Kemper Tax Free Income Funds
SUPPLEMENT TO PROSPECTUS
DATED JANUARY 1, 2000
-----------------------
CLASS I SHARES
-----------------------
KEMPER MUNICIPAL BOND FUND
KEMPER INTERMEDIATE MUNICIPAL BOND FUND
-----------------------
The above funds currently offer four classes of shares to provide investors with
different purchasing options. These are Class A, Class B and Class C shares,
which are described in the funds' prospectus, and Class I shares, which are
described in the prospectus as supplemented hereby. When placing purchase
orders, investors must specify whether the order is for Class A, Class B, Class
C or Class I shares.
Class I shares are available for purchase exclusively by the following
categories of institutional investors: (1) tax-exempt retirement plans (Profit
Sharing, 401(k), Money Purchase Pension and Defined Benefit Plans) of Scudder
Kemper Investments, Inc. ("Scudder Kemper") and its affiliates and rollover
accounts from those plans; (2) the following investment advisory clients of
Scudder Kemper and its investment advisory affiliates that invest at least $1
million in a Fund: unaffiliated benefit plans, such as qualified retirement
plans (other than individual retirement accounts and self-directed retirement
plans); unaffiliated banks and insurance companies purchasing for their own
accounts; and endowment funds of unaffiliated non-profit organizations; (3)
investment-only accounts for large qualified plans, with at least $50 million in
total plan assets or at least 1000 participants; (4) trust and fiduciary
accounts of trust companies and bank trust departments providing fee-based
advisory services that invest at least $1 million in a Fund on behalf of each
trust; (5) policy holders under Zurich-American Insurance Group's collateral
investment program investing at least $200,000 in a Fund; and (6) investment
companies managed by Scudder Kemper that invest primarily in other investment
companies.
Class I shares currently are available for purchase only from Kemper
Distributors, Inc. ("KDI"), principal underwriter for the Funds, and, in the
case of category 4 above, selected dealers authorized by KDI. Share certificates
are not available for Class I shares.
<PAGE>
The following information supplements the indicated sections of the prospectus.
PERFORMANCE
No performance information is presented for Class I Shares since no Class I
Shares were issued as of December 31, 1999.
HOW MUCH INVESTORS PAY
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
Shareholder fees: Fees paid directly from your investment.
Maximum
Sales Maximum
Charge Deferred
(Load) Sales Maximum Redemption
Imposed on Charge Sales Fee (as %
Purchases (Load) Charge on of amount
(as % of (as % of Reinvested redeemed,
offering redemption Dividends/ if Exchange
price) proceeds) Distributions applicable) Fee
------ --------- ------------- ----------- ---
Kemper
Municipal
Bond Fund None None None None None
Kemper
Intermediate
Municipal
Bond Fund None None None None None
Annual fund operating expenses: Expenses that are deducted from fund assets.
Total
annual
fund
Investment Distribution Other operating
management fee (12b-1) fees expenses* expenses*
-------------- ------------ --------- ---------
Kemper Municipal
Bond Fund 0.41% None 0.18% 0.59%
Kemper Intermediate
Municipal Bond Fund 0.55% None 0.26% 0.81%
- -----------
* Estimated, since no Class I shares were issued as of September 30, 1999, the
fiscal year end of the funds.
2
<PAGE>
Example
Based on the figures above, this example is designed to help you compare the
expenses of a fund to those of other funds. The example assumes operating
expenses remain the same and that you invested $10,000, earned 5% annual returns
and reinvested all dividends and distributions. This is only an example; actual
expenses will be different.
Fees and expenses if you sold or held shares after:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Kemper Municipal
Bond Fund $60 $189 $329 $738
Kemper Intermediate
Municipal Bond Fund $83 $259 $450 $1,002
FINANCIAL HIGHLIGHTS
No financial information is presented for Class I shares of Kemper Municipal
Bond Fund and Kemper Intermediate Municipal Bond Fund, since no Class I shares
were issued as of September 30, 1999, the fiscal year end of the funds.
SPECIAL FEATURES
Shareholders of a Fund's Class I shares may exchange their shares for (i) shares
of Zurich Money Funds -- Zurich Money Market Fund if the shareholders of Class I
shares have purchased shares because they are participants in tax-exempt
retirement plans of Scudder Kemper and its affiliates and (ii) Class I shares of
any other "Kemper Mutual Fund" listed in the prospectus. Conversely,
shareholders of Zurich Money Funds -- Zurich Money Market Fund who have
purchased shares because they are participants in tax-exempt retirement plans of
Scudder Kemper and its affiliates may exchange their shares for Class I shares
of "Kemper Mutual Funds" to the extent that they are available through their
plan. Exchanges will be made at the relative net asset values of the shares.
Exchanges are subject to the limitations set forth in the prospectus.
As a result of the relatively lower expenses for Class I shares, the level of
income dividends per share (as a percentage of net asset value) and, therefore,
the overall investment return, typically will be higher for Class I shares than
for Class A, Class B and Class C shares.
3
<PAGE>
January 1, 2000
<PAGE>
LONG-TERM
INVESTING
IN A
SHORT-TERM
WORLD(SM)
January 1, 2000
Prospectus
- --------------------------------------------------------------------------------
KEMPER TAX-FREE INCOME FUNDS
Kemper Intermediate Municipal Bond Fund
Kemper Municipal Bond Fund
Kemper California Tax-Free Income Fund
Kemper Florida Tax-Free Income Fund
Kemper New York Tax-Free Income Fund
Kemper Ohio Tax-Free Income Fund
As with all mutual funds, the Securities and Exchange
Commission (SEC) does not approve or disapprove these
shares or determine whether the information in this
prospectus is truthful or complete. It is a criminal
offense for anyone to inform you otherwise.
[LOGO] KEMPER FUNDS
<PAGE>
HOW THE INVESTING IN
FUNDS WORK THE FUNDS
2 Kemper Intermediate 53 Choosing A Share
Municipal Bond Fund Class
8 Kemper Municipal 59 How To Buy Shares
Bond Fund
60 How To Exchange Or
14 Kemper California Sell Shares
Tax-Free Income Fund
61 Policies You Should
20 Kemper Florida Tax-Free Know About
Income Fund
68 Understanding
26 Kemper New York Distributions And
Tax-Free Income Fund Taxes
32 Kemper Ohio Tax-Free
Income Fund
38 Other Policies And Risks
39 Financial Highlights
<PAGE>
How The Funds Work
These funds invest mainly in municipal bonds. Each fund follows its own goal.
Two of the funds invest in municipal securities from around the country, and
seek income that is free from regular federal income tax. Four of the funds
invest in securities from particular states, and seek income that is free from
regular federal income tax as well as state and local income tax for investors
in that state.
Remember that mutual funds are investments, not bank deposits. They're not
insured or guaranteed by the FDIC or any other government agency. Their share
prices will go up and down, so be aware that you could lose money.
<PAGE>
TICKER SYMBOLS CLASS: A) KIMAX B) KIMBX C) KIMCX
Kemper
Intermediate Municipal
Bond Fund
- --------------------------------------------------------------------------------
FUND GOAL The fund seeks as high a level of current interest income that
is exempt from federal income taxes as is consistent with preservation of
capital.
2 - Kemper Intermediate Municipal Bond Fund
<PAGE>
The Fund's Main Strategy
The fund normally invests at least 80% of net assets in municipal securities
whose income is free from regular federal income tax.
The fund can buy many types of municipal securities. These may include revenue
bonds (which are backed by revenues from a particular source), general
obligation bonds (which are typically backed by the issuer's ability to levy
taxes), as well as, to a limited extent, municipal lease obligations and
investments representing an interest in these.
The portfolio managers look for securities that appear to offer the best income
potential, and normally prefer those that cannot be called in before maturity.
In making sell decisions, the managers typically consider a number of factors,
such as economic outlook and possible interest rate movements to specific
security characteristics and changes in supply and demand within the municipal
bond market.
Although the managers may adjust the fund's dollar-weighted average maturity
(the effective maturity of the fund's portfolio), they will keep it between
three and ten years under normal circumstances. Also, while they're permitted to
use various types of derivatives (contracts whose value is based on, for
example, indices, commodities or securities), the managers don't intend to use
them as principal investments.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
CREDIT QUALITY POLICIES
Normally, at least 90% of the fund's municipal securities are in the top four
grades of credit quality.
Up to 10% of the fund's municipal securities may be junk bonds, which are those
below the fourth credit grade (i.e., grade BB/Ba and below).
Compared to investment-grade bonds, junk bonds generally pay higher yields and
have higher volatility and higher risk of default on payments.
3 - Kemper Intermediate Municipal Bond Fund
<PAGE>
The Main Risks Of Investing In The Fund
There are several risk factors that could reduce the yield you get from the
fund, cause you to lose money or make the fund perform less well than other
investments.
As with most bond funds, one of the most important factors is market interest
rates. A rise in interest rates generally means a fall in bond prices and, in
turn, a fall in the value of your investment. The fund's focus on
intermediate-term bonds may reduce the effect of this risk somewhat, but will
not eliminate it. Changes in interest rates will also affect the fund's yield;
when rates decline, fund yield tends to decline as well.
A second factor is credit quality. If a portfolio security declines in credit
quality it could hurt the fund's share price, or if a portfolio security goes
into default, it could hurt both the fund's yield and share price. This risk is
greater with junk bonds. The fact that the fund may emphasize investments in
certain geographic regions or sectors of the municipal market increases this
risk, because any factors affecting these regions or sectors could affect a
large portion of the fund's securities in a similar manner.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of interest rate trends,
issuers, credit quality or other matters
o derivatives could produce disproportionate losses
o at times, it could be hard to value some investments or to get an attractive
price for them
o securities that rely on third-party insurers to raise their credit quality
could fall in price or go into default if the financial condition of the
insurer deteriorates
o political or legal actions could change the way the fund's dividends are
taxed
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
This fund may be suitable for investors in a moderate to high tax bracket who
are seeking tax-free income and can tolerate some risk to their principal.
4 - Kemper Intermediate Municipal Bond Fund
<PAGE>
Performance
The bar chart shows how the total returns for the fund's Class A shares have
varied from year to year, which may give some idea of risk. The chart doesn't
reflect sales loads; if it did, returns would be lower. The table shows how the
fund's returns over different periods average out.
For context, the table has a broad-based market index (which, unlike the fund,
has no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
- ------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A Shares
- ------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
1995 14.08
1996 3.41
1997 7.52
1998 5.24
Best quarter: 5.19%, Q1 1995 YTD return as of 9/30/1999: -1.09%
Worst quarter: -0.95%, Q1 1996
- ------------------------------------------------------------------------------
Average Annual Total Returns (as of 12/31/1998)
- ------------------------------------------------------------------------------
Since 12/31/97 Since 11/1/94
1 Year Life of Class
A/B/C
- ------------------------------------------------------------------------------
Class A 2.38% 6.80%
- ------------------------------------------------------------------------------
Class B 1.50 6.25
- ------------------------------------------------------------------------------
Class C 4.42 6.70
- ------------------------------------------------------------------------------
Index 6.48 8.98*
- ------------------------------------------------------------------------------
Index: Lehman Brothers Municipal Bond Index, a widely recognized unmanaged
measure of approximately 15,000 bonds. Index returns assume reinvestment of
dividends and, unlike fund returns, do not reflect any fees, expenses or sales
charges.
- --------------------------------------------------------------------------------
The table includes the effects of maximum sales loads. In both the table and the
chart, returns for 1994-1996 would have been lower if operating expenses hadn't
been reduced.
* Since 10/31/94
5 - Kemper Intermediate Municipal Bond Fund
<PAGE>
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
- ------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- ------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- ------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed On Purchases
(as % of offering price) 2.75% None None
- ------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as % of None* 4.00% 1.00%
redemption proceeds)
- ------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- ------------------------------------------------------------------------------
Management Fee 0.55% 0.55% 0.55%
- ------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.75 0.75
- ------------------------------------------------------------------------------
Other Expenses** 0.59 0.63 0.60
- ------------------------------------------------------------------------------
Total Annual Operating Expenses 1.14 1.93 1.90
- ------------------------------------------------------------------------------
* The redemption of shares purchased at net asset value under the Large Order
NAV Purchase Privilege ("Policies You Should Know About -- Policies about
transactions") may be subject to a deferred sales charge of 1.00% if
redeemed within one year of purchase and 0.50% if redeemed during the second
year following purchase.
** Includes cost of shareholder servicing, custody, accounting services and
similar expenses, which vary with fund size and other factors. "Other
Expenses" are restated to reflect changes in certain administrative and blue
sky fees.
Based on the figures above, this example is designed to help you compare the
expenses of each share class to those of other funds. The example assumes
operating expenses remain the same and that you invested $10,000, earned 5%
annual returns and reinvested all dividends and distributions. This is only an
example; actual expenses will be different.
Example 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- ------------------------------------------------------------------------------
Class A shares $388 $627 $885 $1,623
- ------------------------------------------------------------------------------
Class B shares 596 906 1,242 1,860
- ------------------------------------------------------------------------------
Class C shares 293 597 1,026 2,222
- ------------------------------------------------------------------------------
Expenses, assuming you kept your shares
- ------------------------------------------------------------------------------
Class A shares $388 $627 $885 $1,623
- ------------------------------------------------------------------------------
Class B shares 196 606 1,042 1,860
- ------------------------------------------------------------------------------
Class C shares 193 597 1,026 2,222
- ------------------------------------------------------------------------------
6 - Kemper Intermediate Municipal Bond Fund
<PAGE>
THE INVESTMENT ADVISOR
The fund's investment advisor is Scudder Kemper Investments, Inc., located at
345 Park Avenue, New York, NY. Scudder Kemper has more than 80 years of
experience managing mutual funds and currently has more than $290 billion in
assets under management.
Scudder Kemper takes a team approach, bringing together professionals from many
investment disciplines. Supporting each team are Scudder Kemper's many
economists, research analysts, traders and other investment specialists, located
across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee. For the most recent fiscal year, the actual amount the fund paid
in management fees was 0.55% of its average daily net assets.
FUND MANAGERS
Below are the people who handle the fund's day-to-day
management:
Ashton P. Goodfield Philip G. Condon
Lead Portfolio Manager o Began investment career
o Began investment career in 1976
in 1986 o Joined the advisor
o Joined the advisor in 1983
in 1986 o Joined the fund team
o Joined the fund team in 1999
in 1998
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
7 - Kemper Intermediate Municipal Bond Fund
<PAGE>
TICKER SYMBOLS CLASS: A) KMBAX B) KMBBX C) KMBCX
Kemper
Municipal Bond Fund
- --------------------------------------------------------------------------------
FUND GOAL The fund seeks as high a level of current interest income that
is exempt from federal income taxes as is consistent with preservation of
capital.
8 - Kemper Municipal Bond Fund
<PAGE>
The Fund's Main Strategy
The fund normally invests at least 80% of net assets in municipal securities
whose income is free from regular federal income tax.
The fund can buy many types of municipal securities. These may include revenue
bonds (which are backed by revenues from a particular source), general
obligation bonds (which are typically backed by the issuer's ability to levy
taxes), as well as, to a limited extent, municipal lease obligations and
investments representing an interest in these.
The portfolio managers look for securities that appear to offer the best income
potential, and normally prefer those that cannot be called in before maturity.
In making sell decisions, the managers typically consider a number of factors,
such as economic outlook and possible interest rate movements to specific
security characteristics and changes in supply and demand within the municipal
bond market.
Although the managers may adjust the fund's dollar-weighted average maturity
(the effective maturity of the fund's portfolio), they will keep it over 15
years under normal circumstances. Also, while they're permitted to use various
types of derivatives (contracts whose value is based on, for example, indices,
commodities or securities), the managers don't intend to use them as principal
investments.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
CREDIT QUALITY POLICIES
Normally, at least 90% of the fund's municipal securities are in the top four
grades of credit quality.
Up to 10% of the fund's municipal securities may be junk bonds, which are those
below the fourth credit grade (i.e., grade BB/Ba and below).
Compared to investment-grade bonds, junk bonds generally pay higher yields and
have higher volatility and higher risk of default on payments.
9 - Kemper Municipal Bond Fund
<PAGE>
The Main Risks Of Investing In The Fund
There are several risk factors that could reduce the yield you get from the
fund, cause you to lose money or make the fund perform less well than other
investments.
As with most bond funds, one of the most important factors is market interest
rates. A rise in interest rates generally means a fall in bond prices and, in
turn, a fall in the value of your investment. An increase in the fund's
dollar-weighted average maturity could make it more vulnerable to this risk.
Changes in interest rates will also affect the fund's yield; when rates decline,
fund yield tends to decline as well.
A second factor is credit quality. If a portfolio security declines in credit
quality it could hurt the fund's share price, or if a portfolio security goes
into default, it could hurt both the fund's yield and share price. This risk is
greater with junk bonds. The fact that the fund may emphasize investments in
certain geographic regions or sectors of the municipal market increases this
risk, because any factors affecting these regions or sectors could affect a
large portion of the fund's securities in a similar manner.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of interest rate trends,
issuers, credit quality or other matters
o derivatives could produce disproportionate losses
o at times, it could be hard to value some investments or to get an attractive
price for them
o securities that rely on third-party insurers to raise their credit quality
could fall in price or go into default if the financial condition of the
insurer deteriorates
o political or legal actions could change the way the fund's dividends are
taxed
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
Long-term investors seeking tax-free income who can tolerate some risk to their
principal may want to consider this fund.
10 - Kemper Municipal Bond Fund
<PAGE>
Performance
The bar chart shows how the total returns for the fund's Class A shares have
varied from year to year, which may give some idea of risk. The chart doesn't
reflect sales loads; if it did, returns would be lower. The table shows how the
fund's returns over different periods average out.
For context, the table has a broad-based market index (which, unlike the fund,
has no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
- ------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A Shares
- ------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
1989 11.30
1990 6.66
1991 12.78
1992 8.71
1993 13.2
1994 -5.51
1995 18.33
1996 3.33
1997 9.36
1998 5.76
Best quarter: 7.17%, Q2 1989 YTD return as of 9/30/1999: -2.74%
Worst quarter: -5.35%, Q1 1994
- ------------------------------------------------------------------------------
Since Since
Since 5/31/94 Since Since 4/20/76
12/31/97 Life of 12/31/93 12/31/88 Life of
1 Year Class B/C 5 Years 10 Years Class A
- ------------------------------------------------------------------------------
Class A 1.01% -- 4.99% 7.72% 7.71%
- ------------------------------------------------------------------------------
Class B 1.94 6.08% -- -- --
- ------------------------------------------------------------------------------
Class C 4.88 6.54 -- -- --
- ------------------------------------------------------------------------------
Index 6.48 7.72 6.22 8.22 *
- ------------------------------------------------------------------------------
Index: Lehman Brothers Municipal Bond Index, a widely recognized unmanaged
measure of approximately 15,000 bonds. Index returns assume reinvestment of
dividends and, unlike fund returns, do not reflect any fees, expenses or sales
charges.
- ------------------------------------------------------------------------------
* The index was not in existence on the date of Class A shares inception.
11 - Kemper Municipal Bond Fund
<PAGE>
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
- ------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- ------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- ------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed On Purchases
(as % of offering price) 4.50% None None
- ------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as % of
redemption proceeds) None* 4.00% 1.00%
- ------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- ------------------------------------------------------------------------------
Management Fee 0.41% 0.41% 0.41%
- ------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.75 0.75
- ------------------------------------------------------------------------------
Other Expenses** 0.29 0.37 0.39
- ------------------------------------------------------------------------------
Total Annual Operating Expenses 0.70 1.53 1.55
- ------------------------------------------------------------------------------
* The redemption of shares purchased at net asset value under the Large Order
NAV Purchase Privilege (see "Policies You Should Know About -- Policies
about transactions") may be subject to a deferred sales charge of 1.00% if
redeemed within one year of purchase and 0.50% if redeemed during the
second year following purchase.
** Includes cost of shareholder servicing, custody, accounting services and
similar expenses, which vary with fund size and other factors. "Other
Expenses" are restated to reflect changes in certain administrative and
blue sky fees.
Based on the figures above, this example is designed to help you compare the
expenses of each share class to those of other funds. The example assumes
operating expenses remain the same and that you invested $10,000, earned 5%
annual returns and reinvested all dividends and distributions. This is only an
example; actual expenses will be different.
- ------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- ------------------------------------------------------------------------------
Class A shares $518 $664 $822 $1,281
- ------------------------------------------------------------------------------
Class B shares 556 783 1,034 1,393
- ------------------------------------------------------------------------------
Class C shares 258 490 845 1,845
Expenses, assuming you kept your shares
- ------------------------------------------------------------------------------
Class A shares $518 $664 $822 $1,281
- ------------------------------------------------------------------------------
Class B shares 156 483 834 1,393
- ------------------------------------------------------------------------------
Class C shares 158 490 845 1,845
- ------------------------------------------------------------------------------
12 - Kemper Municipal Bond Fund
<PAGE>
THE INVESTMENT ADVISOR
The fund's investment advisor is Scudder Kemper Investments, Inc., located at
345 Park Avenue, New York, NY. Scudder Kemper has more than 80 years of
experience managing mutual funds and currently has more than $290 billion in
assets under management.
Scudder Kemper takes a team approach, bringing together professionals from many
investment disciplines. Supporting each team are Scudder Kemper's many
economists, research analysts, traders and other investment specialists, located
across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee. For the most recent fiscal year, the actual amount the fund paid
in management fees was 0.41% of its average daily net assets.
[ICON]--------------------------------------------------------------------------
FUND MANAGERS
Below are the people who handle the fund's day-to-day
management:
Philip G. Condon Matthew J. Caggiano
Co-Lead Portfolio Manager o Began investment career
o Began investment career in 1989
in 1976 o Joined the advisor
o Joined the advisor in 1983 in 1991
o Joined the fund team o Joined the fund team
in 1999 in 1999
Eleanor R. Brennan
Co-Lead Portfolio Manager
o Began investment career
in 1990
o Joined the advisor in 1995
o Joined the fund team
in 1998
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
- --------------------------------------------------------------------------------
13 - Kemper Municipal Bond Fund
<PAGE>
TICKER SYMBOLS CLASS: A) KCTAX B) KCTBX C) KCTCX
Kemper
California Tax-Free
Income Fund
FUND GOAL The fund seeks a high level of current income that is exempt from
California state and federal income taxes.
14 - Kemper California Tax-Free Income Fund
<PAGE>
The Fund's Main Strategy
The fund normally invests at least 80% of net assets in California municipal
securities and other securities whose income is free from regular federal income
tax.
The fund can buy many types of municipal securities. These may include revenue
bonds (which are backed by revenues from a particular source), general
obligation bonds (which are typically backed by the issuer's ability to levy
taxes), as well as, to a limited extent, municipal lease obligations and
investments representing an interest in these.
The portfolio managers look for securities that appear to offer the best income
potential, and normally prefer those that cannot be called in before maturity.
In making sell decisions, the managers typically consider a number of factors,
such as economic outlook and possible interest rate movements to specific
security characteristics and changes in supply and demand within the municipal
bond market.
Although the managers may adjust the fund's dollar-weighted average maturity
(the effective maturity of the fund's portfolio), they will keep it over 15
years under normal circumstances. Also, while they're permitted to use various
types of derivatives (contracts whose value is based on, for example, indices,
commodities or securities), the managers don't intend to use them as principal
investments.
[ICON]--------------------------------------------------------------------------
CREDIT QUALITY POLICIES
Normally, at least 90% of the fund's municipal securities are in the top four
grades of credit quality.
Up to 10% of the fund's municipal securities may be junk bonds, which are those
below the fourth credit grade (i.e., grade BB/Ba and below).
Compared to investment-grade bonds, junk bonds generally pay higher yields and
have higher volatility and higher risk of default on payments.
15 - Kemper California Tax-Free Income Fund
<PAGE>
The Main Risks Of Investing In The Fund
There are several risk factors that could reduce the yield you get from the
fund, cause you to lose money or make the fund perform less well than other
investments.
As with most bond funds, one of the most important factors is market interest
rates. A rise in interest rates generally means a fall in bond prices and, in
turn, a fall in the value of your investment. An increase in the fund's
dollar-weighted average maturity could make it more vulnerable to this risk.
Changes in interest rates will also affect the fund's yield; when rates decline,
fund yield tends to decline as well.
A second factor is credit quality. If a portfolio security declines in credit
quality it could hurt the fund's share price, or if a portfolio security goes
into default, it could hurt both the fund's yield and share price. This risk is
greater with junk bonds. The fact that the fund may emphasize securities from a
single state increases this risk, because any factors affecting the state or
region, such as economic or fiscal problems, could affect a large portion of the
fund's securities in a similar manner. For example, California residents' high
sensitivity to taxes could make it hard to raise taxes in order to meet
obligations.
Similarly, because the fund isn't diversified and can invest a larger percentage
of assets in a given issuer than a diversified fund, factors affecting the
issuer could affect fund performance.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of interest rate trends, credit
quality or other matters
o derivatives could produce disproportionate losses
o at times, it could be hard to value some investments or to get an attractive
price for them
o securities that rely on third-party insurers to raise their credit quality
could fall in price or go into default if the financial condition of the
insurer deteriorates
o political or legal actions could change the way the fund's dividends are
taxed
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
This fund may suit California taxpayers who are in a moderate to high tax
bracket and are seeking a long-term income investment that generates tax-free
income.
- --------------------------------------------------------------------------------
16 - Kemper California Tax-Free Income Fund
<PAGE>
Performance
The bar chart shows how the total returns for the fund's Class A shares have
varied from year to year, which may give some idea of risk. The chart doesn't
reflect sales loads; if it did, returns would be lower. The table shows how the
fund's returns over different periods average out.
For context, the table has a broad-based market index (which, unlike the fund,
has no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
- ------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A Shares
- ------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
1989 11.48
1990 6.7
1991 11.42
1992 8.25
1993 12.59
1994 -5.47
1995 19.48
1996 2.98
1997 8.59
1998 6.02
Best quarter: 7.72%, Q2 1989 YTD return as of 9/30/1999: -2.55%
Worst quarter: -4.51%, Q1 1994
Average Annual Total Returns (as of 12/31/1998)
- ------------------------------------------------------------------------------
Since Since
Since 5/31/94 Since Since 2/17/83
12/31/97 Life of 12/31/93 12/31/88 Life of
1 Year Class B/C 5 Years 10 Years Class A
- ------------------------------------------------------------------------------
Class A 1.20% -- 5.04% 7.52% 8.65%
- ------------------------------------------------------------------------------
Class B 2.17 6.20% -- -- --
- ------------------------------------------------------------------------------
Class C 5.00 6.39 -- -- --
- ------------------------------------------------------------------------------
Index 6.48 7.72 6.22 8.22 9.14*
- ------------------------------------------------------------------------------
Index: Lehman Brothers Municipal Bond Index, a widely recognized unmanaged
measure of approximately 15,000 bonds. Index returns assume reinvestment of
dividends and, unlike fund returns, do not reflect any fees, expenses or sales
charges.
- ------------------------------------------------------------------------------
* Since 2/28/83
17 - Kemper California Tax-Free Income Fund
<PAGE>
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
Fee Table Class A Class B Class C
- ------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- ------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed On Purchases
(as % of offering price) 4.50% None None
- ------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as % of
redemption proceeds) None* 4.00% 1.00%
- ------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- ------------------------------------------------------------------------------
Management Fee 0.52% 0.52% 0.52%
- ------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.75 0.75
- ------------------------------------------------------------------------------
Other Expenses** 0.31 0.39 0.42
- ------------------------------------------------------------------------------
Total Annual Operating Expenses 0.83 1.66 1.69
- ------------------------------------------------------------------------------
* The redemption of shares purchased at net asset value under the Large Order
NAV Purchase Privilege (see "Policies You Should Know About -- Policies
about transactions") may be subject to a deferred sales charge of 1.00% if
redeemed within one year of purchase and 0.50% if redeemed during the second
year following purchase.
** Includes cost of shareholder servicing, custody, accounting services and
similar expenses, which vary with fund size and other factors. "Other
Expenses" are restated to reflect changes in certain administrative and blue
sky fees.
Based on the figures above, this example is designed to help you compare the
expenses of each share class to those of other funds. The example assumes
operating expenses remain the same and that you invested $10,000, earned 5%
annual returns and reinvested all dividends and distributions. This is only an
example; actual expenses will be different.
- ------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- ------------------------------------------------------------------------------
Class A shares $531 $703 $890 $1,429
- ------------------------------------------------------------------------------
Class B shares 569 823 1,102 1,534
- ------------------------------------------------------------------------------
Class C shares 272 533 913 1,987
- ------------------------------------------------------------------------------
Expenses, assuming you kept your shares
- ------------------------------------------------------------------------------
Class A shares $531 $703 $890 $1,429
- ------------------------------------------------------------------------------
Class B shares 169 523 902 1,534
- ------------------------------------------------------------------------------
Class C shares 172 533 913 1,987
- ------------------------------------------------------------------------------
18 - Kemper California Tax-Free Income Fund
<PAGE>
THE INVESTMENT ADVISOR
The fund's investment advisor is Scudder Kemper Investments, Inc., located at
345 Park Avenue, New York, NY. Scudder Kemper has more than 80 years of
experience managing mutual funds and currently has more than $290 billion in
assets under management.
Scudder Kemper takes a team approach, bringing together professionals from many
investment disciplines. Supporting each team are Scudder Kemper's many
economists, research analysts, traders and other investment specialists, located
across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee. For the most recent fiscal year, the actual amount the fund paid
in management fees was 0.52% of its average daily net assets.
[ICON]--------------------------------------------------------------------------
FUND MANAGERS
Below are the people who handle the fund's day-to-day management:
Eleanor R. Brennan
Lead Portfolio Manager Matthew J. Caggiano
o Began investment career o Began investment career
in 1990 in 1989
o Joined the advisor o Joined the advisor
in 1995 in 1991
o Joined the fund team o Joined the fund team
in 1999 in 1999
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
- --------------------------------------------------------------------------------
19 - Kemper California Tax-Free Income Fund
<PAGE>
TICKER SYMBOLS CLASS: A) KFLAX B) KFLBX C) KFLCX
Kemper
Florida Tax-Free
Income Fund
FUND GOAL The fund seeks a high level of current income that is exempt
from federal income taxes.
20 - Kemper Florida Tax-Free Income Fund
<PAGE>
The Fund's Main Strategy
The fund normally invests at least 80% of net assets in municipal securities
whose income is free from regular federal income tax. In addition, the fund
invests at least 65% of net assets in Florida municipal securities and other
securities that are exempt from the Florida intangibles tax.
The fund can buy many types of municipal securities. These may include revenue
bonds (which are backed by revenues from a particular source), general
obligation bonds (which are typically backed by the issuer's ability to levy
taxes), as well as, to a limited extent, municipal lease obligations and
investments representing an interest in these.
The portfolio managers look for securities that appear to offer the best income
potential, and normally prefer those that cannot be called in before maturity.
In making sell decisions, the managers typically consider a number of factors,
such as economic outlook and possible interest rate movements to specific
security characteristics and changes in supply and demand within the municipal
bond market.
Although the managers may adjust the fund's dollar-weighted average maturity
(the effective maturity of the fund's portfolio), they will keep it over 15
years under normal circumstances. Also, while they're permitted to use various
types of derivatives (contracts whose value is based on, for example, indices,
commodities or securities), the managers don't intend to use them as principal
investments.
[ICON]--------------------------------------------------------------------------
CREDIT QUALITY POLICIES
Normally, at least 90% of the fund's municipal securities are in the top four
grades of credit quality.
Up to 10% of the fund's municipal securities may be junk bonds, which are those
below the fourth credit grade (i.e., grade BB/Ba and below).
Compared to investment-grade bonds, junk bonds generally pay higher yields and
have higher volatility and higher risk of default on payments.
21 - Kemper Florida Tax-Free Income Fund
<PAGE>
The Main Risks Of Investing In The Fund
There are several risk factors that could reduce the yield you get from the
fund, cause you to lose money or make the fund perform less well than other
investments.
As with most bond funds, one of the most important factors is market interest
rates. A rise in interest rates generally means a fall in bond prices and, in
turn, a fall in the value of your investment. An increase in the fund's
dollar-weighted average maturity could make it more vulnerable to this risk.
Changes in interest rates will also affect the fund's yield; when rates decline,
fund yield tends to decline as well.
A second factor is credit quality. If a portfolio security declines in credit
quality it could hurt the fund's share price, or if a portfolio security goes
into default, it could hurt both the fund's yield and share price. This risk is
greater with junk bonds. The fact that the fund may emphasize securities from a
single state increases this risk, because any factors affecting the state or
region, such as economic or fiscal problems, could affect a large portion of the
fund's securities in a similar manner. For example, the state's agricultural,
retirement-related or tourism industries could experience cyclical downturns or
long-term erosion, hurting the local economy.
Similarly, because the fund isn't diversified and can invest a larger percentage
of assets in a given issuer than a diversified fund, factors affecting the
issuer could affect fund performance.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of interest rate trends, credit
quality or other matters
o derivatives could produce disproportionate losses
o at times, it could be hard to value some investments or to get an attractive
price for them
o securities that rely on third-party insurers to raise their credit quality
could fall in price or go into default if the financial condition of the
insurer deteriorates
o political or legal actions could change the way the fund's dividends are
taxed
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
Florida residents who are looking for tax-free income and can invest for the
long term may be interested in this fund.
- --------------------------------------------------------------------------------
22 - Kemper Florida Tax-Free Income Fund
<PAGE>
Performance
The bar chart shows how the total returns for the fund's Class A shares have
varied from year to year, which may give some idea of risk. The chart doesn't
reflect sales loads; if it did, returns would be lower. The table shows how the
fund's returns over different periods average out.
For context, the table has a broad-based market index (which, unlike the fund,
has no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
- ------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A Shares
- ------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
1992 9.11
1993 13.50
1994 -3.91
1995 18.40
1996 2.70
1997 8.67
1998 5.48
Best quarter: 7.08%, Q1 1995 YTD return as of 9/30/1999: -3.56%
Worst quarter: -4.85%, Q1 1994
Average Annual Total Returns (as of 12/31/1998)
- ------------------------------------------------------------------------------
Since Since
Since 5/31/94 Since 4/25/91
12/31/97 Life of 12/31/93 Life of
1 Year Class B/C 5 Years Class A
- ------------------------------------------------------------------------------
Class A 0.70% -- 5.05% 7.49%
- ------------------------------------------------------------------------------
Class B 1.57 6.00% -- --
- ------------------------------------------------------------------------------
Class C 4.64 6.41 -- --
- ------------------------------------------------------------------------------
Index 6.48 7.72 6.22 7.87*
- ------------------------------------------------------------------------------
Index: Lehman Brothers Municipal Bond Index, a widely recognized unmanaged
measure of approximately 15,000 bonds. Index returns assume reinvestment of
dividends and, unlike fund returns, do not reflect any fees, expenses or sales
charges.
- ------------------------------------------------------------------------------
The table includes the effects of maximum sales loads. In both the table and the
chart, returns for 1993 would have been lower if operating expenses hadn't been
reduced.
* Since 4/30/91
23 - Kemper Florida Tax-Free Income Fund
<PAGE>
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
- ------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- ------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- ------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed On Purchases
(as % of offering price) 4.50% None None
- ------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as % of
redemption proceeds) None* 4.00% 1.00%
- ------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- ------------------------------------------------------------------------------
Management Fee 0.55% 0.55% 0.55%
- ------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.75 0.75
- ------------------------------------------------------------------------------
Other Expenses** 0.38 0.44 0.43
- ------------------------------------------------------------------------------
Total Annual Operating Expenses 0.93 1.74 1.73
- ------------------------------------------------------------------------------
* The redemption of shares purchased at net asset value under the Large Order
NAV Purchase Privilege (see "Policies You Should Know About -- Policies
about transactions") may be subject to a deferred sales charge of 1.00% if
redeemed within one year of purchase and 0.50% if redeemed during the second
year following purchase.
** Includes cost of shareholder servicing, custody, accounting services and
similar expenses, which vary with fund size and other factors. "Other
Expenses" are restated to reflect changes in certain administrative and blue
sky fees.
Based on the figures above, this example is designed to help you compare the
expenses of each share class to those of other funds. The example assumes
operating expenses remain the same and that you invested $10,000, earned 5%
annual returns and reinvested all dividends and distributions. This is only an
example; actual expenses will be different.
- ------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- ------------------------------------------------------------------------------
Class A shares $541 $733 $942 $1,542
- ------------------------------------------------------------------------------
Class B shares 577 848 1,144 1,640
- ------------------------------------------------------------------------------
Class C shares 276 545 939 2,041
- ------------------------------------------------------------------------------
Expenses, assuming you kept your shares
- ------------------------------------------------------------------------------
Class A shares $541 $733 $942 $1,542
- ------------------------------------------------------------------------------
Class B shares 177 548 944 1,640
- ------------------------------------------------------------------------------
Class C shares 176 545 939 2,041
- ------------------------------------------------------------------------------
24 - Kemper Florida Tax-Free Income Fund
<PAGE>
THE INVESTMENT ADVISOR
The fund's investment advisor is Scudder Kemper Investments, Inc., located at
345 Park Avenue, New York, NY. Scudder Kemper has more than 80 years of
experience managing mutual funds and currently has more than $290 billion in
assets under management.
Scudder Kemper takes a team approach, bringing together professionals from many
investment disciplines. Supporting each team are Scudder Kemper's many
economists, research analysts, traders and other investment specialists, located
across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee. For the most recent fiscal year, the actual amount the fund paid
in management fees was 0.55% of its average daily net assets.
FUND MANAGERS
Below are the people who handle the fund's day-to-day management:
Eleanor R. Brennan
Lead Portfolio Manager Rebecca L. Wilson
o Began investment career o Began investment career
in 1990 in 1986
o Joined the advisor o Joined the advisor
in 1995 in 1986
o Joined the fund team o Joined the fund team
in 1998 in 1999
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
- --------------------------------------------------------------------------------
25 - Kemper Florida Tax-Free Income Fund
<PAGE>
TICKER SYMBOLS CLASS: A) KNTAX B) KNTBX C) KNTCX
Kemper
New York Tax-Free
Income Fund
FUND GOAL The fund seeks a high level of current income that is exempt
from New York state and New York City income taxes and federal income taxes.
26 - Kemper New York Tax-Free Income Fund
<PAGE>
The Fund's Main Strategy
The fund normally invests at least 80% of net assets in municipal securities
whose income is free from regular federal income tax. In addition, the fund
invests at least 65% of net assets in New York municipal securities and other
securities that are exempt from New York state and New York City income taxes.
The fund can buy many types of municipal securities. These may include revenue
bonds (which are backed by revenues from a particular source), general
obligation bonds (which are typically backed by the issuer's ability to levy
taxes), as well as, to a limited extent, municipal lease obligations and
investments representing an interest in these.
The portfolio managers look for securities that appear to offer the best income
potential, and specific characteristics, such as call features. In making sell
decisions, the managers typically weigh a number of factors against each other,
from economic outlook and possible interest rate movements to changes in supply
and demand within the municipal bond market.
Although the managers may adjust the fund's dollar-weighted average maturity
(the effective maturity of the fund's portfolio) they will keep it over 15 years
under normal circumstances. Also, while they're permitted to use various types
of derivatives (contracts whose value is based on, for example, indices,
commodities or securities), the managers don't intend to use them as principal
investments.
[ICON]--------------------------------------------------------------------------
CREDIT QUALITY POLICIES
Normally, at least 90% of the fund's municipal securities are in the top four
grades of credit quality.
Up to 10% of the fund's municipal securities may be junk bonds, which are those
below the fourth credit grade (i.e., grade BB/Ba and below).
Compared to investment-grade bonds, junk bonds generally pay higher yields and
have higher volatility and higher risk of default on payments.
27 - Kemper New York Tax-Free Income Fund
<PAGE>
The Main Risks Of Investing In The Fund
There are several risk factors that could reduce the yield you get from the
fund, cause you to lose money or make the fund perform less well than other
investments.
As with most bond funds, one of the most important factors is market interest
rates. A rise in interest rates generally means a fall in bond prices and, in
turn, a fall in the value of your investment. An increase in the fund's
dollar-weighted average maturity could make it more vulnerable to this risk.
Changes in interest rates will also affect the fund's yield; when rates decline,
fund yield tends to decline as well.
A second factor is credit quality. If a portfolio security declines in credit
quality it could hurt the fund's share price, or if a portfolio security goes
into default, it could hurt both the fund's yield and share price. This risk is
greater with junk bonds. The fact that the fund may emphasize securities from a
single state increases this risk, because any factors affecting the state or
region, such as economic or fiscal problems, could affect a large portion of the
fund's securities in a similar manner. For example, a downturn in the financial
industry could bring on a fiscal crisis in New York City, which has experienced
such crises before.
Similarly, because the fund isn't diversified and can invest a larger percentage
of assets in a given issuer than a diversified fund, factors affecting the
issuer could affect fund performance.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of interest rate trends, credit
quality or other matters
o derivatives could produce disproportionate losses
o at times, it could be hard to value some investments or to get an attractive
price for them
o securities that rely on third-party insurers to raise their credit quality
could fall in price or go into default if the financial condition of the
insurer deteriorates
o political or legal actions could change the way the fund's dividends are
taxed
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
This fund may interest New York resident taxpayers who are looking for tax-free
income and are investing for the long term.
- --------------------------------------------------------------------------------
28 - Kemper New York Tax-Free Income Fund
<PAGE>
Performance
The bar chart shows how the total returns for the fund's Class A shares have
varied from year to year, which may give some idea of risk. The chart doesn't
reflect sales loads; if it did, returns would be lower. The table shows how the
fund's returns over different periods average out.
For context, the table has a broad-based market index (which, unlike the fund,
has no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
- ------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A Shares
- ------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
1989 12.01
1990 5.93
1991 13.39
1992 9.43
1993 12.95
1994 -4.95
1995 17.98
1996 2.54
1997 8.89
1998 6.00
Best quarter: 7.17%, Q2 1989 YTD return as of 9/30/1999: -3.45%
Worst quarter: -4.47%, Q1 1994
Average Annual Total Returns (as of 12/31/1998)
- ------------------------------------------------------------------------------
Since Since
Since 5/31/94 Since Since 12/31/85
12/31/97 Life of 12/31/93 12/31/88 Life of
1 Year Class B/C 5 Years 10 Years Class A
- ------------------------------------------------------------------------------
Class A 1.21% -- 4.85% 7.74% 7.40%
- ------------------------------------------------------------------------------
Class B 2.33 5.90% -- -- --
- ------------------------------------------------------------------------------
Class C 5.24 6.23 -- -- --
- ------------------------------------------------------------------------------
Index 6.48 7.72 6.22 8.22 8.65
- ------------------------------------------------------------------------------
Index: Lehman Brothers Municipal Bond Index, a widely recognized unmanaged
measure of approximately 15,000 bonds. Index returns assume reinvestment of
dividends and, unlike fund returns, do not reflect any fees, expenses or sales
charges.
- ------------------------------------------------------------------------------
The table includes the effects of maximum sales loads. In both the table and the
chart, returns for 1991 would have been lower if operating expenses hadn't been
reduced.
29 - Kemper New York Tax-Free Income Fund
<PAGE>
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
- ------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- ------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- ------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed On Purchases
(as % of offering price) 4.50% None None
- ------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as % of
redemption proceeds) None* 4.00% 1.00%
- ------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- ------------------------------------------------------------------------------
Management Fee 0.55% 0.55% 0.55%
- ------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.75 0.75
- ------------------------------------------------------------------------------
Other Expenses** 0.35 0.46 0.44
- ------------------------------------------------------------------------------
Total Annual Operating Expenses 0.90 1.76 1.74
- ------------------------------------------------------------------------------
* The redemption of shares purchased at net asset value under the Large Order
NAV Purchase Privilege (see "Policies You Should Know About -- Policies
about transactions") may be subject to a deferred sales charge of 1.00% if
redeemed within one year of purchase and 0.50% if redeemed during the second
year following purchase.
** Includes cost of shareholder servicing, custody, accounting services and
similar expenses, which vary with fund size and other factors. "Other
Expenses" are restated to reflect changes in certain administrative and blue
sky fees.
Based on the figures above, this example is designed to help you compare the
expenses of each share class to those of other funds. The example assumes
operating expenses remain the same and that you invested $10,000, earned 5%
annual returns and reinvested all dividends and distributions. This is only an
example; actual expenses will be different.
- ------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- ------------------------------------------------------------------------------
Class A shares $538 $724 $926 $1,508
- ------------------------------------------------------------------------------
Class B shares 579 854 1,154 1,637
- ------------------------------------------------------------------------------
Class C shares 277 548 944 2,052
- ------------------------------------------------------------------------------
Expenses, assuming you kept your shares
- ------------------------------------------------------------------------------
Class A shares $538 $724 $926 $1,508
- ------------------------------------------------------------------------------
Class B shares 179 554 954 1,637
- ------------------------------------------------------------------------------
Class C shares 177 548 944 2,052
- ------------------------------------------------------------------------------
30 - Kemper New York Tax-Free Income Fund
<PAGE>
THE INVESTMENT ADVISOR
The fund's investment advisor is Scudder Kemper Investments, Inc., located at
345 Park Avenue, New York, NY. Scudder Kemper has more than 80 years of
experience managing mutual funds and currently has more than $290 billion in
assets under management.
Scudder Kemper takes a team approach, bringing together professionals from many
investment disciplines. Supporting each team are Scudder Kemper's many
economists, research analysts, traders and other investment specialists, located
across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee. For the most recent fiscal year, the actual amount the fund paid
in management fees was 0.55% of its average daily net assets.
[ICON]--------------------------------------------------------------------------
FUND MANAGERS
Below are the people who handle the fund's day-to-day management:
Ashton P. Goodfield
Lead Portfolio Manager Eleanor R. Brennan
o Began investment career o Began investment career
in 1986 in 1990
o Joined the advisor o Joined the advisor
in 1986 in 1995
o Joined the fund team o Joined the fund team
in 1999 in 1998
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
- --------------------------------------------------------------------------------
31 - Kemper New York Tax-Free Income Fund
<PAGE>
TICKER SYMBOLS CLASS: A) KOHAX B) KOHBX C) KOHCX
Kemper
Ohio Tax-Free
Income Fund
FUND GOAL The fund seeks a high level of current income that is exempt from
Ohio state and federal income taxes.
32 - Kemper Ohio Tax-Free Income Fund
<PAGE>
The Fund's Main Strategy
The fund normally invests at least 80% of net assets in municipal securities
whose income is free from regular federal income tax. In addition, the fund
invests at least 65% of total assets in Ohio municipal securities and other
securities that are exempt from Ohio state income taxes.
The fund can buy many types of municipal securities. These may include revenue
bonds (which are backed by revenues from a particular source), general
obligation bonds (which are typically backed by the issuer's ability to levy
taxes), as well as, to a limited extent, municipal lease obligations and
investments representing an interest in these.
The portfolio managers look for securities that appear to offer the best income
potential, and normally prefer those that cannot be called in before maturity.
In making sell decisions, the managers typically consider a number of factors,
such as economic outlook and possible interest rate movements to specific
security characteristics and changes in supply and demand within the municipal
bond market.
Although the managers may adjust the fund's dollar-weighted average maturity
(the effective maturity of the fund's portfolio), they will keep it over 15
years under normal circumstances. Also, while they're permitted to use various
types of derivatives (contracts whose value is based on, for example, indices,
commodities or securities), the managers don't intend to use them as principal
investments.
[ICON---------------------------------------------------------------------------
CREDIT QUALITY POLICIES
Normally, at least 90% of the fund's municipal securities are in the top four
grades of credit quality.
Up to 10% of the fund's municipal securities may be junk bonds, which are those
below the fourth credit grade (i.e., grade BB/Ba and below).
Compared to investment-grade bonds, junk bonds generally pay higher yields and
have higher volatility and higher risk of default on payments.
33 - Kemper Ohio Tax-Free Income Fund
<PAGE>
The Main Risks Of Investing In The Fund
There are several risk factors that could reduce the yield you get from the
fund, cause you to lose money or make the fund perform less well than other
investments.
As with most bond funds, one of the most important factors is market interest
rates. A rise in interest rates generally means a fall in bond prices and, in
turn, a fall in the value of your investment. An increase in the fund's
dollar-weighted average maturity could make it more vulnerable to this risk.
Changes in interest rates will also affect the fund's yield; when rates decline,
fund yield tends to decline as well.
A second factor is credit quality. If a portfolio security declines in credit
quality it could hurt the fund's share price, or if a portfolio security goes
into default, it could hurt both the fund's yield and share price. This risk is
greater with junk bonds. The fact that the fund may emphasize securities from a
single state increases this risk, because any factors affecting the state or
region, such as economic or fiscal problems, could affect a large portion of the
fund's securities in a similar manner. For example, the state's manufacturing or
agricultural industries could experience cyclical downturns or long-term
erosion, hurting the local economy.
Similarly, because the fund isn't diversified and can invest a larger percentage
of assets in a given issuer than a diversified fund, factors affecting the
issuer could affect fund performance.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of interest rate trends, credit
quality or other matters
o derivatives could produce disproportionate losses
o at times, it could be hard to value some investments or to get an attractive
price for them
o securities that rely on third-party insurers to raise their credit quality
could fall in price or go into default if the financial condition of the
insurer deteriorates
o political or legal actions could change the way the fund's dividends are
taxed
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
This fund is designed for Ohio investors in moderate to high tax brackets who
are looking for a long-term investment that seeks to offer tax-free income.
- --------------------------------------------------------------------------------
34 - Kemper Ohio Tax-Free Income Fund
<PAGE>
Performance
The bar chart shows how the total returns for the fund's Class A shares have
varied from year to year, which may give some idea of risk. The chart doesn't
reflect sales loads; if it did, returns would be lower. The table shows how the
fund's returns over different periods average out.
For context, the table has a broad-based market index (which, unlike the fund,
has no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
- ------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A Shares
- ------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
1994 -3.67
1995 18.37
1996 3.14
1997 8.74
1998 5.85
Best quarter: 7.37%, Q4 1995 YTD return as of 9/30/1999: -2.22%
Worst quarter: -5.03%, Q1 1994
- ------------------------------------------------------------------------------
Average Annual Total Returns (as of 12/31/1998)
- ------------------------------------------------------------------------------
Since Since
Since 5/31/94 Since 3/22/93
12/31/97 Life of 12/31/93 Life of
1 Year Class B/C 5 Years Class A
- ------------------------------------------------------------------------------
Class A 1.09% -- 5.27% 6.29%
- ------------------------------------------------------------------------------
Class B 2.11 6.32% -- --
- ------------------------------------------------------------------------------
Class C 5.02 6.67 -- --
- ------------------------------------------------------------------------------
Index 6.48 7.72 6.22 6.86*
- ------------------------------------------------------------------------------
Index: Lehman Brothers Municipal Bond Index, a widely recognized unmanaged
measure of approximately 15,000 bonds. Index returns assume reinvestment of
dividends and, unlike fund returns, do not reflect any fees, expenses or sales
charges.
- ------------------------------------------------------------------------------
The table includes the effects of maximum sales loads. In both the table and the
chart, returns for 1993-1994 would have been lower if operating expenses hadn't
been reduced.
* Since 3/31/93
35 - Kemper Ohio Tax-Free Income Fund
<PAGE>
How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
- ------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- ------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- ------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed On Purchases
(as % of offering price) 4.50% None None
- ------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as % of
redemption proceeds) None* 4.00% 1.00%
- ------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- ------------------------------------------------------------------------------
Management Fee 0.55% 0.55% 0.55%
- ------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.75 0.75
- ------------------------------------------------------------------------------
Other Expenses** 0.51 0.56 0.59
- ------------------------------------------------------------------------------
Total Annual Operating Expenses 1.06 1.86 1.89
- ------------------------------------------------------------------------------
* The redemption of shares purchased at net asset value under the Large Order
NAV Purchase Privilege (see "Policies You Should Know About -- Policies
about transactions") may be subject to a deferred sales charge of 1.00% if
redeemed within one year of purchase and 0.50% if redeemed during the second
year following purchase.
** Includes cost of shareholder servicing, custody, accounting services and
similar expenses, which vary with fund size and other factors. "Other
Expenses" are restated to reflect changes in certain administrative and blue
sky fees.
Based on the figures above, this example is designed to help you compare the
expenses of each share class to those of other funds. The example assumes
operating expenses remain the same and that you invested $10,000, earned 5%
annual returns and reinvested all dividends and distributions. This is only an
example; actual expenses will be different.
- ------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- ------------------------------------------------------------------------------
Class A shares $553 $772 $1,008 $1,686
- ------------------------------------------------------------------------------
Class B shares 577 848 1,144 1,707
- ------------------------------------------------------------------------------
Class C shares 292 594 1,021 2,212
Expenses, assuming you kept your shares
- ------------------------------------------------------------------------------
Class A shares $553 $772 $1,008 $1,686
- ------------------------------------------------------------------------------
Class B shares 177 548 1,144 1,707
- ------------------------------------------------------------------------------
Class C shares 192 594 1,021 2,212
- ------------------------------------------------------------------------------
36 - Kemper Ohio Tax-Free Income Fund
<PAGE>
THE INVESTMENT ADVISOR
The fund's investment advisor is Scudder Kemper Investments, Inc., located at
345 Park Avenue, New York, NY. Scudder Kemper has more than 80 years of
experience managing mutual funds and currently has more than $290 billion in
assets under management.
Scudder Kemper takes a team approach, bringing together professionals from many
investment disciplines. Supporting each team are Scudder Kemper's many
economists, research analysts, traders and other investment specialists, located
across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee. For the most recent fiscal year, the actual amount the fund paid
in management fees was 0.55% of its average daily net assets.
[ICON]--------------------------------------------------------------------------
FUND MANAGERS
Below are the people who handle the fund's day-to-day management:
Eleanor R. Brennan
Lead Portfolio Manager Rebecca L. Wilson
o Began investment career o Began investment career
in 1990 in 1986
o Joined the advisor o Joined the advisor
in 1995 in 1986
o Joined the fund team o Joined the fund team
in 1999 in 1998
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
- --------------------------------------------------------------------------------
37 - Kemper Ohio Tax-Free Income Fund
<PAGE>
Other Policies And Risks
While the previous pages describe the main points of each fund's strategy and
risks, there are a few other issues to know about:
o Although major changes tend to be infrequent, each fund's Board could
change that fund's investment goal without seeking shareholder approval.
However, the policy of investing at least 80% of net assets in municipal
securities for each fund cannot be changed without shareholder approval.
o As a temporary defensive measure, any of these funds could shift up to 100%
of assets into investments such as taxable money market securities. This
could prevent losses, but would mean that the fund would not be pursuing
its goal.
o Scudder Kemper establishes a security's credit quality when it buys the
security, using independent ratings or, for unrated securities, its own
credit determination. When ratings don't agree, a fund may use the higher
rating. If a security's credit quality falls, the advisor will determine
whether selling it would be in the shareholders' best interests.
Keep in mind that there is no assurance that any mutual fund will achieve its
goal.
Year 2000 readiness
Like all mutual funds, these funds could be affected by the inability of some
computer systems to recognize the year 2000. Scudder Kemper has a year 2000
readiness program designed to address this problem, and has researched the
readiness of suppliers and business partners as well as issuers of securities
the funds own. Still, there's some risk that the year 2000 problem could
materially affect a fund's operations (such as its ability to calculate net
asset value and to handle purchases and redemptions), its investments or
securities markets in general.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
This prospectus doesn't tell you about every policy or risk of investing in a
fund. For more information, you may want to request a copy of the SAI (the back
cover has additional information on how to do this).
- --------------------------------------------------------------------------------
38 - Other Policies and Risks
<PAGE>
Financial Highlights
These tables are designed to help you understand each fund's financial
performance in recent years. The figures in the first part of each table are for
a single share. The total return figures represent the percentage that an
investor in a particular fund would have earned (or lost), assuming all
dividends and distributions were reinvested. This information has been audited
by Ernst & Young LLP, whose report, along with each fund's financial statements,
is included in that fund's annual report (see "Shareholder reports" on the back
cover).
Kemper Intermediate Municipal Bond Fund
Class A
- ------------------------------------------------------------------------------
Years ended September 30, 1999 1998 1997 1996 1995(a)
- ------------------------------------------------------------------------------
Net asset value, beginning of
period $10.53 $10.31 $10.06 $10.18 $9.50
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income .42 .45 .46 .46 .45
- ------------------------------------------------------------------------------
Net realized and
unrealized gain (loss) (.50) .29 .29 (.04) .68
- ------------------------------------------------------------------------------
Total from investment
operations (.08) .74 .75 .42 1.13
- ------------------------------------------------------------------------------
Less dividends:
- ------------------------------------------------------------------------------
Distribution from net
investment income .42 .45 .46 .46 .45
- ------------------------------------------------------------------------------
Distribution from net realized
gain .03 .07 .04 .08 --
- ------------------------------------------------------------------------------
Total dividends .45 .52 .50 .54 .45
- ------------------------------------------------------------------------------
Net asset value, end of period $10.00 $10.53 $10.31 $10.06 $10.18
- ------------------------------------------------------------------------------
Total return (not annualized) (%) (.79) 7.34 7.62 4.15 12.08
- ------------------------------------------------------------------------------
Ratios to average net assets
(annualized)
- ------------------------------------------------------------------------------
Expenses absorbed by the fund (%) .96 .96 .96 .92 .55
- ------------------------------------------------------------------------------
Net investment income (%) 4.15 4.35 4.55 4.45 5.00
- ------------------------------------------------------------------------------
Other ratios to average net assets
(annualized)
- ------------------------------------------------------------------------------
Expenses (%) .96 .96 .96 1.04 1.05
- ------------------------------------------------------------------------------
Net investment income (%) 4.15 4.35 4.55 4.33 4.50
- ------------------------------------------------------------------------------
(a) November 1, 1994 to September 30, 1995.
39 - Financial Highlights
<PAGE>
Class B
- ------------------------------------------------------------------------------
Years ended September 30, 1999 1998 1997 1996 1995(a)
- ------------------------------------------------------------------------------
Net asset value, beginning of
period $10.52 $10.31 $10.06 $10.18 $9.50
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income .34 .37 .38 .38 .36
- ------------------------------------------------------------------------------
Net realized and
unrealized gain (loss) (.49) .28 .29 (.04) .68
- ------------------------------------------------------------------------------
Total from investment
operations (.15) .65 .67 .34 1.04
- ------------------------------------------------------------------------------
Less dividends:
- ------------------------------------------------------------------------------
Distribution from net
investment income .34 .37 .38 .38 .36
- ------------------------------------------------------------------------------
Distribution from net realized
gain .03 .07 .04 .08 --
- ------------------------------------------------------------------------------
Total dividends .37 .44 .42 .46 .36
- ------------------------------------------------------------------------------
Net asset value, end of period $10.00 $10.52 $10.31 $10.06 $10.18
- ------------------------------------------------------------------------------
Total return (not annualized) (%) (1.48) 6.38 6.78 3.34 11.13
- ------------------------------------------------------------------------------
Ratios to average net assets
(annualized)
- ------------------------------------------------------------------------------
Expenses absorbed by the fund (%) 1.76 1.76 1.76 1.71 1.42
- ------------------------------------------------------------------------------
Net investment income (%) 3.35 3.55 3.75 3.66 4.13
- ------------------------------------------------------------------------------
Other ratios to average net assets
(annualized)
- ------------------------------------------------------------------------------
Expenses (%) 1.76 1.76 1.76 1.83 1.92
- ------------------------------------------------------------------------------
Net investment income (%) 3.35 3.55 3.75 3.54 3.63
- ------------------------------------------------------------------------------
(a) November 1, 1994 to September 30, 1995.
40 - Financial Highlights
<PAGE>
Class C
- ------------------------------------------------------------------------------
Years ended September 30, 1999 1998 1997 1996 1995(a)
- ------------------------------------------------------------------------------
Net asset value, beginning of
period $10.53 $10.31 $10.06 $10.19 $9.50
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income .34 .37 .39 .38 .38
- ------------------------------------------------------------------------------
Net realized and
unrealized gain (loss) (.50) .29 .29 (.05) .69
- ------------------------------------------------------------------------------
Total from investment
operations (.16) .66 .68 .33 1.07
- ------------------------------------------------------------------------------
Less dividends:
- ------------------------------------------------------------------------------
Distribution from net
investment income .34 .37 .39 .38 .38
- ------------------------------------------------------------------------------
Distribution from net realized
gain .03 .07 .04 .08 --
- ------------------------------------------------------------------------------
Total dividends .37 .44 .43 .46 .38
- ------------------------------------------------------------------------------
Net asset value, end of period $10.00 $10.53 $10.31 $10.06 $10.19
- ------------------------------------------------------------------------------
Total return (not annualized) (%) (1.56) 6.55 6.77 3.26 11.43
- ------------------------------------------------------------------------------
Ratios to average net assets
(annualized)
- ------------------------------------------------------------------------------
Expenses absorbed by the fund (%) 1.72 1.73 1.73 1.65 1.28
- ------------------------------------------------------------------------------
Net investment income (%) 3.39 3.58 3.78 3.72 4.27
- ------------------------------------------------------------------------------
Other ratios to average net assets
(annualized)
- ------------------------------------------------------------------------------
Expenses (%) 1.72 1.73 1.73 1.77 1.78
- ------------------------------------------------------------------------------
Net investment income (%) 3.39 3.58 3.78 3.60 3.77
- ------------------------------------------------------------------------------
Supplemental data for all classes
- ------------------------------------------------------------------------------
Years ended September 30, 1999 1998 1997 1996 1995(a)
- ------------------------------------------------------------------------------
Net assets at end of year
(in thousands) $25,463 25,173 21,889 21,901 16,169
- ------------------------------------------------------------------------------
Portfolio turnover rate
(annualized) (%) 30 14 80 80 60
- ------------------------------------------------------------------------------
(a) November 1, 1994 to September 30, 1995.
Notes for Intermediate Municipal Bond Fund: Scudder Kemper agreed to waive the
management fee of the Intermediate Municipal Fund from its inception, November
1, 1994, through April 30, 1995. Thereafter, the management fee was gradually
reinstated through April 30, 1996. "Other ratios to average net assets" are
computed without the waiver of management fee.
Total return does not reflect the effect of any sales charges.
41 - Financial Highlights
<PAGE>
Kemper Municipal Bond Fund
Class A
- ------------------------------------------------------------------------------
Years ended September 30, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net asset value, beginning of
period $10.61 $10.46 $10.18 $10.15 $9.69
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income .48 .52 .54 .55 .55
- ------------------------------------------------------------------------------
Net realized and
unrealized gain (loss) (.76) .37 .36 .06 .50
- ------------------------------------------------------------------------------
Total from investment
operations (.28) .89 .90 .61 1.05
- ------------------------------------------------------------------------------
Less dividends:
- ------------------------------------------------------------------------------
Distribution from net
investment income .48 .52 .54 .55 .55
- ------------------------------------------------------------------------------
Distribution from net realized
gain .25 .22 .08 .03 .04
- ------------------------------------------------------------------------------
Total dividends .73 .74 .62 .58 .59
- ------------------------------------------------------------------------------
Net asset value, end of period $9.60 $10.61 $10.46 $10.18 $10.15
- ------------------------------------------------------------------------------
Total return (%) (2.75) 8.84 9.15 6.00 11.15
- ------------------------------------------------------------------------------
Ratios to average net assets
- ------------------------------------------------------------------------------
Expenses (%) .69 .68 .68 .66 .66
- ------------------------------------------------------------------------------
Net investment income (%) 4.86 4.97 5.29 5.35 5.63
- ------------------------------------------------------------------------------
Class B
- ------------------------------------------------------------------------------
Years ended September 30, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net asset value, beginning of
period $10.58 $10.44 $10.15 $10.13 $9.67
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income .40 .43 .45 .46 .46
- ------------------------------------------------------------------------------
Net realized and
unrealized gain (loss) (.75) .36 .37 .05 .50
- ------------------------------------------------------------------------------
Total from investment
operations (.35) .79 .82 .51 .96
- ------------------------------------------------------------------------------
Less dividends:
- ------------------------------------------------------------------------------
Distribution from net
investment income .40 .43 .45 .46 .46
- ------------------------------------------------------------------------------
Distribution from net realized
gain .25 .22 .08 .03 .04
- ------------------------------------------------------------------------------
Total dividends .65 .65 .53 .49 .50
- ------------------------------------------------------------------------------
Net asset value, end of period $9.58 $10.58 $10.44 $10.15 $10.13
- ------------------------------------------------------------------------------
Total return (not annualized) (%) (3.48) 7.84 8.32 4.97 10.17
- ------------------------------------------------------------------------------
Ratios to average net assets (annualized)
- ------------------------------------------------------------------------------
Expenses (%) 1.53 1.52 1.55 1.54 1.55
- ------------------------------------------------------------------------------
Net investment income (%) 4.02 4.13 4.42 4.47 4.74
- ------------------------------------------------------------------------------
42 - Financial Highlights
<PAGE>
Class C
- ------------------------------------------------------------------------------
Years ended September 30, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net asset value, beginning
of period $10.62 $10.47 $10.18 $10.16 $9.69
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income .40 .43 .46 .46 .47
- ------------------------------------------------------------------------------
Net realized and
unrealized gain (loss) (.75) .37 .37 .05 .51
- ------------------------------------------------------------------------------
Total from investment
operations (.35) .80 .83 .51 .98
- ------------------------------------------------------------------------------
Less dividends:
- ------------------------------------------------------------------------------
Distribution from net
investment income .40 .43 .46 .46 .47
- ------------------------------------------------------------------------------
Distribution from net
realized gain .25 .22 .08 .03 .04
- ------------------------------------------------------------------------------
Total dividends .65 .65 .54 .49 .51
- ------------------------------------------------------------------------------
Net asset value, end of
period $9.62 $10.62 $10.47 $10.18 $10.16
- ------------------------------------------------------------------------------
Total return (not
annualized) (%) (3.47) 7.93 8.34 4.99 10.32
- ------------------------------------------------------------------------------
Ratios to average net assets
(annualized)
- ------------------------------------------------------------------------------
Expenses (%) 1.54 1.52 1.53 1.51 1.51
- ------------------------------------------------------------------------------
Net investment income (%) 4.01 4.13 4.44 4.50 4.78
- ------------------------------------------------------------------------------
Supplemental data for all classes
- ------------------------------------------------------------------------------
Years ended September 30, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net assets at end of year
(in thousands) $2,812,203 3,220,643 3,126,221 3,321,546 3,510,648
- ------------------------------------------------------------------------------
Portfolio turnover rate (%) 70 65 77 97 86
- ------------------------------------------------------------------------------
Note for Municipal Bond Fund: Total return does not reflect the effect of any
sales charges.
43 - Financial Highlights
<PAGE>
Kemper California Tax-Free Income Fund
Class A
- ------------------------------------------------------------------------------
Years ended August 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net asset value, beginning of
year $7.65 $7.52 $7.31 $7.35 $7.22
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income (loss) .34 .36 .38 .39 .39
- ------------------------------------------------------------------------------
Net realized and
unrealized gain (loss) (.41) .26 .25 .04 .17
- ------------------------------------------------------------------------------
Total from investment
operations (.07) .62 .63 .43 .56
- ------------------------------------------------------------------------------
Less dividends:
- ------------------------------------------------------------------------------
Distribution from net
investment income .34 .36 .38 .39 .39
- ------------------------------------------------------------------------------
Distribution from net realized
gain .14 .13 .04 .08 .04
- ------------------------------------------------------------------------------
Total dividends .48 .49 .42 .47 .43
- ------------------------------------------------------------------------------
Net asset value, end of year $7.10 $7.65 $7.52 $7.31 $7.35
- ------------------------------------------------------------------------------
Total return (%) (1.07) 8.56 8.78 5.92 8.13
- ------------------------------------------------------------------------------
Ratios to average net assets
- ------------------------------------------------------------------------------
Expenses (%) .82 .78 .79 .78 .74
- ------------------------------------------------------------------------------
Net investment income (%) 4.60 4.82 5.08 5.18 5.53
- ------------------------------------------------------------------------------
Class B
- ------------------------------------------------------------------------------
Years ended August 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net asset value, beginning of
year $7.66 $7.52 $7.32 $7.35 $7.22
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income (loss) .28 .30 .32 .32 .33
- ------------------------------------------------------------------------------
Net realized and
unrealized gain (loss) (.41) .27 .24 .05 .17
- ------------------------------------------------------------------------------
Total from investment
operations (.13) .57 .56 .37 .50
- ------------------------------------------------------------------------------
Less dividends:
- ------------------------------------------------------------------------------
Distribution from net
investment income .28 .30 .32 .32 .33
- ------------------------------------------------------------------------------
Distribution from net realized
gain .14 .13 .04 .08 .04
- ------------------------------------------------------------------------------
Total dividends .42 .43 .36 .40 .37
- ------------------------------------------------------------------------------
Net asset value, end of year $7.11 $7.66 $7.52 $7.32 $7.35
- ------------------------------------------------------------------------------
Total return (%) (1.90) 7.79 7.73 5.16 7.17
- ------------------------------------------------------------------------------
Ratios to average net assets
- ------------------------------------------------------------------------------
Expenses (%) 1.65 1.63 1.62 1.63 1.60
- ------------------------------------------------------------------------------
Net investment income (%) 3.75 3.97 4.25 4.33 4.67
- ------------------------------------------------------------------------------
44 - Financial Highlights
<PAGE>
Class C
- ------------------------------------------------------------------------------
Years ended August 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net asset value,
beginning of year $7.60 $7.50 $7.31 $7.34 $7.22
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income
(loss) .28 .30 .32 .32 .33
- ------------------------------------------------------------------------------
Net realized and
unrealized gain (loss) (.41) .23 .23 .05 .16
- ------------------------------------------------------------------------------
Total from investment
operations (.13) .53 .55 .37 .49
- ------------------------------------------------------------------------------
Less dividends:
- ------------------------------------------------------------------------------
Distribution from net
investment income .28 .30 .32 .32 .33
- ------------------------------------------------------------------------------
Distribution from net
realized gain .14 .13 .04 .08 .04
- ------------------------------------------------------------------------------
Total dividends .42 .43 .36 .40 .37
- ------------------------------------------------------------------------------
Net asset value, end of year $7.05 $7.60 $7.50 $7.31 $7.34
- ------------------------------------------------------------------------------
Total return (%) (1.91) 7.21 7.59 5.15 7.08
- ------------------------------------------------------------------------------
Ratios to average net assets
- ------------------------------------------------------------------------------
Expenses (%) 1.68 1.62 1.60 1.64 1.56
- ------------------------------------------------------------------------------
Net investment income (%) 3.71 3.98 4.27 4.32 4.71
- ------------------------------------------------------------------------------
Supplemental data for all classes
- ------------------------------------------------------------------------------
Years ended August 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net assets at end of year
(in thousands) $895,938 1,024,272 1,007,907 1,040,538 1,087,232
- ------------------------------------------------------------------------------
Portfolio turnover rate (%) 62 61 79 100 69
- ------------------------------------------------------------------------------
Note for California Tax-Free Income Fund: Total return does not reflect the
effect of any sales charges.
45 - Financial Highlights
<PAGE>
Kemper Florida Tax-Free Income Fund
Class A
- ------------------------------------------------------------------------------
Years ended August 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net asset value, beginning of
year $10.62 $10.42 $10.21 $10.27 $10.11
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income (loss) .47 .49 .51 .52 .53
- ------------------------------------------------------------------------------
Net realized and
unrealized gain (loss) (.68) .35 .33 .08 .30
- ------------------------------------------------------------------------------
Total from investment
operations (.21) .84 .84 .60 .83
- ------------------------------------------------------------------------------
Less dividends:
- ------------------------------------------------------------------------------
Distribution from net
investment income .47 .49 .51 .52 .53
- ------------------------------------------------------------------------------
Distribution from net realized
gain .22 .15 .12 .14 .14
- ------------------------------------------------------------------------------
Total dividends .69 .64 .63 .66 .67
- ------------------------------------------------------------------------------
Net asset value, end of year $9.72 $10.62 $10.42 $10.21 $10.27
- ------------------------------------------------------------------------------
Total return (%) (2.13) 8.27 8.37 5.83 8.62
- ------------------------------------------------------------------------------
Ratios to average net assets
- ------------------------------------------------------------------------------
Expenses (%) .88 .85 .83 .84 .80
- ------------------------------------------------------------------------------
Net investment income (%) 4.57 4.65 4.92 5.00 5.30
- ------------------------------------------------------------------------------
Class B
- ------------------------------------------------------------------------------
Years ended August 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net asset value, beginning of
year $10.60 $10.40 $10.19 $10.26 $10.10
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income (loss) .39 .40 .42 .43 .44
- ------------------------------------------------------------------------------
Net realized and
unrealized gain (loss) (.67) .35 .33 .07 .30
- ------------------------------------------------------------------------------
Total from investment
operations (.28) .75 .75 .50 .74
- ------------------------------------------------------------------------------
Less dividends:
- ------------------------------------------------------------------------------
Distribution from net
investment income .39 .40 .42 .43 .44
- ------------------------------------------------------------------------------
Distribution from net realized
gain .22 .15 .12 .14 .14
- ------------------------------------------------------------------------------
Total dividends .61 .55 .54 .57 .58
- ------------------------------------------------------------------------------
Net asset value, end of year $9.71 $10.60 $10.40 $10.19 $10.26
- ------------------------------------------------------------------------------
Total return (%) (2.85) 7.38 7.48 4.84 7.67
- ------------------------------------------------------------------------------
Ratios to average net assets
- ------------------------------------------------------------------------------
Expenses (%) 1.69 1.68 1.65 1.68 1.65
- ------------------------------------------------------------------------------
Net investment income (%) 3.76 3.82 4.10 4.16 4.45
- ------------------------------------------------------------------------------
46 - Financial Highlights
<PAGE>
Class C
- ------------------------------------------------------------------------------
Years ended August 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net asset value, beginning of
year $10.60 $10.41 $10.20 $10.26 $10.10
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income (loss) .39 .40 .42 .43 .45
- ------------------------------------------------------------------------------
Net realized and
unrealized gain (loss) (.67) .34 .33 .08 .30
- ------------------------------------------------------------------------------
Total from investment
operations (.28) .74 .75 .51 .75
- ------------------------------------------------------------------------------
Less dividends:
- ------------------------------------------------------------------------------
Distribution from net
investment income .39 .40 .42 .43 .45
- ------------------------------------------------------------------------------
Distribution from net realized
gain .22 .15 .12 .14 .14
- ------------------------------------------------------------------------------
Total dividends .61 .55 .54 .57 .59
- ------------------------------------------------------------------------------
Net asset value, end of year $9.71 $10.60 $10.41 $10.20 $10.26
- ------------------------------------------------------------------------------
Total return (%) (2.84) 7.26 7.49 4.97 7.84
- ------------------------------------------------------------------------------
Ratios to average net assets
- ------------------------------------------------------------------------------
Expenses (%) 1.68 1.69 1.64 1.64 1.52
- ------------------------------------------------------------------------------
Net investment income (%) 3.76 3.81 4.11 4.20 4.58
- ------------------------------------------------------------------------------
Supplemental data for all classes
- ------------------------------------------------------------------------------
Years ended August 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net assets at end of year
(in thousands) $92,480 107,531 103,845 108,105 117,292
- ------------------------------------------------------------------------------
Portfolio turnover rate (%) 56 70 87 119 96
- ------------------------------------------------------------------------------
Note for Florida Tax-Free Income Fund: Total return does not reflect the effect
of any sales charges.
47 - Financial Highlights
<PAGE>
Kemper New York Tax-Free Income Fund
Class A
- ------------------------------------------------------------------------------
Years ended August 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net asset value, beginning of
year $11.11 $10.93 $10.66 $10.80 $10.73
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income (loss) .49 .53 .56 .56 .58
- ------------------------------------------------------------------------------
Net realized and
unrealized gain (loss) (.63) .36 .36 -- .20
- ------------------------------------------------------------------------------
Total from investment
operations (.14) .89 .92 .56 .78
- ------------------------------------------------------------------------------
Less dividends:
- ------------------------------------------------------------------------------
Distribution from net
investment income .49 .53 .56 .56 .58
- ------------------------------------------------------------------------------
Distribution from net realized
gain .26 .18 .09 .14 .13
- ------------------------------------------------------------------------------
Total dividends .75 .71 .65 .70 .71
- ------------------------------------------------------------------------------
Net asset value, end of year $10.22 $11.11 $10.93 $10.66 $10.80
- ------------------------------------------------------------------------------
Total return (%) (1.52) 8.44 8.77 5.26 7.62
- ------------------------------------------------------------------------------
Ratios to average net assets
- ------------------------------------------------------------------------------
Expenses (%) .88 .84 .83 .83 .81
- ------------------------------------------------------------------------------
Net investment income (%) 4.49 4.81 5.15 5.15 5.47
- ------------------------------------------------------------------------------
Class B
- ------------------------------------------------------------------------------
Years ended August 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net asset value, beginning of
year $11.13 $10.94 $10.66 $10.80 $10.73
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income (loss) .39 .44 .47 .47 .48
- ------------------------------------------------------------------------------
Net realized and
unrealized gain (loss) (.64) .37 .37 -- .20
- ------------------------------------------------------------------------------
Total from investment
operations (.25) .81 .84 .47 .68
- ------------------------------------------------------------------------------
Less dividends:
- ------------------------------------------------------------------------------
Distribution from net
investment income .39 .44 .47 .47 .48
- ------------------------------------------------------------------------------
Distribution from net realized
gain .26 .18 .09 .14 .13
- ------------------------------------------------------------------------------
Total dividends .65 .62 .56 .61 .61
- ------------------------------------------------------------------------------
Net asset value, end of year $10.23 $11.13 $10.94 $10.66 $10.80
- ------------------------------------------------------------------------------
Total return (%) (2.44) 7.65 7.96 4.36 6.69
- ------------------------------------------------------------------------------
Ratios to average net assets
- ------------------------------------------------------------------------------
Expenses (%) 1.73 1.67 1.67 1.69 1.67
- ------------------------------------------------------------------------------
Net investment income (%) 3.64 3.98 4.31 4.29 4.61
- ------------------------------------------------------------------------------
48 - Financial Highlights
<PAGE>
Class C
- ------------------------------------------------------------------------------
Years ended August 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net asset value, beginning of
year $11.10 $10.92 $10.65 $10.79 $10.73
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income (loss) .40 .44 .47 .47 .48
- ------------------------------------------------------------------------------
Net realized and
unrealized gain (loss) (.63) .36 .36 -- .19
- ------------------------------------------------------------------------------
Total from investment
operations (.23) .80 .83 .47 .67
- ------------------------------------------------------------------------------
Less dividends:
- ------------------------------------------------------------------------------
Distribution from net
investment income .40 .44 .47 .47 .48
- ------------------------------------------------------------------------------
Distribution from net realized
gain .26 .18 .09 .14 .13
- ------------------------------------------------------------------------------
Total dividends .66 .62 .56 .61 .61
- ------------------------------------------------------------------------------
Net asset value, end of year $10.21 $11.10 $10.92 $10.65 $10.79
- ------------------------------------------------------------------------------
Total return (%) (2.33) 7.56 7.87 4.38 6.64
- ------------------------------------------------------------------------------
Ratios to average net assets
- ------------------------------------------------------------------------------
Expenses (%) 1.71 1.67 1.65 1.67 1.62
- ------------------------------------------------------------------------------
Net investment income (%) 3.65 3.98 4.33 4.31 4.66
- ------------------------------------------------------------------------------
Supplemental data for all classes
- ------------------------------------------------------------------------------
Years ended August 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net assets at end of year
(in thousands) $253,442 284,320 285,934 302,346 319,477
- ------------------------------------------------------------------------------
Portfolio turnover rate (%) 69 77 92 104 112
- ------------------------------------------------------------------------------
Note for New York Tax-Free Income Fund: Total return does not reflect the effect
of any sales charges.
49 - Financial Highlights
<PAGE>
Kemper Ohio Tax-Free Income Fund
Class A
- ------------------------------------------------------------------------------
Years ended August 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net asset value, beginning of
year $10.54 $10.22 $9.93 $9.81 $9.56
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income (loss) .46 .47 .47 .48 .50
- ------------------------------------------------------------------------------
Net realized and
unrealized gain (loss) (.53) .39 .32 .12 .25
- ------------------------------------------------------------------------------
Total from investment
operations (.07) .86 .79 .60 .75
- ------------------------------------------------------------------------------
Less dividends:
- ------------------------------------------------------------------------------
Distribution from net
investment income .46 .47 .47 .48 .50
- ------------------------------------------------------------------------------
Distribution from net realized
gain .04 .07 .03 -- --
- ------------------------------------------------------------------------------
Total dividends .50 .54 .50 .48 .50
- ------------------------------------------------------------------------------
Net asset value, end of year $9.97 $10.54 $10.22 $9.93 $9.81
- ------------------------------------------------------------------------------
Total return (%) (.66) 8.57 8.17 6.16 8.20
- ------------------------------------------------------------------------------
Ratios to average net assets
- ------------------------------------------------------------------------------
Expenses (%) .94 .87 .89 .91 .63
- ------------------------------------------------------------------------------
Net investment income (%) 4.38 4.51 4.69 4.78 5.07
- ------------------------------------------------------------------------------
Class B
Years ended August 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net asset value, beginning of
year $10.54 $10.22 $9.93 $9.81 $9.56
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income (loss) .38 .38 .39 .39 .44
- ------------------------------------------------------------------------------
Net realized and
unrealized gain (loss) (.53) .39 .32 .12 .25
- ------------------------------------------------------------------------------
Total from investment
operations (.15) .77 .71 .51 .69
- ------------------------------------------------------------------------------
Less dividends:
- ------------------------------------------------------------------------------
Distribution from net
investment income .38 .38 .39 .39 .44
- ------------------------------------------------------------------------------
Distribution from net realized
gain .04 .07 .03 -- --
- ------------------------------------------------------------------------------
Total dividends .42 .45 .42 .39 .44
- ------------------------------------------------------------------------------
Net asset value, end of year $9.97 $10.54 $10.22 $9.93 $9.81
- ------------------------------------------------------------------------------
Total return (%) (1.55) 7.69 7.29 5.30 7.57
- ------------------------------------------------------------------------------
Ratios to average net assets
- ------------------------------------------------------------------------------
Expenses (%) 1.74 1.69 1.70 1.73 1.32
- ------------------------------------------------------------------------------
Net investment income (%) 3.57 3.69 3.88 3.96 4.58
- ------------------------------------------------------------------------------
50 - Financial Highlights
<PAGE>
Class C
- ------------------------------------------------------------------------------
Years ended August 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net asset value, beginning of
year $10.54 $10.22 $9.93 $9.81 $9.56
- ------------------------------------------------------------------------------
Income from investment operations:
- ------------------------------------------------------------------------------
Net investment income (loss) .37 .38 .39 .39 .44
- ------------------------------------------------------------------------------
Net realized and
unrealized gain (loss) (.53) .39 .32 .12 .25
- ------------------------------------------------------------------------------
Total from investment
operations (.16) .77 .71 .51 .69
- ------------------------------------------------------------------------------
Less dividends:
- ------------------------------------------------------------------------------
Distribution from net
investment income .37 .38 .39 .39 .44
- ------------------------------------------------------------------------------
Distribution from net realized
gain .04 .07 .03 -- --
- ------------------------------------------------------------------------------
Total dividends .41 .45 .42 .39 .44
- ------------------------------------------------------------------------------
Net asset value, end of year $9.97 $10.54 $10.22 $9.93 $9.81
- ------------------------------------------------------------------------------
Total return (%) (1.48) 7.70 7.32 5.28 7.56
- ------------------------------------------------------------------------------
Ratios to average net assets
- ------------------------------------------------------------------------------
Expenses (%) 1.77 1.67 1.68 1.74 1.27
- ------------------------------------------------------------------------------
Net investment income (%) 3.53 3.71 3.90 3.95 4.63
- ------------------------------------------------------------------------------
Supplemental data for all classes
- ------------------------------------------------------------------------------
Years ended August 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net assets at end of year
(in thousands) $44,864 43,841 39,468 37,100 31,450
- ------------------------------------------------------------------------------
Portfolio turnover rate (%) 29 15 52 86 90
- ------------------------------------------------------------------------------
Note for Ohio Tax-Free Income Fund: Scudder Kemper Investments, Inc. agreed to
temporarily waive and absorb certain operating expenses of the fund for the
fiscal year ended August 31, 1995. Absent this waiver, the ratios of expenses to
average net assets would have increased and the ratios of net investment income
to average net assets would have decreased by the following amounts:
0.20% for Class A, 0.43% for Class B and 0.42% for Class C, respectively.
Total return does not reflect the effect of any sales charges.
51 - Financial Highlights
<PAGE>
Investing in the funds
The following pages tell you about many of the services, choices and benefits of
being a Kemper Funds shareholder. You'll also find information on how to check
the status of your account using the method that's most convenient for you.
You can find out more about the topics covered here by speaking with your
financial representative or a representative of your workplace retirement plan
or other investment provider.
<PAGE>
Choosing A Share Class
In this prospectus, there are three share classes for each fund. Each class has
its own fees and expenses, offering you a choice of cost structures.
Before you invest, take a moment to look over the characteristics of each share
class, so that you can be sure to choose the class that's right for you. You may
want to ask your financial representative to help you with this decision.
We describe each share class in detail on the following pages. But first, you
may want to look at the table below, which gives you a brief comparison of the
main features of each class.
- ------------------------------------------------------------------------------
Classes and features Points to help you compare
- ------------------------------------------------------------------------------
Class A
o Sales charges of up to 4.5% (2.75% o Some investors may be able to
for Kemper Intermediate Municipal reduce or eliminate their sales
Bond Fund), charged when you buy charges; see next page
shares
o Total annual operating expenses
o In most cases, no charges when you are lower than those for Class B
sell shares or Class C
o No distribution fee
- ------------------------------------------------------------------------------
Class B
o No charges when you buy shares o The deferred sales charge rate
falls to zero after six years
o Deferred sales charge of up to
4.00%, charged when you sell shares o Shares automatically convert to
you bought within the last six years Class A after six years, which
means lower annual expenses going
o 0.75% distribution fee forward
- ------------------------------------------------------------------------------
Class C
o No charges when you buy shares o The deferred sales charge rate is
lower, but your shares never
o Deferred sales charge of 1.00%, convert to Class A, so annual
charged when you sell shares you expenses remain higher
bought within the last year
o 0.75% distribution fee
- ------------------------------------------------------------------------------
53 - Choosing A Share Class
<PAGE>
Class A shares
Class A shares have a sales charge that varies with the amount you invest:
Sales charge Sales charge as
as a % of a % of your net
Amount of Purchase offering price investment*
- ----------------------------------------------------------
All funds except Intermediate Municipal Bond Fund
- ----------------------------------------------------------
Less than $100,000 4.50% 4.71%
- ----------------------------------------------------------
$100,000 but less 3.50 3.63
than $250,000
- ----------------------------------------------------------
$250,000 but less 2.60 2.67
than $500,000
- ----------------------------------------------------------
$500,000 but less 2.00 2.04
than $1 million
- ----------------------------------------------------------
$1 million and over 0.00** 0.00**
- ----------------------------------------------------------
Intermediate Municipal Bond Fund only
- ----------------------------------------------------------
Less than $100,000 2.75 2.83
- ----------------------------------------------------------
$100,000 but less 2.50 2.56
than $250,000
- ----------------------------------------------------------
$250,000 but less 2.00 2.04
than $500,000
- ----------------------------------------------------------
$500,000 but less 1.50 1.52
than $1 million
- ----------------------------------------------------------
$1 million and over 0.00** 0.00**
- ----------------------------------------------------------
* Rounded to nearest one-hundredth percent.
** Redemption of shares may be subject to a contingent deferred sales charge
as discussed below.
The offering price includes the sales charge.
54 - Choosing A Share Class
<PAGE>
You may be able to lower your Class A sales charges if:
o you plan to invest at least $100,000 over the next 24 months ("letter of
intent")
o the amount of Kemper funds you already own (including shares in certain other
Kemper funds) plus the amount you're investing now is at least $100,000
("cumulative discount")
o you are investing a total of $100,000 or more in several Kemper funds at once
("combined purchases")
The point of these three features is to let you count investments made at other
times for purposes of calculating your present sales charge. Any time you can
use the privileges to "move" your investment into a lower sales charge category
in the table above, it's generally beneficial for you to do so. You can take
advantage of these methods by filling in the appropriate sections of your
application or by speaking with your financial representative.
55 - Choosing A Share Class
<PAGE>
You may be able to buy Class A shares without sales charges when you are:
o reinvesting dividends or distributions
o participating in an investment advisory program under which you pay a fee to
an investment advisor or other firm for portfolio management services
There are a number of additional provisions that apply in order to be eligible
for a sales charge waiver. The fund may waive the sales charges for investors in
other situations as well. Your financial representative or Kemper can answer
your questions and help you determine if you are eligible.
If you're investing $1 million or more, either as a lump sum or through one of
the sales charge reduction features described on the previous page, you may be
eligible to buy Class A shares without sales charges. However, you may be
charged a contingent deferred sales charge (CDSC) of 1.00% on any shares you
sell within the first year of owning them, and a similar charge of 0.50% on
shares you sell within the second year of owning them. ("Large Order NAV
Purchase Privilege"). This CDSC is waived under certain circumstances (see
"Policies You Should Know About"). Your financial representative or Kemper can
answer your questions and help you determine if you're eligible.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
Class A shares may make sense for long-term investors, especially those who are
eligible for reduced or eliminated sales charges.
- --------------------------------------------------------------------------------
56 - Choosing A Share Class
<PAGE>
Class B shares
With Class B shares, you pay no up-front sales charges to the fund. Class B
shares do have a 12b-1 plan, under which a distribution fee of 0.75% is deducted
from fund assets each year. This means the annual expenses for Class B shares
are somewhat higher (and their performance correspondingly lower) compared to
Class A shares, which don't have a 12b-1 fee. After six years, Class B shares
automatically convert to Class A, which has the net effect of lowering the
annual expenses from the seventh year on.
Class B shares have a CDSC. This charge declines over the years you own shares,
and disappears completely after six years of ownership. But for any shares you
sell within those six years, you may be charged as follows:
Year after you bought shares CDSC on shares you sell
- -----------------------------------------------------------
First year 4.00%
- -----------------------------------------------------------
Second or third year 3.00
- -----------------------------------------------------------
Fourth or fifth year 2.00
- -----------------------------------------------------------
Sixth year 1.00
- -----------------------------------------------------------
Seventh year and later None (automatic conversion
to Class A)
- -----------------------------------------------------------
This CDSC is waived under certain circumstances (see "Policies You Should Know
About"). Your financial representative or Kemper can answer your questions and
help you determine if you're eligible.
While Class B shares don't have any front-end sales charges, their higher annual
expenses (due to 12b-1 fees) mean that over the years you could end up paying
more than the equivalent of the maximum allowable front-end sales charge.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
Class B shares can be a logical choice for long-term investors who would prefer
to see all of their investment go to work right away, and can accept somewhat
higher annual expenses in exchange.
- --------------------------------------------------------------------------------
57 - Choosing A Share Class
<PAGE>
Class C shares
Like Class B shares, Class C shares have no up-front sales charges and have a
12b-1 Plan under which a distribution fee of 0.75% is deducted from fund assets
each year. Because of this fee, the annual expenses for Class C shares are
similar to those of Class B shares, but higher than those for Class A shares
(and the performance of Class C shares is correspondingly lower than that of
Class A).
Unlike Class B shares, Class C shares do NOT automatically convert to Class A
after six years, so they continue to have higher annual expenses.
Class C shares have a CDSC, but only on shares you sell within one year of
buying them:
Year after you bought shares CDSC on shares you sell
- -------------------------------------------------------------
First year 1.00%
- -------------------------------------------------------------
Second year and later None
- -------------------------------------------------------------
This CDSC is waived under certain circumstances (see "Policies You Should Know
About"). Your financial representative or Kemper can answer your questions and
help you determine if you're eligible.
While Class C shares don't have any front-end sales charges, their higher annual
expenses (due to 12b-1 fees) mean that over the years you could end up paying
more than the equivalent of the maximum allowable front-end sales charge.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
Class C shares may appeal to investors who plan to sell some or all shares
within six years of buying them, or who aren't certain of their investment time
horizon.
- --------------------------------------------------------------------------------
58 - Choosing A Share Class
<PAGE>
How To Buy Shares
Once you've chosen a share class, use these instructions to make investments.
Make out any checks to "Kemper Funds."
- ------------------------------------------------------------------------------
First investment Additional investments
- ------------------------------------------------------------------------------
$1,000 or more for regular accounts $100 or more for regular accounts
$250 or more for IRAs $50 or more for IRAs
$50 or more with an Automatic $50 or more with an Automatic
Investment Plan Investment Plan
- ------------------------------------------------------------------------------
Through a financial representative
o Contact your representative using o Contact your representative using
the method that's most convenient the method that's most convenient
for you for you
- ------------------------------------------------------------------------------
By mail or express mail (see below)
o Fill out and sign an application o Send a check and a Kemper
investment slip to us at the
o Send it to us at the appropriate appropriate address below
address, along with an investment
check o If you don't have an investment
slip, simply include a letter
with your name, account number,
the full name of the fund and the
share class and your investment
instructions
- ------------------------------------------------------------------------------
By wire
o Call (800) 621-1048 for instructions o Call (800) 621-1048 for instructions
- ------------------------------------------------------------------------------
By phone
-- o Call (800) 621-1048 for instructions
- ------------------------------------------------------------------------------
With an automatic investment plan
-- o To set up regular investments,
call (800) 621-1048
- ------------------------------------------------------------------------------
On the internet
o Follow the instructions at o Follow the instructions at
www.kemper.com www.kemper.com
- ------------------------------------------------------------------------------
Regular mail: Kemper Funds, PO Box 219415, Kansas City, MO 64121-9415
Express, registered, or certified mail:
Kemper Service Company, 811 Main Street, Kansas City, MO 64105-2005
Fax number: (800) 818-7526 (for exchanging and selling only)
59 - How To Buy Shares
<PAGE>
How to Exchange Or Sell Shares
Use these instructions to exchange or sell shares in your account.
- ------------------------------------------------------------------------------
Exchanging into another fund Selling shares
- ------------------------------------------------------------------------------
$1,000 or more to open a new account Some transactions, including most
for over $50,000, can only be
$100 or more for exchanges between ordered in writing with a signature
existing accounts guarantee; if you're in doubt, see
page 63
- ------------------------------------------------------------------------------
Through a financial representative
o Contact your representative by the o Contact your representative by
method that's most convenient for the method that's most convenient
you for you
- ------------------------------------------------------------------------------
By phone or wire
o Call (800) 621-1048 for instructions o Call (800) 621-1048 for instructions
- ------------------------------------------------------------------------------
By mail, express mail or fax
(see previous page)
Write a letter that includes: Write a letter that includes:
o the fund, class and account number o the fund, class and account
you're exchanging out of number from which you want to
sell shares
o the dollar amount or number of
shares you want to exchange o the dollar amount or number of
shares you want to sell
o the name and class of the fund you
want to exchange into o your name(s), signature(s) and
address, as they appear on your
o your name(s), signature(s) and account
address, as they appear on your
account o a daytime telephone number
o a daytime telephone number
- ------------------------------------------------------------------------------
With a systematic exchange plan With a systematic withdrawal plan
o To set up regular exchanges from a o To set up regular cash payments
Kemper fund account, call from a Kemper fund account, call
(800) 621-1048 (800) 621-1048
- ------------------------------------------------------------------------------
On the internet
o Follow the instructions at o Follow the instructions at
www.kemper.com www.kemper.com
- ------------------------------------------------------------------------------
60 - How To Exchante Or Sell Shares
<PAGE>
Policies You Should Know About
Along with the instructions on the previous pages, the policies below may affect
you as a shareholder.
If you are investing through an investment provider, check the materials you got
from them. As a general rule, you should follow the information in those
materials wherever it contradicts the information given here. Please note that
an investment provider may charge its own fees.
Policies about transactions
The funds are open for business each day the New York Stock Exchange is open.
Each fund calculates its share price every business day, as of the close of
regular trading on the Exchange (typically 3 p.m. central time, but sometimes
earlier, as in the case of scheduled half-day trading or unscheduled suspensions
of trading).
You can place an order to buy or sell shares at any time. Once your order is
received by Kemper Service Company, and they have determined that it is a "good
order," it will be processed at the next share price calculated.
Because orders placed through investment providers must be forwarded to Kemper
Service Company before they can be processed, you'll need to allow extra time. A
representative of your investment provider should be able to tell you when your
order will be processed.
Ordinarily, your investment will start to accrue dividends the next business day
after your purchase is processed. When selling shares you'll generally receive
the dividend for the day on which your shares were sold. The level of income
dividends will vary from one class to another based on the class' fees and
expenses.
61 - Policies You Should Know About
<PAGE>
KemperACCESS, the Kemper Automated Information Line, is available 24 hours a day
by calling (800) 972-3060. You can use Kemper ACCESS to get information on
Kemper funds generally and on accounts held directly at Kemper. You can also use
it to make exchanges and sell shares.
EXPRESS-Transfer lets you set up a link between a Kemper account and a bank
account. Once this link is in place, you can move money between the two with a
phone call. You'll need to make sure your bank has Automated Clearing House
(ACH) services. Transactions take two to three days to be completed, and there
is a $100 minimum. To set up EXPRESS-Transfer on a new account, see the account
application; to add it to an existing account, call (800) 621-1048.
Share certificates are available on written request. However, we don't recommend
them unless you want them for a specific purpose, because they can only be sold
by mailing them in, and if they're ever lost they're difficult and expensive to
replace.
When you call us to sell shares, we may record the call, ask you for certain
information or take other steps designed to prevent fraudulent orders. It's
important to understand that as long as we take reasonable steps to ensure that
an order appears genuine, we are not responsible for any losses that may occur.
When you ask us to send or receive a wire, please note that while we don't
charge a fee to send or receive wires, it's possible that your bank may do so.
Wire transactions are completed within 24 hours. The funds can only send or
accept wires of $1,000 or more.
Exchanges among Kemper funds are an option for most shareholders. Exchanges are
a shareholder privilege, not a right: we may reject any exchange order,
particularly when there appears to be a pattern of "market timing" or other
frequent purchases and sales. We may also reject or limit purchase orders, for
these or other reasons.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
The Kemper Web site can be a valuable resource for shareholders with Internet
access. Go to www. kemper.com to get up-to-date information, review balances or
even place orders for exchanges.
- --------------------------------------------------------------------------------
62 - Policies You Should Know About
<PAGE>
When you want to sell more than $50,000 worth of shares, or send the proceeds to
a third party or to a new address, you'll usually need to place your order in
writing and include a signature guarantee. The only exception is if you want
money wired to a bank account that is already on file with us; in that case, you
don't need a signature guarantee. Also, you don't need a signature guarantee for
an exchange, although we may require one in certain other circumstances.
A signature guarantee is simply a certification of your signature -- a valuable
safeguard against fraud. You can get a signature guarantee from most brokers and
most banks, savings institutions and credit unions. Note that you can't get a
signature guarantee from a notary public.
When you sell shares that have a CDSC, we calculate the CDSC as a percentage of
what you paid for the shares or what you are selling them for -- whichever
results in the lowest charge to you. In processing orders to sell shares, we
turn to the shares with the lowest CDSC first. Exchanges from one Kemper fund
into another don't affect CDSCs: for each investment you make, the date you
first bought Kemper shares is the date we use to calculate a CDSC on that
particular investment.
There are certain cases in which you may be exempt from a CDSC. These include:
o the death or disability of an account owner (including a joint owner)
o withdrawals made through a systematic withdrawal plan. Such withdrawals may
be made at a maximum of 10% per year of the net asset value of the account.
o withdrawals related to certain retirement or benefit plans
o redemptions for certain loan advances, hardship provisions or returns of
excess contributions from retirement plans
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
If you ever have difficulty placing an order by phone or fax, you can always
send us your order in writing.
- --------------------------------------------------------------------------------
63 - Policies You Should Know About
<PAGE>
o For Class A shares purchased through the Large Order NAV Purchase Privilege,
redemption of shares whose dealer of record at the time of the investment
notifies Kemper Distributors that the dealer waives the applicable
commission.
o For Class C shares, redemption of shares purchased through a dealer-sponsored
asset allocation program maintained on an omnibus record-keeping system,
provided the dealer of record has waived the advance of the first year
administrative services and distribution fees applicable to such shares and
has agreed to receive such fees quarterly.
In each of these cases, there are a number of additional provisions that apply
in order to be eligible for a CDSC waiver. Your financial representative or
Kemper can answer your questions and help you determine if you are eligible.
If you sell shares in a Kemper fund and then decide to invest with Kemper again
within six months, you can take of advantage of the "reinstatement feature."
With this feature, you can put your money back into the same class of a Kemper
fund at its current NAV and for purposes of sales charges it will be treated as
if it had never left Kemper. You'll be reimbursed (in the form of fund shares)
for any CDSC you paid when you sold. Future CDSC calculations will be based on
your original investment date, rather than your reinstatement date. There is
also an option that lets investors who sold Class B shares buy Class A shares
with no sales charge, although they won't be reimbursed for any CDSC they paid.
You can only use the reinstatement feature once for any given group of shares.
To take advantage of this feature, contact Kemper or your financial
representative.
64 - Policies You Should Know About
<PAGE>
Money from shares you sell is normally sent out within one business day of when
your order is processed (not when it is received), although it could be delayed
for up to seven days. There are also two circumstances when it could be longer:
when you are selling shares you bought recently by check and that check hasn't
cleared yet (maximum delay: 10 days) or when unusual circumstances prompt the
SEC to allow further delays. Certain expedited redemption processes may also be
delayed when you are selling recently purchased shares.
65 - Policies You Should Know About
<PAGE>
How the funds calculate share price
For each fund in this prospectus, the price at which you buy shares is as
follows:
Class A shares -- net asset value per share, or NAV, adjusted to allow for any
applicable sales charges (see "Choosing A Share Class")
Class B and Class C shares -- net asset value per share, or NAV
To calculate NAV, each share class of each fund uses the following equation:
TOTAL ASSETS - TOTAL LIABILITIES
---------------------------------- = NAV
TOTAL NUMBER OF SHARES OUTSTANDING
For each fund and share class in this prospectus, the price at which you sell
shares is also the NAV, although a contingent deferred sales charge may be taken
out of the proceeds (see "Choosing A Share Class").
We typically use market prices to value securities. However, when a market price
isn't available, or when we have reason to believe it doesn't represent market
realities, we may use fair value methods approved by a fund's Board. In such a
case, the fund's value for a security is likely to be different from quoted
market prices.
66 - Policies You Should Know About
<PAGE>
Other rights we reserve
For each fund in this prospectus, you should be aware that we may do any of the
following:
o withhold 31% of your distributions as federal income tax if we have been
notified by the IRS that you are subject to backup withholding, or if you
fail to provide us with a correct taxpayer ID number or certification that
you are exempt from backup withholding
o reject a new account application if you don't provide a correct Social
Security or other tax ID number; if the account has already been opened, we
may give you 30 days' notice to provide the correct number
o charge you $9 each calendar quarter if your account balance is below $1,000
for the entire quarter; this policy doesn't apply to most retirement accounts
or if you have an automatic investment plan
o pay you for shares you sell by "redeeming in kind," that is, by giving you
marketable securities (which typically will involve brokerage costs for you
to liquidate) rather than cash.
o change, add or withdraw various services, fees and account policies (for
example, we may change or terminate the exchange privilege at any time)
67 - Policies You Should Know About
<PAGE>
Understanding Distributions And Taxes
By law, a mutual fund is required to pass through to its shareholders virtually
all of its net earnings. A fund can earn money in two ways: by receiving
interest, dividends or other income from securities it holds, and by selling
securities for more than it paid for them. (A fund's earnings are separate from
any gains or losses stemming from your own purchases and sales of shares.) A
fund may not always pay a distribution for a given period.
The funds have a regular schedule for paying out any earnings to shareholders:
o Income dividends: declared daily and paid monthly
o Short-term and long-term capital gains: November or December, or otherwise as
needed
You can choose how to receive your dividends and distributions. You can have
them all automatically reinvested in fund shares (at NAV), all sent to you by
check, have one type reinvested and the other sent to you by check or have them
invested in a different fund. Tell us your preference on your application. If
you don't indicate a preference, your dividends and distributions will all be
reinvested without sales charges. For retirement plans, reinvestment is the only
option.
Buying and selling fund shares will usually have tax consequences for you. Your
sales of shares may result in a capital gain or loss for you; whether long-term
or short-term depends on how long you owned the shares. For tax purposes, an
exchange is the same as a sale.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
Because each shareholder's tax situation is unique, it's always a good idea to
ask your tax professional about the tax consequences of your investments,
including any state and local tax consequences.
- --------------------------------------------------------------------------------
68 - Understanding Distributions And Taxes
<PAGE>
Dividends from these funds are generally tax free for most shareholders, meaning
that investors can receive them without incurring federal, and (for some
investors) state and local income tax liability. However, there are a few
exceptions:
o a portion of each fund's dividends may be taxable as ordinary income if it
came from investments in taxable securities
o because each fund can invest up to 20% of net assets in securities whose
income is subject to the federal alternative minimum tax (AMT), you may owe
taxes on a portion of your dividends if you are among those investors who
must pay AMT
The following table shows the usual tax status of transactions in fund shares as
well as that of any taxable distributions from the funds:
Generally taxed at ordinary income rates
- --------------------------------------------------------------------------------
o short-term capital gains from selling fund shares
- --------------------------------------------------------------------------------
o taxable income dividends you receive from a fund
- --------------------------------------------------------------------------------
o short-term capital gains distributions you receive from
a fund
Generally taxed at capital gains rates
- --------------------------------------------------------------------------------
o taxable income dividends you receive from a fund
- --------------------------------------------------------------------------------
o long-term capital gains distributions you receive from a
fund
- --------------------------------------------------------------------------------
Your fund will send you detailed tax information every January. These statements
tell you the amount and the tax category of any dividends or distributions you
received. They also have certain details on your purchases and sales of shares.
The tax status of dividends and distributions is the same whether you reinvest
them or not. Dividends or distributions declared in the last quarter of a given
year are taxed in that year, even though you may not receive the money until the
following January.
69 - Understanding Distributions And Taxes
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To Get More Information
Shareholder reports -- These include commentary from each fund's management team
about recent market conditions and the effects of a fund's strategies on its
performance. For each fund, they also have detailed performance figures, a list
of everything the fund owns and the fund's financial statements. Shareholders
get these reports automatically. To reduce costs, we may mail one copy per
household. For more copies, call (800) 621-1048.
Statement of Additional Information (SAI) -- This tells you more about each
fund's features and policies, including additional risk information. The SAI is
incorporated by reference into this document (meaning that it's legally part of
this prospectus).
If you'd like to ask for copies of these documents, or if you're a shareholder
and have questions, please contact Kemper or the SEC (see below). Materials you
get from Kemper are free; those from the SEC involve a copying fee. If you like,
you can look over these materials in person at the SEC's Public Reference Room
in Washington, DC.
SEC
450 Fifth Street, N.W.
Washington, DC 20549-0102
www.sec.gov
Tel (800) SEC-0330
Kemper Funds
222 South Riverside Plaza Chicago, IL 60606-5808 www.kemper.com Tel (800)
621-1048
SEC File Numbers
Kemper Intermediate Municipal Bond Fund 811-2353
Kemper Municipal Bond Fund 811-2353
Kemper California Tax-Free Income Fund 811-3657
Kemper Florida Tax-Free Income Fund 811-3657
Kemper New York Tax-Free Income Fund 811-3657
Kemper Ohio Tax-Free Income Fund 811-3657
Principal Underwriter
Kemper Distributors, Inc.
222 South Riverside Plaza
Chicago, IL 60606-5808
www.kemper.com E-mail [email protected]
Tel (800) 621-1048
[LOGO] KEMPER FUNDS
Long-term investing in a short-term world(SM)
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