KEMPER INTERNATIONAL FUND, 497, 1997-02-27

KEMPER INTERNATIONAL FUND
497, 1997-02-27

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<PAGE> 1

KEMPER GLOBAL INCOME FUND
KEMPER INTERNATIONAL FUND
SUPPLEMENT TO PROSPECTUS
DATED MARCH 1, 1997

CLASS I SHARES

Kemper Global Income Fund (the "Global Fund") and Kemper International Fund (the
"International Fund") (collectively, the "Funds") currently offer four classes
of shares to provide investors with different purchasing options. These are
Class A, Class B and Class C shares, which are described in the prospectus, and
Class I shares, which are described in the prospectus as supplemented hereby.

Class I shares are available for purchase exclusively by the following
investors: (a) tax-exempt retirement plans of Zurich Kemper Investments, Inc.
("ZKI") and its affiliates; and (b) the following investment advisory clients of
ZKI and its investment advisory affiliates (including Zurich Investment
Management, Inc.) that invest at least $1 million in a Fund: (1) unaffiliated
benefit plans (other than individual retirement accounts and self-directed
retirement plans); (2) unaffiliated banks and insurance companies purchasing for
their own accounts; and (3) endowment funds of unaffiliated non-profit
organizations. Class I shares currently are available for purchase only from
Kemper Distributors, Inc., principal underwriter for the Funds. Share
certificates are not available for Class I shares.

The primary distinctions among the classes of each Fund's shares lie in their
initial and contingent deferred sales charge schedules and in their ongoing
expenses, including asset-based sales charges in the form of Rule 12b-1
distribution fees. Class I shares are offered at net asset value without an
initial sales charge, a contingent deferred sales charge or a Rule 12b-1
distribution fee. Also, there is no administrative services fee charged to Class
I shares. As a result of the relatively lower expenses for Class I shares, the
level of income dividends per share (as a percentage of net asset value) and,
therefore, the overall investment return, will typically be higher for Class I
shares than for Class A, Class B and Class C shares although not always as
reflected for the Global Fund below.

The following information for the Class I shares supplements the "Summary of
Expenses" section of the prospectus.

SUMMARY OF EXPENSES

<TABLE>
<CAPTION>
CLASS I
-------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES (APPLICABLE TO BOTH FUNDS)
Maximum Sales Charge on Purchases (as a percentage of
offering price)........................................... None
Maximum Sales Charge on Reinvested Dividends................ None
Redemption Fees............................................. None
Exchange Fee................................................ None
Deferred Sales Charge (as a percentage of redemption
proceeds)................................................. None
</TABLE>

ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)

<TABLE>
<CAPTION>
GLOBAL INTERNATIONAL
FUND FUND
------ -------------
<S> <C> <C>
Management Fees............................................. .75% .74%
12b-1 Fees.................................................. None None
Other Expenses.............................................. .78% .36%
---- ----
Total Operating Expenses.................................... 1.53% 1.10%
==== ====
</TABLE>

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

<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
EXAMPLE ---- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 Global Fund $16 $48 $83 $182
investment assuming (1) 5% annual return and (2) International Fund 11 35 61 134
redemption at the end of each time period:
</TABLE>

The purpose of the preceding table is to assist investors in understanding the
various costs and expenses that an investor in Class I shares of a Fund will
bear directly or indirectly. See "Investment Manager and Underwriter" for more
information.

The Example assumes a 5% annual rate of return pursuant to requirements of the
Securities and Exchange Commission. This hypothetical rate of return is not
intended to be representative of past or future performance
<PAGE> 2

of either Fund. The Example should not be considered to be a representation of
past or future expenses. Actual expenses may be greater or lesser than those
shown.

FINANCIAL HIGHLIGHTS

KEMPER GLOBAL INCOME FUND

<TABLE>
<CAPTION>
YEAR NOVEMBER 22, 1995
ENDED TO
DECEMBER 31, 1996 DECEMBER 31, 1995
CLASS I ----------------- -----------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $9.05 9.57
- ------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .51 .07
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized loss (.02) (.03)
- ------------------------------------------------------------------------------------------------------
Total from investment operations .49 .04
- ------------------------------------------------------------------------------------------------------
Less distribution from net investment income .61 .56
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.93 9.05
- ------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 5.81% .43
- ------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Expenses 1.53% .88
- ------------------------------------------------------------------------------------------------------
Net investment income 5.72% 6.40
- ------------------------------------------------------------------------------------------------------
</TABLE>

KEMPER INTERNATIONAL FUND

<TABLE>
<CAPTION>
YEAR JULY 3
ENDED TO
OCTOBER 31, 1996 OCTOBER 31, 1995
CLASS I ---------------- ----------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $10.61 10.09
- ----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .10 .04
- ----------------------------------------------------------------------------------------------------
Net realized and unrealized gain 1.48 .48
- ----------------------------------------------------------------------------------------------------
Total from investment operations 1.58 .52
- ----------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .15 --
- ----------------------------------------------------------------------------------------------------
Distribution from net realized gain .05 --
- ----------------------------------------------------------------------------------------------------
Total dividends .20 --
- ----------------------------------------------------------------------------------------------------
Net asset value, end of period $11.99 10.61
- ----------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 15.19% 5.15
- ----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Expenses 1.10% .85
- ----------------------------------------------------------------------------------------------------
Net investment income .88% 1.32
- ----------------------------------------------------------------------------------------------------
</TABLE>

SPECIAL FEATURES

Shareholders of a Fund's Class I shares may exchange their shares for (i) shares
of Kemper Money Funds--Kemper Money Market Fund if the shareholders of Class I
shares have purchased shares because they are participants in tax-exempt
retirement plans of ZKI and its affiliates and (ii) Class I shares of any other
"Kemper Mutual Fund" listed under "Special Features--Class A Shares--Combined
Purchases" in the prospectus. Conversely, shareholders of Kemper Money
Funds--Kemper Money Market Fund who have purchased shares because they are
participants in tax-exempt retirement plans of ZKI and its affiliates may
exchange their shares for Class I shares of "Kemper Mutual Funds" to the extent
that they are available through their plan. Exchanges will be made at the shares
relative net asset values. Exchanges are subject to the limitations set forth in
the prospectus under "Special Features--Exchange Privilege--General."

March 1, 1997
KIF-1I (3/97)
<PAGE> 3

TABLE OF CONTENTS
- ---------------------------------------------------------

<TABLE>
<S> <C>
Summary 1
- ------------------------------------------------
Summary of Expenses 2
- ------------------------------------------------
Financial Highlights 4
- ------------------------------------------------
Investment Objectives, Policies and Risk 7
Factors
- ------------------------------------------------
Investment Manager and Underwriter 18
- ------------------------------------------------
Dividends and Taxes 21
- ------------------------------------------------
Net Asset Value 23
- ------------------------------------------------
Purchase of Shares 23
- ------------------------------------------------
Redemption or Repurchase of Shares 29
- ------------------------------------------------
Special Features 34
- ------------------------------------------------
Performance 37
- ------------------------------------------------
Capital Structure 39
- ------------------------------------------------
</TABLE>

This combined prospectus contains information about each of the Funds that a
prospective investor should know before investing and should be retained for
future reference. A Statement of Additional Information dated March 1, 1997, has
been filed with the Securities and Exchange Commission and is incorporated
herein by reference. It is available upon request without charge from the Funds
at the address or telephone number on this cover or the firm from which this
prospectus was received.

THE FUNDS' SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, NOR ARE THEY FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. INVESTMENT IN A
FUND'S SHARES INVOLVES RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.

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

LOGO

KEMPER
GLOBAL INCOME
FUND

KEMPER
INTERNATIONAL
FUND
PROSPECTUS MARCH 1, 1997

KEMPER GLOBAL INCOME FUND
KEMPER INTERNATIONAL FUND
222 South Riverside Plaza, Chicago, Illinois 60606
1-800-621-1048

The objective of Kemper Global Income Fund is to provide high current income
consistent with prudent total return asset management. The Fund pursues its
objective by investing primarily in investment grade foreign and domestic fixed
income securities.

The objective of Kemper International Fund is to seek a total return, a
combination of capital growth and income, principally through an internationally
diversified portfolio of equity securities.

There is no assurance that either Fund's objective will be achieved.
<PAGE> 4

KEMPER GLOBAL INCOME FUND
KEMPER INTERNATIONAL FUND
222 SOUTH RIVERSIDE PLAZA, CHICAGO, ILLINOIS 60606, TELEPHONE 1-800-621-1048

SUMMARY

INVESTMENT OBJECTIVES. Kemper Global Income Fund (the "Global Fund") is
registered as an open-end, non-diversified, management investment company. The
Global Fund's investment objective is to provide high current income consistent
with prudent total return asset management. The Fund pursues its objective by
investing primarily in a portfolio of investment grade foreign and domestic
fixed income securities. The Global Fund may also engage in options, financial
futures, delayed delivery and foreign currency transactions and may lend its
portfolio securities.

Kemper International Fund (the "International Fund") is registered as an
open-end, diversified management investment company. The International Fund's
investment objective is to seek a total return, a combination of capital growth
and income, principally through an internationally diversified portfolio of
equity securities. Under normal circumstances, more than 80% of the
International Fund's total assets will be invested in non-U.S. issuers. The
International Fund also may engage in options, financial futures and foreign
currency transactions. See "Investment Objectives, Policies and Risk Factors."

RISK FACTORS. Each Fund may invest without limit in securities of foreign
issuers. Foreign investments involve risk and opportunity considerations not
typically associated with investing in United States companies. The U.S. Dollar
value of a foreign security tends to decrease when the value of the U.S. Dollar
rises against the foreign currency in which the security is denominated and
tends to increase when the value of the U.S. Dollar falls against such currency.
Thus, the U.S. Dollar value of foreign securities in a Fund's portfolio, and the
Fund's net asset value, may change in response to changes in currency exchange
rates even though the value of the foreign securities in local currency terms
may not have changed. While a Fund's investments in foreign securities will
principally be in developed countries, the Fund may invest a portion of its
assets in countries considered by the Fund's investment manager to be developing
or "emerging" markets, which involve exposure to economic structures that are
generally less diverse and mature than in the United States, and to political
systems that may be less stable. As a "non-diversified" investment company, the
Global Fund will be able to invest a relatively high percentage of its assets in
a limited number of issuers, therefore making the Fund more susceptible to a
single economic, political or regulatory occurrence than a diversified company.
Thus, an investment in either Fund should not be considered as a complete
investment program. There are special risks associated with options, financial
futures, foreign currency and other derivative transactions and there is no
assurance that use of those investment techniques will be successful. Each
Fund's returns and net asset value will fluctuate. See "Investment Objectives,
Policies and Risk Factors."

PURCHASES AND REDEMPTIONS. Each Fund provides investors with the option of
purchasing shares in the following ways:

<TABLE>
<S> <C>
Class A Shares....................... Offered at net asset value plus a maximum sales charge of
4.5% of the offering price for the Global Fund and 5.75% of
the offering price for the International Fund. Reduced sales
charges apply to purchases of $100,000 or more for the
Global Fund and $50,000 or more for the International Fund.
Class A shares purchased at net asset value under the Large
Order NAV Purchase Privilege may be subject to a 1%
contingent deferred sales charge if redeemed within one year
of purchase and a .50% contingent deferred sales charge if
redeemed during the second year of purchase.
Class B Shares....................... Offered at net asset value, subject to a Rule 12b-1
distribution fee and a contingent deferred sales charge that
declines from 4% to zero on certain redemptions made within
six years of purchase. Class B shares automatically convert
into Class A shares (which have lower ongoing expenses) six
years after purchase.
</TABLE>

1
<PAGE> 5
<TABLE>
<S> <C>
Class C Shares....................... Offered at net asset value without an initial sales charge,
but subject to a Rule 12b-1 distribution fee and a 1%
contingent deferred sales charge on redemptions made within
one year of purchase. Class C shares do not convert into
another class.
</TABLE>

Each class of shares represents interests in the same portfolio of investments
of a Fund. The minimum initial investment is $1,000 and investments thereafter
must be at least $100. Shares are redeemable at net asset value, which may be
more or less than original cost, subject to any applicable contingent deferred
sales charge. See "Purchase of Shares" and "Redemption or Repurchase of Shares."

INVESTMENT MANAGER AND UNDERWRITER. Zurich Kemper Investments, Inc. ("ZKI")
serves as investment manager for each Fund. ZKI is paid an investment management
fee by each Fund at an annual rate ranging from .75% to .62% of its average
daily net assets. Zurich Investment Management Limited ("ZIML"), an affiliate of
ZKI, is the sub-adviser for each Fund and is paid by ZKI a fee of .30% for the
Global Fund and .35% for the International Fund of the portion of the average
daily net assets of that Fund allocated by ZKI to ZIML for management. Kemper
Distributors, Inc. ("KDI"), a wholly owned subsidiary of ZKI, is principal
underwriter and administrator for each Fund. For Class B and Class C shares, KDI
receives a Rule 12b-1 distribution fee of .75% of average daily net assets. KDI
also receives the amount of any contingent deferred sales charges paid on the
redemption of shares. The expenses of each Fund, and of other investment
companies investing in foreign securities, can be expected to be higher than for
investment companies investing primarily in domestic securities since the costs
of operation are higher, including custody and transaction costs for foreign
securities and investment management fees. Administrative services are provided
to shareholders under an administrative services agreement with KDI. Each Fund
pays an administrative services fee at an annual rate of up to .25% of average
daily net assets of each class of the Fund, which KDI pays to financial services
firms. See "Investment Manager and Underwriter."

DIVIDENDS. The Global Fund normally distributes monthly dividends of net
investment income, the International Fund normally distributes annual dividends
of net investment income and each Fund distributes any net realized short-term
and long-term capital gains at least annually. Income and capital gain dividends
of a Fund are automatically reinvested in additional shares of that Fund,
without a sales charge, unless the investor makes a different election. See
"Dividends and Taxes."

GENERAL. In the opinion of the staff of the Securities and Exchange Commission,
the use of this combined prospectus may make each Fund liable for any
misstatement or omission in this prospectus regardless of the particular Fund to
which it pertains.

SUMMARY OF EXPENSES

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES (APPLICABLE TO
BOTH FUNDS)(1)
Maximum Sales Charge on Purchases (as a
percentage of offering price).................. 4.5%/5.75%*(2) None None
Maximum Sales Charge on Reinvested Dividends..... None None None
Redemption Fees.................................. None None None
Exchange Fee..................................... None None None
Deferred Sales Charge (as a percentage of
redemption proceeds)........................... None(3) 4% during the first year, 1% during
3% during the second and the first
third years, 2% during year
the fourth and fifth
years and 1% in the sixth
year
*5.75% applies to the International Fund only.
</TABLE>

2
<PAGE> 6

- ---------------
(1) Investment dealers and other firms may independently charge additional fees
for shareholder transactions or for advisory services; please see their
materials for details.

(2) Reduced sales charges apply to purchases of $100,000 (for the Global Fund)
or $50,000 (for the International Fund) or more. See "Purchase of
Shares--Initial Sales Charge Alternative--Class A Shares."

(3) The redemption of Class A shares purchased at net asset value under the
Large Order NAV Purchase Privilege may be subject to a contingent deferred
sales charge of 1% the first year and .50% the second year. See "Purchase of
Shares--Initial Sales Charge Alternative--Class A Shares."

ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)

<TABLE>
<CAPTION>
GLOBAL INTERNATIONAL
FUND FUND
------ -------------
<S> <C> <C>
CLASS A SHARES
Management Fees............................................. .75% .74%
12b-1 Fees.................................................. None None
Other Expenses.............................................. .73% .90%
---- ----
Total Operating Expenses.................................... 1.48% 1.64%
==== ====
CLASS B SHARES
Management Fees............................................. .75% .74%
12b-1 Fees(4)............................................... .75% .75%
Other Expenses.............................................. .64% 1.04%
---- ----
Total Operating Expenses.................................... 2.14% 2.53%
==== ====
CLASS C SHARES
Management Fees............................................. .75% .74%
12b-1 Fees(5)............................................... .75% .75%
Other Expenses.............................................. .56% 1.01%
---- ----
Total Operating Expenses.................................... 2.06% 2.50%
==== ====
</TABLE>

- ---------------
(4) Long-term shareholders may pay more than the economic equivalent of the
maximum initial sales charges permitted by the National Association of
Securities Dealers, although KDI believes that it is unlikely because of the
automatic conversion feature described under "Purchase of Shares--Deferred
Sales Charge Alternative--Class B Shares."
(5) As a result of the accrual of 12b-1 fees, long-term shareholders may pay
more than the economic equivalent of the maximum initial sales charges
permitted by the National Association of Securities Dealers.

EXAMPLE

<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A SHARES ---- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
You would pay the following expenses on a Global Fund $59 $ 90 $122 $214
$1,000 investment, assuming (1) 5% annual International Fund $73 $106 $142 $241
return and (2) redemption at the end of each
time period:
</TABLE>

<TABLE>
<CAPTION>
CLASS B SHARES(6)
<S> <C> <C> <C> <C> <C>
You would pay the following expenses on a Global Fund $52 $ 87 $125 $215
$1,000 investment, assuming (1) 5% annual International Fund $56 $ 99 $145 $245
return and (2) redemption at the end of each
time period:
You would pay the following expenses on the Global Fund $22 $ 67 $115 $215
same investment, assuming no redemption: International Fund $26 $ 79 $135 $245
</TABLE>

- ---------------
(6) Assumes conversion to Class A shares six years after purchase and was
calculated based upon the assumption that the shareholder was an owner of
the shares on the first day of the first year and the contingent deferred
sales charge was applied as follows: 1 year (3%), 3 years (2%), 5 years (1%)
and 10 years (0%). See "Redemption or Repurchase of Shares--Contingent
Deferred Sales Charge--Class B Shares" for more information regarding the
calculation of the contingent deferred sales charge.

3
<PAGE> 7

<TABLE>
<CAPTION>
CLASS C SHARES
<S> <C> <C> <C> <C> <C>
You would pay the following expenses on a Global Fund $21 $64 $111 $239
$1,000 investment, assuming (1) 5% annual International Fund $25 $78 $133 $284
return and (2) redemption at the end of each
time period:
</TABLE>

The purpose of the preceding table is to assist investors in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. See "Investment Manager and Underwriter" for more information. The
Example assumes a 5% annual rate of return pursuant to requirements of the
Securities and Exchange Commission. This hypothetical rate of return is not
intended to be representative of past or future performance of either Fund. THE
EXAMPLE SHOULD NOT BE CONSIDERED TO BE A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.

FINANCIAL HIGHLIGHTS

The tables below show financial information for each Fund expressed in terms of
one share outstanding throughout the period. The information in the table for
each Fund is covered by the report of the Fund's independent auditors. The
report for each Fund is contained in its Registration Statement and is available
from that Fund. The financial statements contained in each Fund's 1996 Annual
Report to Shareholders are incorporated herein by reference and may be obtained
by writing or calling that Fund.

GLOBAL FUND

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, YEAR ENDED JUNE 30, OCTOBER 1, 1989
1996 1995 1994 1993 1993 1992 1991 TO JUNE 30, 1990
CLASS A SHARES ---- ---- ---- ------------ ---- ---- ---- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $9.05 8.55 9.29 9.21 9.44 9.26 9.98 9.00
- -----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .52 .61 .60 .27 .72 .76 .94 .60
- -----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) (.02) 1.05 (.74) .16 (.17) .22 -- .70
- -----------------------------------------------------------------------------------------------------------------------
Total from investment operations .50 1.66 (.14) .43 .55 .98 .94 1.30
- -----------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment
income .58 1.16 .38 -- .72 .73 1.22 .32
- -----------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain -- -- -- .11 .06 .07 .44 --
- -----------------------------------------------------------------------------------------------------------------------
Tax return of capital distribution -- -- .22 .24 -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Total dividends .58 1.16 .60 .35 .78 .80 1.66 .32
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.97 9.05 8.55 9.29 9.21 9.44 9.26 9.98
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED): 5.87% 19.89 (1.47) 4.73 6.16 10.77 9.30 14.74
- -----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Expenses 1.48% 1.34 1.53 1.29 1.52 1.53 1.60 1.64
- -----------------------------------------------------------------------------------------------------------------------
Net investment income 5.77% 6.43 6.67 5.75 7.87 8.32 9.17 9.23
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>

4
<PAGE> 8

<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------------ -----------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31 MAY 31, 1994 TO DECEMBER 31 MAY 31, 1994 TO
1996 1995 DECEMBER 31, 1994 1996 1995 DECEMBER 31, 1994
CLASS B AND C SHARES ----- ----- ----------------- ---- ----- -----------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $9.09 8.56 8.70 9.09 8.56 8.70
- ----------------------------------------------------------------------------------- ---------------------------------
Income from investment operations:
Net investment income .46 .56 .30 .48 .57 .30
- ----------------------------------------------------------------------------------- ---------------------------------
Net realized and unrealized gain (loss) (.02) 1.05 (.14) (.02) 1.05 (.14)
- ----------------------------------------------------------------------------------- ---------------------------------
Total from investment operations .44 1.61 .16 .46 1.62 .16
- ----------------------------------------------------------------------------------- ---------------------------------
Less dividends:
Distribution from net investment income .53 1.08 .19 .53 1.09 .19
- ----------------------------------------------------------------------------------- ---------------------------------
Tax return of capital distribution -- -- .11 -- -- .11
- ----------------------------------------------------------------------------------- ---------------------------------
Total dividends .53 1.08 .30 .53 1.09 .30
- ----------------------------------------------------------------------------------- ---------------------------------
Net asset value, end of period $9.00 9.09 8.56 9.02 9.09 8.56
- ----------------------------------------------------------------------------------- ---------------------------------
TOTAL RETURN (NOT ANNUALIZED): 5.11% 19.21 1.89 5.31 19.26 1.91
- ----------------------------------------------------------------------------------- ---------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Expenses 2.14% 1.98 2.27 2.06 2.06 2.23
- ----------------------------------------------------------------------------------- ---------------------------------
Net investment income 5.11% 5.79 5.89 5.19 5.71 5.93
- ----------------------------------------------------------------------------------- ---------------------------------
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, YEAR ENDED JUNE 30, OCTOBER 1, 1989
1996 1995 1994 1993 1993 1992 1991 TO JUNE 30, 1990
ALL CLASSES ---- ---- ---- ------------ ---- ---- ---- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUPPLEMENTAL DATA:
Net assets at end of period
(in thousands) $131,761 152,959 170,700 83,021 78,068 71,790 58,631 28,391
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate
annualized 276% 220 378 484 372 292 346 444
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

5
<PAGE> 9

INTERNATIONAL FUND

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
CLASS A SHARES ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $10.59 11.13 10.56 8.17 8.76 9.52 9.94 9.35 9.19 8.92
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .04 .07 -- .03 .22 .13 .15 .15 .07 .12
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 1.50 .05 .86 2.54 (.67) .31 .23 .80 1.78 .34
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.54 .12 .86 2.57 (.45) .44 .38 .95 1.85 .46
- ---------------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .12 -- -- .18 -- .11 .08 .22 .11 --
- ---------------------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain .05 .66 .29 -- .14 1.09 .72 .14 1.58 .19
- ---------------------------------------------------------------------------------------------------------------------------------
Total dividends .17 .66 .29 .18 .14 1.20 .80 .36 1.69 .19
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $11.96 10.59 11.13 10.56 8.17 8.76 9.52 9.94 9.35 9.19
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 14.70% 1.69 8.32 32.08 (5.17) 5.38 4.16 10.48 24.89 4.60
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(a):
Expenses 1.64% 1.57 1.54 1.69 1.36 1.41 1.20 1.08 1.08 1.06
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .34% .83 .02 .37 2.61 1.42 1.66 1.48 1.04 1.09
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
CLASS B CLASS C
-------------------------------------- --------------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, MAY 31 TO OCTOBER 31, MAY 31 TO
1996 1995 OCTOBER 31, 1994 1996 1995 OCTOBER 31, 1994
CLASS B AND C SHARES ------ ----- ---------------- ------ ----- ----------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $10.46 11.09 10.58 $10.46 11.09 10.58
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (.06) (.02) (.04) (.06) (.02) (.04)
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain 1.47 .05 .55 1.47 .05 .55
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.41 .03 .51 1.41 .03 .51
- ---------------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .01 -- -- .01 -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain .05 .66 -- .05 .66 --
- ---------------------------------------------------------------------------------------------------------------------------------
Total dividends .06 .66 -- .06 .66 --
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.81 10.46 11.09 $11.81 10.46 11.09
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 13.59% .84 4.82 13.59% .84 4.82
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED):
Expenses 2.53% 2.50 2.58 2.50% 2.50 2.52
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.55)% (.10) (.97) (.52)% (.10) (.91)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
ALL CLASSES 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SUPPLEMENTAL DATA:
Net assets at end of year
(in thousands) $472,243 364,708 418,282 289,898 165,890 184,946 200,730 170,304 176,915 176,666
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 104% 114 103 156 143 209 191 79 89 144
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Average commission rate paid per share on stock transactions for the year ended
October 31, 1996 was $.0182. Foreign commissions usually are lower than U.S.
commissions when expressed as cents per share due to the lower per share price
of many non-U.S. securities.

6
<PAGE> 10

NOTES FOR BOTH FUNDS:

(a) Under the investment management agreement in effect through July 17, 1990,
the investment manager reimbursed the International Fund when operating
expenses exceeded certain limitations. Absent this agreement, for the fiscal
years ended 1989, 1988, 1987, respectively, the ratios of expenses to
average net assets would have been 1.18%, 1.24% and 1.16%, and the ratio of
net investment income to average net assets would have been 1.38%, .88% and
.99%. Effective July 18, 1990, the International Fund entered into a new
investment management agreement which changed the limitation; no expense
reimbursement was made after 1990.

Per share data for the Global Fund for the fiscal years ended 1996 and 1991 were
determined based on average shares outstanding.

Per share data for the International Fund for the fiscal years ended 1996 and
1995 were determined based on average shares outstanding.

Total return does not reflect the effect of any sales charges.

INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS

The following information sets forth each Fund's investment objective and
policies. Each Fund's returns and net asset value will fluctuate and there is no
assurance that a Fund will achieve its objective.

GLOBAL FUND. The objective of the Global Fund is to provide high current income
consistent with prudent total return asset management. In seeking to achieve its
objective, the Fund will invest primarily in investment grade foreign and
domestic fixed income securities. In managing the Fund's portfolio to provide a
high level of current income, the investment manager will also be seeking to
protect net asset value and to provide investors with a total return, which is
measured by changes in net asset value as well as income earned. In so managing
the Fund's portfolio in an effort to reduce volatility and increase returns, the
investment manager may, as is discussed more fully below, adjust the Fund's
portfolio across various global markets, maturity ranges, quality ratings and
issuers based upon its view of interest rates and other market conditions
prevailing throughout the world.

As a global fund, the Fund may invest in securities issued by any issuer and in
any currency and may hold foreign currency. Under normal market conditions, as a
fundamental policy, at least 65% of the Fund's assets will be invested in the
securities of issuers located in at least three countries, one of which may be
the United States. Securities of issuers within a given country may be
denominated in the currency of another country, or in multinational currency
units such as the European Currency Unit ("ECU"). Since the Fund invests in
foreign securities, the net asset value of the Fund will be affected by
fluctuations in currency exchange rates. See "Special Risk Factors" below.

The Fund may seek to capitalize on investment opportunities presented throughout
the world and in international financial markets influenced by the increasing
interdependence of economic cycles and currency exchange rates. Currently, more
than 50% of the value of the world's debt securities is represented by
securities denominated in currencies other than the U.S. Dollar. Over the past
ten years, debt securities offered by certain foreign governments provided
higher investment returns than U.S. Government debt securities. Such returns
reflect interest rates prevailing in those countries and the effect of gains and
losses in the denominated currencies, which have had a substantial impact on
investment in foreign fixed income securities. The relative performance of
various countries' fixed income markets historically has reflected wide
variations relating to the unique characteristics of each country's economy.
Year-to-year fluctuations in certain markets have been significant, and negative
returns have been experienced in various markets from time to time. The
investment manager believes that investment in a global portfolio can provide
investors with more opportunities for attractive returns than investment in a
portfolio comprised exclusively of U.S. debt securities. Also, the flexibility
to invest in fixed income markets around the world can reduce risk since, as
noted above, different world markets have often performed, at a given time, in
radically different ways.

The Fund will allocate its assets among securities of various issuers,
geographic regions, and currency denominations in a manner that is consistent
with its objective based upon relative interest rates among currencies, the
outlook for changes in these interest rates, and anticipated changes in
worldwide exchange rates. In considering

7
<PAGE> 11

these factors, a country's economic and political state, including such factors
as inflation rate, growth prospects, global trade patterns and government
policies, will be evaluated.

It is currently anticipated that the Fund's assets will be invested principally
within Australia, Canada, Japan, New Zealand, the United States and Western
Europe, and in securities denominated in the currencies of these countries or
denominated in multinational currency units such as the ECU. The Fund may also
acquire securities and currency in less developed countries and in developing
countries.

The Fund may invest in debt securities of supranational entities denominated in
any currency. A supranational entity is an entity designated or supported by the
national governments of two or more countries to promote economic reconstruction
or development. Examples of supranational entities include, among others, the
World Bank, the European Investment Bank and the Asian Development Bank. The
Fund may, in addition, invest in debt securities denominated in the ECU of an
issuer in any country (including supranational issuers). The Fund is further
authorized to invest in "semi-governmental securities," which are debt
securities issued by entities owned by either a national, state or equivalent
government or are obligations of such a government jurisdiction that are not
backed by its full faith and credit and general taxing powers.

The Fund is authorized to invest in the securities of any foreign or domestic
issuer. Investments by the Fund in fixed income securities may include
obligations issued or guaranteed by United States or foreign governments
(including foreign states, provinces and municipalities) or their agencies and
instrumentalities; obligations issued or guaranteed by supranational entities;
debt obligations of foreign and domestic corporations, banks and other business
organizations; and other foreign and domestic debt securities such as
convertible securities and preferred stocks, cash and cash equivalents and
repurchase agreements. Under normal market conditions, the Fund, as a
fundamental policy, will invest at least 65%, and may invest up to 100%, of its
total assets in fixed income securities. Some of the Fund's fixed income
securities may be convertible into common stock or be traded together with
warrants for the purchase of common stock, and the Fund may convert such
securities into equities and hold them as equity upon conversion. Investments
may include securities issued by enterprises that have undergone or are
currently undergoing privatization.

The securities in which the Fund may invest will be "investment grade"
securities. Investment grade securities are those rated at the time of purchase
within the four highest grades assigned by Moody's Investors Service, Inc.
("Moody's"), Standard & Poor's Corporation ("S&P") or IBCA Limited (including
its affiliate IBCA, Inc.) ("IBCA"); or that are unrated but are of comparable
quality in the opinion of the investment manager. Most foreign fixed income
securities are unrated. The characteristics of the securities in the Fund's
portfolio, such as the maturity and the type of issuer, will affect yields and
yield differentials, which vary over time. The actual yield realized by the
investor is subject, among other things, to the Fund's expenses and the
investor's transaction costs.

When the investment manager deems it appropriate to invest for temporary
defensive purposes, such as during periods of adverse market conditions, or when
relative yields in other securities are not deemed attractive, part or all of
the Fund's assets may be invested in cash (including foreign currency) or cash
equivalent short-term obligations, either rated as high quality or considered to
be of comparable quality in the opinion of the investment manager, including,
but not limited to, certificates of deposit, commercial paper, short-term notes,
obligations issued or guaranteed by the U.S. Government or any of its agencies
or instrumentalities, and repurchase agreements secured thereby. In particular,
for defensive purposes a larger portion of the Fund's assets may be invested in
U.S. Dollar-denominated obligations to reduce the risks inherent in non-U.S.
Dollar-denominated assets.

The Fund will not normally engage in the trading of securities for the purpose
of realizing short-term profits, but it will adjust its portfolio as considered
advisable in view of prevailing or anticipated market conditions and the Fund's
investment objective. Accordingly, the Fund may sell portfolio securities in
anticipation of a rise in interest rates and purchase securities for inclusion
in its portfolio in anticipation of a decline in interest rates.

The Fund may purchase and sell options on securities, index options, financial
futures contracts and options on financial futures contracts, may enter into
forward foreign currency exchange contracts, foreign currency

8
<PAGE> 12

options and foreign currency futures contracts and options thereon and may
engage in delayed delivery transactions. See "Additional Investment Information"
below.

INTERNATIONAL FUND. The International Fund seeks a total return, a combination
of capital growth and income, principally through an internationally diversified
portfolio of equity securities. Investments may be made for capital growth or
for income or any combination thereof for the purpose of achieving a high
overall return. There is no limitation on the percentage or amount of the Fund's
assets that may be invested in growth or income, and therefore at any particular
time the investment emphasis may be placed solely or primarily on growth of
capital or on income. While the Fund invests principally in equity securities of
non-U.S. issuers, it may also invest in convertible and debt securities and
foreign currencies. The Fund invests primarily in non-U.S. issuers, and under
normal circumstances more than 80% of the Fund's total assets will be invested
in non-U.S. issuers. In determining whether the Fund will be invested for
capital growth or income, the investment manager analyzes the international
equity and fixed income markets and seeks to assess the degree of risk and level
of return that can be expected from each market. See "Special Risk Factors."

In pursuing its objective, the Fund invests primarily in common stocks of
established non-U.S. companies believed to have potential for capital growth,
income or both. However, there is no requirement that the Fund invest
exclusively in common stocks or other equity securities. The Fund may invest in
any other type of security including, but not limited to, convertible securities
(including warrants), preferred stocks, bonds, notes and other debt securities
of companies (including Euro-currency instruments and securities) or obligations
of domestic or foreign governments and their political subdivisions. When the
investment manager believes that the total return potential in debt securities
equals or exceeds the potential return on equity securities, the Fund may
substantially increase its holdings in such debt securities. The Fund may
establish and maintain reserves for defensive purposes or to enable it to take
advantage of buying opportunities. The Fund's reserves may be invested in
domestic as well as foreign short-term money market instruments including, but
not limited to, government obligations, certificates of deposit, bankers'
acceptances, time deposits, commercial paper, short-term corporate debt
securities and repurchase agreements.

The Fund makes investments in various countries. Under normal circumstances,
business activities in not less than three different foreign countries will be
represented in the Fund's portfolio. The Fund may, from time to time, have more
than 25% of its assets invested in any major industrial or developed country
which in the view of the investment manager poses no unique investment risk. The
Fund may purchase securities of companies, wherever organized, that have their
principal activities and interests outside the United States. Investments may
include securities issued by enterprises that have undergone or are currently
undergoing privatization. Under exceptional economic or market conditions
abroad, the Fund may, for defensive purposes, invest all or a major portion of
its assets in U.S. Government obligations or securities of companies
incorporated in and having their principal activities in the United States. The
Fund may also invest its reserves in domestic short-term money-market
instruments as described above.

In determining the appropriate distribution of investments among various
countries and geographic regions, the investment manager ordinarily considers
such factors as prospects for relative economic growth among foreign countries;
expected levels of inflation; relative price levels of the various capital
markets; government policies influencing business conditions; the outlook for
currency relationships and the range of individual investment opportunities
available to the international investor. Currently, approximately 60% of the
market capitalization of equity securities are represented by securities in
currencies other than the U.S. Dollar.

Generally, the Fund will not trade in securities for short-term profits but,
when circumstances warrant, securities may be sold without regard to the length
of time held.

The Fund may purchase and write (sell) options and engage in financial futures
and foreign currency transactions. See "Additional Investment Information"
below.

9
<PAGE> 13

SPECIAL RISK FACTORS. There are risks inherent in investing in any security,
including shares of each Fund. The investment manager attempts to reduce risk
through fundamental research; however, there is no guarantee that such efforts
will be successful and each Fund's returns and net asset value will fluctuate
over time. There are special risks associated with each Fund's investments that
are discussed below.

Foreign securities involve currency risks. The U.S. Dollar value of a foreign
security tends to decrease when the value of the U.S. Dollar rises against the
foreign currency in which the security is denominated and tends to increase when
the value of the U.S. Dollar falls against such currency. Fluctuations in
exchange rates may also affect the earning power and asset value of the foreign
entity issuing the security. Dividend and interest payments may be repatriated
based upon the exchange rate at the time of disbursement or payment, and
restrictions on capital flows may be imposed. Losses and other expenses may be
incurred in converting between various currencies in connection with purchases
and sales of foreign securities.

Foreign securities may be subject to foreign government taxes that reduce their
attractiveness. Other risks of investing in such securities include political or
economic instability in the country involved, the difficulty of predicting
international trade patterns and the possible imposition of exchange controls.
The prices of such securities may be more volatile than those of domestic
securities and the markets for such securities may be less liquid. In addition,
there may be less publicly available information about foreign issuers than
about domestic issuers. Many foreign issuers are not subject to uniform
accounting, auditing and financial reporting standards comparable to those
applicable to domestic issuers. There is generally less regulation of stock
exchanges, brokers, banks and listed companies abroad than in the United States.
With respect to certain foreign countries, there is a possibility of
expropriation or diplomatic developments that could affect investment in these
countries.

EMERGING MARKETS. While a Fund's investments in foreign securities will
principally be in developed countries, a Fund may invest in countries considered
by the Fund's investment manager to be developing or "emerging" markets, which
involve exposure to economic structures that are generally less diverse and
mature than in the United States, and to political systems that may be less
stable. A developing country or emerging market country can be considered to be
a country that is in the initial stages of its industrialization cycle.
Currently, emerging markets generally include every country in the world other
than the United States, Canada, Japan, Australia, New Zealand, Hong Kong,
Singapore and most Western European countries. Currently, investing in many
emerging markets may not be desirable or feasible because of the lack of
adequate custody arrangements for a Fund's assets, overly burdensome
repatriation and similar restrictions, the lack of organized and liquid
securities markets, unacceptable political risks or other reasons. As
opportunities to invest in securities in emerging markets develop, a Fund may
expand and further broaden the group of emerging markets in which it invests. In
the past, markets of developing countries have been more volatile than the
markets of developed countries; however, such markets often have provided higher
rates of return to investors. The investment manager believes that these
characteristics can be expected to continue in the future.

Many of the risks described above relating to foreign securities generally will
be greater for emerging markets than for developed countries. For instance,
economies in individual developing markets may differ favorably or unfavorably
from the U.S. economy in such respects as growth of gross domestic product,
rates of inflation, currency depreciation, capital reinvestment, resource
self-sufficiency and balance of payments positions. Many emerging markets have
experienced substantial rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have very negative
effects on the economies and securities markets of certain developing markets.
Economies in emerging markets generally are dependent heavily upon international
trade and, accordingly, have been and may continue to be affected adversely by
trade barriers, exchange controls, managed adjustments in relative currency
values and other protectionist measures imposed or negotiated by the countries
with which they trade. These economies also have been and may continue to be
affected adversely by economic conditions in the countries with which they
trade.

10
<PAGE> 14

Also, the securities markets of developing countries are substantially smaller,
less developed, less liquid and more volatile than the securities markets of the
United States and other more developed countries. Disclosure, regulatory and
accounting standards in many respects are less stringent than in the United
States and other developed markets. There also may be a lower level of
monitoring and regulation of developing markets and the activities of investors
in such markets, and enforcement of existing regulations has been extremely
limited.

In addition, brokerage commissions, custodial services and other costs relating
to investment in foreign markets generally are more expensive than in the United
States; this is particularly true with respect to emerging markets. Such markets
have different settlement and clearance procedures. In certain markets there
have been times when settlements have been unable to keep pace with the volume
of securities transactions, making it difficult to conduct such transactions.
Such settlement problems may cause emerging market securities to be illiquid.
The inability of a Fund to make intended securities purchases due to settlement
problems could cause the Fund to miss attractive investment opportunities.
Inability to dispose of a portfolio security caused by settlement problems could
result either in losses to a Fund due to subsequent declines in value of the
portfolio security or, if a Fund has entered into a contract to sell the
security, could result in possible liability to the purchaser. Certain emerging
markets may lack clearing facilities equivalent to those in developed countries.
Accordingly, settlements can pose additional risks in such markets and
ultimately can expose a Fund to the risk of losses resulting from a Fund's
inability to recover from a counterparty.

The risk also exists that an emergency situation may arise in one or more
emerging markets as a result of which trading securities may cease or may be
substantially curtailed and prices for a Fund's portfolio securities in such
markets may not be readily available. A Fund's portfolio securities in the
affected markets will be valued at fair value determined in good faith by or
under the direction of the Board of Trustees.

Investment in certain emerging market securities is restricted or controlled to
varying degrees. These restrictions or controls may at times limit or preclude
foreign investment in certain emerging market securities and increase the costs
and expenses of a Fund. Emerging markets may require governmental approval for
the repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if a deterioration occurs in an
emerging market's balance of payments, the market could impose temporary
restrictions on foreign capital remittances.

FIXED INCOME. Since most foreign fixed income securities are not rated, a Fund
will invest in foreign fixed income securities based upon the investment
manager's analysis without relying on published ratings. Since such investments
will be based upon the investment manager's analysis rather than upon published
ratings, achievement of a Fund's goals may depend more upon the abilities of the
investment manager than would otherwise be the case.

The value of the fixed income securities held by a Fund, and thus the net asset
value of the Fund's shares, generally will fluctuate with (a) changes in the
perceived creditworthiness of the issuers of those securities, (b) movements in
interest rates, and (c) changes in the relative values of the currencies in
which a Fund's investments in fixed income securities are denominated with
respect to the U.S. Dollar. The extent of the fluctuation will depend on various
factors, such as the average maturity of a Fund's investments in foreign fixed
income securities, and the extent to which a Fund hedges its interest rate,
credit and currency exchange rate risks. Many of the foreign fixed income
obligations in which a Fund will invest will have long maturities. A longer
average maturity generally is associated with a higher level of volatility in
the market value of such securities in response to changes in market conditions.

Investments in sovereign debt, including Brady Bonds, involve special risks.
Brady Bonds are debt securities issued under a plan implemented to allow debtor
nations to restructure their outstanding commercial bank indebtedness. Foreign
governmental issuers of debt or the governmental authorities that control the
repayment of the debt may be unable or unwilling to repay principal or pay
interest when due. In the event of default, there may be limited or no legal
recourse in that, generally, remedies for defaults must be pursued in the courts
of the defaulting party. Political conditions, especially a sovereign entity's
willingness to meet the terms of its fixed

11
<PAGE> 15

income securities, are of considerable significance. Also, there can be no
assurance that the holders of commercial bank loans to the same sovereign entity
may not contest payments to the holders of sovereign debt in the event of
default under commercial bank loan agreements. In addition, there is no
bankruptcy proceeding with respect to sovereign debt on which a sovereign has
defaulted, and a Fund may be unable to collect all or any part of its investment
in a particular issue.

Foreign investment in certain sovereign debt is restricted or controlled to
varying degrees, including requiring governmental approval for the repatriation
of income, capital or proceed of sales by foreign investors. These restrictions
or controls may at times limit or preclude foreign investment in certain
sovereign debt or increase the costs and expenses of a Fund. A significant
portion of the sovereign debt in which a Fund may invest is issued as part of
debt restructuring and such debt is to be considered speculative. There is a
history of defaults with respect to commercial bank loans by public and private
entities issuing Brady Bonds. All or a portion of the interest payments and/or
principal repayment with respect to Brady Bonds may be uncollateralized.

PRIVATIZED ENTERPRISES. Investments in foreign securities may include securities
issued by enterprises that have undergone or are currently undergoing
privatization. The governments of certain foreign countries have, to varying
degrees, embarked on privatization programs contemplating the sale of all or
part of their interests in state enterprises. A Fund's investments in the
securities of privatized enterprises include privately negotiated investments in
a government- or state-owned or controlled company or enterprise that has not
yet conducted an initial equity offering, investments in the initial offering of
equity securities of a state enterprise or former state enterprise and
investments in the securities of a state enterprise following its initial equity
offering.

In certain jurisdictions, the ability of foreign entities, such as a Fund, to
participate in privatizations may be limited by local law, or the price or terms
on which the Fund may be able to participate may be less advantageous than for
local investors. Moreover, there can be no assurance that governments that have
embarked on privatization programs will continue to divest their ownership of
state enterprises, that proposed privatizations will be successful or that
governments will not re-nationalize enterprises that have been privatized.

In the case of the enterprises in which a Fund may invest, large blocks of the
stock of those enterprises may be held by a small group of stockholders, even
after the initial equity offerings by those enterprises. The sale of some
portion or all of those blocks could have an adverse effect on the price of the
stock of any such enterprise.

Prior to making an initial equity offering, most state enterprises or former
state enterprises go through an internal reorganization or management. Such
reorganizations are made in an attempt to better enable these enterprises to
compete in the private sector. However, certain reorganizations could result in
a management team that does not function as well as the enterprise's prior
management and may have a negative effect on such enterprise. In addition, the
privatization of an enterprise by its government may occur over a number of
years, with the government continuing to hold a controlling position in the
enterprise even after the initial equity offering for the enterprise.

Prior to privatization, most of the state enterprises in which a Fund may invest
enjoy the protection of and receive preferential treatment from the respective
sovereigns that own or control them. After making an initial equity offering
these enterprises may no longer have such protection or receive such
preferential treatment and may become subject to market competition from which
they were previously protected. Some of these enterprises may not be able to
effectively operate in a competitive market and may suffer losses or experience
bankruptcy due to such competition.

DEPOSITORY RECEIPTS. Each Fund may invest in securities of foreign issuers in
the form of American Depository Receipts ("ADRs"). For many foreign securities,
there are U.S. Dollar denominated ADRs, which are bought and sold in the United
States and are issued by domestic banks. ADRs represent the right to receive
securities of foreign issuers deposited in the domestic bank or a correspondent
bank. ADRs do not eliminate all the risk inherent in investing in the securities
of foreign issuers, such as changes in foreign currency exchange rates.

12
<PAGE> 16

However, by investing in ADRs rather than directly in foreign issuers' stock, a
Fund avoids currency risks during the settlement period. In general, there is a
large, liquid market in the United States for most ADRs. The Funds may also
invest in securities of foreign issuers in the form of European Depository
Receipts ("EDRs") and Global Depository Receipts ("GDRs"), which are receipts
evidencing an arrangement with a European bank similar to that for ADRs and are
designed for use in the European and other foreign securities markets. EDRs and
GDRs are not necessarily denominated in the currency of the underlying security.

The Global Fund has registered as a "non-diversified" investment company so that
it will be able to invest more than 5% of its assets in the obligations of an
issuer, subject to the diversification requirements of Subchapter M of the
Internal Revenue Code applicable to the Fund. This allows the Global Fund, as to
50% of its assets, to invest more than 5% of its assets, but not more than 25%,
in the fixed income securities of an individual foreign government or corporate
issuer. Currently, the Fund does not intend to invest more than 5% of its assets
in any individual corporate issuer. Since the Fund may invest a relatively high
percentage of its assets in the obligations of a limited number of issuers, the
Fund may be more susceptible to any single economic, political or regulatory
occurrence than a diversified investment company. See "Investment Restrictions"
in the Statement of Additional Information.

As noted above, the Global Fund may invest in securities that are rated within
the four highest grades by S&P, Moody's or IBCA or, if unrated, are of
comparable quality as determined by the investment manager. Securities rated
within the four highest grades are generally considered to be "investment
grade." Like higher rated securities, securities rated in the fourth grade are
considered to have adequate capacity to pay principal and interest, although
they may have fewer protective provisions than higher rated securities and thus
may be adversely affected by severe economic circumstances and are considered to
have speculative characteristics. The characteristics of the rating categories
are described in the Statement of Additional Information under
"Appendix--Ratings of Investments."

Since interest rates vary with changes in economic, market, political and other
conditions, there can be no assurance that past interest rates are indicative of
future rates. The values of fixed income securities in a Fund's portfolio will
fluctuate depending upon market factors and inversely with current interest rate
levels.

Each Fund may engage in options, financial futures and foreign currency
transactions and the Global Fund may engage in delayed delivery transactions and
may lend its portfolio securities. For a description of special risks associated
with these investment techniques, see "Additional Investment Information" below.

ADDITIONAL INVESTMENT INFORMATION. The portfolio turnover rates for the Funds
are listed under "Financial Highlights." The Funds will have increased
opportunities to adjust their portfolios across various markets and may
experience a high portfolio turnover rate (over 100%), which involves
correspondingly greater brokerage commissions or other transaction costs. Higher
portfolio turnover may result in the realization of greater net short-term
capital gains. In order to continue to qualify as a regulated investment company
for federal income tax purposes, less than 30% of the annual gross income of a
Fund must be derived from the sale or other disposition of securities and
certain other investments held by the Fund for less than three months. See
"Dividends and Taxes" in the Statement of Additional Information.

The Global Fund may take full advantage of the entire range of maturities of
fixed income securities and may adjust the average maturity of its portfolio
from time to time, depending upon its assessment of relative yields on
securities of different maturities and its expectations of future changes in
interest rates. Thus, the average maturity of the Fund's portfolio may be
relatively short (under five years, for example) at some times and relatively
long (over 10 years, for example) at other times. Generally, since shorter term
debt securities tend to be more stable than longer term debt securities, the
portfolio's average maturity will be shorter when interest rates are expected to
rise and longer when interest rates are expected to fall. Since in most foreign
markets debt securities generally are issued with maturities of ten years or
less, it is currently anticipated that the average maturity of the Fund's
portfolio will normally be in the intermediate range (three to ten years).

13
<PAGE> 17

The Global Fund may not borrow money except as a temporary measure for
extraordinary or emergency purposes, and then only in an amount up to one-third
of the value of its total assets, in order to meet redemption requests without
immediately selling any portfolio securities or other assets. If, for any
reason, the current value of the Fund's total assets falls below an amount equal
to three times the amount of its indebtedness from money borrowed, the Fund
will, within three days (not including Sundays and holidays), reduce its
indebtedness to the extent necessary. The Fund will not borrow for leverage
purposes. The Fund may pledge up to 15% of its total assets to secure any such
borrowings. The International Fund may not borrow money except for temporary or
emergency purposes (but not for the purchase of investments) and then only in an
amount not to exceed 5% of its net assets. The Fund may not pledge its assets in
an amount exceeding the amount of the borrowings secured by such pledge.

A Fund will not purchase illiquid securities, including repurchase agreements
maturing in more than seven days, if, as a result thereof, more than 15% of the
Fund's net assets valued at the time of the transaction would be invested in
such securities. See "Investment Policies and Techniques--Over-the-Counter
Options" in the Statement of Additional Information for a description of the
extent to which over-the-counter traded options are in effect considered as
illiquid for purposes of each Fund's limit on illiquid securities. A Fund may
invest in securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933. This rule permits otherwise restricted securities to be
sold to certain institutional buyers, such as the Funds. Such securities may be
illiquid and subject to a Fund's limitation on illiquid securities. A "Rule
144A" security may be treated as liquid, however, if so determined pursuant to
procedures adopted by the Board of Trustees. Investing in Rule 144A securities
could have the effect of increasing the level of illiquidity in the Fund to the
extent that qualified institutional buyers become uninterested for a time in
purchasing Rule 144A securities.

Each Fund has adopted certain fundamental investment restrictions, which are
presented in the Statement of Additional Information and that, together with the
investment objective and any policies of the Fund specifically designated in
this prospectus as fundamental, cannot be changed without approval by holders of
a majority of its outstanding voting shares. As defined in the Investment
Company Act of 1940 ("1940 Act"), this means the lesser of the vote of (a) 67%
of the shares of the Fund present at a meeting where more than 50% of the
outstanding shares are present in person or by proxy; or (b) more than 50% of
the outstanding shares of the Fund. Policies of a Fund that are neither
designated as fundamental nor incorporated into any of the fundamental
investment restrictions referred to above may be changed by the Board of
Trustees of the applicable Fund without shareholder approval.

OPTIONS AND FINANCIAL FUTURES TRANSACTIONS. Each Fund may deal in options on
securities, securities indexes
and foreign currencies, which options may be listed for trading on a national
securities exchange or traded over-
the-counter. Each Fund may write (sell) covered call options and secured put
options on up to 25% of its net
assets and may purchase put and call options provided that no more than 5% of
its net assets may be invested in
premiums on such options.

A call option gives the purchaser the right to buy, and the writer the
obligation to sell, the underlying security or other asset at the exercise price
during or at the end of the option period. A put option gives the purchaser the
right to sell, and the writer the obligation to buy, the underlying security or
other asset at the exercise price during or at the end of the option period. The
writer of a covered call owns securities or other assets that are acceptable for
escrow and the writer of a secured put invests an amount not less than the
exercise price in eligible securities or other assets to the extent that it is
obligated as a writer. If a call written by a Fund is exercised, the Fund
foregoes any possible profit from an increase in the market price of the
underlying security or other asset over the exercise price plus the premium
received. In writing puts, there is a risk that a Fund may be required to take
delivery of the underlying security or other asset at a disadvantageous price.

Over-the-counter traded options ("OTC options") differ from exchange traded
options in several respects. They are transacted directly with dealers and not
with a clearing corporation, and there is a risk of non-performance by the
dealer as a result of the insolvency of such dealer or otherwise, in which event
a Fund may experience

14
<PAGE> 18

material losses. However, in writing options the premium is paid in advance by
the dealer. OTC options are available for a greater variety of securities and
other assets, and a wider range of expiration dates and exercise prices, than
are exchange traded options.

Each Fund may engage in financial futures transactions. Financial futures
contracts are commodity contracts that obligate the long or short holder to take
or make delivery of a specified quantity of a financial instrument, such as a
security, or an amount of a foreign currency, or the cash value of a securities
index during a specified future period at a specified price. A Fund will "cover"
futures contracts sold by the Fund and maintain in a segregated account certain
liquid assets in connection with futures contracts purchased by the Fund as
described under "Investment Policies and Techniques" in the Statement of
Additional Information. In connection with its foreign securities investments, a
Fund may also engage in foreign currency financial futures transactions. A Fund
will not enter into any futures contracts or options on futures contracts if the
aggregate of the market value of the outstanding futures contracts of the Fund
and futures contracts subject to outstanding options written by the Fund would
exceed 50% of the total assets of the Fund.

The Funds may engage in financial futures transactions and may use index options
in an attempt to hedge against the effects of fluctuations in interest rates and
other market conditions. For example, when the near-term market view is bearish
but the portfolio composition is judged satisfactory for the longer term,
exposure to temporary declines in the market may be reduced by entering into
futures contracts to sell securities or the cash value of a securities index.
Conversely, where the near-term view is bullish, but the Fund is believed to be
well positioned for the longer term with a high cash position, the Fund can
hedge against market increases by entering into futures contracts to buy
securities or the cash value of a securities index. In either case, the use of
futures contracts would tend to reduce portfolio turnover and facilitate the
Fund's pursuit of its investment objective. Also, if the Fund owned long-term
bonds and interest rates were expected to rise, it could sell financial futures
contracts or the cash value of a securities index. If interest rates did
increase, the value of the bonds in the Fund would decline, but this decline
would be offset in whole or in part by an increase in the value of the Fund's
futures contracts or the cash value of the securities index. If, on the other
hand, long-term interest rates were expected to decline, the Fund could hold
short-term debt securities and benefit from the income earned by holding such
securities, while at the same time the Fund could purchase futures contracts on
long-term bonds or the cash value of a securities index. Thus, the Fund could
take advantage of the anticipated rise in the value of long-term bonds without
actually buying them. The futures contracts and short-term debt securities could
then be liquidated and the cash proceeds used to buy long-term bonds.

Futures contracts entail risks. If the investment manager's judgment about the
general direction of interest rates, markets or exchange rates is wrong, the
overall performance may be poorer than if no such contracts had been entered
into. There may be an imperfect correlation between movements in prices of
futures contracts and portfolio assets being hedged. In addition, the market
prices of futures contracts may be affected by certain factors. For example, if
participants in the futures market elect to close out their contracts through
offsetting transactions rather than meet margin requirements, distortions in the
normal relationship between the underlying assets and futures market could
result. Price distortions also could result if investors in futures contracts
decide to make or take delivery of underlying securities or other assets rather
than engage in closing transactions because of the resultant reduction in the
liquidity of the futures market. In addition, because, from the point of view of
speculators, margin requirements in the futures market are less onerous than
margin requirements in the cash market, increased participation by speculators
in the futures market could cause temporary price distortions. Due to the
possibility of price distortions in the futures market and because of the
imperfect correlation between movements in the prices of securities or other
assets and movements in the prices of futures contracts, a correct forecast of
market trends by the investment manager still may not result in a successful
hedging transaction. If any of these events should occur, a Fund could lose
money on the financial futures contracts and also on the value of its portfolio
assets. The costs incurred in connection with futures transactions could reduce
a Fund's return.

15
<PAGE> 19

Index options involve risks similar to those risks relating to transactions in
financial futures contracts described above. Also, an option purchased by a Fund
may expire worthless, in which case the Fund would lose the premium paid
therefor.

A Fund may engage in futures transactions only on commodities exchanges or
boards of trade. A Fund will not engage in transactions in index options,
financial futures contracts or related options for speculation, but only as an
attempt to hedge against changes in interest rates or market conditions
affecting the values of securities or other assets that the Fund owns or intends
to purchase.

FOREIGN CURRENCY TRANSACTIONS. Each Fund may invest all or a portion of its
assets in securities denominated in foreign currencies. Each Fund may engage in
foreign currency transactions in connection with its investments in foreign
securities but will not speculate in foreign currency exchange. The value of the
foreign securities investments of a Fund measured in U.S. Dollars may be
affected favorably or unfavorably by changes in foreign currency exchange rates
and exchange control regulations, and the Fund may incur costs in connection
with conversions between various currencies. Each Fund will conduct its foreign
currency exchange transactions either on a spot (i.e., cash) basis at the spot
rate prevailing in the foreign currency exchange market, or through forward
contracts to purchase or sell foreign currencies. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
These contracts are traded directly between currency traders (usually large
commercial banks) and their customers.

When a Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may want to establish the U.S. Dollar cost
or proceeds, as the case may be. By entering into a forward contract in U.S.
Dollars for the purchase or sale of the amount of foreign currency involved in
an underlying security transaction, the Fund is able to protect itself against a
possible loss between trade and settlement dates resulting from an adverse
change in the relationship between the U.S. Dollar and such foreign currency.
However, this tends to limit potential gains which might result from a positive
change in such currency relationships. Each Fund may also hedge its foreign
currency exchange rate risk by engaging in currency financial futures and
options transactions.

When the investment manager believes that the currency of a particular foreign
country may suffer a substantial decline against the U.S. Dollar, it may enter
into a forward contract to sell an amount of foreign currency approximating the
value of some or all of a Fund's portfolio securities denominated in such
foreign currency. In this situation the Fund may, in the alternative, enter into
a forward contract to sell a different foreign currency for a fixed U.S. Dollar
amount where the investment manager believes that the U.S. Dollar value of the
currency to be sold pursuant to the forward contract will fall whenever there is
a decline in the U.S. Dollar value of the currency in which portfolio securities
of the Fund are denominated ("cross-hedge"). The forecasting of short-term
currency market movement is extremely difficult and whether such a short-term
hedging strategy will be successful is highly uncertain.

It is impossible to forecast with absolute precision the market value of
portfolio securities at the expiration of a contract. Accordingly, it may be
necessary for a Fund to purchase additional currency on the spot market (and
bear the expense of such purchase) if the market value of the security is less
than the amount of foreign currency the Fund is obligated to deliver when a
decision is made to sell the security and make delivery of the foreign currency
in settlement of a forward contract. Conversely, it may be necessary to sell on
the spot market some of the foreign currency received upon the sale of the
portfolio security if its market value exceeds the amount of foreign currency
the Fund is obligated to deliver.

The Funds do not enter into forward contracts or maintain a net exposure in such
contracts where the Fund would be obligated to deliver an amount of foreign
currency in excess of the value of the Fund's securities or other assets (a)
denominated in that currency or (b), in the case of a "cross-hedge," denominated
in a currency or currencies that the investment manager believes will have price
movements that tend to correlate closely with

16
<PAGE> 20

that currency. There is no limitation as to the percentage of the Global Fund's
assets that may be committed to forward contracts for the purchase of a foreign
currency; the International Fund does not intend to enter into such forward
contracts if it would have more than 15% of the value of its total assets
committed to such contracts. A Fund segregates cash or liquid securities to the
extent required by applicable regulation in connection with forward foreign
currency exchange contracts entered into for the purchase of a foreign currency.
A Fund generally does not enter into a forward contract with a term longer than
one year.

DERIVATIVES. In addition to options and financial futures transactions,
consistent with its objective, a Fund may invest in a broad array of financial
instruments and securities in which the value of the instrument or security is
"derived" from the performance of an underlying asset or a "benchmark" such as a
security index, an interest rate or a foreign currency ("derivatives").
Derivatives are most often used to manage investment risk, to increase or
decrease exposure to an asset class or benchmark (as a hedge or to enhance
return), or to create an investment position directly (often because it is more
efficient or less costly than direct investment). The types of derivatives used
by a Fund and the techniques employed by the investment manager may change over
time as new derivatives and strategies are developed or regulatory changes
occur.

SPECIAL RISK FACTORS -- OPTIONS, FUTURES, FOREIGN CURRENCIES AND OTHER
DERIVATIVES. The Statement of Additional Information contains further
information about the characteristics, risks and possible benefits of options,
futures, foreign currency and other derivative transactions. See "Investment
Policies and Techniques" in the Statement of Additional Information. The
principal risks are: (a) possible imperfect correlation between movements in the
prices of options, currencies, futures or other derivatives contracts and
movements in the prices of the securities or currencies hedged, used for cover
or that the derivatives intended to replicate; (b) lack of assurance that a
liquid secondary market will exist for any particular option, futures, foreign
currency or other derivatives contract at any particular time; (c) the need for
additional skills and techniques beyond those required for normal portfolio
management; (d) losses on futures contracts resulting from market movements not
anticipated by the investment manager; (e) the possible need to defer closing
out certain options or futures contracts in order to continue to qualify for
beneficial tax treatment afforded "regulated investment companies" under the
Internal Revenue Code; and (f) the possible non-performance of the counter-party
to the derivative contract.

To the extent the Global Fund engages in when-issued or delayed purchases, it
will do so for the purpose of acquiring portfolio securities consistent with the
Fund's investment objective and policies. The Fund reserves the right to sell
these securities before the settlement date if deemed advisable.

In when-issued or delayed delivery transactions, delivery of the securities
occurs beyond normal settlement periods; but the Fund would not pay for such
securities or start earning interest on them until they were delivered. However,
when the Fund purchases securities on a when-issued or delayed delivery basis,
it immediately assumes the risks of ownership, including the risk of price
fluctuation. Failure to deliver a security purchased on a when-issued or delayed
delivery basis may result in a loss or missed opportunity to make an alternative
investment. Depending on market conditions, the Fund's when-issued and delayed
delivery purchase commitments could cause its net asset value per share to be
more volatile; because such securities may increase the amount by which its
total assets, including the value of when-issued and delayed delivery securities
it holds, exceed its net assets.

17
<PAGE> 21

LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, the Global Fund may lend its portfolio securities (principally to
broker-dealers) without limit where such loans are callable at any time and are
continuously secured by segregated collateral (cash or other liquid securities)
equal to no less than the market value, determined daily, of the securities
loaned. The Fund will receive amounts equal to dividends or interest on the
securities loaned. It also will earn income for having made the loan. Any cash
collateral pursuant to these loans will be invested in short-term money market
instruments. As with other extensions of credit, there are risks of delay in
recovery or even loss of rights in the collateral should the borrower of the
securities fail financially. However, the loans would be made only to firms
deemed by the Fund's investment manager to be of good standing, and when the
Fund's investment manager believes the potential earnings to justify the
attendant risk. Management will limit such lending to not more than one-third of
the value of the Global Fund's total assets.

INVESTMENT MANAGER AND UNDERWRITER

INVESTMENT MANAGER. Zurich Kemper Investments, Inc. ("ZKI"), 222 South Riverside
Plaza, Chicago, Illinois 60606, is the investment manager of each Fund and
provides each Fund with continuous professional investment supervision. ZKI is
one of the largest investment managers in the country and has been engaged in
the management of investment funds for more than forty-eight years. ZKI and its
affiliates provide investment advice and manage investment portfolios for the
Kemper Funds, affiliated insurance companies and other corporate, pension,
profit-sharing and individual accounts representing approximately $79 billion
under management. ZKI acts as investment manager for 31 open-end and seven
closed-end investment companies, with 78 separate investment portfolios
representing more than 2.5 million shareholder accounts. ZKI is an indirect
subsidiary of Zurich Insurance Company, an internationally recognized provider
of financial services in property/casualty and life insurance, reinsurance and
asset management.

Responsibility for overall management of each Fund rests with its Board of
Trustees and officers. Professional investment supervision is provided by ZKI.
The investment management agreements provide that ZKI shall act as each Fund's
investment adviser, manage its investments and provide it with various services
and facilities. ZKI will use the services of Zurich Investment Management
Limited ("ZIML"), 1 Fleet Place, London, U.K. EC4M 7RQ an affiliate of ZKI, as a
sub-adviser for each Fund. ZIML is an indirect subsidiary of Zurich Insurance
Company and has served as sub-adviser for mutual funds since December, 1996 and
investment adviser for certain institutional accounts since August, 1988. Under
the terms of the sub-advisory agreement between ZIML and ZKI, ZIML renders
investment advisory and management services with regard to such portion of the
Fund's portfolio as may be allocated to ZIML by ZKI from time to time for
management, including services related to foreign securities, foreign currency
transactions and related investments. ZKI pays ZIML for its services a
sub-advisory fee, payable monthly at the annual rate of .35% for the
International Fund and .30% for the Global Income Fund of the portion of the
average daily net assets of that Fund allocated by ZKI to ZIML for management.

Gordon K. Johns and J. Patrick Beimford, Jr. are the co-portfolio managers of
the Global Fund. Mr. Johns has served in this capacity since the Fund commenced
operations in October 1989 and Mr. Beimford has served in this capacity since
September 1993. Mr. Johns joined ZIML in September 1988 and is a Managing
Director of ZIML. He received a B.A. in law from Balliol College in Oxford,
United Kingdom. Mr. Beimford joined ZKI in April 1976 and is currently an
Executive Vice President and Chief Investment Officer -- Fixed Income
Investments of ZKI and a Vice President of the Fund. He received a B.S.I.M. in
Business from Purdue University, Lafayette, Indiana, and an M.B.A. in Finance
from the University of Chicago, Chicago, Illinois. Mr. Beimford is a Chartered
Financial Analyst.

Dennis H. Ferro is a Managing Director of ZIML and portfolio manager of Kemper
International Fund and has served in this capacity since March 1994. Prior to
coming to ZIML, Mr. Ferro was President, Managing Director and Chief Investment
Officer of an international investment advisory firm. He received a B.A. in

18
<PAGE> 22

Political Science from Villanova University, Villanova, Pennsylvania and an
M.B.A. in Finance from St. Johns University, Jamaica, New York. Mr. Ferro is a
Chartered Financial Analyst.

Each Fund pays ZKI an investment management fee, payable monthly, at the annual
rates shown below:

<TABLE>
<CAPTION>
ANNUAL MANAGEMENT
AVERAGE DAILY NET ASSETS OF THE FUND FEE RATES
------------------------------------ -----------------
<S> <C>
$0 - $250 million........................................... .75%
$250 million - $1 billion................................... .72
$1 billion - $2.5 billion................................... .70
$2.5 billion - $5 billion................................... .68
$5 billion - $7.5 billion................................... .65
$7.5 billion - $10 billion.................................. .64
$10 billion - $12.5 billion................................. .63
Over $12.5 billion.......................................... .62
</TABLE>

The expenses of each Fund, and of other investment companies investing in
foreign securities, can be expected to be higher than for investment companies
investing primarily in domestic securities since the costs of operation are
higher, including custody and transaction costs for foreign securities and
investment management fees.

PRINCIPAL UNDERWRITER. Pursuant to an underwriting and distribution services
agreement ("distribution agreement") with each Fund, Kemper Distributors, Inc.
("KDI"), 222 South Riverside Plaza, Chicago, Illinois 60606, a wholly-owned
subsidiary of ZKI, is the principal underwriter and distributor of each Fund's
shares and acts as agent of each Fund in the sale of its shares. KDI bears all
its expenses of providing services pursuant to the distribution agreement,
including the payment of any commissions. KDI provides for the preparation of
advertising or sales literature and bears the cost of printing and mailing
prospectuses to persons other than shareholders. KDI bears the cost of
qualifying and maintaining the qualification of Fund shares for sale under the
securities laws of the various states and each Fund bears the expense of
registering its shares with the Securities and Exchange Commission. KDI may
enter into related selling group agreements with various broker-dealers,
including affiliates of KDI, that provide distribution services to investors.
KDI also may provide some of the distribution services.

CLASS A SHARES. KDI receives no compensation from the Fund as principal
underwriter for Class A shares and pays all expenses of distribution of each
Fund's Class A shares under the distribution agreement not otherwise paid by
dealers or other financial services firms. As indicated under "Purchase of
Shares," KDI retains the sales charge upon the purchase of shares and pays or
allows concessions or discounts to firms for the sale of Fund shares.

CLASS B SHARES. For its services under the distribution agreement, KDI receives
a fee from each Fund, payable monthly, at the annual rate of .75% of average
daily net assets of each Fund attributable to Class B shares. This fee is
accrued daily as an expense of Class B shares. KDI also receives any contingent
deferred sales charges. See "Redemption or Repurchase of Shares--Contingent
Deferred Sales Charge--Class B Shares." KDI currently compensates firms for
sales of Class B shares at a commission rate of 3.75%.

CLASS C SHARES. For its services under the distribution agreement, KDI receives
a fee from each Fund, payable monthly, at an annual rate of .75% of net assets
of each Fund attributable to Class C shares. This fee is accrued daily as an
expense of Class C shares. KDI currently advances to firms the first year
distribution fee, at a rate of .75% of the purchase price of Class C shares. For
periods after the first year, KDI currently pays firms for sales of Class C
shares a distribution fee, payable quarterly, at an annual rate of .75% of net
assets attributable to Class C shares maintained and serviced by the firm and
the fee continues until terminated by KDI or a Fund.

19
<PAGE> 23

KDI also receives any contingent deferred sales charges. See "Redemption or
Repurchase of Shares -- Contingent Deferred Sales Charges -- Class C Shares."

RULE 12B-1 PLAN. Since each distribution agreement provides for fees payable as
an expense of the Class B shares and the Class C shares that are used by KDI to
pay for distribution services for those classes, that agreement is approved and
reviewed separately for the Class B shares and the Class C shares in accordance
with Rule 12b-1 under the 1940 Act, which regulates the manner in which an
investment company may, directly or indirectly, bear the expenses of
distributing its shares. The table below shows amounts paid in connection with
each Fund's Rule 12b-1 Plan during its 1996 fiscal year.

<TABLE>
<CAPTION>
DISTRIBUTION FEES PAID CONTINGENT DEFERRED
DISTRIBUTION EXPENSES BY FUND TO SALES CHARGES PAID
INCURRED BY UNDERWRITER UNDERWRITER TO UNDERWRITER
------------------------ ----------------------- -------------------
FUND CLASS B CLASS C CLASS B CLASS C CLASS B CLASS C
---- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Global................................. $ 325,000 30,000 347,000 4,000 84,000 --
International.......................... $1,996,000 150,000 541,000 32,000 127,000 --
</TABLE>

If a Rule 12b-1 Plan (the "Plan") is terminated in accordance with its terms,
the obligation of a Fund to make payments to KDI pursuant to the Plan will cease
and the Fund will not be required to make any payments past the termination
date. Thus, there is no legal obligation for the Fund to pay any expenses
incurred by KDI in excess of its fees under a Plan, if for any reason the Plan
is terminated in accordance with its terms. Future fees under a Plan may or may
not be sufficient to reimburse KDI for its expenses incurred.

ADMINISTRATIVE SERVICES. KDI also provides information and administrative
services for Fund shareholders pursuant to an administrative services agreement
("administrative agreement"). KDI may enter into related arrangements with
various financial services firms, such as broker-dealer firms or banks
("firms"), that provide services and facilities for their customers or clients
who are shareholders of the Fund. Such administrative services and assistance
may include, but are not limited to, establishing and maintaining shareholder
accounts and records, processing purchase and redemption transactions, answering
routine inquiries regarding the Fund and its special features and such other
services as may be agreed upon from time to time and permitted by applicable
statute, rule or regulation. KDI bears all its expenses of providing services
pursuant to the administrative agreement, including the payment of any service
fees. For services under the administrative agreement, each Fund pays KDI a fee,
payable monthly, at an annual rate of up to .25% of average daily net assets of
Class A, B, and C shares of such Fund. With respect to Class A shares, KDI then
pays each firm a service fee at an annual rate of (a) up to .15% of net assets
for the Global Fund and .25% of net assets for the International Fund of those
accounts in the Fund that it maintains and services attributable to Class A
shares acquired prior to October 1, 1993, and (b) up to .25% of net assets of
those accounts in each Fund that it maintains and services attributable to Class
A shares acquired on or after October 1, 1993. With respect to Class B shares
and Class C shares, KDI pays each firm a service fee, payable quarterly, at an
annual rate of up to .25% of net assets of those accounts in the Fund that it
maintains and services attributable to Class B shares and Class C shares,
respectively. Firms to which service fees may be paid include broker-dealers
affiliated with KDI.

CLASS A SHARES. For Class A shares, a firm becomes eligible for the service fee
based on assets in the accounts in the month following the month of purchase and
the fee continues until terminated by KDI or the Fund. The fees are calculated
monthly and paid quarterly.

CLASS B AND CLASS C SHARES. KDI currently advances to firms the first year
service fee at a rate of up to .25% of the purchase price of such shares. For
periods after the first year, KDI currently intends to pay firms a service fee
at a rate of up to .25% (calculated monthly and paid quarterly) of the net
assets attributable to Class B and Class C shares maintained and serviced by the
firm and the fee continues until terminated by KDI or the Fund.

20
<PAGE> 24

Currently, the administrative services fee payable to KDI is based only upon
Fund assets in accounts for which there is a firm listed on a Fund's records and
it is intended that KDI will pay all the administrative services fee that it
receives from each Fund to firms in the form of service fees. The effective
administrative services fee rate to be charged against all assets of each Fund
while this procedure is in effect will depend upon the proportion of Fund assets
that is in accounts for which there is a firm of record as well as, with respect
to the Class A shares of the Global Fund, the date when shares representing such
assets were purchased. 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 Funds.

PORTFOLIO TRANSACTIONS. ZKI and ZIML place all orders for purchases and sales of
a Fund's securities. Subject to seeking best execution of orders, they may
consider sales of shares of a Fund and other funds managed by ZKI or its
affiliates as a factor in selecting broker-dealers. See "Portfolio Transactions"
in the Statement of Additional Information.

DIVIDENDS AND TAXES

Dividends paid by a Fund as to each class of its shares will be calculated in
the same manner, at the same time and on the same day. The level of income
dividends per share (as a percentage of net asset value) will be lower for Class
B and Class C shares than for Class A shares primarily as a result of the
distribution services fee applicable to Class B and Class C shares.
Distributions of capital gains, if any, will be paid in the same amount for each
class.

Income dividends and capital gain dividends, if any, of a Fund will be credited
to shareholder accounts in full and fractional Fund shares of the same class at
net asset value except that, upon written request to the Shareholder Service
Agent, a shareholder may select one of the following options:

(1) To receive income and short-term capital gain dividends in cash and
long-term capital gain dividends in shares of the same class at net asset
value; or

(2) To receive income and capital gain dividends in cash.

Any dividends of a Fund that are reinvested normally will be reinvested in Fund
shares of the same class. However, upon written request to the Shareholder
Service Agent, a shareholder may elect to have dividends of a Fund invested
without sales charge in shares of the same class of another Kemper Fund at the
net asset value of such class of such other fund. See "Special Features--Class A
Shares--Combined Purchases" for a list of such other Kemper Funds. To use this
privilege of investing dividends of a Fund in shares of another Kemper Fund,
shareholders must maintain a minimum account value of $1,000 in the Fund
distributing the dividends. The Funds reinvest dividend checks (and future
dividends) in shares of that same class of the Fund and class if

21
<PAGE> 25

checks are returned as undeliverable. Dividends and other distributions in the
aggregate amount of $10 or less are automatically reinvested in shares of the
same Fund unless the shareholder requests that such policy not be applied to the
shareholder's account.

TAXES. Each Fund intends to continue to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code ("Code") and, if so
qualified, will not be liable for federal income taxes to the extent its
earnings are distributed. Dividends derived from net investment income and net
short-term capital gains are taxable to shareholders as ordinary income and
long-term capital gain dividends are taxable to shareholders as long-term
capital gain regardless of how long the shares have been held and whether
received in cash or shares. Long-term capital gain dividends received by
individual shareholders are taxed at a maximum rate of 28%. 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 declared. It is anticipated that only a small
portion, if any, of the ordinary income dividends paid by either Fund will
qualify for the dividends received deduction available to corporate
shareholders.

A dividend received shortly after the purchase of shares reduces the net asset
value of the shares by the amount of the dividend and, although in effect a
return of capital, will be taxable to the shareholder. If the net asset value of
shares were reduced below the shareholder's cost by dividends representing gains
realized on sales of securities, such dividends would be a return of investment
though taxable as stated above.

The International Fund intends to continue to qualify for and may make the
election permitted under Section 853 of the Code. If more than 50% of the value
of the Global Fund's total assets at the close of a fiscal year consists of
foreign securities, the Global Fund may make the election permitted under
Section 853 of the Code. If this election is made, shareholders will be able to
claim a credit or deduction on their income tax returns for, and will be
required to treat as part of the amounts distributed to them, their pro rata
portion of the income taxes paid by the Fund to foreign countries (which taxes
relate primarily to investment income). The shareholders of a Fund may claim a
credit by reason of that Fund's election, subject to certain limitations imposed
by Section 904 of the Code. Also, under the Code, no deduction for foreign taxes
may be claimed by individual shareholders who do not elect to itemize deductions
on their federal income tax returns; although such a shareholder may claim a
credit for foreign taxes and in any event will be treated as having taxable
income in the amount of the shareholder's pro rata share of foreign taxes paid
by the Fund.

Gains and losses attributable to fluctuations in the value of foreign currencies
will be characterized generally as ordinary gain or loss under Section 988 of
the Code. For example, if a Fund sold a foreign bond and part of the gain or
loss on the sale were attributable to an increase or decrease in the value of a
foreign currency, then the currency gain or loss would be treated as ordinary
income or loss. If such transactions result in greater net ordinary income, the
dividends paid by the Fund will be increased; if the result of such transactions
is lower net ordinary income, a portion of dividends paid could be classified as
a return of capital.

Each Fund is required by law to withhold 31% of taxable dividends and redemption
proceeds 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 Individual Retirement Accounts
("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 with their tax advisers regarding the 20% withholding requirement.

After each transaction, shareholders will receive a confirmation statement
giving complete details of the transaction except that statements will be sent
quarterly for transactions involving dividend reinvestment and periodic
investment and redemption programs. Information for income tax purposes will be
provided after the end of the calendar year. Shareholders are encouraged to
retain copies of their account confirmation statements or year-end statements
for tax reporting purposes, including information regarding any foreign taxes
and

22
<PAGE> 26

credits. However, those who have incomplete records may obtain historical
account transaction information at a reasonable fee.

When more than one shareholder resides at the same address, certain reports and
communications to be delivered to such shareholders may be combined in the same
mailing package, and certain duplicate reports and communications may be
eliminated. Similarly, account statements to be sent to such shareholders may be
combined in the same mailing package or consolidated into a single statement.
However, a shareholder may request that the foregoing policies not be applied to
the shareholders's account.

NET ASSET VALUE

The net asset value per share of a Fund is determined separately for each class
by dividing the value of the Fund's net assets attributable to that class by the
number of shares of that class outstanding. The per share net asset value of the
Class B and Class C shares of a Fund will generally be lower than that of the
Class A shares of the Fund because of the higher expenses borne by the Class B
and Class C shares. Securities that are primarily traded on a domestic
securities exchange or securities listed on the NASDAQ National Market are
valued at the last sale price on the exchange or market where primarily traded
or listed, or, if there is no recent sale price available, at the last current
bid quotation. Securities that are primarily traded on foreign securities
exchanges are generally valued at the preceding closing values of such
securities on their respective exchanges where primarily traded. A security that
is listed or traded on more than one exchange is valued at the quotation on the
exchange determined to be the primary market for such security by the Board of
Trustees or its delegates. Securities not so traded or listed are valued at the
last current bid quotation if market quotations are available. Fixed income
securities are valued by using market quotations, or independent pricing
services that use prices provided by market makers or estimates of market values
obtained from yield data relating to instruments or securities with similar
characteristics. Equity options are valued at the last sale price unless the bid
price is higher or the asked price is lower, in which event such bid or asked
price is used. Exchange traded fixed income options, financial futures and
options thereon are valued at the settlement price established each day by the
board of trade or exchange on which they are traded. Over-the-counter traded
options are valued based upon current prices provided by market makers. Other
securities and assets are valued at fair value as determined in good faith by
the Board of Trustees. Because of the need to obtain prices as of the close of
trading on various exchanges throughout the world, the calculation of net asset
value of the Fund does not necessarily take place contemporaneously with the
determination of the prices of a Fund's foreign securities, which may be made
prior to the determination of net asset value. For purposes of determining the
Fund's net asset value, all assets and liabilities initially expressed in
foreign currency values will be converted into U.S. Dollar values at the mean
between the bid and offered quotations of such currencies against U.S. Dollars
as last quoted by a recognized dealer. If an event were to occur after the value
of a security was so established but before the net asset value per share was
determined, which was likely to materially change the net asset value, then that
security would be valued using fair value determinations by the Board of
Trustees or its delegates. On each day the New York Stock Exchange (the
"Exchange") is open for trading, the net asset value is determined as of the
earlier of 3:00 p.m. Chicago time or the close of the Exchange.

PURCHASE OF SHARES

ALTERNATIVE PURCHASE ARRANGEMENTS. Class A shares of each Fund are sold to
investors subject to an initial sales charge. Class B shares are sold without an
initial sales charge but are subject to higher ongoing expenses than Class A
shares and a contingent deferred sales charge payable upon certain redemptions.
Class B shares automatically convert to Class A shares six years after issuance.
Class C shares are sold without an initial sales charge but are subject to
higher ongoing expenses than Class A shares, are subject to a contingent
deferred sales charge payable upon certain redemptions within the first year
following purchase and do not convert into another class. When placing purchase
orders, investors must specify whether the order is for Class A, Class B or
Class C shares.

23
<PAGE> 27

The primary distinctions among the classes of each Fund's shares lie in their
initial and contingent deferred sales charge structures and in their ongoing
expenses, including asset-based sales charges in the form of Rule 12b-1
distribution fees. These differences are summarized in the table below. See,
also, "Summary of Expenses." Each class has distinct advantages and
disadvantages for different investors, and investors may choose the class that
best suits their circumstances and objectives.

<TABLE>
<CAPTION>
ANNUAL 12B-1 FEES
(AS A % OF AVERAGE DAILY
SALES CHARGE NET ASSETS) OTHER INFORMATION
------------ ------------------------ -----------------
<S> <C> <C> <C>
Class A Maximum initial sales charge of None Initial sales charge waived or
4.5% (for the Global Fund) and reduced for certain purchases
5.75% (for the International
Fund) of the public offering
price
Class B Maximum contingent deferred sales 0.75% Shares convert to Class A shares
charge of 4% of redemption six years after issuance
proceeds; declines to zero after
six years
Class C Contingent deferred sales charge 0.75% No conversion feature
of 1% of redemption proceeds for
redemptions made during first
year after purchase
</TABLE>

The minimum initial investment for each Fund is $1,000 and the minimum
subsequent investment is $100. The minimum initial investment for an Individual
Retirement Account is $250 and the minimum subsequent investment is $50. Under
an automatic investment plan, such as Bank Direct Deposit, Payroll Direct
Deposit or Government Direct Deposit, the minimum initial and subsequent
investment is $50. These minimum amounts may be changed at any time in
management's discretion.

Share certificates will not be issued unless requested in writing and may not be
available for certain types of account registrations. It is recommended that
investors not request share certificates unless needed for a specific purpose.
You cannot redeem shares by telephone or wire transfer or use the telephone
exchange privilege if share certificates have been issued. A lost or destroyed
certificate is difficult to replace and can be expensive to the shareholder (a
bond worth 2% or more of the certificate value is normally required).

INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES. The public offering price of
Class A shares for purchasers of the Global Fund choosing the initial sales
charge alternative is the net asset value plus a sales charge, as set forth
below.

<TABLE>
<CAPTION>
GLOBAL FUND--SALES CHARGE
----------------------------------------------------------------------
ALLOWED TO
DEALERS AS A
AS A PERCENTAGE AS A PERCENTAGE PERCENTAGE OF
OF OFFERING PRICE OF NET ASSET VALUE* OFFERING PRICE
AMOUNT OF PURCHASE ----------------- ------------------- --------------
<S> <C> <C> <C>
Less than $100,000................................. 4.50% 4.71% 4.00%
$100,000 but less than $250,000.................... 3.50 3.63 3.00
$250,000 but less than $500,000.................... 2.60 2.67 2.25
$500,000 but less than $1 million.................. 2.00 2.04 1.75
$1 million and over................................ 0.00** 0.00** ***
- ---------------
* Rounded to the nearest one-hundredth percent.
** Redemption of shares may be subject to a contingent deferred sales charge as discussed below.
*** Commission is payable by KDI as discussed
below.
</TABLE>

24
<PAGE> 28

The public offering price of Class A shares for purchasers of the International
Fund choosing the initial sales charge alternative is the net asset value plus a
sales charge, as set forth below.

<TABLE>
<CAPTION>
INTERNATIONAL FUND--SALES CHARGE
----------------------------------------------------------------------
ALLOWED TO
DEALERS AS A
AS A PERCENTAGE AS A PERCENTAGE PERCENTAGE OF
AMOUNT OF PURCHASE OF OFFERING PRICE OF NET ASSET VALUE* OFFERING PRICE
------------------ ----------------- ------------------- --------------
<S> <C> <C> <C>
Less than $50,000.................................. 5.75% 6.10% 5.20%
$50,000 but less than $100,000..................... 4.50 4.71 4.00
$100,000 but less than $250,000.................... 3.50 3.63 3.00
$250,000 but less than $500,000.................... 2.60 2.67 2.25
$500,000 but less than $1 million.................. 2.00 2.04 1.75
$1 million and over................................ .00** .00** ***
- ---------------
* Rounded to the nearest one-hundredth percent.
** Redemption of shares may be subject to a contingent deferred sales charge as discussed below.
*** Commission is payable by KDI as discussed below.
</TABLE>

Each Fund receives the entire net asset value of all Class A shares sold. KDI,
the Funds' principal underwriter, retains the sales charge on sales of Class A
shares from which it allows discounts from the applicable public offering price
to investment dealers, which discounts are uniform for all dealers in the United
States and its territories. The normal discount allowed to dealers is set forth
in the above table. Upon notice to all dealers with whom it has sales
agreements, KDI may reallow up to the full applicable sales charge, as shown in
the above table, during periods and for transactions specified in such notice
and such reallowances may be based upon attainment of minimum sales levels.
During periods when 90% or more of the sales charge is reallowed, such dealers
may be deemed to be underwriters as that term is defined in the Securities Act
of 1933.

Class A shares of a Fund may be purchased at net asset value to the extent that
the amount invested represents the net proceeds from a redemption of shares of a
mutual fund for which ZKI or an affiliate does not serve as investment manager
("non-Kemper Fund") provided that: (a) the investor has previously paid either
an initial sales charge in connection with the purchase of the non-Kemper Fund
shares redeemed or a contingent deferred sales charge in connection with the
redemption of the non-Kemper Fund shares, and (b) the purchase of Fund shares is
made within 90 days after the date of such redemption. To make such a purchase
at net asset value, the investor or the investor's dealer must, at the time of
purchase, submit a request that the purchase be processed at net asset value
pursuant to this privilege. The redemption of the shares of the non-Kemper fund
is, for federal income tax purposes, a sale upon which a gain or loss may be
realized. KDI may in its discretion compensate firms for sales of Class A shares
under this privilege at a commission rate of .50% of the amount of Class A
shares purchased.

Class A shares of a Fund may be purchased at net asset value by: (a) any
purchaser provided that the amount invested in the Fund or other Kemper Mutual
Funds listed under "Special Features--Class A Shares--Combined Purchases" totals
at least $1,000,000 including purchases of Class A shares pursuant to the
"Combined Purchases," "Letter of Intent" and "Cumulative Discount" features
described under "Special Features"; or (b) a participant-directed qualified
retirement plan described in Code Section 401(a) or a participant-directed
non-qualified deferred compensation plan described in Code Section 457 or a
participant-directed qualified retirement plan described in Code Section
403(b)(7) which is not sponsored by a K-12 school district provided in each case
that such plan has not less than 200 eligible employees (the "Large Order NAV
Purchase Privilege"). Redemption within two years of shares purchased under the
Large Order NAV Purchase Privilege may be subject to a contingent deferred sales
charge. See "Redemption or Repurchase of Shares--Contingent Deferred Sales
Charge--Large Order NAV Purchase Privilege."

KDI may in its discretion compensate investment dealers or other financial
services firms in connection with the sale of Class A shares of each Fund at net
asset value in accordance with the Large Order NAV Purchase

25
<PAGE> 29

Privilege up to the following amounts: 1.00% of the net asset value of shares
sold on amounts up to $5 million, .50% on the next $45 million and .25% on
amounts over $50 million. The commission schedule will be reset on a calendar
year basis for sales of shares pursuant to the Large Order NAV Purchase
Privilege to employer sponsored employee benefit plans using the subaccount
recordkeeping system made available through Kemper Service Company. For purposes
of determining the appropriate commission percentage to be applied to a
particular sale, KDI will consider the cumulative amount invested by the
purchaser in the Fund and other Kemper Mutual Funds listed under "Special
Features--Class A Shares--Combined Purchases," including purchases pursuant to
the "Combined Purchases," "Letter of Intent" and "Cumulative Discount" features
referred to above. The privilege of purchasing Class A shares of a Fund at net
asset value under the Large Order NAV Purchase Privilege is not available if
another net asset value purchase privilege is also applicable.

Effective on February 1, 1996, Class A shares of a Fund or any other Kemper
Mutual Fund listed under "Special Features -- Class A Shares -- Combined
Purchases" may be purchased at net asset value in any amount by members of the
plaintiff class in the proceeding known as HOWARD AND AUDREY TABANKIN, ET AL. V.
KEMPER SHORT-TERM GLOBAL INCOME FUND, ET AL., Case No. 93 C 5231 (N.D.IL). This
privilege is generally non-transferrable and continues for the lifetime of
individual class members and for a ten year period for non-individual class
members. To make a purchase at net asset value under this privilege, the
investor must, at the time of purchase, submit a written request that the
purchase be processed at net asset value pursuant to this privilege specifically
identifying the purchaser as a member of the "Tabankin Class." Shares purchased
under this privilege will be maintained in a separate account that includes only
shares purchased under this privilege. For more details concerning this
privilege, class members should refer to the Notice of (1) Proposed Settlement
with Defendants; and (2) Hearing to Determine Fairness of Proposed Settlement
dated August 31, 1995, issued in connection with the aforementioned court
proceeding. For sales of Fund shares at net asset value pursuant to this
privilege, KDI may in its discretion pay investment dealers and other financial
services firms a concession, payable quarterly, at an annual rate of up to .25%
of net assets attributable to such shares maintained and serviced by the firm. A
firm becomes eligible for the concession based upon assets in accounts
attributable to shares purchased under this privilege in the month after the
month of purchase and the concession continues until terminated by KDI. The
privilege of purchasing Class A shares of the Fund at net asset value under this
privilege is not available if another net asset value purchase privilege also
applies.

Class A shares may be sold at net asset value in any amount to: (a) officers,
trustees, directors, employees (including retirees) and sales representatives of
the Fund, its investment manager, its principal underwriter or certain
affiliated companies, for themselves or members of their families; (b)
registered representatives and employees of broker-dealers having selling group
agreements with KDI and officers, directors and employees of service agents of
the Fund, for themselves or their spouses or dependent children; (c)
shareholders who owned shares of Kemper-Dreman Fund, Inc. ("KDF") on September
8, 1995, and have continuously owned shares of KDF (or a Kemper Fund acquired by
exchange of KDF shares) since that date, for themselves or members of their
families; and (d) any trust or pension, profit sharing or other benefit plan for
only such persons. Class A shares may be sold at net asset value in any amount
to selected employees (including their spouses and dependent children) of banks
and other financial services firms that provide administrative services related
to order placement and payment to facilitate transactions in shares of each Fund
for their clients pursuant to an agreement with KDI or one of its affiliates.
Only those employees of such banks and other firms who as part of their usual
duties provide services related to transactions in Fund shares may purchase Fund
Class A shares at net asset value hereunder. Class A shares may also be sold at
net asset value in any amount to unit investment trusts sponsored by Ranson &
Associates, Inc. In addition, unitholders of unit investment trusts sponsored by
Ranson & Associates, Inc. or its predecessors may purchase Fund Class A shares
at net asset value through reinvestment programs described in the prospectuses
of such trusts that have such programs. Class A shares of a Fund may be sold at
net asset value through certain investment advisers registered under the 1940
Act and other financial services firms that adhere to certain standards
established by KDI, including a requirement that such shares be sold for the
benefit of their clients participating in an investment advisory program under
which such clients pay a fee to the investment adviser or other firm for
portfolio management and other services. Such

26
<PAGE> 30

shares are sold for investment purposes and on the condition that they will not
be resold except through redemption or repurchase by the Fund. Each Fund may
also issue Class A shares at net asset value in connection with the acquisition
of the assets of or merger or consolidation with another investment company, or
to shareholders in connection with the investment or reinvestment of income and
capital gain dividends.

Class A shares of a Fund may be purchased at net asset value in any amount by
certain professionals who assist in the promotion of Kemper Funds pursuant to
personal services contracts with KDI, for themselves or members of their
families. KDI in its discretion may compensate financial services firms for
sales of Class A shares under this privilege at a commission rate of .50% of the
amount of Class A shares purchased.

The sales charge scale is applicable to purchases made at one time by any
"purchaser" which includes an individual; or an individual, his or her spouse
and children under the age of 21; or a trustee or other fiduciary of a single
trust estate or single fiduciary account; or an organization exempt from federal
income tax under Section 501(c)(3) or (13) of the Code; or a pension,
profit-sharing or other employee benefit plan whether or not qualified under
Section 401 of the Code; or other organized group of persons whether
incorporated or not, provided the organization has been in existence for at
least six months and has some purpose other than the purchase of redeemable
securities of a registered investment company at a discount. In order to qualify
for a lower sales charge, all orders from an organized group will have to be
placed through a single investment dealer or other firm and identified as
originating from a qualifying purchaser.

DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES. Investors choosing the
deferred sales charge alternative may purchase Class B shares at net asset value
per share without any sales charge at the time of purchase. Since Class B shares
are being sold without an initial sales charge, the full amount of the
investor's purchase payment will be invested in Class B shares for his or her
account. A contingent deferred sales charge may be imposed upon redemption of
Class B shares. See "Redemption or Repurchase of Shares--Contingent Deferred
Sales Charge--Class B Shares."

KDI compensates firms for sales of Class B shares at the time of sale at a
commission rate of up to 3.75% of the amount of Class B shares purchased. KDI is
compensated by each Fund for services as distributor and principal underwriter
for Class B shares. See "Investment Manager and Underwriter."

Class B shares of a Fund will automatically convert to Class A shares of the
same Fund six years after issuance on the basis of the relative net asset value
per share. Class B shareholders of the Funds who originally acquired their
shares as Initial Shares of Kemper Portfolios, formerly known as Kemper
Investment Portfolios ("KIP"), hold them subject to the same conversion period
schedule as that of their KIP Portfolio. Class B shares originally representing
Initial Shares of a KIP Portfolio will automatically convert to Class A shares
of the Fund six years after issuance of the Initial Shares for shares issued on
or after February 1, 1991 and seven years after issuance of the Initial Shares
for shares issued before February 1, 1991. The purpose of the conversion feature
is to relieve holders of Class B shares from the distribution services fee when
they have been outstanding long enough for KDI to have been compensated for
distribution related expenses. For purposes of conversion to Class A shares,
shares purchased through the reinvestment of dividends and other distributions
paid with respect to Class B shares in a shareholder's Fund account will be
converted to Class A shares on a pro rata basis.

PURCHASE OF CLASS C SHARES. The public offering price of the Class C shares of a
Fund is the next determined net asset value. No initial sales charge is imposed.
Since Class C shares are sold without an initial sales charge, the full amount
of the investor's purchase payment will be invested in Class C shares for his or
her account. A contingent deferred sales charge may be imposed upon the
redemption of Class C shares if they are redeemed within one year of purchase.
See "Redemption or Repurchase of Shares--Contingent Deferred Sales Charge--Class
C Shares." KDI currently advances to firms the first year distribution fee at
the rate of .75% of the purchase price of such shares. For periods after the
first year, KDI currently intends to pay firms for sales of Class C shares a
distribution fee, payable quarterly, at an annual rate of .75% of net assets
attributable to Class C shares maintained and serviced by the firm. KDI is
compensated by each Fund for services as distributor and principal underwriter
for Class C shares. See "Investment Manager and Underwriter."

27
<PAGE> 31

WHICH ARRANGEMENT IS BETTER FOR YOU? The decision as to which class of shares
provides a more suitable investment for an investor depends on a number of
factors, including the amount and intended length of the investment. Investors
making investments that qualify for reduced sales charges might consider Class A
shares. Investors who prefer not to pay an initial sales charge and who plan to
hold their investment for more than six years might consider Class B shares.
Investors who prefer not to pay an initial sales charge but who plan to redeem
their shares within six years might consider Class C shares. Orders for Class B
shares or Class C shares for $500,000 or more will be declined. Orders for Class
B shares or Class C shares by employer sponsored employee benefit plans using
the subaccount record keeping system made available through the Shareholder
Service Agent will be invested instead in Class A shares at net asset value
where the combined subaccount value in a Fund or other Kemper Mutual Funds
listed under "Special Features--Class A Shares--Combined Purchases" is in excess
of $5 million including purchases pursuant to the "Combined Purchases," "Letter
of Intent" and "Cumulative Discount" features described under "Special
Features." For more information about the three sales arrangements, consult your
financial representative or the Shareholder Service Agent. Financial services
firms may receive different compensation depending upon which class of shares
they sell.

GENERAL. Banks and other financial services firms may provide administrative
services related to order placement and payment to facilitate transactions in
shares of a Fund for their clients, and KDI may pay them a transaction fee up to
the level of the discount or commission allowable or payable to dealers as
described above. Banks currently are prohibited under the Glass-Steagall Act
from providing certain underwriting or distribution services. Banks or other
financial services firms may be subject to various state laws regarding the
services described above and may be required to register as dealers pursuant to
state law. If banking firms were prohibited from acting in any capacity or
providing any of the described services, management would consider what action,
if any, would be appropriate. KDI does not believe that termination of a
relationship with a bank would result in any material adverse consequences to
the Fund.

KDI may, from time to time, pay or allow to firms a 1% commission on the amount
of shares of a Fund sold by the firm under the following conditions: (i) the
purchased shares are held in a Kemper IRA account, (ii) the shares are purchased
as a direct "roll over" of a distribution from a qualified retirement plan
account maintained on a participant subaccount record keeping system provided by
Kemper Service Company, (iii) the registered representative placing the trade is
a member of ProStar, a group of persons designated by KDI in acknowledgement of
their dedication to the employee benefit plan area and (iv) the purchase is not
otherwise subject to a commission.

In addition to the discounts or commissions described above, KDI will, from time
to time, pay or allow additional discounts, commissions or promotional
incentives, in the form of cash or other compensation, to firms that sell shares
of the Funds. Non-cash compensation includes luxury merchandise and trips to
luxury resorts. In some instances, such discounts, commissions or other
incentives will be offered only to certain firms that sell or are expected to
sell during specified time periods certain minimum amounts of shares of a Fund
or other funds underwritten by KDI.

Orders for the purchase of shares of a Fund will be confirmed at a price based
on the net asset value of that Fund next determined after receipt by KDI of the
order accompanied by payment. However, orders received by dealers or other firms
prior to the determination of net asset value (see "Net Asset Value") and
received by KDI prior to the close of its business day will be confirmed at a
price based on the net asset value effective on that day ("trade date"). The
Funds reserve the right to determine the net asset value more frequently than
once a day if deemed desirable. Dealers and other financial services firms are
obligated to transmit orders promptly. Collection may take significantly longer
for a check drawn on a foreign bank than for a check drawn on a domestic bank.
Therefore, if an order is accompanied by a check drawn on a foreign bank, funds
must normally be collected before shares will be purchased. See "Purchase and
Redemption of Shares" in the Statement of Additional Information.

28
<PAGE> 32

Investment dealers and other firms provide varying arrangements for their
clients to purchase and redeem Fund shares. Some may establish higher minimum
investment requirements than set forth above. Firms may arrange with their
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' return. Firms also may hold
Fund shares in nominee or street name as agent for and on behalf of their
customers. In such instances, the Funds' transfer agent will have no information
with respect to or control over 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 Funds through the Shareholder Service Agent for recordkeeping and other
expenses relating to these nominee accounts. In addition, certain privileges
with respect to the purchase and redemption of shares or the reinvestment of
dividends may not be available through such firms. 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. Such firms, including affiliates of KDI, may
receive compensation from the Funds through the Shareholder Service Agent for
these services. This prospectus should be read in connection with such firms'
material regarding their fees and services.

Each Fund reserves the right to withdraw all or any part of the offering made by
this prospectus and to reject purchase orders. Also, from time to time, a Fund
may temporarily suspend the offering of any class of its shares to new
investors. During the period of such suspension, persons who are already
shareholders of such class of such Fund normally are permitted to continue to
purchase additional shares of such class and to have dividends reinvested.

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

REDEMPTION OR REPURCHASE OF SHARES

GENERAL. Any shareholder may require the Fund to redeem his or her shares. 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 Mutual Funds, Attention: Redemption Department, P.O. Box
419557, Kansas City, Missouri 64141-6557. 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.

The redemption price for shares of a Fund will be the net asset value per share
of that Fund next determined following receipt by the Shareholder Service Agent
of a properly executed request with any required documents as described above.
Payment for shares redeemed will be made in cash as promptly as practicable but
in no event later than seven days after receipt of a properly executed request
accompanied by any outstanding share certificates in proper form for transfer.
When a Fund is asked to redeem shares for which it may not have yet received
good payment (i.e., purchases by check, EXPRESS-Transfer or Bank Direct
Deposit), it 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. The redemption within two years of Class A shares purchased at net asset
value under the Large Order NAV Purchase Privilege may be subject to a
contingent deferred sales charge (see "Purchase of Shares--Initial Sales Charge
Alternative--Class A Shares") and the redemption of Class B shares within six
years may be subject to a

29
<PAGE> 33

contingent deferred sales charge (see "Contingent Deferred Sales Charge--Class B
Shares" below) and the redemption of Class C shares within the first year
following purchase may be subject to a contingent deferred sales charge (see
"Contingent Deferred Sales Charge--Class C Shares" below).

Because of the high cost of maintaining small accounts, the Funds reserve the
right to redeem an account (and, in the case of Class B shares, impose any
applicable contingent deferred sales charge) that falls below the minimum
investment level, currently $1,000, as a result of redemptions. Currently,
Individual Retirement Accounts and employee benefit plan accounts are not
subject to this procedure. 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 Fund redeems the shareholder account. The
investment required to reach that level may be made at net asset value (without
any initial sales charge in the case of Class A shares).

Shareholders can request the following telephone privileges: expedited wire
transfer redemptions and EXPRESS-Transfer transactions (see "Special Features")
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. A Fund or its agents may be liable for
any losses, expenses or costs arising out of fraudulent or unauthorized
telephone requests pursuant to these privileges unless the Fund or its agents
reasonably believe, based upon reasonable verification procedures, that the
telephone instructions are genuine. THE SHAREHOLDER WILL BEAR THE RISK OF LOSS
including loss resulting from fraudulent or unauthorized transactions, so 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.

TELEPHONE REDEMPTIONS. If the proceeds of the redemption (prior to the
imposition of any contingent deferred sales charge) 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 signature guarantee is sufficient for redemptions by individual or joint
account holders, and trust, executor and guardian account holders (excluding
custodial accounts for gifts and transfers to minors), provided the trustee,
executor or guardian is named in the account registration. Other institutional
account holders and guardian account holders of custodial accounts for gifts and
transfers to minors 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 1-800-621-1048. Shares purchased by
check or through EXPRESS-Transfer or Bank Direct Deposit 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 Funds reserve the
right to terminate or modify this privilege at any time.

REPURCHASES (CONFIRMED REDEMPTIONS). A request for repurchase may be
communicated by a shareholder through a securities dealer or other financial
services firm to KDI, which a Fund has authorized to act as its agent. There is
no charge by KDI with respect to repurchases; however, dealers or other firms
may charge customary commissions for their services. Dealers and other financial
services firms are obligated to transmit orders promptly. The repurchase price
will be the net asset value next determined after receipt of a request by KDI.
However, requests for repurchases received by dealers or other firms prior to
the determination of net asset value (see "Net Asset Value") and received by KDI
prior to the close of KDI's business day will be

30
<PAGE> 34

confirmed at the net asset value effective on that day. The offer to repurchase
may be suspended at any time. Requirements as to stock powers, certificates,
payments and delay of payments are the same as for redemptions.

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 of a Fund can be redeemed and proceeds sent by federal wire
transfer to a single previously designated account. Requests received by the
Shareholder Service Agent prior to the determination of net asset value will
result in shares being redeemed that day at the net asset value effective on
that day and normally the proceeds will be sent to the designated account the
following business day. Delivery of the proceeds of a wire redemption request of
$250,000 or more may be delayed by the Fund for up to seven days if ZKI deems it
appropriate under then current market conditions. Once authorization is on file,
the Shareholder Service Agent will honor requests by telephone at 1-800-621-1048
or in writing, subject to the limitations on liability described under "General"
above. The Funds are not responsible for the efficiency of the federal wire
system or the account holder's financial services firm or bank. The Funds
currently do 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 (including any contingent
deferred sales charge). 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
EXPRESS-Transfer or Bank Direct Deposit may not be redeemed by wire transfer
until such shares have been owned for at least 10 days. Account holders may not
use this privilege 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
Funds reserve the right to terminate or modify this privilege at any time.

CONTINGENT DEFERRED SALES CHARGE--LARGE ORDER NAV PURCHASE PRIVILEGE. A
contingent deferred sales charge may be imposed upon redemption of Class A
shares that are purchased under the Large Order NAV Purchase Privilege as
follows: 1% if they are redeemed within one year of purchase and .50% if they
are redeemed during the second year following purchase. The charge will not be
imposed upon redemption of reinvested dividends or share appreciation. The
charge is applied to the value of the shares redeemed excluding amounts not
subject to the charge. The contingent deferred sales charge will be waived in
the event of: (a) redemptions by a participant-directed qualified retirement
plan described in Code Section 401(a) or a participant-directed non-qualified
deferred compensation plan described in Code Section 457 or a
participant-directed qualified retirement plan described in Code Section
403(b)(7) which is not sponsored by a K-12 school district; (b) redemptions by
employer sponsored employee benefit plans using the subaccount record keeping
system made available through the Shareholder Service Agent; (c) redemption of
shares of a shareholder (including a registered joint owner) who has died; (d)
redemption of shares of a shareholder (including a registered joint owner) who
after purchase of the shares being redeemed becomes totally disabled (as
evidenced by a determination by the federal Social Security Administration); (e)
redemptions under a Fund's Systematic Withdrawal Plan at a maximum of 10% per
year of the net asset value of the account; and (f) redemptions of shares whose
dealer of record at the time of the investment notifies KDI that the dealer
waives the commission applicable to such Large Order NAV Purchase.

CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES. A contingent deferred sales
charge may be imposed upon redemption of Class B shares. There is no such charge
upon redemption of any share

31
<PAGE> 35

appreciation or reinvested dividends on Class B shares. The charge is computed
at the following rates applied to the value of the shares redeemed excluding
amounts not subject to the charge.

<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
SALES
YEAR OF REDEMPTION AFTER PURCHASE CHARGE
--------------------------------- ----------
<S> <C>
First....................................................... 4%
Second...................................................... 3%
Third....................................................... 3%
Fourth...................................................... 2%
Fifth....................................................... 2%
Sixth....................................................... 1%
</TABLE>

Class B shareholders who originally acquired their shares as Initial Shares of
Kemper Portfolios, formerly known as Kemper Investment Portfolios, hold them
subject to the same CDSC schedule that applied when those shares were purchased,
as follows:

<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES CHARGE
------------------------------------------------------------
YEAR OF SHARES PURCHASED ON OR AFTER
REDEMPTION FEBRUARY 1, 1991 AND
AFTER SHARES PURCHASED ON OR AFTER BEFORE
PURCHASE MARCH 1, 1993 MARCH 1, 1993
---------- ---------------------------- ----------------------------
<S> <C> <C>
First................................ 4% 3%
Second............................... 3% 3%
Third................................ 3% 2%
Fourth............................... 2% 2%
Fifth................................ 2% 1%
Sixth................................ 1% 1%
</TABLE>

The contingent deferred sales charge will be waived: (a) in the event of the
total disability (as evidenced by a determination by the federal Social Security
Administration) of the shareholder (including a registered joint owner)
occurring after the purchase of the shares being redeemed, (b) in the event of
the death of the shareholder (including a registered joint owner), (c) for
redemptions made pursuant to a systematic withdrawal plan (see "Special
Features--Systematic Withdrawal Plan" below), (d) for redemptions made pursuant
to any IRA systematic withdrawal based on the shareholder's life expectancy
including, but not limited to, substantially equal periodic payments described
in Internal Revenue Code Section 72(t)(2)(A)(iv) prior to age 59 1/2 and (e) for
redemptions to satisfy required minimum distributions after age 70 1/2 from an
IRA account (with the maximum amount subject to this waiver being based only
upon the shareholder's Kemper IRA accounts). The contingent deferred sales
charge will also be waived in connection with the following redemptions of
shares held by employer sponsored employee benefit plans maintained on the
subaccount record keeping system made available by the Shareholder Service
Agent: (a) redemptions to satisfy participant loan advances (note that loan
repayments constitute new purchases for purposes of the contingent deferred
sales charge and the conversion privilege), (b) redemptions in connection with
retirement distributions (limited at any one time to 10% of the total value of
plan assets invested in a Fund), (c) redemptions in connection with
distributions qualifying under the hardship provisions of the Internal Revenue
Code and (d) redemptions representing returns of excess contributions to such
plans.

CONTINGENT DEFERRED SALES CHARGE--CLASS C SHARES. A contingent deferred sales
charge of 1% may be imposed upon redemption of Class C shares if they are
redeemed within one year of purchase. The charge will not be imposed upon
redemption of reinvested dividends or share appreciation. The charge is applied
to the value of the shares redeemed excluding amounts not subject to the charge.
The contingent deferred sales charge will be waived: (a) in the event of the
total disability (as evidenced by a determination by the federal Social Security
Administration) of the shareholder (including a registered joint owner)
occurring

32
<PAGE> 36

after the purchase of the shares being redeemed, (b) in the event of the death
of the shareholder (including a registered joint owner), (c) for redemptions
made pursuant to a systematic withdrawal plan (limited to 10% of the net asset
value of the account during the first year, see "Special Features--Systematic
Withdrawal Plan"), (d) for redemptions made pursuant to any IRA systematic
withdrawal based on the shareholder's life expectancy including, but not limited
to, substantially equal periodic payments described in Internal Revenue Code
Section 72(t)(2)(A)(iv) prior to age 59 1/2, (e) for redemptions to satisfy
required minimum distributions after age 70 1/2 from an IRA account (with the
maximum amount subject to this waiver being based only upon the shareholder's
Kemper IRA accounts) and (f) for any participant-directed redemption of shares
held by employer sponsored employee benefit plans maintained on the subaccount
record keeping system made available by the Shareholder Service Agent.

CONTINGENT DEFERRED SALES CHARGE--GENERAL. The following example will illustrate
the operation of the contingent deferred sales charge. Assume that an investor
makes a single purchase of $10,000 of a Fund's Class B shares and that 16 months
later the value of the shares has grown by $1,000 through reinvested dividends
and by an additional $1,000 in appreciation to a total of $12,000. If the
investor were then to redeem the entire $12,000 in share value, the contingent
deferred sales charge would be payable only with respect to $10,000 because
neither the $1,000 of reinvested dividends nor the $1,000 of share appreciation
is subject to the charge. The charge would be at the rate of 3% ($300) because
it was in the second year after the purchase was made.

The rate of the contingent deferred sales charge is determined by the length of
the period of ownership. Investments are tracked on a monthly basis. The period
of ownership for this purpose begins the first day of the month in which the
order for the investment is received. For example, an investment made in
December, 1996 will be eligible for the second year's charge if redeemed on or
after December 1, 1997. In the event no specific order is requested, the
redemption will be made first from shares representing reinvested dividends and
then from the earliest purchase of shares. KDI receives any contingent deferred
sales charge directly.

REINVESTMENT PRIVILEGE. A shareholder who has redeemed Class A shares of a Fund
or any other Kemper Mutual Fund listed under "Special Features--Class A
Shares--Combined Purchases" (other than shares of Kemper Cash Reserves Fund
purchased directly at net asset value) may reinvest up to the full amount
redeemed at net asset value at the time of the reinvestment in Class A shares of
the Fund or of the other listed Kemper Mutual Funds. A shareholder of a Fund or
any other Kemper Mutual Fund who redeems Class A shares purchased under the
Large Order NAV Purchase Privilege (see "Purchase of Shares -- Initial Sales
Charge Alternative -- Class A Shares"), Class B shares or Class C shares and
incurs a contingent deferred sales charge may reinvest up to the full amount
redeemed at net asset value at the time of the reinvestment in Class A shares,
Class B shares or Class C shares, as the case may be, of a Fund or of other
Kemper Mutual Funds. The amount of any contingent deferred sales charge also
will be reinvested. These reinvested shares will retain their original cost and
purchase date for purposes of the contingent deferred sales charge. Also, a
holder of Class B shares who has redeemed shares may reinvest up to the full
amount redeemed, less any applicable contingent deferred sales charge that may
have been imposed upon the redemption of such shares, at net asset value in
Class A shares of a Fund or of the other Kemper Mutual Funds listed under
"Special Features--Class A Shares--Combined Purchases." Purchases through the
reinvestment privilege are subject to the minimum investment requirements
applicable to the shares being purchased and may only be made for Kemper Mutual
Funds available for sale in the shareholder's state of residence as listed under
"Special Features--Exchange Privilege." The reinvestment privilege can be used
only once as to any specific shares and reinvestment must be effected within six
months of the redemption. If a loss is realized on the redemption of Fund
shares, the reinvestment in the same Fund may be subject to the "wash sale"
rules if made within 30 days of the redemption, resulting in a postponement of
the recognition of such loss for federal income tax purposes. The reinvestment
privilege may be terminated or modified at any time.

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<PAGE> 37

SPECIAL FEATURES

CLASS A SHARES--COMBINED PURCHASES. A Fund's Class A shares (or the equivalent)
may be purchased at the rate applicable to the discount bracket attained by
combining concurrent investments in Class A shares of any of the following
funds: 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 Fund, Kemper U.S. Government Securities Fund, Kemper International Fund,
Kemper State Tax-Free Income Series, Kemper Adjustable Rate U.S. Government
Fund, Kemper Blue Chip Fund, Kemper Global Income Fund, Kemper Target Equity
Fund (series are subject to a limited offering period), Kemper Intermediate
Municipal Bond Fund, Kemper Cash Reserves Fund, Kemper U.S. Mortgage Fund,
Kemper Short-Intermediate Government Fund Kemper-Dreman Fund, Inc., Kemper
Value+Growth Fund, Kemper Quantitative Equity Fund, Kemper Horizon Fund, Kemper
Europe Fund, Kemper Asian Growth Fund and Kemper Aggressive Growth Fund ("Kemper
Mutual Funds"). Except as noted below, there is no combined purchase credit for
direct purchases of shares of Kemper Money Funds, Cash Equivalent Fund,
Tax-Exempt California Money Market Fund, Cash Account Trust, Tax-Exempt New York
Money Market Fund or Investors Cash Trust ("Money Market Funds"), which are not
considered "Kemper Mutual Funds" for purposes hereof. For purposes of the
Combined Purchases feature described above as well as for the Letter of Intent
and Cumulative Discount features described below, employer sponsored employee
benefit plans using the subaccount record keeping system made available through
the Shareholder Service Agent may include: (a) Money Market Funds as "Kemper
Mutual Funds", (b) all classes of shares of any Kemper Mutual Fund and (c) the
value of any other plan investments, such as guaranteed investment contracts and
employer stock, maintained on such subaccount record keeping system.

CLASS A SHARES--LETTER OF INTENT. The same reduced sales charges for Class A
shares, as shown in the applicable prospectus, also apply to the aggregate
amount of purchases of such Kemper Mutual Funds listed above made by any
purchaser within a 24-month period under a written Letter of Intent ("Letter")
provided by KDI. The Letter, which imposes no obligation to purchase or sell
additional Class A shares, provides for a price adjustment depending upon the
actual amount purchased within such period. The Letter provides that the first
purchase following execution of the Letter must be at least 5% of the amount of
the intended purchase, and that 5% of the amount of the intended purchase
normally will be held in escrow in the form of shares pending completion of the
intended purchase. If the total investments under the Letter are less than the
intended amount and thereby qualify only for a higher sales charge than actually
paid, the appropriate number of escrowed shares are redeemed and the proceeds
used toward satisfaction of the obligation to pay the increased sales charge.
The Letter for an employer sponsored employee benefit plan maintained on the
subaccount record keeping system available through the Shareholder Service Agent
may have special provisions regarding payment of any increased sales charge
resulting from a failure to complete the intended purchase under the Letter. A
shareholder may include the value (at the maximum offering price) of all shares
of such Kemper Mutual Funds held of record as of the initial purchase date under
the Letter as an "accumulation credit" toward the completion of the Letter, but
no price adjustment will be made on such shares. Only investments in Class A
shares of a Fund are included for this privilege.

CLASS A SHARES--CUMULATIVE DISCOUNT. Each Fund's Class A shares also may be
purchased at the rate applicable to the discount bracket attained by adding to
the cost of Fund shares being purchased the value of all Class A shares of the
above mentioned Kemper Mutual Funds (computed at the maximum offering price at
the time of the purchase for which the discount is applicable) already owned by
the investor.

CLASS A SHARES--AVAILABILITY OF QUANTITY DISCOUNTS. An investor or the
investor's dealer or other financial services firm must notify the Shareholder
Service Agent or KDI whenever a quantity discount or reduced sales charge is
applicable to a purchase. Upon such notification, the investor will receive the
lowest applicable sales charge. Quantity discounts described above may be
modified or terminated at any time.

34
<PAGE> 38

EXCHANGE PRIVILEGE. Shareholders of Class A, Class B and Class C shares may
exchange their shares for shares of the corresponding class of other Kemper
Mutual Funds in accordance with the provisions below.

CLASS A SHARES. Class A shares of the Kemper Mutual Funds and shares of the
Money Market Funds listed under "Special Features--Class A Shares--Combined
Purchases" above may be exchanged for each other at their relative net asset
values. 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. Series of Kemper Target
Equity Fund are available on exchange only during the offering period for such
series as described in the applicable prospectus. Cash Equivalent Fund,
Tax-Exempt California Money Market Fund, Cash Account Trust, Tax-Exempt New York
Money Market Fund and Investors Cash Trust are available on exchange but only
through a financial services firm having a services agreement with KDI.

Class A shares of a Fund purchased under the Large Order NAV Purchase Privilege
may be exchanged for Class A shares of another Kemper Mutual Fund or a Money
Market Fund under the exchange privilege described above without paying any
contingent deferred sales charge at the time of exchange. If the Class A shares
received on exchange are redeemed thereafter, a contingent deferred sales charge
may be imposed in accordance with the foregoing requirements provided that the
shares redeemed will retain their original cost and purchase date for purposes
of the contingent deferred sales charge.

CLASS B SHARES. Class B shares of a Fund and Class B shares of any other Kemper
Mutual Fund listed under "Special Features--Class A Shares--Combined Purchases"
may be exchanged for each other at their relative net asset values. Class B
shares may be exchanged without any contingent deferred sales charge being
imposed at the time of exchange. For purposes of the contingent deferred sales
charge that may be imposed upon the redemption of the Class B shares received on
exchange, amounts exchanged retain their original cost and purchase date.

CLASS C SHARES. Class C shares of a Fund and Class C shares of any other Kemper
Mutual Fund listed under "Special Features--Class A Shares--Combined Purchases"
may be exchanged for each other at their relative net asset values. Class C
shares may be exchanged without a contingent deferred sales charge being imposed
at the time of exchange. For determining whether there is a contingent deferred
sales charge that may be imposed upon the redemption of the Class C shares
received by exchange, the cost and purchase date of the shares that were
originally purchased and exchanged are retained.

GENERAL. Shares of a Kemper Mutual Fund with a value in excess of $1,000,000
(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 (the "15 Day Hold Period"). 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, direction or
advice, including without limitation, accounts administered by a financial
services firm offering market timing, asset allocation or similar services. The
total value of shares being exchanged must at least equal the minimum investment
requirement of the Kemper 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, dealers or other 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 of such shares. Shareholders interested in exercising the exchange
privilege may obtain prospectuses of the other funds from dealers, other firms
or KDI. Exchanges may be accomplished by a written request to Kemper Service
Company, Attention: Exchange Department, P.O. Box 419557, Kansas City, Missouri
64141-6557, or by telephone if the shareholder has given authorization. Once the
authorization is on file, the Shareholder Service Agent will honor requests by
telephone at 1-800-621-1048, subject to the

35
<PAGE> 39

limitations on liability under "Redemption or Repurchase of Shares--General."
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. Exchanges may only be made for Kemper Funds that are
eligible for sale in the shareholder's state of residence. Currently Tax-Exempt
California Money Market Fund is available for sale only in California and
Tax-Exempt New York Money Market Fund is available for sale only in New York,
Connecticut, New Jersey and Pennsylvania. Except as otherwise permitted by
applicable regulations, 60 days' prior written notice of any termination or
material change will be provided.

SYSTEMATIC EXCHANGE PRIVILEGE. The owner of $1,000 or more of any class of the
shares of a Kemper Mutual Fund or Money Market Fund may authorize the automatic
exchange of a specified amount ($100 minimum) of such shares for shares of the
same class of another such Kemper Fund. If selected, exchanges will be made
automatically until the privilege is terminated by the shareholder or the other
Kemper Fund. Exchanges are subject to the terms and conditions described above
under "Exchange Privilege," except that the $1,000 minimum investment
requirement for the Kemper Fund acquired on exchange is not applicable. This
privilege may not be used for the exchange of shares held in certificated form.

EXPRESS-TRANSFER. EXPRESS-Transfer permits the transfer of money via the
Automated Clearing House System (minimum $100 and maximum $5,000) from a
shareholder's bank, savings and loan, or credit union account to purchase shares
in the Fund. Shareholders can also redeem shares (minimum $100 and maximum
$50,000) from their Fund account and transfer the proceeds to their bank,
savings and loan, or credit union checking account. Shares purchased by check or
through EXPRESS-Transfer or Bank Direct Deposit may not be redeemed under this
privilege until such shares have been owned for at least 10 days. By enrolling
in EXPRESS-Transfer, the shareholder authorizes the Shareholder Service Agent to
rely upon telephone instructions from ANY PERSON to transfer the specified
amounts between the shareholder's Fund account and the predesignated bank,
savings and loan or credit union account, subject to the limitations on
liability under "Redemption or Repurchase of Shares--General." Once enrolled in
EXPRESS-Transfer, a shareholder can initiate a transaction by calling Kemper
Shareholder Services toll free at 1-800-621-1048 Monday through Friday, 8:00
a.m. to 3:00 p.m. Chicago time. Shareholders may terminate this privilege by
sending written notice to Kemper Service Company, P.O. Box 419415, Kansas City,
Missouri 64141-6415. Termination will become effective as soon as the
Shareholder Service Agent has had a reasonable time to act upon the request.
EXPRESS-Transfer cannot be used with passbook savings accounts or for
tax-deferred plans such as Individual Retirement Accounts ("IRAs").

BANK DIRECT DEPOSIT. A shareholder may purchase additional Fund shares through
an automatic investment program. With the Bank Direct Deposit Purchase Plan,
investments are made automatically (minimum $50, maximum $50,000) from the
shareholder's account at a bank, savings and loan or credit union into the
shareholder's Fund account. By enrolling in Bank Direct Deposit, the shareholder
authorizes the Fund and its agents to either draw checks or initiate Automated
Clearing House debits against the designated account at a bank or other
financial institution. This privilege may be selected by completing the
appropriate section on the Account Application or by contacting the Shareholder
Service Agent for appropriate forms. A shareholder may terminate his or her Plan
by sending written notice to Kemper Service Company, P.O. Box 419415, Kansas
City, Missouri 64141-6415. Termination by a shareholder will become effective
within thirty days after the Shareholder Service Agent has received the request.
A Fund may immediately terminate a shareholder's Plan in the event that any item
is unpaid by the shareholder's financial institution. A Fund may terminate or
modify this privilege at any time.

PAYROLL DIRECT DEPOSIT AND GOVERNMENT DIRECT DEPOSIT. A shareholder may invest
in a Fund through Payroll Direct Deposit or Government Direct Deposit. Under
these programs, all or a portion of a shareholder's net pay or government check
is automatically invested in a Fund account each payment period. A shareholder
may terminate participation in these programs by giving written notice to the
shareholder's

36
<PAGE> 40

employer or government agency, as appropriate. (A reasonable time to act is
required.) A Fund is not responsible for the efficiency of the employer or
government agency making the payment or any financial institutions transmitting
payments.

SYSTEMATIC WITHDRAWAL PLAN. The owner of $5,000 or more of a class of a Fund's
shares at the offering price (net asset value plus, in the case of Class A
shares, the initial sales charge) 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
a designated payee monthly, quarterly, semiannually or annually. The $5,000
minimum account size is not applicable to Individual Retirement Accounts. The
minimum periodic payment is $100. The maximum annual rate at which Class B
shares may be redeemed (and Class A shares purchased under the Large Order NAV
Purchase Privilege and Class C shares in their first year following the
purchase) under a systematic withdrawal plan is 10% of the net asset value of
the account. Shares are redeemed so that the payee will receive payment
approximately the first of the month. Any income and capital gain dividends will
be automatically reinvested 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 and fluctuations in the net asset value
of the shares redeemed, redemptions for the purpose of making such payments may
reduce or even exhaust the account.

The purchase of Class A shares while participating in a systematic withdrawal
plan ordinarily will be disadvantageous to the investor because the investor
will be paying a sales charge on the purchase of shares at the same time that
the investor is redeeming shares upon which a sales charge may already have been
paid. Therefore, the Funds will not knowingly permit additional investments of
less than $2,000 if the investor is at the same time making systematic
withdrawals. KDI will waive the contingent deferred sales charge on redemption
of Class A shares purchased under the Large Order NAV Purchase Privilege, Class
B shares and Class C shares made pursuant to a systematic withdrawal plan. The
right is reserved to amend the systematic withdrawal plan on 30 days' notice.
The plan may be terminated at any time by the investor or the Funds.

TAX-SHELTERED RETIREMENT PLANS. The Shareholder Service Agent provides
retirement plan services and documents and KDI can establish investor accounts
in any of the following types of retirement plans:

- - Individual Retirement Accounts ("IRAs") with IFTC as custodian. This includes
Simplified Employee Pension Plan ("SEP") IRA accounts and prototype documents.

- - 403(b)(7) Custodial Accounts also with IFTC as custodian. This type of plan is
available to employees of most non-profit organizations.

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

Brochures describing the above plans as well as 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 with IFTC as custodian describe the current fees payable to
IFTC for its services as custodian. Investors should consult with their own tax
advisers before establishing a retirement plan.

PERFORMANCE

The Funds may advertise several types of performance information for a class of
shares, including "average annual total return" and "total return" and, for the
Global Fund, "yield." Performance information will be computed separately for
Class A, Class B and Class C shares. Each of these figures is based upon
historical results and is not representative of the future performance of any
class of the Funds.

The Global Fund's yield is a measure of the net investment income per share
earned over a specific one month or 30-day period expressed as a percentage of
the maximum offering price of the Fund's shares. Yield is an annualized figure,
which means that it is assumed that the Fund generates the same level of net
investment

37
<PAGE> 41

income over a one year period. Net investment income is assumed to be compounded
semiannually when it is annualized.

Average annual total return and total return figures measure both the net
investment income generated by, and the effect of any realized and unrealized
appreciation or depreciation of, the underlying investments in a Fund's
portfolio for the period in question, assuming the reinvestment of all
dividends. Thus, these figures reflect the change in the value of an investment
in the Fund during a specified period. Average annual total return will be
quoted for at least the one, five and ten year periods ending on a recent
calendar quarter (or if such periods have not yet elapsed, at the end of a
shorter period corresponding to the life of the Fund for performance purposes).
Average annual total return figures represent the average annual percentage
change over the period in question. Total return figures represent the aggregate
percentage or dollar value change over the period in question.

A Fund's performance may be compared to that of the Consumer Price Index or, for
the Global Fund, various unmanaged bond indexes such as the Salomon Brothers
High Grade Corporate Bond Index, the Lehman Brothers Government/Corporate Bond
Index and the Salomon Brothers World Government Bond Index, or for the
International Fund various unmanaged equity indexes such as the Dow Jones
Industrial Average, the Standard & Poor's 500 Stock Index and the Europe
Austral-Asia Far East ("EAFE") Index and may also be compared to the performance
of other mutual funds or mutual fund indexes as reported by independent mutual
fund reporting services such as Lipper Analytical Services, Inc. ("Lipper").
Lipper performance calculations are based upon changes in net asset value with
all dividends reinvested and do not include the effect of any sales charges.
Also, investors may want to compare the historical returns of various global
securities markets. Such returns would not necessarily be representative of the
future performance of such markets or of the performance of the Fund.

Information may be quoted from publications such as MORNINGSTAR, INC., THE WALL
STREET JOURNAL, MONEY MAGAZINE, FORBES, BARRON'S, FORTUNE, THE CHICAGO TRIBUNE,
USA TODAY, INSTITUTIONAL INVESTOR and REGISTERED REPRESENTATIVE. Also, investors
may want to compare the historical returns of various investments, performance
indexes of those investments or economic indicators, including but not limited
to stocks, bonds, certificates of deposit, money market funds and U.S. Treasury
obligations. Bank product performance may be based upon, among other things, the
BANK RATE MONITOR National IndexTM or various certificate of deposit indexes.
Money market fund performance may be based upon, among other things, the
IBC/Donoghue's Money Fund Report(R) or Money Market Insight(R), reporting
services on money market funds. Performance of U.S. Treasury obligations may be
based upon, among other things, various U.S. Treasury bill indexes. Certain of
these alternative investments may offer fixed rates of return and guaranteed
principal and may be insured.

A Fund may depict the historical performance of the securities in which the Fund
may invest over periods reflecting a variety of market or economic conditions
either alone or in comparison with alternative investments, performance indexes
of those investments or economic indicators. The Fund may also describe its
portfolio holdings and depict its size or relative size compared to other mutual
funds, the number and make-up of its shareholder base and other descriptive
factors concerning the Fund.

The Global Fund may include in its sales literature and shareholder reports a
quotation of the current "distribution rate" for a class of the Fund.
Distribution rate is simply a measure of the level of dividends distributed for
a specified period. It differs from yield, which is a measure of the income
actually earned by the Fund's investments, and from total return, which is a
measure of the income actually earned by, plus the effect of any realized and
unrealized appreciation or depreciation of such investments during the period.
Distribution rate is, therefore, not intended to be a complete measure of
performance. Distribution rate may sometimes be greater than yield since, for
instance, it may include gains from the sale of options or other short-term and
possibly long-term gains (which may be non-recurring) and may not include the
effect of amortization of bond premiums. As reflected under "Investment
Objectives, Policies and Risk Factors--Additional Investment Information,"
option writing can limit the potential for capital appreciation.

38
<PAGE> 42

The Global Fund's Class A shares are sold at net asset value plus a maximum
sales charge of 4.5% of the offering price. The International Fund's Class A
shares are sold at net asset value plus a maximum sales charge of 5.75% of the
offering price. While the maximum sales charge is normally reflected in a Fund's
Class A performance figures, certain total return calculations may not include
such charge and those results would be reduced if it were included. Class B
shares and Class C shares are sold at net asset value. Redemptions of Class B
shares within the first six years after purchase may be subject to a contingent
deferred sales charge that ranges from 4% during the first year to 0% after six
years. Redemption of Class C shares within the first year after purchase may be
subject to a 1% contingent deferred sales charge. Average annual total return
figures do, and total return figures may, include the effect of the contingent
deferred sales charge for the Class B shares and Class C shares that may be
imposed at the end of the period in question. Performance figures for the Class
B shares and Class C shares not including the effect of the applicable
contingent deferred sales charge would be reduced if it were included.

A Fund's returns and net asset value will fluctuate and shares of a Fund are
redeemable by an investor at the then current net asset value, which may be more
or less than original cost. Redemption of Class B shares and Class C shares may
be subject to a contingent deferred sales charge as described above. Additional
information concerning each Fund's performance, and the performance of various
global stock and bond markets, appears in the Statement of Additional
Information. Additional information about each Fund's performance also appears
in its Annual Report to Shareholders, which is available without charge from the
applicable Fund.

CAPITAL STRUCTURE

The Funds are open-end management investment companies, organized as separate
business trusts under the laws of Massachusetts. The Global Fund was organized
as a business trust under the laws of Massachusetts on August 3, 1988. The
International Fund was organized as a business trust under the laws of
Massachusetts on October 24, 1985 and, effective January 31, 1986, that Fund
pursuant to a reorganization succeeded to the assets and liabilities of Kemper
International Fund, Inc., a Maryland corporation organized in 1980.

Each 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. While only shares of a single
Portfolio are presently being offered by each Fund, the Board of Trustees of
each Fund may authorize the issuance of additional classes and additional
Portfolios if deemed desirable, each with its own investment objective, policies
and restrictions. Since the Funds may offer multiple Portfolios, each is known
as a "series company." Currently, each Fund offers four classes of shares of a
single Portfolio. These are Class A, Class B and Class C shares, as well as
Class I shares, which have different expenses, which may affect performance, and
that are available for purchase exclusively by the following investors: (a)
tax-exempt retirement plans of ZKI and its affiliates; and (b) the following
investment advisory clients of ZKI and its investment advisory affiliates that
invest at least $1 million in a Fund: (1) unaffiliated benefit plans (other than
individual retirement accounts and self-directed retirement plans); (2)
unaffiliated banks and insurance companies purchasing for their own accounts;
and (3) endowment funds of unaffiliated non-profit organizations. Shares of a
Fund have equal noncumulative voting rights except that Class B and Class C
shares have separate and exclusive voting rights with respect to each Fund's
Rule 12b-1 Plan. Shares of each class also have equal rights with respect to
dividends, assets and liquidation of such Fund subject to any preferences (such
as resulting from different Rule 12b-1 distribution fees), rights or privileges
of any classes of shares of a Fund. Shares are fully paid and nonassessable when
issued, are transferable without restriction and have no preemptive or
conversion rights. The Funds are not required to hold annual shareholder
meetings and do not intend to do so. However, they 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 each Fund, shareholders may remove
trustees. If shares of more than one Portfolio are outstanding, shareholders
will vote by Portfolio and not in the aggregate or by class except when voting
in the aggregate is required under the Investment Company Act of 1940, such as
for the election of trustees, or when voting by class is appropriate.

39
<PAGE> 43

STATEMENT OF ADDITIONAL INFORMATION
MARCH 1, 1997

KEMPER GLOBAL INCOME FUND
KEMPER INTERNATIONAL FUND
222 SOUTH RIVERSIDE PLAZA, CHICAGO, ILLINOIS 60606
1-800-621-1048

This Statement of Additional Information is not a prospectus. It is the combined
Statement of Additional Information for Kemper Global Income Fund and Kemper
International Fund (the "Funds"). It should be read in conjunction with the
combined prospectus of the Funds dated March 1, 1997. The prospectus may be
obtained without charge from the Funds.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Restrictions..................................... B-1

Investment Policies and Techniques.......................... B-4

Dividends and Taxes......................................... B-10

Performance................................................. B-11

Investment Manager and Underwriter.......................... B-19

Portfolio Transactions...................................... B-24

Purchase and Redemption of Shares........................... B-25

Officers and Trustees....................................... B-26

Shareholder Rights.......................................... B-28

Appendix--Ratings of Investments............................ B-30
</TABLE>

The financial statements appearing in each Fund's Annual Report to Shareholders
are incorporated herein by reference. The Report for the Fund for which this
Statement of Additional Information is requested accompanies this document.

KIF-13 3/97 (LOGO)printed on recycled paper
<PAGE> 44

INVESTMENT RESTRICTIONS

Each Fund has adopted certain fundamental investment restrictions which,
together with the investment objective and fundamental policies of such Fund,
cannot be changed without approval of a "majority" of its outstanding voting
shares. As defined in the Investment Company Act of 1940, this means the lesser
of (1) 67% of the Fund's shares present at a meeting where more than 50% of the
outstanding shares are present in person or by proxy; or (2) more than 50% of
the Fund's outstanding shares.

THE GLOBAL FUND MAY NOT, AS A FUNDAMENTAL POLICY:

(1) 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 total value of the Fund's assets would be invested in
securities of that issuer except that, with respect to 50% of the Fund's total
assets, the Fund may invest up to 25% of its total assets in securities of any
one issuer.

(2) Purchase more than 10% of any class of voting securities of any issuer.

(3) Make loans to others provided that the Fund may purchase debt obligations or
repurchase agreements and it may lend its securities 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
portfolio securities. If, for any reason, the current value of the Fund's total
assets falls below an amount equal to three times the amount of its indebtedness
from money borrowed, the Fund will, within three days (not including Sundays and
holidays), reduce its indebtedness to the extent necessary. The Fund will not
borrow for leverage purposes and will not purchase securities or make
investments while borrowings are outstanding.

(5) Pledge, hypothecate, mortgage or otherwise encumber more than 15% of its
total assets and then only to secure borrowings permitted by restriction 4
above. (The collateral arrangements with respect to options, financial futures
and delayed delivery transactions and any margin payments in connection
therewith are not deemed to be pledges or other encumbrances.)

(6) Purchase securities on margin, except to obtain such short-term credits as
may be necessary for the clearance of transactions; however, the Fund may make
margin deposits in connection with options and financial futures transactions.

(7) Make short sales of securities or other assets or maintain a short position
for the account of the Fund unless at all times when a short position is open it
owns an equal amount of such securities or other assets or owns securities
which, without payment of any further consideration, are convertible into or
exchangeable for securities or other assets of the same issue as, and equal in
amount to, the securities or other assets sold short and unless not more than
10% of the Fund's total assets is held as collateral for such sales at any one
time.

(8) Write or sell put or call options, combinations thereof or similar options
on more than 25% of the Fund's net assets; nor may the Fund purchase put or call
options if more than 5% of the Fund's net assets would be invested in premiums
on put and call options, combinations thereof or similar options; however, the
Fund may buy or sell options on financial futures contracts.

(9) Purchase securities (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if as a result of such purchase
25% or more of the Fund's total assets would be invested in any one industry.

(10) Invest in commodities or commodity futures contracts, although it may buy
or sell financial futures contracts and options on such contracts, and engage in
foreign currency transactions; or in real estate (including

B-1
<PAGE> 45

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 including real estate investment trusts.

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

(12) Issue senior securities except as permitted under the Investment Company
Act of 1940.

If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The Global
Fund did not borrow money as permitted by investment restriction number 4 in the
latest fiscal year and it has no present intention of borrowing during the
current year. The Global Fund has adopted the following non-fundamental
restrictions, which may be changed by the Board of Trustees without shareholder
approval. The Global Fund may not:

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

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

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

(iv) Invest more than 15% of its net assets in illiquid securities.

(v) Invest in warrants if more than 5% of the Fund's net assets would be
invested in warrants. Included within that amount, but not to exceed 2% of the
Fund's net assets, may be warrants not listed on the New York or American Stock
Exchanges. Warrants acquired in units or attached to securities may be deemed to
be without value for such purposes.

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

(vii) Invest in oil, gas or other mineral leases.

(viii) Invest more than 5% of the Fund's total assets in securities of issuers
(other than obligations of, or guaranteed by, the U.S. Government, its agencies
or instrumentalities) which with their predecessors have a record of less than
three years continuous operation, and equity securities of issuers which are not
readily marketable.

(ix) Invest more than 5% of its total assets in restricted securities, excluding
restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933 that have been determined to be liquid pursuant to
procedures adopted by the Board of Trustees, provided that the total amount of
Fund assets invested in restricted securities and securities of issuers which
with their predecessors have a record of less than three years continuous
operation will not exceed 15% of total assets.

(x) Invest more than 10% of its total assets in securities of real estate
investment trusts.

THE INTERNATIONAL FUND MAY NOT, AS A FUNDAMENTAL POLICY:

(1) Purchase securities of any issuer (other than obligations of, or guaranteed
by, the United States or any foreign government or their agencies or
instrumentalities) if, as a result, more than 5% of the Fund's total assets
would be invested in securities of that issuer. With respect to 75% of its
assets, the Fund will limit its investments in the securities of any one foreign
government issuer to 5% of the Fund's total assets.

B-2
<PAGE> 46

(2) Purchase more than 10% of any class of securities of any issuer except
securities issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities. All debt securities and all preferred stocks are each
considered as one class.

(3) Lend money or securities, provided that the making of time or demand
deposits with banks and the purchase of debt securities such as bonds,
debentures, commercial paper, repurchase agreements and short-term obligations
in accordance with its objective and policies are not prohibited.

(4) Borrow money except for temporary or emergency purposes (but not for the
purpose of purchase of investments) and then only in an amount not to exceed 5%
of the Fund's net assets; or pledge the Fund's securities or receivables or
transfer or assign or otherwise encumber them in an amount exceeding the amount
of the borrowing secured thereby.

(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; however, the Fund may make margin deposits in connection with
financial futures and options transactions.

(6) Write or sell put or call options, combinations thereof or similar options
on more than 25% of the Fund's net assets; nor may it purchase put or call
options if more than 5% of the Fund's net assets would be invested in premiums
on put and call options, combinations thereof or similar options; however, the
Fund may buy or sell options on financial futures contracts.

(7) Concentrate more than 25% of the value of its assets in any one industry.
Water, communications, electric and gas utilities shall each be considered a
separate industry. This limitation shall not apply to obligations issued by the
United States or any foreign government or their agencies or instrumentalities.

(8) Invest in commodities or commodity futures contracts, although it may buy or
sell financial futures contracts and options on such contracts and may enter
into foreign currency transactions; or in real estate, although it may invest in
securities which are secured by real estate and securities of issuers which
invest or deal in real estate.

(9) Underwrite securities issued by others except to the extent the Fund may be
deemed to be an underwriter, under the federal securities laws, in connection
with the disposition of portfolio securities. The Fund may buy and sell
securities outside the United States which are not registered with the
Securities and Exchange Commission or marketable in the United States.

(10) Issue senior securities except as permitted under the Investment Company
Act of 1940.

If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The
International Fund did not borrow money as permitted by investment restriction
number 4 in the latest fiscal year and it has no present intention of borrowing
during the current year. The International Fund has adopted the following
non-fundamental restrictions, which may be changed by the Board of Trustees
without shareholder approval. The International Fund may not:

(i) Invest more than 5% of the Fund's total assets in securities of issuers
which with their predecessors have a record of less than three years continuous
operation, and equity securities of issuers which are not readily marketable.

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

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

B-3
<PAGE> 47

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

(v) Purchase securities of other investment companies, except in connection with
a merger, consolidation, acquisition or reorganization, or by purchase in the
open market of securities of closed-end investment companies where no
underwriter or dealer's commission or profit, other than customary broker's
commission, is involved and only if immediately thereafter not more than (i) 3%
of the total outstanding voting stock of such company is owned by the Fund, (ii)
5% of the Fund's total assets would be invested in any one such company, and
(iii) 10% of the Fund's total assets would be invested in such securities.

(vi) Invest more than 15% of its net assets in illiquid securities.

(vii) Invest in warrants if more than 5% of the Fund's net assets would be
invested in warrants. Included within that amount, but not to exceed 2% of the
Fund's net assets, may be warrants not listed on the New York or American Stock
Exchanges. Warrants acquired in units or attached to securities may be deemed to
be without value for such purposes.

(viii) Invest in oil, gas, and other mineral leases.

(ix) Purchase or sell real property (including limited partnership interests but
excluding readily marketable interests in real estate investment trusts and
readily marketable securities of companies which invest in real estate).

(x) Invest more than 5% of its total assets in restricted securities, excluding
restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933 that have been determined to be liquid pursuant to
procedures adopted by the Board of Trustees, provided that the total amount of
Fund assets invested in restricted securities and securities of issuer which
with their predecessors have a record of less than three years continuous
operation will not exceed 15% of total assets.

(xi) Invest more than 10% of its total assets in securities of real estate
investment trusts.

INVESTMENT POLICIES AND TECHNIQUES

GENERAL. Each Fund may engage in futures, options and other derivatives
transactions in accordance with its investment objective and policies. The Funds
intends to engage in such transactions if it appears to the investment manager
to be advantageous for the Funds to do so, in order to pursue its investment
objective, to hedge against the effects of fluctuating interest rates and to
stabilize the value of its assets and not for speculation. The use of futures
and options, and possible benefits and attendant risks, are discussed below,
along with information concerning certain other investment policies and
techniques.

FINANCIAL FUTURES CONTRACTS. Each Fund may enter into financial futures
contracts for the future delivery of a financial instrument, such as a security,
or an amount of foreign currency, or the cash value of a securities index or
other appropriate index, as available, such as a foreign currency index. This
investment technique is designed primarily to hedge (i.e., protect) against
anticipated future changes in market conditions or foreign exchange rates which
otherwise might adversely affect the value of securities or other assets which
the Fund holds or intends to purchase. A "sale" of a futures contract means the
undertaking of a contractual obligation to deliver the securities or the cash
value of an index or foreign currency called for by the contract at a specified
price during a specified delivery period. A "purchase" of a futures contract
means the undertaking of a contractual obligation to acquire the securities or
cash value of an index or foreign currency at a specified price during a
specified delivery period. At the time of delivery in the case of fixed income
securities pursuant to the contract, adjustments are made to recognize
differences in value arising from the delivery of securities with a different
interest rate than that specified in the contract. In some cases, securities
called for by a futures contract may not have been issued at the time the
contract was written.

B-4
<PAGE> 48

Although some financial futures contracts by their terms call for the actual
delivery or acquisition of securities or other assets, in most cases a party
will close out the contractual commitment before delivery of the underlying
assets by purchasing (or selling, as the case may be) on a commodities exchange
an identical futures contract calling for delivery in the same month. Such a
transaction, if effected through a member of an exchange, cancels the obligation
to make or take delivery of the underlying securities or other assets. All
transactions in the futures market are made, offset or fulfilled through a
clearing house associated with the exchange on which the contracts are traded. A
Fund will incur brokerage fees when it purchases or sells contracts, and will be
required to maintain margin deposits. At the time a Fund enters into a futures
contract, it is required to deposit with its custodian, on behalf of the broker,
a specified amount of cash or eligible securities, called "initial margin." The
initial margin required for a futures contract is set by the exchange on which
the contract is traded. Subsequent payments, called "variation margin," to and
from the broker are made on a daily basis as the market price of the futures
contract fluctuates. The costs incurred in connection with futures transactions
could reduce a Fund's return. Futures contracts entail risks. If the investment
manager's judgment about the general direction of markets or exchange rates is
wrong, the overall performance may be poorer than if no such contracts had been
entered into.

There may be an imperfect correlation between movements in prices of futures
contracts and portfolio assets being hedged. In addition, the market prices of
futures contracts may be affected by certain factors. If participants in the
futures market elect to close out their contracts through offsetting
transactions rather than meet margin requirements, distortions in the normal
relationship between the assets and futures markets could result. Price
distortions also could result if investors in futures contracts decide to make
or take delivery of underlying securities or other assets rather than engage in
closing transactions because of the resultant reduction in the liquidity of the
futures market. In addition, from the point of view of speculators, the margin
requirements in the futures market are less onerous than margin requirements in
the cash market, increased participation by speculators in the futures market
could cause temporary price distortions. Due to the possibility of price
distortions in the futures market and because of the imperfect correlation
between movements in the prices of securities or other assets and movements in
the prices of futures contracts, a correct forecast of market trends by the
investment manager still may not result in a successful hedging transaction. If
any of these events should occur, the Fund could lose money on the financial
futures contracts and also on the value of its portfolio assets.

OPTIONS ON FINANCIAL FUTURES CONTRACTS. Each Fund may purchase and write call
and put options on financial futures contracts. An option on a futures contract
gives the purchaser the right, in return for the premium paid, to assume a
position in a futures contract at a specified exercise price at any time during
the period of the option. Upon exercise, the writer of the option delivers the
futures contract to the holder at the exercise price. A Fund would be required
to deposit with its custodian initial margin and maintenance margin with respect
to put and call options on futures contracts written by it. Each Fund will
establish segregated accounts or will provide cover with respect to written
options on financial futures contracts in a manner similar to that described
under "Options on Securities." Options on futures contracts involve risks
similar to those risks relating to transactions in financial futures contracts
described above. Also, an option purchased by a Fund may expire worthless, in
which case the Fund would lose the premium paid therefor.

OPTIONS ON SECURITIES. Each Fund may write (sell) "covered" call options on
securities as long as it owns the underlying securities subject to the option or
an option to purchase the same underlying securities, having an exercise price
equal to or less than the exercise price of the "covered" option, or will
establish and maintain for the term of the option a segregated account
consisting of cash or other liquid securities ("eligible securities") to the
extent required by applicable regulation in connection with the optioned
securities. A Fund may write "covered" put options provided that, as long as the
Fund is obligated as a writer of a put option, the Fund will own an option to
sell the underlying securities subject to the option, having an exercise price
equal to or greater than the exercise price of the "covered" option, or it will
deposit and maintain in a segregated account eligible securities having a value
equal to or greater than the exercise price of the option. A call option gives
the purchaser the right to buy, and the writer the obligation to sell, the
underlying security at the exercise

B-5
<PAGE> 49

price during or at the end of the option period. A put option gives the
purchaser the right to sell, and the writer has the obligation to buy, the
underlying security at the exercise price during or at the end of the option
period. The premium received for writing an option will reflect, among other
things, the current market price of the underlying security, the relationship of
the exercise price to such market price, the price volatility of the underlying
security, the option period, supply and demand and interest rates. The Funds may
write or purchase spread options, which are options for which the exercise price
may be a fixed dollar spread or yield spread between the security underlying the
option and another security that is used as a bench mark. The exercise price of
an option may be below, equal to or above the current market value of the
underlying security at the time the option is written. The buyer of a put who
also owns the related security is protected by ownership of a put option against
any decline in that security's price below the exercise price less the amount
paid for the option. The ability to purchase put options allows a Fund to
protect capital gains in an appreciated security it owns, without being required
to actually sell that security. At times a Fund would like to establish a
position in a security upon which call options are available. By purchasing a
call option, a Fund is able to fix the cost of acquiring the security, this
being the cost of the call plus the exercise price of the option. This procedure
also provides some protection from an unexpected downturn in the market because
a Fund is only at risk for the amount of the premium paid for the call option
which it can, if it chooses, permit to expire.

During the option period the covered call writer gives up the potential for
capital appreciation above the exercise price should the underlying asset rise
in value, and the secured put writer retains the risk of loss should the
underlying security decline in value. For the covered call writer, substantial
appreciation in the value of the underlying asset would result in the security
being "called away." For the secured put writer, substantial depreciation in the
value of the underlying security would result in the security being "put to" the
writer. If a covered call option expires unexercised, the writer realizes a gain
in the amount of the premium received. If the covered call option writer has to
sell the underlying security because of the exercise of a call option, it
realizes a gain or loss from the sale of the underlying security, with the
proceeds being increased by the amount of the premium.

If a secured put option expires unexercised, the writer realizes a gain from the
amount of the premium. If the secured put writer has to buy the underlying
security because of the exercise of the put option, the secured put writer
incurs an unrealized loss to the extent that the current market value of the
underlying security is less than the exercise price of the put option. However,
this would be offset in whole or in part by gain from the premium received.

OVER-THE-COUNTER OPTIONS. As indicated in the prospectus (see "Investment
Objectives, Policies and Risk Factors"), each Fund may deal in over-the-counter
traded options ("OTC options"). OTC options differ from exchange traded options
in several respects. They are transacted directly with dealers and not with a
clearing corporation, and there is a risk of nonperformance by the dealer as a
result of the insolvency of such dealer or otherwise, in which event a Fund may
experience material losses. However, in writing options the premium is paid in
advance by the dealer. OTC options are available for a greater variety of
securities, and a wider range of expiration dates and exercise prices, than are
exchange traded options. Since there is no exchange, pricing is normally done by
reference to information from market makers, which information is carefully
monitored by the investment manager and verified in appropriate cases.

A writer or purchaser of a put or call option can terminate it voluntarily only
by entering into a closing transaction. In the case of OTC options, there can be
no assurance that a continuous liquid secondary market will exist for any
particular option at any specific time. Consequently, a Fund may be able to
realize the value of an OTC option it has purchased only by exercising it or
entering into a closing sale transaction with the dealer that issued it.
Similarly, when a Fund writes an OTC option, it generally can close out that
option prior to its expiration only by entering into a closing purchase
transaction with the dealer to which the Fund originally wrote it. If a covered
call option writer cannot effect a closing transaction, it cannot sell the
underlying security until the option expires or the option is exercised.
Therefore, a covered call option writer of an OTC option may not be able to sell
an underlying security even though it might otherwise be advantageous to do so.

B-6
<PAGE> 50

Likewise, a secured put writer of an OTC option may be unable to sell the
securities pledged to secure the put for other investment purposes while it is
obligated as a put writer. Similarly, a purchaser of such put or call option
might also find it difficult to terminate its position on a timely basis in the
absence of a secondary market.

The Funds understand the position of the staff of the Securities and Exchange
Commission ("SEC") to be that purchased OTC options and the securities used as
"cover" for written OTC options are illiquid securities. The investment manager
disagrees with this position and has found the dealers with which it engages in
OTC options transactions generally agreeable to and capable of entering into
closing transactions. The Funds have adopted procedures for engaging in OTC
options for the purpose of reducing any potential adverse effect of such
transactions upon the liquidity of the Funds' portfolios. A brief description of
such procedures is set forth below.

A Fund will only engage in OTC options transactions with dealers approved by the
investment manager pursuant to procedures adopted by the Fund's Board of
Trustees. The investment manager believes that the approved dealers should be
able to enter into closing transactions if necessary and, therefore, present
minimal credit risks to a Fund. The investment manager will monitor the
creditworthiness of the approved dealers on an ongoing basis. A Fund currently
will not engage in OTC options transactions if the amount invested by the Fund
in OTC options, plus a "liquidity charge" related to OTC options written by the
Fund, plus the amount invested by the Fund in illiquid securities, would exceed
15% of the Fund's net assets. The "liquidity charge" referred to above is
computed as described below.

The Funds anticipate entering into agreements with dealers to which a Fund sells
OTC options. Under these agreements a Fund would have the absolute right to
repurchase the OTC options from the dealer at any time at a price no greater
than a price established under the agreements (the "Repurchase Price"). The
"liquidity charge" referred to above for a specific OTC option transaction will
be the Repurchase Price related to the OTC option less the intrinsic value of
the OTC option. The intrinsic value of an OTC call option for such purposes will
be the amount by which the current market value of the underlying security
exceeds the exercise price. In the case of an OTC put option, intrinsic value
will be the amount by which the exercise price exceeds the current market value
of the underlying security. If there is no such agreement requiring a dealer to
allow the Fund to repurchase a specific OTC option written by the Fund, the
"liquidity charge" will be the current market value of the securities serving as
"cover" for such OTC option.

OPTIONS ON SECURITIES INDICES. Each Fund also may purchase and write call and
put options on securities indices in an attempt to hedge against market
conditions affecting the value of securities that the Fund owns or intends to
purchase, and not for speculation. Through the writing or purchase of index
options, a Fund can achieve many of the same objectives as through the use of
options on individual securities. Options on securities indices are similar to
options on a security except that, rather than the right to take or make
delivery of a security at a specified price, an option on a securities index
gives the holder the right to receive, upon exercise of the option, an amount of
cash if the closing level of the securities index upon which the option is based
is greater than, in the case of a call, or less than, in the case of a put, the
exercise price of the option. This amount of cash is equal to the difference
between the closing price of the index and the exercise price of the option. The
writer of the option is obligated, in return for the premium received, to make
delivery of this amount. Unlike security options, all settlements are in cash
and gain or loss depends upon price movements in the market generally (or in a
particular industry or segment of the market), rather than upon price movements
in individual securities. Price movements in securities that the Fund owns or
intends to purchase will probably not correlate perfectly with movements in the
level of an index since the prices of such securities may be affected by
somewhat different factors and, therefore, the Fund bears the risk that a loss
on an index option would not be completely offset by movements in the price of
such securities.

When a Fund writes an option on a securities index, it will segregate and
mark-to-market eligible securities to the extent required by applicable
regulation. In addition, where the Fund writes a call option on a securities

B-7
<PAGE> 51

index at a time when the contract value exceeds the exercise price, the Fund
will segregate and mark-to-market, until the option expires or is closed out,
cash or cash equivalents equal in value to such excess.

Each Fund may also purchase and sell options on other appropriate indices, as
available, such as foreign currency indices. Options on a securities index
involve risks similar to those risks relating to transactions in financial
futures contracts described above. Also, an option purchased by a Fund may
expire worthless, in which case the Fund would lose the premium paid therefor.

FOREIGN CURRENCY OPTIONS. Each Fund may engage in foreign currency options
transactions. A foreign currency option provides the option buyer with the right
to buy or sell a stated amount of foreign currency at the exercise price at a
specified date or during the option period. A call option gives its owner the
right, but not the obligation, to buy the currency, while a put option gives its
owner the right, but not the obligation, to sell the currency. The option seller
(writer) is obligated to fulfill the terms of the option sold if it is
exercised. However, either seller or buyer may close its position during the
option period in the secondary market for such options any time prior to
expiration.

A call rises in value if the underlying currency appreciates. Conversely, a put
rises in value if the underlying currency depreciates. While purchasing a
foreign currency option can protect the Fund against an adverse movement in the
value of a foreign currency, it does not limit the gain which might result from
a favorable movement in the value of such currency. For example, if a Fund were
holding securities denominated in an appreciating foreign currency and had
purchased a foreign currency put to hedge against a decline in the value of the
currency, it would not have to exercise its put. Similarly, if the Fund has
entered into a contract to purchase a security denominated in a foreign currency
and had purchased a foreign currency call to hedge against a rise in value of
the currency but instead the currency had depreciated in value between the date
of purchase and the settlement date, the Fund would not have to exercise its
call but could acquire in the spot market the amount of foreign currency needed
for settlement.

FOREIGN CURRENCY FUTURES TRANSACTIONS. As part of its financial futures
transactions (see "Financial Futures Contracts" and "Options on Financial
Futures Contracts" above), each Fund may use foreign currency futures contracts
and options on such futures contracts. Through the purchase or sale of such
contracts, a Fund may be able to achieve many of the same objectives as through
forward foreign currency exchange contracts more effectively and possibly at a
lower cost.

Unlike forward foreign currency exchange contracts, foreign currency futures
contracts and options on foreign currency futures contracts are standardized as
to amount and delivery period and are traded on boards of trade and commodities
exchanges. It is anticipated that such contracts may provide greater liquidity
and lower cost than forward foreign currency exchange contracts.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. Each Fund may engage in forward
foreign currency transactions. A forward foreign currency exchange contract
involves an obligation to purchase or sell a specific currency at a future date,
which may be any fixed number of days ("term") from the date of the contract
agreed upon by the parties, at a price set at the time of the contract. These
contracts are traded directly between currency traders (usually large commercial
banks) and their customers. The investment manager believes that it is important
to have the flexibility to enter into such forward contracts when it determines
that to do so is in the best interests of a Fund. A Fund will not speculate in
foreign currency exchange.

If a Fund retains the portfolio security and engages in an offsetting
transaction with respect to a forward contract, the Fund will incur a gain or a
loss (as described below) to the extent that there has been movement in forward
contract prices. If the Fund engages in an offsetting transaction, it may
subsequently enter into a new forward contract to sell the foreign currency.
Should forward prices decline during the period between the Fund's entering into
a forward contract for the sale of foreign currency and the date it enters into
an offsetting contract for the purchase of the foreign currency, the Fund would
realize a gain to the extent the price of the currency it has agreed to sell
exceeds the price of the currency it has agreed to purchase. Should forward
prices

B-8
<PAGE> 52

increase, the Fund would suffer a loss to the extent the price of the currency
it has agreed to purchase exceeds the price of the currency it has agreed to
sell. Although such contracts tend to minimize the risk of loss due to a decline
in the value of the hedged currency, they also tend to limit any potential gain
which might result should the value of such currency increase. The Fund will
have to convert its holdings of foreign currencies into U.S. Dollars from time
to time in order to meet such needs as Fund expenses and redemption requests.
Although foreign exchange dealers do not charge a fee for conversion, they do
realize a profit based on the difference (the "spread") between the prices at
which they are buying and selling various currencies.

A Fund will not enter into forward contracts or maintain a net exposure in such
contracts when the Fund would be obligated to deliver an amount of foreign
currency in excess of the value of the Fund's securities or other assets
denominated in that currency. See "Foreign Currency Transactions" under
"Investment Objectives, Policies and Risk Factors--Additional Investment
Information" in the prospectus. There is no limitation as to the percentage of
the Global Fund's assets that may be committed to forward contracts for the
purchase of a foreign currency; the International Fund does not intend to enter
into such forward contracts if it would have more than 15% of the value of its
total assets committed to such contracts. A Fund segregates eligible securities
to the extent required by applicable regulation in connection with forward
foreign currency exchange contracts entered into for the purchase of a foreign
currency. If the value of the securities segregated declines, additional cash or
securities are added so that the segregated amount is not less than the amount
of the Fund's commitments with respect to such contracts. A Fund generally does
not enter into a forward contract with a term longer than one year.

DELAYED DELIVERY TRANSACTIONS. The Global Fund may purchase or sell portfolio
securities on a when-issued or delayed delivery basis. When-issued or delayed
delivery transactions involve a commitment by the Fund to purchase or sell
securities with payment and delivery to take place in the future in order to
secure what is considered to be an advantageous price or yield to the Fund at
the time of entering into the transaction. When the Fund enters into a delayed
delivery purchase, it becomes obligated to purchase securities and it has all
the rights and risks attendant to ownership of a security, although delivery and
payment occur at a later date. The value of fixed income securities to be
delivered in the future will fluctuate as interest rates vary. At the time the
Fund makes the commitment to purchase a security on a when-issued or delayed
delivery basis, it will record the transaction and reflect the liability for the
purchase and the value of the security in determining its net asset value.
Likewise, at the time the Fund makes the commitment to sell a security on a
delayed delivery basis, it will record the transaction and include the proceeds
to be received in determining its net asset value; accordingly, any fluctuations
in the value of the security sold pursuant to a delayed delivery commitment are
ignored in calculating net asset value so long as the commitment remains in
effect. The Fund generally has the ability to close out a purchase obligation on
or before the settlement date, rather than take delivery of the security.

To the extent the Global Fund engages in when-issued or delayed delivery
purchases, it will do so for the purpose of acquiring portfolio securities
consistent with the Fund's investment objective and policies. The Fund reserves
the right to sell these securities before the settlement date if deemed
advisable.

REGULATORY RESTRICTIONS. To the extent required to comply with applicable
regulation, when purchasing a futures contract, writing a put option or entering
into a delayed delivery purchase or a forward foreign currency exchange
purchase, a Fund will maintain eligible securities in a segregated account. A
Fund will use cover in connection with selling a futures contract.

A Fund will not engage in transactions in financial futures contracts or options
thereon for speculation, but only to attempt to hedge against changes in market
conditions affecting the values of securities or other assets which the Fund
holds or intends to purchase.

B-9
<PAGE> 53

REPURCHASE AGREEMENTS. A Fund may invest in repurchase agreements, which are
instruments under which the Fund acquires ownership of a security from a
broker-dealer or bank that agrees to repurchase the security at a mutually
agreed upon time and price (which price is higher than the purchase price),
thereby determining the yield during the Fund's holding period. In the event of
a bankruptcy or other default of a seller of a repurchase agreement, the Fund
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 securities underlying a repurchase agreement will be
marked-to-market every business day so that the value of such securities is at
least equal to the investment value of the repurchase agreement, including any
accrued interest thereon. Each Fund currently does not intend to invest more
than 5% of its net assets in repurchase agreements during the current year.

SHORT SALES AGAINST-THE-BOX. The Global Fund may make short sales
against-the-box for the purpose of deferring realization of gain or loss for
federal income tax purposes. A short sale "against-the-box" is a short sale in
which the Fund owns at least an equal amount of the securities sold short or
securities convertible into or exchangeable for, without payment of any further
consideration, securities of the same issue as, and at least equal in amount to,
the securities or other assets sold short. The Fund may engage in such short
sales only to the extent that not more than 10% of the Fund's total assets
(determined at the time of the short sale) is held as collateral for such sales.
The Fund currently does not intend, however, to engage in such short sales to
the extent that more than 5% of its net assets will be held as collateral
therefor during the current year.

DIVIDENDS AND TAXES

The level of income dividends per share (as a percentage of net asset value)
will be lower for Class B and Class C shares than for Class A shares primarily
as a result of the distribution services fee applicable to Class B and Class C
shares. Distributions of capital gains, if any, will be paid in the same amount
for each class.

A Fund may at any time vary the foregoing dividend practice and, therefore,
reserves the right from time to time either to distribute or to retain for
reinvestment such of its net investment income and its net short-term and
long-term capital gains as the Board of Trustees of the Fund determines
appropriate under then current circumstances. In particular, and without
limiting the foregoing, a Fund may make additional distributions of net
investment income or capital gain net income in order to satisfy the minimum
distribution requirements contained in the Internal Revenue Code (the "Code").
Dividends will be reinvested in shares of the Fund unless shareholders indicate
in writing that they wish to receive them in cash or in shares of other Kemper
Funds as provided in the prospectus.

TAXES. Each Fund intends to continue to qualify as a regulated investment
company under Subchapter M of the Code and, if so qualified, will not be liable
for federal income taxes to the extent its earnings are distributed. One of the
Subchapter M requirements to be satisfied is that less than 30% of a Fund's
gross income during the fiscal year must be derived from gains (not reduced by
losses) from the sale or other disposition of securities and certain other
investments held for less than three months. A Fund may be limited in its
options, futures and foreign currency transactions in order to prevent
recognition of such gains.

A Fund's options, futures and foreign currency transactions are subject to
special tax provisions that may accelerate or defer recognition of certain gains
or losses, change the character of certain gains or losses, or alter the holding
periods of certain of the Fund's securities.

The mark-to-market rules of the Code may require a Fund to recognize unrealized
gains and losses on certain options and futures held by the Fund at the end of
the fiscal year. Under these provisions, 60% of any capital gain or loss
recognized will generally be treated as long-term and 40% as short-term.
However, although

B-10
<PAGE> 54

certain forward contracts and futures contracts on foreign currency are
marked-to-market, the gain or loss is generally ordinary under Section 988 of
the Code. In addition, the straddle rules of the Code would require deferral of
certain losses realized on positions of a straddle to the extent that the Fund
had unrealized gains in offsetting positions at year end.

A 4% excise tax is imposed on the excess of the required distribution for a
calendar year over the distributed amount for such calendar year. The required
distribution is the sum of 98% of a Fund's net investment income for the
calendar year plus 98% of its capital gain net income for the one-year period
ending October 31, plus any undistributed net investment income from the prior
calendar year, plus any undistributed capital gain net income from the one year
period ended October 31 in the prior calendar year, minus any overdistribution
in the prior calendar year. For purposes of calculating the required
distribution, foreign currency gains or losses occurring after October 31 are
taken into account in the following calendar year. The Funds intend to declare
or distribute dividends during the appropriate periods of an amount sufficient
to prevent imposition of the 4% excise tax.

It is anticipated that only a small portion, if any, of the ordinary income
dividends from the Funds will be eligible for the dividends received deduction
available to corporate shareholders. The aggregate amount eligible for the
dividends received deduction may not exceed the aggregate qualifying dividends
received by a Fund for the fiscal year.

A shareholder who redeems shares of a Fund will recognize capital gain or loss
for federal income tax purposes measured by the difference between the value of
the shares redeemed and the adjusted cost basis of the shares. Any loss
recognized on the redemption of Fund shares held six months or less will be
treated as long-term capital loss to the extent that the shareholder has
received any long-term capital gain dividends on such shares. A shareholder who
has redeemed shares of a Fund or any other Kemper Mutual Fund listed in the
prospectus under "Special Features--Class A Shares--Combined Purchases" (other
than shares of Kemper Cash Reserves Fund not acquired by exchange from another
Kemper Mutual Fund) may reinvest the amount redeemed at net asset value at the
time of the reinvestment in shares of the Fund or in shares of the other Kemper
Mutual Funds within six months of the redemption as described in the prospectus
under "Redemption or Repurchase of Shares--Reinvestment Privilege." If redeemed
shares were held less than 91 days, then the lesser of (a) the sales charge
waived on the reinvested shares, or (b) the sales charge incurred on the
redeemed shares, is included in the basis of the reinvested shares and is not
included in the basis of the redeemed shares. If a shareholder realizes a loss
on the redemption or exchange of a Fund's shares and reinvests in shares of the
same Fund within 30 days before or after the redemption or exchange, the
transactions may be subject to the wash sale rules resulting in a postponement
of the recognition of such loss for federal income tax purposes. An exchange of
a Fund's shares for shares of another fund is treated as a redemption and
reinvestment for federal income tax purposes upon which gain or loss may be
recognized.

Investment income derived from foreign securities may be subject to foreign
income taxes withheld at the source. Because the amount of a Fund's investments
in various countries will change from time to time, it is not possible to
determine the effective rate of such taxes in advance.

Shareholders who are non-resident aliens are subject to U.S. withholding tax on
ordinary income dividends (whether received in cash or shares) at a rate of 30%
or such lower rate as prescribed by any applicable tax treaty.

PERFORMANCE

As described in the prospectus, each Fund's historical performance or return for
a class of shares may be shown in the form of "average annual total return" and
"total return" figures, and for the Global Fund may be shown in the form of
"yield" figures. These various measures of performance are described below.
Performance information will be computed separately for each class.

B-11
<PAGE> 55

Yield is a measure of the net investment income per share earned over a specific
one month or 30-day period expressed as a percentage of the maximum offering
price of the Global Fund's shares (which is net asset value for Class B and
Class C shares) at the end of the period. Average annual total return and total
return measure both the net investment income generated by, and the effect of
any realized or unrealized appreciation or depreciation of, the underlying
investments in the Fund's portfolio.

The Global Fund's yield is computed in accordance with a standardized method
prescribed by rules of the Securities and Exchange Commission. The Fund's Class
A, Class B and Class C shares' yields based upon the one-month period ended
December 31, 1996 were 4.49%, 4.04%, and 4.12%, respectively. The Fund's yield
is computed by dividing the net investment income per share earned during the
specified one month or 30-day period by the maximum offering price per share
(which is net asset value for Class B and Class C shares) on the last day of the
period, according to the following formula:

<TABLE>
<CAPTION>
<S> <C> <C>
a - b
-------
YIELD = 2[( +1)(6) - 1
cd
</TABLE>

Where: a = dividends and interest earned during the period.

b = expenses accrued for the period (net of reimbursements).

c = the average daily number of shares outstanding during the period
that were entitled to receive dividends.

d = the maximum offering price per share on the last day of the period
(which is net asset value for Class B and Class C shares).

In computing the foregoing yield, the Global Fund follows certain standardized
accounting practices specified by Securities and Exchange Commission rules.
These practices are not necessarily consistent with those that the Fund uses to
prepare its annual and interim financial statements in conformity with generally
accepted accounting principles.

Each Fund's average annual total return quotation is computed in accordance with
a standardized method prescribed by rules of the Securities and Exchange
Commission. The average annual total return for a Fund for a specific period is
found by first taking a hypothetical $1,000 investment ("initial investment") in
the Fund's shares on the first day of the period, adjusting to deduct the
maximum sales charge (in the case of Class A shares), and computing the
"redeemable value" of that investment at the end of the period. The redeemable
value in the case of Class B or Class C shares may or may not include the effect
of the applicable contingent deferred sales charge that may be imposed at the
end of the period. The redeemable value is then divided by the initial
investment, and this quotient is taken to the Nth root (N representing the
number of years in the period) and 1 is subtracted from the result, which is
then expressed as a percentage. The calculation assumes that all income and
capital gains dividends paid by the Fund have been reinvested at net asset value
on the reinvestment dates during the period. Average annual total return figures
may also be calculated without deducting the maximum sales charge.

Calculation of a Fund's total return is not subject to a standardized formula,
except when calculated for the Fund's "Financial Highlights" table in the Fund's
financial statements and prospectus. Total return performance for a specific
period is calculated by first taking a hypothetical investment ("initial
investment") in the Fund's shares on the first day of the period, either
adjusting or not adjusting to deduct the maximum sales charge (in the case of
Class A shares), and computing the "ending value" of that investment at the end
of the period. The total return percentage is then determined by subtracting the
initial investment from the ending value and dividing the remainder by the
initial investment and expressing the result as a percentage. The ending value
in the case of Class B and Class C shares may or may not include the effect of
the applicable contingent deferred sales charge that may be imposed at the end
of the period. The calculation assumes that all income and capital gains
dividends paid by the Fund have been reinvested at net asset value on the
reinvestment dates during the period. Total return may also be shown as the
increased dollar value of the hypothetical investment over the

B-12
<PAGE> 56

period. Total return calculations that do not include the effect of the sales
charge for Class A shares or the contingent deferred sales charge for Class B
shares would be reduced if such charge were included.

A Fund's performance figures are based upon historical results and are not
representative of future performance. The Global Fund's Class A shares are sold
at net asset value plus a maximum sales charge of 4.5% of the offering price and
the International Fund's Class A shares are sold at net asset value plus a
maximum sales charge of 5.75% of the offering price. Class B and Class C shares
are sold at net asset value. Redemption of Class B shares may be subject to a
contingent deferred sales charge that is 4% in the first year following the
purchase, declines by a specified percentage each year thereafter and becomes
zero after six years. Redemption of Class C shares may be subject to a 1%
contingent deferred sales charge in the first year following purchase. Returns
and net asset value will fluctuate. Factors affecting each Fund's performance
include general market conditions, operating expenses and investment management.
Any additional fees charged by a dealer or other financial services firm would
reduce returns described in this section. Shares of each Fund are redeemable at
the then current net asset value, which may be more or less than original cost.

The figures below show performance information for various periods. Comparative
information with respect to certain indices is also included. There are
differences and similarities between the investments which a Fund may purchase
and the investments measured by the indices which are described herein. The
Consumer Price Index is generally considered to be a measure of inflation. The
Salomon Brothers World Government Bond Index generally represents the
performance of government debt securities of various markets throughout the
world, including the United States. The Salomon Brothers High Grade Corporate
Bond Index generally represents the performance of high grade long-term
corporate bonds during various market conditions. The Lehman Brothers
Government/Corporate Bond Index generally represents the performance of
intermediate and long-term government and investment grade corporate debt
securities during various market conditions. The Dow Jones Industrial Average
and the Standard & Poor's 500 Stock Index are indices of common stocks which are
considered to be generally representative of the U.S. stock market. The Europe
Austral-Asia Far East ("EAFE") Index is an index that is considered to be
generally representative of major non-U.S. stock markets. The Lipper
International Fund Index is a weighted performance average of other mutual funds
that invest primarily in securities of foreign issuers. The foregoing indices
are unmanaged. The net asset value and returns of the Funds will fluctuate. No
adjustment has been made for taxes payable on dividends. The periods indicated
were ones of fluctuating securities prices and interest rates.

B-13
<PAGE> 57

GLOBAL FUND--DECEMBER 31, 1996
<TABLE>
<CAPTION>

INITIAL CAPITAL GAIN INCOME ENDING PERCENTAGE ENDING
TOTAL $10,000 DIVIDENDS DIVIDENDS VALUE INCREASE VALUE
RETURN INVESTMENT(1) REINVESTED REINVESTED(2) (ADJUSTED)(1) (ADJUSTED)(1) (UNADJUSTED)(1)
TABLE ------------- ------------ ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) 9,523 29 8,898 18,450 84.5 19,311
Five Years 8,470 20 4,415 12,905 29.1 13,518
Three Years 9,218 0 2,718 11,936 19.4 12,502
One Year 9,462 0 645 10,107 1.1 10,587
CLASS B SHARES
Life of Fund(++) 10,345 0 2,417 12,462 24.6 12,462
One Year 9,901 0 609 10,213 2.1 10,510
CLASS C SHARES
Life of Fund(++) 10,367 0 2,428 * * 12,795
One Year 9,923 0 608 * * 10,531

<CAPTION>
COMPARED TO
--------------------------------------------
SALOMON
SALOMON BROS.
BROS. HIGH LEHMAN
PERCENTAGE CONSUMER WORLD GRADE BROTHERS
TOTAL INCREASE PRICE GOVT. CORP. GOVT./CORP.
RETURN (UNADJUSTED)(1) INDEX(3) INDEX(4) INDEX(5) INDEX(6)
TABLE --------------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) 93.1 26.9 101.55 99.5 84.3
Five Years 35.2 15.0 50.90 50.5 41.4
Three Years 25.0 8.8 26.24 21.6 18.4
One Year 5.9 3.3 3.62 1.4 2.9
CLASS B SHARES
Life of Fund(++) 24.6 7.5 27.21 29.6 23.5
One Year 5.1 3.3 3.62 1.4 2.9
CLASS C SHARES
Life of Fund(++) 28.0 7.5 27.21 29.6 23.5
One Year 5.3 3.3 3.62 1.4 2.9
</TABLE>

<TABLE>
<CAPTION>
Salomon
Bros. Salomon Lehman
AVERAGE ANNUAL Fund Fund Fund Consumer World Bros. High Brothers
TOTAL RETURN Class A Class B Class C Price Govt. Grade Corp. Govt./Corp.
TABLE Shares Shares Shares Index(3) Index(4) Index(5) Index(6)
- --------------------- ------- ------- ------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund(+) 8.8 * * 3.3 10.15 10.0 8.8
Life of Fund(++) * 8.9 10.0 2.8 9.76 10.5 8.5
Five Years 5.2 * * 2.8 8.58 8.5 7.2
Three Years 6.1 * * 2.8 8.08 6.7 5.8
One Year 1.1 2.1 5.3 3.3 3.62 1.4 2.9
</TABLE>

- ---------------
* Not applicable or available.

(+) Since October 1, 1989 for Class A shares.

(++) Since May 31, 1994 for Class B and Class C shares.

B-14
<PAGE> 58

INTERNATIONAL FUND--OCTOBER 31, 1996
<TABLE>
<CAPTION>
COMPARED T
----------
Initial Income Ending Percentage Ending Percentage
TOTAL $10,000 Capital Gain Dividends Value Increase Value Increase Dow Jones
RETURN Investment Dividends Reinvested (adjusted) (adjusted) (unadjusted) (unadjusted) Industrial
TABLE (1) Reinvested (2) (1) (1) (1) (1) Average(7)
------ ---------- ------------ ---------- ---------- ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) $18,121 $25,703 $14,678 $58,502 485.0% $62,076 520.8% 1,001.5%
Ten Years 12,636 6,824 4,164 23,624 136.2 25,068 150.7 340.8
Five Years 12,875 928 1,119 14,922 49.2 15,824 58.2 125.1
Three Years 10,678 721 513 11,912 19.1 12,634 26.3 76.9
One Year 10,641 50 116 10,807 8.1 11,470 14.7 29.7
Year to Date 10,436 0 0 10,436 4.4 11,074 10.7 19.8
CLASS B SHARES
Life of Fund(++) $11,163 $ 466 $ 378 $11,707 17.1% $12,007 20.1% 70.9%
One year 11,290 54 15 11,059 10.6 11,359 13.6 29.7
CLASS C SHARES
Life of Fund(++) $11,163 $ 466 $ 378 * * $12,007 20.1% 70.9%
One year 11,290 54 15 * * 11,359 13.6 29.7

<CAPTION>
COMPARED TO
-----------------------------------------
Standard Lipper
TOTAL & Consumer Inter-
RETURN Poor's Price EAFE national
TABLE 500(8) Index(3) Index(9) Fund(10)
------ -------- -------- -------- --------
<S> <C> <C> <C> <C>
CLASS A SHARES
Life of Fund(+) 829.0% 76.3% 696.5% *
Ten Years 291.4 43.5 150.7 165.6%
Five Years 105.6 15.2 46.8 59.1
Three Years 62.8 8.7 22.2 25.0
One Year 24.0 3.0 10.8 12.7
Year to Date 16.4 3.1 3.6 8.3
CLASS B SHARES
Life of Fund(++) 64.6% 7.3% 16.3% 16.7%
One year 24.0 3.0 10.8 12.7
CLASS C SHARES
Life of Fund(++) 64.6% 7.3% 16.3% 16.7%
One year 24.0 3.0 10.8 12.7
</TABLE>

<TABLE>
<CAPTION>
AVERAGE Standard
ANNUAL Fund Fund Fund Dow Jones & Consumer Lipper
TOTAL RETURN Class A Class B Class C Industrial Poor's Price EAFE International
TABLE Shares Shares Shares Average(7) 500(8) Index(3) Index(9) Fund(10)
------------ ------- ------- ------- ---------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of Fund(+) 12.1% * * 16.8% 15.5% 3.7% 14.4% *
Life of Fund(++) * 6.7% 7.9% 24.8 22.9 3.0 6.4 6.6%
Ten Years 9.0 * * 16.0 14.6 3.7 9.6 10.3
Five Years 8.3 * * 17.6 15.5 2.9 8.0 9.7
Three Years 6.0 * * 20.9 17.6 2.8 6.9 7.7
One Year 8.1 10.6 13.6 29.7 24.0 3.0 10.8 12.7
</TABLE>

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

* Not applicable or available.

(+) Since May 21, 1981 for Class A shares.

(++) Since May 31, 1994 for Class B and Class C shares.

FOOTNOTES FOR BOTH FUNDS

(1) The Initial Investment and adjusted amounts for Class A shares were
adjusted for the maximum initial sales charge at the beginning of the
period, which is 5.75% for the International Fund and 4.5% for the Global
Fund. The Initial Investment for Class B and Class C shares was not
adjusted. Amounts were adjusted for Class B shares for the contingent
deferred sales charge that may be imposed at the end of the period based
upon the schedule for shares sold currently, see "Redemption or Repurchase
of Shares" in the prospectus. No adjustments were made to Class C shares.

(2) Includes short-term capital gain dividends, if any.

(3) The Consumer Price Index is a statistical measure of change, over time, in
the prices of goods and services in major expenditure groups for all urban
consumers. Source is Towers Data Systems.

(4) The Salomon Brothers World Government Bond Index is on a U.S. Dollar total
return basis with all dividends reinvested and is comprised of government
bonds from ten countries (United States, Japan, United Kingdom, Germany,
France, Canada, the Netherlands, Australia, Switzerland and Denmark). This
index is unmanaged. The minimum maturity is 1 year. Source is Lipper
Analytical Services, Inc.

(5) The Salomon Brothers High Grade Corporate Bond Index is on a total return
basis with all dividends reinvested and is comprised of high grade
long-term industrial and utility bonds rated in the top two rating
categories. This index is unmanaged. Source is Towers Data Systems.

(6) The Lehman Brothers Government/Corporate Bond Index is on a total return
basis and is comprised of all publicly issued, non-convertible, domestic
debt of the U.S. Government or any agency thereof, quasi-Federal
corporation, or corporate debt guaranteed by the U.S. Government and all
publicly issued, fixed-rate, non-convertible, domestic debt of the three
major corporate classifications: industrial, utility, and financial. Only
notes and bonds with a minimum outstanding principal amount of $1,000,000
and a minimum of one year to maturity are included. Bonds included must
have a rating of at least Baa by Moody's Investors Service, Inc., BBB by
Standard & Poor's Corporation or in the case of bank bonds not rated by
either Moody's or S&P, BBB by Fitch Investors Service. This index is
unmanaged. Source is Towers Data Systems.

B-15
<PAGE> 59

(7) The Dow Jones Industrial Average is an unmanaged weighted average of thirty
blue chip industrial corporations listed on the New York Stock Exchange.
Assumes reinvestment of dividends. Source is Towers Data Systems.

(8) The Standard & Poor's 500 Stock Index is an unmanaged unweighted average of
500 stocks, over 95% of which are listed on the New York Stock Exchange.
Assumes reinvestment of dividends. Source is Towers Data Systems.

(9) The EAFE Index (Morgan Stanley Capital International Europe, Austral-Asia,
Far East Index) is a generally accepted benchmark for performance of major
overseas markets. This index is unmanaged and is U.S. dollar adjusted.
Assumes reinvestment of dividends. Source is Towers Data Systems.

(10) The Lipper International Fund Index is a net asset value weighted index of
the performance of certain mutual funds tracked by Lipper Analytical
Services, Inc. The index is comprised of mutual funds that invest assets in
the securities whose primary trading markets are outside of the United
States. Performance is based on changes in net asset value with all
dividends reinvested and with no adjustment for sales charge. Source is
Towers Data Systems.

The following tables illustrate an assumed $10,000 investment in Class A shares
of each Fund, which includes the maximum sales charge of 4.5% for the Global
Fund and 5.75% for the International Fund, with income and capital gain
dividends reinvested in additional shares. The table for each Fund covers the
period from its commencement of operations through December 31, 1996.
- --------------------------------------------------------------------------------

GLOBAL FUND (10/1/89)

<TABLE>
<CAPTION>
DIVIDENDS CUMULATIVE VALUE OF SHARES ACQUIRED
ANNUAL ANNUAL REINVESTED
YEAR INCOME CAPITAL GAIN INITIAL REINVESTED CAPITAL
ENDED DIVIDENDS DIVIDENDS INVEST- INCOME GAIN TOTAL
12/31 REINVESTED* REINVESTED MENT DIVIDENDS* DIVIDENDS VALUE
<C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------
1989 $ 170 $ 0 $9,840 $ 172 $ 0 $10,012
1990 1,541 0 10,563 1,718 0 12,281
1991 1,119 0 10,732 2,916 0 13,648
1992 1,093 29 9,671 3,688 29 13,388
1993 1,097 0 9,862 4,866 30 14,758
1994 983 0 9,076 5,437 28 14,541
1995 1,178 0 10,128 7,273 31 17,432
1996 2,043 0 9,523 8,898 29 18,450
</TABLE>

* Includes short-term capital gain dividends.
- --------------------------------------------------------------------------------

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

INTERNATIONAL FUND (5/21/81)

<TABLE>
<CAPTION>
DIVIDENDS CUMULATIVE VALUE OF SHARES ACQUIRED
ANNUAL
ANNUAL CAPITAL REINVESTED
YEAR INCOME GAIN REINVESTED CAPITAL
ENDED DIVIDENDS DIVIDENDS INITIAL INCOME GAIN TOTAL
12/31 REINVESTED* REINVESTED INVESTMENT DIVIDENDS* DIVIDENDS VALUE
<C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------
1981 $ 205 $ 0 $ 9,167 $ 223 $ 0 $ 9,390
1982 273 0 9,113 538 0 9,651
1983 161 162 11,348 845 164 12,357
1984 231 728 9,445 925 854 11,234
1985 181 743 13,773 1,585 2,157 17,515
1986 1,766 4,604 14,621 3,523 7,104 25,248
1987 923 3,978 12,561 3,909 10,407 26,877
1988 814 456 14,121 5,229 12,163 31,513
1989 1,965 813 15,364 7,866 14,135 37,365
1990 1,216 3,206 12,409 7,559 14,596 34,564
1991 0 591 13,318 8,113 16,287 37,718
1992 772 0 12,409 8,328 15,175 35,912
1993 132 1,140 16,378 11,128 21,209 48,715
1994 1,397 1,577 14,713 11,408 20,646 46,767
1995 554 241 16,364 13,254 23,210 52,828
1996 709 3,228 17,894 15,227 28,716 61,837
</TABLE>

* Includes short-term capital gain dividends.
- --------------------------------------------------------------------------------

B-16
<PAGE> 60

Investors may want to compare a Fund's performance to that of certificates of
deposit issued by banks and other depository institutions. Certificates of
deposit may offer fixed or variable interest rates and principal is guaranteed
and may be insured. Withdrawal of the deposit prior to maturity will normally be
subject to a penalty. Rates offered by banks and other depository institutions
are subject to change at any time specified by the issuing institution. The
shares of the Fund are not insured and net asset value as well as yield will
fluctuate. Shares of a Fund are redeemable at net asset value which may be more
or less than original cost. Redemption of Class B and Class C shares may be
subject to a contingent deferred sales charge. The bonds in the Global Fund's
portfolio are generally of longer term than most certificates of deposit and may
reflect longer term market interest rate fluctuations.

Investors may also want to compare a Fund's performance to that of U.S. Treasury
bills, notes or bonds. Rates of 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 will generally
fluctuate inversely with interest rates prior to maturity and will equal par
value at maturity. Shares of a Fund are redeemable at net asset value, which may
be more or less than original cost. The Funds' returns will also fluctuate.

In order to appreciate more fully the opportunities for income throughout the
world and the potential advantages of investing in the Global Fund, investors
may want to compare the historical performance of various bond markets around
the world. Such performance, of course, would not necessarily be representative
of future actual or relative performance of such markets, or of the past or
future performance of the Fund.

The table below reflects the relative returns of certain unmanaged domestic bond
indexes and a foreign bond index over the periods indicated.

BOND INDEX TOTAL RETURNS
(PERIODS ENDED 12/31/96)

<TABLE>
<CAPTION>
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
----- ------ ------ -------
<S> <C> <C> <C> <C>
Salomon Non-U.S. Bond Index(1).............................. 4.08% 31.88% 59.06% 184.72%
Salomon Long-Term High Yield Bond Index(2).................. 7.86 34.24 91.90 201.82
Salomon High Grade Corp. Bond Index(3)...................... 1.4 21.6 50.5 147.3
Merrill Lynch Govt./Corp. Bond Index(4)..................... 2.97 18.52 41.74 123.68
Lehman Brothers Govt./Corp. Bond Index(5)................... 2.9 18.4 41.4 123.6
</TABLE>

- ---------------
(1) The Salomon Brothers Non-U.S. Bond Index is on a U.S. dollar total return
basis with all dividends reinvested and is comprised of non-U.S. government
and corporate bonds with more than five years to maturity. This index is
unmanaged. Source is Lipper Analytical Services, Inc.

(2) The Salomon Brothers Long-Term High Yield Bond Index is on a total return
basis with all dividends reinvested and is comprised of high yield bonds
with a par value of $50 million or higher and a maturity of 10 years or
longer rated BB+ or lower by Standard & Poor's Corporation or Ba1 or lower
by Moody's Investors Service, Inc. This index is unmanaged. Source is
Salomon Brothers Inc.

(3) The Salomon Brothers High Grade Corporate Bond Index is on a total return
basis with all dividends reinvested and is comprised of high grade long-term
industrial and utility bonds rated in the top two rating categories. This
index is unmanaged. Source is Towers Data Systems.

(4) The Merrill Lynch Government/Corporate Bond Index is based upon the total
return with all dividends reinvested of 4,000 corporate and 300 government
bond issues with an intermediate average maturity and an average quality
rating of Aa (Moody's Investors Service, Inc.) or AA (Standard & Poor's
Corporation). This index is unmanaged. Source is Lipper Analytical Services,
Inc.

(5) The Lehman Brothers Government/Corporate Bond Index is on a total return
basis and is comprised of all publicly issued, nonconvertible, domestic debt
of the U.S. Government or any agency thereof, quasi-federal corporation, or
corporate debt guaranteed by the U.S. Government and all publicly issued,
fixed-rate, non-convertible, domestic debt of the three major corporate
classifications: industrial, utility, and financial. Only notes and bonds
with a minimum outstanding principal amount of $1,000,000 and a minimum of
one year to maturity are included. Bonds included must have a rating of at
least Baa by Moody's Investors Services, Inc., BBB by Standard & Poor's
Corporation or in the case of bank bonds not rated by either Moody's or S&P,
BBB by Fitch Investors Services. This index is unmanaged. Source is Towers
Data Systems.

B-17
<PAGE> 61

The following table depicts the best performing world government bond market for
each year during the period 1983-1996. The performance of these markets is
compared in each case to the performance of long-term U.S. Government bonds for
the same period. As shown in this table, the U.S. market, as represented by U.S.
Government bonds, was the best performing market in only one of the past ten
years. Performance is on a U.S. Dollar total return basis with all dividends
reinvested.

BEST WORLD BOND MARKETS VS. U.S. BOND MARKET
1983-1996

<TABLE>
<CAPTION>
Long-Term U.S.**
Year Top Foreign Government Returns* Govt. Returns
---- ------------------------------- ----------------
<S> <C> <C> <C>
1983......................................... Japan 12.56% 1.66%
1984......................................... Canada 8.82 15.02
1985......................................... France 52.78 31.52
1986......................................... Japan 43.55 24.18
1987......................................... United Kingdom 47.57 (2.79)
1988......................................... Australia 30.34 9.35
1989......................................... Canada 17.97 19.16
1990......................................... United Kingdom 29.16 6.35
1991......................................... Australia 26.70 18.66
1992......................................... Japan 11.96 8.06
1993......................................... Japan 27.58 17.49
1994......................................... Belgium 12.22 (7.70)
1995......................................... Sweden 34.83 30.92
1996......................................... Italy 27.19 (.83)
</TABLE>

- ---------------
* Source: Salomon Brothers International Bond Market Performance Indexes.
** Source: Salomon Brothers Treasury/Govt Sponsored Long Term Index

The following table depicts the available yields from various global markets as
of January 29, 1997 and shows the wide range of yields among various markets.
Yield is a measure of the income generated by an investment and is not a
complete measure of performance. Yield does not include the effect of
appreciation or depreciation of the underlying investment due to changes in
interest rates or currency valuations or other market conditions, which may vary
from one global market to another. Thus, it is possible for a lower yielding
investment to outperform a higher yielding investment on a total return basis.

AVAILABLE YIELDS: INTERNATIONAL BONDS

<TABLE>
<CAPTION>
Long-Term Gov'ts. Long-Term Corp.
----------------- ---------------
<S> <C> <C>
Australia............................................ 7.46% 7.80%
Belgium.............................................. 5.79 5.91
Canada............................................... 6.65 7.58
France............................................... 5.55 5.84
Germany.............................................. 5.70 5.45
Italy................................................ 7.24 6.28
Japan................................................ 2.60 2.44
Spain................................................ 6.62 7.15
Sweden............................................... 6.70 6.51
Switzerland.......................................... 3.67 3.95
Britain.............................................. 7.53 8.12
United States........................................ 6.61 7.63
</TABLE>

- ---------------
Source: The Economist. The Economist obtains its yield information from the
following sources: Banco Bilbao Vizcaya, Chase Manhattan, Belgium Bankers
Association, Royal Bank of Canada, Westpac Banking Corp., Credit Lyonnais, Bank
Nederland, Svenska Handelsbanken, CFSB, and the WEFA Group.

B-18
<PAGE> 62

In 1996, the U.S. stock market ranked 11 in U.S. Dollar total return out of 22
markets. The source for non-U.S. stock markets is Morgan Stanley Capital
International, which ranks the major non-U.S. stock markets. The U.S. stock
market is measured by the Standard & Poor's 500 Stock Index ("S&P 500"), which
is an unmanaged, unweighted average of 500 stocks, over 95% of which are listed
on the New York Stock Exchange. Morgan Stanley Capital International and S&P 500
performance are on a total return basis after adjustment for reinvestment of
distributions. Morgan Stanley Capital International performance data is U.S.
Dollar adjusted and thus reflects both the change in local currency terms plus
the change in the value of the local currency against the U.S. Dollar. This
information is provided to compare the past performance of the U.S. stock market
with non-U.S. stock markets. It is not necessarily indicative of the future
performance of these markets or of the performance of the International Fund as
compared to any of these markets. The past performance of the Fund as compared
to various market indexes is provided above.

The following table compares the performance of the Class A shares of each Fund
over various periods with that of other mutual funds within the category
described below according to data reported by Lipper Analytical Services, Inc.
("Lipper"), New York, New York, which is a mutual fund reporting service. Lipper
performance figures are based on changes in net asset value, with all income and
capital gain dividends reinvested. Such calculations do not include the effect
of any sales charges. Future performance cannot be guaranteed. Lipper publishes
performance analyses on a regular basis.

GLOBAL FUND

<TABLE>
<CAPTION>
Lipper Mutual Fund
Performance Analysis
--------------------
Global Income Funds
-------------------
<S> <C>
Five Years (Period ended 12/31/96).......................... 38.96
Three Years (Period ended 12/31/96)......................... 18.85
One Year (Period ended 12/31/96)............................ 10.41
</TABLE>

The Lipper Global Income Fund category includes funds which by prospectus or
portfolio practice invest primarily in U.S. Dollar and non-U.S. Dollar debt
instruments of issuers located in at least 3 countries, one of which may be in
the United States. This category includes funds with a variety of objectives,
policies and market and credit risks that should be considered in reviewing
these rankings.

INTERNATIONAL FUND

<TABLE>
<CAPTION>
Lipper Mutual Fund
Performance Analysis
--------------------
International Funds
-------------------
<S> <C>
Ten Years (Period ended 12/31/96)........................... 156.66
Five Years (Period ended 12/31/96).......................... 62.85
One Year (Period ended 12/31/96)............................ 11.76
</TABLE>

The Lipper International Funds category includes funds which invest their assets
in securities whose primary trading markets are outside of the United States.

INVESTMENT MANAGER AND UNDERWRITER

INVESTMENT MANAGER. Zurich Kemper Investments, Inc. ("ZKI"), 222 South Riverside
Plaza, Chicago, Illinois 60606, is each Fund's investment manager. ZKI is wholly
owned by ZKI Holding Corp. ZKI Holding Corp. is a more than 90% owned subsidiary
of Zurich Holding Company of America, Inc., which is a wholly owned subsidiary
of Zurich Insurance Company, an internationally recognized provider of financial
services in property/casualty and life insurance, reinsurance and asset
management. Pursuant to the investment manage-

B-19
<PAGE> 63

ment agreements, ZKI acts as each Fund's investment adviser, manages its
investments, administers its business affairs, furnishes office facilities and
equipment, provides clerical, bookkeeping 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 investment
management agreements provide that the Fund shall pay the charges and expenses
of its operations, including the fees and expenses of the trustees (except those
who are affiliates of ZKI), independent auditors, counsel, custodian and
transfer agent and the cost of share certificates, reports and notices to
shareholders, brokerage commissions or transaction costs, costs of calculating
net asset value, taxes and membership dues. Each Fund bears the expenses of
registration of its shares with the Securities and Exchange Commission, while
Kemper Distributors, Inc., as principal underwriter, pays the cost of qualifying
and maintaining the qualification of each Fund's shares for sale under the
securities laws of the various states. ZKI has agreed to reimburse each Fund to
the extent required by applicable state expense limitations should all operating
expenses of each Fund, including the investment management fees of ZKI but
excluding taxes, interest, distribution fees, extraordinary expenses, brokerage
commissions or transaction costs and any other properly excludable expenses,
exceed the applicable state expense limitations. Currently, there are no state
expense limitations in effect.

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

Each Fund's investment management agreement continues in effect from year to
year so long as its continuation is approved at least annually by (a) a majority
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 and (b) by the
shareholders or the Board of Trustees of the Fund. Each Fund's investment
management agreement may be terminated at any time upon 60 days' notice by
either party, or by a majority vote of the outstanding shares of the Fund, and
will terminate automatically upon assignment. If additional Funds become subject
to an investment management agreement, the provisions concerning continuation,
amendment and termination shall be on a Fund by Fund basis. Additional Funds may
be subject to a different agreement.

The current investment management fee rates paid by the Funds are in the
prospectus, see "Investment Manager and Underwriter." The investment management
fees paid by each Fund for its last three fiscal years are shown in the table
below.

<TABLE>
<CAPTION>
FUND FISCAL 1996 FISCAL 1995 FISCAL 1994
---- ----------- ----------- -----------
<S> <C> <C> <C>
Global..................................................... $1,050,000 $1,238,000 $ 864,000
International.............................................. $3,177,000 $2,757,000 $2,666,000
</TABLE>

FUND SUB-ADVISER. Zurich Investment Management Limited ("ZIML"), 1 Fleet Place,
London, U.K. EC4M 7RQ, an affiliate of ZKI, is the sub-adviser for each Fund.
ZIML acts as sub-adviser pursuant to the terms of the sub-advisory agreement
between it and ZKI for each Fund. ZIML is subject to regulations by the
Investment Management Regulatory Organization (IMRO) in England as well as the
U.S. Securities and Exchange Commission.

Under the terms of the sub-advisory agreement for a Fund, ZIML renders
investment advisory and management services with regard to that portion of the
Fund's portfolio as may be allocated to ZIML by ZKI from time to time for
management, including services related to foreign securities, foreign currency
transactions and related investments. ZIML may, under the terms of each
sub-advisory agreement, render similar services to others including other
investment companies. For its services, ZIML will receive from ZKI a monthly fee
at the annual rate of .30% for the Global Income Fund and .35% for the
International Fund of the portion of the average daily net assets of each Fund
allocated by ZKI to ZIML for management. ZIML permits any of its officers or
employees to serve without compensation as trustees or officers of the Fund if
elected to such positions.

B-20
<PAGE> 64

Each sub-advisory agreement provides that ZIML will not be liable for any error
of judgment or mistake of law or for any loss suffered by the Fund in connection
with matters to which the sub-advisory agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
ZIML in the performance of its duties or from reckless disregard by ZIML of its
obligations and duties under the sub-advisory agreement.

Each sub-advisory agreement is for an initial term ending March 1, 1998 and
continues in effect from year to year so long as its continuation is approved at
least annually (a) by a majority 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 and (b) by the shareholders or the Board of Trustees. Each
sub-advisory agreement may be terminated at any time for a Fund upon 60 days
notice by ZKI, ZIML or the Board of Trustees, or by a majority vote of the
outstanding shares of the Fund, and will terminate automatically upon assignment
or upon the termination of the Fund's investment management agreement. If
additional Funds become subject to a sub-advisory agreement, the provisions
concerning continuation, amendment and termination shall be on a Fund-by-Fund
basis. Additional Funds may be subject to a different agreement. No sub-advisory
fees were paid by ZKI to ZIML for each Fund's 1996 fiscal year, although in
prior fiscal years ZKI has paid ZIML for its services to ZKI with respect to
foreign securities investments of the Funds.

PRINCIPAL UNDERWRITER. Pursuant to separate underwriting and distribution
services agreements ("distribution agreements"), Kemper Distributors, Inc.
("KDI"), a wholly owned subsidiary of ZKI, is the principal underwriter and
distributor for the shares of each Fund and acts as agent of the Fund in the
continuous offering of its shares. KDI bears all of its expenses of providing
services pursuant to the distribution agreement, including the payment of any
commissions. Each Fund pays the cost for the prospectus and shareholder reports
to be set in type and printed for existing shareholders, and KDI pays for the
printing and distribution of copies thereof used in connection with the offering
of shares to prospective investors. KDI also pays for supplementary sales
literature and advertising costs.

Each distribution agreement continues in effect from year to year so long as
such continuance is approved for each class at least annually by a vote of the
Board of Trustees of the Fund, including the Trustees who are not interested
persons of the Fund and who have no direct or indirect financial interest in the
agreement. Each agreement automatically terminates in the event of its
assignment and may be terminated for a class at any time without penalty by a
Fund or by KDI upon 60 days' notice. Termination by a Fund with respect to a
class may be by vote of a majority of the Board of Trustees, or a majority of
the Trustees who are not interested persons of the Fund and who have no direct
or indirect financial interest in the agreement, or a "majority of the
outstanding voting securities" of the class of the Fund, as defined under the
Investment Company Act of 1940. The agreement may not be amended for a class to
increase the fee to be paid by a Fund with respect to such class without
approval by a majority of the outstanding voting securities of such class of the
Fund and all material amendments must in any event be approved by the Board of
Trustees in the manner described above with respect to the continuation of the
agreement. The provisions concerning the continuation, amendment and termination
of the distribution agreement are on a Fund by Fund basis and for each Fund on a
class by class basis.

B-21
<PAGE> 65

CLASS A SHARES. The following information concerns the underwriting commissions
paid in connection with the distribution of each Fund's Class A shares for the
fiscal years noted.

<TABLE>
<CAPTION>
COMMISSIONS COMMISSIONS
COMMISSIONS RETAINED UNDERWRITER PAID TO KEMPER
FUND FISCAL YEAR BY UNDERWRITER PAID TO ALL FIRMS AFFILIATED FIRMS
---- ----------- -------------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Global.................................. 1996 $ 31,000 72,000 1,000
1995 $ 11,000 73,000 3,000
1994 $ 15,000 111,000 37,000
International........................... 1996 $ 95,000 714,000 26,000
1995 $ 67,000 617,000 88,000
1994 $213,000 1,551,000 386,000
</TABLE>

CLASS B SHARES AND CLASS C SHARES. Since the distribution agreement provides for
fees charged to Class B and Class C shares that are used by KDI to pay for
distribution services (see the prospectus under "Investment Manager and
Underwriter"), the agreement (the "Plan") is approved and renewed separately for
the Class B and Class C shares in accordance with Rule 12b-1 under the
Investment Company Act of 1940, which regulates the manner in which an
investment company may, directly or indirectly, bear expenses of distributing
its shares. Expenses of the Funds and of KDI, in connection with the Rule 12b-1
Plans for the Class B and Class C shares are set forth below. A portion of the
marketing, sales and operating expenses shown below could be considered overhead
expense.
<TABLE>
<CAPTION>

DISTRIBUTION CONTINGENT TOTAL
FEES PAID DEFERRED COMMISSIONS COMMISSIONS
FISCAL BY FUND TO SALES CHARGES PAID BY UNDERWRITER PAID BY UNDERWRITER
FUND CLASS B SHARES YEAR UNDERWRITER TO UNDERWRITER TO FIRMS TO AFFILIATED FIRMS
------------------- ------ ------------ -------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C>
Global...................... 1996 $347,000 84,000 173,000 1,000
1995 $390,000 145,000 113,000 19,000
International............... 1996 $541,000 127,000 972,000 15,000
1995 $256,000 72,000 573,000 97,000

<CAPTION>
OTHER DISTRIBUTION EXPENSES PAID BY UNDERWRITER
-----------------------------------------------------------
ADVERTISING MARKETING MISC.
AND PROSPECTUS AND SALES OPERATING INTEREST
FUND CLASS B SHARES LITERATURE PRINTING EXPENSES EXPENSES EXPENSES
------------------- ----------- ---------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Global...................... 39,000 3,000 83,000 27,000 --
22,000 15,000 64,000 49,000 11,000
International............... 229,000 22,000 463,000 98,000 212,000
69,000 17,000 306,000 48,000 105,000
</TABLE>
<TABLE>
<CAPTION>
TOTAL DISTRIBUTION
DISTRIBUTION CONTINGENT DISTRIBUTION FEES PAID
FEES PAID DEFERRED FEES PAID BY UNDERWRITER
FISCAL BY FUND SALES CHARGE BY UNDERWRITER TO AFFILIATED
FUND CLASS C SHARES YEAR TO UNDERWRITER TO UNDERWRITER TO FIRMS FIRMS
------------------- ------ -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Global............... 1996 $ 4,000 -- 8,000 --
1995 $ 1,000 -- 1,000 --
International........ 1996 $32,000 -- 46,000 --
1995 $11,000 -- 10,000 2,000

ADMINISTRATIVE SERVICES. Administrative services are provided to each Fund under
an administrative services agreement ("administrative agreement") with KDI. KDI
bears all its expenses of providing services pursuant to the administrative
agreement between KDI and each Fund, including the payment of service fees. For
the services under the administrative agreement, each Fund pays KDI an
administrative services fee, payable monthly, at the annual rate of up to .25%
of average daily net assets of Class A, B and C shares of the Fund.

KDI enters into related arrangements with various financial services firms, such
as broker-dealers or banks ("firms"), that provide services and facilities for
their customers or clients who are shareholders of a Fund. The firms provide
such office space and equipment, telephone facilities and personnel as is
necessary or beneficial for providing information and services to their clients.
Such services and assistance may include, but are not limited to, establishing
and maintaining shareholder accounts and records, processing purchase and
redemption transactions, answering routine inquiries regarding the Funds,
assistance to clients in changing dividend and investment options, account
designations and addresses and such other services as may be agreed upon from
time to time and permitted by applicable statute, rule or regulation. With
respect to Class A shares, KDI pays each firm

B-22
<PAGE> 66

a service fee, payable quarterly, at an annual rate of (a) up to .15% of the net
assets in Fund accounts that it maintains and services (.25% of the
International Fund) attributable to Class A shares acquired prior to October 1,
1993, and (b) up to .25% of the net assets in Fund accounts that it maintains
and services attributable to Class A shares acquired on or after October 1,
1993, in each case commencing with the month after investment. With respect to
Class B shares and Class C shares, KDI currently advances to firms the first-
year service fee at a rate of up to .25% of the purchase price of such shares.
For periods after the first year, KDI currently intends to pay firms a service
fee at an annual rate of up to .25% (calculated monthly and paid quarterly) of
the net assets attributable to Class B and Class C shares maintained and
serviced by the firm and the fee continues until terminated by KDI or the Fund.
Firms to which service fees may be paid include broker-dealers affiliated with
KDI.

The following information concerns the administrative services fee paid by each
Fund.

<TABLE>
<CAPTION>
ADMINISTRATIVE SERVICE FEES
PAID BY FUND SERVICE FEES SERVICE FEES
------------------------------- PAID BY ADMINISTRATOR PAID BY ADMINISTRATOR
FUND FISCAL PERIOD CLASS A CLASS B CLASS C TO FIRMS TO AFFILIATED FIRMS
---- ------------- ------- ------- ------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Global............... 1996 $173,000 $113,000 1,000 291,000 12,000
1995 $199,000 126,000 -- 327,000 46,000
1994* $154,000 45,000 -- 224,000 58,000
International........ 1996 $772,000 179,000 11,000 984,000 16,000
1995 $711,000 85,000 4,000 808,000 149,000
1994* $723,000 16,000 -- 755,000 162,000
</TABLE>

- ---------------
* Class B and Class C shares were first offered on May 31, 1994.

KDI also may provide some of the above services and may retain any portion of
the fee under the administrative agreement not paid to firms to compensate
itself for administrative functions performed for a Fund. Currently, the
administrative services fee payable to KDI is based only upon Fund assets in
accounts for which there is a firm listed on the Fund's records and it is
intended that KDI will pay all the administrative services fees that it receives
from the Fund to firms in the form of service fees. The effective administrative
services fee rate to be charged against all assets of each Fund while this
procedure is in effect will depend upon the proportion of Fund assets that is in
accounts for which there is a firm of record as well as, with respect to the
Global Fund's Class A shares, the date when shares representing such assets were
purchased. The Board of Trustees of a Fund, in its discretion, may approve
basing the fee to KDI on all Fund assets in the future.

Certain trustees or officers of each Fund are also directors or officers of ZKI,
ZIML or KDI as indicated under "Officers and Trustees."

CUSTODIAN, TRANSFER AGENT AND SHAREHOLDER SERVICE AGENT. The Chase Manhattan
Bank, Chase MetroTech Center, Brooklyn, New York 11245, as custodian, has
custody of all securities and cash of each Fund held outside the United States.
Investors Fiduciary Trust Company ("IFTC"), 127 West 10th Street, Kansas City,
Missouri 64105, as custodian, and State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110, as sub-custodian, have custody of
all securities and cash of each Fund maintained in the United States. They
attend to the collection of principal and income, and payment for and collection
of proceeds of securities bought and sold by each Fund. IFTC is also each Fund's
transfer agent and dividend-paying agent. Pursuant to a services agreement with
IFTC, Kemper Service Company ("KSvC"), an affiliate of ZKI, serves as
"Shareholder Service Agent" of each Fund and, as such, performs all of IFTC's
duties as transfer agent and dividend paying agent. IFTC receives as transfer
agent, and pays to KSvC, annual account fees of $6 per account plus account set
up, transaction, maintenance charges, annual fees associated with the contingent
deferred sales charge (Class B only) and out-of-pocket expense reimbursement.
IFTC's fee is reduced by certain earnings credits in favor of each Fund. For the
fiscal year ended December 31, 1996, IFTC remitted shareholder service fees in
the amount of $264,000 to KSvC as Shareholder Service Agent for the Global Fund.
For the fiscal

B-23
<PAGE> 67

year ended October 31, 1996, IFTC remitted shareholder service fees in the
amount of $1,512,000 to KSvC as Shareholder Service Agent for the International
Fund.

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

PORTFOLIO TRANSACTIONS

ZKI is the investment manager for the Kemper Funds and ZKI and its affiliates
also furnish investment management services to other clients including
affiliated insurance companies. ZIML is the sub-adviser for each Fund. ZKI and
its affiliates share some common research and trading facilities. ZIML is the
subadviser for other Kemper Funds. At times investment decisions may be made to
purchase or sell the same investment securities for a Fund and for one or more
of the other clients managed by ZKI or its affiliates. When two or more of such
clients are simultaneously engaged in the purchase or sale of the same security
through the same trading facility, the transactions are allocated as to amount
and price in a manner considered equitable to each and so that each receives, to
the extent practicable, the average price of such transactions.

National securities exchanges have established limitations governing the maximum
number of options in each class which may be written by a single investor or
group of investors acting in concert. An exchange may order the liquidation of
positions found to be in violation of these limits, and it may impose certain
other sanctions. These position limits may restrict the number of options the
Fund will be able to write on a particular security.

The above mentioned factors may have a detrimental effect on the quantities or
prices of securities and options and futures contracts available to the Fund. On
the other hand, the ability of a Fund to participate in volume transactions may
produce better executions for a Fund in some cases. The Board of Trustees of
each Fund believes that the benefits of ZKI's organization outweigh any
limitations that may arise from simultaneous transactions or position
limitations.

ZKI and ZIML, in effecting purchases and sales of portfolio securities for the
account of a Fund, will implement the Fund's policy of seeking best execution of
orders. ZKI and ZIML may be permitted to pay higher brokerage commissions for
research services as described below. Consistent with this policy, orders for
portfolio transactions are placed with broker-dealer firms giving consideration
to the quality, quantity and nature of each firm's professional services, which
include execution, financial responsibility, responsiveness, clearance
procedures, wire service quotations and statistical and other research
information provided to a Fund and ZKI and its affiliates. Subject to seeking
best execution of an order, brokerage is allocated on the basis of all services
provided. Any research benefits derived are available for all clients of ZKI and
its affiliates. In selecting among firms believed to meet the criteria for
handling a particular transaction, ZKI and ZIML may give consideration to those
firms that have sold or are selling shares of the Funds and of other funds
managed by ZKI or its affiliates, as well as to those firms that provide market,
statistical and other research information to a Fund and ZKI and its affiliates,
although ZKI and ZIML are not authorized to pay higher commissions to firms that
provide such services, except as provided below.

ZKI and ZIML may in certain instances be permitted to pay higher brokerage
commissions solely for receipt of market, statistical and other research
services as defined in Section 28(e) of the Securities Exchange Act of 1934 and
interpretations thereunder. Such services may include, among other things:
economic, industry or company research reports or investment recommendations;
computerized databases; quotation and execution equipment and software; and
research or analytical computer software and services. Where products or
services have a "mixed use," a good faith effort is made to make a reasonable
allocation of the cost of products or services in accordance with the
anticipated research and non-research uses and the cost attributable to
non-research use is

B-24
<PAGE> 68

paid by ZKI or one of its affiliates in cash. Subject to Section 28(e) and
procedures adopted by the Board of Trustees of each Fund, a Fund could pay a
firm that provides research services commissions for effecting a securities
transaction for the Fund in excess of the amount other firms would have charged
for the transaction if ZKI or ZIML determines in good faith that the greater
commission is reasonable in relation to the value of the brokerage and research
services provided by the executing firm viewed in terms either of a particular
transaction or ZKI's or ZIML's overall responsibilities to the Fund and other
clients. Not all of such research services may be useful or of value in advising
a particular Fund. Research benefits will be available for all clients of ZKI
and its affiliates. The investment management fee paid by a Fund to ZKI is not
reduced because these research services are received.

The table below shows total brokerage commissions paid by each Fund for the last
three fiscal periods and for the most recent fiscal year, the percentage thereof
that was allocated to firms based upon research information provided.

<TABLE>
<CAPTION>
ALLOCATED TO FIRMS
BASED ON RESEARCH
FUND FISCAL 1996 IN FISCAL 1996 FISCAL 1995 FISCAL 1994
---- ----------- ------------------ ----------- -----------
<S> <C> <C> <C> <C>
Global...................................... $ 0 0% $ 0 $ 0
International............................... $2,982,000 46% $2,899,000 $2,655,000
</TABLE>

PURCHASE AND REDEMPTION OF SHARES

As described in the prospectus, Fund shares are sold at their public offering
price, which is the net asset value next determined after an order is received
in proper form plus, with respect to Class A shares, an initial sales charge.
The minimum initial investment is $1,000 and the minimum subsequent investment
is $100 but such minimum amounts may be changed at any time. See the prospectus
for certain exceptions to these minimums. An order for the purchase of shares
that is 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.

Upon receipt by the Shareholder Service Agent of a request for redemption,
shares of a Fund will be redeemed by the Fund at the applicable net asset value
per share of such Fund as described in the Funds' prospectus.

Scheduled variations in or the elimination of the initial sales charge for
purchases of Class A shares or the contingent deferred sales charge for
redemptions of Class B or Class C shares by certain classes of persons or
through certain types of transactions as described in the prospectus are
provided because of anticipated economies in sales and sales-related efforts.

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

Although it is the Global 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
satisfy the redemption request 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
occurred, shareholders receiving securities

B-25
<PAGE> 69

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 so liquid as a redemption entirely in cash. The Global Fund has elected
to be governed by Rule 18f-1 under the Investment Company Act of 1940 pursuant
to which the Fund is obligated to redeem shares solely in cash up to the lesser
of $250,000 or 1% of the net assets of the Fund during any 90-day period for any
one shareholder of record.

The conversion of Class B shares to Class A shares may be subject to the
continuing availability of an opinion of counsel, ruling by the Internal Revenue
Service or other assurance acceptable to each Fund to the effect that (a) the
assessment of the distribution services fee with respect to Class B shares and
not Class A shares does not result in the Fund's dividends constituting
"preferential dividends" under the Internal Revenue Code, and (b) that the
conversion of Class B shares to Class A shares does not constitute a taxable
event under the Internal Revenue Code. The conversion of Class B shares to Class
A shares may be suspended if such assurance is not available. In that event, no
further conversions of Class B shares would occur, and shares might continue to
be subject to the distribution services fee for an indefinite period that may
extend beyond the proposed conversion date as described in the prospectus.

OFFICERS AND TRUSTEES

The officers and trustees of each Fund, their birthdates, their principal
occupations and their affiliations, if any, with ZKI, the investment manager,
ZIML, the sub-adviser of the Funds, and KDI, principal underwriter, are as
follows (The number following each person's title is the number of investment
companies managed by ZKI and its affiliates for which he or she holds similar
positions):

DAVID W. BELIN (6/20/28), Trustee (25), 2000 Financial Center, 7th and Walnut,
Des Moines, Iowa; Member, Belin Lamson McCormick Zumbach Flynn, P.C.
(attorneys).

LEWIS A. BURNHAM (1/8/33), Trustee (25), 16410 Avila Boulevard, Tampa, Florida;
Director, Management Consulting Services, McNulty & Company; formerly Executive
Vice President, Anchor Glass Container Corporation.

DONALD L. DUNAWAY (3/8/37), Trustee (25), 7515 Pelican Bay Blvd., Naples,
Florida; Retired; formerly, Executive Vice President, A. O. Smith Corporation
(diversified manufacturer).

ROBERT B. HOFFMAN (12/11/36), Trustee (25), 800 N. Lindbergh Boulevard, St.
Louis, Missouri; Senior Vice President and Chief Financial Officer, Monsanto
Company (chemical products); prior thereto, Vice President, FMC Corporation
(manufacturer of machinery and chemicals); prior thereto, Director, Executive
Vice President and Chief Financial Officer, Staley Continental, Inc. (food
products).

DONALD R. JONES (1/17/30), Trustee (25), 1776 Beaver Pond Road, Inverness,
Illinois; Retired; Director, Motorola, Inc. (manufacturer of electronic
equipment and components); formerly, Executive Vice President and Chief
Financial Officer, Motorola, Inc.

DOMINIQUE P. MORAX (10/02/48), Trustee* (38), 222 South Riverside Plaza,
Chicago, Illinois; Member, Extended Corporate Executive Board, Zurich Insurance
Company; Director, ZKI.

SHIRLEY D. PETERSON (9/3/41), Trustee (25), 401 Rosemont Avenue, Frederick,
Maryland; President, Hood College, Maryland; prior thereto, Partner, Steptoe &
Johnson (attorneys); prior thereto, Commissioner, Internal Revenue Service;
prior thereto, Assistant Attorney General, U.S. Department of Justice.

WILLIAM P. SOMMERS (7/22/33), Trustee (25), 333 Ravenswood Avenue, Menlo Park,
California; 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) (retired), Director, Rohr, Inc., Therapeutic Discovery Corp. and Litton
Industries.

B-26
<PAGE> 70

STEPHEN B. TIMBERS (8/8/44), President and Trustee* (38), 222 South Riverside
Plaza, Chicago, Illinois; President, Chief Executive Officer, Chief Investment
Officer and Director, ZKI; Director, KDI, Dreman Value Advisors, Inc., and LTV
Corporation.

JOHN E. NEAL (3/9/50), Vice President* (38), 222 South Riverside Plaza, Chicago,
Illinois; President, Kemper Funds Group, a unit of ZKI; Director, ZKI, Dreman
Value Advisors, Inc. and KDI.

CHARLES R. MANZONI, JR. (1/23/47), Vice President* (38), 222 South Riverside
Plaza, Chicago, Illinois; Executive Vice President, Secretary and General
Counsel of ZKI; Secretary, ZKI Holding Corp.; Secretary, ZKI Agency, Inc.;
formerly, Partner, Gardner, Carton & Douglas (attorneys).

JEROME L. DUFFY (6/29/36), Treasurer* (38), 222 South Riverside Plaza, Chicago,
Illinois; Senior Vice President, ZKI.

PHILIP J. COLLORA (11/15/45), Vice President and Secretary* (38), 222 South
Riverside Plaza, Chicago, Illinois; Attorney, Senior Vice President and
Assistant Secretary, ZKI.

ELIZABETH C. WERTH (10/1/47), Assistant Secretary* (31), 222 South Riverside
Plaza, Chicago, Illinois; Vice President, ZKI; Vice President and Director of
State Registrations, KDI.

GLOBAL FUND:

J. PATRICK BEIMFORD, JR., (5/25/50) Vice President* (23), 222 South Riverside
Plaza, Chicago, Illinois; Executive Vice President and Chief Investment
Officer -- Fixed Income, ZKI.

INTERNATIONAL FUND:

STEVEN H. REYNOLDS, (9/11/43), Vice President* (15), 222 South Riverside Plaza,
Chicago, Illinois; Executive Vice President and Chief Investment
Officer -- Equities, ZKI.

* Interested persons of the Fund as defined in the Investment Company Act of
1940.

The trustees and officers who are "interested persons" as designated above
receive no compensation from the Funds. The table below shows amounts paid or
accrued to those trustees who are not designated "interested persons" during
each Fund's 1996 fiscal year except that the information in the last column is
for calendar year 1996.

<TABLE>
<CAPTION>
AGGREGATE COMPENSATION FROM TOTAL COMPENSATION
FUNDS FROM FUNDS AND
------------------------------- KEMPER FUND COMPLEX
NAME OF TRUSTEE GLOBAL INTERNATIONAL PAID TO TRUSTEES**
--------------- ------ ------------- -------------------
<S> <C> <C> <C>
David W. Belin*.................................... $2,800 4,200 143,400
Lewis A. Burnham................................... $2,000 2,800 88,800
Donald L. Dunaway*................................. $3,000 4,200 141,200
Robert B. Hoffman.................................. $2,000 2,900 92,100
Donald R. Jones.................................... $2,000 2,900 92,100
Shirley D. Peterson................................ $2,000 2,800 89,800
William P. Sommers................................. $1,900 2,800 87,500
</TABLE>

- ---------------
* Includes current fees deferred and interest pursuant to deferred
compensation agreements with the Funds. Deferred amounts accrue interest
monthly at a rate equal to the yield of Kemper Money Funds -- Kemper Money
Market Fund. Total deferred fees and interest accrued for the latest and all
prior fiscal years are $16,700 and $28,100 for Mr. Belin and $18,400 and
$23,800 for Mr. Dunaway from Global and International Funds, respectively.

** Includes compensation for service on the boards of twenty-four Kemper funds.
Each trustee currently serves as a trustee of 25 Kemper Funds with 42 fund
portfolios.

B-27
<PAGE> 71

As of February 5, 1997, the trustees and officers as a group owned less than 1%
of the then outstanding shares of each Fund and no person owned of record more
than 5% of the outstanding shares of any class of either Fund, except as shown
below:

<TABLE>
<CAPTION>
FUND NAME AND ADDRESS CLASS PERCENTAGE
- ---- ---------------- ----- ----------
<S> <C> <C> <C> <C>
International... * NFSC/FMTC IRA C 5.20%
FBO Paul L. Beach
2506 Glynnwood, Ln.
Bartlesville, OK 74006
** MLPF&S for the sole benefit of its customers
4800 Deer Lake Dr. C 9.49%
Jacksonville, FL 32246
** ZKI Inc. Retirement Plan
811 Main I 6.60%
Kansas City, Missouri 64105
Global.......... * Everen Clearing Corp. B 6.67%
FBO Timothy D. Mardas
4638 Moss Rock Dr.
Hilliard, OH 43026
* Bear Stearns Securities Corp.
1 Metrotech Center North C 5.44%
Brooklyn, NY 11201
** MLPF&S for sole benefit of its customers
4800 Deer Lake Dr. C 34.11%
Jacksonville, FL 32246
* WLN
P.O. Box 3888 C 13.83%
Lacey, WA 98509
** Invest Financial Corp 401K P/S
2701 North Rocky Point Dr. I 84.76%
Tampa, FL 33607
</TABLE>

- ---------------
* Record and beneficial owner.

** Record owner only.

SHAREHOLDER RIGHTS

The Funds generally are not required to hold meetings of their shareholders.
Under the Agreement and Declaration of Trust of each 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 approval by
shareholders is required by the Investment Company Act of 1940 ("1940 Act"); (c)
any termination of the Fund or a class 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, supplying any omission, curing any
ambiguity or curing, correcting or supplementing any

B-28
<PAGE> 72

defective or inconsistent provision thereof); and (e) such additional matters as
may be required by law, the Declaration of Trust, the By-laws of the Fund, or
any registration of the Fund with the Securities and Exchange Commission or any
state, or as the trustees may consider necessary or desirable. The shareholders
also would vote upon changes in fundamental investment objectives, policies or
restrictions.

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

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

Each Fund'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 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
independent auditors. Some matters requiring a larger vote under the Declaration
of Trust, such as termination or reorganization of a 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.

Each Fund's 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 a
Fund. The Declaration of Trust, however, disclaims shareholder liability for
acts or obligations of each Fund and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument entered into or executed by a
Fund or the Fund's 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 a Fund and each 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 ZKI remote and not
material, since it is limited to circumstances in which a disclaimer is
inoperative and such Fund itself is unable to meet its obligations.

B-29
<PAGE> 73

APPENDIX--RATINGS OF INVESTMENTS

STANDARD & POOR'S CORPORATION BOND RATINGS

AAA. Debt rated AAA had the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

AA. Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.

A. Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB. Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

BB, B, CCC, CC AND C. Debt rated BB, B, CCC, CC and C is regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.

CI. The rating CI is reserved for income bonds on which no interest is being
paid.

D. Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.

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 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.

A. Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

BAA. Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

BA. Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B. Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

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CAA. Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

CA. Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C. Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

IBCA LIMITED BOND RATINGS

AAA. Obligations for which there is the lowest expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial, such
that adverse changes in business, economic or financial conditions are unlikely
to increase investment risk significantly.

AA. Obligations for which there is a very low expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial. Adverse
changes in business, economic or financial conditions may increase investment
risk albeit not very significantly.

A. Obligations for which there is a low expectation of investment risk. Capacity
for timely repayment of principal and interest is strong, although adverse
changes in business, economic or financial conditions may lead to increased
investment risk.

BBB. Obligations for which there is currently a low expectation of investment
risk. Capacity for timely repayment of principal and interest is adequate,
although adverse changes in business, economic or financial conditions are more
likely to lead to increased investment risk than for obligations in higher
categories.

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