KEMPER PORTFOLIOS, 485APOS, 1999-01-29

KEMPER PORTFOLIOS
485APOS, 1999-01-29

Previous: TCA CABLE TV INC, 10-K, 1999-01-29

Next: SUMMIT INVESTORS PLANS, 24F-2NT, 1999-01-29

Filed electronically with the Securities and Exchange Commission
on January 29, 1999
File No. 2-76806
File No. 811-3440

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /___/

Pre-Effective Amendment No. /___/
Post-Effective Amendment No. 30 / X /
--
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /___/

Amendment No. 32 / X /
--

KEMPER PORTFOLIOS
-----------------
(Exact Name of Registrant as Specified in Charter)

222 South Riverside Plaza, Chicago, Illinois 60606
--------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code: (312) 537-7000

Philip J. Collora, Vice President and Secretary
Scudder Kemper Investment, Inc.
222 South Riverside Plaza
Chicago, Illinois 60606
-----------------------
(Name and Address of Agent for Service)

It is proposed that this filing will become effective (check appropriate box):

/ / Immediately upon filing pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a) (1)
/ / 75 days after filing pursuant to paragraph (a) (2)
/ / On __________________ pursuant to paragraph (b)
/ / On __________________ pursuant to paragraph (a) (1)
/ X / On February 1, 1999 pursuant to paragraph (a) (3) of Rule 485.

If Appropriate, check the following box:
/ / This post-effective amendment designates a new effective date for a
previously filed post-effective amendment

<PAGE>

KEMPER PORTFOLIOS
KEMPER CASH RESERVES FUND
CROSS-REFERENCE SHEET

Items Required By Form N-1A
---------------------------

PART A
- ------
<TABLE>
<CAPTION>

Item No. Item Caption Prospectus Caption
-------- ------------ ------------------

<S> <C> <C> <C>
1. Front and Back Cover Pages Cover Page and Back Cover Page

2. Risk / Return Summary: About the Fund
Investments, Risks and Expense Information
Performance Past Performance
Investment Objective and Principal Strategies
Principal Risk Factors of the Fund

3. Risk/Return Summary: Fee Expense Information
Table

4. Investment Objectives, Investment Objective and Principal Strategies
Principal Investment Principal Risk Factors of the Fund; Principal Strategies and
Strategies and Related Risks Investments; Related Risks

5. Management's Discussion of Not Applicable
Fund Performance

6. Management, Organization and Investment Manager
Capital Structure Portfolio Management

7. Shareholder Information Transaction Information
Share Price

8. Distribution Arrangements Distribution and Taxes
Transaction Information

9. Financial Highlights Financial Highlights
Information

Cross Reference - Page 1
<PAGE>

KEMPER PORTFOLIOS
KEMPER CASH RESERVES FUND
CROSS-REFERENCE SHEET

(continued)

Items Required By Form N-1A
---------------------------

PART B
- ------

Item No. Item Caption Caption in Statement of Additional Information
-------- ------------ ----------------------------------------------

10. Cover Page and Table Cover Page
of Contents Table of Contents

11. Fund History Investment Manager and Underwriter

12. Description of the Investment Policies and Techniques
Fund and its Additional Investment Information
Investments and Risks Investment Restrictions

13. Management of the Fund Officers and Trustees
Investment Manager and Underwriter

14. Control Persons and Officers and Trustees
Principal Holders of Investment Manager and Underwriter
Securities

15. Investment Advisory Officers and Trustees
and Other Services Investment Manager and Underwriter

16. Brokerage Allocation Portfolio transactions
and Other Practices Brokerage Commissions

17. Capital Stock and Investment Policies and Techniques
Other Securities

18. Purchase, Redemption Purchase, Repurchase and Redemption of Shares
and Pricing of Shares Net Asset Value

19. Taxation of the Fund Dividends and Taxes

20. Underwriters Investment Manager and Underwriter

21. Calculation of Performance
Performance Data

22. Financial Statements Financial Statements

</TABLE>

Cross Reference - Page 2

<PAGE>
KEMPER CASH RESERVES FUND
SUPPLEMENT TO PROSPECTUS
DATED FEBRUARY 1, 1999

CLASS I SHARES

The fund currently offers four classes of shares to provide investors with
different purchasing options. These are Class A, Class B and Class C shares,
which are described in the prospectus, and Class I shares, which are described
in the prospectus as supplemented hereby. When placing purchase orders,
investors must specify for which class of shares they are ordering.

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; and (5) policy holders under Zurich-American Insurance Group's collateral
investment program investing at least $200,000 in a fund.

Class I shares currently are available for purchase only from Kemper
Distributors, Inc., principal underwriter for the fund, and, in the case of
category 4 above, elected dealers authorized by Kemper Distributors, Inc. Share
certificates are not available for Class I shares.

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

<PAGE>

The following information supplements the indicated sections of the prospectus.

Fee and expense information

The following information is designed to help you understand the costs of
investing in the fund. Each class of shares has a different set of transaction
fees, which will vary based on the length of time you hold shares in the fund
and the amount of your investment. You will find details about fee discounts and
waivers in the Buying shares and Special features sections.

- -----------------------------------------------------------------------
Shareholder fees: Fees paid directly from your investment.
- -----------------------------------------------------------------------

- -----------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on Purchases None
(as a % of offering price)
- -----------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as a % of None
redemption proceeds)
- -----------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed On None
Reinvested Dividends/ Distributions
- -----------------------------------------------------------------------
Redemption Fee None
- -----------------------------------------------------------------------
Exchange Fee None
- -----------------------------------------------------------------------

- --------------------------------------------------------------------------------
Annual fund operating expenses: Expenses that are deducted from fund assets.
- --------------------------------------------------------------------------------

- -----------------------------------------------------------------------
Management Fee 0.40
- -----------------------------------------------------------------------
Distribution (12b-1) Fees None
- -----------------------------------------------------------------------
Other expenses* 0.22
- -----------------------------------------------------------------------
Total Annual Fund Operating Expenses* 0.62
- -----------------------------------------------------------------------

* Estimated for the current fiscal year, since no Class I shares have been
issued as of the fund's fiscal year end.

Example

This example is to help you compare the cost of investing in a fund with the
cost of investing in other mutual funds.

This example illustrates the impact of the above fees and expenses on an account
with an initial investment of $10,000, based on the expenses shown above. It
assumes a 5% annual return, the reinvestment of all dividends and distributions
and "annual fund operating expenses" remaining the same each year. The example
is hypothetical: actual fund expenses and return vary from year to year, and may
be higher or lower than those shown.

- ------------------------------------------------------
Fees and expenses if you sold shares after:
- ------------------------------------------------------
1 Year $68
- ------------------------------------------------------
3 Years $214
- ------------------------------------------------------
5 Years $373
- ------------------------------------------------------
10 Years $835
- ------------------------------------------------------

SPECIAL FEATURES

Shareholders of the 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

2
<PAGE>

participants in tax-exempt retirement plans of Scudder Kemper and its affiliates
and (ii) Class I shares of any other "Kemper 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 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.

February 1, 1999

3
<PAGE>

Contents

2 About The Fund
- --------------------------------------------------------------------------------

2 Investment objective and principal
strategies

2 Principal risk factors of the fund

2 Past performance

5 Principal strategies and investments

6 Additional risks

6 Investment manager

8 About Your Investment
- --------------------------------------------------------------------------------

8 Choosing a share class

11 Buying shares

14 Selling and exchanging shares

15 Distributions and taxes

16 Transaction information

18 Financial Highlights
- --------------------------------------------------------------------------------

(Neither this table of contents nor the outside cover are part of the
prospectus.)
<PAGE>

[LOGO] KEMPER FUNDS

Kemper Cash
Reserves Fund

PROSPECTUS February 1, 1999

KEMPER CASH RESERVES FUND
222 South Riverside Plaza, Chicago, Illinois 60606 (800) 621-1048

Mutual funds:
o are not FDIC-insured
o have no bank guarantees
o may lose value

The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
<PAGE>

ABOUT THE FUND

INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES

The fund seeks maximum current income to the extent consistent with stability of
principal from a portfolio of high quality money market instruments. The fund is
managed to maintain a net asset value of $1.00 per share. The fund's investment
objective may be changed without a vote of shareholders.

The fund pursues its objective through a portfolio of high quality U.S. dollar
denominated money market instruments.

The fund is designed primarily as an exchange vehicle for investments in other
Kemper Funds that offer multiple classes of shares sold through financial
services firms.

The investment manager actively manages the fund's portfolio:

o with respect to the short-term interest rate outlook

o by selecting securities for superior price or income performance

The fund will invest only in securities with remaining maturities of 12 months
or less and maintains a dollar weighted average portfolio maturity of 90 days or
less in accordance with federal law.

The fund will normally invest at least 25% of its net assets in instruments
issued by domestic or foreign banks.

PRINCIPAL RISK FACTORS OF THE FUND

An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the fund.

Because of their short maturities, liquidity and high quality, money market
instruments, such as those in which the fund invests, are generally considered
to be among the safest available.

To the extent the fund is invested in instruments issued by domestic or foreign
banks, the fund may be more adversely affected by changes in market or economic
conditions and other circumstances affecting the banking industry than it would
be if the fund's assets were not so concentrated.

Portfolio strategy. The portfolio management team's skill in choosing
appropriate investments for the fund will determine in large part the fund's
ability to achieve its investment objective.

PAST PERFORMANCE

The chart and table below provide some indication of the risks of investing in
the fund by illustrating how the fund has performed from year to year. Of
course, past performance is not necessarily an indication of future performance.

2
<PAGE>

The information provided in the chart is for Class B shares, and does not
reflect sales charges, which reduce return.

Total returns for years ended December 31

[The following table was originally a bar chart in the printed materials.]

1989 7.54%
1990 6.39%
1991 4.15%
1992 1.86%
1993 1.55%
1994 2.58%
1995 4.44%
1996 3.51%
1997 3.50%
1998 3.44%

For the period included in the bar chart, the fund's highest return for a
calendar quarter was 1.99% (the second quarter of 1989), and the fund's lowest
return for a calendar quarter was 0.37% (the fourth quarter of 1993).

Average Annual Total Returns

For periods ended
December 31, 1998 Class A Class B Class C
----------------- ------- ------- -------

One Year 4.48% 0.47% 3.80%

Five Years 4.49% 3.32% --

Ten Years -- 3.88% --

Since Class Inception* 3.94% 4.52% 3.88%

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

* Inception dates for Class A, Class B and Class C shares are 1/10/92,
2/6/84 and 5/31/94, respectively.

Fee and expense information

The following information is designed to help you understand the fees and
expenses that you may pay if you buy and hold shares of the fund. Each class of
shares has a different set of transaction fees, which will vary based on the
length of time you hold shares in the fund and the amount of your investment.
You will find details about fee discounts and waivers in the Buying shares and
Choosing a share class -- Special features section of this prospectus.

7-Day Annualized Yield

On December 31, 1998 Class A Class B Class C
------- ------- -------
3.88% 2.91% 3.22%

3
<PAGE>

Shareholder fees: Fees paid directly from your investment.

Class A Class B Class C
------- ------- -------
Maximum Sales Charge
(Load) Imposed on
Purchases (as % of offering
price) None(1) None None

Maximum Deferred Sales
Charge (Load) (as % of
redemption proceeds) None(2) 4% 1%

Maximum Sales Charge
(Load) Imposed on
Reinvested
Dividends/Distributions None None None

Redemption Fee (as % of
amount redeemed, if
applicable) None None None

Exchange Fee None None None

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

(1) The applicable sales charge applies for exchanges into Class A shares of
other Kemper Funds.

(2) The redemption of Class A shares purchased at net asset value under the
Large Order NAV Purchase Privilege may be subject to a contingent deferred
sales charge of 1% during the first year and 0.50% during the second year.

Annual fund operating expenses: Expenses that are deducted from fund assets.

Class A Class B Class C
------- ------- -------
Management Fee 0.40% 0.40% 0.40%
Distribution (12b-1) Fees None 0.75% 0.75%
Other Expenses 0.81% 1.07% 0.73%
Total Annual Fund Operating Expenses 1.21% 2.22% 1.88%

Example

This example is to help you compare the cost of investing in the fund with the
cost of investing in other mutual funds.

Fees and expenses if you sold shares after:

Class A Class B Class C
------- ------- -------
1 Year $123 $625 $291
3 Years $384 $994 $591
5 Years $665 $1,390 $1,016
10 Years $1,466 $2,063 $2,201

4
<PAGE>

Fees and expenses if you did not sell your shares:

Class A Class B Class C
------- ------- -------
1 Year $123 $225 $191
3 Years $384 $694 $591
5 Years $665 $1,190 $1,016
10 Years $1,466 $2,063 $2,201

PRINCIPAL STRATEGIES AND INVESTMENTS

The fund invests in the following high quality U.S. dollar denominated money
market instruments with remaining maturities of 12 months or less:

o Commercial paper rated Prime-1 or Prime-2 by Moody's Investors Service,
Inc. or A-1 or A-2 by Standard & Poor's Corporation, or commercial paper
or notes issued by companies with an unsecured debt issue outstanding
currently rated A or higher by Moody's Investors Service, Inc. or Standard
& Poor's Corporation where the obligation is on the same or a higher level
of priority as the rated issue, and investments in other corporate
obligations such as publicly traded bonds, debentures and notes rated A or
higher by Moody's Investors Service, Inc. or Standard & Poor's
Corporation.

o Obligations of, or guaranteed by, the U.S. or Canadian governments, their
agencies or instrumentalities. The two broad categories of U.S. government
debt instruments are: (a) direct obligations of the U.S. Treasury and (b)
securities issued or guaranteed by agencies and instrumentalities of the
U.S. government. Some obligations issued or guaranteed by agencies or
instrumentalities of the U.S. government are backed by the full faith and
credit of the United States and others are backed exclusively by the
agency or instrumentality with limited rights of the issuer to borrow from
the U.S. Treasury.

o Bank certificates of deposit, time deposits or bankers' acceptances
limited to U.S. banks or Canadian chartered banks having total assets in
excess of $1 billion, or U.S. branches of foreign banks having total
assets in excess of $10 billion.

o Repurchase agreements of obligations which are suitable for investment
under the categories set forth above.

o Eurodollar certificates of deposit issued by London branches of U.S.
banks, or commercial paper issued by foreign entities.

In addition, the fund limits its investments to securities that meet the
quality, maturity and diversification requirements of federal law.

The fund may purchase floating rate and variable rate securities. These
securities pay interest at rates that change periodically to reflect changes in
market interest rates. The interest rate of a floating rate instrument is
generally based on a known lending rate, such as a bank's prime rate, and is
reset whenever the underlying rate is adjusted. Because these securities adjust
the

5
<PAGE>

interest they pay, there may be greater returns when interest rates are rising
because of the additional interest payments the fund will receive, and there may
be lesser returns when interest rates are falling because of the reduction in
interest payments to the fund. These securities include floating rate and
variable rate demand notes and bonds. These investments may have maturities
(time for scheduled full repayment of principal) of more than one year, but
generally allow the holder to demand payment of principal plus accrued interest
within a relatively short period. Because the interest rate on variable rate and
floating rate demand notes can change as market interest rates change, these
investments are unlikely to be able to lock in favorable longer term interest
rates. The interest rate on a variable rate demand note is reset at specified
intervals at a market rate.

More information about investments and strategies is provided in the Statement
of Additional Information. Of course, there can be no guarantee that by
following these strategies, the fund will achieve its objective.

ADDITIONAL RISKS

To the extent that the fund is invested in Eurodollar certificates of deposit
issued by London branches of U.S. banks, or commercial paper issued by foreign
entities, it may be subject to some foreign investment risk. Eurodollar
certificates of deposit may not be subject to the same regulatory requirements
as certificates issued by U.S. banks and associated income may be subject to the
imposition of foreign taxes.

INVESTMENT MANAGER

The fund retains the investment management firm of Scudder Kemper Investments,
Inc., Two International Place, Boston, MA, to manage its daily investment and
business affairs subject to the policies established by the fund's Board.
Scudder Kemper Investments, Inc. actively manages the fund's investments.
Professional management can be an important advantage for investors who do not
have the time or expertise to invest directly in individual securities. Scudder
Kemper Investments, Inc. is one of the largest and most experienced investment
management organizations worldwide, managing more than $230 billion in assets
globally for mutual fund investors, retirement and pension plans, institutional
and corporate clients, and private family and individual accounts.

For the fiscal year ended September 30, 1998, Scudder Kemper Investments, Inc.
received an annual fee of 0.40% of the fund's average daily net assets.

6
<PAGE>

Portfolio management

The following investment professionals are associated with the fund as
indicated:

Name & Title Joined the Fund Background
- --------------------------------------------------------------------------------
Frank J. Rachwalski, Jr. 1984 Mr. Rachwalski joined Scudder
Lead Portfolio Manager Kemper Investments in 1973, and is
currently a Senior Vice President.
Since joining Scudder Kemper
Investments, Mr. Rachwalski has
served as portfolio manager for
other affiliated mutual funds, and
has over 20 years of experience in
short-term fixed income investing
and research.

John W. Stuebe 1984 Mr. Stuebe joined Scudder Kemper
Portfolio Manager Investments in 1979 as a fixed
income trader for money market
securities and is currently a Vice
President. Mr. Stuebe manages
short-term non-government
securities, primarily for money
market funds, as well as the cash
portion of other affiliated mutual
funds.
- --------------------------------------------------------------------------------

Year 2000 readiness

Like other mutual funds and financial and business organizations worldwide, the
fund could be adversely affected if computer systems on which it relies, which
primarily include those used by the investment manager, its affiliates or other
service providers, are unable to correctly process date-related information on
and after January 1, 2000. This risk is commonly called the Year 2000 Issue.
Failure to successfully address the Year 2000 Issue could result in
interruptions to and other material adverse effects on the fund's business and
operations, such as problems with calculating net asset value and difficulties
in implementing a fund's purchase and redemption procedures. The investment
manager has commenced a review of the Year 2000 Issue as it may affect the fund
and is taking steps it believes are reasonably designed to address the Year 2000
Issue, although there can be no assurances that these steps will be sufficient.
In addition, there can be no assurances that the Year 2000 Issue will not have
an adverse effect on the issuers whose securities are held by the fund or on
global markets or economies generally.

Euro conversion

The introduction of a new European currency, the Euro, may result in
uncertainties for European securities and for the operation of the fund. The
Euro was introduced on January 1, 1999, by eleven European countries that are
members of the European Economic and Monetary Union (EMU). The introduction of
the Euro requires the redenomination of European debt and equity securities over
a period of time, which may result in various accounting

7
<PAGE>

differences and/or tax treatments. Additional questions are raised by the fact
that certain other European community members, including the United Kingdom, did
not officially implement the Euro on January 1, 1999.

The investment manager is actively working to address Euro-related issues and
understands that other key service providers are taking similar steps. At this
time, however, no one knows precisely what the degree of impact will be. To the
extent that the market impact or effect on fund holdings is negative, it could
hurt the fund's performance.

ABOUT YOUR INVESTMENT

CHOOSING A SHARE CLASS

The fund provides investors with the option of purchasing shares in the
following ways:

- --------------------------------------------------------------------------------
Class A Shares Offered at net asset value without an initial sales
charge, but the applicable sales charge applies for
exchanges of such shares into Class A shares of other
Kemper Funds.

Class B Shares Offered at net asset value without an initial sales
charge, but subject to a 0.75% Rule 12b-1 distribution
fee and a contingent deferred sales charge that declines
from 4% to zero on certain redemptions made within six
years of purchase. Class B shares automatically convert
into Class A shares (which have lower ongoing expenses)
six years after purchase.

Class C Shares Offered at net asset value without an initial sales
charge, but subject to a 0.75% Rule 12b-1 distribution
fee and a 1% contingent deferred sales charge on
redemptions made within one year of purchase. Class C
shares do not convert into another class.
- --------------------------------------------------------------------------------

When placing purchase orders, investors must specify whether the order is for
Class A, Class B or Class C shares. Each class of shares represents interests in
the same portfolio of investments of the fund.

The decision as to which class to choose depends on a number of factors,
including the amount and intended length of the investment, and the other Kemper
Fund into which an investor may wish to exchange in the future. Shareholders of
Class A, Class B and Class C shares of the fund may exchange their shares for
shares of the corresponding class of other Kemper Funds. While Class A shares of
the fund are sold without an initial sales charge, applicable sales charges
apply for exchanges into Class A shares of other Kemper Funds. Investors who
prefer not to pay an initial sales charge upon investment in the fund or who
qualify for reduced sales charges for other Kemper Funds on exchange might
consider Class A shares. Investors who prefer not to pay an initial sales charge
and who plan to hold their investment (including other Kemper Funds into which
they may exchange) for more than six years might consider Class B shares.
Investors who prefer not to pay an initial sales charge

8
<PAGE>

but who plan to redeem their shares within six years might consider Class C
shares. For more information about these arrangements, consult your financial
representative or Kemper Service Company, the Shareholder Service Agent. Be
aware that financial services firms may receive different compensation depending
upon which class of shares they sell.

Rule 12b-1 plan

The fund has adopted a plan under Rule 12b-1 that provides for fees payable as
an expense of the Class B shares and the Class C shares that are used by Kemper
Distributors, Inc., the fund's principal underwriter, to pay for distribution
and other services provided to shareholders of those classes. Because 12b-1 fees
are paid out of fund assets on an ongoing basis, they will, over time, increase
the cost of investment and may cost more than other types of sales charges.
Long-term shareholders may pay more than the economic equivalent of the maximum
initial sales charges permitted by the National Association of Securities
Dealers, although Kemper Distributors, Inc. believes that is is unlikely, in the
case of Class B shares, because of the automatic conversion feature of those
shares.

Special features

Class A Shares -- Combined Purchases. The fund's Class A shares (or the
equivalent) may be purchased at the rate applicable to the discount bracket
attained by combining concurrent investments in Class A shares of most Kemper
Funds.

Class A Shares -- Letter of Intent. The same reduced sales charges for Class A
shares also apply to the aggregate amount of purchases made by any purchaser
within a 24-month period under a written Letter of Intent ("Letter") provided by
Kemper Distributors, Inc. The Letter, which imposes no obligation to purchase or
sell additional Class A shares, provides for a price adjustment depending upon
the actual amount purchased within such period.

Class A Shares -- Cumulative Discount. Class A shares of the fund may also be
purchased at the rate applicable to the discount bracket attained by adding to
the cost of shares of the fund being purchased, the value of all Class A shares
of most Kemper Funds (computed at the maximum offering price at the time of the
purchase for which the discount is applicable) already owned by the investor.

Class A Shares -- Large Order NAV Purchase Privilege. Class A shares of the fund
may be purchased at net asset value by any purchaser provided that the amount
invested in the fund or other Kemper Funds totals at least $1,000,000 including
purchases of Class A shares pursuant to the "Combined Purchases," "Letter of
Intent" and "Cumulative Discount" features described above (the "Large Order NAV
Purchase Privilege").

9
<PAGE>

Class A Shares -- Availability of Quantity Discounts. An investor or the
investor's dealer or other financial services firm must notify Kemper Service
Company, the Shareholder Service Agent or Kemper Distributors, Inc. whenever a
quantity discount or reduced sales charge is applicable to a purchase. Upon such
notification, the investor will receive the lowest applicable sales charge.
Quantity discounts described above may be modified or terminated at any time.

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

Class A Shares. Class A shares of most Kemper Funds and shares of certain Money
Market Funds may be exchanged for each other at their relative net asset values.
Shares of Money Market Funds and the Cash Reserves Fund that were acquired by
purchase (not including shares acquired by dividend reinvestment) are subject to
the applicable sales charge on exchange. Series of Kemper Target Equity Fund are
available on exchange only during the Offering Period for such series as
described in the applicable prospectus. Cash Equivalent Fund, Tax-Exempt
California Money Market Fund, Cash Account Trust, Investors Municipal Cash Fund
and Investors Cash Trust are available on exchange but only through a financial
services firm having a services agreement with Kemper Distributors, Inc.

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

Class C Shares. Class C shares of the fund and Class C shares of most Kemper
Funds may be exchanged for each other at their relative net asset values. Class
C shares may be exchanged without a contingent deferred sales charge being
imposed at the time of exchange. For determining whether there is a contingent
deferred sales charge that may be imposed upon the redemption of the Class C
shares received by exchange, they retain the cost and purchase date of the
shares that were originally purchased and exchanged.

10
<PAGE>

BUYING SHARES

The fund is designed primarily as an exchange vehicle for investments in other
Kemper Funds sold through financial services firms. For example, the fund may
serve as a temporary investment for amounts ultimately intended for investment
in equity or fixed income Kemper Funds through techniques such as "dollar cost
averaging." The primary distinctions among the classes of the fund's shares lie
in their initial and contingent deferred sales charge structures and in their
ongoing expenses, including asset-based sales charges in the form of Rule 12b-1
distribution fees. These differences are summarized in the tables below. Each
class has distinct advantages and disadvantages for different investors, and
investors may choose the class that best suits their circumstances and
objectives.

CLASS A SHARES

Public Offering Price

Net asset value per share without any sales charge at the time of purchase.

Contingent Deferred Sales Charge

None

Rule 12b-1 Fee

None

Exchange Privilege

No initial sales charge applies to purchases of Class A shares of the fund, but
the applicable sales charge applies for exchanges into Class A shares of other
Kemper Funds.

CLASS B SHARES

Public Offering Price

Net asset value per share without any sales charge at the time of purchase.

Contingent Deferred Sales Charge

A contingent deferred sales charge may be imposed upon redemption of Class B
shares. There is no such charge upon redemption of any reinvested dividends on
Class B shares. The charge is computed at the following rates applied to the
value of the shares redeemed excluding amounts not subject to the charge.

- --------------------------------------------------------------------------------
Year of Redemption
After Purchase: First Second Third Fourth Fifth Sixth
- --------------------------------------------------------------------------------
Contingent Deferred
Sales Charge: 4% 3% 3% 2% 2% 1%
- --------------------------------------------------------------------------------

The contingent deferred sales charge will be waived:

o in the event of the total disability (as evidenced by a determination by
the federal Social Security Administration) of the shareholder (including
a

11
<PAGE>

registered joint owner) occurring after the purchase of the shares being
redeemed

o in the event of the death of the shareholder (including a registered joint
owner)

o for redemptions made pursuant to a systematic withdrawal plan

o for redemptions made pursuant to any IRA systematic withdrawal plan based
on the shareholder's life expectancy including, but not limited to,
substantially equal periodic payments described in Internal Revenue Code
Section 72(t)(2)(A)(iv) prior to age 59 1/2

o for redemptions to satisfy required minimum distributions after age 70 1/2
from an IRA account (with the maximum amount subject to this waiver being
based only upon the shareholder's Kemper IRA accounts).

The contingent deferred sales charge will also be waived in connection with the
following redemptions of shares held by employer sponsored employee benefit
plans maintained on the subaccount record keeping system made available by
Kemper Service Company, the Shareholder Service Agent:

o redemptions to satisfy participant loan advances (note that loan
repayments constitute new purchases for purposes of the contingent
deferred sales charge and the conversion privilege)

o redemptions in connection with retirement distributions (limited at any
one time to 10% of the total value of plan assets invested in a fund)

o redemptions in connection with distributions qualifying under the hardship
provisions of the Internal Revenue Code

o redemptions representing returns of excess contributions to such plans.

Rule 12b-1 Fee

0.75%

Conversion Feature

Class B shares of the fund will automatically convert to Class A shares of the
same fund six years after issuance on the basis of the relative net asset value
per share. Shares purchased through the reinvestment of dividends and other
distributions paid with respect to Class B shares in a shareholder's fund
account will be converted to Class A shares on a pro rata basis.

Exchange Privilege

Class B shares of the fund and Class B shares of most Kemper Funds may be
exchanged for each other at their relative net asset values without a contingent
deferred sales charge.

12
<PAGE>

CLASS C SHARES

Public Offering Price

Net asset value per share without any sales charge at the time of purchase

Contingent Deferred Sales Charge

A contingent deferred sales charge of 1% may be imposed upon redemption of Class
C shares redeemed within one year of purchase. The charge will not be imposed
upon redemption of reinvested dividends. The charge is applied to the value of
the shares redeemed excluding amounts not subject to the charge. The contingent
deferred sales charge will be waived:

o in the event of the total disability (as evidenced by a determination by
the federal Social Security Administration) of the shareholder (including
a registered joint owner) occurring after the purchase of the shares being
redeemed

o in the event of the death of the shareholder (including a registered joint
owner)

o for redemptions made pursuant to a systematic withdrawal plan

o for redemptions made pursuant to any IRA systematic withdrawal based on
the shareholder's life expectancy including, but not limited to,
substantially equal periodic payments described in Internal Revenue Code
Section 72(t)(2)(A)(iv) prior to age 59 1/2

o for any participant-directed redemption of shares held by employer
sponsored employee benefit plans maintained on the subaccount record
keeping system made available by Kemper Service Company, the Shareholder
Service Agent and

o redemption of shares by an employer sponsored employee benefit plan that
offers funds in addition to Kemper Funds and whose dealer of record has
waived the advance of the first year administrative service and
distribution fees applicable to such shares and agrees to receive such
fees quarterly.

Rule 12b-1 Fee

0.75%

Conversion Feature

None

Exchange Privilege

Class C shares of the fund and Class C shares of most Kemper Funds may be
exchanged for each other at their relative net asset values. Class C shares may
be exchanged without a contingent deferred sales charge.

13
<PAGE>

SELLING AND EXCHANGING SHARES

General

Contact your securities dealer or other financial services firm to arrange for
share redemptions or exchanges.

Any shareholder may require the fund to redeem his or her shares. When shares
are held for the account of a shareholder by the funds' transfer agent, the
shareholder may redeem them by sending a written request with signatures
guaranteed to Kemper Funds, Attention: Redemption Department, P.O. Box 419557,
Kansas City, Missouri 64141-6557.

An exchange of shares entails the sale of fund shares and subsequent purchase of
shares of another Kemper Fund.

The rate of the contingent deferred sales charge is determined by the length of
the period of ownership. Investments are tracked on a monthly basis. The period
of ownership for this purpose begins the first day of the month in which the
order for the investment is received. In the event no specific order is
requested when redeeming shares subject to a contingent deferred sales charge,
the redemption will be made first from shares representing reinvested dividends
and then from the earliest purchase of shares. Kemper Distributors, Inc.
receives any contingent deferred sales charge directly.

Share certificates

When certificates for shares have been issued, they must be mailed to or
deposited with Kemper Service Company, the Shareholder Service Agent, along with
a duly endorsed stock power and accompanied by a written request for redemption.
Redemption requests and a stock power must be endorsed by the account holder
with signatures guaranteed. The redemption request and stock power must be
signed exactly as the account is registered, including any special capacity of
the registered owner. Additional documentation may be requested, and a signature
guarantee is normally required, from institutional and fiduciary account
holders, such as corporations, custodians (e.g., under the Uniform Transfers to
Minors Act), executors, administrators, trustees or guardians.

Reinvestment privilege

A shareholder of the fund who redeems Class B shares or Class C shares and
incurs a contingent deferred sales charge may reinvest up to the full amount
redeemed at net asset value at the time of the reinvestment in Class A shares,
Class B shares or Class C shares, as the case may be, of its fund or of any
other Kemper Fund. The amount of any contingent deferred sales charge also will
be reinvested. These reinvested shares will retain their original cost and
purchase date for purposes of the contingent deferred sales charge. Also, a
holder of Class B shares who has redeemed shares may reinvest up to the full
amount redeemed, less any applicable contingent deferred sales charge that may
have been imposed upon the redemption of such shares, at net asset value in
Class A shares of the fund or of the other Kemper Funds. Purchases through the
reinvestment privilege are subject to the minimum investment requirements
applicable to the shares being purchased and may only be made for Kemper

14
<PAGE>

Funds available for sale in the shareholder's state of residence. The
reinvestment privilege can be used only once as to any specific shares and
reinvestment must be effected within six months of the redemption. The
reinvestment privilege may be terminated or modified at any time.

DISTRIBUTIONS AND TAXES

Dividends and capital gains distributions

The fund declares daily dividends from net investment income and dividends are
reinvested or paid in cash monthly.

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

Income dividends and capital gain dividends, if any, of the fund will be
credited to shareholder accounts in full and fractional shares of the same class
of the fund at net asset value, except that, upon written request to Kemper
Service Company, the Shareholder Service Agent, a shareholder may choose to
receive income and capital gain dividends in cash.

Any dividends of the fund that are reinvested normally will be reinvested in
shares of the same class. However, upon written request to Kemper Service
Company, the Shareholder Service Agent, a shareholder may choose to have
dividends of the fund invested in shares of the same class of another Kemper
Fund at the net asset value of that class and fund. To use this privilege of
investing dividends of the fund in shares of another Kemper Fund, shareholders
must maintain a minimum account value of $1,000 in the fund. The fund will
reinvest dividend checks (and future dividends) in shares of that same class if
checks are returned as undeliverable. Dividends and other distributions in the
aggregate amount of $10 or less are automatically reinvested in shares of the
fund unless the shareholder requests that such policy not be applied to the
shareholder's account.

Distributions are generally taxable whether received in cash or reinvested.
Exchanges among funds are also taxable events.

Taxes

Dividends representing net investment income and net short-term capital gains,
if any, are taxable to shareholders as ordinary income. Long-term capital gains
distributions, if any, are taxable to individual shareholders as long-term
capital gains, regardless of the length of time shareholders have owned shares.
A portion of dividends from ordinary income may qualify for the
dividends-received deduction for corporations.

Any dividends or capital gains distributions declared in October, November or
December with a record date in such month and paid during the following January
are taxable as if paid on December 31 of the calendar year in which they were
declared.

15
<PAGE>

The fund sends you detailed tax information about the amount and type of
distributions by January 31of the following year.

TRANSACTION INFORMATION

Share price

Scudder Fund Accounting Corporation determines the net asset value per share of
the fund as of the close of regular trading on the New York Stock Exchange,
normally 4:00 p.m. eastern time, on each day the New York Stock Exchange is open
for trading. The fund reserves the right to determine the net asset value more
frequently than once a day if deemed desirable. The fund seeks to maintain a net
asset value of $1.00 per share and values its portfolio instruments at amortized
cost. Calculations are made to compare the value of the fund's investments,
valued at amortized cost, with market-based values. In order to value its
investments at amortized cost, the fund purchases only securities with a
maturity of 12 months or less and maintains a dollar-weighted average portfolio
maturity of 90 days or less. In addition, the fund limits its portfolio
investments to securities that meet the quality and diversification requirements
of federal law.

The net asset value per share is the value of one share and is determined
separately for each class by dividing the value of the fund's net assets
attributable to that class, less all liabilities, by the number of shares of
that class outstanding.

Processing time

The fund seeks to be as fully invested as possible at all times in order to
achieve maximum income. Since the fund will be investing in instruments which
normally require immediate payment in Federal Funds (monies credited to a bank's
account with its regional Federal Reserve Bank), the fund has adopted certain
procedures for the convenience of its shareholders and to ensure that the fund
receives investable funds. (a) Wire transfer. Orders received by wire transfer
in the form of Federal Funds will be effected at the next determined net asset
value after receipt by the fund's Shareholder Service Agent and such shares will
receive the dividend for the next calendar day following the day when the
purchase is effective. If payment is wired in Federal Funds, the payment should
be wired to United Missouri Bank of Kansas City, N.A., 10th and Grand Avenue,
Kansas City, Missouri 64106. If payment is to be wired, the firm which services
the account should handle the details of the transaction. (b) Check. Orders for
purchase accompanied by a check or other negotiable bank draft will be accepted
and effected as of the close of the New York Stock Exchange on the business day
following receipt and such shares will receive the dividend for the next
calendar day following the day when the purchase is effective. (c) Dealer
Trades. Orders processed through dealers or other financial services firms,
including trades via Fund/SERV, will be effected at the net asset value
effective on the trade date. These purchases will begin earning dividends the
calendar day following the payment date.

16
<PAGE>

Payment for shares you sell will be made in cash as promptly as practicable but
in no event later than seven days after receipt of a properly executed request.
If you have share certificates, these must accompany your order in proper form
for transfer. When you place an order to sell shares for which the fund may not
yet have received good payment (i.e., purchases by check, EXPRESS-Transfer or
Bank Direct Deposit), the fund may delay transmittal of the proceeds until it
has determined that collected funds have been received for the purchase of such
shares. This may be up to 10 days from receipt by the fund of the purchase
amount. If shares being redeemed were acquired from an exchange of shares of a
mutual fund that were offered subject to a contingent deferred sales charge, as
described in the prospectus for that other fund, the redemption of such shares
by the fund may be subject to a contingent deferred sales charge, as explained
in such prospectus.

Signature guarantees

A signature guarantee is required unless you sell $50,000 or less worth of
shares (prior to the imposition of any contingent deferred sales charge) and the
proceeds are payable to the shareholder of record at the address of record. You
can obtain a guarantee from most brokerage houses and financial institutions,
although not from a notary public. The fund will normally send you the proceeds
within one business day following your request, but may take up to seven
business days (or longer in the case of shares recently purchased by check).

Purchase restrictions

Purchases and sales should be made for long-term investment purposes only. The
fund and Kemper Distributors, Inc. each reserves the right to reject purchases
of fund shares (including exchanges) for any reason. The fund reserves the right
to withdraw all or any part of the offering made by this prospectus and to
reject purchase orders. Also, from time to time, the fund may temporarily
suspend the offering of its shares or a class of its shares to new investors.
During the period of such suspension, persons who are already shareholders
normally are permitted to continue to purchase additional shares and to have
dividends reinvested.

Minimum balances

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

Because of the high cost of maintaining small accounts, the fund may assess a
quarterly fee of $9 on an account with a balance below $1,000 for the quarter.
The fee will not apply to accounts enrolled in an automatic investment program,
Individual Retirement Accounts or employer sponsored employee benefit plans

17
<PAGE>

using the subaccount record keeping system made available through Kemper Service
Company, the Shareholder Service Agent.

Third party transactions

If you buy and sell shares of the fund through a member of the National
Association of Securities Dealers, Inc. (other than the fund's distributor,
Kemper Distributors, Inc.), that member may charge a fee for that service. This
prospectus should be read in connection with such firms' material regarding
their fees and services.

Redemption-in-kind

The fund reserves the right to honor any request for redemption or repurchase by
making payment in whole or in part in readily marketable securities ("redemption
in kind"). These securities will be chosen by the fund and valued as they are
for purposes of computing the fund's net asset value. A shareholder may incur
transaction expenses in converting these securities to cash.

FINANCIAL HIGHLIGHTS

The tables below are intended to help you understand the fund's financial
performance for the periods reflected below. Certain information reflects
financial results for a single fund share. The total return figures show what an
investor in the fund would have earned (or lost) assuming reinvestment of all
distributions. The information has been audited by Ernst & Young LLP whose
report, along with the fund's financial statements, is included in the annual
report, which is available upon request by calling the Kemper Funds at
1-800-621-1048.

Kemper Cash Reserves Fund

Two
months
ended
September Year ended
Year ended September 30, 30, July 31,
CLASS A SHARES 1998 1997 1996 1995 1995 1994
- --------------------------------------------------------------------------------
Per share operating performance
Net asset value,
beginning of
period $1.00 1.00 1.00 1.00 1.00 1.00
- --------------------------------------------------------------------------------
Net investment
income .04 .04 .05 .01 .05 .03
- --------------------------------------------------------------------------------
Less dividends
declared .04 .04 .05 .01 .05 .03
- --------------------------------------------------------------------------------
Net asset value, end
of period $1.00 1.00 1.00 1.00 1.00 1.00
- --------------------------------------------------------------------------------
Total return
(not annualized) 4.58% 4.57 4.67 .85 4.99 2.78
- --------------------------------------------------------------------------------
Ratios to average net
assets (annualized)
Expenses 1.21% 1.16 1.08 .92 .89 .92
- --------------------------------------------------------------------------------
Net investment
income 4.49% 4.45 4.53 5.11 4.75 2.86
- --------------------------------------------------------------------------------

18
<PAGE>

Two
months
ended
September Year ended
Year ended September 30, 30, July 31,
CLASS B SHARES 1998 1997 1996 1995 1995 1994
- --------------------------------------------------------------------------------
Per share operating performance
Net asset value,
beginning of
period $1.00 1.00 1.00 1.00 1.00 1.00
- --------------------------------------------------------------------------------
Net investment
income .03 .03 .04 .01 .04 .02
- --------------------------------------------------------------------------------
Less dividends
declared .03 .03 .04 .01 .04 .02
- --------------------------------------------------------------------------------
Net asset value, end
of period $1.00 1.00 1.00 1.00 1.00 1.00
- --------------------------------------------------------------------------------
Total return
(not annualized) 3.53% 3.49 3.73 .71 4.08 1.78
- --------------------------------------------------------------------------------
Ratios to average net
assets (annualized)
Expenses 2.22% 2.19 1.99 1.79 1.78 1.89
- --------------------------------------------------------------------------------
Net investment
income 3.48% 3.42 3.62 4.24 3.86 1.89
- --------------------------------------------------------------------------------

Two
months May
ended Year 31 to
September ended July
Year ended September 30, 30, July 31, 31,
CLASS C SHARES 1998 1997 1996 1995 1995 1994
- --------------------------------------------------------------------------------
Per share operating performance
Net asset value,
beginning of
period $1.00 1.00 1.00 1.00 1.00 1.00
- --------------------------------------------------------------------------------
Net investment
income .04 .04 .04 .01 .04 --
- --------------------------------------------------------------------------------
Less dividends
declared .04 .04 .04 .01 .04 --
- --------------------------------------------------------------------------------
Net asset value, end
of period $1.00 1.00 1.00 1.00 1.00 1.00
- --------------------------------------------------------------------------------
Total return (not
annualized) 3.90% 3.85 3.93 .71 4.08 .42
- --------------------------------------------------------------------------------
Ratios to average net
assets (annualized)
Expenses 1.88% 1.84 1.79 1.78 1.76 1.80
- --------------------------------------------------------------------------------
Net investment
income 3.82% 3.77 3.82 4.25 3.88 2.64
- --------------------------------------------------------------------------------

19
<PAGE>

<TABLE>
<CAPTION>
Two
months
ended
September Year ended
Year ended September 30, 30, July 31,
1998 1997 1996 1995 1995 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Supplemental data for all classes
Net assets at end
of period
(in thousands) $549,389 339,655 207,616 176,557 213,031 424,317
- -----------------------------------------------------------------------------------------------------
</TABLE>

Notes: The total returns for the year ended July 31, 1995 include the effect of
a capital contribution from Scudder Kemper Investments, Inc. Without the capital
contribution, the total returns would have been 4.07% in Class A shares, 3.16%
in Class B shares and 3.16% in Class C shares.

Scudder Kemper Investments, Inc. agreed to absorb certain operating expenses of
the fund during a portion of the year ended July 31, 1994. Absent this
agreement, ratios of expenses and net investment income to average net assets
would have been as follows: Class A shares (1.15% and 2.63%); Class B shares
(2.12% and 1.66%).

20
<PAGE>

Additional information about the fund may be found in the Statement of
Additional Information, the Shareholder Services Guide and in shareholder
reports. Shareholder inquiries may be made by calling the Kemper Funds at the
toll-free telephone number listed below. The Statement of Additional Information
contains more information on fund investments and operations. The Shareholder
Services Guide contains more information about purchases and sales of fund
shares. The semiannual and annual shareholder reports contain a discussion of
the market conditions and the investment strategies that significantly affected
the fund's performance during the last fiscal year, as well as a listing of
portfolio holdings and financial statements. These and other fund documents may
be obtained without charge from the following sources:

- --------------------------------------------------------------------------------
By Phone Call the Kemper Funds at: 1-800-621-1048
- --------------------------------------------------------------------------------
By Mail Kemper Distributors, Inc.
222 South Riverside Plaza
Chicago, IL 60606-5808

Public Reference Section
Securities and Exchange Commission
Washington, D.C. 20549-6009
(a duplication fee is charged)
- --------------------------------------------------------------------------------
In Person Public Reference Room
Securities and Exchange Commission
Washington, D.C.

(Call 1-800-SEC-0330
for more information.)
- --------------------------------------------------------------------------------
By Internet http://www.sec.gov
http://www.kemper.com
- --------------------------------------------------------------------------------

The Statement of Additional Information is incorporated by reference into this
prospectus (is legally a part of this prospectus).

Investment Company Act file numbers:

Kemper Cash Reserves Fund 811-3440

[PRINTED WITH SOY INK LOGO] [RECYCLE LOGO] Printed on recycled paper
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION
February 1, 1999

Kemper Cash Reserves Fund
222 South Riverside Plaza, Chicago, Illinois 60606
1-800-621-1048

This Statement of Additional Information is not a prospectus. It is the
Statement of Additional Information for Kemper Cash Reserves Fund (the "Fund"),
a series of Kemper Portfolios (the "Trust"). It should be read in conjunction
with the prospectus of the Fund dated February 1, 1999. The prospectus may be
obtained without charge from the Fund.

TABLE OF CONTENTS

INVESTMENT RESTRICTIONS ................................................... 2
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS .......................... 4
PORTFOLIO TRANSACTIONS .................................................... 5
INVESTMENT MANAGER AND UNDERWRITER ........................................ 6
PURCHASE AND REDEMPTION OF SHARES ......................................... 11
DIVIDENDS AND TAXES ....................................................... 14
PERFORMANCE ............................................................... 22
OFFICERS AND TRUSTEES ..................................................... 25
SHAREHOLDER RIGHTS ........................................................ 28
APPENDIX -- RATINGS OF INVESTMENTS ........................................ 30

The financial statements appearing in the Fund's 1998 Annual Report to
Shareholders are incorporated herein by reference. The Annual Report for the
Fund accompanies this document.

KCRF-13 12/97 Printed on recycled paper
<PAGE>

INVESTMENT RESTRICTIONS

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

The Fund has elected to be classified as a diversified series of an open-end
investment trust.

The Fund may not, as a fundamental policy:

1. Make loans except as permitted under the Investment Company Act of 1940,
as amended, and as interpreted or modified by regulatory authority having
jurisdiction, from time to time.

2. Borrow money, except as permitted under the Investment Company Act of
1940, as amended, and as interpreted or modified by regulatory authority
having jurisdiction, from time to time.

3. Concentrate its investments in a particular industry, as that term is used
in the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to time,
except that the fund intends to invest more than 25% of its net assets in
instruments issued by banks.

4. Engage in the business of underwriting securities issued by others, except
to the extent the Fund may be deemed to be an underwriter in connection
with the disposition of portfolio securities.

5. Issue senior securities, except as permitted under the Investment Company
Act of 1940, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.

6. Purchase physical commodities or contracts relating to physical
commodities.

7. Purhcase or sell real estate, which term does not include securities or
companies which deal in real estate or mortgages or investments secured by
real estate or interests therein, except that the Fund reserves freedom of
action to hold and to sell real estate acquired as a result of the Fund's
ownership of securities.

If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The Fund has
adopted the following non-fundamental restrictions, which may be changed by the
Board of Trustees without shareholder approval. The Fund may not:

i. Purchase securities or make investments other than in
accordance with its investment objective and policies.

ii. Purchase securities of any issuer (other than obligations of,
or guaranteed by, the U.S. Government, its agencies or
instrumentalities) if, as a result, more than 5% of the value
of the Fund's net assets would be invested in securities of
that issuer.

iii. Purchase more than 10% of any class of securities of any
issuer. All debt securities and all preferred stocks are each
considered as one class.

iv. Invest more than 5% of the Fund's total assets in securities
of issuers (other than obligations of, or guaranteed by, the
U.S. Government, its agencies or instrumentalities) which with
their predecessors have a record of less than three years
continuous operation.

v. Enter into repurchase agreements if more than 10% of the
Fund's net assets valued at the time of the transaction would
be subject to repurchase agreements maturing in more than
seven days.

vi. Purchase or retain the securities of any issuer if any of the
officers, trustees or directors of Kemper Portfolios or its
investment adviser owns beneficially more than 1/2 of 1% of
the securities of such issuer and together they own more than
5% of the securities of such issuer.

vii. Invest more than 5% of the Fund's total assets in securities
restricted as to disposition under the federal securities laws
(except commercial paper issued under Section 4(2) of the
Securities Act of 1933) and no more

2
<PAGE>

than 10% of its assets will be invested in securities which
are considered illiquid. Repurchase agreements maturing in
more than 7 days are considered illiquid for purposes of this
restriction.

viii. Invest for the purpose of exercising control or management of
another issuer.

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

x. Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or
acquisition of assets.

xi. Make short sales of securities, or purchase any securities on
margin except to obtain such short-term credits as may be
necessary for the clearance of transactions.

xii. Engage in put or call option transactions.

INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS

The following information sets forth the Fund's investment objective, policies
and risk factors. The Fund seeks to maintain a net asset value of $1.00 per
share. There is no assurance that the Fund will achieve its objective.

The Fund seeks maximum current income to the extent consistent with stability of
principal from a portfolio of the following types of U.S. Dollar denominated
money market instruments that mature in 12 months or less:

1. Obligations of, or guaranteed by, the U.S. or Canadian Governments, their
agencies or instrumentalities. The two broad categories of U.S. Government debt
instruments are: (a) direct obligations of the U.S. Treasury and (b) securities
issued or guaranteed by agencies and instrumentalities of the U.S. Government.
Some obligations issued or guaranteed by agencies or instrumentalities of the
U.S. Government are backed by the full faith and credit of the United States and
others are backed exclusively by the agency or instrumentality with limited
rights of the issuer to borrow from the U.S.
Treasury.

2. Bank certificates of deposit, time deposits or bankers' acceptances limited
to U.S. banks or Canadian chartered banks having total assets in excess of $1
billion.

3. Bank certificates of deposit, time deposits or bankers' acceptances of U.S.
branches of foreign banks having total assets in excess of $10 billion.

4. Commercial paper rated Prime-1 or Prime-2 by Moody's Investor Services, Inc.
("Moody's") or A-1 or A-2 by Standard & Poor's Corporation ("S&P"), or
commercial paper or notes issued by companies with an unsecured debt issue
outstanding currently rated A or higher by Moody's or S&P where the obligation
is on the same or a higher level of priority as the rated issue, and investments
in other corporate obligations such as publicly traded bonds, debentures and
notes rated A or higher by Moody's or S&P.

5. Repurchase agreements of obligations which are suitable for investment under
the categories set forth above. Repurchase agreements are discussed under
"Additional Investment Information" below.

In addition, the Fund limits its investments to securities that meet the quality
and diversification requirements of Rule 2a-7 under the Investment Company Act
of 1940. See "Net Asset Value."

To the extent the Fund purchases Eurodollar certificates of deposit issued by
London branches of U.S. banks, or commercial paper issued by foreign entities,
consideration will be given to their marketability, possible restrictions on
international currency transactions and regulations imposed by the domicile
country of the foreign issuer. Eurodollar certificates of deposit may not be
subject to the same regulatory requirements as certificates issued by U.S. banks
and associated income may be subject to the imposition of foreign taxes. The
Fund will normally invest at least 25% of its net assets in instruments issued
by domestic or foreign banks. As a result, the Fund may be more adversely
affected by changes in market or economic conditions and other circumstances
affecting the banking industry than it would be if the Fund's assets were not so
concentrated.

The Fund seeks to maintain its net asset value at $1.00 per share by valuing its
portfolio of investments on the amortized cost method in accordance with Rule
2a-7. While the Fund will make every effort to maintain a fixed net asset value
of $1.00 per share, there can be no assurance that this objective will be
achieved. See "Net Asset Value."

3
<PAGE>

The Fund may invest in instruments bearing rates of interest that are adjusted
periodically or which "float" continuously according to formulae intended to
minimize fluctuations in values of the instruments ("Variable Rate Securities").
The interest rate of Variable Rate Securities is ordinarily determined by
reference to or is a percentage of an objective standard. Generally, the changes
in the interest rate on Variable Rate Securities reduce the fluctuation in the
market value of such securities. Accordingly, as interest rates decrease or
increase, the potential for capital appreciation or depreciation is less than
for fixed rate obligations. Some Variable Rate Securities ("Variable Rate Demand
Securities") have a demand feature entitling the purchaser to resell the
securities to the issuer at an amount approximately equal to amortized cost or
the principal amount thereof plus accrued interest. As is the case for other
Variable Rate Securities, the interest rate on Variable Rate Demand Securities
varies according to some objective standard intended to minimize fluctuation in
the values of the instruments. The Fund determines the maturity of Variable Rate
Securities in accordance with Securities and Exchange Commission rules that
allow the Fund to consider certain of such instruments as having maturities
earlier than the maturity date on the face of the instrument.

Section 4(2) Paper. Subject to its investment objectives and policies, the Fund
may invest in commercial paper issued by major corporations under the Securities
Act of 1933 in reliance on the exemption from registration afforded by Section
3(a)(3) thereof. Such commercial paper may be issued only to finance current
transactions and must mature in nine months or less. Trading of such commercial
paper is conducted primarily by institutional investors through investment
dealers, and individual investor participation in the commercial paper market is
very limited. The Fund also may invest in commercial paper issued in reliance on
the so-called "private placement" exemption from registration afforded by
Section 4(2) of the Securities Act of 1933 ("Section 4(2) paper"). Section 4(2)
paper is restricted as to disposition under the federal securities laws, and
generally is sold to institutional investors such as the Fund who agree that
they are purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) paper normally is resold to other institutional investors like the
Fund through or with the assistance of the issuer or investment dealers who make
a market in the Section 4(2) paper, thus providing liquidity. The investment
manager considers the legally restricted but readily saleable Section 4(2) paper
to be liquid; however, pursuant to procedures approved by the Board of Trustees,
if a particular investment in Section 4(2) paper is not determined to be liquid,
that investment will be included within the limitation on illiquid securities.
The investment manager monitors the liquidity of the Fund's investments in
Section 4(2) paper on a continuing basis. See "Investment Restrictions" in the
Statement of Additional Information.

Additional Investment Information. The Fund will invest only in securities with
remaining maturities of 12 months or less and maintains a dollar-weighted
average portfolio maturity of 90 days or less in accordance with Rule 2a-7 under
the Investment Company Act of 1940. Since securities with maturities of less
than one year are excluded from portfolio turnover rate calculations, the
portfolio turnover rate for the Fund is zero.

The Fund will not purchase illiquid securities, including repurchase agreements
maturing in more than seven days, if, as a result thereof, more than 10% of the
Fund's net assets, valued at the time of the transaction, would be invested in
such securities.

The Fund has adopted certain fundamental investment restrictions which cannot be
changed without approval by holders of a majority of its outstanding voting
shares. As defined in the Investment Company Act of 1940 ("1940 Act"), this
means the lesser of the vote of (a) 67% of the shares of the Fund present at a
meeting where more than 50% of the outstanding shares are present in person or
by proxy; or (b) more than 50% of the outstanding shares of the Fund.

Repurchase Agreements. The Fund may invest in repurchase agreements, under which
it acquires ownership of a security and the broker-dealer or bank agrees to
repurchase the security at a mutually agreed upon time and price, thereby
determining the yield during the Fund's holding period. In the event of a
bankruptcy or other default of a seller of a repurchase agreement, the Fund
might have expenses in enforcing its rights, and could experience losses,
including a decline in the value of the underlying securities and loss of
income. The securities underlying a repurchase agreement will be
marked-to-market every business day so that the value of such securities is at
least equal to the investment value of the repurchase agreement, including any
accrued interest thereon. In addition, the Fund must take physical possession of
the

4
<PAGE>

security or receive written confirmation of the purchase and a custodial or
safekeeping receipt from a third party or be recorded as the owner of the
security through the Federal Reserve Book-Entry System. Repurchase agreements
will be limited to transactions with financial institutions believed by the
investment manager to present minimal credit risk. The investment manager will
monitor on an on-going basis the creditworthiness of the broker-dealers and
banks with which the Fund may engage in repurchase agreements. Repurchase
agreements maturing in more than seven days will be considered as illiquid for
purposes of the Fund's limitations on illiquid securities.

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

PORTFOLIO TRANSACTIONS

Portfolio transactions are undertaken principally to pursue the objective of
each Portfolio in relation to movements in the general level of interest rates,
to invest money obtained from the sale of Fund shares, to reinvest proceeds from
maturing portfolio securities and to meet redemptions of Fund shares. This may
increase or decrease the yield of a Portfolio depending upon the Adviser's
ability to correctly time and execute such transactions. Since a Portfolio's
assets are invested in securities with short maturities, its portfolio will turn
over several times a year. Securities with maturities of less than one year are
excluded from required portfolio turnover rate calculations, each Portfolio's
portfolio turnover rate for reporting purposes should generally be zero.

The primary objective of the Adviser in placing orders for the purchase and sale
of securities for a Fund's portfolio is to obtain the most favorable net results
taking into account such factors as price, commission where applicable, size of
order, difficulty of execution and skill required of the executing
broker/dealer. The Adviser seeks to evaluate the overall reasonableness of
brokerage commissions paid (to the extent applicable) through its familiarity
with commissions charged on comparable transactions, as well as by comparing
commissions paid by a Fund to reported commissions paid by others. The Adviser
reviews on a routine basis commission rates, execution and settlement services
performed, making internal and external comparisons.

When it can be done consistently with the policy of obtaining the most favorable
net results, it is the Adviser's practice to place such orders with
broker/dealers who supply research, market and statistical information to a
Fund. The term "research, market and statistical information" includes advice as
to the value of securities: the advisability of investing in, purchasing or
selling securities; the availability of securities or purchasers or sellers of
securities; and analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts.
The Adviser is authorized when placing portfolio transactions for a Fund to pay
a brokerage commission in excess of that which another broker might charge for
executing the same transaction solely on account of the receipt of research,
market or statistical information. In effecting transactions in over-the-counter
securities, orders are placed with the principal market makers for the security
being traded unless, after exercising care, it appears that more favorable
results are available elsewhere.

In selecting among firms believed to meet the criteria for handling a particular
transaction, the Adviser may give consideration to those firms that have sold or
are selling shares of a Fund managed by the Adviser.

To the maximum extent feasible, it is expected that the Adviser will place
orders for portfolio transactions through Scudder Investor Services, Inc.
("SIS"), a corporation registered as a broker-dealer and a subsidiary of the
Adviser. SIS will place orders on behalf of the Fund with issuers, underwriters
or other brokers and dealers. SIS will not receive any commission, fee or other
remuneration from the Fund for this service.

5
<PAGE>

Although certain research, market and statistical information from
broker/dealers may be useful to a Fund and to the Adviser, it is the opinion of
the Adviser that such information only supplements its own research effort since
the information must still be analyzed, weighed and reviewed by the Adviser's
staff. Such information may be useful to the Adviser in providing services to
clients other than the Fund and not all such information is used by the Adviser
in connection with the Fund. Conversely, such information provided to the
Adviser by broker/dealers through whom other clients of the Adviser effect
securities transactions may be useful to the Adviser in providing services to a
Fund.

The Board members for a Fund review from time to time whether the recapture for
the benefit of a Fund of some portion of the brokerage commissions or similar
fees paid by a Fund on portfolio transactions is legally permissible and
advisable.

Money market instruments are normally purchased in principal transactions
directly from the issuer or from an underwriter or market maker. There usually
are no brokerage commissions paid by the Fund for such purchases. During the
last three fiscal years the Fund paid no portfolio brokerage commissions.
Purchases from underwriters will include a commission or concession paid by the
issuer to the underwriter, and purchases from dealers serving as market makers
will include the spread between the bid and asked prices.

INVESTMENT MANAGER AND UNDERWRITER

Investment Manager. Scudder Kemper Investments, Inc. (the "Adviser"), 345 Park
Avenue, New York, New York, is the Fund's investment manager. The Adviser is
approximately 70% owned by Zurich Financial Services, Inc., a newly formed
global insurance and financial services company. The balance of the Adviser is
owned by its officers and employees. Pursuant to an investment management
agreement, the Adviser acts as the Fund's investment adviser, manages its
investments, administers its business affairs, furnishes office facilities and
equipment, provides clerical and administrative services, and permits any of its
officers or employees to serve without compensation as trustees or officers of
the Fund if elected to such positions. The investment management agreement
provides that the Fund shall pay the charges and expenses of its operations,
including the fees and expenses of the trustees (except those who are affiliated
with the Adviser), independent auditors, counsel, custodian and transfer agent
and the cost of share certificates, reports and notices to shareholders,
brokerage commissions or transaction costs, costs of calculating net asset value
and maintaining all accounting records thereto, taxes and membership dues. The
Fund bears the expenses of registration of its shares with the Securities and
Exchange Commission, while Kemper Distributors, Inc. ("KDI"), as principal
underwriter, pays the cost of qualifying and maintaining the qualification of
the Fund's shares for sale under the securities laws of the various states.

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

The Fund's investment management agreement continues in effect from year to year
so long as its continuation is approved at least annually by (a) a majority of
the trustees who are not parties to such agreement or interested persons of any
such party except in their capacity as trustees of the Trust and (b) by the
shareholders of the Fund or the Board of Trustees. The Fund's investment
management agreement may be terminated at any time upon 60 days' notice by
either party, or by a majority vote of the outstanding shares of the Fund, and
will terminate automatically upon assignment. Each of the three current series
of the Trust, including the Fund, is subject to the investment management
agreement, and the provisions concerning continuation, amendment and termination
are on a series by series basis. Additional series may be subject to a different
agreement.

At December 31, 1997, pursuant to the terms of an agreement, Scudder, Stevens &
Clark, Inc. ("Scudder") and Zurich Insurance Company ("Zurich") formed a new
global organization by combining Scudder with Zurich Kemper Investments, Inc., a
former subsidiary of Zurich and former investment manager of the Fund, and
Scudder changed it name to Scudder Kemper Investments, Inc. As a result of the
transaction, Zurich owned approximately 70% of the Adviser, with the balance
owned by the Adviser's officers and employees.

On September 7, 1998, the businesses of Zurich (including Zurich's 70% interest
in the Adviser) and the financial services businesses of B.A.T Industries p.l.c.
("B.A.T") were combined to form a new global insurance and financial services
company known as Zurich Financial Services, Inc. By way of a dual holding
company structure, former Zurich

6
<PAGE>

shareholder initially owned approximately 57% of Zurich Financial Services,
Inc., with the balance initially owned by former B.A.T shareholders.

Upon consummation of this transaction, the Fund's existing investment management
agreement with the Adviser was deemed to have been assigned and, therefore,
terminated. The Board has approved a new investment management agreement with
the Adviser, which is substantially identical to the current investment
management agreement, except for the date of execution and termination. This
agreement became effective upon the termination of the then current investment
management agreement and has been approved by shareholders at a special meeting
that concluded in December 1998.

For the services and facilities furnished, the Fund pays an annual investment
management fee, payable monthly, on a graduated basis at the following annual
rates: 0.40% of the first $250 million of average daily net assets, 0.38% of the
next $750 million, 0.35% of the next $1.5 billion, 0.32% of the next $2.5
billion, 0.30% of the next $2.5 billion, 0.28% of the next $2.5 billion, 0.26%
of the next $2.5 billion, and 0.25% of average daily net assets over $12.5
billion. The investment management fees paid by the Fund for its 1998, 1997 and
1996 fiscal years were $1,269,000, $1,059,000 and $922,000, respectively.

Fund Accounting Agent. Scudder Fund Accounting Corporation ("SFAC"), Two
International Place, Boston, Massachusetts, 02110, a subsidiary of the Adviser,
is responsible for determining the daily net asset value per share of the Funds
and maintaining all accounting records related thereto. Currently, SFAC receives
no fee for its services to the Fund, however, subject to Board approval, at some
time in the future, SFAC may seek payment for its services under this agreement.

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

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

Class A Shares. KDI receives no compensation from the Fund as principal
underwriter for Class A shares and pays all expenses of distribution of the
Fund's Class A shares under the distribution agreement not otherwise paid by
dealers or other financial services firms.

7
<PAGE>

Class B Shares and Class C Shares. Since the distribution agreement provides for
fees charged to Class B and Class C shares that are used by KDI to pay for
distribution services (see the prospectus under "Investment Manager and
Underwriter"), the agreement (the "Plan"), is approved and renewed separately
for the Class B and Class C shares in accordance with Rule 12b-1 under the 1940
Act, which regulates the manner in which an investment company may, directly or
indirectly, bear expenses of distributing its shares. Currently, the Fund's Rule
12b-1 Plan has been separated from its distribution agreement.

For its services under the distribution agreement, KDI receives a fee from the
Fund, payable monthly, at the annual rate of 0.75% of average daily net assets
of the Fund attributable to Class C shares. This fee is accrued daily as an
expense of Class C shares. KDI currently advances to firms the first year
distribution fee at a rate of 0.75% of the purchase price of Class C shares. For
periods after the first year, KDI currently pays firms for sales of Class C
shares a distribution fee, payable quarterly, at an annual rate of 0.75% of net
assets attributable to Class C shares maintained and serviced by the firm and
the fee continues until terminated by KDI or the Fund. KDI also receives any
contingent deferred sales charges. See "Redemption or Repurchase of
Shares--Contingent Deferred Sales Charge--Class C Shares."

Rule 12b-1 Plan. Since the distribution agreement provides for fees payable as
an expense of the Class B shares and the Class C shares that are used by KDI to
pay for distribution services for those classes, that agreement is approved and
reviewed separately for the Class B shares and the Class C shares in accordance
with Rule 12b-1 under the 1940 Act, which regulates the manner in which an
investment company may, directly or indirectly, bear the expenses of
distributing its shares. Currently, the Fund's Rule 12b-1 Plan is separated from
its distribution agreement. The table below shows amounts paid in connection
with the Fund's Rule 12b-1 Plan during its 1998 fiscal year.

<TABLE>
<CAPTION>
Distribution Expenses Distribution Fees Paid by Contingent Deferred Sales Charges Paid
Incurred by Underwriter Fund to Underwriter to Underwriter
----------------------------------------------------------------------------------------------------------
Class B Class C Class B Class C Class B Class C
----------------------------------------------------------------------------------------------------------

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

Expenses of the Fund and of KDI in connection with the Rule 12b-1 plans for the
Class B and Class C shares are set forth below. A portion of the marketing,
sales and operating expenses shown below could be considered overhead expense.

8
<PAGE>

<TABLE>
<CAPTION>
Distribution Other Distribution Expenses Paid by KDI
Contingent Total Fees Paid by ---------------------------------------
Distribution Deferred Sales Distribution KDI to KDI Advertising Misc.
Class B Fiscal Fees Paid by Charges Paid Fees Paid by Affiliated and Prospectus Marketing and Operating Interest
Shares Year Fund to KDI to KDI KDI to Firms Firms Literature Printing Sales Expenses Expenses Expense
- ------ ---- ----------- ------ ------------ ----- ---------- -------- -------------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>

1998 $1,993,000 813,000 3,267,000 0 320,000 28,000 656,000 123,000 1,576,000
1997 $1,499,000 808,000 3,671,000 0 553,000 40,000 1,432,000 217,000 1,196,000
1996 $1,380,000 766,000 2,820,000 28,000 660,000 52,000 1,467,000 235,000 789,000

<CAPTION>
Distribution Other Distribution Expenses Paid by KDI
Contingent Total Fees Paid by ---------------------------------------
Distribution Deferred Sales Distribution KDI to KDI Advertising Misc.
Class C Fiscal Fees Paid by Charges Paid Fees Paid by Affiliated and Prospectus Marketing and Operating Interest
Shares Year Fund to KDI to KDI KDI to Firms Firms Literature Printing Sales Expenses Expenses Expense
- ------ ---- ----------- ------ ------------ ----- ---------- -------- -------------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>

1998 $232,000 24,000 431,000 0 156,000 14,000 329,000 68,000 176,000
1997 $118,000 16,000 237,000 0 165,000 12,000 415,000 46,000 107,000
1996 $ 48,000 1,000 162,000 0 112,000 9,000 143,000 39,000 43,000
</TABLE>

9
<PAGE>

Administrative Services. Administrative services are provided to the Fund under
an administrative services agreement ("administrative agreement") with Kemper
Distributors, Inc. ("KDI"), 222 South Riverside Plaza, Chicago, Illinois, 60606,
an affiliate of the Adviser. KDI bears all its expenses of providing services
pursuant to the administrative agreement between KDI and the Fund, including the
payment of service fees. For the services under the administrative agreement,
the Fund pays KDI an administrative services fee, payable monthly, at the annual
rate of up to 0.25% of average daily net assets of Class A, B and C shares of
the Fund.

KDI has entered into related arrangements with various broker-dealer firms and
other service or administrative firms ("firms"), that provide services and
facilities for their customers or clients who are investors of the Fund. The
firms provide such office space and equipment, telephone facilities and
personnel as is necessary or beneficial for providing information and services
to their clients. Such services and assistance may include, but are not limited
to, establishing and maintaining accounts and records, processing purchase and
redemption transactions, answering routine inquiries regarding the Fund,
assistance to clients in changing dividend and investment options, account
designations and addresses and such other administrative services as may be
agreed upon from time to time and permitted by applicable statute, rule or
regulation. With respect to Class A shares, KDI pays each firm a service fee,
payable quarterly, at an annual rate of up to 0.25% of the net assets in Fund
accounts that it maintains and services attributable to Class A shares,
commencing with the month after investment. With respect to Class B shares and
Class C shares, KDI currently advances to firms the first-year service fee at a
rate of up to 0.25% of the purchase price of such shares. For periods after the
first year, KDI currently intends to pay firms a service fee at an annual rate
of up to 0.25% (calculated monthly and normally paid quarterly) of the net
assets attributable to Class B and Class C shares maintained and serviced by the
firm and the fee continues until terminated by KDI or the Fund. Firms to which
service fees may be paid include affiliates of KDI.

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

[To Be Updated]

<TABLE>
<CAPTION>
Administrative Service Fees Paid by Fund
---------------------------------------- Total Service Fees Paid Service Fees Paid by KDI
Fiscal Year Class A Class B Class B by KDI to Firms to KDI Affiliated Firms
- ----------- ------- ------- ------- --------------- -----------------------
<S> <C> <C> <C> <C> <C>

1998
1997 $112,000 492,000 44,000 824,000 0
1996 $ 92,000 446,000 16,000 690,000 7,000
</TABLE>

KDI also may provide some of the above services and may retain any portion of
the fee under the administrative agreement not paid to firms to compensate
itself for administrative functions performed for the Fund. Currently, however,
the administrative services fee payable to KDI is based only upon Fund assets in
accounts for which a firm provides administrative services and it is intended
that KDI will pay all the administrative services fee that it receives from the
Fund to firms in the form of service fees. The effective administrative services
fee rate to be charged against all assets of the Fund while this procedure is in
effect will depend upon the proportion of Fund assets that is in accounts for
which a firm of record provides administrative services. The Board of Trustees
of the Fund, in its discretion, may approve basing the fee to KDI on all Fund
assets in the future.

Certain trustees or officers of the Fund are also directors or officers of the
Adviser or KDI as indicated under "Officers and Trustees."

Custodian, Transfer Agent and Shareholder Service Agent. State Street Bank and
Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, as custodian,
has custody of all securities and cash of the Fund. It attends to the collection
of principal and income, and payment for and collection of proceeds of
securities bought and sold by the Fund. Investor Fiduciary Trust Company
("IFTC") is the Fund's transfer agent and dividend-paying agent. Pursuant to a
services agreement with IFTC, Kemper Service Company ("KSvC"), an affiliate of
the Adviser, serves as "Shareholder Service Agent" of the Fund, and as such,
performs all of IFTC's duties as transfer agent and dividend paying agent. IFTC
receives as transfer agent, and pays to KSvC as follows: prior to January 1,
1999, annual account fees of up to $8 per account plus account set up,
transaction and maintenance charges, annual fees associated with the contingent
deferred sales charge (Class B only) and out-of-pocket expense reimbursement;
and, effective January 1, 1999, annual account fees of $14.00 ($23.00 for
retirement accounts) plus account set-up charges, annual fees associated with
the contingent deferred

10
<PAGE>

sales charges (Class B shares only), an asset based fee of 0.02%, and
out-of-pocket expense reimbursement. IFTC's fee is reduced by certain earnings
credits in favor of the Fund. For the Fund's 1998 fiscal year the shareholder
service fees IFTC remitted to KSvC were $1,353,000.

Independent Auditors and Reports to Shareholders. The Fund's independent
auditors, Ernst & Young LLP, 233 South Wacker Drive, Chicago, Illinois 60606,
audit and report on the Fund's annual financial statements, review certain
regulatory reports and the Fund's federal income tax returns, and perform other
professional accounting, auditing, tax and advisory services when engaged to do
so by the Fund. Shareholders will receive annual audited financial statements
and semi-annual unaudited financial statements.

Legal Counsel. Vedder, Price, Kaufman & Kammholz, 222 North LaSalle Street,
Chicago, Illinois 60601, serves as legal counsel to the Fund.

PURCHASE, REPURCHASE AND REDEMPTION OF SHARES

PURCHASE OF SHARES

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

The Fund is designed primarily as an exchange vehicle for investments in other
Kemper Mutual Funds sold through financial services firms. For example, the Fund
may serve as a temporary investment for amounts ultimately intended for
investment in equity or fixed income Kemper Mutual Funds through techniques such
as "dollar cost averaging." The primary distinctions among the classes of the
Fund's shares lie in their initial and contingent deferred sales charge
structures and in their ongoing expenses, including asset-based sales charges in
the form of Rule 12b-1 distribution fees. These differences are summarized in
the table below. See, also, "Summary of Expenses." Each class has distinct
advantages and disadvantages for different investors, and investors may choose
the class that best suits their circumstances and objectives.

<TABLE>
<CAPTION>
Annual 12b-1 Fees
(as a % of
average daily
Sales Charge net assets) Other Information
------------ ----------- -----------------
<S> <C> <C> <C>
Class A* None None Shares convert to
Class B Maximum contingent deferred sales 0.75% Class A shares
charge of 4% of redemption six years after
proceeds; declines to zero after issuance
six years
Class C Contingent deferred sales charge of
1% of redemption proceeds for
redemptions made during first year
after purchase 0.75% No conversion
feature
</TABLE>

* No initial sales charge applies to purchases of Class A shares of the
Fund, but the applicable sales charge applies for exchanges into Class A
shares of other Kemper Mutual Funds.

The minimum initial investment for the Fund is $1,000 and the minimum subsequent
investment is $100. The minimum initial investment for an Individual Retirement
Account is $250 and the minimum subsequent investment is $50. Under an automatic
investment plan, such as Bank Direct Deposit, Payroll Direct Deposit or
Government Direct Deposit, the minimum initial and subsequent investment is $50.
These minimum amounts may be changed at any time in management's discretion. In
order to begin accruing income dividends as soon as possible, purchasers may
wire payment to United Missouri Bank of Kansas City, N.A., 10th and Grand
Avenue, Kansas City, Missouri 64106.

11
<PAGE>

The Fund seeks to be as fully invested as possible at all times in order to
achieve maximum income. Since the Fund will be investing in instruments which
normally require immediate payment in Federal Funds (monies credited to a bank's
account with its regional Federal Reserve Bank), the Fund has adopted certain
procedures for the convenience of its shareholders and to ensure that the Fund
receives investable funds. (a) Wire transfer. Orders received by wire transfer
in the form of Federal Funds will be effected at the next determined net asset
value after receipt by the Fund's Shareholder Service Agent and such shares will
receive the dividend for the next calendar day following the day when the
purchase is effective. If payment is wired in Federal Funds, the payment should
be wired to United Missouri Bank of Kansas City, N.A., 10th and Grand Avenue,
Kansas City, Missouri 64106. If payment is to be wired, the firm which services
the account should handle the details of the transaction. (b) Check. Orders for
purchase accompanied by a check or other negotiable bank draft will be accepted
and effected as of the close of the Exchange on the business day following
receipt and such shares will receive the dividend for the next calendar day
following the day when the purchase is effective. (c) Dealer Trades. Orders
processed through dealers or other financial services firms, including trades
via Fund/SERV, will be effected at the net asset value effective on the trade
date. These purchases will begin earning dividends the calendar day following
the payment date. See "Dividends and Taxes" for more information.

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

Class A Shares. Class A shares are sold at their net asset value with no sales
charge.

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

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

Class B shares of the Fund will automatically convert to Class A shares six
years after issuance on the basis of the relative net asset value per share. The
purpose of the conversion feature is to relieve holders of Class B shares from
the distribution services fee when they have been outstanding long enough for
KDI to have been compensated for distribution related expenses. For purposes of
conversion to Class A shares, shares purchased through the reinvestment of
dividends and other distributions paid with respect to Class B shares in a
shareholder's Fund account will be converted to Class A shares on a pro rata
basis.

Purchase of Class C Shares. The public offering price of the Class C shares of
the Fund is the next determined net asset value. No initial sales charge is
imposed. Since Class C shares are sold without an initial sales charge, the full
amount of the investor's purchase payment will be invested in Class C shares for
his or her account. A contingent deferred sales charge may be imposed upon the
redemption of Class C shares if they are redeemed within one year of purchase.
See "Redemption or Repurchase of Shares--Contingent Deferred Sales Charge--Class
C Shares." KDI currently advances to firms the first year distribution fee at a
rate of 0.75% of the purchase price of such shares. For periods after the first
year, KDI currently intends to pay firms for sales of Class C shares a
distribution fee, payable quarterly, at an annual rate of 0.75% of net assets
attributable to Class C shares maintained and serviced by the firm. KDI is
compensated by the Fund for services as distributor and principal underwriter
for Class C shares. See "Investment Manager and Underwriter."

General. Banks and other financial services firms may provide administrative
services related to order placement and payment to facilitate transactions in
shares of the Fund for their clients, and KDI may pay them a transaction fee up
to the level of the discount or commission allowable or payable to dealers, as
described above. Banks are currently prohibited under the Glass-Steagall Act
from providing certain underwriting or distribution services. Banks or other
financial services

12
<PAGE>

firms may be subject to various state laws regarding the services described
above and may be required to register as dealers pursuant to state law. If
banking firms were prohibited from acting in any capacity or providing any of
the described services, management would consider what action, if any, would be
appropriate. KDI does not believe that termination of a relationship with a bank
would result in any material adverse consequences to the Fund.

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

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

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

Investment dealers and other firms provide varying arrangements for their
clients to purchase and redeem the Fund's shares. Some may establish higher
minimum investment requirements than set forth above. Firms may arrange with
their clients for other investment or administrative services. Such firms may
independently establish and charge additional amounts to their clients for such
services, which charges would reduce the clients' return. Firms also may hold
the Fund's shares in nominee or street name as agent for and on behalf of their
customers. In such instances, the Fund's transfer agent will have no information
with respect to or control over the accounts of specific shareholders. Such
shareholders may obtain access to their accounts and information about their
accounts only from their firm. Certain of these firms may receive compensation
from the Fund through the Shareholder Service Agent for recordkeeping and other
expenses relating to these nominee accounts. In addition, certain privileges
with respect to the purchase and redemption of shares or the reinvestment of
dividends may not be available through such firms. Some firms may participate in
a program allowing them access to their clients' accounts for servicing
including, without limitation, transfers of registration and dividend payee
changes; and may perform functions such as generation of confirmation statements
and disbursement of cash dividends. Such firms, including affiliates of KDI, may
receive compensation from the Fund through the Shareholder Service Agent for
these services. This prospectus should be read in connection with such firms'
material regarding their fees and services.

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

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

As described in the Fund's prospectus, shares of the Fund are sold at their
public offering price, which is the net asset value per share of the Fund next
determined after an order is received in proper form. The applicable sales
charge applies for exchanges from Class A shares of the Fund to Class A shares
of other Kemper Mutual Funds. The minimum initial investment is $1,000 and the
minimum subsequent investment is $100 but such minimum amounts may be changed at
any time. See the prospectus for certain exceptions to these minimums. An order
for the purchase of shares that is accompanied by a check drawn on a foreign
bank (other than a check drawn on a Canadian bank in U.S. Dollars) will not be
considered in proper form and will not be processed unless and until the Fund
determines that it has received payment of the proceeds of the check. The time
required for such a determination will vary and cannot be determined in advance.

13
<PAGE>

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

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

The Fund may suspend the right of redemption or delay payment more than seven
days (a) during any period when the New York Stock Exchange ("Exchange") is
closed other than customary weekend and holiday closings or during any period in
which trading on the Exchange is restricted, (b) during any period when an
emergency exists as a result of which (i) disposal of the Fund's investments is
not reasonably practicable, or (ii) it is not reasonably practicable for the
Fund to determine the value of its net assets, or (c) for such other periods as
the Securities and Exchange Commission may by order permit for the protection of
the Fund's shareholders.

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

REDEMPTION OR REPURCHASE OF SHARES

General. Any shareholder may require the Fund to redeem his or her shares. When
shares are held for the account of a shareholder by the Fund's transfer agent,
the shareholder may redeem them by sending a written request with signatures
guaranteed to Kemper Mutual Funds, Attention: Redemption Department, P.O. Box
419557, Kansas City, Missouri 64141-6557. When certificates for shares have been
issued, they must be mailed to or deposited with the Shareholder Service Agent,
along with a duly endorsed stock power and accompanied by a written request for
redemption. Redemption requests and a stock power must be endorsed by the
account holder with signatures guaranteed by a commercial bank, trust company,
savings and loan association, federal savings bank, member firm of a national
securities exchange or other eligible financial institution. The redemption
request and stock power must be signed exactly as the account is registered
including any special capacity of the registered owner. Additional documentation
may be requested, and a signature guarantee is normally required, from
institutional and fiduciary account holders, such as corporations, custodians
(e.g., under the Uniform Transfers to Minors Act), executors, administrators,
trustees or guardians.

The redemption price for shares of the Fund will be the net asset value per
share of the Fund next determined following receipt by the Shareholder Service
Agent of a properly executed request with any required documents as described
above. Payment for shares redeemed will be made in cash as promptly as
practicable but in no event later than seven days after receipt of a properly
executed request accompanied by any outstanding share certificates in proper
form for transfer. When the Fund is asked to redeem shares for which it may not
have yet received good payment (i.e., purchases by check, EXPRESS-Transfer or
Bank Direct Deposit), it may delay transmittal of redemption proceeds until it
has determined that collected funds have been received for the purchase of such
shares, which will be up to 10 days from receipt by the Fund of the purchase
amount. The redemption of Class B shares within six years may be subject to a
contingent deferred sales charge (see "Contingent Deferred Sales Charge--Class B
Shares" below), and the redemption of Class C shares within the first year
following purchase may be subject to a contingent deferred sales charge (see
"Contingent Deferred Sales Charge--Class C Shares" below).

Because of the high cost of maintaining small accounts, the Fund may assess a
quarterly fee of $9 on an account with a balance below $1,000 for the quarter.
The fee will not apply to accounts enrolled in an automatic investment program,
Individual Retirement Accounts or employer sponsored employee benefit plans
using the subaccount record keeping system made available through the
Shareholder Service Agent.

Shareholders can request the following telephone privileges: expedited wire
transfer redemptions and EXPRESS-Transfer transactions (see "Special Features")
and exchange transactions for individual and institutional accounts and
pre-authorized telephone redemption transactions for certain institutional
accounts. Shareholders may choose these privileges on the account application or
by contacting the Shareholder Service Agent for appropriate instructions. Please
note that the telephone

14
<PAGE>

exchange privilege is automatic unless the shareholder refuses it on the account
application. The Fund or its agents may be liable for any losses, expenses or
costs arising out of fraudulent or unauthorized telephone requests pursuant to
these privileges unless the Fund or its agents reasonably believe, based upon
reasonable verification procedures, that the telephonic instructions are
genuine. The shareholder will bear the risk of loss, including loss resulting
from fraudulent or unauthorized transactions, as long as the reasonable
verification procedures are followed. The verification procedures include
recording instructions, requiring certain identifying information before acting
upon instructions and sending written confirmations.

If shares being redeemed were acquired from an exchange of shares of a mutual
fund that were offered subject to a contingent deferred sales charge as
described in the prospectus for that other fund, the redemption of such shares
by the Fund may be subject to a contingent deferred sales charge as explained in
such prospectus.

Telephone Redemptions. If the proceeds of the redemption (prior to the
imposition of any contingent deferred sales charge) are $50,000 or less and the
proceeds are payable to the shareholder of record at the address of record,
normally a telephone request or a written request by any one account holder
without a signature guarantee is sufficient for redemptions by individual or
joint account holders, and trust, executor, guardian and custodial account
holders , provided the trustee, executor, guardian or custodian is named in the
account registration. Other institutional account holders and guardian account
holders of custodial accounts for gifts and transfers to minors may exercise
this special privilege of redeeming shares by telephone request or written
request without signature guarantee subject to the same conditions as individual
account holders and subject to the limitations on liability described under
"General" above, provided that this privilege has been pre-authorized by the
institutional account holder or guardian account holder by written instruction
to the Shareholder Service Agent with signatures guaranteed. Telephone requests
may be made by calling 1-800-621-1048. Shares purchased by check or through
EXPRESS-Transfer or Bank Direct Deposit may not be redeemed under this privilege
of redeeming shares by telephone request until such shares have been owned for
at least 10 days. This privilege of redeeming shares by telephone request or by
written request without a signature guarantee may not be used to redeem shares
held in certificated form and may not be used if the shareholder's account has
had an address change within 30 days of the redemption request. During periods
when it is difficult to contact the Shareholder Service Agent by telephone, it
may be difficult to use the telephone redemption privilege, although investors
can still redeem by mail. The Fund reserves the right to terminate or modify
this privilege at any time.

Repurchases (Confirmed Redemptions). A request for repurchase may be
communicated by a shareholder through a securities dealer or other financial
services firm to KDI, which the Fund has authorized to act as its agent. There
is no charge by KDI with respect to repurchases; however, dealers or other firms
may charge customary commissions for their services. Dealers and other financial
services firms are obligated to transmit orders promptly. The repurchase price
will be the net asset value of the Fund next determined after receipt of a
request by KDI. However, requests for repurchases received by dealers or other
firms prior to the determination of net asset value (see "Net Asset Value") and
received by KDI prior to the close of KDI's business day will be confirmed at
the net asset value effective on that day. The offer to repurchase may be
suspended at any time. Requirements as to stock powers, certificates, payments
and delay of payments are the same as for redemptions.

Expedited Wire Transfer Redemptions. If the account holder has given
authorization for expedited wire redemption to the account holder's brokerage or
bank account, shares of the Fund can be redeemed and proceeds sent by federal
wire transfer to a single previously designated account. Requests received by
the Shareholder Service Agent prior to the determination of net asset value will
result in shares being redeemed that day at the net asset value of the Fund
effective on that day and normally the proceeds will be sent to the designated
account the following business day. Delivery of the proceeds of a wire
redemption request of $250,000 or more may be delayed by the Fund for up to
seven days if the investment manager deems it appropriate under then current
market conditions. Once authorization is on file, the Shareholder Service Agent
will honor requests by telephone at 1-800-621-1048 or in writing, subject to the
limitations on liability described under "General" above. The Fund is not
responsible for the efficiency of the federal wire system or the account
holder's financial services firm or bank. The Fund currently does not charge the
account holder for wire transfers. The account holder is responsible for any
charges imposed by the account holder's firm or bank. There is a $1,000 wire
redemption minimum (including any contingent deferred sales charge). To change
the designated account to receive wire redemption proceeds, send a written
request to the Shareholder Service Agent with signatures guaranteed as described
above or contact the firm through which shares of the Fund were purchased.
Shares purchased by check or through EXPRESS-Transfer or Bank Direct Deposit may
not be redeemed by wire transfer until such shares have been owned for at least
10 days. Account holders may not use this privilege to redeem shares held in
certificated form. During periods when it is difficult to contact the
Shareholder Service

15
<PAGE>

Agent by telephone, it may be difficult to use the expedited redemption
privilege. The Fund reserves the right to terminate or modify this privilege at
any time.

Contingent Deferred Sales Charge--Class B Shares. A contingent deferred sales
charge may be imposed upon redemption of Class B shares. There is no such charge
upon redemption of any reinvested dividends on Class B shares. The charge is
computed at the following rates applied to the value of the shares redeemed
excluding amounts not subject to the charge.

Year of Contingent
Redemption Deferred
After Sales
Purchase Charge
-------- ------

First 4%
Second 3%
Third 3%
Fourth 2%
Fifth 2%
Sixth 1%

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

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

Contingent Deferred Sales Charge--Class C Shares. A contingent deferred sales
charge of 1% may be imposed upon redemption of Class C shares if they are
redeemed within one year of purchase. The charge will not be imposed upon
redemption of reinvested dividends. The charge is applied to the value of the
shares redeemed excluding amounts not subject to the charge. The contingent
deferred sales charge will be waived: (a) in the event of the total disability
(as evidenced by a determination by the federal Social Security Administration)
of the shareholder (including a registered joint owner) occurring after the
purchase of the shares being redeemed, (b) in the event of the death of the
shareholder (including a registered joint

16
<PAGE>

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

Contingent Deferred Sales Charge--General. The following example will illustrate
the operation of the contingent deferred sales charge. Assume that an investor
makes a single purchase of $10,000 of the Fund's Class B shares and that 16
months later the value of the shares has grown by $1,000 through reinvested
dividends to a total of $11,000. If the investor were then to redeem the entire
$11,000 in share value, the contingent deferred sales charge would be payable
only with respect to $10,000 because the $1,000 of reinvested dividends is not
subject to the charge. The charge would be at the rate of 3% ($300) because it
was in the second year after the purchase was made.

The rate of the contingent deferred sales charge is determined by the length of
the period of ownership. Investments are tracked on a monthly basis. The period
of ownership for this purpose begins the first day of the month in which the
order for the investment is received. For example, an investment made in
December, 1998 will be eligible for the second year's charge if redeemed on or
after December 1, 1999. In the event no specific order is requested, the
redemption will be made first from shares representing reinvested dividends and
then from the earliest purchase of shares. KDI receives any contingent deferred
sales charge directly.

Reinvestment Privilege. A shareholder of the Fund who redeems Class B shares or
Class C shares and incurs a contingent deferred sales charge may reinvest up to
the full amount redeemed at net asset value at the time of the reinvestment in
Class A shares, Class B shares or Class C shares, as the case may be, of its
Fund or of any other Kemper Mutual Fund listed under "Special Features -- Class
A Shares -- Combined Purchases". The amount of any contingent deferred sales
charge also will be reinvested. These reinvested shares will retain their
original cost and purchase date for purposes of the contingent deferred sales
charge. Also, a holder of Class B shares who has redeemed shares may reinvest up
to the full amount redeemed, less any applicable contingent deferred sales
charge that may have been imposed upon the redemption of such shares, at net
asset value in Class A shares of the Fund or of the other Kemper Mutual Funds
listed under "Special Features--Class A Shares--Combined Purchases." Purchases
through the reinvestment privilege are subject to the minimum investment
requirements applicable to the shares being purchased and may only be made for
Kemper Mutual Funds available for sale in the shareholder's state of residence
as listed under "Special Features--Exchange Privilege." The reinvestment
privilege can be used only once as to any specific shares and reinvestment must
be effected within six months of the redemption. The reinvestment privilege may
be terminated or modified at any time.

SPECIAL FEATURES

Class A Shares -- Combined Purchases. The Class A shares (or the equivalent) of
any Kemper Mutual Fund may be purchased at the rate applicable to the discount
bracket attained by combining concurrent investments in Class A shares of any of
the following funds: Kemper Adjustable Rate U.S. Government Fund, Kemper
Aggressive Growth Fund, Kemper Asian Growth Fund, Kemper Blue Chip Fund, Kemper
California Tax-Free Income Fund, Kemper Cash Reserves Fund, Kemper Contrarian
Fund, Kemper Diversified Income Fund, Kemper Emerging Markets Growth Fund,
Kemper Emerging Markets Income Fund, Kemper Europe Fund, Kemper Florida Tax-Free
Income Fund, Kemper Global Blue Chip Fund, Kemper Global Income Fund, Kemper
Growth Fund, Kemper High Yield Fund, Kemper High Yield Opportunity, Kemper
Horizon 10+ Portfolio, Kemper Horizon 20+ Portfolio, Kemper Horizon 5 Portfolio,
Kemper Income And Capital Preservation Fund, Kemper Intermediate Municipal Bond,
Kemper International Fund, Kemper International Growth and Income Fund, Kemper
Large Company Growth Fund (currently available only to employees of Scudder
Kemper Investments, Inc.; not available in all states), Kemper Latin America
Fund, Kemper Municipal Bond Fund, Kemper New York Tax-Free Income Fund, Kemper
Ohio Tax-Free Income Fund, Kemper Quantitative Equity Fund, Kemper Research Fund
(currently available only to employees of Scudder Kemper Investments, Inc.; not
available in all states), Kemper Retirement Fund -- Series I, Kemper Retirement
Fund -- Series II, Kemper Retirement Fund -- Series III, Kemper Retirement Fund
- -- Series IV, Kemper Retirement Fund -- Series V, Kemper Retirement Fund --
Series VI, Kemper Retirement Fund --

17
<PAGE>

Series VII, Kemper Short-Intermediate Government Fund, Kemper Small Cap Value
Fund, Kemper Small Cap Value+Growth Fund (currently available only to employees
of Scudder Kemper Investments, Inc.; not available in all states), Kemper Small
Capitalization Equity Fund, Kemper Small Cap Relative Value Fund, Kemper
Technology Fund, Kemper Total Return Fund, Kemper U.S. Government Securities
Fund, Kemper U.S. Growth and Income Fund, Kemper U.S. Mortgage Fund, Kemper
Value+Growth Fund, Kemper Worldwide 2004 Fund, Kemper-Dreman High Return Equity
Fund and Kemper-Dreman Financial Services Fund. ("Kemper Mutual Funds") Except
as noted below, there is no combined purchase credit for direct purchases of
shares of Zurich Money Funds, Cash Equivalent Fund, Tax-Exempt California Money
Market Fund, Cash Account Trust, Investors Municipal Cash Fund or Investors Cash
Trust ("Money Market Funds"), which are not considered Kemper Mutual Funds for
purposes hereof. For purposes of the Combined Purchases feature described above
as well as for the Letter of Intent and Cumulative Discount features described
below, employer sponsored employee benefit plans using the subaccount record
keeping system made available through the Shareholder Service Agent or its
affiliates may include: (a) Money Market Funds as "Kemper Mutual Funds," (b) all
classes of shares of any Kemper Mutual Fund, and (c) the value of any other plan
investments, such as guaranteed investment contracts and employer stock,
maintained on such subaccount record keeping system.

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

Class A Shares -- Cumulative Discount. Class A shares of a Kemper Mutual Fund
may also be purchased at the rate applicable to the discount bracket attained by
adding to the cost of shares of the Fund being purchased, the value of all Class
A shares of the above mentioned Kemper Mutual Funds (computed at the maximum
offering price at the time of the purchase for which the discount is applicable)
already owned by the investor.

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

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

Class A Shares. Class A shares of the Kemper Mutual Funds and shares of the
Money Market Funds listed under "Special Features--Class A Shares--Combined
Purchases" above may be exchanged for each other at their relative net asset
values.

18
<PAGE>

Shares of Money Market Funds and the Cash Reserves Fund that were acquired by
purchase (not including shares acquired by dividend reinvestment) are subject to
the applicable sales charge on exchange. Series of Kemper Target Equity Fund are
available on exchange only during the Offering Period for such series as
described in the applicable prospectus. Cash Equivalent Fund, Tax-Exempt
California Money Market Fund, Cash Account Trust, Investors Municipal Cash Fund
and Investors Cash Trust are available on exchange but only through a financial
services firm having a services agreement with KDI.

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

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

General. Shares of a Kemper Mutual Fund with a value in excess of $1,000,000
(except Kemper Cash Reserves Fund) acquired by exchange from another Kemper
Mutual Fund, or from a Money Market Fund, may not be exchanged thereafter until
they have been owned for 15 days (the "15 Day Hold Policy"). For purposes of
determining whether the 15 Day Hold Policy applies to a particular exchange, the
value of the shares to be exchanged shall be computed by aggregating the value
of shares being exchanged for all accounts under common control, direction, or
advice, including without limitation, accounts administered by a financial
services firm offering market timing, asset allocation or similar services. The
total value of shares being exchanged must at least equal the minimum investment
requirement of the Kemper Fund into which they are being exchanged. Exchanges
are made based on relative dollar values of the shares involved in the exchange.
There is no service fee for an exchange; however, dealers or other firms may
charge for their services in effecting exchange transactions. Exchanges will be
effected by redemption of shares of the fund held and purchase of shares of the
other fund. For federal income tax purposes, any such exchange constitutes a
sale upon which a gain or loss may be realized, depending upon whether the value
of the shares being exchanged is more or less than the shareholder's adjusted
cost basis of such shares. Shareholders interested in exercising the exchange
privilege may obtain prospectuses of the other funds from dealers, other firms
or KDI. Exchanges may be accomplished by a written request to KSvC, Attention:
Exchange Department, P.O. Box 419557, Kansas City, Missouri 64141-6557, or by
telephone if the shareholder has given authorization. Once the authorization is
on file, the Shareholder Service Agent will honor requests by telephone at
1-800-621-1048, subject to the limitations on liability under "Redemption or
Repurchase of Shares--General." Any share certificates must be deposited prior
to any exchange of such shares. During periods when it is difficult to contact
the Shareholder Service Agent by telephone, it may be difficult to use the
telephone exchange privilege. The exchange privilege is not a right and may be
suspended, terminated or modified at any time. Except as otherwise permitted by
applicable regulations, 60 days' prior written notice of any termination or
material change will be provided. Exchanges may only be made for funds that are
available for sale in the shareholder's state of residence. Currently,
Tax-Exempt California Money Market Fund is available for sale only in California
and the portfolios of Investors Municipal Cash Fund are available for sale only
in certain states.

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

EXPRESS-Transfer. EXPRESS-Transfer permits the transfer of money via the
Automated Clearing House System (minimum $100 and maximum $50,000) from a
shareholder's bank, savings and loan, or credit union account to purchase shares
in the Fund. Shareholders can also redeem shares (minimum $100 and maximum
$50,000) from their Fund account and transfer the proceeds to their bank,
savings and loan, or credit union checking account. Shares purchased by check or
through EXPRESS-Transfer or Bank Direct Deposit may not be redeemed under this
privilege until such shares have been owned for at least 10 days. By enrolling
in EXPRESS-Transfer, the shareholder authorizes the Shareholder Service Agent to

19
<PAGE>

rely upon telephone instructions from any person to transfer the specified
amounts between the shareholder's Fund account and the predesignated bank,
savings and loan or credit union account, subject to the limitations on
liability under "Redemption or Repurchase of Shares--General." Once enrolled in
EXPRESS-Transfer, a shareholder can initiate a transaction by calling
Shareholder Services toll free at 1-800-621-1048 Monday through Friday, 8:00
a.m. to 3:00 p.m. Chicago time. Shareholders may terminate this privilege by
sending written notice to KSvC, P.O. Box 419415, Kansas City, Missouri
64141-6415. Termination will become effective as soon as the Shareholder Service
Agent has had a reasonable time to act upon the request. EXPRESS-Transfer cannot
be used with passbook savings accounts or for tax-deferred plans such as
Individual Retirement Accounts ("IRAs").

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

Payroll Direct Deposit and Government Direct Deposit.A shareholder may invest in
the Fund through Payroll Direct Deposit or Government Direct Deposit. Under
these programs, all or a portion of a shareholder's net pay or government check
is automatically invested in the Fund account each payment period. A shareholder
may terminate participation in these programs by giving written notice to the
shareholder's employer or government agency, as appropriate. (A reasonable time
to act is required.) The Fund is not responsible for the efficiency of the
employer or government agency making the payment or any financial institutions
transmitting payments.

Systematic Withdrawal Plan. The owner of $5,000 or more of a class of the Fund's
shares at the offering price may provide for the payment from the owner's
account of any requested dollar amount up to $50,000 to be paid to the owner or
a designated payee monthly, quarterly, semiannually or annually. The $5,000
minimum account size is not applicable to Individual Retirement Accounts. The
minimum periodic payment is $100. The maximum annual rate at which Class B
shares may be redeemed (and Class C shares in their first year following the
purchase) under a systematic withdrawal plan is 10% of the net asset value of
the account. Shares are redeemed so that the payee will receive payment
approximately the first of the month. Any income and capital gain dividends will
be automatically reinvested at net asset value. A sufficient number of full and
fractional shares will be redeemed to make the designated payment. Depending
upon the size of the payments requested and fluctuations in the net asset value
of the shares redeemed, redemptions for the purpose of making such payments may
reduce or even exhaust the account.

KDI will waive the contingent deferred sales charge on redemptions of Class B
shares and Class C shares made pursuant to a systematic withdrawal plan. The
right is reserved to amend the systematic withdrawal plan on 30 days' notice.
The plan may be terminated at any time by the investor or the Fund.

Tax-Sheltered Retirement Plans. The Shareholder Service Agent provides
retirement plan services and documents and KDI can establish investor accounts
in any of the following types of retirement plans:

o Individual Retirement Accounts ("IRAs") with IFTC as custodian. This
includes Savings Incentive Match Plan for Employees of Small Employers
("SIMPLE"), IRA accounts and Simplified Employee Pension Plan ("SEP") IRA
accounts and prototype documents.

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

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

Brochures describing the above plans as well as model defined benefit plans,
target benefit plans, 457 plans, 401(k) plans, SIMPLE 401(k) plans and materials
for establishing them are available from the Shareholder Service Agent upon
request.

20
<PAGE>

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

Trustees' Power to Change Objectives and Policies. Except as specifically stated
to the contrary, the objectives and policies of the Fund may be changed by the
Trustees without a vote of the shareholders.

DIVIDENDS AND TAXES

Dividends. The Fund declares daily dividends of its net investment income.
Dividends will be reinvested or paid in cash monthly. If a shareholder redeems
his or her entire account, all dividends accrued to the time of redemption will
be paid at that time. The Fund calculates its dividends based on its daily net
investment income. For this purpose, the net investment income of the Fund
consists of (a) accrued interest income plus or minus amortized discount or
premium, (b) plus or minus all short-term realized gains and losses on
investments and (c) minus accrued expenses allocated to the Fund. Expenses are
accrued each day. While the Fund's investments are valued at amortized cost (see
"Net Asset Value" in the prospectus), there will be no unrealized gains or
losses on such investments. However, should the net asset value deviate
significantly from market value, the Board of Trustees could decide to value the
investments at market value and then unrealized gains and losses would be
included in net investment income above.

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

Income dividends and capital gain dividends, if any, of the Fund will be
credited to shareholder accounts in full and fractional shares of the same class
of the Fund at net asset value, except that, upon written request to the
Shareholder Service Agent, a shareholder may elect to receive income and capital
gain dividends in cash.

Any dividends of the Fund that are reinvested normally will be reinvested in
shares of the same class. However, upon written request to the Shareholder
Service Agent, a shareholder may elect to have dividends of the Fund invested in
shares of the same class of another Kemper Fund at the net asset value of such
class of such other fund. See "Special Features--Class A Shares--Combined
Purchases" for a list of such other Kemper Funds. To use this privilege of
investing dividends of the Fund in shares of another Kemper Fund, shareholders
must maintain a minimum account value of $1,000 in the Fund. The Fund reinvests
dividend checks (and future dividends) in shares of that same class if checks
are returned as undeliverable. Dividends and other distributions in the
aggregate amount of $10 or less are automatically reinvested in shares of the
Fund unless the shareholder requests that such policy not be applied to the
shareholder's account.

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

Taxes. The Fund intends to continue to qualify as a regulated investment company
under Subchapter M of the Code and, if so qualified, will not be liable for
federal income taxes to the extent its earnings are distributed. Dividends
derived from net investment income and net short-term capital gains are taxable
to shareholders as ordinary income whether received in cash or shares. Dividends
declared in October, November or December to shareholders of record as of a date
in one of those months and paid during the following January are treated as paid
on December 31 of the calendar year declared. No portion of the dividends paid
by the Fund will qualify for the dividends received deduction.

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

A shareholder who has redeemed shares of the Fund (other than shares of the Fund
not acquired by exchange from another Kemper Mutual Fund) or other Kemper Mutual
Fund listed in the prospectus under "Special Features -- Class A Shares --

21
<PAGE>

Combined Purchases" may reinvest the amount redeemed at net asset value at the
time of the reinvestment in shares of any Kemper Mutual Fund within six months
of the redemption as described in the prospectus under "Redemption or Repurchase
of Shares -- Reinvestment Privilege." If redeemed shares were purchased after
October 3, 1989 and were held less than 91 days, then the lesser of (a) the
sales charge waived on the reinvested shares, or (b) the sales charge incurred
on the redeemed shares, is included in the basis of the reinvested shares and is
not included in the basis of the redeemed shares. If a shareholder realized a
loss on the redemption or exchange of a Fund's shares and reinvests in shares of
the same Fund within 30 days before or after the redemption or exchange, the
transactions may be subject to the wash sale rules resulting in a postponement
of the recognition of such loss for federal income tax purposes. An exchange of
a Fund's shares for shares of another fund is treated as a redemption and
reinvestment for federal income tax purposes upon which gain or loss may be
recognized.

After each transaction, shareholders will receive a confirmation statement
giving complete details of the transaction except that statements will be sent
quarterly for transactions involving dividend reinvestment and periodic
investment and redemption programs. Information for income tax purposes will be
provided after the end of the calendar year. Shareholders are encouraged to
retain copies of their account confirmation statements or year-end statements
for tax reporting purposes. However, those who have incomplete records may
obtain historical account transaction information at a reasonable fee.

Shareholders who are non-resident aliens are subject to U.S. withholding tax on
ordinary income dividends (whetherreceived in cash or shares) at a rate of 30%
or such lower rate as prescribed by any applicable tax treatyThe Fund is
required by law to withhold 31% of taxable dividends and redemption proceeds
paid to certain shareholders who do not furnish a correct taxpayer
identification number (in the case of individuals, a social security number) and
in certain other circumstances. Trustees of qualified retirement plans and
403(b)(7) accounts are required by law to withhold 20% of the taxable portion of
any distribution that is eligible to be "rolled over." The 20% withholding
requirement does not apply to distributions from Individual Retirement Accounts
("IRAs") or any part of a distribution that is transferred directly to another
qualified retirement plan, 403(b)(7) account, or IRA. Shareholders should
consult with their tax advisers regarding the 20% withholding requirement.

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

NET ASSET VALUE

The net asset value per share of a Fund is the value of one share and is
determined separately for each class by dividing the value of a Fund's net
assets attributable to the class by the number of shares of that class
outstanding. The per share net asset value of each of Class B and Class C shares
of the Fund will generally be lower than that of the Class A shares of a Fund
because of the higher expenses borne by the Class B and Class C shares. The net
asset value of shares of a Fund is computed as of the close of regular trading
(the "value time") on the New York Stock Exchange (the "Exchange") on each day
the Exchange is open for trading. The Exchange is scheduled to be closed on the
following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.

Portfolio securities for which market quotations are readily available are
generally valued at market value as of the value time in the manner described
below. All other securities may be valued at fair value as determined in good
faith by or under the direction of the Board.

With respect to the Funds with securities listed primarily on foreign exchanges,
such securities may trade on days when the Fund's net asset value is not
computed, and, therefore, the net asset value of a Fund may be significantly
affected on days when the investor has no access to the Fund.

An exchange-traded equity security is valued at its most recent sale price.
Lacking any sales, the security is valued at the calculated mean between the
most recent bid quotation and the most recent asked quotation (the "Calculated
Mean"). Lacking a Calculated Mean, the security is valued at the most recent bid
quotation. An equity security which is traded on The Nasdaq Stock Market Inc.
("Nasdaq") is valued at its most recent sale price. Lacking any sales, the
security is valued at the most recent bid quotation. The value of an equity
security not quoted on Nasdaq, but traded in another over-the-counter

22
<PAGE>

market, is its most recent sale price. Lacking any sales, the security is valued
at the Calculated Mean. Lacking a Calculated Mean, the security is valued at the
most recent bid quotation.

Debt securities are valued at prices supplied by a pricing agent(s) which
reflect broker/dealer supplied valuations and electronic data processing
techniques. Money market instruments purchased with an original maturity of
sixty days or less, maturing at par, shall be valued at amortized cost, which
the Board believes approximates market value. If it is not possible to value a
particular debt security pursuant to these valuation methods, the value of such
security is the most recent bid quotation supplied by a bona fide marketmaker.
If it is not possible to value a particular debt security pursuant to the above
methods, the investment manager of the particular fund may calculate the price
of that debt security, subject to limitations established by the Board.

An exchange-traded options contract on securities, currencies, futures and other
financial instruments is valued at its most recent sale price on such exchange.
Lacking any sales, the options contract is valued at the Calculated Mean.
Lacking any Calculated Mean, the options contract is valued at the most recent
bid quotation in the case of a purchased options contract, or the most recent
asked quotation in the case of a written options contract. An options contract
on securities, currencies and other financial instruments traded
over-the-counter is valued at the most recent bid quotation in the case of a
purchased options contract and at the most recent asked quotation in the case of
a written options contract. Futures contracts are valued at the most recent
settlement price. Foreign currency exchange forward contracts are valued at the
value of the underlying currency at the prevailing exchange rate on the
valuation date.

If a security is traded on more than one exchange, or upon one or more exchanges
and in the over-the-counter market, quotations are taken from the market in
which the security is traded most extensively.

If, in the opinion of the Valuation Committee of the Board of Trustees, the
value of a portfolio asset as determined in accordance with these procedures
does not represent the fair market value of the portfolio asset, the value of
the portfolio asset is taken to be an amount which, in the opinion of the
Valuation Committee, represents fair market value on the basis of all available
information. The value of other portfolio holdings owned by a Fund is determined
in a manner which, in the discretion of the Valuation Committee, most fairly
reflects market value of the property on the valuation date.

Following the valuations of securities or other portfolios assets in terms of
the currency in which the market quotation used is expressed ("Local Currency"),
the value of these portfolio assets in terms of U.S. dollars is calculated by
converting the Local Currency into U.S. dollars at the prevailing currency
exchange rate on the valuation date.

PERFORMANCE

The Fund may advertise several types of performance information for a class of
shares, including "yield" and "effective yield." Performance information will be
computed separately for Class A, Class B and Class C shares. Each of these
figures is based upon historical results and is not representative of the future
performance of any class of the Fund. If the Fund's fees

23
<PAGE>

or expenses are being waived or absorbed by the Adviser, the Fund may also
advertise performance information before and after the effect of the fee waiver
or expense absorption.

The Fund's historical performance or return for a class of shares may be shown
in the form of "yield" and "effective yield." These various measures of
performance are described below. Performance information will be computed
separately for each class. The Adviser agreed to absorb certain operating
expenses for the Fund for the periods and to the extent specified in this
Statement of Additional Information. See "Investment Manager and Underwriter."
Because of this expense absorption, the performance results for the Fund may be
shown with and without the effect of this waiver and expense absorption.
Performance results not giving effect to expense absorptions will be lower.

Yield is a measure of the net investment income per share earned over a specific
seven-day period expressed as a percentage of the maximum offering price of the
Fund's shares at the end of the period.

The Fund's yield is computed in accordance with a standardized method prescribed
by rules of the Securities and Exchange Commission. The Fund's yield for its
Class A, Class B and Class C shares for the seven-day period ended September 30,
1998 was 4.46%, 3.49% and 3.80%, respectively.

The Fund's yield is computed in accordance with a standardized method prescribed
by rules of the Securities and Exchange Commission. Under that method, the
current yield quotation is based on a seven-day period and is computed as
follows. The first calculation is net investment income per share; which is
accrued interest on portfolio securities, plus or minus amortized discount or
premium, less accrued expenses. This number is then divided by the price per
share (expected to remain constant at $1.00) at the beginning of the period
("base period return"). The result is then divided by 7 and multiplied by 365
and the resulting yield figure is carried to the nearest one-hundredth of one
percent. Realized capital gains or losses and unrealized appreciation or
depreciation of investments are not included in the calculation.

[To Be Updated]

The Fund's effective yield is determined by taking the base period return
(computed as described above) and calculating the effect of assumed compounding.
The formula for the effective yield is: (base period return + 1) 365,7 -1. The
Fund's effective yield for its Class A, Class B and Class C shares for the
seven-day period ended September 30, 1998 was ___%, ___% and ___%, respectively.

The Fund's performance figures are based upon historical results and are not
representative of future performance. The Fund's Class A shares are sold at net
asset value without an initial sales charge. Class B and Class C shares are sold
at net asset value. Redemptions of Class B shares may be subject to a contingent
deferred sales charge that is 4% in the first year following the purchase,
declines by a specified percentage each year thereafter and becomes zero after
six years. Redemption of Class C shares may be subject to a 1% contingent
deferred sales charge in the first year following purchase. Yields will
fluctuate. Factors affecting the Fund's performance include general market
conditions, operating expenses and investment management. Any additional fees
charged by a dealer or other financial services firm would reduce the returns
described in this section.

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

Investors may want to compare the performance of the Fund to that of
certificates of deposit issued by banks and other depository institutions.
Certificates of deposit represent an alternative income producing product.
Certificates of deposit may offer fixed or variable interest rates and principal
is guaranteed and may be insured. Withdrawal of deposits prior to maturity will
normally be subject to a penalty. Rates offered by banks and other depository
institutions are subject to change at any time specified by the issuing
institution. The shares of the Fund are not insured and yield will fluctuate.
The Fund seeks to maintain a stable net asset value of $1.00.

Investors also may want to compare the performance of the Fund to that of U.S.
Treasury bills, notes or bonds because such instruments represent alternative
income producing products. Treasury obligations are issued in selected
denominations.

24
<PAGE>

Rates of Treasury obligations are fixed at the time of issuance and payment of
principal and interest is backed by the full faith and credit of the U.S.
Treasury. The market value of such instruments will generally fluctuate
inversely with interest rates prior to maturity and will equal par value at
maturity.

The Fund's performance may be compared to that of the Consumer Price Index and
may also be compared to the performance of other mutual funds or mutual fund
indexes with similar objectives and policies as reported by independent mutual
fund reporting services such as Lipper Analytical Services, Inc. ("Lipper").
Lipper performance calculations are based upon changes in net asset value with
all dividends reinvested and do not include the effect of any sales charges.

Information may be quoted from publications such as Morningstar, Inc., The Wall
Street Journal, Money Magazine, Forbes, Barron's, Fortune, The Chicago Tribune,
USA Today, Institutional Investor and Registered Representative. Also, investors
may want to compare the historical returns of various investments, performance
indexes of those investments or economic indicators, including but not limited
to stocks, bonds, certificates of deposit and other bank products, money market
funds and U.S. Treasury obligations. Bank product performance may be based upon,
among other things, the BANK RATE MONITOR National Index(R) or various
certificate of deposit indexes. Money market fund performance may be based upon,
among other things, the IBC/Donoghue's Money Fund Report@ or Money Market
Insight@, reporting services on money market funds. Performance of U.S. Treasury
obligations may be based upon, among other things, various U.S. Treasury bill
indexes. Certain of these alternative investments may offer fixed rates of
return and guaranteed principal and may be insured. Economic indicators may
include, without limitation, indicators of market rate trends and cost of funds,
such as Federal Home Loan Bank Board 11th District Cost of Funds Index ("COFI").
The Fund may also describe its portfolio holdings and depict its size or
relative size compared to other mutual funds, the number and make-up of its
shareholder base and other descriptive factors concerning the Fund.

Redemptions of Class B shares within the first six years after purchase may be
subject to a contingent deferred sales charge that ranges from 4% during the
first year to 0% after six years. Redemption of Class C shares within the first
year after purchase may be subject to a 1% contingent deferred sales charge.
Average annual total return figures do, and total return figures may, include
the effect of the contingent deferred sales charge for the Class B shares and
Class C shares that may be imposed at the end of the period in question.
Performance figures for the Class B shares and Class C shares not including the
effect of the applicable contingent deferred sales charge would be reduced if it
were included.

The Fund's yield will fluctuate. Additional information about the Fund's
performance appears in its Annual Report to Shareholders, which is available
without charge from the Fund.

OFFICERS AND TRUSTEES

The officers and trustees of the Trust, their birthdates, their principal
occupations and their affiliations, if any, with the Adviser and KDI are listed
below. All persons named as trustees also serve in similar capacities for other
funds advised by the Adviser.

All Funds:

LEWIS A. BURNHAM (1/8/33), Trustee, 16410 Avila Boulevard, Tampa, Florida;
Retired; formerly, Partner Business Resources Group; formerly Executive Vice
President, Anchor Glass Container Corporation.

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

ROBERT B. HOFFMAN (12/11/36), Trustee , 800 N. Lindbergh Boulevard, St. Louis,
Missouri; Vice Chairmanand Chief Financial Officer, Monsanto Company
(agricultural, pharmaceutical and nutritional food products); prior thereto,
Vice Presidentand Head of International Operations, FMC Corporation
(manufacturer of machinery and chemicals).

DONALD R. JONES (1/17/30), Trustee, 182 Old Wick Lane, Inverness, Illinois;
Retired; Director, Motorola, Inc. (manufacturer of electronic equipment and
components); formerly, Executive Vice President and Chief Financial Officer,
Motorola, Inc.

THOMAS W. LITTAUER (4/26/55), Vice President and Trustee*, Two International
Place, Boston, Massachusetts; Managing Director, Adviser; formerly, Head of
Broker Dealer Division of an unaffiliated investment management firm

25
<PAGE>

during 1997; prior thereto, President of Client Management Services of an
unaffiliated investment management firm from 1991 to 1996.

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

DANIEL PIERCE (3/18/84), Trustee*, Two International Place, Boston,
Massachusetts; Managing Director, Adviser.

WILLIAM P. SOMMERS (7/22/33), Trustee, 24717 Harbour View Drive, Ponte Vedra
Beach, Florida (retired); formerly, President and Chief Executive Officer, SRI
International (research and development); prior thereto, Executive Vice
President, Iameter (medical information and educational service provider); prior
thereto, Senior Vice President and Director, Booz, Allen & Hamilton, Inc.
(management consulting firm): Director, Rohr, Inc., Therapeutic Discovery Corp.
and Litton Industries.

MARK S. CASADY (9/21/60), President*, 345 Park Avenue, New York, New York;
Managing Director, Adviser; formerly, Institutional Sales Managing Director,
Adviser.

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

ANN M. McCREARY (11/6/56), Vice President*, 345 Park Avenue, New York, New York;
Managing Director, Adviser.

ROBERT C. PECK, JR. (10/1/46), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Managing Directo, Adviser; formerly, Executive Vice President
and Chief Investment Officer with an unaffiliated investment management firm
from 1988 to June 1997.

KATHRYN L. QUIRK (12/3/52), Vice President*, 345 Park Avenue, New York, New
York; Managing Director, Adviser.

RICHARD L. VANDENBERG (11/16/49), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Senior Vice President, Adviser; formerly, Senior Vice
President and Portfolio Manager with an unaffiliated investment management firm.

FRANK J. RACHWALSKI, JR. (3/26/45), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Senior Vice President, Adviser.

LINDA J. WONDRACK (9/12/64), Vice President*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.

JOHN R. HEBBLE (6/27/58), Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.

BRENDA LYONS (2/21/63), Assistant Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser

CAROLINE PEARSON (4/1/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Senior Vice President, Adviser; formerly, Associate,
Dechert Price & Rhoads (law firm) 1989 to 1997.

MAUREEN E. KANE (2/14/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Vice President, Adviser; formerly, Assistant Vice
President of an unaffiliated investment management firm; prior thereto,
Associate Staff Attorney of an unaffiliated investment management firm;
Associate, Peabody & Arnold (law firm).

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

26
<PAGE>

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

The trustees and officers who are "interested persons" as designated above
receive no compensation from the Fund. The table below shows amounts paid or
accrued to those trustees who are not designated "interested persons" during the
Fund's 1998 fiscal year, except that the information in the last column is for
calendar year 1997.

[To Be Updated]

<TABLE>
<CAPTION>
Aggregate Compensation From
---------------------------
Total
Compensation
Kemper Kemper Funds
Kemper Cash Kemper U.S. Short-Intermediate Paid to
Name of Trustee Reserves Fund Mortgage Fund Government Fund Kemper Portfolios+ Trustees**
- --------------- ------------- ------------- --------------- ------------------ ----------
<S> <C> <C> <C> <C> <C>
Lewis A. Burnham
Donald L. Dunaway*
Robert B. Hoffman
Donald R. Jones
Shirley D. Peterson
William P. Sommers
</TABLE>

+ Includes Kemper Cash Reserves Fund, Kemper U.S. Mortgage Fund and Kemper
Short-Intermediate Government Fund.

* Includes deferred fees and interest thereon pursuant to deferred
compensation agreements with Kemper Funds. Deferred amounts accrue
interest monthly at a rate equal to the yield of Zurich Money Funds --
Zurich Money Market Fund. Total deferred amounts and interest accrued
through the Fund's fiscal year are $_____ for Mr. Dunaway, for Kemper
Portfolios+, respectively.

** Includes compensation for service on the boards of 25 Kemper funds with 41
fund portfolios. Each trustee currently serves as a trustee of 26 Kemper
Funds with 46 fund portfolios. Total compensation does not reflect amounts
paid by the Adviser to the trustees for meetings regarding the combination
of Scudder and Zurich Kemper Investments, Inc. Such amounts totaled
$_____, $_____, $_____,$_____, $_____, $____ and $_____, for Messrs.
__________, __________, __________, __________,__________, __________ and
__________, respectively.

As of December 31, 198, the officers and trustees of the Fund, as a group, owned
less than 1% of the then outstanding shares of the Fund.

As of December 31, 1998, the following entities owned of record greater than 5%
of the outstanding shares of a particular class of the Fund:

<TABLE>
<CAPTION>
Name and Address Class(es) Percentage of Shares Owned
---------------- --------- --------------------------

<S> <C> <C>
Donaldson Lufkin Jenrette Securities Corp, Inc. A 5.37%
P.O. Box 2052 C 7.83%
Jersey City, NJ 07303
</TABLE>

27
<PAGE>

<TABLE>
<S> <C> <C>
CIBC Oppenheimer Corp. A 7.34%
P.O. Box 2052
Church Street Station
New York, NY 10008

Bear Stearns Securities Corp. A 12.23%
1 Metrotech Center North
Brooklyn, NY 11201

National Financial Services Corp. C 10.72%
200 Liberty Street
New York, NY 10281

INDE & Co. (Custodian) C 5.69%
4401 Rockside Road
Independence, OH 44131

Everen Securities, Inc. C 15.58%
1111 East Kilbourn Avenue
Milwaukee, WI 53202
</TABLE>

SHAREHOLDER RIGHTS

The Fund is the third separate series, or "Portfolio", of Kemper Portfolios
("KP" or the "Trust"), an open-end management investment company organized as a
business trust under the laws of Massachusetts on August 9, 1985. Effective
November 20, 1987, KP pursuant to a reorganization succeeded to the assets and
liabilities of Investment Portfolios, Inc., a Maryland corporation organized on
March 26, 1982. After such reorganization, KP was known as Investment Portfolios
until February 1, 1991, and thereafter until May 28, 1994, as Kemper Investment
Portfolios, when the name of KP became "Kemper Portfolios." Prior to May 28,
1994, the Fund was known as the Money Market Portfolio.

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

28
<PAGE>

The Fund generally is not required to hold meetings of its shareholders. Under
the Agreement and Declaration of Trust of the Trust ("Declaration of Trust"),
however, shareholder meetings will be held in connection with the following
matters: (a) the election or removal of trustees if a meeting is called for such
purpose; (b) the adoption of any contract for which shareholder approval is
required by the 1940 Act; (c) any termination of the Fund or a class to the
extent and as provided in the Declaration of Trust; (d) any amendment of the
Declaration of Trust (other than amendments changing the name of the Fund,
supplying any omission, curing any ambiguity or curing, correcting or
supplementing any defective or inconsistent provision thereof); (e) as to
whether a court action, proceeding or claim should or should not be brought or
maintained derivatively or as a class on behalf of the Fund or the shareholders,
to the same extent as the stockholders of a Massachusetts business corporation;
and (f) such additional matters as may be required by law, the Declaration of
Trust, the By- laws of the Trust, or any registration of the Fund with the
Securities and Exchange Commission or any state, or as the trustees may consider
necessary or desirable. The shareholders also would vote upon changes in
fundamental investment objectives, policies or restrictions.

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

Trustees may be removed from office by a vote of the holders of a majority of
the outstanding shares at a meeting called for that purpose, which meeting shall
be held upon the written request of the holders of not less than 10% of the
outstanding shares. Upon the written request of ten or more shareholders who
have been such for at least six months and who hold shares constituting at least
1% of the outstanding shares of the Trust stating that such shareholders wish to
communicate with the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider removal of a trustee, the
Trust has undertaken to disseminate appropriate materials at the expense of the
requesting shareholders.

The Trust's Declaration of Trust provides that the presence at a shareholder
meeting in person or by proxy of at least 30% of the shares entitled to vote on
a matter shall constitute a quorum. Thus, a meeting of shareholders of the Trust
could take place even if less than a majority of the shareholders were
represented on its scheduled date. Shareholders would in such a case be
permitted to take action which does not require a larger vote than a majority of
a quorum, such as the election of trustees and ratification of the selection of
auditors. Some matters requiring a larger vote under the Declaration of Trust,
such as termination or reorganization of the Fund and certain amendments of the
Declaration of Trust, would not be affected by this provision; nor would matters
which under the 1940 Act require the vote of a "majority of the outstanding
voting securities" as defined in the 1940 Act.

The Trust's Declaration of Trust specifically authorizes the Board of Trustees
to terminate the Trust or any series or class by notice to the shareholders
without shareholder approval.

Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for obligations of the
Trust. The Declaration of Trust, however, disclaims shareholder liability for
acts or obligations of the Trust and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument entered into or executed by
the Trust or the Trust's trustees. Moreover, the Declaration of Trust provides
for indemnification out of Trust property for all losses and expenses of any
shareholder held personally liable for the obligations of the Trust and the
Trust will be covered by insurance which the trustees consider adequate to cover
foreseeable tort claims. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is considered by the Adviser as remote
and not material, since it is limited to circumstances in which a disclaimer is
inoperative and the Trust itself is unable to meet its obligations.

29
<PAGE>

APPENDIX -- RATINGS OF INVESTMENTS

COMMERCIAL PAPER RATINGS

Commercial paper rated by Standard & Poor's Corporation ("S&P") has the
following characteristics: Liquidity ratios are adequate to meet cash
requirements. Long-term senior debt is rated "A" or better. The issuer has
access to at least two additional channels of borrowing. Basic earnings and cash
flow have an upward trend with allowance made for unusual circumstances.
Typically, the issuer's industry is well established and the issuer has a strong
position within the industry. The reliability and quality of management are
unquestioned. Relative strength or weakness of the above factors determine
whether the issuer's commercial paper is rated A-1 or A-2.

The ratings Prime-1 and Prime-2 are the two highest commercial paper ratings
assigned by Moody's Investors Service, Inc. ("Moody's"). Among the factors
considered by it in assigning ratings are the following: (1) evaluation of the
management of the issuer; (2) economic evaluation of the issuer's industry or
industries and an appraisal of speculative-type risks which may be inherent in
certain areas; (3) evaluation of the issuer's products in relation to
competition and customer acceptance; (4) liquidity; (5) amount and quality of
long-term debt; (6) trend of earnings over a period of ten years; (7) financial
strength of a parent company and the relationships which exist with the issuer;
and (8) recognition by the management of obligations which may be present or may
arise as a result of public interest questions and preparations to meet such
obligations. Relative strength or weakness of the above factors determines
whether the issuer's commercial paper is rated Prime-1 or 2.

<PAGE>
KEMPER PORTFOLIOS
KEMPER CASH RESERVES FUND
PART C. OTHER INFORMATION
<TABLE>
<CAPTION>

Item 23. Exhibits.
-------- ---------

<S> <C> <C>
(a) Amended and Restated Agreement and Declaration of Trust, incorporated by
reference to Post-Effective Amendment No. 25 to Registrant's Registration
Statement on Form N-1A filed November 30, 1995.

(b) By-laws, incorporated by reference to Post-Effective Amendment No. 25 to
Registrant's Registration Statement on Form N-1A filed November 30, 1995.

(d)(1) Investment Management Agreement, incorporated by reference to Post-Effective
Amendment No. 26 to Registrant's Registration Statement on Form N-1A filed
December 20, 1996.

(d)(1)(a) Investment Management Agreement between the Registrant, on behalf of Kemper
Cash Reserves Fund, and Scudder Kemper Investments, Inc. dated December 31,
1997, incorporated by reference to Post-Effective Amendment No. 29 to
Registrant's Registration Statement on Form N-1A filed December 3, 1998.

(d)(1)(b) Investment Management Agreement between the Registrant, on behalf of Kemper
U.S. Mortgage Fund, and Scudder Kemper Investments, Inc. dated December 31,
1997, incorporated by reference to Post-Effective Amendment No. 29 to
Registrant's Registration Statement on Form N-1A filed December 3, 1998.

(d)(1)(c) Investment Management Agreement between the Registrant, on behalf of Kemper
Short-Intermediate Government Fund, and Scudder Kemper Investments, Inc.
dated December 31, 1997, incorporated by reference to Post-Effective
Amendment No. 29 to Registrant's Registration Statement on Form N-1A filed
December 3, 1998.

(d)(2)(a) Investment Management Agreement between the Registrant, on behalf of Kemper
Cash Reserves Fund, and Scudder Kemper Investments, Inc. dated September 7,
1998, incorporated by reference to Post-Effective Amendment No. 29 to
Registrant's Registration Statement on Form N-1A filed December 3, 1998.

(d)(2)(b) Investment Management Agreement between the Registrant, on behalf of Kemper
U.S. Mortgage Fund, and Scudder Kemper Investments, Inc. dated September 7,
1998, incorporated by reference to Post-Effective Amendment No. 29 to
Registrant's Registration Statement on Form N-1A filed December 3, 1998.

(d)(2)(c) Investment Management Agreement between the Registrant, on behalf of Kemper
Short-Intermediate Fund, and Scudder Kemper Investments, Inc. dated
September 7, 1998, incorporated by reference to Post-Effective Amendment No.
29 to Registrant's Registration Statement on Form N-1A filed December 3,
1998.

Part C - Page 1
<PAGE>

(e)(1) Underwriting and Distribution Services Agreement between the Registrant and
Kemper Distributors, Inc. dated August 1, 1998, incorporated by reference to
Post-Effective Amendment No. 29 to Registrant's Registration Statement on
Form N-1A filed December 3, 1998.

(e)(2) Underwriting and Distribution Services Agreement between the Registrant and
Kemper Distributors, Inc. dated September 7, 1998, incorporated by reference
to Post-Effective Amendment No. 29 to Registrant's Registration Statement on
Form N-1A filed December 3, 1998.

(f) Inapplicable

(g)(1)(a) Custody Agreement (Form 1), incorporated by reference to Post-Effective
Amendment No. 25 to Registrant's Registration Statement on Form N-1A filed
November 30, 1995.

(g)(1)(b) Custody Agreement (Form 2), incorporated by reference to Post-Effective
Amendment No. 25 to Registrant's Registration Statement on Form N-1A filed
November 30, 1995.

(h)(1) Agency Agreement, incorporated by reference to Post-Effective Amendment No.
25 to Registrant's Registration Statement on Form N-1A filed November 30,
1995.

(h)(1)(a) Supplement to Agency Agreement, incorporated by reference to Post-Effective
Amendment No. 27 to Registrant's Registration Statement on Form N-1A filed
December 30, 1997.

(h)(1)(b) Supplement to Agency Agreement to be filed by amendment.

(h)(2) Administrative Services Agreement, incorporated by reference to
Post-Effective Amendment No. 27 to Registrant's Registration Statement on
Form N-1A filed December 30, 1997.

(h)(3)(a) Fund Accounting Services Agreement between the Registrant, on behalf of
Kemper Cash Reserves Fund, and Scudder Fund Accounting Corporation dated
December 31, 1997, incorporated by reference to Post-Effective Amendment No.
29 to Registrant's Registration Statement on Form N-1A filed December 3,
1998.

(h)(3)(b) Fund Accounting Services Agreement between the Registrant, on behalf of
Kemper U.S. Mortgage Fund, and Scudder Fund Accounting Corporation dated
December 31, 1997, incorporated by reference to Post-Effective Amendment No.
29 to Registrant's Registration Statement on Form N-1A filed December 3,
1998.

(h)(3)(c) Fund Accounting Services Agreement between the Registrant, on behalf of
Kemper Short-Intermediate Government Fund, and Scudder Fund Accounting
Corporation dated December 31, 1997, incorporated by reference to
Post-Effective Amendment No. 29 to Registrant's Registration Statement on
Form N-1A filed December 3, 1998.

(i) Inapplicable

Part C - Page 2
<PAGE>

(j) Consent of Independent Accountants, filed herein.

(k) Inapplicable

(l) Inapplicable

(m)(1) Amended and Restated 12b-1 Plans (Class B shares) for Kemper Cash Reserves
Fund, incorporated by reference to Post-Effective Amendment No. 29 to
Registrant's Registration Statement on Form N-1A filed December 3, 1998.

(m)(2) Amended and Restated 12b-1 Plans (Class C shares) for Kemper Cash Reserves
Fund, incorporated by reference to Post-Effective Amendment No. 29 to
Registrant's Registration Statement on Form N-1A filed December 3, 1998.

(m)(3) Amended and Restated 12b-1 Plans (Class B shares) for Kemper U.S. Mortgage
Fund, incorporated by reference to Post-Effective Amendment No. 29 to
Registrant's Registration Statement on Form N-1A filed December 3, 1998.

(m)(4) Amended and Restated 12b-1 Plans (Class C shares) for Kemper U.S. Mortgage
Fund, incorporated by reference to Post-Effective Amendment No. 29 to
Registrant's Registration Statement on Form N-1A filed December 3, 1998.

(m)(5) Amended and Restated 12b-1 Plans (Class B shares) for Kemper
Short-Intermediate Government Fund, incorporated by reference to
Post-Effective Amendment No. 29 to Registrant's Registration Statement on
Form N-1A filed December 3, 1998.

(m)(6) Amended and Restated 12b-1 Plans (Class C shares) for Kemper
Short-Intermediate Government Fund, incorporated by reference to
Post-Effective Amendment No. 29 to Registrant's Registration Statement on
Form N-1A filed December 3, 1998.

(n) Financial Data Schedules, filed herein.

(o) Amended and Restated Written Instrument Establishing and Designating
Separate Classes of Shares, incorporated by reference to Post-Effective
Amendment No. 26 filed December 20, 1996.
</TABLE>

Item 24. Persons Controlled by or under Common Control with Fund.
- -------- --------------------------------------------------------

None

Item 25. Indemnification.
- -------- ----------------

Article VIII of the Registrant's Agreement and Declaration of Trust
(Exhibit 1 hereto, which is incorporated herein by reference) provides in effect
that the Registrant will indemnify its officers and trustees under certain
circumstances. However, in accordance with Section 17(h) and 17(i) of the
Investment Company Act of 1940 and its own terms, said Article of the Agreement
and Declaration of Trust does not protect any person against any liability to

Part C - Page 3
<PAGE>

the Registrant or its shareholders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers, and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such trustee, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question as to whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

On June 26, 1997, Zurich Insurance Company ("Zurich"), ZKI Holding
Corp. ("ZKIH"), Zurich Kemper Investments, Inc. ("ZKI"), Scudder, Stevens &
Clark, Inc. ("Scudder") and the representatives of the beneficial owners of the
capital stock of Scudder ("Scudder Representatives") entered into a transaction
agreement ("Transaction Agreement") pursuant to which Zurich became the majority
stockholder in Scudder with an approximately 70% interest, and ZKI was combined
with Scudder ("Transaction"). In connection with the trustees' evaluation of the
Transaction, Zurich agreed to indemnify the Registrant and the trustees who were
not interested persons of ZKI or Scudder (the "Independent Trustees") for and
against any liability and expenses based upon any action or omission by the
Independent Trustees in connection with their consideration of and action with
respect to the Transaction. In addition, Scudder has agreed to indemnify the
Registrant and the Independent Trustees for and against any liability and
expenses based upon any misstatements or omissions by Scudder to the Independent
Trustees in connection with their consideration of the Transaction.

Item 26. Business and Other Connections of Investment Adviser
- -------- ----------------------------------------------------

Scudder Kemper Investments, Inc. has stockholders and
employees who are denominated officers but do not as such have
corporation-wide responsibilities. Such persons are not
considered officers for the purpose of this Item 26.

<TABLE>
<CAPTION>
Business and Other Connections of Board
Name of Directors of Registrant's Adviser
---- ------------------------------------

<S> <C>
Stephen R. Beckwith Treasurer and Chief Financial Officer, Scudder Kemper Investments, Inc.**
Vice President and Treasurer, Scudder Fund Accounting Corporation*
Director, Scudder Stevens & Clark Corporation**
Director and Chairman, Scudder Defined Contribution Services, Inc.**
Director and President, Scudder Capital Asset Corporation**
Director and President, Scudder Capital Stock Corporation**
Director and President, Scudder Capital Planning Corporation**
Director and President, SS&C Investment Corporation**
Director and President, SIS Investment Corporation**
Director and President, SRV Investment Corporation**

Lynn S. Birdsong Director and Vice President, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark (Luxembourg) S.A.#

William H. Bolinder Director, Scudder Kemper Investments, Inc.**
Member, Group Executive Board, Zurich Financial Services, Inc. ##
Chairman, Zurich-American Insurance Company o

Part C - Page 4
<PAGE>

Laurence W. Cheng Director, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland##
Director, ZKI Holding Corporation xx

Gunther Gose Director, Scudder Kemper Investments, Inc.**
CFO and Member, Group Executive Board, Zurich Financial Services, Inc. ##
CEO/Branch Offices, Zurich Life Insurance Company ##

Rolf Huppi Director, Chairman of the Board, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland##
Director, Chairman of the Board, Zurich Holding Company of America o
Director, ZKI Holding Corporation xx

Kathryn L. Quirk Chief Legal Officer, Chief Compliance Officer and Secretary, Scudder Kemper
Investments, Inc.**
Director, Senior Vice President & Assistant Clerk, Scudder Investor Services, Inc.*
Director, Vice President & Secretary, Scudder Fund Accounting Corporation*
Director, Vice President & Secretary, Scudder Realty Holdings Corporation*
Director & Assistant Clerk, Scudder Service Corporation*
Director, SFA, Inc.*
Vice President, Director & Assistant Secretary, Scudder Precious Metals, Inc.***
Director, Scudder, Stevens & Clark Japan, Inc.***
Director, Vice President and Secretary, Scudder, Stevens & Clark of Canada, Ltd.***
Director, Vice President and Secretary, Scudder Canada Investor Services Limited***
Director, Vice President and Secretary, Scudder Realty Advisers, Inc. x
Director and Secretary, Scudder, Stevens & Clark Corporation**
Director and Secretary, Scudder, Stevens & Clark Overseas Corporation oo
Director and Secretary, SFA, Inc.*
Director, Vice President and Secretary, Scudder Defined Contribution Services, Inc.**
Director, Vice President and Secretary, Scudder Capital Asset Corporation**
Director, Vice President and Secretary, Scudder Capital Stock Corporation**
Director, Vice President and Secretary, Scudder Capital Planning Corporation**
Director, Vice President and Secretary, SS&C Investment Corporation**
Director, Vice President and Secretary, SIS Investment Corporation**
Director, Vice President and Secretary, SRV Investment Corporation**
Director, Vice President and Secretary, Scudder Brokerage Services, Inc.*
Director, Korea Bond Fund Management Co., Ltd.+

Cornelia M. Small Director and Vice President, Scudder Kemper Investments, Inc.**

Edmond D. Villani Director, President and Chief Executive Officer, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark Japan, Inc.###
President and Director, Scudder, Stevens & Clark Overseas Corporation oo
President and Director, Scudder, Stevens & Clark Corporation**
Director, Scudder Realty Advisors, Inc.x
Director, IBJ Global Investment Management S.A. Luxembourg, Grand-Duchy of Luxembourg

* Two International Place, Boston, MA
x 333 South Hope Street, Los Angeles, CA
** 345 Park Avenue, New York, NY
# Societe Anonyme, 47, Boulevard Royal, L-2449 Luxembourg, R.C. Luxembourg B 34.564
*** Toronto, Ontario, Canada

Part C - Page 5
<PAGE>

oo 20-5, Ichibancho, Chiyoda-ku, Tokyo, Japan
### 1-7, Kojimachi, Chiyoda-ku, Tokyo, Japan
xx 222 S. Riverside, Chicago, IL
o Zurich Towers, 1400 American Ln., Schaumburg, IL
+ P.O. Box 309, Upland House, S. Church St., Grand Cayman, British West Indies
## Mythenquai-2, P.O. Box CH-8022, Zurich, Switzerland

</TABLE>
Item 27. Principal Underwriters.
- -------- -----------------------

(a)

Kemper Distributors, Inc. acts as principal underwriter of the
Registrant's shares and acts as principal underwriter of the Kemper
Funds.

(b)

Information on the officers and directors of Kemper Distributors, Inc.,
principal underwriter for the Registrant is set forth below. The
principal business address is 222 South Riverside Plaza, Chicago,
Illinois 60606.

<TABLE>
<CAPTION>
(1) (2) (3)

Positions and Offices with Positions and
Name Kemper Distributors, Inc. Offices with Registrant
---- ------------------------- -----------------------
<S> <C> <C> <C>

James L. Greenawalt President

Thomas W. Littauer Director, Chief Executive Officer

Kathryn L. Quirk Director, Secretary, Chief Legal
Officer and Vice President

James J. McGovern Chief Financial Officer and Vice
President

Linda J. Wondrack Vice President and Chief Compliance
Officer

Paula Gaccione Vice President

Michael E. Harrington Vice President

Robert A. Rudell Vice President

William M. Thomas Vice President

Elizabeth C. Werth Vice President

Todd N. Gierke Assistant Treasurer

Philip J. Collora Assistant Secretary

Paul J. Elmlinger Assistant Secretary

Diane E. Ratekin Assistant Secretary

Part C - Page 6
<PAGE>
(1) (2) (3)

Positions and Offices with Positions and
Name Kemper Distributors, Inc. Offices with Registrant
---- ------------------------- -----------------------

Daniel Pierce Director, Chairman

Mark S. Casady Director, Vice Chairman

Stephen R. Beckwith Director
</TABLE>

Item 28. Location of Accounts and Records
- -------- --------------------------------

Accounts, books and other documents are maintained at the offices of
the Registrant, the offices of Registrant's investment adviser, Scudder Kemper
Investments, Inc., 222 South Riverside Plaza, Chicago, Illinois 60606, at the
offices of the Registrant's principal underwriter, Kemper Distributors, Inc.,
222 South Riverside Plaza, Chicago, Illinois 60606 or, in the case of records
concerning custodial functions, at the offices of the custodian, Investors
Fiduciary Trust Company ("IFTC"), 801 Pennsylvania Avenue, Kansas City, Missouri
64105 or, in the case of records concerning transfer agency functions, at the
offices of IFTC and of the shareholder service agent, Kemper Service Company,
811 Main Street, Kansas City, Missouri 64105.

Item 29. Management Services.
- -------- --------------------

Inapplicable.

Item 30. Undertakings.
- -------- -------------

Inapplicable.

Part C - Page 7
<PAGE>
SIGNATURES
----------

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement, pursuant to
Rule 485(b) under the Securities Act of 1933, and has duly caused this amendment
to its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Chicago and State of Illinois, on the
26th day of January, 1999.

KEMPER PORTFOLIOS

By /s/Mark S. Casady
-------------------------
Mark S. Casady, President

Pursuant to the requirements of the Securities Act of 1933, this
amendment to its Registration Statement has been signed below on January 26,
1999, on behalf of the following persons in the capacities indicated.

SIGNATURE TITLE DATE
- --------- ----- ----

<S> <C> <C>
/s/ Daniel Pierce January 26, 1999
- --------------------------------------
Daniel Pierce* Chairman and Trustee

/s/ Lewis A. Burnham January 26, 1999
- --------------------------------------
Lewis A. Burnham* Trustee

/s/ Donald L. Dunaway January 26, 1999
- --------------------------------------
Donald L. Dunaway* Trustee

/s/ Robert B. Hoffman January 26, 1999
- --------------------------------------
Robert B. Hoffman* Trustee

/s/ Donald R. Jones January 26, 1999
- --------------------------------------
Donald R. Jones* Trustee

/s/ Thomas W. Littauer January 26, 1999
- --------------------------------------
Thomas W. Littauer Trustee

/s/ Shirley D. Peterson January 26, 1999
- --------------------------------------
Shirley D. Peterson* Trustee

<PAGE>
1

SIGNATURE TITLE DATE
- --------- ----- ----

/s/ William P. Sommers January 26, 1999
- --------------------------------------
William P. Sommers* Trustee

/s/ John R. Hebble January 26, 1999
- --------------------------------------
John R. Hebble Treasurer (Principal Financial and
Accounting Officer)
</TABLE>

*By: /s/ Philip J. Collara
----------------------------
Philip J. Collora**

** Philip J. Collora signs this document
pursuant to powers of attorney contained in
Post-Effective Amendment No. 28 to the
Registration Statement, filed November 2,
1998.

2
<PAGE>
File No. 2-76806
File No. 811-3440

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

EXHIBITS

FORM N-1A

POST-EFFECTIVE AMENDMENT NO. 30
TO REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

AND

AMENDMENT NO. 32

TO REGISTRATION STATEMENT

UNDER

THE INVESTMENT COMPANY ACT OF 1940

KEMPER PORTFOLIOS

<PAGE>

KEMPER PORTFOLIOS

EXHIBIT INDEX

Exhibit (j)
Exhibit (n)

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "Financial
Highlights" and "Independent Auditors and Reports to Shareholders" and to the
use of our report on the Kemper Cash Reserves Fund dated November 17, 1998 in
the Registration Statement (Form N-1A) of Kemper Portfolios and its
incorporation by reference in the related Prospectus and Statement of Additional
Information of Kemper Cash Reserves Fund, filed with the Securities and Exchange
Commission in this Post-Effective Amendment No. 30 to the Registration Statement
under the Securities Act of 1933 (File No. 2-76806) and in this Amendment No. 32
to the Registration Statement under the Investment Company Act of 1940 (File No.
811-3440).

ERNST & YOUNG LLP

Chicago, Illinois
January 29, 1999

<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FORM THE 1998 ANNUAL REPORT TO SHAREHOLDERS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000701638
<NAME> KEMPER PORTFOLIOS
<SERIES>
<NUMBER> 031
<NAME> KEMPER CASH RESERVES FUND - CLASS A
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 545,816
<INVESTMENTS-AT-VALUE> 545,816
<RECEIVABLES> 9,081
<ASSETS-OTHER> 260
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 555,157
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,768
<TOTAL-LIABILITIES> 5,768
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 549,389
<SHARES-COMMON-STOCK> 196,771
<SHARES-COMMON-PRIOR> 90,524
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 549,389
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 16,532
<OTHER-INCOME> 0
<EXPENSES-NET> (5,459)
<NET-INVESTMENT-INCOME> 11,073
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 11,073
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,961)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,276,571
<NUMBER-OF-SHARES-REDEEMED> (2,173,206)
<SHARES-REINVESTED> 2,882
<NET-CHANGE-IN-ASSETS> 209,734
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,269
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,459
<AVERAGE-NET-ASSETS> 289,686
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .04
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.04)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 1.21
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FORM THE 1998 ANNUAL REPORT TO SHAREHOLDERS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000701638
<NAME> KEMPER PORTFOLIOS
<SERIES>
<NUMBER> 032
<NAME> KEMPER CASH RESERVES FUND - CLASS B
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 545,816
<INVESTMENTS-AT-VALUE> 545,816
<RECEIVABLES> 9,081
<ASSETS-OTHER> 260
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 555,157
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,768
<TOTAL-LIABILITIES> 5,768
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 549,389
<SHARES-COMMON-STOCK> 284,735
<SHARES-COMMON-PRIOR> 216,980
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 549,389
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 16,532
<OTHER-INCOME> 0
<EXPENSES-NET> (5,459)
<NET-INVESTMENT-INCOME> 11,073
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 11,073
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5,956)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 635,811
<NUMBER-OF-SHARES-REDEEMED> (573,166)
<SHARES-REINVESTED> 5,110
<NET-CHANGE-IN-ASSETS> 209,734
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,269
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,459
<AVERAGE-NET-ASSETS> 289,686
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.03)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 2.22
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FORM THE 1998 ANNUAL REPORT TO SHAREHOLDERS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000701638
<NAME> KEMPER PORTFOLIOS
<SERIES>
<NUMBER> 033
<NAME> KEMPER CASH RESERVES FUND - CLASS C
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 545,816
<INVESTMENTS-AT-VALUE> 545,816
<RECEIVABLES> 9,081
<ASSETS-OTHER> 260
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 555,157
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,768
<TOTAL-LIABILITIES> 5,768
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 549,389
<SHARES-COMMON-STOCK> 67,883
<SHARES-COMMON-PRIOR> 32,151
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 549,389
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 16,532
<OTHER-INCOME> 0
<EXPENSES-NET> (5,459)
<NET-INVESTMENT-INCOME> 11,073
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 11,073
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,156)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 868,930
<NUMBER-OF-SHARES-REDEEMED> (834,049)
<SHARES-REINVESTED> 851
<NET-CHANGE-IN-ASSETS> 209,734
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,269
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,459
<AVERAGE-NET-ASSETS> 289,686
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .04
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.04)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 1.88
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>