Filed electronically with the Securities and Exchange Commission on
June 1, 2000
File No. 33-34645
File No. 811-6103
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. 18 /X/
and/or --
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /_/
Amendment No. 20 /X/
--
INVESTORS CASH 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
Investors Cash Trust
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)
/_/ On ______________ pursuant to paragraph (b)
/X/ On August 1, 2000 pursuant to paragraph (a) (1)
/_/ On ______________ pursuant to paragraph (a) (2) of Rule 485
If appropriate, check the following box:
/_/ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
<PAGE>
PROSPECTUS ENCLOSED
--------------------------------------------------------------------------------
Investors
Cash Trust
August 1, 2000
Government Securities Portfolio
o Service Shares
o Managed Shares
o Institutional Shares
Treasury Portfolio
o Service Shares
o Premier Share
<PAGE>
INVESTORS CASH TRUST
PROSPECTUS
August 1, 2000
Government Securities Portfolio
o Service Shares
o Managed Shares
o Institutional Shares
Treasury Portfolio
o Service Shares
o Premier Share
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>
<CAPTION>
Table of Contents
INVESTORS CASH TRUST
The Fund And Its Portfolios Your Investment In The Fund
<S> <C>
1 Government Securities Portfolio 13 Policies You Should Know About
5 Treasury Portfolio 17 Understanding Distributions And Taxes
9 Other Policies And Risks
10 Who Manages The Fund
</TABLE>
<PAGE>
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TICKER SYMBOL XXXXX
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 objective by investing exclusively in U.S. Treasury
bills, notes, bonds and other obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, and related repurchase
agreements.
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).
Working in conjunction with a credit analyst, 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 fund'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 a
portfolio or make it perform less well than other investments. Although each
portfolio seeks to preserve the value of your investment at $1.00 per share, you
could lose money by investing in the fund.
As with most money market funds, the most important factor is 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 each portfolio's high credit standards, its yield may be lower than
the yields of money funds that don't limit their investments to
government-guaranteed securities.
Other factors that could affect performance include:
o the managers could be incorrect in their analysis of interest rate trends,
credit quality or other matters
o securities that rely on third-party guarantors to raise their credit
quality could fall in price or go into default if the financial condition
of the guarantor deteriorates
o political or legal actions could change the way the portfolio's dividends
are taxed
2
<PAGE>
|Performance
The bar chart shows how the portfolio's Service Shares' total returns have
varied from year to year, which may give some idea of risk. The table shows how
the portfolio's 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.
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
--------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year
--------------------------------------------------------------------------------
1991 5.71
1992 3.45
1993 2.95
1994 4.03
1995 5.83
1996 5.33
1997 5.93
1998 5.35
1999 5.08
Best Quarter: %, Q 199
Worst Quarter: %, Q 199
--------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/1999
--------------------------------------------------------------------------------
1 Year 5 Years 10 Years
-------------------------------------------------------
% % %
-------------------------------------------------------
7-day yield as of 12/31/1999: %
3
<PAGE>
|How Much Investors Pay
The fee table describe the fees and expenses that you may pay if you buy and
hold Service Shares. This information doesn't include any fees that may be
charged by your financial services firm.
--------------------------------------------------------------------------------
Fee Table
--------------------------------------------------------------------------------
The fund has no sales charges or other shareholder fees. The fund does have
annual operating expenses, and as a shareholder you pay them indirectly.
Shareholder Fees (%) None
(paid directly from your investment)
--------------------------------------------------------------------------------
Annual Operating Expenses (%)
(deducted from fund assets)
--------------------------------------------------------------------------------
Management Fee
--------------------------------------------------------------------------------
Distribution (12b-1) Fee
--------------------------------------------------------------------------------
Other Expenses*
--------------------------------------------------------------------------------
Total Annual Operating Expenses
--------------------------------------------------------------------------------
* Includes costs of shareholder servicing, custody, accounting services 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
expenses to those of other funds. The example assumes the expenses above remain
the same, that you invested $10,000, earned 5% annual returns and reinvested all
dividends and distributions.This is only an example; actual expenses will be
different.
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------
$ $ $ $
--------------------------------------------------------
4
<PAGE>
--------------------------------------------------------------------------------
TICKER SYMBOL XXXXX
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 objective by investing exclusively at least 65% of
total assets in short-term U.S. Treasury securities or in repurchase agreements
backed by these securities. While the portfolio may place up to 20% of total
assets in other types of investments, it can only invest in high quality
short-term securities that are guaranteed by the full faith and credit of the
U.S. government as to the timely payment of interest and principal.
Income paid by Treasuries is usually free from state and local income taxes, and
for most portfolio shareholders the bulk of portfolio distributions will be free
from these taxes as well (although not from federal income tax).
Working in conjunction with a credit analyst, 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 fund'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
<PAGE>
|Main Risks to Investors
There are several risk factors that could reduce the yield you get from a
portfolio or make it perform less well than other investments. Although each
portfolio seeks to preserve the value of your investment at $1.00 per share, you
could lose money by investing in the fund.
As with most money market funds, the most important factor is 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 each portfolio's high credit standards, its yield may be lower than
the yields of money funds that don't limit their investments to
government-guaranteed securities.
Other factors that could affect performance include:
o the managers could be incorrect in their analysis of interest rate trends,
credit quality or other matters
o securities that rely on third-party guarantors to raise their credit
quality could fall in price or go into default if the financial condition
of the guarantor deteriorates
o political or legal actions could change the way the portfolio's dividends
are taxed
6
<PAGE>
|Performance
The bar chart shows how the portfolio's Service Shares' total returns have
varied from year to year, which may give some idea of risk. The table shows how
the portfolio's 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
1992 3.33
1993 2.89
1994 4.02
1995 5.75
1996 5.20
1997 5.75
1998 5.21
1999 5.66
Best Quarter: %, Q 199
Worst Quarter: %, Q 199
Average Annual Total Returns as of 12/31/1999
1 Year 5 Years 10 Years
---------------------------------------------------
% % %
---------------------------------------------------
7-day yield as of 12/31/1999: %
7
<PAGE>
|How Much Investors Pay
The fee table describe the fees and expenses that you may pay if you buy and
hold Service Shares. This information doesn't include any fees that may be
charged by your financial services firm.
--------------------------------------------------------------------------------
Fee Table
--------------------------------------------------------------------------------
The fund has no sales charges or other shareholder fees. The fund does have
annual operating expenses, and as a shareholder you pay them indirectly.
Shareholder Fees (%) None
(paid directly from your investment)
--------------------------------------------------------------------------------
Annual Operating Expenses (%)
(deducted from fund assets)
--------------------------------------------------------------------------------
Management Fee
--------------------------------------------------------------------------------
Distribution (12b-1) Fee
--------------------------------------------------------------------------------
Other Expenses*
--------------------------------------------------------------------------------
Total Annual Operating Expenses
--------------------------------------------------------------------------------
* Includes costs of shareholder servicing, custody, accounting services 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
expenses to those of other funds. The example assumes the expenses above remain
the same, that you invested $10,000, earned 5% annual returns and reinvested all
dividends and distributions. This is only an example; actual expenses will be
different.
1 Year 3 Years 5 Years 10 Years
---------------------------------------------------------
$ $ $ $
---------------------------------------------------------
8
<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 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 fund, the security will be sold unless the
advisor or 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.
9
<PAGE>
|Who Manages The Fund
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, 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 portfolios' investment advisor, Scudder Kemper receives a
management fee. For the most recent fiscal year, the actual amounts Government
Securities Portfolio and Treasury Portfolio each paid in management fees were
--% and --%, respectively, of its average daily net assets.
The Portfolio Managers
The portfolio managers handle the day-to-day management of the portfolios. The
lead manager for each portfolio is Frank Rachwalski, Jr. Mr. Rachwalski, who
began his investment career when he joined the advisor in 1973, has managed each
portfolio since its inception. Christopher Proctor serves as manager for each
portfolio. Mr. Proctor joined the advisor in -- and began his investment career
in --.
o Each portfolio is managed by a team of investment professionals who work
together to develop the portfolio's investment strategies.
10
<PAGE>
|Financial Highlights
This table is designed to help you understand the financial performance of the
portfolio's service shares in recent years. The figures in the first part of the
table are for a single service 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 the portfolios
financial statements, is included in the annual report (see "Shareholder
reports" on the last page).
<TABLE>
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Government Securities Portfolio -- Service Shares
-------------------------------------------------------------------------------------------------------------------
Year ended March 31, 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 1.00 1.00 1.00 1.00
-------------------------------------------------------------------------------------------------------------------
Net investment income .05 .05 .05 .05 .06
-------------------------------------------------------------------------------------------------------------------
Less distributions from net investment income (.05) (.05) (.05) (.05) (.06)
-------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 1.00 1.00 1.00 1.00
-------------------------------------------------------------------------------------------------------------------
Total return (%) (a) 5.22 5.20 5.50 5.30 5.74
-------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
-------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ thousands) 264,292 490,127 312,194 168,933 230,944
-------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) .33 .33 .38 .32 .32
-------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) .25 .25 .25 .25 .25
-------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (%) 4.98 5.05 5.37 5.17 5.57
-------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Not annualized
(a) Total return would have been lower had certain expenses not been reduced.
--------------------------------------------------------------------------------
Government Securities Portfolio -- Managed Shares
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Government Securities Portfolio -- Institutional Shares
--------------------------------------------------------------------------------
11
<PAGE>
<TABLE>
-------------------------------------------------------------------------------------------------------------------
Treasury Portfolio -- Service Shares
-------------------------------------------------------------------------------------------------------------------
Year ended March 31, 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 1.00 1.00 1.00 1.00
-------------------------------------------------------------------------------------------------------------------
Net investment income .05 .05 .05 .05 .05
-------------------------------------------------------------------------------------------------------------------
Less distributions from net investment (.05) (.05) (.05) (.05) (.05)
income
-------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 1.00 1.00 1.00 1.00
-------------------------------------------------------------------------------------------------------------------
Total Return (%) (a) 5.08 5.03 5.34 5.15 5.66
-------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
-------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ thousands) 47,889 58,402 74,290 63,347 101,576
-------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) .46 .37 .38 .37 .37
-------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) .25 .25 .25 .25 .25
-------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (%) 4.94 4.92 5.21 5.03 5.48
-------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Not annualized
(a) Total return would have been lower had certain expenses not been reduced.
--------------------------------------------------------------------------------
Treasury Portfolio -- Premier Shares
--------------------------------------------------------------------------------
12
<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, financial institution or workplace retirement plan, 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.
Policies about transactions
Each portfolio is open for business each day the New York Stock Exchange is
open. Normally, each portfolio calculates its share price three times every
business day: at 1:00 p.m., 3:00 p.m. and 4:00 p.m. Central time for Government
Securities Portfolio, and 11:00 a.m., 1:00 p.m. and 3:00 p.m. Central time for
Treasury Portfolio.
13
<PAGE>
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.
For the Government Securities Portfolio, orders for purchase of shares received
by wire transfer in the form of Federal Funds, if accepted, will be effected at
the next determined share price calculated and will receive that day's dividend
if effected before the 3:00 p.m. Central time net asset value determination,
otherwise such shares will receive the dividend for the next calendar day. Wire
purchase orders received between 1:00 p.m. and 3:00 p.m. Central time, for
effectiveness at the 3:00 p.m. Central time net asset value determination may be
rejected based on certain guidelines. In particular, only investors known to the
fund may submit wire purchase orders between 1:00 p.m. and 3:00 p.m. Central
time and acceptance of such an order will, among other things, be based upon the
level of purchase orders received by the fund, the size of the order submitted,
general market conditions, and the availability of investments for the fund.
For the Treasury Portfolio, shares purchased by wire will receive that day's
dividend if effected at or prior to the 1:00 p.m. Central time net asset value
determination, otherwise, such shares will receive the dividend for the next
calendar day.
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 for the Treasury Portfolio
and 4:00 p.m. Central time for the Government Securities Portfolio on the next
business day following receipt, and such shares will receive the dividend for
the next calendar day following the day when 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.
Upon receipt by the shareholder service agent, Kemper Service Company, of a
request in the form described below, shares of the portfolio will be redeemed at
the next determined net asset value. If processed at 3:00 p.m. Central time for
the Treasury Portfolio and 4:00 p.m. Central time for the Government Securities
Portfolio, the shareholder will receive that day's dividend. Requests received
by the shareholder service agent for expedited wire redemptions prior to 11:00
a.m. Central time, in the case of the Treasury Portfolio, and prior to 1:00 p.m.
Central time, in the case of the Government Securities Portfolio, will result in
shares being redeemed that day, and normally proceeds will be sent to the
designated account that day. However, the shareholder will not receive that
day's dividend.
14
<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 portfolios' 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.
15
<PAGE>
Your financial services firm may set its own minimum investments, although those
set by the portfolios 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
Each portfolio's share price is its net asset value per share, or NAV. To
calculate NAV, a 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
o change, add or withdraw various services, fees and account policies
o reject or limit purchases of shares for any reason
o withdraw or suspend any part of the offering made by this prospectus
16
<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
November or December, and may make additional distributions for tax purposes if
necessary.
You can choose how to receive your dividends and distributions. You can have
them all automatically reinvested in portfolio 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 portfolio
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 portfolios
--------------------------------------------------------------------------------
o short-term capital gains distributions received from the portfolios
--------------------------------------------------------------------------------
Generally taxed at capital gains rates
--------------------------------------------------------------------------------
o long-term capital gains from selling portfolio shares
--------------------------------------------------------------------------------
o long-term capital gains distributions received from the portfolios
--------------------------------------------------------------------------------
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.
17
<PAGE>
|To Get More Information
Shareholder reports -- These include commentary from each portfolio's management
team about recent market conditions and the effects of a portfolio's strategies
on its performance. They also have detailed performance figures, a list of
everything each portfolio owns and the portfolios' 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, or if you're a shareholder
and have questions, please contact your financial services firm or the SEC (see
below). 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. 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 20549-6009
www.sec.gov
Tel (800) SEC-0330
SEC File Number
Investors Cash Trust 811-6103
<PAGE>
This page
intentionally
left blank
(not part of prospectus).
<PAGE>
INVESTORS CASH TRUST
STATEMENT OF ADDITIONAL INFORMATION
August 1, 2000
Government Securities Portfolio
Treasury Portfolio
222 South Riverside Plaza, Chicago, Illinois 60606
1-800-231-8568
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the prospectus of Investors Cash Trust (the "Fund")
dated August 1, 2000. The prospectus may be obtained without charge from the
Fund, and is also available along with other related materials on the SEC's
Internet Web site (http://www.sec.gov).
------------
TABLE OF CONTENTS
Page
----
Investment Restrictions.................................. 1
Investment Policies and Techniques....................... 2
Investment Manager and Shareholder Services.............. 4
Portfolio Transactions................................... 6
Purchase and Redemption of Shares........................ 8
Dividends, Taxes and Net Asset Value..................... 10
Performance.............................................. 12
Officers and Trustees.................................... 13
Special Features......................................... 17
Shareholder Rights....................................... 18
The financial statements appearing in the Fund's 2000 Annual Report to
Shareholders are incorporated herein by reference. The Fund's Annual Report
accompanies this Statement of Additional Information, and may be obtained
without charge by calling 1-800-231-8568.
<PAGE>
INVESTMENT RESTRICTIONS
The Fund has adopted for the Government Securities Portfolio and Treasury
Portfolio certain investment restrictions which 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 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 by the Portfolio's Board
of Trustees, without a vote of shareholders.
The Fund has elected to be classified as a diversified open-end investment
company.
As a matter of fundamental policy, each 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 a 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 a 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.
The following policies are non-fundamental, and may be changed or eliminated for
each Portfolio by the Fund's Board without a vote of shareholders:
Each of the Government Securities Portfolio and the Treasury Portfolio may not:
1. 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;
2. write, purchase, or sell puts, calls or combinations thereof;
3. lend portfolio securities in an amount greater than 5% of its total
assets; or
4. invest more than 10% of net assets in illiquid securities.
The Government Securities Portfolio may not:
1. Purchase any securities other than obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities, and repurchase
agreements of such obligations, except in connection with a
master/feeder fund structure. However, if the Fund implements a
master/feeder fund structure, shareholder approval is required; or
2. Borrow money in an amount greater than one third of its total assets,
except for temporary or emergency purposes.
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The Treasury Portfolio may not:
1. Purchase any securities other than obligations issued by the U.S.
Government and repurchase agreements of such obligations, except in
connection with a master/feeder fund structure. However, if the Fund
implements a master/feeder fund structure, shareholder approval is
required; or
2. borrow money in an amount greater than 5% of its total assets, except
for temporary or emergency purposes.
Code of Ethics. The Fund, 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 Funds 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 Funds, 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 Funds. 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.
Interfund Borrowing and Lending Program. The Fund has received exemptive relief
from the SEC which permits the Fund 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), except that the Fund may engage in reverse repurchase
agreements and dollar rolls for any purpose.
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 the Portfolio may purchase are meant to describe the spectrum
of investments that Scudder Kemper Investments, Inc. (the "Adviser"), in its
discretion, might, but is not required to, use in managing 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 the Portfolio's performance.
The Portfolios described in this Statement of Additional 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.
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Each Portfolio is designed primarily for state and local governments and related
agencies, school districts and other tax-exempt organizations to invest the
proceeds of tax-exempt bonds and working capital.
Neither Portfolio will 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.
Government Securities Portfolio. The Government Securities Portfolio seeks
maximum current income consistent with stability of capital. The Portfolio
pursues its objective by investing exclusively in U.S. Treasury bills, notes,
bonds and other obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and repurchase agreements of such obligations. All
securities purchased mature in 12 months or less. Some securities issued by U.S.
Government agencies or instrumentalities are supported only by the credit of the
agency or instrumentality, such as those issued by the Federal Home Loan Bank;
and others have an additional line of credit with the U.S. Treasury, such as
those issued by the Federal National Mortgage Association and Farm Credit
System. Also, as to securities supported only by the credit of the issuing
agency or instrumentality or by an additional line of credit with the U.S.
Treasury, there is no guarantee that the U.S. Government will provide support to
such agencies or instrumentalities and such securities may involve risk of loss
of principal and interest. The Portfolio's investments in obligations issued or
guaranteed by U.S. Government agencies or instrumentalities currently are
limited to those issued or guaranteed by the following entities: Federal Land
Bank, Farm Credit System, Federal Home Loan Banks, Federal Home Loan Mortgage
Corporation, Federal National Mortgage Association, Government National Mortgage
Association and Export-Import Credit Bank. The foregoing list of acceptable
entities is subject to change by action of the Fund's Board of Trustees;
however, the Fund will provide written notice to shareholders at least sixty
(60) days before any purchase by the Portfolio of obligations issued or
guaranteed by an entity not named above.
Treasury Portfolio. The Treasury Portfolio seeks maximum current income
consistent with stability of capital. The Portfolio pursues its objective by
investing exclusively in U.S. Treasury bills, notes, bonds and other obligations
issued by the U.S. Government and related repurchase agreements. All securities
purchased mature in 12 months or less. The payment of principal and interest on
the securities in the Portfolio's portfolio is backed by the full faith and
credit of the U.S. Government. See below for information regarding repurchase
agreements.
There can be no assurance that each Portfolio's objective can be met.
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 a 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 Fitch.
A repurchase agreement provides a means for a Portfolio to earn taxable income
on funds for periods as short as overnight. It is an arrangement under which the
purchaser (i.e., the Portfolio) acquires a security ("Obligation") and the
seller agrees, at the time of sale, to repurchase the Obligation at a specified
time and price. Securities subject to a repurchase agreement are held in a
segregated account, and the value of such securities kept at least equal to the
repurchase price on a daily basis. The repurchase price may be higher than the
purchase price, the difference being income to the Portfolio, or the purchase
and repurchase prices may be the same, with interest at a stated rate due to the
Portfolio together with the repurchase price on the date of repurchase. In
either case, the income to a Portfolio (which is taxable) is unrelated to the
interest rate on the Obligation itself. Obligations will be held by the
custodian or in the Federal Reserve Book Entry system.
For purposes of the 1940 Act, a repurchase agreement is deemed to be a loan from
a Portfolio to the seller of the Obligation subject to the repurchase agreement,
and is therefore subject to that Portfolio's investment restriction applicable
to loans. It is not clear whether a court would consider the Obligation
purchased by a Portfolio subject to a repurchase agreement as being owned by
that Portfolio or as being collateral for a loan by the Portfolio to the seller.
In the event of the commencement of 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
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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.
Repurchase agreements are instruments under which a Portfolio acquires ownership
of a U.S. Government security from a broker-dealer or bank that agrees to
repurchase the U.S. Government 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 incur expenses in
enforcing its rights, and could experience losses, including a decline in the
value of the underlying securities and loss of income. Currently, a Portfolio
will only enter into repurchase agreements with primary U.S. Government
securities dealers recognized by the Federal Reserve Bank of New York that have
been approved pursuant to procedures adopted by the Board of Trustees of the
Fund. 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.
A Portfolio may invest in U.S. Government securities having rates of interest
that are adjusted periodically or which "float" continuously according to
formulae intended to minimize fluctuation in values of the instruments
("Variable Rate Securities"). The interest rate of Variable Rate Securities
ordinarily is determined by reference to or is a percentage of an objective
standard such as a bank's prime rate, the 90-day U.S. Treasury Bill rate, or the
rate of return on commercial paper or bank certificates of deposit. Generally,
the changes in the interest rate on Variable Rate Securities reduce the
fluctuation in the market value of such securities. Accordingly, as interest
rates decrease or increase, the potential for capital appreciation or
depreciation is less than for fixed-rate obligations. Some Variable Rate
Securities ("Variable Rate Demand Securities") have a demand feature entitling
the purchaser to resell the securities at an amount approximately equal to
amortized cost or the principal amount thereof plus accrued interest. As is the
case for other Variable Rate Securities, the interest rate on Variable Rate
Demand Securities varies according to some objective standard intended to
minimize fluctuation in the values of the instruments. Each Portfolio determines
the maturity of Variable Rate Securities in accordance with Rule 2a-7, which
allows the Portfolio to consider certain of such instruments as having
maturities shorter than the maturity date on the face of the instrument.
INVESTMENT MANAGER AND SHAREHOLDER SERVICES
Investment Manager. Scudder Kemper Investments, Inc., 345 Park Avenue, New York,
New York, is the Fund's investment manager. The Adviser 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 Fund's
Board of Trustees and officers. Pursuant to an investment management agreement,
the Adviser acts as each Portfolio's investment adviser, manages its
investments, administers its business affairs, furnishes office facilities and
equipment, provides clerical and administrative services and permits any of its
officers or employees to serve without compensation as trustees or officers of
the Fund if elected to such positions. The Fund pays the expenses of its
operations, including the fees and expenses of 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
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fees, the fees and expenses of qualifying the Fund and its shares for
distribution under federal and state securities laws and membership dues in the
Investment Company Institute or any similar organization. The Fund's expenses
generally are allocated between the Portfolios on the basis of relative net
assets at the time of allocation, except that expenses directly attributable to
a particular Portfolio are charged to that Portfolio.
The agreement provides that the Adviser shall not be liable for any error of
judgment or of law, or for any loss suffered by the Fund in connection with the
matters to which the agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Adviser in the
performance of its obligations and duties, or by reason of its reckless
disregard of its obligations and duties under the agreement.
The investment management agreement continues in effect from year to year so
long as its continuation is approved at least annually by (a) a majority vote of
the trustees who are not parties to such agreement or interested persons of any
such party except in their capacity as trustees of the Fund, cast in person at a
meeting called for such purpose, and (b) by the shareholders of each Portfolio
or the Board of Trustees. If continuation is not approved for a Portfolio, the
investment management agreement nevertheless may continue in effect for any
Portfolio for which it is approved, and the Adviser may continue to serve as
investment manager for the Portfolio for which it is not approved to the extent
permitted by the 1940 Act. It may be terminated at any time upon 60 days' notice
by either party, or by a majority vote of the outstanding shares, and will
terminate automatically upon assignment.
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 manager 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.
Upon consummation of this transaction, the Portfolios' then current investment
management agreement with the Adviser was deemed to have been assigned and,
therefore, terminated. The Board approved a new investment management agreement
(the "Agreement") with the Adviser, which is substantially identical to the
prior investment management agreement, except for the date of execution and
termination. The Agreement became effective on September 7, 1998, upon the
termination of the then current investment management agreement, and was
approved at a shareholder meeting held in December 1998.
The Agreement, dated September 7, 1998, was approved by the Trustees of the Fund
on August 11, 1998. The Agreement will continue in effect until September 30,
1999 and from year to year thereafter only if its continuance is approved
annually by the vote of a majority of those Trustees who are not parties to such
Agreement or interested persons of the Adviser or the Fund, cast in person at a
meeting called for the purpose of voting on such approval, and either by a vote
of the Fund's Trustees or of a majority of the outstanding voting securities of
the Fund. 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.
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For services and facilities furnished, the Fund pays a monthly investment
management fee of 1/12 of 0.15% of average daily net assets of the Government
Securities and Treasury Portfolios. The investment management fee is computed
based on the combined average daily net assets of all Portfolios and allocated
between the Portfolios based upon the relative net asset levels. Pursuant to the
investment management agreement, the Fund incurred investment management fees
for the Government Securities Portfolio of $________, $535,000 and $342,000 for
the fiscal years ended March 31, 2000, 1999 and 1998 , respectively. The Fund
incurred investment management fees of $_______, $89,000 and $91,000 for the
Treasury Portfolio 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 to 0.25% of average daily net assets of a Portfolio on
an annual basis until July 31, 2000. For this purpose, "Portfolio operating
expenses" do not include taxes, interest, extraordinary expenses, brokerage
commissions or transaction costs. During the fiscal years ended March 31, 2000,
1999 and 1998, under expense limits then in effect, the Adviser (or an
affiliate) absorbed $________, $308,000 and $294,000 , respectively, of the
Government Securities Portfolio's operating expenses. During the fiscal years
ended March 31, 2000, 1999 and 1998 , under expense limits then in effect, the
Adviser (or an affiliate) absorbed $________, $71,000 and $81,000 ,
respectively, of the Treasury Portfolio's operating expenses.
Certain trustees or officers of the Fund are also directors or officers of the
Adviser and its affiliates as indicated under "Officers and Trustees."
The Fund, 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.
Fund Accounting Agent. Scudder Fund Accounting Corporation ("SFAC"), Two
International Place, Boston, Massachusetts 02110, a subsidiary of the Adviser,
is responsible for determining the daily net asset value per share of each
Portfolio and maintaining all accounting records related thereto. Currently,
SFAC receives no fee for its services to the Fund; however, subject to Board
approval, at some time in the future, SFAC may seek payment for its services
under this agreement.
Underwriter. Pursuant to an underwriting agreement, Kemper Distributors, Inc.
("KDI" ), 222 South Riverside Plaza, Chicago, Illinois 60606, an affiliate of
the Adviser, serves as the principal underwriter of the continuous offering of
the Fund's shares. The Underwriter receives no compensation from the Fund as
principal underwriter and pays all expenses of distribution of the Fund's shares
under the underwriting agreement not otherwise paid by dealers or other
financial services firms.
Administrator. Pursuant to an administrative services agreement ("administrative
agreement"), KDI bears all of its expenses of providing services pursuant to the
administrative agreement between KDI and each Portfolio, including the payment
of service fees. The Administrator also serves as administrator to the Fund to
provide information and services for shareholders. The administrative agreement
provides that the Administrator shall appoint various firms to provide
administrative services for their customers or clients who are shareholders of
the Fund. The firms are to provide such office space and equipment, telephone
facilities and personnel as are necessary or appropriate for providing
information and services to Fund shareholders. For its services, the Fund pays
the Administrator an annual administrative services fee, payable monthly, of
0.10% of average daily net assets of each Portfolio.
The Administrator has related services agreements with various firms to provide
administrative services for Fund shareholders. Such services and assistance may
include, but are not 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 the Fund, assisting clients in changing account
options, designations and addresses, and such other services as may be agreed
upon from time to time and as may be permitted by applicable statute, rule or
regulation. The Administrator also has services agreements with banking firms to
provide the above listed services, except for certain distribution services that
the banks may be prohibited from providing, for their clients who wish to invest
in the Fund. The Administrator also may provide some of the above services for
the Fund. The Administrator normally pays the firms a monthly service fee at an
annual rate that ranges between 0.05% and 0.10% of average net assets of those
Fund accounts that it maintains and services. The Administrator may elect to
keep a portion of the total administration fee to compensate itself for
functions performed for the Fund. During the fiscal years ended March 31, 2000,
1999 and 1998 , the
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Government Securities Portfolio incurred administrative services fees of
$_________, $357,000 and $228,000 , respectively, and the Administrator (or the
Adviser as predecessor to the Administrator) paid $_______, $174,000 and
$114,000 , respectively, as service fees to firms. During the fiscal years ended
March 31, 2000, 1999 and 1998 , the Treasury Portfolio incurred administrative
services fees of $________, $59,000 and $60,000 , respectively, and the
Administrator (or the Adviser as predecessor to the Administrator) paid
$_______, $30,000 and $31,000 , respectively, as service fees to firms. During
the fiscal years ended March 31, 2000, 1999 and 1998, neither Portfolio paid
fees to firms then affiliated with the Administrator.
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 Fund. State
Street attends to the collection of principal and income, and payment for and
collection of proceeds of securities bought and sold by the Fund. Investors
Fiduciary Trust Company ("IFTC"), 801 Pennsylvania Avenue, Kansas City, Missouri
64105, is the transfer agent of the Fund. Pursuant to a services agreement with
IFTC, Kemper Service Company, an affiliate of the Adviser, serves as
"Shareholder Service Agent." IFTC receives, as transfer agent, and pays to the
Shareholder Service Agent annual account fees of a maximum of $13 per year per
account plus out-of-pocket expense reimbursement. During the fiscal year ended
March 31, 2000, 1999 and 1998, IFTC remitted shareholder service fees in the
amount of $_______, $41,000 and $26,000, respectively, to the Shareholder
Service Agent.
Independent Auditors and Reports to Shareholders. The Fund's independent
auditors, Ernst & Young LLP, 233 South Wacker Drive, Chicago, Illinois 60606,
audit and report on the Fund's annual financial statements, review certain
regulatory reports and the Fund's federal income tax return, and perform other
professional accounting, auditing, tax and advisory services when engaged to do
so by the Fund. Shareholders will receive annual audited financial statements
and semi-annual unaudited financial statements.
Legal Counsel. Vedder, Price, Kaufman & Kammholz, 222 North LaSalle Street,
Chicago, Illinois, 60601, serves as legal counsel for the Fund.
PORTFOLIO TRANSACTIONS
Brokerage
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 its familiarity with commissions charged
on comparable transactions, as well as by comparing commissions paid by a
Portfolio to reported commissions paid by others. The Adviser reviews on a
routine basis commission rates, execution and settlement services performed,
making internal and external comparisons.
When it can be done consistently with the policy of obtaining the most favorable
net results, it is the Adviser's practice to place such orders with
broker-dealers who supply research, market and statistical information to a
Fund. The term "research, market and statistical information" includes advice as
to the value of securities: the advisability of investing in, purchasing or
selling securities; the availability of securities or purchasers or sellers of
securities; and analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts.
The Adviser is authorized when placing portfolio transactions for a Fund to pay
a brokerage commission in excess of that which another broker might charge for
executing the same transaction solely on account of the receipt of research,
market or statistical information. In effecting transactions solely on account
of the receipt of research, market or statistical information. The Adviser may
place orders with a broker-dealer on the basis that the broker-dealer has or has
not sold shares of a Portfolio. In effecting transactions in over-the-counter
securities, orders are placed with the principal market makers for the security
being traded unless, after exercising care, it appears that more favorable
results are available elsewhere.
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In selecting among firms believed to meet the criteria for handling a particular
transaction, the Adviser may give consideration to those firms that have sold or
are selling shares of a Fund managed by the Adviser.
To the maximum extent feasible, it is expected that the Adviser will place
orders for portfolio transactions through Scudder Investor Services, Inc.
("SIS"), a corporation registered as a broker-dealer and a subsidiary of the
Adviser. SIS will place orders on behalf of the Fund with issuers, underwriters
or other brokers and dealers. SIS will not receive any commission, fee or other
remuneration from the Fund for this service.
Although certain research, market and statistical information from
broker-dealers may be useful to a Fund and to the Adviser, it is the opinion of
the Adviser that such information only supplements its own research effort since
the information must still be analyzed, weighed and reviewed by the Adviser's
staff. Such information may be useful to the Adviser in providing services to
clients other than the Fund and not all such information is used by the Adviser
in connection with the Fund. Conversely, such information provided to the
Adviser by broker-dealers through whom other clients of the Adviser effect
securities transactions may be useful to the Adviser in providing services to a
Fund.
The Trustees review, from time to time, whether the recapture for the benefit of
a Fund of some portion of the brokerage commissions or similar fees paid by a
Fund on portfolio transactions is legally permissible and advisable.
A Fund's average portfolio turnover rate is the ratio of the lesser of sales or
purchases to the monthly average value of the portfolio securities owned during
the year, excluding all securities with maturities or expiration dates at the
time of acquisition of one year or less. A higher rate involves greater
brokerage transaction expenses to a Fund and may result in the realization of
net capital gains, which would be taxable to shareholders, when distributed.
Purchases and sales are made for a Fund's portfolio whenever necessary, in
management's opinion, to meet a Fund's objective.
Money market instruments are normally purchased in principal transactions
directly from the issuer or from an underwriter or market maker. There usually
are no brokerage commissions paid by the Fund for such purchases. During the
last three fiscal years the Fund paid no portfolio brokerage commissions.
Purchases from underwriters will include a commission or concession paid by the
issuer to the underwriter, and purchases from dealers serving as market makers
will include the spread between the bid and asked prices.
PURCHASE AND REDEMPTION OF SHARES
Purchase of Shares
Shares of a Portfolio are sold at their net asset value next determined after an
order and payment are received in the form described in the prospectus. The
minimum initial investment is $1 million but such minimum amount may be changed
at any time. The Fund may waive the minimum for purchases by trustees,
directors, officers or employees of the Fund or the Adviser and its affiliates.
An investor wishing to open an account should use the Account Application
available from the Fund or financial services firms. Orders for the purchase of
shares that are accompanied by a check drawn on a foreign bank (other than a
check drawn on a Canadian bank in U.S. Dollars) will not be considered in proper
form and will not be processed unless and until the Fund determines that it has
received payment of the proceeds of the check. The time required for such a
determination will vary and cannot be determined in advance.
Redemption of Shares
General. Upon receipt by the Shareholder Service Agent of a request in the form
described below, shares of a Portfolio will be redeemed by the Fund at the next
determined net asset value. If processed at 3:00 p.m. Chicago time, the
shareholder will receive that day's dividend. A shareholder may use either the
regular or expedited redemption procedures. Shareholders who redeem all their
shares of a Portfolio will receive the net asset value of such shares and all
declared but unpaid dividends on such shares.
8
<PAGE>
If shares of a Portfolio to be redeemed were purchased by check or through
certain Automated Clearing House ("ACH") transactions, the Fund may delay
transmittal of redemption proceeds until it has determined that collected funds
have been received for the purchase of such shares, which will be up to 10 days
from receipt by the Fund of the purchase amount. Shareholders may not use ACH or
Redemption Checks (see "Redemptions by Draft") 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.
The Fund may suspend the right of redemption or delay payment more than seven
days (a) during any period when the New York Stock Exchange ("Exchange") is
closed other than customary weekend and holiday closings or during any period in
which trading on the Exchange is restricted, (b) during any period when an
emergency exists as a result of which (i) disposal of a Portfolio's investments
is not reasonably practicable, or (ii) it is not reasonably practicable for the
Fund to determine the value of its net assets, or (c) for such other periods as
the Securities and Exchange Commission may by order permit for the protection of
the Fund's shareholders.
Although it is the Fund's present policy to redeem in cash, if the Board of
Trustees determines that a material adverse effect would be experienced by the
remaining shareholders if payment were made wholly in cash, the Fund will pay
the redemption price in whole or in part by a distribution of portfolio
securities in lieu of cash, in conformity with the applicable rules of the
Securities and Exchange Commission, taking such securities at the same value
used to determine net asset value, and selecting the securities in such manner
as the Board of Trustees 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 Fund has elected to be governed by Rule 18f-1 under the
1940 Act, pursuant to which the Fund is obligated to redeem shares of a
Portfolio solely in cash up to the lesser of $250,000 or 1% of the net assets of
the Portfolio during any 90-day period for any one shareholder of record.
If shares being redeemed were acquired from an exchange of shares of a mutual
fund that were offered subject to a contingent deferred sales charge as
described in the prospectus for that other fund, the redemption of such shares
by the Fund may be subject to a contingent deferred sales charge as explained in
such prospectus.
Shareholders can request the following telephone privileges: expedited wire
transfer redemptions, ACH transactions and exchange transactions for individual
and institutional accounts and pre-authorized telephone redemption transactions
for certain institutional accounts. Shareholders may choose these privileges on
the account application or by contacting the Shareholder Service Agent for
appropriate instructions. Please note that the telephone exchange privilege is
automatic unless the shareholder refuses it on the account application. The Fund
or its agents may be liable for any losses, expenses or costs arising out of
fraudulent or unauthorized telephone requests pursuant to these privileges,
unless the Fund or its agents reasonably believe, based upon reasonable
verification procedures, that the telephone instructions are genuine. The
shareholder will bear the risk of loss, resulting from fraudulent or
unauthorized transactions, as long as the reasonable verification procedures are
followed. The verification procedures include recording instructions, requiring
certain identifying information before acting upon instructions and sending
written confirmations.
Because of the high cost of maintaining small accounts, the Fund reserves the
right to redeem an account that falls below the minimum investment level. 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 Fund redeems the
shareholder account.
Financial services firms provide varying arrangements for their clients to
redeem Fund 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 Fund's transfer agent, the shareholder may redeem them by sending a written
request with signatures guaranteed to Kemper Service Company, P.O. Box 419153,
Kansas City, Missouri 64141-6153. When certificates for shares have been issued,
they must be mailed to or deposited with the Shareholder Service Agent, along
with a duly endorsed stock power and accompanied by a written request for
redemption. Redemption requests and a stock power must be endorsed by the
account holder with signatures guaranteed by a commercial bank, trust company,
savings and loan association, federal savings bank,
9
<PAGE>
member firm of a national securities exchange or other eligible financial
institution. The redemption request and stock power must be signed exactly as
the account is registered including any special capacity of the registered
owner. Additional documentation may be requested, and a signature guarantee is
normally required, from institutional and fiduciary account holders, such as
corporations, custodians (e.g., under the Uniform Transfers to Minors Act),
executors, administrators, trustees or guardians.
Telephone Redemptions. If the proceeds of the redemption are $50,000 or less and
the proceeds are payable to the shareholder of record at the address of record,
normally a telephone request or a written request by any one account holder
without a signature guarantee is sufficient for redemptions by individual or
joint account holders, and trust, executor, guardian and custodian account
holders, provided the trustee, executor guardian or custodian is named in the
account registration. Other institutional account holders may exercise this
special privilege of redeeming shares by telephone request or written request
without signature guarantee subject to the same conditions as individual account
holders and subject to the limitations on liability described under "General"
above, provided that this privilege has been pre-authorized by the institutional
account holder or guardian account holder by written instruction to the
Shareholder Service Agent with signatures guaranteed. Telephone requests may be
made by calling 1-800-231-8568. Shares purchased by check or through certain ACH
transactions may not be redeemed under this privilege of redeeming shares by
telephone request until such shares have been owned for at least 10 days. This
privilege of redeeming shares by telephone request or by written request without
a signature guarantee may not be used to redeem shares held in certificated form
and may not be used if the shareholder's account has had an address change
within 30 days of the redemption request. During periods when it is difficult to
contact the Shareholder Service Agent by telephone, it may be difficult to use
the telephone redemption privilege, although investors can still redeem by mail.
The Fund reserves the right to terminate or modify this privilege at any time.
Expedited Wire Transfer Redemptions. If the account holder has given
authorization for expedited wire redemption to the account holder's brokerage or
bank account, shares can be redeemed and proceeds sent by a federal wire
transfer to a single previously designated account. Requests received by the
Shareholder Service Agent prior to 11:00 a.m. Chicago time will result in shares
being redeemed that day and normally the proceeds will be sent to the designated
account that day. Once authorization is on file, the Shareholder Service Agent
will honor requests by telephone at 1-800-231-8568 or in writing, subject to the
limitations on liability described under "General" above. The Fund is not
responsible for the efficiency of the federal wire system or the account
holder's financial services firm or bank. The Fund currently does not charge the
account holder for wire transfers. The account holder is responsible for any
charges imposed by the account holder's firm or bank. There is a $1,000 wire
redemption minimum. To change the designated account to receive wire redemption
proceeds, send a written request to the Shareholder Service Agent with
signatures guaranteed as described above, or contact the firm through which
shares of the Fund were purchased. Shares purchased by check or through certain
ACH transactions may not be redeemed by wire transfer until the shares have been
owned for at least 10 days. Account holders may not use this procedure to redeem
shares held in certificated form. During periods when it is difficult to contact
the Shareholder Service Agent by telephone, it may be difficult to use the
expedited wire transfer redemption privilege. The Fund reserves the right to
terminate or modify this privilege at any time.
Redemptions By Draft. Upon request, shareholders will be provided with drafts to
be drawn on the Fund ("Redemption Checks"). These Redemption Checks may be made
payable to the order of any person for not more than $5 million. Shareholders
should not write Redemption Checks in an amount less than $250 since a $10
service fee will be charged as described below. When a Redemption Check is
presented for payment, a sufficient number of full and fractional shares in the
shareholder's account will be redeemed as of the next determined net asset value
to cover the amount of the Redemption Check. This will enable the shareholder to
continue earning dividends until the Fund receives the Redemption Check. A
shareholder wishing to use this method of redemption must complete and file an
Account Application which is available from the Fund or firms through which
shares were purchased. Redemption Checks should not be used to close an account
since the account normally includes accrued but unpaid dividends. The Fund
reserves the right to terminate or modify this privilege at any time. This
privilege may not be available through some firms that distribute shares of the
Fund. In addition, firms may impose minimum balance requirements in order to
offer this feature. Firms may also impose fees to investors for this privilege
or establish variations of minimum check amounts if approved by the Fund.
Unless one signer is authorized on the Account 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
10
<PAGE>
purchased by check or through certain ACH transactions may not be redeemed by
Redemption Check until the shares have been on the Fund's books for at least 10
days. Shareholders may not use this procedure to redeem shares held in
certificated form. The Fund reserves the right to terminate or modify this
privilege at any time.
The Fund may refuse to honor Redemption Checks whenever the right of redemption
has been suspended or postponed, or whenever the account is otherwise impaired.
A $10 service fee will be charged when a Redemption Check is presented to redeem
Fund shares in excess of the value of a Fund account or in an amount less than
$250; when a Redemption Check is presented that would require redemption of
shares that were purchased by check or certain ACH transactions within 10 days;
or when "stop payment" of a Redemption Check is requested.
DIVIDENDS, TAXES AND NET ASSET VALUE
Dividends. Dividends are declared daily and paid monthly. Shareholders will
receive cash dividends unless they elect to receive dividends in additional
shares. For cash dividends, checks will be mailed or proceeds wired within five
business days after the reinvestment date described below. For dividends paid in
additional shares, dividends will be reinvested monthly in shares of the same
Portfolio normally on the first day of each month, if a business day, otherwise
on the next business day. The Fund will pay shareholders who redeem their entire
accounts all unpaid dividends at the time of redemption not later than the next
dividend payment date.
Each Portfolio calculates its dividends based on its daily net investment
income. For this purpose, net investment income 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. Expenses of the Fund are accrued each day. Since 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 paid in cash monthly and shareholders will receive monthly
confirmation of dividends and of purchase and redemption transactions.
Shareholders may select one of the following ways to receive dividends:
1. 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. Dividends will be received in cash unless the
shareholder elects to have them reinvested. If an investment is in the form of a
retirement plan, all dividends and capital gains distributions must be
reinvested into the shareholder's account.
2. Reinvest Dividends at net asset value into additional shares of the same
Portfolio if so requested. Dividends are reinvested on the 1st day of each month
if a business day, otherwise on the next business day.
The Fund reinvests dividend checks (and future dividends) in shares of the Fund
if checks are returned as undeliverable. Dividends and other distributions in
the aggregate amount of $10 or less are automatically reinvested in shares of
the Fund unless the shareholder requests that such policy not be applied to the
shareholder's account.
Taxes. Each 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. Dividends from a Portfolio do not qualify for the dividends
received deduction available to corporate shareholders.
If for any taxable year a Portfolio does not qualify for the special federal
income tax treatment afforded regulated investment companies, all of its taxable
income will be subject to federal income tax at regular corporate rates (without
any deduction for distributions to its shareholders). In such event, dividend
distributions would be taxable to shareholders to the extent of current
accumulated earnings and profits, and would be eligible for the dividends
received deduction, in the case of corporate shareholders.
11
<PAGE>
Dividends declared in October, November or December to shareholders of record as
of a date in one of those months and paid during the following January are
treated as paid on December 31 of the calendar year in which declared for
federal income tax purposes. The Fund may adjust its schedule for dividend
reinvestment for the month of December to assist it in complying with reporting
and minimum distribution requirements contained in the Code.
The Code restricts the ability to invest tax-exempt bond proceeds at yields
materially higher than the yield on the issue. Tax advisers should be consulted
before investing tax-exempt bond proceeds in a Portfolio.
Portfolio dividends that are derived from interest on direct obligations of the
U.S. Government and certain of its agencies and instrumentalities may be exempt
from state and local taxes in certain states. In other states, arguments can be
made that such distributions should be exempt from state and local taxes based
on federal law, 31 U.S.C. Section 3124, and the U.S. Supreme Court's
interpretation of that provision in AMERICAN BANK AND TRUST CO. v. DALLAS
COUNTY, 463 U.S. 855 (1983). The Fund currently intends to advise shareholders
of the proportion of its dividends that consists of such interest. Shareholders
should consult their tax advisers regarding the possible exclusion of such
portion of their dividends for state and local income tax purposes.
Each Portfolio is required by law to withhold 31% of taxable dividends paid to
certain shareholders who do not furnish a correct taxpayer identification number
(in the case of individuals, a social security number) and in certain other
circumstances. Trustees of qualified retirement plans and 403(b)(7) accounts are
required by law to withhold 20% of the taxable portion of any distribution that
is eligible to be "rolled over." The 20% withholding requirement does not apply
to distributions from IRAs or any part of a distribution that is transferred
directly to another qualified retirement plan, 403(b)(7) account, or IRA.
Shareholders should consult their tax advisers regarding the 20% withholding
requirements.
Shareholders normally will receive monthly confirmations of dividends and of
purchase and redemption transactions except that confirmations of dividend
reinvestment for 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.
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 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 which the Board of Trustees of the Fund believed would result in
a material dilution to shareholders or purchasers, the Board of Trustees would
promptly consider what action, if any, should be initiated. If a Portfolio's net
asset value per share (computed using market values) declined, or were expected
to decline, below $1.00 (computed using amortized cost), the Board of Trustees
of the Fund might temporarily reduce or suspend dividend payments in an effort
to maintain the net asset value at $1.00 per share. As a result of such
reduction or suspension of dividends or other action by the Board of Trustees,
an investor would receive less income during a given period than if such a
reduction or suspension had not taken place. Such action could result in
investors receiving no dividend for the period during which they held their
shares and receiving, upon redemption, a price per share lower than that which
they paid. On the other hand, if a Portfolio's net asset value per share
(computed using market values) were to increase, or were anticipated to increase
above $1.00 (computed using amortized cost), the Board of Trustees of the Fund
might supplement dividends in an effort to maintain the net asset value at $1.00
per share.
PERFORMANCE
12
<PAGE>
From time to time, the Fund may advertise several types of performance
information for a Portfolio, including "yield" and "effective 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 historical performance calculation for a Portfolio may be shown in the form
of "yield" and "effective yield." These various measures of performance are
described below. The Adviser has contractually agreed to absorb certain
operating expenses of each Portfolio to the extent specified in the prospectus.
Without this expense absorption, the performance results noted herein for the
Government Securities and Treasury Portfolios would have been lower.
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 March 31, 1999, the Government Securities
Portfolio's seven-day yield was 4.73% and the Treasury Portfolio's seven-day
yield was 4.53%.
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 March 31, 2000, the Government
Securities Portfolio's seven-day effective yield was ____% and the Treasury
Portfolio's seven-day effective yield was ____%.
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 Fund may depict the historical performance of the securities in which the
Fund may invest over periods reflecting a variety of market or economic
conditions either alone or in comparison with alternative investments
performance indexes of those investments or economic indicators. The Fund may
also describe its portfolio holdings and depict its size or relative size
compared to other mutual funds, the number and make-up of its shareholder base
and other descriptive factors concerning the Fund.
Each Portfolio's yield will fluctuate. Shares of the Fund are not insured.
The performance of a Portfolio may be compared to that of other mutual funds
tracked by Lipper, Inc. ("Lipper"). Lipper performance calculations include the
reinvestment of all capital gain and income dividends for the periods covered by
the calculations. A Portfolio's performance also may be compared to other money
market funds reported by IBC Financial Data, Inc. Money Fund Report(R) or Money
Market Insight(R) ("IBC Financial Data, Inc."), reporting services on money
market funds. As reported by IBC Financial Data, Inc., all investment results
represent total return (annualized results for the period net of management fees
and expenses) and one year investment results would be
13
<PAGE>
effective annual yields assuming reinvestment of dividends. In addition,
investors may want to compare the Fund's performance to the Consumer Price
Index, either directly or by calculating its "real rate of return," which is
adjusted for the effects of inflation.
Investors also may want to compare a Portfolio's performance to that of U.S.
Treasury bills or notes because such instruments represent alternative income
producing products. Treasury obligations are issued in selected denominations.
Rates of U.S. Treasury obligations are fixed at the time of issuance and payment
of principal and interest is backed by the full faith and credit of the U.S.
Treasury. The market value of such instruments generally will fluctuate
inversely with interest rates prior to maturity and will equal par value at
maturity. Generally, the values of obligations with shorter maturities will
fluctuate less than those with longer maturities. Each Portfolio's yield will
fluctuate. Also, while each Portfolio seeks to maintain a net asset value per
share of $1.00, there is no assurance that it will be able to do so.
OFFICERS AND TRUSTEES
The officers and trustees of the Fund, their birth dates, their principal
occupations and their affiliations, if any, with the Adviser and Underwriter,
are listed below. All persons named as 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 (management consulting
firm); formerly, Executive Vice President, Anchor Glass Container Corporation.
DONALD L. DUNAWAY (3/8/37), Trustee, 7011 Green Tree Drive, Naples, Florida;
Retired; formerly, Executive Vice President, A. O. Smith Corporation
(diversified manufacturer).
ROBERT B. HOFFMAN (12/11/36), Trustee, 1530 North State Parkway, Chicago,
Illinois; Chairman, Harnischfeger Industries, Inc. (machinery for the mining and
paper industries); formerly, Vice Chairman and Chief Financial Officer, Monsanto
Company (agricultural, pharmaceutical and nutritional/food products); formerly,
Vice President, Head of International Operations FMC Corporation (manufacturer
of machinery and chemicals).
DONALD R. JONES (1/17/30), Trustee, 182 Old Wick Lane, Inverness, Illinois;
Retired; Director, Motorola, Inc. (manufacturer of electronic equipment and
components); formerly, Executive Vice President and Chief Financial Officer,
Motorola, Inc.
THOMAS W. LITTAUER (4/26/55), Trustee and Vice President*, Two International
Place, Boston, Massachusetts; Managing Director, Adviser; formerly, Head of
Broker Dealer Division of an unaffiliated investment management firm during
1997; prior thereto, President of Client Management Services of an unaffiliated
investment management firm from 1991 to 1996.
SHIRLEY D. PETERSON (9/3/41), Trustee, 401 Rosemont Avenue, Frederick, Maryland;
President, Hood College; formerly, partner, Steptoe & Johnson (attorneys); prior
thereto, Commissioner, Internal Revenue Service; prior thereto, Assistant
Attorney General (Tax), U.S.
Department of Justice; Director; Bethlehem Steel Corp.
CORNELIA M. SMALL* (7/28/44), Trustee*, 345 Park Avenue, New York, New York;
Managing Director, Scudder Kemper Investments, Inc.
WILLIAM P. SOMMERS (7/22/33), Trustee, 24717 Harbour View Drive, Ponte Vedro
Beach, Florida; Consultant and Director, SRI International (research and
development); formerly, President and Chief Executive Officer, SRI
International; prior thereto, Executive Vice President, Iameter (medical
information and educational service
14
<PAGE>
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, Adviser.
PHILIP J. COLLOR
A (11/15/45), Vice President and Secretary*, 222 South Riverside Plaza, Chicago,
Illinois; Senior Vice President, Adviser. ANN M. McCREARY (11/6/56), Vice
President*, 345 Park Avenue, New York, New York; Managing Director, Adviser.
ROBERT C. PECK, JR. (10/1/46), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Managing Director, Adviser; formerly, Executive Vice
President and Chief Investment Officer with an unaffiliated investment
management firm from 1988 to June 1997.
KATHRYN L. QUIRK (12/3/52), Vice President*, 345 Park Avenue, New York, New
York; Managing Director, Adviser.
FRANK J. RACHWALSKI, JR. (3/26/45), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Managing Director, Adviser.
LINDA J. WONDRACK (9/12/64), Vice President*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.
JOHN R. HEBBLE (6/27/58), Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.
BRENDA LYONS (2/21/63), Assistant Treasurer*, Two International Place, Boston,
Massachusetts Senior Vice President, Adviser.
CAROLINE PEARSON (4/1/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Senior Vice President, Adviser; formerly, Associate,
Dechert Price & Rhoads (law firm), from 1989 to 1997.
MAUREEN E. KANE (2/14/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Vice President, Adviser; formerly, Assistant Vice
President of an unaffiliated investment management firm; prior thereto,
Associate Staff Attorney of an unaffiliated investment management firm;
Associate, Peabody & Arnold (law firm).
* Interested persons as defined in the 1940 Act.
The trustees and officers who are "interested persons" as designated above
receive no compensation from the Fund. The table below shows amounts paid or
accrued to those trustees who are not designated "interested persons" during the
Fund's fiscal year ended March 31, 2000, except that the information in the last
column is for calendar year 1999.
15
<PAGE>
<TABLE>
<CAPTION>
Total
Compensation From
Aggregate Compensation Kemper Fund Complex
Name Of Trustee From Fund Paid To Trustees(1)
--------------- --------- -------------------
<S> <C> <C>
John W. Ballantine(2)........................... $ $
Lewis A. Burnham................................
Donald L. Dunaway(3)............................
Robert B. Hoffman...............................
Donald R. Jones.................................
Shirley D. Peterson.............................
William P. Sommers..............................
</TABLE>
--------------------
(1) Includes compensation for service on the Boards of 25 Kemper funds with
43 fund portfolios. Each trustee currently serves as trustee of 26
Kemper Funds with 48 fund portfolios.
(2) John W. Ballantine became a Trustee on May 18, 1999.
(3) Pursuant to deferred compensation agreements with the Kemper Funds,
deferred amounts accrue interest monthly at a rate approximate to the
yield of Zurich Money Funds - Zurich Money Market Fund. Total deferred
fees and interest accrued for all prior fiscal years are $13,700 for
Mr. Dunaway from Investors Cash Trust.
On June 30, 2000, the trustees and officers as a group owned less than 1% of the
outstanding shares of each Portfolio. No person owned of record 5% or more of
the outstanding shares of the Treasury Portfolio and Government Securities
Portfolio except the entities indicated in the chart below.
Name And Address % Owned Portfolio
---------------- ------- ---------
First of America - Michigan*
P.O. Box 4042
Kalamazoo, MI 49003
Walker County*
1100 University Avenue, Rm. 203
Huntsville, TX 77340
Friendswood ISD*
General Fund
302 Laurel Drive
Friendswood, TX 77546
Angelina County
P.O. Box 908
Lufkin, TX 75902
Erath County
266th Adult Probation
Erath County Courthouse
100 Graham
Stephenville, TX 76401
Palo Pinto County
General Fund
P.O. Box 75
Palo Pinto, TX 76484
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Smith County
General Fund
Smith County Courthouse, Rm. 114
Tyler, TX 75702
Spring Branch ISD
Food Service Account
P. O. Box 19432
Houston, TX 77224
Asset Preservation, Inc. FBO**
A. A. Timber Enterprises LLC
19794 Riverside Avenue
Anderson, CA 96007
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* Record and beneficial owner.
** Beneficial owner.
SPECIAL FEATURES
Exchange Privilege. Subject to the limitations described below, Class A Shares
(or the equivalent) of the following Kemper Mutual Funds may be exchanged for
each other at their relative net asset values: Kemper Technology Fund, Kemper
Total Return Fund, Kemper Growth Fund, Kemper Small Capitalization Equity Fund,
Kemper Income and Capital Preservation Fund, Kemper Municipal Bond Fund, Kemper
Diversified Income Fund, Kemper High Yield Series, Kemper U.S. Government
Securities Fund, Kemper International Fund, Kemper State Tax-Free Income Series,
Kemper Adjustable Rate U.S. Government Fund, Kemper Blue Chip Fund, Kemper
Global Income Fund, Kemper Target Equity Fund (series are subject to a limited
offering period), Kemper Intermediate Municipal Bond Fund, Kemper Cash Reserves
Fund, Kemper U.S. Mortgage Fund, Kemper Value Series, Inc., Kemper Value Plus
Growth Fund, Kemper Horizon Fund, Kemper Europe Fund, Kemper Asian Growth Fund,
Kemper Aggressive Growth Fund, Kemper Global/International Series, Inc., Kemper
U.S. Growth and Income Fund, Kemper Small Cap Relative Value Fund, Kemper-Dreman
Financial Services Fund, Kemper Value Fund, Kemper Classic Growth Fund, Kemper
Global Discovery Fund, Kemper High Yield Fund II, Kemper Equity Trust, Kemper
Income Trust, Kemper Funds Trust and Kemper Securities Trust ("Kemper Mutual
Funds") and certain "Money Market Funds" (Zurich Money Funds, Zurich Yieldwise
Funds, Cash Equivalent Fund, Tax-Exempt California Money Market Fund, Cash
Account Trust, Investors Municipal Cash Fund and Investors Cash Trust). Shares
of Money Market Funds and Kemper Cash Reserves Fund that were acquired by
purchase (not including shares acquired by dividend reinvestment) are subject to
the applicable sales charge on exchange. In addition, shares of a Kemper Fund in
excess of $1,000,000 (except 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 judgement, 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 the
Underwriter 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,
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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 effecting 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 firms or the Underwriter. 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 regulations, 60 days' prior written notice of any termination or
material change will be provided.
SHAREHOLDER RIGHTS
The Fund is an open-end, diversified management investment company, organized as
a business trust under the laws of Massachusetts on March 2, 1990. The Fund 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. The Fund's shares are not currently divided into classes. While only
shares of the "Government Securities Portfolio" and "Treasury Portfolio" are
presently being offered, the Board of Trustees may authorize the issuance of
additional Portfolios if deemed desirable, each with its own investment
objective, policies and restrictions. Since the Fund offers multiple Portfolios,
it is known as a "series company." 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 Fund is not required to hold annual
shareholders' meetings and does not intend to do so. However, it will hold
special meetings as required or deemed desirable for such purposes as electing
trustees, changing fundamental policies or approving an investment management
agreement. Subject to the Agreement and Declaration of Trust of the Fund,
shareholders may remove trustees. Shareholders will vote by Portfolio and not in
the aggregate or by class except when voting in the aggregate is required under
the 1940 Act, such as for the election of trustees, or when the Board of
Trustees determines that voting by class is appropriate.
The Fund generally is not required to hold meetings of its shareholders. Under
the Agreement and Declaration of Trust of the Fund ("Declaration of Trust"),
however, shareholder meetings will be held in connection with the following
matters: (a) the election or removal of trustees if a meeting is called for such
purpose; (b) the adoption of any contract for which shareholder approval is
required by the 1940 Act; (c) any termination of the Fund to the extent and as
provided in the Declaration of Trust; (d) any amendment of the Declaration of
Trust (other than amendments changing the name of the Fund or any Portfolio,
establishing a Portfolio, supplying any omission, curing any ambiguity or
curing, correcting or supplementing any defective or inconsistent provision
thereof); and (e) such additional matters as may be required by law, the
Declaration of Trust, the By-laws of the Fund, or any registration of the Fund
with the Securities and Exchange Commission or any state, or as the trustees may
consider necessary or desirable. The shareholders also would vote upon changes
in fundamental investment objectives, policies or restrictions.
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<PAGE>
Each trustee serves until the next meeting of shareholders, if any, called for
the purpose of electing trustees and until the election and qualification of a
successor or until such trustee sooner dies, resigns, retires or is removed by a
majority vote of the shares entitled to vote (as described below) or a majority
of the trustees. In accordance with the 1940 Act (a) the Fund will hold a
shareholder meeting for the election of trustees at such time as less than a
majority of the trustees have been elected by shareholders, and (b) if, as a
result of a vacancy on the Board of Trustees, less than two-thirds of the
trustees have been elected by the shareholders, that vacancy will be filled only
by a vote of the shareholders.
Trustees may be removed from office by a vote of the holders of a majority of
the outstanding shares at a meeting called for that purpose, which meeting shall
be held upon the written request of the holders of not less than 10% of the
outstanding shares. Upon the written request of ten or more shareholders, who
have been such for at least six months and who hold shares constituting at least
1% of the outstanding shares of the Fund, stating that such shareholders wish to
communicate with the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider removal of a trustee, the
Fund has undertaken to disseminate appropriate materials at the expense of the
requesting shareholders.
The Declaration of Trust provides that the presence at a shareholder meeting in
person or by proxy of at least 30% of the shares entitled to vote on a matter
shall constitute a quorum. Thus, a meeting of shareholders of the Fund could
take place even if less than a majority of the shareholders were represented on
its scheduled date. Shareholders would in such a case be permitted to take
action which does not require a larger vote than a majority of a quorum, such as
the election of trustees and ratification of the selection of auditors. Some
matters requiring a larger vote under the Declaration of Trust, such as
termination or reorganization of the Fund and certain amendments of the
Declaration of Trust, would not be affected by this provision; nor would matters
which under the 1940 Act require the vote of a "majority of the outstanding
voting securities" as defined in the 1940 Act.
The Declaration of Trust specifically authorizes the Board of Trustees to
terminate the Fund (or any Portfolio or class) by notice to the shareholders
without shareholder approval.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for obligations of the
Fund. The Declaration of Trust, however, disclaims shareholder liability for
acts or obligations of the Fund and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument entered into or executed by
the Fund or the trustees. Moreover, the Declaration of Trust provides for
indemnification out of Fund property for all losses and expenses of any
shareholder held personally liable for the obligations of the Fund and the Fund
will be covered by insurance which the trustees consider adequate to cover
foreseeable tort claims. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is considered by the Adviser remote and
not material, since it is limited to circumstances in which a disclaimer is
inoperative and the Fund itself is unable to meet its obligations.
Master/Feeder Fund Structure. The Board of Trustees may determine, without
further shareholder approval, in the future that the objectives of each
Portfolio would be achieved more effectively by investing in a master fund in a
master/feeder fund structure. A master/feeder fund structure is one in which a
fund (a "feeder fund"), instead of investing directly in a portfolio of
securities, invests all of its investment assets in a separate registered
investment company (the "master fund") with substantially the same investment
objective and policies as the feeder fund. Such a structure permits the pooling
of assets of two or more feeder funds in the master fund in an effort to achieve
possible economies of scale and efficiencies in portfolio management, while
preserving separate identities or distribution channels at the feeder fund
level. An existing investment company is able to convert to a feeder fund by
selling all of its investments, which involves brokerage and other transaction
costs and the realization of taxable gain or loss, or by contributing its assets
to the master fund and possibly avoiding transaction costs and, in certain
circumstances, the realization of taxable gain or loss.
19
<PAGE>
INVESTORS CASH TRUST
STATEMENT OF ADDITIONAL INFORMATION
August 1, 2000
Government Securities Portfolio
Scudder Government Cash Institutional Shares
Government Cash Managed Shares
222 South Riverside Plaza, Chicago, Illinois 60606
1-800-537-3177
This Statement of Additional Information contains information about the Scudder
Government Cash Institutional Shares ("Institutional Shares") and Government
Cash Managed Shares ("Managed Shares") (collectively the "Shares") of Government
Securities Portfolio (the "Portfolio) offered by Investors Cash 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 March 31, 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.
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TABLE OF CONTENTS
Page
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Investment Restrictions.................................................. 1
Investment Policies and Techniques....................................... 2
Investment Manager and Shareholder Services.............................. 4
Portfolio Transactions................................................... 7
Purchase and Redemption of Shares........................................ 8
Dividends, Taxes and Net Asset Value..................................... 11
Performance.............................................................. 13
Officers and Trustees.................................................... 15
Special Features......................................................... 18
Shareholder Rights....................................................... 19
<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,
as amended (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 by the
Portfolio's Board of Trustees, without a vote of shareholders.
The Portfolio has elected to be classified as a diversified open-end investment
company.
As a matter of fundamental policy, the 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.
The following policies are non-fundamental, and may be changed or eliminated for
the Portfolio by its Board without a vote of the Portfolio's shareholders:
The Portfolio may not:
1. 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,
2. write, purchase, or sell puts, calls or combinations thereof; or
3. purchase any securities other than obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities, and repurchase
agreements of such obligations, except in connection with a master/feeder
fund structure. However, if the Fund implements a master/feeder fund
structure, shareholder approval is required;
4. borrow money in an amount greater than one third of its total assets,
except for temporary or emergency purposes;
5. lend portfolio securities in an amount greater than 5% of its total assets;
or
6. invest more than 10% of net assets in illiquid securities.
<PAGE>
INVESTMENT POLICIES AND TECHNIQUES
Descriptions in this Statement of Additional Information of a particular
investment practice or technique in which the Portfolio may engage or a
financial instrument which the Portfolio may purchase are meant to describe the
spectrum of investments that Scudder Kemper Investments, Inc. (the "Adviser" or
"Scudder Kemper"), in its discretion, might, but is not required to, use in
managing the Portfolio's assets. The Adviser may, in its discretion, at any
time, employ such practice, technique or instrument for one or more funds but
not for all funds advised by it. Furthermore, it is possible that certain types
of financial instruments or investment techniques described herein may not be
available, permissible, economically feasible or effective for their intended
purposes in all markets. Certain practices, techniques, or instruments may not
be principal activities of the Portfolio, but, to the extent employed, could,
from time to time, have a material impact on the Portfolio's performance.
The Portfolio described in this Statement of Additional seek 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. It is designed
for investors who seek maximum current income consistent with stability of
capital. The Trust pools individual and institutional investors' money that it
uses to buy high quality money market instruments. The Trust is a series
investment company that is able to provide investors with a choice of separate
investment portfolios. It currently offers two investment Portfolios: the
Government Securities Portfolio and the Treasury Portfolio. The Government
Portfolio currently offers three classes of shares: the Service Shares, the
Government Cash Managed Shares (the "Managed Shares"), and the Scudder
Government 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.
Government Securities Portfolio. The Portfolio seeks maximum current income
consistent with stability of capital. The Portfolio pursues its objective by
investing exclusively in U.S. Treasury bills, notes, bonds and other obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities
and repurchase agreements of such obligations. All securities purchased mature
in 12 months or less. Some securities issued by U.S. Government agencies or
instrumentalities are supported only by the credit of the agency or
instrumentality, such as those issued by the Federal Home Loan Bank; and others
have an additional line of credit with the U.S. Treasury, such as those issued
by Fannie Mae and Farm Credit System. Also, as to securities supported only by
the credit of the issuing agency or instrumentality or by an additional line of
credit with the U.S. Treasury, there is no guarantee that the U.S. Government
will provide support to such agencies or instrumentalities and such securities
may involve risk of loss of principal and interest. The Portfolio's investments
in obligations issued or guaranteed by U.S. Government agencies or
instrumentalities currently are limited to those issued or guaranteed by the
following entities: Federal Land Bank, Farm Credit System, Federal Home Loan
Banks, Federal Home Loan Mortgage Corporation, Fannie Mae, Government National
Mortgage Association and Export-Import Credit Bank. The foregoing list of
acceptable entities is subject to change by action of the Trust's Board of
Trustees; however, the Trust will provide written notice to shareholders at
least sixty (60) days before any purchase by the Portfolio of obligations issued
or guaranteed by an entity not named above.
There can be no assurance that the Portfolio's objective can be met.
Code of Ethics. The Fund, 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 Fund 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 Fund, subject to
requirements and restrictions set forth in the applicable Code of Ethics.
2
<PAGE>
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 Fund. 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.
Interfund Borrowing and Lending Program. The Fund has received exemptive relief
from the SEC which permits the Fund 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), except that the Fund may engage in reverse repurchase
agreements and dollar rolls for any purpose.
Repurchase Agreements. Repurchase agreements are instruments under which the
Portfolio acquires ownership of a U.S. Government security from a broker-dealer
or bank that agrees to repurchase the U.S. Government 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 incur 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 Adviser to be at least as high as
that of other obligations the portfolio may purchase or to be at least equal to
that of issuers of commercial paper rated within the two highest grades assigned
by Moody's, S&P or Duff. Currently, the Portfolio will only enter into
repurchase agreements with primary U.S. Government securities dealers recognized
by the Federal Reserve Bank of New York that have been approved pursuant to
procedures adopted by the Board of Trustees of the Trust.
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.
For purposes of the 1940 Act, a repurchase agreement is deemed to be a loan from
the Portfolio to the seller of the Obligation subject to the repurchase
agreement, and is therefore subject to that Portfolio's investment restriction
3
<PAGE>
applicable to loans. It is not clear whether a court would consider the
Obligation purchased by the Portfolio subject to a repurchase agreement as being
owned by the Portfolio or as being collateral for a loan by the Portfolio to the
seller. In the event of the commencement of bankruptcy or insolvency proceedings
with respect to the seller of the Obligation before repurchase of the Obligation
under a repurchase agreement, the Portfolio may encounter delay and incur costs
before being able to sell the security. Delays may involve loss of interest or
decline in price of the Obligation. If the court characterized the transaction
as a loan and the Portfolio has not perfected an interest in the Obligation, the
Portfolio may be required to return the Obligation to the seller's estate and be
treated as an unsecured creditor of the seller. As an unsecured creditor, the
Portfolio is at risk of losing some or all of the principal and income involved
in the transaction. As with any unsecured debt obligation purchased for the
Portfolio, the Adviser seeks to minimize the risk of loss through repurchase
agreements by analyzing the creditworthiness of the obligor, in this case the
seller of the Obligation. Apart from the risk of bankruptcy or insolvency
proceedings, there is also the risk that the seller may fail to repurchase the
Obligation, in which case the Portfolio may incur a loss if the proceeds to the
Portfolio of the sale to a third party are less than the repurchase price.
However, if the market value of the Obligation subject to the repurchase
agreement becomes less than the repurchase price (including interest), the
Portfolio will direct the seller of the Obligation to deliver additional
securities so that the market value of all securities subject to the repurchase
agreement will equal or exceed the repurchase price. It is possible that the
Portfolio will be unsuccessful in seeking to enforce the seller's contractual
obligation to deliver additional securities.
The Portfolio will not purchase illiquid securities including 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 U.S. Government securities having rates of interest
that are adjusted periodically or which "float" continuously according to
formulae intended to minimize fluctuation in values of the instruments
("Variable Rate Securities"). The interest rate of Variable Rate Securities
ordinarily is determined by reference to or is a percentage of an objective
standard such as a bank's prime rate, the 90-day U.S. Treasury Bill rate, or the
rate of return on commercial paper or bank certificates of deposit. Generally,
the changes in the interest rate on Variable Rate Securities reduce the
fluctuation in the market value of such securities. Accordingly, as interest
rates decrease or increase, the potential for capital appreciation or
depreciation is less than for fixed-rate obligations. Some Variable Rate
Securities ("Variable Rate Demand Securities") have a demand feature entitling
the purchaser to resell the securities at an amount approximately equal to
amortized cost or the principal amount thereof plus accrued interest. As is the
case for other Variable Rate Securities, the interest rate on Variable Rate
Demand Securities varies according to some objective standard intended to
minimize fluctuation in the values of the instruments. The Portfolio determines
the maturity of Variable Rate Securities in accordance with Rule 2a-7, which
allows the Portfolio to consider certain of such instruments as having
maturities shorter than the maturity date on the face of the instrument.
INVESTMENT ADVISER AND SHAREHOLDER SERVICES
Investment Adviser. Scudder Kemper Investments, Inc. (the "Adviser" or "Scudder
Kemper"), 345 Park Avenue, New York, New York, is the Portfolio's investment
adviser. The Adviser 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 Adviser acts as the Portfolio's
investment adviser, manages its investments, administers its business affairs,
furnishes office facilities and equipment, provides clerical and administrative
services and permits any of its officers or employees to serve without
compensation as trustees or officers of the Trust if elected to such positions.
The Portfolio 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 Portfolio and its shares for
distribution under federal and state securities laws and membership dues in the
Investment Company Institute or any similar organization. The Portfolio's
expenses generally are allocated between the Portfolios of the Trust on the
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basis of relative net assets at the time of allocation, except that expenses
directly attributable to a particular Portfolio are charged to that Portfolio.
The investment management agreement provides that the Adviser shall not be
liable for any error of judgment or of law, or for any loss suffered by the
Portfolio in connection with the matters to which the agreement relates, except
a loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Adviser in the performance of its obligations and duties, or by
reason of its reckless disregard of its obligations and duties under the
agreement.
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 Adviser
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 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) by the
shareholders of the Portfolio 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 Adviser
may continue to serve as investment manager for the Portfolio for which it is
not approved to the extent permitted by the 1940 Act. It 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 with respect to that Portfolio, and will
terminate automatically upon assignment.
At December 31, 1997, pursuant to the terms of an agreement, Scudder, Stevens &
Clark, Inc. ("Scudder"), and Zurich Insurance Company ("Zurich"), formed a new
global organization by combining Scudder with Zurich Kemper Investments, Inc.
("ZKI"), a former subsidiary of Zurich and the former investment manager to the
Portfolio and Scudder changed its name to Scudder Kemper Investments, Inc.
On September 7, 1998, the businesses of Zurich (including Zurich's 70% interest
in the Adviser) and the financial services businesses of B.A.T Industries p.l.c.
("B.A.T") were combined to form a new global insurance and financial services
company known as Zurich Financial Services Group. By way of a dual holding
company structure, former Zurich shareholders initially owned approximately 57%
of Zurich Financial Services Group, with the balance initially owned by former
B.A.T shareholders.
Upon consummation of this transaction, the Portfolio's then current investment
management agreement with the Adviser was deemed to have been assigned and,
therefore, terminated. The Board approved a new investment management agreement
(the "Agreement") with the Adviser, which is substantially identical to the
prior investment management agreement, except for the dates of execution and
termination. The Agreement became effective on September 7, 1998 upon the
termination of the then current investment management agreement, and was
approved at a shareholder meeting held in December 1998.
For services and facilities furnished, the Trust pays a monthly investment
management fee of 1/12 of 0.15% of average daily net assets of the Government
Securities Portfolio and Treasury Portfolio (a separate portfolio of the Trust).
The investment management fee is computed based on the combined average daily
net assets of the Portfolios and allocated between the Portfolios based upon the
relative net assets of each. Pursuant to the investment management agreement,
the Trust incurred investment management fees for the Government Securities
Portfolio of $_______, $535,000 and $342,000 for the fiscal years ended March
31, 2000, 1999 and 1998 , respectively. For this purpose, "Portfolio operating
expenses" do not include taxes, interest, extraordinary expenses, brokerage
commissions or transaction costs. During the fiscal years ended March 31, 2000,
1999 and 1998, under expense limits then in effect, the Adviser (or an
affiliate) absorbed $______, $308,000 and $294,000 , respectively, of the
Portfolio's operating expenses. Scudder Kemper and certain affiliates have
agreed, for a one year period ending ___________, 2000, to cap expenses of the
Managed Shares at the same basis point levels as had existed on the Scudder
Fund, Inc.- Scudder Government 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.
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Certain trustees or officers of the Trust are also directors or officers of the
Adviser and its affiliates as indicated under "Officers and Trustees."
The Fund, 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.
Fund Accounting Agent. Scudder Fund Accounting Corporation ("SFAC"), Two
International Place, Boston, Massachusetts 02110, a subsidiary of the Adviser,
is responsible for determining the daily net asset value per share of the
Portfolio and maintaining all accounting records related thereto. Currently,
SFAC receives no fee for its services to the Portfolio; however, subject to
Board approval, at some time in the future, SFAC may seek payment for its
services under this agreement.
Distributor and Administrator. Pursuant to an underwriting and distribution
agreement ("distribution agreement"), Kemper Distributors, Inc. ("KDI"), 222
South Riverside Plaza, Chicago, Illinois 60606, an affiliate of the Adviser,
serves as distributor and principal underwriter for the Trust to provide
information and services for existing and potential shareholders. The
distribution agreement provides that KDI shall appoint various firms to provide
cash management services for their customers or clients through the Trust.
As principal underwriter for the Trust, KDI acts as agent of the Trust in the
sale of its shares of the Portfolio. KDI pays all its expenses under the
distribution agreement. 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.
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, the
administrative services fee may be increased to a maximum of 0.25% of average
daily net assets.
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 0.15% of the average
daily
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net assets in the Portfolio's Managed Shares accounts that it maintains and
services. 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 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. State
Street attends to the collection of principal and income, and payment for and
collection of proceeds of securities bought and sold by the Portfolio. Investors
Fiduciary Trust Company ("IFTC"), 801 Pennsylvania Avenue, Kansas City, Missouri
64105, is the transfer agent of the Portfolio. Pursuant to a services agreement
with IFTC, Kemper Service Company ("KSvC"), an affiliate of the Adviser, serves
as "Shareholder Service Agent." IFTC receives, as transfer agent, and pays to
the Shareholder Service Agent annual account fees of a maximum of $13 per year
per account plus out-of-pocket expense reimbursement. During the fiscal year
ended March 31, 2000, 1999 and 1998, IFTC remitted shareholder service fees in
the amount of $_______, $41,000 and $26,000, respectively, to the Shareholder
Service Agent with respect to services 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. 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 this Statement of Additional Information
should be read in connection with such firm's material regarding its fees and
services.
Independent Auditors and Reports To Shareholders. The Trust's independent
auditors, Ernst & Young LLP, 233 South Wacker Drive, Chicago, Illinois 60606,
audit and report on the Trust's annual financial statements, review certain
regulatory reports and the Trust's federal income tax return, and perform other
professional accounting, auditing, tax and advisory services when engaged to do
so by the Trust. Shareholders will receive annual audited financial statements
and semi-annual unaudited financial statements.
Legal Counsel. Vedder, Price, Kaufman & Kammholz, 222 North LaSalle Street,
Chicago, Illinois, 60601, serves as legal counsel for the Trust.
PORTFOLIO TRANSACTIONS
Brokerage
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 the Portfolio is to obtain the most favorable net results,
taking into account such factors as price, commission where applicable, size of
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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 the Portfolio to
reported commissions paid by others. The Adviser 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 Adviser 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 Adviser's practice to place such orders with
broker/dealers who supply brokerage and research services to the Adviser 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
Adviser 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 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 the 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 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 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 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 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
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 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.
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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) 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 Adviser 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 4:00 p.m. Eastern time net asset
value determination for the Portfolio. The Portfolio, Shareholder Servicing
Agent and Cash Products Group each reserves the right to reject any purchase
order. The Portfolio will accept purchase orders after 4:00 p.m. eastern time
and before 5:00 p.m. eastern time, but will reject certain purchase orders after
2:00 p.m. Eastern time. Orders received between 2:00 p.m. and 5 p.m. eastern
time will be accepted from existing Portfolio shareholders only. In addition,
purchase orders received after 2:00 p.m. may be rejected based upon maximum
limits set by the Portfolio as to purchases from a single investor and as to the
aggregate amount of purchases accepted after 2:00 p.m. on a given day.
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 United
Missouri Bank of Kansas City, N.A. (ABA #101-000-695), 10th and Grand Avenue,
Kansas City, MO 64106 for credit to appropriate Portfolio bank account
(144:98-0120-0321-1 for the Institutional Shares and 244:98-0120-0321-1 for the
Managed Shares) 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 or prior to 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.
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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 (see "Redemptions by Draft") 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.
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 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 Portfolio has elected to be governed by Rule 18f-1 under
the 1940 Act, pursuant to which the Portfolio 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 being redeemed were acquired from an exchange of shares of a mutual
fund that were offered subject to a contingent deferred sales charge as
described in the prospectus for that other fund, the redemption of such shares
by the fund may be subject to a contingent deferred sales charge as explained in
such prospectus.
Shareholders can request the following telephone privileges: expedited wire
transfer redemptions, ACH transactions and exchange transactions for individual
and institutional accounts and pre-authorized telephone redemption transactions
for certain institutional accounts. Shareholders may choose these privileges on
the account application or by contacting the Shareholder Service Agent for
appropriate instructions. Please note that the telephone exchange privilege is
automatic unless the shareholder refuses it on the account application. The
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 the 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, the Portfolio reserves
the right to redeem an account that falls below the minimum investment level.
Thus, a shareholder that 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 Portfolio's transfer agent, the shareholder may redeem them by sending a
written request with signatures guaranteed (if applicable) 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
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the account holder with signatures guaranteed by a commercial bank, trust
company, savings and loan association, federal savings bank, member firm of a
national securities exchange or other eligible financial institution. The
redemption request and stock power must be signed exactly as the account is
registered including any special capacity of the registered owner. Additional
documentation may be requested, and a signature guarantee is normally required,
from institutional and fiduciary account holders, such as corporations,
custodians (e.g., under the Uniform Transfers to Minors Act), executors,
administrators, trustees or guardians.
Telephone Redemptions. If the proceeds of the redemption are $50,000 or less and
the proceeds are payable to the shareholder of record at the address of record,
normally a telephone request or a written request by any one account holder
without a signature guarantee is sufficient for redemptions by individual or
joint account holders, and trust, executor, guardian and custodian account
holders, provided the trustee, executor guardian or custodian is named in the
account registration. Other institutional account holders may exercise this
special privilege of redeeming shares by telephone request or written request
without signature guarantee subject to the same conditions as individual account
holders and subject to the limitations on liability described under "General"
above, provided that this privilege has been pre-authorized by the institutional
account holder or guardian account holder by written instruction to the
Shareholder Service Agent with signatures guaranteed. Telephone requests may be
made by calling 1-800-537-3177. 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 certificated form
and may not be used if the shareholder's account has had an address change
within 30 days of the redemption request. During periods when it is difficult to
contact the Shareholder Service Agent by telephone, it may be difficult to use
the telephone redemption privilege, although investors can still redeem by mail.
The 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 2:00 p.m. 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 1-800-337-3177 or in writing, subject to the
limitations on liability described under "General" above. 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 certificated form. During periods when it is difficult
to contact the Shareholder Service Agent by telephone, it may be difficult to
use the expedited wire transfer redemption privilege. The 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 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.
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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; 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 The address of the Kemper site 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 and
profiles with links between summary information in Profiles and details in the
Prospectus. Users can fill out new account forms on-line, order free software,
and request literature on funds.
DIVIDENDS, TAXES AND NET ASSET VALUE
Dividends. Dividends are declared daily and paid monthly. Shareholders will
receive dividends in additional shares unless they elect to receive cash.
Dividends will be reinvested monthly in shares of the Portfolio at the net asset
value normally on the last calendar of each month if a business day, otherwise
on the next business day. 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 in of 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 this Portfolio, respectively, and also
must maintain a minimum account value of $100,000 and 1,000,000 in the
corresponding shares of 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
12
<PAGE>
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.
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. Dividends from the Portfolio do not qualify for the dividends
received deduction available to corporate shareholders.
If for any taxable year the Portfolio does not qualify for the special federal
income tax treatment afforded regulated investment companies, all of its taxable
income will be subject to federal income tax at regular corporate rates (without
any deduction for distributions to its shareholders). In such event, dividend
distributions would be taxable to shareholders to the extent of current
accumulated earnings and profits, and would be eligible for the dividends
received deduction, in the case of 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 it in complying with reporting
and minimum distribution requirements contained in the Code.
The Code restricts the ability to invest tax-exempt bond proceeds at yields
materially higher than the yield on the issue. Tax advisers should be consulted
before investing tax-exempt bond proceeds in the Portfolio.
Portfolio dividends that are derived from interest on direct obligations of the
U.S. Government and certain of its agencies and instrumentalities may be exempt
from state and local taxes in certain states. In other states, arguments can be
made that such distributions should be exempt from state and local taxes based
on federal law, 31 U.S.C. Section 3124, and the U.S. Supreme Court's
interpretation of that provision in AMERICAN BANK AND TRUST CO. v. DALLAS
COUNTY, 463 U.S. 855 (1983). The Portfolio currently intends to advise
shareholders of the proportion of its dividends that consists of such interest.
Shareholders should consult their tax advisers regarding the possible exclusion
of such portion of their dividends for state and local income tax purposes.
The Portfolio is required by law to withhold 31% of taxable dividends paid to
certain shareholders who do not furnish a correct taxpayer identification number
(in the case of individuals, a social security number) and in certain other
circumstances. Trustees of qualified retirement plans and 403(b)(7) accounts are
required by law to withhold 20% of the taxable portion of any distribution that
is eligible to be "rolled over." The 20% withholding requirement does not apply
to distributions from IRAs or any part of a distribution that is transferred
directly to another qualified retirement plan, 403(b)(7) account, or IRA.
Shareholders should consult their tax advisers regarding the 20% withholding
requirement.
Shareholders normally will receive monthly confirmations of dividends and of
purchase and redemption transactions except that confirmations of dividend
reinvestment for 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.
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 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 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
13
<PAGE>
which 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 held 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 procedures established by KDI.
PERFORMANCE
From time to time, the Portfolio 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 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.
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.
Because the Managed Shares and Institutional Shares of the Portfolio are new
classes of shares, there is no yield information as of the date of this
Statement of Additional Information.
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. The Portfolio
may also describe its portfolio holdings
14
<PAGE>
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.
The performance of the Portfolio may be compared to that of other mutual funds
tracked by Lipper, Inc. ("Lipper"). Lipper performance calculations include the
reinvestment of all capital gain and income dividends for the periods covered by
the calculations. The Portfolio's performance also may be compared to other
money market funds reported by IBC Financial Data, Inc. Money Fund Report(R) or
Money Market Insight(R) ("IBC Financial Data, Inc."), reporting services on
money market funds. As reported by IBC Financial Data, Inc., all investment
results represent total return (annualized results for the period net of
management fees and expenses) and one year investment results would be effective
annual yields assuming reinvestment of dividends. 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.
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.
OFFICERS AND TRUSTEES
The officers and trustees of the Trust, their birth dates, 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.
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), Trustee and Vice President*, Two International
Place, Boston, Massachusetts; Managing Director, Adviser; formerly, Head of
Broker Dealer Division of an unaffiliated investment management firm during
1997; prior thereto, President of Client Management Services of an unaffiliated
investment management firm from 1991 to 1996.
SHIRLEY D. PETERSON (9/3/41), Trustee, 401 Rosemont Avenue, Frederick, Maryland;
President, Hood College; formerly, partner, Steptoe & Johnson (attorneys); prior
thereto, Commissioner, Internal Revenue Service; prior thereto, Assistant
Attorney General Tax, U.S. Department of Justice; Director; Bethlehem Steel
Corp.
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<PAGE>
CORNELIA M. SMALL (7/28/44), Trustee*, 345 Park Avenue, New York, NY; Managing
Director, Adviser.
WILLIAM P. SOMMERS (7/22/33), Trustee, 24717 Harbour View Drive, Ponte Vedra
Beach, Florida; Consultant and Director, SRI Consulting; formerly, President and
Chief Executive Officer, SRI International 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, Adviser.
PHILIP J. COLLORA (11/15/45), Vice President and Secretary*, 222 South Riverside
Plaza, Chicago, Illinois; Senior Vice President, Adviser.
ANN M. McCREARY (11/6/56), Vice President*, 345 Park Avenue, New York, New York;
Managing Director, Adviser.
ROBERT C. PECK, JR. (10/1/46), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Managing Director, Adviser; formerly, Executive Vice
President and Chief Investment Officer with an unaffiliated investment
management firm from 1988 to June 1997.
KATHRYN L. QUIRK (12/3/52), Vice President*, 345 Park Avenue, New York, New
York; Managing Director, Adviser.
FRANK J. RACHWALSKI, JR. (3/26/45), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Managing Director, Adviser.
LINDA J. WONDRACK (9/12/64), Vice President*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.
JOHN R. HEBBLE (6/27/58), Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.
BRENDA LYONS (2/21/63), Assistant Treasurer*, Two International Place, Boston,
Massachusetts Senior Vice President, Adviser.
CAROLINE PEARSON (4/1/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Senior Vice President, Adviser; formerly, Associate,
Dechert Price & Rhoads (law firm), from 1989 to 1997.
MAUREEN E. KANE (2/14/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Vice President, Adviser; formerly, Assistant Vice
President of an unaffiliated investment management firm; prior thereto,
Associate Staff Attorney of an unaffiliated investment management firm;
Associate, Peabody & Arnold (law firm).
* 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 March 31, 2000, except that the information in the
last column is for calendar year 1999.
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<PAGE>
<TABLE>
Total
Aggregate Compensation From
Compensation Kemper Fund Complex
Name Of Trustee From Portfolio Paid To Trustees(1)
--------------- -------------- -------------------
<S> <C> <C>
John W. Ballantine(2) $ $
Lewis A. Burnham................................
Donald L. Dunaway(3)............................
Robert B. Hoffman...............................
Donald R. Jones.................................
Shirley D. Peterson.............................
William P. Sommers..............................
</TABLE>
--------------------
(1) Includes compensation for service on the Boards of 25 Kemper funds with 43
fund portfolios. Each trustee currently serves as trustee of 26 Kemper
Funds with 48 fund portfolios.
(2) John W. Ballantine became a Trustee on May 18, 1999.
(3) Pursuant to deferred compensation agreements with the Kemper Funds,
deferred amounts accrue interest monthly at a rate approximate to the yield
of Zurich Money Funds - Zurich Money Market Fund. Total deferred fees and
interest accrued for all prior fiscal years are $13,700 for Mr. Dunaway
from Investors Cash Trust.
On July 1, 2000, the trustees and officers as a group owned less than 1% of the
outstanding shares of the Portfolio. No person owned of record 5% or more of the
outstanding shares of the Portfolio except the entities indicated in the chart
below owned more than 5 percent of the Service Shares of the portfolio.
Name And Address % Owned
---------------- -------
Matagorda County - General Fund
1700 7th Street
Bay City, TX 77414
Montgomery County.
General Account
P.O. Box 1307
Conroe, TX
Pecos County - Gas Reserve
103 W. Callaghan
Fort Stockton, TX 79735
Spring Branch ISD.
Food Service Account
P.O. Box 19432
Houston, TX
Sweeney ISD
1999 Bond Fund
1310 N. Elm Street
Sweeney, TX 77480
Ellis County
General Fund
203 S. Rogers
Waxahachie, TX 75165
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<PAGE>
SPECIAL FEATURES
Exchange Privilege. Subject to the limitations described below, Class A Shares
(or the equivalent) of the following Kemper Mutual Funds may be exchanged for
each other at their relative net asset values: Kemper Technology Fund, Kemper
Total Return Fund, Kemper Growth Fund, Kemper Small Capitalization Equity Fund,
Kemper Income and Capital Preservation Fund, Kemper Municipal Bond Fund, Kemper
Diversified Income Fund, Kemper High Yield Series, Kemper U.S. Government
Securities Fund, Kemper International Fund, Kemper State Tax-Free Income Series,
Kemper Adjustable Rate U.S. Government Fund, Kemper Blue Chip Fund, Kemper
Global Income Fund, Kemper Target Equity Fund (series are subject to a limited
offering period), Kemper Intermediate Municipal Bond Fund, Kemper Cash Reserves
Fund, Kemper U.S. Mortgage Fund, Kemper Value Series, Inc., Kemper Value Plus
Growth Fund, Kemper Horizon Fund, Kemper Europe Fund, Kemper Asian Growth Fund,
Kemper Aggressive Growth Fund, Kemper Global/International Series, Inc., Kemper
U.S. Growth and Income Fund, Kemper Small Cap Relative Value Fund, Kemper-Dreman
Financial Services Fund, Kemper Value Fund, Kemper Classic Growth Fund, Kemper
Global Discovery Fund, Kemper High Yield Fund II, Kemper Equity Trust, Kemper
Income Trust, Kemper Funds Trust and Kemper Securities Trust ("Kemper Mutual
Funds") and certain "Money Market Funds" (Zurich Money Funds, Zurich Yieldwise
Funds, Cash Equivalent Fund, Tax-Exempt California Money Market Fund, Cash
Account Trust, Investors Municipal Cash Fund and Investors Cash Trust). Shares
of Money Market Funds and Kemper Cash Reserves Fund that were acquired by
purchase (not including shares acquired by dividend reinvestment) are subject to
the applicable sales charge on exchange. In addition, shares of a Kemper Fund in
excess of $1,000,000 (except 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 judgement, 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 the 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 effecting 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 firms or the 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 regulations,
60 days' prior written notice of any termination or material change will be
provided.
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<PAGE>
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.
o Prototype money purchase pension and profit-sharing plans may be
adopted by employers. The maximum contribution per participant is the
lesser of 25% of compensation or $30,000.
Brochures describing the above plans as well as providing model defined benefit
plans, target benefit plans, 457 plans, 401(k) plans and materials for
establishing them are available from the Shareholder Service Agent upon request.
The brochures for plans trusteed by IFTC describe the current fees payable to
IFTC for its services as trustee. Investors should consult with their own tax
advisers before establishing a retirement plan.
Electronic Funds Transfer Programs. For your convenience, the Trust has
established several investment and redemption programs using electronic funds
transfer via the Automated Clearing House (ACH). There is currently no charge by
the Trust for these programs. To use these features, your financial institution
(your employer's financial institution in the case of payroll deposit) must be
affiliated with an Automated Clearing House (ACH). This ACH affiliation permits
the Shareholder Service Agent to electronically transfer money between your bank
account, or employer's payroll bank in the case of Direct Deposit, and your
account. Your bank's crediting policies of these transferred funds may vary.
These features may be amended or terminated at any time by the Trust.
Shareholders should contact Kemper Service Company at 1-800-621-1048 or the
financial services firm through which their account was established for more
information. These programs may not be available through some firms that
distribute shares of the Portfolios.
SHAREHOLDER RIGHTS
The Trust 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. The Portfolio's shares are currently divided into
three classes: Service Shares, Managed Shares and Institutional Shares. While
only shares of the "Government Securities Portfolio" and "Treasury Portfolio"
are presently being offered, the Board of Trustees may authorize the issuance of
additional Portfolios if deemed desirable, each with its own investment
objective, policies and restrictions. Since the Trust offers multiple
Portfolios, it is known as a "series company." Shares of the 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. However, it will hold
special
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meetings as required or deemed desirable for such purposes as electing trustees,
changing fundamental policies or approving an investment management agreement.
Subject to the Agreement and Declaration of Trust of the Trust, shareholders may
remove trustees. Shareholders will vote by Portfolio and not in the aggregate or
by class except when voting in the aggregate is required under the 1940 Act,
such as for the election of trustees, or when the Board of Trustees determines
that voting by class is appropriate.
The Trust generally is not required to hold meetings of its shareholders. Under
the Agreement 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.
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 on 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 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 any Portfolio or class) by notice to the shareholders
without shareholder approval.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for obligations of the
Trust. The Declaration of Trust, however, disclaims shareholder liability for
acts or obligations of the Trust and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument entered into or executed by
the Trust or the trustees. Moreover, the Declaration of Trust provides for
indemnification out of Trust property for all losses and expenses of any
shareholder held personally liable for the obligations of the Trust and the
Trust will be covered by insurance which the trustees consider adequate to cover
foreseeable tort claims. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is considered by the Adviser remote and
not material, since it is limited to circumstances in which a disclaimer is
inoperative and the Trust itself is unable to meet its obligations.
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STATEMENT OF ADDITIONAL INFORMATION
August 1, 2000
Premier Money Market Shares:
Money Market Portfolio
Government Securities Portfolio
Tax-Exempt Portfolio
Treasury Portfolio
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).
TABLE OF CONTENTS
INVESTMENT RESTRICTIONS......................................................2
INVESTMENT POLICIES AND TECHNIQUES...........................................5
INVESTMENT ADVISER AND SHAREHOLDER SERVICES.................................11
PORTFOLIO TRANSACTIONS......................................................15
PURCHASE AND REDEMPTION OF SHARES...........................................16
DIVIDENDS, NET ASSET VALUE AND TAXES........................................19
PERFORMANCE.................................................................21
OFFICERS AND TRUSTEES.......................................................23
SPECIAL FEATURES............................................................27
SHAREHOLDER RIGHTS..........................................................29
APPENDIX -- RATINGS OF INVESTMENTS..........................................30
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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.
The Money Market Portfolio and the Government Securities Portfolio individually
may not:
(1) Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its agencies or
instrumentalities) if, as a result, more than 5% of the value of the
Portfolio's assets would be invested in securities of that issuer.
(2) Purchase more than 10% of any class of securities of any issuer. All
debt securities and all preferred stocks are each considered as one
class.
(3) Make loans to others (except through the purchase of debt obligations
or repurchase agreements in accordance with its investment objective
and policies).
(4) Borrow money except as a temporary measure for extraordinary or
emergency purposes and then only in an amount up to one-third of the
value of its total assets, in order to meet redemption requests without
immediately selling any money market instruments (any such borrowings
under this section will not be collateralized). If, for any reason, the
current value of the Portfolio's total assets falls below an amount
equal to three times the amount of its indebtedness from money
borrowed, the Portfolio will, within three days (not including Sundays
and holidays), reduce its indebtedness to the extent necessary. The
Portfolio will not borrow for leverage purposes.
(5) Make short sales of securities, or purchase any securities on margin
except to obtain such short-term credits as may be necessary for the
clearance of transactions.
(6) Write, purchase or sell puts, calls or combinations thereof.
(7) Purchase or retain the securities of any issuer if any of the officers,
trustees or directors of the Trust or its investment adviser owns
beneficially more than 1/2 of 1% of the securities of such issuer and
together own more than 5% of the securities of such issuer.
(8) Invest for the purpose of exercising control or management of another
issuer.
(9) Invest in commodities or commodity futures contracts or in real estate
(or real estate limited partnerships), although it may invest in
securities which are secured by real estate and securities of issuers
which invest or deal in real estate.
(10) Invest in interests in oil, gas or other mineral exploration or
development programs or leases, although it may invest in the
securities of issuers which invest in or sponsor such programs.
(11) Underwrite securities issued by others except to the extent the
Portfolio may be deemed to be an underwriter, under the federal
securities laws, in connection with the disposition of portfolio
securities.
(12) Issue senior securities as defined in the 1940 Act.
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Additionally, the Money Market Portfolio may not:
(13) Concentrate 25% or more of the value of the Portfolio's assets in any
one industry; provided, however, that (a) the Portfolio reserves
freedom of action to invest up to 100% of its assets in obligations of,
or guaranteed by, the United States Government, its agencies or
instrumentalities in accordance with its investment objective and
policies and (b) the Portfolio will invest at least 25% of its assets
in obligations issued by banks in accordance with its investment
objective and policies. However, the Portfolio may, in the discretion
of its investment adviser, invest less than 25% of its assets in
obligations issued by banks whenever the Portfolio assumes a temporary
defensive posture.
With regard to restriction #13, for purposes of determining the percentage of
the Portfolio's total assets invested in securities of issuers having their
principal business activities in a particular industry, asset backed securities
will be classified separately, based on the nature of the underlying assets.
Currently, the following categories are used: captive auto, diversified, retail
and consumer loans, captive equipment and business, business trade receivables,
nuclear fuel and capital and mortgage lending.
The Tax-Exempt Portfolio may not:
(1) Purchase securities if as a result of such purchase more than
25% of the Portfolio's total assets would be invested in any
industry or in any one state. Municipal Securities and
obligations of, or guaranteed by, the U.S. Government, its
agencies or instrumentalities are not considered an industry
for purposes of this restriction.
(2) Purchase securities of any issuer (other than obligations of,
or guaranteed by, the U.S. Government, its agencies or
instrumentalities) if as a result more than 5% of the value of
the Portfolio's assets would be invested in the securities of
such issuer. For purposes of this limitation, the Portfolio
will regard the entity that has the primary responsibility for
the payment of interest and principal as the issuer.
(3) Make loans to others (except through the purchase of debt
obligations or repurchase agreements in accordance with its
investment objective and policies).
(4) Borrow money except as a temporary measure for extraordinary
or emergency purposes and then only in an amount up to
one-third of the value of its total assets, in order to meet
redemption requests without immediately selling any money
market instruments (any such borrowings under this section
will not be collateralized). If, for any reason, the current
value of the Portfolio's total assets falls below an amount
equal to three times the amount of its indebtedness from money
borrowed, the Portfolio will, within three days (not including
Sundays and holidays), reduce its indebtedness to the extent
necessary. The Portfolio will not borrow for leverage
purposes.
(5) Make short sales of securities or purchase securities on
margin, except to obtain such short-term credits as may be
necessary for the clearance of transactions.
(6) Write, purchase or sell puts, calls or combinations thereof,
although the Portfolio may purchase Municipal Securities
subject to Standby Commitments in accordance with its
investment objective and policies.
(7) Purchase or retain the securities of any issuer if any of the
officers, trustees or directors of the Trust or its investment
adviser owns beneficially more than 1/2 of 1% of the
securities of such issuer and together own more than 5% of the
securities of such issuer.
(8) Invest for the purpose of exercising control or management of
another issuer.
(9) Invest in commodities or commodity futures contracts or in
real estate (or real estate limited partnerships) except that
the Portfolio may invest in Municipal Securities secured by
real estate or interests therein.
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(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:
(i) Purchase any securities other than obligations issued
by the U.S. Government and repurchase agreements of
such obligations, except in connection with a
master/feeder fund
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structure. However, if the Fund implements a
master/feeder fund structure, shareholder approval is
required.
(ii) Borrow money in an amount greater than 5% of its
total assets, except for temporary or emergency
purposes.
(iii) Lend portfolio securities in an amount greater than
5% of its total assets.
(iv) 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. It 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
(which is not offered in this Statement of Additional Information) and the
Tax-Exempt Portfolio. Investors Cash Trust currently offers two investment
portfolios: the Government Securities Portfolio 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.
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
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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
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
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investment by the Portfolio. Collection of receivables in the trust may be
affected by various social, legal and economic factors affecting the use of
credit and repayment patterns, such as changes in consumer protection laws, the
rate of inflation, unemployment levels and relative interest rates. It is
anticipated that for most publicly offered certificates there will be a liquid
secondary market or there may be demand features enabling the Portfolio to
readily sell its certificates prior to maturity to the issuer or a third party.
While the Portfolio may invest without limit in certificates, it is currently
anticipated that such investments will not exceed 25% of the Portfolio's assets.
Government Securities Portfolio. The Portfolio seeks maximum current income
consistent with stability of capital. The Portfolio pursues its objective by
investing exclusively in U.S. Treasury bills, notes, bonds and other obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities
and repurchase agreements of such obligations. All such securities purchased
mature in 12 months or less. Some securities issued by U.S. Government agencies
or instrumentalities are supported only by the credit of the agency or
instrumentality, such as those issued by the Federal Home Loan Bank, and others
have an additional line of credit with the U.S. Treasury, such as those issued
by Fannie Mae, the Farm Credit System and the Student Loan Marketing
Association. Short-term U.S. Government obligations generally are considered to
be the safest short-term investment. The U.S. Government guarantee of the
securities owned by the Portfolio, however, does not guarantee the net asset
value of its shares, which the Portfolio seeks to maintain at $1.00 per share.
Also, with respect to securities supported only by the credit of the issuing
agency or instrumentality or by an additional line of credit with the U.S.
Treasury, there is no guarantee that the U.S. Government will provide support to
such agencies or instrumentalities and such securities may involve risk of loss
of principal and interest.
Tax-Exempt Portfolio. The Portfolio seeks maximum current income that is exempt
from Federal income taxes to the extent consistent with stability of capital.
The Portfolio pursues its objective primarily through a professionally managed,
diversified portfolio of short-term high quality tax-exempt municipal
obligations. Under normal market conditions at least 80% of the Portfolio's
total assets will, as a fundamental policy, be invested in obligations issued by
or on behalf of states, territories and possessions of the United States and the
District of Columbia and their political subdivisions, agencies and
instrumentalities, the income from which is exempt from Federal income tax
("Municipal Securities"). In compliance with the position of the staff of the
Securities and Exchange Commission, the Portfolio does not consider "private
activity" bonds to be Municipal Securities for purposes of the 80% limitation.
This is a fundamental policy so long as the staff maintains its position, after
which it would become non-fundamental.
Municipal Securities, such as industrial development bonds, are issued by or on
behalf of public authorities to obtain funds for purposes including privately
operated airports, housing, conventions, trade shows, ports, sports, parking or
pollution control facilities or for facilities for water, gas, electricity or
sewage and solid waste disposal. Such obligations, which may include lease
arrangements, are included within the term Municipal Securities if the interest
paid thereon qualifies as exempt from federal income tax. Other types of
industrial development bonds, the proceeds of which are used for the
construction, equipment, repair or improvement of privately operated industrial
or commercial facilities, may constitute Municipal Securities, although current
Federal tax laws place substantial limitations on the size of such issues.
Municipal Securities which the Portfolio may purchase include, without
limitation, debt obligations issued to obtain funds for various public purposes,
including the construction of a wide range of public facilities such as
airports, bridges, highways, housing, hospitals, mass transportation, public
utilities, schools, streets, and water and sewer works. Other public purposes
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.
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The Portfolio will invest only in Municipal Securities that at the time of
purchase: (a) are rated within the two highest-ratings for Municipal Securities
(Aaa or Aa) assigned by Moody's or (AAA or AA) assigned by S&P; (b) are
guaranteed or insured by the U.S. Government as to the payment of principal and
interest; (c) are fully collateralized by an escrow of U.S. Government
securities acceptable to the Portfolio's investment 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 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
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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 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 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 related repurchase agreements. All securities
purchased mature in 12 months or less. The payment of principal and interest on
the securities in the Portfolio's 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.
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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.
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. 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.
For purposes of the 1940 Act, a repurchase agreement is deemed to be a loan from
a Portfolio to the seller of the Obligation subject to the repurchase agreement
and is therefore subject to that Portfolio's investment restriction applicable
to loans. It is not clear whether a court would consider the Obligation
purchased by a Portfolio subject to a repurchase agreement as being owned by
that Portfolio or as being collateral for a loan by the Portfolio to the seller.
In the event of the commencement of 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.
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Repurchase agreements are instruments under which a Portfolio acquires ownership
of a U.S. Government security from a broker-dealer or bank that agrees to
repurchase the U.S. Government 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 incur expenses in
enforcing its rights, and could experience losses, including a decline in the
value of the underlying securities and loss of income. Currently, a Portfolio
will only enter into repurchase agreements with primary U.S. Government
securities dealers recognized by the Federal Reserve Bank of New York that have
been approved by the adviser. 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 Trust's Board of Trustees has
approved the filing of an application for exemptive relief with the SEC which
would permit the Potfolio to participate in an interfund lending program among
certain investment companies advised by the Adviser. If the Portfolio receives
the requested relief, the interfund lending program would allow the
participating funds to borrow money from and loan money to each other for
temporary or emergency purposes. The program would be 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 would
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 would extend overnight,
but could have a maximum duration of seven days. Loans could 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 Portfolio is actually engaged in
borrowing through the interfund lending program, the Portfolio, as a matter of
non-fundamental policy, may not borrow for other than temporary or emergency
purposes (and not for leveraging).
INVESTMENT ADVISER AND SHAREHOLDER SERVICES
Investment Adviser. Scudder Kemper Investments, Inc. ("Scudder Kemper") 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 Portfolio 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 Portfolio and its shares for
distribution under federal and state securities laws and membership dues in the
Investment Company Institute or any similar organization.
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
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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.
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),
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 $3,120,000, $1,167,000 and $699,000, respectively, for
the fiscal year ended April 30, 1999; $1,888,000, $1,020,000 and $530,000
respectively, for the fiscal year ended April 30, 1998; and $975,000, and
$483,000 and $69,000, respectively, for the fiscal year ended April 30, 1997.
The Adviser and certain affiliates have agreed to limit certain operating
expenses of the Portfolios to the extent described in the prospectus. If expense
limits had not been in effect for the Service Shares of the Portfolios, the
Adviser would have received investment management fees from the Money Market,
Government Securities and Tax-Exempt Portfolios of $4,086,000, $1,270,000 and
$699,000, respectively, for the fiscal year ended April 30, 1999; $2,463,000,
$1,301,000 and $630,000, respectively, for the fiscal year ended April 30, 1998,
and $1,150,000, $744,000 and $212,000, respectively, for the fiscal year ended
April 30, 1997. The Adviser absorbed operating expenses for the Money Market,
Government Securities and Tax-Exempt Portfolios of $2,233,000, $103,000 and $0,
respectively, for the fiscal year ended April 30, 1999; $1,253,000, $281,000 and
$100,000, respectively, for the year ended April 30, 1998; $175,000, $261,000
and $143,000, respectively, for the fiscal year ended April 30, 1997.
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
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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 Portfolios incurred investment management fees of $89,000, $91,000 and
$122,000 for the Treasury Portfolio for the fiscal years ended March 31, 1999,
1998 and 1997, respectively. By contract, the Adviser and certain affiliates
have agreed to limit operating expenses of the Premium Money Market Shares of
the Treasury Portfolio to 1.00% of average daily net assets of Treasury
Portfolio on an annual basis until August 1, 2001. For this purpose, "Portfolio
operating expenses" do not include taxes, interest, extraordinary expenses,
brokerage commissions or transaction costs. During the fiscal years ended March
31, 1999, 1998 and 1997, under expense limits then in effect for the Treasury
Portfolio's Service Shares, the Adviser (or an affiliate) absorbed $71,000,
$81,000 and $98,000, respectively, of the Treasury Portfolio's operating
expenses.
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. The Funds, 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 Funds 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 Funds, 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 Funds. 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
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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.
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.
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. 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, 1999, IFTC remitted shareholder service fees for Money Market
Portfolio in the amount of $4,860,000, for Government Securities Portfolio of
$1,242,000, and for Tax-Exempt Portfolio of $698,000 to KSvC as Shareholder
Service Agent. During the fiscal year ended March 31, 1999, IFTC remitted
shareholder service fees for Treasury Portfolio in the amount of $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 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
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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 Portfolios may waive the minimum for purchases by
trustees, directors, officers or employees of the Portfolios 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; (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
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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.
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
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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 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.
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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.
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.
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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 of time
shareholders have owned their shares. Dividends from these Portfolios do not
qualify for the dividends received deduction available to corporate
shareholders.
Dividends declared in October, November or December to shareholders of record as
of a date in one of those months and paid during the following January are
treated as paid on December 31 of the calendar year in which declared for
Federal income tax purposes. The Portfolio may adjust its schedule for dividend
reinvestment for the month of December to assist in complying with the reporting
and minimum distribution requirements contained in the Code.
Tax-Exempt Portfolio. The Tax-Exempt Portfolio intends to continue to qualify
under the Code as a regulated investment company and, if so qualified, will not
be liable for Federal income taxes to the extent its earnings are distributed.
This Portfolio also intends to meet the requirements of the Code applicable to
regulated investment companies distributing tax-exempt interest dividends and,
accordingly, dividends representing net interest received on Municipal
Securities will not be included by shareholders in their gross income for
Federal income tax purposes, except to the extent such interest is subject
20
<PAGE>
to the alternative minimum tax as discussed below. Dividends representing
taxable net investment income (such as net interest income from temporary
investments in obligations of the U.S. Government) and net short-term capital
gains, if any, are taxable to shareholders as ordinary income. Net interest on
certain "private activity bonds" issued on or after August 8,1986 is treated as
an item of tax preference and may, therefore, be subject to both the individual
and corporate alternative minimum tax. To the extent provided by regulations to
be issued by the Secretary of the Treasury, exempt-interest dividends from the
Tax-Exempt Portfolio are to be treated as interest on private activity bonds in
proportion to the interest income the Portfolio receives from private activity
bonds, reduced by allowable deductions. For the 1998 calendar year 19% of the
net interest income was derived from "private activity bonds. "
Exempt-interest dividends, except to the extent of interest from "private
activity bonds," are not treated as a tax-preference item. For a corporate
shareholder, however, such dividends will be included in determining such
corporate shareholder's "adjusted current earnings." Seventy-five percent of the
excess, if any, of "adjusted current earnings" over the corporate shareholder's
other alternative minimum taxable income with certain adjustments will be a
tax-preference item. Corporate shareholders are advised to consult their tax
advisers with respect to alternative minimum tax consequences.
Shareholders will be required to disclose on their Federal income tax returns
the amount of tax-exempt interest earned during the year, including
exempt-interest dividends received from the Tax-Exempt Portfolio.
Individuals whose modified income exceeds a base amount will be subject to
Federal income tax on up to 85% of their Social Security benefits. Modified
income includes adjusted gross income, tax-exempt interest, including
exempt-interest dividends from the Tax-Exempt Portfolio, and 50% of Social
Security benefits.
The tax exemption of dividends from the Tax-Exempt Portfolio for Federal income
tax purposes does not necessarily result in exemption under the income or other
tax laws of any state or local taxing authority. The laws of the several states
and local taxing authorities vary with respect to the taxation of such income
and shareholders of the Portfolios are advised to consult their own tax advisers
as to the status of their accounts under state and local tax laws.
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 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
21
<PAGE>
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.
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
22
<PAGE>
want to compare the Portfolio's performance to the Consumer Price Index either
directly or by calculating its "real rate of return," which is adjusted for the
effects of inflation.
Tax-Exempt Versus Taxable Yield. You may want to determine which investment --
tax-exempt or taxable -- will provide you with a higher after-tax return. To
determine the taxable equivalent yield, simply divide the yield from the
tax-exempt investment by the sum of [1 minus your marginal tax rate]. The tables
below are provided for your convenience in making this calculation for selected
tax-exempt yields and taxable income levels. These yields are presented for
purposes of illustration only and are not representative of any yield that the
Tax-Exempt Portfolio may generate. Both tables are based upon current law as to
the 1999 tax rates schedules.
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% (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.
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<PAGE>
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.
ROBERT C. PECK, JR. (10/1/46), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Managing Director, Scudder Kemper; formerly, Executive Vice
President and Chief Investment Officer with an unaffiliated investment
management firm from 1988 to June 1997.
KATHRYN L. QUIRK (12/3/52), Vice President*, 345 Park Avenue, New York, New
York; Managing Director, Scudder Kemper.
FRANK J. RACHWALSKI, JR. (3/26/45), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Managing Director, Scudder Kemper.
LINDA J. WONDRACK (9/12/64), Vice President*, Two International Place, Boston,
Massachusetts; Senior Vice President, Scudder Kemper.
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.
24
<PAGE>
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 2000 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.
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:
25
<PAGE>
<TABLE>
<CAPTION>
Name and Address % Owned Portfolio
---------------- ------- ---------
<S> <C> <C>
National City Bank Investors Cash Trust/Treasury
Money Market Unit Portfolio - Service Shares
4100 W. 150th Street
Cleveland, OH 44135
Walker County Investors Cash Trust/ Treasury
Disbursement Account Portfolio - Service Shares
1100 University Avenue
Huntsville, TX 77340
Angelina County General Fund Investors Cash Trust/ Treasury
P.O. Box 908 Portfolio - Service Shares
Lufkin, TX 75902
Smith County General Fund Investors Cash Trust/ Treasury
Smith County Courthouse Portfolio - Service Shares
Tyler, TX 75702
DST Systems Cash Account Trust/ Government
Sub-transfer Agent FBO Berger Securities Portfolio - Service
Program Customers Shares
127 W. 10th St.
Kansas City, MO 64105
May Financial Corp. Cash Account Trust/ Government
For exclusive benefit of May Customers Securities Portfolio - Service
8333 Douglas Ave Shares
Dallas, TX 75225
Prudential Securities Cash Account Trust/ Tax-Exempt
1 New York Plaza Portfolio - Service Shares
New York, NY 10004
Cash Account Trust/ Money Market
Dean McBride FBO Portfolio - Premium Reserves
George Hughes Shares
2218 E. Rovey Ave.
Phoenix, AZ 85016
Centurion Trust Company Cash Account Trust/ Money
FBO Omnibus/Centurion Capital Management Market Portfolio - Premium
2425 E. Camelback Reserves Shares
Phoenix, AZ 85016
26
<PAGE>
Name and Address %Owned Portfolio
---------------- ------ ---------
Asset Preservation Inc. 14.10 Cash Account Trust/ Money Market
FBO Newcastle Industries Inc. Portfolio - Institutional
19501 Biscayne Blvd.
Miami, FL 33180
Asset Preservation Inc. 5.76 Cash Account Trust/ Money Market
FBO Charles Schusterman Revocable Trust - Institutional Shares
4099 McEwen Road
Dallas, TX 75244
Walnut Street Securities 17.14 Cash Account Trust/ Money Market
FBO Asset Preservation, Inc. - Institutional Shares
400 S. 4th Street
St. Louis, MO 63102
Scudder Kemper Investments 99.85 Cash Account Trust/Tax Exempt
345 Park Avenue Portfolio-Institutional Shares
New York, NY 10154
Scudder Kemper Investments 99.85 Cash Account/Tax Exempt Portfolio
345 Park Avenue - Managed Shares
New York, NY 10154
</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, 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 "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
27
<PAGE>
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.
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
28
<PAGE>
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.
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.
29
<PAGE>
APPENDIX -- RATINGS OF INVESTMENTS
COMMERCIAL PAPER RATINGS
A-1, A-2, Prime-1, Prime-2 and Duff 1, Duff 2 Commercial Paper Ratings
Commercial paper rated by Standard & Poor's Corporation has the following
characteristics: Liquidity ratios are adequate to meet cash requirements.
Long-term senior debt is rated "A" or better. The issuer has access to at least
two additional channels of borrowing. Basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances. Typically, the
issuer's industry is well established and the issuer has a strong position
within the industry. The reliability and quality of management are unquestioned.
Relative strength or weakness of the above factors determine whether the
issuer's commercial paper is rated A-1, A-2 or A-3.
The ratings Prime-1 and Prime-2 are the two highest commercial paper ratings
assigned by Moody's Investors Service, Inc. Among the factors considered by them
in assigning ratings are the following: (1) evaluation of the management of the
issuer; (2) economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain areas; (3)
evaluation of the issuer's products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend
of earnings over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and (8) recognition
by the management of obligations which may be present or may arise as a result
of public interest questions and preparations to meet such obligations. Relative
strength or weakness of the above factors determines whether the issuer's
commercial paper is rated Prime-1, 2 or 3.
The rating Duff-1 is the highest commercial paper rating assigned by Duff &
Phelps Inc. Paper rated Duff-1 is regarded as having very high certainty of
timely payment with excellent liquidity factors that are supported by ample
asset protection. Risk factors are minor. Paper rated Duff-2 is regarded as
having good certainty of timely payment, good access to capital markets and
sound liquidity factors and company fundamentals. Risk factors are small.
MIG-1 and MIG-2 Municipal Notes
Moody's Investors Service, Inc.'s ratings for state and municipal notes and
other short-term loans will be designated Moody's Investment Grade (MIG). This
distinction is in recognition of the differences between short-term credit risk
and long-term risk. Factors affecting the liquidity of the borrower are
uppermost in importance in short-term borrowing, while various factors of the
first importance in bond risk are of lesser importance in the short run. Loans
designated MIG-1 are of the best quality, enjoying strong protection from
established cash flows of funds for their servicing or from established and
broad-based access to the market for refinancing, or both. Loans designated
MIG-2 are of high quality, with margins of protection ample although not so
large as in the preceding group.
STANDARD & POOR'S CORPORATION BOND RATINGS, CORPORATE BONDS
AAA. This is the highest rating assigned by Standard & Poor's Corporation to a
debt obligation and indicates an extremely strong capacity to pay principal and
interest.
AA. Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
MOODY'S INVESTORS SERVICE, INC. BOND RATINGS
Aaa. Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa. Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may
30
<PAGE>
not be as large as in Aaa securities or fluctuation of protective elements may
be of greater amplitude or there may be other elements present which make the
long term risks appear somewhat larger than in Aaa securities.
DUFF & PHELP'S INC. BOND RATINGS
AAA -- Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA -- High credit quality. Protection factors are strong. Risk is modest but may
vary slightly from time to time because of economic conditions.
31
<PAGE>
INVESTORS CASH TRUST
PART C. OTHER INFORMATION
<TABLE>
<CAPTION>
Item 23. Exhibits.
------- ---------
<S> <C> <C>
(a) (1) Amended and Restated Agreement and Declaration of Trust, dated March 9,
1990, is incorporated by reference to Post-Effective Amendment No. 7 to the
Registration Statement.
(2) Written Instrument Amending Agreement and Declaration of Trust, dated August
14, 1990, is incorporated by reference to Post-Effective Amendment No. 7 to
the Registration Statement.
(3) Written Instrument Amending Agreement and Declaration of Trust, dated
September 19, 1990, is incorporated by reference to Post-Effective Amendment
No. 7 to the Registration Statement.
(b) By-laws of the Trust are incorporated by reference to Post-Effective
Amendment No. 7 to the Registration Statement.
(c) (1) Text of Share Certificate is incorporated by reference to Post-Effective
Amendment No. 7 to the Registration Statement.
(2) Establishment and Declaration of Series of Beneficial Interest with respect
to the Government Cash Managed Shares and Scudder Government Cash
Institutional Shares of the Government Securities Portfolio is incorporated
by reference to Post-Effective Amendment No. 15.
(3) Establishment and Designation of Classes of Shares of Beneficial Interest,
$0.01 par value, with respect to Treasury Portfolio Premier Money Market
Shares is incorporated by reference to Post-Effective Amendment No. 17 to
the Registration Statement.
(d) Investment Management Agreement, dated October 1, 1999, is filed herein.
(e) (1) Underwriting Agreement between the Registrant and Kemper Distributors, Inc.,
dated October 1, 1999, is incorporated by reference to Post-Effective
Amendment No. 17 to the Registration Statement.
(2) Form of Selling Group Agreement is incorporated by reference to
Post-Effective Amendment No. 7 to the Registration Statement.
(f) Inapplicable.
(g) Custody Agreement between the Registrant, on behalf of Government Securities
Portfolio and Treasury Portfolio, and State Street Bank and Trust Company,
dated April 19, 1999, incorporated by reference to Post-Effective Amendment
No. 11 to the Registration Statement.
(h) (1) Agency Agreement, dated September 21, 1990, is incorporated by reference to
Post-Effective Amendment No. 7 to the Registration Statement.
1
<PAGE>
(2) Supplement to Agency Agreement, dated April 1, 1991,is incorporated by
reference to Post-Effective Amendment No. 7 to the Registration Statement.
(3) Supplement to Agency Agreement, dated October 1, 1992, is incorporated by
reference to Post-Effective Amendment No. 7 to the Registration Statement.
(4) Supplement to Agency Agreement, dated April 1, 1995, is incorporated by
reference to Post-Effective Amendment No. 8 to the Registration Statement.
(5) Administration and Shareholder Services Agreement, dated October 1, 1991, is
incorporated by reference to Post-Effective Amendment No. 7 to the
Registration Statement.
(6) Amendment to Administration and Shareholder Services Agreement, dated
December 1, 1993, is incorporated by reference to Post-Effective Amendment
No. 7 to the Registration Statement.
(7) Assignment and Assumption Agreement, dated February 1, 1995, is incorporated
by reference to Post-Effective Amendment No. 7 to the Registration Statement.
(8) Fund Accounting Services Agreements, each dated December 31, 1997, on behalf
of Government Securities Portfolio and Treasury Portfolio, respectively, is
incorporated by reference to Post-Effective Amendment No. 10 to the
Registration Statement.
(10) Amended and Restated Administration and Shareholder Services Agreement
between the Registrant, on behalf of the Treasury Portfolio Service Shares,
and Kemper Distributors, Inc, is incorporated by reference to Post-Effective
Amendment No. 17 to the Registration Statement.
(11) Amended and Restated Administration and Shareholder Services Agreement
between the Registrant, on behalf of the Government Securities Portfolio
Service Shares, and Kemper Distributors, Inc, is incorporated by reference
to Post-Effective Amendment No. 17 to the Registration Statement.
(12) Administration and Shareholder Services Agreement on behalf of the Treasury
Portfolio Premier Money Market Shares, dated November 30, 1999, is
incorporated by reference to Post-Effective Amendment No. 17 to the
Registration Statement.
(i) Legal Opinion and Consent of Counsel to be filed by amendment.
(j) Consent of Independent Accountants to be filed by amendment.
(k) Inapplicable
(l) Inapplicable
(m) 12b-1 Plan between the Registrant, on behalf of the Treasury Portfolio -
Premier Money Market Shares is incorporated by reference to Post-Effective
Amendment No. 17 to the Registration Statement.
2
<PAGE>
(n) Inapplicable
(o) Mutual Funds Multi-Distribution System Plan - Rule 18f-3 Plan is
incorporated by reference to Post-Effective Amendment No. 17 to the
Registration Statement.
</TABLE>
Item 24. Persons Controlled by or under Common Control with Fund.
-------- --------------------------------------------------------
None
Item 25. Indemnification.
-------- ----------------
Article VIII of the Registrant's Agreement and Declaration of Trust
(Exhibit 1 hereto, which is incorporated herein by reference) provides in effect
that the Registrant will indemnify its officers and trustees under certain
circumstances. However, in accordance with Section 17(h) and 17(i) of the
Investment Company Act of 1940 and its own terms, said Article of the Agreement
and Declaration of Trust does not protect any person against any liability to
the Registrant or its shareholders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers, and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such trustee, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question as to whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
Item 26. Business and 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>
3
<PAGE>
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. @@
4
<PAGE>
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
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.*
5
<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.
</TABLE>
* 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
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.
6
<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>
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
William M. Thomas Managing Director 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
7
<PAGE>
Positions and Offices with Positions and
Name Kemper Distributors, Inc. Offices with Registrant
---- ------------------------- -----------------------
Howard S. Schneider Managing Director None
Thomas V. Bruns Managing Director None
Johnston Allan Norris Managing Director and Senior Vice None
President
John H. Robinson, Jr. Managing Director and Senior Vice None
President
George A. Antonak Senior Vice President None
</TABLE>
(c) Not applicable
Item 28. Location of Accounts and Records.
-------- ---------------------------------
Accounts, books and other documents are maintained at the offices of
the Registrant, the offices of Registrant's investment adviser, Scudder Kemper
Investments, Inc., 222 South Riverside Plaza, Chicago, Illinois 60606, at the
offices of the Registrant's principal underwriter, Kemper Distributors, Inc.,
222 South Riverside Plaza, Chicago, Illinois 60606 or, in the case of records
concerning custodial functions, at the offices of the custodian, State Street
Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110 or, in
the case of records concerning transfer agency functions, at the offices of
State Street Bank and Trust Company and of the shareholder service agent, Kemper
Service Company, 811 Main Street, Kansas City, Missouri 64105.
Item 29. Management Services.
-------- --------------------
Inapplicable.
Item 30. Undertakings.
-------- -------------
Inapplicable.
8
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Chicago and State of Illinois, on the
1st day of June, 2000.
INVESTORS CASH TRUST
By /s/ Mark S. Casady
-------------------------
Mark S. Casady
President
Pursuant to the requirements of the Securities Act of 1933, this
amendment to its Registration Statement has been signed below on June 1, 2000 on
behalf of the following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Thomas W. Littauer June 1, 2000
-----------------------------------
Thomas W. Littauer* Chairman and Trustee
/s/ John W. Ballantine June 1, 2000
-----------------------------------
John W. Ballantine* Trustee
/s/ Lewis A. Burnham June 1, 2000
-----------------------------------
Lewis A. Burnham* Trustee
June 1, 2000
-----------------------------------
Linda C. Coughlin Trustee
/s/ Donald L. Dunaway June 1, 2000
-----------------------------------
Donald L. Dunaway* Trustee
/s/ Robert B. Hoffman June 1, 2000
-----------------------------------
Robert B. Hoffman* Trustee
/s/ Donald R. Jones June 1, 2000
-----------------------------------
Donald R. Jones* Trustee
/s/ Shirley D. Peterson June 1, 2000
-----------------------------------
Shirley D. Peterson* Trustee
<PAGE>
/s/ William P. Sommers June 1, 2000
-----------------------------------
William P. Sommers* Trustee
/s/ John R. Hebble June 1, 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. 10 to
the Registration Statement, filed on July
28, 1998 and Post-Effective Amendment No.
13 to the Registration Statement, filed
on September 3, 1999.
2
<PAGE>
File No. 33-34645
File No. 811-6103
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
FORM N-1A
POST-EFFECTIVE AMENDMENT NO. 18
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 20
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
INVESTORS CASH TRUST
<PAGE>
INVESTORS CASH TRUST
2