<PAGE>
Zurich Money Funds
PROSPECTUS
November 10, 1996
(revised as of April 14, 1997)
ZURICH MONEY FUNDS
222 SOUTH RIVERSIDE PLAZA,
CHICAGO, ILLINOIS 60606-5808
1-800-537-6001.
The Funds are designed for investors who seek maximum current income to the ex-
tent consistent with stability of principal. Each Fund invests exclusively in
high quality money market instruments.
.ZURICH MONEY MARKET FUND
.ZURICH GOVERNMENT MONEY FUND
.ZURICH TAX-FREE MONEY FUND
This prospectus contains information about each Fund that a prospective in-
vestor should know before investing and should be retained for future refer-
ence. A Statement of Additional Information dated November 10, 1996 (revised as
of April 14, 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 above or by calling 1-800-537-6001.
INVESTMENTS IN THE FUNDS ARE NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERN-
MENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR
ANY OTHER AGENCY, AND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR EN-
DORSED BY, ANY BANK. THERE CAN BE NO ASSURANCE THAT A FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary..................................................................... 2
Summary of Fund Expenses.................................................... 3
Financial Highlights........................................................ 4
How the Funds Work.......................................................... 5
Investment Objectives, Policies and Risk Factors............................ 5
Net Asset Value--Determining Share Price.................................... 9
How To Buy Shares........................................................... 10
How To Sell Shares.......................................................... 11
Exchanging Shares........................................................... 14
Special Features............................................................ 15
Dividends and Taxes......................................................... 16
Investment Manager.......................................................... 18
Performance................................................................. 19
Capital Structure........................................................... 20
Account Services Directory.................................................. 21
</TABLE>
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.
<PAGE>
SUMMARY
INVESTMENT OBJECTIVES
Zurich Money Funds (the "Trust") is an open-end, diversified, management in-
vestment company offering a choice of three investment funds ("Funds"). Each
Fund is designed to provide you with professional management of your short-term
investment dollars; the dollars that you want to be very liquid and accessible
when special opportunities arise or that you want to know are in high quality
investments.
Each Fund invests in high quality short-term money market instruments consis-
tent with its specific objective.
.THE ZURICH MONEY MARKET FUND seeks maximum current income to the extent con-
sistent with stability of principal from a portfolio primarily of commercial
paper and bank obligations.
.THE ZURICH GOVERNMENT MONEY FUND seeks maximum current income to the extent
consistent with stability of principal from a portfolio of obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities.
.THE ZURICH TAX-FREE MONEY FUND seeks maximum current income that is exempt
from federal income taxes to the extent consistent with stability of principal
from a portfolio of municipal securities.
Each Fund may use a variety of investment techniques in seeking its objective
including the purchase of repurchase agreements and variable rate securities.
Each Fund seeks to maintain a net asset value of $1.00 per share; however,
there is no assurance that the objective of any Fund will be achieved or that
any Fund will be able to maintain a net asset value of $1.00 per share. See
"How the Funds Work" and "Investment Objectives, Policies and Risk Factors."
INVESTMENT MANAGER
Zurich Kemper Investments, Inc. ("ZKI") is the investment manager for the
Funds and provides the Funds with continuous professional investment supervi-
sion. ZKI is paid an annual investment management fee, payable monthly, on a
graduated basis ranging from .50% of the first $215 million of average daily
net assets of the Trust to .25% of average daily net assets of the Trust over
$800 million. See "Investment Manager."
BUYING AND SELLING SHARES
You may buy and sell shares of each Fund at net asset value with no sales
charge. The minimum initial investment is $1,000 and the minimum subsequent in-
vestment is $100 ($50 under an automatic investment plan). Accounts may be
opened using the Account Application available from the Funds. Shares may be
purchased by mailing a check, by wire transfer or in person in downtown Chicago
and Kansas City. Please see "How To Buy Shares" for more information on how
easy it is to invest. Shares may be sold or redeemed by written request or by
using one of the Funds' expedited redemption procedures. See "How To Sell
Shares" for specific details.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are automatically
reinvested in additional shares of the same Fund, unless you elect to be paid
by check. See "Dividends and Taxes."
SPECIAL FEATURES
A number of features are available to account holders, including: the Zurich
Money-PLUS AccountSM, a cash management program offering a combination of fea-
tures including a no minimum checking account and a VISA(R) check card and
Electronic Funds Transfer Programs. See "Special Features" and "Account Serv-
ices Directory" for a description of these and other features.
2
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SUMMARY OF FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES*
<TABLE>
<S> <C>
Sales Load on Purchases.................................................... None
Sales Load on Reinvested Dividends......................................... None
Deferred Sales Load........................................................ None
Redemption Fees............................................................ None
Exchange Fee............................................................... None
</TABLE>
- --------
*Table does not include $3.00 monthly small account fee. See "How to Sell
Shares."
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
ZURICH ZURICH
MONEY ZURICH TAX-FREE
MARKET GOVERNMENT MONEY
FUND MONEY FUND FUND
------ ---------- --------
<S> <C> <C> <C>
Management Fees...................................... .27% .27% .27%
12b-1 Fees........................................... None None None
Other Expenses....................................... .23% .19% .12%
---- ---- ----
Total Operating Expenses............................. .50% .46% .39%
</TABLE>
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming a 5% an-
nual return and redemption at the end of each time period:
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market.................................. $ 5 $16 $28 $63
Government.................................... $ 5 $15 $26 $58
Tax-Free...................................... $ 4 $13 $22 $49
</TABLE>
The purpose of the table above is to assist you in understanding the various
costs and expenses that an investor in a Fund will bear directly or indirectly.
Investment dealers and other firms may independently charge shareholders addi-
tional fees. The Example assumes a 5% annual rate of return pursuant to re-
quirements of the Securities and Exchange Commission. This hypothetical rate of
return is not intended to be representative of past or future performance of
any Fund. The Example should not be considered to be a representation of past
or future expenses. Actual expenses may be greater or less than those shown.
3
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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 tables
is covered by the report of the Funds' independent auditors. The report is con-
tained in the Funds' Registration Statement and is available from the Funds.
The financial statements contained in the Funds' 1996 Annual Report to Share-
holders are incorporated herein by reference and may be obtained by writing or
calling the Funds.
ZURICH MONEY MARKET FUND
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE
OPERATING
PERFORMANCE:
Net asset value,
beginning of year $1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
- ------------------------------------------------------------------------------------------------------------------------
Net investment
income and
dividends
declared .05 .05 .03 .03 .04 .07 .08 .09 .07 .06
- ------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of year $1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN: 5.34% 5.34 3.20 2.96 4.45 7.19 8.50 9.03 7.03 6.02
- ------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE
NET ASSETS:
Expenses .50% .52 .52 .52 .49 .46 .45 .49 .50 .52
- ------------------------------------------------------------------------------------------------------------------------
Net investment
income 5.20% 5.19 3.14 2.92 4.42 6.94 8.16 8.71 6.79 5.84
- ------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL
DATA:
Net assets at end
of year
(in thousands) $4,225,775 4,025,098 4,148,789 4,499,930 5,664,194 7,553,950 7,603,418 6,638,489 4,893,284 4,235,907
- ------------------------------------------------------------------------------------------------------------------------
ZURICH GOVERNMENT MONEY FUND
<CAPTION>
YEAR ENDED JULY 31,
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE
OPERATING
PERFORMANCE:
Net asset value,
beginning of year $1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
- ------------------------------------------------------------------------------------------------------------------------
Net investment
income and
dividends
declared .05 .05 .03 .03 .04 .07 .08 .09 .07 .06
- ------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of year $1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN: 5.34% 5.36 3.20 2.97 4.50 6.95 8.45 8.96 6.88 5.79
- ------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE
NET ASSETS:
Expenses .46% .46 .47 .45 .43 .43 .43 .49 .51 .67
- ------------------------------------------------------------------------------------------------------------------------
Net investment
income 5.20% 5.21 3.15 2.94 4.44 6.65 8.08 8.79 6.66 5.64
- ------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL
DATA:
Net assets at end
of year
(in thousands) $672,041 603,601 707,368 694,303 926,328 1,126,417 845,347 514,303 177,812 110,366
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
ZURICH TAX-FREE MONEY FUND
<TABLE>
<CAPTION>
SEPTEMBER 10, 1987
YEAR ENDED JULY 31, TO JULY 31,
1996 1995 1994 1993 1992 1991 1990 1989 1988
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PER-
FORMANCE:
Net asset value, begin-
ning of period $1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
- -------------------------------------------------------------------------------------------------------------
Net investment income
and dividends declared .03 .03 .02 .02 .04 .05 .06 .06 .04
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of
period $1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
- -------------------------------------------------------------------------------------------------------------
TOTAL RETURN: 3.44% 3.53 2.33 2.39 3.57 5.07 5.81 6.21 4.33
- -------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS:
Expenses .39% .40 .41 .39 .39 .38 .40 .39 .45
- -------------------------------------------------------------------------------------------------------------
Net investment income 3.38% 3.46 2.30 2.36 3.49 4.92 5.64 6.12 4.68
- -------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets at end of pe-
riod (in thousands) $729,018 760,143 792,131 758,630 796,272 788,253 693,307 529,670 190,933
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</TABLE>
NOTE: Ratios have been determined on an annualized basis. Total return is not
annualized. The Zurich Money Market Fund's total return for the year ended July
31, 1995 includes the effect of a capital contribution from the investment man-
ager. Without the capital contribution, the total return would have been 4.62%.
4
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HOW THE FUNDS WORK
Zurich Money Funds are designed to provide you with professional management
of short-term investment dollars. They are designed for investors who seek
maximum current income consistent with stability of principal plus liquidity.
To help meet these objectives, you are provided with a choice of separate in-
vestment funds ("Funds"): the Zurich Money Market Fund (the "Money Market
Fund"), the Zurich Government Money Fund (the "Government Money Fund") and the
Zurich Tax-Free Money Fund (the "Tax-Free Money Fund"). Because each Fund com-
bines its shareholders' money, it can buy and sell large blocks of securities,
which reduces transaction costs and maximizes yields. Each Fund is managed by
investment professionals who analyze market trends to take advantage of chang-
ing conditions and who seek to minimize risk by diversifying each Fund's in-
vestments.
Each Fund seeks to maintain a net asset value of $1.00 per share. Thus, the
Funds are designed for investors who want to avoid the fluctuations of princi-
pal commonly associated with equity and long-term bond investments. The fluc-
tuations of these other types of investments are often represented by the
movement of various unmanaged market indexes, such as the Dow Jones Industrial
Average. In addition, although there can be no guarantee that a Fund will
achieve its objective or that it will maintain a net asset value of $1.00 per
share, each Fund has maintained a $1.00 net asset value since its inception.
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS
MONEY MARKET FUND
THE MONEY MARKET FUND SEEKS MAXIMUM CURRENT INCOME TO THE EXTENT CONSISTENT
WITH STABILITY OF PRINCIPAL. The Fund pursues its objective by investing ex-
clusively in the following types of U.S. Dollar denominated money market in-
struments that mature in 12 months or less:
.Obligations of, or guaranteed by, the U.S. Government, its agencies or in-
strumentalities.
.Bank certificates of deposit (including time deposits) or bankers' accept-
ances limited to domestic banks (including their foreign branches) and Cana-
dian chartered banks having total assets in excess of $1 billion.
.Commercial paper obligations rated A-1 or A-2 by Standard & Poor's Corpora-
tion ("S&P") or Prime-1 or Prime-2 by Moody's Investors Service, Inc.
("Moody's") or issued by companies with an unsecured debt issue outstanding
currently rated Aa by Moody's or AA by S&P or higher and investments in other
corporate obligations such as publicly traded bonds, debentures and notes
rated Aa by Moody's or AA by S&P or higher. For a description of these rat-
ings, see "Appendix--Ratings of Investments" in the Statement of Additional
Information.
.Repurchase agreements of obligations that are suitable for investment under
the categories set forth above. Repurchase agreements are discussed below.
To the extent the Money Market Fund purchases Eurodollar certificates of de-
posit issued by London branches of U.S. banks, or commercial paper issued by
foreign entities, consideration will be given to their marketability, to pos-
sible restrictions on international currency transactions and to regulations
imposed by the domicile country of the foreign issuer. Eurodollar certificates
of deposit are not subject to the same regulatory requirements as certificates
issued by U.S. banks and associated income may be subject to the imposition of
foreign taxes.
The Money Market Fund may invest in commercial paper which is issued by ma-
jor corporations without registration under the Securities Act of 1933 in re-
liance on the exemption from registration afforded by Section 3(a)(3) thereof.
Such commercial paper may be issued only to finance current transactions and
must mature in nine months or less. Trading of such commercial paper is con-
ducted primarily by institutional investors through investment dealers, and
individual investor participation in the commercial paper market is very lim-
ited.
The Fund may also invest in commercial paper issued in reliance on the so-
called "private placement" exemption from registration afforded by Section
4(2) of the Securities Act of 1933 ("Section 4(2) paper"). Section 4(2) paper
is restricted as to disposition under the federal securities laws, and gener-
ally is sold to institutional investors such as the Fund who agree that they
are purchasing
5
<PAGE>
Investment Objectives and Policies--continued
the paper for investment and not with a view to public distribution. Any re-
sale by the purchaser must be in an exempt transaction. Section 4(2) paper
normally is resold to other institutional investors like the Fund through or
with the assistance of the issuer or investment dealers who make a market in
the Section 4(2) paper, thus providing liquidity. The Fund's investment man-
ager considers the legally restricted but readily saleable Section 4(2) paper
to be liquid; however, pursuant to procedures approved by the Board of Trust-
ees of the Trust, if a particular investment in Section 4(2) paper is not de-
termined to be liquid, that investment will be included within the 10% limita-
tion on illiquid securities discussed under "The Funds" below. The Fund's in-
vestment manager monitors the liquidity of its investments in Section 4(2) pa-
per on a continuous basis.
The Money Market Fund may concentrate more than 25% of its assets in bank
certificates of deposit or banker's acceptances of United States banks in ac-
cordance with its investment objective and policies. Accordingly, the Fund may
be more adversely affected by changes in market or economic conditions and
other circumstances affecting the banking industry than it would be if the
Fund's assets were not so concentrated.
GOVERNMENT MONEY FUND
THE GOVERNMENT MONEY FUND SEEKS MAXIMUM CURRENT INCOME TO THE EXTENT CONSIS-
TENT WITH STABILITY OF PRINCIPAL. The Fund pursues its objective by investing
exclusively in the following securities that mature within 12 months or less.
.U.S. Treasury bills, notes, bonds and other obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities.
.Repurchase agreements of the obligations described above.
Some securities issued by U.S. Government agencies or instrumentalities are
supported only by the credit of the agency or instrumentality, such as those
issued by the Federal Home Loan Bank, and others have an additional line of
credit with the U.S. Treasury, such as those issued by the Federal National
Mortgage Association, Farm Credit System and Student Loan Marketing Associa-
tion. Short-term U.S. Government obligations generally are considered to be
the safest short-term investment. The U.S. Government guarantee of the securi-
ties owned by the Fund, however, does not guarantee the net asset value of its
shares, which the Fund seeks to maintain at $1.00 per share. Also, with re-
spect to securities supported only by the credit of the issuing agency or in-
strumentality or by an additional line of credit with the U.S. Treasury, there
is no guarantee that the U.S. Government will provide support to such agencies
or instrumentalities and such securities may involve risk of loss of principal
and interest.
TAX-FREE MONEY FUND
THE TAX-FREE MONEY FUND SEEKS MAXIMUM CURRENT INCOME THAT IS EXEMPT FROM
FEDERAL INCOME TAXES TO THE EXTENT CONSISTENT WITH STABILITY OF PRINCIPAL. The
Fund pursues its objective primarily through a professionally managed, diver-
sified portfolio of short-term high quality tax-exempt municipal obligations.
Under normal market conditions at least 80% of the Fund's total assets will,
as a fundamental policy, be invested in obligations issued by or on behalf of
states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities, the
income from which is exempt from federal income tax ("Municipal Securities").
In compliance with the position of the staff of the Securities and Exchange
Commission, the Fund does not consider "private activity" bonds as described
in "Dividends and Taxes--Tax-Free Money Fund" as Municipal Securities for pur-
poses of the 80% limitation. This is a fundamental policy so long as the staff
maintains its position, after which it would become non-fundamental.
Dividends representing net interest income received by the Tax-Free Money
Fund on Municipal Securities will be exempt from federal income tax when dis-
tributed to the Fund's shareholders. Such dividend income may be subject to
state and local taxes. See "Dividends and Taxes--Tax-Free Money Fund." The
Fund's assets will consist of Municipal Securities, temporary investments as
described below and cash. The Fund considers short-term Municipal Securities
to be those that mature in one year or less.
6
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Investment Objectives and Policies--continued
The Tax-Free Money Fund will invest only in Municipal Securities which at
the time of purchase:
.are rated within the two highest ratings for Municipal Securities (Aaa or Aa)
assigned by Moody's or (AAA or AA) assigned by S&P;
.are guaranteed or insured by the U.S. Government as to the payment of princi-
pal and interest;
.are fully collateralized by an escrow of U.S. Government securities accept-
able to the Fund's investment manager;
.have at the time of purchase a Moody's short-term municipal securities rating
of MIG-2 or higher or a municipal commercial paper rating of P-2 or higher, or
S&P's municipal commercial paper rating of A-2 or higher;
.are unrated, if longer term Municipal Securities of that issuer are rated
within the two highest rating categories by Moody's or S&P; or
.are determined to be at least equal in quality to one or more of the above
ratings in the discretion of the Fund's investment manager.
Municipal Securities generally are classified as "general obligation" or
"revenue" issues. General obligation bonds are secured by the issuer's pledge
of its full credit and taxing power for the payment of principal and interest.
Revenue bonds are payable only from the revenues derived from a particular fa-
cility or class of facilities or, in some cases, from the proceeds of a spe-
cial excise tax or other specific revenue source such as the user of the fa-
cility being financed. Industrial development bonds held by the Fund are in
most cases revenue bonds and are not payable from the unrestricted revenues of
the issuer. Among other types of instruments, the Fund may purchase tax-exempt
commercial paper, warrants and short-term municipal notes such as tax antici-
pation notes, bond anticipation notes, revenue anticipation notes, construc-
tion loan notes and other forms of short-term loans. Such notes are issued
with a short-term maturity in anticipation of the receipt of tax payments, the
proceeds of bond placements or other revenues. A more detailed discussion of
Municipal Securities and the Moody's and S&P ratings outlined above is con-
tained in the Statement of Additional Information. As indicated above and un-
der "Dividends and Taxes--Tax-Free Money Fund," the Fund may invest in "pri-
vate activity" bonds.
The Tax-Free Money Fund may purchase securities which provide for the right
to resell them to an issuer, bank or dealer at an agreed upon price or yield
within a specified period prior to the maturity date of such securities. Such
a right to resell is referred to as a "Standby Commitment." Securities may
cost more with Standby Commitments than without them. Standby Commitments will
be entered into solely to facilitate portfolio liquidity. A Standby Commitment
may be exercised before the maturity date of the related Municipal Security if
the Fund's investment manager revises its evaluation of the creditworthiness
of the underlying security or of the entity issuing the Standby Commitment.
The Fund's policy is to enter into Standby Commitments only with issuers,
banks or dealers that are determined by the Fund's investment manager to pres-
ent minimal credit risks. If an issuer, bank or dealer should default on its
obligation to repurchase an underlying security, the Fund might be unable to
recover all or a portion of any loss sustained from having to sell the secu-
rity elsewhere. For purposes of valuing the Fund's securities at amortized
cost, the stated maturity of Municipal Securities subject to Standby Commit-
ments is not changed.
The Tax-Free Money Fund may purchase high quality Certificates of Participa-
tion in trusts that hold Municipal Securities. A Certificate of Participation
gives the Fund an undivided interest in the Municipal Security in the propor-
tion that the Fund's interest bears to the total principal amount of the Mu-
nicipal Security. These Certificates of Participation may be variable rate or
fixed rate with remaining maturities of one year or less. A Certificate of
Participation may be backed by an irrevocable letter of credit or guarantee of
a financial institution that satisfies rating agencies as to the credit qual-
ity of the Municipal Security supporting the payment of principal and interest
on the Certificate of Participation. Payments of principal and interest would
be dependent upon the underlying Municipal Security and may be guaranteed un-
der a letter of credit to the extent of such credit. The
7
<PAGE>
Investment Objectives and Policies--continued
quality rating by a rating service of an issue of Certificates of Participa-
tion is based primarily upon the rating of the Municipal Security held by the
trust and the credit rating of the issuer of any letter of credit and of any
other guarantor providing credit support to the issue. The Fund's investment
manager considers these factors as well as others, such as any quality ratings
issued by the rating services identified above, in reviewing the credit risk
presented by a Certificate of Participation and in determining whether the
Certificate of Participation is appropriate for investment by the Fund. It is
anticipated by the Fund's investment manager that, for most publicly offered
Certificates of Participation, there will be a liquid secondary market or
there may be demand features enabling the Fund to readily sell its Certifi-
cates of Participation prior to maturity to the issuer or a third party. As to
those instruments with demand features, the Fund intends to exercise its right
to demand payment from the issuer of the demand feature only upon a default
under the terms of the Municipal Security, as needed to provide liquidity to
meet redemptions, or to maintain a high quality investment portfolio.
The Tax-Free Money Fund may purchase and sell Municipal Securities on a
when-issued or delayed delivery basis. A when-issued or delayed delivery
transaction arises when securities are bought or sold for future payment and
delivery to secure what is considered to be an advantageous price and yield to
the Fund at the time it enters into the transaction. In determining the matu-
rity of portfolio securities purchased on a when-issued or delayed delivery
basis, the Fund will consider them to have been purchased on the date when it
committed itself to the purchase.
A security purchased on a when-issued basis, like all securities held by the
Tax-Free Money Fund, is subject to changes in market value based upon changes
in the level of interest rates and investors' perceptions of the creditworthi-
ness of the issuer. Generally such securities will appreciate in value when
interest rates decline and decrease in value when interest rates rise. There-
fore if, in order to achieve higher interest income, the Fund remains substan-
tially fully invested at the same time that it has purchased securities on a
when-issued basis, there will be a greater possibility that the market value
of the Fund's assets will vary from $1.00 per share, since the value of a
when-issued security is subject to market fluctuation and no interest accrues
to the purchaser prior to settlement of the transaction. See "Net Asset Val-
ue--Determining Share Price."
The Fund will only make commitments to purchase Municipal Securities on a
when-issued or delayed delivery basis with the intention of actually acquiring
the securities, but the Fund reserves the right to sell these securities be-
fore the settlement date if deemed advisable. The sale of these securities may
result in the realization of gains that are not exempt from federal income
tax.
In seeking to achieve its investment objective, the Tax-Free Money Fund may
invest all or any part of its assets in Municipal Securities that are indus-
trial development bonds. Moreover, although the Fund does not currently intend
to do so on a regular basis, it may invest more than 25% of its assets in Mu-
nicipal Securities that are repayable out of revenue streams generated from
economically related projects or facilities, if such investment is deemed nec-
essary or appropriate by the Fund's investment manager. To the extent that the
Fund's assets are concentrated in Municipal Securities payable from revenues
on economically related projects and facilities, the Fund will be subject to
the risks presented by such projects to a greater extent than it would be if
the Fund's assets were not so concentrated.
From time to time, as a defensive measure or when acceptable short-term Mu-
nicipal Securities are not available, the Tax-Free Money Fund may invest in
taxable "temporary investments" which include:
.obligations of the U.S. Government, its agencies or instrumentalities;
.debt securities rated within the two highest grades by Moody's or S&P;
.commercial paper rated in the two highest grades by either of such rating
services;
.certificates of deposit of domestic banks with assets of $1 billion or more;
and
.any of the foregoing temporary investments subject to repurchase agreements
(Repurchase agreements are discussed below).
8
<PAGE>
Investment Objectives and Policies--continued
Interest income from temporary investments is taxable to shareholders as or-
dinary income. Although the Fund is permitted to invest in taxable securities,
it is the Fund's primary intention to generate income dividends that are not
subject to federal income taxes. See "Dividends and Taxes." For a description
of the ratings, see "Appendix--Ratings of Investments" in the Statement of Ad-
ditional Information.
THE FUNDS
In addition to the specific investment objective and policies listed above,
each Fund limits its investments to securities that meet the requirements of
Rule 2a-7 under the Investment Company Act of 1940 (the "1940 Act"). See "Net
Asset Value--Determining Share Price."
Each Fund may invest in instruments that have interest rates that adjust pe-
riodically or that "float" continuously according to formulae intended to min-
imize fluctuation in values of the instruments ("Variable Rate Securities").
The interest rate on a Variable Rate Security is ordinarily determined by ref-
erence to or is a percentage of an objective standard such as a bank's prime
rate, the 90-day U.S. Treasury bill rate, or the rate of return on commercial
paper or bank certificates of deposit. Generally, the changes in the interest
rate on Variable Rate Securities reduce the fluctuation in the market value of
such securities. Accordingly, as interest rates decrease or increase, the po-
tential for capital appreciation or depreciation is less than for fixed-rate
obligations. Some Variable Rate Securities ("Variable Rate Demand Securities")
have a demand feature entitling the purchaser to resell the securities at an
amount approximately equal to amortized cost or the principal amount thereof
plus accrued interest. As is the case for other Variable Rate Securities, the
interest rate on Variable Rate Demand Securities varies according to some ob-
jective standard intended to minimize fluctuation in the values of the instru-
ments. Each Fund determines the maturity of Variable Rate Securities in accor-
dance with Securities and Exchange Commission rules which allow the Fund to
consider certain of such instruments as having maturities shorter than the ma-
turity date on the face of the instrument.
Each Fund may invest in repurchase agreements, which are instruments under
which a Fund acquires ownership of a security from a broker-dealer or bank
that agrees to repurchase the security at a mutually agreed upon time and
price (which price is higher than the purchase price), thereby determining the
yield during the Fund's holding period. Maturity of the securities subject to
repurchase may exceed one year. In the event of a bankruptcy or other default
of a seller of a repurchase agreement, a Fund might incur expenses in enforc-
ing its rights, and could experience losses, including a decline in the value
of the underlying securities and loss of income. A Fund will not purchase il-
liquid securities, including time deposits and repurchase agreements maturing
in more than seven days, if, as a result thereof, more than 10% of such Fund's
net assets valued at the time of the transaction would be invested in such se-
curities.
A Fund may not borrow money except as a temporary measure for extraordinary
or emergency purposes, and then only in an amount up to one-third of the value
of its total assets, in order to meet redemption requests without immediately
selling any portfolio securities. Any such borrowings under this provision
will not be collateralized. 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 in-
debtedness from money borrowed, the Fund will, within three business days, re-
duce its indebtedness to the extent necessary. No Fund will borrow for lever-
age purposes.
Certain investment restrictions have been adopted for each Fund and are pre-
sented in the Statement of Additional Information and together with the in-
vestment objective and policies of such Fund, cannot be changed without ap-
proval by holders of a majority of its outstanding voting shares. As defined
in the 1940 Act, this means the lesser of the vote of (a) 67% of the shares of
such 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.
NET ASSET VALUE--DETERMINING SHARE PRICE
The price you pay when you buy shares in a Fund and the price you receive if
you redeem is the net asset
9
<PAGE>
Net Asset Value--continued
value computed after we receive your order to buy or redeem in proper form (as
described under "How To Buy Shares"). The net asset value per share of each
Fund is calculated by dividing the total value of the assets of the Fund, minus
its liabilities, by the total number of its shares outstanding.
The net asset value per share of each Fund is determined on each day the New
York Stock Exchange is open for trading, at 11:00 a.m., 1:00 p.m. and 3:00 p.m.
Central time for the Money Market and Government Money Funds and at 11:00 a.m.
and 3:00 p.m. Central time for the Tax-Free Money Fund. Each Fund seeks to
maintain a net asset value of $1.00 per share.
Each Fund values its portfolio instruments at amortized cost in accordance
with Rule 2a-7 under the 1940 Act, which means that they are valued at their
acquisition cost (as adjusted for amortization of premium or discount) rather
than at current market value. Calculations are made to compare the value of
each Fund's investments valued at amortized cost with market-based value. Mar-
ket-based valuations are obtained by using actual quotations provided by market
makers, estimates of market value, or values obtained from yield data relating
to classes of money market instruments published by reputable sources at the
mean between the bid and asked prices for the instruments. If a deviation of
1/2 of 1% or more were to occur between a Fund's net asset value per share cal-
culated by reference to market-based values and a Fund's $1.00 per share net
asset value, or if there were any other deviation that the Board of Trustees
believed would result in a material dilution to shareholders or purchasers, the
Board of Trustees would promptly consider what action, if any, should be initi-
ated. In order to value its investments at amortized cost, the Funds purchase
only securities with a maturity of one year or less and maintain a dollar-
weighted average portfolio maturity of 90 days or less. In addition, the Funds
limit their portfolio investments to securities that meet the quality and di-
versification requirements of Rule 2a-7.
HOW TO BUY SHARES
Whether you're opening an account or adding to it, we hope that you'll find
that we've made your shareholder transactions easy. Shares of each Fund are
sold at their net asset value with no sales charge. To open an account you
should use the Account Application available from the Funds and choose one of
the methods outlined below. Call 1-800-537-6001 if you have questions or need
assistance.
INVESTMENT AMOUNTS
The minimum initial investment for each Fund is $1,000 and the minimum subse-
quent investment is $100. For an Individual Retirement Account ("IRA"), the
minimum initial investment is $250 and the minimum subsequent investment is
$50. Under an automatic investment plan, such as Automatic Purchase Plan, Pay-
roll Direct Deposit and Government Direct Deposit, the minimum periodic invest-
ment is $50. These minimum amounts may be changed at any time in management's
discretion.
BY MAIL
Complete the Account Application and mail it with your check (payable to ZMF
followed by the Fund name) to the Funds' Shareholder Service Agent to:
Zurich Kemper Service Company
Transfer Agency Division
P.O. Box 419356
Kansas City, Missouri 64141-6356.
Subsequent purchases should be sent to:
Zurich Kemper Service Company
Transfer Agency Division
P.O. Box 419154
Kansas City, Missouri 64141-6154.
Purchases by check or other negotiable bank draft will be invested as of 3:00
p.m. Central time on the next business day after receipt and will begin earning
dividends the following business day. Purchases by check drawn on a foreign
bank will normally be effective after the check clears. See "Purchase and
Redemption of Shares" in the Statement of Additional Information.
BY WIRE
If you open your account by wire, your money is invested faster than if you
mail a check, so you'll start earning dividends sooner. To open an account
through wire transfer, call a Zurich Money Fund Specialist, toll free at 1-800-
537-6001 to obtain an account number. Then have your bank or broker wire Fed-
eral Funds (mon-
10
<PAGE>
How To Buy Shares--continued
ies credited to a bank's account with its regional Federal Reserve Bank), to-
gether with your account number, the name of the Fund and the name in which
your account is registered, to United Missouri Bank of Kansas City, N.A. (ABA
# 1010-0069-5), 10th and Grand Avenue, Kansas City, MO 64106 for credit to the
appropriate Fund bank account (Zurich Money Market Fund: 98-0103-346-8; Zurich
Government Money Fund: 98-0116-259-4; or Zurich Tax-Free Money Fund: 98-0001-
577-6). Your account will then be opened and the order for purchase of Fund
shares will be effected at the next determined net asset value. Shares pur-
chased by wire will receive that day's dividend if effected at or prior to
1:00 p.m. Central time for the Money Market and the Government Money Funds,
and by 11:00 a.m. Central time net asset value determination for the Tax-Free
Money Fund. The Funds accept wires at no charge, although your bank may charge
you for this service.
BY ELECTRONIC FUNDS TRANSFER
Please see "Special Features" for more information on buying shares using
electronic funds transfer such as:
EZ-TRANSFER
AUTOMATIC PURCHASE PLAN
PAYROLL DIRECT DEPOSIT
GOVERNMENT DIRECT DEPOSIT
via the Automated Clearing House ("ACH") System.
IN PERSON
In downtown Chicago, you can make a direct investment at the Zurich Kemper
Service Center at 222 South Riverside Plaza, 1st Floor, with the assistance of
customer service representatives. In Kansas City, you can make a direct in-
vestment at 811 Main Street, 7th Floor.
OTHER INFORMATION
The Funds reserve the right to withdraw all or any part of the offering made
by this prospectus or to reject purchase orders. The Funds also reserve the
right at any time to waive or increase the minimum investment requirements.
All orders to purchase shares are subject to acceptance by the Funds and are
not binding until confirmed or accepted in writing. Any purchase that would
result in total account balances for a single shareholder in excess of $3 mil-
lion is subject to prior approval by the Funds. Share certificates are issued
only on request to the Funds and may not be available for certain types of ac-
count registrations. Investments may also be made in the Funds through broker-
dealers and others, who may charge a commission or other fee for their servic-
es. A $10 service fee will be charged when a check for the purchase of shares
is returned because of insufficient or uncollected funds or a stop payment or-
der.
If you elect to redeem shares of a Fund purchased by check or through EZ-
Transfer or Automatic Purchase Plan the Fund may delay transmittal of redemp-
tion proceeds until it has determined that collected funds have been received
for the purchase of such shares, which may be up to 10 calendar days from re-
ceipt by the Fund of the purchase amount. See "How to Sell Shares."
HOW TO SELL SHARES
You can access all or part of your account by redeeming your shares. Your
shares will be redeemed at the next determined net asset value after your re-
quest has been received in proper form. If processed at 3:00 p.m. Central
time, you will receive that day's dividend on the shares you sold. If you re-
deem all your shares of a Fund, you will receive the net asset value of such
shares and all declared but unpaid dividends on such shares. You may use ei-
ther the regular or expedited redemption features described in this section to
sell your shares.
BY MAIL
Send a written request signed by all account owners stating the amount to be
redeemed and specifying
the account number and Fund from which shares are to be redeemed to:
Zurich Kemper Service Company
Transfer Agency Division
P.O. Box 419557
Kansas City, Missouri 64141-6557.
The request must be signed exactly as the account is registered, including any
special capacity of the registered owner, and signature(s) must be guaranteed
(except as noted under "By Telephone" below) by a commercial bank, trust com-
pany, savings and loan association, federal savings bank, member firm of a na-
tional securities exchange
11
<PAGE>
How To Sell Shares--continued
or other eligible financial institution. If any share certificates were is-
sued, they must also be signed with signature(s) guaranteed. Additional docu-
mentation may be requested, and a signature guarantee is normally required,
from institutional and fiduciary account holders such as corporations, custo-
dians (e.g. under the Uniform Transfers to Minors Act), executors, administra-
tors, trustees or guardians.
BY TELEPHONE
If the proceeds of the redemption are $50,000 or less and the proceeds are
payable to the shareholder of record at the address of record, normally a tel-
ephone request or a written request by any one account holder without a signa-
ture 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 limita-
tions on liability described under "General" below, provided that this privi-
lege 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 Zurich Share-
holder Services at 1-888-ZURICH-1 (987-4241). Shares purchased by check or
through EZ-Transfer or Automatic Purchase Plan 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 sharehold-
er's account has had an address change within 30 days of the redemption re-
quest. During periods when it is difficult to contact the Shareholder Service
Agent by telephone, it may be difficult to use the telephone redemption privi-
lege, although you can still redeem by mail. The Funds reserve the right to
terminate or modify this privilege at any time.
BY WIRE
If you wish to have the proceeds of a redemption "wire transferred" to your
brokerage or bank account you need to have signed up for the privilege and
have the form on file with the Shareholder Service Agent. Once the form is on
file, redemption requests ($1,000 minimum) may be made by calling 1-888-ZU-
RICH-1 (987-4241) or in writing, subject to the limitations on liability de-
scribed under "General" below. However, the proceeds will be sent only to the
single bank or trust company you have designated on the Account Application.
This privilege will be terminated if the Shareholder Service Agent receives
written notice from any account holder of revocation of this authority.
Requests for wire transfer redemptions received by the Shareholder Service
Agent prior to 11:00 a.m. Central time will result in shares being redeemed
that day and normally a wire transfer will be sent to the designated account
that day. Dividends for that day will not be earned. The Funds are not respon-
sible for the efficiency of the federal wire system or the account holder's
financial services firm or bank. The Funds currently do not charge you for
wire transfers. You are responsible for any charges your firm or bank makes
for sending or receiving wire transfers. There is a $1,000 wire redemption
minimum. To change the designated account to receive wire redemption proceeds,
send a written request to the Shareholder Service Agent with signatures guar-
anteed as described above.
Shares purchased by check or through EZ-Transfer or Automatic Purchase Plan
may not be redeemed by wire transfer until the shares have been owned for at
least 10 days. You may not use this privilege to redeem shares held in certif-
icated form. During periods when it is difficult to contact the Shareholder
Service Agent by telephone, it may be difficult to use the expedited wire re-
demption privilege. The Funds reserve the right to terminate or modify this
privilege at any time.
12
<PAGE>
How To Sell Shares--continued
BY REDEMPTION CHECK
If you select this method of redemption on your Account Application, you will
normally receive drafts ("Redemption Checks") within 2 weeks of opening your
account which you may use to draw on your Fund account, but not to close it.
When a Redemption Check is presented for payment, a sufficient number of full
and fractional shares in your account will be redeemed at the next determined
net asset value to cover the amount of the Redemption Check. This will enable
you to continue earning daily dividends until the Fund receives the Redemption
Check.
You may write Redemption Checks payable to the order of any person in any
amount not more than $5 million. Shareholders should not write Redemption
Checks in an amount less than $500 since a $10 service fee will be charged as
described below. In addition, Redemption Checks should not be used to close an
account since the account normally includes accrued but unpaid dividends.
Unless one signer is authorized on the Account Application, Redemption Checks
must be signed by all account holders. If the Shareholder Service Agent re-
ceives written notice by any owner revoking the authorization to sign individu-
ally, all account owners will be required to sign. Redemption Checks must be
signed exactly as the account is registered. Shares purchased by check or
through EZ-Transfer or Automatic Purchase Plan may not be redeemed by Redemp-
tion Check until the shares have been on the Fund's books for at least 10 days.
You may not use this privilege to redeem shares held in certificated form. The
Funds reserve the right to terminate or modify this privilege at any time.
The Funds may refuse to honor Redemption Checks whenever the right of redemp-
tion has been suspended or postponed, or whenever the account is otherwise im-
paired. A $10 service fee will be charged when a Redemption Check is presented
to redeem Fund shares in excess of the value of your Fund account or in an
amount less than $500; when a Redemption Check is presented that would require
redemption of shares that were purchased by check or through EZ-Transfer or Au-
tomatic Purchase Plan within 10 days; or when you request "stop payment" of a
Redemption Check by telephone or in writing. A "stop payment" request may be
made by calling Shareholder Services at 1-888 ZURICH-1 (987-4241).
GENERAL
If shares of a Fund to be redeemed were purchased by check or through EZ-
Transfer or Automatic Purchase Plan (see "Special Features--Electronic Funds
Transfer Programs") the Fund may delay transmittal of redemption proceeds until
it has determined that collected funds have been received for the purchase of
such shares, which will be up to 10 days from receipt by the Fund of the pur-
chase amount. Shareholders may not use wire transfer or Redemption Check fea-
tures until the shares being redeemed have been owned for at least 10 days and
shareholders may not use such procedures to redeem shares held in certificated
form. There is no such delay when the shares being redeemed were originally
purchased by wiring Federal Funds.
If shares being redeemed were acquired from an exchange of shares of a mutual
fund that were offered subject to a contingent deferred sales charge as de-
scribed in the prospectus for that other fund, the redemption of such shares by
a Fund may be subject to a contingent deferred sales charge as explained in
such prospectus.
Shareholders can request the following telephone privileges: expedited wire
transfer redemptions, ACH transactions and exchange transactions for individual
and institutional accounts and pre-authorized telephone redemption transactions
for certain institutional accounts. Shareholders may choose these privileges on
the Account Application or by contacting the Shareholder Service Agent for ap-
propriate instructions. Please note that the telephone exchange privilege is
automatic unless the shareholder refuses it on the account application. The
Trust or its agents may be liable for losses, expenses or costs arising out of
fraudulent or unauthorized telephone requests pursuant to these privileges, un-
less the Trust or its agent reasonably believe, based upon reasonable verifica-
tion procedures, that the telephonic instructions are genuine. The SHAREHOLDER
WILL BEAR THE RISK OF LOSS, including loss resulting from fraudulent or unau-
thorized transactions, as
13
<PAGE>
How To Sell Shares--continued
long as the reasonable verification procedures are followed. The verification
procedures include recording instructions, requiring certain identifying infor-
mation before acting upon instructions and sending written confirmations.
Because of the high cost of maintaining small accounts, THE FUNDS MAY ASSESS
A MONTHLY FEE OF $3 ON ANY ACCOUNT WITH A BALANCE BELOW $1,000 FOR 30 CONSECU-
TIVE DAYS. The fee will not apply to accounts enrolled in an automatic invest-
ment program or to IRAs. See "How To Buy Shares".
EXCHANGING SHARES
Diversification is at the heart of most effective investment planning. That's
why we make it easy for you to exchange your shares of Zurich Money Funds for
shares of Kemper Funds. Please remember that money market shares you acquire by
dividend reinvestment may be exchanged into a Kemper Mutual Fund with no sales
charge; though money fund shares you purchase are subject to the applicable
sales charge when exchanged.
The total value of shares being exchanged must at least equal the minimum in-
vestment requirement of the fund into which they are being exchanged. Exchanges
are made based on relative dollar values of the shares involved in the ex-
change. We don't charge you a service fee for an exchange; however, dealers or
other firms may charge for their services. To exchange shares, call us or con-
tact your financial adviser to obtain prospectuses of the Kemper Funds in which
you are interested. You may make an exchange by mail or by telephone:
BY TELEPHONE
Once you've completed the authorization section on the account application
and we have it on file, exchange requests may be made by calling 1-888-ZURICH-1
(987-4241), subject to the limitations on liability described under "How To
Sell Shares--General." During periods when it is difficult to contact the
Shareholder Service Agent by telephone, it may be difficult to use the tele-
phone exchange privilege.
BY MAIL
Send your request to:
Zurich Money Funds
P.O. Box 419557
Attention: Exchange Department
Kansas City, Missouri 64141-6557
Exchanges will be effected by redemption of shares of the fund held and pur-
chase 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, depend-
ing upon whether the value of the shares being exchanged is more or less than
the shareholder's adjusted cost basis. Any certificates for shares must be de-
posited prior to any exchange of such shares. The exchange privilege is not a
right and may be suspended, terminated or modified at any time. Except as oth-
erwise permitted by applicable regulation, 60 days prior written notice of any
termination or material change will be provided.
AUTOMATIC EXCHANGE PLAN
With an account balance of $1,000 or more, shareholders may authorize the au-
tomatic exchange of a specified amount ($100 minimum) of such shares for shares
of a Kemper Fund. If selected, exchanges will be made automatically until the
privilege is terminated by the shareholder or the Fund. Exchanges are subject
to the terms and conditions described above under "Exchanging Shares," except
that there is no minimum investment requirement for the Kemper Fund acquired on
exchange. This privilege may not be used for the exchange of shares held in
certificated form.
Subject to the limitations described in this section, Class A shares (or the
equivalent) of the following Kemper Mutual Funds may be exchanged for each
other at their relative net asset values: Kemper Technology Fund, Kemper Total
Return Fund, Kemper Growth Fund, Kemper Small Capitalization Equity Fund, Kem-
per Income and Capital Preservation Fund, Kemper Municipal Bond Fund, Kemper
Diversified Income Fund, Kemper High Yield Fund, Kemper U.S. Government Securi-
ties Fund, Kemper International Fund, Kemper State Tax-Free Income Series, Kem-
per Adjustable Rate U.S. Government Fund, Kemper Blue Chip Fund, Kemper Global
Income
14
<PAGE>
Exchanging Shares--continued
Fund, Kemper Target Equity Fund (series are subject to a limited offering pe-
riod), Kemper Intermediate Municipal Bond Fund, Kemper Cash Reserves Fund,
Kemper U.S. Mortgage Fund, Kemper Short-Intermediate Government Fund, Kemper
Value+Growth Fund, Kemper-Dreman Fund, Inc., Kemper Horizon Fund, Kemper Quan-
titative Equity Fund, Kemper Europe Fund and Kemper Asian Growth Fund ("Kemper
Mutual Funds") and certain "Money Market Funds" (Zurich Money Funds, Cash
Equivalent Fund, Tax-Exempt California Money Market Fund, Cash Account Trust,
Tax-Exempt New York Money Market Fund and Investors Cash Trust). Shares of
Money Market Funds and Kemper Cash Reserves Fund that were acquired by pur-
chase (not including shares acquired by dividend reinvestment) are subject to
the applicable sales charge on exchange. Shares purchased by check or through
EXPRESS-Transfer or Bank Direct Deposit may not be exchanged until they have
been owned for at least 15 days. In addition, shares of Kemper Funds, other
than a Money Market Fund and Kemper Cash Reserves Fund, acquired by exchange
from another fund may not be exchanged thereafter until they have been owned
for 15 days. Series of Kemper Target Equity Fund will be available on exchange
only during the Offering Period for such series as described in the prospectus
for such series. Cash Equivalent Fund, Tax-Exempt California Money Market
Fund, Cash Account Trust, 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 Zurich Kemper Distributors, Inc. with
respect to such funds. Exchanges may only be made for funds that are available
for sale in the shareholder's state of residence. Currently, Tax-Exempt Cali-
fornia Money Market Fund is available for sale only in California; and Tax-Ex-
empt New York Money Market Fund is available for sale only in New York, Con-
necticut, New Jersey and Pennsylvania.
SPECIAL RETIREMENT PLANS
Shareholders of the 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 any "Kemper Mutual Fund" listed
above to the extent that they are available through their plan. Conversely,
shareholders of Class I shares may exchange their shares for shares of the
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. Exchanges will be made at the shares' relative net asset values
through their plan. Exchanges are subject to the limitations set forth above.
SPECIAL FEATURES
ZURICH MONEY-PLUS ACCOUNTSM
The Zurich Money-PLUS AccountSM is a cash management program offering a com-
bination of features and benefits. The program includes checkwriting (no mini-
mum dollar amount) and a VISA(R) Gold Check Card (a debit card). The INVESTORS
MONEYCARDSM VISA(R) is issued by Investors Fiduciary Trust Company ("IFTC").
Currently, the fee for this service is $65 a year with charges for additional
checks. There is a fee of $1.00 per transaction for use of Automated Teller
Machines. The minimum initial account balance required to be eligible for this
privilege is $5,000. You may use only the checks provided through the Zurich
Money-PLUS AccountSM. Any check for an amount in excess of the funds available
for redemption from the shareholder's account will be returned and will sub-
ject the account to additional service fees. If you have the INVESTORS
MONEYCARDSM VISA(R) and request an expedited wire transfer redemption, the
wire will be sent on the next business day following the request. Fees and
features of the Zurich Money-PLUS AccountSM are subject to modification. This
program is available only to those who are residents of the United States.
Shareholders should contact the Shareholder Service Agent at 1-800-537-6001
for more information.
ELECTRONIC FUNDS TRANSFER PROGRAMS
For your convenience, the Funds have established several investment and re-
demption programs using electronic funds transfer which are described below.
There is currently no charge by the Funds for these programs. Shareholders
should contact the Shareholder Service Agent at 1-888-ZURICH-1 (987-4241) for
more information.
.EZ-TRANSFER With just one easy phone call, EZ-Transfer quickly and conve-
niently transfers money (minimum
15
<PAGE>
Special Features--continued
$100 and maximum $50,000) from your bank, savings and loan or credit union ac-
count to purchase shares in a Fund. You can also redeem shares (minimum $100
and maximum $50,000) from your Fund account and transfer the proceeds to your
bank, savings and loan or credit union checking account. When you choose to
participate in the EZ-Transfer program, you designate the bank, savings and
loan or credit union account which will be debited or credited under the pro-
gram. After you have received a notice confirming that this service has been
added to your Fund account, please allow a minimum of 20 days for bank notifi-
cation and processing. By choosing to participate in this program, you autho-
rize the Shareholder Service Agent to rely upon telephone instructions from
any person to transfer the specified amounts between your Fund account and
your predesignated bank, savings and loan or credit union account, subject to
the limitations on liability under "How To Sell Shares--General." The Share-
holder Service Agent will then purchase or redeem sufficient full and frac-
tional shares in your account to satisfy the request. Once you are enrolled in
EZ-Transfer, you can initiate a transaction by simply calling Zurich Share-
holder Services toll free at 1-888- ZURICH-1 (987-4241) Monday through Friday,
8:00 a.m. to 3:00 p.m. Central time or by calling Zurich Info Line at 1-888-
987-8678 24 hours a day. See "How To Sell Shares--General" for information on
our 10 day hold policy. Any account holder may terminate this privilege by
sending written notice to Zurich Money Funds, P.O. Box 419415, Kansas City,
Missouri 64141-6415. Termination will become effective as soon as the Share-
holder Service Agent has had a reasonable time to act upon the request. EZ-
Transfer cannot be used with passbook savings accounts. This program may not
be used for tax-deferred plans such as Individual Retirement Accounts (IRAs).
. AUTOMATIC PURCHASE PLAN You may establish an automatic investment program
with your Fund account. With Automatic Purchase Plan, monthly investments
(maximum $50,000) are made automatically from your account at a bank, savings
and loan, or credit union into your Fund account. By signing up for this priv-
ilege, you authorize the Trust and its agents to take money out of
your predesignated bank, savings and loan or credit union account and invest
that money in your Fund account. Any account owner may terminate this privi-
lege simply by sending written notice to Zurich Money Funds, 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 re-
quest. This privilege may not be used with passbook savings accounts.
. AUTOMATIC CHECK DEPOSIT You may conveniently invest in the Funds through
Payroll Direct Deposit or Government Direct Deposit. You can arrange to have
all or a portion of your net pay or government check automatically invested in
your Fund account each payment period. You may terminate your participation in
these programs by giving written notice to your employer or the government
agency, as appropriate. (A reasonable time to act is required.) The Funds are
not responsible for the efficiency of your employer or the government agency
making the payment or any financial institution transmitting payment.
To use these features, the participating financial institution must be af-
filiated with the ACH System. This ACH affiliation permits the Shareholder
Service Agent to electronically transfer money between your bank account or
employer's payroll bank in the case of Payroll Direct Deposit or the U.S. Gov-
ernment in the case of Government Direct Deposit, and your Fund account. Your
financial institution's crediting policies for these transferred funds may
vary. These features may be amended or terminated at any time by the Funds.
OTHER SPECIAL FEATURES
Information about the following special features is contained in the State-
ment of Additional Information. Additional information may also be obtained by
contacting Zurich Shareholder Services at 1-888-ZURICH-1 (987-4241).
--Automatic Withdrawal Programs
--Tax Sheltered Retirement Programs
DIVIDENDS AND TAXES
DIVIDEND PAYMENT
To help keep your account growing, dividends from any Fund are automatically
reinvested in additional shares
16
<PAGE>
Dividend and Taxes--continued
of that Fund, unless you request payment by check on your account application
or make such a request later. Dividends are declared daily and paid monthly.
Dividends are normally reinvested on the 25th of each month if a business
day, otherwise on the prior business day. If you've chosen to receive divi-
dends in cash, checks will be mailed monthly to you or any person you desig-
nate. Shareholders may request this option by contacting the Shareholder Serv-
ice Agent (see "How To Buy Shares").
Each Fund will reinvest dividend checks (and future dividends) in shares of
that same Fund if checks are returned as undeliverable. Dividends and other
distributions of a Fund in the aggregate amount of $10 or less are automati-
cally reinvested in shares of the same Fund unless you request that such pol-
icy not be applied to your account.
DIVIDEND EXCHANGE PRIVILEGE
Upon written request to the Shareholder Service Agent, a shareholder may
elect to have Fund dividends invested without sales charge in shares of a Kem-
per Fund offering this privilege at the net asset value of the other fund. See
"Exchanging Shares" for a list of these Kemper Funds. To use this privilege of
investing Fund dividends in shares of a Kemper Fund, shareholders must main-
tain a minimum account value of $1,000 in the Zurich Money Funds. Share cer-
tificates will only be issued on request.
TAXABLE FUNDS
The Money Market Fund and the Government Money Fund each intend to continue
to qualify as a regulated investment company under Subchapter M of the Inter-
nal Revenue Code (the "Code") and if so qualified will not be subject to fed-
eral income taxes to the extent its earnings are distributed. Dividends de-
rived from interest and short-term capital gains are taxable as ordinary in-
come whether received in cash or reinvested in additional shares. Dividends
from these Funds do not qualify for the dividends received deduction available
to corporate shareholders.
TAX-FREE MONEY FUND
The Tax-Free Money Fund intends to continue to qualify under the Code as a
regulated investment company and, if so qualified, will not be liable for fed-
eral income taxes to the extent its earnings are distributed. This Fund also
intends to meet the requirements of the Code applicable to regulated invest-
ment companies distributing tax-exempt interest dividends and, accordingly,
dividends representing net interest received on Municipal Securities will not
be includable by shareholders in their gross income for federal income tax
purposes, except to the extent such interest is subject to the alternative
minimum tax as discussed below. Dividends representing taxable net investment
income (such as net interest income from temporary investments in obligations
of the U.S. Government) and net short-term capital gains, if any, are taxable
to shareholders as ordinary income. All taxpayers will be required to disclose
on their federal income tax returns the amount of tax-exempt interest earned
during the year, including exempt-interest dividends from the Tax-Free Money
Fund.
Net interest on certain "private activity bonds" issued on or after August
8, 1986 is treated as an item of tax preference and may, therefore, be subject
to both the individual and corporate alternative minimum tax. To the extent
provided by regulations to be issued by the Secretary of the Treasury, exempt-
interest dividends from the Tax-Free Money Fund are to be treated as interest
on private activity bonds in proportion to the interest income the Fund re-
ceives from private activity bonds, reduced by allowable deductions. For the
1995 calendar year, 17% of the net interest income of the Tax-Free Money Fund
was derived from "private activity bonds."
Exempt-interest dividends, except to the extent of interest from "private
activity bonds," are not treated as a tax preference item. For a corporate
shareholder, however, such dividends will be included in determining such cor-
porate shareholder's "adjusted current earnings." Seventy-five percent of the
excess, if any, of "adjusted current earnings" over the corporate sharehold-
er's other alternative minimum taxable income with certain adjustments will be
a tax preference item. Corporate shareholders are advised to consult their tax
advisers with respect to alternative minimum tax consequences.
17
<PAGE>
Dividends and Taxes--continued
Individuals whose modified income exceeds a base amount will be subject to
federal income tax on up to 85% of their Social Security benefits. Modified
income includes adjusted gross income, tax-exempt interest, including exempt-
interest dividends from the Tax-Free Money Fund, and 50% of Social Security
benefits.
The tax exemption of dividends from the Tax-Free Money Fund for federal in-
come tax purposes does not necessarily result in exemption under the income or
other tax laws of any state or local taxing authority. The laws of the several
states and local taxing authorities vary with respect to the taxation of such
income and shareholders of the Fund are advised to consult their own tax ad-
viser as to the status of their accounts under state and local tax laws.
THE FUNDS
Dividends declared in October, November or December to shareholders of rec-
ord as of a date in one of those months and paid during the following January
are treated as paid on December 31 of the calendar year in which declared for
federal income tax purposes. Each Fund may adjust its schedule for dividend
reinvestment for the month of December to assist it in complying with report-
ing and minimum distribution requirements contained in the Code.
Each Fund is required by law to withhold 31% of taxable dividends paid to
certain shareholders who do not furnish a correct taxpayer identification num-
ber (in the case of individuals, a social security number) and in certain
other circumstances. Trustees of qualified retirement plans and 403(b)(7) ac-
counts are required by law to withhold 20% of the taxable portion of any dis-
tribution that is eligible to be "rolled over." The 20% withholding require-
ment does not apply to distributions from IRAs or any part of a distribution
that is transferred directly to another qualified retirement plan, 403(b)(7)
account, or IRA. Shareholders should consult their tax advisers regarding the
20% withholding requirement.
You will receive a monthly statement giving complete details of dividend re-
investment and purchase and redemption transactions during the month. Tax in-
formation will be provided annually. You should retain copies of your monthly
account statements or year-end statements for tax reporting purposes. However,
those who have incomplete records may obtain historical account transaction
information at a reasonable fee.
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 state-
ment. However, a shareholder may request that the foregoing policies not be
applied to the shareholder's account.
INVESTMENT MANAGER
Zurich Kemper Investments, Inc. ("ZKI"), 222 South Riverside Plaza, Chicago,
Illinois 60606-5808, is the investment manager of the Funds and provides the
Funds with continuous professional investment supervision. ZKI has been en-
gaged in the management of investment funds for more than forty-eight years
and is one of the largest investment managers in the country. ZKI and its af-
filiates provide investment advice and manage investment portfolios for the
Zurich Money Funds, Kemper Funds, affiliated insurance companies, and other
corporate, pension, profit-sharing and individual accounts representing ap-
proximately $76 billion under management, including $10 billion in money mar-
ket fund assets. ZKI acts as investment manager for 30 open-end and seven
closed-end investment companies, with 77 separate investment portfolios, rep-
resenting more than 3 million shareholder accounts. ZKI is an indirect subsid-
iary of Zurich Insurance Company, an internationally recognized company pro-
viding services in life and non-life insurance, reinsurance and asset manage-
ment.
Responsibility for overall management of the Funds rests with the Board of
Trustees and officers of the Trust. Professional investment supervision is
provided by ZKI. The investment management agreement provides that ZKI shall
act as the Funds' investment adviser, manage their investments and provide the
Funds with various services and facilities.
18
<PAGE>
Investment Manager--continued
Frank J. Rachwalski, Jr. is the portfolio manager of the Funds. He has
served in this capacity since the Funds commenced operations. Mr. Rachwalski
joined ZKI in January, 1973 and is currently a Senior Vice President of ZKI
and a Vice President of the Trust. He received a B.B.A. and an M.B.A. from
Loyola University, Chicago, Illinois.
For the services and facilities furnished, the Trust pays an annual invest-
ment management fee, payable monthly, on a graduated basis ranging from .50%
of the first $215 million of average daily net assets of the Trust, to .25% of
average daily net assets of the Trust over $800 million.
Zurich Kemper Distributors, Inc., 222 South Riverside Plaza, Chicago, Illi-
nois 60606-5808, an affiliate of ZKI, is the principal underwriter of the
Funds and acts as agent of the Funds in the sale of their shares.
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 cus-
tody of all securities and cash of the Funds. They attend to the collection of
principal and income, and payment for and collection of proceeds of securities
bought and sold by the Funds. IFTC is also the Funds' transfer and dividend-
paying agent. Pursuant to a services agreement with IFTC, Zurich Kemper Serv-
ice Company, 811 Main Street, Kansas City, Missouri 64105, an affiliate of
ZKI, serves as Shareholder Service Agent of the Funds.
PERFORMANCE
The Funds may advertise several types of performance information, including
"yield," "effective yield," "total return," "average annual total return" and,
for the Tax-Free Money Fund only, "tax equivalent yield." Please remember that
performance information is based upon historical earnings and is not represen-
tative of future performance. The yield of a Fund refers to the net investment
income generated by a hypothetical investment in the Fund over a specific sev-
en-day period. This net investment income is then annualized, which means that
the net investment income generated during the seven-day period is assumed to
be generated each week over an annual period and is shown as a percentage of
the investment. The effective yield is calculated similarly, but the net in-
vestment income earned by the investment is assumed to be compounded weekly
when annualized. The effective yield will be slightly higher than the yield
due to this compounding effect. Average annual total return and total return
measure both net investment income and any realized or unrealized appreciation
or depreciation of a Fund's investments, assuming reinvestment of all divi-
dends. Average annual total return represents the average annual percentage
change over the period and total return represents the aggregate percentage or
dollar value change over the period. Tax equivalent yield is the yield that a
taxable investment must generate in order to equal the Tax-Free Money Fund's
yield for an investor in a stated federal income tax bracket (normally assumed
to be the maximum tax rate). Tax equivalent yield is based upon, and will be
higher than, the portion of the Tax-Free Money Fund's yield that is tax-ex-
empt.
The performance of a Fund may be compared to that of other money market mu-
tual funds or mutual fund indexes as reported by independent mutual fund re-
porting services such as Lipper Analytical Services, Inc. ("Lipper"). A Fund's
performance and its relative size may be compared to other money market mutual
funds as reported by IBC Financial Data, Inc.'s Money Fund Report(R) or Money
Market Insight(R), reporting services on money market funds. Investors may
want to compare a Fund's performance to that of various bank products as re-
ported by BANK RATE MONITOR(TM), a financial reporting service that weekly
publishes average rates of bank and thrift institution money market deposit
accounts and interest bearing checking accounts or various certificate of de-
posit indexes. The performance of a Fund also may be compared to that of U.S.
Treasury bills and notes. Certain of these alternative investments may offer
fixed rates of return and guaranteed principal and may be insured. In addi-
tion, investors may want to compare a Fund's performance to the Consumer Price
Index either directly or by calculating its "real rate of return," which ad-
justs its return for the effects of inflation.
19
<PAGE>
Performance--continued
Information may be quoted from publications such as Morningstar, Inc., The
Wall Street Journal, Money Magazine, Forbes, Barron's, Fortune, The Chicago
Tribune, USA Today, Institutional Investor and Registered Representative. The
Funds may depict the historical performance of the securities in which a Fund
may invest over periods reflecting a variety of market or economic conditions
either alone or in comparison with alternative investments, performance in-
dexes of those investments or economic indicators. Each 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 de-
scriptive factors concerning the Fund.
Each Fund's returns will fluctuate. Shares of the Funds are not insured. Ad-
ditional information concerning a Fund's performance appears in the Statement
of Additional Information.
CAPITAL STRUCTURE
Zurich Money Funds is an open-end, diversified, management investment compa-
ny, organized as a business trust under the laws of Massachusetts on August 9,
1985. Effective February 1, 1996, the name of the Trust was changed from Kem-
per Money Market Fund to Kemper Money Funds. Effective November 29, 1985, the
Money Market Fund, pursuant to a reorganization, succeeded to the assets and
liabilities of Kemper Money Market Fund, Inc., a Maryland corporation orga-
nized on September 19, 1974. Effective November 14, 1986, the Government Money
Fund succeeded to the assets and liabilities of Kemper Government Money Market
Fund, a business trust organized under the laws of Massachusetts on August 9,
1985.
Effective November 29, 1985, Kemper Government Money Market Fund succeeded
to the assets and liabilities of Kemper Government Money Market Fund, Inc., a
Maryland corporation organized November 3, 1981. The Tax-Free Money Fund com-
menced public offering of its shares on September 10, 1987. The Trust may is-
sue an unlimited number of shares of beneficial interest, all having no par
value. While only shares of the three previously described Funds are presently
being offered, the Board of Trustees may authorize the issuance of additional
series if deemed desirable, each with its own investment objective, policies
and restrictions. Since the Trust may offer multiple series, it is known as a
"series company." Shares of a Fund have equal noncumulative voting rights and
equal rights with respect to dividends, assets and liquidation of such Fund.
Shares are fully paid and nonassessable when issued, are transferable without
restriction and have no preemptive or conversion rights. The Trust is not re-
quired to hold annual shareholders' meetings and does not intend to do so.
However, it will hold special meetings as required or deemed desirable for
such purposes as electing trustees, changing fundamental policies or approving
an investment management agreement. Subject to the Agreement and Declaration
of Trust of the Trust, shareholders may remove trustees. Shareholders will
vote by Fund and not in the aggregate except when voting in the aggregate is
required under the 1940 Act, such as for the election of trustees.
20
<PAGE>
ACCOUNT SERVICES DIRECTORY
To avoid delays in the future, it is a good idea to sign up for account
services and features at the time an account is opened.
TO OPEN A NEW ACCOUNT
If you would like to open a new account or need a question answered, call a Zu-
rich Money Fund Specialist between 8 a.m. and 6 p.m. Central time at 1-800-
537-6001.
CURRENT ACCOUNT ASSISTANCE
If you have a question about a current account, call a Shareholder Services
Representative between 7 a.m. and 6 p.m. Central time, Monday through Friday,
and between 8 a.m. and 3 p.m. Central time on Saturday at 1-888-ZURICH-1 (987-
4241).
For better service, please have your account number and your most recent state-
ment at hand. For a special phone line for hearing impaired shareholders with a
TELECOMMUNICATIONS DEVICE FOR THE DEAF (TDD), call 1-800-972-3006.
24-HOUR ACCOUNT INFORMATION
From a touch-tone phone, you can use Zurich InfoLine (1-888-987-8678), our au-
tomated account information service, to obtain the following information 24
hours a day:
. ACCOUNT BALANCE
. LAST DIVIDEND PAID
. CURRENT YIELD . TRANSACTION CONFIRMATION
. PRE-AUTHORIZED TRANSFERS TO AND FROM A BANK ACCOUNT
CHECKWRITING
You can write any number of checks for $500 or more against your available ac-
count balance. See Zurich MoneyPlus AccountSM for a no-minimum checking option.
AUTOMATIC CHECK DEPOSIT
You can save time by signing up for direct deposit of Payroll or Government
checks into your Zurich Money Funds account. Ask your employer about how to ar-
range this with all or part of your paycheck. Government Direct Deposit forms
are available by calling 1-888-ZURICH-1 (987-4241).
AUTOMATIC INVESTING
If you already directly deposit your paycheck into a bank account, you may want
to consider using Automatic Purchase Plan to help set aside some money for the
future. You specify the frequency and amount of your investment, and Zurich
will automatically have money from your personal checking or savings account
transferred to your Zurich Money Funds account. And this service may be changed
at any time . . . even deferred for a few months if you need to.
MONEY-BY-PHONE
You can make transfers from your money market account to your bank account with
just a phone call if you sign up for EZ-Transfer. This feature also allows you
to transfer money to your Zurich Money Funds account over-the-phone. These
transfers generally take 1-2 days, depending on the time of day that you call
Shareholder Services.
You can also request an expedited (same day) wire transfer from your money mar-
ket account to your bank if you call before 11 a.m. Central time ($1,000 mini-
mum redemption).
AUTOMATIC BILL-PAYING
The Automatic Withdrawal feature can be used to pay a regular, important bill
such as a mortgage or car payment. You designate when and how much, and Zurich
will make the payment directly from your money market account.
MONEYPLUS ACCOUNTSM
A powerful money management feature that makes it easy and economical to use
your Zurich Money Funds for day-to-day transactions. For a $65 annual fee, you
get unlimited checkwriting and a VISA Gold Check Card to use for debit and ATM
transactions. For special forms to sign-up for this add-on feature, call 1-800-
537-6001. For customer service on the VISA card, call 1-800-346-8904.
EXCHANGES WITH KEMPER MUTUAL FUNDS
You can exchange with Kemper Funds by calling Shareholder Services between 8
a.m. and 3 p.m. Central time, Monday through Friday at 1-888-ZURICH-1 (987-
4241).
21
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[LOGO OF ZURICH]
Zurich Kemper Distributors, Inc.
222 South Riverside Plaza
Chicago, IL 60606-5808
Phone (800) 537-6001
ZMF 1 (4/97)
ZKDI 703122
[LOGO OF RECYCLED PAPER]
printed on recycled paper
[LOGO OF ZURICH]
prospectus
- -------------------
November 10, 1996
(revised as of April 14, 1997)
Zurich Money Funds
Zurich Money Market Fund
Zurich Government Money Fund
Zurich Tax-Free Money Fund
Formerly Kemper Money Funds
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER 10, 1996
(REVISED AS OF APRIL 14, 1997)
ZURICH MONEY FUNDS
222 SOUTH RIVERSIDE PLAZA, CHICAGO, ILLINOIS 60606-5808
(800) 537-6001
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the prospectus of Zurich Money Funds (the "Trust")
dated November 10, 1996 (revised as of April 14, 1997). The prospectus may be
obtained without charge by calling or writing Zurich Money Funds.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Restrictions............................................. B-1
Municipal Securities................................................ B-4
Investment Manager.................................................. B-5
Portfolio Transactions.............................................. B-6
Purchase and Redemption of Shares................................... B-7
Dividends, Net Asset Value and Taxes................................ B-8
Performance......................................................... B-9
Officers and Trustees............................................... B-14
Special Features.................................................... B-16
Shareholder Rights.................................................. B-17
Appendix--Ratings of Investments.................................... B-18
</TABLE>
The financial statements appearing in the Funds' 1996 Annual Report to
Shareholders are incorporated herein by reference. The Funds' Annual Report
accompanies this Statement of Additional Information.
ZMF-13 4/97
LOGO
printed on recycled paper
<PAGE>
INVESTMENT RESTRICTIONS
The Zurich Money Market Fund (the "Money Market Fund"), Zurich Government
Money Fund (the "Government Money Fund") and Zurich Tax-Free Money Fund (the
"Tax-Free Money Fund") have adopted certain investment restrictions which,
together with the investment objective and policies of each Fund, cannot be
changed without approval by holders of a majority of such Fund's outstanding
voting shares. As defined in the Investment Company Act of 1940, 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 of the Fund are present
in person or by proxy; or (b) more than 50% of the outstanding shares of the
Fund.
THE MONEY MARKET FUND may not:
(1) Purchase common stocks, preferred stocks, warrants, other equity
securities, state bonds, municipal bonds or industrial revenue bonds (except
through the purchase of debt obligations in accordance with its investment
objective and policies).
(2) Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its agencies or
instrumentalities) if, as a result, more than 5% of the value of the Fund's
assets would be invested in securities of that issuer.
(3) Purchase more than 10% of any class of securities of any issuer. All debt
securities and all preferred stocks are each considered as one class.
(4) 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.
(5) Enter into repurchase agreements if, as a result thereof, more than 10% of
the Fund's total assets valued at the time of the transaction would be subject
to repurchase agreements maturing in more than seven days.
(6) Make loans to others (except through the purchase of debt obligations or
repurchase agreements in accordance with its investment objective and
policies).
(7) Borrow money except as a temporary measure for extraordinary or emergency
purposes and then only in an amount up to one-third of the value of its total
assets, in order to meet redemption requests without immediately selling any
money market instruments (any such borrowings under this section will not be
collateralized). If, for any reason, the current value of the Fund's total
assets falls below an amount equal to three times the amount of its
indebtedness from money borrowed, the Fund will, within three business days,
reduce its indebtedness to the extent necessary. The Fund will not borrow for
leverage purposes.
(8) 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.
(9) Write, purchase or sell puts, calls or combinations thereof.
(10) Concentrate more than 25% of the value of its assets in any one industry;
provided, however, that the Fund reserves freedom of action to invest up to
100% of its assets in certificates of deposit or bankers' acceptances when
management considers it to be in the best interests of the Fund in attaining
its investment objective.
(11) Purchase or retain the securities of any issuer if any of the officers,
trustees or directors of the Trust or its investment adviser owns beneficially
more than 1/2 of 1% of the securities of such issuer and together own more
than 5% of the securities of such issuer.
B-1
<PAGE>
(12) Invest more than 5% of the Fund's total assets in securities restricted
as to disposition under the federal securities laws (except commercial paper
issued under Section 4(2) of the Securities Act of 1933).
(13) Invest for the purpose of exercising control or management of another
issuer.
(14) Invest in commodities or commodity futures contracts 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.
(15) 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.
(16) Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of assets.
(17) 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.
(18) Issue senior securities as defined in the Investment Company Act of 1940.
THE GOVERNMENT MONEY FUND may not:
(1) Purchase securities or make investments other than in accordance with its
investment objective and policies.
(2) Enter into repurchase agreements if, as a result thereof, more than 10% of
the Fund's total assets valued at the time of the transaction would be subject
to repurchase agreements maturing in more than seven days.
(3) Make loans to others (except through the purchase of debt obligations or
repurchase agreements in accordance with its investment objective and
policies).
(4) Borrow money except as a temporary measure for extraordinary or emergency
purposes and then only in an amount up to one-third of the value of its total
assets, in order to meet redemption requests without immediately selling any
instruments (any such borrowings under this section will not be
collateralized). If, for any reason, the current value of the Fund's total
assets falls below an amount equal to three times the amount of its
indebtedness from money borrowed, the Fund will, within three business days,
reduce its indebtedness to the extent necessary. The Fund will not borrow for
leverage purposes.
(5) Make short sales of securities, or purchase any securities on margin
except to obtain such short-term credits as may be necessary for the clearance
of transactions.
(6) 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 Fund securities.
(7) Issue senior securities as defined in the Investment Company Act of 1940.
THE TAX-FREE MONEY FUND may not:
(1) Purchase securities if as a result of such purchase 25% or more of the
Fund's total assets would be invested in any one industry or in any one state.
Municipal Securities and obligations of, or guaranteed by, the U.S.
Government, its agencies or instrumentalities are not considered an industry
for purposes of this restriction.
(2) Purchase securities of any issuer (other than obligations of, or
guaranteed by, the U.S. Government, its agencies or instrumentalities) if as a
result more than 5% of the value of the Fund's assets would be invested in the
B-2
<PAGE>
securities of such issuer. For purposes of this limitation, the Fund will
regard the entity which has the primary responsibility for the payment of
interest and principal as the issuer.
(3) Invest more than 5% of the Fund's total assets in industrial development
bonds sponsored by companies which with their predecessors have less than
three years' continuous operation.
(4) Make loans to others (except through the purchase of debt obligations or
repurchase agreements in accordance with its investment objective and
policies).
(5) Borrow money except as a temporary measure for extraordinary or emergency
purposes and then only in an amount up to one-third of the value of its total
assets, in order to meet redemption requests without immediately selling any
money market instruments (any such borrowings under this section will not be
collateralized). If, for any reason, the current value of the Fund's total
assets falls below an amount equal to three times the amount of its
indebtedness from money borrowed, the Fund will, within three business days,
reduce its indebtedness to the extent necessary. The Fund will not borrow for
leverage purposes.
(6) Make short sales of securities or purchase securities on margin, except to
obtain such short-term credits as may be necessary for the clearance of
transactions.
(7) Write, purchase or sell puts, calls or combinations thereof, although the
Fund may purchase Municipal Securities subject to Standby Commitments in
accordance with its investment objective and policies.
(8) Purchase or retain the securities of any issuer if any of the officers,
trustees or directors of the Trust or its investment adviser owns beneficially
more than 1/2 of 1% of the securities of such issuer and together own more
than 5% of the securities of such issuer.
(9) Invest more than 5% of the Fund's total assets in securities restricted as
to disposition under the federal securities laws (except commercial paper
issued under Section 4(2) of the Securities Act of 1933).
(10) Invest for the purpose of exercising control or management of another
issuer.
(11) Invest in commodities or commodity futures contracts or in real estate
except that the Fund may invest in Municipal Securities secured by real estate
or interests therein.
(12) Invest in interests in oil, gas or other mineral exploration or
development programs, although it may invest in Municipal Securities of
issuers which invest in or sponsor such programs.
(13) Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of assets.
(14) 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.
(15) Issue senior securities as defined in the Investment Company Act of 1940.
If a Fund adheres to a percentage restriction 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
Funds did not borrow money, as permitted by investment restrictions number 7
(Money Market Fund), number 4 (Government Money Fund) and number 5 (Tax-Free
Money Fund), in the latest fiscal year; and they have no present intention of
borrowing during the coming year. In any event, borrowings would only be as
permitted by such restrictions. The Tax-Free Money Fund may invest more than
25% of its total assets in industrial development bonds.
B-3
<PAGE>
MUNICIPAL SECURITIES
Municipal Securities which the Tax-Free Money Fund may purchase include,
without limitation, debt obligations issued to obtain funds for various public
purposes, including the construction of a wide range of public facilities such
as airports, bridges, highways, housing, hospitals, mass transportation,
public utilities, schools, streets, and water and sewer works. Other public
purposes for which Municipal Securities may be issued include refunding
outstanding obligations, obtaining funds for general operating expenses and
obtaining funds to loan to other public institutions and facilities.
Municipal Securities, such as industrial development bonds, are issued by or
on behalf of public authorities to obtain funds for purposes including
privately operated airports, housing, conventions, trade shows, ports, sports,
parking or pollution control facilities or for facilities for water, gas,
electricity or sewage and solid waste disposal. Such obligations, which may
include lease arrangements, are included within the term Municipal Securities
if the interest paid thereon qualifies as exempt from federal income tax.
Other types of industrial development bonds, the proceeds of which are used
for the construction, equipment, repair or improvement of privately operated
industrial or commercial facilities, may constitute Municipal Securities,
although current federal tax laws place substantial limitations on the size of
such issues.
Municipal Securities generally are classified as "general obligation" or
"revenue." General obligation notes are secured by the issuer's pledge of its
full credit and taxing power for the payment of principal and interest.
Revenue notes are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise or other specific revenue source. Industrial development bonds
which are Municipal Securities are in most cases revenue bonds and generally
do not constitute the pledge of the credit of the issuer of such bonds.
Examples of Municipal Securities that are issued with original maturities of
one year or less are short-term tax anticipation notes, bond anticipation
notes, revenue anticipation notes, construction loan notes, pre-refunded
municipal bonds, warrants and tax-free commercial paper.
Tax anticipation notes typically are sold to finance working capital needs of
municipalities in anticipation of receiving property taxes on a future date.
Bond anticipation notes are sold on an interim basis in anticipation of a
municipality issuing a longer term bond in the future. Revenue anticipation
notes are issued in expectation of receipt of other types of revenue such as
those available under the Federal Revenue Sharing Program. Construction loan
notes are instruments insured by the Federal Housing Administration with
permanent financing by "Fannie Mae" (the Federal National Mortgage
Association) or "Ginnie Mae" (the Government National Mortgage Association) at
the end of the project construction period. Pre-refunded municipal bonds are
bonds which are not yet refundable, but for which securities have been placed
in escrow to refund an original municipal bond issue when it becomes
refundable. Tax-free commercial paper is an unsecured promissory obligation
issued or guaranteed by a municipal issuer. The Tax-Free Money Fund may
purchase other Municipal Securities similar to the foregoing, which are or may
become available, including securities issued to pre-refund other outstanding
obligations of municipal issuers.
The federal bankruptcy statutes relating to the adjustments of debts of
political subdivisions and authorities of states of the United States provide
that, in certain circumstances, such subdivisions or authorities may be
authorized to initiate bankruptcy proceedings without prior notice to or
consent of creditors, which proceedings could result in material adverse
changes in the rights of holders of obligations issued by such subdivisions or
authorities.
B-4
<PAGE>
Litigation challenging the validity under state constitutions of present
systems of financing public education has been initiated or adjudicated in a
number of states, and legislation has been introduced to effect changes in
public school finances in some states. In other instances there has been
litigation challenging the issuance of pollution control revenue bonds or the
validity of their issuance under state or federal law which ultimately could
affect the validity of those Municipal Securities or the tax-free nature of
the interest thereon.
INVESTMENT MANAGER
INVESTMENT MANAGER. Zurich Kemper Investments, Inc. ("ZKI") is the Funds'
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 company providing services in life and non-life
insurance, reinsurance and asset management. Pursuant to an investment
management agreement, 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,
provides shareholder and information services and permits any of its officers
or employees to serve without compensation as trustees or officers of the
Trust if elected to such positions. The Trust pays the expenses of its
operations, including the fees and expenses of independent auditors, counsel,
custodian and transfer agent and the cost of share certificates, reports and
notices to shareholders, costs of calculating net asset value, brokerage
commissions or transaction costs, taxes, registration fees, the fees and
expenses of qualifying the Fund and its shares for distribution under federal
and state securities laws and membership dues in the Investment Company
Institute or any similar organization. Trust expenses generally are allocated
among the Funds on the basis of relative net assets at the time of allocation,
except that expenses directly attributable to a particular Fund are charged to
that Fund.
The investment management agreement continues in effect from year to year for
each Fund 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 Trust
and (b) by the shareholders of each Fund or the Board of Trustees. If
continuation is not approved for a Fund, the investment management agreement
nevertheless may continue in effect for the Funds for which it is approved and
ZKI may continue to serve as investment manager for the Fund for which it is
not approved to the extent permitted by the Investment Company Act of 1940.
The agreement may be terminated at any time upon 60 days notice by either
party, or by a majority vote of the outstanding shares of a Fund with respect
to that Fund, and will terminate automatically upon assignment. Shareholders
of each Fund will vote separately upon continuation of the investment
management agreement and upon other matters affecting only an individual Fund.
Additional Funds may be subject to a different agreement. The agreement
provides that ZKI shall not be liable for any error of judgment or of law, or
for any loss suffered by the Funds in connection with the matters to which the
agreement relates, except a loss resulting from willful misfeasance, bad faith
or gross negligence on the part of ZKI in the performance of its obligations
and duties, or by reason of its reckless disregard of its obligations and
duties under the agreement.
For the services and facilities furnished, the Trust pays an annual investment
management fee, payable monthly, on a graduated basis of .50% of the first
$215 million of average daily net assets of the Trust, .375% on the next $335
million, .30% on the next $250 million and .25% of average daily net assets of
the Trust over $800 million. ZKI has agreed to reimburse the Trust should all
operating expenses of the Trust, including the investment management fee of
ZKI but excluding taxes, interest, extraordinary expenses and brokerage
commissions or transaction costs, exceed 1 1/2% of the first $30 million of
average net assets of the Trust and 1% of average net assets over $30 million
on an annual basis. The investment management fee and the expense limitation
are
B-5
<PAGE>
computed based upon the combined average daily net assets of the Funds and are
allocated among such Funds based upon the relative net assets of each Fund.
For its services as investment adviser and manager and for facilities
furnished during the fiscal years ended July 31 indicated, the Funds incurred
investment management fees as shown.
<TABLE>
<CAPTION>
FUND 1996 1995 1994
- ---- ----------- ----------- -----------
<S> <C> <C> <C>
Money Market................................ $11,134,000 $10,924,000 $11,439,000
Government Money............................ $ 1,747,000 $ 1,637,000 $ 1,840,000
Tax-Free Money.............................. $ 2,032,000 $ 2,072,000 $ 2,100,000
</TABLE>
PRINCIPAL UNDERWRITER. Zurich Kemper Distributors, Inc. ("ZKDI"), an affiliate
of ZKI, is the principal underwriter for shares of the Funds and acts as agent
of the Funds in the sale of their shares. The Funds pay the cost for the
prospectus and shareholder reports to be set in type and printed for existing
shareholders, and ZKDI pays for the printing and distribution of copies
thereof used in connection with the offering of shares to prospective
investors. ZKDI also pays for supplementary sales literature and advertising
costs. Terms of continuation, termination and assignment under the
underwriting agreement are identical to those described above with regard to
the investment management agreement, except that termination other than upon
assignment requires six months notice and shares are voted in the aggregate
and not by Fund whenever shareholders vote with respect to such agreement.
Certain officers or trustees of the Trust are also directors or officers of
ZKI and ZKDI as indicated under "Officers and Trustees."
CUSTODIAN AND SHAREHOLDER SERVICE AGENT. 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 the Funds. They attend to the collection of principal and income, and
payment for and collection of proceeds of securities bought and sold by the
Funds. IFTC is also the Funds' transfer and dividend-paying agent. Pursuant to
a services agreement with IFTC, Zurich Kemper Service Company ("ZKSvC"), an
affiliate of ZKI, serves as "Shareholder Service Agent." IFTC receives, as
transfer agent, and pays to ZKSvC, annual account fees of a maximum of $8 per
account plus account set-up, transaction, maintenance and out-of-pocket
expense reimbursement. For the fiscal year ended July 31, 1996, IFTC remitted
shareholder service fees in the amount of $6,709,000 to ZKSvC as Shareholder
Service Agent.
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
Portfolio transactions are undertaken principally to pursue the objective of
each Fund in relation to movements in the general level of interest rates, to
invest money obtained from the sale of Fund shares, to reinvest proceeds from
maturing portfolio securities and to meet redemptions of Fund shares. This may
increase or decrease the yield of a Fund depending upon management's ability
to correctly time and execute such transactions. Since a Fund's assets are
invested in securities with short maturities, its portfolio will turn over
several times a year. Securities with maturities of less than one year are
excluded from required portfolio turnover rate calculations, so each Fund's
portfolio turnover rate for reporting purposes is zero.
B-6
<PAGE>
ZKI and its affiliates furnish investment management services for the Kemper
Funds and other clients including affiliated insurance companies. These
entities may share some common research and trading facilities. At times
investment decisions may be made to purchase or sell the same investment
security for a Fund and for one or more of the other clients of 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.
ZKI, in effecting purchases and sales of portfolio securities for the account
of each Fund, will implement the Funds' policy of seeking the best execution
of orders, which includes best net prices. Consistent with this policy, orders
for portfolio transactions are placed with broker-dealer firms giving
consideration to the quality, quantity and nature of the firm's professional
services which include execution, clearance procedures, reliability and other
factors. In selecting among the firms believed to meet the criteria for
handling a particular transaction, ZKI may give consideration to those firms
that provide market, statistical and other research information to the Funds
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, including clients of
affiliated companies. Since it is only supplementary to ZKI's own research
efforts and must be analyzed and reviewed by ZKI's staff, the receipt of
research information is not expected to materially reduce expenses. The Funds
expect that purchases and sales of portfolio securities usually will be
principal transactions. Portfolio securities will normally be purchased
directly from the issuer or from an underwriter or market maker for the
securities. There are normally no brokerage commissions paid by the Funds for
such purchases and none were paid by any Fund during the Funds' last three
fiscal years. Purchases from underwriters include a commission or concession
paid by the issuer to the underwriter, and purchases from dealers serving as
market makers include the spread between the bid and asked prices.
PURCHASE AND REDEMPTION OF SHARES
Shares of each Fund are sold at their net asset value next determined after an
order and payment are received in the form described in the Funds' prospectus.
There is no sales charge. The minimum initial investment in any Fund 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. The Funds may waive the minimum for purchases by trustees,
directors, officers or employees of the Trust or ZKI and its affiliates and
the $3 monthly fee assessed on accounts below $1,000. An investor wishing to
open an account should use the Account Application Form available from the
Funds and choose one of the methods of purchase described in the Funds'
prospectus. 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 in
proper form, shares will be redeemed by a Fund at the applicable net asset
value as described in the Funds' prospectus. A shareholder may elect to use
either the regular or expedited redemption procedures.
The Funds 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
B-7
<PAGE>
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 the Funds' shareholders.
Although it is the Trust's present policy to redeem in cash, if the Board of
Trustees determines that a material adverse effect would be experienced by the
remaining shareholders if payment were made wholly in cash, the Trust will pay
the redemption price in whole or in part by a distribution of portfolio
securities in lieu of cash, in conformity with the applicable rules of the
Securities and Exchange Commission, taking such securities at the same value
used to determine net asset value, and selecting the securities in such manner
as the Board of Trustees may deem fair and equitable. If such a distribution
occurs, shareholders receiving securities and selling them could receive less
than the redemption value of such securities and in addition could incur
certain transaction costs. Such a redemption would not be as liquid as a
redemption entirely in cash. The Trust has elected to be governed by Rule 18f-
1 under the Investment Company Act of 1940 pursuant to which the Trust is
obligated to redeem shares of a Fund solely in cash up to the lesser of
$250,000 or 1% of the net assets of the Fund during any 90-day period for any
one shareholder of record.
DIVIDENDS, NET ASSET VALUE AND TAXES
DIVIDENDS. Dividends are declared daily and paid monthly. Shareholders will
receive dividends in additional shares of the same Fund unless they elect to
receive cash. Dividends will be reinvested monthly at the net asset value
normally on the 25th of each month if a business day, otherwise on the prior
business day. The Funds will pay shareholders who redeem their entire accounts
all unpaid dividends at the time of redemption not later than the next
dividend payment date.
Each Fund calculates its dividends based on its daily net investment income.
For this purpose, the net investment income of a Fund consists of (a) accrued
interest income plus or minus amortized discount or premium (excluding market
discount for the Tax-Free Money Fund), (b) plus or minus all short-term
realized gains and losses on portfolio assets and (c) minus accrued expenses
allocated to the Fund. Expenses of the Funds are accrued each day. While each
Fund's investments are valued at amortized cost, there will be no unrealized
gains or losses on portfolio securities. However, should the net asset value
of a Fund deviate significantly from market value, the Board of Trustees could
decide to value the portfolio securities at market value and then unrealized
gains and losses would be included in net investment income above.
NET ASSET VALUE. As described in the prospectus, each Fund values its
portfolio instruments at amortized cost, which does not take into account
unrealized capital gains or losses. This involves initially valuing an
instrument at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. While this method
provides certainty in valuation, it may result in periods during which value,
as determined by amortized cost, is higher or lower than the price the Fund
would receive if it sold the instrument. Calculations are made to compare the
value of a Fund's investments valued at amortized cost with market values.
Market valuations are obtained by using actual quotations provided by market
makers, estimates of market value, or values obtained from yield data relating
to classes of money market instruments published by reputable sources at the
mean between the bid and asked prices for the instruments. If a deviation of
1/2 of 1% or more were to occur between the net asset value per share
calculated by reference to market values and a Fund's $1.00 per share net
asset value, or if there were any other
B-8
<PAGE>
deviation that the Board of Trustees of the Trust believed would result in a
material dilution to shareholders or purchasers, the Board of Trustees would
promptly consider what action, if any, should be initiated. If a Fund's net
asset value per share (computed using market values) declined, or were
expected to decline, below $1.00 (computed using amortized cost), the Board of
Trustees of the Trust might temporarily reduce or suspend dividend payments in
an effort to maintain the net asset value at $1.00 per share. As a result of
such reduction or suspension of dividends or other action by the Board of
Trustees, an investor would receive less income during a given period than if
such a reduction or suspension had not taken place. Such action could result
in investors receiving no dividends for the period during which they held
shares and receiving, upon redemption, a price per share lower than that which
they paid. On the other hand, if a Fund's net asset value per share (computed
using market values) were to increase, or were anticipated to increase, above
$1.00 (computed using amortized cost), the Board of Trustees of the Trust
might supplement dividends in an effort to maintain the net asset value at
$1.00 per share.
TAXES. Interest on indebtedness which is incurred to purchase or carry shares
of a mutual fund portfolio which distributes exempt-interest dividends during
the year is not deductible for federal income tax purposes. Further, the Tax-
Free Money Fund may not be an appropriate investment for persons who are
"substantial users' of facilities financed by industrial development bonds
held by the Tax-Free Money Fund or are "related persons' to such users; such
persons should consult their tax advisers before investing in the Tax-Free
Money Fund.
The "Superfund Act of 1986" (the "Superfund Act") imposes a separate tax on
corporations at a rate of 0.12 percent of the excess of such corporation's
"modified alternative minimum taxable income" over $2 million. A portion of
tax-exempt interest, including exempt-interest dividends from the Tax-Free
Money Fund, may be includible in modified alternative minimum taxable income.
Corporate shareholders are advised to consult their tax advisers with respect
to the consequences of the Superfund Act.
PERFORMANCE
As reflected in the prospectus, the historical performance calculation for a
Fund may be shown in the form of "yield," "effective yield," "total return,"
"average annual total return" and, for the Tax-Free Money Fund only, "tax
equivalent yield." These various measures of performance are described below.
Each Fund's yield is computed in accordance with a standardized method
prescribed by rules of the Securities and Exchange Commission. Under that
method, the current yield quotation is based on a seven-day period and is
computed for each Fund as follows. The first calculation is net investment
income per share, which is accrued interest on portfolio securities, plus or
minus amortized discount or premium (excluding market discount for the Tax-
Free Money Fund), less accrued expenses. This number is then divided by the
price per share (expected to remain constant at $1.00) at the beginning of the
period ("base period return"). The result is then divided by 7 and multiplied
by 365 and the resulting yield figure is carried to the nearest one-hundredth
of one percent. Realized capital gains or losses and unrealized appreciation
or depreciation of investments are not included in the calculation.
Each Fund's effective yield is determined by taking the base period return
(computed as described above) and calculating the effect of assumed
compounding. The formula for the effective yield is: (base period return +
1)/3//6//5///7/ - 1.
Average annual total return ("AATR") is found for a specific period by first
taking a hypothetical $1,000 investment ("initial investment") on the first
day of the period and computing the "redeemable value" of that investment at
the end of the period. The redeemable value is then divided by the initial
investment, and this quotient is taken to
B-9
<PAGE>
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 dividends have been reinvested at net asset value
on the reinvestment dates.
Total return is not calculated according to a standard formula, except when
calculated for the "Financial Highlights" table in the financial statements.
Total return is calculated similarly to AATR but is not annualized. It may be
shown as a percentage or the increased dollar value of the hypothetical
investment over the period.
All performance information shown below is for periods ended July 31, 1996.
<TABLE>
<CAPTION>
*TAX- AATR TOTAL TOTAL TOTAL
YIELD EFFECTIVE YIELD EQUIVALENT YIELD AATR 5 AATR RETURN RETURN RETURN
FUND 7 DAYS 7 DAYS 7 DAYS 1 YR. YRS. 10 YRS. 1 YR. 5 YRS. 10 YRS.
- ---- ------ --------------- ---------------- ----- ---- ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Zurich Money Market..... 5.1% 5.2% -- 5.4% 4.3% 5.9% 5.3% 23.1% 77.1%
Zurich Government Money. 5.1 5.2 -- 5.4 4.3 5.8 5.4 23.3 76.1
Zurich Tax-Free Money**. 3.3 3.4 5.3% 3.5 3.1 N/A 3.4 16.3 43.3**
</TABLE>
- -------
* Based upon a marginal federal income tax rate of 37.1%.
**Since 9/10/87.
The tax equivalent yield of the Tax-Free Money Fund is computed by dividing
that portion of the Fund's yield (computed as described above) which is tax-
exempt by (one minus the stated federal income tax rate) and adding the result
to that portion, if any, of the yield of the Fund that is not tax-exempt. For
additional information concerning tax-exempt yields, see "Tax-Exempt versus
Taxable Yield" below.
Each Fund's yield fluctuates, and the publication of an annualized yield
quotation is not a representation as to what an investment in a Fund will
actually yield for any given future period. Actual yields will depend not only
on changes in interest rates on money market instruments during the period in
which the investment in a Fund is held, but also on such matters as Fund
expenses.
Money market mutual funds allow smaller investors to participate in the money
market and to receive money market yields that previously were available only
to those investors with large sums of money. Prior to the introduction of the
first money market mutual funds, small investors wanting to manage their cash
reserves had a limited choice of bank products available with a predetermined
set of interest rates such as passbook savings accounts and checking accounts.
Currently, there are hundreds of money market funds managing billions of
dollars for millions of investors. Zurich Money Funds is one of the largest
money market funds.
Investors have an extensive choice of money market funds and money market
deposit accounts and the information below may be useful to investors who wish
to compare the past performance of the Money Market Fund, the Government Money
Fund and the Tax-Free Money Fund with that of their competitors. Past
performance cannot be a guarantee of future results.
As indicated in the prospectus (see "Performance"), the performance of the
Funds may be compared to that of other mutual funds tracked by Lipper
Analytical Services, Inc. ("Lipper"). Lipper performance calculations include
the reinvestment of all capital gain and income dividends for the periods
covered by the calculations. A Fund's performance also may be compared to
other money market funds reported by IBC Financial Data, Inc.'s Money Fund
Report(R), or Money Market Insight(R), reporting services on money market
funds. As reported by IBC, all investment results represent total return
(annualized results for the period net of management fees and expenses) and
one year investment results are effective annual yields assuming reinvestment
of dividends.
Lipper and IBC reported the following results for the Money Market Fund and
the Government Money Fund.
B-10
<PAGE>
LIPPER ANALYTICAL SERVICES, INC. IBC
<TABLE>
<CAPTION>
MONEY MARKET
FUND'S
RANKING VS
MONEY MARKET
PERIOD ENDED 9/30/96 INSTRUMENT FUNDS
- -------------------- ------------------
<S> <C>
1 Year.................. 26 of 287
3 Months................ 26 of 295
1 Month................. 105 of 295
<CAPTION>
GOVERNMENT
MONEY FUND'S
RANKING VS
U.S. GOVERNMENT
PERIOD ENDED 9/30/96 MONEY MARKET FUNDS
- -------------------- ------------------
<S> <C>
1 Year.................. 7 of 112
3 Months................ 10 of 115
1 Month................. 31 of 116
</TABLE>
<TABLE>
<CAPTION>
ZURICH
MONEY AVERAGE YIELD
MARKET ALL TAXABLE
PERIOD ENDED FUND'S MONEY MARKET
9/30/96 YIELD FUNDS
- ------------ ---------- -------------
<S> <C> <C>
1 Year............ 5.27% 5.05%
1 Month........... 5.07 4.83
7 Days**.......... 5.09 4.86
<CAPTION>
ZURICH
GOVERNMENT AVERAGE YIELD
MONEY ALL TAXABLE
PERIOD ENDED FUND'S GOVERNMENT
9/30/96 YIELD MONEY FUNDS
- ------------ ---------- -------------
<S> <C> <C>
1 Year............ 5.25% 4.87%
1 Month........... 5.06 4.66
7 Days**.......... 5.04 4.69
</TABLE>
According to IBC, for the one-year period ended September 30, 1996, the Money
Market Fund ranked by yield #18 among 222 General Purpose Money Funds (this
category does not include money market funds whose shares are marketed
primarily to institutional investors). According to IBC, for the one-year
period ended September 30, 1996, the Government Money Fund ranked by yield #9
among 190 Taxable Government Money Funds (this category does not include
taxable government money funds whose shares are marketed primarily to
institutional investors). For the one year period ended September 30, 1996,
the Tax-Free Money Fund ranked by yield #7 among 120 Tax-Free Money Funds
(this category does not include tax-free money funds whose shares are marketed
primarily to institutional investors or state specific tax-free money funds).
The Money Market Fund ranked #4 among 93 General Purpose Money Funds with a
ten-year history according to IBC as of June 30, 1996. The Government Money
Fund ranked #2 among 56 Government Money Funds with a ten-year history
according to IBC as of June 30, 1996. The number of shareholder accounts in
the Funds were approximately 285,273 at September 30, 1996, including 240,490
in the Money Market Fund, 26,775 in the Government Money Fund, and 18,008 in
the Tax-Free Money Fund. The value of shares in the Funds as of September 30,
1996 was approximately $5.6 billion, including $4.2 billion in the Money
Market Fund, $681 million in the Government Money Fund and $734 million in the
Tax-Free Money Fund. The Money Market Fund was the 29th largest in total
assets of 724 Taxable Money Market Funds reported by IBC as of September 30,
1996.
The following investment comparisons are based upon information reported by
Lipper and IBC. In the comparison of the Tax-Free Money Fund's performance
versus the comparison yields, the performance of that Fund has been adjusted
on a taxable equivalent basis assuming a marginal federal tax rate of 37.1%
(see "Tax-Exempt versus Taxable Yield" below for more information concerning
taxable equivalent performance).
LIPPER ANALYTICAL SERVICES, INC. IBC
<TABLE>
<CAPTION>
TAX-FREE MONEY
FUND'S RANKING VS
TAX-EXEMPT
PERIOD ENDED 9/30/96 MONEY MARKET FUNDS
- -------------------- ------------------
<S> <C>
1 Year.................. 7 of 132
3 Months................ 4 of 136
1 Month................. 25 of 136
</TABLE>
<TABLE>
<CAPTION>
ZURICH AVERAGE YIELD
TAX-FREE ALL TAX-FREE
PERIOD ENDED MONEY MONEY MARKET
9/30/96 FUND FUNDS
------------ -------- -------------
<S> <C> <C>
1 Year............. 3.38% 3.08%
1 Month............ 3.32 3.00
7 Days**........... 3.46 3.18
</TABLE>
B-11
<PAGE>
<TABLE>
<CAPTION>
LIPPER ZURICH LIPPER
TAX-EXEMPT TAX-FREE MONEY
ZURICH MONEY FUND MARKET
TAX- MARKET TAXABLE INSTRUMENT
FREE FUND EQUIVALENT FUNDS
PERIOD FUND AVERAGE BASIS* AVERAGE
- ------ ------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
1 Year Ended
9/30/96 3.39% 3.02% 5.39% 4.89%
</TABLE>
<TABLE>
<CAPTION>
ZURICH
TAX- AVERAGE
FREE FUND YIELD ALL
TAXABLE TAXABLE
PERIOD ENDED EQUIVALENT MONEY MARKET
9/30/96 BASIS* FUNDS
- ------------ ---------- ------------
<S> <C> <C>
1 Year............. 5.37% 5.05%
1 Month............ 5.27 4.83
7 Days**........... 5.50 4.86
</TABLE>
- -------
*Source: Zurich Kemper Investments (not reported by IBC).
**For Period Ended October 1, 1996.
For the ten, five and one year periods ended September 30, 1996, Lipper ranked
the Money Market Fund #5 of 102, #17 of 173 and #26 of 287, respectively, among
Money Market Instrument Funds. Lipper also ranked the Money Market Fund #1 in
such category for the periods shown below.
<TABLE>
<CAPTION>
NUMBER
OF
FUNDS
IN PERIOD
ATEGORYC PERIOD ENDING
- -------- -------- --------
<S> <C> <C>
41......................................................... 3 Years 12/31/80
23......................................................... 5 Years 12/31/80
50......................................................... 3 Years 12/31/81
34......................................................... 5 Years 12/31/81
110......................................................... 3 Years 12/31/84
81......................................................... 4 Years 12/31/84
66......................................................... 5 Years 12/31/84
109......................................................... 4 Years 12/31/85
80......................................................... 5 Years 12/31/85
142......................................................... 5 Years 12/31/88
39......................................................... 10 Years 12/31/88
54......................................................... 10 Years 12/31/89
33......................................................... 12 Years 12/31/89
64......................................................... 10 Years 12/31/90
79......................................................... 10 Years 12/31/91
31......................................................... 15 Years 12/31/92
36......................................................... 15 Years 12/31/93
</TABLE>
As indicated in the prospectus, a Fund's performance also may be compared on a
before or after-tax basis to various bank products, including the average rate
of bank and thrift institution money market deposit accounts, interest bearing
checking accounts and certificates of deposit as reported in the BANK RATE
MONITOR National Index(TM) of 100 leading bank and thrift institutions as
published by the BANK RATE MONITOR(TM), N. Palm Beach, Florida 33408. The rates
published by the BANK RATE MONITOR National Index(TM) are averages of the
personal account rates offered on the Wednesday prior to the date of
publication by 100 large banks and thrifts in the top ten Consolidated Standard
Metropolitan Statistical Areas.
With respect to money market deposit accounts and interest bearing checking
accounts, account minimums range upward from $2,000 in each institution and
compounding methods vary. Interest bearing checking accounts generally offer
unlimited check writing while money market deposit accounts generally restrict
the number of checks that may be written. If more than one rate is offered, the
lowest rate is used. Rates are determined by the financial institution and are
subject to change at any time specified by the institution. Generally, the
rates offered for these products take market conditions and competitive product
yields into consideration when set. Bank
B-12
<PAGE>
products represent a taxable alternative income producing product. Bank and
thrift institution deposit accounts may be insured. Shareholder accounts in
the Funds are not insured. Bank passbook savings accounts compete with money
market mutual fund products with respect to certain liquidity features but may
not offer all of the features available from a money market mutual fund, such
as check writing. Bank passbook savings accounts normally offer a fixed rate
of interest while the yield of the Funds fluctuates. Bank checking accounts
normally do not pay interest but compete with money market mutual fund
products with respect to certain liquidity features (e.g., the ability to
write checks against the account). Bank certificates of deposit may offer
fixed or variable rates for a set term. (Normally, a variety of terms are
available.) Withdrawal of these deposits prior to maturity will normally be
subject to a penalty. In contrast, shares of the Funds are redeemable at the
net asset value (normally, $1.00 per share) next determined after a request is
received, without charge.
The table below compares the seven day annualized yields of the Money Market
Fund and the Government Money Fund at September 4, 1996 with the rates for
money market deposit accounts, interest bearing checking accounts and 6-month
maturity certificates of deposit reported for September 4, 1996 for the BANK
RATE MONITOR National Index(TM) for each of the ten Consolidated Standard
Metropolitan Statistical Areas that are covered by that index and for all
areas combined. The information provided below is historical and is not
representative of future performance of any type of bank product or of any
Fund. The rates reported by the BANK RATE MONITOR(TM) are not necessarily
representative of the rates offered by banks outside of the scope of report.
Furthermore, rate information for one area of the country is not necessarily
representative of rates in other areas. The rates provided for the bank
accounts assume no compounding and are for the lowest minimum deposit required
to open an account. Higher rates may be available for large deposits.
<TABLE>
<CAPTION>
MONEY MARKET INTEREST 6-MONTH GOVERNMENT
DEPOSIT ACCOUNTS CHECKING CERTIFICATES OF MONEY MARKET MONEY FUND
AREA STATED RATE STATED RATE DEPOSIT RATE FUND YIELD YIELD
- ---- ---------------- ----------- --------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
New York................ 2.8% 1.6% 4.4% 5.04% 5.02%
Los Angeles............. 2.3 1.0 5.0 5.04 5.02
Chicago................. 3.0 1.7 5.1 5.04 5.02
San Francisco........... 2.3 1.0 5.0 5.04 5.02
Philadelphia............ 2.2 1.1 4.1 5.04 5.02
Detroit................. 2.8 1.7 4.7 5.04 5.02
Boston.................. 2.8 1.2 5.1 5.04 5.02
Houston................. 2.9 1.5 4.9 5.04 5.02
Dallas.................. 2.8 1.3 4.8 5.04 5.02
Washington.............. 3.0 1.8 4.6 5.04 5.02
NATIONAL INDEX.......... 2.7 1.4 4.8 5.04 5.02
</TABLE>
Since January, 1984, the Money Market Fund has had a higher yield than the
BANK RATE MONITOR National Index(TM) for both money market deposit accounts
and for interest bearing checking accounts for 657 out of 657 weeks through
September 4, 1996.
Investors may also want to compare a Fund's performance to that of U.S.
Treasury bills or notes because such instruments represent alternative income
producing products. Treasury obligations are issued in selected denominations.
Rates of U.S. Treasury obligations are fixed at the time of issuance and
payment of principal and interest is backed by the full faith and credit of
the U.S. Treasury. The market value of such instruments will generally
fluctuate inversely with interest rates prior to maturity and will equal par
value at maturity. Generally, the values of obligations with shorter
maturities will fluctuate less than those with longer maturities. Each Fund's
yield will fluctuate. Also, while each Fund seeks to maintain a net asset
value per share of $1.00, there is no assurance that it will be able to do so.
B-13
<PAGE>
TAX-FREE VERSUS TAXABLE YIELD. You may want to determine which investment--
tax-free or taxable--will provide you with a higher after-tax return. To
determine the taxable equivalent yield, simply divide the yield from the tax-
free investment by the sum of [1 minus your marginal tax rate]. The tables
below are provided for your convenience in making this calculation for
selected tax-free yields and taxable income levels. These yields are presented
for purposes of illustration only and are not representative of any yield that
the Tax-Free Money Fund may generate. Both tables are based upon current law
as to the 1996 federal tax rate schedules.
TAXABLE EQUIVALENT YIELD TABLE FOR PERSONS WHOSE ADJUSTED GROSS INCOME IS
UNDER $117,950
<TABLE>
<CAPTION>
YOUR A TAX-EXEMPT YIELD OF:
TAXABLE INCOME MARGINAL 2% 3% 4% 5% 6% 7%
FEDERAL TAX IS EQUIVALENT TO A TAXABLE
SINGLE JOINT RATE YIELD OF:
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$24,000-$58,150 $40,100-$96,900 28.0% 2.78 4.17 5.56 6.94 8.33 9.72
- ---------------------------------------------------------------------------
Over $58,150 Over $96,900 31.0 2.90 4.35 5.80 7.25 8.70 10.14
- ---------------------------------------------------------------------------
</TABLE>
TAXABLE EQUIVALENT YIELD TABLE FOR PERSONS WHOSE ADJUSTED GROSS INCOME IS OVER
$117,950*
<TABLE>
<CAPTION>
YOUR A TAX-EXEMPT YIELD OF:
TAXABLE INCOME MARGINAL 2% 3% 4% 5% 6% 7%
FEDERAL TAX IS EQUIVALENT TO A TAXABLE
SINGLE JOINT RATE YIELD OF:
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$58,150-$121,300 $96,900-$147,700 31.9% 2.94 4.41 5.87 7.34 8.81 10.28
- --------------------------------------------------------------------------------
$121,300-$263,750 $147,700-$263,750 37.1 3.18 4.77 6.36 7.95 9.54 11.13
- --------------------------------------------------------------------------------
Over $263,750 Over $263,750 40.8 3.38 5.07 6.76 8.45 10.14 11.82
- --------------------------------------------------------------------------------
</TABLE>
*This table assumes a decrease of $3.00 of itemized deductions for each $100
of adjusted gross income over $117,950. For a married couple with adjusted
gross income between $176,950 and $299,450 (single between $117,950 and
$240,450), add 0.7% to the above Marginal Federal Tax Rate for each personal
and dependency exemption. The taxable equivalent yield is the tax-exempt
yield divided by: 100% minus the adjusted tax rate. For example, if the table
tax rate is 37.1% and you are married with no dependents, the adjusted tax
rate is 38.5% (37.1% + 0.7% + 0.7%). For a tax-exempt yield of 6%, the
taxable equivalent yield is about 9.8% (6% / (100% - 38.5%)).
OFFICERS AND TRUSTEES
The officers and trustees of the Trust, their birthdates, their principal
occupations and their affiliations, if any, with ZKI and ZKDI 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 (24), 2000 Financial Center, 7th and Walnut,
Des Moines, Iowa; Member, Belin Harris Lamson McCormick, P.C. (attorneys).
LEWIS A. BURNHAM (1/8/33), Trustee (24), 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 (24), 7515 Pelican Bay Blvd., Naples,
Florida; Retired; formerly, Executive Vice President, A. O. Smith Corporation
(diversified manufacturer).
ROBERT B. HOFFMAN (12/11/36), Trustee (24), 800 North Lindbergh Boulevard, St.
Louis, Missouri; Senior Vice President and Chief Financial Officer, Monsanto
Company (chemical products); prior thereto, Vice President, FMC
B-14
<PAGE>
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 (24), 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* (37), 222 S. Riverside Plaza, Chicago,
Illinois; Member, Extended Corporate Executive Board, Zurich Insurance
Company, Director, ZKI.
SHIRLEY D. PETERSON, (9/3/41), Trustee (24), 401 Rosemont Avenue, Frederick,
Maryland; President, Hood College; 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 (24), 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.
STEPHEN B. TIMBERS (8/8/44), President and Trustee* (37), 222 South Riverside
Plaza, Chicago, Illinois; President, Chief Executive Officer, Chief Investment
Officer and Director, ZKDI; Director, ZKDI, Dreman Value Advisors, Inc. and
LTV Corporation.
CHARLES R. MANZONI, JR. (1/23/47), Vice President* (37), 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).
JOHN E. NEAL (3/9/50), Vice President* (37), 222 South Riverside Plaza,
Chicago, Illinois; President, Kemper Funds Group, a unit of ZKI; Director, ZKI
and ZKDI.
JEROME L. DUFFY (6/29/36), Treasurer* (37), 222 South Riverside Plaza,
Chicago, Illinois; Senior Vice President, ZKI.
PHILIP J. COLLORA (11/15/45), Vice President and Secretary* (37), 222 South
Riverside Plaza, Chicago, Illinois; Attorney, Senior Vice President and
Assistant Secretary, ZKI.
ELIZABETH C. WERTH (10/1/47), Assistant Secretary* (30), 222 South Riverside
Plaza, Chicago, Illinois; Vice President, ZKI; Vice President and Director of
State Registrations, ZKDI.
J. PATRICK BEIMFORD, Jr. (5/25/50), Vice President* (24), 222 South Riverside
Plaza, Chicago, Illinois; Executive Vice President and Chief Investment
Officer--Fixed Income, ZKI.
FRANK RACHWALSKI, Jr. (3/26/45), Vice President* (9), 222 South Riverside
Plaza, Chicago, Illinois; Senior Vice President, ZKI.
*Interested persons of the Funds 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
B-15
<PAGE>
persons" during the Trust's 1996 fiscal year except that the information in
the last column is for calendar year 1995.
<TABLE>
<CAPTION>
TOTAL COMPENSATION
FROM TRUST AND
AGGREGATE COMPENSATION FUND COMPLEX
NAME OF TRUSTEE FROM TRUST PAID TO TRUSTEES**
- --------------- ----------------------------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
David W. Belin*.......... $12,900 $149,700
Lewis A. Burnham......... $ 7,700 $111,000
Donald L. Dunaway*....... $12,200 $151,000
Robert B. Hoffman........ $ 7,700 $105,500
Donald R. Jones.......... $ 7,900 $110,700
Shirley D. Peterson***... $ 6,300 $ 44,500
William P. Sommers....... $ 7,500 $100,700
</TABLE>
- -------
* Includes current fees deferred and interest pursuant to deferred
compensation agreements with the Trust. Deferred amounts accrue interest
monthly at a rate equal to the yield of Zurich Money Funds--Money Market
Fund. Total deferred amounts and interest accrued through July 31, 1996 are
$119,900 for Mr. Belin and $91,000 for Mr. Dunaway.
** Includes compensation for service on twenty-three funds managed by ZKI with
40 fund portfolios. Each trustee currently serves as a trustee of 24 funds
managed by ZKI with 41 fund portfolios.
*** Appointed a trustee of certain fund boards on June 15, 1995.
As of October 31, 1996, the officers and trustees of the Trust, as a group,
owned less than 1% of the outstanding shares of each Fund and no person owned
of record 5% or more of the outstanding shares of any Fund except as shown
below:
<TABLE>
<CAPTION>
FUND NAME & ADDRESS PERCENTAGE
---- -------------------- ----------
<S> <C> <C>
Zurich Government Money Fund Everen Capital Corp. 6.20%
77 W. Wacker Dr.
Chicago, IL 60601
</TABLE>
SPECIAL FEATURES
AUTOMATIC WITHDRAWAL PROGRAM. If you own $5,000 or more of a Fund's shares you
may provide for the payment from your account of any requested dollar amount
to be paid to you or your designated payee monthly, quarterly, semi-annually
or annually. The $5,000 minimum account size is not applicable to Individual
Retirement Accounts. Dividend distributions will be 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, redemptions for the purpose of making such payments may
reduce or even exhaust the account. The program may be amended on thirty days
notice by the Fund and may be terminated at any time by the shareholder or the
Funds.
TAX-SHELTERED RETIREMENT PROGRAMS. The Shareholder Service Agent provides
retirement plan services and documents and can establish your account 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) Custodial Accounts 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 contribution per participant is the lesser of 25% of
compensation or $30,000.
Brochures describing the above plans as well as providing model defined
benefit plans, target benefit plans, 457 plans, 401(k) plans and materials for
establishing them are available from the Shareholder Service Agent upon
request. The brochures for plans 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.
B-16
<PAGE>
SHAREHOLDER RIGHTS
The Trust generally is not required to hold meetings of its shareholders.
Under the Agreement and Declaration of Trust of the Trust ("Declaration of
Trust"), however, shareholder meetings will be held in connection with the
following matters: (a) the election or removal of trustees, if a meeting is
called for such purpose; (b) the adoption of any contract for which
shareholder approval is required by the Investment Company Act of 1940 ("1940
Act"); (c) any termination of the Trust to the extent and as provided in the
Declaration of Trust; (d) any amendment of the Declaration of Trust (other
than amendments changing the name of the Trust or any Fund, establishing a
Fund, supplying any omission, curing any ambiguity or curing, correcting or
supplementing any defective or inconsistent provision thereof); (e) as to
whether a court action, proceeding or claim should or should not be brought or
maintained derivatively or as a class action on behalf of the Trust or the
shareholders, to the same extent as the stockholders of a Massachusetts
business corporation; and (f) such additional matters as may be required by
law, the Declaration of Trust, the By-laws of the Trust, or any registration
of the Trust with the Securities and Exchange Commission or any state, or as
the trustees may consider necessary or desirable. The shareholders also would
vote upon changes in fundamental investment objectives, policies or
restrictions.
Each trustee serves until the next meeting of shareholders, if any, called for
the purpose of electing trustees and until the election and qualification of
his successor or until such trustee sooner dies, resigns, retires or is
removed by a majority vote of the shares entitled to vote (as described below)
or a majority of the trustees. In accordance with the 1940 Act (a) the Trust
will hold a shareholder meeting for the election of trustees at such time as
less than a majority of the trustees have been elected by shareholders, and
(b) if, as a result of a vacancy in the Board of Trustees, less than two-
thirds of the trustees have been elected by the shareholders, that vacancy
will be filled only by a vote of the shareholders.
Trustees may be removed from office by a vote of the holders of a majority of
the outstanding shares at a meeting called for that purpose, which meeting
shall be held upon the written request of the holders of not less than 10% of
the outstanding shares. Upon the written request of ten or more shareholders
who have been such for at least six months and who hold shares constituting at
least 1% of the outstanding shares of the Trust stating that such shareholders
wish to communicate with the other shareholders for the purpose of obtaining
the signatures necessary to demand a meeting to consider removal of a trustee,
the Trust has undertaken to disseminate appropriate materials at the expense
of the requesting shareholders.
The Declaration of Trust provides that the presence at a shareholder meeting
in person or by proxy of at least 30% of the shares entitled to vote on a
matter shall constitute a quorum. Thus, a meeting of shareholders of the Trust
could take place even if less than a majority of the shareholders were
represented on its scheduled date. Shareholders would in such a case be
permitted to take action which does not require a larger vote than a majority
of a quorum, such as the election of trustees and ratification of the
selection of auditors. Some matters requiring a larger vote under the
Declaration of Trust, such as termination or reorganization of the Trust and
certain amendments of the Declaration of Trust, would not be affected by this
provision; nor would matters which under the 1940 Act require the vote of a
"majority of the outstanding voting securities" as defined in the 1940 Act.
The Declaration of Trust specifically authorizes the Board of Trustees to
terminate the Trust (or any Fund) by notice to the shareholders without
shareholder approval.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for obligations of the
Trust. The Declaration of Trust, however, disclaims shareholder liability for
acts or obligations of the Trust and requires that notice of such disclaimer
be given in each agreement, obligation, or instrument entered into or executed
by the Trust or the trustees. Moreover, the Declaration of Trust provides for
indemnification out of Trust property for all losses and expenses of any
shareholder held personally liable for the obligations of the Trust and the
Trust will be covered by insurance which the trustees consider adequate to
cover foreseeable tort claims. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is considered by ZKI remote
and not material since it is limited to circumstances in which a disclaimer is
inoperative and the Trust itself is unable to meet its obligations.
B-17
<PAGE>
APPENDIX--RATINGS OF INVESTMENTS
COMMERCIAL PAPER RATINGS
A-1, A-2 AND PRIME-1, PRIME-2 COMMERCIAL PAPER RATINGS
Commercial paper rated by Standard & Poor's Corporation has the following
characteristics: Liquidity ratios are adequate to meet cash requirements.
Long-term senior debt is rated "A" or better. The issuer has access to at
least two additional channels of borrowing. Basic earnings and cash flow have
an upward trend with allowance made for unusual circumstances. Typically, the
issuer's industry is well established and the issuer has a strong position
within the industry. The reliability and quality of management are
unquestioned. Relative strength or weakness of the above factors determine
whether the issuer's commercial paper is rated A-1, A-2 or A-3.
The ratings Prime-1 and Prime-2 are the two highest commercial paper ratings
assigned by Moody's Investors Service, Inc. Among the factors considered by it
in assigning ratings are the following: (1) evaluation of the management of
the issuer; (2) economic evaluation of the issuer's industry or industries and
an appraisal of speculative-type risks which may be inherent in certain areas;
(3) evaluation of the issuer's products in relation to competition and
customer acceptance; (4) liquidity; (5) amount and quality of long-term debt;
(6) trend of earnings over a period of ten years; (7) financial strength of a
parent company and the relationships which exist with the issuer; and (8)
recognition by the management of obligations which may be present or may arise
as a result of public interest questions and preparations to meet such
obligations. Relative strength or weakness of the above factors determines
whether the issuer's commercial paper is rated Prime-1, 2 or 3.
MIG-1 AND MIG-2 MUNICIPAL NOTES
Moody's ratings for state and municipal notes and other short-term loans will
be designated Moody's Investment Grade (MIG). This distinction is in
recognition of the differences between short-term credit risk and long-term
risk. Factors affecting the liquidity of the borrower are uppermost in
importance in short-term borrowing, while various factors of the first
importance in bond risk are of lesser importance in the short run. Loans
designated MIG-1 are of the best quality, enjoying strong protection from
established cash flows of funds for their servicing or from established and
broad-based access to the market for refinancing, or both. Loans designated
MIG-2 are of high quality, with margins of protection ample although not so
large as in the preceding group.
STANDARD & POOR'S CORPORATION BOND RATINGS
AAA. This is the highest rating assigned by Standard & Poor's Corporation to a
debt obligation and indicates an extremely strong capacity to pay principal
and interest.
AA. Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances
they differ from AAA issues only in small degree.
A. Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
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.
B-18
<PAGE>
AA. Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long term risks appear somewhat larger than in Aaa
securities.
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.
B-19
