KEMPER ASIAN GROWTH FUND, N-1A EL, 1996-07-29

KEMPER ASIAN GROWTH FUND
N-1A EL, 1996-07-29

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 29, 1996
1933 ACT REGISTRATION NO. 333-
1940 ACT REGISTRATION NO. 811-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A

<TABLE>
<S> <C>
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. _ / /
</TABLE>

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

KEMPER ASIAN GROWTH FUND
(Exact name of Registrant as Specified in Charter)

<TABLE>
<S> <C>
120 South LaSalle Street, Chicago, Illinois 60603
(Address of Principal Executive Office) (Zip Code)
</TABLE>

Registrant's Telephone Number, including Area Code: (312) 781-1121

<TABLE>
<S> <C>
Philip J. Collora, Vice President and Secretary With a copy to:
Kemper Asian Growth Fund Cathy G. O'Kelly
120 South LaSalle Street David A. Sturms
Chicago, Illinois 60603 Vedder, Price, Kaufman & Kammholz
(Name and Address of Agent for Service) 222 North LaSalle Street
Chicago, Illinois 60601
</TABLE>

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 ASIAN GROWTH 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
Performance.............................. Inapplicable
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 ASIAN GROWTH FUND
SUPPLEMENT TO PROSPECTUS
DATED , 1996
CLASS I SHARES

The Kemper Asian Growth 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 Zurich Kemper Investments, Inc.
("ZKI") and its affiliates; and (b) the following investment advisory clients of
ZKI and its investment advisory affiliates (including Zurich Investment
Management, Inc.) 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..................................................................... .60%
12b-1 Fees.......................................................................... None
Other Expenses...................................................................... .35%
----
Total Operating Expenses............................................................ .95%
=====
</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.................................................. $ 10 $30
</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. It is anticipated that the Fund will commence operations on or
about , 1996; thus "Other Expenses" shown above for Class I shares
are estimates for the current fiscal year. Zurich Kemper Investments, Inc.
("ZKI"), 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 .85% and
"Total Operating Expenses" would be 1.20%. 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 Funds--Kemper Money Market Fund if the shareholders of
Class I shares have purchased shares because they are participants in tax-exempt
retirement plans of ZKI 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
Funds--Kemper Money Market Fund who have purchased shares because they are
participants in tax-exempt retirement plans of ZKI 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
KAGF-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 14
- ------------------------------------------------
Net Asset Value 15
- ------------------------------------------------
Purchase of Shares 16
- ------------------------------------------------
Redemption or Repurchase of Shares 21
- ------------------------------------------------
Special Features 25
- ------------------------------------------------
Performance 29
- ------------------------------------------------
Capital Structure 30
- ------------------------------------------------
</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.

[KEMPER LOGO]

KEMPER

ASIAN
GROWTH

FUND

PROSPECTUS , 1996

KEMPER ASIAN GROWTH FUND
120 South LaSalle Street, Chicago, Illinois 60603
1-800-621-1048

The objective of Kemper Asian Growth Fund is to provide long-term capital
growth. The Fund pursues its objective by investing primarily in the equity
securities of Asian companies.

There is no assurance that the Fund's objective will be achieved.
<PAGE> 6

KEMPER ASIAN GROWTH FUND
120 SOUTH LASALLE STREET, CHICAGO, ILLINOIS 60603, TELEPHONE 1-800-621-1048

SUMMARY

INVESTMENT OBJECTIVE. Kemper Asian Growth 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 Asian 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 Asian
companies may present greater risk than investment in a more diversified
portfolio of foreign securities. Since the Fund invests its assets principally
in countries considered by the Fund's investment manager to be developing or
"emerging" markets, this will 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. 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 if redeemed within one year
of purchase and a .50% contingent deferred sales charge if
redeemed during the second year of purchase.
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 sales charge, but
subject to a Rule 12b-1 distribution fee and a 1% contingent
deferred sales charge on redemptions made within one year of
purchase. 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 and Class C 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. Zurich Kemper Investments, Inc. ("ZKI") is
the Fund's investment manager. ZKI is paid an investment management fee by the
Fund at an annual rate ranging from .85% to .72% of its average daily net
assets. Kemper Distributors, Inc. ("KDI"), a wholly owned subsidiary of ZKI, 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, 1% during
3% during the second and the first
third years, 2% during year
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 of Class A shares purchased at net asset value under the
Large Order NAV Purchase Privilege may be subject to a contingent deferred
sales charge of 1% the first year and .50% the second year. 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......................................................................... .60%
12b-1 Fees.............................................................................. None
Other Expenses.......................................................................... .92%
----
Total Operating Expenses................................................................ 1.52%
=====
CLASS B SHARES
Management Fees......................................................................... .60%
12b-1 Fees(4)........................................................................... .75%
Other Expenses.......................................................................... 1.07%
----
Total Operating Expenses................................................................ 2.42%
=====
</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......................................................................... .60%
12b-1 Fees(5)........................................................................... .75%
Other Expenses.......................................................................... 1.04%
------
Total Operating Expenses................................................................ 2.39%
=====
</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% $ 65 $ 96
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% $ 55 $ 95
annual return and (2) redemption at the end of each time period:
You would pay the following expenses on the same investment, assuming no $ 25 $ 75
redemption:
</TABLE>

<TABLE>
<CAPTION>
CLASS C SHARES(7)
<S> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming (1) 5% $ 24 $ 75
annual return and (2) redemption at the end of each time period:
</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.

(7) Assumes that the shareholder was the owner on the first day of the first
year and the contingent deferred sales charge was not applicable for any of
the periods shown. See "Redemption or Repurchase of Shares--Contingent
Deferred Sales Charge--Class C Shares."

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. It is
anticipated that the Fund will commence operations on or about , 1996;
thus "Other Expenses" shown above are estimates for the current fiscal year.
ZKI, 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 .85% and "Total Operating
Expenses" for Class A, B and C shares would be 1.77%, 2.67% and 2.64%,
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 Asian companies ("Asian Equity Securities"). Asian Equity
Securities include common stocks, preferred stocks, securities convertible into
or exchangeable for common or preferred stocks, equity investments in
partnerships, joint ventures and other forms of non-corporate investment and
warrants, options and rights exercisable for equity securities that are issued
by Asian companies as defined below.

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

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

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

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

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

When the investment manager deems it appropriate to invest for temporary
defensive purposes, such as during periods of adverse market conditions, up to
100% of the Fund's assets may be invested in cash (including foreign currency)
or cash equivalent short-term obligations, either rated as high quality or
considered to be of comparable quality in the opinion of the investment manager,
including, but not limited to, certificates of deposit, commercial paper,
short-term notes, obligations issued or guaranteed by the U.S. Government or any
of its

4
<PAGE> 10

agencies or instrumentalities, and repurchase agreements secured thereby. In
particular, for temporary defensive purposes the Fund's assets may be invested
without limitation in U.S. Dollar-denominated obligations to reduce the risks
inherent in non-U.S. Dollar-denominated assets.

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

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

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

EMERGING MARKETS. Since the Fund's investments in foreign securities may be in
developing or "emerging" markets, this will 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,
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 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

5
<PAGE> 11

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 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.

6
<PAGE> 12

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 Global Depository
Receipts ("GDRs"), which are receipts evidencing an arrangement with a bank
similar to that for ADRs and are designed for use in other foreign securities
markets. GDRs are not necessarily denominated in the currency of the underlying
security.

ADDITIONAL INVESTMENT INFORMATION. It is anticipated that, under normal
circumstances, the portfolio turnover rate for the Fund will not exceed 100%.
Higher portfolio turnover 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 Fund will not borrow for leverage purposes. The Fund may
pledge up to 15% of its total assets to secure any such borrowings.

7
<PAGE> 13

The Fund may invest in repurchase agreements and engage in short sales
against-the-box. See "Investment Policies and Techniques--Repurchase Agreements
and--Short Sales Against-The-Box" in the Statement of Additional Information.

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

8
<PAGE> 14

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 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.

9
<PAGE> 15

These contracts are traded directly between currency traders (usually large
commercial banks) and their customers.

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 Fund's investment manager believes that the currency of a particular
foreign country may suffer a substantial decline against the U.S. Dollar, it may
enter into a forward contract to sell an amount of foreign currency
approximating the value of some or all of the Fund's portfolio securities
denominated in such foreign currency. 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, financial futures and foreign currency
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 currency
("derivatives"). Derivatives are most often used in an effort to manage
investment risk, to increase or decrease exposure to an asset class or benchmark
(as a hedge or to enhance return), or to create an investment position
indirectly (often because it is more efficient or less costly than direct
investment). There is no guarantee that these results can be achieved through
the use of derivatives. 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

10
<PAGE> 16

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.

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. Zurich Kemper Investments, Inc. ("ZKI"), 120 South LaSalle
Street, Chicago, Illinois 60603, is the investment manager of the Fund and
provides the Fund with continuous professional investment supervision. ZKI is
one of the largest investment managers in the country and has been engaged in
the management of investment funds for more than forty-six years. ZKI and its
affiliates provide investment advice and manage investment portfolios for the
Kemper Funds, affiliated insurance companies and other corporate, pension,
profit-sharing and individual accounts representing approximately $79 billion
under management. ZKI acts as investment manager for 30 open-end and seven
closed-end investment companies, with 77 separate investment portfolios,
representing more than 3 million shareholder accounts. ZKI is an indirect
subsidiary of Zurich Insurance Company, an internationally recognized company
providing services in life and non-life insurance, reinsurance and asset
management.

Responsibility for overall management of the Fund rests with its Board of
Trustees and officers. Professional investment supervision is provided by ZKI.
The investment management agreement provides that ZKI shall act as the Fund's
investment adviser, manage its investments and provide it with various services
and facilities. ZKI will utilize the services of Zurich Investment Management
Limited ("ZIML"), 1 Fleet Place, London EC4M 7RQ, a wholly owned subsidiary of
ZKI, with respect to foreign securities investments of the Fund including
analysis, research, execution and trading services.

Andrew Mason has been the portfolio manager of the Fund since its inception in
1996. Mr. Mason joined ZIML in 1994, and is currently a vice president of the
Fund and Director--Asian Equities for ZIML. Prior thereto, he was a portfolio
manager of the Asian and Japanese portfolios for a United Kingdom pension fund.
Mr. Mason received his Bachelors degree in Economics from University College
Swansea, Wales.

The ZKI 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.

11
<PAGE> 17

The Fund pays ZKI 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........................................... .85%
$250 million - $1 billion................................... .82
$1 billion - $2.5 billion................................... .80
$2.5 billion - $5 billion................................... .78
$5 billion - $7.5 billion................................... .75
$7.5 billion - $10 billion.................................. .74
$10 billion - $12.5 billion................................. .73
Over $12.5 billion.......................................... .72
</TABLE>

ZKI 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 ZKI, 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. KDI currently advances to
firms the first year distribution fee at a rate of .75% of the purchase price of
such shares. For periods after the first year, KDI currently intends to pay
firms for sales of Class C shares a distribution fee, payable quarterly, at an
annual rate of .75% of net assets attributable to Class C shares maintained and
serviced by the firm and the fee continues until terminated by KDI or the Fund.
KDI also receives any contingent deferred sales charges. See "Redemption or
Repurchase of Shares--Contingent Deferred Sales Charge--Class C Shares."

12
<PAGE> 18

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, 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
Class A, B and C shares of the Fund. KDI then pays each firm a service fee at an
annual rate of up to .25% of net assets attributable to Class A, B and C shares
maintained and serviced by the firm. Firms to which service fees may be paid
include broker-dealers affiliated with KDI.

CLASS A SHARES. For Class A shares, a firm becomes eligible for the service fee
based upon assets in the accounts in the month following the month of purchase
and the fee continues until terminated by KDI or the Fund. The fees are
calculated monthly and paid quarterly.

CLASS B AND CLASS C SHARES. KDI currently advances to firms the first-year
service fee at a rate of up to .25% of the purchase price of such shares. For
periods after the first year, KDI currently intends to pay firms a service fee
at a rate of up to .25% (calculated monthly and paid quarterly) of the net
assets attributable to Class B and Class C shares maintained and serviced by the
firm. After the first year, a firm becomes eligible for the quarterly service
fee and the fee continues until terminated by KDI or the Fund.

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. In addition, KDI may, from time to
time, from its own resources pay certain firms additional amounts for ongoing
administrative services and assistance provided to their customers and clients
who are shareholders of the Fund.

13
<PAGE> 19

as such, performs all of IFTC's duties as transfer agent and dividend-paying
agent. For a description of transfer agent and shareholder service agent fees
payable to IFTC and the Shareholder Service Agent, see "Investment Manager and
Underwriter" in the Statement of Additional Information.

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

DIVIDENDS AND TAXES

DIVIDENDS. The Fund 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.

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. Dividends and other distributions in the aggregate amount of $10
or less are automatically reinvested in shares of the Fund unless the
shareholder requests that such policy not be applied to the shareholder's
account.

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

14
<PAGE> 20

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.

If more than 50% of the value of the Fund's total assets at the close of a
fiscal year consists of foreign securities, the Fund may make the election
permitted under Section 853 of the Code. If 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
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

15
<PAGE> 21

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 sales charge but are subject to
higher ongoing expenses than Class A shares, are subject to a contingent
deferred sales charge payable upon certain redemptions within the first year
following purchase, and do not convert into another class. When placing purchase
orders, investors must specify whether the order is for Class A, Class B or
Class C shares.

The primary distinctions among the classes of 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 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 Contingent deferred sales charge 0.75% No conversion feature
of 1% of redemption proceeds for
redemptions made during first
year after purchase
</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).

16
<PAGE> 22

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

Class A shares of 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 ZKI 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. KDI may in its discretion compensate firms for
sales of Class A shares under this privilege at a commission rate of .50% of the
amount of Class A shares purchased.

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 two years of shares purchased
under the Large Order NAV Purchase Privilege may be subject to a contingent
deferred sales charge. See "Redemption or Repurchase of Shares--Contingent
Deferred Sales Charge--Large Order NAV Purchase Privilege."

KDI may in its discretion compensate investment dealers or other financial
services firms in connection with the sale of Class A shares of the Fund at net
asset value in accordance with the Large Order NAV Purchase Privilege up to the
following amounts: 1.00% of the net asset value of shares sold on amounts up to
$5 million, .50% on the

17
<PAGE> 23

next $45 million and .25% on amounts over $50 million. The commission schedule
will be reset on a calendar year basis for sales of shares pursuant to the Large
Order NAV Purchase Privilege to employer sponsored employee benefit plans using
the subaccount recordkeeping system made available through Kemper Service
Company. For purposes of determining the appropriate commission percentage to be
applied to a particular sale, KDI will consider the cumulative amount invested
by the purchaser in the Fund and other Kemper Mutual Funds listed under "Special
Features--Class A Shares--Combined Purchases," including purchases pursuant to
the "Combined Purchases," "Letter of Intent" and "Cumulative Discount" features
referred to above. The privilege of purchasing Class A shares of 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 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 of the Fund may be purchased at net asset value in any amount by
certain professionals who assist in the promotion of Kemper Funds pursuant to
personal services contracts with KDI, for themselves or members of their
families. KDI in its discretion may compensate financial services firms for
sales of Class A shares under this privilege at a commission rate of .50% of the
amount of Class A shares purchased.

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

18
<PAGE> 24

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 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 sales charge is
imposed. Since Class C shares are sold without an initial sales charge, the full
amount of the investor's purchase payment will be invested in Class C shares for
his or her account. A contingent deferred sales charge may be imposed upon the
redemption of Class C shares if they are redeemed within one year of purchase.
See "Redemption or Repurchase of Shares--Contingent Deferred Sales Charge--Class
C Shares." KDI currently advances to firms the first year distribution fee at a
rate of .75% of the purchase price of such shares. For periods after the first
year, KDI currently intends to pay firms for sales of Class C shares a
distribution fee, payable quarterly, at an annual rate of .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."

19
<PAGE> 25

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

20
<PAGE> 26

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 (i.e., purchases by check, Express-Transfer or
Bank Direct Deposit), it may delay transmittal of redemption proceeds until it
has determined that collected funds have been received for the purchase of such
shares, which will be up to 10 days from receipt by the Fund of the purchase
amount. The redemption within two years of Class A shares purchased at net asset
value under the Large Order NAV Purchase Privilege may be subject to a
contingent deferred sales charge (see "Purchase of Shares--Initial Sales Charge
Alternative--Class A Shares") and the redemption of Class B shares within six
years may be subject to a contingent deferred sales charge (see "Contingent
Deferred Sales Charge--Class B Shares" below), and the redemption of Class C
shares within the first year following purchase may be subject to a contingent
deferred sales charge (see "Contingent Deferred Sales Charge--Class C Shares"
below).

Because of the high cost of maintaining small accounts, the Fund reserve the
right to redeem an account (and, in the case of Class B shares and Class C
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).

21
<PAGE> 27

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
and Class C 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 or guardian account holder by written
instruction to the Shareholder Service Agent with signatures guaranteed.
Telephone requests may be made by calling 1-800-621-1048. Shares purchased by
check or through EXPRESS-Transfer or Bank Direct Deposit may not be redeemed
under this privilege of redeeming shares by telephone request until such shares
have been owned for at least 10 days. This privilege of redeeming shares by
telephone request or by written request without a signature guarantee may not be
used to redeem shares held in certificated form and may not be used if the
shareholder's account has had an address change within 30 days of the redemption
request. During periods when it is difficult to contact the Shareholder Service
Agent by telephone, it may be difficult to use the telephone redemption
privilege, although investors can still redeem by mail. The 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 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

22
<PAGE> 28

is not responsible for the efficiency of the federal wire system or the account
holder's financial services firm or bank. The Fund currently does not charge the
account holder for wire transfers. The account holder is responsible for any
charges imposed by the account holder's firm or bank. There is a $1,000 wire
redemption minimum (including any contingent deferred sales charge). To change
the designated account to receive wire redemption proceeds, send a written
request to the Shareholder Service Agent with signatures guaranteed as described
above or contact the firm through which shares of the Fund were purchased.
Shares purchased by check or through EXPRESS-Transfer or Bank Direct Deposit may
not be redeemed by wire transfer until such shares have been owned for at least
10 days. Account holders may not use this privilege to redeem shares held in
certificated form. During periods when it is difficult to contact the
Shareholder Service Agent by telephone, it may be difficult to use the expedited
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 may be imposed upon redemption of Class A
shares that are purchased under the Large Order NAV Purchase Privilege as
follows: 1% if they are redeemed within one year of purchase and .50% if they
are redeemed during the second year following purchase. The charge will not be
imposed upon redemption of reinvested dividends or share appreciation. The
charge is applied to the value of the shares redeemed excluding amounts not
subject to the charge. The contingent deferred sales charge will be waived in
the event of: (a) redemptions by a participant-directed qualified retirement
plan described in Code Section 401(a) or a participant-directed non-qualified
deferred compensation plan described in Code Section 457; (b) redemptions by
employer sponsored employee benefit plans using the subaccount record keeping
system made available through the Shareholder Service Agent; (c) redemption of
shares of a shareholder (including a registered joint owner) who has died; (d)
redemption of shares of a shareholder (including a registered joint owner) who
after purchase of the shares being redeemed becomes totally disabled (as
evidenced by a determination by the federal Social Security Administration); (e)
redemptions under the Fund's Systematic Withdrawal Plan at a maximum of 10% per
year of the net asset value of the account; and (f) redemptions of shares of a
shareholder whose dealer of record at the time of the investment notifies KDI
that the dealer waives the discretionary commission applicable to such Large
Order NAV Purchase.

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

<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>

23
<PAGE> 29

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 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.

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

CONTINGENT DEFERRED SALES CHARGE--GENERAL. The following example will illustrate
the operation of the contingent deferred sales charge. Assume that an investor
makes a single purchase of $10,000 of the

24
<PAGE> 30

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 is determined by the length of
the period of ownership. Investments are tracked on a monthly basis. The period
of ownership for this purpose begins the first day of the month in which the
order for the investment is received. For example, an investment made in
December, 1996 will be eligible for the second year's charge if redeemed on or
after December 1, 1997. In the event no specific order is requested when
redeeming shares subject to a contingent deferred sales charge, the redemption
will be made first from shares representing reinvested dividends and then from
the earliest purchase of shares. KDI receives any contingent deferred sales
charge directly.

REINVESTMENT PRIVILEGE. A shareholder who has redeemed Class A shares of 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
Large Order NAV Purchase Privilege (see "Purchase of Shares--Initial Sales
Charge Alternative--Class A Shares") or Class B shares or Class C shares and
incurs a contingent deferred sales charge may reinvest up to the full amount
redeemed at net asset value at the time of the reinvestment in Class A shares,
Class B or Class C 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 (or the
equivalent) may be purchased at the rate applicable to the discount bracket
attained by combining concurrent investments in Class A shares of any of the
following funds: Kemper Technology Fund, Kemper Total Return Fund, Kemper Growth
Fund, Kemper Small Capitalization Equity Fund, Kemper Income and Capital
Preservation Fund, Kemper Municipal Bond Fund, Kemper 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, Kemper Europe Fund and Kemper Asian Growth Fund ("Kemper Mutual Funds").
Except as noted below, there is no combined purchase credit for direct purchases
of shares of Kemper Money Funds, Cash Equivalent Fund, Tax-Exempt

25
<PAGE> 31

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 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

26
<PAGE> 32

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.
Class C shares may be exchanged without a contingent deferred sales charge being
imposed at the time of exchange. For determining whether there is a contingent
deferred sales charge that may be imposed upon the redemption of the Class C
shares received by exchange, they retain the cost and purchase date of the
shares that were originally purchased and exchanged.

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 10 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, 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 Service Company, Attention: Exchange Department, P.O. Box
419557, Kansas City, Missouri 64141-6557, or by telephone if the shareholder has
given authorization. Once the authorization is on file, the Shareholder Service
Agent will honor requests by telephone at 1-800-621-1048, 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 $50,000) from a
shareholder's bank, savings and loan, or credit union account to purchase shares
in the Fund. Shareholders can also redeem shares (minimum $100 and maximum
$50,000) from their Fund account and transfer the proceeds to their bank,
savings and loan, or credit union checking account. Shares purchased by check or
through Express-Transfer or Bank Direct Deposit may not be

27
<PAGE> 33

redeemed under this privilege of redeeming shares by Express-Transfer until such
shares have been owned for at least 10 days. By enrolling in EXPRESS-Transfer,
the shareholder authorizes the Shareholder Service Agent to rely upon telephone
instructions from ANY PERSON to transfer the specified amounts between the
shareholder's Fund account and the predesignated bank, savings and loan or
credit union account, subject to the limitations on liability under "Redemption
or Repurchase of Shares--General." Once enrolled in EXPRESS-Transfer, a
shareholder can initiate a transaction by calling Kemper Shareholder Services
toll free at 1-800-621-1048 Monday through Friday, 8:00 a.m. to 3:00 p.m.
Chicago time. Shareholders may terminate this privilege by sending written
notice to Kemper Service Company, P.O. Box 419415, Kansas City, Missouri
64141-6415. Termination will become effective as soon as the Shareholder Service
Agent has had a reasonable time to act upon the request. EXPRESS-Transfer cannot
be used with passbook savings accounts or for tax-deferred plans such as
Individual Retirement Accounts ("IRAs").

BANK DIRECT DEPOSIT. A shareholder may purchase additional Fund shares through
an automatic investment program. With the Bank Direct Deposit Purchase Plan,
investments are made automatically 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
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 (and Class C
shares in the first year following the purchase) may be redeemed under a
systematic withdrawal plan is 10% of the net asset value of the account. 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 and Class C shares made pursuant to a systematic withdrawal plan. The
right is reserved to amend the systematic withdrawal plan on 30 days' notice.
The plan may be terminated at any time by the investor or the Fund.

28
<PAGE> 34

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") with IFTC as custodian. This includes
Simplified Employee Pension Plan ("SEP") IRA accounts and prototype documents.

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

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

Brochures describing the above plans as well as model defined benefit plans,
target benefit plans, 457 plans, 401(k) plans 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 custodian. 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. ZKI 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 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, including, but not limited to, the Dow Jones
Industrial Average, Value Line, the Standard & Poor's 500 Stock Index, the
Europe Australasia Far East ("EAFE") Index, AC (Combined) Far East Free ex Japan
Index and any of the country indices or regional indices prepared by Morgan
Stanley Capital International (MSCI), 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 Asian 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

29
<PAGE> 35

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 may also describe
economic, political, demographic, and regulatory trends and conditions relative
to the European region and specific countries within that region and may compare
such conditions to other regions throughout the world.

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. Redemption of Class C shares within the first
year after purchase may be subject to a 1% contingent deferred sales charge.
Average annual total return figures do, and total return figures may, include
the effect of the contingent deferred sales charge for the Class B and Class C
shares that may be imposed at the end of the period in question. Performance
figures for the Class B shares and Class C shares not including the effect of
the applicable contingent deferred sales charge would be reduced if it were
included.

The Fund's 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 and Class C 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.

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 Asian Growth 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 ZKI and its affiliates;
and (b) the following investment advisory clients of ZKI 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.

30
<PAGE> 36

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.

31
<PAGE> 37
P R O S P E C T U S

KEMPER
ASIAN GROWTH
FUND

__________, 1996

[KEMPER FUNDS LOGO]

Kemper Distributors, Inc.
120 South LaSalle Street
Chicago, IL 60603

[LOGO] printed on recycled paper
<PAGE> 38

KEMPER ASIAN GROWTH 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> 39

STATEMENT OF ADDITIONAL INFORMATION
, 1996

KEMPER ASIAN GROWTH 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 Asian Growth 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-13
Purchase and Redemption of Shares.................................. B-14
Officers and Trustees.............................................. B-15
Shareholder Rights................................................. B-16
Report of Independent Auditors ( , 1996)............. B-18
Statement of Net Assets ( , 1996).................... B-19
</TABLE>

KAGF-11 /96 [RECYCLED PAPER LOGO] printed on recycled paper
<PAGE> 40

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
U.S. Government or its 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> 41

(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> 42

INVESTMENT POLICIES AND TECHNIQUES

GENERAL. The Fund may engage in futures, options and other derivative
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 and also to hedge against the effects of market risks but not for
speculative purposes. 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> 43

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

B-4
<PAGE> 44

the 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

B-5
<PAGE> 45

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.

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

B-6
<PAGE> 46

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 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.

B-7
<PAGE> 47

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

B-8
<PAGE> 48

ordinary under Section 988 of the Code. In addition, the straddle rules of the
Code would require deferral of certain losses realized on positions of a
straddle to the extent that the Fund had unrealized gains in offsetting
positions at year end.

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

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 redeemed
shares were purchased after October 3, 1989 and were held less than 91 days,
then the lesser of (a) the sales charge waived on the reinvested shares, or (b)
the sales charge incurred on the redeemed shares, is included in the basis of
the reinvested shares and is not included in the basis of the redeemed shares.
If a shareholder 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. Zurich
Kemper Investments, 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.

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<PAGE> 49

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 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 and Class C 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. Redemption of Class C
shares may be subject to a 1% contingent deferred sales charge in the first year
following the purchase. Returns and net asset value will fluctuate. Factors
affecting the Fund's performance include general market conditions, operating
expenses and investment management. Any additional fees charged by a dealer or
other financial services firm would reduce returns described in this section.
Shares of the Fund are redeemable at the then current net asset value, which may
be more or less than original cost.

INVESTMENT MANAGER AND UNDERWRITER

INVESTMENT MANAGER. Zurich Kemper Investments, Inc. ("ZKI"), 120 South LaSalle
Street, Chicago, Illinois 60603, is the Fund's investment manager. ZKI is wholly
owned by KFS Holding Corp. KFS Holding Corp. is a more than 90% owned subsidiary
of Zurich Holding Company of America, Inc., which is a wholly owned subsidiary
of Zurich Insurance Company, an internationally recognized company providing
services in life and non-life insurance, reinsurance and asset management.
Pursuant to the investment management agreement, ZKI acts as the Fund's
investment adviser, manages its investments, administers its business affairs,
furnishes office facilities and equipment, provides clerical, bookkeeping and
administrative services and permits any of its officers or employees to serve
without compensation as trustees or officers of the 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 ZKI), independent
auditors, counsel, custodian and transfer agent and the cost of share
certificates, reports and notices to

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<PAGE> 50

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. ZKI has agreed to reimburse the Fund
to the extent required by applicable state expense limitations should all
operating expenses of the Fund, including the investment management fees of ZKI
but excluding taxes, interest, distribution fees, extraordinary expenses,
brokerage commissions or transaction costs and any other properly excludable
expenses, exceed the applicable state expense limitations. 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.

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

The Fund's investment management agreement has an initial term ending March 1,
1998 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 ZKI 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 ZKI, 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.

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<PAGE> 51

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 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 and Class C shares, KDI currently
advances to firms the first-year service fee at a rate of up to .25% of the
purchase price of such shares. For periods after the first year, KDI currently
intends to pay firms a service fee at a rate of up to .25% (calculated monthly
and paid quarterly) of the net assets attributable to Class B and Class C shares
maintained and serviced by the firm. After the first year, a firm becomes
eligible for the quarterly service fee and the fee continues until terminated by
KDI or the Fund. Firms to which service fees may be paid include broker-dealers
affiliated with KDI.

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 ZKI
or KDI, as indicated under "Officers and Trustees."

CUSTODIAN, TRANSFER AGENT AND SHAREHOLDER SERVICE AGENT. The Chase Manhattan
Bank, Chase MetroTech Center, Brooklyn, New York 11245, as custodian, has
custody of all securities and cash of 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 ZKI, serves as
"Shareholder Service Agent" of the Fund, and as such, performs all of IFTC's
duties as transfer agent and dividend-paying agent. 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 shares 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

B-12
<PAGE> 52

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

ZKI and its affiliates furnish investment management services for the Kemper
Funds and other clients including affiliated insurance companies. As described
in the Fund's prospectus, ZKI will use the services of its subsidiary, Zurich
Investment Management Limited ("ZIML"), with respect to foreign securities
investments of the Fund including analysis, research, execution and trading
services. ZKI and its affiliates may share some common research and trading
facilities. At times investment decisions may be made to purchase or sell the
same investment securities for the Fund and for one or more of the other clients
managed by ZKI or its affiliates. When two or more of such clients are
simultaneously engaged in the purchase or sale of the same security through the
same trading facility, the transactions are allocated as to amount and price in
a manner considered equitable to each.

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 ZKI's organization outweigh any
limitations that may arise from simultaneous transactions or position
limitations.

ZKI and ZIML, in effecting purchases and sales of portfolio securities for the
account of the Fund, will implement the Fund's policy of seeking best execution
of orders, which includes best net prices, except to the extent that ZKI and
ZIML may be permitted to pay higher brokerage commissions for research services
as described below. Consistent with this policy, orders for portfolio
transactions are placed with broker-dealer firms giving consideration to the
quality, quantity and nature of each firm's professional services, which include
execution, clearance procedures, wire service quotations and statistical and
other research information provided to the Fund, ZKI and ZIML. Any research
benefits derived are available for all clients, including clients of affiliated
companies. Since it is only supplemental to ZKI's and ZIML's own research
efforts and must be analyzed and reviewed by ZKI's and ZIML's 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, ZKI and ZIML may give consideration to those firms that have sold
or are selling shares of the Fund and of other funds managed by ZKI or its
affiliates, as well as to those firms that provide market, statistical and other
research information to the Fund, ZKI and ZIML, although ZKI and ZIML are 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.

ZKI and ZIML 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 adopted by the Board of Trustees
of the Fund, the Fund could pay a firm that provides research services to ZKI
and ZIML a commission for effecting a securities transaction for the Fund in
excess of the amount other firms would have charged for the transaction if ZKI
and ZIML 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 ZKI's and ZIML'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 ZKI and its subsidiaries. The investment management
fee paid by the Fund to ZKI is not reduced because ZKI and ZIML receive these
research services.

B-13
<PAGE> 53

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. The Fund may waive the minimum for
purchases by trustees, directors, officers or employees of the Fund or ZKI and
its affiliates. 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.

Scheduled variations in or the elimination of the initial sales charge for
purchases of Class A shares or the contingent deferred sales charge for
redemptions of Class B or Class C shares by certain classes of persons or
through certain types of transactions as described 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, a 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) 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.

B-14
<PAGE> 54

OFFICERS AND TRUSTEES

The officers and trustees of the Fund, their birthdates, their principal
occupations and their affiliations, if any, with ZKI, the Fund's investment
manager, and KDI, the principal underwriter or their affiliates, are as follows
(the number following each person's title is the number of investment companies
managed by ZKI and its affiliates for which he or she holds similar positions):

DAVID W. BELIN (6/20/28), Trustee (24), 2000 Financial Center, 7th and Walnut,
Des Moines, Iowa; Member, Belin Harris Lamson McCormick, P.C. (attorneys).

LEWIS A. BURNHAM (1/8/33), Trustee (24), 16410 Avila Boulevard, Tampa, Florida;
Director, Management Consulting Services, McNulty & Company; formerly Executive
Vice President, Anchor Glass Container Corporation.

DONALD L. DUNAWAY (3/8/37), Trustee (24), 7515 Pelican Bay Blvd., Naples,
Florida; Retired; formerly, Executive Vice President, A.O. Smith Corporation
(diversified manufacturer).

ROBERT B. HOFFMAN (12/11/36), Trustee (24), 800 N. Lindbergh Boulevard, St.
Louis, Missouri; Senior Vice President and Chief Financial Officer, Monsanto
Company (chemical products); prior thereto, Vice President, FMC Corporation
(manufacturer of machinery and chemicals); prior thereto, Director, Executive
Vice President and Chief Financial Officer, Staley Continental, Inc. (food
products).

DONALD R. JONES (1/17/30), Trustee (24), 1776 Beaver Pond Road, Inverness,
Illinois; Retired; Director, Motorola, Inc. (manufacturer of electronic
equipment and components); formerly, Executive Vice President and Chief
Financial Officer, Motorola, Inc.

DOMINIQUE P. MORAX (10/02/48), Trustee* (37), 120 South LaSalle Street, Chicago,
Illinois; Member, Extended Corporate Executive Board, Zurich Insurance Company,
Director, ZKI.

SHIRLEY D. PETERSON (9/3/41), Trustee (24), 401 Rosemont Avenue, Frederick,
Maryland; President, Hood College, Maryland; prior thereto, Partner, Steptoe &
Johnson (attorneys); prior thereto, Commissioner, Internal Revenue Service;
prior thereto, Assistant Attorney General, U.S. Department of Justice.

WILLIAM P. SOMMERS (7/22/33), Trustee (24), 333 Ravenswood Avenue, Menlo Park,
California; President and Chief Executive Officer, SRI International (research
and development); prior thereto, Executive Vice President, Iameter (medical
information and educational service provider); prior thereto, Senior Vice
President and Director, Booz, Allen & Hamilton, Inc. (management consulting
firm) (retired), Director, Rohr, Inc., Therapeutic Discovery Corp. and Litton
Industries.

STEPHEN B. TIMBERS (8/8/44), President and Trustee* (37), 120 South LaSalle
Street, Chicago, Illinois; President, Chief Executive Officer, Chief Investment
Officer and Director, ZKI; Director, KDI, Dreman Value Advisors, Inc., and LTV
Corporation.

DENNIS H. FERRO (6/20/45), Vice President (6), 1 Fleet Place, London, U.K.,
Executive Vice President, ZKI; Managing Director--Equities, Zurich Investment
Management Limited; formerly, President and Chief Investment Officer, Cigna
International Investment Advisors, Inc.

ANDREW MASON (2/20/58), Vice President* (1), 1 Fleet Place, London, U.K.;
Director--Asian Equities, Zurich Investment Management Limited.

JOHN E. NEAL (3/9/50), Vice President* (37), 120 South LaSalle Street, Chicago,
Illinois; President, Kemper Funds Group, a unit of ZKI; Director, ZKI, Dreman
Value Advisors, Inc. and KDI.

JOHN E. PETERS (11/4/47), Vice President* (37), 120 South LaSalle Street,
Chicago, Illinois; Senior Executive Vice President and Director, ZKI; President
and Director, KDI; Director, Dreman Value Advisors, Inc.

B-15
<PAGE> 55

JEROME L. DUFFY (6/29/36), Treasurer* (37), 120 South LaSalle Street, Chicago,
Illinois; Senior Vice President, ZKI.

PHILIP J. COLLORA (11/15/45), Vice President and Secretary* (37), 120 South
LaSalle Street, Chicago, Illinois; Attorney, Senior Vice President and Assistant
Secretary, ZKI.

ELIZABETH C. WERTH (10/1/47), Assistant Secretary* (29), 120 South LaSalle
Street, Chicago, Illinois; Vice President, ZKI; Vice President and Director of
State Registrations, KDI.

* 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. 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 or accrued to such trustees during calendar year
1995.

<TABLE>
<CAPTION>
AGGREGATE TOTAL COMPENSATION FROM
COMPENSATION KEMPER FUND COMPLEX PAID
NAME OF BOARD MEMBER FROM FUND(2) TO BOARD MEMBERS(3)
- ------------------------------------------------------------ ------------ ------------------------
<S> <C> <C>
David W. Belin(1)........................................... $0 $149,700
Lewis A. Burnham............................................ $0 $111,000
Donald L. Dunaway(1)........................................ $0 $151,000
Robert B. Hoffman........................................... $0 $105,500
Donald R. Jones............................................. $0 $110,700
Shirley D. Peterson(4)...................................... $0 $ 44,500
William P. Sommers.......................................... $0 $100,700
</TABLE>

- ---------------
(1) Includes current fees deferred and interest pursuant to deferred
compensation agreements with the Funds. Deferred amounts accrue interest
monthly at a rate equal to the yield of Kemper Money Funds -- Kemper Money
Market Fund.

(2) No compensation for services as fee schedule not established. It is
anticipated that a fee schedule will be established in the future.

(3) Includes compensation for service on the boards of 22 Kemper funds with 40
fund portfolios.

(4) Appointed to Board in June, 1995.

As of [ ], 1996, ZKI 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.

B-16
<PAGE> 56

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.

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 ZKI 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> 57

REPORT OF INDEPENDENT AUDITORS

The Board of Trustees and Shareholder
Kemper Asian Growth Fund

We have audited the accompanying statement of net assets of Kemper Asian Growth
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 Asian Growth Fund at
, 1996 in conformity with generally accepted accounting principles.

Chicago, Illinois
, 1996

B-18
<PAGE> 58

KEMPER ASIAN GROWTH 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 3,473.684
Class B 3,473.684
Class C 3,578.947 $100,000
========
THE PRICING OF SHARES
Net asset value and redemption price per share........................................
Class A ($33,000 / 3,473.684 shares outstanding).................................... $ 9.50
Class B* ($33,000 / 3,473.684 shares outstanding)................................... $ 9.50
Class C* ($34,000 / 3,578.947 shares outstanding)................................... $ 9.50
Maximum offering price per share......................................................
Class A (net asset value, plus 6.10% of net asset value or 5.75% of offering
price)........................................................................... $ 10.08
Class B (net asset value)........................................................... $ 9.50
Class C (net asset value)........................................................... $ 9.50
</TABLE>

- ---------------
* Subject to contingent deferred sales charge.

NOTES:

Kemper Asian Growth 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
Zurich Kemper Investments, Inc. ("ZKI"), 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 ZKI.

B-19
<PAGE> 59

KEMPER ASIAN GROWTH 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.

(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. 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.*
99.B8(b). Foreign Custody Agreement.*
99.B9(a). Agency Agreement.*
99.B9(b). 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> 60

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

Inapplicable.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES

As of July 17, 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> 61
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."

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

Kemper Mutual Funds:
Kemper Technology Fund
Kemper Total Return Fund
Kemper Growth Fund
Kemper Small Capitalization Equity Fund
Kemper Income and Capital Preservation Fund
Kemper Money Funds
Kemper National Tax-Free Income Series
Kemper Diversified Income Fund
Kemper High Yield Fund
Cash Equivalent Fund
Kemper U.S. Government Securities Fund
Kemper International Fund
Kemper Portfolios
Kemper State Tax-Free Income Series
Tax-Exempt California Money Market Fund
Kemper Adjustable Rate U.S. Government Fund
Kemper Blue Chip Fund
Kemper Global Income Fund
Kemper Target Equity Fund
Cash Account Trust
Investors Cash Trust
Tax-Exempt New York Money Market Fund
Kemper Value Plus Growth Fund
Kemper Quantitative Equity Fund
Kemper Horizon Fund
Kemper Europe Fund
Kemper Asian Growth Fund

Kemper Closed-End Funds:
Kemper High Income Trust
Kemper Intermediate Government Trust
Kemper Municipal Income Trust
Kemper Multi-Market Income Trust
Kemper Strategic Municipal Income Trust
The Growth Fund of Spain, Inc.
Kemper Strategic Income Fund

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

C-3
<PAGE> 62
Item 28(b) Business and Other Connections of Officers
and Directors of Zurich Kemper Investments, Inc.,
the Investment Advisor

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

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

ALTER, LOREN
Director, Zurich Kemper Investments, Inc.

BOLINDER, WILLIAM H.
Director, Vicechairman, Zurich Kemper Investments, Inc.

CHENG, LAURENCE W.
Director, Zurich Kemper Investments, Inc.
President and Chief Executive Officer, Zurich Investment
Management Group

GLUCKSTERN, STEVEN M.
Director, Chairman, Zurich Kemper Investments, Inc.

HANGGI, ROLF
Director, Zurich Kemper Investments, Inc.

HUPPI, ROLF
Director, Zurich Kemper Investments, Inc.
Chief Executive Officer, Zurich Insurance Company

C-4
<PAGE> 63
LELAND, MARC E.
Director, Zurich Kemper Investments, Inc.

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

PALM, MICHAEL
Director, Zurich Kemper Investments, Inc.

WHITE, WALTER L.
Director, Zurich Kemper Investments, Inc.

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

PETERS, JOHN E.
Director, Senior Executive Vice President, Zurich Kemper
Investments, Inc.
Director, Dreman Value Advisors, Inc.
Director, President, Kemper Distributors, Inc.
Vice President, Zurich Investment Management, Inc.
Vice President, Kemper Funds
Director, Kemper Service Company
Director, President, ZKI Agency, Inc.

VOGEL, VICTOR E.
Senior Executive Vice President, Zurich Kemper Investments, Inc.

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

C-5

<PAGE> 64
Vice President, Kemper Strategic Income Fund
Vice President, Kemper Strategic Municipal Income Trust
Vice President, Kemper U.S. Government Securities Fund
Vice President, Tax-Exempt California Money Market Fund
Vice President, Tax-Exempt New York Money Market Fund

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

FERRO, DENNIS H.
Executive Vice President, Zurich Kemper Investments, Inc.
Director, Managing Director-Equities, Zurich Investment
Management Limited
Vice President, Kemper International Fund
Vice President, Kemper Investors Fund
Vice President, Kemper Target Equity Fund
Vice President, The Growth Fund of Spain, Inc.
Vice President, Kemper Europe Fund

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

JOHNS, GORDON K.
Executive Vice President, Zurich Kemper Investments, 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, Zurich Investment Management Limited
Vice President, Kemper Multi-Market Income Trust
Director, Thames Heritage Parade Limited

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

MANZONI, JR., CHARLES R.
Executive Vice President, Secretary & General Counsel, Zurich Kemper
Investments, Inc.
Secretary, ZKI Agency, Inc.

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

REYNOLDS, STEVEN H.
Executive Vice President, Chief Investment Officer - Equities, Zurich
Kemper Investments, Inc.
Vice President, Kemper Technology Fund
Vice President, Kemper Total Return Fund
Vice President, Kemper Growth Fund
Vice President, Kemper Small Capitalization Equity Fund

C-6

<PAGE> 65
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

ROBERTS, SCOTT A.
Executive Vice President, Zurich Kemper Investments, Inc.
Director, Executive Vice President, Zurich Investment Management, Inc.

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

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

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

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

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

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

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

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

COLLECCHIA, FRANK E.
Senior Vice President, Zurich Kemper Investments, Inc.
Senior Vice President, Zurich Investment Management, Inc.
Senior Investment Officer, Federal Kemper Life Assurance
Company

C-7
<PAGE> 66
Senior Investment Officer, Fidelity Life Association
Vice President, Galaxy Offshore, Inc.
Senior Investment Officer, Kemper Investors Life Insurance
Company

COLLORA, PHILIP J.
Senior Vice President and Assistant Secretary, Zurich Kemper
Investments, Inc.
Vice President and Secretary, Kemper Funds
Assistant Secretary, Kemper International Management, Inc.
Assistant Secretary, Zurich Investment Management, Inc.
Assistant Secretary, Dreman Value Advisors, Inc.
Assistant Secretary, ZKI Agency, Inc.

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

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

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

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

GLASSMAN, HARVEY
Senior Vice President, Zurich Kemper Investments, Inc.

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

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

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

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

C-8

<PAGE> 67
Director, Executive Vice President, Zurich Investment Management, Inc.

KLEIN, MARTY
Senior Vice President, Zurich Kemper Investments, Inc.

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

McNAMARA, MICHAEL A.
Senior Vice President, Zurich Kemper Investments, Inc.
Vice President, Kemper Diversified Income Fund
Vice President, Kemper High Income Trust
Vice President, Kemper High Yield Fund
Vice President, Kemper Investors Fund
Vice President, Kemper Multi-Market Income Trust
Vice President, Kemper Strategic Income Fund

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

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

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

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

REGNER, THOMAS M.
Senior Vice President, Zurich Kemper Investments, Inc.
Vice President, Kemper Horizon Fund
Vice President, Kemper Investors Fund

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

C-9
<PAGE> 68
Vice President, Kemper Multi-Market Income Trust
Vice President, Kemper Strategic Income Fund

SCHUMACHER, ROBERT T.
Senior Vice President, Zurich Kemper Investments, Inc.

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

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

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

THOUIN-LEERKAMP, EDITH A.
Senior Vice President, Zurich Kemper Investments, Inc.
Director-European Equities, Zurich Investment Management Limited
Vice President, Kemper Europe Fund

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

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

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

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

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

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

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

C-10
<PAGE> 69
CHIEN, CHRISTINE
First Vice President, Zurich Kemper Investments, Inc.

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

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

DEXTER, STEPHEN P.
First Vice President, Zurich Kemper Investments, Inc.

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

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

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

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

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

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

KEELEY, MICHELLE M.
First Vice President, Zurich Kemper Investments, Inc.
Vice President, Kemper Intermediate Government Trust
Vice President, Kemper Portfolios

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

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

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

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

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

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

MURRAY, SCOTT S.

C-11
<PAGE> 70
First Vice President, Zurich Kemper Investments, Inc.
Vice President, Kemper Service Company

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

PANOZZO, ROBERTA L.
First Vice President, Zurich Kemper Investments, Inc.

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

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

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

TEPPER, SHARYN A.
First Vice President, Zurich Kemper Investments, Inc.

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

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

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

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

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

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

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

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

BARRY, JOANN M.

C-12
<PAGE> 71
Vice President, Zurich Kemper Investments, Inc.

BIEBERLY, CHRISTINE A.
Vice President, Zurich Kemper Investments, Inc.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

HECHT, MARC L.

C-13

<PAGE> 72
Hecht, Marc L.
Vice President, Zurich Kemper Investments, Inc.
Assistant Secretary, ZKI Agency, Inc.

HUM, CHI H.
Vice President, Zurich Kemper Investments, Inc.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

MITCHELL, KATHERINE H.
Vice President, Zurich Kemper Investments, Inc.

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

C-14
<PAGE> 73

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

SPILLER, KATHLEEN A.
Vice President, Zurich Kemper Investments, Inc.

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

C-15
<PAGE> 74

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

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

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

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

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

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

C-16
<PAGE> 75
ITEM 29. PRINCIPAL UNDERWRITERS

(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>
POSITIONS AND
POSITIONS AND OFFICES OFFICES WITH
NAME WITH UNDERWRITER REGISTRANT
<S> <C> <C>
John E. Peters Principal, Director, President Vice President
Willam 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 Chief Financial Officer None
Linda A. Bercher Senior Vice President None
Terry Cunningham Senior Vice President None
John H. Robison, Jr. Senior Vice President None
Henry J. Schulthesz Senior Vice President None
Thomas V. Bruns Vice President None
Carlene D. Merold Vice President None
Elizabeth C. Werth Vice President Assistant Secretary
Diane E. Ratekin Assistant Secretary None
</TABLE>

C-17
<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,
Zurich Kemper Investments, 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-18
<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
29th day of July, 1996.

KEMPER ASIAN GROWTH 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 July 29, 1996 on behalf of the
following persons in the capacities indicated.

<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>

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

/s/David W. Belin* Trustee
----------------------------------
/s/Lewis A. Burnham* Trustee
----------------------------------
/s/Donald L. Dunaway* Trustee
----------------------------------
/s/Robert B. Hoffman* Trustee
----------------------------------
/s/Donald R. Jones* Trustee
----------------------------------
/s/Dominique P. Morax* Trustee
----------------------------------
/s/Shirley D. Peterson* Trustee
----------------------------------
/s/William P. Sommers* Trustee
----------------------------------

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

*Philip J. Collora signs this document pursuant to powers of
attorney filed herewith.

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

<PAGE> 78

KEMPER ASIAN GROWTH FUND

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Exhibits
<S> <C> <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. 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.*
99.B8(b). Foreign Custody Agreement.*
99.B9(a). Agency Agreement.*
99.B9(b). 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)
AGREEMENT AND DECLARATION OF TRUST

KEMPER TRUST #25

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 #25 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

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,

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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

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<PAGE> 5

any time without any cause or reason therefore whatsoever. 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 desirable.

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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. Notwithstanding 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 thereof, which call shall be made by the
Trustees or the President of the Trust. Meetings of Shareholders may
be called by the Trustees 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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<PAGE> 17

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.

17
<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

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<PAGE> 22

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 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;

22
<PAGE> 23

(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

(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.

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<PAGE> 24

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
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.

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<PAGE> 25

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
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

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<PAGE> 26

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.
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
thereunder

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<PAGE> 27

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, 1996.

/s/ Michael DeFao
----------------------------------
Notary Public

My Commission Expires: Aug 7 1998
----------

<PAGE> 1

EXHIBIT 99.B1(B)
WRITTEN INST. AMENDING DECLARATION OF TRUST

KEMPER TRUST #25

WRITTEN INSTRUMENT AMENDING THE
AGREEMENT AND DECLARATION OF TRUST

MAY 22, 1996

The undersigned, being the sole trustee of Kemper Trust #25 (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 Asian
Growth Fund." This instrument shall constitute an amendment to the Declaration
of Trust.

IN WITNESS WHEREOF, the undersigned has this 22nd day of May,
1996, 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> 2

EXHIBIT 99.B4(b)
WRITTEN INSTRUMENT DESIGNATING CLASSES OF SHARES

KEMPER ASIAN GROWTH FUND

WRITTEN INSTRUMENT ESTABLISHING
AND DESIGNATING SEPARATE CLASSES OF SHARES

May 30, 1996

The undersigned constitute all the Trustees of Kemper Asian Growth
Fund (the "Fund"), a Massachusetts business trust governed by an Agreement and
Declaration of Trust dated June 12, 1995 (the "Declaration of Trust"). This
instrument is executed pursuant to Section 1 of Article III of the Declaration
of Trust in order to establish and designate separate classes of shares of any
series of the Fund, and it is based in part upon resolutions of the Board of
Trustees of the Fund adopted at a meeting on May 30, 1996.

WHEREAS, Under the Declaration of Trust the Board of Trustees has the
authority, in its discretion and without shareholder approval, to divide the
shares of any series of the Fund into separate classes of shares;

WHEREAS, This Board of Trustees has previously approved, subject to
various conditions, the division of the shares of each series of the Fund into
four classes of shares, to be named "Class A Shares," "Class B Shares," "Class
C Shares" and "Class I Shares;"

WHEREAS, This Board of Trustees deems it desirable and in the best
interests of the Fund to divide the shares of each series of the Fund, whether
now existing or hereafter created (the "series"), into four separate classes of
shares to be named, as previously indicated, "Class A Shares," "Class B
Shares," "Class C Shares" and "Class I Shares" and to provide investors with a
conversion feature from Class B Shares to the Class A Shares, which conversion
feature would thereby eliminate any distribution services fee then in effect
under any plan adopted pursuant to Rule 12b-1 of the Investment Company Act of
1940 ("1940 Act") for such Class B Shares; and

WHEREAS, This Board of Trustees believes that the creation of four
separate classes of shares as provided herein will be in the best interests of
and will have no negative effects upon the current shareholders of the Fund;

NOW, THEREFORE, the establishment and designation of separate classes
of shares of any series of the Fund is approved in accordance with the
following provisions:

<PAGE> 3

1. Subject to the conditions hereinafter set forth, the shares of
any series shall be divided into four classes to be known respectively as the
"Class A Shares," the "Class B Shares," the "Class C Shares" and the "Class I
Shares," which classes shall have such preferences and special or relative
rights and privileges as may be determined from time to time by this Board of
Trustees subject always to the Declaration of Trust and the 1940 Act and the
rules and regulations thereunder.

2. Subject to the terms of the Declaration of Trust, the Class A
Shares, Class B Shares, Class C Shares and Class I Shares will have the same
rights and privileges except that:

(A) The Class A Shares

(1) shall be sold subject to an initial sales charge as
described in the prospectus for the Fund as from time to time in
effect or shall be issued to shareholders in connection with the
conversion feature as hereinafter described;

(2) shall have an administrative service fee;

(3) shall not have a plan of distribution adopted under
Rule 12b-1 of the 1940 Act ("Rule 12b-1 plan") and no fees
payable under the Rule 12b-1 plans for the Class B Shares or
Class C Shares shall be allocated or charged to the Class A
Shares; and

(4) shall have such dividend reinvestment, exchange and
redemption rights and privileges as may be described in the
prospectus for the Fund as from time to time in effect; and

(B) the Class B Shares

(1) shall be sold without an initial sales charge but
subject to a contingent deferred sales charge imposed upon the
redemption of the Class B shares as described in the prospectus
of the Fund as from time to time in effect;

(2) shall have an administrative service fee;

(3) shall have a Rule 12b-1 plan and any fees payable from
time to time under such plan shall be allocated and charged to,
and any voting rights with respect to such plan shall be
exercisable by, the Class B Shares only;

(4) shall convert to Class A Shares within a specified
number of years as hereinafter described; and

(5) shall have such purchase, dividend reinvestment,
exchange and redemption rights and privileges associated

<PAGE> 4

therewith as may be described in the prospectus for the Fund as
from time to time in effect; and

(1) shall be sold without any initial sales charge but
subject to a contingent deferred sales charge imposed upon the
redemption of the Class C shares as described in the prospectus
of the Fund as from time to time in effect;

(2) shall have an administrative service fee;

(4) shall have such purchase, dividend reinvestment,
exchange and redemption rights and privileges associated
therewith as may be described in the prospectus for the Fund as
from time to time in effect; and

(D) the Class I Shares

(1) shall be sold without any initial sales charge or any
contingent deferred sales charge;

(2) shall not have an administrative service fee;

(3) shall not have a Rule 12b-1 plan and no fees payable
under the plans for the Class B Shares or Class C Shares shall
be allocated or charged to the Class I Shares; and

(4) shall have such dividend reinvestment, exchange and
redemption rights and privileges as may be described in the
prospectus for the Fund as from time to time in effect.

3. Any shares of the Fund that are issued and outstanding at
the time when shares of the Fund are effectively divided into
separate classes of shares as set forth above shall be classified as
Class A Shares.

4. Class A Shares of a series shall be issued to holders of
Class B Shares of the same series pursuant to the following described
conversion feature:

(A) Class B Shares will convert to Class A Shares six
years after issuance of such Class B Shares; provided, however,
that any Class B Shares issued in exchange for shares originally
classified as Initial Shares of Kemper Portfolios, formerly
known as Kemper Investment Portfolios (KP), whether in
connection with a reorganization with a series of KP or

<PAGE> 5

otherwise, shall convert to Class A Shares seven years after
issuance of such Initial Shares if such Initial Shares were
issued prior to February 1, 1991;

(B) Class B Shares issued upon reinvestment of income and
capital gain dividends and other distributions will convert to
Class A Shares on a pro rata basis with other Class B Shares;
and

(C) Conversion to Class A Shares shall be based upon the
relative net asset values of the Class A Shares and the Class B
Shares at the time of conversion.

IN WITNESS WHEREOF, the undersigned have this 30th day of May,
1996 signed these presents.

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

(signatures continue)

4
<PAGE> 6

------------------------------------
David W. Belin, Trustee 1705 Plaza
Circle Des Moines, Iowa 50322

------------------------------------
Lewis A. Burnham, Trustee 16410 Avila
Boulevard Tampa, Florida 33613

------------------------------------
Donald L. Dunaway, Trustee
7515 Pelican Bay Boulevard, #903
Naples, Florida 33963

------------------------------------
Robert B. Hoffman, Trustee
10045 Litzsinger Road
St. Louis, MO 63124-1131

------------------------------------
Donald R. Jones, Trustee
1776 Beaver Pond Road
Inverness, Illinois 60067

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

------------------------------------
Shirley D. Peterson, Trustee
401 Rosemont Avenue
Frederick, MD 21701-8575

------------------------------------
William P. Sommers, Trustee
2181 Parkside Avenue
Hillsborough, California 94010

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

<PAGE> 1
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 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 Asian Growth Fund.

Signature Title Date

/s/ Stephen B. Timbers Trustee May 30, 1996
- ----------------------------

<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 his 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 Asian Growth Fund.

Signature Title Date

/s/ David W. Belin Trustee May 30, 1996
- ---------------------------

<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 his 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 Asian Growth Fund.

Signature Title Date

/s/ Lewis A. Burnham Trustee May 30, 1996
- ---------------------------
<PAGE> 4

POWER OF ATTORNEY

Signature Title Date

/s/ Donald L. Dunaway Trustee May 30, 1996
- ---------------------------

<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 his 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 Asian Growth Fund.

Signature Title Date

/s/ Robert B. Hoffman Trustee May 30, 1996
- ----------------------------

<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 his 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 Asian Growth Fund.

Signature Title Date

/s/ Donald R. Jones Trustee May 30, 1996
- --------------------------

<PAGE> 7

POWER OF ATTORNEY

Signature Title Date

/s/ Dominique P. Morax Trustee May 30, 1996
- ---------------------------

<PAGE> 8

POWER OF ATTORNEY

Signature Title Date

/s/ Shirley D. Peterson Trustee May 30, 1996
- ----------------------------
<PAGE> 9

POWER OF ATTORNEY

Signature Title Date

/s/ William P. Sommers Trustee May 30, 1996
- ---------------------------