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>
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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>
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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.
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This fund may be of interest to investors who want a versatile, broadly
diversified money fund.
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6
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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
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THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
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1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
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Best quarter: ____%, Q_ 19__ YTD return as of [FISCAL YEAR END]: ___%
Worst quarter: ____%, Q_ 19__
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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
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Class A % % % %
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Class B -- -- --
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Class C -- -- --
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To obtain the Fund's current 7-day yield, call (800) 621-1048
7
<PAGE>
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How Much Investors Pay
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
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Fee Table Class A Class B Class C
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Shareholder Fees, paid directly from your investment
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Maximum Sales Charge (Load) On Purchases
(as % of offering price) None* None None
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Maximum Contingent Deferred Sales Charge
(Load) (as % of redemption proceeds) None[*] 4.00% 1.00%
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Annual Operating Expenses, deducted from fund assets
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Management Fee % % %
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Distribution (12b-1) Fee None
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Other Expenses**
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Total Annual Operating Expenses[***]
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* 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.
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Example 1 Year 3 Years 5 Years 10 Years
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Expenses, assuming you sold your shares at the end of each period
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Class A shares $ $ $
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Class B shares
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Class C shares
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Expenses, assuming you kept your shares
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Class A shares $ $ $
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Class B shares
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Class C shares
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9
<PAGE>
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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.
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The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
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10
<PAGE>
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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>
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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>
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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.
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Classes and features Points to help you compare
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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
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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
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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
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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.
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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.
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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.
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17
<PAGE>
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How To Buy Shares
Once you've chosen a share class, use these instructions to make investments.
Make out any checks to "Kemper Funds."
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First investment Additional investments
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$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
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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
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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>
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How To Exchange Or Sell Shares
Use these instructions to exchange or sell shares in your account.
<TABLE>
<CAPTION>
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Exchanging into another fund Selling shares
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<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
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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
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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
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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
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On the Internet
o Follow the instructions at o Follow the instructions at
www.kemper.com www.kemper.com
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</TABLE>
19
<PAGE>
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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.
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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.
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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>
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To Get More Information
Shareholder reports -- These include commentary from each fund's management team
about recent market conditions and the effects of a fund's strategies on its
performance. For each fund, they also have detailed performance figures, a list
of everything the fund owns, and the fund's financial statements. Shareholders
get these reports automatically. To reduce costs, we may mail one copy per
household. For more copies, call (800) 621-1048.
Statement of Additional Information (SAI) -- This tells you more about each
fund's features and policies, including additional risk information. The SAI is
incorporated by reference into this document (meaning that it's legally part of
this prospectus).
If you'd like to ask for copies of these documents, or if you're a shareholder
and have questions, please contact Kemper or the SEC (see below). Materials you
get from Kemper are free; those from the SEC involve a copying fee. If you like,
you can look over these materials in person at the SEC's Public Reference Room
in Washington, DC.
SEC
450 Fifth Street, N.W.
Washington, DC 20549-6009
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.
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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
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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
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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%
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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.
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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.
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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.
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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
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$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
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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
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<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
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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.
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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.
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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
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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