STATEMENT OF ADDITIONAL INFORMATION
                                  March 1, 1999
                           As Revised January 19, 2000

                   KEMPER ASIAN GROWTH FUND (the "Asian Fund")
                     KEMPER EUROPE FUND (the "Europe Fund")
                  KEMPER GLOBAL INCOME FUND (the "Global Fund")
              KEMPER INTERNATIONAL FUND (the "International Fund")
               222 South Riverside Plaza, Chicago, Illinois 60606
                                 1-800-621-1048

This Statement of Additional Information is not a prospectus. It is the combined
Statement  of  Additional   Information  for  the  Asian,  Europe,   Global  and
International  Funds (the "Funds").  It should be read in  conjunction  with the
combined  prospectus  of the Funds dated March 1, 1999.  The  prospectus  may be
obtained  without charge from the Funds and is also  available  along with other
related materials on the SEC's Internet web site (http://www.sec.gov).

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

                                  TABLE OF CONTENTS


                                                                         Page
                                                                         ----

         Investment Restrictions.......................................     2

         Investment Policies and Techniques............................     5

         Dividends and Taxes...........................................    20

         Performance...................................................    26

         Investment Manager and Underwriter............................    33

         Portfolio Transactions........................................    40

         Purchase, Repurchase and Redemption of Shares.................    41

         Officers and Trustees.........................................    55

         Shareholder Rights............................................    60

         Appendix--Ratings of Investments..............................    62

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



INVESTMENT RESTRICTIONS

Each Fund has adopted certain fundamental  investment  restrictions which cannot
be changed without approval of a "majority" of its outstanding voting shares. As
defined in the Investment  Company Act of 1940, this means the lesser of (1) 67%
of the Fund's shares present at a meeting where 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 Asian Growth,  Europe, and International Funds are classified as diversified
open-end  management  investment   companies.   The  Global  Income  Fund  is  a
non-diversified open-end investment management company.

Each  Fund,  with  the  exception  of the  International  Fund,  may  not,  as a
fundamental policy:

1.   Make loans except as permitted under the Investment Company Act of 1940, as
     amended,  and as  interpreted  or modified by regulatory  authority  having
     jurisdiction, from time to time.

2.   Borrow money, except as permitted under the Investment Company Act of 1940,
     as amended,  and as interpreted or modified by regulatory  authority having
     jurisdiction, from time to time.

3.   Concentrate its investments in a particular industry,  as that term is used
     in the  Investment  Company Act of 1940, as amended,  and as interpreted or
     modified by regulatory authority having jurisdiction, from time to time.

4.   Purchase   physical   commodities   or   contracts   relating  to  physical
     commodities.

5.   Engage in the business of underwriting  securities issued by others, except
     to the extent that a Fund may be deemed to be an  underwriter in connection
     with the disposition of portfolio securities.

6.   Issue senior  securities  except as permitted under the Investment  Company
     Act of 1940,  as amended,  and as  interpreted  or  modified by  regulatory
     authority having jurisdiction, from time to time.

7.   Purchase or sell real  estate,  which term does not include  securities  of
     companies which deal in real estate or mortgages or investments  secured by
     real estate or interests therein,  except that the Fund reserves freedom of
     action to hold and to sell real  estate  acquired as a result of the Fund's
     ownership of securities.

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. Each Fund has
also adopted the following non-fundamental restrictions, which may be changed by
the Board of Trustees without shareholder approval.

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

         i.       Invest for the purpose of exercising  control or management of
                  another issuer.

         ii.      Invest more than 15% of its net assets in illiquid securities.

         iii.     Purchase  more than 10% of any class of voting  securities  of
                  any issuer, except that all or substantially all of the assets
                  of the Fund may be invested in another  registered  investment
                  company having the same investment objective and substantially
                  similar investment policies as the Fund.

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

                                       2


         v.       Make short sales of securities,  or purchase any securities on
                  margin  except to obtain  such  short-term  credits  as may be
                  necessary for the clearance of transactions; however, the Fund
                  may make  margin  deposits  in  connection  with  options  and
                  financial futures transactions.

         vi.      Purchase  options,  unless the aggregate  premiums paid on all
                  such  options held by the Fund at any time do not exceed 20%of
                  its total  assets;  or sell put options,  if as a result,  the
                  aggregate value of the obligations underlying such put options
                  would exceed 50% of its total assets;

         vii.     Enter into  futures  contracts  or  purchase  options  thereon
                  unless  immediately  after  the  purchase,  the  value  of the
                  aggregate   initial   margin  with  respect  to  such  futures
                  contracts  entered into on behalf of the Fund and the premiums
                  paid for such options on futures  contracts does not exceed 5%
                  of the fair market value of the Fund's total assets;  provided
                  that in the case of an option that is in-the-money at the time
                  of  purchase,  the  in-the-money  amount  may be  excluded  in
                  computing the 5% limit.

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

         i.       Invest for the purpose of exercising  control or management of
                  another issuer.

         ii.      Invest more than 15% of its net assets in illiquid securities.

         iii.     Purchase  more than 10% of any class of voting  securities  of
                  any issuer.

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

         v.       Make short sales of securities,  or purchase any securities on
                  margin  except to obtain  such  short-term  credits  as may be
                  necessary for the clearance of transactions; however, the Fund
                  may make  margin  deposits  in  connection  with  options  and
                  financial futures transactions.

         vi.      Purchase  options,  unless the aggregate  premiums paid on all
                  such  options held by the Fund at any time do not exceed 20%of
                  its total  assets;  or sell put options,  if as a result,  the
                  aggregate value of the obligations underlying such put options
                  would exceed 50% of its total assets;

         vii.     Enter into  futures  contracts  or  purchase  options  thereon
                  unless  immediately  after  the  purchase,  the  value  of the
                  aggregate   initial   margin  with  respect  to  such  futures
                  contracts  entered into on behalf of the Fund and the premiums
                  paid for such options on futures  contracts does not exceed 5%
                  of the fair market value of the Fund's total assets;  provided
                  that in the case of an option that is in-the-money at the time
                  of  purchase,  the  in-the-money  amount  may be  excluded  in
                  computing the 5% limit.

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

         i.       Invest for the purpose of exercising  control or management of
                  another issuer.

         ii.      Invest more than 15% of its net assets in illiquid securities.

         iii.     Purchase  more than 10% of any class of voting  securities  of
                  any issuer, except that all or substantially all of the assets
                  of the Fund may be invested in another  registered  investment
                  company having the same investment objective and substantially
                  similar investment policies as the Fund.

                                       3


         iv.      Pledge, hypothecate,  mortgage or otherwise encumber more than
                  15% of its total  assets  and then only to secure  borrowings.
                  (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.)

         v.       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.

         vi.      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.

         vii.     Purchase  options,  unless the aggregate  premiums paid on all
                  such  options held by the Fund at any time do not exceed 20%of
                  its total  assets;  or sell put options,  if as a result,  the
                  aggregate value of the obligations underlying such put options
                  would exceed 50% of its total assets;

         viii.    Enter into  futures  contracts  or  purchase  options  thereon
                  unless  immediately  after  the  purchase,  the  value  of the
                  aggregate   initial   margin  with  respect  to  such  futures
                  contracts  entered into on behalf of the Fund and the premiums
                  paid for such options on futures  contracts does not exceed 5%
                  of the fair market value of the Fund's total assets;  provided
                  that in the case of an option that is in-the-money at the time
                  of  purchase,  the  in-the-money  amount  may be  excluded  in
                  computing the 5% limit.

The International Fund may not, as a fundamental policy:

1.   Purchase  more than 10% of any class of  securities  of any  issuer  except
     securities  issued  or  guaranteed  by the  U.S.  Government  or any of its
     agencies or instrumentalities. All debt securities and all preferred stocks
     are each considered as one class.

2.   Make loans except as permitted under the Investment Company Act of 1940, as
     amended,  and as  interpreted  or modified by regulatory  authority  having
     jurisdiction, from time to time.

3.   Borrow money, except as permitted under the Investment Company Act of 1940,
     as amended,  and as interpreted or modified by regulatory  authority having
     jurisdiction, from time to time.

4.   Concentrate its investments in a particular industry,  as that term is used
     in the  Investment  Company Act of 1940, as amended,  and as interpreted or
     modified by regulatory authority having jurisdiction, from time to time.

5.   Purchase   physical   commodities   or   contracts   relating  to  physical
     commodities.

6.   Purchase or sell real  estate,  which term does not include  securities  of
     companies which deal in real estate or mortgages or investments  secured by
     real estate or interests therein,  except that the Fund reserves freedom of
     action to hold and to sell real  estate  acquired as a result of the Fund's
     ownership of securities.

7.   Engage in the business of underwriting  securities issued by others, except
     to the extent that a Fund may be deemed to be an  underwriter in connection
     with the disposition of portfolio securities.

8.   Issue senior  securities  except as permitted under the Investment  Company
     Act of 1940,  as amended,  and as  interpreted  or  modified by  regulatory
     authority having jurisdiction, from time to time.

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
International  Fund did not borrow money as permitted by investment  restriction
number 4 in the latest fiscal year

                                       4


and it has no present  intention  of  borrowing  during the  current  year.  The
International Fund has adopted the following non-fundamental restrictions, which
may be changed by the Board of Trustees without shareholder approval.

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

         i.       Invest for the purpose of exercising  control or management of
                  another issuer.

         ii.      Invest more than 15% of its net assets in illiquid securities.

         iii.     Purchase  more  than  10% of any  class of  securities  of any
                  issuer  except  securities  issued or  guaranteed  by the U.S.
                  Government  or any of its agencies or  instrumentalities.  All
                  debt  securities and all preferred  stocks are each considered
                  as one class.

         iv.      Make short sales of securities,  or purchase any securities on
                  margin  except to obtain  such  short-term  credits  as may be
                  necessary for the clearance of transactions; however, the Fund
                  may make margin deposits in connection with financial  futures
                  and options transactions.

         v.       Pledge the Fund's  securities  or  receivables  or transfer or
                  assign or otherwise  encumber them in an amount  exceeding the
                  amount of the borrowing secured thereby.

         vi.      Purchase  options,  unless the aggregate  premiums paid on all
                  such  options held by the Fund at any time do not exceed 20%of
                  its total  assets;  or sell put options,  if as a result,  the
                  aggregate value of the obligations underlying such put options
                  would exceed 50% of its total assets;

         vii.     Enter into  futures  contracts  or  purchase  options  thereon
                  unless  immediately  after  the  purchase,  the  value  of the
                  aggregate   initial   margin  with  respect  to  such  futures
                  contracts  entered into on behalf of the Fund and the premiums
                  paid for such options on futures  contracts does not exceed 5%
                  of the fair market value of the Fund's total assets;  provided
                  that in the case of an option that is in-the-money at the time
                  of  purchase,  the  in-the-money  amount  may be  excluded  in
                  computing the 5% limit.


INVESTMENT POLICIES AND TECHNIQUES

The  following  information  sets forth each  Fund's  investment  objective  and
policies. Each Fund's returns and net asset value will fluctuate and there is no
assurance that a Fund will achieve its objective.

ASIAN FUND.  The objective of the Asian Fund is long-term  capital  growth.  The
Fund seeks to achieve its  objective  by investing  in a  diversified  portfolio
consisting  primarily of equity  securities of Asian  companies  ("Asian  Equity
Securities").  Asian Equity Securities include common stocks,  preferred stocks,
securities  convertible  into or  exchangeable  for common or preferred  stocks,
equity   investments  in  partnerships,   joint  ventures  and  other  forms  of
non-corporate investment and warrants, options and rights exercisable for equity
securities that are issued by Asian companies as defined below.

The Fund  considers an issuer of securities to be an Asian company if: (i) it is
organized  under the laws of an Asian  country and has a principal  office in an
Asian  country;  (ii) it derives 50% or more of its total revenues from business
in Asia;  or (iii) its  equity  securities  are  traded  principally  on a stock
exchange in Asia. Under normal circumstances,  the Fund will invest at least 85%
of its total assets in Asian Equity  Securities  and will invest at least 65% of
its total assets in Asian Equity  Securities of issuers  meeting at least one of
the first two criteria described in the preceding sentence.  For purposes of the
foregoing policies,  the Fund also considers Asian Equity Securities to include:
(i) shares of closed-end management  investment  companies,  the assets of which
are invested  primarily in Asian Equity Securities and (ii) depository  receipts
(such as  American  Depository  Receipts)  where  the  underlying  or  deposited
securities are Asian Equity Securities.

                                       5


Currently,  the Fund invests  principally in developing or "emerging"  countries
(see  "Special  Risk  Factors --  Emerging  Markets"  below).  Some  examples of
emerging  countries in which the Fund may invest  without limit  include  China,
Indonesia, Korea, Malaysia,  Philippines,  Thailand and Taiwan. The Fund may, in
the  discretion  of the  Fund's  investment  manager,  invest  without  limit in
developed Asian countries such as Hong Kong, Japan and Singapore;  however,  the
Fund will only invest in Japan when economic conditions warrant and then only in
limited amounts.

In pursuing its objective, the Fund invests primarily in Asian Equity Securities
believed to have potential for capital growth.  However, there is no requirement
that the Fund invest exclusively in Asian Equity  Securities.  Subject to limits
described  above,  the Fund may invest in any other type of security  including,
but not limited to, equity securities of non-Asian  companies,  bonds, notes and
other debt securities of domestic or foreign companies (including Asian-currency
instruments and  securities) and obligations of domestic or foreign  governments
and their political subdivisions.  Currently, the Fund does not intend to invest
more  than 5% of its  net  assets  in  debt  securities  (except  for  temporary
defensive investments described below).

The  Fund  makes   investments   in  various  Asian   countries.   Under  normal
circumstances,  business  activities  in not  less  than  four  different  Asian
countries will be represented in the Fund's  portfolio.  The Fund may, from time
to time, have 40% or more of its assets  invested in any major Asian  industrial
or developed country which, in the view of the Fund's investment manager,  poses
no  unique  investment  risk.  Investments  may  include  securities  issued  by
enterprises that have undergone or are currently undergoing privatization.

In determining the appropriate  distribution of investments  among various Asian
countries and  geographic  regions,  the Fund's  investment  manager  ordinarily
considers  such factors as prospects  for relative  economic  growth among Asian
countries;  expected  levels of inflation;  relative price levels of the various
capital  markets;  government  policies  influencing  business  conditions;  the
outlook  for  currency  relationships  and the  range of  individual  investment
opportunities available to investors in Asian companies.

When the  investment  manager  deems it  appropriate  to  invest  for  temporary
defensive purposes,  such as during periods of adverse market conditions,  up to
100% of the Fund's assets may be invested in cash (including  foreign  currency)
or cash  equivalent  short-term  obligations,  either  rated as high  quality or
considered to be of comparable quality in the opinion of the investment manager,
including,  but not  limited to,  certificates  of  deposit,  commercial  paper,
short-term notes, obligations issued or guaranteed by the U.S. Government or any
of its agencies or instrumentalities, and repurchase agreements secured thereby.
In  particular,  for  temporary  defensive  purposes  the  Fund's  assets may be
invested without limitation in U.S. Dollar-denominated obligations to reduce the
risks inherent in non-U.S.
Dollar-denominated assets.

Generally,  the Fund will not trade in securities  for  short-term  profits but,
when circumstances warrant,  securities may be sold without regard to the length
of time held.

The Fund may purchase and write (sell)  options and engage in financial  futures
and foreign  currency  transactions and may lend its portfolio  securities.  See
"Additional Investment Information" below.

EUROPE FUND. The objective of the Europe Fund is long-term  capital growth.  The
Fund seeks to achieve its  objective  by investing  in a  diversified  portfolio
consisting  primarily  of equity  securities  of European  companies  ("European
Equity Securities"). European Equity Securities include common stocks, preferred
stocks,  securities  convertible  into or  exchangeable  for common or preferred
stocks,  equity  investments in partnerships,  joint ventures and other forms of
non-corporate  investments  and  warrants,  options and rights  exercisable  for
equity securities that are issued by European companies as defined below.

The Fund  considers an issuer of securities to be a European  company if: (i) it
is organized under the laws of a European  country and has a principal office in
a European  country;  (ii) it  derives  50% or more of its total  revenues  from
business in Europe; or (iii) its equity  securities are traded  principally on a
stock exchange in Europe.  Under normal  circumstances,  the Fund will invest at
least 85% of its total assets in European  Equity  Securities and will invest at
least 65% of its total assets in European  Equity  Securities of issuers meeting
at least one of the first two criteria described in the preceding sentence.  For
purposes of the foregoing  policies,  the Fund also  considers  European  Equity
Securities to include: (i) shares of closed-end management investment companies,
the assets of

                                       6


which are invested  primarily in European Equity  Securities and (ii) depository
receipts (such as American Depository Receipts and European Depository Receipts)
where the underlying or deposited securities are European Equity Securities.

The Fund invests principally in developed countries, but it may invest up to 25%
of its total assets in  developing or  "emerging"  countries  (see "Special Risk
Factors -- Emerging Markets" below). Currently, the developed European countries
in which the Fund may invest without limit include Austria, France, Germany, the
Netherlands,  Switzerland,  Spain, Italy, Luxembourg,  United Kingdom,  Ireland,
Belgium, Denmark, Sweden, Norway and Finland. The Fund may, in the discretion of
the Fund's investment manager,  invest without limit in other European countries
in the future if they  become  developed  countries.  Some  examples of emerging
European countries are Portugal,  Greece, Turkey,  Hungary, Poland and the Czech
Republic.

In pursuing  its  objective,  the Fund  invests  primarily  in  European  Equity
Securities believed to have potential for capital growth.  However,  there is no
requirement  that the Fund invest  exclusively  in European  Equity  Securities.
Subject  to limits  described  above,  the Fund may  invest in any other type of
security  including,  but not  limited to,  equity  securities  of  non-European
companies,  bonds,  notes and other  debt  securities  of  domestic  or  foreign
companies (including  Euro-currency  instruments and securities) and obligations
of domestic or foreign governments and their political subdivisions.  Currently,
the Fund  does not  intend  to  invest  more  than 5% of its net  assets in debt
securities  during the coming year (except for temporary  defensive  investments
described below).

The  Fund  makes  investments  in  various  European  countries.   Under  normal
circumstances,  business  activities  in not less than five  different  European
countries will be represented in the Fund's  portfolio.  The Fund may, from time
to  time,  have  25% or  more  of its  assets  invested  in any  major  European
industrial  or developed  country  which,  in the view of the Fund's  investment
manager,  poses no unique  investment risk.  Investments may include  securities
issued  by  enterprises   that  have  undergone  or  are  currently   undergoing
privatization.

In  determining  the  appropriate  distribution  of  investments  among  various
European  countries  and  geographic  regions,  the  Fund's  investment  manager
ordinarily  considers  such factors as prospects  for relative  economic  growth
among European countries; expected levels of inflation; relative price levels of
the  various  capital  markets;   government   policies   influencing   business
conditions;  the outlook for currency  relationships and the range of individual
investment opportunities available to investors in European companies.

When the  investment  manager  deems it  appropriate  to  invest  for  temporary
defensive purposes,  such as during periods of adverse market conditions,  up to
100% of the Fund's assets may be invested in cash (including  foreign  currency)
or cash  equivalent  short-term  obligations,  either  rated as high  quality or
considered to be of comparable quality in the opinion of the investment manager,
including,  but not  limited to,  certificates  of  deposit,  commercial  paper,
short-term notes, obligations issued or guaranteed by the U.S. Government or any
of its agencies or instrumentalities, and repurchase agreements secured thereby.
In  particular,  for  temporary  defensive  purposes  the  Fund's  assets may be
invested without limitation in U.S. Dollar-denominated obligations to reduce the
risks inherent in non-U.S. Dollar-denominated assets.

Generally,  the Fund will not trade in securities  for  short-term  profits but,
when circumstances warrant,  securities may be sold without regard to the length
of time held.

The Fund may purchase and write (sell)  options and engage in financial  futures
and foreign  currency  transactions and may lend its portfolio  securities.  See
"Additional Investment Information" below.

GLOBAL FUND.  The objective of the Global Fund is to provide high current income
consistent with prudent total return asset management. In seeking to achieve its
objective,  the Fund will  invest  primarily  in  investment  grade  foreign and
domestic fixed income securities.  In managing the Fund's portfolio to provide a
high level of current  income,  the  investment  manager will also be seeking to
protect net asset value and to provide  investors with a total return,  which is
measured by changes in net asset value as well as income earned.  In so managing
the Fund's portfolio in an effort to reduce volatility and increase returns, the
investment  manager  may, as is discussed  more fully  below,  adjust the Fund's
portfolio across various global markets,  maturity  ranges,  quality ratings and
issuers  based  upon its view of  interest  rates  and other  market  conditions
prevailing throughout the world.

                                       7


As a global fund, the Fund may invest in securities  issued by any issuer and in
any currency and may hold foreign currency. Under normal market conditions, as a
non-fundamental  policy,  at least 65% of the Fund's  assets will be invested in
the securities of issuers located in at least three countries,  one of which may
be the United  States.  Securities  of  issuers  within a given  country  may be
denominated in the currency of another  country,  or in  multinational  currency
units such as the  European  Currency  Unit  ("ECU").  Since the Fund invests in
foreign  securities,  the net  asset  value  of the  Fund  will be  affected  by
fluctuations in currency exchange rates. See "Special Risk Factors" below.

The Fund may seek to capitalize on investment opportunities presented throughout
the world and in international  financial  markets  influenced by the increasing
interdependence of economic cycles and currency exchange rates. Currently,  more
than  50%  of the  value  of the  world's  debt  securities  is  represented  by
securities  denominated in currencies other than the U.S. Dollar.  Over the past
ten years,  debt  securities  offered by certain  foreign  governments  provided
higher  investment  returns than U.S.  Government debt securities.  Such returns
reflect interest rates prevailing in those countries and the effect of gains and
losses in the  denominated  currencies,  which have had a substantial  impact on
investment  in foreign  fixed income  securities.  The relative  performance  of
various  countries'  fixed  income  markets   historically  has  reflected  wide
variations  relating to the unique  characteristics  of each country's  economy.
Year-to-year fluctuations in certain markets have been significant, and negative
returns  have  been  experienced  in  various  markets  from  time to time.  The
investment  manager  believes that investment in a global  portfolio can provide
investors with more  opportunities  for attractive  returns than investment in a
portfolio comprised  exclusively of U.S. debt securities.  Also, the flexibility
to invest in fixed  income  markets  around the world can reduce risk since,  as
noted above,  different world markets have often performed,  at a given time, in
radically different ways.

The  Fund  will  allocate  its  assets  among  securities  of  various  issuers,
geographic  regions,  and currency  denominations in a manner that is consistent
with its objective  based upon relative  interest  rates among  currencies,  the
outlook  for  changes  in these  interest  rates,  and  anticipated  changes  in
worldwide exchange rates. In considering these factors, a country's economic and
political  state,  including such factors as inflation rate,  growth  prospects,
global trade patterns and government policies, will be evaluated.

It is currently  anticipated that the Fund's assets will be invested principally
within  Australia,  Canada,  Japan,  New Zealand,  the United States and Western
Europe,  and in securities  denominated in the currencies of these  countries or
denominated in  multinational  currency units such as the ECU. The Fund may also
acquire  securities and currency in less  developed  countries and in developing
countries.

The Fund may invest in debt securities of supranational  entities denominated in
any currency. A supranational entity is an entity designated or supported by the
national governments of two or more countries to promote economic reconstruction
or development.  Examples of supranational  entities include,  among others, the
World Bank, the European  Investment  Bank and the Asian  Development  Bank. The
Fund may, in addition,  invest in debt  securities  denominated in the ECU of an
issuer in any country  (including  supranational  issuers).  The Fund is further
authorized  to  invest  in   "semi-governmental   securities,"  which  are  debt
securities  issued by entities  owned by either a national,  state or equivalent
government or are  obligations  of such a government  jurisdiction  that are not
backed by its full faith and credit and general taxing powers.

The Fund is  authorized  to invest in the  securities of any foreign or domestic
issuer.  Investments  by  the  Fund  in  fixed  income  securities  may  include
obligations  issued or  guaranteed  by  United  States  or  foreign  governments
(including foreign states,  provinces and  municipalities) or their agencies and
instrumentalities;  obligations issued or guaranteed by supranational  entities;
debt obligations of foreign and domestic corporations,  banks and other business
organizations;   and  other  foreign  and  domestic  debt   securities  such  as
convertible  securities  and preferred  stocks,  cash and cash  equivalents  and
repurchase  agreements.   Under  normal  market  conditions,   the  Fund,  as  a
non-fundamental  policy, will invest at least 65%, and may invest up to 100%, of
its total  assets in fixed  income  securities.  Some of the Fund's fixed income
securities  may be  convertible  into common  stock or be traded  together  with
warrants  for the  purchase  of  common  stock,  and the Fund may  convert  such
securities  into equities and hold them as equity upon  conversion.  Investments
may  include  securities  issued  by  enterprises  that  have  undergone  or are
currently undergoing privatization.

                                       8


The  securities  in  which  the  Fund  may  invest  will be  "investment  grade"
securities.  Investment grade securities are those rated at the time of purchase
within the four  highest  grades  assigned by Moody's  Investors  Service,  Inc.
("Moody's"),  Standard & Poor's  Corporation  ("S&P") or IBCA Limited (including
its affiliate IBCA,  Inc.)  ("IBCA");  or that are unrated but are of comparable
quality in the opinion of the  investment  manager.  Most  foreign  fixed income
securities  are unrated.  The  characteristics  of the  securities in the Fund's
portfolio,  such as the maturity and the type of issuer,  will affect yields and
yield  differentials,  which vary over time.  The actual  yield  realized by the
investor  is  subject,  among  other  things,  to the  Fund's  expenses  and the
investor's transaction costs.

When the  investment  manager  deems it  appropriate  to  invest  for  temporary
defensive purposes, such as during periods of adverse market conditions, or when
relative yields in other  securities are not deemed  attractive,  part or all of
the Fund's assets may be invested in cash (including  foreign  currency) or cash
equivalent short-term obligations, either rated as high quality or considered to
be of comparable  quality in the opinion of the investment  manager,  including,
but not limited to, certificates of deposit, commercial paper, short-term notes,
obligations  issued or guaranteed by the U.S.  Government or any of its agencies
or instrumentalities,  and repurchase agreements secured thereby. In particular,
for defensive  purposes a larger portion of the Fund's assets may be invested in
U.S. Dollar-denominated obligations to reduce the risks inherent in non-U.S.
Dollar-denominated assets.

The Fund will not normally  engage in the trading of securities  for the purpose
of realizing  short-term profits, but it will adjust its portfolio as considered
advisable in view of prevailing or anticipated  market conditions and the Fund's
investment  objective.  Accordingly,  the Fund may sell portfolio  securities in
anticipation  of a rise in interest rates and purchase  securities for inclusion
in its portfolio in anticipation of a decline in interest rates.

The Fund may purchase  and sell put options and enter into futures  contracts or
purchase options. The Fund may also utilize various other investment  strategies
through  the use of  derivatives  contracts.  See  "Strategic  Transactions  and
Derivatives."

INTERNATIONAL  FUND. The International  Fund seeks a total return, a combination
of capital growth and income, principally through an internationally diversified
portfolio of equity  securities.  Investments  may be made for capital growth or
for  income or any  combination  thereof  for the  purpose of  achieving  a high
overall return. There is no limitation on the percentage or amount of the Fund's
assets that may be invested in growth or income, and therefore at any particular
time the  investment  emphasis  may be placed  solely or  primarily on growth of
capital or on income. While the Fund invests principally in equity securities of
non-U.S.  issuers,  it may also invest in  convertible  and debt  securities and
foreign currencies.  The Fund invests primarily in non-U.S.  issuers,  and under
normal  circumstances  more than 80% of the Fund's total assets will be invested
in non-U.S.  issuers.  In  determining  whether  the Fund will be  invested  for
capital growth or income,  the  investment  manager  analyzes the  international
equity and fixed income markets and seeks to assess the degree of risk and level
of return that can be expected from each market. See "Special Risk Factors."

In pursuing  its  objective,  the Fund  invests  primarily  in common  stocks of
established  non-U.S.  companies  believed to have potential for capital growth,
income  or  both.  However,  there  is  no  requirement  that  the  Fund  invest
exclusively in common stocks or other equity securities.  The Fund may invest in
any other type of security including, but not limited to, convertible securities
(including  warrants),  preferred stocks, bonds, notes and other debt securities
of companies (including Euro-currency instruments and securities) or obligations
of domestic or foreign  governments and their political  subdivisions.  When the
investment  manager  believes that the total return potential in debt securities
equals or  exceeds  the  potential  return on  equity  securities,  the Fund may
substantially  increase  its  holdings  in such  debt  securities.  The Fund may
establish and maintain  reserves for defensive  purposes or to enable it to take
advantage  of buying  opportunities.  The Fund's  reserves  may be  invested  in
domestic as well as foreign short-term money market instruments  including,  but
not limited  to,  government  obligations,  certificates  of  deposit,  bankers'
acceptances,   time  deposits,   commercial  paper,  short-term  corporate  debt
securities and repurchase agreements.

The Fund makes  investments in various  countries.  Under normal  circumstances,
business  activities in not less than three different  foreign countries will be
represented in the Fund's portfolio.  The Fund may, from time to time, have more
than 25% of its assets  invested in any major  industrial  or developed  country
which in the view of the investment manager poses no unique investment risk. The
Fund may purchase securities of companies,  wherever organized,  that have their
principal  activities and interests  outside the United States.  Investments may
include  securities  issued by enterprises  that have undergone or are currently
undergoing  privatization.  Under  exceptional

                                       9


economic or market  conditions  abroad,  the Fund may, for  defensive  purposes,
invest all or a major portion of its assets in U.S.  Government  obligations  or
securities of companies incorporated in and having their principal activities in
the United States. The Fund may also invest its reserves in domestic  short-term
money-market instruments as described above.

In  determining  the  appropriate  distribution  of  investments  among  various
countries and geographic  regions,  the investment manager ordinarily  considers
such factors as prospects for relative economic growth among foreign  countries;
expected  levels of  inflation;  relative  price  levels of the various  capital
markets;  government policies influencing  business conditions;  the outlook for
currency  relationships  and the range of  individual  investment  opportunities
available to the international investor.

Generally,  the Fund will not trade in securities  for  short-term  profits but,
when circumstances warrant,  securities may be sold without regard to the length
of time held.

The Fund may purchase  and sell put options and enter into futures  contracts or
purchase options. The Fund may also utilize various other investment  strategies
through  the use of  derivatives  contracts.  See  "Strategic  Transactions  and
Derivatives."

SPECIAL RISK  FACTORS.  There are risks  inherent in investing in any  security,
including  shares of each Fund. The investment  manager  attempts to reduce risk
through fundamental research;  however,  there is no guarantee that such efforts
will be successful  and each Fund's  returns and net asset value will  fluctuate
over time. There are special risks associated with each Fund's  investments that
are discussed below.

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 U.S.  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  upon  the  exchange  rate at the time of  disbursement  or  payment,  and
restrictions  on capital flows may be imposed.  Losses and other expenses may be
incurred in converting  between various  currencies in connection with purchases
and sales of foreign securities.

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 such 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.
With  respect  to  certain  foreign   countries,   there  is  a  possibility  of
expropriation or diplomatic  developments  that could affect investment in these
countries.

Because the Asian Fund  concentrates  its  investments in Asian  companies,  the
performance  of the  Asian  Fund is  closely  tied  to  economic  and  political
conditions within Asia. The current  economies and political  structures of many
of the countries the Asian Fund may invest in do not compare  favorably with the
United States or other mature  economies in terms of wealth and stability.  As a
result,  such  investments  will be subject to more risk and  erratic and abrupt
price movements; particularly in the emerging Asian countries.  Concentration of
the Asian  Fund's  investments  in Asian  companies  presents  greater risk than
investment in a more diversified portfolio of foreign securities.

Because the Europe Fund concentrates its investments in European companies,  the
performance  of the  Europe  Fund is  closely  tied to  economic  and  political
conditions within Europe. Some European countries, particularly those in Eastern
Europe, have less stable economies than those in Western Europe. The movement of
many Eastern European  countries toward market economies and the movement toward
a unified common market may significantly affect European economies and markets.
Economic  growth  transformation  and  renewal  are  currently  taking  place in
different areas and different ways including:  a trend toward privatizations and
corporate restructurings,  deregulation and modernization of securities markets;
reduction in trade barriers and currency restrictions; global expansion by major
European  companies of both exports and production;  steps toward the broadening
of the  European

                                       10


Community;  economic reform and modernization of the former communist  countries
of Eastern Europe;  expected further growth of an already large middle class and
a  general  increase  in  consumer   spending;   and  anticipated  labor  market
restructuring.  There can be no  assurance,  of course,  that  these  trends and
conditions will continue or that anticipated economic benefits will be realized.
Concentration of the Europe Fund's investments in European companies may present
greater  risk  than  investment  in a  more  diversified  portfolio  of  foreign
securities.

EMERGING MARKETS.  While the Europe, Global and International Funds' investments
in foreign  securities will principally be in developed  countries,  a Fund may,
and in the  case  of the  Asian  Fund  will  principally,  invest  in  countries
considered  by the Fund's  investment  manager to be  developing  or  "emerging"
markets.  The  Europe  Fund may  invest  up to 25% of its  total  assets in such
countries and, while no specific limits apply, it is currently  anticipated that
less than 25% of the total assets for each of the Global and International Funds
will be invested in such  countries.  Developing  or  emerging  markets  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  country 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 a 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,  a 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.

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 a 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 a Fund due to  subsequent  declines  in value of the
portfolio  security  or,  if a 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 a Fund to the  risk of  losses  resulting  from a Fund's
inability to recover from a counterparty.

                                       11


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 a Fund's  portfolio  securities in such
markets  may not be readily  available.  A Fund's  portfolio  securities  in the
affected  markets  will be valued at fair value  determined  in good faith by or
under the direction of its 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 costs
and expenses of a 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.

FIXED INCOME.  Since most foreign fixed income  securities are not rated, a Fund
will  invest in  foreign  fixed  income  securities  based  upon the  investment
manager's analysis without relying on published ratings.  Since such investments
will be based upon the investment  manager's analysis rather than upon published
ratings, achievement of a Fund's goals may depend more upon the abilities of the
investment manager than would otherwise be the case.

The value of the fixed income  securities held by a Fund, and thus the net asset
value of the Fund's  shares,  generally  will  fluctuate with (a) changes in the
perceived  creditworthiness of the issuers of those securities, (b) movements in
interest  rates,  and (c) changes in the relative  values of the  currencies  in
which a Fund's  investments  in fixed income  securities  are  denominated  with
respect to the U.S. Dollar. The extent of the fluctuation will depend on various
factors,  such as the average maturity of a Fund's  investments in foreign fixed
income  securities,  and the extent to which a Fund  hedges its  interest  rate,
credit and  currency  exchange  rate  risks.  Many of the foreign  fixed  income
obligations  in which a Fund will  invest  will have long  maturities.  A longer
average  maturity  generally is associated  with a higher level of volatility in
the market value of such securities in response to changes in market conditions.

Investments in sovereign  debt,  including  Brady Bonds,  involve special risks.
Brady Bonds are debt securities  issued under a plan implemented to allow debtor
nations to restructure their outstanding  commercial bank indebtedness.  Foreign
governmental  issuers of debt or the  governmental  authorities that control the
repayment  of the debt may be  unable or  unwilling  to repay  principal  or pay
interest  when due.  In the event of  default,  there may be limited or no legal
recourse in that, generally, remedies for defaults must be pursued in the courts
of the defaulting party.  Political conditions,  especially a sovereign entity's
willingness  to  meet  the  terms  of  its  fixed  income  securities,   are  of
considerable  significance.  Also, there can be no assurance that the holders of
commercial bank loans to the same sovereign  entity may not contest  payments to
the holders of sovereign debt in the event of default under commercial bank loan
agreements.  In  addition,  there is no  bankruptcy  proceeding  with respect to
sovereign debt on which a sovereign has  defaulted,  and a Fund may be unable to
collect all or any part of its investment in a particular issue.

Foreign  investment  in certain  sovereign  debt is  restricted or controlled to
varying degrees,  including requiring governmental approval for the repatriation
of income, capital or proceed of sales by foreign investors.  These restrictions
or  controls  may at times  limit or  preclude  foreign  investment  in  certain
sovereign  debt or  increase  the costs and  expenses of a Fund.  A  significant
portion  of the  sovereign  debt in which a Fund may invest is issued as part of
debt  restructuring  and such debt is to be considered  speculative.  There is a
history of defaults with respect to commercial  bank loans by public and private
entities issuing Brady Bonds.  All or a portion of the interest  payments and/or
principal repayment with respect to Brady Bonds may be uncollateralized.

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.  A  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 a 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

                                       12


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 a 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  or  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 a 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 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.  Each Fund may invest in securities of foreign  issuers in
the form of American Depository Receipts ("ADRs").  For many foreign securities,
there are U.S. Dollar  denominated ADRs, which are bought and sold in the United
States and are 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, such as changes in foreign currency exchange rates. However,
by  investing in ADRs rather than  directly in foreign  issuers'  stock,  a Fund
avoids  currency  risks during the  settlement  period.  In general,  there is a
large,  liquid  market in the United  States  for most ADRs.  The Funds may also
invest  in  securities  of  foreign  issuers  in the form of  Global  Depository
Receipts  ("GDRs"),  and European  Depository  Receipts ("EDRs") for the Europe,
Global and  International  Funds,  which are receipts  evidencing an arrangement
with a bank, similar to that for ADRs, and are designed for use in other foreign
securities  markets.  EDRs  and  GDRs  are not  necessarily  denominated  in the
currency of the underlying security.

INVESTMENT COMPANY SECURITIES Each Fund, with the exception of the Kemper Global
Income Fund, may acquire securities of other investment  companies to the extent
consistent  with its investment  objective and subject to the limitations of the
1940  Act.  Each  Fund  will  indirectly  bear  its  proportionate  share of any
management fees and other expenses paid by such other investment companies.

For example,  a Fund may invest in a variety of investment  companies which seek
to track the  composition  and  performance  of  specific  indexes or a specific
portion of an index.  These  index-based  investments hold  substantially all of
their assets in securities representing their specific index.  Accordingly,  the
main risk of investing in index-based  investments is the same as investing in a
portfolio  of equity  securities  comprising  the index.  The  market  prices of
index-based  investments  will fluctuate in accordance  with both changes in the
market  value of their  underlying  portfolio  securities  and due to supply and
demand for the  instruments on the exchanges on which they are traded (which may
result in their  trading at a discount  or premium to their  NAVs).  Index-based
investments  may not replicate  exactly the performance of their specified index
because of  transaction  costs and because of the  temporary  unavailability  of
certain component securities of the index.

Examples of index-based investments include:

SPDRs(R):  SPDRs,  an acronym for "Standard & Poor's  Depositary  Receipts," are
based on the S&P 500  Composite  Stock Price Index.  They are issued by the SPDR
Trust,  a unit  investment  trust that  holds  shares of  substantially  all the
companies  in the S&P 500 in  substantially  the  same  weighting  and  seeks to
closely track the price performance and dividend yield of the Index.

                                       13


MidCap  SPDRs(R):  MidCap SPDRs are based on the S&P MidCap 400 Index.  They are
issued by the MidCap SPDR Trust, a unit investment  trust that holds a portfolio
of securities  consisting of  substantially  all of the common stocks in the S&P
MidCap 400 Index in substantially  the same weighting and seeks to closely track
the price performance and dividend yield of the Index.

Select Sector SPDRs(R):  Select Sector SPDRs are based on a particular sector or
group of  industries  that are  represented  by a specified  Select Sector Index
within the Standard & Poor's Composite Stock Price Index. They are issued by The
Select Sector SPDR Trust, an open-end  management  investment  company with nine
portfolios  that each seeks to closely track the price  performance and dividend
yield of a particular Select Sector Index.

DIAMONDS(SM):  DIAMONDS are based on the Dow Jones Industrial Average(SM).  They
are issued by the DIAMONDS Trust, a unit investment trust that holds a portfolio
of all the component common stocks of the Dow Jones Industrial Average and seeks
to closely track the price performance and dividend yield of the Dow.

Nasdaq-100 Shares: Nasdaq-100 Shares are based on the Nasdaq 100 Index. They are
issued by the Nasdaq-100  Trust, a unit investment  trust that holds a portfolio
consisting of substantially  all of the securities,  in  substantially  the same
weighting,  as the component stocks of the Nasdaq-100 Index and seeks to closely
track the price performance and dividend yield of the Index.

WEBs(SM):  WEBs, an acronym for "World Equity Benchmark Shares," are based on 17
country-specific  Morgan Stanley Capital International  Indexes. They are issued
by the WEBs Index Fund,  Inc., an open-end  management  investment  company that
seeks to generally  correspond to the price and yield  performance of a specific
Morgan Stanley Capital International Index.


ADDITIONAL INVESTMENT  INFORMATION.  The Funds will have increased opportunities
to adjust their  portfolios  across  various  markets and may  experience a high
portfolio  turnover rate (over 100%),  which  involves  correspondingly  greater
brokerage  commissions or other transaction costs. Higher portfolio turnover may
result  in  the  realization  of  greater  net  short-term  capital  gains.  See
"Dividends and Taxes" below.

The Global Fund has registered as a "non-diversified" investment company so that
it will be able to invest  more than 5% of its assets in the  obligations  of an
issuer,  subject to the  diversification  requirements  of  Subchapter  M of the
Internal Revenue Code applicable to the Fund. This allows the Global Fund, as to
50% of its assets, to invest more than 5% of its assets,  but not more than 25%,
in the fixed income securities of an individual  foreign government or corporate
issuer. Currently, the Fund does not intend to invest more than 5% of its assets
in any individual  corporate issuer. Since the Fund may invest a relatively high
percentage of its assets in the obligations of a limited number of issuers,  the
Fund may be more  susceptible  to any single  economic,  political or regulatory
occurrence than a diversified investment company.

As noted above,  the Global Fund may invest in securities  that are rated within
the  four  highest  grades  by S&P,  Moody's  or IBCA  or,  if  unrated,  are of
comparable  quality as determined by the investment  manager.  Securities  rated
within  the four  highest  grades are  generally  considered  to be  "investment
grade." Like higher rated  securities,  securities rated in the fourth grade are
considered  to have adequate  capacity to pay  principal and interest,  although
they may have fewer protective  provisions than higher rated securities and thus
may be adversely affected by severe economic circumstances and are considered to
have speculative  characteristics.  The characteristics of the rating categories
are described in the "Appendix -- Ratings of Investments."

Since interest rates vary with changes in economic,  market, political and other
conditions, there can be no assurance that past interest rates are indicative of
future rates.  The values of fixed income  securities in a Fund's portfolio will
fluctuate depending upon market factors and inversely with current interest rate
levels.

The Global Fund may take full  advantage  of the entire range of  maturities  of
fixed income  securities  and may adjust the average  maturity of its  portfolio
from  time to  time,  depending  upon  its  assessment  of  relative  yields  on
securities of different  maturities  and its  expectations  of future changes in
interest  rates.  Thus,  the  average  maturity of the Fund's  portfolio  may be
relatively  short (under five years,  for example) at some times and  relatively
long (over 10

                                       14


years,  for  example)  at  other  times.  Generally,  since  shorter  term  debt
securities  tend to be  more  stable  than  longer  term  debt  securities,  the
portfolio's average maturity will be shorter when interest rates are expected to
rise and longer when interest rates are expected to fall.  Since in most foreign
markets debt  securities  generally  are issued with  maturities of ten years or
less,  it is  currently  anticipated  that the  average  maturity  of the Fund's
portfolio will normally be in the intermediate range (three to ten years).

A Fund will not purchase illiquid securities,  including  repurchase  agreements
maturing in more than seven days, if, as a result thereof,  more than 15% of the
Fund's net assets  valued at the time of the  transaction  would be  invested in
such  securities.  If the Fund  holds a  material  percentage  of its  assets in
illiquid securities,  there may be a question concerning the ability of the Fund
to make  payment  within  seven  days of the date its shares  are  tendered  for
redemption. SEC guidelines provide that the usual limit on aggregate holdings by
an open-end  investment company of illiquid assets is 15% of its net assets. See
"Investment   Policies  and  Techniques  --  Over-the-Counter   Options"  for  a
description  of the extent to which  over-  the-counter  traded  options  are in
effect  considered  as illiquid  for  purposes of each Fund's  limit on illiquid
securities. A 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 Funds. Such
securities  may be  illiquid  and  subject to a 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.

Each Fund has adopted certain  fundamental  investment  restrictions,  which are
presented  above and that,  together with any policies of the Fund  specifically
designated in this statement of additional information 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 ("1940  Act"),  this
means the lesser of the vote of (a) 67% of the  shares of the Fund  present at a
meeting where more than 50% of the  outstanding  shares are present in person or
by proxy; or (b) more than 50% of the outstanding  shares of the Fund.  Policies
of a 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 applicable Fund without shareholder approval.

REPURCHASE  AGREEMENTS.  A 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.  Each 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. Each of the Asian, Europe and Global Funds may make
short sales  against-the-box  for the purpose of, but not limited to,  deferring
realization of loss when deemed advantageous 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.

                                       15


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.

LENDING  OF  PORTFOLIO   SECURITIES.   Consistent  with  applicable   regulatory
requirements,  each of the Asian, Europe and Global Funds 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. A Fund will receive amounts equal to dividends
or interest on the securities  loaned.  It also will 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
standing, and when the Fund's investment manager believes the potential earnings
justify the attendant risk.  Management will limit such lending to not more than
one-third of the value of a Fund's total assets.


STRATEGIC  TRANSACTIONS AND DERIVATIVES.  Each Fund may, but is not required to,
utilize various other investment  strategies as described below to hedge various
market risks (such as interest  rates,  currency  exchange  rates,  and broad or
specific  equity or  fixed-income  market  movements),  to manage the  effective
maturity or duration of fixed-income  securities in each Fund's portfolio, or to
enhance  potential  gain.  These  strategies may be executed  through the use of
derivative contracts. Such strategies are generally accepted as a part of modern
portfolio  management and are regularly  utilized by many mutual funds and other
institutional investors.  Techniques and instruments may change over time as new
instruments and strategies are developed or regulatory changes occur.

         In the course of pursuing these  investment  strategies,  each Fund may
purchase and sell  exchange-listed and  over-the-counter put and call options on
securities,  equity and  fixed-income  indices and other financial  instruments,
purchase and sell financial  futures  contracts and options thereon,  enter into
various interest rate transactions such as swaps,  caps, floors or collars,  and
enter into various currency  transactions  such as currency  forward  contracts,
currency futures contracts,  currency swaps or options on currencies or currency
futures  (collectively,  all the above  are  called  "Strategic  Transactions").
Strategic  Transactions  may be used without limit to attempt to protect against
possible  changes in the market value of  securities  held in or to be purchased
for each Fund's portfolio resulting from securities markets or currency exchange
rate  fluctuations,  to protect each Fund's unrealized gains in the value of its
portfolio  securities,  to facilitate the sale of such securities for investment
purposes,   to  manage  the  effective  maturity  or  duration  of  fixed-income
securities  in  each  Fund's  portfolio,  or to  establish  a  position  in  the
derivatives  markets  as  a  temporary  substitute  for  purchasing  or  selling
particular  securities.  Some Strategic Transactions may also be used to enhance
potential  gain although no more than 5% of each Fund's assets will be committed
to Strategic  Transactions entered into for non-hedging purposes.  Any or all of
these investment techniques may be used at any time and in any combination,  and
there is no particular  strategy  that dictates the use of one technique  rather
than  another,  as use of any  Strategic  Transaction  is a function of numerous
variables including market conditions. The ability of each Fund to utilize these
Strategic  Transactions  successfully  will depend on the  Adviser's  ability to
predict  pertinent  market  movements,  which cannot be assured.  Each Fund will
comply  with  applicable   regulatory   requirements  when  implementing   these
strategies,   techniques  and  instruments.   Strategic  Transactions  involving
financial  futures and options  thereon will be purchased,  sold or entered into
only for bona fide hedging, risk management or portfolio management purposes and
not for speculative purposes.

         Strategic  Transactions,  including  derivative  contracts,  have risks
associated  with them  including  possible  default  by the  other  party to the
transaction,  illiquidity  and, to the extent the  Adviser's  view as to certain
market  movements  is  incorrect,  the  risk  that  the  use of  such  Strategic
Transactions  could result in losses greater than if they had not been used. Use
of put and call  options  may result in losses to each  Fund,  force the sale or
purchase of portfolio  securities at inopportune times or for prices higher than
(in the case of put options) or lower than (in the case of call options) current
market  values,  limit the amount of  appreciation  each Fund can realize on its
investments or cause each Fund to hold a security it might  otherwise  sell. The
use of  currency  transactions  can  result in each Fund  incurring  losses as a
result of a number of factors  including the  imposition  of exchange  controls,
suspension  of  settlements,  or the inability to deliver or receive a specified
currency.  The use of options and futures  transactions  entails  certain  other
risks. In particular, the variable degree of correlation between price movements
of futures

                                       16


contracts  and price  movements in the related  portfolio  position of each Fund
creates the  possibility  that losses on the hedging  instrument  may be greater
than  gains in the value of each  Fund's  position.  In  addition,  futures  and
options   markets   may  not  be  liquid  in  all   circumstances   and  certain
over-the-counter  options may have no markets.  As a result, in certain markets,
each  Fund  might  not be able to  close  out a  transaction  without  incurring
substantial  losses,  if at  all.  Although  the  use  of  futures  and  options
transactions  for  hedging  should  tend to  minimize  the risk of loss due to a
decline in the value of the hedged position, at the same time they tend to limit
any  potential  gain  which  might  result  from an  increase  in  value of such
position. Finally, the daily variation margin requirements for futures contracts
would create a greater ongoing potential  financial risk than would purchases of
options,  where the  exposure  is  limited to the cost of the  initial  premium.
Losses resulting from the use of Strategic  Transactions  would reduce net asset
value, and possibly income, and such losses can be greater than if the Strategic
Transactions had not been utilized.

General  Characteristics of Options. Put options and call options typically have
similar structural  characteristics and operational  mechanics regardless of the
underlying  instrument on which they are purchased or sold.  Thus, the following
general  discussion relates to each of the particular types of options discussed
in greater  detail below.  In addition,  many Strategic  Transactions  involving
options  require  segregation of Fund assets in special  accounts,  as described
below under "Use of Segregated and Other Special Accounts."

         A put option  gives the  purchaser  of the  option,  upon  payment of a
premium, the right to sell, and the writer the obligation to buy, the underlying
security,  commodity, index, currency or other instrument at the exercise price.
For  instance,  each  Fund's  purchase  of a put option on a  security  might be
designed  to protect  its  holdings in the  underlying  instrument  (or, in some
cases, a similar  instrument)  against a substantial decline in the market value
by giving  each Fund the right to sell such  instrument  at the option  exercise
price.  A call  option,  upon payment of a premium,  gives the  purchaser of the
option the right to buy, and the seller the  obligation to sell,  the underlying
instrument  at the exercise  price.  Each Fund's  purchase of a call option on a
security,  financial  future,  index,  currency  or  other  instrument  might be
intended to protect each Fund against an increase in the price of the underlying
instrument  that it  intends  to  purchase  in the future by fixing the price at
which it may purchase such instrument.  An American style put or call option may
be exercised at any time during the option period while a European  style put or
call option may be exercised only upon expiration or during a fixed period prior
thereto.  Each Fund is authorized to purchase and sell exchange  listed  options
and over-the-counter options ("OTC options"). Exchange listed options are issued
by a regulated  intermediary such as the Options Clearing  Corporation  ("OCC"),
which  guarantees  the  performance  of the  obligations  of the parties to such
options. The discussion below uses the OCC as an example, but is also applicable
to other financial intermediaries.

         With  certain  exceptions,  OCC  issued  and  exchange  listed  options
generally  settle by physical  delivery of the underlying  security or currency,
although in the future cash settlement may become  available.  Index options and
Eurodollar instruments are cash settled for the net amount, if any, by which the
option is  "in-the-money"  (i.e.,  where the value of the underlying  instrument
exceeds,  in the case of a call  option,  or is less than,  in the case of a put
option,  the exercise  price of the option) at the time the option is exercised.
Frequently,  rather than taking or making delivery of the underlying  instrument
through  the process of  exercising  the  option,  listed  options are closed by
entering into  offsetting  purchase or sale  transactions  that do not result in
ownership of the new option.

         Each Fund's  ability to close out its position as a purchaser or seller
of an OCC or exchange listed put or call option is dependent,  in part, upon the
liquidity of the option market.  Among the possible reasons for the absence of a
liquid option market on an exchange are: (i)  insufficient  trading  interest in
certain options; (ii) restrictions on transactions imposed by an exchange; (iii)
trading  halts,  suspensions  or other  restrictions  imposed  with  respect  to
particular  classes  or series of  options or  underlying  securities  including
reaching daily price limits;  (iv)  interruption of the normal operations of the
OCC or an exchange;  (v)  inadequacy of the  facilities of an exchange or OCC to
handle current  trading  volume;  or (vi) a decision by one or more exchanges to
discontinue the trading of options (or a particular class or series of options),
in which event the relevant  market for that option on that exchange would cease
to exist, although outstanding options on that exchange would generally continue
to be exercisable in accordance with their terms.

         The hours of trading for listed options may not coincide with the hours
during which the underlying financial instruments are traded. To the extent that
the  option  markets  close  before the  markets  for the  underlying

                                       17


financial  instruments,  significant  price and rate movements can take place in
the underlying markets that cannot be reflected in the option markets.

         OTC options are purchased from or sold to securities dealers, financial
institutions  or  other  parties  ("Counterparties")  through  direct  bilateral
agreement with the Counterparty.  In contrast to exchange listed options,  which
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement,  term, exercise price,
premium,  guarantees and security,  are set by negotiation of the parties.  Each
Fund will only sell OTC  options  (other  than OTC  currency  options)  that are
subject to a buy-back provision permitting each Fund to require the Counterparty
to sell the option back to each Fund at a formula price within seven days.  Each
Fund  expects  generally  to enter into OTC  options  that have cash  settlement
provisions, although it is not required to do so.

         Unless the  parties  provide  for it,  there is no central  clearing or
guaranty function in an OTC option.  As a result,  if the Counterparty  fails to
make or take delivery of the security,  currency or other instrument  underlying
an OTC  option  it has  entered  into  with  each  Fund or  fails to make a cash
settlement  payment due in accordance  with the terms of that option,  each Fund
will lose any premium it paid for the option as well as any anticipated  benefit
of the transaction. Accordingly, the Adviser must assess the creditworthiness of
each  such   Counterparty  or  any  guarantor  or  credit   enhancement  of  the
Counterparty's  credit to  determine  the  likelihood  that the terms of the OTC
option will be satisfied.  Each Fund will engage in OTC option transactions only
with U.S.  government  securities dealers recognized by the Federal Reserve Bank
of New York as "primary dealers" or broker/dealers, domestic or foreign banks or
other  financial  institutions  which have  received (or the  guarantors  of the
obligation  of which  have  received)  a  short-term  credit  rating of A-1 from
Standard & Poor's ("S&P") or P-1 from Moody's Investors  Service  ("Moody's") or
an  equivalent  rating  from  any  nationally   recognized   statistical  rating
organization  ("NRSRO")  or,  in the  case  of OTC  currency  transactions,  are
determined to be of equivalent  credit quality by the Adviser.  The staff of the
SEC currently  takes the position that OTC options  purchased by each Fund,  and
portfolio securities "covering" the amount of each Fund's obligation pursuant to
an OTC  option  sold by it (the  cost of the  sell-back  plus  the  in-the-money
amount,  if any) are  illiquid,  and are  subject to each Fund's  limitation  on
investing no more than 10% of its assets in illiquid securities.

         If each Fund sells a call  option,  the premium  that it  receives  may
serve as a  partial  hedge,  to the  extent  of the  option  premium,  against a
decrease  in the  value  of the  underlying  securities  or  instruments  in its
portfolio or will increase each Fund's income.  The sale of put options can also
provide income.

         Each Fund may purchase and sell call  options on  securities  including
U.S. Treasury and agency securities,  mortgage-backed securities, corporate debt
securities,  equity securities (including convertible securities) and Eurodollar
instruments that are traded on U.S. and foreign securities  exchanges and in the
over-the-counter  markets,  and on securities  indices,  currencies  and futures
contracts.  All calls sold by each Fund must be "covered" (i.e.,  each Fund must
own the  securities  or futures  contract  subject to the call) or must meet the
asset  segregation   requirements  described  below  as  long  as  the  call  is
outstanding.  Even  though  each Fund will  receive  the option  premium to help
protect it against  loss,  a call sold by each Fund exposes each Fund during the
term of the option to possible loss of  opportunity to realize  appreciation  in
the market price of the  underlying  security or instrument and may require each
Fund to hold a security or instrument which it might otherwise have sold.

         Each Fund may  purchase  and sell put options on  securities  including
U.S.  Treasury  and  agency  securities,   mortgage-backed  securities,  foreign
sovereign  debt,  corporate  debt  securities,   equity  securities   (including
convertible  securities) and Eurodollar instruments (whether or not it holds the
above securities in its portfolio),  and on securities  indices,  currencies and
futures contracts other than futures on individual corporate debt and individual
equity  securities.  Each Fund will not sell put options  if, as a result,  more
than 50% of each Fund's  assets would be required to be  segregated to cover its
potential  obligations  under such put options  other than those with respect to
futures and options thereon.  In selling put options,  there is a risk that each
Fund may be required to buy the underlying  security at a disadvantageous  price
above the market price.

General  Characteristics of Futures.  Each Fund may enter into financial futures
contracts  or purchase or sell put and call  options on such  futures as a hedge
against  anticipated  interest  rate,  currency or equity  market  changes,  for
duration  management  and for risk  management  purposes.  Futures are generally
bought and sold on the commodities  exchanges where they are listed with payment
of  initial  and  variation  margin as  described  below.  The sale of a

                                       18


futures contract  creates a firm obligation by each Fund, as seller,  to deliver
to the  buyer  the  specific  type of  financial  instrument  called  for in the
contract at a specific  future time for a specified  price (or,  with respect to
index  futures and  Eurodollar  instruments,  the net cash  amount).  Options on
futures  contracts are similar to options on securities except that 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 and  obligates the seller to deliver
such position.

         Each Fund's use of  financial  futures and options  thereon will in all
cases be consistent with applicable  regulatory  requirements  and in particular
the rules and regulations of the Commodity  Futures Trading  Commission and will
be entered into only for bona fide hedging,  risk management (including duration
management) or other portfolio  management  purposes.  Typically,  maintaining a
futures contract or selling an option thereon requires each Fund to deposit with
a financial  intermediary  as security for its  obligations an amount of cash or
other specified  assets (initial  margin) which initially is typically 1% to 10%
of the face amount of the  contract  (but may be higher in some  circumstances).
Additional  cash or assets  (variation  margin) may be required to be  deposited
thereafter  on a  daily  basis  as the  mark to  market  value  of the  contract
fluctuates. The purchase of an option on financial futures involves payment of a
premium for the option without any further  obligation on the part of each Fund.
If each Fund  exercises an option on a futures  contract it will be obligated to
post  initial  margin  (and  potential  subsequent  variation  margin)  for  the
resulting futures position just as it would for any position.  Futures contracts
and  options  thereon  are  generally  settled by  entering  into an  offsetting
transaction  but there can be no assurance that the position can be offset prior
to settlement at an advantageous price, nor that delivery will occur.

         Each Fund will not enter  into a futures  contract  or  related  option
(except for closing  transactions) if,  immediately  thereafter,  the sum of the
amount of its initial margin and premiums on open futures  contracts and options
thereon  would exceed 5% of each Fund's total assets  (taken at current  value);
however,  in the  case of an  option  that is  in-the-money  at the  time of the
purchase,  the  in-the-money  amount  may  be  excluded  in  calculating  the 5%
limitation.  The segregation  requirements with respect to futures contracts and
options thereon are described below.

Options on Securities  Indices and Other Financial  Indices.  Each Fund also may
purchase and sell call and put options on securities indices and other financial
indices and in so doing can achieve many of the same objectives it would achieve
through  the sale or  purchase  of options  on  individual  securities  or other
instruments.  Options on  securities  indices  and other  financial  indices are
similar to options on a security or other  instrument  except that,  rather than
settling by physical delivery of the underlying instrument,  they settle by cash
settlement,  i.e.,  an option on an index gives the holder the right to receive,
upon exercise of the option, an amount of cash if the closing level of the index
upon which the option is based exceeds,  in the case of a call, or is less than,
in the case of a put, the exercise  price of the option  (except if, in the case
of an OTC option, physical delivery is specified).  This amount of cash is equal
to the excess of the closing  price of the index over the exercise  price of the
option,  which  also may be  multiplied  by a formula  value.  The seller of the
option is  obligated,  in return for the premium  received,  to make delivery of
this  amount.  The  gain or loss on an  option  on an  index  depends  on  price
movements in the instruments making up the market,  market segment,  industry or
other  composite  on which the  underlying  index is based,  rather  than  price
movements in  individual  securities,  as is the case with respect to options on
securities.

Currency  Transactions.  Each Fund may  engage  in  currency  transactions  with
Counterparties in order to hedge the value of portfolio holdings  denominated in
particular   currencies  against   fluctuations  in  relative  value.   Currency
transactions  include  forward  currency  contracts,  exchange  listed  currency
futures,  exchange  listed and OTC options on currencies,  and currency swaps. A
forward currency contract involves a privately negotiated obligation to purchase
or sell (with delivery generally required) a specific currency at a future date,
which may be any fixed number of days from the date of the contract  agreed upon
by the parties,  at a price set at the time of the contract.  A currency swap is
an agreement to exchange cash flows based on the notional  difference  among two
or more  currencies  and operates  similarly to an interest rate swap,  which is
described  below.   Each  Fund  may  enter  into  currency   transactions   with
Counterparties  which have received (or the guarantors of the obligations  which
have received) a credit rating of A-1 or P-1 by S&P or Moody's, respectively, or
that  have  an  equivalent  rating  from  a  NRSRO  or are  determined  to be of
equivalent credit quality by the Adviser.

         Each Fund's dealings in forward  currency  contracts and other currency
transactions  such as  futures,  options,  options on futures  and swaps will be
limited  to  hedging   involving  either  specific   transactions  or  portfolio
positions.  Transaction  hedging is entering  into a currency  transaction  with
respect to specific  assets or  liabilities  of

                                       19


each Fund, which will generally arise in connection with the purchase or sale of
its portfolio securities or the receipt of income therefrom. Position hedging is
entering  into  a  currency  transaction  with  respect  to  portfolio  security
positions denominated or generally quoted in that currency.

         Each Fund will not enter into a transaction to hedge currency  exposure
to an  extent  greater,  after  netting  all  transactions  intended  wholly  or
partially to offset other transactions,  than the aggregate market value (at the
time of entering into the  transaction)  of the securities held in its portfolio
that are denominated or generally  quoted in or currently  convertible into such
currency, other than with respect to proxy hedging or cross hedging as described
below.

         Each Fund may also cross-hedge currencies by entering into transactions
to purchase or sell one or more currencies that are expected to decline in value
relative  to other  currencies  to which  each  Fund has or in which  each  Fund
expects to have portfolio exposure.

         To reduce the effect of currency  fluctuations on the value of existing
or anticipated  holdings of portfolio  securities,  each Fund may also engage in
proxy  hedging.  Proxy  hedging  is often used when the  currency  to which each
Fund's  portfolio  is  exposed is  difficult  to hedge or to hedge  against  the
dollar.  Proxy  hedging  entails  entering into a commitment or option to sell a
currency  whose changes in value are generally  considered to be correlated to a
currency or currencies in which some or all of each Fund's portfolio  securities
are or are expected to be denominated,  in exchange for U.S. dollars. The amount
of the commitment or option would not exceed the value of each Fund's securities
denominated in correlated currencies. For example, if the Adviser considers that
the Austrian schilling is correlated to the German  deutschemark (the "D-mark"),
each Fund holds  securities  denominated in schillings and the Adviser  believes
that the value of schillings will decline against the U.S.  dollar,  the Adviser
may enter into a commitment or option to sell D-marks and buy dollars.  Currency
hedging involves some of the same risks and considerations as other transactions
with similar  instruments.  Currency  transactions  can result in losses to each
Fund if the  currency  being  hedged  fluctuates  in value  to a degree  or in a
direction that is not anticipated. Further, there is the risk that the perceived
correlation  between various currencies may not be present or may not be present
during the particular time that each Fund is engaging in proxy hedging.  If each
Fund enters into a currency hedging transaction,  each Fund will comply with the
asset segregation requirements described below.

Risks of  Currency  Transactions.  Currency  transactions  are  subject to risks
different from those of other portfolio  transactions.  Because currency control
is of great  importance  to the  issuing  governments  and  influences  economic
planning and policy, purchases and sales of currency and related instruments can
be  negatively  affected  by  government  exchange  controls,   blockages,   and
manipulations or exchange restrictions imposed by governments.  These can result
in losses to each Fund if it is unable to deliver or receive  currency  or funds
in settlement of obligations  and could also cause hedges it has entered into to
be rendered  useless,  resulting in full currency  exposure as well as incurring
transaction  costs.  Buyers and sellers of  currency  futures are subject to the
same risks that apply to the use of futures generally.  Further, settlement of a
currency  futures  contract for the purchase of most  currencies must occur at a
bank  based in the  issuing  nation.  Trading  options  on  currency  futures is
relatively  new,  and the ability to establish  and close out  positions on such
options is subject to the maintenance of a liquid market which may not always be
available.  Currency  exchange rates may fluctuate based on factors extrinsic to
that country's economy.

Combined Transactions. Each Fund may enter into multiple transactions, including
multiple options transactions,  multiple futures transactions, multiple currency
transactions  (including forward currency  contracts) and multiple interest rate
transactions and any combination of futures, options, currency and interest rate
transactions   ("component"   transactions),   instead  of  a  single  Strategic
Transaction,  as part of a single or combined  strategy  when, in the opinion of
the  Adviser,  it is in the best  interests  of each  Fund to do so. A  combined
transaction  will usually  contain  elements of risk that are present in each of
its component transactions.  Although combined transactions are normally entered
into based on the Adviser's  judgment that the combined  strategies  will reduce
risk or otherwise  more  effectively  achieve the desired  portfolio  management
goal, it is possible that the  combination  will instead  increase such risks or
hinder achievement of the portfolio management objective.

Swaps,  Caps,  Floors and Collars.  Among the Strategic  Transactions into which
each Fund may enter are interest rate, currency and index swaps and the purchase
or sale of related  caps,  floors and  collars.  Each Fund expects to enter into
these  transactions  primarily  to  preserve a return or spread on a  particular
investment  or  portion  of  its

                                       20


portfolio,  to protect against currency  fluctuations,  as a duration management
technique  or to protect  against any increase in the price of  securities  each
Fund  anticipates  purchasing  at a later date.  Each Fund  intends to use these
transactions  as hedges  and not as  speculative  investments  and will not sell
interest  rate  caps or  floors  where  it  does  not own  securities  or  other
instruments  providing  the income  stream  each Fund may be  obligated  to pay.
Interest  rate swaps  involve the  exchange by each Fund with  another  party of
their respective  commitments to pay or receive  interest,  e.g., an exchange of
floating rate payments for fixed rate payments with respect to a notional amount
of  principal.  A currency  swap is an  agreement  to  exchange  cash flows on a
notional  amount  of  two  or  more  currencies  based  on  the  relative  value
differential  among them and an index swap is an agreement to swap cash flows on
a notional amount based on changes in the values of the reference  indices.  The
purchase  of a cap  entitles  the  purchaser  to receive  payments on a notional
principal  amount from the party selling such cap to the extent that a specified
index exceeds a predetermined  interest rate or amount.  The purchase of a floor
entitles the purchaser to receive  payments on a notional  principal amount from
the party selling such floor to the extent that a specified  index falls below a
predetermined  interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain return within a  predetermined  range of interest
rates or values.

         Each Fund will usually enter into swaps on a net basis,  i.e.,  the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with each Fund receiving or paying, as the case may
be,  only the net amount of the two  payments.  Inasmuch as these  swaps,  caps,
floors and collars are entered into for good faith hedging purposes, the Adviser
and each Fund believe such obligations do not constitute senior securities under
the 1940 Act and,  accordingly,  will not  treat  them as being  subject  to its
borrowing  restrictions.  Each Fund will not enter into any swap,  cap, floor or
collar  transaction  unless, at the time of entering into such transaction,  the
unsecured  long-term  debt  of  the  Counterparty,   combined  with  any  credit
enhancements,  is rated at least A by S&P or Moody's or has an equivalent rating
from a NRSRO or is determined to be of equivalent credit quality by the Adviser.
If  there is a  default  by the  Counterparty,  each  Fund may have  contractual
remedies pursuant to the agreements related to the transaction.  The swap market
has  grown  substantially  in  recent  years  with a large  number  of banks and
investment  banking  firms  acting both as  principals  and as agents  utilizing
standardized  swap  documentation.  As a  result,  the swap  market  has  become
relatively  liquid.  Caps,  floors and collars are more recent  innovations  for
which  standardized   documentation  has  not  yet  been  fully  developed  and,
accordingly, they are less liquid than swaps.

Eurodollar   Instruments.   Each  Fund  may  make   investments   in  Eurodollar
instruments.   Eurodollar  instruments  are  U.S.   dollar-denominated   futures
contracts or options  thereon which are linked to the London  Interbank  Offered
Rate ("LIBOR"), although foreign currency-denominated  instruments are available
from time to time.  Eurodollar  futures  contracts enable purchasers to obtain a
fixed  rate for the  lending  of funds and  sellers  to obtain a fixed  rate for
borrowings. Each Fund might use Eurodollar futures contracts and options thereon
to hedge against  changes in LIBOR,  to which many interest rate swaps and fixed
income instruments are linked.

Risks of Strategic  Transactions  Outside the U.S.  When  conducted  outside the
U.S., Strategic  Transactions may not be regulated as rigorously as in the U.S.,
may not involve a clearing mechanism and related guarantees,  and are subject to
the risk of governmental actions affecting trading in, or the prices of, foreign
securities,  currencies and other instruments.  The value of such positions also
could be adversely affected by: (i) other complex foreign  political,  legal and
economic factors,  (ii) lesser availability than in the U.S. of data on which to
make trading decisions, (iii) delays in each Fund's ability to act upon economic
events occurring in foreign markets during  non-business hours in the U.S., (iv)
the  imposition of different  exercise and  settlement  terms and procedures and
margin  requirements  than  in the  U.S.,  and  (v)  lower  trading  volume  and
liquidity.

Use of Segregated and Other Special Accounts.  Many Strategic  Transactions,  in
addition to other  requirements,  require that each Fund  segregate  liquid high
grade assets with its custodian to the extent Fund obligations are not otherwise
"covered" through ownership of the underlying security,  financial instrument or
currency.  In general,  either the full amount of any obligation by each Fund to
pay or  deliver  securities  or  assets  must be  covered  at all  times  by the
securities, instruments or currency required to be delivered, or, subject to any
regulatory  restrictions,  an amount of cash or liquid high grade  securities at
least equal to the current amount of the obligation  must be segregated with the
custodian. The segregated assets cannot be sold or transferred unless equivalent
assets are substituted in their place or it is no longer  necessary to segregate
them. For example,  a call option written by each Fund will require each Fund to
hold the  securities  subject to the call (or  securities  convertible  into the
needed  securities  without  additional  consideration)  or to segregate  liquid
high-grade  securities  sufficient to purchase and

                                       21


deliver the securities if the call is exercised. A call option sold by each Fund
on an index will require each Fund to own portfolio  securities  which correlate
with the index or to  segregate  liquid high grade assets equal to the excess of
the index value over the exercise price on a current basis. A put option written
by each Fund requires each Fund to segregate liquid,  high grade assets equal to
the exercise price.

         Except when each Fund enters into a forward  contract  for the purchase
or sale of a security  denominated in a particular  currency,  which requires no
segregation,  a  currency  contract  which  obligates  each  Fund to buy or sell
currency will generally  require each Fund to hold an amount of that currency or
liquid securities  denominated in that currency equal to each Fund's obligations
or to  segregate  liquid  high grade  assets  equal to the amount of each Fund's
obligation.

         OTC options  entered into by each Fund,  including those on securities,
currency,  financial  instruments or indices and OCC issued and exchange  listed
index options,  will generally  provide for cash settlement.  As a result,  when
each Fund sells these  instruments  it will only  segregate  an amount of assets
equal to its accrued net obligations,  as there is no requirement for payment or
delivery of amounts in excess of the net amount.  These  amounts will equal 100%
of the exercise price in the case of a non cash-settled  put, the same as an OCC
guaranteed listed option sold by each Fund, or the in-the-money  amount plus any
sell-back formula amount in the case of a cash-settled put or call. In addition,
when each Fund sells a call  option on an index at a time when the  in-the-money
amount exceeds the exercise price,  each Fund will  segregate,  until the option
expires  or is  closed  out,  cash or cash  equivalents  equal  in value to such
excess.  OCC issued and  exchange  listed  options  sold by each Fund other than
those above  generally  settle with  physical  delivery,  or with an election of
either  physical  delivery or cash  settlement  and each Fund will  segregate an
amount of assets  equal to the full value of the option.  OTC  options  settling
with physical delivery,  or with an election of either physical delivery or cash
settlement  will be treated the same as other  options  settling  with  physical
delivery.

         In the case of a futures contract or an option thereon,  each Fund must
deposit  initial  margin and  possible  daily  variation  margin in  addition to
segregating  assets  sufficient  to meet its  obligation  to purchase or provide
securities  or  currencies,  or to pay the amount owed at the  expiration  of an
index-based futures contract. Such assets may consist of cash, cash equivalents,
liquid debt or equity securities or other acceptable assets.

         With  respect  to swaps,  each Fund will  accrue  the net amount of the
excess,  if any, of its obligations over its  entitlements  with respect to each
swap on a daily basis and will  segregate an amount of cash or liquid high grade
securities having a value equal to the accrued excess.  Caps, floors and collars
require  segregation of assets with a value equal to each Fund's net obligation,
if any.

         Strategic  Transactions  may be covered by other means when  consistent
with applicable  regulatory  policies.  Each Fund may also enter into offsetting
transactions so that its combined position,  coupled with any segregated assets,
equals  its  net  outstanding   obligation  in  related  options  and  Strategic
Transactions.  For example,  each Fund could purchase a put option if the strike
price of that option is the same or higher than the strike price of a put option
sold by each Fund.  Moreover,  instead of segregating assets if each Fund held a
futures or forward contract,  it could purchase a put option on the same futures
or forward  contract with a strike price as high or higher than the price of the
contract held. Other Strategic  Transactions may also be offset in combinations.
If the  offsetting  transaction  terminates  at the time of or after the primary
transaction no segregation is required, but if it terminates prior to such time,
assets equal to any remaining obligation would need to be segregated.

         Each Fund's activities involving Strategic  Transactions may be limited
by  the   requirements  of  Subchapter  M  of  the  Internal  Revenue  Code  for
qualification as a regulated investment company. (See "TAXES.")



DIVIDENDS AND TAXES

DIVIDENDS.  The  Global  Fund  normally  distributes  monthly  dividends  of net
investment income, the Asian, Europe and International Funds normally distribute
annual  dividends of net  investment  income and each Fund  distributes  any net
realized short-term and long-term capital gains at least annually.

                                       22


The level of income  dividends  per share (as a  percentage  of net asset value)
will be lower for Class B and Class C shares  than for Class A shares  primarily
as a result of the  distribution  services fee applicable to Class B and Class C
shares.  Distributions of capital gains, if any, will be paid in the same amount
for each class.

A 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  of the  Fund  determines
appropriate  under  then  current  circumstances.  In  particular,  and  without
limiting  the  foregoing,  a  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").

Income dividends and capital gain dividends,  if any, of a Fund will be credited
to shareholder  accounts in full and fractional Fund shares of the same class at
net asset value except that,  upon written  request to the  Shareholder  Service
Agent, a shareholder may select one of the following options:

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

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

Any dividends of a Fund that are reinvested  normally will be reinvested in Fund
shares of the same  class.  However,  upon  written  request to the  Shareholder
Service  Agent,  a  shareholder  may elect to have  dividends of a Fund invested
without  sales charge in shares of the same class of another  Kemper Fund at the
net asset value of such class of such other fund. See "Special Features -- Class
A Shares -- Combined  Purchases"  for a list of such other Kemper Funds.  To use
this  privilege  of investing  dividends  of a Fund in shares of another  Kemper
Fund,  shareholders  must maintain a minimum account value of $1,000 in the Fund
distributing  the  dividends.  The Funds  reinvest  dividend  checks (and future
dividends)  in  shares of that  same  class of the Fund and class if checks  are
returned as  undeliverable.  Dividends and other  distributions in the aggregate
amount of $10 or less are  automatically  reinvested  in shares of the same Fund
unless  the  shareholder  requests  that  such  policy  not  be  applied  to the
shareholder's account.

TAXES.  Each Fund  intends to  continue  to qualify  as a  regulated  investment
company under Subchapter M of the Code and, if so qualified,  will not be liable
for  federal  income  taxes to the extent its  earnings  are  distributed.  Such
qualification  does  not  involve  governmental  supervision  or  management  of
investment practices or policy.

A regulated  investment  company  qualifying  under  Subchapter M of the Code is
required  to  distribute  to its  shareholders  at least  90% of its  investment
company taxable income (including net short-term  capital gain) and generally is
not subject to federal income tax to the extent that it distributes annually its
investment  company taxable income and net realized  capital gains in the manner
required under the Code.  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 20% on gains realized by
a Fund from  securities held more than 18 months and at a maximum rate of 28% on
gains realized by a Fund from  securities  held more than 12 months but not more
than  18  months.  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.  A portion  of the  dividends  paid by the Funds may  qualify  for the
dividends received deduction available to corporate shareholders.

A dividend  received  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.

A 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 a 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 or loss
recognized  will  generally  be  treated  as  long-term  and 40% as  short-term.
However,   although   certain   forward   contracts  on  foreign   currency  are
marked-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 a  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 Funds intend to declare or distribute dividends
during the appropriate  periods of an amount sufficient to prevent imposition of
the 4% excise tax. If any net realized  long-term capital gains in excess of net
realized  short-term  capital  losses are  retained by a Fund for  reinvestment,
requiring federal income taxes to be paid thereon by a Fund, the Fund intends to
elect to treat such capital gains as having been distributed to shareholders. As
a result,  each shareholder will report such capital gains as long-term  capital
gains,  will be able to claim a relative  share of federal  income taxes paid by
the  Fund  on such  gains  as a  credit  against  personal  federal  income  tax
liability,  and will be  entitled  to increase  the  adjusted  tax basis on Fund
shares by the  difference  between a pro rata share of such gains  owned and the
individual tax credit.

It is  anticipated  that only a small  portion,  if any, of the ordinary  income
dividends from the Funds will 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 a Fund for the fiscal year.

A shareholder  who redeems shares of a 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 a Fund or any other  Kemper  Mutual Fund listed  herein
under "Special Features--Class A Shares--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  describedherein  under  "Redemption  or
Repurchase of Shares--Reinvestment Privilege." If 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 a Fund's  shares  and  reinvests  in shares  of the same Fund  within 30 days
before or after the redemption or exchange,  the  transactions may be subject to
the wash sale rules  resulting in a postponement of the recognition of such loss
for federal  income tax  purposes.  An exchange of a Fund's shares for shares of
another fund is treated as a redemption and  reinvestment for federal income tax
purposes upon which gain or loss may be recognized.

Investment  income  derived  from foreign  securities  may be subject to foreign
income taxes withheld at the source.  Because the amount of a Fund's investments
in various  countries  will  change  from time to time,  it is not  possible  to
determine the effective rate of such taxes in advance.

A Fund may  invest  in  shares  of  certain  foreign  corporations  which may be
classified under the Code as passive foreign investment companies ("PFICs").  If
a Fund receives a so-called  "excess  distribution"  with respect to PFIC stock,
the Fund itself may be subject to a tax on a portion of the excess distribution.
Certain  distributions  from a PFIC as well as  gains  from the sale of the PFIC
shares are treated as "excess  distributions." In general, under the PFIC rules,
an excess  distribution  is treated as having  been  realized  ratably  over the
period  during which the Fund held the PFIC shares.  The Fund will be subject to
tax on the portion, if any, of an excess distribution that is allocated to prior
Fund  taxable  years and an interest  factor will be added to the tax, as if the
tax had been payable in such prior taxable years. Excess distributions allocated
to the current  taxable year are  characterized  as ordinary income even though,
absent application of the PFIC rules,  certain excess  distributions  might have
been classified as capital gain.

A Fund may make an  election  to mark to  market  its  shares  of these  foreign
investment  companies in lieu of being subject to U.S.  federal income taxation.
At the end of each taxable year to which the  election  applies,  the Fund would
report as  ordinary  income  the  amount by which the fair  market  value of the
foreign  company's stock exceeds the Fund's adjusted basis in these shares;  any
mark to market losses and any loss from an actual disposition of shares would be
deductible  as  ordinary  loss to the  extent  of any net mark to  market  gains
included in income in prior years.  The effect of the election would be to treat
excess  distributions  and gain on  dispositions as ordinary income which is not
subject to a fund level tax when  distributed  to  shareholders  as a  dividend.
Alternatively,  a Fund may



elect to include as income and gain its share of the  ordinary  earnings and net
capital gain of certain foreign  investment  companies in lieu of being taxed in
the manner described above.

Equity  options   (including  covered  call  options  on  portfolio  stock)  and
over-the-counter  options on debt securities written or purchased by a Fund will
be  subject  to tax under  Section  1234 of the  Code.  In  general,  no loss is
recognized by a Fund upon payment of a premium in  connection  with the purchase
of a put or call option.  The  character of any gain or loss  recognized  (i.e.,
long-term or short-term) will generally  depend,  in the case of a lapse or sale
of the option,  on the Fund's holding period for the option,  and in the case of
an exercise of a put option,  on the Fund's  holding  period for the  underlying
stock.  The  purchase  of a put option may  constitute  a short sale for federal
income  tax  purposes,  causing  an  adjustment  in the  holding  period  of the
underlying stock or substantially  identical stock in the Fund's portfolio. If a
Fund writes a put or call option,  no gain is  recognized  upon its receipt of a
premium. If the option lapses or is closed out, any gain or loss is treated as a
short-term  capital gain or loss. If a call option is  exercised,  any resulting
gain or loss is a short-term or long-term  capital gain or loss depending on the
holding period of the underlying  stock. The exercise of a put option written by
a Fund is not a taxable transaction for the Fund.

Many futures  contracts and certain foreign currency forward  contracts  entered
into by a Fund and all listed non-equity  options written or purchased by a Fund
(including  options on  futures  contracts  and  options  on  broad-based  stock
indices) will be governed by Section 1256 of the Code.  Absent a tax election to
the contrary, gain or loss attributable to the lapse, exercise or closing out of
any such position  generally will be treated as 60% long-term and 40% short-term
capital gain or loss, and on the last trading day of the Fund's fiscal year, all
outstanding  Section 1256 positions will be marked to market (i.e. treated as if
such  positions  were closed out at their closing  price on such day),  with any
resulting  gain or loss  recognized as 60% long-term and 40%  short-term.  Under
Section 988 of the Code,  discussed  below,  foreign  currency gain or loss from
foreign  currency-related  forward contracts and similar  financial  instruments
entered  into or acquired by a Fund will be treated as  ordinary  income.  Under
certain  circumstances,  entry into a futures  contract  to sell a security  may
constitute a short sale for federal  income tax purposes,  causing an adjustment
in the holding period of the underlying  security or a  substantially  identical
security in the Fund's portfolio.

Positions  of a Fund which  consist of at least one stock and at least one other
position with respect to a related  security  which  substantially  diminishes a
Fund's risk of loss with  respect to such stock could be treated as a "straddle"
which is governed by Section 1092 of the Code,  the operation of which may cause
deferral of losses,  adjustments  in the holding  periods of stock or securities
and conversion of short-term  capital losses into long-term  capital losses.  An
exception to these  straddle  rules exists for certain  "qualified  covered call
options" on stock written by the Fund.

Positions  of a Fund which  consist of at least one  position  not  governed  by
Section 1256 and at least one futures or forward  contract or non-equity  option
governed by Section  1256 which  substantially  diminishes a Fund's risk of loss
with  respect to such  other  position  will be  treated as a "mixed  straddle."
Although  mixed  straddles are subject to the straddle  rules of Section 1092 of
the Code,  certain tax  elections  exist for them which reduce or eliminate  the
operation  of these  rules.  The Fund  intends to monitor  its  transactions  in
options and futures and may make certain tax elections in connection  with these
investments.

Notwithstanding any of the foregoing,  recent tax law changes may require a Fund
to  recognize  gain  (but  not  loss)  from  a  constructive   sale  of  certain
"appreciated financial positions" if a Fund enters into a short sale, offsetting
notional  principal  contract,  futures or  forward  contract  transaction  with
respect  to  the  appreciated  position  or  substantially  identical  property.
Appreciated  financial positions subject to this constructive sale treatment are
interests (including options,  futures and forward contracts and short sales) in
stock,  partnership  interests,  certain  actively traded trust  instruments and
certain debt instruments.  Constructive sale treatment of appreciated  financial
positions  does not apply to certain  transactions  closed in the 90-day  period
ending with the 30th day after the close of the Fund's  taxable year, if certain
conditions are met.



Similarly,  if a  Fund  enters  into a  short  sale  of  property  that  becomes
substantially  worthless,  the Fund will be required to  recognize  gain at that
time as though  it had  closed  the short  sale.  Future  regulations  may apply
similar treatment to other strategic  transactions with respect to property that
becomes substantially worthless.

Under the Code,  gains or losses  attributable to fluctuations in exchange rates
which  occur  between  the  time  a  Fund  accrues  receivables  or  liabilities
denominated in a foreign  currency and the time the Fund actually  collects such
receivables, or pays such liabilities,  generally are treated as ordinary income
or ordinary loss. Similarly,  on disposition of debt securities denominated in a
foreign currency,  and on disposition of certain options,  futures contracts and
forward contracts,  gains or losses attributable to fluctuations in the value of
foreign currency between the date of acquisition of the security or contract and
the date of disposition  are also treated as ordinary gain or loss.  These gains
or losses,  referred  to under the Code as  "Section  988" gains or losses,  may
increase or decrease the amount of a Fund's investment company taxable income to
be distributed to its shareholders as ordinary income.

Dividends from domestic corporations are expected to comprise a substantial part
of each Fund's  gross  income.  To the extent that such  dividends  constitute a
portion of a Fund's gross income,  a portion of the income  distributions of the
Fund may be eligible for the deduction for dividends  received by  corporations.
Shareholders will be informed of the portion of dividends which so qualify.  The
dividends-received  deduction is reduced to the extent the shares of a Fund with
respect to which the dividends are received are treated as  debt-financed  under
federal  income tax law, and is  eliminated if either those shares or the shares
of the Fund are  deemed to have been held by a Fund or the  shareholder,  as the
case may be, for less than 46 days during the 90-day  period  beginning  45 days
before the shares become ex-dividend.

Properly  designated  distributions of the excess of net long-term  capital gain
over net  short-term  capital  loss are  taxable to  shareholders  as  long-term
capital gain,  regardless of the length of time the shares of the Fund have been
held  by  such  shareholders.  Such  distributions  are  not  eligible  for  the
dividends-received  deduction.  Any loss realized upon the  redemption of shares
held at the time of  redemption  for six  months  or less will be  treated  as a
long-term  capital loss to the extent of any amounts treated as distributions of
long-term capital gain during such six-month period.

Distributions  of investment  company  taxable  income and net realized  capital
gains will be taxable as described above, whether received in shares or in cash.
Shareholders  electing to receive distributions in the form of additional shares
will have a cost basis for federal income tax purposes in each share so received
equal to the net asset value of a share on the reinvestment date.

All distributions of investment  company taxable income and net realized capital
gain,  whether  received  in  shares  or in  cash,  must  be  reported  by  each
shareholder on his or her federal income tax return. Dividends and capital gains
distributions  declared  in  October,   November  or  December  and  payable  to
shareholders  of record in such a month will be deemed to have been  received by
shareholders  on  December  31 if paid  during  January of the  following  year.
Redemptions of shares,  including  exchanges for shares of another Scudder fund,
may result in tax  consequences  (gain or loss) to the  shareholder and are also
subject to these reporting requirements.

The Funds  will be  required  to  report to the  Internal  Revenue  Service  all
distributions of taxable income and capital gains as well as gross proceeds from
the redemption or exchange of Fund shares,  except in the case of certain exempt
shareholders.  Under the backup  withholding  provisions  of Section 3406 of the
Code,  distributions  of taxable  income and capital gains and proceeds from the
redemption  or exchange of the shares of a regulated  investment  company may be
subject to  withholding  of federal income tax at the rate of 31% in the case of
non-exempt  shareholders  who fail to furnish the investment  company with their
taxpayer identification numbers and with required certifications regarding their
status under the federal income tax law. Withholding may also be required if the
Fund is notified by the IRS or a broker that the taxpayer  identification number
furnished by the shareholder is incorrect or that the shareholder has previously
failed to report interest or dividend income. If the withholding  provisions are
applicable,  any  such  distributions  and  proceeds,  whether  taken in cash or
reinvested in additional  shares,  will be reduced by the amounts required to be
withheld.



Shareholders of a Fund may be subject to state and local taxes on  distributions
received from a Fund and on redemptions of the Fund's shares.  Each distribution
is  accompanied  by a  brief  explanation  of  the  form  and  character  of the
distribution.  In January  of each year the Fund  issues to each  shareholder  a
statement of the federal income tax status of all distributions.

Each Fund is organized as a  Massachusetts  business trust and is not liable for
any income or franchise tax in the Commonwealth of Massachusetts,  provided that
it qualifies as a regulated investment company for federal income tax purposes.

An individual may make a deductible IRA  contribution  for any taxable year only
if (i) the individual is not an active  participant in an employer's  retirement
plan, or (ii) the  individual has an adjusted gross income below a certain level
($50,000 for married  individuals filing a joint return, with a phase-out of the
deduction for adjusted gross income between  $50,000 and $60,000;  $30,000 for a
single  individual,  with a phase-out for adjusted gross income between  $30,000
and  $40,000).  An  individual is not  considered  an active  participant  in an
employer's  retirement plan if the individual's  spouse is an active participant
in such a plan.  However,  in the  case of a joint  return,  the  amount  of the
deductible  contribution by the individual who is not an active participant (but
whose spouse is) is phased out for adjusted  gross income  between  $150,000 and
$160,000. However, an individual not permitted to make a deductible contribution
to an  IRA  for  any  such  taxable  year  may  nonetheless  make  nondeductible
contributions  up to $2,000 to an IRA (up to $2,000 per  individual  for married
couples if only one spouse has earned  income) for that year.  There are special
rules for  determining  how  withdrawals are to be taxed if an IRA contains both
deductible and nondeductible amounts. In general, a proportionate amount of each
withdrawal will be deemed to be made from nondeductible  contributions;  amounts
treated as a return of nondeductible  contributions  will not be taxable.  Also,
annual  contributions  may be made to a  spousal  IRA  even  if the  spouse  has
earnings  in a given  year if the  spouse  elects  to be  treated  as  having no
earnings (for IRA contribution purposes) for the year.

Distributions  by a Fund  result in a  reduction  in the net asset  value of the
Fund's  shares.  Should  a  distribution  reduce  the net  asset  value  below a
shareholder's cost basis, such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above,  even though,
from an investment standpoint, it may constitute a partial return of capital. In
particular, investors should consider the tax implications of buying shares just
prior to a distribution. The price of shares purchased at that time includes the
amount  of the  forthcoming  distribution.  Those  purchasing  just  prior  to a
distribution   will  then   receive  a  partial   return  of  capital  upon  the
distribution,  which will nevertheless be taxable to them.  Shareholders who are
non-resident  aliens are  subject to U.S.  withholding  tax on  ordinary  income
dividends  (whether  received  in cash or shares) at a rate of 30% or such lower
rate as prescribed by any applicable tax treaty. Each Fund is required by law to
withhold  31% of  taxable  dividends  and  redemption  proceeds  paid to certain
shareholders who do not furnish a correct taxpayer identification number (in the
case  of  individuals,   a  social   security   number)  and  in  certain  other
circumstances. Trustees of qualified retirement plans and 403(b)(7) accounts are
required by law to withhold 20% of the taxable portion of any distribution  that
is eligible to be "rolled over". The 20% withholding  requirement does not apply
to  distributions  from Individual  Retirement  Accounts (IRAs) or any part of a
distribution that is transferred  directly to another qualified retirement plan,
403(b)(7) account,  or IRA.  Shareholders should consult with their tax Advisors
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  reinvestment  of dividends and periodic
investment  and  redemption  programs.  Information  for  income  tax  purposes,
including,  when  appropriate,  information  regarding  any  foreign  taxes  and
credits,  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.

The foregoing  discussion of U.S.  federal  income tax law relates solely to the
application of that law to U.S.  persons,  i.e., U.S. citizens and residents and
U.S. corporations, partnerships, trusts and estates. Each shareholder who is not
a U.S. person should consider the U.S. and foreign tax consequences of ownership
of shares of the Fund,  including the possibility that such a shareholder may be
subject to a U.S.  withholding tax at a rate of 30% (or at a lower rate under an
applicable income tax treaty) on amounts  constituting  ordinary income received
by him or her, where such amounts are treated as income from U.S.  sources under
the Code.

Dividend and interest  income  received by a Fund from sources  outside the U.S.
may  be  subject  to  withholding  and  other  taxes  imposed  by  such  foreign
jurisdictions. Tax conventions between certain countries and the U.S. may reduce
or eliminate these foreign taxes,  however,  and foreign countries  generally do
not impose taxes on capital gains respecting investments by foreign investors.

Shareholders  should  consult their tax advisors  about the  application  of the
provisions of tax law described in this  Statement of Additional  Information in
light of their particular tax situations.

NET ASSET VALUE

The net  asset  value  per  share  of a Fund is the  value of one  share  and is
determined  separately  for each  class by  dividing  the value of a Fund's  net
assets  attributable  to the  class  by the  number  of  shares  of  that  class
outstanding. The per share net asset value of each of Class B and Class C shares
of the Fund will  generally  be lower  than that of the Class A shares of a Fund
because of the higher expenses borne by the Class B and Class C shares.  The net
asset value of shares of a Fund is  computed as of the close of regular  trading
(the "value time") on the New York Stock  Exchange (the  "Exchange") on each day
the Exchange is open for trading.  The Exchange is scheduled to be closed on the
following holidays: New Year's Day, Dr. Martin Luther King, Jr. Day, Presidents'
Day, Good Friday,  Memorial Day,  Independence Day, Labor Day,  Thanksgiving and
Christmas.

Portfolio  securities  for which market  quotations  are readily  available  are
generally  valued at market  value as of the value time in the manner  described
below.  All other  securities  may be valued at fair value as determined in good
faith by or under the direction of the Board.

With respect to the Funds with securities listed primarily on foreign exchanges,
such  securities  may  trade on days  when the  Fund's  net  asset  value is not
computed;  and  therefore,  the net asset  value of a Fund may be  significantly
affected on days when the investor has no access to the Fund.

An  exchange-traded  equity  security  is valued at its most  recent sale price.
Lacking any sales,  the  security is valued at the  calculated  mean between the
most recent bid quotation and the most recent asked  quotation (the  "Calculated
Mean"). Lacking a Calculated Mean, the security is valued at the most recent bid
quotation.  An equity  security  which is traded on The Nasdaq Stock Market Inc.
("Nasdaq")  is valued at its most  recent sale  price.  Lacking  any sales,  the
security  is valued at the most  recent  bid  quotation.  The value of an equity
security not quoted on Nasdaq, but traded in another over-the-counter market, is
its most  recent sale price.  Lacking any sales,  the  security is valued at the
Calculated  Mean.  Lacking a Calculated Mean, the security is valued at the most
recent bid quotation.

Debt  securities  are  valued at prices  supplied  by a pricing  agent(s)  which
reflect  broker/dealer   supplied  valuations  and  electronic  data  processing
techniques.  Money market  instruments  purchased  with an original  maturity of
sixty days or less,  maturing at par, shall be valued at amortized  cost,  which
the Board believes  approximates  market value. If it is not possible to value a
particular debt security pursuant to these valuation methods,  the value of such
security is the most recent bid quotation  supplied by a bona fide  marketmaker.
If it is not possible to value a particular debt security  pursuant to the above
methods,  the investment  manager of the particular fund may calculate the price
of that debt security, subject to limitations established by the Board.



An exchange-traded options contract on securities, currencies, futures and other
financial  instruments is valued at its most recent sale price on such exchange.
Lacking  any sales,  the  options  contract  is valued at the  Calculated  Mean.
Lacking any Calculated  Mean, the options  contract is valued at the most recent
bid quotation in the case of a purchased  options  contract,  or the most recent
asked quotation in the case of a written options  contract.  An options contract
on   securities,    currencies   and   other   financial    instruments   traded
over-the-counter  is valued at the most  recent bid  quotation  in the case of a
purchased options contract and at the most recent asked quotation in the case of
a written  options  contract.  Futures  contracts  are valued at the most recent
settlement price.  Foreign currency exchange forward contracts are valued at the
value  of  the  underlying  currency  at the  prevailing  exchange  rate  on the
valuation date.

If a security is traded on more than one exchange, or upon one or more exchanges
and in the  over-the-counter  market,  quotations  are taken  from the market in
which the security is traded most extensively.

If, in the opinion of the  Valuation  Committee  of the Board of  Trustees,  the
value of a portfolio  asset as determined in  accordance  with these  procedures
does not represent the fair market value of the  portfolio  asset,  the value of
the  portfolio  asset is taken to be an  amount  which,  in the  opinion  of the
Valuation Committee,  represents fair market value on the basis of all available
information. The value of other portfolio holdings owned by a Fund is determined
in a manner which,  in the  discretion of the Valuation  Committee,  most fairly
reflects market value of the property on the valuation date.

Following the  valuations of securities or other  portfolios  assets in terms of
the currency in which the market quotation used is expressed ("Local Currency"),
the value of these  portfolio  assets in terms of U.S.  dollars is calculated by
converting  the Local  Currency  into U.S.  dollars at the  prevailing  currency
exchange rate on the valuation date.

PERFORMANCE

A Fund may advertise  several types of  performance  information  for a class of
shares,  including "yield" and "average annual total return" and "total return."
Performance  information  will be computed  separately  for each class.  Each of
these figures is based upon historical  results and is not representative of the
future  performance  of any class of a Fund. A Fund with fees or expenses  being
waived or absorbed by Scudder Kemper may also advertise performance  information
before and after the effect of the fee waiver or expense absorption.

A Fund's historical  performance or return for a class of shares may be shown in
the form of "average  annual total return" and "total return"  figures,  and for
the  Global  Fund may be shown in the form of  "yield"  figures.  These  various
measures of performance are described  below.  Performance  information  will be
computed separately for each class.

Yield is a measure of the net investment income per share earned over a specific
one month or 30-day  period  expressed as a percentage  of the maximum  offering
price of the  Global  Fund's  shares  (which is net asset  value for Class B and
Class C shares) at the end of the period.  Average annual total return and total
return  measure both the net investment  income  generated by, and the effect of
any realized or  unrealized  appreciation  or  depreciation  of, the  underlying
investments in the Fund's portfolio.

The Global Fund's yield is computed in  accordance  with a  standardized  method
prescribed by rules of the Securities and Exchange Commission.  The Fund's Class
A, Class B and Class C shares'  yields  based upon the  one-month  period  ended
December 31, 1998 were 2.09%, 1.25%, and 2.50%,  respectively.  The Fund's yield
is computed by dividing the net  investment  income per share earned  during the
specified  one month or 30-day  period by the maximum  offering  price per share
(which is net asset value for Class B and Class C shares) on the last day of the
period, according to the following formula:

         YIELD = 2[(a - b + 1)^6 - 1]
                    -----
                     cd

Where:   a =      dividends and interest earned during the period.



         b =      expenses accrued for the period (net of reimbursements).

         c =      the average  daily number of shares  outstanding  during the
                  period that were entitled to receive dividends.

         d =      the maximum  offering price per share on the last day of the
                  period  (which  is net  asset  value  for  Class B and Class C
                  shares).

In computing the foregoing yield,  the Global Fund follows certain  standardized
accounting  practices  specified by Securities  and Exchange  Commission  rules.
These practices are not necessarily  consistent with those that the Fund uses to
prepare its annual and interim financial statements in conformity with generally
accepted accounting principles.

Each 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 a 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  (in the  case of  Class A  shares),  and  computing  the
"redeemable  value" of that investment at the end of the period.  The redeemable
value in the case of Class B or Class C shares may or may not include the effect
of the  applicable  contingent  deferred sales charge that may be imposed 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 figures
may also be calculated without deducting the maximum sales charge.

Calculation of a 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 (in the case of
Class A shares),  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 ending value
in the case of Class B and Class C shares may or may not  include  the effect of
the applicable  contingent  deferred sales charge that may be imposed at the end
of the  period.  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 for Class
A shares or the  contingent  deferred  sales  charge for Class B shares would be
reduced if such charge were included.

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  a  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 a Fund
during a specified  period.  Average  annual  total return will be quoted for at
least the one-,  five- and ten-year  periods ending on a recent calendar quarter
(or if such  periods  have  not yet  elapsed,  at the  end of a  shorter  period
corresponding to the life of the Fund for performance purposes).  Average annual
total return  figures  represent the average annual  percentage  change over the
period in question.  Total return figures represent the aggregate  percentage or
dollar value change over the period in question.

A Fund's  performance  figures  are based upon  historical  results  and are not
representative of future performance.  The Global Fund's Class A shares are sold
at net asset value plus a maximum sales charge of 4.5% of the offering price and
each of the Asian,  Europe and  International  Funds' Class A shares are sold at
net asset  value plus a maximum  sales  charge of 5.75% of the  offering  price.
Class B and Class C shares are sold at net asset  value.  Redemption  of Class B
shares may be subject to a  contingent  deferred  sales charge that is 4% in the
first year following the



purchase,  declines by a specified  percentage  each year thereafter and becomes
zero  after six  years.  Redemption  of Class C shares  may be  subject  to a 1%
contingent deferred sales charge in the first year following  purchase.  Average
annual total return figures do, and total return figures may, include the effect
of the  contingent  deferred  sales  charge  for the Class B shares  and Class C
shares  that may be imposed at the end of the  period in  question.  Performance
figures  for the Class B shares and Class C shares not  including  the effect of
the  applicable  contingent  deferred  sales  charge would be reduced if it were
included.  Returns and net asset value will  fluctuate.  Factors  affecting each
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 each Fund are  redeemable  at the then current net asset value,  which may be
more or less than original cost.

A Fund's  performance  may be  compared to that of the  Consumer  Price Index or
various  unmanaged  bond  indexes  including,  but not  limited  to, the Salomon
Brothers High Grade Corporate Bond Index,  the Lehman  Brothers  Adjustable Rate
Index, the Lehman Brothers Aggregate Bond Index, the Lehman Brothers Government/
Corporate  Bond Index,  the Salomon  Brothers  Long-Term  High Yield Index,  the
Salomon  Brothers 30 Year GNMA Index and the Merrill Lynch Market Weighted Index
and may also be compared to the performance of other mutual funds or mutual fund
indexes with similar  objectives and policies as reported by independent  mutual
fund reporting  services such as Lipper Analytical  Services,  Inc.  ("Lipper").
Lipper  performance  calculations are based upon changes in net asset value with
all dividends reinvested and do not include the effect of any sales charges.

Information may be quoted from publications such as Morningstar,  Inc., The Wall
Street Journal, Money Magazine, Forbes, Barron's,  Fortune, The Chicago Tribune,
USA Today, Institutional Investor and Registered Representative. Also, investors
may want to compare the historical returns of various  investments,  performance
indexes of those investments or economic  indicators,  including but not limited
to stocks, bonds,  certificates of deposit and other bank products, money market
funds and U.S. Treasury obligations. Bank product performance may be based upon,
among  other  things,  the BANK  RATE  MONITOR  National  Index(TM)  or  various
certificate of deposit indexes. Money market fund performance may be based upon,
among other  things,  the  IBC/Donoghue's  Money Fund  Report(R) or Money Market
Insight(R),  reporting  services  on money  market  funds.  Performance  of U.S.
Treasury  obligations  may be based  upon,  among  other  things,  various  U.S.
Treasury bill indexes.  Certain of these alternative investments may offer fixed
rates of return and guaranteed principal and may be insured. Economic indicators
may include,  without  limitation,  indicators of market rate trends and cost of
funds,  such as Federal Home Loan Bank Board 11th  District  Cost of Funds Index
("COFI").

A 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,  performance indexes
of those  investments  or  economic  indicators.  A 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.

Each Fund's  returns and net asset value will fluctuate and shares of a Fund are
redeemable by an investor at the then current net asset value, which may be more
or less than original cost.  Redemption of Class B shares and Class C shares may
be subject to a contingent deferred sales charge as described above.  Additional
information  about each Fund's  performance also appears in its Annual Report to
Shareholders, which is available without charge from the applicable Fund.

The figures below show performance information for various periods.

The net asset value and returns of the Funds will  fluctuate.  No adjustment has
been made for taxes payable on  dividends.  The periods  indicated  were ones of
fluctuating securities prices and interest rates.

ASIAN FUND--November 30, 1998
                        AVERAGE ANNUAL         Fund       Fund       Fund
                      TOTAL RETURN TABLE       Class A    Class B    Class C
                      ------------------       Shares     Shares     Shares
                                               ------     ------     ------

                 Life of Class(+)                 (25.11)    (24.88)    (23.72)



                 One Year                         (22.44)    (21.08)    (18.72)

                       (+) Since October 21, 1996 for all classes.


                         EUROPE FUND--NOVEMBER 30, 1998

                        AVERAGE ANNUAL         Fund       Fund       Fund
                      TOTAL RETURN TABLE       Class A    Class B    Class C
                      ------------------       Shares     Shares     Shares
                                               ------     ------     ------

                 Life of Class(+)               15.88      16.55      17.71
                 One Year                       10.49      12.92      16.48

                       (+) Since May 1, 1996 for all classes.


GLOBAL FUND--DECEMBER 31, 1998

                     AVERAGE ANNUAL         Fund       Fund       Fund
                   TOTAL RETURN TABLE       Class A    Class B    Class C
                   ------------------       Shares     Shares     Shares
                                            ------     ------     ------

                  Life of Class(+)            8.09       6.89       7.70
                  Five Years                  5.70       *          *
                  Three Years                 4.33       4.58       5.30
                  One Year                    3.90      (1.84)      8.30

               (+)  Since October 1, 1989 for Class A shares. Since May 31, 1994
                    for Class B and Class C shares.
               *    Does not apply

                   INTERNATIONAL FUND--OCTOBER 31, 1998

                     AVERAGE ANNUAL         Fund       Fund       Fund
                   TOTAL RETURN TABLE       Class A    Class B    Class C
                   ------------------       Shares     Shares     Shares
                                            ------     ------     ------

                  Life of Class(+)           11.49%       6.55     (0.37)
                  Ten Years                   7.51          *          *
                  Five Years                  6.31          *          *
                  One Year                   (5.31)     (0.37)     (6.94)

                  (+)      Since May 21, 1981 for Class A shares.  Since May 31,
                           1994 for Class B and Class C shares.
                  *        Does not apply.

                             FOOTNOTES FOR ALL FUNDS

(1)  The  Initial  Investment  and  adjusted  amounts  for  Class A shares  were
     adjusted  for the maximum  initial  sales  charge at the  beginning  of the
     period,  which is 5.75% for the Asian,  Europe and International  Funds and
     4.5% for the Global Fund.  The Initial  Investment  for Class B and Class C
     shares was not  adjusted.  Amounts were adjusted for Class B shares for the
     contingent  deferred  sales  charge  that may be  imposed at the end of the
     period based upon the schedule for shares sold  currently,  see "Redemption
     or  Repurchase  of  Shares"  herein.  No  adjustments  were made to Class C
     shares.

Investors may want to compare a Fund's  performance to that of  certificates  of
deposit  issued by banks  and other  depository  institutions.  Certificates  of
deposit may offer fixed or variable  interest  rates and principal is guaranteed
and may be insured. Withdrawal of the deposit prior to maturity will normally be
subject to a penalty.  Rates offered by banks and other depository  institutions
are  subject to change at any time  specified  by the issuing  institution.  The
shares of the Fund are not  insured  and net asset  value as well as yield  will
fluctuate.  Shares of a Fund are redeemable at net asset value which may be more
or less than  original  cost.  Redemption  of Class B and Class C shares  may be
subject to a contingent  deferred  sales charge.  The bonds in the Global Fund's
portfolio are generally of longer term than most certificates of deposit and may
reflect longer term market interest rate fluctuations.



Investors may also want to compare a Fund's performance to that of U.S. Treasury
bills,  notes or bonds.  Rates of Treasury  obligations are fixed at the time of
issuance and payment of  principal  and interest is backed by the full faith and
credit of the U.S. Treasury. The market value of such instruments will generally
fluctuate  inversely  with  interest  rates prior to maturity and will equal par
value at maturity. Shares of a Fund are redeemable at net asset value, which may
be more or less than original cost. The Funds' returns will also fluctuate.

In order to appreciate more fully the  opportunities  for income  throughout the
world and the potential  advantages  of investing in the Global Fund,  investors
may want to compare the  historical  performance  of various bond markets around
the world. Such performance,  of course, would not necessarily be representative
of future  actual or relative  performance  of such  markets,  or of the past or
future  performance of the Fund. The following table compares the performance of
the Class A shares of each Fund over  various  periods with that of other mutual
funds within the category  described  below according to data reported by Lipper
Analytical Services, Inc. ("Lipper"), New York, New York, which is a mutual fund
reporting service.  Lipper performance figures are based on changes in net asset
value, with all income and capital gain dividends reinvested.  Such calculations
do not include the effect of any sales  charges.  Future  performance  cannot be
guaranteed. Lipper publishes performance analyses on a regular basis.

ASIAN FUND




                                                                                     Lipper Mutual Fund
                                                                                    Performance Analysis
                                                                                    --------------------
                                                                                   Pacific Ex-Japan Funds
                                                                                   ----------------------

                                                                                     
One Year (Period ended 11/30/98)..........................................             #58 of 87 funds
The Lipper Pacific Ex-Japan Fund category includes funds that concentrate
     their  investments in equity  securities  with primary  trading  markets or
     operations  concentrated in the Pacific region  (including Asian countries)
     and that specifically does not invest in Japan.


EUROPE FUND




                                                                                     Lipper Mutual Fund
                                                                                    Performance Analysis
                                                                                    --------------------
                                                                                    European Region Funds
                                                                                    ---------------------

                                                                                     
One Year (Period ended 11/30/98)..........................................             #64 of 95 funds
The Lipper European Region Fund category includes funds that concentrate their
     investments  in  equity   securities   whose  primary  trading  markets  or
     operations  are  concentrated  in the European  region or a single  country
     within this region.



GLOBAL FUND




                                                                                     Lipper Mutual Fund
                                                                                    Performance Analysis
                                                                                    --------------------
                                                                                     Global Income Funds
                                                                                     -------------------

                                                                                     
Five Years (Period ended 12/31/98)............              ..............             #40 of 145 funds
Three Years (Period ended 12/31/98)...........              ..............             #72 of 111 funds
One Year (Period ended 12/31/98)...............             ..............             #18 of 67 funds




The Lipper  Global Income Fund  category  includes  funds which by prospectus or
portfolio  practice  invest  primarily in U.S.  Dollar and non-U.S.  Dollar debt
instruments of issuers  located in at least 3 countries,  one of which may be in
the United  States.  This category  includes funds with a variety of objectives,
policies  and market and credit  risks that should be  considered  in  reviewing
these rankings.


INTERNATIONAL FUND




                                                                                     Lipper Mutual Fund
                                                                                    Performance Analysis
                                                                                    --------------------
                                                                                     International Funds
                                                                                     -------------------

                                                                                     
Fifteen Years (Period ended 11/30/98)................   ..................             #7 of 12 funds
Ten Years (Period ended 11/30/98)....................   ..................             #18 of 36 funds
Five Years (Period ended 11/30/98)...................   ..................             #61 of 145 funds
One Year (Period ended 11/30/98).....................   ..................             #370 of 489 funds


The Lipper International Funds category includes funds which invest their assets
in securities whose primary trading markets are outside of the United States.

INVESTMENT MANAGER AND UNDERWRITER

INVESTMENT MANAGER.  Scudder Kemper Investments,  Inc. ("Scudder Kemper" or "the
Adviser"),  345 Park  Avenue,  New York,  New York,  is each  Fund's  investment
manager. Scudder Kemper is approximately 70% owned by Zurich Financial Services,
a newly formed global insurance and financial  services company.  The balance of
the Adviser is owned by its  officers  and  employees.  Pursuant  to  investment
management  agreements,  Scudder Kemper acts as each Fund's investment  adviser,
manages its  investments,  administers its business  affairs,  furnishes  office
facilities and equipment,  provides clerical and  administrative  services,  and
permits any of its  officers  or  employees  to serve  without  compensation  as
trustees  or  officers of a Fund if elected to such  positions.  The  investment
management  agreements  provide 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 officers or employees of Scudder  Kemper),  independent
auditors,   counsel,  custodian  and  transfer  agent  and  the  cost  of  share
certificates,  reports and notices to  shareholders,  brokerage  commissions  or
transaction  costs,  costs of calculating  net asset value and  maintaining  all
accounting  records related thereto,  taxes and membership dues. Each Fund bears
the  expenses of  registration  of its shares with the  Securities  and Exchange
Commission,  while Kemper Distributors,  Inc., ("KDI") as principal underwriter,
pays the cost of qualifying and  maintaining  the  qualification  of each Fund's
shares for sale under the securities laws of the various states.

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

Each Fund's  investment  management  agreement  continues in effect from year to
year so long as its  continuation is approved at least annually 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 by the
shareholders of the Fund subject  thereto or the Board of Trustees.  Each Fund's
investment  management  agreement  may be  terminated  at any time upon 60 days'
notice by either party, or by a majority vote of the  outstanding  shares of the
Fund subject  thereto,  and will terminate  automatically  upon  assignment.  If
additional  Funds become  subject to an  investment  management  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.



Responsibility  for  overall  management  of each Fund  rests  with its Board of
Trustees  and  officers.  Professional  investment  supervision  is  provided by
Scudder Kemper. The investment management agreements provide that Scudder Kemper
shall act as each Fund's investment Advisor,  manage its investments and provide
it with various services and facilities.

On December 31, 1997, pursuant to the terms of an agreement,  Scudder, Stevens &
Clark,  Inc.  ("Scudder") and Zurich Insurance  Company  ("Zurich") formed a new
global organization by combining Scudder with Zurich Kemper Investments, Inc., a
former subsidiary of Zurich and the former investment  manager to each Fund, and
Scudder changed its name to Scudder Kemper Investments,  Inc. As a result of the
transaction,  Zurich owned  approximately  70% of the Advisor,  with the balance
owned by the  Advisor's  officers  and  employees.  On  September  7, 1998,  the
businesses of Zurich (including Zurich's 70% interest in Scudder Kemper) and the
financial services businesses of B.A.T Industries p.l.c. ("B.A.T") were combined
to form a new global  insurance and financial  services  company known as Zurich
Financial  Services,  Inc. By way of a dual holding  company  structure,  former
Zurich  shareholders  initially  owned  approximately  57% of  Zurich  Financial
Services,  Inc., with the balance initially owned by former B.A.T  shareholders.
Upon  consummation  of  this  transaction,   each  Fund's  existing   investment
management  agreement  with Scudder Kemper was deemed to have been assigned and,
therefore,  terminated.  The  Board has  approved  a new  investment  management
agreement with Scudder Kemper,  which is substantially  identical to the current
investment  management   agreement,   except  for  the  date  of  execution  and
termination.  This agreement  became  effective upon the termination of the then
current  investment  management  agreement and was approved by shareholders at a
special meeting which concluded in December 1998.

Each Fund pays Scudder Kemper an investment  management fee, payable monthly, at
1/12 of the annual rates shown below:




                                                                                   Annual Management Fee Rates
                                                                                   ---------------------------
                                                                            Europe, Global and
Average Daily Net Assets of the Fund                                           International               Asian
- ------------------------------------                                           -------------               -----

                                                                                                      
$0 - $250 million                                                                   0.75%                   0.85%
$250 million - $1 billion                                                           0.72                    0.82
$1 billion - $2.5 billion                                                           0.70                    0.80
$2.5 billion - $5 billion                                                           0.68                    0.78
$5 billion - $7.5 billion                                                           0.65                    0.75
$7.5 billion - $10 billion                                                          0.64                    0.74
$10 billion - $12.5 billion                                                         0.63                    0.73
Over $12.5 billion                                                                  0.62                    0.72


The  expenses  of each Fund,  and of other  investment  companies  investing  in
foreign securities,  can be expected to be higher than for investment  companies
investing  primarily in domestic  securities  since the costs of  operation  are
higher,  including  custody and  transaction  costs for foreign  securities  and
investment management fees.

The investment  management  fees incurred by each Fund for its last three fiscal
years are shown in the table below.




Fund                                           Fiscal 1998           Fiscal 1997           Fiscal 1996
- ----                                           -----------           -----------           -----------

                                                                              
Asian................................                 None*             $45,000        $1,000(Degree)
Europe...............................              None**               $95,000        $7,000(Degree)(Degree)
Global...............................            $675,000              $858,000            $1,050,000
International........................          $4,612,000            $4,131,000            $3,177,000


*  After waiver of $58,000.
** After waiver of $349,000.
o  For the  period  October  21,  1996  (commencement  of  operations)  to
   November 30, 1996.
oo For the period May 1, 1996  (commencement  of  operations)  to November
   30, 1996.



Fund  Sub-Adviser.  Scudder  Investments  U.K.,  Limited ("Scudder UK"), 1 South
Place,  London,  U.K.  EC42M  2ZS,  an  affiliate  of  Scudder  Kemper,  is  the
sub-adviser for the Europe,  Global Income, and International  Funds. Scudder UK
acts as sub-adviser pursuant to the terms of the sub-advisory  agreement between
it and Scudder Kemper for each Fund. Scudder UK is subject to regulations by the
Investment Management  Regulatory  Organization (IMRO) in England as well as the
U.S. Securities and Exchange Commission.

Under the terms of the  sub-advisory  agreement  for a Fund,  Scudder UK renders
investment  advisory and management  services with regard to that portion of the
Fund's  portfolio  as may be allocated to Scudder UK by the Adviser from time to
time for management,  including services related to foreign securities,  foreign
currency  transactions and related investments.  Scudder UK may, under the terms
of each  sub-advisory  agreement,  render similar  services to others  including
other investment companies.  For its services,  Scudder UK will receive from the
Adviser a monthly fee at the annual rate of 0.30% for the Global Income Fund and
0.35% for each of the  Europe  and  International  Funds of the  portion  of the
average daily net assets of each Fund allocated by the Adviser to Scudder UK for
management. Scudder UK permits any of its officers or employees to serve without
compensation as trustees or officers of the Fund if elected to such positions.

Each sub-advisory  agreement provides that Scudder UK 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 Scudder UK in the  performance of its duties or from reckless  disregard
by Scudder UK of its obligations and duties under the sub-advisory agreement.

Each sub-advisory agreement continues in effect from year to year so long as its
continuation is approved at least annually 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 by the  shareholders  of the Fund
subject  thereto or the Board of Trustees.  Each  sub-advisory  agreement may be
terminated at any time for a Fund upon 60 days notice by Scudder Kemper, Scudder
UK or the Board of Trustees,  or by a majority vote of the outstanding shares of
the Fund subject thereto,  and will terminate  automatically  upon assignment or
upon  the  termination  of  the  Fund's  investment  management  agreement.   If
additional  Funds become  subject to a  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. No sub-advisory
fees were paid by the Adviser to Scudder UK for periods prior to the 1997 fiscal
year,  although in such periods the Adviser has paid Scudder UK for its services
to Scudder Kemper with respect to foreign securities investments of the Funds.

The  sub-advisory  fees  paid by each  Fund for its last  fiscal  year are shown
below.

Fund                                                             Fiscal 1998*
- ----                                                             ------------

Europe.....................................................         $163,000
Global.....................................................         $270,000
International..............................................       $1,890,000
*  Estimated.

FUND  ACCOUNTING  AGENT.  Scudder  Fund  Accounting  Corporation  ("SFAC"),  Two
International  Place,  Boston,  Massachusetts  02110,  a  subsidiary  of Scudder
Kemper,  is responsible  for  determining the daily net asset value per share of
the Funds and maintaining all accounting  records  related  thereto.  Currently,
SFAC  receives no fee for its services to the Funds;  however,  subject to Board
approval,  some time in the future, SFAC may seek payment for its services under
this agreement.

PRINCIPAL  UNDERWRITER.  Pursuant  to  separate  underwriting  and  distribution
services  agreements  ("distribution  agreements"),  Kemper  Distributors,  Inc.
("KDI"), 222 South Riverside Plaza,  Chicago,  Illinois,  60606, an affiliate of
Scudder Kemper,  is the principal  underwriter and distributor for the shares of
each  Fund  and acts as agent  of the  Fund in the  continuous  offering  of its
shares.  KDI bears all of its  expenses of  providing  services



pursuant  to  the   distribution   agreement,   including  the  payment  of  any
commissions.  Each Fund pays the cost for the prospectus and shareholder reports
to be set in type and printed for  existing  shareholders,  and KDI pays for the
printing and distribution of copies thereof used in connection with the offering
of shares  to  prospective  investors.  KDI also  pays for  supplementary  sales
literature and advertising costs.

Each  distribution  agreement  continues  in effect from year to year so long as
such  continuance  is approved for each class at least annually by a vote of the
Board of Trustees of the Fund,  including  the Trustees  who are not  interested
persons of the Fund and who have no direct or indirect financial interest in the
agreement.   Each  agreement  automatically  terminates  in  the  event  of  its
assignment  and may be terminated  for a class at any time without  penalty by a
Fund or by KDI upon 60 days'  notice.  Termination  by a Fund with  respect to a
class may be by vote of a majority  of the Board of  Trustees,  or a majority of
the Trustees who are not  interested  persons of the Fund and who have no direct
or  indirect  financial  interest  in  the  agreement,  or a  "majority  of  the
outstanding  voting  securities"  of the class of the Fund, as defined under the
Investment  Company Act of 1940. The agreement may not be amended for a class to
increase  the fee to be paid  by a Fund  with  respect  to  such  class  without
approval by a majority of the outstanding voting securities of such class of the
Fund and all material  amendments  must in any event be approved by the Board of
Trustees in the manner  described above with respect to the  continuation of the
agreement. The provisions concerning the continuation, amendment and termination
of the distribution agreement are on a Fund by Fund basis and for each Fund on a
class by class basis.

CLASS A  SHARES.  KDI  receives  no  compensation  from the  Funds as  principal
underwriter  for Class A shares and pays all  expenses of  distribution  of each
Fund's Class A shares under the  distribution  agreements  not otherwise paid by
dealers or other  financial  services  firms.  As indicated  under  "Purchase of
Shares,"  KDI retains the sales  charge upon the  purchase of shares and pays or
allows concessions or discounts to firms for the sale of each Fund's shares. The
following  information concerns the underwriting  commissions paid in connection
with the distribution of each Fund's Class A shares for the fiscal years noted.




                                            Commissions          Commissions      Commissions Paid To
                                            Retained By       Underwriter Paid     Kemper Affiliated
        Fund             Fiscal Year        Underwriter         To All Firms             Firms
        ----             -----------        -----------         ------------             -----

                                                                            
       Asian               1998                $3,000               $37,000                  --
                           1997               $14,000               $59,000                  --
                           1996*               $1,000                $3,000                  --

       Europe              1998               $22,000              $217,000                  --
                           1997               $20,000               $99,000                  --
                           1996**              $5,000               $24,000              $1,000

       Global              1998                $3,000               $24,000                  --
                           1997                $9,000               $49,000                  --
                           1996               $31,000               $72,000              $1,000

   International           1998              $105,000              $887,000                  --
                           1997               $96,000              $959,000                  --
                           1996               $95,000              $714,000            $26, 000


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

*    For the period  October 21, 1996  (commencement  of operations) to November
     30, 1996.
**   For the period May 1, 1996  (commencement  of  operations)  to November 30,
     1996.

Class B Shares. For its services under the distribution agreement,  KDI receives
a fee from each Fund under a Rule 12b-1  Plan,  payable  monthly,  at the annual
rate of 0.75% of average daily net assets of each Fund  attributable  to Class B
shares.  This fee is accrued  daily as an  expense  of Class B shares.  KDI also
receives any contingent deferred



sales  charges.  See  "Redemption or Repurchase of  Shares--Contingent  Deferred
Sales  Charge--Class  B Shares." KDI  currently  compensates  firms for sales of
Class B shares at a commission rate of 3.75%.

Class C Shares. For its services under the distribution agreement,  KDI receives
a fee from each Fund under a Rule 12b-1  Plan,  payable  monthly,  at the annual
rate of 0.75% of average daily net assets of each Fund  attributable  to Class C
shares. This fee is accrued daily as an expense of Class C shares. KDI currently
advances  to firms the  first  year  distribution  fee at a rate of 0.75% of the
purchase  price of Class C  shares.  For  periods  after  the  first  year,  KDI
currently  pays firms for sales of Class C shares a  distribution  fee,  payable
quarterly,  at an annual  rate of 0.75% of net  assets  attributable  to Class C
shares  maintained  and  serviced  by the  firm  and  the  fee  continues  until
terminated by KDI or a Fund.  KDI also receives any  contingent  deferred  sales
charges.  See  "Redemption  or Repurchase of  Shares--Contingent  Deferred Sales
Charges--Class C Shares".

CLASS B SHARES AND CLASS C SHARES. Each Fund has adopted a plan under Rule 12b-1
that  provides  for fees payable as an expense of the Class B shares and Class C
shares  that are used by KDI to pay for  distribution  and  services  for  those
classes.  Because  12b-1 fees are paid out of fund  assets on an ongoing  basis,
they will,  over time,  increase  the cost of an  investment  and cost more than
other types of sales charges.

Expenses  of the Funds and of KDI, in  connection  with the Rule 12b-1 Plans for
the Class B and Class C shares are set forth below.  A portion of the marketing,
sales and operating expenses shown below could be considered overhead expense.




                                                                       Other Distribution Expenses Paid By
                                                                                   Underwriter
                                                                     ----------------------------------------
                                                       Commissions
                               Contingent     Total      Paid By
                  Distribution  Deferred   Commissions Underwriter
                   Fees Paid      Sales      Paid By       To        Advertising             Marketing  Misc.      Interest
Fund Class Fiscal  By Fund To  Charges To  Underwriter Affiliated        and     Prospectus  and Sales  Operating  Fund
B Shares    Year  Underwriter  Underwriter   To Firms     Firms       Literature  Printing    Expenses  Expenses   Expenses
- --------    ----  -----------  -----------   --------     -----       ----------  --------    --------- --------   --------

                                                                                    
   Asian    1998     $21,000      $6,000      $53,000      --           $7,000     $1,000     $14,000   $28,000   $18,000
            1997     $18,000      $7,000     $103,000      --          $12,000     $1,000     $25,000    $4,000    $9,000
            1996*     --           --          $2,000      --           $1,000      --         $2,000    $3,000      --

  Europe    1998    $103,000     $43,000     $408,000      --          $43,000     $5,000     $84,000   $50,000   $75,000
            1997     $41,000     $15,000     $253,000      --          $19,000     $1,000     $56,000   $21,000   $18,000
           1996**     $3,000        --        $29,000      --           $3,000      --         $7,000    $6,000    $1,000

  Global    1998    $120,000     $52,000      $58,000      --           $7,000     $1,000     $12,000   $19,000  ($41,000)
            1997    $270,000     $62,000     $147,000      --          $22,000     $2,000     $64,000   $25,000     --
            1996    $347,000     $84,000     $173,000      $1,000      $39,000     $3,000     $83,000   $27,000     --

International 1998$1,234,000    $285,000    $1,313,000     --         $173,000    $20,000     $358,000  $74,000  $509,000
             1997   $970,000    $227,000    $1,709,000     --         $219,000    $15,000     $595,000  $94,000  $395,000
             1996   $541,000    $127,000      $972,000    $15,000     $229,000    $22,000     $463,000  $98,000  $212,000





                                                                       Other Distribution Expenses Paid By
                                                                                   Underwriter
                                                                     ----------------------------------------
                                                       Commissions
                               Contingent     Total      Paid By
                  Distribution  Deferred   Commissions Underwriter
                   Fees Paid      Sales      Paid By       To        Advertising             Marketing  Misc.      Interest
Fund Class Fiscal  By Fund To  Charges To  Underwriter Affiliated        and     Prospectus  and Sales  Operating  Fund
C Shares    Year  Underwriter  Underwriter   To Firms     Firms       Literature  Printing    Expenses  Expenses   Expenses
- --------    ----  -----------  -----------   --------     -----       ----------  --------    --------- --------   --------
                                                                                       
  Asian    1998     $2,000       --         $4,000        --           $1,000      --       $1,000   $12,000   $3,000
           1997     $2,000       --         $3,000        --           $2,000      --       $4,000   $10,000   $1,000
           1996*     --          --           --          --             --        --       $1,000    $1,000    --

  Europe   1998    $18,000      $1,000     $17,000        --           $5,000     $1,000   $12,000   $15,000   $4,000
           1997     $4,000       --         $6,000        --           $2,000      --       $5,000    $8,000   $2,000
           1996**   $1,000       --         $1,000        --           $1,000      --       $3,000    $2,000    --

  Global   1998    $12,000       --        $13,000        --           $3,000      --       $5,000   $12,000   $8,000
           1997     $9,000      $1,000      $8,000        --           $4,000      --      $11,000    $4,000   $6,000
           1996     $4,000       --         $8,000        --           $5,000      --      $11,000    $3,000   $3,000



International 1998  $162,000     $7,00    $171,000        --           $48,000    $7,000   $103,000  $27,000  $45,000
            1997    $96,000      $3,000   $117,000        --           $45,000    $3,000   $118,000   $4,000  $26,000
            1996    $32,000       --       $46,000        --           $30,000    $3,000    $53,000   $7,000  $11,000


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

*    For the period  October 21, 1996  (commencement  of operations) to November
     30, 1996.

**   For the period May 1, 1996  (commencement  of  operations)  to November 30,
     1996.


If a Rule 12b-1 Plan (the "Plan") is terminated  in  accordance  with its terms,
the obligation of a Fund to make payments to KDI pursuant to the Plan will cease
and the Fund will not be  required  to make any  payments  past the  termination
date.  Thus,  there is no  legal  obligation  for the  Fund to pay any  expenses
incurred  by KDI in excess of its fees under a Plan,  if for any reason the Plan
is terminated in accordance with its terms.  Future fees under a Plan may or may
not be sufficient to reimburse KDI for its expenses incurred.

ADMINISTRATIVE SERVICES. Administrative services are provided to each Fund under
an administrative services agreement ("administrative  agreement") with KDI. KDI
bears all its  expenses of  providing  services  pursuant to the  administrative
agreement between KDI and each Fund,  including the payment of service fees. For
the  services  under  the  administrative  agreement,  each  Fund  pays  KDI  an
administrative  services fee, payable monthly, at the annual rate of up to 0.25%
of average daily net assets of Class A, B and C shares of the Fund.

KDI enters into  related  arrangements  with  various  broker-dealers  and other
service or administrative firms ("firms"),  that provide services and facilities
for their  customers or clients who are  investors of a Fund.  The firms provide
such office  space and  equipment,  telephone  facilities  and  personnel  as is
necessary or beneficial for providing information and services to their clients.
Such services and assistance may include,  but are not limited to,  establishing
and  maintaining  accounts  and  records,  processing  purchase  and  redemption
transactions,  answering  routine inquiries  regarding the Funds,  assistance to
clients in changing dividend and investment  options,  account  designations and
addresses  and such other  services  as may be agreed upon from time to time and
permitted by applicable  statute,  rule or  regulation.  With respect to Class A
shares,  KDI pays each firm a service fee,  normally  payable  quarterly,  at an
annual rate of (a) up to 0.15% of the net assets for the Global and 0.25% of the
net  assets for the  International  Fund of these  accounts  in the fund that it
maintains and services that are attributable to Class A shares acquired prior to
October 1, 1993,  and (b) up to 0.25% of the net assets in Fund accounts that it
maintains  and  services  attributable  to Class A shares  acquired  on or after
October 1, 1993, in each case commencing with the month after  investment.  With
respect to Class B shares and Class C shares,  KDI  currently  advances to firms
the  first-year  service fee at a rate of up to 0.25% of the  purchase  price of
such shares.  For periods  after the first year,  KDI  currently  intends to pay
firms a service  fee at an annual  rate of up to 0.25%  (calculated  monthly and
normally paid  quarterly) of the net assets  attributable to Class B and Class C
shares  maintained  and  serviced  by the  firm  and  the  fee  continues  until
terminated  by KDI or the Fund.  Firms to which service fees may be paid include
broker-dealers affiliated with KDI.

The following information concerns the administrative  services fee paid by each
Fund.






                                    Administrative Service Fees Paid By  Service Fees Paid By  Service Fees Paid By
                                                    Fund                    Administrator          Administrator
                                    -------------------------------------       To                      To
       Fund          Fiscal Period    Class A     Class B     Class C         Firms          Affiliated Firms
       ----          -------------    -------     -------     -------         -----         -------------------
                                                                                          
       Asian             1998          $8,000      $6,000       --               $20,000                     --
                         1997*         $1,000      $5,000      $1,000            $19,000                     --
                                           --          --           --               --                      --
                         1996^o

      Europe             1998         $46,000         --       $5,000           $113,000                     --
                         1997*         $7,000     $13,000          --            $37,000                     --
                                       $1,000      $1,000          --             $4,000                     --
                         1996^oo

      Global             1998         $147,000    $38,000      $4,000           $192,000                     --
                         1997         $149,000    $86,000      $3,000           $239,000                     --
                         1996         $173,000    $113,000     $1,000           $291,000                $12,000

   International         1998        $1,013,000   $360,000    $51,000         $1,438,000                     --
                         1997         $926,000    $322,000    $32,000         $1,301,000                     --
                         1996         $772,000    $179,000    $11,000           $984,000                $16,000


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

^o   For the period  October 21, 1996  (commencement  of operations) to November
     30, 1996.
^oo  For the period May 1, 1996  (commencement  of  operations)  to November 30,
     1996.
*    Amounts shown after expense waiver.

KDI also may provide  some of the above  services  and may retain any portion of
the fee  under  the  administrative  agreement  not paid to firms to  compensate
itself  for  administrative  functions  performed  for a  Fund.  Currently,  the
administrative  services  fee  payable to KDI is based only upon Fund  assets in
accounts  for which  there is a firm  listed  on the  Fund's  records  and it is
intended that KDI 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 each Fund  while this
procedure is in effect will depend upon the proportion of Fund assets that is in
accounts  for which  there is a firm of record as well as,  with  respect to the
Global Fund's Class A shares, the date when shares representing such assets were
purchased.  The Board of  Trustees  of a Fund,  in its  discretion,  may approve
basing the fee to KDI on all Fund assets in the future.

Certain  trustees  or officers  of each Fund are also  directors  or officers of
Scudder Kemper, Scudder UK or KDI as indicated under "Officers and Trustees."

CUSTODIAN,  TRANSFER AGENT AND  SHAREHOLDER  SERVICE AGENT.  The Chase Manhattan
Bank,  Chase  MetroTech  Center,  Brooklyn,  New York 11245,  as custodian,  has
custody of all  securities and cash of each Fund held outside the United States.
Investors  Fiduciary Trust Company  ("IFTC"),  801 Pennsylvania  Avenue,  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 each Fund  maintained  in 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 each Fund. IFTC is also each Fund's
transfer agent and dividend-paying  agent. Pursuant to a services agreement with
IFTC, Kemper Service Company ("KSvC"), an affiliate of Scudder Kemper, serves as
"Shareholder  Service  Agent" of each Fund and, as such,  performs all of IFTC's
duties as transfer  agent and dividend  paying agent.  IFTC receives as transfer
agent,  and pays to KSvC as follows:  prior to January 1, 1999,  annual  account
fees at a maximum  rate of $6 per  account  plus  account  set up,  transaction,
maintenance  charges,  annual fees associated with the contingent deferred sales
charge  (Class B only) and  out-of-pocket  expense  reimbursement  and effective
January 1, 1999, for the Asian,  Europe, and International  Funds annual account
fees of $10.00 ($18.00 for retirement accounts) plus set up charges, annual fees
associated  with the  contingent  deferred  sales  charges  (Class  B only),  an
asset-based  fee of 0.08% and  out-of-pocket  reimbursement,  and for the Global
Fund annual account fees of $14.00 ($23.00 for retirement  accounts) plus set up
charges,  annual fees  associated  with the



contingent  deferred sales charges (Class B only),  an asset-based  fee of 0.05%
and  out-of-pocket  reimbursement.  IFTC's fee is  reduced  by certain  earnings
credits in favor of each Fund.

The  following  shows for each Fund's 1998 fiscal year the  shareholder  service
fees IFTC remitted to KSvC.

                                                             Fees IFTC
Fund                                                       Paid to KSVC
- ----                                                       ------------

Asian                                                          $78,000
Europe                                                        $581,000
Global                                                        $197,000
International                                               $2,432,000

INDEPENDENT  AUDITORS  AND  REPORTS  TO  SHAREHOLDERS.  The  Funds'  independent
auditors,  Ernst & Young LLP, 233 South Wacker Drive,  Chicago,  Illinois 60606,
audit and report on the  Funds'  annual  financial  statements,  review  certain
regulatory  reports and the Funds' federal income tax return,  and perform other
professional accounting,  auditing, tax and advisory services when engaged to do
so by the Funds.  Shareholders will receive annual audited financial  statements
and semi-annual unaudited financial statements.

LEGAL COUNSEL.  Vedder,  Price,  Kaufman & Kammholz,  222 North LaSalle  Street,
Chicago, Illinois 60601, serves as legal counsel to the Funds.

PORTFOLIO TRANSACTIONS

Brokerage

Allocation  of  brokerage  is  supervised  by the Adviser  (which also  includes
Scudder UK for purposes of the following disclosure).

The primary objective of the Adviser in placing orders for the purchase and sale
of securities for a Fund's portfolio is to obtain the most favorable net results
taking into account such factors as price, commission where applicable,  size of
order,   difficulty   of  execution   and  skill   required  of  the   executing
broker/dealer.  The Adviser  seeks to evaluate  the  overall  reasonableness  of
brokerage commissions paid (to the extent applicable) through the familiarity of
the Distributor with commissions charged on comparable transactions,  as well as
by comparing  commissions paid by a Fund to reported commissions paid by others.
The  Adviser  reviews  on  a  routine  basis  commission  rates,  execution  and
settlement services performed, making internal and external comparisons.

The Funds'  purchases and sales of fixed-income  securities are generally placed
by the Advisor with primary  market makers for these  securities on a net basis,
without any brokerage  commission being paid by a Fund.  Trading does,  however,
involve  transaction costs.  Transactions with dealers serving as primary market
makers  reflect  the  spread  between  the bid and asked  prices.  Purchases  of
underwritten  issues may be made, which will include an underwriting fee paid to
the underwriter.

When it can be done consistently with the policy of obtaining the most favorable
net  results,   it  is  the  Adviser's   practice  to  place  such  orders  with
broker/dealers  who supply  research,  market and  statistical  information to a
Fund. The term "research, market and statistical information" includes advice as
to the value of  securities;  the  advisability  of investing in,  purchasing or
selling  securities;  the availability of securities or purchasers or sellers of
securities; and analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts.
The Adviser is authorized when placing portfolio  transactions for a Fund to pay
a brokerage  commission in excess of that which another  broker might charge for
executing  the same  transaction  solely on account of the receipt of  research,
market  or   statistical   information.   The  Adviser  may  place  orders  with
broker/dealers on the basis that the broker/dealer has or has not sold shares of
a Fund. In effecting  transactions in  over-the-counter  securities,  orders are
placed with the principal  market makers for the security  being traded  unless,
after  exercising  care,  it appears that more  favorable  results are available
elsewhere.



To the  maximum  extent  feasible,  it is expected  that the Adviser  will place
orders for  portfolio  transactions  through  Scudder  Investor  Services,  Inc.
("SIS"),  a corporation  registered as a  broker-dealer  and a subsidiary of the
Adviser. SIS will place orders on behalf of the Funds with issuers, underwriters
or other brokers and dealers. SIS will not receive any commission,  fee or other
remuneration from the Funds for this service.

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

The Board members review from time to time whether the recapture for the benefit
of a Fund of some portion of the brokerage commissions or similar fees paid by a
Fund on portfolio transactions is legally permissible and advisable.

Each Fund's average portfolio  turnover rate is the ratio of the lesser of sales
or purchases to the monthly  average  value of the  portfolio  securities  owned
during the year, excluding all securities with maturities or expiration dates at
the time of  acquisition  of one year or less.  A higher rate  involves  greater
brokerage  transaction  expenses to a Fund and may result in the  realization of
net capital  gains,  which would be taxable to  shareholders  when  distributed.
Purchases  and  sales are made for a Fund's  portfolio  whenever  necessary,  in
management's opinion, to meet a Fund's objective.

The table below shows total brokerage commissions paid by each Fund for the last
three fiscal periods and for the most recent fiscal year, the percentage thereof
that was allocated to firms based upon research information provided.




                                                Allocated to
                                                ------------
                                               Firms Based on
                                               --------------
                                                Research in
                                                -----------
                              Fiscal 1998        Fiscal 1998       Fiscal 1997       Fiscal 1996
                              -----------        -----------       -----------       -----------

                                                                       
Asian                           $99,000*              100%*          $142,000      $15,000^o
Europe                         $340,000*               93%*           $89,000      $9,000^oo
Global                                $0                 0%                $0                $0
International                $2,888,000*               96%*        $2,339,000        $2,982,000


- --------------------
*    Estimated.
^o For the  period  October  21,  1996  (commencement  of  operations)  to
     November 30, 1996.
^oo  For the period May 1, 1996  (commencement  of  operations)  to
     November 30, 1996.

PURCHASE, REPURCHASE AND REDEMPTION OF SHARES

PURCHASE OF SHARES

ALTERNATIVE  PURCHASE  ARRANGEMENTS.  Class A  shares  of each  Fund are sold to
investors subject to an initial sales charge. Class B shares are sold without an
initial  sales charge but are subject to higher  ongoing  expenses  than Class A
shares and a contingent deferred sales charge payable upon certain  redemptions.
Class B shares automatically convert to Class A shares six years after issuance.
Class C shares  are sold  without  an initial  sales  charge but are  subject to
higher  ongoing  expenses  than  Class A shares,  are  subject  to a  contingent
deferred  sales charge  payable upon certain  redemptions  within the first year
following  purchase and do not convert into another class. When placing purchase
orders,  investors  must  specify  whether  the order is for Class A, Class B or
Class C shares.



The primary  distinctions  among the classes of each Fund's  shares lie in their
initial and  contingent  deferred  sales charge  structures and in their ongoing
expenses,  including  asset-based  sales  charges  in the  form  of  Rule  12b-1
distribution  fees.  These  differences are summarized in the table below.  See,
also,   "Summary  of  Expenses."   Each  class  has  distinct   advantages   and
disadvantages for different  investors,  and investors may choose the class that
best suits their circumstances and objectives.




                                                      Annual 12b-1 Fees (As a % of
                            Sales Charge                Average Daily Net Assets)             Other Information
                            ------------                -------------------------             -----------------
                                                                              
Class A           Maximum initial sales charge of               None                   Initial sales charge waived or
                  4.5% (for the Global Fund) and                                       reduced for certain purchases
                  5.75% (for each of the Asian,
                  Europe and International  Funds)
                  of the public offering price
Class B           Maximum contingent deferred                   0.75%                  Shares convert to Class A
                  sales charge of 4% of redemption                                     shares six years after issuance
                  proceeds; declines to zero after
                  six years
Class C           Contingent deferred sales charge              0.75%                  No conversion feature
                  of 1% of redemption proceeds for
                  redemptions made during first
                  year after purchase


The  minimum  initial  investment  for  each  Fund is  $1,000  and  the  minimum
subsequent  investment is $100. The minimum initial investment for an Individual
Retirement Account is $250 and the minimum  subsequent  investment is $50. Under
an  automatic  investment  plan,  such as Bank Direct  Deposit,  Payroll  Direct
Deposit or  Government  Direct  Deposit,  the  minimum  initial  and  subsequent
investment  is  $50.  These  minimum  amounts  may be  changed  at any  time  in
management's discretion.

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).

INITIAL SALES CHARGE ALTERNATIVE -- CLASS A SHARES. The public offering price of
Class A shares for  purchasers  of the Global Fund  choosing  the initial  sales
charge  alternative  is the net asset  value plus a sales  charge,  as set forth
below.




                                                                   Global Fund -- Sales Charge
                                        ---------------------------------------------------------------------------------
                                           As A Percentage         As A Percentage          Allowed To Dealers As A
          Amount of Purchase              Of Offering Price      of Net Asset Value*      Percentage Of Offering Price
          ------------------              -----------------      -------------------      ----------------------------

                                                                                          
Less than $100,000.................            4.50%                     4.71%                     4.00%
$100,000 but less than $250,000....            3.50                      3.63                      3.00
$250,000 but less than $500,000....            2.60                      2.67                      2.25
$500,000 but less than $1 million..            2.00                      2.04                      1.75
$1 million and over................            0.00**                    0.00**                    ***

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


*    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 KDI as discussed below.



The public offering price of Class A shares for purchasers of the Asian,  Europe
or International  Fund choosing the initial sales charge  alternative is the net
asset value plus a sales charge, as set forth below.




                                                      Asian, Europe And International Funds -- Sales Charge
                                        ---------------------------------------------------------------------------------
                                           As A Percentage         As A Percentage          Allowed To Dealers As A
          Amount of Purchase              Of Offering Price      of Net Asset Value*      Percentage Of Offering Price
          ------------------              -----------------      -------------------      ----------------------------

                                                                                          
Less than $50,000..................            5.75%                     6.10%                     5.20%
$50,000 but less than $100,000.....            4.50                      4.71                      4.00
$100,000 but less than $250,000....            3.50                      3.63                      3.00
$250,000 but less than $500,000....            2.60                      2.67                      2.25
$500,000 but less than $1 million..            2.00                      2.04                      1.75
$1 million and over................            0.00**                    0.00**                    ***


*    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 KDI as discussed below.

Each Fund  receives the entire net asset value of all Class A shares sold.  KDI,
the Funds' principal  underwriter,  retains the sales charge on sales of Class A
shares 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,  KDI 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.

Class A shares of a 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  Scudder  Kemper  or an  affiliate  does  not  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.  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.  KDI may in its
discretion  compensate firms for sales of Class A shares under this privilege at
a commission rate of 0.50% of the amount of Class A shares purchased.

Class A  shares  of a 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 listed under  "Special  Features -- Class A Shares -- Combined  Purchases"
totals at least $1,000,000 including purchases of Class A shares 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").  Redemption within two years of shares purchased under the
Large Order NAV Purchase Privilege may be subject to a contingent deferred sales
charge.  See  "Redemption  or Repurchase of Shares -- Contingent  Deferred Sales
Charge -- Large Order NAV Purchase Privilege."

KDI may in its  discretion  compensate  investment  dealers  or other  financial
services firms in connection with the sale of Class A shares of each 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, 0.50% on the next $45 million and 0.25% 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  to
employer  sponsored  employee  benefit plans using the subaccount  recordkeeping
system made available  through KSvC. For purposes of determining the appropriate
commission  percentage to be applied to a particular sale, KDI will consider the
cumulative  amount invested by the purchaser in the Fund and other Kemper Mutual
Funds listed under "Special  Features -- Class A Shares -- Combined  Purchases,"
including purchases pursuant to the "Combined Purchases," "Letter of Intent" and
"Cumulative  Discount"  features  referred to above. The privilege of purchasing
Class A shares of a Fund at net asset value  under the Large Order NAV  Purchase
Privilege is not available if another net asset value  purchase  privilege  also
applies.

Class A shares of a Fund or any other Kemper  Mutual Fund listed under  "Special
Features -- Class A Shares -- 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, KDI may in its discretion pay investment dealers and
other financial  services firms a concession,  payable  quarterly,  at an annual
rate of up to 0.25% 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 KDI.  The  privilege  of  purchasing  Class A shares of the Fund at net asset
value under this  privilege is not available if another net asset value purchase
privilege also applies.

Class A 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 KDI 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 Value Series,  Inc. ("KVS") on September
8, 1995, and have continuously owned shares of KVS (or a Kemper Fund acquired by
exchange  of KVS shares)  since that date,  for  themselves  or members of their
families; and (d) any trust or pension, profit sharing or other benefit plan for
only such  persons.  Class A 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 each Fund
for their clients  pursuant to an agreement  with KDI 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
Class A shares at net asset value hereunder.  Class A shares may also 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. or its  predecessors may purchase Fund Class A shares
at net asset value  through  reinvestment  programs  described  hereines of such
trusts  that  have  such  programs.  Class A shares of a Fund may be sold at net
asset value through certain  investment  advisers  registered under the 1940 Act
and other financial services firms that adhere to certain standards  established
by KDI,  including  a  requirement  that such  shares be sold for the benefit of
their clients  participating in an 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.  Each Fund may also  issue  Class A 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.



Class A shares of a Fund may be  purchased  at net asset  value by  persons  who
purchase  such shares  through bank trust  departments  that process such trades
through an  automated,  integrated  mutual fund clearing  program  provided by a
third party clearing firm.

Class A shares of a 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 KDI,  for  themselves  or  members  of their
families.  KDI in its  discretion may  compensate  financial  services firms for
sales of Class A shares under this  privilege  at a commission  rate of 0.50% of
the amount of Class A shares purchased.

Class A shares of a Fund may be  purchased  at net asset  value by  persons  who
purchase shares of the Fund through KDI as part of an automated billing and wage
deduction  program  administered  by  RewardsPlus  of America for the benefit of
employees of participating employer groups.

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.

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

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

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

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

WHICH  ARRANGEMENT  IS BETTER FOR YOU?  The decision as to which class of shares
provides  a more  suitable  investment  for an  investor  depends on a number of
factors,  including the amount and intended length of



the  investment.  Investors  making  investments  that qualify for reduced sales
charges  might  consider  Class A shares.  Investors  who  prefer  not to pay an
initial  sales  charge and who plan to hold their  investment  for more than six
years might consider Class B shares.  Investors who prefer not to pay an initial
sales charge but who plan to redeem their shares within six years might consider
Class C shares. Orders for Class B shares or Class C shares for $500,000 or more
will be  declined.  Orders  for  Class B shares  or Class C shares  by  employer
sponsored employee benefit plans using the subaccount record keeping system made
available  through the  Shareholder  Service  Agent will be invested  instead in
Class A shares at net asset value where the combined  subaccount value in a Fund
or other Kemper Mutual Funds listed under "Special Features -- Class A Shares --
Combined  Purchases" is in excess of $5 million including  purchases pursuant to
the "Combined  Purchases," "Letter of Intent" and "Cumulative Discount" features
described under "Special  Features." For more information  about the three sales
arrangements,  consult your financial  representative or the Shareholder Service
Agent.  Financial  services firms may receive different  compensation  depending
upon which class of shares they sell.

GENERAL.  Banks and other  financial  services firms may provide  administrative
services  related to order  placement and payment to facilitate  transactions in
shares of a Fund for their clients, and KDI may pay them a transaction fee up to
the level of the  discount  or  commission  allowable  or  payable to dealers as
described  above.  Banks 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.  KDI  does not  believe  that  termination  of a
relationship  with a bank would result in any material  adverse  consequences to
the Fund.

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

In addition to the discounts or commissions described above, KDI will, from time
to  time,  pay  or  allow  additional  discounts,   commissions  or  promotional
incentives, in the form of cash, to firms that sell shares of the Funds. In some
instances, such discounts,  commissions or other incentives will be offered only
to certain firms that sell or are expected to sell during specified time periods
certain minimum amounts of shares of a Fund or other funds underwritten by KDI.

Orders for the  purchase of shares of a Fund will be  confirmed at a price based
on the net asset value of that Fund next determined  after receipt by KDI 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 KDI prior to the close of its  business  day will be  confirmed at a
price based on the net asset value  effective  on that day ("trade  date").  The
Funds  reserve the right to determine the net asset value more  frequently  than
once a day if deemed desirable.  Dealers and other financial  services firms are
obligated to transmit orders promptly.  Collection may take significantly longer
for a check drawn on a foreign  bank than for a check drawn on a domestic  bank.
Therefore,  if an order is accompanied by a check drawn on a foreign bank, funds
must normally be collected before shares will be purchased.

Investment  dealers  and other  firms  provide  varying  arrangements  for their
clients to purchase and redeem 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 Funds' 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 Funds through the Shareholder Service Agent for



recordkeeping  and  other  expenses  relating  to  these  nominee  accounts.  In
addition,  certain  privileges  with  respect to the  purchase,  repurchase  and
redemption  of shares or the  reinvestment  of  dividends  may not be  available
through such firms. Some firms may participate in a program allowing them access
to  their  clients'  accounts  for  servicing  including,   without  limitation,
transfers of registration and dividend payee changes;  and may perform functions
such  as  generation  of  confirmation   statements  and  disbursement  of  cash
dividends.  Such firms,  including  affiliates of KDI, may receive  compensation
from the Funds through the Shareholder Service Agent for these services.

Each Fund reserves the right to withdraw all or any part of the offering made by
the  prospectus  and this  statement  of  additional  information  and to reject
purchase  orders.  Also, from time to time, a Fund may  temporarily  suspend the
offering of any class of its shares to new investors.  During the period of such
suspension,  persons  who are  already  shareholders  of such class of such Fund
normally are permitted to continue to purchase  additional  shares of such class
and to have dividends reinvested.

Shareholders  should  direct their  inquiries to KSvC,  811 Main Street,  Kansas
City, Missouri 64105-2005 or to the firm from which they received this statement
of additional information.

As described herein,  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,  with  respect to Class A shares,  an initial  sales  charge.  The minimum
initial investment is $1,000 and the minimum  subsequent  investment is $100 but
such  minimum  amounts may be changed at any time.  An order for the purchase of
shares  that is  accompanied  by a check  drawn on a foreign  bank (other than a
check drawn on a Canadian bank in U.S. Dollars) will not be considered in proper
form and will not be processed  unless and until the Fund determines that it has
received  payment of the  proceeds of the check.  The time  required  for such a
determination will vary and cannot be determined in advance. 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.

The Funds  have  authorized  certain  members  of the  National  Association  of
Securities Dealers, Inc. ("NASD"), other than Kemper Distributors,  Inc. ("KDI")
to accept  purchase and redemption  orders for the Fund's shares.  Those brokers
may also designate other parties to accept purchase and redemption orders on the
Fund's  behalf.  Orders for purchase or  redemption  will be deemed to have been
received by the Fund when such brokers or their authorized  designees accept the
orders.  Subject to the terms of the  contract  between the Fund and the broker,
ordinarily  orders  will be priced as the Fund's net asset  value next  computed
after  acceptance by such brokers or their  authorized  designees.  Further,  if
purchases or  redemptions  of the Fund's  shares are arranged and  settlement is
made at an investor's  election through any other  authorized NASD member,  that
member  may,  at its  discretion,  charge a fee for that  service.  The Board of
Trustees or  Directors as the case may be ("Board") of the Fund and KDI each has
the right to limit the  amount of  purchases  by,  and to refuse to sell to, any
person. The Board and KDI may suspend or terminate the offering of shares of the
Fund at any time for any reason.

REDEMPTION OR REPURCHASE OF SHARES

GENERAL.  Any shareholder may require the Fund to redeem his or her shares. When
shares are held for the account of a shareholder by the Fund's  transfer  agent,
the  shareholder  may redeem them by sending a written  request with  signatures
guaranteed to Kemper 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.



The redemption  price for shares of a Fund will be the net asset value per share
of that Fund next determined  following receipt by the Shareholder Service Agent
of a properly  executed request with any required  documents as described above.
Payment for shares  redeemed will be made in cash as promptly as practicable but
in no event later than seven days after receipt of a properly  executed  request
accompanied by any outstanding  share  certificates in proper form for transfer.
When a Fund is asked to redeem  shares  for  which it may not have yet  received
good  payment  (i.e.,  purchases  by  check,  EXPRESS-Transfer  or  Bank  Direct
Deposit),  it  may  delay  transmittal  of  redemption  proceeds  until  it  has
determined  that  collected  funds have been  received  for the purchase of such
shares,  which will be up to 10 days from  receipt  by the Fund of the  purchase
amount. The redemption within two years of Class A shares purchased at net asset
value  under  the  Large  Order  NAV  Purchase  Privilege  may be  subject  to a
contingent  deferred  sales  charge (see  "Purchase  of Shares -- Initial  Sales
Charge  Alternative  -- Class A Shares")  and the  redemption  of Class B shares
within six years may be subject  to a  contingent  deferred  sales  charge  (see
"Contingent  Deferred  Sales Charge -- Class B Shares" below) and the redemption
of Class C shares within the first year  following  purchase may be subject to a
contingent deferred sales charge (see "Contingent Deferred Sales Charge -- Class
C Shares" below).

Because of the high cost of maintaining  small accounts,  the Funds may assess a
quarterly  fee of $9 on an account with a balance  below $1,000 for the quarter.
The fee will not apply to accounts enrolled in an automatic  investment program,
Individual  Retirement  Accounts or employer  sponsored  employee  benefit plans
using  the  subaccount   record  keeping  system  made  available   through  the
Shareholder Service Agent.

Shareholders  can request the following  telephone  privileges:  expedited  wire
transfer redemptions and EXPRESS-Transfer  transactions (see "Special Features")
and  exchange  transactions  for  individual  and  institutional   accounts  and
pre-authorized  telephone  redemption  transactions  for  certain  institutional
accounts. Shareholders may choose these privileges on the account application or
by contacting the Shareholder Service Agent for appropriate instructions. Please
note that the telephone  exchange  privilege is automatic unless the shareholder
refuses it on the  account  application.  A Fund or its agents may be liable for
any  losses,  expenses  or  costs  arising  out of  fraudulent  or  unauthorized
telephone  requests  pursuant to these privileges  unless the Fund or its agents
reasonably  believe,  based upon reasonable  verification  procedures,  that the
telephone  instructions are genuine.  The shareholder will bear the risk of loss
including loss resulting from fraudulent or unauthorized  transactions,  so 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  (prior  to  the
imposition of any contingent  deferred sales charge) are $50,000 or less and the
proceeds  are  payable to the  shareholder  of record at the  address of record,
normally a  telephone  request or a written  request by any one  account  holder
without 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 account holder or guardian account holder by
written instruction to the Shareholder Service Agent with signatures guaranteed.
Telephone  requests may be made by calling  1-800-621-1048.  Shares purchased by
check or through  EXPRESS-Transfer  or Bank  Direct  Deposit may not be redeemed
under this privilege of redeeming shares by telephone  request until such shares
have been owned for at least 10 days.  This  privilege  of  redeeming  shares by
telephone request or by written request without a signature guarantee may not be
used to  redeem  shares  held in  certificated  form  and may not be used if the
shareholder's account has had an address change within 30 days of the redemption
request.  During periods when it is difficult to contact the Shareholder Service
Agent  by  telephone,  it  may be  difficult  to use  the  telephone  redemption
privilege,  although  investors can still redeem by mail.  The Funds reserve the
right to terminate or modify this privilege at any time.

REPURCHASES   (CONFIRMED   REDEMPTIONS).   A  request  for   repurchase  may  be
communicated  by a shareholder  through a securities  dealer or other  financial
services firm to KDI, which a Fund has authorized to act as its agent.  There is
no charge by KDI with respect to  repurchases;  however,  dealers or other firms
may charge



customary  commissions for their services.  Dealers and other financial services
firms are obligated to transmit orders  promptly.  The repurchase  price will be
the net asset value next determined after receipt of a request by KDI.  However,
requests  for  repurchases  received  by  dealers  or other  firms  prior to the
determination  of net asset value (see "Net Asset  Value")  and  received by KDI
prior to the  close of KDI's  business  day will be  confirmed  at the net asset
value  effective  on that day. The offer to  repurchase  may be suspended at any
time.  Requirements  as to stock  powers,  certificates,  payments  and delay of
payments are the same as for redemptions.

EXPEDITED   WIRE  TRANSFER   REDEMPTIONS.   If  the  account  holder  has  given
authorization for expedited wire redemption to the account holder's brokerage or
bank account, shares of a Fund can be redeemed and proceeds sent by federal wire
transfer to a single  previously  designated  account.  Requests received by the
Shareholder  Service  Agent prior to the  determination  of net asset value will
result in shares  being  redeemed  that day at the net asset value  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  Scudder
Kemper  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 Funds are not responsible for the
efficiency of the federal wire system or the account holder's financial services
firm or bank.  The Funds  currently  do not charge the  account  holder for wire
transfers.  The account  holder is  responsible  for any charges  imposed by the
account  holder's  firm or  bank.  There  is a $1,000  wire  redemption  minimum
(including  any  contingent  deferred  sales  charge).  To change the designated
account to  receive  wire  redemption  proceeds,  send a written  request to the
Shareholder  Service  Agent with  signatures  guaranteed  as described  above or
contact  the firm  through  which  shares  of the Fund  were  purchased.  Shares
purchased by check or through EXPRESS-Transfer or Bank Direct Deposit may not be
redeemed  by wire  transfer  until such  shares  have been owned for at least 10
days.  Account  holders  may not use this  privilege  to redeem  shares  held in
certificated   form.  During  periods  when  it  is  difficult  to  contact  the
Shareholder Service Agent by telephone, it may be difficult to use the expedited
wire transfer redemption privilege.  The Funds reserve the right to terminate or
modify this privilege at any time.

CONTINGENT  DEFERRED  SALES  CHARGE -- LARGE  ORDER NAV  PURCHASE  PRIVILEGE.  A
contingent  deferred  sales  charge may be imposed  upon  redemption  of Class A
shares  that are  purchased  under the Large  Order NAV  Purchase  Privilege  as
follows:  1% if they are redeemed  within one year of purchase and 0.50% 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  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 a 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 whose
dealer of  record at the time of the  investment  notifies  KDI that the  dealer
waives the commission applicable to such Large Order NAV Purchase.

CONTINGENT  DEFERRED SALES CHARGE -- CLASS B SHARES. A contingent deferred sales
charge may be imposed upon redemption of Class B shares. There is no such charge
upon  redemption of any share  appreciation  or reinvested  dividends on Class B
shares.  The charge is computed at the  following  rates applied to the value of
the shares redeemed excluding amounts not subject to the charge.

                                                           Contingent Deferred
Year Of Redemption After Purchase                             Sales Charge
- ---------------------------------                             ------------

First......................................................        4%
Second.....................................................        3%



Third......................................................        3%
Fourth.....................................................        2%
Fifth......................................................        2%
Sixth......................................................        1%

The  contingent  deferred  sales charge will be waived:  (a) in the event of the
total disability (as evidenced by a determination by the federal Social Security
Administration)  of  the  shareholder   (including  a  registered  joint  owner)
occurring after the purchase of the shares being  redeemed,  (b) in the event of
the death of the  shareholder  (including a  registered  joint  owner),  (c) for
redemptions made pursuant to a systematic withdrawal plan (see "Special Features
- -- Systematic  Withdrawal Plan" below), (d) for redemptions made pursuant to any
IRA systematic  withdrawal based on the shareholder's life expectancy including,
but not limited to,  substantially equal periodic payments described in Internal
Revenue Code Section 72(t)(2)(A)(iv) prior to age 59 1/2 and (e) for redemptions
to satisfy required minimum  distributions  after age 70 1/2 from an IRA account
(with the  maximum  amount  subject  to this  waiver  being  based only upon the
shareholder's  Kemper IRA accounts).  The contingent  deferred sales charge will
also be waived in connection  with the following  redemptions  of shares held by
employer  sponsored  employee benefit plans maintained on the subaccount  record
keeping system made available by the Shareholder  Service Agent: (a) redemptions
to satisfy  participant loan advances (note that loan repayments  constitute new
purchases  for  purposes  of  the  contingent  deferred  sales  charge  and  the
conversion   privilege),   (b)   redemptions  in  connection   with   retirement
distributions  (limited at any one time to 10% of the total value of plan assets
invested in a Fund), (c) redemptions in connection with distributions qualifying
under the hardship  provisions of the Internal  Revenue Code and (d) redemptions
representing returns of excess contributions to such plans.

CONTINGENT  DEFERRED SALES CHARGE -- CLASS C SHARES. A contingent deferred sales
charge  of 1% may be  imposed  upon  redemption  of Class C  shares  if they are
redeemed  within  one year of  purchase.  The charge  will not be  imposed  upon
redemption of reinvested dividends 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:  (a) in the event of the
total disability (as evidenced by a determination by the federal Social Security
Administration)  of  the  shareholder   (including  a  registered  joint  owner)
occurring after the purchase of the shares being  redeemed,  (b) in the event of
the death of the  shareholder  (including a  registered  joint  owner),  (c) for
redemptions made pursuant to a systematic withdrawal plan (limited to 10% of the
net asset value of the account during the first year,  see "Special  Features --
Systematic  Withdrawal  Plan"),  (d) for  redemptions  made  pursuant to any IRA
systematic withdrawal based on the shareholder's life expectancy including,  but
not limited to,  substantially  equal  periodic  payments  described in Internal
Revenue Code Section 72(t)(2)(A)(iv) prior to age 59 1/2, (e) for redemptions to
satisfy  required  minimum  distributions  after age 70 1/2 from an IRA  account
(with the  maximum  amount  subject  to this  waiver  being  based only upon the
shareholder's Kemper IRA accounts), (f) for any participant-directed  redemption
of shares held by employer  sponsored  employee  benefit plans maintained on the
subaccount record keeping system made available by the Shareholder Service Agent
and (g) redemption of shares by an employer sponsored employee benefit plan that
offers  funds in addition to Kemper  Funds and whose dealer of record has waived
the  advance of the first year  administrative  service  and  distribution  fees
applicable to such shares and agrees to receive such fees quarterly.

CONTINGENT  DEFERRED  SALES  CHARGE  --  GENERAL.  The  following  example  will
illustrate the operation of the contingent deferred sales charge. Assume that an
investor makes a single  purchase of $10,000 of a Fund's Class B shares and that
16 months later the value of the shares has grown by $1,000  through  reinvested
dividends and by an additional $1,000 in appreciation to a total of $12,000.  If
the  investor  were  then to redeem  the  entire  $12,000  in share  value,  the
contingent  deferred  sales charge would be payable only with respect to $10,000
because  neither  the  $1,000 of  reinvested  dividends  nor the $1,000 of share
appreciation  is subject to the  charge.  The charge  would be at the rate of 3%
($300) because it was in the second year after the purchase was made.

The rate of the contingent  deferred sales charge is determined by the length of
the period of ownership.  Investments are tracked on a monthly basis. The period
of  ownership  for this  purpose  begins the first day of the month in which the
order for the investment is received.  For example,  an investment made in March
1999 will be eligible for the second year's charge if redeemed on or after March
1, 2000. In the event no specific  order is requested, the



redemption will be made first from shares representing  reinvested dividends and
then from the earliest purchase of shares. KDI receives any contingent  deferred
sales charge directly.

REINVESTMENT  PRIVILEGE. A shareholder who has redeemed Class A shares of a Fund
or any other Kemper Mutual Fund listed under "Special Features -- Class A Shares
- -- 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 Class A shares of the Fund or of
the other listed  Kemper  Mutual  Funds.  A  shareholder  of a Fund or any other
Kemper  Mutual Fund who redeems Class A shares  purchased  under the Large Order
NAV  Purchase  Privilege  (see  "Purchase  of Shares  --  Initial  Sales  Charge
Alternative  -- Class A Shares"),  Class B shares or Class C shares and incurs a
contingent  deferred sales charge may reinvest up to the full amount redeemed at
net  asset  value at the time of the  reinvestment  in Class A  shares,  Class B
shares  or Class C  shares,  as the case  may be,  of a Fund or 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  who has  redeemed  shares  may  reinvest  up to the full  amount
redeemed,  less any  applicable  contingent  deferred sales charge that may have
been imposed upon the  redemption of such shares,  at net asset value in Class A
shares of a Fund or of the other  Kemper  Mutual  Funds  listed  under  "Special
Features  --  Class A Shares  --  Combined  Purchases."  Purchases  through  the
reinvestment  privilege  are  subject  to the  minimum  investment  requirements
applicable to the shares being  purchased and may only be made for Kemper Mutual
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 a postponement of
the recognition of such loss for federal income tax purposes.  The  reinvestment
privilege may be terminated or modified at any time.

SPECIAL FEATURES

CLASS  A  SHARES  --  COMBINED  PURCHASES.  A  Fund's  Class  A  shares  (or the
equivalent)  may be purchased  at the rate  applicable  to the discount  bracket
attained by  combining  concurrent  investments  in Class A shares of any of the
following funds: Kemper 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 Strategic Income Fund,
Kemper  High Yield  Series,  Kemper  U.S.  Government  Securities  Fund,  Kemper
International Fund, Kemper State Tax-Free Income Series,  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 Value Series,  Inc., Kemper Value Plus Growth Fund, Kemper Horizon
Fund,  Kemper Europe Fund,  Kemper Asian Growth Fund,  Kemper  Aggressive Growth
Fund, Kemper  Global/International  Series,  Inc.,  Kemper Equity Trust,  Kemper
Income Trust,  Kemper Funds Trust,  and Kemper  Securities Trust ("Kemper Mutual
Funds").  Except as noted below, there is no combined purchase credit for direct
purchases of shares of Zurich  Money Funds,  Cash  Equivalent  Fund,  Tax-Exempt
California Money Market Fund, Cash Account Trust,  Investors Municipal Cash Fund
or Investors Cash Trust ("Money Market Funds"), which are not considered "Kemper
Mutual  Funds" for  purposes  hereof.  For  purposes of the  Combined  Purchases
feature  described  above as well as for the  Letter  of Intent  and  Cumulative
Discount features  described below,  employer  sponsored  employee benefit plans
using  the  subaccount   record  keeping  system  made  available   through  the
Shareholder Service Agent may include:  (a) Money Market Funds as "Kemper Mutual
Funds", (b) all classes of shares of any Kemper Mutual Fund and (c) the value of
any other plan investments, such as guaranteed investment contracts and employer
stock, maintained on such subaccount record keeping system.

CLASS A SHARES -- LETTER OF INTENT.  The same reduced  sales charges for Class A
shares,  as shown in the  applicable  prospectus,  also  apply to the  aggregate
amount of  purchases  of such  Kemper  Mutual  Funds  listed  above  made by any
purchaser  within a 24-month period under a written Letter of Intent  ("Letter")
provided by KDI. The Letter,  which  imposes no  obligation  to purchase or sell
additional Class A shares,  provides for a price  adjustment  depending upon the
actual amount purchased  within such period.  The Letter provides that the first
purchase following  execution of the Letter must be at least 5% of the amount of
the  intended  purchase,  and that 5%



of the amount of the intended  purchase  normally  will be held in escrow in the
form of  shares  pending  completion  of the  intended  purchase.  If the  total
investments  under the Letter  are less than the  intended  amount  and  thereby
qualify only for a higher  sales  charge than  actually  paid,  the  appropriate
number of escrowed shares are redeemed and the proceeds used toward satisfaction
of the obligation to pay the increased sales charge.  The Letter for an employer
sponsored  employee  benefit plan  maintained on the  subaccount  record keeping
system  available  through  the  Shareholder  Service  Agent  may  have  special
provisions  regarding  payment of any increased  sales charge  resulting  from a
failure to complete the intended  purchase under the Letter.  A shareholder  may
include the value (at the maximum  offering  price) of all shares of such Kemper
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.  Only investments in Class A shares of a
Fund are included for this privilege.

CLASS A SHARES --  CUMULATIVE  DISCOUNT.  Each Fund's Class A 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 Class A 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.

CLASS A SHARES  --  AVAILABILITY  OF  QUANTITY  DISCOUNTS.  An  investor  or the
investor's  dealer or other financial  services firm must notify the Shareholder
Service  Agent or KDI  whenever a quantity  discount or reduced  sales charge is
applicable to a purchase. Upon such notification,  the investor will receive the
lowest  applicable  sales  charge.  Quantity  discounts  described  above may be
modified or terminated at any time.

EXCHANGE  PRIVILEGE.  Shareholders  of Class A,  Class B and Class C shares  may
exchange  their  shares for shares of the  corresponding  class of other  Kemper
Mutual Funds in accordance with the provisions below.

CLASS A SHARES.  Class A shares of the  Kemper  Mutual  Funds and  shares of the
Money Market Funds listed under "Special  Features -- Class A Shares -- Combined
Purchases"  above may be  exchanged  for each other at their  relative net asset
values.  Shares of Money  Market Funds and 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.  Series of Kemper Target
Equity Fund are available on exchange  only during the offering  period for such
series as  described in the  applicable  prospectus  or statement of  additional
information. Cash Equivalent Fund, Tax-Exempt California Money Market Fund, Cash
Account  Trust,  Investors  Municipal  Cash Fund and  Investors  Cash  Trust are
available  on  exchange  but only  through a  financial  services  firm having a
services agreement with KDI.

Class A shares of a Fund purchased under the Large Order NAV Purchase  Privilege
may be  exchanged  for Class A shares of another  Kemper  Mutual Fund or a Money
Market Fund under the exchange  privilege  described  above  without  paying any
contingent deferred sales charge at the time of exchange.  If the Class A 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.

CLASS B SHARES.  Class B shares of a Fund and Class B shares of any other Kemper
Mutual  Fund  listed  under  "Special  Features  -- Class A Shares  --  Combined
Purchases"  may be exchanged for each other at their  relative net asset values.
Class B shares may be exchanged  without any  contingent  deferred  sales charge
being imposed at the time of exchange.  For purposes of the contingent  deferred
sales  charge  that may be  imposed  upon the  redemption  of the Class B shares
received on exchange,  amounts exchanged retain their original cost and purchase
date.

CLASS C SHARES.  Class C shares of a Fund and Class C shares of any other Kemper
Mutual  Fund  listed  under  "Special  Features  -- Class A Shares  --  Combined
Purchases"  may be exchanged for each other at their  relative net asset values.
Class C shares may be exchanged without a contingent deferred sales charge being
imposed at the time of exchange.  For determining  whether there is a contingent
deferred  sales  charge that may be imposed upon the  redemption  of the Class C
shares received by exchange,  the cost and purchase date of the shares that were
originally purchased and exchanged are retained.



GENERAL.  Shares of a Kemper  Mutual  Fund with a value in excess of  $1,000,000
(except  Kemper Cash Reserves  Fund)  acquired by exchange  from another  Kemper
Mutual Fund, or from a Money Market Fund, may not be exchanged  thereafter until
they have been owned for 15 days (the "15 Day Hold  Policy").  Effective June 1,
1999, each fund reserves the right to invoke the 15-Day Hold Policy for accounts
of $1,000,000 or less if, in the investment  manager's  judgement,  the exchange
activity may have an adverse  effect on the fund.  In  particular,  a pattern of
exchanges that coincides  with a "market  timing"  strategy may be disruptive to
the fund and therefore may be subject to the 15 Day Hold Policy.

For  purposes  of  determining  whether  the 15 Day  Hold  Policy  applies  to a
particular  exchange,  the value of the shares to be exchanged shall be computed
by aggregating the value of shares being exchanged for all accounts under common
control,   direction  or  advice,   including   without   limitation,   accounts
administered  by  a  financial  services  firm  offering  market  timing,  asset
allocation or similar  services.  The total value of shares being exchanged must
at least equal the minimum investment  requirement of the Kemper Fund into which
they are being exchanged.  Exchanges are made based on relative dollar values of
the shares  involved in the  exchange.  There is no service fee for an exchange;
however,  dealers  or other  firms may charge for their  services  in  effecting
exchange transactions. Exchanges will be effected by redemption of shares of the
fund held and  purchase  of shares of the other  fund.  For  federal  income tax
purposes,  any such exchange constitutes a sale upon which a gain or loss may be
realized, depending upon whether the value of the shares being exchanged is more
or less than the shareholder's adjusted cost basis of such shares.  Shareholders
interested in exercising the exchange  privilege may obtain  prospectuses of the
other funds from dealers, other firms or KDI. Exchanges may be accomplished by a
written request to KSvC, Attention: Exchange Department, P.O. Box 419557, Kansas
City,  Missouri  64141-6557,  or by  telephone  if  the  shareholder  has  given
authorization.  Once the authorization is on file, the Shareholder Service Agent
will honor requests by telephone at  1-800-621-1048,  subject to the limitations
on liability  under  "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 implement the telephone  exchange  privilege.
The  exchange  privilege  is not a right  and may be  suspended,  terminated  or
modified  at any time.  Exchanges  may only be made for  Kemper  Funds  that are
eligible for sale in the shareholder's state of residence.  Currently Tax-Exempt
California  Money Market Fund is available for sale only in  California  and the
portfolios  of  Investors  Municipal  Cash Fund are  available  for sale only in
certain states.

SYSTEMATIC EXCHANGE  PRIVILEGE.  The owner of $1,000 or more of any class of the
shares of a Kemper  Mutual Fund or Money Market Fund may authorize the automatic
exchange of a specified  amount ($100  minimum) of such shares for shares of the
same class of another such Kemper  Fund.  If  selected,  exchanges  will be made
automatically  until the privilege is terminated by the shareholder or the other
Kemper Fund.  Exchanges are subject to the terms and conditions  described above
under  "Exchange   Privilege,"   except  that  the  $1,000  minimum   investment
requirement  for the Kemper Fund  acquired on exchange is not  applicable.  This
privilege may not be used for the exchange of shares held in certificated form.

EXPRESS-TRANSFER.  EXPRESS-Transfer  permits  the  transfer  of  money  via  the
Automated  Clearing  House  System  (minimum  $100 and  maximum  $5,000)  from a
shareholder's bank, savings and loan, or credit union account to purchase shares
in the Fund.  Shareholders  can also  redeem  shares  (minimum  $100 and maximum
$50,000)  from their Fund  account  and  transfer  the  proceeds  to their bank,
savings and loan, or credit union checking account. Shares purchased by check or
through  EXPRESS-Transfer  or Bank Direct Deposit may not be redeemed under this
privilege  until such shares have been owned for at least 10 days.  By enrolling
in EXPRESS-Transfer, the shareholder authorizes the Shareholder Service Agent to
rely upon  telephone  instructions  from ANY PERSON to  transfer  the  specified
amounts  between the  shareholder's  Fund  account and the  predesignated  bank,
savings  and  loan or  credit  union  account,  subject  to the  limitations  on
liability  under  "Redemption or Repurchase of Shares -- General." Once enrolled
in EXPRESS-Transfer,  a shareholder can initiate a transaction by calling 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  KSvC,  P.O.  Box  419415,  Kansas  City,  Missouri
64141-6415. Termination will become effective as soon as the Shareholder Service
Agent has had a reasonable time to act upon the request. EXPRESS-Transfer cannot
be used  with  passbook  savings  accounts  or for  tax-deferred  plans  such as
Individual Retirement Accounts ("IRAs").



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

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

SYSTEMATIC  WITHDRAWAL  PLAN. The owner of $5,000 or more of a class of a Fund's
shares at the  offering  price (net  asset  value  plus,  in the case of Class A
shares,  the initial  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.  The  maximum  annual  rate at which Class B
shares may be redeemed (and Class A shares  purchased  under the Large Order NAV
Purchase  Privilege  and  Class C  shares  in their  first  year  following  the
purchase)  under a systematic  withdrawal  plan is 10% of the net asset value of
the  account.  Shares  are  redeemed  so that the  payee  will  receive  payment
approximately the first of the month. Any income and capital gain dividends will
be automatically  reinvested at net asset value. A sufficient number of full and
fractional  shares will be redeemed to make the  designated  payment.  Depending
upon the size of the payments  requested and fluctuations in the net asset value
of the shares redeemed,  redemptions for the purpose of making such payments may
reduce or even exhaust the account.

The purchase of Class A 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 Funds will not knowingly permit additional  investments of
less  than  $2,000  if  the  investor  is at the  same  time  making  systematic
withdrawals.  KDI will waive the contingent  deferred sales charge on redemption
of Class A shares purchased under the Large Order NAV Purchase Privilege,  Class
B shares and Class C shares made pursuant to a systematic  withdrawal  plan. The
right is reserved to amend the  systematic  withdrawal  plan on 30 days' notice.
The plan may be terminated at any time by the investor or the Funds.

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

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

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

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



Brochures  describing  the above plans as well as model defined  benefit  plans,
target benefit plans, 457 plans, 401(k) plans, SIMPLE 401(k) plans and materials
for  establishing  them are available  from the  Shareholder  Service Agent upon
request.  The  brochures  for plans with IFTC as custodian  describe the current
fees payable to IFTC for its services as  custodian.  Investors  should  consult
with their own tax advisers before establishing a retirement plan.

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

Scheduled  variations  in or the  elimination  of the initial  sales  charge for
purchases  of  Class A  shares  or the  contingent  deferred  sales  charge  for
redemptions  of Class B or Class C shares  by  certain  classes  of  persons  or
through certain types of transactions as described  herein are provided  because
of anticipated economies in sales and sales-related efforts.

A Fund may suspend the right of redemption or delay payment more than seven days
(a) during any period when the New York Stock  Exchange  ("Exchange")  is closed
other than customary  weekend and holiday closings or during any period in which
trading on the Exchange is  restricted,  (b) during any period when an emergency
exists  as a result  of  which  (i)  disposal  of a  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 a
Fund's shareholders.

Although it is each of the Asian,  Europe and Global  Funds'  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 so liquid as a redemption entirely in cash. Each of the Asian, Europe and
Global  Funds 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.

The  conversion  of Class B  shares  to Class A  shares  may be  subject  to the
continuing availability of an opinion of counsel, ruling by the Internal Revenue
Service or other  assurance  acceptable  to each Fund to the effect that (a) the
assessment of the  distribution  services fee with respect to Class B shares and
not  Class A  shares  does  not  result  in the  Fund's  dividends  constituting
"preferential  dividends"  under the  Internal  Revenue  Code,  and (b) that the
conversion  of Class B shares to Class A shares  does not  constitute  a taxable
event under the Internal Revenue Code. The conversion of Class B shares to Class
A shares may be suspended if such assurance is not available.  In that event, no
further  conversions of Class B shares would occur, and shares might continue to
be subject to the  distribution  services fee for an indefinite  period that may
extend beyond the proposed conversion date as described herein.

OFFICERS AND TRUSTEES

The  officers  and  trustees of each Fund,  their  birthdates,  their  principal
occupations and their affiliations,  if any, with Scudder Kemper, the investment
manager,   Scudder  UK,  the  sub-adviser  of  the  Funds,  and  KDI,  principal
underwriter,  are listed  below.  All persons  named as  trustees  also serve in
similar capacities for other funds advised by Scudder Kemper.

TRUSTEES--ASIAN, GLOBAL AND INTERNATIONAL FUNDS

LEWIS A. BURNHAM  (1/8/33),  Trustee,  16410 Avila  Boulevard,  Tampa,  Florida;
Retired; formerly,  Partner, Business Resources Group; formerly,  Executive Vice
President, Anchor Glass Container Corporation.



DONALD L. DUNAWAY (3/8/37),  Trustee,  7515 Pelican Bay Blvd., Naples,  Florida;
Retired;   formerly,   Executive  Vice  President,   A.  O.  Smith   Corporation
(diversified manufacturer).

ROBERT B. HOFFMAN (12/11/36), Trustee, 800 North Lindbergh Boulevard, St. Louis,
Missouri;   Vice  Chairman  and  Chief  Financial   Officer,   Monsanto  Company
(agricultural,  pharmaceutical and  nutritional/food  products);  prior thereto,
Vice President, Head of International Operations,  FMC Corporation (manufacturer
of machinery and chemicals).

DONALD R. JONES  (1/17/30),  Trustee,  182 Old Wick Lane,  Inverness,  Illinois;
Retired;  Director,  Motorola,  Inc.  (manufacturer of electronic  equipment and
components);  formerly,  Executive Vice President and Chief  Financial  Officer,
Motorola, Inc.

THOMAS  W.  LITTAUER  (4/26/55),  Trustee*,  Two  International  Place,  Boston,
Massachusetts;  Managing  Director,  Scudder  Kemper;  formerly,  Head of Broker
Dealer Division of an unaffiliated investment management firm during 1997; prior
thereto,  President of Client Management Services of an unaffiliated  investment
management firm from 1991 to 1996.

SHIRLEY D. PETERSON (9/3/41), Trustee, 401 Rosemont Avenue, Frederick, Maryland;
President, Hood College; formerly, Partner, Steptoe & Johnson (attorneys); prior
thereto,  Commissioner,  Internal  Revenue  Service;  prior  thereto,  Assistant
Attorney General, U.S. Department of Justice; Director, Bethlehem Steel Corp.

DANIEL PIERCE (3/18/34), Trustee*, 345 Park Avenue, New York, New York; Chairman
of the Board and Managing Director,  Scudder Kemper;  Director,  Fiduciary Trust
Company and Fiduciary Company Incorporated.

WILLIAM P. SOMMERS  (7/22/33),  Trustee,  24717 Harbour View Drive,  Ponte Vedra
Beach,  Florida;  Consultant  and  Director,  SRI  International  (research  and
development);   prior  thereto,  President  and  Chief  Executive  Officer,  SRI
International;   prior  thereto,  Executive  Vice  President,  Iameter  (medical
information  and  educational  service  provider);  prior  thereto,  Senior Vice
President and Director,  Booz,  Allen & Hamilton,  Inc.  (management  consulting
firm) ; Director, PSI Inc., Evergreen Solar, Inc., and Litton Industries.

TRUSTEES--EUROPE FUND

JAMES E. AKINS  (10/15/26),  Trustee,  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, 1973-1976.

ARTHUR R. GOTTSCHALK  (2/13/25),  Trustee,  10642 Brookridge  Drive,  Frankfort,
Illinois;  Retired;  formerly,  President,  Illinois Manufacturers  Association;
Trustee,  Illinois  Masonic  Medical Center;  formerly,  Illinois State Senator;
formerly, Vice President, The Reuben H. Donnelley Corp.; formerly, attorney.

FREDERICK T. KELSEY (4/25/27),  Trustee,  4010 Arbor Lane, Unit 102, Northfield,
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 Northern  Institutional Funds; formerly,
Trustee of the Pilot Funds.

THOMAS  W.  LITTAUER  (4/26/55),  Trustee*,  Two  International  Place,  Boston,
Massachusetts;  Managing  Director,  Scudder  Kemper;  formerly,  Head of Broker
Dealer Division of an unaffiliated investment management firm during 1997; prior
thereto,  President of Client Management Services of an unaffiliated  investment
management firm from 1991 to 1996.

DANIEL PIERCE (3/18/34), Trustee*, 345 Park Avenue, New York, New York; Chairman
of the Board and Managing Director,  Scudder Kemper;  Director,  Fiduciary Trust
Company and Fiduciary Company Incorporated.



FRED B.  RENWICK  (2/1/30),  Trustee,  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; formerly, member of the Investment Committee
of  Atlanta  University  Board  of  Trustees;  formerly,  Director  of  Board of
Pensions, Evangelical Lutheran Church in America.

JOHN B. TINGLEFF (5/4/35), Trustee, 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,  311 Spring Lake,
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, Inc.

OFFICERS -- ALL FUNDS

MARK S. CASADY  (9/21/60),  President*,  345 Park  Avenue,  New York,  New York;
Managing Director, Scudder Kemper.

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

THOMAS W. LITTAUER (4/26/55), Vice President*,  Two International Place, Boston,
Massachusetts; Managing Director, Scudder Kemper.

ANN M. McCREARY (11/6/56), Vice President*, 345 Park Avenue, New York, New York;
Senior Vice President, Scudder Kemper.

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

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

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

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

CAROLINE  PEARSON  (4/1/62),  Assistant  Secretary*,  Two  International  Place,
Boston, Massachusetts; Senior Vice President, Scudder Kemper.

MAUREEN  E. KANE  (2/14/62),  Assistant  Secretary*,  Two  International  Place,
Boston, Massachusetts; Vice President, Scudder Kemper.

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

Additional Officer for Global Fund only:

ROBERT C. PECK, JR.  (10/1/46),  Vice  President*,  222 South  Riverside  Plaza,
Chicago, Illinois;  Managing Director, Scudder Kemper; formerly,  Executive Vice
President  and  Chief  Investment   Officer  with  an  unaffiliated   investment
management firm from 1988 to June 1997.

Additional Officers for Asian Fund only:



THERESA GUSMAN (2/29/60), Vice President*,  345 Park Avenue, New York, New York;
Senior Vice President, Scudder Kemper.

CORNELIA M. SMALL  (7/28/44),  Vice President*,  345 Park Avenue,  New York, New
York; Managing Director, Scudder Kemper.

Additional Officers for Europe Fund only:

CORNELIA M. SMALL*, See above.

Additional Officers for International Fund only:

STEPHEN P. DEXTER, Vice President*,  345 Park Avenue, New York, New York; Senior
Vice President, Scudder Kemper.

CORNELIA M. SMALL*, See above.

*    Interested  persons of the Fund 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 Funds.  The tables below shows amounts paid or
accrued to those trustees who are not  designated  "interested  persons"  during
each Fund's 1998 fiscal year except that the  information  in the last column is
for calendar year 1998.

Trustees -- Asian, Global and International Funds




                                           Aggregate Compensation From Funds            Total Compensation
                                                                                      From Funds and Kemper
                                                                                           Fund Complex
Name of Trustee                      Asian          Global           International      Paid To Trustees**
- ---------------                      -----          ------           -------------      ------------------

                                                                                
Lewis A. Burnham.............         $400          $2,000              $3,300              $126,100
Donald L. Dunaway*...........         $400          $2,200              $3,600              $135,000
Robert B. Hoffman............         $400          $1,900              $3,200              $116,100
Donald R. Jones..............         $400          $2,100              $3,400              $129,600
Shirley D. Peterson..........         $400          $1,800              $3,000              $108,800
William P. Sommers...........         $400          $1,800              $3,000              $108,800


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

*    Includes deferred fees. Pursuant to deferred  compensation  agreements with
     the funds,  deferred amounts accrue interest monthly at a rate equal to the
     yield of Zurich Money Funds -- Zurich Money  Market  Fund.  Total  deferred
     fees  (including   interest   thereon)  payable  from  Asian,   Global  and
     International  Funds,  respectively  are $0,  $16,200  and  $18,000 for Mr.
     Dunaway.

 **  Includes  compensation for service on the boards of 26 Kemper funds with 48
     fund  portfolios.  Each trustee  currently serves as a trustee of 26 Kemper
     Funds with 45 fund portfolios.

Trustees -- Europe Fund




                                                         Aggregate          Total Compensation From Kemper
                                                        Compensation              Fund Complex Paid
                 Name Of Trustee                         From Fund               To Board Members(2)
                 ---------------                         ---------               -------------------

                                                                                
James E. Akins...............................             $1,700                      $130,000
Arthur R. Gottschalk(1)......................             $1,800                      $133,200



Frederick T. Kelsey..........................             $1,700                      $130,500
Fred B. Renwick..............................             $1,700                      $130,500
John B. Tingleff.............................             $1,800                      $134,800
John G. Weithers.............................             $1,800                      $134,800


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

(1)  Includes deferred fees. Pursuant to deferred  compensation  agreements with
     the fund,  deferred  amounts accrue interest monthly at a rate equal to the
     yield of Zurich Money  Funds--Zurich Money Market Fund. Total deferred fees
     (including  interest  thereon)  payable  from the fund are  $3,700  for Mr.
     Gottschalk.

(2)  Includes  compensation for service on the Boards of 15 Kemper Funds with 53
     fund  portfolios.  Each  trustee  currently  serves as a board member of 15
     Kemper funds with 53 fund portfolios.

As of January 29, 1999,  the trustees and officers as a group owned less than 1%
of the then  outstanding  shares of each Fund and no person owned of record more
than 5% of the outstanding  shares of any class of either Fund,  except as shown
below:




Kemper International Fund
- -------------------------

Name and Address                                         Class                          Percentage
- ----------------                                         -----                          ----------

                                                                                     
National Financial Svcs Corp.,                             C                               5.07
200 Liberty Street
New York, NY  10281

Kemper Europe Fund
- ------------------


Name and Address                                         Class                          Percentage
- ----------------                                         -----                          ----------

National Financial Svcs Corp.,                             A                               8.27
200 Liberty Street
New York, NY  10281

Donaldson Lufkin Jenrette                                  A                               6.14
1 Pershin Plaza
Jersey City, NJ  07399

National Financial Svcs Corp.,                             B                               7.04
200 Liberty Street
New York, NY  10281

Donaldson Lufkin Jenrette                                  B                               6.70
1 Pershin Plaza
Jersey City, NJ  07399

Lincoln Trust Company                                      B                               5.09
Attn: 1900 Monarch Tower
3424 Peachtree Road NE
Atlanta, GA  30326

National Financial Svcs Corp.,                             C                               7.42
200 Liberty Street
New York, NY  10281



Donaldson Lufkin Jenrette                                  C                               9.90
1 Pershin Plaza
Jersey City, NJ  07399

Sterling Trust Co.                                         C                               5.89
LM Kohn & Company
9810 Montgomery Road
Cincinnati, OH  45242

Kemper Global Income Fund
- -------------------------


Name and Address                                         Class                          Percentage
- ----------------                                         -----                          ----------

National Financial Svcs Corp.,                             A                               6.46
200 Liberty Street
New York, NY  10281

Everen Securities Inc.                                     A                               8.29
77 W. Wacker Drive
Chicago, IL  60601

National Financial Svcs Corp.,                             B                               6.73
200 Liberty Street
New York, NY  10281

Everen Securities Inc.                                     B                              16.86
77 W. Wacker Drive
Chicago, IL  60601

Donaldson Lufkin Jenrette                                  C                              46.32
1 Pershin Plaza
Jersey City, NJ  07399

MLPF&S for the sole Benefit of ITS                         C                              17.56
Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL  32246


Kemper Asian Growth
- -------------------


Name and Address                                         Class                          Percentage
- ----------------                                         -----                          ----------

National Financial Svcs Corp.,                             A                               7.09
200 Liberty Street
New York, NY  10281

National City Bank of Pennsylvania                         A                               7.36
McKeesport Healthcare Pension



P.O. Box 94984
Cleveland, OH  44101

National Financial Svcs Corp.,                             B                              12.18
200 Liberty Street
New York, NY  10281

A.G. Edwards & Sons Inc.                                   C                               7.10
1 N. Jefferson Avenue
St. Louis, MO  63103

Coldstream Capital LLC                                     C                               5.35
811 North Rexford Drive
Beverly Hills, CA  90210


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

*    Record and beneficial owner.

**   Record owner only.

SHAREHOLDER RIGHTS

The Funds are open-end management  investment  companies,  organized as separate
business trusts under the laws of Massachusetts. The Asian and Europe Funds were
each organized as a business trust under the laws of  Massachusetts  on June 12,
1995.  The  Global  Fund was  organized  as a business  trust  under the laws of
Massachusetts  on August 3, 1988.  The  International  Fund was  organized  as a
business  trust  under  the laws of  Massachusetts  on  October  24,  1985  and,
effective January 31, 1986, that Fund pursuant to a reorganization  succeeded to
the  assets and  liabilities  of Kemper  International  Fund,  Inc.,  a Maryland
corporation organized in 1980.

The Asian Fund and the Global  Fund each may in the future  seek to achieve  its
investment objective by pooling its assets with assets of other mutual funds for
investment in another  investment  company having the same investment  objective
and  substantially  the same investment  policies and restrictions as such Fund.
The  purpose  of  such  an  arrangement  is  to  achieve   greater   operational
efficiencies  and to  reduce  costs.  It is  expected  that any such  investment
company will be managed by Scudder  Kemper in  substantially  the same manner as
the corresponding  Fund.  Shareholders of a Fund will be given at least 30 days'
prior notice of any such investment,  although they will not be entitled to vote
on the action.  Such investment would be made only if the Trustees  determine it
to be in the best interests of the respective Fund and its shareholders.

Each Fund may issue an unlimited number of shares of beneficial  interest in one
or more series or "Portfolios," all having no par value, which may be divided by
the Board of  Trustees  into  classes of shares.  While only  shares of a single
Portfolio  are presently  being  offered by each Fund,  the Board of Trustees of
each Fund may  authorize  the  issuance of  additional  classes  and  additional
Portfolios if deemed desirable, each with its own investment objective, policies
and restrictions.  Since the Funds may offer multiple Portfolios,  each is known
as a "series company."  Currently,  each Fund offers four classes of shares of a
single  Portfolio.  These  are Class A,  Class B and Class C shares,  as well as
Class I shares, which have different expenses, which may affect performance, and
that are available for purchase  exclusively  by the  following  investors:  (a)
tax-exempt  retirement  plans of Scudder Kemper and its affiliates;  and (b) the
following  investment  advisory  clients  of Scudder  Kemper and its  investment
advisory  affiliates that invest at least $1 million in a Fund: (1) unaffiliated
benefit  plans (other than  individual  retirement  accounts  and  self-directed
retirement plans); (2) unaffiliated banks and insurance companies purchasing for
their  own  accounts;  and  (3)  endowment  funds  of  unaffiliated   non-profit
organizations.  Shares of a Fund have equal  noncumulative  voting rights except
that Class B and Class C shares have separate and  exclusive  voting rights with
respect to each  Fund's  Rule 12b-1  Plan.  Shares of each class also have equal
rights with respect to dividends, assets



and liquidation of such Fund subject to any preferences  (such as resulting from
different Rule 12b-1 distribution  fees), rights or privileges of any classes of
shares of a Fund.  Shares  are fully paid and  nonassessable  when  issued,  are
transferable  without  restriction and have no preemptive or conversion  rights.
The Funds are not required to hold annual shareholder meetings and do not intend
to do so.  However,  they 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 each Fund,  shareholders may remove trustees.  If shares
of more than one Portfolio are outstanding,  shareholders will vote by Portfolio
and not in the  aggregate  or by class  except when voting in the  aggregate  is
required under the Investment  Company Act of 1940,  such as for the election of
trustees, or when voting by class is appropriate.

The Funds  generally  are not required to hold  meetings of their  shareholders.
Under the  Agreement  and  Declaration  of Trust of each Fund  ("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 Fund or a class to the  extent and as  provided  in the
Declaration of Trust;  (d) any amendment of the Declaration of Trust (other than
amendments  changing the name of the Fund,  supplying any  omission,  curing any
ambiguity or curing,  correcting or supplementing  any defective or inconsistent
provision  thereof);  and (e) such additional matters as may be required by law,
the  Declaration of Trust,  the By-laws of the Fund, or any  registration of the
Fund  with the  Securities  and  Exchange  Commission  or any  state,  or as the
trustees may consider  necessary or desirable.  The shareholders also would vote
upon changes in fundamental investment policies.

Each Fund's activities are supervised by the Fund's Board of Trustees.

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) each  Fund  will hold a
shareholder  meeting  for the  election  of trustees at such time as less than a
majority of the  trustees  have been elected by  shareholders,  and (b) if, as a
result  of a vacancy  in the Board of  Trustees,  less  than  two-thirds  of the
trustees have been elected by the shareholders, that vacancy will be filled only
by a vote of the shareholders.

Trustees  may be removed  from  office by a vote of the holders of a majority of
the outstanding shares at a meeting called for that purpose, which meeting shall
be held upon the  written  request  of the  holders  of not less than 10% of the
outstanding  shares.  Upon the written request of ten or more  shareholders  who
have been such for at least six months and who hold shares constituting at least
1% of the outstanding  shares of a Fund 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,  each
Fund has undertaken to disseminate  appropriate  materials at the expense of the
requesting shareholders.

Each Fund's  Declaration  of Trust  provides  that the presence at a shareholder
meeting in person or by proxy of at least 30% of the shares  entitled to vote on
a matter shall  constitute a quorum.  Thus, a meeting of  shareholders of a Fund
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
independent auditors. Some matters requiring a larger vote under the Declaration
of Trust, such as termination or reorganization of a Fund and certain amendments
of the Declaration of Trust, would not be affected by this provision;  nor would
matters  which  under  the  1940 Act  require  the  vote of a  "majority  of the
outstanding voting securities" as defined in the 1940 Act.

Each Fund's Declaration of Trust  specifically  authorizes the Board of Trustees
to terminate  the Fund or any  Portfolio 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 a
Fund. The Declaration of Trust,  however,  disclaims  shareholder  liability for



acts or obligations of each Fund and requires that notice of such  disclaimer be
given in each agreement, obligation, or instrument entered into or executed by a
Fund or the Fund's  trustees.  Moreover,  the  Declaration of Trust provides for
indemnification  out of  Fund  property  for  all  losses  and  expenses  of any
shareholder  held personally  liable for the obligations of a Fund and each Fund
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 Scudder Kemper remote
and not material,  since it is limited to circumstances in which a disclaimer is
inoperative and such Fund itself is unable to meet its obligations.



APPENDIX--RATINGS OF INVESTMENTS

                   Standard & Poor's Corporation Bond Ratings

AAA.  Debt  rated AAA had the  highest  rating  assigned  by  Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

AA. Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.

A. Debt  rated A has a strong  capacity  to pay  interest  and  repay  principal
although it is somewhat more  susceptible  to the adverse  effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB.  Debt rated BBB is regarded as having an adequate  capacity to pay interest
and  repay  principal.   Whereas  it  normally  exhibits   adequate   protection
parameters,  adverse  economic  conditions  or changing  circumstances  are more
likely to lead to a weakened  capacity to pay interest and repay  principal  for
debt in this category than in higher rated categories.

BB, B, CCC, CC and C. Debt rated BB, B, CCC, CC and C is  regarded,  on balance,
as predominantly  speculative with respect to capacity to pay interest and repay
principal in  accordance  with the terms of the  obligation.  BB  indicates  the
lowest degree of speculation and C the highest degree of speculation. While such
debt will likely have some  quality and  protective  characteristics,  these are
outweighed by large uncertainties or major risk exposures to adverse conditions.

CI. The rating CI is  reserved  for income  bonds on which no  interest is being
paid.

D. Debt rated D is in  default,  and  payment of interest  and/or  repayment  of
principal is in arrears.

                  Moody's Investors Service, Inc., Bond Ratings

AAA. Bonds which are rated Aaa are judged to be of the best quality.  They carry
the  smallest  degree  of  investment  risk  and are  generally  referred  to as
"gilt-edge."  Interest  payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change,  such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

Aa. Bonds which are rated Aa are judged to be of high quality by all  standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds.  They are rated lower than the best bonds  because  margins of protection
may not be as large as in Aaa securities or  fluctuation of protective  elements
may be of greater  amplitude or there may be other  elements  present which make
the long term risks appear somewhat larger than in Aaa securities.

A. Bonds which are rated A possess many favorable investment  attributes and are
to be considered as upper medium grade  obligations.  Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

Baa. Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither  highly  protected nor poorly  secured.  Interest  payments and
principal  security  appear  adequate  for the present  but  certain  protective
elements may be lacking or may be  characteristically  unreliable over any great
length of time. Such bonds lack outstanding  investment  characteristics  and in
fact have speculative characteristics as well.

Ba.  Bonds  which are rated Ba are judged to have  speculative  elements;  their
future cannot be considered  as well assured.  Often the  protection of interest
and  principal  payments may be very  moderate and thereby not well  safeguarded
during  both  good  and bad  times  over the  future.  Uncertainty  of  position
characterizes bonds in this class.



B. Bonds  which are rated B  generally  lack  characteristics  of the  desirable
investment.  Assurance of interest and principal  payments or of  maintenance of
other terms of the contract over any long period of time may be small.

Caa.  Bonds  which are rated Caa are of poor  standing.  Such  issues  may be in
default or there may be present  elements of danger with respect to principal or
interest.

Ca. Bonds which are rated Ca represent  obligations  which are  speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C.  Bonds  which are rated C are the lowest  rated  class of bonds and issues so
rated can be regarded as having  extremely  poor prospects of ever attaining any
real investment standing.

                            IBCA Limited Bond Ratings

AAA.  Obligations for which there is the lowest  expectation of investment risk.
Capacity for timely  repayment of principal  and interest is  substantial,  such
that adverse changes in business,  economic or financial conditions are unlikely
to increase investment risk significantly.

AA.  Obligations for which there is a very low  expectation of investment  risk.
Capacity for timely repayment of principal and interest is substantial.  Adverse
changes in business,  economic or financial  conditions may increase  investment
risk albeit not very significantly.

A. Obligations for which there is a low expectation of investment risk. Capacity
for timely  repayment of  principal  and  interest is strong,  although  adverse
changes in  business,  economic or  financial  conditions  may lead to increased
investment risk.

BBB.  Obligations  for which there is currently a low  expectation of investment
risk.  Capacity  for timely  repayment  of  principal  and interest is adequate,
although adverse changes in business,  economic or financial conditions are more
likely  to lead to  increased  investment  risk than for  obligations  in higher
categories.