluntarily at 1.00%. This cap may be terminated at any time at the option
of the advisor.
--------------------------------------------------------------------------------
Example
--------------------------------------------------------------------------------
Based on the figures above, this example helps you compare the portfolio's
Service Shares' expenses to those of other mutual funds. The example assumes the
expenses above remain the same, that you invested $10,000, earned 5% annual
returns, reinvested all dividends and distributions and sold your shares at the
end of each period. This is only an example; actual expenses will be different.
1 Year 3 Years 5 Years 10 Years
-------------------------------------------------------------------------------
$110 $343 $595 $1,317
-------------------------------------------------------------------------------
8 | Government Securities Portfolio
<PAGE>
--------------------------------------------------------------------------------
TICKER SYMBOL CHTXX
Tax-Exempt Portfolio
The Portfolio's Goal And Main
Strategy
The portfolio seeks to provide maximum current income that is exempt from
Federal income taxes to the extent consistent with stability of capital.
The portfolio seeks to provide income exempt from regular federal income tax and
stability of principal through investments in high quality short-term municipal
securities. The portfolio normally invests at least 80% of net assets in
municipal securities, the income from which is free from regular federal income
tax and from alternative minimum tax (AMT).
The portfolio may buy many types of municipal securities, including industrial
development bonds, but all must meet the rules for money market portfolio
investments (see sidebar). In addition, the portfolio focuses its investments on
securities that are in the top credit grade for short-term debt securities.
Working in conjunction with credit analysts, the portfolio managers screen
potential securities and develop a list of those that the portfolio may buy. The
managers then decide which securities on this list to buy, looking for
attractive yield and weighing considerations such as credit quality, economic
outlooks, and possible interest rate movements.
The managers may adjust the portfolio's exposure to interest rate risk,
typically seeking to take advantage of possible rises in interest rates and to
preserve yield when interest rates appear likely to fall.
--------------------------------------------------------------------------------
Money Fund Rules
To be called a money market fund, a mutual fund must operate within strict
federal rules. Designed to help maintain a stable $1.00 share price, these rules
limit money funds to particular types of securities. Some of the rules:
o individual securities must have remaining maturities of no more than 397
days
o the dollar-weighted average maturity of the portfolio's holdings cannot
exceed 90 days
o all securities must be in the top two credit grades for short-term debt
securities and be denominated in U.S. dollars
9 | Tax-Exempt Portfolio
<PAGE>
Main Risks to Investors
There are several risk factors that could reduce the yield you get from the
portfolio or make it perform less well than other investments.
As with most money market portfolios, the most important factor is short-term
market interest rates. The portfolio's yield tends to reflect current interest
rates, which means that when these rates fall, the portfolio's yield generally
falls as well.
The municipal securities market is narrower and less liquid, with fewer
investors, issuers and market makers, than the taxable securities market. The
more limited marketability of municipal securities may make it more difficult in
certain circumstances to dispose of large investments advantageously.
Industrial development bonds, which are municipal securities, generally do not
constitute the pledge of the credit of the issuer of such bonds. The portfolio
may invest all or any part of its assets in municipal securities that are
industrial development bonds.
To the extent that the portfolio invests in taxable securities, a portion of its
income would be taxable.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of interest rate trends,
credit quality or other factors
o the counterparty to a repurchase agreement or other transaction could
default on its obligations
o political or legal actions could change the way the portfolio's dividends
are taxed, particularly in certain states or localities
o over time, the real value of the portfolio's yield may be eroded by
inflation
An investment in the portfolio is not insured or guaranteed by the FDIC or any
other government agency. Although the portfolio seeks to preserve the value of
your investment at $1.00 per share, this share price isn't guaranteed and you
could lose money by investing in the portfolio.
10 | Tax-Exempt Portfolio
<PAGE>
Performance
The bar chart shows how the total returns for the portfolio's Service Shares
have varied from year to year, which may give some idea of risk. The table shows
how the portfolio's Service Shares returns over different periods average out.
All figures on this page assume reinvestment of dividends and distributions. As
always, past performance is no guarantee of future results.
--------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
3.91 2.42 1.84 2.32 3.32 2.85 2.90 2.70 2.42
--------------------------------------------------------------------------------
1991 1992 1993 1994 1995 1996 1997 1998 1999
--------------------------------------------------------------------------------
Best Quarter: 0.98%, Q1 1991
Worst Quarter: 0.44%, Q1 1994
Year-to-date return as of 6/30/2000: 1.56%
--------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/1999
--------------------------------------------------------------------------------
1 Year 5 Years Since Inception*
------------------------------------------------------
2.42% 2.84% 2.76%
------------------------------------------------------
* Inception date for the Service Shares of the portfolio is December 3, 1990.
In the chart, total returns for 1991 through 1999 would have been lower if
operating expenses hadn't been reduced.
In the table, total returns from inception through 1999 would have been lower if
operating expenses hadn't been reduced.
7-day yield as of 12/31/1999: 3.29%
11 | Tax-Exempt Portfolio
<PAGE>
How Much Investors Pay
This fee table describes the fees and expenses that you may pay if you buy and
hold Service Shares of this portfolio. This information doesn't include any fees
that may be charged by your financial services firm.
--------------------------------------------------------------------------------
Fee Table
--------------------------------------------------------------------------------
Shareholder Fees (%)
(paid directly from your investment) None
-------------------------------------------------------------------------------
Annual Operating Expenses (%)
(deducted from portfolio assets)
-------------------------------------------------------------------------------
Management Fee 0.17%
-------------------------------------------------------------------------------
Distribution (12b-1) Fee 0.50%
-------------------------------------------------------------------------------
Other Expenses* 0.28%
-------------------------------------------------------------------------------
Total Annual Operating Expenses** 0.95%
-------------------------------------------------------------------------------
* Includes costs of shareholder servicing, custody and similar expenses,
which may vary with fund size and other factors.
** By contract, total annual operating expenses are capped at 0.95% through
August 31, 2000.
--------------------------------------------------------------------------------
Example
--------------------------------------------------------------------------------
Based on the figures above, this example helps you compare the portfolio's
Service Shares' expenses to those of other mutual funds. The example assumes the
expenses above remain the same, that you invested $10,000, earned 5% annual
returns, reinvested all dividends and distributions and sold your shares at the
end of each period. This is only an example; actual expenses will be different.
1 Year 3 Years 5 Years 10 Years
-------------------------------------------------------------------------------
$97 $303 $526 $1,166
-------------------------------------------------------------------------------
12 | Tax-Exempt Portfolio
<PAGE>
Other Policies And Risks
While the previous pages describe the main points of each portfolio's strategy
and risks, there are a few other issues to know about:
o As a temporary defensive measure, the Tax-Exempt Portfolio could invest in
taxable money market securities. This would mean that the portfolio was not
pursuing its goal.
o The investment advisor establishes a security's credit grade when it buys
the security, using independent ratings or, for unrated securities, its own
credit analysis. If a security's credit quality falls below the minimum
required for purchase by a portfolio, the security will be sold unless the
Board believes this would not be in the shareholders' best interests.
o This prospectus doesn't tell you about every policy or risk of investing in
a portfolio. For more information, you may want to request a copy of the
Statement of Additional Information (the last page tells you how to do
this).
Keep in mind that there is no assurance that any mutual fund will achieve its
goal.
Who Manages The Portfolios
The Investment Advisor
The portfolios' investment advisor is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY. Scudder Kemper has more than 80 years of experience
managing mutual funds and currently has more than $290 billion in assets under
management.
Scudder Kemper takes a team approach to asset management, bringing together
professionals from many investment disciplines. Supporting each team are Scudder
Kemper's many economists, research analysts, traders and other investment
specialists, located across the United States and around the world.
For serving as each portfolio's investment advisor, Scudder Kemper receives a
management fee from each portfolio. Below are the actual rates paid by each
portfolio for the 12 months through the most recent fiscal year end, as a
percentage of daily net assets.
------------------------------------------------------
Portfolio Name Fee Paid
------------------------------------------------------
Money Market Portfolio 0.17%
------------------------------------------------------
Government Securities Portfolio 0.17%
------------------------------------------------------
Tax-Exempt Portfolio 0.17%
------------------------------------------------------
The Portfolio Managers
The portfolio managers handle the day-to-day management of each portfolio. Frank
J. Rachwalski, Jr. serves as lead manager for each portfolio.
Mr. Rachwalski joined the advisor in 1973 and began his investment career at
that time. Mr. Rachwalski joined each portfolio in 1990, and has been
responsible for the trading and portfolio management of money market funds since
1974.
Money Market Portfolio -- Geoffrey Gibbs serves as manager for the portfolio.
Mr. Gibbs joined the advisor in 1996 as a trader for money market funds and
began his investment career in 1994. Mr. Gibbs joined the portfolio in 1999.
Government Securities Portfolio -- Dean Meddaugh serves as manager for the
portfolio. Mr. Meddaugh joined the advisor in 1996 as a money market trader, and
in 1998 became a money market manager. He began his investment career in 1994 as
an accountant for an unaffiliated investment management firm. Mr. Meddaugh
joined the portfolio in 1999.
Tax-Exempt Portfolio -- Jerri I. Cohen serves as a manager to the portfolio. Ms.
Cohen joined the advisor in 1981 as an accountant and began her investment
career in 1992 as a money market trader. Ms. Cohen joined the portfolio in 1998.
13 | Other Policies And Risks
<PAGE>
Financial Highlights
These tables are designed to help you understand each portfolio's financial
performance in recent years. The figures in the first part of the tables are for
a single share. The total return figures represent the percentage that an
investor in a particular portfolio would have earned, assuming all dividends and
distributions were reinvested. This information has been audited by Ernst &
Young LLP, whose report, along with each portfolio's financial statements, is
included in the annual report (see "Shareholder reports" on the last page).
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Money Market Portfolio -- Service Shares
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Years ended April 30, 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.00 1.00 1.00 1.00 1.00
-------------------------------------------------------------------------------------------------------------------
Net investment income .05 .04 .05 .05 .05
-------------------------------------------------------------------------------------------------------------------
Less distributions from net investment
income (.05) (.04) (.05) (.05) (.05)
-------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 1.00 1.00 1.00 1.00
-------------------------------------------------------------------------------------------------------------------
Total Return (%) (a) 4.74 4.46 4.85 4.60 4.96
-------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
-------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ thousands) 6,314,907 3,343,011 1,995,057 584,947 455,025
-------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense
reductions (%) 1.08 1.10 1.10 1.03 1.05
-------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 1.00 1.00 1.00 1.00 1.00
-------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (%) 4.72 4.34 4.71 4.51 4.83
-------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return would have been lower had certain expenses not been reduced.
14 | Financial Highlights
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Government Securities Portfolio -- Service Shares
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Years ended April 30, 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.00 1.00 1.00 1.00 1.00
-------------------------------------------------------------------------------------------------------------------
Net investment income .04 .04 .05 .05 .05
-------------------------------------------------------------------------------------------------------------------
Less distributions from net investment
income (.04) (.04) (.05) (.05) (.05)
-------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 1.00 1.00 1.00 1.00
-------------------------------------------------------------------------------------------------------------------
Total Return (%) (a) 4.54 4.34 4.78 4.69 5.01
-------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
-------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ thousands) 497,927 793,170 804,565 544,501 189,919
-------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense
reductions (%) 1.08 1.01 1.02 .99 1.06
-------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 1.00 1.00 .98 .92 .90
-------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (%) 4.37 4.24 4.68 4.59 4.88
-------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return would have been lower had certain expenses not been reduced.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Tax-Exempt Portfolio -- Service Shares
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Years ended April 30, 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.00 1.00 1.00 1.00 1.00
-------------------------------------------------------------------------------------------------------------------
Net investment income .03 .02 .03 .03 .03
-------------------------------------------------------------------------------------------------------------------
Less distributions from net investment
income (.03) (.02) (.03) (.03) (.03)
-------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 1.00 1.00 1.00 1.00
-------------------------------------------------------------------------------------------------------------------
Total Return (%) (a) 2.68 2.50 2.92 2.82 3.16
-------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
--------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ thousands) 464,535 380,629 368,141 220,791 66,981
-------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense
reductions (%) .95 .91 .97 .96 .98
-------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) .95 .91 .91 .81 .78
-------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (%) 2.66 2.45 2.87 2.78 3.10
-------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return would have been lower had certain expenses not been reduced.
15 | Financial Highlights
<PAGE>
--------------------------------------------------------------------------------
Your Investment In The Portfolios
The following pages describe the main policies associated with buying and
selling shares of the portfolios. There is also information on dividends and
taxes and other matters that may affect you as a portfolio shareholder.
Because these portfolios are available only through a financial services firm,
such as a broker or financial institution, you should contact a representative
of your financial services firm for instructions on how to buy or sell portfolio
shares.
Policies You Should Know
About
The policies below may affect you as a shareholder. In any case where materials
provided by your financial services firm contradict the information given here,
you should follow the information in your firm's materials. Please note that a
financial services firm may charge its own fees.
Keep in mind that the information in this prospectus applies only to each
portfolio's Service Shares. The Money Market Portfolio and the Tax-Exempt
Portfolio have three other share classes, and the Government Securities
Portfolio has one other share class, which are described in separate
prospectuses and which have different fees, requirements and services.
Rule 12b-1 Plan
Each portfolio has adopted a plan under Rule 12b-1 for each portfolio's Service
Shares that provides for fees payable as an expense of a portfolio that are used
by Kemper Distributors, Inc., as principal underwriter, to pay for distribution
and services for that portfolio. Under the 12b-1 plan, each portfolio pays an
annual distribution services fee, payable monthly, of 0.60% of that portfolio's
average daily net assets (except Tax-Exempt Portfolio, which pays 0.50%).
Because 12b-1 fees are paid out of the portfolios' assets on an ongoing basis,
they will, over time, increase the cost of investment and may cost more than
paying other types of sales charges.
16 | Policies You Should Know About
<PAGE>
Policies about transactions
The portfolios are open for business each day the New York Stock Exchange is
open.
Normally, the portfolios calculate their share price every business day: at
11:00 a.m., 1:00 p.m. and 3:00 p.m. Central time for Money Market Portfolio; at
11:00 a.m. 1:00 p.m., 3:00 p.m. and 8:00 p.m. Central time for Government
Securities Portfolio; and at 11:00 a.m. and 3:00 p.m. Central time for
Tax-Exempt Portfolio.
As noted earlier, each portfolio expects to maintain a stable $1.00 share price.
You can place an order to buy or sell shares at any time. Once your order is
received by Kemper Service Company, and they have determined that it is a "good
order," it will be processed at the next share price calculated.
Because orders placed through financial services firms must be forwarded to
Kemper Service Company before they can be processed, you'll need to allow extra
time. A representative of your financial services firm should be able to tell
you when your order will be processed.
Wire transactions that arrive by 1:00 p.m. Central time (11:00 a.m. Central time
for Tax-Exempt Portfolio) will receive that day's dividend. Wire transactions
received by 3:00 p.m. Central time (for all portfolios) or 8:00 p.m. (for
Government Securities Portfolio) will start to accrue dividends the next
calendar day. Investments by check will be effective at 3:00 p.m. Central time
on the business day following receipt and will earn dividends the following
calendar day. Confirmed share purchases that are effective at 8:00 p.m. Central
time for the Government Securities Portfolio will receive dividends upon receipt
of payment in accordance with the time provisions above.
Wire purchase orders should be directed to:
UMB Bank N.A.
(ABA #101-000-695)
10th Grand Avenue,
Kansas City, Missouri 64106
for credit to the appropriate portfolio bank account (CAT Money Market Portfolio
46: 98-0119-980-3; CAT Government Securities Portfolio 47: 98-0119-983-8; CAT
Tax-Exempt Portfolio 48: 98-0119-985-4) and further credit to your account
number.
When selling shares, you'll generally receive the dividend for the day on which
your shares were sold. If we receive a sell request before 11:00 a.m. Central
time and the request calls for proceeds to be sent out by wire, we will normally
wire you the proceeds on the same day. However you won't receive that day's
dividend.
Checkwriting lets you sell portfolio shares by writing a check. Your investment
keeps earning dividends until your check clears. Please note that you should not
write checks for less than $250 or for more than $5,000,000. Note as well that
we can't honor any check larger than your balance at the time the check is
presented to us.
17 | Policies You Should Know About
<PAGE>
When you want to sell more than $50,000 worth of shares or send the proceeds to
a third party or to a new address, you'll usually need to place your order in
writing and include a signature guarantee. The only exception is if you want
money wired to a bank account that is already on file with us; in that case, you
don't need a signature guarantee. Also, you don't need a signature guarantee for
an exchange, although we may require one in certain other circumstances.
A signature guarantee is simply a certification of your signature -- a valuable
safeguard against fraud. You can get a signature guarantee from most brokerages,
banks, savings institutions and credit unions. Note that you can't get a
signature guarantee from a notary public.
If your shares are registered directly with the portfolio's transfer agent, you
can sell them by sending a written request (with a signature guarantee) to:
Kemper Service Company
Attention: Transaction Processing
P.O. Box 219557
Kansas City, MO 64121
Money from shares you sell is normally sent out within one business day of when
your order is processed (not when it is received), although it could be delayed
for up to seven days. There are also two circumstances when it could be longer:
when you are selling shares you bought recently by check and that check hasn't
cleared yet (maximum delay: ten days) or when unusual circumstances prompt the
SEC to allow further delays.
You may obtain additional information about other ways to sell your shares by
contacting your financial services firm.
Your financial services firm may set its own minimum investments, although those
set by each portfolio are as follows:
o Minimum initial investment: $1,000
o Minimum additional investment: $100
o Minimum investment with an automatic investment plan: $50
Share certificates are available on written request. However, we don't recommend
them unless you want them for a specific purpose, because they can only be sold
by mailing them in, and if they're ever lost they're difficult and expensive to
replace.
How the portfolios calculate share price
For each share class of each portfolio, the share price is the net asset value
per share, or NAV. To calculate NAV, each share class of each portfolio uses the
following equation:
TOTAL ASSETS - TOTAL LIABILITIES
---------------------------------- = NAV
TOTAL NUMBER OF SHARES OUTSTANDING
In valuing securities, we typically use the amortized cost method (the method
used by most money market funds).
18 | Policies You Should Know About
<PAGE>
Other rights we reserve
You should be aware that we may do any of the following:
o withhold 31% of your distributions as federal income tax if you have been
notified by the IRS that you are subject to backup withholding, or if you
fail to provide us with a correct taxpayer ID number or certification that
you are exempt from backup withholding
o reject a new account application if you don't provide a correct Social
Security or other tax ID number; if the account has already been opened, we
may give you 30 days' notice to provide the correct number
o close your account and send you the proceeds if your balance falls below
$1,000; we will give you 60 days' notice so you can either increase your
balance or close your account (this policy doesn't apply to most retirement
accounts or if you have an automatic investment plan)
o pay you for shares you sell by "redeeming in kind," that is, by giving you
marketable securities (which typically will involve brokerage costs for you
to liquidate) rather than cash; generally, the portfolio won't make a
redemption in kind unless your requests over a 90-day period total more
than $250,000 or 1% of the value of the portfolio's net assets
o change, add or withdraw various services, fees and account policies
o reject or limit purchases of shares for any reason without prior notice
o withdraw or suspend any part of the offering made by this prospectus
19 | Policies You Should Know About
<PAGE>
Understanding Distributions And Taxes
Because each shareholder's tax situation is unique, it's always a good idea to
ask your tax professional about the tax consequences of your investments,
including any state and local tax consequences.
By law, a mutual fund is required to pass through to its shareholders virtually
all of its net earnings. A portfolio can earn money in two ways: by receiving
interest, dividends or other income from securities it holds, and by selling
securities for more than it paid for them. (A fund's earnings are separate from
any gains or losses stemming from your own purchase of shares.) A portfolio may
not always pay a distribution for a given period.
The portfolios intend to declare income dividends daily, and pay them monthly.
The portfolios may make short- or long-term capital gains distributions in
October, November or December, and may make additional distributions for tax
purposes if necessary. Capital gains may be taxable at different rates depending
on the length of time the portfolio holds its assets. Exchanges of portfolio
shares or among other mutual funds may also be taxable events.
You can choose how to receive your dividends and distributions. You can have
them all automatically reinvested in fund shares (at NAV) or all sent to you by
check. Tell us your preference on your application. If you don't indicate a
preference, your dividends and distributions will all be reinvested. For
retirement plans, reinvestment is the only option.
Dividends from Tax-Exempt Portfolio are generally tax-free for most
shareholders, meaning that investors can receive them without incurring federal
income tax liability. However, there are a few exceptions:
o a portion of Tax-Exempt Portfolio's dividends may be taxable as an ordinary
income if it came from investments in taxable securities
o because Tax-Exempt Portfolio can invest up to 20% of net assets in
securities whose income is subject to the federal alternative minimum tax
(AMT), you may owe taxes on a portion of your dividends if you are among
those investors who must pay AMT
The following tables show the usual tax status of transactions in fund shares as
well as that of any taxable distribution from a portfolio:
Generally taxed at ordinary income rates
--------------------------------------------------------------------------------
o short-term capital gains from selling portfolio shares
--------------------------------------------------------------------------------
o income dividends you receive from a portfolio
--------------------------------------------------------------------------------
o short-term capital gains distributions you receive
from a portfolio
--------------------------------------------------------------------------------
Generally taxed at capital gains rates
--------------------------------------------------------------------------------
o long-term capital gains from selling fund shares
--------------------------------------------------------------------------------
o long-term capital gains distributions you receive
from a portfolio
--------------------------------------------------------------------------------
You will be sent detailed tax information every January. These statements tell
you the amount and the tax category of any dividends or distributions you
received. They also have certain details on your purchases and sales of shares.
The tax status of dividends and distributions is the same whether you reinvest
them or not. Dividends or distributions declared in the last quarter of a given
year are taxed in that year, even though you may not receive the money until the
following January.
20 | Understanding Distributions And Taxes
<PAGE>
To Get More Information
Shareholder reports -- These have detailed performance figures, a list of
everything each portfolio owns and each portfolio's financial statements.
Shareholders get these reports automatically. To reduce costs, we may mail one
copy per household. For more copies, contact your financial services firm.
Statement of Additional Information (SAI) -- This tells you more about each
portfolio's features and policies, including additional risk information. The
SAI is incorporated by reference into this document (meaning that it's legally
part of this prospectus).
If you'd like to ask for copies of these documents, please contact your
financial services firm or the SEC (see below). If you're a shareholder and have
questions, please contact your financial services firm. Materials you get from
your financial services firm are free; those from the SEC involve a copying fee.
If you like, you can look over these materials in person at the SEC's Public
Reference Room in Washington, DC, or request them electronically at
[email protected]. You can also obtain these materials by calling the
Shareholder Service Agent at (800) 231-8568, during normal business hours only.
SEC
450 Fifth Street, N.W.
Washington, DC 20549-0102
1-202-942-8090
www.sec.gov
SEC File Number
Cash Account Trust 811-5970
<PAGE>
Premium Reserve Money
Market Shares
P R O S P E C T U S
August 1, 2000
Money Market Portfolio
As with all mutual funds, the Securities and
Exchange Commission (SEC) does not approve
or disapprove these shares or determine
whether the information in this prospectus
is truthful or complete. It is a criminal
offense for anyone to inform you otherwise.
<PAGE>
Table of Contents
MONEY MARKET PORTFOLIO -- PREMIUM RESERVE MONEY MARKET SHARES
About The Portfolio
1 The Portfolio's Goal And Main Strategy
2 Main Risks To Investors
3 Performance
4 How Much Investors Pay
5 Other Policies And Risks
6 Who Manages The Portfolio
7 Financial Highlights
Your Investment In The Portfolio
8 Policies You Should Know About
11 Understanding Distributions And Taxes
<PAGE>
Money Market Portfolio
| The Portfolio's Goal And Main Strategy
The portfolio seeks maximum current income consistent with stability of capital.
The portfolio pursues its goal by investing primarily in high quality short-term
securities, as well as certain repurchase agreements.
The portfolio may buy securities from many types of issuers, including the U.S.
government, banks (both U.S. banks and U.S. branches of foreign banks),
corporations, and municipalities. The portfolio will normally invest at least
25% of total assets in bank obligations. However, everything the portfolio buys
must meet the rules for money market portfolio investments (see sidebar). In
addition, the portfolio focuses its investments on securities that are in the
top credit grade for short-term debt securities.
Working in conjunction with credit analysts, the portfolio managers screen
potential securities and develop a list of those that the portfolio may buy. The
managers then decide which securities on this list to buy, looking for
attractive yield and weighing considerations such as credit quality, economic
outlooks, and possible interest rate movements.
The managers may adjust the portfolio's exposure to interest rate risk,
typically seeking to take advantage of possible rises in interest rates and to
preserve yield when interest rates appear likely to fall.
--------------------------------------------------------------------------------
Money Fund Rules
To be called a money market fund, a mutual fund must operate within strict
federal rules. Designed to help maintain a stable $1.00 share price, these rules
limit money funds to particular types of securities. Some of the rules:
o individual securities must have remaining maturities of no more than 397
days
o the dollar-weighted average maturity of the portfolio's holdings cannot
exceed 90 days
o all securities must be in the top two credit grades for short-term debt
securities and be denominated in U.S. dollars
The Portfolio's Goal And Main Strategy | 1
<PAGE>
| Main Risks To Investors
There are several risk factors that could reduce the yield you get from the
portfolio or make it perform less well than other investments.
As with most money market portfolios, the most important factor is short-term
market interest rates. The portfolio's yield tends to reflect current interest
rates, which means that when these rates fall, the portfolio's yield generally
falls as well.
Investments by the portfolio in Eurodollar certificates of deposit issued by
London branches of U.S. banks, and different obligations issued by foreign
entities, including U.S. branches of foreign banks, involve additional risks
than investments in securities of domestic branches of U.S. banks. These risks
include, but are not limited to, future unfavorable political and economic
developments, possible withholding taxes on interest payments, seizure of
foreign deposits, currency controls, or interest limitations or other
governmental restrictions that might affect payment of principal or interest.
The market for such obligations may be less liquid and, at times, more volatile
than for securities of domestic branches of U.S. banks. Additionally, there may
be less public information available about foreign banks and their branches.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of interest rate trends,
credit quality or other factors
o the counterparty to a repurchase agreement or other transaction could
default on its obligations
o over time, the real value of the portfolio's yield may be eroded by
inflation
An investment in the portfolio is not insured or guaranteed by the FDIC or any
other government agency. Although the portfolio seeks to preserve the value of
your investments at $1.00 per share, this share price isn't guaranteed and you
could lose money by investing in the portfolio.
2 | Main Risks To Investors
<PAGE>
| Performance
The bar chart shows how the total returns for the portfolio's Service Shares
have varied from year to year, which may give some idea of risk. The table shows
how the portfolio's Service Shares returns over different periods average out.
All figures on this page assume reinvestment of dividends and distributions. As
always, past performance is no guarantee of future results.
Premium Reserve Money Market Shares do not have a full calendar year of
performance, therefore past performance data is not provided with respect to the
Premium Reserve Money Market Shares. Although Service Shares are not offered in
this prospectus, they are invested in the same portfolio of securities. Service
Shares annual returns differ only to the extent that the classes have different
fees and expenses.
--------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
5.36 2.99 2.39 3.51 5.13 4.64 4.80 4.69 4.38
1991 1992 1993 1994 1995 1996 1997 1998 1999
Best Quarter: 1.58%, Q1 1991
Worst Quarter: 0.57%, Q2 1993
Year-to-date return as of 6/30/2000: 2.62%
--------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/1999
--------------------------------------------------------------------------------
1 Year 5 Years Since Inception*
--------------------------------------------------------------------------------
4.38% 4.72% 4.23%
--------------------------------------------------------------------------------
* Inception date for the portfolio's Service Shares is December 3, 1990.
In the chart, total returns for 1991 through 1999 would have been lower if
operating expenses hadn't been reduced.
In the table, total returns from inception through 1999 would have been lower if
operating expenses hadn't been reduced.
7-day yield as of 12/31/1999: 5.05%
To find out current Premium Reserve Money Market Shares performance, including
yield information, contact your financial services firm from which you obtained
this prospectus.
Performance | 3
<PAGE>
| How Much Investors Pay
This fee table describes the fees and expenses that you may pay if you buy and
hold Premium Reserve Money Market Shares of the portfolio. This information
doesn't include any fees that may be charged by your financial services firm.
--------------------------------------------------------------------------------
Fee Table
--------------------------------------------------------------------------------
Shareholder Fees (%)
(paid directly from your investment) None
--------------------------------------------------------------------------------
Annual Operating Expenses (%)
(deducted from portfolio assets)
--------------------------------------------------------------------------------
Management Fee 0.17%
--------------------------------------------------------------------------------
Distribution (12b-1) Fee None
--------------------------------------------------------------------------------
Other Expenses* 0.51%
--------------------------------------------------------------------------------
Total Annual Operating Expenses 0.68%
--------------------------------------------------------------------------------
* Includes costs of shareholder servicing, custody and similar expenses,
which may vary with fund size and other factors.
--------------------------------------------------------------------------------
Example
--------------------------------------------------------------------------------
Based on the figures above, this example helps you compare the portfolio's
Premium Reserve Money Market Shares' expenses to those of other mutual funds.
The example assumes the expenses above remain the same you invested $10,000,
earned 5% annual returns, reinvested all dividends and distributions and sold
your shares at the end of each period. This is only an example; actual expenses
will be different.
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
$69 $218 $379 $847
--------------------------------------------------------------------------------
4 | How Much Investors Pay
<PAGE>
| Other Policies And Risks
While the previous pages describe the main points of the portfolio's strategy
and risks, there are a few other issues to know about:
o The investment advisor establishes a security's credit grade when it buys the
security, using independent ratings or, for unrated securities, its own
credit analysis. If a security's credit quality falls below the minimum
required for purchase by the portfolio, the security will be sold unless the
Board believes this would not be in the shareholders' best interests.
o This prospectus doesn't tell you about every policy or risk of investing in
the portfolio. For more information, you may want to request a copy of the
Statement of Additional Information (the last page tells you how to do this).
Keep in mind that there is no assurance that any mutual fund will achieve its
goal.
Other Policies And Risks | 5
<PAGE>
| Who Manages The Portfolio
The Investment Advisor
The portfolio's investment advisor is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY. Scudder Kemper has more than 80 years of experience
managing mutual funds and currently has more than $290 billion in assets under
management.
Scudder Kemper takes a team approach to asset management, bringing together
professionals from many investment disciplines. Supporting each team are Scudder
Kemper's many economists, research analysts, traders and other investment
specialists, located across the United States and around the world.
For serving as the portfolio's investment advisor, Scudder Kemper receives a
management fee. For the 12 months through the most recent fiscal year end, the
portfolio paid management fees of 0.17% of its average daily net assets.
The Portfolio Managers
The portfolio managers handle the day-to-day management of the portfolio.
Frank J. Rachwalski, Jr. serves as lead manager for the portfolio. Mr.
Rachwalski joined the advisor in 1973 and began his investment career at that
time. Mr. Rachwalski joined the portfolio in 1990, and has been responsible for
the trading and portfolio management of money market funds since 1974. Geoffrey
Gibbs serves as manager for the portfolio. Mr. Gibbs joined the advisor in 1996
as a trader for money market funds and began his investment career in 1994. Mr.
Gibbs joined the portfolio in 1999.
o The portfolio is managed by a team of investment professionals who work
together to develop the portfolio's investment strategies.
6 | Who Manages The Portfolio
<PAGE>
| Financial Highlights
This table is designed to help you understand the portfolio's financial
performance in recent years. The figures in the first part of the table are for
a single share. The total return figures represent the percentage that an
investor in the portfolio would have earned, assuming all dividends and
distributions were reinvested. This information has been audited by Ernst &
Young LLP, whose report, along with the portfolio's financial statements, is
included in the annual report (see "Shareholder reports" on the last page).
--------------------------------------------------------------------------------
Money Market Portfolio -- Premium Reserve Money Market Shares
--------------------------------------------------------------------------------
Years ended April 30, 2000 1999(a)
--------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.00 1.00
--------------------------------------------------------------------------------
Net investment income .05 .01
--------------------------------------------------------------------------------
Less distributions from net investment income (.05) (.01)
--------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 1.00
--------------------------------------------------------------------------------
Total Return (%) (b) 5.05 1.18**
--------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
--------------------------------------------------------------------------------
Net assets, end of period ($ thousands) 16,932 272
--------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) .68 .67*
--------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) .68 .67*
--------------------------------------------------------------------------------
Ratio of net investment income (%) 5.31 4.38*
--------------------------------------------------------------------------------
(a) For the period January 22, 1999 to April 30, 1999.
(b) Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
Financial Highlights | 7
<PAGE>
Your Investment In The Portfolio
The following pages describe the main policies associated with buying and
selling shares of the portfolio. There is also information on dividends and
taxes and other matters that may affect you as a portfolio shareholder.
Because the portfolio is available only through a financial services firm, such
as a broker or financial institution, you should contact a representative of
your financial services firm for instructions on how to buy or sell portfolio
shares.
| Policies You Should Know About
The policies below may affect you as a shareholder. In any case where materials
provided by your financial services firm contradict the information given here,
you should follow the information in your firm's materials. Please note that a
financial services firm may charge its own fees.
Keep in mind that the information in this prospectus applies only to the
portfolio's Premium Reserve Money Market Shares. The portfolio has three other
share classes, which are described in separate prospectuses and which have
different fees, requirements and services.
Policies about transactions
The portfolio is open for business each day the New York Stock Exchange is open.
Normally, the portfolio calculates its share price three times every business
day at 11:00 a.m., 1:00 p.m. and 3:00 p.m. Central time.
As noted earlier, each portfolio expects to maintain a stable $1.00 share price.
You can place an order to buy or sell shares at any time. Once your order is
received by Kemper Service Company, and they have determined that it is a "good
order," it will be processed at the next share price calculated.
8 | Policies YOu Should Know About
<PAGE>
Because orders placed through financial services firms must be forwarded to
Kemper Service Company before they can be processed, you'll need to allow extra
time. A representative of your financial services firm should be able to tell
you when your order will be processed.
Wire transactions that arrive by 1:00 p.m. Central time will receive that day's
dividend. Wire transactions received between 1:00 p.m. Central time and 3:00
p.m. Central time will start to accrue dividends the next calendar day.
Investments by check will be effective at 3:00 p.m. Central time on the business
day following receipt and will earn dividends the following calendar day.
Wire purchase orders should be directed to:
UMB Bank N.A.
ABA #101-000-695
10th and Grand Avenue
Kansas City, MO 64106
for credit to Premium Reserve Money Market Shares (98-0119-980-3) and further
credit to your money market account number.
When selling shares, you'll generally receive the dividend for the day on which
your shares were sold. If we receive a sell request before 11:00 a.m. Central
time and the request calls for proceeds to be sent out by wire, we will normally
wire you the proceeds on the same day. However you won't receive that day's
dividend.
Checkwriting lets you sell portfolio shares by writing a check. Your investment
keeps earning dividends until your check clears. Please note that you should not
write checks for less than $250 or for more than $5,000,000. Note as well that
we can't honor any check larger than your balance at the time the check is
presented to us.
When you want to sell more than $50,000 worth of shares or send the proceeds to
a third party or to a new address, you'll usually need to place your order in
writing and include a signature guarantee. The only exception is if you want
money wired to a bank account that is already on file with us; in that case, you
don't need a signature guarantee. Also, you don't need a signature guarantee for
an exchange, although we may require one in certain other circumstances.
A signature guarantee is simply a certification of your signature -- a valuable
safeguard against fraud. You can get a signature guarantee from most brokerages,
banks, savings institutions and credit unions. Note that you can't get a
signature guarantee from a notary public.
If your shares are registered directly with the portfolio's transfer agent, you
can sell them by sending a written request (with a signature guarantee) to:
Kemper Service Company
Attention: Transaction Processing
P.O. Box 219557
Kansas City, MO 64121
Policies You Should Know About | 9
<PAGE>
Money from shares you sell is normally sent out within one business day of when
your order is processed (not when it is received), although it could be delayed
for up to seven days. There are also two circumstances when it could be longer:
when you are selling shares you bought recently by check and that check hasn't
cleared yet (maximum delay: ten days) or when unusual circumstances prompt the
SEC to allow further delays.
You may obtain additional information about other ways to sell your shares by
contacting your financial services firm.
Your financial services firm may set its own minimum investments, although those
set by the portfolio are as follows:
o Minimum initial investment: $1,000
o Minimum additional investment: $100
o Minimum investment with an automatic investment plan: $50
Share Certificates are available on written request. However, we don't recommend
them unless you want them for a specific purpose, because they can only be sold
by mailing them in, and if they're ever lost they're difficult and expensive to
replace.
How the portfolio calculates share price
For the share class of the portfolio, the share price is the net asset value per
share, or NAV. To calculate NAV, the share class of the portfolio uses the
following equation:
TOTAL ASSETS - TOTAL LIABILITIES
--------------------------------- = NAV
TOTAL NUMBER OF SHARES OUTSTANDING
In valuing securities, we typically use the amortized cost method (the method
used by most money market funds).
Other rights we reserve
You should be aware that we may do any of the following:
o withhold 31% of your distributions as federal income tax if you have been
notified by the IRS that you are subject to backup withholding, or if you
fail to provide us with a correct taxpayer ID number or certification that
you are exempt from backup withholding
o reject a new account application if you don't provide a correct Social
Security or other tax ID number; if the account has already been opened, we
may give you 30 days' notice to provide the correct number
o close your account and send you the proceeds if your balance falls below
$1,000; we will give you 60 days' notice so you can either increase your
balance or close your account (this policy doesn't apply to most retirement
accounts or if you have an automatic investment plan)
o pay you for shares you sell by "redeeming in kind," that is, by giving you
marketable securities (which typically will involve brokerage costs for you
to liquidate) rather than cash; generally, the portfolio won't make a
redemption in kind unless your requests over a 90-day period total more than
$250,000 or 1% of the value of the portfolio's net assets
o change, add or withdraw various services, fees and account policies
o reject or limit purchases of shares for any reason without prior notice
o withdraw or suspend any part of the offering made by this prospectus
10 | Policies You Should Know About
<PAGE>
| Understanding Distributions And Taxes
Because each shareholder's tax situation is unique, it's always a good idea to
ask your tax professional about the tax consequences of your investments,
including any state and local tax consequences.
By law, a mutual fund is required to pass through to its shareholders virtually
all of its net earnings. The portfolio can earn money in two ways: by receiving
interest, dividends or other income from securities it holds, and by selling
securities for more than it paid for them. (The portfolio's earnings are
separate from any gains or losses stemming from your own purchase of shares.)
The portfolio may not always pay a distribution for a given period.
The portfolio intends to declare income dividends daily, and pay them monthly.
The portfolio may make short- or long-term capital gains distributions in
October, November or December, and may make additional distributions for tax
purposes if necessary. Capital gains may be taxable at different rates depending
on the length of time the portfolio holds its assets. Exchanges of portfolio
shares or among other mutual funds may also be taxable events.
You can choose how to receive your dividends and distributions. You can have
them all automatically reinvested in fund shares (at NAV) or all sent to you by
check. Tell us your preference on your application. If you don't indicate a
preference, your dividends and distributions will all be reinvested. For
retirement plans, reinvestment is the only option.
The following tables show the usual tax status of transactions in fund shares as
well as that of any taxable distribution from a portfolio:
Generally taxed at ordinary income rates
--------------------------------------------------------------------------------
o short-term capital gains from selling portfolio shares
--------------------------------------------------------------------------------
o income dividends you receive from the portfolio
--------------------------------------------------------------------------------
o short-term capital gains distributions you receive from the portfolio
--------------------------------------------------------------------------------
Generally taxed at capital gains rates
--------------------------------------------------------------------------------
o long-term capital gains from selling portfolio shares
--------------------------------------------------------------------------------
o long-term capital gains distributions you receive from the portfolio
--------------------------------------------------------------------------------
You will be sent detailed tax information every January. These statements tell
you the amount and the tax category of any dividends or distributions you
received. They also have certain details on your purchases and sales of shares.
The tax status of dividends and distributions is the same whether you reinvest
them or not. Dividends or distributions declared in the last quarter of a given
year are taxed in that year, even though you may not receive the money until the
following January.
Understanding Distributions And Taxes | 11
<PAGE>
| To Get More Information
Shareholder reports -- These have detailed performance figures, a list of
everything the portfolio owns and the portfolio's financial statements.
Shareholders get these reports automatically. To reduce costs, we may mail one
copy per household. For more copies, contact your financial services firm.
Statement of Additional Information (SAI) -- This tells you more about the
portfolio's features and policies, including additional risk information. The
SAI is incorporated by reference into this document (meaning that it's legally
part of this prospectus).
If you'd like to ask for copies of these documents, please contact your
financial services firm or the SEC (see below). If you're a shareholder and have
questions, please contact your financial services firm. Materials you get from
your financial services firm are free; those from the SEC involve a copying fee.
If you like, you can look over these materials in person at the SEC's Public
Reference Room in Washington, DC, or request them electronically at
[email protected]. You can also obtain these materials by calling the
Shareholder Service Agent at (800) 231-8568, during normal business hours only.
SEC
450 Fifth Street, N.W.
Washington, DC 20549-0102
1-202-942-8090
www.sec.gov
SEC File Number
Cash Account Trust 811-5970
<PAGE>
Institutional Money
Market Shares
P R O S P E C T U S
August 1, 2000
Money Market Portfolio
As with all mutual funds, the Securities and Exchange Commission
(SEC) does not approve or disapprove these shares or determine
whether the information in this prospectus is truthful or
complete. It is a criminal offense for anyone to inform you
otherwise.
<PAGE>
Table of Contents
MONEY MARKET PORTFOLIO -- INSTITUTIONAL MONEY MARKET SHARES
About The Portfolio
1 The Portfolio's Goal And Main Strategy
2 Main Risks To Investors
3 Performance
4 How Much Investors Pay
5 Other Policies And Risks
6 Who Manages The Portfolio
7 Financial Highlights
Your Investment In The Portfolio
8 Policies You Should Know About
11 Understanding Distributions And Taxes
<PAGE>
Money Market Portfolio
| The Portfolio's Goal And Main Strategy
The portfolio seeks maximum current income consistent with stability of capital.
The portfolio pursues its goal by investing primarily in high quality short-term
securities, as well as certain repurchase agreements.
The portfolio may buy securities from many types of issuers, including the U.S.
government, banks (both U.S. banks and U.S. branches of foreign banks),
corporations, and municipalities. The portfolio will normally invest at least
25% of total assets in bank obligations. However, everything the portfolio buys
must meet the rules for money market portfolio investments (see sidebar). In
addition, the portfolio focuses its investments on securities that are in the
top credit grade for short-term debt securities.
Working in conjunction with credit analysts, the portfolio managers screen
potential securities and develop a list of those that the portfolio may buy. The
managers then decide which securities on this list to buy, looking for
attractive yield and weighing considerations such as credit quality, economic
outlooks, and possible interest rate movements.
The managers may adjust the portfolio's exposure to interest rate risk,
typically seeking to take advantage of possible rises in interest rates and to
preserve yield when interest rates appear likely to fall.
--------------------------------------------------------------------------------
Money Fund Rules
To be called a money market fund, a mutual fund must operate within strict
federal rules. Designed to help maintain a stable $1.00 share price, these rules
limit money funds to particular types of securities. Some of the rules:
o individual securities must have remaining maturities of no more than 397
days
o the dollar-weighted average maturity of the portfolio's holdings cannot
exceed 90 days
o all securities must be in the top two credit grades for short-term debt
securities and be denominated in U.S. dollars
The Portfolio's Goal And Main Strategy | 1
<PAGE>
| Main Risks To Investors
There are several risk factors that could reduce the yield you get from the
portfolio or make it perform less well than other investments.
As with most money market portfolios, the most important factor is short-term
market interest rates. The portfolio's yield tends to reflect current interest
rates, which means that when these rates fall, the portfolio's yield generally
falls as well.
Investments by the portfolio in Eurodollar certificates of deposit issued by
London branches of U.S. banks, and different obligations issued by foreign
entities, including U.S. branches of foreign banks, involve additional risks
than investments in securities of domestic branches of U.S. banks. These risks
include, but are not limited to, future unfavorable political and economic
developments, possible withholding taxes on interest payments, seizure of
foreign deposits, currency controls, or interest limitations or other
governmental restrictions that might affect payment of principal or interest.
The market for such obligations may be less liquid and, at times, more volatile
than for securities of domestic branches of U.S. banks. Additionally, there may
be less public information available about foreign banks and their branches.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of interest rate trends,
credit quality or other factors
o the counterparty to a repurchase agreement or other transaction could
default on its obligations
o over time, the real value of the portfolio's yield may be eroded by
inflation
An investment in the portfolio is not insured or guaranteed by the FDIC or any
other government agency. Although the portfolio seeks to preserve the value of
your investment at $1.00 per share, this share price isn't guaranteed and you
could lose money by investing in the portfolio.
2 | Main Risks To Investors
<PAGE>
| Performance
The bar chart shows how the total returns for the portfolio's Service Shares
have varied from year to year, which may give some idea of risk. The table shows
how the portfolio's Service Shares returns over different periods average out.
All figures on this page assume reinvestment of dividends and distributions. As
always, past performance is no guarantee of future results.
Institutional Money Market Shares do not have a full calendar year of
performance, therefore past performance data is not provided with respect to
Institutional Money Market Shares. Although Service Shares are not offered in
this prospectus, they are invested in the same portfolio of securities. Service
Shares annual returns differ only to the extent that the classes have different
fees and expenses.
--------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
5.36 2.99 2.39 3.51 5.13 4.64 4.80 4.69 4.38
1991 1992 1993 1994 1995 1996 1997 1998 1999
Best Quarter: 1.58%, Q1 1991
Worst Quarter: 0.57%, Q2 1993
Year-to-date return as of 6/30/2000: 2.62%
--------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/1999
--------------------------------------------------------------------------------
1 Year 5 Years Since Inception*
--------------------------------------------------------------------------------
4.38% 4.72% 4.23%
--------------------------------------------------------------------------------
* Inception date for the portfolio's Service Shares is December 3, 1990.
In the chart, total returns for 1991 through 1999 would have been lower if
operating expenses hadn't been reduced.
In the table, total returns from inception through 1999 would have been lower if
operating expenses hadn't been reduced.
7-day yield as of 12/31/1999: 5.05%
To find out current Institutional Money Market Shares performance, including
yield information, contact your financial services firm from which you obtained
this prospectus.
Performance | 3
<PAGE>
| How Much Investors Pay
This fee table describes the fees and expenses that you may pay if you buy and
hold Institutional Money Market Shares of the portfolio. This information
doesn't include any fees that may be charged by your financial services firm.
--------------------------------------------------------------------------------
Fee Table
--------------------------------------------------------------------------------
Shareholder Fees (%) None
(paid directly from your investment)
--------------------------------------------------------------------------------
Annual Operating Expenses (%)
(deducted from portfolio assets)
--------------------------------------------------------------------------------
Management Fee 0.17%
--------------------------------------------------------------------------------
Distribution (12b-1) Fee None
--------------------------------------------------------------------------------
Other Expenses* 0.12%
--------------------------------------------------------------------------------
Total Annual Operating Expenses 0.29%
--------------------------------------------------------------------------------
Expense Reimbursement** 0.04%
--------------------------------------------------------------------------------
Net Expenses** 0.25%
--------------------------------------------------------------------------------
* Includes costs of shareholder servicing, custody and similar expenses,
which may vary with fund size and other factors.
** By contract, total annual operating expenses are capped at 0.25% through
July 31, 2001.
--------------------------------------------------------------------------------
Example
--------------------------------------------------------------------------------
Based on the figures above (including one year of capped expenses), this example
helps you compare the portfolio's Institutional Money Market Shares' expenses to
those of other mutual funds. The example assumes the expenses above remain the
same, that you invested $10,000, earned 5% annual returns, reinvested all
dividends and distributions and sold your shares at the end of each period. This
is only an example; actual expenses will be different.
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------
$26 $89 $159 $364
--------------------------------------------------------------------------
4 | How Much Investors Pay
<PAGE>
| Other Policies And Risks
While the previous pages describe the main points of the portfolio's strategy
and risks, there are a few other issues to know about:
o The investment advisor establishes a security's credit grade when it buys the
security, using independent ratings or, for unrated securities, its own
credit analysis. If a security's credit quality falls below the minimum
required for purchase by a portfolio, the security will be sold unless the
Board believes this would not be in the shareholders' best interests.
o This prospectus doesn't tell you about every policy or risk of investing in
the portfolio. For more information, you may want to request a copy of the
Statement of Additional Information (the last page tells you how to do this).
Keep in mind that there is no assurance that any mutual fund will achieve its
goal.
Other Policies And Risks | 5
<PAGE>
| Who Manages The Portfolio
The Investment Advisor
The portfolio's investment advisor is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY. Scudder Kemper has more than 80 years of experience
managing mutual funds and currently has more than $290 billion in assets under
management.
Scudder Kemper takes a team approach to asset management, bringing together
professionals from many investment disciplines. Supporting each team are Scudder
Kemper's many economists, research analysts, traders and other investment
specialists, located across the United States and around the world.
For serving as the portfolio's investment advisor, Scudder Kemper receives a
management fee. For the 12 months through the most recent fiscal year end, the
portfolio paid management fees of 0.17% of its average daily net assets.
The Portfolio Managers
The portfolio managers handle the day-to-day management of the portfolio.
Frank J. Rachwalski, Jr. serves as lead manager for the portfolio. Mr.
Rachwalski joined the advisor in 1973 and began his investment career at that
time. Mr. Rachwalski joined the portfolio in 1990, and has been responsible for
the trading and portfolio management of money market funds since 1974. Geoffrey
Gibbs serves as manager for the portfolio. Mr. Gibbs joined the advisor in 1996
as a trader for money market funds and began his investment career in 1994. Mr.
Gibbs joined the portfolio in 1999.
o The portfolio is managed by a team of investment professionals who work
together to develop the portfolio's investment strategies.
6 | Who Manages The Portfolio
<PAGE>
| Financial Highlights
This table is designed to help you understand the portfolio's financial
performance in recent years. The figures in the first part of the table are for
a single share. The total return figures represent the percentage that an
investor in the portfolio would have earned, assuming all dividends and
distributions were reinvested. This information has been audited by Ernst &
Young LLP, whose report, along with the portfolio's financial statements, is
included in the annual report (see "Shareholder reports" on the last page).
--------------------------------------------------------------------------------
Money Market Portfolio -- Institutional Money Market Shares
--------------------------------------------------------------------------------
Years ended April 30, 2000 1999(a)
--------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.00 1.00
--------------------------------------------------------------------------------
Net investment income .05 .01
--------------------------------------------------------------------------------
Less distributions from net investment income (.05) (.01)
--------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 1.00
--------------------------------------------------------------------------------
Total Return (%) (b) 5.50 1.29
--------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
--------------------------------------------------------------------------------
Net assets, end of period ($ thousands) 182,974 102
--------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) .29 .28
--------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) .25 .25
--------------------------------------------------------------------------------
Ratio of net investment income (%) 5.58 4.75
--------------------------------------------------------------------------------
(a) For the period January 22, 1999 to April 30, 1999.
(b) Total return would have been lower had certain expenses not been reduced.
Financial Highlights | 7
<PAGE>
Your Investment In The Portfolio
The following pages describe the main policies associated with buying and
selling shares of the portfolio. There is also information on dividends and
taxes and other matters that may affect you as a portfolio shareholder.
Because the portfolio is available only through a financial services firm, such
as a broker or financial institution, you should contact a representative of
your financial services firm for instructions on how to buy or sell portfolio
shares.
| Policies You Should Know About
The policies below may affect you as a shareholder. In any case where materials
provided by your financial services firm contradict the information given here,
you should follow the information in your firm's materials. Please note that a
financial services firm may charge its own fees.
Keep in mind that the information in this prospectus applies only to the
portfolio's Institutional Money Market Shares. The portfolio has three other
share classes, which are described in separate prospectuses and which have
different fees, requirements and services.
Policies about transactions
The portfolio is open for business each day the New York Stock Exchange is open.
Normally, the portfolio calculates its share price three times every business
day at 11:00 a.m., 1:00 p.m. and 3:00 p.m. Central time.
As noted earlier, the portfolio expects to maintain a stable $1.00 share price.
You can place an order to buy or sell shares at any time. Once your order is
received by Kemper Service Company, and they have determined that it is a "good
order," it will be processed at the next share price calculated.
8 | Policies You Should Know About
<PAGE>
Because orders placed through financial services firms must be forwarded to
Kemper Service Company before they can be processed, you'll need to allow extra
time. A representative of your financial services firm should be able to tell
you when your order will be processed.
Orders to buy shares of the portfolio will be accepted only by wire transfer in
the form of Federal Funds. Wire transactions that arrive by 1:00 p.m. Central
time will receive that day's dividend. Wire transactions received between 1:00
p.m. Central time and 3:00 p.m. Central time will start to accrue dividends the
next calendar day.
Wire purchase orders should be directed to:
UMB Bank N.A.
A.B.A.# 101-000-695
10th and Grand Avenue
Kansas City, MO 64106
for credit to Institutional Money Market Shares (146: 98-0119-980-3) and further
credit to your money market account number.
When selling shares, you'll generally receive the dividend for the day on which
your shares were sold. If we receive a sell request before 11:00 a.m. Central
time and the request calls for proceeds to be sent out by wire, we will normally
wire you the proceeds on the same day. However you won't receive that day's
dividend.
When you want to sell more than $50,000 worth of shares or send the proceeds to
a third party or to a new address, you'll usually need to place your order in
writing and include a signature guarantee. The only exception is if you want
money wired to a bank account that is already on file with us; in that case, you
don't need a signature guarantee. Also, you don't need a signature guarantee for
an exchange, although we may require one in certain other circumstances.
A signature guarantee is simply a certification of your signature -- a valuable
safeguard against fraud. You can get a signature guarantee from most brokerages,
banks, savings institutions and credit unions. Note that you can't get a
signature guarantee from a notary public.
If your shares are registered directly with the portfolio's transfer agent, you
can sell them by sending a written request (with a signature guarantee) to:
Kemper Service Company
Attention: Transaction Processing
P.O. Box 219557
Kansas City, MO 64121
Policies You Should Know About | 9
<PAGE>
Money from shares you sell is normally sent out within one business day of when
your order is processed (not when it is received), although it could be delayed
for up to seven days. There are also two circumstances when it could be longer:
when you are selling shares you bought recently by check and that check hasn't
cleared yet (maximum delay: ten days) or when unusual circumstances prompt the
SEC to allow further delays.
You may obtain additional information about other ways to sell your shares by
contacting your financial services firm.
Your financial services firm may set its own minimum investments, although the
minimum initial investment set by the portfolio is $250,000.
Share certificates are available on written request. However, we don't recommend
them unless you want them for a specific purpose, because they can only be sold
by mailing them in, and if they're ever lost they're difficult and expensive to
replace.
How the portfolio calculates share price
For the share class of the portfolio, the share price is the net asset value per
share, or NAV. To calculate NAV, the share class of the portfolio uses the
following equation:
TOTAL ASSETS - TOTAL LIABILITIES
--------------------------------- = NAV
TOTAL NUMBER OF SHARES OUTSTANDING
In valuing securities, we typically use the amortized cost method (the method
used by most money market funds).
Other rights we reserve
You should be aware that we may do any of the following:
o withhold 31% of your distributions as federal income tax if you have been
notified by the IRS that you are subject to backup withholding, or if you
fail to provide us with a correct taxpayer ID number or certification that
you are exempt from backup withholding
o reject a new account application if you don't provide a correct Social
Security or other tax ID number; if the account has already been opened, we
may give you 30 days' notice to provide the correct number
o close your account and send you the proceeds if your balance falls below
$100,000; we will give you 60 days' notice so you can either increase your
balance or close your account (this policy doesn't apply to most retirement
accounts)
o pay you for shares you sell by "redeeming in kind," that is, by giving you
marketable securities (which typically will involve brokerage costs for you
to liquidate) rather than cash; generally, the portfolio won't make a
redemption in kind unless your requests over a 90-day period total more than
$250,000 or 1% of the value of the portfolio's net assets
o change, add or withdraw various services, fees and account policies
o reject or limit purchases of shares for any reason without prior notice
o withdraw or suspend any part of the offering made by this prospectus
10 | Policies You Should Know About
<PAGE>
| Understanding Distributions And Taxes
Because each shareholder's tax situation is unique, it's always a good idea to
ask your tax professional about the tax consequences of your investments,
including any state and local tax consequences.
By law, a mutual fund is required to pass through to its shareholders virtually
all of its net earnings. The portfolio can earn money in two ways: by receiving
interest, dividends or other income from securities it holds, and by selling
securities for more than it paid for them. (The portfolio's earnings are
separate from any gains or losses stemming from your own purchase of shares.)
The portfolio may not always pay a distribution for a given period.
The portfolio intends to declare income dividends daily, and pay them monthly.
The portfolio may make short- or long-term capital gains distributions in
October, November or December, and may make additional distributions for tax
purposes if necessary. Capital gains may be taxable at different rates depending
on the length of time the portfolio holds its assets. Exchanges of portfolio
shares or among other mutual funds may also be taxable events.
You can choose how to receive your dividends and distributions. You can have
them all automatically reinvested in fund shares (at NAV) or all sent to you by
check. Tell us your preference on your application. If you don't indicate a
preference, your dividends and distributions will all be reinvested. For
retirement plans, reinvestment is the only option.
The following tables show the usual tax status of transactions in fund shares as
well as that of any taxable distribution from the portfolio:
Generally taxed at ordinary income rates
--------------------------------------------------------------------------------
o short-term capital gains from selling portfolio shares
--------------------------------------------------------------------------------
o income dividends you receive from the portfolio
--------------------------------------------------------------------------------
o short-term capital gains distributions you receive from the portfolio
--------------------------------------------------------------------------------
Generally taxed at capital gains rates
--------------------------------------------------------------------------------
o long-term capital gains from selling portfolio shares
--------------------------------------------------------------------------------
o long-term capital gains distributions you receive from the portfolio
--------------------------------------------------------------------------------
You will be sent detailed tax information every January. These statements tell
you the amount and the tax category of any dividends or distributions you
received. They also have certain details on your purchases and sales of shares.
The tax status of dividends and distributions is the same whether you reinvest
them or not. Dividends or distributions declared in the last quarter of a given
year are taxed in that year, even though you may not receive the money until the
following January.
Understanding Distributions And Taxes | 11
<PAGE>
| To Get More Information
Shareholder reports -- These have detailed performance figures, a list of
everything the portfolio owns and the portfolio's financial statements.
Shareholders get these reports automatically. To reduce costs, we may mail one
copy per household. For more copies, contact your financial services firm.
Statement of Additional Information (SAI) -- This tells you more about the
portfolio's features and policies, including additional risk information. The
SAI is incorporated by reference into this document (meaning that it's legally
part of this prospectus).
If you'd like to ask for copies of these documents, please contact your
financial services firm or the SEC (see below). If you're a shareholder and have
questions, please contact your financial services firm. Materials you get from
your financial services firm are free; those from the SEC involve a copying fee.
If you like, you can look over these materials in person at the SEC's Public
Reference Room in Washington, DC, or request them electronically at
[email protected]. You can also obtain these materials by calling the
Shareholder Service Agent at (800) 231-8568, during normal business hours only.
SEC
450 Fifth Street, N.W.
Washington, DC 20549-0102
1-202-942-8090
www.sec.gov
SEC File Number
Cash Account Trust 811-5970
<PAGE>
SCUDDER
INVESTMENTS(SM)
[LOGO]
Tax-Exempt Portfolio
Tax-Exempt Cash
Managed Shares
Fund #248
Prospectus
August 1, 2000
As with all mutual funds, the Securities and Exchange Commission (SEC) does not
approve or disapprove these shares or determine whether the information in this
prospectus is truthful or complete. It is a criminal offense for anyone to
inform you otherwise.
<PAGE>
Table of Contents
TAX-EXEMPT PORTFOLIO -- TAX-EXEMPT CASH MANAGED SHARES
About The Portfolio
1 The Portfolio's Goal And
Main Strategy
2 Main Risks To Investors
3 Performance
4 How Much Investors Pay
5 Other Policies And Risks
5 Who Manages The Portfolio
6 Financial Highlights
Your Investment In The Portfolio
7 Policies You Should Know About
8 How To Buy Shares
9 How To Sell Shares
12 Understanding Distributions
And Taxes
<PAGE>
Tax-Exempt Portfolio
| The Portfolio's Goal And Main Strategy
The portfolio seeks to provide maximum current income that is exempt from
Federal income taxes to the extent consistent with stability of capital.
The portfolio seeks to provide income exempt from regular federal income tax and
stability of principal through investments in high quality short-term municipal
securities. The portfolio normally invests at least 80% of net assets in
municipal securities, the income from which is free from regular federal income
tax and from alternative minimum tax (AMT).
The portfolio may buy many types of municipal securities, including industrial
development bonds, but all must meet the rules for money market portfolio
investments (see sidebar). In addition, the portfolio focuses its investments on
securities that are in the top credit grade for short-term debt securities.
Working in conjunction with credit analysts, the portfolio managers screen
potential securities and develop a list of those that the portfolio may buy. The
managers then decide which securities on this list to buy, looking for
attractive yield and weighing considerations such as credit quality, economic
outlooks, and possible interest rate movements.
The managers may adjust the portfolio's exposure to interest rate risk,
typically seeking to take advantage of possible rises in interest rates and to
preserve yield when interest rates appear likely to fall.
--------------------------------------------------------------------------------
Money Fund Rules
To be called a money market fund, a mutual fund must operate within strict
federal rules. Designed to help maintain a stable $1.00 share price, these rules
limit money funds to particular types of securities. Some of the rules:
o individual securities must have remaining maturities of no more than 397
days
o the dollar-weighted average maturity of the portfolio's holdings cannot
exceed 90 days
o all securities must be in the top two credit grades for short-term debt
securities and be denominated in U.S. dollars
The Portfolio's Goal And Main Strategy | 1
<PAGE>
| Main Risks To Investors
There are several risk factors that could reduce the yield you get from the
portfolio or make it perform less well than other investments.
As with most money market portfolios, the most important factor is short-term
market interest rates. The portfolio's yield tends to reflect current interest
rates, which means that when these rates fall, the portfolio's yield generally
falls as well.
The municipal securities market is narrower and less liquid, with fewer
investors, issuers and market makers, than the taxable securities market. The
more limited marketability of municipal securities may make it more difficult in
certain circumstances to dispose of large investments advantageously.
Industrial development bonds, which are municipal securities, generally do not
constitute the pledge of the credit of the issuer of such bonds. The portfolio
may invest all or any part of its assets in municipal securities that are
industrial development bonds.
To the extent that the portfolio invests in taxable securities, a portion of its
income would be taxable.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of interest rate trends,
credit quality or other factors
o the counterparty to a repurchase agreement or other transaction could
default on its obligations
o political or legal actions could change the way the portfolio's dividends
are taxed, particularly in certain states or localities
o over time, the real value of the portfolio's yield may be eroded by
inflation
An investment in the portfolio is not insured or guaranteed by the FDIC or any
other government agency. Although the portfolio seeks to preserve the value of
your investment at $1.00 per share, this share price isn't guaranteed and you
could lose money by investing in the portfolio.
2 | Main Risks To Investors
<PAGE>
| Performance
The bar chart shows how the total returns for the portfolio's Service Shares
have varied from year to year, which may give some idea of risk. The table shows
how the portfolio's Service Shares returns over different periods average out.
All figures on this page assume reinvestment of dividends and distributions. As
always, past performance is no guarantee of future results.
Managed Shares do not have a full calendar year of performance, therefore past
performance data is not provided with respect to the Managed Shares. Although
Service Shares are not offered in this prospectus, they are invested in the same
portfolio of securities. Service Shares annual returns differ only to the extent
that the classes have different fees and expenses.
--------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
3.91 2.42 1.84 2.32 3.32 2.85 2.90 2.70 2.42
1991 1992 1993 1994 1995 1996 1997 1998 1999
Best Quarter: 0.98%, Q1 1991
Worst Quarter: 0.44%, Q1 1994
Year-to-date return as of 6/30/2000: 1.56%
--------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/1999
--------------------------------------------------------------------------------
1 Year 5 Years Since Inception*
---------------------------------------------------
2.42% 2.84% 2.76%
---------------------------------------------------
* Inception date for the portfolio's Service Shares is December 3, 1990.
In the chart, total returns for 1991 through 1999 would have been lower if
operating expenses hadn't been reduced.
In the table, total returns from inception through 1999 would have been lower if
operating expenses hadn't been reduced.
7-day yield as of 12/31/1999: 3.29%
To find out current Managed Shares performance, including yield information,
contact your financial services firm from which you obtained this prospectus.
Performance | 3
<PAGE>
| How Much Investors Pay
This fee table describes the fees and expenses that you may pay if you buy and
hold Managed Shares of the portfolio. This information doesn't include any fees
that may be charged by your financial services firm.
--------------------------------------------------------------------------------
Fee Table
--------------------------------------------------------------------------------
Shareholder Fees (%)
(paid directly from your investment) None
--------------------------------------------------------------------------------
Annual Operating Expenses (%)
(deducted from portfolio assets)
--------------------------------------------------------------------------------
Management Fee 0.17%
--------------------------------------------------------------------------------
Distribution (12b-1) Fee None
--------------------------------------------------------------------------------
Other Expenses* 0.31%
--------------------------------------------------------------------------------
Total Annual Operating Expenses 0.48%
--------------------------------------------------------------------------------
* Includes costs of shareholder servicing, custody and similar expenses, which
may vary with fund size and other factors.
--------------------------------------------------------------------------------
Example
--------------------------------------------------------------------------------
Based on the figures above, this example helps you compare this portfolio's
Managed Shares' expenses to those of other mutual funds. The example assumes the
expenses above remain the same, that you invested $10,000, earned 5% annual
returns, reinvested all dividends and distributions and sold your shares at the
end of each period. This is only an example; actual expenses will be different.
1 Year 3 Years 5 Years 10 Years
------------------------------------------------------
$49 $154 $269 $604
------------------------------------------------------
4 | How Much Investors Pay
<PAGE>
| Other Policies And Risks
While the previous pages describe the main points of the portfolio's strategy
and risks, there are a few other issues to know about:
o As a temporary defensive measure, the portfolio could invest in taxable money
market securities. This would mean that the portfolio was not pursuing its
goal.
o The investment advisor establishes a security's credit grade when it buys the
security, using independent ratings or, for unrated securities, its own
credit analysis. If a security's credit quality falls below the minimum
required for purchase by the portfolio, the security will be sold unless the
Board believes this would not be in the shareholders' best interests.
o This prospectus doesn't tell you about every policy or risk of investing in
the portfolio. For more information, you may want to request a copy of the
Statement of Additional Information (the last page tells you how to do this).
Keep in mind that there is no assurance that any mutual fund will achieve its
goal.
| Who Manages The Portfolio
The Investment Advisor
The portfolio's investment advisor is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY. Scudder Kemper has more than 80 years of experience
managing mutual funds and currently has more than $290 billion in assets under
management.
Scudder Kemper takes a team approach to asset management, bringing together
professionals from many investment disciplines. Supporting each team are Scudder
Kemper's many economists, research analysts, traders and other investment
specialists, located across the United States and around the world.
For serving as the portfolio's investment advisor, Scudder Kemper receives a
management fee. For the 12 months through the most recent fiscal year end, the
portfolio paid management fees of 0.17% of its average daily net assets.
The Portfolio Managers
The portfolio managers handle the day-to-day management of the portfolio.
Frank J. Rachwalski, Jr. serves as lead manager for the portfolio. Mr.
Rachwalski joined the advisor in 1973 and began his investment career at that
time. Mr. Rachwalski joined the portfolio in 1990, and has been responsible for
the trading and portfolio management of money market funds since 1974. Jerri I.
Cohen serves as a manager to the portfolio. Ms. Cohen joined the advisor in 1981
as an accountant and began her investment career in 1992 as a money market
trader. Ms. Cohen joined the portfolio in 1998.
O The portfolio is managed by a team of investment professionals who work
together to develop the portfolio's investment strategies.
Other Policies And Risks | 5
<PAGE>
| Financial Highlights
This table is designed to help you understand the portfolio's financial
performance in recent years. The figures in the first part of the table are for
a single share. The total return figures represent the percentage that an
investor in the portfolio would have earned, assuming all dividends and
distributions were reinvested. This information has been audited by Ernst &
Young LLP, whose report, along with the portfolio's financial statements, is
included in the annual report (see "Shareholder reports" on the last page).
--------------------------------------------------------------------------------
Tax-Exempt Portfolio -- Managed Shares
--------------------------------------------------------------------------------
Period ended April 30, 2000(a)
--------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.00
--------------------------------------------------------------------------------
Net investment income .02
--------------------------------------------------------------------------------
Less distributions from net investment income (.02)
--------------------------------------------------------------------------------
Net asset value, end of period $ 1.00
--------------------------------------------------------------------------------
Total Return (%) (b) 1.24**
--------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
--------------------------------------------------------------------------------
Net assets, end of period ($ thousands) 131,325
--------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) .48*
--------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) .48*
--------------------------------------------------------------------------------
Ratio of net investment income (%) 3.34*
--------------------------------------------------------------------------------
(a) For the period November 17, 1999 to April 30, 2000.
(b) Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
6 | Financial Highlights
<PAGE>
Your Investment In The Portfolio
The following pages describe the main policies associated with buying and
selling shares of the portfolio. There is also information on dividends and
taxes and other matters that may affect you as a portfolio shareholder.
Because this portfolio is available only through a financial services firm, such
as a broker or financial institution, you should contact a representative of
your financial services firm for instructions on how to buy or sell portfolio
shares.
| Policies You Should Know About
The policies below may affect you as a shareholder. In any case where materials
provided by your financial services firm contradict the information given here,
you should follow the information in your firm's materials. Please note that a
financial services firm may charge its own fees.
Keep in mind that the information in this prospectus applies only to the
portfolio's Managed Shares. The portfolio has three other share classes, which
are described in separate prospectuses and which have different fees,
requirements and services.
Policies You Should Know About | 7
<PAGE>
| How To Buy Shares
Use these instructions to make investments.
<TABLE>
<CAPTION>
Buying shares First investment Additional investments
-------------------------------------------------------------------------------------
<S> <C> <C>
$100,000 or more for all accounts $1,000 or more for regular
accounts
$100 or more for IRAs
$50 or more with an
automatic investment plan
-------------------------------------------------------------------------------------
By wire o Call (800) 537-3177 to open an o Instruct the wiring bank
account and get an account number to transmit the specified
amount to UMB Bank, N.A.
o Instruct wiring bank to transmit with the information
the specified amount to: stated to the left.
UMB Bank, N.A.
10th and Grand Avenue
Kansas City, Missouri 64106
ABA Number 101000695
DDA #248:9801199854
Attention: Tax-Exempt Portfolio
Managed Shares
Account (name(s) in which
registered)
Account Number and amount
invested in the portfolio
o Complete a purchase application
and send it to us at the address
below
-------------------------------------------------------------------------------------
By mail or o Fill out and sign a purchase o Send a check and a letter
express mail application with your name, account
(see below) number, the full name of
o Send it to us at the address the portfolio and class,
below, along with an investment and your investment
check made out to "Tax-Exempt instructions to us at the
Portfolio" address below
-------------------------------------------------------------------------------------
With an -- o To set up regular
automatic investments, call
investment plan (800) 537-3177
-------------------------------------------------------------------------------------
Regular, express, Kemper Service Company, Institutional Funds Client Services
registered, or 222 South Riverside Plaza, 33rd Floor
certified mail: Chicago, IL 60606
-------------------------------------------------------------------------------------
Fax number: (800) 537-9960
-------------------------------------------------------------------------------------
E-Mail address: [email protected]
-------------------------------------------------------------------------------------
</TABLE>
8 | How To Buy Shares
<PAGE>
| How To Sell Shares
Use these instructions to sell shares in your account.
Selling shares
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
<S> <C>
By Expedited If Expedited Redemption Service has been elected on the Purchase
Redemption Application on file with the Transfer Agent, redemption of
Service shares may be requested by:
o telephoning Client Services at (800) 537-3177
o faxing a request to (800) 537-9960
-------------------------------------------------------------------------------------
By mail, express Write a letter that includes:
mail or fax
o the portfolio, class, and account number from which you want
to sell shares
o the dollar amount or number of shares you want to sell o
your name(s), signature(s), and address, as they appear on
your account
o a daytime telephone number
Mail the letter to:
Kemper Service Company
Institutional Funds Client Services
222 South Riverside Plaza, 33rd Floor
Chicago, IL 60606
or fax to:
(800) 537-9960
-------------------------------------------------------------------------------------
By phone o Call (800) 537-3177 for instructions
-------------------------------------------------------------------------------------
With an automatic o To set up regular cash payments from your account, call
investment plan (800) 537-3177
-------------------------------------------------------------------------------------
Using Checkwriting o Call (800) 537-3177
-------------------------------------------------------------------------------------
</TABLE>
How To Sell Shares | 9
<PAGE>
Policies about transactions
The portfolio is open for business each day the New York Stock Exchange is open.
Normally, the portfolio calculates its share price every business day at 12:00
noon Eastern time and 4:00 p.m. Eastern time.
As noted earlier, the portfolio expects to maintain a stable $1.00 share price.
You can place an order to buy or sell shares at any time. Once your order is
received by Kemper Service Company, and they have determined that it is a "good
order," it will be processed at the next share price calculated.
Because orders placed through financial services firms must be forwarded to
Kemper Service Company before they can be processed, you'll need to allow extra
time. A representative of your financial services firm should be able to tell
you when your order will be processed.
Wire transactions that arrive by 12:00 noon Eastern time will receive that day's
dividend. Wire transactions received between 12:00 noon Eastern time and 4:00
p.m. Eastern time will start to accrue dividends the next calendar day.
Investments by check will be effective at 4:00 p.m. Eastern time on the business
day following receipt and will earn dividends the following calendar day. If
possible, those arriving after 12:00 noon Eastern time but before 4:00 p.m.
Eastern time will be processed that day as well. If an order is accompanied by a
check drawn on a foreign bank, funds must normally be collected on such check
before shares of the portfolio will be purchased.
When selling shares, you'll generally receive the dividend for the day on which
your shares were sold. If we receive a sell request before 12:00 noon Eastern
time and the request calls for proceeds to be sent out by wire, we will normally
wire you the proceeds on the same day. However you won't receive that day's
dividend.
Expedited Redemption Service allows you to have proceeds from your sales of fund
shares wired directly to a bank account. To use this service, you'll need to
designate the bank account in advance. Follow the instructions on your
application. Expedited Redemption Service orders that arrive before 12:00 noon
Eastern time will be processed that day, and we will normally wire you the
proceeds on the same day. However, you won't receive that day's dividend.
Checkwriting lets you sell portfolio shares by writing a check. Your investment
keeps earning dividends until your check clears. Please note that you should not
write checks for less than $1,000 or for more than $5,000,000. Note as well that
we can't honor any check larger than your balance at the time the check is
presented to us.
10 | How To Sell Shares
<PAGE>
When you want to sell more than $50,000 worth of shares or send the proceeds to
a third party or to a new address, you'll usually need to place your order in
writing and include a signature guarantee. The only exception is if you want
money wired to a bank account that is already on file with us; in that case, you
don't need a signature guarantee. Also, you don't need a signature guarantee for
an exchange, although we may require one in certain other circumstances.
A signature guarantee is simply a certification of your signature -- a valuable
safeguard against fraud. You can get a signature guarantee from most brokerages,
banks, savings institutions and credit unions. Note that you can't get a
signature guarantee from a notary public.
With same-day redemptions through Expedited Redemption Service, money from
shares you sell is normally sent out the same day we receive your order. Money
from other orders is normally sent out within one business day of when your
order is processed (not when it is received), although it could be delayed for
up to seven days. There are also two circumstances when it could be longer: when
you are selling shares you bought recently by check and that check hasn't
cleared yet (maximum delay: 10 days) or when unusual circumstances prompt the
SEC to allow further delays.
Share certificates are available on written request. However, we don't recommend
them unless you want them for a specific purpose, because they can only be sold
by mailing them in, and if they're ever lost they're difficult and expensive to
replace.
How the portfolio calculates share price
For the share class of the portfolio, the share price is the net asset value per
share, or NAV. To calculate NAV for the share class, the portfolio uses the
following equation:
TOTAL ASSETS - TOTAL
LIABILITIES
---------------------- = NAV
TOTAL NUMBER OF SHARES
OUTSTANDING
In valuing securities, we typically use the amortized cost method (the method
used by most money market funds).
How To Sell Shares | 11
<PAGE>
Other rights we reserve
You should be aware that we may do any of the following:
o withhold 31% of your distributions as federal income tax if you have been
notified by the IRS that you are subject to backup withholding, or if you
fail to provide us with a correct taxpayer ID number or certification that
you are exempt from backup withholding
o reject a new account application if you don't provide a correct Social
Security or other tax ID number; if the account has already been opened, we
may give you 30 days' notice to provide the correct number
o close your account and send you the proceeds if your balance falls below the
required minimum for at least 30 days; we will give you 60 days' notice so
you can either increase your balance or close your account (this policy
doesn't apply to most retirement accounts or if you have an automatic
investment plan)
o pay you for shares you sell by "redeeming in kind," that is, by giving you
marketable securities (which typically will involve brokerage costs for you
to liquidate) rather than cash; generally, the portfolio won't make a
redemption in kind unless your requests over a 90-day period total more than
$250,000 or 1% of the value of the portfolio's net assets
o change, add or withdraw various services, fees and account policies
o reject or limit purchases of shares for any reason without prior notice
o withdraw or suspend any part of the offering made by this prospectus
| Understanding Distributions And Taxes
Because each shareholder's tax situation is unique, it's always a good idea to
ask your tax professional about the tax consequences of your investments,
including any state and local tax consequences.
By law, a mutual fund is required to pass through to its shareholders virtually
all of its net earnings. The portfolio can earn money in two ways: by receiving
interest, dividends or other income from securities it holds, and by selling
securities for more than it paid for them. (The portfolio's earnings are
separate from any gains or losses stemming from your own purchase of shares.)
The portfolio may not always pay a distribution for a given period.
12 | Understanding Distributions And Taxes
<PAGE>
The portfolio intends to declare income dividends daily, and pay them monthly.
The portfolio may make short- or long-term capital gains distributions in
October, November or December, and may make additional distributions for tax
purposes if necessary. Capital gains may be taxable at different rates depending
on the length of time the portfolio holds its assets. Exchanges of portfolio
shares or among other mutual funds may also be taxable events.
You can choose how to receive your dividends and distributions. You can have
them all automatically reinvested in fund shares (at NAV) or all sent to you by
check. Tell us your preference on your application. If you don't indicate a
preference, your dividends and distributions will all be reinvested. For
retirement plans, reinvestment is the only option.
Dividends from the portfolio are generally tax-free for most shareholders,
meaning that investors can receive them without incurring federal income tax
liability. However, there are a few exceptions:
o a portion of the portfolio's dividends may be taxable as an ordinary income
if it came from investments in taxable securities
o because the portfolio can invest up to 20% of net assets in securities
whose income is subject to the federal alternative minimum tax (AMT), you
may owe taxes on a portion of your dividends if you are among those
investors who must pay AMT
The following tables show the usual tax status of transactions in fund shares as
well as that of any taxable distribution from a portfolio:
Generally taxed at ordinary income rates
------------------------------------------
o short-term capital gains from selling
portfolio shares
------------------------------------------
o income dividends you receive from the
portfolio
------------------------------------------
o short-term capital gains distributions
you receive from the portfolio
------------------------------------------
Generally taxed at capital gains rates
------------------------------------------
o long-term capital gains from selling
portfolio shares
------------------------------------------
o long-term capital gains distributions
you receive from the portfolio
------------------------------------------
You will be sent detailed tax information every January. These statements tell
you the amount and the tax category of any dividends or distributions you
received. They also have certain details on your purchases and sales of shares.
The tax status of dividends and distributions is the same whether you reinvest
them or not. Dividends or distributions declared in the last quarter of a given
year are taxed in that year, even though you may not receive the money until the
following January.
Understanding Distributions And Taxes | 13
<PAGE>
| To Get More Information
Shareholder reports -- These have detailed performance figures, a list of
everything the portfolio owns and the portfolio's financial statements.
Shareholders get these reports automatically. To reduce costs, we may mail one
copy per household. For more copies, contact your financial services firm.
Statement of Additional Information (SAI) -- This tells you more about the
portfolio's features and policies, including additional risk information. The
SAI is incorporated by reference into this document (meaning that it's legally
part of this prospectus).
If you'd like to ask for copies of these documents, please contact your
financial services firm or the SEC (see below). If you're a shareholder and have
questions, please contact your financial services firm. Materials you get from
your financial services firm are free; those from the SEC involve a copying fee.
If you like, you can look over these materials in person at the SEC's Public
Reference Room in Washington, DC, or request them electronically at
[email protected]. You can also obtain these materials by calling Client
Services at (800) 537-3177, during normal business hours only.
SEC
450 Fifth Street, N.W.
Washington, DC 20549-0102
1-202-942-8090
www.sec.gov
SEC File Number
Cash Account Trust 811-5970
<PAGE>
SCUDDER
INVESTMENTS (SM)
[LOGO]
Tax-Exempt Portfolio
Scudder
Tax-Exempt Cash
Institutional Shares
Fund #148
Prospectus
August 1, 2000
As with all mutual funds, the Securities and Exchange Commission (SEC) does not
approve or disapprove these shares or determine whether the information in this
prospectus is truthful or complete. It is a criminal offense for anyone to
inform you otherwise.
<PAGE>
--------------------------------------------------------------------------------
Table of Contents
TAX-EXEMPT PORTFOLIO -- TAX-EXEMPT CASH INSTITUTIONAL SHARES
Your Investment
About The Portfolio In The Portfolio
7 Policies You Should Know About
1 The Portfolio's Goal And
Main Strategy 8 How To Buy Shares
2 Main Risks To Investors 9 How To Sell Shares
3 Performance 12 Understanding Distributions
And Taxes
4 How Much Investors Pay
5 Other Policies And Risks
5 Who Manages The Portfolio
6 Financial Highlights
<PAGE>
--------------------------------------------------------------------------------
Tax-Exempt Portfolio
The Portfolio's Goal
And Main Strategy
The portfolio seeks to provide maximum current income that is exempt from
Federal income taxes to the extent consistent with stability of capital.
The portfolio seeks to provide income exempt from regular federal income tax and
stability of principal through investments in high quality short-term municipal
securities. The portfolio normally invests at least 80% of net assets in
municipal securities, the income from which is free from regular federal income
tax and from alternative minimum tax (AMT).
The portfolio may buy many types of municipal securities, including industrial
development bonds, but all must meet the rules for money market portfolio
investments (see sidebar). In addition, the portfolio focuses its investments on
securities that are in the top credit grade for short-term debt securities.
Working in conjunction with credit analysts, the portfolio managers screen
potential securities and develop a list of those that the portfolio may buy. The
managers then decide which securities on this list to buy, looking for
attractive yield and weighing considerations such as credit quality, economic
outlooks, and possible interest rate movements.
The managers may adjust the portfolio's exposure to interest rate risk,
typically seeking to take advantage of possible rises in interest rates and to
preserve yield when interest rates appear likely to fall.
--------------------------------------------------------------------------------
Money Fund Rules
To be called a money market fund, a mutual fund must operate within strict
federal rules. Designed to help maintain a stable $1.00 share price, these rules
limit money funds to particular types of securities. Some of the rules:
o individual securities must have remaining maturities of no more than 397
days
o the dollar-weighted average maturity of the portfolio's holdings cannot
exceed 90 days
o all securities must be in the top two credit grades for short-term debt
securities and be denominated in U.S. dollars
1
<PAGE>
Main Risks to Investors
There are several risk factors that could reduce the yield you get from the
portfolio or make it perform less well than other investments.
As with most money market portfolios, the most important factor is short-term
market interest rates. The portfolio's yield tends to reflect current interest
rates, which means that when these rates fall, the portfolio's yield generally
falls as well.
The municipal securities market is narrower and less liquid, with fewer
investors, issuers and market makers, than the taxable securities market. The
more limited marketability of municipal securities may make it more difficult in
certain circumstances to dispose of large investments advantageously.
Industrial development bonds, which are municipal securities, generally do not
constitute the pledge of the credit of the issuer of such bonds. The portfolio
may invest all or any part of its assets in municipal securities that are
industrial development bonds.
To the extent that the portfolio invests in taxable securities, a portion of its
income would be taxable.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of interest rate trends,
credit quality or other factors
o the counterparty to a repurchase agreement or other transaction could
default on its obligations
o political or legal actions could change the way the portfolio's dividends
are taxed, particularly in certain states or localities
o over time, the real value of the portfolio's yield may be eroded by
inflation
An investment in the portfolio is not insured or guaranteed by the FDIC or any
other government agency. Although the portfolio seeks to preserve the value of
your investment at $1.00 per share, this share price isn't guaranteed and you
could lose money by investing in the portfolio.
2
<PAGE>
Performance
The bar chart shows how the total returns for the portfolio's Service Shares
have varied from year to year, which may give some idea of risk. The table shows
how the portfolio's Service Shares returns over different periods average out.
All figures on this page assume reinvestment of dividends and distributions. As
always, past performance is no guarantee of future results.
Institutional Shares do not have a full calendar year of performance, therefore
past performance data is not provided with respect to Institutional Shares.
Although Service Shares are not offered in this prospectus, they are invested in
the same portfolio of securities. Service Shares annual returns differ only to
the extent that the classes have different fees and expenses.
--------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
3.91 2.42 1.84 2.32 3.32 2.85 2.90 2.70 2.42
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1991 1992 1993 1994 1995 1996 1997 1998 1999
--------------------------------------------------------------------------------
Best Quarter: 0.98%, Q1 1991
Worst Quarter: 0.44%, Q1 1994
Year-to-date return as of 6/30/2000: 1.56%
--------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/1999
--------------------------------------------------------------------------------
1 Year 5 Years Since Inception*
---------------------------------------------------
2.42% 2.84% 2.76%
---------------------------------------------------
* Inception date for the portfolio's Service Shares is December 3, 1990.
7-day yield as of 12/31/1999: 3.29%
In the chart, total returns for 1991 through 1999 would have been lower if
operating expenses hadn't been reduced.
In the table, total returns from inception through 1999 would have been lower if
operating expenses hadn't been reduced.
To find out current Institutional Shares performance, including yield
information, contact your financial services firm from which you obtained this
prospectus.
3
<PAGE>
How Much Investors Pay
This fee table describes the fees and expenses that you may pay if you buy and
hold Institutional Shares of the portfolio. This information doesn't include any
fees that may be charged by your financial services firm.
--------------------------------------------------------------------------------
Fee Table
--------------------------------------------------------------------------------
Shareholder Fees (%)
(paid directly from your investment) None
-------------------------------------------------------
Annual Operating Expenses (%)
(deducted from portfolio assets)
-------------------------------------------------------
Management Fee 0.17%
-------------------------------------------------------
Distribution (12b-1) Fee None
-------------------------------------------------------
Other Expenses* 0.06%
-------------------------------------------------------
Total Annual Operating Expenses 0.23%
-------------------------------------------------------
* Includes costs of shareholder servicing, custody and similar expenses,
which may vary with fund size and other factors.
--------------------------------------------------------------------------------
Example
--------------------------------------------------------------------------------
Based on the figures above, this example helps you compare the portfolio's
Institutional Shares' expenses to those of other mutual funds. The example
assumes the expenses above remain the same, that you invested $10,000, earned 5%
annual returns, reinvested all dividends and distributions and sold your shares
at the end of each period. This is only an example; actual expenses will be
different.
1 Year 3 Years 5 Years 10 Years
-------------------------------------------------------
$24 $74 $130 $293
-------------------------------------------------------
4
<PAGE>
Other Policies And Risks
While the previous pages describe the main points of the portfolio's strategy
and risks, there are a few other issues to know about:
o As a temporary defensive measure, the portfolio could invest in taxable
money market securities. This would mean that the portfolio was not
pursuing its goal.
o The investment advisor establishes a security's credit grade when it buys
the security, using independent ratings or, for unrated securities, its own
credit analysis. If a security's credit quality falls below the minimum
required for purchase by the portfolio, the security will be sold unless
the Board believes this would not be in the shareholders' best interests.
o This prospectus doesn't tell you about every policy or risk of investing in
the portfolio. For more information, you may want to request a copy of the
Statement of Additional Information (the last page tells you how to do
this).
Keep in mind that there is no assurance that any mutual fund will achieve its
goal.
Who Manages The
Portfolio
The Investment Advisor
The portfolio's investment advisor is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY. Scudder Kemper has more than 80 years of experience
managing mutual funds and currently has more than $290 billion in assets under
management.
Scudder Kemper takes a team approach to asset management, bringing together
professionals from many investment disciplines. Supporting each team are Scudder
Kemper's many economists, research analysts, traders and other investment
specialists, located across the United States and around the world.
For serving as the portfolio's investment advisor, Scudder Kemper receives a
management fee. For the 12 months through the most recent fiscal year end, the
portfolio paid management fees of 0.17% of its average daily net assets.
The Portfolio Managers
The portfolio managers handle the day-to-day management of the portfolio.
Frank J. Rachwalski, Jr. serves as lead manager for the portfolio. Mr.
Rachwalski joined the advisor in 1973 and began his investment career at that
time. Mr. Rachwalski joined the portfolio in 1990, and has been responsible for
the trading and portfolio management of money market funds since 1974. Jerri I.
Cohen serves as a manager to the portfolio. Ms. Cohen joined the advisor in 1981
as an accountant and began her investment career in 1992 as a money market
trader. Ms. Cohen joined the portfolio in 1998.
5
<PAGE>
Financial Highlights
This table is designed to help you understand the portfolio's financial
performance in recent years. The figures in the first part of the table are for
a single share. The total return figures represent the percentage that an
investor in the portfolio would have earned, assuming all dividends and
distributions were reinvested. This information has been audited by Ernst &
Young LLP, whose report, along with the portfolio's financial statements, is
included in the annual report (see "Shareholder reports" on the last page).
--------------------------------------------------------------------------------
Tax-Exempt Portfolio -- Institutional Shares
--------------------------------------------------------------------------------
Period ended April 30, 2000(a)
--------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.00
--------------------------------------------------------------------------------
Net investment income .02
--------------------------------------------------------------------------------
Less distributions from net investment income (.02)
--------------------------------------------------------------------------------
Net asset value, end of period $ 1.00
--------------------------------------------------------------------------------
Total Return (%) (b) 1.33**
--------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
--------------------------------------------------------------------------------
Net assets, end of period ($ thousands) 169,227
--------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) .23*
--------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) .23*
--------------------------------------------------------------------------------
Ratio of net investment income (%) 3.59*
--------------------------------------------------------------------------------
(a) For the period November 17, 1999 to April 30, 2000.
(b) Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
6
<PAGE>
--------------------------------------------------------------------------------
Your Investment In The Portfolio
The following pages describe the main policies associated with buying and
selling shares of the portfolio. There is also information on dividends and
taxes and other matters that may affect you as a portfolio shareholder.
Because this portfolio is available only through a financial services firm, such
as a broker or financial institution, you should contact a representative of
your financial services firm for instructions on how to buy or sell portfolio
shares.
Policies You Should Know About
The policies below may affect you as a shareholder. In any case where materials
provided by your financial services firm contradict the information given here,
you should follow the information in your firm's materials. Please note that a
financial services firm may charge its own fees.
Keep in mind that the information in this prospectus applies only to the
portfolio's Institutional Shares. The portfolio has three other share classes,
which are described in separate prospectuses and which have different fees,
requirements and services.
7
<PAGE>
How To Buy Shares
Use these instructions to make investments.
<TABLE>
<CAPTION>
Buying shares First investment Additional investments
-------------------------------------------------------------------------------------
<S> <C> <C>
$1,000,000 or more for all accounts No minimum amount
-------------------------------------------------------------------------------------
By wire o Call (800) 537-3177 to open an o Instruct the wiring bank
account and get an account number to transmit the specified
amount to UMB Bank, N.A.
o Instruct wiring bank to transmit with the information stated
the specified amount to: to the left.
UMB Bank, N.A.
10th and Grand Avenue
Kansas City, Missouri 64106
ABA Number 101000695
DDA #148:9801199854
Attention: Tax-Exempt Portfolio
Institutional Shares
Account (name(s) in which
registered)
Account Number and amount invested
in the portfolio
o Complete a purchase application
and send it to us at the address
below
-------------------------------------------------------------------------------------
By mail or o Fill out and sign a purchase o Send a check and a letter
express mail application with your name, account
(see below) number, the full name of the
o Send it to us at the address portfolio and class, and
below, along with an investment your investment instructions
check made out to "Tax-Exempt to us at the address below
Portfolio"
-------------------------------------------------------------------------------------
Regular, express, Kemper Service Company, Institutional Funds Client Services
registered, or 222 South Riverside Plaza, 33rd Floor
certified mail: Chicago, IL 60606
-------------------------------------------------------------------------------------
Fax number: (800) 537-9960
-------------------------------------------------------------------------------------
E-Mail address: [email protected]
-------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
How To Sell Shares
Use these instructions to sell shares in your account.
<TABLE>
<CAPTION>
Selling shares
-------------------------------------------------------------------------------------
<S> <C>
By Expedited If Expedited Redemption Service has been elected on the Purchase
Redemption Application on file with the Transfer Agent, redemption of
Service shares may be requested by:
o telephoning Client Services at (800) 537-3177
o faxing a request to (800) 537-9960
-------------------------------------------------------------------------------------
By mail, express Write a letter that includes:
mail or fax
o the portfolio, class, and account number from which you want
to sell shares
o the dollar amount or number of shares you want to sell
o your name(s), signature(s), and address, as they appear on
your account
o a daytime telephone number
Mail the letter to:
Kemper Service Company
Institutional Funds Client Services
222 South Riverside Plaza, 33rd Floor
Chicago, IL 60606
or fax to:
(800) 537-9960
-------------------------------------------------------------------------------------
By phone o Call (800) 537-3177 for instructions
-------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
Policies about transactions
The portfolio is open for business each day the New York Stock Exchange is open.
Normally, the portfolio calculates its share price every business day at 12:00
noon Eastern time and 4:00 p.m. Eastern time.
As noted earlier, the portfolio expects to maintain a stable $1.00 share price.
You can place an order to buy or sell shares at any time. Once your order is
received by Kemper Service Company, and they have determined that it is a "good
order," it will be processed at the next share price calculated.
Because orders placed through financial services firms must be forwarded to
Kemper Service Company before they can be processed, you'll need to allow extra
time. A representative of your financial services firm should be able to tell
you when your order will be processed.
Wire transactions that arrive by 12:00 noon Eastern time will receive that day's
dividend. Wire transactions received between 12:00 noon Eastern time and 4:00
p.m. Eastern time will start to accrue dividends the next calendar day.
Investments by check will be effective at 4:00 p.m. Eastern time on the business
day following receipt and will earn dividends the following calendar day. If an
order is accompanied by a check drawn on a foreign bank, funds must normally be
collected on such check before shares of the portfolio will be purchased.
When selling shares, you'll generally receive the dividend for the day on which
your shares were sold. If we receive a sell request before 12:00 noon Eastern
time and the request calls for proceeds to be sent out by wire, we will normally
wire you the proceeds on the same day. However you won't receive that day's
dividend.
Expedited Redemption Service allows you to have proceeds from your sales of fund
shares wired directly to a bank account. To use this service, you'll need to
designate the bank account in advance. Follow the instructions on your
application. Expedited Redemption Service orders that arrive before 12:00 noon
Eastern time will be processed that day and we will normally wire you the
proceeds on the same day. However, you won't receive that day's dividend.
10
<PAGE>
When you want to sell more than $50,000 worth of shares or send the proceeds to
a third party or to a new address, you'll usually need to place your order in
writing and include a signature guarantee. The only exception is if you want
money wired to a bank account that is already on file with us; in that case, you
don't need a signature guarantee. Also, you don't need a signature guarantee for
an exchange, although we may require one in certain other circumstances.
A signature guarantee is simply a certification of your signature -- a valuable
safeguard against fraud. You can get a signature guarantee from most brokerages,
banks, savings institutions and credit unions. Note that you can't get a
signature guarantee from a notary public.
With same-day redemptions through Expedited Redemption Service, money from
shares you sell is normally sent out the same day we receive your order. Money
from other orders is normally sent out within one business day of when your
order is processed (not when it is received), although it could be delayed for
up to seven days. There are also two circumstances when it could be longer: when
you are selling shares you bought recently by check and that check hasn't
cleared yet (maximum delay: 10 days) or when unusual circumstances prompt the
SEC to allow further delays.
Share certificates are available on written request. However, we don't recommend
them unless you want them for a specific purpose, because they can only be sold
by mailing them in, and if they're ever lost they're difficult and expensive to
replace.
How the portfolio calculates share price
For the share class of the portfolio, the share price is the net asset value per
share, or NAV. To calculate NAV for the share class, the portfolio uses the
following equation:
TOTAL ASSETS - TOTAL
LIABILITIES
---------------------------------- = NAV
TOTAL NUMBER OF SHARES
OUTSTANDING
In valuing securities, we typically use the amortized cost method (the method
used by most money market funds).
11
<PAGE>
Other rights we reserve
You should be aware that we may do any of the following:
o withhold 31% of your distributions as federal income tax if you have been
notified by the IRS that you are subject to backup withholding, or if you
fail to provide us with a correct taxpayer ID number or certification that
you are exempt from backup withholding
o reject a new account application if you don't provide a correct Social
Security or other tax ID number; if the account has already been opened, we
may give you 30 days' notice to provide the correct number
o close your account and send you the proceeds if your balance falls below
the required minimum; we will give you 60 days' notice so you can either
increase your balance or close your account
o change, add or withdraw various services, fees and account policies
o reject or limit purchases of shares for any reason without prior notice
o withdraw or suspend any part of the offering made by this prospectus
Understanding
Distributions And Taxes
Because each shareholder's tax situation is unique, it's always a good idea to
ask your tax professional about the tax consequences of your investments,
including any state and local tax consequences.
By law, a mutual fund is required to pass through to its shareholders virtually
all of its net earnings. The portfolio can earn money in two ways: by receiving
interest, dividends or other income from securities it holds, and by selling
securities for more than it paid for them. (The portfolio's earnings are
separate from any gains or losses stemming from your own purchase of shares.)
The portfolio may not always pay a distribution for a given period.
12
<PAGE>
The portfolio intends to declare income dividends daily, and pay them monthly.
The portfolio may make short- or long-term capital gains distributions in
October, November or December, and may make additional distributions for tax
purposes if necessary. Capital gains may be taxable at different rates depending
on the length of time the portfolio holds its assets. Exchanges of portfolio
shares or among other mutual funds may also be taxable events.
You can choose how to receive your dividends and distributions. You can have
them all automatically reinvested in fund shares (at NAV) or all sent to you by
check. Tell us your preference on your application. If you don't indicate a
preference, your dividends and distributions will all be reinvested. For
retirement plans, reinvestment is the only option.
Dividends from the portfolio are generally tax-free for most shareholders,
meaning that investors can receive them without incurring federal income tax
liability. However, there are a few exceptions:
o a portion of the portfolio's dividends may be taxable as an ordinary income
if it came from investments in taxable securities
o because the portfolio can invest up to 20% of net assets in securities
whose income is subject to the federal alternative minimum tax (AMT), you
may owe taxes on a portion of your dividends if you are among those
investors who must pay AMT
The following tables show the usual tax status of transactions in fund shares as
well as that of any taxable distribution from a portfolio:
Generally taxed at ordinary income
rates
------------------------------------------
o short-term capital gains from selling
portfolio shares
------------------------------------------
o income dividends you receive from the
portfolio
------------------------------------------
o short-term capital gains distributions
you receive from the portfolio
------------------------------------------
Generally taxed at capital gains rates
------------------------------------------
o long-term capital gains from selling
portfolio shares
------------------------------------------
o long-term capital gains distributions
you receive from the portfolio
------------------------------------------
You will be sent detailed tax information every January. These statements tell
you the amount and the tax category of any dividends or distributions you
received. They also have certain details on your purchases and sales of shares.
The tax status of dividends and distributions is the same whether you reinvest
them or not. Dividends or distributions declared in the last quarter of a given
year are taxed in that year, even though you may not receive the money until the
following January.
13
<PAGE>
To Get More Information
Shareholder reports -- These have detailed performance figures, a list of
everything the portfolio owns and the portfolio's financial statements.
Shareholders get these reports automatically. To reduce costs, we may mail one
copy per household. For more copies, contact your financial services firm.
Statement of Additional Information (SAI) -- This tells you more about the
portfolio's features and policies, including additional risk information. The
SAI is incorporated by reference into this document (meaning that it's legally
part of this prospectus).
If you'd like to ask for copies of these documents, please contact your
financial services firm or the SEC (see below). If you're a shareholder and have
questions, please contact your financial services firm. Materials you get from
your financial services firm are free; those from the SEC involve a copying fee.
If you like, you can look over these materials in person at the SEC's Public
Reference Room in Washington, DC, or request them electronically at
[email protected]. You can also obtain these materials by calling Client
Services at (800) 537-3177, during normal business hours only.
SEC
450 Fifth Street, N.W.
Washington, DC 20549-0102
1-202-942-8090
www.sec.gov
SEC File Number
Cash Account Trust 811-5970
<PAGE>
Premier Money Market
Shares
P R O S P E C T U S
August 1, 2000
Money Market Portfolio
Government Securities Portfolio
Tax-Exempt Portfolio
Treasury Portfolio
As with all mutual funds, the Securities and Exchange
Commission (SEC) does not approve or disapprove these
shares or determine whether the information in this
prospectus is truthful or complete. It is a criminal
offense for anyone to inform you otherwise.
<PAGE>
Table of Contents
Premier Money Market shares
About The Portfolios
1 Money Market Portfolio
5 Government Securities Portfolio
9 Tax-Exempt Portfolio
13 Treasury Portfolio
17 Other Policies And Risks
18 Who Manages The Portfolios
19 Financial Highlights
Your Investment In The Portfolios
21 Policies You Should Know About
25 Understanding Distributions And Taxes
<PAGE>
Money Market Portfolio
| The Portfolio's Goal And Main Strategy
The portfolio seeks maximum current income consistent with stability of capital.
The portfolio pursues its goal by investing primarily in high quality short-term
securities, as well as certain repurchase agreements.
The portfolio may buy securities from many types of issuers, including the U.S.
government, banks (both U.S. banks and U.S. branches of foreign banks),
corporations, and municipalities. The portfolio will normally invest at least
25% of total assets in bank obligations. However, everything the portfolio buys
must meet the rules for money market portfolio investments (see sidebar). In
addition, the portfolio focuses its investments on securities that are in the
top credit grade for short-term debt securities.
Working in conjunction with credit analysts, the portfolio managers screen
potential securities and develop a list of those that the portfolio may buy. The
managers then decide which securities on this list to buy, looking for
attractive yield and weighing considerations such as credit quality, economic
outlooks, and possible interest rate movements.
The managers may adjust the portfolio's exposure to interest rate risk,
typically seeking to take advantage of possible rises in interest rates and to
preserve yield when interest rates appear likely to fall.
--------------------------------------------------------------------------------
Money Fund Rules
To be called a money market fund, a mutual fund must operate within strict
federal rules. Designed to help maintain a stable $1.00 share price, these rules
limit money funds to particular types of securities. Some of the rules:
o individual securities must have remaining maturities of no more than 397
days
o the dollar-weighted average maturity of the portfolio's holdings cannot
exceed 90 days
o all securities must be in the top two credit grades for short-term debt
securities and be denominated in U.S. dollars
Money Market Portfolio | 1
<PAGE>
| Main Risks To Investors
There are several risk factors that could reduce the yield you get from the
portfolio or make it perform less well than other investments.
As with most money market portfolios, the most important factor is short-term
market interest rates. The portfolio's yield tends to reflect current interest
rates, which means that when these rates fall, the portfolio's yield generally
falls as well.
Investments by the portfolio in Eurodollar certificates of deposit issued by
London branches of U.S. banks, and different obligations issued by foreign
entities, including U.S. branches of foreign banks, involve additional risks
than investments in securities of domestic branches of U.S. banks. These risks
include, but are not limited to, future unfavorable political and economic
developments, possible withholding taxes on interest payments, seizure of
foreign deposits, currency controls, or interest limitations or other
governmental restrictions that might affect payment of principal or interest.
The market for such obligations may be less liquid and, at times, more volatile
than for securities of domestic branches of U.S. banks. Additionally, there may
be less public information available about foreign banks and their branches.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of interest rate trends,
credit quality or other factors
o the counterparty to a repurchase agreement or other transaction could
default on its obligations
o over time, the real value of the portfolio's yield may be eroded by
inflation
An investment in the portfolio is not insured or guaranteed by the FDIC or any
other government agency. Although the portfolio seeks to preserve the value of
your investment at $1.00 per share, this share price isn't guaranteed and you
could lose money by investing in the portfolio.
2 | Money Market Portfolio
<PAGE>
| Performance
The bar chart shows how the total returns for the portfolio's Service Shares
have varied from year to year, which may give some idea of risk. The table shows
how the portfolio's Service Shares returns over different periods average out.
All figures on this page assume reinvestment of dividends and distributions. As
always, past performance is no guarantee of future results.
Premier Money Market Shares do not have a full calendar year of performance,
therefore past performance data is not provided with respect to Premier Money
Market Shares. Although Service Shares are not offered in this prospectus, they
are invested in the same portfolio of securities. Service Shares annual returns
differ only to the extent that the classes have different fees and expenses.
--------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
5.36 2.99 2.39 3.51 5.13 4.64 4.80 4.69 4.38
1991 1992 1993 1994 1995 1996 1997 1998 1999
Best Quarter: 1.58%, Q1 1991
Worst Quarter: 0.57%, Q2 1993
Year-to-date return as of 6/30/2000: 2.62%
--------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/1999
--------------------------------------------------------------------------------
1 Year 5 Years Since Inception*
--------------------------------------------------------------------------------
4.38% 4.72% 4.23%
--------------------------------------------------------------------------------
* Inception date for the portfolio's Service Shares is
December 3, 1990.
In the chart, total returns for 1991 through 1999 would have been lower if
operating expenses hadn't been reduced.
In the table, total returns from inception through 1999 would have been lower if
operating expenses hadn't been reduced.
7-day yield as of 12/31/1999: 5.05%
To find out Premier Money Market Shares performance, including yield
information, contact your financial services firm from which you obtained this
prospectus.
Money Market Portfolio | 3
<PAGE>
| How Much Investors Pay
This fee table describes the fees and expenses that you may pay if you buy and
hold Premier Money Market Shares of the portfolio. This information doesn't
include any fees that may be charged by your financial services firm.
--------------------------------------------------------------------------------
Fee Table
--------------------------------------------------------------------------------
Shareholder Fees (%)
(paid directly from your investment) None
--------------------------------------------------------------------------------
Annual Operating Expenses (%)
(deducted from portfolio assets)
--------------------------------------------------------------------------------
Management Fee 0.17%
--------------------------------------------------------------------------------
Distribution (12b-1) Fee 0.25%
--------------------------------------------------------------------------------
Other Expenses* 0.56%
--------------------------------------------------------------------------------
Total Annual Operating Expenses 0.98%
--------------------------------------------------------------------------------
* Includes costs of shareholder servicing, custody and similar expenses,
which may vary with fund size and other factors.
--------------------------------------------------------------------------------
Example
--------------------------------------------------------------------------------
Based on the figures above, this example helps you compare the portfolio's
Premier Money Market Shares' expenses to those of other mutual funds. The
example assumes the expenses above remain the same, that you invested $10,000,
earned 5% annual returns, reinvested all dividends and distributions and sold
your shares at the end of each period. This is only an example; actual expenses
will be different.
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
$100 $312 $542 $1,201
--------------------------------------------------------------------------------
4 | Money Market Portfolio
<PAGE>
Government Securities Portfolio
| The Portfolio's Goal And Main Strategy
The portfolio seeks to provide maximum current income consistent with stability
of capital.
The portfolio pursues its goal 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 backed by these
securities.
Working in conjunction with credit analysts, the portfolio managers screen
potential securities and develop a list of those that the portfolio may buy. The
managers then decide which securities on this list to buy, looking for
attractive yield and weighing considerations such as economic outlook and
possible interest rate movements. The managers may adjust the portfolio's
exposure to interest rate risk, typically seeking to take advantage of possible
rises in interest rates and to preserve yield when interest rates appear likely
to fall.
--------------------------------------------------------------------------------
Money Fund Rules
To be called a money market fund, a mutual fund must operate within strict
federal rules. Designed to help maintain a stable $1.00 share price, these rules
limit money funds to particular types of securities. Some of the rules:
o individual securities must have remaining maturities of no more than 397
days
o the dollar-weighted average maturity of the portfolio's holdings cannot
exceed 90 days
o all securities must be in the top two credit grades for short-term debt
securities and be denominated in U.S. dollars
Government Securities Portfolio | 5
<PAGE>
| Main Risks To Investors
There are several risk factors that could reduce the yield you get from the
portfolio or make it perform less well than other investments.
As with most money market portfolios, the most important factor is short-term
market interest rates. The portfolio's yield tends to reflect current interest
rates, which means that when these rates fall, the portfolio's yield generally
falls as well.
Some securities issued by U.S. Government agencies or instrumentalities are
supported only by the credit of that agency or instrumentality, while other
securities are backed by the full faith and credit of the U.S. Government. 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.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of interest rate trends,
credit quality or other factors
o the counterparty to a repurchase agreement or other transaction could
default on its obligations
o over time, the real value of the portfolio's yield may be eroded by
inflation
An investment in the portfolio is not insured or guaranteed by the FDIC or any
other government agency. Although the portfolio seeks to preserve the value of
your investment at $1.00 per share, this share price isn't guaranteed and you
could lose money by investing in the portfolio.
6 | Government Securities Portfolio
<PAGE>
| Performance
The bar chart shows how the total returns for the portfolio's Service Shares
have varied from year to year, which may give some idea of risk. The table shows
how the portfolio's Service Shares returns over different periods average out.
All figures on this page assume reinvestment of dividends and distributions. As
always, past performance is no guarantee of future results.
Premier Money Market Shares do not have a full calendar year of performance,
therefore past performance data is not provided with respect to Premier Money
Market Shares. Although Service Shares are not offered in this prospectus, they
are invested in the same portfolio of securities. Service Shares annual returns
differ only to the extent that the classes have different fees and expenses.
--------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
5.29 3.05 2.42 3.51 5.19 4.70 4.79 4.56 4.21
1991 1992 1993 1994 1995 1996 1997 1998 1999
Best Quarter: 1.46%, Q1 1991
Worst Quarter: 0.59%, Q2 1993
Year-to-date return as of 6/30/2000: 2.54%
--------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/1999
--------------------------------------------------------------------------------
1 Year 5 Years Since Inception*
--------------------------------------------------------------------------------
4.21% 4.69% 4.21%
--------------------------------------------------------------------------------
* Inception date for the portfolio's Service Shares is
December 3, 1990.
In the chart, total returns for 1991 through 1999 would have been lower if
operating expenses hadn't been reduced.
In the table, total returns from inception through 1999 would have been lower if
operating expenses hadn't been reduced.
7-day yield as of 12/31/1999: 4.73%
To find out Premier Money Market Shares performance, including yield
information, contact your financial services firm from which you obtained this
prospectus.
Government Securities Portfolio | 7
<PAGE>
| How Much Investors Pay
This fee table describes the fees and expenses that you may pay if you buy and
hold Premier Money Market Shares of the portfolio. This information doesn't
include any fees that may be charged by your financial services firm.
--------------------------------------------------------------------------------
Fee Table
--------------------------------------------------------------------------------
Shareholder Fees (%)
(paid directly from your investment) None
--------------------------------------------------------------------------------
Annual Operating Expenses (%)
(deducted from portfolio assets)
--------------------------------------------------------------------------------
Management Fee 0.17%
--------------------------------------------------------------------------------
Distribution (12b-1) Fee 0.25%
--------------------------------------------------------------------------------
Other Expenses* 0.58%
--------------------------------------------------------------------------------
Total Annual Operating Expenses** 1.00%
--------------------------------------------------------------------------------
* Includes costs of shareholder servicing, custody and similar expenses,
which may vary with fund size and other factors.
** By contract, total portfolio expenses are capped at 1.00% through July 31,
2001.
--------------------------------------------------------------------------------
Example
--------------------------------------------------------------------------------
Based on the figures above, this example helps you compare the portfolio's
Premier Money Market Shares' expenses to those of other mutual funds. The
example assumes the expenses above remain the same, that you invested $10,000,
earned 5% annual returns, reinvested all dividends and distributions and sold
your shares at the end of each period. This is only an example; actual expenses
will be different.
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
$102 $318 $552 $1,225
--------------------------------------------------------------------------------
8 | Government Securities Portfolio
<PAGE>
Tax-Exempt Portfolio
| The Portfolio's Goal And Main Strategy
The portfolio seeks to provide maximum current income that is exempt from
Federal income taxes to the extent consistent with stability of capital.
The portfolio seeks to provide income exempt from regular federal income tax and
stability of principal through investments in high quality short-term municipal
securities. The portfolio normally invests at least 80% of net assets in
municipal securities, the income from which is free from regular federal income
tax and from alternative minimum tax (AMT).
The portfolio may buy many types of municipal securities, including industrial
development bonds, but all must meet the rules for money market portfolio
investments (see sidebar). In addition, the portfolio focuses its investments on
securities that are in the top credit grade for short-term debt securities.
Working in conjunction with credit analysts, the portfolio managers screen
potential securities and develop a list of those that the portfolio may buy. The
managers then decide which securities on this list to buy, looking for
attractive yield and weighing considerations such as credit quality, economic
outlooks, and possible interest rate movements.
The managers may adjust the portfolio's exposure to interest rate risk,
typically seeking to take advantage of possible rises in interest rates and to
preserve yield when interest rates appear likely to fall.
--------------------------------------------------------------------------------
Money Fund Rules
To be called a money market fund, a mutual fund must operate within strict
federal rules. Designed to help maintain a stable $1.00 share price, these rules
limit money funds to particular types of securities. Some of the rules:
o individual securities must have remaining maturities of no more than 397
days
o the dollar-weighted average maturity of the portfolio's holdings cannot
exceed 90 days
o all securities must be in the top two credit grades for short-term debt
securities and be denominated in U.S. dollars
Tax-Exempt Portfolio | 9
<PAGE>
| Main Risks To Investors
There are several risk factors that could reduce the yield you get from the
portfolio or make it perform less well than other investments.
As with most money market portfolios, the most important factor is short-term
market interest rates. The portfolio's yield tends to reflect current interest
rates, which means that when these rates fall, the portfolio's yield generally
falls as well.
The municipal securities market is narrower and less liquid, with fewer
investors, issuers and market makers, than the taxable securities market. The
more limited marketability of municipal securities may make it more difficult in
certain circumstances to dispose of large investments advantageously.
Industrial development bonds, which are municipal securities, generally do not
constitute the pledge of the credit of the issuer of such bonds. The portfolio
may invest all or any part of its assets in municipal securities that are
industrial development bonds.
To the extent that the portfolio invests in taxable securities, a portion of its
income would be taxable.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of interest rate trends,
credit quality and other factors
o the counterparty to a repurchase agreement or other transaction could
default on its obligations
o political or legal actions could change the way the portfolio's dividends
are taxed, particularly in certain states or localities
o over time, the real value of the portfolio's yield may be eroded by
inflation
An investment in the portfolio is not insured or guaranteed by the FDIC or any
other government agency. Although the portfolio seeks to preserve the value of
your investment at $1.00 per share, this share price isn't guaranteed and you
could lose money by investing in the portfolio.
10 | Tax-Exempt Portfolio
<PAGE>
| Performance
The bar chart shows how the total returns for the portfolio's Service Shares
have varied from year to year, which may give some idea of risk. The table shows
how the portfolio's Service Shares returns over different periods average out.
All figures on this page assume reinvestment of dividends and distributions. As
always, past performance is no guarantee of future results.
Premier Money Market Shares do not have a full calendar year of performance,
therefore past performance data is not provided with respect to Premier Money
Market Shares. Although Service Shares are not offered in this prospectus, they
are invested in the same portfolio of securities. Service Shares annual returns
differ only to the extent that the classes have different fees and expenses.
--------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
3.91 2.42 1.84 2.32 3.32 2.85 2.90 2.70 2.42
1991 1992 1993 1994 1995 1996 1997 1998 1999
Best Quarter: 0.98%, Q1 1991
Worst Quarter: 0.44%, Q1 1994
Year-to-date return as of 6/30/2000: 1.56%
--------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/1999
--------------------------------------------------------------------------------
1 Year 5 Years Since Inception*
--------------------------------------------------------------------------------
2.42% 2.84% 2.76%
--------------------------------------------------------------------------------
* Inception date for the portfolio's Service Shares is December 3, 1990.
In the chart, total returns for 1991 through 1999 would have been lower if
operating expenses hadn't been reduced.
In the table, total returns from inception through 1999 would have been lower if
operating expenses hadn't been reduced.
7-day yield as of 12/31/1999: 3.29%
To find out Premier Money Market Shares performance, including yield
information, contact your financial services firm from which you obtained this
prospectus.
Tax-Exempt Portfolio | 11
<PAGE>
| How Much Investors Pay
This fee table describes the fees and expenses that you may pay if you buy and
hold Premier Money Market Shares of the portfolio. This information doesn't
include any fees that may be charged by your financial services firm.
--------------------------------------------------------------------------------
Fee Table
--------------------------------------------------------------------------------
Shareholder Fees (%)
(paid directly from your investment) None
--------------------------------------------------------------------------------
Annual Operating Expenses (%)
(deducted from portfolio assets)
--------------------------------------------------------------------------------
Management Fee 0.17%
--------------------------------------------------------------------------------
Distribution (12b-1) Fee 0.25%
--------------------------------------------------------------------------------
Other Expenses* 0.54%
--------------------------------------------------------------------------------
Total Annual Operating Expenses 0.96%
--------------------------------------------------------------------------------
* Includes costs of shareholder servicing, custody and similar expenses,
which may vary with fund size and other factors.
--------------------------------------------------------------------------------
Example
--------------------------------------------------------------------------------
Based on the figures above, this example helps you compare the portfolio's
Premier Money Market Shares' expenses to those of other mutual funds. The
example assumes the expenses above remain the same, that you invested $10,000,
earned 5% annual returns, reinvested all dividends and distributions and sold
your shares at the end of each period. This is only an example; actual expenses
will be different.
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
$98 $306 $531 $1,178
--------------------------------------------------------------------------------
12 | Tax-Exempt Portfolio
<PAGE>
Treasury Portfolio
| The Portfolio's Goal And Main Strategy
The portfolio seeks to provide maximum current income consistent with stability
of capital.
The portfolio pursues its goal by investing exclusively in short-term U.S.
Treasury securities or in repurchase agreements backed by these securities. The
timely payment of principal and interest on these securities is guaranteed by
the full faith and credit of the U.S. government.
Working in conjunction with credit analysts, the portfolio managers screen
potential securities and develop a list of those that the portfolio may buy. The
managers then decide which securities on this list to buy, looking for
attractive yield and weighing considerations such as economic outlooks and
possible interest rate movements. The managers may adjust the portfolio's
exposure to interest rate risk, typically seeking to take advantage of possible
rises in interest rates and to preserve yield when interest rates appear likely
to fall.
--------------------------------------------------------------------------------
Money Fund Rules
To be called a money market fund, a mutual fund must operate within strict
federal rules. Designed to help maintain a stable $1.00 share price, these rules
limit money funds to particular types of securities. Some of the rules:
o individual securities must have remaining maturities of no more than 397
days
o the dollar-weighted average maturity of the portfolio's holdings cannot
exceed 90 days
o all securities must be in the top two credit grades for short-term debt
securities and be denominated in U.S. dollars
Treasury Portfolio | 13
<PAGE>
| Main Risks To Investors
There are several risk factors that could reduce the yield you get from the
portfolio or make it perform less well than other investments.
As with most money market funds, the most important factor is short-term market
interest rates. Each portfolio's yield tends to reflect current interest rates,
which means that when these rates fall, the portfolio's yield generally falls as
well.
Because of the portfolio's high credit standards, its yield may be lower than
the yields of money funds that don't limit their investments to government
securities.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of interest rate trends,
credit quality and other factors
o over time, the real value of the portfolio's yield may be eroded by
inflation
An investment in the portfolio is not insured or guaranteed by the FDIC or any
other government agency. Although the portfolio seeks to preserve the value of
your investment at $1.00 per share, this share price isn't guaranteed and you
could lose money by investing in the portfolio.
14 | Treasury Portolio
<PAGE>
| Performance
The bar chart shows how the total returns for the portfolio's Service Shares
have varied from year to year, which may give some idea of risk. The table shows
how the portfolio's Service Shares' returns over different periods average out.
All figures on this page assume reinvestment of dividends and distributions. As
always, past performance is no guarantee of future results.
Premier Money Market Shares do not have a full calendar year of performance,
therefore past performance data is not provided. Although Service Shares are not
offered in this prospectus, they are invested in the same portfolio of
securities. Service Shares annual returns differ only to the extent that the
classes have different fees and expenses.
--------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
3.33 2.89 4.02 5.75 5.20 5.75 5.21 5.30
1992 1993 1994 1995 1996 1997 1998 1999
Best Quarter: 1.79%, Q4 1997
Worst Quarter: 0.69%, Q4 1992
Year-to-date return as of 6/30/2000: 3.31%
--------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/1999
--------------------------------------------------------------------------------
1 Year 5 Years Since Inception*
--------------------------------------------------------------------------------
5.30% 5.35% 4.62%
--------------------------------------------------------------------------------
* Inception date for the portfolio's Service Shares is December 17, 1991.
In the chart, total returns for 1992 through 1999 would have been lower if
operating expenses hadn't been reduced.
In the table, total returns from inception through 1999 would have been lower if
operating expenses hadn't been reduced.
7-day yield as of 12/31/1999: 5.10%
To find out Premier Money Market Shares performance, including yield
information, contact your financial services firm from which you obtained this
prospectus.
Treasury Portfolio | 15
<PAGE>
| How Much Investors Pay
This fee table describes the fees and expenses that you may pay if you buy and
hold Premier Money Market Shares of this portfolio. This information doesn't
include any fees that may be charged by your financial services firm.
--------------------------------------------------------------------------------
Fee Table
--------------------------------------------------------------------------------
Shareholder Fees (%)
(paid directly from your investment) None
--------------------------------------------------------------------------------
Annual Operating Expenses (%)
(deducted from portfolio assets)
--------------------------------------------------------------------------------
Management Fee 0.15%
--------------------------------------------------------------------------------
Distribution (12b-1) Fee 0.25%
--------------------------------------------------------------------------------
Other Expenses* 0.63%
--------------------------------------------------------------------------------
Total Annual Operating Expenses 1.03%
--------------------------------------------------------------------------------
Expense Reimbursement** 0.03%
--------------------------------------------------------------------------------
Net Expenses** 1.00%
--------------------------------------------------------------------------------
* Includes costs of shareholder servicing, custody and similar expenses, which
may vary with portfolio size and other factors.
** By contract, total annual operating expenses are capped at 1.00% through
July 31, 2000.
--------------------------------------------------------------------------------
Example
--------------------------------------------------------------------------------
Based on the figures above (including one year of capped expenses), this example
helps you compare the portfolio's Premier Money Market Shares' expenses to those
of other mutual funds. The example assumes the expenses above remain the same,
that you invested $10,000, earned 5% annual returns, reinvested all dividends
and distributions and sold your shares at the end of each period. This is only
an example; actual expenses will be different.
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
$102 $325 $566 $1,257
--------------------------------------------------------------------------------
16 | Treasury Portfolio
<PAGE>
| Other Policies And Risks
While the previous pages describe the main points of each portfolio's strategy
and risks, there are a few other issues to know about:
o As a temporary defensive measure, the Tax-Exempt Portfolio could invest in
taxable money market securities. This would mean that the portfolio was not
pursuing its goal.
o The investment advisor establishes a security's credit grade when it buys the
security, using independent ratings or, for unrated securities, its own
credit analysis. If a security's credit quality falls below the minimum
required for purchase by a portfolio, the security will be sold unless the
Board believes this would not be in the shareholders' best interests.
o This prospectus doesn't tell you about every policy or risk of investing in a
portfolio. For more information on these, you may want to request a copy of
the Statement of Additional Information (the last page tells you how to do
this).
Keep in mind that there is no assurance that any mutual fund will achieve its
goal.
Other Policies And Risks | 17
<PAGE>
| Who Manages The Portfolios
The Investment Advisor
The portfolios' investment advisor is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY. Scudder Kemper has more than 80 years of experience
managing mutual funds and currently has more than $290 billion in assets under
management.
Scudder Kemper takes a team approach to asset management, bringing together
professionals from many investment disciplines. Supporting each team are Scudder
Kemper's many economists, research analysts, traders and other investment
specialists, located across the United States and around the world.
For serving as each portfolio's investment advisor, Scudder Kemper receives a
management fee. Below are the actual rates paid by each portfolio for the 12
months through the most recent fiscal year end, as a percentage of daily net
assets.
------------------------------------------------------
Portfolio Name Fee Paid
------------------------------------------------------
Money Market Portfolio 0.17%
------------------------------------------------------
Government Securities Portfolio 0.17%
------------------------------------------------------
Tax-Exempt Portfolio 0.17%
------------------------------------------------------
Treasury Portfolio 0.00%*
------------------------------------------------------
* Reflecting the effect of expense limitations and/or fee waivers then in
effect.
The Portfolio Managers
The portfolio managers handle the day-to-day management of each portfolio. Frank
J. Rachwalski, Jr. serves as lead manager for each portfolio.
Mr. Rachwalski joined the advisor in 1973 and began his investment career at
that time. Mr. Rachwalski joined each portfolio in 1990, and has been
responsible for the trading and portfolio management of money market funds since
1974.
Money Market Portfolio -- Geoffrey Gibbs serves as manager for the portfolio.
Mr. Gibbs joined the advisor in 1996 as a trader for money market funds and
began his investment career in 1994. Mr. Gibbs joined the portfolio in 1999.
Government Securities Portfolio -- Dean Meddaugh serves as manager for the
portfolio. Mr. Meddaugh joined the advisor in 1996 as a money market trader, and
in 1998 became a money market manager. He began his investment career in 1994 as
an accountant for an unaffiliated investment management firm. Mr. Meddaugh
joined the portfolio in 1999.
Tax-Exempt Portfolio and Treasury Portfolio -- Jerri I. Cohen serves as a
manager to each portfolio. Ms. Cohen joined the advisor in 1981 as an accountant
and began her investment career in 1992 as a money market trader. Ms. Cohen
joined the portfolios in 1998.
o The portfolios are managed by a team of investment professionals who work
together to develop the portfolios' investment strategies.
18 | Who Manages The Portfolios
<PAGE>
| Financial Highlights
These tables are designed to help you understand the financial performance of
each portfolio's Premier Money Market Shares for the most recent fiscal year.
The figures in the first part of the table are for a single share. The total
return figures represent the percentage that an investor in a particular
portfolio would have earned, assuming all dividends and distributions were
reinvested. This information has been audited by Ernst & Young LLP, whose
report, along with each portfolio's financial statements, is included in the
annual report (see "Shareholder reports" on the last page).
--------------------------------------------------------------------------------
Money Market Portfolio -- Premier Money Market Shares
--------------------------------------------------------------------------------
Period ended April 30, 2000(a)
--------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.00
--------------------------------------------------------------------------------
Net investment income .01
--------------------------------------------------------------------------------
Less distributions from net investment income (.01)
--------------------------------------------------------------------------------
Net asset value, end of period $ 1.00
--------------------------------------------------------------------------------
Total Return (%) (b) .94%**
--------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
--------------------------------------------------------------------------------
Net assets, end of period ($ thousands) 11,359
--------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) .98*
--------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) .95*
--------------------------------------------------------------------------------
Ratio of net investment income (%) 5.19*
--------------------------------------------------------------------------------
(a) For the period February 23, 2000 to April 30, 2000.
(b) Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
Financial Highlights | 19
<PAGE>
--------------------------------------------------------------------------------
Government Securities Portfolio -- Premier Money Market Shares
--------------------------------------------------------------------------------
Period ended April 30, 2000(a)
--------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.00
--------------------------------------------------------------------------------
Net investment income .01
--------------------------------------------------------------------------------
Less distributions from net investment income (.01)
--------------------------------------------------------------------------------
Net asset value, end of period $ 1.00
--------------------------------------------------------------------------------
Total Return (%) (b) .84**
--------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
--------------------------------------------------------------------------------
Net assets, end of period ($ thousands) 3,708
--------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 1.00*
--------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 1.00*
--------------------------------------------------------------------------------
Ratio of net investment income (%) 5.01*
--------------------------------------------------------------------------------
(a) For the period March 1, 2000 to April 30, 2000.
(b) Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
--------------------------------------------------------------------------------
Tax-Exempt Portfolio -- Premier Money Market Shares
--------------------------------------------------------------------------------
Period ended April 30, 2000(a)
--------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.00
--------------------------------------------------------------------------------
Net investment income .01
--------------------------------------------------------------------------------
Less distributions from net investment income (.01)
--------------------------------------------------------------------------------
Net asset value, end of period $ 1.00
--------------------------------------------------------------------------------
Total Return (%) (b) .45**
--------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
--------------------------------------------------------------------------------
Net assets, end of period ($ thousands) 402
--------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) .96*
--------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) .96*
--------------------------------------------------------------------------------
Ratio of net investment income (%) 3.05*
--------------------------------------------------------------------------------
(a) For the period March 7, 2000 to April 30, 2000.
(b) Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
20 | Financial Highlights
<PAGE>
Your Investment In The Portfolios
The following pages describe the main policies associated with buying and
selling shares of the portfolios. There is also information on dividends and
taxes and other matters that may affect you as a portfolio shareholder.
Because these portfolios are available only through a financial services firm,
such as a broker or financial institution, you should contact a representative
of your financial services firm for instructions on how to buy or sell portfolio
shares.
| Policies You Should Know About
The policies below may affect you as a shareholder. In any case where materials
provided by your financial services firm contradict the information given here,
you should follow the information in your firm's materials. Please note that a
financial services firm may charge its own fees.
Keep in mind that the information in this prospectus applies only to each
portfolio's Premier Money Market Shares. The Money Market Portfolio and
Tax-Exempt Portfolio have three other share classes, Government Securities
Portfolio and Treasury Portfolio have one other share class, which are described
in separate prospectuses and which have different fees, requirements and
services.
Rule 12b-1 Plan
Each portfolio has adopted a plan under Rule 12b-1 for each portfolio's Premier
Money Market Shares that provides for fees payable as an expense of a portfolio
that are used by the principal underwriter to pay for distribution and services
for that portfolio. Under the 12b-1 plan, each portfolio pays an annual
distribution services fee, payable monthly, of 0.25% of that portfolio's average
daily net assets. Because 12b-1 fees are paid out of the portfolios' assets on
an ongoing basis, they will, over time, increase the cost of investment and may
cost more than paying other types of sales charges.
Policies You Should Know About | 21
<PAGE>
Policies about transactions
The portfolios are open for business each day the New York Stock Exchange is
open. Normally, the portfolios calculate their share price every business day:
at 11:00 a.m., 1:00 p.m. and 3:00 p.m. Central time for Money Market Portfolio
and Treasury Portfolio, at 11:00 a.m., 1:00 p.m., 3:00 p.m. and 8:00 p.m.
Central time for Government Securities Portfolio and at 11:00 a.m. and 3:00 p.m.
Central time for Tax-Exempt Portfolio.
As noted earlier, each portfolio expects to maintain a stable $1.00 share price.
You can place an order to buy or sell shares at any time. Once your order is
received by Kemper Service Company, and they have determined that it is a "good
order," it will be processed at the next share price calculated.
Because orders placed through financial services firms must be forwarded to
Kemper Service Company before they can be processed, you'll need to allow extra
time. A representative of your financial services firm should be able to tell
you when your order will be processed.
Wire transactions that arrive by 1:00 p.m. Central time (11:00 a.m. Central time
for Tax-Exempt Portfolio) will receive that day's dividend. Wire transactions
received by 3:00 p.m. Central time (for all portfolios) or 8:00 p.m. (for
Government Securities Portfolio) will start to accrue dividends the next
calendar day. Investments by check will be effective at 3:00 p.m. Central time
on the business day following receipt and will earn dividends the following
calendar day. Confirmed share purchases that are effective at 8:00 p.m. Central
time for Government Securities Portfolio will receive dividends upon receipt of
payment in accordance with the time provisions above. If an order is accompanied
by a check drawn on a foreign bank, funds must normally be collected on such
check before shares of a portfolio will be purchased.
Wire purchase orders should be directed to:
UMB Bank N.A.
(ABA #101-000-695)
10th Grand Avenue,
Kansas City, Missouri 64106
for credit to the appropriate portfolio bank account (Money Market Portfolio
346: 98-0119-980-3; Government Securities Portfolio 347: 98-0119-983-8;
Tax-Exempt Portfolio 348: 98-0119-985-4; Treasury Portfolio 343: 98-7036-760-2)
and further credit to your account number.
When selling shares, you'll generally receive the dividend for the day on which
your shares were sold. If we receive a sell request before 11:00 a.m. Central
time and the request calls for proceeds to be sent out by wire, we will normally
wire you the proceeds on the same day. However you won't receive that day's
dividend.
Checkwriting lets you sell portfolio shares by writing a check. Your investment
keeps earning dividends until your check clears. Please note that you should not
write checks for less than $100 or for more than $5,000,000. Note as well that
we can't honor any check larger than your balance at the time the check is
presented to us.
22 | Policies You Should Know About
<PAGE>
When you want to sell more than $50,000 worth of shares or send the proceeds to
a third party or to a new address, you'll usually need to place your order in
writing and include a signature guarantee. The only exception is if you want
money wired to a bank account that is already on file with us; in that case, you
don't need a signature guarantee. Also, you don't need a signature guarantee for
an exchange, although we may require one in certain other circumstances.
A signature guarantee is simply a certification of your signature -- a valuable
safeguard against fraud. You can get a signature guarantee from most brokerages,
banks, savings institutions and credit unions. Note that you can't get a
signature guarantee from a notary public.
If you purchased your shares directly from the portfolio's transfer agent, you
can sell them by sending a written request (with a signature guarantee) to:
Kemper Service Company
Attention: Transaction Processing
P.O. Box 219557
Kansas City, MO 64121
Money from shares you sell is normally sent out within one business day of when
your order is processed (not when it is received), although it could be delayed
for up to seven days. There are also two circumstances when it could be longer:
when you are selling shares you bought recently by check and that check hasn't
cleared yet (maximum delay: ten days) or when unusual circumstances prompt the
SEC to allow further delays.
You may obtain additional information about other ways to sell your shares by
contacting your financial services firm.
Your financial services firm may set its own minimum investments, although those
set by each portfolio are as follows:
o Minimum initial investment: $1,000
o Minimum additional investment: $100
Share certificates are available on written request. However, we don't recommend
them unless you want them for a specific purpose, because they can only be sold
by mailing them in, and if they're ever lost they're difficult and expensive to
replace.
How the portfolios calculate share price
For each share class of each portfolio the share price is the net asset value
per share, or NAV. To calculate NAV, each share class of each portfolio uses the
following equation:
TOTAL ASSETS - TOTAL LIABILITIES
---------------------------------- = NAV
TOTAL NUMBER OF SHARES OUTSTANDING
In valuing securities, we typically use the amortized cost method (the method
used by most money market funds).
Policies You Should Know About | 23
<PAGE>
Other rights we reserve
You should be aware that we may do any of the following:
o withhold 31% of your distributions as federal income tax if you have been
notified by the IRS that you are subject to backup withholding, or if you
fail to provide us with a correct taxpayer ID number or certification that
you are exempt from backup withholding
o reject a new account application if you don't provide a correct Social
Security or other tax ID number; if the account has already been opened, we
may give you 30 days' notice to provide the correct number
o close your account and send you the proceeds if your balance falls below
$1,000; we will give you 60 days' notice so you can either increase your
balance or close your account (this policy doesn't apply to most retirement
accounts)
o pay you for shares you sell by "redeeming in kind," that is, by giving you
marketable securities (which typically will involve brokerage costs for you
to liquidate) rather than cash; generally, a portfolio won't make a
redemption in kind unless your requests over a 90-day period total more than
$250,000 or 1% of the value of a portfolio's net assets
o change, add or withdraw various services, fees and account policies
o reject or limit purchases of shares for any reason without prior notice
o withdraw or suspend any part of the offering made by this prospectus
24 | Policies You Should Know About
<PAGE>
| Understanding Distributions And Taxes
Because each shareholder's tax situation is unique, it's always a good idea to
ask your tax professional about the tax consequences of your investments,
including any state and local tax consequences.
By law, a mutual fund is required to pass through to its shareholders virtually
all of its net earnings. A portfolio can earn money in two ways: by receiving
interest, dividends or other income from securities it holds, and by selling
securities for more than it paid for them. (A portfolio's earnings are separate
from any gains or losses stemming from your own purchase of shares.) A portfolio
may not always pay a distribution for a given period.
The portfolios intend to declare income dividends daily, and pay them monthly.
The portfolios may make short- or long-term capital gains distributions in
October, November or December, and may make additional distributions for tax
purposes if necessary. Capital gains may be taxable at different rates depending
on the length of time the portfolio holds its assets. Exchanges of portfolio
shares or among other mutual funds may also be taxable events.
You can choose how to receive your dividends and distributions. You can have
them all automatically reinvested in fund shares (at NAV) or all sent to you by
check. Tell us your preference on your application. If you don't indicate a
preference, your dividends and distributions will all be reinvested. For
retirement plans, reinvestment is the only option.
Dividends from Tax-Exempt Portfolio are generally tax-free for most
shareholders, meaning that investors can receive them without incurring federal
income tax liability. However, there are a few exceptions:
o a portion of Tax-Exempt Portfolio's dividends may be taxable as an ordinary
income if it came from investments in taxable securities
o because Tax-Exempt Portfolio can invest up to 20% of net assets in
securities whose income is subject to the federal alternative minimum tax
(AMT), you may owe taxes on a portion of your dividends if you are among
those investors who must pay AMT
The following tables show the usual tax status of transactions in fund shares as
well as that of any taxable distribution from a portfolio:
Generally taxed at ordinary income rates
--------------------------------------------------------------------------------
o short-term capital gains from selling portfolio shares
--------------------------------------------------------------------------------
o income dividends you receive from a portfolio
--------------------------------------------------------------------------------
o short-term capital gains distributions you receive from a portfolio
--------------------------------------------------------------------------------
Generally taxed at capital gains rates
--------------------------------------------------------------------------------
o long-term capital gains from selling portfolio shares
--------------------------------------------------------------------------------
o long-term capital gains distributions you receive from a portfolio
--------------------------------------------------------------------------------
You will be sent detailed tax information every January. These statements tell
you the amount and the tax category of any dividends or distributions you
received. They also have certain details on your purchases and sales of shares.
The tax status of dividends and distributions is the same whether you reinvest
them or not. Dividends or distributions declared in the last quarter of a given
year are taxed in that year, even though you may not receive the money until the
following January.
Understanding Distributions And Taxes | 25
<PAGE>
| To Get More Information
Shareholder reports -- These have detailed performance figures, a list of
everything each portfolio owns and the portfolio's financial statements.
Shareholders get these reports automatically. To reduce costs, we may mail one
copy per household. For more copies, contact your financial services firm.
Statement of Additional Information (SAI) -- This tells you more about each
portfolio's features and policies, including additional risk information. The
SAI is incorporated by reference into this document (meaning that it's legally
part of this prospectus).
If you'd like to ask for copies of these documents, please contact your
financial services firm or the SEC (see below). If you're a shareholder and have
questions, please contact your financial services firm. Materials you get from
your financial services firm are free; those from the SEC involve a copying fee.
If you like, you can look over these materials in person at the SEC's Public
Reference Room in Washington, DC, or request them electronically at
[email protected]. You can also obtain these materials by calling the
Shareholder Service Agent at (800) 231-8568, during normal business hours only.
SEC
450 Fifth Street, N.W.
Washington, DC 20549-0102
1-202-942-8090
www.sec.gov
SEC File Numbers:
Cash Account Trust 811-5970
Money Market Portfolio
Government Securities Portfolio
Tax-Exempt Portfolio
Investors Cash Trust
Treasury Portfolio 811-6103
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
August 1, 2000
CASH ACCOUNT TRUST
222 South Riverside Plaza, Chicago, Illinois 60606
1-800-231-8568
This combined Statement of Additional Information contains information about the
Service Shares of the Money Market Portfolio, Government Securities Portfolio
and Tax-Exempt Portfolio (each a "Portfolio", collectively the "Portfolios")
offered by Cash Account Trust (the "Trust"). The Trust is an open-end
diversified management investment company. This combined Statement of Additional
Information is not a prospectus and should be read in conjunction with the
prospectus of the Trust dated August 1, 2000. The prospectus may be obtained
without charge from the Trust at the address or telephone number on this cover
or the firm from which this Statement of Additional Information was received and
is also available along with other related materials at the SEC's Internet web
site (http://www.sec.gov). The Portfolios' Annual Report, dated April 30, 2000,
which accompanies this Statement of Additional Information and may also be
obtained free of charge by calling (800) 231-8568, is incorporated by reference
into and is hereby deemed to be a part of this Statement of Additional
Information.
TABLE OF CONTENTS
INVESTMENT RESTRICTIONS.................................................2
INVESTMENT POLICIES AND TECHNIQUES......................................4
INVESTMENT MANAGER AND SHAREHOLDER SERVICES............................10
PORTFOLIO TRANSACTIONS.................................................14
PURCHASE AND REDEMPTION OF SHARES......................................15
DIVIDENDS, NET ASSET VALUE AND TAXES...................................18
PERFORMANCE............................................................20
OFFICERS AND TRUSTEES..................................................22
SPECIAL FEATURES.......................................................25
SHAREHOLDER RIGHTS.....................................................27
APPENDIX -- RATINGS OF INVESTMENTS.....................................28
<PAGE>
INVESTMENT RESTRICTIONS
The Trust has adopted for the Portfolios certain investment restrictions which,
together with the investment objective and policies of each Portfolio (except
for policies designated as non-fundamental and limited in regard to the
Tax-Exempt Portfolio to the policies in the first and fifth paragraphs under
Investment Policies and Techniques- "Tax-Exempt Portfolio" below), cannot be
changed for a Portfolio without approval by holders of a majority of its
outstanding voting shares. As defined in the Investment Company Act of 1940, as
amended (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 Trust is an open-end diversified management investment company.
The Money Market Portfolio and the Government Securities Portfolio individually
may not:
(1) Purchase securities of any issuer (other than obligations of,
or guaranteed by, the United States Government, its agencies
or instrumentalities) if, as a result, more than 5% of the
value of the Portfolio's assets would be invested in
securities of that issuer.
(2) Purchase more than 10% of any class of securities of any
issuer. All debt securities and all preferred stocks are each
considered as one class.
(3) Make loans to others (except through the purchase of debt
obligations or repurchase agreements in accordance with its
investment objective and policies).
(4) Borrow money except as a temporary measure for extraordinary
or emergency purposes and then only in an amount up to
one-third of the value of its total assets, in order to meet
redemption requests without immediately selling any money
market instruments (any such borrowings under this section
will not be collateralized). If, for any reason, the current
value of the Portfolio's total assets falls below an amount
equal to three times the amount of its indebtedness from money
borrowed, the Portfolio will, within three days (not including
Sundays and holidays), reduce its indebtedness to the extent
necessary. The Portfolio will not borrow for leverage
purposes.
(5) Make short sales of securities, or purchase any securities on
margin except to obtain such short-term credits as may be
necessary for the clearance of transactions.
(6) Write, purchase or sell puts, calls or combinations thereof.
(7) Purchase or retain the securities of any issuer if any of the
officers, trustees or directors of the Trust or its investment
adviser owns beneficially more than 1/2 of 1% of the
securities of such issuer and together own more than 5% of the
securities of such issuer.
(8) Invest for the purpose of exercising control or management of
another issuer.
(9) Invest in commodities or commodity futures contracts or in
real estate (or real estate limited partnerships), although it
may invest in securities which are secured by real estate and
securities of issuers which invest or deal in real estate.
(10) Invest in interests in oil, gas or other mineral exploration
or development programs or leases, although it may invest in
the securities of issuers which invest in or sponsor such
programs.
(11) Underwrite securities issued by others except to the extent
the Portfolio may be deemed to be an underwriter, under the
federal securities laws, in connection with the disposition of
portfolio securities.
2
<PAGE>
(12) Issue senior securities as defined in the 1940 Act.
Additionally, the Money Market Portfolio may not:
(13) Concentrate 25% or more of the value of the Portfolio's assets
in any one industry; provided, however, that (a) the Portfolio
reserves freedom of action to invest up to 100% of its assets
in obligations of, or guaranteed by, the United States
Government, its agencies or instrumentalities in accordance
with its investment objective and policies and (b) the
Portfolio will invest at least 25% of its assets in
obligations issued by banks in accordance with its investment
objective and policies. However, the Portfolio may, in the
discretion of its investment adviser, invest less than 25% of
its assets in obligations issued by banks whenever the
Portfolio assumes a temporary defensive posture.
With regard to restriction #13, for purposes of determining the percentage of
the Portfolio's total assets invested in securities of issuers having their
principal business activities in a particular industry, asset backed securities
will be classified separately, based on the nature of the underlying assets.
Currently, the following categories are used: captive auto, diversified, retail
and consumer loans, captive equipment and business, business trade receivables,
nuclear fuel and capital and mortgage lending.
The Tax-Exempt Portfolio may not:
(1) Purchase securities if as a result of such purchase more than
25% of the Portfolio's total assets would be invested in any
industry or in any one state. Municipal securities and
obligations of, or guaranteed by, the U.S. Government, its
agencies or instrumentalities are not considered an industry
for purposes of this restriction.
(2) Purchase securities of any issuer (other than obligations of,
or guaranteed by, the U.S. Government, its agencies or
instrumentalities) if as a result more than 5% of the value of
the Portfolio's assets would be invested in the securities of
such issuer. For purposes of this limitation, the Portfolio
will regard the entity that has the primary responsibility for
the payment of interest and principal as the issuer.
(3) Make loans to others (except through the purchase of debt
obligations or repurchase agreements in accordance with its
investment objective and policies).
(4) Borrow money except as a temporary measure for extraordinary
or emergency purposes and then only in an amount up to
one-third of the value of its total assets, in order to meet
redemption requests without immediately selling any money
market instruments (any such borrowings under this section
will not be collateralized). If, for any reason, the current
value of the Portfolio's total assets falls below an amount
equal to three times the amount of its indebtedness from money
borrowed, the Portfolio will, within three days (not including
Sundays and holidays), reduce its indebtedness to the extent
necessary. The Portfolio will not borrow for leverage
purposes.
(5) Make short sales of securities or purchase securities on
margin, except to obtain such short-term credits as may be
necessary for the clearance of transactions.
(6) Write, purchase or sell puts, calls or combinations thereof,
although the Portfolio may purchase Municipal Securities
subject to Standby Commitments in accordance with its
investment objective and policies.
(7) Purchase or retain the securities of any issuer if any of the
officers, trustees or directors of the Trust or its investment
adviser owns beneficially more than 1/2 of 1% of the
securities of such issuer and together own more than 5% of the
securities of such issuer.
(8) Invest for the purpose of exercising control or management of
another issuer.
3
<PAGE>
(9) Invest in commodities or commodity futures contracts or in
real estate (or real estate limited partnerships) except that
the Portfolio may invest in Municipal Securities secured by
real estate or interests therein.
(10) Invest in interests in oil, gas or other mineral exploration
or development programs or leases, although it may invest in
Municipal Securities of issuers which invest in or sponsor
such programs or leases.
(11) Underwrite securities issued by others except to the extent
the Portfolio may be deemed to be an underwriter, under the
federal securities laws, in connection with the disposition of
portfolio securities.
(12) Issue senior securities as defined in the 1940 Act.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The
Portfolios did not borrow in the latest fiscal period and have no present
intention of borrowing during the coming year as permitted for each Portfolio by
investment restriction number 4. In any event, borrowings would only be made as
permitted by such restrictions. The Tax-Exempt Portfolio may invest more than
25% of its total assets in industrial development bonds. Each Portfolio, as a
non-fundamental policy that may be changed without shareholder vote,
individually may not:
(i) Purchase securities of other investment companies,
except in connection with a merger, consolidation,
reorganization or acquisition of assets.
INVESTMENT POLICIES AND TECHNIQUES
Descriptions in this Statement of Additional Information of a particular
investment practice or technique in which a Portfolio may engage or a financial
instrument which a Portfolio may purchase are meant to describe the spectrum of
investments that Scudder Kemper Investments, Inc. (the "Advisor"), in its
discretion, might, but is not required to, use in managing a Portfolio's assets.
The Advisor may, in its discretion, at any time, employ such practice, technique
or instrument for one or more funds but not for all funds advised by it.
Furthermore, it is possible that certain types of financial instruments or
investment techniques described herein may not be available, permissible,
economically feasible or effective for their intended purposes in all markets.
Certain practices, techniques, or instruments may not be principal activities of
a Portfolio, but, to the extent employed, could, from time to time, have a
material impact on a Portfolio's performance.
The Portfolios described in this Statement of Additional Information seek to
provide maximum current income consistent with the stability of capital. Each
Portfolio is managed to maintain a net asset value of $1.00 per share.
The Trust is a money market mutual fund designed to provide its shareholders
with professional management of short-term investment dollars. The Trust is
designed for investors who seek maximum current income consistent with stability
of capital. The Trust pools individual and institutional investors' money that
it uses to buy high quality money market instruments. The Trust is a series
investment company that is able to provide investors with a choice of separate
investment portfolios. It currently offers three investment Portfolios: the
Money Market Portfolio, the Government Securities Portfolio and the Tax-Exempt
Portfolio. Because each Portfolio combines its shareholders' money, it can buy
and sell large blocks of securities, which reduces transaction costs and
maximizes yields. The Trust is managed by investment professionals who analyze
market trends to take advantage of changing conditions and who seek to minimize
risk by diversifying each Portfolio's investments. A Portfolio's investments are
subject to price fluctuations resulting from rising or declining interest rates
and are subject to the ability of the issuers of such investments to make
payment at maturity. However, because of their short maturities, liquidity and
high quality ratings, high quality money market instruments, such as those in
which the Portfolios invest, are generally considered to be among the safest
available. Thus, each Portfolio is designed for investors
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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 Portfolio seeks maximum current income consistent
with stability of capital. The Portfolio pursues its objective by investing
primarily in the following types of U.S. Dollar-denominated money market
instruments that mature in 397 days or less:
1. Obligations of, or guaranteed by, the U.S. or Canadian governments,
their agencies or instrumentalities.
2. Bank certificates of deposit, time deposits or bankers' acceptances of
U.S. banks (including their foreign branches) and Canadian chartered
banks having total assets in excess of $1 billion.
3. Bank certificates of deposit, time deposits or bankers' acceptances of
foreign banks (including their U.S. and foreign branches) having total
assets in excess of $10 billion.
4. Commercial paper, notes, bonds, debentures, participation certificates
or other debt obligations that (i) are rated high quality by Moody's
Investors Service, Inc. ("Moody's"), Standard & Poor's Corporation
("S&P"), or Duff & Phelps, Inc. ("Duff"); or (ii) if unrated, are
determined to be at least equal in quality to one or more of the above
ratings in the discretion of the Portfolio's investment manager.
Currently, only obligations in the top two categories are considered to
be rated high quality. The two highest rating categories of Moody's,
S&P and Duff for commercial paper are Prime-1 and Prime-2, A-1 and A-2
and Duff 1 and Duff 2, respectively. For other debt obligations, the
two highest rating categories for such services are Aaa and Aa, AAA and
AA and AAA and AA, respectively. For a description of these ratings,
see "Appendix-- Ratings of Investments" in this Statement of Additional
Information.
5. Repurchase agreements of obligations that are suitable for investment
under the categories set forth above. Repurchase agreements are
discussed below.
In addition, the Portfolio limits its investments to securities that meet the
quality and diversification requirements of Rule 2a-7 under the 1940 Act.
The Portfolio will normally invest at least 25% of its assets in obligations
issued by banks; provided, however, the Portfolio may in the discretion of the
Portfolio's investment manager temporarily invest less than 25% of its assets in
such obligations whenever the Portfolio assumes a defensive posture. Investments
by the Portfolio in Eurodollar certificates of deposit issued by London branches
of U.S. banks, or obligations issued by foreign entities, including U.S.
branches of foreign banks, involve risks that are different from investments in
securities of domestic branches of U.S. banks. These risks may include future
unfavorable political and economic developments, possible withholding taxes on
interest payments, seizure of foreign deposits, currency controls, interest
limitations or other governmental restrictions that might affect payment of
principal or interest. The market for such obligations may be less liquid and,
at times, more volatile than for securities of domestic branches of U.S. banks.
Additionally, there may be less public information available about foreign banks
and their branches. The profitability of the banking industry is dependent
largely upon the availability and cost of funds for the purpose of financing
lending operations under prevailing money market conditions. General economic
conditions as well as exposure to credit losses arising from possible financial
difficulties of borrowers play an important part in banking operations. As a
result of Federal and state laws and regulations, domestic banks are, among
other things, required to maintain specified levels of reserves, limited in the
amounts they can loan to a single borrower and subject to other regulations
designed to promote financial soundness. However, not all such laws and
regulations apply to the foreign branches of domestic banks. Foreign branches of
foreign banks are not regulated by U.S. banking authorities, and generally are
not bound by accounting, auditing and financial reporting standards comparable
to U.S. banks. Bank obligations held by the Portfolio do not benefit materially
from insurance from the Federal Deposit Insurance Corporation.
The Portfolio may invest in commercial paper issued by major corporations under
the Securities Act of 1933 in reliance on the exemption from registration
afforded by Section 3(a)(3) thereof. Such commercial paper may be issued only to
finance current transactions and must mature in nine months or less. Trading of
such commercial paper is conducted primarily by institutional investors through
investment dealers and individual investor participation in the commercial paper
market is very limited. The Portfolio also may invest in commercial paper issued
in reliance on the so-called "private placement" exemption from registration
that is afforded by Section 4(2) of the Securities Act of 1933 ("Section 4(2)
paper"). Section 4(2) paper is restricted as to disposition under the federal
securities laws, and generally is sold to institutional investors such as the
Portfolio who agree that they are purchasing the paper for investment and not
with a view to public distribution. Any resale by the purchaser must be in an
exempt transaction. Section 4(2) paper normally is resold to other institutional
investors like the Portfolio through or with the assistance of the issuer or
investment dealers who make a market in Section 4(2) paper,
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thus providing liquidity. The Portfolio's investment manager considers the
legally restricted but readily saleable Section 4(2) paper to be liquid;
however, pursuant to procedures approved by the Board of Trustees of the Trust,
if a particular investment in Section 4(2) paper is not determined to be liquid,
that investment will be included within the 10% limitation on illiquid
securities discussed below. The Portfolio's investment manager monitors the
liquidity of the Portfolio's investments in Section 4(2) paper on a continuous
basis.
The Portfolio may invest in high quality participation certificates
("certificates") representing undivided interests in trusts that hold a
portfolio of receivables from consumer and commercial credit transactions, such
as transactions involving consumer revolving credit card accounts or commercial
revolving credit loan facilities. The receivables would include amounts charged
for goods and services, finance charges, late charges and other related fees and
charges. Interest payable on the certificates may be fixed or may be adjusted
periodically or "float" continuously according to a formula based upon an
objective standard such as the 30-day commercial paper rate ("Variable Rate
Securities"). A trust may have the benefit of a letter of credit from a bank at
a level established to satisfy rating agencies as to the credit quality of the
assets supporting the payment of principal and interest on the certificates.
Payments of principal and interest on the certificates would be dependent upon
the underlying receivables in the trust and may be guaranteed under a letter of
credit to the extent of such credit. The quality rating by a rating service of
an issue of certificates is based primarily upon the value of the receivables
held by the trust and the credit rating of the issuer of any letter of credit
and of any other guarantor providing credit support to the trust. The
Portfolio's investment manager considers these factors as well as others, such
as any quality ratings issued by the rating services identified above, in
reviewing the credit risk presented by a certificate and in determining whether
the certificate is appropriate for investment by the Portfolio. Collection of
receivables in the trust may be affected by various social, legal and economic
factors affecting the use of credit and repayment patterns, such as changes in
consumer protection laws, the rate of inflation, unemployment levels and
relative interest rates. It is anticipated that for most publicly offered
certificates there will be a liquid secondary market or there may be demand
features enabling the Portfolio to readily sell its certificates prior to
maturity to the issuer or a third party. While the Portfolio may invest without
limit in certificates, it is currently anticipated that such investments will
not exceed 25% of the Portfolio's assets.
Government Securities Portfolio. The Portfolio seeks to provide maximum current
income consistent with stability of capital. The Portfolio pursues its objective
by investing primarily 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 backed by such obligations. All such
securities purchased mature in 397 days 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 are backed by the full faith and credit of the U.S. Government. Short-term
U.S. Government obligations generally are considered to be the safest short-term
investment. The U.S. Government guarantee of the securities owned by the
Portfolio, however, does not guarantee the net asset value of its shares, which
the Portfolio seeks to maintain at $1.00 per share. Also, with respect to
securities supported only by the credit of the issuing agency or instrumentality
that are backed by the full faith and credit of the U.S. Government, 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. Income paid by Treasuries is usually free from state and local income
taxes, and for most fund shareholders the bulk of fund distributions will be
free from these taxes as well (although not from federal income tax).
Tax-Exempt Portfolio. The Portfolio seeks to provide maximum current income that
is exempt from Federal income taxes to the extent consistent with stability of
capital. The Portfolio 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 and
alternative minimum tax ("Municipal Securities"). In compliance with the
position of the staff of the Securities and Exchange Commission, the Portfolio
does not consider "private activity" bonds to be Municipal Securities for
purposes of the 80% limitation. This is a fundamental policy so long as the
staff maintains its position, after which it would become non-fundamental.
Municipal Securities, such as industrial development bonds, are issued by or on
behalf of public authorities to obtain funds for purposes including privately
operated airports, housing, conventions, trade shows, ports, sports, parking or
pollution
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control facilities or for facilities for water, gas, electricity or sewage and
solid waste disposal. Such obligations, which may include lease arrangements,
are included within the term Municipal Securities if the interest paid thereon
qualifies as exempt from federal income tax. Other types of industrial
development bonds, the proceeds of which are used for the construction,
equipment, repair or improvement of privately operated industrial or commercial
facilities, may constitute Municipal Securities, although current Federal tax
laws place substantial limitations on the size of such issues.
Municipal Securities which the Portfolio may purchase include, without
limitation, debt obligations issued to obtain funds for various public purposes,
including the construction of a wide range of public facilities such as
airports, bridges, highways, housing, hospitals, mass transportation, public
utilities, schools, streets, and water and sewer works. Other public purposes
for which Municipal Securities may be issued include refunding outstanding
obligations, obtaining funds for general operating expenses and obtaining funds
to loan to other public institutions and facilities.
Tax anticipation notes typically are sold to finance working capital needs of
municipalities in anticipation of receiving property taxes on a future date.
Bond anticipation notes are sold on an interim basis in anticipation of a
municipality issuing a longer term bond in the future. Revenue anticipation
notes are issued in expectation of receipt of other types of revenue such as
those available under the Federal Revenue Sharing Program. Construction loan
notes are instruments insured by the Federal Housing Administration with
permanent financing by Fannie Mae or "Ginnie Mae" (the Government National
Mortgage Association) at the end of the project construction period.
Pre-refunded municipal bonds are bonds which are not yet refundable, but for
which securities have been placed in escrow to refund an original municipal bond
issue when it becomes refundable. Tax-free commercial paper is an unsecured
promissory obligation issued or guaranteed by a municipal issuer. The Tax-Exempt
Portfolio may purchase other Municipal Securities similar to the foregoing,
which are or may become available, including securities issued to pre-refund
other outstanding obligations of municipal issuers.
The Portfolio will invest only in Municipal Securities that at the time of
purchase: (a) are rated within the two highest-ratings for Municipal Securities
assigned by Moody's (Aaa or Aa) or assigned by S&P (AAA or AA); (b) are
guaranteed or insured by the U.S. Government as to the payment of principal and
interest; (c) are fully collateralized by an escrow of U.S. Government
securities acceptable to the Portfolio's investment manager; (d) have at the
time of purchase Moody's short-term Municipal Securities rating of MIG-2 or
higher or a municipal commercial paper rating of P-2 or higher, or S&P's
municipal commercial paper rating of A-2 or higher; (e) are unrated, if longer
term Municipal Securities of that issuer are rated within the two highest rating
categories by Moody's or S&P; or (f) are determined to be at least equal in
quality to one or more of the above ratings in the discretion of the Portfolio's
investment manager. In addition, the Portfolio limits its investments to
securities that meet the quality requirements of Rule 2a-7 under the Investment
Company Act of 1940. See "Net Asset Value."
Dividends representing net interest income received by the Portfolio on
Municipal Securities will be exempt from federal income tax when distributed to
the Portfolio's shareholders. Such dividend income may be subject to state and
local taxes. The Portfolio's assets will consist of Municipal Securities,
taxable temporary investments as described below and cash. The Portfolio
considers short-term Municipal Securities to be those that mature in 397 days or
less. Examples of Municipal Securities that are issued with original maturities
of one year or less are short-term tax anticipation notes, bond anticipation
notes, revenue anticipation notes, construction loan notes, pre-refunded
municipal bonds, warrants and tax-free commercial paper.
Municipal Securities generally are classified as "general obligation" or
"revenue" issues. General obligation bonds are secured by the issuer's pledge of
its full credit and taxing power for the payment of principal and interest.
Revenue bonds are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source such as the user of the
facility being financed. Industrial development bonds held by the Portfolio are
in most cases revenue bonds and generally are not payable from the unrestricted
revenues of the issuer, and do not constitute the pledge of the credit of the
issuer of such bonds. Among other types of instruments, the Portfolio may
purchase tax-exempt commercial paper, warrants and short-term municipal notes
such as tax anticipation notes, bond anticipation notes, revenue anticipation
notes, construction loan notes and other forms of short-term loans. Such notes
are issued with a short-term maturity in anticipation of the receipt of tax
payments, the proceeds of bond placements or other revenues. See "Appendix" for
a more detailed discussion of the Moody's and S&P ratings outlined above. The
Portfolio may invest in short-term "private activity" bonds.
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The Portfolio may purchase securities that provide for the right to resell them
to an issuer, bank or dealer at an agreed upon price or yield within a specified
period prior to the maturity date of such securities. Such a right to resell is
referred to as a "Standby Commitment." Securities may cost more with Standby
Commitments than without them. Standby Commitments will be entered into solely
to facilitate portfolio liquidity. A Standby Commitment may be exercised before
the maturity date of the related Municipal Security if the Portfolio's
investment adviser revises its evaluation of the creditworthiness of the
underlying security or of the entity issuing the Standby Commitment. The
Portfolio's policy is to enter into Standby Commitments only with issuers, banks
or dealers that are determined by the Portfolio's investment manager to present
minimal credit risks. If an issuer, bank or dealer should default on its
obligation to repurchase an underlying security, the Portfolio might be unable
to recover all or a portion of any loss sustained from having to sell the
security elsewhere.
The Portfolio may purchase high quality Certificates of Participation in trusts
that hold Municipal Securities. A Certificate of Participation gives the
Portfolio an undivided interest in the Municipal Security in the proportion that
the Portfolio's interest bears to the total principal amount of the Municipal
Security. These Certificates of Participation may be variable rate or fixed rate
with remaining maturities of one year or less. A Certificate of Participation
may be backed by an irrevocable letter of credit or guarantee of a financial
institution that satisfies rating agencies as to the credit quality of the
Municipal Security supporting the payment of principal and interest on the
Certificate of Participation. Payments of principal and interest would be
dependent upon the underlying Municipal Security and may be guaranteed under a
letter of credit to the extent of such credit. The quality rating by a rating
service of an issue of Certificates of Participation is based primarily upon the
rating of the Municipal Security held by the trust and the credit rating of the
issuer of any letter of credit and of any other guarantor providing credit
support to the issue. The Portfolio's investment manager considers these factors
as well as others, such as any quality ratings issued by the rating services
identified above, in reviewing the credit risk presented by a Certificate of
Participation and in determining whether the Certificate of Participation is
appropriate for investment by the Portfolio. It is anticipated by the
Portfolio's investment manager that, for most publicly offered Certificates of
Participation, there will be a liquid secondary market or there may be demand
features enabling the Portfolio to readily sell its Certificates of
Participation prior to maturity to the issuer or a third party. As to those
instruments with demand features, the Portfolio intends to exercise its right to
demand payment from the issuer of the demand feature only upon a default under
the terms of the Municipal Security, as needed to provide liquidity to meet
redemptions, or to maintain a high quality investment portfolio.
The Portfolio may purchase and sell Municipal Securities on a when-issued or
delayed delivery basis. A when-issued or delayed delivery transaction arises
when securities are bought or sold for future payment and delivery to secure
what is considered to be an advantageous price and yield to the Portfolio at the
time it enters into the transaction. In determining the maturity of portfolio
securities purchased on a when-issued or delayed delivery basis, the Portfolio
will consider them to have been purchased on the date when it committed itself
to the purchase.
A security purchased on a when-issued basis, like all securities held by the
Portfolio, is subject to changes in market value based upon changes in the level
of interest rates and investors' perceptions of the creditworthiness of the
issuer. Generally such securities will appreciate in value when interest rates
decline and decrease in value when interest rates rise. Therefore if, in order
to achieve higher interest income, the Portfolio remains substantially fully
invested at the same time that it has purchased securities on a when-issued
basis, there will be a greater possibility that the market value of the
Portfolio's assets will vary from $1.00 per share because the value of a
when-issued security is subject to market fluctuation and no interest accrues to
the purchaser prior to settlement of the transaction.
The Portfolio will only make commitments to purchase Municipal Securities on a
when-issued or delayed delivery basis with the intention of actually acquiring
the securities, but the Portfolio reserves the right to sell these securities
before the settlement date if deemed advisable. The sale of these securities may
result in the realization of gains that are not exempt from federal income tax.
In seeking to achieve its investment objective, the Portfolio may invest all or
any part of its assets in Municipal Securities that are industrial development
bonds. Moreover, although the Portfolio does not currently intend to do so on a
regular basis, it may invest more than 25% of its assets in Municipal Securities
that are repayable out of revenue streams generated from economically related
projects or facilities, if such investment is deemed necessary or appropriate by
the Portfolio's investment manager. To the extent that the Portfolio's assets
are concentrated in Municipal Securities payable from revenues on economically
related projects and facilities, the Portfolio will be subject to the risks
presented by such projects to a greater extent than it would be if the
Portfolio's assets were not so concentrated.
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From time to time, as a defensive measure or when acceptable short-term
Municipal Securities are not available, the Tax-Exempt Portfolio may invest in
taxable "temporary investments" that include: obligations of the U.S.
Government, its agencies or instrumentalities; debt securities rated within the
two highest grades by Moody's or S&P ; commercial paper rated in the two highest
grades by either of such rating services; certificates of deposit of domestic
banks with assets of $1 billion or more; and any of the foregoing temporary
investments subject to repurchase agreements. Repurchase agreements are
discussed below. Interest income from temporary investments is taxable to
shareholders as ordinary income. Although the Portfolio is permitted to invest
in taxable securities (limited under normal market conditions to 20% of the
Portfolio's total assets), it is the Portfolio's primary intention to generate
income dividends that are not subject to federal income taxes.
The Federal bankruptcy statutes relating to the adjustments of debts of
political subdivisions and authorities of states of the United States provide
that, in certain circumstances, such subdivisions or authorities may be
authorized to initiate bankruptcy proceedings without prior notice to or consent
of creditors, which proceedings could result in material adverse changes in the
rights of holders of obligations issued by such subdivisions or authorities.
Litigation challenging the validity under state constitutions of present systems
of financing public education has been initiated or adjudicated in a number of
states and legislation has been introduced to effect changes in public school
finances in some states. In other instances, there has been litigation
challenging the issuance of pollution control revenue bonds or the validity of
their issuance under state or Federal law that ultimately could affect the
validity of those Municipal Securities or the tax-free nature of the interest
thereon.
The Trust. Each Portfolio may invest in repurchase agreements, which are
instruments under which a Portfolio acquires ownership of a security from a
broker-dealer or bank that agrees to repurchase the security at a mutually
agreed upon time and price (which price is higher than the purchase price),
thereby determining the yield during the Portfolio's holding period. Maturity of
the securities subject to repurchase may exceed one year. In the event of a
bankruptcy or other default of a seller of a repurchase agreement, a Portfolio
might have expenses in enforcing its rights, and could experience losses,
including a decline in the value of the underlying securities and loss of
income. A Portfolio will not purchase illiquid securities, including time
deposits and repurchase agreements maturing in more than seven days if, as a
result thereof, more than 10% of such Portfolio's net assets valued at the time
of the transaction would be invested in such securities.
Each Portfolio may invest in Variable Rate Securities, instruments having rates
of interest that are adjusted periodically or that "float" continuously
according to formulae intended to minimize fluctuation in values of the
instruments. The interest rate of Variable Rate Securities ordinarily is
determined by reference to or is a percentage of an objective standard such as a
bank's prime rate, the 90-day U.S. Treasury Bill rate, or the rate of return on
commercial paper or bank certificates of deposit. Generally, the changes in the
interest rate on Variable Rate Securities reduce the fluctuation in the market
value of such securities. Accordingly, as interest rates decrease or increase,
the potential for capital appreciation or depreciation is less than for
fixed-rate obligations. Some Variable Rate Securities ("Variable Rate Demand
Securities") have a demand feature entitling the purchaser to resell the
securities at an amount approximately equal to amortized cost or the principal
amount thereof plus accrued interest. As is the case for other Variable Rate
Securities, the interest rate on Variable Rate Demand Securities varies
according to some objective standard intended to minimize fluctuation in the
values of the instruments. Each Portfolio determines the maturity of Variable
Rate Securities in accordance with Rule 2a-7, which allows each Portfolio to
consider certain of such instruments as having maturities shorter than the
maturity date on the face of the instrument .
A Portfolio may not borrow money except as a temporary measure for extraordinary
or emergency purposes, and then only in an amount up to one-third of the value
of its total assets, in order to meet redemption requests without immediately
selling any portfolio securities. Any such borrowings under this provision will
not be collateralized. No Portfolio will borrow for leverage purposes.
Repurchase Agreements. The Portfolios may enter into repurchase agreements with
any member bank of the Federal Reserve System or any domestic broker/dealer
which is recognized as a reporting Government securities dealer if the
creditworthiness of the bank or broker/dealer has been determined by the Advisor
to be at least as high as that of other obligations the Portfolios may purchase
or to be at least equal to that of issuers of commercial paper rated within the
two highest grades assigned by Moody's, S&P or Duff.
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A repurchase agreement provides a means for a Portfolio to earn taxable income
on funds for periods as short as overnight. It is an arrangement under which the
purchaser (i.e., the Portfolio) acquires a security ("Obligation") and the
seller agrees, at the time of sale, to repurchase the Obligation at a specified
time and price. Securities subject to a repurchase agreement are held in a
segregated account and the value of such securities kept at least equal to the
repurchase price on a daily basis. The repurchase price may be higher than the
purchase price, the difference being income to the Portfolio, or the purchase
and repurchase prices may be the same, with interest at a stated rate due to the
Portfolio together with the repurchase price on the date of repurchase. In
either case, the income to a Portfolio (which is taxable) is unrelated to the
interest rate on the Obligation itself. Obligations will be held by the
custodian or in the Federal Reserve Book Entry system.
It is not clear whether a court would consider the Obligation purchased by a
Portfolio subject to a repurchase agreement as being owned by that Portfolio or
as being collateral for a loan by the Portfolio to the seller. In the event of
the commencement of bankruptcy or insolvency proceedings with respect to the
seller of the Obligation before repurchase of the Obligation under a repurchase
agreement, a Portfolio may encounter delay and incur costs before being able to
sell the security. Delays may involve loss of interest or decline in price of
the Obligation. If the court characterized the transaction as a loan and a
Portfolio has not perfected an interest in the Obligation, that Portfolio may be
required to return the Obligation to the seller's estate and be treated as an
unsecured creditor of the seller. As an unsecured creditor, a Portfolio is at
risk of losing some or all of the principal and income involved in the
transaction. As with any unsecured debt obligation purchased for each Portfolio,
the Advisor seeks to minimize the risk of loss through repurchase agreements by
analyzing the creditworthiness of the obligor, in this case the seller of the
Obligation. Apart from the risk of bankruptcy or insolvency proceedings, there
is also the risk that the seller may fail to repurchase the Obligation, in which
case the Portfolio may incur a loss if the proceeds to the Portfolio of the sale
to a third party are less than the repurchase price. However, if the market
value of the Obligation subject to the repurchase agreement becomes less than
the repurchase price (including interest), each Portfolio will direct the seller
of the Obligation to deliver additional securities so that the market value of
all securities subject to the repurchase agreement will equal or exceed the
repurchase price. It is possible that a Portfolio will be unsuccessful in
seeking to enforce the seller's contractual obligation to deliver additional
securities.
Interfund Borrowing and Lending Program. The Trust has received exemptive relief
from the SEC which permits the Trust to participate in an interfund lending
program among certain investment companies advised by the Advisor. The interfund
lending program allows the participating funds to borrow money from and loan
money to each other for temporary or emergency purposes. The program is subject
to a number of conditions designed to ensure fair and equitable treatment of all
participating funds, including the following: (1) no fund may borrow money
through the program unless it receives a more favorable interest rate than a
rate approximating the lowest interest rate at which bank loans would be
available to any of the participating funds under a loan agreement; and (2) no
fund may lend money through the program unless it receives a more favorable
return than that available from an investment in repurchase agreements and, to
the extent applicable, money market cash sweep arrangements. In addition, a fund
may participate in the program only if and to the extent that such participation
is consistent with the fund's investment objectives and policies (for instance,
money market funds would normally participate only as lenders and tax exempt
funds only as borrowers). Interfund loans and borrowings may extend overnight,
but could have a maximum duration of seven days. Loans may be called on one
day's notice. A fund may have to borrow from a bank at a higher interest rate if
an interfund loan is called or not renewed. Any delay in repayment to a lending
fund could result in a lost investment opportunity or additional costs. The
program is subject to the oversight and periodic review of the Boards of the
participating funds. To the extent the Trust is actually engaged in borrowing
through the interfund lending program, the Trust, as a matter of non-fundamental
policy, may not borrow for other than temporary or emergency purposes (and not
for leveraging).
INVESTMENT ADVISOR AND SHAREHOLDER SERVICES
Investment Advisor. Scudder Kemper Investments, Inc. ("Scudder Kemper") 345 Park
Avenue, New York, New York, is the investment adviser for the Portfolio. Scudder
Kemper is approximately 70% owned by Zurich Insurance Company, a leading
internationally recognized provider of insurance and financial services in
property/casualty and life insurance, reinsurance and structured financial
solutions as well as asset management. The balance of Scudder Kemper is
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owned by Scudder Kemper's officers and employees. Responsibility for overall
management of each Fund rests with the Trust's Board of Trustees and officers.
Pursuant to an investment management agreement (the "Agreement"), Scudder Kemper
acts as each Fund's Advisor, manages its investments, administers its business
affairs, furnishes office facilities and equipment, provides clerical and
administrative services, provides shareholder and information services and
permits any of its officers or employees to serve without compensation as
trustees or officers of the Trust if elected to such positions. The Trust pays
the expenses of its operations, including the fees and expenses of independent
auditors, counsel, custodian and transfer agent and the cost of share
certificates, reports and notices to shareholders, costs of calculating net
asset value and maintaining all accounting records related thereto, brokerage
commissions or transaction costs, taxes, registration fees, the fees and
expenses of qualifying the Trust and its shares for distribution under federal
and state securities laws and membership dues in the Investment Company
Institute or any similar organization.
The Agreement provides that Scudder Kemper shall not be liable for any error of
judgment or of law, or for any loss suffered by the Trust in connection with the
matters to which the agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of Scudder Kemper in the
performance of its obligations and duties, or by reason of its reckless
disregard of its obligations and duties under the agreement.
In certain cases the investments for the Portfolios are managed by the same
individuals who manage one or more other mutual funds advised by the Advisor
that have similar names, objectives and investment styles as the Portfolios. You
should be aware that the Portfolios are likely to differ from these other mutual
funds in size, cash flow pattern and tax matters. Accordingly, the holdings and
performance of the Portfolios can be expected to vary from those of the other
mutual funds.
On 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., a
former subsidiary of Zurich and the former investment manager to each Fund, and
Scudder changed its name to Scudder Kemper Investments, Inc. As a result of the
transaction, Zurich owned approximately 70% of the Adviser, with the balance
owned by the Adviser's officers and employees.
On September 7, 1998, the businesses of Zurich (including Zurich's 70% interest
in Scudder Kemper) 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 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 Scudder Kemper was deemed to have been assigned and,
therefore, terminated. The Board has approved a new investment management
agreement with Scudder Kemper, which is substantially identical to the current
investment management agreement, except for the date of execution and
termination. This agreement became effective upon the termination of the then
current investment management agreement and was approved by shareholders at a
special meeting.
The Agreement dated September 7, 1998, was last approved by the trustees of the
Trust on August 11, 1998. The Agreement will continue in effect until September
30, 2000 and from year to year thereafter only if its continuance is approved
annually by the vote of a majority of those trustees who are not parties to such
Agreement or interested persons of the Advisor or the Trust, cast in person at a
meeting called for the purpose of voting on such approval, and either by a vote
of the Trust's trustees or of a majority of the outstanding voting securities of
the Trust. The Agreement may be terminated at any time without payment of
penalty by either party on sixty days' written notice, and automatically
terminates in the event of its assignment.
If additional Portfolios become subject to the Agreement, the provisions
concerning continuation, amendment and termination shall be on a Portfolio by
Portfolio basis and the management fee and the expense limitations shall be
computed based upon the average daily net assets of all Portfolios subject to
the agreement and shall be allocated among such Portfolios based upon the
relative net assets of such Portfolios. Additional Portfolios may be subject to
a different agreement. Currently, the Money Market Portfolio, the Government
Securities Portfolio and the Tax-Exempt Portfolio are subject to the agreement.
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For the services and facilities furnished to the Money Market Portfolio,
Government Securities Portfolio and Tax-Exempt Portfolio, the Portfolios pay a
monthly investment management fee on a graduated basis at 1/12 of 0.22% of the
first $500 million of combined average daily net assets of such Portfolios,
0.20% of the next $500 million, 0.175% of the next $1 billion, 0.16% of the next
$1 billion and 0.15% of combined average daily net assets of such Portfolios
over $3 billion. The investment management fee is computed based on average
daily net assets of the Portfolios and allocated among the Portfolios based upon
the relative net assets of each Portfolio. Pursuant to the investment management
agreement, the Money Market Portfolio, Government Securities Portfolio and
Tax-Exempt Portfolio paid the Advisor fees of $8,142,641, $552,289, and
$833,361, respectively, for the fiscal year ended April 30, 2000; $3,120,000,
$1,167,000 and $699,000, respectively, for the fiscal year ended April 30, 1999;
and $1,888,000, $1,020,000 and $530,000 respectively, for the fiscal year ended
April 30, 1998. The Advisor and certain affiliates have agreed to limit certain
operating expenses of the Portfolios to the extent described in the prospectus.
If expense limits had not been in effect the Advisor would have received
investment management fees from the Money Market Portfolio, Government
Securities Portfolio and Tax-Exempt Portfolio of $8,142,641, $999,952, and
$833,361, respectively, for the fiscal year ended April 30, 2000; $4,086,000,
$1,270,000 and $699,000, respectively, for the fiscal year ended April 30, 1999;
and $2,463,000, $1,301,000 and $630,000, respectively, for the fiscal year ended
April 30, 1998. The Advisor absorbed operating expenses for the Money Market
Portfolio, Government Securities Portfolio and Tax-Exempt Portfolio of $0,
$447,663, and $0, respectively, for the fiscal year ended April 30, 2000;
$2,233,000, $103,000 and $0, respectively, for the fiscal year ended April 30,
1999; and $1,253,000, $281,000 and $100,000, respectively, for the year ended
April 30, 1998.
Certain officers or trustees of the Trust are also directors or officers of the
Advisor and its affiliates as indicated under "Officers and Trustees."
Fund Accounting Agent. Scudder Fund Accounting Corporation ("SFAC"), Two
International Place, Boston, Massachusetts 02110, a subsidiary of Scudder
Kemper, is responsible for determining the daily net asset value per share of
the Portfolios and maintaining all accounting records related hereto. Currently,
SFAC receives no fee for its services to the Portfolios; however, subject to
Board approval, at some time in the future, SFAC may seek payment for its
services under this agreement.
Distributor and Administrator. Pursuant to an administration, shareholder
services and distribution agreement ("distribution agreement"), Kemper
Distributors, Inc. ("KDI"), 222 South Riverside Plaza, Chicago, Illinois 60606,
an affiliate of the Advisor, serves as primary administrator and principal
underwriter for the Portfolios to provide information and services for existing
and potential shareholders. The distribution agreement provides that KDI shall
appoint various firms to provide cash management services for their customers or
clients through the Portfolios. The firms are to provide such office space and
equipment, telephone facilities, personnel and literature distribution as is
necessary or appropriate for providing information and services to the firms'
clients. Each Portfolio has adopted a plan in accordance with Rule 12b-1 of the
1940 Act (the "12b-1 Plans"). This rule regulates the manner in which an
investment company may, directly or indirectly, bear the expenses of
distributing shares. For its services under the distribution agreement and
pursuant to the 12b-1 Plans, each Portfolio pays KDI a distribution services
fee, payable monthly, at the annual rate of 0.60% of average daily net assets
with respect to Service shares of the Money Market Portfolio and the Government
Securities Portfolio and 0.50% of average daily net assets with respect to the
Service shares of the Tax-Exempt Portfolio. Expenditures by KDI on behalf of the
Portfolios need not be made on the same basis that such fees are allocated. The
fees are accrued daily as an expense of the Portfolios.
As principal underwriter for the Portfolios, KDI acts as agent of each Portfolio
in the sale of that Portfolio's shares. KDI pays all its expenses under the
distribution agreement including, without limitation, services fees to firms.
The Trust pays the cost for the prospectus and shareholder reports to be set in
type and printed for existing shareholders, and KDI pays for the printing and
distribution of copies thereof used in connection with the offering of shares to
prospective investors. KDI also pays for supplementary sales literature and
advertising costs.
KDI has entered into related administration services and selling group
agreements ("services agreements") with various firms to provide cash management
and other services for a Portfolio's shareholders. Such services and assistance
may include, but
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may not be limited to, establishing and maintaining shareholder accounts and
records, processing purchase and redemption transactions, providing automatic
investment in Portfolio shares of client account balances, answering routine
inquiries regarding a Portfolio, assisting clients in changing account options,
designations and addresses, and such other services as may be agreed upon from
time to time and as may be permitted by applicable statute, rule or regulation.
KDI also may provide some of the above services for the Portfolios. 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 Service shares of the Money Market Portfolio
and Government Securities Portfolio that they maintain and service and 0.50% of
average daily net assets of those accounts in the Service 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,
2000, the Money Market Portfolio, Government Securities Portfolio and Tax-Exempt
Portfolio paid distribution services fees of $24,678,842, $3,170,641 and
$2,104,280, respectively. KDI waived expenses for the Money Market Portfolio,
Government Securities Portfolio and Tax-Exempt Portfolio of $3,931,738, $447,663
and $0, respectively, for the fiscal year ended April 30 2000. During the fiscal
year ended April 30, 1999, the Money Market Portfolio, Government Securities
Portfolio and Tax-Exempt Portfolio paid distribution services fees of
$12,373,000, $4,329,000 and $1,831,000, respectively. Of such amounts, KDI
remitted pursuant to related services agreements $19,750,000 as service fees to
firms. A portion of the aforesaid marketing, sales and operating expenses could
be considered overhead expense. In addition to the discounts or commissions
described above, KDI will, from time to time, pay or allow additional discounts,
commissions or promotional incentives, in the form of cash or other
compensation, to firms that sell shares of the Portfolios.
The distribution agreement and the 12b-1 Plans continue in effect from year to
year so long as such continuance is approved at least annually by a vote of the
Board of Trustees of the Trust, including the Trustees who are not interested
persons of the Trust and who have no direct or indirect financial interest in
the agreement. The distribution agreement automatically terminates in the event
of its assignment and may be terminated at any time without penalty by the Trust
or by KDI upon 60 days' written notice. Termination of the distribution
agreement by the Trust may be by vote of a majority of the Board of Trustees, or
a majority of the Trustees who are not interested persons of the Trust and who
have no direct or indirect financial interest in the agreement, or a "majority
of the outstanding voting securities" of the Trust as defined under the 1940
Act. The 12b-1 Plans may not be amended to increase the fee to be paid by a
Portfolio without approval by a majority of the outstanding voting securities of
the Portfolio and all material amendments must in any event be approved by the
Board of Trustees in the manner described above with respect to the continuation
of the 12b-1 Plans. The 12b-1 Plans may be terminated at any time without
penalty by a vote of the majority of the Trustees who are not interested persons
of the Trust and who have no direct or indirect financial interest in the Plan,
or by a vote of the majority of the outstanding voting securities of the Trust.
The Portfolios of the Trust will vote separately with respect to the 12b-1
Plans.
Custodian, Transfer Agent and Shareholder Service Agent. State Street Bank and
Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, as custodian,
has custody of all securities and cash of the Trust. It attends to the
collection of principal and income, and payment for and collection of proceeds
of securities bought and sold by each Portfolio. Pursuant to a services
agreement with Investors Fiduciary Trust Company ("IFTC"), 801 Pennsylvania
Avenue, Kansas City, Missouri 64105, Kemper Service Company ("KSvC"), an
affiliate of the Advisor, 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, 2000, IFTC remitted shareholder service fees for Money Market
Portfolio in the amount of $11,380,698, for Government Securities Portfolio of
$1,235,764, and for Tax-Exempt Portfolio of $870,299 to KSvC as Shareholder
Service Agent.
Code of Ethics. The Trust, the Advisor and principal underwriter have each
adopted codes of ethics under rule 17j-1 of the Investment Company Act. Board
members, officers of the Trust and employees of the Advisor and principal
underwriter are permitted to make personal securities transactions, including
transactions in securities that may be purchased or held by the Trust, subject
to requirements and restrictions set forth in the applicable Code of Ethics. The
Advisor's Code of Ethics contains provisions and requirements designed to
identify and address certain conflicts of interest between personal investment
activities and the interests of the Trust. Among other things, the Advisor's
Code of Ethics prohibits certain types of transactions absent prior approval,
imposes time periods during which personal transactions may not be made in
certain securities, and requires the submission of duplicate broker
confirmations and quarterly reporting of securities transactions. Additional
restrictions apply to portfolio managers, traders, research analysts and others
involved in the investment advisory process. Exceptions to these and other
provisions of the Advisor's Code of Ethics may be granted in particular
circumstances after review by appropriate personnel.
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Independent Auditors and Reports to Shareholders. The Trust's independent
auditors, Ernst & Young LLP, 233 South Wacker Drive, Chicago, Illinois 60606,
audit and report on the Trust's annual financial statements, review certain
regulatory reports and the Trust's federal income tax return, and perform other
professional accounting, auditing, tax and advisory services when engaged to do
so by the Trust. Shareholders will receive annual audited financial statements
and semi-annual unaudited financial statements.
Legal Counsel. Vedder, Price, Kaufman & Kammholz, 222 North LaSalle Street,
Chicago, Illinois 60601, serves as legal counsel for the Trust.
The Trust, or the Advisor (including any affiliate of the Advisor), or both, may
pay unaffiliated third parties for providing recordkeeping and other
administrative services with respect to accounts of participants in retirement
plans or other beneficial owners of portfolio shares whose interests are held in
an omnibus account.
PORTFOLIO TRANSACTIONS
Brokerage Commissions
Allocation of brokerage is supervised by the Advisor.
The primary objective of the Advisor in placing orders for the purchase and sale
of securities for a Portfolio is to obtain the most favorable net results,
taking into account such factors as price, commission where applicable, size of
order, difficulty of execution and skill required of the executing
broker/dealer. The Advisor seeks to evaluate the overall reasonableness of
brokerage commissions paid (to the extent applicable) through the familiarity of
Scudder Investor Services, Inc. ("SIS") with commissions charged on comparable
transactions, as well as by comparing commissions paid by a Portfolio to
reported commissions paid by others. The Advisor routinely reviews commission
rates, execution and settlement services performed and makes internal and
external comparisons.
A Portfolio's purchases and sales of fixed-income securities are generally
placed by the Advisor with primary market makers for these securities on a net
basis, with out any brokerage commission being paid by a Portfolio. Trading
does, however, involve transaction costs. Transactions with dealers serving as
primary market makers reflect the spread between the bid and asked prices.
Purchases of underwritten issues may be made, which will include an underwriting
fee paid to the underwriter.
When it can be done consistently with the policy of obtaining the most favorable
net results, it is the Advisor's practice to place such orders with
broker/dealers who supply brokerage and research services to the Advisor or a
Portfolio. The term "research services" includes advice as to the value of
securities; the advisability of investing in, purchasing or selling securities;
the availability of securities or purchasers or sellers of securities; and
analyses and reports concerning issuers, industries, securities, economic
factors and trends, portfolio strategy and the performance of accounts. The
Advisor is authorized when placing portfolio transactions, if applicable, for a
Portfolio to pay a brokerage commission in excess of that which another broker
might charge for executing the same transaction on account of execution services
and the receipt of research services. The Advisor has negotiated arrangements,
which are not applicable to most fixed-income transactions, with certain
broker/dealers pursuant to which a broker/dealer will provide research services
to the Advisor or a Portfolio in exchange for the direction by the Advisor of
brokerage transactions to the broker/dealer. These arrangements regarding
receipt of research services generally apply to equity security transactions.
The Advisor may place orders with a broker/dealer on the basis that the
broker/dealer has or has not sold shares of a Portfolio. In effecting
transactions in over-the-counter securities, orders are placed with the
principal market makers for the security being traded unless, after exercising
care, it appears that more favorable results are available elsewhere.
To the maximum extent feasible, it is expected that the Advisor will place
orders for portfolio transactions through SIS, which is a corporation registered
as a broker/dealer and a subsidiary of the Advisor; SIS will place orders on
behalf of a Portfolio with issuers, underwriters or other brokers and dealers.
SIS will not receive any commission, fee or other remuneration from a Portfolio
for this service.
Although certain research services from broker/dealers may be useful to a
Portfolio and to the Advisor, it is the opinion of the Advisor that such
information only supplements the Advisor's own research effort since the
information must still be
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analyzed, weighed, and reviewed by the Advisor's staff. Such information may be
useful to the Advisor in providing services to clients other than a Portfolio,
and not all such information is used by the Advisor in connection with a
Portfolio. Conversely, such information provided to the Advisor by
broker/dealers through whom other clients of the Advisor effect securities
transactions may be useful to the Advisor in providing services to a Portfolio.
The Trustees review, from time to time, whether the recapture for the benefit of
a Portfolio of some portion of the brokerage commissions or similar fees paid by
a Portfolio on portfolio transactions is legally permissible and advisable.
Money market instruments are normally purchased in principal transactions
directly from the issuer or from an underwriter or market maker. There usually
are no brokerage commissions paid by a Portfolio for such purchases. During the
last three fiscal years each Portfolio paid no portfolio brokerage commissions.
Purchases from underwriters will include a commission or concession paid by the
issuer to the underwriter, and purchases from dealers serving as market makers
will include the spread between the bid and asked prices.
PURCHASE AND REDEMPTION OF SHARES
Purchase of Shares
Shares of each Portfolio are sold at net asset value through selected financial
services firms, such as broker-dealers and banks ("firms"). Investors must
indicate the Portfolio in which they wish to invest. Each Portfolio has
established a minimum initial investment for Service Shares of each Portfolio of
$1,000 ($50 for automatic investment plans) and $100 for subsequent investments,
but these minimums may be changed at anytime in management's discretion. Firms
offering Portfolio shares may set higher minimums for accounts they service and
may change such minimums at their discretion. The Trust may waive the minimum
for purchases by trustees, directors, officers or employees of the Trust or the
Advisor and its affiliates.
Each Portfolio seeks to have their investment portfolios as fully invested as
possible at all times in order to achieve maximum income. Since each Portfolio
will be investing in instruments that normally require immediate payment in
Federal Funds (monies credited to a bank's account with its regional Federal
Reserve Bank), each Portfolio has adopted procedures for the convenience of its
shareholders and to ensure that each Portfolio receives investable funds. An
investor wishing to open an account should use the Account Information Form
available from the Trust or financial services firms. Orders for the purchase of
shares that are accompanied by a check drawn on a foreign bank (other than a
check drawn on a Canadian bank in U.S. Dollars) will not be considered in proper
form and will not be processed unless and until a Portfolio determines that it
has received payment of the proceeds of the check. The time required for such a
determination will vary and cannot be determined in advance.
Orders for purchase of shares of a Portfolio received by wire transfer in the
form of Federal Funds will be effected at the next determined net asset value.
Shares purchased by wire will receive (i) that day's dividend if effected at or
prior to the 1:00 p.m. Central time net asset value determination for the Money
Market Portfolio and the Government Securities Portfolio and at or prior to the
11:00 a.m. Central time net asset value determination for the Tax-Exempt
Portfolio; (ii) the dividend for the next calendar day if effected at the 3:00
p.m. Central time net asset value determination for the Money Market Portfolio
and Tax-Exempt Portfolio or, for the Government Securities Portfolio, 8:00 p.m.
Central time net asset value determination provided such payment is received by
3:00 p.m. Central time; or (iii) the dividend for the next business day if
effected at the 8:00 p.m. Central time net asset value determination and payment
is received after 3:00 p.m. Central time on such date for the Government
Securities Portfolio. Confirmed share purchases that are effective at the 8:00
p.m. Central time net asset value determination for the Government Securities
Portfolio will receive dividends upon receipt of payment for such transactions
in the form of Federal Funds in accordance with the time provisions immediately
above.
Orders for purchase accompanied by a check or other negotiable bank draft will
be accepted and effected as of 3:00 p.m. Central time on the next business day
following receipt and such shares will receive the dividend for the next
calendar day following the day the purchase is effected. If an order is
accompanied by a check drawn on a foreign bank, funds must normally be collected
on such check before shares will be purchased.
If payment is wired in Federal Funds, the payment should be directed to UMB
Bank, N.A. (ABA #101-000-695), 10th and Grand Avenue, Kansas City, MO 64106 for
credit to the appropriate Portfolio
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bank account (CAT Money Market Portfolio 46: 98-0119-980-3; CAT Government
Securities Portfolio 47: 98-0119-983-8; CAT Tax-Exempt Portfolio 48:
98-0119-985-4) and further credit to your account number.
Redemption of Shares
General. Upon receipt by the Shareholder Service Agent of a request in the form
described below, shares of a Portfolio will be redeemed by a Portfolio at the
next determined net asset value. If processed by 3:00 p.m. (or 8:00 p.m. for the
Government Securities Portfolio) Central time, the shareholder will receive that
day's dividend. A shareholder may use either the regular or expedited redemption
procedures. Shareholders who redeem all their shares of a Portfolio will receive
the net asset value of such shares and all declared but unpaid dividends on such
shares.
Each Portfolio may suspend the right of redemption or delay payment more than
seven days (a) during any period when the New York Stock Exchange ("Exchange")
is closed other than customary weekend and holiday closings or during any period
in which trading on the Exchange is restricted, (b) during any period when an
emergency exists as a result of which (i) disposal of a Portfolio's investments
is not reasonably practicable, or (ii) it is not reasonably practicable for a
Portfolio to determine the value of its net assets, or (c) for such other
periods as the Securities and Exchange Commission may by order permit for the
protection of the Trust's shareholders.
Although it is each Portfolio's present policy to redeem in cash, if the Board
of Trustees determines that a material adverse effect would be experienced by
the remaining shareholders if payment were made wholly in cash, a Portfolio will
pay the redemption price in part by a distribution of portfolio securities in
lieu of cash, in conformity with the applicable rules of the Securities and
Exchange Commission, taking such securities at the same value used to determine
net asset value, and selecting the securities in such manner as the Board of
Trustees may deem fair and equitable. If such a distribution occurs,
shareholders receiving securities and selling them could receive less than the
redemption value of such securities and in addition would incur certain
transaction costs. Such a redemption would not be as liquid as a redemption
entirely in cash. The Trust has elected to be governed by Rule 18f-1 under the
1940 Act pursuant to which the Trust is obligated to redeem shares of a
Portfolio solely in cash up to the lesser of $250,000 or 1% of the net assets of
that Portfolio during any 90-day period for any one shareholder of record.
If shares of a Portfolio to be redeemed were purchased by check or through
certain Automated Clearing House ("ACH") transactions, the Portfolio may delay
transmittal of redemption proceeds until it has determined that collected funds
have been received for the purchase of such shares, which will be up to 10 days
from receipt by the Portfolio of the purchase amount. Shareholders may not use
ACH or Redemption Checks (defined below) until the shares being redeemed have
been owned for at least 10 days and shareholders may not use such procedures to
redeem shares held in certificated form. There is no delay when shares being
redeemed were purchased by wiring Federal Funds.
If shares being redeemed were acquired from an exchange of shares of a mutual
fund that were offered subject to a contingent deferred sales charge as
described in the prospectus for that other fund, the redemption of such shares
by a Portfolio may be subject to a contingent deferred sales charge as explained
in such prospectus.
Shareholders can request the following telephone privileges: expedited wire
transfer redemptions, ACH transactions and exchange transactions for individual
and institutional accounts and pre-authorized telephone redemption transactions
for certain institutional accounts. Shareholders may choose these privileges on
the account application or by contacting the Shareholder Service Agent for
appropriate instructions. Please note that the telephone exchange privilege is
automatic unless the shareholder refuses it on the account application. The
Trust or its agents may be liable for any losses, expenses or costs arising out
of fraudulent or unauthorized telephone requests pursuant to these privileges,
unless the Trust or its agents reasonably believe, based upon reasonable
verification procedures, that the telephone instructions are genuine. The
shareholder will bear the risk of loss, resulting from fraudulent or
unauthorized transactions, as long as the reasonable verification procedures are
followed. The verification procedures include recording instructions, requiring
certain identifying information before acting upon instructions and sending
written confirmations.
Because of the high cost of maintaining small accounts, each Portfolio reserves
the right to redeem an account that falls below the minimum investment level.
Thus, a shareholder who makes only the minimum initial investment and then
redeems any portion thereof might have the account redeemed. A shareholder will
be notified in writing and will be allowed 60 days
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to make additional purchases to bring the account value up to the minimum
investment level before a Portfolio redeems the shareholder account.
Financial services firms provide varying arrangements for their clients to
redeem Portfolio shares. Such firms may independently establish and charge
amounts to their clients for such services.
Regular Redemptions. When shares are held for the account of a shareholder by
the Trust's transfer agent, the shareholder may redeem them by sending a written
request with signatures guaranteed to Kemper Service Company, P.O. Box 419153,
Kansas City, Missouri 64141-6153. When certificates for shares have been issued,
they must be mailed to or deposited with the Shareholder Service Agent, along
with a duly endorsed stock power and accompanied by a written request for
redemption. Redemption requests and a stock power must be endorsed by the
account holder with signatures guaranteed by a commercial bank, trust company,
savings and loan association, federal savings bank, member firm of a national
securities exchange or other eligible financial institution. The redemption
request and stock power must be signed exactly as the account is registered
including any special capacity of the registered owner. Additional documentation
may be requested, and a signature guarantee is normally required, from
institutional and fiduciary account holders, such as corporations, custodians
(e.g., under the Uniform Transfers to Minors Act), executors, administrators,
trustees or guardians.
Telephone Redemptions. If the proceeds of the redemption are $50,000 or less and
the proceeds are payable to the shareholder of record at the address of record,
normally a telephone request or a written request by any one account holder
without a signature guarantee is sufficient for redemptions by individual or
joint account holders, and trust, executor, guardian and custodian account
holders, provided the trustee, executor, guardian or custodian is named in the
account registration. Other institutional account holders may exercise this
special privilege of redeeming shares by telephone request or written request
without signature guarantee subject to the same conditions as individual account
holders and subject to the limitations on liability, provided that this
privilege has been pre-authorized by the institutional account holder or
guardian account holder by written instruction to the Shareholder Service Agent
with signatures guaranteed. Telephone requests may be made by calling
1-800-231-8568. Shares purchased by check or through certain ACH transactions
may not be redeemed under this privilege of redeeming shares by telephone
request until such shares have been owned for at least 10 days. This privilege
of redeeming shares by telephone request or by written request without a
signature guarantee may not be used to redeem shares held in certificate form
and may not be used if the shareholder's account has had an address change
within 30 days of the redemption request. During periods when it is difficult to
contact the Shareholder Service Agent by telephone, it may be difficult to use
the telephone redemption privilege, although investors can still redeem by mail.
Each Portfolio reserves the right to terminate or modify this privilege at any
time.
Expedited Wire Transfer Redemptions. If the account holder has given
authorization for expedited wire redemption to the account holder's brokerage or
bank account, shares can be redeemed and proceeds sent by a federal wire
transfer to a single previously designated account. Requests received by the
Shareholder Service Agent prior to 11:00 a.m. Central time will result in shares
being redeemed that day and normally the proceeds will be sent to the designated
account that day. Once authorization is on file, the Shareholder Service Agent
will honor requests by telephone at 1-800-231-8568 or in writing, subject to the
limitations on liability. A Portfolio is not responsible for the efficiency of
the federal wire system or the account holder's financial services firm or bank.
Each Portfolio currently does not charge the account holder for wire transfers.
The account holder is responsible for any charges imposed by the account
holder's firm or bank. There is a $1,000 wire redemption minimum. To change the
designated account to receive wire redemption proceeds, send a written request
to the Shareholder Service Agent with signatures guaranteed as described above,
or contact the firm through which shares of a Portfolio were purchased. Shares
purchased by check or through certain ACH transactions may not be redeemed by
wire transfer until the shares have been owned for at least 10 days. Account
holders may not use this procedure to redeem shares held in certificate form.
During periods when it is difficult to contact the Shareholder Service Agent by
telephone, it may be difficult to use the expedited wire transfer redemption
privilege. Each Portfolio reserves the right to terminate or modify this
privilege at any time.
Redemptions By Draft. Upon request, shareholders will be provided with drafts to
be drawn on a Portfolio ("Redemption Checks"). These Redemption Checks may be
made payable to the order of any person for not more than $5 million.
Shareholders should not write Redemption Checks in an amount less than $250
since a $10 service fee will be charged as described below. When a Redemption
Check is presented for payment, a sufficient number of full and fractional
shares in the shareholder's account will be redeemed as of the next determined
net asset value to cover the amount of the Redemption
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Check. This will enable the shareholder to continue earning dividends until a
Portfolio receives the Redemption Check. A shareholder wishing to use this
method of redemption must complete and file an Account Application which is
available from each Portfolio or firms through which shares were purchased.
Redemption Checks should not be used to close an account since the account
normally includes accrued but unpaid dividends. Each Portfolio reserves the
right to terminate or modify this privilege at any time. This privilege may not
be available through some firms that distribute shares of each Portfolio. In
addition, firms may impose minimum balance requirements in order to offer this
feature. Firms may also impose fees to investors for this privilege or establish
variations of minimum check amounts if approved by each Portfolio.
Unless one signer is authorized on the Account Application, Redemption Checks
must be signed by all account holders. Any change in the signature authorization
must be made by written notice to the Shareholder Service Agent. Shares
purchased by check or through certain ACH transactions may not be redeemed by
Redemption Check until the shares have been on a Portfolio's books for at least
10 days. Shareholders may not use this procedure to redeem shares held in
certificate form. Each Portfolio reserves the right to terminate or modify this
privilege at any time.
A Portfolio may refuse to honor Redemption Checks whenever the right of
redemption has been suspended or postponed, or whenever the account is otherwise
impaired. A $10 service fee will be charged when a Redemption Check is presented
to redeem Portfolio shares in excess of the value of a Portfolio account or in
an amount less than $250; when a Redemption Check is presented that would
require redemption of shares that were purchased by check or certain ACH
transactions within 10 days; or when "stop payment" of a Redemption Check is
requested.
Special Features. Certain firms that offer Service Shares of a Portfolio also
provide special redemption features through charge or debit cards and checks
that redeem Portfolio Service Shares. Various firms have different charges for
their services. Shareholders should obtain information from their firm with
respect to any special redemption features, applicable charges, minimum balance
requirements and special rules of the cash management program being offered.
DIVIDENDS, NET ASSET VALUE AND TAXES
Dividends. Dividends are declared daily and paid monthly. Shareholders will
receive dividends in additional shares unless they elect to receive cash.
Dividends will be reinvested monthly in shares of a Portfolio at net asset value
on the last business day of the month. A Portfolio will pay shareholders who
redeem their entire accounts all unpaid dividends at the time of the redemption
not later than the next dividend payment date. Upon written request to the
Shareholder Service Agent, a shareholder may elect to have Portfolio dividends
invested without sales charge in shares of another Kemper Mutual Fund offering
this privilege at the net asset value of such other fund. See "Special Features
-- Exchange Privilege" for a list of such other Kemper Mutual Funds. To use this
privilege of investing Portfolio dividends in shares of another Kemper Mutual
Fund, shareholders must maintain a minimum account value of $1,000 in this
Portfolio and must maintain a minimum account value of $1,000 in the fund in
which dividends are reinvested.
Each Portfolio calculates its dividends based on its daily net investment
income. For this purpose, the net investment income of the Portfolio consists of
(a) accrued interest income plus or minus amortized discount or premium
(excluding market discount for the Tax-Exempt Portfolio), (b) plus or minus all
short-term realized gains and losses on investments and (c) minus accrued
expenses allocated to the Portfolio. Expenses of each Portfolio are accrued each
day. While each Portfolio's investments are valued at amortized cost, there will
be no unrealized gains or losses on such investments. However, should the net
asset value of a Portfolio deviate significantly from market value, the Board of
Trustees could decide to value the investments at market value and then
unrealized gains and losses would be included in net investment income above.
Dividends are reinvested monthly and shareholders will receive monthly
confirmations of dividends and of purchase and redemption transactions except
that confirmations of dividend reinvestment for Individual Retirement Accounts
and other fiduciary accounts for which Investors Fiduciary Trust Company acts as
trustee will be sent quarterly.
If the shareholder elects to receive dividends in cash, checks will be mailed
monthly, within five business days of the reinvestment date (described below),
to the shareholder or any person designated by the shareholder. At the option of
the shareholder, cash dividends may be sent by Federal Funds wire. Shareholders
may request to have dividends sent by wire on the Account Application or by
contacting the Shareholder Service Agent (see "Purchase of Shares"). The
Portfolio reinvests dividend checks (and future dividends) in shares of the
Portfolio if checks are returned as undeliverable. Dividends and other
18
<PAGE>
distributions in the aggregate amount of $10 or less are automatically
reinvested in shares of the Portfolio unless the shareholder requests that such
policy not be applied to the shareholder's account.
Net Asset Value. As described in the prospectus, each Portfolio values its
portfolio instruments at amortized cost, which does not take into account
unrealized capital gains or losses. This involves initially valuing an
instrument at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. While this method provides
certainty in valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the price the Portfolio
would receive if it sold the instrument. Calculations are made to compare the
value of a Portfolio's investments valued at amortized cost with market values.
Market valuations are obtained by using actual quotations provided by market
makers, estimates of market value, or values obtained from yield data relating
to classes of money market instruments published by reputable sources at the
mean between the bid and asked prices for the instruments. If a deviation of 1/2
of 1% or more were to occur between the net asset value per share calculated by
reference to market values and a Portfolio's $1.00 per share net asset value, or
if there were any other deviation that the Board of Trustees of the Trust
believed would result in a material dilution to shareholders or purchasers, the
Board of Trustees would promptly consider what action, if any, should be
initiated. If a Portfolio's net asset value per share (computed using market
values) declined, or were expected to decline, below $1.00 (computed using
amortized cost), the Board of Trustees of the Trust might temporarily reduce or
suspend dividend payments in an effort to maintain the net asset value at $1.00
per share. As a result of such reduction or suspension of dividends or other
action by the Board of Trustees, an investor would receive less income during a
given period than if such a reduction or suspension had not taken place. Such
action could result in investors receiving no dividend for the period during
which they hold their shares and receiving, upon redemption, a price per share
lower than that which they paid. On the other hand, if a Portfolio's net asset
value per share (computed using market values) were to increase, or were
anticipated to increase above $1.00 (computed using amortized cost), the Board
of Trustees of the Trust might supplement dividends in an effort to maintain the
net asset value at $1.00 per share. Orders received by dealers or other
financial services firms prior to the 8:00 p.m. determination of net asset value
for the Government Securities Portfolio and received by KDI prior to the close
of its business day can be confirmed at the 8:00 p.m. determination of net asset
value for that day. Such transactions are settled by payment of Federal funds in
accordance with procedures established by KDI. Redemption orders received in
connection with the administration of checkwriting programs by certain dealers
or other financial services firms prior to the determination of the Portfolio's
net asset value also may be processed on a confirmed basis in accordance with
the procedures established by KDI.
Taxes.
Taxable Portfolios. The Money Market Portfolio and the Government Securities
Portfolio each intend to continue to qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code (the "Code") and, if so
qualified, will not be subject to Federal income taxes to the extent its
earnings are distributed. Dividends derived from interest and short-term capital
gains are taxable as ordinary income whether received in cash or reinvested in
additional shares. Long-term capital gains distributions, if any, are taxable as
long-term capital gains regardless of the length of time shareholders have owned
their shares. Dividends from these Portfolios do not qualify for the dividends
received deduction available to corporate shareholders.
Dividends declared in October, November or December to shareholders of record as
of a date in one of those months and paid during the following January are
treated as paid on December 31 of the calendar year in which declared for
Federal income tax purposes. The Portfolios may adjust their schedule for
dividend reinvestment for the month of December to assist in complying with the
reporting and minimum distribution requirements contained in the Code.
Tax-Exempt Portfolio. The Tax-Exempt Portfolio intends to continue to qualify
under the Code as a regulated investment company and, if so qualified, will not
be liable for Federal income taxes to the extent its earnings are distributed.
This Portfolio also intends to meet the requirements of the Code applicable to
regulated investment companies distributing tax-exempt interest dividends and,
accordingly, dividends representing net interest received on Municipal
Securities will not be included by shareholders in their gross income for
Federal income tax purposes, except to the extent such interest is subject to
the alternative minimum tax as discussed below. Dividends representing taxable
net investment income (such as net interest income from temporary investments in
obligations of the U.S. Government) and net short-term capital gains, if any,
are taxable to shareholders as ordinary income. Net interest on certain "private
activity bonds" issued on or after August 8, 1986 is treated as an item of tax
preference and may, therefore, be subject to both the individual and corporate
alternative
19
<PAGE>
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.
Exempt-interest dividends, except to the extent of interest from "private
activity bonds," are not treated as a tax-preference item. For a corporate
shareholder, however, such dividends will be included in determining such
corporate shareholder's "adjusted current earnings." Seventy-five percent of the
excess, if any, of "adjusted current earnings" over the corporate shareholder's
other alternative minimum taxable income with certain adjustments will be a
tax-preference item. Corporate shareholders are advised to consult their tax
advisers with respect to alternative minimum tax consequences.
Shareholders will be required to disclose on their Federal income tax returns
the amount of tax-exempt interest earned during the year, including
exempt-interest dividends received from the Tax-Exempt Portfolio.
Individuals whose modified income exceeds a base amount will be subject to
Federal income tax on up to 85% of their Social Security benefits. Modified
income includes adjusted gross income, tax-exempt interest, including
exempt-interest dividends from the Tax-Exempt Portfolio, and 50% of Social
Security benefits.
The tax exemption of dividends from the Tax-Exempt Portfolio for Federal income
tax purposes does not necessarily result in exemption under the income or other
tax laws of any state or local taxing authority. The laws of the several states
and local taxing authorities vary with respect to the taxation of such income
and shareholders of the Portfolios are advised to consult their own tax advisers
as to the status of their accounts under state and local tax laws.
Each Portfolio is required by federal income tax law to withhold 31% of taxable
dividends paid to certain shareholders who do not furnish a correct taxpayer
identification number (in the case of individuals, a social security number) and
in certain other circumstances. Trustees of qualified retirement plans and
403(b)(7) accounts are required by law to withhold 20% of the taxable portion of
any distribution that is eligible to be "rolled over." The 20% withholding
requirement does not apply to distributions from IRAs or any part of a
distribution that is transferred directly to another qualified retirement plan,
403(b)(7) account, or IRA. Shareholders should consult their tax advisers
regarding the 20% withholding requirement.
Interest on indebtedness which is incurred to purchase or carry shares of a
mutual fund which distributes exempt-interest dividends during the year is not
deductible for Federal income tax purposes. Further, the Tax-Exempt Portfolio
may not be an appropriate investment for persons who are "substantial users" of
facilities financed by industrial development bonds held by the Tax-Exempt
Portfolio or are "related persons" to such users; such persons should consult
their tax advisers before investing in the Tax-Exempt Portfolio.
Shareholders normally will receive monthly confirmations of dividends and of
purchase and redemption transactions except that confirmations of dividend
reinvestment for IRAs and other fiduciary accounts for which Investors Fiduciary
Trust Company serves as trustee will be sent quarterly. Firms may provide
varying arrangements with their clients with respect to confirmations. Tax
information will be provided annually. Shareholders are encouraged to retain
copies of their account confirmation statements or year-end statements for tax
reporting purposes. However, those who have incomplete records may obtain
historical account transaction information at a reasonable fee.
PERFORMANCE
From time to time, the Trust may advertise several types of performance
information for a Portfolio, including "yield" and "effective yield" and, in the
case of the Tax-Exempt Portfolio, "tax equivalent yield". Each of these figures
is based upon historical earnings and is not representative of the future
performance of a Portfolio. The yield of a Portfolio refers to the net
20
<PAGE>
investment income generated by a hypothetical investment in the Portfolio over a
specific seven-day period. This net investment income is then annualized, which
means that the net investment income generated during the seven-day period is
assumed to be generated each week over an annual period and is shown as a
percentage of the investment. The effective yield is calculated similarly, but
the net investment income earned by the investment is assumed to be compounded
when annualized. The effective yield will be slightly higher than the yield due
to this compounding effect.
The Advisor, the Portfolio's Principal Underwriter, Kemper Distributors, Inc.,
the Portfolio's Shareholder Service Agent, Kemper Service Company, and the
Portfolio's Accounting Agent, Scudder Fund Accounting Corporation, temporarily
have agreed to maintain certain operating expenses of each Portfolio to the
extent specified in the prospectus. The performance results noted herein for the
Service Shares of the Money Market, Tax-Exempt and Government Securities
Portfolios would have been lower had certain expenses not been capped.
Each Portfolio's seven-day yield is computed in accordance with a standardized
method prescribed by rules of the Securities and Exchange Commission. Under that
method, the yield quotation is based on a seven-day period and is computed for
each Portfolio as follows. The first calculation is net investment income per
share, which is accrued interest on portfolio securities, plus or minus
amortized discount or premium, less accrued expenses. This number is then
divided by the price per share (expected to remain constant at $1.00) at the
beginning of the period ("base period return"). The result is then divided by 7
and multiplied by 365 and the resulting yield figure is carried to the nearest
one-hundredth of one percent. Realized capital gains or losses and unrealized
appreciation or depreciation of investments are not included in the
calculations. For the period ended April 30, 2000, the Money Market Portfolio's
seven-day yield was 5.26%, the Tax-Exempt Portfolio's seven-day yield was 3.56%
and the Government Securities Portfolio's seven-day yield was 5.02%.
Each Portfolio's seven-day 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 seven-day effective yield is:
(seven-day base period return +1)365/7 - 1. Each Portfolio may also advertise a
thirty-day effective yield in which case the formula is (thirty-day base period
return +1)365/30 - 1. For the period ended April 30, 2000, the Money Market
Portfolio's seven-day effective yield was 5.40%, the Tax-Exempt Portfolio's
seven-day effective yield was 3.63% and the Government Securities Portfolio's
seven-day effective yield was 5.14%.
The tax equivalent yield of the Tax-Exempt Portfolio is computed by dividing
that portion of the Portfolio's yield (computed as described above) which is
tax-exempt by (one minus the stated Federal income tax rate) and adding the
product to that portion, if any, of the yield of the Portfolio that is not
tax-exempt. Based upon an assumed marginal Federal income tax rate of 37.1% and
the Tax-Exempt Portfolio's yield computed as described above for the seven-day
period ended April 30, 2000, the Tax-Exempt Portfolio's tax equivalent yield for
the period was 5.66%. For additional information concerning tax-exempt yields,
see "Tax-Exempt versus Taxable Yield" below.
Each Portfolio's yield fluctuates, and the publication of an annualized yield
quotation is not a representation as to what an investment in a Portfolio will
actually yield for any given future period. Actual yields will depend not only
on changes in interest rates on money market instruments during the period in
which the investment in a Portfolio is held, but also on such matters as
Portfolio expenses.
Investors have an extensive choice of money market funds and money market
deposit accounts and the information below may be useful to investors who wish
to compare the past performance of a Portfolio with that of its competitors.
Past performance cannot be a guarantee of future results.
The Trust may depict the historical performance of the securities in which a
Portfolio may invest over periods reflecting a variety of market or economic
conditions either alone or in comparison with alternative investments
performance indexes of those investments or economic indicators. A Portfolio may
also describe its portfolio holdings and depict its size or relative size
compared to other mutual funds, the number and make-up of its shareholder base
and other descriptive factors concerning the Portfolio.
Investors also may want to compare the Portfolio's performance to that of U.S.
Treasury bills or notes because such instruments represent alternative income
producing products. Treasury obligations are issued in selected denominations.
Rates of U.S. Treasury obligations are fixed at the time of issuance and payment
of principal and interest is backed by the
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<PAGE>
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. In addition, investors may want to compare a Portfolio's performance
to the Consumer Price Index either directly or by calculating its "real rate of
return," which is adjusted for the effects of inflation.
Tax-Exempt Versus Taxable Yield. You may want to determine which investment --
tax-exempt or taxable -- will provide you with a higher after-tax return. To
determine the taxable equivalent yield, simply divide the yield from the
tax-exempt investment by the sum of [1 minus your marginal tax rate]. The tables
below are provided for your convenience in making this calculation for selected
tax-exempt yields and taxable income levels. These yields are presented for
purposes of illustration only and are not representative of any yield that the
Tax-Exempt Portfolio may generate. Both tables are based upon current law as to
the 1999 tax rates schedules.
Taxable Equivalent Yield Table For Persons Whose Adjusted Gross Income Is Under
$126,600
<TABLE>
<CAPTION>
Your A Tax-Exempt Yield of:
Single Joint
2% 3% 4% 6% 7%
Marginal 5%
Taxable Income Federal Tax Rate Is Equivalent to a Taxable Yield of:
-------------- ---------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$25,750-$62,450 $43,050-$104,050 28.0% 2.78 4.17 5.56 6.94 8.33 9.72
Over $62,450 Over $104,050 31.0 2.90 4.35 5.80 7.25 8.70 10.14
Taxable Equivalent Yield Table For Persons Whose Adjusted Gross Income Is Over $126,600
Your A Tax-Exempt Yield of:
Single Joint
2% 3% 4% 6% 7%
Marginal 5%
Taxable Income Federal Tax Rate Is Equivalent to a Taxable Yield of:
-------------- ---------------- ------------------------------------
$62,450-$130,250 $104,050-$158,550 31.9% 2.94 4.41 5.87 7.34 8.81 10.28
$130,250-$283,150 $158,550-$283,150 37.1 3.18 4.77 6.36 7.95 9.54 11.13
Over $283,150 Over $283,150 40.8 3.38 5.07 6.76 8.45 10.14 11.82
</TABLE>
* This table assumes a decrease of $3.00 of itemized deductions for each
$100 of adjusted gross income over $126,600. For a married couple with
adjusted gross income between $189,950 and $312,450 (single between
$126,600 and $249,100), add 0.7% to the above Marginal Federal Tax Rate
for each personal and dependency exemption. The taxable equivalent
yield is the tax-exempt yield divided by: 100% minus the adjusted tax
rate. For example, if the table tax rate is 37.1% and you are married
with no dependents, the adjusted tax rate is 38.5% (37.1% + 0.7% +
0.7%). For a tax-exempt yield of 6%, the taxable equivalent yield is
about 9.8% (6% / (100%-38.5%)).
OFFICERS AND TRUSTEES
The officers and trustees of the Trust, their birthdates, their principal
occupations and their affiliations, if any, with the Advisor and KDI, are listed
below. All persons named as officers and trustees also serve in similar
capacities for other funds advised by the Advisor:
22
<PAGE>
JOHN W. BALLANTINE (2/16/46), Trustee, 1500 North Lake Shore Drive, Chicago,
Illinois; First Chicago NBD Corporation/The First National Bank of Chicago:
1996-1998 Executive Vice President and Chief Risk Management Officer; 1995-1996
Executive Vice President and Head of International Banking; 1992-1995 Executive
Vice President, Chief Credit and Market Risk Officer.
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.
LINDA C. COUGHLIN (1/1/52), Trustee*, Two International Place, Boston,
Massachusetts; Managing Director, Scudder Kemper.
DONALD L. DUNAWAY (3/8/37), Trustee, 7011 Green Tree Drive, Naples, Florida;
Retired; formerly, Executive Vice President, A. O. Smith Corporation
(diversified manufacturer).
ROBERT B. HOFFMAN (12/11/36), Trustee, 1530 North State Parkway, Chicago,
Illinois; Chairman, Harnischfeger Industries, Inc. (machinery for the mining and
paper industries); formerly, Vice Chairman and Chief Financial Officer, Monsanto
Company (agricultural, pharmaceutical and nutritional/food products); formerly,
Vice President, Head of International Operations, FMC Corporation (manufacturer
of machinery and chemicals).
DONALD R. JONES (1/17/30), Trustee, 182 Old Wick Lane, Inverness, Illinois;
Retired; Director, Motorola, Inc. (manufacturer of electronic equipment and
components); formerly, Executive Vice President and Chief Financial Officer,
Motorola, Inc.
THOMAS W. LITTAUER (4/26/55), Vice President and Trustee*, Two International
Place, Boston, Massachusetts; Managing Director, Scudder Kemper; formerly, Head
of Broker Dealer Division of an unaffiliated investment management firm during
1997; prior thereto, President of Client Management Services of an unaffiliated
investment management firm from 1991 to 1996.
SHIRLEY D. PETERSON (9/3/41), Trustee, 401 Rosemont Avenue, Frederick, Maryland;
President, Hood College; formerly, partner, Steptoe & Johnson (attorneys); prior
thereto, Commissioner, Internal Revenue Service; prior thereto, Assistant
Attorney General (Tax), U.S. Department of Justice; Director Bethlehem Steel
Corp.
WILLIAM P. SOMMERS (7/22/33), Trustee, 24717 Harbour View Drive, Ponte Vedra
Beach, Florida; Consultant and Director, SRI Consulting; prior thereto President
and Chief Executive Officer, SRI International (research and development); prior
thereto, Executive Vice President, Iameter (medical information and educational
service provider); prior thereto, Senior Vice President and Director, Booz,
Allen & Hamilton Inc. (management consulting firm); Director, PSI Inc.,
Evergreen Solar, Inc. and Litton Industries.
MARK S. CASADY (9/21/60), President*, 345 Park Avenue, New York, New York;
Managing Director, Scudder Kemper.
PHILIP J. COLLORA (11/15/45), Vice President and Secretary*, 222 South Riverside
Plaza, Chicago, Illinois; Senior Vice President, Scudder Kemper.
ANN M. McCREARY (11/6/56), Vice President*, 345 Park Avenue, New York, New York;
Managing Director, Scudder Kemper.
KATHRYN L. QUIRK (12/3/52), Vice President*, 345 Park Avenue, New York, New
York; Managing Director, Scudder Kemper.
23
<PAGE>
FRANK J. RACHWALSKI, JR. (3/26/45), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Managing Director, Scudder Kemper.
LINDA J. WONDRACK (9/12/64), Vice President*, Two International Place, Boston,
Massachusetts; Senior Vice President, Scudder Kemper.
JOHN R. HEBBLE (6/27/58), Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Scudder Kemper.
BRENDA LYONS (2/21/63), Assistant Treasurer*, Two International Place, Boston,
Massachusetts Senior Vice President, Scudder Kemper.
CAROLINE PEARSON (4/1/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Senior Vice President, Scudder Kemper; formerly,
Associate, Dechert Price & Rhoads (law firm), from 1989 to 1997.
MAUREEN E. KANE (2/14/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Vice President, Scudder Kemper; formerly, Assistant Vice
President of an unaffiliated investment management firm; prior thereto,
Associate Staff Attorney of an unaffiliated investment management firm;
Associate, Peabody & Arnold (law firm).
Unless otherwise stated, all the Trustees and officers have been associated with
their respective companies for more than five years, but not necessarily in the
same capacity.
* Interested persons as defined in the Investment Company Act of 1940.
The trustees and officers who are "interested persons" as designated above
receive no compensation from the Trust. The table below shows amounts paid or
accrued to those trustees who are not designated "interested persons" during the
Trust's fiscal year ended April 30, 2000. The information in the last column
indicates the total amounts paid or accrued for the calendar year 1999 for all
Scudder Kemper Funds.
<TABLE>
<CAPTION>
Aggregate Total Compensation Scudder Kemper
--------- ---------------------------------
Name of Trustee Compensation From Trust Funds Paid
--------------- ----------------------- ----------
To Trustees(2)
--------------
<S> <C> <C>
John W. Ballantine $3,572 $57,230
Lewis A. Burnham $5,464 $89,340
Donald L. Dunaway (1) $6,000 $125,900
Robert B. Hoffman $5,392 $109,000
Donald R. Jones $5,433 $114,200
Shirley D. Peterson $5,043 $114,000
William P. Sommers $5,043 $109,000
</TABLE>
(1) Includes deferred fees. Pursuant to deferred compensation agreements with
the Trust, deferred amounts accrue interest monthly at a rate approximate
to the yield of Zurich Money Funds -- Zurich Money Market Fund. Total
deferred fees (including the interest thereon) payable from the Trust to
Mr. Dunaway for the latest and all prior fiscal years are $22,000 and
$16,500.
(2) Includes compensation for service on the Boards of 25 Kemper funds with 41
fund portfolios. Each trustee currently serves as trustee of 26 Kemper
Funds with 45 fund portfolios.
24
<PAGE>
On June 30, 2000, the officers and trustees of the Trust, as a group, owned less
than 1% of the then outstanding shares of each Portfolio. No person owned of
record 5% or more of the outstanding shares of any class of any Portfolio,
except the persons indicated in the chart below:
<TABLE>
<CAPTION>
------------------------------------- ----------------------------------- -----------------------------------
Name and Address % Owned Portfolio
------------------------------------- ----------------------------------- -----------------------------------
<S> <C> <C>
May Financial Corp. 5.06% Cash Account Trust/Govt.
For the benefit of customers Securities Portfolio
8333 Douglas Avenue
Dallas, Texas 75225
------------------------------------- ----------------------------------- -----------------------------------
Joan Lawton Oppenheimer 6.12% Cash Account Trust/Tax Exempt
1 New York Plaza Portfolio
New York, NY 10004
------------------------------------- ----------------------------------- -----------------------------------
</TABLE>
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
Strategic Income Fund, Kemper High Yield Series, Kemper U.S. Government
Securities Fund, Kemper International Fund, Kemper State Tax-Free Income Series,
Kemper Short-Term 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 Value Series, Inc., Kemper Value Plus Growth
Fund, Kemper Horizon Fund, Kemper New Europe Fund, Inc., Kemper Asian Growth
Fund, Kemper Aggressive Growth Fund, Kemper Global/International Series, Inc.,
Kemper Securities Trust and Kemper Equity Trust ("Kemper Mutual Funds") and
certain "Money Market Funds" (Zurich Money Funds, Zurich Yieldwise Money Fund,
Cash Equivalent Fund, Tax-Exempt California Money Market Fund, Cash Account
Trust, Investors Municipal Cash Fund and Investors Cash Trust). Shares of Money
Market Funds and Kemper Cash Reserves Fund that were acquired by purchase (not
including shares acquired by dividend reinvestment) are subject to the
applicable sales charge on exchange. In addition, shares of a Kemper Mutual Fund
in excess of $1,000,000 (except Zurich Yieldwise Money Fund and Kemper Cash
Reserves Fund) acquired by exchange from another Fund may not be exchanged
thereafter until they have been owned for 15 days (the "15-Day Hold Policy"). In
addition to the current limits on exchanges of shares with a value over
$1,000,000, shares of a Kemper fund with a value of $1,000,000 or less (except
Kemper Cash Reserves Fund) acquired by exchange from another Kemper fund, or
from a money market fund, may not be exchanged thereafter until they have been
owned for 15 days, if, in the investment manager's judgment, the exchange
activity may have an adverse effect on the fund. In particular, a pattern of
exchanges that coincides with a "market timing" strategy may be disruptive to
the Kemper fund and therefore may be subject to the 15-day hold policy. For
purposes of determining whether the 15-Day Hold Policy applies to a particular
exchange, the value of the shares to be exchanged shall be computed by
aggregating the value of shares being exchanged for all accounts under common
control, discretion or advice, including without limitation accounts
administered by a financial services firm offering market timing, asset
allocation or similar services. Series of Kemper Target Equity Fund will be
available on exchange only during the Offering Period for such series as
described in the prospectus for such series. Cash Equivalent Fund, Tax-Exempt
California Money Market Fund, Cash Account Trust, Investors Municipal Cash Fund
and Investors Cash Trust are available on exchange but only through a financial
services firm having a services agreement with KDI with respect to such funds.
Exchanges may only be made for funds that are available for sale in the
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shareholder's state of residence. Currently, Tax-Exempt California Money Market
Fund is available for sale only in California and the portfolios of Investors
Municipal Cash Fund are available for sale in certain states.
The total value of shares being exchanged must at least equal the minimum
investment requirement of the fund into which they are being exchanged.
Exchanges are made based on relative dollar values of the shares involved in the
exchange. There is no service fee for an exchange; however, financial services
firms may charge for their services in expediting exchange transactions.
Exchanges will be effected by redemption of shares of the fund held and purchase
of shares of the other fund. For federal income tax purposes, any such exchange
constitutes a sale upon which a gain or loss may be realized, depending upon
whether the value of the shares being exchanged is more or less than the
shareholder's adjusted cost basis. Shareholders interested in exercising the
exchange privilege may obtain an exchange form and prospectuses of the other
funds from financial services firms or KDI. Exchanges also may be authorized by
telephone if the shareholder has given authorization. Once the authorization is
on file, the Shareholder Service Agent will honor requests by telephone at
1-800-231-8568 or in writing subject to the limitations on liability described
in the prospectus. Any share certificates must be deposited prior to any
exchange of such shares. During periods when it is difficult to contact the
Shareholder Service Agent by telephone, it may be difficult to implement the
telephone exchange privilege. The exchange privilege is not a right and may be
suspended, terminated or modified at any time. Except as otherwise permitted by
applicable regulation, 60 days' prior written notice of any termination or
material change will be provided.
Systematic Withdrawal Program. An owner of $5,000 or more of a Portfolio's
Service Shares may provide for the payment from the owner's account of any
requested dollar amount up to $50,000 to be paid to the owner or the owner's
designated payee monthly, quarterly, semi-annually or annually. The $5,000
minimum account size is not applicable to Individual Retirement Accounts.
Dividend distributions will be reinvested automatically at net asset value. A
sufficient number of full and fractional shares will be redeemed to make the
designated payment. Depending upon the size of the payments requested,
redemptions for the purpose of making such payments may reduce or even exhaust
the account. The program may be amended on thirty days notice by a Portfolio and
may be terminated at any time by the shareholder or a Portfolio. Firms provide
varying arrangements for their clients to redeem shares of a Portfolio on a
periodic basis. Such firms may independently establish minimums for such
services.
Tax-Sheltered Retirement Programs. The Shareholder Service Agent provides
retirement plan services and documents and KDI can establish your account in any
of the following types of retirement plans:
o Individual Retirement Accounts (IRAs) trusteed by Investors
Fiduciary Trust Company ("IFTC"). This includes Simplified
Employee Pension Plan (SEP) IRA accounts and prototype
documents.
o 403(b) Custodial Accounts also trusteed by IFTC. This type of
plan is available to employees of most non-profit
organizations.
o Prototype money purchase pension and profit-sharing plans may
be adopted by employers. The maximum contribution per
participant is the lesser of 25% of compensation or $30,000.
Brochures describing the above plans as well as providing model defined benefit
plans, target benefit plans, 457 plans, 401(k) plans and materials for
establishing them are available from the Shareholder Service Agent upon request.
The brochures for plans trusteed by IFTC describe the current fees payable to
IFTC for its services as trustee. Investors should consult with their own tax
advisers before establishing a retirement plan.
Electronic Funds Transfer Programs. For your convenience, the Trust has
established several investment and redemption programs using electronic funds
transfer via the Automated Clearing House (ACH). There is currently no charge by
the Trust for these programs. To use these features, your financial institution
(your employer's financial institution in the case of payroll deposit) must be
affiliated with an Automated Clearing House (ACH). This ACH affiliation permits
the Shareholder Service Agent to electronically transfer money between your bank
account, or employer's payroll bank in the case of Direct Deposit, and your
account. Your bank's crediting policies of these transferred funds may vary.
These features may be amended or terminated at any time by the Trust.
Shareholders should contact Kemper Service Company at 1-800-621-1048 or the
financial services firm through which their account was established for more
information. These programs may not be available through some firms that
distribute shares of the Portfolios.
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SHAREHOLDER RIGHTS
The Trust generally is not required to hold meetings of its shareholders. Under
the Agreement and Declaration of Trust ("Declaration of Trust"), however,
shareholder meetings will be held in connection with the following matters: (a)
the election or removal of trustees if a meeting is called for such purpose; (b)
the adoption of any contract for which shareholder approval is required by the
1940 Act; (c) any termination of the Trust to the extent and as provided in the
Declaration of Trust; (d) any amendment of the Declaration of Trust (other than
amendments changing the name of the Trust or any Portfolio, establishing a
Portfolio, supplying any omission, curing any ambiguity or curing, correcting or
supplementing any defective or inconsistent provision thereof); and (e) such
additional matters as may be required by law, the Declaration of Trust, the
By-laws of the Trust, or any registration of the Trust with the Securities and
Exchange Commission or any state, or as the trustees may consider necessary or
desirable. The shareholders also would vote upon changes in fundamental
investment objectives, policies or restrictions.
Subject to the Declaration of Trust, shareholders may remove trustees. Each
trustee serves until the next meeting of shareholders, if any, called for the
purpose of electing trustees and until the election and qualification of a
successor or until such trustee sooner dies, resigns, retires or is removed by a
majority vote of the shares entitled to vote (as described below) or a majority
of the trustees. In accordance with the 1940 Act (a) the Trust will hold a
shareholder meeting for the election of trustees at such time as less than a
majority of the trustees have been elected by shareholders, and (b) if, as a
result of a vacancy in the Board of Trustees, less than two-thirds of the
trustees have been elected by the shareholders, that vacancy will be filled only
by a vote of the shareholders.
Trustees may be removed from office by a vote of the holders of a majority of
the outstanding shares at a meeting called for that purpose, which meeting shall
be held upon the written request of the holders of not less than 10% of the
outstanding shares. Upon the written request of ten or more shareholders who
have been such for at least six months and who hold shares constituting at least
1% of the outstanding shares of the Trust stating that such shareholders wish to
communicate with the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider removal of a trustee, the
Trust has undertaken to disseminate appropriate materials at the expense of the
requesting shareholders.
The Declaration of Trust provides that the presence at a shareholder meeting in
person or by proxy of at least 30% of the shares entitled to vote on a matter
shall constitute a quorum. Thus, a meeting of shareholders of a Portfolio could
take place even if less than a majority of the shareholders were represented on
its scheduled date. Shareholders would in such a case be permitted to take
action which does not require a larger vote than a majority of a quorum, such as
the election of trustees and ratification of the selection of auditors. Some
matters requiring a larger vote under the Declaration of Trust, such as
termination or reorganization of a Portfolio and certain amendments of the
Declaration of Trust, would not be affected by this provision; nor would matters
which under the 1940 Act require the vote of a "majority of the outstanding
voting securities" as defined in the 1940 Act.
The Declaration of Trust specifically authorizes the Board of Trustees to
terminate the Trust (or any Portfolio or class) by notice to the shareholders
without shareholder approval.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for obligations of the
Trust. The Declaration of Trust, however, disclaims shareholder liability for
acts or obligations of the Trust and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument entered into or executed by
the Trust or the trustees. Moreover, the Declaration of Trust provides for
indemnification out of Trust property for all losses and expenses of any
shareholder held personally liable for the obligations of the Trust and the
Trust will be covered by insurance which the trustees consider adequate to cover
foreseeable tort claims. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is considered by the Advisor remote and
not material, since it is limited to circumstances in which a disclaimer is
inoperative and the Trust itself is unable to meet its obligations.
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APPENDIX -- RATINGS OF INVESTMENTS
COMMERCIAL PAPER RATINGS
A-1, A-2, Prime-1, Prime-2 and Duff 1, Duff 2 Commercial Paper Ratings
Commercial paper rated by Standard & Poor's Corporation has the following
characteristics: Liquidity ratios are adequate to meet cash requirements.
Long-term senior debt is rated "A" or better. The issuer has access to at least
two additional channels of borrowing. Basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances. Typically, the
issuer's industry is well established and the issuer has a strong position
within the industry. The reliability and quality of management are unquestioned.
Relative strength or weakness of the above factors determine whether the
issuer's commercial paper is rated A-1, A-2 or A-3.
The ratings Prime-1 and Prime-2 are the two highest commercial paper ratings
assigned by Moody's Investors Service, Inc. Among the factors considered by them
in assigning ratings are the following: (1) evaluation of the management of the
issuer; (2) economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain areas; (3)
evaluation of the issuer's products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend
of earnings over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and (8) recognition
by the management of obligations which may be present or may arise as a result
of public interest questions and preparations to meet such obligations. Relative
strength or weakness of the above factors determines whether the issuer's
commercial paper is rated Prime-1, 2 or 3.
The rating Duff-1 is the highest commercial paper rating assigned by Duff &
Phelps Inc. Paper rated Duff-1 is regarded as having very high certainty of
timely payment with excellent liquidity factors that are supported by ample
asset protection. Risk factors are minor. Paper rated Duff-2 is regarded as
having good certainty of timely payment, good access to capital markets and
sound liquidity factors and company fundamentals. Risk factors are small.
MIG-1 and MIG-2 Municipal Notes
Moody's Investors Service, Inc.'s ratings for state and municipal notes and
other short-term loans will be designated Moody's Investment Grade (MIG). This
distinction is in recognition of the differences between short-term credit risk
and long-term risk. Factors affecting the liquidity of the borrower are
uppermost in importance in short-term borrowing, while various factors of the
first importance in bond risk are of lesser importance in the short run. Loans
designated MIG-1 are of the best quality, enjoying strong protection from
established cash flows of funds for their servicing or from established and
broad-based access to the market for refinancing, or both. Loans designated
MIG-2 are of high quality, with margins of protection ample although not so
large as in the preceding group.
STANDARD & POOR'S CORPORATION BOND RATINGS, CORPORATE BONDS
AAA. This is the highest rating assigned by Standard & Poor's Corporation to a
debt obligation and indicates an extremely strong capacity to pay principal and
interest.
AA. Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
MOODY'S INVESTORS SERVICE, INC. BOND RATINGS
Aaa. Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
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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.
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MONEY MARKET PORTFOLIO
Premium Reserve Money Market Shares
Institutional Money Market Shares
STATEMENT OF ADDITIONAL INFORMATION
August 1, 2000
CASH ACCOUNT TRUST
222 South Riverside Plaza, Chicago, Illinois 60606
1-800-231-8568
This combined Statement of Additional Information contains information about the
Premium Reserve Money Market Shares ("Premium Reserve Shares"), and
Institutional Money Market Shares ("Institutional Shares") (collectively, the
"Shares"), each a class of the Money Market Portfolio (the "Portfolio") offered
by Cash Account Trust (the "Trust"). Cash Account Trust is an open-end
diversified management investment company. The Trust currently offers three
investment portfolios, including the Money Market Portfolio. This combined
Statement of Additional Information is not a prospectus and should be read in
conjunction with the appropriate prospectus of the Premium Reserve Shares and
Institutional Shares of the Portfolio dated August 1, 2000. The prospectus may
be obtained without charge from the Trust at the address or telephone number on
this cover or the firm from which this Statement of Additional Information was
received and is also available along with other related materials at the SEC's
Internet web site (http://www.sec.gov). The Annual Report for the Shares of the
Portfolio, dated April 30, 2000 which accompanies this Statement of Additional
Information and may also be obtained free of charge by calling (800) 231-8568,
is incorporated by reference into and is hereby deemed to be a part of this
Statement of Additional Information.
TABLE OF CONTENTS
INVESTMENT RESTRICTIONS.................................................2
INVESTMENT MANAGER AND SHAREHOLDER SERVICES.............................7
PORTFOLIO TRANSACTIONS.................................................10
PURCHASES AND REDEMPTION OF SHARES.....................................11
DIVIDENDS, NET ASSET VALUE AND TAXES...................................14
PERFORMANCE............................................................16
OFFICERS AND TRUSTEES..................................................17
SPECIAL FEATURES.......................................................19
SHAREHOLDER RIGHTS.....................................................21
APPENDIX -- RATINGS OF INVESTMENTS.....................................24
<PAGE>
INVESTMENT RESTRICTIONS
The Trust has adopted for the Portfolio certain investment restrictions which
cannot be changed for the Portfolio without approval by holders of a majority of
its outstanding voting shares. As defined in the Investment Company Act of 1940
(the "1940 Act), this means the lesser of the vote of (a) 67% of the Portfolio's
shares present at a meeting where more than 50% of the outstanding shares of the
Portfolio are present in person or by proxy; or (b) more than 50% of the
Portfolio's outstanding shares. Except as otherwise noted, the portfolio's
investment objective and other policies may be changed without a vote of
shareholders.
The Trust is an open-end diversified management investment company.
The Portfolio may not:
(1) Purchase securities of any issuer (other than obligations of,
or guaranteed by, the United States Government, its agencies
or instrumentalities) if, as a result, more than 5% of the
value of the Portfolio's assets would be invested in
securities of that issuer.
(2) Purchase more than 10% of any class of securities of any
issuer. All debt securities and all preferred stocks are each
considered as one class.
(3) Make loans to others (except through the purchase of debt
obligations or repurchase agreements in accordance with its
investment objective and policies).
(4) Borrow money except as a temporary measure for extraordinary
or emergency purposes and then only in an amount up to
one-third of the value of its total assets, in order to meet
redemption requests without immediately selling any money
market instruments (any such borrowings under this section
will not be collateralized). If, for any reason, the current
value of the Portfolio's total assets falls below an amount
equal to three times the amount of its indebtedness from money
borrowed, the Portfolio will, within three days (not including
Sundays and holidays), reduce its indebtedness to the extent
necessary. The Portfolio will not borrow for leverage
purposes.
(5) Make short sales of securities, or purchase any securities on
margin except to obtain such short-term credits as may be
necessary for the clearance of transactions.
(6) Write, purchase or sell puts, calls or combinations thereof.
(7) Purchase or retain the securities of any issuer if any of the
officers, trustees or directors of the Trust or its investment
adviser owns beneficially more than 1/2 of 1% of the
securities of such issuer and together own more than 5% of the
securities of such issuer.
(8) Invest for the purpose of exercising control or management of
another issuer.
(9) Invest in commodities or commodity futures contracts or in
real estate (or real estate limited partnerships), although it
may invest in securities which are secured by real estate and
securities of issuers which invest or deal in real estate.
(10) Invest in interests in oil, gas or other mineral exploration
or development programs or leases, although it may invest in
the securities of issuers which invest in or sponsor such
programs.
(11) Underwrite securities issued by others except to the extent
the Portfolio may be deemed to be an underwriter, under the
federal securities laws, in connection with the disposition of
portfolio securities.
(12) Issue senior securities as defined in the 1940 Act.
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(13) Concentrate 25% or more of the value of the Portfolio's assets
in any one industry; provided, however, that (a) the Portfolio
reserves freedom of action to invest up to 100% of its assets
in obligations of, or guaranteed by, the United States
Government, its agencies or instrumentalities in accordance
with its investment objective and policies and (b) the
Portfolio will invest at least 25% of its assets in
obligations issued by banks in accordance with its investment
objective and policies. However, the Portfolio may, in the
discretion of its investment adviser, invest less than 25% of
its assets in obligations issued by banks whenever the
Portfolio assumes a temporary defensive posture.
With regard to restriction #13, for purposes of determining the percentage of
the Portfolio's total assets invested in securities of issuers having their
principal business activities in a particular industry, asset backed securities
will be classified separately, based on the nature of the underlying assets.
Currently, the following categories are used: captive auto, diversified, retail
and consumer loans, captive equipment and business, business trade receivables,
nuclear fuel and capital and mortgage lending.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The Portfolio
has no present intention of borrowing during the coming year as permitted for
the Portfolio by investment restriction number 4. In any event, borrowings would
only be made as permitted by such restrictions. In addition, the Portfolio may
not, as a non-fundamental policy that may be changed without shareholder vote:
(i) Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or
acquisition of assets.
INVESTMENT POLICIES AND TECHNIQUES
Descriptions in this Statement of Additional Information of a particular
investment practice or technique in which the Portfolio may engage or a
financial instrument which the Portfolio may purchase are meant to describe the
spectrum of investments that Scudder Kemper Investments, Inc. (the "Advisor"),
in its discretion, might, but is not required to, use in managing the
Portfolio's assets. The Advisor may, in its discretion, at any time, employ such
practice, technique or instrument for one or more funds but not for all funds
advised by it. Furthermore, it is possible that certain types of financial
instruments or investment techniques described herein may not be available,
permissible, economically feasible or effective for their intended purposes in
all markets. Certain practices, techniques, or instruments may not be principal
activities of the Portfolio, but, to the extent employed, could, from time to
time, have a material impact on the Portfolio's performance.
The Trust is a money market mutual fund designed to provide its shareholders
with professional management of short-term investment dollars. It is a series
investment company that is able to provide investors with a choice of separate
investment portfolios. The Trust currently offers three investment portfolios:
the Money Market Portfolio, the Government Securities Portfolio and the
Tax-Exempt Portfolio. The Trust is designed for investors who seek maximum
current income consistent with stability of capital. It pools individual and
institutional investors' money that it uses to buy high quality money market
instruments. Because each portfolio of the Trust combines its shareholders'
money, the portfolio can buy and sell large blocks of securities, which reduces
transaction costs and maximizes yields.
Money Market Portfolio.
The Portfolio is managed to maintain a net asset value of $1.00 per share. The
Portfolio is managed by investment professionals who analyze market trends to
take advantage of changing conditions and who seek to minimize risk by
diversifying the Portfolio's investments. The Portfolio's investments are
subject to price fluctuations resulting from rising or declining interest rates
and are subject to the ability of the issuers of such investments to make
payment at maturity. However, because of their short maturities, liquidity and
high quality ratings, high quality money market instruments, such as those in
which the Portfolio invests, are generally considered to be among the safest
available. Thus, the Portfolio is designed for investors who want to avoid the
fluctuations of principal commonly associated with equity or long-term bond
investments. There can be no guarantee that the Portfolio will achieve its
objective or that it will maintain a net asset value of $1.00 per share.
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The Portfolio pursues its objective by investing primarily in the following
types of U.S. Dollar-denominated money market instruments that mature in 397
days or less:
1. Obligations of, or guaranteed by, the U.S. or Canadian governments,
their agencies or instrumentalities.
2. Bank certificates of deposit, time deposits or bankers' acceptances of
U.S. banks (including their foreign branches) and Canadian chartered
banks having total assets in excess of $1 billion.
3. Bank certificates of deposit, time deposits or bankers' acceptances of
foreign banks (including their U.S. and foreign branches) having total
assets in excess of $10 billion.
4. Commercial paper, notes, bonds, debentures, participation certificates
or other debt obligations that (i) are rated high quality by Moody's
Investors Service, Inc. ("Moody's"), Standard & Poor's Corporation
("S&P"), or Duff & Phelps, Inc. ("Duff"); or (ii) if unrated, are
determined to be at least equal in quality to one or more of the above
ratings in the discretion of the Portfolio's investment manager.
Currently, only obligations in the top two categories are considered to
be rated high quality. The two highest rating categories of Moody's,
S&P and Duff for commercial paper are Prime-1 and Prime-2, A-1 and A-2
and Duff 1 and Duff 2, respectively. For other debt obligations, the
two highest rating categories for such services are Aaa and Aa, AAA and
AA and AAA and AA, respectively. For a description of these ratings,
see "Appendix -- Ratings of Investments" in this Statement of
Additional Information.
5. Repurchase agreements of obligations that are suitable for investment
under the categories set forth above. Repurchase agreements are
discussed below.
In addition, the Portfolio limits its investments to securities that meet the
quality and diversification requirements of Rule 2a-7 under the Investment
Company Act of 1940 (the "1940 Act").
The Portfolio will normally invest at least 25% of its assets in obligations
issued by banks; provided, however, the Portfolio may in the discretion of the
Portfolio's investment manager temporarily invest less than 25% of its assets in
such obligations whenever the Portfolio assumes a defensive posture. Investments
by the Portfolio in Eurodollar certificates of deposit issued by London branches
of U.S. banks, or obligations issued by foreign entities, including foreign
banks, involve risks that are different from investments in securities of
domestic branches of U.S. banks. These risks may include future unfavorable
political and economic developments, possible withholding taxes on interest
payments, seizure of foreign deposits, currency controls, interest limitations
or other governmental restrictions that might affect payment of principal or
interest. The market for such obligations may be less liquid and, at times, more
volatile than for securities of domestic branches of U.S. banks. Additionally,
there may be less public information available about foreign banks and their
branches. The profitability of the banking industry is dependent largely upon
the availability and cost of funds for the purpose of financing lending
operations under prevailing money market conditions. General economic conditions
as well as exposure to credit losses arising from possible financial
difficulties of borrowers play an important part in banking operations. As a
result of Federal and state laws and regulations, domestic banks are, among
other things, required to maintain specified levels of reserves, limited in the
amounts they can loan to a single borrower and subject to other regulations
designed to promote financial soundness. However, not all such laws and
regulations apply to the foreign branches of domestic banks. Foreign branches of
foreign banks are not regulated by U.S. banking authorities, and generally are
not bound by accounting, auditing and financial reporting standards comparable
to U.S. banks. Bank obligations held by the Portfolio do not benefit materially
from insurance from the Federal Deposit Insurance Corporation.
.
The Portfolio may invest in commercial paper issued by major corporations under
the Securities Act of 1933 in reliance on the exemption from registration
afforded by Section 3(a)(3) thereof. Such commercial paper may be issued only to
finance current transactions and must mature in nine months or less. Trading of
such commercial paper is conducted primarily by institutional investors through
investment dealers and individual investor participation in the commercial paper
market is very limited. The Portfolio also may invest in commercial paper issued
in reliance on the so-called "private placement" exemption from registration
that is afforded by Section 4(2) of the Securities Act of 1933 ("Section 4(2)
paper"). Section 4(2) paper is restricted as to disposition under the federal
securities laws, and generally is sold to institutional investors such as the
Portfolio who agree that they are purchasing the paper for investment and not
with a view to public distribution. Any resale by the purchaser must be in an
exempt transaction. Section 4(2) paper normally is resold to other institutional
investors like the Portfolio through or with the assistance of the issuer or
investment dealers who make a market in Section 4(2) paper, thus providing
liquidity. The Portfolio's investment manager considers the legally restricted
but readily saleable Section 4(2) paper to be liquid; however, pursuant to
procedures approved by the Board of Trustees of the Trust, if a particular
investment in Section 4(2) paper is not determined to be liquid, that investment
will be included within the 10% limitation on illiquid
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securities discussed below. The Portfolio's investment manager monitors the
liquidity of the Portfolio's investments in Section 4(2) paper on a continuous
basis.
The Portfolio may invest in high quality participation certificates
("certificates") representing undivided interests in trusts that hold a
portfolio of receivables from consumer and commercial credit transactions, such
as transactions involving consumer revolving credit card accounts or commercial
revolving credit loan facilities. The receivables would include amounts charged
for goods and services, finance charges, late charges and other related fees and
charges. Interest payable on the certificates may be fixed or may be adjusted
periodically or "float" continuously according to a formula based upon an
objective standard such as the 30-day commercial paper rate ("Variable Rate
Securities"). A trust may have the benefit of a letter of credit from a bank at
a level established to satisfy rating agencies as to the credit quality of the
assets supporting the payment of principal and interest on the certificates.
Payments of principal and interest on the certificates would be dependent upon
the underlying receivables in the trust and may be guaranteed under a letter of
credit to the extent of such credit. The quality rating by a rating service of
an issue of certificates is based primarily upon the value of the receivables
held by the trust and the credit rating of the issuer of any letter of credit
and of any other guarantor providing credit support to the trust. The
Portfolio's investment manager considers these factors as well as others, such
as any quality ratings issued by the rating services identified above, in
reviewing the credit risk presented by a certificate and in determining whether
the certificate is appropriate for investment by the Portfolio. Collection of
receivables in the trust may be affected by various social, legal and economic
factors affecting the use of credit and repayment patterns, such as changes in
consumer protection laws, the rate of inflation, unemployment levels and
relative interest rates. It is anticipated that for most publicly offered
certificates there will be a liquid secondary market or there may be demand
features enabling the Portfolio to readily sell its certificates prior to
maturity to the issuer or a third party. While the Portfolio may invest without
limit in certificates, it is currently anticipated that such investments will
not exceed 25% of the Portfolio's assets.
The Portfolio may invest in Variable Rate Securities, instruments having rates
of interest that are adjusted periodically or that "float" continuously
according to formulae intended to minimize fluctuation in values of the
instruments. The interest rate of Variable Rate Securities ordinarily is
determined by reference to or is a percentage of an objective standard such as a
bank's prime rate, the 90-day U.S. Treasury Bill rate, or the rate of return on
commercial paper or bank certificates of deposit. Generally, the changes in the
interest rate on Variable Rate Securities reduce the fluctuation in the market
value of such securities. Accordingly, as interest rates decrease or increase,
the potential for capital appreciation or depreciation is less than for
fixed-rate obligations. Some Variable Rate Securities ("Variable Rate Demand
Securities") have a demand feature entitling the purchaser to resell the
securities at an amount approximately equal to amortized cost or the principal
amount thereof plus accrued interest. As is the case for other Variable Rate
Securities, the interest rate on Variable Rate Demand Securities varies
according to some objective standard intended to minimize fluctuation in the
values of the instruments. The Portfolio determines the maturity of Variable
Rate Securities in accordance with Rule 2a-7, which allows the Portfolio to
consider certain of such instruments as having maturities shorter than the
maturity date on the face of the instrument.
The Portfolio will not purchase illiquid securities, including time deposits and
repurchase agreements maturing in more than seven days if, as a result thereof,
more than 10% of the Portfolio's net assets valued at the time of the
transaction would be invested in such securities.
Repurchase Agreements. The Portfolio may invest in repurchase agreements, which
are instruments under which the Portfolio acquires ownership of a security from
a broker-dealer or bank that agrees to repurchase the security at a mutually
agreed upon time and price (which price is higher than the purchase price),
thereby determining the yield during the Portfolio's holding period. Maturity of
the securities subject to repurchase may exceed one year. In the event of a
bankruptcy or other default of a seller of a repurchase agreement, the Portfolio
might have expenses in enforcing its rights, and could experience losses,
including a decline in the value of the underlying securities and loss of
income.
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The Portfolio may enter into repurchase agreements with any member bank of the
Federal Reserve System or any domestic broker/dealer which is recognized as a
reporting Government securities dealer if the creditworthiness of the bank or
broker/dealer has been determined by the Advisor to be at least as high as that
of other obligations the Portfolio may purchase or to be at least equal to that
of issuers of commercial paper rated within the two highest grades assigned by
Moody's, S&P or Duff.
A repurchase agreement provides a means for the Portfolio to earn taxable income
on funds for periods as short as overnight. It is an arrangement under which the
purchaser (i.e., the Portfolio) acquires a security ("Obligation") and the
seller agrees, at the time of sale, to repurchase the Obligation at a specified
time and price. Securities subject to a repurchase agreement are held in a
segregated account and the value of such securities kept at least equal to the
repurchase price on a daily basis. The repurchase price may be higher than the
purchase price, the difference being income to the Portfolio, or the purchase
and repurchase prices may be the same, with interest at a stated rate due to the
Portfolio together with the repurchase price on the date of repurchase. In
either case, the income to the Portfolio (which is taxable) is unrelated to the
interest rate on the Obligation itself. Obligations will be held by the
custodian or in the Federal Reserve Book Entry system.
It is not clear whether a court would consider the Obligation purchased by the
Portfolio subject to a repurchase agreement as being owned by the Portfolio or
as being collateral for a loan by the Portfolio to the seller. In the event of
the commencement of bankruptcy or insolvency proceedings with respect to the
seller of the Obligation before repurchase of the Obligation under a repurchase
agreement, the Portfolio may encounter delay and incur costs before being able
to sell the security. Delays may involve loss of interest or decline in price of
the Obligation. If the court characterized the transaction as a loan and the
Portfolio has not perfected an interest in the Obligation, the Portfolio may be
required to return the Obligation to the seller's estate and be treated as an
unsecured creditor of the seller. As an unsecured creditor, the Portfolio is at
risk of losing some or all of the principal and income involved in the
transaction. As with any unsecured debt obligation purchased for the Portfolio,
the Advisor seeks to minimize the risk of loss through repurchase agreements by
analyzing the creditworthiness of the obligor, in this case the seller of the
Obligation. Apart from the risk of bankruptcy or insolvency proceedings, there
is also the risk that the seller may fail to repurchase the Obligation, in which
case the Portfolio may incur a loss if the proceeds to the Portfolio of the sale
to a third party are less than the repurchase price. However, if the market
value of the Obligation subject to the repurchase agreement becomes less than
the repurchase price (including interest), the Portfolio will direct the seller
of the Obligation to deliver additional securities so that the market value of
all securities subject to the repurchase agreement will equal or exceed the
repurchase price. It is possible that the Portfolio will be unsuccessful in
seeking to enforce the seller's contractual obligation to deliver additional
securities.
Interfund Borrowing and Lending Program. The Trust haves received exemptive
relief from the SEC which permits the Trust to participate in an interfund
lending program among certain investment companies advised by the Advisor. The
interfund lending program allows the participating funds to borrow money from
and loan money to each other for temporary or emergency purposes. The program is
subject to a number of conditions designed to ensure fair and equitable
treatment of all participating funds, including the following: (1) no fund may
borrow money through the program unless it receives a more favorable interest
rate than a rate approximating the lowest interest rate at which bank loans
would be available to any of the participating funds under a loan agreement; and
(2) no portfolio may lend money through the program unless it receives a more
favorable return than that available from an investment in repurchase agreements
and, to the extent applicable, money market cash sweep arrangements. In
addition, a portfolio may participate in the program only if and to the extent
that such participation is consistent with the portfolio's investment objectives
and policies (for instance, money market funds would normally participate only
as lenders and tax exempt funds only as borrowers). Interfund loans and
borrowings may extend overnight, but could have a maximum duration of seven
days. Loans may be called on one day's notice. A portfolio may have to borrow
from a bank at a higher interest rate if an interfund loan is called or not
renewed. Any delay in repayment to a lending fund could result in a lost
investment opportunity or additional costs. The program is subject to the
oversight and periodic review of the Boards of the participating portfolios. To
the extent the Trust is actually engaged in borrowing through the interfund
lending program, the Trust,
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as a matter of non-fundamental policy, may not borrow for other than temporary
or emergency purposes (and not for leveraging).
INVESTMENT ADVISOR AND SHAREHOLDER SERVICES
Investment Advisor. Scudder Kemper Investments, Inc. (the "Advisor" or "Scudder
Kemper") 345 Park Avenue, New York, New York, is the investment adviser for the
Portfolio. Scudder Kemper is approximately 70% owned by Zurich Insurance
Company, a leading internationally recognized provider of insurance and
financial services in property/casualty and life insurance, reinsurance and
structured financial solutions as well as asset management. The balance of
Scudder Kemper is owned by Scudder Kemper's officers and employees.
Responsibility for overall management of the Portfolio rests with the Trust's
Board of Trustees and officers. Pursuant to an investment management agreement
(the "Agreement"), Scudder Kemper acts as the Portfolio's Advisor, manages its
investments, administers its business affairs, furnishes office facilities and
equipment, provides clerical and administrative services, provides shareholder
and information services and permits any of its officers or employees to serve
without compensation as trustees or officers of the Trust if elected to such
positions. The Trust pays the expenses of its operations, including the fees and
expenses of independent auditors, counsel, custodian and transfer agent and the
cost of share certificates, reports and notices to shareholders, costs of
calculating net asset value and maintaining all accounting records related
thereto, brokerage commissions or transaction costs, taxes, registration fees,
the fees and expenses of qualifying the Trust and its shares for distribution
under federal and state securities laws and membership dues in the Investment
Company Institute or any similar organization.
The Agreement provides that Scudder Kemper shall not be liable for any error of
judgment or of law, or for any loss suffered by the Trust in connection with the
matters to which the agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of Scudder Kemper in the
performance of its obligations and duties, or by reason of its reckless
disregard of its obligations and duties under the agreement.
In certain cases the investments for the Portfolio are managed by the same
individuals who manage one or more other mutual funds advised by the Advisor
that have similar names, objectives and investment styles as the Portfolio. You
should be aware that the Portfolio are likely to differ from these other mutual
funds in size, cash flow pattern and tax matters. Accordingly, the holdings and
performance of the Portfolio can be expected to vary from those of the other
mutual funds.
On December 31, 1997, pursuant to the terms of an agreement, Scudder, Stevens &
Clark, Inc. ("Scudder") and Zurich Insurance Company ("Zurich") formed a new
global organization by combining Scudder with Zurich Kemper Investments, Inc., a
former subsidiary of Zurich and the former investment manager to each Fund, and
Scudder changed its name to Scudder Kemper Investments, Inc. As a result of the
transaction, Zurich owned approximately 70% of the Adviser, with the balance
owned by the Adviser's officers and employees.
On September 7, 1998, the businesses of Zurich (including Zurich's 70% interest
in Scudder Kemper) 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 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 Scudder Kemper was deemed to have been assigned and,
therefore, terminated. The Board has approved a new investment management
agreement with Scudder Kemper, which is substantially identical to the current
investment management
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agreement, except for the date of execution and termination. This agreement
became effective upon the termination of the then current investment management
agreement and was approved by shareholders at a special meeting.
The Agreement dated September 7, 1998, was last approved by the trustees of the
Trust on August 11, 1998. The Agreement will continue in effect until September
30, 2000 and from year to year thereafter only if its continuance is approved
annually by the vote of a majority of those trustees who are not parties to such
Agreement or interested persons of the Advisor the Trust, cast in person at a
meeting called for the purpose of voting on such approval, and either by a vote
of the Trust's trustees or of a majority of the outstanding voting securities of
the Trust. The Agreement may be terminated at any time without payment of
penalty by either party on sixty days' written notice, and automatically
terminates in the event of its assignment.
If additional Portfolios become subject to the Agreement, the provisions
concerning continuation, amendment and termination shall be on a Portfolio by
Portfolio basis and the management fee and the expense limitations shall be
computed based upon the average daily net assets of all Portfolios subject to
the agreement and shall be allocated among such Portfolios based upon the
relative net assets of such Portfolios. Additional Portfolios may be subject to
a different agreement. Currently, the Money Market Portfolio, the Government
Securities Portfolio and the Tax-Exempt Portfolio are subject to the agreement.
For the services and facilities furnished to the Trust, the Trust pays a monthly
investment management fee on a graduated basis at 1/12 of 0.22% of the first
$500 million of combined average daily net assets of the Trust, 0.20% of the
next $500 million, 0.175% of the next $1 billion, 0.16% of the next $1 billion
and 0.15% of combined average daily net assets of the Trust over $3 billion. The
investment management fee is computed based on average daily net assets of the
Portfolio subject to the agreement and allocated among all of the Portfolios of
the Trust based upon the relative net assets of each Portfolio. Pursuant to the
investment management agreement, the Portfolio paid the Advisor fees of
$8,142,641 for the fiscal year ended April 30, 2000; $3,120,000 for the fiscal
year ended April 30, 1999; and $1,888,000 for the fiscal year ended April 30,
1998. The Advisor and certain affiliates have agreed to limit certain operating
expenses of the Portfolio to the extent described in the prospectus. If expense
limits had not been in effect the Advisor would have received investment
management fees from the Portfolio of $8,142,641 for the fiscal year ended April
30, 2000; $4,086,000 for the fiscal year ended April 30, 1999; and $2,463,000
for the fiscal year ended April 30, 1998. The Advisor absorbed operating
expenses for the Portfolio of $0 for the fiscal year ended April 30, 2000;
$2,233,000 for the fiscal year ended April 30, 1999; and $1,253,000 for the
fiscal year ended April 30, 1998.
Certain officers or trustees of the Trust are also directors or officers of the
Advisor and its affiliates as indicated under "Officers and Trustees."
Fund Accounting Agent. Scudder Fund Accounting Corporation ("SFAC"), Two
International Place, Boston, Massachusetts 02110, a subsidiary of the Advisor,
is responsible for determining the daily net asset value per share of the
Portfolio and maintaining all accounting records related thereto. Currently,
SFAC receives no fee for its services to the Portfolio; however, subject to
Board approval, at some time in the future, SFAC may seek payment for its
services under this agreement.
Distributor and Administrator. Pursuant to an underwriting and distribution
agreement ("distribution agreement"), Kemper Distributors, Inc. ("KDI"), 222
South Riverside Plaza, Chicago, Illinois 60606, an affiliate of the Advisor,
serves as distributor and principal underwriter for the Trust to provide
information and services for existing and potential shareholders. The
distribution agreement provides that KDI shall appoint various firms to provide
cash management services for their customers or clients through the Trust.
As principal underwriter for the Trust, KDI acts as agent of the Trust in the
sale of its shares of the Portfolio. KDI pays all its expenses under the
distribution agreement including, without limitation, services fees to firms.
The Trust pays the cost for the prospectus and shareholder reports to be set in
type and printed for existing shareholders, and KDI pays for the printing and
distribution of copies thereof used in connection with the offering of shares to
prospective investors. KDI also pays for supplementary sales literature and
advertising costs. KDI has entered into related selling group agreements with
various firms to provide distribution services for Fund shareholders. KDI
receives no compensation from the Trust as principal underwriter
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for the Shares and pays all expenses of distribution of the Shares not otherwise
paid by dealers and other financial services firms.
The distribution agreement continues in effect from year to year so long as such
continuance is approved at least annually by a vote of the Board of Trustees of
the Trust, including the Trustees who are not interested persons of the Trust
and who have no direct or indirect financial interest in the agreement. The
distribution agreement automatically terminates in the event of its assignment
and may be terminated at any time without penalty by the Trust or by KDI upon 60
days' written notice. Termination of the distribution agreement by the Trust may
be by vote of a majority of the Board of Trustees, or a majority of the Trustees
who are not interested persons of the Trust and who have no direct or indirect
financial interest in the agreement, or a "majority of the outstanding voting
securities" of the Trust as defined under the 1940 Act.
Administrative services are provided to the Portfolio under an administration
services agreement ("administration agreement") with KDI. KDI bears all its
expenses of providing services pursuant to the administration agreement between
KDI and the Portfolio, including the payment of service fees. Premium Reserve
Shares of the Portfolio each pay KDI an administrative services fee, payable
monthly, at an annual rate of up to 0.25% of average daily net assets of the
Portfolio. Institutional Shares of the Portfolio pays KDI an administrative
services fee, payable monthly, at an annual rate of up to 0.15% of average daily
net assets of the Portfolio. In addition to the discounts or commissions
described above, KDI will, from time to time, pay or allow additional discounts,
commissions or promotional incentives, in the form of cash or other
compensation, to firms that sell shares of the Funds. During the fiscal year
ended April 30, 2000, the Portfolio paid distribution services fees of
$24,678,842. KDI waived expenses for the Portfolio of $3,931,738 for the fiscal
year ended April 30, 2000. During the fiscal year ended April 30, 1999, the
shares of the Portfolio paid distribution services fees of $12,373,000.
KDI has entered into related arrangements with various broker-dealer firms and
other service or administrative firms ("firms") that provide services and
facilities for their customers or clients who are investors in Premium Reserve
Shares and Institutional Shares of the Portfolio. The firms provide such office
space and equipment, telephone facilities and personnel as is necessary or
beneficial for providing information and services to their clients. Such
services and assistance may include, but are not limited to, establishing and
maintaining accounts and records, processing purchase and redemption
transactions, answering routine inquiries regarding the Portfolio, assistance to
clients in changing dividend and investment options, account designations and
addresses and such other administrative services as may be agreed upon from time
to time and permitted by applicable statute, rule or regulation. KDI pays each
firm a service fee, normally payable quarterly, at an annual rate of up to 0.25%
and 0.15% of the net assets in the Portfolio's Premium Reserves Shares and
Institutional Shares accounts, respectively, that it maintains and services,
commencing with the month after investment. After the first year, a firm becomes
eligible for the quarterly service fee and the fee continues until terminated by
KDI or the Portfolio. Firms to which service fees may be paid may include
affiliates of KDI. During the fiscal year ended April 30, 2000, the Portfolio
incurred administrative services fees of $41,312.
KDI also may provide some of the above services and may retain any portion of
the fee under the administrative agreement not paid to firms to compensate
itself for administrative functions performed for the Portfolio.
Custodian, Transfer Agent and Shareholder Service Agent. State Street Bank and
Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, as custodian,
has custody of all securities and cash of the Trust. It attends to the
collection of principal and income, and payment for and collection of proceeds
of securities bought and sold by the Portfolio. Pursuant to a services agreement
with Investors Fiduciary Trust Company ("IFTC"), 801 Pennsylvania Avenue, Kansas
City, Missouri 64105, the transfer agent for the Trust, Kemper Service Company
("KSvC"), an affiliate of the Advisor, serves as "Shareholder Service Agent."
IFTC receives from the Premium Reserve Shares and Institutional Shares, as
transfer agent, and pays to KSvC annual account fees of a maximum of $13 per
account plus out-of-pocket expense reimbursement. During the fiscal year ended
April 30, 2000, IFTC remitted shareholder service fees for Money Market
Portfolio in the amount of $11,380,698 to KSvC as Shareholder Service Agent.
During the fiscal year ended April 30, 1999, IFTC remitted shareholder service
fees for Money Market Portfolio in the amount of $4,860,000 to KSvC as
Shareholder Service Agent.
Code of Ethics. The Trust, the Advisor and principal underwriter have each
adopted codes of ethics under rule 17j-1 of the Investment Company Act. Board
members, officers of the Trust and employees of the Advisor and principal
underwriter are permitted to make personal securities transactions, including
transactions in securities that may be
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purchased or held by the Trust, subject to requirements and restrictions set
forth in the applicable Code of Ethics. The Advisor's Code of Ethics contains
provisions and requirements designed to identify and address certain conflicts
of interest between personal investment activities and the interests of the
Trust. Among other things, the Advisor's Code of Ethics prohibits certain types
of transactions absent prior approval, imposes time periods during which
personal transactions may not be made in certain securities, and requires the
submission of duplicate broker confirmations and quarterly reporting of
securities transactions. Additional restrictions apply to portfolio managers,
traders, research analysts and others involved in the investment advisory
process. Exceptions to these and other provisions of the Advisor's Code of
Ethics may be granted in particular circumstances after review by appropriate
personnel.
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.
The Portfolio, or the Advisor (including any affiliate of the Advisor), or both,
may pay unaffiliated third parties for providing recordkeeping and other
administrative services with respect to accounts of participants in retirement
plans or other beneficial owners of Portfolio shares whose interests are held in
an omnibus account.
PORTFOLIO TRANSACTIONS
Brokerage Commissions
Allocation of brokerage is supervised by the Advisor.
The primary objective of the Advisor in placing orders for the purchase and sale
of securities for the 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 Advisor seeks to evaluate the overall reasonableness of
brokerage commissions paid (to the extent applicable) through the familiarity of
Scudder Investor Services, Inc. ("SIS") with commissions charged on comparable
transactions, as well as by comparing commissions paid by the Portfolio to
reported commissions paid by others. The Advisor routinely reviews commission
rates, execution and settlement services performed and makes internal and
external comparisons.
The Portfolio's purchases and sales of fixed-income securities are generally
placed by the Advisor with primary market makers for these securities on a net
basis, with out any brokerage commission being paid by the Portfolio. Trading
does, however, involve transaction costs. Transactions with dealers serving as
primary market makers reflect the spread between the bid and asked prices.
Purchases of underwritten issues may be made, which will include an underwriting
fee paid to the underwriter.
When it can be done consistently with the policy of obtaining the most favorable
net results, it is the Advisor's practice to place such orders with
broker/dealers who supply brokerage and research services to the Advisor or the
Portfolio. The term "research services" includes advice as to the value of
securities; the advisability of investing in, purchasing or selling securities;
the availability of securities or purchasers or sellers of securities; and
analyses and reports concerning issuers, industries, securities, economic
factors and trends, portfolio strategy and the performance of accounts. The
Advisor is authorized when placing portfolio transactions, if applicable, for
the Portfolio to pay a brokerage commission in excess of that which another
broker might charge for executing the same transaction on account of execution
services and the receipt of research services. The Advisor has negotiated
arrangements, which are not applicable to most fixed-income transactions, with
certain broker/dealers pursuant to which a broker/dealer will provide research
services to the Advisor or the Portfolio in exchange for the direction by the
Advisor of brokerage transactions to the broker/dealer. These arrangements
regarding receipt of research services generally apply to equity security
transactions. The Advisor may place orders with a broker/dealer on the basis
that the broker/dealer has or has not sold shares of the Portfolio. In effecting
transactions in over-
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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 Advisor will place
orders for portfolio transactions through SIS, which is a corporation registered
as a broker/dealer and a subsidiary of the Advisor; SIS will place orders on
behalf of the Portfolio with issuers, underwriters or other brokers and dealers.
SIS will not receive any commission, fee or other remuneration from the
Portfolio for this service.
Although certain research services from broker/dealers may be useful to the
Portfolio and to the Advisor, it is the opinion of the Advisor that such
information only supplements the Advisor's own research effort since the
information must still be analyzed, weighed, and reviewed by the Advisor's
staff. Such information may be useful to the Advisor in providing services to
clients other than the Portfolio, and not all such information is used by the
Advisor in connection with the Portfolio. Conversely, such information provided
to the Advisor by broker/dealers through whom other clients of the Advisor
effect securities transactions may be useful to the Advisor in providing
services to the Portfolio.
The Trustees review, from time to time, whether the recapture for the benefit of
the Portfolio of some portion of the brokerage commissions or similar fees paid
by the Portfolio on portfolio transactions is legally permissible and advisable.
Money market instruments are normally purchased in principal transactions
directly from the issuer or from an underwriter or market maker. There usually
are no brokerage commissions paid by the Portfolio for such purchases. During
the last three fiscal years the Portfolio paid no portfolio brokerage
commissions. Purchases from underwriters will include a commission or concession
paid by the issuer to the underwriter, and purchases from dealers serving as
market makers will include the spread between the bid and asked prices.
PURCHASES AND REDEMPTION OF SHARES
Purchase of Shares
Shares of the Portfolio are sold at their net asset value next determined after
an order and payment are received in the form described in the prospectus. For
Premium Reserve Shares, the minimum initial investment is $1,000 ($50 for an
automatic investment plan) and the minimum subsequent investment is $100. For
Institutional Shares, the minimum initial investment is $250,000. Such minimum
amounts may be changed at any time. The Portfolio may waive the minimum for
purchases by trustees, directors, officers or employees of the Trust or the
Advisor and its affiliates. An investor wishing to open an account should use
the Account Application available from the Portfolio or financial services
firms. Orders for the purchase of shares that are accompanied by a check drawn
on a foreign bank (other than a check drawn on a Canadian bank in U.S. Dollars)
will not be considered in proper form and will not be rocessed unless and until
the Portfolio determines that it has received payment of the proceeds of the
check. The time required for such a determination will vary and cannot be
determined in advance.
Clients of Firms. Firms provide varying arrangements for their clients with
respect to the purchase and redemption of Portfolio shares and the confirmation
thereof and may arrange with their clients for other investment or
administrative services. Such firms are responsible for the prompt transmission
of purchase and redemption orders. Some firms may establish higher minimum
investment requirements than set forth above. Such firms may independently
establish and charge additional amounts to their clients for their services,
which charges would reduce their clients' yield or return. Firms may also hold
Portfolio shares in nominee or street name as agent for and on behalf of their
clients. In such instances, the Portfolio's Trust's transfer agent will have no
information with respect to or control over the accounts of specific
shareholders. Such shareholders may obtain access to their accounts and
information about their accounts only from their firm. Certain of these firms
may receive compensation through the Trust's Shareholder Service Agent for
record-keeping and other expenses relating to these nominee accounts. In
addition, certain privileges with respect to the purchase and redemption of
shares (such as check writing redemptions) or the reinvestment of dividends may
not be available through such firms or may only be available subject to certain
conditions or limitations. Some firms may participate in a program allowing them
access to their clients' accounts for servicing including, without limitation,
transfers of registration and dividend payee changes; and may
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perform functions such as generation of confirmation statements and disbursement
of cash dividends. The prospectus should be read in connection with such firm's
material regarding its fees and services.
Other Information. The Portfolio reserves the right to withdraw all or any part
of the offering made by this prospectus or to reject purchase orders, without
prior notice. The Portfolio also reserves the right at any time to waive or
increase the minimum investment requirements. All orders to purchase Shares of
the Portfolio are subject to acceptance by the Portfolio and are not binding
until confirmed or accepted in writing. Any purchase that would result in total
account balances for a single shareholder in excess of $3 million is subject to
prior approval by the Portfolio. Share certificates are issued only on request.
A $10 service fee will be charged when a check for the purchase of Shares is
returned because of insufficient or uncollected funds or a stop payment order.
Shareholders should direct their inquiries to the firm from which they received
this prospectus or to Kemper Service Company ("KSvC"), the Trust's "Shareholder
Service Agent," 811 Main Street, Kansas City, Missouri 64105-2005.
Redemption of Shares
General. Upon receipt by the Shareholder Service Agent of a request in the form
described below, shares of the Portfolio will be redeemed by the Portfolio at
the next determined net asset value. If processed at 3:00 p.m. Central time, the
shareholder will receive that day's dividend. A shareholder may use either the
regular or expedited redemption procedures. Shareholders who redeem all their
shares of the Portfolio will receive the net asset value of such shares and all
declared but unpaid dividends on such shares.
The Portfolio may suspend the right of redemption or delay payment more than
seven days (a) during any period when the New York Stock Exchange ("Exchange")
is closed other than customary weekend and holiday closings or during any period
in which trading on the Exchange is restricted, (b) during any period when an
emergency exists as a result of which (i) disposal of the Portfolio's
investments is not reasonably practicable, or (ii) it is not reasonably
practicable for the Portfolio to determine the value of its net assets, or (c)
for such other periods as the Securities and Exchange Commission may by order
permit for the protection of the Portfolio's shareholders.
Although it is the Portfolio's present policy to redeem in cash, if the Board of
Trustees determines that a material adverse effect would be experienced by the
remaining shareholders if payment were made wholly in cash, the Portfolio will
pay the redemption price in part by a distribution of portfolio securities in
lieu of cash, in conformity with the applicable rules of the Securities and
Exchange Commission, taking such securities at the same value used to determine
net asset value, and selecting the securities in such manner as the Board of
Trustees may deem fair and equitable. If such a distribution occurs,
shareholders receiving securities and selling them could receive less than the
redemption value of such securities and in addition would incur certain
transaction costs. Such a redemption would not be as liquid as a redemption
entirely in cash. The Trust has elected to be governed by Rule 18f-1 under the
1940 Act pursuant to which the Trust is obligated to redeem shares of the
Portfolio solely in cash up to the lesser of $250,000 or 1% of the net assets of
the Portfolio during any 90-day period for any one shareholder of record.
If shares of the Portfolio to be redeemed were purchased by check or through
certain Automated Clearing House ("ACH") transactions, the Portfolio may delay
transmittal of redemption proceeds until it has determined that collected funds
have been received for the purchase of such shares, which will be up to 10 days
from receipt by the Portfolio of the purchase amount. Shareholders may not use
ACH or Redemption Checks (defined below) until the shares being redeemed have
been owned for at least 10 days and shareholders may not use such procedures to
redeem shares held in certificated form. There is no delay when shares being
redeemed were purchased by wiring Federal Funds.
If shares being redeemed were acquired from an exchange of shares of a mutual
fund that were offered subject to a contingent deferred sales charge as
described in the prospectus for that other fund, the redemption of such shares
by the Portfolio may be subject to a contingent deferred sales charge as
explained in such prospectus.
Shareholders can request the following telephone privileges: expedited wire
transfer redemptions, ACH transactions and exchange transactions for individual
and institutional accounts and pre-authorized telephone redemption transactions
for certain institutional accounts. Shareholders may choose these privileges on
the account application or by contacting the Shareholder Service Agent for
appropriate instructions. Please note that the telephone exchange privilege is
automatic unless
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the shareholder refuses it on the account application. The Trust or its agents
may be liable for any losses, expenses or costs arising out of fraudulent or
unauthorized telephone requests pursuant to these privileges, unless the Trust
or its agents reasonably believe, based upon reasonable verification procedures,
that the telephone instructions are genuine. The shareholder will bear the risk
of loss, resulting from fraudulent or unauthorized transactions, as long as the
reasonable verification procedures are followed. The verification procedures
include recording instructions, requiring certain identifying information before
acting upon instructions and sending written confirmations.
Because of the high cost of maintaining small accounts, the Portfolio reserves
the right to redeem an account that falls below the minimum investment level.
Thus, a shareholder who makes only the minimum initial investment and then
redeems any portion thereof might have the account redeemed. A shareholder will
be notified in writing and will be allowed 60 days to make additional purchases
to bring the account value up to the minimum investment level before the
Portfolio redeems the shareholder account.
Financial services firms provide varying arrangements for their clients to
redeem Portfolio Shares. Such firms may independently establish and charge
amounts to their clients for such services.
Regular Redemptions. When Shares are held for the account of a shareholder by
the Trust's transfer agent, the shareholder may redeem them by sending a written
request with signatures guaranteed to Kemper Service Company, P.O. Box 419153,
Kansas City, Missouri 64141-6153. When certificates for shares have been issued,
they must be mailed to or deposited with the Shareholder Service Agent, along
with a duly endorsed stock power and accompanied by a written request for
redemption. Redemption requests and a stock power must be endorsed by the
account holder with signatures guaranteed by a commercial bank, trust company,
savings and loan association, federal savings bank, member firm of a national
securities exchange or other eligible financial institution. The redemption
request and stock power must be signed exactly as the account is registered
including any special capacity of the registered owner. Additional documentation
may be requested, and a signature guarantee is normally required, from
institutional and fiduciary account holders, such as corporations, custodians
(e.g., under the Uniform Transfers to Minors Act), executors, administrators,
trustees or guardians.
Telephone Redemptions. If the proceeds of the redemption are $50,000 or less and
the proceeds are payable to the shareholder of record at the address of record,
normally a telephone request or a written request by any one account holder
without a signature guarantee is sufficient for redemptions by individual or
joint account holders, and trust, executor, guardian and custodian account
holders, provided the trustee, executor, guardian or custodian is named in the
account registration. Other institutional account holders may exercise this
special privilege of redeeming shares by telephone request or written request
without signature guarantee subject to the same conditions as individual account
holders and subject to the limitations on liability, provided that this
privilege has been pre-authorized by the institutional account holder or
guardian account holder by written instruction to the Shareholder Service Agent
with signatures guaranteed. Telephone requests may be made by calling
1-800-231-8568. Shares purchased by check or through certain ACH transactions
may not be redeemed under this privilege of redeeming shares by telephone
request until such shares have been owned for at least 10 days. This privilege
of redeeming shares by telephone request or by written request without a
signature guarantee may not be used to redeem shares held in certificate form
and may not be used if the shareholder's account has had an address change
within 30 days of the redemption request. During periods when it is difficult to
contact the Shareholder Service Agent by telephone, it may be difficult to use
the telephone redemption privilege, although investors can still redeem by mail.
The Portfolio reserves the right to terminate or modify this privilege at any
time.
Expedited Wire Transfer Redemptions. If the account holder has given
authorization for expedited wire redemption to the account holder's brokerage or
bank account, shares can be redeemed and proceeds sent by a federal wire
transfer to a single previously designated account. Requests received by the
Shareholder Service Agent prior to 11:00 p.m. Central time will result in
Premium Reserve Shares and Institutional Shares being redeemed that day and
normally the proceeds will be sent to the designated account that day. Once
authorization is on file, the Shareholder Service Agent will honor requests by
telephone at 1-800-231-8568 or in writing, subject to the limitations on
liability. The Portfolio is not responsible for the efficiency of the federal
wire system or the account holder's financial services firm or bank. The
Portfolio currently does not charge the account holder for wire transfers. The
account holder is responsible for any charges imposed by the account holder's
firm or bank. There is a $1,000 wire redemption minimum. To change the
designated account to receive wire redemption proceeds, send a written request
to the Shareholder Service Agent with signatures guaranteed as described above,
or contact the firm through which shares of the Portfolio were purchased. Except
for Institutional Shares, Shares purchased
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<PAGE>
by check or through certain ACH transactions may not be redeemed by wire
transfer until the shares have been owned for at least 10 days. Account holders
may not use this procedure to redeem shares held in certificate form. During
periods when it is difficult to contact the Shareholder Service Agent by
telephone, it may be difficult to use the expedited wire transfer redemption
privilege. The Portfolio reserves the right to terminate or modify this
privilege at any time.
Redemptions By Draft. This section does not apply to Institutional Shares. Upon
request, shareholders will be provided with drafts to be drawn on the Portfolio
("Redemption Checks"). These Redemption Checks may be made payable to the order
of any person for not more than $5 million. Shareholders should not write
Redemption Checks in an amount less than $250 since a $10 service fee will be
charged as described below. When a Redemption Check is presented for payment, a
sufficient number of full and fractional shares in the shareholder's account
will be redeemed as of the next determined net asset value to cover the amount
of the Redemption Check. This will enable the shareholder to continue earning
dividends until the Portfolio receives the Redemption Check. A shareholder
wishing to use this method of redemption must complete and file an Account
Application which is available from the Portfolio or firms through which shares
were purchased. Redemption Checks should not be used to close an account since
the account normally includes accrued but unpaid dividends. The Portfolio
reserves the right to terminate or modify this privilege at any time. This
privilege may not be available through some firms that distribute shares of the
Portfolio. In addition, firms may impose minimum balance requirements in order
to offer this feature. Firms may also impose fees to investors for this
privilege or establish variations of minimum check amounts if approved by the
Portfolio.
Unless one signer is authorized on the Account Application, Redemption Checks
must be signed by all account holders. Any change in the signature authorization
must be made by written notice to the Shareholder Service Agent. Shares
purchased by check or through certain ACH transactions may not be redeemed by
Redemption Check until the shares have been on the Portfolio's books for at
least 10 days. Shareholders may not use this procedure to redeem shares held in
certificate form. The Portfolio reserves the right to terminate or modify this
privilege at any time.
The Portfolio may refuse to honor Redemption Checks whenever the right of
redemption has been suspended or postponed, or whenever the account is otherwise
impaired. A $10 service fee will be charged when a Redemption Check is presented
to redeem Portfolio shares in excess of the value of a Portfolio account or in
an amount less than $250; when a Redemption Check is presented that would
require redemption of shares that were purchased by check or certain ACH
transactions within 10 days; or when "stop payment" of a Redemption Check is
requested.
Special Features. Certain firms that offer Shares of the Portfolio also provide
special redemption features through charge or debit cards and checks that redeem
Portfolio Shares. Various firms have different charges for their services.
Shareholders should obtain information from their firm with respect to any
special redemption features, applicable charges, minimum balance requirements
and special rules of the cash management program being offered.
DIVIDENDS, NET ASSET VALUE AND TAXES
Dividends. Dividends are declared daily and paid monthly. Shareholders will
receive dividends in additional shares unless they elect to receive cash.
Dividends will be reinvested monthly in shares of a Portfolio at net asset value
on the last business day of the month. The Portfolio will pay shareholders that
redeem their entire accounts all unpaid dividends at the time of the redemption
not later than the next dividend payment date. Upon written request to the
Shareholder Service Agent, a shareholder may elect to have Portfolio dividends
invested without sales charge in shares of another Kemper Mutual Fund offering
this privilege at the net asset value of such other fund. See "Special Features-
Exchange Privilege" for a list of such other Kemper Mutual Funds. To use this
privilege of investing Portfolio dividends in shares of another Kemper Mutual
Fund, shareholders must maintain a minimum account value of $1,000 in Premium
Reserve Shares, $25,000 in Premier Shares and $250,000 in Institutional Shares,
and must maintain a minimum account value of $1,000 in the fund in which
dividends are reinvested.
The Shares of the Portfolio calculate their dividends based on its daily net
investment income. For this purpose, the net investment income of the Shares of
the Portfolio consists of (a) accrued interest income plus or minus amortized
discount or premium, (b) plus or minus all short-term realized gains and losses
on investments and (c) minus accrued expenses allocated to the Shares of the
Portfolio. Expenses of the Portfolio are accrued each day. While the Shares of
the Portfolio's investments are valued at amortized cost, there will be no
unrealized gains or losses on such investments. However, should the net asset
14
<PAGE>
value of the Shares of the Portfolio deviate significantly from market value,
the Board of Trustees could decide to value the investments at market value and
then unrealized gains and losses would be included in net investment income
above. Dividends are reinvested monthly and shareholders will receive monthly
confirmations of dividends and of purchase and redemption transactions except
that confirmations of dividend reinvestment for Individual Retirement Accounts
and other fiduciary accounts for which Investors Fiduciary Trust Company acts as
trustee will be sent quarterly.
If the shareholder elects to receive dividends in cash, checks will be mailed
monthly, within five business days of the reinvestment date (described below),
to the shareholder or any person designated by the shareholder. At the option of
the shareholder, cash dividends may be sent by Federal Funds wire. Shareholders
may request to have dividends sent by wire on the Account Application or by
contacting the Shareholder Service Agent (see "Purchase of Shares"). The
Portfolio reinvests dividend checks (and future dividends) in shares of the
Portfolio if checks are returned as undeliverable. Dividends and other
distributions in the aggregate amount of $10 or less are automatically
reinvested in shares of the Portfolio unless the shareholder requests that such
policy not be applied to the shareholder's account.
Net Asset Value. As described in the prospectus, the Portfolio values its
portfolio instruments at amortized cost, which does not take into account
unrealized capital gains or losses. This involves initially valuing an
instrument at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. While this method provides
certainty in valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the price the Portfolio
would receive if it sold the instrument. Calculations are made to compare the
value of the Shares of the Portfolio's investments valued at amortized cost with
market values. Market valuations are obtained by using actual quotations
provided by market makers, estimates of market value, or values obtained from
yield data relating to classes of money market instruments published by
reputable sources at the mean between the bid and asked prices for the
instruments. If a deviation of 1/2 of 1% or more were to occur between the net
asset value per share calculated by reference to market values and the
Portfolio's $1.00 per share net asset value, or if there were any other
deviation that the Board of Trustees of the Trust believed would result in a
material dilution to shareholders or purchasers, the Board of Trustees would
promptly consider what action, if any, should be initiated. If the Shares of the
Portfolio's net asset value per share (computed using market values) declined,
or were expected to decline, below $1.00 (computed using amortized cost), the
Board of Trustees of the Trust might temporarily reduce or suspend dividend
payments in an effort to maintain the net asset value at $1.00 per share. As a
result of such reduction or suspension of dividends or other action by the Board
of Trustees, an investor would receive less income during a given period than if
such a reduction or suspension had not taken place. Such action could result in
investors receiving no dividend for the period during which they hold their
shares and receiving, upon redemption, a price per share lower than that which
they paid. On the other hand, if the Shares of the Portfolio's net asset value
per share (computed using market values) were to increase, or were anticipated
to increase above $1.00 (computed using amortized cost), the Board of Trustees
of the Trust might supplement dividends in an effort to maintain the net asset
value at $1.00 per share. Redemption orders received in connection with the
administration of checkwriting programs by certain dealers or other financial
services firms prior to the determination of the Portfolio's net asset value
also may be processed on a confirmed basis in accordance with the procedures
established by KDI.
Taxes. The Portfolio intends to continue to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code (the "Code") and, if so
qualified, will not be subject to Federal income taxes to the extent its
earnings are distributed. Dividends derived from interest and short-term capital
gains are taxable as ordinary income whether received in cash or reinvested in
additional shares. Long-term capital gains distributions, if any, are taxable as
long-term capital gains regardless of the length of time shareholders have owned
their shares. Dividends from the portfolio do not qualify for the dividends
received deduction available to corporate shareholders.
Dividends declared in October, November or December to shareholders of record as
of a date in one of those months and paid during the following January are
treated as paid on December 31 of the calendar year in which declared for
Federal income tax purposes. The Portfolio may adjust its schedule for dividend
reinvestment for the month of December to assist in complying with the reporting
and minimum distribution requirements contained in the Code.
The Portfolio is required by federal income tax 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
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<PAGE>
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.
PERFORMANCE
From time to time, the Trust may advertise several types of performance
information for the Portfolio, including "yield" and "effective yield." Each of
these figures is based upon historical earnings and is not representative of the
future performance of the Portfolio. The yield of the Portfolio refers to the
net investment income generated by a hypothetical investment in the Portfolio
over a specific seven-day period. This net investment income is then annualized,
which means that the net investment income generated during the seven-day period
is assumed to be generated each week over an annual period and is shown as a
percentage of the investment. The effective yield is calculated similarly, but
the net investment income earned by the investment is assumed to be compounded
when annualized. The effective yield will be slightly higher than the yield due
to this compounding effect. The tax equivalent yield is similar to the effective
yield calculated on an after-tax basis.
The Advisor, the Portfolio's Principal Underwriter, Kemper Distributors, Inc.,
the Portfolio's Shareholder Service Agent, Kemper Service Company, and the
Portfolio's Accounting Agent, Scudder Fund Accounting Corporation, temporarily
have agreed to maintain certain operating expenses of the Portfolio to the
extent specified in the prospectus. The performance results noted herein for the
Portfolio would have been lower had certain expenses not been capped.
The Portfolio's seven-day yield is computed in accordance with a standardized
method prescribed by rules of the Securities and Exchange Commission. Under that
method, the yield quotation is based on a seven-day period and is computed for
the Portfolio as follows. The first calculation is net investment income per
share, which is accrued interest on portfolio securities, plus or minus
amortized discount or premium, less accrued expenses. This number is then
divided by the price per share (expected to remain constant at $1.00) at the
beginning of the period ("base period return"). The result is then divided by 7
and multiplied by 365 and the resulting yield figure is carried to the nearest
one-hundredth of one percent. Realized capital gains or losses and unrealized
appreciation or depreciation of investments are not included in the
calculations. For the period ended April 30, 2000, the Portfolio's Premium
Reserve Shares' seven-day yield was 5.56%, and the Portfolio's Institutional
Shares' seven-day yield was 6.01%.
The Portfolio's seven-day 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 seven-day effective yield is:
(seven-day base period return +1)365/7 - 1. The Portfolio may also advertise a
thirty-day effective yield in which case the formula is (thirty-day base period
return +1)365/30 - 1. For the period ended April 30, 2000, the Portfolio's
Premium Reserve Shares' seven-day effective yield was 5.71%, and the Portfolio's
Institutional Shares' seven-day effective yield was 6.19%.
The Portfolio's yield fluctuates, and the publication of an annualized yield
quotation is not a representation as to what an investment in the Portfolio will
actually yield for any given future period. Actual yields will depend not only
on changes in interest rates on money market instruments during the period in
which the investment in the Portfolio is held, but also on such matters as
Portfolio expenses.
16
<PAGE>
Investors have an extensive choice of money market funds and money market
deposit accounts and the information above may be useful to investors who wish
to compare the past performance of the Portfolio with that of its competitors.
Past performance cannot be a guarantee of future results.
The Trust may depict the historical performance of the securities in which the
Portfolio may invest over periods reflecting a variety of market or economic
conditions either alone or in comparison with alternative investments
performance indexes of those investments or economic indicators. The Trust may
also describe the Portfolio's holdings and depict its size or relative size
compared to other mutual funds, the number and make-up of its shareholder base
and other descriptive factors concerning the Portfolio.
Investors also may want to compare the Portfolio's performance to that of U.S.
Treasury bills or notes because such instruments represent alternative income
producing products. Treasury obligations are issued in selected denominations.
Rates of U.S. Treasury obligations are fixed at the time of issuance and payment
of principal and interest is backed by the full faith and credit of the U.S.
Treasury. The market value of such instruments generally will fluctuate
inversely with interest rates prior to maturity and will equal par value at
maturity. Generally, the values of obligations with shorter maturities will
fluctuate less than those with longer maturities. The Portfolio's yield will
fluctuate. Also, while the Portfolio seeks to maintain a net asset value per
share of $1.00, there is no assurance that it will be able to do so. In
addition, investors may want to compare the Portfolio's performance to the
Consumer Price Index either directly or by calculating its "real rate of
return," which is adjusted for the effects of inflation.
OFFICERS AND TRUSTEES
The officers and trustees of the Trust, their birthdates, their principal
occupations and their affiliations, if any, with the Advisor and KDI, are listed
below. All persons named as officers and trustees also serve in similar
capacities for other funds advised by the Advisor:
JOHN W. BALLANTINE (2/16/46), Trustee, 1500 North Lake Shore Drive, Chicago,
Illinois; First Chicago NBD Corporation/The First National Bank of Chicago:
1996-1998 Executive Vice President and Chief Risk Management Officer; 1995-1996
Executive Vice President and Head of International Banking; 1992-1995 Executive
Vice President, Chief Credit and Market Risk Officer.
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.
LINDA C. COUGHLIN (1/1/52) Trustee, Two International Place, Boston,
Massachusetts; Managing Director, Scudder Kemper.
DONALD L. DUNAWAY (3/8/37), Trustee, 7011 Green Tree Drive, Naples, Florida;
Retired; formerly, Executive Vice President, A. O. Smith Corporation
(diversified manufacturer).
ROBERT B. HOFFMAN (12/11/36), Trustee, 1530 North State Parkway, Chicago,
Illinois; Chairman, Harnischfeger Industries, Inc. (machinery for the mining and
paper industries); formerly, Vice Chairman and Chief Financial Officer, Monsanto
Company (agricultural, pharmaceutical and nutritional/food products); formerly,
Vice President, Head of International Operations, FMC Corporation (manufacturer
of machinery and chemicals).
DONALD R. JONES (1/17/30), Trustee, 182 Old Wick Lane, Inverness, Illinois;
Retired; Director, Motorola, Inc. (manufacturer of electronic equipment and
components); formerly, Executive Vice President and Chief Financial Officer,
Motorola, Inc.
THOMAS W. LITTAUER (4/26/55), Vice President and Trustee*, Two International
Place, Boston, Massachusetts; Managing Director, Scudder Kemper; formerly, Head
of Broker Dealer Division of an unaffiliated investment management
17
<PAGE>
firm during 1997; prior thereto, President of Client Management Services of an
unaffiliated investment management firm from 1991 to 1996.
SHIRLEY D. PETERSON (9/3/41), Trustee, 401 Rosemont Avenue, Frederick, Maryland;
President, Hood College; formerly, partner, Steptoe & Johnson (attorneys); prior
thereto, Commissioner, Internal Revenue Service; prior thereto, Assistant
Attorney General (Tax), U.S. Department of Justice; Director Bethlehem Steel
Corp.
WILLIAM P. SOMMERS (7/22/33), Trustee, 24717 Harbour View Drive, Ponte Vedra
Beach, Florida; Consultant and Director, SRI Consulting; prior thereto President
and Chief Executive Officer, SRI International (research and development); prior
thereto, Executive Vice President, Iameter (medical information and educational
service provider); prior thereto, Senior Vice President and Director, Booz,
Allen & Hamilton Inc. (management consulting firm); Director, PSI Inc.,
Evergreen Solar, Inc. and Litton Industries.
MARK S. CASADY (9/21/60), President*, 345 Park Avenue, New York, New York;
Managing Director, Scudder Kemper.
PHILIP J. COLLORA (11/15/45), Vice President and Secretary*, 222 South Riverside
Plaza, Chicago, Illinois; Senior Vice President, Scudder Kemper.
ANN M. McCREARY (11/6/56), Vice President*, 345 Park Avenue, New York, New York;
Managing Director, Scudder Kemper.
KATHRYN L. QUIRK (12/3/52), Vice President*, 345 Park Avenue, New York, New
York; Managing Director, Scudder Kemper.
FRANK J. RACHWALSKI, JR. (3/26/45), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Managing Director, Scudder Kemper.
LINDA J. WONDRACK (9/12/64), Vice President*, Two International Place, Boston,
Massachusetts; Senior Vice President, Scudder Kemper.
JOHN R. HEBBLE (6/27/58), Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Scudder Kemper.
BRENDA LYONS (2/21/63), Assistant Treasurer*, Two International Place, Boston,
Massachusetts Senior Vice President, Scudder Kemper.
CAROLINE PEARSON (4/1/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Senior Vice President, Scudder Kemper; formerly,
Associate, Dechert Price & Rhoads (law firm), from 1989 to 1997.
MAUREEN E. KANE (2/14/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Vice President, Scudder Kemper; formerly, Assistant Vice
President of an unaffiliated investment management firm; prior thereto,
Associate Staff Attorney of an unaffiliated investment management firm;
Associate, Peabody & Arnold (law firm).
Unless otherwise stated, all the Trustees and officers have been associated with
their respective companies for more than five years, but not necessarily in the
same capacity.
* Interested persons as defined in the Investment Company Act of 1940.
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<PAGE>
The trustees and officers who are "interested persons" as designated above
receive no compensation from the Trust. The table below shows amounts paid or
accrued to those trustees who are not designated "interested persons" during the
Trust's fiscal year ended April 30, 2000 and the total compensation that the
Trust paid to each trustee during the calendar year 1999 for all Scudder Kemper
Funds.
<TABLE>
<CAPTION>
Aggregate Total Compensation Scudder Kemper Funds
Name of Trustee Compensation From Trust Paid to Trustees (2)
--------------- ----------------------- --------------------
<S> <C> <C>
John W. Ballantine $3,572 $57,230
Lewis A. Burnham $5,464 $89,340
Donald L. Dunaway (1) $6,000 $125,900
Robert B. Hoffman $5,392 $109,000
Donald R.Jones $5,433 $114,200
Shirley D. Peterson $5,043 $114,000
William P. Sommers $5,043 $109,000
</TABLE>
(1) Includes deferred fees. Pursuant to deferred compensation agreements with
the Trust, deferred amounts accrue interest monthly at a rate approximate
to the yield of Zurich Money Funds -- Zurich Money Market Fund. Total
deferred fees (including interest thereon) payable from the Trust to Mr.
Dunaway for the latest and all prior fiscal years is $16,500.
(2) Includes compensation for service on the Boards of 25 Kemper funds with 41
fund portfolios. Each trustee currently serves as trustee of 26 Kemper
Funds with 45 fund portfolios.
On June 30, 2000, the officers and trustees of the Trust, as a group, owned less
than 1% of the then outstanding shares of each Portfolio. No person owned of
record 5% or more of the outstanding shares of any class of any Portfolio,
except the persons indicated in the chart below:
19
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Name and Address % Owned Portfolio
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
May Financial Corp. 5.06% Cash Account Trust/Govt.
For the benefit of customers Securities Portfolio
8333 Douglas Avenue
Dallas, Texas 75225
-------------------------------------------------------------------------------------------------------------
Joan Lawton Oppenheimer 6.12% Cash Account Trust/Tax Exempt
1 New York Plaza Portfolio
New York, NY 10004
-------------------------------------------------------------------------------------------------------------
</TABLE>
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
Strategic Income Fund, Kemper High Yield Series, Kemper U.S. Government
Securities Fund, Kemper International Fund, Kemper State Tax-Free Income Series,
Kemper Short-Term 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 Value Series, Inc., Kemper Value Plus Growth
Fund, Kemper Horizon Fund, Kemper New Europe Fund, Inc., Kemper Asian Growth
Fund, Kemper Aggressive Growth Fund, Kemper Global/International Series, Inc.,
Kemper Securities Trust and Kemper Equity Trust ("Kemper Mutual Funds") and
certain "Money Market Funds" (Zurich Money Funds, Zurich Yieldwise Money Fund,
Cash Equivalent Fund, Tax-Exempt California Money Market Fund, Cash Account
Trust, Investors Municipal Cash Fund and Investors Cash Trust). Shares of Money
Market Funds and Kemper Cash Reserves Fund that were acquired by purchase (not
including shares acquired by dividend reinvestment) are subject to the
applicable sales charge on exchange. In addition, shares of a Kemper Mutual Fund
in excess of $1,000,000 (except Zurich Yieldwise Money Fund and Kemper Cash
Retails Fund) acquired by exchange from another Fund may not be exchanged
thereafter until they have been owned for 15 days (the "15-Day Hold Policy"). In
addition to the current limits on exchanges of shares with a value over
$1,000,000, shares of a Kemper fund with a value of $1,000,000 or less (except
Kemper Cash Reserves Fund) acquired by exchange from another Kemper fund, or
from a money market fund, may not be exchanged thereafter until they have been
owned for 15 days, if, in the investment manager's judgment, the exchange
activity may have an adverse effect on the fund. In particular, a pattern of
exchanges that coincides with a "market timing" strategy may be disruptive to
the Kemper fund and therefore may be subject to the 15-day hold policy. For
purposes of determining whether the 15-Day Hold Policy applies to a particular
exchange, the value of the shares to be exchanged shall be computed by
aggregating the value of shares being exchanged for all accounts under common
control, discretion or advice, including without limitation accounts
administered by a financial services firm offering market timing, asset
allocation or similar services. Series of Kemper Target Equity Fund will be
available on exchange only during the Offering Period for such series as
described in the prospectus for such series. Cash Equivalent Fund, Tax-Exempt
California Money Market Fund, Cash Account Trust, Investors Municipal Cash Fund
and Investors Cash Trust are available on exchange but only through a financial
services firm having a services agreement with KDI with respect to such funds.
Exchanges may only be made for funds that are available for sale in the
shareholder's state of residence. Currently, Tax-Exempt California Money Market
Fund is available for sale only in California and the portfolios of Investors
Municipal Cash Fund are available for sale in certain states.
The total value of shares being exchanged must at least equal the minimum
investment requirement of the fund into which they are being exchanged.
Exchanges are made based on relative dollar values of the shares involved in the
exchange. There is no service fee for an exchange; however, financial services
firms may charge for their services in expediting exchange transactions.
Exchanges will be effected by redemption of shares of the fund held and purchase
of shares of the other fund. For federal income tax purposes, any such exchange
constitutes a sale upon which a gain or loss may be realized, depending
20
<PAGE>
upon whether the value of the shares being exchanged is more or less than the
shareholder's adjusted cost basis. Shareholders interested in exercising the
exchange privilege may obtain an exchange form and prospectuses of the other
funds from financial services firms or KDI. Exchanges also may be authorized by
telephone if the shareholder has given authorization. Once the authorization is
on file, the Shareholder Service Agent will honor requests by telephone at
1-800-231-8568 or in writing subject to the limitations on liability described
in the prospectus. Any share certificates must be deposited prior to any
exchange of such shares. During periods when it is difficult to contact the
Shareholder Service Agent by telephone, it may be difficult to implement the
telephone exchange privilege. The exchange privilege is not a right and may be
suspended, terminated or modified at any time. Except as otherwise permitted by
applicable regulation, 60 days' prior written notice of any termination or
material change will be provided.
Systematic Withdrawal Program. An owner of $5,000 or more of the Portfolio's
Premium Reserve Shares and Institutional Shares may provide for the payment from
the owner's account of any requested dollar amount up to $50,000 to be paid to
the owner or the owner's designated payee monthly, quarterly, semi-annually or
annually. The $5,000 minimum account size is not applicable to Individual
Retirement Accounts. Dividend distributions will be reinvested automatically at
net asset value. A sufficient number of full and fractional shares will be
redeemed to make the designated payment. Depending upon the size of the payments
requested, redemptions for the purpose of making such payments may reduce or
even exhaust the account. The program may be amended on thirty days notice by
the Portfolio and may be terminated at any time by the shareholder or the
Portfolio. Firms provide varying arrangements for their clients to redeem
Portfolio shares on a periodic basis. Such firms may independently establish
minimums for such services.
Tax-Sheltered Retirement Programs. The Shareholder Service Agent provides
retirement plan services and documents and KDI can establish your account in any
of the following types of retirement plans:
o Individual Retirement Accounts (IRAs) trusteed by Investors
Fiduciary Trust Company ("IFTC"). This includes Simplified
Employee Pension Plan (SEP) IRA accounts and prototype
documents.
o 403(b) Custodial Accounts also trusteed by IFTC. This type of
plan is available to employees of most non-profit
organizations.
o Prototype money purchase pension and profit-sharing plans may
be adopted by employers. The maximum contribution per
participant is the lesser of 25% of compensation or $30,000.
Brochures describing the above plans as well as providing model defined benefit
plans, target benefit plans, 457 plans, 401(k) plans and materials for
establishing them are available from the Shareholder Service Agent upon request.
The brochures for plans trusteed by IFTC describe the current fees payable to
IFTC for its services as trustee. Investors should consult with their own tax
advisers before establishing a retirement plan.
Electronic Funds Transfer Programs. For your convenience, the Portfolio has
established several investment and redemption programs using electronic funds
transfer via the Automated Clearing House (ACH). There is currently no charge by
the Portfolio for these programs. To use these features, your financial
institution (your employer's financial institution in the case of payroll
deposit) must be affiliated with an Automated Clearing House (ACH). This ACH
affiliation permits the Shareholder Service Agent to electronically transfer
money between your bank account, or employer's payroll bank in the case of
Direct Deposit, and your Portfolio account. Your bank's crediting policies of
these transferred funds may vary. These features may be amended or terminated at
any time by the Portfolio. Shareholders should contact Kemper Service Company at
1-800-621-1048 or the financial services firm through which their account was
established for more information. These programs may not be available through
some firms that distribute shares of the Portfolio.
SHAREHOLDER RIGHTS
The Trust is an open-end, diversified management investment company, organized
as a business trust under the laws of Massachusetts on March 2, 1990. The Trust
may issue an unlimited number of shares of beneficial interest in one or more
series or "Portfolios," all having no par value, which may be divided by the
Board of Trustees into classes of shares, subject to compliance with the
Securities and Exchange Commission regulations permitting the creation of
separate classes of shares. While only shares of the "Money Market Portfolio",
"Government Securities Portfolio" and "Treasury Portfolio" are
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presently being offered, the Board of Trustees may authorize the issuance of
additional Portfolios if deemed desirable, each with its own investment
objective, policies and restrictions. Since the Trust offers multiple
Portfolios, it is known as a "series company." Furthermore, the Money Market
Portfolio is currently divided into four classes; the Premium Reserve Shares,
Premier Money Market Shares, Institutional Shares, and Service Shares. Shares of
each Portfolio have equal noncumulative voting rights and equal rights with
respect to dividends, assets and liquidation of such Portfolio subject to any
preferences, rights or privileges of any classes of shares within the Portfolio.
Generally each class of shares issued by a particular Portfolio would differ as
to the allocation of certain expenses of the Portfolio such as distribution and
administrative expenses, permitting, among other things, different levels of
services or methods of distribution among various classes. Shares are fully paid
and nonassessable when issued, are transferable without restriction and have no
preemptive or conversion rights. The Trust is not required to hold annual
shareholders' meetings and does not intend to do so. Under the Agreements and
Declaration of Trust of the Trust ("Declaration of Trust"), however, shareholder
meetings will be held in connection with the following matters: (a) the election
or removal of trustees if a meeting is called for such purpose; (b) the adoption
of any contract for which shareholder approval is required by the 1940 Act; (c)
any termination of the Trust to the extent and as provided in the Declaration of
Trust; (d) any amendment of the Declaration of Trust (other than amendments
changing the name of the Trust or any Portfolio, establishing the Portfolio,
supplying any omission, curing any ambiguity or curing, correcting or
supplementing any defective or inconsistent provision thereof); and (e) such
additional matters as may be required by law, the Declaration of Trust, the
By-laws of the Trust, or any registration of the Trust with the Securities and
Exchange Commission or any state, or as the trustees may consider necessary or
desirable. The shareholders also would vote upon changes in fundamental
investment objectives, policies or restrictions.
Subject to the Declaration of Trust, shareholders may remove trustees. Each
trustee serves until the next meeting of shareholders, if any, called for the
purpose of electing trustees and until the election and qualification of a
successor or until such trustee sooner dies, resigns, retires or is removed by a
majority vote of the shares entitled to vote (as described below) or a majority
of the trustees. In accordance with the 1940 Act (a) the Trust will hold a
shareholder meeting for the election of trustees at such time as less than a
majority of the trustees have been elected by shareholders, and (b) if, as a
result of a vacancy in the Board of Trustees, less than two-thirds of the
trustees have been elected by the shareholders, that vacancy will be filled only
by a vote of the shareholders.
Shareholders will vote by Portfolio and not in the aggregate or by class except
when voting in the aggregate is required under the Investment Company Act of
1940, such as for the election of trustees, or when the Board of Trustees
determines that voting by class is appropriate.
Trustees may be removed from office by a vote of the holders of a majority of
the outstanding shares at a meeting called for that purpose, which meeting shall
be held upon the written request of the holders of not less than 10% of the
outstanding shares. Upon the written request of ten or more shareholders who
have been such for at least six months and who hold shares constituting at least
1% of the outstanding shares of the Trust stating that such shareholders wish to
communicate with the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider removal of a trustee, the
Trust has undertaken to disseminate appropriate materials at the expense of the
requesting shareholders.
The Declaration of Trust provides that the presence at a shareholder meeting in
person or by proxy of at least 30% of the shares entitled to vote on a matter
shall constitute a quorum. Thus, a meeting of shareholders of the Trust could
take place even if less than a majority of the shareholders were represented on
its scheduled date. Shareholders would in such a case be permitted to take
action which does not require a larger vote than a majority of a quorum, such as
the election of trustees and ratification of the selection of auditors. Some
matters requiring a larger vote under the Declaration of Trust, such as
termination or reorganization of the Trust and certain amendments of the
Declaration of Trust, would not be affected by this provision; nor would matters
which under the 1940 Act require the vote of a "majority of the outstanding
voting securities" as defined in the 1940 Act.
The Declaration of Trust specifically authorizes the Board of Trustees to
terminate the Trust (or Portfolio or Shares) by notice to the shareholders
without shareholder approval.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for obligations of the
Trust. The Declaration of Trust, however, disclaims shareholder liability for
acts or obligations of the Trust and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument
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entered into or executed by the Trust or the trustees. Moreover, the Declaration
of Trust provides for indemnification out of Trust property for all losses and
expenses of any shareholder held personally liable for the obligations of the
Trust and the Trust will be covered by insurance which the trustees consider
adequate to cover foreseeable tort claims. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is considered by
the Advisor remote and not material, since it is limited to circumstances in
which a disclaimer is inoperative and the Trust itself is unable to meet its
obligations.
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APPENDIX -- RATINGS OF INVESTMENTS
COMMERCIAL PAPER RATINGS
A-1, A-2, Prime-1, Prime-2 and Duff 1, Duff 2 Commercial Paper Ratings
Commercial paper rated by Standard & Poor's Corporation has the following
characteristics: Liquidity ratios are adequate to meet cash requirements.
Long-term senior debt is rated "A" or better. The issuer has access to at least
two additional channels of borrowing. Basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances. Typically, the
issuer's industry is well established and the issuer has a strong position
within the industry. The reliability and quality of management are unquestioned.
Relative strength or weakness of the above factors determine whether the
issuer's commercial paper is rated A-1, A-2 or A-3.
The ratings Prime-1 and Prime-2 are the two highest commercial paper ratings
assigned by Moody's Investors Service, Inc. Among the factors considered by them
in assigning ratings are the following: (1) evaluation of the management of the
issuer; (2) economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain areas; (3)
evaluation of the issuer's products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend
of earnings over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and (8) recognition
by the management of obligations which may be present or may arise as a result
of public interest questions and preparations to meet such obligations. Relative
strength or weakness of the above factors determines whether the issuer's
commercial paper is rated Prime-1, 2 or 3.
The rating Duff-1 is the highest commercial paper rating assigned by Duff &
Phelps Inc. Paper rated Duff-1 is regarded as having very high certainty of
timely payment with excellent liquidity factors that are supported by ample
asset protection. Risk factors are minor. Paper rated Duff-2 is regarded as
having good certainty of timely payment, good access to capital markets and
sound liquidity factors and company fundamentals. Risk factors are small.
MIG-1 and MIG-2 Municipal Notes
Moody's Investors Service, Inc.'s ratings for state and municipal notes and
other short-term loans will be designated Moody's Investment Grade (MIG). This
distinction is in recognition of the differences between short-term credit risk
and long-term risk. Factors affecting the liquidity of the borrower are
uppermost in importance in short-term borrowing, while various factors of the
first importance in bond risk are of lesser importance in the short run. Loans
designated MIG-1 are of the best quality, enjoying strong protection from
established cash flows of funds for their servicing or from established and
broad-based access to the market for refinancing, or both. Loans designated
MIG-2 are of high quality, with margins of protection ample although not so
large as in the preceding group.
STANDARD & POOR'S CORPORATION BOND RATINGS, CORPORATE BONDS
AAA. This is the highest rating assigned by Standard & Poor's Corporation to a
debt obligation and indicates an extremely strong capacity to pay principal and
interest.
AA. Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
MOODY'S INVESTORS SERVICE, INC. BOND RATINGS
Aaa. Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
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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.
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CASH ACCOUNT TRUST
STATEMENT OF ADDITIONAL INFORMATION
August 1, 2000
Tax-Exempt Portfolio
Scudder Tax-Exempt Cash Institutional Shares
Tax-Exempt Cash Managed Shares
222 South Riverside Plaza, Chicago, Illinois 60606
1-800-537-3177
This Statement of Additional Information contains information about the
Scudder Tax-Exempt Cash Institutional Shares ("Institutional Shares") and
Tax-Exempt Cash Managed Shares ("Managed Shares") (collectively the "Shares") of
Tax-Exempt Portfolio (the "Portfolio") offered by Cash Account Trust (the
"Trust"), an open-end diversified management investment company. This Statement
of Additional Information is not a prospectus and should be read in conjunction
with the prospectus for the Institutional and Managed Shares of the Portfolio
dated August 1, 2000. The prospectus may be obtained without charge from the
Trust at the address or telephone number on this cover or the firm from which
this Statement of Additional Information was received and is also available
along with other related materials at the SEC's Internet web site
(http://www.sec.gov). The Portfolio's Annual Report dated April 30, 2000 is
incorporated by reference into and is hereby deemed to be a part of this
Statement of Additional Information. The Portfolio's Annual Report accompanies
this Statement of Additional Information, and may be obtained without charge by
calling 1-800-537-3177.
TABLE OF CONTENTS
INVESTMENT RESTRICTIONS...................................................2
INVESTMENT POLICIES AND TECHNIQUES........................................3
INVESTMENT MANAGER AND SHAREHOLDER SERVICES...............................8
PORTFOLIO TRANSACTIONS...................................................11
PURCHASE AND REDEMPTION OF SHARES........................................13
DIVIDENDS, NET ASSET VALUE AND TAXES.....................................16
PERFORMANCE..............................................................18
OFFICERS AND TRUSTEES....................................................19
SPECIAL FEATURES.........................................................22
SHAREHOLDER RIGHTS.......................................................24
APPENDIX -- RATINGS OF INVESTMENTS.......................................26
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INVESTMENT RESTRICTIONS
The Trust has adopted for the Portfolio certain investment restrictions which,
together with the investment objective and policies of the Portfolio (except for
policies designated as non-fundamental and limited in regard to the Portfolio to
the policies in the first and fifth paragraphs under "Investment Policies and
Techniques-Tax-Exempt Portfolio" below), cannot be changed for the Portfolio
without approval by holders of a majority of its outstanding voting shares. As
defined in the Investment Company Act of 1940, as amended (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 Portfolio may not:
(1) Purchase securities if as a result of such purchase more than
25% of the Portfolio's total assets would be invested in any
industry or in any one state. Municipal Securities and
obligations of, or guaranteed by, the U.S. Government, its
agencies or instrumentalities are not considered an industry
for purposes of this restriction.
(2) Purchase securities of any issuer (other than obligations of,
or guaranteed by, the U.S. Government, its agencies or
instrumentalities) if as a result more than 5% of the value of
the Portfolio's assets would be invested in the securities of
such issuer. For purposes of this limitation, the Portfolio
will regard the entity that has the primary responsibility for
the payment of interest and principal as the issuer.
(3) Make loans to others (except through the purchase of debt
obligations or repurchase agreements in accordance with its
investment objective and policies).
(4) Borrow money except as a temporary measure for extraordinary
or emergency purposes and then only in an amount up to
one-third of the value of its total assets, in order to meet
redemption requests without immediately selling any money
market instruments (any such borrowings under this section
will not be collateralized). If, for any reason, the current
value of the Portfolio's total assets falls below an amount
equal to three times the amount of its indebtedness from money
borrowed, the Portfolio will, within three days (not including
Sundays and holidays), reduce its indebtedness to the extent
necessary. The Portfolio will not borrow for leverage
purposes.
(5) Make short sales of securities or purchase securities on
margin, except to obtain such short-term credits as may be
necessary for the clearance of transactions.
(6) Write, purchase or sell puts, calls or combinations thereof,
although the Portfolio may purchase Municipal Securities
subject to Standby Commitments in accordance with its
investment objective and policies.
(7) Purchase or retain the securities of any issuer if any of the
officers, trustees or directors of the Trust or its investment
adviser owns beneficially more than 1/2 of 1% of the
securities of such issuer and together own more than 5% of the
securities of such issuer.
(8) Invest for the purpose of exercising control or management of
another issuer.
(9) Invest in commodities or commodity futures contracts or in
real estate (or real estate limited partnerships) except that
the Portfolio may invest in Municipal Securities secured by
real estate or interests therein.
(10) Invest in interests in oil, gas or other mineral exploration
or development programs or leases, although it may invest in
Municipal Securities of issuers which invest in or sponsor
such programs or leases.
(11) Underwrite securities issued by others except to the extent
the Portfolio may be deemed to be an underwriter, under the
federal securities laws, in connection with the disposition of
portfolio securities.
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(12) Issue senior securities as defined in the 1940 Act.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The Portfolio
did not borrow in the latest fiscal period and has no present intention of
borrowing during the coming year as permitted for the Portfolio by investment
restriction number 4, 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). In any event, borrowings would only be made as
permitted by such restrictions. The Portfolio may invest more than 25% of its
total assets in industrial development bonds.
In addition, the Portfolio, as a non-fundamental policy that may be changed
without shareholder vote, may not:
(i) Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or
acquisition of assets.
INVESTMENT POLICIES AND TECHNIQUES
Descriptions in this Statement of Additional Information of the particular
investment practice or technique in which the Portfolio may engage or a
financial instrument which the Portfolio may purchase are meant to describe the
spectrum of investments that Scudder Kemper Investments, Inc. (the "Advisor" or
"Scudder Kemper"), in its discretion, might, but is not required to, use in
managing the Portfolio's assets. The Advisor may, in its discretion, at any
time, employ such practice, technique or instrument for one or more funds but
not for all funds advised by it. Furthermore, it is possible that certain types
of financial instruments or investment techniques described herein may not be
available, permissible, economically feasible or effective for their intended
purposes in all markets. Certain practices, techniques, or instruments may not
be principal activities of the Portfolio, but, to the extent employed, could,
from time to time, have a material impact on the Portfolio's performance.
The Portfolio described in this Statement of Additional Information seeks to
provide maximum current income consistent with the stability of capital. The
Portfolio is managed to maintain a net asset value of $1.00 per share.
The Trust is a money market mutual fund designed to provide its shareholders
with professional management of short-term investment dollars. The Trust is
designed for investors who seek maximum current income consistent with stability
of capital. The Trust pools individual and institutional investors' money that
it uses to buy high quality money market instruments. The Trust is a series
investment company that is able to provide investors with a choice of separate
investment portfolios. It currently offers three investment Portfolios: the
Money Market Portfolio, the Government Securities Portfolio and the Tax-Exempt
Portfolio. The Tax-Exempt Portfolio currently offers three classes of shares:
the Service Shares, the Tax-Exempt Cash Managed Shares (the "Managed Shares"),
and the Scudder Tax-Exempt Cash Institutional Shares (the "Institutional
Shares"). Institutional and Managed Shares are described herein. Because the
Portfolio combines its shareholders' money, it can buy and sell large blocks of
securities, which reduces transaction costs and maximizes yields. The Trust is
managed by investment professionals who analyze market trends to take advantage
of changing conditions and who seek to minimize risk by diversifying the
Portfolio's investments. The Portfolio'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 Portfolio
invests, are generally considered to be among the safest available. Thus, the
Portfolio is designed for investors who want to avoid the fluctuations of
principal commonly associated with equity or long-term bond investments. There
can be no guarantee that the Portfolio will achieve its objective or that it
will maintain a net asset value of $1.00 per share.
Tax-Exempt Portfolio. The Portfolio seeks to provide maximum current income that
is exempt from Federal income taxes to the extent consistent with stability of
capital. The Portfolio 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 and
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alternative minimum tax ("Municipal Securities"). In compliance with the
position of the staff of the Securities and Exchange Commission, the Portfolio
does not consider "private activity" bonds to be Municipal Securities for
purposes of the 80% limitation. This is a fundamental policy so long as the
staff maintains its position, after which it would become non-fundamental.
Municipal Securities, such as industrial development bonds, are issued by or on
behalf of public authorities to obtain funds for purposes including privately
operated airports, housing, conventions, trade shows, ports, sports, parking or
pollution control facilities or for facilities for water, gas, electricity or
sewage and solid waste disposal. Such obligations, which may include lease
arrangements, are included within the term Municipal Securities if the interest
paid thereon qualifies as exempt from federal income tax. Other types of
industrial development bonds, the proceeds of which are used for the
construction, equipment, repair or improvement of privately operated industrial
or commercial facilities, may constitute Municipal Securities, although current
Federal tax laws place substantial limitations on the size of such issues.
Municipal Securities which the Portfolio may purchase include, without
limitation, debt obligations issued to obtain funds for various public purposes,
including the construction of a wide range of public facilities such as
airports, bridges, highways, housing, hospitals, mass transportation, public
utilities, schools, streets, and water and sewer works. Other public purposes
for which Municipal Securities may be issued include refunding outstanding
obligations, obtaining funds for general operating expenses and obtaining funds
to loan to other public institutions and facilities.
Tax anticipation notes typically are sold to finance working capital needs of
municipalities in anticipation of receiving property taxes on a future date.
Bond anticipation notes are sold on an interim basis in anticipation of a
municipality issuing a longer term bond in the future. Revenue anticipation
notes are issued in expectation of receipt of other types of revenue such as
those available under the Federal Revenue Sharing Program. Construction loan
notes are instruments insured by the Federal Housing Administration with
permanent financing by Fannie Mae or "Ginnie Mae" (the Government National
Mortgage Association) at the end of the project construction period.
Pre-refunded municipal bonds are bonds which are not yet refundable, but for
which securities have been placed in escrow to refund an original municipal bond
issue when it becomes refundable. Tax-free commercial paper is an unsecured
promissory obligation issued or guaranteed by a municipal issuer. The Portfolio
may purchase other Municipal Securities similar to the foregoing, which are or
may become available, including securities issued to pre-refund other
outstanding obligations of municipal issuers.
The Portfolio will invest only in Municipal Securities that at the time of
purchase: (a) are rated within the two highest-ratings for Municipal Securities
assigned by Moody's (Aaa or Aa) or assigned by S&P (AAA or AA); (b) are
guaranteed or insured by the U.S. Government as to the payment of principal and
interest; (c) are fully collateralized by an escrow of U.S. Government
securities acceptable to the Portfolio's investment manager; (d) have at the
time of purchase Moody's short-term Municipal Securities rating of MIG-2 or
higher or a municipal commercial paper rating of P-2 or higher, or S&P's
municipal commercial paper rating of A-2 or higher; (e) are unrated, if longer
term Municipal Securities of that issuer are rated within the two highest rating
categories by Moody's or S&P ; or (f) are determined to be at least equal in
quality to one or more of the above ratings in the discretion of the Portfolio's
Advisor. See "Appendix" for a more detailed discussion of the Moody's and S&P
ratings outlined above. In addition, the Portfolio limits its investments to
securities that meet the quality requirements of Rule 2a-7 under the 1940 Act.
See "Net Asset Value."
Dividends representing net interest income received by the Portfolio on
Municipal Securities will be exempt from federal income tax when distributed to
the Portfolio's shareholders. Such dividend income may be subject to state and
local taxes. The Portfolio's assets will consist of Municipal Securities,
taxable temporary investments as described below and cash. The Portfolio
considers short-term Municipal Securities to be those that mature in 397 days or
less. Examples of Municipal Securities that are issued with original maturities
of one year or less are short-term tax anticipation notes, bond anticipation
notes, revenue anticipation notes, construction loan notes, pre-refunded
municipal bonds, warrants and tax-free commercial paper.
Municipal Securities generally are classified as "general obligation" or
"revenue" issues. General obligation bonds are secured by the issuer's pledge of
its full credit and taxing power for the payment of principal and interest.
Revenue
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bonds are payable only from the revenues derived from a particular facility or
class of facilities or, in some cases, from the proceeds of a special excise tax
or other specific revenue source such as the user of the facility being
financed. Industrial development bonds held by the Portfolio are in most cases
revenue bonds and generally are not payable from the unrestricted revenues of
the issuer, and do not constitute the pledge of the credit of the issuer of such
bonds. Among other types of instruments, the Portfolio may purchase tax-exempt
commercial paper, warrants and short-term municipal notes such as tax
anticipation notes, bond anticipation notes, revenue anticipation notes,
construction loan notes and other forms of short-term loans. Such notes are
issued with a short-term maturity in anticipation of the receipt of tax
payments, the proceeds of bond placements or other revenues. The Portfolio may
invest in short-term "private activity" bonds.
The Portfolio may purchase securities that provide for the right to resell them
to an issuer, bank or dealer at an agreed upon price or yield within a specified
period prior to the maturity date of such securities. Such a right to resell is
referred to as a "Standby Commitment." Securities may cost more with Standby
Commitments than without them. Standby Commitments will be entered into solely
to facilitate portfolio liquidity. A Standby Commitment may be exercised before
the maturity date of the related Municipal Security if the Portfolio's
investment adviser revises its evaluation of the creditworthiness of the
underlying security or of the entity issuing the Standby Commitment. The
Portfolio's policy is to enter into Standby Commitments only with issuers, banks
or dealers that are determined by the Portfolio's investment manager to present
minimal credit risks. If an issuer, bank or dealer should default on its
obligation to repurchase an underlying security, the Portfolio might be unable
to recover all or a portion of any loss sustained from having to sell the
security elsewhere.
The Portfolio may purchase high quality Certificates of Participation in trusts
that hold Municipal Securities. A Certificate of Participation gives the
Portfolio an undivided interest in the Municipal Security in the proportion that
the Portfolio's interest bears to the total principal amount of the Municipal
Security. These Certificates of Participation may be variable rate or fixed rate
with remaining maturities of one year or less. A Certificate of Participation
may be backed by an irrevocable letter of credit or guarantee of a financial
institution that satisfies rating agencies as to the credit quality of the
Municipal Security supporting the payment of principal and interest on the
Certificate of Participation. Payments of principal and interest would be
dependent upon the underlying Municipal Security and may be guaranteed under a
letter of credit to the extent of such credit. The quality rating by a rating
service of an issue of Certificates of Participation is based primarily upon the
rating of the Municipal Security held by the trust and the credit rating of the
issuer of any letter of credit and of any other guarantor providing credit
support to the issue. The Portfolio's investment manager considers these factors
as well as others, such as any quality ratings issued by the rating services
identified above, in reviewing the credit risk presented by a Certificate of
Participation and in determining whether the Certificate of Participation is
appropriate for investment by the Portfolio. It is anticipated by the
Portfolio's Advisor that, for most publicly offered Certificates of
Participation, there will be a liquid secondary market or there may be demand
features enabling the Portfolio to readily sell its Certificates of
Participation prior to maturity to the issuer or a third party. As to those
instruments with demand features, the Portfolio intends to exercise its right to
demand payment from the issuer of the demand feature only upon a default under
the terms of the Municipal Security, as needed to provide liquidity to meet
redemptions, or to maintain a high quality investment portfolio.
The Portfolio may purchase and sell Municipal Securities on a when-issued or
delayed delivery basis. A when-issued or delayed delivery transaction arises
when securities are bought or sold for future payment and delivery to secure
what is considered to be an advantageous price and yield to the Portfolio at the
time it enters into the transaction. In determining the maturity of portfolio
securities purchased on a when-issued or delayed delivery basis, the Portfolio
will consider them to have been purchased on the date when it committed itself
to the purchase.
A security purchased on a when-issued basis, like all securities held by the
Portfolio, is subject to changes in market value based upon changes in the level
of interest rates and investors' perceptions of the creditworthiness of the
issuer. Generally such securities will appreciate in value when interest rates
decline and decrease in value when interest rates rise. Therefore if, in order
to achieve higher interest income, the Portfolio remains substantially fully
invested at the same time that it has purchased securities on a when-issued
basis, there will be a greater possibility that the market value of the
Portfolio's assets will vary from $1.00 per share because the value of a
when-issued security is subject to market fluctuation and no interest accrues to
the purchaser prior to settlement of the transaction.
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The Portfolio will only make commitments to purchase Municipal Securities on a
when-issued or delayed delivery basis with the intention of actually acquiring
the securities, but the Portfolio reserves the right to sell these securities
before the settlement date if deemed advisable. The sale of these securities may
result in the realization of gains that are not exempt from federal income tax.
In seeking to achieve its investment objective, the Portfolio may invest all or
any part of its assets in Municipal Securities that are industrial development
bonds. Moreover, although the Portfolio does not currently intend to do so on a
regular basis, it may invest more than 25% of its assets in Municipal Securities
that are repayable out of revenue streams generated from economically related
projects or facilities, if such investment is deemed necessary or appropriate by
the Portfolio's investment manager. To the extent that the Portfolio's assets
are concentrated in Municipal Securities payable from revenues on economically
related projects and facilities, the Portfolio will be subject to the risks
presented by such projects to a greater extent than it would be if the
Portfolio's assets were not so concentrated.
From time to time, as a defensive measure or when acceptable short-term
Municipal Securities are not available, the Portfolio may invest in taxable
"temporary investments" that include: obligations of the U.S. Government, its
agencies or instrumentalities; debt securities rated within the two highest
grades by Moody's or S&P ; commercial paper rated in the two highest grades by
either of such rating services; certificates of deposit of domestic banks with
assets of $1 billion or more; and any of the foregoing temporary investments
subject to repurchase agreements. Repurchase agreements are discussed below.
Interest income from temporary investments is taxable to shareholders as
ordinary income. Although the Portfolio is permitted to invest in taxable
securities (limited under normal market conditions to 20% of the Portfolio's
total assets), it is the Portfolio's primary intention to generate income
dividends that are not subject to federal income taxes.
The Federal bankruptcy statutes relating to the adjustments of debts of
political subdivisions and authorities of states of the United States provide
that, in certain circumstances, such subdivisions or authorities may be
authorized to initiate bankruptcy proceedings without prior notice to or consent
of creditors, which proceedings could result in material adverse changes in the
rights of holders of obligations issued by such subdivisions or authorities.
Litigation challenging the validity under state constitutions of present systems
of financing public education has been initiated or adjudicated in a number of
states and legislation has been introduced to effect changes in public school
finances in some states. In other instances, there has been litigation
challenging the issuance of pollution control revenue bonds or the validity of
their issuance under state or Federal law that ultimately could affect the
validity of those Municipal Securities or the tax-free nature of the interest
thereon.
The Portfolio will not purchase illiquid securities, including time deposits and
repurchase agreements maturing in more than seven days if, as a result thereof,
more than 10% of the Portfolio's net assets valued at the time of the
transaction would be invested in such securities.
The Portfolio may invest in Variable Rate Securities, instruments having rates
of interest that are adjusted periodically or that "float" continuously
according to formulae intended to minimize fluctuation in values of the
instruments. The interest rate of Variable Rate Securities ordinarily is
determined by reference to or is a percentage of an objective standard such as a
bank's prime rate, the 90-day U.S. Treasury Bill rate, or the rate of return on
commercial paper or bank certificates of deposit. Generally, the changes in the
interest rate on Variable Rate Securities reduce the fluctuation in the market
value of such securities. Accordingly, as interest rates decrease or increase,
the potential for capital appreciation or depreciation is less than for
fixed-rate obligations. Some Variable Rate Securities ("Variable Rate Demand
Securities") have a demand feature entitling the purchaser to resell the
securities at an amount approximately equal to amortized cost or the principal
amount thereof plus accrued interest. As is the case for other Variable Rate
Securities, the interest rate on Variable Rate Demand Securities varies
according to some objective standard intended to minimize fluctuation in the
values of the instruments. The Portfolio determines the maturity of Variable
Rate Securities in accordance with Rule 2a-7, which allows the Portfolio to
consider certain of such instruments as having maturities shorter than the
maturity date on the face of the instrument.
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Repurchase Agreements. The Portfolio may invest in repurchase agreements, which
are instruments under which the Portfolio acquires ownership of a security from
a broker-dealer or bank that agrees to repurchase the security at a mutually
agreed upon time and price (which price is higher than the purchase price),
thereby determining the yield during the Portfolio's holding period. Maturity of
the securities subject to repurchase may exceed one year. In the event of a
bankruptcy or other default of a seller of a repurchase agreement, the Portfolio
might have expenses in enforcing its rights, and could experience losses,
including a decline in the value of the underlying securities and loss of
income.
The Portfolio may enter into repurchase agreements with any member bank of the
Federal Reserve System or any domestic broker/dealer which is recognized as a
reporting Government securities dealer if the creditworthiness of the bank or
broker/dealer has been determined by the Advisor to be at least as high as that
of other obligations the Portfolio may purchase or to be at least equal to that
of issuers of commercial paper rated within the two highest grades assigned by
Moody's, S&P or Duff.
A repurchase agreement provides a means for the Portfolio to earn taxable income
on funds for periods as short as overnight. It is an arrangement under which the
purchaser (i.e., the Portfolio) acquires a security ("Obligation") and the
seller agrees, at the time of sale, to repurchase the Obligation at a specified
time and price. Securities subject to a repurchase agreement are held in a
segregated account and the value of such securities kept at least equal to the
repurchase price on a daily basis. The repurchase price may be higher than the
purchase price, the difference being income to the Portfolio, or the purchase
and repurchase prices may be the same, with interest at a stated rate due to the
Portfolio together with the repurchase price on the date of repurchase. In
either case, the income to the Portfolio (which is taxable) is unrelated to the
interest rate on the Obligation itself. Obligations will be held by the
custodian or in the Federal Reserve Book Entry system.
It is not clear whether a court would consider the Obligation purchased by the
Portfolio subject to a repurchase agreement as being owned by that Portfolio or
as being collateral for a loan by the Portfolio to the seller. In the event of
the commencement of bankruptcy or insolvency proceedings with respect to the
seller of the Obligation before repurchase of the Obligation under a repurchase
agreement, the Portfolio may encounter delay and incur costs before being able
to sell the security. Delays may involve loss of interest or decline in price of
the Obligation. If the court characterized the transaction as a loan and the
Portfolio has not perfected an interest in the Obligation, the Portfolio may be
required to return the Obligation to the seller's estate and be treated as an
unsecured creditor of the seller. As an unsecured creditor, the Portfolio is at
risk of losing some or all of the principal and income involved in the
transaction. As with any unsecured debt obligation purchased for the Portfolio,
the Advisor seeks to minimize the risk of loss through repurchase agreements by
analyzing the creditworthiness of the obligor, in this case the seller of the
Obligation. Apart from the risk of bankruptcy or insolvency proceedings, there
is also the risk that the seller may fail to repurchase the Obligation, in which
case the Portfolio may incur a loss if the proceeds to the Portfolio of the sale
to a third party are less than the repurchase price. However, if the market
value of the Obligation subject to the repurchase agreement becomes less than
the repurchase price (including interest), the Portfolio will direct the seller
of the Obligation to deliver additional securities so that the market value of
all securities subject to the repurchase agreement will equal or exceed the
repurchase price. It is possible that the Portfolio will be unsuccessful in
seeking to enforce the seller's contractual obligation to deliver additional
securities.
Interfund Borrowing and Lending Program. The Trust has received exemptive relief
from the SEC which permits the Trust to participate in an interfund lending
program among certain investment companies advised by the Advisor. The interfund
lending program allows the participating funds to borrow money from and loan
money to each other for temporary or emergency purposes. The program is subject
to a number of conditions designed to ensure fair and equitable treatment of all
participating funds, including the following: (1) no fund may borrow money
through the program unless it receives a more favorable interest rate than a
rate approximating the lowest interest rate at which bank loans would be
available to any of the participating funds under a loan agreement; and (2) no
fund may lend money through the program unless it receives a more favorable
return than that available from an investment in repurchase agreements and, to
the extent applicable, money market cash sweep arrangements. In addition, a fund
may participate in the program only if and to the extent that such participation
is consistent with the fund's investment objectives and policies (for instance,
money market funds would normally participate only as lenders and tax exempt
funds only as borrowers). Interfund loans and borrowings may extend overnight,
but could have a maximum duration of
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seven days. Loans may be called on one day's notice. A fund may have to borrow
from a bank at a higher interest rate if an interfund loan is called or not
renewed. Any delay in repayment to a lending fund could result in a lost
investment opportunity or additional costs. The program is subject to the
oversight and periodic review of the Boards of the participating funds. To the
extent the Trust is actually engaged in borrowing through the interfund lending
program, the Trust, as a matter of non-fundamental policy, may not borrow for
other than temporary or emergency purposes (and not for leveraging).
INVESTMENT ADVISOR AND SHAREHOLDER SERVICES
Investment Advisor. Scudder Kemper Investments, Inc. (the "Advisor" or "Scudder
Kemper"), 345 Park Avenue, New York, New York, is the investment adviser for the
Portfolio. Scudder Kemper is approximately 70% owned by Zurich Insurance
Company, a leading internationally recognized provider of insurance and
financial services in property/casualty and life insurance, reinsurance and
structured financial solutions as well as asset management. The balance of
Scudder Kemper is owned by Scudder Kemper's officers and employees.
Responsibility for overall management of the Portfolio rests with the Trust's
Board of Trustees and officers. Pursuant to the investment management agreement,
the Advisor acts as the Portfolio's investment manager, 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 Trust and its shares
for distribution under federal and state securities laws and membership dues in
the Investment Company Institute or any similar organization. The Trust's
expenses generally are allocated among the Portfolios of the Trust 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 Advisor 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 Advisor in the performance of its obligations and duties, or by
reason of its reckless disregard of its obligations and duties under the
agreement.
In certain cases the investments for the Portfolio are managed by the same
individuals who manage one or more other mutual funds advised by the Advisor
that have similar names, objectives and investment styles as the Portfolio. You
should be aware that the Portfolio is likely to differ from these other mutual
funds in size, cash flow pattern and tax matters. Accordingly, the holdings and
performance of the Portfolio can be expected to vary from those of the other
mutual funds.
The investment management agreement continues in effect from year to year for
the Portfolio subject thereto so long as its continuation is approved at least
annually by (a) a majority vote of the trustees who are not parties to such
agreement or interested persons of any such party except in their capacity as
trustees of the Trust, cast in person at a meeting called for such purpose, and
(b) the shareholders of the Portfolio subject thereto or the Board of Trustees.
If continuation is not approved for the Portfolio, the investment management
agreement nevertheless may continue in effect for any Portfolio for which it is
approved and the Advisor may continue to serve as investment manager for the
Portfolio for which it is not approved to the extent permitted by the 1940 Act.
The agreement may be terminated at any time upon 60 days notice by either party,
or by a majority vote of the outstanding shares of the Portfolio subject thereto
with respect to that Portfolio, and will terminate automatically upon
assignment. Additional Portfolios may be subject to different agreements.
On December 31, 1997, pursuant to the terms of an agreement, Scudder, Stevens &
Clark, Inc. ("Scudder") and Zurich Insurance Company ("Zurich") formed a new
global organization by combining Scudder with Zurich Kemper Investments, Inc., a
former subsidiary of Zurich and the former investment manager to each Fund, and
Scudder changed its name to Scudder Kemper Investments, Inc. As a result of the
transaction, Zurich owned approximately 70% of the Adviser, with the balance
owned by the Adviser's officers and employees.
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On September 7, 1998, the businesses of Zurich (including Zurich's 70% interest
in Scudder Kemper) 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 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 Scudder Kemper was deemed to have been assigned and,
therefore, terminated. The Board has approved a new investment management
agreement with Scudder Kemper, which is substantially identical to the current
investment management agreement, except for the date of execution and
termination. This agreement became effective upon the termination of the then
current investment management agreement and was approved by shareholders at a
special meeting.
For the services and facilities furnished to the Money Market Portfolio,
Government Securities Portfolios (separate portfolios of the Trust) and
Tax-Exempt Portfolio, the Portfolios pay a monthly investment management fee on
a graduated basis at 1/12 of 0.22% of the first $500 million of combined average
daily net assets of such Portfolios, 0.20% of the next $500 million, 0.175% of
the next $1 billion, 0.16% of the next $1 billion and 0.15% of combined average
daily net assets of such Portfolios over $3 billion. The investment management
fee is computed based on the combined average daily net assets of the Portfolios
and allocated among the Portfolios based upon the relative net assets of each
Portfolio. For the fiscal years ended April 30, 2000, 1999 and 1998, the
Tax-Exempt Portfolio paid the Advisor fees of $833,361, $699,000, and $530,000,
respectively. If certain expense limits or fee waivers had not been in effect
during the periods described, the Advisor would have received investment
management fees from the Tax-Exempt Portfolio of $833,361, $699,000, and
$630,000 for the fiscal year ended April 30, 2000, 1999, and 1998, respectively.
The Advisor absorbed operating expenses for the Tax-Exempt Portfolio of $0, $0,
and $100,000, respectively, for the fiscal year ended April 30, 2000, 1999, and
1998, respectively. Scudder Kemper and certain affiliates have agreed, for a one
year period ending August 31, 2000, to cap expenses of the Managed Shares at the
same basis point levels as had existed on the Scudder Fund, Inc.- Scudder Tax
Free Money Market Series Managed Shares in the month prior to that fund's
ceasing of operations. Furthermore, from time to time Scudder Kemper may
voluntarily waive a portion of its fee.
Certain officers or trustees of the Trust are also directors or officers of the
Advisor and its affiliates as indicated under "Officers and Trustees."
Fund Accounting Agent. Scudder Fund Accounting Corporation ("SFAC"), Two
International Place, Boston, Massachusetts 02110, a subsidiary of the Advisor,
is responsible for determining the daily net asset value per share of the
Portfolio and maintaining all accounting records related thereto. Currently,
SFAC receives no fee for its services to the Portfolio; however, subject to
Board approval, at some time in the future, SFAC may seek payment for its
services under this agreement.
Distributor and Administrator. Pursuant to an underwriting and distribution
agreement ("distribution agreement"), Kemper Distributors, Inc. ("KDI"), 222
South Riverside Plaza, Chicago, Illinois 60606, an affiliate of the Advisor,
serves as distributor and principal underwriter for the Trust to provide
information and services for existing and potential shareholders. The
distribution agreement provides that KDI shall appoint various firms to provide
cash management services for their customers or clients through the Trust.
As principal underwriter for the Trust, KDI acts as agent of the Trust in the
sale of its shares of the Portfolio. KDI pays all its expenses under the
distribution agreement. 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
Portfolio shareholders. KDI receives no compensation from the Trust as principal
underwriter for the Shares and pays all expenses of distribution of the Shares
not otherwise paid by dealers and other financial services firms. KDI may, from
time to time, pay or allow discounts, commissions or promotional incentives, in
the form of cash, to firms that sell Shares of the Portfolio.
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The distribution agreement continues in effect from year to year so long as such
continuance is approved at least annually by a vote of the Board of Trustees of
the Trust, including the Trustees who are not interested persons of the Trust
and who have no direct or indirect financial interest in the agreement. The
distribution agreement automatically terminates in the event of its assignment
and may be terminated at any time without penalty by the Trust or by KDI upon 60
days' written notice. Termination of the distribution agreement by the Trust may
be by vote of a majority of the Board of Trustees, or a majority of the Trustees
who are not interested persons of the Trust and who have no direct or indirect
financial interest in the agreement, or a "majority of the outstanding voting
securities" of the Trust as defined under the 1940 Act.
Administrative services are provided to the Managed Shares of the Portfolio
under an administration services agreement ("administration agreement") with
KDI. KDI bears all its expenses of providing services pursuant to the
administration agreement between KDI and the Managed Shares of the Portfolio,
including the payment of service fees. Managed Shares of the Portfolio currently
pay KDI an administrative services fee, payable monthly, at an annual rate of up
to 0.15% of average daily net assets attributable to those shares of the
Portfolio. In the discretion of the Board of Trustees of the Trust, this
administrative services fee may be increased to a maximum of 0.25% of average
daily net assets. During the fiscal year ended April 30, 2000, the shares of the
Tax-Exempt Portfolio paid distribution services fees of $2,104,280. In addition
to the discounts or commissions described above, KDI will, from time to time,
pay or allow additional discounts, commissions or promotional incentives, in the
form of cash or other compensation, to firms that sell shares of the Trust.
KDI has entered into related arrangements with various banks, broker-dealer
firms and other service or administrative firms ("firms") that provide services
and facilities for their customers or clients who are investors in Managed
Shares of the Portfolio. The firms provide such office space and equipment,
telephone facilities and personnel as is necessary or beneficial for providing
information and services to their clients. Such services and assistance may
include, but are not limited to, establishing and maintaining accounts and
records, processing purchase and redemption transactions, answering routine
inquiries regarding the Portfolio, assistance to clients in changing dividend
and investment options, account designations and addresses and such other
administrative services as may be agreed upon from time to time and permitted by
applicable statute, rule or regulation. Currently, KDI pays each firm a service
fee, normally payable monthly, at an annual rate of up to 0.25% and 0.15% of the
average daily net assets in the Portfolio's Managed Shares and Institutional
Shares accounts, respectively, that it maintains and services. Firms to which
service fees may be paid may include affiliates of KDI. During the fiscal year
ended April 30, 2000, the Portfolio incurred administrative services fees of
$89,254.
In addition, KDI may from time to time, from its own resources, pay certain
firms additional amounts for ongoing administrative services and assistance
provided to their customers and clients who are shareholders of the Managed
Shares of the Portfolio.
KDI also may provide some of the above services and may retain any portion of
the fee under the administration agreement not paid to firms to compensate
itself for administrative functions performed for the Managed Shares of the
Portfolio.
Custodian, Transfer Agent and Shareholder Service Agent. State Street Bank and
Trust Company ("State Street"), 225 Franklin Street, Boston, Massachusetts
02110, as custodian, has custody of all securities and cash of the Trust. It
attends to the collection of principal and income, and payment for and
collection of proceeds of securities bought and sold by the Portfolio. Pursuant
to a services agreement with Investors Fiduciary Trust Company ("IFTC"), 801
Pennsylvania Avenue, Kansas City, Missouri 64105, transfer agent of the Trust,
Kemper Service Company ("KSvC"), an affiliate of the Advisor, 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, 2000, IFTC remitted
shareholder service fees in the amount of $870,299 to KSvC as Shareholder
Service Agent with respect to service provided to the Portfolio. During the
fiscal year ended April 30, 1999, IFTC remitted shareholder service fees in the
amount of $698,000 to KSvC as Shareholder Service Agent with respect to service
provided to the Portfolio.
Firms provide varying arrangements for their clients with respect to the
purchase and redemption of Portfolio shares and the confirmation thereof. Such
firms are responsible for the prompt transmission of purchase and redemption
orders.
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Some firms may establish higher minimum investment requirements than set forth
below. A firm may arrange with its clients for other investment or
administrative services. Such firms may independently establish and charge
additional amounts to their clients for such services, which charges would
reduce the clients' yield or return. Firms may also hold Portfolio shares in
nominee or street name as agent for and on behalf of their clients. In such
instances, the Trust's transfer agent will have no information with respect to
or control over the accounts of specific shareholders. Such shareholders may
obtain access to their accounts and information about their accounts only from
their firm. Certain of these firms may receive compensation from the Managed
Shares of the Portfolio for recordkeeping 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 conditions and 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 and Statement of Additional Information should
be read in connection with such firm's material regarding its fees and services.
Code of Ethics. The Trust, the Advisor and principal underwriter have each
adopted codes of ethics under rule 17j-1 of the Investment Company Act. Board
members, officers of the Trust and employees of the Advisor and principal
underwriter are permitted to make personal securities transactions, including
transactions in securities that may be purchased or held by the Trust, subject
to requirements and restrictions set forth in the applicable Code of Ethics. The
Advisor's Code of Ethics contains provisions and requirements designed to
identify and address certain conflicts of interest between personal investment
activities and the interests of the Trust. Among other things, the Advisor's
Code of Ethics prohibits certain types of transactions absent prior approval,
imposes time periods during which personal transactions may not be made in
certain securities, and requires the submission of duplicate broker
confirmations and quarterly reporting of securities transactions. Additional
restrictions apply to portfolio managers, traders, research analysts and others
involved in the investment advisory process. Exceptions to these and other
provisions of the Advisor's Code of Ethics may be granted in particular
circumstances after review by appropriate personnel.
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.
The Trust, or the Advisor (including any affiliate of the Advisor), or both, may
pay unaffiliated third parties for providing recordkeeping and other
administrative services with respect to accounts of participants in retirement
plans or other beneficial owners of Fund shares whose interests are held in an
omnibus account.
PORTFOLIO TRANSACTIONS
Brokerage Commissions
Allocation of brokerage is supervised by the Advisor.
The primary objective of the Advisor in placing orders for the purchase and sale
of securities for the 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 Advisor seeks to evaluate the overall reasonableness of
brokerage commissions paid (to the extent applicable) through the familiarity of
the Scudder Investor Services, Inc. ("SIS"), a corporation registered as a
broker-dealer and a subsidiary of the Advisor. with commissions charged on
comparable transactions, as well as by comparing commissions paid by the
Portfolio to reported commissions paid by others. The Advisor routinely reviews
commission rates, execution and settlement services performed and makes internal
and external comparisons.
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The Portfolio's purchases and sales of fixed-income securities are generally
placed by the Advisor with primary market makers for these securities on a net
basis, without any brokerage commission being paid by the Portfolio. Trading
does, however, involve transaction costs. Transactions with dealers serving as
primary market makers reflect the spread between the bid and asked prices.
Purchases of underwritten issues may be made, which will include an underwriting
fee paid to the underwriter.
When it can be done consistently with the policy of obtaining the most favorable
net results, it is the Advisor's practice to place such orders with
broker/dealers who supply brokerage and research services to the Advisor or the
Portfolio. The term "research services" includes advice as to the value of
securities; the advisability of investing in, purchasing or selling securities;
the availability of securities or purchasers or sellers of securities; and
analyses and reports concerning issuers, industries, securities, economic
factors and trends, portfolio strategy and the performance of accounts. The
Advisor is authorized when placing portfolio transactions, if applicable, for
the Portfolio to pay a brokerage commission in excess of that which another
broker might charge for executing the same transaction on account of execution
services and the receipt of research services. The Advisor has negotiated
arrangements, which are not applicable to most fixed-income transactions, with
certain broker/dealers pursuant to which a broker/dealer will provide research
services, to the Advisor or the Portfolio in exchange for the direction by the
Advisor of brokerage transactions to the broker/dealer. These arrangements
regarding receipt of research services generally apply to equity security
transactions. The Advisor may place orders with a broker/dealer on the basis
that the broker/dealer has or has not sold shares of the Portfolio. In effecting
transactions in over-the-counter securities, orders are placed with the
principal market makers for the security being traded unless, after exercising
care, it appears that more favorable results are available elsewhere.
To the maximum extent feasible, it is expected that the Advisor will place
orders for portfolio transactions through SIS. SIS will place orders on behalf
of the Portfolio with issuers, underwriters or other brokers and dealers. SIS
will not receive any commission, fee or other remuneration from the Portfolio
for this service.
Although certain research services from broker/dealers may be useful to the
Portfolio and to the Advisor, it is the opinion of the Advisor that such
information only supplements the Advisor's own research effort since the
information must still be analyzed, weighed, and reviewed by the Advisor's
staff. Such information may be useful to the Advisor in providing services to
clients other than the Portfolio, and not all such information is used by the
Advisor in connection with the Portfolio. Conversely, such information provided
to the Advisor by broker/dealers through whom other clients of the Advisor
effect securities transactions may be useful to the Advisor in providing
services to the Portfolio.
The Trustees review, from time to time, whether the recapture for the benefit of
the Portfolio of some portion of the brokerage commissions or similar fees paid
by the Portfolio on portfolio transactions is legally permissible and advisable.
Money market instruments are normally purchased in principal transactions
directly from the issuer or from an underwriter or market maker. There usually
are no brokerage commissions paid by the Portfolio for such purchases. During
the last three fiscal years the Portfolio paid no portfolio brokerage
commissions. Purchases from underwriters will include a commission or concession
paid by the issuer to the underwriter, and purchases from dealers serving as
market makers will include the spread between the bid and asked prices.
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PURCHASE AND REDEMPTION OF SHARES
Purchase of Shares
Shares of the Portfolio are sold at net asset value next determined after an
order and payment are received in the form described in the prospectus.
Investors must indicate the class of shares in the Portfolio in which they wish
to invest. The Portfolio has established a minimum initial investment for the
Managed Shares of $100,000 and $1,000 ($100 for IRAs and $50 for automatic
investment plans) for each subsequent investment. The minimal initial investment
for the Institutional Shares is $1,000,000. There is no minimum for each
subsequent investment. These minimums may be changed at anytime in management's
discretion. Firms offering Portfolio shares may set higher minimums for accounts
they service and may change such minimums at their discretion. The Trust may
waive the minimum for purchases by trustees, directors, officers or employees of
the Trust or the Advisor and its affiliates. 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 Portfolio determines that it has
received payment of the proceeds of the check. The time required for such a
determination will vary and cannot be determined in advance.
The Portfolio seeks to remain as fully invested as possible at all times in
order to achieve maximum income. Since the Portfolio will be investing in
instruments that normally require immediate payment in Federal Funds (monies
credited to a bank's account with its regional Federal Reserve Bank), the
Portfolio has adopted procedures for the convenience of its shareholders and to
ensure that the Portfolio receives investable funds. An investor wishing to open
an account should use the Account Information Form available from the Trust or
financial services firms. Orders for the purchase of shares that are accompanied
by a check drawn on a foreign bank (other than a check drawn on a Canadian bank
in U.S. Dollars) will not be considered in proper form and will not be processed
unless and until the Portfolio determines that it has received payment of the
proceeds of the check. The time required for such a determination will vary and
cannot be determined in advance.
Orders for purchase of Managed Shares and Institutional Shares of the Portfolio
received by wire transfer in the form of Federal Funds will be effected at the
next determined net asset value. Shares purchased by wire will receive that
day's dividend if effected at or prior to the 12:00 noon Eastern Time net asset
value determination for the Portfolio.
Orders for purchase accompanied by a check or other negotiable bank draft will
be accepted and effected as of 4:00 p.m. Eastern Time on the next business day
following receipt and such Shares will receive the dividend for the next
calendar day following the day the purchase is effected. If an order is
accompanied by a check drawn on a foreign bank, funds must normally be collected
on such check before Shares will be purchased.
If payment is wired in Federal Funds, the payment should be directed to UMB
Bank, N.A. (ABA #101-000-695), 10th and Grand Avenue, Kansas City, MO 64106 for
credit to the Portfolio bank account (CAT Tax-Exempt Portfolio 148
(Institutional Shares) or 248 (Managed Shares): 98-0119-985-4) and further
credit to your account number.
Redemption of Shares
General. Upon receipt by the Shareholder Service Agent of a request in the form
described below, shares of the Portfolio will be redeemed by the Portfolio at
the next determined net asset value. If processed by 4:00 p.m. Eastern time, the
shareholder will receive that day's dividend. A shareholder may use either the
regular or expedited redemption procedures. Shareholders who redeem all their
shares of the Portfolio will receive the net asset value of such shares and all
declared but unpaid dividends on such shares.
The Portfolio may suspend the right of redemption or delay payment more than
seven days (a) during any period when the New York Stock Exchange ("Exchange")
is closed other than customary weekend and holiday closings or during any period
in which trading on the Exchange is restricted, (b) during any period when an
emergency exists as a result of which (i) disposal of the Portfolio's
investments is not reasonably practicable, or (ii) it is not reasonably
practicable for the Portfolio to determine the value of its net assets, or (c)
for such other periods as the Securities and Exchange Commission may by order
permit for the protection of the Trust's shareholders.
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<PAGE>
Although it is the Portfolio's present policy to redeem in cash, if the Board of
Trustees determines that a material adverse effect would be experienced by the
remaining shareholders if payment were made wholly in cash, the Portfolio will
pay the redemption price in part by a distribution of portfolio securities in
lieu of cash, in conformity with the applicable rules of the Securities and
Exchange Commission, taking such securities at the same value used to determine
net asset value, and selecting the securities in such manner as the Board of
Trustees may deem fair and equitable. If such a distribution occurs,
shareholders receiving securities and selling them could receive less than the
redemption value of such securities and in addition would incur certain
transaction costs. Such a redemption would not be as liquid as a redemption
entirely in cash. The Trust has elected to be governed by Rule 18f-1 under the
1940 Act pursuant to which the Trust is obligated to redeem shares of the
Portfolio solely in cash up to the lesser of $250,000 or 1% of the net assets of
that Portfolio during any 90-day period for any one shareholder of record.
If shares of the Portfolio to be redeemed were purchased by check or through
certain Automated Clearing House ("ACH") transactions, the Portfolio may delay
transmittal of redemption proceeds until it has determined that collected funds
have been received for the purchase of such shares, which will be up to 10 days
from receipt by the Portfolio of the purchase amount. Shareholders may not use
ACH or Redemption Checks (defined below) until the shares being redeemed have
been owned for at least 10 days and shareholders may not use such procedures to
redeem shares held in certificated form. There is no delay when shares being
redeemed were purchased by wiring Federal Funds.
If shares being redeemed were acquired from an exchange of shares of a mutual
fund that were offered subject to a contingent deferred sales charge as
described in the prospectus for that other fund, the redemption of such shares
by the Portfolio may be subject to a contingent deferred sales charge as
explained in such prospectus.
Shareholders can request the following telephone privileges: expedited wire
transfer redemptions, ACH transactions and exchange transactions for individual
and institutional accounts and pre-authorized telephone redemption transactions
for certain institutional accounts. Shareholders may choose these privileges on
the account application or by contacting the Shareholder Service Agent for
appropriate instructions. Please note that the telephone exchange privilege is
automatic unless the shareholder refuses it on the account application. The
Trust or its agents may be liable for any losses, expenses or costs arising out
of fraudulent or unauthorized telephone requests pursuant to these privileges,
unless the Trust or its agents reasonably believe, based upon reasonable
verification procedures, that the telephone instructions are genuine. The
shareholder will bear the risk of loss, resulting from fraudulent or
unauthorized transactions, as long as the reasonable verification procedures are
followed. The verification procedures include recording instructions, requiring
certain identifying information before acting upon instructions and sending
written confirmations.
Because of the high cost of maintaining small accounts, the Portfolio reserves
the right to redeem an account that falls below the minimum investment level.
Thus, a shareholder who makes only the minimum initial investment and then
redeems any portion thereof might have the account redeemed. A shareholder will
be notified in writing and will be allowed 60 days to make additional purchases
to bring the account value up to the minimum investment level before the
Portfolio redeems the shareholder account.
Financial services firms provide varying arrangements for their clients to
redeem Portfolio shares. Such firms may independently establish and charge
amounts to their clients for such services.
Regular Redemptions. When shares are held for the account of a shareholder by
the Trust's transfer agent, the shareholder may redeem them by sending a written
request with signatures guaranteed to Kemper Service Company, P.O. Box 419153,
Kansas City, Missouri 64141-6153. When certificates for shares have been issued,
they must be mailed to or deposited with the Shareholder Service Agent, along
with a duly endorsed stock power and accompanied by a written request for
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.
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<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, 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
1-800-537-3177. Shares purchased by check or through certain ACH transactions
may not be redeemed under this privilege of redeeming shares by telephone
request until such shares have been owned for at least 10 days. This privilege
of redeeming shares by telephone request or by written request without a
signature guarantee may not be used to redeem shares held in certificate form
and may not be used if the shareholder's account has had an address change
within 30 days of the redemption request. During periods when it is difficult to
contact the Shareholder Service Agent by telephone, it may be difficult to use
the telephone redemption privilege, although investors can still redeem by mail.
The Portfolio reserves the right to terminate or modify this privilege at any
time.
Expedited Wire Transfer Redemptions. If the account holder has given
authorization for expedited wire redemption to the account holder's brokerage or
bank account, shares can be redeemed and proceeds sent by a federal wire
transfer to a single previously designated account. Requests received by the
Shareholder Service Agent prior to 12:00 noon Eastern 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 1-800-537-3177 or in writing, subject to the
limitations on liability. The Portfolio is not responsible for the efficiency of
the federal wire system or the account holder's financial services firm or bank.
The Portfolio currently does not charge the account holder for wire transfers.
The account holder is responsible for any charges imposed by the account
holder's firm or bank. There is a $1,000 wire redemption minimum. To change the
designated account to receive wire redemption proceeds, send a written request
to the Shareholder Service Agent with signatures guaranteed as described above,
or contact the firm through which shares of the Portfolio were purchased. Shares
purchased by check or through certain ACH transactions may not be redeemed by
wire transfer until the shares have been owned for at least 10 days. Account
holders may not use this procedure to redeem shares held in certificate form.
During periods when it is difficult to contact the Shareholder Service Agent by
telephone, it may be difficult to use the expedited wire transfer redemption
privilege. The Portfolio reserves the right to terminate or modify this
privilege at any time.
Redemptions By Draft (Managed Shares Only). Upon request, shareholders will be
provided with drafts to be drawn on the Portfolio ("Redemption Checks"). These
Redemption Checks may be made payable to the order of any person for not more
than $5 million. Shareholders should not write Redemption Checks in an amount
less than $1,000. If the check is less than $1,000 a $10 service fee will be
charged as described below. When a Redemption Check is presented for payment, a
sufficient number of full and fractional shares in the shareholder's account
will be redeemed as of the next determined net asset value to cover the amount
of the Redemption Check. This will enable the shareholder to continue earning
dividends until the Portfolio receives the Redemption Check. A shareholder
wishing to use this method of redemption must complete and file an Account
Application which is available from the Portfolio or firms through which shares
were purchased. Redemption Checks should not be used to close an account since
the account normally includes accrued but unpaid dividends. The Portfolio
reserves the right to terminate or modify this privilege at any time. This
privilege may not be available through some firms that distribute shares of the
Portfolio. In addition, firms may impose minimum balance requirements in order
to offer this feature. Firms may also impose fees to investors for this
privilege or establish variations of minimum check amounts if approved by the
Portfolio.
Unless one signer is authorized on the Account Application, Redemption Checks
must be signed by all account holders. Any change in the signature authorization
must be made by written notice to the Shareholder Service Agent. Shares
purchased by check or through certain ACH transactions may not be redeemed by
Redemption Check until the shares have been on the Portfolio's books for at
least 10 days. Shareholders may not use this procedure to redeem shares held in
certificate form. The Portfolio reserves the right to terminate or modify this
privilege at any time.
The Portfolio may refuse to honor Redemption Checks whenever the right of
redemption has been suspended or postponed, or whenever the account is otherwise
impaired. A $10 service fee will be charged when a Redemption Check is presented
to redeem Portfolio shares in excess of the value of the Portfolio account or in
an amount less than $1,000;
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<PAGE>
when a Redemption Check is presented that would require redemption of shares
that were purchased by check or certain ACH transactions within 10 days; or when
"stop payment" of a Redemption Check is requested.
Special Features. Certain firms that offer Shares of the Portfolio also provide
special redemption features through charge or debit cards and checks that redeem
Portfolio Shares. Various firms have different charges for their services.
Shareholders should obtain information from their firm with respect to any
special redemption features, applicable charges, minimum balance requirements
and special rules of the cash management program being offered.
Internet access
World Wide Web Site Kemper maintains a website that is http://www.kemper.com.
The site offers guidance on global investing and developing strategies to help
meet financial goals and provides access to the Kemper investor relations
department via e-mail. The site also enables users to access or view fund
prospectuses. Users can fill out new account forms on-line, order free software,
and request literature on funds.
DIVIDENDS, NET ASSET VALUE AND TAXES
Dividends. Dividends are declared daily and paid monthly. Shareholders will
receive dividends in additional shares unless they elect to receive cash.
Dividends will be reinvested monthly in shares of a Portfolio at the net asset
value normally on the last business day of the month. The Portfolio will pay
shareholders who redeem their entire accounts all unpaid dividends at the time
of the redemption not later than the next dividend payment date. Upon written
request to the Shareholder Service Agent, a shareholder may elect to have
Portfolio dividends invested without sales charge in shares of another Kemper
Mutual Fund offering this privilege at the net asset value of such other fund.
See "Special Features -- Exchange Privilege" for a list of such other Kemper
Mutual Funds. To use this privilege of investing Portfolio dividends shares in
another Kemper Mutual Fund, shareholders must maintain a minimum account value
of $100,000 and $1,000,000 for the Managed and Institutional Shares of the
Portfolio, respectively, and must maintain a minimum account value of $1,000 in
the fund in which dividends are reinvested.
The 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 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 Portfolio are accrued each day. While the Portfolio's
investments are valued at amortized cost, there will be no unrealized gains or
losses on such investments. However, should the net asset value of the Portfolio
deviate significantly from market value, the Board of Trustees could decide to
value the investments at market value and then unrealized gains and losses would
be included in net investment income above. Dividends are reinvested monthly and
shareholders will receive monthly confirmations of dividends and of purchase and
redemption transactions except that confirmations of dividend reinvestment for
Individual Retirement Accounts and other fiduciary accounts for which Investors
Fiduciary Trust Company acts as trustee will be sent quarterly.
If the shareholder elects to receive dividends in cash, checks will be mailed
monthly, within five business days of the reinvestment date (described below),
to the shareholder or any person designated by the shareholder. At the option of
the shareholder, cash dividends may be sent by Federal Funds wire. Shareholders
may request to have dividends sent by wire on the Account Application or by
contacting the Shareholder Service Agent (see "Purchase of Shares"). The
Portfolio reinvests dividend checks (and future dividends) in shares of the
Portfolio if checks are returned as undeliverable. Dividends and other
distributions in the aggregate amount of $10 or less are automatically
reinvested in shares of the Portfolio unless the shareholder requests that such
policy not be applied to the shareholder's account.
Net Asset Value. As described in the prospectus, the Portfolio values its
portfolio instruments at amortized cost, which does not take into account
unrealized capital gains or losses. This involves initially valuing an
instrument at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. While this method provides
certainty in valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the price the Portfolio
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<PAGE>
would receive if it sold the instrument. Calculations are made to compare the
value of the Portfolio's investments valued at amortized cost with market
values. Market valuations are obtained by using actual quotations provided by
market makers, estimates of market value, or values obtained from yield data
relating to classes of money market instruments published by reputable sources
at the mean between the bid and asked prices for the instruments. If a deviation
of 1/2 of 1% or more were to occur between the net asset value per share
calculated by reference to market values and the Portfolio's $1.00 per share net
asset value, or if there were any other deviation that the Board of Trustees of
the 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 Portfolio's net asset value per share (computed
using market values) declined, or were expected to decline, below $1.00
(computed using amortized cost), the Board of Trustees of the Trust might
temporarily reduce or suspend dividend payments in an effort to maintain the net
asset value at $1.00 per share. As a result of such reduction or suspension of
dividends or other action by the Board of Trustees, an investor would receive
less income during a given period than if such a reduction or suspension had not
taken place. Such action could result in investors receiving no dividend for the
period during which they hold their shares and receiving, upon redemption, a
price per share lower than that which they paid. On the other hand, if the
Portfolio's net asset value per share (computed using market values) were to
increase, or were anticipated to increase above $1.00 (computed using amortized
cost), the Board of Trustees of the Trust might supplement dividends in an
effort to maintain the net asset value at $1.00 per share. Redemption orders
received in connection with the administration of checkwriting programs by
certain dealers or other financial services firms prior to the determination of
the Portfolio's net asset value also may be processed on a confirmed basis in
accordance with the procedures established by KDI.
TAXES
The Portfolio intends to continue to qualify 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. The Portfolio also intends to
meet the requirements of the Code applicable to regulated investment companies
distributing tax-exempt interest dividends and, accordingly, dividends
representing net interest received on Municipal Securities will not be included
by shareholders in their gross income for Federal income tax purposes, except to
the extent such interest is subject to the alternative minimum tax as discussed
below. Dividends representing taxable net investment income (such as net
interest income from temporary investments in obligations of the U.S.
Government) and net short-term capital gains, if any, are taxable to
shareholders as ordinary income. Net interest on certain "private activity
bonds" issued on or after August 8,1986 is treated as an item of tax preference
and may, therefore, be subject to both the individual and corporate alternative
minimum tax. To the extent provided by regulations to be issued by the Secretary
of the Treasury, exempt-interest dividends from the 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 1998 calendar year 19% of the net interest income was derived from
"private activity bonds. "
Exempt-interest dividends, except to the extent of interest from "private
activity bonds," are not treated as a tax-preference item. For a corporate
shareholder, however, such dividends will be included in determining such
corporate shareholder's "adjusted current earnings." Seventy-five percent of the
excess, if any, of "adjusted current earnings" over the corporate shareholder's
other alternative minimum taxable income with certain adjustments will be a
tax-preference item. Corporate shareholders are advised to consult their tax
advisers with respect to alternative minimum tax consequences.
Shareholders will be required to disclose on their Federal income tax returns
the amount of tax-exempt interest earned during the year, including
exempt-interest dividends received from the 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 Portfolio, and 50% of Social Security
benefits.
The tax exemption of dividends from the 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 Portfolio are advised to consult their own tax advisers as
to the status of their accounts under state and local tax laws.
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The Portfolio is required by federal income tax law to withhold 31% of taxable
dividends paid to certain shareholders who do not furnish a correct taxpayer
identification number (in the case of individuals, a social security number) and
in certain other circumstances. Trustees of qualified retirement plans and
403(b)(7) accounts are required by law to withhold 20% of the taxable portion of
any distribution that is eligible to be "rolled over." The 20% withholding
requirement does not apply to distributions from IRAs or any part of a
distribution that is transferred directly to another qualified retirement plan,
403(b)(7) account, or IRA. Shareholders should consult their tax advisers
regarding the 20% withholding requirement.
Interest on indebtedness which is incurred to purchase or carry shares of a
mutual fund which distributes exempt-interest dividends during the year is not
deductible for Federal income tax purposes. Further, the Portfolio may not be an
appropriate investment for persons who are "substantial users" of facilities
financed by industrial development bonds held by the Portfolio or are "related
persons" to such users; such persons should consult their tax advisers before
investing in the Portfolio.
Shareholders normally will receive monthly confirmations of dividends and of
purchase and redemption transactions except that confirmations of dividend
reinvestment for IRAs and other fiduciary accounts for which Investors Fiduciary
Trust Company serves as trustee will be sent quarterly. Firms may provide
varying arrangements with their clients with respect to confirmations. Tax
information will be provided annually. Shareholders are encouraged to retain
copies of their account confirmation statements or year-end statements for tax
reporting purposes. However, those who have incomplete records may obtain
historical account transaction information at a reasonable fee.
PERFORMANCE
From time to time, the Trust may advertise several types of performance
information for the Portfolio, including "yield", "effective yield" and "tax
equivalent yield". Each of these figures is based upon historical earnings and
is not representative of the future performance of the Portfolio. The yield of
the Portfolio refers to the net investment income generated by a hypothetical
investment in the Portfolio over a specific seven-day period. This net
investment income is then annualized, which means that the net investment income
generated during the seven-day period is assumed to be generated each week over
an annual period and is shown as a percentage of the investment. The effective
yield is calculated similarly, but the net investment income earned by the
investment is assumed to be compounded when annualized. The effective yield will
be slightly higher than the yield due to this compounding effect.
The Advisor, the Portfolio's Principal Underwriter, Kemper Distributors, Inc.,
the Portfolio's Shareholder Service Agent, Kemper Service Company, and the
Portfolio's Accounting Agent, Scudder Fund Accounting Corporation, temporarily
have agreed to maintain certain operating expenses of the Portfolio to the
extent specified in the prospectus. The performance results noted herein for the
Portfolio would have been lower had certain expenses not been capped.
The Portfolio's seven-day yield is computed in accordance with a standardized
method prescribed by rules of the Securities and Exchange Commission. Under that
method, the yield quotation is based on a seven-day period and is computed for
the Portfolio as follows. The first calculation is net investment income per
share, which is accrued interest on portfolio securities, plus or minus
amortized discount or premium, less accrued expenses. This number is then
divided by the price per share (expected to remain constant at $1.00) at the
beginning of the period ("base period return"). The result is then divided by 7
and multiplied by 365 and the resulting yield figure is carried to the nearest
one-hundredth of one percent. Realized capital gains or losses and unrealized
appreciation or depreciation of investments are not included in the
calculations. For the period ended April 30, 2000, the Portfolio's Institutional
Shares seven-day yield was 4.26%, and the Managed Shares seven-day yield was
4.02%.
The Portfolio's seven-day 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 seven-day effective yield is:
(seven-day base
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period return +1)365/7 - 1. The Portfolio may also advertise a thirty-day
effective yield in which case the formula is (thirty-day base period return
+1)365/30 - 1. For the period ended April 30, 2000, the Portfolio's
Institutional Shares' seven-day effective yield was 4.35%, and the Managed
Shares' seven-day effective yield was 4.10%.
The tax equivalent yield of the 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.
The Portfolio's yield fluctuates, and the publication of an annualized yield
quotation is not a representation as to what an investment in the Portfolio will
actually yield for any given future period. Actual yields will depend not only
on changes in interest rates on money market instruments during the period in
which the investment in the Portfolio is held, but also on such matters as
Portfolio expenses.
Investors have an extensive choice of money market funds and money market
deposit accounts and the information below may be useful to investors who wish
to compare the past performance of the Portfolio with that of its competitors.
Past performance cannot be a guarantee of future results.
The Portfolio may depict the historical performance of the securities in which
the Portfolio may invest over periods reflecting a variety of market or economic
conditions either alone or in comparison with alternative investments
performance indexes of those investments or economic indicators. A Portfolio may
also describe its portfolio holdings and depict its size or relative size
compared to other mutual funds, the number and make-up of its shareholder base
and other descriptive factors concerning the Portfolio.
Investors also may want to compare the Portfolio's performance to that of U.S.
Treasury bills or notes because such instruments represent alternative income
producing products. Treasury obligations are issued in selected denominations.
Rates of U.S. Treasury obligations are fixed at the time of issuance and payment
of principal and interest is backed by the full faith and credit of the U.S.
Treasury. The market value of such instruments generally will fluctuate
inversely with interest rates prior to maturity and will equal par value at
maturity. Generally, the values of obligations with shorter maturities will
fluctuate less than those with longer maturities. The Portfolio's yield will
fluctuate. Also, while the Portfolio seeks to maintain a net asset value per
share of $1.00, there is no assurance that it will be able to do so
Tax-Exempt versus Taxable Yield. You may want to determine which investment --
tax-exempt or taxable -- will provide you with a higher after-tax return. To
determine the taxable equivalent yield, simply divide the yield from the
tax-exempt investment by the sum of [1 minus your marginal tax rate]. The tables
below are provided for your convenience in making this calculation for selected
tax-exempt yields and taxable income levels. These yields are presented for
purposes of illustration only and are not representative of any yield that the
Tax-Exempt Portfolio may generate. Both tables are based upon current law as to
the 1999 tax rate schedules.
Taxable Equivalent Yield Table For Persons Whose Adjusted Gross Income Is Under
$126,600
<TABLE>
<CAPTION>
A Tax-Exempt Yield of:
Single Joint Your Marginal 2% 3% 4% 5% 6% 7%
Taxable Income Federal Tax Rate Is Equivalent to a Taxable Yield of:
-------------- ---------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$25,750-$62,450 $43,050-$104,050 28.0% 2.78 4.17 5.56 6.94 8.33 9.72
Over $62,450 Over $104,050 31.0 2.90 4.35 5.80 7.25 8.70 10.14
Taxable Equivalent Yield Table For Persons Whose Adjusted Gross Income Is Over
$126,600
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+ A Tax-Exempt Yield of:
Single Joint Your Marginal 2% 3% 4% 5% 6% 7%
Taxable Income Federal Tax Rate Is Equivalent to a Taxable Yield of:
-------------- ---------------- ------------------------------------
$62,450-$130,250 $104,050-$158,550 31.9% 2.94 4.41 5.87 7.34 8.81 10.28
$130,250-$283,150 $158,550-$283,150 37.1 3.18 4.77 6.36 7.95 9.54 11.13
Over $283,150 Over $283,150 40.8 3.38 5.07 6.76 8.45 10.14 11.82
</TABLE>
* This table assumes a decrease of $3.00 of itemized deductions for each
$100 of adjusted gross income over $126,600. For a married couple with
adjusted gross income between $189,950 and $312,450 (single between
$126,600 and $249,100), add 0.7% to the above Marginal Federal Tax Rate
for each personal and dependency exemption. The taxable equivalent
yield is the tax-exempt yield divided by: 100% minus the adjusted tax
rate. For example, if the table tax rate is 37.1% and you are married
with no dependents, the adjusted tax rate is 38.5% (37.1% + 0.7% +
0.7%). For a tax-exempt yield of 6%, the taxable equivalent yield is
about 9.8% (6% / (100%-38.5%)).
OFFICERS AND TRUSTEES
The officers and trustees of the Trust, their birthdates, their principal
occupations and their affiliations, if any, with the Advisor and KDI, are listed
below. All persons named as officers and trustees also serve in similar
capacities for other funds advised by the Advisor:
JOHN W. BALLANTINE (2/16/46), Trustee, 1500 North Lake Shore Drive, Chicago,
Illinois; First Chicago NBD Corporation/The First National Bank of Chicago:
1996-1998 Executive Vice President and Chief Risk Management Officer; 1995-1996
Executive Vice President and Head of International Banking; 1992-1995 Executive
Vice President, Chief Credit and Market Risk Officer.
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.
LINDA C. COUGHLIN (1/1/52) Trustee, Two International Place, Boston,
Massachusetts; Managing Director, Scudder Kemper.
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, 1530 North State Parkway, Chicago,
Illinois; Chairman, Harnischfeger Industries, Inc. (machinery for the mining and
paper industries); formerly, Vice Chairman and Chief Financial Officer, Monsanto
Company (agricultural, pharmaceutical and nutritional/food products); formerly,
Vice President, Head of International Operations, FMC Corporation (manufacturer
of machinery and chemicals).
DONALD R. JONES (1/17/30), Trustee, 182 Old Wick Lane, Inverness, Illinois;
Retired; Director, Motorola, Inc. (manufacturer of electronic equipment and
components); formerly, Executive Vice President and Chief Financial Officer,
Motorola, Inc.
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.
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WILLIAM P. SOMMERS (7/22/33), Trustee, 24717 Harbour View Drive, Ponte Vedra
Beach, Florida; Consultant and Director, SRI Consulting; prior thereto President
and Chief Executive Officer, SRI International (research and development); prior
thereto, Executive Vice President, Iameter (medical information and educational
service provider); prior thereto, Senior Vice President and Director, Booz,
Allen & Hamilton Inc. (management consulting firm); Director, PSI Inc.,
Evergreen Solar, Inc. and Litton Industries.
MARK S. CASADY (9/21/60), President*, 345 Park Avenue, New York, New York;
Managing Director, Advisor; 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,
Advisor.
THOMAS W. LITTAUER (4/26/55), Trustee and Vice President *, Two International
Place, Boston, Massachusetts; Managing Director, Advisor; formerly, Head of
Broker Dealer Division of an unaffiliated investment management firm during
1997; prior thereto, President of Client Management Services of an unaffiliated
investment management firm from 1991 to 1996.
ANN M. McCREARY (11/6/56), Vice President*, 345 Park Avenue, New York, New York;
Managing Director, Advisor.
KATHRYN L. QUIRK (12/3/52), Vice President*, 345 Park Avenue, New York, New
York; Managing Director, Advisor.
FRANK J. RACHWALSKI, JR. (3/26/45), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Managing Director, Advisor.
LINDA J. WONDRACK (9/12/64), Vice President*, Two International Place, Boston,
Massachusetts; Senior Vice President, Advisor.
JOHN R. HEBBLE (6/27/58), Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Advisor.
BRENDA LYONS (2/21/63), Assistant Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Advisor.
CAROLINE PEARSON (4/1/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Senior Vice President, Advisor; formerly, Associate,
Dechert Price & Rhoads (law firm) 1989 to 1997.
MAUREEN E. KANE (2/14/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Vice President, Advisor; 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).
Unless otherwise stated, all the Trustees and officers have been associated with
their respective companies for more than five years, but not necessarily in the
same capacity.
* Interested persons as defined in the 1940 Act.
The trustees and officers who are "interested persons" as designated above
receive no compensation from the Trust. The table below shows amounts paid or
accrued to those trustees who are not designated "interested persons" during the
Trust's fiscal year ended April 30, 2000 and the total compensation that the
Trust paid to each trustee during the calendar year 1999 for all Scudder Kemper
Funds.
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Total Compensation
Aggregate Scudder Kemper Funds Paid
Name of Trustee Compensation From Trust To Trustees(2)
--------------- ----------------------- --------------
John W. Ballantine $3,572 $57,230
Lewis A. Burnham $5,464 $89,340
Donald L. Dunaway (1) $6,000 $125,900
Robert B. Hoffman $5,392 $109,000
Donald R. Jones $5,433 $114,200
Shirley D. Peterson $5,043 $114,000
William P. Sommers $5,043 $109,000
(1) Includes deferred fees, pursuant to deferred compensation agreements with
the Trust, deferred amounts accrue interest monthly at a rate approximate
to the yield of Zurich Money Funds -- Zurich Money Market Fund. Total
deferred fees (including interest thereon) payable from the Trust to Mr
Dunaway for the latest and all prior fiscal years are $22,000 and $16,500.
(2) Includes compensation for service on the Boards of 25 Kemper funds with 41
fund portfolios. Each trustee currently serves as trustee of 27 Kemper
Funds with 46 fund portfolios.
On June 30, 2000, the officers and trustees of the Trust, as a group, owned less
than 1% of the then outstanding shares of the Portfolio. No person owned of
record 5% or more of the outstanding shares of any class of any Portfolio,
except the persons indicated in the chart below owned more than 5 percent of the
shares of the portfolio.
<TABLE>
<CAPTION>
------------------------------------- ----------------------------------- -----------------------------------
Name And Address % Owned Portfolio
------------------------------------- ----------------------------------- -----------------------------------
<S> <C> <C>
May Financial Corp. 5.06% Cash Account Trust/Govt.
For the benefit of customers Securities Portfolio
8333 Douglas Avenue
Dallas, Texas 75225
------------------------------------- ----------------------------------- -----------------------------------
Joan Lawton Oppenheimer 6.12% Cash Account Trust/Tax Exempt
1 New York Plaza Portfolio
New York, NY 10004
------------------------------------- ----------------------------------- -----------------------------------
</TABLE>
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
Strategic Income Fund, Kemper High Yield Series, Kemper U.S. Government
Securities Fund, Kemper International Fund, Kemper State Tax-Free Income Series,
Kemper Short-Term 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 Value Series, Inc., Kemper Value Plus Growth
Fund, Kemper Horizon Fund, Kemper New Europe Fund, Inc., Kemper Asian Growth
Fund, Kemper Aggressive Growth Fund, Kemper Global/International Series, Inc.,
Kemper Securities Trust and Kemper Equity Trust ("Kemper Mutual Funds") and
certain "Money Market Funds" (Zurich Money Funds, Zurich Yieldwise Money Fund,
Cash Equivalent Fund, Tax-Exempt California Money Market Fund, Cash Account
Trust, Investors Municipal Cash Fund and Investors Cash
22
<PAGE>
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 Money Market Fund and Kemper
Cash Reserves Fund) acquired by exchange from another Fund may not be exchanged
thereafter until they have been owned for 15 days (the "15-Day Hold Policy"). In
addition to the current limits on exchanges of shares with a value over
$1,000,000, shares of a Kemper Fund with a value of $1,000,000 or less (except
Money Market Fund and Kemper Cash Reserves Fund) acquired by exchange from
another Kemper Fund, or from a Money Market Fund, may not be exchanged
thereafter until they have been owned for 15 days, if, in the investment
manager's judgment, the exchange activity may have an adverse effect on the
fund. In particular, a pattern of exchanges that coincides with a "market
timing" strategy may be disruptive to the Kemper Fund and therefore may be
subject to the 15-day hold policy. For purposes of determining whether the
15-Day Hold Policy applies to a particular exchange, the value of the shares to
be exchanged shall be computed by aggregating the value of shares being
exchanged for all accounts under common control, discretion or advice, including
without limitation accounts administered by a financial services firm offering
market timing, asset allocation or similar services. Series of Kemper Target
Equity Fund will be available on exchange only during the Offering Period for
such series as described in the prospectus for such series. Cash Equivalent
Fund, Tax-Exempt California Money Market Fund, Cash Account Trust, Investors
Municipal Cash Fund and Investors Cash Trust are available on exchange but only
through a financial services firm having a services agreement with KDI with
respect to such funds. Exchanges may only be made for funds that are available
for sale in the shareholder's state of residence. Currently, Tax-Exempt
California Money Market Fund is available for sale only in California and the
portfolios of Investors Municipal Cash Fund are available for sale in certain
states.
The total value of shares being exchanged must at least equal the minimum
investment requirement of the fund into which they are being exchanged.
Exchanges are made based on relative dollar values of the shares involved in the
exchange. There is no service fee for an exchange; however, financial services
firms may charge for their services in expediting exchange transactions.
Exchanges will be effected by redemption of shares of the fund held and purchase
of shares of the other fund. For federal income tax purposes, any such exchange
constitutes a sale upon which a gain or loss may be realized, depending upon
whether the value of the shares being exchanged is more or less than the
shareholder's adjusted cost basis. Shareholders interested in exercising the
exchange privilege may obtain an exchange form and prospectuses of the other
funds from financial services firms or KDI. Exchanges also may be authorized by
telephone if the shareholder has given authorization. Once the authorization is
on file, the Shareholder Service Agent will honor requests by telephone at
1-800-537-3177 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 (Managed Shares Only). An owner of $5,000 or more
of the Portfolio's shares may provide for the payment from the owner's account
of any requested dollar amount up to $50,000 to be paid to the owner or the
owner's designated payee monthly, quarterly, semi-annually or annually. The
$5,000 minimum account size is not applicable to Individual Retirement Accounts.
Dividend distributions will be reinvested automatically at net asset value. A
sufficient number of full and fractional shares will be redeemed to make the
designated payment. Depending upon the size of the payments requested,
redemptions for the purpose of making such payments may reduce or even exhaust
the account. The program may be amended on thirty days notice by the Portfolio
and may be terminated at any time by the shareholder or the Portfolio. Firms
provide varying arrangements for their clients to redeem shares of the Portfolio
on a periodic basis. Such firms may independently establish minimums for such
services.
Tax-Sheltered Retirement Programs. The Shareholder Service Agent provides
retirement plan services and documents and KDI can establish your account in any
of the following types of retirement plans:
o Individual Retirement Accounts (IRAs) trusteed by Investors
Fiduciary Trust Company ("IFTC"). This includes Simplified
Employee Pension Plan (SEP) IRA accounts and prototype
documents.
o 403(b) Custodial Accounts also trusteed by IFTC. This type of
plan is available to employees of most non-profit
organizations.
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<PAGE>
o Prototype money purchase pension and profit-sharing plans may
be adopted by employers. The maximum contribution per
participant is the lesser of 25% of compensation or $30,000.
Brochures describing the above plans as well as providing model defined benefit
plans, target benefit plans, 457 plans, 401(k) plans and materials for
establishing them are available from the Shareholder Service Agent upon request.
The brochures for plans trusteed by IFTC describe the current fees payable to
IFTC for its services as trustee. Investors should consult with their own tax
advisers before establishing a retirement plan.
Electronic Funds Transfer Programs. For your convenience, the Trust has
established several investment and redemption programs using electronic funds
transfer via the Automated Clearing House (ACH). There is currently no charge by
the Trust for these programs. To use these features, your financial institution
(your employer's financial institution in the case of payroll deposit) must be
affiliated with an Automated Clearing House (ACH). This ACH affiliation permits
the Shareholder Service Agent to electronically transfer money between your bank
account, or employer's payroll bank in the case of Direct Deposit, and your
account. Your bank's crediting policies of these transferred funds may vary.
These features may be amended or terminated at any time by the Trust.
Shareholders should contact Kemper Service Company at 1-800-621-1048 or the
financial services firm through which their account was established for more
information. These programs may not be available through some firms that
distribute shares of the Portfolio.
SHAREHOLDER RIGHTS
The Trust generally is not required to hold meetings of its shareholders. Under
the Agreement and Declaration of Trust ("Declaration of Trust"), however,
shareholder meetings will be held in connection with the following matters: (a)
the election or removal of trustees if a meeting is called for such purpose; (b)
the adoption of any contract for which shareholder approval is required by the
1940 Act; (c) any termination of the Trust to the extent and as provided in the
Declaration of Trust; (d) any amendment of the Declaration of Trust (other than
amendments changing the name of the Trust or any Portfolio, establishing the
Portfolio, supplying any omission, curing any ambiguity or curing, correcting or
supplementing any defective or inconsistent provision thereof); and (e) such
additional matters as may be required by law, the Declaration of Trust, the
By-laws of the Trust, or any registration of the Trust with the Securities and
Exchange Commission or any state, or as the trustees may consider necessary or
desirable. The shareholders also would vote upon changes in fundamental
investment objectives, policies or restrictions.
Each trustee serves until the next meeting of shareholders, if any, called for
the purpose of electing trustees and until the election and qualification of a
successor or until such trustee sooner dies, resigns, retires or is removed by a
majority vote of the shares entitled to vote (as described below) or a majority
of the trustees. In accordance with the 1940 Act (a) the Trust will hold a
shareholder meeting for the election of trustees at such time as less than a
majority of the trustees have been elected by shareholders, and (b) if, as a
result of a vacancy in the Board of Trustees, less than two-thirds of the
trustees have been elected by the shareholders, that vacancy will be filled only
by a vote of the shareholders.
Trustees may be removed from office by a vote of the holders of a majority of
the outstanding shares at a meeting called for that purpose, which meeting shall
be held upon the written request of the holders of not less than 10% of the
outstanding shares. Upon the written request of ten or more shareholders who
have been such for at least six months and who hold shares constituting at least
1% of the outstanding shares of the Trust stating that such shareholders wish to
communicate with the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider removal of a trustee, the
Trust has undertaken to disseminate appropriate materials at the expense of the
requesting shareholders.
The Declaration of Trust provides that the presence at a shareholder meeting in
person or by proxy of at least 30% of the shares entitled to vote on a matter
shall constitute a quorum. Thus, a meeting of shareholders of the Portfolio
could take place even if less than a majority of the shareholders were
represented on its scheduled date. Shareholders would in such a case be
permitted to take action which does not require a larger vote than a majority of
a quorum, such as the election of trustees and ratification of the selection of
auditors. Some matters requiring a larger vote under the Declaration of Trust,
such as termination or reorganization of the Portfolio and certain amendments of
the Declaration of Trust, would not be affected by this provision; nor would
matters which under the 1940 Act require the vote of a "majority of the
outstanding voting securities" as defined in the 1940 Act.
24
<PAGE>
The Declaration of Trust specifically authorizes the Board of Trustees to
terminate the Trust (or any Portfolio or class) by notice to the shareholders
without shareholder approval.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for obligations of the
Trust. The Declaration of Trust, however, disclaims shareholder liability for
acts or obligations of the Trust and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument entered into or executed by
the Trust or the trustees. Moreover, the Declaration of Trust provides for
indemnification out of Trust property for all losses and expenses of any
shareholder held personally liable for the obligations of the Trust and the
Trust will be covered by insurance which the trustees consider adequate to cover
foreseeable tort claims. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is considered by the Advisor remote and
not material, since it is limited to circumstances in which a disclaimer is
inoperative and the Trust itself is unable to meet its obligations.
25
<PAGE>
APPENDIX -- RATINGS OF INVESTMENTS
COMMERCIAL PAPER RATINGS
A-1, A-2, Prime-1, Prime-2 and Duff 1, Duff 2 Commercial Paper Ratings
Commercial paper rated by Standard & Poor's Corporation has the following
characteristics: Liquidity ratios are adequate to meet cash requirements.
Long-term senior debt is rated "A" or better. The issuer has access to at least
two additional channels of borrowing. Basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances. Typically, the
issuer's industry is well established and the issuer has a strong position
within the industry. The reliability and quality of management are unquestioned.
Relative strength or weakness of the above factors determine whether the
issuer's commercial paper is rated A-1, A-2 or A-3.
The ratings Prime-1 and Prime-2 are the two highest commercial paper ratings
assigned by Moody's Investors Service, Inc. Among the factors considered by them
in assigning ratings are the following: (1) evaluation of the management of the
issuer; (2) economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain areas; (3)
evaluation of the issuer's products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend
of earnings over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and (8) recognition
by the management of obligations which may be present or may arise as a result
of public interest questions and preparations to meet such obligations. Relative
strength or weakness of the above factors determines whether the issuer's
commercial paper is rated Prime-1, 2 or 3.
The rating Duff-1 is the highest commercial paper rating assigned by Duff &
Phelps Inc. Paper rated Duff-1 is regarded as having very high certainty of
timely payment with excellent liquidity factors that are supported by ample
asset protection. Risk factors are minor. Paper rated Duff-2 is regarded as
having good certainty of timely payment, good access to capital markets and
sound liquidity factors and company fundamentals. Risk factors are small.
MIG-1 and MIG-2 Municipal Notes
Moody's Investors Service, Inc.'s ratings for state and municipal notes and
other short-term loans will be designated Moody's Investment Grade (MIG). This
distinction is in recognition of the differences between short-term credit risk
and long-term risk. Factors affecting the liquidity of the borrower are
uppermost in importance in short-term borrowing, while various factors of the
first importance in bond risk are of lesser importance in the short run. Loans
designated MIG-1 are of the best quality, enjoying strong protection from
established cash flows of funds for their servicing or from established and
broad-based access to the market for refinancing, or both. Loans designated
MIG-2 are of high quality, with margins of protection ample although not so
large as in the preceding group.
STANDARD & POOR'S CORPORATION BOND RATINGS, CORPORATE BONDS
AAA. This is the highest rating assigned by Standard & Poor's Corporation to a
debt obligation and indicates an extremely strong capacity to pay principal and
interest.
AA. Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
MOODY'S INVESTORS SERVICE, INC. BOND RATINGS
Aaa. Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa. Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of
26
<PAGE>
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.
27
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
August 1, 2000
Premier Money Market Shares:
Cash Account Trust
Money Market Portfolio
Government Securities Portfolio
Tax-Exempt Portfolio
Investors Cash Trust
Treasury Portfolio
(each, a "Portfolio" and collectively, the "Portfolios")
222 South Riverside Plaza, Chicago, Illinois 60606
1-800-231-8568
This combined Statement of Additional Information contains information about the
Premier Money Market Shares of the Money Market Portfolio, Government Securities
Portfolio and Tax-Exempt Portfolio, each a series of Cash Account Trust and the
Premier Money Market Shares of the Treasury Portfolio, a series of Investors
Cash Trust. Cash Account Trust and Investors Cash Trust (each a "Trust",
collectively the "Trusts") are open-end diversified management investment
companies. This combined Statement of Additional Information is not a prospectus
and should be read in conjunction with the prospectus of the Premier Money
Market Shares of the Money Market Portfolio, Government Securities Portfolio,
Tax-Exempt Portfolio, and Treasury Portfolio (each a "Portfolio", collectively
the "Portfolios") dated August 1, 2000. The prospectus may be obtained without
charge from the Trusts at the address or telephone number on this cover or the
firm from which this Statement of Additional Information was received and is
also available along with other related materials at the SEC's Internet web site
(http://www.sec.gov). The Portfolio's Annual Report accompanies this Statement
of Additional Information, and may eb obtained without charge by calling
1-800-231-8568.
TABLE OF CONTENTS
INVESTMENT RESTRICTIONS.......................................................2
INVESTMENT POLICIES AND TECHNIQUES............................................5
INVESTMENT ADVISER AND SHAREHOLDER SERVICES..................................12
PORTFOLIO TRANSACTIONS.......................................................16
PURCHASE AND REDEMPTION OF SHARES............................................17
DIVIDENDS, NET ASSET VALUE AND TAXES.........................................20
PERFORMANCE..................................................................23
OFFICERS AND TRUSTEES........................................................25
1
<PAGE>
SPECIAL FEATURES.............................................................28
SHAREHOLDER RIGHTS...........................................................30
APPENDIX -- RATINGS OF INVESTMENTS...........................................32
2
<PAGE>
INVESTMENT RESTRICTIONS
The Trusts have each adopted for the Portfolios certain investment restrictions
which, together with the investment objective and policies of each Portfolio
(except for policies designated as non-fundamental and limited in regard to the
Tax-Exempt Portfolio to the policies in the first and fifth paragraphs under
Investment Policies and Techniques- "Tax-Exempt Portfolio" below), cannot be
changed for a Portfolio without approval by holders of a majority of its
outstanding voting shares. As defined in the Investment Company Act of 1940, as
amended (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.
Each Trust is an open-end diversified investment management company.
The Money Market Portfolio and the Government Securities Portfolio individually
may not:
(1) Purchase securities of any issuer (other than obligations of,
or guaranteed by, the United States Government, its agencies
or instrumentalities) if, as a result, more than 5% of the
value of the Portfolio's assets would be invested in
securities of that issuer.
(2) Purchase more than 10% of any class of securities of any
issuer. All debt securities and all preferred stocks are each
considered as one class.
(3) Make loans to others (except through the purchase of debt
obligations or repurchase agreements in accordance with its
investment objective and policies).
(4) Borrow money except as a temporary measure for extraordinary
or emergency purposes and then only in an amount up to
one-third of the value of its total assets, in order to meet
redemption requests without immediately selling any money
market instruments (any such borrowings under this section
will not be collateralized). If, for any reason, the current
value of the Portfolio's total assets falls below an amount
equal to three times the amount of its indebtedness from money
borrowed, the Portfolio will, within three days (not including
Sundays and holidays), reduce its indebtedness to the extent
necessary. The Portfolio will not borrow for leverage
purposes.
(5) Make short sales of securities, or purchase any securities on
margin except to obtain such short-term credits as may be
necessary for the clearance of transactions.
(6) Write, purchase or sell puts, calls or combinations thereof.
(7) Purchase or retain the securities of any issuer if any of the
officers, trustees or directors of the Trust or its investment
adviser owns beneficially more than 1/2 of 1% of the
securities of such issuer and together own more than 5% of the
securities of such issuer.
(8) Invest for the purpose of exercising control or management of
another issuer.
(9) Invest in commodities or commodity futures contracts or in
real estate (or real estate limited partnerships), although it
may invest in securities which are secured by real estate and
securities of issuers which invest or deal in real estate.
(10) Invest in interests in oil, gas or other mineral exploration
or development programs or leases, although it may invest in
the securities of issuers which invest in or sponsor such
programs.
(11) Underwrite securities issued by others except to the extent
the Portfolio may be deemed to be an underwriter, under the
federal securities laws, in connection with the disposition of
portfolio securities.
3
<PAGE>
(12) Issue senior securities as defined in the 1940 Act.
Additionally, the Money Market Portfolio may not:
(13) Concentrate 25% or more of the value of the Portfolio's assets
in any one industry; provided, however, that (a) the Portfolio
reserves freedom of action to invest up to 100% of its assets
in obligations of, or guaranteed by, the United States
Government, its agencies or instrumentalities in accordance
with its investment objective and policies and (b) the
Portfolio will invest at least 25% of its assets in
obligations issued by banks in accordance with its investment
objective and policies. However, the Portfolio may, in the
discretion of its investment adviser, invest less than 25% of
its assets in obligations issued by banks whenever the
Portfolio assumes a temporary defensive posture.
With regard to restriction #13, for purposes of determining the percentage of
the Portfolio's total assets invested in securities of issuers having their
principal business activities in a particular industry, asset backed securities
will be classified separately, based on the nature of the underlying assets.
Currently, the following categories are used: captive auto, diversified, retail
and consumer loans, captive equipment and business, business trade receivables,
nuclear fuel and capital and mortgage lending.
The Tax-Exempt Portfolio may not:
(1) Purchase securities if as a result of such purchase more than
25% of the Portfolio's total assets would be invested in any
industry or in any one state. Municipal Securities and
obligations of, or guaranteed by, the U.S. Government, its
agencies or instrumentalities are not considered an industry
for purposes of this restriction.
(2) Purchase securities of any issuer (other than obligations of,
or guaranteed by, the U.S. Government, its agencies or
instrumentalities) if as a result more than 5% of the value of
the Portfolio's assets would be invested in the securities of
such issuer. For purposes of this limitation, the Portfolio
will regard the entity that has the primary responsibility for
the payment of interest and principal as the issuer.
(3) Make loans to others (except through the purchase of debt
obligations or repurchase agreements in accordance with its
investment objective and policies).
(4) Borrow money except as a temporary measure for extraordinary
or emergency purposes and then only in an amount up to
one-third of the value of its total assets, in order to meet
redemption requests without immediately selling any money
market instruments (any such borrowings under this section
will not be collateralized). If, for any reason, the current
value of the Portfolio's total assets falls below an amount
equal to three times the amount of its indebtedness from money
borrowed, the Portfolio will, within three days (not including
Sundays and holidays), reduce its indebtedness to the extent
necessary. The Portfolio will not borrow for leverage
purposes.
(5) Make short sales of securities or purchase securities on
margin, except to obtain such short-term credits as may be
necessary for the clearance of transactions.
(6) Write, purchase or sell puts, calls or combinations thereof,
although the Portfolio may purchase Municipal Securities
subject to Standby Commitments in accordance with its
investment objective and policies.
(7) Purchase or retain the securities of any issuer if any of the
officers, trustees or directors of the Trust or its investment
adviser owns beneficially more than 1/2 of 1% of the
securities of such issuer and together own more than 5% of the
securities of such issuer.
(8) Invest for the purpose of exercising control or management of
another issuer.
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(9) Invest in commodities or commodity futures contracts or in
real estate (or real estate limited partnerships) except that
the Portfolio may invest in Municipal Securities secured by
real estate or interests therein.
(10) Invest in interests in oil, gas or other mineral exploration
or development programs or leases, although it may invest in
Municipal Securities of issuers which invest in or sponsor
such programs or leases.
(11) Underwrite securities issued by others except to the extent
the Portfolio may be deemed to be an underwriter, under the
federal securities laws, in connection with the disposition of
portfolio securities.
(12) Issue senior securities as defined in the 1940 Act.
The Treasury Portfolio may not:
(1) Borrow money, except as permitted under the 1940 Act, and as
interpreted or modified by regulatory authority having
jurisdiction, from time to time;
(2) Issue senior securities, except as permitted under the 1940
Act, and as interpreted or modified by regulatory authority
having jurisdiction, from time to time;
(3) Concentrate its investments in a particular industry, as that
term is used in the 1940 Act, and as interpreted or modified
by regulatory authority having jurisdiction, from time to
time;
(4) Engage in the business of underwriting securities issued by
others, except to the extent that the Portfolio may be deemed
to be an underwriter in connection with the disposition of
portfolio securities;
(5) Purchase or sell real estate, which term does not include
securities of companies which deal in real estate or mortgages
or investments secured by real estate or interests therein,
except that the Portfolio reserves freedom of action to hold
and to sell real estate acquired as a result of the
Portfolio's ownership of securities;
(6) Purchase physical commodities or contracts relating to
physical commodities; or
(7) Make loans, except as permitted under the 1940 Act, and as
interpreted or modified by regulatory authority having
jurisdiction, from time to time.
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 under each
portfolio's investment restriction relating to borrowing. In any event,
borrowings would only be made as permitted by such restrictions. The Tax-Exempt
Portfolio may invest more than 25% of its total assets in industrial development
bonds.
The Money Market Portfolio and the Government Securities Portfolio, as a
non-fundamental policy that may be changed without shareholder vote,
individually may not:
(i) Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or
acquisition of assets.
The Tax-Exempt Portfolio, as a non-fundamental policy that may be changed
without shareholder vote, may not:
(i) Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or
acquisition of assets.
The Treasury Portfolio, as a non-fundamental policy that may be changed without
shareholder vote, may not:
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(i) Borrow money in an amount greater than 5% of its total assets,
except for temporary or emergency purposes.
(ii) Lend portfolio securities in an amount greater than 5% of its
total assets.
(iii) Invest more than 10% of net assets in illiquid securities.
INVESTMENT POLICIES AND TECHNIQUES
Descriptions in this Statement of Additional Information of a particular
investment practice or technique in which a Portfolio may engage or a financial
instrument which a Portfolio may purchase are meant to describe the spectrum of
investments that Scudder Kemper Investments, Inc. (the "Adviser"), in its
discretion, might, but is not required to, use in managing a Portfolio's assets.
The Adviser may, in its discretion, at any time, employ such practice, technique
or instrument for one or more funds but not for all funds advised by it.
Furthermore, it is possible that certain types of financial instruments or
investment techniques described herein may not be available, permissible,
economically feasible or effective for their intended purposes in all markets.
Certain practices, techniques, or instruments may not be principal activities of
a Portfolio, but, to the extent employed, could, from time to time, have a
material impact on a Portfolio's performance.
The Portfolios described in this Statement of Additional Information seek to
provide maximum current income consistent with the stability of capital. Each
Portfolio is managed to maintain a net asset value of $1.00 per share.
Each Trust is a money market mutual fund designed to provide its shareholders
with professional management of short-term investment dollars. Each Trust is
designed for investors who seek maximum current income consistent with stability
of capital. Each Trust pools individual and institutional investors' money that
it uses to buy high quality money market instruments. Each Trust is a series
investment company that is able to provide investors with a choice of separate
investment portfolios. Cash Account Trust currently offers three investment
portfolios: the Money Market Portfolio, the Government Securities Portfolio and
the Tax-Exempt Portfolio. Investors Cash Trust currently offers two investment
portfolios: the Government Securities Portfolio (which is not offered in this
Statement of Additional Information) and the Treasury Portfolio. Because each
Portfolio combines its shareholders' money, it can buy and sell large blocks of
securities, which reduces transaction costs and maximizes yields. Each Trust is
managed by investment professionals who analyze market trends to take advantage
of changing conditions and who seek to minimize risk by diversifying each
Portfolio's investments. A Portfolio's investments are subject to price
fluctuations resulting from rising or declining interest rates and are subject
to the ability of the issuers of such investments to make payment at maturity.
However, because of their short maturities, liquidity and high quality ratings,
high quality money market instruments, such as those in which the Portfolios
invest, are generally considered to be among the safest available. Thus, each
Portfolio is designed for investors who want to avoid the fluctuations of
principal commonly associated with equity or long-term bond investments. There
can be no guarantee that a Portfolio will achieve its objective or that it will
maintain a net asset value of $1.00 per share.
Money Market Portfolio. The Portfolio seeks maximum current income consistent
with stability of capital. The Portfolio pursues its objective by investing
exclusively in the following types of U.S. Dollar-denominated money market
instruments that mature in 12 months or less:
1. Obligations of, or guaranteed by, the U.S. or Canadian governments,
their agencies or instrumentalities.
2. Bank certificates of deposit, time deposits or bankers' acceptances of
U.S. banks (including their foreign branches) and Canadian chartered
banks having total assets in excess of $1 billion.
3. Bank certificates of deposit, time deposits or bankers' acceptances of
foreign banks (including their U.S. and foreign branches) having total
assets in excess of $10 billion.
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4. Commercial paper, notes, bonds, debentures, participation certificates
or other debt obligations that (i) are rated high quality by Moody's
Investors Service, Inc. ("Moody's"), Standard & Poor's Corporation
("S&P"), or Duff & Phelps, Inc. ("Duff"); or (ii) if unrated, are
determined to be at least equal in quality to one or more of the above
ratings in the discretion of the Portfolio's investment adviser.
Currently, only obligations in the top two categories are considered to
be rated high quality. The two highest rating categories of Moody's,
S&P and Duff for commercial paper are Prime-1 and Prime-2, A-1 and A-2
and Duff 1 and Duff 2, respectively. For other debt obligations, the
two highest rating categories for such services are Aaa and Aa, AAA and
AA and AAA and AA, respectively. For a description of these ratings,
see "Appendix-- Ratings of Investments" in this Statement of Additional
Information.
5. Repurchase agreements of obligations that are suitable for investment
under the categories set forth above. Repurchase agreements are
discussed below.
In addition, the Portfolio limits its investments to securities that meet the
quality and diversification requirements of Rule 2a-7 under the 1940 Act.
The Portfolio will normally invest at least 25% of its assets in obligations
issued by banks; provided, however, the Portfolio may in the discretion of the
Portfolio's investment adviser temporarily invest less than 25% of its assets in
such obligations whenever the Portfolio assumes a defensive posture. Investments
by the Portfolio in Eurodollar certificates of deposit issued by London branches
of U.S. banks, or obligations issued by foreign entities, including foreign
banks, involve risks that are different from investments in securities of
domestic branches of U.S. banks. These risks may include future unfavorable
political and economic developments, possible withholding taxes on interest
payments, seizure of foreign deposits, currency controls, interest limitations
or other governmental restrictions that might affect payment of principal or
interest. The market for such obligations may be less liquid and, at times, more
volatile than for securities of domestic branches of U.S. banks. Additionally,
there may be less public information available about foreign banks and their
branches. The profitability of the banking industry is dependent largely upon
the availability and cost of funds for the purpose of financing lending
operations under prevailing money market conditions. General economic conditions
as well as exposure to credit losses arising from possible financial
difficulties of borrowers play an important part in banking operations. As a
result of Federal and state laws and regulations, domestic banks are, among
other things, required to maintain specified levels of reserves, limited in the
amounts they can loan to a single borrower and subject to other regulations
designed to promote financial soundness. However, not all such laws and
regulations apply to the foreign branches of domestic banks. Foreign branches of
foreign banks are not regulated by U.S. banking authorities, and generally are
not bound by accounting, auditing and financial reporting standards comparable
to U.S. banks. Bank obligations held by the Portfolio do not benefit materially
from insurance from the Federal Deposit Insurance Corporation.
The Portfolio may invest in commercial paper issued by major corporations under
the Securities Act of 1933 in reliance on the exemption from registration
afforded by Section 3(a)(3) thereof. Such commercial paper may be issued only to
finance current transactions and must mature in nine months or less. Trading of
such commercial paper is conducted primarily by institutional investors through
investment dealers and individual investor participation in the commercial paper
market is very limited. The Portfolio also may invest in commercial paper issued
in reliance on the so-called "private placement" exemption from registration
that is afforded by Section 4(2) of the Securities Act of 1933 ("Section 4(2)
paper"). Section 4(2) paper is restricted as to disposition under the federal
securities laws, and generally is sold to institutional investors such as the
Portfolio who agree that they are purchasing the paper for investment and not
with a view to public distribution. Any resale by the purchaser must be in an
exempt transaction. Section 4(2) paper normally is resold to other institutional
investors like the Portfolio through or with the assistance of the issuer or
investment dealers who make a market in Section 4(2) paper, thus providing
liquidity. The Portfolio's investment adviser considers the legally restricted
but readily saleable Section 4(2) paper to be liquid; however, pursuant to
procedures approved by the Board of Trustees of the Trust, if a particular
investment in Section 4(2) paper is not determined to be liquid, that investment
will be included within the 10% limitation on illiquid securities discussed
below. The Portfolio's investment adviser monitors the liquidity of the
Portfolio's investments in Section 4(2) paper on a continuous basis.
The Portfolio may invest in high quality participation certificates
("certificates") representing undivided interests in trusts that hold a
portfolio of receivables from consumer and commercial credit transactions, such
as transactions involving consumer revolving credit card accounts or commercial
revolving credit loan facilities. The receivables would include amounts charged
for goods and services, finance charges, late charges and other related fees and
charges. Interest payable on the certificates may be fixed or may be adjusted
periodically or "float" continuously according to a formula based upon an
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objective standard such as the 30-day commercial paper rate ("Variable Rate
Securities"). A trust may have the benefit of a letter of credit from a bank at
a level established to satisfy rating agencies as to the credit quality of the
assets supporting the payment of principal and interest on the certificates.
Payments of principal and interest on the certificates would be dependent upon
the underlying receivables in the trust and may be guaranteed under a letter of
credit to the extent of such credit. The quality rating by a rating service of
an issue of certificates is based primarily upon the value of the receivables
held by the trust and the credit rating of the issuer of any letter of credit
and of any other guarantor providing credit support to the trust. The
Portfolio's investment adviser considers these factors as well as others, such
as any quality ratings issued by the rating services identified above, in
reviewing the credit risk presented by a certificate and in determining whether
the certificate is appropriate for investment by the Portfolio. Collection of
receivables in the trust may be affected by various social, legal and economic
factors affecting the use of credit and repayment patterns, such as changes in
consumer protection laws, the rate of inflation, unemployment levels and
relative interest rates. It is anticipated that for most publicly offered
certificates there will be a liquid secondary market or there may be demand
features enabling the Portfolio to readily sell its certificates prior to
maturity to the issuer or a third party. While the Portfolio may invest without
limit in certificates, it is currently anticipated that such investments will
not exceed 25% of the Portfolio's assets.
Government Securities Portfolio. The Portfolio seeks to provide 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 backed by such obligations. All such
securities purchased mature in 12 months or less. Some securities issued by U.S.
Government agencies or instrumentalities are supported only by the credit of the
agency or instrumentality, such as those issued by the Federal Home Loan Bank,
and others (that are backed by the full faith and credit of the U.S.
Government). Short-term U.S. Government obligations generally are considered to
be the safest short-term investment. The U.S. Government guarantee of the
securities owned by the Portfolio, however, does not guarantee the net asset
value of its shares, which the Portfolio seeks to maintain at $1.00 per share.
Also, with respect to securities supported only by the credit of the issuing
agency or instrumentality or that are backed by the full faith and credit of the
U.S. Government., there is no guarantee that the U.S. Government will provide
support to such agencies or instrumentalities and such securities may involve
risk of loss of principal and interest.
Tax-Exempt Portfolio. The Portfolio seeks to provide maximum current income that
is exempt from Federal income taxes to the extent consistent with stability of
capital. The Portfolio pursues its objective primarily through a professionally
managed, diversified portfolio of short-term high quality tax-exempt municipal
obligations. Under normal market conditions at least 80% of the Portfolio's
total assets will, as a fundamental policy, be invested in obligations issued by
or on behalf of states, territories and possessions of the United States and the
District of Columbia and their political subdivisions, agencies and
instrumentalities, the income from which is exempt from Federal income tax
("Municipal Securities"). In compliance with the position of the staff of the
Securities and Exchange Commission, the Portfolio does not consider "private
activity" bonds to be Municipal Securities for purposes of the 80% limitation.
This is a fundamental policy so long as the staff maintains its position, after
which it would become non-fundamental.
Municipal Securities, such as industrial development bonds, are issued by or on
behalf of public authorities to obtain funds for purposes including privately
operated airports, housing, conventions, trade shows, ports, sports, parking or
pollution control facilities or for facilities for water, gas, electricity or
sewage and solid waste disposal. Such obligations, which may include lease
arrangements, are included within the term Municipal Securities if the interest
paid thereon qualifies as exempt from federal income tax. Other types of
industrial development bonds, the proceeds of which are used for the
construction, equipment, repair or improvement of privately operated industrial
or commercial facilities, may constitute Municipal Securities, although current
Federal tax laws place substantial limitations on the size of such issues.
Municipal Securities which the Portfolio may purchase include, without
limitation, debt obligations issued to obtain funds for various public purposes,
including the construction of a wide range of public facilities such as
airports, bridges, highways, housing, hospitals, mass transportation, public
utilities, schools, streets, and water and sewer works. Other public purposes
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.
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Tax anticipation notes typically are sold to finance working capital needs of
municipalities in anticipation of receiving property taxes on a future date.
Bond anticipation notes are sold on an interim basis in anticipation of a
municipality issuing a longer term bond in the future. Revenue anticipation
notes are issued in expectation of receipt of other types of revenue such as
those available under the Federal Revenue Sharing Program. Construction loan
notes are instruments insured by the Federal Housing Administration with
permanent financing by Fannie Mae or "Ginnie Mae" (the Government National
Mortgage Association) at the end of the project construction period.
Pre-refunded municipal bonds are bonds which are not yet refundable, but for
which securities have been placed in escrow to refund an original municipal bond
issue when it becomes refundable. Tax-free commercial paper is an unsecured
promissory obligation issued or guaranteed by a municipal issuer. The Tax-Exempt
Portfolio may purchase other Municipal Securities similar to the foregoing,
which are or may become available, including securities issued to pre-refund
other outstanding obligations of municipal issuers.
The Portfolio will invest only in Municipal Securities that at the time of
purchase: (a) are rated within the two highest ratings for Municipal Securities
assigned by Moody's (Aaa or Aa) or assigned by S&P (AAA or AA); (b) are
guaranteed or insured by the U.S. Government as to the payment of principal and
interest; (c) are fully collateralized by an escrow of U.S. Government
securities acceptable to the Portfolio's investment adviser; (d) have at the
time of purchase Moody's short-term Municipal Securities rating of MIG-2 or
higher or a municipal commercial paper rating of P-2 or higher, or S&P's
municipal commercial paper rating of A-2 or higher; (e) are unrated, if longer
term Municipal Securities of that issuer are rated within the two highest rating
categories by Moody's or S&P ; or (f) are determined to be at least equal in
quality to one or more of the above ratings in the discretion of the Portfolio's
investment adviser. In addition, the Portfolio limits its investments to
securities that meet the quality requirements of Rule 2a-7 under the Investment
Company Act of 1940. See "Net Asset Value."
Dividends representing net interest income received by the Portfolio on
Municipal Securities will be exempt from federal income tax when distributed to
the Portfolio's shareholders. Such dividend income may be subject to state and
local taxes. The Portfolio's assets will consist of Municipal Securities,
taxable temporary investments as described below and cash. The Portfolio
considers short-term Municipal Securities to be those that mature in one year or
less. Examples of Municipal Securities that are issued with original maturities
of one year or less are short-term tax anticipation notes, bond anticipation
notes, revenue anticipation notes, construction loan notes, pre-refunded
municipal bonds, warrants and tax-free commercial paper.
Municipal Securities generally are classified as "general obligation" or
"revenue" issues. General obligation bonds are secured by the issuer's pledge of
its full credit and taxing power for the payment of principal and interest.
Revenue bonds are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source such as the user of the
facility being financed. Industrial development bonds held by the Portfolio are
in most cases revenue bonds and generally are not payable from the unrestricted
revenues of the issuer, and do not constitute the pledge of the credit of the
issuer of such bonds. Among other types of instruments, the Portfolio may
purchase tax-exempt commercial paper, warrants and short-term municipal notes
such as tax anticipation notes, bond anticipation notes, revenue anticipation
notes, construction loan notes and other forms of short-term loans. Such notes
are issued with a short-term maturity in anticipation of the receipt of tax
payments, the proceeds of bond placements or other revenues. See "Appendix" for
a more detailed discussion of the Moody's and S&P ratings outlined above. The
Portfolio may invest in short-term "private activity" bonds.
The Portfolio may purchase securities that provide for the right to resell them
to an issuer, bank or dealer at an agreed upon price or yield within a specified
period prior to the maturity date of such securities. Such a right to resell is
referred to as a "Standby Commitment." Securities may cost more with Standby
Commitments than without them. Standby Commitments will be entered into solely
to facilitate portfolio liquidity. A Standby Commitment may be exercised before
the maturity date of the related Municipal Security if the Portfolio's
investment adviser revises its evaluation of the creditworthiness of the
underlying security or of the entity issuing the Standby Commitment. The
Portfolio's policy is to enter into Standby Commitments only with issuers, banks
or dealers that are determined by the Portfolio's investment adviser 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 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
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bears to the total principal amount of the Municipal Security. These
Certificates of Participation may be variable rate or fixed rate with remaining
maturities of one year or less. A Certificate of Participation may be backed by
an irrevocable letter of credit or guarantee of a financial institution that
satisfies rating agencies as to the credit quality of the Municipal Security
supporting the payment of principal and interest on the Certificate of
Participation. Payments of principal and interest would be dependent upon the
underlying Municipal Security and may be guaranteed under a letter of credit to
the extent of such credit. The quality rating by a rating service of an issue of
Certificates of Participation is based primarily upon the rating of the
Municipal Security held by the trust and the credit rating of the issuer of any
letter of credit and of any other guarantor providing credit support to the
issue. The Portfolio's investment adviser considers these factors as well as
others, such as any quality ratings issued by the rating services identified
above, in reviewing the credit risk presented by a Certificate of Participation
and in determining whether the Certificate of Participation is appropriate for
investment by the Portfolio. It is anticipated by the Portfolio's investment
adviser that, for most publicly offered Certificates of Participation, there
will be a liquid secondary market or there may be demand features enabling the
Portfolio to readily sell its Certificates of Participation prior to maturity to
the issuer or a third party. As to those instruments with demand features, the
Portfolio intends to exercise its right to demand payment from the issuer of the
demand feature only upon a default under the terms of the Municipal Security, as
needed to provide liquidity to meet redemptions, or to maintain a high quality
investment portfolio.
The Portfolio may purchase and sell Municipal Securities on a when-issued or
delayed delivery basis. A when-issued or delayed delivery transaction arises
when securities are bought or sold for future payment and delivery to secure
what is considered to be an advantageous price and yield to the Portfolio at the
time it enters into the transaction. In determining the maturity of portfolio
securities purchased on a when-issued or delayed delivery basis, the Portfolio
will consider them to have been purchased on the date when it committed itself
to the purchase.
A security purchased on a when-issued basis, like all securities held by the
Portfolio, is subject to changes in market value based upon changes in the level
of interest rates and investors' perceptions of the creditworthiness of the
issuer. Generally such securities will appreciate in value when interest rates
decline and decrease in value when interest rates rise. Therefore if, in order
to achieve higher interest income, the Portfolio remains substantially fully
invested at the same time that it has purchased securities on a when-issued
basis, there will be a greater possibility that the market value of the
Portfolio's assets will vary from $1.00 per share because the value of a
when-issued security is subject to market fluctuation and no interest accrues to
the purchaser prior to settlement of the transaction.
The Portfolio will only make commitments to purchase Municipal Securities on a
when-issued or delayed delivery basis with the intention of actually acquiring
the securities, but the Portfolio reserves the right to sell these securities
before the settlement date if deemed advisable. The sale of these securities may
result in the realization of gains that are not exempt from federal income tax.
In seeking to achieve its investment objective, the Portfolio may invest all or
any part of its assets in Municipal Securities that are industrial development
bonds. Moreover, although the Portfolio does not currently intend to do so on a
regular basis, it may invest more than 25% of its assets in Municipal Securities
that are repayable out of revenue streams generated from economically related
projects or facilities, if such investment is deemed necessary or appropriate by
the Portfolio's investment adviser. To the extent that the Portfolio's assets
are concentrated in Municipal Securities payable from revenues on economically
related projects and facilities, the Portfolio will be subject to the risks
presented by such projects to a greater extent than it would be if the
Portfolio's assets were not so concentrated.
From time to time, as a defensive measure or when acceptable short-term
Municipal Securities are not available, the Tax-Exempt Portfolio may invest in
taxable "temporary investments" that include: obligations of the U.S.
Government, its agencies or instrumentalities; debt securities rated within the
two highest grades by Moody's or S&P; commercial paper rated in the two highest
grades by either of such rating services; certificates of deposit of domestic
banks with assets of $1 billion or more; and any of the foregoing temporary
investments subject to repurchase agreements. Repurchase agreements are
discussed below. Interest income from temporary investments is taxable to
shareholders as ordinary income. Although the Portfolio is permitted to invest
in taxable securities (limited under normal market conditions to 20% of the
Portfolio's total assets), it is the Portfolio's primary intention to generate
income dividends that are not subject to federal income taxes.
The Federal bankruptcy statutes relating to the adjustments of debts of
political subdivisions and authorities of states of the United States provide
that, in certain circumstances, such subdivisions or authorities may be
authorized to initiate bankruptcy
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proceedings without prior notice to or consent of creditors, which proceedings
could result in material adverse changes in the rights of holders of obligations
issued by such subdivisions or authorities.
Litigation challenging the validity under state constitutions of present systems
of financing public education has been initiated or adjudicated in a number of
states and legislation has been introduced to effect changes in public school
finances in some states. In other instances, there has been litigation
challenging the issuance of pollution control revenue bonds or the validity of
their issuance under state or Federal law that ultimately could affect the
validity of those Municipal Securities or the tax-free nature of the interest
thereon.
Treasury Portfolio. The Treasury Portfolio seeks to provide 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 by the U.S. Government and repurchase agreements backed by
such securities. All securities purchased mature in 12 months or less. The
payment of principal and interest on the securities in the portfolio is backed
by the full faith and credit of the U.S. Government. See below for information
regarding variable rate securities and repurchase agreements.
There can be no assurance that each Portfolio's objective can be met.
Variable Rate Securities. Each Portfolio may invest in Variable Rate Securities,
instruments having rates of interest that are adjusted periodically or that
"float" continuously according to formulae intended to minimize fluctuation in
values of the instruments. The interest rate of Variable Rate Securities
ordinarily is determined by reference to or is a percentage of an objective
standard such as a bank's prime rate, the 90-day U.S. Treasury Bill rate, or the
rate of return on commercial paper or bank certificates of deposit. Generally,
the changes in the interest rate on Variable Rate Securities reduce the
fluctuation in the market value of such securities. Accordingly, as interest
rates decrease or increase, the potential for capital appreciation or
depreciation is less than for fixed-rate obligations. Some Variable Rate Demand
Securities ("Variable Rate Demand Securities") have a demand feature entitling
the purchaser to resell the securities at an amount approximately equal to
amortized cost or the principal amount thereof plus accrued interest. As is the
case for other Variable Rate Securities, the interest rate on Variable Rate
Demand Securities varies according to some objective standard intended to
minimize fluctuation in the values of the instruments. Each Portfolio determines
the maturity of Variable Rate Securities in accordance with Rule 2a-7, which
allows each Portfolio to consider certain of such instruments as having
maturities shorter than the maturity date on the face of the instrument .
Borrowing. 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 (5% of total assets for the Treasury
Portfolio), in order to meet redemption requests without immediately selling any
portfolio securities. Any such borrowings under this provision will not be
collateralized. No Portfolio will borrow for leverage purposes.
Repurchase Agreements. Each Portfolio may enter into repurchase agreements with
any member bank of the Federal Reserve System or any domestic broker/dealer
which is recognized as a reporting Government securities dealer if the
creditworthiness of the bank or broker/dealer has been determined by the Adviser
to be at least as high as that of other obligations the Portfolios may purchase
or to be at least equal to that of issuers of commercial paper rated within the
two highest grades assigned by Moody's, S&P or Duff.
A repurchase agreement provides a means for a Portfolio to earn taxable income
on funds for periods as short as overnight. It is an arrangement under which the
purchaser (i.e., the Portfolio) acquires a security ("Obligation") and the
seller agrees, at the time of sale, to repurchase the Obligation at a specified
time and price. Securities subject to a repurchase agreement are held in a
segregated account and the value of such securities kept at least equal to the
repurchase price on a daily basis. The repurchase price may be higher than the
purchase price, the difference being income to the Portfolio, or the purchase
and repurchase prices may be the same, with interest at a stated rate due to the
Portfolio together with the repurchase price on the date of repurchase. In
either case, the income to a Portfolio (which is taxable) is unrelated to the
interest rate on the Obligation itself. Obligations will be held by the
custodian or in the Federal Reserve Book Entry system.
It is not clear whether a court would consider the Obligation purchased by a
Portfolio subject to a repurchase agreement as being owned by that Portfolio or
as being
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collateral for a loan by the Portfolio to the seller. In the event of the
commencement of bankruptcy or insolvency proceedings with respect to the seller
of the Obligation before repurchase of the Obligation under a repurchase
agreement, a Portfolio may encounter delay and incur costs before being able to
sell the security. Delays may involve loss of interest or decline in price of
the Obligation. If the court characterized the transaction as a loan and a
Portfolio has not perfected an interest in the Obligation, that Portfolio may be
required to return the Obligation to the seller's estate and be treated as an
unsecured creditor of the seller. As an unsecured creditor, a Portfolio is at
risk of losing some or all of the principal and income involved in the
transaction. As with any unsecured debt obligation purchased for each Portfolio,
the Adviser seeks to minimize the risk of loss through repurchase agreements by
analyzing the creditworthiness of the obligor, in this case the seller of the
Obligation. Apart from the risk of bankruptcy or insolvency proceedings, there
is also the risk that the seller may fail to repurchase the Obligation, in which
case the Portfolio may incur a loss if the proceeds to the Portfolio of the sale
to a third party are less than the repurchase price. However, if the market
value of the Obligation subject to the repurchase agreement becomes less than
the repurchase price (including interest), each Portfolio will direct the seller
of the Obligation to deliver additional securities so that the market value of
all securities subject to the repurchase agreement will equal or exceed the
repurchase price. It is possible that a Portfolio will be unsuccessful in
seeking to enforce the seller's contractual obligation to deliver additional
securities.
A Portfolio will not purchase illiquid securities including repurchase
agreements maturing in more than seven days if, as a result thereof, more than
10% of a Portfolio's net assets valued at the time of the transaction would be
invested in such securities.
Interfund Lending (Treasury Portfolio Only). The Portfolio has received
exemptive relief from the SEC which permits the Portfolio to participate in an
interfund lending program among certain investment companies advised by the
Adviser. The interfund lending program allows the participating funds to borrow
money from and loan money to each other for temporary or emergency purposes. The
program is subject to a number of conditions designed to ensure fair and
equitable treatment of all participating funds, including the following: (1) no
fund may borrow money through the program unless it receives a more favorable
interest rate than a rate approximating the lowest interest rate at which bank
loans would be available to any of the participating funds under a loan
agreement; and (2) no fund may lend money through the program unless it receives
a more favorable return than that available from an investment in repurchase
agreements and, to the extent applicable, money market cash sweep arrangements.
In addition, a fund may participate in the program only if and to the extent
that such participation is consistent with the fund's investment objectives and
policies (for instance, money market funds would normally participate only as
lenders and tax exempt funds only as borrowers). Interfund loans and borrowings
may extend overnight, but could have a maximum duration of seven days. Loans may
be called on one day's notice. A fund may have to borrow from a bank at a higher
interest rate if an interfund loan is called or not renewed. Any delay in
repayment to a lending fund could result in a lost investment opportunity or
additional costs. The program is subject to the oversight and periodic review of
the Boards of the participating funds. To the extent the Fund is actually
engaged in borrowing through the interfund lending program, the Fund, as a
matter of non-fundamental policy, may not borrow for other than temporary or
emergency purposes (and not for leveraging).
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INVESTMENT ADVISER AND SHAREHOLDER SERVICES
Investment Adviser. Scudder Kemper Investments, Inc. ("Scudder Kemper" or the
"Adviser") 345 Park Avenue, New York, New York 10154-0010, is the investment
adviser for each Portfolio. Scudder Kemper is approximately 70% owned by Zurich
Insurance Company, a leading internationally recognized provider of insurance
and financial services in property/casualty and life insurance, reinsurance and
structured financial solutions as well as asset management. The balance of
Scudder Kemper is owned by Scudder Kemper's officers and employees.
Responsibility for overall management of each Portfolio rests with the Board of
Trustees and officers. Pursuant to investment management agreements between the
Trusts, on behalf of the Portfolios, and Scudder Kemper (the "Agreements"),
Scudder Kemper acts as each Portfolio's Adviser, manages its investments,
administers its business affairs, furnishes office facilities and equipment,
provides clerical and administrative services, provides shareholder and
information services and permits any of its officers or employees to serve
without compensation as trustees or officers of each Trust if elected to such
positions. Each Trust pays the expenses of its operations, including the fees
and expenses of independent auditors, counsel, custodian and transfer agent and
the cost of share certificates, reports and notices to shareholders, costs of
calculating net asset value and maintaining all accounting records related
thereto, brokerage commissions or transaction costs, taxes, registration fees,
the fees and expenses of qualifying each Trust and its shares for distribution
under federal and state securities laws and membership dues in the Investment
Company Institute or any similar organization. Each Trust's expenses generally
are allocated between the Portfolios of the Trust on the basis of relative net
assets at time of allocation, except that expenses directly attributable to a
particular Portfolio are charged to that Portfolio.
Each Agreement provides that Scudder Kemper shall not be liable for any error of
judgment or of law, or for any loss suffered by the Portfolios in connection
with the matters to which the Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of Scudder Kemper
in the performance of its obligations and duties, or by reason of its reckless
disregard of its obligations and duties under the Agreement.
In certain cases the investments for the Portfolios are managed by the same
individuals who manage one or more other mutual funds advised by the Adviser
that have similar names, objectives and investment styles as the Portfolios. You
should be aware that the Portfolios are likely to differ from these other mutual
funds in size, cash flow pattern and tax matters. Accordingly, the holdings and
performance of the Portfolios can be expected to vary from those of the other
mutual funds.
On December 31, 1997, pursuant to the terms of an agreement, Scudder, Stevens &
Clark, Inc. ("Scudder"), and Zurich Insurance Company ("Zurich"), formed a new
global investment organization by combining Scudder with Zurich Kemper
Investments, Inc. ("ZKI") and Zurich Kemper Value Advisors, Inc. ("ZKVA"),
former subsidiaries of Zurich. ZKI was the former investment adviser for each
Portfolio. Upon completion of the transaction, Scudder changed its name to
Scudder Kemper Investments, Inc. As a result of the transaction, Zurich owns
approximately 70% of Scudder Kemper, with the balance owned by Scudder Kemper's
officers and employees.
On September 7, 1998, the businesses of Zurich (including Zurich's 70% interest
in the Adviser) and the financial services businesses of B.A.T Industries p.l.c.
("B.A.T") were combined to form a new global insurance and financial services
company known as Zurich Financial Services Group. By way of a dual holding
company structure, former Zurich shareholders initially owned approximately 57%
of Zurich Financial Services Group, with the balance initially owned by former
B.A.T shareholders.
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Upon consummation of this transaction, each Portfolio's then current investment
management agreement with the Adviser was deemed to have been assigned and,
therefore, terminated. The Board approved the Agreements with the Adviser, which
are substantially identical to the prior investment management agreements,
except for the dates of execution and termination. The Agreements became
effective on September 7, 1998, upon the termination of the then current
investment management agreements, and were approved at a shareholder meeting
held on December 17, 1998.
The Agreements, dated September 7, 1998, were approved by the trustees of each
Trust on August 11, 1998. The Agreements will continue in effect each year only
if their continuances are approved annually by the vote of a majority of those
trustees who are not parties to such Agreements or interested persons of the
Adviser or a Trust, cast in person at a meeting called for the purpose of voting
on such approval, and either by a vote of a Trust's trustees or of a majority of
the outstanding voting securities of each Trust. The Agreements may be
terminated at any time without payment of penalty by either party on sixty days'
written notice, and automatically terminate in the event of its assignment.
If additional Portfolios become subject to the Agreements, the provisions
concerning continuation, amendment and termination shall be on a Portfolio by
Portfolio basis and the management fee and the expense limitations shall be
computed based upon the average daily net assets of all Portfolios subject to
the Agreements and shall be allocated among such Portfolios based upon the
relative net assets of such Portfolios. Additional Portfolios may be subject to
a different agreement.
For the services and facilities furnished to the portfolios of Cash Account
Trust (i.e. the Money Market, Government Securities and Tax-Exempt Portfolios),
the Portfolios pay a monthly investment management fee on a graduated basis at
1/12 of 0.22% of the first $500 million of combined average daily net assets of
such Portfolios, 0.20% of the next $500 million 0.175% of the next $1 billion,
0.16% of the next $1 billion and 0.15% of combined average daily net assets of
such Portfolios over $3 billion. The investment management fee is computed based
on average daily net assets of the Portfolios and allocated among the Portfolios
based upon the relative net assets of each Portfolio. Pursuant to the investment
management agreement, the Money Market, Government Securities and Tax-Exempt
Portfolios paid the Adviser fees of $8,142,641, $999,952, $833,361,
respectively, for the fiscal year ended April 30, 2000; $3,120,000, $1,167,000
and $699,000, respectively, for the fiscal year ended April 30, 1999; and
$1,888,000, $1,020,000 and $530,000 respectively, for the fiscal year ended
April 30, 1998. The Adviser and certain affiliates have agreed to limit certain
operating expenses of the Portfolios to the extent described in the prospectus..
The Adviser absorbed operating expenses for the Money Market, Government
Securities and Tax-Exempt Portfolios of $4,053, $454,806, $3,382 for the fiscal
year ended April 30, 2000; $2,233,000, $103,000 and $0, respectively, for the
fiscal year ended April 30, 1999; and $1,253,000, $281,000 and $100,000,
respectively, for the year ended April 30, 1998.
For services and facilities furnished to the portfolios of Investors Cash Trust
(i.e. the Treasury Portfolio and the Government Securities Portfolio (which does
not offer Premier Money Market Shares)), the Portfolios pay a monthly investment
management fee of 1/12 of 0.15% of average daily net assets of such Portfolios.
The investment management fee is computed based on the combined average daily
net assets of such Portfolios and allocated between the Portfolios based upon
the relative net asset levels. Pursuant to the investment management agreement,
the Treasury Portfolio incurred investment management fees of $0, $89,000, and
$91,000 for the fiscal years ended March 31, 2000, 1999, and 1998, respectively.
By contract, the Adviser and certain affiliates have agreed to limit operating
expenses of the Premier Money Market Shares of the Treasury Portfolio to 1.00%
of average daily net assets of Treasury Portfolio on an annual basis until July
31, 2001. For this purpose, "Portfolio operating expenses" do not include taxes,
interest, extraordinary expenses, brokerage commissions or transaction costs.
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Certain officers or trustees of the Trusts are also directors or officers of the
Adviser as indicated under "Officers and Trustees."
The Funds, or the Adviser (including any affiliate of the Adviser), or both, may
pay unaffiliated third parties for providing recordkeeping and other
administrative services with respect to accounts of participants in retirement
plans or other beneficial owners of Fund shares whose interests are held in an
omnibus account.
Code of Ethics. Each Trust, the Adviser and principal underwriter have each
adopted codes of ethics under rule 17j-1 of the Investment Company Act. Board
members, officers of the Trusts and employees of the Adviser and principal
underwriter are permitted to make personal securities transactions, including
transactions in securities that may be purchased or held by the Trusts, subject
to requirements and restrictions set forth in the applicable Code of Ethics. The
Adviser's Code of Ethics contains provisions and requirements designed to
identify and address certain conflicts of interest between personal investment
activities and the interests of the Trusts. Among other things, the Adviser's
Code of Ethics prohibits certain types of transactions absent prior approval,
imposes time periods during which personal transactions may not be made in
certain securities, and requires the submission of duplicate broker
confirmations and quarterly reporting of securities transactions. Additional
restrictions apply to portfolio managers, traders, research analysts and others
involved in the investment advisory process. Exceptions to these and other
provisions of the Adviser's Code of Ethics may be granted in particular
circumstances after review by appropriate personnel.
Fund Accounting Agent. Scudder Fund Accounting Corporation ("SFAC"), Two
International Place, Boston, Massachusetts 02110, a subsidiary of Scudder
Kemper, is responsible for determining the daily net asset value per share of
the Portfolios and maintaining all accounting records related hereto. Currently,
SFAC receives no fee for its services to the Portfolios; 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"), 222
South Riverside Plaza, Chicago, Illinois 60606, an affiliate of the Adviser,
serves as distributor and principal underwriter for the Portfolios to provide
information and services for existing and potential shareholders. The
distribution agreement provides that KDI shall appoint various firms to provide
cash management services for their customers or clients through the Portfolios.
The firms are to provide such office space and equipment, telephone facilities,
personnel and literature distribution as is necessary or appropriate for
providing information and services to the firms' clients. Each Portfolio has
adopted for the Premier Money Market Shares of each Portfolio a plan in
accordance with Rule 12b-1 of the 1940 Act (the "12b-1 Plans"). This rule
regulates the manner in which an investment company may, directly or indirectly,
bear the expenses of distributing shares. For its services under the
distribution agreement and pursuant to the 12b-1 Plans, each Portfolio pays KDI
a distribution services fee, payable monthly, at the annual rate of 0.25% of
average daily net assets with respect to the Premier Money Market Shares of the
Money Market Portfolio, the Government Securities Portfolio, the Tax-Exempt
Portfolio, and the Treasury Portfolio. Expenditures by KDI on behalf of Premier
Money Market Shares of each Portfolio need not be made on the same basis that
such fees are allocated. The fees are accrued daily as an expense of the
Portfolios.
As principal underwriter for the Portfolios, KDI acts as agent of each Portfolio
in the sale of that Portfolio's shares. KDI pays all its expenses under the
distribution agreement including, without limitation, services fees to firms
that provide services related to the Portfolios. Each 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 entered into related distribution services group agreements ("services
agreements") with one firm and anticipates entering into agreements with other
firms to provide distribution services for shareholders of the Premier Money
Market Shares of each Portfolio. KDI also may provide some of the distribution
services for the Premier Money Market Shares of each Portfolio KDI normally pays
such firms for services at a maximum annual rate of 0.25% of average daily net
assets of those accounts in the Premier Money Market Shares of the Money Market
Portfolio, the Government Securities Portfolio, the Tax-Exempt Portfolio, and
the Treasury Portfolio that they maintain and service. KDI in its discretion may
pay firms additional amounts in connection with some or all of the services
described above.
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The distribution agreement and the 12b-1 Plans continue in effect from year to
year so long as such continuance is approved at least annually by a vote of the
Board of Trustees of each 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. For each Trust, termination of the
distribution agreement may be by vote of a majority of the Board of Trustees, or
a majority of the Trustees who are not interested persons of the Trust and who
have no direct or indirect financial interest in the agreement, or a "majority
of the outstanding voting securities" of the Trust as defined under the 1940
Act. The 12b-1 Plans may not be amended to increase the fee to be paid by a
class without approval by a majority of the outstanding voting securities of the
class and all material amendments must in any event be approved by the Board of
Trustees in the manner described above with respect to the continuation of the
12b-1 Plans. The 12b-1 Plans may be terminated for a class at any time without
penalty by a vote of the majority of the Trustees who are not interested persons
of the Trust 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 class.
The Premier Money Market Shares of the Portfolios of each Trust will vote
separately with respect to the 12b-1 Plans.
Administrative services are provided to the Premier Money Market Shares of the
Portfolios under an administrative and shareholder services agreement
("administration agreement") with KDI. KDI bears all its expenses of providing
services pursuant to the administration agreement between KDI and the Premier
Money Market Shares of the Portfolios, including the payment of service fees.
Premier Money Market Shares of the Portfolios currently pay KDI an
administrative service fee, payable monthly, at an annual rate of up to 0.25% of
average daily net assets attributable to those shares of the Portfolios. During
the fiscal year ended April 30, 2000, the shares of the Money Market, Government
Securities and Tax-Exempt Portfolios paid distribution services fees of
$24,678,842, $3,170,641, and $2,104,280. In addition to the discounts or
commissions described above, KDI will, from time to time, pay or allow
additional discounts, commissions or promotional incentives, in the form of cash
or other compensation, to firms that sell shares of the Trust.
KDI has entered into related arrangements with various banks, broker dealer
firms and other service or administrative firms ("firms") that provide services
and facilities for their customers and clients who are investors in Premier
Money Market Shares of the Portfolios. 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 Portfolios, 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. Currently, KDI pays each
firm a service fee, normally payable monthly, at an annual rate of up to 0.25%
of the average daily net assets in the Portfolio's Premier Money Market Shares
accounts that it maintains and services. During the fiscal year ended April 30,
2000, the Money Market, Government Securities and Tax-Exempt Portfolios incurred
administrative services fees of $41,312, $514, and $89,254. During the fiscal
year ended March 31, 2000, the Treasury Portfolio incurred administrative
services fees of $46,057.
Firms to which service fees may be paid may include affiliates of KDI. In
addition, KDI may from time to time, from its own resources, pay firms
additional amounts for ongoing administrative services and assistance provided
to their customers and clients who are shareholders of the Premier Money Market
Shares of the Portfolios. KDI also may provide some of the above services and
may retain any portion of the fee under the administration agreement not paid to
firms to compensate itself for administrative functions performed for the
Premier Shares of the Portfolios.
Clients of Firms. Firms provide varying arrangements for their clients with
respect to the purchase and redemption of Portfolio shares and the confirmation
thereof and may arrange to have 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 different minimum
investment requirements than set forth above. Such firms may independently
establish and charge additional amounts to their clients for their services,
which charges would reduce their clients' yield or return. Firms may also hold
Portfolio shares in nominee or street name as agent for and on behalf of
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 (up to 0.25% of the average daily net assets of the
Portfolio's Premier Money Market Share accounts that it maintains and service)
through the Portfolio's Shareholder Servicing Agent for record-keeping and other
expenses relating to these nominee accounts holding Premier Money Market Shares.
In addition, certain privileges with
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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.
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 each Trust. It attends to the
collection of principal and income, and payment for and collection of proceeds
of securities bought and sold by each Portfolio. Pursuant to a services
agreement with Investors Fiduciary Trust Company ("IFTC"), 801 Pennsylvania
Avenue, Kansas City, Missouri 64105, Kemper Service Company ("KSvC"), an
affiliate of the Adviser, serves as "Shareholder Service Agent." IFTC receives,
as transfer agent, and pays to KSvC annual account fees of a maximum of $13 per
account plus out-of-pocket expense reimbursement. During the fiscal year ended
April 30, 2000 and 1999, IFTC remitted shareholder service fees for Money Market
Portfolio in the amount of $11,380,698 and $4,860,000; for Government Securities
Portfolio of $1,235,764 and $1,242,000; and for Tax-Exempt Portfolio of $870,299
and $698,000 to KSvC as Shareholder Service Agent. During the fiscal year ended
March 31, 2000 and 1999, IFTC remitted shareholder service fees for Treasury
Portfolio in the amount of $6,619 and $30,000 to KSvC as Shareholder Service
Agent.
Independent Auditors and Reports to Shareholders. Each Portfolio's independent
auditors, Ernst & Young LLP, 233 South Wacker Drive, Chicago, Illinois 60606,
audit and report on each Portfolio's annual financial statements, review certain
regulatory reports and the Portfolios' federal income tax return, and perform
other professional accounting, auditing, tax and advisory services when engaged
to do so by the Portfolios. 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 each Portfolio.
PORTFOLIO TRANSACTIONS
Brokerage Commissions
Allocation of brokerage is supervised by the Adviser.
The primary objective of the Adviser in placing orders for the purchase and sale
of securities for a Portfolio is to obtain the most favorable net results,
taking into account such factors as price, commission where applicable, size of
order, difficulty of execution and skill required of the executing
broker/dealer. The Adviser seeks to evaluate the overall reasonableness of
brokerage commissions paid (to the extent applicable) through the familiarity of
Scudder Investor Services, Inc. ("SIS") with commissions charged on comparable
transactions, as well as by comparing commissions paid by a Portfolio to
reported commissions paid by others. The Adviser routinely reviews commission
rates, execution and settlement services performed and makes internal and
external comparisons.
A Portfolio's purchases and sales of fixed-income securities are generally
placed by the Adviser with primary market makers for these securities on a net
basis, without any brokerage commission being paid by a Portfolio. Trading does,
however, involve transaction costs. Transactions with dealers serving as primary
market makers reflect the spread between the bid and asked prices. Purchases of
underwritten issues may be made, which will include an underwriting fee paid to
the underwriter.
When it can be done consistently with the policy of obtaining the most favorable
net results, it is the Adviser's practice to place such orders with
broker/dealers who supply brokerage and research services to the Adviser or a
Portfolio. The term "research services" includes advice as to the value of
securities; the advisability of investing in, purchasing or selling securities;
the availability of securities or purchasers or sellers of securities; and
analyses and reports concerning issuers, industries, securities, economic
factors and trends, portfolio strategy and the performance of accounts. The
Adviser is authorized when placing portfolio transactions, if applicable, for a
Portfolio to pay a brokerage commission in excess of that which another broker
might charge for executing the same transaction on account of execution services
and the receipt of
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research services. The Adviser has negotiated arrangements, which are not
applicable to most fixed-income transactions, with certain broker/dealers
pursuant to which a broker/dealer will provide research services to the Adviser
or a Portfolio in exchange for the direction by the Adviser of brokerage
transactions to the broker/dealer. These arrangements regarding receipt of
research services generally apply to equity security transactions. The Adviser
may place orders with a broker/dealer on the basis that the broker/dealer has or
has not sold shares of a Portfolio. In effecting transactions in
over-the-counter securities, orders are placed with the principal market makers
for the security being traded unless, after exercising care, it appears that
more favorable results are available elsewhere.
To the maximum extent feasible, it is expected that the Adviser will place
orders for portfolio transactions through SIS, which is a corporation registered
as a broker/dealer and a subsidiary of the Adviser; SIS will place orders on
behalf of a Portfolio with issuers, underwriters or other brokers and dealers.
SIS will not receive any commission, fee or other remuneration from a Portfolio
for this service.
Although certain research services from broker/dealers may be useful to a
Portfolio and to the Adviser, it is the opinion of the Adviser that such
information only supplements the Adviser's own research effort since the
information must still be analyzed, weighed, and reviewed by the Adviser's
staff. Such information may be useful to the Adviser in providing services to
clients other than a Portfolio, and not all such information is used by the
Adviser in connection with a Portfolio. Conversely, such information provided to
the Adviser by broker/dealers through whom other clients of the Adviser effect
securities transactions may be useful to the Adviser in providing services to a
Portfolio.
The Trustees review, from time to time, whether the recapture for the benefit of
a Portfolio of some portion of the brokerage commissions or similar fees paid by
a Portfolio on portfolio transactions is legally permissible and advisable.
Money market instruments are normally purchased in principal transactions
directly from the issuer or from an underwriter or market maker. There usually
are no brokerage commissions paid by a Portfolio for such purchases. During the
last three fiscal years each Portfolio paid no portfolio brokerage commissions.
Purchases from underwriters will include a commission or concession paid by the
issuer to the underwriter, and purchases from dealers serving as market makers
will include the spread between the bid and asked prices.
PURCHASE AND REDEMPTION OF SHARES
Purchase of Shares
Shares of each Portfolio are sold at net asset value through selected financial
services firms, such as broker-dealers and banks ("firms"). Investors must
indicate the Portfolio in which they wish to invest. Each Portfolio has
established a minimum initial investment for shares of each Portfolio of $1,000
and $100 for subsequent investments, but these minimums may be changed at
anytime in management's discretion. Firms offering Portfolio shares may set
different minimums for accounts they service and may change such minimums at
their discretion. The Trusts may waive the minimum for purchases by trustees,
directors, officers or employees of the Trusts or the Adviser and its
affiliates.
Each Portfolio seeks to have their investment portfolios as fully invested as
possible at all times in order to achieve maximum income. Since each Portfolio
will be investing in instruments that normally require immediate payment in
Federal Funds (monies credited to a bank's account with its regional Federal
Reserve Bank), each Portfolio has adopted procedures for the convenience of its
shareholders and to ensure that each Portfolio receives investable funds. An
investor wishing to open an account should use the Account Information Form
available from a Trust or financial services firms. Orders for the purchase of
shares that are accompanied by a check drawn on a foreign bank (other than a
check drawn on a Canadian bank in U.S. Dollars) will not be considered in proper
form and will not be processed unless and until a Portfolio determines that it
has received payment of the proceeds of the check. The time required for such a
determination will vary and cannot be determined in advance.
Orders for purchase of shares of a Portfolio received by wire transfer in the
form of Federal Funds will be effected at the next determined net asset value.
Shares purchased by wire will receive (i) that day's dividend if effected at or
prior to the 1:00 p.m. Central time net asset value determination for the Money
Market Portfolio, the Government Securities Portfolio and the Treasury
Portfolio, and at or prior to the 11:00 a.m. Central time net asset value
determination for the Tax-Exempt Portfolio;
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(ii) the dividend for the next calendar day if effected at the 3:00 p.m. or, for
the Government Securities Portfolio, 8:00 p.m. Central time net asset value
determination provided such payment is received by 3:00 p.m. Central time; or
(iii) the dividend for the next business day if effected at the 8:00 p.m.
Central time net asset value determination and payment is received after 3:00
p.m. Central time on such date for the Government Securities Portfolio.
Confirmed share purchases that are effective at the 8:00 p.m. Central time net
asset value determination for the Government Securities Portfolio will receive
dividends upon receipt of payment for such transactions in the form of Federal
Funds in accordance with the time provisions immediately above.
Orders for purchase accompanied by a check or other negotiable bank draft will
be accepted and effected as of 3:00 p.m. Central time on the next business day
following receipt and such shares will receive the dividend for the next
calendar day following the day the purchase is effected. If an order is
accompanied by a check drawn on a foreign bank, funds must normally be collected
on such check before shares will be purchased.
If payment is wired in Federal Funds, the payment should be directed to UMB
Bank, N.A. (ABA #101-000-695), 10th and Grand Avenue, Kansas City, MO 64106 for
credit to appropriate Fund bank account (Money Market Portfolio 346:
98-0119-980-3; Government Securities Portfolio 347: 98-0119-983-8; Tax-Exempt
Portfolio 348: 98-0119-985-4; Treasury Portfolio 343: 98-7036-760-2) and further
credit to your account number.
Redemption of Shares
General. Upon receipt by the Shareholder Service Agent of a request in the form
described below, shares of a Portfolio will be redeemed by a Portfolio at the
next determined net asset value. If processed at 3:00 p.m. (or 8:00 p.m. for the
Government Securities Portfolio) Central time, the shareholder will receive that
day's dividend. A shareholder may use either the regular or expedited redemption
procedures. Shareholders who redeem all their shares of a Portfolio will receive
the net asset value of such shares and all declared but unpaid dividends on such
shares.
Each Portfolio may suspend the right of redemption or delay payment more than
seven days (a) during any period when the New York Stock Exchange ("Exchange")
is closed other than customary weekend and holiday closings or during any period
in which trading on the Exchange is restricted, (b) during any period when an
emergency exists as a result of which (i) disposal of a Portfolio's investments
is not reasonably practicable, or (ii) it is not reasonably practicable for a
Portfolio to determine the value of its net assets, or (c) for such other
periods as the Securities and Exchange Commission may by order permit for the
protection of a Portfolio's shareholders.
Although it is each Portfolio's present policy to redeem in cash, if the Board
of Trustees determines that a material adverse effect would be experienced by
the remaining shareholders if payment were made wholly in cash, a Portfolio will
pay the redemption price in part by a distribution of portfolio securities in
lieu of cash, in conformity with the applicable rules of the Securities and
Exchange Commission, taking such securities at the same value used to determine
net asset value, and selecting the securities in such manner as the Board of
Trustees may deem fair and equitable. If such a distribution occurs,
shareholders receiving securities and selling them could receive less than the
redemption value of such securities and in addition would incur certain
transaction costs. Such a redemption would not be as liquid as a redemption
entirely in cash. Each Trust has elected to be governed by Rule 18f-1 under the
1940 Act pursuant to which each Portfolio is obligated to redeem shares of a
Portfolio solely in cash up to the lesser of $250,000 or 1% of the net assets of
that Portfolio during any 90-day period for any one shareholder of record.
If shares of a Portfolio to be redeemed were purchased by check or through
certain Automated Clearing House ("ACH") transactions, the Portfolio may delay
transmittal of redemption proceeds until it has determined that collected funds
have been received for the purchase of such shares, which will be up to 10 days
from receipt by the Portfolio of the purchase amount. Shareholders may not use
ACH or Redemption Checks (defined below) until the shares being redeemed have
been owned for at least 10 days and shareholders may not use such procedures to
redeem shares held in certificated form. There is no delay when shares being
redeemed were purchased by wiring Federal Funds.
If shares being redeemed were acquired from an exchange of shares of a mutual
fund that were offered subject to a contingent deferred sales charge as
described in the prospectus for that other fund, the redemption of such shares
by a Portfolio may be subject to a contingent deferred sales charge as explained
in such prospectus.
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<PAGE>
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. Each
Portfolio 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 a Portfolio or its agents reasonably believe, based upon
reasonable verification procedures, that the telephone instructions are genuine.
The shareholder will bear the risk of loss, resulting from fraudulent or
unauthorized transactions, as long as the reasonable verification procedures are
followed. The verification procedures include recording instructions, requiring
certain identifying information before acting upon instructions and sending
written confirmations.
Because of the high cost of maintaining small accounts, each Portfolio reserves
the right to redeem an account that falls below the minimum investment level.
Thus, a shareholder who makes only the minimum initial investment and then
redeems any portion thereof might have the account redeemed. A shareholder will
be notified in writing and will be allowed 60 days to make additional purchases
to bring the account value up to the minimum investment level before a Portfolio
redeems the shareholder account.
Financial services firms provide varying arrangements for their clients to
redeem Portfolio shares. Such firms may independently establish and charge
amounts to their clients for such services.
Regular Redemptions. When shares are held for the account of a shareholder by a
Portfolio's transfer agent, the shareholder may redeem them by sending a written
request with signatures guaranteed to Kemper Service Company, P.O. Box 219153,
Kansas City, Missouri 64141-9153. When certificates for shares have been issued,
they must be mailed to or deposited with the Shareholder Service Agent, along
with a duly endorsed stock power and accompanied by a written request for
redemption. Redemption requests and a stock power must be endorsed by the
account holder with signatures guaranteed by a commercial bank, trust company,
savings and loan association, federal savings bank, member firm of a national
securities exchange or other eligible financial institution. The redemption
request and stock power must be signed exactly as the account is registered
including any special capacity of the registered owner. Additional documentation
may be requested, and a signature guarantee is normally required, from
institutional and fiduciary account holders, such as corporations, custodians
(e.g., under the Uniform Transfers to Minors Act), executors, administrators,
trustees or guardians.
Telephone Redemptions. If the proceeds of the redemption are $50,000 or less and
the proceeds are payable to the shareholder of record at the address of record,
normally a telephone request or a written request by any one account holder
without a signature guarantee is sufficient for redemptions by individual or
joint account holders, and trust, executor, guardian and custodian account
holders, provided the trustee, executor, guardian or custodian is named in the
account registration. Other institutional account holders may exercise this
special privilege of redeeming shares by telephone request or written request
without signature guarantee subject to the same conditions as individual account
holders and subject to the limitations on liability, provided that this
privilege has been pre-authorized by the institutional account holder or
guardian account holder by written instruction to the Shareholder Service Agent
with signatures guaranteed. Telephone requests may be made by calling
1-800-231-8568. Shares purchased by check or through certain ACH transactions
may not be redeemed under this privilege of redeeming shares by telephone
request until such shares have been owned for at least 10 days. This privilege
of redeeming shares by telephone request or by written request without a
signature guarantee may not be used to redeem shares held in certificate form
and may not be used if the shareholder's account has had an address change
within 30 days of the redemption request. During periods when it is difficult to
contact the Shareholder Service Agent by telephone, it may be difficult to use
the telephone redemption privilege, although investors can still redeem by mail.
Each Portfolio reserves the right to terminate or modify this privilege at any
time.
Expedited Wire Transfer Redemptions. If the account holder has given
authorization for expedited wire redemption to the account holder's brokerage or
bank account, shares can be redeemed and proceeds sent by a federal wire
transfer to a single previously designated account. Requests received by the
Shareholder Service Agent prior to 11:00 a.m. Central time will result in shares
being redeemed that day and normally the proceeds will be sent to the designated
account that day. Once authorization is on file, the Shareholder Service Agent
will honor requests by telephone at 1-800-231-8568 or in writing, subject to the
limitations on liability. A Portfolio is not responsible for the efficiency of
the federal wire system or the
20
<PAGE>
account holder's financial services firm or bank. Each Portfolio currently does
not charge the account holder for wire transfers. The account holder is
responsible for any charges imposed by the account holder's firm or bank. There
is a $1,000 wire redemption minimum. To change the designated account to receive
wire redemption proceeds, send a written request to the Shareholder Service
Agent with signatures guaranteed as described above, or contact the firm through
which shares of a Portfolio were purchased. Shares purchased by check or through
certain ACH transactions may not be redeemed by wire transfer until the shares
have been owned for at least 10 days. Account holders may not use this procedure
to redeem shares held in certificate form. During periods when it is difficult
to contact the Shareholder Service Agent by telephone, it may be difficult to
use the expedited wire transfer redemption privilege. Each Portfolio reserves
the right to terminate or modify this privilege at any time.
Redemptions By Draft. Upon request, shareholders will be provided with drafts to
be drawn on a Portfolio ("Redemption Checks"). These Redemption Checks may be
made payable to the order of any person for not more than $5 million.
Shareholders should not write Redemption Checks in an amount less than $100
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 a Portfolio receives the
Redemption Check. A shareholder wishing to use this method of redemption must
complete and file an Account Application which is available from each Portfolio
or firms through which shares were purchased. Redemption Checks should not be
used to close an account since the account normally includes accrued but unpaid
dividends. Each Portfolio reserves the right to terminate or modify this
privilege at any time. This privilege may not be available through some firms
that distribute shares of each Portfolio. In addition, firms may impose minimum
balance requirements in order to offer this feature. Firms may also impose fees
to investors for this privilege or establish variations of minimum check amounts
if approved by each Portfolio.
Unless one signer is authorized on the Account Application, Redemption Checks
must be signed by all account holders. Any change in the signature authorization
must be made by written notice to the Shareholder Service Agent. Shares
purchased by check or through certain ACH transactions may not be redeemed by
Redemption Check until the shares have been on a Portfolio's books for at least
10 days. Shareholders may not use this procedure to redeem shares held in
certificate form. Each Portfolio reserves the right to terminate or modify this
privilege at any time.
A Portfolio may refuse to honor Redemption Checks whenever the right of
redemption has been suspended or postponed, or whenever the account is otherwise
impaired. A $10 service fee will be charged when a Redemption Check is presented
to redeem Portfolio shares in excess of the value of a Portfolio account or in
an amount less than $250; when a Redemption Check is presented that would
require redemption of shares that were purchased by check or certain ACH
transactions within 10 days; or when "stop payment" of a Redemption Check is
requested.
Special Features. Certain firms that offer shares of a Portfolio also provide
special redemption features through charge or debit cards and checks that redeem
Portfolio shares. Various firms have different charges for their services.
Shareholders should obtain information from their firm with respect to any
special redemption features, applicable charges, minimum balance requirements
and special rules of the cash management program being offered.
DIVIDENDS, NET ASSET VALUE AND TAXES
Dividends. Dividends are declared daily and paid monthly. Shareholders will
receive dividends in additional shares unless they elect to receive cash.
Dividends will be reinvested monthly in shares of a Portfolio at the net asset
value normally on the last business day of each month for the Money Market
Portfolio, the Government Securities Portfolio, the Tax-Exempt Portfolio and the
Treasury Portfolio if a business day, otherwise on the next business day. A
Portfolio will pay shareholders who redeem their entire accounts all unpaid
dividends at the time of the redemption not later than the next dividend payment
date. Upon written request to the Shareholder Service Agent, a shareholder may
elect to have Portfolio dividends invested without sales charge in shares of
another Kemper Mutual Fund offering this privilege at the net asset value of
such other fund. See "Special Features -- Exchange Privilege" for a list of such
other Kemper Mutual Funds. To use this privilege of investing Portfolio
dividends in shares of another Kemper Mutual Fund, shareholders must maintain a
minimum account value of $1,000 in this Portfolio and must maintain a minimum
account value of $1,000 in the fund in which dividends are reinvested.
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<PAGE>
Each Portfolio calculates its dividends based on its daily net investment
income. For this purpose, the net investment income of the Portfolio consists of
(a) accrued interest income plus or minus amortized discount or premium
(excluding market discount for the Tax-Exempt Portfolio), (b) plus or minus all
short-term realized gains and losses on investments and (c) minus accrued
expenses allocated to the Portfolio. Expenses of each Portfolio are accrued each
day. While each Portfolio's investments are valued at amortized cost, there will
be no unrealized gains or losses on such investments. However, should the net
asset value of a Portfolio deviate significantly from market value, each
Portfolio's Board of Trustees could decide to value the investments at market
value and then unrealized gains and losses would be included in net investment
income above. Dividends are reinvested monthly and shareholders will receive
monthly confirmations of dividends and of purchase and redemption transactions
except that confirmations of dividend reinvestment for Individual Retirement
Accounts and other fiduciary accounts for which Investors Fiduciary Trust
Company acts as trustee will be sent quarterly.
If the shareholder elects to receive dividends in cash, checks will be mailed
monthly, within five business days of the reinvestment date (described below),
to the shareholder or any person designated by the shareholder. At the option of
the shareholder, cash dividends may be sent by Federal Funds wire. Shareholders
may request to have dividends sent by wire on the Account Application or by
contacting the Shareholder Service Agent (see "Purchase of Shares"). The
Portfolio reinvests dividend checks (and future dividends) in shares of the
Portfolio if checks are returned as undeliverable. Dividends and other
distributions in the aggregate amount of $10 or less are automatically
reinvested in shares of the Portfolio unless the shareholder requests that such
policy not be applied to the shareholder's account.
Net Asset Value. As described in the prospectus, 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 a 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 a Trust believed
would result in a material dilution to shareholders or purchasers, the Board of
Trustees would promptly consider what action, if any, should be initiated. If a
Portfolio's net asset value per share (computed using market values) declined,
or were expected to decline, below $1.00 (computed using amortized cost), the
Board of Trustees of a Trust might temporarily reduce or suspend dividend
payments in an effort to maintain the net asset value at $1.00 per share. As a
result of such reduction or suspension of dividends or other action by the Board
of Trustees, an investor would receive less income during a given period than if
such a reduction or suspension had not taken place. Such action could result in
investors receiving no dividend for the period during which they hold their
shares and receiving, upon redemption, a price per share lower than that which
they paid. On the other hand, if a Portfolio's net asset value per share
(computed using market values) were to increase, or were anticipated to increase
above $1.00 (computed using amortized cost), the Board of Trustees of a
Portfolio might supplement dividends in an effort to maintain the net asset
value at $1.00 per share. Orders received by dealers or other financial services
firms prior to the 8:00 p.m. determination of net asset value for the Government
Securities Portfolio and received by KDI prior to the close of its business day
can be confirmed at the 8:00 p.m. determination of net asset value for that day.
Such transactions are settled by payment of Federal funds in accordance with
procedures established by KDI. Redemption orders received in connection with the
administration of checkwriting programs by certain dealers or other financial
services firms prior to the determination of the Portfolio's net asset value
also may be processed on a confirmed basis in accordance with the procedures
established by KDI.
Taxes.
Taxable Portfolios. The Money Market Portfolio, the Government Securities
Portfolio and the Treasury 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
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<PAGE>
of time shareholders have owned their shares. Dividends from these Portfolios do
not qualify for the dividends received deduction available to corporate
shareholders.
Dividends declared in October, November or December to shareholders of record as
of a date in one of those months and paid during the following January are
treated as paid on December 31 of the calendar year in which declared for
Federal income tax purposes. The Portfolios may adjust their schedules for
dividend reinvestment for the month of December to assist in complying with the
reporting and minimum distribution requirements contained in the Code.
Tax-Exempt Portfolio. The Tax-Exempt Portfolio intends to continue to qualify
under the Code as a regulated investment company and, if so qualified, will not
be liable for Federal income taxes to the extent its earnings are distributed.
This Portfolio also intends to meet the requirements of the Code applicable to
regulated investment companies distributing tax-exempt interest dividends and,
accordingly, dividends representing net interest received on Municipal
Securities will not be included by shareholders in their gross income for
Federal income tax purposes, except to the extent such interest is subject to
the alternative minimum tax as discussed below. Dividends representing taxable
net investment income (such as net interest income from temporary investments in
obligations of the U.S. Government) and net short-term capital gains, if any,
are taxable to shareholders as ordinary income. Net interest on certain "private
activity bonds" issued on or after August 8, 1986 is treated as an item of tax
preference and may, therefore, be subject to both the individual and corporate
alternative minimum tax. To the extent provided by regulations to be issued by
the Secretary of the Treasury, exempt-interest dividends from the Tax-Exempt
Portfolio are to be treated as interest on private activity bonds in proportion
to the interest income the Portfolio receives from private activity bonds,
reduced by allowable deductions.
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.
Interest on indebtedness which is incurred to purchase or carry shares of a
mutual fund which distributes exempt-interest dividends during the year is not
deductible for Federal income tax purposes. Further, the Tax-Exempt Portfolio
may not be an appropriate investment for persons who are "substantial users" of
facilities financed by industrial development bonds held by the Tax-Exempt
Portfolio or are "related persons" to such users; such persons should consult
their tax advisers before investing in the Tax-Exempt Portfolio.
The "Superfund Act of 1986" (the "Superfund Act") imposes a separate tax on
corporations at a rate of 0.12 percent of the excess of such corporation's
"modified alternative minimum taxable income" over $2 million. A portion of
tax-exempt interest, including exempt-interest dividends from the Tax-Exempt
Portfolio, may be includable in modified alternative minimum taxable income.
Corporate shareholders are advised to consult their tax advisers with respect to
the consequences of the Superfund Act.
All Portfolios. Each Portfolio is required by law to withhold 31% of taxable
dividends paid to certain shareholders that do not furnish a correct taxpayer
identification number (in the case of individuals, a social security number) and
in certain other
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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.
PERFORMANCE
From time to time, each Portfolio may advertise several types of performance
information for a Portfolio, including "yield" and "effective yield" and, in the
case of the Tax-Exempt Portfolio, "tax equivalent yield". Each of these figures
is based upon historical earnings and is not representative of the future
performance of a Portfolio. The yield of a Portfolio refers to the net
investment income generated by a hypothetical investment in the Portfolio over a
specific seven-day period. This net investment income is then annualized, which
means that the net investment income generated during the seven-day period is
assumed to be generated each week over an annual period and is shown as a
percentage of the investment. The effective yield is calculated similarly, but
the net investment income earned by the investment is assumed to be compounded
when annualized. The effective yield will be slightly higher than the yield due
to this compounding effect.
The Adviser, the Portfolios' Principal Underwriter, Kemper Distributors, Inc.,
the Portfolios' Shareholder Service Agent, Kemper Service Company, and the
Portfolios' Accounting Agent, Scudder Fund Accounting Corporation, have agreed
to maintain certain operating expenses of each Portfolio to the extent specified
in the prospectus. The performance results noted herein for the Money Market,
Government Securities, Tax-Exempt and Treasury Portfolios would have been lower
had certain expenses not been capped. Because the Premier Money Market Shares of
each Portfolio have different expenses their yields will differ from other
classes within a Portfolio.
Each Portfolio's seven-day yield is computed in accordance with a standardized
method prescribed by rules of the Securities and Exchange Commission. Under that
method, the yield quotation is based on a seven-day period and is computed for
each Portfolio as follows. The first calculation is net investment income per
share, which is accrued interest on portfolio securities, plus or minus
amortized discount or premium, less accrued expenses. This number is then
divided by the price per share (expected to remain constant at $1.00) at the
beginning of the period ("base period return"). The result is then divided by 7
and multiplied by 365 and the resulting yield figure is carried to the nearest
one-hundredth of one percent. Realized capital gains or losses and unrealized
appreciation or depreciation of investments are not included in the
calculations.
Each Portfolio's effective seven-day yield is determined by taking the base
period return (computed as described above) and calculating the effect of
assumed compounding. The formula for the seven-day effective yield is:
(seven-day base period return +1)365/7 - 1. Each Portfolio may also advertise a
thirty-day effective yield in which case the formula is (thirty-day base period
return +1)365/30 - 1.
The tax equivalent yield of the Tax-Exempt Portfolio is computed by dividing
that portion of the Portfolio's yield (computed as described above) which is
tax-exempt by (one minus the stated Federal income tax rate) and adding the
product to that portion, if any, of the yield of the Portfolio that is not
tax-exempt. For additional information concerning tax-exempt yields, see
"Tax-Exempt versus Taxable Yield" below.
Each Portfolio's yield fluctuates, and the publication of an annualized yield
quotation is not a representation as to what an investment in a Portfolio will
actually yield for any given future period. Actual yields will depend not only
on changes in interest rates on money market instruments during the period in
which the investment in a Portfolio is held, but also on such matters as
Portfolio expenses.
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Investors have an extensive choice of money market funds and money market
deposit accounts and the information below may be useful to investors who wish
to compare the past performance of a Portfolio with that of its competitors.
Past performance cannot be a guarantee of future results.
Each Portfolio may depict the historical performance of the securities in which
a Portfolio may invest over periods reflecting a variety of market or economic
conditions either alone or in comparison with alternative investments
performance indexes of those investments or economic indicators. A Portfolio may
also describe its portfolio holdings and depict its size or relative size
compared to other mutual funds, the number and make-up of its shareholder base
and other descriptive factors concerning the Portfolio.
Investors also may want to compare the Portfolio's performance to that of U.S.
Treasury bills or notes because such instruments represent alternative income
producing products. Treasury obligations are issued in selected denominations.
Rates of U.S. Treasury obligations are fixed at the time of issuance and payment
of principal and interest is backed by the full faith and credit of the U.S.
Treasury. The market value of such instruments generally will fluctuate
inversely with interest rates prior to maturity and will equal par value at
maturity. Generally, the values of obligations with shorter maturities will
fluctuate less than those with longer maturities. The Portfolio's yield will
fluctuate. Also, while the Portfolio seeks to maintain a net asset value per
share of $1.00, there is no assurance that it will be able to do so. In
addition, investors may want to compare the Portfolio's performance to the
Consumer Price Index either directly or by calculating its "real rate of
return," which is adjusted for the effects of inflation.
Tax-Exempt Versus Taxable Yield. You may want to determine which investment --
tax-exempt or taxable -- will provide you with a higher after-tax return. To
determine the taxable equivalent yield, simply divide the yield from the
tax-exempt investment by the sum of [1 minus your marginal tax rate]. The tables
below are provided for your convenience in making this calculation for selected
tax-exempt yields and taxable income levels. These yields are presented for
purposes of illustration only and are not representative of any yield that the
Tax-Exempt Portfolio may generate. Both tables are based upon current law as to
the 1999 tax rates schedules.
Taxable Equivalent Yield Table For Persons Whose Adjusted Gross Income Is Under
$126,600
<TABLE>
<CAPTION>
Single Joint Your A Tax-Exempt Yield of:
Marginal 2% 3% 4% 5% 6% 7%
Taxable Income Federal Tax Rate Is Equivalent to a Taxable Yield of:
-------------- ---------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$25,750-$62,450 $43,050-$104,050 28.0% 2.78 4.17 5.56 6.94 8.33 9.72
Over $62,450 Over $104,050 31.0 2.90 4.35 5.80 7.25 8.70 10.14
Taxable Equivalent Yield Table For Persons Whose Adjusted Gross Income Is Over
$126,600
Single Joint Your A Tax-Exempt Yield of:
Marginal 2% 3% 4% 5% 6% 7%
Taxable Income Federal Tax Rate Is Equivalent to a Taxable Yield of:
-------------- ---------------- ------------------------------------
$62,450-$130,250 $104,050-$158,550 31.9% 2.94 4.41 5.87 7.34 8.81 10.28
$130,250-$283,150 $158,550-$283,150 37.1 3.18 4.77 6.36 7.95 9.54 11.13
Over $283,150 Over $283,150 40.8 3.38 5.07 6.76 8.45 10.14 11.82
</TABLE>
* This table assumes a decrease of $3.00 of itemized deductions for each
$100 of adjusted gross income over $126,600. For a married couple with
adjusted gross income between $189,950 and $312,450 (single between
$126,600 and $249,100), add 0.7% to the above Marginal Federal Tax Rate
for each personal and dependency exemption. The taxable equivalent
yield is the tax-exempt yield divided by: 100% minus the adjusted tax
rate. For example, if the table tax rate is 37.1% and you are married
with no dependents, the adjusted tax rate is 38.5%
25
<PAGE>
(37.1% + 0.7% + 0.7%). For a tax-exempt yield of 6%, the taxable
equivalent yield is about 9.8% (6% / (100%-38.5%)).
OFFICERS AND TRUSTEES
The officers and trustees of each Trust, their birthdates, their principal
occupations and their affiliations, if any, with the Adviser and KDI, are listed
below. All persons named as officers and trustees also serve in similar
capacities for other funds advised by the Adviser:
JOHN W. BALLANTINE (2/16/46), Trustee, 1500 North Lake Shore Drive, Chicago,
Illinois; First Chicago NBD Corporation/The First National Bank of Chicago:
1996-1998 Executive Vice President and Chief Risk Management Officer; 1995-1996
Executive Vice President and Head of International Banking; 1992-1995 Executive
Vice President, Chief Credit and Market Risk Officer.
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.
LINDA C. COUGHLIN (1/1/52), Trustee*, 345 Park Avenue, New York, New York,
Managing Director, Scudder Kemper.
DONALD L. DUNAWAY (3/8/37), Trustee, 7011 Green Tree Drive, Naples, Florida;
Retired; formerly, Executive Vice President, A. O. Smith Corporation
(diversified manufacturer).
ROBERT B. HOFFMAN (12/11/36), Trustee, 1530 North State Parkway, Chicago,
Illinois; Chairman, Harnischfeger Industries, Inc. (machinery for the mining and
paper industries); formerly, Vice Chairman and Chief Financial Officer, Monsanto
Company (agricultural, pharmaceutical and nutritional/food products); formerly,
Vice President, Head of International Operations, FMC Corporation (manufacturer
of machinery and chemicals).
DONALD R. JONES (1/17/30), Trustee, 182 Old Wick Lane, Inverness, Illinois;
Retired; Director, Motorola, Inc. (manufacturer of electronic equipment and
components); formerly, Executive Vice President and Chief Financial Officer,
Motorola, Inc.
THOMAS W. LITTAUER (4/26/55), Chairman and Trustee*, Two International Place,
Boston, Massachusetts; Managing Director, Scudder Kemper; formerly, Head of
Broker Dealer Division of an unaffiliated investment management firm during
1997; prior thereto, President of Client Management Services of an unaffiliated
investment management firm from 1991 to 1996.
SHIRLEY D. PETERSON (9/3/41), Trustee, 401 Rosemont Avenue, Frederick, Maryland;
President, Hood College; formerly, partner, Steptoe & Johnson (attorneys); prior
thereto, Commissioner, Internal Revenue Service; prior thereto, Assistant
Attorney General (Tax), U.S. Department of Justice; Director Bethlehem Steel
Corp.
WILLIAM P. SOMMERS (7/22/33), Trustee, 24717 Harbour View Drive, Ponte Vedra
Beach, Florida; Consultant and Director, SRI Consulting; prior thereto President
and Chief Executive Officer, SRI International (research and development); prior
thereto, Executive Vice President, Iameter (medical information and educational
service provider); prior thereto, Senior Vice President and Director, Booz,
Allen & Hamilton Inc. (management consulting firm); Director, PSI Inc.,
Evergreen Solar, Inc. and Litton Industries.
MARK S. CASADY (9/21/60), President*, 345 Park Avenue, New York, New York;
Managing Director, Scudder Kemper.
PHILIP J. COLLORA (11/15/45), Vice President and Secretary*, 222 South Riverside
Plaza, Chicago, Illinois; Senior Vice President, Scudder Kemper.
ANN M. McCREARY (11/6/56), Vice President*, 345 Park Avenue, New York, New York;
Managing Director, Scudder Kemper.
26
<PAGE>
KATHRYN L. QUIRK (12/3/52), Vice President*, 345 Park Avenue, New York, New
York; Managing Director, Scudder Kemper.
FRANK J. RACHWALSKI, JR. (3/26/45), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Managing Director, Scudder Kemper.
LINDA J. WONDRACK (9/12/64), Vice President*, Two International Place, Boston,
Massachusetts; Senior Vice President, Scudder Kemper.
JOHN R. HEBBLE (6/27/58), Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Scudder Kemper.
BRENDA LYONS (2/21/63), Assistant Treasurer*, Two International Place, Boston,
Massachusetts Senior Vice President, Scudder Kemper.
CAROLINE PEARSON (4/1/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Senior Vice President, Scudder Kemper; formerly,
Associate, Dechert Price & Rhoads (law firm), from 1989 to 1997.
MAUREEN E. KANE (2/14/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Vice President, Scudder Kemper; formerly, Assistant Vice
President of an unaffiliated investment management firm; prior thereto,
Associate Staff Attorney of an unaffiliated investment management firm;
Associate, Peabody & Arnold (law firm).
* Interested persons as defined in the Investment Company Act of 1940.
The trustees and officers who are "interested persons" as designated above
receive no compensation from each Trust. The table below shows amounts paid or
accrued to those trustees who are not designated "interested persons" during
Cash Account Trust's fiscal year ended April 30, 2000 or Investors Cash Trust's
fiscal year ended March 31, 2000. The information in the last column indicates
the total amounts paid or accrued for the calendar year 1999 for all Scudder
Kemper Funds.
<TABLE>
<CAPTION>
Total Compensation
Aggregate Compensation Aggregate Compensation From Scudder Kemper Funds
Name of Trustee From Cash Account Trust Investors Cash Trust Paid To Trustees(2)
--------------- ----------------------- -------------------- -------------------
<S> <C> <C> <C>
John W. Ballantine(3) $ $ $
Lewis A. Burnham
Donald L. Dunaway (1)
Robert B. Hoffman
Donald R. Jones
Shirley D. Peterson
William P. Sommers
</TABLE>
(1) Includes deferred fees. Pursuant to deferred compensation agreements
with the Trust, deferred amounts accrue interest monthly at a rate
approximate to the yield of Zurich Money Funds -- Zurich Money Market
Fund. Total deferred fees (including interest thereon) accrued through
Investors Cash Trust's and Cash Account Trust's most recent fiscal year
payable to Mr. Dunaway are $13,700 and $22,000, respectively.
(2) Includes compensation for service on the Boards of 25 Kemper funds with
41 fund portfolios. Each trustee currently serves as trustee of 27
Kemper Funds with 47 fund portfolios.
(3) John W. Ballantine became a Trustee on May 18, 1999.
27
<PAGE>
Each Trust's Board of Trustees is responsible for the general oversight of each
Portfolio's business. A majority of the Board's members are not affiliated with
Scudder Kemper Investments, Inc.
On July 1, 2000, the officers and trustees of each Trust, as a group, owned less
than 1% of the then outstanding shares of each Portfolio. No person owned of
record 5% or more of the outstanding shares of any class of any Portfolio,
except the persons indicated in the chart below:
28
<PAGE>
<TABLE>
<CAPTION>
------------------------------------- ----------------------------------- -----------------------------------
NAME AND ADDRESS PERCENTAGE PORTFOLIO
------------------------------------- ----------------------------------- -----------------------------------
<S> <C> <C>
National City Bank 28.17% Investors Cash Trust:
Money Market Unit Treasury Portfolio
4100 W. 150th Street
Cleveland, Ohio 44135
------------------------------------- ----------------------------------- -----------------------------------
Walker County 8.70% Investors Cash Trust:
Disbursement Account Treasury Portfolio
1100 University Avenue
Huntsville, TX 77340
------------------------------------- ----------------------------------- -----------------------------------
Angelina County General Fund 22.08% Investors Cash Trust:
P.O. Box 908 Treasury Portfolio
Lufkin, Texas 75902
------------------------------------- ----------------------------------- -----------------------------------
Erath County 17.95% Investors Cash Trust:
Erath County Courthouse Treasury Portfolio
100 Graham
Stephenville, TX 76401
------------------------------------- ----------------------------------- -----------------------------------
Palo Pinto County 5.08% Investors Cash Trust:
General Fund Treasury Portfolio
P.O. Box 75
Palo Pinto, Texas 76484
------------------------------------- ----------------------------------- -----------------------------------
Smith County 12.29% Investors Cash Trust:
General Fund Treasury Portfolio
Smith County Courthouse
Tyler, Texas 75702
------------------------------------- ----------------------------------- -----------------------------------
May Financial Corp. 5.06% Cash Account Trust:
For the benefit of customers Government Securities Portfolio
8333 Douglas Avenue
Dallas, Texas 75225
------------------------------------- ----------------------------------- -----------------------------------
Joan Lawton Oppenheimer 6.12% Cash Account Trust:
1 New York Plaza Tax Exempt Portfolio
New York, NY 10004
------------------------------------- ----------------------------------- -----------------------------------
</TABLE>
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
Strategic Income Fund, Kemper High Yield Series, Kemper U.S. Government
Securities Fund, Kemper International Fund, Kemper State Tax-Free Income Series,
Kemper Short-Term 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 New Europe Fund, Inc., Kemper Asian Growth
Fund, Kemper Aggressive Growth Fund, Kemper Global/International Series, Inc.,
Kemper Securities Trust and Kemper Equity Trust ("Kemper Mutual Funds") and
certain "Money Market Funds" (Zurich Money Funds, Zurich Yieldwise Money Fund,
Cash Equivalent Fund, Tax-Exempt California Money Market Fund, Cash Account
Trust, Investors Municipal Cash Fund and Investors Cash Trust). Shares of Money
Market Funds and Kemper Cash Reserves Fund that were acquired by purchase (not
including shares acquired by dividend reinvestment) are subject to the
applicable sales charge on exchange. In addition, shares of a Kemper Mutual Fund
in excess of $1,000,000 (except Money Market 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
29
<PAGE>
"15-Day Hold Policy"). In addition shares of a Kemper Mutual Fund with a value
of $1,000,000 or less (except Kemper Cash Reserves Fund) acquired by exchange
from another Kemper Mutual Fund, or from a Money Market Fund, may not be
exchanged thereafter until they have been owned for 15 days, if, in the
investment adviser's judgment, the exchange activity may have an adverse effect
on the fund. In particular, a pattern of exchanges that coincides with a "market
timing" strategy may be disruptive to the Kemper fund and therefore may be
subject to the 15-day hold policy. For purposes of determining whether the
15-Day Hold Policy applies to a particular exchange, the value of the shares to
be exchanged shall be computed by aggregating the value of shares being
exchanged for all accounts under common control, discretion or advice, including
without limitation accounts administered by a financial services firm offering
market timing, asset allocation or similar services. Series of Kemper Target
Equity Fund will be available on exchange only during the Offering Period for
such series as described in the prospectus for such series. Cash Equivalent
Fund, Tax-Exempt California Money Market Fund, Cash Account Trust, Investors
Municipal Cash Fund and Investors Cash Trust are available on exchange but only
through a financial services firm having a services agreement with KDI with
respect to such funds. Exchanges may only be made for funds that are available
for sale in the shareholder's state of residence. Currently, Tax-Exempt
California Money Market Fund is available for sale only in California and the
portfolios of Investors Municipal Cash Fund are available for sale in certain
states.
The total value of shares being exchanged must at least equal the minimum
investment requirement of the fund into which they are being exchanged.
Exchanges are made based on relative dollar values of the shares involved in the
exchange. There is no service fee for an exchange; however, financial services
firms may charge for their services in expediting exchange transactions.
Exchanges will be effected by redemption of shares of the fund held and purchase
of shares of the other fund. For federal income tax purposes, any such exchange
constitutes a sale upon which a gain or loss may be realized, depending upon
whether the value of the shares being exchanged is more or less than the
shareholder's adjusted cost basis. Shareholders interested in exercising the
exchange privilege may obtain an exchange form and prospectuses of the other
funds from financial services firms or KDI. Exchanges also may be authorized by
telephone if the shareholder has given authorization. Once the authorization is
on file, the Shareholder Service Agent will honor requests by telephone at
1-800-231-8568 or in writing subject to the limitations on liability described
in the prospectus. Any share certificates must be deposited prior to any
exchange of such shares. During periods when it is difficult to contact the
Shareholder Service Agent by telephone, it may be difficult to implement the
telephone exchange privilege. The exchange privilege is not a right and may be
suspended, terminated or modified at any time. Except as otherwise permitted by
applicable regulation, 60 days' prior written notice of any termination or
material change will be provided.
Systematic Withdrawal Program. An owner of $5,000 or more of a Portfolio's
shares may provide for the payment from the owner's account of any requested
dollar amount up to $50,000 to be paid to the owner or the owner's designated
payee monthly, quarterly, semi-annually or annually. The $5,000 minimum account
size is not applicable to Individual Retirement Accounts. Dividend distributions
will be reinvested automatically at net asset value. A sufficient number of full
and fractional shares will be redeemed to make the designated payment. Depending
upon the size of the payments requested, redemptions for the purpose of making
such payments may reduce or even exhaust the account. The program may be amended
on thirty days notice by a Portfolio and may be terminated at any time by the
shareholder or a Portfolio. Firms provide varying arrangements for their clients
to redeem shares of a Portfolio on a periodic basis. Such firms may
independently establish minimums for such services.
Tax-Sheltered Retirement Programs. The Shareholder Service Agent provides
retirement plan services and documents and KDI can establish your account in any
of the following types of retirement plans:
o Individual Retirement Accounts (IRAs) trusteed by Investors
Fiduciary Trust Company ("IFTC"). This includes Simplified
Employee Pension Plan (SEP) IRA accounts and prototype
documents.
o 403(b) Custodial Accounts also trusteed by IFTC. This type of
plan is available to employees of most non-profit
organizations.
o Prototype money purchase pension and profit-sharing plans may
be adopted by employers. The maximum contribution per
participant is the lesser of 25% of compensation or $30,000.
30
<PAGE>
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.
Financial services firms offering the Portfolios may have their own documents.
Please contact the financial services firm from which you received this
Statement of Additional Information for more information. Investors should
consult with their own tax advisers before establishing a retirement plan.
Electronic Funds Transfer Programs. For your convenience, each Trust has
established several investment and redemption programs using electronic funds
transfer via the Automated Clearing House (ACH). There is currently no charge by
either Trust for these programs. To use these features, your financial
institution (your employer's financial institution in the case of payroll
deposit) must be affiliated with an Automated Clearing House (ACH). This ACH
affiliation permits the Shareholder Service Agent to electronically transfer
money between your bank account, or employer's payroll bank in the case of
Direct Deposit, and your account. Your bank's crediting policies of these
transferred funds may vary. These features may be amended or terminated at any
time by the Trusts. Shareholders should contact Kemper Service Company at
1-800-621-1048 or the financial services firm through which their account was
established for more information. These programs may not be available through
some firms that distribute shares of the Portfolios.
SHAREHOLDER RIGHTS
Each Trust generally is not required to hold meetings of its shareholders. Under
each Trust's Agreement and Declaration of Trust ("Declaration of Trust"),
however, shareholder meetings will be held in connection with the following
matters: (a) the election or removal of trustees if a meeting is called for such
purpose; (b) the adoption of any contract for which shareholder approval is
required by the 1940 Act; (c) any termination of a Trust to the extent and as
provided in the Declaration of Trust; (d) any amendment of the Declaration of
Trust (other than amendments changing the name of the Trust or any Portfolio,
establishing a Portfolio, supplying any omission, curing any ambiguity or
curing, correcting or supplementing any defective or inconsistent provision
thereof); and (e) such additional matters as may be required by law, the
Declaration of Trust, the By-laws of a Trust, or any registration of a Trust
with the Securities and Exchange Commission or any state, or as the trustees may
consider necessary or desirable. The shareholders also would vote upon changes
in fundamental investment objectives, policies or restrictions.
Each trustee serves until the next meeting of shareholders, if any, called for
the purpose of electing trustees and until the election and qualification of a
successor or until such trustee sooner dies, resigns, retires or is removed by a
majority vote of the shares entitled to vote (as described below) or a majority
of the trustees. In accordance with the 1940 Act (a) each Trust will hold a
shareholder meeting for the election of trustees at such time as less than a
majority of the trustees have been elected by shareholders, and (b) if, as a
result of a vacancy in the Board of Trustees, less than two-thirds of the
trustees have been elected by the shareholders, that vacancy will be filled only
by a vote of the shareholders.
Trustees may be removed from office by a vote of the holders of a majority of
the outstanding shares at a meeting called for that purpose, which meeting shall
be held upon the written request of the holders of not less than 10% of the
outstanding shares. Upon the written request of ten or more shareholders who
have been such for at least six months and who hold shares constituting at least
1% of the outstanding shares of the Trust stating that such shareholders wish to
communicate with the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider removal of a trustee, the
Trust has undertaken to disseminate appropriate materials at the expense of the
requesting shareholders.
Each Trust's Declaration of Trust provides that the presence at a shareholder
meeting in person or by proxy of at least 30% of the shares entitled to vote on
a matter shall constitute a quorum. Thus, a meeting of shareholders of a
Portfolio could take place even if less than a majority of the shareholders were
represented on its scheduled date. Shareholders would in such a case be
permitted to take action which does not require a larger vote than a majority of
a quorum, such as the election of trustees and ratification of the selection of
auditors. Some matters requiring a larger vote under the Declaration of Trust,
such as termination or reorganization of a Portfolio and certain amendments of
the Declaration of Trust, would not be affected by this provision; nor would
matters which under the 1940 Act require the vote of a "majority of the
outstanding voting securities" as defined in the 1940 Act.
Each Declaration of Trust specifically authorizes the Board of Trustees to
terminate the Trust (or any Portfolio or class) by notice to the shareholders
without shareholder approval.
31
<PAGE>
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for obligations of each
Trust. Each Declaration of Trust, however, disclaims shareholder liability for
acts or obligations of the Trust and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument entered into or executed by
the Trust or the trustees. Moreover, the Declaration of Trust provides for
indemnification out of Trust property for all losses and expenses of any
shareholder held personally liable for the obligations of the Trust and the
Trust will be covered by insurance which the trustees consider adequate to cover
foreseeable tort claims. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is considered by the Adviser remote and
not material, since it is limited to circumstances in which a disclaimer is
inoperative and the Trust itself is unable to meet its obligations.
32
<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.
33
<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.
34
<PAGE>
CASH ACCOUNT TRUST
PART C
------
OTHER INFORMATION
-----------------
<TABLE>
<CAPTION>
Item 23. Exhibits:
-------- --------
<S> <C> <C> <C>
(a) (1) Amended and Restated Agreement and Declaration of Trust dated
March 17, 1990, is incorporated by reference to Post-Effective
Amendment No. 5 to the Registration Statement.
(b) By-Laws of the Registrant are incorporated by reference to
Post-Effective Amendment No. 5 to the Registration Statement.
(c) (1) Establishment and Designation of Classes of Shares of Beneficial
Interest, $0.01 par value, with respect to Money Market Portfolio
Retail, Premier, Institutional, and Service Shares, is incorporated
by reference to Post-Effective Amendment No. 10 to the Registration
Statement.
(2) Establishment and Designation of Classes of Shares of Beneficial
Interest, $0.01 par value, with respect to Tax Exempt Portfolio
Scudder Managed and Scudder Institutional Shares, is incorporated
by reference to Post-Effective Amendment No. 17 to the
Registration Statement.
(3) Establishment and Designation of Classes of Shares of Beneficial
Interest, $0.01 par value, with respect to the Premier Money
Market Shares and the Money Market Portfolio is incorporated by
reference to Post-Effective Amendment No. 18 to the Registration
Statement.
(4) Establishment and Designation of Classes of Shares of Beneficial
Interest, $0.01 par value, with respect to the Premier Money
Market Shares and the Government Securities Portfolio is
incorporated by reference to Post-Effective Amendment No. 18 to
the Registration Statement.
(5) Amended and Restated Establishment and Designation of Additional
Class of Shares of Beneficial Interest, $0.01 par value, with
respect to the Premier Money Market Shares and the Tax Exempt
Portfolio is incorporated by reference to Post-Effective
Amendment No. 18 to the Registration Statement.
(d) Investment Management Agreement between the Registrant and Scudder
Kemper Investments, Inc., dated September 7, 1998, is incorporated
by reference to Post-Effective Amendment No. 16 the Registration
Statement.
(e) Underwriting and Distribution Services Agreement between the
Registrant and Kemper Distributors, Inc., dated October 1, 1999,
is incorporated by reference to Post-Effective Amendment No. 18 to
the Registration Statement.
<PAGE>
(f) Inapplicable.
(g) Custodian Agreement between the Registrant and State Street Bank
and Trust Company ("State Street Bank"), dated April 19, 1999, is
incorporated by reference to Post-Effective Amendment No. 13 to
the Registration Statement.
(h) (1) Agency Agreement between the Registrant and Kemper Service
Company, dated September 6, 1990, is incorporated by reference to
Post-Effective Amendment No. 5 to the Registration Statement.
(2) Supplement, dated April 1, 1995, to Agency Agreement between the
Registrant and Kemper Service Company, is incorporated by
reference to Post-Effective Amendment No. 6 to the Registration
Statement.
(3) Fund Accounting Services Agreement between the Registrant, on
behalf of Government Securities Portfolio, and Scudder Fund
Accounting Corporation, dated December 31, 1997, is incorporated
by reference to Post-Effective Amendment No. 8 to the Registration
Statement.
(4) Fund Accounting Services Agreement between the Registrant, on
behalf of Money Market Portfolio, and Scudder Fund Accounting
Corporation dated December 31, 1997 is incorporated by reference
to Post-Effective Amendment No. 8 to the Registration Statement.
(5) Fund Accounting Services Agreement between the Registrant, on
behalf of Tax-Exempt Portfolio, and Scudder Fund Accounting
Corporation, dated December 31, 1997, is incorporated by reference
to Post-Effective Amendment No. 8 to the Registration Statement.
(6) Administration, Shareholder Services and Distribution Agreement
dated December 31, 1997 between the Registrant, and Kemper
Distributors, Inc., is incorporated by reference to Post-Effective
Amendment No. 10 to the Registration Statement.
(7) Administration and Shareholder Services Agreement between the
Registrant, on behalf of Money Market Portfolio Retail Shares, and
Kemper Distributors, Inc., Inc. dated January 15, 1999, is
incorporated by reference to Post-Effective Amendment No. 10 to
the Registration Statement.
(8) Administration and Shareholder Services Agreement between the
Registrant, on behalf of Money Market Portfolio Institutional
Shares, and Kemper Distributors, Inc., Inc., dated January 15,
1999, is incorporated by reference to Post-Effective Amendment No.
10 to the Registration Statement.
2
<PAGE>
(9) Administration and Shareholder Services Agreement between the
Registrant, on behalf of the Money Market Portfolio Premier Money
Market Shares, and Kemper Distributors, Inc., dated November 30,
1999, is incorporated by reference to Post-Effective Amendment No.
18 to the Registration Statement.
(10) Administration and Shareholder Services Agreement between the
Registrant, on behalf of the Government Securities Portfolio
Premier Money Market Shares, and Kemper Distributors, Inc, dated
November 30, 1999, is incorporated by reference to Post-Effective
Amendment No. 18 to the Registration Statement.
(11) Administration and Shareholder Services Agreement between the
Registrant, on behalf of the Tax Exempt Portfolio Premier Money
Market Shares, and Kemper Distributors, Inc, dated November 30,
1999, is incorporated by reference to Post-Effective Amendment No.
18 to the Registration Statement.
(12) Administration and Shareholder Services Agreement between the
Registrant, on behalf of the Tax Exempt Portfolio Cash Managed
Shares, and Kemper Distributors, Inc, dated September 30, 1999, is
incorporated by reference to Post-Effective Amendment No. 18 to
the Registration Statement.
(i) Legal Opinion of Counsel.
Filed herein.
(j) Consent of Independent Accountants.
Filed herein.
(k) Inapplicable.
(l) Inapplicable.
(m) (1) Amended and Restated 12b-1 Plan between the Registrant, on behalf
of Tax-Exempt Portfolio, and Kemper Distributors, Inc. is
incorporated by reference to Post-Effective Amendment No. 9 to the
Registration Statement.
(2) Amended and Restated 12b-1 Plan between the Registrant, on behalf
of Government Securities Portfolio, and Kemper Distributors, Inc.
is incorporated by reference to Post-Effective Amendment No. 9 to
the Registration Statement.
(3) Amended and Restated 12b-1 Plan between the Registrant, on behalf
of Money Market Portfolio, and Kemper Distributors, Inc. is
incorporated by reference to Post-Effective Amendment No. 9 to the
Registration Statement.
(4) 12b-1 Plan between the Registrant, on behalf of the Money Market
Portfolio - Premier Money Market Shares, is incorporated by
reference to Post-Effective Amendment No. 18 to the Registration
Statement.
3
<PAGE>
(5) 12b-1 Plan between the Registrant, on behalf of the Government
Securities Portfolio - Premier Money Market Shares, is
incorporated by reference to Post-Effective Amendment No. 18 to
the Registration Statement.
(6) 12b-1 Plan between the Registrant, on behalf of the Tax Exempt
Portfolio - Premier Money Market Shares, is incorporated by
reference to Post-Effective Amendment No. 18 to the Registration
Statement.
(n) Inapplicable
(o) (1) Amended and Restated Multi-Distribution System Plan -Rule 18f-3
Plan, on behalf of the Money Market Portfolio is incorporated by
reference to Post-Effective Amendment No. 18 to the Registration
Statement.
(2) Amended and Restated Multi-Distribution System Plan - Rule 18f-3
Plan, on behalf of the Government Securities Portfolio is
incorporated by reference to Post-Effective Amendment No. 18 to
the Registration Statement.
(3) Amended and Restated Multi-Distribution System Plan - Rule 18f-3
Plan, on behalf of the Tax-Exempt Portfolio is incorporated by
reference to Post-Effective Amendment No. 18 to the Registration
Statement.
(p) (1) Code of Ethics for Scudder Kemper Investments, Inc. and Kemper
Distributors, Inc.
Filed herein.
(p) (2) Code of Ethics for Cash Account Trust.
Filed herein.
</TABLE>
Item 24. Persons Controlled by or under Common Control with Fund.
-------- --------------------------------------------------------
None
Item 25. Indemnification.
-------- ----------------
Article VIII of the Registrant's Agreement and Declaration of Trust
(Exhibit 1 hereto, which is incorporated herein by reference) provides in effect
that the Registrant will indemnify its officers and trustees under certain
circumstances. However, in accordance with Section 17(h) and 17(i) of the
Investment Company Act of 1940 and its own terms, said Article of the Agreement
and Declaration of Trust does not protect any person against any liability to
the Registrant or its shareholders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers, and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such trustee, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question as
4
<PAGE>
to whether such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.
Item 26. Business or Other Connections of Investment Adviser
-------- ---------------------------------------------------
Scudder Kemper Investments, Inc. has stockholders and
employees who are denominated officers but do not as such have
corporation-wide responsibilities. Such persons are not
considered officers for the purpose of this Item 26.
<TABLE>
<CAPTION>
Business and Other Connections of Board
Name of Directors of Registrant's Adviser
---- ------------------------------------
<S> <C>
Stephen R. Beckwith Treasurer, Scudder Kemper Investments, Inc.**
Director, Kemper Service Company
Director, Vice President and Treasurer, Scudder Fund Accounting Corporation*
Director and Treasurer, Scudder Stevens & Clark Corporation**
Director and Chairman, Scudder Defined Contribution Services, Inc.**
Director and President, Scudder Capital Asset Corporation**
Director and President, Scudder Capital Stock Corporation**
Director and President, Scudder Capital Planning Corporation**
Director and President, SS&C Investment Corporation**
Director and President, SIS Investment Corporation**
Director and President, SRV Investment Corporation**
Director and Chairman, Scudder Threadneedle International Ltd.
Director, Scudder Kemper Holdings (UK) Ltd. oo
Director and President, Scudder Realty Holdings Corporation *
Director, Scudder, Stevens & Clark Overseas Corporation o
Director and Treasurer, Zurich Investment Management, Inc. xx
Director and Treasurer, Zurich Kemper Investments, Inc.
Lynn S. Birdsong Director, Vice President and Chief Investment Officer, Scudder Kemper Investments, Inc.
**
Director and Chairman, Scudder Investments (Luxembourg) S.A. #
Director, Scudder Investments (U.K.) Ltd. oo
Director and Chairman of the Board, Scudder Investments Asia, Ltd. ooo
Director and Chairman, Scudder Investments Japan, Inc. +
Senior Vice President, Scudder Investor Services, Inc.
Director and Chairman, Scudder Trust (Cayman) Ltd. @@@
Director, Scudder, Stevens & Clark Australia x
Director and Vice President, Zurich Investment Management, Inc. xx
Director and President, Scudder, Stevens & Clark Corporation **
Director and President, Scudder , Stevens & Clark Overseas Corporation o
Director, Scudder Threadneedle International Ltd.
Director, Korea Bond Fund Management Co., Ltd. @@
William H. Bolinder Director, Scudder Kemper Investments, Inc.**
Member Group Executive Board, Zurich Financial Services, Inc. ##
Chairman, Zurich-American Insurance Company xxx
Nick Bratt Director and Vice President, Scudder Kemper Investments, Inc.**
Vice President, Scudder MAXXUM Company***
Vice President, Scudder, Stevens & Clark Corporation**
Vice President, Scudder, Stevens & Clark Overseas Corporation o
5
<PAGE>
Laurence W. Cheng Director, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland ##
Director, ZKI Holding Corporation xx
Gunther Gose Director, Scudder Kemper Investments, Inc.**
CFO, Member Group Executive Board, Zurich Financial Services, Inc. ##
CEO/Branch Offices, Zurich Life Insurance Company ##
Rolf Huppi Director, Chairman of the Board, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland ##
Director, Chairman of the Board, Zurich Holding Company of America xxx
Director, ZKI Holding Corporation xx
Harold D. Kahn Chief Financial Officer, Scudder Kemper Investments, Inc.**
Kathryn L. Quirk Chief Legal Officer, Chief Compliance Officer and Secretary, Scudder Kemper
Investments, Inc.**
Director, Vice President, Chief Legal Officer and Secretary, Kemper Distributors, Inc.
Director and Secretary, Kemper Service Company
Director, Senior Vice President, Chief Legal Officer & Assistant Clerk, Scudder
Investor Services, Inc.
Director, Vice President & Secretary, Scudder Fund Accounting Corporation*
Director, Vice President & Secretary, Scudder Realty Holdings Corporation*
Director & Assistant Clerk, Scudder Service Corporation*
Director and Secretary, SFA, Inc.*
Vice President, Director & Assistant Secretary, Scudder Precious Metals, Inc.***
Director, Scudder, Stevens & Clark Japan, Inc. ###
Director, Vice President and Secretary, Scudder, Stevens & Clark of Canada, Ltd.***
Director, Vice President and Secretary, Scudder Canada Investor Services Limited***
Director, Vice President and Secretary, Scudder Realty Advisers, Inc. @
Director and Secretary, Scudder, Stevens & Clark Corporation**
Director and Secretary, Scudder, Stevens & Clark Overseas Corporation o
Director, Vice President and Secretary, Scudder Defined Contribution Services, Inc.**
Director, Vice President and Secretary, Scudder Capital Asset Corporation**
Director, Vice President and Secretary, Scudder Capital Stock Corporation**
Director, Vice President and Secretary, Scudder Capital Planning Corporation**
Director, Vice President and Secretary, SS&C Investment Corporation**
Director, Vice President and Secretary, SIS Investment Corporation**
Director, Vice President and Secretary, SRV Investment Corporation**
Director, Vice President, Chief Legal Officer and Secretary, Scudder Financial
Services, Inc.*
6
<PAGE>
Director, Korea Bond Fund Management Co., Ltd. @@
Director, Scudder Threadneedle International Ltd.
Director, Chairman of the Board and Secretary, Scudder Investments Canada, Ltd.
Director, Scudder Investments Japan, Inc. +
Director and Secretary, Scudder Kemper Holdings (UK) Ltd. oo
Director and Secretary, Zurich Investment Management, Inc. xx
Edmond D. Villani Director, President and Chief Executive Officer, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark Japan, Inc. ###
President and Director, Scudder, Stevens & Clark Overseas Corporation o
President and Director, Scudder, Stevens & Clark Corporation**
Director, Scudder Realty Advisors, Inc. @
Director, IBJ Global Investment Management S.A. Luxembourg, Grand-Duchy of Luxembourg
Director, Scudder Threadneedle International Ltd. oo
Director, Scudder Investments Japan, Inc. +
Director, Scudder Kemper Holdings (UK) Ltd. oo
President and Director, Zurich Investment Management, Inc. xx
Director and Deputy Chairman, Scudder Investment Holdings, Ltd.
* Two International Place, Boston, MA
@ 333 South Hope Street, Los Angeles, CA
** 345 Park Avenue, New York, NY
# Societe Anonyme, 47, Boulevard Royal, L-2449 Luxembourg, R.C. Luxembourg B 34.564
*** Toronto, Ontario, Canada
@@@ Grand Cayman, Cayman Islands, British West Indies
o 20-5, Ichibancho, Chiyoda-ku, Tokyo, Japan
### 1-7, Kojimachi, Chiyoda-ku, Tokyo, Japan
xx 222 S. Riverside, Chicago, IL
xxx Zurich Towers, 1400 American Ln., Schaumburg, IL
@@ P.O. Box 309, Upland House, S. Church St., Grand Cayman, British West Indies
## Mythenquai-2, P.O. Box CH-8022, Zurich, Switzerland
oo 1 South Place 5th floor, London EC2M 2ZS England
ooo One Exchange Square 29th Floor, Hong Kong
+ Kamiyachyo Mori Building, 12F1, 4-3-20, Toranomon, Minato-ku, Tokyo 105-0001
x Level 3, 5 Blue Street North Sydney, NSW 2060
</TABLE>
Item 27. Principal Underwriters.
-------- -----------------------
(a)
Kemper Distributors, Inc. acts as principal underwriter of the
Registrant's shares and acts as principal underwriter of the Kemper
Funds.
7
<PAGE>
(b)
Information on the officers and directors of Kemper Distributors, Inc.,
principal underwriter for the Registrant is set forth below. The
principal business address is 222 South Riverside Plaza, Chicago,
Illinois 60606.
<TABLE>
<CAPTION>
(1) (2) (3)
Positions and Offices with Positions and
Name Kemper Distributors, Inc. Offices with Registrant
---- ------------------------- -----------------------
<S> <C> <C> <C>
James L. Greenawalt President None
Linda C. Coughlin Director and Vice Chairman Trustee and President
Kathryn L. Quirk Director, Secretary, Chief Legal Trustee, Vice President and Assistant
Officer and Vice President Secretary
James J. McGovern Chief Financial Officer and Treasurer None
Linda J. Wondrack Vice President and Chief Compliance None
Officer
Paula Gaccione Vice President None
Michael E. Harrington Managing Director None
Robert A. Rudell Vice President None
Todd N. Gierke Assistant Treasurer None
Philip J. Collora Assistant Secretary None
Paul J. Elmlinger Assistant Secretary None
Diane E. Ratekin Assistant Secretary None
Mark S. Casady Director and Chairman None
Herbert A. Christiansen Vice President None
Robert Froelich Managing Director None
C. Perry Moore Senior Vice President and Managing None
Director
Lorie O'Malley Managing Director None
William F. Glavin Managing Director None
Gary N. Kocher Managing Director None
Howard S. Schneider Managing Director None
Thomas V. Bruns Managing Director None
Johnston Allan Norris Managing Director and Senior Vice None
President
8
<PAGE>
Positions and Offices with Positions and
Name Kemper Distributors, Inc. Offices with Registrant
---- ------------------------- -----------------------
John H. Robinson, Jr. Managing Director and Senior Vice None
President
</TABLE>
(c) Not applicable.
Item 28. Location of Accounts and Records.
-------- ---------------------------------
Accounts, books and other documents are maintained at the offices of
the Registrant, the offices of Registrant's investment adviser, Scudder Kemper
Investments, Inc., 222 South Riverside Plaza, Chicago, Illinois 60606, at the
offices of the Registrant's principal underwriter, Kemper Distributors, Inc.,
222 South Riverside Plaza, Chicago, Illinois 60606 or, in the case of records
concerning custodial functions, at the offices of the custodian, State Street
Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110 or, in
the case of records concerning transfer agency functions, at the offices of
State Street Bank and Trust Company and of the shareholder service agent, Kemper
Service Company, 811 Main Street, Kansas City, Missouri 64105.
Item 29. Management Services.
-------- --------------------
Inapplicable.
Item 30. Undertakings.
-------- -------------
Inapplicable.
9
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this amendment to its Registration
Statement under the Securities Act of 1933 and has duly caused this amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Chicago and State of Illinois, on the
31st day of July, 2000.
CASH ACCOUNT TRUST
By /s/ Mark S. Casady
----------------------------
Mark S. Casady, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on July 31, 2000 on behalf of the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Mark S. Casady July 31, 2000
--------------------------------------
Mark S. Casady President
/s/ Thomas W. Littauer July 31, 2000
--------------------------------------
Thomas W. Littauer* Chairman and Trustee
/s/ John W. Ballantine July 31, 2000
--------------------------------------
John W. Ballantine* Trustee
/s/ Lewis A. Burnham July 31, 2000
--------------------------------------
Lewis A. Burnham* Trustee
--------------------------------------
Linda C. Coughlin Trustee
/s/ Donald L. Dunaway July 31, 2000
--------------------------------------
Donald L. Dunaway* Trustee
--------------------------------------
Robert B. Hoffman Trustee
/s/ Donald R. Jones July 31, 2000
--------------------------------------
Donald R. Jones* Trustee
/s/ Shirley D. Peterson July 31, 2000
--------------------------------------
Shirley D. Peterson* Trustee
/s/William P. Sommers July 31, 2000
--------------------------------------
William P. Sommers* Trustee
<PAGE>
/s/ John R. Hebble July 31, 2000
--------------------------------------
John R. Hebble Treasurer (Principal Financial and
Accounting Officer)
</TABLE>
*By: /s/ Philip J. Collora
---------------------
Philip J. Collora**
** Philip J. Collora signs this document
pursuant to powers of attorney contained
in Post-Effective Amendment No. 8 to the
Registration Statement, filed on August
28, 1998 and pursuant to a power of
attorney contained in Post Effective
Amendment No. 12, filed on June 16, 1999
and pursuant to powers of attorney filed
herein.
2
<PAGE>
File No. 33-32476
File No. 811-5970
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM N-1A
POST-EFFECTIVE AMENDMENT NO. 20
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 21
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
CASH ACCOUNT TRUST
<PAGE>
CASH ACCOUNT TRUST
EXHIBIT INDEX
Exhibit (c)(5)
Exhibit (i)
Exhibit (j)
Exhibit (p)(1)
Exhibit (p)(2)
2
