KEMPER PORTFOLIOS
485APOS, 2000-12-01
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        Filed electronically with the Securities and Exchange Commission
                              on December 1, 2000

                                                               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. 37                   / X /
                                                      --
                                     and/or
                        REGISTRATION STATEMENT UNDER THE
                         INVESTMENT COMPANY ACT OF 1940                    /___/

                                Amendment No. 39                           / 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 (date) pursuant to paragraph (b)
/ X /         On February 1, 2001 pursuant to paragraph (a) (1)
/___/         On (date) pursuant to paragraph (a) (3)
/___/         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 PORTFOLIOS

                            Kemper Cash Reserves Fund


                                        1

<PAGE>

                                                                       LONG-TERM
                                                                       INVESTING
                                                                            IN A
                                                                      SHORT-TERM
                                                                      WORLD (SM)

     February 1, 2001

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

 4  Kemper Cash Reserves Fund        14  Choosing A Share Class

11  Other Policies                   18  How To Buy Shares

12  Financial Highlights             19  How To Exchange Or Sell Shares

                                     20  Policies You Should Know About

                                     25  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 you could lose money.

<PAGE>

TICKER SYMBOLS      CLASS: A) _____  B) _____  C)_____











Kemper
Cash Reserves Fund



FUND GOAL The fund seeks maximum current income to the extent consistent with
stability of principal.

                                       4
<PAGE>

--------------------------------------------------------------------------------
The Fund's Main Strategy

The fund pursues its goal by investing exclusively in high quality short-term
securities, as well as repurchase agreements.

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 its net assets in obligations of U.S. banks and domestic branches of
foreign banks. However, everything the fund buys must meet the rules for money
market fund investments (see below).

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.


---[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

                                       5
<PAGE>

--------------------------------------------------------------------------------
The Main 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 yield tends 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 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 guarantors to raise their credit quality
     could fall in price or go into default if the financial condition of the
     guarantor deteriorates

o    over time, inflation may erode the real value of an investment in the
     portfolio.

THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.

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

This fund may be of interest to investors who want a versatile, broadly
diversified money fund.

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

                                       6
<PAGE>

--------------------------------------------------------------------------------
Performance

The bar chart 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
reflect sales loads; if it did, returns would be lower. The table shows how the
fund's returns over different periods average out.

All figures on this page assume reinvestment of dividends and distributions. As
always, past performance is no guarantee of future results.

--------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year                    Class B Shares
--------------------------------------------------------------------------------

THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE

BAR CHART DATA:



--------------------------------------------------------------------------------
  1991    1992    1993   1994    1995    1996    1997    1998   1999     2000
--------------------------------------------------------------------------------

Best quarter: ____%, Q_ 19__          YTD return as of [FISCAL YEAR END]: ___%

Worst quarter: ____%, Q_ 19__

--------------------------------------------------------------------------------
Average Annual Total Returns (as of 12/31/2000)
--------------------------------------------------------------------------------

                                                                  Since
                             Since       Since        Since       --
                             12/31/9_    12/31/9_     12/31/__    Life of
                             1 Year      5 Years      10 Years    Classes
------------------------------------------------------------------------------
Class A                          %           %            %           %
------------------------------------------------------------------------------
Class B                                 --           --          --
------------------------------------------------------------------------------
Class C                                 --           --          --
------------------------------------------------------------------------------

To obtain the Fund's current 7-day yield, call (800) 621-1048

                                       7
<PAGE>

--------------------------------------------------------------------------------
How Much Investors Pay

This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.

------------------------------------------------------------------------------
Fee Table                                    Class A    Class B    Class C
------------------------------------------------------------------------------

Shareholder Fees, paid directly from your investment
------------------------------------------------------------------------------
Maximum Sales Charge (Load) On Purchases
(as % of offering price)                     None*      None       None
------------------------------------------------------------------------------
Maximum Contingent Deferred Sales Charge
(Load) (as % of redemption proceeds)         None[*]    4.00%      1.00%
------------------------------------------------------------------------------

Annual Operating Expenses, deducted from fund assets
------------------------------------------------------------------------------
Management Fee                               %                %          %
------------------------------------------------------------------------------
Distribution (12b-1) Fee                     None
------------------------------------------------------------------------------
Other Expenses**
------------------------------------------------------------------------------
Total Annual Operating Expenses[***]
------------------------------------------------------------------------------

*    The applicable sales charge applies for exchanges into Class A shares of
     other Kemper funds.

**   Includes costs of shareholder servicing, custody, accounting services and
     similar expenses, which may vary with fund size and other factors. "Other
     Expenses" are restated to reflect changes in certain administrative and
     blue sky fees.

                                       8
<PAGE>

Based on the figures above, this example is designed to help you compare the
expenses of each share class to those of other funds. The example assumes
operating expenses remain the same and that you invested $10,000, earned 5%
annual returns and reinvested all dividends and distributions. This is only an
example; actual expenses will be different.

------------------------------------------------------------------------------
Example                        1 Year      3 Years      5 Years    10 Years
------------------------------------------------------------------------------

Expenses, assuming you sold your shares at the end of each period
------------------------------------------------------------------------------
Class A shares                                 $            $            $
------------------------------------------------------------------------------
Class B shares
------------------------------------------------------------------------------
Class C shares
------------------------------------------------------------------------------

Expenses, assuming you kept your shares
------------------------------------------------------------------------------
Class A shares                                 $            $            $
------------------------------------------------------------------------------
Class B shares
------------------------------------------------------------------------------
Class C shares
------------------------------------------------------------------------------


                                       9
<PAGE>
--------------------------------------------------------------------------------
THE INVESTMENT ADVISOR

The fund's investment advisor is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY. Scudder Kemper has more than 80 years of experience
managing mutual funds and currently has more than $290 billion in assets under
management.

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 __% of its average daily net assets.





---[ICON]-----------------------------------------------------------------------
          FUND MANAGERS

Below are the people who handle the fund's day-to-day management:

  Frank Rachwalski, Jr.       Jerri L. Cohen
    o Began investment          o Began investment
      career in 1973              career in 1992
    o Joined the advisor in     o Joined the advisor
      1973                        in 1981
    o Joined the fund team      o Joined the fund team
      in 1984                     in 1998

THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.

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

The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.

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

                                       10
<PAGE>

--------------------------------------------------------------------------------
Other Policies and Risks

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    Although major changes tend to be infrequent, the fund's Board could change
     the fund's investment goal without seeking shareholder approval.

o    The fund's investment advisor establishes a security's credit grate at the
     time it buys securities, using independent ratings or, for unrated
     securities, its own credit determination. 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 interest

Keep in mind that there is no assurance that any mutual fund will achieve its
goal.

This prospectus doesn't tell you about every policy or risk of investing in a
fund. For more information, you may want to request a copy of the SAI (the back
cover has additional information on how to do this).

                                       11
<PAGE>

--------------------------------------------------------------------------------
Financial Highlights

These tables are designed to help you understand each fund's financial
performance in recent years. The figures in the first part of each table are for
a single share. The total return figures represent the percentage that an
investor in a particular fund would have earned (or lost), assuming all
dividends and distributions were reinvested. This information has been audited
by Ernst & Young LLP, whose report, along with each fund's financial statements,
is included in that fund's annual report (see "Shareholder reports" on the back
cover).

                                       12
<PAGE>

Investing In The Funds

The following pages tell you about many of the services, choices and benefits of
being a Kemper Funds shareholder. You'll also find information on how to check
the status of your account using the method that's most convenient for you.

You can find out more about the topics covered here by speaking with your
financial representative or a representative of your workplace retirement plan
or other investment provider.

                                       13
<PAGE>

--------------------------------------------------------------------------------
Choosing A Share Class

In this prospectus, there are three share classes for each fund. Each class has
its own fees and expenses, offering you a choice of cost structures.

Before you invest, take a moment to look over the characteristics of each share
class, so that you can be sure to choose the class that's right for you. You may
want to ask your financial representative to help you with this decision.

We describe each share class in detail on the following pages. But first, you
may want to look at the table below, which gives you a brief comparison of the
main features of each class.

Before you invest, take a moment to look over the characteristics of each share
class, so that you can be sure to choose the class that's right for you. You may
want to ask your financial representative to help you with this decision.

We describe each share class in detail on the following pages. But first, you
may want to look at the table below, which gives you a brief comparison of the
main features of each class.

--------------------------------------------------------------------------------
Classes and features                        Points to help you compare
--------------------------------------------------------------------------------

Class A

o  No charges when you buy shares           o  Total annual operating
                                               expenses are lower than those
o  In most cases, no sales charge when         for Class B or Class C  shares
   you sell

o  No distribution fee

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

Class B

o  No charges when you buy shares           o  The deferred sales charge
                                               rate falls to zero after six
o  Deferred sales charge of up to 4.00%,       years
   charged when you sell shares you bought
   within the last six years                o  Shares automatically convert
                                               to Class A after six years,
o  0.75% distribution fee                      which means lower annual
                                               expenses going forward

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

Class C

o  No charges when you buy shares           o  The deferred sales charge
                                               rate is lower, but your shares
o  Deferred sales charge of 1.00%, charged     never convert to Class A, so
   when you sell shares you bought             annual expenses remain higher
   within the last year

o  0.75% distribution fee

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

                                       14
<PAGE>

Class A shares

Class A shares have no sales charges when you buy shares.

If you later exchange Class A Shares of another Kemper fund, you'll be charged
any applicable sales charges. However, if you bought shares of this fund by
exchange from a Kemper fund where you already paid a sales charge, you will be
credited for the sales charges you paid if you later exchange back into a fund
with a Class A sales charge.

If you've invested $1 million or more in another Kemper Fund, either as a lump
sum or through one of the sales charge reduction features described in that
fund's prospectus, and you exchange into Class A Shares of this fund, you may be
charged a 1% contingent deferred sales charge if you redeem shares within one
year of your initial purchase of the other Kemper fund. If you redeem shares
within two years of your initial purchase of the other Kemper fund, you may be
charged a 0.50% contingent deferred sales charge. This CDSC is waived under
certain circumstances (see "Policies You Should Know About"). Your financial
representative or Kemper can answer your questions and help you determine if
you're eligible.

THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.

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

Class A shares may make sense for long-term investors, especially those who are
eligible for reduced sales charges for other Kemper funds.

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

                                       15
<PAGE>

Class B shares

With Class B shares, you pay no up-front sales charges to the fund. Class B
shares do have a 12b-1 plan, under which a distribution fee of 0.75% is deducted
from fund assets each year. This means the annual expenses for Class B shares
are somewhat higher (and their performance correspondingly lower) compared to
Class A shares, which don't have a 12b-1 fee. After six years, Class B shares
automatically convert to Class A, which has the [net] effect of lowering the
annual expenses from the seventh year on.

Class B shares have a 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 year and later  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 make sense for long-term investors who would prefer to see
all of their investment go to work right away, and can accept somewhat higher
annual expenses in exchange.

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

                                       16
<PAGE>

Class C shares

Like Class B shares, Class C shares have no up-front sales charges and have a
12b-1 plan under which a distribution fee of 0.75% is deducted from fund assets
each year. Because of this fee, the annual expenses for Class C shares are
similar to those of Class B shares, but higher than those for Class A shares
(and the performance of Class C shares is correspondingly lower than that of
Class A). However, unlike Class A shares, your entire investment goes to work
immediately.

Unlike Class B shares, Class C shares do NOT automatically convert to Class A
after six years, so they continue to have higher annual expenses.

Class C shares have a CDSC, but only on shares you sell within one year of
buying them:

Year after you
bought shares          CDSC on shares you sell
---------------------------------------------------------
First year             1.00%
---------------------------------------------------------
Second year and later  None
---------------------------------------------------------

This CDSC is waived under certain circumstances (see "Policies You Should Know
About"). Your financial representative or Kemper can answer your questions and
help you determine if you're eligible.

While Class C shares don't have any front-end sales charges, their higher annual
expenses (due to 12b-1 fees) mean that over the years you could end up paying
more than the equivalent of the maximum allowable front-end sales charge.

THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.

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

Class C shares may appeal to investors who plan to sell some or all shares
within six years of buying them, or who aren't certain of their investment time
horizon.

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

                                       17
<PAGE>

--------------------------------------------------------------------------------
How To Buy Shares

Once you've chosen a share class, use these instructions to make investments.
Make out any checks to "Kemper Funds."

------------------------------------------------------------------------------
First investment                            Additional investments
------------------------------------------------------------------------------

$1,000 or more for regular accounts         $100 or more for regular accounts

$250 or more for IRAs                       $50 or more for IRAs

$50 or more with an Automatic Investment    $50 or more with an Automatic
Plan                                        Investment Plan, Payroll
                                            Deduction or Direct Deposit
------------------------------------------------------------------------------

Through a financial representative          o  Contact your representative
                                               using the method that's most
o  Contact your representative using the       convenient for you
   method that's most convenient for you
------------------------------------------------------------------------------

By mail or express mail (see below)

o  Fill out and sign an application         o  Send a check and a Kemper
                                               investment slip to us at the
o  Send it to us at the appropriate            appropriate address below
   address, along with an investment check
                                            o  If you don't have an investment
                                               slip, simply include a letter
                                               with your name, account number,
                                               the full name of the fund and the
                                               share class and your investment
                                               instructions
------------------------------------------------------------------------------

By wire

o  Call (800) 621-1048 for instructions     o  Call (800) 621-1048 for
                                               instructions
------------------------------------------------------------------------------

By phone

--                                          o  Call (800) 621-1048 for
                                               instructions
------------------------------------------------------------------------------

With an automatic investment plan

                                            o  To set up regular
--                                             investments, call (800) 621-1048
------------------------------------------------------------------------------

On the Internet

o  Follow the instructions at               o  Follow the instructions at
   www.kemper.com                              www.kemper.com
------------------------------------------------------------------------------



Regular mail: Kemper Funds, PO Box 219415, Kansas City, MO 64121-9153

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)


                                       18
<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 22
----------------------------------------------------------------------------------------

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         o the fund, class and account number
  you're exchanging out of                     from which you want to sell shares

o the dollar amount or number of             o the dollar amount or number of shares
  shares you want to exchange                  you want to sell

                                             o your name(s), signature(s) and
o the name and class of the fund you           address, as they appear on your
  want to exchange into                        account

                                             o a daytime telephone number
o your name(s), signature(s) and address,
  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>


                                       19
<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 each day 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 3 p.m. Central time, but sometimes earlier,
as in the case of scheduled half-day trading or unscheduled suspensions of
trading).

You can place an order to buy or sell shares at any time. Once your order is
received by Kemper Service Company, and they have determined that it is a "good
order," it will be processed at the next share price calculated.

Because orders placed through investment providers must be forwarded to Kemper
Service Company before they can be processed, you'll need to allow extra time. A
representative of your investment provider should be able to tell you when your
order will be processed.

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.

                                       20
<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 they can only be sold
by mailing them in, and if they're ever lost they're difficult and expensive to
replace.

When you call us to sell shares, we may record the call, ask you for certain
information or take other steps designed to prevent fraudulent orders. It's
important to understand that, with respect to certain pre-authorized
transactions, as long as we take reasonable steps to ensure that an order
appears genuine, we are not responsible for any losses that may occur.

When you ask us to send or receive a wire, please note that while we don't
charge a fee to send or receive wires, it's possible that your bank may do so.
Wire transactions are completed within 24 hours. The funds can only send or
accept wires of $1,000 or more.

Exchanges among Kemper funds are an option for most shareholders. Exchanges are
a shareholder privilege, not a right: we may reject any exchange order,
particularly when there appears to be a pattern of "market timing" or other
frequent purchases and sales. We may also reject or limit purchase orders, for
these or other reasons.

THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.

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

The Kemper Web site can be a valuable resource for shareholders with Internet
access. Go to www. kemper.com to get up-to-date information, review balances or
even place orders for exchanges.

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

                                       21
<PAGE>

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,
banks, savings institutions and credit unions. Note that you can't get a
signature guarantee from a notary public.

When you sell shares that have a CDSC, we calculate the CDSC as a percentage of
what you paid for the shares or what you are selling them for -- whichever
results in the lowest charge to you. In processing orders to sell shares, we
turn to the shares with the lowest CDSC first. Exchanges from one Kemper fund
into another don't affect CDSCs: for each investment you make, the date you
first bought Kemper shares is the date we use to calculate a CDSC on that
particular investment.

There are certain cases in which you may be exempt from a CDSC. These include:

o    the death or disability of an account owner (including a joint owner)

o    withdrawals made through a systematic withdrawal plan

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

o    for Class A shares purchased through the Large Order NAV Purchase
     Privilege, redemption of shares whose dealer of record at the time of the
     investment notifies Kemper Distributors that the dealer waives the
     applicable commission

THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.

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

If you ever have difficulty placing an order by phone or fax, you can always
send us your order in writing.

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

                                       22
<PAGE>

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. 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 processed (not when it is received), although it could be delayed
for up to seven days. There are also two circumstances when it could be longer:
when you are selling shares you bought recently by check and that check hasn't
cleared yet (maximum delay: 10 days) or when unusual circumstances prompt the
SEC to allow further delays. Certain expedited redemption processes may also be
delayed when you are selling recently purchased shares.

How the fund calculates share price

For each share class, 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

                                       23
<PAGE>

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 and certain investors
in Class A Shares, 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.

In valuing securities, we typically use amortized cost (the method used by most
money market funds).

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 you 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    charge you $9 each calendar quarter if your account balance is below $1,000
     for the entire quarter; this policy doesn't apply to most retirement
     accounts or if you have an automatic investment plan

o    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    pay you for shares you sell by "redeeming in kind," that is, by giving you
     marketable securities (which typically will involve brokerage costs for you
     to liquidate) rather than cash

o    change, add or withdraw various services, fees and account policies (for
     example, we may change or terminate the exchange privilege at any time)

                                       24
<PAGE>

--------------------------------------------------------------------------------
Understanding Distributions and Taxes

By law, a mutual fund is required to pass through to its shareholders virtually
all of its net earnings. A fund can earn money in two ways: by receiving
interest, dividends or other income from securities it holds, and by selling
securities for more than it paid for them. (A fund's earnings are separate from
any gains or losses stemming from your own 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 fund may make
additional distributions for tax purposes if necessary.

You can choose how to receive your dividends and distributions. You can have
them all automatically reinvested in fund shares or all 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 FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.

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

Because each shareholder's tax situation is unique, it's always a good idea to
ask your tax professional about the tax consequences of your investments,
including any state and local tax consequences.

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



                                       25
<PAGE>

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 in that year, even though you may not receive the money until the
following January.

                                       26
<PAGE>

--------------------------------------------------------------------------------
To Get More Information

Shareholder reports -- These include commentary from each fund's management team
about recent market conditions and the effects of a fund's strategies on its
performance. For each fund, they also have detailed performance figures, a list
of everything the fund owns, and the fund's financial statements. Shareholders
get these reports automatically. To reduce costs, we may mail one copy per
household. For more copies, call (800) 621-1048.

Statement of Additional Information (SAI) -- This tells you more about each
fund's features and policies, including additional risk information. The SAI is
incorporated by reference into this document (meaning that it's legally part of
this prospectus).

If you'd like to ask for copies of these documents, or if you're a shareholder
and have questions, please contact Kemper or the SEC (see below). Materials you
get from Kemper are free; those from the SEC involve a copying fee. If you like,
you can look over these materials in person at the SEC's Public Reference Room
in Washington, DC.

SEC
450 Fifth Street, N.W.
Washington, DC 20549-6009
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 Numbers

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

                            Kemper Cash Reserves Fund




                          Class A, Class B and Class C












                       STATEMENT OF ADDITIONAL INFORMATION

                                February 1, 2000


         This Statement of Additional Information is not a prospectus and should
be read in conjunction with the prospectus for the Fund, as amended from time to
time,  a copy of which  may be  obtained  without  charge by  contacting  Kemper
Distributors,   Inc.,  222  South  Riverside  Plaza,  Chicago,  Illinois  60606,
1-800-621-1048,  or from  the firm  from  which  this  Statement  of  Additional
Information was obtained.

         The Annual Report to Shareholders of the Fund, dated September 30, 2000
accompanies  this Statement of Additional  Information.  It is  incorporated  by
reference  and is  hereby  deemed  to be part of this  Statement  of  Additional
Information.


         This Statement of Additional  Information is  incorporated by reference
into the prospectus.




<PAGE>




Table of Contents to be added.





                                       2
<PAGE>

                            Policies and Techniques

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.

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.

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  typically  invests more than 25% of its net assets in  obligations of U.S.
banks and domestic branches of foreign banks. As a result,  the Fund may be more
adversely  affected  by  changes  in market  or  economic  conditions  and other
circumstances  affecting  the  banking  industry  than it would be if the Fund's
assets were not so concentrated.

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

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.



                                       3
<PAGE>

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. 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.

Additional Information about Investment Techniques

The  following  section  includes  disclosure  about  investment  practices  and
techniques which may be utilized by the Fund. Specific  limitations and policies
regarding the use of these techniques may be found in the "Investment  Objective
and  Policies"  section,  as  well  as  in  "Investment   Restrictions"   below.
Descriptions  in  this  Statement  of  Additional  Information  of a  particular
investment  practice  or  technique  in which the Fund may engage or a financial
instrument  which the Fund may  purchase  are meant to describe  the spectrum of
investments that Scudder Kemper Investments, Inc. (the "Investment Manager"), in
its  discretion,  might,  but is not  required  to, use in  managing  the Fund's
portfolio  assets.  The Investment  Manager may, in its discretion,  at any time
employ such practice,  technique or instrument for one or more funds but not for
all funds  advised by it.  Furthermore,  it is possible  that  certain  types of
financial  instruments  or  investment  techniques  described  herein may not be
available,  permissible,  economically  feasible or effective for their intended
purposes in all markets. Certain practices,  techniques,  or instruments may not
be principal activities of the Fund but, to the extent employed, could from time
to time have a material impact on the Fund's performance.

Interfund Borrowing and Lending Program.  The Fund has received exemptive relief
from the SEC which  permits  the Fund to  participate  in an  interfund  lending
program among certain investment companies advised by the Manager. The interfund
lending  program  allows the  participating  funds to borrow money from and loan
money to each other for temporary or emergency purposes.  The program is subject
to a number of conditions designed to ensure fair and equitable treatment of all
participating  funds,  including  the  following:  (1) no fund may borrow  money
through the program  unless it receives a more  favorable  interest  rate than a
rate  approximating  the  lowest  interest  rate at which  bank  loans  would be
available to any of the participating  funds under a loan agreement;  and (2) no
fund may lend money  through  the program  unless it  receives a more  favorable
return than that available from an investment in repurchase  agreements  and, to
the extent applicable, money market cash sweep arrangements. In addition, a fund
may participate in the program only if and to the extent that such participation
is consistent with the fund's investment  objectives and policies (for instance,
money market  funds would  normally  participate  only as lenders and tax exempt
funds only as borrowers).  Interfund loans and borrowings may extend  overnight,
but could  have a maximum  duration  of seven  days.  Loans may be called on one
day's notice. A fund may have to borrow from a bank at a higher interest rate if
an interfund loan is called or not renewed.  Any delay in repayment to a lending
fund could result in a lost  investment  opportunity  or additional  costs.  The
program is subject to the  oversight  and  periodic  review of the Boards of the
participating  funds.  To the extent the Fund is actually  engaged in  borrowing
through the interfund lending program,  the Fund, as a matter of non-fundamental
policy,  may not borrow for other than temporary or emergency  purposes (and not
for  leveraging),  except  that  the  Fund  may  engage  in  reverse  repurchase
agreements and dollar rolls for any purpose.

Investment of  Uninvested  Cash  Balances.  The Fund may have cash balances that
have not been invested in portfolio securities  ("Uninvested Cash").  Uninvested
Cash may result  from a variety of  sources,  including  dividends  or  interest
received from portfolio securities, unsettled securities transactions,  reserves
held for  investment  strategy  purposes,  scheduled  maturity  of  investments,
liquidation  of  investment  securities  to  meet  anticipated  redemptions  and
dividend payments, and new cash received from investors.  Uninvested Cash may be
invested  directly  in  money  market   instruments  or  other  short-term  debt
obligations.  Pursuant to an Exemptive Order issued by the SEC, the Fund may use
Uninvested  Cash to purchase  shares of affiliated  funds including money market
funds,  short-term bond funds and Scudder Cash Management  Investment  Trust, or
one or more future entities for which Scudder Kemper Investments acts as trustee
or investment  advisor that operate as cash management  investment  vehicles and
that are excluded from the definition of investment  company pursuant to section
3(c)(1) or 3(c)(7) of the  Investment  Company  Act of 1940  (collectively,  the
"Central  Funds")  in excess  of the  limitations  of  Section  12(d)(1)  of the


                                       4
<PAGE>

Investment  Company Act.  Investment  by the Fund in shares of the Central Funds
will be in accordance with the Fund's  investment  policies and  restrictions as
set forth in its registration statement.

Certain of the  Central  Funds  comply  with rule 2a-7 under the Act.  The other
Central Funds are or will be short-term  bond funds that invest in  fixed-income
securities  and maintain a dollar  weighted  average  maturity of three years or
less.  Each of the  Central  Funds will be managed  specifically  to  maintain a
highly liquid  portfolio,  and access to them will enhance the Fund's ability to
manage Uninvested Cash.

The Fund will invest  Uninvested  Cash in Central  Funds only to the extent that
the Fund's aggregate  investment in the Central Funds does not exceed 25% of its
total  assets in shares of the Central  Funds.  Purchase  and sales of shares of
Central Funds are made at net asset value.

Lending of  Portfolio  Securities.  The Fund may seek to increase  its income by
lending   portfolio   securities.   Such   loans  may  be  made  to   registered
broker/dealers or other financial  institutions,  and are required to be secured
continuously  by  collateral in cash or liquid  assets,  maintained on a current
basis at an amount at least equal to the market  value and  accrued  interest of
the  securities  loaned.  The Fund has the right to call a loan and  obtain  the
securities loaned on five days' notice or, in connection with securities trading
on foreign  markets,  within such longer period of time which coincides with the
normal  settlement  period for  purchases  and sales of such  securities in such
foreign  markets.  During the existence of a loan, the Fund continues to receive
the equivalent of any distributions  paid by the issuer on the securities loaned
and also receives compensation based on investment of the collateral.  The risks
in lending securities,  as with other extensions of secured credit, consist of a
possible  delay in recovery  and a loss of rights in the  collateral  should the
borrower of the  securities  fail  financially.  Loans may be made only to firms
deemed by the  Investment  Manager to be of good  standing  and will not be made
unless,  in the judgment of the  Investment  Manager,  the  consideration  to be
earned from such loans would justify the risk.

Repurchase Agreements.  The Fund may invest in repurchase agreements pursuant to
its  investment  guidelines.  In  a  repurchase  agreement,  the  Fund  acquires
ownership of a security and  simultaneously  commits to resell that  security to
the seller, typically a bank or broker/dealer.

         A repurchase  agreement provides a means for the Fund to earn income on
funds for periods as short as overnight.  It is an  arrangement  under which the
purchaser  (i.e.,  the Fund) acquires a security  ("Obligation")  and the seller
agrees,  at the time of sale, to repurchase  the  Obligation at a specified time
and price. Securities subject to a repurchase agreement are held in a segregated
account and, as described in more detail below,  the value of such securities is
kept at least equal to the  repurchase  price on a daily basis.  The  repurchase
price may be higher than the purchase price,  the difference being income to the
Fund, or the purchase and repurchase  prices may be the same, with interest at a
stated rate due to the Fund together with the repurchase  price upon repurchase.
In either case,  the income to the Fund is unrelated to the interest rate on the
Obligation  itself.  Obligations will be held by the custodian or in the Federal
Reserve Book Entry System.


         In  the  event  of  the   commencement   of  bankruptcy  or  insolvency
proceedings  with respect to the seller of the Obligation  before  repurchase of
the Obligation  under a repurchase  agreement,  the Fund may encounter delay and
incur costs before being able to sell the  security.  Delays may involve loss of
interest  or  decline in price of the  Obligation.  As with any  unsecured  debt
Obligation  purchased for the Fund, the  Investment  Manager seeks to reduce the
risk of loss through repurchase  agreements by analyzing the creditworthiness of
the obligor,  in this case the seller of the Obligation.  Apart from the risk of
bankruptcy or insolvency proceedings, there is also the risk that the seller may
fail to repurchase  the  Obligation,  in which case the Fund may incur a loss if
the  proceeds  to the  Fund of the  sale to a third  party  are  less  than  the
repurchase  price.  However,  if the market  value  (including  interest) of the
Obligation subject to the repurchase  agreement becomes less than the repurchase
price (including interest), the Fund will direct the seller of the Obligation to
deliver additional  securities so that the market value


                                       5
<PAGE>

(including  interest) of all securities subject to the repurchase agreement will
equal or exceed the repurchase price.


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 Fund's Board , if
a particular  investment  in Section 4(2) paper is not  determined to be liquid,
that  investment  will be included within the limitation of the Fund on illiquid
securities.  The Investment Manager monitors the liquidity of its investments in
Section 4(2) paper on a continuing basis.

Investment Restrictions

The following restrictions may not be changed with respect to a Fund without the
approval of a majority of the outstanding  voting securities of such Fund which,
under the 1940 Act and the rules  thereunder  and as used in this  Statement  of
Additional  Information,  means the lesser of (i) 67% of the shares of such Fund
present at a meeting if the holders of more than 50% of the  outstanding  shares
of such Fund are  present  in  person or by proxy,  or (ii) more than 50% of the
outstanding shares of such Fund.

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

In addition, as a matter of fundamental policy, the Fund will not:

         (1)      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;

         (2)      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;

         (3)      purchase  physical   commodities  or  contracts   relating  to
                  physical commodities;

         (4)      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;

         (5)      engage in the business of  underwriting  securities  issued by
                  others, except to the extent that the Fund may be deemed to be
                  an underwriter in connection with the disposition of portfolio
                  securities;

         (6)      purchase  or sell real  estate,  which  term does not  include
                  securities of 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; and

         (7)      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.

                                       6
<PAGE>

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.

The Fund has adopted the following  non-fundamental  restrictions,  which may be
changed by the Board without shareholder approval. The Fund may not:


         (1)  borrow  money in an amount  greater  than 5% of its total  assets,
         except for temporary or emergency purposes;


         (2) lend  portfolio  securities in an amount  greater than one third of
         its total assets; and

         (3) Invest more than 10% of net assets in illiquid securities.

If a percentage  restriction  is adhered to at the time of  investment,  a later
increase or  decrease  beyond the  specified  limit  resulting  from a change in
values or net assets will not be considered a violation.

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.

Net Asset Value

The net  asset  value  per share  for each  class of the Fund is  determined  by
Scudder Fund Accounting Corporation,  a subsidiary of the Investment Manager, on
each day the New York Stock Exchange (the  "Exchange") is open for trading.  The
net asset value per share of the Fund is determined  at 5:00 p.m.  Eastern time.
The Exchange normally is closed on the following national  holidays:  New Year's
Day, Dr. Martin Luther King,  Jr. Day,  Presidents'  Day, Good Friday,  Memorial
Day,  Independence  Day,  Labor  Day,  Thanksgiving  and  Christmas,  and on the
preceding  Friday or  subsequent  Monday when one of these  holidays  falls on a
Saturday or Sunday, respectively. The net asset value per share of each class is
computed by dividing  the value of the total assets  attributable  to a specific
class,  less all liabilities  attributable to that class, by the total number of
outstanding  shares  of  that  class.  The  valuation  of the  Fund's  portfolio
securities is based upon their  amortized  cost which does not take into account
unrealized securities gains or losses. This method involves initially valuing an
instrument  at its cost and  thereafter  amortizing  to maturity any discount or
premium,  regardless of the impact of  fluctuating  interest rates on the market
value of the instrument.  While this method provides certainty in valuation,  it
may result in periods  during which value,  as determined by amortized  cost, is
higher or lower than the price the Fund would receive if it sold the instrument.
During periods of declining  interest  rates,  the quoted yield on shares of the
Fund may tend to be higher than a like computation made by a fund with identical
investments  utilizing  a method of  valuation  based  upon  market  prices  and
estimates of market  prices for all of its portfolio  instruments.  Thus, if the
use of amortized cost by the Fund resulted in a lower aggregate  portfolio value
on a particular day, a prospective  investor in the Fund would be able to obtain
a  somewhat  higher  yield if he  purchased  shares of the Fund on that day than
would result from  investment  in a fund  utilizing  solely market  values,  and
existing  investors  in the Fund  would  receive  less  investment  income.  The
converse would apply in a period of rising interest rates.  Other securities and
assets for which market  quotations are not readily available are valued in good
faith at fair value using  methods  determined  by the Trustees and applied on a
consistent basis. For example, securities with remaining maturities of more than
60 days for which market  quotations are not readily available are valued on the
basis of market  quotations for securities of comparable  maturity,  quality and
type. The Trustees review the valuation of the Fund's securities through receipt
of  regular  reports  from the  Investment  Manager  at each  regular  Trustees'
meeting.  Determinations  of net asset  value made other than as of the close of
the  Exchange  may employ  adjustments  for changes in interest  rates and other
market factors.

Fund  Accounting  Agent.  Scudder  Fund  Accounting  Corporation  ("SFAC"),  Two
International  Place,  Boston,  MA, 02110,  a subsidiary of Scudder  Kemper,  is
responsible  for determining the daily net asset value per share of the Fund 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.



                                       7
<PAGE>

Purchases

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>
---------------------------------------------------------------------------------------------------------------------
                                     Sales                     Annual 12b-1 Fees
                                     Charge                (as a % of average daily         Other Information
                                                                      --------------
                                                                  net assets)
                                                                  -----------
---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------
<S>    <C>             <C>                                           <C>                <C>
       Class A*                       None                           None
---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------
       Class B         Maximum contingent deferred sales             0.75%              Shares convert to Class A
                           charge of 4% of redemption                                     shares six years after
                        proceeds; declines to zero after                                         issuance
                                   six years
---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------
       Class C          Contingent deferred sales charge             0.75%                No conversion feature
                        of 1% of redemption proceeds for
                         redemptions made during first
                              year after purchase
---------------------------------------------------------------------------------------------------------------------
</TABLE>

* 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 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


                                       8
<PAGE>

date.  These  purchases will begin earning  dividends the calendar day following
the payment date. See "Dividends and Taxes" for more information.

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

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

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

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

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

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

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

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

In addition to the discounts or commissions described above, KDI will, from time
to  time,  pay  or  allow  additional  discounts,   commissions  or  promotional
incentives,  in the form of cash, to firms that sell shares of the Fund. 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.

                                       9
<PAGE>

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.

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


                                       10
<PAGE>

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.

Redemptions and Exchanges

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 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


                                       11
<PAGE>

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 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 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.

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.


                                                Contingent Deferred
Year of Redemption After Purchase               Sales Charge

First                                           4%


                                       12
<PAGE>

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.

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.

                                       13
<PAGE>

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.  LIST TO BE UPDATED  Each  Fund's  Class A
shares  (or the  equivalent)  may be  purchased  at the rate  applicable  to the
discount bracket attained by combining concurrent  investments in Class A shares
of any of the  following  funds:  Kemper  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  Emerging  Markets
Growth 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 Fund II,  Kemper  High Yield  Opportunity  Fund,  Kemper  Horizon 10+
Portfolio,  Kemper  Horizon 20+ Portfolio,  Kemper  Horizon 5 Portfolio,  Kemper
Income and Capital  Preservation Fund, Kemper Intermediate  Municipal Bond Fund,
Kemper  International  Fund,  Kemper  International  Research 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 Europe Fund,  Kemper New York Tax-Free
Income Fund,  Kemper Ohio Tax-Free Income Fund,  Kemper Research Fund (currently
available only to employees of Scudder Kemper  Investments,  Inc.; not available
in all states),  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 S&P 500 Index Fund, Kemper  Short-Term U.S.  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 Strategic Income Fund,
Kemper  Target 2010 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  Financial  Services Fund,  Kemper-Dreman  High Return Equity Fund
("Kemper Mutual Funds").  Except as noted below,  there is no combined  purchase
credit for direct  purchases of shares of Zurich Money  Funds,  Cash  Equivalent
Fund,  Tax-Exempt  California  Money Market Fund, Cash Account Trust,  Investors
Municipal Cash Fund or Investors Cash Trust ("Money  Market  Funds"),  which are
not considered  "Kemper Mutual Funds" for purposes  hereof.  For purposes of the
Combined  Purchases  feature described above as well as for the Letter of Intent
and Cumulative  Discount features  described below,  employer sponsored employee
benefit plans using the subaccount  record keeping system made available through
the  Shareholder  Service Agent or its affiliates may include:  (a) Money Market
Funds as "Kemper  Mutual  Funds," (b) all classes of shares of any Kemper Mutual
Fund,  and (c) the  value of any  other  plan  investments,  such as  guaranteed
investment  contracts and employer stock,  maintained on such subaccount  record
keeping system.



                                       14
<PAGE>

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.

If a shareholder has invested $1 million or more in another Kemper Fund,  either
as a lump sum or through on of the sales charge reduction  features described in
that fund's prospectus,  and a shareholder exchanges into Class A shares of this
fund, the shareholder  may be charged a 1 % contingent  deferred sales charge if
they redeem shares within one year of your initial  purchase of the other Kemper
Fund. If they redeem  shares  within two years of their initial  purchase of the
other Kemper Fund, they may be charged a 0.50% contingent  deferred sales charge
 . This CDSC is waived under certain circumstances. See the Fund's prospectus for
more details.

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.

                                       15
<PAGE>

General.  Shares of a Kemper  Mutual  Fund with a value in excess of  $1,000,000
(except  Kemper Cash Reserves  Fund)  acquired by exchange  from another  Kemper
Mutual Fund, or from a Money Market Fund, may not be exchanged  thereafter until
they have been owned for 15 days (the "15 Day Hold Policy"). In addition, shares
of a Kemper fund with a value of $1,000,000 or less (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,
if, in the Manager's judgment,  the exchange activity may have an adverse effect
on the fund. In particular, a pattern of exchanges that coincides with a "market
timing"  strategy  may be  disruptive  to the Kemper fund and  therefore  may be
subject to the 15-Day Hold Policy.  For purposes of  determining  whether the 15
Day Hold Policy applies to a particular exchange,  the value of the shares to be
exchanged  shall be computed by aggregating  the value of shares being exchanged
for all accounts under common control,  direction, or advice,  including without
limitation,  accounts  administered by a financial services firm offering market
timing,  asset allocation or similar  services.  The total value of shares being
exchanged must at least equal the minimum  investment  requirement of the Kemper
Fund into which they are being  exchanged.  Exchanges are made based on relative
dollar values of the shares  involved in the  exchange.  There is no service fee
for an exchange;  however,  dealers or other firms may charge for their services
in effecting exchange transactions.  Exchanges will be effected by redemption of
shares of the fund held and  purchase of shares of the other  fund.  For federal
income tax purposes,  any such exchange  constitutes a sale upon which a gain or
loss may be  realized,  depending  upon  whether  the value of the shares  being
exchanged  is more or less than the  shareholder's  adjusted  cost basis of such
shares.  Shareholders interested in exercising the exchange privilege may obtain
prospectuses of the other funds from dealers,  other firms or KDI. Exchanges may
be accomplished by a written request to KSvC,  Attention:  Exchange  Department,
P.O.  Box 419557,  Kansas  City,  Missouri  64141-6557,  or by  telephone if the
shareholder  has given  authorization.  Once the  authorization  is on file, the
Shareholder  Service Agent will honor  requests by telephone at  1-800-621-1048,
subject  to  the  limitations  on  liability  under  "Purchase,  Repurchase  and
Redemption 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


                                       16
<PAGE>

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

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

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

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

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

o    Traditional,  Roth  and  Education Individual Retirement Accounts ("IRAs").
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.  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 the Fund's custodian describe the current
fees payable for its services as custodian.  Investors should consult with their
own tax advisers before establishing a retirement plan.

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.

The Fund may at any time vary its foregoing dividend  practices and,  therefore,
reserves  the  right  from  time to time to  either  distribute  or  retain  for
reinvestment  such of its net  investment  income  and  its net  short-term  and
long-term


                                       17
<PAGE>

capital  gains as its  Board  determines  appropriate  under  the  then  current
circumstances.  In particular,  and without limiting the foregoing, the Fund may
make  additional  distributions  of net  investment  income or capital  gain net
income in order to satisfy the minimum  distribution  requirements  contained in
the Internal Revenue Code (the "Code").

Dividends  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 portion for
each class.

Income and  capital  gain  dividends,  if any,  for 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 select one of the following options:

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

(2) To receive both 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 of that same Fund. However, upon written request to the
Shareholder  Service  Agent,  a  shareholder  may elect to have  Fund  dividends
invested  in shares of the same  class of another  Kemper  Fund at the net asset
value  of  such  class  of such  other  fund.  See  "Purchase,  Repurchase,  and
Redemption of Shares",  "Special Features--Class A Shares--Combined  Purchases",
for a list of such other  Kemper  Funds.  To use this  privilege  of investing a
Fund's dividends in shares of another Kemper Fund,  shareholders must maintain a
minimum  account value of $1,000 in the Fund  distributing  the  dividends.  The
Funds will  reinvest  dividend  checks (and future  dividends) in shares of that
same Fund and class if checks are returned as undeliverable. Dividends and other
distributions  of  the  Fund  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.

Performance Information

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 Investment  Manager,
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 Investment  Manager
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  Investment  Manager  and  Underwriter."  Because  of  this  expense
absorption,  the performance  results for the Fund may be shown with and without
the effect of this waiver and expense absorption.

Performance results not giving effect to expense absorptions will be lower.

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


The Fund's yield is computed in accordance with a standardized method prescribed
by rules of the  Securities  and Exchange  Commission.  The Fund's yield for its
Class A, Class B and Class C shares for the seven-day period ended September 30,
2000 was _____4.64% and 3.62% 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


                                       18
<PAGE>

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  25 yield for its Class A,  Class B and Class C shares for the
seven-day   period  ended  September  30,  2000  was  _____,   4.75%  and  3.69%
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 A and C shares may be subject to a 1%  contingent  deferred
sales charge in the first year following purchase. Yields will fluctuate.

Factors  affecting the Fund's  performance  include  general market  conditions,
operating expenses and investment management.

Any additional fees charged by a dealer or other  financial  services firm would
reduce the returns described in this section.

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

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

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

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


                                       19
<PAGE>

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.


TO BE UPDATED:

Performance  figures for Class A and C shares for the  periods  January 10, 1992
and May  31,  1994,  respectively,  to  October  31,  1999  reflect  the  actual
performance of these classes of shares. Returns for Class A and C shares for the
periods February 6, 1984 to January 10, 1992 and May 31, 1994, respectively, are
derived from the historical  performance of Class B shares,  adjusted to reflect
the operating expenses  applicable to Class A and C shares,  which may be higher
or lower than those of Class B shares. The performance figures are also adjusted
to reflect the maximum  sales charge of 5.75% for Class A shares and the maximum
current  contingent  deferred  sales  charge of 4% for Class B shares and 1% for
Class C shares.

The returns in the chart below assume reinvestment of distributions at net asset
value  and  represent  both  actual  past   performance   figures  and  adjusted
performance  figures of the Class B shares of the Fund as described above;  they
do not guarantee  future  results.  Investment  return and principal  value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost.

Average Annual Total Return for the periods ended October
31, 1999*

                One Year         Five Years      Ten Years      Life of Class**
                --------         ----------      ---------      ---------------
Class A         4.12%            4.62%           4.52%          3.96%
Class B         0.08%            3.45%           3.54%          4.44%
Class C         3.44%            3.88%           3.78%          3.81%


* Because  Class A and C shares were not  introduced  until January 10, 1992 and
May 31,  1994,  respectively,  the total return for Class A and C shares for the
period  prior to their  introduction  is based upon the  performance  of Class B
shares from the commencement of investment operations,  February 6, 1984 through
January 10, 1992 and May 31, 1994,  respectively.  Actual performance of Class A
and C shares is shown beginning January 10, 1992 and May 31, 1994, respectively.

** Since January 10, 1992,  February 6, 1984 and May 31, 1994 for Class A, B and
C shares, respectively.




                                       20
<PAGE>

Fund Organization

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,   three  of  which  are  described  in  this   statement  of  additional
information.  An  additional  class,  Class I  shares,  are  offered  through  a
supplement  and have different  expenses than Class A, B and C shares,  that may
affect performance,  and are available for purchase exclusively by the following
investors:  (a) tax-exempt  retirement  plans of the Manager and its affiliates;
and (b)  the  following  investment  advisory  clients  of the  Manager  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.

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.

                                       21
<PAGE>

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 Manager 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.


Master/feeder structure

The Board has the discretion to retain the current distribution  arrangement for
the Fund while investing in a master fund in a  master/feeder  structure fund as
described below.

A master/feeder fund structure is one in which a fund (a "feeder fund"), instead
of investing  directly in a portfolio of securities,  invests most or all of its
investment  assets in a separate  registered  investment  company  (the  "master
fund") with  substantially  the same  investment  objective  and policies as the
feeder  fund.  Such a  structure  permits  the  pooling of assets of two or more
feeder funds,  preserving  separate  identities or distribution  channels at the
feeder  fund  level.  Based on the  premise  that  certain  of the  expenses  of
operating an investment  portfolio are  relatively  fixed,  a larger  investment
portfolio may eventually  achieve a lower ratio of operating expenses to average
net assets. An existing  investment  company is able to convert to a feeder fund
by  selling  all  of  its  investments,   which  involves  brokerage  and  other
transaction  costs and realization of a taxable gain or loss, or by contributing
its assets to the master  fund and  avoiding  transaction  costs and,  if proper
procedures are followed, the realization of taxable gain or loss.


Investment manager

Scudder Kemper Investments,  Inc. (the "Investment  Manager"),  345 Park Avenue,
New York,  NY, an  investment  counsel firm,  acts as investment  adviser to the
Fund. This organization,  the predecessor of which is Scudder,  Stevens & Clark,
Inc., is one of the most  experienced  investment  counsel firms in the U. S. It
was established as a partnership in 1919 and pioneered the practice of providing
investment  counsel to individual  clients on a fee basis. In 1928 it introduced
the first  no-load  mutual fund to the public.  In 1953 the  Investment  Manager
introduced Scudder  International Fund, Inc., the first mutual fund available in
the U.S.  investing  internationally in securities of issuers in several foreign
countries.  The predecessor firm reorganized from a partnership to a corporation
on June 28, 1985.  On December 31, 1997,  Zurich  Insurance  Company  ("Zurich")
acquired  a majority  interest  in the  Investment  Manager,  and Zurich  Kemper
Investments,  Inc., a Zurich subsidiary,  became part of the Investment


                                       22
<PAGE>

Manager.  The Investment  Manager's name changed to Scudder Kemper  Investments,
Inc. On September 7, 1998,  the  businesses  of Zurich  (including  Zurich's 70%
interest  in Scudder  Kemper) and the  financial  services  businesses  of B.A.T
Industries  p.l.c.  ("B.A.T")  were combined to form a new global  insurance and
financial services company known as Zurich Financial Services Group. By way of a
dual holding  company  structure,  former Zurich  shareholders  initially  owned
approximately 57% of Zurich Financial Services Group, with the balance initially
owned by former B.A.T shareholders. On October 17, 2000, the dual-headed holding
company structure of Zurich Financial Services Group, comprised of Allied Zurich
p.l.c. in the United Kingdom and Zurich Allied in Switzerland,  was unified into
a single Swiss holding company, Zurich Financial Services.

Founded in 1872, Zurich is a multinational,  public corporation  organized under
the laws of  Switzerland.  Its home  office is  located  at  Mythenquai  2, 8002
Zurich,  Switzerland.  Historically,  Zurich's  earnings  have resulted from its
operations as an insurer as well as from its ownership of its  subsidiaries  and
affiliated  companies  (the  "Zurich  Insurance  Group").  Zurich and the Zurich
Insurance  Group provide an extensive  range of insurance  products and services
and have branch offices and  subsidiaries  in more than 40 countries  throughout
the world.

The principal  source of the Investment  Manager's  income is professional  fees
received  from  providing  continuous  investment  advice.  Today,  it  provides
investment  counsel for many individuals and institutions,  including  insurance
companies,   colleges,  industrial  corporations,   and  financial  and  banking
organizations  as well as  providing  investment  advice  to over  [XX] open and
closed-end mutual funds.

The Investment  Manager  maintains a large research  department,  which conducts
continuous   studies  of  the  factors  that  affect  the  position  of  various
industries, companies and individual securities. The Investment Manager receives
published  reports and statistical  compilations from issuers and other sources,
as  well as  analyses  from  brokers  and  dealers  who  may  execute  portfolio
transactions  for the  Investment  Manager's  clients.  However,  the Investment
Manager regards this  information and material as an adjunct to its own research
activities.  The Investment Manager's  international  investment management team
travels  the  world,   researching  hundreds  of  companies.  In  selecting  the
securities  in  which  the Fund  may  invest,  the  conclusions  and  investment
decisions  of the  Investment  Manager  with  respect  to the  Funds  are  based
primarily on the analyses of its own research department.

Certain  investments  may be  appropriate  for a fund and also for other clients
advised by the  Investment  Manager.  Investment  decisions for a fund and other
clients are made with a view to achieving their respective investment objectives
and after consideration of such factors as their current holdings,  availability
of cash for investment and the size of their investments generally.  Frequently,
a particular  security may be bought or sold for only one client or in different
amounts  and at  different  times for more  than one but less than all  clients.
Likewise,  a particular  security may be bought for one or more clients when one
or more other clients are selling the security. In addition,  purchases or sales
of the same  security  may be made for two or more  clients on the same day.  In
such event,  such  transactions  will be allocated among the clients in a manner
believed by the Investment  Manager to be equitable to each. In some cases, this
procedure  could have an adverse effect on the price or amount of the securities
purchased or sold by a fund. Purchase and sale orders for a fund may be combined
with  those of other  clients  of the  Investment  Manager  in the  interest  of
achieving the most favorable net results to that fund.

In  certain  cases,  the  investments  for the  fund  are  managed  by the  same
individuals  who manage one or more other mutual funds advised by the Investment
Manager,  that have similar names,  objectives and investment styles. You should
be aware that the Fund is likely to differ  from  these  other  mutual  funds in
size,  cash  flow  pattern  and  tax  matters.  Accordingly,  the  holdings  and
performance of the Fund can be expected to vary from those of these other mutual
funds.

The  Board  approved  the  current  investment  management  agreement  with  the
Investment  Manager upon the  termination  of the former  investment  management
agreement.  The current  agreement  was  approved by  shareholders  at a special
meeting that concluded in December 1998.

For  the  services  and  facilities  furnished,  the  Fund  pays  an  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 $2,050,000, $1,269,000 and $1,059,000, respectively.

                                       23
<PAGE>

The Manager may serve as adviser to other funds with  investment  objectives and
policies  similar  to those of the Funds  that may have  different  distribution
arrangements or expenses, which may affect performance.

Code of Ethics

The Fund, the  Investment  Manager and principal  underwriter  have each adopted
codes of ethics under rule 17j-1 of the  Investment  Company Act. Board members,
officers of the Fund and  employees  of the  Investment  Manager  and  principal
underwriter are permitted to make personal  securities  transactions,  including
transactions in securities that may be purchased or held by the Fund, subject to
requirements and  restrictions  set forth in the applicable Code of Ethics.  The
Investment  Manager's  Code  of  Ethics  contains  provisions  and  requirements
designed to identify and address certain  conflicts of interest between personal
investment  activities  and the interests of the Fund.  Among other things,  the
Investment  Manager's  Code of Ethics  prohibits  certain types of  transactions
absent prior approval,  imposes time periods during which personal  transactions
may not be made in certain securities,  and requires the submission of duplicate
broker  confirmations  and  quarterly  reporting  of  securities   transactions.
Additional restrictions apply to portfolio managers,  traders, research analysts
and others involved in the investment advisory process.  Exceptions to these and
other  provisions of the  Investment  Manager's Code of Ethics may be granted in
particular circumstances after review by appropriate personnel.

OFFICERS AND TRUSTEES

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

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.

LINDA C.  COUGHLIN  (1/1/52),  Trustee*,  345 Park Avenue,  New York,  New York,
Managing Director, Scudder Kemper.


THOMAS W.  LITTAUER  (4/26/55),  Chairman,  Vice  President  and  Trustee*,  Two
International  Place,  Boston,  Massachusetts;   Managing  Director,  Investment
Manager;  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.

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


                                       24
<PAGE>

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,  Investment Manager;  formerly,  Institutional Sales Managing
Director, Investment Manager.

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

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

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



RICHARD L. VANDENBERG  (11/16/49),  Vice President*,  222 South Riverside Plaza,
Chicago, Illinois; Managing Director,  Investment Manager; 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, Investment Manager.

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

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

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

CAROLINE  PEARSON  (4/1/62),  Assistant  Secretary*,  Two  International  Place,
Boston,  Massachusetts;  Senior Vice President,  Investment  Manager;  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,  Investment Manager; 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 fiscal year ended September 30, 2000,  except that the information in the
last column is for calendar year 2000.


<TABLE>
<CAPTION>
                                                     Aggregate Compensation From
                                                     ---------------------------

<S>    <C>                         <C>                    <C>                <C>
                                    Kemper Cash             Kemper           Total Compensation Kemper
       Name of Trustee             Reserves Fund          Portfolios         Funds Paid to Trustees***
       ---------------             -------------          ----------         -------------------------


John W. Ballantine
Lewis A. Burnham
Donald L. Dunaway**


                                       25
<PAGE>
                                                     Aggregate Compensation From
                                                     ---------------------------

                                    Kemper Cash             Kemper           Total Compensation Kemper
       Name of Trustee             Reserves Fund          Portfolios         Funds Paid to Trustees***
       ---------------             -------------          ----------         -------------------------

Robert B. Hoffman
Donald R. Jones
Shirley D. Peterson
William P. Sommers

</TABLE>




** Includes deferred fees. Pursuant to deferred compensation agreements with the
Trust,  deferred  amounts accrue interest  monthly at a rate  approximate to the
yield of Zurich  Money Funds -- Zurich Money  Market  Fund.  Total  deferred fee
(including interest thereon) accrued through the Fund's fiscal year payable from
the Trust to Mr. Dunaway are $__________.


***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 January 1, 2001, the officers and trustees of the Fund, as a group,  owned
less than 1% of the then outstanding shares of the Fund.

As of January 1, 2001, 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>
CIBC World Markets Corp.                            A
P.O. Box 3484
Church Street Station
New York, NY  10008

Bear Stearns Securities Corp.                       A
1 Metrotech Center N.
Brooklyn, NY  11201

National Financial Services Corp.                   C
FBO Joseph & Marjorie Caldwell, TTEE
200 Liberty Street
New York, NY  10281

</TABLE>

Administrative Services.  Administrative services are provided to the Fund under
an administrative services agreement ("administrative  agreement") with KDI. KDI
bears all its  expenses of  providing  services  pursuant to the  administrative
agreement  between KDI and 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 each class 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,

                                       26
<PAGE>

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.

Administrative services fees paid by the Fund are set forth below:

<TABLE>
<CAPTION>

                               Administrative Service Fees Paid by Fund
                               ----------------------------------------



<S>                             <C>         <C>     <C>        <C>        <C>              <C>
Fund                            Fiscal      Class   Class B    Class C    Total   Service  Service      Fees
----                            ------      -----   -------    -------    Fees  Paid  by   Paid  by  KDI to
                                Year        A                             KDI to Firms     KDI  Affiliated
                                ----        -                             ------------     ---------------
                                                                                           Firms
                                                                                           -----
-------------------------------------------------------------------------------------------------------------
Kemper Cash Reserves           2000
-------------------------------------------------------------------------------------------------------------
                               1999
-------------------------------------------------------------------------------------------------------------
                               1998
-------------------------------------------------------------------------------------------------------------
</TABLE>

[ADD FOOTNOTES FOR SHORTER PERIODS, EXPENSE REIMBURSEMENT & ETC.]
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,  the
administrative  services fee payable to KDI is payable based upon Fund assets in
accounts  for  which a firm  provides  administrative  services  and,  effective
January 1, 2000, at an annual rate of 0.15% based on Fund assets in accounts for
which  there is no firm  (other  than KDI)  listed on the  Fund's  records.  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 Funds are also  directors  or officers of
Scudder Kemper or KDI as indicated under "Officers and Trustees."

CUSTODIAN,  TRANSFER AGENT AND SHAREHOLDER  SERVICE AGENT. State Street Bank and
Trust Company ("SSB"),  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.

SSB is also the Fund's transfer agent and dividend-paying  agent.  Pursuant to a
services  agreement with SSB, Kemper Service Company  ("KSvC"),  an affiliate of
Scudder Kemper,  serves as "Shareholder Service Agent" of the Fund and, as such,
performs all of SSB's duties as transfer  agent and dividend  paying agent.  SSB
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.


            -------------------------------------------------------------------
            Fund                         Fees SSB Paid to KSvC
            ----                         ---------------------
            -------------------------------------------------------------------
            Kemper Cash Reserves Fund
            -------------------------------------------------------------------

[ADD FOOTNOTES FOR SHORTER PERIODS, EXPENSE REIMBURSEMENT & ETC.]

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


                                       27
<PAGE>

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 .

Distributor

Principal  Underwriter.  Pursuant to a separate  underwriting  and  distribution
services  agreement  ("distribution  agreement"),   Kemper  Distributors,   Inc.
("KDI"), a wholly owned subsidiary of the Investment  Manager,  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%.

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


                                       28
<PAGE>

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.  In
addition, KDI may, from time to time, from its own resources,  pay certain firms
additional amounts for ongoing  administrative  services and assistance provided
to their customers and clients who are shareholders of the Fund.


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.




                                       29
<PAGE>




                                       30
<PAGE>


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

---------- ------- ------------- ------------ ------------ ------------
                                 Contingent      Total     Distribution
                   Distribution   Deferred    Distribution  Fees Paid
Class B    Fiscal   Fees Paid       Sales      Fees Paid    by KDI to
Shares      Year   by Fund to      Charges    by KDI to        KDI
------      ----      --------                   -------
                       KDI       Paid to KDI     Firms     Affiliated
                       ---               ---     -----     -----------
                                                             Firms
                                                             -----
---------- ------- ------------- ------------ ------------ ------------

---------- ------- ------------- ------------ ------------ ------------
           2000
---------- ------- ------------- ------------ ------------ ------------
           1999    $1,739,783     1,449,405    2,537,771        0
---------- ------- ------------- ------------ ------------ ------------
           1998    $1,180,000    813,000      3,242,000         0
---------- ------- ------------- ------------ ------------ ------------


---------- ------- ------------- ------------ ------------ ------------
                                 Contingent      Total     Distribution
                   Distribution   Deferred    Distribution  Fees Paid
Class C    Fiscal   Fees Paid       Sales      Fees Paid    by KDI to
Shares      Year   by Fund to      Charges    by KDI to        KDI
------      ----      --------                   -------
                       KDI       Paid to KDI     Firms     Affiliated
                       ---               ---     -----     -----------
                                                              Firms
                                                              -----
---------- ------- ------------- ------------ ------------ ------------

---------- ------- ------------- ------------ ------------ ------------
            2000
---------- ------- ------------- ------------ ------------ ------------
            1999     $533,775      84,132       660,536         0
---------- ------- ------------- ------------ ------------ ------------
            1998     $208,000      24,000       493,000         0
---------- ------- ------------- ------------ ------------ ------------




--------------------- -----------------------------------------
                      Other Distribution Expenses Paid by KDI
--------------------- -----------------------------------------

Advertising                             Misc.
    and      Prospectus   Marketing   Operating    Interest
Literature    Printing    and Sales    Expenses     Expense
----------    --------        ------   --------     -------
                           Expenses
                           --------


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

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

------------ ------------ ----------- ----------- -------------
  188,020      12,078      502,101      65,360     1,760,937
------------ ------------ ----------- ----------- -------------
   320,000   28,000       656,000     123,000      1,576,000
------------ ------------ ----------- ----------- -------------


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

Advertising                             Misc.
   and       Prospectus   Marketing   Operating    Interest
Literature    Printing    and Sales    Expenses     Expense
----------    --------        ------   --------     -------
                           Expenses
                           --------


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

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

------------ ------------ ----------- ----------- -------------
  102,276       6,468      274,317      42,947      235,088
------------ ------------ ----------- ----------- -------------
  156,000      14,000      329,000      68,000      176,000
------------ ------------ ----------- ----------- -------------




<PAGE>


Rule 12b-1  Plans.  The Trust has adopted on behalf of the Fund,  in  accordance
with Rule  12b-1  under the 1940 Act,  separate  Rule 12b-1  distribution  plans
pertaining to the Fund's Class B and Class C shares (each a "Plan").  Under each
Plan, the Fund pays KDI a distribution fee, payable monthly,  at the annual rate
of 0.75% of the average daily net assets  attributable to its Class B or Class C
shares.  Under each Plan, KDI may compensate  various  financial  services firms
("Firms")  for  sales of Fund  shares  and may pay other  commissions,  fees and
concessions to such Firms.  The  distribution  fee  compensates KDI for expenses
incurred in connection with activities  primarily intended to result in the sale
of the Fund's Class B or Class C shares,  including the printing of prospectuses
and reports for persons other than existing  shareholders  and the  preparation,
printing and distribution of sales literature and advertising materials.

Among other  things,  the Plan  provides  that KDI will prepare  reports for the
Board on a quarterly  basis for each class  showing  amounts paid to the various
Firms and such other information as the Board may reasonably request.  Each Plan
will continue in effect indefinitely, provided that such continuance is approved
at least  annually  by vote of a majority  of the Board,  and a majority  of the
Board Members who are not  "interested  persons" (as defined in the 1940 Act) of
the Fund and who have no direct or indirect  financial interest in the operation
of the Plan ("Qualified Board Members"), cast at an in-person meeting called for
such  purpose,  or by vote of at  least a  majority  of the  outstanding  voting
securities of the  applicable  class.  Any material  amendment to a Plan must be
approved by vote of a majority of the Board, and of the Qualified Board Members.
An  amendment to a Plan to increase  materially  the amount to be paid to KDI by
the Fund for distribution  services with respect to the applicable class must be
approved by a majority of the outstanding voting securities of that class. While
each Plan is in effect,  the selection  and  nomination of Board Members who are
not  "interested  persons"  shall be  committed to the  discretion  of the Board
Members who are not themselves "interested persons". If a Plan is terminated (or
not renewed)  with respect to either  class,  the Plan with respect to the other
class  may  continue  in  effect  unless  it also  has been  terminated  (or not
renewed).


PORTFOLIO TRANSACTIONS

Brokerage Commissions

Allocation of brokerage is supervised by the Investment Manager.

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

The  primary  objective  of the  Investment  Manager in  placing  orders for the
purchase and sale of securities for the Fund 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   Investment   Manager   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  Investment  Manager
routinely reviews commission rates,  execution and settlement services performed
and makes internal and external comparisons.

When it can be done consistently with the policy of obtaining the most favorable
net results,  it is the Investment  Manager's practice to place such orders with
broker/dealers  who supply  brokerage  and research  services to the  Investment
Manager or the Fund.  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 Investment  Manager 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


<PAGE>

Investment Manager 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 Investment  Manager or the
Fund in  exchange  for the  direction  by the  Investment  Manager of  brokerage
transactions  to the  broker/dealer.  These  arrangements  regarding  receipt of
research  services  generally  apply  to  equity  security   transactions.   The
Investment  Manager 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 Investment Manager will
place orders for  portfolio  transactions  through SIS,  which is a  corporation
registered as a broker/dealer  and a subsidiary of the Investment  Manager;  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.

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

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 net capital  gains income for the one-year  period
ending October 31, plus any  undistributed  net investment income from the prior
calendar year, plus any undistributed net capital gains 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

                                       33
<PAGE>

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 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  Investment  Managers  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.



In order to  reduce  the  amount of mail you  receive  and to help  reduce  fund
expenses,  we  generally  send a  single  copy  of any  shareholder  report  and
prospectus to each household.  If you do not want the mailing of these documents
to be  combined  with those for other  members of your  household,  please  call
1-800-621-1048.

FINANCIAL STATEMENTS

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

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

                                       34
<PAGE>

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.


                                       35
<PAGE>


                                KEMPER PORTFOLIOS
                           PART C. OTHER INFORMATION
<TABLE>
<S>           <C>          <C>          <C>
Item 23       Exhibits
-------       --------

              (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.
                                        (Incorporated by reference to Post-Effective Amendment No. 32 to
                                        Registrant's Registration Statement).

                           (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

              (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

<PAGE>

                                        (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)                       Legal Opinion and Consent of Counsel to be filed by amendment.

              (j)                       Consent of Independent Auditors to be filed by 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.
                                        (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.)


                                        2
<PAGE>


              (n)                       Multi-Distribution System Plan.
                                        (Incorporated by reference to Post-Effective Amendment No. 26 to
                                        the Registration Statement.)

              (p)          (1)          Code of Ethics for Scudder Kemper Investments, Inc. and certain of
                                        its subsidiaries, including Kemper Distributors, Inc. and Scudder
                                        Investor Services, Inc., is filed herein.

                           (2)          Code of Ethics for Kemper Portfolios is filed herein.
</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 and Other Connections of Investment Adviser
--------          ----------------------------------------------------


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

                                        3
<PAGE>

<TABLE>
<S>                        <C>

Name                       Business and Other Connections of Board of Directors of Registrant's Adviser
----                       ----------------------------------------------------------------------------

Stephen R. Beckwith        Treasurer, Scudder Kemper Investments, Inc.**
                           Director, Kemper Service Company
                           Director, Vice President and Treasurer, Scudder Fund Accounting Corporation*
                           Director and Treasurer, 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**
                           Director and Chairman, Scudder Threadneedle International Ltd.
                           Director, Scudder Kemper Holdings (UK) Ltd. oo
                           Director and President, Scudder Realty Holdings Corporation *
                           Director, Scudder, Stevens & Clark Overseas Corporation o
                           Director and Treasurer, Zurich Investment Management, Inc. xx
                           Director and Treasurer, Zurich Kemper Investments, Inc.

Lynn S. Birdsong           Director, Vice President and Chief Investment Officer, Scudder Kemper Investments, Inc. **
                           Director and Chairman, Scudder Investments (Luxembourg) S.A. #
                           Director, Scudder Investments (U.K.) Ltd. oo
                           Director and Chairman of the Board, Scudder Investments Asia, Ltd. ooo
                           Director and Chairman, Scudder Investments Japan, Inc. +
                           Senior Vice President, Scudder Investor Services, Inc.
                           Director and Chairman, Scudder Trust (Cayman) Ltd. @@@
                           Director, Scudder, Stevens & Clark Australia x
                           Director and Vice President, Zurich Investment Management, Inc. xx
                           Director and President, Scudder, Stevens & Clark Corporation **
                           Director and President, Scudder , Stevens & Clark Overseas Corporation o
                           Director, Scudder Threadneedle International Ltd.
                           Director, Korea Bond Fund Management Co., Ltd. @@

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

Nicholas Bratt             Director and Vice President, Scudder Kemper Investments, Inc.**
                           Vice President, Scudder MAXXUM Company***
                           Vice President, Scudder, Stevens & Clark Corporation**
                           Vice President, Scudder, Stevens & Clark Overseas Corporation o

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

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

                                        4
<PAGE>

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 xxx
                           Director, ZKI Holding Corporation xx

Harold D. Kahn             Chief Financial Officer, Scudder Kemper Investments, Inc.**

Kathryn L. Quirk           Director and Secretary, Scudder, Stevens & Clark Overseas Corporation o
                           Director, Vice President and Secretary, Scudder Defined Contribution Services, Inc.**
                           Director, Vice President and Secretary, Scudder Capital Asset Corporation**
                           Director, Vice President and Secretary, Scudder Capital Stock Corporation**
                           Director, Vice President and Secretary, Scudder Capital Planning Corporation**
                           Director, Vice President and Secretary, SS&C Investment Corporation**
                           Director, Vice President and Secretary, SIS Investment Corporation**
                           Director, Vice President and Secretary, SRV Investment Corporation**
                           Director, Vice President, Chief Legal Officer and Secretary, Scudder Financial Services,
                           Inc.*
                           Director, Korea Bond Fund Management Co., Ltd. @@
                           Director, Scudder Threadneedle International Ltd.
                           Director, Chairman of the Board and Secretary, Scudder Investments Canada, Ltd.
                           Director, Scudder Investments Japan, Inc. +
                           Director and Secretary, Scudder Kemper Holdings (UK) Ltd. oo
                           Director and Secretary, Zurich Investment Management, Inc. xx
                           Director, Secretary, Chief Legal Officer and Vice President, Kemper Distributors, 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 o
                           President and Director, Scudder, Stevens & Clark Corporation**
                           Director, Scudder Realty Advisors, Inc. @
                           Director, IBJ Global Investment Management S.A. Luxembourg, Grand-Duchy of Luxembourg
                           Director, Scudder Threadneedle International Ltd.  oo
                           Director, Scudder Investments Japan, Inc. +
                           Director, Scudder Kemper Holdings (UK) Ltd. oo
                           President and Director, Zurich Investment Management, Inc. xx
                           Director and Deputy Chairman, Scudder Investment Holdings, Ltd.

</TABLE>

                     *     Two International Place, Boston, MA
                     @     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
                     @@@   Grand Cayman, Cayman Islands, British West Indies
                      o    20-5, Ichibancho, Chiyoda-ku, Tokyo, Japan
                     ###   1-7, Kojimachi, Chiyoda-ku, Tokyo, Japan
                     xx    222 S. Riverside, Chicago, IL
                     xxx   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

                                        5

<PAGE>

                     oo    1 South Place 5th floor, London EC2M 2ZS England
                     ooo   One Exchange Square 29th Floor, Hong Kong
                     +     Kamiyachyo Mori Building, 12F1, 4-3-20, Toranomon,
                           Minato-ku, Tokyo 105-0001
                     x     Level 3, 5 Blue Street North Sydney, NSW 2060

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>
         <S>                    <C>                                          <C>

         (1)                    (2)                                          (3)

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

         Thomas V. Bruns        President                                    None

         Linda C. Coughlin      Director and Vice Chairman                   None

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

         James J. McGovern      Chief Financial Officer and Treasurer        None

         Linda J. Wondrack      Vice President and Chief Compliance Officer  Vice President

         Paula Gaccione         Vice President                               None

         Michael E. Harrington  Managing Director                            None

         Todd N. Gierke         Assistant Treasurer                          None

         Philip J. Collora      Assistant Secretary                          Vice President and Secretary

         Diane E. Ratekin       Assistant Secretary                          None

         Mark S. Casady         Director and Chairman                        President

         Terrence S. McBride    Vice President                               None

         Robert Froelich        Managing Director                            None

         C. Perry Moore         Senior Vice President and Managing Director  None


                                        6
<PAGE>

         Lorie O'Malley         Managing Director                            None

         William F. Glavin      Managing Director                            None

         Gary N. Kocher         Managing Director                            None

         Susan K. Crenshaw      Vice President                               None

         Johnston A. Norris     Managing Director and Senior Vice President  None

         John H. Robison, Jr.   Managing Director and Senior Vice President  None

         Robert J. Guerin       Vice President                               None

         Kimberly S. Nassar     Vice President                               None

         Scott B. David         Vice President                               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,  State Street
Bank  and  Trust  Company  ("State  Street"),   225  Franklin  Street,   Boston,
Massachusetts  02110  or,  in the case of  records  concerning  transfer  agency
functions,  at the offices of State Street 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.



                                        7
<PAGE>

                                   SIGNATURES
                                   ----------

         Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant 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 29th day of
November 2000.

                                                 KEMPER PORTFOLIOS


                                                 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 29th day of November 2000 on
behalf of the following persons in the capacities indicated.

<TABLE>
<CAPTION>
SIGNATURE                                   TITLE                                        DATE
---------                                   -----                                        ----

<S>                                         <C>                                          <C>
/s/ Thomas W. Littauer
--------------------------------------
Thomas W. Littauer*                         Chairman and Trustee                         November 29, 2000

/s/ John R. Hebble
--------------------------------------
John R. Hebble                              Treasurer (Principal Financial and           November 29, 2000
                                            Accounting Officer)
/s/ John W. Ballantine
--------------------------------------
John W. Ballantine*                         Trustee                                      November 29, 2000

/s/ Lewis A. Burnham
--------------------------------------
Lewis A. Burnham*                           Trustee                                      November 29, 2000

/s/ Linda C. Coughlin
--------------------------------------
Linda C. Coughlin*                          Trustee                                      November 29, 2000

/s/ Donald L. Dunaway
--------------------------------------
Donald L. Dunaway*                          Trustee                                      November 29, 2000

/s/ Robert B. Hoffman
--------------------------------------
Robert B. Hoffman*                          Trustee                                      November 29, 2000

/s/ Donald R. Jones
--------------------------------------
Donald R. Jones*                            Trustee                                      November 29, 2000

/s/ Shirley D. Peterson
--------------------------------------
Shirley D. Peterson*                        Trustee                                      November 29, 2000

/s/ William P. Sommers
--------------------------------------
William P. Sommers*                         Trustee                                      November 29, 2000
</TABLE>

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

         **       Attorney-in-fact pursuant to powers of
                  attorney contained in and incorporated by
                  reference to Post-Effective Amendment No.
                  28 to the Registration Statement, filed
                  November 2, 1998, Post Effective Amendment
                  No. 31 to the Registration Statement,
                  filed October 18, 1999, and Post Effective
                  Amendment No. 32 to the Registration
                  Statement, filed November 18, 1999.

<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. 37

                            TO REGISTRATION STATEMENT

                                      UNDER

                           THE SECURITIES ACT OF 1933

                                       AND

                                AMENDMENT NO. 39

                            TO REGISTRATION STATEMENT

                                      UNDER

                       THE INVESTMENT COMPANY ACT OF 1940



                                KEMPER PORTFOLIOS




                                        8
<PAGE>



                                KEMPER PORTFOLIOS

                                  EXHIBIT INDEX


                                 Exhibit (p)(1)
                                 Exhibit (p)(2)

                                        9



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