Filed electronically with the Securities and Exchange Commission on
November 18, 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. 32 /_X_/
and/or --
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /___/
Amendment No. 34 /_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
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)
/___/ On __________________ pursuant to paragraph (b)
/___/ 60 days after filing pursuant to paragraph (a) (1)
/_X_/ On February 1, 2000 pursuant to paragraph (a) (1)
/___/ 75 days after filing pursuant to paragraph (a) (2)
/___/ On ____________________ pursuant to paragraph (a) (2) of Rule 485.
If Appropriate, check the following box:
/___/ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
<PAGE>
KEMPER CASH RESERVES FUND
SUPPLEMENT TO PROSPECTUS
DATED FEBRUARY 1, 2000
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 whether the order is for Class A, Class B, Class c or
Class I shares.
Class I shares are available for purchase exclusively by the following
categories of institutional investors: (1) tax-exempt retirement plans (Profit
Sharing, 401(k), Money Purchase Pension and Defined Benefit Plans) of Scudder
Kemper Investments, Inc. ("Scudder Kemper") and its affiliates and rollover
accounts from those plans; (2) the following investment advisory clients of
Scudder Kemper and its investment advisory affiliates that invest at least $1
million in the 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 the fund on behalf of each
trust; (5) policy holders under Zurich-American Insurance Group's collateral
investment program investing at least $200,000 in a fund and (6) investment
companies managed by Scudder Kemper that invest primarily in other investment
companies.
Class I shares currently are available for purchase only from Kemper
Distributors, Inc. ("KDI"), principal underwriter for the fund, and, in the case
of category 4 above, selected dealers authorized by KDI. Share certificates are
not available for Class I shares.
<PAGE>
The following information supplements the indicated sections of the prospectus.
How Much Investors Pay
The Class I shares have no sales charges or other shareholder fees. The fund
does have annual operating expenses and as a shareholder you pay them
indirectly.
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Fee Table Class I
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Shareholder Fees, paid directly from your investment
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Maximum Sales Charge (Load) Imposed on Purchases None
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Maximum Contingent Deferred Sales Charge (Load) None
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Annual Operating Expenses, deducted from fund assets.
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Management Fees
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Distribution (12b-1) Fees
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Other expenses
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Total Annual Operating Expenses
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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
- ------------------------------------------------------
3 Years
- ------------------------------------------------------
5 Years
- ------------------------------------------------------
10 Years
- ------------------------------------------------------
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 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 Mutual Funds"
to the extent that they are available through their plan. Exchanges will be made
at the relative net asset values of the shares. Exchanges are subject to the
limitations set forth in the prospectus.
2
<PAGE>
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 generally be higher for Class I shares than
for Class A, Class B and Class C shares.
February 1, 2000
3
<PAGE>
LONG-TERM
INVESTING
IN A
SHORT-TERM
WORLD(SM)
February 1, 2000
Prospectus
Kemper Money Funds
Kemper Cash Reserves Fund
As with all mutual funds, the Securities and Exchange Commission (SEC) does not
approve or disapprove these shares or determine whether the information in this
prospectus is truthful or complete. It is a criminal offense for anyone to
inform you otherwise.
[LOGO] KEMPER FUNDS
<PAGE>
HOW THE INVESTING IN
FUND WORKS THE FUND
2 Kemper Cash Reserves 11 Choosing A Share
Fund Class
8 Other Policies 15 How To Buy Shares
9 Financial Highlights 16 How To Exchange Or
Sell Shares
17 Policies You Should
Know About
23 Understanding
Distributions And Taxes
<PAGE>
How The Fund Works
On the next few pages, you'll find information about this fund's investment
goal, the main strategies it uses to pursue that goal, and the main risks that
could affect its performance.
Whether you are considering investing in the fund or are already a shareholder,
you'll probably want to look this information over carefully. You may want to
keep it on hand for reference as well.
Remember that mutual funds are investments, not bank deposits. They're not
insured or guaranteed by the FDIC or any other government agency. This fund's
share price isn't guaranteed, so be aware that you could lose money.
<PAGE>
TICKER SYMBOLS CLASS: A) XXXXX B) XXXXX C) XXXXX
Kemper
Cash Reserves Fund
The fund seeks maximum current income to the extent consistent with stability of
principal.
2
<PAGE>
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The Fund's Strategy
The fund pursues its goal by investing exclusively in high quality short-term
securities, as well as repurchase agreements that are backed by these
securities.
The fund may buy securities from many types of issuers, including the U.S.
government, corporations and municipalities. The fund typically invests more
than 25% of net assets in obligations of U.S. and foreign banks. However,
everything the fund buys must meet the rules for money market fund investments
(see sidebar).
Working in conjunction with credit analysts, the portfolio managers screen
potential securities and develop a list of those that the fund may buy. The
managers then decide which securities on this list to buy, looking for
attractive yield and weighing considerations such as credit quality, economic
outlook and possible interest rate movements. The managers may adjust the fund's
exposure to interest rate risk, typically seeking to take advantage of possible
rises in interest rates and to preserve yield when interest rates appear likely
to fall.
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[ICON] MONEY FUND RULES
To be called a money market fund, a mutual fund must operate within strict
federal rules. Designed to help maintain a stable share price, these rules limit
money funds to particular types of securities. Some of the rules:
o individual securities must have remaining maturities of no more than 397
days
o the dollar-weighted average maturity of the fund's holdings cannot exceed
90 days
o all securities must be in the top two credit grades for short-term
securities and be denominated in U.S. dollars
3
<PAGE>
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The Risks Of Investing In The Fund
Money market funds are generally considered to have lower risks than other types
of mutual funds. Even so, there are several risk factors that could reduce the
yield you get from the fund or make it perform less well than other investments.
Although the fund seeks to preserve the value of your investment at $1.00 per
share, you could lose money by investing in the fund.
As with most money market funds, the most important factor affecting the fund's
performance is market interest rates. The fund's yields tend to reflect current
interest rates, which means that when these rates fall, the fund's yield
generally falls as well.
A second factor is credit quality. If a portfolio security declines in credit
quality or goes into default, it could hurt the fund's performance. To the
extent that the fund emphasizes certain sectors of the short-term securities
market, the fund increases its exposure to factors affecting these sectors. For
example, banks' repayment abilities could be compromised by broad economic
declines or sharp rises in interest rates. Securities from foreign banks may
have greater credit risk than comparable U.S. securities, for reasons ranging
from political and economic uncertainties to less stringent banking regulations.
Other factors that could affect performance include:
o the managers could be incorrect in their analysis of interest rate trends,
credit quality, or other matters
o the counterparty to a repurchase agreement or other transaction could
default on its obligations
o securities that rely on outside third party guarantors to raise their
credit quality could fall in price or go into default if the financial
condition of the third party guarantor deteriorates
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
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This fund may be of interest to investors who want a versatile, broadly
diversified money fund that places equal emphasis on credit quality, yield and
stability.
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4
<PAGE>
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Performance
The bar chart below shows how the total returns for the fund's Class B shares
have varied from year to year, which may give some idea of risk. (The chart
doesn't include shareholder fees, which would reduce returns.) The table shows
how the fund's returns over different periods average out.
- ------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class B shares
- ------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA
00.00 00.00 00.00 00.00 00.00 00.00 00.00 00.00 00.00 00.00
- --------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- --------------------------------------------------------------------------------
Best quarter: 0.00%, Q0 1990 YTD return as of-- : 0.00%
Worst quarter: -0.00%, Q0 1900
- --------------------------------------------------------------------------------
Average Annual Total Returns (as of 12/31/1999)
- --------------------------------------------------------------------------------
Since
1 Year 5 Years 10 Years Inception
- ------------------------------------------------------------------------------
Class A 00.00% 00.00% 00.00% 00.00%
- ------------------------------------------------------------------------------
Class B 00.00 00.00 -- --
- ------------------------------------------------------------------------------
Class C 00.00 00.00 -- --
- ------------------------------------------------------------------------------
* Total returns for 19_-19_ would have been lower if operating expenses
hadn't been maintained.
5
<PAGE>
- --------------------------------------------------------------------------------
How Much Investors Pay
Depending on which share class you choose and how much you invest, you may be
charged shareholder fees. The fund also has annual operating expenses, and as a
shareholder you pay them indirectly.
- --------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- --------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed On Purchases
(as % of offering price) None None None
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load)
(as % of redemption proceeds) 1.00%* 4.00% 1.00%
- --------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- --------------------------------------------------------------------------------
Management Fees 0.00% 0.00% 0.00%
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Distribution (12b-1) Fees None 0.00 0.00
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Other Expenses** 0.00 0.00 0.00
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Total Annual Operating Expenses 0.00 0.00 0.00
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* Only on shares bought without a sales charge and sold within a year. See
"Choosing A Share Class, Class A Shares."
** Includes costs of shareholder servicing, custody, accounting services and
similar expenses, which may vary with fund size and other factors.
- --------------------------------------------------------------------------------
THE INVESTMENT ADVISOR
The fund's investment advisor is Scudder Kemper Investments, Inc., located at
345 Park Avenue, New York, NY 10154-0010. Scudder Kemper has more than 70 years
of experience managing mutual funds and currently has more than $290 billion in
assets under management.
Scudder Kemper takes a team approach, bringing together professionals from many
investment disciplines. Supporting each team are Scudder Kemper's many
economists, research analysts, traders and other investment specialists, located
across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee. For the most recent fiscal year, the actual amount the fund paid
in management fees was 0.00% of its average daily net assets.
6
<PAGE>
Based on the costs in the fee table, this example is designed to help you
compare the expenses of each share class to those of other funds. The example
assumes operating expenses remain the same and that you invested $10,000, earned
5% annual returns and reinvested all dividends and distributions. This is only
an example; actual expenses will be different.
- --------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- --------------------------------------------------------------------------------
Class A shares $0,000 $0,000 $0,000 $0,000
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Class B shares 0,000 0,000 0,000 0,000
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Class C shares 0,000 0,000 0,000 0,000
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Expenses, assuming you kept your shares
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Class A shares $0,000 $0,000 $0,000 $0,000
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Class B shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Class C shares 0,000 0,000 0,000 0,000
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- --------------------------------------------------------------------------------
FUND MANAGERS
Below are the people who handle the fund's day-to-day management:
Frank Rachwalski, Jr. Jerri I. Cohen
Lead Portfolio Manager o Began investment career
o Began investment career in 1992
in 1973 o Joined the advisor in 1981
o Joined the advisor in 1973 o Joined the fund team
o Joined the fund team 1998
in 1984
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
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7
<PAGE>
- --------------------------------------------------------------------------------
Other Policies
While the sections on the previous pages describe the main points of the fund's
strategy and risks, there are a few other issues to know about:
o
o The funds' investment advisor establishes a security's credit grade at the
time it buys securities, using independent ratings or, for unrated
securities, its own credit ratings. If a security's credit quality falls
below the minimum required for purchase by the fund, the security will be
sold unless the Board believes this would not be in the shareholders' best
interests.
Year 2000 readiness
Like all mutual funds, this fund could be affected by the inability of some
computer systems to recognize the year 2000. The investment advisor has a year
2000 readiness program designed to address this problem, and has researched the
readiness of suppliers and business partners as well as issuers of securities
the funds own. Still, there's some risk that the year 2000 problem could
materially affect the fund's operations (such as its ability to calculate net
asset value and process purchases and redemptions), its investments, or
securities markets in general.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
This prospectus doesn't tell you about every policy or risk of investing in the
fund.
For more information, you may want to request a copy of the SAI (the back cover
has information on how to do this).
8
<PAGE>
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Financial Highlights
This table is designed to help you understand the fund's financial performance
in recent years. The figures in the first part of the table are for a single
share. The total return figures represent the percentage that an investor in the
fund would have earned (or lost), assuming all dividends and distributions were
reinvested. This information has been audited by Ernst & Young LLP, whose
report, along with the fund's financial statements, is included in the fund's
annual report (see "Shareholder reports" on the back cover).
Kemper Cash Reserves Fund
[Financial Highlights to be provided.]
9
<PAGE>
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Investing In The Fund
The following pages tell you about many of the services, choices and benefits of
being a Kemper Funds shareholder. You'll also find information on how to check
the status of your account using the method that's most convenient for you.
You can find out more about the topics covered here by speaking with your
financial representative or other investment provider, such as a workplace
retirement plan.
<PAGE>
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Choosing A Share Class
In this prospectus, there are three share classes for the fund. Each class has
its own fees and expenses, offering you a choice of cost structures.
Before you invest, take a moment to look over the characteristics of each share
class, so that you can be sure to choose the class that's right for you. You may
want to ask your financial representative to help you with this decision.
We describe each share class in detail on the following pages. But first, you
may want to look at the table below, which gives you a brief comparison of the
main features of each class.
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------
Classes and features Points to help you compare
- -----------------------------------------------------------------------------------
Class A
o No charges when you buy shares o Annual expenses are lower than those
for Class B or Class C
o Deferred sales charge of 1% when you
sell shares during the first year after
purchase
o No marketing/distribution fee
- -----------------------------------------------------------------------------------
Class B
o No charges when you buy shares o The deferred sales charge rate falls
to zero after six years
o Deferred sales charge of up to 4.00%
charged when you sell shares you o Shares automatically convert to
bought within the last six years Class A after six years, which means
lower annual expenses going forward
o 0.75% marketing and distribution fee
- -----------------------------------------------------------------------------------
Class C
o No charges when you buy shares o The deferred sales charge rate is
lower, but your shares never convert to
o Deferred sales charge of 1.00%, Class A, so annual expenses remain higher
charged when you sell shares you
bought within the last year
o 0.75% marketing and distribution fee
- -----------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
Class A shares
Class A shares have no up-front sales charges. However, the applicable sales
charge applies for exchanges into Class A shares of other Kemper funds.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
Class A shares may make sense for long-term investors, especially those who are
eligible for reduced sales charges for other Kemper funds.
- --------------------------------------------------------------------------------
12
<PAGE>
Class B shares
Like Class A shares, Class B shares have no up-front sales charges. Class B
shares do have a 12b-1 plan, under which the fund charges you an annual
marketing/ distribution fee of 0.75%. This means the annual expenses for Class B
shares are somewhat higher (and their performance correspondingly lower)
compared to Class A shares, which don't have a 12b-1 fee. After six years, Class
B shares automatically convert to Class A, which has the net effect of lowering
the annual expenses from the seventh year on.
Class B shares have a contingent deferred sales charge (CDSC). This charge
declines over the years you own shares, and disappears completely after six
years of ownership. But for any shares you sell within those six years, you may
be charged as follows:
Year after you bought shares CDSC on shares you sell
- -----------------------------------------------------------
First year 4.00%
- -----------------------------------------------------------
Second or third year 3.00
- -----------------------------------------------------------
Fourth or fifth year 2.00
- -----------------------------------------------------------
Sixth year 1.00
- -----------------------------------------------------------
Seventh year and later None
(automatic conversion to
Class A)
- -----------------------------------------------------------
This CDSC is waived under certain circumstances (see "Policies You Should Know
About"). Your financial representative or Kemper can answer your questions and
help you determine if you're eligible.
While Class B shares don't have any front-end sales charges, their higher annual
expenses (due to 12b-1 fees) mean that over the years you could end up paying
more than the equivalent of the maximum allowable front-end sales charge.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
Class B shares can be a logical choice for long-term investors who prefer to see
all of their investment go to work right away, and can accept somewhat higher
annual expenses in exchange.
- --------------------------------------------------------------------------------
13
<PAGE>
Class C shares
Like Class A and Class B shares, Class C shares have no up-front sales charges.
Class C shares do have a 12b-1 plan that allows the fund to charge you an annual
marketing/ distribution fee of 0.75%. Because of this fee, the annual expenses
for Class C shares are similar to those of Class B shares, but higher than those
for Class A shares (and the performance of Class C shares is correspondingly
lower than that of Class A shares).
Unlike Class B shares, Class C shares do NOT automatically convert to Class A
after six years, so they continue to have higher annual expenses.
Class C shares have a contingent deferred sales charge (CDSC), but only on
shares you sell within one year of buying them:
Year after you bought shares CDSC on shares you sell
- ----------------------------------------------------------
First year 1.00%
- ----------------------------------------------------------
Second year and later None
- ----------------------------------------------------------
This CDSC is waived under certain circumstances (see "Policies You Should Know
About"). Your financial representative or Kemper can answer your questions and
help you determine if you're eligible.
While Class C shares don't have any front-end sales charges, their higher annual
expenses mean that over the years you could end up paying more than the
equivalent of the maximum allowable front-end sales charge.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
- --------------------------------------------------------------------------------
Class C shares may appeal to investors who plan to sell some or all shares
within six years of buying them, or who aren't certain of their investment time
horizon.
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
How to Buy Shares
Once you've chosen a share class, use these instructions to make investments.
Make out any checks to "Kemper Funds."
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
First investment Additional investments
- ------------------------------------------------------------------------------------
<S> <C>
$1,000 or more for regular accounts $100 or more for regular accounts
$250 or more for IRAs $50 or more for IRAs
$50 or more with an Automatic
Investment Plan
- ------------------------------------------------------------------------------------
Through a financial representative
o Contact your representative using o Contact your representative using
the method that's most convenient the method that's most convenient
for you for you
- ------------------------------------------------------------------------------------
By mail or express mail (see below)
o Fill out and sign an application o Send a check and a Kemper
investment slip to us at the
o Send it to us at the appropriate appropriate address below
address, along with an investment
check o If you don't have an investment slip,
simply include a letter with your name,
account number, the full name of the
fund and the share class and your
investment instructions
- ------------------------------------------------------------------------------------
By wire
o Call (800) 621-1048 for instructions o Call (800) 621-1048 for instructions
- ------------------------------------------------------------------------------------
By phone
o Not available o Call (800) 621-1048 for instructions
- ------------------------------------------------------------------------------------
With an automatic investment plan
o Not available o To set up regular investments, call
(800) 621-1048
- ------------------------------------------------------------------------------------
On the Internet
o Follow the instructions at o Follow the instructions at
www.kemper.com www.kemper.com
- ------------------------------------------------------------------------------------
</TABLE>
Regular mail: Kemper Funds, PO Box 219415, Kansas City, MO 64121-9415
Express, registered, or certified mail:
Kemper Service Company, 811 Main Street, Kansas City, MO 64105-2005
Fax number: 800-818-7526 (for exchanging and selling only)
15
<PAGE>
- --------------------------------------------------------------------------------
How to Exchange Or Sell Shares
Use these instructions to exchange or sell shares in your account.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Exchanging into another fund Selling shares
- ----------------------------------------------------------------------------------------
<S> <C>
$1,000 or more to open a new account Some transactions, including most
for over $50,000, can only be
$100 or more for exchanges between ordered in writing with a signature
existing accounts guarantee; if you're in doubt, see
page 00
- ----------------------------------------------------------------------------------------
Through a financial representative
o Contact your representative by the o Contact your representative by
method that's most convenient for you the method that's most convenient for you
- ----------------------------------------------------------------------------------------
By phone or wire
o Call (800) 621-1048 for instructions o Call (800) 621-1048 for instructions
- ----------------------------------------------------------------------------------------
By mail, express mail or fax
(see previous page)
Write a letter that includes:
Write a letter that includes:
o the fund, class and account number
you're exchanging out of o the fund, class and account number
from which you want to sell shares
o the dollar amount or number of
shares you want to exchange o the dollar amount or number of shares
you want to sell
o the name and class of the fund you o your name(s), signature(s) and
want to exchange into address, as they appear on your
account
o your name(s), signature(s) and address, o a daytime telephone number
as they appear on your account
o a daytime telephone number
- ----------------------------------------------------------------------------------------
With a systematic exchange plan With a systematic withdrawal plan
o To set up regular exchanges from a o To set up regular cash payments from a
Kemper fund account, call Kemper fund account, call
(800) 621-1048 (800) 621-1048
- ----------------------------------------------------------------------------------------
On the Internet
o Follow the instructions at o Follow the instructions at
www.kemper.com www.kemper.com
- ----------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
- --------------------------------------------------------------------------------
Policies You Should Know About
Along with the instructions on the previous pages, the policies below may affect
you as a shareholder.
If you are investing through an investment provider, check the materials you got
from them. As a general rule, you should follow the information in those
materials wherever it contradicts the information given here. Please note that
an investment provider may charge its own fees.
Policies about transactions
The fund is open for business whenever the New York Stock Exchange is open. The
fund calculates its share price every business day, as of the close of regular
trading on the Exchange (typically 4 p.m. eastern time, but sometimes earlier,
as in the case of scheduled half-day trading or unscheduled suspensions of
trading).
You can place an order to buy or sell shares at any time. Once your order is
received by Kemper Service Company, and they have determined that it is a "good
order," it will be processed at the next share price calculated.
Because orders placed through investment providers must be forwarded to Kemper
Service Company before they can be processed, you'll need to allow extra time. A
representative of your investment provider should be able to tell you when your
order will be processed.
KemperACCESS, the Kemper Automated Information Line, is available 24 hours a day
by calling (800) 972-3060. You can use Kemper ACCESS to get information on
Kemper funds generally and on accounts held directly at Kemper. You can also use
it to make exchanges and sell shares.
17
<PAGE>
EXPRESS-Transfer lets you set up a link between a Kemper account and a bank
account. Once this link is in place, you can move money between the two with a
phone call. You'll need to make sure your bank has Automated Clearing House
(ACH) services. Transactions take two to three days to be completed, and there
is a $100 minimum. To set up EXPRESS-Transfer on a new account, see the account
application; to add it to an existing account, call (800) 621-1048.
Share certificates are available on written request. However, we don't recommend
them unless you want them for a specific purpose, because your shares can only
be sold by mailing them in, and if they're ever lost they're difficult and
expensive to replace.
When you call us to sell shares, we may record the call, ask you for certain
information or take other steps designed to prevent fraudulent orders. It's
important to understand that, with respect to certain pre-authorized privileges,
as long as we take reasonable steps to ensure that an order appears genuine, we
are not responsible for any losses that may occur.
When you ask us to send or receive a wire, please note that while we don't
charge a fee to send or receive wires, it's possible that your bank may do so.
Wire transactions are completed within 24 hours. The funds can only send or
accept wires of $1,000 or more.
Exchanges among Kemper funds are an option for most shareholders. Exchanges are
a shareholder privilege, not a right: we may reject any exchange order,
particularly when there appears to be a pattern of "market timing" or other
frequent purchases and sales. We may also reject or limit purchase orders, for
these or other reasons.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
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The Kemper Web site can be a valuable resource for shareholders with Internet
access. Go to www. kemper.com to get up-to-date information, review balances or
even place orders for exchanges.
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When you want to sell more than $50,000 worth of shares, you'll usually need to
place your order in writing and include a signature guarantee. The only
exception is if you want money wired to a bank account that is already on file
with us; in that case, you don't need a signature guarantee. Also, you don't
need a signature guarantee for an exchange, although we may require one in
certain other circumstances.
A signature guarantee is simply a certification of your signature -- a valuable
safeguard against fraud. You can get a signature guarantee from most brokers and
most banks, savings institutions and credit unions. Note that you can't get a
signature guarantee from a notary public.
When you sell shares that have a contingent deferred sales charge (CDSC), we
calculate the CDSC as a percentage of what you paid for the shares or what you
are selling them for -- whichever results in the lowest charge to you. In
processing orders to sell shares, we turn to the shares with the lowest CDSC
first. Exchanges from one Kemper fund into another don't affect CDSC. For each
investment you make, the date you first bought Kemper shares is the date we use
to calculate a CDSC on that particular investment.
There are certain cases in which you may be exempt from a CDSC. These include:
o the death or disability of an account owner (including a joint owner)
o withdrawals made through a systematic withdrawal plan
o withdrawals related to certain retirement or benefit plans
o redemptions for certain loan advances, hardship provisions or returns of
excess contributions from retirement plans
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
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If you ever have difficulty placing an order by phone or fax, you can always
send us your order in writing.
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In each of these cases, there are a number of additional provisions that apply
in order to be eligible for a CDSC waiver. Your financial representative or
Kemper can answer your questions and help you determine if you are eligible.
If you sell shares in a Kemper fund and then decide to invest with Kemper again
within six months, you can take advantage of the "reinstatement feature." With
this feature, you can put your money back into the same class of a Kemper fund
at its current NAV and for purposes of sales charges it will be treated as if it
had never left Kemper. You'll be reimbursed (in the form of fund shares) for any
CDSC you paid when you sold your shares. Future CDSC calculations will be based
on your original investment date, rather than your reinstatement date. There is
also an option that lets investors who sold Class B shares buy Class A shares
with no sales charge, although they won't be reimbursed for any CDSC they paid.
You can only use the reinstatement feature once for any given group of shares.
To take advantage of this feature, contact Kemper or your financial
representative.
Money from shares you sell is normally sent out within one business day of when
your order is received in proper form, although it could be delayed for up to
seven days. There are also two circumstances when it could be longer: when you
are selling shares you bought recently by check and that check hasn't cleared
yet (maximum delay: 10 days) or when unusual circumstances prompt the SEC to
allow further delays.
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How the fund calculates share price
The price at which you buy shares is the net asset value per share, or NAV.
To calculate NAV, each share class of the fund uses the following equation:
TOTAL ASSETS - TOTAL LIABILITIES
---------------------------------- = NAV
TOTAL NUMBER OF SHARES OUTSTANDING
For each share class in this prospectus, the price at which you sell shares is
also the NAV, although for Class B and Class C investors a contingent deferred
sales charge may be taken out of the proceeds (see "Choosing A Share Class").
As noted earlier, the fund seeks to maintain a stable $1.00 share price.
We typically use amortized cost (the method used by most money market funds) to
value securities.
Other rights we reserve
You should be aware that we may do any of the following:
o withhold 31% of your distributions as federal income tax if we have been
notified by the IRS that you are subject to backup withholding, or if you
fail to provide us with a correct taxpayer ID number or certification that
you are exempt from backup withholding
o reject a new account application if you don't provide a correct Social
Security or other tax ID number; if the account has already been opened, we
may give you 30 days' notice to provide the correct number
o charge you $9 each calendar quarter if your account balance is below $1,000
for the entire quarter; this policy doesn't apply to most retirement
accounts or if you have an automatic investment plan
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o pay you for shares you sell by "redeeming in kind," that is, by giving you
marketable securities (which typically will involve brokerage costs for you
to liquidate) rather than cash; in most cases, a fund won't make a
redemption in kind unless your requests over a 90-day period total more
than $250,000 or 1% of the fund's assets, whichever is less
o calculate NAV more than once a day
o change, add or withdraw various services, fees and account policies (for
example, we may change or terminate the exchange privilege at any time)
22
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Understanding Distributions And Taxes
By law, a mutual fund is required to pass through to its shareholders virtually
all of its net earnings. A fund can earn money in two ways: by receiving
interest, dividends or other income from securities it holds, and by selling
securities for more than it paid for them. (A fund's earnings are separate from
any gains or losses stemming from your own purchase of shares.) A fund may not
always pay a distribution for a given period.
The fund intends to declare income dividends daily, and pay them monthly. The
fund may take into account capital gains and losses (other than net long-term
capital gains) in their daily dividend declarations. The funds may make
additional distributions for tax purposes if necessary.
You can choose how to receive your dividends and distributions. You can have
them automatically reinvested in fund shares or sent to you by check. Tell us
your preference on your application. If you don't indicate a preference, your
dividends and distributions will all be reinvested. For retirement plans,
reinvestment is the only option.
Dividends are generally taxed at ordinary income rates. Any long-term capital
gains distributions are generally taxed at capital gains rates, although the
fund typically doesn't expect to make long-term capital gains distributions.
Also, because the fund seeks to maintain a stable share price, you are unlikely
to have a capital gain or loss when you sell fund shares. For tax purposes, an
exchange is the same as a sale.
The fund will send you detailed tax information every January. These statements
tell you the amount and the tax category of any dividends or distributions you
received. They also have certain details on your purchases and sales of shares.
The tax status of dividends and distributions is the same whether you reinvest
them or not. Dividends or distributions declared in the last quarter of a given
year are taxed
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
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Because each shareholder's tax situation is unique, it's always a good idea to
ask your tax professional about the tax consequences of your investments,
including any state and local tax consequences.
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23
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in that year, even though you may not receive the money until the
following January.
24
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To Get More Information
Shareholder reports -- These include commentary from the fund's management team
about recent market conditions and the effects of the fund's strategies on its
performance. For each fund, they also have detailed performance figures, a list
of everything the fund owns, and the fund's financial statements. Shareholders
get these reports automatically. To reduce costs, we mail one copy per
household. For more copies, call (800) 621-1048.
Statement of Additional Information (SAI) -- This tells you more about the
fund's features and policies, including additional risk information. The SAI is
incorporated by reference into this document (meaning that it's legally part of
this prospectus).
If you'd like to ask for copies of these documents, or if you're a shareholder
and have questions, please contact Kemper or the SEC (see below). Materials you
get from Kemper are free; those from the SEC involve a copying fee. If you like,
you can look over these materials in person at the SEC's Public Reference Room
in Washington, DC.
SEC
450 Fifth Street, N.W.
Washington, DC 20549-6009
www.sec.gov
Tel (800) SEC-0330
Kemper Funds
222 South Riverside Plaza
Chicago, IL 60606-5808
www.kemper.com
Tel (800) 621-1048
SEC File Number
Kemper Cash Reserves Fund 811-3440
PRINCIPAL UNDERWRITER
Kemper Distributors, Inc.
222 South Riverside Plaza Chicago, IL 60606-5808
www.kemper.com E-mail [email protected]
Tel (800) 621-1048
[LOGO] KEMPER FUNDS
Long-term investing in a short term world(SM)
<PAGE>
KEMPER PORTFOLIOS
STATEMENT OF ADDITIONAL INFORMATION
February 1, 2000
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 should be
read in conjunction with the prospectus of Kemper Cash Reserves Fund (the
"Fund") dated February 1, 2000. The prospectus may be obtained without charge
from the Fund by calling or writing the Fund or the firm from which the
prospectus was obtained, and is also available, along with other related
materials, on the SEC's Internet web site (http://www.sec.gov).
TABLE OF CONTENTS
INVESTMENT RESTRICTIONS........................................................2
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS...............................4
INVESTMENT MANAGER AND UNDERWRITER.............................................5
PORTFOLIO TRANSACTIONS.........................................................6
PURCHASE AND REDEMPTION OF SHARES.............................................11
DIVIDENDS AND TAXES...........................................................14
PERFORMANCE...................................................................22
OFFICERS AND TRUSTEES.........................................................24
SHAREHOLDER RIGHTS............................................................27
APPENDIX -- RATINGS OF INVESTMENTS............................................29
The financial statements appearing in the Fund's 1999 Annual Report to
Shareholders are incorporated herein by reference. The Annual Report for the
Fund accompanies this Statement of Additional Information, and further copies
may be obtained without charge by calling 1-800-.
<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 as amended (the "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.
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. Purchase 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.
With regard to Restriction #3, for purposes of determining the percentage of the
Fund's total assets invested in securities of issuers having their principal
business activities in a particular industry, asset-backed securities will be
classified separately, based on the nature of the underlying assets. Currently,
the following categories are used: captive auto, diversified, retail and
consumer loans, captive equipment and business, business trade receivables,
nuclear fuel and capital and mortgage lending.
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.
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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 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 U.S. 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.
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<PAGE>
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."
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" herein.
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 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
4
<PAGE>
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
Brokerage Commissions
Allocation of brokerage is supervised by the Adviser.
The primary objective of the Adviser in placing orders for the purchase and sale
of securities for a Portfolio is to obtain the most favorable net results,
taking into account such factors as price, commission where applicable, size of
order, difficulty of execution and skill required of the executing
broker/dealer. The Adviser seeks to evaluate the overall reasonableness of
brokerage commissions paid (to the extent applicable) through the familiarity of
Scudder Investor Services, Inc. ("SIS") with commissions charged on comparable
transactions, as well as by comparing commissions paid by the Fund to reported
commissions paid by others. The Adviser routinely reviews commission rates,
execution and settlement services performed and makes internal and external
comparisons.
A Portfolio's purchases and sales of fixed-income securities are generally
placed by the Adviser with primary market makers for these securities on a net
basis, with out any brokerage commission being paid by the Fund. Trading does,
however, involve transaction costs. Transactions with dealers serving as primary
market makers reflect the spread between the bid and asked prices. Purchases of
underwritten issues may be made, which will include an underwriting fee paid to
the underwriter.
When it can be done consistently with the policy of obtaining the most favorable
net results, it is the Adviser's practice to place such orders with
broker/dealers who supply brokerage and research services to the Adviser or the.
The term "research services" includes advice as to the value of securities; the
advisability of investing in, purchasing or selling securities; the availability
of securities or purchasers or sellers of securities; and analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts. The Adviser is authorized
when placing portfolio transactions, if applicable, for the Fund to pay a
brokerage commission in excess of that which another broker might charge for
executing the same transaction on account of execution services and the receipt
of research services. The Adviser has negotiated arrangements, which are not
applicable to most fixed-income transactions, with certain broker/dealers
pursuant to which a broker/dealer will provide research services to the Adviser
or the Fund in exchange for the direction by the Adviser of brokerage
transactions to the broker/dealer. These arrangements regarding receipt of
research services generally apply to equity security transactions. The Adviser
may place orders with a broker/dealer on the basis that the broker/dealer has or
has not sold shares of the Fund. In effecting transactions in over-the-counter
securities, orders are placed with the principal market makers for the security
being traded unless, after exercising care, it appears that more favorable
results are available elsewhere.
To the maximum extent feasible, it is expected that the Adviser will place
orders for portfolio transactions through SIS, which is a corporation registered
as a broker/dealer and a subsidiary of the Adviser; SIS will place orders on
behalf of the Fund with issuers, underwriters or other brokers and dealers. SIS
will not receive any commission, fee or other remuneration from a Portfolio for
this service.
5
<PAGE>
Although certain research services from broker/dealers may be useful to a
Portfolio and to the Adviser, it is the opinion of the Adviser that such
information only supplements the Adviser's own research effort since the
information must still be analyzed, weighed, and reviewed by the Adviser's
staff. Such information may be useful to the Adviser in providing services to
clients other than 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
the Fund.
The Trustees review, from time to time, whether the recapture for the benefit of
the Fund of some portion of the brokerage commissions or similar fees paid by
the 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 ADVISER AND UNDERWRITER
Investment Adviser. Scudder Kemper Investments, Inc. (the "Adviser" or "Scudder
Kemper"), 345 Park Avenue, New York, New York, is the Fund's investment adviser.
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. Responsibility for overall
management of the Fund rests with the Trust's Board of Trustees and officers.
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
6
<PAGE>
known as Zurich Financial Services, Inc. By way of a dual holding company
structure, former Zurich 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 1999, 1998 and
1997 fiscal years were $__________$1,269,000 and $1,059,000, 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.
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,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 B shares. This fee is accrued daily as an
expense of Class B shares. KDI also receives any contingent deferred sales
charges. See "Redemption or Repurchase of Shares--Contingent Deferred Sales
Charge--Class B Shares." KDI currently compensates firms for sales of Class B
shares at a commission rate of 3.75%.
7
<PAGE>
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 1999, 1998 and 1997 fiscal years.
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>
Contingent Total Distribution
Distribution Deferred Sales Distribution Fees Paid by
Class B Fiscal Fees Paid by Charges Paid to Fees Paid by KDI to KDI
Shares Year Fund to KDI KDI KDI to Firms Affiliated Firms
- ------ ---- ----------- --- ------------ ----------------
<S> <C> <C> <C> <C>
1999
1998 $1,180,000 813,000 3,242,000 0
1997 $1,499,000 808,000 3,671,000 0
Other Distribution Expenses Paid by KDI
---------------------------------------
Advertising Misc.
Class B and Prospectus Marketing and Operating Interest
Shares Literature Printing Sales Expenses Expenses Expense
- ------ ---------- -------- -------------- -------- -------
320,000 28,000 656,000 123,000 1,576,000
553,000 40,000 1,432,000 217,000 1,196,000
Contingent Total Distribution
Distribution Deferred Sales Distribution Fees Paid by
Class C Fiscal Fees Paid by Charges Paid to Fees Paid by KDI to KDI
Shares Year Fund to KDI KDI KDI to Firms Affiliated Firms
- ------ ---- ----------- --- ------------ ----------------
1999
1998 $208,000 24,000 493,000 0
1997 $118,000 16,000 237,000 0
Other Distribution Expenses Paid by KDI
---------------------------------------
Advertising Misc.
Class C and Prospectus Marketing and Operating Interest
Shares Literature Printing Sales Expenses Expenses Expense
- ------ ---------- -------- -------------- -------- -------
156,000 14,000 329,000 68,000 176,000
165,000 12,000 415,000 46,000 107,000
</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.
<TABLE>
<CAPTION>
Total Service Fees Paid Service Fees Paid by KDI
Administrative Service Fees Paid by Fund by KDI to Firms to KDI Affiliated Firms
---------------------------------------- ---------------------- -----------------------
Fiscal Year Class A Class B Class B
----------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
1999 $XXXX $XXXX $XXXX $XXXX $XXXX
1998 188,000 399,000 68,000 913,000 0
1997 $112,000 492,000 44,000 824,000 0
</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: annual account fees of
$14.00 ($23.00 for retirement accounts) plus account set-up charges, annual fees
associated with the contingent deferred 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 1999,
1998 and 1997 fiscal years the shareholder service fees IFTC remitted to KSvC
were $______ $1,353,000, and $_______.
<PAGE>
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 Fund are subject to the
applicable sales charge of the Kemper 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 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 table below. 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
Sales Charge daily net assets) Other Information
------------ ----------------- -----------------
<S> <C> <C> <C>
Class A* None None
Class B Maximum contingent deferred sales 0.75% Shares convert to
charge of 4% of redemption Class A shares
proceeds; declines to zero after six years 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 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.
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
11
<PAGE>
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 Adviser 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 Adviser 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 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.
12
<PAGE>
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 may include merchandise and trips to 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 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.
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.
13
<PAGE>
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 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 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
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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 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.
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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%
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 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.
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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 1999 will be eligible for the second year's charge if redeemed on or
after December 1, 2000. 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 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 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 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.
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. 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.
SPECIAL FEATURES
Class A Shares -- Combined Purchases. The Class A shares (or the equivalent) of
any Kemper 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 New 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 -- 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 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 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
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Funds as "Kemper Funds," (b) all classes of shares of any Kemper 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 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 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 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 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
Funds in accordance with the provisions below.
Class A Shares. Class A shares of the Kemper Funds and shares of the Money
Market Funds listed under "Special Features--Class A Shares--Combined Purchases"
above may be exchanged for each other at their relative net asset values. Shares
of Money Market Funds and 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 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 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 Fund with a value in excess of $1,000,000 (except
Kemper Cash Reserves Fund) acquired by exchange from another Kemper Fund, or
from a Money Market Fund, may not be exchanged thereafter until they have been
owned for 15 days (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
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<PAGE>
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 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
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
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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. 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.
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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 Fund) or other Kemper Fund listed
in the prospectus under "Special Features -- Class A Shares --Combined
Purchases" may reinvest the amount redeemed at net asset value at the time of
the reinvestment in shares of any Kemper 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 (whether received in cash or shares) at a rate of 30%
or such lower rate as prescribed by any applicable tax treaty. The 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
21
<PAGE>
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 the Fund 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 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 the Fund
because of the higher expenses borne by the Class B and Class C shares. The net
asset value of shares of the 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, Dr. 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 the 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 that 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 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 market maker.
If it is not possible to value a particular debt security pursuant to the above
methods, the investment adviser 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.
22
<PAGE>
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 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 Adviser 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,
1999 was _______%, __________% and _____________%, 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.
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, 1999 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. However, 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. 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.
23
<PAGE>
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. 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(TM) or various
certificate of deposit indexes. Money market fund performance may be based upon,
among other things, the IBC/Donoghue's Money Fund Report(R) or Money Market
Insight(R), reporting services on money market funds. Performance of U.S.
Treasury obligations may be based upon, among other things, various U.S.
Treasury bill indexes. Certain of these alternative investments may offer fixed
rates of return and guaranteed principal and may be insured. 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.
24
<PAGE>
JOHN W. BALLANTINE (2/16/46), Trustee, 1500 North Lake Shore Drive, Chicago,
Illinois; First Chicago NBD Corporation/The First National Bank of Chicago:
1996-1998 Executive Vice President and Chief Risk Management Officer; 1995-1996
Executive Vice President and Head of International Banking; 1992-1995 Executive
Vice President, Chief Credit and Market Risk Officer.
LEWIS A. BURNHAM (1/8/33), Trustee, 16410 Avila Boulevard, Tampa, Florida;
Retired; formerly, Partner Business Resources Group; formerly Executive Vice
President, Anchor Glass Container Corporation.
DONALD L. DUNAWAY (3/8/37), Trustee, 7515 Pelican Bay Blvd., Naples, Florida;
Retired; formerly, Executive Vice President, A. O. Smith Corporation
(diversified manufacturer).
ROBERT B. HOFFMAN (12/11/36), Trustee, 1530 North State Parkway, Chicago,
Illinois; Chairman, Harnischfeger Industries, Inc. (machinery for the mining and
paper industries); formerly, Vice Chairman and Chief Financial Officer, Monsanto
Company (agricultural, pharmaceutical and nutritional/food products); formerly,
Vice President, Head of International Operations, FMC Corporation (manufacturer
of machinery and chemicals).
DONALD R. JONES (1/17/30), Trustee, 182 Old Wick Lane, Inverness, Illinois;
Retired; Director, Motorola, Inc. (manufacturer of electronic equipment and
components); formerly, Executive Vice President and Chief Financial Officer,
Motorola, Inc.
THOMAS W. LITTAUER (4/26/55), Vice President and Trustee*, Two International
Place, Boston, Massachusetts; Managing Director, Adviser; formerly, Head of
Broker Dealer Division of an unaffiliated investment management firm during
1997; prior thereto, President of Client Management Services of an unaffiliated
investment management firm from 1991 to 1996.
SHIRLEY D. PETERSON (9/3/41), Trustee, 401 Rosemont Avenue, Frederick, Maryland;
President, Hood College, 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.
CORNELIA M. SMALL (7/28/44), Trustee*, 345 Park Avenue, New York, NY; Managing
Director, Scudder Kemper.
WILLIAM P. SOMMERS (7/22/33), Trustee, 24717 Harbour View Drive, Ponte Vedra
Beach, Florida; Consultant and Director, SRI International (research and
development); formerly, President and Chief Executive Officer, SRI
International; prior thereto, Executive Vice President, Iameter (medical
information and educational service provider); prior thereto, Senior Vice
President and Director, Booz, Allen & Hamilton, Inc. (management consulting
firm); Director, PSI, Inc., Evergreen Solar, Inc. and Litton Industries.
MARK S. CASADY (9/21/60), President*, 345 Park Avenue, New York, New York;
Managing Director, Adviser; formerly, Institutional Sales Managing Director,
Adviser.
PHILIP J. COLLORA (11/15/45), Vice President and Secretary*, 222 South Riverside
Plaza, Chicago, Illinois; Senior Vice President , Adviser.
ANN M. McCREARY (11/6/56), Vice President*, 345 Park Avenue, New York, New York;
Managing Director, Adviser.
ROBERT C. PECK, JR. (10/1/46), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Managing Director, Adviser; formerly, Executive Vice
President and Chief Investment Officer with an unaffiliated investment
management firm from 1988 to June 1997.
KATHRYN L. QUIRK (12/3/52), Vice President*, 345 Park Avenue, New York, New
York; Managing Director, Adviser
RICHARD L. VANDENBERG (11/16/49), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Managing Director, 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; Managing Director, Adviser.
LINDA J. WONDRACK (9/12/64), Vice President*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.
JOHN R. HEBBLE (6/27/58), Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.
25
<PAGE>
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).
* 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 1998.
<TABLE>
<CAPTION>
Aggregate Compensation From
---------------------------
Total
Kemper Compensation
Short-Intermediate Kemper Funds
Kemper Cash Kemper U.S. Government Kemper Paid to
Name of Trustee Reserves Fund Mortgage Fund Fund Portfolios+ Trustees**
- --------------- ------------- ------------- ---- ----------- ----------
<S> <C> <C> <C> <C> <C>
John W. Ballantine
Lewis A. Burnham $1,700 5,700 1,800 10,000 126,100
Donald L. Dunaway* $1,900 6,200 1,900 10,000 135,000
Robert B. Hoffman $1,700 5,500 1,700 8,900 116,000
Donald R. Jones $1,800 5,900 1,800 9,500 129,600
Shirley D. Peterson $1,600 5,100 1,600 8,200 108,800
William P. Sommers $1,600 5,100 1,600 8,200 108,800
</TABLE>
+ Includes Kemper Cash Reserves Fund, Kemper U.S. Mortgage Fund and Kemper
Short-Intermediate Government Fund.
* Includes deferred fees 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
amount and interest accrued through the Fund's fiscal year are $110,400 for
Mr. Dunaway, for Kemper Portfolios+.
** Includes compensation for service on the boards of 25 Kemper funds with 41
fund portfolios. Each trustee currently serves as a trustee of 27 Kemper
Funds with 47 fund portfolios.
As of December 31, 1999, 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, 1999, 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>
</TABLE>
26
<PAGE>
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.
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.
27
<PAGE>
Each trustee serves until the next meeting of shareholders, if any, called for
the purpose of electing trustees and until the election and qualification of a
successor or until such trustee sooner dies, resigns, retires or is removed by a
majority vote of the shares entitled to vote (as described below) or a majority
of the trustees. In accordance with the 1940 Act (a) the 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.
28
<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.
29
<PAGE>
KEMPER PORTFOLIOS
<TABLE>
<CAPTION>
Item 23 Exhibits
- ------- --------
<S> <C> <C> <C>
(a) (1) Amended and Restated Agreement and Declaration of Trust.
(Incorporated by reference to Post-Effective Amendment No. 25 to the
Registration Statement.)
(2) Written Instrument Amending the Agreement and Declaration of Trust.
(Incorporated by reference to Post-Effective Amendment No. 25 to the
Registration Statement.)
(b) By-Laws.
(Incorporated by reference to Post-Effective Amendment No. 25 to the
Registration Statement.)
(c) (1) Text of Share Certificate.
(Incorporated by reference to Post-Effective Amendment No. 25 to the
Registration Statement.)
(2) Amended and Restated Written Instrument Establishing and Designating
Separate Classes of Shares.
(Incorporated by reference to Post-Effective Amendment No. 26 to the
Registration Statement.)
(c) (3) Written Instrument Changing the Name of the Series of the Trust.
(Incorporated by reference to Post-Effective Amendment No. 26 to the
Registration Statement.)
(d) (1) Revised Investment Management Agreement between the Registrant, on behalf of
Kemper Cash Reserves Fund, and Scudder Kemper Investments, Inc., dated
September 7, 1998 is filed herein.
(2) Revised 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. 31 to the
Registration Statement.)
(e) Underwriting and Distribution Service Agreement between the Registrant and
Kemper Distributors, Inc., dated September 7, 1998. (Incorporated by
reference to Post-Effective Amendment No. 29 to the Registration Statement.)
(f) Inapplicable
<PAGE>
(g) Custodian Contract between Registrant and State Street Bank and Trust
Company dated April 5, 1999. (Incorporated by reference to Post-Effective
Amendment No. 31 to the Registrant's Registration Statement on Form N-1A
filed on October 18, 1999.)
(h) (1) Agency Agreement
(Incorporated by reference to Post-Effective Amendment No. 25 to the
Registration Statement.)
(2) Supplement to Agency Agreement.
(Incorporated by reference to Post-Effective Amendment No. 27 to
the Registration Statement.)
(3) Administrative Services Agreement.
(Incorporated by reference to Post-Effective Amendment No. 27 to
the Registration Statement.)
(h) (4) Fund Accounting Services Agreement between the Registrant, on
behalf of Kemper Cash Reserves Fund, and Scudder Fund Accounting
Corp., dated December 31, 1997.
(Incorporated by reference to Post-Effective Amendment No. 29 to
the Registration Statement.)
(h) (5) Fund Accounting Services Agreement between the Registrant, on
behalf of Kemper U.S. Mortgage Fund, and Scudder Fund Accounting
Corp., dated December 31, 1997.
(Incorporated by reference to Post-Effective Amendment No. 29 to
the Registration Statement.)
(i) To be filed by subsequent amendment.
(j) To be filed by subsequent amendment.
(k) Inapplicable
(l) Inapplicable
(m) (1) Amended and Restated 12b-1 Plan between the Registrant, on behalf
of Kemper Cash Reserves Fund (Class B shares), and Kemper
Distributors, Inc., dated August 1, 1998.
(Incorporated by reference to Post-Effective Amendment No. 29 to
the Registration Statement.)
(2) Amended and Restated 12b-1 Plan between the Registrant, on behalf
of Kemper Cash Reserves Fund (Class C shares), and Kemper
Distributors, Inc., dated August 1, 1998.
(Incorporated by reference to Post-Effective Amendment No. 29 to
the Registration Statement.)
(3) Amended and Restated 12b-1 Plan between the Registrant, on behalf
of Kemper U.S. Mortgage Fund (Class B shares), and Kemper
Distributors, Inc., dated August 1, 1998.
2
<PAGE>
(Incorporated by reference to Post-Effective Amendment No. 29 to
the Registration Statement.)
(4) Amended and Restated 12b-1 Plan between the Registrant, on behalf
of Kemper U.S. Mortgage Fund (Class C shares), and Kemper
Distributors, Inc., dated August 1, 1998.
(Incorporated by reference to Post-Effective Amendment No. 29 to
the Registration Statement.)
(n) Inapplicable.
(o) Multi-Distribution System Plan.
(Incorporated by reference to Post-Effective Amendment No. 26 to
the Registration Statement.)
</TABLE>
Item 24. Persons Controlled by or Under Common Control with Registrant
- -------- -------------------------------------------------------------
Not applicable.
Item 25. Indemnification
- ---- --- ---------------
Article VIII of the Registrant's Agreement and Declaration of Trust
(Exhibit 1 hereto, which is incorporated herein by reference) provides in effect
that the Registrant will indemnify its officers and trustees under certain
circumstances. However, in accordance with Section 17(h) and 17(i) of the
Investment Company Act of 1940 and its own terms, said Article of the Agreement
and Declaration of Trust does not protect any person against any liability to
the Registrant or its shareholders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers, and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such trustee, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question as to whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
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 or Other Connections of Investment Adviser
- -------- ---------------------------------------------------
3
<PAGE>
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.#
Laurence W. Cheng Director, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland##
Director, ZKI Holding Corporation xx
Steven Gluckstern Director, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland##
Director, Zurich Holding Company of America o
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 Director, 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**
4
<PAGE>
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 Financial Services, Inc.*
Director, Korea Bond Fund Management Co., Ltd.+
Cornelia M. Small 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
</TABLE>
* 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
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
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 None
Thomas W. Littauer Director, Chief Executive Officer Vice President
Kathryn L. Quirk Director, Secretary, Chief Legal Vice President
Officer and Vice President
James J. McGovern Chief Financial Officer and Vice None
President
5
<PAGE>
Positions and Offices with Positions and
Name Kemper Distributors, Inc. Offices with Registrant
---- ------------------------- -----------------------
Linda J. Wondrack Vice President and Chief Compliance Vice President
Officer
Paula Gaccione Vice President None
Michael E. Harrington Vice President None
Robert A. Rudell Vice President None
William M. Thomas Vice President None
Todd N. Gierke Assistant Treasurer None
Philip J. Collora Assistant Secretary Vice President and Secretary
Paul J. Elmlinger Assistant Secretary None
Diane E. Ratekin Assistant Secretary None
Mark S. Casady Director, Vice Chairman None
Stephen R. Beckwith Director None
</TABLE>
(c) Not applicable
Item 28. Location of Accounts and Records
- -------- --------------------------------
Accounts, books and other documents are maintained at the offices of
the Registrant, the offices of Registrant's investment adviser, Scudder Kemper
Investments, Inc., 222 South Riverside Plaza, Chicago, Illinois 60606, at the
offices of the Registrant's principal underwriter, Kemper Distributors, Inc.,
222 South Riverside Plaza, Chicago, Illinois 60606 or, in the case of records
concerning custodial functions, at the offices of the custodian, 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
- -------- -------------------
Not applicable.
Item 30 Undertakings
- ------- ------------
Not applicable.
6
<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(a) under the Securities Act of 1933 and has duly caused this
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 15th day
of November, 1999.
By: /s/ Mark S. Casady
------------------------------
Mark S. Casady, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on the 15th day of November, 1999
on behalf of the following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------- -----
<S> <C> <C>
/s/ Thomas W. Littauer Chairman and Trustee November 15, 1999
- --------------------------------------
Thomas W. Littauer*
/s/ John W. Ballantine Trustee November 15, 1999
- --------------------------------------
John W. Ballantine*
/s/ Lewis A. Burnham Trustee November 15, 1999
- --------------------------------------
Lewis A. Burnham*
/s/ Donald L. Dunaway Trustee November 15, 1999
- --------------------------------------
Donald L. Dunaway*
/s/ Robert B. Hoffman Trustee November 15, 1999
- --------------------------------------
Robert B. Hoffman*
/s/ Donald R. Jones Trustee November 15, 1999
- --------------------------------------
Donald R. Jones*
/s/ Shirley D. Peterson Trustee November 15, 1999
- --------------------------------------
Shirley D. Peterson*
/s/ Cornelia M. Small Trustee November 15, 1999
- --------------------------------------
Cornelia M. Small*
/s/ William P. Sommers
- --------------------------------------
William P. Sommers* Trustee November 15, 1999
/s/ John R. Hebble Treasurer (Principal Financial
- --------------------------------------
John R. Hebble and Accounting Officer) November 15, 1999
</TABLE>
*By: /s/ Philip J. Collora
Philip J. Collora**
** Attorney-in-fact pursuant to powers of
attorney contained in Post-Effective
Amendment No. 28 to the Registration
Statement, filed November 2, 1998 and with
Post Effective Amendment No. 31 to the
Registration Statement, filed October 19,
1999 and filed with this Post Effective
Amendment No. 32.
<PAGE>
LIMITED POWER OF ATTORNEY
-------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints Caroline Pearson, Maureen E. Kane, and Philip J. Collora and any of
them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities to sign the Registration Statement of Kemper Portfolios,
a Massachusetts business trust, on Form N-1A under the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended, and any or all
amendments thereto, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully as all intents and purposes as he might or could do
in person, hereby ratifying and confirming all said attorney-in-fact and agent
may lawfully do or cause to be done by virtue hereof.
DATED: June 30, 1999
/s/ Thomas W. Littauer
----------------------
Thomas W. Littauer
Trustee
<PAGE>
LIMITED POWER OF ATTORNEY
-------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints Caroline Pearson, Maureen E. Kane, and Philip J. Collora and any of
them, her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for her and in her name, place and stead, in
any and all capacities to sign the Registration Statement of Kemper Portfolios,
a Massachusetts business trust, on Form N-1A under the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended, and any or all
amendments thereto, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully as all intents and purposes as he might or could do
in person, hereby ratifying and confirming all said attorney-in-fact and agent
may lawfully do or cause to be done by virtue hereof.
DATED: October 26, 1999
/s/ Cornelia M. Small
---------------------
Cornelia M. Small
Trustee
2
<PAGE>
File No. 2-76806
File No. 811-3440
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
FORM N-1A
POST-EFFECTIVE AMENDMENT NO. 32
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 34
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
KEMPER PORTFOLIOS
7
<PAGE>
KEMPER PORTFOLIOS
EXHIBIT INDEX
d(1)
8
Ex d(1)
INVESTMENT MANAGEMENT AGREEMENT
Kemper Portfolios
222 South Riverside Plaza
Chicago, Illinois 60606
September 7, 1998
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Kemper Cash Reserves Fund
Ladies and Gentlemen:
KEMPER PORTFOLIOS (the "Trust") has been established as a Massachusetts business
trust to engage in the business of an investment company. Pursuant to the
Trust's Declaration of Trust, as amended from time-to-time (the "Declaration"),
the Board of Trustees is authorized to issue the Trust's shares of beneficial
interest (the "Shares"), in separate series, or funds. The Board of Trustees has
authorized Kemper Cash Reserves Fund (the "Fund"). Series may be abolished and
dissolved, and additional series established, from time to time by action of the
Trustees.
The Trust, on behalf of the Fund, has selected you to act as the investment
manager of the Fund and to provide certain other services, as more fully set
forth below, and you have indicated that you are willing to act as such
investment manager and to perform such services under the terms and conditions
hereinafter set forth. Accordingly, the Trust on behalf of the Fund agrees with
you as follows:
1. Delivery of Documents. The Trust engages in the business of investing and
reinvesting the assets of the Fund in the manner and in accordance with the
investment objectives, policies and restrictions specified in the currently
effective Prospectus (the "Prospectus") and Statement of Additional Information
(the "SAI") relating to the Fund included in the Trust's Registration Statement
on Form N-1A, as amended from time to time, (the "Registration Statement") filed
by the Trust under the Investment Company Act of 1940, as amended, (the "1940
Act") and the Securities Act of 1933, as amended. Copies of the documents
referred to in the preceding sentence have been furnished to you by the Trust.
The Trust has also furnished you with copies properly certified or authenticated
of each of the following additional documents related to the Trust and the Fund:
(a) The Declaration, as amended to date.
(b) By-Laws of the Trust as in effect on the date hereof (the "By-
Laws").
(c) Resolutions of the Trustees of the Trust and the shareholders
of the Fund selecting you as investment manager and approving
the form of this Agreement.
(d) Establishment and Designation of Series of Shares of
Beneficial Interest relating to the Fund, as applicable.
The Trust will furnish you from time to time with copies, properly certified or
authenticated, of all amendments of or supplements, if any, to the foregoing,
including the Prospectus, the SAI and the Registration Statement.
2. Portfolio Management Services. As manager of the assets of the Fund, you
shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations
<PAGE>
thereunder; and all other applicable federal and state laws and regulations of
which you have knowledge; subject always to policies and instructions adopted by
the Trust's Board of Trustees. In connection therewith, you shall use reasonable
efforts to manage the Fund so that it will qualify as a regulated investment
company under Subchapter M of the Code and regulations issued thereunder. The
Fund shall have the benefit of the investment analysis and research, the review
of current economic conditions and trends and the consideration of long-range
investment policy generally available to your investment advisory clients. In
managing the Fund in accordance with the requirements set forth in this section
2, you shall be entitled to receive and act upon advice of counsel to the Trust.
You shall also make available to the Trust promptly upon request all of the
Fund's investment records and ledgers as are necessary to assist the Trust in
complying with the requirements of the 1940 Act and other applicable laws. To
the extent required by law, you shall furnish to regulatory authorities having
the requisite authority any information or reports in connection with the
services provided pursuant to this Agreement which may be requested in order to
ascertain whether the operations of the Trust are being conducted in a manner
consistent with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
the Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Trust's Board of Trustees periodic reports on the
investment performance of the Fund and on the performance of your obligations
pursuant to this Agreement, and you shall supply such additional reports and
information as the Trust's officers or Board of Trustees shall reasonably
request.
3. Administrative Services. In addition to the portfolio management services
specified above in section 2, you shall furnish at your expense for the use of
the Fund such office space and facilities in the United States as the Fund may
require for its reasonable needs, and you (or one or more of your affiliates
designated by you) shall render to the Trust administrative services on behalf
of the Fund necessary for operating as an open end investment company and not
provided by persons not parties to this Agreement including, but not limited to,
preparing reports to and meeting materials for the Trust's Board of Trustees and
reports and notices to Fund shareholders; supervising, negotiating contractual
arrangements with, to the extent appropriate, and monitoring the performance of,
accounting agents, custodians, depositories, transfer agents and pricing agents,
accountants, attorneys, printers, underwriters, brokers and dealers, insurers
and other persons in any capacity deemed to be necessary or desirable to Fund
operations; preparing and making filings with the Securities and Exchange
Commission (the "SEC") and other regulatory and self-regulatory organizations,
including, but not limited to, preliminary and definitive proxy materials,
post-effective amendments to the Registration Statement, semi-annual reports on
Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act; overseeing the
tabulation of proxies by the Fund's transfer agent; assisting in the preparation
and filing of the Fund's federal, state and local tax returns; preparing and
filing the Fund's federal excise tax return pursuant to Section 4982 of the
Code; providing assistance with investor and public relations matters;
monitoring the valuation of portfolio securities and the calculation of net
asset value; monitoring the registration of Shares of the Fund under applicable
federal and state securities laws; maintaining or causing to be maintained for
the Fund all books, records and reports and any other information required under
the 1940 Act, to the extent that such books, records and reports and other
information are not maintained by the Fund's custodian or other agents of the
Fund; assisting in establishing the accounting policies of the Fund; assisting
in the resolution of accounting issues that may arise with respect to the Fund's
operations and consulting with the Fund's independent accountants, legal counsel
and the Fund's other agents as necessary in connection therewith; establishing
and monitoring the Fund's operating expense budgets; reviewing the Fund's bills;
processing the payment of bills that have been approved by an authorized person;
assisting the Fund in determining the amount of dividends and distributions
available to be paid by the Fund to its shareholders, preparing and arranging
for the printing of dividend notices to shareholders, and providing the transfer
and dividend paying agent, the custodian, and the accounting agent with such
information as is required for such parties to effect the payment of dividends
and distributions; and otherwise assisting the Trust as it may reasonably
request in the conduct of the Fund's business, subject to the direction and
control of the Trust's Board of Trustees. Nothing in this Agreement shall be
deemed to shift to you or to diminish the obligations of any agent of the Fund
or any other person not a party to this
2
<PAGE>
Agreement which is obligated to provide services to the Fund.
4. Allocation of Charges and Expenses. Except as otherwise specifically provided
in this section 4, you shall pay the compensation and expenses of all Trustees,
officers and executive employees of the Trust (including the Fund's share of
payroll taxes) who are affiliated persons of you, and you shall make available,
without expense to the Fund, the services of such of your directors, officers
and employees as may duly be elected officers of the Trust, subject to their
individual consent to serve and to any limitations imposed by law. You shall
provide at your expense the portfolio management services described in section 2
hereof and the administrative services described in section 3 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 4. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Trustees and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Trust; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent for which the
Trust is responsible pursuant to the terms of the Fund Accounting Services
Agreement, custodians, subcustodians, transfer agents, dividend disbursing
agents and registrars; payment for portfolio pricing or valuation services to
pricing agents, accountants, bankers and other specialists, if any; expenses of
preparing share certificates and, except as provided below in this section 4,
other expenses in connection with the issuance, offering, distribution, sale,
redemption or repurchase of securities issued by the Fund; expenses relating to
investor and public relations; expenses and fees of registering or qualifying
Shares of the Fund for sale; interest charges, bond premiums and other insurance
expense; freight, insurance and other charges in connection with the shipment of
the Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Trust business) of Trustees, officers and
employees of the Trust who are not affiliated persons of you; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
of the Fund; expenses of printing and distributing reports, notices and
dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of the Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Trustees and officers of the Trust; and costs of
shareholders' and other meetings.
You shall not be required to pay expenses of any activity which is primarily
intended to result in sales of Shares of the Fund if and to the extent that (i)
such expenses are required to be borne by a principal underwriter which acts as
the distributor of the Fund's Shares pursuant to an underwriting agreement which
provides that the underwriter shall assume some or all of such expenses, or (ii)
the Trust on behalf of the Fund shall have adopted a plan in conformity with
Rule 12b-1 under the 1940 Act providing that the Fund (or some other party)
shall assume some or all of such expenses. You shall be required to pay such of
the foregoing sales expenses as are not required to be paid by the principal
underwriter pursuant to the underwriting agreement or are not permitted to be
paid by the Fund (or some other party) pursuant to such a plan.
5. Management Fee. For all services to be rendered, payments to be made and
costs to be assumed by you as provided in sections 2, 3, and 4 hereof, the Trust
on behalf of the Fund shall pay you in United States Dollars on the last day of
each month the unpaid balance of a fee equal to the excess of (a) 1/12 of .40 of
1 percent of the average daily net assets as defined below of the Fund for such
month; provided that, for any calendar month during which the average of such
values exceeds $250,000,000 the fee payable for that month based on the portion
of the average of such values in excess of $250,000,000 shall be 1/12 of .38 of
1 percent of such portion; provided that, for any calendar month during which
the average of such values exceeds $1,000,000,000, the fee payable for that
month based on the portion of the average of such values in excess of
$1,000,000,000 shall be 1/12 of .35 of 1 percent of such portion; provided that,
for any calendar month during which the average of such values exceeds
$2,500,000,000, the fee payable for that month based on the portion of the
average of such values in excess of $2,500,000,000 shall be 1/12 of .32 of 1
percent of such portion; provided that, for any calendar month during which the
average of such values exceeds $5,000,000,000, the fee payable for that month
based on the portion of
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the average of such values in excess of $5,000,000,000 shall be 1/12 of .30 of 1
percent of such portion; provided that, for any calendar month during which the
average of such values exceeds $7,500,000,000, the fee payable for that month
based on the portion of the average of such values in excess of $7,500,000,000
shall be 1/12 of .28 of 1 percent of such portion; provided that, for any
calendar month during which the average of such values exceeds 10,000,000,000,
the fee payable for that month based on the portion of the average of such
values in excess of $10,000,000,000 shall be 1/12 of .26 of 1 percent of such
portion; and provided that, for any calendar month during which the average of
such values exceeds 12,500,000,000, the fee payable for that month based on the
portion of the average of such values in excess of $12,500,000,000 shall be 1/12
of .25 of 1 percent of such portion; over (b) any compensation waived by you
from time to time (as more fully described below). You shall be entitled to
receive during any month such interim payments of your fee hereunder as you
shall request, provided that no such payment shall exceed 75 percent of the
amount of your fee then accrued on the books of the Fund and unpaid.
The "average daily net assets" of the Fund shall mean the average of the values
placed on the Fund's net assets as of 4:00 p.m. (New York time) on each day on
which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of the Fund shall always be determined
pursuant to the applicable provisions of the Declaration and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 5, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of 4:00 p.m. (New York time), or as of such other time as the value of
the net assets of the Fund's portfolio may be lawfully determined on that day.
If the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of this
section 5.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Fund's expenses, as if such waiver
or limitation were fully set forth herein.
6. Avoidance of Inconsistent Position; Services Not Exclusive. In connection
with purchases or sales of portfolio securities and other investments for the
account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
Your services to the Fund pursuant to this Agreement are not to be deemed to be
exclusive and it is understood that you may render investment advice, management
and services to others. In acting under this Agreement, you shall be an
independent contractor and not an agent of the Trust. Whenever the Fund and one
or more other accounts or investment companies advised by you have available
funds for investment, investments suitable and appropriate for each shall be
allocated in accordance with procedures believed by you to be equitable to each
entity. Similarly, opportunities to sell securities shall be allocated in a
manner believed by you to be equitable. The Fund recognizes that in some cases
this procedure may adversely affect the size of the position that may be
acquired or disposed of for the Fund.
7. Limitation of Liability of Manager. As an inducement to your undertaking to
render services pursuant to this Agreement, the Trust agrees that you shall not
be liable under this Agreement for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the matters to which this
Agreement relates, provided that nothing in this Agreement shall be deemed to
protect or purport to protect you against any liability to the Trust, the Fund
or its shareholders to which you would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of your duties, or
by reason of your reckless disregard of your obligations and duties hereunder.
8. Duration and Termination of This Agreement. This Agreement shall remain in
force until September 30,
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1999, and continue in force from year to year thereafter, but only so long as
such continuance is specifically approved at least annually (a) by the vote of a
majority of the Trustees who are not parties to this Agreement or interested
persons of any party to this Agreement, cast in person at a meeting called for
the purpose of voting on such approval, and (b) by the Trustees of the Trust, or
by the vote of a majority of the outstanding voting securities of the Fund. The
aforesaid requirement that continuance of this Agreement be "specifically
approved at least annually" shall be construed in a manner consistent with the
1940 Act and the rules and regulations thereunder and any applicable SEC
exemptive order therefrom.
This Agreement may be terminated with respect to the Fund at any time, without
the payment of any penalty, by the vote of a majority of the outstanding voting
securities of the Fund or by the Trust's Board of Trustees on 60 days' written
notice to you, or by you on 60 days' written notice to the Trust. This Agreement
shall terminate automatically in the event of its assignment.
This Agreement may be terminated with respect to the Fund at any time without
the payment of any penalty by the Board of Trustees or by vote of a majority of
the outstanding voting securities of the Fund in the event that it shall have
been established by a court of competent jurisdiction that you or any of your
officers or directors has taken any action which results in a breach of your
covenants set forth herein.
9. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
10. Limitation of Liability for Claims. The Declaration, a copy of which,
together with all amendments thereto, is on file in the Office of the Secretary
of the Commonwealth of Massachusetts, provides that the name "Kemper Portfolios"
refers to the Trustees under the Declaration collectively as Trustees and not as
individuals or personally, and that no shareholder of the Fund, or Trustee,
officer, employee or agent of the Trust, shall be subject to claims against or
obligations of the Trust or of the Fund to any extent whatsoever, but that the
Trust estate only shall be liable.
You are hereby expressly put on notice of the limitation of liability as set
forth in the Declaration and you agree that the obligations assumed by the Trust
on behalf of the Fund pursuant to this Agreement shall be limited in all cases
to the Fund and its assets, and you shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Fund or any other
series of the Trust, or from any Trustee, officer, employee or agent of the
Trust. You understand that the rights and obligations of each Fund, or series,
under the Declaration are separate and distinct from those of any and all other
series.
11. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
In interpreting the provisions of this Agreement, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner which would cause the
Fund to fail to comply with the requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Trust on behalf of the Fund.
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If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
KEMPER PORTFOLIOS, on behalf of
Kemper Cash Reserves Fund
By: /s/ Mark Casady
-----------------------------
President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By: /s/ Stephen R. Beckwith
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