<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 5, 1996
1933 ACT REGISTRATION NO. 33-
1940 ACT REGISTRATION NO. 811-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. / /
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. / /
(Check appropriate box or boxes)
------------------
KEMPER EUROPE FUND
(Exact name of Registrant as Specified in Charter)
120 South LaSalle Street, Chicago, Illinois 60603
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (312) 781-1121
Philip J. Collora, Vice President and Secretary With a copy to:
Kemper Europe Fund Charles F. Custer
120 South LaSalle Street Vedder, Price, Kaufman & Kammholz
Chicago, Illinois 60603 222 North LaSalle Street
(Name and Address of Agent for Service) Chicago, Illinois 60601
APPROXIMATE DATE OF PROPOSED OFFERING: As soon as practicable after the
effective date of this Registration Statement.
Pursuant to Reg. sec. 270.24f-2 under the Investment Company Act of 1940,
Registrant hereby declares that an indefinite number or amount of shares are
being registered under the Securities Act of 1933. A registration filing fee of
$500 is being paid with this filing.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS
EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME
EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL
THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.
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<PAGE> 2
KEMPER EUROPE FUND
CROSS-REFERENCE SHEET
BETWEEN ITEMS ENUMERATED IN PART A
OF FORM N-1A AND PROSPECTUS
<TABLE>
<CAPTION>
ITEM NUMBER
OF FORM N-1A LOCATION IN PROSPECTUS
<C> <S> <C>
1. Cover Page............................... Cover Page
2. Synopsis................................. Summary; Summary of Expenses; Supplement to
Prospectus
3. Condensed Financial Information.......... Performance
4. General Description of Registrant........ Summary; Investment Objective, Policies and
Risk Factors; Capital Structure
5. Management of the Fund................... Summary; Investment Manager and
Underwriter
5A. Management's Discussion of Fund Inapplicable
Performance..............................
6. Capital Stock and Other Securities....... Summary; Dividends and Taxes; Purchase of
Shares; Capital Structure
7. Purchase of Securities Being Offered..... Summary; Purchase of Shares; Investment
Manager and Underwriter; Net Asset Value;
Special Features; Supplement to Prospectus
8. Redemption or Repurchase................. Summary; Redemption or Repurchase of Shares
9. Pending Legal Proceedings................ Inapplicable
</TABLE>
<PAGE> 3
KEMPER EUROPE FUND
SUPPLEMENT TO PROSPECTUS
DATED , 1996
CLASS I SHARES
The Kemper Europe Fund (the "Fund") currently offers four classes of shares
of a single investment portfolio to provide investors with different purchasing
options. These are Class A, Class B and Class C shares, which are described in
the prospectus, and Class I shares, which are described in the prospectus as
supplemented hereby.
Class I shares are available for purchase exclusively by the following
investors: (a) tax-exempt retirement plans of Kemper Financial Services, Inc.
("KFS") and its affiliates; and (b) the following investment advisory clients of
KFS and its investment advisory affiliates (including Kemper Asset Management
Company ("KAMCO") that invest at least $1 million in the Fund: (1) unaffiliated
benefit plans, such as qualified retirement plans (other than individual
retirement accounts and self-directed retirement plans); (2) unaffiliated banks
and insurance companies purchasing for their own accounts; and (3) endowment
funds of unaffiliated non-profit organizations. Class I shares currently are
available for purchase only from Kemper Distributors, Inc., principal
underwriter for the Fund. Share certificates are not available for Class I
shares.
The primary distinctions among the classes of the Fund's shares lie in
their initial and contingent deferred sales charge schedules and in their
ongoing expenses, including asset-based sales charges in the form of Rule 12b-1
distribution fees. Class I shares are offered at net asset value without an
initial sales charge and are not subject to a contingent deferred sales charge
or a Rule 12b-1 distribution fee. Also, there is no administrative services fee
charged to Class I shares. As a result of the relatively lower expenses for
Class I shares, the overall investment return will be higher for Class I shares
than for Class A, Class B and Class C shares.
The following information supplements the indicated sections of the
prospectus.
SUMMARY OF EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
CLASS I
-------
<S> <C>
Maximum Sales Charge on Purchases (as a percentage of offering price)................ None
Maximum Sales Charge on Reinvested Dividends......................................... None
Redemption Fees...................................................................... None
Exchange Fee......................................................................... None
Deferred Sales Charge (as a percentage of redemption proceeds)....................... None
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets, after management fee reduction)
<S> <C>
Management Fees...................................................................... .50%
12b-1 Fees........................................................................... None
Other Expenses....................................................................... .35%
----
Total Operating Expenses............................................................. .85%
=====
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
- ----------------------------------------------------------------------------- ------ -------
<S> <C> <C>
You would pay the following expenses on
a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at
the end of each time period.................................................. $ 9 $27
</TABLE>
The purpose of the preceding table is to assist investors in understanding
the various costs and expenses that an investor in Class I shares of the Fund
will bear directly or indirectly. See "Investment Manager and Underwriter" for
more information. The Fund commenced operations on , 1996; thus "Other
Expenses" shown above for Class I shares are estimates for the current fiscal
year. Kemper Financial Services, Inc. ("KFS"), the Fund's investment manager,
has agreed to a reduction of its investment management fee by .25% until the
earlier of one year from the date when the Fund commences operations or the date
when the Fund's net assets reach $100 million. The effect of this management fee
reduction is reflected in the above table. Without such fee reduction,
"Management Fees" would be .75% and "Total Operating Expenses" would be 1.10%.
The Example assumes a 5% annual rate of return pursuant to requirements of the
Securities and Exchange Commission. This hypothetical rate of return is not
intended to be representative of past or future performance of the Fund. THE
EXAMPLE SHOULD NOT BE CONSIDERED TO BE A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
SPECIAL FEATURES
Shareholders of the Fund's Class I shares may exchange their shares for (i)
shares of Kemper Money Market Fund--Money Market Portfolio if the shareholders
of Class I shares have purchased shares because they are participants in
tax-exempt retirement plans of KFS and its affiliates and (ii) Class I shares of
any other "Kemper Mutual Fund" listed under "Special Features--Class A
Shares--Combined Purchases" in the prospectus. Conversely, shareholders of
Kemper Money Market Fund--Money Market Portfolio who have purchased shares
because they are participants in tax-exempt retirement plans of KFS and its
affiliates may exchange their shares for Class I shares of "Kemper Mutual Funds"
to the extent that they are available through their plan. Exchanges will be made
at the relative net asset values of the shares. Exchanges are subject to the
limitations set forth in the prospectus under "Special Features--Exchange
Privilege--General."
, 1996
KEUF-1A /96
2
<PAGE> 5
TABLE OF CONTENTS
- ------------------------------------------------
<TABLE>
<S> <C>
Summary 1
- ------------------------------------------------
Summary of Expenses 2
- ------------------------------------------------
Investment Objective, Policies and Risk
Factors 4
- ------------------------------------------------
Investment Manager and Underwriter 11
- ------------------------------------------------
Dividends and Taxes 13
- ------------------------------------------------
Net Asset Value 15
- ------------------------------------------------
Purchase of Shares 15
- ------------------------------------------------
Redemption or Repurchase of Shares 20
- ------------------------------------------------
Special Features 24
- ------------------------------------------------
Performance 27
- ------------------------------------------------
Capital Structure 29
- ------------------------------------------------
</TABLE>
This prospectus contains information about the Fund that a prospective investor
should know before investing and should be retained for future reference. A
Statement of Additional Information dated , 1996, has been
filed with the Securities and Exchange Commission and is incorporated herein by
reference. It is available upon request without charge from the Fund at the
address or telephone number on this cover or the firm from which this prospectus
was received.
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, NOR ARE THEY FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. INVESTMENT IN THE
FUND'S SHARES INVOLVES RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
(LOGO)JKLM
KEMPER
EUROPE
FUND
PROSPECTUS , 1996
KEMPER EUROPE FUND
120 South LaSalle Street, Chicago, Illinois 60603
1-800-621-1048
The objective of Kemper Europe Fund is to provide long-term capital growth. The
Fund pursues its objective by investing primarily in the equity securities of
European companies.
There is no assurance that the Fund's objective will be achieved.
<PAGE> 6
KEMPER EUROPE FUND
120 SOUTH LASALLE STREET, CHICAGO, ILLINOIS 60603, TELEPHONE 1-800-621-1048
SUMMARY
INVESTMENT OBJECTIVE. Kemper Europe Fund (the "Fund") is an open-end,
diversified, management investment company. The Fund's investment objective is
to provide 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. No assurance can be given that the Fund's investment
objective will be achieved. Any current income generated from these securities
is incidental to the investment objective of the Fund. The Fund may also engage
in options, financial futures and foreign currency transactions and may lend its
portfolio securities. See "Investment Objective, Policies and Risk Factors."
RISK FACTORS. The Fund may invest without limit in securities of foreign
issuers. Foreign investments involve risk and opportunity considerations not
typically associated with investing in United States companies. 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.
Thus, the U.S. Dollar value of foreign securities in the Fund's portfolio, and
the Fund's net asset value, may change in response to changes in currency
exchange rates even though the value of the foreign securities in local currency
terms may not have changed. Concentration of the Fund's investments in European
companies may present greater risk than investment in a more diversified
portfolio of foreign securities. While the Fund's investments in foreign
securities will principally be in developed countries, the Fund may invest up to
25% of its assets in countries considered by the Fund's investment manager to be
developing or "emerging" markets, which involve exposure to economic structures
that are generally less diverse and mature than in the United States, and to
political systems that may be less stable. There are special risks associated
with options, financial futures, foreign currency and other derivative
transactions and there is no assurance that use of those investment techniques
will be successful. The Fund's returns and net asset value will fluctuate. See
"Investment Objective, Policies and Risk Factors."
PURCHASES AND REDEMPTIONS. The Fund provides investors with the option of
purchasing shares in the following ways:
<TABLE>
<S> <C>
Class A Shares................ Offered at net asset value plus a maximum sales charge of 5.75%
of the offering price. Reduced sales charges apply to purchases
of $50,000 or more. The redemption within one year of Class A
shares purchased at net asset value under the Large Order NAV
Purchase Privilege may be subject to a 1% contingent deferred
sales charge.
Class B Shares................ Offered at net asset value, subject to a Rule 12b-1 distribution
fee and a contingent deferred sales charge that declines from 4%
to zero on certain redemptions made within six years of purchase.
Class B shares automatically convert into Class A shares (which
have lower ongoing expenses) six years after purchase.
Class C Shares................ Offered at net asset value without an initial or contingent
deferred sales charge, but subject to a Rule 12b-1 distribution
fee. Class C shares do not convert into another class.
</TABLE>
Each class of shares represents interests in the same portfolio of investments
of the Fund. The minimum initial investment is $1,000 and investments thereafter
must be at least $100. Shares are redeemable at net asset value, which may be
more or less than original cost, subject, in the case of Class A shares
purchased under the Large Order NAV Purchase Privilege and in the case of Class
B shares, to any applicable contingent deferred sales charge. See "Purchase of
Shares" and "Redemption or Repurchase of Shares."
1
<PAGE> 7
INVESTMENT MANAGER AND UNDERWRITER. Kemper Financial Services, Inc. ("KFS") is
the Fund's investment manager. KFS is paid an investment management fee by the
Fund at an annual rate ranging from .75% to .62% of its average daily net
assets. Kemper Distributors, Inc. ("KDI"), a wholly owned subsidiary of KFS, is
principal underwriter and administrator for the Fund. For Class B and Class C
shares, KDI receives a Rule 12b-1 distribution fee of .75% of average daily net
assets. KDI also receives the amount of any contingent deferred sales charges
paid on the redemption of shares. The expenses of the 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. Administrative services
are provided to shareholders under an administrative services agreement with
KDI. The Fund pays an administrative services fee at an annual rate of up to
..25% of average daily net assets of each class of the Fund, which KDI pays to
financial services firms. See "Investment Manager and Underwriter."
DIVIDENDS. The Fund normally distributes annual dividends of net investment
income and any net realized short-term and long-term capital gains. Income and
capital gain dividends of the Fund are automatically reinvested in additional
shares of the Fund, without a sales charge, unless the investor makes a
different election. See "Dividends and Taxes."
SUMMARY OF EXPENSES
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
--------- ------------------------- ----------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Charge on Purchases (as a percentage
of offering price)................................ 5.75%(2) None None
Maximum Sales Charge on Reinvested Dividends........ None None None
Redemption Fees..................................... None None None
Exchange Fee........................................ None None None
Deferred Sales Charge (as a percentage of redemption
proceeds)......................................... None(3) 4% during the first year, None
3% during the second and
third years, 2% during
the fourth and fifth
years and 1% in the sixth
year
</TABLE>
- ---------------
(1) Investment dealers and other firms may independently charge additional fees
for shareholder transactions or for advisory services; please see their
materials for details.
(2) Reduced sales charges apply to purchases of $50,000 or more. See "Purchase
of Shares--Initial Sales Charge Alternative--Class A Shares."
(3) The redemption within one year of Class A shares purchased at net asset
value under the Large Order NAV Purchase Privilege may be subject to a 1%
contingent deferred sales charge. See "Purchase of Shares--Initial Sales
Charge Alternative--Class A Shares."
2
<PAGE> 8
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets, after
management fee reduction)
<TABLE>
<S> <C>
CLASS A SHARES
Management Fees.......................................................................... .50%
12b-1 Fees............................................................................... None
Other Expenses........................................................................... .92%
----
Total Operating Expenses................................................................. 1.42%
=====
CLASS B SHARES
Management Fees.......................................................................... .50%
12b-1 Fees(4)............................................................................ .75%
Other Expenses........................................................................... 1.07%
----
Total Operating Expenses................................................................. 2.32%
=====
</TABLE>
- ---------------
(4) Long-term shareholders may pay more than the economic equivalent of the
maximum initial sales charges permitted by the National Association of
Securities Dealers, although KDI believes that it is unlikely because of the
automatic conversion feature described under "Purchase of Shares--Deferred
Sales Charge Alternative--Class B Shares."
<TABLE>
<S> <C>
CLASS C SHARES
Management Fees.......................................................................... .50%
12b-1 Fees(5)............................................................................ .75%
Other Expenses........................................................................... 1.04%
------
Total Operating Expenses................................................................. 2.29%
=====
</TABLE>
- ---------------
(5) As a result of the accrual of 12b-1 fees, long-term shareholders may pay
more than the economic equivalent of the maximum initial sales charges
permitted by the National Association of Securities Dealers.
EXAMPLE
<TABLE>
<CAPTION>
3
CLASS A SHARES 1 YEAR YEARS
------ ------
<S> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming (1) 5% $ 71 $100
annual return and (2) redemption at the end of each time period:
</TABLE>
<TABLE>
<CAPTION>
CLASS B SHARES(6)
<S> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming (1) 5% $ 54 $ 92
annual return and (2) redemption at the end of each time period:
You would pay the following expenses on the same investment, assuming no $ 24 $ 72
redemption:
</TABLE>
- ---------------
(6) Assumes conversion to Class A shares six years after purchase and was
calculated based upon the assumption that the shareholder was an owner of
the shares on the first day of the first year and the contingent deferred
sales charge was applied as follows: 1 year (3%) and 3 years (2%). See
"Redemption or Repurchase of Shares--Contingent Deferred Sales Charge--Class
B Shares" for more information regarding the calculation of the contingent
deferred sales charge.
<TABLE>
<CAPTION>
CLASS C SHARES
<S> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming (1) 5% $ 23 $ 72
annual return and (2) redemption at the end of each time period:
</TABLE>
The purpose of the preceding table is to assist investors in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. See "Investment Manager and Underwriter" for more information. The
Fund commenced operations on , 1996; thus "Other Expenses" shown
above are estimates for the current fiscal year. KFS, the Fund's investment
manager, has agreed to a reduction of its investment management fee by .25%
until the earlier of one year from the date when the Fund commences operations
or the date when the Fund's net assets reach $100 million. The effect of this
management fee reduction is reflected in the above table. Without such fee
reduction, "Management Fees" would be .75% and "Total Operating Expenses" for
Class A, B and C shares would be 1.67%, 2.57% and 2.54%, respectively. The
Example assumes a 5% annual rate of return pursuant to requirements of the
Securities and Exchange Commission. This hypothetical rate of return is not
intended to be representative of past or future performance of the Fund. THE
EXAMPLE SHOULD NOT BE CONSIDERED TO BE A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
3
<PAGE> 9
INVESTMENT OBJECTIVE, POLICIES AND RISK FACTORS
The following information sets forth the Fund's investment objective, policies
and risk factors. The Fund's returns and net asset value will fluctuate and
there is no assurance that the Fund will achieve its objective.
The objective of the 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
investment 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 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
obligations during the coming year (except for 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 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, 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
4
<PAGE> 10
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 large 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.
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.
SPECIAL RISK FACTORS. There are risks inherent in investing in any security,
including shares of the Fund. The investment manager attempts to reduce risk
through fundamental research; however, there is no guarantee that such efforts
will be successful and the Fund's returns and net asset value will fluctuate
over time. There are special risks associated with the 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 on 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 Fund concentrates its investments in European companies, the
performance of the 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.
Concentration of the Fund's investments in European companies may present
greater risk than investment in a more diversified portfolio of foreign
securities.
EMERGING MARKETS. While the Fund's investments in foreign securities will be
principally in developed countries, the Fund may invest up to 25% of its total
assets in countries considered by the Fund's investment manager to be developing
or "emerging" markets, which involve exposure to economic structures that are
generally less diverse and mature than in the United States, and to political
systems that may be less stable. A developing 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 developed European countries listed above,
the United States, Canada, Japan, Australia, New Zealand, Hong Kong and
Singapore. The characteristics of markets can change over time. Currently,
investing in many emerging markets may not be desirable or feasible because of
the lack of adequate custody arrangements for the Fund's assets, overly
burdensome repatriation and similar restrictions, the lack of organized and
liquid securities markets, unacceptable political risks or other reasons. As
opportunities to invest in securities in emerging markets develop, the Fund may
expand and
5
<PAGE> 11
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 Fund's 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 the Fund to make intended securities purchases due to
settlement problems could cause the Fund to miss attractive investment
opportunities. Inability to dispose of a portfolio security caused by settlement
problems could result either in losses to the Fund due to subsequent declines in
value of the portfolio security or, if the Fund has entered into a contract to
sell the security, could result in possible liability to the purchaser. Certain
emerging markets may lack clearing facilities equivalent to those in developed
countries. Accordingly, settlements can pose additional risks in such markets
and ultimately can expose the Fund to the risk of losses resulting from the
Fund's inability to recover from a counterparty.
The risk also exists that an emergency situation may arise in one or more
emerging markets as a result of which trading securities may cease or may be
substantially curtailed and prices for the Fund's portfolio securities in such
markets may not be readily available. The Fund's portfolio securities in the
affected markets will be valued at fair value determined in good faith by or
under the direction of the Board of Trustees.
Investment in certain emerging market securities is restricted or controlled to
varying degrees. These restrictions or controls may at times limit or preclude
foreign investment in certain emerging market securities and increase the costs
and expenses of the Fund. Emerging markets may require governmental approval for
the repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if a deterioration occurs in an
emerging market's balance of payments, the market could impose temporary
restrictions on foreign capital remittances.
PRIVATIZED ENTERPRISES. Investments in foreign securities may include securities
issued by enterprises that have undergone or are currently undergoing
privatization. The governments of certain foreign countries have, to varying
degrees, embarked on privatization programs contemplating the sale of all or
part of their interests in state enterprises. The Fund's investments in the
securities of privatized enterprises include privately negotiated investments in
a government- or state-owned or controlled company or enterprise that has not
yet conducted an
6
<PAGE> 12
initial equity offering, investments in the initial offering of equity
securities of a state enterprise or former state enterprise and investments in
the securities of a state enterprise following its initial equity offering.
In certain jurisdictions, the ability of foreign entities, such as the Fund, to
participate in privatizations may be limited by local law, or the price or terms
on which the Fund may be able to participate may be less advantageous than for
local investors. Moreover, there can be no assurance that governments that have
embarked on privatization programs will continue to divest their ownership of
state enterprises, that proposed privatizations will be successful or that
governments will not re-nationalize enterprises that have been privatized.
In the case of the enterprises in which the Fund may invest, large blocks of the
stock of those enterprises may be held by a small group of stockholders, even
after the initial equity offerings by those enterprises. The sale of some
portion or all of those blocks could have an adverse effect on the price of the
stock of any such enterprise.
Prior to making an initial equity offering, most state enterprises or former
state enterprises go through an internal reorganization 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 the Fund may
invest enjoy the protection of and receive preferential treatment from the
respective sovereigns that own or control them. After making an initial equity
offering these enterprises may no longer have such protection or receive such
preferential treatment and may become subject to market competition from which
they were previously protected. Some of these enterprises may not be able to
effectively operate in a competitive market and may suffer losses or experience
bankruptcy due to such competition.
DEPOSITORY RECEIPTS. The Fund may invest in securities of foreign issuers in the
form of American 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 a 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, the Fund
avoids currency risks during the settlement period. In general, there is a
large, liquid market in the United States for most ADRs. The Fund may also
invest in securities of foreign issuers in the form of European Depository
Receipts ("EDRs") and Global Depository Receipts ("GDRs"), which are receipts
evidencing an arrangement with a bank similar to that for ADRs and are designed
for use in the European and other foreign securities markets. EDRs and GDRs are
not necessarily denominated in the currency of the underlying security.
ADDITIONAL INVESTMENT INFORMATION. The Fund will have opportunities to adjust
its portfolio 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. In order to continue to
qualify as a regulated investment company for federal income tax purposes, less
than 30% of the annual gross income of the Fund must be derived from the sale or
other disposition of securities and certain other investments held by the Fund
for less than three months. See "Dividends and Taxes" in the Statement of
Additional Information.
The Fund may not borrow money except as a temporary measure for extraordinary or
emergency purposes, and then only in an amount up to one-third of the value of
its total assets, in order to meet redemption requests without immediately
selling any portfolio securities or other assets. If, for any reason, the
current value of the Fund's total assets falls below an amount equal to three
times the amount of its indebtedness from money borrowed, the Fund will, within
three days (not including Sundays and holidays), reduce its indebtedness to the
extent necessary. The
7
<PAGE> 13
Fund will not borrow for leverage purposes. The Fund may pledge up to 15% of its
total assets to secure any such borrowings.
The Fund will not purchase illiquid securities, including repurchase agreements
maturing in more than seven days, if, as a result thereof, more than 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" in the Statement
of Additional Information for a description of the extent to which
over-the-counter traded options are in effect considered as illiquid for
purposes of the Fund's limit on illiquid securities. The Fund may invest in
securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933. This rule permits otherwise restricted securities to be sold to certain
institutional buyers, such as the Fund. Such securities may be illiquid and
subject to the Fund's limitation on illiquid securities. A "Rule 144A" security
may be treated as liquid, however, if so determined pursuant to procedures
adopted by the Board of Trustees. Investing in Rule 144A securities could have
the effect of increasing the level of illiquidity in the Fund to the extent that
qualified institutional buyers become uninterested for a time in purchasing Rule
144A securities.
The Fund has adopted certain fundamental investment restrictions which are
presented in the Statement of Additional Information and which, together with
the investment objective of the Fund, cannot be changed without approval by
holders of a majority of its outstanding voting shares. As defined in the
Investment Company Act of 1940, this means the lesser of the vote of (a) 67% of
the shares of the Fund present at a meeting where more than 50% of the
outstanding shares are present in person or by proxy; or (b) more than 50% of
the outstanding shares of the Fund. Policies of the Fund that are not
incorporated into any of the fundamental investment restrictions referred to
above may be changed by the Board of Trustees of the Fund without shareholder
approval.
OPTIONS AND FINANCIAL FUTURES TRANSACTIONS. The Fund may deal in options on
securities, securities indexes and foreign currencies, which options may be
listed for trading on a national securities exchange or traded over-the-counter.
The Fund may write (sell) covered call options and secured put options on up to
25% of its net assets and may purchase put and call options, provided that no
more than 5% of its net assets may be invested in premiums on such options.
A call option gives the purchaser the right to buy, and the writer the
obligation to sell, the underlying security or other asset at the exercise price
during or at the end of the option period. A put option gives the purchaser the
right to sell, and the writer the obligation to buy, the underlying security or
other asset at the exercise price during or at the end of the option period. The
writer of a covered call owns securities or other assets that are acceptable for
escrow and the writer of a secured put invests an amount not less than the
exercise price in eligible securities or other assets to the extent that it is
obligated as a writer. If a call written by the Fund is exercised, the Fund
foregoes any possible profit from an increase in the market price of the
underlying security or other asset over the exercise price plus the premium
received. In writing puts, there is a risk that the Fund may be required to take
delivery of the underlying security or other asset at a disadvantageous price.
Over-the-counter traded options ("OTC options") differ from exchange traded
options in several respects. They are transacted directly with dealers and not
with a clearing corporation, and there is a risk of non-performance by the
dealer as a result of the insolvency of such dealer or otherwise, in which event
the Fund may experience material losses. However, in writing options the premium
is paid in advance by the dealer. OTC options are available for a greater
variety of securities and other assets, and a wider range of expiration dates
and exercise prices, than are exchange traded options.
The Fund may engage in financial futures transactions. Financial futures
contracts are commodity contracts that obligate the long or short holder to take
or make delivery of a specified quantity of a financial instrument, such as a
security, or an amount of a foreign currency, or the cash value of a securities
index during a specified future period at a specified price. The Fund will
"cover" futures contracts sold by the Fund and maintain in a segregated account
8
<PAGE> 14
certain liquid assets in connection with futures contracts purchased by the Fund
as described under "Investment Policies and Techniques" in the Statement of
Additional Information. In connection with its foreign securities investments,
the Fund may also engage in foreign currency financial futures transactions. The
Fund will not enter into any futures contracts or options on futures contracts
if the aggregate of the market value of the outstanding futures contracts of the
Fund and futures contracts subject to outstanding options written by the Fund
would exceed 50% of the total assets of the Fund.
The Fund may engage in financial futures transactions and may use index options
in an attempt to hedge against market risks. For example, when the near-term
market view is bearish but the portfolio composition is judged satisfactory for
the longer term, exposure to temporary declines in the market may be reduced by
entering into futures contracts to sell securities or the cash value of a
securities index. Conversely, where the near-term view is bullish, but the Fund
is believed to be well positioned for the longer term with a high cash position,
the Fund can hedge against market increases by entering into futures contracts
to buy securities or the cash value of a securities index. In either case, the
use of futures contracts would tend to reduce portfolio turnover and facilitate
the Fund's pursuit of its investment objective.
Futures contracts entail risks. If the investment manager's judgment about the
general direction of interest rates, markets or exchange rates is wrong, the
overall performance may be poorer than if no such contracts had been entered
into. There may be an imperfect correlation between movements in prices of
futures contracts and portfolio assets being hedged. In addition, the market
prices of futures contracts may be affected by certain factors. For example, if
participants in the futures market elect to close out their contracts rather
than meet margin requirements, distortions in the normal relationship between
the underlying assets and futures market could result. Price distortions also
could result if investors in futures contracts decide to make or take delivery
of underlying securities or other assets rather than engage in closing
transactions because of the resultant reduction in the liquidity of the futures
market. In addition, because, from the point of view of speculators, margin
requirements in the futures market are less onerous than margin requirements in
the cash market, increased participation by speculators in the futures market
could cause temporary price distortions. Due to the possibility of price
distortions in the futures market and because of the imperfect correlation
between movements in the prices of securities or other assets and movements in
the prices of futures contracts, a correct forecast of market trends by the
investment manager still may not result in a successful hedging transaction. If
any of these events should occur, the Fund could lose money on the financial
futures contracts and also on the value of its portfolio assets. The costs
incurred in connection with futures transactions could reduce the Fund's return.
Index options involve risks similar to those risks relating to transactions in
financial futures contracts described above. Also, an option purchased by the
Fund may expire worthless, in which case the Fund would lose the premium paid
therefor.
The Fund may engage in futures transactions only on commodities exchanges or
boards of trade. The Fund will not engage in transactions in index options,
financial futures contracts or related options for speculation, but only as an
attempt to hedge against changes in interest rates or market conditions
affecting the values of securities or other assets that the Fund owns or intends
to purchase.
FOREIGN CURRENCY TRANSACTIONS. The Fund may invest all or a portion of its
assets in securities denominated in foreign currencies. The Fund may engage in
foreign currency transactions in connection with its investments in foreign
securities but will not speculate in foreign currency exchange. The value of the
foreign securities investments of the Fund measured in U.S. Dollars (including
ADRs) may be affected favorably or unfavorably by changes in foreign currency
exchange rates and exchange control regulations, and the Fund may incur costs in
connection with conversions between various currencies. The Fund will conduct
its foreign currency exchange transactions either on a spot (i.e., cash) basis
at the spot rate prevailing in the foreign currency exchange market, or through
forward contracts to purchase or sell foreign currencies. A forward foreign
currency exchange contract involves an obligation to purchase or sell a specific
currency at a future date, 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. These contracts are traded directly between currency traders (usually
large commercial banks) and their customers.
9
<PAGE> 15
When the Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may want to establish the U.S. Dollar cost
or proceeds, as the case may be. By entering into a forward contract in U.S.
Dollars for the purchase or sale of the amount of foreign currency involved in
an underlying security transaction, the Fund is able to protect itself against a
possible loss between trade and settlement dates resulting from an adverse
change in the relationship between the U.S. Dollar and such foreign currency.
However, this tends to limit potential gains which might result from a positive
change in such currency relationships. The Fund may also hedge its foreign
currency exchange rate risk by engaging in currency financial futures and
options transactions.
When the investment manager believes that the currency of a particular foreign
country may suffer a substantial decline against the U.S. Dollar, it may enter
into a forward contract to sell an amount of foreign currency approximating the
value of some or all of the Fund's portfolio securities denominated in such
foreign currency. The forecasting of short-term currency market movement is
extremely difficult and whether such a short-term hedging strategy will be
successful is highly uncertain.
It is impossible to forecast with absolute precision the market value of
portfolio securities at the expiration of a contract. Accordingly, it may be
necessary for the Fund to purchase additional currency on the spot market (and
bear the expense of such purchase) if the market value of the security is less
than the amount of foreign currency the Fund is obligated to deliver when a
decision is made to sell the security and make delivery of the foreign currency
in settlement of a forward contract. Conversely, it may be necessary to sell on
the spot market some of the foreign currency received upon the sale of the
portfolio security if its market value exceeds the amount of foreign currency
the Fund is obligated to deliver.
The Fund will not enter into forward contracts or maintain a net exposure in
such contracts where the Fund would be obligated to deliver an amount of foreign
currency in excess of the value of the Fund's securities or other assets
denominated in that currency. The Fund does not intend to enter into such
forward contracts if it would have more than 15% of the value of its total
assets committed to such contracts. The Fund segregates cash or liquid
high-grade securities in an amount not less than the value of the Fund's total
assets committed to forward foreign currency exchange contracts entered into for
the purchase of a foreign currency. If the value of the securities segregated
declines, additional cash or securities are added so that the segregated amount
is not less than the amount of the Fund's commitments with respect to such
contracts. The Fund generally does not enter into a forward contract with a term
longer than one year.
DERIVATIVES. In addition to options and financial futures transactions,
consistent with its objective, the Fund may invest in a broad array of financial
instruments and securities in which the value of the instrument or security is
"derived" from the performance of an underlying asset or a "benchmark" such as a
security index, an interest rate or a foreign currency ("derivatives").
Derivatives are most often used to manage investment risk, to increase or
decrease exposure to an asset class or benchmark (as a hedge or to enhance
return), or to create an investment position directly (often because it is more
efficient or less costly than direct investment). The types of derivatives used
by the Fund and the techniques employed by the investment manager may change
over time as new derivatives and strategies are developed or regulatory changes
occur.
SPECIAL RISK FACTORS--OPTIONS, FUTURES, FOREIGN CURRENCIES AND OTHER
DERIVATIVES. The Statement of Additional Information contains further
information about the characteristics, risks and possible benefits of options,
futures, foreign currency and other derivative transactions. See "Investment
Policies and Techniques" in the Statement of Additional Information. The
principal risks are: (a) possible imperfect correlation between movements in the
prices of options, currencies, futures or other derivatives contracts and
movements in the prices of the securities or currencies hedged, used for cover
or that the derivatives intended to replicate; (b) lack of assurance that a
liquid secondary market will exist for any particular option, futures, foreign
currency or other derivatives contract at any particular time; (c) the need for
additional skills and techniques beyond those required for normal portfolio
management; (d) losses on futures contracts resulting from market movements not
anticipated by the investment manager; (e) the possible need to defer closing
out certain options, futures or other derivative contracts in order to continue
to qualify for beneficial tax treatment afforded "regulated investment
companies" under the Internal Revenue Code; and (f) the possible non-performance
of the counter-party to the derivative contract.
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<PAGE> 16
LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, the Fund may lend its portfolio securities (principally to
broker-dealers) without limit where such loans are callable at any time and are
continuously secured by segregated collateral (cash or U.S. Government
securities) equal to no less than the market value, determined daily, of the
securities loaned. The Fund will receive amounts equal to dividends or interest
on the securities loaned. It 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 to justify the
attendant risk. Management will limit such lending to not more than one-third of
the value of the Fund's total assets.
INVESTMENT MANAGER AND UNDERWRITER
INVESTMENT MANAGER. Kemper Financial Services, Inc. ("KFS"), 120 South LaSalle
Street, Chicago, Illinois 60603, is the investment manager of the Fund and
provides the Fund with continuous professional investment supervision. KFS is
one of the largest investment managers in the country and has been engaged in
the management of investment funds for more than forty-five years. KFS and its
affiliates provide investment advice and manage investment portfolios for the
Kemper Funds, the Kemper insurance companies, Kemper Corporation and other
corporate, pension, profit-sharing and individual accounts representing
approximately $60 billion under management. KFS acts as investment manager or
principal underwriter for 29 open-end and seven closed-end investment companies,
with 69 separate investment portfolios, representing more than 3 million
shareholder accounts. KFS is a subsidiary of Zurich Insurance Company, an
insurance and financial services holding company.
Responsibility for overall management of the Fund rests with its Board of
Trustees and officers. Professional investment supervision is provided by KFS.
The investment management agreement provides that KFS shall act as the Fund's
investment adviser, manage its investments and provide it with various services
and facilities. KFS will utilize the services of Kemper Investment Management
Company Limited ("KIMCO"), 1 Fleet Place, London EC4M 7RQ, a wholly owned
subsidiary of KFS, with respect to foreign securities investments of the Fund
including analysis, research, execution and trading services.
Edith A. Thouin has been the portfolio manager of the Fund since its inception
in 1996. Ms. Thouin joined KFS and KIMCO in 1992, and is currently a vice
president of the Fund, a first vice president of KFS and Director--European
Equities for KIMCO. Ms. Thouin received an L.L.M. in law from the University of
Leiden (The Netherlands) in 1983 and is a member of the Swiss Society of
Security Analysts. As reflected above, KIMCO is an affiliate of KFS that
provides services to KFS with respect to the Fund's foreign investments.
The KFS International Equity Investments area, directed by Dennis H. Ferro,
provides research and analysis regarding foreign investments to the portfolio
manager. After investment decisions are made, equity traders execute the
portfolio manager's instructions through various broker-dealer firms.
The Fund pays KFS an investment management fee, payable monthly, at the annual
rates shown below.
<TABLE>
<CAPTION>
ANNUAL MANAGEMENT
AVERAGE DAILY NET ASSETS OF THE FUND FEE RATES
- ------------------------------------------------------------------------------- -----------------
<S> <C>
$0 - $250 million.............................................................. .75%
$250 million - $1 billion...................................................... .72
$1 billion - $2.5 billion...................................................... .70
$2.5 billion - $5 billion...................................................... .68
$5 billion - $7.5 billion...................................................... .65
$7.5 billion - $10 billion..................................................... .64
$10 billion - $12.5 billion.................................................... .63
Over $12.5 billion............................................................. .62
</TABLE>
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<PAGE> 17
KFS has agreed to a reduction of its investment management fee by .25% until the
earlier of one year from the date when the Fund commences operations or the date
when the Fund's net assets reach $100 million. The investment management fees
set forth under "Summary of Expenses" include the effect of this management fee
reduction. The expenses of the 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.
PRINCIPAL UNDERWRITER. Pursuant to an underwriting and distribution services
agreement ("distribution agreement") with the Fund, Kemper Distributors, Inc.
("KDI"), 120 South LaSalle Street, Chicago, Illinois 60603, a wholly owned
subsidiary of KFS, is the principal underwriter and distributor of the Fund's
shares and acts as agent of the Fund in the sale of its shares. KDI bears all
its expenses of providing services pursuant to the distribution agreement,
including the payment of any commissions. KDI provides for the preparation of
advertising or sales literature and bears the cost of printing and mailing
prospectuses to persons other than shareholders. KDI bears the cost of
qualifying and maintaining the qualification of Fund shares for sale under the
securities laws of the various states and the Fund bears the expense of
registering its shares with the Securities and Exchange Commission. KDI may
enter into related selling group agreements with various broker-dealers,
including affiliates of KDI, that provide distribution services to investors.
KDI also may provide some of the distribution services.
CLASS A SHARES. KDI receives no compensation from the Fund as principal
underwriter for Class A shares and pays all expenses of distribution of the
Fund's Class A shares under the distribution agreement not otherwise paid by
dealers or other financial services firms. 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 Fund shares.
CLASS B SHARES. For its services under the distribution agreement, KDI receives
a fee from the Fund, payable monthly, at an annual rate of .75% of average daily
net assets of the Fund attributable to Class B shares. This fee is accrued daily
as an expense of Class B shares. KDI also receives any contingent deferred sales
charges. See "Redemption or Repurchase of Shares--Contingent Deferred Sales
Charge--Class B Shares." KDI currently compensates firms for sales of Class B
shares at a commission rate of 3.75%.
CLASS C SHARES. For its services under the distribution agreement, KDI receives
a fee from the Fund, payable monthly, at an annual rate of .75% of average daily
net assets of the Fund attributable to Class C shares. This fee is accrued daily
as an expense of Class C shares. KDI currently pays firms for sales of Class C
shares a distribution fee, payable quarterly, at an annual rate of .75% of
average daily net assets attributable to Class C shares maintained and serviced
by the firm. A firm becomes eligible for the distribution fee based upon assets
in accounts in the month of purchase and the fee continues until terminated by
KDI or the Fund.
RULE 12B-1 PLAN. Since each distribution agreement provides for fees payable as
an expense of the Class B shares and the Class C shares that are used by KDI to
pay for distribution services for those classes, that agreement is approved and
reviewed separately for the Class B shares and the Class C shares in accordance
with Rule 12b-1 under the Investment Company Act of 1940, which regulates the
manner in which an investment company may, directly or indirectly, bear the
expenses of distributing its shares.
If the Rule 12b-1 Plan (the "Plan") is terminated in accordance with its terms,
the obligation of the Fund to make payments to KDI pursuant to the Plan will
cease and the Fund will not be required to make any payments past the
termination date. Thus, there is no legal obligation for the Fund to pay any
expenses incurred by KDI in excess of its fees under the Plan, if for any reason
the Plan is terminated in accordance with its terms. Future fees under the Plan
may or may not be sufficient to reimburse KDI for its expenses incurred.
ADMINISTRATIVE SERVICES. KDI also provides information and administrative
services for Fund shareholders pursuant to an administrative services agreement
("administrative agreement"). KDI may enter into related arrangements with
various financial services firms, such as broker-dealer firms or banks
("firms"), that provide services and facilities for their customers or clients
who are shareholders of the Fund. Such administrative services and assistance
may include, but are not limited to, establishing and maintaining shareholder
accounts and records,
12
<PAGE> 18
processing purchase and redemption transactions, answering routine inquiries
regarding the Fund and its special features and such other services as may be
agreed upon from time to time and permitted by applicable statute, rule or
regulation. KDI bears all its expenses of providing services pursuant to the
administrative agreement, including the payment of any service fees. For
services under the administrative agreement, the Fund pays KDI a fee, payable
monthly, at an annual rate of up to .25% of average daily net assets of each
class of the Fund. With respect to Class A shares, KDI then pays each firm a
service fee at an annual rate of (a) up to .25% of net assets of those accounts
that it maintains and services attributable to Class A shares. With respect to
Class B shares and Class C shares, KDI pays each firm a service fee, payable
quarterly, at an annual rate of up to .25% of net assets of those accounts in
the Fund that it maintains and services attributable to Class B shares and Class
C shares, respectively. Firms to which service fees may be paid include
broker-dealers affiliated with KDI. A firm becomes eligible for the service fee
based on assets in the accounts in the month following the month of purchase (in
the month of purchase for Class C shares) and the fee continues until terminated
by KDI or the Fund. The fees are calculated monthly and paid quarterly. KDI may
advance to financial services firms the first year service fee related to Class
B shares sold by such firms at a rate of up to .25% of the purchase price of
such shares. As compensation therefor, KDI may retain the administrative
services fee paid by the Fund with respect to such shares for the first year
after purchase. Financial services firms will become eligible for future service
fees with respect to such shares commencing in the thirteenth month following
the month of purchase.
KDI also may provide some of the above services and may retain any portion of
the fee under the administrative agreement not paid to firms to compensate
itself for administrative functions performed for the Fund. Currently, the
administrative services fee payable to KDI is 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 fee that it receives
from the Fund to firms in the form of service fees. The effective administrative
services fee rate to be charged against all assets of the Fund while this
procedure is in effect will depend upon the proportion of Fund assets that is in
accounts for which there is a firm of record.
CUSTODIAN, TRANSFER AGENT AND SHAREHOLDER SERVICE AGENT. The Chase Manhattan
Bank, N.A., Chase MetroTech Center, Brooklyn, New York 11245, as custodian, has
custody of all securities and cash of the Fund held outside the United States.
Investors Fiduciary Trust Company ("IFTC"), 127 West 10th Street, Kansas City,
Missouri 64105, as custodian, and State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110, as sub-custodian, have custody of
all securities and cash of the Fund maintained in the United States. IFTC also
is the Fund's transfer agent and dividend-paying agent. Pursuant to a services
agreement with IFTC, Kemper Service Company, an affiliate of KFS, serves as
"Shareholder Service Agent" of the Fund and as such, performs all of IFTC's
duties as transfer agent and dividend-paying agent. For a description of
transfer agent and shareholder service agent fees payable to IFTC and the
Shareholder Service Agent, see "Investment Manager and Underwriter" in the
Statement of Additional Information.
PORTFOLIO TRANSACTIONS. KFS places all orders for purchases and sales of the
Fund's securities. Subject to seeking best execution of orders, KFS may consider
sales of shares of the Fund and other funds managed by KFS or its affiliates as
a factor in selecting broker-dealers. See "Portfolio Transactions" in the
Statement of Additional Information.
DIVIDENDS AND TAXES
DIVIDENDS. The Fund normally distributes annual dividends of net investment
income and any net realized short-term and long-term capital gains.
Dividends paid by the Fund as to each class of its shares will be calculated in
the same manner, at the same time and on the same day. The level of income
dividends per share (as a percentage of net asset value) will be lower for Class
B and Class C shares than for Class A shares primarily as a result of the
distribution services fee applicable to Class B and Class C shares.
Distributions of capital gains, if any, will be paid in the same amount for each
class.
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<PAGE> 19
Income dividends and capital gain dividends, if any, of the 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 the 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 the 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 the Fund in shares of another Kemper Fund,
shareholders must maintain a minimum account value of $1,000 in the Fund and a
minimum account value of $1,000 in the Kemper Fund in which dividends of the
Fund are reinvested. The Fund will reinvest dividend checks (and future
dividends) in shares of that same class of the Fund if checks are returned as
undeliverable.
TAXES. The Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code ("Code") and, if so qualified, will
not be liable for federal income taxes to the extent its earnings are
distributed. Dividends derived from net investment income and net short-term
capital gains are taxable to shareholders as ordinary income and long-term
capital gain dividends are taxable to shareholders as long-term capital gain
regardless of how long the shares have been held and whether received in cash or
shares. Long-term capital gain dividends received by individual shareholders are
taxed at a maximum rate of 28%. Dividends declared in October, November or
December to shareholders of record as of a date in one of those months and paid
during the following January are treated as paid on December 31 of the calendar
year declared. It is anticipated that only a small portion, if any, of the
ordinary income dividends paid by the Fund will 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.
The Fund intends to qualify for and make the election permitted under Section
853 of the Code. If the Fund is so qualified and this election is made,
shareholders will be able to claim a credit or deduction on their income tax
returns for, and will be required to treat as part of the amounts distributed to
them, their pro rata portion of the income taxes paid by the Fund to foreign
countries (which taxes relate primarily to investment income). The shareholders
of the Fund may claim a credit by reason of the Fund's election, subject to
certain limitations imposed by Section 904 of the Code. Also, under the Code, no
deduction for foreign taxes may be claimed by individual shareholders who do not
elect to itemize deductions on their federal income tax returns; although such a
shareholder may claim a credit for foreign taxes and in any event will be
treated as having taxable income in the amount of the shareholder's pro rata
share of foreign taxes paid by the Fund.
The Fund is required by law to withhold 31% of taxable dividends and redemption
proceeds paid to certain shareholders who do not furnish a correct taxpayer
identification number (in the case of individuals, a social security number) and
in certain other circumstances. Trustees of qualified retirement plans and
403(b)(7) accounts are required by law to withhold 20% of the taxable portion of
any distribution that is eligible to be "rolled over." The 20% withholding
requirement does not apply to distributions from Individual Retirement Accounts
("IRAs") or any part of a distribution that is transferred directly to another
qualified retirement plan, 403(b)(7) account, or IRA. Shareholders should
consult with their tax advisers regarding the 20% withholding requirement.
After each transaction, shareholders will receive a confirmation statement
giving complete details of the transaction except that statements will be sent
quarterly for transactions involving dividend reinvestment and periodic
14
<PAGE> 20
investment and redemption programs. Information for income tax purposes,
including 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.
NET ASSET VALUE
The net asset value per share of the Fund is determined separately for each
class by dividing the value of the Fund's net assets attributable to that class
by the number of shares of that class outstanding. The per share net asset value
of the Class B and Class C shares of the Fund will generally be lower than that
of the Class A shares of the Fund because of the higher expenses borne by the
Class B and Class C shares. Securities that are primarily traded on a domestic
securities exchange or securities listed on the NASDAQ National Market are
valued at the last sale price on the exchange or market where primarily traded
or listed, or, if there is no recent sale price available, at the last current
bid quotation. Securities that are primarily traded on foreign securities
exchanges are generally valued at the preceding closing values of such
securities on their respective exchanges where primarily traded. A security that
is listed or traded on more than one exchange is valued at the quotation on the
exchange determined to be the primary market for such security by the Board of
Trustees or its delegates. Securities not so traded or listed are valued at the
last current bid quotation if market quotations are available. Equity options
are valued at the last sale price unless the bid price is higher or the asked
price is lower, in which event such bid or asked price is used. Exchange traded
fixed income options are valued at the last sale price unless there is no sale
price, in which event current prices provided by market makers are used.
Over-the-counter traded options are valued based upon current prices provided by
market makers. Financial futures and options thereon are valued at the
settlement price established each day by the board of trade or exchange on which
they are traded. Other securities and assets are valued at fair value as
determined in good faith by the Board of Trustees. Because of the need to obtain
prices as of the close of trading on various exchanges throughout the world, the
calculation of net asset value of the Fund does not necessarily take place
contemporaneously with the determination of the prices of the Fund's foreign
securities, which may be made prior to the determination of net asset value. For
purposes of determining the Fund's net asset value, all assets and liabilities
initially expressed in foreign currency values will be converted into U.S.
Dollar values at the mean between the bid and offered quotations of such
currencies against U.S. Dollars as last quoted by a recognized dealer. If an
event were to occur after the value of a security was so established but before
the net asset value per share was determined, which was likely to materially
change the net asset value, then that security would be valued using fair value
considerations determined by the Board of Trustees or its delegates. On each day
the New York Stock Exchange (the "Exchange") is open for trading, the net asset
value is determined as of the earlier of 3:00 p.m. Chicago time or the close of
the Exchange.
PURCHASE OF SHARES
ALTERNATIVE PURCHASE ARRANGEMENTS. Class A shares of the 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 or a contingent deferred sales charge
but are subject to higher ongoing expenses than Class A shares 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 the Fund's shares lie in their
initial and contingent deferred sales charge structures and in their ongoing
expenses, including asset-based sales charges in the form of Rule 12b-1
distribution fees. These differences are summarized in the table below. See,
also, "Summary of Expenses." Each
15
<PAGE> 21
class has distinct advantages and disadvantages for different investors, and
investors may choose the class that best suits their circumstances and
objectives.
<TABLE>
<CAPTION>
ANNUAL 12B-1 FEES
(AS A % OF AVERAGE DAILY
SALES CHARGE NET ASSETS) OTHER INFORMATION
--------------------------------- ------------------------ ---------------------------------
<S> <C> <C> <C>
Class A Maximum initial sales charge of None Initial sales charge waived or
5.75% of the public offering reduced for certain purchases
price
Class B Maximum contingent deferred sales 0.75% Shares convert to Class A shares
charge of 4% of redemption six years after issuance
proceeds; declines to zero after
six years
Class C None 0.75% No conversion feature
</TABLE>
The minimum initial investment for the Fund is $1,000 and the minimum subsequent
investment is $100. The minimum initial investment for an Individual Retirement
Account is $250 and the minimum subsequent investment is $50. Under an automatic
investment plan, such as Bank Direct Deposit, Payroll Direct Deposit or
Government Direct Deposit, the minimum initial and subsequent investment is $50.
These minimum amounts may be changed at any time in management's discretion.
Share certificates will not be issued unless requested in writing. 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 choosing the initial sales charge alternative is
the net asset value plus a sales charge, as set forth below.
<TABLE>
<CAPTION>
SALES CHARGE
----------------------------------------
ALLOWED
TO
DEALERS
AS A AS A AS A
PERCENTAGE PERCENTAGE PERCENTAGE
OF OF NET OF
OFFERING ASSET OFFERING
AMOUNT OF PURCHASE PRICE VALUE* PRICE
------ ------ ------
<S> <C> <C> <C>
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.
</TABLE>
The 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.
16
<PAGE> 22
Class A shares of the Fund may be purchased at net asset value to the extent
that the amount invested represents the net proceeds from a redemption of shares
of a mutual fund for which KFS 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.
Class A shares of the Fund may be purchased at net asset value by: (a) any
purchaser provided that the amount invested in the Fund or other Kemper Mutual
Funds 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 provided
in either case that such plan has not less than 200 eligible employees (the
"Large Order NAV Purchase Privilege"). Redemption within one year 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 the Fund to
employer sponsored employee benefit plans using the subaccount recordkeeping
system made available through the Shareholder Service Agent 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
in any calendar year, .50% on the next $5 million and .25% on amounts over $10
million in such calendar year. KDI may in its discretion compensate investment
dealers or other financial services firms in connection with the sale of Class A
shares of the Fund to other purchasers at net asset value in accordance with the
Large Order NAV Purchase Privilege up to the following amounts: .70% of the net
asset value of shares sold on amounts up to $3 million, .50% on the next $2
million and .25% on amounts over $5 million. For purposes of determining the
appropriate commission percentage to be applied to a particular sale under the
foregoing schedules, 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 the Fund at net
asset value under the Large Order NAV Purchase Privilege is not available if
another net asset value purchase privilege is also applicable.
Effective on February 1, 1996, Class A shares of the 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 at its discretion pay investment dealers and other financial
services firms a concession, payable quarterly, at an annual rate of up to .25%
of net assets attributable to such shares maintained and serviced by the firm. A
firm becomes eligible for the concession based upon assets in accounts
attributable to shares purchased under this privilege in the month after the
month of
17
<PAGE> 23
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-Dreman Fund, Inc. ("KDF") on September
8, 1995, and have continuously owned shares of KDF (or a Kemper Fund acquired by
exchange of KDF shares) since that date, for themselves or members of their
families, and (d) any trust 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 the 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 Class A shares may
purchase Fund Class A shares at net asset value hereunder. Class A shares may be
sold at net asset value in any amount to unit investment trusts sponsored by
Everen Securities, Inc. In addition, unitholders of unit investment trusts
sponsored by Everen Securities, Inc. or its predecessors may purchase the Fund's
Class A shares at net asset value through reinvestment programs described in the
prospectuses of such trusts that have such programs. The Fund's Class A shares
may be sold at net asset value through certain investment advisers registered
under the Investment Advisers Act of 1940 and other financial services firms
that adhere to certain standards established by KDI, including a requirement
that such shares be sold for the benefit of their clients participating in a
"wrap account" or similar program under which such clients pay a fee to the
investment adviser or other firm. Such shares are sold for investment purposes
and on the condition that they will not be resold except through redemption or
repurchase by the Fund. The Fund may also issue 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.
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 the Fund for services as distributor and principal underwriter
for Class B shares. See "Investment Manager and Underwriter."
Class B shares of the Fund will automatically convert to Class A shares of the
Fund six years after issuance on the basis of the relative net asset value per
share. Class B shareholders of the Fund who originally acquired their shares as
Initial Shares of Kemper Portfolios, formerly known as Kemper Investment
Portfolios ("KIP"), hold them subject
18
<PAGE> 24
to the same conversion period schedule as that of their KIP Portfolio. Class B
shares originally representing Initial Shares of a KIP Portfolio will
automatically convert to Class A shares of the Fund six years after issuance of
the Initial Shares for shares issued on or after February 1, 1991 and seven
years after issuance of the Initial Shares for shares issued before February 1,
1991. The purpose of the conversion feature is to relieve holders of Class B
shares from the distribution services fee when they have been outstanding long
enough for KDI to have been compensated for distribution related expenses. For
purposes of conversion to Class A shares, shares purchased through the
reinvestment of dividends and other distributions paid with respect to Class B
shares in a shareholder's Fund account will be converted to Class A shares on a
pro rata basis.
PURCHASE OF CLASS C SHARES. The public offering price of the Class C shares of
the Fund is the next determined net asset value. No initial or contingent
deferred 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. KDI pays firms for sales of
Class C shares a distribution fee, payable quarterly, at an annual rate of .75%
of net assets attributable to Class C shares maintained and serviced by the
firm. KDI is compensated by the Fund 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 the 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 the Fund for their clients, and KDI may pay them a transaction fee up
to the level of the discount or commission allowable or payable to dealers as
described above. Banks 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.
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 or other compensation, to firms that sell shares
of the Fund. Non-cash compensation includes luxury merchandise and trips to
luxury resorts. In some instances, such discounts, commissions or other
incentives will be offered only to certain firms that sell or are expected to
sell during specified time periods certain minimum amounts of shares of the Fund
or other funds underwritten by KDI.
Orders for the purchase of shares of a Fund will be confirmed at a price based
on the net asset value of the Fund next determined after receipt by KDI of the
order accompanied by payment. However, orders received by dealers or other 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
19
<PAGE> 25
date"). The Fund reserves the right to determine the net asset value more
frequently than once a day if deemed desirable. Dealers and other financial
services firms are obligated to transmit orders promptly. Collection may take
significantly longer for a check drawn on a foreign bank than for a check drawn
on a domestic bank. Therefore, if an order is accompanied by a check drawn on a
foreign bank, funds must normally be collected before shares will be purchased.
See "Purchase and Redemption of Shares" in the Statement of Additional
Information.
Investment dealers and other firms provide varying arrangements for their
clients to purchase and redeem Fund shares. Some may establish higher minimum
investment requirements than set forth above. Firms may arrange with their
clients for other investment or administrative services. Such firms may
independently establish and charge additional amounts to their clients for such
services, which charges would reduce the clients' return. Firms also may hold
Fund shares in nominee or street name as agent for and on behalf of their
customers. In such instances, the Fund's transfer agent will have no information
with respect to or control over accounts of specific shareholders. Such
shareholders may obtain access to their accounts and information about their
accounts only from their firm. Certain of these firms may receive compensation
from the Fund through the Shareholder Service Agent for recordkeeping and other
expenses relating to these nominee accounts. In addition, certain privileges
with respect to the purchase and redemption of shares or the reinvestment of
dividends may not be available through such firms. Some firms may participate in
a program allowing them access to their clients' accounts for servicing
including, without limitation, transfers of registration and dividend payee
changes; and may perform functions such as generation of confirmation statements
and disbursement of cash dividends. Such firms, including affiliates of KDI, may
receive compensation from the Fund through the Shareholder Service Agent for
these services. This prospectus should be read in connection with such firms'
material regarding their fees and services.
The Fund reserves the right to withdraw all or any part of the offering made by
this prospectus and to reject purchase orders. Also, from time to time, the Fund
may temporarily suspend the offering of any class of its shares to new
investors. During the period of such suspension, persons who are already
shareholders of such class of the Fund normally are permitted to continue to
purchase additional shares of such class and to have dividends reinvested.
Shareholders should direct their inquiries to Kemper Service Company, 811 Main
Street, Kansas City, Missouri 64105-2005 or to the firm from which they received
this prospectus.
REDEMPTION OR REPURCHASE OF SHARES
GENERAL. Any shareholder may require the Fund to redeem his or her shares. When
shares are held for the account of a shareholder by the Fund's transfer agent,
the shareholder may redeem them by 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 the Fund will be the net asset value per
share of the Fund next determined following receipt by the Shareholder Service
Agent of a properly executed request with any required documents as described
above. Payment for shares redeemed will be made in cash as promptly as
practicable but in no event later than seven days after receipt of a properly
executed request accompanied by any outstanding share certificates in proper
form for transfer. When the Fund is asked to redeem shares for which it may not
have yet received good payment, 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 15 days from receipt by the Fund of the
purchase
20
<PAGE> 26
amount. The redemption within one year of Class A shares purchased at net asset
value under the Large Order NAV Purchase Privilege may be subject to a 1%
contingent deferred sales charge (see "Purchase of Shares--Initial Sales Charge
Alternative--Class A Shares") and the redemption of Class B shares may be
subject to a contingent deferred sales charge (see "Contingent Deferred Sales
Charge--Class B Shares" below).
Because of the high cost of maintaining small accounts, the Fund reserve the
right to redeem an account (and, in the case of Class B shares, impose any
applicable contingent deferred sales charge) that falls below the minimum
investment level, currently $1,000, as a result of redemptions. Currently,
Individual Retirement Accounts (IRAs) and employee benefit plan accounts are not
subject to this procedure. A shareholder will be notified in writing and will be
allowed 60 days to make additional purchases to bring the account value up to
the minimum investment level before the Fund redeems the shareholder's account.
The investment required to reach that level may be made at net asset value
(without any initial sales charge in the case of Class A shares).
Shareholders can request the following telephone privileges: expedited wire
transfer redemptions and EXPRESS-Transfer transactions (see "Special Features")
and exchange transactions for individual and institutional accounts and
pre-authorized telephone redemption transactions for certain institutional
accounts. Shareholders may choose these privileges on the account application or
by contacting the Shareholder Service Agent for appropriate instructions. Please
note that the telephone exchange privilege is automatic unless the shareholder
refuses it on the account application. The Fund or its agents may be liable for
any losses, expenses or costs arising out of any fraudulent or unauthorized
telephone requests pursuant to these privileges unless the Fund or its agents
reasonably believe, based upon reasonable verification procedures, that the
telephonic instructions are genuine. The SHAREHOLDER WILL BEAR THE RISK OF LOSS,
including loss resulting from fraudulent or unauthorized transactions, so long
as reasonable verification procedures are followed. 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 in the case of Class B
shares) are $50,000 or less and the proceeds are payable to the shareholder of
record at the address of record, normally a telephone request or a written
request by any one account holder without a signature guarantee is sufficient
for redemptions by individual or joint account holders, and trust, executor and
guardian account holders (excluding custodial accounts for gifts and transfers
to minors), provided the trustee, executor or guardian is named in the account
registration. Other institutional account holders and guardian account holders
of custodial accounts for gifts and transfers to minors may exercise this
special privilege of redeeming shares by telephone request or written request
without a signature guarantee subject to the same conditions as individual
account holders and subject to the limitations on liability described under
"General" above, provided that this privilege has been pre-authorized by the
institutional account holder by written instruction to the Shareholder Service
Agent with signatures guaranteed. Telephone requests may be made by calling
1-800-621-1048. Shares purchased by check or through EXPRESS-Transfer or Bank
Direct Deposit may not be redeemed under this privilege of redeeming shares by
telephone request until such shares have been owned for at least 15 days. This
privilege of redeeming shares by telephone request or by written request without
a signature guarantee may not be used to redeem shares held in certificated form
and may not be used if the shareholder's account has had an address change
within 30 days of the redemption request. During periods when it is difficult to
contact the Shareholder Service Agent by telephone, it may be difficult to use
the telephone redemption privilege, although investors can still redeem by mail.
The Fund reserves the right to terminate or modify this privilege at any time.
REPURCHASES (CONFIRMED REDEMPTIONS). A request for repurchase may be
communicated by a shareholder through a securities dealer or other financial
services firm to KDI, which the Fund has authorized to act as its agent. There
is no charge by KDI with respect to repurchases; however, dealers or other firms
may charge customary commissions for their services. Dealers and other financial
services firms are obligated to transmit orders promptly. The repurchase price
will be the net asset value 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
21
<PAGE> 27
effective on that day. The offer to repurchase may be suspended at any time.
Requirements as to stock powers, certificates, payments and delay of payments
are the same as for redemptions.
EXPEDITED WIRE TRANSFER REDEMPTIONS. If the account holder has given
authorization for expedited wire redemption to the account holder's brokerage or
bank account, shares of the Fund can be redeemed and proceeds sent by federal
wire transfer to a single previously designated account. Requests received by
the Shareholder Service Agent prior to the determination of net asset value will
result in shares being redeemed that day at the net asset value effective on
that day and normally the proceeds will be sent to the designated account the
following business day. Delivery of the proceeds of a wire redemption request of
$250,000 or more may be delayed by the Fund for up to seven days if the
investment manager deems it appropriate under then current market conditions.
Once authorization is on file, the Shareholder Service Agent will honor requests
by telephone at 1-800-621-1048 or in writing, subject to the limitations on
liability described under "General" above. The Fund is not responsible for the
efficiency of the federal wire system or the account holder's financial services
firm or bank. The Fund currently does not charge the account holder for wire
transfers. The account holder is responsible for any charges imposed by the
account holder's firm or bank. There is a $1,000 wire redemption minimum
(including any contingent deferred sales charge). To change the designated
account to receive wire redemption proceeds, send a written request to the
Shareholder Service Agent with signatures guaranteed as described above or
contact the firm through which shares of the Fund were purchased. Shares
purchased by check or through EXPRESS-Transfer or Bank Direct Deposit may not be
redeemed by wire transfer until such shares have been owned for at least 15
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 Fund reserves 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 of 1% may be imposed upon redemption of Class A
shares that are purchased under the Large Order NAV Purchase Privilege 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 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; (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); and (e)
redemptions under the Fund's Systematic Withdrawal Plan at a maximum of 10% per
year of the net asset value of the account.
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.
<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
SALES
YEAR OF REDEMPTION AFTER PURCHASE CHARGE
------------------------------------------------------------------------ ----------
<S> <C>
First................................................................... 4%
Second.................................................................. 3%
Third................................................................... 3%
Fourth.................................................................. 2%
Fifth................................................................... 2%
Sixth................................................................... 1%
</TABLE>
22
<PAGE> 28
Class B shareholders who originally acquired their shares as Initial Shares of
Kemper Portfolios, formerly known as Kemper Investment Portfolios, hold them
subject to the same CDSC schedule that applied when those shares were purchased,
as follows:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES CHARGE
---------------------------------------------------------------------------------------
SHARES PURCHASED ON OR AFTER
YEAR OF REDEMPTION SHARES PURCHASED ON OR AFTER FEBRUARY 1, 1991 AND BEFORE SHARES PURCHASED BEFORE
AFTER PURCHASE MARCH 1, 1993 MARCH 1, 1993 FEBRUARY 1, 1991
------------------------ ---------------------------- ---------------------------- -----------------------
<S> <C> <C> <C>
First................... 4% 3% 5%
Second.................. 3% 3% 4%
Third................... 3% 2% 3%
Fourth.................. 2% 2% 2%
Fifth................... 2% 1% 2%
Sixth................... 1% 1% 1%
</TABLE>
The following example will illustrate the operation of the contingent deferred
sales charge. Assume that an investor makes a single purchase of $10,000 of the
Fund's Class B shares and that 16 months later the value of the shares has grown
by $1,000 through reinvested dividends and by an additional $1,000 of share
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 under the schedule above 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 April, 1996 will be eligible for the 3% charge if redeemed on
or after April 1, 1997. In the event no specific order is requested, the
redemption will be made first from Class B shares representing reinvested
dividends and then from the earliest purchase of Class B shares. KDI receives
any contingent deferred sales charge directly.
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 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 the Fund), (c) redemptions in connection with distributions
qualifying under the hardship provisions of the Code and (d) redemptions
representing returns of excess contributions to such plans.
REINVESTMENT PRIVILEGE. A shareholder who has redeemed Class A shares of the
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 the Fund
or any other Kemper Mutual Fund who redeems Class A shares purchased under the
23
<PAGE> 29
Large Order NAV Purchase Privilege (see "Purchase of Shares--Initial Sales
Charge Alternative--Class A Shares") or Class B 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 or Class B shares, as
the case may be, of the 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 the 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 shares of the
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. The Fund's Class A shares 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 Diversified Income Fund, Kemper High Yield Fund, Kemper U.S.
Government Securities Fund, Kemper International Fund, Kemper State Tax-Free
Income Series, Kemper Adjustable Rate U.S. Government Fund, Kemper Blue Chip
Fund, Kemper Global Income Fund, Kemper Target Equity Fund (series are subject
to a limited offering period), Kemper Intermediate Municipal Bond Fund, Kemper
Cash Reserves Fund, Kemper U.S. Mortgage Fund, Kemper Short-Intermediate
Government Fund, Kemper-Dreman Fund, Inc., Kemper Value+Growth Fund, Kemper
Quantitative Equity Fund, Kemper Horizon Fund and Kemper Europe Fund ("Kemper
Mutual Funds"). Except as noted below, there is no combined purchase credit for
direct purchases of shares of Kemper Money Market Fund, Cash Equivalent Fund,
Tax-Exempt California Money Market Fund, Cash Account Trust, Tax-Exempt New York
Money Market Fund or Investors Cash Trust ("Money Market Funds"), which are not
considered "Kemper Mutual Funds" for purposes hereof. For purposes of the
Combined Purchases feature described above as well as for the Letter of Intent
and Cumulative Discount features described below, employer sponsored employee
benefit plans using the subaccount record keeping system made available through
the Shareholder Service Agent may include: (a) Money Market Funds as "Kemper
Mutual Funds," (b) all classes of shares of any Kemper Mutual Fund and (c) the
value of any other plan 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
24
<PAGE> 30
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 the Fund are included for this
privilege.
CLASS A SHARES--CUMULATIVE DISCOUNT. The 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. Cash Equivalent Fund,
Tax-Exempt California Money Market Fund, Cash Account Trust, Tax-Exempt New York
Money Market Fund and Investors Cash Trust are available on exchange but only
through a financial services firm having a services agreement with KDI.
Class A shares of the 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 the 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 the 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.
GENERAL. Shares purchased by check or through EXPRESS-Transfer or Bank Direct
Deposit may not be exchanged until they have been owned for at least 15 days. In
addition, shares of a Kemper Mutual Fund (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 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,
25
<PAGE> 31
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 Kemper Mutual Funds, 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
Tax-Exempt New York Money Market Fund is available for sale only in New York,
Connecticut, New Jersey and Pennsylvania. Except as otherwise permitted by
applicable regulations, 60 days' prior written notice of any termination or
material change will be provided.
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," including the $1,000 minimum investment requirement
for the Kemper Fund acquired on exchange. 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 $2,500) from a
shareholder's bank, savings and loan, or credit union account to purchase shares
in the Fund. Shareholders can also redeem shares (minimum $500 and maximum
$2,500) from their Fund account and transfer the proceeds to their bank, savings
and loan, or credit union checking account. By enrolling in EXPRESS-Transfer,
the shareholder authorizes the Shareholder Service Agent to rely upon telephone
instructions from ANY PERSON to transfer the specified amounts between the
shareholder's Fund account and the predesignated bank, savings and loan or
credit union account, subject to the limitations on liability under "Redemption
or Repurchase of Shares--General." Once enrolled in EXPRESS-Transfer, a
shareholder can initiate a transaction by calling Kemper Shareholder Services
toll free at 1-800-621-1048 Monday through Friday, 8:00 a.m. to 3:00 p.m.
Chicago time. Shareholders may terminate this privilege by sending written
notice to Kemper Service Company, P.O. Box 419415, Kansas City, Missouri
64141-6415. Termination will become effective as soon as the Shareholder Service
Agent has had a reasonable time to act upon the request. EXPRESS-Transfer cannot
be used with passbook savings accounts or for tax-deferred plans such as
Individual Retirement Accounts ("IRAs").
BANK DIRECT DEPOSIT. A shareholder may purchase additional Fund shares through
an automatic investment program. With the Bank Direct Deposit Purchase Plan,
monthly investments are made automatically 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 Kemper
Service Company, P.O. Box 419415, Kansas City, Missouri 64141-6415. Termination
by a shareholder will become effective within thirty days after the Shareholder
Service Agent has received the request. The Fund may immediately terminate a
shareholder's Plan in the event that any item is unpaid by the shareholder's
financial institution. The Fund may terminate or modify this privilege at any
time.
PAYROLL DIRECT DEPOSIT AND GOVERNMENT DIRECT DEPOSIT. A shareholder may invest
in the Fund through Payroll Direct Deposit or Government Direct Deposit. Under
these programs, all or a portion of a shareholder's net pay or government check
is automatically invested in their Fund account each payment period. A
26
<PAGE> 32
shareholder may terminate participation in these programs by giving written
notice to the shareholder's employer or government agency, as appropriate. (A
reasonable time to act is required.) The Fund is not responsible for the
efficiency of the employer or government agency making the payment or any
financial institutions transmitting payments.
SYSTEMATIC WITHDRAWAL PLAN. The owner of $5,000 or more of a class of the Fund's
shares at the offering price (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 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
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 Fund 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 B shares made pursuant to a systematic withdrawal plan. The right is
reserved to amend the systematic withdrawal plan on 30 days' notice. The plan
may be terminated at any time by the investor or the Fund.
TAX-SHELTERED RETIREMENT PLANS. The Shareholder Service Agent provides
retirement plan services and documents and KDI can establish investor accounts
in any of the following types of retirement plans:
- - Individual Retirement Accounts ("IRAs") trusteed by IFTC. This includes
Simplified Employee Pension Plan ("SEP") IRA accounts and prototype documents.
- - 403(b)(7) Custodial Accounts also trusteed by IFTC. This type of plan is
available to employees of most non-profit organizations.
- - Prototype money purchase pension and profit-sharing plans may be adopted by
employers. The maximum annual contribution per participant is the lesser of
25% of compensation or $30,000.
Brochures describing the above plans as well as model defined benefit plans,
target benefit plans, 457 plans, 401(k) plans and materials for establishing
them are available from the Shareholder Service Agent upon request. The
brochures for plans trusteed by IFTC describe the current fees payable to IFTC
for its services as trustee. Investors should consult with their own tax
advisers before establishing a retirement plan.
PERFORMANCE
The Fund may advertise several types of performance information for a class of
shares, including "average annual total return" and "total return." Performance
information will be computed separately for Class A, Class B and Class C shares.
Each of these figures is based upon historical results and is not representative
of the future performance of any class of the Fund. KFS has agreed to a
temporary reduction of its investment management fee payable by the Fund to the
extent specified under "Investment Manager and Underwriter." This fee reduction
will improve the performance results of the Fund.
Average annual total return and total return figures measure both the net
investment income generated by, and the effect of any realized and unrealized
appreciation or depreciation of, the underlying investments in the Fund's
portfolio for the period in question, assuming the reinvestment of all
dividends. Thus, these figures reflect the
27
<PAGE> 33
change in the value of an investment in the Fund during a specified period.
Average annual total return will be quoted for at least the one, five and ten
year periods ending on a recent calendar quarter (or if such periods have not
yet elapsed, at the end of a shorter period corresponding to the life of the
Fund for performance purposes). Average annual total return figures represent
the average annual percentage change over the period in question. Total return
figures represent the aggregate percentage or dollar value change over the
period in question.
The Fund's performance may be compared to that of the Consumer Price Index or
various unmanaged equity indexes such as the Dow Jones Industrial Average, the
Standard & Poor's 500 Stock Index and the Europe Austral-Asia Far East ("EAFE")
Index and may also be compared to the performance of other mutual funds or
mutual fund indexes as reported by independent mutual fund reporting services
such as Lipper Analytical Services, Inc. ("Lipper"). Lipper performance
calculations are based upon changes in net asset value with all dividends
reinvested and do not include the effect of any sales charges. Also, investors
may want to compare the historical returns of various European securities
markets. Such returns would not necessarily be representative of the future
performance of such markets or of the performance of the Fund.
Information may be quoted from publications such as Morningstar, Inc., The Wall
Street Journal, Money Magazine, Forbes, Barron's, Fortune, The Chicago Tribune,
USA Today, Institutional Investor and Registered Representative. Also, investors
may want to compare the historical returns of various investments, performance
indexes of those investments or economic indicators, including, but not limited
to, stocks, bonds, certificates of deposit, money market funds and U.S. Treasury
obligations. Bank product performance may be based upon, among other things, the
BANK RATE MONITOR National IndexTM 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.
The Fund may depict the historical performance of the securities in which the
Fund may invest over periods reflecting a variety of market or economic
conditions either alone or in comparison with alternative investments,
performance indexes of those investments or economic indicators. The Fund may
also describe its portfolio holdings and depict its size or relative size
compared to other mutual funds, the number and make-up of its shareholder base
and other descriptive factors concerning the Fund.
The Fund's Class A shares are sold at net asset value plus a maximum sales
charge of 5.75% of the offering price. While the maximum sales charge is
normally reflected in a Fund's Class A performance figures, certain total return
calculations may not include such charge and those results would be reduced if
it were included. Class B shares and Class C shares are sold at net asset value.
Redemptions of Class B shares within the first six years after purchase may be
subject to a contingent deferred sales charge that ranges from 4% during the
first year to 0% after six years. 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 that may be imposed at the end of the period in
question. Performance figures for the Class B shares not including the effect of
the applicable contingent deferred sales charge would be reduced if it were
included.
The Fund's returns and net asset value will fluctuate and shares of the Fund are
redeemable by an investor at the then current net asset value, which may be more
or less than original cost. Redemption of Class B shares may be subject to a
contingent deferred sales charge as described above. Additional information
concerning the Fund's performance, and the performance of various global stock
markets, appears in the Statement of Additional Information. Additional
information about the Fund's performance will also appear in its Annual Report
to Shareholders, which will be available without charge from the Fund.
28
<PAGE> 34
CAPITAL STRUCTURE
The Fund is an open-end management investment company, organized as a business
trust under the laws of Massachusetts. The Fund was organized as a business
trust under the laws of Massachusetts on June 12, 1995. The investment manager
invested the "seed money" as the sole shareholder of Kemper Europe Fund before
the public offering of its shares and therefore, as of the date of this
prospectus, controlled the Fund.
The 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 the Fund, the Board of Trustees of the
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 Fund may offer multiple Portfolios, it is known as a
"series company." Shares of a Portfolio have equal noncumulative voting rights
and equal rights with respect to dividends, assets and liquidation of such
Portfolio and are subject to any preferences, rights or privileges of any
classes of shares of the Portfolio. Currently, the Fund offers four classes of
shares of a single Portfolio. These are Class A, Class B and Class C shares, as
well as Class I shares, which are available for purchase exclusively by the
following investors: (a) tax-exempt retirement plans of KFS and its affiliates;
and (b) the following investment advisory clients of KFS and its investment
advisory affiliates that invest at least $1 million in the 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 the Fund have equal noncumulative voting
rights except that Class B and Class C shares have separate and exclusive voting
rights with respect to the Fund's Rule 12b-1 Plan. Shares of each class also
have equal rights with respect to dividends, assets and liquidation of the Fund
subject to any preferences (such as resulting from different Rule 12b-1
distribution fees), rights or privileges of any classes of shares of the Fund.
Shares are fully paid and nonassessable when issued, are transferable without
restriction and have no preemptive or conversion rights. The Fund is not
required to hold annual shareholder meetings and does not intend to do so.
However, it will hold special meetings as required or deemed desirable for such
purposes as electing trustees, changing fundamental policies or approving an
investment management agreement. Subject to the Agreement and Declaration of
Trust of the 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.
29
<PAGE> 35
Kemper Distributors, Inc.
120 South LaSalle Street
Chicago, Illinois 60603
1-800-621-1048
KEUF-1 /96 (LOGO)printed on recycled paper
KEMPER
EUROPE
FUND
PROSPECTUS
, 1996
IJKLM(LOGO)
KEMPER
<PAGE> 36
KEMPER EUROPE FUND
CROSS-REFERENCE SHEET
BETWEEN ITEMS ENUMERATED IN PART B
OF FORM N-1A AND STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
ITEM NUMBER LOCATION IN STATEMENT OF
OF FORM N-1A ADDITIONAL INFORMATION
---------------------------------------------
<S> <C> <C>
10. Cover Page.................................... Cover Page
11. Table of Contents............................. Table of Contents
12. General Information and History............... Inapplicable
13. Investment Objectives and Policies............ Investment Restrictions; Investment Policies
and Techniques
14. Management of the Fund........................ Investment Manager and Underwriter;
Officers and Trustees
15. Control Persons and Principal Holders of
Securities.................................... Officers and Trustees
16. Investment Advisory and Other Services........ Investment Manager and Underwriter; Officers
and Trustees
17. Brokerage Allocation and Other Practices...... Portfolio Transactions
18. Capital Stock and Other Securities............ Dividends and Taxes;
Shareholder Rights
19. Purchase, Redemption and Pricing of
Securities Being Offered...................... Purchase and Redemption of Shares
20. Tax Status.................................... Dividends and Taxes
21. Underwriters.................................. Investment Manager and Underwriter
22. Calculation of Performance Data............... Performance
23. Financial Statements.......................... Report of Independent Auditors, Statement of
Net Assets
</TABLE>
<PAGE> 37
STATEMENT OF ADDITIONAL INFORMATION
, 1996
KEMPER EUROPE FUND
120 SOUTH LASALLE STREET, CHICAGO, ILLINOIS 60603
1-800-621-1048
This Statement of Additional Information is not a prospectus. It is the
Statement of Additional Information for Kemper Europe Fund (the "Fund"). It
should be read in conjunction with the prospectus of the Fund dated ,
1996. The prospectus may be obtained without charge from the Fund.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
- --------------------------------------------------------------------------
<S> <C>
Investment Restrictions............................................ B-1
Investment Policies and Techniques................................. B-3
Dividends and Taxes................................................ B-8
Performance........................................................ B-9
Investment Manager and Underwriter................................. B-10
Portfolio Transactions............................................. B-12
Purchase and Redemption of Shares.................................. B-13
Officers and Trustees.............................................. B-14
Shareholder Rights................................................. B-16
Report of Independent Auditors ( , 1996)................ B-18
Statement of Net Assets ( , 1996)....................... B-19
</TABLE>
KEUF-13 /96 (LOGO)printed on recycled paper
<PAGE> 38
INVESTMENT RESTRICTIONS
The Fund has adopted certain fundamental investment restrictions which, together
with the investment objective of the Fund, 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 FUND MAY NOT, AS A FUNDAMENTAL POLICY:
(1) With respect to 75% of the Fund's total assets, purchase securities of any
issuer (other than securities issued or guaranteed by the U.S. Government or any
of its agencies or instrumentalities) if, as a result, more than 5% of the
Fund's total assets would be invested in securities of that issuer.
(2) Purchase more than 10% of any class of voting securities of any issuer.
(3) Lend money or securities, provided that the making of time or demand
deposits with banks and the purchase of debt securities such as bonds,
debentures, commercial paper, repurchase agreements and short-term obligations
in accordance with its objective and policies are not prohibited.
(4) Borrow money except as a temporary measure for extraordinary or emergency
purposes, and then only in an amount up to one-third of the value of its total
assets, in order to meet redemption requests without immediately selling any
portfolio securities. If, for any reason, the current value of the Fund's total
assets falls below an amount equal to three times the amount of its indebtedness
from money borrowed, the Fund will, within three days (not including Sundays and
holidays), reduce its indebtedness to the extent necessary. The Fund will not
borrow for leverage purposes and will not purchase securities or make
investments while borrowings are outstanding.
(5) Pledge, hypothecate, mortgage or otherwise encumber more than 15% of its
total assets and then only to secure borrowings permitted by restriction 4
above. (The collateral arrangements with respect to options and financial
futures transactions and any margin payments in connection therewith are not
deemed to be pledges or other encumbrances.)
(6) 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.
(7) Write or sell put or call options, combinations thereof or similar options
on more than 25% of the Fund's net assets; nor may it purchase put or call
options if more than 5% of the Fund's net assets would be invested in premiums
on put and call options, combinations thereof or similar options; however, the
Fund may buy or sell options on financial futures contracts.
(8) Concentrate 25% or more of the Fund's total assets in any one industry.
Water, communications, electric and gas utilities shall each be considered a
separate industry. This limitation shall not apply to obligations issued by the
United States or any foreign government or their agencies or instrumentalities.
(9) Invest in commodities or commodity futures contracts, although it may buy or
sell financial futures contracts and options on such contracts and may enter
into foreign currency transactions; or in real estate, although it may invest in
securities which are secured by real estate and securities of issuers which
invest or deal in real estate including real estate investment trusts.
(10) Underwrite securities issued by others except to the extent the Fund may be
deemed to be an underwriter, under the federal securities laws, in connection
with the disposition of portfolio securities. The Fund may buy and sell
securities outside the United States which are not registered with the
Securities and Exchange Commission or marketable in the United States.
B-1
<PAGE> 39
(11) Issue senior securities except as permitted under the Investment Company
Act of 1940.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The Fund has
adopted the following non-fundamental restrictions, which may be changed by the
Board of Trustees without shareholder approval. The Fund may not:
(i) Invest more than 5% of the Fund's total assets in securities of issuers
(other than obligations of, or guaranteed by, the U.S. Government, its agencies
or instrumentalities) which with their predecessors have a record of less than
three years continuous operation, and equity securities of issuers which are not
readily marketable.
(ii) Purchase or retain the securities of any issuer if any of the officers,
trustees or directors of the Fund or its investment adviser owns beneficially
more than 1/2 of 1% of the securities of such issuer and together own more than
5% of the securities of such issuer.
(iii) Invest for the purpose of exercising control or management of another
issuer.
(iv) Invest in interests in oil, gas or other mineral exploration or development
programs, although it may invest in the securities of issuers which invest in or
sponsor such programs.
(v) Purchase securities of other investment companies, except in connection with
a merger, consolidation, acquisition or reorganization, or by purchase in the
open market of securities of closed-end investment companies where no
underwriter or dealer's commission or profit, other than customary broker's
commission, is involved and only if immediately thereafter not more than (i) 3%
of the total outstanding voting stock of such company is owned by the Fund, (ii)
5% of the Fund's total assets would be invested in any one such company, and
(iii) 10% of the Fund's total assets would be invested in such securities.
(vi) Invest more than 15% of its net assets in illiquid securities.
(vii) Invest in warrants if more than 5% of the Fund's net assets would be
invested in warrants. Included within that amount, but not to exceed 2% of the
Fund's net assets, may be warrants not listed on the New York or American Stock
Exchanges. Warrants acquired in units or attached to securities may be deemed to
be without value for such purposes.
(viii) Invest in oil, gas, and other mineral leases.
(ix) Purchase or sell real property (including limited partnership interests but
excluding readily marketable interests in real estate investment trusts and
readily marketable securities of companies which invest in real estate).
(x) Invest more than 5% of its total assets in restricted securities, excluding
restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933 that have been determined to be liquid pursuant to
procedures adopted by the Board of Trustees, provided that the total amount of
Fund assets invested in restricted securities and securities of issuers which
with their predecessors have a record of less than 3 years continuous operation
will not exceed 15% of total assets.
(xi) Invest more than 10% of its total assets in securities of real estate
investment trusts.
B-2
<PAGE> 40
INVESTMENT POLICIES AND TECHNIQUES
GENERAL. The Fund may engage in futures and options transactions in accordance
with its investment objective and policies. The Fund intends to engage in such
transactions if it appears to the investment manager to be advantageous for the
Fund to do so, in order to pursue its investment objective, to hedge against the
effects of fluctuating interest rates and to stabilize the value of its assets
and not for speculation. The use of futures and options, and possible benefits
and attendant risks, are discussed below, along with information concerning
certain other investment policies and techniques.
FINANCIAL FUTURES CONTRACTS. The Fund may enter into financial futures contracts
for the future delivery of a financial instrument, such as a security, or an
amount of foreign currency, or the cash value of a securities index. This
investment technique is designed primarily to hedge (i.e., protect) against
anticipated future changes in market conditions or foreign exchange rates which
otherwise might affect adversely the value of securities or other assets which
the Fund holds or intends to purchase. A "sale" of a futures contract means the
undertaking of a contractual obligation to deliver the securities or the cash
value of an index or foreign currency called for by the contract at a specified
price during a specified delivery period. A "purchase" of a futures contract
means the undertaking of a contractual obligation to acquire the securities or
cash value of an index or foreign currency at a specified price during a
specified delivery period. At the time of delivery, in the case of fixed income
securities pursuant to the contract, adjustments are made to recognize
differences in value arising from the delivery of securities with a different
interest rate than that specified in the contract. In some cases, securities
called for by a futures contract may not have been issued at the time the
contract was written.
Although some financial futures contracts by their terms call for the actual
delivery or acquisition of securities or other assets, in most cases a party
will close out the contractual commitment before delivery of the underlying
assets by purchasing (or selling, as the case may be) on a commodities exchange
an identical futures contract calling for delivery in the same month. Such a
transaction, if effected through a member of an exchange, cancels the obligation
to make or take delivery of the underlying securities or other assets. All
transactions in the futures market are made, offset or fulfilled through a
clearing house associated with the exchange on which the contracts are traded.
The Fund will incur brokerage fees when it purchases or sells contracts, and
will be required to maintain margin deposits. At the time the Fund enters into a
futures contract, it is required to deposit with its custodian, on behalf of the
broker, a specified amount of cash or eligible securities, called "initial
margin." The initial margin required for a futures contract is set by the
exchange on which the contract is traded. Subsequent payments, called "variation
margin," to and from the broker are made on a daily basis as the market price of
the futures contract fluctuates. The costs incurred in connection with futures
transactions could reduce the Fund's return. Futures contracts entail risks. If
the investment manager's judgment about the general direction of markets or
exchange rates is wrong, the overall performance may be poorer than if no such
contracts had been entered into.
There may be an imperfect correlation between movements in prices of futures
contracts and portfolio assets being hedged. In addition, the market prices of
futures contracts may be affected by certain factors. If participants in the
futures market elect to close out their contracts through offsetting
transactions rather than meet margin requirements, distortions in the normal
relationship between the assets and futures markets could result. Price
distortions could also result if investors in futures contracts decide to make
or take delivery of underlying securities or other assets rather than engage in
closing transactions because of the resultant reduction in the liquidity of the
futures market. In addition, from the point of view of speculators, the margin
requirements in the futures market are less onerous than margin requirements in
the cash market, increased participation by speculators in the futures market
could cause temporary price distortions. Due to the possibility of price
distortions in the futures market and because of the imperfect correlation
between movements in the prices of securities or other assets and movements in
the prices of futures contracts, a correct forecast of market trends by the
investment manager may still not result in a successful hedging transaction. If
any of these events should occur, the Fund could lose money on the financial
futures contracts and also on the value of its portfolio assets.
B-3
<PAGE> 41
OPTIONS ON FINANCIAL FUTURES CONTRACTS. The Fund may purchase and write call and
put options on financial futures contracts. An option on a futures contract
gives the purchaser the right, in return for the premium paid, to assume a
position in a futures contract at a specified exercise price at any time during
the period of the option. Upon exercise, the writer of the option delivers the
futures contract to the holder at the exercise price. The Fund would be required
to deposit with its custodian initial margin and maintenance margin with respect
to put and call options on futures contracts written by it. The Fund will
establish segregated accounts or will provide cover with respect to written
options on financial futures contracts in a manner similar to that described
under "Options on Securities." Options on futures contracts involve risks
similar to those risks relating to transactions in financial futures contracts
described above. Also, an option purchased by the Fund may expire worthless, in
which case the Fund would lose the premium paid therefor.
OPTIONS ON SECURITIES. The Fund may write (sell) "covered" call options on
securities as long as it owns the underlying securities subject to the option or
an option to purchase the same underlying securities, having an exercise price
equal to or less than the exercise price of the "covered" option, or will
establish and maintain for the term of the option a segregated account
consisting of cash, U.S. Government securities or other liquid high-grade debt
obligations ("eligible securities") having a value at least equal to the
fluctuating market value of the optioned securities. The Fund may write
"covered" put options provided that, as long as the Fund is obligated as a
writer of a put option, the Fund will own an option to sell the underlying
securities subject to the option, having an exercise price equal to or greater
than the exercise price of the "covered" option, or it will deposit and maintain
in a segregated account eligible securities having a value equal to or greater
than the exercise price of the option. A call option gives the purchaser the
right to buy, and the writer the obligation to sell, the underlying security at
the exercise price during or at the end of the option period. A put option gives
the purchaser the right to sell, and the writer the obligation to buy, the
underlying security at the exercise price during or at the end of the option
period. The premium received for writing an option will reflect, among other
things, the current market price of the underlying security, the relationship of
the exercise price to such market price, the price volatility of the underlying
security, the option period, supply and demand and interest rates. The Fund may
write or purchase spread options, which are options for which the exercise price
may be a fixed dollar spread or yield spread between the security underlying the
option and another security that is used as a bench mark. The exercise price of
an option may be below, equal to or above the current market value of the
underlying security at the time the option is written. The buyer of a put who
also owns the related security is protected by ownership of a put option against
any decline in that security's price below the exercise price less the amount
paid for the option. The ability to purchase put options allows the Fund to
protect capital gains in an appreciated security it owns, without being required
to actually sell that security. At times the Fund would like to establish a
position in a security upon which call options are available. By purchasing a
call option, the Fund is able to fix the cost of acquiring the security, this
being the cost of the call plus the exercise price of the option. This procedure
also provides some protection from an unexpected downturn in the market because
the Fund is only at risk for the amount of the premium paid for the call option
which it can, if it chooses, permit to expire.
During the option period the covered call writer gives up the potential for
capital appreciation above the exercise price should the underlying asset rise
in value, and the secured put writer retains the risk of loss should the
underlying security decline in value. For the covered call writer, substantial
appreciation in the value of the underlying asset would result in the security
being "called away." For the secured put writer, substantial depreciation in the
value of the underlying security would result in the security being "put to" the
writer. If a covered call option expires unexercised, the writer realizes a gain
in the amount of the premium received. If the covered call option writer has to
sell the underlying security because of the exercise of a call option, it
realizes a gain or loss from the sale of the underlying security, with the
proceeds being increased by the amount of the premium.
If a secured put option expires unexercised, the writer realizes a gain from the
amount of the premium. If the secured put writer has to buy the underlying
security because of the exercise of the put option, the secured put writer
incurs an unrealized loss to the extent that the current market value of the
underlying security is less than the
B-4
<PAGE> 42
exercise price of the put option. However, this would be offset in whole or in
part by gain from the premium received.
OVER-THE-COUNTER OPTIONS. As indicated in the prospectus (see "Investment
Objective, Policies and Risk Factors"), the Fund may deal in over-the-counter
traded options ("OTC options"). OTC options differ from exchange traded options
in several respects. They are transacted directly with dealers and not with a
clearing corporation, and there is a risk of nonperformance by the dealer as a
result of the insolvency of such dealer or otherwise, in which event the Fund
may experience material losses. However, in writing options the premium is paid
in advance by the dealer. OTC options are available for a greater variety of
securities, and a wider range of expiration dates and exercise prices, than are
exchange traded options. Since there is no exchange, pricing is normally done by
reference to information from market makers, which information is carefully
monitored by the investment manager and verified in appropriate cases.
A writer or purchaser of a put or call option can terminate it voluntarily only
by entering into a closing transaction. In the case of OTC options, there can be
no assurance that a continuous liquid secondary market will exist for any
particular option at any specific time. Consequently, the Fund may be able to
realize the value of an OTC option it has purchased only by exercising it or
entering into a closing sale transaction with the dealer that issued it.
Similarly, when the Fund writes an OTC option, it generally can close out that
option prior to its expiration only by entering into a closing purchase
transaction with the dealer to which the Fund originally wrote it. If a covered
call option writer cannot effect a closing transaction, it cannot sell the
underlying security until the option expires or the option is exercised.
Therefore, a covered call option writer of an OTC option may not be able to sell
an underlying security even though it might otherwise be advantageous to do so.
Likewise, a secured put writer of an OTC option may be unable to sell the
securities pledged to secure the put for other investment purposes while it is
obligated as a put writer. Similarly, a purchaser of such put or call option
might also find it difficult to terminate its position on a timely basis in the
absence of a secondary market.
The Fund understands the position of the staff of the Securities and Exchange
Commission ("SEC") to be that purchased OTC options and the securities used as
"cover" for written OTC options are illiquid securities. The investment manager
disagrees with this position and has found the dealers with which it engages in
OTC options transactions generally agreeable to and capable of entering into
closing transactions. The Fund has adopted procedures for engaging in OTC
options for the purpose of reducing any potential adverse effect of such
transactions upon the liquidity of the Fund's portfolio. A brief description of
such procedures is set forth below.
The Fund will only engage in OTC options transactions with dealers approved by
the investment manager pursuant to procedures adopted by the Fund's Board of
Trustees. The investment manager believes that the approved dealers should be
able to enter into closing transactions if necessary and, therefore, present
minimal credit risks to the Fund. The investment manager will monitor the
creditworthiness of the approved dealers on an ongoing basis. The Fund currently
will not engage in OTC options transactions if the amount invested by the Fund
in OTC options, plus a "liquidity charge" related to OTC options written by the
Fund, plus the amount invested by the Fund in illiquid securities, would exceed
15% of the Fund's net assets. The "liquidity charge" referred to above is
computed as described below.
The Fund anticipates entering into agreements with dealers to which the Fund
sells OTC options. Under these agreements the Fund would have the absolute right
to repurchase the OTC options from the dealer at any time at a price no greater
than a price established under the agreements (the "Repurchase Price"). The
"liquidity charge" referred to above for a specific OTC option transaction will
be the Repurchase Price related to the OTC option less the intrinsic value of
the OTC option. The intrinsic value of an OTC call option for such purposes will
be the amount by which the current market value of the underlying security
exceeds the exercise price. In the case of an OTC put option, intrinsic value
will be the amount by which the exercise price exceeds the current market value
of the underlying security. If there is no such agreement requiring a dealer to
allow the Fund to repurchase a specific OTC option written by the Fund, the
"liquidity charge" will be the current market value of the securities serving as
"cover" for such OTC option.
B-5
<PAGE> 43
OPTIONS ON SECURITIES INDICES. The Fund also may purchase and write call and put
options on securities indices in an attempt to hedge against market conditions
affecting the value of securities that the Fund owns or intends to purchase, and
not for speculation. Through the writing or purchase of index options, the Fund
can achieve many of the same objectives as through the use of options on
individual securities. Options on securities indices are similar to options on a
security except that, rather than the right to take or make delivery of a
security at a specified price, an option on a securities index gives the holder
the right to receive, upon exercise of the option, an amount of cash if the
closing level of the securities index upon which the option is based is greater
than, in the case of a call, or less than, in the case of a put, the exercise
price of the option. This amount of cash is equal to the difference between the
closing price of the index and the exercise price of the option. The writer of
the option is obligated, in return for the premium received, to make delivery of
this amount. Unlike security options, all settlements are in cash and gain or
loss depends upon price movements in the market generally (or in a particular
industry or segment of the market), rather than upon price movements in
individual securities. Price movements in securities that the Fund owns or
intends to purchase will probably not correlate perfectly with movements in the
level of an index since the prices of such securities may be affected by
somewhat different factors and, therefore, the Fund bears the risk that a loss
on an index option would not be completely offset by movements in the price of
such securities.
When the Fund writes an option on a securities index, it will segregate and
mark-to-market eligible securities equal in value to at least 100% of the
exercise price in the case of a put, or the contract value in the case of a
call. In addition, where the Fund writes a call option on a securities index at
a time when the contract value exceeds the exercise price, the Fund will
segregate and mark-to-market, until the option expires or is closed out, cash or
cash equivalents equal in value to such excess.
The Fund may also purchase and sell options on other appropriate indices, as
available, such as foreign currency indices. Options on a securities index
involve risks similar to those risks relating to transactions in financial
futures contracts described above. Also, an option purchased by the Fund may
expire worthless, in which case the Fund would lose the premium paid therefor.
REGULATORY RESTRICTIONS. To the extent required to comply with SEC Release No.
IC-10666, when purchasing a futures contract, writing a put option or entering
into a forward foreign currency exchange purchase, the Fund will maintain in a
segregated account cash, U.S. Government securities or liquid high-grade debt
obligations equal to the value of such contracts. The Fund will use cover in
connection with selling a futures contract.
The Fund will not engage in transactions in financial futures contracts or
options thereon for speculation, but only in an attempt to hedge against changes
in interest rates or market conditions affecting the value of securities which
the Fund holds or intends to purchase.
FOREIGN CURRENCY OPTIONS. The Fund may engage in foreign currency options
transactions. A foreign currency option provides the option buyer with the right
to buy or sell a stated amount of foreign currency at the exercise price at a
specified date or during the option period. A call option gives its owner the
right, but not the obligation, to buy the currency, while a put option gives its
owner the right, but not the obligation, to sell the currency. The option seller
(writer) is obligated to fulfill the terms of the option sold if it is
exercised. However, either seller or buyer may close its position during the
option period in the secondary market for such options any time prior to
expiration.
A call rises in value if the underlying currency appreciates. Conversely, a put
rises in value if the underlying currency depreciates. While purchasing a
foreign currency option can protect the Fund against an adverse movement in the
value of a foreign currency, it does not limit the gain which might result from
a favorable movement in the value of such currency. For example, if the Fund
were holding securities denominated in an appreciating foreign currency and had
purchased a foreign currency put to hedge against a decline in the value of the
currency, it would not have to exercise its put. Similarly, if the Fund has
entered into a contract to purchase a security denominated in a foreign currency
and had purchased a foreign currency call to hedge against a rise in value of
the currency but instead the
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currency had depreciated in value between the date of purchase and the
settlement date, the Fund would not have to exercise its call but could acquire
in the spot market the amount of foreign currency needed for settlement.
FOREIGN CURRENCY FUTURES TRANSACTIONS. As part of its financial futures
transactions (see "Financial Futures Contracts" and "Options on Financial
Futures Contracts" above), the Fund may use foreign currency futures contracts
and options on such futures contracts. Through the purchase or sale of such
contracts, the Fund may be able to achieve many of the same objectives as
through forward foreign currency exchange contracts more effectively and
possibly at a lower cost.
Unlike forward foreign currency exchange contracts, foreign currency futures
contracts and options on foreign currency futures contracts are standardized as
to amount and delivery period and are traded on boards of trade and commodities
exchanges. It is anticipated that such contracts may provide greater liquidity
and lower cost than forward foreign currency exchange contracts.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The Fund may engage in forward
foreign currency transactions. A forward foreign currency exchange contract
involves an obligation to purchase or sell a specific currency at a future date,
which may be any fixed number of days ("term") from the date of the contract
agreed upon by the parties, at a price set at the time of the contract. These
contracts are traded directly between currency traders (usually large commercial
banks) and their customers. The investment manager believes that it is important
to have the flexibility to enter into such forward contracts when it determines
that to do so is in the best interests of the Fund. The Fund will not speculate
in foreign currency exchange.
If the Fund retains the portfolio security and engages in an offsetting
transaction with respect to a forward contract, the Fund will incur a gain or a
loss (as described below) to the extent that there has been movement in forward
contract prices. If the Fund engages in an offsetting transaction, it may
subsequently enter into a new forward contract to sell the foreign currency.
Should forward prices decline during the period between the Fund's entering into
a forward contract for the sale of foreign currency and the date it enters into
an offsetting contract for the purchase of the foreign currency, the Fund would
realize a gain to the extent the price of the currency it has agreed to sell
exceeds the price of the currency it has agreed to purchase. Should forward
prices increase, the Fund would suffer a loss to the extent the price of the
currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell. Although such contracts tend to minimize the risk of loss due to
a decline in the value of the hedged currency, they also tend to limit any
potential gain which might result should the value of such currency increase.
The Fund will have to convert its holdings of foreign currencies into U.S.
Dollars from time to time in order to meet such needs as Fund expenses and
redemption requests. Although foreign exchange dealers do not charge a fee for
conversion, they do realize a profit based on the difference (the "spread")
between the prices at which they are buying and selling various currencies.
The Fund will not enter into forward contracts or maintain a net exposure in
such contracts when the Fund would be obligated to deliver an amount of foreign
currency in excess of the value of the Fund's securities or other assets
denominated in that currency. See "Foreign Currency Transactions" under
"Investment Objective, Policies and Risk Factors--Additional Investment
Information" in the prospectus. The Fund does not intend to enter into such
forward contracts if it would have more than 15% of the value of its total
assets committed to such contracts. The Fund segregates cash or liquid
high-grade securities in an amount not less than the value of the Fund's total
assets committed to forward foreign currency exchange contracts entered into for
the purchase of a foreign currency. If the value of the securities segregated
declines, additional cash or securities are added so that the segregated amount
is not less than the amount of the Fund's commitments with respect to such
contracts. The Fund generally does not enter into a forward contract with a term
longer than one year.
REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements, which are
instruments under which the Fund acquires ownership of a security from a
broker-dealer or bank that agrees to repurchase the security at a mutually
agreed upon time and price (which price is higher than the purchase price),
thereby determining the yield during the Fund's holding period. In the event of
a bankruptcy or other default of a seller of a repurchase agreement, the Fund
might incur expenses in enforcing its rights, and could experience losses,
including a decline
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in the value of the underlying securities and loss of income. The securities
underlying a repurchase agreement will be marked-to-market every business day so
that the value of such securities is at least equal to the investment value of
the repurchase agreement, including any accrued interest thereon. The Fund
currently does not intend to invest more than 5% of its net assets in repurchase
agreements during the current year.
SHORT SALES AGAINST-THE-BOX. The Fund may make short sales against-the-box for
the purpose of deferring realization of gain or loss for federal income tax
purposes. A short sale "against-the-box" is a short sale in which the Fund owns
at least an equal amount of the securities sold short or securities convertible
into or exchangeable for, without payment of any further consideration,
securities of the same issue as, and at least equal in amount to, the securities
sold short. The Fund may engage in such short sales only to the extent that not
more than 10% of the Fund's total assets (determined at the time of the short
sale) is held as collateral for such sales. The Fund currently does not intend,
however, to engage in such short sales to the extent that more than 5% of its
net assets will be held as collateral therefor during the current year.
DIVIDENDS AND TAXES
DIVIDENDS. The Fund normally distributes annual dividends of net investment
income and any net realized short-term and long-term capital gains.
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.
The Fund may at any time vary the foregoing dividend practice and, therefore,
reserves the right from time to time to either distribute or retain for
reinvestment such of its net investment income and its net short-term and long-
term capital gains as the Board of Trustees of the Fund determines appropriate
under then current circumstances. In particular, and without limiting the
foregoing, the Fund may make additional distributions of net investment income
or capital gain net income in order to satisfy the minimum distribution
requirements contained in the Internal Revenue Code (the "Code"). Dividends will
be reinvested in shares of the Fund unless shareholders indicate in writing that
they wish to receive them in cash or in shares of other Kemper Funds as provided
in the prospectus.
TAXES. The Fund intends to qualify as a regulated investment company under
Subchapter M of the Code and, if so qualified, will not be liable for federal
income taxes to the extent its earnings are distributed. One of the Subchapter M
requirements to be satisfied is that less than 30% of the Fund's gross income
during the fiscal year must be derived from gains (not reduced by losses) from
the sale or other disposition of securities and certain other investments held
for less than three months. The Fund may be limited in its options, futures and
foreign currency transactions in order to prevent recognition of such gains.
The Fund's options, futures and foreign currency transactions are subject to
special tax provisions that may accelerate or defer recognition of certain gains
or losses, change the character of certain gains or losses, or alter the holding
periods of certain of the Fund's securities.
The mark-to-market rules of the Code may require 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 and futures 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 the Fund's net investment income for the
calendar year plus 98% of its capital gain net income for the one-year period
ending October 31, plus any
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undistributed net investment income from the prior calendar year, plus any
undistributed capital gain net income from the one year period ended October 31
in the prior calendar year, minus any overdistribution in the prior calendar
year. For purposes of calculating the required distribution, foreign currency
gains or losses occurring after October 31 are taken into account in the
following calendar year. The Fund intends to declare or distribute dividends
during the appropriate periods of an amount sufficient to prevent imposition of
the 4% excise tax.
It is anticipated that only a small portion, if any, of the ordinary income
dividends from the Fund 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 the Fund for the fiscal year.
A shareholder who redeems shares of the Fund will recognize capital gain or loss
for federal income tax purposes measured by the difference between the value of
the shares redeemed and the adjusted cost basis of the shares. Any loss
recognized on the redemption of Fund shares held six months or less will be
treated as long-term capital loss to the extent that the shareholder has
received any long-term capital gain dividends on such shares. A shareholder who
has redeemed shares of the Fund or any other Kemper Mutual Fund listed in the
prospectus under "Special Features--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 described in the prospectus
under "Redemption or Repurchase of Shares--Reinvestment Privilege." 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.
The Fund's investment income derived from foreign securities may be subject to
foreign income taxes withheld at the source. Because the amount of the 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.
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.
PERFORMANCE
As described in the Prospectus, the 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. These measures of performance are described below.
Performance information will be computed separately for each class. Kemper
Financial Services, Inc., the Fund's investment manager, has agreed to a
reduction of its management fee for the Fund to the extent specified in the
prospectus. See "Investment Manager and Underwriter." This fee reduction will
improve the performance results of the Fund.
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
Fund's average annual total return quotation is computed in accordance with a
standardized method prescribed by rules of the Securities and Exchange
Commission. The average annual total return for the Fund for a specific period
is found by first taking a hypothetical $1,000 investment ("initial investment")
in the Fund's shares on the first day of the period, adjusting to deduct the
maximum sales charge (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 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
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as a percentage. The calculation assumes that all income and capital gains
dividends paid by the Fund have been reinvested at net asset value on the
reinvestment dates during the period. Average annual total return may also be
calculated without deducting the maximum sales charge.
Calculation of the Fund's total return is not subject to a standardized formula,
except when calculated for the Fund's "Financial Highlights" table in the Fund's
financial statements and prospectus. Total return performance for a specific
period is calculated by first taking a hypothetical investment ("initial
investment") in the Fund's shares on the first day of the period, either
adjusting or not adjusting to deduct the maximum sales charge (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 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
charges were included.
The Fund's performance figures are based upon historical results and are not
necessarily representative of future performance. The Fund's 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. Returns and net asset
value will fluctuate. Factors affecting the Fund's performance include general
market conditions, operating expenses and investment management. Any additional
fees charged by a dealer or other financial services firm would reduce returns
described in this section. Shares of the Fund are redeemable at the then current
net asset value, which may be more or less than original cost.
INVESTMENT MANAGER AND UNDERWRITER
INVESTMENT MANAGER. Kemper Financial Services, Inc. ("KFS"), 120 South LaSalle
Street, Chicago, Illinois 60603, is the Fund's investment manager. KFS is owned
by KFS Holding Corp. KFS Holding Corp. is a subsidiary of Zurich Holding Company
of America, Inc., which is a subsidiary of Zurich Insurance Company, a Swiss
insurance and financial services holding company. Pursuant to the investment
management agreement, KFS acts as the Fund's investment adviser, manages its
investments, administers its business affairs, furnishes office facilities and
equipment, provides clerical, bookkeeping and administrative services and
permits any of its officers or employees to serve without compensation as
trustees or officers of the Fund if elected to such positions. The investment
management agreement provides that the Fund shall pay the charges and expenses
of its operations, including the fees and expenses of the trustees (except those
who are officers or employees of KFS), independent auditors, counsel, custodian
and transfer agent and the cost of share certificates, reports and notices to
shareholders, brokerage commissions or transaction costs, costs of calculating
net asset value, taxes and membership dues. The Fund bears the expenses of
registration of its shares with the Securities and Exchange Commission, while
Kemper Distributors, Inc. ("KDI"), as principal underwriter, pays the cost of
qualifying and maintaining the qualification of the Fund's shares for sale under
the securities laws of the various states. KFS has agreed to reimburse the Fund
to the extent required by applicable state expense limitations should all
operating expenses of the Fund, including the investment management fees of KFS
but excluding taxes, interest, distribution fees, extraordinary expenses,
brokerage commissions or transaction costs and any other properly excludable
expenses, exceed the applicable state expense limitations. The Fund believes
that the most restrictive state expense limitation currently in effect would
require that such operating expenses not exceed 2.5% of the first $30 million of
average daily net assets, 2% of the next $70 million and 1.5% of average daily
net assets over $100 million. Under such state expense limitation, custodian
costs attributable to foreign securities that are in excess of similar domestic
custodian costs are excluded from operating expenses.
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The investment management agreement provides that KFS shall not be liable for
any error of judgment or of law, or for any loss suffered by the Fund in
connection with the matters to which the agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
KFS in the performance of its obligations and duties, or by reason of its
reckless disregard of its obligations and duties under the agreement.
The Fund's investment management agreement has an initial term ending April 1,
1997 and it continues in effect from year to year thereafter so long as its
continuation is approved at least annually (a) by a majority of the trustees who
are not parties to such agreement or interested persons of any such party except
in their capacity as trustees of the Fund and (b) by the shareholders or the
Board of Trustees of the Fund. The 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, and will terminate automatically
upon assignment. If additional series become subject to an investment management
agreement, the provisions concerning continuation, amendment and termination
shall be on a series by series basis. Additional series may be subject to a
different agreement.
The investment management fee rates paid to KFS by the Fund are set forth in the
Prospectus, under "Investment Manager and Underwriter."
PRINCIPAL UNDERWRITER. Pursuant to an underwriting and distribution services
agreement ("distribution agreement"), Kemper Distributors, Inc., a wholly owned
subsidiary of KFS, is the principal underwriter and distributor for the shares
of the Fund and acts as agent of the Fund in the continuous offering its shares.
KDI bears all its expenses of providing services pursuant to the distribution
agreement, including the payment of any commissions. The Fund pays the cost for
the prospectus and shareholder reports to be set in type and printed for
existing shareholders, and KDI pays for the printing and distribution of copies
thereof used in connection with the offering of shares to prospective investors.
KDI also pays for supplementary sales literature and advertising costs.
The distribution agreement continues in effect from year to year so long as such
continuance is approved for each class at least annually by a vote of the Board
of Trustees of the Fund, including the Trustees who are not interested persons
of the Fund and who have no direct or indirect financial interest in the
agreement. The distribution agreement automatically terminates in the event of
its assignment and may be terminated for a class at any time without penalty by
the Fund or by KDI upon 60 days' notice. Termination by the Fund with respect to
a class may be by vote of a majority of the Board of Trustees, or a majority of
the Trustees who are not interested persons of the Fund and who have no direct
or indirect financial interest in the distribution 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 distribution agreement may not be
amended for a class to increase the fee to be paid by the Fund with respect to
such class without approval by a majority of the outstanding voting securities
of such class of the Fund and all material amendments must in any event be
approved by the Board of Trustees in the manner described above with respect to
the continuation of the distribution agreement. The provisions concerning the
continuation, amendment and termination of the distribution agreement are on a
class by class basis.
ADMINISTRATIVE SERVICES. Administrative services are provided to the Fund under
an administrative services agreement ("administrative agreement") with KDI. KDI
bears all its expenses of providing services pursuant to the administrative
agreement between KDI and the Fund, including the payment of service fees. For
the services under the administrative agreement, the Fund pays KDI an
administrative services fee, payable monthly, at an annual rate of up to .25% of
average daily net assets of Class A, B and C shares of the Fund.
KDI enters into related arrangements with various financial services firms, such
as broker-dealers or banks ("firms"), that provide services and facilities for
their customers or clients who are shareholders of the Fund. The firms provide
such office space and equipment, telephone facilities and personnel as is
necessary or beneficial for providing information and services to their clients.
Such services and assistance may include, but are not limited to, establishing
and maintaining shareholder accounts and records, processing purchase and
redemption transactions, answering routine inquiries regarding the Fund,
assistance to clients in changing dividend and investment options, account
designations and addresses and such other services as may be agreed upon from
time to time and permitted by applicable statute, rule or regulation. With
respect to Class A shares, KDI pays each firm a service fee, payable
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quarterly, at an annual rate of up to .25% of the net assets in Fund accounts
that it maintains and services attributable to Class A shares, commencing with
the month after investment. With respect to Class B shares and Class C shares,
KDI pays each firm a service fee, payable quarterly, at an annual rate of up to
..25% of the net assets in Fund accounts that it maintains and services
attributable to Class B shares and Class C shares, respectively, commencing with
the month after investment (month of investment for Class C shares); provided,
however, KDI may, for Class B shares, advance the first year service fee as
described in the Prospectus under "Investment Manager and Underwriter." Firms to
which service fees may be paid include broker-dealers affiliated with KDI.
KDI also may provide some of the above services and may retain any portion of
the fee under the administrative agreement not paid to firms to compensate
itself for administrative functions performed for the Fund. Currently, the
administrative services fee payable to KDI is 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 fee that it receives
from the Fund to firms in the form of service fees. The effective administrative
services fee rate to be charged against all assets of the Fund while this
procedure is in effect will depend upon the proportion of Fund assets that is in
accounts for which there is a firm of record. The Board of Trustees of the Fund,
in its discretion, may approve basing the fee to KDI on all Fund assets in the
future.
Certain trustees or officers of the Fund are also directors or officers of KFS
or KDI, as indicated under "Officers and Trustees."
CUSTODIAN AND SHAREHOLDER SERVICE AGENT. The Chase Manhattan Bank, N.A., Chase
MetroTech Center, Brooklyn, New York 11245, as custodian, has custody of all
securities and cash of the Fund held outside the United States. Investors
Fiduciary Trust Company ("IFTC"), 127 West 10th Street, Kansas City, Missouri
64105, as custodian, and State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02110, as sub-custodian, have custody of all
securities and cash of the 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 the Fund. IFTC is also the Fund's
transfer agent and dividend-paying agent. Pursuant to a services agreement with
IFTC, Kemper Service Company ("KSvC"), an affiliate of KFS, serves as
"Shareholder Service Agent" of the 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, annual account fees of $6 per account plus account set
up, transaction and maintenance charges, annual fees associated with the
contingent deferred sales charge (Class B only) and out-of-pocket expense
reimbursement. IFTC's fee is reduced by certain earnings credits in favor of the
Fund.
INDEPENDENT AUDITORS AND REPORTS TO SHAREHOLDERS. The Fund's independent
auditors, Ernst & Young LLP, 233 South Wacker Drive, Chicago, Illinois 60606,
audit and report on the Fund's annual financial statements, review certain
regulatory reports and the Fund's federal income tax return, and perform other
professional accounting, auditing, tax and advisory services when engaged to do
so by the Fund. Shareholders will receive annual audited financial statements
and semi-annual unaudited financial statements.
PORTFOLIO TRANSACTIONS
KFS is the investment manager for the Kemper Funds and KFS and its affiliates
also furnish investment management services to other clients including Kemper
Corporation and the Kemper insurance companies. KFS is the sole shareholder of
Kemper Asset Management Company and Kemper Investment Management Company
Limited. These three entities share some common research and trading facilities.
Dreman Value Advisors, Inc. ("DVA"), a wholly owned subsidiary of KFS, is the
investment manager for Kemper-Dreman Fund, Inc. and sub-adviser for another
Kemper Fund. At times investment decisions may be made to purchase or sell the
same investment securities for the Fund and for one or more of the other clients
managed by KFS or its affiliates. When two or more of such clients are
simultaneously engaged in the purchase or sale of the same security through the
same trading facility, the transactions are allocated as to amount and price in
a manner considered equitable to each.
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National securities exchanges have established limitations governing the maximum
number of options in each class which may be written by a single investor or
group of investors acting in concert. An exchange may order the liquidation of
positions found to be in violation of these limits, and it may impose certain
other sanctions. These position limits may restrict the number of options the
Fund will be able to write on a particular security.
The above mentioned factors may have a detrimental effect on the quantities or
prices of securities and options and futures contracts available to the Fund. On
the other hand, the ability of the Fund to participate in volume transactions
may produce better executions for the Fund in some cases. The Board of Trustees
of the Fund believes that the benefits of KFS's organization outweigh any
limitations that may arise from simultaneous transactions or position
limitations.
KFS, in effecting purchases and sales of portfolio securities for the account of
the Fund, will implement the Fund's policy of seeking best execution of orders,
which includes best net prices, except to the extent that KFS may be permitted
to pay higher brokerage commissions for research services as described below.
Consistent with this policy, orders for portfolio transactions are placed with
broker-dealer firms giving consideration to the quality, quantity and nature of
each firm's professional services, which include execution, clearance
procedures, wire service quotations and statistical and other research
information provided to the Fund and KFS. Any research benefits derived are
available for all clients, including clients of affiliated companies. Since it
is only supplementary to KFS's own research efforts and must be analyzed and
reviewed by KFS' staff, the receipt of research information is not expected to
materially reduce expenses. In selecting among firms believed to meet the
criteria for handling a particular transaction, KFS may give consideration to
those firms that have sold or are selling shares of the Fund and of other funds
managed by KFS or its affiliates, as well as to those firms that provide market,
statistical and other research information to the Fund and KFS, although KFS is
not authorized to pay higher commissions or, in the case of principal trades,
higher prices to firms that provide such services, except as provided below.
KFS may in certain instances be permitted to pay higher brokerage commissions
(not including principal trades) solely for receipt of market, statistical and
other research services. Subject to Section 28(e) of the Securities Exchange Act
of 1934 and procedures that may be adopted by the Board of Trustees of the Fund,
the Fund could pay a firm that provides research services to KFS a commission
for effecting a securities transaction for the Fund in excess of the amount
other firms would have charged for the transaction if KFS determines in good
faith that the greater commission is reasonable in relation to the value of the
research services provided by the executing firm viewed in terms either of a
particular transaction or KFS's overall responsibilities to the Fund or other
clients. Not all of such research services may be useful or of value in advising
the Fund. Research benefits will be available for all clients of KFS and its
subsidiaries. The investment management fee paid by the Fund to KFS is not
reduced because KFS receives these research services.
PURCHASE AND REDEMPTION OF SHARES
As described in the prospectus, 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. See the prospectus
for certain exceptions to these minimums. An order for the purchase of shares
that is accompanied by a check drawn on a foreign bank (other than a check drawn
on a Canadian bank in U.S. Dollars) will not be considered in proper form and
will not be processed unless and until the Fund determines that it has received
payment of the proceeds of the check. The time required for such a determination
will vary and cannot be determined in advance.
Upon receipt by the Shareholder Service Agent of a request for redemption,
shares of the Fund will be redeemed by the Fund at the applicable net asset
value per share of the Fund as described in the Fund's Prospectus. The
redemption within one year of Class A shares purchased at net asset value under
the Large Order NAV Purchase Privilege described in the prospectus may be
subject to a 1% contingent deferred sales charge (see "Purchase of Shares" in
the prospectus). Redemption of Class B shares may be subject to a contingent
deferred sales charge.
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When the Fund is asked to redeem shares for which it may not yet have received
good payment, it may delay the mailing of a redemption check until it has
determined that collected funds have been received for the purchase of such
shares, which will be up to 15 days.
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 shares by certain classes of persons or through certain
types of transactions as described in the prospectus is provided because of
anticipated economies in sales and sales-related efforts.
The Fund may suspend the right of redemption or delay payment more than seven
days (a) during any period when the New York Stock Exchange ("Exchange") is
closed other than customary weekend and holiday closings or during any period in
which trading on the Exchange is restricted, (b) during any period when an
emergency exists as a result of which (i) disposal of the Fund's investments is
not reasonably practicable, or (ii) it is not reasonably practicable for the
Fund to determine the value of its net assets, or (c) for such other periods as
the Securities and Exchange Commission may by order permit for the protection of
the Fund's shareholders.
Although it is the Fund's present policy to redeem in cash, if the Board of
Trustees determines that a material adverse effect would be experienced by the
remaining shareholders if payment were made wholly in cash, the Fund will
satisfy the redemption request in whole or in part by a distribution of
portfolio securities in lieu of cash, in conformity with the applicable rules of
the Securities and Exchange Commission, taking such securities at the same value
used to determine net asset value, and selecting the securities in such manner
as the Board of Trustees may deem fair and equitable. If such a distribution
occurred, shareholders receiving securities and selling them could receive less
than the redemption value of such securities and in addition would incur certain
transaction costs. Such a redemption would not be so liquid as a redemption
entirely in cash. The Fund 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 the 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 in the prospectus.
OFFICERS AND TRUSTEES
The officers and trustees of the Fund, their birthdates, their principal
occupations and their affiliations, if any, with KFS, the investment manager,
and KDI, the principal underwriter, are as follows (the number following each
person's title is the number of investment companies managed by KFS and its
affiliates for which he or she holds similar positions):
JAMES E. AKINS (10/15/26), Trustee (13), 2904 Garfield Terrace, N.W.,
Washington, D.C.; Consultant on International, Political and Economic Affairs;
formerly a career United States Foreign Service Officer, Energy Adviser for the
White House and United States Ambassador to Saudi Arabia, 1973-76.
FRED B. RENWICK (2/1/30), Trustee (13), 3 Hanover Square, New York, New York;
Professor of Finance, New York University, Stern School of Business; Director,
TIFF Industrial Program, Inc., Director, the Wartberg Home Foundation; Chairman
Investment Committee of Morehouse College Board of Trustees; Chairman, American
Bible
B-14
<PAGE> 52
Society Investment Committee; formerly member of the Investment Committee of
Atlanta University Board of Trustees; formerly Director of Board of Pensions
Evangelical Lutheran Church of America.
ARTHUR R. GOTTSCHALK (2/13/25), Trustee (13), 10642 Brookridge Drive, Frankfort,
Illinois, Retired; formerly, President, Illinois Manufacturers Association;
Trustee, Illinois Masonic Medical Center; Member, Board of Governors, Heartland
Institute/Illinois; formerly, Illinois State Senator.
FREDERICK T. KELSEY (4/25/27), Trustee (13), 3133 Laughing Gull Court, John's
Island, South Carolina; Retired; formerly, consultant to Goldman, Sachs & Co.;
formerly, President, Treasurer and Trustee of Institutional Liquid Assets and
its affiliated mutual funds; Trustee of the Benchmark Fund and the Pilot Fund.
*DAVID B. MATHIS (4/13/38), Trustee (36), Kemper Center, Long Grove, Illinois;
Chairman of the Board, Chief Executive Officer and Director, Lumbermens Mutual
Casualty Company; Director, IMC Global Inc.
STEPHEN B. TIMBERS (8/8/44), President and Trustee (36), 120 South LaSalle
Street, Chicago, Illinois; Chairman, Chief Executive Officer, Chief Investment
Officer and Director, KFS; Director, KDI, Dreman Value Advisors, Inc. and LTV
Corporation.
JOHN B. TINGLEFF (5/4/35), Trustee (13), 2015 South Lake Shore Drive, Harbor
Springs, Michigan; Retired; formerly, President, Tingleff & Associates
(management consulting firm); formerly, Senior Vice President, Continental
Illinois National Bank & Trust Company.
JOHN G. WEITHERS (8/8/33), Trustee (13), 311 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.
*STEVEN H. REYNOLDS (9/11/43), Vice President (13), 120 South LaSalle Street,
Chicago, Illinois; Executive Vice President and Chief Investment
Officer--Equities, KFS.
*JOHN E. NEAL (3/9/50), Vice President (5), 120 South LaSalle Street, Chicago,
Illinois; President, Chief Operating Officer and Director, KFS; Director, Dreman
Value Advisors, Inc., KDI and several other Kemper Corporation subsidiaries;
prior thereto, Senior Vice President, Kemper Real Estate Management Company.
*JOHN E. PETERS (11/4/47), Vice President (36), 120 South LaSalle Street,
Chicago, Illinois; Senior Executive Vice President and Director, KFS; President
and Director, KDI; Director, Dreman Value Advisors, Inc.
*CHARLES F. CUSTER (8/19/28), Vice President and Assistant Secretary (36), 222
North LaSalle Street, Chicago, Illinois; Partner, Vedder, Price, Kaufman &
Kammholz (attorneys), Legal Counsel to the Fund.
*JEROME L. DUFFY (6/29/36), Treasurer (36) 120 South LaSalle Street, Chicago,
Illinois, Senior Vice President, KFS.
*PHILIP J. COLLORA (11/15/45), Vice President and Secretary (36), 120 South
LaSalle Street, Chicago, Illinois; Attorney, Senior Vice President and Assistant
Secretary, KFS.
*ELIZABETH C. WERTH (10/1/47), Assistant Secretary (28), 120 South LaSalle
Street, Chicago, Illinois; Vice President, KFS; and Vice President and Director
of State Registrations, KDI.
*DENNIS H. FERRO (6/20/45), Vice President (5), 1 Fleet Place, London, U.K.,
Executive Vice President, KFS; Managing Director--Equities, Kemper Investment
Management Company Limited; formerly, President and Chief Investment Officer,
Cigna International Investment Advisors, Inc.
B-15
<PAGE> 53
*EDITH A. THOUIN (5/5/57), Vice President (1), 1 Fleet Place, London, U.K.,
First Vice President, KFS; Director--European Equities, Kemper Investment
Management Company Limited.
* 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 Fund, except that Mr. Custer's law firm
receives fees from the Fund as counsel to the Fund. The table below shows
amounts estimated to be paid or accrued to those trustees who are not designated
"interested persons" during the Fund's first full fiscal year and the total
compensation that the Kemper Funds paid to such trustees during calendar year
1995.
<TABLE>
<CAPTION>
PENSION OR
AGGREGATE RETIREMENT BENEFITS TOTAL COMPENSATION
COMPENSATION ACCRUED AS PART OF KEMPER FUNDS PAID
NAME OF BOARD MEMBER FROM FUND FUND EXPENSES TO BOARD MEMBERS(2)
- ---------------------------------------------- ------------ ------------------- -------------------
<S> <C> <C> <C>
James E. Akins................................ $ $ 0 $
Arthur R. Gottschalk(1)....................... $ $ 0 $
Frederick T. Kelsey(1)........................ $ $ 0 $
Fred B. Renwick............................... $ $ 0 $
John B. Tingleff.............................. $ $ 0 $
John G. Weithers.............................. $ $ 0 $
</TABLE>
- ---------------
(1) Includes deferred fees and interest thereon pursuant to deferred
compensation agreements with Kemper funds. Deferred amounts accrue interest
monthly at a rate equal to the yield of Kemper Money Market Fund--Money
Market Portfolio.
(2) Includes estimated compensation for service for calendar year 1995 on the
Boards of 13 Kemper funds, with 29 fund portfolios and amounts for new funds
as if the fund had existed at the beginning of the year and for one fund as
if it had been affiliated with the Kemper funds for all of 1995 and the
Board Members had been such for all the Kemper funds during the period.
As of [ ], 1996, KFS owned all the shares of each class of the
Fund with shares outstanding (Class A, Class B and Class C).
SHAREHOLDER RIGHTS
The Fund generally is not required to hold meetings of its shareholders. Under
the Agreement and Declaration of Trust of the 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 objectives, policies or restrictions.
Each trustee serves until the next meeting of shareholders, if any, called for
the purpose of electing trustees and until the election and qualification of a
successor or until such trustee sooner dies, resigns, retires or is removed by a
majority vote of the shares entitled to vote (as described below) or a majority
of the trustees. In accordance with the 1940 Act (a) the 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.
B-16
<PAGE> 54
Trustees may be removed from office by a vote of the holders of a majority of
the outstanding shares at a meeting called for that purpose, which meeting shall
be held upon the written request of the holders of not less than 10% of the
outstanding shares. Upon the written request of ten or more shareholders who
have been such for at least six months and who hold shares constituting at least
1% of the outstanding shares of the 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, the
Fund has undertaken to disseminate appropriate materials at the expense of the
requesting shareholders.
The 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 the 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 the Fund and certain
amendments of the Declaration of Trust, would not be affected by this provision;
nor would matters which under the 1940 Act require the vote of a "majority of
the outstanding voting securities" as defined in the 1940 Act.
The 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 the
Fund. The Declaration of Trust, however, disclaims shareholder liability for
acts or obligations of the Fund and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument entered into or executed by
the 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 the Fund and the 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 KFS remote and not
material, since it is limited to circumstances in which a disclaimer is
inoperative and the Fund itself is unable to meet its obligations.
B-17
<PAGE> 55
REPORT OF INDEPENDENT AUDITORS
The Board of Trustees and Shareholder
Kemper Europe Fund
We have audited the accompanying statement of net assets of Kemper Europe Fund
as of [ ], 1996. This statement of net assets is the
responsibility of the Fund's management. Our responsibility is to express an
opinion on this statement of net assets based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of net assets is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement of net assets. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall statement of net assets
presentation. We believe that our audit of the statement of net assets provides
a reasonable basis for our opinion.
In our opinion, the statement of net assets referred to above presents fairly,
in all material respects, the financial position of Kemper Europe Fund at
[ ], 1996 in conformity with generally accepted accounting
principles.
Chicago, Illinois
[ ], 1996
B-18
<PAGE> 56
KEMPER EUROPE FUND
STATEMENT OF NET ASSETS-- , 1996
<TABLE>
<S> <C>
ASSETS
Cash.................................................................................. $100,000
========
NET ASSETS
Net assets, applicable to shares of beneficial interest (unlimited number of shares
authorized, no par value) outstanding as follows:
Class A
Class B
Class C $100,000
========
THE PRICING OF SHARES
Net asset value and redemption price per share........................................
Class A............................................................................. $
Class B*............................................................................ $
Class C............................................................................. $
Maximum offering price per share......................................................
Class A (net asset value, plus 6.10% of net asset value or 5.75% of offering
price)........................................................................... $
Class B (net asset value)........................................................... $
Class C (net asset value)........................................................... $
</TABLE>
- ---------------
* Subject to contingent deferred sales charge.
NOTES:
Kemper Europe Fund (the "Fund"), was organized as a business trust under the
laws of The Commonwealth of Massachusetts on June 12, 1995; All Class A, Class B
and Class C shares of beneficial interest of the Fund were issued to Kemper
Financial Services, Inc. ("KFS"), the investment manager on
[ ], 1996. The Fund may establish multiple portfolios;
currently, a single portfolio has been established.
The costs of organization of the Fund will be paid by KFS.
B-19
<PAGE> 57
KEMPER EUROPE FUND
PART C.
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
(i) Financial Statements included in Part A of the Registration
Statement: None.
(ii) Financial Statements included in Part B of the Registration
Statement:
Statement of Net Assets.*
Report of Independent Auditors.*
Schedules I, II, III, IV and V are omitted as the required information
is not present.
- ---------------
* To be filed before the effective date of the Registration Statement.
(b) Exhibits
<TABLE>
<S> <C>
99.B1(a). Agreement and Declaration of Trust.
99.B1(b). Written Instrument Amending the Agreement and Declaration of Trust.
99.B2. By-Laws.
99.B3. Inapplicable.
99.B4(a). Text of Share Certificate.*
99.B4(b). Written Instrument Establishing and Designating Separate Classes of
Shares.*
99.B5(a). Investment Management Agreement.*
99.B6(a). Underwriting and Distribution Services Agreement.*
99.B6(b). Form of Selling Group Agreement.*
99.B7. Inapplicable.
99.B8(a). Custody Agreement (Form 1).*
99.B8(b). Foreign Custody Agreement (Form 2).*
99.B9. Agency Agreement.*
99.B9(c). Administrative Services Agreement.*
99.B10(a). Legal Opinion and Consent of Vedder, Price, Kaufman & Kammholz.*
99.B10(b). Legal Opinion and Consent of Ropes & Gray.*
99.B11. Consent and Report of Independent Auditors.*
99.B12. Inapplicable.
99.B13. Subscription Agreement.*
99.B14(a). Kemper Retirement Plan Prototype.*
99.B14(b). Model Individual Retirement Account.*
99.B15. See 6(a) above (Class B and Class C shares).
99.B16. Inapplicable.
99.B18. Multi-Distribution System Plan.*
99.B24. Powers of Attorney.
27. Inapplicable.
</TABLE>
- ---------------
* To be filed before the effective date of the Registration Statement.
C-1
<PAGE> 58
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Inapplicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of January 3, 1996 there was no holder of record of any class of
shares of Registrant.
ITEM 27. INDEMNIFICATION
Article VIII of the Registrant's Agreement and Declaration of Trust
(Exhibit 1 hereto, which is incorporated herein by reference) provides in effect
that the Registrant will indemnify its officers and trustees under certain
circumstances. However, in accordance with Section 17(h) and 17(i) of the
Investment Company Act of 1940 and its own terms, said Article of the Agreement
and Declaration of Trust does not protect any person against any liability to
the Registrant or its shareholders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers, and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such trustee, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question as to whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
C-2
<PAGE> 59
ITEM 28(a) BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Information pertaining to business and other connections of the
Registrant's investment adviser is hereby incorporated by reference to the
section of the Prospectus captioned "Investment Manager and Underwriter," and to
the section of the Statement of Additional Information captioned "Investment
Manager and Underwriter."
Kemper Financial Services, Inc., investment adviser of the Registrant, is
investment adviser of:
Kemper Mutual Funds:
Kemper Technology Fund
Kemper Total Return Fund
Kemper Growth Fund
Kemper Small Capitalization Equity Fund
Kemper Income and Capital Preservation Fund
Kemper Money Market Fund
Kemper National Tax-Free Income Series
Kemper Diversified Income Fund
Kemper High Yield Fund
Cash Equivalent Fund
Kemper U.S. Government Securities Fund
Kemper International Fund
Kemper Portfolios
Kemper State Tax-Free Income Series
Tax-Exempt California Money Market Fund
Kemper Adjustable Rate U.S. Government Fund
Kemper Blue Chip Fund
Kemper Global Income Fund
Kemper Target Equity Fund
Cash Account Trust
Investors Cash Trust
Tax-Exempt New York Money Market Fund
Kemper Value Plus Growth Fund
Kemper Quantitative Equity Fund
Kemper Horizon Fund
Kemper Europe Fund
Kemper Closed-End Funds:
Kemper High Income Trust
Kemper Intermediate Government Trust
Kemper Municipal Income Trust
Kemper Multi-Market Income Trust
Kemper Strategic Municipal Income Trust
The Growth Fund of Spain, Inc.
Kemper Strategic Income Fund
Kemper Financial Services, Inc. also furnishes investment advice to and
manages investment portfolios for other clients including Kemper Investors Fund
and Kemper International Bond Fund.
C-3
<PAGE> 60
Item 28(b) Business and Other Connections of Officers
and Directors of Kemper Financial Services Inc.,
the Investment Advisor
MATHIS, DAVID B.
Director, IMC Global, Inc.
Trustee, Kemper Funds
Chairman of the Board, Chief Executive Officer and Director,
Lumbermen's Mutual Casualty Company
TIMBERS, STEPHEN B.
Director, Chairman, Chief Executive Officer and Chief Investment Officer,
Kemper Financial Services, Inc.
Director, Vice President, Kemper Asset Holdings, Inc.
Director, Kemper Distributors, Inc.
Director, Chairman, Kemper Asset Management Company
Director, Chairman, Kemper Service Company
Director, Federal Kemper Life Assurance Company
Director, Dreman Value Advisors, Inc.
Director, Vice President, FKLA Loire Court, Inc.
Vice President, FKLA Realty Corporation
Director, President, Galaxy Offshore, Inc.
Director, Vice President, FLA First Nationwide, Inc.
Director, Vice President, FLA Plate Building, Inc.
Vice President, FLA Realty Corp.
Director, President, Kemper International Management, Inc.
Director, Kemper Investors Life Insurance Company
Trustee and President, Kemper Funds
Vice President, Kemper Portfolio Corp.
Director, Vice President, Kemper Real Estate, Inc.
C-4
<PAGE> 61
Director, Vice President, Kemper/Cymrot Management, Inc.
Director, Vice President, Kemper/Cymrot, Inc.
Vice President, KFC Portfolio Corp.
Director, Vice President, KI Arnold Industrial, Inc.
Director, Vice President, KI Canyon Park, Inc.
Director, Vice President, KI Centreville, Inc.
Director, Vice President, KI Colorado Boulevard, Inc.
Director, Vice President, KI Dublin Boulevard, Inc.
Director, Vice President, KI LaFiesta Square, Inc.
Director, Vice President, KI Lewinsville, Inc.
Director, Vice President, KI Monterey Research, Inc.
Director, Vice President, KI Olive Street, Inc.
Director, Vice President, KI Sutter Street, Inc.
Director, Vice President, KI Thornton Boulevard, Inc.
Vice President, KILICO Realty Corporation
Director, Vice President, KR 77 Fitness Center, Inc.
Director, Vice President, KR Avondale Redmond, Inc.
Director, Vice President, KR Black Mountain, Inc.
Director, Vice President, KR Brannan Resources, Inc.
Director, Vice President, KR Clay Capital, Inc.
Director, Vice President, KR Cranbury, Inc.
Director, Vice President, KR Delta Wetlands, Inc.
Director, Vice President, KR Gainesville, Inc.
Director, Vice President, KR Hotels, Inc.
Director, Vice President, KR Lafayette Apartments, Inc.
Director, Vice President, KR Lafayette BART, Inc.
Director, Vice President, KR Palm Plaza, Inc.
Director, Vice President, KR Red Hill Associates, Inc.
Director, Vice President, KR Seagate/Gateway North, Inc.
Director, Vice President, KR Venture Way, Inc.
Director, Vice President, KR Walnut Creek, Inc.
Director, The LTV Corporation
Director, Investment Analysts Society of Chicago
NEAL, JOHN E.
Director, President and Chief Operating Officer, Kemper Financial Services,
Inc.,
Director, President, Kemper Service Company
Director, Kemper Distributors, Inc.
Director, Kemper Asset Management Company
Director, Dreman Value Advisors, Inc.
Director, Ardenwood Financial Corporation
Director, Avondale Redmond, Inc.
Director, Black Mountain, Inc.
Director, Brannan Resources, Inc.
Director, Butterfield Financial Corporation
Director, Camelot Financial Corporation
Director, Clay Capital, Inc.
Director, Coast Broadcasting Company
C-5
<PAGE> 62
Director, Crow Canyon, Inc.
Director, Hawaii Kai Development Company
Director, Kacor Gateway, Inc.
Director, Kailua Associates, Inc.
Director, Kacor Trust Deed Company
Director, Community Investment Corporation
Director, Continental Community Development Corporation
Director, President, Kemper Real Estate, Inc.
Director, President, Kemper Cymrot, Inc.
Director, President, Cymrot Management, Inc.
Director, President, FKLA Loire Court, Inc.
Director, Vice President, FKLA Realty Corporation
Director, President, FLA First Nationwide, Inc.
Director, President, FLA Plate Building, Inc.
Director, Vice President, FLA Realty Corporation
Director, Kemper/Lumbermens Properties, Inc.
Director, Senior Vice President, Kemper Real Estate Management Company
Director, KRDC, Inc.
Director, Lafayette Apartments, Inc.
Director, Lafayette Hills, Inc.
Director, Margarita Village Retirement Community, Inc.
Director, Mesa Homes
Director, Mesa Homes Brokerage Company
Director, Mount Doloroes Corporation
Director, Montgomery Gallery, Inc.
Director, Monterey Research Park, Inc.
Director, One Corporate Centre, Inc.
Director, Pacific Homes, Inc.
Director, Palomar Triad, Inc.
Director, Pine/Battery Properties, Inc.
Director, Rancho and Industrial Property Brokerage, Inc.
Director, Rancho California, Inc.
Director, Rancho Regional Shopping Center, Inc.
Director, Red Hill Associates, Inc.
Director, Seagate Associates, Inc.
Director, Seattle Gateway, Inc.
Director, Sutter Street, Inc.
Director, Technology Way, Inc.
Director, Time DC, Inc.
Director, Tourelle Corporation
Director, Two Corporate Centre, Inc.
Director, Venture Way, Inc.
Director, Vice President, Kemper Portfolio Corporation
Director, Vice President, KFC Portfolio Corporation
Director, Vice President, KILICO Realty Corporation
Director, President, KI Arnold Industrial, Inc.
Director, President, KI Canyon Park, Inc.
Director, President, KI Centreville, Inc.
Director, President, KI Colorado Boulevard, Inc.
Director, President, KI Dublin Boulevard, Inc.
Director, President, KI LaFiesta Square, Inc.
C-6
<PAGE> 63
Director, President, KI Lewinsville, Inc.
Director, President, KI Monterey Research, Inc.
Director, President, KI Olive Street, Inc.
Director, President, KI Thornton Boulevard, Inc.
Director, President, KI Sutter Street, Inc.
Director, President, KR 77 Fitness Center, Inc.
Director, President, KR Avondale Redmond, Inc.
Director, President, KR Black Mountain, Inc.
Director, President, KR Brannan Resources, Inc.
Director, President, KR Clay Capital, Inc.
Director, President, KR Cranbury, Inc.
Director, President, KR Delta Wetlands, Inc.
Director, President, KR Gainesville, Inc.
Director, President, KR Hotels, Inc.
Director, President, KR Lafayette Apartments, Inc.
Director, President, KR Lafayette BART, Inc.
Director, President, KR Palm Plaza, Inc.
Director, President, KR Red Hill Associates, Inc.
Director, President, KR Seagate/Gateway North, Inc.
Director, President, KR Venture Way, Inc.
Director, President, KR Walnut Creek, Inc.
Director, K-P Greenway, Inc.
Director, K-P Plaza Dallas, Inc.
Director, Kemper/Prime Acquisition Fund, Inc.
Director, KRDC, Inc.
Director, RespiteCare
Director, President, SMS Realty Corp.
Director, Urban Shopping Centers, Inc.
Vice President, Kemper-Dreman Fund, Inc.
Vice President, Kemper Value Plus Growth Fund
Vice President, Kemper Quantitative Equity Fund
Vice President, Kemper Horizon Fund
Vice President, Kemper Europe Fund
PETERS, JOHN E.
Director, Senior Executive Vice President, Kemper Financial
Services, Inc.
Director, Dreman Value Advisors, Inc.
Director, President, Kemper Distributors, Inc.
Vice President, Kemper Asset Management Company
Vice President, Kemper Funds
Director, Kemper Service Company
C-7
<PAGE> 64
BEIMFORD, JR., JOSEPH P.
Executive Vice President, Kemper Financial Services, Inc.
Vice President, Cash Account Trust
Vice President, Cash Equivalent Fund
Vice President, Galaxy Offshore, Inc.
Vice President, Investors Cash Trust
Vice President, Kemper Adjustable Rate U.S. Government Fund
Vice President, Kemper Diversified Income Fund
Vice President, Kemper Global Income Fund
Vice President, Kemper High Income Trust
Vice President, Kemper High Yield Fund
Vice President, Kemper Income and Capital Preservation Fund
Vice President, Kemper Intermediate Government Trust
Vice President, Kemper International Bond Fund
Vice President, Kemper Investors Fund
Vice President, Kemper Money Market Fund
Vice President, Kemper Multi-Market Income Trust
Vice President, Kemper Municipal Income Trust
Vice President, Kemper National Tax-Free Income Series
Vice President, Kemper Portfolios
Vice President, Kemper State Tax-Free Income Series
Vice President, Kemper Strategic Income Fund
Vice President, Kemper Strategic Municipal Income Trust
Vice President, Kemper U.S. Government Securities Fund
Vice President, Tax-Exempt California Money Market Fund
Vice President, Tax-Exempt New York Money Market Fund
CHAPMAN II, WILLIAM E.
Executive Vice President, Kemper Financial Services, Inc.
Director, Executive Vice President, Kemper Distributors, Inc.
COXON, JAMES H.
Executive Vice President, Kemper Financial Services, Inc.
Director, Vice President, Galaxy Offshore, Inc.
Executive Vice President, Kemper Asset Management Company
FERRO, DENNIS H.
Executive Vice President, Kemper Financial Services, Inc.
Vice President, Kemper International Fund
Director, Managing Director-Equities, Kemper Investment Management
Company Limited
Vice President, Kemper Investors Fund
Vice President, Kemper Target Equity Fund
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<PAGE> 65
Vice President, The Growth Fund of Spain, Inc.
Vice President, Kemper Europe Fund
GREENAWALT, JAMES L.
Executive Vice President, Kemper Financial Services, Inc.
Director, Executive Vice President, Kemper Distributors, Inc.
JOHNS, GORDON K.
Executive Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Global Income Fund
Vice President, Kemper Diversified Income Fund
Vice President, Kemper International Bond Fund
Vice President, Kemper International Management, Inc.
Managing Director and Joint Secretary, Kemper Investment
Management Company Limited
Vice President, Kemper Multi-Market Income Trust
Director, Thames Heritage Parade Limited
LANGBAUM, GARY A.
Executive Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Total Return Fund
Vice President, Kemper Investors Fund
REYNOLDS, STEVEN H.
Executive Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Technology Fund
Vice President, Kemper Total Return Fund
Vice President, Kemper Growth Fund
Vice President, Kemper Small Capitalization Equity Fund
Vice President, Kemper International Fund
Vice President, Kemper Blue Chip Fund
Vice President, Kemper Value Plus Growth Fund
Vice President, Kemper Quantitative Equity Fund
Vice President, Kemper Target Equity Fund
Vice President, Kemper Horizon Fund
Vice President, Kemper Investors Fund
Vice President, The Growth Fund of Spain, Inc.
Vice President, Kemper Europe Fund
SILIGMUELLER, DALE S.
Executive Vice President, Kemper Financial Services, Inc.
Director, Executive Vice President, Kemper Service Company
BUKOWSKI, DANIEL J.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Quantitative Equity Fund
Vice President, Kemper Value Plus Growth Fund
BUTLER, DAVID H.
Senior Vice President, Kemper Financial Services, Inc.
CERVONE, DAVID M.
Senior Vice President, Kemper Financial Services, Inc.
CESSINE, ROBERT S.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Income and Capital Preservation Fund
Vice President, Kemper Diversified Income Fund
Vice President, Kemper Multi-Market Income Trust
CHESTER, TRACY McCORMICK
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Blue Chip Fund
Vice President, Kemper Target Equity Fund
Vice President, Kemper Value Plus Growth Fund
CIARLELLI, ROBERT W.
Senior Vice President, Kemper Financial Services, Inc.
Executive Vice President, Kemper Service Company
C-9
<PAGE> 66
COLLECCHIA, FRANK E.
Senior Vice President, Kemper Financial Services, Inc.
Senior Investment Officer, Federal Kemper Life Assurance
Company
Senior Investment Officer, Fidelity Life Association
Vice President, FKLA Loire Court, Inc.
Vice President, FLA First Nationwide, Inc.
Vice President, FLA Plate Building, Inc.
Vice President, Galaxy Offshore, Inc.
Senior Investment Officer, Kemper Investors Life Insurance
Company
Vice President, KI Arnold Industrial, Inc.
Vice President, KI Canyon Park, Inc.
Vice President, KI Centreville, Inc.
Vice President, KI Colorado Boulevard, Inc.
Vice President, KI Dublin Boulevard, Inc.
Vice President, KI LaFiesta Square, Inc.
Vice President, KI Lewinsville, Inc.
Vice President, KI Monterey Research, Inc.
Vice President, KI Olive Street, Inc.
Vice President, KI Sutter Street, Inc.
Vice President, KI Thornton Boulevard, Inc.
Vice President, KR 77 Fitness Center, Inc.
Vice President, KR Avondale Redmond, Inc.
Vice President, KR Black Mountain, Inc.
Vice President, KR Brannan Resources, Inc.
Vice President, KR Clay Capital, Inc.
Vice President, KR Cranbury, Inc.
Vice President, KR Delta Wetlands, Inc.
Vice President, KR Gainesville, Inc.
Vice President, KR Halawa Associates, Inc.
Vice President, KR Hotels, Inc.
Vice President, KR Lafayette Apartments, Inc.
Vice President, KR Lafayette BART, Inc.
Vice President, KR Palm Plaza, Inc.
Vice President, KR Red Hill Associates, Inc.
Vice President, KR Seagate/Gateway North, Inc.
Vice President, KR Venture Way, Inc.
Vice President, KR Walnut Creek, Inc.
COLLORA, PHILIP J.
Senior Vice President and Assistant Secretary, Kemper Financial
Services, Inc.
Vice President and Secretary, Kemper Funds
Assistant Secretary, Kemper International Management, Inc.
DIERENFELDT, DAVID F.
Senior Vice President, Associate General Counsel,
Assistant Secretary, Kemper Financial Services, Inc.
Vice President and Secretary, Kemper Distributors, Inc.
Secretary, Dreman Value Advisors, Inc.
Assistant Secretary, Galaxy Offshore, Inc.
C-10
<PAGE> 67
Director, Secretary, INVEST Financial Corporation
Secretary, INVEST Financial Corporation Holding Company
Assistant Secretary, Investors Brokerage Services
Insurance Agency, Inc.
Assistant Secretary, Investors Brokerage Services, Inc.
Secretary, Kemper Asset Management Company
Assistant Secretary, Kemper International Management, Inc.
Assistant Secretary, Kemper Investment Management Company
Limited
Vice President and Assistant Secretary, Kemper Investors Fund
Secretary, Kemper Service Company
DUDASIK, PATRICK H.
Senior Vice President, Kemper Financial Services, Inc.
Executive Vice President, Chief Financial Officer and Treasurer,
Dreman Value Advisors, Inc.
Vice President and Treasurer, Kemper Asset Management Company
Treasurer and Chief Financial Officer, Kemper Distributors, Inc.
Treasurer and Chief Financial Officer, Kemper Service Company
Director and Treasurer, Kemper Investment Management Company
Limited
DUFFY, JEROME L.
Senior Vice President, Kemper Financial Services, Inc.
Treasurer, Kemper Funds
GALLAGHER, MICHAEL L.
Senior Vice President, Kemper Financial Services, Inc.
Senior Vice President, Kemper Service Company
GLASSMAN, HARVEY
Senior Vice President, Kemper Financial Services, Inc.
GOERS, RICHARD A.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Technology Fund
GUENTHER, HAROLD E.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Galaxy Offshore, Inc.
HUSSEY, KAREN A.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Investors Fund
Vice President, Kemper Small Capitalization Equity Fund
INNES, BRUCE D.
Senior Vice President, Kemper Financial Services, Inc.
Co-President, International Association of Corporate and
Professional Recruiters
C-11
<PAGE> 68
KLEIN, GEORGE
Senior Vice President, Kemper Financial Services, Inc.
Director, Executive Vice President, Kemper Asset Management
Company
KORTH, FRANK D.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Technology Fund
McNAMARA, MICHAEL A.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Diversified Income Fund
Vice President, Kemper High Income Trust
Vice President, Kemper High Yield Fund
Vice President, Kemper Investors Fund
Vice President, Kemper Multi-Market Income Trust
Vice President, Kemper Strategic Income Fund
MIER, CHRISTOPHER J.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper National Tax-Free Income Series
Vice President, Kemper Municipal Income Trust
Vice President, Kemper State Tax-Free Income Series
Vice President, Kemper Strategic Municipal Income Trust
MURRIHY, MAURA J.
Senior Vice President, Kemper Financial Services, Inc.
NATHANSON, IRA
Senior Vice President, Kemper Financial Services, Inc.
RABIEGA, CRAIG F.
Senior Vice President, Kemper Financial Services, Inc.
First Vice President, Kemper Service Company
RACHWALSKI, JR. FRANK J.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Cash Account Trust
Vice President, Cash Equivalent Fund
Vice President, Investors Cash Trust
Vice President, Kemper Investors Fund
Vice President, Kemper Money Market Fund
Vice President, Kemper Portfolios
C-12
<PAGE> 69
Vice President, Tax-Exempt California Money Market Fund
Vice President, Tax-Exempt New York Money Market Fund
REGNER, THOMAS M.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Horizon Fund
RESIS, JR., HARRY E.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Diversified Income Fund
Vice President, Kemper High Income Trust
Vice President, Kemper High Yield Fund
Vice President, Kemper Investors Fund
Vice President, Kemper Multi-Market Income Trust
Vice President, Kemper Strategic Income Fund
SCHUMACHER, ROBERT T.
Senior Vice President, Kemper Financial Services, Inc.
SMITH, JR., EDWARD BYRON
Senior Vice President, Kemper Financial Services, Inc.
VINCENT, CHRISTOPHER T.
Senior Vice President, Kemper Financial Services, Inc.
First Vice President, Kemper Asset Management Company
BAZAN, KENNETH M.
First Vice President, Kemper Financial Services, Inc.
Director, K-P Greenway, Inc.
Director, K-P Plaza Dallas, Inc.
Director, Kemper/Prime Acquisition Fund, Inc.
BOEHM, JONATHAN J.
First Vice President, Kemper Financial Services, Inc.
Senior Vice President, Kemper Service Company
BURROW, DALE R.
First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Strategic Municipal Income Trust
BYRNES, ELIZABETH A.
First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Adjustable Rate U.S. Government Fund
Vice President, Kemper Intermediate Government Trust
C-13
<PAGE> 70
CHIEN, CHRISTINE
First Vice President, Kemper Financial Services, Inc.
DeMAIO, CHRIS C.
First Vice President, Kemper Financial Services, Inc.
Vice President and Chief Accounting Officer, Kemper Service
Company
DEXTER, STEPHEN P.
First Vice President, Kemper Financial Services, Inc.
DOYLE, DANIEL J.
First Vice President, Kemper Financial Services, Inc.
FENGER, JAMES E.
First Vice President, Kemper Financial Services, Inc.
HALE, DAVID D.
First Vice President, Kemper Financial Services, Inc.
HARRINGTON, MICHAEL E.
First Vice President, Kemper Financial Services, Inc.
HORTON, ROBERT J.
First Vice President, Kemper Financial Services, Inc.
JACOBS, PETER M.
First Vice President, Kemper Financial Services, Inc.
KEELEY, MICHELLE M.
First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Intermediate Government Trust
Vice President, Kemper Portfolios
KIEL, CAROL L.
First Vice President, Kemper Financial Services, Inc.
LAUGHLIN, ANN M.
First Vice President, Kemper Financial Services, Inc.
LENTZ, MAUREEN P.
First Vice President, Kemper Financial Services, Inc.
McCRINDLE-PETRARCA, SUSAN
First Vice President, Kemper Financial Services, Inc.
MINER, EDWARD
First Vice President, Kemper Financial Services, Inc.
MURRAY, SCOTT S.
First Vice President, Kemper Financial Services, Inc.
C-14
<PAGE> 71
Vice President, Kemper Service Company
PAYNE, III, ROBERT D.
First Vice President, Kemper Financial Services, Inc.
PANOZZO, ROBERTA L.
First Vice President, Kemper Financial Services, Inc.
RADIS, STEVE A.
First Vice President, Kemper Financial Services, Inc.
RATEKIN, DIANE E.
First Vice President, Assistant General Counsel and Assistant
Secretary, Kemper Financial Services, Inc.
Assistant Secretary, Kemper Distributors, Inc.
SILVIA, JOHN E.
First Vice President, Kemper Financial Services, Inc.
STUEBE, JOHN W.
First Vice President, Kemper Financial Services, Inc.
Vice President, Cash Account Trust
Vice President, Cash Equivalent Fund
THOUIN, EDITH A.
First Vice President, Kemper Financial Services, Inc.
Director-European Equities, Kemper Investment Management Company Limited
Vice President, Kemper Europe Fund
TRUTTER, JONATHAN W.
First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Diversified Income Fund
Vice President, Kemper Multi-Market Income Trust
Vice President, Kemper Strategic Income Fund
WETHERALD, ROBERT F.
First Vice President, Kemper Financial Services, Inc.
WILLSON, STEPHEN R.
First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Strategic Municipal Income Trust
WITTNEBEL, MARK E.
First Vice President, Kemper Financial Services, Inc.
BARRY, JOANN M.
Vice President, Kemper Financial Services, Inc.
BODEM, RICHARD A.
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Service Company
C-15
<PAGE> 72
CARNEY, ANNE T.
Vice President, Kemper Financial Services, Inc.
CARTER, PAUL J.
Vice President, Kemper Financial Services, Inc.
CHRISTIANSEN, HERBERT A.
Vice President, Kemper Financial Services, Inc.
First Vice President, Kemper Service Company
COHEN, JERRI I.
Vice President, Kemper Financial Services, Inc.
ESOLA, CHARLES J.
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Service Company
FRIHART, THORA A.
Vice President, Kemper Financial Services, Inc.
GERACI, AUGUST L.
Vice President, Kemper Financial Services, Inc.
GOLAN, JAMES S.
Vice President, Kemper Financial Services, Inc.
HESS, THOMAS L.
Vice President, Kemper Financial Services, Inc.
HUOT, LISA L.
Vice President, Kemper Financial Services, Inc.
KARWOWSKI, KENNETH F.
Vice President, Kemper Financial Services, Inc.
KNAPP, WILLIAM M.
Vice President, Kemper Financial Services, Inc.
KOCH, DEBORAH L.
Vice President, Kemper Financial Services, Inc.
KOURY, KATHRYN E.
Vice President, Kemper Financial Services, Inc.
KRANZ, KATHY J.
Vice President, Kemper Financial Services, Inc.
KRUEGER, PAMELA D.
Vice President, Kemper Financial Services, Inc.
C-16
<PAGE> 73
KYCE, JOYCE
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Service Company
LeFEBVRE, THOMAS J.
Vice President, Kemper Financial Services, Inc.
MANGIPUDI, V. RAO
Vice President, Kemper Financial Services, Inc.
McGOVERN, KAREN B.
Vice President, Kemper Financial Services, Inc.
MILLER, MAUREEN A.
Vice President, Kemper Financial Services, Inc.
MITCHELL, KATHERINE H.
Vice President, Kemper Financial Services, Inc.
MURPHY, THOMAS M.
Vice President, Kemper Financial Services, Inc.
NEVILLE, BRIAN P.
Vice President, Kemper Financial Services, Inc.
PANOZZO, ALBERT R.
Vice President, Kemper Financial Services, Inc.
PONTECORE, SUSAN E.
Vice President, Kemper Financial Services, Inc.
QUADRINI, LISA L.
Vice President, Kemper Financial Services, Inc.
ROKOSZ, PAUL A.
Vice President, Kemper Financial Services, Inc.
ROSE, KATIE M.
Vice President, Kemper Financial Services, Inc.
SHULTZ, KAREN D.
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Service Company
SMITH, ROBERT G.
Vice President, Kemper Financial Services, Inc.
SOPHER, EDWARD O.
Vice President, Kemper Financial Services, Inc.
STROMM, LAWRENCE D.
Vice President, Kemper Financial Services, Inc.
C-17
<PAGE> 74
TEPPER, SHARYN A.
Vice President, Kemper Financial Services, Inc.
VANDEMERKT, RICHARD J.
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Service Company
WATKINS, JAMES K.
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Service Company
WERTH, ELIZABETH C.
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Distributors, Inc.
Assistant Secretary, Kemper Mutual Funds
Assistant Secretary, Kemper International Bond Fund
Assistant Secretary, Kemper Target Equity Fund
Assistant Secretary, Kemper-Dreman Fund, Inc.
Assistant Secretary, Kemper Horizon Fund
Assistant Secretary, Kemper Europe Fund
WIZER, BARBARA K.
Vice President, Kemper Financial Services, Inc.
ZURAWSKI, CATHERINE N.
Vice President, Kemper Financial Services, Inc.
C-18
<PAGE> 75
ITEM 29. PRINCIPAL UNDERWRITER
(a) Kemper Distributors, Inc. acts as principal underwriter of the
Registrant's shares and acts as principal underwriter of the Kemper Mutual
Funds, Kemper Investors Fund, Kemper International Bond Fund and Kemper-Dreman
Fund, Inc.
(b) Information on the officers and directors of Kemper Distributors, Inc.,
principal underwriter for the Registrant is set forth below. The principal
business address is 120 South LaSalle Street, Chicago, Illinois 60603.
<TABLE>
<CAPTION>
POSITIONS AND
POSITIONS AND OFFICES OFFICES WITH
NAME WITH UNDERWRITER REGISTRANT
- ------------------------ ------------------------------------------------ -------------------
<S> <C> <C>
John E. Peters Principal Director, President Vice President
William E. Chapman, II Director, Executive Vice President None
James L. Greenawalt Director, Executive Vice President None
John E. Neal Director Vice President
Stephen B. Timbers Director President, Trustee
Patrick H. Dudasik Financial Principal, Treasurer and None
Chief Financial Officer
Linda A. Bercher Senior Vice President None
Thomas V. Bruns Senior Vice President None
Terry Cunningham Senior Vice President None
Daniel T. O'Lear Senior Vice President None
John H. Robison, Jr. Senior Vice President None
Henry J. Schulthesz Senior Vice President None
David F. Dierenfeldt Vice President, Secretary None
Carlene D. Merold Vice President None
Elizabeth C. Werth Vice President Assistant Secretary
Kathleen A. Gallichio Assistant Secretary None
Diane E. Ratekin Assistant Secretary None
</TABLE>
(c) Not applicable.
C-19
<PAGE> 76
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All such accounts, books and other documents are maintained at the
offices of the Registrant, at the offices of Registrant's investment manager,
Kemper Financial Services, Inc. and Kemper Distributors, Inc., the Registrant's
principal underwriter, 120 South LaSalle Street, Chicago, Illinois 60603 or at
the offices of the custodian and transfer agent, Investors Fiduciary Trust
Company, 127 West 10th Street, Kansas City, Missouri 64141, at the offices of
the custodian, The Chase Manhattan Bank, Chase MetroTech Center, Brooklyn, New
York 11245 or at the offices of the shareholder services agent, Kemper Service
Company, 811 Main Street, Kansas City, Missouri 64105.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(a) Not applicable.
(b) The Registrant undertakes to file a Post-Effective Amendment using
financial statements of Registrant, which need not be certified, within four to
six months from the effective date of the Registration Statement.
(c) The Registrant undertakes to furnish to each person to whom a
prospectus is delivered a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
C-20
<PAGE> 77
S I G N A T U R E S
-------------------
Pursuant to the requirements of the Securities Act of
1933 and the Investment Company Act of 1940, the Registrant
has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in
the City of Chicago and State of Illinois, on the 5th day of
January, 1996.
KEMPER EUROPE FUND
By /s/ Stephen B. Timbers
------------------------------
Stephen B. Timbers, President
Pursuant to the requirements of the Securities Act of
1933, this Registration Statement has been signed below on
January 5, 1996 on behalf of the following persons in the
capacities indicated.
Signature Title
/s/ Stephen B. Timbers President (Principal
----------------------------------- Executive Officer)
Stephen B. Timbers and Trustee
/s/James E. Akins* Trustee
-----------------------------------
/s/Arthur R. Gottschalk* Trustee
-----------------------------------
/s/Frederick T. Kelsey* Trustee
-----------------------------------
/s/David B. Mathis* Trustee
-----------------------------------
/s/Fred B. Renwick* Trustee
-----------------------------------
/s/John B. Tingleff* Trustee
-----------------------------------
/s/John G. Weithers* Trustee
-----------------------------------
/s/ Jerome L. Duffy Treasurer (Principal
----------------------------------- Financial and
Jerome L. Duffy Accounting Officer)
*Philip J. Collora signs this document pursuant to powers of
attorney herewith.
/s/ Philip J. Collora
--------------------------------
Philip J. Collora
<PAGE> 78
KEMPER EUROPE FUND
INDEX TO EXHIBITS
<TABLE>
<S> <C> <C>
Exhibits
99.B1(a). Agreement and Declaration of Trust.
99.B1(b). Written Instrument Amending the Agreement and Declaration of Trust.
99.B2. By-Laws.
99.B3. Inapplicable.
99.B4(a). Text of Share Certificate.*
99.B4(b). Written Instrument Establishing and Designating Separate Classes of
Shares.*
99.B5(a). Investment Management Agreement.*
99.B6(a). Underwriting and Distribution Services Agreement.*
99.B6(b). Form of Selling Group Agreement.*
99.B7. Inapplicable.
99.B8(a). Custody Agreement (Form 1).*
99.B8(b). Foreign Custody Agreement (Form 2).*
99.B9. Agency Agreement.*
99.B9(c). Administrative Services Agreement.*
99.B10(a). Legal Opinion and Consent of Vedder, Price, Kaufman & Kammholz.*
99.B10(b). Legal Opinion and Consent of Ropes & Gray.*
99.B11. Consent and Report of Independent Auditors.*
99.B12. Inapplicable.
99.B13. Subscription Agreement.*
99.B14(a). Kemper Retirement Plan Prototype.*
99.B14(b). Model Individual Retirement Account.*
99.B15. See 6(a) above (Class B and Class C shares).
99.B16. Inapplicable.
99.B18. Multi-Distribution System Plan.*
99.B24. Powers of Attorney.
27. Inapplicable.
</TABLE>
- ---------------
* To be filed before the effective date of the Registration Statement.
<PAGE> 1
EXHIBIT 99.B1(a).
KEMPER TRUST #24
AGREEMENT AND DECLARATION OF TRUST
AGREEMENT AND DECLARATION OF TRUST made at Boston,
Massachusetts, this 12th day of June, 1995, by the Trustees
hereunder, and by the holders of shares of beneficial interest to
be issued hereunder as hereinafter provided.
WITNESSETH
WHEREAS, the Trustees hereunder are desirous of forming a
trust for the purposes of carrying on the business of a
management investment company; and
WHEREAS, in furtherance of such purposes, the Trustees are
acquiring and may hereafter acquire assets and properties, to
hold and manage as trustees of a Massachusetts voluntary
association with transferable shares in accordance with the
provisions hereinafter set forth;
NOW, THEREFORE, the Trustees hereby declare that they will
hold all cash, securities and other assets and properties which
they may from time to time acquire in any manner as Trustees
hereunder IN TRUST to manage and dispose of the same upon the
following terms and conditions for the pro rata benefit of the
holders from time to time of shares in this Trust as hereinafter
set forth.
ARTICLE I
Name and Definitions
Name and Registered Agent
Section 1. This Trust shall be known as Kemper Trust #24
and the Trustees shall conduct the business of the Trust under
that name or any other name as they may from time to time
determine. The registered agent for the Trust in Massachusetts
shall be CT Corporation System whose address is 2 Oliver Street,
Boston, Massachusetts or such other person as the Trustees may
from time to time designate.
Definitions
Section 2. Whenever used herein, unless otherwise required
by the context or specifically provided:
<PAGE> 2
(a) The "Trust" refers to the Massachusetts voluntary
association established by this Agreement and Declaration of
Trust, as amended from time to time, pursuant to Massachusetts
General Laws, Chapter 182;
(b) "Trustees" refers to the Trustees of the Trust named
herein or elected in accordance with Article IV and then in
office;
(c) "Shares" mean the equal proportionate transferable
units of interest into which the beneficial interest in the Trust
shall be divided from time to time or, if more than one series or
class of shares is authorized under or pursuant to Article III,
the equal proportionate transferable units of interest into which
each such series or class shall be divided from time to time;
(d) "Shareholder" means a record owner of Shares;
(e) The "1940 Act" refers to the Investment Company Act of
1940 (and any successor statute) and the Rules and Regulations
thereunder, all as amended from time to time;
(f) The terms "Affiliated Person", "Assignment",
"Commission", "Interested Person", "Principal Underwriter" and
"vote of a majority of the outstanding voting securities" shall
have the meanings given them in the 1940 Act;
(g) "Declaration of Trust" shall mean this Agreement and
Declaration of Trust as amended or restated from time to time;
(h) "By-Laws" shall mean the By-Laws of the Trust as
amended from time to time;
(i) "Net asset value" shall have the meaning set forth in
Section 6 of Article VI hereof;
(j) The terms "series" or "series of Shares" refers to the
one or more separate investment portfolios of the Trust
authorized under or pursuant to Article III into which the assets
and liabilities of the Trust may be divided and the Shares of the
Trust representing the beneficial interest of Shareholders in
such respective portfolios; and
(k) The terms "class" or "class of Shares" refers to the
division of Shares representing any series into two or more
classes authorized under or pursuant to Article III.
2
<PAGE> 3
ARTICLE II
Nature and Purpose
The Trust is a voluntary association (commonly known as a
business trust) of the type referred to in Chapter 182 of the
General Laws of the Commonwealth of Massachusetts. The Trust is
not intended to be, shall not be deemed to be, and shall not be
treated as, a general or a limited partnership, joint venture,
corporation or joint stock company, nor shall the Trustees or
Shareholders or any of them for any purpose be deemed to be, or
be treated in any way whatsoever as though they were, liable or
responsible hereunder as partners or joint venturers. The
purpose of the Trust is to engage in, operate and carry on the
business of an open-end management investment company and to do
any and all acts or things as are necessary, convenient,
appropriate, incidental or customary in connection therewith.
ARTICLE III
Shares
Division of Beneficial Interest
Section 1. The Shares of the Trust shall be issued in one
or more series as the Trustees may, without Shareholder approval,
authorize from time to time. Each series shall be preferred over
all other series in respect of the assets allocated to that
series as hereinafter provided. The beneficial interest in each
series shall at all times be divided into Shares (without par
value) of such series, each of which shall, except as provided in
the following sentence, represent an equal proportionate interest
in such series with each other Share of the same series, none
having priority or preference over another Share of the same
series. The Trustees may, without Shareholder approval, divide
the Shares of any series into two or more classes, Shares of each
such class having such preferences and special or relative rights
or privileges (including conversion rights, if any) as the
Trustees may determine. The number of Shares authorized shall be
unlimited, and the Shares so authorized may be represented in
part by fractional Shares. The Trustees may from time to time
divide or combine the shares of any series or class into a
greater or lesser number without thereby changing the
proportionate beneficial interests in the series or class.
Without limiting the authority of the Trustees set forth in this
Section 1 to establish and designate any further series or class,
the Trustees hereby establish and designate one series of Shares
to be known as the "Initial Portfolio." The establishment and
designation of any series or class of Shares in addition to the
foregoing shall be effective upon the execution by a majority of
the then Trustees of an instrument setting forth such
establishment and designation and the relative rights and
preferences of such series or class. As provided in Article IX,
3
<PAGE> 4
Section 1 hereof, any series or class of Shares (whether or not
there shall then be Shares outstanding of said series or class)
may be terminated by the Trustees by written notice to the
Shareholders of such series or class or by the vote of the
Shareholders of such series or class entitled to vote more than
fifty percent (50%) of the votes entitled to be cast on the
matter. In the event of any such termination, a majority of the
then Trustees shall execute an instrument setting forth the
termination of such series or class.
Ownership of Shares
Section 2. The ownership and transfer of Shares shall be
recorded on the books of the Trust or its transfer or similar
agent. No certificates certifying the ownership of Shares shall
be issued except as the Trustees may otherwise determine from
time to time. The Trustees may make such rules as they consider
appropriate for the issuance of Share certificates, the transfer
of Shares and similar matters. The record books of the Trust as
kept by the Trust or any transfer or similar agent of the Trust,
as the case may be, shall be conclusive as to who are the
Shareholders of each series or class and as to the number of
Shares of each series or class held from time to time by each
Shareholder.
Investment in the Trust; Assets of a Series
Section 3. The Trustees may issue Shares of the Trust to
such persons and on such terms and, subject to any requirements
of law, for such consideration, which may consist of cash or
tangible or intangible property or a combination thereof, as they
may from time to time authorize.
All consideration received by the Trust for the issue or
sale of Shares of a particular series, together with all income,
earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation thereof, and any
funds or payments derived from any reinvestment of such proceeds
in whatever form the same may be, shall, irrevocably belong to
such series of Shares for all purposes, subject only to the
rights of creditors, and shall be so handled upon the books of
account of the Trust and are herein referred to as "assets of"
such series. Any allocation of the assets of a series among any
classes of Shares of such series shall be made in a manner
consistent with the preferences and special or relative rights or
privileges of such classes.
Right to Refuse Orders
Section 4. The Trust by action of its Trustees shall have
the right to refuse to accept any subscription for its Shares at
any time without any cause or reason therefore whatsoever.
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Without limiting the foregoing, the Trust shall have the right
not to accept subscriptions under circumstances or in amounts as
the Trustees in their sole discretion consider to be
disadvantageous to existing Shareholders and the Trust may from
time to time set minimum and/or maximum amounts which may be
invested in Shares by a subscriber.
Order in Proper Form
Section 5. The criteria for determining what constitutes an
order in proper form and the time of receipt of such an order by
the Trust shall be prescribed by resolution of the Trustees.
When Shares Become Outstanding
Section 6. Shares subscribed for and for which an order in
proper form has been received shall be deemed to be outstanding
as of the time of acceptance of the order therefor and the
determination of the net price thereof, which price shall be then
deemed to be an asset of the Trust.
Merger or Consolidation
Section 7. In connection with the acquisition of all or
substantially all the assets or stock of another investment
company, investment trust, or of a company classified as a
personal holding company under Federal Income Tax laws, the
Trustees may issue or cause to be issued Shares of a series or
class and accept in payment therefor, in lieu of cash, such
assets at their market value, or such stock at the market value
of the assets held by such investment company or investment
trust, either with or without adjustment for contingent costs or
liabilities.
No Preemptive Rights, Etc.
Section 8. Shareholders shall have no preemptive or other
right to receive, purchase or subscribe for any additional Shares
or other securities issued by the Trust. The Shareholders shall
have no appraisal rights with respect to their Shares and, except
as otherwise determined by the Trustees in their sole discretion,
shall have no exchange or conversion rights with respect to their
Shares.
Status of Shares and Limitation of Personal Liability
Section 9. Shares shall be deemed to be personal property
giving only the rights provided in this instrument. Every
Shareholder by virtue of having become a Shareholder shall be
held to have expressly assented and agreed to the terms of the
Declaration of Trust and to have become a party thereto. The
death of a Shareholder during the continuance of the Trust shall
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not operate to terminate the same nor entitle the representative
of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees,
but only to the rights of said decedent under this Trust.
Ownership of Shares shall not entitle the Shareholder to any
title in or to the whole or any part of the Trust property or
right to call for a partition or division of the same or for an
accounting, nor shall the ownership of Shares constitute the
Shareholders partners. Neither the Trust nor the Trustees, nor
any officer, employee or agent of the Trust shall have any power
to bind personally any Shareholder, nor except as specifically
provided herein to call upon any Shareholder for the payment of
any sum of money or assessment whatsoever other than such as the
Shareholder may at any time personally agree to pay.
Shareholder Inspection Rights
Section 10. Any Shareholder or his agent may inspect and
copy during normal business hours any of the following documents
of the Trust: By-Laws, minutes of the proceedings of the
Shareholders and annual financial statements of the Trust,
including a balance sheet and financial statements of operations.
The foregoing rights of inspection of Shareholders of the Trust
are the exclusive and sole rights of the Shareholders with
respect thereto and no Shareholder of the Trust shall have, as a
Shareholder, the right to inspect or copy any of the books,
records or other documents of the Trust except as specifically
provided in this Section 10 of this Article III or except as
otherwise determined by the Trustees.
ARTICLE IV
The Trustees
Number, Designation, Election, Term, Etc.
Section 1.
(a) Initial Trustee. Upon his execution of this
Declaration of Trust or a counterpart hereof or some other
writing in which he accepts such Trusteeship and agrees to the
provisions hereof, Antonio DeSpirito III shall become a Trustee
hereof.
(b) Number. The Trustees serving as such, whether named
above or hereafter becoming Trustees, may increase or decrease
the number of Trustees to a number other than the number
theretofore determined which number shall not be less than three
nor more than fifteen except during the period prior to any sale
of Shares pursuant to any public offering. No decrease in the
number of Trustees shall have the effect of removing any Trustee
from office prior to the expiration of his term, but the number
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of Trustees may be decreased in conjunction with the removal of a
Trustee pursuant to subsection (e) of this Section 1.
(c) Term and Election. Each Trustee, whether named above
or hereafter becoming a Trustee, shall serve as a Trustee until
the next meeting of Shareholders, if any, called for the purpose
of considering the election or re-election of such Trustee or of
a successor to such Trustee, and until the election and
qualification of his successor, if any, elected at such meeting,
or until such Trustee sooner dies, resigns, retires or is
removed. Upon the election and qualification of a new Trustee,
the Trust estate shall vest in the new Trustee (together with the
continuing or other new Trustees) without any further act or
conveyance. Prior to any sale of Shares pursuant to any public
offering, the initial Trustee named above (and any individual
appointed by such initial Trustee to act as sole Trustee) shall
have the right to appoint other persons as Trustees each to serve
as Trustees as aforesaid until the first meeting of Shareholders
called for the purpose of the election or re-election of such
Trustee or of a successor to such Trustee.
(d) Resignation and Retirement. Any Trustee may resign his
trust or retire as a Trustee, by written instrument signed by him
and delivered to the other Trustees or to the Chairman of the
Board, if any, the President or the Secretary of the Trust, and
such resignation or retirement shall take effect upon such
delivery or upon such later date as is specified in such
instrument.
(e) Removal. Any Trustee may be removed for cause at any
time by written instrument, signed by at least a majority of the
number of Trustees prior to such removal, specifying the date
upon which such removal shall become effective. Any Trustee may
be removed with or without cause (i) by the vote of the
Shareholders entitled to vote more than fifty percent (50%) of
the votes entitled to be cast on the matter voting together
without regard to series or class at any meeting called for such
purpose, or (ii) by a written consent filed with the custodian of
the Trust's portfolio securities and executed by the Shareholders
entitled to vote more than fifty percent (50%) of the votes
entitled to be cast on the matter voting together without regard
to series or class.
Whenever ten or more Shareholders of record who have been
such for at least six months preceding the date of application,
and who hold in the aggregate Shares constituting at least one
percent of the outstanding Shares of the Trust, shall apply to
the Trustees in writing, stating that they wish to communicate
with other Shareholders with a view to obtaining signatures to a
request for a meeting to consider removal of a Trustee and
accompanied by a form of communication and request that they wish
to transmit, the Trustees shall within five business days after
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receipt of such application inform such applicants as to the
approximate cost of mailing to the Shareholders of record the
proposed communication and form of request. Upon the written
request of such applicants, accompanied by a tender of the
material to be mailed and of the reasonable expenses of mailing,
the Trustees shall, within reasonable promptness, mail such
material to all Shareholders of record at their addresses as
recorded on the books of the Trust. Notwithstanding the
foregoing, the Trustees may refuse to mail such material on the
basis and in accordance with the procedures set forth in the last
two paragraphs of Section 16(c) of the 1940 Act.
(f) Vacancies. Any vacancy or anticipated vacancy
resulting from any reason, including without limitation the
death, resignation, retirement, removal or incapacity of any of
the Trustees, or resulting from an increase in the number of
Trustees by the other Trustees may (but so long as there are at
least three remaining Trustees at all times subsequent to any
sale of Shares pursuant to any public offering, need not unless
required by the 1940 Act) be filled either by a majority of the
remaining Trustees, even if less than a quorum, through the
appointment in writing of such other person as such remaining
Trustees in their discretion shall determine or, whenever deemed
appropriate by the remaining Trustees, by the election by the
Shareholders, at a meeting called for such purpose, of a person
to fill such vacancy. Upon the appointment or election and
qualification of a new Trustee as aforesaid, the Trust estate
shall vest in the new Trustee, together with the continuing
Trustees, without any further act or conveyance, except that any
such appointment or election in anticipation of a vacancy to
occur by reason of retirement, resignation, or increase in number
of Trustees to be effective at a later date shall become
effective only at or after the effective date of said retirement,
resignation, or increase in number of Trustees.
(g) Mandatory Election by Shareholders. Notwithstanding
the foregoing provisions of this Section 1, the Trustees shall
call a meeting of the Shareholders for the election of one or
more Trustees at such time or times as may be required in order
that the provisions of the 1940 Act may be complied with, and the
authority hereinabove provided for the Trustees to appoint any
successor Trustee or Trustees shall be restricted if such
appointment would result in failure of the Trust to comply with
any provision of the 1940 Act.
(h) Effect of Death, Resignation, Etc. The death,
resignation, retirement, removal or incapacity of the Trustees,
or any one of them, shall not operate to annul or terminate the
Trust or to revoke or terminate any existing agency or contract
created or entered into pursuant to the terms of this Declaration
of Trust.
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(i) No Accounting. Except under circumstances which would
justify his removal for cause, no person ceasing to be a Trustee
as a result of his death, resignation, retirement, removal or
incapacity (nor the estate of any such person) shall be required
to make an accounting to the Shareholders or remaining Trustees
upon such cessation.
Powers
Section 2. The Trustees, subject only to the specific
limitations contained in this Declaration of Trust or otherwise
imposed by the 1940 Act or other applicable law, shall have,
without further or other authorization and free from any power or
control of the Shareholders, full, absolute and exclusive power,
control and authority over the Trust assets and the business and
affairs of the Trust to the same extent as if the Trustees were
the sole and absolute owners thereof in their own right and to do
all such acts and things as in their sole judgment and discretion
are necessary and incidental to, or desirable for the carrying
out of any of the purposes of the Trust or conducting the
business of the Trust. Any determination made in good faith by
the Trustees of the purposes of the Trust or the existence of any
power or authority hereunder shall be conclusive. In construing
the provisions of this Declaration of Trust, there shall be a
presumption in favor of the grant of power and authority to the
Trustees. Without limiting the foregoing, the Trustees may adopt
By-Laws not inconsistent with this Declaration of Trust
containing provisions relating to the business of the Trust, the
conduct of its affairs, its rights or powers and the rights or
powers of its Shareholders, Trustees, officers, employees and
other agents and may amend and repeal them to the extent that
such By-Laws do not reserve that right to the Shareholders; fill
vacancies in their number, including vacancies resulting from
increases in their number, unless a vote of the Trust's
Shareholders is required to fill such vacancies pursuant to the
1940 Act; elect and remove such officers and appoint and
terminate such agents as they consider appropriate; appoint from
their own number, and terminate, any one or more committees
consisting of two or more Trustees, including an executive
committee which may, when the Trustees are not in session,
exercise some or all of the powers and authority of the Trustees
as the Trustees may determine; appoint an advisory board, the
members of which shall not be Trustees and need not be
Shareholders; employ one or more investment advisers or managers
as provided in Section 6 of this Article IV; employ one or more
custodians of the assets of the Trust and authorize such
custodians to employ subcustodians and to deposit all or any part
of such assets in a system or systems for the central handling of
securities; retain a transfer agent or a Shareholder services
agent, or both; provide for the distribution of Shares by the
Trust, through one or more principal underwriters or otherwise;
set record dates for the determination of Shareholders with
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respect to various matters; and in general delegate such
authority as they consider desirable to any officer of the Trust,
to any committee of the Trustees and to any agent or employee of
the Trust or to any such custodian or underwriter.
In furtherance of and not in limitation of the foregoing,
the Trustees shall have power and authority:
(a) To invest and reinvest in, to buy or otherwise acquire,
to hold, for investment or otherwise, to sell or otherwise
dispose of, to lend or to pledge, to trade in or deal in
securities or interests of all kinds, however evidenced, or
obligations of all kinds, however evidenced, or rights, warrants,
or contracts to acquire such securities, interests, or
obligations, of any private or public company, corporation,
association, general or limited partnership, trust or other
enterprise or organization, foreign or domestic, or issued or
guaranteed by any national or state government, foreign or
domestic, or their agencies, instrumentalities or subdivisions
(including but not limited to, bonds, debentures, bills, time
notes and all other evidences of indebtedness); negotiable or
non-negotiable instruments; any and all futures contracts;
government securities and money market instruments (including but
not limited to, bank certificates of deposit, finance paper,
commercial paper, bankers acceptances, and all kinds of
repurchase agreements);
(b) To invest and reinvest in, to buy or otherwise acquire,
to hold, for investment or otherwise, to sell or otherwise
dispose of foreign currencies, and funds and exchanges, and make
deposits in banks, savings banks, trust companies, and savings
and loan associations, foreign or domestic;
(c) To acquire (by purchase, lease or otherwise) and to
hold, use, maintain, develop, and dispose of (by sale or
otherwise) any property, real or personal, and any interest
therein;
(d) To sell, exchange, lend, pledge, mortgage, hypothecate,
write options on and lease any or all of the assets of the Trust;
(e) To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities or property;
and to execute and deliver proxies or powers of attorney to such
person or persons as the Trustees shall deem proper, granting to
such person or persons such power and discretion with relation to
securities or property as the Trustees shall deem proper;
(f) To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of
securities;
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(g) To hold any security or property in a form not
indicating any trust, whether in bearer, unregistered or other
negotiable form, or in the name of the Trustees or of the Trust
or in the name of a custodian, subcustodian or other depositary
or a nominee or nominees or otherwise;
(h) Subject to the provisions of Article III, to allocate
assets, liabilities, income and expenses of the Trust to a
particular series of Shares or to apportion the same among two or
more series, provided that any liabilities or expenses incurred
by a particular series shall be payable solely out of the assets
of that series; and to the extent necessary or appropriate to
give effect to the preferences and special or relative rights or
privileges of any classes of Shares, to allocate assets,
liabilities, income and expenses of a series to a particular
class of Shares of that series or to apportion the same among two
or more classes of Shares of that series;
(i) To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or
issuer, any security or property of which is or was held in the
Trust; to consent to any contract, lease, mortgage, purchase or
sale of property by such corporation or issuer, and to pay calls
or subscriptions with respect to any security held in the Trust;
(j) To join with other security holders in acting through a
committee, depositary, voting trustee or otherwise, and in that
connection to deposit any security with, or transfer any security
to, any such committee, depositary or trustee, and to delegate to
them such power and authority with relation to any security
(whether or not so deposited or transferred) as the Trustees
shall deem proper, and to agree to pay, and to pay, such portion
of the expenses and compensation of such committee, depositary or
trustee as the Trustees shall deem proper;
(k) To compromise, arbitrate or otherwise adjust claims in
favor of or against the Trust or any matter in controversy,
including but not limited to claims for taxes;
(l) To enter into joint ventures, general or limited
partnerships and any other combinations or associations;
(m) To borrow funds;
(n) To endorse or guarantee the payment of any notes or
other obligations of any person; to make contracts of guaranty or
suretyship, or otherwise assume liability for payment thereof;
and to mortgage and pledge the Trust property or any part thereof
to secure any of or all such obligations;
(o) To purchase and pay for entirely out of Trust property
such insurance as they may deem necessary or appropriate for the
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conduct of the business, including, without limitation, insurance
policies insuring the assets of the Trust and payment of
distributions and principal on its portfolio investments, and
insurance policies insuring the Shareholders, Trustees, officers,
employees, agents, investment advisers or managers, principal
underwriters, or independent contractors of the Trust
individually against all claims and liabilities of every nature
arising by reason of holding, being or having held any such
office or position, or by reason of any action alleged to have
been taken or omitted by any such person as Shareholder, Trustee,
officer, employee, agent, investment adviser or manager,
principal underwriter, or independent contractor, including any
action taken or omitted that may be determined to constitute
negligence, whether or not the Trust would have the power to
indemnify such person against such liability; and
(p) To pay pensions for faithful service, as deemed
appropriate by the Trustees, and to adopt, establish and carry
out pension, profit-sharing, share bonus, share purchase,
savings, thrift and other retirement, incentive and benefit
plans, trusts and provisions, including the purchasing of life
insurance and annuity contracts as a means of providing such
retirement and other benefits, for any or all of the Trustees,
officers, employees and agents of the Trust.
The Trustees shall not in any way be bound or limited by any
present or future law or custom in regard to investments by
trustees of common law trusts. Except as otherwise provided
herein or from time to time in the By-Laws, any action to be
taken by the Trustees may be taken by a majority of the Trustees
present at a meeting of Trustees (if a quorum by present), within
or without Massachusetts, including any meeting held by means of
a conference telephone or other communications equipment by means
of which all persons participating in the meeting can communicate
with each other simultaneously and participation by such means
shall constitute presence in person at a meeting, or by written
consents of a majority of the Trustees then in office.
Payment of Expenses, Allocation of Liabilities
Section 3. The Trustees are authorized to pay or to
cause to be paid out of the principal or income of the Trust, or
partly out of principal and partly out of income, as they deem
fair, all expenses, fees, charges, taxes and liabilities incurred
or arising in connection with the Trust, or in connection with
the management thereof, including, but not limited to, the
Trustees' compensation and such expenses and charges for the
services of the Trust's officers, employees, investment adviser
or manager, principal underwriter, auditor, counsel, custodian,
transfer agent, shareholder servicing agent, and such other
agents or independent contractors and such other expenses and
charges as the Trustees may deem necessary or proper to incur.
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The assets of a particular series of Shares shall be charged
with the liabilities (including, in the discretion of the
Trustees or their delegate, accrued expenses and reserves)
incurred in respect of such series (but not with liabilities
incurred in respect of any other series) and such series shall
also be charged with its share of any other liabilities. Any
allocation of the liabilities of a series among classes of Shares
of that series shall be done in a manner consistent with the
preferences and special or relative rights or privileges of such
classes. The determination of the Trustees shall be final and
conclusive as to the amount of liabilities to be charged to one
or more particular series or class. The Trustees may delegate
from time to time the power to make such allocation to one or
more Trustees or to an agent of the Trust appointed for such
purpose. The liabilities with which a series is so charged are
herein referred to as the "liabilities of" such series.
Section 4. The Trustees shall have the power, as
frequently as they may determine, to cause each Shareholder to
pay directly, in advance or arrears, for charges for the Trust's
custodian or transfer or shareholder service or similar agent, an
amount fixed from time to time by the Trustees, by setting off
such charges due from such Shareholder from declared but unpaid
dividends owed such Shareholder and/or by reducing the number of
Shares in the account of such Shareholder by that number of full
and/or fractional Shares which represents the outstanding amount
of such charges due from such Shareholder.
Ownership of Assets of the Trust
Section 5. Title to all of the assets of each series of
the Trust and of the Trust shall at all times be considered as
vested in the Trustees.
Advisory, Management and Distribution
Section 6. Subject to a favorable vote of a majority of
the outstanding voting securities of a series of the Trust, the
Trustees may on behalf of such series, at any time and from time
to time, contract for exclusive or nonexclusive advisory and/or
management services for such series with a corporation, trust,
association or other organization, every such contract to comply
with such requirements and restrictions as may be set forth in
the By-Laws; and any such contract may contain such other terms
interpretive of or in addition to said requirements and
restrictions as the Trustees may determine, including, without
limitation, authority to determine from time to time what
investments shall be purchased, held, sold or exchanged and what
portion, if any, of the assets of such series shall be held
uninvested and to make changes in such series' investments. The
Trustees may also, at any time and from time to time, contract
with a corporation, trust, association or other organization,
appointing it exclusive or nonexclusive distributor or principal
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underwriter for the Shares, every such contract to comply with
such requirements and restrictions as may be set forth in the By-
Laws; and any such contract may contain such other terms
interpretive of or in addition to said requirements and
restrictions as the Trustees may determine.
The fact that:
(a) any of the Shareholders, Trustees or officers of the
Trust is a shareholder, director, officer, partner, trustee,
employee, manager, advisor, principal underwriter, or distributor
or agent of or for any corporation, trust, association, or other
organization, or of or for any parent or affiliate of any
organization, with which an advisory or management or principal
underwriter's or distributor's contract, or transfer, shareholder
services or other agency contract may have been or may hereafter
be made, or that any such organization, or any parent or
affiliate thereof, is a Shareholder or has an interest in the
Trust, or that
(b) any corporation, trust, association or other
organization with which an advisory or management or principal
underwriter's or distributor's contract, or transfer, shareholder
services or other agency contract may have been or may hereafter
be made also has an advisory or management contract, or principal
underwriter's or distributor's contract, or transfer, shareholder
services or other agency contract with one or more other corpora-
tions, trusts, associations, or other organizations, or has other
businesses or interests shall not affect the validity of any such
contract or disqualify any Shareholder, Trustee or officer of the
Trust from voting upon or executing the same or create any
liability or accountability to the Trust or its Shareholders.
ARTICLE V
Shareholders' Voting Powers and Meetings
Voting Powers
Section 1. Subject to the voting provisions of one or
more classes of Shares, the Shareholders shall have power to vote
only: (a) for the election or removal of Trustees as provided in
Article IV, Section 1; (b) with respect to any investment adviser
or manager as provided in Article IV, Section 6; (c) with respect
to any termination or reorganization of the Trust or any series
or class thereof to the extent and as provided in Article IX,
Section 1; (d) with respect to any amendment of this Declaration
of Trust to the extent and as provided in Article IX, Section 4;
and (e) with respect to such additional matters relating to the
Trust as may be required by law, the 1940 Act, this Declaration
of Trust, the By-Laws or any registration of the Trust with the
Securities and Exchange Commission (or any successor agency) or
any state, or as the Trustees may consider necessary or desir-
able.
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Each whole Share shall be entitled to one vote as to any
matter on which it is entitled to vote and each fractional Share
shall be entitled to a proportionate fractional vote. Notwith-
standing any other provision of the Declaration of Trust, on any
matter submitted to a vote of Shareholders all Shares of the
Trust then entitled to vote shall, except to the extent otherwise
required or permitted by the preferences and special or relative
rights or privileges of any classes of Shares, be voted by
individual series and not in the aggregate or by class, except
(a) when required by the 1940 Act, Shares shall be voted in the
aggregate and not by individual series; and (b) when the Trustees
have determined that the matter affects only the interests of one
or more series or classes, then only Shareholders of such series
or class shall be entitled to vote thereon. There shall be no
cumulative voting in the election of Trustees. Shares may be
voted in person or by proxy.
A proxy with respect to Shares held in the name of two or
more persons shall be valid if executed by any one of them unless
at or prior to the exercise of the proxy the Trust receives a
specific written notice to the contrary from any one of them. A
proxy purporting to be executed by or on behalf of a Shareholder
shall be deemed valid unless challenged at or prior to its
exercise and the burden of proving invalidity shall rest on the
challenger.
Until Shares of any series or class are issued, the Trustees
may exercise all rights of Shareholders and may take any action
required by law, this Declaration of Trust or the By-Laws to be
taken by Shareholders of such series or class.
Shareholder Meetings
Section 2. Meetings of Shareholders (including meetings
involving only one or more but less than all series or classes)
may be called and held from time to time for the purpose of
taking action upon any matter requiring the vote or authority of
the Shareholders as herein provided or upon any other matter
deemed by the Trustees to be necessary or desirable. Such
meetings shall be held at the principal office of the Trust as
set forth in the By-Laws of the Trust or at any such other place
within the United States as may be designated in the call there-
of, which call shall be made by the Trustees or the President of
the Trust. Meetings of Shareholders may be called by the Trust-
ees or such other person or persons as may be specified in the
By-Laws upon written application by Shareholders holding at least
twenty-five percent (25%) (or ten percent (10%) if the purpose of
the meeting is to determine if a Trustee is to be removed from
office) of the Shares then outstanding of all series and classes
entitled to vote at such meeting requesting a meeting be called
for a purpose requiring action by the Shareholders as provided
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herein or in the By-Laws which purpose shall be specified in any
such written application.
Shareholders shall be entitled to at least seven days'
written notice of any meeting of the Shareholders.
Quorum and Required Vote
Section 3. The presence at a meeting of Shareholders in
person or by proxy of Shareholders entitled to vote at least
thirty percent (30%) of all votes entitled to be cast at the
meeting of each series or class entitled to vote as a series or
class shall be a quorum for the transaction of business at a
Shareholders' meeting, except that where any provision of law or
of this Declaration of Trust permits or requires that the holders
of Shares shall vote in the aggregate and not as a series or
class, then the presence in person or by proxy of Shareholders
entitled to vote at least thirty percent (30%) of all votes
entitled to be cast at the meeting (without regard to series or
class) shall constitute a quorum. Any lesser number, however,
shall be sufficient for adjournments. Any adjourned session or
sessions may be held within a reasonable time after the date set
for the original meeting without the necessity of further notice.
Except when a larger vote is required by any provisions of
the 1940 Act, this Declaration of Trust or the By-Laws, a
majority of the Shares of each series or class voted on the
matter shall decide that matter insofar as that series or class
is concerned, provided that where any provision of law, this
Declaration of Trust or the By-Laws permits or requires that the
holders of Shares vote in the aggregate and not as a series or
class, then a majority of the Shares voted on any matter (without
regard to series or class) shall decide such matter and a
plurality shall elect a Trustee.
Action by Written Consent
Section 4. Any action taken by Shareholders may be taken
without a meeting if Shareholders entitled to vote more than
fifty percent (50%) of the votes entitled to be cast on the
matter of each series or class or, where any provision of law,
this Declaration of Trust or the By-Laws permits or requires that
the holders of Shares vote in the aggregate and not as a series
or class, if Shareholders entitled to vote more than fifty
percent (50%) of the votes entitled to be cast thereon (without
regard to series or class) (or in either case such larger vote as
shall be required by any provision of this Declaration of Trust
or the By-Laws) consent to the action in writing and such written
consents are filed with the records of the meetings of
Shareholders. Such consent shall be treated for all purposes as
a vote taken at a meeting of Shareholders.
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Additional Provisions
Section 5. The By-Laws may include further provisions
for Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.
ARTICLE VI
Distributions, Redemptions and Repurchases,
and Determination of Net Asset Value
Distributions
Section 1. The Trustees may in their sole discretion
from time to time distribute to the Shareholders of any series
such income and gains, accrued or realized, as the Trustees may
determine, after providing for actual and accrued expenses and
liabilities of such series (including such reserves as the
Trustees may establish) determined in accordance with this
Declaration of Trust and good accounting practices. The Trustees
shall have full discretion to determine which items shall be
treated as income and which items as capital and their
determination shall be binding upon the Shareholders.
Distributions to any series, if any be made, shall be in Shares
of such series, in cash or otherwise and on a date or dates
determined by the Trustees. At any time and from time to time in
their discretion, the Trustees may distribute to the Shareholders
of any series as of a record date or dates determined by the
Trustees, in Shares of such series, in cash or otherwise, all or
part of any gains realized on the sale or disposition of property
of the series or otherwise, or all or part of any other principal
of the Trust attributable to the series. Except to the extent
otherwise required or permitted by the preferences and special or
relative rights or privileges of any classes of Shares of that
series, each distribution pursuant to this Section 1 shall be
made ratably according to the number of Shares of the series held
by the several Shareholders on the applicable record date
thereof, provided that distributions from assets of a series may
only be made to the holders of the Shares of such series and
provided that no distributions need be made on Shares purchased
pursuant to orders received, or for which payment is made, after
such time or times as the Trustees may determine. Any
distribution to the Shareholders of a particular class of Shares
shall be made to such Shareholders pro rata in proportion to the
number of Shares of such class held by each of them. Any
distribution paid in Shares will be paid at the net asset value
thereof as determined in accordance with this Declaration of
Trust. The Trustees have the power, in their discretion, to
distribute for any year amounts sufficient to enable the Trust to
qualify as a "regulated investment company" under the Internal
Revenue Code as amended (or any successor thereto) to avoid any
liability for federal income tax in respect of that year.
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<PAGE> 18
Redemptions and Repurchases
Section 2. Any holder of Shares of the Trust may, by
presentation of a request in proper form, together with his
certificates, if any, for such Shares, in proper form for
transfer to the Trust or duly authorized agent of the Trust,
request redemption of his shares for the net asset value thereof
determined and computed in accordance with the provisions of this
Section 2 and the provisions of Section 6 of this Article VI.
Upon receipt by the Trust or its duly authorized agent, as
the case may be, of such a request for redemption of Shares in
proper form, such Shares shall be redeemed at the net asset value
per share of the particular series or class next determined after
such request is received or determined as of such other time
fixed by the Trustees as may be permitted or required by the 1940
Act. The criteria for determining what constitutes a request for
redemption in proper form and the time of receipt of such request
shall be fixed by the Trustees.
The obligation of the Trust to redeem its Shares as set
forth above in this Section 2 shall be subject to the condition
that such obligation may be suspended by the Trust by or under
authority of the Trustees during any period or periods when and
to the extent permissible under the 1940 Act. If there is such a
suspension, any Shareholder may withdraw any request for
redemption which has been received by the Trust during any such
period and the applicable net asset value with respect to which
would but for such suspension be calculated as of a time during
such period. Upon such withdrawal, the Trust shall return to the
Shareholder the certificates therefor, if any.
The Trust may also purchase, repurchase or redeem Shares in
accordance with such other methods, upon such other terms and
subject to such other conditions as the Trustee may from time to
time authorize at a price not exceeding the net asset value of
such Shares in effect when the purchase or repurchase or any
contract to purchase or repurchase is made. Shares redeemed or
repurchased by the Trust hereunder shall be cancelled upon such
redemption or repurchase without further action by the Trust or
the Trustees and the number of issued and outstanding Shares of
the relevant series and class shall thereupon be reduced by such
amount.
Payment for Shares Redeemed
Section 3. Payment of the redemption price for Shares
redeemed pursuant to this Article VI shall be made by the Trust
or its duly authorized agent after receipt by the Trust or its
duly authorized agent of a request for redemption in proper form
(together with any certificates for such Shares as provided in
Section 2 above) in accordance with procedures and subject to
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<PAGE> 19
conditions prescribed by the Trustees; provided, however, that
payment may be postponed during the period in which the
redemption of Shares is suspended under Section 2 above. Subject
to any generally applicable limitation imposed by the Trustees,
any payment on redemption, purchase or repurchase by the Trust of
Shares may, if authorized by the Trustees, be made wholly or
partly in kind, instead of in cash. Such payment in kind shall
be made by distributing securities or other property,
constituting, in the opinion of the Trustees, a fair
representation of the various types of securities and other
property then held by the series of Shares being redeemed,
purchased or repurchased (but not necessarily involving a portion
of each of the series' holdings) and taken at their value used in
determining the net asset value of the Shares in respect of which
payment is made.
Redemptions at the Option of the Trust
Section 4. The Trust shall have the right at its option
and at any time and from time to time to redeem Shares of any
Shareholder at the net asset value thereof as determined in
accordance with Section 6 of this Article VI, if at such time
such Shareholder owns fewer shares of a series or class than, or
Shares of a series or class having an aggregate net asset value
of less than, an amount determined from time to time by the
Trustees. Any such redemption at the option of the Trust shall
be made in accordance with such other criteria and procedures for
determining the Shares to be redeemed, the redemption date and
the means of effecting such redemption as the Trustees may from
time to time authorize.
Additional Provisions Relating to Dividends, Redemptions and
Repurchases
Section 5. The completion of redemption, purchase or
repurchase of Shares shall constitute a full discharge of the
Trust and the Trustees with respect to such Shares. No dividend
or distribution (including, without limitation, any distribution
paid upon termination of the Trust or of any series or class)
with respect to, nor any redemption or repurchase of, the Shares
of any series or class shall be effected by the Trust other than
from the assets of such series.
Determination of Net Asset Value
Section 6. The term "net asset value" of each Share of a
series or class as of any particular time shall be the quotient
obtained by dividing the value, as at such time, of the net
assets of such series or class (i.e., the value of the assets of
such series or class less the liabilities of such series or
class, exclusive of liabilities represented by the Shares of such
series or class) by the total number of Shares of such series or
19
<PAGE> 20
class outstanding at such time, all determined and computed in
accordance with the Trust's current prospectus.
The Trustees, or any officer, or officers or agent of the
Trust designated for the purpose by the Trustees shall determine
the net asset value of the Shares of each series or class, and
the Trustees shall fix the time or times as of which the net
asset value of the Shares of each series or class shall be
determined and shall fix the periods during which any such net
asset value shall be effective as to sales, redemptions and
repurchases of, and other transactions in, the Shares of such
series or class, except as such times and periods for any such
transaction may be fixed by other provisions of this Declaration
of Trust or by the By-Laws.
Determinations in accordance with this Section 6 made in
good faith shall be binding on all parties concerned.
How Long Shares are Outstanding
Section 7. Shares of the Trust surrendered to the Trust
for redemption by it pursuant to the provisions of Section 2 of
this Article VI shall be deemed to be outstanding until the
redemption price thereof is determined pursuant to this Article
VI and, thereupon and until paid, the redemption price thereof
shall be deemed to be a liability of the Trust. Shares of the
Trust purchased by the Trust in the open market shall be deemed
to be outstanding until confirmation of purchase thereof by the
Trust and, thereupon and until paid, the purchase price thereof
shall be deemed to be a liability of the Trust. Shares of the
Trust redeemed by the Trust pursuant to Section 4 of this Article
VI shall be deemed to be outstanding until said Shares are deemed
to be redeemed in accordance with procedures adopted by the
Trustees pursuant to said Section 4.
ARTICLE VII
Compensation and Limitation of Liability
of Trustees and Shareholders
Section 1. The Trustees as such shall be entitled to
reasonable compensation from the Trust if the rate thereof is
prescribed by such Trustees. Nothing herein shall in any way
prevent the employment of any Trustee for advisory, management,
legal, accounting, investment banking or other services and
payment for the same by the Trust, it being recognized that such
employment may result in such Trustee being considered an
Affiliated Person or an Interested Person.
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<PAGE> 21
Limitation of Liability
Section 2. The Trustees shall not be responsible or
liable in any event for any neglect or wrongdoing of any officer,
agent, employee, investment adviser or manager, principal
underwriter or custodian, nor shall any Trustee be responsible
for the act or omission of any other Trustee. Nothing in this
Declaration of Trust shall protect any Trustee against any
liability to which such Trustee would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of the
office of Trustee.
Every note, bond, contract, instrument, certificate, Share
or undertaking and every other act or thing whatsoever executed
or done by or on behalf of the Trust or the Trustees or any of
them in connection with the Trust shall be conclusively deemed to
have been executed or done only in or with respect to their or
his capacity as Trustees or Trustee and neither such Trustees or
Trustee nor the Shareholders shall be personally liable thereon.
Every note, bond, contract, instrument, certificate or
undertaking made or issued by the Trustees or by any officers or
officer shall give notice that this Declaration of Trust is on
file with the Secretary of State of The Commonwealth of
Massachusetts and shall recite that the same was executed or made
by or on behalf of the Trust by them as Trustees or Trustee or as
officers or officer and not individually and that the obligations
of such instrument are not binding upon any of them or the
Shareholders individually but are binding only upon the assets
and property of the Trust or a particular series of Shares, and
may contain such further recital as he or they may deem
appropriate, but the omission thereof shall not operate to bind
any Trustees or Trustee or officers or officer or Shareholders or
Shareholder individually.
All persons extending credit to, contracting with or having
any claim against the Trust or a particular series of Shares
shall look only to the assets of the Trust or the assets of that
particular series of Shares, as the case may be, for payment
under such credit, contract or claim; and neither the
Shareholders nor the Trustees, nor any of the Trust's officers,
employees or agents, whether past, present or future, shall be
personally liable therefor.
Trustees' Good Faith Action, Expert Advice, No Bond or Surety
Section 3. The exercise by the Trustees of their powers
and discretions hereunder shall be binding upon everyone
interested. A Trustee shall be liable only for his own willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of the office of Trustee, and
for nothing else, and shall not be liable for errors of judgment
or mistakes of fact or law. The Trustees may take advice of
counsel
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<PAGE> 22
or other experts with respect to the meaning and operation
of this Declaration of Trust and their duties as Trustees
hereunder, and shall be under no liability for any act or
omission in accordance with such advice or for failing to
follow such advice. In discharging their duties, the Trustees,
when acting in good faith, shall be entitled to rely upon the
books of account of the Trust and upon written reports made to
the Trustees by any officer appointed by them, any independent
public accountant and (with respect to the subject matter of the
contract involved) any officer, partner or responsible employee
of any other party to any contract entered into pursuant to
Section 2 of Article IV. The Trustees shall not be required to
give any bond as such, nor any surety if a bond is required.
Liability of Third Persons Dealing with Trustees
Section 4. No person dealing with the Trustees shall be
bound to make any inquiry concerning the validity of any
transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the
Trust or upon its order.
ARTICLE VIII
Indemnification
Subject to the exceptions and limitations contained in this
Article, every person who is, or has been, a Trustee or officer
of the Trust (including persons who serve at the request of the
Trust as directors, officers or trustees of another organization
in which the Trust has an interest as a shareholder, creditor or
otherwise) hereinafter referred to as a "Covered Person", shall
be indemnified by the Trust to the fullest extent permitted by
law against liability and against all expenses reasonably
incurred or paid by him in connection with any claim, action,
suit or proceeding in which he becomes involved as a party or
otherwise by virtue of his being or having been such a Trustee,
director or officer and against amounts paid or incurred by him
in settlement thereof.
No indemnification shall be provided hereunder to a Covered
Person:
(a) against any liability to the Trust or its Shareholders
by reason of a final adjudication by the court or other body
before which the proceeding was brought that he engaged in
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office;
(b) with respect to any matter as to which he shall have
been finally adjudicated not to have acted in good faith in the
reasonable belief that his action was in the best interest of the
Trust; or
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<PAGE> 23
(c) in the event of a settlement or other disposition not
involving a final adjudication (as provided in paragraph (a) or
(b)) and resulting in a payment by a Covered Person, unless there
has been either a determination that such Covered Person did not
engage in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his
office by the court or other body approving the settlement or
other disposition or a reasonable determination, based on a
review of readily available facts (as opposed to a full trial-
type inquiry) that he did not engage in such conduct:
(i) by a vote of a majority of the Disinterested
Trustees acting on the matter (provided that a majority of the
Disinterested Trustees then in office act on the matter); or
(ii) by written opinion of independent legal
counsel.
The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable,
shall not affect any other rights to which any Covered Person may
now or hereafter be entitled, shall continue as to a person who
has ceased to be such a Covered Person and shall inure to the
benefit of the heirs, executors and administrators of such a
person. Nothing contained herein shall affect any rights to
indemnification to which Trust personnel other than Covered
Persons may be entitled by contract or otherwise under law.
Expenses of preparation and presentation of a defense to any
claim, action, suit or proceeding subject to a claim for
indemnification under this Article shall be advanced by the Trust
prior to final disposition thereof upon receipt of an undertaking
by or on behalf of the recipient to repay such amount if it is
ultimately determined that he is not entitled to indemnification
under this Article, provided that either:
(a) such undertaking is secured by a surety bond or some
other appropriate security or the Trust shall be insured against
losses arising out of any such advances; or
(b) a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees
then in office act on the matter) or independent legal counsel in
a written opinion shall determine, based upon a review of the
readily available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
As used in this Article, a "Disinterested Trustee" is one
(a) who is not an "interested person" of the Trust, as defined in
the 1940 Act (including anyone who has been exempted from being
an "interested person" by any rule, regulation or order of the
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<PAGE> 24
Commission), and (b) against whom none of such actions, suits or
other proceedings or another action, suit or other proceeding on
the same or similar grounds is then or has been pending.
As used in this Article, the words "claim", "action", "suit"
or "proceeding" shall apply to all claims, actions, suits or
proceedings (civil, criminal or other, including appeals), actual
or threatened; and the words "liability" and "expenses" shall
include without limitation, attorneys' fees, cost, judgments,
amounts paid in settlement, fines, penalties and other
liabilities.
In case any Shareholder or former Shareholder shall be held
to be personally liable solely by reason of his or her being or
having been a Shareholder and not because of his or her acts or
omissions or for some other reason, the Shareholder or former
Shareholder (or his or her heirs, executors, administrators or
other legal representatives or in the case of a corporation or
other entity, its corporate or other general successor) shall be
entitled to be held harmless from and indemnified against all
loss and expense arising from such liability but only out of the
assets of the particular series of Shares of which he or she is
or was a Shareholder; provided, however, there shall be no
liability or obligation of the Trust arising hereunder to
reimburse any Shareholder for taxes paid by reason of such
Shareholder's ownership of Shares or for losses suffered by
reason of any changes in value of any Trust assets.
ARTICLE IX
Miscellaneous
Duration, Termination and Reorganization of Trust
Section 1. Unless terminated as provided herein, the
Trust shall continue without limitation of time. The Trust may
be terminated at any time by the Trustees by written notice to
the Shareholders without a vote of the Shareholders of the Trust
or by the vote of the Shareholders entitled to vote more than
fifty percent (50%) of the votes of each series or class entitled
to be cast on the matter. Any series or class of Shares may be
terminated at any time by the Trustees by written notice to the
Shareholders of such series or class without a vote of the
Shareholders of such series or class or by the vote of the
Shareholders of such series or class entitled to vote more than
fifty percent (50%) of the votes entitled to be cast on the
matter.
Upon termination of the Trust or of any one or more series
or classes of Shares, after paying or otherwise providing for all
charges, taxes, expenses and liabilities, whether due or accrued
or anticipated, of the particular series or class as may be
determined by the Trustees, the Trust shall in accordance with
such procedures as the Trustees consider appropriate reduce to
the extent necessary
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<PAGE> 25
the remaining assets of the particular series to distributable
form in cash or other securities, or any combination thereof, and
distribute the proceeds to the Shareholders of the series or
class involved, ratably according to the number of Shares of such
series or class held by the several Shareholders of such series
or class on the date of termination. Any such distributions
with respect to any series which has one or more classes of
Shares outstanding shall be made ratably to such classes in the
same proportion as the number of Shares of each class bears to
the total number of Shares of the series, except to the extent
otherwise required or permitted by the preferences and special or
relative rights or privileges of any classes of Shares of any
such series.
At any time by the affirmative vote of the Shareholders of
the affected series entitled to vote more than fifty percent
(50%) of the votes entitled to be cast on the matter, the
Trustees may sell, convey and transfer the assets of the Trust,
or the assets belonging to any one or more series, to another
trust, partnership, association or corporation organized under
the laws of any state of the United States, or to the Trust to be
held as assets belonging to another series of the Trust, in
exchange for cash, shares or other securities (including, in the
case of a transfer to another series of the Trust, Shares of such
other series) with such transfer being made subject to or with
the assumption by the transferee of, the liabilities belonging to
each series the assets of which are so distributed. Following
such transfer, the Trustees shall distribute such cash, shares or
other securities (giving due effect to the assets and liabilities
belonging to and any other differences among the various series
the assets belonging to which have so been transferred) among the
Shareholders of the series the assets belonging to which have
been so transferred; and if all the assets of the Trust have been
so distributed, the Trust shall be terminated.
Filing of Copies, References, Headings
Section 2. The original or a copy of this instrument and
of each amendment hereto shall be kept at the office of the Trust
where it may be inspected by any Shareholder. A copy of this
instrument and of each amendment hereto shall be filed by the
Trust with the Secretary of State of The Commonwealth of
Massachusetts and with the Boston City Clerk, as well as any
other governmental office where such filing may from time to time
be required. Anyone dealing with the Trust may rely on a
certificate by any officer of the Trust as to whether or not any
such amendments have been made and as to any matters in
connection with the Trust hereunder; and, with the same effect as
if it were the original, may rely on a copy certified by an
officer of the Trust to be a copy of this instrument or of any
such amendments. In this instrument and in any such amendment,
references to this instrument, and all expressions like "herein",
"hereof", and "hereunder", shall be deemed to refer to this
instrument as amended from time to time.
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<PAGE> 26
Headings are placed herein for convenience of reference only and
shall not be taken as a part hereof or control or affect the
meaning, construction or effect of this instrument. This
instrument may be executed in any number of counterparts each of
which shall be deemed an original.
Applicable Law
Section 3. This Declaration of Trust is made in The
Commonwealth of Massachusetts, and it is created under and is to
be governed by and construed and administered according to the
laws of said Commonwealth. The Trust shall be of the type
commonly called a Massachusetts business trust, and without
limiting the provisions hereof, the Trust may exercise all powers
which are ordinarily exercised by such a trust.
Amendments
Section 4. This Declaration of Trust may be amended at
any time by an instrument in writing signed by a majority of the
then Trustees when authorized so to do by vote of Shareholders
holding more than fifty percent (50%) of the Shares of each
series entitled to vote, except that an amendment which in the
determination of the Trustees shall affect the holders of one or
more series or classes of Shares but not the holders of all
outstanding series and classes shall be authorized by vote of the
Shareholders holding more than fifty percent (50%) of the Shares
entitled to vote of each series or class affected and no vote of
Shareholders of a series or class not affected shall be required.
Amendments having the purpose of changing the name of the Trust
or of supplying any omission, curing any ambiguity or curing,
correcting or supplementing any provision which is defective or
inconsistent with the 1940 Act or with the requirements of the
Internal Revenue Code and the regulations thereunder for the
Trust's obtaining the most favorable treatment
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<PAGE> 27
thereunder available to regulated investment companies shall not
require authorization by Shareholder vote.
IN WITNESS WHEREOF, the undersigned has hereunto set his
hand and seal for himself and his assigns, as of the day and year
first above written.
/s/ Antonio DeSpirito III
------------------------------
(SEAL) Antonio DeSpirito III, Trustee
Residence Address:
145 Endicott St., Apt. 12
-------------------------------
Boston, Ma. 02113
-------------------------------
COMMONWEALTH OF MASSACHUSETTS
County of Suffolk, ss.
Then personally appeared the above-named Antonio DeSpirito
III who acknowledged the foregoing instrument to be his free act
and deed, before me this 12 day of June, 1995.
/s/ Michael DeFao
------------------------------
Notary Public
My Commission Expires: Aug 7 1998
Address of Trust:
120 South LaSalle St.
Chicago, IL 60603
27
<PAGE> 1
EXHIBIT 99.B1(b).
KEMPER TRUST #24
WRITTEN INSTRUMENT AMENDING THE
AGREEMENT AND DECLARATION OF TRUST
----------------------------------
November 20, 1995
-----------------
The undersigned, being the sole trustee of Kemper Trust #24
(the "Trust"), a business trust organized pursuant to an
Agreement and Declaration of Trust dated June 12, 1995 (the
"Declaration of Trust"), pursuant to Section 1 of Article I and
Section 4 of Article IX of the Declaration of Trust, does hereby
change the name of the Trust to "Kemper Europe Fund". This
instrument shall constitute an amendment to the Declaration of
Trust.
IN WITNESS WHEREOF, the undersigned has this 20th day of
November, 1995, signed these presents.
/s/ Philip J. Collora
-----------------------------------
Philip J. Collora, Sole Trustee
2734 Lawndale Avenue
Evanston, Illinois 60201
The address of the Trust is:
120 South LaSalle Street
Chicago, Illinois 60603
<PAGE> 1
EXHIBIT 99.B2.
BY-LAWS OF
KEMPER EUROPE FUND
Section 1. Agreement and Declaration of
Trust and Principal Office
1.1 Agreement and Declaration of Trust. These By-Laws shall
be subject to the Agreement and Declaration of Trust, as from
time to time in effect (the "Declaration of Trust"), of Kemper
Europe Fund, the Massachusetts business trust established by the
Declaration of Trust (the "Trust").
1.2 Principal Office of the Trust; Resident Agent. The
principal office of the Trust shall be located in Chicago,
Illinois. Its resident agent in Massachusetts shall be CT
Corporation System, 2 Oliver Street, Boston, Massachusetts or
such other person as the Trustees may from time to time select.
Section 2. Shareholders
2.1 Shareholder Meetings. Meetings of the shareholders may
be called at any time by the Trustees, by the President or, if
the Trustees and the President shall fail to call any meeting of
shareholders for a period of 30 days after written application of
one or more shareholders who hold at least 25% of all shares
issued and outstanding and entitled to vote at the meeting (or
10% if the purpose of the meeting is to determine if a Trustee
shall be removed from office), then such shareholders may call
such meeting. Each call of a meeting shall state the place,
date, hour and purposes of the meeting.
2.2 Place of Meetings. All meetings of the shareholders
shall be held at the principal office of the Trust, or, to the
extent permitted by the Declaration of Trust, at such other place
within the United States as shall be designated by the Trustees
or the President of the Trust.
2.3 Notice of Meetings. A written notice of each meeting of
shareholders, stating the place, date and hour and the purposes
of the meeting, shall be given at least seven days before the
meeting to each shareholder entitled to vote thereat by leaving
such notice with him or at his residence or usual place of
business or by mailing it, postage prepaid, and addressed to such
shareholder at his address as it appears in the records of the
Trust. Such notice shall be given by the Secretary or an
Assistant Secretary or by an officer designated by the Trustees.
No notice of any meeting of shareholders need be given to a
shareholder if a written waiver of notice, executed before or
<PAGE> 2
after the meeting by such shareholder or his attorney thereunto
duly authorized, is filed with the records of the meeting.
2.4 Ballots. No ballot shall be required for any election
unless requested by a shareholder present or represented at the
meeting and entitled to vote in the election.
2.5 Proxies and Voting. Shareholders entitled to vote may
vote either in person or by proxy in writing dated not more than
six months before the meeting named therein, which proxies shall
be filed with the Secretary or other person responsible to record
the proceedings of the meeting before being voted. Unless
otherwise specifically limited by their terms, such proxies shall
entitle the holders thereof to vote at any adjournment of such
meeting but shall not be valid after the final adjournment of
such meeting. At all meetings of shareholders, unless the voting
is conducted by inspectors, all questions relating to the
qualification of voters, the validity of proxies and the
acceptance or rejection of votes shall be decided by the chairman
of the meeting.
Section 3. Trustees
3.1 Committees and Advisory Board. The Trustees may appoint
from their number an executive committee and other committees.
Any such committee may be abolished and reconstituted at any time
and from time to time by the Trustees. Except as the Trustees
may otherwise determine, any such committee may make rules for
the conduct of its business. The Trustees may appoint an
advisory board to consist of not less than two nor more than five
members. The members of the advisory board shall be compensated
in such manner as the Trustees may determine and shall confer
with and advise the Trustees regarding the investments and other
affairs of the Trust. Each member of the advisory board shall
hold office until the first meeting of the Trustees following the
meeting of the shareholders, if any, next following his
appointment and until his successor is appointed and qualified,
or until he sooner dies, resigns, is removed, or becomes
disqualified, or until the advisory board is sooner abolished by
the Trustees.
3.2 Regular Meetings. Regular meetings of the Trustees may
be held without call or notice at such places and at such times
as the Trustees may from time to time determine, provided that
notice of the first regular meeting following any such
determination shall be given to absent Trustees. A regular
meeting of the Trustees may be held without call or notice
immediately after and at the same place as any meeting of the
shareholders.
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<PAGE> 3
3.3 Special Meetings. Special meetings of the Trustees may
be held at any time and at any place designated in the call of
the meeting, when called by the Chairman of the Board or by two
or more Trustees, sufficient notice thereof being given to each
Trustee by the Secretary or an Assistant Secretary or by the
officer or one of the Trustees calling the meeting.
3.4 Notice. It shall be sufficient notice to a Trustee to
send notice by mail at least three days or by telegram at least
twenty-four hours before the meeting addressed to the Trustee at
his or her usual or last known business or residence address or
to give notice to him or her in person or by telephone at least
twenty-four hours before the meeting. Notice of a meeting need
not be given to any Trustee if a written waiver of notice,
executed by him or her before or after the meeting, is filed with
the records of the meeting, or to any Trustee who attends the
meeting without protesting prior thereto or at its commencement
the lack of notice to him or her. Neither notice of a meeting
nor a waiver of a notice need specify the purposes of the
meeting.
3.5 Quorum. At any meeting of the Trustees, one-third of the
Trustees then in office shall constitute a quorum; provided,
however, a quorum (unless the Board of Trustees consists of two
or fewer persons) shall not be less than two. Any meeting may be
adjourned from time to time by a majority of the votes cast upon
the question, whether or not a quorum is present, and the meeting
may be held as adjourned without further notice.
Section 4. Officers and Agents
4.1 Enumeration; Qualification. The officers of the Trust
shall be a President, a Treasurer, a Secretary and such other
officers, if any, as the Trustees from time to time may in their
discretion elect or appoint. The Trust may also have such
agents, if any, as the Trustees from time to time may in their
discretion appoint. Any officer may be but none need be a
Trustee or shareholder. Any two or more offices may be held by
the same person.
4.2 Powers. Subject to the other provisions of these By-
Laws, each officer shall have, in addition to the duties and
powers herein and in the Declaration of Trust set forth, such
duties and powers as are commonly incident to his or her office
as if the Trust were organized as a Massachusetts business
corporation and such other duties and powers as the Trustees may
from time to time designate.
4.3 Election. The President, the Treasurer and the Secretary
shall be elected annually by the Trustees at their first meeting
in each calendar year or at such later meeting in such year as
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the Trustees shall determine. Other officers or agents, if any,
may be elected or appointed by the Trustees at said meeting or at
any other time.
4.4 Tenure. The President, Treasurer and Secretary shall
hold office until the first meeting of Trustees in each calendar
year and until their respective successors are chosen and
qualified, or in each case until he or she sooner dies, resigns,
is removed or becomes disqualified. Each other officer shall
hold office and each agent shall retain his or her authority at
the pleasure of the Trustees.
4.5 Chairman of the Board. The Chairman of the Board of
Trustees, if one is so appointed, shall be chosen from among the
Trustees and may hold office only so long as he continues to be a
Trustee. The Chairman of the Board, if any is so appointed,
shall preside at all meetings of the shareholders and of the
Trustees at which he is present; and shall have such other duties
and powers as specified herein and as may be assigned to him by
the Trustee.
4.6 President and Vice Presidents. The President shall be
the chief executive officer of the Trust. The President shall,
subject to the control of the Trustees, have general charge and
supervision of the Trust and shall perform such other duties and
have such other powers as the Trustees shall prescribe from time
to time. Any Vice President shall at the request or in the
absence or disability of the President exercise the powers of the
President and perform such other duties and have such other
powers as shall be designated from time to time by the Trustees.
4.7 Treasurer and Controller. The Treasurer shall be the
chief financial officer of the Trust and, subject to any
arrangement made by the Trustees with a bank or trust company or
other organization as custodian or transfer or shareholder
services agent, shall be in charge of its valuable papers and
shall have such other duties and powers as may be designated from
time to time by the Trustees or by the President. If at any time
there shall be no Controller, the Treasurer shall also be the
chief accounting officer of the Trust and shall have the duties
and power prescribed herein for the Controller. Any Assistant
Treasurer shall have such duties and powers as shall be
designated from time to time by the Trustees.
The Controller, if any be elected, shall be the chief accounting
officer of the Trust and shall be in charge of its books of
account and accounting records. The Controller shall be
responsible for preparation of financial statements of the Trust
and shall have such other duties and powers as may be designated
from time to time by the Trustees or the President.
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4.8 Secretary and Assistant Secretaries. The Secretary shall
record all proceedings of the shareholders and the Trustees in
books to be kept therefor, which books shall be kept at the
principal office of the Trust. In the absence of the Secretary
from any meeting of shareholders or Trustees, an Assistant
Secretary, or if there be none or if he or she is absent, a
temporary clerk chosen at the meeting shall record the
proceedings thereof in the aforesaid books.
Section 5. Resignations and Removals
Any Trustee may resign his trust or retire as a Trustee in
accordance with procedures set forth in the Declaration of Trust.
Any officer or advisory board member may resign at any time by
delivering his or her resignation in writing to the Chairman of
the Board, the President or the Secretary or to a meeting of the
Trustees. The Trustees may remove any officer or advisory board
member elected or appointed by them with or without cause by the
vote of a majority of the Trustees then in office. Except to the
extent expressly provided in a written agreement with the Trust,
no Trustee, officer, or advisory board member resigning, and no
officer or advisory board member removed, shall have any right to
any compensation for any period following his or her resignation
or removal, or any right to damages on account of such removal.
Section 6. Vacancies
A vacancy in the office of Trustee shall be filed in accordance
with the Declaration of Trust. Vacancies resulting from the
death, resignation, incapacity or removal of any officer may be
filled by the Trustees. Each successor of any such officer shall
hold office for the unexpired term, and in the case of the
President, the Treasurer and the Secretary, until his or her
successor is chosen and qualified, or in each case until he or
she sooner dies, resigns, is removed or becomes disqualified.
Section 7. Shares of Beneficial Interest
7.1 Share Certificates. No certificates certifying the
ownership of shares shall be issued except as the Trustees may
otherwise authorize. In the event that the Trustees authorize
the issuance of share certificates, subject to the provisions of
Section 7.3, each shareholder shall be entitled to a certificate
stating the number of shares owned by him or her, in such form as
shall be prescribed from time to time by the Trustees. Such
certificate shall be signed by the President or a Vice President
and by the Treasurer, Assistant Treasurer, Secretary or Assistant
Secretary. Such signatures may be facsimiles if the certificate
is signed by a transfer or shareholder services agent or by a
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registrar, other than a Trustee, officer or employee of the
Trust. In case any officer who has signed or whose facsimile
signature has been placed on such certificate shall have ceased
to be such officer before such certificate is issued, it may be
issued by the Trust with the same effect as if he or she were
such officer at the time of its issue.
In lieu of issuing certificates for shares, the Trustees or the
transfer or shareholder services agent may either issue receipts
therefor or may keep accounts upon the books of the Trust for the
record holders of such shares, who shall in either case be
deemed, for all purposes hereunder, to be the holders of
certificates for such shares as if they had accepted such
certificates and shall be held to have expressly assented and
agreed to the terms hereof.
7.2 Loss of Certificates. In the case of the alleged loss or
destruction or the mutilation of a share certificate, a duplicate
certificate may be issued in place thereof, upon such terms as
the Trustees may prescribe.
7.3 Discontinuance of Issuance of Certificates. The Trustees
may at any time discontinue the issuance of share certificates
and may, by written notice to each shareholder, require the
surrender of share certificates to the Trust for cancellation.
Such surrender and cancellation shall not affect the ownership of
shares in the Trust.
Section 8. Record Date
The Trustees may fix in advance a time, which shall not be more
than 90 days before the date of any meeting of shareholders or
the date for the payment of any dividend or making of any other
distribution to shareholders, as the record date for determining
the shareholders having the right to notice and to vote at such
meeting and any adjournment thereof or the right to receive such
dividend or distribution, and in such case only shareholders of
record on such record date shall have such right, notwithstanding
any transfer of shares on the books of the Trust after the record
date.
Section 9. Seal
The seal of the Trust shall, subject to alteration by the
Trustees, consist of a flat-faced circular die with the word
"Massachusetts" together with the name of the Trust, cut or
engraved thereon; but, unless otherwise required by the Trustees,
the seal shall not be necessary to be placed on, and its absence
shall not impair the validity of, any document, instrument, or
other paper executed and delivered by or on behalf of the Trust.
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Section 10. Execution of Papers
Except as the Trustees may generally or in particular cases
authorize the execution thereof in some other manner, all deeds,
leases, transfers, contracts, bonds, notes, checks, drafts and
other obligations made, accepted or endorsed by the Trust shall
be signed, and any transfers of securities standing in the name
of the Trust shall be executed, by the President or by one of the
Vice Presidents or by the Treasurer or by whomsoever else shall
be designated for that purpose by the vote of the Trustees and
need not bear the seal of the Trust.
Section 11. Fiscal Year
The fiscal year of the Trust shall end on such date in each year
as the Trustees shall from time to time determine.
Section 12. Amendments
These By-Laws may be amended or repealed, in whole or in part, by
a majority of the Trustees then in office at any meeting of the
Trustees, or by one or more writings signed by such majority.
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EXHIBIT 99.B24
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints
Charles F. Custer, Stephen B. Timbers and Philip J. Collora
and each of them, any of whom may act without the joinder of
the others, as such person's attorney-in-fact to sign
and file on his behalf individually and in the capacity stated
below such registration statements, amendments, post-effective
amendments, exhibits, applications and other documents with
the Securities and Exchange Commission or any other
regulatory authority as may be desirable or necessary in
connection with the public offering of shares of Kemper
Europe Fund.
Signature Title Date
--------- ----- ----
/s/ Stephen B. Timbers Trustee December 5, 1995
---------------------------
<PAGE> 2
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints
Charles F. Custer, Stephen B. Timbers and Philip J. Collora
and each of them, any of whom may act without the joinder of
the others, as such person's attorney-in-fact to sign and
file on such person's behalf individually and in the capacity
stated below such registration statements, amendments,
post-effective amendments, exhibits, applications and other
documents with the Securities and Exchange Commission or any
other regulatory authority as may be desirable or necessary
in connection with the public offering of shares of Kemper
Europe Fund.
Signature Title Date
--------- ----- ----
/s/ James E. Akins Trustee December 5, 1995
-------------------------
<PAGE> 3
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints
Charles F. Custer, Stephen B. Timbers and Philip J. Collora
and each of them, any of whom may act without the joinder of
the others, as such person's attorney-in-fact to sign and
file on his behalf individually and in the capacity stated below
such registration statements, amendments, post-effective
amendments, exhibits, applications and other documents with
the Securities and Exchange Commission or any other
regulatory authority as may be desirable or necessary in
connection with the public offering of shares of Kemper
Europe Fund.
Signature Title Date
--------- ----- ----
/s/ Arthur R. Gottschalk Trustee December 5, 1995
--------------------------
<PAGE> 4
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints
Charles F. Custer, Stephen B. Timbers and Philip J. Collora
and each of them, any of whom may act without the joinder of
the others, as such person's attorney-in-fact to sign and file on
his behalf individually and in the capacity stated below such
registration statements, amendments, post-effective
amendments, exhibits, applications and other documents with
the Securities and Exchange Commission or any other
regulatory authority as may be desirable or necessary in
connection with the public offering of shares of Kemper
Europe Fund.
Signature Title Date
--------- ----- ----
/s/ Frederick T. Kelsey Trustee December 5, 1995
--------------------------
<PAGE> 5
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints
Charles F. Custer, Stephen B. Timbers and Philip J. Collora
and each of them, any of whom may act without the joinder of
the others, as such person's attorney-in-fact to sign and file on
his behalf individually and in the capacity stated below such
registration statements, amendments, post-effective
amendments, exhibits, applications and other documents with
the Securities and Exchange Commission or any other
regulatory authority as may be desirable or necessary in
connection with the public offering of shares of Kemper
Europe Fund.
Signature Title Date
--------- ----- ----
/s/ David B. Mathis Trustee December 5, 1995
--------------------------
<PAGE> 6
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints
Charles F. Custer, Stephen B. Timbers and Philip J. Collora
and each of them, any of whom may act without the joinder of
the others, as such person's attorney-in-fact to sign and
file on such person's behalf individually and in the capacity
stated below such registration statements, amendments,
post-effective amendments, exhibits, applications and other
documents with the Securities and Exchange Commission or any
other regulatory authority as may be desirable or necessary
in connection with the public offering of shares of Kemper
Europe Fund.
Signature Title Date
--------- ----- ----
/s/ Fred B. Renwick Trustee December 5, 1995
---------------------------
<PAGE> 7
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints
Charles F. Custer, Stephen B. Timbers and Philip J. Collora
and each of them, any of whom may act without the joinder of
the others, as such person's attorney-in-fact to sign and
file on his behalf individually and in the capacity stated below
such registration statements, amendments, post-effective
amendments, exhibits, applications and other documents with
the Securities and Exchange Commission or any other
regulatory authority as may be desirable or necessary in
connection with the public offering of shares of Kemper
Europe Fund.
Signature Title Date
--------- ----- ----
/s/ John B. Tingleff Trustee December 5, 1995
--------------------------
<PAGE> 8
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints
Charles F. Custer, Stephen B. Timbers and Philip J. Collora
and each of them, any of whom may act without the joinder of
the others, as such person's attorney-in-fact to sign and
file on his behalf individually and in the capacity stated below
such registration statements, amendments, post-effective
amendments, exhibits, applications and other documents with
the Securities and Exchange Commission or any other
regulatory authority as may be desirable or necessary in
connection with the public offering of shares of Kemper
Europe Fund.
Signature Title Date
--------- ----- ----
/s/ John G. Weithers Trustee December 5, 1995
------------------------
