KEMPER TARGET EQUITY FUND, 485BPOS, 1997-04-29

KEMPER TARGET EQUITY FUND
485BPOS, 1997-04-29

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 28, 1997.

1933 ACT REGISTRATION NO. 33-30876
1940 ACT REGISTRATION NO. 811-5896
================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A

REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. _ [ ]
Post-Effective Amendment No. 24 [X]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 26 [X]

(Check appropriate box or boxes)
------------------

KEMPER TARGET EQUITY FUND

(Exact name of Registrant as Specified in Charter)

<TABLE>

<S> <C>
222 South Riverside Plaza, Chicago, Illinois 60606
(Address of Principal Executive Office) (Zip Code)
</TABLE>

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

<TABLE>
<S> <C>
Philip J. Collora With a copy to:
Vice President and Secretary Charles F. Custer
Kemper Target Equity Fund David A. Sturms
222 South Riverside Plaza Vedder, Price, Kaufman & Kammholz
Chicago, Illinois 60606-5808 222 North LaSalle Street
(Name and Address of Agent for Service) Chicago, Illinois 60601
</TABLE>

Registrant has registered an indefinite number of its shares under the
Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act
of 1940. The Rule 24f-2 Notice for Registrant's fiscal year ended June 30, 1996
was filed on or about August 27, 1996.

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

[X] immediately upon filing pursuant to paragraph (b)

[ ] on (date) pursuant to paragraph (b)

[ ] 60 days after filing pursuant to paragraph (a)(1)

[ ] on (date) pursuant to paragraph (a)(1)

[ ] 75 days after filing pursuant to paragraph (a)(2)

[ ] on May 1, 1997 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.
================================================================================
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KEMPER TARGET EQUITY FUND
KEMPER RETIREMENT FUND SERIES VII
CROSS-REFERENCE SHEET
BETWEEN ITEMS ENUMERATED IN PART A
OF FORM N-1A AND PROSPECTUS

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<CAPTION>
ITEM NUMBER
OF FORM N-1A LOCATION IN PROSPECTUS
------------ ----------------------
<S> <C> <C>
1. Cover Page............................. Cover Page
2. Synopsis............................... Summary; Summary of Expenses
3. Condensed Financial Information........ Performance
4. General Description of Registrant...... Summary; Investment Objectives, Policies and Risk
Factors; Capital Structure
5. Management of the Fund................. Summary; Investment Manager and Underwriter
5A. Management's Discussion of
Fund Performance....................... Inapplicable
6. Capital Stock and Other Securities..... Summary; Investment Objectives, Policies and Risk
Factors; Dividends and Taxes; Net Asset Value;
Purchase of Shares; Capital Structure
7. Purchase of Securities Being Offered... Summary; Investment Manager and Underwriter; Net
Asset Value; Purchase of Shares; Special Features
8. Redemption or Repurchase............... Summary; Redemption or Repurchase of Shares
9. Pending Legal Proceedings.............. Inapplicable
</TABLE>
<PAGE> 3

TABLE OF CONTENTS
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<TABLE>
<S> <C>
Summary 1
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Summary of Expenses 2
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Investment Objectives, Policies and Risk 3
Factors
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Investment Manager and Underwriter 10
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Dividends and Taxes 12
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Net Asset Value 13
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Purchase of Shares 14
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Redemption or Repurchase of Shares 18
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Special Features 20
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Performance 23
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Capital Structure 24
- ------------------------------------------------
</TABLE>

This prospectus contains information about the Fund that you should know before
investing and should be retained for future reference. A Statement of Additional
Information dated May 1, 1997, has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. It is available upon request
without charge from the Fund at the address or telephone number on this cover or
the firm from which this prospectus was received.

FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY,
ANY BANK, NOR ARE THEY FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. INVESTMENT IN FUND
SHARES INVOLVES RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[KEMPER FUNDS LOGO]

KEMPER

RETIREMENT

FUND SERIES VII

PROSPECTUS MAY 1, 1997

KEMPER RETIREMENT FUND SERIES VII
222 S. Riverside Plaza, Chicago, Illinois 60606, 1-800-621-1048.

The objectives of Kemper Retirement Fund Series VII (the "Fund") are to provide
a guaranteed return of investment on the Maturity Date (May 15, 2008) to
investors who reinvest all dividends and hold their shares to the Maturity Date,
and to provide long-term growth of capital. The Fund pursues its objectives by
investing a portion of its assets in "zero coupon" U.S. Treasury obligations and
the balance of its assets primarily in common stocks. The Fund is intended for
long-term investors and is not appropriate for investors seeking current income.
The assurance that investors who reinvest dividends and hold their shares until
the Maturity Date will receive on the Maturity Date at least their original
investment is provided by the par value of the zero coupon U.S. Treasury
obligations in the Fund's portfolio on that date as well as by a guarantee from
Zurich Kemper Investments, Inc., the Fund's investment manager. There is no
assurance that the Fund's objective of long-term growth of capital will be
achieved. The Fund's shares are not guaranteed by the U.S. Government. The Fund
is a series of Kemper Target Equity Fund.
<PAGE> 4

KEMPER RETIREMENT FUND SERIES VII
222 SOUTH RIVERSIDE PLAZA, CHICAGO, ILLINOIS 60606, TELEPHONE 1-800-621-1048

SUMMARY

INVESTMENT OBJECTIVES; PERMITTED INVESTMENTS. Kemper Retirement Fund Series VII
(the "Fund") is a diversified series of Kemper Target Equity Fund (the "Trust"),
which is an open-end, management investment company that may issue shares in one
or more series. The Fund's investment objectives are to provide a guaranteed
return of investment on the Maturity Date (May 15, 2008) to investors who
reinvest all dividends and hold their shares to the Maturity Date, and to
provide long-term growth of capital. The Fund pursues its objectives by
investing a portion of its assets in "zero coupon" U.S. Treasury Obligations
("Zero Coupon Treasuries") and the balance of its assets primarily in common
stocks. The assurance that investors who reinvest all dividends and hold their
shares until the Maturity Date will receive on the Maturity Date at least their
original investment is provided by the par value of the Zero Coupon Treasuries
as well as by a guarantee from Zurich Kemper Investments, Inc., the Fund's
investment manager. The Fund's returns will fluctuate and there is no assurance
that the Fund will achieve its objective of long-term capital growth. The Zero
Coupon Treasuries are normally purchased at a substantial discount and represent
the right to receive par value at a fixed date from the U.S. Government. The
amount invested in common stocks provides appreciation potential. See
"Investment Objectives, Policies and Risk Factors."

SPECIAL RISK FACTORS. The Fund is intended for long-term investors and is not
appropriate for investors seeking current income. The Fund is designed so that
shareholders who reinvest all dividends and hold their shares until the Maturity
Date will receive on the Maturity Date an amount at least equal to their
investment, including any sales charge ("Investment Protection"), even if the
value of the investments of the Fund other than the Zero Coupon Treasuries were
to decrease to zero, which the Fund's investment manager considers highly
unlikely. The Fund does not seek to provide a specific return on investors'
capital or to protect principal on an after-tax or present value basis. An
investor who reinvested all dividends and who, upon redemption at the Maturity
Date, received only the principal amount invested, would have received a zero
rate of return on such investment. Investors who do not reinvest all dividends
or who redeem all or part of their shares in the Fund prior to the Maturity Date
will not benefit from the Fund's Investment Protection, and upon redemption may
receive more or less than their original investment; provided, however, in the
event of a partial redemption, the Fund's Investment Protection will continue as
to that part of the original investment that remains invested (with all
dividends thereon reinvested) until the Maturity Date. The government guarantee
of the Zero Coupon Treasuries in the Fund's portfolio does not guarantee the
market value of the Zero Coupon Treasuries or the shares of the Fund, whose net
asset value will fluctuate. Zero Coupon Treasuries normally are subject to
substantially greater price fluctuations during periods of changing interest
rates than are securities of comparable quality that make regular interest
payments. Investors subject to tax should be aware that any portion of the
amount returned to them upon redemption of shares that constitutes accretion of
interest on the Zero Coupon Treasuries will have been taxable as ordinary income
over the period that the shares were held. The Fund may invest a small portion
of its assets in options and foreign securities and may engage in financial
futures and foreign currency transactions. See "Investment Objectives, Policies
and Risk Factors" and "Dividends and Taxes."

INVESTMENT MANAGER AND UNDERWRITER. Zurich Kemper Investments, Inc. ("ZKI") is
the Fund's investment manager. ZKI is paid an investment management fee at the
annual rate of .50% of average daily net assets of the Fund. Zurich Investment
Management Limited ("ZIML"), an affiliate of ZKI, is the sub-adviser for the
Fund and is paid by ZKI a fee of .35% of the portion of the average daily net
assets of the Fund allocated by ZKI to ZIML for management. Zurich Kemper
Distributors, Inc. ("ZKDI"), a wholly owned subsidiary of ZKI, is the Fund's
principal underwriter and administrator. Administrative services are provided to
shareholders under an administrative services agreement with ZKDI. The Fund pays
an administrative services fee at the annual rate of up to .25% of average daily
net assets of the Fund, which ZKDI pays to financial services firms. See
"Investment Manager and Underwriter."

PURCHASES AND REDEMPTIONS. Investors may purchase the Fund's shares only during
a limited offering period (the "Offering Period"). Purchases may be made at net
asset value plus a maximum sales charge of 5.0% of the offering

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<PAGE> 5

price. Reduced sales charges apply to purchases of $100,000 or more. The minimum
initial investment is $1,000 and the minimum subsequent investment is $100. The
minimum initial investment for an employee benefit plan or Individual Retirement
Account is $250 and the minimum subsequent investment is $50. It is anticipated
that the Offering Period will continue until May 15, 1998 but the period may be
shortened or extended at the option of the Fund. Shareholders will still be
permitted to reinvest dividends in shares of the Fund after the end of the
Offering Period. Shares may be redeemed without charge or penalty at net asset
value, which may be more or less than original cost. Shares purchased at net
asset value under the Large Order NAV Purchase Privilege may be subject to a 1%
contingent deferred sales charge if redeemed within one year of purchase and a
.50% contingent deferred sales charge if redeemed during the second year of
purchase. See "Purchase of Shares" and "Redemption or Repurchase of Shares."

INVESTORS IN THE FUND. The Fund is designed for long-term investors who seek
principal protection as well as the opportunity for capital growth, such as
investors who want to provide for future health care costs, fund college
education costs or fund IRAs or other tax-qualified retirement plans. Through a
single investment in shares of the Fund, investors receive the benefits of
diversification, professional management and liquidity, and relief from
administrative details such as accounting for distributions and the safekeeping
of securities.

DIVIDENDS. The Fund normally distributes annual dividends of net investment
income and any net realized short-term and long-term capital gains. Investors
may have income and capital gain dividends automatically reinvested in the Fund
without a sales charge and must do so in order to receive the benefit of the
Fund's Investment Protection. See "Dividends and Taxes."

GENERAL INFORMATION AND CAPITAL. The Trust is organized as a business trust
under the laws of Massachusetts and may issue an unlimited number of shares of
beneficial interest in one or more series, one of such series being the Fund.
Shares 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; but 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. See
"Capital Structure."

SUMMARY OF EXPENSES

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<S> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Charge on Purchases (as a percentage of
offering price)........................................... 5.0%
Maximum Sales Charge on Reinvested Dividends................ None
Deferred Sales Charge....................................... None(2)
Redemption Fees............................................. None
Exchange Fee................................................ None
ANNUAL FUND OPERATING EXPENSES (as a percentage of average
net assets)
Management Fees............................................. .50%
12b-1 Fees.................................................. None
Other Expenses.............................................. .60%
----
Total Operating Expenses.................................... 1.10%
====
</TABLE>

- ---------------
(1) Investment dealers and other firms may independently charge additional fees
for shareholder transactions or for advisory services; please see their
materials for details. Reduced sales charges apply to purchases of $100,000
or more. See "Purchase of Shares."

(2) The redemption of shares purchased at net asset value under the Large Order
NAV Purchase Privilege may be subject to a contingent deferred sales charge
of 1% the first year and .50% the second year. See "Purchase of Shares."

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<PAGE> 6

EXAMPLE

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<S> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming 1 YEAR 3 YEARS
(1)5% annual return and (2) redemption at the end of each
time period: $61 $83
</TABLE>

The purpose of the preceding table is to assist investors in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. The Example assumes a 5% annual rate of return pursuant to
requirements of the Securities and Exchange Commission. This hypothetical rate
of return is not intended to be representative of past or future performance of
the Fund. THE EXAMPLE SHOULD NOT BE CONSIDERED TO BE A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS

OBJECTIVES. The objectives of the Fund are to provide a guaranteed return of
investment on the Maturity Date (May 15, 2008) to investors who reinvest all
dividends and hold their shares to the Maturity Date and to provide long-term
growth of capital. As a fundamental policy, the Fund pursues its objectives by
investing a portion of its assets in "zero coupon" U.S. Treasury obligations
("Zero Coupon Treasuries") and the balance of its assets primarily in common
stocks ("Equity Securities").

The Fund is intended for long-term investors who seek principal protection as
well as the opportunity for capital growth, such as investors who want to
provide for future health care costs, fund college education costs or fund IRAs
or other tax-qualified retirement plans. The Fund is designed so that
shareholders who reinvest all dividends and hold their investment until the
Maturity Date will receive on the Maturity Date an amount at least equal to
their original investment, including any sales charge ("Investment Protection").
This will occur even if the value of the investments of the Fund other than the
Zero Coupon Treasuries were to decrease to zero, which the investment manager
considers highly unlikely. The assurance that investors who reinvest all
dividends and hold their shares until the Maturity Date will receive on the
Maturity Date at least their original investment is provided by the par value of
the Zero Coupon Treasuries in the Fund's portfolio as well as by a guarantee
from Zurich Kemper Investments, Inc. ("ZKI"), the Fund's investment manager. See
"How the Fund Works" below. Investors who do not reinvest all dividends or who
redeem part or all of their investment in the Fund other than on the Maturity
Date will not receive the benefit of the Fund's Investment Protection, and upon
the redemption may receive more or less than the amount of their original
investment; provided, however, in the event of a partial redemption, the Fund's
Investment Protection will continue as to that part of the original investment
that remains invested (with all dividends thereon reinvested) until the Maturity
Date. The Fund may not be appropriate for investors who expect to redeem their
investment in the Fund prior to the Maturity Date or who will require cash
distributions from the Fund. Since the benefit of Investment Protection is an
inherent characteristic of the Fund's shares, it continues in the event of a
transfer of the shares by gift, under a will or otherwise, provided dividends on
the shares continue to be reinvested and the shares continue to be held until
the Maturity Date.

The opportunity for capital growth for an investor arises to the extent that the
value of the Fund's assets, including Equity Securities, is greater than the par
value of the Zero Coupon Treasuries on the Maturity Date. Thus, the Fund in
effect will have two major portfolio segments: one consisting of Zero Coupon
Treasuries to pursue Investment Protection and the other consisting of Equity
Securities to pursue long-term capital growth. The Fund's returns and net asset
value will fluctuate. There is no assurance that the Fund will achieve its
objective of long-term capital growth.

HOW THE FUND WORKS. As noted above, the Fund will invest in Zero Coupon
Treasuries and Equity Securities in pursuing its objectives. Zero Coupon
Treasuries evidence the right to receive a fixed payment at a specific future
date from the U.S. Government. The Fund will offer its shares during a limited
offering period (the "Offering Period") at net asset value plus the applicable
sales charge. See "Purchase of Shares." The Zero Coupon Treasuries that the Fund
acquires with the proceeds of the sale of its shares during the Offering Period
will be selected so as to mature at a specific par value on or about the
Maturity Date. The Fund's investment manager will continuously adjust the
proportion of the Fund's assets that are invested in Zero Coupon Treasuries so
that the value of the Zero Coupon Treasuries on the Maturity Date (i.e., the
aggregate par value of the Zero Coupon Treasuries in the portfolio) will be
sufficient to enable investors who reinvest all dividends and hold their
investment in the Fund until the Maturity Date to receive on the Maturity Date
the full amount of such

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<PAGE> 7

investment, including any sales charge. Thus, the minimum par value of Zero
Coupon Treasuries per Fund share necessary to provide for the Fund's Investment
Protection will be continuously determined and maintained.

In order to provide further assurance that the Fund's Investment Protection will
be maintained, ZKI has entered into a Guaranty Agreement. Under the Guaranty
Agreement, ZKI has agreed to make sufficient payments on the Maturity Date to
enable shareholders who have reinvested all dividends and held their investment
in the Fund until the Maturity Date to receive on the Maturity Date an aggregate
amount of redemption proceeds and payments under the Guaranty Agreement equal to
the amount of their original investment, including any sales charge.

The portion of the Fund's assets that will be allocated to the purchase of Zero
Coupon Treasuries will fluctuate during the Offering Period. This is because the
value of the Zero Coupon Treasuries and Equity Securities, and therefore the
offering price of the Fund's shares, will fluctuate with changes in interest
rates and other market value fluctuations. If the offering price of the Fund's
shares increases during the Offering Period, the minimum par value of Zero
Coupon Treasuries per Fund share necessary to provide for the Fund's Investment
Protection will increase and this amount will be fixed by the highest offering
price during the Offering Period. The Fund may hold Zero Coupon Treasuries in an
amount in excess of the amount necessary to provide for the Fund's Investment
Protection in the discretion of the Fund's investment manager. During the
Offering Period, under normal market conditions, the proportion of the Fund's
portfolio invested in Zero Coupon Treasuries may be expected to range from 50%
to 65%; but a greater or lesser percentage is possible.

As the percentage of Zero Coupon Treasuries in the Fund's portfolio increases,
the percentage of Equity Securities in the portfolio will necessarily decrease.
This will result in less potential for capital growth from equity securities. In
order to help ensure at least a minimum level of exposure to the equity markets
for shareholders, the Fund will cease offering its shares if their continued
offering would cause more than 70% of its assets to be allocated to Zero Coupon
Treasuries. After the Offering Period is over, no additional assets will be
allocated to the purchase of Zero Coupon Treasuries. However, since the values
of the Zero Coupon Treasuries and Equity Securities are often affected in
different ways by changes in interest rates and other market conditions and will
often fluctuate independently, the percentage of the Fund's net asset value
represented by Zero Coupon Treasuries will continue to fluctuate after the end
of the Offering Period. Zero Coupon Treasuries may be liquidated before the
Maturity Date to meet redemptions and pay cash dividends, provided that the
minimum amount necessary to provide for the Fund's Investment Protection is
maintained.

Shareholders who elect to receive dividends in cash are in effect withdrawing a
portion of the accreted income on the Zero Coupon Treasuries that are held to
protect their original principal investment at the Maturity Date. These
shareholders will receive the same net asset value per share for any Fund shares
redeemed at the Maturity Date as shareholders who reinvest dividends, but they
will have fewer shares to redeem than shareholders similarly situated who had
reinvested all dividends. Shareholders who redeem some or all of their shares
before the Maturity Date lose the benefit of Investment Protection with respect
to those shares redeemed. Thus, investors are encouraged to reinvest all
dividends and to evaluate their need to receive some or all of their investment
prior to the Maturity Date before making an investment in the Fund.

ZERO COUPON TREASURIES. The Zero Coupon Treasuries held by the Fund will
consist of U.S. Treasury notes or bonds that have been stripped of their
unmatured interest coupons or will consist of unmatured interest coupons from
U.S. Treasury notes or bonds. The Zero Coupon Treasuries evidence the right to
receive a fixed payment at a future date (i.e., the Maturity Date) from the U.S.
Government, and are backed by the full faith and credit of the U.S. Government.
The guarantee of the U.S. Government does not apply to the market value of the
Zero Coupon Treasuries owned by the Fund or to the shares of the Fund. The
market value of Zero Coupon Treasuries generally will fluctuate inversely with
changes in interest rates. As interest rates rise, the value of the Zero Coupon
Treasuries will tend to decline and as interest rates fall the value of the Zero
Coupon Treasuries will tend to increase. Zero Coupon Treasuries are purchased at
a deep discount because the buyer obtains only the right to a fixed payment at a
fixed date in the future and does not receive any periodic interest payments.
The effect of owning deep discount bonds that do not make current interest
payments (such as the Zero Coupon Treasuries) is

4
<PAGE> 8

that a fixed yield is earned not only on the original investment but also, in
effect, on all earnings during the life of the discount obligation. This
implicit reinvestment of earnings at the same rate eliminates the risk of being
unable to reinvest the income on such obligations at a rate as high as the
implicit yield on the discount obligation, but at the same time eliminates the
holder's ability to reinvest at higher rates in the future. For this reason, the
Zero Coupon Treasuries normally are subject to substantially greater price
fluctuations during periods of changing interest rates than are securities of
comparable quality that make regular interest payments. As the maturity of the
Zero Coupon Treasuries becomes shorter (i.e., as the period to the Maturity Date
is shorter), the degree of price fluctuation will become less. Additional
information concerning Zero Coupon Treasuries appears in the Statement of
Additional Information of the Fund under "Investment Policies and Techniques."

EQUITY SECURITIES. With respect to Fund assets not invested in Zero Coupon
Treasuries, the Fund will seek long-term capital growth through professional
management and diversification of investments in securities the Fund's
investment manager believes to have possibilities for capital growth. In seeking
to achieve capital growth, it will be the Fund's policy to invest assets not
otherwise invested in Zero Coupon Treasuries primarily in securities that the
Fund's investment manager believes offer the potential for increasing the Fund's
total asset value. While it is anticipated that most investments will be in
common stocks of companies with above-average growth prospects, investments may
also be made to a limited degree in other common stocks, warrants and in
convertible securities, such as bonds and preferred stocks. Factors that the
Fund's investment manager may consider in making its equity investments are
patterns of growth in sales and earnings, the development of new or improved
products or services, a favorable outlook for growth in the industry, the
probability of increased operating efficiencies, emphasis on research and
development, cyclical conditions, and other signs that a company is expected to
show greater than average capital growth and earnings growth. The Fund's
investment policy with respect to these assets may involve a somewhat greater
risk than is inherent in some other investment securities. Also, any income
received from such securities will be incidental.

In seeking to obtain capital growth, the Fund may trade to some degree in
securities for the short-term. To this extent, the Fund will be engaged in
trading operations based on short-term market considerations as distinct from
long-term investment based upon fundamental valuation of securities.

The Fund may also purchase options on securities and index options, may purchase
and sell financial futures contracts and options on financial futures contracts,
may purchase foreign securities and engage in related foreign currency
transactions and may at times lend its portfolio securities. There may also be
times when a significant portion of the Fund's assets not invested in Zero
Coupon Treasuries may be held temporarily in cash or defensive type securities
such as high-grade debt securities, securities of the U.S. Government and its
agencies and high quality money market instruments, including repurchase
agreements, depending upon the investment manager's analysis of business and
economic conditions and the outlook for security prices.

SPECIAL RISK FACTORS. The value of the Zero Coupon Treasuries and the Equity
Securities in the Fund's portfolio will fluctuate prior to the Maturity Date and
the value of the Zero Coupon Treasuries will equal their par value on the
Maturity Date. As noted previously (see "Zero Coupon Treasuries"), the value of
the Zero Coupon Treasuries may be expected to experience more volatility than
U.S. Government securities that have similar yields and maturities but that make
current distributions of interest. Thus, the net asset value of the Fund's
shares will fluctuate with changes in interest rates and other market conditions
prior to the Maturity Date. As an open-end investment company, the Fund will
redeem its shares at the request of a shareholder at the net asset value per
share next determined after a request is received in proper form. Thus,
shareholders who redeem their shares prior to the Maturity Date may receive more
or less than their acquisition cost, including any sales charge, whether or not
they reinvest their dividends. Such shares, therefore, would not receive the
benefit of the Fund's Investment Protection. Any shares not redeemed prior to
the Maturity Date by a shareholder would continue to receive the benefit of the
Fund's Investment Protection provided that all dividends with respect to such
shares are reinvested. Accordingly, the Fund may not be appropriate for
investors who expect to redeem their investment in the Fund prior to the
Maturity Date.

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<PAGE> 9

Each year the Fund will be required to accrue an increasing amount of income on
its Zero Coupon Treasuries utilizing the effective interest method. However, to
maintain its tax status as a pass-through entity under Subchapter M of the
Internal Revenue Code and also to avoid imposition of excise taxes, the Fund
will be required to distribute dividends equal to substantially all of its net
investment income, including the accrued income on its Zero Coupon Treasuries
for which it receives no payments in cash prior to their maturity. Dividends of
the Fund's investment income and short-term capital gains will be taxable to
shareholders as ordinary income for federal income tax purposes, whether
received in cash or reinvested in additional shares. See "Dividends and Taxes."
However, shareholders who elect to receive dividends in cash, instead of
reinvesting these amounts in additional shares of the Fund, may realize an
amount upon redemption of their investment on the Maturity Date that is less or
greater than their acquisition cost and, therefore, will not receive the benefit
of the Fund's Investment Protection. Accordingly, the Fund may not be
appropriate for investors who will require cash distributions from the Fund in
order to meet current tax obligations resulting from their investment or for
other needs.

As noted previously, the Fund will maintain a minimum par value of Zero Coupon
Treasuries per share in order to provide for the Fund's Investment Protection.
In order to generate sufficient cash to meet dividend requirements and other
operational needs and to redeem Fund shares on request, the Fund may be required
to limit reinvestment of capital on the disposition of Equity Securities and may
be required to liquidate Equity Securities at a time when it is otherwise
disadvantageous to do so, which may result in the realization of losses on the
disposition of such securities, and may also be required to borrow money to
satisfy dividend and redemption requirements. The liquidation of Equity
Securities and the expenses of borrowing money in such circumstances could
impair the ability of the Fund to meet its objective of long-term capital
growth.

The Fund provides Investment Protection to investors who reinvest all dividends
and do not redeem their shares before the Maturity Date. In addition, as noted
above, dividends from the Fund will be taxable to shareholders whether received
in cash or reinvested in additional shares. Thus, the Fund does not provide a
specific return on investors' capital or protect principal on an after-tax or
present value basis. An investor who reinvested all dividends and who, upon
redemption at the Maturity Date, received only the original amount invested
including any sales charge, would have received a zero rate of return on such
investment. This could only happen if the value of the Fund's investments other
than Zero Coupon Treasuries were to decrease to zero, an event that the Fund's
investment manager considers highly unlikely. The present value of $1,000 on the
Maturity Date discounted for inflation assumed to be at an annual rate of 4% is
approximately $649 on the date of this prospectus.

Investors subject to tax should be aware that any portion of the amount returned
to them upon redemption of shares that constitutes accretion of interest on the
Zero Coupon Treasuries will have been taxable each year as ordinary income over
the period during which shares were held. See "Dividends and Taxes."

The Fund may purchase options on securities and index options, may purchase and
sell financial futures contracts and options on financial futures contracts, may
purchase foreign securities and engage in related foreign currency transactions
and may at times lend its portfolio securities. See "Additional Investment
Information" below for a discussion of these investment techniques and the
related risks.

MATURITY DATE. The Board of Trustees of the Trust may in its sole discretion
elect, without shareholder approval, to continue the operation of the Fund after
the Maturity Date with a new maturity date ("New Maturity Date"). Such a
decision may be made to provide shareholders with the opportunity of continuing
their investment in the Fund for a new term without recognizing any taxable
capital gains as a result of a redemption. In that event, shareholders of the
Fund may either continue as such or redeem their shares in the Fund.
Shareholders who reinvest all dividends and hold their shares to the Maturity
Date will be entitled to the benefit of the Fund's Investment Protection on the
Maturity Date whether they continue as shareholders or redeem their shares. If
this alternative were to be elected, the Fund would at the Maturity Date collect
the proceeds of the Zero Coupon Treasuries that mature on such date and, after
allowing for any redemption requests by shareholders, reinvest

6
<PAGE> 10

such proceeds in Zero Coupon Treasuries and Equity Securities as necessary to
provide for the Fund's Investment Protection benefit on the New Maturity Date.
For such purposes, the principal investment of shareholders then in the Fund
would be deemed to be the net asset value of their investment in the Fund at the
current Maturity Date. Thus, in effect, the total value of such shareholders'
investment in the Fund on the current Maturity Date will be treated as an
investment for the new term and will benefit from the Fund's Investment
Protection for the new term if they reinvest all dividends and maintain their
investment in the Fund until the New Maturity Date. If the Board of Trustees
elects to continue the Fund, shareholders will be given 60 days' prior notice of
such election and the New Maturity Date. In that event, it is anticipated that
the offering of the Fund's shares would commence again after the Maturity Date
with a new prospectus for such period as the Board of Trustees shall determine.

On the Maturity Date, the Fund may also be terminated at the election of the
Board of Trustees of the Trust in its sole discretion and without approval by
shareholders, upon 60 days' prior notice to shareholders. In such event, the
proceeds of the Zero Coupon Treasuries maturing on such date shall be collected
and the Equity Securities and other assets then owned by the Fund shall be sold
or otherwise reduced to cash, the liabilities of the Fund will be discharged or
otherwise provided for, the Fund's outstanding shares will be mandatorily
redeemed at the net asset value per share determined on the Maturity Date and,
within seven days thereafter, the Fund's net assets will be distributed to
shareholders and the Fund shall be thereafter terminated. Termination of the
Fund may require the disposition of the Equity Securities at a time when it is
otherwise disadvantageous to do so and may involve selling securities at a
substantial loss. The estimated expenses of liquidation and termination of the
Fund, however, are not expected to affect materially the ability of the Fund to
provide for its Investment Protection benefit. In the event of termination of
the Fund as noted above, the redemption of shares effected in connection with
such termination would for current federal income tax purposes constitute a sale
upon which a gain or loss may be realized depending upon whether the value of
the shares being redeemed is more or less than the shareholder's adjusted cost
basis of such shares.

Subject to shareholder approval, other alternatives may be pursued by the Fund
after the Maturity Date. For instance, the Board of Trustees may consider the
possibility of a tax-free reorganization between the Fund and another registered
open-end management investment company or any other series of the Trust. The
Board of Trustees has not considered any possibilities regarding the operation
of the Fund after the Maturity Date.

ADDITIONAL INVESTMENT INFORMATION. The annual turnover rate of the Fund's
portfolio may vary from year to year, and may also be affected by cash
requirements for redemptions and repurchases of Fund shares, and by the
necessity of maintaining the Fund as a regulated investment company under the
Internal Revenue Code in order to receive certain favorable tax treatment. It is
anticipated that, under normal circumstances, the Fund's portfolio turnover rate
will be less than 100%.

The Fund may not borrow money except as a temporary measure for extraordinary or
emergency purposes, and then only in an amount up to one-third of the value of
its total assets, in order to meet redemption requests without immediately
selling any portfolio securities or other assets. If, for any reason, the
current value of the Fund's total assets falls below an amount equal to three
times the amount of its indebtedness from money borrowed, the Fund will, within
three days (not including Sundays and holidays), reduce its indebtedness to the
extent necessary. The Fund will not borrow for leverage purposes. The Fund may
pledge up to 15% of its total assets to secure any such borrowings. The Fund
will not purchase illiquid securities, including repurchase agreements maturing
in more than seven days, if, as a result thereof, more than 10% of the Fund's
net assets, valued at the time of the transaction, would be invested in such
securities. The Fund may invest in securities eligible for resale pursuant to
Rule 144A under the Securities Act of 1933. This rule permits otherwise
restricted securities to be sold to certain institutional buyers, such as the
Fund. Such securities may be illiquid and subject to the Fund's limitation on
illiquid securities. A "Rule 144A" security may be treated as liquid, however,
if so determined pursuant to procedures adopted by the Board of Trustees.
Investing in Rule 144A securities could have the effect of increasing the level
of illiquidity in the Fund to the extent that qualified institutional buyers
become uninterested for a time in purchasing Rule 144A securities.

7
<PAGE> 11

The Trust has adopted for the Fund certain fundamental investment restrictions
which are presented in the Statement of Additional Information and which,
together with its investment objectives and any policies of the Fund
specifically designated in this prospectus as fundamental, cannot be changed
without approval by holders of a majority of its outstanding voting shares. As
defined in the Investment Company Act of 1940, this means the lesser of the vote
of (a) 67% of the shares of the Fund present at a meeting where more than 50% of
the outstanding shares are present in person or by proxy; or (b) more than 50%
of the outstanding shares of the Fund. Policies of the Fund that are neither
designated as fundamental nor incorporated into any of the fundamental
investment restrictions referred to above may be changed by the Board of
Trustees of the Fund without shareholder approval. Notwithstanding the
foregoing, the Board of Trustees may, in its discretion and without shareholder
approval, determine that the Fund should be terminated on the Maturity Date or
continued thereafter with a New Maturity Date as more fully described under
"Maturity Date" above.

OPTIONS AND FINANCIAL FUTURES TRANSACTIONS. The Fund may invest up to five
percent of its net assets in put and call options on securities. A put option
gives the holder (buyer) the right to sell a security at a specified price (the
exercise price) at any time until a certain date (the expiration date). A call
option gives the holder (buyer) the right to purchase a security or other asset
at a specified price (the exercise price) at any time until a certain date (the
expiration date). The Fund will only invest in options that are traded on
securities exchanges and for which it pays a premium (cost of option). As part
of its options transactions, the Fund may also purchase options on securities
indices in an attempt to hedge against market conditions affecting the values of
securities that the Fund owns or intends to purchase, and not for speculation.
Options on securities indices are similar to options on a security except that,
rather than the right to take or make delivery of a security at a specified
price, an option on a securities index gives the holder the right to receive,
upon exercise of the option, an amount of cash if the closing level of the
securities index upon which the option is based is greater than, in the case of
a call, or less than, in the case of a put, the exercise price of the option. In
connection with its foreign securities investments, the Fund may also purchase
foreign currency options. The Fund may enter into closing transactions, exercise
its options or permit them to expire.

The Fund may engage in financial futures transactions. Financial futures
contracts are commodity contracts that obligate the long or short holder to take
or make delivery of a specified quantity of a financial instrument, such as a
security, or the cash value of a securities index during a specified future
period at a specified price. The Fund will "cover" futures contracts sold by the
Fund and maintain in a segregated account certain liquid assets in connection
with futures contracts purchased by the Fund as described under "Investment
Policies and Techniques" in the Statement of Additional Information. In
connection with its foreign securities investments, the Fund may also engage in
foreign currency financial futures transactions. The Fund will not enter into
any futures contracts or options on futures contracts if the aggregate of the
contract value of the outstanding futures contracts of the Fund and futures
contracts subject to outstanding options written by the Fund would exceed 50% of
the total assets of the Fund.

The Fund may engage in financial futures transactions as an attempt to hedge
against market risks. For example, when the near-term market view is bearish but
the portfolio composition is judged satisfactory for the longer term, exposure
to temporary declines in the market may be reduced by entering into futures
contracts to sell securities or the cash value of a securities index.
Conversely, where the near-term view is bullish, but the Fund is believed to be
well positioned for the longer term with a high cash position, the Fund can
hedge against market increases by entering into futures contracts to buy
securities or the cash value of a securities index. In either case, the use of
futures contracts would tend to reduce portfolio turnover and facilitate the
Fund's pursuit of its investment objectives.

Futures contracts entail risks. If the investment manager's judgment about the
general direction of interest rates, markets or exchange rates is wrong, the
overall performance may be poorer than if no such contracts had been entered
into. There may be an imperfect correlation between movements in prices of
futures contracts and portfolio assets being hedged. In addition, the market
prices of futures contracts may be affected by certain factors. For example, if
participants in the futures market elect to close out their contracts rather
than meet

8
<PAGE> 12

margin requirements, distortions in the normal relationship between the
underlying assets and futures markets could result. Price distortions also could
result if investors in futures contracts decide to make or take delivery of
underlying securities or other assets rather than engage in closing transactions
because of the resultant reduction in the liquidity of the futures market. In
addition, because, from the point of view of speculators, margin requirements in
the futures market are less onerous than margin requirements in the cash market,
increased participation by speculators in the futures market could cause
temporary price distortions. Due to the possibility of price distortions in the
futures market and because of the imperfect correlation between movements in the
prices of securities or other assets and movements in the prices of futures
contracts, a correct forecast of market trends by the investment manager still
may not result in a successful hedging transaction. If any of these events
should occur, the Fund could lose money on the financial futures contracts and
also on the value of its portfolio assets. The costs incurred in connection with
futures transactions could reduce the Fund's return.

Index options involve risks similar to those risks relating to transactions in
financial futures contracts described above. Also, an option purchased by the
Fund may expire worthless, in which case the Fund would lose the premium paid
therefor.

The Fund may engage in futures transactions only on commodities exchanges or
boards of trade. The Fund will not engage in transactions in financial futures
contracts or related options for speculation, but only as an attempt to hedge
against changes in market conditions affecting the values of securities that the
Fund owns or intends to purchase.

DERIVATIVES. In addition to options and financial futures, consistent with its
objective, the Fund may invest in a broad array of financial instruments and
securities in which the value of the instrument or security is "derived" from
the performance of an underlying asset or a "benchmark" such as a security
index, an interest rate or a currency ("derivatives"). Derivatives are most
often used to manage investment risk, to increase or decrease exposure to an
asset class or benchmark (as a hedge or to enhance return), or to create an
investment position indirectly (often because it is more efficient or less
costly than direct investment). The types of derivatives used by the Fund and
the techniques employed by the investment manager may change over time as new
derivatives and strategies are developed or regulatory changes occur.

RISK FACTORS. The Statement of Additional Information contains further
information about the characteristics, risks and possible benefits of options,
futures and other derivatives transactions. See "Investment Policies and
Techniques" in the Statement of Additional Information. The principal risks are:
(a) possible imperfect correlation between movements in the prices of options,
futures or other derivatives contracts and movements in the prices of the
securities or currencies hedged, used for cover or that the derivatives intended
to replicate; (b) lack of assurance that a liquid secondary market will exist
for any particular option, futures or other derivatives contract at any
particular time; (c) the need for additional skills and techniques beyond those
required for normal portfolio management; (d) losses on futures contracts
resulting from market movements not anticipated by the investment manager; (e)
the possible need to defer closing out certain options, futures or other
derivatives contracts in order to continue to qualify for beneficial tax
treatment afforded "regulated investment companies" under the Internal Revenue
Code; and (f) the possible non-performance of the counter-party to the
derivatives contract.

LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, the Fund may lend its portfolio securities (principally to
broker-dealers) without limit where such loans are callable at any time and are
continuously secured by segregated collateral (cash or other liquid securities)
equal to no less than the market value, determined daily, of the securities
loaned. The Fund will receive amounts equal to dividends or interest on the
securities loaned. It will also earn income for having made the loan. Any cash
collateral pursuant to these loans will be invested in short-term money market
instruments. As with other extensions of credit, there are risks of delay in
recovery or even loss of rights in the collateral should the borrower of the
securities fail financially. However, the loans would be made only to firms
deemed by the Fund's investment manager to be of good

9
<PAGE> 13

standing, and when the Fund's investment manager believes the potential earnings
to justify the attendant risk. Management will limit such lending to not more
than one-third of the value of the Fund's total assets.

FOREIGN SECURITIES. Although the Fund will invest primarily in securities that
are publicly traded in the United States, it has the discretion to invest a
portion of its assets in foreign securities that are traded principally in
securities markets outside the United States. The Fund currently limits
investment in foreign securities not publicly traded in the United States to
less than 10% of its total assets. The Fund may also invest in U.S. Dollar
denominated American Depository Receipts ("ADRs"), which are bought and sold in
the United States and are not subject to the preceding limitation. Foreign
securities present certain risks in addition to those presented by domestic
securities, including risks associated with currency fluctuations, possible
imposition of foreign governmental regulations or taxes adversely affecting
portfolio securities and generally different degrees of liquidity, market
volatility and availability of information. However, the Fund intends to invest
in foreign securities only when the potential benefits to it are deemed by the
Fund's investment manager to outweigh those risks. The Fund may make investments
in developing countries that are in the initial stages of their
industrialization cycle. In the past, markets of developing countries have been
more volatile than the markets of developed countries; however such markets
often have provided higher rates of return to investors. Investments in foreign
securities may include securities issued by enterprises that have undergone or
are currently undergoing privatization. In connection with its foreign
securities investments, the Fund may, to a limited extent, engage in foreign
currency exchange transactions, purchase foreign currency options and purchase
and sell foreign currency futures contracts. More complete information
concerning foreign securities and related techniques is contained under
"Investment Policies and Techniques--Foreign Securities and Foreign Currency
Transactions" in the Statement of Additional Information.

INVESTMENT MANAGER AND UNDERWRITER

INVESTMENT MANAGER. Zurich Kemper Investments, Inc. ("ZKI"), 222 South Riverside
Plaza, Chicago, Illinois 60606, is the investment manager of the Fund and
provides the Fund with continuous professional investment supervision. ZKI is
one of the largest investment managers in the country and has been engaged in
the management of investment funds for more than forty-eight years. ZKI and its
affiliates provide investment advice and manage investment portfolios for the
Kemper Funds, Zurich Money Funds, affiliated insurance companies and other
corporate, pension, profit-sharing and individual accounts representing
approximately $79 billion under management. ZKI acts as investment manager for
32 open-end and seven closed-end investment companies, with 82 separate
investment portfolios, representing more than 2.5 million shareholder accounts.
ZKI is an indirect subsidiary of Zurich Insurance Company, an internationally
recognized provider of financial services in property/casualty and life
insurance, reinsurance and asset management.

Responsibility for overall management of the Fund rests with the Board of
Trustees and officers of the Trust. Professional investment supervision is
provided by ZKI. The investment management agreement provides that ZKI shall act
as the Fund's investment adviser, manage its investments and provide it with
various services and facilities. Zurich Investment Management Limited ("ZIML"),
1 Fleet Place, London, U.K. EC4M 7RQ, an affiliate of ZKI, is the sub-adviser
for the Fund. ZIML is an indirect subsidiary of Zurich Insurance Company and has
served as sub-adviser for mutual funds since December, 1996 and investment
adviser for certain institutional accounts since August, 1988. Under the terms
of the sub-advisory agreement between ZIML and ZKI, ZIML renders investment
advisory and management services with regard to such portion of the Fund's
portfolio as may be allocated to ZIML by ZKI from time to time for management of
foreign securities, including foreign currency transactions and related
investments. ZKI pays ZIML for its services a sub-advisory fee, payable monthly
at the annual rate of .35% of the portion of the average daily net assets of the
Fund allocated by ZKI to ZIML for management.

Tracy McCormick Chester is the portfolio manager of the Fund. She has served in
this capacity since the Fund commenced operations in May 1997. Ms. McCormick
Chester joined ZKI in September 1994. She is a vice

10
<PAGE> 14

president of the Trust and senior vice president of ZKI. Prior to coming to ZKI,
she was a senior vice president and portfolio manager of an investment
management company and prior thereto, she managed private accounts. She received
a B.A. and a M.B.A. in Finance from Michigan State University, East Lansing,
Michigan.

The Fund pays ZKI an investment management fee, payable monthly, at the annual
rate of .50% of average daily net assets of the Fund. The investment management
agreement provides that the Fund shall pay the charges and expenses of its
operations, including the fees and expenses of the trustees (except those
affiliated with ZKI), independent auditors, counsel, custodian and transfer
agent and the cost of share certificates, reports and notices to shareholders,
brokerage commissions or transaction costs, costs of calculating net asset
value, taxes and membership dues.

PRINCIPAL UNDERWRITER. Pursuant to an underwriting agreement, Zurich Kemper
Distributors, Inc. ("ZKDI"), a wholly owned subsidiary of ZKI, is the principal
underwriter of the Fund's shares and acts as agent of the Fund in the sale of
its shares. ZKDI receives no compensation from the Fund as principal underwriter
and pays all expenses of distribution of the Fund's shares under the
underwriting agreement not otherwise paid by dealers or other financial services
firms. The Fund bears the expense of registration of its shares with the
Securities and Exchange Commission, while ZKDI, as underwriter, pays the cost of
qualifying and maintaining the qualification of the Fund's shares for sale under
the securities laws of the various states. As indicated under "Purchase of
Shares," ZKDI retains the sales charge upon the purchase of shares and pays or
allows concessions or discounts to firms for the sale of Fund shares.

ADMINISTRATOR. ZKDI also provides information and administrative services for
Fund shareholders pursuant to an administrative services agreement
("administrative agreement"). ZKDI enters 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
in the Fund. Such administrative 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 and its special features, and such other administrative services as may be
agreed upon from time to time and permitted by applicable statute, rule or
regulation. ZKDI bears all its expenses of providing services pursuant to the
administrative agreement, including the payment of any service fees. For
services under the administrative agreement, the Fund pays ZKDI a fee, payable
monthly, at the annual rate of up to .25% of average daily net assets of the
Fund. ZKDI then pays each firm a service fee at an annual rate of up to .25% of
net assets of those accounts in the Fund maintained and serviced by the firm.
Firms to which service fees may be paid include affiliates of ZKDI. A firm
becomes eligible for the service fee based on assets in the accounts in the
month following the month of purchase and the fee continues until terminated by
ZKDI or the Fund. The fees are calculated monthly and paid quarterly.

ZKDI 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 ZKDI is based only upon Fund assets in
accounts for which a firm provides administrative services and it is intended
that ZKDI will pay all the administrative services fees that it receives from
the Fund to firms in the form of service fees. The effective administrative
services fee rate to be charged against all assets of the Fund while this
procedure is in effect would depend upon the proportion of Fund assets that is
in accounts for which a firm provides administrative services. In addition, ZKDI
may, from time to time, from its own resources pay certain firms additional
amounts for ongoing administration services and assistance provided to their
customers and clients who are shareholders of the Fund.

11
<PAGE> 15

and sold by the Fund. IFTC also is the Fund's transfer agent and dividend-paying
agent. Pursuant to a services agreement with IFTC, Zurich Kemper Service
Company, an affiliate of ZKI, serves as "Shareholder Service Agent" of the Fund
and, as such, performs all of IFTC's duties as transfer agent and dividend
paying agent. For a description of transfer agent and shareholder service agent
fees payable to IFTC and the Shareholder Service Agent, see "Investment Manager
and Underwriter" in the Statement of Additional Information.

PORTFOLIO TRANSACTIONS. ZKI and ZIML place all orders for purchases and sales of
the Fund's securities. Subject to seeking best execution of orders, ZKI and ZIML
may consider sales of shares of the Fund and other funds managed by ZKI or its
affiliates as a factor in selecting broker-dealers. See "Portfolio Transactions"
in the Statement of Additional Information.

DIVIDENDS AND TAXES

DIVIDENDS. The Fund will normally distribute annual dividends of net investment
income and any net realized short-term and long-term capital gains.

Income dividends and capital gain dividends, if any, will be credited to
shareholder accounts in full and fractional Fund shares at net asset value on
the reinvestment date without sales charge 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 at net asset value; or

(2) To receive income and capital gain dividends in cash.

Any dividends that are reinvested will be reinvested in shares of the Fund. The
Fund will reinvest dividend checks (and future dividends) in shares of the Fund
if checks are returned as undeliverable. Dividends and other distributions in
the aggregate amount of $10 or less are automatically reinvested in shares of
the Fund unless the shareholder requests that such policy not be applied to the
shareholder's account. Upon written request by a shareholder to the Shareholder
Service Agent, a share certificate will be issued for any or all full shares
credited to the shareholder's account. As noted previously (see "Investment
Objectives, Policies and Risk Factors--How the Fund Works and Special Risk
Factors"), only shareholders who reinvest all their dividends in the Fund and
hold their shares until the Maturity Date will receive the benefit of the Fund's
Investment Protection.

TAXES. The Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code ("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 and long-term
capital gain dividends are taxable to shareholders as long-term capital gain
regardless of how long the shares have been held and whether received in cash or
shares. Long-term capital gain dividends received by individual shareholders are
taxed at a maximum rate of 28%. 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. It is anticipated that a portion of the ordinary income dividends
paid by the Fund will qualify for the dividends received deduction available to
corporate shareholders.

The Zero Coupon Treasuries will be treated as bonds that were issued to the Fund
at an original issue discount. Original issue discount is treated as interest
for federal income tax purposes and the amount of original issue discount
generally will be the difference between the bond's purchase price and its
stated redemption price at maturity. The Fund will be required to include in
gross income for each taxable year the daily portions of original issue discount
attributable to the Zero Coupon Treasuries held by the Fund as such original
issue discount accrues. Dividends derived from such original issue discount that
accrues for such year will be taxable to shareholders as ordinary income. In
general, original issue discount accrues daily under a constant interest rate
method which takes into account the semi-annual compounding of accrued interest.
In the case of the Zero Coupon Treasuries, this method will generally result in
an increasing amount of income to the Fund each year.

12
<PAGE> 16

A dividend received by a shareholder shortly after the purchase of shares
reduces the net asset value of the shares by the amount of the dividend and,
although in effect a return of capital, will be taxable to the shareholder. If
the net asset value of shares were reduced below the shareholder's cost by
dividends representing gains realized on sales of securities, such dividends
would be a return of investment though taxable as stated above.

Fund dividends that are derived from interest on the Zero Coupon Treasuries and
other direct obligations of the U.S. Government and certain of its agencies and
instrumentalities may be exempt from state and local taxes in certain states. In
other states, arguments can be made that such distributions should be exempt
from state and local taxes based on federal law, 31 U.S.C. Section 3124, and the
U.S. Supreme Court's interpretation of that provision in AMERICAN BANK AND TRUST
CO. v. DALLAS COUNTY, 463 U.S. 855 (1983). The Fund currently intends to advise
shareholders of the proportion of its dividends that consists of such interest.
Shareholders should consult their tax advisers regarding the possible exclusion
of such portion of their dividends for state and local income tax purposes.

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 their tax advisers regarding the 20% withholding requirement.

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.

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

NET ASSET VALUE

The net asset value per share is determined by calculating the total value of
the Fund's assets, which will normally be composed chiefly of investment
securities, deducting total liabilities and dividing the result by the number of
shares outstanding. Fixed income securities, including Zero Coupon Treasuries,
are valued by using market quotations, or independent pricing services that use
prices provided by market makers or estimates of market values obtained from
yield data relating to instruments or securities with similar characteristics.
Portfolio securities that are traded on a domestic securities exchange or
securities listed on the NASDAQ National Market are valued at the last sale
price on the exchange or market where primarily traded or listed or, if there is
no recent last sale price available, at the last current bid quotation.
Portfolio securities that are primarily traded on foreign securities exchanges
are generally valued at the preceding closing values of such securities on their
respective exchanges where primarily traded. Securities not so traded or listed
are valued at the last current bid quotation if market quotations are available.
Equity options are valued at the last sale price unless the bid price is higher
or the asked price is lower, in which event such bid or asked price is used.
Financial futures and options thereon are valued at the settlement price
established each day by the board of trade or exchange on which they are traded.

13
<PAGE> 17

Other securities and assets are valued at fair value as determined in good faith
by the Board of Trustees. For purposes of determining the Fund's net asset
value, all assets and liabilities initially expressed in foreign currency values
will be converted into U.S. Dollar values at the mean between the bid and
offered quotations of such currencies against U.S. Dollars as last quoted by a
recognized dealer. If an event were to occur after the value of a security was
so established but before the net asset value per share was determined, which
was likely to materially change the net asset value, then that security would be
valued using fair value determinations by the Board of Trustees or its
delegates. On each day the New York Stock Exchange (the "Exchange") is open for
trading, the net asset value is determined as of the earlier of 3:00 p.m.
Chicago time or the close of the Exchange.

PURCHASE OF SHARES

Shares of the Fund may be purchased from investment dealers during the Offering
Period described below at the public offering price, which is the net asset
value next determined plus a sales charge that is a percentage of the public
offering price and varies as shown below. The minimum initial investment is
$1,000 and the minimum subsequent investment is $100. The minimum initial
investment for an Individual Retirement Account or employee benefit plan account
is $250 and the minimum subsequent investment is $50. These minimum amounts may
be changed at any time in management's discretion.

<TABLE>
<CAPTION>
Sales Charge
--------------------------------------------------------------
Allowed to
As a Percentage Dealers as a
As a Percentage of Net Asset Percentage of
Amount of Purchase of Offering Price Value* Offering Price
------------------ ----------------- --------------- --------------
<S> <C> <C> <C>
Less than $100,000............................... 5.00% 5.26% 4.50%
$100,000 but less than $250,000.................. 4.00 4.17 3.60
$250,000 but less than $500,000.................. 3.00 3.09 2.70
$500,000 but less than $1 million................ 2.00 2.04 1.80
$1 million and over.............................. 0.00** 0.00** ***
</TABLE>

- ---------------
* Rounded to the nearest one-hundredth percent.
** Redemption of shares may be subject to a contingent deferred sales charge as
discussed below.

*** Commission is payable by ZKDI as discussed below.

Shares will only be offered to the public during the Offering Period, which is
expected to end on May 15, 1998. The Fund may at its option extend or shorten
the Offering Period. The offering of shares of the Fund shall be subject to
suspension or termination as provided under "Investment Objectives, Policies and
Risk Factors--How the Fund Works." In addition, the offering of Fund shares may
be suspended from time to time during the Offering Period in the discretion of
ZKDI. During any period in which the public offering of shares is suspended or
terminated, shareholders will still be permitted to reinvest dividends in shares
of the Fund.

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).

The Fund receives the entire net asset value of all shares sold. ZKDI, the
Fund's principal underwriter, retains the sales charge from which it allows
discounts from the applicable public offering price to investment dealers, which
discounts are uniform for all dealers in the United States and its territories.
The normal discount allowed to dealers is set forth in the above table. Upon
notice to all dealers with whom it has sales agreements, ZKDI may reallow up to
the full applicable sales charge, as shown in the above table, during periods
and for transactions specified in such notice and such reallowances may be based
upon attainment of minimum sales levels. During periods when 90% or more of the
sales charge is reallowed, such dealers may be deemed to be underwriters as that
term is defined in the Securities Act of 1933.

14
<PAGE> 18

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 ZKDI may pay them a transaction fee up to the
level of the discount or other concession allowable to dealers as described
above. Banks currently are prohibited under the Glass-Steagall Act from
providing certain underwriting or distribution services. Banks or other
financial services firms may be subject to various state laws regarding the
services described above and may be required to register as dealers pursuant to
state law. If banking firms were prohibited from acting in any capacity or
providing any of the described services, management would consider what action,
if any, would be appropriate. Management does not believe that termination of a
relationship with a bank would result in any material adverse consequences to
the Fund.

ZKDI may from time to time, pay or allow to firms a 1% commission on the amount
of shares of the Fund sold 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 Kemper
Service Company, (iii) the registered representative placing the trade is a
member of ProStar, a group of persons designated by ZKDI in acknowledgment 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, ZKDI will, from
time to time, pay or allow additional discounts or promotional incentives, in
the form of cash or other compensation, to firms that sell shares of the Fund.
Non-cash compensation includes luxury merchandise and trips to luxury resorts.
In some instances, such discounts 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
ZKDI.

Shares of the Fund may be purchased at net asset value to the extent that the
amount invested represents the net proceeds from a redemption of shares of a
mutual fund for which neither ZKI nor an affiliate serve as investment manager
("non-Kemper Fund") provided that: (a) the investor has previously paid either
an initial sales charge in connection with the purchase of the non-Kemper Fund
shares redeemed or a contingent deferred sales charge in connection with the
redemption of the non-Kemper Fund shares, and (b) the purchase of Fund shares is
made within 90 days after the date of such redemption. To make such a purchase
at net asset value, the investor or the investor's dealer must, at the time of
purchase, submit a request that the purchase be processed at net asset value
pursuant to this privilege. ZKDI may in its discretion compensate firms for
sales of shares under this privilege at a commission rate of .50% of the
purchase price of the Fund shares purchased. The redemption of the shares of the
non-Kemper Fund is, for federal income tax purposes, a sale upon which a gain or
loss may be realized.

Shares of the Fund may be purchased at net asset value by: (a) any purchaser
provided that the amount invested in the Fund or other Kemper Mutual Funds
described under "Special Features--Combined Purchases" totals at least
$1,000,000 including purchases pursuant to the "Combined Purchases," "Letter of
Intent" and "Cumulative Discount" features described under "Special Features";
or (b) a participant-directed qualified retirement plan described in Code
Section 401(a) or a participant-directed non-qualified deferred compensation
plan described in Code Section 457 or a participant-directed qualified
retirement plan described in Code Section 403(b)(7) which is not sponsored by a
K-12 school district, provided in each case that such plan has not less than 200
eligible employees (the "Large Order NAV Purchase Privilege").

A contingent deferred sales charge may be imposed upon redemption of shares of
the Fund that are purchased under the Large Order NAV Purchase Privilege as
follows: 1% if they are redeemed within one year of purchase and .50% if they
are redeemed during the second year following purchase. The charge will not be
imposed upon redemption of reinvested dividends or share appreciation. 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 in
the event of (a) redemptions by a participant-directed qualified retirement plan
described in Code Section 401(a) or a participant-directed non-qualified
deferred compensation plan described in Code Section 457 or a participant-
directed qualified retirement plan described in Code Section 403(b)(7) which is
not sponsored by a K-12 school

15
<PAGE> 19

district; (b) redemptions by employer sponsored employee benefit plans using the
subaccount record keeping system made available through the Shareholder Service
Agent; (c) redemption of shares of a shareholder (including a registered joint
owner) who has died; (d) redemption of shares of a shareholder (including a
registered joint owner) who after purchase of the shares being redeemed becomes
totally disabled (as evidenced by a determination by the federal Social Security
Administration); (e) redemptions under the Fund's Systematic Withdrawal Plan at
a maximum of 10% per year of the net asset value of the account; and (f)
redemptions of shares by a shareholder whose dealer of record at the time of
investment notifies ZKDI that the dealer waives the discretionary commission
applicable to such Large Order NAV Purchase.

Shares of the Fund purchased under the Large Order NAV Purchase Privilege may be
exchanged for shares of another Kemper Mutual Fund or a Money Market Fund under
the exchange privilege described under "Special Features--Exchange Privilege"
without paying any contingent deferred sales charge at the time of exchange. If
the shares received on exchange are redeemed thereafter, a contingent deferred
sales charge may be imposed in accordance with the foregoing requirements
provided that the shares redeemed will retain their original cost and purchase
date for purposes of the contingent deferred sales charge.

ZKDI may in its discretion compensate investment dealers or other financial
services firms in connection with the sale of shares of the Fund at net asset
value in accordance with the Large Order NAV Purchase Privilege up to the
following amounts: 1.00% of the net asset value of shares sold on amounts up to
$5 million, .50% on the next $45 million and .25% on amounts over $50 million.
The commission schedule will be reset on a calendar year basis for sales of
shares pursuant to the Large Order NAV Purchase Privilege. For purposes of
determining the appropriate commission percentage to be applied to a particular
sale, ZKDI will consider the cumulative amount invested by the purchaser in the
Fund and other Kemper Mutual Funds listed under "Special Features--Combined
Purchases," including purchases pursuant to the "Combined Purchases," "Letter of
Intent" and "Cumulative Discount" features referred to above. The privilege of
purchasing shares of the Fund at net asset value under the Large Order NAV
Purchase Privilege is not available if another net asset value purchase
privilege is also applicable.

Shares of the Fund may be purchased at net asset value in any amount by certain
professionals who assist in the promotion of Kemper Funds pursuant to personal
services contracts with ZKDI, for themselves or members of their families. ZKDI
in its discretion may compensate financial services firms for sales of shares
under this privilege at a commission rate of .50% of the amount of shares
purchased.

Shares may be sold at net asset value in any amount to: (a) officers, trustees,
directors, employees (including retirees) and sales representatives of the Fund,
its investment manager, its principal underwriter or certain affiliated
companies, for themselves or members of their families; (b) registered
representatives and employees of broker-dealers having selling group agreements
with ZKDI and officers, directors and employees of service agents of the Fund,
for themselves or their spouses or dependent children; (c) shareholders who
owned shares of Kemper-Dreman Fund, Inc. ("KDF") on September 8, 1995, and have
continuously owned shares of KDF (or a Kemper Fund acquired by exchange of KDF
shares) since that date, for themselves or members of their families; and (d)
any trust, pension, profit-sharing or other benefit plan for only such persons.
Shares may be sold at net asset value in any amount to selected employees
(including their spouses and dependent children) of banks and other financial
services firms that provide administrative services related to order placement
and payment to facilitate transactions in shares of the Fund for their clients
pursuant to an agreement with ZKDI or one of its affiliates. Only those
employees of such banks and other firms who as part of their usual duties
provide services related to transactions in Fund shares may purchase Fund shares
at net asset value hereunder. Shares may be sold at net asset value in any
amount to unit investment trusts sponsored by Ranson & Associates, Inc. In
addition, unitholders of unit investment trusts sponsored by Ranson &
Associates, Inc. may purchase Fund shares at net asset value through
reinvestment programs described in the prospectuses of such trusts which have
such programs. Shares of the Fund may be sold at net asset value through certain
investment advisers registered under the Investment Advisers Act of 1940 and
other financial services firms that adhere to certain standards established by
ZKDI, including a requirement that such shares be sold for the benefit of their
clients participating in an

16
<PAGE> 20

investment advisory program under which such clients pay a fee to the investment
adviser or other firm for portfolio management and other services. Such shares
are sold for investment purposes and on the condition that they will not be
resold except through redemption or repurchase by the Fund. The Fund may also
issue shares at net asset value in connection with the acquisition of the assets
of or merger or consolidation with another investment company, or to
shareholders in connection with the investment or reinvestment of income and
capital gain dividends.

Shares of the Fund or any other Kemper Mutual Fund listed under "Special
Features Combined Purchases" may be purchased at net asset value in any amount
by members of the plaintiff class in the proceeding known as HOWARD AND AUDREY
TABANKIN, ET AL. V. KEMPER SHORT-TERM GLOBAL INCOME FUND, ET AL., Case No. 93 C
5231 (N.D. IL). This privilege is generally non-transferrable and continues for
the lifetime of individual class members and for a ten year period for
non-individual class members. To make a purchase at net asset value under this
privilege, the investor must, at the time of purchase, submit a written request
that the purchase be processed at net asset value pursuant to this privilege
specifically identifying the purchaser as a member of the "Tabankin Class."
Shares purchased under this privilege will be maintained in a separate account
that includes only shares purchased under this privilege. For more details
concerning this privilege, class members should refer to the Notice of (1)
Proposed Settlement with Defendants; and (2) Hearing to Determine Fairness of
Proposed Settlement, dated August 31, 1995, issued in connection with the
aforementioned court proceeding. For sales of Fund shares at net asset value
pursuant to this privilege, ZKDI may at its discretion pay investment dealers
and other financial services firms a concession, payable quarterly, at an annual
rate of up to .25% of net assets attributable to such shares maintained and
serviced by the firm. A firm becomes eligible for the concession based upon
assets in accounts attributable to shares purchased under this privilege in the
month after the month of purchase and the concession continues until terminated
by ZKDI. The privilege of purchasing shares of a Fund at net asset value under
this privilege is not available if another net asset value purchase privilege
also applies (including the purchase of Class A shares of the Cash Reserves
Fund).

The sales charge scale is applicable to purchases made at one time by any
"purchaser" which includes: an individual; or an individual, his or her spouse
and children under the age of 21; or a trustee or other fiduciary of a single
trust estate or single fiduciary account; or an organization exempt from federal
income tax under Section 501(c)(3) or (13) of the Code; or a pension,
profit-sharing or other employee benefit plan whether or not qualified under
Section 401 of the Code; or other organized group of persons whether
incorporated or not, provided the organization has been in existence for at
least six months and has some purpose other than the purchase of redeemable
securities of a registered investment company at a discount. In order to qualify
for a lower sales charge, all orders from an organized group will have to be
placed through a single investment dealer or other firm and identified as
originating from a qualifying purchaser.

Investment dealers and other firms provide varying arrangements for their
clients to purchase and redeem Fund 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
Fund 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 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 ZKDI,
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.

17
<PAGE> 21

Orders for the purchase of shares of the Fund will be confirmed at a price based
on the net asset value next determined after receipt by ZKDI of the order
accompanied by payment. However, orders received by dealers or other firms prior
to the determination of net asset value (see "Net Asset Value") and received by
ZKDI prior to the close of its business day will be confirmed at a price based
on the net asset value effective on that day. 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. See "Purchase and Redemption of
Shares" in the Statement of Additional Information.

The Fund reserves the right to withdraw all or any part of the offering made by
this prospectus and to reject purchase orders.

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

REDEMPTION OR REPURCHASE OF SHARES

GENERAL. Any shareholder may require the Fund to redeem his or her shares. When
shares are held for the account of a shareholder by the Fund's transfer agent,
the shareholder may redeem them by making a written request with signatures
guaranteed to Kemper Mutual Funds, Attention: Redemption Department, P.O. Box
419557, Kansas City, Missouri 64141-6557. When certificates for shares have been
issued, they must be mailed to or deposited with the Shareholder Service Agent,
along with a duly endorsed stock power and accompanied by a written request for
redemption. Redemption requests and a stock power must be endorsed by the
account holder with signatures guaranteed by a commercial bank, trust company,
savings and loan association, federal savings bank, member firm of a national
securities exchange or other eligible financial institution. The redemption
request and stock power must be signed exactly as the account is registered
including any special capacity of the registered owner. Additional documentation
may be requested, and a signature guarantee is normally required, from
institutional and fiduciary account holders, such as corporations, custodians
(e.g., under the Uniform Transfers to Minors Act), executors, administrators,
trustees or guardians. As noted previously (see "Investment Objectives, Policies
and Risk Factors--How the Fund Works and Special Risk Factors"), only
shareholders who hold their shares in the Fund until the Maturity Date and
reinvest their dividends in the Fund will necessarily receive the benefit of the
Fund's Investment Protection.

The redemption price will be the net asset value 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 requested 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 within two years of
shares purchased at net asset value under the Large Order NAV Purchase Privilege
may be subject to a contingent deferred sales charge (see "Purchase of Shares").

Because of the high cost of maintaining small accounts, effective January 1998,
the Fund may assess a quarterly fee of $9 on any 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

18
<PAGE> 22

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 agent reasonably believes, 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.

TELEPHONE REDEMPTIONS. If the proceeds of the redemption are $50,000 or less and
the proceeds are payable to the shareholder of record at the address of record,
normally a telephone request or a written request by any one account holder
without a signature guarantee is sufficient for redemptions by individual or
joint account holders, and trust, executor and guardian account holders
(excluding custodial accounts for gifts and transfers to minors), provided the
trustee, executor or guardian is named in the account registration. Other
institutional account holders and guardian account holders of custodial accounts
for gifts and transfers to minors may exercise this special privilege of
redeeming shares by telephone request or written request without signature
guarantee subject to the same conditions as individual account holders and
subject to the limitations on liability described under "General" above,
provided that this privilege has been pre-authorized by the institutional or
guardian account holder by written instruction to the Shareholder Service Agent
with signatures guaranteed. Telephone requests may be made by calling
1-800-621-1048. Shares purchased by check, 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 ZKDI, which the Fund has authorized to act as its agent. There
is no charge by ZKDI 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 next determined after receipt of a
request by ZKDI. 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 ZKDI prior to the close of ZKDI'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 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 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 ZKI 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. To change the designated account to receive
wire redemption proceeds, send a written request to the Shareholder Service
Agent with signatures guaranteed as

19
<PAGE> 23

described above or contact the firm through which shares of the Fund were
purchased. Shares purchased by check, 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 procedure 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 wire transfer redemption privilege. The Fund reserves the right to
terminate or modify this privilege at any time.

REINVESTMENT PRIVILEGE. A shareholder who has redeemed shares of the Fund or
Class A shares of any other Kemper Mutual Fund listed under "Special
Features--Combined Purchases" (other than shares of Kemper Cash Reserves Fund
purchased directly at net asset value) may reinvest up to the full amount
redeemed at net asset value at the time of the reinvestment in shares of the
Fund or in Class A shares of the other listed Kemper Mutual Funds. A shareholder
of the Fund or any other Kemper Mutual Fund who redeems shares purchased under
the Large Order NAV Purchase Privilege (see "Purchase of 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 shares of the Fund or Class A
shares of other Kemper Mutual Funds. 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 of another Kemper Mutual Fund who has
redeemed shares of that fund 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 the Fund or in Class A
shares of the other Kemper Mutual Funds listed under "Special Features--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 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. If a loss is
realized on the redemption of Fund shares, the reinvestment in the same Fund may
be subject to the "wash sale" rules if made within 30 days of the redemption,
resulting in the postponement of the recognition of such loss for federal income
tax purposes. The reinvestment privilege may be terminated or modified at any
time and is subject to the limited Offering Period of the Fund.

SPECIAL FEATURES

COMBINED PURCHASES. The Fund's shares may be purchased at the rate applicable to
the discount bracket attained by combining concurrent investments in Class A
shares (or the equivalent) of any of the following funds: Kemper Technology
Fund, Kemper Total Return Fund, Kemper Growth Fund, Kemper Small Capitalization
Equity Fund, Kemper Income and Capital Preservation Fund, Kemper Municipal Bond
Fund, Kemper Diversified Income Fund, Kemper High Yield Fund, Kemper U.S.
Government Securities Fund, Kemper International Fund, Kemper State Tax-Free
Income Series, Kemper Adjustable Rate U.S. Government Fund, Kemper Blue Chip
Fund, Kemper Global Income Fund, Kemper Target Equity Fund (series are subject
to a limited offering period), Kemper Intermediate Municipal Bond Fund, Kemper
Cash Reserves Fund, Kemper U.S. Mortgage Fund, Kemper Short-Intermediate
Government Fund, Kemper-Dreman Fund, Inc., Kemper Value+Growth Fund, Kemper
Horizon Fund, Kemper Quantitative Equity Fund, Kemper Europe Fund, Kemper Asian
Growth Fund and Kemper Aggressive Growth 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, Tax-Exempt New York Money Market 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 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
investment, such as guaranteed investment contracts and employer stock,
maintained on such subaccount record keeping system.

20
<PAGE> 24

LETTER OF INTENT. The same reduced sales charges, as shown in the applicable
prospectus, also apply to the aggregate amount of purchases of such Kemper
Mutual Funds listed above made by any purchaser within a 24-month period under a
written Letter of Intent ("Letter") provided by ZKDI. As noted under "Purchase
of Shares," the Offering Period for the purchase of shares of the Fund is
limited. However, shares of other Kemper Mutual Funds noted above would be
available beyond that period. The Letter, which imposes no obligation to
purchase or sell additional 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 will be
redeemed and the proceeds used toward satisfaction of the obligation to pay the
increased sales charge. The Letter for an employer sponsored employee benefit
plan maintained on the subaccount record keeping system available through the
Shareholder Service Agent may have special provisions regarding payment of any
increased sales charge resulting from a failure to complete the intended
purchase under the Letter. A shareholder may include the value (at the maximum
offering price) of all shares of such Kemper Mutual Funds held of record as of
the initial purchase date under the Letter as an "accumulation credit" toward
the completion of the Letter, but no price adjustment will be made on such
shares.

CUMULATIVE DISCOUNT. The Fund's shares also may be purchased at the rate
applicable to the discount bracket attained by adding to the cost of Fund shares
being purchased the value of all shares of the above mentioned Kemper Mutual
Funds (computed at the maximum offering price at the time of the purchase for
which the discount is applicable) already owned by the investor.

AVAILABILITY OF QUANTITY DISCOUNTS. An investor or the investor's dealer or
other financial services firm must notify the Shareholder Service Agent or ZKDI
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. Subject to the following limitations, shares of the Kemper
Mutual Funds and Money Market Funds listed under "Special Features--Combined
Purchases" above may be exchanged for each other at their relative net asset
values. Shares of Money Market Funds and Kemper Cash Reserves Fund that were
acquired by purchase (not including shares acquired by dividend reinvestment)
are subject to the applicable sales charge on exchange. Shares of a Kemper
Mutual Fund with a value in excess of $1,000,000 (except Kemper Cash Reserves
Fund) acquired by exchange from another Kemper Mutual Fund, or from a Money
Market Fund, may not be exchanged thereafter until they have been owned for 15
days (the "15 Day Hold Policy"). For purposes of determining whether the 15 Day
Hold Policy applies to a particular exchange, the value of the shares to be
exchanged shall be computed by aggregating the value of shares being exchanged
for all accounts under common control, direction, or advice, including without
limitation, accounts administered by a financial services firm offering market
timing, asset allocation or similar services. A series of Kemper Target Equity
Fund will be 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, Tax-Exempt New York
Money Market Fund and Investors Cash Trust are available on exchange but only
through a financial services firm having a services agreement with ZKDI.
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 Tax-Exempt New York Money
Market Fund is available for sale only in New York, Connecticut, New Jersey and
Pennsylvania.

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

21
<PAGE> 25

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 ZKDI. Exchanges may be accomplished by
a written request to Zurich Kemper Service Company, 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
or in writing, subject to the limitations on liability under "Redemption or
Repurchase of Shares--General." Any share certificates must be deposited prior
to any exchange of such shares. During periods when it is difficult to contact
the Shareholder Service Agent by telephone, it may be difficult to use the
telephone exchange privilege. The exchange privilege is not a right and may be
suspended, terminated or modified at any time. Except as otherwise permitted by
applicable regulations, 60 days' prior written notice of any termination or
material change will be provided.

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 of redeeming shares by EXPRESS-Transfer 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 Kemper 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 Kemper Service Company,
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").

SYSTEMATIC WITHDRAWAL PLAN. The owner of $5,000 or more of the Fund's shares at
the offering price (net asset value plus the sales charge) 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. Shares are redeemed
so that the payee will receive payment approximately the first of the month. 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.

The purchase of shares while participating in a systematic withdrawal plan
ordinarily will be disadvantageous to the investor because the investor will be
paying a sales charge on the purchase of shares at the same time that the
investor is redeeming shares upon which a sales charge may already have been
paid. Therefore, the Fund will not knowingly permit additional investments of
less than $2,000 if the investor is at the same time making systematic
withdrawals. (See "Purchase of Shares" regarding the limited Offering Period for
the Fund's shares.) 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. As noted previously (see "Investment Objectives, Policies and Risk
Factors--How the Fund Works and Special Risk Factors"), only shareholders who
hold their shares in the Fund until the Maturity Date and reinvest their
dividends in the Fund will necessarily receive the benefit of the Fund's
Investment Protection.

22
<PAGE> 26

TAX-SHELTERED RETIREMENT PLANS. The Shareholder Service Agent provides
retirement plan services and documents and ZKDI can establish investor accounts
in any of the following types of retirement plans:

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

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

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

Brochures describing the above plans as well as model defined benefit plans,
target benefit plans, 457 plans, 401(k) plans, SIMPLE 401(k) plans and materials
for establishing them are available from the Shareholder Service Agent upon
request. The brochures for plans with IFTC as custodian describe the current
fees payable to IFTC for its services as custodian. Investors should consult
with their own tax advisers before establishing a retirement plan. In view of
the limited Offering Period of the Fund (see "Purchase of Shares"), the Fund may
not be appropriate for periodic contribution plans.

PERFORMANCE

The Fund may advertise several types of performance information, including
"average annual total return" and "total return." Each of these figures is based
upon historical results and is not representative of the future performance of
the Fund.

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 information 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.

The Fund's performance may be compared to that of the Consumer Price Index or
various unmanaged indexes including the Standard & Poor's 500 Stock Index, the
Russell 1000(R) Growth Index. The Fund's performance may also be compared to the
performance of other mutual funds or mutual fund indexes 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, money market funds and U.S. Treasury
obligations. Bank product performance may be based upon, among other things, the
BANK RATE MONITOR National Index(TM) or various certificate of deposit indexes.
Money market fund performance may be based upon, among other things, the
IBC/Donoghue 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.

The Fund may depict the historical performance of the securities in which the
Fund may invest over periods reflecting a variety of market or economic
conditions either alone or in comparison with alternative investments,

23
<PAGE> 27

performance indexes of those investments or economic indicators. 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.

The Fund's shares are sold at net asset value plus a maximum sales charge of
5.0% of the offering price. While the maximum sales charge is normally reflected
in the Fund's performance figures, certain total return calculations may not
include such charge and those results would be reduced if it were included. The
Fund's returns and net asset value will fluctuate. Shares of the Fund are
redeemable by an investor at the then current net asset value, which may be more
or less than original cost. Additional information concerning the Fund's
performance and concerning the historical performance of various types of
investments that may be used to provide for retirement needs appears in the
Statement of Additional Information. Additional information about the Fund's
performance also appears in its Annual Report to Shareholders, which is
available without charge from the Fund.

CAPITAL STRUCTURE

The Trust is an open-end, management investment company, organized as a business
trust under the laws of Massachusetts on August 3, 1988. Effective May 1, 1994,
the Trust changed its name from Kemper Retirement Fund to Kemper Target Equity
Fund. The Trust may issue an unlimited number of shares of beneficial interest
in one or more series, all having no par value. The Trust has established eight
series of shares: Kemper Retirement Fund Series I, Series II, Series III, Series
IV, Series V, Series VI and Kemper Worldwide 2004 Fund, which are no longer
offered, and Kemper Retirement Fund Series VII, which is the Fund. The Board of
Trustees may authorize the issuance of additional series if deemed desirable,
each with its own investment objective, policies and restrictions. Since the
Trust may offer multiple series, it is known as a "series company." Shares of a
series have equal noncumulative voting rights and equal rights with respect to
dividends, assets and liquidation of such series. Shares 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
shareholders' 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. Shareholders will vote by series and not in
the aggregate except when voting in the aggregate is required under the
Investment Company Act of 1940, such as for the election of trustees. Any series
of the Trust, including the Fund, may be divided by the Board of Trustees into
classes of shares, subject to compliance with the Securities and Exchange
Commission regulations permitting the creation of separate classes of shares.
The Trust's shares currently are not divided into classes. Shares of a series
would be subject to any preferences, rights or privileges of any classes of
shares of the series. Generally each class of shares issued by a particular
series of the Trust would differ as to the allocation of certain expenses of the
series such as distribution and administrative expenses permitting, among other
things, different levels of service or methods of distribution among various
classes.

24
<PAGE> 28
PROSPECTUS

KEMPER
RETIREMENT
FUND SERIES VII

MAY 1, 1997

Zurich Kemper Distributors, Inc.
222 South Riverside Plaza

Chicago, IL 60606

KRF-1 (5/97)
ZKDI 702010

[LOGO] KEMPER FUNDS
<PAGE> 29

KEMPER TARGET EQUITY FUND
KEMPER RETIREMENT FUND SERIES VII

CROSS-REFERENCE SHEET
BETWEEN ITEMS ENUMERATED IN PART B
OF FORM N-1A AND STATEMENT OF ADDITIONAL INFORMATION

<TABLE>
<CAPTION>
ITEM NUMBER LOCATION IN STATEMENT OF
OF FORM N-1A ADDITIONAL INFORMATION
------------ ------------------------
<S> <C> <C>
10. Cover Page............................... Cover Page
11. Table of Contents........................ Table of Contents
12. General Information and History.......... Inapplicable
13. Investment Objectives and Policies....... Investment Restrictions; Investment Policies
and Techniques
14. Management of the Fund................... Investment Manager and Underwriter;
Officers and Trustees
15. Control Persons and Principal Holders of
Securities............................... Officers and Trustees
16. Investment Advisory and Other Services... Investment Manager and Underwriter
17. Brokerage Allocation and Other
Practices................................ Portfolio Transactions
18. Capital Stock and Other Securities....... Dividends and Taxes;
Shareholder Rights
19. Purchase, Redemption and Pricing of
Securities Being Offered................. Purchase and Redemption of Shares
20. Tax Status............................... Dividends and Taxes
21. Underwriters............................. Investment Manager and Underwriter
22. Calculation of Performance Data.......... Performance
23. Financial Statements..................... Report of Independent Auditors; Statement of Net
Assets
</TABLE>
<PAGE> 30

STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1997

KEMPER RETIREMENT FUND SERIES VII
222 SOUTH RIVERSIDE PLAZA STREET, CHICAGO, ILLINOIS 60606
1-800-621-1048

This Statement of Additional Information is not a prospectus and should be read
in conjunction with the prospectus of Kemper Retirement Fund Series VII (the
"Fund") dated May 1, 1997. The prospectus may be obtained without charge from
the Fund. The Fund is a series of Kemper Target Equity Fund.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Restrictions..................................... B-1

Investment Policies and Techniques.......................... B-2

Dividends and Taxes......................................... B-9

Performance................................................. B-11

Investment Manager and Underwriter.......................... B-11

Portfolio Transactions...................................... B-14

Purchase and Redemption of Shares........................... B-15

Officers and Trustees....................................... B-15

Shareholder Rights.......................................... B-17

Report of Independent Auditors (April 22, 1997)............. B-19

Statement of Net Assets (April 22, 1997).................... B-20
</TABLE>

KRF-13 5/97 (LOGO)printed on recycled paper
<PAGE> 31

INVESTMENT RESTRICTIONS

Kemper Target Equity Fund (the "Trust") has adopted the following fundamental
investment restrictions which cannot be changed with respect to Kemper
Retirement Fund Series VII (the "Fund"), without approval of a "majority" of its
outstanding shares, which means the lesser of (1) 67% of the Fund's shares
present at a meeting at which the holders of more than 50% of the outstanding
shares are present in person or by proxy; or (2) more than 50% of the Fund's
outstanding shares.

The Fund may not, as a fundamental policy:

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

(2) Purchase more than 10% of any class of voting securities of any issuer.

(3) Make loans to others provided that the Fund may purchase debt obligations or
repurchase agreements and it may lend its securities in accordance with its
investment objectives and policies.

(4) Borrow money except as a temporary measure for extraordinary or emergency
purposes, and then only in an amount up to one-third of the value of its total
assets, in order to meet redemption requests without immediately selling any
portfolio securities. If, for any reason, the current value of the Fund's total
assets falls below an amount equal to three times the amount of its indebtedness
from money borrowed, the Fund will, within three days (not including Sundays and
holidays), reduce its indebtedness to the extent necessary. The Fund will not
borrow for leverage purposes and will not purchase securities or make
investments while borrowings are outstanding.

(5) Pledge, hypothecate, mortgage or otherwise encumber more than 15% of its
total assets and then only to secure borrowings permitted by restriction 4
above. (The collateral arrangements with respect to options, financial futures
and delayed delivery transactions and any margin payments in connection
therewith are not deemed to be pledges or other encumbrances.)

(6) Purchase securities on margin, except to obtain such short-term credits as
may be necessary for the clearance of transactions; however, the Fund may make
margin deposits in connection with options and financial futures transactions.

(7) Make short sales of securities or other assets or maintain a short position
for the account of the Fund unless at all times when a short position is open it
owns an equal amount of such securities or other assets or owns securities
which, without payment of any further consideration, are convertible into or
exchangeable for securities or other assets of the same issue as, and equal in
amount to, the securities or other assets sold short and unless not more than
10% of the Fund's total assets is held as collateral for such sales at any one
time.

(8) Purchase securities (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if as a result of such purchase
25% or more of the Fund's total assets would be invested in any one industry.

(9) Invest in commodities or commodity futures contracts, although it may buy or
sell financial futures contracts and options on such contracts, and engage in
foreign currency transactions; or in real estate (including real estate limited
partnerships), although it may invest in securities which are secured by real
estate and securities of issuers which invest or deal in real estate including
real estate investment trusts.

(10) Underwrite securities issued by others except to the extent the Fund may be
deemed to be an underwriter, under the federal securities laws, in connection
with the disposition of portfolio securities.

(11) Issue senior securities as defined in the Investment Company Act of 1940.

B-1
<PAGE> 32

If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The Fund did
not borrow money as permitted by investment restriction number (4) in the latest
fiscal year and it has no present intention of borrowing during the current
year. The Fund has adopted the following non-fundamental restrictions, which may
be changed by the Board of Trustees without shareholder approval.

The Fund may not, as a non-fundamental policy:

(i) Invest in warrants if more than 5% of the Fund's net assets would be
invested in warrants. Included within that amount, but not to exceed 2% of the
Fund's net assets, may be warrants not listed on the New York or American Stock
Exchanges. Warrants acquired in units or attached to securities may be deemed to
be without value for such purposes.

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

(iii) Invest in oil, gas or other mineral leases.

(iv) Invest more than 5% of the Fund's total assets in securities of issuers
(other than obligations of, or guaranteed by, the U.S. Government, its agencies
or instrumentalities) which with their predecessors have a record of less than
three years continuous operation and equity securities of issuers which are not
readily marketable.

(v) Invest more than 5% of its total assets in restricted securities, excluding
restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933 that have been determined to be liquid pursuant to
procedures adopted by the Board of Trustees, provided that the total amount of
Fund assets invested in restricted securities and securities of issuers which
with their predecessors have a record of less than three years continuous
operation will not exceed 10% of total assets.

(vi) Invest more than 10% of its total assets in securities of real estate
investment trusts.

(vii) Write or sell put or call options, combinations thereof or similar
options; nor may the Fund purchase put or call options if more than 5% of the
Fund's net assets would be invested in premiums on put and call options,
combinations thereof or similar options; however, the Fund may buy or sell
options on financial futures contracts.

(viii) Purchase or retain the securities of any issuer if any of the officers,
trustees or directors of the Trust or its investment adviser owns beneficially
more than 1/2 of 1% of the securities of such issuer and together own more than
5% of the securities of such issuer.

(ix) Invest for the purpose of exercising control or management of another
issuer.

(x) Invest in interests in oil or gas exploration or development programs,
although it may invest in the securities of issuers which invest in or sponsor
such programs.

INVESTMENT POLICIES AND TECHNIQUES

GENERAL. The Fund may invest in Zero Coupon Treasuries and Equity Securities (as
defined in the prospectus) and engage in futures, options and other derivatives
transactions and other investment techniques in accordance with its investment
objectives and policies. See "Investment Objectives, Policies and Risk Factors"
in the prospectus. Supplemental information concerning the Fund's investments
and certain investment techniques is set forth below.

ZERO COUPON TREASURIES. There are currently two basic types of zero coupon
securities, those created by separating the interest and principal components of
a previously issued interest-paying security and those originally issued in the
form of a face amount only security paying no interest. Zero coupon securities
of the U.S.

B-2
<PAGE> 33

Government and certain of its agencies and instrumentalities and of private
corporate issuers are currently available, although the Fund will purchase only
those that represent direct obligations of the U.S. Government.

Zero coupon securities of the U.S. Government that are currently available are
called STRIPS (Separate Trading of Registered Interest and Principal of
Securities) or CUBES (Coupon Under Book-Entry Safekeeping). STRIPS and CUBES are
issued under programs introduced by the U.S. Treasury and are direct obligations
of the U.S. Government. The U.S. Government does not issue zero coupon
securities directly. The STRIPS program, which is ongoing, is designed to
facilitate the secondary market stripping of selected Treasury notes and bonds
into individual interest and principal components. Under the program, the U.S.
Treasury continues to sell its notes and bonds through its customary auction
process. However, a purchaser of those notes and bonds who has access to a
book-entry account at a Federal Reserve bank may separate the specified Treasury
notes and bonds into individual interest and principal components. The selected
Treasury securities may thereafter be maintained in the book-entry system
operated by the Federal Reserve in a manner that permits the separate trading
and ownership of the interest and principal payments. The Federal Reserve does
not charge a fee for this service; however, the book-entry transfer of interest
or principal components is subject to the same fee schedule generally applicable
to the transfer of Treasury securities.

Under the program, in order for a book-entry Treasury security to be separated
into its component parts, the face amount of the security must be an amount
which, based on the stated interest rate of the security, will produce a
semi-annual interest payment of $1,000 or a multiple of $1,000. Once a
book-entry security has been separated, each interest and principal component
may be maintained and transferred in multiples of $1,000 regardless of the face
amount initially required for separation or the resulting amount required for
each interest payment.

CUBES, like STRIPS, are direct obligations of the U.S. Government. CUBES are
coupons that have previously been physically stripped from Treasury notes and
bonds, but which were deposited with the Federal Reserve and are now carried and
transferable in book-entry form only. Only stripped Treasury coupons maturing on
or after January 15, 1988, that were stripped prior to January 5, 1987, were
eligible for conversion to book-entry form under the CUBES program.

Investment banks may also strip Treasury securities and sell them under
proprietary names. These securities may not be as liquid as STRIPS and CUBES and
the Fund has no present intention of investing in these instruments.

STRIPS and CUBES are purchased at a discount from $1,000. Absent a default by
the U.S. Government, a purchaser will receive face value for each of the STRIPS
and CUBES provided the STRIPS and CUBES are held to their due dates. While
STRIPS and CUBES can be purchased on any business day, they all currently come
due on February 15, May 15, August 15 or November 15.

FINANCIAL FUTURES CONTRACTS. The Fund may enter into financial futures contracts
for the future delivery of a financial instrument, such as a security, or an
amount of foreign currency or the cash value of a securities index. This
investment technique is designed primarily to hedge (i.e., protect) against
anticipated future changes in market conditions or foreign exchange rates which
otherwise might adversely affect the value of securities or other assets which
the Fund holds or intends to purchase. A "sale" of a futures contract means the
undertaking of a contractual obligation to deliver the securities or the cash
value of an index or foreign currency called for by the contract at a specified
price during a specified delivery period. A "purchase" of a futures contract
means the undertaking of a contractual obligation to acquire the securities or
cash value of an index or foreign currency at a specified price during a
specified delivery period. At the time of delivery, in the case of fixed income
securities pursuant to the contract, adjustments are made to recognize
differences in value arising from the delivery of securities with a different
interest rate than that specified in the contract. In some cases, securities
called for by a futures contract may not have been issued at the time the
contract was written.

Although some financial futures contracts by their terms call for the actual
delivery or acquisition of securities or other assets, in most cases a party
will close out the contractual commitment before delivery without having to make
or take delivery of the underlying assets by purchasing (or selling, as the case
may be) on a commodities

B-3
<PAGE> 34

exchange an identical futures contract calling for delivery in the same month.
Such a transaction, if effected through a member of an exchange, cancels the
obligation to make or take delivery of the underlying securities or other
assets. All transactions in the futures market are made, offset or fulfilled
through a clearing house associated with the exchange on which the contracts are
traded. The Fund will incur brokerage fees when it purchases or sells contracts,
and will be required to maintain margin deposits. At the time the Fund enters
into a futures contract, it is required to deposit with its custodian, on behalf
of the broker, a specified amount of cash or eligible securities, called
"initial margin." The initial margin required for a futures contract is set by
the exchange on which the contract is traded. Subsequent payments, called
"variation margin," to and from the broker are made on a daily basis as the
market price of the futures contract fluctuates. The costs incurred in
connection with futures transactions could reduce the Fund's return. Futures
contracts entail risks. If the investment manager's judgment about the general
direction of markets or exchange rates is wrong, the overall performance may be
poorer than if no such contracts had been entered into.

There may be an imperfect correlation between movements in prices of futures
contracts and portfolio assets being hedged. In addition, the market prices of
futures contracts may be affected by certain factors. If participants in the
futures market elect to close out their contracts through offsetting
transactions rather than meet margin requirements, distortions in the normal
relationship between the assets and futures markets could result. Price
distortions could also result if investors in futures contracts decide to make
or take delivery of underlying securities or other assets rather than engage in
closing transactions because of the resultant reduction in the liquidity of the
futures market. In addition, because, from the point of view of speculators, the
margin requirements in the futures market are less onerous than margin
requirements in the cash market, increased participation by speculators in the
futures market could cause temporary price distortions. Due to the possibility
of price distortions in the futures market and because of the imperfect
correlation between movements in the prices of securities or other assets and
movements in the prices of futures contracts, a correct forecast of market
trends by the investment manager may still not result in a successful hedging
transaction. If any of these events should occur, the Fund could lose money on
the financial futures contracts and also on the value of its assets.

OPTIONS ON FINANCIAL FUTURES CONTRACTS. The Fund may purchase and write call and
put options on financial futures contracts. An option on a futures contract
gives the purchaser the right, in return for the premium paid, to assume a
position in a futures contract at a specified exercise price at any time during
the period of the option. Upon exercise, the writer of the option delivers the
futures contract to the holder at the exercise price. The Fund would be required
to deposit with its custodian initial margin and maintenance margin with respect
to put and call options on futures contracts written by it. The Fund will
establish segregated accounts or will provide cover with respect to written
options on financial futures contracts in a manner similar to that described
under "Options on Securities" below. Options on futures contracts involve risks
similar to those risks relating to transactions in financial futures contracts
described above. Also, an option purchased by the Fund may expire worthless, in
which case the Fund would lose the premium paid therefor.

OPTIONS ON SECURITIES. The Fund may invest in put and call options on
securities. The Fund will only invest in options which are traded on securities
exchanges and for which it pays a premium (cost of option). The Fund may enter
into closing transactions, exercise its options or permit them to expire. A put
option gives the holder (buyer) the "right to sell" a security at a specified
price (the exercise price) at any time until a certain date (the expiration
date). A call option gives the holder (buyer) the "right to purchase" a security
at a specified price (the exercise price) at any time until a certain date (the
expiration date). The Fund may purchase spread options which are options for
which the exercise price may be a fixed dollar spread or yield spread between
the security underlying the option and another security that is used as a bench
mark. The exercise price of an option may be below, equal to or above the
current market value of the underlying security at the time the option is
written. Options traded on national securities exchanges are issued by The
Options Clearing Corporation.

In effect, the buyer of a put option who also owns the related security is
protected by ownership of the put option against any decline in that security's
price below the exercise price less the amount paid for the option. The ability

B-4
<PAGE> 35

to purchase put options allows the Fund to protect capital gains in an
appreciated security it owns, without being required to sell that security.

At times the Fund may wish to establish a position in a security upon which call
options are available. By purchasing a call option the Fund is able to fix the
cost of acquiring the security, this being the cost of the call option plus the
exercise price of the option. This procedure also provides some protection from
an unexpected downturn in the market because the Fund would be at risk only for
the amount of the premium paid for the call option which it can, if it chooses,
permit to expire.

When the Fund purchases a call option it pays a premium. The Fund will benefit
only if the market price of the related investment is above the call price plus
the premium during the exercise period and the call is either exercised or sold
at a profit. If it is not exercised or sold, it will become worthless at its
expiration date and the Fund will lose its premium payment. If the Fund buys a
put option, it also pays a premium. If the market price of the related
investment is above the exercise price and, as a result, the put is not
exercised or sold, the put will become worthless at its expiration date.

OPTIONS ON SECURITIES INDICES. The Fund also may purchase call and put options
on securities indices in an attempt to hedge against market conditions affecting
the value of securities that the Fund owns or intends to purchase, and not for
speculation. Through the purchase of index options, the Fund can achieve many of
the same objectives as through the use of options on individual securities.
Options on securities indices are similar to options on a security except that,
rather than the right to take or make delivery of a security at a specified
price, an option on a securities index gives the holder the right to receive,
upon exercise of the option, an amount of cash if the closing level of the
securities index upon which the option is based is greater than, in the case of
a call, or less than, in the case of a put, the exercise price of the option.
This amount of cash is equal to the difference between the closing price of the
index and the exercise price of the option. The writer of the option is
obligated, in return for the premium received, to make delivery of this amount.
Unlike security options, all settlements are in cash and gain or loss depends
upon price movements in the market generally (or in a particular industry or
segment of the market) rather than upon price movements in individual
securities. Price movements in securities that the Fund owns or intends to
purchase will probably not correlate perfectly with movements in the level of an
index since the prices of such securities may be affected by somewhat different
factors. Therefore, the Fund bears the risk that a loss on an index option would
not be completely offset by movements in the price of such securities.

Options on a securities index involve risks similar to those risks relating to
transactions in financial futures contracts described above. Also, an option
purchased by the Fund may expire worthless, in which case the Fund would lose
the premium paid therefor.

REGULATORY RESTRICTIONS. To the extent required to comply with applicable
regulation, when purchasing a futures contract, or entering into a forward
foreign currency exchange purchase, the Fund will maintain eligible securities
in a segregated account. The Fund will use cover in connection with selling a
futures contract.

The Fund will not engage in transactions in financial futures contracts or
options thereon for speculation, but only to attempt to hedge against changes in
market conditions affecting the values of securities which the Fund holds or
intends to purchase.

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<PAGE> 36

Foreign securities involve currency risks. The U.S. Dollar value of a foreign
security tends to decrease when the value of the U.S. Dollar rises against the
foreign currency in which the security is denominated and tends to increase when
the value of the dollar falls against such currency. Fluctuations in exchange
rates may also affect the earning power and asset value of the foreign entity
issuing the security. Dividend and interest payments may be repatriated based on
the exchange rate at the time of disbursement, and restrictions on capital flows
may be imposed.

Foreign securities may be subject to foreign government taxes that reduce their
attractiveness. Other risks of investing in such securities include political or
economic instability in the country involved, the difficulty of predicting
international trade patterns and the possible imposition of exchange controls.
The prices of such securities may be more volatile than those of domestic
securities and the markets for foreign securities may be less liquid. In
addition, there may be less publicly available information about foreign issuers
than about domestic issuers. Many foreign issuers are not subject to uniform
accounting, auditing and financial reporting standards comparable to those
applicable to domestic issuers. There is generally less regulation of stock
exchanges, brokers, banks and listed companies abroad than in the United States.
Settlement of Foreign Securities trades may take longer and present more risk
than for domestic securities. With respect to certain foreign countries, there
is a possibility of expropriation or diplomatic developments that could affect
investment in these countries. Losses and other expenses may be incurred in
converting between various currencies in connection with purchases and sales of
foreign securities.

EMERGING MARKETS. While the Fund's investments in foreign securities will
principally be in developed countries, the Fund may invest a portion of its
assets in countries considered by the Fund's investment manager to be developing
or "emerging" markets, which involve exposure to economic structures that are
generally less diverse and mature than in the United States, and to political
systems that may be less stable. A developing or emerging market country can be
considered to be a country that is in the initial stages of its
industrialization cycle. Currently, emerging markets generally include every
country in the world other than the United States, Canada, Japan, Australia, New
Zealand, Hong Kong, Singapore and most Western European countries. Currently,
investing in many emerging markets may not be desirable or feasible because of
the lack of adequate custody arrangements for the Fund's assets, overly
burdensome repatriation and similar restrictions, the lack of organized and
liquid securities markets, unacceptable political risks or other reasons. As
opportunities to invest in securities in emerging markets develop, the Fund may
expand and further broaden the group of emerging markets in which it invests. In
the past, markets of developing countries have been more volatile than the
markets of developed countries; however, such markets often have provided higher
rates of return to investors. The investment manager believes that these
characteristics can be expected to continue in the future.

Many of the risks described above relating to foreign securities generally will
be greater for emerging markets than for developed countries. For instance,
economies in individual developing markets may differ favorably or unfavorably
from the U.S. economy in such respects as growth of gross domestic product,
rates of inflation, currency depreciation, capital reinvestment, resource
self-sufficiency and balance of payments positions. Many emerging markets have
experienced substantial rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have very negative
effects on the economies and securities markets of certain developing markets.
Economies in emerging markets generally are dependent heavily upon international
trade and, accordingly, have been and may continue to be affected adversely by
trade barriers, exchange controls, managed adjustments in relative currency
values and other protectionist measures imposed or negotiated by the countries
with which they trade. These economies also have been and may continue to be
affected adversely by economic conditions in the countries with which they
trade.

Also, the securities markets of developing countries are substantially smaller,
less developed, less liquid and more volatile than the securities markets of the
United States and other more developed countries. Disclosure, regulatory and
accounting standards in many respects are less stringent than in the United
States and other developed markets. There also may be a lower level of
monitoring and regulation of developing markets and the activities of investors
in such markets, and enforcement of existing regulations has been extremely
limited.

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<PAGE> 37

In addition, brokerage commissions, custodial services and other costs relating
to investment in foreign markets generally are more expensive than in the United
States; this is particularly true with respect to emerging markets. Such markets
have different settlement and clearance procedures. In certain markets there
have been times when settlements have been unable to keep pace with the volume
of securities transactions, making it difficult to conduct such transactions.
Such settlement problems may cause emerging market securities to be illiquid.
The inability of the Fund to make intended securities purchases due to
settlement problems could cause the Fund to miss attractive investment
opportunities. Inability to dispose of a portfolio security caused by settlement
problems could result either in losses to the Fund due to subsequent declines in
value of the portfolio security or, if the Fund has entered into a contract to
sell the security, could result in possible liability to the purchaser. Certain
emerging markets may lack clearing facilities equivalent to those in developed
countries. Accordingly, settlements can pose additional risks in such markets
and ultimately can expose the Fund to the risk of losses resulting from the
Fund's inability to recover from a counterparty.

The risk also exists that an emergency situation may arise in one or more
emerging markets as a result of which trading securities may cease or may be
substantially curtailed and prices for the Fund's portfolio securities in such
markets may not be readily available. The Fund's portfolio securities in the
affected markets will be valued at fair value determined in good faith by or
under the direction of the Board of Trustees.

Investment in certain emerging market securities is restricted or controlled to
varying degrees. These restrictions or controls may at times limit or preclude
foreign investment in certain emerging market securities and increase the cost
and expenses of the Fund. Emerging markets may require governmental approval for
the repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if a deterioration occurs in an
emerging market's balance of payments, the market could impose temporary
restrictions on foreign capital remittances.

PRIVATIZED ENTERPRISES. Investments in foreign securities may include securities
issued by enterprises that have undergone or are currently undergoing
privatization. The governments of certain foreign countries have, to varying
degrees, embarked on privatization programs contemplating the sale of all or
part of their interests in state enterprises. The Fund's investments in the
securities of privatized enterprises include privately negotiated investments in
a government- or state-owned or controlled company or enterprise that has not
yet conducted an initial equity offering, investments in the initial offering of
equity securities of a state enterprise or former state enterprise and
investments in the securities of a state enterprise following its initial equity
offering.

In certain jurisdictions, the ability of foreign entities, such as the Fund, to
participate in privatizations may be limited by local law, or the price or terms
on which the Fund may be able to participate may be less advantageous than for
local investors. Moreover, there can be no assurance that governments that have
embarked on privatization programs will continue to divest their ownership of
state enterprises, that proposed privatizations will be successful or that
governments will not re-nationalize enterprises that have been privatized.

In the case of the enterprises in which the Fund may invest, large blocks of the
stock of those enterprises may be held by a small group of stockholders, even
after the initial equity offerings by those enterprises. The sale of some
portion or all of those blocks could have an adverse effect on the price of the
stock of any such enterprise.

Prior to making an initial equity offering, most state enterprises or former
state enterprises go through an internal reorganization of management. Such
reorganizations are made in an attempt to better enable these enterprises to
compete in the private sector. However, certain reorganizations could result in
a management team that does not function as well as the enterprise's prior
management and may have a negative effect on such enterprise. In addition, the
privatization of an enterprise by its government may occur over a number of
years, with the government continuing to hold a controlling position in the
enterprise even after the initial equity offering for the enterprise.

Prior to privatization, most of the state enterprises in which the Fund may
invest enjoy the protection of and receive preferential treatment from the
respective sovereigns that own or control them. After making an initial equity
offering these enterprises may no longer have such protection or receive such
preferential treatment and

B-7
<PAGE> 38

may become subject to market competition from which they were previously
protected. Some of these enterprises may not be able to effectively operate in a
competitive market and may suffer losses or experience bankruptcy due to such
competition.

DEPOSITORY RECEIPTS. The Fund may invest in securities of foreign issuers in the
form of American Depositary Receipts ("ADRs"). For many foreign securities,
there are U.S. Dollar-denominated ADRs, which are bought and sold in the United
States and are generally issued by domestic banks. ADRs represent the right to
receive securities of foreign issuers deposited in the domestic bank or a
correspondent bank. ADRs do not eliminate all the risk inherent in investing in
the securities of foreign issuers. However, by investing in ADRs rather than
directly in foreign issuers' stock, the Fund will avoid currency risks during
the settlement period for either purchases or sales. In general, there is a
large, liquid market in the United States for most ADRs. The Fund may also
invest in securities of foreign issuers in the form of European Depository
Receipts ("EDRs") and Global Depositary Receipts ("GDRs"), which are receipts
evidencing an arrangement with a European bank similar to that for ADRs and are
designed for use in the European and other foreign securities markets. EDRs and
GDRs are not necessarily denominated in the currency of the underlying security.

FOREIGN CURRENCY TRANSACTIONS. As indicated above (see "Foreign Securities"),
the Fund may invest a limited portion of its assets in securities denominated in
foreign currencies. The value of the assets of the Fund invested in such
securities as measured in U.S. Dollars may be affected favorably or unfavorably
by changes in foreign currency exchange rates and exchange control regulations,
and the Fund may incur costs in connection with conversions between various
currencies. The Fund will conduct its foreign currency exchange transactions
either on a spot (i.e., cash) basis at the spot rate prevailing in the foreign
currency exchange market, or through forward contracts to purchase or sell
foreign currencies. A forward foreign currency exchange contract involves an
obligation to purchase or sell a specific currency at a future date at a price
set at the time of the contract.

By entering into a forward contract in U.S. Dollars for the purchase or sale of
the amount of foreign currency involved in an underlying security transaction,
the Fund is able to protect itself against a possible loss between trade and
settlement dates resulting from an adverse change in the relationship between
the U.S. Dollar and such foreign currency. However, this tends to limit gains
which might result from a positive change in such currency relationships.

When the Fund's investment manager believes that the currency of a particular
foreign country may suffer a substantial decline against the U.S. Dollar, it may
enter into a forward contract to sell an amount of foreign currency
approximating the value of some or all of the Fund's portfolio securities
denominated in such foreign currency. It is extremely difficult to forecast
short-term currency market movements, and whether such a short-term hedging
strategy would be successful is highly uncertain.

It is impossible to forecast with absolute precision the market value of
portfolio securities at the expiration of a contract. Accordingly, it may be
necessary for the Fund to purchase additional currency on the spot market (and
bear the expense of such purchase) if the market value of the security is less
than the amount of foreign currency the Fund is obligated to deliver when a
decision is made to sell the security and make delivery of the foreign currency
in settlement of a forward contract. Conversely, it may be necessary to sell on
the spot market some of the foreign currency received upon the sale of the
portfolio security if its market value exceeds the amount of foreign currency
the Fund is obligated to deliver.

If the Fund retains the portfolio security and engages in an offsetting
transaction with respect to a forward contract, the Fund will incur a gain or a
loss (as described below) to the extent that there has been movement in forward
contract prices. If the Fund engages in an offsetting transaction, it may
subsequently enter into a new forward contract to sell the foreign currency.
Should forward prices decline during the period between the Fund's entering into
a forward contract for the sale of foreign currency and the date it enters into
an offsetting contract for the purchase of the foreign currency, the Fund would
realize a gain to the extent the price of the currency it has agreed to sell
exceeds the price of the currency it has agreed to purchase. Should forward
prices increase, the Fund would suffer a loss to the extent the price of the
currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell. Although such contracts tend to minimize the risk of loss due to
a decline in the

B-8
<PAGE> 39

value of the hedged currency, they also tend to limit any gain which might
result should the value of such currency increase. The Fund may have to convert
its holdings of foreign currencies into U.S. Dollars from time to time in order
to meet such needs as Fund expenses and redemption requests.

The Fund does not enter into forward contracts or maintain a net exposure in
such contracts where the Fund would be obligated to deliver an amount of foreign
currency in excess of the value of the Fund's portfolio securities or other
assets denominated in that currency. The Fund does not intend to enter into
forward contracts for the purchase of a foreign currency if the Fund would have
more than 5% of the value of its total assets committed to such contracts. The
Fund segregates eligible securities to the extent required by applicable
regulations in connection with forward foreign currency exchange contracts
entered into for the purchase of a foreign currency. The Fund generally does not
enter into a forward contract with a term longer than one year.

The Fund may also hedge its foreign currency exchange rate risk by engaging in
foreign currency financial futures transactions and by purchasing foreign
currency options. A foreign currency call rises in value if the underlying
currency appreciates. Conversely, a put rises in value if the underlying
currency depreciates. Through the purchase or sale of foreign currency financial
futures contracts, the Fund may be able to achieve many of the same objectives
as through forward foreign currency exchange contracts more effectively and
perhaps at a lower cost. Unlike forward foreign currency exchange contracts,
foreign currency futures contracts and options on foreign currency futures
contracts are standardized as to amount and delivery period and are traded on
boards of trade and commodities exchanges. Such contracts may provide greater
liquidity and lower cost than forward foreign currency exchange contracts. For
additional information concerning options transactions and financial futures
transactions, please see "Investment Objectives, Policies and Risk
Factors--Additional Investment Information" in the prospectus and related
subsections above under "Investment Policies and Techniques."

REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements, which are
instruments under which the Fund acquires ownership of a security from a
broker-dealer or bank that agrees to repurchase the security at a mutually
agreed upon time and price (which price is higher than the purchase price),
thereby determining the yield during the Fund's holding period. In the event of
a bankruptcy or other default of a seller of a repurchase agreement, the Fund
might incur expenses in enforcing its rights, and could experience losses,
including a decline in the value of the underlying securities and loss of
income. The securities underlying a repurchase agreement will be
marked-to-market every business day so that the value of such securities is at
least equal to the investment value of the repurchase agreement, including any
accrued interest thereon. The Fund currently does not intend to invest more than
5% of its net assets in repurchase agreements during the current year.

SHORT SALES AGAINST-THE-BOX. The Fund may make short sales against-the-box for
the purpose of deferring realization of gain or loss for federal income tax
purposes. A short sale "against-the-box" is a short sale in which the Fund owns
at least an equal amount of the securities sold short or securities convertible
into or exchangeable for, without payment of any further consideration,
securities of the same issue as, and at least equal in amount to, the securities
or other assets sold short. The Fund may engage in such short sales only to the
extent that not more than 10% of the Fund's total assets (determined at the time
of the short sale) is held as collateral for such sales. The Fund currently does
not intend, however, to engage in such short sales to the extent that more than
5% of its net assets will be held as collateral therefor during the current
year.

DIVIDENDS AND TAXES

DIVIDENDS. The Fund will normally distribute annual dividends of net investment
income and any net realized short-term and long-term capital gains. The Fund may
at any time vary the foregoing dividend practice and, therefore, reserves the
right from time to time either to distribute or to retain for reinvestment such
of its net investment income and its net short-term and long-term capital gains
as the Board of Trustees determines appropriate under 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 will be reinvested in

B-9
<PAGE> 40

shares of the Fund unless shareholders indicate in writing that they wish to
receive them in cash or in shares of other Kemper Funds. As reflected in the
prospectus (see "Dividends and Taxes"), shareholders must reinvest all dividends
and hold their shares until the Maturity Date in order to be assured of the
benefit of the Fund's Investment Protection.

TAXES. The Fund intends 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. One of the Subchapter M
requirements to be satisfied is that less than 30% of the Fund's gross income
during the fiscal year must be derived from gains (not reduced by losses) from
the sale or other disposition of securities and certain other investments held
for less than three months. The Fund may be limited in its options, futures and
foreign currency transactions in order to prevent recognition of such gains.

The Fund's options, futures and foreign currency transactions are subject to
special tax provisions that may accelerate or defer recognition of certain gains
or losses, change the character of certain gains or losses, or alter the holding
periods of certain of the Fund's securities.

The mark-to-market rules of the Code may require the Fund to recognize
unrealized gains and losses on certain options and futures held by the Fund at
the end of the fiscal year. Under these provisions, 60% of any capital gain net
income or loss recognized will generally be treated as long-term and 40% as
short-term. However, although certain forward contracts and futures contracts on
foreign currency are mark-to-market, the gain or loss is generally ordinary
under Section 988 of the Code. In addition, the straddle rules of the Code would
require deferral of certain losses realized on positions of a straddle to the
extent that the Fund had unrealized gains in offsetting positions at year end.

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

A portion of the ordinary income dividends from the Fund may be eligible for the
dividends received deduction available to corporate shareholders. The aggregate
amount eligible for the dividends received deduction may not exceed the
aggregate qualifying dividends received by the Fund for the fiscal year.

A shareholder who redeems shares of the Fund will recognize capital gain or loss
for federal income tax purposes measured by the difference between the value of
the shares redeemed and the adjusted cost basis of the shares. Any loss
recognized on the redemption of Fund shares held six months or less will be
treated as long-term capital loss to the extent that the shareholder has
received any long-term capital gain dividends on such shares. A shareholder who
has redeemed shares of the Fund or any other Kemper Mutual Fund listed in the
prospectus under "Special Features--Combined Purchases" (other than shares of
Kemper Cash Reserves Fund not acquired by exchange from another Kemper Mutual
Fund) may reinvest the amount redeemed at net asset value at the time of the
reinvestment in shares of the Fund or in shares of the other Kemper Mutual Funds
within six months of the redemption as described in the prospectus under
"Redemption or Repurchase of Shares--Reinvestment Privilege." If the redeemed
shares 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 realizes a loss
on the redemption or exchange of Fund shares and reinvests in the same Fund's
shares 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
Fund shares for shares of another fund is treated as a redemption and
reinvestment for federal income tax purposes.

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<PAGE> 41

PERFORMANCE

As described in the prospectus, the Fund's historical performance or return may
be shown in the form of "average annual total return" and "total return"
figures. These various measures of performance are described below.

The Fund's average annual total return quotation is computed in accordance with
a standardized method prescribed by rules of the Securities and Exchange
Commission. The average annual total return for the Fund for a specific period
is found by first taking a hypothetical $1,000 investment ("initial investment")
in the Fund's shares on the first day of the period, adjusting to deduct the
maximum sales charge, and computing the "redeemable value" of that investment at
the end of the period. The redeemable value is then divided by the initial
investment, and this quotient is taken to the Nth root (N representing the
number of years in the period) and 1 is subtracted from the result, which is
then expressed as a percentage. The calculation assumes that all income and
capital gains dividends paid by the Fund have been reinvested at net asset value
on the reinvestment dates during the period. Average annual total return may
also be calculated without deducting the maximum sales charge.

Calculation of the Fund's total return is not subject to a standardized formula,
except when calculated for the Fund's "Financial Highlights" table in the Fund's
financial statements and prospectus. Total return performance for a specific
period is calculated by first taking a hypothetical investment ("initial
investment") in the Fund's shares on the first day of the period, either
adjusting or not adjusting to deduct the maximum sales charge, and computing the
"ending value" of that investment at the end of the period. The total return
percentage is then determined by subtracting the initial investment from the
ending value and dividing the remainder by the initial investment and expressing
the result as a percentage. The calculation assumes that all income and capital
gains dividends paid by the Fund have been reinvested at net asset value on the
reinvestment dates during the period. Total return may also be shown as the
increased dollar value of the hypothetical investment over the period. Total
return calculations that do not include the effect of the sales charge would be
reduced if such charge were included.

The Fund's performance figures are based upon historical results and are not
representative of future performance. The Fund's shares are sold at net asset
value plus a maximum sales charge of 5.0% of the offering price. Returns and net
asset value 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 returns described in this section. Shares of the Fund are redeemable at
the then current net asset value, which may be more or less than original cost.

INVESTMENT MANAGER AND UNDERWRITER

INVESTMENT MANAGER. Zurich Kemper Investments, Inc. ("ZKI"), 222 South Riverside
Plaza, Chicago, Illinois 60606, is the Fund's investment manager. ZKI is wholly
owned by ZKI Holding Corp. ZKI Holding Corp. is a more than 90% owned subsidiary
of Zurich Holding Company of America, Inc., which is a wholly owned subsidiary
of Zurich Insurance Company, an internationally recognized provider of financial
services in property/casualty and life insurance, reinsurance and asset
management. Pursuant to an investment management agreement, ZKI acts as the
Fund's investment adviser, manages its investments, administers its business
affairs, furnishes office facilities and equipment, provides clerical,
bookkeeping and administrative services, and permits any of its officers or
employees to serve without compensation as trustees or officers of the Trust if
elected to such positions. The investment management agreement provides that the
Fund shall pay the charges and expenses of its operations, including the fees
and expenses of the trustees (except those who are affiliated with ZKI),
independent auditors, counsel, custodian and transfer agent and the cost of
share certificates, reports and notices to shareholders, brokerage commissions
or transaction costs, costs of calculating net asset value, taxes and membership
dues. The Fund bears the expenses of registration of its shares with the
Securities and Exchange Commission, while the principal underwriter pays the
cost of qualifying and maintaining the qualification of the Fund's shares for
sale under the securities laws of the various states. Kemper Retirement Fund
Series I, Series II,

B-11
<PAGE> 42

Series III, Series IV, Series V and Series VI (which are no longer being
offered), and the Fund are subject to the investment management agreement. The
Trust's expenses are generally allocated among the series on the basis of
relative net assets at the time of allocation, except that expenses directly
attributable to a particular series are charged to that series.

The Fund pays ZKI an investment management fee, payable monthly, at an annual
rate of .50% of average daily net assets of the Fund. ZKI has agreed to
reimburse the Fund to the extent required by applicable state expense
limitations should all operating expenses of the Fund, including the investment
management fees of ZKI but excluding taxes, interest, distribution fees,
extraordinary expenses, brokerage commissions or transaction costs and any other
properly excludable expenses, exceed the applicable state expense limitations.
Currently, there are no state expense limitations in effect.

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

The investment management agreement continues in effect from year to year for
each series subject to the agreement so long as its continuation is approved at
least annually by (a) a majority of the trustees who are not parties to such
agreement or interested persons of any such party except in their capacity as
trustees of the Trust and (b) by the shareholders of each series or the Board of
Trustees. It may be terminated at any time upon 60 days' notice by either party,
or by a majority vote of the outstanding shares of a series with respect to that
series, and will terminate automatically upon assignment. If continuation is not
approved for a series, the investment management agreement nevertheless may
continue in effect for the series for which it is approved and ZKI may continue
to serve as investment manager for the series for which it is not approved to
the extent permitted by the Investment Company Act of 1940. The management fee
and the expense limitation are computed based upon the average daily net assets
of all series subject to the agreement and are allocated among such series based
upon the relative net assets of each such series. Additional series may be
subject to the same or a different agreement. Kemper Worldwide 2004 Fund, a
series of the Trust, has a different agreement.

FUND SUB-ADVISER. Zurich Investment Management Limited ("ZIML"), 1 Fleet Place,
London, U.K. EC4M 7R0, an affiliate of ZKI, is the sub-adviser for the foreign
securities portion of the Fund. ZIML acts as sub-adviser pursuant to the terms
of a sub-advisory agreement between it and ZKI.

Under the terms of the sub-advisory agreement for the Fund, ZIML renders
investment advisory and management services with regard to that portion of the
Fund's portfolio as may be allocated to ZIML by ZKI from time to time for
management of foreign securities, including foreign currency transactions and
related investments. ZIML may, under the terms of the sub-advisory agreement,
render similar services to others including other investment companies. For its
services, ZIML will receive from ZKI a monthly fee at the annual rate of .35% of
the portion of the average daily net assets of the Fund allocated by ZKI to ZIML
for management. ZIML permits any of its officers or employees to serve without
compensation as trustees or officers of the Fund if elected to such positions.
Kemper Retirement Fund Series I, Series II, Series III, Series IV, Series V and
Series VI (which are no longer being offered) and the Fund are subject to the
Sub-Advisory Agreement.

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

The sub-advisory agreement is for an initial term ending April 1, 1998 and
continues in effect from year to year so long as its continuation is approved at
least annually (a) by a majority of the trustees who are not parties to such
agreement or interested persons of any such party except in their capacity as
trustees of the Fund and (b) by the shareholders or the Board of Trustees. The
sub-advisory agreement may be terminated at any time for the Fund upon 60 days
notice by ZKI, ZIML or the Board of Trustees, or by a majority vote of the
outstanding shares of the Fund, and will terminate automatically upon assignment
or upon the termination of the Fund's investment

B-12
<PAGE> 43

management agreement. If additional Funds become subject to the sub-advisory
agreement, the provisions concerning continuation, amendment and termination
shall be on a Fund-by-Fund basis. Additional Funds may be subject to a different
agreement. Kemper Worldwide 2004 Fund, a series of the Trust, is subject to a
different sub-advisory agreement.

PRINCIPAL UNDERWRITER. Zurich Kemper Distributors, Inc. ("ZKDI"), a wholly owned
subsidiary of ZKI, is the principal underwriter for shares of the Trust and acts
as agent of the Trust in the continuous offering of its shares. The Trust pays
the cost for the prospectus and shareholder reports to be set in type and
printed for existing shareholders, and ZKDI pays for the printing and
distribution of copies thereof used in connection with the offering of shares to
prospective investors. ZKDI also pays for supplementary sales literature and
advertising costs. Terms of continuation, termination and assignment under the
underwriting agreement are identical to those described above with regard to the
investment management agreement, except that termination other than upon
assignment requires six months' notice and continuation, amendment and
termination need not be on a series by series basis.

ADMINISTRATIVE SERVICES. Administrative services are provided to the Trust under
an administrative services agreement ("administrative agreement") with ZKDI.
ZKDI bears all its expenses of providing services pursuant to the administrative
agreement between ZKDI and the Trust, including the payment of any service fees.
The Trust pays ZKDI an administrative services fee, payable monthly, at the
annual rate of up to .25% of average daily net assets of the Trust.

ZKDI enters 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 in the Trust. The firms shall
provide such office space and equipment, telephone facilities and personnel as
is necessary or appropriate 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 Trust, and
such other administrative services as may be agreed upon from time to time and
permitted by applicable statute, rule or regulation. ZKDI pays such firms a
service fee, payable quarterly, at an annual rate of up to .25% of the net
assets in Trust accounts that they maintain and service commencing with the
month after investment. Firms to which service fees may be paid include
broker-dealers affiliated with ZKDI.

ZKDI 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 Trust. Currently, the
administrative services fee payable to ZKDI is based only upon Trust assets in
accounts for which a firm provides administrative services and it is intended
that ZKDI will pay all the administrative services fees that it receives from
the Trust to firms in the form of service fees. The effective administrative
services fee rate to be charged against all assets of the Trust while this
procedure is in effect would depend upon the proportion of Trust assets that is
in accounts for which a firm of record provides administrative services. The
Board of Trustees of the Trust, in its discretion, may approve basing the fee to
ZKDI on all Trust assets in the future.

Certain trustees or officers of the Trust are also directors or officers of ZKI,
ZIML or ZKDI as indicated under "Officers and Trustees."

CUSTODIAN, TRANSFER AGENT AND SHAREHOLDER SERVICE AGENT. Investors Fiduciary
Trust Company ("IFTC"), 127 West 10th Street, Kansas City, Missouri 64105, as
custodian and State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, as sub-custodian, have custody of all securities and cash
of the Trust maintained in the United States. The Chase Manhattan Bank, Chase
MetroTech Center, Brooklyn, New York 11245, as custodian, has custody of all
securities and cash of the Trust held outside the United States. They attend to
the collection of principal and income, and payment for and collection of
proceeds of securities bought and sold by the Fund. IFTC is also the Trust's
transfer agent and dividend-paying agent. Pursuant to a services agreement with
IFTC, Zurich Kemper Service Company ("ZKSVC"), an affiliate of ZKI, serves as
"Shareholder Service Agent" of the Fund, and, as such, performs all of IFTC's
duties as transfer agent and dividend paying

B-13
<PAGE> 44

agent. IFTC receives from the Fund as transfer agent, and pays to ZKSVC, annual
account fees of $6 per account plus account set up, transaction and maintenance
charges and out-of-pocket expense reimbursement. IFTC's fee is reduced by
certain earnings credits in favor of the Fund.

INDEPENDENT AUDITORS AND REPORTS TO SHAREHOLDERS. The Trust'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 return, and perform other
professional accounting, auditing, tax and advisory services when engaged to do
so by the Trust. Shareholders will receive annual audited financial statements
and semi-annual unaudited financial statements.

PORTFOLIO TRANSACTIONS

ZKI and its affiliates furnish investment management services for the Kemper
Funds, Zurich Money Funds and other clients including affiliated insurance
companies. ZIML is the sub-adviser for the Fund and other Kemper Funds. ZKI and
its affiliates share some common research and trading facilities. At times
investment decisions may be made to purchase or sell the same investment
securities for the Fund and for one or more of the other clients advised by ZKI
or its affiliates. When two or more of such clients are simultaneously engaged
in the purchase or sale of the same security through the same trading facility,
the transactions are allocated as to amount and price in a manner considered
equitable to each.

The above mentioned factors may have a detrimental effect on the quantities or
prices of securities and options and futures contracts available to the Fund. On
the other hand, the ability of the Fund to participate in volume transactions
may produce better executions for the Fund in some cases.

ZKI and ZIML, in effecting purchases and sales of portfolio securities for the
account of the Fund, will implement the Fund's policy of seeking best execution
of orders. ZKI and ZIML may be permitted to pay higher brokerage commissions for
research services as described below. Consistent with this policy, orders for
portfolio transactions are placed with broker-dealer firms giving consideration
to the quality, quantity and nature of each firm's professional services, which
include execution, financial responsibility, responsiveness, clearance
procedures, wire service quotations and statistical and other research
information provided to the Fund and ZKI and its affiliates. Subject to the
policy of seeking best execution of an order, brokerage is allocated on the
basis of all services provided. Any research benefits derived are available for
all clients of ZKI and its affiliates. In selecting among firms believed to meet
the criteria for handling a particular transaction, ZKI and ZIML may give
consideration to those firms that have sold or are selling shares of the Fund
and other funds managed by ZKI or its affiliates, as well as to those firms that
provide market, statistical and other research information to the Fund and ZKI
and its affiliates, although ZKI and ZIML are not authorized to pay higher
commissions to firms that provide such services, except as described below.

ZKI and ZIML may in certain instances be permitted to pay higher brokerage
commissions solely for receipt of market, statistical and other research
services as defined in Section 28(e) of the Securities Exchange Act of 1934 and
interpretations thereunder. Such services may include, among other things:
economic, industry or company research reports or investment recommendations;
computerized databases; quotation equipment and software; and research or
analytical computer software and services. ZKI and ZIML may attempt to direct
sufficient commissions and in the case of transactions for certain types of
clients, dealer selling concessions on new issues of securities, to ensure the
continued receipt of such research products and services. Where products or
services have a "mixed use," a good faith effort is made to make a reasonable
allocation of the cost of the products or services in accordance with the
anticipated research and non-research uses and the cost attributable to
non-research use is paid by ZKI or one of its affiliates in cash. Subject to
Section 28(e) and procedures adopted by the Board of Trustees of the Trust, the
Fund could pay a firm that provides research services commissions for effecting
a securities transaction for the Fund in excess of the amount other firms would
have charged for the transaction if ZKI or ZIML determines in good faith that
the greater commission is reasonable in relation to the value of the brokerage
and research services provided by the executing firm viewed in terms either of a
particular transaction

B-14
<PAGE> 45

or ZKI's or ZIML's overall responsibilities to the Fund and other clients. Not
all of such research services may be useful or of value in advising a particular
Fund. Research benefits will be available for all clients of ZKI and its
affiliates. The investment management fee paid by the Fund to ZKI is not reduced
because these research services are received.

PURCHASE AND REDEMPTION OF SHARES

During the Offering Period described in the prospectus (see "Purchase of
Shares"), Fund shares are sold at their public offering price, which is the net
asset value next determined after an order is received in proper form plus a
sales charge as described in the Fund's prospectus. 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 determination
will vary and cannot be determined in advance. The amount received by a
shareholder upon redemption or repurchase may be more or less than the amount
paid for such shares depending on the market value of the Fund's portfolio
securities at the time; provided, however, shareholders who hold their shares to
the Maturity Date and reinvest their dividends will receive the benefit of the
Fund's Investment Protection.

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

Scheduled variations in or the elimination of the sales charge for purchases by
certain classes of persons or through certain types of transactions as described
in the prospectus is 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 (the "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.

Although it is the Fund's present policy to redeem in cash, if the Board of
Trustees determines that a material adverse effect would be experienced by the
remaining shareholders if payment were made wholly in cash, the Fund will
satisfy the redemption request in whole or in part by a distribution of
portfolio securities in lieu of cash, in conformity with the applicable rules of
the Securities and Exchange Commission, taking such securities at the same value
used to determine net asset value, and selecting the securities in such manner
as the Board of Trustees may deem fair and equitable. If such a distribution
occurred, shareholders receiving securities and selling them could receive less
than the redemption value of such securities and in addition would incur certain
transaction costs. Such a redemption would not be as liquid as a redemption
entirely in cash. The Trust has elected to be governed by Rule 18f-1 under the
Investment Company Act of 1940 pursuant to which the Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net assets of
the Fund during any 90-day period for any one shareholder of record.

OFFICERS AND TRUSTEES

The officers and trustees of the Trust, their birthdates, their principal
occupations and their affiliations, if any, with ZKI, the Fund's investment
adviser, ZIML, the sub-adviser of the Fund, and ZKDI, the Fund's principal

B-15
<PAGE> 46

underwriter, are as follows (The number following each person's title is the
number of investment companies managed by ZKI or an affiliate for which he or
she holds similar positions):

JAMES E. AKINS (10/15/26), Director (13), 2904 Garfield Terrace N.W.,
Washington, D.C.; Consultant on International, Political and Economic Affairs;
formerly a career United States Foreign Service Officer; Energy Adviser for the
White House; United States Ambassador to Saudi Arabia.

ARTHUR R. GOTTSCHALK (2/13/25), Trustee (13), 10642 Brookridge Drive, Frankfort,
Illinois; Retired; formerly, President, Illinois Manufacturers Association;
Trustee, Illinois Masonic Medical Center; Member, Board of Governors, Heartland
Institute/Illinois; formerly, Illinois State Senator.

FREDERICK T. KELSEY (4/25/27), Trustee (13), 738 York Court, Northbrook,
Illinois; Retired; formerly, consultant to Goldman, Sachs & Co.; formerly,
President, Treasurer and Trustee of Institutional Liquid Assets and its
affiliated mutual funds; Trustee of the Benchmark Fund and the Pilot Fund.

DOMINIQUE P. MORAX (10/2/48), Trustee* (39), 222 South Riverside Plaza, Chicago,
Illinois; Member, Extended Corporate Executive Board, Zurich Insurance Company;
Director, ZKI.

FRED B. RENWICK (2/1/30), Director (13), 3 Hanover Square, New York, New York;
Professor of Finance, New York University, Stern School of Business; Director,
TIFF Industrial Program, Inc.; Director, The Wartburg Home Foundation; Chairman,
Investment Committee of Morehouse College Board of Trustees; Chairman, American
Bible Society Investment Committee; previously member of the Investment
Committee of Atlanta University Board of Trustees; previously Director of Board
of Pensions Evangelical Lutheran Church in America.

STEPHEN B. TIMBERS (8/8/44), President and Trustee* (39), 222 South Riverside
Plaza, Chicago, Illinois; President, Chief Executive Officer, Chief Investment
Officer and Director, ZKI; Director, ZKDI, Dreman Value Advisors, Inc. and LTV
Corporation.

JOHN B. TINGLEFF (5/4/35), Trustee (13), 2015 South Lake Shore Drive, Harbor
Springs, Michigan; Retired; formerly President, Tingleff & Associates
(management consulting firm); formerly, Senior Vice President, Continental
Illinois National Bank & Trust Company.

JOHN G. WEITHERS (8/8/33), Trustee (13), 311 Springlake, Hinsdale, Illinois;
Retired; formerly, Chairman of the Board and Chief Executive Officer, Chicago
Stock Exchange; Director, Federal Life Insurance Company; President of the
Members of the Corporation and Trustee, DePaul University; Director, Systems
Imagineering and Records Management Services, Inc.

CHARLES R. MANZONI, JR. (1/23/47), Vice President* (39), 222 South Riverside
Plaza, Chicago, Illinois; Executive Vice President, Secretary and General
Counsel of ZKI, Secretary of ZKI Holding Corp., Secretary ZKI Agency, Inc.;
formerly, Partner, Gardner Carton & Douglas (attorneys).

STEVEN H. REYNOLDS (9/11/43), Vice President* (12), 222 South Riverside Plaza,
Chicago, Illinois, Executive Vice President and Chief Investment
Officer--Equities, ZKI.

TRACY McCORMICK CHESTER (9/27/54), Vice President* (3), 222 South Riverside
Plaza, Chicago, Illinois; Senior Vice President and Portfolio Manager, ZKI;
formerly, Portfolio Manager for Fiduciary Management; prior thereto, independent
consultant managing private accounts.

JOHN E. NEAL (3/9/50), Vice President* (39), 222 South Riverside Plaza, Chicago,
Illinois; President, Kemper Funds Group, a unit of ZKI; Director, ZKI, Dreman
Value Advisors, Inc. and ZKDI.

JEROME L. DUFFY (6/29/36), Treasurer* (39), 222 South Riverside Plaza, Chicago,
Illinois; Senior Vice President, ZKI.

PHILIP J. COLLORA (11/15/45), Vice President and Secretary* (39), 222 South
Riverside Plaza, Chicago, Illinois; Attorney, Senior Vice President and
Assistant Secretary, ZKI.

B-16
<PAGE> 47

ELIZABETH C. WERTH (10/1/47), Assistant Secretary* (32), 222 South Riverside
Plaza, Chicago, Illinois; Vice President and Director of State Registrations,
ZKI and ZKDI.

* Interested persons as defined in the Investment Company Act of 1940.

The trustees and officers who are "interested persons" as designated above
receive no compensation from the Trust. The table below shows amounts paid or
accrued to those trustees who are not designated "interested persons" during the
Trust's 1996 fiscal year, except that the information in the last column is for
calendar year 1996.

<TABLE>
<CAPTION>
TOTAL
COMPENSATION
AGGREGATE KEMPER FUNDS
COMPENSATION PAID TO
NAME OF TRUSTEE FROM TRUST TRUSTEES(2)
--------------- ------------ ------------
<S> <C> <C>
James B. Akins.............................................. $16,300 $ 94,300
Arthur R. Gottschalk(1)..................................... $23,000 $102,700
Frederick T. Kelsey(1)...................................... $24,000 $106,800
Fred B. Renwick............................................. $16,300 $ 94,300
John B. Tingleff............................................ $21,000 $ 94,300
John G. Weithers............................................ $21,000 $ 94,300
</TABLE>

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

(1) Includes deferred fees and interest thereon pursuant to deferred
compensation agreements with the Trust. Deferred amounts accrue interest
monthly at a rate equal to the yield of Kemper Money Funds--Kemper Money
Market Fund. Total deferred amounts and interest accrued through December
31, 1996 for the Trust are $48,400 and $79,300 for Messrs. Gottschalk and
Kelsey, respectively.

(2) Includes compensation for service on the boards of 13 Kemper funds with 36
fund portfolios.

As of April 30, 1997, the trustees and officers as a group owned less than 1% of
the outstanding shares of any series of the Trust and ZKI owned of record all of
the outstanding shares of the Fund and no person owned of record 5% or more of
any other series of the Trust.

SHAREHOLDER RIGHTS

The Trust 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 approval by shareholders is
required by the Investment Company Act of 1940 ("1940 Act"); (c) any termination
of the Trust, a series 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 Trust, establishing a series, 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 action on behalf of the Trust 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 Trust 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

B-17
<PAGE> 48

than a majority of the trustees have been elected by shareholders, and (b) if,
as a result of a vacancy in the Board of Trustees, less than two-thirds of the
trustees have been elected by the shareholders, that vacancy will be filled only
by a vote of the shareholders.

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

The 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 Trust 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 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 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 ZKI and ZKDI 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.

B-18
<PAGE> 49

REPORT OF INDEPENDENT AUDITORS

The Board of Trustees and Shareholder
Kemper Target Equity Fund--
Kemper Retirement Fund--Series VII

We have audited the accompanying statement of net assets of Kemper Target Equity
Fund--Kemper Retirement Fund--Series VII as of April 22, 1997. This statement of
net assets is the responsibility of the Trust's management. Our responsibility
is to express an opinion on this statement of net assets based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of net assets is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement of net assets. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall statement of net assets
presentation. We believe that our audit of the statement of net assets provides
a reasonable basis for our opinion.

In our opinion, the statement of net assets referred to above presents fairly,
in all material respects, the financial position of Kemper Target Equity
Fund--Kemper Retirement Fund--Series VII at April 22, 1997 in conformity with
generally accepted accounting principles.

Chicago, Illinois

April 22, 1997

B-19
<PAGE> 50

KEMPER TARGET EQUITY FUND--
KEMPER RETIREMENT FUND SERIES VII

STATEMENT OF NET ASSETS--APRIL 22, 1997

<TABLE>
<S> <C>
ASSETS
Cash........................................................ $100,000
========
NET ASSETS
Net assets, applicable to 11,111.111 shares of beneficial
interest outstanding, equivalent to $9.00 per share
(unlimited number of shares authorized, no par value)..... $100,000
========
THE PRICING OF SHARES
Net asset value and redemption price per share ($100,000 /
11,111.111 shares outstanding)............................ $ 9.00
Maximum offering price per share (net asset value, plus
5.26% of net asset value or 5.00% of offering price)...... $ 9.47
</TABLE>

- ---------------
NOTES:

Kemper Target Equity Fund (the "Trust") was organized as a business trust under
the laws of The Commonwealth of Massachusetts on August 3, 1988; all shares of
beneficial interest of Kemper Retirement Fund Series VII (the "Fund") of the
Trust were issued to Zurich Kemper Investments, Inc. ("ZKI"), the investment
manager for the Fund, on April 22, 1997 for $100,000 cash. The Trust may
establish multiple series; currently eight series have been established.

The costs of organization of the Fund will be paid by ZKI.

B-20
<PAGE> 51

KEMPER TARGET EQUITY FUND
KEMPER RETIREMENT FUND SERIES VII

PART C.

OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial Statements

(i) Financial Statements included in Part A of the Registration
Statement: None.

(ii) Financial Statements included in Part B of the Registration
Statement:
Statement of Net Assets--April 22, 1997.
Schedules I, II, III, IV and V are omitted as the required information is not
present.

(b) Exhibits

<TABLE>
<S> <C>
99.B1.(a) Amended and Restated Agreement and Declaration of Trust.(1)
99.B1.(b) Written Instrument Establishing and Designating Kemper
Retirement Fund Series VII.
99.B2. By-Laws.(1)
99.B3. Inapplicable.
99.B4. Text of Share Certificate.(1)
99.B5.(a) Investment Management Agreement (Kemper Retirement Fund
Series).(2)
99.B5.(b) Notification of Additional Portfolio (Series VII).
99.B5.(c) Investment Management Agreement (Kemper Worldwide 2004
Fund).(2)
99.B5.(d) Sub-Advisory Agreement--Retirement Fund Series.
99.B5.(e) Sub-Advisory Agreement--Worldwide 2004.
99.B5.(f) Notification of Additional Portfolio (Series VII).
99.B6.(a) Underwriting Agreement.(2)
99.B6.(b) Form of Selling Group Agreement.
99.B7. Inapplicable.
99.B8.(a) Custody Agreement.(1)
99.B8.(b) Foreign Custody Agreement.(1)
99.B9.(a) Agency Agreement.(1)
99.B9.(b) Supplement to Agency Agreement.(2)
99.B9.(c) Administrative Services Agreement.(1)
99.B9.(d) Guaranty Agreement--Kemper Retirement Fund Series I.(1)
99.B9.(e) Guaranty Agreement--Kemper Retirement Fund Series II.(1)
99.B9.(f) Guaranty Agreement--Kemper Retirement Fund Series III.(1)
99.B9.(g) Guaranty Agreement--Kemper Retirement Fund Series IV.(1)
99.B9.(h) Guaranty Agreement--Kemper Retirement Fund Series V.(1)
99.B9.(i) Guaranty Agreement--Kemper Retirement Fund Series VI.(1)
99.B9.(j) Guaranty Agreement--Kemper Worldwide 2004 Fund.(1)
99.B9.(k) Assignment and Assumption Agreement.(1)
99.B9.(l) Guaranty Agreement--Kemper Retirement Fund Series VII.
99.B10.(a) Opinion and Consent of Vedder, Price, Kaufman & Kammholz.
99.B10.(b) Opinion and Consent of Ropes & Gray.
99.B11. Consent and Report of Independent Auditors.
99.B12. Inapplicable.
99.B13. Subscription Agreement--Series VII.
99.B14.(a) Kemper Retirement Plan Prototype.(3)
99.B14.(b) Model Individual Retirement Account.(3)
99.B15. Inapplicable.
99.B16. Performance Calculations.(1)
99.B24. Powers of Attorney.(4)
99.B485(b) Representation of Counsel (Rule 485(b))
</TABLE>

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

(1) Incorporated herein by reference to Post-Effective Amendment No. 20 to
Registrant's Registration Statement on Form N-1A filed on or about April
20, 1995.

(2) Incorporated herein by reference to Post-Effective Amendment No. 22 to
Registrant's Registration Statement on Form N-1A filed on October 11, 1996.

(3) Incorporated herein by reference to Post-Effective Amendment No. 21 to
Registrant's Registration Statement on Form N-1A filed on October 16, 1995.

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<PAGE> 52

(4) Incorporated herein by reference to Post-Effective Amendment No. 21 to
Registrant's Registration Statement on Form N-1A filed on October 16, 1995,
except for the Power of Attorney of Dominique P. Morax, which is
incorporated herein by reference to Post-Effective Amendment No. 22 to
Registrant's Registration Statement on Form N-1A filed on October 11, 1996.

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

Inapplicable.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES

As of January 30, 1997 there were holders of record of the shares of
Registrant as follows:

<TABLE>
<CAPTION>
SERIES NUMBER
------ ------
<S> <C>
Kemper Retirement Fund Series I................... 5,893
Kemper Retirement Fund Series II.................. 9,671
Kemper Retirement Fund Series III................. 7,789
Kemper Retirement Fund Series IV.................. 9,229
Kemper Retirement Fund Series V................... 9,331
Kemper Retirement Fund Series VI.................. 4,956
Kemper Retirement Fund Series VII................. --
Kemper Worldwide 2004 Fund........................ 2,830
</TABLE>

ITEM 27. 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.

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<PAGE> 53
ITEM 28(a) BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

Information pertaining to business and other connections of the
Registrant's investment advisers is hereby incorporated by reference to the
section of the Prospectus captioned "Investment Manager and Underwriter"
and to the section of the Statement of Additional Information captioned
"Investment Manager and Underwriter".

Zurich Kemper Investments, Inc., investment adviser of the Registrant, is
investment adviser of:

Kemper Mutual Funds:
Kemper Technology Fund
Kemper Total Return Fund
Kemper Growth Fund
Kemper Small Capitalization Equity Fund
Kemper Income and Capital Preservation Fund
Zurich Money Funds
Kemper National Tax-Free Income Series
Kemper Diversified Income Fund
Kemper High Yield Fund
Cash Equivalent Fund
Kemper U.S. Government Securities Fund
Kemper International Fund
Kemper Portfolios
Kemper State Tax-Free Income Series
Tax-Exempt California Money Market Fund
Kemper Adjustable Rate U.S. Government Fund
Kemper Blue Chip Fund
Kemper Global Income Fund
Kemper Target Equity Fund
Cash Account Trust
Investors Cash Trust
Tax-Exempt New York Money Market Fund
Kemper Value Plus Growth Fund
Kemper Quantitative Equity Fund
Kemper Horizon Fund
Kemper Europe Fund
Kemper Asian Growth Fund
Kemper Aggressive Growth Fund
Zurich YieldWise Money Fund
Kemper Closed-End Funds:
Kemper High Income Trust
Kemper Intermediate Government Trust
Kemper Municipal Income Trust
Kemper Multi-Market Income Trust
Kemper Strategic Municipal Income Trust
The Growth Fund of Spain, Inc.
Kemper Strategic Income Fund

Zurich Kemper Investments, Inc. also furnishes investment advice to and
manages investment portfolios for other clients including Kemper Investors Fund
and Kemper International Bond Fund.

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<PAGE> 54
Item 28(b)(i) Business and Other Connections of Officers
and Directors of Zurich Kemper Investments, Inc.,
the Investment Adviser

TIMBERS, STEPHEN B.
Director, President, Chief Executive Officer and Chief Investment
Officer, Zurich Kemper Investments, Inc.
Director, Zurich Kemper Distributors, Inc.
Director, Zurich Investment Management, Inc.
Director, Chairman, Zurich Kemper Service Company
Director, Dreman Value Advisors, Inc.
Director, ZKI Agency, Inc.
Director, President, Kemper International Management, Inc.
Trustee and President, Kemper Funds
Director, The LTV Corporation
Governor, Investment Company Institute

NEAL, JOHN E.
Director, Zurich Kemper Investments, Inc.
President, Kemper Funds Group, a unit of Zurich Kemper
Investments, Inc.
Director, President, Zurich Kemper Service Company
Director, Zurich Kemper Distributors, Inc.
Director, Zurich Investment Management, Inc.
Director, Dreman Value Advisors, Inc.
Director, ZKI Agency, Inc.
Director, Community Investment Corporation
Director, Continental Community Development Corporation
Director, K-P Greenway, Inc.
Director, K-P Plaza Dallas, Inc.
Director, Kemper/Prime Acquisition Fund, Inc.
Director, RespiteCare
Director, Urban Shopping Centers, Inc.
Vice President, Kemper Funds

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<PAGE> 55

MORAX, DOMINQUE P.
Director, Zurich Kemper Investments, Inc.
Senior Vice President, Member Extended Corporate Executive Board,
Zurich Insurance Company
Trustee, Kemper Funds
Executive Committee, ZKI Holding Corporation

CHAPMAN, II, WILLIAM E.
President, Kemper Retirement Plans Group, a unit of Zurich Kemper
Investments, Inc.
Director, Executive Vice President, Zurich Kemper Distributors, Inc.
Executive Vice President, Zurich Kemper Service Company

VOGEL, VICTOR E.
Senior Executive Vice President, Zurich Kemper Investments, Inc.
Trustee, Zurich Kemper Investments, Inc. Profit Sharing Plan & Money
Purchase Pension Plan
Executive Vice President, Zurich Kemper Service Company

BEIMFORD, JR., JOSEPH P.
Executive Vice President, Chief Investment Officer - Fixed
Income, Zurich Kemper Investments, Inc.
Vice President, Cash Account Trust
Vice President, Cash Equivalent Fund
Vice President, Galaxy Offshore, Inc.
Vice President, Investors Cash Trust
Vice President, Kemper Adjustable Rate U.S. Government Fund
Vice President, Kemper Diversified Income Fund
Vice President, Kemper Global Income Fund
Vice President, Kemper High Income Trust
Vice President, Kemper High Yield Fund
Vice President, Kemper Income and Capital Preservation Fund
Vice President, Kemper Intermediate Government Trust
Vice President, Kemper International Bond Fund
Vice President, Kemper Investors Fund
Vice President, Kemper Money Funds
Vice President, Kemper Multi-Market Income Trust
Vice President, Kemper Municipal Income Trust
Vice President, Kemper National Tax-Free Income Series
Vice President, Kemper Portfolios
Vice President, Kemper State Tax-Free Income Series
Vice President, Kemper Strategic Income Fund
Vice President, Kemper Strategic Municipal Income Trust
Vice President, Kemper U.S. Government Securities Fund
Vice President, Tax-Exempt California Money Market Fund
Vice President, Tax-Exempt New York Money Market Fund

COXON, JAMES H.
Executive Vice President, Zurich Kemper Investments, Inc.
Director, Vice President, Galaxy Offshore, Inc.

C-5

<PAGE> 56
Managing Director, Zurich Investment Management, Inc.

DUDASIK, PATRICK H.
Executive Vice President and Chief Financial Officer, Zurich Kemper
Investments, Inc.
Executive Vice President, Chief Financial Officer and Treasurer,
Dreman Value Advisors, Inc.
Chief Financial Officer and Treasurer, Zurich Investment Management, Inc.
Treasurer and Chief Financial Officer, Zurich Kemper Distributors, Inc.
Treasurer and Chief Financial Officer, Zurich Kemper Service Company
Treasurer, ZKI Agency, Inc.

FROEHLICH, PH.D, ROBERT J.
Executive Vice President, Chief Investment Strategist Zurich Kemper
Investments, Inc.

GREENAWALT, JAMES L.
Executive Vice President, Zurich Kemper Investments, Inc.
Director, President, Zurich Kemper Distributors, Inc.
Director, President, ZKI Agency, Inc.

LANGBAUM, GARY A.
Executive Vice President, Zurich Kemper Investments, Inc.
Vice President, Kemper Total Return Fund
Vice President, Kemper Investors Fund

MANZONI, JR., CHARLES R.
Executive Vice President, Secretary & General Counsel, Zurich Kemper
Investments, Inc.
Vice President, Kemper Funds
Secretary, ZKI Agency, Inc.
Secretary, Zurich Kemper Service Company
Secretary, Zurich Kemper Distributors, Inc.
Secretary, ZKI Holding Corporation
Secretary, Zurich Investment Management, Inc.
Secretary, Dreman Value Advisors, Inc.

MURRIHY, MAURA J.
Executive Vice President, Zurich Kemper Investments, Inc.

REYNOLDS, STEVEN H.
Executive Vice President, Chief Investment Officer - Equities, Zurich
Kemper Investments, Inc.
Vice President, Kemper Technology Fund
Vice President, Kemper Total Return Fund
Vice President, Kemper Growth Fund
Vice President, Kemper Small Capitalization Equity Fund
Vice President, Kemper International Fund
Vice President, Kemper Blue Chip Fund
Vice President, Kemper Value Plus Growth Fund
Vice President, Kemper Quantitative Equity Fund
Vice President, Kemper Target Equity Fund
Vice President, Kemper Horizon Fund
Vice President, Kemper Investors Fund
Vice President, The Growth Fund of Spain, Inc.
Vice President, Kemper Europe Fund

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<PAGE> 57
ROBERTS, SCOTT A.
Executive Vice President, Zurich Kemper Investments, Inc.
Director, Senior Managing Director, Zurich Investment Management, Inc.

SILIGMUELLER, DALE S.
Executive Vice President, Zurich Kemper Investments, Inc.
Director, Executive Vice President, Zurich Kemper Service Company

WEISS, ROBERT D.
Executive Vice President, Zurich Kemper Investments, Inc.
Director, Senior Managing Director, Zurich Investment Management, Inc.

BUKOWSKI, DANIEL J.
Senior Vice President, Zurich Kemper Investments, Inc.
Vice President, Kemper Quantitative Equity Fund
Vice President, Kemper Value Plus Growth Fund
Vice President, Kemper Investors Fund

BUTLER, DAVID H.
Senior Vice President, Zurich Kemper Investments, Inc.

CERVONE, DAVID M.
Senior Vice President, Zurich Kemper Investments, Inc.

CESSINE, ROBERT S.
Senior Vice President, Zurich Kemper Investments, Inc.
Vice President, Kemper Income and Capital Preservation Fund
Vice President, Kemper Diversified Income Fund
Vice President, Kemper Multi-Market Income Trust
Vice President, Kemper Investors Fund

CHESTER, TRACY McCORMICK
Senior Vice President, Zurich Kemper Investments, Inc.
Vice President, Kemper Blue Chip Fund
Vice President, Kemper Target Equity Fund

CHIEN, CHRISTINE
Senior Vice President, Zurich Kemper Investments, Inc.

CIARLELLI, ROBERT W.
Senior Vice President, Zurich Kemper Investments, Inc.
Executive Vice President, Zurich Kemper Service Company

COLLORA, PHILIP J.
Senior Vice President and Assistant Secretary, Zurich Kemper
Investments, Inc.
Vice President and Secretary, Kemper Funds

C-7

<PAGE> 58
Assistant Secretary, Kemper International Management, Inc.
Assistant Secretary, Zurich Investment Management, Inc.
Assistant Secretary, Dreman Value Advisors, Inc.
Assistant Secretary, ZKI Agency, Inc.

DUFFY, JEROME L.
Senior Vice President, Zurich Kemper Investments, Inc.
Treasurer, Kemper Funds

FENGER, JAMES E.
Senior Vice President, Zurich Kemper Investments, Inc.

FINK, THOMAS M.
Senior Vice President, Zurich Kemper Investments, Inc.
Managing Director, Zurich Investment Management, Inc.

GALLAGHER, MICHAEL L.
Senior Vice President, Zurich Kemper Investments, Inc.
Senior Vice President, Zurich Kemper Service Company

GOERS, RICHARD A.
Senior Vice President, Zurich Kemper Investments, Inc.

GREENWALD, MARSHALL L.
Senior Vice President, Zurich Kemper Investments, Inc.
Managing Director, Zurich Investment Management, Inc.

HARRINGTON, MICHAEL E.
Senior Vice President, Zurich Kemper Investments, Inc.

KEITH, GEORGE
Senior Vice President, Zurich Kemper Investments, Inc.

KLEIN, GEORGE
Senior Vice President, Zurich Kemper Investments, Inc.
Director, Managing Director, Zurich Investment Management, Inc.

KLEIN, MARTIN
Senior Vice President, Zurich Kemper Investments, Inc.
Managing Director, Zurich Investment Management, Inc.

KOCHER, GARY
Senior Vice President, Zurich Kemper Investments, Inc.

KORTH, FRANK D.
Senior Vice President, Zurich Kemper Investments, Inc.
Vice President, Kemper Technology Fund

McNAMARA, MICHAEL A.
Senior Vice President, Zurich Kemper Investments, Inc.
Vice President, Kemper Diversified Income Fund
Vice President, Kemper High Income Trust
Vice President, Kemper High Yield Fund

C-8

<PAGE> 59
Vice President, Kemper Investors Fund
Vice President, Kemper Multi-Market Income Trust
Vice President, Kemper Strategic Income Fund

MOELLER, JAMES V.
Senior Vice President, Zurich Kemper Investments, Inc.
Managing Director, Zurich Investment Management, Inc.

MOORE, C. PERRY
Senior Vice President, Zurich Kemper Investments, Inc.
Vice President, ZKI Agency, Inc.

MIER, CHRISTOPHER J.
Senior Vice President, Zurich Kemper Investments, Inc.
Vice President, Kemper National Tax-Free Income Series
Vice President, Kemper Municipal Income Trust
Vice President, Kemper State Tax-Free Income Series
Vice President, Kemper Strategic Municipal Income Trust

RABIEGA, CRAIG F.
Senior Vice President, Zurich Kemper Investments, Inc.
First Vice President, Zurich Kemper Service Company

RACHWALSKI, JR. FRANK J.
Senior Vice President, Zurich Kemper Investments, Inc.
Vice President, Cash Account Trust
Vice President, Cash Equivalent Fund
Vice President, Investors Cash Trust
Vice President, Kemper Investors Fund
Vice President, Kemper Money Funds
Vice President, Kemper Portfolios
Vice President, Tax-Exempt California Money Market Fund
Vice President, Tax-Exempt New York Money Market Fund

RESIS, JR., HARRY E.
Senior Vice President, Zurich Kemper Investments, Inc.
Vice President, Kemper Diversified Income Fund
Vice President, Kemper High Income Trust
Vice President, Kemper High Yield Fund
Vice President, Kemper Investors Fund
Vice President, Kemper Multi-Market Income Trust
Vice President, Kemper Strategic Income Fund

SILVIA, JOHN E.
Senior Vice President, Zurich Kemper Investments, Inc.

SMITH, JR., EDWARD BYRON
Senior Vice President, Zurich Kemper Investments, Inc.

SWANSON, DAVID
Senior Vice President, Zurich Kemper Investments, Inc.

C-9

<PAGE> 60

VANDENBERG, RICHARD
Senior Vice President, Zurich Kemper Investments, Inc.
Vice President, Kemper Diversified Income Fund
Vice President, Kemper U.S. Government Securities Fund
Vice President, Kemper Portfolios
Vice President, Kemper Adjustable Rate U.S. Government Fund

VINCENT, CHRISTOPHER T.
Senior Vice President, Zurich Kemper Investments, Inc.
Managing Director, Zurich Investment Management, Inc.

WONNACOTT, LARRY R.
Senior Vice President, Zurich Kemper Investments, Inc.
Managing Director, Zurich Investment Management, Inc.

BAZAN, KENNETH M.
First Vice President, Zurich Kemper Investments, Inc.
Director, K-P Greenway, Inc.
Director, K-P Plaza Dallas, Inc.
Director, Kemper/Prime Acquisition Fund, Inc.

BOEHM, JONATHAN J.
First Vice President, Zurich Kemper Investments, Inc.
Senior Vice President, Zurich Kemper Service Company

BURROW, DALE R.
First Vice President, Zurich Kemper Investments, Inc.
Vice President, Kemper Strategic Municipal Income Trust

BYRNES, ELIZABETH A.
First Vice President, Zurich Kemper Investments, Inc.
Vice President, Kemper Adjustable Rate U.S. Government Fund
Vice President, Kemper Intermediate Government Trust

CHRISTIANSEN, HERBERT A.
First Vice President, Zurich Kemper Investments, Inc.
First Vice President, Zurich Kemper Service Company

COHEN, JERRI I.
First Vice President, Zurich Kemper Investments, Inc.

DeMAIO, CHRIS C.
First Vice President, Zurich Kemper Investments, Inc.
Vice President and Chief Accounting Officer, Zurich Kemper Service
Company

C-10

<PAGE> 61
DEXTER, STEPHEN P.
First Vice President, Zurich Kemper Investments, Inc.

DOYLE, DANIEL J.
First Vice President, Zurich Kemper Investments, Inc.

HALE, DAVID D.
First Vice President, Zurich Kemper Investments, Inc.

HAUSKEN, PHILIP D.
First Vice President, Zurich Kemper Investments, Inc.
Vice President, Zurich Kemper Distributors, Inc.
Assistant Secretary, Zurich Investment Management, Inc.

HORTON, ROBERT J.
First Vice President, Zurich Kemper Investments, Inc.

INNES, BRUCE D.
First Vice President, Zurich Kemper Investments, Inc.
Co-President, International Association of Corporate and
Professional Recruiters

JACOBS, PETER M.
First Vice President, Zurich Kemper Investments, Inc.

KEELEY, MICHELLE M.
First Vice President, Zurich Kemper Investments, Inc.

KIEL, CAROL L.
First Vice President, Zurich Kemper Investments, Inc.

KNAPP, WILLIAM M.
First Vice President, Zurich Kemper Investments, Inc.

LASKA, ROBERTA E.
First Vice President, Zurich Kemper Investments, Inc.

LAUGHLIN, ANN M.
First Vice President, Zurich Kemper Investments, Inc.

LENTZ, MAUREEN P.
First Vice President, Zurich Kemper Investments, Inc.

McCRINDLE-PETRARCA, SUSAN
First Vice President, Zurich Kemper Investments, Inc.

McGOVERN, KAREN
First Vice President, Zurich Kemper Investments, Inc.

MICHAEL, DIANNE
First Vice President, Zurich Kemper Investments, Inc.

MINER, EDWARD
First Vice President, Zurich Kemper Investments, Inc.

MURRAY, SCOTT S.
First Vice President, Zurich Kemper Investments, Inc.
Vice President, Zurich Kemper Service Company

NORRIS, JOHNSTON A.
First Vice President, Zurich Kemper Investments, Inc.

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<PAGE> 62
PANOZZO, ROBERTA L.
First Vice President, Zurich Kemper Investments, Inc.

PONTECORE, SUSAN E.
First Vice President, Zurich Kemper Investments, Inc.

RADIS, STEVE A.
First Vice President, Zurich Kemper Investments, Inc.

RATEKIN, DIANE E.
First Vice President, Assistant General Counsel and Assistant
Secretary, Zurich Kemper Investments, Inc.
Assistant Secretary, Zurich Kemper Distributors, Inc.

SMITH, ROBERT G.
First Vice President, Zurich Kemper Investments, Inc.

STUEBE, JOHN W.
First Vice President, Zurich Kemper Investments, Inc.
Vice President, Cash Account Trust
Vice President, Cash Equivalent Fund

TEPPER, SHARYN A.
First Vice President, Zurich Kemper Investments, Inc.
Assistant Secretary, Zurich Investment Management, Inc.

TRUTTER, JONATHAN W.
First Vice President, Zurich Kemper Investments, Inc.
Managing Director, Zurich Investment Management, Inc.
Vice President, Kemper Diversified Income Fund
Vice President, Kemper Multi-Market Income Trust
Vice President, Kemper Strategic Income Fund

WETHERALD, ROBERT F.
First Vice President, Zurich Kemper Investments, Inc.

WILLSON, STEPHEN R.
First Vice President, Zurich Kemper Investments, Inc.
Vice President, Kemper Strategic Municipal Income Trust

WITTNEBEL, MARK E.
First Vice President, Zurich Kemper Investments, Inc.

ADAMS, DONALD
Vice President, Zurich Kemper Investments, Inc.

ALLEN, PATRICIA L.
Vice President, Zurich Kemper Investments, Inc.

ANTONAK, GEORGE A.
Vice President, Zurich Kemper Investments, Inc.

BALASUBRAMANIAM, KALAMADI
Vice President, Zurich Kemper Investments, Inc.

BARRY, JOANN M.
Vice President, Zurich Kemper Investments, Inc.

BARSANTI, WILLIAM
Vice President, Zurich Kemper Investments, Inc.

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<PAGE> 63
BIEBERLY, CHRISTINE A.
Vice President, Zurich Kemper Investments, Inc.

BODEM, RICHARD A.
Vice President, Zurich Kemper Investments, Inc.
Vice President, Zurich Kemper Service Company

BRENNAN, ELEANOR R.
Vice President, Zurich Kemper Investments, Inc.

BUCHANAN, PAMELA S.
Vice President, Zurich Kemper Investments, Inc.

BURKE, MARY PAT
Vice President, Zurich Kemper Investments, Inc.

BURSHTAN, DAVID H.
Vice President, Zurich Kemper Investments, Inc.

CARNEY, ANNE T.
Vice President, Zurich Kemper Investments, Inc.

CACCIOLA, RONALD
Vice President, Zurich Kemper Investments, Inc.
Managing Director, Zurich Investment Management, Inc.

CARTER, PAUL J.
Vice President and Compliance Manager, Zurich Kemper Investments, Inc.

CECOLA, MARY
Vice President, Zurich Kemper Investments, Inc.

COULTER, STEVAN F.
Vice President, Zurich Kemper Investments, Inc.

CRAWSHAW, SUSAN
Vice President, Zurich Kemper Investments, Inc.

ESOLA, CHARLES J.
Vice President, Zurich Kemper Investments, Inc.
Vice President, Zurich Kemper Service Company

FRIHART, THORA A.
Vice President, Zurich Kemper Investments, Inc.

GERACI, AUGUST L.
Vice President, Zurich Kemper Investments, Inc.

GOLAN, JAMES S.
Vice President, Zurich Kemper Investments, Inc.

GRAY, PATRICK
Vice President, Zurich Kemper Investments, Inc.

GROOTENDORST, TONYA
Vice President, Zurich Kemper Investments, Inc.

HECHT, MARC L.
Vice President, Zurich Kemper Investments, Inc.
Assistant Secretary, Zurich Kemper Distributors, Inc.
Assistant Secretary, ZKI Holding Corporation
Assistant Secretary, ZKI Agency, Inc.
Assistant Secretary, Zurich Investment Management, Inc.
Assistant Secretary, Dreman Value Advisors, Inc.

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<PAGE> 64
HUOT, LISA L.
Vice President, Zurich Kemper Investments, Inc.

JASINSKI, R. ANTHONY
Vice President, Zurich Kemper Investments, Inc.

KARWOWSKI, KENNETH F.
Vice President, Zurich Kemper Investments, Inc.

KENNEDY, PATRICK J.
Vice President, Zurich Kemper Investments, Inc.

KOBS, MICHAEL G.
Vice President, Zurich Kemper Investments, Inc.

KOCH, DEBORAH L.
Vice President, Zurich Kemper Investments, Inc.

KOURY, KATHRYN E.
Vice President, Zurich Kemper Investments, Inc.

KOWALCZYK, MARK A.
Vice President, Zurich Kemper Investments, Inc.
Vice President, ZKI Agency, Inc.

KRANZ, KATHY J.
Vice President, Zurich Kemper Investments, Inc.

KRUEGER, PAMELA D.
Vice President, Zurich Kemper Investments, Inc.

KYCE, JOYCE
Vice President, Zurich Kemper Investments, Inc.
Vice President, Zurich Kemper Service Company

LAUTZ, STEPHEN
Vice President, Zurich Kemper Investments, Inc.

LeFEBVRE, THOMAS J.
Vice President, Zurich Kemper Investments, Inc.

MARKLEY, DAVID
Vice President, Zurich Kemper Investments, Inc.

MATZA, LINDA
Vice President, Zurich Kemper Investments, Inc.

McGINN, MARTHA R.
Vice President, Zurich Kemper Investments, Inc.

MILLER, GARY L.
Vice President, Zurich Kemper Investments, Inc.

MILLIGAN, BRIAN J.
Vice President, Zurich Kemper Investments, Inc.

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<PAGE> 65
MULLEN, TERRENCE
Vice President, Zurich Kemper Investments, Inc.

MURPHY, THOMAS M.
Vice President, Zurich Kemper Investments, Inc.

NEVILLE, BRIAN P.
Vice President, Zurich Kemper Investments, Inc.

NORMAN, JR., DONALD L.
Vice President, Zurich Kemper Investments, Inc.

NOWAK, GREGORY J.
Vice President, Zurich Kemper Investments, Inc.

PANOZZO, ALBERT R.
Vice President, Zurich Kemper Investments, Inc.

PAXTON, THOMAS
Vice President, Zurich Kemper Investments, Inc.

QUADRINI, LISA L.
Vice President, Zurich Kemper Investments, Inc.

RANDALL, JR., WALTER R.
Vice President, Zurich Kemper Investments, Inc.

ROBINSON, DEBRA A.
Vice President, Zurich Kemper Investments, Inc.

RODGERS, JOHN B.
Vice President, Zurich Kemper Investments, Inc.

ROKOSZ, PAUL A.
Vice President, Zurich Kemper Investments, Inc.

ROSE, KATIE M.
Vice President, Zurich Kemper Investments, Inc.

RUDIN, MICHELLE I.
Vice President, Zurich Kemper Investments, Inc.

SAENGER, MARYELLEN
Vice President, Zurich Kemper Investments, Inc.

SHULTZ, KAREN D.
Vice President, Zurich Kemper Investments, Inc.
Vice President, Zurich Kemper Service Company

SOPHER, EDWARD O.
Vice President, Zurich Kemper Investments, Inc.

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<PAGE> 66
SPILLER, KATHLEEN A.
Vice President, Zurich Kemper Investments, Inc.

SPURLING, CHRIS
Vice President, Zurich Kemper Investments, Inc.

STROMM, LAWRENCE D.
Vice President, Zurich Kemper Investments, Inc.

THOMAS, JILL
Vice President, Zurich Kemper Investments, Inc.

TRUNSKY, JUDITH C.
Vice President, Zurich Kemper Investments, Inc.

VANDEMERKT, RICHARD J.
Vice President, Zurich Kemper Investments, Inc.
Vice President, Zurich Kemper Service Company

WALKER, ANGELA
Vice President, Zurich Kemper Investments, Inc.

WATKINS, JAMES K.
Vice President, Zurich Kemper Investments, Inc.
Vice President, Zurich Kemper Service Company

WERTH, ELIZABETH C.
Vice President, Zurich Kemper Investments, Inc.
Vice President, Zurich Kemper Distributors, Inc.
Assistant Secretary, Kemper Open-End Funds

WILNER, MITCHELL
Vice President, Zurich Kemper Investments, Inc.

WIZER, BARBARA K.
Vice President, Zurich Kemper Investments, Inc.

ZURAWSKI, CATHERINE N.
Vice President, Zurich Kemper Investments, Inc.

C-16

<PAGE> 67
ITEM 29. PRINCIPAL UNDERWRITERS

(a) Zurich Kemper Distributors, Inc. acts as principal underwriter of
the Registrant's shares and acts as principal underwriter of the Kemper Funds,
Kemper Investors Fund, Kemper International Bond Fund and Kemper-Dreman Fund,
Inc.

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

<TABLE>
<CAPTION>
POSITIONS AND
POSITIONS AND OFFICES OFFICES WITH
NAME WITH UNDERWRITER REGISTRANT
---- ---------------- ----------
<S> <C> <C>
James L. Greenawalt Director, President None
William E. Chapman, II Director, Executive Vice President None
John E. Neal Director Vice President
Stephen B. Timbers Director President/Trustee
Patrick H. Dudasik Financial Principal, Treasurer
and Chief Financial Officer None
Linda A. Bercher Senior Vice President None
Thomas V. Bruns Senior Vice President None
Terry Cunningham Senior Vice President None
John H. Robison, Jr. Senior Vice President None
Henry J. Schulthesz Senior Vice President None
Philip D. Hausken Vice President None
Carlene D. Merold Vice President None
Elizabeth C. Werth Vice President Assistant Secretary
Charles R. Manzoni, Jr. Secretary Vice President
Marc L. Hecht Assistant Secretary None
Diane E. Ratekin Assistant Secretary None
</TABLE>

C-17

<PAGE> 68

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS

All such accounts, books and other documents are maintained at the offices
of the Registrant, at the offices of Registrant's investment manager, 222 South
Riverside Plaza, Chicago, Illinois 60606, at the offices of Registrant's
principal underwriter, Zurich Kemper Distributors, Inc., 222 South Riverside
Plaza, Chicago, Illinois 60606, at the offices of the Registrant's custodian and
transfer agent, Investors Fiduciary Trust Company, 127 West 10th Street, Kansas
City, Missouri 64105 or at the offices of the Registrant's shareholder services
agent, Zurich Kemper Service Company, 811 Main Street, Kansas City, Missouri
64105.

ITEM 31. MANAGEMENT SERVICES

Not applicable.

ITEM 32. UNDERTAKINGS

(a) Not applicable.

(b) Registrant undertakes to file a Post-Effective Amendment containing
financial statements, with respect to Kemper Retirement Fund Series VII, which
need not be certified, within four to six months of the effective date of this
Registration Statement.

(c) The Registrant undertakes to furnish to each person to whom a
prospectus is delivered a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.

C-18
<PAGE> 69
S I G N A T U R E S

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 25th day of
April, 1997.

KEMPER TARGET EQUITY FUND

By /s/ Stephen B. Timbers
---------------------------------
Stephen B. Timbers, President

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on April 25, 1997 on behalf of
the following persons in the capacities indicated.

Signature Title
--------- -----

/s/ Stephen B. Timbers President (Principal
- ---------------------------------------- Executive Officer) and
Stephen B. Timbers Trustee

/s/James E. Akins* Trustee
- ----------------------------------------
/s/Arthur R. Gottschalk* Trustee
- ----------------------------------------
/s/Frederick T. Kelsey* Trustee
- ----------------------------------------
/s/Dominique P. Morax* Trustee
- ----------------------------------------
/s/Fred B. Renwick* Trustee
- ----------------------------------------
/s/John B. Tingleff* Trustee
- ----------------------------------------
/s/John G. Weithers* Trustee
- ----------------------------------------

/s/Jerome L. Duffy Treasurer (Principal
- ---------------------------------------- Financial and
Jerome L. Duffy Accounting Officer)

*Philip J. Collora signs this document pursuant to powers of
attorney filed with the Registration Statement on Form N-1A filed
on October 16, 1995 (except for the Power of Attorney of
Dominique P. Morax, which is incorporated herein by reference to
Post-Effective Amendment No. 22 to Registrant's Registration
Statement on Form N-1A filed on October 11, 1996.)

/s/ Philip J. Collora
--------------------------------
Philip J. Collora

<PAGE> 70

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
99.B1.(a) Amended and Restated Agreement and Declaration of Trust.(1)
99.B1.(b) Written Instrument Establishing and Designating Kemper
Retirement Fund Series VII.
99.B2. By-Laws.(1)
99.B3. Inapplicable.
99.B4. Text of Share Certificate.(1)
99.B5.(a) Investment Management Agreement (Kemper Retirement Fund
Series).(2)
99.B5.(b) Notification of Additional Portfolio (Series VII).
99.B5.(c) Investment Management Agreement (Kemper Worldwide 2004
Fund).(2)
99.B5.(d) Sub-Advisory Agreement--Retirement Fund Series.
99.B5.(e) Sub-Advisory Agreement--Worldwide 2004.
99.B5.(f) Notification of Additional Portfolio (Series VII).
99.B6.(a) Underwriting Agreement.(2)
99.B6.(b) Form of Selling Group Agreement.
99.B7. Inapplicable.
99.B8.(a) Custody Agreement.(1)
99.B8.(b) Foreign Custody Agreement.(1)
99.B9.(a) Agency Agreement.(1)
99.B9.(b) Supplement to Agency Agreement.(2)
99.B9.(c) Administrative Services Agreement.(1)
99.B9.(d) Guaranty Agreement--Kemper Retirement Fund Series I.(1)
99.B9.(e) Guaranty Agreement--Kemper Retirement Fund Series II.(1)
99.B9.(f) Guaranty Agreement--Kemper Retirement Fund Series III.(1)
99.B9.(g) Guaranty Agreement--Kemper Retirement Fund Series IV.(1)
99.B9.(h) Guaranty Agreement--Kemper Retirement Fund Series V.(1)
99.B9.(i) Guaranty Agreement--Kemper Retirement Fund Series VI.(1)
99.B9.(j) Guaranty Agreement--Kemper Worldwide 2004 Fund.(1)
99.B9.(k) Assignment and Assumption Agreement.(1)
99.B9.(l) Guaranty Agreement--Kemper Retirement Fund Series VII.
99.B10.(a) Opinion and Consent of Vedder, Price, Kaufman & Kammholz.
99.B10.(b) Opinion and Consent of Ropes & Gray.
99.B11. Consent and Report of Independent Auditors.
99.B12. Inapplicable.
99.B13. Subscription Agreement--Series VII.
99.B14.(a) Kemper Retirement Plan Prototype.(3)
99.B14.(b) Model Individual Retirement Account.(3)
99.B15. Inapplicable.
99.B16. Performance Calculations.(1)
99.B24. Powers of Attorney.(4)
99.485(b) Representation of Counsel (Rule 485(b)).
</TABLE>

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

(1) Incorporated herein by reference to Post-Effective Amendment No. 20 to
Registrant's Registration Statement on Form N-1A filed on or about April 20,
1995.

(2) Incorporated herein by reference to Post-Effective Amendment No. 22 to
Registrant's Registration Statement on Form N-1A filed on October 11, 1996.

(3) Incorporated herein by reference to Post-Effective Amendment No. 21 to
Registrant's Registration Statement on Form N-1A filed on October 16, 1995.

<PAGE> 1
Exhibit 99.B1(b)

KEMPER TARGET EQUITY FUND

WRITTEN INSTRUMENT ESTABLISHING AND DESIGNATING

KEMPER RETIREMENT FUND SERIES VII

The undersigned, being a majority of the trustees of Kemper

Target Equity Fund (the "Trust"), a business trust organized

pursuant to an amended and restated Agreement and Declaration of

Trust dated September 15, 1994, as amended (the "Declaration of

Trust"), pursuant to Section 1 of Article III of the Declaration

of Trust, do hereby establish and designate an eighth series of

Shares of the Trust to be known as "Kemper Retirement Fund Series

VII." The relative rights and preferences of such series shall

be as set forth in the Declaration of Trust.

IN WITNESS WHEREOF, the undersigned have this the 22nd day

of April, 1997 signed these presents.

/s/ Stephen B. Timbers
-----------------------------------
Stephen B. Timbers, Trustee
210 South Green Bay Road
Lake Forest, IL 60045

(Signatures continue)

<PAGE> 2

/s/ James E. Akins
-----------------------------------
James E. Akins, Trustee
2904 Garfield Terrace, N.W.
Washington, DC 20008-3507

/s/ Arthur R. Gottschalk
-----------------------------------
Arthur R. Gottschalk, Trustee
10642 Brookridge Drive
Frankfort, Illinois 60423

/s/ Frederick T. Kelsey
-----------------------------------
Frederick T. Kelsey, Trustee
3133 Laughing Gull Court
Johns Island, South Carolina 29455

/s/ Dominique P. Morax
-----------------------------------
Dominique P. Morax, Trustee
Vordere Dorfstrasse 13
8803 Ruschlikon
Switzerland

/s/ Fred B. Renwick
-----------------------------------
Fred B. Renwick, Trustee
3 Hanover Square
New York, New York 10004

-----------------------------------
Stephen B. Timbers, Trustee
210 South Green Bay Road
Lake Forest, Illinois 60045

/s/ John B. Tingleff
-----------------------------------
John B. Tingleff, Trustee
2015 South Lake Shore Drive
Harbor Springs, Michigan 49740

/s/ John G. Weithers
-----------------------------------
John G. Weithers, Trustee
311 Springlake
Hinsdale, Illinois 60521

<PAGE> 1

Exhibit 99.B5(b)

NOTIFICATION OF ADDITIONAL PORTFOLIO

Kemper Target Equity Fund, a Massachusetts business trust (the
"Fund"), pursuant to Paragraph 2 of the Investment Management
Agreement [Kemper Retirement Fund Series] ("Management
Agreement") dated January 4, 1996 between the Fund and Kemper
Financial Services, Inc. (currently named Zurich Kemper
Investments, Inc.) (the "Adviser") hereby notifies the Adviser
that it desires to retain the Adviser to render investment
advisory and management services under the Management Agreement
for the series of the Fund known as Kemper Retirement Fund Series
VII ("Series VII").

Dated: May 1, 1997

KEMPER TARGET EQUITY FUND

By:
--------------------------
Title:
-----------------------

Attest:
-----------------------
Title:
-----------------------

Adviser, pursuant to said Paragraph 2 of the Management
Agreement, hereby notifies the Fund that it is willing to render
the aforesaid services for Series VII and acknowledges that such
Series VII shall hereby become a "Portfolio" under the Management
Agreement.

ZURICH KEMPER INVESTMENTS, INC.

By:
----------------------------
Title:
-------------------------

Attest:
-----------------------
Title:
-----------------------

<PAGE> 1

Exhibit 99.B5(d)

SUB-ADVISORY AGREEMENT

(Form 2 Series)

AGREEMENT made this 1st day of December, 1996, by and between ZURICH
KEMPER INVESTMENTS, INC., a Delaware corporation (the "Adviser") and ZURICH
INVESTMENT MANAGEMENT LIMITED, an English corporation (the "Sub-Adviser").

WHEREAS, KEMPER TARGET EQUITY FUND, a Massachusetts business trust
(the "Fund") is a management investment company registered under the Investment
Company Act of 1940;

WHEREAS, the Fund is authorized to issue Shares in separate series
with each representing the interests in a separate portfolio of securities and
other assets;

WHEREAS, the Fund has retained the Adviser to render to it investment
advisory and management services with regard to the series of the Fund known as
the Kemper Retirement Fund-Series I, Kemper Retirement Fund-Series II,
Kemper Retirement Fund-Series III, Kemper Retirement Fund-Series IV, Kemper
Retirement Fund- Series V, Kemper Retirement Fund-Series VI (the "initial
series") pursuant to an Investment Management Agreement (the "Management
Agreement"); and

WHEREAS, the Adviser desires at this time to retain the Sub-Adviser
to render investment advisory and management services with respect to that
portion of the portfolio of the Fund's initial series allocated to the
Sub-Adviser by the Adviser for management of foreign securities, including
foreign currency transactions and related investments, and the Sub-Adviser is
willing to render such services;

NOW THEREFORE, in consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties hereto as follows:

1. The Adviser hereby employs the Sub-Adviser to manage the
investment and reinvestment of the assets of the initial series of the Fund
allocated by the Adviser in its sole discretion to the Sub-Adviser for
management of foreign securities, including foreign currency transactions and
related investments, in accordance with the applicable investment objectives,
policies and limitations and subject to the supervision of the Adviser and the
Board of Trustees of the Fund for the period and upon the terms herein set
forth, and to place orders for the purchase or sale of portfolio securities for
the Fund's account with brokers or dealers selected by the

<PAGE> 2

Sub-Adviser; and, in connection therewith, the Sub-Adviser is
authorized as the agent of the Fund to give instructions to the Custodian of
the Fund as to the deliveries of securities and payments of cash for the
account of the Fund. In connection with the selection of such brokers or
dealers and the placing of such orders, the Sub-Adviser is directed to seek for
the Fund best execution of orders. Subject to such policies as the Board of
Trustees of the Fund determines and subject to satisfying the requirements of
Section 28(e) of the Securities Exchange Act of 1934, the Sub-Adviser shall not
be deemed to have acted unlawfully or to have breached any duty, created by
this Agreement or otherwise, solely by reason of its having caused the Fund to
pay a broker or dealer an amount of commission for effecting a securities
transaction in excess of the amount of commission another broker or dealer
would have charged for effecting that transaction, if the Sub-Adviser
determined in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer viewed in terms of either that particular transaction or the
Sub-Adviser's overall responsibilities with respect to the clients of the
Sub-Adviser as to which the Sub-Adviser exercises investment discretion. The
Adviser recognizes that all research services and research that the Sub-Adviser
receives are available for all clients of the Sub-Adviser, and that the Fund
and other clients of the Sub-Adviser may benefit thereby. The investment of
funds shall be subject to all applicable restrictions of the Agreement and
Declaration of Trust and By-Laws of the Fund as may from time to time be in
force.

The Sub-Adviser accepts such employment and agrees during such period
to render such investment management services, to furnish related office
facilities and equipment and clerical, bookkeeping and administrative services
for the Fund, to permit any of its officers or employees to serve without
compensation as trustees or officers of the Fund if elected to such positions
and to assume the obligations herein set forth for the compensation herein
provided. The Sub-Adviser shall for all purposes herein provided be deemed to
be an independent contractor and, unless otherwise expressly provided or
authorized, shall have no authority to act for or represent the Fund or the
Adviser in any way or otherwise be deemed an agent of the Fund or the Adviser.
It is understood and agreed that the Sub-Adviser, by separate agreements with
the Fund, may also serve the Fund in other capacities.

The Sub-Adviser will keep the Fund and the Adviser informed of
developments materially affecting the Fund and shall, on the Sub-Adviser's
own initiative and as reasonably requested by the Adviser or the Fund, furnish
to the Fund and the Adviser from time to time whatever information the Adviser
reasonably believes appropriate for this purpose.

-2-

<PAGE> 3

The Sub-Adviser agrees that, in the performance of the duties
required of it by this Agreement, it will comply with the Investment
Advisers Act of 1940 and the Investment Company Act of 1940, and all rules and
regulations thereunder, and all applicable laws and regulations and with any
applicable procedures adopted by the Fund's Board of Trustees and identified in
writing to the Sub-Adviser.

The Sub-Adviser shall provide the Adviser with such investment
portfolio accounting and shall maintain and provide such detailed records and
reports as the Adviser may from time to time reasonably request, including
without limitation, daily processing of investment transactions and cash
positions, periodic valuations of investment portfolio positions as required by
the Adviser, monthly reports of the investment portfolio and all investment
transactions and the preparation of such reports and compilation of such data
as may be required by the Adviser to comply with the obligations imposed upon
it under Management Agreement.

The Sub-Adviser shall provide adequate security with respect to all
materials, records, documents and data relating to any of its responsibilities
pursuant to this Agreement including any means for the effecting of securities
transactions.

The Sub-Adviser agrees that it will make available to the Adviser and
the Fund promptly upon their request copies of all of its investment records
and ledgers with respect to the Fund to assist the Adviser and the Fund in
monitoring compliance with the Investment Company Act of 1940 and the
Investment Advisers Act of 1940, as well as other applicable laws. The
Sub-Adviser will furnish the Fund's Board of Trustees such periodic and special
reports with respect to the portfolio of each series subject to this Agreement
as the Adviser or the Board of Trustees may reasonably request.

In compliance with the requirements of Rule 31a-3 under the Investment
Company Act of 1940, the Sub-Adviser hereby agrees that any records that
it maintains for the Fund are the property of the Fund and further agrees to
surrender promptly to the Fund copies of any such records upon the Fund's
request. The Sub- Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 under the Investment Company Act of 1940 any records
with respect to the Sub-Adviser's duties hereunder required to be maintained by
Rule 31a-1 under the such Act to the extent that the Sub-Adviser prepares and
maintains such records pursuant to this Agreement and to preserve the records
required by Rule 204-2 under the Investment Advisers Act of 1940 for the period
specified in that Rule.

The Sub-Adviser agrees that it will immediately notify the Adviser and
the Fund in the event that the Sub-Adviser: (i)

-3-

<PAGE> 4

becomes subject to a statutory disqualification that prevents the
Sub-Adviser from serving as an investment adviser pursuant to this Agreement;
or (ii) is or expects to become the subject of an administrative proceeding or
enforcement action by the United States Securities and Exchange Commission, the
Investment Management Regulatory Organization ("IMRO") or other regulatory
authority.

The Sub-Adviser represents that it is an investment adviser registered
under the Investment Advisers Act of 1940 and other applicable laws and it is
regulated by IMRO and will treat the Fund as a Non-Private Customer as defined
by IMRO. The Sub-Adviser agrees to maintain the completeness and accuracy of
its registration on Form ADV in accordance with all legal requirements relating
to that Form. The Sub-Adviser acknowledges that it is an "investment adviser"
to the Fund within the meaning of the Investment Company Act of 1940 and the
Investment Advisers Act of 1940.

The Sub-Adviser shall be responsible maintaining an appropriate
compliance program to ensure that the services provided by it under this
Agreement are performed in a manner consistent with applicable laws and the
terms of this Agreement. Furthermore, the Sub-Adviser shall maintain and
enforce a Code of Ethics that is in form and substance satisfactory to the
Adviser. Sub-Adviser agrees to provide such reports and certifications
regarding its compliance program as the Adviser or the Fund shall reasonably
request from time to time.

2. In the event that there are, from time to time, one or more
additional series of the Fund with respect to which the Adviser desires to
retain the Sub-Adviser to render investment advisory and management services
hereunder, the Adviser shall notify the Sub-Adviser in writing. If the
Sub-Adviser is willing to render such services, it shall notify the Adviser in
writing whereupon such additional series shall become subject to this
Agreement.

3. For the services and facilities described in Section 1, the Adviser
will pay to the Sub-Adviser, at the end of each calendar month, a sub-advisory
fee computed at an annual rate of that portion of the average daily net assets
of the initial series of the Fund that is allocated by the Adviser to the
Sub-Adviser for management as specified below:

-4-

<PAGE> 5

Series Annual Rate
- ------ -----------
<S> <C>
Kemper Retirement Fund-Series I .35%
Kemper Retirement Fund-Series II .35%
Kemper Retirement Fund-Series III .35%
Kemper Retirement Fund-Series IV .35%
Kemper Retirement Fund-Series V .35%
Kemper Retirement Fund-Series VI .35%

</TABLE>

For the month and year in which this Agreement becomes effective or
terminates, there shall be an appropriate proration on the basis of the number
of days that the Agreement is in effect during the month and year, respectively.

4. The services of the Sub-Adviser under this Agreement are not to be
deemed exclusive, and the Sub-Adviser shall be free to render similar services
or other services to others so long as its services hereunder are not impaired
thereby.

5. The Sub-Adviser shall arrange, if desired by the Fund, for officers
or employees of the Sub-Adviser to serve, without compensation from the Fund,
as trustees, officers or agents of the Fund if duly elected or appointed to
such positions and subject to their individual consent and to any limitations
imposed by law.

6. The net asset value for each series of the Fund subject to this
Agreement shall be calculated as the Board of Trustees of the Fund may
determine from time to time in accordance with the provisions of the
Investment Company Act of 1940. On each day when net asset value is not
calculated, the net asset value of a series shall be deemed to be the net asset
value of such series as of the close of business on the last day on which such
calculation was made for the purpose of the foregoing computations.

7. Subject to applicable statutes and regulations, it is understood
that certain trustees, officers or agents of the Fund are or may be interested
in the Sub-Adviser as officers, directors, agents, shareholders or otherwise,
and that the officers, directors, shareholders and agents of the Sub-Adviser
may be interested in the Fund otherwise than as a trustee, officer or agent.

8. The Sub-Adviser shall not be liable for any error of judgment or
of law or for any loss suffered by the Fund or the

-5-

<PAGE> 6

Adviser in connection with the matters to which this Agreement relates, except
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Sub-Adviser in the performance of its obligations and duties or by
reason of its reckless disregard of its obligations and duties under this
Agreement.

9. This Agreement shall become effective with respect to the initial
series of the Fund on the date hereof and shall remain in full force until
April 1, 1998, unless sooner terminated as hereinafter provided. This
Agreement shall continue in force from year to year thereafter with respect to
each such series, but only as long as such continuance is specifically approved
for each series at least annually in the manner required by the Investment
Company Act of 1940 and the rules and regulations thereunder; provided,
however, that if the continuation of this Agreement is not approved for a
series, the Sub-Adviser may continue to serve in such capacity for such series
in the manner and to the extent permitted by the Investment Company Act of 1940
and the rules and regulations thereunder.

This Agreement shall automatically terminate in the event of its
assignment or in the event of the termination of the Management Agreement
and may be terminated at any time with respect to any series subject to this
Agreement without the payment of any penalty by the Adviser or by the
Sub-Adviser on sixty (60) days written notice to the other party. The Fund may
effect termination with respect to any such series without payment of any
penalty by action of the Board of Trustees or by vote of a majority of the
outstanding voting securities of such series on sixty (60) days written notice
to the Adviser and the Sub-Adviser.

This Agreement may be terminated with respect to any series at any time
without the payment of any penalty by the Board of Trustees of the Fund, by
vote of a majority of the outstanding voting securities of such series or by
the Adviser in the event that it shall have been established by a court of
competent jurisdiction that the Sub-Adviser or any officer or director of the
Sub-Adviser has taken any action which results in a breach of the covenants of
the Sub-Adviser set forth herein.

The terms "assignment" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth in the Investment Company Act of
1940 and the rules and regulations thereunder.

Termination of this Agreement shall not affect the right of the
Sub-Adviser to receive payments on any unpaid balance of the compensation
described in Section 3 earned prior to such termination.

-6-

<PAGE> 7

10. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder shall not be
thereby affected.

11. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as
such other party may designate for the receipt of such notice.

12. This Agreement shall be construed in accordance with applicable
federal law and the laws of the State of Illinois.

13. This Agreement is the entire contract between the parties relating
to the subject matter hereof and supersedes all prior agreements between the
parties relating to the subject matter hereof.

IN WITNESS WHEREOF, the Adviser and the Sub-Adviser have caused this
Agreement to be executed as of the day and year first above written.

ZURICH KEMPER INVESTMENTS, INC.

By: /s/ Patrick H. Dudasik
--------------------------------
Title: Senior Vice President
-----------------------------

ZURICH INVESTMENT MANAGEMENT LIMITED

By: /s/ Dennis H. Ferro
---------------------------------
Title: Managing Director
------------------------------

-7-

<PAGE> 1
Exhibit 99.B5(e)

SUB-ADVISORY AGREEMENT

(Form 1 Series)

WHEREAS, KEMPER TARGET EQUITY FUND, a Massachusetts business trust (the
"Fund") is a management investment company registered under the Investment
Company Act of 1940;

WHEREAS, the Fund is authorized to issue Shares in separate series with
each representing the interests in a separate portfolio of securities and other
assets;

WHEREAS, the Fund has retained the Adviser to render to it investment
advisory and management services with regard to the series of the Fund known
as the Kemper Worldwide 2004 Fund (the "initial series") pursuant to an
Investment Management Agreement (the "Management Agreement"); and

WHEREAS, the Adviser desires at this time to retain the Sub-Adviser to
render investment advisory and management services with respect to that portion
of the portfolio of the Fund's initial series allocated to the Sub-Adviser by
the Adviser for management, including services related to foreign securities,
foreign currency transactions and related investments, and the Sub-Adviser is
willing to render such services;

NOW THEREFORE, in consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties hereto as follows:

1. The Adviser hereby employs the Sub-Adviser to manage the investment
and reinvestment of the assets of the initial series of the Fund allocated by
the Adviser in its sole discretion to the Sub-Adviser for management, including
services related to foreign securities, foreign currency transactions and
related investments, in accordance with the applicable investment objectives,
policies and limitations and subject to the supervision of the Adviser and the
Board of Trustees of the Fund for the period and upon the terms herein set
forth, and to place orders for the purchase or sale of portfolio securities for
the Fund's account with brokers or dealers selected by the Sub-Adviser; and, in
connection therewith, the Sub-Adviser is authorized as the agent of the Fund to
give instructions to the Custodian of the Fund as to the deliveries of
securities and

<PAGE> 2

payments of cash for the account of the Fund. In connection with the selection
of such brokers or dealers and the placing of such orders, the Sub-Adviser is
directed to seek for the Fund best execution of orders. Subject to such
policies as the Board of Trustees of the Fund determines and subject to
satisfying the requirements of Section 28(e) of the Securities Exchange Act of
1934, the Sub-Adviser shall not be deemed to have acted unlawfully or to have
breached any duty, created by this Agreement or otherwise, solely by reason of
its having caused the Fund to pay a broker or dealer an amount of commission
for effecting a securities transaction in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction, if
the Sub-Adviser determined in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer viewed in terms of either that particular
transaction or the Sub-Adviser's overall responsibilities with respect to the
clients of the Sub-Adviser as to which the Sub-Adviser exercises investment
discretion. The Adviser recognizes that all research services and research
that the Sub-Adviser receives are available for all clients of the Sub-Adviser,
and that the Fund and other clients of the Sub-Adviser may benefit thereby.
The investment of funds shall be subject to all applicable restrictions of the
Agreement and Declaration of Trust and By-Laws of the Fund as may from time to
time be in force.

The Sub-Adviser accepts such employment and agrees during such period to
render such investment management services, to furnish related office
facilities and equipment and clerical, bookkeeping and administrative services
for the Fund, to permit any of its officers or employees to serve without
compensation as trustees or officers of the Fund if elected to such positions
and to assume the obligations herein set forth for the compensation herein
provided. The Sub-Adviser shall for all purposes herein provided be deemed to
be an independent contractor and, unless otherwise expressly provided or
authorized, shall have no authority to act for or represent the Fund or the
Adviser in any way or otherwise be deemed an agent of the Fund or the Adviser.
It is understood and agreed that the Sub-Adviser, by separate agreements with
the Fund, may also serve the Fund in other capacities.

The Sub-Adviser will keep the Fund and the Adviser informed of
developments materially affecting the Fund and shall, on the Sub-Adviser's own
initiative and as reasonably requested by the Adviser or the Fund, furnish to
the Fund and the Adviser from time to time whatever information the Adviser
reasonably believes appropriate for this purpose.

The Sub-Adviser agrees that, in the performance of the duties required
of it by this Agreement, it will comply with the

-2-

<PAGE> 3

Investment Advisers Act of 1940 and the Investment Company Act of 1940,
and all rules and regulations thereunder, and all applicable laws and
regulations and with any applicable procedures adopted by the Fund's Board of
Trustees and identified in writing to the Sub-Adviser.

The Sub-Adviser shall provide the Adviser with such investment portfolio
accounting and shall maintain and provide such detailed records and reports as
the Adviser may from time to time reasonably request, including without
limitation, daily processing of investment transactions and cash positions,
periodic valuations of investment portfolio positions as required by the
Adviser, monthly reports of the investment portfolio and all investment
transactions and the preparation of such reports and compilation of such data
as may be required by the Adviser to comply with the obligations imposed upon
it under Management Agreement.

In compliance with the requirements of Rule 31a-3 under the Investment
Company Act of 1940, the Sub-Adviser hereby agrees that any records that it
maintains for the Fund are the property of the Fund and further agrees to
surrender promptly to the Fund copies of any such records upon the Fund's
request. The Sub-Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 under the Investment Company Act of 1940 any records
with respect to the Sub-Adviser's duties hereunder required to be maintained by
Rule 31a-1 under the such Act to the extent that the Sub-Adviser prepares and
maintains such records pursuant to this Agreement and to preserve the records
required by Rule 204-2 under the Investment Advisers Act of 1940 for the period
specified in that Rule.

The Sub-Adviser agrees that it will immediately notify the Adviser and
the Fund in the event that the Sub-Adviser: (i) becomes subject to a statutory
disqualification that prevents the Sub-Adviser from serving as an investment
adviser pursuant to

-3-

<PAGE> 4

this Agreement; or (ii) is or expects to become the subject of an
administrative proceeding or enforcement action by the United States Securities
and Exchange Commission, the Investment Management Regulatory Organization
("IMRO") or other regulatory authority.

2. In the event that there are, from time to time, one or more
additional series of the Fund with respect to which the Adviser desires to
retain the Sub-Adviser to render investment advisory and management
services hereunder, the Adviser shall notify the Sub-Adviser in writing. If
the Sub-Adviser is willing to render such services, it shall notify the Adviser
in writing whereupon such additional series shall become subject to this
Agreement.

Series Annual Rate
------ -----------
<S> <C>
Kemper Worldwide 2004 Fund .35%

</TABLE>

-4-

<PAGE> 5

5. The Sub-Adviser shall arrange, if desired by the Fund, for officers
or employees of the Sub-Adviser to serve, without compensation from the Fund, as
trustees, officers or agents of the Fund if duly elected or appointed to such
positions and subject to their individual consent and to any limitations
imposed by law.

6. The net asset value for each series of the Fund subject to this
Agreement shall be calculated as the Board of Trustees of the Fund may
determine from time to time in accordance with the provisions of the
Investment Company Act of 1940. On each day when net asset value is not
calculated, the net asset value of a series shall be deemed to be the net
asset value of such series as of the close of business on the last day on
which such calculation was made for the purpose of the foregoing computations.

7. Subject to applicable statutes and regulations, it is understood
that certain trustees, officers or agents of the Fund are or may be
interested in the Sub-Adviser as officers, directors, agents, shareholders or
otherwise, and that the officers, directors, shareholders and agents of the
Sub-Adviser may be interested in the Fund otherwise than as a trustee, officer
or agent.

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

-5-

<PAGE> 6

rules and regulations thereunder; provided, however, that if the continuation
of this Agreement is not approved for a series, the Sub-Adviser may
continue to serve in such capacity for such series in the manner and to the
extent permitted by the Investment Company Act of 1940 and the rules and
regulations thereunder.

This Agreement may be terminated with respect to any series at any time
without the payment of any penalty by the Board of Trustees of the Fund, by vote
of a majority of the outstanding voting securities of such series or by the
Adviser in the event that it shall have been established by a court of
competent jurisdiction that the Sub-Adviser or any officer or director of the
Sub-Adviser has taken any action which results in a breach of the covenants of
the Sub-Adviser set forth herein.

The terms "assignment" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth in the Investment Company Act of
1940 and the rules and regulations thereunder.

Termination of this Agreement shall not affect the right of the
Sub-Adviser to receive payments on any unpaid balance of the compensation
described in Section 3 earned prior to such termination.

10. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder shall not be
thereby affected.

12. This Agreement shall be construed in accordance with applicable
federal law and the laws of the State of Illinois.

13. This Agreement is the entire contract between the parties relating
to the subject matter hereof and supersedes all

-6-

<PAGE> 7

prior agreements between the parties relating to the subject matter hereof.

IN WITNESS WHEREOF, the Adviser and the Sub-Adviser have caused this
Agreement to be executed as of the day and year first above written.

ZURICH KEMPER INVESTMENTS, INC.

By: /s/ Patrick H. Dudasik
--------------------------------
Title: Senior Vice President
-----------------------------

ZURICH INVESTMENT MANAGEMENT LIMITED

By: /s/ Dennis H. Ferro
---------------------------------
Title: Managing Director
------------------------------

-7-

<PAGE> 1
Exhibit 99.B5(f)

NOTIFICATION OF ADDITIONAL PORTFOLIO
------------------------------------

Zurich Kemper Investments, Inc., a Delaware corporation (the "Adviser"),
pursuant to Paragraph 2 of the Sub-Advisory Agreement (Form 2 Series)
("Sub-Advisory Agreement") dated December 1, 1996 between the Adviser and
Zurich Investment Management Limited, an English corporation (the
"Sub-Adviser") hereby notifies the Sub-Adviser that it desires to retain the
Sub-Adviser to render investment advisory and management services under the
Sub-Advisory Agreement for the Kemper Retirement Fund Series VII of Kemper
Target Equity Fund, the sub-advisory fee for such services to be computed at
the annual rate set forth in Appendix A hereto in accordance with Paragraph 3
of the Sub-Advisory Agreement.

Dated: May 1, 1997

ZURICH KEMPER INVESTMENTS, INC.

By:
--------------------------------
Title:
-----------------------------

Attest:
---------------
Title:
----------------

Sub-Adviser, pursuant to said Paragraph 2 of the Sub-Advisory Agreement,
hereby notifies the Adviser that it is willing to render the aforesaid services
for the Kemper Retirement Fund Series VII for the sub-advisory fee described
above and acknowledges that such Portfolio shall hereby become a "Portfolio"
under the Sub-Advisory Agreement.

ZURICH INVESTMENT MANAGEMENT LIMITED

By:
---------------------------------
Title:
------------------------------

Attest:
---------------
Title:
----------------

<PAGE> 2

APPENDIX A

SUB-ADVISORY FEE

Series Annual Rate
------ -----------
<S> <C>
Series VII .35 of 1%

</TABLE>

<PAGE> 1

Exhibit 99.B6(b)

SELLING GROUP AGREEMENT KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza, Chicago, Illinois 60606

Dear Financial Services Firm:

As principal underwriter and distributor, we invite you to join a Selling
Group for the distribution of shares of the Kemper Funds (herein called
"Funds"), but only in those states in which the shares of the respective Funds
may legally be offered for sale. As exclusive agent of each of the Funds, we
offer to sell to you shares of the Funds on the following terms:
1. In all sales of these shares to the public you shall act as dealer for
your own account, and in no transaction shall you have any authority to act as
agent for the issuer, for us, or for any other member of the Selling Group.
2. Orders received from you will be accepted by us only at the public
offering price applicable to each order, as established by the Prospectus of
each Fund, subject to the discount, commission or other concession, if any, as
provided in such Prospectus. Upon receipt from you of any order to purchase
shares of a Fund, we shall confirm to you in writing or by wire to be followed
by a confirmation in writing. Additional instructions may be forwarded to you
from time to time. All orders are subject to acceptance or rejection by us in
our sole discretion.
3. You may offer and sell shares to your customers only at the public
offering price determined in the manner described in the applicable Prospectus.
The public offering price is the net asset value per share as provided in the
applicable Prospectus plus, with respect to certain Funds, a sales charge from
which you shall receive a discount equal to a percentage of the applicable
offering price as provided in the applicable Prospectus. You shall receive a
sales commission, with respect to certain Funds, equal to a percentage of the
amount invested as provided in the applicable Prospectus. You shall receive a
distribution service fee, for certain Funds for which such fees are available,
as provided in the applicable Prospectus which fee shall be payable with
respect to such assets, for such periods and at such intervals as are from time
to time specified by us. The discounts or other concessions to which you may be
entitled in connection with sales to your customers pursuant to any special
features of a Fund (such as cumulative discounts, letters of intent, etc., the
terms of which shall be as described in the applicable Prospectus and related
forms) shall be in accordance with the terms of such features. You may receive
an administrative service fee, with respect to certain Funds for which such
fees are available, as provided in the applicable Prospectus, which fee shall
be payable with respect to such assets, for such periods and at such intervals
as are from time

<PAGE> 2

to time specified by us. Our liability to you with respect to the payment of
any service fee is limited to the proceeds received by us from the Funds for
your services, and you waive any right you may have to payment of any
service fee until we are in receipt of the proceeds from the Funds that are
attributable to your services.

4. By accepting this agreement, you agree:
(a) To purchase shares only from us or from your customers.
(b) That you will purchase shares from us only to cover purchase
orders already received from your customers, or for your own bona fide
investments.
(c) That you will not purchase shares from your customers at a price
lower than the bid price then quoted by or for the Fund involved. You may,
however, sell shares for the account of your customer to the Fund, or to us as
agent for the Fund, at the bid price currently quoted by or for the Fund and
charge your customer a fair commission for handling the transaction.
(d) That you will not withhold placing with us orders received from
your customers so as to profit yourself as a result of such withholding.
5. We will not accept from you any conditional orders for shares.
6. If any shares confirmed to you under the terms of this agreement are
repurchased by the issuing Fund or by us as agent for the Fund, or are tendered
for repurchase, within seven business days after the date of our confirmation
of the original purchase order, you shall forthwith refund to us the full
discount, commission, finder's fee or other concession, if any, allowed or paid
to you on such shares.
7. Payment for shares ordered from us shall be in New York clearing house
funds and must be received by the appropriate Fund's shareholder service agent
within seven days after our acceptance of your order (or such shorter time
period as may be required by applicable regulations). If such payment is not
received, we reserve the right, without notice, forthwith to cancel the sale
or, at our option, to sell the shares ordered back to the Fund, in which case
we may hold you responsible for any loss, including loss of profit suffered by
us as a result of your failure to make such payment.
8. Shares sold to you hereunder shall be available in negotiable form for
delivery at the appropriate Fund's shareholder services agent, against payment,
unless other instructions have been given.
9. All sales will be made subject to our receipt of shares from the Fund.
We reserve the right, in our discretion, without notice, to suspend
sales or withdraw the offering of shares entirely. We reserve the right to
modify, cancel or change the terms of this agreement, upon 15 days prior
written notice to you. Also, the sales charges, discounts, commissions or
other concessions, service fees of any kind provided for hereunder are subject
to change at any time by the Funds and us.

<PAGE> 3

10. All communications to us should be sent to the address
in the heading above. Any notice to you shall be duly given if mailed or
telegraphed to you at the address specified by you below.
11. This agreement shall be construed in accordance with the laws of
Illinois. This agreement is subject to the Prospectuses of the Funds from time
to time in effect, and, in the event of a conflict, the terms of the
Prospectuses shall control. References herein to the "Prospectus" of a Fund
shall mean the prospectus and statement of additional information of such Fund
as from time to time in effect. Any changes, modifications or additions
reflected in any such Prospectus shall be effective on the date of such
Prospectus (or supplement thereto) unless specified otherwise.
12. This agreement is subject to the Additional Stipulations and
Conditions on the reverse side hereof, all of which are a part of this
agreement.

Kemper Distributors, Inc.

By
----------------------------
Authorized Signature

Title
-------------------------

We have read the foregoing agreement and accept and agree to the
terms and conditions thereof.

Firm
-------------------------
Witness
------------------------ By
----------------------------
Authorized Representative

Dated Title
------------------------- -------------------------

<PAGE> 4

ADDITIONAL STIPULATIONS AND CONDITIONS

13. No person is authorized to make any representations concerning
shares of any Fund except those contained in the Prospectus of such Fund and in
printed information subsequently issued by the Fund or by us as information
supplemental to such Prospectus. If you wish to use your own advertising with
respect to a Fund, all such advertising must be approved by us or by the Fund
prior to use. You shall be responsible for any required filing of such
advertising.
14. Your acceptance of this agreement constitutes a representation (i)
that you are a registered security dealer and a member in good standing of the
National Association of Securities Dealers, Inc. and that you agree to comply
with all state and federal laws, rules and regulations applicable to
transactions hereunder and to the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., or (ii) if you are offering and
selling shares of the Funds only in jurisdictions outside of the several
states, territories and possessions of the United States and are not otherwise
required to be a member of the National Association of Securities Dealers,
Inc., that you nevertheless agree to conduct your business in accordance with
the spirit of the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and to observe the laws and regulations of the
applicable jurisdiction. You likewise agree that you will not offer to sell
shares of any Fund in any state or other jurisdiction in which they may not
lawfully be offered for sale.
15. You shall make available an investment management account for your
customers through the Funds and shall provide such office space and equipment,
telephone facilities, personnel and literature distribution as is necessary or
appropriate for providing information and services to your customer. Such
services and assistance may include, but not be limited to, establishment and
maintenance of shareholder accounts and records, processing purchase and
redemption transactions, answering routine inquiries regarding the Funds, and
such other services as may be agreed upon from time to time and as may be
permitted by applicable statute, rule, or regulation. You agree to release,
indemnify and hold harmless the Funds, us and our respective representatives
and agents from any and all direct or indirect liabilities or losses resulting
from requests, directions, actions or inactions of or by you, your officers,
employees or agents regarding the purchase, redemption or transfer of
registration of shares of the Funds for accounts of you, your customers and
other shareholders or from any unauthorized or improper use of any on-line
computer facilities. You shall prepare such periodic reports for us as shall
reasonably be requested by us. You shall immediately inform the Funds or us of
all written complaints received by you from Fund shareholders relating to the
maintenance of their accounts and shall promptly answer all such complaints and
other similar correspondence. You shall provide the Funds and us on a timely

<PAGE> 5

basis with such information as may be required to complete various regulatory
forms.
16. As a result of the necessity to compute the amount of any contingent
deferred sales charge due with respect to the redemption of shares, you may not
hold shares of a Fund imposing such a charge in an account registered in your
name or in the name of your nominee for the benefit of certain of your
customers except with our prior written consent. Except as otherwise permitted
by us, shares of such a Fund owned by a shareholder must be in a separate
identifiable account for such shareholder.
17. Shares of certain Funds have been divided into separate classes:
Class A Shares, Class B Shares and Class C Shares. Class A Shares are offered
at net asset value plus an initial sales charge. Class B Shares are offered at
net asset value without an initial sales charge but are subject to a contingent
deferred sales charge and a Rule 12b-1 fee and have a conversion feature.
Class C Shares are offered at net asset value without an initial sales charge
but are subject to a contingent deferred sales charge and a Rule 12b-1
fee, and have no conversion feature. Please see the appropriate Prospectuses
for a more complete description of the distinctions between the classes of
shares.
It is important to investors not only to choose Funds appropriate for
their investment objectives, but also to choose the appropriate distribution
arrangement, based on the amount invested and the expected duration of the
investment. To assist investors in these decisions, we have instituted the
following policies with respect to orders for shares of the Funds. The
following policies and procedures with respect to sales of classes of shares of
the Funds apply to each broker/dealer that distributes shares of the Funds.
1. All purchase orders for $500,000 or more (not including street name
or omnibus accounts) should be for Class A Shares.
2. Any purchase order of less than $500,000 may be for either Class A,
Class B or Class C Shares in light of the relevant facts and circumstances,
including:
a. the specific purchase order dollar amount;
b. the length of time the investor expects to hold the shares; and
c. any other relevant circumstances such as the availability of
purchases under a Letter of Intent, Combined Purchases or Cumulative Discount
Privilege.
There are instances when one pricing structure may be more appropriate
than another. For example, investors who would qualify for a reduced sales
charge on Class A Shares may determine that payment of a reduced front-end
sales charge is preferable to payment of an ongoing Rule 12b-1 fee. On the
other hand, investors whose orders would not qualify for such a discount and
who plan to hold their investment for more than six years may wish to defer the
sales charge and would consider Class B Shares. Investors who prefer not to
pay an initial sales charge and who plan to redeem their shares within six
years might consider Class C Shares.

<PAGE> 6

Appropriate supervisory personnel within your organization must ensure
that all employees receiving investor inquiries about the purchase of shares of
the Funds advise the investor of the available pricing structures offered by
the Funds and the impact of choosing one method over another, including
breakpoints and the availability of Letters of Intent, Combined Purchases and
Cumulative Discounts. In some instances it may be appropriate for a
supervisory person to discuss a purchase with the investor.
18. This agreement shall be in substitution of any prior selling group
agreement between you and us regarding these shares. This agreement shall not
be applicable to the provision of services for Cash Equivalent Fund, Tax-Exempt
California Money Market Fund, Tax-Exempt New York Money Market Fund, Investors
Cash Trust and similar wholesale money market funds. The payment of related
distribution and services fees, shall be subject to separate services
agreements.

<PAGE> 1

Exhibit 99.B9(l)

GUARANTY AGREEMENT

Agreement dated the 22nd day of April, 1997 by and between Zurich Kemper
Investments, Inc., a Delaware corporation ("ZKI") and Kemper Target Equity
Fund, a Massachusetts business trust (the "Trust").

WHEREAS, the Trust is an open-end, diversified, management investment
company that may issue shares in one or more series, the eighth series of the
Trust being designated as "Kemper Retirement Fund Series VII" (the "Fund");

WHEREAS, ZKI is the investment manager for the Fund;

WHEREAS, the investment objectives of the Fund are to provide a
guarantee of return of investment, including any sales charge, for shares
redeemed on May 15, 2008 (the "Maturity Date") and to provide long-term growth
of capital;

WHEREAS, the Fund will pursue its objectives by investing a portion of
its assets in "zero coupon" U.S. Treasury obligations and the balance of its
assets primarily in common stocks;

WHEREAS, the Fund is designed to provide a guarantee of return of
investment only to those investors who reinvest dividends and hold their shares
until the Maturity Date ("Eligible Investors"); and

WHEREAS, the Fund and ZKI want to provide further assurance pursuant to
this Agreement that Eligible Investors will receive a return of investment
upon redemption of their shares on the Maturity Date;

NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
hereto agree as follows:

1. ZKI agrees that it will make payments to Eligible Investors on the
Maturity Date in such amounts as may be necessary to enable all Eligible
Investors to receive, upon redemption of their investment in the Fund on
the Maturity Date at the then current net asset value thereof, an aggregate
amount of redemption proceeds and payments hereunder equal to the amount of
their original investment, including any sales charge.

2. The Trust hereby accepts the undertaking by ZKI set forth in this
Agreement.

<PAGE> 2

3. This Agreement shall be governed by the laws of the State of
Illinois, except that Paragraph 4 hereof shall be governed by the laws of The
Commonwealth of Massachusetts.

4. All parties hereto are expressly put on notice of the Trust's
Amended and Restated Agreement and Declaration of Trust, which is on file with
the Secretary of The Commonwealth of Massachusetts, and the limitation of
shareholder and trustee liability contained therein. This Agreement has been
executed by and on behalf of Trust by its representatives as such
representatives and not individually, and the obligations, if any, of Trust
hereunder are not binding upon any of the Trustees, officers or shareholders of
the Trust individually but are binding upon only the assets and property of the
Fund.

IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officer as of the day and year
first set forth above.

ZURICH KEMPER INVESTMENTS, INC..

By: /s/ Patrick H. Dudasik
-----------------------------
Title: Executive Vice President
--------------------------
and Chief Financial Officer
-----------------------------

KEMPER TARGET EQUITY FUND

By: /s/ John E. Neal
-----------------------------
Title: Vice President
--------------------------

-2-

<PAGE> 1
[LETTERHEAD FOR VEDDER PRICE]

April 28, 1997

Kemper Target Equity Fund
222 South Riverside Plaza
Chicago, Illinois 60606

Ladies and Gentlemen:

Reference is made to Post-Effective Amendment No. 24 to the
Registration Statement on Form N-1A under the Securities Act of 1933 being
filed by Kemper Target Equity Fund (the "Fund") in connection with the proposed
public offering of units of beneficial interest, no par value ("Shares"), in
the Kemper Retirement Fund Series VII (the "Portfolio").

We have acted as counsel to the Fund since its inception and in such
capacity are familiar with the Fund's organization and have counseled the Fund
regarding various legal matters. We have examined such Fund records and other
documents and certificates as we have considered necessary or appropriate for
the purposes of this opinion. In our examination of such materials, we have
assumed the genuineness of all signatures and the conformity to original
documents of all copies submitted to us.

Based upon the foregoing and upon the opinion dated April 28, 1997 by
Ropes & Gray of Boston, Massachusetts, and assuming that the Fund's Agreement
and Declaration of Trust dated August 3, 1988, and amended and restated on
September 15, 1994, and as amended on April 7, 1995 and April 22, 1997, and the
By-Laws of the Fund adopted November 1, 1989 are presently in full force and
effect and have not been amended in any respect and that the resolutions
adopted by the Board of Trustees of the Fund on January 17, 1997 relating to
organizational matters, securities matters and the issuance of shares are
presently in full force and effect and have not been amended in any respect, we
advise you and opine that (a) the Fund is a legally organized and validly
existing voluntary association with transferrable shares under the laws of the
Commonwealth of Massachusetts and is authorized to issue an unlimited number of
Shares in the Portfolio; and (b) upon the issuance of the Shares in accordance
with the Fund's Agreement and Declaration of Trust and the receipt by the Fund
of a purchase price not less than the net asset value per Share, the Shares
will be legally issued and outstanding, fully paid and non-assessable (although
shareholders of the Fund may be subject to liability under certain
circumstances described in the opinion from Ropes & Gray).

<PAGE> 2
VEDDER PRICE

Kemper Target Equity Fund
April 28, 1997
Page 2

This opinion is solely for the benefit of the Fund, the Fund's Board of
Trustees and the Fund's officers and may not be relied upon by any other person
without our prior written consent. We hereby consent to the use of this
opinion in connection with said Post-Effective Amendment.

Very truly yours,

VEDDER, PRICE, KAUFMAN & KAMMHOLZ

DAS/COK:dme

<PAGE> 1
Exhibit 99.B10-(b)

ROPES & GRAY
ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110-2624
(617) 851-7000
FAX: (617) 851-7050

<TABLE>
<S> <C>
30 KENNEDY PLAZA ONE FRANKLIN SQUARE
PROVIDENCE, RI 02803-8328 1301 K STREET, N.W
(401) 455-4400 SUITE 800 EAST
FAX: (401) 455-4401 WASHINGTON, DC 30005-3333
(202) 626-3900
FAX: (202) 626-3961
</TABLE>

April 28, 1997

Kemper Target Equity Fund
222 South Riverside Plaza
Chicago, Illinois 60601

Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, Illinois 60601

Ladies and Gentlemen:

We are furnishing this opinion with respect to the proposed offer and
sale from time to time by Kemper Retirement Funds Series VII (the "Fund"), a
series of Kemper Target Equity Fund (the "Trust"), of an indefinite number of
shares of beneficial interest of the Fund (the "Shares"), pursuant to a
post-effective amendment to the Trust's Registration Statement on Form N-1A
(No. 33-30876) under the Securities Act of 1933, as amended.

We have examined the Trust's records of Trustee action, its By-Laws and
its Agreement and Declaration of Trust, as amended to date. We have examined
such other documents as we deem necessary for the purposes of this opinion.

We assume that appropriate action has been or will be taken to register
or qualify the sale of the Shares under any applicable state laws regulating
sales and offerings of securities and that upon sale of the Shares, the Trust
will receive the authorized consideration therefor, and that such consideration
will in each case at least equal the net asset value of the shares.

Based upon the foregoing, we are of the opinion that:

1. The Trust is a legally organized and validly existing unincorporated
voluntary association under the laws of The Commonwealth of Massachusetts
which, unless terminated as provided in its Agreement and Declaration of Trust,
shall continue in existence without limitation of time.

<PAGE> 2
April 28, 1997

Kemper Target Equity Fund
Vedder, Price, Kaufman & Kammholz -2-

2. The Trust is authorized to issue an unlimited number of Shares and
that, when the Shares are issued and sold after the post-effective amendment to
the Registration Statement has been declared effective and the authorized
consideration therefor is received by the Trust, they will be validly issued,
fully paid, and nonassessable by the Trust.

The Trust is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust or
any series of the Trust (a "Series"). However, the Agreement and Declaration of
Trust disclaims shareholder liability for acts and obligations of the Trust or
of a particular Series and requires that notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed by the
Trustees or officers of the Trust. The Agreement and Declaration of Trust
provides for indemnification out of the property of a particular Series for all
loss and expense of any shareholder of that Series held personally liable for
the obligations of such Series. Thus, the risk of liability is limited to
circumstances in which the relevant Series would be unable to meet its
obligations.

We hereby consent to the filing of this opinion as an exhibit to the
aforesaid post-effective amendment to the Trust's Registration Statement.

Very truly yours,

Ropes & Gray

<PAGE> 1
CONSENT OF INDEPENDENT AUDITORS

We consent to the use of our report with respect to Kemper Target Equity Fund--
Kemper Retirement Fund--Series VII dated April 22, 1997 in the Registration
Statement of Kemper Target Equity Fund on Form N-1A and the related Prospectus
and Statement of Additional Information filed with the Securities and Exchange
Commission in this Post-Effective Amendment No. 24 to the Registration Statement
under the Securities Act of 1933 (File No. 33-30876) and in this Amendment No.
26 to the Registration Statement under the Investment Company Act of 1940 (File
No. 811-5896).

/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Chicago, Illinois
April 25, 1997

<PAGE> 2
REPORT OF INDEPENDENT AUDITORS

The Board of Trustees and Shareholder
Kemper Target Equity Fund--
Kemper Retirement Fund--Series VII

We have audited the accompanying statement of net assets of Kemper Target
Equity Fund--Kemper Retirement Fund--Series VII as of April 22, 1997. This
statement of net assets is the responsibility of the Trust's management. Our
responsibility is to express an opinion on this statement of net assets based
on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of net assets is free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement of net assets.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall statement of
net assets presentation. We believe that our audit of the statement of net
assets provides a reasonable basis for our opinion.

In our opinion, the statement of net assets referred to above presents fairly,
in all material respects, the financial position of Kemper Target
Equity--Kemper Retirement Fund--Series VII at April 22, 1997 in conformity with
generally accepted accounting principles.

/s/ Ernst & Young LLP
ERNST & YOUNG LLP

Chicago, Illinois
April 22, 1997

<PAGE> 1

Exhibit 99.B13

KEMPER TARGET EQUITY FUND
KEMPER RETIREMENT FUND SERIES VII

Subscription Agreement

1. Share Subscription. The undersigned agrees to purchase
from Kemper Target Equity Fund (the "Fund") the number of shares (the "Shares")
of the series of the Fund known as Kemper Retirement Fund Series VII (the
"Portfolio"), without par value, set forth at the end of this Agreement on
the terms and conditions set forth herein and in the Preliminary Prospectus
("Preliminary Prospectus") described below, and hereby tenders the amount of
the price required to purchase these Shares at the price set forth at the end
of this Agreement.

The undersigned understands that the Fund has prepared a registration
statement or an amendment thereto for filing with the Securities and Exchange
Commission on Form N-1A, which contains the Preliminary Prospectus which
describes the Fund, the Portfolio and the Shares. By its signature hereto,
the undersigned hereby acknowledges receipt of a copy of the Preliminary
Prospectus.

The undersigned recognizes that the Portfolio will not be fully
operational until such time as it commences the public offering of its shares.
Accordingly, a number of features of the Portfolio described in the Preliminary
Prospectus, including, without limitation, the declaration and payment of
dividends, and redemption of shares upon request of shareholders, are not, in
fact, in existence at the present time and will not be instituted until the
Portfolio's registration under the Securities Act of 1933 is made effective.

2. Registration and Warranties. The undersigned hereby represents and
warrants as follows:

(a) It is aware that no Federal or state agency has made any
findings or determination as to the fairness for investment, nor any
recommendation or endorsement, of the Shares;

(b) It has such knowledge and experience of financial and business
matters as will enable it to utilize the information made available to it
in connection with the offering of the Shares, to evaluate the merits and
risks of the prospective investment and to make an informed investment
decision;

<PAGE> 2

(c) It recognizes that the Portfolio has no financial or operating
history and, further, that investment in the Portfolio involves certain
risks, and it has taken full cognizance of and understands all of the
risks related to the purchase of the Shares, and it acknowledges that it
has suitable financial resources and anticipated income to bear the
economic risk of such an investment;

(d) It is purchasing the Shares for its own account, for investment,
and not with any present intention of redemption, distribution, or resale
of the Shares, either in whole or in part;

(e) It will not sell the Shares purchased by it without registration
of the Shares under the Securities Act of 1933 or exemption therefrom;

(f) This Agreement and the Preliminary Prospectus and such material
documents relating to the Fund as it has requested have been provided to
it by the Fund and have been reviewed carefully by it; and

(g) It has also had the opportunity to ask questions of, and receive
answers from, representatives of the Fund concerning the Fund and the
terms of the offering.

3. The undersigned recognizes that the Fund reserves the unrestricted
right to reject or limit any subscription and to close the offer at any time.

Number of Shares: 11,111.111 of Kemper Retirement Fund Series VII.
Subscription price $9.00 per share for an aggregate price of $100,000.

IN WITNESS WHEREOF, the undersigned has executed this instrument this 22nd
day of April, 1997.

ZURICH KEMPER INVESTMENTS, INC.

By: /s/ Philip J. Collora
----------------------------
Title: Senior Vice President
-------------------------

-2-

<PAGE> 1
Exhibit 99.485(b)

VEDDER PRICE VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 NORTH LASALLE STREET
CHICAGO, ILLINOIS 60601-1003
312-609-7500
FACSIMILE: 312-609-5005

A PARTNERSHIP INCLUDING VEDDER, PRICE,
KAUFMAN & KAMMHOLZ, P.C.
WITH OFFICES IN CHICAGO AND NEW YORK CITY

April 29, 1997

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Re: Kemper Target Equity Fund
-------------------------

To The Commission:

We are counsel to the above-referenced investment company (the "Fund")
and as such have participated in the preparation and review of Post-Effective
Amendment No. 24 to the Fund's registration statement being filed pursuant to
Rule 485(b) under the Securities Act of 1933. In accordance with paragraph
(b)(4) of Rule 485, we hereby represent that such amendment does not contain
disclosures which would render it ineligible to become effective pursuant to
paragraph (b) thereof.

Very truly yours,

VEDDER, PRICE, KAUFMAN & KAMMHOLZ