Supplement to currently effective
Statement of Additional Information
for each of the listed funds:
Kemper California Tax-Free Income Fund
Kemper Florida Tax-Free Income Fund
Kemper New York Tax-Free Income Fund
Kemper Ohio Tax-Free Income Fund
Kemper Municipal Bond Fund
Kemper Intermediate Municipal Bond Fund
The following disclosure supplements and, where appropriate, replaces the
current information for each fund listed above in their respective Statements of
Additional Information.
Municipal Lease Obligations and Participation Interests.
Participation interests represent undivided interests in municipal leases,
installment purchase contracts, conditional sales contracts or other
instruments. These are typically issued by a Trust or other entity which has
received an assignment of the payments to be made by the state or political
subdivision under such leases or contracts. They may be variable rate or fixed
rate.
Short term securities: the Fund may purchase from banks participation interests
in all or part of specific holdings of municipal obligations, provided the
participation interest is fully insured. Each participation is backed by an
irrevocable letter of credit or guarantee of the selling bank that the
Investment Manager has determined meets the prescribed quality standards of the
Fund. Therefore, either the credit of the issuer of the municipal obligation or
the selling bank, or both, will meet the quality standards of the particular
Fund. The Fund has the right to sell the participation back to the bank after
seven days' notice for the full principal amount of the Fund's interest in the
municipal obligation plus accrued interest, but only (i) as required to provide
liquidity to the Fund, (ii) to maintain a high quality investment portfolio or
(iii) upon a default under the terms of the municipal obligation. The selling
bank will receive a fee from the Fund in connection with the arrangement. The
Fund will not purchase participation interests unless in the opinion of bond
counsel, counsel for the issuers of such participations or counsel selected by
the Investment Manager, the interest from such participations is exempt from
regular federal income tax and state income tax, if applicable, for the Fund.
A municipal lease obligation may take the form of a lease, installment purchase
contract or conditional sales contract which is issued by a state or local
government and authorities to acquire land, equipment and facilities. Income
from such obligations is generally exempt from state and local taxes in the
state of issuance. Municipal lease obligations frequently involve special risks
not normally associated with general obligations or revenue bonds. Leases and
installment purchase or conditional sale contracts (which normally provide for
title in the leased asset to pass eventually to the governmental issuer) have
evolved as a means for governmental issuers to acquire property and equipment
without meeting the constitutional and statutory requirements for the issuance
of debt. The debt issuance limitations are deemed to be inapplicable because of
the inclusion in many leases or contracts of "non-appropriation" clauses that
relieve the governmental issuer of any obligation to make future payments under
the lease or contract unless money is appropriated for such purpose by the
appropriate legislative body on a yearly or other periodic basis. In addition,
such leases or contracts may be subject to the temporary abatement of payments
in the event the issuer is prevented from maintaining occupancy of the leased
premises or utilizing the leased equipment. Although the obligations may be
secured by the leased equipment or facilities, the disposition of the property
in the event of nonappropriation or foreclosure might prove difficult, time
consuming and costly, and result in a delay in recovery or the failure to fully
recover the Fund's original investment.
Certain municipal lease obligations and participation interests may be deemed
illiquid for the purpose of the Fund's limitation on investments in illiquid
securities. Other municipal lease obligations and participation interests
acquired by the Fund may be determined by the Investment Manager to be liquid
securities for the purpose of such limitation. In determining the liquidity of
municipal lease obligations and participation interests, the Investment Manager
will consider a variety of factors including: (1) the willingness of dealers to
bid for the security; (2) the number of dealers willing to purchase or sell the
obligation and the number of other potential buyers; (3) the
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frequency of trades or quotes for the obligation; and (4) the nature of the
marketplace trades. In addition, the Investment Manager will consider factors
unique to particular lease obligations and participation interests affecting the
marketability thereof. These include the general creditworthiness of the issuer,
the importance to the issuer of the property covered by the lease and the
likelihood that the marketability of the obligation will be maintained
throughout the time the obligation is held by the Fund.
August 4, 2000
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